Iqbal And Twombly: Sensible Interpretations Of The Pleading Rules

Monday, July 5, 2010 - 00:00

Lawyers for Civil Justice has been deeply involved in the debate over the Supreme Court's decisions in Iqbal and Twombly. Criticism of these decisions has mostly focused on two arguments: (1) that the decisions have improperly altered the intended meaning of Federal Rule of Civil Procedure 8(a), and (2) that the "plausibility" standard adopted in those decisions will unfairly exclude many plaintiffs from federal court, thereby denying them justice. Neither of these arguments is valid. Both decisions are sensible interpretations of the pleading Rules.

The "plausibility" standard of Iqbal and Twombly in no way contravened either the letter or spirit of the Rules. To the contrary, while Twombly did reject the hyperbolic and poorly reasoned dictum of the Court's earlier decision in Conley v. Gibson, it simultaneously made clear that the complaint in Conley would have survived under its "plausibility" standard, despite the clear absence of factual detail that would have been required under a fact pleading standard. The argument that these decisions have improperly returned the federal courts to a pre-Federal Rules fact pleading standard, then, represents either an incorrect reading of the decisions, or nothing more than a smokescreen, designed to divert the attention of the rule makers from their proper focus in considering proposed revisions to the Rules.

The Court's articulation of the "plausibility" standard may result in the dismissal of a number of complaints that would no doubt have been allowed to proceed to the discovery stage under a lax pleading standard that demanded nothing more than the vague and conclusory assertion of the defendant's violation of law. But those who have so vigorously decried this result as an injustice or an outrageous denial of a citizen's right to a day in court have completely ignored the vitally important and indisputable fact that procedural law should advance the goals of the substantive law. No injustice is done by the dismissal of a complaint, unless the plaintiff who has been dismissed actually possessed a valid substantive claim deserving of enforcement by the judicial system - a conclusion that there is no ex ante basis for reaching.

Most important, those who have protested the supposed injustice committed to plaintiffs by these decisions willingly ignore the other side of the coin: the great injustice done to defendants who in reality have violated no legal right of the plaintiff, by permitting a plaintiff's unilateral, conclusory, and unsupported assertion of liability to serve as a form of "Open, Sesame" to impose the enormous and expensive burdens of almost unlimited discovery on defendant. The attack on the "plausibility" standard fails to grasp the pathological impact of a less demanding pleading standard on achievement of the goals of the underlying substantive law. The costly and inefficient nature of the procedural system prior to the Court's articulation of the "plausibility" standard is directly linked to the imposition of heavy discovery burdens in many cases. This is true, whether or not the complaint actually alleges what is ultimately determined to be a factually valid claim - something that a "no barrier" standard is wholly incapable of deciphering prior to the discovery stage.

In addition to recognizing the unnecessary burdens and economic inefficiencies that inevitably result for the federal judicial system as a whole, it is important to understand the extremely negative implications of such a lax pleading standard for the goals of the underlying substantive law. If plaintiffs with unfounded claims are permitted to proceed to discovery, the probability of ultimate victory on the merits - either by summary judgment or trial - will be of little comfort to an unjustly sued defendant. Even under this best-case scenario, a business defendant would inevitably pass the costs on to its consumers, thereby artificially raising the cost of its product or service.

Even more harmful is the understandable willingness of many defendants to settle unjust lawsuits, for no reason other than to avoid the costs and burdens of discovery. Unjust compensation results, and the costs are once again passed along to the consumer. The continued viability of a product or service may therefore be determined by the judicial system's imposition of false and artificial costs on defendants who have violated no substantive law. Such results grossly over-enforce the underlying substantive law by making consumers pay for costs that do not derive from any legally punishable or compensable behavior or any defect. In this manner, a "no barrier" pleading standard is highly likely to lead to substantial skewing of the substantive law - the very result which a procedural system should be designed to avoid.

Accordingly, LCJ has proposed that the rule makers implement the pleading standards of Twombly and Iqbal so that no case proceeds to discovery unless the allegations meet a certain manageable threshold of particularity and plausibility.