Wednesday, March 31, 2010

Loser Pays: Cost-Shifting In The Third Circuit

OK, we admit it. The title was a bit of a tease, and we realize that any plaintiffs’ lawyers who read no further may flood us with comments like “where do you think we are – England?” So just to be clear: this post does not talk about a successful defendant recovering attorney’s fee awards, even though we may think that is a fine idea to curb some of the litigation abuse and baseless claims we see on a daily basis in the mass tort world.

But the recent Third Circuit decision in Reger v. Nemours Found., Inc., __ F.3d __, 2010 WL 1135800 (3d Cir. Mar. 26, 2010) is still interesting to us, even though it’s a med mal case, for what it says about an award of costs to the victorious defendant pursuant to Federal Rule of Civil Procedure 54(d). Awards of costs typically do not include the “big ticket” items like attorney’s fees, deposition costs, expert fees, and trial support. In fact, in the two Nemours cases that were consolidated for appeal, the costs awarded amounted to only about $5,000 in one case and $21,500 in the other (although those plaintiffs claimed the cost award represented approximately 20% of their annual income). Certainly not chump change, but we’d imagine costs of defense were a wee bit higher than that. Rule 54(d)(1) states that costs “should be allowed to the prevailing party,” and the losing plaintiffs “did not contest the reasonableness of the items claimed,” Reger, 2010 WL 1135800, at *1 – so why did the 3rd Circuit have to get involved in a pro forma cost award?

Well, the plaintiffs/appellants raised two core complaints. First, they thought the district courts should have written an opinion when affirming the clerk’s award of costs. That’s not the interesting part; there should be nothing controversial about a court affirming the clerk’s award – it happens every day – and so no opinion is necessary. The court only needs to articulate its reasons if it exercises discretion to deny or reduce a cost award.

But the bigger issue – and the one that interests us – arose because plaintiffs argued that it would be unfair to assess costs given the financial disparity between the parties. Id. at *1-2. Plaintiffs complained that Third Circuit precedent should be overruled because it “effectively eliminated a party’s relative ability to pay as a consideration a district court may use in denying or reducing an award of costs.” Id. at *2. The Third Circuit rule is that a district court may consider things like true indigency and inability to pay when modifying a cost award, but mere wealth disparity is not enough to warrant a reduction. Id. at *2 n.3. Any other rule, of course, would amount to open season on any and all cost petitions filed by prevailing corporate defendants.

Of course, plaintiffs raised the specter (or spectre, since we’re being accused of anglophilia), of a “chilling effect” on med mal and personal injury cases should filthy rich defendants be allowed to collect costs from poor little plaintiffs. Id. at *3. The Third Circuit wasn’t moved by this impassioned plea, seeing nothing “chilling” whatsoever about a prevailing party seeking the costs to which it is entitled under Rule 54(d). In fact, the court suggested that maybe, just maybe, parties should “pause and calculate the risk of pursuing meritless or marginal claims.” Id. The prevailing party’s entitlement to costs should come as no surprise to anyone who has ever read the Rules of Civil Procedure. So listen up, plaintiffs’ lawyers, because the Third Circuit just sent you a pretty simple message: next time you decide to roll the dice with an iffy case, “it is incumbent” on you to “explain the risks of litigation” to your client – including the risk that they have to shell out costs when they lose. Id. No, it’s not fee-shifting – but at least it’s something.

Tuesday, March 30, 2010

Judge Posner on conflicts of law, statutes of repose and limitations, and forum non conveniens

On Friday, Judge Posner issued an interesting opinion in Chang v. Baxter Healthcare Corp., No. 09-2280 (7th Cir. March 26, 2010). The opinion affirms the dismissal on statute of limitations and forum non conveniens grounds of claims brought against U.S. companies by plaintiffs from Taiwan. Along the way, Judge Posner has some interesting things to say about: (1) California conflicts of law rules, (2) California’s “borrowing” statute, (3) statutes of repose and limitations generally, (4) the discovery rule, (5) fraudulent concealment (“Denial of liability when negotiating a settlement agreement is the norm; it is not evidence of fraudulent concealment of anything”), (6) the difference between the terms “arose” and “accrued,” (7) the difficulties in obtaining evidence in Taiwan for a case pending in the U.S., and (8) the relevance of differences in the foreign forum’s substantive law and statute of limitations to the forum non conveniens analysis. It’s Posner, so you’ll probably find it interesting. We do, but we have to be “speak no evil” on this one, since we represent one of the winning parties. In any event, we wanted our readers to know about it.

Monday, March 29, 2010

Shameless Plug for DRI Drug and Device Seminar

This is a guest post by J. Carter Thompson, of Baker Donelson, and it's for a good cause:

*************

DRI’s Drug and Medical Device Committee will hold its 26th annual Seminar on May 20-21, 2010, at the San Francisco Marriott, in San Francisco, California.  The Seminar is the preeminent program for practitioners who represent pharmaceutical and medical device manufacturers. The Seminar will feature a number of nationally recognized attorneys [editor's note:  including Bob Limbacher of Dechert], both in-house and outside counsel, and other professionals, who will address cutting-edge topics that are relevant to all who practice in this area, whether they are associates, lead trial counsel, or in-house counsel. This year’s program will offer a mixture of presentations, such as trial skills demonstrations, panel discussions and individual presentations from leaders in their practice areas. In addition to the outstanding program, there will be numerous networking opportunities, including the annual Young Lawyers Blockbuster.


Seminar speakers will address key topics such as the latest developments in preemption following Levine and Riegel, defending drug and device cases on the science, presenting clinical trial evidence to a jury, new developments in innovator liability, and defending consumer protection claims. Those who attend may earn up to 12.5 hours of CLE, including 1.0 hours of ethics.

See the Seminar Brochure to register or to learn additional information. The advanced registration deadline is April 30, 2010.

It's Always Convenient in Philadelphia

The authors of this blog live and work in the Philadelphia area. And that suits us right down to the ground. Despite a bad reputation from fans throwing snowballs at Santa (or the Mayor throwing them at the Dallas Cowboys), Philly is a terrific place, with unsurpassed historical (Independence Hall, Betsy Ross House, Valley Forge, Larry Fine) and cultural attractions (the Franklin Institute, Mutter, and Mummer museums - and soon the Barnes (thanks to its Lower Merion neighbors for running it into town).

Philly is an even more terrific place to be a litigator, especially in drug and device law. Look at a map and see how major pharmaceutical companies ring the Delaware Valley and line up from the top of the New Jersey Turnpike down to Wilmington, Delaware. Add to that the presence of extraordinarily aggressive and creative plaintiff lawyers in the City of Brotherly Love, and it's no surprise that so many of the most prominent drug and device lawsuits end up in our backyard.

Plaintiff lawyers love -- absolutely love -- to file mass tort lawsuits in the Philadelphia Court of Common Pleas (the good old "CCP"). And we're not just talking about Philadelphia plaintiff lawyers. There's no shortage of cowboy boots in City Hall (where CCP is located), because Texas plaintiff lawyers spend almost as much time here as in their home on the range, since the Lone Star state saw fit to pass real-live tort reform. Maybe that's because Philadelphia has been in and out of ATRA's "hellhole jurisdiction" list for years- not as bad as some places (most of West Virginia), but a lot worse than others (say, the state of Delaware, or Chester County PA (more on that later)). We have personally been in courtrooms where, in between the rumblings of the subway (rolling loudly directly underneath the building) judges issue rulings that can sometimes charitably be described as peculiar. (In a recent pharma case, the husband of a decedent was claiming loss of consortium. A plaintiff witness sadly described the husband as, in one word, "alone." The defendant was never permitted to mention that the husband had remarried. Explain that one.)

A number of the judges have a background as plaintiff lawyers (and the pay isn't very good, so a lot of what we get are former criminal defense and prosecutors who need a lot of on the job training in other legal areas). Judges here are elected, one party is all powerful (guess which one has 80%+ of all partisan registered voters), and plaintiff lawyers have been known to make the occasional campaign contribution - and no, there are no limits to individual contributions to judges in Pennsylvania.

All that being said, we think the pro-plaintiff reputation of Philly judges can be a bit overblown. Most of the judges apply the rules fairly and rigorously and prevent plaintiff lawyers from choking the life out of the Pennsylvania Rules of Evidence. No matter what one's background or political predilections, there's only so much of plaintiff lawyer overreaching, empty-pleading, lawsuit-warehousing, and jury-baiting that one can take.

If Malcolm Gladwell is right about huge amounts of experience (he said 10,000 hours) being the key factor in producing excellence, then we ought to see lots of excellence in Philly lawyers and judges when it comes to pharma litigation. Most of the people in the courtroom (including the clerical staff) have pretty much seen it all before. Experience produces efficiency and predictability....

...Except maybe when it comes to jury verdicts. It's probably more the reputation of Philadelphia juries that makes CCP so alluring to plaintiff lawyers. Some verdicts coming out of City Hall can themselves cause whiplash (we remember a couple of 9-figure verdicts - almost immediately set aside - to no-present-injury drug plaintiffs). Nevertheless, we feel compelled to rise to the defense of our brethren, as we've seen other Philly juries apply their well-honed cynicism (most are Eagles fans, after all) against bogus plaintiff claims and send those plaintiffs empty-handed back to Georgia, Utah, Texas, or wherever they come from.

And yet like army ants plaintiffs keep marching into our CCP. They come to Philly from far-flung nooks and crannies of the US -- or globe -- and sue companies that are (and even aren't) based in Philly. That sure keeps the local judges and juries busy, but with the city facing a huge deficit, it's hard to believe that's spending all this money to provide courtrooms, judges, juries, and all the rest for plaintiffs from all over will be looked upon favorably by city taxpayers facing budget cuts and a 12% property tax increase. Maybe the visitors bring some sort of jolt to the economy (some of those high-flying plaintiff lawyers down a lot of creme brulee and Johnny Walker Black at the Four Seasons), but we doubt that makes up for the strains imposed upon the local judicial system. We'll leave the economics of Philadelphia as a lawsuit capital to the Chamber of Commerce.

There is a legal doctrine that's supposed to act as a check on blatant forum shopping: forum non conveniens. We recently blogged about a New York court that sent Lipitor plaintiffs back on a midnight train to Georgia because the plaintiffs lived in Georgia, ingested the product in Georgia, suffered the alleged injuries in Georgia, all the doctors were in Georgia, and all the plaintiffs' witnesses were in Georgia. Pretty straightforward, right?

Not so much in Philly. In Hunter v. Shire, Inc., 2010 WL 937279 (Pa. Super. March 17, 2010), the court allowed a Georgia (what's with this Georgia diaspora?) plaintiff to maintain an action in Philly CCP even though, just like the plaintiff in the NY case, the plaintiff lived in Georgia, ingested the product in Georgia, suffered the alleged injuries in Georgia, all the doctors were in Georgia, and all the plaintiffs' witnesses were in Georgia. Why?

