Thursday, June 04, 2009

More On Pleading In The Wake Of Twombly And Iqbal

When we stepped to the plate to defend the Supreme Court’s adoption of a “plausibility” standard for pleading in Ashcroft v. Iqbal, 129 S. Ct. 1937 (U.S. 2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), we knew that academia had been almost uniformly critical. It still is.

But we also learned something else – our peers (often more than that, actually) among the trial bar, agree with us that the excesses of modern discovery warrant adoption of tougher standards for pleading than the gloss put on “short and plain” by the now-overruled Conley case. Reader Tom Hurney, over at Jackson Kelly (one of the great things about blogging is what we learn from our readers) was good enough to pass along a 2008 “interim report” about discovery conducted by the American College of Trial Lawyers and the Institute for the Advancement of the American Legal System. Importantly, the American College isn’t a knee-jerk pro-defense organization. Its membership is drawn from both sides of the “v.” Interim Report at 2.

Briefly, this interim report asks the question what to do now about the “expense and burden of discovery” and its “substantial adverse effects on the civil justice system.” Interim Report at 1. It summarizes the results of a survey that over 1400 members of the American College answered. One of the major points of agreement was that tougher pleading was a necessary step to curbing excessive discovery expense.

Lawyers are inherently conservative and the Task Force did not anticipate that the responding Fellows would call for radical surgery. . . . Certain rules and practices, however, emerged as causes of significant discontent.

Nearly half of the respondents said that notice pleading has become a problem because extensive discovery is required to narrow the claims and defenses and 57 percent said that with notice pleading, motions to dismiss on the pleadings are not effective in limiting claims and narrowing litigation issues. More than 76 percent said that answers to complaints likewise do not accomplish the goal of narrowing issues. This suggests that a further look at notice pleading may be in order.
Interim Report, at 4 (emphasis added).

So regardless of the flack that we take from our law professor friends, we feel better about things – knowing that our opinion that “it’s about time” is shared by a large number of our colleagues who are actually in the business of trying cases. We think that, in this area, experience is probably more valuable than theory. And in Twombly and Iqbal, the Supreme Court essentially agreed.

One of the critiques that we've received is that tougher pleading standards disproportionately hurt the little guys (who are plaintiffs) and favor big business and government (who are defendants). That may be true – we’re defense lawyers, after all – but it conversely means that the original Conley rule did just the opposite. Which still begs the question, why is one side better than the other?

One view is, of course, that more litigation is intrinsically better than less. We’re more familiar than we care to be with that argument. We’ve seen it made (usually in private, with a wink and a nod) in opposition to preemption. But occasionally such sentiments go public. For instance, here’s the response of “The Younger Lawyer” to Wyeth v. Levine:

What does all this [preceding discussion of Levine] mean for young lawyers? Well, as an initial matter, it means that plaintiffs will be able to continue pursuing state law claims against pharmaceutical manufacturers. Manufacturers will not be entirely precluded from continuing to assert federal pre-emption in the future, but complex legal and factual questions regarding the evidence necessary to establish the pre-emption defense will need to be resolved.

Translation: There will be plenty of work for plaintiffs counsel and defense counsel alike. Young lawyers will continue to be busy!
Well, we’re sorry, but we don’t subscribe to this view – and anybody who does won’t be working for us. We don't see litigation as a conspiracy of lawyers against their clients to keep themselves "busy" and to enrich themselves at client expense. The law is (or at least should be) a means of resolving legitimate disputes as quickly and efficiently as possible, and to get rid of the rest, again, as quickly and efficiently as possible.

So we reject the normative view, implicitly taken by much of the academic response (yes, we know they have graduating classes to place), that it’s better to let unmeritorious cases proceed than to take the risk that meritorious cases will be dismissed. We believe that either way represents error, and neither error is inherently better than the other. Putting aside philosophy, we tend to favor Type II over Type I errors in this context for two reasons: (1) the mere fact of litigation creates enormous transaction costs that the absence of litigation does not, and (2) we’re defense lawyers.

But on a more practical basis, the assumption that all plaintiffs are “little guys” and all defendants are “big mules” isn’t accurate. In mass torts and class actions, for example, there are no little guys anymore. Rather, there are very sophisticated plaintiffs’ lawyers – also repeat players in the system – who frequently take advantage of “anything goes” pleading to make broad allegations that are as difficult to disprove as they are expensive to defend. In the Bone Screw litigation, for example, we had the “omni” conspiracy claims that: (1) the entire industry (which did and still does sue each other constantly over IP issues) got together to defraud doctors, and (2) companies and doctors got together to deceive other doctors. E.g., In re Orthopedic Bone Screw Products Liability Litigation, 1997 WL 186325 (E.D. Pa. April 16, 1997) (dismissing claims but denying Rule 11 sanctions), affirmed, 193 F.3d 781 (3d Cir. 1999).

To treat mass tort/class action plaintiffs as if they are legal babes in the woods denies reality.

Moreover, there are lots of cases where “big business” and “government” are found on both – or exclusively the other – sides of the “v.” Third-party payer cases are an obvious example, as are state attorney general actions involving similar overpayment (and all kinds of other) claims. The aforementioned IP cases, with large medical device companies on both sides, are another. And that’s just in (or in the vicinity of) our own legal sandbox. To justify meaningless pleading standards on the grounds that they favor the little guy gives an unwarranted assist to a lot of large and sophisticated plaintiffs who don’t by anyone's standards deserve any such a break.

