Saturday, September 11, 2010

Plaintiffs Lawyers Continue to Wail About Iqbal and Twombly, But Statistics Show No Rise in Dismissal Rate From Higher Pleading Standard

Tougher pleading standards are making it harder for for investor claims and employee litigation against large corporations. As reported by Bloomberg:
Where once it was enough to give a defendant “fair notice” of a claim and the grounds on which it rested, the high court’s 2007 holding in Bell Atlantic Corp. v. Twombly required an antitrust complaint to contain enough facts to show a claim that is “plausible on its face.” Two years later, in Ashcroft v. Iqbal, the court applied Twombly to all federal civil suits.
The Supreme Court rulings mean that someone who wants to sue in federal court “should not subject a defendant to the costs and burdens of litigation when there is no plausible basis for their claims,” Lisa Rickard, president of the U.S. Chamber of Commerce’s Institute for Legal Reform, said in an e-mail.
Plaintiffs lawyers have railed against the higher pleading standard from the beginning,
"[They] say the justices’ new threshold unfairly closes the courthouse to their clients or increases their costs by forcing them to gather facts before suing, often before they can gain access to key information.
Plaintiffs lawyers point to recent lawsuits brought against a waste management firm owned by Credit Suisse Group AG and Dollar General Corp, which were dismissed on account of the higher pleading standard, as evidence that the new standard, "unfairly closes the courthouse to... clients or increases [the] costs" of litigation.

However, "case law to date does not appear to indicate that Iqbal has dramatically changed the application of the standards used to determine pleading sufficiency,” according to a July 26 Judicial Conference public memorandum. In a sample of cases, "dismissals were granted 38 percent of the time they were requested in both the four months before Twombly and the four months after Iqbal, according to an Aug. 12 report by the Administrative Office of the U.S. Courts, the support agency for the federal system. Nonetheless, "[s]ome U.S. lawmakers are seeking a return to the old, less restrictive standard" by passing legislation that refers to the previous "no set of facts" pleading standard previously used.