Unless Congress Acts -- The Courts Will Belong to Wall Street, Not Main Street

We have staked out our position on the Supreme Court's continued chipping away at the ability of the investor to get redress for wrongs committed by corporate America. Let's just realize that our Supreme Court has been co-opted to protect corporations over individuals. Shutting the door on the ability to pursue aiders and abettors, now loosely defined to be over-inclusive by the Supreme Court, is just one of the areas Senator Spector seeks to remedy. See my post below. But Senator Spector has also introduced a bill to remedy a newer evil----forcing the wronged to plead more than ever before required, just to get access to the court system.

Senate Bill 1504 would reverse the Supreme Courts decision this year, which gives a federal judge the ability to throw out a lawsuit, before discovery, if he does not think it is "plausible." That's a lot of discretion without any guidance, and keeping the case away from a jury based upon personal biases.  

Senate Bill 1504 is designed to return the standard to what it was prior to 2007, when the Court handed down its ruling in Bell Atlantic Corp. v. Twombly. That case and another — Ashcroft v. Iqbal from the most recent term — have raised the standard that pleaders must meet to avoid having their cases quickly tossed. Specter, in remarks prepared for the Senate floor, accused the Court’s majorities of making an end run around precedent with the two recent cases.

“The effect of the Court’s actions will no doubt be to deny many plaintiffs with meritorious claims access to the federal courts and, with it, any legal redress for their injuries,” Specter said. “I think that is an especially unwelcome development at a time when, with the litigating resources of our executive-branch and administrative agencies stretched thin, the enforcement of federal antitrust, consumer protection, civil rights and other laws that benefit the public will fall increasingly to private litigants.”

At issue is how specific a pleading must be under the Federal Rules of Civil Procedure. Rule 8 requires that a complaint include “a short and plain statement of the claim showing that the pleader is entitled to relief,” while Rule 12 allows for the dismissal of complaints that are vague or that fail to state a claim. Under Iqbal, a 5-4 decision written by Justice Anthony Kennedy, many courts are now requiring more-specific facts that aren’t often available until discovery.

The Iqbal -Twombly debate arrived on Capitol Hill when the House Committee on the Judiciary Subcommittee on the Constitution, Civil Rights and Civil Liberties held hearings on October 27, 2009. The hearing was entitled "Access to Justice Denied – Ashcroft v. Iqbal." The Committee’s page about the hearing, including links to the witnesses’ testimony can be found here. From Arthur Miller's written comments:

Not only has plausibility pleading undone the simplicity and legal basis of the Rule 8 pleading regime and the limited function of the motion to dismiss, but it also grants virtually unbridled discretion to district judges. Under the new standard, the Court has vested trial judges with the authority to evaluate the strength of the factual “showing” of each claim for relief and thus determine whether or not it should proceed.

In conducting this analysis, judges are first to distinguish factual allegations from legal conclusions, since only the former need be accepted as true. Some post-Iqbal decisions suggest that the conclusion category is being applied quite expansively, embracing allegations that one might well consider to be factual and therefore historically jury triable.

By transforming factual allegations into legal conclusions and drawing inferences from them, judges are performing functions previously left to juries at trial, and doing so based only on the complaint.

Once trial judges have identified the factual allegations, they then must decide whether a plausible claim for relief has been shown by relying on their “judicial experience and common sense,” highly subjective concepts largely devoid of accepted—let alone universal—meaning.

Further, the plausibility of factual allegations appears to depend on the judge’s opinion of the relative likelihood of wrongdoing as measured against a hypothesized innocent explanation. As is true of the division between fact and legal conclusion, the Court has provided little direction on how to measure the palpably nebulous factors of “judicial experience,” “common sense,” and “more likely” alternative explanation it has inserted into the threshold Rule 12(b)(6) dynamic.

Once again, a citizen’s due process right to a day in court before a jury of his or her peers is threatened.

The subjectivity at the heart of Twombly-Iqbal raises the concern that rulings on motions to dismiss may turn on individual ideology regarding the underlying substantive law, attitudes toward private enforcement of federal statutes, and resort to extra-pleading matters hitherto far beyond the scope of a Rule 12(b)(6) motion to dismiss. As a result, inconsistent rulings on virtually identical complaints may well be based on judges’ disparate subjective views of what allegations are plausible.

Courts already have differed on issues that were once settled. For instance, the Third Circuit has ruled that the 2002 Supreme Court decision in Swierkiewicz v. Sorema, N.A.,which upheld notice pleading in employment discrimination actions, no longer was valid law after Twombly-Iqbal. 27 Courts in other circuits disagree.

Twombly and Iqbal have swung the pendulum away from the prior emphasis on access for potentially meritorious claims; it probably will affect litigants bringing complex claims the hardest. Those cases -- many involving Constitutional and statutory rights that seek the enforcement of important national policies and often affecting large numbers of people -- include claims in which factual sufficiency is most difficult to achieve at the pleading stage and tend to be resource consumptive.

Already, recent decisions suggest that complex cases, such as those involving claims of discrimination, conspiracy, and antitrust violations, have been treated as if they were disfavored actions. Perhaps the propensity to dismiss these claims should come as no surprise: Twombly and Iqbal arose in two such contexts, and lower courts may find it easier to apply the Supreme Court’s reasoning to complaints with seemingly similar facts. Yet ambiguity abounds. Where is the plausibility line and what must be pled to survive a motion to dismiss? How will each judge’s personal experience and common sense affect his or her determination of plausibility? As a result of these and other uncertainties, the value of prior case law and predictability are obscured, and plaintiffs will be left guessing as to what each individual judge will consider sufficient. Throughout, the defendant basically gets a pass.

Moreover, how can plaintiffs with potentially meritorious claims plead with factual sufficiency without discovery, especially when they are limited in terms of time, lack resources for pre-institution investigations, and critical information is held by the defendants? 

Contact your Senators and Congresspersons and ask them to support these bills, before you find that you too have no access to the courts.