On the other end of the spectrum, we already cut pro se plaintiffs all kinds of breaks. But pro se plaintiffs aren't usually the ones who file interrogatories with hundreds of subparts or who demand production of millions of documents and untold gigabytes of electronic information.

Another point that's made is that any change “should be established through the notice-and-comment, increasingly democratized and political, Rules Enabling Act process.”

Why? Conley was a court decision. For fifty years nobody argued that the Court shouldn’t have done what it did. Why the sudden emphasis on formalism once the wheel finally turns? Courts construe statutes and rules all the time. They create, alter, and abolish legal actions and defenses. It’s called the “common law.” It’s been around for quite a while.

To be fair, as an abstract proposition, we don’t deny that a formal rules change would be a more rational approach. But Conley persisted for fifty years, and nobody did anything. Advantages in terms of process from formal rulemaking are unfortunately more than counteracted by disadvantages in terms of improbability and just plain inertia. Twombly and Iqbal aren’t perfect, but they promise a significant improvement. In the law, as in other areas, the perfect is all too often the enemy of the good.

We have the same response – only moreso – to Lumen Mulligan’s comment to the original critique of our post. That comment is essentially, if discovery is the problem, fix discovery, and don't bother with pleading.

In the abstract we'd agree. But a lot of time and effort have gone into “fixing” discovery. Rule 26, governing discovery, has metastasized to the point that it now fills more than five pages of single-spaced type. Since broad discovery was permitted in 1966, Rule 26 has been amended in 1980, 1983, 1987, 1993, 2000, and 2006. Yet the consensus of the country’s best trial lawyers is still:

The discovery system is, in fact, broken. Discovery costs far too much and has become an end in itself. As one respondent noted: “The discovery rules in particular are impractical in that they promote full discovery as a value above almost everything else.” Electronic discovery, in particular, clearly needs a serious overhaul. It is described time and time again as a “morass.” Concerning electronic discovery, one respondent stated, “The new rules are a nightmare. The bigger the case, the more the abuse and the bigger the nightmare.”
Interim Report, at 3, item 2. Ideally, we could fix discovery. But that fix has eluded the Rules Committee’s best efforts for well over a quarter century. Since pursuit of the perfect was obstructing the accomplishment of anything good, it was past time to try something else.

At least at the moment, Twombly/Iqbal is that something. Is it perfect? Hardly. Is it better than where we were? We hope so, and we’re pleased to have the opportunity to find out.

Besides, from Prof. Mulligan’s comments elsewhere on the subject, we doubt whether he’s really interested in addressing the problem at all. Rather, he asserts that once plaintiffs allege anything about anything, that should get them to the jury, because only the jury decides credibility (“robs the jury of its historic role in assessing the veracity of civil allegations”). The suggestion that we continue tilting exclusively at the discovery windmill thus seems designed to perpetuate an unacceptable status quo.

Finally, it just isn’t that hard to plead the facts necessary to bring a "plausible" claim – but it's a lot harder to support a complicated and difficult-to-prove claim. Look at what Twombly and Iqbal were about. The first was an antitrust claim alleging a long-term, industry-wide conspiracy in a situation where such a conspiracy wasn’t economically plausible. The second alleged the involvement (maybe a conspiracy, maybe less) of multiple governmental officials, some extremely senior, to violate a prisoner’s civil rights. Those weren’t simple claims.

Simple claims are easy to plead. A simple product liability claim alleges that there was something wrong with a product (the drug warning didn’t mention something; the medical device broke), that there was no substantial change, that the problem caused an injury, and damages. A plausibility standard won’t cause much of a problem.

If something less plausible then turns up in subsequent discovery – the defendant intentionally suppressed evidence of the unwarned-of drug risk or deviated from the FDA-approved design of the device – that’s what amended pleadings are for. Amendments to pleadings are “freely given” where “justice so requires,” Fed. R. Civ. P. 15(a)(2), so that rare plaintiff who actually finds a smoking gun in discovery would be free to add whatever claims such a discovery would support.

Conversely, there is no justification for allowing the same sort of allegations to be made at the outset in the absence of any factual basis – nor is there a reason to permit a broad, vague claim of “FDA violation” simply to serve as a jumping off point for a fishing expedition.

We can hear the next objection coming from a mile away - "but Riegel requires a 'parallel' violation and if we can't plead it, we're out court." Right. That's not a problem with pleading, but rather a consequence of preemption. The whole purpose of preemption is to cut off claims. That's why it's so controversial. Riegel means that fewer PMA product liability claims should be brought, period. It doesn't give plaintiffs a license to allege "violations" that have no known basis in fact, and then force defendants through millions of dollars of discovery on the off-chance that something unknown might turn up. Congress has stated in the FDCA that violations are exclusively for the FDA to enforce. In cases where Riegel applies, the "plausibility" pleading standard ensures that the Supreme Court's preemption ruling is not evaded.

Carl Sagan once said that extraordinary claims require extraordinary proof. He should have been a lawyer. In today's legal environment, given the huge expense of discovery as a means of generating the necessary proof, at the outset extraordinary claims properly demand more rigorous pleading.

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