memorandum - United States Courts

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MEMORANDUM DATE:

November 23, 2011

TO:

Civil Rules Committee Standing Rules Committee

FROM:

Andrea Kuperman1

SUBJECT:

Review of Case Law Applying Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal

P REPARED FOR THE C ONSIDERATION OF THE A DVISORY C OMMITTEE ON C IVIL R ULES This memorandum addresses the application of the pleading standards after the Supreme Court’s decisions in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937 (2009). I have been asked to continue monitoring and reviewing the case law for the Civil Rules Advisory Committee’s consideration. Below is a short summary of the case law, summaries of the holdings in Twombly and Iqbal, and descriptions of cases discussing and applying Iqbal.2 The body of the memo addresses the circuit court cases, and the district court cases

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Andrea Kuperman is the Chief Counsel to the Rules Committees, and she is the former Rules Law Clerk to Judge Lee H. Rosenthal, former Chair of the Judicial Conference Committee on Rules of Practice and Procedure (“Standing Committee”). Katharine David, temporary Rules Law Clerk to Judge Rosenthal, updated the memorandum to include cases decided between July 21, 2010 and December 10, 2010. Jeff Barr, an attorney in the Office of Judges Programs at the Administrative Office of the U.S. Courts, updated the memorandum to include cases decided between December 10, 2010 and August 31, 2011. 2

A search in W estlaw reveals that, as of October 26, 2011, Iqbal had been cited over 30,000 times, in case law alone. W estlaw’s KeyCite function, in addition to showing any negative citing references for the case, indicates how extensively positive citing references examine the case. The depth-of-treatment categories include “examining,” “discussing,” “citing,” and “mentioning.” This memo includes appellate cases that are labeled in W estlaw as either “examining” or “discussing” Iqbal, as well as those listed as negative citing references (because, for example, they “decline to extend” or “distinguish” Iqbal), but excludes cases in these categories that do not substantively discuss the portion of Iqbal focusing on pleading requirements. This version of the memo includes appellate cases through August 31, 2011. W ith respect to district court cases, as of October 26, 2011, there were approximately 12,260 cases listed on W estlaw as either “examining” or “discussing” Iqbal. Because of the large number of citations, the appendix to this memo includes a sample of the district court cases, focusing largely on those that examine Iqbal in more detail. For the initial version of this memo, I also conducted searches for cases involving employment discrimination claims, cases addressing the adequacy of allegations of mental state, cases addressing pleading where information is in the opposing party’s possession, and cases addressing whether pleading “on information and belief” is sufficient. W hile these searches were limited to cases addressing Iqbal, with these more pointed inquiries I did not limit the searches solely to those cases listed as “examining” or “discussing” Iqbal. Because these searches turned up many cases, particularly in the category

are described in the appendix. The following cases are new to this version of the memo. The description of each of these cases is highlighted. •

Soto-Torres v. Fraticelli, 654 F.3d 153, 2011 WL 3632450 (1st Cir. 2011). Page 22.



Roman-Oliveras v. Puerto Rico Elec. Power Auth., 655 F.3d 43, 2011 WL 3621548 (1st Cir. 2011). Page 27.



Ocasio-Hernandez v. Fortuno-Burset, 640 F.3d 1, 2011 WL 1228768 (1st Cir. 2011). Page 31.



Schwab v. Smalls, No. 10-221-cv, 2011 WL 3156530 (2d Cir. Jul. 27, 2011) (summary order). Page 60.



Ideal Steel Supply Corp. v. Anza, 652 F.3d 310, 2011 WL 2557618 (2d Cir. 2011). Page 62.



In re Lehman Bros. Mortg.-Backed Sec. Litig., 650 F.3d 167, 2011 WL 1778726 (2d Cir. 2011). Page 70.



Gallop v. Cheney, 642 F.3d 364, 2011 WL 1565858 (2d Cir. 2011). Page 79.



Argueta v. U.S. Immigration and Customs Enforcement, 643 F.3d 60, 2011 WL 2315125 (3d Cir. 2011). Page 170.



Cotter v. Newark Hous. Auth., 422 F. App’x 95, 2011 WL 1289731 (3d Cir. 2011) (unpublished). Page 179.



Wilson v. City of Philadelphia, 415 F. App’x 434, 2011 WL 692998 (3d Cir. 2011) (unpublished). Page 181.



Higgenbotham v. Connatser, 420 F. App’x 466, 2011 WL 1239872 (5th Cir. 2011) (unpublished) (per curiam). Page 279.

of employment discrimination, this memo addresses examples drawn from those results. Updates to this memo after the original submission on October 2, 2009, have focused largely on appellate cases because as the number of cases applying Iqbal has grown, it has seemed appropriate to focus on appellate cases, which will guide district courts as to how to apply Iqbal in different contexts. This version of the memo updates citations for cases that were in a prior version of the memo as a Westlaw citation, but were later printed in the Federal Reporter, the Federal Supplement, or the Federal Appendix. The pinpoint citations have not been updated for many of the cases from the W estlaw pinpoints to the reporter’s pinpoint, but the W estlaw pagination can still be used to look up pinpoint citations in Westlaw.

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Patterson v. Novartis Pharm. Corp., No. 10-5886, 2011 WL 3701884 (6th Cir. Aug. 23, 2011) (unpublished). Page 306.



Havard v. Wayne Cnty., No. 09-1235, 2011 WL 3648226 (6th Cir. Aug. 19, 2011) (unpublished). Page 310.



Ctr. for Bio-Ethical Reform, Inc. v. Napolitano, 648 F.3d 365, 2011 WL 3330114 (6th Cir. 2011). Page 314.



Pulte Homes, Inc. v. Laborers’ Int’l Union, 648 F.3d 295, 2011 WL 3274014 (6th Cir. 2011). Page 324.



Watson Carpet & Floor Covering, Inc. v. Mohawk Indus., Inc., 648 F.3d 452, 2011 WL 2462833 (6th Cir. 2011). Page 328.



New Albany Tractor, Inc. v. Louisville Tractor, Inc., 650 F.3d 1046, 2011 WL 2448909 (6th Cir. 2011). Page 334.



Rondigo, L.L.C. v. Twp. of Richmond, 641 F.3d 673 (6th Cir. 2011). Page 339.



Vance v. Rumsfeld, 653 F.3d 591, 2011 WL 3437511 (7th Cir. 2011). Page 363.



U.S. v. Corinthian Colleges, 655 F.3d 984, 2011 WL 3524208 (9th Cir. 2011). Page 435.



Lacey v. Maricopa Co., 649 F.3d 1118, 2011 WL 2276198 (9th Cir. 2011). Page 447.



Cafasso v. General Dynamics C4 Sys., Inc., 637 F.3d 1047, 2011 WL 1053366 (9th Cir. 2011). Page 459.



Cook v. Brewer, 637 F.3d 1002, 2011 WL 902111 (9th Cir. 2011). Page 464.



Cook v. Brewer, 649 F.3d 915, 2011 WL 1213095 (9th Cir. 2011) (per curiam), cert. denied, 131 S. Ct. 2465 (2011). Page 468.

C

Winne v. City of Lakewood, No. 10-1568, 2011 WL 3562921 (10th Cir. Aug. 15, 2011) (unpublished). Page 509.



Mamani v. Berzain, 654 F.3d 1148, 2011 WL 3795468 (11th Cir. 2011). Page 551.



Henderson v. J.P. Morgan Chase Bank, No. 10-13286, 2011 WL 3362682 (11th 3

Cir. Aug. 4, 2011) (per curiam) (unpublished). Page 559.

S UMMARY OF THE C ASE L AW The cases recognize that Twombly and Iqbal require that pleadings contain more than legal conclusions and enough detail to allow the court to infer more than the mere possibility of misconduct. But the case law to date does not appear to indicate that Iqbal has dramatically changed the application of the standards used to determine pleading sufficiency. Instead, the appellate courts are taking a context-specific approach to applying Twombly and Iqbal and are instructing the district courts to be careful in determining whether to dismiss a complaint. One appellate court has indicated that Iqbal made clear that the circuit’s heightened pleading standard in cases brought under 42 U.S.C. § 1983 could no longer be applied. In a recent circuit court decision authored by Justice Souter (who also authored Twombly), the court explained that a “plausible but inconclusive inference from pleaded facts will survive a motion to dismiss . . . .” Other courts have emphasized that notice pleading remains intact. Many courts continue to rely on pre-Twombly case law to support some of the propositions cited in Twombly and Iqbal—that legal conclusions need not be accepted as true and that at least some factual averments are necessary to survive the pleadings stage. In addition, some of the post-Iqbal cases dismissing complaints note that those complaints would have been deficient even before Twombly and Iqbal. And some courts discuss Twombly and Iqbal but dismiss based on the conclusion that the law does not provide relief, not based on a lack of plausible facts. The approach taken by many courts may suggest that Twombly and Iqbal are providing a new framework

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in which to analyze familiar pleading concepts, rather than an entirely new pleading standard.3 Even after Twombly and Iqbal, many appellate court decisions instruct the district courts to use caution in dismissing complaints and have reversed dismissals where the district courts failed to presume the facts to be true or required the plaintiff to plead with too much particularity. Recent Supreme Court decisions exemplify careful application of pleading standards in two very different contexts, a prisoner civil rights claim and a securities claim. At the same time, some cases state that Twombly and Iqbal have raised the bar for defeating a motion to dismiss based on failure to state a claim. Although some of the courts making such statements actually deny motions to dismiss and find the pleadings sufficient, there are also some cases in which courts have expressly stated or implied that the claims might have survived before Twombly and Iqbal, but do not survive under current pleading standards. One recent appellate court decision indicated that the relevant information was in the defendant’s hands, but that the court could not allow discovery before dismissal. Many of the circuit court cases emphasize that the Iqbal analysis is context-specific. Under this context-specific approach, courts appear to apply the analysis more leniently in cases where pleading with more detail may be difficult. For example, courts have continued to emphasize that pro se pleadings are evaluated more leniently than others, and courts continue to find pleading on “information and belief” to be appropriate when permitted under the rules and cases. Courts also continue frequently to grant leave to amend if the complaint’s allegations are initially deemed 3

Courts are just beginning to examine whether the Twombly/Iqbal framework applies to affirmative defenses, but the issue has not yet been resolved by the courts of appeals. See FTC v. Hope Now Modifications, LLC, No. 09-1204 (JBS/JS), 2011 W L 883202, at *2, *3 (D.N.J. Mar. 10, 2011) (noting that “no Federal Circuit Court has yet considered whether to extend the pleading requirements of Twombly and Iqbal to affirmative defenses,” and “join[ing] the two other Districts in [the Third] Circuit that have addressed this issue by holding that the heightened pleading standard of Twombly and Iqbal does not apply to affirmative defenses”).

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insufficient. Continued monitoring of the case law will be important to further understand how the appellate courts are instructing the district courts to handle motions to dismiss. THE TWOMBLY AND IQBAL DECISIONS The Twombly Decision On May 21, 2007, the Supreme Court decided Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). In Twombly, the Court addressed the question of “whether a § 1 [of the Sherman Act] complaint can survive a motion to dismiss when it alleges that major telecommunications providers engaged in certain parallel conduct unfavorable to competition, absent some factual context suggesting agreement, as distinct from identical, independent action.” Id. at 548. The complaint alleged that the “Incumbent Local Exchange Carriers” or “ILECs” had conspired to restrain trade by “‘engag[ing] in parallel conduct’ in their respective service areas to inhibit the growth of upstart CLECs [competitive local exchange carriers],” and by “allegedly . . . making unfair agreements with the CLECs for access to ILEC networks, providing inferior connections to the networks, overcharging, and billing in ways designed to sabotage the CLECs’ relations with their own customers.” Id. at 550. The complaint also alleged “agreements by the ILECs to refrain from competing against one another,” which could be “inferred from the ILECs’ common failure ‘meaningfully [to] pursu[e]’ ‘attractive business opportunit[ies]’ in contiguous markets where they possessed ‘substantial competitive advantages,’ and from a statement of Richard Notebaert, chief executive officer (CEO) of the ILEC Qwest, that competing in the territory of another ILEC ‘‘might be a good way to turn a quick dollar but that doesn’t make it right.’’” Id. at 551 (internal record citations omitted). The Twombly Court first discussed the requirements for pleading under Rule 8, noting that 6

Rule 8(a)(2) “requires only ‘a short and plain statement of the claim showing that the pleader is entitled to relief,’ in order to ‘give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.’” See id. at 555 (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). The Court explained that “[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. (internal citations omitted). “Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Twombly, 550 U.S. at 555 (internal citations, footnote, and emphasis omitted). The Court emphasized that “[w]hile, for most types of cases, the Federal Rules eliminated the cumbersome requirement that a claimant ‘set out in detail the facts upon which he bases his claim,’ Conley v. Gibson, 355 U.S. 41, 47, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957) (emphasis added), Rule 8(a)(2) still requires a ‘showing,’ rather than a blanket assertion , of entitlement to relief. Without some factual allegation in the complaint, it is hard to see how a claimant could satisfy the requirement of providing not only ‘fair notice’ of the nature of the claim, but also ‘grounds’ on which the claim rests.” Id. at 555 n.3 (citation omitted). The Court held that stating a § 1 claim “requires a complaint with enough factual matter (taken as true) to suggest that an agreement was made.” Id. at 556. But the Court emphasized that “[a]sking for plausible grounds to infer an agreement does not impose a probability requirement at the pleading stage; it simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of illegal agreement.” Id. (footnote omitted). The Court cautioned that “a well-pleaded complaint may proceed even if it strikes a savvy 7

judge that actual proof of those facts is improbable, and ‘that recovery is very remote and unlikely.’” Id. (citation omitted). Because lawful parallel conduct is not enough to show an unlawful agreement, the Court concluded that an allegation of parallel conduct and an assertion of conspiracy were not sufficient, explaining that “[w]ithout more[,] parallel conduct does not suggest conspiracy, and a conclusory allegation of agreement at some unidentified point does not supply facts adequate to show illegality.” Id. at 556–57. The Court stated that its conclusion was consistent with Rule 8: “The need at the pleading stage for allegations plausibly suggesting (not merely consistent with) agreement reflects the threshold requirement of Rule 8(a)(2) that the ‘plain statement’ possess enough heft to ‘sho[w] that the pleader is entitled to relief.’” Twombly, 550 U.S. at 557. The Court held that ‘[a]n allegation of parallel conduct is thus much like a naked assertion of conspiracy in a § 1 complaint: it gets the complaint close to stating a claim, but without some further factual enhancement it stops short of the line between possibility and plausibility of ‘entitle[ment] to relief.’” Id. (citation omitted). The Court expressed concern with the expense of discovery on a baseless claim, stating that “when the allegations in a complaint, however true, could not raise a claim of entitlement to relief, ‘‘this basic deficiency should . . . be exposed at the point of minimum expenditure of time and money by the parties and the court.’’” Id. at 558 (citations omitted). The Court seemed especially concerned with those costs in the context of antitrust litigation: “[I]t is one thing to be cautious before dismissing an antitrust complaint in advance of discovery, but quite another to forget that proceeding to antitrust discovery can be expensive.” Id. (internal citation omitted). The Court also expressed doubts about discovery management being effective in preventing unmeritorious claims from requiring expensive discovery, stating that “[i]t is no answer to say that a claim just shy of a 8

plausible entitlement to relief can, if groundless, be weeded out early in the process through ‘careful case management,’ given the common lament that the success of judicial supervision in checking discovery abuse has been on the modest side.” Id. at 559 (citation omitted). The Court continued: And it is self-evident that the problem of discovery abuse cannot be solved by “careful scrutiny of the evidence at the summary judgment stage,” much less “lucid instructions to juries”; the threat of discovery expense will push cost-conscious defendants to settle even anemic cases before reaching those proceedings. Probably, then, it is only by taking care to require allegations that reach the level suggesting conspiracy that we can hope to avoid the potentially enormous expense of discovery in cases with no “‘reasonably founded hope that the [discovery] process will reveal relevant evidence’” to support a § 1 claim. Id. (internal citation omitted). The Twombly Court also evaluated the language in Conley v. Gibson that “‘a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.’” Twombly, 550 U.S. at 561 (quoting Conley, 355 U.S. at 45–46). The Court explained that this statement in Conley could not be read literally: “On such a focused and literal reading of Conley’s ‘no set of facts,’ a wholly conclusory statement of claim would survive a motion to dismiss whenever the pleadings left open the possibility that a plaintiff might later establish some ‘set of [undisclosed] facts’ to support recovery. . . . It seems fair to say that this approach to pleading would dispense with any showing of a ‘‘reasonably founded hope’’ that a plaintiff would be able to make a case.” Id. at 561–62 (citation omitted). The Court held that the “no set of facts” language from Conley should be retired and was “best forgotten as an incomplete, negative gloss on an accepted pleading standard: once a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint.” Id. at 563 (citations omitted). 9

Using the foregoing principles, the Court concluded that the plaintiff’s complaint was insufficient. The Court contrasted the conclusory allegations in the complaint with the notice given by a complaint following Form 9: Apart from identifying a seven-year span in which the § 1 violations were supposed to have occurred . . . , the pleadings mentioned no specific time, place, or person involved in the alleged conspiracies. This lack of notice contrasts sharply with the model form for pleading negligence, Form 9, which the dissent says exemplifies the kind of “bare allegation” that survives a motion to dismiss. Whereas the model form alleges that the defendant struck the plaintiff with his car while plaintiff was crossing a particular highway at a specified date and time, the complaint here furnishes no clue as to which of the four ILECs (much less which of their employees) supposedly agreed, or when and where the illicit agreement took place. A defendant wishing to prepare an answer in the simple fact pattern laid out in Form 9 would know what to answer; a defendant seeking to respond to plaintiffs’ conclusory allegations in the § 1 context would have little idea where to begin. Id. at 565 n.10. The Court was careful to emphasize that it was not applying a heightened or particularized pleading standard, which is only required for those categories of claims falling under Rule 9, and explained its “concern [wa]s not that the allegations in the complaint were insufficiently ‘particular[ized]’; rather, the complaint warranted dismissal because it failed in toto to render plaintiffs’ entitlement to relief plausible.” Id. at 569 n.14 (internal citation omitted). The Court concluded: “[W]e do not require heightened fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face. Because the plaintiffs here have not nudged their claims across the line from conceivable to plausible, their complaint must be dismissed.” Id. at 570. The Iqbal Decision Two years after Twombly, the Supreme Court elaborated on the pleading standards discussed in Twombly in Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009). In Iqbal, the plaintiff, a citizen of Pakistan 10

and a Muslim, was arrested on criminal charges and detained by federal officials. Id. at 1942. The plaintiff alleged that he was deprived of constitutional rights, and sued numerous federal officials, including former Attorney General John Ashcroft and FBI Director Robert Mueller. Id. Ashcroft and Mueller were the only appellants.

Id.

The complaint alleged that “they adopted an

unconstitutional policy that subjected the plaintiff to harsh conditions of confinement on account of his race, religion, or national origin.” Id. The Iqbal Court explained that “the pleading standard Rule 8 announces does not require ‘detailed

factual

allegations,’

but

it

demands

more

than

an

unadorned,

the-defendant-unlawfully-harmed-me accusation.” Id. at 1949 (citing Twombly, 550 U.S. at 555). With respect to the “plausibility” standard described in Twombly, Iqbal explained that “[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.” Iqbal, 129 S. Ct. at 1949 (citing Twombly, 550 U.S. at 556). The Iqbal Court noted that “[t]he plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (citing Twombly, 550 U.S. at 556). “Where a complaint pleads facts that are ‘merely consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and plausibility of ‘entitlement to relief.’’” Id. (quoting Twombly, 550 U.S. at 557). The Court explained: Two working principles underlie our decision in Twombly. First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. [Twombly, 550 U.S.] at 555, 127 S. Ct. 1955 (Although for the purposes of a motion to dismiss we must take all of the factual allegations in the complaint as true, we “are not bound to accept as true a legal conclusion couched as a 11

factual allegation” (internal quotation marks omitted)). Rule 8 marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions. Second, only a complaint that states a plausible claim for relief survives a motion to dismiss. Id., at 556, 127 S. Ct. 1955. Determining whether a complaint states a plausible claim for relief will, as the Court of Appeals observed, be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. 490 F.3d, at 157–158. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not “show[n]”—“that the pleader is entitled to relief.” FED . RULE CIV . PROC. 8(a)(2). Id. at 1949–50 (second alteration in original). The Iqbal Court set out a two-step procedure for evaluating whether a complaint should be dismissed: [A] court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief. Id. at 1950. In analyzing the complaint in Iqbal, the Court noted that it alleged that Ashcroft and Mueller “‘knew of, condoned, and willfully and maliciously agreed to subject [the plaintiff]’ to harsh conditions of confinement ‘as a matter of policy, solely on account of [his] religion, race, and/or national origin and for no legitimate penological interest’”; that Ashcroft “was the ‘principal architect’ of this invidious policy”; and that Mueller “was ‘instrumental’ in adopting and executing it.” Id. at 1951 (citations omitted). The Court found these allegations to be conclusory, that they “amount[ed] to nothing more than a ‘formulaic recitation of the elements’ of a constitutional 12

discrimination claim,” and that they were not entitled to a presumption of veracity. Id. (citations omitted). Turning to the factual allegations in the complaint, the Iqbal Court noted that the complaint alleged that the FBI, under Mueller’s direction, arrested and detained thousands of Arab Muslim men as part of its investigation of the September 11 attacks, and that the policy of holding detainees in highly restrictive conditions until cleared by the FBI was approved by Ashcroft and Mueller. Id. The Court concluded that while these allegations were consistent with Ashcroft and Mueller designating detainees of “high interest” because of their race, religion, or national origin, there were more likely explanations that prevented the allegations from plausibly establishing a claim. See id. Because the September 11 attacks were perpetrated by Arab Muslim hijackers claiming to be members of Al Qaeda, an Islamic fundamentalist group, the Court found that “[i]t should come as no surprise that a legitimate policy directing law enforcement to arrest and detain individuals because of their suspected link to the attacks would produce a disparate, incidental impact on Arab Muslims, even though the purpose of the policy was to target neither Arabs nor Muslims.” Id. The Court also noted that while there were additional allegations against other defendants, the only factual allegation against the appellants was that they “adopt[ed] a policy approving ‘restrictive conditions of confinement’ for post-September-11 detainees until they were ‘‘cleared’ by the FBI.’” Iqbal, 129 S. Ct. at 1952. The Court said this was not enough: Accepting the truth of that allegation, the complaint does not show, or even intimate, that petitioners purposefully housed detainees in the ADMAX SHU due to their race, religion, or national origin. All it plausibly suggests is that the Nation’s top law enforcement officers, in the aftermath of a devastating terrorist attack, sought to keep suspected terrorists in the most secure conditions available until the suspects could be cleared of terrorist activity. Respondent does not argue, nor can he, that such a motive would violate petitioners’ 13

constitutional obligations. He would need to allege more by way of factual content to “nudg[e]” his claim of purposeful discrimination “across the line from conceivable to plausible.” Twombly, 550 U.S., at 570, 127 S. Ct. 1955. Id. The Iqbal Court also rejected the plaintiff’s argument that because the Federal Rules allowed pleading discriminatory intent “generally,” his complaint was sufficient. Id. at 1954. The Court explained: It is true that Rule 9(b) requires particularity when pleading “fraud or mistake,” while allowing “[m]alice, intent, knowledge, and other conditions of a person’s mind [to] be alleged generally.” But “generally” is a relative term. In the context of Rule 9, it is to be compared to the particularity requirement applicable to fraud or mistake. Rule 9 merely excuses a party from pleading discriminatory intent under an elevated pleading standard. It does not give him license to evade the less rigid—though still operative—strictures of Rule 8. And Rule 8 does not empower respondent to plead the bare elements of his cause of action, affix the label “general allegation,” and expect his complaint to survive a motion to dismiss. Id. (internal citation omitted). Finally, the Iqbal Court also confirmed that the pleading requirements described in Twombly are not limited to the antitrust context present in that case. See id. at 1953 (holding that the argument that “Twombly should be limited to pleadings made in the context of an antitrust dispute . . . is not supported by Twombly and is incompatible with the Federal Rules of Civil Procedure”). The Court explained that “[t]hough Twombly determined the sufficiency of a complaint sounding in antitrust, the decision was based on our interpretation and application of Rule 8,” which “in turn governs the pleading standard ‘in all civil actions and proceedings in the United States district courts.’” Id. (citations omitted). The Iqbal Court also confirmed Twombly’s rejection of case-management as an appropriate alternative to disposing of implausible claims, particularly in the context of qualified 14

immunity: Our rejection of the careful-case-management approach is especially important in suits where Government-official defendants are entitled to assert the defense of qualified immunity. The basic thrust of the qualified-immunity doctrine is to free officials from the concerns of litigation, including “avoidance of disruptive discovery.” There are serious and legitimate reasons for this. If a Government official is to devote time to his or her duties, and to the formulation of sound and responsible policies, it is counterproductive to require the substantial diversion that is attendant to participating in litigation and making informed decisions as to how it should proceed. Litigation, though necessary to ensure that officials comply with the law, exacts heavy costs in terms of efficiency and expenditure of valuable time and resources that might otherwise be directed to the proper execution of the work of the Government. The costs of diversion are only magnified when Government officials are charged with responding to, as Judge Cabranes aptly put it, “a national and international security emergency unprecedented in the history of the American Republic.” 490 F.3d[] at 179. Iqbal, 129 S. Ct. at 1953 (internal citations omitted).4 Shortly after Iqbal was decided, the Senate introduced S. 1504, The Notice Pleading Restoration Act of 2009, which provided that a federal court cannot dismiss a complaint under Federal Rule of Civil Procedure 12(b)(6) or (e), except under the standards set forth in Conley v. Gibson, 355 U.S. 41 (1957). The House introduced H.R. 4115, The Open Access to Courts Act of 2009, which provided: “A court shall not dismiss a complaint under subdivision (b)(6), (c) or (e) of 4

The Supreme Court found that Iqbal’s complaint “fail[ed] to plead sufficient facts to state a claim for purposeful and unlawful discrimination against petitioners,” and remanded to allow the “Court of Appeals [to] decide in the first instance whether to remand to the District Court so that respondent can seek leave to amend his deficient complaint.” Iqbal, 129 S. Ct. at 1954. On remand, the Second Circuit noted that it was “accustomed to reviewing a district court’s decision whether to grant or deny leave to amend, rather than making that decision . . . in the first instance,” and found “no need to depart from the ordinary course . . . .” Iqbal v. Ashcroft, 574 F.3d 820, 822 (2d Cir. 2009) (per curiam). The Second Circuit remanded to the district court “for further proceedings in light of the Supreme Court’s decision in Ashcroft v. Iqbal, 129 S. Ct. 1937.” Id. “‘On September 29, 2009, the remaining parties in Iqbal filed a document in [the Second Circuit] stipulating that the appeal was to be ‘withdrawn from active consideration before the Court . . . because a settlement ha[d] been reached in principle between Javaid Iqbal and defendant United States.’” Arar v. Ashcroft, 585 F.3d 559, 585 n.8 (2d Cir. 2009) (Sack, J., dissenting) (quoting Iqbal v. Hasty, No. 05-5768-cv (2d Cir. Sept. 30, 2009), “Stipulation W ithdrawing Appeal from Active Consideration” dated September 29, 2009), cert. denied, --- S. Ct. ----, No. 09-923, 2010 W L 390379 (Jun. 14, 2010).

15

Rule 12 of the Federal Rules of Civil Procedure unless it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim which would entitle the plaintiff to relief. A court shall not dismiss a complaint under one of those subdivisions on the basis of a determination by the judge that the factual contents of the complaint do not show the plaintiff’s claim to be plausible or are insufficient to warrant a reasonable inference that the defendant is liable for the misconduct alleged.”5 SUPREME COURT UPDATE C

Matrixx Initiatives, Inc. v. Siracusano, 131 S. Ct. 1309, 2011 WL 977060 (Mar. 22, 2011). The Supreme Court examined the question of “whether a plaintiff can state a claim for securities fraud under § 10(b) of the Securities and Exchange Act of 1934 and Securities and Exchange Commission (SEC) Rule 10b-5, based on a pharmaceutical company’s failure to disclose reports of adverse events associated with a product if the reports do not disclose a statistically significant number of adverse events.” Id. at *3 (internal citations omitted). The plaintiffs had asserted that Matrixx Initiatives, Inc. and three of its executives (collectively, “Matrixx”) failed to disclose reports of a possible link between its cold remedy product (Zicam) and loss of smell (anosmia). Id. The Court’s unanimous decision rejected the defendants’ argument that the complaint did not adequately allege that Matrixx made a material representation or omission or that it acted with scienter because it did not allege that Matrixx knew of a statistically significant number of adverse events requiring disclosure. Id. The Court declined to adopt a bright-line rule, explaining that “[a]lthough in many cases reasonable investors would not consider reports of adverse events to be material information, respondents have alleged facts plausibly suggesting that reasonable investors would have viewed these particular reports as material.” Id. The Court noted that “Respondents have also alleged facts ‘giving rise to a strong inference’ that Matrixx ‘acted with the required state of mind.’” Id. (citation omitted). The Court affirmed the Ninth Circuit’s decision to reverse dismissal of the complaint.6 The Court noted that the lower courts had properly assumed all facts alleged in the complaint to be true, citing Iqbal. Matrixx, 2011 WL 977060, at *4. The Court declined to adopt a

5

The Senate bill stated that it applied “[e]xcept as otherwise expressly provided by an Act of Congress or by an amendment to the Federal Rules of Civil Procedure which takes effect after the date of enactment of this Act.” The House bill stated that it applied “except as otherwise expressly provided by an Act of Congress enacted after the date of the enactment of this section or by amendments made after such date to the Federal Rules of Civil Procedure pursuant to the procedures prescribed by the Judicial Conference under this chapter.” 6

For a full description of the N inth Circuit’s opinion and a more detailed description of the facts alleged in the complaint, see the discussion of the Ninth Circuit opinion later in this memo.

16

bright-line rule that lack of statistical significance of adverse event reports precluded those reports from being material to reasonable investors, explaining that the “contextual inquiry may reveal in some cases that reasonable investors would have viewed reports of adverse events as material even though the reports did not provide statistically significant evidence of a causal link.” Id. at *11 (footnote omitted). The Court then held that the complaint adequately pleaded materiality: Applying Basic[, Inc. v. Levinson, 485 U.S. 224 (1988)]’s “total mix” standard in this case, we conclude that respondents have adequately pleaded materiality. This is not a case about a handful of anecdotal reports, as Matrixx suggests. Assuming the complaint’s allegations to be true, as we must, Matrixx received information that plausibly indicated a reliable causal link between Zicam and anosmia. That information included reports from three medical professionals and researchers about more than 10 patients who had lost their sense of smell after using Zicam. Clarot [(Matrix’s vice president for research and development)] told Linschoten [(a researcher treating someone who had lost their sense of smell after using Matrixx’s product)] that Matrixx had received additional reports of anosmia. (In addition, during the class period, nine plaintiffs commenced four product liability lawsuits against Matrixx alleging a causal link between Zicam use and anosmia.) Further, Matrixx knew that Linschoten and Dr. Jafek [(a colleague of Linschoten who had observed patients suffering from anosmia after using Matrixx’s product)] had presented their findings about a causal link between Zicam and anosmia to a national medical conference devoted to treatment of diseases of the nose. Their presentation described a patient who experienced severe burning in his nose, followed immediately by a loss of smell, after using Zicam—suggesting a temporal relationship between Zicam use and anosmia. Critically, both Dr. Hirsch and Linschoten had also drawn Matrixx’s attention to previous studies that had demonstrated a biological causal link between intranasal application of zinc and anosmia. Before his conversation with Linschoten, Clarot, Matrixx’s vice president of research and development, was seemingly unaware of these studies, and the complaint suggests that, as of the class period, Matrixx had not conducted any research of its own relating to anosmia. Accordingly, it can reasonably be inferred from the complaint that Matrixx had no basis for rejecting Dr. Jafek’s findings out of hand. We believe that these allegations suffice to “raise a reasonable expectation that discovery will reveal evidence” satisfying the 17

materiality requirement, Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007), and to “allo[w] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged,” Iqbal, 556 U.S., at ----, 129 S. Ct., at ---(slip op., at 14). The information provided to Matrixx by medical experts revealed a plausible causal relationship between Zicam Cold Remedy and anosmia. Consumers likely would have viewed the risk associated with Zicam (possible loss of smell) as substantially outweighing the benefit of using the product (alleviating cold symptoms), particularly in light of the existence of many alternative products on the market. Importantly, Zicam Cold Remedy allegedly accounted for 70 percent of Matrixx’s sales. Viewing the allegations of the complaint as a whole, the complaint alleges facts suggesting a significant risk to the commercial viability of Matrixx’s leading product. It is substantially likely that a reasonable investor would have viewed this information “‘as having significantly altered the [‘]total mix[’] of information made available.’” Basic, 485 U.S., at 232, 108 S. Ct. 978 (quoting TSC Industries, 426 U.S., at 449, 96 S. Ct. 2126). Matrixx told the market that revenues were going to rise 50 and then 80 percent. Assuming the complaint’s allegations to be true, however, Matrixx had information indicating a significant risk to its leading revenue-generating product. Matrixx also stated that reports indicating that Zicam caused anosmia were “‘completely unfounded and misleading’” and that “‘the safety and efficacy of zinc gluconate for the treatment of symptoms related to the common cold have been well established.’” Importantly, however, Matrixx had evidence of a biological link between Zicam’s key ingredient and anosmia, and it had not conducted any studies of its own to disprove that link. In fact, as Matrixx later revealed, the scientific evidence at that time was “‘insufficient . . . to determine if zinc gluconate, when used as recommended, affects a person’s ability to smell.’” Assuming the facts to be true, these were material facts “necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.” 17 CFR § 240.10b-5(b). We therefore affirm the Court of Appeals’ holding that respondents adequately pleaded the element of a material misrepresentation or omission. Id. at *12–13 (footnotes and additional internal citations omitted) (omission in original). During its discussion of the adequacy of the pleadings, the Court noted that “to survive a motion to dismiss, respondents need only allege ‘enough facts to state a claim to relief that 18

is plausible on its face.’” Id. at *12 n.12 (quoting Twombly, 550 U.S. at 570). The Court found the allegations plausible, holding that they “plausibly suggest[ed] that Dr. Jafek and Linschoten’s conclusions were based on reliable evidence of a causal link between Zicam and anosmia,” and that the existence of the studies cited in the complaint “suggest[ed] a plausible biological link between zinc and anosmia, which, in combination with the other allegations, [wa]s sufficient to survive a motion to dismiss.” Id. at *12 nn.12–13. The Court also concluded that “Matrixx’s proposed bright-line rule requiring an allegation of statistical significance to establish a strong inference of scienter [wa]s just as flawed as its approach to materiality.” Matrixx, 2011 WL 977060, at *13. The Court explained: The inference that Matrixx acted recklessly (or intentionally, for that matter) is at least as compelling, if not more compelling, than the inference that it simply thought the reports did not indicate anything meaningful about adverse reactions. According to the complaint, Matrixx was sufficiently concerned about the information it received that it informed Linschoten that it had hired a consultant to review the product, asked Linschoten to participate in animal studies, and convened a panel of physicians and scientists in response to Dr. Jafek’s presentation. It successfully prevented Dr. Jafek from using Zicam’s name in his presentation on the ground that he needed Matrixx’s permission to do so. Most significantly, Matrixx issued a press release that suggested that studies had confirmed that Zicam does not cause anosmia when, in fact, it had not conducted any studies relating to anosmia and the scientific evidence at that time, according to the panel of scientists, was insufficient to determine whether Zicam did or did not cause anosmia. These allegations, “taken collectively,” give rise to a “cogent and compelling” inference that Matrixx elected not to disclose the reports of adverse events not because it believed they were meaningless but because it understood their likely effect on the market. Tellabs[, Inc. v. Makor Issues & Rights, Ltd.], 551 U.S. [308,] 323, 324, 127 S. Ct. 2499 [(2007)]. “[A] reasonable person” would deem the inference that Matrixx acted with deliberate recklessness (or even intent) “at least as compelling as any opposing inference one could draw from the facts alleged.” Id., at 324, 127 S. Ct. 2499. We conclude, in agreement with the Court of Appeals, that respondents have adequately pleaded scienter. Whether respondents can ultimately prove their allegations and establish scienter is an altogether different question. Id. at *14 (footnote omitted).

