Iqbal Followup
In a recent post, we discussed the Supreme Court's surprise May 18 decision in Iqbal v. Ashcroft - holding that a plaintiff needs to have some real facts in a complaint rather than just "formulaic conclusions." We predicted that the defense bar would rise to the occasion by filing motions to dismiss in Fair Labor Standards Act cases in which the skeletal allegations fail to say what it is that the defendant did which is claimed to violate the law. Here are two of the early returns:
Qureshi v. Panjwani, 2009 WL 1631798 (S.D. Tex., June 9, 2009): The court reviewed the pivotal language of Iqbal - "the pleading standard ... does not require 'detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation" - and allowed the plaintiff to amend the complaint to supply additional facts.
Noble v. Serco, Inc., 2009 WL 1811550 (E.D.Ky., June 25, 2009): The employer's motion to dismiss was filed on February 2, and class certification proceedings were stayed pending the court's ruling on the motion. Since the briefing was long over when the Iqbal decision issued, the Judge didn't mention Iqbal but relied on the opinion two years earlier in Bell Atlantic Corp. v. Twombly. Twombly had announced a new rule for deciding motions to dismiss: A complaint must contain (1) "enough facts to state a claim to relief that is plausible," (2) more than "a formulaic recitation of a cause of action's elements," and (3) allegations that suggest "a right to relief above a speculative level." The court said there was enough in the complaint to meet these tests, and did not require plaintiff to amend to say more.
One swallow doesn't make a spring, but examination of these two decisions - and of the large number of other cases in which Iqbal motions have been filed - strongly suggests that there are lessons to be learned for both sides. Defendants will continue to file motions to dismiss, and plaintiffs will counter with amendments of the complaint (at the motion-to-dismiss stage, the complaint usually can be amended as a matter of right if no answer has been filed). Situations in which the court throws the case out based on a sketchy complaint may be rare. Life would be simpler if plaintiffs' counsel included enough facts to show what position plaintiff held, what the general nature of the claim is (e.g., misclassification as exempt, failure to pay for hours spent at the beginning and end of the workday, deductions from salary of exempt personnel, and so on), and whether the plaintiff or counsel had brought the claim to the employer's attention. That will require a little more work at the beginning, but could cut down on the number of arguments by both sides over truly threshold issues.
I rest my case.
Qureshi v. Panjwani, 2009 WL 1631798 (S.D. Tex., June 9, 2009): The court reviewed the pivotal language of Iqbal - "the pleading standard ... does not require 'detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation" - and allowed the plaintiff to amend the complaint to supply additional facts.
Noble v. Serco, Inc., 2009 WL 1811550 (E.D.Ky., June 25, 2009): The employer's motion to dismiss was filed on February 2, and class certification proceedings were stayed pending the court's ruling on the motion. Since the briefing was long over when the Iqbal decision issued, the Judge didn't mention Iqbal but relied on the opinion two years earlier in Bell Atlantic Corp. v. Twombly. Twombly had announced a new rule for deciding motions to dismiss: A complaint must contain (1) "enough facts to state a claim to relief that is plausible," (2) more than "a formulaic recitation of a cause of action's elements," and (3) allegations that suggest "a right to relief above a speculative level." The court said there was enough in the complaint to meet these tests, and did not require plaintiff to amend to say more.
One swallow doesn't make a spring, but examination of these two decisions - and of the large number of other cases in which Iqbal motions have been filed - strongly suggests that there are lessons to be learned for both sides. Defendants will continue to file motions to dismiss, and plaintiffs will counter with amendments of the complaint (at the motion-to-dismiss stage, the complaint usually can be amended as a matter of right if no answer has been filed). Situations in which the court throws the case out based on a sketchy complaint may be rare. Life would be simpler if plaintiffs' counsel included enough facts to show what position plaintiff held, what the general nature of the claim is (e.g., misclassification as exempt, failure to pay for hours spent at the beginning and end of the workday, deductions from salary of exempt personnel, and so on), and whether the plaintiff or counsel had brought the claim to the employer's attention. That will require a little more work at the beginning, but could cut down on the number of arguments by both sides over truly threshold issues.
I rest my case.
4 Comments:
Seems odd that several items on the "wish list" for pleadings are not elements of the plaintiff's claim. For example, exemption is an affirmative defense. Therefore, an allegation of "misclassification as exempt" is responding to an affirmative defense that may or may not be asserted. From the worker's prospective, maybe employer's will stop answering with "plaintiff was exempt under one or more of the FLSA's exemptions." Employers will have to explain, on the front end, they did not pay overtime.
This is true as far as it goes, but if the plaintiff is being treated as exempt and believes that characterization is incorrect, there seems to be no harm - and, in fact, much good - in saying so in the complaint. There is no administrative filing which is a prerequisite to the bringing of an FLSA action, and often there is no demand letter either, so the typical notice pleading furnishes no notice at all. If this seems unduly employer-oriented, that's the admitted viewpoint of this blog.
On July 22, Senator Arlen Specter introduced a bill designed to reverse both Iqbal and Twombly. The "Notice Pleading Restoration Act of 2009" would prohibit dismissals of federal court complaints "except under the standards set forth by the Supreme Court of the United States in Conley v. Gibson, 355 U.S. 41 (1957)." We'll see what happens next; federal judges are extremely reluctant to take stock in newly-introduced bills as an indication of which way the legislative winds are blowing, but if there's already a reluctance to dismiss on a "technicality," the bill may have some effect.
2 years later, it is amazing how easy it is, in light of Twombly and Iqbal, for employers to escape from paying overtime, and consequently continue to incorrectly classify employees as exempt so they do not have to (1) pay overtime, and (2) hire an adequate amount of staff to meet their labor demands.
Although even assuming the complaining class of employees are entitled to overtime, these two decisions shift what used to be the employers burden, onto the complaining employees, in which case the employees practically have to gain access to the company's proprietary information in order to produce enough evidence to meet the "plausible" standard. Consequently, the employees also risk opening up themselves to a conversion cause of action by the employer, in order to show that they were subject to an underlying policy or other internal and protected communications used to satisfy the commonality hurdle.
Although one would think the courts would allow some discovery, the 9th Circuit, 2 years later seem to favor dismissing these cases without considering the difficulty employees have in obtaining access to the company's internal documents. The use of these Twombly and Iqbal seem to be boiler-plate defenses now days for employers.
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