As to my catch-22, Ms. Mitchell and Mr. Wallach would have plaintiffs proveall their facts prior to discovery.  But that is not our system.  One might well have defendants have all their facts proved for affirmative defenses before they list them in the answer. But we don’t do that either.

I do not advocate meritless suits.  Rather I am noting that many claims require plaintiffs to prove information to which they cannot gain access until they get to discovery.  Hence making them plead such facts is a catch-22.  This is not saying such facts do not exist, rather it is saying they are not in possession of the plaintiff at the time of filing the answer.  If we put pressure to prove all facts before filing a complaint, the effects could be unappealing.  To name just one for example, this scheme would push plaintiffs to hire teams of private investigators, outside the supervision of the court, to gather information in order to justify allegation.  

I am signing off.  It’s been a pleasure. My thanks to Ms. Mitchell, Mr. Wallach, and the folks at PublicSquare.net.

Ms. Mitchell and Mr. Wallach first note that Twombly and Iqbal do not change the text of Rule 8(a)(2) but offer an interpretation of it.  I agree, of course.  I did not intend to imply that Twobly/Iqbal created a formal amendment to the text of the rule itself.  But, as they surely agree, it is a substantial reinterpretation, such that the standard employed in district courts now is very different than what was applied 2 years ago.  Lest we would not be typing here today.   My point regarding amendments, was not that the Court amended the text of Rule 8.  Rather, my point is: If we are concerned about pleading rules because discovery in certain types of cases is too expensive, then amendment is a better course conduct.  Of course, the Court can interpret Rule 8 however it wants.  But should it do so in the context of a case in which all the relevant factual issues we have been talking about are not part of the record of the case at issue?  That is my question.  I think it should not. Finally, amending the rules would not be litigation creating.  There is not a tidal wave of litigation over what fraud means in the context of Rule 9(b).  Similarly, I would doubt there would be litigation over what a claim under the Sherman Act means.

I agree that discovery costs hit defendants in this context more than plaintiffs.  But my point was only that these costs are not a one-way street and that if discovery is to cost $7 million dollars, even sharing 1/7 of that cost is significant, especially given the payment structure for plaintiffs’ attorneys.  This remains a financial disincentive for plaintiffs to engage in discovery in a meritless case.

Ms. Mitchell and Mr. Wallach argue that Conley in essence read “showing that the pleader is entitled to relief” out of Rule 8(a)(2).  I think that position in error.  Any number of 12(b)(6) motions can be, and are with great frequency, under the Conley interpretation of Rule 8, arguing that the complaint fails as a matter of law.  For example, defendant can move under 12(b)(6) because the statute sued upon does not create a cause of action for plaintiff, Pegram v. Herdrich, 530 U.S. 211, 217 (2000) (affirming 12(b)(6) dismissal of ERISA claim because a breach of fiduciary duty cause of action did not arise against defendant under the statute) , or based upon the facts as stated in the complaint defendant necessarily prevails upon an affirmative defense, Jones v. Bock  549 U.S. 199, 215 (2007) (“A complaint is subject to dismissal for failure to state a claim if the allegations, taken as true, show the plaintiff is not entitled to relief. If the allegations, for example, show that relief is barred by the applicable statute of limitations, the complaint is subject to dismissal for failure to state a claim.”). Unfortunately, the Administrative Office of the United States Court does not provide a more detailed breakdown of case terminations (see here) so we cannot know how many claims were dismissed on 12(b)(6) pre-Trombly, but the numbers of dismissals before the pre-trial stage exceeds 50%.   Conley, then, did not commit the interpretation sin of rendering a portion of Rule 8(a)(2) a nullity, as Ms. Mitchell and Mr. Wallach suggest.  See Mountain States Tel. & Tel. Co. v. Pueblo of Santa Ana, 472 U.S. 237, 249 (1985) (“the elementary canon of construction that a statute should be interpreted so as not to render one part inoperative”).  Rather Conley (properly in my view) limited the “entitled to relief” language to legal challenges against the complaint that do not address the veracity of the allegations.  In fact, if one adopts Ms. Mitchell and Mr. Wallach’s interpretation of Rule 8(a), then Rule 9(b) is rendered a nullity—as there is nothing more to add in such claims that is not already required under their interpretation of Rule 8(a).  See Ricci v. DeStefano ,129 S.Ct. 2658, 2674 (2009) (“We must interpret the statute to give effect to both provisions where possible.”).  I think their reading of Rule 8(a)(2), not only contrary to 50 years of practice, but a strained interpretation of the Rules read as a whole.