There's a long answer and a short answer. The short answer is that in the usual tug-of-war between plaintiff and defendant, where the plaintiff says the case is mostly about the defendant's conduct, and the defendant says the case is mostly about the plaintiff's conduct and injuries, the plaintiff won. The Hunter court agreed that the central issues in the case concerned the development, testing, and marketing of the drug, all of which were carried out by defendant's employees in Pennsylvania.

The long answer involves the usual forum non conveniens analysis. As a preliminary matter, the defendant cannot make the FNC argument without showing an alternative forum exists. That was no problem in Hunter, because Georgia actually has a court system. That's nice - even if Georgia plaintiffs don't like to use it. Next comes the balancing of the private and public factors. Here, the Hunter court reached a bad result by relying on an earlier bad decision, Wright v. Aventis Pasteur, Inc. 905 A.2d 544 (Pa. Super. 2006). Wright involved Texas plaintiffs, but change "Texas" to "Georgia" and you end up with an almost complete transposition of the Wright court's reasoning into the Hunter decision. Wright was wrong for a number of reasons, but the most maddening is that the appellate court reversed the trial court's decision to dismiss on FNC grounds, even though such dismissals are reviewed for abuse of discretion.

Anyway, back to the private-and-public-factor balancing test (and, as we all know, balancing tests are just fancy ways of reaching the result you want at the outset). The first private factor involves the deference given to the plaintiff's choice of forum. There must be "weighty reasons" to overturn the plaintiff's preference. The defendant pharmaceutical company argues that it is burdensome to travel to Georgia to depose plaintiff's medical providers. But the court concluded that the "central issue in this case does not involve [plaintiff's] consumption of the drug." Hunter, at *4. Huh? Rather, the case "primarily concerns [defendant's] development, marketing, testing, and knowledge of the risks of heart attacks associated with its use." Id. at *2. And then, of course, there is the "public factor" that the case involved the actions of a pharmaceutical company that marketed its products in Pennsylvania; in light of that fact, "the conclusion that the citizens of this state had no interest in the action was unsubstantiated." Sure. The citizens of Pennsylvania are desperately interested in raising their property taxes to let out-of-state litigants clog up their court system.

Here's what's wrong with Hunter (and Wright). First, the deference to plaintiff's choice of forum was overblown. In Piper Aircraft Co. v. Reyno, 454 U.S. 235 (1981), the Supreme Court made clear that the assumption that a forum is convenient is "less reasonable" when a plaintiff is foreign and therefore should be applied with less than maximum vigor. See also Sinochem Int'l Co. Ltd. v. Malaysia Int'l Shipping Corp., 549 U.S. 422, 430 (2007) ("When the plaintiff's choice is not its home forum ... the presumption in the plaintiff's favor applies with less force, for the assumption that the chosen forum is appropriate is in such cases less reasonable"). Relaxing the presumption in favor of plaintiff's choice of forum is especially appropriate when it appears that the plaintiff's choice was made based on forum shopping reasons, as opposed to some other rational basis. See Iragorri v. United Techs. Corp., 274 F.3d 65, 71 (2d Cir. 2001) ("[T]he more it appears that the plaintiff's choice of a U.S. forum was motivated by forum-shopping ... the less deference the plaintiff's choice commands.") Let's face it, the plaintiffs in Hunter and Wright (and their lawyers) were engaged in pure, unmitigated forum shopping. You'll see further proof of that shortly.

Second, the weighing of the factors was simplistic and one-sided. How can it reasonably be said that the case is all about defendant's conduct, when issues of specific causation, reliance, and damages are at least as likely to lead to resolution of the case? It's hard to believe that the number of company witnesses will add up to more than than the plaintiff, friends, family, and doctors. Moreover, at least some company witnesses are likely to come to trial, even if they must travel a considerable distance. By contrast, there is no way to compel treating doctors to interrupt their busy medical practices and fly up to Philadelphia to describe their care of the plaintiff. We hope that, at a minimum, the defendants in Wright and Hunter are allowed to argue to the jury that, "Ladies and Gentlemen, the treating doctors are the most important witnesses in the case. They have no axe to grind. The proper care of the plaintiff is their highest concern. As you heard from the reading of their deposition transcripts [or saw in the video], they think the plaintiff needed this medicine, that the medicine helped the plaintiff, and that the medicine didn't harm the plaintiff at all. Now, we would have liked for you to have been able to see the doctors here in court, live and in person. But plaintiff's lawyers made the decision to file their lawsuit in a jurisdiction hundreds of miles away from where the plaintiff and his doctors live, so that, unfortunately, just wasn't possible." You can even get an adverse inference instruction in Pennsylvania against a plaintiff who fails to call treating physicians. Bowman v. Plumbarama Co., 53 D. &. C.4th 434, 437-38 (C.P. Philadelphia Co.2001), aff'd mem., 797 A.2d 367 (Pa. Super. 2001) (full text at 2001 WL 34394456).

We mentioned above that the plaintiff in Hunter was engaged in unadulterated forum shopping. What's our proof of that? It arrives in the last part of the Hunter opinion. 2010 WL 937279, at *5-6. The issue in that case wasn't just whether the action should have been in Pennsylvania or Georgia, it was also whether the case should have been filed in Philadelphia County or Chester County. Pa. R. Civ. P. 1006(d)(1) "embodies the doctrine of forum non conveniens as between counties in Pennsylvania." Remember how the court decided that the Pennsylvania forum was convenient because the case was about Shire's conduct and Shire was located in Pennsylvania? The location of the defendant's employees was a really big deal to the court. Well, Shire is located in Chester County, not Philadelphia County. To be more specific, Shire's corporate headquarters are located in Chester County. As the Supreme Court recently held in a case on diversity jurisdiction, a corporation's principal place of business is almost always going to be its corporate headquarters. Hertz Corp. v. Friend, 2010 U.S. LEXIS 1897 (Feb. 23, 2010).



But a lawsuit in Chester County means a suburban court, with a suburban (probably Republican) judge and, egad, a suburban jury. Plaintiff sure as heck didn't want that. Why, that would be as bad as a Georgia jury!

But facts are facts, and geography is as plain as a map, so how does the case remain in Philadelphia County? The court offers three reasons. The first is that old bugaboo, deference to plaintiff's choice of forum. 2010 WL 937279, at *5. But, again, plaintiff is a foreigner so such deference is attenuated. Second, "Chester and Philadelphia Counties are adjacent to each other and are readily accessible in a short amount of travel time." Id. at *6. Now that's a rarefied judicial principle. There are several counties adjacent to Chester. In actual fact, Philadelphia County is NOT adjacent to Chester County. But it is adjacent to a county that's adjacent to Chester County. And it's certainly the nearest county that has occasionally been designated a Judicial Hellhole. And, aside from that fact, there is no imaginable reason for the case to be litigated in Philadelphia. Third, the defendant did not "demonstrate with detailed averments in its petition and accompanying brief why the chosen forum was vexatious or burdensome to it." Id. We don't know what evidence was submitted by defendant, and we don't know what sort of issues would have passed muster under the Rule 1006 FNC "test" (child care issues for company employees, erection of a Berlin Wall along the County Line, a pathological fear of cheesesteaks?), but the lesson seems to be that a defendant had better be energetic and creative in cobbling together evidence of inconvenience.

Finally - Irony alert: Chambers this year ranked the Pennsylvania judicial system as 34th best in the country in terms of "fairness of litigation environment." That's a swell improvement over 2008, when we were only 36th. Want to take a stab as to Pennsylvania's highest ranking category? "Having and enforcing meaningful venue requirements."

In the meantime, welcome to Philadelphia. Enjoy our judicial system (while we pay for it). Have a pretzel. And call us.

Thursday, March 25, 2010

Litigation - Has The Process Become The Purpose?

Richard Nagareda, law professor at Vanderbilt, is a really smart guy.  Bexis got to know him while Professor Nagareda was one of the Reporters for ALI’s Aggregate Litigation Principles Project and Bexis was a defense-oriented gadfly on the Members’ Consultative Group for that project.


Anyway, they kept in touch, and he’s given us a sneak peek at his latest paper entitled “1938 All Over Again? Pre-Trial as Trial in Complex Litigation.” It’s also supposed to be available here, and maybe it is, but we Luddites couldn’t get that site to work right, and had to beg him for a copy.

The primary thesis of the paper, in a nutshell is that, just as in 1938 when the original Federal Rules were adopted, we’re approaching a crisis point of sorts where issues of procedure are threatening to create an unacceptable level of distortion in the substance of litigation. That’s the first half of the title. The second half of the title reflects the paper’s secondary thesis – that the function of litigation as dispute resolution has evolved from resolution by trial to resolution by settlement . That’s what Professor Nagareda says on the very first page: “Settlement rather than trial has emerged as the dominant endgame of civil litigation, especially litigation complex in substance or procedural format.”  Paper at 1.

Now, being defense lawyers rather than academics, we’d quibble with that a bit.  We think there’s a third option – dismissal.  But in the context of mass torts, where the other side can send plaintiffs at you like regiments at the Somme, dismissals are now mostly part of pre-settlement maneuvering.  Only if we've got a really powerful defense, like preemption in In re Medtronic, Inc. Sprint Fidelis Leads Products Liability Litigation, 592 F. Supp.2d 1147 (D. Minn. 2009) (discussed here), or we can take advantage of a really dumb decision by the other side, see Maestas v. Sofamor Danek Group, Inc., 33 S.W.3d 805 (Tenn. 2000) (1500 cases dismissed where plaintiffs conceded a uniform discovery date outside the statute of limitations and then lost on tolling), do mass torts end in outright dismissal.

But then, you can say the same thing about trials. Maybe we’re forgetting something, but we can’t think of a trial outright ending a mass tort, one way or the other, since that big Bendectin mass causation trial well over twenty years ago.  See In re Bendectin Litigation, 857 F.2d 290 (6th Cir. 1988).
Professor Nagareda pursues the “disappearing trial” notion as key to the rise of procedure, rather than trial, as the driving force in modern litigation. He quotes stats, that we’re sure are accurate, that the rate of trials has dropped by 90% – from almost 19% of all cases back in 1938, to less than 2% today.  Paper at 1. That’s the truth, but we don’t think it’s the whole truth.  We suspect that there are every bit as many trials (that is, the numerator of the fraction) now as back then, rather it’s the total number of cases (the denominator) that has changed radically.  It's easy enough to find modern statistics, but it would take more time than it's worth to us to dig up decades old statistics to compare them to.

If there hasn't been a litigation explosion, then a lot of lawyers have spent a lot of money for nothing for a long time.  That's because a major sea change in litigation – something Professor Nagareda’s paper never mentions – is the extension of First Amendment protection to lawyer solicitation.  From auto accidents (in Philly, any non-at-fault driver in any accident reported to the police can expect at least two lawyer solicits) to prescription drug mass torts (just google the name of any drug that’s been mentioned in litigation) lawyer solicitation is now all around us.  That certainly wasn't the case in 1938.  So we think that the disappearance of trial is more of a relative than an absolute thing.

