The law of unintended consequences: shockwaves in the lower courts after Atlantic Corp. v. Twombly.

• Author: McMahon, Colleen

When I was trying to come up with a topic for the Donahue Lecture and Essay, my law clerks suggested that I focus on the unintended complications that appellate courts sometimes impose on district judges. From guest sittings on the Court of Appeals, I have learned that appellate judges approach cases and legal issues differently from trial court judges. Trial level judges have busy civil and criminal dockets to move, so we tend to favor practical--rather than elegantly theoretical--solutions to the problems we face. The practical considerations of case management, however, are not always taken into account in appellate decisions. When the rules that are handed down are difficult or time-consuming to implement, they can adversely affect the administration of justice at the nisi prius level.

We have all heard of the law of unintended consequences. More than a few recent appellate decisions have brought in their wake unanticipated (and, I am sure, unintended) consequences for the management of cases in trial courts, to the prejudice of litigants and the consternation of the judges who must put the decisions into practice.

A few recent Supreme Court decisions, which are causing no end of practical problems for district judges, illustrate my point. For example, most legal observers thought the Supreme Court took the case of Rita v. United States (3) to resolve a circuit split over whether a sentence within the United States Sentencing Guidelines is or is not presumptively reasonable. Instead, the Court enshrined the split into law, holding that a court of appeals "may" presume that a Guidelines sentence is reasonable, but not that it "must" do so. (4) As a result, in some circuits, courts presume Guidelines sentences are reasonable and defense counsel seeking below-Guidelines sentences must try to rebut that presumption; while in other circuits, defense counsel argue at sentencing that a proposed sentence would be reasonable without having to worry about any presumption. (5) These are two entirely different exercises.

Another decision that gives rise to tremendous practical implementation issues is Saucier v. Katz. (6) In Saucier, the Supreme Court announced the procedure that district courts should follow to determine whether a public officer defendant is entitled to qualified immunity. (7) But the procedure the Court selected is cumbersome and inherently contradictory, as well as difficult and extremely time-consuming to apply in practice.

Finally, one of the most controversial decisions that illustrates my thesis is last term's decision in the case of Bell Atlantic v. Twombly. (8) In this essay, I will discuss the Twombly decision, identify its unintended consequences, and suggest one possible reason why the Supreme Court continues to confound district judges by unwittingly erecting barriers to effective case management.

1. BELL ATLANTIC CORP. V. TWOMBLY

   Bell Atlantic Corp. v. Twombly was probably the least anticipated decision to come out of the 2007 Supreme Court. It also happens to be one of the Court's most important procedural decisions of the last decade, with massive implications for civil litigation. Twombly's seismic impact is apparent when one considers that in the first six months after the decision was handed down, it was cited in more than 2,000 district court opinions and 150 circuit court opinions. (9)

   Because Twombly is so widely cited, it is particularly unfortunate that no one quite understands what the case holds. Depending on how one reads it, the Twombly decision might have radically changed one of the iconic rules of civil procedure, while overturning or modifying one of the most often cited cases in the United States Reports. (10) As both district court and appellate court judges try to parse the meaning of a few key phrases in the Twombly decision, what was once uniform dogma about the pleading standard for most causes of action is being fragmented on a circuit-by-circuit--or sometimes a judge-by-judge--basis. We district court judges suddenly and unexpectedly find ourselves puzzled over something we thought we knew how to do with our eyes closed: dispose of a motion to dismiss a case for failure to state a claim.

2. PLEADING UNDER THE FEDERAL RULES

   Rule 8 of the Federal Rules of Civil Procedure sets forth a simple pleading standard for the average complaint: "A pleading that states a claim for relief must contain ... (2) a short and plain statement of the claim showing that the pleader is entitled to relief...." (11) This rule is short and to the point, like the "notice pleading" standard it advocates. The rule's requirements are few in number and easy to satisfy.