Professor Mulligan’s characterization of Iqbal as an “amendment” to  Rule 8 misses the mark.  Iqbal did not “amend” Rule 8 any more than Conley did.  Rather, Iqbal interpreted Rule 8.  And it  is unquestionably the role of the Supreme Court to definitively interpret the Federal Rules of Civil Procedure.  Rule 8 does not call for pure notice pleading.  It requires not only a “short plain statement of the claim,” but also sufficient detail in this statement to “show[] that the pleader is entitled to relief.”  Conley’s construction of Rule 8 rendered this latter requirement virtually meaningless.  Iqbal corrects this error.  The Iqbal standard does not represent a return to the pleadings standards that prevailed before the pleadings standards that prevailed prior to 1937.  Unfortunately, however, a careful survey of pre-1937 pleadings standards cannot be accomplished in this format. 

Requiring plaintiffs to show a reasonable basis for believing that they may have a legitimate claim does not create a Catch-22.  It is simply not true that plaintiffs can discover whether such a basis exists only through discovery.  Taking Professor Mulligan’s example of a Title VII discrimination suit, if employees are discharged but have no grounds to plausibly believe that the discharge was driven by discriminatory motive, then they should not file lawsuits.  The mere fact that a person is fired should not be sufficient, without more, to set a lawsuit in motion.  On the other hand, if employees have a reasonable basis to believe that their discharge was the result of discrimination, they should allege the specific facts which lead them to that conclusion and they should have no trouble satisfying Rule 8.

Professor Mulligan is undoubtedly correct that plaintiffs incur costs in conducting discovery.  But that does not mean that the burden on plaintiffs and defendants is anywhere near symmetrical.  Plaintiffs will usually have fewer witnesses subject to deposition, especially where an individual sues a business.  While plaintiffs still must pay for attorney time in taking the deposition of a defense witness, defendants must pay both for the time of the attorney and the witness’s time.  Further, plaintiffs incur virtually no costs in demanding that defendants sift through thousands—and oftentimes millions—of documents to respond to requests for production.  It is simply beyond question that baseless lawsuits are often settled to avoid the costs of discovery.  

Professor Mulligan suggests that the a stratified system may be worth considering under which different types of cases are subjected to different pleading standards.  However, as Professor Mulligan acknowledges, such a system can be accomplished only by an amendment to the rules.  Therefore the issue goes beyond whether Iqbal is a proper interpretation of the existing rules.  Further, such a system would be accompanied by its own set of complications, inviting litigation over precisely what type of case a given complaint presents and whether it must clear the low or high hurdle.

In my view, Ms. Mitchell and Mr. Wallach’s retort that discovery in anti-trust is too expensive, merely proves my point.  As I noted in a previous post, the best evidence I have seen places the discovery costs of complex anti-trust suits at 33% of the amount at stake.  In $20 Million dollar suit, that is a lot to spend on discovery.  I have never disagreed that discovery in an anti-trust suit is expensive.  But anti-trust, and a few others like mass tort, are the exception to the rule.  It makes little sense to change all of procedure to accommodate 5% of the cases.  This is especially true when we already have a device, Rule 9, under which we can require pleading with specificity for a delimited class of cases.

Ms. Mitchell and Mr. Wallach also question the validity of the sample and study upon which I rely.  All the more reason for this discussion to have happened in the rules committee.  They could have looked to numerous studies, had public comment, commissioned a new study etc. 

If the imposition of fact pleading as to the 95% (or whatever the number is) of cases where discovery is closer to 3% of the amount at stake came at no cost, I would not complain.  The difficulty is the catch-22 I described earlier.  There are certain categories of cases, like intentional discrimination cases, where plaintiff’s claim requires allegations about facts that the plaintiff cannot obtain without discovery.  In the federal system until Twombly/Iqbal, plaintiff relied upon inference to survive a Rule 12(b)(6) motion in this regard.  This seems much less likely now.  As such, the Iqbal regime comes at the cost of dismissing more potentially meritorious cases pre-discovery. 