But that doesn’t make the phenomenon Professor Nagareda discusses any less real.

In response to this explosion of litigation, Professor Nagareda posits, the courts have successively elevated four procedural pinch points to try to winnow out the wheat from the chaff.  These are:  (1) summary judgment, (2) Daubert/expert admissibility, (3) class certification, and (4) Twombly/Iqbal/Rule 8/12 motions to dismiss. Paper at 13-20.  While we quibble with one chronological aspect of his analysis (as tort lawyers we push the date of the crackdown on class actions back to Amchem/Ortiz in the mid-90s, and the “rigorous analysis” language in GE v. Falcon, 457 U.S. 147, 161 (1982)), we think that the analysis as a whole is spot on.  In our “Taking Stock” post, the last three of those four items took the top three spots as the most favorable legal developments of our careers.  Summary judgment would have made that list as well, except we were mere babes in the woods then and there was no way we could claim any credit (or blame) for that.

Professor Nagareda also draws a distinction between pinch points that are “variance” related and those that are “cost imposition” related.  By “variance” he means sorting out cases that vary from their “expected value” chiefly by being really lousy cases.  “Cost imposition” is less jargony.  That means, duh!, a decision that does (or conversely, does not) impose litigation costs on a party (almost, but not always, our defendant clients).  With the litigation explosion bring hordes of nuisance cases into the system, the Nagareda paper recognizes (at some length, see pp. 4-6, 8) the effect of what it calls “p” – which stands for “probability of success.” Id. at 8.

The most important concept in the paper, as it serves as the jumping off point for just about everything that follows, is:

As p approaches zero, the settlement zone for a given lawsuit will tend to be defined primarily by the sum of the two sides’ litigation costs. Low-merit or unmeritorious litigation, in other words, has a settlement value that depends largely upon what one might call the overhead associated with the process of discerning that p is zero or nearly so.
Paper at 8. Basically, this is the academic way of defining what litigators call “nuisance value.”

In mass torts, nuisance value is the name of the game.  Between the enormous cost of discovery and the proliferation of bad cases brought about by the solicitation-driven litigation explosion, the “p” of a lot of cases is essentially the amount of discovery that courts permit plaintiffs to put defendants through.  That can be quite a lot in the modern mass tort model of litigation.  The idea is to file so many cases that the defendants, and more importantly the courts, are deterred from ever examining the merits of more than a small fraction.

And that brings us to Twombly/Iqbal – to which the Nagareda paper is ultimately directed. The first three of the pinch points: summary judgment, Daubert, and class certification, Professor Nagareda asserts, all dealt with variance, that is determining when cases are so weak that they should be dismissed on the merits before going further into litigation or to trial.  Paper at 20-24.  Twombly/Iqbal, on the other hand, “marks a shift in emphasis."  Id. at 24.  Rule 8/12 dismissal on the pleadings involves “cost imposition rather than variance.” Id.

There’s another place where we part company somewhat from Professor Nagareda – although we certainly understand why he thinks that way.  After all, as we pointed out recently, that’s how the Supreme Court in both Twombly and Iqbal framed its rationale.

But we think that the idea of a “plausible” complaint is also directed towards the a action's lack of intrinsic merit – and at the deepest level.  If a lawyer pleads a fact-free complaint full of legal conclusions that simply parrot the elements of a cause of action, that means one of two things:  (1) the lawyer’s simply lazy, in which case s/he should be forced to replead something that resembles a real cause of action, or (2) facts aren’t pleaded because the lawyer does not posses any facts that would establish a cause of action.

To us both alternatives, and especially the second, impact directly on the merits.  As we explained in detail in that earlier post, all of the elements of a pharmaceutical product liability cause of action are theoretically available to the plaintiff, either through medical records, drug warnings, or the opinions of expert witnesses available to hire.  If plaintiffs don’t plead them – or worse, can’t – they’re just hoping to use a fishing expedition to drive up the nuisance value of the case while hoping for something, anything that might make a case that they don’t have when they file it.

So we view Twombly/Iqbal as also being directed to the merits.

That being said, we certainly can’t, and don't, deny that tightening up Rule 8/12 is likewise directed at cost containment. In that sense it’s not that much different than class certification, though, since one of the basic rationales (again, as we mentioned in the earlier post) for doing with the earlier “when in doubt, certify” precedents, was the creation of intense pressure to settle regardless of the merits brought about by the sheer size of class actions.

But let’s return to the thesis of the paper:  how procedure is disrupting resolution of claims on the merits. Professor Nagareda posits that, in 1938, the motivation for the Federal Rules was that hypertechnical pleading was disrupting the ability of the litigation system to resolve cases at approximately their true value through trial.  Now, the need for change is that the extreme costs of discovery disrupt the ability of the litigation system to resolve cases at approximately their true value through settlement (or, we’d add, dismissal).  Paper at 25.

But, warns Professor Nagareda, the Supreme Court’s chosen method for addressing discovery costs is “indirect.”  Rather than regulating discovery directly (as one learns in driver's ed, the way to pass a truck is to pass the truck), the Supreme Court has required courts to identify those “implausibly” pleaded cases that shouldn’t be allowed discovery at all.  Paper at 25-26.  The Court even “derides the enterprise of direct judicial regulation of discovery abuse.”  Id. at 26.

Up to that point, we find ourselves nodding in agreement.  But then, we were hoping to find some acknowledgment that the Supreme Court had a point.  We believe there are quite valid reasons to be dismissive, even derisive, of the prospect for direct regulation of discovery abuse.  That's because for decades, the discovery rules have been amended and then amended again.  We’ve had pretrial conferences, self-executing discovery, and multitudes of local rules.  Nothing’s worked.  Discovery only gets more and more expensive – especially in complex cases.  And then electronic discovery happened.

Nuff said.

We, at least don’t blame the Court for trying something completely different.

But that doesn’t seem to bother Professor Nagareda.  He’s more interested in the “informational base” – specifically:

The problem is that, when judicial scrutiny of plausibility is to occur, the informational base on which the court may ascertain whether variance is normatively good or bad is itself quite thin, precisely because discovery has yet to take place.
Paper at 26-27.

We’ve thought about that, too.  We eventually came to the conclusion – typical defense lawyers that we are – that the point of the whole exercise is to decrease the amount of litigation.  Therefore, if a substantive cause of action depends upon hard-to-know, and thus hard-to-plead facts, that’s because the substantive law intended it that way.  The source of the law, be it courts or legislatures, wishes that such causes of action not be overused by litigants.

Professor Nagareda, by contrast, at times equates private litigation with “any other regulatory enterprise.” Paper at 28.

Therein, we think, lies part of the problem. Courts were not set up to be regulatory enterprises. They can serve that purpose, but compared to administrative bodies they’re expensive and cumbersome. The explosion in litigation (abetted, if not caused, by Conley anything-goes pleading) has been accompanied by a sense, held by lawyers, many judges, and law professors, too, that litigation is the best means to solve everybody’s problems.  We don’t happen to think that’s true.  Many of the hard-to-plead causes of action that have “information base” problems, we suspect, should best be left to true “regulatory enterprises” and not be addressed by civil litigation.

So, anyway, what do we do with this postulated reprise of 1938?  The first time around brought us the famously “transsubstantive” Federal Rules.  As we’ve suggested elsewhere, maybe with some causes of action that society chooses to favor – certainly not product liability litigation, we say – it’s time to retreat from transsubstantiveness (assuming that’s that word, since transubstantiation means something else).  One of the benefits we see is that Twombly/Iqbal places the burden of inertia, that is getting the legislature to act, as with the burden of proof, back on the plaintiff side where it belongs.

Professor Nagareda’s solution, however, remains mostly transsubtantive. Although hinting at possible specific fixes, Paper at 32 (discussing immunity), he would rather tinker with the rules some more.  One of his suggestions, we don’t really like:

the law might provide for the shifting of discovery costs post-pleading and pre-summary-judgment in the event that the court ultimately grants summary judgment for the responding party
Paper at 35.  That sounds good, but the problem, which we wished the Paper had discussed, is that courts don’t like to award sanctions – at least against poor little plaintiffs suing big bad corporations.  If a summary judgment motion came with a mandatory cost-shifting provision, then courts would be a lot less likely to grant summary judgment.  Generally, we like being out of litigation even more than we like taxing costs.  That’s why, everything else being equal, we’ll almost always trade possible costs for the plaintiff giving up an appeal.  Even when our clients are absolutely entitled to costs, as when we’ve won an appeal, courts all too often decide to cut the other side a break because our clients are big and the other side isn’t.

Besides, as Professor Nagareda recognizes, Paper at 35-36, we’d rather have Twombly/Iqbal and not have to worry about discovery at all.

Then there’s the other solution offered by the paper, the “informative ruling.” Paper at 38. That’s law-professor-speak for what we litigators usually call “without prejudice.”  Instead of the Rules’ current series of procedural steps that provide on/off switches for litigation, Professor Nagareda discusses a proposal that (both to him and to us) sounds a lot like alternative dispute resolution, only within the judicial context – the “preliminary judgment.”  Id. at 40-41.  What this would entail is before discovery, both sides giving the judge their best shot, and the judge responding by putting a number on the case.  That number would be used to encourage settlement.  Id. at 41 (“the anchor generated by the preliminary judgment would remain as a desirable source of influence on bargaining”).

It’s an interesting thought, but it still doesn’t solve the basic problem with non-binding arbitration, which is if the other side is bound and determined to use discovery costs to drive up the nuisance value of a bad case, that isn’t going to stop them.

But Professor Nagareda’s article has got us thinking.  Maybe there’s a way to combine the features of both of these ideas.  We haven’t thought this through entirely, but it would be possible to add attributes of the cost-shifting summary judgment motion discussed on pp. 35-37 of the Nagareda paper with the “preliminary judgment” idea presented on pp. 40-42?  That is, one goes through the preliminary judgment procedure of both sides presenting what they know about the case pre-discovery and the judge putting a dollar value on it. However, the judge doesn’t disclose what this number is at that time.  Then both sides are required simultaneously to submit their own numbers for their best estimate of what the case is worth.

That’s the preliminary judgment part of it.

What we see happening next is a form of cost shifting.  All three numbers are revealed, and the position of the judge’s number within the range provided by the party’s respective numbers determines who pays what for discovery.  To take an entirely hypothetical – but not unusual – situation, suppose that at the early stage, the plaintiffs unrealistically sought $500,000 and the defendant obdurately offered nothing at all.  That’s the range.  If the judge’s number were $100,000, that would be 20% of the plaintiff’s demand.  Such an outcome would then require that the plaintiff pays 80% of the defendant’s discovery costs, and the defendant pays 20% of the plaintiff’s costs. If the judge estimated that the case was worth $400,000, then the percentages would be flipped.

