Repealing Iqbal And Twombly: Understanding The Physics Of Politics

Monday, July 5, 2010 - 01:00

Lisa A. Rickard

PresidentU.S. Chamber InstituteFor Legal Reform

Sir Issac Newton's Third Law of physics teaches us that every action causes an equal and opposite reaction.

But unlike the physical laws of motion, the law of today's Washington politics seems to be telling us that every action creates an opportunity for a disproportionate reaction, one that can reward special interests while having a profound impact on our nation.

In 2007 and 2008, the Supreme Court's actions in a pair of decisions ( Ashcroft v. Iqbal and Bell Atlantic v. Twombly ) has triggered a lopsided legislative reaction from the trial bar and their allies which, if successful, will greatly expand the number of costly junk lawsuits that could seriously injure an already fragile economy.

The Notice Pleading Restoration Act of 2009 (S. 1504) and its House companion, the Open Access to Courts Act (H.R. 4115), embodies an effort by some in Congress - working at the behest of the plaintiffs' bar - to legislatively repeal these two opinions which stood for an unremarkable and commonsense legal proposition: plaintiffs should not sue someone and subject a defendant to the costs and burdens of litigation if there is no plausible basis for their claims.

Proponents of this bill claim that Iqbal and Twombly marked a radical "sea change" in federal procedural law and that a generation of plaintiffs will be barred from seeking redress for their injuries because they are now subject to a universal heightened pleading standard in federal court.

Nothing could be further from the truth.The reality is that the Iqbal and Twombly decisions represent an outgrowth and endorsement of a vast body of lower federal court precedent governing federal pleading standards for over five decades. These lower court standards represent the very rules of procedural law that any first year law student learns in civil procedure: plaintiffs cannot advance complaints containing "bald assertions," "unsupported conclusions" and "legal conclusions."

Supporters of the legislation point to a 1957 Supreme Court case called Conley v. Gibson , which they say established a prevailing, and somewhat broader, pleading standard prior to Iqbal and Twombly . But Justice Souter disagreed, declaring of the Conley decision: "a good many judges and commentators have balked at taking the literal terms of the Conley passage as a pleading standard."And even the Federal Judicial Conference recently noted that Conley's "no set of facts" language was never "literally applied" by the federal courts. Translation: Conley was never used by the federal courts and in fact has been specifically rejected by many federal judges.

While the plaintiffs' bar and their allies in Congress bellow about how Iqbal and Twombly have caused a massive spike in the dismissal rates of civil complaints, a review of the empirical evidence shows quite the contrary.Indeed, recently circulated data from the Judicial Conference Advisory Committee on Civil Rules shows no discernable change in the rates of dismissals throughout the 94 federal judicial districts across the country.

Pleading standards perform an essential gatekeeping function. They ensure that federal courts are not overwhelmed with frivolous cases and that defendants are not hauled into court on a whim and subjected to the onerous burdens of discovery. Reversing Iqbal and Twombly would increase the already-excessive litigation burdens on businesses in this country - small and large alike - diverting resources that would otherwise be used to create jobs and strengthen our nation's economy.

Without pleading standards, meritless cases will abound. And they will place a tremendous cost on businesses given the limitless opportunities for trial lawyers to sue first and ask questions later.Plaintiffs with a baseless claim would have instant leverage to force a settlement over any defendant who must now face the real threat of expensive and burdensome discovery.

The cumulative effect of reversing the Supreme Court rulings in Iqbal and Twombly would deal a devastating blow to America's fragile economy, as the job creators, already facing economic uncertainty and weak markets, would see their job-creating capital siphoned off to pay what amounts to plaintiffs' lawyer extortion.

This Congress has created a cottage industry out of attempting to reverse Supreme Court rulings with which they disagree. That, of course, is their prerogative. But make no mistake, the Iqbal and Twombly bill is a plaintiffs' lawyer bonanza disguised in the cloak of "justice." It would only result in a new wave of large lawsuits that will further pummel our fragile economy, and become the latest example of the law of political physics.