Pleading with Congress to resist the urge to overrule Twombly and Iqbal.

• Author: Huston, Michael R.

In Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal, the Supreme Court changed the rhetoric of the federal pleading system. Those decisions have been decried by members of the bar, scholars, and legislators as judicial activism and a rewriting of the Federal Rules of Civil Procedure. Such criticism has led members of both houses of Congress to introduce legislation to overrule the decisions and return to some variation of the "notice pleading" regime that existed before Twombly. This Note argues that both of the current proposals to overrule Twombly and Iqbal should be rejected. Although the bills take different approaches to their goal of overruling Twombly and Iqbal, each one would disrupt the careful balance of interests created by the Federal Rules and create intolerable confusion for judges ruling on the often-filed 12(b)(6) motion to dismiss. Especially because the long-term effects of Twombly and Iqbal on federal pleading remain unclear, Congress should avoid a rush to judgment on this important issue.

TABLE OF CONTENTS INTRODUCTION I. FROM NOTICE PLEADING TO PLAUSIBILITY PLEADING (AND BACK AGAIN?) A. Conley and the Legacy of Notice Pleading B. Twombly and the Rise of Plausibility C. Iqbal and the New Analytical Framework D. Congress Reacts 1. The Senate: Notice Pleading Restoration Act of 2009 2. The House of Representatives: Open Access to Courts Act of 2009 II. BUSINESS AS USUAL: RULE 8(a)(2) IN THE FEDERAL COURTS AFTER IQBAL A. The Strict Language of Conley Has Never Actually Been Used as a Pleading Standard in Federal Court B. Iqbal Has Not Resulted in a Significant Increase in Rule 12(b)(6) Dismissals C. Iqbal Is Not Likely to Significantly Increase Dismissal Rates in the Foreseeable Future III. CONGRESS SHOULD REJECT LEGISLATION OVERRULING TWOMBLY AND IQBAL A. House Bill 4115 Is Inconsistent with Rule 8(a) and Supreme Court Precedent, and Would Imbalance the Benefits and Burdens of Discovery B. Senate Bill 1504 Would Create Ambiguity in the Pleading Standard and Produce Conflicting Sources of Legal Authority C. Congress Should Resist the Urge to React Hastily to Twombly and Iqbal CONCLUSION INTRODUCTION

During the confirmation hearings of John G. Roberts, Jr. to become Chief Justice of the United States in 2005, then-Judge Roberts famously remarked, "Judges are like umpires. Umpires don't make the rules, they apply them." (1) But in the wake of the Supreme Court's decisions in Bell Atlantic Corp. v. Twombly (2) and Ashcroft v. Iqbal, (3) some have accused the Chief Justice and a majority of the Court of remaking the rules of the federal courts--the Federal Rules of Civil Procedure (the "Federal Rules").

Iqbal has been called "the most significant Supreme Court decision in a decade for day-to-day litigation in the federal courts." (4) In that case, the plaintiff's original cause of action alleged intentional racial discrimination, but by the time the case reached the Supreme Court it turned instead on a question of procedure: what standard governs a motion in federal court to dismiss a pleading for failure to state a claim under Rule 12(b)(6)? (5)

Rule 8(a)(2), which has governed the sufficiency of federal pleadings since the adoption of the Federal Rules, requires only that the claimant provide "a short and plain statement of the claim showing that the pleader is entitled to relief." (6) From 1957 to 2006, the Supreme Court interpreted this rule in a plaintiff-friendly manner, highlighted by the landmark decision in Conley v. Gibson, (7) which stated that a motion to dismiss should be denied unless the reviewing court can discern "no set of facts" that would entitle the claimant to relief. Conley came to be synonymous with "notice pleading," the view that the primary--or perhaps even sole--function of a complaint is to put a defendant on notice of the plaintiff's allegations so that the defendant can begin to prepare a defense. In Twombly, however, the Court announced that Conley's famous "no set of facts" language had "earned its retirement." (8) Although the Court explicitly affirmed the validity of Rule 8(a)(2) as written and claimed no drastic change to the standard, (9) the Court interpreted the rule to require that a claimant include enough facts in his complaint to state a claim to relief that is "plausible on its face." (10)