It’s a half-baked idea, we admit it.  We haven’t considered what to do, for example, if both parties’ numbers were more or less than the judge’s.  But as far as we know it’s an original idea, and it has some valuable attributes.  On the one hand, it doesn’t make cost-shifting dependent on an existing motion and thereby reduce the likelihood of that motion itself being granted.  On the other hand, it puts some teeth in a preliminary judgment process, which if lacking any mandatory force, and could well end up as mere busy work.

So we throw that idea out there for the academic types to tear apart.

Thanks, Professor Nagareda, for your provocative article.

Wednesday, March 24, 2010

For Whom The Pipe Tolls? Not Fosamax Plaintiffs

We’ve previously argued that courts should eliminate class action tolling of the statute of limitations in the mass tort context. In a nutshell, we see the rule first announced in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974) – allowing for tolling of the statute of limitations for all members of a putative federal class until the court’s class certification decision – to be a bit hoary in the current fast-paced, go-go world of MDL and state consolidations and mass actions. Pipe tolling is especially annoying in the mass tort personal injury context, where we all know that plaintiffs have a low likelihood of getting a class certified in federal court, and thus the filing of a class action feels like either: (1) a not-so-clever ruse to toll the statute of limitations while plaintiffs’ lawyers go out and solicit real-life, individual clients, or; (2) a not-so-clever ruse to get a seat at the table when the court picks the plaintiffs’ lawyers who will serve as “lead counsel” in the inevitable MDL/consolidation. There’s also the potential for real abuse of the doctrine, as individual plaintiffs may try to claim they are entitled to tolling of very different claims than those asserted in the class action.

While we wait for the courts to wake up and realize that Pipe tolling makes no sense for personal injury mass torts, we take some solace that at least the doctrine isn’t being abused too much every time we see a decision like this one from the Fosamax MDL out of the Southern District of New York. In re Fosamax Prods. Liab. Litig., 2010 U.S. Dist. LEXIS 23885 (Mar. 15, 2010). The quick procedural rundown, which is always important in Pipe tolling cases: (1) In 2005, plaintiffs file a nationwide personal injury class action in federal court in the Middle District of Tennessee (thank you, CAFA); (2) the case gets sent to New York as part of the MDL, where (insert ironic gasp here) the court denies class certification in 2008, 248 F.R.D. 389 (S.D.N.Y. 2008); (3) while the class action is pending, three Virginia plaintiffs file individual personal injury lawsuits (in 2007 and early 2008); and (4) a fourth Virginia plaintiff files her personal injury lawsuit a few months after class certification is denied.

The defendant moved for summary judgment, claiming that all four Virginia individual cases were barred by the statute of limitations. There was no dispute that Virginia’s two-year statute of limitations applied. Id. at *4. There was also no dispute that the four plaintiffs filed their individual lawsuits more than two years after they sustained their alleged injuries. Id. Case closed, right?

Not so fast, said the plaintiffs. They claimed that the Virginia statute of limitations should have tolled on their claims during the pendency of the class certification decision in the MDL, thanks to American Pipe and its progeny. Id. at *5-6. The court rejected this argument, and in doing so, refused to expand Pipe tolling to allow for “cross-jurisdictional tolling.” This is kind of a big deal in Pipe-land (which is a land ruled by egg-heads) – so big of a deal that we’ve written about it on a bunch of occasions, and even have a cross-jurisdictional tolling scorecard. Cross-jurisdictional tolling addresses the following scenario: Class action is filed in jurisdiction A. Subsequently, a putative class member files a lawsuit in jurisdiction B. Did the statute of limitations for the claims filed in jurisdiction B toll during the pendency of the jurisdiction A class certification decision?

Of course, for a federal court sitting in diversity and determining whether a state statute of limitations tolls for a state-law claim, the federal court has to apply state statutes of limitations, including state tolling principles. So the question becomes, what does the state law have to say about whether it’s adopted an expansive version of American Pipe tolling for a class action filed in another jurisdiction? Often, the answer is a deafening silence. In those cases, the federal court sitting in diversity has two choices: (1) decline to import cross-jurisdictional tolling absent a clear and explicit sign from the state’s legislature or highest court that the state is one of the few where the doctrine has been adopted; or (2) take a wild shot in the dark and guess that the state would adopt cross-jurisdictional tolling – they just haven’t gotten around to it yet. The Fosamax court took the high road, noting that “federal courts generally have been disinclined to import cross-jurisdictional tolling into the law of a state that has not ruled on the issue.” Id. at *8-9. We agree, and call the first approach a well-reasoned attempt faithfully to interpret applicable state law and respect the principles of comity and federalism. We call the second approach judicial activism. So, if we’re going to have to live with Pipe tolling for a while, at least we have courts like the Fosamax court refusing to expand the doctrine.

Tuesday, March 23, 2010

No harm, no foul

It’s March Madness time, and the language of basketball fills the air. One expression that has moved from the basketball courts to everyday language is “no harm, no foul.” “No harm, no foul” (in tougher games, no blood, no foul) is the response to a claim that a foul should be called for an allegedly improper act. If the act did not hurt anyone or affect the play of the game, then the referee should not call a foul. The recent decision in Watkins v. Omni Life Science, Inc., No. 09-10857-RGS (D. Mass. March 9, 2010) applied this rule to dismiss a class action.

The plaintiffs in Watkins sought to bring a class action on behalf of recipients of the Apex Model Replacement Hip. According to the complaint, the Apex Hip failed more often than other replacement hips. But the plaintiffs’ Apex Hips had not malfunctioned, and their proposed class specifically excluded people whose Apex Hips had actually failed or malfunctioned.
Plaintiffs claimed that the relatively high failure rate of Apex Hips put them at serious risk of future harm, and they brought a litany of claims, including breach of implied warranty, breach of contract, unjust enrichment, and violations of the consumer protection laws of Massachusetts and all other states. The defendant moved to dismiss this nonsense, based on that well-known rule followed in all kinds of courts, and the court agreed.

Before reaching the merits, the court decided to apply the law of Massachusetts, Omni’s principal place of business, because that is the only state with a substantive tie to all class members. Id. at 5. We have written before that courts usually apply the law of the place where the plaintiff received the product and allegedly was injured, which usually means that the laws of 50 states apply to claims by a nationwide class of plaintiffs and that class certification therefore should be denied. We don’t approve of the Watkins court’s considering the pendency of a class action claim in choosing which state’s law applies, as the same state’s law should apply to a plaintiff’s claim whether the plaintiff brings a claim individually or as part of a class action. Normally we would hit the court with a full-court press on its choice of law ruling, but since the court ultimately dismissed the complaint, we’ll call no harm, no foul.

The court then considered Omni’s argument that all claims should be dismissed because plaintiffs did not plead a legally cognizable injury. Massachusetts follows the economic loss rule, under which purely economic losses can’t be recovered in tort actions absent personal injury or property damage, and applies that rule to tort claims dressed up as contract claims and consumer protection claims. Id. at 6-7. The court cited this rule in rejecting plaintiffs’ claim that they were injured by paying extra money for their supposedly overvalued Apex Hips. Id. at 8.

Plaintiffs also claimed that their replacement hips had a “diminished market value,” but no one took that claim seriously. Maybe we should check eBay before saying this, but we doubt that there is much of a market for used replacement hips or that the plaintiffs were going to pluck their hips out and sell them on the open market.

Plaintiffs maintained that they were really injured because they had “the apprehension caused by the prospect of an increased risk of hip failure.” Id. at 7. Nonsense, the court said. “Apprehension of a heightened risk stemming from an allegedly defective product that has not failed or caused harm is insufficient as a matter of law to support a claim.” Id. at 8. Of course that makes perfect sense: you can’t ask the ref to call a foul just because you are worried that another player will foul you. You have to wait for actual harm before asking referees or courts to take action.

We understand how this happens: a plaintiffs’ lawyer reads about a problem and advertises on the internet, saying that anyone with an Apex Hip should contact the lawyer. Inevitably some people contact the lawyer with Apex Hips that are working just fine. The better plaintiffs’ lawyers will understand the “no harm, no foul” rule and turn those potential clients away. But some plaintiffs’ lawyers will see all potential clients as potential revenue streams and will try to figure out a way to turn that inventory into money – for the plaintiffs’ lawyer. The lawyer may have visions of a class action resulting in a settlement giving the plaintiffs’ lawyer millions of dollars in fees and the clients coupons for 10% off replacement hips. But our no injury scorecard, which is filled with similar unsuccessful class action claims, shows that judges who know what they are doing will dismiss those claims. Hungry plaintiffs’ lawyers might take a look at that scorecard before wasting their time on claims without real injuries.

Omni also argued in the alternative that the fraud claims should be dismissed under Fed. R. Civ. P. 9(b), which requires plaintiffs to plead detailed facts if they want to bring fraud claims. Plaintiffs made the formulaic misrepresentation claim that Omni knew about and concealed an alleged design defect in the Apex Hip, but then the facts got in the way. The court found that the complaint’s allegations by themselves might have survived a post-Twombly motion to dismiss, but dismissed the fraud claims because the exhibits plaintiffs attached to the complaint showed that Omni actually had publicly disclosed test results suggesting problems with the Apex Hip. Op. at 11-12. In other words, the alleged misrepresentations caused no harm, because the true facts were disclosed to consumers, and therefore no foul fraud claim could survive dismissal.

Fifth Circuit: No, you can't prove Requip causes gambling

What happens is Vegas should stay in Vegas - and should not be turned into a product liability suit.  That's the takeaway from Wells v. SmithKline Beecham Corp., No. 09-50244, slip op. (5th Cir. March 22, 2010).  Somebody who had been gambling (and losing) for more than thirty years tried to claim that a medication for Parkinson's disease causes him to lose still more after he began taking the drugs.

As the Fifth Circuit, observed, none of plaintiff's three experts could say that the drug caused gambling:  Expert #1 ("we don’t have enough data to suggest causality"); Expert #2 ("has a cause-and-effect relationship been established . . .?  No.”).  Expert #3 ("I cannot say [the drug] directly causes [pathological gambling].  What I can say is that there is an association between the two variables. . . .  [T]hat’s different than talking about the issue of causation.”).  Slip op. at 6.

Umpire Daubert says, "strike three, your out."

Amazingly, the plaintiff appealed.  The Fifth Circuit rung the plaintiff up again:
While “[w]e . . . understand that in epidemiology hardly any study is ever conclusive, and we do not suggest that an expert must back his or her opinion with published studies that unequivocally support his or her conclusions,” here there is simply too great an analytical gap between the data and the opinion proffered.  And the bases for the experts’ conclusions pass none of the applicable Daubert tests:  that [the drug] causes problem gambling is not generally accepted, has not been subjected to peer review and publication, and is not backed by studies meeting requisite scientific standards. Without the expert testimony, Wells cannot prove general causation – and judgment must be entered for GSK.
Slip op. at 8-9 (footnotes and other stuff omitted).  "[T]he scientific knowledge is not yet there."  Id. at 9.

