Tuesday, October 4, 2011

State Courts Split Over Adoption of Twombly/Iqbal Pleading Standards

On July 21, 2011, the Tennessee Supreme Court, sitting en banc in Webb v. Nashville Area Habitat for Humanity, 2011 Tenn. LEXIS 623 (Tenn. July 21, 2011), unanimously declined to embrace the Supreme Court’s new Rule 8 pleading standards articulated in Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009). Judge Sharon Lee, writing for the court, stated:

“In summary, it must be remembered that we are addressing the standard in assessing the sufficiency of a single document filed at the very beginning of a case – the complaint. Our motion-to-dismiss jurisprudence reflects the principle that this stage of the proceeding is particularly ill-suited for an evaluation of the likelihood of success on the merits or of the weight of the facts pleaded, or as a docket-clearing mechanism… We decline to reinterpret Rule 8 to require a pleader demonstrate ‘plausibility’ and continue to adhere to the well established standards [set forth in Tennessee jurisprudence which follows a liberal notice pleading standard].”

2011 Tenn. LEXIS 623 at *40-41. In rejecting the Supreme Court’s new pleading standards, the Tennessee Supreme Court relied upon a similar decision from the Washington State Supreme Court in McCurry v. Chevy Chase Bank, FSB, 169 Wn.2d 96, 233 P.3d 861 (Wash. 2010) (en banc) where that court also rejected the Supreme Court’s plausibility standard. In McCurry, the court stated as follows:

“The Supreme Court's plausibility standard is predicated on policy determinations specific to the federal trial courts. The Twombly Court concluded: federal trial courts are incapable of adequately preventing discovery abuses, weak claims cannot be effectively weeded out early in the discovery process, and this makes discovery expensive and encourages defendants to settle ‘largely groundless’ claims. See 550 U.S. at 557-58, 559, 127 S. Ct. 1955. Neither party has shown these policy determinations hold sufficiently true in the Washington trial courts to warrant such a drastic change in court procedure.

Nor has either party here addressed countervailing policy considerations. For example, do current discovery expenses justify plaintiffs' loss of access to that discovery and general access to the courts, particularly in cases where evidence is almost exclusively in the possession of defendants? Could runaway discovery expenses be addressed by better means — perhaps involving more court oversight of the discovery process or a change in the discovery rules?”

Id. at 102-103. The Supreme Court of Delaware in Cent. Mrtg. Co. v. Morgan Stanley Mortgage Capital Holdings LLC, 2011 Del. LEXIS 439 (Del. Sup. Ct. August 18, 2011) (en banc), “decline[d] to use this case as the vehicle to address whether the Twombly-Iqbal holdings affect our governing standard… Instead, we emphasize that, until this Court decides otherwise or a change is duly effected through the Civil Rules process, the governing pleading standard in Delaware to survive a motion to dismiss is reasonable ‘conceivability.’” The Delaware “conceivability” standard is “more akin to ‘possibility,’ while the federal ‘plausibility’ standard falls somewhere between mere ‘possibility’ but short of ‘probability.’” Id. at *14-15, n.13.

In contrast to the outright rejections of Twombly/Iqbal pleading standards by the Tennessee and Washington Supreme Courts, several state supreme courts have embraced the new standards. See, e.g. Doe v. Bd. Of Regents of Univ. of Neb., 280 Neb. 492, 788 N.W.2d 264, 274-78 (Neb. 2010) (adopting the Twombly/Iqbal standard); Iannacchino v. Ford Motor Co., 451 Mass. 623, 888 N.E.2d 879, 890 (Mass. 2008) (adopting the Twombly standard in a pre-Iqbal decision); Sisney v. Best Inc., 2008 SD 70, 754 N.W.2d 804, 807-09 (S.D. 2008) (adopting the Twombly standard in a pre-Iqbal decision).

Most recently, on September 15, 2011, the District of Columbia Court of Appeals in Potomac Development Corp. v. District of Columbia, No. 10-CV-632, 2011 D.C. App. LEXIS 552 (D.C. September 15, 2011), reinstated the court’s earlier adoption of the plausibility standard. In Mazza v. House Craft, LLC, 18 A.3d 786 (D.C. 2011), vacated as moot, 22 A.3d 820 (D.C. 2011) (per curiam), the court, Judge Blackburne-Rigsby writing for the panel, adopted the standard, but that opinion was subsequently vacated as moot and thus not of precedential value. See also Grayson v. AT&T Corp., 15 A.3d 219, 229 n.16 (D.C. 2011) (en banc); Oh v. National Capital Revitalization Corp., 7 A.3d 997, 1005 n.10 (D.C. 2010); Solers, Inc. v. Doe, 977 A.2d 941, 948 n.5 (D.C. 2009).

As mentioned in a recent note by a law student at UC Berkley, the rejections of the new federal plausibility pleading standards raise some interesting Erie issues. For example, if a state claim under the state law of Tennessee or Washington were litigated in federal district court under that court’s diversity jurisdiction, the federal court would not be required to adopt state pleading standards. See Hanna v. Plumer, 380 U.S. 460 (1965). Under reverse-Erie analysis, the state courts hearing federal subject-matter claims normally use state procedures unless federal procedural rights are a “basic and fundamental” part of the federal right at issue. Felder v. Casey, 487 U.S. 131, 151 (1988) (“[f]ederal law takes state courts as it finds them only insofar as those courts employ rules that do not impose unnecessary burdens upon rights of recovery authorized by federal laws”). In Brown v. W. Ry. of Ala., 338 U.S. 294 (1949), the Court held that pleading standards can be integral to the enforcement of federal rights, holding that states may not apply more stringent pleading standards than would be applied to the case had it been brought in federal court. Id. at 296. The Supreme Court has never addressed whether states may apply less stringent pleading standards to federal claims. The author of the note suggests that Western Railway was predicated on the protection of federal rights in state courts, and argues that less stringent pleading standards do not threaten the enforcement of federal rights and thus may pass muster under currently existing reverse-Erie jurisprudence. See Roger M. Michalski, Tremors of Things to Come: The Great Split Between Federal and State Pleading Standards, 120 Yale L. J. 109 (2010).

So, the practice tips would seem to be the following:

  1. Counsel should be aware of the latest articulation of pleading standards from the applicable state supreme court or the intermediate courts if the issue has not yet filtered up to the supreme court.
  2. Where a pleading standard less stringent than Twombly/Iqbal has been adopted like in Tennessee, Washington and Delaware, counsel for plaintiff should consider whether the case is more appropriately filed in state court.
  3. If the pleading standard remains uncertain in the applicable state, counsel might consider filing in state court and arguing for a rejection of the new federal standard.
  4. Where plaintiff has filed in state court, the defense should consider the argument that under Western Railway, the new federal standard should be applied to any federal claim asserted in state court.
  5. The defense, where state claims are brought in federal court, should emphasize to the district judge that whatever the state standard might be, the new federal plausibility standard must be applied.
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Anonymous said...

Any word on Virginia?

Anonymous said...

Nice information provide about state courts.....
Employment Law

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