Two years later, the Supreme Court reaffirmed the Twombly standard (11) in Iqbal and laid out the analytical framework, or "working principles," that federal courts now use to evaluate the sufficiency of pleadings. (12) Iqbal's working principles direct the reviewing court to separate the complaint's "legal conclusions" and "threadbare recitals of the elements of a cause of action," neither of which are entitled to be presumed true, from its well-pied facts, which the court must presume to be true at the pleading stage. (13) The court must then determine whether the well-pied facts alone, taken as true, state a "plausible claim for relief." (14)

Reaction to Iqbal in the academic community and from the plaintiffs' bar was overwhelmingly fierce and negative. Scholars and practitioners called it a "grave disappointment," a "really bad opinion" and "an excuse to throw out suits on the pleadings." (15) Professor Stephen Burbank testified before Congress that "Twombly and Iqbal may contribute to the phenomenon of vanishing trials, the degradation of the Seventh Amendment right to a jury trial, and the emasculation of private civil litigation as a means of enforcing public law." (16) This criticism was based in part on the fear that Iqbal will result in a significant increase in the number of cases dismissed in federal court before plaintiffs have an opportunity to develop their claims through the discovery process. (17) The decision has even been described as creating an "insurmountable barrier to access" to the courts for certain plaintiffs. (18) In 2009, animosity toward the Court's recent pleading decisions led to the introduction of bills in both houses of Congress to overrule Twombly and Iqbal and mandate a return to the "notice pleading" standard of Conley. (19) As of mid-2010, both of these bills have been referred to their respective chambers' judiciary committees and reviewed in hearings.

This Note argues that Congress should reject the urge to overrule Twombly and Iqbal because such legislation would distort the careful balance of interests developed by the Federal Rules. Part I reviews the Supreme Court's Rule 8(a)(2) pleading jurisprudence from Conley to Twombly and Iqbal, as well as Congress's reaction to those decisions. Part II considers recent federal decisions that have applied the Iqbal working principles to Rule 12(b)(6) motions and concludes that the decision has not dramatically increased the number of cases dismissed in federal court. Finally, Part III argues that Congress should reject legislation that would overrule Twombly and Iqbal. Such legislation would either inject unacceptable confusion into federal pleading practice or would implement an unworkable standard that unfairly burdens defendants before any wrongdoing has been plausibly alleged.

1. FROM NOTICE PLEADING TO PLAUSIBILITY PLEADING (AND BACK AGAIN?)

   1. Conley and the Legacy of Notice Pleading

      Notice pleading's most important expression came in the Supreme Court's 1957 decision in Conley v. Gibson. (20) The Conley complaint alleged illegal race discrimination in union practices and the defendants moved to dismiss for lack of jurisdiction and failure to state a claim upon which relief may be granted. (21) The Supreme Court reversed the dismissal of the complaint in the lower courts, holding that the complaint was sufficient under Rule 8(a)(2) and stating that when reviewing Rule 12(b)(6) motions, "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." (22)

      Conley's interpretation of Rule 8(a)(2) was liberal by design. (23) It reflected the Court's understanding that the Federal Rules seek to provide a plaintiff with an opportunity to pursue his claims even when he cannot prove them at the pleading stage. (24) In this respect, the Conley standard was largely successful: the vast majority of motions to dismiss for failure to state a claim were denied in federal court. (25) Along with generous discovery rules that permit a plaintiff to obtain all nonprivileged information in the defendant's possession relevant to the claim, (26) Conley's interpretation of Rule 8(a)(2) sought to provide the plaintiff with the best possible opportunity to develop his facts and prove his case at trial.

      Although Conley's "no set of facts" interpretation of Rule 8(a)(2) became the standard citation for federal courts ruling on Rule 12(b)(6) motions, that interpretation was severely criticized. Some believed that the standard unduly favored plaintiffs and would allow too many frivolous claims to proceed, thereby forcing defendants to undertake huge discovery expenses shortly after an action was filed. (27) This in turn was said to create massive settlement leverage for plaintiffs (28) and encourage them to bring suits with little or no merit. Such concerns led Congress to pass the Private Securities Litigation Reform Act of 1995, (29) designed to prevent plaintiffs from manipulating the liberal pleading system to achieve settlement leverage through discovery in securities cases--cases which Congress believed were particularly vulnerable to abuse. (30) Eventually, these same concerns contributed to the Supreme Court's repudiation of the Conley standard altogether.

   2. Twombly and the Rise of Plausibility

      Conley's vision of notice pleading maintained its position as the standard interpretation of Rule 8(a)(2) for five decades. Then in 2007, the Supreme Court cast considerable doubt on the future of notice pleading with its decision in Bell Atlantic Corp. v...