19

C

Skinner v. Switzer, 131 S. Ct. 1289, 2011 WL 767703 (Mar. 7, 2011). Skinner, a state prisoner who had been convicted of capital murder and sentenced to death, filed an action under 42 U.S.C. § 1983,7 alleging that the district attorney’s refusal to allow him access to biological evidence for purposes of DNA forensic testing violated his right to due process. The district court dismissed Skinner’s suit for failure to state a claim, reasoning that postconviction requests for DNA evidence may only be made in habeas corpus proceedings, not under § 1983. The Fifth Circuit affirmed. The Supreme Court reversed, 6-3, holding that Skinner had properly invoked § 1983. Justice Ginsburg delivered the opinion of the Court, in which Justices Roberts, Scalia, Breyer, Sotomayor, and Kagan joined. Justice Thomas filed a dissenting opinion, in which Justices Kennedy and Alito joined. The Supreme Court began its discussion by reviewing the standard governing consideration of a motion to dismiss for failure to state a claim. The Court stated: Because this case was resolved on a motion to dismiss for failure to state a claim, the question below was “not whether [Skinner] will ultimately prevail” on his procedural due process claim, see Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S. Ct. 1683, 40 L. Ed. 2d 90 (1974), but whether his complaint was sufficient to cross the federal court’s threshold, see Swierkiewicz v. Sorema N. A., 534 U.S. 506, 514, 122 S. Ct. 992, 152 L. Ed. 2d 1 (2002). Skinner’s complaint is not a model of the careful drafter’s art, but under the Federal Rules of Civil Procedure, a complaint need not pin plaintiff’s claim for relief to a precise legal theory. Rule 8(a)(2) of the Federal Rules of Civil Procedure generally requires only a plausible “short and plain” statement of the plaintiff’s claim, not an exposition of his legal argument. See 5 C. WRIGHT & A. MILLER, FEDERAL PRACTICE & PROCEDURE § 1219, pp. 277–278 (3d ed. 2004 and Supp.2010). Skinner, 2011 WL 767703, at *6.8 The dissenting opinion did not mention this passage or discuss any pleading issue.

C

Ashcroft v. Al-Kidd, No. 10-98, 131 S. Ct. 415 (Oct. 18, 2010). On October 18, 2010, the Supreme Court granted certiorari and agreed to review the Ninth Circuit’s opinion in

7

Under § 1983, “[e]very person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress . . . .” 42 U.S.C. § 1983. This statute will be referred to in this memo as “§ 1983.”

8

The Court’s citation of its prior opinion in Swierkiewicz may be noteworthy. In Fowler v. UPMC Shadyside, 578 F.3d 203 (3d Cir. 2009), infra, the Third Circuit questioned the continuing vitality of Swierkiewicz, while several other courts have favorably cited Swierkiewicz since Twombly and Iqbal.

20

Ashcroft v. Al-Kidd, 580 F.3d 949 (9th Cir. 2009), discussed below. The Court will consider two questions: 1.

Whether the court of appeals erred in denying petitioner absolute immunity from the pretext claim.

2.

Whether the court of appeals erred in denying petitioner qualified immunity from the pretext claim based on the conclusions that (a) the Fourth Amendment prohibits an officer from executing a valid material witness warrant with the subjective intent of conducting further investigation or preventatively detaining the subject; and (b) this Fourth Amendment rule was clearly established at the time of respondent’s arrest.

The Court decided the case on May 31, 2011. See 131 S. Ct. 2074 (2011). The Court reversed and remanded, but its opinion did not mention Iqbal’s discussion of pleading standards and stated that the Court would construe the factual allegations as true because the case arose from a motion to dismiss.

21

CIRCUIT COURT CASE LAW INTERPRETING IQBAL First Circuit •

Soto-Torres v. Fraticelli, 654 F.3d 153, 2011 WL 3632450 (1st Cir. Aug. 19, 2011). Plaintiff Soto-Torres filed a complaint under Bivens against defendant Luis Fraticelli, an FBI agent, claiming unlawful detention and excessive force during the execution of a search warrant. Fraticelli was the Special Agent in Charge (SAC) of the FBI’s operations in Puerto Rico. The complaint alleged actions during the September 23, 2005, execution of a search warrant by FBI or other federal agents on the residence of Filiberto Ojeda Rios, a notorious fugitive and convicted felon who was thought to be dangerous and hiding in a house in Hormigueros, Puerto Rico. That house was near the property of Soto-Torres’s parents. The complaint alleges that, in the course of these operations, unnamed FBI agents assaulted Soto–Torres, pushed him to the ground and handcuffed him, and detained him in handcuffs for approximately four hours without explaining the basis of his detention. Although SAC Fraticelli was in charge of the operation, he was not present during the operation and had no personal contact with Soto-Torres. Id. at *1. The district court denied defendant’s motion to dismiss the complaint on grounds of qualified immunity. The First Circuit reversed and directed judgment for defendant on the basis of qualified immunity. The court of appeals related in detail the background of the complaint, as follows: We provide some undisputed background facts, agreed upon by the parties. Soto-Torres’s claims arise out of an FBI operation to apprehend Filiberto Ojeda Rios, a Puerto Rico fugitive and leader of the Macheteros group. The Macheteros have claimed responsibility for acts of violence in Puerto Rico, including the murders of a police officer in 1978 and U.S. Navy sailors in 1979 and 1982. In 1983, Macheteros operatives robbed a Wells Fargo facility in West Hartford, Connecticut. Two years later, when FBI agents acted to arrest Ojeda and other Macheteros members in connection with the robbery, Ojeda shot and wounded an agent. He was acquitted of the shooting charge in a 1989 trial in which he represented himself. In 1990, while released on bond pending his trial for the armed robbery charges, Ojeda severed his electronic monitoring 22

device and fled; the next day the U.S. District Court for the District of Connecticut issued a warrant for his arrest. In 1992, Ojeda was tried in absentia for the armed robbery, convicted on fourteen counts, and sentenced to fifty-five years in prison. In early September 2005, the San Juan FBI determined that Ojeda was living in a house in Hormigueros on the west side of Puerto Rico. At this time there were warrants for Ojeda’s arrest both for his 1990 flight and for his 1992 conviction. Consistent with the hazards of the operation, on September 22, 2005, “a team of FBI sniper-observers initiated surveillance of the Ojeda residence.” Their surveillance “continue[d] until September 23, 2005.” The parents of Soto-Torres lived within “hundreds of feet” of this Ojeda target residence. The two properties did not adjoin, and from Soto-Torres’s parents’ home “there was no visibility toward the targeted residence” due to “the topography of the place.” No warrant was requested to search Soto-Torres’s parents’ property. During the period of the FBI surveillance, Soto-Torres went to his parents’ property “on a daily basis” to feed his horse. On September 23, 2005, at approximately 3:45 p.m., SotoTorres arrived at his parents’ property to feed his horse and work on fences on the property. At some point between 4:10 p.m. and 4:15 p.m., two unidentified helicopters flew overhead and “several vehicles . . . full of armed federal agents” arrived at the property. Soto-Torres alleges that these agents “assaulted and pushed [him] to the floor” and that he was subsequently “detained and handcuffed behind his back for almost four hours” while being “strongly interrogated by several federal agents.” He alleges that the agents “pointed their firearms” toward him for “most of” this time and threatened to put him in prison. He alleges that he was not told what was happening until his eventual release at around 8:00 p.m., “having be[en] placed under the most severe mental distress for almost four (4) hours.” As injury, he alleges that this detention and treatment caused him “physical harm and emotional suffering,” such that he “required psychological and medical treatment.” Soto-Torres does not allege that SAC Fraticelli was present when these events occurred or that Fraticelli witnessed their occurrence. Rather, he makes only two relevant allegations. He alleges that Fraticelli “was the officer in charge during the incident” and that he “participated in or directed the constitutional violations 23

alleged . . . or knew of the violation[s] and failed to act to prevent them.” These are the only allegations that address Fraticelli’s involvement in Soto-Torres’s detention. Id. at *2–3. The court of appeals found that the plaintiff’s complaint failed to adequately allege defendant Fraticelli’s personal involvement in the alleged events. The court reasoned: A plaintiff bringing a Bivens action “must plead that each Government-official defendant, through the official’s own individual actions, has violated the Constitution.” Iqbal, 129 S. Ct. at 1948. There is no vicarious liability. See id. (citing Monell v. Dep’t of Soc. Servs., 436 U.S. 658, 691, 98 S. Ct. 2018, 56 L. Ed. 2d 611 (1978)). As to an assertion of supervisory liability, we held in Maldonado that a supervisor may not be held liable for the constitutional violations committed by his or her subordinates, unless there is an “‘affirmative link’ between the behavior of a subordinate and the action or inaction of his supervisor . . . such that the supervisor’s conduct led inexorably to the constitutional violation.” 568 F.3d at 275 (quoting Pineda v. Toomey, 533 F.3d 50, 54 (1st Cir.2008)) (internal quotation marks omitted). In determining whether the facts alleged in the complaint are sufficient to survive the Rule 12(c) motion, we employ a two-pronged approach. The first prong is to identify the factual allegation[s] and to identify statements in the complaint that merely offer legal conclusions couched as facts or are threadbare or conclusory. Ocasio–Hernández v. Fortuño–Burset, 640 F.3d 1, 12 (1st Cir. 2011). “[S]ome allegations, while not stating ultimate legal conclusions, are nevertheless so threadbare or speculative that they fail to cross ‘the line between the conclusory and the factual.’” Peñalbert–Rosa v. Fortuño–Burset, 631 F.3d 592, 595 (1st Cir. 2011) (quoting Twombly, 550 U.S. at 557 n.5). The second prong is to ask whether the facts alleged would “allow[ ] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 129 S. Ct. at 1949. “The make-or-break standard ... is that the combined allegations, taken as true, must state a plausible, not a merely conceivable, case for relief.” Sepúlveda-Villarini v. Dep’t of Educ. of P.R., 628 F.3d 25, 29 (1st Cir. 2010). “The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a 24

defendant has acted unlawfully.” Id. (quoting Iqbal, 129 S. Ct. at 1949) (internal quotation marks omitted). When a complaint pleads facts that are “‘merely consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and plausibility of entitlement to relief.’” Iqbal, 129 S. Ct. at 1949 (quoting Twombly, 550 U.S. at 557). .... Soto-Torres essentially brings this suit on a theory of supervisory liability. The only allegations in the complaint linking Fraticelli with the detention of Soto-Torres are that Fraticelli “was the officer in charge during the incident” and that he “participated in or directed the constitutional violations alleged herein, or knew of the violation[s] and failed to act to prevent them.” Iqbal and our precedents applying it make clear that these claims necessarily fail. As our discussion of the law of supervisory liability makes clear, the allegation that Fraticelli was “the officer in charge” does not come close to meeting the required standard. While the complaint states that Fraticelli “participated in or directed the constitutional violations alleged herein,” it provided no facts to support either that he “participated in” or “directed” the plaintiff’s detention. In some sense, all high officials in charge of a government operation “participate in” or “direct” the operation. Iqbal makes clear that this is plainly insufficient to support a theory of supervisory liability and fails as a matter of law. For the complaint to have asserted a cognizable claim, it was required to allege additional facts sufficient to make out a violation of a constitutional right. Those additional facts would then be measured against the standards for individual liability. The complaint would have had to plead facts supporting a plausible inference that Fraticelli personally directed the officers to take those steps against plaintiff which themselves violated the Constitution in some way. Such a pleading would then have been tested to see whether the standards for immunity had been met. But in this case, the complaint does not even meet the first prong of our two-part Iqbal inquiry. Our precedents make clear that it is not enough to state that a defendant “was the officer in charge during the incident” and that he “participated in or directed the constitutional violations” alleged. We 25

so held in Maldonado, where we dismissed a claim against a mayor who promulgated a no-pets policy in municipal housing properties that led to the killing of pets by subordinate officials. 568 F.3d at 273–74. We explained the dismissal by observing that the mayor’s alleged level of involvement in the killing of the pets was “insufficient to support a finding of liability,” id. at 273, even though the complaint alleged that the mayor observed one of the raids and “supervised, directly or indirectly, the agencies involved,” id. at 274. The complaint identified “no policy which authorized the killing of the pets, much less one which the Mayor authorized.” Id. at 273. It is also the effect of our ruling in Peñalbert–Rosa, where we held that a complaint did not sufficiently allege the involvement of a governor in the alleged politically motivated termination of the plaintiff, who worked at the governor’s mansion. 631 F.3d at 595. The complaint merely stated that the governor was in charge of approving all personnel decisions at the mansion, including the termination of the plaintiff, and that the governor “knew or assumed” that the plaintiff belonged to a different political party. Id. Soto-Torres’s allegations about Fraticelli's active involvement are no more concrete than those of the plaintiff in Iqbal. The plaintiff in Iqbal alleged that Attorney General Ashcroft and FBI Director Mueller “knew of, condoned, and . . . agreed to subject” him to harsh conditions of detention, and that Ashcroft was the “principal architect” of the policy that led to his detention and that Mueller was “instrumental” in adopting and executing it. Iqbal, 129 S. Ct. at 1951. The Court deemed those bare allegations to be too conclusory to be “entitled to the assumption of truth.” Id. As to Soto-Torres’s alternative formulation that Fraticelli “knew of the violation[s] and failed to act to prevent them,” his factual allegations are again insufficient. The complaint does not provide facts regarding what Fraticelli is alleged to have known when, nor does it specify how he is alleged to have known it, or how he somehow personally caused the detention. Soto-Torres has been unable to provide adequate facts although he has twice amended his complaint over a period of many years. If Soto-Torres “had any basis beyond speculation for charging [Fraticelli] with knowing participation in the wrong, it seems almost certain that this would have been mentioned.” Peñalbert–Rosa, 631 F.3d at 596. Id. at *3–5 (footnotes omitted). 26



Roman-Oliveras v. Puerto Rico Elec. Power Auth., 655 F.3d 43, 2011 WL 3621548 (1st Cir. Aug. 18, 2011). Plaintiff Hector Roman-Oliveras filed a complaint against defendant Puerto Rico Electric Power Authority (“PREPA”), its managers James Velez and Julio Renta, and others, alleging that after over twenty years of successful employment with PREPA despite suffering from schizophrenia, he was inexplicably removed from his job in 2006, required to undergo multiple medical evaluations, and then terminated even though each evaluation pronounced him fit to work. The complaint alleged, among other things, claims under the Americans with Disabilities Act (ADA), asserting that PREPA terminated plaintiff because of his medical condition. The court of appeals summarized the complaint as follows: Before the events at issue in this litigation, Román had worked successfully for PREPA for twenty-two years while receiving regular psychiatric treatment for schizophrenia. The condition had been diagnosed more than thirty years earlier. Román received excellent evaluations and was always available for overtime work. Beginning in 2005, Román’s immediate superior, defendant James Vélez, and the plant superintendent, defendant Julio Renta, made Román’s life difficult in retaliation for his union activities and role as a “leader of workm[e]n.” Román’s complaint states that the PREPA supervisors harassed him, “making improper rude comments against him, taking adverse person[ne]l action and fabricating labor cases against him.” The complaint accuses the defendants of attempting on one occasion to transfer Román “without the benefit of paying him [food] and car allowance” and of treating him “differently from similarly situated individuals outside of his protected group.” The complaint further alleges that Vélez and Renta used false information and “their official positions improperly as employees and engineers of co-defendant PREPA” to cause harm to Román. On March 1, 2006, PREPA’s social worker asked the Authority’s physician to bar Román from working until he was evaluated by a psychiatrist, and PREPA thereafter did not allow him to work. On April 24, the social worker received the psychiatric report, which stated that Román could resume his duties. On May 23, PREPA “formally acknowledge[d]” the psychiatrist’s report and recommendation. Román, however, remained out of work, involuntarily, despite the satisfactory report. On August 7, PREPA’s physician ordered “asbestos [ ] medical evaluations” of Román. The resulting report stated that Román was “fit for duties including as per his psychiatric condition.”

27

Although PREPA’s physicians recommended on October 17 that Román return to work, and he repeatedly asked to return, defendant Renta requested additional medical evaluations on November 13 and referred Román for an involuntary medical leave. Román also was asked for the evaluations of his private doctors. In January 2007, he submitted the requested medical certification from his psychiatrist. Despite findings by “[a]ll of the doctors” that Román was capable of resuming his work, defendants again refused to allow him to do so, “changing the entire process of the reinstallation of plaintff[’]s duties.” Román was taken off PREPA’s payroll in February 2007. Although he alleges that he was terminated, he submitted an employment certification in Spanish to the district court that, according to the court, “reflects that Román had been on medical leave, without pay, since February 10, 2007.” The defendants presented a translated employment certification stating that, as of September 5, 2007, Román remained a PREPA employee “hold[ing] the regular position of Central Power Plant Electrician II.” The complaint alleges, however, that Renta and Vélez ordered removal of Román's personal items from the work area, removal of his name from his locker, and reassignment of his toolbox to another employee. Id. at *2. The district court dismissed the plaintiffs’ claims under the ADA on the ground that he had failed to allege facts showing that he was disabled within the meaning of the ADA. The First Circuit disagreed, and vacated the district court’s dismissal of plaintiff’s ADA claims against PREPA. The court reasoned as follows: To state a claim of disability discrimination under Title I of the ADA, Román needed to allege facts showing that (1) he was disabled within the meaning of the Act; (2) he could perform the essential functions of his job, with or without reasonable accommodation, and (3) the employer took adverse action against him, in whole or in part, because of his disability. Ruiz Rivera v. Pfizer Pharm., LLC, 521 F.3d 76, 82 (1st Cir. 2008); Bailey v. Ga.-Pac. Corp., 306 F.3d 1162, 1166 (1st Cir. 2002). An individual is disabled for purposes of the ADA if he (1) has a physical or mental impairment that substantially limits one or more major life activities; (2) has a record of such an impairment; or (3) is regarded as having such an impairment. Ruiz Rivera, 521 F.3d at 82; see also 42 U.S.C. § 12102(2) (2008). 28

The district court concluded that Román had failed to allege facts sufficient to establish that he was disabled under any of the statute’s three definitions. We agree that the complaint falls short on the first two alternatives. As to the first option, the district court correctly noted that Román did not allege that schizophrenia substantially limited any aspect of his life, including his ability to work. Indeed, the thrust of appellant’s complaint is that he was fully capable of working, but was unfairly denied the opportunity to do so “because of his medical condition.” He thus has not stated a claim of disability discrimination based on the condition of schizophrenia itself. For a similar reason, the district court correctly found that Román’s complaint failed to satisfy the “record of impairment” prong of the disability definition. The “record” provision is designed “to protect those who have recovered or are recovering from substantially limiting impairments from discrimination based on their medical history.” Bailey, 306 F.3d at 1169. Thus, to qualify for ADA coverage on the basis of this provision, Román would need to show that in the past he had, “or has been misclassified as having, an impairment that substantially limited a major life activity.” Id. Again, because Román has not alleged substantial limitations as a result of schizophrenia, he failed to state an ADA claim based on having a record of impairment. Finally, the district court rejected appellant’s “regarded as” claim on the ground that he had “failed to allege facts sufficient to show that defendants ever regarded Román's schizophrenia as having a substantial impact on his work.” To prove a regarded as claim against his employer, a plaintiff ordinarily must show either that the employer (1) “mistakenly believes that [he] has a physical impairment that substantially limits one or more major life activities,” or (2) “mistakenly believes that an actual, nonlimiting impairment substantially limits one or more major life activities.” Sutton v. United Air Lines, Inc., 527 U.S. 471, 489 (1999), superseded by statute, ADA Amendments Act of 2008, Pub.L. No. 110–325, § 2(a)(4)-(6), 122 Stat. 3553; see also Ruiz Rivera, 521 F.3d at 83; Sullivan v. Neiman Marcus Grp., Inc., 358 F.3d 110, 117 (1st Cir. 2004). We focus on the second of these alternatives. To survive a motion to dismiss, a plaintiff must allege “only enough facts to state a claim to relief that is plausible on its face.” Bell Atl. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the 29

court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). According to the allegations in the complaint, Román was removed from his position and forced to undergo multiple medical evaluations at the behest of the defendants, and also was required to submit a medical certification from his treating psychiatrist. Despite favorable test results each time, defendants persisted in refusing to allow Román to work. Taken as true, these allegations, together with the allegation that Román always performed his job well, readily support three pertinent inferences: (1) defendants mistakenly believed that Román’s psychiatric condition substantially limited his ability to do his job; (2) they refused to let him work based on that erroneous, discriminatory judgment; and (3) they repeatedly attempted to justify removing him from his job through the psychiatric and other medical testing. To state a violation of the ADA when the major life activity at issue is working, however, Román must show “‘not only that the employer thought that he was impaired in his ability to do the job that he held, but also that the employer regarded him as substantially impaired in “either a class of jobs or a broad range of jobs in various classes as compared with the average person having comparable training, skills, and abilities.”’” Ruiz Rivera, 521 F.3d at 83 (quoting Sullivan, 358 F.3d at 117 (quoting Murphy v. United Parcel Serv., Inc., 527 U.S. 516, 523 (1999))). Although the complaint does not explicitly assert that PREPA had such a broad perception of Román’s incapacity, the allegations are sufficient to embrace that contention. According to the complaint, PREPA removed Román from his position without any meaningful effort to offer him alternative positions appropriate for whatever limitations his employer attributed to him. Román alleges one attempted transfer, but his objections to it—based on denial of food and travel allowance—suggest it was a temporary relocation rather than reassignment to a new position deemed more suitable for his abilities. In any event, given that the disability at issue is a mental condition rather than a discrete physical limitation, defendants’ actions in removing Román and repeatedly demanding psychiatric evaluations permit the inference that defendants deemed him disqualified from a broad range of jobs. Cf. Quiles-Quiles v. Henderson, 439 F.3d 1, 6–7 (1st Cir. 2006) (concluding that supervisors’ belief that plaintiff’s mental impairment posed a safety risk to coworkers, “preclud[ing] him from holding most jobs in our economy,” permitted jurors to find that employer regarded him as 30

disabled); Watts v. United Parcel Serv., 378 F. App’x 520, 526 (6th Cir. 2010) (unpublished) (“When a defendant flatly bars a plaintiff from working at any job at the defendant’s company, that is generally sufficient proof that the employer regards the plaintiff as disabled in the major life activity of working so as to preclude the defendant being awarded judgment as a matter of law.”). Román has thus made a sufficient showing of disability within the meaning of the ADA to survive defendants’ motion to dismiss. His allegations easily satisfy the other two pleading prerequisites for his claim to proceed: that he could perform the essential functions of his job and that PREPA took adverse action against him, in whole or in part, because of his disability. We see no alternative view of the allegations that is “‘just as much in line’ with innocent conduct” as with disability discrimination, Ocasio, 640 F.3d at 11 (quoting Twombly, 550 U.S. at 554); see also Iqbal, 129 S. Ct. at 1949, and Román has thus passed “the line between possibility and plausibility” in asserting a regarded-as violation of the ADA, Twombly, 550 U.S. at 557. We hasten to add that we offer no view on the merits of his claim. The question at this stage of the case is not “the likelihood that a causal connection will prove out as fact.” Sepúlveda-Villarini, 628 F.3d at 30. Rather, “the standard is plausibility assuming the pleaded facts to be true and read in a plaintiff’s favor.” Id.; see also Twombly, 550 U.S. at 563 n.8 (“[W]hen a complaint adequately states a claim, it may not be dismissed based on a district court’s assessment that the plaintiff will fail to find evidentiary support for his allegations or prove his claim to the satisfaction of the factfinder.”). Here, the pleaded facts support “[a] plausible but inconclusive inference” of discrimination based on disability, Sepúlveda-Villarini, 628 F.3d at 30, and Román is therefore entitled to proceed with his ADA claim. Id. at *4–6. •

Ocasio-Hernandez v. Fortuno-Burset, 640 F.3d 1, 2011 WL 1228768 (1st Cir. Apr. 1, 2011).9 Plaintiff Ocasio-Hernandez was one of fourteen maintenance and domestic workers at the Puerto Rico governor’s mansion, known as “La Fortaleza.” Some of the workers had held their positions for nearly twenty years. In early 2009, after the governorship of the

9

The district court’s opinion, 639 F. Supp. 2d 217 (D.P.R. 2009), was included in earlier versions of this memo. Because the First Circuit vacated that decision, the district court’s opinion has been removed from the appendix to this memo.

31

commonwealth changed hands from one political party to another with the election of Governor Fortuno, each of the workers—without any notice or job evaluation—received a letter of termination from Ms. Berlingeri, the Administrator at La Fortaleza. The letter did not state any cause for the terminations. None of the workers had been known to be members of the new governor’s political party. In answering press questions about layoffs and terminations at La Fortaleza, Mr. Blanco, the governor’s chief of staff, stated that terminated employees had been privy to confidential, sensitive information. This was not true, however, of these fourteen employees, who performed tasks such as laundry, ironing, sewing, and cleaning. The fourteen workers brought suit under § 1983, alleging termination for political reasons in violation of the first amendment, deprivation of property without due process, and denial of equal protection. The complaint named four defendants: Governor Fortuno; his wife, first lady Luce Vela, who chaired a committee for the maintenance, restoration, and preservation of La Fortaleza; Mr. Blanco; and Ms. Berlingeri. At an initial case conference, the district court informed the plaintiffs that their complaint satisfied the federal notice pleading standard, and advised the defendants not to file a motion to dismiss. After the Supreme Court issued its decision in Iqbal, however, the district court scheduled an emergency hearing to hear arguments on whether Iqbal required the case to be dismissed for insufficient factual allegations. At that hearing, the defendants moved to dismiss the complaint. The court denied that motion without prejudice and gave the plaintiff thirty days to amend their complaint, which they did. Following amendment of the complaint, the district court granted the defendants’ motion to dismiss the complaint. As recounted by the court of appeals, The district court began its opinion and order in this case by dismissing all claims against three of the four defendants—Governor Fortuño, First Lady Vela, and Blanco. According to the court, the factual allegations in the complaint failed to show with the required specificity that those three defendants had caused the plaintiffs’ terminations. The court described the plaintiffs’ case against those defendants as resting on “an implicit assumption that the defendants’ [sic] participated in the decision” because of their positions of authority. It noted that “no additional factual allegations, such as interactions between the defendants and particular plaintiffs, . . . tie Fortuño, Vela, and Blanco to the deprivation of the plaintiffs’ constitutional rights.” The district court did find, however, that the plaintiffs had “minimally satisfied” their burden of pleading Berlingeri’s participation in the terminations, “since the plaintiffs allege that she signed the letter which officially separated the plaintiffs from their 32

employment at La Fortaleza.” It nevertheless concluded that the plaintiffs’ political discrimination claim failed because the complaint lacked sufficient factual allegations to show that Berlingeri had knowledge of the plaintiffs’ political affiliation or that political affiliation played a role in the termination decision: “The fact that Berlingeri may have made disparaging remarks about the previous administration does not lead to the conclusion that she thought or knew that plaintiffs were PDP members or supporters.” It found that “the same can be said” with respect to the plaintiffs’ allegations that Berlingeri’s trusted aide was a staunch NPP supporter, wore the party's logo, and sang Governor Fortuño's campaign jingle. The court also discounted the complaint's allegation that Berlingeri, the other defendants, and newly hired clerical staff had inquired into the circumstances of the plaintiffs’ hire at La Fortaleza. It noted that the complaint “contains no specific account of these conversations,” and thus described it as “a generic allegation, made without reference to specific facts that might make it ‘plausible on its face.’” The court further explained that had such inquiries taken place, that fact would “not lead to the conclusion that [the defendants] did so in order to ascertain [the plaintiffs’] political affiliation, or that they in fact gained that information.” The court likewise discounted the plaintiffs’ allegation that they were replaced in their positions by NPP-affiliated workers, describing it as “a conclusory statement.” It pointed out that the “plaintiffs do not identify who replaced any or all of the plaintiffs, nor the date of these replacements” and that the complaint merely asserts “that this occurred as to all of the plaintiffs.” Further, the court found that the defendants’ failure to justify the terminations or to conduct performance evaluations was not “relevant” to the claim, as “plaintiffs were not entitled to any explanation.” Lastly, the court explained that “mere temporal proximity” between a change in administration and an employee’s dismissal is “insufficient to establish discriminatory animus.” Id. at *3–4. The First Circuit vacated the district court’s dismissal of the complaint. The court of appeals began its discussion with a review of “the current state of federal notice pleading.” The court stated, We distill the following principles from Twombly and Iqbal. Dismissal of a complaint pursuant to Rule 12(b)(6) is 33

inappropriate if the complaint satisfies Rule 8(a)(2)’s requirement of “a short and plain statement of the claim showing that the pleader is entitled to relief,” FED . R. CIV . P. 8(a)(2). See Iqbal, 129 S. Ct. at 1949; Twombly, 550 U.S. at 555, 127 S. Ct. 1955. A “short and plain” statement needs only enough detail to provide a defendant with “‘fair notice of what the . . . claim is and the grounds upon which it rests.’” Twombly, 550 U.S. at 555, 127 S. Ct. 1955 (citing Conley, 355 U.S. at 47, 78 S. Ct. 99); see also Erickson v. Pardus, 551 U.S. 89, 93, 127 S. Ct. 2197, 167 L. Ed. 2d 1081 (2007) (“Federal Rule of Civil Procedure 8(a)(2) requires only ‘a short and plain statement . . . .’ Specific facts are not necessary.”). However, in order to “show” an entitlement to relief a complaint must contain enough factual material “to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” See Twombly, 550 U.S. at 555, 127 S. Ct. 1955 (citation omitted); see also Iqbal, 129 S. Ct. at 1950. “Where a complaint pleads facts that are ‘merely consistent with’ a defendant's liability, it ‘stops short of the line between possibility and plausibility of entitlement to relief.’” Iqbal, 129 S. Ct. at 1949 (quoting Twombly, 550 U.S. at 557, 127 S. Ct. 1955). In short, an adequate complaint must provide fair notice to the defendants and state a facially plausible legal claim. In resolving a motion to dismiss, a court should employ a two-pronged approach. It should begin by identifying and disregarding statements in the complaint that merely offer “‘legal conclusion[s] couched as . . . fact[ ]’” or “[t]hreadbare recitals of the elements of a cause of action.” Id. at 1949–50 (quoting Twombly, 550 U.S. at 555, 127 S. Ct. 1955). A plaintiff is not entitled to “proceed perforce” by virtue of allegations that merely parrot the elements of the cause of action. See id. at 1950; cf. Sanchez v. Pereira-Castillo, 590 F.3d 31, 49 (1st Cir. 2009) (disregarding as conclusory, under Iqbal’s first prong, a factual allegation that merely “[p]arrot[ed] our standard for supervisory liability in the context of Section 1983” in alleging that defendants had “failed to [supervise] with deliberate indifference and/or reckless disregard of Plaintiff’s federally protected rights”). Non-conclusory factual allegations in the complaint must then be treated as true, even if seemingly incredible. Iqbal, 129 S. Ct. at 1951 (“To be clear, we do not reject these bald allegations on the ground that they are unrealistic or nonsensical. . . . It is the conclusory nature of respondent’s allegations, rather than their extravagantly fanciful nature, that disentitles them to the presumption of truth.”). But cf. Peñalbert-Rosa v. Fortuño–Burset, 631 F.3d 592, 595 (1st Cir. 2011) (“[S]ome allegations, while not 34

stating ultimate legal conclusions, are nevertheless so threadbare or speculative that they fail to cross the line between the conclusory and the factual.”) (internal quotation marks omitted). If that factual content, so taken, “allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged,” the claim has facial plausibility. Iqbal, 129 S. Ct. at 1949. “The make-or-break standard . . . is that the combined allegations, taken as true, must state a plausible, not a merely conceivable, case for relief.” SepúlvedaVillarini v. Dep’t of Educ. of P.R., 628 F.3d 25, 29 (1st Cir. 2010) (Souter, J.). Although evaluating the plausibility of a legal claim “requires the reviewing court to draw on its judicial experience and common sense,” Iqbal, 129 S. Ct. at 1950, the court may not disregard properly pled factual allegations, “even if it strikes a savvy judge that actual proof of those facts is improbable.” Twombly, 550 U.S. at 556, 127 S. Ct. 1955; see also Neitzke v. Williams, 490 U.S. 319, 327, 109 S. Ct. 1827, 104 L.Ed.2d 338 (1989) (“Rule 12(b)(6) does not countenance . . . dismissals based on a judge’s disbelief of a complaint’s factual allegations.”). Nor may a court attempt to forecast a plaintiff’s likelihood of success on the merits; “a well-pleaded complaint may proceed even if . . . a recovery is very remote and unlikely.” Twombly, 550 U.S. at 556, 127 S. Ct. 1955 (internal quotation marks omitted); see also id. at 563 n.8, 127 S. Ct. 1955 (“[W]hen a complaint adequately states a claim, it may not be dismissed based on a district court’s assessment that the plaintiff will fail to find evidentiary support for his allegations or prove his claim to the satisfaction of the factfinder.”). The relevant inquiry focuses on the reasonableness of the inference of liability that the plaintiff is asking the court to draw from the facts alleged in the complaint. Id. at *8–9 (emphasis added). The court of appeals then ruled that the plaintiffs’ complaint alleged enough to show that all four defendants had knowledge of the plaintiffs’ political affiliation. The court stated, The district court concluded that the plaintiffs’ complaint inadequately alleged Berlingeri’s knowledge. In reaching that conclusion, it disregarded as “conclusory” an allegation that the plaintiffs were replaced by NPP-affiliated workers because the plaintiffs “do not identify who replaced any or all of the plaintiffs, nor the date of these replacements.” It also disregarded as “generic, blanket statements” numerous allegations that the defendants and their subordinates had questioned the plaintiffs about the 35

circumstances of their hires in order to discern their political affiliations. The court explained that the complaint “contains no specific account of these conversations.” The court then added that, even if the defendants had questioned the plaintiffs about the circumstances of their employment, such questioning “does not lead to the conclusion that [the defendants] did so in order to ascertain [the plaintiffs’] political affiliation, or that they in fact gained that information.” It reasoned similarly with respect to allegations about disparaging remarks made by Berlingeri: “The fact Berlingeri may have made disparaging remarks about the previous administration does not lead to the conclusion that she thought or knew that plaintiffs were PDP members or supporters” and that “[t]he same can be said” of the plaintiffs’ allegations regarding the overtly politicized conduct of Berlingeri’s aide. The district court erred by not affording the plaintiffs’ allegations the presumption of truth to which they were entitled. First, as we explained above, the Supreme Court’s concerns about conclusory allegations expressed in Twombly and Iqbal focused on allegations of ultimate legal conclusions and on unadorned recitations of a cause-of-action’s elements couched as factual assertions. Allegations of discrete factual events such as the defendants questioning the plaintiffs and replacing the plaintiffs with new employees are not “conclusory” in the relevant sense. Second, factual allegations in a complaint do not need to contain the level of specificity sought by the district court. See, e.g., Leatherman v. Tarrant Cty. Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 167–69, 113 S. Ct. 1160, 122 L.Ed.2d 517 (1993); cf. Iqbal, 129 S. Ct. at 1951 (accepting allegations that the FBI “arrested and detained thousands of Arab Muslim men” pursuant to a policy that was “approved by [the defendants] in discussions in the weeks after September 11, 2001”) (internal quotation marks omitted); Twombly, 550 U.S. at 550–51, 564–65, 127 S. Ct. 1955 (accepting allegations that defendants “engaged in parallel conduct” and failed to “meaningfully . . . pursue attractive business opportunities”) (alterations omitted) (internal quotation marks omitted); see also id. at 565 n.10, 127 S. Ct. 1955 (“Here, our concern is not that the allegations in the complaint were insufficiently ‘particularized’; rather, the complaint warranted dismissal because it failed in toto to render plaintiffs’ entitlement to relief plausible.”) (alteration omitted) (citation omitted). The plaintiffs’ allegations were sufficiently detailed to provide the defendants “fair notice of what the . . . claim is and the grounds upon which it rests.” Id. at 555, 127 S. Ct. 1955 (internal quotation marks omitted). Those allegations should not 36