Hence, my view that a middle course is more appropriate.  Only in those cases, like anti-trust, where we know discovery is astronomically expensive, should we require fact-pleading.  We can do that by amending Rule 9.  But as to the vast bulk of cases, this cost-benefit analysis (as I understand the empirical evidence) does not weigh in favor of more rigorous pleading, because we will dismiss more potentially meritorious cases early even though we do not face a huge discovery cost problem here.

As I noted earlier, 15 states continue with a type of fact-pleading regime.  Nevertheless, these systems work reasonably well, even with the type of cases I describe above, in large part do the practice of pleading upon “information and belief.”  In essence this is a means of satisfying a fact-pleading requirement without actually attesting to the veracity of the fact. 

The Court has yet to adequately address this issue.  Allowing a liberal information-and-belief practice would essentially take the sting out of Iqbal and Twombly.  As such, I doubt this practice will settle in at the federal level.  Leaving us with the catch-22 I describe.

As to stigma harms for law suits, I agree that a falsely brought civil suit brings some stigmatic harm for defendants.  But losing the ability to bring, say, a meritorious Title VII claim because our pleading standard asks plaintiff to allege facts s/he cannot obtain brings costs too.    We should rationally balance those harms against the best evidence we have in a forum institutionally capable of engaging in the inquiry (i.e., the rules committee).

In this post, I turn to an Iqbal specific critique.  In our system of justice, determining the veracity of allegations is reserved for the finder of fact.  While that role can be played by the judge (at the appropriate stage of the trial), it is typically played by the jury. Recall, under Iqbal, however the courts need not assume a plaintiff’s factual averments to be true.  Any scheme, such as this, that empowers judges pre-discovery to determine the truthfulness of allegations limits the traditional role of the jury.  But of course, the jury trial is a constitutionally enshrined value.

Now, our system limits jury power in many meaningful ways.  The jury must base its decision on admissible evidence, that evidence itself must be deemed sufficient (assuming it is true) to support the verdict, jury instructions play a big role, etc.  But absent truly outrageous claims, our system ultimately leaves the determination of whether a claim is true to the jury.  That is our tradition (and constitutional command in non-equity cases).

The set of truly outrageous claims that form the exception to this rule leaving the truthfulness of assertions to the finder of fact is limited.  Justice Souter, again the author of Twombly but dissenting in Iqbal, makes this point: “The sole exception to this rule lies with allegations that are sufficiently fantastic to defy reality as we know it: claims about little green men, or the plaintiff’s recent trip to Pluto, or experiences in time travel.”  Iqbal, 129 S.Ct. at 1959 (Souter, J., dissenting). 

Iqbal itself is not a little-green-men allegation.  Plaintiff alleges that John Ashcroft was motivated by racial and religious prejudice in enacting an enforcement regime.  Now this might be false.  (I hope so.)  But it is not an allegation of time travel.  Thus, traditionally speaking, it would be for the jury to ultimately decide whether the allegation is true.  Iqbal, however, empowers a trial judge to determine whether allegations are plausibly true based upon his or her common sense and experience.  Now, I am all for common sense and experience as the ultimate arbiter of liability — but traditionally it has been the jury who exercises that function.  I think that the proper balance.

We can already see this traditional balance shifting.   In a recent district court case in the Middle District of Georgia, Rhodes v. MacDonald, the court employed Iqbal’s common sense standard.  The court held, as a matter of common sense, that plaintiff’s allegation that President Obama was born in Nigeria is untrue.  While this is common sense to me too, I am not the jury.  Indeed, a jury might well agree with plaintiff, given that, according to some polls, 58% of Republicans thinks the President not a native born citizen. 

The point, I believe, is that while our system maintains many tools to ferret out meritless factual assertions, mere common sense of the trial judge has never been one of them.  This is a big change.  Take, again, my hypothetical Title VII claim in which the plaintiff alleges intentional racial discrimination.  Could a judge under Iqbal, dismiss the case because, based upon his/her common sense, employers just don’t discrimination anymore?  Is this any more implausible than that John Ashcroft was motivated by prejudice?  I think not.

Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009) did not change the pleading standard. That was and is still governed by Rule 8, which requires “a short and plain statement of the claim showing that the pleader is entitled to relief.” Under previous interpretations of this standard, such as that set forth in Conley v. Gibson, 355 U.S. 41, 46-47 (1957), the focus was on keeping the pleading barrier low and on the “short and plain statement” aspect of Rule 8. In Iqbal the court gave renewed vigor to the requirement that the complaint show “that the pleader is entitled to relief.”

Accordingly the court ruled in Twombly that “threadbare recitals of a cause of action’s elements, supported by mere conclusory statements” will no longer suffice. 550 U.S. at 555. In Iqbal, the Court made clear that Twombly’s ruling has general application. 129 S.Ct. at 1949. If Professor Mulligan intends to suggest that Iqbal signals a return to the pre-Rule 8 pleading requirements that mired parties in protracted debates about the technicalities of the complaint, that is not the case. Iqbal recognized that Rule 8 is a “notable and generous departure from the hyper-technical, code pleading regime of a prior era” but at the same time cautioned that the departure was not without bounds and that Rule 8’s requirements do not “unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.” Id.

Which brings us to the subject of discovery. Professor Mulligan suggests it is not as burdensome as critics suggest and that it is but a fraction of the amounts at stake. Statistics on this issue can be misleading because issues such as how cases are selected for inclusion in a study and whether they were settled to avoid discovery costs will cause wide variations in the results. In antitrust cases, the genesis of Twombly and an area in which I frequently practice, discovery costs are staggering. Once into discovery, plaintiffs can seek every communication relating to pricing from an entire industry for a multi-year time period. That means that every company in the industry needs to advise all of its employees who have anything to do with pricing to preserve all of their documents, expensive e-discovery searches must be undertaken and oftentimes an individual’s files will have to be gone through page-by-page to find responsive documents. All to respond to just a single request. In such cases, discovery can keep substantial teams of lawyers busy for years, literally. This is extraordinarily costly.

Nor are antitrust defendants alone. Just last year the Institute for the Advancement of the American Legal System issued an interim report that was a joint project of the American College of Trial Lawyers Task Force on Discovery and the Institute for the Advancement of the American Legal System. Among its conclusions, “[d]iscovery costs far too much and has become an end in itself.” “Meritless cases, especially smaller cases, are being settled rather than being tried because it costs too much to litigate them.” In response to the Institute’s survey, “[n]early half of respondents said that notice pleading has become a problem because extensive discovery is required to narrow the claims and defenses and 57 percent said that with notice pleading, motions to dismiss on the pleadings are not effective in limiting claims and narrowing litigation issues.”

Beyond discovery, what I think often gets lost in the analysis is that real people’s lives are affected when they are accused of wrongdoing. A lawsuit gives a veneer of credibility to allegations of wrongdoing and often individuals, or companies, have to live under a cloud for years before the case resolves. When the allegations of wrongdoing are nothing more than conclusory statements asserted with the hope they will open the door to a fishing expedition during discovery, it is right to require more before allowing them to proceed.

Iqbal is a welcome response to these issues. It requires plaintiffs to fulfill their obligation to show that they are entitled to relief, not to just list the elements of a claim as allegations in a complaint. This demands only that a plaintiff show that they have some reasonable basis for believing that they have a legitimate claim. This requirement will focus litigation on the claims with merit and reduce the extraordinary burden of litigation expenses in unmeritorious cases.

I turn now to a Twombly specific critique: if this change was needed, it should have come by amendment to the Federal Rules, not by Supreme Court interpretation of Rule 8(a)(2).

In essence, Twombly  re-imposed the fact-intensive pleading system that was in place pre-1937.  This system is not without merit.  In 15 states (including my home state of Michigan) apply this scheme in their state courts.  Moreover, while the Federal Rules generally adopt a notice-pleading regime, the Federal Rules do impose a fact-pleading regime by exception to certain classes of cases under Rule 9.  This fact-intension pleading scheme has the benefit (as the Twombly Court noted) of restricting the ability of meritless cases from proceeding to the at-times costly discovery stage. 

