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Plaintiffs Groups Mount Effort to Undo 'Iqbal

Monday, September 21, 2009

On May 18, the U.S. Supreme Court gave corporate defendants a gift that keeps on giving: the Iqbal decision, which has made it easier than ever for defendants to shut down lawsuits before they get to the costly discovery stage.

Now, four months later, civil rights and consumer groups and trial lawyers are beginning to push back. They met on Sept. 14 in Washington, D.C., to lay plans for a two-pronged battle to undo what they see as a devastating blow to their lifeblood litigation. The campaign will be aimed at Congress as well as the rulemaking process for federal courts. Hearings are being planned for October in the House and the Senate.

"This ruling has threatened to upend the way we have been doing things for a very long time," said John Payton of the NAACP Legal Defense and Educational Fund, which is part of the growing coalition. "The alarm is quite real."

In Ashcroft v. Iqbal (pdf), which built on the 2007 Bell Atlantic Corp. v. Twombly (pdf) decision, the Court said plaintiffs must include in their initial pleadings substantial, not "threadbare," factual assertions that give "facial plausibility" to their claims -- a major shift from the tradition of "notice pleading," which required only a simple statement of the case against the defendant.

With remarkable speed and success, "Iqbal motions" to dismiss because of insufficient pleadings have become commonplace in federal courts, already producing more than 1,500 district court and 100 appellate court decisions according to a Westlaw search. Many more are pending.

WEEDING OUT THE WEAK?

Business advocates say that Iqbal weeds out weak or frivolous lawsuits and is a much-needed standard that will reduce federal court caseloads.

"Having a factual basis before you go forward, that's a good thing, whether you are a plaintiff or a defendant," said Marc Williams, president of the Defense Resources Institute, which bills itself as the voice of the defense bar. He added, "The good lawyers do the work in advance."

That's nonsense, say civil rights advocates. Most plaintiffs in employment and other discrimination cases have no access to the facts that could prove discrimination -- such as personnel files and company documents -- at the pleading stage, they say.

Under Iqbal, "the person filing the suit has to get inside the head of the employer" before being given access to any documents -- a Catch-22 that will thwart valid suits, said Lisa Bornstein, senior counsel at the Leadership Conference on Civil Rights. "It's really a padlock on the courthouse door."

John Vail, vice president of the Center for Constitutional Litigation, thinks Iqbal caps a trend that verges on the unconstitutional, violating the Seventh Amendment's guarantee of a jury trial in civil cases. "It heralds a return to the kind of legal practice Dickens condemned in Bleak House," said Vail.

The Sept. 14 meeting of groups mounting a challenge to Iqbal took place at the offices of Vail's client, the American Association for Justice. In addition to the trial lawyers' group, the Legal Defense Fund and the Leadership Conference, represented at the meeting were Public Citizen, the Sierra Club, the National Employment Lawyers Association and the Committee to Support the Antitrust Laws.

A wide range of cases have already been affected by Iqbal. A major lawsuit against the makers of Seroquel, an anti-psychotic drug, was dismissed on Iqbal grounds in the Middle District of Florida in July. Last month, a California federal judge, citing Iqbal, dismissed a case challenging the government's no-fly list, brought by a Muslim woman who claimed she was a victim of profiling. In a case at the 11th U.S. Circuit Court of Appeals, also last month, an Alien Tort Claims Act suit against Coca-Cola bottlers in Colombia was dismissed on Iqbal grounds.

"I have spent my whole life with the federal rules, and this is one of the biggest deals I have ever seen," said New York University School of Law professor Arthur Miller, a longtime expert on civil procedure. "Me, old fogy troglodyte that I am, I see serious problems with democratic values here, with access to the courts, with resolution of disputes with a jury of peers."

Brooklyn Law School professor Elizabeth Schneider, who has written extensively on federal civil procedure, said Iqbal is forcing trial judges to go "line by line" through pleadings, using subjective factors to decide what parts are factual and which statements are conclusory. "If that's not an open door to judicial bias, I don't know what is," she said.

Michael Carvin, a partner in the Washington office of Jones Day and a frequent litigator on behalf of companies, countered that Iqbal has been "very beneficial" in "slowing the major abuse of litigation against corporations." He said, "You can't just throw mud against the wall. You have to have some theory of the case." Under the previous rule, companies contend, plaintiffs would state frivolous claims in hopes that companies would settle rather than face expensive discovery.

The main target for those seeking to roll back Iqbal is Congress. Sen. Arlen Specter, D-Pa., introduced a bill in July that would return pleading standards to the pre-Twombly status. A similar House bill may be introduced this week. To turn an esoteric issue like pleading standards into a popular cause, the groups that met last week may seek out individual litigants who can testify about how the Iqbal standard affected their lawsuits."Though the issue may seem dry, we've already seen that Americans are being kept out of the courtroom as a result of Iqbal ... so passage of this legislation is critically important," said Nan Aron of the Alliance for Justice.

REVISING THE RULES

Another strategy under debate is to seek changes in the Federal Rules of Civil Procedure regarding pleadings (Rule 8) and dismissals (Rule 12). Some critics say the Supreme Court, by deciding Iqbal as it did, in effect amended the rules without going through the rulemaking process. Rule 8, for example, calls for a "short and plain statement" of the plaintiff's claim in initial pleadings. At the 2nd Circuit's judicial conference this summer, Justice Ruth Bader Ginsburg, who dissented in Iqbal, said that in her view the Court had "messed up the federal rules."

But altering the federal rules is a lengthy process, noted University of Pennsylvania Law School professor Stephen Burbank, a strong critic of Iqbal. He also cautioned, "The process is under the control of the Supreme Court, which is responsible for these atrocities." Chief Justice John Roberts Jr., who was in the 5-4 majority in Iqbal, appoints members of Judicial Conference committees.

U.S. District Judge Mark Kravitz of Connecticut, who chairs the influential Judicial Conference Advisory Committee on Civil Rules, said his committee is monitoring the impact of Iqbal and Twombly with an eye toward gathering data and discussing later this year whether rule changes are needed. "We ought to be deliberate about it," Kravitz said in his first comments to the press about the Iqbal issue. So far, he told The National Law Journal, his sense is that judges are "taking a fairly nuanced view of Iqbal" and that it is not yet "a blockbuster that gets rid of any case that is filed."

Indeed, not all judges are rubber-stamping Iqbal motions. During a hearing Aug. 10 in an employment discrimination case, Senior Judge Milton Shadur of the U.S. District Court for the Northern District of Illinois told defense lawyers that Iqbal and Twombly "don't operate as a kind of universal 'get out of jail free' card."

Even the Iqbal case itself is not entirely over despite the Supreme Court's decision. Javaid Iqbal, a Pakistani Muslim detained in the United States after the Sept. 11, 2001, attacks, is trying to hold then-Attorney General John Ashcroft and others personally liable for constitutional violations. The Court ruled that Iqbal's pleadings -- such as his claim that Ashcroft was the "principal architect" of his detention -- were conclusory and insufficient to justify proceeding. The Court sent the case back to the 2nd Circuit, leaving open the possibility that Iqbal could amend his pleadings.

Since then, Iqbal's lawyer, Alex Reinert, said he has been in settlement talks with the government. But if the case is not settled, Reinert said he plans to amend the pleadings to include facts that the Court said were missing -- facts he obtained during a period of discovery before the high court ruled.

"We think we can meet the new standard," said Reinert, who teaches at Yeshiva University Benjamin N. Cardozo School of Law. "We absolutely still could win."