:: Notice Versus Fact Pleading – When Additional Facts Must Be Alleged Under F.R.Civ. P. 8
This post is a follow up on the previous two posts regarding the tactic of challenging the sufficiency of pleadings. Of course, since this is an ERISA website, this subject is a digression. On the other hand, the issue is quite topical and often arises in ERISA litigation.
Furthermore, I would be remiss, having posted on the Braden v. Wal-Mart Stores, Inc. opinion today not to mention this significant aspect of the opinion.
First, some context is in order. Here is a brief overview of the tension between notice and fact pleading. It is legal history, but it is also history that is repeating itself.
The quick historical recap is as follows:
- Notice Pleading – 1938
- Conley v. Gibson, 355 U. S. 41, 47 (1957), embracing notice pleading
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), revising Conley in favor of stricter plausibility standard
And most recently, we have the highly significant opinion, Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009), which arguably extends the fact requirements in pleading even further. This was a very significant pull to the stricter fact pleading side of Rule 8 interpretation.
Yesterday, Hunton & Williams provided a quite helpful overview of the political firestorm ignited by Igbal.
Opponents of the Iqbal decision have not gone away quietly. In July, Senator Arlen Spector (D-Pa) introduced the Notice Pleading Restoration Act (S. 1504). More recently, on November 19, 2009, Representative Gerald Nadler (D-NY) introduced the Open Access to Courts Act of 2009 (H.R. 4115).
See, Proposed Bills Seek To Loosen Pleading Requirements For Claims In Federal Court,
Hunton Employment & Labor Perspectives™ (November 30, 2009)
With that context, now consider the following excerpt from the Braden v. Wal Mart Eighth Circuit opinion which interprets a challenge to factual sufficiency of the plaintiff’s pleading favorably, even in light of Iqbal.
It is in this sort of situation—where there is a concrete, “obvious alternative explanation” for the defendant’s conduct—that a plaintiff may be required to plead additional facts tending to rule out the alternative. Id. (quoting Twombly, 550 U.S. at 567); cf. Twombly, 550 U.S. at 566 (plaintiff failed to state a claim where facts alleged described nothing more than defendants’ “natural,” lawful reaction to economic incentives). Such a requirement is neither a special rule nor a new one. It is simply a corollary of the basic plausibility requirement. An inference pressed by the plaintiff is not plausible if the facts he points to are precisely the result one would expect from lawful conduct in which the defendant is known to have engaged.
Not every potential lawful explanation for the defendant’s conduct renders the plaintiff’s theory implausible. Just as a plaintiff cannot proceed if his allegations are “‘merely consistent with’ a defendant’s liability,” id. at 1949 (quoting Twombly, 550 U.S. at 557), so a defendant is not entitled to dismissal if the facts are merely consistent with lawful conduct. And that is exactly the situation in this case.
Certainly appellees could have chosen funds with higher fees for various reasons, but this speculation is far from the sort of concrete, obvious alternative explanation Braden would need to rebut in his complaint. Requiring a plaintiff to rule out every possible lawful explanation for the conduct he challenges would invert the principle that the “complaint is construed most favorably to the nonmoving party,” Northstar Indus., 576 F.3d at 832, and would impose the sort of “probability requirement” at the pleading stage which Iqbal and Twombly explicitly reject. See Iqbal, 129 S. Ct. at 1949–50.
One may expect to see this Eighth Circuit opinion frequently cited as a means of deflecting the harsh requirements that some courts have ascribed to the Supreme Court’s interpretation of Rule 8 in Iqbal.
