Thursday, May 31, 2007

Long Overdue Retirement for Anything Goes Pleading (Twombly)

It happened an antitrust case, but when the Supreme Court speaks even we tort lawyers listen – although it might take us a little while longer to get around to reading the opinion. Last week, in Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955 (U.S. 2007), a solid 7-2 majority (per Souter, J.) of the Court said some things about federal pleading that it (and we) recognized were long overdue.

Basically, federal courts (and we hope state courts with rules that track the federal rules) should no longer allow pleadings to become the almost fact-free zones that pre-Twombly practice has permitted. That has meant a lot of broad, vague allegations out there – particularly, but by no means exclusively, involving conspiracy or concerted action – that amount to little more than innocuous facts spliced together with sinister-sounding adjectives. Before Twombly, courts all too often contented themselves with punting on the pleadings and relegating to discovery the task of sorting out whether there’s really anything worth litigating.

We admit we’re a little late (there was a holiday, though, so give us a break). There’s already been commentary on Twombly from the usual suspects: Pointoflaw, AEI (http://www.aei.org/publications/filter.all,pubID.26242/pub_detail.asp), Lawprofessors, scotusblog, and Prof Dorf – as well as from antitrust mavens with whom we don’t often interact: Lawprofessors (the antitrust group, this time), Antitrustreview, and MoFo (http://www.mondaq.com/i_article.asp_Q_articleid_E_48811_A_rss_E_0). Sorry, but we couldn't make some of the abbreviated links work.

What happened in Twombly (very briefly) is that the antitrust statute (15 U.S.C. §1) only prohibits contracts, combinations and conspiracies in restraint of trade. The Twombly plaintiffs couldn’t quite gin up that level of coordinated enterprise in their complaint. All they pleaded was that established telephone carriers (the so-called “ILECs”) – who were government-tolerated local monopolies – engaged in “parallel conduct” that inhibited competition from so-called “CLECs”. We know, it sounds like something out of “A Brave New World,” but that’s telecommunications-speak.

Pleading issues entered into Twombly because so-called “conscious parallelism” isn’t enough to violate the antitrust laws (so Twombly states). The opinion contains lot of economic analysis about how similarly situated businesses can be expected to react similarly to similar economic stimuli, including the stimulus of competition, but we’ll leave that to the antitrust mavens that we’ve linked to.

Because conscious parallelism doesn’t read conspiracy out of the antitrust statute, the district court (in New York) granted a Rule 12(b)(6) motion to dismiss, holding that the complaint didn’t contain anything deserving of antitrust relief. On appeal, the Second Circuit found that to be error and reinstated the complaint. It held that as long as a conspiracy was one of the “plausible” possibilities suggested by these plaintiffs’ allegations, that was close enough. If there was any “set of facts” that, under the plaintiffs’ broad allegations, could constitute actionable collusion, it was up to discovery (and perhaps trial) to sort out what really happened. Twombly v. Bell Atlantic Corp., 425 F.3d 99, 114 (2d Cir. 2005).

Thankfully, the Supreme Court reversed. Close only counts in horseshoes and hand grenades.

As we said, Twombly’s erudite discussion of the economic justifications for “conscious parallelism” under the antitrust statutes isn’t what interests us. As product liability practitioners, we’re drawn to the Court’s broader ruling that pleadings must actually plead the facts that justify the requested relief – which is something not limited by the legal theory before the Court. The federal rules are the federal rules. There’s not one set of rules for antitrust and another for what we do. What the federal rules require in terms of pleading is a “short, plain statement” of the “grounds” that “entitle[]” the plaintiff to relief. Fed. R. Civ. P. 8(a). Needless to say, Rule 8(a) leaves courts with a lot of leeway – and Twombly held that for decades courts have been giving plaintiffs altogether too much leeway.

The backstory for the Twombly decision goes way back – fifty years to Conley v. Gibson, 355 U.S. 41 (1957). In Conley, after determining that the complaint before it was adequately pleaded, the Court went off on a bit of a tangent, and made some very indulgent observations about when dismissal for failure to state a claim under Rule 12(b)(6) was appropriate: “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.” 355 U.S. at 45-46 (emphasis added). As Twombly points out, 127 S. Ct. at 1968, that statement was dictum – which for you non-lawyers is just a fancy term for “not necessary to decide anything in the case.”

Dictum or no, since 1957, Conley’s “no set of facts” language became one of the most famous phrases in federal civil procedure – and one of the most widely abused. The problem has been, as Twombly accurately observed, that “taken in isolation,” Conley could be read “as saying that any statement revealing the theory of the claim will suffice unless its factual impossibility may be shown from the face of the pleadings.” 127 S. Ct. at 1968.

