Congress eyes pleading standard

Congress is reviewing a U.S. Supreme Court ruling that critics say may preclude legitimate federal claims against corporate defendants, and the federal judiciary's rulemaking arm is examining the issue.

However, data from thousands of federal cases citing the high court's May 18 ruling in John D. Ashcroft et al. vs. Javaid Iqbal et al. suggest the tougher claim pleading standard that the ruling imposed on plaintiffs has had “little or no impact,” said a representative of the rulemaking body.

Given the nominal increase in the number of motions to dismiss and the number granted while civil litigation continues to rise, “we're very skeptical at this point” that a problem exists, said John Rabiej, chief of the support office for the Rules Committee of the Judicial Conference of the United States.

While the Supreme Court promulgates federal civil procedure rules and Congress can weigh in, rule modifications generally are based on the Judicial Conference's recommendations. Mr. Rabiej said there is no time line for the Judicial Conference to formally address the issue.

Still, civil rights attorneys and many law professors fear many legitimate claims cannot survive defense motions to dismiss.

Corporate defense attorneys say the new standard will eliminate costly meritless cases that plaintiffs file in hopes they'll be allowed to rummage through defendants' files.

Under the previous pleading standard, established by the Supreme Court in 1957 and codified in the civil procedure rules, a plaintiff had to provide “a short and plain statement”—or notice—of its assertions.

Now a plaintiff must state a claim “that is plausible on its face” and include “sufficient factual matter” that is incontrovertible, the court ruled in Ashcroft vs. Iqbal, overturning a 2nd U.S. Circuit Court of Appeals decision. The high court's 5-4 ruling drew from its 2007 decision in Bell Atlantic Corp. et al. vs. William Twombly et al., an antitrust case the legal community wasn't sure applied to all civil litigation.

Writing for the majority in Ashcroft vs. Iqbal, Justice Anthony M. Kennedy said a claim properly pled under the new standard “allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” A pleading may include a legal conclusion, such as the plaintiff's civil rights were violated, but it won't be assumed to be true, he noted.

In the case, Mr. Iqbal alleged that top federal justice officials violated thousands of U.S. Arab Muslims' constitutional rights by ordering them detained after the 2001 terrorist attacks. On remand, the court ruled, the plaintiff “must plead with sufficient factual matter” a claim showing the defendants implemented detention policies intending to discriminate “on account of race, religion or national origin.”

Congress took notice. On July 22, Sen. Arlen Specter, D-Pa., introduced the Notice Pleading Restoration Act of 2009, S.B. 1504, which would restore the previous notice pleading standard. On Oct. 27, a House Judiciary subcommittee conducted a hearing on the issue.

But the tougher standard is necessary because discovery in meritless cases is expensive and causes administrative burdens that disrupt defendants' business, said product liability defense attorney Mark Herrmann, a partner with Jones Day in Chicago.

More fundamentally, if a claim is implausible, “why should it go forward?” asked attorney Kevin LaCroix, a partner with executive liability intermediary OakBridge Insurance Services L.L.C. in Beachwood, Ohio.

The problem is that the new standard also sinks weak legitimate cases—those filed by harmed plaintiffs who have insufficient facts when filing suit, said Robert Bone, a professor at the Boston University School of Law.

The only way plaintiffs with weak legitimate cases, especially civil rights claims, can obtain the facts the Supreme Court wants in pleadings is through discovery, because only defendants would have that evidence, said Lisa Bornstein, senior counsel and senior policy analyst with the Leadership Conference on Civil Rights, a Washington-based civil rights coalition.

Defense attorney Marc Williams, immediate past president of the Chicago-based Defense Research Institute, said critics are “overstating” their concerns. Judges can allow limited discovery to prevent such problems, said Mr. Williams, a partner at Huddleston Bolen L.L.P. in Huntington, W.Va.

Edward Hartnett, a professor at Seton Hall University Law School in Newark, N.J., agreed that option is available to judges.

However, Mr. Bone said the ruling “frowns” on that solution.

Plaintiffs attorney John Vail, vp and senior litigation counsel for the Center for Constitutional Litigation P.C., asserted that the ruling clearly bars such case management. Washington-based CCL specializes in court access cases and represents the American Assn. for Justice, a trial lawyers group.

The ruling also could hurt some corporate defendants, an insurer attorney said. Because pleadings must be more factual to survive, some might clearly show the claims are not insurable and that insurers have no duty to defend them, said Laura A. Foggan, counsel for the Complex Insurance Claims Litigation Assn. in Washington and a partner at Wiley, Rein & Fielding L.L.P.

But facts typically aren't disputed in insurance coverage cases; the interpretation of their effect on coverage is, said policyholder attorney William G. Passannante, a partner with Anderson Kill & Olick P.C. in New York. “Usually in insurance recovery matters, more facts don't lead to less coverage.”

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