have been disregarded. Additionally, the district court erred when it failed to evaluate the cumulative effect of the factual allegations. The question confronting a court on a motion to dismiss is whether all the facts alleged, when viewed in the light most favorable to the plaintiffs, render the plaintiff's entitlement to relief plausible. See id. at 569 n.14, 127 S. Ct. 1955; Braden v. Wal–Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir.2009) (explaining that “the complaint should be read as a whole, not parsed piece by piece to determine whether each allegation, in isolation, is plausible”). No single allegation need “lead to the conclusion”—in the district court's words—of some necessary element, provided that, in sum, the allegations of the complaint make the claim as a whole at least plausible. See Sepúlveda-Villarini, 628 F.3d at 29 (“The make-or-break standard . . . is that the combined allegations, taken as true, must state a plausible, not a merely conceivable, case for relief.”) (emphasis added). Indeed, the Supreme Court has suggested that allegations that would individually lack the heft to make a claim plausible may suffice to state a claim in the context of the complaint’s other factual allegations. See Twombly, 550 U.S. at 557, 127 S. Ct. 1955 (“An allegation of parallel conduct . . . gets the complaint close to stating a claim, but without some further factual enhancement it stops short of the line between possibility and plausibility.”). We also reject the district court’s “lead to the conclusion” formulation to the extent it implies a stronger logical connection than that demanded by plausibility. As we have said previously, “[a] plausible but inconclusive inference from pleaded facts will survive a motion to dismiss.” Sepúlveda-Villarini, 628 F.3d at 30. Taking all well-pleaded factual allegations as true, the plaintiffs in this case have pleaded adequate factual material to support a reasonable inference that the four defendants had knowledge of their political beliefs. The complaint states that the defendants asked several plaintiffs about “the circumstances pertaining to how and when they got to work at Fortaleza”; that an aide to Berlingeri similarly “asked each of them as to how and when they began work at the Governor’s Mansion,” taking notes on their responses; and that confidential clerical personnel brought in by the new administration “insisted on interrogating them in order to ascertain their respective political affiliations.” This last allegation, in particular, contains a clear assertion that the clerical staff inquired directly into the plaintiffs’ political affiliations, rather than obliquely 37

into circumstances that might imply such affiliations. Cf. Montfort–Rodríguez v. Rey–Hernández, 504 F.3d 221, 226 (1st Cir. 2007) (finding sufficient evidence of a defendant’s knowledge where he had asked a subordinate to generate a list of trust employees and where subordinate thereby acquired knowledge of the political affiliation of employees). The plaintiffs’ complaint thus plainly shows that the defendants were actively seeking the knowledge in question from the plaintiffs. The plaintiffs’ complaint also shows that the information was potentially accessible to the defendants from sources other than the plaintiffs. The complaint states that employees at La Fortaleza knew, and commonly discussed, the political affiliations of their co-workers. Cf. Peguero-Moronta v. Santiago, 464 F.3d 29, 48 (1st Cir. 2006) (finding sufficient evidence of defendants’ knowledge where “evidence portrays a relatively small workplace where everyone knew who everyone else was and political affiliations were common office knowledge”). In the same paragraph, the complaint states that certain NPP-affiliated employees who possessed this information were promoted to “high level trust positions” by the defendants following the change of administration and were consulted by the defendants in making employment decisions. These allegations are also consistent with the plaintiffs’ allegation of rumors that had spread among employees at La Fortaleza suggesting the defendants were maintaining a list of “employees considered as PDP’s [sic] . . . who would be terminated and substituted with NPP’ers [sic].” In short, in light of the pleadings as a whole, these allegations plausibly show the defendants’ awareness of the plaintiffs’ political affiliation at the time that they were terminated. Id. at *10–12 (emphasis added). Next, the court of appeals ruled that the plaintiffs had alleged enough to show that all four defendants had played a role in the decision to terminate the plaintiffs. The court stated: The district court concluded that the allegations of participation by Governor Fortuño, First Lady Vela, and Blanco were inadequate because they relied entirely on “the positions these defendants hold within the governor’s mansion,” and “no additional factual allegations, such as interactions between the defendants and particular plaintiffs, . . . tie Fortuño, Vela, and Blanco to the deprivation of the plaintiffs’ constitutional rights.” That conclusion was erroneous. Although § 1983 liability cannot rest solely on a 38

defendant’s position of authority, see Ayala-Rodriguez v. Rullán, 511 F.3d 232, 236 (1st Cir. 2007), the plaintiffs’ complaint does include other well-pleaded factual allegations that detail each of these three defendants’ level of personal involvement in and familiarity with the plaintiffs’ terminations. According to the complaint, Governor Fortuño is the nominating authority at La Fortaleza. He approves or disapproves of all personnel decisions at the mansion. As early as January 2009, Governor Fortuño signed an Executive Order authorizing Berlingeri to issue termination notices at La Fortaleza. The plaintiffs have alleged that Governor Fortuño personally participated in questioning them about how and when they began to work at La Fortaleza in order to learn their political affiliation. When responding to press questions about the potential termination of government employees, Governor Fortuño allegedly stated that those who would be terminated “did not vote for him.” According to the complaint, First Lady Vela serves as the chair of a committee charged with the maintenance, restoration, and preservation of La Fortaleza. In that role, she allegedly oversees maintenance and domestic workers. Indeed, the complaint states that she publicly took personal responsibility for overseeing certain renovations and improvements in her time at La Fortaleza, demonstrating her active participation in that role. Vela allegedly interacted with the plaintiffs while they executed their duties, making disparaging remarks to them about the prior PDP administration and informing them that “changes had come.” She is also alleged to have been overheard stating her intention to “clean up the kitchen,” a remark reasonably understood as reflecting an intent to replace certain staff members. The district court improperly disregarded this comment as “an ambiguous remark that does not necessarily refer to the dismissals at issue in this case.” On a motion to dismiss, we are obligated to view the facts of the complaint in the light most favorable to the plaintiffs, and to resolve any ambiguities in their favor. Given these requirements, the “necessarily refer” standard of the district court is particularly inappropriate for evaluating the sufficiency of the allegations in a complaint. Finally, Blanco is alleged to be the Chief of Staff at La Fortaleza, a title which itself indicates his role in personnel management. According to the complaint, Blanco was also 39

responsible for answering press questions about the specific terminations at La Fortaleza. In responding to the press, Blanco allegedly lied about the reason for the plaintiffs’ termination, claiming that the plaintiffs were privy to confidential information and that performance evaluations were being regularly conducted. The allegations in the complaint show, however, that Blanco understood the true reason for the terminations at La Fortaleza, which he revealed by making disparaging remarks about the prior PDP administration to a group of former employees who were protesting at the mansion. The complaint also states that Blanco openly acknowledged to the press that some of the terminated employees would be replaced. As we have often emphasized, one rarely finds “smoking gun” evidence in a political discrimination case. Lamboy-Ortiz, 630 F.3d at 240. Circumstantial evidence must, at times, suffice. Moreover, the requirement of plausibility on a motion to dismiss under Rule 12(b)(6) “simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of the illegal [conduct].” Twombly, 550 U.S. at 556, 127 S. Ct. 1955. The allegations above plausibly show that each defendant possessed knowledge of and shared some responsibility for the termination of employees at La Fortaleza. Id. at *13–14 (emphasis added) (footnote omitted). Finally, the court of appeals ruled that the plaintiffs’ allegations supported a reasonable inference that the defendants’ decision to terminate the plaintiffs’ employment was substantially motivated by the plaintiff’s political affiliation. The court concluded: We have previously explained that a politically charged employment atmosphere “occasioned by the major political shift from the NPP to the PDP . . . coupled with the fact that plaintiffs and defendants are of competing political persuasions[ ] may be probative of discriminatory animus.” Acevedo-Diaz v. Aponte, 1 F.3d 62, 69 (1st Cir. 1993). Here, the plaintiffs have alleged just such a case. Following the election of Governor Fortuño, “logos and flyers allusive to the NPP and Governor Fortuño were in full display and clear to employees at the Governor’s Mansion.” The political affiliation of employees was “commonly shared and discussed” while rumors spread concerning a list of PDP-affiliated workers who were to be terminated. The plaintiffs alleged that the defendants contributed to the politically charged atmosphere by repeatedly inquiring into the political affiliation of employees and by making disparaging comments to employees about the prior PDP 40

administration, including Vela’s expressed intent to “clean up the kitchen” and assertions by Vela and Berlingeri’s aide that “things had indeed changed” at La Fortaleza. Cf. Lamboy-Ortiz, 630 F.3d at 239 (holding that it was reasonable for a plaintiff to bring a political discrimination suit against a PDP-affiliated mayor who had made “vitriolic, anti-NPP commentary,” had stated an intent to “make [a] cleanup” of certain NPP-affiliated employees, and who was rumored to have maintained a “list” of NPP-affiliated employees he intended to oust). The allegations of the complaint go well beyond this atmospheric evidence, however. The plaintiffs alleged that they were fired less than ten weeks after Governor Fortuño assumed office. Although the district court is correct that temporal proximity between the change in political administration and the turnover of staff is not itself sufficient to satisfy a plaintiff's burden of proof on the causation element of a political discrimination claim, it unquestionably contributes at the motion to dismiss stage to the reasonable inference that the employment decision was politically motivated. See, e.g., Peguero-Moronta, 464 F.3d at 53. In contrast to their treatment, the plaintiffs alleged that NPP-affiliated employees were promoted to high-level trust positions following the change in administration. Similarly, the plaintiffs alleged that their positions at La Fortaleza were filled almost immediately by NPP-affiliated workers. We have previously described such comparative evidence as “helpful” in demonstrating that a particular plaintiff was targeted for his or her political views. See Mercado-Berrios v. Cancel-Alegría, 611 F.3d 18, 24 (1st Cir. 2010). Lastly, plaintiffs again point to the public statements made by the defendants as an acknowledgment of the political motivation behind the administration's employment decisions. Blanco’s alleged misstatements to the press about the reasons for the terminations at La Fortaleza and about conducting regular performance evaluations bolster the plaintiffs’ contention that the terminations had a discriminatory basis. See Acevedo-Diaz, 1 F.3d at 68 (“[T]o the extent the reasons given by the employer at the time of the dismissal are later proven false or frivolous, the weight of the evidence of discriminatory animus may be enhanced.”). Similarly, viewed in the light most favorable to the plaintiffs, Blanco’s and Berlingeri’s alleged disparaging remarks about the prior PDP-affiliated administration to terminated employees, and Governor Fortuño’s press statements that “none of them voted for him” when questioned about potential employee firings, serve to confirm the plaintiffs’ core 41

allegation: the defendants’ political biases played a substantial role in the employment decisions at La Fortaleza. The cumulative weight of the plaintiffs’ factual allegations easily nudges their claim of political discrimination “across the line from conceivable to plausible” as to each defendant. Iqbal, 129 S. Ct. at 1951. Read as a whole, the plaintiffs’ complaint unquestionably describes a plausible discriminatory sequence that is all too familiar in this circuit. Id. at *15–16 (emphasis added) (footnote omitted). •

Peñalbert-Rosa v. Fortuno-Burset, 631 F.3d 592 (1st Cir. 2011). Plaintiff Peñalbert was employed as a receptionist in an office building annexed to the Puerto Rico governor’s mansion. She was discharged from commonwealth employment in February 2009, shortly after the governorship of the commonwealth changed hands from one political party to another. She then brought an action under § 1983 alleging that her position did not entail policy work or handling confidential information and that her termination resulted from her political affiliation and therefore violated her federal constitutional rights to free speech and association, due process, and equal protection. The complaint named as defendants the governor, the governor’s chief of staff, and the administrator of the governor’s mansion. The First Circuit’s discussion was as follows: The complaint adequately alleges a claim that someone discharged Peñalbert in violation of the First Amendment. Presumably, whoever discharged her was acting as a state actor, and no basis has yet been asserted for exempting Peñalbert from the protections of Branti [v. Finkel, 445 U.S. 507 (1980)] and Elrod [v. Burns, 427 U.S. 347 (1976)]. While there may have been some reason independent of political party for the firing, the opposite inference may be drawn from the timing of the discharge, the lack of explanation and the replacement by a member of the opposing party. The trouble with Peñalbert’s complaint is not that the charge is implausible; political firings after elections in Puerto Rico are not uncommon. But, save under special conditions, an adequate complaint must include not only a plausible claim but also a plausible defendant. Yet there is nothing in the complaint beyond raw speculation to suggest that the named defendants participated—either as perpetrators or accomplices—in the decision to dismiss Peñalbert. To be sure, the complaint asserts that Governor Fortuno “approves or disapproves of all personnel decisions [at the governor’s 42

mansion], including the personnel decisions concerning the termination of [Peñalbert]”; that the two named subordinate officials “participated” in these decisions; that the defendants “knew or assumed” that Peñalbert belonged to the [Popular Democratic Party (“PDP”)] “and/or” was not a member of the [New Progressive Party (“NPP”)]; and ultimately that all three conspired to dismiss Peñalbert because she was a member of the PDP. All except that conspiracy charge are at least couched in factual terms. The plaintiff's factual allegations are ordinarily assumed to be true in passing on the adequacy of the complaint, which need not plead evidence. See, e.g., Sepúlveda-Villarini v. Dep’t of Educ.,628 F.3d 25, 30 (1st Cir. 2010); Sandler v. E. Airlines, Inc., 649 F.2d 19, 20 (1st Cir. 1981) (per curiam). But “ordinarily” does not mean “always”: some allegations, while not stating ultimate legal conclusions, are nevertheless so threadbare or speculative that they fail to cross “the line between the conclusory and the factual.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 n. 5, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007). Thus, in Ashcroft v. Iqbal, --- U.S. ----, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009), the complaint charged that two high-ranking government officials knowingly condoned harsh detention conditions for the plaintiff “as a matter of policy, solely on account of [his] religion, race, and/or national origin,” id. at 1944 (quoting complaint). Although this was patently a factual claim about the named defendants’ state of mind, the Supreme Court held that the bare allegation of intent was inadequate absent more specific factual assertions: To be clear, we do not reject these bald allegations on the ground that they are unrealistic or nonsensical. We do not so characterize them any more than the Court in Twombly rejected the plaintiffs’ express allegation of “‘a contract, combination or conspiracy to prevent competitive entry,’” because it thought that claim too chimerical to be maintained. It is the conclusory nature of respondent's allegations, rather than their extravagantly fanciful nature, that disentitles them to the presumption of truth. Id. at 1951 (internal citation omitted). Iqbal could be viewed as emergent law, see, e.g., 129 S. Ct. 43

at 1961 (Souter, J., dissenting), but we ourselves had earlier said a complaint that rests on “bald assertions” and “unsupportable conclusions” may be subject to dismissal, Aulson v. Blanchard, 83 F.3d 1, 3 (1st Cir. 1996); and our decisions since Iqbal have several times found unadorned factual assertions to be inadequate. Without trying to lay down a mechanical rule, it is enough to say that sometimes a threadbare factual allegation bears insignia of its speculative character and, absent greater concreteness, invites an early challenge—which can be countered by a plaintiff’s supplying of the missing detail. Here, Peñalbert’s complaint does allege that personnel decisions in the executive mansion are within the authority of the governor, but nothing beyond speculation supports the further assertion that the governor or his chief of staff participated in the decision to dismiss Peñalbert. Someone denominated the “administrator” of the governor’s mansion might more plausibly be involved, but nothing in the complaint indicates the administrator’s actual duties or that the administrator ordinarily passes on the selection or discharge of a receptionist. A defendant could be liable, even without knowing of Peñalbert or her position, if (for example) on some generic basis that defendant authorized the impermissible firing of PDP supporters because of their party membership or beliefs. Cf. Figueroa-Serrano v. Ramos-Alverio, 221 F.3d 1, 8 (1st Cir. 2000) (discussing alleged statement by mayor of his “intention to rid City Hall of NPP employees”). But, again, mere possibility is not enough to state a claim and again no facts are stated in the complaint to show that in this instance any of the three gave such an order or that it is even plausible that they did. If Peñalbert had any basis beyond speculation for charging any one of the named defendants with knowing participation in the wrong, it seems almost certain that this would have been mentioned—if not in the complaint at least in the opposition to the motion to dismiss. Specific information, even if not in the form of admissible evidence, would likely be enough at this stage; pure speculation is not. This may seem hard on a plaintiff who merely suspects wrongdoing, but even discovery requires a minimum showing and “fishing expeditions” are not permitted. DM Research, 170 F.3d at 55. However, Peñalbert’s position is in one respect different: the 44

complaint adequately alleges—based on the non-conclusory facts already listed—that someone fired Peñalbert based on party membership. Of course, the factual allegations might be later undermined or countered by affirmative defenses, e.g., Cepero-Rivera v. Fagundo, 414 F.3d 124, 132-33 (1st Cir. 2005); but at this stage the complaint adequately asserts a federal wrong by someone. So while the present complaint does not justify suit against the defendants actually named, an avenue for discovery may be open. A plaintiff who is unaware of the identity of the person who wronged her can sometimes proceed against a “John Doe” defendant as a placeholder. E.g., Iqbal, 129 S. Ct. at 1943; Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics, 403 U.S. 388, 390 n. 2, 91 S. Ct. 1999, 29 L. Ed. 2d 619 (1971); see also 5A Wright & Miller, supra note 1, § 1321, at 382 & n. 6. We have previously condoned the device, at least when discovery is likely to reveal the identity of the correct defendant and good faith investigative efforts to do so have already failed. See Martínez- Rivera v. Sánchez Ramos, 498 F.3d 3, 7-8 (1st Cir. 2007). Whether Peñalbert could make such a showing is not clear from the face of her complaint, and she has not sought this “John Doe” alternative. Rarely do we rescue a civil claim—even to the very limited extent now contemplated—on grounds not urged either on the district court or on us. But Twombly and Iqbal are relatively recent; developing a workable distinction between “fact” and “speculation” is still a work in progress; and while upholding the dismissal of the complaint against the named defendants, we think that the interests of justice warrant a remand to give Peñalbert a reasonable opportunity to move to amend the complaint to seek relief against a “John Doe” defendant. Peñalbert-Rosa, 631 F.3d at 594–597 (emphasis added) (footnotes omitted). •

Plumbers’ Union Local 12 Pension Fund v. Nomura Asset Acceptance Corp., 632 F.3d 762, 2011 WL 183971 (1st Cir. Jan. 20, 2011). Three union pension and welfare funds filed a putative class action against eight trusts, the “depositor” that organized the trusts, the trusts’ underwriters, and five officers of the depositor. Plaintiffs sought redress for losses suffered when they acquired trust certificates representing mortgage-backed securities. The gravamen of the plaintiffs’ complaint was that the trusts’ offering documents, i.e., the registration statements and prospectus supplements, contained false and misleading statements, and as a result plaintiffs purchased securities whose true value when purchased was less than what the plaintiffs paid for them. The district court dismissed all of the plaintiffs’ claims, holding that on the face of the complaint, the plaintiffs did not sufficiently state any claim. 45

The First Circuit, noting Iqbal and Twombly, observed that “the usual difficulty of parsing and evaluating misrepresentation claims at the complaint stage in securities cases is further complicated by recent case law tightening the sieve through which a well-pled complaint must pass.” The court went on to affirm the dismissal of most, but not all, of the plaintiffs’ claims, reasoning as follows: This brings us to the individual charges of false or misleading statements and to the specific allegations of the complaint. . . . [W]e consider the adequacy of the allegations charge by charge. The underwriting guidelines. Plaintiffs first point to a set of statements in the offering documents implying that the banks that originated the mortgages used lending guidelines to determine borrowers’ creditworthiness and ability to repay the loans. For example, the prospectus supplements for the two trusts at issue stated that First National Bank of Nevada (“FNBN”), one of the “key” loan originators for those trusts, used “underwriting guidelines [that] are primarily intended to evaluate the prospective borrower’s credit standing and ability to repay the loan, as well as the value and adequacy of the proposed mortgaged property as collateral.” In fact, plaintiffs allege, FNBN “routinely violated” its lending guidelines and instead approved as many loans as possible, even “scrub[bing]” loan applications of potentially disqualifying material. Indeed, plaintiffs allege that this was FNBN’s “business model,” aimed at milling applications at high speed to generate profits from the sale of such risky loans to others. Thus, plaintiffs say, contrary to the registration statement, borrowers did not “demonstrate[ ] an established ability to repay indebtedness in a timely fashion” and employment history was not “verified.” Admittedly, warnings in the offering documents state, for example, that the “underwriting standards ... typically differ from, and are ... generally less stringent than, the underwriting standards established by Fannie Mae or Freddie Mac”; that “certain exceptions to the underwriting standards ... are made in the event that compensating factors are demonstrated by a prospective borrower”; and that FNBN “originates or purchases loans that have been originated under certain limited documentation programs” that “may not require income, employment or asset verification.” The district court ruled that, read together with such warnings, the complained-of assurances were not materially false or misleading, but we cannot agree. Neither being “less stringent” than Fannie Mae 46

nor saying that exceptions occur when borrowers demonstrate other “compensating factors” reveals what plaintiffs allege, namely, a wholesale abandonment of underwriting standards. That is true too of the warning that less verification may be employed for “certain limited documentation programs designed to streamline the loan underwriting process.” Plaintiffs’ allegation of wholesale abandonment may not be proved, but—if accepted at this stage—it is enough to defeat dismissal. Defendants say that no detailed factual support is provided for the allegation and that it is implausible. Despite the familiar generalization that evidence need not be pled at the complaint stage, see Twombly, 550 U.S. at 555, 127 S. Ct. 1955, courts increasingly insist that more specific facts be alleged where an allegation is conclusory, see Maldonado, 568 F.3d at 266, 274; and the same is true for implausibility, at least where the claim is considered as a whole, Twombly, 550 U.S. at 570, 127 S. Ct. 1955; see Arista Records LLC v. Doe 3, 604 F.3d 110, 119-21 (2d Cir. 2010). “Conclusory” and “implausible” are matters of degree rather than sharp-edged categories. Iqbal, 129 S. Ct. at 1949; Twombly, 550 U.S. at 555, 127 S. Ct. 1955. However, the practices alleged in this case are fairly specific and a number of lenders in the industry are widely understood to have engaged in such practices. The harder problem is whether enough has been said in the complaint—beyond conclusory assertions—to link such practices with specific lending banks that supplied the mortgages that underpinned the trusts. Similar complaints in other cases have cited to more substantial sources, including statements from confidential witnesses, former employees and internal e-mails. This is a familiar problem: plaintiffs want discovery to develop such evidence, while courts are loath to license fishing expeditions. While this case presents a judgment call, the sharp drop in the credit ratings after the sales and the specific allegations as to FNBN offer enough basis to warrant some initial discovery aimed at these precise allegations. The district court is free to limit discovery stringently and to revisit the adequacy of the allegations thereafter and even before possible motions for summary judgment. See, e.g., Miss. Pub. Emps.’ Ret. Sys. v. Bos. Sci. Corp., 523 F.3d 75, 79 (1st Cir. 2008). Appraisal practices. The complaint also alleges that the offering documents contained false statements relating to the methods 47

used to appraise the property values of potential borrowers—the ratio of property value to loan being a key indicator of risk. For example, the April 19, 2006, registration statement and the prospectus supplements stated that “[a]ll appraisals” were conducted in accordance with the “Uniform Standards of Professional Appraisal Practice” (“USPAP”). These in turn require that appraisers “perform assignments with impartiality, objectivity, and independence” and make it unethical for appraisers, among other things, to accept an assignment contingent on reporting a predetermined result. The complaint alleges in a single general statement that the appraisals underlying the loans at issue here failed to comply with USPAP requirements; but there is no allegation that any specific bank that supplied mortgages to the trusts did exert undue pressure, let alone that the pressure succeeded. The complaint fairly read is that many appraisers in the banking industry were subject to such pressure. So, unlike the lending standard allegation, the complaint is essentially a claim that other banks engaged in such practices, some of which probably distorted loans, and therefore this may have happened in this case. On this basis, virtually every investor in mortgage-backed securities could subject a multiplicity of defendants “to the most unrestrained of fishing expeditions.” Gooley v. Mobil Oil Corp., 851 F.3d 513, 515 (1st Cir. 1988); see also DM Research, Inc. v. Coll. of Am. Pathologists, 170 F.3d 53, 55 (1st Cir. 1999). Accordingly, we agree with the district court that such an allegation—amounting to the statement that others in the industry engaged in wrongful pressure—is not enough. Several other district courts have reached precisely this conclusion. .... Seller or solicitor allegations. Section 12(a)(2) permits a plaintiff to sue only a defendant who either sold its own security to the plaintiff or (for financial gain) successfully solicited the sale of that security to the plaintiff. Pinter, 486 U.S. at 642-47, 650 & n. 21. The district court dismissed plaintiffs’ section 12(a)(2) claims, concluding that they did not adequately allege that defendants sold the certificates to the plaintiffs or solicited the sales. This was apparently because the complaint used a more ambiguous phrase—that plaintiffs “acquired the [c]ertificates pursuant and/or traceable to” the offering documents—found insufficient by a number of courts. E.g., Pub. Emps.’ Ret. Sys. of Miss. v. Merrill Lynch & Co. Inc., 714 F. Supp. 2d 48

475, 484 (S.D.N.Y. 2010); Wells Fargo, 712 F. Supp. 2d at 966. But the complaint also alleged that plaintiffs “acquired . . . [c]ertificates from defendant Nomura Securities” and that the “[d]efendants promoted and sold the [c]ertificates to [the p]laintiffs and other members of the [c]lass” (emphasis added); these allegations are sufficient to state a claim under section 12(a)(2) so long as material misstatements or misleading omissions are alleged. The district court’s dismissal of plaintiffs’ section 12(a)(2) claims for failure to allege defendants’ requisite connections with the sale was in error. Plumbers’ Union, 2011 WL 183971, at *7–10 (emphasis added) (footnotes omitted). •

Sepúlveda-Villarini v. Dep’t of Educ. of Puerto Rico, 628 F.3d 25 (1st Cir. 2010). Public school teachers (Sepúlveda and Velázquez) sued the Puerto Rico Department of Education, its Secretary (Aragunde), and the school director (Oliveras), for failure to accommodate an employee’s disability as required by Title I of the Americans with Disabilities Act (ADA), 42 U.S.C. §§ 12111-12117, and § 504 of the Rehabilitation Act, 29 U.S.C. § 794. Aragunde was sued in his official capacity; Oliveras was sued in his personal capacity. The district court dismissed for failure to state a claim. The First Circuit vacated and remanded. Sepúlveda alleged that he suffered a stroke while teaching and required heart by-pass surgery. For five years after the surgery, the school made accommodations for Sepúlveda, providing him a first floor classroom, a reduced number of pupils, and a rest period. Then Secretary Aragunde issued instructions to keep class size at a minimum of 20. Sepúlveda’s class size was increased to 30, but a neophyte teacher was assigned to share Sepúlveda’s duties. Sepúlveda claimed “that the new arrangement is an unreasonable refusal to accommodate, resulting in emotional consequences with physical symptoms requiring treatment.” The district court dismissed Sepúlveda’s claims of personal liability against the school director and all of his Title VII claims. It dismissed the Title I and Rehabilitation Act claims for failure to allege how smaller class size would allow Sepúlveda to go on teaching. The district court dismissed the Title II claim, relying on its ruling in a prior case that Title II did not reach employment-based claims and, alternatively, rejecting the Title II claim for failure to allege how smaller class size would allow Sepúlveda to go on teaching. Velázquez alleged that she suffered from a throat condition known as aphonia, with symptoms including excessive coughing and shortness of breath, which was allegedly aggravated by dust and debris stemming from construction at the school some years ago. For four years she was provided with reduced class size, until Secretary Aragunde issued his instructions to increase class size. She alleged “that ensuing emotional and physical stress required treatment.” The district court dismissed her personal liability claims, all Title VII claims, and her Title II claim on the ground that Title II does not refer to employment discrimination. The court addressed defendants’ sovereign immunity defense, which it did 49

not reach in Sepúlveda’s case, and sustained the defense, dismissing the Title I claim against the Department in toto and against the Secretary insofar as Velázquez sought money damages. The court then dismissed the Title I and Rehabilitation Act claims against the Secretary for failure to allege how the reduced class size would allow Velázquez to teach, but the larger class size would not. The First Circuit, in an opinion by Justice Souter, first noted that all claims of error were waived, “except as to the sufficiency of allegations as stating claims that the Department and its Secretary are responsible under Title I or § 504 of the Rehabilitation Act for failures to make reasonable accommodations for disabilities.” The court then explained that: The statement of a claim of actionable failure to make reasonable employment accommodation for disability under either Title I of the ADA or §504 of the Rehabilitation Act must allege a disability covered by the statute, the ability of the plaintiff to do a job with or without accommodation as the case may be, and the refusal of the employer, despite knowledge of the disability, to accommodate the disability by reasonably varying the standard conditions of employment. The court set forth the pleading standard: “Federal Rule of Civil Procedure 8(a)(2) requires only ‘a short and plain statement of the claim showing that the pleader is entitled to relief,’ in order to ‘give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Fed. R. Civ. P. 8(a)(2) and Conley v. Gibson, 355 U.S. 41, 47 (1957)). The make-or-break standard, as the district court recognized, is that the combined allegations, taken as true, must state a plausible, not a merely conceivable, case for relief. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950-51 (2009) (citing Twombly, 550 U.S. at 570); see also Twombly, 550 U.S. at 555 (“Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” (footnote and citations omitted)). “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 plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. at 1949 (citations omitted). 50

The court then decided that the district court erred by demanding “more than plausibility”: We think that the district court demanded more than plausibility. Each set of pleadings includes two significant sets of allegations. First, for a period of four or five school years the school administration provided the reduced class size in response to the respective plaintiff’s request, supported by some sort of medical certification attesting to its legitimacy. In each complaint, those years of requested accommodation are put forward as establishing, in effect, a base-line of adequacy under the statute in response to an implicit acknowledgment that a statutory disability required the provisions that were made. Second, each set of pleadings describes changed facts beginning in the 2007-08 year, in which instructions from the defendant Secretary resulted in raising the class size to 30 (with a young team teacher to share the load with Sepúlveda). Each complaint alleges that the plaintiff’s emotional and physical health subsequently deteriorated to the point of requiring treatment, and each concludes that assigning 30 pupils was less than reasonable accommodation under the statute. To be sure, this sequence of alleged facts does not describe a causal connection in terms of the exact psychological or physiological mechanism by which each plaintiff’s capacity continues to be overwhelmed. But reading the allegations with the required favor to the plaintiff means accepting the changes in class size as the only variable, from which one would infer that there probably is some causal connection between the work of a doubled class size and the physical and emotional deterioration of the disabled teacher. After all, for years the school authorities themselves apparently thought the small classes were the reasonable and appropriate size; it does not seem remarkable that a teacher would be worn down by doubling the size, even with a young helper, who will need to be supervised. (footnotes omitted). The court noted that the district court’s “call for allegations explaining ‘how’ class size was significant’” was a “call for pleading the details of medical evidence in order to bolster the likelihood that a causal connection will prove out as fact.” And explained that “Twombly cautioned against thinking of plausibility as a standard of likely success on the merits; the standard is plausibility assuming the pleaded facts to be true and read in a plaintiff’s favor.” Finally, the court explained: None of this is to deny the wisdom of the old maxim that after 51

the fact does not necessarily mean caused by the fact, but its teaching here is not that the inference of causation is implausible (taking the facts as true), but that it is possible that other, undisclosed facts may explain the sequence better. Such a possibility does not negate plausibility, however; it is simply a reminder that plausibility of allegations may not be matched by adequacy of evidence. A plausible but inconclusive inference from pleaded facts will survive a motion to dismiss, and the fair inferences from the facts pleaded in these cases point to the essential difference between each of them and the circumstances in Twombly, for example, in which the same actionable conduct alleged on the defendant’s part had been held in some prior cases to be lawful behavior. (emphasis added). •

Sanchez v. Pereira-Castillo, 590 F.3d 31, 2009 WL 4936397 (1st Cir. Dec. 23, 2009). The plaintiff alleged that “while a prisoner at a Puerto Rico correctional institution, correctional officers subjected him to an escalating series of searches of his abdominal cavity that culminated in a forced exploratory abdominal surgery.” Id. at *1. The plaintiff sued correctional officers for the Commonwealth of Puerto Rico Administration of Corrections (“AOC”) and doctors from the Rio Piedras Medical Center (“Rio Piedras”) under § 1983. Id. The complaint alleged violations of the plaintiff’s constitutional rights and supplemental claims under Puerto Rico law. Id. The district court dismissed the complaint for failure to state a claim. The First Circuit reversed the dismissal of the Fourth Amendment claims against two of the correctional officers and the doctor who performed the surgery, reinstated the state law claims, and remanded. Id. The complaint alleged that after a handheld metal detector gave a positive reading when the plaintiff was scanned, the plaintiff was subject to increasingly invasive searches. Id. The plaintiff was allegedly sniffed by law-enforcement dogs, strip-searched, scanned with a metal detector while naked, subject to abdominal x-rays, placed under constant surveillance, forced to have bowel movements on the floor in front of correctional officers, subjected to two rectal examinations and lab tests at Rio Piedras, and eventually subjected to exploratory abdominal surgery that required the plaintiff to be under total anesthesia and remain in the hospital for two days of recovery. See Sanchez, 2009 WL 4936397, at *1–3. According to the complaint, none of the search methods employed after the original metal detector test revealed any evidence of contraband except that one doctor concluded that the x-rays revealed a foreign object in the plaintiff’s rectum consistent with a cellular telephone. See id. Defendant Sergeant Cabán-Rosados (“Cabán”) allegedly conducted the original search of the plaintiff’s living quarters; asked an unknown doctor, labeled in the complaint as Dr. Richard Roe I, to order the x-rays; refused to produce a judicial order regarding the x-rays at the plaintiff’s request; ordered the plaintiff to have bowel movements on the floor; ordered the plaintiff to be taken to the medical area at the prison; and coordinated the plaintiff’s transport to Rio Piedras for a rectal examination and/or a medical procedure to remove a foreign object. Id. 52

at *1–2. Dr. Richard Roe I was alleged to have taken the x-ray ordered by Cabán; Dr. Richard Roe II was alleged to have examined the x-ray results and determined that a foreign object was present in the plaintiff’s rectum and to have issued a referral to the emergency room at Rio Piedras for further testing or intervention, despite the fact that a second bowel movement showed no foreign objects and over the plaintiff’s objection, denial, and request for an additional x-ray; John Doe was a correctional officer alleged to have escorted the plaintiff to the hospital and to have insisted on rectal examinations and the surgery; Dr. Richard Roe III was alleged to be a doctor at Rio Piedras who conducted the rectal examinations and ordered the lab tests; Dr. Richard Roe IV was alleged to be a superior of Dr. Richard Roe III who participated in the second rectal examination and who, together with Dr. Richard Roe III, requested a surgical consultation; Dr. Sandra Deniz was the surgeon who evaluated the plaintiff and conducted the exploratory surgery after she was made aware of the negative findings of the two rectal examinations, the normal results of the lab tests, the absence of foreign objects in the bowel movements, the plaintiff’s denials of the allegations that he had a cell phone, and the plaintiff’s requests for a second set of x-rays. Id. The complaint alleged that the plaintiff signed a consent form for the surgery only because of pressure from John Doe and only after Dr. Deniz agreed to perform another rectal examination before the surgery, which Dr. Deniz failed to do. Id. at *3. The surgery revealed no foreign objects, and this finding was confirmed by a subsequent x-ray. Id. In addition to the Drs. Richard Roe I–IV, John Doe, Cabán, Commander Sanchez (who was never properly served), and Dr. Deniz, the complaint also named Puerto Rico’s secretary of corrections and rehabilitation, the security director of the AOC, the director of the eastern region for the AOC, the security director of the eastern region of the AOC, and the superintendent of the prison (collectively, “administrative correctional defendants,” and together with Cabán and John Doe, the “correctional defendants”). Sanchez, 2009 WL 4936397, at *3. The administrative correctional defendants and Cabán moved to dismiss the complaint for failure to state a claim, asserting that the administrative correctional defendants should be dismissed because respondeat superior liability was not available under § 1983 and that the correctional defendants were entitled to qualified immunity. Id. Dr. Deniz also requested dismissal, alleging that the plaintiff’s medical rights were not violated by the surgery, that the plaintiff was limited to tort remedies for medical malpractice, and that she was entitled to Eleventh Amendment immunity in her official capacity and qualified immunity in her personal capacity. Id. The district court granted the motions, finding that because the defendants were sued in their personal capacity, sovereign immunity did not apply; the strip searches, x-rays, and rectal examinations were reasonable and did not violate the Fourth Amendment; the Fifth Amendment claim could not survive because that amendment applies only to actions of the federal government; the complaint did not state a claim against the correctional defendants with respect to the surgery because the decision regarding the surgery was made by Dr. Deniz; and that the claim against Dr. Deniz failed because she was not a state actor, but was instead acting as a doctor. Id. at *4 & n.3. The district court denied the plaintiff’s requests for reconsideration and for leave to file an amended complaint. Id. On appeal, with respect to the Fourth Amendment claim, the court found it “impossible to 53

