Supporters of the legislation point to a 1957 Supreme Court case called Conley v. Gibson, which they say established a prevailing, and somewhat broader, pleading standard prior to Iqbal and Twombly . But Justice Souter disagreed, declaring of the Conley decision: "a good many judges and commentators have balked at taking the literal terms of the Conley passage as a pleading standard." And even the Federal Judicial Conference recently noted that Conley's "no set of facts" language was never "literally applied" by the federal courts. Translation: Conley was never used by the federal courts and in fact has been specifically rejected by many federal judges.
While the plaintiffs' bar and their allies in Congress bellow about how Iqbal and Twombly have caused a massive spike in the dismissal rates of civil complaints, a review of the empirical evidence shows quite the contrary. Indeed, recently circulated data from the Judicial Conference Advisory Committee on Civil Rules shows no discernable change in the rates of dismissals throughout the 94 federal judicial districts across the country.
Pleading standards perform an essential gatekeeping function. They ensure that federal courts are not overwhelmed with frivolous cases and that defendants are not hauled into court on a whim and subjected to the onerous burdens of discovery. Reversing Iqbal and Twombly would increase the already-excessive litigation burdens on businesses in this country - small and large alike - diverting resources that would otherwise be used to create jobs and strengthen our nation's economy.
Without pleading standards, meritless cases will abound. And they will place a tremendous cost on businesses given the limitless opportunities for trial lawyers to sue first and ask questions later. Plaintiffs with a baseless claim would have instant leverage to force a settlement over any defendant who must now face the real threat of expensive and burdensome discovery.
The cumulative effect of reversing the Supreme Court rulings in Iqbal and Twombly would deal a devastating blow to America's fragile economy, as the job creators, already facing economic uncertainty and weak markets, would see their job-creating capital siphoned off to pay what amounts to plaintiffs' lawyer extortion.
This Congress has created a cottage industry out of attempting to reverse Supreme Court rulings with which they disagree. That, of course, is their prerogative. But make no mistake, the Iqbal and Twombly bill is a plaintiffs' lawyer bonanza disguised in the cloak of "justice." It would only result in a new wave of large lawsuits that will further pummel our fragile economy, and become the latest example of the law of political physics.