And don't bet on baseball, either.

We're told that congrats to Marcy Greer, Stephanie Smith, and Stacey Martinez of Fullbright & Jaworski, and to Cindy Bennes of Phillips Lytle.

Monday, March 22, 2010

We're Not Neutral on Twombly/Iqbal

We recently took an ivory tower tour to see what academics were saying about Twombly/Iqbal. Not surprisingly, we found more disapproval than approval, and more complexity than clarity. One law review article, Effron, "The Plaintiff Neutrality Principle: Pleading Complex Litigation in the Era of Twombly and Iqbal," 51 Wm & Mary L. Rev. 1997 (2010) (hereinafter "Effron"), quotes us on the applicability of Twombly/Iqbal to MDL master complaints.


First, thanks for noticing, Professor. We're glad to see folks in the academy pay some attention to what actual practitioners think about the prominent legal issues of the day. Second, while we find parts of the article to be closely-reasoned and creative, we think the idea of narrowing Twombly/Iqbal to make the plausibility requirement more palatable is like saying half a loaf is better than none. Right now, we still think we're entitled to the whole loaf.


Let's start with the title of the article, focusing on that "Neutrality" word. Our business is advocacy. From where we stand, there isn't much neutrality in sight. We argue for our client's positions and cite to "neutral" principles when they are helpful and convenient. Plaintiff lawyers do likewise. Why? Courts necessarily say they like neutrality. When we were in law school in the Pleistocene era (well before the "Era of Twombly and Iqbal"), we were compelled to read a lecture by Columbia law professor Herbert Wechsler titled "Toward Neutral Principles of Constitutional Law." It's been a long time since we thought about that lecture.


Neutrality is a tool that takes one only so far. Kant and Rawls built entire philosophies around the concept of neutrality. What's the categorical imperative but a mental exercise where you pretend you might be any random member of society before deciding how you'd like a certain set of arrangements? But it's a strange, counterfactual mind-game, and it seems oblivious to huge chunks of human experience. Rawls's Theory of Justice pretends people aren't the passionate, risk-taking bundles of neurons they really are. The only time we've found the neutrality principle to work is when we've told our kids that one cuts the pie then the other chooses. We've found more wisdom in the philosophy of Thomas Hobbes, not just because "solitary, poor, nasty, brutish, and short" perfectly described our junior prom date, but because he said that "Reason scouts and spies for the passions."


We're not neutral when we litigate cases. Plaintiff lawyers aren't neutral. Sad to say, but most judges don't come across as neutral. If they don't favor a side, they often seem to favor docket control, or passing frail cases along to juries so as to avoid tough decisions. Maybe gatekeeping should be neutral, but gatekeeping is hard work.


All of which is to say that Professor Effron's "plaintiff neutrality principle" strikes us as an unlikely way to reconcile hostile plaintiffs and hostile courts to Twombly/Iqbal. If we understand it correctly -- and the fog of academia renders that unlikely -- Effron thinks that Twombly/Iqbal should be relaxed for allegations that plaintiffs make about their own conduct: "[F]actual allegations of a plaintiff's own conduct, or condition for which there are both lawful and unlawful explanations, are sufficient to state a claim." Effron at 2047. The "plaintiff neutrality principle" ends up being a non sequitur for the most part when it comes to mass tort litigation. Complaints in our neighborhood tend to fall down on the job with respect to pleading conduct of defendants, prescribing doctors, and regulators. For example:


  • What is the defect?

  • What should the warning have said?

  • How were the plaintiff's doctors affected by anything the defendant said, did, or did not say or do?


As for plaintiff's own conduct, we don't see why it's asking too much for a plaintiff to say when she used the product, and how she was injured. Given that such information is uniquely available to plaintiff, Effron's proposal to relax the standards for pleading such facts is a little hard to understand. Forget about "plausibility" -- we usually don't get any facts at all on these issues. We get little, formulaic sweet nothings. That is especially true when plaintiffs' counsel are filing thousands of cases where they seem remarkably unaware of the facts relating to their own clients. More on that later.


So how does our cheery little blog make a cameo appearance in this law review article? Effron addresses how the "plaintiff neutrality principle" works with group allegations, which can require a plaintiff to speculate as to facts regarding other plaintiffs. That happens in class action complainst, as well as in -- ta da! -- MDL master complaints. Effron quotes our August 2009 post on the Nuvaring MDL where we wondered whether MDL master complaints might make it more difficult to test plaintiff-specific pleadings, such as whether there are any facts "affirmatively indicating that the defendant's promotion affected his or her prescriber." Effron at 2059. Then Effron quotes the Nuvaring judge's ruling that inspired our post, where the judge denied a motion to dismiss the master complaint because "the master consolidated complaint in this action was simply meant to be an administrative tool to place in one document all of the claims at issue in this litigation." Id., quoting In re Nuvaring Prods. Liab. Litig., No. 4:08MD1964 RWS, 2009 WL 2425391, at *2 (E.D. Mo. Aug. 6, 2009). Perhaps you will recall that rather than rule on the motion to dismiss the master complaint, the Nuvaring judge struck the complaint and asked plaintiff to file individual complaints. Not surprisingly, those individual complaints were broad, formulaic documents bereft of key factual allegations. And yet the judge seemed surprised and disappointed when the defendant moved to dismiss those complaints, and he proceeded to deny those motions rather forcefully.


It was starting to smell like at least one judge believed that Twombly and Iqbal are banned from MDL cases. Indeed, the Nuvaring plaintiff lawyers argued exactly that in an article praising the result and attacking some of our blog posts on the case. We registered our disagreement in a cogent, balanced, tasteful little ditty.


Where does Professor Effron stand in this high-minded debate? Well, we're not so sure. We don't speak law review-ese, at least not fluently, so we have trouble translating the following: "The Nuvaring judge's conclusion that a MDL master complaint is not an appropriate target for a motion to dismiss is a rather blunt tool for protecting the integrity of aggregated complaints at the outset of litigation, especially because it gives rise to the not unreasonable charge that the judge has carved out MDL complaints as an exception to the Iqbal standard for pleading." Effron at 2060. Let's re-read that. Okay, we'd like to think Effron mostly agrees with us. We like the "blunt tool" point. And we enjoy being called "not unreasonable." That's high praise from an academic. But excuse us if we choke on the phrase "integrity of aggregated claimants." Where's the "integrity" of a cobbled-together inventory of cases for which the lawyers have trouble finding facts or, for that matter, their own plaintiffs?


Here is Effron's proposed alternative: "[J]udges should use the plaintiff and group plaintiff neutrality principles to evaluate plaintiff directed allegations in a complaint and dismiss a master complaint for insufficient factual allegations in only two situations: (1) when the allegations of defendant or third-party conduct are implausible according to the Twombly and Iqbal standard, or (2) when the allegations of plaintiff conduct or condition are facially implausible." Id.


Let's take that apart. As for number 1, if Effron is including the Twombly/Iqbal ban on formulaic, conclusory allegations regarding "defendant or third-party conduct," then the Nuvaring master complaint should have been dismissed. As for number 2, we still don't see why the form of a litigation (in this case, an MDL) should relieve plaintiffs of Supreme Court pleading requirements. The "facially implausible" exception suggested by Effron applies when publicly available statistics make the allegations seem unlikely. Effron cites the "egregious illustration" of silicosis litigation, where there were more complaints of the disease than seemed medically possible. Id. at 2061-62. Great. Does that mean that aside from out-and-out fraud, plaintiff conduct/condition allegations in an MDL master complaint cannot be tested under Twombly/Iqbal?


Here is how Effron wraps up the analysis of Nuvaring: "For example, after the Nuvaring judge declined to allow the defendants to bring a Rule 12(b)(6) motion against the master complaint, the defendants filed individual motions to dismiss each and every claimant. To the extent that these were directed at allegations about defendant conduct that were common to all of the complaints, these motions defeat some of the efficiencies that MDLs are supposed to bring." Id. at 2068. Wait a minute. "[T]hese motions defeat" the "efficiencies"? That's a funny way of saying it. Wasn't it the judge's refusal to consider the dismissal motion that defeated the efficiencies?


Effron goes on: "Rather than attacking the institution of the master complaint, the judge should determine if any of the common allegations are about plaintiff conduct or condition, and if so, whether these should be subjected to the group plaintiff neutrality principle or even treated as facially implausible based on publicly available data." Id. Like that's really going to happen. Just a reminder: the "group plaintiff neutrality principle" exists nowhere in Twombly/Iqbal. Rather, it is a construct conjured up to cure a problem that wouldn't be a problem if courts simply followed Supreme Court precedent.


Plaintiffs aren't neutral and complaints aren't neutral. They should possess facts and comply with Twombly/Iqbal -- not Kant, Rawls, or neutral principles that are anything but neutral in practice.

Friday, March 19, 2010

This Just In - Colorado Appellate Court Adopts Learned Intermediary

Thanks and a tip of the cyberhat to Jeff Pilkington and Geoff Klingsporn of Davis, Graham & Stubbs for letting us know about O'Connell v. Biomet, Inc., No. 09CA0224, slip op. (Colo. App. March 18, 2010), which explicitly adopted the learned intermediary rule, it believed, for the first time.  There's a fairly long discussion, but here's the key quote:
Based on the above authorities, we are persuaded that the learned intermediary doctrine should apply to failure to warn claims in the context of a medical device installed operatively when it is available only to physicians and obtained by prescription, and the doctor is in a position to reduce the risks of harm in accordance with the instructions or warnings.
O'Connell, slip op. at 8.  We'd already put Colorado in the pro column based upon Hamilton v. Hardy, 549 P.2d 1099, 1110 (Colo. App. 1976), but O'Connell didn't view the holding in Hamilton, which it described as the "drug manufacturer’s duty is to give adequate warnings to the medical profession," id. at 6, as controlling on the question.  Guess what?  We don't care.  We've certainly got definitive favorable Colorado appellate precedent now, and that's what counts.

The learned intermediary rule, of course, doesn't usually win any case for the defense by itself - but this time it apparently did.  It seems that plaintiffs changed their warning-related argument completely on appeal, and thus managed to waive both their prior argument (by not raising it on appeal) and their new argument (because it wasn't presented to the court below).  Slip op. at 9-10.  Ouch.

Pennsylvania Strict Liability - District Courts Should Not Practice Self Help

A peculiar situation has developed in Pennsylvania product liability law.  In Berrier v. Simplicity Manufacturing, Inc., 563 F.3d 38 (3d Cir. 2009), the Third Circuit predicted the the Pennsylvania Supreme Court would abandon its peculiar form of hyper-strict strict liability and adopt the negligence-based form of product liability described by the Third Restatement of Torts,  We blogged about that, here.  One reason that the Berrier court had for taking that step was that the Pennsylvania Supreme Court had accepted this question in a case called Bugosh and would soon rule.  The Third Circuit attempted to anticipate Bugosh.

