Changing the Game: The Effect of Twombly/Iqbal on Affirmative Defenses
Your client has been sued. Your time to file an answer is about to expire. What do you do? If this were a law school exam, any civil procedure student (even the one who never understood International Shoe) knows a defendant can answer a complaint pursuant to the standard set forth in Federal Rule of Civil Procedure 8(c). In fact, law students would consider such a question an easy lay-up. In practice, however, properly responding to a complaint is becoming more like a half-court shot in a close game with three seconds remaining in the fourth quarter. Because many district courts are applying the Twombly/Iqbal pleading standard to affirmative defenses, defense counsel are learning that the first shot in the complex game of litigation is as pressure-packed as the final shot at the buzzer.
Heightened Plausibility Standard
Responding to a complaint is a complex task that requires research, client communications and tactical decision-making all within 21 days. It has long been common practice for defendants to assert all of their affirmative defenses in short and plain terms without alleging a factual basis for each affirmative defense. Since the U.S. Supreme Court decisions in Bell Atlantic Corp. v. Twombly, and Ashcroft v. Iqbal, however, defendants are being held to the heightened plausibility standard by many courts.
Most recently, the District of Maryland and the Eastern District of Virginia joined the growing number of federal district courts applying the heightened pleading standard to affirmative defenses. The few district courts within the 3rd Circuit that have decided this issue, however, have yet to join the majority. Specifically, both the District of the Virgin Islands and the Western District of Pennsylvania have declined to apply the heightened pleading standard to affirmative defenses. (See the Western District of Pennsylvania's 2010 opinion Robuck v. Mine Safety Appliances Co .) The Eastern District of Pennsylvania, Middle District of Pennsylvania, District of Delaware and District of New Jersey have yet to squarely address this issue.
At present, neither the U.S. Supreme Court nor any federal appellate court has decided whether Twombly/Iqbal applies to affirmative defenses. Therefore, without guidance or precedent, the federal district courts are left with the task of deciding the scope of Twombly/Iqbal and their impact on future federal litigation across the nation.
In Twombly, the Supreme Court mandated that plaintiffs must plead sufficient facts to "state a claim to relief that is plausible on its face." The Supreme Court explained the plausibility standard as follows: Although a complaint need not contain "detailed factual allegations," it must contain "more than labels and conclusions" or a "formulaic recitation of the elements of a cause of action." In Iqbal, the Supreme Court expanded upon Twombly by prescribing the analytical approach to be followed when judging the sufficiency of a complaint. Specifically, the court held that a plausibility standard asks for "more than a sheer possibility that a defendant has acted unlawfully." Indeed, a "claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged," the justices said in Iqbal.
Is Standard Applicable?
The majority of federal district courts acknowledge that the U.S. Supreme Court did not address whether affirmative defenses were subject to the heightened pleading requirements set forth in Twombly/Iqbal. As such, the district courts applying the heightened pleading standard to affirmative defenses implicitly — or, in many cases, explicitly — acknowledge that they are deducing how the Supreme Court would decide this issue based on Twombly/Iqbal. Courts declining Twombly/Iqbal's application to affirmative defenses cite the Supreme Court's silence as a reason the heightened pleading standard is inapplicable.
In addition to the disagreement over legal precedent, district courts also disagree as to the meaning of fairness. Courts in the majority reason that Twombly/ Iqbal should apply to pleading affirmative defenses because it is only fair to hold defendants to the same standard as the plaintiffs. In other words, "What is good for the goose is good for the gander." However, courts not applying Twombly/Iqbal to affirmative defenses note that drafting a complaint and drafting an answer are entirely different undertakings, and should be treated as such.
It is only fair that plaintiffs articulate their legal claims with supporting facts. To that end, plaintiffs often have years to draft a complaint. Conversely, defendants have 21 days to respond to each of the plaintiff's allegations, plead its affirmative defenses and set forth any counterclaims. Any affirmative defense not pled may be deemed waived. So, assuming a plaintiff had one year to draft a complaint (by any means a short statute of limitations), he would still nonetheless have eight times more time to work on his complaint than would the answering defendant. In other words, it is unfair to hold plaintiffs and defendants to the same initial pleading standard. Additionally, courts that do not apply Twombly/Iqbal reason that a defendant's affirmative defenses arise directly from facts alleged in the complaint. Thus, requiring a defendant to regurgitate facts already pled simply to assert an affirmative defense is a futile exercise. As one court in the minority noted, "It is absurd to require a defendant to re-plead every fact relevant to an affirmative defense."
Courts applying Twombly/Iqbal address the fact that a defendant has much less time to draft an answer than a plaintiff does to craft a complaint. They reconcile the difference by noting that federal district courts liberally grant amendments to pleadings pursuant to Federal Rule of Civil Procedure 15; therefore, defendants will not be prejudiced by the heightened pleading standard. However, the minority of courts implicitly note that relying on Rule 15, an exception that liberally allows amendments to pleadings, ignores Rule 8(c), the rule for answering a complaint. In other words, the exception, Rule 15, swallows the rule, Rule 8(c). Moreover, although courts do not address the issue directly, relying on Rule 15 creates docket-clogging motion practice early in the case that will undoubtedly affect the judicial process. Relying on Rule 15 also presupposes that a court will grant the amendment, which is an assumption that should not be liberally made.
Be Prepared
Litigators need to be aware of the growing trend of holding defendants to the heightened Twombly/Iqbal standard for affirmative defenses. Even though the courts in the 3rd Circuit have yet to apply Twombly/Iqbal to affirmative defenses, practitioners need to prepare themselves — and their clients — nonetheless.
As coaches preach to their players during a pre-season practice, "Failing to prepare is preparing to fail." With the possibility of the heightened pleading standard applying to affirmative defenses, preparation at the initial stage of litigation is more important than ever. It is critical that counsel and clients conference to discuss all factual bases underlying the claims and defenses. This will ensure that defense counsel is prepared to support his or her answer with factual precision if required to do so by a federal judge.
Moreover, thorough preparation at the outset could alleviate litigation costs. Clients must be aware that the heightened pleading standard may bring additional costs. For clients and counsel who do not properly prepare an answer, they may face additional costs (1) opposing a motion to dismiss for failure to conform to the Twombly/Iqbal standard; (2) a motion to amend the answer pursuant to Rule 15 and (3) the time spent drafting the amended answer.
As the litigation process is expensive enough, clients will demand — and deserve — counsel who will get it right the first time. Moreover, an in-depth conference at the outset will likely help frame the scope of discovery. As discovery costs are the most difficult costs for supervising attorneys to budget — not to mention the cost that makes clients cringe — narrowing the scope of discovery at the outset could avoid discovery costs down the road.
One thing is for sure, with the advent of Twombly/Iqbal applying to affirmative defenses, and without any direction from the federal appellate courts, defense counsel must recognize that the first decision in litigation is as critical as the final shot at the buzzer with the game on the line.
This article first appeared in The Legal Intelligencer on October 25, 2010.
Reprinted with permission from The Legal Intelligencer.