reconcile the allegations in the complaint with the district court’s conclusion that these procedures were ‘medical decisions made exclusively by physicians’” because “[a]ccording to the complaint, the procedures were carried out at the insistence of correctional officials for the purpose of finding a cell phone in plaintiff’s rectum.” Id. at *6. The court affirmed dismissal of the claims based on the strip searches and x-rays because the plaintiff did not pursue them on appeal, as well as the dismissal of Drs. Roe I and II because the complaint had no allegations that those doctors were involved in the rectal examinations or the surgery. Id. at *6 n.4. The court explained that the complaint adequately alleged that the rectal examinations and the surgery were searches within the scope of the Fourth Amendment: The procedures were the direct culmination of a series of searches that began when a metal detector used to scan plaintiff’s person gave a positive reading. The complaint describes the surgery as “medically unnecessary,” and explains circumstances supporting that claim, namely that plaintiff had two normal bowel movements before the searches were conducted, that Dr. Roe III examined him upon arrival at the hospital and found him to be asymptomatic, and that several lab tests ordered by Dr. Roe III were found to be “within normal limits.” Because the procedures described in the complaint were searches for evidence, they are properly analyzed under the framework of the Fourth Amendment. Sanchez, 2009 WL 4936397, at *6. The court found that the rectal examinations were not unreasonable under the Fourth Amendment because “[t]he complaint describe[d] no abusive or otherwise unprofessional conduct on the part of the correctional officers or the doctors during the rectal exams” and did not “set forth any facts to suggest that the rectal examinations of plaintiff’s person by medical professionals were more intrusive than similar exams carried out as a matter of policy by paraprofessionals at other prisons,” and because the plaintiff did “not argue that the digital rectal searches were not related to a legitimate penological need” or “describe any circumstances surrounding the examinations that would [have] ma[de] the searches appear abusive.” Id. at *8. The court concluded that “the rectal searches of plaintiff described in the complaint, carried out by medical professionals in the relatively private, sanitary environment of a hospital, upon suspicion that plaintiff had contraband in his rectum, and with no abusive or humiliating conduct on the part of the law enforcement officers or the doctors, were not unreasonable.” Id. (footnote omitted). As a result, the court affirmed the dismissal of Drs. Roe III and IV because, “according to the complaint, they did not encourage or participate in the surgery.” Id. at *8 n.6. The court determined that the complaint adequately alleged an unreasonable search with respect to the surgery, noting that the complaint stated that the plaintiff “was forced to undergo dangerous, painful, and extremely intrusive abdominal surgery for the purpose of finding a contraband telephone allegedly concealed in his intestines, even though the basis for believing there was a telephone was slight, several tests had indicated the absence of any such object, and additional, far less intrusive testing could easily have obviated any need for such 54

grievous intrusion.” Id. at *9. The court disagreed with the district court’s conclusion that the signed consent for surgery eliminated Fourth Amendment concerns, “reiterat[ing] that the district court was obligated . . . to accept the well-pleaded facts in the complaint as true.” Id. at *10. The court concluded: Plaintiff was a prisoner who had been under constant surveillance for more than a day prior to the surgery, and had been forced to submit to searches, x-rays, and invasive rectal examinations prior to his signing the consent form. He had twice been forced to excrete on a floor in the presence of prison personnel. In light of these intimidating circumstances, plaintiff’s claim that he was pressured and intimidated into signing the consent form is plausible. Sanchez, 2009 WL 4936397, at *10. In addition, the court noted that according to the complaint, the plaintiff gave consent to the surgery only if Dr. Deniz would first conduct another rectal examination, which she did not do. Id. The court stated that “[v]iewing the plaintiff’s well-pleaded factual allegations as true, [it] conclude[d] that ‘society is prepared to recognize’ that a prisoner has a reasonable expectation that he will not be forced to undergo abdominal surgery for the purpose of finding contraband, at least in these circumstances.” Id. at *12. The court noted that the plaintiff “was surgically invaded for the purpose of searching for a cell phone when other, less-invasive means had already indicated the absence of such an object,” “there [wa]s serious doubt whether the surgery was even ‘likely to produce evidence of a crime,’ and by far less drastic measures[,] the existence of the telephone could easily have been excluded.” Id. (internal citation omitted). The court held that “the allegations in the complaint describe[d] an unreasonable search conducted under the color of state law.” Id. (footnote omitted). Having found that the plaintiff had “alleged facts which, if proved, would amount to a violation of his Fourth Amendment rights,” the court turned to “the sufficiency of his claims that the various defendants in this action caused that violation.” Id. After emphasizing that the evaluation of a complaint is a context-specific task, the court concluded that the claims against Cabán, John Doe, and Dr. Deniz had “‘facial plausibility,’” but that the claims against the administrative correctional defendants did not. Sanchez, 2009 WL 4936397, at *12 (citing Iqbal, 129 S. Ct. at 1949). The court noted that under Iqbal, it could “‘begin by identifying pleadings that, because they are no more than conclusions, are not entitled to an assumption of truth.’” Id. at *13 (quoting Iqbal, 129 S. Ct. at 1950). The court stated: Turning to plaintiff’s complaint, we find that it does little more than assert a legal conclusion about the involvement of the administrative correctional defendants in the underlying constitutional violation. Parroting our standard for supervisory liability in the context of Section 1983, the complaint alleges that the administrative defendants were “responsible for ensuring that the correctional officers under their command followed practices and procedures [that] would respect the 55

rights and ensure the bodily integrity of Plaintiff” and that “they failed to do [so] with deliberate indifference and/or reckless disregard of Plaintiff’s federally protected rights.” This is precisely the type of “the-defendant-unlawfully-harmed-me” allegation that the Supreme Court has determined should not be given credence when standing alone. Id. (citing Iqbal, 129 S. Ct. at 1949) (alterations in original). The court continued: The sole additional reference to the administrative correctional defendants’ role in the surgery is the complaint’s statement that “[t]he pushiness exerted by John Doe [upon the doctors] followed . . . the regulations and directives designed by [Puerto Rico’s Secretary of Corrections and Rehabilitation] Pereira and construed and implemented by all of the other Supervisory Defendants.” However, the only regulations described in the complaint are the strip search and x-ray regulations promulgated by Pereira. The deliberate indifference required to establish a supervisory liability/failure to train claim cannot plausibly be inferred from the mere existence of a poorly-implemented strip search or x-ray policy and a bald assertion that the surgery somehow resulted from those policies. We conclude, therefore, that the “complaint has alleged—but it has not ‘show[n]’—‘that the pleader is entitled to relief’” from the administrative correctional defendants. Iqbal, 129 S. Ct. at 1950 (quoting FED . RULE CIV . PROC. 8(a)(2)). Although it did so on different grounds, the district court was correct to dismiss the claims against those defendants. Id. (first, second, and fourth alterations in original) (footnote omitted). The court noted that “[t]he complaint contain[ed] more specific factual allegations about the administrative correctional defendant[s’] supervisory responsibility for the strip and x-ray searches,” but that “[b]ecause [the court] f[ound] there to be no underlying constitutional violation arising from the strip and x-ray searches of plaintiff, the claims for supervisory liability arising from those searches must fail.” Id. at *13 n.9. However, with respect to Cabán and John Doe, the court found the plaintiff’s allegations “sufficient to allow [it] ‘to draw the reasonable inference that [each] defendant [wa]s liable for the misconduct alleged.’” Id. at *14 (quoting Iqbal, 129 S. Ct. at 1949) (second alteration in original). The court explained: Although the claims against John Doe and Cabán also rest on a form of supervisory liability in the sense that neither one actually performed the surgery on plaintiff, those claims do not depend on a showing by plaintiff of a failure to train amounting to deliberate indifference to his constitutional rights. Instead, plaintiff succeeds in pleading that the 56

defendants were liable as “primary violator[s] . . . in the rights-violating incident,” thereby stating a sufficient claim for relief. Sanchez, 2009 WL 4936397, at *14 (citation omitted). The court found the claims against Cabán plausible: Plaintiff’s complaint specifically alleges that Cabán was directly involved in all phases of the search for contraband, and in the ultimate decision to transport plaintiff to the hospital “for a rectal examination and/or a medical procedure to remove the foreign object purportedly lodged in Plaintiff’s rectum.” The complaint goes on to allege that John Doe, acting pursuant to “orders imparted by Cabán,” pressured the doctors to conduct a medical procedure to remove the illusory cell phone from plaintiff’s bowels. Given these allegations, it is a plausible inference that Cabán caused plaintiff to be subjected to the deprivation of his Fourth Amendment rights. See 42 U.S.C. § 1983. Id. at *14 (footnote omitted). Because “an actor is ‘responsible for ‘those consequences attributable to reasonably foreseeable intervening forces, including the acts of third parties,’’” and because the court “read the plaintiff’s complaint to state that Cabán affirmatively set in motion the trip to the hospital for the purpose of removing the alleged contraband from within plaintiff’s body, with a resort by medical professionals to whatever procedure was required to achieve that goal,” the plaintiff had adequately stated a claim against Cabán. Id. (citations omitted). With respect to John Doe, the court held: The complaint alleges that plaintiff arrived at the hospital emergency room “accompanied by John Doe.” The complaint further states that “[a]t all times John Doe insisted that plaintiff was hiding a cellular phone in his rectum and pressured the medical personnel at the emergency room . . . to conduct a medical procedure to remove it.” Thus, the complaint charges John Doe with affirmatively causing the violation of plaintiff’s rights by insisting at the hospital that the doctors perform a medical procedure to remove the suspected contraband from his stomach. Like Cabán, he is alleged to be a primary violator of plaintiff’s Fourth Amendment rights. Id. (alteration in original). The court next considered whether the plaintiff had adequately pleaded state action with respect to Dr. Deniz. (It was undisputed that the correctional defendants were state actors. Id. at *15 n.12.) The plaintiff argued that Dr. Deniz was a state actor under the state compulsion test, which provides that a party is a state actor “‘when the state ‘has exercised coercive power or has provided such significant encouragement, either overt or covert, that the [challenged conduct] must in law be deemed to be that of the State.’’” Id. at *15 (citation 57

omitted). The court concluded that the complaint, “which describe[d] ‘the insistence and pressure exerted by John Doe upon all of the physicians that examined him at the Rio Piedras Medical Center,’ sufficiently allege[d] facts that m[et] the state compulsion test.” Sanchez, 2009 WL 4936397, at *15. The court concluded that Cabán and John Doe were not entitled to qualified immunity because “the surgery described in the complaint and its attendant circumstances were so outrageous, [the court] could comfortably conclude that a reasonable officer would understand that, under the particular facts of this case, the surgery violated plaintiff’s clearly established right to be free from an unreasonable search.” Id. at *16 (citation omitted). The court determined that Dr. Deniz also was not entitled to qualified immunity, explaining that “a reasonable doctor should have understood that the surgery at issue here, performed at the insistence of the correctional authorities and not for plaintiff’s benefit, violated plaintiff’s Fourth Amendment right to be free of unreasonable searches and seizures.” Id. at *18. Finally, because the court found that some of the federal claims should not have been dismissed, it reinstated the supplemental state law claims and remanded. Id. •

Maldonado v. Fontanes, 568 F.3d 263 (1st Cir. 2009). Residents of public housing complexes brought a civil rights suit under § 1983 against the mayor of Barceloneta, Puerto Rico, alleging that their rights had been violated by the seizures and cruel killings of their pet cats and dogs. Id. at 266. The pets were taken in two separate raids after the Municipality of Barceloneta assumed control of the public housing complexes. Id. Prior to that transfer, the plaintiffs had been allowed to keep pets in the housing complexes. Id. A few days before the raids, the residents were told to surrender their pets or face eviction. Id. The plaintiffs alleged that after their pets were seized, the pets were violently killed. Id. The mayor, in his personal capacity, moved to dismiss all damages claims against him on the ground of qualified immunity. Maldonado, 468 F.3d at 266. The district court denied the motion to dismiss, and the mayor took an interlocutory appeal. Id. The First Circuit affirmed the denial of the motion for qualified immunity on the Fourth Amendment and Fourteenth Amendment procedural due process claims, but applied Iqbal to reverse the denial of qualified immunity to the mayor as to the Fourteenth Amendment substantive due process claims. Id. The mayor also moved to dismiss for failure to state a claim, and the district court granted the motion as to some claims and denied it as to the Fourth and Fourteenth Amendment claims and pendent state law claims, but that order was not appealable. Id. at 267 n.1. With respect to the substantive due process claim, the First Circuit stated: “[A]nalyzing the pleadings under Iqbal, we hold that the allegations of the complaint do not allege a sufficient connection between the Mayor and the alleged conscience-shocking behavior—the killing of the seized pets—to state the elements of a substantive due process violation.” Id. at 273. Specifically, the court noted that the mayor’s alleged liability did not involve a policy of the municipality and was not based on the mayor’s personal conduct, but instead was based on the allegation that the mayor promulgated a pet policy for the public housing complexes and was present at and participated in one of the raids. Id. The court concluded that this was insufficient to find the mayor liable because there was nothing conscience-shocking about the 58

pet policy itself, which did not address how prohibited pets were to be removed, and because the complaint alleged no policy authorizing the killing of the pets and no such policy authorized by the mayor. Id. The court noted that the complaint alleged an informal policy from the repeating of the raids, but held that a single repetition was not sufficient to show the mayor’s endorsement of an informal policy, stating that it would “reject such ‘‘naked assertion[s]’ devoid of ‘further factual enhancement.’’” Maldonado, 568 F.3d at 273 n.6 (quoting Iqbal, 129 S. Ct. at 1950 (quoting Twombly, 550 U.S. at 557)). The court also concluded that there was no allegation that the mayor was personally involved in any of the conscience-shocking behavior. Id. at 274. The court noted that while the complaint alleged that the mayor was present at the first raid and observed it, he was “not named as the individual who directly planned, supervised, and executed the raids,” and there was no allegation that he participated in the killings or directed the private contractor who captured the pets. Id. Instead, the complaint only alleged that “he supervised, directly or indirectly, the agencies involved.” Id. The court noted the “generalized” allegation that the mayor “planned, personally participated in, and executed the raids in concert with others,” but stated that “the others are named as the persons with specific administrative responsibilities as to the public housing complexes.” Id. The court concluded that “‘[t]hese bare assertions, much like the pleading of conspiracy in Twombly, amount[ed] to nothing more than a ‘formulaic recitation of the elements’ of a constitutional [tort],’ Iqbal, at 1951 (quoting Twombly, 550 U.S. at 55, 127 S. Ct. 1955), and [we]re insufficient to push the plaintiffs’ claim beyond the pleadings stage.” Id. (second alteration in original). The court continued: “[T]he complaint alleges, without any more details, that the Mayor was among all the other public and private employees ‘snatching pets from owners.’ Although these bare allegations may be ‘consistent with’ a finding of liability against the Mayor for seizure of the same pets, such allegations ‘stop[ ] short of the line between possibility and plausibility of ‘entitlement to relief’ on the larger substantive due process claim.” Maldonado, 568 F.3d at 274 (quoting Iqbal, 129 S. Ct. at 1960 (quoting Twombly, 550 U.S. at 557) (internal quotation marks omitted)) (second alteration in original). The court held that the allegations against the mayor did not show “that his involvement was sufficiently direct to hold him liable for violations of the plaintiffs’ substantive due process rights.” Id. Finally, the court concluded that the allegations did not support a theory of supervisory liability because “supervisory liability lies only where an ‘‘affirmative link’ between the behavior of a subordinate and the action or inaction of his supervisor’ exists such that ‘‘the supervisor’s conduct led inexorably to the constitutional violation,’’” and the allegations did not support finding such a link. See id. at 274–75 (citations omitted). The court also concluded that there was no liability under a theory of deliberate indifference because such liability “‘will be found only if it would be manifest to any reasonable official that his conduct was very likely to violate an individual’s constitutional rights,’” but “the Mayor’s promulgation of a pet policy that was silent as to the manner in which the pets were to be collected and disposed of, coupled with his mere presence at one of the raids, [wa]s insufficient to create the affirmative link necessary for a finding of supervisory liability, even 59

under a theory of deliberate indifference.” Id. at 275 (citation omitted). The court concluded that qualified immunity on the Fourteenth Amendment substantive due process claim was warranted. Id.

Second Circuit •

Schwab v. Smalls, No. 10-221-cv, 2011 WL 3156530 (2d Cir. Jul. 27, 2011) (summary order). Plaintiff Marilyn Schwab, a former school employee, filed a complaint against, among others, two school officials, defendants Robert Smalls and Robert Chakar, under § 1983, alleging that the defendants terminated her employment on the basis of her race in violation of her right to equal protection. The court of appeals summarized the allegations of the plaintiff’s complaint as follows: From 1997 to 2008, Schwab, who is white, worked part-time at Woodlands High School as the Youth Employment Services (“YES”) Coordinator for the defendant Greenburgh Central School District No. 7 (the “District”). Schwab asserts that between June and October of 2008, Smalls, the District Superintendent of Schools (who is African–American), and Chakar, the principal of Woodlands High School (whom the plaintiff terms “Arab–Lebanese,” J.A. 6), “coerce[d] her [into] involuntary retirement,” J.A. 8, by demanding that she provide a report regarding the students’ success securing employment, which data Smalls knew Schwab had never been asked to collect or report. In essence, Schwab alleges that Smalls’s and Chakar’s demands for the data were a pretext for racial discrimination against her. When Schwab failed to provide a report meeting Smalls’s professed expectations, he declined to recommend her reappointment for the 2008–09 school year and named defendant Brown (who is African–American) as Schwab’s replacement. Id. at *1. The district court dismissed Schwab’s complaint, without prejudice, for failure to state a claim. The district court “analyzed Schwab’s complaint under the three-part burden-shifting standard articulated in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802 (1973), concluding that because the plaintiff had not ‘alleged facts giving rise to an inference of [the defendants’] discriminatory intent,’ J.A. 30, she had not met her burden of pleading a plausible claim ‘that any of the [i]ndividual [d]efendants acted unlawfully.’” Id. at *2. The Second Circuit reversed the district court’s dismissal of Schwab’s complaint. The court reasoned as follows: In Swierkiewicz v. Sorema N.A., 534 U.S. 506 (2002), the 60

Supreme Court interpreted the McDonnell Douglas standard to be “an evidentiary standard, not a pleading requirement,” id. at 510; see generally id. The teaching of Swierkiewicz, then, is that a plaintiff alleging employment discrimination need not plead facts establishing a plausible prima facie case of discrimination to survive a motion to dismiss. Questions have been raised, however, as to Swierkiewicz’s continued viability in light of Twombly and Iqbal. Compare Boykin v. KeyCorp, 521 F.3d 202, 212–13 (2d Cir. 2008) (pre Iqbal case concluding that Twombly “affirmed the vitality” of Swierkiewicz ), and Al– Kidd v. Ashcroft, 580 F.3d 949, 974 (9th Cir. 2009) (stating that Twombly “reaffirmed” Swierkiewicz’s “reject[ion of] a fact pleading requirement for Title VII employment discrimination”), rev’d on other grounds sub nom. Ashcroft v. Al–Kidd, 131 S. Ct. 2074 (2011), with Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009) (Swierkiewicz “has been repudiated by both Twombly and Iqbal . . . at least insofar as [Swierkiewicz] concerns pleading requirements and relies on Conley [v. Gibson, 355 U.S. 41 (1957) ].”). We need not address these questions, however, because we conclude that Schwab’s complaint alleges facts sufficient to state a claim of employment discrimination against defendants Smalls and Chakar under both the Swierkiewicz standard and the more demanding McDonnell Douglas-based approach adopted by the district court. The plaintiff’s complaint alleges that (1) she is white and Smalls and Chakar are African–American and “Arab–Lebanese,” respectively; (2) she held her position without incident for many years; . . . (3) her employment was terminated after Smalls refused to recommend her reappointment; and (4) the circumstances of her termination are suggestive of discrimination. With regard to the fourth point—the final element of a prima facie case of discrimination under McDonnell Douglas and the only element that the defendants contest for the purposes of this appeal—the complaint provides the approximate date and substance of the defendants’ meeting at which they agreed to their “plan”; alleges that their aim was to force Schwab out of her position so that they could appoint a less qualified African-American woman in her place; and details the allegedly pretextual requests for data that Schwab had never been asked or required to maintain. We think this satisfies Schwab’s burden at this early stage of the litigation under either of the two arguably applicable pleading standards. Id. at *2.

61



Ideal Steel Supply Corp. v. Anza, 652 F.3d 310, 2011 WL 2557618 (2d Cir. Jun. 28, 2011). Plaintiff Ideal Steel Supply Corp., a retailer selling steel products, bought a complaint under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1962–68, against its competitor, the National Steel Supply Co., owned by Joseph and Vincent Anza. The court of appeals summarized the factual background of the plaintiff’s complaint as follows: Ideal operates a retail business in the New York City boroughs of Queens and the Bronx, selling steel mill products and related hardware and services to professional ironworkers, small steel fabricators, and do-it-yourself homeowners in the New York, New Jersey, and Connecticut area. Defendant National Steel Supply, Inc., is owned by defendants Joseph and Vincent Anza (collectively “the Anzas”) and is Ideal’s competitor. National operates two retail outlets, one in Queens and one in the Bronx, each located a few minutes’ drive from the Ideal store in that borough. Ideal and National sell substantially the same products to essentially the same customer base. Ideal commenced the present action in 2002, principally-asserting two civil RICO claims. First, it asserted a claim against the Anzas, alleging that they had conducted, or participated in the conduct of, the affairs of an interstate-business enterprise through a pattern of racketeering activity, in violation of 18 U.S.C. § 1962(c). Ideal alleged that, since at least 1998, National at its Queens store, at the direction of the Anzas, had engaged in a pattern of racketeering activity by (a) not charging sales tax to any customers who paid for their purchases in cash (the “cash-no-tax” scheme), thereby violating state laws that required merchants to charge and collect such taxes, and (b) then submitting, by mail and wire, fraudulent sales and income tax reports and returns that concealed National’s cash sales and misrepresented its total taxable sales, thereby evading substantial sums in income tax. Ideal alleged that by engaging in the cash-no-tax scheme through a pattern of mail and wire frauds in violation of § 1962(c), National injured Ideal’s business by luring away customers who chose to buy from National simply in order to save more than eight percent on their purchases by not paying the required sales tax. Second, Ideal alleged that in 1999 and 2000, the Anzas and National, in violation of § 1962(a), invested funds derived from National’s Queens store’s cash-notax scheme to establish National's store in the Bronx. The opening of that facility caused Ideal to lose a substantial amount of business at its Bronx store. Id. at *1–2. 62

In other words, Ideal alleged claims under two different provisions of RICO—section 1962(c) and section 1962(a). Section 1962(c) makes it unlawful for any person employed by or associated with an enterprise “to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.” Section 1962(a) makes it “unlawful for any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity . . . to use or invest, directly or indirectly, any part of such income, or the proceeds of such income, in acquisition of any interest in, or the establishment or operation of, any enterprise . . . .” Years of litigation already had culminated in a visit to the Supreme Court, which ruled in Ideal Steel Supply Corp. v. Anza, 547 U.S. 451 (2006), that the plaintiff’s RICO claim under section 1962(c) was untenable because plaintiff did not allege facts showing, under the Court’s analysis of the RICO statute, that “the alleged violation led directly to the plaintiff’s injuries.” Id. at 460–61. Because the Second Circuit’s prior ruling had not dealt with the plaintiff’s section 1962(a) claim, however, the Supreme Court remanded the case for further consideration of the section 1962(a) claim. The district court dismissed the plaintiff’s section 1962(a) claim on the ground that the complaint failed to allege facts sufficient to show that the defendants’ alleged racketeering activity was the proximate cause of injury to the plaintiff. According to the court of appeals, the district court ruled as follows: The Complaint again described the cash-no-tax scheme conducted at National’s Queens facility in the late 1990s and early 2000s, and the attendant mail and wire frauds that allowed defendants to retain unreported profits and avoid paying proper taxes. It alleged that defendants used the concealed unlawful profits and tax savings to finance the opening of the National store in the Bronx to compete with Ideal. According to the Complaint and materials developed in discovery, for 1999 and 2000 National filed tax returns reporting total income of $145,118. Following the commencement of the present lawsuit, however, National filed amended tax returns showing that its total income for those years had instead been nearly $1.7 million, and that for the period 1998–2003 National had underreported its taxable income by a total of $4.3 million, allowing it to underpay its taxes by approximately $1.7 million. Discovery and other proceedings revealed that the Anzas had created a corporation called Easton Development Corporation (“Easton Corporation”) to purchase property in 1999 to enable National to open its store in the Bronx, and that the cash portion of the purchase price was $500,000, which was paid by National. (See Deposition of Joseph Anza at 34; Declaration of Vincent Anza dated December 12, 2008 (“Anza Decl.”), ¶¶ 10, 11; Deposition of Vincent Anza (“Anza Dep.”) at 188.) National began operating its Bronx store in 2000. (See Anza Decl. ¶ 4.) Defendants 63

stated that “National expended approximately $850,000 to open its Bronx facility” (id. ¶ 5); a report prepared by accountants retained by Ideal concluded that National had spent considerably more. Ideal asserted that prior to 2000 there were no companies capable—in either size or breadth of offerings—of competing with Ideal in the Bronx, and that in 1998–2000, Ideal consistently had annual sales in the range of $4 million–$4.6 million. It alleged that defendants’ opening of the National store in the Bronx injured Ideal in two ways. First, simply by being there and offering products and services comparable to those offered by Ideal, the new National store took customers from Ideal, causing Ideal’s annual sales in 2001–2002 to drop by about one-third, to $2.7 million–$2.9 million. Second, Ideal asserts that at the Bronx store National engaged in the same cash-no-tax scheme that it conducted in the Queens store, thus allowing National to lure customers with the lower prices financed by the prior tax frauds. Defendants moved for judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c), or alternatively for summary judgment pursuant to Fed.R.Civ.P. 56, dismissing the Complaint on the ground that Ideal could not show that its lost sales were proximately caused by the mere creation of National’s Bronx facility through the alleged investment of the proceeds of racketeering activity. In Ideal Steel Supply Corp. v. Anza, No. 02 Civ. 4788, 2009 WL 1883272 (S.D.N.Y. June 30, 2009) (“ Ideal IV ”), the district court found defendants’ position persuasive, and it granted judgment on the pleadings and, alternatively, summary judgment. First, the court found that Ideal’s Complaint failed to meet the standard set by Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 167 L.Ed.2d 929 (2007) (“Twombly”), which requires a plaintiff to plead “‘more than labels and conclusions, and a formulaic recitation of the elements of a cause of action,’” Ideal IV, 2009 WL 1883272, at *3 (quoting Twombly, 550 U.S. at 555). The district court found that “[d]efendants argue persuasively that Plaintiff fails to plead facts showing that Ideal’s lost sales were proximately caused by the mere creation of National’s Bronx facility through the alleged investment of an unspecified amount of RICO proceeds.” Ideal IV, 2009 WL 1883272, at *4 (internal quotation marks omitted). It also found the Complaint deficient . . . in that it does not allege facts explaining how Defendants’ investment of purported racketeering 64

income to establish and operate its Bronx business location proximately caused Ideal to lose sales, profits, and market share. . . . Plaintiff’s allegations that “Defendants substantially decreased Ideal’s sales, profits, and local market share, and eliminated Ideal’s dominant market position, by using racketeering proceeds to acquire, establish, and operate their Bronx business operation,” . . . are little more than “labels and conclusions,” Twombly, 550 U.S. at 555, and do not show how Defendants[’] “alleged violation [of RICO] led directly to [Ideal’s] injuries,” [Ideal] III, 547 U.S. at 461. They are insufficient to state a claim under Section 1962(a). Ideal IV, 2009 WL 1883272, at *4 (emphases added). In the alternative, the district court granted defendants’ motion for summary judgment. The court noted that the Supreme Court in Ideal III had found that proximate cause was lacking with respect to Ideal’s 1962(c) claim because “‘it would require a complex assessment to establish what portion of Ideal’s lost sales were the product of National’s [conduct]’ because ‘[b]usinesses lose and gain customers for many reasons,’” Ideal IV, 2009 WL 1883272, at *6 (quoting Ideal III, 547 U.S. at 459). The district court stated that “[t]his is no less true here” with respect to the 1962(a) claim. Ideal IV, 2009 WL 1883272, at *6. Plaintiff’s Section 1962(a) RICO claim raises the same concerns in view of Plaintiff’s assertions that its injuries include “a permanent loss of sales, profits, and market share,” . . . That is, it would be purely speculative . . . for this Court to conclude that Ideal’s alleged injuries resulted from Defendants’ conduct as opposed to other factors . . . . “The element of proximate causation . . . is meant to prevent these types of intricate, uncertain inquiries from overrunning RICO litigation.” [Ideal] III, 547 U.S. at 460. Ideal IV, 2009 WL 1883272, at *6. The court found that proximate cause was lacking because “there were intervening factors that may have caused Ideal’s alleged lost sales, profits, and diminution in market share.” Id. at *5. 65

For one thing, Ideal’s principal, Giacomo Brancato, testified that Ideal’s Bronx location had “thousands of customers that buy thousands of products for many different uses.” . . . The decisions of individual purchasers, i.e., in this case presumably not to buy steel products from Ideal, have been held to constitute an independent intervening act between the alleged RICO violations and the alleged injuries. Id. (emphases added). The court also found that “Ideal’s Bronx operation had several competitors,” id. at *5 n.2, that Ideal “received and accepted” inferior products, id. at *6, and that Ideal made various business decisions such as deciding whether or not to lower its prices to match those of National, see id., all of which the court held constituted intervening factors preventing Ideal from establishing proximate cause. Accordingly, the district court dismissed Ideal’s claim under § 1962(a). Id. at *5–7. The Second Circuit panel, by a 2-1 vote, reversed the district court’s dismissal of the plaintiff’s claim under section 1962(a). The court reasoned: [T]he district court dismissed the Complaint pursuant to Rule 12(c) on the grounds that it did not specify the amount of RICO proceeds used to create National’s Bronx facility, Ideal IV, 2009 WL 1883272, at *4, and “d[id] not allege facts explaining how Defendants’ investment of purported racketeering income to establish and operate its Bronx business location proximately caused Ideal to lose sales, profits, and market share,” id.; and that Ideal’s “allegations that Defendants substantially decreased Ideal’s sales, profits, and local market share, and eliminated Ideal’s dominant market position, by using racketeering proceeds to acquire, establish, and operate their Bronx business operation, . . . [we]re little more than ‘labels and conclusions,’” id. (quoting Twombly, 550 U.S. at 555 (other internal quotation marks omitted)), or “‘a formulaic recitation of the elements of a cause of action,’” id. at *3 (quoting Twombly, 550 U.S. at 555). We disagree with the district court’s characterizations and its application of Twombly. First, the Twombly Court noted that Fed.R.Civ.P. 8(a)(2) “requires only ‘a short and plain statement of the claim showing that 66

the pleader is entitled to relief,’ in order to give the defendant fair notice of what the . . . claim is and the grounds upon which it rests,” Twombly, 550 U.S. at 555 (other internal quotation marks omitted); see also Swierkiewicz v. Sorema N.A., 534 U.S. 506, 508, 512, 122 S. Ct. 992, 152 L.Ed.2d 1 (2002) (to satisfy Rule 8(a)(2), a plaintiff who alleges facts that provide fair notice of his claim need not also allege “specific facts establishing a prima facie case”). The Twombly Court, while stating that mere “labels and conclusions” or “formulaic recitation[s] of the elements of a cause of action will not do,” stated that “a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations,” but only “[f]actual allegations [that are] enough to raise a right to relief above the speculative level,” 550 U.S. at 555, i.e., enough to make the claim “plausible,” id. at 570; see Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (“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 Twombly Court stated that “[a]sking for plausible grounds . . . does not impose a probability requirement at the pleading stage; it simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of illegal[ity].” 550 U.S. at 556. The district court in Ideal IV demanded of Ideal a pleading at a level of specificity that was not justified by Twombly. The Complaint’s “allegations that Defendants substantially decreased Ideal’s sales, profits, and local market share, and eliminated Ideal’s dominant market position, by using racketeering proceeds to acquire, establish, and operate their Bronx business operation,” Ideal IV, 2009 WL 1883272, at *4 (internal quotation marks omitted), were not properly characterized as “labels,” id., nor could the allegations—as they were set forth in the Complaint—be considered a mere formulaic repetition of the statutory language or considered so conclusory as to lack facial plausibility. The Complaint alleged, inter alia, that the income of National, as a Subchapter S corporation under the Internal Revenue Code, passed through to the Anzas as its sole shareholders (see Complaint ¶ 26); that from at least 1996 to the spring of 2004, National and the Anzas filed fraudulent tax returns understating the amount of their taxable income and enabling them to save and amass substantial funds (see, e.g., id. ¶¶ 28, 30, 61); that after the commencement of this lawsuit in 2002, defendants admitted the falsity of those income tax returns by filing amended returns showing that they had falsely underreported National’s income to tax authorities for several years (see id. ¶ 29); that defendants’ false tax returns from 1996 to spring 2004 were filed by mail and fax, violated federal laws 67

against mail and wire fraud, and constituted a pattern of racketeering activity in violation of RICO (see id. ¶¶ 34–35, 45, 61); that for each of the years 1999 and 2000, defendants reported taxable income of less than $100,000 (see id. ¶ 38); that the purchase and renovation expenses for National’s Bronx facility were capital expenses that could not be funded with pre-tax dollars (see id. ¶ 39); that the expense of purchasing, renovating, equipping, stocking, and opening National’s Bronx facility was estimated by Ideal to be in excess of $1 million (see id. ¶ 37); and that in 1999–2000, defendants fraudulently underreported their income by more than $1 million (see id. ¶ 40). The Complaint alleged that before National opened its Bronx facility, Ideal had a dominant market position there, with no serious competitors, as no other Bronx vendors offered as comprehensive an array of goods and services as Ideal (see id. ¶ 11); that National’s Bronx facility, opened in the summer of 2000 a mere eight minutes’ drive from Ideal’s facility, began to offer an array of goods and services similar to those offered by Ideal (see id. ¶¶ 9–15); and that the opening of National’s Bronx facility caused a substantial decrease in Ideal’s sales, profits, and local market share (see id. ¶ 43). We see nothing implausible in the allegations that a plaintiff business entity that had once enjoyed a dominant market position, with no serious competition from other, more limited, entities, lost business when a large competitor comparable in size and offerings to the plaintiff opened nearby. Second, although the standards for dismissal pursuant to Rule 12(c) are the same as for a dismissal pursuant to Rule 12(b)(6), see, e.g., Rivera v. Heyman, 157 F.3d 101, 103 (2d Cir. 1998), and the standard set by Twombly for evaluation of the viability of the pleading is the same under each Rule, see, e.g., Hayden v. Paterson, 594 F.3d 150, 160–61 (2d Cir. 2010), we view the district court’s focus solely on the allegations of the Complaint, given the posture of this case, as a misapplication of Twombly. Twombly is meant to allow the parties and the court to avoid the expense of discovery and other pretrial motion practice when the complaint states no plausible claim on which relief can be granted: [W]hen the allegations in a complaint, however true, could not raise a claim of entitlement to relief, this basic deficiency should . . . be exposed at the point of minimum expenditure of time and money by the parties and the court. Twombly, 550 U.S. at 558 (internal quotation marks omitted) 68