In all fairness to the Third Circuit, it only took this step after attempting to certify Berrier to the Pennsylvania Supreme Court and being rebuffed.

Anyway, as we also reported previously, the Pennsylvania Supreme Court surprised just about everyone, and instead of deciding Bugosh one way or the other, dismissed the appeal as improvidently granted.  See Bugosh v. I.U. North America, Inc., 971 A.2d 1228 (Pa. 2009).

Since the Bugosh dismissal left Pennsylvania state law unchanged, that created an unusual situation.  Pennsylvania state courts continue using the old hyper-strict liability form of product liability in accordance with older state supreme court precedents, while federal courts, bound by Berrier's prediction apply the Third Restatement.

Or does it?

In a display of district court self-help the likes of which we've never seen before, some judges have simply opted to ignore that Third Circuit's Berrier opinion as a "mistake" - even though it's never been overruled by the Third Circuit itself, and the Bugosh dismissal decided nothing at all, leaving the Third Restatement question open.  See Milesco v. Norfolk Southern Corp., 2010 WL 55331, at *3 (M.D. Pa. Jan. 5, 2010) (construing Bugosh dismissal as "clear indication that it intends for the Second RST to apply" even though the dismissal "was not accompanied by any rationale") (Jones, J.); Durkot v. Tesco Equipment, LLC, 654 F. Supp.2d 295, (Mag. E.D.Pa. 2009) ("the Third Circuit's prediction as to the Pennsylvania Supreme Court's adopting the Restatement Third simply did not hold true" therefore Berrier "is invalid") (Hart, Mag. J.); McGonigal v. Sears Roebuck & Co., 2009 WL 2137210, at *4-5 (Mag. E.D. Pa. July 16, 2009) (essentially ignoring Berrier and deciding to continue with old law until Pennsylvania legislature changes it) (Rice, Mag. J.).

It's pretty rare for a district court simply to refuse to follow binding circuit precedent as "mistaken" where neither the circuit court nor the state supreme court has so decided.  It's especially cheeky for mere magistrate judges to be declaring a court of appeals decision "invalid" - but there you are.

On the other hand, two other courts have considered the same question and consider themselves bound by BerrierHoffman v. Paper Converting Machine Co., ___ F. Supp.2d ___, 2010 WL 845984, at *3 (E.D. Pa. March 3, 2010) ("because the Pennsylvania Supreme Court decision in Bugosh was merely a procedural dismissal of the matter, the absence of a substantive decision renders the Third Circuit's decision in Berrier binding precedent") (Tucker, J.); Richetta v. Stanley Fastening Systems, 661 F. Supp.2d 500, 507 (E.D. Pa. 2009) ("As Bugosh was a procedural decision on the appropriateness of the appeal, the Court cannot infer that Berrier 's prediction that a majority of the Justices of the Pennsylvania Supreme Court would adopt the Third Restatement is now invalid. The true reasoning behind the Pennsylvania Supreme Court's decision in Bugosh cannot be known, and this Court will not engage in speculation.") (Golden, J.).

Our view - other than it's a mess?   We think that it's not the business of a lower court to decide that an appellate court is "mistaken."  That's not within the lower court's job description, and more importantly it's an invitation to chaos.  A lower court, when being of such an opinion, should follow the appellate decision, but state its reasons for disagreeing, and if necessary certify the question for immediate appeal.  As another recent Eastern District of Pennsylvania decision has held:
When this Court sits in its diversity jurisdiction and applies Pennsylvania law, it is not bound by the decisions of lower Pennsylvania courts when the Third Circuit has predicted that the Pennsylvania Supreme Court will decide an issue differently.  See Mansman v. Tuman, 970 F.Supp. 389, 402 (E.D. Pa. 1997) (“The Third Circuit's interpretation of Pennsylvania law is binding on the district court ....”); Cohen v. Am. Int'l Ins. Co., Civ. A. No. 95-5243,1996 WL 103793, at *3 (E.D.Pa. March 7, 1996) (“The Third Circuit's prediction of how Pennsylvania's highest court will rule carries authority independent of intermediate state courts' decisions.”). . . . [T]his Court is obliged to follow Third Circuit precedent even when it conflicts with decisions of lower Pennsylvania courts.
Stein v. Fenestra America, L.L.C., 2010 WL 816346, at *5 (E.D. Pa. March 9, 2010) (emphasis added).

Moreover, because Bexis was actually involved in Berrier - representing amicus PLAC - we know something about Berrier that none of these courts have picked up on.  After Bugosh was dismissed by the Pennsylvania Supreme Court, the loser in Berrier went back to the Third Circuit and asked it specifically to recall the Berrier mandate and reconsider the decision in light of this subsequent development.  The Third Circuit declined to do so.  Here's a copy of the Berrier order declining to recall the mandate in light of Bugosh.  Thus, contrary to what some decisions seem to assume, the Berrier court itself had a chance to say that its prediction was a mistake in light of the Bugosh dismissal - and it declined that opportunity.

Thursday, March 18, 2010

Once More Into The Breach

The other day we put up a piece about a Twombly/Iqbal law review symposium that promised “diverse interpretations.”  From an academic perspective, it was an impressive collection of articles that attacked Twombly/Iqbal from no fewer than 12 different directions.  But from our perspective, it turned out to be something of a disappointment, since the promised "diversity" never materialized.  Instead it was the usual academic Greek chorus of criticism, with the only “diversity” being differing avenues of criticism.


Having smacked that one down, we’re feeling like Mickey Mouse as the Sorcerer’s Apprentice in Fantasia – smash one broom and two more rise up in its place.  Since that post, we’ve been deluged with additional articles….

Well, not exactly deluged, but our readers have sent us a couple.

The first of these, Edward A. Hartnett, “Responding to Twombly & Iqbal: Where Do We Go from Here?” generously views Twombly/Iqbal “as equivalent to the traditional insistence that a factual inference be reasonable.”  Id. at 1.

We think there’s quite a bit more to Twombly/Iqbal than that.  As we’ve said elsewhere, our view is that Twombly/Iqbal have taken the “a short and plain statement of the claim showing that the pleader is entitled to relief” language of Fed. R. Civ. P. 8(a)(2), and given it a different gloss – one that emphasizes the “showing that the pleader is entitled” language more, and the “short and plain” language less, than was the case under the now-discarded Conley v. Gibson, 355 U.S. 41 (1957), formulation.  From an institutional standpoint we thus view Twombly/Iqbal and Conley as equivalents, with the Court having as much authority to adopt one interpretation as the other.  But make no mistake about it, the interpretation itself has changed, and we think it’s the right one given the litigation explosion that Conley at minimum facilitated.

But we agree with Professor Hartnett that the change isn’t all that radical – although here, we think a little radicalism might be a good thing.  In the last piece in PENNumbra, we were criticized because we only cited one case (when we were bound by a tight word count) for the (we thought well-accepted) proposition that courts were already retreating from the impractical Conley “any set of facts” rule before Twomby.  Well, we don’t have a word count here, as much as some might consider it desirable.  As much as we respect Professor Burbank, that particular comment was hogwash.  E.g., Kyle v. Morton High School, 144 F.3d 448, 455 (7th Cir. 1998) (Conley’s “no set of facts” language “has never been taken literally”) (citation and quotation marks omitted).

That judicial reluctance starts at the top. There are several pre-Twombly Supreme Court cases that departed from Conley rather dramatically.  A long time ago (like when Bexis started practicing law) the Supreme Court held that “a district court must retain the power to insist upon some specificity in pleading before allowing a potentially massive factual controversy to proceed.”  General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 528 n.17 (1983).  Conley’s “any set of facts” standard could not mean literally "any" set of facts.  Id. at 526 (it is “not. . .proper to assume that the [plaintiff] can prove facts that it has not alleged or that the defendants [can be liable] in ways that have not been alleged”).

More recently, in Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005), a unanimous court found a “suffered damages thereby” causation allegation formulaic and told the plaintiff to go away.  A “short and plain statement” (the part that the other side emphasizes) “must provide the defendant with fair notice of what the plaintiff’s claim is and the grounds upon which it rests.”  Id. at 346. Then the Court discussed the same problems that eventually brought about the express change wrought by Twombly/Iqbal:

[The Court rejected reading Rule 8 in a way that] would permit a plaintiff with a largely groundless claim to simply 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, rather than a reasonably founded hope that the [discovery] process will reveal relevant evidence.
Id. at 347 (citation and quotation marks omitted).

[A]llowing a plaintiff to forgo giving any indication of the [damages] and proximate cause that the plaintiff has in mind would bring about harm of the very sort the statutes seek to avoid. . .abusive practices including the routine filing of lawsuits. . .with only [a] faint hope that the discovery process might lead eventually to some plausible cause of action.
Id. (citation and quotation marks omitted).  See also Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 319 (2007) (“the complaint must say enough to give the defendant fair notice of what the plaintiff’s claim is and the grounds upon which it rests”) (following Dura Pharmaceuticals); Crawford-El v. Britton, 523 U.S. 574, 598 (1998) (courts must “insist” upon “specific, nonconclusory factual allegations” before a suit may “survive a prediscovery motion for dismissal”); Papasan v. Allain, 478 U.S. 265, 286 (1986) (affirming dismissal of complaint full of “legal conclusions” that “we are not bound to credit and may disregard”).  So it’s not at all accurate to view Twombly/Iqbal as somehow coming from out of the blue.  The Supreme Court had already duly warned the bar – repeatedly.