   Rule 8 does not require a short and plain statement of the facts underlying a claim; it says only that the plaintiff must draft a short and plain statement of the claim. (12) Under the "notice pleading" system, a complaint need only give the defendant notice of the nature of the plaintiff's claim so he can begin to prepare a defense. (13) The facts undergirding the claim do not generally need to be pleaded; they will be fleshed out later through discovery. (14)

   Twelve examples of the sort of "short, plain statement" necessary to plead a claim are appended to the Federal Rules of Civil Procedure. Rule 84 states that these appended forms are intended to "illustrate the simplicity and brevity" that Rule 8 contemplates. (15) The model pleadings are indeed brief and to the point. My personal favorite is the model complaint for an accounting, which states, in its entirety: "Defendant owes plaintiff -- dollars according to the account hereto annexed as Exhibit A." (16) It does not get any shorter or plainer than that.

   The drafters of the Federal Rules of Civil Procedure adopted notice pleading because they wanted to get away from the old common-law pleading rules that had bedeviled courts and litigants in England and the United States for centuries. (17) Rule 8 reflects a preference for having cases decided on their merits. (18) It eschews the old practice of forcing a plaintiff to jump through procedural hoops in order to survive a motion to dismiss (formerly known as a "demurrer"). (19) Particularity (i.e., more allegations of fact) is only required in a complaint alleging mistake or where the allegations directed to a defendant are thought to be particularly offensive--such as allegations of fraud or deceit. (20)

   Any doubt about the ease with which a plaintiff could satisfy Rule 8 was put to rest in 1957, when the Supreme Court decided Conley v. Gibson, (21) a case that is often taught on the first day of Civil Procedure class. In Conley, the Court explained that Rule 8(a)(2) relieved a plaintiff of the burdensome common-law requirement to "set out in detail the facts upon which he bases his claim." (22) The Court said that as long as the complaint provides fair notice of the grounds for entitlement to relief, "[t]he accepted rule [is] that 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." (23)

   Let me illustrate what I have always understood to be the Conley rule, using the sort of pleading that I commonly see as a district court judge: A plaintiff files a complaint alleging that (1) she is a woman, (2) she was fired from her job, (3) for which she was qualified, (4) because of her gender. A complaint such as this could not be dismissed for failure to state a claim. Of course, much more is needed to prove a claim like this, but proof is for a later day.

   Rule 8, as generously interpreted by Conley, is unquestionably slanted in favor of the pleading plaintiff. The downside of the "no set of facts" formulation is the ease with which an utterly meritless case can proceed through discovery, consuming scarce judicial resources and burdening defendants financially. As Congress has created more and more rights and remedies, and Americans have become more and more inclined to "make a federal case" out of circumstances that aggrieve them, the economic and public policy consequences of a liberal pleading rule have become increasingly apparent.

   Nonetheless, prior to the Twombly decision, neither Congress nor the Federal Rules Advisory Committee saw any need to tighten the extremely liberal notice pleading standard that was applied pretty uniformly across the country. (24) Indeed, in a new appendix to the Federal Rules of Civil Procedure, effective as of December 1, 2007, the sample form complaints are largely verbatim copies of the form complaints appended to the 1963 revision to the Rules. (25) Whatever its consequences, the Conley standard was clear and well-settled. There was certainly no groundswell to reexamine Conley, and no one thought that it was in danger of being altered.

3. THE TWOMBLY DECISION

   In Twombly, a putative class of telephone and/or internet subscribers sued a group of local telephone companies. (26) Plaintiffs alleged that the companies had conspired to restrain trade and had agreed to refrain from competing with each other in their respective markets, all in violation of Section 1 of the Sherman Act. (27) They alleged that Incumbent Local Exchange Carriers (ILECs) engaged in parallel conduct and made agreements with each other that discouraged competition. (28) The complaint, however, did not allege facts "suggesting that refraining from competing in other territories as [Competitive Local Exchange Carriers] was contrary to defendants' apparent economic interests." (29)

   The district court granted defendants' motion to dismiss the complaint under Rule 12(b)(6) of the Federal Rules. (30) Judge Lynch, a fine scholar who came to the bench from a tenured professorship at Columbia Law School, held that allegations of parallel business conduct, without more, failed to state a claim under Section 1 of the Sherman Act. (31)

   On appeal, the Second Circuit reinstated the...