While in most cases, the costs of discovery do not appear rampantly out of control, there are certain categories of claims, anti-trust being one (Thomas E. Willging et al., An Empirical Study of Discovery and Disclosure Practice Under the 1993 Federal Rule Amendments, 39 B.C. L. Rev. 525, 532 (1998)), where discovery costs do tend toward the extreme.    Thus, there are a class of cases in which, from a policy perspective, good reasons exist to believe that access to discovery should be limited or curtailed.

The Court,  however, by interpreting Rule 8(a)(2) under a plausibility standard, made a rule that is applicable to every case.  See Iqbal, 129 S.Ct. at 1957.  It would have been better to focus the cure of limited access to discovery to those areas that required it.   That is, if anti-trust suits (and a few others) are as, a matter of empirical fact, significantly more costly in discovery than the bulk of suits, we should treat them differently.  Perhaps they should be added under the fact-pleading regime of Rule 9. 

The institutional posture of the rules committee, not the Court disposing of a case, is the place to make these types of arguments as they reach across swaths of cases instead of just discussing the facts of one particular case.  Moreover, the rules committee has the power to make any number of nuanced changes to address the cost of discover in such cases.  For example, it could amend Rule 26 (the principle discovery rule) to narrow initial discovery in such cases and impose an early summary judgment motion under Rule 56.  Or it could beef up Rule 11 (the ethics rule) to address meritless pleading in anti-trust suits.  The Court disposing of a particular case, however, by this institutional posture is forced into making a one-size-fits-all rule.

Importantly, this one-size-fits-all rule comes at a cost.  Again in the vast bulk of cases the cost of discovery is not radically out of control.  Nevertheless, the Court has applied this plausibility requirement as to inferences upon all plaintiffs.  This requires them to plead facts to survive a pre-discovery dismissal that, often times, they simply cannot obtain without discovery.  For example, many federal anti-discrimination claims require  allegations about the defendant employer’s motivations.  Until one gets the boss into a deposition, allegations about motivation will necessarily be done by inference.  But now, skeptical judges are empowered to dismiss, say, gender or racial discrimination cases at the earliest stage because the judge does not find the plaintiff’s inference plausible. 

This puts plaintiffs in a catch 22.  They must plead discriminatory motivation with facts under Twombly.  But they cannot get those facts until they get to discovery.  But they cannot get to discovery until they plead discriminatory motivation with facts.  And on and on.  Now in those 5% of cases where discovery really is exceptionally expensive, such a scheme—all things considered—might be a sound policy choice.  But in a typical Title VII cases, say, where discovery is not so costly, I am hard pressed to believe this a sound policy.

I turn now in this post to a critique of Twombly and Iqbal.  As I noted in my first post, these are actually two different standards.  Twombly assumes facts in a complaint to be true but bars implausible inferences.  Iqbal goes farther and does not assume certain alleged facts to be true, if given the judges common sense and experience, the allegation is implausible.  More concerns with Twombly are more process based, while my concerns with Iqbal are more substantive.  In this post,  however, I begin with a concern common to both cases.

The real issue in both these cases is not, actually, an abstract fight about the detail needed in a complaint (although that is how the Court frames the issues).  Rather both of these cases are about discovery (i.e., the process during which both sides in a lawsuit gather evidence in preparation for trial).  More precisely, these cases are concerned with the costs of discovery.  The assumed truth (I question this is a bit) is that discovery always costs large sums of money and that this disproportionately affects defendants. 

The Court, in a moment of clarity, noted this as well:  the Court fears that “the threat of discovery expense will push cost-conscious defendants to settle even anemic cases before reaching” summary judgment.  Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955, 1967 (2007).  The Court also noted that allowing a weak case proceed to discovery “represent[s] an in terrorem increment to settlement value.”  The operative theory, then, is that discovery costs too much and that this cost hits defendants the hardest.  This huge cost, the argument goes, pushes defendants to settle cases that are unmeritorious.  This is unjust.   Therefore, we should prevent weak cases from proceeding to discovery by tightening pleading rules.  The key planks here are that discovery is always too expensive and that this cost disproportionately affects defendants.  I dispute these in turn.