Tell us about it. For years, we’ve sought to remove fanciful allegations of industry-wide tortious conduct, decades of evil intent, and equivalent rubbish from mass tort pleadings. Whether we win or lose on the merits, time and time again we’ve been met with this exact Conley quote – improperly taken, as Twombly held, “in isolation.” E.g., Desiano v. Warner-Lambert Co., 326 F.3d 339, 347 (2d Cir. 2003); Thompson v. Goetzmann, 315 F.3d 457, 460 (5th Cir. 2002); In re Orthopedic Bone Screw Products Liability Litigation, 193 F.3d 781, 794 (3d Cir. 1999); Prohias v. Pfizer, Inc., 2007 WL 1228784, at *3 (S.D. Fla. Apr. 24, 2007); Adamson v. Ortho-McNeil Pharmaceutical, Inc., 463 F. Supp.2d 496 500 (D.N.J. 2006); Bailey v. Janssen Pharmaceutica, Inc., 2006 WL 3665417, at *2 (S.D. Fla. Nov. 14, 2006); Orso v. Bayer Corp., 2006 WL 2794975, at *2 (N.D. Ill. Sep. 27, 2006); Mattingly v. Medtronic, Inc., 466 F. Supp.2d 1170, 1172-73 (E.D. Mo. 2006); Bearden v. Wyeth, 2006 WL 4474723, at *6 n.1 (E.D. Pa. May 5, 2006); Vanderwerf v. SmithKlineBeecham Corp., 414 F.Supp.2d 1023, 1025 (D. Kan. 2006). This list could go on and on.

Thankfully it won’t any longer. Twombly recognized that, in practice it was impossible to take Conley “literally,” since the Conley “no set of facts” standard for dismissal “would dispense with any showing of a reasonably founded hope that a plaintiff would be able to make a case.” 127 S. Ct. at 1969. Thus, the Court formally “retired” the perplexing Conley formulation:

[T]he passage so often quoted fails to mention this understanding on the part of the [Conley] Court [that the complaint it examined “amply stat[ed] a claim”], and after puzzling the profession for 50 years, this famous observation has earned its retirement. 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.
Id. (emphasis added) (we’ll be omitting internal citations in all Twombly quotations). In other words, the “any set of facts” business only comes into play after the cause of action itself has already been properly pleaded.

Thus Twombly holds that plaintiffs must allege is actual “facts” that establish the legal cause of action. These facts must be “plausible” – more than “speculative” and more than a “suspicion.” 127 S. Ct. at 1965, 1970. It’s no longer enough to say that some set of unpleaded facts might make out a claim – the plaintiff must allege a set of facts that actually does. Here’s the Court’s new standard, into which we have substituted the tort jargon we deal with for the antitrust jargon of Twombly itself:

[S]tating. . .a claim requires a complaint with enough factual matter (taken as true) to suggest that a[ duty] was [breached]. Asking for plausible grounds to infer [tortious conduct] does not impose a probability requirement at the pleading stage; it simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of [such conduct].
127 S. Ct. at 1965.

The Court then hit the nail squarely on the head when it discussed why it was time to relegate Conley to the dustbin of history – and why we can no longer afford (if we ever could) to let lawyers throw allegations against the wall and let discovery see if they can make those allegations stick. Litigation is expensive, and that expense combined with overly permissive pleading leaves the door wide open to legalized extortion:

[S]omething beyond the mere possibility of [a claim] must be alleged, lest a plaintiff with a largely groundless claim be allowed to take up the time of a number of other people, with the right to do so representing an in terrorem increment of the settlement value.
127 S. Ct. at 1966. The Court was talking about antitrust, but every word is equally applicable to the mass torts we have to grapple with. E.g., In re Rhone-Poulenc Rorer Inc., 51 F.3d 1293, 1298-99 (7th Cir. 1995) (discussing “blackmail settlements” created by mass-tort class actions).