And notwithstanding Conley, a bunch of court of appeals decisions likewise sought (to varying extents) to rein in conclusory pleadings.  Tal v. Hogan, 453 F.3d 1244, 1261 (10th Cir. 2006) (“[b]are bones accusations. . .without any supporting facts” held “insufficient”); Aponte-Torres v. University of Puerto Rico, 445 F.3d 50, 55 (1st Cir. 2006) (refusing to “credit bald assertions, unsupportable conclusions, periphrastic circumlocutions, and the like”); Eastern Food Services, Inc. v. Pontifical Catholic University Services Ass’n, 357 F.3d 1, 3 (1st Cir. 2004) (dismissing suit as “not a plausible antitrust case”); Farm Credit Services v. American State Bank, 339 F.3d 764, 767 (8th Cir. 2003) (“we are free to ignore legal conclusions, unsupported conclusions, unwarranted inferences and sweeping legal conclusions cast in the form of factual allegations”); Davila v. Delta Air Lines, Inc., 326 F.3d 1183, 1185 (11th Cir. 2003) (“conclusory allegations, unwarranted factual deductions or legal conclusions masquerading as facts will not prevent dismissal”); Dickson v. Microsoft Corp., 309 F.3d 193, 202 (4th Cir. 2002) (“allegations must be stated in terms that are neither vague nor conclusory’”); Browning v. Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002) (“we accept neither inferences drawn by plaintiffs if such inferences are unsupported by the facts set out in the complaint, nor legal conclusions cast in the form of factual allegations”); DM Research v. College of American Pathologists, 170 F.3d 53, 55 (1st Cir. 1999) (complaint must plead a “factual predicate concrete enough to warrant further proceedings” as “the price of entry, even to discovery”); George Haug Co. v. Rolls Royce Motor Cars, Inc., 148 F.3d 136, 139 (2d Cir. 1998) (following Associated General Contractors formulation); City of Pittsburgh v. West Penn Power Co., 147 F.3d 256, 263 & n.13 (3d Cir. 1998) (“[w]e do draw on the allegations of the complaint, but in a realistic, rather than a slavish, manner”; rejecting “unsupported conclusions and unwarranted inferences”); Columbia Natural Resources, Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995) (“liberal Rule 12(b)(6) review is not afforded legal conclusions and unwarranted factual inferences”; “a complaint must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory”); Blackburn v. City of Marshall, 42 F.3d 925, 931 (5th Cir. 1995) (notwithstanding Conley, “conclusory allegations or legal conclusions masquerading as factual assertions will not suffice to prevent a motion to dismiss”); Cayman Exploration Corp. v. United Gas Pipe Line Co., 873 F.2d 1357, 1359 & n.2 (10th Cir. 1989) (following Associated General Contractors formulation; “courts may require some minimal and reasonable particularity in pleading before they allow an. . .action to proceed”); Ascon Properties, Inc. v. Mobil Oil Co., 866 F.2d 1149, 1155 (9th Cir. 1989) (following Associated General Contractors formulation); Commonwealth v. PepsiCo, Inc., 836 F.2d 173, 182 (3d Cir. 1988) (“plaintiff must plead the essential facts” because “litigation today is too expensive a process to waste time on fanciful claims”); Heart Disease Research Foundation v. General Motors Corp., 463 F.2d 98, 100 (2d Cir. 1972) (“bare bones statement. . .without any supporting facts permits dismissal”); Jackson v. Nelson, 405 F.2d 872, 873 (9th Cir. 1968) (affirming dismissal of “a series of broad conclusory statements unsupported, for the most part, by specific allegations of fact”).  Please note, we deleted all internal quotations in the various citations.

You want cases?  You got cases.

So we don’t give much credence to complaints that Twombly/Iqbal drastically changed the law.  Iqbal, after all, was brought under Bivens v. Six Unknown Agents, 403 U.S. 388 (1971), a case that created a whole new kind of tort (now named for the case - so-called "Bivens actions") out of equally whole cloth.  Bivens was thus a far more drastic change in the law than Twombly/Iqbal could conceivably be – yet Bivens is championed by Twombly/Iqbal’s critics. The “radical change” argument is thus a red herring; it’s only a matter of whose ox is being gored.

But all this being said, we’re not willing to go through the gyrations that Professor Hartnett is to avoid the conclusion that Twombly/Iqbal overruled ConleyHartnett Article, at 3-4.  We view “earned its retirement,” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 563 (2007), as simply a rhetorical way of saying “overruled” – and, we might add, good riddance.  We share the recently expressed view in Boroff v. Alza Corp., ___ F. Supp.2d ___, 2010 WL 395211, at *2 (N.D. Ohio Jan. 27, 2010), that “the Supreme Court has consigned the Conley standard to the dustbin of history.”

Most of the Hartnett Article is a critique of various legislative proposals to overturn Twombly/Iqbal and restore the pro-litigation status quo ante.  Needless to say we oppose them all.  In light of the above, however, we’d have to agree with Professor Hartnett that Professor Burbank’s proposal to restore “interpretations of the Federal Rules of Civil Procedure by the Supreme Court of the United States, and by lower courts in decisions consistent with such interpretations, that existed on May 20, 2007” – that is to say the day before Twombly was decided – isn’t likely to do anything except make a big mess.  It’s not hard at all to rebuild Twombly from its judicial precursors.  Hartnett Article, at 6-7.

One notable thing about all of these proposals is that they’re – to use law-professor-speak “transsubstantive.”  That is, they seek an across-the-board rollback of the new Twombly/Iqbal “plausibility” pleading standard and to allow conclusory and implausible allegations to state claims for purposes of Rules 8 and 12 in all types of litigation.  Most of these proposals (except Professor Burbank's) actually go far beyond Twombly/Iqbal and would overrule all or most of the prior precedent we cited above. That strikes us as facially overkill and indicative of unexpressed (and in some cases, ulterior) motives at work. Thus, we agree with Professor Hartnett that:

In short, proposals that seek to sharply reduce or completely eliminate the power of a court to rely on the conclusory nature or the plausibility of an allegation seem to me to either not achieve their purpose, or to make Rule 12(b)(6) ineffective as a means of testing the substantive sufficiency of a complaint. They are not the way to go either.
Hartnett Article, at 14.

Professor Burbank, for one, identifies with “civil rights” and “employment discrimination” “victims.”  We’ve heard that elsewhere, too – he’s hardly alone in that respect.  But then, why aren’t there proposals along the lines of what was done with fraud claims in Rule 9(b) and with securities litigation in the Private Securities Litigation Reform Act of 1995?  Congress found a particular problem with pleading in the securities context and passed a statute imposing a new standard specifically for that kind of litigation.  If there’s a perceived pleading problem peculiar the civil rights field – why not at least propose a similar, and similarly limited, fix?

We suspect that’s because of the tort (and other) lawyers lying in the weeds.  All of the current proposals would, beyond allowing just civil rights plaintiffs to proceed with implausible lawsuits, also restore the unfettered ability of an asbestos plaintiff (more, precisely counsel) to sue 100 defendants upon a single conclusory and undifferentiated allegation of “exposure to defendants’ products.”  The literature we’ve seen is notably lacking in arguments why Twombly/Iqbal shouldn't apply in the sandbox where we play – mass torts involving prescription medical product liability litigation.  So if there’s a problem with Twombly/Iqbal at all – and we’ve hardly found the emotionalism and litigation-uber-alles mindset that passes for argument in this area persuasive – maybe the answer is to ditch transubstantivism.

The second article, Robin J. Effron, “The Plaintiff Neutrality Principle: Pleading Complex Litigation in the Era of Twombly and Iqbal,” does just that – sort of.  Its thesis is that certain types class action plaintiffs should be exempt from Twombly/Iqbal and thus be uniquely allowed to plead implausible claims, because class actions supposedly create judicial economies of their own.  Effron Article at 2037-40.  Professor Effron gets to this conclusion through the proposition that “it is cheaper to litigate a claim in one or a small number of cases rather than many times over.  Id. at 2038.  That’s a false assumption, at least in our neck of the woods, because even gigantic pharmaceutical mass torts are rarely tried more than a few dozen times, as was the case in Vioxx, Baycol, Bone Screw (one trial in the entire litigation), and presumably others in which we didn’t have personal involvement.  Instead, class actions increase litigation, and the cost of litigation, by sweeping up de minimus claims – “negative value suits” – that would never have been in the legal system to start with. Litigation costs are increased across the board in class actions, because the dramatically increased stakes make every bit of discovery, and every tactical ploy, both worth doing and worth defending against.

The Effron Article contends, however, that “class actions are different.”  Article, at 2016.  We would agree, but only in the sense that they’re worse.  As has been long recognized, class actions more subject to being abused to obtain extortionate settlements than non-aggregated litigation.  E.g., Castano v. American Tobacco Co., 84 F.3d 734, 746 (5th Cir. 1996) (a class action “magnifies and strengthens the number of unmeritorious claims”); In re Rhone-Poulenc Rorer Inc., 51 F.3d 1293, 1298 (7th Cir. 1995) (defendants “may not wish to roll these dice. That is putting it mildly. They will be under intense pressure to settle”).  For that reason, we think that a “formulaic” pleading of satisfaction of the Rule 23 elements of a complaint is at least as bad (and probably worse, given the policy basis of Twombly/Iqbal) as any other “formulaic” pleading.  If legal conclusions concerning the Rule 23 elements are credited, the litigation gets a whole lot more expensive in a big hurry.

We don’t think it’s the law either, that class actions are “different” for Twombly/Iqbal purposes.  As we highlighted previously, courts have begun using Twombly/Iqbal to police class action allegations.  See Central Regional Employees Benefit Fund v. Cephalon, Inc., 2009 WL 3245485, at *4 (D.N.J. Oct. 7, 2009).  The Effron Article helpfully identifies other similar precedent involving other areas of the law.  Id. at 2053-54.  Even it agrees, however, that under current law, “class actions are subject to the same plausibility requirements” as other litigation.  Id. at 2017. That’s refreshing honesty, at least.

The Effron Article also claims that class actions impose costs upon plaintiffs that make them unlikely to be frivolous:

Once one accepts the fact that, in most cases, plaintiff’s pretrial litigation costs are nontrivial, economic modeling of litigant behavior suggests that plaintiffs’ pretrial litigation costs are a meaningful constraint on a plaintiff’s willingness to file a meritless claim.
Article at 2036 (footnotes omitted).  Well phooey on economic modeling then.  It doesn’t get anywhere close to explaining real world behavior – the “filing frenzy” of multiple class action complaints being filed with days, if not hours, of events such as product recalls.  Professor Effron's “accepted” fact is also inconsistent with what we see routinely in MDL practice, where defendants spend many millions on responding to discovery, but rarely get more than questionnaires and medical records from the other side.  Finally, any "model" has to account for the peculiar effect of even a meritless class action having the substantive effect of tolling the statute of limitations for every member of the putative class.  Please, Professor Effron, get out of that ivory tower every now and then.

We do agree with Professor Effron that Twombly/Iqbal is not applicable to class certification.  See Effron Article at 2018-19.  We’ve blogged before about cases such as In re Hydrogen Peroxide Litigation, 552 F.3d 305 (3d Cir. 2008), and In re Initial Public Offering Securities Litigation, 471 F.3d 24 (2d Cir. 2006).  Class certification is governed by those cases, which we think involve considerably more rigorous examination of all aspects of such litigation (and rightfully so) than occurs under Rule 8.  Under Rule 8, the available relief is not denial of class certification, but striking of class action allegations.  That means that under Twombly/Iqbal, class certification is not at issue, and if such a motion is granted, would never become an issue.

Finally, as to class actions, we also tend to agree with the general thrust of Professor Effron’s take on transsubstantivism in the class action context, although probably not in a way she would approve.  We think class actions generally are ill-suited for transsubstantive treatment.  We would prefer to see Rule 23 done away with entirely, and the standards for class certification determined legislatively on a subject-by-subject basis, as has long been the case with the Magnuson-Moss Act.  It may well be that, for reasons of jurisprudential policy, the standards for class certification in civil rights actions should be different than in mass torts such as prescription medical product liability litigation – but that’s a topic for another day.