As two, non-partisan Senior Researchers at the Federal Judicial Center observed “the debate over discovery reform has proceeded largely, but not entirely, with reference to salient personal experiences and not with benefit of empirical evidence.”  See Glenn. S. Koppel, Reflection on the Chimera of a Uniform Code of State Civil Procedure, 58 DePaul L. Rev. 971, 1001-02 (2009).  Anecdotes and political rhetoric have filled the knowledge vacuum created by the dearth empirical information.   Id.  In fact, recently the Advisory Committee recommended the scope-narrowing amendment to the discovery rules, despite the lack of an empirical case for the amendment, “largely because of the political preferences of the leadership of the American College of Trial Lawyers and the ABA Litigation Section.”  Id.

The question is: do we have evidence to support the notion that discovery is usually too costly.  The answer is we do not.  Rather the evidence supports the opposite conclusion.  In the overwhelming majority of cases, discovery comes to about 3% of the amount at stake.  Thomas E. Willging et al., An Empirical Study of Discovery and Disclosure Practice Under the 1993 Federal Rule Amendments, 39 B.C. L. Rev. 525, 531 (1998).  This is not a picture of discovery run amok or of a scary weapon to be wielded against hapless defendants.  To be sure, in 5% of cases filed discovery may run as much as 33% of the amount at stake.  Id.  But we know, by and large, which cases these are and can account for them by a separate rule.  (I will discuss this in a future post.)  There is no need to have a one-size-fits all approach, which is what Iqbal creates.  Indeed, the Federal Rules already allow for exceptions to the notice-pleading approach by way of Rule 9, where cases such as fraud are required to conform to the old fact-pleading scheme. 

I end by noting that the costs of discovery are not a one-way street.  In those few cases where discovery is very expensive, these cost must be borne by plaintiffs as well.  Moreover, given the typically contingency payment scheme for plaintiffs’ attorneys, this cost must be financed with the mere hope that a judgment or settlement is forthcoming.  Defendants, and defense attorneys, pay monthly, typically out of pocket.  Thus, the costs of discovery are certainly daunting and scary for plaintiffs too.  Proceeding to expensive discovery on a dog of a case will likely be a financial disaster for plaintiffs’ attorneys.  Thus, the in terrorem threat of discovery is not one-sided.  There is already a financial disincentive for plaintiffs to proceed to discovery on meritless cases.