(emphasis ours). In the present case, the point of minimum expense had long since been passed. The case had been addressed at each of the three levels of the federal judicial system; and, by the time of Ideal IV, discovery had been completed. To be sure, whether the complaint states a claim upon which relief can be granted is a question of law, and that question may be raised even as late as at the trial of the action, see Fed.R.Civ.P. 12(h)(2). But pleadings often may be amended. Prior to trial, after the time to amend as of right has passed, “[t]he court should freely give leave [to amend] when justice so requires,” Fed.R.Civ.P. 15(a)(2); see, e.g., Rachman Bag Co. v. Liberty Mutual Insurance Co., 46 F.3d 230, 234–35 (2d Cir. 1995); see also Fed.R.Civ.P. 15(b)(1) (even at trial, “[t]he court should freely permit an amendment” to conform the pleadings to the proof, unless the objecting party can show prejudice). Indeed, the availability of “amendment of pleadings” was one of the reasons for Congress’s expectation that the private right of action for RICO violations would be an effective tool. S.Rep. No. 91–517, at 82. In light of the fact that discovery in this case had been completed prior to the decision in Ideal IV, we do not regard Twombly as requiring that defendants’ Rule 12(c) motion be granted if evidence that had already been produced during discovery would fill the perceived gaps in the Complaint. For example, although the district court found persuasive the defendants’ argument that the Complaint did not specify how much RICO income was invested to create the National facility in the Bronx, materials in the record showed that the purchase price of the property was $2.5 million; that of that sum, $500,000 in cash was paid at the closing, and that that $500,000 was provided by National (see, e.g., Anza Dep. at 186–87, 435); that defendants admit that opening the Bronx store cost at least $850,000 (see, e.g., Anza Decl. ¶ 5); and that Ideal’s expert accountant estimated that the total cost exceeded $1 million. To the extent that the district court viewed as conclusory the Complaint’s allegations that defendants had filed income tax returns that substantially understated their taxable income, the court should have taken into account the tax returns in the record—both those that were originally filed by National showing less than $73,000 in taxable income for each of the years 1999 and 2000, and the amended returns showing taxable income for those two years totaling nearly $1.7 million, as well as the deposition testimony of an accountant for National that those and other amended returns filed for National showed that for 1998–2003 National had unreported income totaling approximately $4.3 million (see Deposition of Jay L. Ofsink at 40). And to the extent that the court viewed the Complaint’s allegation that Ideal’s Bronx operation lost 69

sales after the advent of National as conclusory, it should have taken into consideration, inter alia, the deposition testimony of Ideal’s sole shareholder, Giacomo Brancato, who stated that in each of the years 1998, 1999, and 2000, Ideal had sales in the range of $4 million—$4.6 million (Deposition of Giacomo Brancato (“Brancato Dep.”) at 282); and that after National opened its Bronx facility in the summer of 2000, Ideal’s sales in 2001 and 2002 dropped by about one-third, to $2.7 million–$2.9 million (see id.). The record also permits the inference that the sales lost by Ideal were made by National. National’s tax returns for 2001 and 2002 showed that its gross sales for those years, the first two full years of its Bronx facility’s operation, were, respectively, some $1.2 million and $2.3 million more than its gross sales during the last year before the Bronx facility was opened. Although the returns do not provide figures for National’s Queens and Bronx facilities separately, it is surely inferable that at least a substantial portion of its 24–47% increase in sales was attributable to the Bronx facility. In these circumstances, assuming the truth of the Complaint’s allegations and of evidence in the record supporting those allegations, if defendants’ investment of the proceeds of their alleged pattern of mail and wire frauds has not sufficiently directly harmed Ideal to meet the standard of proximate cause, we find it difficult to envision anyone who could show injury proximately caused by that investment—or to fathom to whom Congress meant to grant a private right of action under subsection (a). We conclude that the district court erred in dismissing Ideal’s Complaint pursuant to Rule 12(c). Id. at *11–14 (emphasis added). Judge Cabranes dissented from the panel’s ruling, but his dissent rested on issues of the analysis of proximate causation for purposes of RICO section 1962(a), and not on issues regarding the proper interpretation of Twombly and Iqbal. •

In re Lehman Bros. Mortg.-Backed Sec. Litig., 650 F.3d 167, 2011 WL 1778726 (2d Cir. May 11, 2011). Plaintiffs, a number of union and other pension trusts, filed a class action complaint seeking to hold defendant McGraw Hill, through its subsidiaries Standard and Poor’s, Moody’s Investors Service, and Fitch, Inc. (the “Rating Agencies”), liable as underwriters or “control persons” for misstatements or omissions in securities offering documents, in violation of sections 11 and 15 of the Securities Act. The plaintiffs alleged that the Rating Agencies were “underwriters” as defined by the statute because they helped structure the securities in order to achieve desired ratings. Plaintiffs also alleged that the Rating Agencies provided advice and direction about how to structure the securities transactions to the primary violators of the securities laws, making the Rating Agencies also 70

liable as “control persons” under the statute. The court of appeals summarized the details of the plaintiffs’ allegations as follows: A. The Securities Offerings 1. Mortgage Pass–Through Certificates In the period from 2005 to 2007, plaintiffs and similarly situated persons purchased approximately $155 billion worth of mortgage pass-through certificates registered with the Securities and Exchange Commission (“SEC”) entitling them to distributions from underlying pools of mortgages. To create such certificates, a “sponsor” originates or acquires mortgages. Next, the loans are sold to a “depositor” that securitizes the loans—meaning, in effect, that the depositor secures the rights to cash flows from the loans so that those rights can be sold to investors. The loans are then placed in issuing trusts, which collect the principal and interest payments made by the individual mortgage borrowers and, in turn, pay out distributions to the purchasers of the mortgage pass-through certificates. Finally, different risk levels, or “tranches” of risk, are created by using various types of credit enhancement, such as subordinating lower tranches to absorb losses first, overcollateralizing the loan pools in excess of the bond amount, or creating an excess spread fund to cover the difference between the interest collected from borrowers and amounts owed to investors. Each tranche is denominated by a credit rating—in these cases issued by one or more Rating Agencies—determined by the seniority level and the expected loss of the loan pool. Finally, the depositor sells the certificates to underwriters, who then offer them to investors. Many of the certificates here at issue received AAA ratings, the “safest” tranche supposedly least likely to default. Investment-grade ratings were crucial to the certificates’ sale because many institutional investors must purchase investment-grade securities. Moreover, some senior certificates’ sales were conditioned on the receipt of AAA ratings. 2. Union Plaintiffs’ Purchase of Certificates The Union Plaintiffs and other similarly situated persons bought certificates in ninety-four offerings between September 29, 2005, and July 28, 2007, that were sponsored by Lehman Brothers Holdings, Inc. (“LBHI”) and underwritten by Lehman Brothers, Inc., 71

with Structured Asset Securities Corporation (“SASCo”), a wholly-owned LBHI entity, acting as depositor (collectively, “Lehman”). The certificates were issued pursuant to one of two registration statements, initially filed with the SEC on September 16, 2005, and August 8, 2006, respectively. S & P and Moody’s rated the securities. 3. Wyoming’s Purchase of Certificates Wyoming and similarly situated persons purchased certificates sponsored by IndyMac Bank, with IndyMac MBS, Inc. acting as depositor. Many large investment banks underwrote the offerings, which were issued pursuant to three registration statements first filed on August 15, 2005, February 24, 2006, and February 14, 2007, respectively. S & P, Moody’s, and Fitch rated Wyoming’s certificates. 4. Vaszurele’s Purchase of Certificates Vaszurele and similarly situated plaintiffs acquired senior mortgage pass-through certificates, issued on June 28, 2006, by the Residential Asset Securitization Trust 2006–A8 (“RAST”). IndyMac Bank sponsored Vaszurele’s certificates, with IndyMac MBS, Inc. acting as depositor and Credit Suisse Securities (USA) Inc. as lead underwriter. S & P and Moody’s rated the certificates acquired by Vaszurele, which are traceable to a registration statement initially filed on February 24, 2006. B. Rating Agencies’ Alleged Role in the Offerings In the transactions described above, plaintiffs allege that the Rating Agencies, which ordinarily serve as passive evaluators of credit risk, exceeded their traditional roles by actively aiding in the structuring and securitization process. Specifically, plaintiffs allege that issuing banks engaged particular Rating Agencies through a “ratings shopping” process, whereby the Rating Agencies reviewed loan-level data for a mortgage pool and provided preliminary ratings. Union Compl. ¶ 66; Wyoming Compl. ¶ 200. The banks then negotiated with the Rating Agencies regarding the amount of credit enhancements and percentage of AAA certificates for each mortgage pool. By thus “play[ing] the agencies off one another” and choosing the agency offering the highest percentage of AAA certificates with the least amount of credit enhancements, the banks purportedly “engender[ed] a race to the bottom in terms of rating quality.” Union Compl. ¶ 170. 72

During and after this negotiation, the Rating Agencies engaged in an “iterative process” with the banks, providing “feedback” on which combinations of loans and credit enhancements would generate particular ratings. Id. ¶ 177 (internal quotation marks and emphasis omitted); Wyoming Compl. ¶ 91 (internal quotation marks and emphasis omitted); Vaszurele Compl. ¶ 38 (internal quotation marks and emphasis omitted). In the course of this dialogue, issuers adjusted the certificates’ structures until they achieved desired ratings. As one Moody’s officer described the process: “You start with a rating and build a deal around a rating.” Union Compl. ¶ 176 (internal quotation marks and emphasis omitted); Wyoming Compl. ¶ 90 (internal quotation marks omitted); Vaszurele Compl. ¶ 38 (internal quotation marks and emphasis omitted). Plaintiffs submit that the Rating Agencies thus helped determine the composition of loan pools, the certificates’ structures, and the amount and kinds of credit enhancement for particular tranches. Toward this end, the Rating Agencies allegedly provided their modeling tools to the banks’ traders to help them pre-determine the combinations of credit enhancements and loans needed to achieve specific ratings. S & P’s LEVELS or SPIRES models, and Moody’s M–3 model, analyzed fifty to eighty different loan characteristics in estimating the number and extent of likely loan defaults. Based on these factors, the models calculated the amount of credit enhancement required for a specific pool of loans to receive a AAA rating. According to the Union Plaintiffs, LBHI used the modeling data in determining bidding prices for loans. Moody’s and S & P also received loan-level files and advised Lehman on appropriate loan prices. The Rating Agencies, however, had purportedly failed to update their models to reflect accurately the higher risks of certain underlying loans, such as subprime, interest-only, and negative amortization mortgages. The models also failed to account for deteriorating loan origination standards. As a result, plaintiffs complain that the certificates’ AAA or investment-grade ratings did not accurately represent their risk. Id. at *1–3 (footnote omitted). The district court granted the defendants’ motion to dismiss. The district court found that the plaintiffs did not allege facts showing that the Rating Agencies fell within the statutory definition of “underwriter” when they participated in creating the securities, since they did not purchase the securities for resale. The district court also found that the plaintiffs did not allege facts showing that the Rating Agencies’ power to influence or persuade the primary 73

violators constituted the requisite “practical ability to direct the actions of people who issue or sell securities.” Id. at 4. The Second Circuit affirmed the district court’s dismissal of the complaint. The court reasoned as follows: Applying the underwriter definition on de novo review, we conclude that plaintiffs failed to allege facts sufficient to state a plausible § 11 claim against the Rating Agency defendants. The complaints contain extensive descriptions of the Rating Agencies’ activities in structuring the certificate transactions, dictating the kinds and quantity of loans or credit enhancements needed for desired ratings, and providing modeling tools to traders to pre-structure loan pools. Plaintiffs submit that these allegations demonstrate that the Rating Agencies played a necessary role in the securities’ distribution because (1) their ratings translated opaque financial products into understandable risk levels, (2) institutional investors were required to buy investment-grade securities, and (3) offerings were conditioned on senior tranches receiving AAA ratings. We disagree. Like all of the district courts to have considered similar claims, we conclude that structuring or creating securities does not constitute the requisite participation in underwriting. As the district court in this case explained, even assuming, as we must, that the Rating Agencies “had a good deal to do with the composition and characteristics of the pools of mortgage loans and the credit enhancements of the [c]ertificates that ultimately were sold,” plaintiffs failed to allege that defendants “participated in the relevant” undertaking: that of purchasing securities from the issuer with a view towards distribution, or selling or offering securities for the issuer in connection with a distribution. In re Lehman Bros. Sec. & ERISA Litig., 681 F. Supp. 2d at 499; see also In re Wells Fargo Mortg.-Backed Certificates Litig., 712 F. Supp. 2d at 968–69 (dismissing § 11 claims when plaintiffs failed to allege rating agencies undertook “activities related to the [securities’] distribution or sale”); New Jersey Carpenters Vacation Fund v. Royal Bank of Scot. Grp., PLC, 720 F. Supp. 2d at 263–64 (concluding that playing “significant role in the creation” of certificates does not constitute requisite “participat[ion] in the sale or distribution” of securities). The Rating Agencies’ efforts in creating and structuring certificates occurred during the initial stages of securitization, not during efforts to disperse certificates to investors. See New Jersey Carpenters Vacation Fund v. Royal Bank of Scot. Grp., PLC, 720 F. Supp. 2d at 263–64 (noting that 74

certificate creation occurred during “securitization process” rather than during marketing, distribution, or sale (internal quotation marks omitted)). The fact that the market needed ratings to understand structured financial products or that particular ratings were essential to the certificates’ eventual sale does not change the analysis. While it is certainly true that some investors will refrain from buying securities that do not bear a AAA rating, and that some banks will decline to assume the risk of pursuing a public offering unless a security receives a high credit rating, plaintiffs, once again, fail to demonstrate that the Rating Agencies were involved in a statutorily listed distributional activity. The rating issued by a Rating Agency speaks merely to the Agency’s opinion of the creditworthiness of a particular security. In other words, it is the sort of expert opinion classically evaluated under the “expert” provision of § 11, not under the “underwriter” provision. See 15 U.S.C. § 77k(a)(4) (providing for “expert” liability against “accountant[s], engineer[s], or appraiser[s], or any person whose profession gives authority to a statement made by him, who has with his consent been named as having prepared or certified any part of the registration statement.”); see also id. § 77g(a) (providing requirements by which “consent” must be established for purposes of § 77k(a)(4)). Indeed, each offering document explained that the assigned credit rating was “not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time.” See, e.g., Defs.’ Br. at 7. .... In sum, because plaintiffs failed to plead facts sufficient to bring the Rating Agencies within the statutory definition of underwriter, their § 11 claims against these defendants were properly dismissed. C. Section 15 Control Person Claims The Union Plaintiffs and Wyoming also appeal the district court’s dismissal of their § 15 control person claims against the Rating Agencies. Section 15 imposes joint and several liability on “[e]very person who, by or through stock ownership, agency, or otherwise . . . controls any person liable under” § 11. 15 U.S.C. § 77o(a). To establish § 15 liability, a plaintiff must show a “primary violation” of 75

§ 11 and control of the primary violator by defendants. ECA & Local 134 IBEW Joint Pension Trust v. JP Morgan Chase Co., 553 F.3d 187, 206–07 (2d Cir. 2009); see also In re Morgan Stanley Info. Fund Sec. Litig., 592 F.3d at 358. Because it is undisputed that plaintiffs adequately pleaded primary § 11 violations by the certificates’ issuers or depositors, the only question on appeal is whether the facts alleged permit an inference that the Rating Agencies controlled the primary violators. Although our Court has not yet discussed “control” for § 15 purposes, in the context of claims under § 20(a) of the 1934 Act against persons controlling primary § 10(b) violators, we have defined “control” as “‘the power to direct or cause the direction of the management and policies of [the primary violators], whether through the ownership of voting securities, by contract, or otherwise.’” SEC v. First Jersey Sec., Inc., 101 F.3d 1450, 1472–73 (2d Cir. 1996) (quoting 17 C.F.R. § 240.12b–2). Because § 15 and § 20(a) are roughly parallel control person provisions under the 1933 and 1934 Acts, respectively, we here adopt the quoted First Jersey definition of control for § 15 claims. See 15 U.S.C. § 77o(a) (imposing liability on persons who “control[ ] any person liable” under § § 11 or 12); id. § 78t (imposing liability on persons who “control[ ] any person liable” under § 10(b)); In re Refco, Inc. Sec. Litig., 503 F. Supp .2d 611, 660 (S.D.N.Y. 2007) (noting that § 20(a) and § 15 “are parallel provisions”). The parties dispute whether we should further adopt the requirement that § 20 plaintiffs demonstrate “culpable participation” by the alleged controlling person for purposes of § 15. See SEC v. First Jersey Sec., Inc., 101 F.3d at 1472 (requiring § 20 plaintiff to show that “controlling person was in some meaningful sense a culpable participant in the fraud perpetrated by the controlled person” (internal quotation marks and brackets omitted)). That issue has divided district courts in this Circuit. Compare P. Stolz Family P’ship, L.P. v. Daum, 166 F. Supp. 2d 871, 873 (S.D.N.Y. 2001) (requiring culpable participation), reversed in part on other grounds by 355 F.3d 92 (2d Cir. 2004), with In re Refco, Inc. Sec. Litig., 503 F. Supp. 2d at 660–61 & n.43 (noting that despite similarity between § 15 and § 20(a), “culpable participation” requirement applies only to § 20(a) because § 20(a) excepts from liability those acting “in good faith ” who did not directly or indirectly induce violation (emphasis in original)); In re CINAR Corp. Sec. Litig., 186 F. Supp. 2d 279, 309–10 (E.D.N.Y. 2002) (declining to require culpable participation because § 11, unlike § 10(b), does “not contain an intent element”). We need 76

not decide here whether “culpable participation” is a necessary element for § 15 liability because plaintiffs’ § 15 claims fail in any event for inadequate pleading of the undisputed element of control. Plaintiffs contend that the district court erroneously applied a heightened pleading standard by requiring their complaints to support an inference “that the decision making power lay entirely with the Rating Agencies.” In re Lehman Bros. Sec. & ERISA Litig., 681 F. Supp. 2d at 501 (emphasis added). Unlike plaintiffs, we do not understand the district court’s passing reference to “entire” control to require a pleading that defendants controlled the primary violators to the exclusion of all others. The district court correctly observed that § 15 imposes liability on “‘[e]very person’ “who controls a primary violator. Id. at 500 (quoting 15 U.S.C. § 77o) (emphasis added). Moreover, the district court analyzed explicitly whether plaintiffs pleaded “allegations . . . sufficient to justify a conclusion that the Rating Agencies controlled others who violated [§ 11].” Id. In any event, after de novo review we conclude that plaintiffs’ allegations are insufficient. Wyoming alleges that defendants “actively collaborated” with the depositors in creating the transactions by providing “direct input,” “advisory opinions,” and “guidance” on which loans or structures would achieve desired ratings. Wyoming Compl. ¶¶ 47–49, 64, 89, 97. The Union Plaintiffs similarly allege that the Rating Agencies influenced the primary violators by providing advice and feedback on appropriate loan prices and structures, thereby “largely determin[ing] the amount and kind of credit enhancement” that would result in specific ratings. Union Compl. ¶¶ 173–75, 178. At most, these allegations suggest that the Rating Agencies provided advice and “strategic direction,” Wyoming Br. at 32, on how to structure transactions to achieve particular ratings. Such purported involvement in transaction-level decisions falls far short of showing a power to direct the primary violators’ “management and policies.” Moreover, allegations of advice, feedback, and guidance fail to raise a reasonable inference that the Rating Agencies had the power to direct, rather than merely inform, the banks’ ultimate structuring decisions. Put another way, providing advice that the banks chose to follow does not suggest control. See Harrison v. Dean Witter Reynolds, Inc., 974 F.2d 873, 877 (7th Cir. 1992) ( “[T]he ability to persuade and give counsel is not the same thing as ‘control’ . . . .” (internal quotation marks omitted)); New Jersey Carpenters Health 77

Fund v. Residential Capital, LLC, No. 08 CV 8781, 2010 WL 1257528, at *7 (S.D.N.Y. Mar. 31, 2010) (dismissing control person claim against underwriters because ability to persuade issuers insufficient). Indeed, plaintiffs’ “ratings shopping” allegations undermine their control theory. Specifically, plaintiffs allege that the banks wielded “incredible leverage over,” Wyoming Compl. ¶ 195, and “pressured” the Rating Agencies, Union Compl. ¶ 168, by awarding business to the agency providing the highest percentage of AAA ratings with the lowest levels of credit enhancement. Such allegations might suggest that the primary violators had power over the Rating Agencies’ policies by “engendering a race to the bottom in terms of rating quality.” Wyoming Compl. ¶ 170. But they do not support any inference that the Rating Agencies had the power to direct the primary violators’ policies. Nor are we persuaded by the Union Plaintiffs’ argument that they adequately alleged control by stating that SASCo was a “dummy corporation” with the sole purpose of securitizing transactions. The complaint does not, in fact, allege that SASCo was a “dummy corporation,” see Manning v. Utils. Mut. Ins. Co., 254 F.3d 387, 401 (2d Cir. 2001) (noting that allegations must be contained in complaint to defeat motion to dismiss), nor does it plead facts suggesting that SASCo was a shell company created to avoid liability for securities law violations, cf. In re Refco, Inc. Sec. Litig., 503 F. Supp. 2d at 661 (concluding defendants could be liable when they allegedly controlled entities exercising power over shell entities). In any event, the complaint alleges that Lehman wholly owned SASCo and “controlled every aspect of the securitization,” without alleging that the Rating Agencies created SASCo or directed its management or policies. Union Compl. ¶ 6. Such allegations do not raise a reasonable inference that the Rating Agencies controlled SASCo. Accordingly, we affirm the district court’s dismissal of the control person claims. Id. at *11–16 (citations and footnotes omitted). The court of appeals also affirmed the district court’s denial of leave to amend. The court reasoned: In their briefs in opposition to the motions to dismiss, plaintiffs requested leave to amend without specifying what additional facts, if 78

any, they might assert in a new pleading. As we have previously ruled, “[i]t is within the [district] court’s discretion to deny leave to amend implicitly by not addressing” requests for amendment made “informally in a brief filed in opposition to a motion to dismiss.” Joblove v. Barr Labs. Inc. ( In re Tamoxifen Citrate Antitrust Litig.), 466 F.3d 187, 220 (2d Cir. 2006); see also Litwin v. Blackstone Grp., L.P., 634 F.3d 706, 723 (2d Cir. 2011). Where, as here, the district court did not specify in its decisions that it dismissed the complaints with prejudice, and plaintiffs thereafter failed to make formal motions to amend or to offer proposed amended complaints, we identify no abuse of discretion in the district court’s implicit denial of plaintiffs’ cursory requests for leave to amend. In any event, a denial of leave to amend is not an abuse of discretion if amendment would be futile. See In re Tamoxifen Citrate Antitrust Litig., 466 F.3d at 220. While plaintiffs’ conclusorily assert on appeal that recent government investigations provide new information about the Rating Agencies’ role in the transactions, they fail to identify new facts that might redress the complaints’ noted deficiencies. Accordingly, we reject as without merit plaintiffs’ challenge to the denial of leave to amend. Id. at *16–17. •

Gallop v. Cheney, 642 F.3d 364, 2011 WL 1565858 (2d Cir. Apr. 27, 2011). April Gallop filed a Bivens complaint against high U.S. government civilian and military officials alleging that she was injured in the attack on the Pentagon on September 11, 2001, and that that attack was caused by the defendants in order (1) to create a domestic political atmosphere in which they could pursue their policy objectives, and (2) to conceal the misallocation of large sums of money appropriated to the Department of Defense. The court of appeals described the complaint: [T]he Complaint hypothesizes a fantastical alternative history to the widely accepted account of the “explosion” that injured Gallop and killed hundreds of other men and women inside the Pentagon. Among other things, Gallop’s complaint alleges that American Airlines Flight 77 did not crash into the Pentagon—indeed, that no plane crashed into the Pentagon. . . . Instead, the Complaint alleges that the United States most senior military and civilian leaders “cause[d] and arrange[d] for high explosive charges to be detonated inside the Pentagon, and/or a missile of some sort to be fired at the building . . . to give the false impression that hijackers had crashed the plane into the building, as had apparently happened in New York.” 79

Gallop further contends that these officials knew of the September 11 attacks in advance, facilitated their execution, and attempted to cover up their involvement in order to “generate a political atmosphere of acceptance in which [the government] could enact and implement radical changes in the policy and practice of constitutional government in [the United States].” In addition, Gallop alleges that the attacks were intended to conceal the revelation on September 10, 2001, that $2.3 trillion in congressional appropriations “could not be accounted for” in a recent Department of Defense audit. Id. at *2–3. The district court dismissed the complaint with prejudice as frivolous and as failing to make out non-conclusory factual allegations. The Second Circuit affirmed, agreeing that the complaint failed to state a plausible claim for relief. The court observed: After a de novo review, we have no hesitation in concluding that the District Court correctly determined that the few conceivably “well-pleaded” facts in Gallop’s complaint are frivolous. While, as a general matter, Gallop or any other plaintiff certainly may allege that the most senior members of the United States government conspired to commit acts of terrorism against the Untied States, the courts have no obligation to entertain pure speculation and conjecture. Indeed, in attempting to marshal a series of unsubstantiated and inconsistent allegations in order to explain why American Airlines Flight 77 did not crash into the Pentagon, the complaint fails to set forth a consistent, much less plausible, theory for what actually happened that morning in Arlington, Virginia. See, e.g., Complaint ¶ 3 (alleging that defendants may have caused “high explosive charges to be detonated inside the Pentagon”); ¶ 21 (alleging that defendants “may have employed Muslim extremists to carry out suicide attacks; or . . . may have used Muslim extremists as dupes or patsies”); id. (alleging that “four planes” were in fact hijacked on the morning of September 11); ¶ 33 (alleging that “[i]f Flight 77, or a substitute, did swoop low over the [Pentagon], to create the false impression of a suicide attack, it was then flown away by its pilot, or remote control, and apparently crashed somewhere else”); ¶ 40(d)(3) (alleging that apart from Flight 77 “a different, additional, flying object . . . hit the Pentagon”); ¶ 43 (alleging that there “may have been a missile strike, perhaps penetrating through to the back wall, which helped collapse the section that fell in, possibly augmented by explosives placed inside”). Furthermore, and notwithstanding the unsupported assumptions regarding the fate of American Airlines Flight 77, the 80

complaint also fails to plausibly allege the existence of a conspiracy among the defendants. Gallop offers not a single fact to corroborate her allegation of a “meeting of the minds” among the conspirators. Complaint ¶ 55. It is well settled that claims of conspiracy “containing only conclusory, vague, or general allegations of conspiracy to deprive a person of constitutional rights cannot withstand a motion to dismiss.” Leon v. Murphy, 988 F.2d 303, 311 (2d Cir. 1993) (quotation marks omitted). We therefore agree with the District Court that Gallop’s allegations of conspiracy are baseless and spun entirely of “cynical delusion and fantasy.” The District Court did not err in dismissing the complaint with prejudice. Id. at *6–7 (citation omitted). The court of appeals also rejected the plaintiff’s argument that she should have been permitted to amend her complaint. The court noted that the plaintiff never requested leave to amend, and held that “in the absence of any indication that Gallop could—or would—provide additional allegations that might lead to a different result, the District Court did not err in dismissing her claim with prejudice. As we have had occasion to explain, ‘[a] counseled plaintiff is not necessarily entitled to a remand for repleading whenever he has indicated a desire to amend his complaint, notwithstanding the failure of plaintiff’s counsel to make a showing that the complaint’s defects can be cured.’ Porat v. Lincoln Towers Cmty. Ass'n, 464 F.3d 274, 276 (2d Cir. 2006).” Id. at *8. •

Litwin v. Blackstone Group, L.P., 634 F.3d 706, 2011 WL 447050 (2d Cir. Feb. 10, 2011), cert. denied, --- S. Ct. ----, 2011 WL 4532981 (Oct. 3, 2011). The plaintiffs brought a putative securities class action on behalf of themselves and all others who purchased the common units of the Blackstone Group (“Blackstone”) at the time of its IPO. They sought remedies under the Securities Act for alleged material omissions from, and misstatements in, Blackstone’s registration statement and prospectus. Blackstone, the Second Circuit explained, is one of the largest independent alternative asset managers in the world, with total assets under management of approximately $88.4 billion as of 2007. Blackstone receives a substantial portion of its revenues from two sources: (1) a 1.5% management fee on its total assets under management, and (2) performance fees of 20% of the profits generated from the capital it invests on behalf of its limited partners. Under certain circumstances, when investments perform poorly, Blackstone may be subject to a “claw-back” of already-paid performance fees. In other words, it may be required to return fees which it has already collected. The plaintiffs alleged that, at the time of Blackstone’s IPO and unbeknownst to non-insider purchasers of Blackstone common units, two of Blackstone’s portfolio companies (FGIC Corp. and Freescale), as well as its real estate fund investments, were experiencing problems. Blackstone allegedly knew of these problems and reasonably expected these problems to 81

subject it to reduced future performance fees and a claw-back of past performance fees, thereby materially affecting its future revenues. The plaintiffs alleged that Blackstone was required to disclose these material adverse developments in its registration statement, but did not. The plaintiffs further alleged that Blackstone omitted material information regarding the downward trend in the real estate market and its likely input on Blackstone’s real estate investments. The plaintiffs alleged that Blackstone’s registration statement contained the following affirmative material misstatement: The real estate industry is also experiencing historically high levels of growth and liquidity driven by the strength of the U.S. economy . . . and the availability of financing for acquiring real estate assets. . . . . The strong investor demand for real estate assets is due to a number of factors, including persistent, reasonable levels of interest rates . . . and the ability of lenders to repackage their loans into securitizations, thereby diversifying and limiting their risk. These factors have combined to significantly increase the capital committed to real estate funds from a variety of institutional investors. In addition, the plaintiffs alleged that Blackstone’s unaudited financial statements for the three-month periods ending March 31, 2007 and March 31, 2006, respectively, which were included in its registration statement, violated generally accepted accounting principles (“GAAP”) and materially overstated the values of Blackstone’s real estate investments and its investment in FGIC. The plaintiffs also alleged that Blackstone’s disclosure of certain risk factors was too general and failed to inform investors adequately of the then-existing specific risks related to the real estate and credit markets. The district court dismissed the plaintiffs’ complaint for failure to state a claim. The district court’s opinion found that the alleged omissions and misstatements concerning FGIC, Freescale, and Blackstone’s real estate investments were not material. First, the district court analyzed the relative scale or quantitative materiality of the alleged FGIC and Freescale omissions. After noting the Second Circuit’s and the SEC’s acceptance of a 5% threshold as an appropriate “starting place” or “preliminary assumption” of immateriality, the district court noted that “Blackstone’s $331 million investment in FGIC represented a mere 0.4% of Blackstone's [total] assets under management at the time of the IPO.” The district court then addressed the plaintiffs’ argument that the materiality of the omissions is best illustrated by the effect the eventual $122.2 million drop in value of Blackstone’s FGIC investment had on Blackstone’s 2007 annual revenues. The district court found that the decline in FGIC’s investment value was quantitatively immaterial as compared with Blackstone's $3.12 billion in total revenues for 2007. The district court next looked at the quantitative materiality of the Freescale omissions, again comparing Blackstone’s investment to its total assets under management. The court stated that “the $3.1 billion investment in Freescale represented 3.6% of the total $88.4 billion [that Blackstone] had under management at the time of the IPO.” The district court found it 82

significant that the complaint did not (and likely could not) allege that Freescale’s loss of its exclusive supplier relationship with Motorola would cause Blackstone’s investment in Freescale to lose 100% of its value. The district court then pointed to the structure of the Blackstone enterprise as further support for the immateriality of the alleged omissions. According to the district court, because the performance of individual portfolio companies only affects Blackstone’s revenues after investment gains or losses are aggregated at the fund level, the poor performance of one investment may be offset by the strong performance of another. Accordingly, “there is no way to make a principled distinction between the negative information that Plaintiff[s] claim[ ] was wrongfully omitted from the Registration Statement and information . . . about every other portfolio company.” The district court found that requiring disclosure of information about particular portfolio companies or investments would risk “obfuscat[ing] truly material information in a flood of unnecessary detail, a result that the securities laws forbid.” The district court acknowledged that this quantitative analysis is not dispositive of materiality, but found that only one of the qualitative factors that the Second Circuit or the SEC often consider was present in this case. Specifically, the court found that: (1) none of the omissions concealed unlawful transactions or conduct; (2) the alleged omissions did not relate to a significant aspect of Blackstone’s operations; (3) there was no significant market reaction to the public disclosure of the alleged omissions; (4) the alleged omissions did not hide a failure to meet analysts’ expectations; (5) the alleged omissions did not change a loss into income or vice versa; and (6) the alleged omissions did not affect Blackstone’s compliance with loan covenants or other contractual requirements. The district court noted that the one qualitative factor it did find present in this case—that the alleged omissions had the effect of increasing Blackstone's management's compensation—was not enough, by itself, to make the omissions material. Accordingly, the district court held that the alleged omissions concerning FGIC and Freescale were immaterial as a matter of law. The district court separately analyzed the alleged omissions and misstatements regarding Blackstone’s real estate investments. It first noted that the complaint failed to “identify a single real estate investment or allege a single fact capable of linking the problems in the subprime residential mortgage market in late 2006 and early 2007 and the roughly contemporaneous decline in home prices (which are well-documented by the [complaint]) to Blackstone’s real estate investments, 85% of which were in commercial and hotel properties.” According to the district court, without further factual enhancement as to how the troubles in the residential mortgage markets could have a foreseeable material effect on Blackstone’s real estate investments, the plaintiffs’ allegations fell short of the plausibility standard set forth in Twombly. In addition, the district court found that the plaintiffs had failed to allege any facts that, if true, would render false those statements alleged to be affirmative misrepresentations. The district court further found that insofar as the plaintiffs alleged that Blackstone was required to disclose general market conditions, such omissions are not actionable because Sections 11 and 12(a)(2) do not require disclosure of publicly available information: “The omission of generally known macro-economic conditions is not 83

material because such matters are already part of the ‘total mix’ of information available to investors.” Finally, the district court noted that the complaint contained no allegations that Blackstone knew that market conditions “were reasonably likely to have a material effect on its portfolio of real estate investments,” and stated that “generalized allegations that problems brewing in the market at large made it ‘foreseeable’ that a particular set of unidentified investments would sour are insufficient to ‘nudge[ ] [the] claims across the line from conceivable to plausible.’” On appeal, the Second Circuit noted that the plaintiffs’ complaint explicitly did not allege fraud. Instead, the complaint alleged that Blackstone acted negligently in preparing its registration statement and prospectus. Further, Blackstone did not argue on appeal that the plaintiffs’ claims were premised on allegations of fraud. Accordingly, the Second Circuit found that the plaintiffs’ claims were not subject to the heightened pleading standard of FED . R. CIV . P. 9(b). The Second Circuit, through the following lengthy analysis, identified the core issue as whether the downward trend and uncertainty in the real estate market, already known and existing at the time of the IPO, was reasonably likely to have a material impact on Blackstone’s financial condition: Section 11 of the Securities Act imposes liability on issuers and other signatories of a registration statement that, upon becoming effective, “contain[s] an untrue statement of a material fact or omit[s] to state a material fact required to be stated therein or necessary to make the statements therein not misleading.” 15 U.S.C. § 77k(a). Section 12(a)(2) imposes liability under similar circumstances on issuers or sellers of securities by means of a prospectus. See id. § 77l(a)(2). So long as a plaintiff establishes one of the three bases for liability under these provisions—(1) a material misrepresentation; (2) a material omission in contravention of an affirmative legal disclosure obligation; or (3) a material omission of information that is necessary to prevent existing disclosures from being misleading, see In re Morgan Stanley Info. Fund Sec. Litig., 592 F.3d 347, 360 (2d Cir. 2010)—then, in a Section 11 case, “the general rule [is] that an issuer’s liability . . . is absolute.” . . . The primary issue before us is the second basis for liability; that is, whether Blackstone's Registration Statement and Prospectus omitted material information that Blackstone was legally required to disclose. Required Disclosures Under Item 303 of Regulation S-K Plaintiffs principally contend that Item 303 of SEC Regulation S-K, 17 C.F.R. § 229.303(a)(3)(ii), provides the basis for Blackstone’s disclosure obligation. Pursuant to Subsection (a)(3)(ii) of Item 303, a registrant must “[d]escribe any known trends or 84

uncertainties ... that the registrant reasonably expects will have a material . . . unfavorable impact on . . . revenues or income from continuing operations.” Instruction 3 to paragraph 303(a) provides that “[t]he discussion and analysis shall focus specifically on material events and uncertainties known to management that would cause reported financial information not to be necessarily indicative of future operating results or of future financial condition.” 17 C.F.R. § 229.303(a) instruction 3. The SEC’s interpretive release regarding Item 303 clarifies that the Regulation imposes a disclosure duty “where a trend, demand, commitment, event or uncertainty is both [1] presently known to management and [2] reasonably likely to have material effects on the registrant’s financial condition or results of operations.” Although the District Court opinion and the parties on appeal primarily focus on the materiality of Blackstone’s alleged omissions, Blackstone does urge that plaintiffs’ complaint fails to adequately allege that Blackstone was required by Item 303 to disclose trends in the real estate market for the purpose of Sections 11 and 12(a)(2). We disagree. Plaintiffs allege that the downward trend in the real estate market was already known and existing at the time of the IPO, and that the trend or uncertainty in the market was reasonably likely to have a material impact on Blackstone’s financial condition. Therefore, plaintiffs have adequately pleaded a presently existing trend, event, or uncertainty, and the sole remaining issue is whether the effect of the “known” information was “reasonably likely” to be material for the purpose of Item 303 and, in turn, for the purpose of Sections 11 and 12(a)(2). Litwin, 2011 WL 447050, at *6–7 (internal citation omitted). The court then held that the plaintiffs met their pleading burden to plausibly allege that the information Blackstone omitted from its offering documents was “material”: In this case, the District Court confronted a Rule 12(b)(6) motion, a motion for which plaintiffs need only satisfy the basic notice pleading requirements of Rule 8. So long as plaintiffs plausibly allege that Blackstone omitted material information that it was required to disclose or made material misstatements in its offering documents, they meet the relatively minimal burden of stating a claim pursuant to Sections 11 and 12(a)(2), under which, should plaintiffs’ claims be substantiated, Blackstone’s liability as an issuer is absolute. Where the principal issue is materiality, an inherently fact-specific finding, the burden on plaintiffs to state a claim is even lower. 85