On the question of Twombly/Iqbal, we’re litigators, not professors, so we don’t have the time or inclination to create fancy theoretical constructs such as “plaintiff neutrality principles.”  Effron Article, at 2045-51.  Thus, as a rule of thumb for our prescription medical product liability litigation, we go with what we’ll call the “one fact rule.”  It’s not particularly elegant, but it works for us.  The Court in Aschroft v. Iqbal made a number of points, among them these:  (1) Rule 8 “does not require detailed factual allegations,” 129 S. Ct. 1937, 1949 (2009); but it (2) “demands more than an unadorned, the defendant-unlawfully-harmed-me accusation,” id.; which means that (3) “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”  Id. Thus (4) “only a complaint that states a plausible claim for relief survives a motion to dismiss,” id. at 1950, and to get past Rule 12, the plaintiff has to (5) “plead[] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”  Id. at 1949.  Only after that does discovery come into play, since plaintiffs can “not unlock the doors of discovery. . .armed with nothing more than conclusions.”  Id. at 1950.

So when we get a complaint, we look to see whether, there’s at least one actual fact pleaded that supports each essential element of a cause of action.  A plaintiff can plead more if s/he so pleases, but there has to be at least one – otherwise we’ll probably file a Twombly/Iqbal motion.

Let’s explore this a little further with a hypothetical product liability claim involving drug or medical device X. We start with “so and so makes X.”   Assuming there’s a factual basis for it, that satisfies the Restatement §402A requirement that there be a product seller.   Now it needs to be linked to the plaintiff, so we look for something like “on such and such date, Dr. A prescribed X to plaintiff, his/her patient,” and (although in some cases this can be assumed) “Plaintiff took/used X.”   That suffices to establish exposure – unless there are unusual circumstances, such as the Jozwiak case we blogged about on Monday, where the plaintiff made an impossible allegation that put two different pain pumps in the same plaintiff’s shoulder at the same time.  Finally the plaintiff should state what is the alleged injury.  “Plaintiff suffers from condition Z," and goes on and list whatever the injuries are.

So far, so good.  We don’t see any fairness problems here at all.  All of this information is, or should be, in the plaintiff’s possession.  Everyone has a right to his or her own medical records, and a plaintiff (or more specifically counsel) should at minimum review them before filing suit.  See Effron Article, at 2047 (“[w]hen it comes to a plaintiff’s medical condition, the plaintiff himself is assumed to possess the relevant knowledge”).

Beyond that, it depends on the type of claim.  Assuming a warning claim – the most common – the plaintiff needs to plead causation and defect.  Causation comes in two parts, medical and warning (sometimes called actual and proximate cause).  So is the defect stated?  “The warnings for X didn’t mention/understated/whatever Z, which the defendant knew/should have known because of [some piece of scientific information known at the time of prescription].”  That should be enough for Rules 8/12, again assuming the facts are valid, to plead a warning defect.  It also goes a long way to pleading medical causation, since the cited piece of scientific information presumably links X to Z.  If it doesn't, well that plaintiff has more serious legal problems than Twombly/Iqbal.

Prescription medical product warnings are, of course, subject to the state of the art defense, so we don’t think it’s “plausible” to allege a warning defect only in light of after-discovered knowledge.  Do it, and there'll be a motion.  In a warning case, every state except West Virginia, follows the learned intermediary rule, so in pleading warning causation, we’re expecting to see some fact that suggests that Dr. X in some way, shape, or form, relied upon the warning that’s alleged to be defective.

Again, we perceive no prospect unfairness.  The warnings are public information, as is the scientific data that's the basis of the inadequate warning claim.  Plaintiffs (or their lawyers) have the ability – a lot more than defendants – to talk to the prescribing physician to find out what led him/her to write the prescription.  See Erickson v. Pardus, 551 U.S. 89, 94 (2007) (allegations concerning physician conduct sufficiently well pleaded).

If it’s a design defect case (more common in devices), or a manufacturing defect claim, then we’ll expect a fact indicating the nature of the defect (component D should have been smooth rather than rough; X contained half/twice as much of the active ingredient as intended).  Simply saying that X was defective because it broke isn’t going to cut it with us, as we’ve discussed elsewhere, so failure to say what the defect is (or to state facts creating a circumstantial case) would likely draw a motion.  In practice, proper pleading will require that plaintiff’s counsel run the case by an expert of some sort.  See Effron Article, at 2049 (allegation that “‘I ate Twinkies. Twinkies caused my hepatitis to worsen’ would be insufficient”).

So that’s our quick and dirty rule of thumb for what’s “plausible” under Twombly/Iqbal.  One fact per essential element of a claim.  It doesn’t involve anything that’s inherently outside of a plaintiff’s access.

The issue of a plaintiff's access to evidence has more “plausibility” (so to speak) in the PMA device cases, where preemption forces plaintiffs to allege some sort of FDCA regulatory violation in order to state a claim.  We've heard lots of plaintiffs argue that they can’t support such allegations with any facts unless they have discovery first.  In some PMA cases (where there’s been no recall or other FDA enforcement action) they may well have a point as a practical matter.

Tough.

That’s not a problem with pleading; rather it’s an effect of PMA preemption.  The preemption, not Twombly/Iqbal, prevents such plaintiffs from satisfying our “one fact” rule.  And that’s just what preemption is supposed to do – impose a legal rule that bars claims that might otherwise be meritorious.  It’s no different than the statute of limitations or any other defense in that respect.  For that reason, we don’t view the “I need discovery” bleating to be a legitimate criticism of Twombly/Iqbal.  Plaintiffs aren't allowed to be "private attorneys general" ferretting out FDCA violations - the statute limits enforcement to the government.

Our “rule of thumb,” and any other faithful application of Twombly/Iqbal, does involve – horror of horrors – plaintiff’s counsel actually having to investigate the case prior to filing the complaint.  That always means looking through the medical records.  In a warning case, that probably means interviewing the prescriber.  In a design or manufacturing defect case, that probably means engaging an expert witness and getting at least a preliminary opinion.  In short, under Twombly/Iqbal, Rules 8 and 12 now provide an effective means of enforcing the “representation” specified by Fed. R. Civ. P. 11(b)(3) that the “factual contentions have evidentiary support.”  Twombly/Iqbal also means significant curtailment of litigation by word processor, since a one-fact standard does require more case-specific pleading, just not full-blown “detailed factual allegations.”

We think that’s just great.  Any requirement that requires case-specific pleading is going to curtail the filing of thousands of almost identical, completely formulaic – we’ve even called them “schlocky” – complaints that create mass torts.  Most of these claims, a large majority, are effectively worthless, and would be quickly dismissed if they ever showed up on a trial list.  Plaintiffs’ counsel know this, which is why (as we’ve discussed) they often try to file them in bulk to avoid even the filing fee.  Their sole of these claims' existence is the numbers game:  to try to terrorize defendants into settling massive litigation.  The cost of litigation inherent in an overly generous reading of Rule 8 is precisely what Twombly/Iqbal is all about:

We alluded to the practical significance of the Rule 8 entitlement requirement. . .when we explained that something beyond the mere possibility of loss causation 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.  So, when the allegations in a complaint, however true, could not raise a claim of entitlement to relief, this basic deficiency should be exposed at the point of minimum expenditure of time and money by the parties and the court.  Some threshold of plausibility must be crossed at the outset before a. . .case should be permitted to go into its inevitably costly and protracted discovery phase.
Twombly, 550 U.S. at 557-58 (lots of internal cites and quotation marks omitted).  And it’s not just discovery costs either.  Litigation imposes a variety of costs upon defendants that justify critical scrutiny of pleadings:

Litigation. . .exacts heavy costs in terms of efficiency and expenditure of valuable time and resources that might otherwise be directed to the proper execution of the work of the Government. . . .  It is no answer to these concerns to say that discovery for petitioners can be deferred while pretrial proceedings continue for other defendants.  It is quite likely that, when discovery as to the other parties proceeds, it would prove necessary for petitioners and their counsel to participate in the process. . . .  Even if petitioners are not yet themselves subject to discovery orders, then, they would not be free from the burdens of discovery.  We decline respondent's invitation to relax the pleading requirements on the ground that. . .petitioners [should have] minimally intrusive discovery.  That promise provides especially cold comfort in this pleading context . . . . Because respondent's complaint is deficient under Rule 8, he is not entitled to discovery, cabined or otherwise.
Iqbal, 129 S. Ct. at 1953-54 (lots of internal cites and quotation marks omitted).

And that’s why we don’t care for Professor Hartnett’s idea of “allegations likely to have evidentiary support after a reasonable opportunity for discovery.”  Hartnett Article, at 17-23.  From a defense perspective, it’s toothless, since Professor Hartnett abjures sanctions under Rule 11(b)(3), even though ostensibly relying on that rule as the proposal’s major justification in the current Rules.  Article, at 21-22.  The supposed distinction between a plaintiff being “wrong” and “unjustifiably wrong” is cold comfort to a defendant put through great expense by an implausible claim.

Twombly/Iqbal are about reining in the cost of litigation; we might feel differently about Professor Hartnett's proposal if it required payment of all a defendant’s costs of “appropriate” (the Article's term) discovery – should designated allegations nonetheless turn out to be unfounded.  But under the proposal as offered, there’s no penalty for over-designation.  If it’s one thing that the fifty-year life span of Conley established, it’s that unrestrained pleading imposes huge discovery costs on defendants.  Even Professor Burbank (who really tried hard) was reduced to relying upon a single study of tiny cases in which even then 25% of the parties believed the process was too expensive.  The excessive cost of modern discovery is simply not a issue capable of dispute any longer.

We understand that a lot of academics feel that they have to help their students get jobs, or else eventually they won’t have jobs either.  Thus, they tend to support anything and everything that results in more, rather than less, litigation.  As defense lawyers, we don’t share that mindset.  Rather, we agree with the Court in Iqbal, supra, that there’s is no entitlement to discovery, “appropriate” or otherwise, unless the plaintiff can construct a plausible complaint without it.

As we explained above, in discussing the PMA device cases – if the substantive law requires plaintiffs to plead something not publicly available and thus not ordinarily accessible without discovery, the concern should be with the substantive law, not the pleading rules.  A law (statutory or otherwise) that requires, as an essential element, facts that cannot routinely be pleaded probably does so for a reason, and we'd expect that reason to be to limit access to the remedy it provides.

In short, a cause of action that’s hard to plead was probably supposed to that way.

In the overly litigation friendly Conley environment, any number of such causes of action were simply being overused.  If that means there’s a “problem” to be solved, that problem involves amending the substantive law – in a non-transsubstantive manner – and not allowing the massive evasion of the essential elements of every legal cause of action that occurs when the filing of complaints is reduced to a meaningless exercise.

A footnote: Yes, we are aware that we have been quoted by Professor Effron in the portion of her article dealing with MDL Master Complaints.  See Effron Article, at 2056-60.  We’ve deliberately held that aside for a separate post – on the not-implausible basis that this one has gotten too darn long.