Congressman John Dingell, D-Dearborn, once said at a congressional hearing, “I’ll let you write the substance … and you let me write the procedure, and I’ll screw you every time.”
Recognizing that procedure does indeed matter, PublicSquare.net asked Ms. Caroline Mitchell and me to debate the merits of the Supreme Court’s recent cases that change the standard for drafting a satisfactory complaint in federal court (i.e., the document that starts a lawsuit by laying out the basis for the plaintiff’s claim against the defendant). I would like to thank the folks at PublicSquare.net for hosting this discussion and Ms. Mitchell for participating. In this first post, I begin with an introduction to the issue. In my next post, I will offer my critique of the new regime.
From the middle of the nineteenth century until the end of the 1930s, plaintiffs in drafting complaints were required to provide a great amount of factual detail in order to satisfy the then-prevailing pleading standards. This fact-intensive scheme led to two main difficulties: (1) Courts and parties spent an inordinate amount of time, money and energy determining how much detail was required in the complaint and distinguishing “facts” from “legal” conclusions. Moreover, none of this effort was expended on the underlying merits of the claim, but rather on satisfying a procedural hurdle. (2) As Congress and state legislatures passed more complicated legislation, creating claims to address more nuanced injuries than common-law battery (or the like), plaintiffs found themselves unable to acquire the facts needed to plead a fact-intensive complaint successfully without the coercive power of a court to compel the opposing party to release the relevant information.
In 1937, the federal rules of procedure were radically reworked, creating the still-governing Federal Rules of Civil Procedure. Among other things, the drafters of the Federal Rules sought to address the difficulties outlined above. They drafted two rules that directly address this issue. First, they rejected fact-intensive pleading for a “notice” pleading scheme under Rule 8(a)(2).1   Instead of requiring plaintiffs to provide a detailed factual account of the injury of which they are complaining, the Federal Rules only require plaintiffs to put the defendant on notice of the nature of the complaint being brought. Second, a failure to satisfy this low standard, may be addressed by a pre-answer motion (the answer is the document the defendant files to respond to the complaint) under Federal Rule 12(b)(6). Factual detail, under this scheme, is to be developed in a later stage of the litigation process called discovery.
This mere notice standard for complaints was affirmed by the Supreme Court in Conley v. Gibson, 355 U.S. 41, 46-47 (1957). Here the Court held that “complaint should not be dismissed . . . [for failure to comport with Rule 8(a)(2)] 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.” Thus, the Court ruled that a complaint was merely a vehicle to put the defendant upon notice of a suit—not an opportunity to adjudge the veracity of plaintiff’s underlying factual assertions. Put more concretely, under this standard, courts (only during this early, pre-discovery period) were to assume facts stated in a complaint are true and allow a plaintiff to draw any possible inferences from these allegations. This approach to pleading had come to govern, not only in the federal system, but in 35 state systems as well. Moreover, the Court reiterated this Conley holding upon numerous occasions until two years ago.2
The Court’s 2007 Bell Atlantic Corp. v. Twombly changed these, by then, well-settled rules for pleading. 127 S. Ct. 1955 (2007). The plaintiffs in Twombly brought federal anti-trust claims against several local providers of telephone and Internet service. The plaintiffs’ theory of the case, as required under the Sherman Act, was that the telephone companies had conspired with each other not to compete, thereby creating monopoly pricing power in the each company’s local market. The relevant part of the plaintiffs’ complaint merely alleged that the companies pricing packages tended to parallel each others. From this the plaintiffs’ sought the legal conclusion that the defendants had conspired to set prices by way of inference. Justice Souter, writing for the Court, rejected this complaint as implausible. The Court hewed to the traditional standard of assuming the facts alleged as true. Here, the fact of parallel pricing conduct. But the Court rejected the Conley standard of allowing a plaintiff the benefit of any conceivable inference. Rather, the Court held that inferences must be plausible. Here, the Court found the inference from parallel conduct to conspiracy implausible. Thus, the Court required the plaintiffs to plead the conspiracy with specific facts.
Building upon Twombly, last spring the Court issued Ashcroft v. Iqbal.129 S.Ct. 1937 (2009).Here federal authorities arrested Mr. Iqbal, an Arab Muslim, after the 9/11 attacks. After his release and deportation to Pakistan, Mr. Iqbal sued senior Department of Justice officials contending that he was arrested solely on the basis of his race and religion. Such allegations, if true, would constitute significant constitutional violations and would justify an award of monetary damages for Mr. Iqbal. The Court, speaking through Justice Kennedy, agreed that Mr. Iqbal’s “allegations are consistent with … [his designation as a person] ‘of high interest’ because of [his] race, religion, or national origin. But given more likely explanations, they do not plausibly establish this purpose.” That is, the Court relied upon the Twombly plausibility holding to rule that it did not believe Mr. Iqbal’s preliminary allegations. This holding drew a vigorous dissent from Justice Souter, the author of Twombly. Under Iqbal, Justice Souter complained, not only is plaintiff not entitled to all conceivable inferences from his allegations (per Twombly), but the courts need not assume his factual averments to be true. A step too far in his view.
This is where we stand then. Under the pre-2007 regime, plaintiffs needed only to put a defendant upon notice of the claim against it. Plaintiffs were entitled to an assumption (during pre-discovery motions) that their allegations were true and inferences from these allegations were true. Under Iqbal, neither of these assumptions continue to govern pre-discovery Rule 12(b)(6) motions.

1Fed. R. Civ. P. 8(a)(a) (“A pleading that states a claim for relief must contain . . . . a short and plain statement of the claim showing that the pleader is entitled to relief.”).