Accordingly, we cannot agree with the District Court at this preliminary stage of litigation that the alleged omissions and misstatements “are so obviously unimportant to a reasonable investor that reasonable minds could not differ on the question of their importance.” Materiality of Omissions Related to FGIC and Freescale As to the materiality of the omissions related to FGIC and Freescale, Blackstone first argues that the relevant information was public knowledge, and thus could not be material because it was already part of the “total mix” of information available to investors. Specifically, Blackstone contends that, as the complaint itself alleges based on citations to news articles and analysts’ calls, the shift in FGIC’s strategy toward a less conservative approach to bond insurance and Freescale’s loss of its exclusive contract with Motorola were facts publicly known at the time of the IPO. It is true that, as a general matter, the “‘total mix’ of information may . . . include information already in the public domain and facts known or reasonably available to [potential investors].” United Paperworkers Int’l Union v. Int’l Paper Co., 985 F.2d 1190, 1199 (2d Cir. 1993) (internal quotation marks omitted). But case law does not support the sweeping proposition that an issuer of securities is never required to disclose publicly available information. In this case, the key information that plaintiffs assert should have been disclosed is whether, and to what extent, the particular known trend, event, or uncertainty might have been reasonably expected to materially affect Blackstone’s investments. And this potential future impact was certainly not public knowledge, particularly in the case of FGIC, which was not even mentioned in Blackstone’s Registration Statement and thus cannot be considered part of the “total mix” of information already available to investors. Again, the focus of plaintiffs’ claims is the required disclosures under Item 303—plaintiffs are not seeking the disclosure of the mere fact of Blackstone’s investment in FGIC, of the downward trend in the real estate market, or of Freescale’s loss of its exclusive contract with Motorola. Rather, plaintiffs claim that Blackstone was required to disclose the manner in which those then-known trends, events, or uncertainties might reasonably be expected to materially impact Blackstone’s future revenues. While it is true that Blackstone’s investments in FGIC and 86

Freescale fall below the presumptive 5% threshold of materiality, we find that the District Court erred in its analysis of certain qualitative factors related to materiality. First, the District Court and Blackstone place too much emphasis on Blackstone’s structure and on the fact that a loss in one portfolio company might be offset by a gain in another portfolio company. Blackstone is not permitted, in assessing materiality, to aggregate negative and positive effects on its performance fees in order to avoid disclosure of a particular material negative event. Cf. SAB No. 99, Fed.Reg. at 45,153 (noting in the context of aggregating and netting multiple misstatements that “[r]egistrants and their auditors first should consider whether each misstatement is material, irrespective of its effect when combined with other misstatements”). Were we to hold otherwise, we would effectively sanction misstatements in a registration statement or prospectus related to particular portfolio companies so long as the net effect on the revenues of a public private equity firm like Blackstone was immaterial. The question, of course, is not whether a loss in a particular investment’s value will merely affect revenues, because even after aggregation of gains and losses at the fund level, it will almost certainly have some effect. The relevant question under Item 303 is whether Blackstone reasonably expects the impact to be material. We see no principled basis for holding that an historically “private” equity company that has chosen to go public is somehow subject to a different standard under the securities disclosure laws and regulations than a traditional public company with numerous subsidiaries. See Mohsen Manesh, Legal Asymmetry and the End of Corporate Law, 34 DEL. J. CORP . L. 465, 482 (2009) (noting that Blackstone, as a publicly listed entity, is “substantively indistinguishable from [its] publicly traded corporate counterparts”). In a case of pure omissions, to the extent that the securities laws require information to be disclosed and the information in question is material in the eyes of a reasonable investor, Blackstone must disclose the information. Blackstone’s structure is no defense on a motion to dismiss. Second, the District Court erred in finding that the alleged omissions did not relate to a significant aspect of Blackstone’s operations. In discussing “considerations that may well render material a quantitatively small misstatement,” SAB No. 99 provides that “materiality . . . may turn on where [the misstatement] appears in the financial statements:” “[S]ituations may arise . . . where the auditor will conclude that a matter relating to segment information is qualitatively material even though, in his or her judgment, it is quantitatively immaterial to the financial statements taken as a 87

whole.” SAB No. 99, 64 Fed.Reg. at 45,152. SAB No. 99 also provides that one factor affecting qualitative materiality is whether the misstatement or omission relates to a segment that plays a “significant role” in the registrant’s business. Id. In this case, Blackstone makes clear in its offering documents that Corporate Private Equity is its flagship segment, playing a significant role in the company’s history, operations, and value. Blackstone states that its Corporate Private Equity fund is “among the largest . . . ever raised,” and that its “long-term leadership in private equity has imbued the Blackstone brand with value that enhances all of [its] different businesses and facilitates [its] ability to expand into complementary new businesses.” Because Blackstone’s Corporate Private Equity segment plays such an important role in Blackstone’s business and provides value to all of its other asset management and financial advisory services, a reasonable investor would almost certainly want to know information related to that segment that Blackstone reasonably expects will have a material adverse effect on its future revenues. Therefore, the alleged misstatements and omissions relating to FGIC and Freescale were plausibly material. Furthermore, with respect to Freescale in particular, Blackstone’s investment in the company accounted for 9.4% of the Corporate Private Equity segment’s assets under management, and the investment was nearly three times larger than the next largest investment in that segment as reported in Blackstone’s Prospectus. Even where a misstatement or omission may be quantitatively small compared to a registrant’s firm-wide financial results, its significance to a particularly important segment of a registrant’s business tends to show its materiality. See In re Kidder Peabody, 10 F. Supp. 2d at 410–11 (noting that while amount of “false profits may have been minor compared to GE’s earnings as a whole, they were quite significant to” a subsidiary’s profits, which, “in turn, represented a significant portion of GE's balance sheet”). Viewed in that light, we cannot hold that the alleged loss of Freescale’s exclusive contract with its largest customer and the concomitant potential negative impact on one of the largest investments in Blackstone’s Corporate Private Equity segment was immaterial. Finally, the District Court failed to consider another relevant qualitative factor—that the omissions “mask[ ] a change in earnings or other trends.” SAB No. 99, 64 Fed.Reg. at 45,152. Such a possibility is precisely what the required disclosures under Item 303 aim to avoid. Here, Blackstone omitted information related to FGIC and Freescale that plaintiffs allege was reasonably likely to have a 88

material effect on the revenues of Blackstone’s Corporate Private Equity segment and, in turn, on Blackstone as a whole. Blackstone’s failure to disclose that information masked a reasonably likely change in earnings, as well as the trend, event, or uncertainty that was likely to cause such a change. All of these qualitative factors, together with the District Court’s correct observation that the alleged omissions “doubtless had ‘the effect of increasing management’s compensation,’” see SAB No. 99, 64 Fed.Reg. at 45,152, show that the alleged omissions were material. Accordingly, we hold that plaintiffs have adequately pleaded that Blackstone omitted material information related to FGIC and Freescale that it was required to disclose under Item 303 of Regulation S-K. Materiality of Omissions and Misstatements Related to Real Estate Investments We also find that the District Court erred in its analysis of the alleged omissions and misstatements related to Blackstone’s real estate investments. First, the District Court’s opinion implies that to state a plausible claim, plaintiffs’ complaint had to identify specific real estate investments made or assets held by Blackstone funds that might have been at risk as a result of the then-known trends in the real estate industry. This expectation, however, misses the very core of plaintiffs' allegations, namely, that Blackstone omitted material information that it had a duty to report. In other words, plaintiffs’ precise, actionable allegation is that Blackstone failed to disclose material details of its real estate investments, and specifically that it failed to disclose the manner in which those unidentified, particular investments might be materially affected by the then-existing downward trend in housing prices, the increasing default rates for sub-prime mortgage loans, and the pending problems for complex mortgage securities. That is all Item 303 requires in order to trigger a disclosure obligation: a known trend that Blackstone reasonably expected would materially affect its investments and revenues. Plaintiffs allege that they were unaware of, but legally entitled to disclosure of, the very information that the District Court held had to be specified in plaintiffs’ complaint. Moreover, there are two problems with the District Court’s finding that plaintiffs’ claims fail because they cannot establish any “link[ ]” between the declining residential real estate market and Blackstone's heavy investments in commercial real estate. See id. at 89

544. First, the offering documents indicate, and Blackstone admits, that Blackstone has at least one modest-sized residential real estate investment, and, drawing all reasonable inferences in plaintiffs’ favor, its residential real estate holdings might constitute as much as $3 billion and 15% of the Real Estate segment’s assets under management. See supra n. 6. This alone is enough on a Rule 12(b)(6) motion to establish a plausible link between the alleged trend in the residential real estate market and Blackstone’s real estate investments. Second, even if the overwhelming majority of Blackstone’s real estate investments are commercial in nature, it is certainly plausible for plaintiffs to allege that a collapse in the residential real estate market, and, more importantly, in the market for complex securitizations of residential mortgages, might reasonably be expected to adversely affect commercial real estate investments. Blackstone’s own disclosures in its Registration Statement make this link clear, given that it admits that “the ability of lenders to repackage their [residential] loans into securitizations” is one factor contributing to the “significant[ ] increase [in] the capital committed to [predominantly commercial] real estate funds.” Finally, the District Court erred when it stated that “Plaintiff[s] fail[ ] to allege any facts . . . that if true, would render false the few statements alleged to be affirmative misrepresentations.” To the contrary, plaintiffs provide significant factual detail about the general deterioration of the real estate market and specific facts that, drawing all reasonable inferences in plaintiffs’ favor, directly contradict statements made by Blackstone in its Registration Statement. First, the chart in plaintiffs’ complaint illustrating the seasonally adjusted price change in the U .S. housing market contradicts Blackstone’s representation that the “real estate industry [was] . . . experiencing historically high levels of growth,” because the chart shows that the rate of price appreciation began to decline significantly beginning in late 2005. In addition, Blackstone’s representation that “strong investor demand for real estate assets is due [in part] to . . . persistent, reasonable levels of interest rates” is refuted by plaintiffs’ allegations that “[a]s key short-term and the prime rates rose [beginning in June 2004], other interest rates rose as well, including those for most residential mortgage loans” and that “[t]his rise in interest rates made it more difficult for borrowers to meet their payment obligations.” Also, Blackstone’s statement that “lenders [were able] to repackage their loans into securitizations, thereby diversifying and limiting their risk,” is at least impliedly refuted by plaintiffs’ detailed allegations as to how the increasing sub-prime mortgage loan defaults were going to impact negatively the 90

existing and future uses of, and value associated with, CDOs, RMBSs, and CDSs. Absent these errors, the materiality of the alleged omitted and misstated information related to Blackstone’s real estate investments becomes clear. First, Blackstone’s real estate segment played a “significant role,” SAB No. 99, 64 Fed.Reg. at 45,152, in Blackstone’s business. While Blackstone’s real estate segment may not be as prominent to the company’s traditional identity as its Corporate Private Equity segment, Blackstone’s real estate segment nevertheless constituted 22.6% of Blackstone’s total assets under management. A reasonable Blackstone investor may well have wanted to know of any potentially adverse trends concerning a segment that constituted nearly a quarter of Blackstone’s total assets under management. Second, the alleged misstatements and omissions regarding real estate were qualitatively material because they masked a potential change in earnings or other trends. Finally, the alleged misstatements and omissions, if proven, had “the effect of increasing management's compensation,” id. For all these reasons, we conclude that the District Court erred in dismissing plaintiffs’ allegations relating to Blackstone’s real estate investments. Plaintiffs plausibly allege that Blackstone omitted material information that it was required to disclose and that it made material misstatements in its IPO offering documents. .... In sum, we hold that the District Court erred in dismissing for failure to state a claim plaintiffs’ complaint brought pursuant to Sections 11, 12(a)(2), and 15 of the Securities Act because (1) plaintiffs plausibly allege that Blackstone omitted from its Registration Statement and Prospectus material information related to its investments in FGIC and Freescale that Blackstone was required to disclose under Item 303 of Regulation S-K; (2) plaintiffs plausibly allege that Blackstone both omitted material information that it was required to disclose under Item 303 and made material misstatements in its offering documents related to its real estate investments; and (3) plaintiffs’ remaining GAAP and risk disclosure allegations are derivative of their primary allegations, and therefore these secondary allegations are sufficient to state a claim. Litwin, 2011 WL 447050, at *8–14 (internal citations omitted). •

DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104 (2d Cir. 2010). Following the termination 91

of her employment as a correspondent for MSNBC, Plaintiff DiFolco sued MSNBC, its President (Kaplan), and an Executive Producer (Leon) for breach of contract, defamation, and tortious interference with prospective business relations. Id. at 106. Defendants filed a motion to dismiss the complaint for failure to state a claim. Id. at 109. The district court dismissed DiFolco’s complaints. Id. It concluded that DiFolco repudiated her contract in an exchange of emails and, therefore, that MSNBC had no financial obligations to DiFolco under the terms of her contract. Id. In reaching that conclusion, the district court found that the contract was “unambiguous in its requirement that [DiFolco] was to be at MSNBC's disposal for a two-year period” and that the August 23 and August 31 emails from DiFolco unambiguously “constituted repudiation of the Contract and relieved MSNBC of future obligations.” Id. The district court also dismissed DiFolco's defamation claims because it concluded that two of the claims were based on true statements and the third consisted of non-actionable opinion. DiFolco, 622 F.3d at 110. And it dismissed her tortious interference with prospective business relations claim because it was predicated on the tortious interference claim. Id. The Second Circuit reversed as to the breach of contract and defamation claims, but affirmed the dismissal of the tortious interference with prospective business relations claim. In support of her breach of contract claim, DiFolco made the following allegations: 38. While she expressed her hopes to have maintained a productive working relationship with the Company and “be a part of [Kaplan’s] team for a long time to come,” Ms. DiFolco realized the Defendants Leon and Brownstein continued to cancel her shoots and force her off the air. As such, she indicated to Defendant Kaplan that they should “discuss [her] exit from the shows.” This was Ms. DiFolco’s way of expressing to Kaplan her desire not to disrupt the shows on which she worked. 39. Defendant Kaplan agreed to meet with her as proposed to further discuss the matters raised in her email. 40. That same day, Ms. DiFolco informed Defendant Leon that she planned to meet with Defendant Kaplan on September 1, 2005. She also stated that she hoped to record the shows for early September out of New Jersey since she had to be in New York to cover “Fashion Week,” noting that it would save the Company time and money on airfare if she simply remained on the East coast for that entire time period. Defendant Leon agreed to this arrangement. 41. The next day, on August 24, 2005, Defendant Leon responded by abruptly informing her that they “decided to change the direction of the fashion week coverage” and planned to send the New York Times 92

style editor to cover the shows instead of Ms. DiFolco. 42. Ms. DiFolco immediately contacted Defendant Kaplan, forwarding Defendant Leon’s most recent example of his ongoing effort to force her off the air and asked to know why she was being taken off the scheduled shoots. She specifically inquired whether Defendant Kaplan had made Defendant Leon aware of her previous request for a meeting, fearing that Defendant Leon had canceled her participation in Fashion Week in retaliation for approaching his superior and that her email would be misinterpreted. 43. Ms. DiFolco clearly expressed that “[she] did not resign yesterday” and confirmed their agreed meeting scheduled for September 1, 2005. 44. Defendant Kaplan acknowledged that he made Defendant Leon aware of her previous email. His email stated, “My complete impression is that you have resigned,” and then continued, “sooner is better since your obvious intent is to leave.” 45. While Ms. DiFolco was in flight from California, Defendant Leon left her a voicemail message that her meeting with Kaplan was canceled. At the same time, Defendant MSNBC sent Ms. DiFolco a proposed separation and release agreement through her agent, claiming that she had resigned. Id. at 107-08. In support of her defamation claim, DiFolco’s complaint alleged that “one or more Defendants began making ... defamatory statements about Ms. DiFolco on the Internet and to various media outlets.” Id. at 108. DiFolco alleged that the defamatory statements were “made by, with the participation of and/or under the authority and direction of one or more of Defendants.” Id. The allegedly defamatory statements were (1) that “DiFolco had resigned, broken her contract and/or deserted her co-anchor;” (2) that DiFolco had resigned “in the middle of her contract;” and (3) that “[l]uscious Claudia DiFolco has quit MSNBC in the middle of her contract, leaving Sharon Tay as the sole host of ‘Entertainment Hotlist’ and ‘At the Movies.’” DiFolco, 622 F.3d at 108. DiFolco claimed that these statements “could only have originated from MSNBC officials given the confidential nature of her contract dispute.” Id. DiFolco also claimed that defendants caused another defamatory message about her to be posted on a website. Id. The message stated that DiFolco: [B]elieve[d] that cleavage, over time [sic] in the makeup chair and a huge desire to become a star is ... how to pay your dues” and that “throughout her irrelevant career at MSNBC, she constantly ignored 93

directions from news producers during live shots, refused to do alternate takes for editing purposes, pouted like a child and never was a team player.” Id. at 108-09 (alterations in original). In support of her tortious interference claim, DiFolco alleged that “[d]efendants intentionally interfered with Plaintiff’s professional relationships and opportunities for employment” and that “[d]efendants actions permanently injured Plaintiff’s business relationships in the [news and entertainment] industry.” Id. at 115. The Second Circuit set forth the standard of review from Twombly and Iqbal: In its formulation of the Twombly-Iqbal requirements for a statement of claim, the Supreme Court has established the following order to be followed in determining whether the pleading is adequate: “When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Id. at 111 (quoting Iqbal, 129 S. Ct. at 1950). The court next considered whether the lower court properly considered DiFolco’s emails and explained that, in considering a 12(b)(6) motion to dismiss, a district court may consider: [T]he facts alleged in the complaint, documents attached to the complaint as exhibits, and documents incorporated by reference in the complaint. Where a document is not incorporated by reference, the court may never[the]less consider it where the complaint “relies heavily upon its terms and effect,” thereby rendering the document “integral” to the complaint. DiFolco, 622 F.3d at 111 (quoting Mangiafico v. Blumenthal, 471 F.3d 391, 398 (2d Cir. 2006)) (internal citations omitted). An “integral” document should be considered, however, only if there is no dispute about the authenticity and accuracy of the document and there are no material disputed issues of fact regarding the relevance of the document. Id. The Second Circuit determined that the August 23 email could be considered because DiFolco referred to it in her complaint (id. at 112), but that the district court erred in considering the August 31 e-mail because it “was not attached to the complaint, was not incorporated by reference in the complaint, and was not integral to the complaint.” Id. at 113. In any event, the court disagreed that the emails showed conclusively that DiFolco had 94

resigned. Id. The court noted that, under New York law, “a repudiation can be determined to have occurred only when it is shown that ‘the announcement of an attention not to perform was positive and unequivocal.’” DiFolco, 622 F.3d at 112 (quoting Tenavision, Inc. v. Neuman, 379 n.E.2d 1166, 1168 (1978)). And that the issue of repudiation is generally an issue of fact. Id. Then the court examined the language of DiFolco’s emails and disagreed that she unambiguously expressed an intention to leave as a matter of law: “There are at least factual issues as to whether DiFolco had made a final and definite communication of an intent to forego performance or had indicated her refusal to perform in a clear and unqualified way such as to justify a conclusion that she had repudiated her contract.” Id. at 112-13. The court reinstated DiFolco’s breach of contract claim. Id. at 113. The court then considered DiFolco’s defamation causes of action. It explained that, under New York law, a defamation claim may be based on a “writing which tends to disparage a person in the way of [her] office profession, or trade.” Id. at 114 (quoting Nichols v. Item Publishers, Inc., 132 N.E.2d 860, 862 (1956)). The court decided that DiFolco’s complaint “sets forth the necessary elements to make out a claim for defamation in New York, including the element of malice” and reinstated the defamation claims. Id. Turning to the tortious interference claim, the Second Circuit concluded that: “ [a]side from the fact that these allegations are too conclusory, vague, and lacking in a factual basis to make out DiFolco’s tortious interference claim, the complaint fails entirely to describe any third party with whom DiFolco had prospective business relations to be interfered with.” DiFolco, 622 F.3d at 114-15. •

Kiobel v. Royal Dutch Petroleum, 621 F.3d 111 (2d Cir. 2010) (per curiam), cert. denied, Shell Petroleum N.V. v. Kiobel, --- S. Ct. ----, 2011 WL 4533484 (2011). Plaintiffs, residents of Nigeria, alleged that Dutch, British, and Nigerian corporations engaged in oil exploration and production had aided and abetted the Nigerian government in committing violations of the law of nations. Id. at 117. Specifically, plaintiffs brought claims of aiding and abetting (1) extrajudicial killing; (2) crimes against humanity; (3) torture or cruel, inhuman, and degrading treatment; (4) arbitrary arrest and detention; (5) violation of the rights to life, liberty, security, and association; (6) forced exile; and (7) property destruction. Id. at 123. The district court dismissed the following claims for failure to state a claim: aiding and abetting property destruction; forced exile; extrajudicial killing; and violations of the rights to life, liberty, security, and association. Id. at 124. The district court denied defendants’ motion to dismiss with respect to the remaining claims of aiding and abetting arbitrary arrest and detention; crimes against humanity; and torture or cruel, inhuman, and degrading treatment. Id. The district court certified its entire order for interlocutory appeal. Id. The Second Circuit affirmed in part and reversed in part, holding that it lacked subject matter jurisdiction over all of the plaintiffs’ claims because corporate liability is not a “rule of customary international law.” Kiobel, 621 F.3d at 120, 145. The court first determined that it had jurisdiction under the ATS only if corporations were subject to tort liability under the ATS. See id. at 117, 126. The court then examined 95

international law to determine the scope of liability. See id. at 131-145. The court looked to the history and conduct of international tribunals (id. at 132-37), international treaties (id. at 137-41), and works of scholars and jurists (id. at 142-144) and concluded that: Together, those authorities demonstrate that imposing liability on corporations for violations of customary international law has not attained a discernible, much less universal, acceptance among nations of the world in their relations inter se. Because corporate liability is not recognized as a “specific, universal, and obligatory” norm, it is not a rule of customary international law that we may apply under the ATS. Accordingly, insofar as plaintiffs in this action seek to hold only corporations liable for their conduct in Nigeria (as opposed to individuals within those corporations), and only under the ATS, their claims must be dismissed for lack of subject matter jurisdiction. Kiobel, 621 F.3d at 145 (internal citation omitted). Judge Leval filed a concurring opinion. He disagreed with the majority that corporations are not subject to international law. See id. at 150 (Leval, J., concurring). But would have dismissed Kiobel’s complaint for the alternative reason that it “fail[ed] to state a proper legal claim of entitlement to relief.” Id. at 153. He explained: [T]he pertinent allegations of the Complaint fall short of mandatory standards established by decisions of this court and the Supreme Court. We recently held in Presbyterian Church of Sudan v. Talisman Energy, Inc., 582 F.3d 244 (2d Cir. 2009), that liability under the ATS for aiding and abetting in a violation of international human rights lies only where the aider and abettor acts with a purpose to bring about the abuse of human rights. Id. at 259. Furthermore, the Supreme Court ruled in Ashcroft v. Iqbal, --- U.S. ----, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009), that a complaint is insufficient as a matter of law unless it pleads specific facts that “allow[ ] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. at 1949. When read together, Talisman and Iqbal establish a requirement that, for a complaint to properly allege a defendant's complicity in human rights abuses perpetrated by officials of a foreign government, it must plead specific facts supporting a reasonable inference that the defendant acted with a purpose of bringing about the abuses. The allegations against Appellants in these appeals do not satisfy this standard. While the Complaint plausibly alleges that Appellants knew of human rights abuses committed by officials of the government of Nigeria and took actions which contributed indirectly to the commission of those offenses, it does not contain allegations supporting a reasonable 96

inference that Appellants acted with a purpose of bringing about the alleged abuses. Kiobel, 621 F.3d at 188 (Leval, J., concurring) (second alteration in original). Judge Leval discussed the pleading standard from Twombly and Iqbal: “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Iqbal, 129 S. Ct. at 1949 (emphasis added) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)). “Facial plausibility” means that the plaintiff’s factual pleadings “allow[ ] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. A complaint that pleads facts that are “merely consistent with” a defendant's liability is not plausible. Id. Conclusory allegations that the defendant violated the standards of law do not satisfy the need for plausible factual allegations. Twombly, 550 U.S. at 555, 127 S. Ct. 1955 (holding that “courts are not bound to accept as true a legal conclusion couched as a factual allegation” (internal quotation marks omitted)); see also Kirch v. Liberty Media Corp., 449 F.3d 388, 398 (2d Cir.2006) (“[C]onclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to [defeat] a motion to dismiss.” (internal quotation marks and citation omitted) (second alteration in original)). This requirement applies to pleadings of intent as well as conduct. See Iqbal, 129 S. Ct. at 1954. Kiobel, 621 F.3d at 191 (Leval, J., concurring) (alterations in original). Kiobel alleged that (1) “Shell itself aided and abetted the government of Nigeria in the government’s commission of various human rights violations against the Ogoni,” (2) alternatively, that Shell is liable on either of two theories for the actions of its subsidiary SPDC - either as SPDC’s alter ego, or as SPDC’s principal on an agency theory. Id. at 191. With respect to his claim that Shell was directly involved as an aider and abetter, Kiobel pleaded that Shell: willfully ... aided and abetted SPDC and the Nigerian military regime in the joint plan to carry out a deliberate campaign of terror and intimidation through the use of extrajudicial killings, torture, arbitrary arrest and detention, military assault against civilians, cruel, inhuman and degrading treatment, crimes against humanity, forced exile, restrictions on assembly and the confiscation and destruction of private and communal property, all for the purpose of protecting Shell 97

property and enhancing SPDC’s ability to explore for and extract oil from areas where Plaintiffs and members of the Class resided. Id. at 191-92. And also that “the Nigerian military’s campaign of violence against the Ogoni was ‘instigated, planned, facilitated, conspired and cooperated in’ by Shell.” Id. at 192. Judge Leval opined that “[s]uch pleadings are merely a conclusory accusation of violation of a legal standard and do not withstand the test of Twombly and Iqbal. They fail to “state a claim upon which relief can be granted.” Id. (quoting FED . R. CIV . P. 12(b)(6)). Kiobel also asserted: (1) that SPDC and Shell met in Europe in February 1993 and “formulate[d] a strategy to suppress MOSOP and to return to Ogoniland,” (2) that “[b]ased on past behavior, Shell and SPDC knew that the means to be used [by the Nigerian military] in that endeavor would include military violence against Ogoni civilians,” and (3) that “Shell and SPDC” provided direct, physical support to the Nigerian military and police operations conducted against the Ogoni by, for example, providing transportation to the Nigerian forces; utilizing Shell property as a staging area for attacks; and providing food, clothing, gear, and pay for soldiers involved. Id. (alterations in original). Judge Leval also considered these allegations legally insufficient “because they do not support a reasonable inference that Shell provided substantial assistance to the Nigerian government with a purpose to advance or facilitate the Nigerian government’s violations of the human rights of the Ogoni people.” Kiobel, 621 F.3d at 192 (Leval, J., concurring) (emphasis in original). Judge Leval next considered Kiobel’s allegations that Shell “provided financial support and other assistance to the Nigerian forces with knowledge that they would engage in human rights abuses,” and pointed out that: [T]he Complaint fails to allege facts (at least sufficiently to satisfy the Iqbal standard) showing a purpose to advance or facilitate human rights abuses. The provision of assistance to the Nigerian military with knowledge that the Nigerian military would engage in human rights abuses does not support an inference of a purpose on Shell’s part to advance or facilitate human rights abuses. An enterprise engaged in finance may well provide financing to a government, in order to earn profits derived from interest payments, with the knowledge that the government’s operations involve infliction of human rights abuses. Possession of such knowledge would not support the inference that the financier acted with a purpose to advance the human rights abuses. Likewise, an entity engaged in 98

petroleum exploration and extraction may well provide financing and assistance to the local government in order to obtain protection needed for the petroleum operations with knowledge that the government acts abusively in providing the protection. Knowledge of the government’s repeated pattern of abuses and expectation that they will be repeated, however, is not the same as a purpose to advance or facilitate such abuses, and the difference is significant for this inquiry. Id. at 193. Judge Leval concluded that: In sum, the pleadings do not assert facts which support a plausible assertion that Shell rendered assistance to the Nigerian military and police for the purpose of facilitating human rights abuses, as opposed to rendering such assistance for the purpose of obtaining protection for its petroleum operations with awareness that Nigerian forces would act abusively. In circumstances where an enterprise requires protection in order to be able to carry out its operations, its provision of assistance to the local government in order to obtain the protection, even with knowledge that the local government will go beyond provision of legitimate protection and will act abusively, does not without more support the inference of a purpose to advance or facilitate the human rights abuses and therefore does not justify the imposition of liability for aiding and abetting those abuses. Id. at 193-94. •

Hollander v. Copacabana Nightclub, 624 F.3d 30, 2010 WL 3419954 (2d Cir. Sept. 1, 2010) (per curiam), cert. denied, 131 S. Ct. 914 (2011). Plaintiff brought a § 1983 action against nightclub operators and promoters, alleging that “Ladies Night” promotions, charging women discounted admission, constituted sex discrimination in violation of his equal protection rights. Id. at *1. The district court dismissed after concluding that the nightclubs were not state actors and the Second Circuit affirmed. Id. The court first discussed the plausibility standard from Twombly and Iqbal: To survive a motion to dismiss, the complaint must set out only enough facts to state a claim to relief that is plausible on its face. Ashcroft v. Iqbal, --- U.S. ----, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009). This standard “is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)). “Where a complaint pleads facts that are ‘merely consistent with’ a defendant’s 99

liability, it ‘stops short of the line between possibility and plausibility of “entitlement to relief.”’” Id. (quoting Twombly, 550 U.S. at 557, 127 S. Ct. 1955). Id. And the court explained that, to assert a § 1983 claim, a “plaintiff must allege that the state was involved in the activity that caused the injury giving rise to the action” Id. at *2 (quoting Sybalski v. Independent Group Home Living Program, Inc., 546 F.3d 255, 257 (2d Cir. 2008) (per curiam)) (emphasis in original). The court decided that the only state action alleged – state issuance of a liquor license – was an insufficient basis to establish nightclubs were “state actors” for purposes of a § 1983 action. Id. at *3. •

Mortimer Off Shore Services, Ltd. v. The Federal Republic of Germany, 615 F.3d 97 (2d Cir. 2010), cert. denied, 131 S. Ct. 1502 (2011). Plaintiff Mortimer filed an action under the Federal Sovereign Immunities Act (“FSIA”) to enforce against the Federal Republic of Germany (“FRG”) 351 bearer bonds valued at over $400,000,000. Id. at 98. The bonds were initially issued in 1928, by private banks within the state of Prussia – territory that later constituted West Germany and East Germany, which have since been reunified to make up the present-day FRG. Id. at 99. Mortimer alleged that the FRG assumed liability for the bonds. Id. The district court denied FRG’s motion to dismiss for lack of subject matter jurisdiction and granted FRG’s motion to dismiss for failure to state a claim. Id. at 104. The district court noted that “unlike private parties, sovereigns can only assume liability for debt of predecessor states through explicit acts that leave traces in legal documents.” Id. (emphasis in original). The district court concluded that “Mortimer did not affirmatively plead the source of [the FRG]’s obligation to satisfy the bonds, and thus failed to ‘state a claim of relief that is plausible on its face.’” Mortimer, 615 F.3d at 104 (quoting Twombly, 550 U.S. at 570) (internal citations omitted). Mortimer filed motions to amend the judgment and for leave to file an amended complaint. Id. The district court denied the motions. Id. Mortimer appealed the dismissal of its complaint for failure to state a claim, and the denial of its motions to amend the judgment and for leave to file an amended complaint. Id. at 105. The FRG cross-appealed, challenging the district court’s holding that it had subject matter jurisdiction. Id. The Second Circuit affirmed. The Second Circuit explained that the FSIA “is the sole source for subject matter jurisdiction over any action against a foreign state,” (id. (quoting Cabiriri v. Republic of Ghana, 165 F.3d 193, 196 (2d Cir. 1999))), and that it “provides that a foreign sovereign ‘shall be immune from the jurisdiction of the courts of the United States,’ unless one of the FSIA’s exceptions applies.” Mortimer, 615 F.3d at 105. (quoting 28 U.S.C. § 1604). The court discussed bonds issued by banks in the territory that became West Germany separately from the bonds issued by the banks in the territory that became East Germany. Id. The court’s analysis turned on whether the FRG had assumed liability for the bonds, thus falling within the FSIA “commercial activity exception.” Id. at 105-06. Because the FRG “agreed that it had assumed liability for properly validated West German bonds,” the court determined that the FSIA exceptions applied to the West German bonds. Id. at 107-08. 100

With respect to the East German bonds, “Mortimer’s proposed amended complaint ... alleged that upon unification, the FRG assumed liability for East Germany’s debts, including the East German bonds.” Id. at 112. The Second Circuit noted that, under the Unification Treaty, the FRG assumed indebtedness for East Germany’s state debts, but pointed out that Mortimer failed to allege “how East Germany assumed liability for bonds issued by private banks located in the state of Prussia.” Id. “Thus, Mortimer’s allegation that the Unification Treaty alone provides no basis for liability beyond speculation that East Germany assumed liability for the bonds. A claim based on such speculation is implausible.” Mortimer, 615 F.3d at 112. The court decided that Mortimer’s original complaint contained “mere conclusory statements” that the FRG assumed liability for the East German bonds. Id. And agreed with the district court that “leave to amend would have been futile” since Mortimer’s proposed amended complaint did not cure these deficiencies. Id. After determining that it had subject matter jurisdiction over the West German bonds, the court considered Mortimer’s claim as to those bonds on the merits. Id. The court determined that Mortimer was required to comply with certain validation procedures before it could recover. Mortimer, 615 F.3d at 115. Mortimer did not comply with the validation procedures or explain why its delay in doing so was excusable. Id. at 117. Thus, the Second Circuit held that “Mortimer, by not satisfying either criterion, has failed to set forth a plausible basis in either the complaint or the proposed amended complaint for enforcing the West German Bonds.” Id. The court also affirmed the district court’s denial of leave to amend with respect to the West German bonds because the proposed amended complaint also failed to set forth a plausible basis for enforcing the West German bonds. Id. •

DiPetto v. U.S. Postal Serv., 383 F. App’x 102, No. 09-3203-cv, 2010 WL 2724463 (2d Cir. Jul. 12, 2010) (unpublished summary order). The pro se plaintiff appealed the district court’s decision to dismiss his employment discrimination claims sua sponte. Id. at *1. The Second Circuit noted that “[a]lthough a district court may dismiss a complaint sua sponte for failure to comply with Rule 8, ‘[d]ismissal . . . is usually reserved for those cases in which the complaint is so confused, ambiguous, vague, or otherwise unintelligible that its true substance, if any, is well disguised.’” Id. (second alteration and omission in original) (quoting Simmons v. Abruzzo, 49 F.3d 83, 86 (2d Cir. 1995)). The court stated that it had “recently addressed the application of . . . Iqbal . . . to pro se pleadings and noted that, even after . . . Twombly . . . , [it] remain[ed] obligated to construe pro se complaints liberally.” Id. (citing Harris v. Mills, 572 F.3d 66, 71–72 (2d Cir. 2009)). The court stated that “while pro se complaints must contain sufficient factual allegations to meet the plausibility standard, we should look for such allegations by reading pro se complaints with ‘special solicitude’ and interpreting them to raise the ‘strongest [claims] that they suggest.’” Id. (alteration in original) (quoting Triestman v. Fed. Bureau of Prisons, 470 F.3d 471, 474–75 (2d Cir. 2006) (emphasis in original)). The court further noted that “[w]ith respect to discrimination claims, [it had] explained in Boykin [v. KeyCorp, 521 F.3d 202, 212 (2d Cir. 2008)] that plaintiffs are not required ‘to plead facts sufficient to establish a prima facie disparate treatment claim’ under Title VII, because ‘the McDonnell Douglas burden-shifting framework ‘is an evidentiary standard, not a pleading requirement,’ and that to require more than Rule 8(a)’s 101

