Changing plaintiffs’ standard gives defendants cheap judgments: Unintended consequences?

February 24, 2016

CourtroomPerhaps it was never intended that something as basic as changing plaintiffs’ pleading standards would cause Federal courts to enter cheap judgments for defendants.  But that is exactly what has happened.  Here’s how.

Rule 12(b)(6) is the Civil Rule under which complaints in Federal Courts can be dismissed for failure to state a claim upon which relief can be granted.  For decades Federal judges ruled by the standard of whether a complaint stated what was called “ultimate facts;” if a plaintiff alleged the ultimate facts of a controversy, without details for the most part, that was enough.  It was a fairly easy standard to meet and defendants and their lawyers complained about it bitterly for that reason.

The Roberts Court changed the Rules of Order, you should pardon the pun.  The Supreme Court majority changed the pleading standard to “plausibility” instead.  This was expressly intended at the time to make it harder to file complaints in the hard-working Federal court system.  In basic terms if the judge does not think that a complaint is “plausible,” then it isn’t.  The complaint will be dismissed in that Federal case.

There is another difference from the prior “ultimate facts” pleading standard.  Under the previous standard Federal judges could not look at anything but the face of the complaint, in essence.  If the plaintiff failed to plead the ultimate facts of the controversy she, he or it was suing over, then exhibits and testimony could not add ultimate facts that weren’t in the complaint in the first place.

Under the “plausibility” pleading standard, in contrast, Federal judges were enabled to look at all sorts of exhibits and testimony to see if a complaint is “plausible” in their judgment.  Simultaneously, defendants were enabled by the change to provide evidence in exhibits and testimony which challenges the “plausibility” of the plaintiff’s complaint.  The exhibits which a Federal judge now is empowered to consider when ruling on a motion to dismiss include testimony in the form of declarations and affidavits, so far, and manifold types and kinds of documents, whether or not the evidence would be admissible in any other context.

There are a few nuances that the Supreme Court and other Federal courts have added to the so-called plausibility standard, but that is basically how it works in most cases.

This effectively changes a motion to dismiss into a motion for summary judgment  without the governing standards.  A Federal judge is supposed to evaluate every motion for summary judgment by determining two things.  One is to decide whether there is or is not a genuine issue of material fact such that a jury should or should not try the case.  If the decision is that there are no genuine issues of material fact for a jury to try, the second thing for a Federal judge to then decide is whether the party requesting the summary judgment is entitled to it as a matter of law.  So there you have it, the two-part test for getting a summary judgment in Federal court (and most State courts apply the same standard to summary judgments):  Is there a genuine issue of material fact, and if not, is the moving party entitled to a summary judgment, i.e., a judgment without a trial and without benefit of a jury, as a matter of law.

In practice, the end result is that Federal judges often enter judgments of dismissal subject only to what is essentially their subjective determination of whether a given complaint is “plausible.”  Under that standard there is no need for a trial and certainly no need for a jury.  Under the Roberts Rule of plausibility, only judges, not the community, are worthy of the trust to determine from the beginning which complaints if any stay in court.  Needless to say, this view of the thing makes individual “plausibility” subject to the understanding if any of a person, the Federal judge, who may not have experienced the circumstances alleged in a given complaint.  Yet it is that same Federal judge who is called upon not to determine rather clinically whether the complaint contains allegations of “ultimate facts” necessary to support the claim, but rather whether the complaint is “plausible” to a particular judge who has her or his own unique experiences and background.

Insurance companies are using this quasi summary judgment to introduce the affirmative defense known as the “Filed Rate Doctrine,” a doctrine intended to avoid judicial circumvention of regulatory proceedings.  In this example of how the changed pleading standard works as a quasi-summary judgment without the summary judgment Rule involved, the Filed Rate Doctrine began life in utilities regulation cases.  A ratepayer is basically forbidden to go to court to try to get a better rate from a judge than the ratepayer got from a regulator who sets the rates in question.  The Filed Rate Doctrine is increasingly pleaded in insurance cases to argue that complaints filed by people should be thrown out because their complaints challenge premiums allowed by insurance regulators.

Few judges are familiar with filed rate defenses in insurance cases.  Truth be told, most judges including Federal judges are very happy that there are specialized forums for litigating issues of rates and premiums, and that these issues are not litigated in their own courts.  Most judges do not ever see challenges to rates or premiums playing out in their courtrooms.  In the context of this specific example of how defendants are getting cheap judgments by successfully convincing judges that complaints are not plausible, there are potential solutions.  One is that judges may in a given case receive guidance from the adversary process on things beyond their ordinary experience such as the Filed Rate Doctrine.  That may not be such a viable option, given that the adversary process, for whatever reason, has actually resulted in cheap judgments under the quasi summary judgment ruling of plausibility.

Another potential solution would be that these judges should avail themselves of their ability to appoint an expert to assist in their understanding of the filed rate insurance doctrine.

In the end, as the example of the Filed Rate Doctrine illustrates, the problem to be addressed is not so much advocacy or the experience of judges, as it is in what undoubtedly seemed to be a simple change in the pleading standard for complaints in Federal courts.   The perhaps unintended consequence of that “simple” change is that defendants get cheap judgments without having to offer admissible evidence.  When a rule of justice administration consistently yields unjust results, it is time to change the rule if justice is the goal.

Titles by Dennis Wall