2 See, e.g, Erickson v. Pardus, 551 U.S. 89 (2007); Swierkiewicz v. Sorema N. A., 534 U.S. 506 (2002);  Leatherman v. Tarrant County Narcotics Intelligence and Coordination Unit, 507 U.S. 163 (1993).

I’ll take one more go at this.

There is nothing in the statute which prohibits any human being from making any political comment.  If Warren Buffett or George Soros or Ross Perot or Donald Trump or any other person with the resources to do it wants to run an ad or a movie, they’re obviously permitted to do so under the First Amendment.   Nothing that I can see in the statute would prohibit an individual from producing a movie and renting out a theater to show it, either.

I hate slippery slope arguments, but the issue of corporate personhood has been taken to such extremes (note that Rehnquist dissented in Belotti along with Brennan, Marshall, and White) that it’s important to point out that:

- People have limited lifespans.  Corporations don’t.   I think I’m safe in saying that every human being on Fortune’s 500 list will be dead in 120 years.  It’s a reasonable bet that at least 20% of the corporations on the corporate list will still exist in some form.

- People have the right to vote.  Corporations don’t.   I haven’t yet come across anyone arguing that any 18-year-old corporation should be able to cast a ballot, but it’s really not a far leap from free speech to the vote.  (As a sci-fi buff, I’ll also make a prediction that in my lifetime– I’m 37– the SCOTUS is going to have to make a decision on the personhood of an Artificial Intelligence program.  I hope I’m still young enough to see that argument.)

- Even such fundamental rights as equal protection do not fully apply to corporations.  Otherwise the corporate income tax would be held unconstitutional for its different rates and different scope of deductions.

- Corporations, at least in Delaware and Nevada, grant their privately held owners a degree of anonymity that in and of itself is incompatible with modern campaign finance law.  How do you know that each individual shareholder of a corporation is even legally entitled to make a contribution?  I’ve brought this up a couple of times, but it’s a really serious problem, even in the case of nonprofits.  People who are interested in the Second Amendment may be aware that there was actually something of a coup in the leadership of the NRA about 20 years back (on the surface, it may have seemed not much more than a move from Washington DC to the Outer Beltway, but the positions the organization took changed, sometimes dramatically).  What’s the remedy if a dues-paying member, or even a strong minority of dues-paying members, disagrees with the position espoused?

(I should point out that it sometimes seems that 2/3 of what I do during campaigns is write nice letters to would-be donors enclosing uncashed checks that used their corporate or LLC checkbooks by mistake or by ignorance– once I had to write such a letter to the candidate’s daughter, who naturally was not amused.)

As a history nitpicker, I’ll point out that the 1907 Tillman Act is actually almost entirely in sync with modern corporate law.  In 1907, New Jersey and Delaware were still in the race to the bottom for the most lenient corporate laws.  While some other states, like my native Pennsylvania, still required an act of the legislature to form a corporation in 1907, Delaware at least did not.  (New Jersey let Delaware win the race when a liberal do-gooder named Woodrow Wilson got elected governor and got stricter corporate laws passed.)  (I’ll also digress a bit further and state that in 1907 in Pennsylvania, any corporation was entitled to form its own police force, with full powers of armament, arrest, and detention.  These coal and iron police, as they were called, existed until the Great Depression.  But even if you were, say, a corporate grocery, you were entitled to a police force with guns and badges and the whole works.)

Finally, and I think I’m probably on my weakest ground here, since using foreign law, even for comparison, has become a bugaboo, I’d like to direct my fellow Americans’ attention to what’s been going on in Italy for the last few years.   Faced with the problem that Silvio Berlusconi owns all the private network TV stations and most of the newspapers, and with the corollary problem that his opposition would have to pay Berlusconi for airtime to run anti-Berlusconi ads, Italy in its last election simply outlawed TV political advertising.  Whether it made much of an impact on the outcome of the election, it’s hard to say (Berlusconi’s TV news programs are like something out of Orwell– light years beyond the worst things that liberals think about Fox News or conservatives think about MSNBC here), but my Italian relatives reported that for the first time in a long time, they felt like issues, rather than sound-bites, were being discussed.  Having just come off an election that seemed like it was between Sarah Palin and Bill Ayers, it sounds almost like democratic ecstasy.