‘simplified notice pleading standard’ would unjustifiedly impose a heightened pleading requirement on the plaintiff.’” Id. (quoting Boykin, 521 F.3d at 212). The court cited a preTwombly case law to emphasize that it had “held there is no heightened pleading requirement for civil rights complaints alleging racial animus, and ha[d] found such claims sufficiently pled when the complaint stated simply that the plaintiffs ‘[were] African-Americans, describe[d] defendants’ actions in detail, and allege[d] that defendants selected [plaintiffs] for maltreatment ‘solely because of their color.’’” DiPetto, 2010 WL 2724463, at *1 (second, third, fourth, and fifth alterations in original) (quoting Phillip v. Univ. of Rochester, 316 F.3d 291, 298 (2d Cir. 2003)). The court found the amended complaint’s allegations sufficient under these standards: [R]eading Appellant’s amended complaint to raise the strongest claims that it suggests, we find that Appellant stated he was Caucasian, described specific discriminatory actions that had been taken against him by his supervisor, and alleged that he was treated differently, inter alia, on the basis of his race. While Appellant did not explicitly state that he was filing a Title VII claim, federal employees are restricted to challenges under Title VII when complaining about employment discrimination. Accordingly, we conclude that Appellant’s amended complaint, unlike his original complaint, which did not provide relevant details about his race or the race of relevant persons involved with the employment actions, gave fair notice to Appellee that he was raising a claim, pursuant to Title VII, on the basis that, because he was Caucasian, he received less overtime and work breaks than other employees, and that sick and annual leave policies were applied differently to him. See Erickson, 551 U.S. at 93 (holding that a complaint must “give the defendant fair notice of what the . . . claim is and the grounds upon which it rests” (ellipsis in original)). Id. at *2 (footnote omitted). The court rejected the argument that dismissal was appropriate because the plaintiff failed to attach a right-to-sue letter from the EEOC, explaining that the plaintiff “was not required to demonstrate at the pleading stage that his claims were administratively exhausted,” and that, as a federal employee, he was not required to obtain a right-to-sue letter. Id. (citations omitted). The court stated that “the district court erred when it concluded that Appellant failed to give fair notice of his claims as required under Rule 8(a)(2), because his ‘allegations, taken as true, indicate the possibility of discrimination and thus present a plausible claim of disparate treatment.’” Id. (quoting Boykin, 521 F.3d at 215–16; and citing Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002)). •

Ruston v. Town Bd. for Skaneateles, 610 F.3d 55, No. 09-4480-cv, 2010 WL 2680644 (2d Cir. Jul. 8, 2010), cert. denied, 131 S. Ct. 824 (2010). The court applied Iqbal to a “class of one” equal protection claim and determined that Iqbal effectively overruled earlier Second Circuit precedent regarding pleading a “class of one” claim. The plaintiffs alleged that they 102

owned a 27-acre lakefront lot in the Town of Skaneateles (the “Town”), but outside the Village of Skaneateles (the “Village”). Id. at *1. The plaintiffs asserted that the Town and the Village unconstitutionally frustrated their plans to develop their land. Id. Specifically, in 1990, the plaintiffs presented the Town with a plan to subdivide their lot and build a new housing development, and the Town required the plaintiffs to get permission from the Village to connect the new homes to the Village sewer system. Id. The Village denied this request. Id. Then, in 2000, the plaintiffs sought permission from the Town to subdivide their property to build a development with 14 residential units, but the complaint alleged that “the Town delayed and raised a series of obstacles to their application.” Id. The plaintiffs twice sought to connect the new homes to the Village sewer system, but both requests were denied. Ruston, 2010 WL 2680644, at *1. The plaintiffs filed a renewed application with the Town, but the Town delayed consideration for over a year, by which time a new zoning law had become effective. Id. The plaintiffs alleged that the law was designed to block their proposed development and that the Town cited the new law in denying their development application. Id. The plaintiffs filed suit under §§ 1983 and 1985 against the Village, the Town Board, the Town Planning Board, and members of the Town Board and the Town Planning Board. Id. The complaint asserted a conspiracy to violate the plaintiffs’ civil rights, violation of due process, and violation of equal protection rights, as well as claims against the Town defendants alleging that the new zoning law was unconstitutionally vague and violated their substantive due process rights and their equal protection rights. Id. The complaint also asserted a state law claim to enforce vested property rights. Upon motion by the Village and the Town defendants, the district court dismissed the § 1985 conspiracy claims against all defendants with prejudice; the substantive due process claim against the Village with prejudice; and the equal protection claim against the Village without prejudice. Id. The plaintiffs “filed an amended complaint, renewing all claims against the Town defendants (except the § 1985 conspiracy claims), and re-casting the equal protection claim against the Village.” Ruston, 2010 WL 2680644, at *2. The district court dismissed with prejudice all federal claims against the Town defendants and the Village, and also dismissed the state law claim without prejudice after declining to exercise supplemental jurisdiction. Id. On appeal, the plaintiffs primarily asserted error in the dismissal of their equal protection claim. Id. The Second Circuit summarily rejected their claims of error with respect to the substantive due process claim and the claim challenging the facial constitutionality of the new zoning law. Id. at *2 n.2. The court explained that “[a]s to their substantive due process claim, they had no federally protected property right to approval of the sewer hookups or the development itself (as approval of either required a favorable exercise of discretion), and they did not allege governmental behavior that ‘may fairly be said to shock the contemporary conscience . . . .’” Id. (internal citations omitted). “As to the facial constitutionality of the new zoning law, [the court held that] the Rustons failed to allege that ‘‘no set of circumstances exist[ed] under which the [law] would be valid.’’” Id. (third alteration in original) (citation omitted). The Second Circuit began by noting that “[t]he Supreme Court ha[d] recently clarified the 103

pleading standard required to withstand a motion to dismiss,” and by emphasizing that determining whether a complaint states a plausible claim for relief is a context-specific task. Ruston, 2010 WL 2680644, at *2 (citing Iqbal, 129 S. Ct. at 1950). The court noted that “[d]istrict courts within [the Second] Circuit differ[ed] as to the impact of this pleading standard on a ‘class of one’ equal protection claim,” explaining that “[t]his uncertainty [wa]s attributable to the tension between [i] [the Second Circuit’s] decision in DeMuria v. Hawkes, 328 F.3d 704, 707 (2d Cir. 2003), which held under a now-obsolete pleading standard that a ‘class of one’ claim is adequately pled (‘albeit barely’ so) even without specification of others similarly situated, and [ii] the Supreme Court’s recent clarifications, which require that a complaint allege facts sufficient to establish ‘a plausible claim for relief.’” Id. (quoting Iqbal, 129 S. Ct. at 1950; and citing Twombly, 550 U.S. at 566). The court held that “the pleading standard set out in Iqbal supersedes the ‘general allegation’ deemed sufficient in DeMuria . . . .” Id. at *3. The court concluded that the facts alleged in the complaint were insufficient to meet the Iqbal standard: The Rustons’ complaint fails to allege facts that “plausibly suggest an entitlement to relief.” As to the Town defendants, the Rustons’ argument appears to be that the Town refused to consider their application while considering applications submitted by those similarly situated. However, the Rustons do not allege specific examples of the Town’s proceedings, let alone applications that were made by persons similarly situated. The equal protection claim as to the Town defendants therefore fails for lack of factual allegations to support the legal conclusion. As to the Village, the Rustons argue that other, similarly situated properties were allowed to connect to the Village’s sewer system. The Rustons do identify several properties that allegedly were allowed to connect to the Village’s sewer system, all of them individual homes or businesses that (like the Rustons’ land) were outside the Village but within the Town. We credit, as we must, the factual allegations that these other properties received sewer access while the Rustons’ property did not. Nevertheless the complaint fails to state a claim that would support relief. “[C]lass-of-one plaintiffs must show an extremely high degree of similarity between themselves and the persons to whom they compare themselves.” Clubside, Inc. v. Valentin, 468 F.3d 144, 159 (2d Cir.2006). “Accordingly, to succeed on a class-of-one claim, a plaintiff must establish that (i) no rational person could regard the circumstances of the plaintiff to differ from those of a comparator to a degree that would justify the differential treatment on the basis of 104

a legitimate government policy; and (ii) the similarity in circumstances and difference in treatment are sufficient to exclude the possibility that the defendants acted on the basis of a mistake.” Id. (internal quotation marks omitted). Under this standard, none of the properties cited by the Rustons suffice: a house built in 1987; a country club that was renovated in “the early 1990’s”; two neighboring properties—“connected to the Village sewer system for decades”—that are not further described; a house built “in or around 2004”; a “luxury spa” built “in the late 1990’s”; and a “large commercial building.” None of these properties is similar to the Rustons’ proposed 14-home development, let alone so similar that no rational person could see them as different: some are commercial properties versus the residential properties at issue, see Campbell v. Rainbow City, 434 F.3d 1306, 1314–15 (11th Cir. 2006) (properties that differed in land use were not prima facie similarly situated); see also Clubside, Inc., 468 F.3d at 159, and the residential connections were single homes, not a new development as proposed by the Rustons, see id. at 159–60 (projects involving “different types of housing and density levels” were not similarly situated as a matter of law). As the Rustons fail to allege that properties sufficiently similar to theirs were treated more favorably by either the Village or the Town, they have failed to state a “class of one” equal protection claim. Id. at *3–4 (alterations in original). •

Vaughn v. Air Line Pilots Ass’n, Int’l, 604 F.3d 703, No. 08-4173-cv, 2010 WL 1930278 (2d Cir. May 14, 2010). More than 100 U.S. Airways pilots, over or approaching the age of sixty, sued the Air Line Pilots Association, International (“ALPA”) and Duane Woerth, former president of ALPA, alleging violations of the duty of fair representation, among other claims. The district court dismissed the fourth amended complaint, and the Second Circuit affirmed. ALPA was the labor organization that represented U.S. Airways pilots. Id. at *1. Under the collective bargaining agreement in place in 2001, U.S. Airways maintained a defined benefit plan (“DB Plan”) for the pilots, guaranteeing the pilots a certain level of pension benefits at retirement. Id. Under the Employee Retirement Income Security Act (ERISA), the plan was required to have sufficient funding to pay 80% of the promised benefits at all times, and if the funding dropped below that level, U.S. Airways was required to make contributions to ensure sufficient funding. Id. Although the DB Plan was fully funded or over-funded 105

between 1999 and 2001, U.S. Airways reported in 2002 that the plan was only funded at 64%. Id. In the spring and summer of 2002, U.S. Airways negotiated with ALPA to obtain substantial concessions from the pilots on wages and benefits, claiming that the concessions were necessary to avoid bankruptcy. Id. U.S. Airways also obtained tentative approval of a $1 billion loan package guaranteed by the Air Transportation Stabilization Board (“ATSB”), “conditioned on U.S. Airways demonstrating that it could achieve certain revenue and cost reduction targets over a seven-year period.” Vaughn, 2010 WL 1930278, at *1. U.S. Airways filed for Chapter 11 bankruptcy in 2002. Id. at *2. U.S. Airways obtained another loan, but after determining that it could not meet the revenue targets upon which that loan and the earlier loan were conditioned, asked ALPA for additional concessions from the pilots. Id. ALPA did not conduct an independent audit, but agreed to concessions, including modification of the DB Plan. Id. “When confronted by its failure to conduct an audit, ALPA erroneously stated to its members that it could not compel the company to disclose the financial condition of the DB Plan,” while “[i]n fact, the collective bargaining agreement explicitly gave ALPA the right to conduct such an audit.” Id. Despite the additional concessions, the DB Plan continued to have a deficit. Id. After efforts failed to solve the deficit problem, U.S. Airways and ALPA engaged in confidential negotiations that resulted in U.S. Airways agreeing to negotiate and create a follow-up pension plan if the DB Plan had to be terminated. Vaughn, 2010 WL 1930278, at *2. “The terms of this agreement were to remain confidential if and until the DB Plan was terminated, although ALPA members soon learned of the agreement, interpreting it as ALPA’s tacit consent to the DB Plan’s termination.” Id. U.S. Airways then petitioned the bankruptcy court to “distress terminate” the DB Plan under ERISA. Id. ALPA objected, but “the bankruptcy court ruled that U.S. Airways met the requirements for a distress termination, recognizing that the $1 billion loan guarantee from ATSB was dependent on resolution of the pension funding deficit.” Id. U.S. Airways and ALPA engaged in negotiations to terminate the DB Plan and create a follow-up plan, and during the negotiations, “several ALPA members received letters from two union officials, assuring the pilots that they would have an opportunity to vote on any proposal to terminate the DB Plan and implement a new plan.” Id. (footnote omitted). Despite this notice, U.S. Airways and ALPA agreed to replace the DB Plan with a new defined contribution plan (“DC Plan I”), without any vote by ALPA members. Id. The court explained the details of DC Plan I: Under the DC Plan I, U.S. Airways was required to make contributions at different rates for each pilot based on a complex formula aimed at helping pilots achieve a target benefit amount upon retirement. The formula provided for greater contributions to pilots approaching the mandatory retirement age of 60 than to younger pilots who had more time to accrue contributions. However, the higher contributions to older pilots were still limited to 100% of the pilot’s salary, meaning that regardless of the higher contributions, pilots close to 60 were less likely to meet the targeted retirement amount than younger pilots. Plaintiffs also allege that under the plan, older pilots would also receive a significant amount of their 106

contributions subject to immediate taxation whereas younger pilots would be able to defer their tax obligations. In contrast to the DB Plan, U.S. Airways was not required to guarantee a particular benefit level; rather, U.S. Airways only had to make the promised contributions according to the formula. Vaughn, 2010 WL 1930278, at *3. Even after these measures, U.S. Airways filed for a second bankruptcy under Chapter 11, and ALPA then “agreed to further concessions, including an amendment to the defined contribution plan (‘DC Plan II’) that eliminated the formula and targeted benefit concept and instead required U.S. Airways to make contributions to each pilot’s individual account at the same rate—10% of the pilot’s salary—regardless of age, seniority, or any other factor.” Id. “At around the same time, some pilots—but not all—received a Summary Annual Report stating that the DB Plan had been fully funded as of December 31, 2002, directly contradicting the statements U.S. Airways and ALPA had made at the time.” Id. The plaintiffs’ complaint alleged breach of the duty of fair representation under the Railway Labor Act against ALPA and Woerth; violations of the Age Discrimination in Employment Act (ADEA) against ALPA and U.S. Airways; violations of ERISA against U.S. Airways; and violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) against ALPA, U.S. Airways, and an entity that had given U.S. Airways a loan. Id. The plaintiffs voluntarily withdrew their claims against U.S. Airways, and the district court granted the motion by the remaining defendants to dismiss all claims. Id. This appellate opinion discussed only the duty of fair representation claims.10 10 The dismissal of the RICO claims was affirmed in a separate Second Circuit opinion. See Vaughn v. Air Line Pilots Ass’n, No. 08-4173-cv, 2010 W L 1932388 (2d Cir. May 14, 2010). The plaintiffs appealed “only the dismissal of those portions of the complaint alleging that ALPA committed racketeering acts premised on fraud-wire fraud, mail fraud and fraud in connection with a bankruptcy proceeding.” Id. at *1. The court noted that predicate acts premised on fraud require pleading scienter, but that Rule 9(b) did not require pleading scienter with specificity. See id. The court cited a pre-Twombly case to noted that “‘the relaxation of Rule 9(b)’s specificity requirement for scienter must not be mistaken for [a] license to base claims fo fraud on speculation and conclusory allegations,’ and a plaintiff must still ‘allege facts that give rise to a strong inference of fraudulent intent.’” Id. (alteration in original) (quoting Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1128 (2d Cir. 1994) (quotation marks and citations omitted)) (internal citation omitted). The Second Circuit rejected the plaintiffs argument that they had established a “strong inference of fraudulent intent”:

W e cannot conclude that plaintiffs have provided a sufficient basis upon which to infer that ALPA had a motive for committing fraud and a clear opportunity to do so. In a nutshell, plaintiffs allege . . . that ALPA conspired with U.S. Airways to “exact hundreds of millions of dollars a year in pilot concessions— for each of several years,” thus “decimat[ing]” pension benefits so that ALPA could receive management fees under the DC Plan and U.S. Airways could terminate the DB Plan. W e cannot draw the requisite “strong inference” of fraudulent intent based on these allegations because: (1) the complaint does not allege that the fees were of such proportion to the amounts frittered away so as to make it plausible that ALPA would engage in the alleged scheme; and (2) ALPA is legally permitted to receive fees for a service. See Rombach v. Chang, 355 F.3d 164, 177 (2d Cir. 2004). In

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On appeal, the plaintiffs argued that the district court erred in dismissing their claims that ALPA breached its duty of fair representation. Id. at *4. The court noted that its “review of such allegations is ‘highly deferential, recognizing the wide latitude that [unions] need for the effective performance of their bargaining responsibilities.’” Vaughn, 2010 WL 1930278, at *4 (alteration in original) (quoting Air Line Pilots Ass’n v. O’Neill, 499 U.S. 65, 74 (1991)). Proving a union has breached its duty of fair representation requires establishing that the union’s actions or inactions “‘are either ‘arbitrary, discriminatory, or in bad faith’’” and that there is “‘a causal connection between the union’s wrongful conduct and [the plaintiffs’] injuries.’” Id. (citations omitted). The court noted that “[a] union’s actions are ‘arbitrary only if, in light of the factual and legal landscape at the time of the union’s actions, the union’s behavior is so far outside a wide range of reasonableness as to be irrational,’” and that “‘even negligence on the union’s part does not give rise to a breach.’” Id. (citations omitted). The court held: Applying those standards here, we conclude that the district court did not err in dismissing counts I through III of the complaint. Count I alleges that ALPA’s failure to conduct an audit, misrepresentation of its ability to do so, and later after-the-fact audit were a breach of the duty of fair representation. However, the allegations are only capable of supporting a finding that ALPA acted negligently. Since, even as alleged in the complaint, these events occurred against a particular “factual landscape”—after September 11, 2001, when U.S. Airways “suffered further severe economic losses on top of prior financial difficulties,”—we cannot conclude that ALPA’s failure to conduct the audit was “so far outside a wide range of reasonableness as to be irrational.” O’Neill, 499 U.S. at 67 (internal citations and quotation marks omitted). Id. at *5 (footnote omitted). The court rejected the argument that “ALPA acted in bad faith by agreeing to the termination of the DB Plan so that it could reap lucrative fees for managing the follow-up plan,” stating: As pled, we do not believe that the allegations “nudge [plaintiffs’ claim] across the line from conceivable to plausible.” Iqbal, 129 S. Ct. at 1951 (quoting Twombly, 550 U.S. at 570). The complaint does not allege that the fees were of such proportion to the concessions so as to make it plausible that ALPA was improperly motivated by the fees when it agreed to the termination of the DB Plan. Plaintiffs have

addition, the alleged circumstances of conscious behavior are insufficient to raise the strong inference of fraudulent intent for the same reasons those allegations fail to support plaintiffs’ duty of fair representation claims. Id. at *2 (alteration in original).

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offered no plausible explanation for why ALPA would believe that such an arrangement would be in its self-interest. As for ALPA’s alleged intentional misrepresentation of its right to conduct an audit, plaintiffs themselves allege that ALPA made the misrepresentation in an attempt to “legitimize ALPA’s abdication of its responsibility,” an allegation that supports a claim of negligence, not bad faith. Id. (alteration in original) (footnote omitted). The court pointed out that “the mere collection of management fees in exchange for services legally rendered does not, without more, evidence an improper motive,” noting that the cases the plaintiffs cited all involved illegal kickback schemes, but the plaintiffs had not alleged an illegal kickback scheme here. Id. The court also concluded: Moreover, plaintiffs have failed to allege a causal connection between ALPA’s failure to conduct the audit and the termination of the DB Plan. When ALPA finally did hire an actuary to conduct an audit, the actuary confirmed U.S. Airways’s numbers. Thus, it is unclear how the audit would have increased ALPA’s bargaining power or changed the result of the negotiations. Plaintiffs argue that the later audit was insufficient because it “simply asked an actuary to use U.S. Airways’ same models (indeed, their same computer and numbers) to make sure those numbers added up correctly.” Yet, Plaintiffs themselves state in their complaint that the DB Plan was only funded at 64% in 2002. Thus, whether or not the later audit was sufficient, plaintiffs appear to agree with U.S. Airways that the DB Plan was substantially underfunded. Vaughn, 2010 WL 1930278, at *5 (footnote and internal citation omitted). The court dismissed the plaintiffs’ argument that the Summary Annual Report stated that the DB Plan was fully funded in December 2002 and thus created a fact issue as to whether the DB Plan was actually underfunded in 2002, noting that “plaintiffs themselves do not allege that the plan was fully funded in 2002 and, indeed, allege the opposite—that it was underfunded at 64%.” Id. at *5 n.7. The court stated that “Plaintiffs may not argue this both ways—they either believe that the DB Plan was underfunded or they believe it is an open question.” Id. In Count II, the plaintiffs made the same allegations as in Count I, “but further allege[d] that ALPA officials promised that termination of the DB Plan would be voted on by the membership, but notwithstanding this promise, no vote was held, and the plan was terminated.” Id. at *6. With respect to causation, “this count alleged that ‘ALPA’s rapid turnaround on the ratification issue prevented pilots from having any say as to the terms of the proposed DC Plan and thus disadvantaged certain ALPA members,’ and further that ‘[t]he promise of a ratification vote lulled the pilots into a false sense of security, with the result that they could do nothing but watch as their rights and their futures were traded away.’” Id. (alteration in original). The Second Circuit concluded that the complaint failed 109

to plead causation adequately: Assuming that the allegations in count II, if true, would constitute bad faith, plaintiffs have failed to plead a causal connection between this claim and their injuries. Plaintiffs have not alleged that, had a vote occurred, the pilots would not have voted for the DB Plan. Nor do they allege that rejecting the agreement would have resulted in a plan more generous to older pilots. It is true that if plaintiffs had been informed that no vote would take place, they might have lobbied hard to prevent termination of the DC Plan I. But even then, there is no allegation that the DB Plan could have been saved, given the bankruptcy court’s ruling that U.S. Airways qualified for distress termination. In short, plaintiffs have failed to plausibly allege that ALPA’s alleged bad faith affected the outcome of the negotiations in any way. Id. (footnote omitted). In Count III, “plaintiffs allege[d] that ALPA discriminated against them by agreeing to the terms of the DC Plans, which ‘impacted older pilots more harshly than younger pilots.’” Vaughn, 2010 WL 1930278, at *6 (citation omitted). Noting that “a union’s acts are only discriminatory if they are ‘intentional, severe, and unrelated to legitimate union objectives,’” the court held: Here, the DC Plan I actually benefitted older pilots by requiring U.S. Airways to make larger contributions to older pilots’ plans, which directly contradicts plaintiffs’ theory that ALPA intended to discriminate against them. Similarly, the DC Plan II guaranteed older and younger pilots pension benefits based on the same formula—10% of the pilot’s salary. The fact that older pilots may have received fewer benefits under the plan is, as the district court explained in the context of plaintiffs’ ADEA claims, “the result of basic economics, specifically the time value of money, and is not related to the older pilots’ age.” Id. The court also noted that “there is no requirement that unions treat their members identically as long as their actions are related to legitimate union objectives.” Id. The court concluded that “[g]iven that U.S. Airways could not successfully reorganize and emerge from bankruptcy protection without decreasing its pension obligations, it was inevitable that the resulting negotiations would affect some pilots more harshly than others,” and that “[w]ithout additional evidence that the union intended to discriminate against plaintiffs, the mere fact that older pilots were disproportionately affected [wa]s not sufficient to show that ALPA acted in a discriminatory manner.” Id. 110



Kregler v. City of New York, 375 F. App’x 143, No. 09-3840-cv, 2010 WL 1740806 (2d Cir. May 3, 2010) (unpublished summary order).11 The Second Circuit overturned the district court’s dismissal of Kregler’s complaint under § 1983. The court discussed the pleading standards after Iqbal and concluded: Kregler’s amended complaint pleads facts sufficient to clear this threshold. He alleges that in response to his announced stance in support of a candidate in a heated local political campaign, employees of the New York City Fire Department induced contacts at the Department of Investigation to prevent his appointment as a City Marshal. This allegation is neither a legal conclusion nor asserts a claim that is implausible on its face. Kregler’s claim that political animus caused certain defendants to lie about or mischaracterize Kregler’s disciplinary record, and that that same political animus caused other defendants to accept their misrepresentations is not implausible on its face and therefore not susceptible to a motion to dismiss. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Id. at *1 (footnote omitted). The court noted that the district court had utilized a Rule 12(i) hearing12 to examine the issue, but “express[ed] no opinion . . . as to the use of that procedure

11

A summary of the district court’s opinion in this case was included in an earlier version of this memo, but has now been removed from the appendix because the decision was vacated on appeal. 12

Rule 12(i)— formerly Rule 12(d) before the 2007 restyling— provides: “If a party so moves, any defense listed in Rule 12(b)(1)–(7)— whether made in a pleading or by motion— and a motion under Rule 12(c) must be heard and decided before trial unless the court orders a deferral until trial.” F ED . R. C IV . P. 12(i). According to one treatise, “Rule 12(i) allows a party to assert Rule 12(b) defenses and a Rule 12(c) motion for judgment on the pleadings before trial on the merits, contemplating the possible hearing and determination of jurisdictional or other issues in advance of trial. The district court is free to decide the best way to deal with the question, because neither the federal rules nor the statutes provide a prescribed course. The court’s decision whether to hold a preliminary hearing or to defer the matter to trial on the merits may be set aside on appeal only for abuse of discretion.” 2 J AM ES W M . M OO RE ET AL., M OO RE ’S F EDERAL P RACTICE § 12.50 at 12-142 (3d ed. 2009) (footnotes omitted). The treatise explains: “Because most of the defenses in Rule 12(b) that can be addressed by a preliminary hearing affect the court’s jurisdiction, it is advisable to dispose of them before trial if at all possible, regardless of the court’s power to defer them. On the other hand, if ruling on the defense entails substantial consideration of the merits, as is often the case, the question can most effectively be addressed during trial. Deferring matters until trial also allows a court to give consideration to matters with such grave consequences as motions for dismissal under Rule 12(b)(1)–(7) or a judgment on the pleadings under Rule 12(c).” Id. at 12-143. The treatise also notes that “[b]oth Rule 12’s preliminary hearing and its discretionary deferral to trial are valuable but often overlooked tools in the court’s arsenal.” Id. at 12-143–44. Another treatise has explained that in determining whether to exercise discretion to grant a preliminary hearing, as opposed to deferring the issues to trial, “the district court must balance the need to test the sufficiency of the defense or objection and the right of a party to have his defense or objection decided promptly and thereby possibly avoid costly and protracted litigation against such factors as the expense and delay the hearing may cause, the difficulty or likelihood of arriving at a meaningful result of the question presented by the motion at the hearing, and the possibility that the issue to be decided on the hearing is so interwoven with the merits of the case, which . . . can occur in various contexts, that a postponement until trial is desirable.” 5C C H A R LE S A. W R IGH T & A RTHU R R. M ILLER , F ED ERAL P RACTICE AN D

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or the impact of the facts adduced therein.” Id. at *1 n.1. The court held that “Kregler’s motion for leave to amend, which was denied below as futile, should be granted upon remand.” Id. at *2. •

Arista Records LLC v. Doe 3, 604 F.3d 110, No. 09-0905-cv, 2010 WL 1729107 (2d Cir. Apr. 29, 2010). In this copyright infringement case, the district judge approved the magistrate judge’s ruling denying the defendants’ motion to quash a subpoena served on the defendants’ Internet service providers seeking information disclosing the defendants’ identities. Id. at *1. In considering the motion to quash, the magistrate judge looked at the allegations in the complaint and concluded that the defendants’ qualified First Amendment right of anonymity was outweighed by the plaintiffs’ allegations that the defendants were illegally downloading and/or distributing copyrighted music over the Internet and the plaintiffs’ need for the information in order to enforce their rights. Id. On appeal, defendant Doe 3 argued that the allegations in the complaint were not sufficient to overcome his First Amendment right of anonymity and that the motion to quash was improperly referred to the magistrate judge. Id. The Second Circuit affirmed. The plaintiff recording companies’ complaint alleged that the defendants had infringed the plaintiffs’ copyrights by using an online file-sharing network to download and/or distribute the plaintiffs’ copyrighted music. Id. The complaint attached an Exhibit A, which listed for each defendant: the IP address at a stated date and time, the name of the file-sharing network used, the titles of 6–10 songs downloaded from the IP address, and which plaintiff was the copyright owner of each song. Id. The complaint requested damages and injunctive relief prohibiting further infringement of the copyrights. Arista Records, 2010 WL 1729107, at *1. The plaintiffs did not know the defendants’ identities, and sought authorization to serve a subpoena on the defendants’ common ISP, the State University of New York at Albany (“SUNYA”), to obtain each defendant’s name, address, phone number, email address, and Media Access Control address identifying the device engaged in the online communication. Id. The plaintiffs ultimately voluntarily dismissed most of the defendants, and the remaining defendants filed a motion to quash, arguing that the First Amendment provided them with a qualified right to use the Internet anonymously and that under Rule 45(c)(3)(A)(iii), a subpoena must be quashed or modified if it “‘requires disclosure of privileged or other protected matter, if no exception or waiver applies.’” Id. at *2. The defendants conceded that the First Amendment right to anonymity was not a license to infringe copyrights, but argued that their privilege could “‘only be overcome by a substantial and particularized showing,’ sufficient to ‘plead a prima facie case of copyright infringement,’” a showing that

P RO CED U RE § 1373 (3d ed. 2004) (footnotes omitted). This treatise also notes: “A district court cannot dismiss a complaint on the basis of a Rule 12(b) defense or objection without giving the plaintiff an opportunity to be heard; a dismissal without that opportunity has been properly characterized as a denial of due process. At a preliminary hearing, the court may consider affidavits and other documentary matter and if the decision turns on issues of credibility or disputed questions of fact, the district judge may hear oral testimony.” Id. (footnotes omitted). The treatise further notes that “[i]f the issue is of so complex or uncertain a nature that witnesses are necessary, it would be wise for the court to defer the determination of the matter until trial.” Id. (footnote omitted).

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the defendants argued was not made in the complaint. Id. The defendants argued that the heightened pleading standard imposed by Twombly required the plaintiffs to “‘state, on personal knowledge, a specific claim for copyright infringement against each and every Doe defendant.’” Id. Specifically, the defendants asserted that the plaintiffs were required to present specific evidence, including a declaration from whoever examined the files available for download from each defendant’s computer, listened to the files, verified that they were copyrighted songs, determined that the copyrights were registered (and to which plaintiffs), to list the songs that a particular defendant made available for download, and to annex corresponding copyright registration certificates for the songs. Id. (quotation marks omitted). The defendants further argued that the complaint failed to allege actual distribution of song files to the public and that the plaintiffs were required to both show that their claims could withstand a motion to dismiss for failure to state a claim and produce sufficient evidence supporting each element of the claims. Arista Records, 2010 WL 1729107, at *2. The magistrate judge evaluated five factors for balancing the First Amendment right to anonymity against a copyright owner’s right to disclosure of the identity of a possible trespasser, including: the defendants’ expectation of privacy, the prima facie strength of plaintiffs’ claims of injury, the specificity of the discovery request, the plaintiffs’ need for the information, and the availability of the information through other means. Id. at *3. The magistrate judge concluded that all five factors weighed against quashing the subpoena, and noted that the “plaintiffs had sufficiently pleaded copyright infringement claims, alleging ownership of the copyrights, copying, and distribution of the protected works by the Doe defendants without the consent of the owners.” Id. The magistrate judge also noted that the allegations of distribution were supported by Exhibit A, which specified the plaintiffs’ investigator’s sampling of some of the downloads. Id. On review of the magistrate judge’s decision, the district court rejected the contention that Doe 3’s motion to quash was “in essence a motion to dismiss under Rule 12(b)(6) and hence was a dispositive motion, noting that the Rule, by its terms confers the right to move for dismissal for failure to state a claim on ‘‘a party,’’” and that because the defendants had not yet been served, they were not yet “parties.” Id. at *4. The court rejected the proposition that the magistrate judge lacked authority to rule on the motion. Id. Doe 3’s primary appellate argument was that the complaint did not state a claim sufficient to overcome his First Amendment privilege of anonymity. Arista Records, 2010 WL 1729107, at *4. The Second Circuit agreed that the motion to quash was not a dispositive motion, explaining that under the five-factor test the magistrate judge applied, the judge could have granted the motion “despite the sufficiency of the Complaint if it had found, for example, that the subpoena was unduly broad or that plaintiffs had easy access to the Doe 113

defendants’ identities through other means,” and that “[q]uashing the subpoena on such a basis plainly would not have ended the action.” Id. at *5. The court also noted that even if the motion to quash could be considered a dispositive motion, that would only have resulted in de novo review by the district court, and the district court had indicated that even under de novo review, it would have upheld denial of the motion. Id. With respect to the challenge to the substantive ruling on the motion to quash, “Doe 3 contend[ed] that the court should have found that plaintiffs did not make a ‘particularized showing’ sufficient to overcome his qualified privilege.” Id. at *7 (internal citation omitted). The Second Circuit held that “[n]either Doe 3’s reliance on Twombly/Iqbal nor his contention that plaintiffs’ allegations [we]re insufficiently specific ha[d] merit.” Id. at *8. The court explained: [T]he notion that Twombly imposed a heightened standard that requires a complaint to include specific evidence, factual allegations in addition to those required by Rule 8, and declarations from the persons who collected the evidence is belied by the Twombly opinion itself. The Court noted that Rule 8(a)(2) of the Federal Rules of Civil Procedure “requires only ‘a short and plain statement of the claim showing that the pleader is entitled to relief,’ in order to give the defendant fair notice of what the . . . claim is and the grounds upon which it rests,” Twombly, 550 U.S. at 555 (other internal quotation marks omitted); see also Swierkiewicz v. Sorema N.A., 534 U.S. 506, 508, 512 (2002) (holding that, at the pleading stage, an employment discrimination plaintiff who alleges facts that provide fair notice of his claim need not also allege “specific facts establishing a prima facie case,” for such a “heightened pleading standard . . . conflicts with Federal Rule of Civil Procedure 8(a)(2).”). Id. (omissions in original). The court also noted that “[t]he Twombly plausibility standard, which applies to all civil actions, see Iqbal, 129 S. Ct. at 1953, does not prevent a plaintiff from ‘pleading facts alleged ‘upon information and belief,’’ where the facts are peculiarly within the possession and control of the defendant, see, e.g., Boykin v. KeyCorp., 521 F.3d 202, 215 (2d Cir. 2008), or where the belief is based on factual information that makes the inference of culpability plausible, see Iqbal, 129 S. Ct. at 1949 . . . .” Arista Records, 2010 WL 1729107, at *8. The court pointed out that the Twombly court specifically stated that “‘we do not apply any ‘heightened’ pleading standard,’” and “emphasized that its holding was consistent with its ruling in Swierkiewicz that ‘a heightened pleading requirement,’ requiring the pleading of ‘‘specific facts’ beyond those necessary to state [a] claim and the grounds showing entitlement to relief,’ was ‘impermissible.’” Id. at *9 (quoting Twombly, 550 U.S. at 569 n.14, 570 (alterations in original)). The court explained that Iqbal also did not raise the pleading requirements: “Nor did Iqbal heighten the pleading requirements. Rather, it reiterated much of the discussion in Twombly and rejected as insufficient a pleading that the Iqbal Court regarded as entirely conclusory.” Id. “[A]lthough Twombly 114

and Iqbal require ‘‘factual amplification [where] needed to render a claim plausible,’’” id. (alteration in original) (quoting Turkmen v. Ashcroft, 589 F.3d 542, 546 (2d Cir. 2009)), the court “reject[ed] Doe 3’s contention that Twombly and Iqbal require the pleading of specific evidence or extra facts beyond what is needed to make the claim plausible,” id. (first alteration in original). The court found “[e]ven less meritorious . . . Doe 3’s contention that plaintiffs’ showing in the present case was vague and conclusory.” Id. The court noted that the defendant’s brief omitted a crucial portion of the complaint—the citation to Exhibit A. Arista Records, 2010 WL 1729107, at *9. The court explained: To the extent that ¶ 22’s allegations are made on information and belief, virtually all of them are supported by factual assertions in Exhibit A. For example, the allegation that each Doe defendant ‘has used’ file-sharing networks to download and distribute plaintiffs’ music is supported by Exhibit A’s lists of specific songs found in the respective Doe defendants’ file-sharing folders, on the date shown, at the time indicated, on the specified online, peer-to-peer, file-sharing network. The allegation that there was “continue[d]” use is supported by, inter alia, the utter improbability that the songs observed by plaintiffs’ investigators in a given Doe defendant’s file-sharing folder at a particular time were there only at the precise instant at which they were observed, and not before and not afterwards; the inference of continued use is also supported by the facts that Exhibit A lists each of the “Doe” defendants as engaging in such file-sharing on a different date and that defendants’ attorney has represented that some of the “Doe” defendants are in fact the same person. The principal assertion made only on information-and-belief is that defendants’ copying and/or distribution of plaintiffs’ music were without permission. But no more definitive assertion as to lack of permission seems possible when the users remain anonymous. Id. at *10 (emphasis added) (alteration in original) (internal citations omitted). The court noted that “[p]age 3 of . . . Exhibit [A] makes assertions as to Doe 3 and could hardly be more specific.” Id. The court explained that “[i]t specifie[d] that at ‘IP address [ ] 169.226.226.24’ at 2:15:57 a.m. on April 12, 2007, the ‘P2P Network [ ] AresWarez’ was in use (emphases in original); that a total of 236 audio files were present in a file-sharing folder at that IP address at that time; and that among those files were the following songs, whose respective copyrights were owned by the plaintiffs indicated: . . . .” Id. (third and fourth alterations in original). The court concluded that “[g]iven the factual detail in the Complaint and its Exhibit, plaintiffs’ pleading plainly state[d] copyright infringement claims that [we]re plausible.” Id. (citing Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 920 (2005); In re: Aimster Copyright Litig., 334 F.3d 643, 645 (7th Cir. 2003)). The court also noted that the declaration submitted in support of the subpoena “pointed out that Exhibit A list[ed] only samples of the numerous ‘audio files that were being shared by [the Doe d]efendants at the time that the RIAA’s agent . . . observed the infringing activity,’ 115

and that complete lists would be provided to the court upon request.” Id. at *11 (alteration and omission in original) (internal citations omitted). The court stated that “[n]o greater specificity in the Complaint or in plaintiffs’ submissions in support of their request for the subpoena to SUNYA was required.” Arista Records, 2010 WL 1729107, at *11. The court rejected Doe 3’s argument that the complaint did not adequately allege copyright infringement because “merely ‘making . . . available’ a work on a peer-to-peer network does not violate the copyright holder’s distribution right absent proof of actual distribution,” explaining that it did not “need [to] address the question of whether copyright infringement occurs when a work is simply made available . . . because the Complaint allege[d] not that defendants merely made songs available on the network but that defendants both actually downloaded plaintiffs’ copyrighted works and distributed them.” Id. (first omission in original). The court found that “the facts asserted in the Complaint [we]re adequate to support these allegations.” Id. The court noted that it “need not decide whether the requirement [it] endorse[d] . . . , that a plaintiff seeking to subpoena an anonymous Internet defendant’s identifying information must make a ‘concrete showing of a prima facie claim of actionable harm,’ would be satisfied by a well-pleaded complaint unaccompanied by any evidentiary showing” because “plaintiffs’ Complaint, attached exhibit, and supporting declaration [we]re clearly sufficient to meet that standard.” Id. The court affirmed the denial of the motion to quash. •

Shomo v. New York, 374 F. App’x 180, No. 06-5434-pr, 2010 WL 1628771 (2d Cir. Apr. 22, 2010) (unpublished summary order). The district court sua sponte dismissed the pro se plaintiff’s § 1983 complaint, with leave to amend, relying on Rules 8 and 10 and 28 U.S.C. § 1915(e).13 Id. at *1. The court noted that it had not previously set forth a standard of review for sua sponte dismissal of a complaint under Rule 8 or Rule 10, but “conclude[d] that, under either an abuse of discretion or de novo standard, the district court erred in dismissing Appellant’s complaint, even with leave to amend, because many of Appellant’s claims, if true, would be actionable under the Eighth Amendment, the American with Disabilities Act [(ADA)], . . . and section 504 of the Rehabilitation Act of 1973 . . . .” Id. The court found that “[w]hile the district court afforded Appellant the opportunity to amend his complaint, Appellant’s complaint was not so deficient as to require its dismissal at such an early stage of litigation.” Id. The court discussed the standard for dismissal: The jurisprudence involving Rule 8, traced from our decision in Salahuddin[ v. Cuomo, 861 F.2d 40 (2d Cir. 1988)] through the Supreme Court’s recent Iqbal decision, is difficult to apply to the dismissal of a complaint containing too much detail, especially where

13

28 U.S.C. § 1915 addresses proceedings in forma pauperis, and subsection (e)(2) provides that a court shall dismiss the case under certain circumstances, including that the action is frivolous or malicious or fails to state a claim on which relief can be granted. See 28 U.S.C. § 1915(e)(2).

