Comment on Roger Michalski & Abby Wood “Twombly & Iqbal at the State Level” Dan Klerman USC Faculty Workshop August 27, 2015

Pleading I Notice Pleading (1938 to 2008) Plaintiff does not need to plead facts or evidence or specific legal theory Form 11. “the defendant negligently drove a motor vehicle against the plaintiff.” Theory. Cases should be decided based on facts Purpose of pleading is to provide notice to defendant of basic contour of case Most cases should go to discovery, so that facts can be developed Case should only be dismissed of clear that no law exists that would support claim E.g. Student sues Prof. Klerman for calling on him in class and asking him a hard question Critics. Notice pleading led to frivolous cases, coercive settlements, and wasted time & money

Pleading II Twombly (2007) and Iqbal (2009) Federal judges should ignore conclusory pleadings and dismiss claims if liability is “implausible” based on facts plead Interpreted to mean that plaintiffs must plead with factual specificity Theory. Cases should not be allowed to go to discovery unless likely to be valid Discovery is expensive Only cases which meet some threshold of plausibility should be allowed to proceed Critics: Will lead to dismissal of valid claims Especially in cases where defendant has informational advantage e.g. employment discrimination Bombshell Unexpected Affects every case in federal court Two of most cited Supreme Court cases of all time

Empirical Literature Vast literature testing effect of Twombly & Iqbal Twombly & Iqbal = Twiqbal Literature is inconclusive Michalski & Wood undersell their paper by characterizing their paper as confirming consensus in literature that there is no effect No effect Cecil (2011, 2011a), Hubbard (2013) Negative effect Gelbach (2012), Eisenberg & Clermont (2014), Reinert (2015) Perhaps literature review was written when started paper Not fully updated to reflect most recent articles?

The Advantage of Looking at States Literature before Wood & Michalski is exclusively federal Michalski & Wood – Look to states States have their own procedural systems Some follow federal rules and cases Others do not Some had notice pleading before Twiqbal Some retained notice pleading after Twiqbal Some followed federal lead and switched from notice pleading to plausibility pleading, most importantly Nebraska Disadvantage of studies based on federal court Only two basic empirical approaches Time-series –pre v. post Twiqbal Cross-category – Civil rights v. contracts Advantage of analyzing state court 3 empirical approaches Time-series – pre v. post change in Nebraska Cross-categories – medmal v. contracts Cross-sectional – Nebraska v. states that didn’t change

Nebraska? State court data quality is poor Only 1 of states that switched has decent data – Nebraska So really Michalski & Wood are not studying “Twombly & Iqbal in the States.” They are studying one state, Nebraska Using other states, which did not switch, as controls Still, study of change in Nebraska is important Twice as good to have data on two jurisdictions that switched (federal cts. and Nebraska) than just one jurisdiction (federal cts.) Study of Twombly (2007) & Iqbal (2009) complicated by Financial Crisis ( ) & Great Recession ( ) Nebraska changed its pleading in late 2010, after Crisis and Recession over So crisis affects only part of “pre” period. Nebraska caseload is different and more typical than federal Most litigation is in state court

Analysis of MTD Grant Rate Obvious way to study change in pleading is to look at motions to dismiss (MTDs) If pleading standard becomes more stringent Then it’s easier for defendants to prevail on MTDs Then one would expect defendants to prevail on a greater percentage of MTDs Cecil (2011, 2011a) and Hubbard (2013) find no increase in % of MTDs won by defendants Reinert (2015) finds increase, when exclude dismissals based on factors unaffected by Twiqbal (statutes of limitations, immunities, etc.) Michalski & Wood % of MTDs won by defendants DROP (although sensitive to measurement) But can’t isolate reasons, like Reinert

MTD Grant Rate & MTD Motion Rate Looking at MTD grant rate is problematic Maybe MTD grant rate was steady (or drops) because defendants file MTDs in weaker cases after pleading change So look at % of cases in which defendants file MTDs Hubbard (2013) no change Michalski & Wood no change (or maybe drop)

Clermont & Eisenberg (2014) Look at % of cases in which defendants prevail on pre- trial motions Michalski & Wood should do similar analysis Would find drop?

Settlement & Selection Maybe the reason there’s no effect on motions to dismiss is that parties settlement behavior changes as a result of change in pleading MTD grant rate would go up if same cases were subject to MTD But plaintiffs settle or drop weak cases which would result in MTDs So cases actually subject to MTD are stronger than before So MTD grant rate does not go up So % of cases with MTDs does not go up Gelbach (2012) proposes correction: Correction provides lower bound on effect of pleading change Michalski & Wood should calculate lower bound for Nebraska

Complaints Maybe no effect on MTDs because plaintiffs respond to change in pleading by writing more detailed complaints Not investigated previously by anyone Michalski & Wood find no change in total complaint length But really want length (detail) per claim Length per first claim because later claims often incorporate by reference facts from first claim Since # of claims does not change (see next slide) Michalski & Wood would probably find no change in length per claim Very important and novel result Why no affect on complaint length? Even under notice pleading regime, most plaintiffs’ lawyers pled with lots of detail Enhances settlement leverage (Hubbard 2015) Makes judge think better of case Contingent-fee lawyers don’t ordinarily take cases without lots of facts at start

Claims & Filings Maybe no change in MTDs or complaint length Because plaintiffs stop filing weaker cases and weaker claims So look at case filings & claims per case No one done before? Boyd (2013) briefly analyzes number of claims per complaint So have just a tiny bit of data post Twombly (2007) and no data post Iqbal (2009) Find fewer claims per complaint Do analyze number of cases files Michalski & Wood Analyze both cases filed and claims per case No effect in MedMal or other torts, where one might expect effect

Lots of Other Great Stuff in Paper Synthetic controls Equivalence testing Comparison between case types Medmal v other types

Conclusion Important Paper Well-executed empirical analysis Interesting, plausible, and important results Suggestions Better literature review, highlighting genuine disagreement Put mini-literature review at beginning of each section Rather than one big literature review at the beginning of the whole paer Reverse order of analysis So start with MTD grant rate analysis Easier to understand Follows history of literature Replicate analyses in literature Clermont & Eisenberg (2014) graph Gelbach (2012) correction Analyze complaint length per claim Especially length of first claim