Originally published in Anderson Kill Commercial Litigation Advisor, Winter 2009.
Recent Supreme Court decisions have dramatically revamped the pleading standards that have applied for decades to complaints filed in federal courts.
Since the adoption of the Federal Rules of Civil Procedure in 1938, attorneys in federal courts have drafted complaints under a pleading standard known as notice pleading. Notice pleading simply required that complaints put opposing parties on notice. Only in certain circumstances, such as with allegations of fraud, did the Rules mandate any sort of detail.
In 1957, the Supreme Court highlighted this minimal standard of pleading in Conley v. Gibson, holding that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief."
In the generations of practice since Conley, plaintiffs' lawyers drafted these short and concise notice complaints, and defendants rarely succeeded in dismissing a complaint based upon the sufficiency of the pleadings. Matters rapidly proceeded to discovery.
Two recent Supreme Court decisions, Iqbal and Twombly, have turned this pleading standard on its head.
In 2007, in Bell Atlantic v. Twombly, an anti-trust conspiracy case, the Supreme Court set forth a higher standard of pleading. Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). Specifically, the Supreme Court called upon plaintiffs to offer "more than labels and conclusions." In fact, the Supreme Court required plaintiffs to make allegations "plausible to support a reasonable belief that the expectations of discovery will lead to evidence of illegality."
Then, in its last term, in Ashcroft v. Iqbal, the Supreme Court declared that the heightened pleading standard articulated in Twombly applied in all federal cases, not just complex, anti-trust conspiracy cases. Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009). According to Iqbal, pleadings must be more than naked assertions devoid of facts and more than threadbare recitals or mere conclusory statements.
For plaintiffs' counsel, the changed landscape mandates more in-depth investigation of a claim prior to filing a complaint as well as more precise drafting. Due to the limitations of pre-suit discovery in federal court, this may be a difficult challenge to meet in many cases and will frequently require the use of creative investigation strategies, such as the use of private investigators; or, where prior government actions were involved, extensive FOIA requests. Longer lead-times than in the past will be required for the institution of suit.
Counsel defending a federal lawsuit should also look to utilize the heightened pleading requirements to their advantage since they provide a higher hurdle for plaintiffs.
Specifically, defense counsel should seriously consider a motion to dismiss complaints that have been drafted based on the old "notice only" concept. At best, the heightened pleading standards may knock out a claim, saving the defendant the substantial expenses of discovery. At worst, the motion may force plaintiffs to disclose strategic information or to make strategic decisions before they are ready to do so. If nothing else, the possibility of knocking out a claim may accelerate the litigation process and may make plaintiffs more amenable to settlement.
These heightened pleading requirements will also reverberate throughout state courts because many state courts give strong consideration to changes in federal court practice.
Legislation to overturn these new Supreme Court decisions has already been introduced in both the House and the Senate. More hearings are planned for the Spring. Monitoring the legislation is important; but for now, counsel should be prepared to litigate in the current environment.
Jerry S. Goldman is a shareholder in the New
York and Philadelphia offices of Anderson Kill. Mr. Goldman
practices in the areas of complex litigation, general business law,
white collar criminal defense, employment law, federal and
international taxation, estate planning, and estate and trust
administration.
(212) 278-1000 (New York); (267) 216-2795 (Pennsylvania)
jgoldman@andersonkill.com
*Peter A. Halprin is a law clerk in the New York office of Anderson Kill.
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Anderson Kill & Olick, P.C. practices law in the areas of Insurance Recovery, Anti-Counterfeiting, Bankruptcy, Commercial Litigation, Corporate & Securities, Employment & Labor Law, Real Estate & Construction, Tax, and Trusts & Estates. Best-known for its work in insurance recovery, the firm represents policyholders only in insurance coverage disputes, with no ties to insurance companies and no conflicts of interest. Clients include Fortune 1000 companies, small and medium-sized businesses, governmental entities, and nonprofits as well as personal estates. Based in New York City, the firm also has offices in Greenwich, CT, Newark, NJ, Philadelphia, PA, Ventura, CA and Washington, DC. For companies seeking to do business internationally, Anderson Kill, through its membership in Interleges, a consortium of similar law firms in some 20 countries, assures the same high quality of service throughout the world that it provides itself here in the United States.
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