The End of Uncertainty: The Colorado Supreme Court Adopts the Plausibility Pleading Standard, 0217 COBJ, Vol. 46 No. 2 Pg. 27

Author:Megan Garnett, Franz Hardy, J.

46 Colo.Law. 27

The End of Uncertainty: The Colorado Supreme Court Adopts the Plausibility Pleading Standard

Vol. 46, No. 2 [Page 27]

The Colorado Lawyer

February, 2017

The Civil Litigator

Megan Garnett, Franz Hardy, J.

For 50 years Colorado courts applied the Conley v. Gibson pleading standard to motions to dismiss for failure to state a claim After the U.S. Supreme Court adopted the plausibility pleading standard, it was unclear whether Colorado would change its standard accordingly. The Colorado Supreme Court settled this issue in Warne v. Hall.

Until recently, the Colorado Supreme Court had not expressly adopted the federal court pleading standard on motions to dismiss for failure to state a claim. In Warne v. Hall,1 a close 4 to 3 opinion, the Court explicitly adopted the Iqbal/Twombly[2] plausibility standard set forth by the U.S. Supreme Court.

This article discusses the history and evolution of the pleading standard in both federal and Colorado courts, the recent decision in Warne, and what effect the new standard may have on motions to dismiss.

Evolution of the Pleading Standard in Federal Court

In 1957, the U.S. Supreme Court's decision in Conley v. Gibson established the standard that a complaint should not be dismissed "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 "[3] This "no set of facts" standard controlled for 50 years until 2007, when the U.S. Supreme Court decided Bell Atlantic Corp. v. Twombly, a 7 to 2 opinion that expressly abandoned the Conley standard.4 The Court explained,

Conley's "no set of facts"language has been questioned, criticized, and explained away long enough. . . . The phrase is best forgotten as an incomplete, negative gloss on an accepted pleading standard: once a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint . . . . Conley, then, described the breadth of opportunity to prove what an adequate complaint claims, not the minimum standard of adequate pleading to govern a complaint's survival.5

Twombly was an antitrust case brought by subscribers against telephone and Internet services providers for violating § 1 of the Sherman Act by agreeing to not compete with each other and to exclude other potential competitors, allowing each local telephone company to monopolize its own market. In interpreting Fed.R.Civ.P. 8 and deciding that the complaint did not plead sufficient facts to suggest that a valid claim arose, the U.S. Supreme Court held "a plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do."6 The high court concluded by stating that it does "not require fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face," and a plaintiff must allege enough facts to nudge his claims "across the line from conceivable to plausible."7 Twombly established what is commonly referred to as the "plausibility standard" for reviewing motions to dismiss for failure to state a claim.

In 2009, in Ashcroft v. Iqbal, a 6 to 3 opinion, the U.S. Supreme Court expressly expanded the Twombly plausibility standard to all claims for relief.[8]

Iqbal involved a detainee designated a person of "high interest" to the September 11 attack investigation who filed a Bivens9 action against numerous federal officials. Citing the Twombly discussion on the plausibility standard, the U.S. Supreme Court stated that two working principles drove its decision in Twombly: First, courts need not accept legal conclusions as true, and "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice."10 Second, only a complaint that states a plausible claim for relief will survive a motion to dismiss.11 The Court then detailed a two-step approach to determine whether a complaint sufficiently alleges a claim for relief. First, courts can "choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth."12 Second, courts may then consider whether the remaining well-pleaded factual allegations "plausibly give rise to an entitlement of relief."13

The Colorado Standard and Warne v. Hall

The Colorado Supreme Court first adopted the Conley standard in 1964 in Sprott v. Roberts.[14] Colorado courts consistently used the Conley standard for motions to dismiss for failure to state a claim for more than 50 years. But Twombly and Iqbal introduced uncertainty about whether the Conley standard remained applicable. On June 27, 2016, the Colorado Supreme Court squarely addressed whether Colorado courts should continue to follow the long-standing standard in Conley or the more recently adopted Iqbal/Twombly standard. The Warne opinion confirms that the proper standard for a motion to dismiss is not that "it appears beyond doubt that the plaintiff can prove 'no set of facts' in support of his claim" under Conley, but instead that a complaint must contain sufficient factual matter "to state a claim for relief that is plausible on its face" as set forth in

Twombly and Iqbal.15 Relying on these decisions, the majority recognized the principles that properly identify the pleading standard under a motion to dismiss: "The Court in Iqbal characterized that standard as being underlain by two working principles: First, 'the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions,' and second, 'only a complaint that states a plausible claim for relief survives a motion to dismiss' . . . ."16

Warne involved a complaint filed against the Town of Gilcrest and its mayor.17 The complaint alleged that the defendants caused a third party to terminate a purchase agreement with the plaintiff.18 Although the terms of the agreement were not included in the pleadings, the complaint alleged that the plaintiff had attempted to get approval for the sale of land to a third party business to build its headquarters, but the town and mayor imposed "unauthorized and unreasonable conditions" on the proposed site development plan after it was conditionally approved by the town board.19 The complaint also alleged that the defendants' actions were motivated by malice toward the plaintiff.20

The complaint asserted claims for intentional interference with contractual obligations, taking without just compensation, and violation of substantive due process under 28 U.S.C. § 1983.21 Because it stated both federal and state claims, the case was initially removed to federal court, where the defendants filed a motion to dismiss for failure to state a claim under Fed.R.Civ.P. 12(b)(6) based on the plausibility standard.22 Before the federal court ruled on the motion, the parties stipulated to dismiss the federal claims and to remand the case to state court to consider the remaining claim, intentional interference with contractual obligations. On remand, the district court considered the motion to dismiss under CRCP 12(b)(5), and the defendants argued that the court should apply the Iqbal/Twombly plausibility standard.23 The court granted the motion to dismiss without clarifying which standard it used; it simply stated that the plaintiff had not sufficiently alleged a claim for relief.24 The court also granted the plaintiff leave to amend the complaint.

The plaintiff filed an amended complaint with additional allegations in attempt to support his claim.[25] The defendants renewed their motion to dismiss, which the court granted, finding that the new allegations did not allege specific conduct sufficient to support the claim.26 The plaintiff appealed, and the Court of Appeals reversed, stating that it was bound by Conley's "no set of facts" standard. The Court therefore expressly rejected the Iqbal/Twombly "plausible on its face" standard.27 The Court held that under Conley, the plaintiff had properly stated a claim because his allegations showed that the defendants possessed the authority and intent to block the development plan and had the authority to impose conditions that caused the contract to be terminated.28 On the defendants' request, the Colorado Supreme Court accepted certiorari.

The Majority Opinion

In a 4 to 3 opinion, the majority reversed the Court of Appeals' application of the Conley standard. Justice Coats's majority opinion acknowledged that the Court had long followed the principle that "motions for dismissal are looked upon with disfavor and will be granted only if it appears beyond doubt that the plaintiff can prove no set of facts in support of a claim that...

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