Hoffman’s Analysis of FJC Study of Twombly/Iqbal Published
Professor Lonny Hoffman’s article, “Twombly and Iqbal’s Measure: An Assessment of the Federal Judicial Center’s Study of Motions to Dismiss” has just been published at 6 Fed. Cts. L. Rev. 1 (2012), available here.
The abstract reads:
This paper provides the first comprehensive assessment of the Federal Judicial Center’s long-anticipated study of motions to dismiss for failure to state a claim after the U.S. Supreme Court’s decision in Ashcroft v. Iqbal. Three primary assessments are made of the FJC’s study. First, the FJC’s findings do not indicate that the Court’s decisions have had no effect on dismissal practice. To the contrary, the FJC found that after Iqbal, a plaintiff was twice as likely to face a motion to dismiss. This sizeable increase in the rate of Rule 12(b)(6) motion activity represents a marked departure from the steady filing rate observed over the last several decades and means, among other consequences, added costs for plaintiffs. Similarly, the data regarding orders resolving dismissal motions demonstrates the consequential impacts of the Court’s cases, as in every case type studied there was a higher likelihood after Iqbal that a motion to dismiss would be granted. Second, due to the inherent limitations of doing empirical work of this nature, the cases may be having effects that the FJC researchers were unable to detect. Comparing how many motions were filed and granted before Twombly with after Iqbal does not indicate whether the Court’s cases are deterring some claims from being brought, whether they have increased dismissals of complaints on factual sufficiency grounds, or how many meritorious cases have been dismissed as a result of the Court’s stricter pleading filter. Finally, the data the FJC researchers gathered may be incomplete, particularly as to the filing rate. As a result, the study may be providing an incomplete picture of actual Rule 12(b)(6) activity.
Forthcoming in the Kentucky Law Journal and posted on SSRN, Raymond Brescia has completed an empirical study of Iqbal’s effect that, unlike past studies, attempts to focus solely on motions to dismiss going to the specificity of the pleadings.
The abstract for “The Iqbal Effect: The Impact of New Pleadings Standards in Employment and Housing Discrimination Litigation” follows.
Abstract: In May 2009, the Supreme Court issued its decision in Ashcroft v. Iqbal, a case brought by an immigrant of Pakistani descent caught up in the worldwide investigation that followed the horrific attacks of September 11, 2001. In that decision, the Court extended the “plausibility test” first introduced two years earlier, in Bell Atlantic v. Twombly, to all civil pleadings in federal court. That test requires that, in order to satisfy federal pleading requirements, a complaint must allege a plausible set of facts. But what is plausible in a given case may be in the eye of the beholder.
In the two years since the Court reached its decision in Iqbal, that opinion has been cited roughly 25,000 times. The empirical analysis contained in this study attempts to gauge the impact of Iqbal on civil rights cases, specifically cases involving allegations of employment and/or housing discrimination. While several other studies have attempted to answer similar questions, to date, no study has analyzed this impact with reference solely to motions based on the specificity of the pleadings: which is, of course, the central issue in Twombly and Iqbal. In addition, other studies looked exclusively at quantitative results, with no assessment of the manner in which the plausibility standard was being applied by the lower courts. This empirical study attempts to fill that gap in the empirical research.
This study identified over 1850 reported decisions on motions to dismiss in employment and housing discrimination cases filed in federal district court covering the years prior to and after the Court’s decision in Twombly. From this group of cases, a smaller sub-set, totaling 634 cases, was identified by excluding those decisions—included in previous studies—that bore no relation to the issue of the specificity of the pleadings. Furthermore, despite this winnowing process, the sample size for this study was still considerably larger than those analyzed in previous studies.
This detailed study yielded the following results. Surprisingly, the dismissal rate in this class of cases during a set time-period immediately prior to the Twombly decision was actually slightly higher than the dismissal rate of decisions issued in the time period between issuance of the Twombly and Iqbal decisions, but then the rate increases considerably after Iqbal. The dismissal rates for all cases pre-Twombly was 61%; between Twombly and Iqbal, it was 56%; but then after Iqbal, it was 72%, an 18% increase from the pre-Twombly period analyzed.
In addition, even more troubling, plaintiffs were far more likely after Iqbal than either before Twombly or immediately thereafter to face a motion to dismiss challenging the sufficiency of the pleadings in the cases analyzed. Indeed, decisions on such motions were generated only 12 times in the first quarter of 2004 (the first quarter analyzed in this study), but then 61 times in the third quarter of 2010 (the last full quarter analyzed): a greater than 500% increase.
Moreover, when it comes to the substance of these decisions, something else appears to be happening. Despite the increased dismissal rate following Iqbal, oddly, in a class of cases analyzed for this study, courts rarely invoked the plausibility standard in the same manner it was utilized by the Court in Twombly and Iqbal; that is, courts rarely found that dismissal was warranted if there was an arguably more plausible, and entirely legal, basis for the challenged conduct. Finally, and similarly, judges rarely, if ever, appear to invoke their own “experience and common sense,” as urged to by the Court, when ruling on motions to dismiss in these cases.
These outcomes yield three conclusions. First, district courts are using the Iqbal precedent, though not necessarily Twombly, to dismiss employment and housing discrimination cases at an accelerated rate. Second, although courts may be invoking the Twombly/Iqbal plausibility standard in assessing the sufficiency of the pleadings in employment and housing discrimination cases, they are certainly not relying on or utilizing the plausibility standard as articulated in these two precedents. This suggests that the subjective elements of the plausibility standard may be infecting these outcomes. That is, if district court judges are dismissing cases at a higher rate post-Iqbal, yet are not relying on the guidance the Court has given such lower courts in how to deploy the plausibility standard, it would seem that such courts may feel emboldened to dismiss cases that might have survived such a motion had that motion been decided pre-Iqbal. Finally, regardless of whether there is a dramatic Twombly or Iqbal effect on outcomes, motions to dismiss challenging the sufficiency of the pleadings are much more common since Iqbal, which means that even if some plaintiffs are defeating such motions, it still comes at a price: it increases transactions costs in these cases, and may, as a result, have a chilling effect on lawyers contemplating bringing them in the first place.