Early dismissal: the Supreme Court's further tightening of procedural rules means that corporate defendants may secure early dismissal of lawsuits.

• Author: Rydzewski, Leo G.
• Position: Case overview

You're the CEO or director of finance for a publicly-traded company. You receive a call from your General Counsel, who reports that the company has been sued and that the plaintiff is seeking to take very expensive discovery of the company's electronic information, including your emails. From your General Counsel's description of the case, it sounds like another fishing expedition in which the plaintiff has raised very general factual allegations and recited only the basic elements of a claim. You believe that the case has no merit but, nonetheless, the company will need to weigh two equally-unappetizing choices: the costs of defense (including the substantial costs of discovery) against the costs of entering into an early "nuisance value" settlement and the payment of some funds to plaintiff's counsel.

Now there is a viable third option. In two recent cases, including one decided earlier this year, the Supreme Court has given new "teeth" to the procedural rules governing what facts a plaintiff must allege to gain access to the courts, giving defendant much greater prospects of an early dismissal. In the past, a plaintiff could proceed with litigation so long as the complaint placed the defendant on "notice" of the claims and there were "no set of facts" on which plaintiff would be entitled to relief. Now, however, plaintiffs no longer will be able to proceed by alleging the elements of a cause of action or making unsubstantiated conclusions. Instead, trial courts must scrutinize the allegations raised in the complaint to determine whether they are based upon facts and not mere conclusions, and whether the well-pleaded facts are sufficient to establish that the claim is "plausible on its face." This new standard gives defendants a much greater chance of having the case dismissed shortly after it is filed, before undertaking any expensive discovery, and without making a settlement payment to plaintiff's counsel.

Lurking behind the Supreme Court's new heightened standard is a concern over the increased costs of discovery and the prospect of requiring companies to spend their time and money on discovery when the complaint fails to identify specific facts showing that they are culpable. Litigation is expensive, both in time and money. Through these decisions, the Court is taking additional steps to better ensure that a plaintiff has a viable case before proceeding to impose those costs upon others.

The new "plausibility" pleading standard

The...