To level the playing field, Twombly held that there must be a “threshold of plausibility” before a “case should be permitted to go into its inevitably costly and protracted discovery phase.” 127 S. Ct. at 1966. Strengthened pleading requirements are the first line of defense against abusive and protracted litigation:

It is no answer to say that a claim just shy of a plausible entitlement to relief can, if groundless, be weeded out early in the discovery process through careful case management, given the common lament that the success of judicial supervision in checking discovery abuse has been on the modest. And it is self-evident that the problem of discovery abuse cannot be solved by careful scrutiny of evidence at the summary judgment stage, much less lucid instructions to juries. . . . [T]he threat of discovery expense will push cost-conscious defendants to settle even anemic cases before reaching those proceedings. Probably, then, it is only by taking care to require allegations that reach the level suggesting [a viable cause of action] that we can hope to avoid the potentially enormous expense of discovery in cases with no reasonably founded hope that the discovery process will. . .support a []claim.
Id. at 1967 (emphasis added). Paper “reassurances” from interested counsel are unfounded “optimism,” since in reality “the hope of effective judicial supervision is slim.” Id. at 1967 n.6.

Welcome to the club. We’ve been saying precisely the same thing about mass tort litigation for years. Sometimes, we’ve felt like voices crying in the wilderness in our opposition to the creation of ever larger and more complicated forms of aggregated litigation. Perhaps the poster child for Conley abuse is In re Methyl Tertiary Butyl Ether (MTBE) Products Liability Litigation, 379 F. Supp.2d 348, 367-68, 370, 432, (S.D.N.Y. 2005), in which the now-disapproved “set of facts” language was cited no less than five times in an opinion that invented a novel “commingled market share liability” theory and imposed it upon defendants in fifteen states, when only a couple of those states even allow ordinary market share liability. Id. at 374-440.

Good riddance to this sort of anything goes practice under Rule 12. Having the Supreme Court saying in Twombly what needs to be said about “sprawling, costly, and hugely time-consuming” litigation, 127 S. Ct. at 1967 n.6., is music to our very tired ears. Twombly gives defendants a means of distinguishing adverse precedent like the MTBE case as “decided on an improperly broad view of the pleadings” and of reinforcing beneficial precedent that was decided “even under the prior, broader standard.” We’ll take what we can get.

More specifically, Twombly held, “[w]ithout more, parallel conduct does not suggest conspiracy, and a conclusory allegation of agreement at some unidentified point does not supply facts adequate to show illegality.” 127 S. Ct. at 1966. Thus a conspiracy complaint that “fail[s] in toto to render plaintiffs’ entitlement to relief plausible” “must be dismissed” unless it “[]cross[es] the line from conceivable to plausible.” Id. at 1974. We’ll take that, too – because it’s not like we never see conspiracy (and similar) claims in our line of work. Whenever there’s a potentially insolvent manufacturer, this sort of thing gets pleaded to bring in defendants with deeper pockets. Similar pleading issues arise when plaintiffs have difficulty identifying the manufacturer of the offending product, and instead resort to market share liability or other forms of aggregate liability, sometimes including outright “civil conspiracy.”

We can think of some “minimal” pleading standards that would be appropriate in prescription medical product liability litigation after Twombly – things that should be necessary simply to state a viable cause of action. We invite our readers to add to the list:

  • Plead what the alleged defect is.
  • If alleging inadequate warnings (usually the most important theory), plead when any alleged new medical risk information became available, and that it was before the plaintiff used the product.
  • If alleging inadequate warnings, plead that the FDA would have allowed a different warning than the one it approved.
  • If alleging inadequate warnings, plead how a different warning would have altered the prescriber’s conduct and thus avoided the alleged harm.
  • If alleging concealment or misrepresentation, plead how this supposedly happened.
  • Plead the circumstantial underpinnings for res ipsa loquitur.
  • If pleading inadequate design in jurisdictions requiring a feasible alternative design, plead what the alternative is and how it can be considered feasible.
  • If alleging violations of FDA regulations, plead what the regulation is and how it was violated.
  • If alleging manufacturing defect, plead how the product failed to meet the manufacturer’s specifications.
  • In multi-defendant complaints, plead allegations against differently situated defendants separately.
  • If alleging concerted action between otherwise competing manufacturers, plead how it could be in a defendant’s interest to cover up safety problems in competing products.

There may well be an analogy here to how Celotex Corp. v. Catrett, 477 U.S. 317 (1986), affected summary judgment practice under Rule 56. Only time will tell, but we think that Twombly, if enforced according to its terms, makes a good start to restoring plausibility to pleadings that under the prior Conley rule all to often resembled castles in the clouds.

Now for our own castle in the clouds. We think it would be splendid if the Court would only follow up its own comments in Twombly about abusive and expensive discovery with some concrete action on that front (fee-shifting with regards to electronic discovery comes immediately to mind) to change the thrust of the Rules of Civil Procedure. If that happened, the millennium would truly have arrived.

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