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the complaint is filed by a pro se litigant. On the one hand, pleadings “need only give the defendant fair notice of what the . . . claim is and the grounds upon which it rests,” Erickson v. Pardus, 551 U.S. 89, 93 (2007) (internal quotation marks omitted), and a court has the power to dismiss a complaint that is “prolix” or has a “surfeit of detail,” Salahuddin, 861 F.2d at 42–43. On the other hand, “[d]ismissal . . . is usually reserved for those cases in which the complaint is so confused, ambiguous, vague, or otherwise unintelligible that its true substance, if any, is well disguised.” Id. at 42. A complaint must plead “enough facts to state a claim to relief that is plausible on its face.” See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); see also Ashcroft v. Iqbal, --- U.S. ----, 129 S. Ct. 1937, 1949 (2009) (holding that Rule 8 calls for “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face’”). “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.” Iqbal, 129 S. Ct. at 1949 (citing Twombly, 550 U.S. at 556). Id. (emphasis added). The court emphasized that pro se complaints must be reviewed with leniency, stating that “even after Twombly, where a litigant is proceeding pro se, courts remain ‘obligated’ to construe pro se complaints liberally.” Id. at *2 (citing Harris v. Mills, 572 F.3d 66, 72 (2d Cir. 2009). The court explained that “while pro se complaints must contain sufficient factual allegations to meet the plausibility standard, courts should look for such allegations by reading pro se complaints with ‘special solicitude’ and interpreting them to raise the ‘strongest [claims] that they suggest.’” Shomo, 2010 WL 1628771, at *2 (alteration in original) (quoting Triestman v. Fed. Bureau of Prisons, 470 F.3d 471, 474–75 (2d Cir. 2006) (per curiam) (emphasis in original)). The court concluded that the complaint was sufficient: Notwithstanding the length and detail of Appellant’s complaint, his claims enunciate recognizable unconstitutional behavior. The day-to-day events described by Appellant concern the activities of his daily living: his need to be fed, bathed, and aided with toileting. While citing to numerous federal statutes (a practice not uncommon for pro se litigants), Appellant’s claims centered around his disability and the alleged deliberate indifference to his serious medical needs. He then amplified these claims, as required under Twombly and Iqbal, by making specific references to events that he claimed were evidence of such deliberate indifference. Insofar as he cited multiple civil rights statutes, “[t]he failure in a complaint to state a statute, or to cite the correct one, in no way affects the merits of a claim. Factual allegations alone are what matters.” Albert v. Carovano, 851 F.2d 561, 571 n.3 (2d Cir. 1988). 117

In fact, while not a model of clarity, Appellant’s complaint is neither “unintelligible” nor “a labrynthian prolixity of unrelated and vituperative charges that defied comprehension.” Prezzi v. Schelter, 469 F.2d 691, 692 (2d Cir. 1972). Significantly, we have recognized that it “is not unusual [for] a pro se litigant” to present “allegations [that are] not neatly parsed and include[ ] a great deal of irrelevant detail.” Phillips v. Girdich, 408 F.3d 124, 130 (2d Cir. 2005). The details in Appellant’s complaint are all “related” to his need to be aided in the activities of his daily living. Finally, Appellant’s complaint arguably gave the State “fair notice” of his Eighth Amendment, ADA and Rehabilitation Act claims, allowing it to engage in motion practice or prepare for trial by reviewing Appellant’s medical history, medical needs, and the care provided to him. Id. (alterations in original). With respect to the dismissal under section 1915(e), the court found the dismissal inappropriate “because the district court did not, in fact, review the merits of his claims to determine whether they were frivolous under the relevant civil rights statute, and, in fact, acknowledged that some of the claims had plausible merit.” Id. The court next disapproved of the district court’s order that the plaintiff “confine his amended complaint to a certain number of pages and . . . sue no more than twenty defendants.” Id. at *3. The court explained that “a district court may not impose pleading requirements on a complaint that exceed the floor set by Rule 8 of the Federal Rules of Civil Procedure, ‘[f]or then district courts could impose disparate levels of pleading requirements on different sorts of plaintiffs.’” Id. (quoting Wynder v. McMahaon, 360 F.3d 73, 78 (2d Cir. 2004)). The court explained that imposing such requirements would violate “‘Rule 8’s purpose—to lower the entry barriers for federal plaintiffs and to establish prospectively a rule common to all litigants . . . .’” Id. (quoting Wynder, 360 F.3d at 78). The court noted that although the district court had erred by imposing requirements on the complaint that went beyond the requirements in the civil rules, some aspects of the complaint might not survive dismissal. Shomo, 2010 WL 1628771, at *3. The court explained: “For one thing, there is a critical distinction between the notice requirements of Rule 8(a) and the requirement, under Rule 12(b)(6), that a plaintiff state a claim upon which relief can be granted.” [Wynder, 360 F.3d at 78.] Thus, the district court will remain free to consider whether each claim in any amended complaint states a claim upon which relief can be granted or is otherwise frivolous. 118

Id. The Second Circuit remanded the case to the district court for reinstatement of the plaintiff’s Eighth Amendment, ADA, and Rehabilitation Act claims. Id. •

Peter F. Gaito Architecture, LLC v. Simone Dev. Corp., 602 F.3d 57, No. 09-2613-cv, 2010 WL 1337225 (2d Cir. Apr. 7, 2010). The district court dismissed the plaintiffs’ copyright infringement complaint, finding that it failed to allege substantial similarity between the plaintiffs’ architectural design and the allegedly infringing design, and the Second Circuit affirmed. The complaint alleged that the City of New Rochelle issued a request for development proposals for a mixed-use development in downtown. Id. at *1. The plaintiffs and the defendants agreed to jointly submit a proposal, with the plaintiffs designing the architectural plans and the defendants securing financing. Id. The City awarded the project to the group, and the plaintiffs then registered their designs with the U.S. Copyright Office. Id. Defendant Simone Church Street LLC entered into a memorandum of understanding with New Rochelle to serve as the developer for the project. Id. A dispute arose as to the defendants’ payment to plaintiffs for the project, and the defendants then terminated their relationship with the plaintiffs and instead hired another architectural firm. Id. at *2. The complaint alleged that the defendants used the plaintiffs’ copyrighted designs for the project, and identified 35 alleged similarities between the plaintiffs’ design and the defendants’ redesign. Peter F. Gaito Architecture, 2010 WL 1337225, at *2. The plaintiffs alleged violations of the Copyright Act and asserted claims for quantum meruit and unjust enrichment under state law. Id. The district court granted the defendants’ motion to dismiss, finding that, assuming actual copying occurred, “there was no substantial similarity between defendants’ re-design and the protectible elements of plaintiffs’ design.” Id. The district court then declined to exercise supplemental jurisdiction over the state law claims and dismissed them without prejudice. Id. The Second Circuit considered whether it was proper to determine whether there was a substantial similarity between the two designs at the pleadings stage. The court noted that “questions of non-infringement have traditionally been reserved for the trier of fact,” but stated that “[t]he question of substantial similarity is by no means exclusively reserved for resolution by a jury, however, and we have repeatedly recognized that, in certain circumstances, it is entirely appropriate for a district court to resolve that question as a matter of law, ‘either because the similarity between the two works concerns only non-copyrightable elements of the plaintiff’s work, or because no reasonable jury, properly instructed, could find that the two works are substantially similar.’” Id. at *5 (citations omitted). The court explained that “[t]hese same principles hold true when a defendant raises the question of substantial similarity at the pleadings stage on a motion to dismiss.” Id. The court noted that “[i]n copyright infringement actions, ‘the works themselves supersede and control contrary descriptions of them,’ including ‘any contrary allegations, conclusions or descriptions of the works contained in the pleadings.’” Peter F. Gaito Architecture, 2010 WL 1337225, at *5 (internal citation omitted) (quoting 3-12 NIMMER ON COPYRIGHT § 12.10) (additional citations omitted). The court also noted that “[w]hen a court is called upon to consider whether the works are substantively similar, no discovery or fact-finding is typically necessary, because ‘what is required is only a visual comparison of the works.’” Id. (quoting 119

Folio Impressions, Inc. v. Byer Cal., 937 F.2d 759, 766 (2d Cir. 1991)). The court concluded that “where, as here, the works in question are attached to a plaintiff’s complaint, it is entirely appropriate for the district court to consider the similarity between those works in connection with a motion to dismiss, because the court has before it all that is necessary in order to make such an evaluation.” Id. at *6. The court explained that “[i]f, in making that evaluation, the district court determines that the two works are ‘not substantially similar as a matter of law,’ Kregos v. A.P., 3 F.3d 656, 664 (2d Cir. 1993), the district court can properly conclude that the plaintiff’s complaint, together with the works incorporated therein, do not ‘plausibly give rise to an entitlement to relief.’” Id. (quoting Iqbal, 129 S. Ct. at 1950; citing Wiren v. Shubert Theatre Corp., 5. F. Supp. 358, 362 (S.D.N.Y. 1933)). The court was “mindful that a motion to dismiss does not involve consideration of whether ‘a plaintiff will ultimately prevail’ on the merits, but instead solely ‘whether the claimant is entitled to offer evidence’ in support of his claims,” “acknowledge[d] that there can be certain instances of alleged copyright infringement where the question of substantial similarity cannot be addressed without the aid of discovery or expert testimony,” and stated that “[n]othing in this opinion should be read to upset these settled principles, or to indicate that the question of non-infringement is always properly considered at the pleadings stage without the aid of discovery.” Id. at *7. But the court concluded that “where, as here, the district court has before it all that is necessary to make a comparison of the works in question, . . . [there is] no error in the district court’s decision to resolve the question of substantial similarity as a matter of law on a Rule 12(b)(6) motion to dismiss.” Id. In reviewing whether the two designs were substantially similar, the court noted that it was “principally guided ‘by comparing the contested design’s ‘total concept and overall feel’ with that of the allegedly infringed work,’ as instructed by [the court’s] ‘good eyes and common sense.’” Peter F. Gaito Architecture, 2010 WL 1337225, at *8 (internal citation omitted) (quoting Hamil Am. Inc. v. GFI, 193 F.3d 92, 99 (2d Cir. 1999)). On its de novo review of the designs, the court concluded that there was an “utter lack of similarity between the two designs.” Id. The court stated that “[u]pon examining the ‘total concept and feel’ of the designs with ‘good eyes and common sense,’ . . . [it could] confidently conclude that no ‘average lay observer would recognize the alleged copy as having been appropriated from the copyrighted work.’” Id. at *9 (citations omitted). The court held that “it [could not] be said that defendants misappropriated plaintiffs’ specific ‘personal expression’ of the project, but instead merely used the unprotectible concepts and ideas contained in plaintiffs’ designs.” Id. at *11. The court held that “because plaintiffs ha[d] failed to allege that ‘a substantial similarity exists between [defendants’] work and the protectible elements of [plaintiffs’],’ the district court properly dismissed plaintiffs’ federal copyright claim.” Id. (second and third alterations in original) (internal citation omitted). The court also found no error in the district court declining to exercise supplemental jurisdiction over the state law claims, after the federal claim was dismissed. Id. The court concluded that the complaint did not “‘state a claim to relief that [wa]s plausible on its face,’” and affirmed the dismissal. Peter F. Gaito Architecture, 2010 WL 1337225, at *11 (quoting Iqbal, 129 S. Ct. at 1949). •

Kuck v. Danaher, 600 F.3d 159, No. 08-5368-cv, 2010 WL 1039273 (2d Cir. Mar. 23, 120

2010). The plaintiff alleged that his rights were violated when he attempted to renew his permit to carry a firearm with the Connecticut Department of Public Safety (“DPS”). Id. at *1. According to the complaint, after Kuck applied to renew his permit, a DPS employee requested that Kuck provide a U.S. passport, birth certificate, or voter registration card to prove his citizenship. Id. Kuck objected, arguing that he had submitted proof of citizenship when he first applied for a permit and that he had not been required to provide proof of citizenship with a previous renewal application. Id. Kuck alleged that “the DPS requirement was arbitrary, designed to harass, and, in any event, not authorized by state law.” Id. Kuck refused to provide the documentation and his permit was denied. Id. Kuck, who served as Secretary of the Board of Firearms Permit Examiners, appealed to the Board. Kuck, 2010 WL 1039273, at *1. His appeal hearing was not scheduled for over eighteen months, and he was deprived of his permit during that time. Id. Just before his hearing, but after his lawsuit was filed, Kuck provided documentation, and his renewal request was granted. Id. Kuck “contend[ed] that DPS and the Board ha[d] acted to burden gun-owners’ ability to obtain carry permits by improperly denying applications in the first instance and then subjecting applicants to unjustified and prolonged appeals.” Id. at *2. Kuck asserted a violation of procedural due process, a violation of substantive due process, and a First Amendment retaliation claim. Id. Kuck filed the suit as a putative class action, “seeking to represent a class of individuals whose permits ha[d] been erroneously denied by DPS and ha[d] subsequently been subjected to a long-delayed appeal before the Board.” Id. The district court dismissed, finding that “the hearing delay was not so long as to make the availability of review ‘meaningless or nonexistent.’” Kuck, 2010 WL 1039273, at *2. The district court also denied Kuck’s request to amend his complaint as futile. Id. With respect to the procedural due process claim, “Kuck’s main contention [wa]s that the eighteen-month period he waited to receive an appeal hearing before the Board was, in light of the liberty interest at stake, excessive and unwarranted, and thus violated due process.” Id. “Kuck further allege[d] that, as a matter of practice, DPS deliberately seeks to prolong the appeals process in order to unlawfully deprive citizens of pistol permits.” Id. The Second Circuit noted that under the Supreme Court’s decision in Mathews v. Eldridge, 424 U.S. 319 (1976), the court was required to balance three factors, and explained that “determining the moment at which state procedures become so untimely that they become meaningless is a matter of context, driven by the Mathews factors.” Kuck, 2010 WL 1039273, at *3. The court determined that the first factor—the private interest at stake—“[t]hough not overwhelming or absolute, . . . remain[ed] significant.” Id. at *5. With respect to the second factor—the risk of erroneous deprivation—the court noted that Kuck alleged that “the DPS frequently denies permit applications for bogus or frivolous reasons, thereby subjecting qualified applicants to a lengthy appeals process, only to grant the permit months or years later, just before the appeal hearing,” and that “Kuck claimed that DPS was not entitled under state law to require proof of citizenship with his 2007 renewal application, and that his permit should not have been denied for lack of such documentation.” Id. “Kuck offer[ed] figures suggesting that the number of appeals ‘resolved’ without a hearing [wa]s indeed far greater than those actually heard by the Board,” and the court noted that “[t]his data [wa]s consistent with [Kuck’s] allegation that many permits are granted or reinstated 121

shortly before the Board is due to hear the applicant’s appeal.” Id. The court also noted that “Kuck . . . [wa]s in an unusual position to describe the process by which appeals [we]re resolved,” explaining that “[be]cause he sits on the Board itself, his allegations ha[d] some additional plausibility at this early stage of the proceedings.” Id. at *5 n.5 (citing Iqbal, 129 S. Ct. at 1950, for the proposition that “‘[d]etermining whether a complaint states a plausible claim for relief will . . . be a context-specific task’”). Kuck alleged that the delay was not trivial, resulting in applicants waiting fourteen to twenty months to receive an appeal hearing. Id. at *5. The court held that “[t]ogether, these allegations plausibly allege[d] a state practice of delaying appeals, only to moot them at the very last minute, after the applicant has waited more than one year for a hearing.” Kuck, 2010 WL 1039273, at *5 (citing Iqbal, 129 S. Ct. at 1949–50). The court concluded that the second Mathews factor weighed in favor of Kuck at the early stage of litigation. Id. With respect to the third factor—the governmental interest at stake—the court found the state’s explanation for delay “far from overwhelming,” noting that “the complaint suggest[ed] that the appeal sits gathering dust for nearly all of the interim period, awaiting a scheduled hearing date.” Id. at *6. The court concluded that Kuck had properly stated a procedural due process claim, and noted that “[w]hether discovery will bear out his claim is a matter for the district court to determine on remand.” Id. Kuck also asserted a substantive due process claim, alleging that the “DPS imposed arbitrary requirements contrary to state law which, when combined with the lengthy appeals process, denied him substantive due process.” Id. at *7. The appellate court agreed with the district court that “DPS’s alleged misconduct was not so ‘egregious, outrageous, or shocking to the contemporary conscience’ that it violated substantive due process.” Id. The court noted that “nothing in the complaint ‘shocks the conscience’ or suggests a ‘gross abuse of governmental authority,’” and that “substantive due process does not entitle federal courts to examine every alleged violation of state law, especially ones that, while perhaps vexatious, are more routine than egregious.” Kuck, 2010 WL 1039273, at *7. The court affirmed the dismissal of this claim. Kuck also asserted “that his First Amendment rights were violated when he was threatened and harassed by a DPS officer, allegedly on account of his outspoken criticism of the agency and the appeals board.” Id. The court concluded that “[w]hile Kuck ha[d] adequately alleged that he engaged in protected speech, he ha[d] not pleaded facts that suggest[ed] he was actually threatened by any of the defendants,” explaining that “[a]t most, the allegations suggest[ed] that the DPS officer intended to strictly enforce laws limiting the sale of firearms at upcoming gun shows.” Id. Because “retaliation cannot be established where no adverse action has been alleged,” and because “nothing in the complaint suggest[ed] that Kuck’s speech was ‘actually chilled’ as a result of the DPS officer’s statements,” the Second Circuit affirmed the district court’s dismissal of this claim. Id. The court did not reach the plaintiff’s request to join additional defendants or his motion to amend, and directed the district court to consider these issues on remand. Id. at *8. •

Sanders v. Grenadier Realty, Inc., 367 F. App’x 173, No. 09-2341-cv, 2010 WL 605715 (2d 122

Cir. Feb. 22, 2010) (unpublished summary order). The plaintiffs, who served as president and vice president of their housing project’s tenants’ association, sued the housing project (Stevenson Commons) and Grenadier Realty, Inc. for violations of 42 U.S.C. § 1982, the Fair Housing Act (FHA), 42 U.S.C. § 3601 et seq., the First Amendment, and New York state law. Id. at *1. The district court dismissed the complaint under Rule 12(b)(6) and denied leave to amend. Id. The Second Circuit affirmed. In support of the section 1982 claim, the plaintiffs alleged that “‘[u]pon information and belief, non-black residents have been granted subsidies and re-certifications while plaintiffs have been denied the same in the same period,’” and that “‘[i]n light of the foregoing therefore, the defendants discriminated against plaintiffs on account of their race and national origin in violation of Title VIII, and sections 1982 and 1981.’” Id. The Second Circuit concluded that “[w]hile paragraph 17 d[id] allege facts consistent with a discrimination claim, i.e., that non-black residents were granted subsidies, it nevertheless ‘stop[ped] short of the line between possibility and plausibility of entitlement to relief’ because plaintiffs d[id] not allege any facts supporting an inference of racial animus.” Id. (internal citation to Iqbal, 129 S. Ct. at 1949, omitted). The court disapproved of the plaintiffs’ use of pleading “on information and belief” under the circumstances: Further, plaintiffs allege no basis for the “information and belief” on which their assertion that non-black residents were granted subsidies rests. “[P]leading on information and belief is not an appropriate form of pleading if the matter is within the personal knowledge of the pleader or ‘presumptively’ within his knowledge, unless he rebuts that presumption. Thus, matters of public record or matters generally known in the community should not be alleged on information and belief inasmuch as everyone is held to be conversant with them.” 5 CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 1224, at 300–01 (3d ed. 2004). Because the complaint does not illuminate the nature of the challenged re-certification process, we do not know whether this assertion is a matter of public record which plaintiffs should plead on personal knowledge. In any event, while pleadings may be based on “the best of the [attorney’s] knowledge, information, and belief,” that information and belief must be “formed after an inquiry reasonable under the circumstances.” FED . R. CIV . P. 11. Id. at *1 n.2 (alterations in original). The court held that the section 1982 claim was properly dismissed. Sanders, 2010 WL 605715, at *1. In support of the plaintiffs’ FHA claim, they “alleged that they were ‘refused a recertification that would [have] granted [them] much needed rent subsidies’ in violation of the FHA.” Id. at *2 (alterations in original). The court held that the complaint “fail[ed] adequately to plead that plaintiffs ‘were qualified to rent or purchase the housing,’” noting that the only support 123

in the complaint consisted of the conclusory allegations that “‘Sanders was . . . denied the right to subsidies that she is entitled to,’” and that “‘[a]t all times plaintiffs were competent and able to pay their rent under the subsidies offered to [them] under the National Housing Act.’” Id. (third alteration in original). The court explained that “a necessary precondition to rent subsidies is a resident’s submission of required reports as to her income and household composition within ten days of the landlord’s written request,” and that “[b]ecause plaintiffs ha[d] not alleged satisfaction of this requirement for the year at issue, [the court could not] conclude that the complaint plausibly allege[d] plaintiffs’ entitlement to the subsidies that qualif[ied] them to pay their rent.” Id. The court held that “[i]n light of this omission and plaintiffs’ failure to allege what defendants did or did not do to deny them subsidies, [there was] no error in the district court’s dismissal of plaintiffs’ FHA claim.” Id. (citing Iqbal, 129 S. Ct. at 1949, for the proposition that “‘[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice’”). The district court dismissed the First Amendment claim because the plaintiffs did not adequately plead that the defendants were state actors, and the appellate court found this dismissal proper. See id. The Second Circuit explained that “the complaint [wa]s ambiguous regarding the relationship between defendants’ challenged conduct and decisions regarding government subsidies,” and that “[p]laintiffs’ allegation that ‘they have also been threatened with eviction and refused a recertification that would [have] granted [them] much needed rent subsidies,’ [wa]s insufficient to support an inference of state action because it d[id] not demonstrate state responsibility for tenants’ recertification.” Sanders, 2010 WL 605715, at *2 (second and third alterations in original) (internal citation omitted). In addition, the court noted that “the fact of government subsidy, by itself, [cannot] establish state action.” Id. (citation omitted). The Second Circuit also affirmed the denial of leave to amend, noting that the “plaintiffs were afforded two opportunities to amend before their complaint was dismissed” and “the district court reasonably concluded that leave to amend would be futile because the affidavits plaintiffs submitted in support of their proposed additional claims contained the same deficient, conclusory allegations that led the district court to dismiss the complaint.” Id. at *3. •

Samuel v. Bellevue Hosp. Ctr., 366 F. App’x 206, No. 08-4635-cv, 2010 WL 537725 (2d Cir. Feb. 17, 2010) (unpublished summary order), cert. denied, 131 S. Ct. 100 (2010). The plaintiff appealed the district court’s dismissal of his employment discrimination lawsuit. Id. at *1. The Second Circuit noted that “the district court’s method of dismissing part of Samuel’s complaint by anticipating an inability to prevail on summary judgment was questionable,” but concluded that the judgment could be affirmed on other grounds. Id. The court held that “[i]n the context of the fantastic and delusional nature of the majority of his complaint, Samuel failed to allege sufficient facts to render plausible his conclusory assertion that the defendants discriminated against him on the basis of his membership in a protected class,” and that “[a]ccordingly, Samuel ha[d] not created a reasonable inference that Bellevue Hospital Center [wa]s liable for the misconduct alleged.” Id. (citing Iqbal, 129 S. Ct. at 124

1949). •

Hayden v. Paterson, 594 F.3d 150 (2d Cir. 2010). The complaint challenged the validity of New York’s constitutional provision that required the legislature to enact felon disenfranchisement laws and a New York election law that disenfranchised convicted felons who were incarcerated or on parole. Id. at 154. The plaintiffs alleged that these enactments violated their rights under the Voting Rights Act of 1965 (VRA); the First, Fourteenth and Fifteenth Amendments to the Constitution; the Civil Rights Acts of 1957 and 1960; and customary international law. Id. The defendants moved for judgment on the pleadings under Rule 12(c). Id. The district court dismissed the VRA claim, and the Second Circuit, sitting en banc, had previously affirmed that decision, finding that the VRA did not apply to prisoner disenfranchisement laws. Id. at 155. The district court also held that the factual allegations were not sufficient to state claims under the Fourteenth and Fifteenth Amendments because the allegations did not support finding that New York’s constitutional provision requiring the legislature to disenfranchise felons was passed with discriminatory intent and because “New York’s non-uniform legislative practice of disenfranchising only those felons sentenced to incarceration or serving parole ‘[wa]s entirely rationale.’” Id. The only issues on appeal were whether the district court erred in finding that the plaintiffs failed to allege facts to support the intentional discrimination and equal protection claims. Hayden, 594 F.3d at 155. The constitutional provision at issue “require[d] the legislature to ‘enact laws excluding from the right of suffrage all persons convicted of bribery or of any infamous crime,’” and the state statute at issue “prohibit[ed] convicted felons from voting while they [we]re serving a prison sentence or while they [we]re on parole following a prison sentence.” Id. The statute allowed felons to vote if they had completed their sentences or had never been sentenced to a term of imprisonment. Id. The complaint alleged that there was a history of racial discrimination in New York’s disenfranchisement laws, that the state statute was disparately applied, and that there were racial disparities in the disenfranchisement rates of certain minorities. Id. at 157. “[P]laintiffs contend[ed] that New York’s constitutional provision mandating felon disenfranchisement was enacted with the intent to discriminate against persons on account of their race in violation of the Equal Protection Clause of the Fourteenth Amendment and the Fifteenth Amendment.” Id. “Plaintiffs further argue[d] that New York’s felon disenfranchisement scheme violate[d] equal protection guarantees because it distinguish[ed] among felons in an unconstitutional manner by denying the right to vote only to those felons sentenced to incarceration or serving parole and not to those who ha[d] their prison sentence suspended or who [we]re sentenced to probation.” Id. The Second Circuit described the complaint’s factual allegations as follows: New York has historically used a wide variety of mechanisms to discriminate against minority voters. “Throughout the New York Constitutional Conventions addressing the right of suffrage, the framers made explicit statements of intent to discriminate against minority voters.” “Delegates created certain voting requirements that 125

expressly applied only to racial minorities and crafted other provisions with seemingly neutral language that they knew would have a discriminatory effect on racial minorities. The disenfranchisement of felons was one aspect of this effort to deprive minorities of the right to vote.” For example, plaintiffs’ complaint alleges that in 1777, the framers initially excluded minorities “by limiting suffrage to property holders and free men,” but then as more Blacks became property holders and freemen, the legislature removed all property restrictions and instead expressly excluded Blacks from participating in the 1801 election of constitutional delegates. Furthermore, “[a]t the second New York Constitutional Convention in 1821, the delegates met to address the issue of suffrage generally and Black suffrage in particular”; the conversation “sparked heated discussions, during which many delegates expressed the view that racial minorities were essentially unequipped to participate in civil society,” and “[s]ome delegates made explicit statements regarding Blacks’ natural inferiority and unfitness for suffrage.” For example, one delegate to the 1821 convention instructed his colleagues to “[l]ook to your jails and penitentiaries. By whom are they filled? By the very race, whom it is now proposed to cloth [sic] with the power of deciding upon your political rights.” Another delegate urged his fellow delegates to “[s]urvey your prisons—your alms-houses—your bridewells and your penitentiaries, and what a darkening host meets your eye! More than one-third of the convicts and felons which those walls enclose, are of your sable population.” Another argued that the “right of suffrage” should be “extended to White men only.” “Based on their belief in Blacks’ unfitness for democratic participation, the delegates designed new voting requirements aimed at stripping Black citizens of their previously held right to vote.” “Article II of the Constitution of 1821 incorporated the new discriminatory restrictions and contained new and unusually high property requirements that expressly applied only to men of color. Only [a tiny percentage of the total] Black population met these requirements. Article II also provided new citizenship requirements that applied only to men of color. Id.” As one delegate to the 1821 Constitutional Convention explained, while the new property qualification “did not directly restrict the right to vote to the ‘White’ male, as some had desired, nevertheless, the same result was accomplished by inserting property qualifications . . . that were not required for the White man.” “Article II further restricted the suffrage of minorities by permitting the state legislature to disenfranchise 126

persons ‘who have been, or may be, convicted of infamous crimes.’ N.Y. CONST. art. II, § 2. Through common law and legislative interpretation, ‘infamous crimes’ came to mean traditional felonies.” In 1826, an amendment to the New York Constitution abolished all property qualifications for White male suffrage, but left intact the unduly onerous property requirements for Black males. In 1846, at the third Constitutional Convention of New York, “heated debates over suffrage again focused on Blacks. Advocating for the denial of equal suffrage, delegates continued to make explicit statements regarding Blacks’ unfitness for suffrage, including a declaration that the proportion of ‘infamous crime’ in the minority population was more than thirteen times that in the White population.” “Felon disenfranchisement was further solidified in the Convention of 1846. As amended, the relevant constitutional provision stated: ‘Laws may be passed excluding from the right of suffrage all persons who have been or may be convicted of bribery, of larceny, or of any infamous crime . . . .’ N.Y. Const. art. II, § 2 (amended 1894) (emphasis added).” “When re-enacting the felon disenfranchisement provision and specifically including ‘any infamous crime’ in the category of convictions that would disqualify voters, the delegates were acutely aware that these restrictions would have a discriminatory impact on Blacks.” At the 1866–1867 fourth Constitutional Convention of New York, “after engaging in heated debates,” legislators “rejected various proposals to expand suffrage and instead chose to maintain racially discriminatory property qualifications.” New York’s explicit racially discriminatory suffrage requirements were in place until voided by the adoption of the Fifteenth Amendment to the United States Constitution in 1870. Under § 1 of the Fifteenth Amendment, “The right of citizens of the United States to vote shall not be denied or abridged by the United States or by any State on account of race, color, or previous condition of servitude.” “[T]wo years after the passage of the Fifteenth Amendment, an unprecedented committee convened and amended the disenfranchisement provision of the New York Constitution to require the state legislature, at its following session, to enact laws excluding persons convicted of infamous crimes from the right to vote. N.Y. CONST. art. II, § 2 (amended 1894). Theretofore, the enactment of such laws was permissive.” Hayden, 594 F.3d at 157–59 (alterations in original) (internal citations and footnotes omitted). However, the court noted that “[u]nlike the allegations just described, plaintiffs’ 127

complaint include[d] no specific factual allegations of discriminatory intent that post-date 1874.” Id. at 159. The court explained: For example, with regard to the present constitutional provision that remains in force today and that was enacted in 1894, plaintiffs simply state that “[i]n 1894, at the Constitutional Convention following the [1874 New York constitutional amendment], the delegates permanently abandoned the permissive language and adopted a constitutional requirement that the legislature enact disenfranchisement laws.” Plaintiffs further allege that this is the constitutional provision “pursuant to which § 5-106 of the New York State Election Law was enacted and under which persons incarcerated and on parole for felony convictions are presently disenfranchised in New York State.” As is apparent from this quoted language, plaintiffs’ amended complaint does not allege any facts as to discriminatory intent behind the delegates’ adoption of the 1894 constitutional provision, which is still in effect today. Nor do plaintiffs make any non-conclusory factual allegations of discriminatory intent with respect to the enactment of, and subsequent amendments to, New York’s felon disenfranchisement statute. Id. (alterations in original). With respect to the allegation that New York’s laws had a disparate impact on particular groups, the plaintiffs alleged that “Blacks and Latinos in New York are prosecuted, convicted, and sentenced to incarceration at rates substantially disproportionate to Whites,” and cited statistics from the 2000 census. Id. at 159–60. The complaint also alleged that “‘Blacks and Latinos are sentenced to incarceration at substantially higher rates than Whites, and Whites are sentenced to probation at substantially higher rates than Blacks and Latinos,” again citing statistics to back up this assertion. Id. at 160. The Second Circuit held that while “plaintiffs’ allegations [were] sufficient with regard to the 1821, 1846, and 1874 constitutional provisions, . . . plaintiffs fail[ed] to allege any nonconclusory facts to support a finding of discriminatory intent as to the 1894 provision or subsequent statutory enactments.” Id. at 161. The court “conclude[d] that plaintiffs fail[ed] to state a claim that [wa]s plausible on its face or, stated differently, that ‘nudge[d] [their] claims of invidious discrimination across the line from conceivable to plausible.’” Id. (fourth alteration in original) (quoting Iqbal, 129 S. Ct. at 1951). The Second Circuit remanded to allow the plaintiffs to seek leave to amend. Hayden, 594 F.3d at 161. The court began its analysis by identifying the conclusory allegations that were not entitled to an assumption of truth. The court stated: Plaintiffs allege, for example, that “[t]he disenfranchisement of felons 128

was one aspect of [constitutional delegates adopting certain voting requirements] to deprive minorities of the right to vote,” which is a “bare assertion[ ] . . . amount[ing] to nothing more than a formulaic recitation of the elements of a constitutional discrimination claim,” Iqbal, 129 S. Ct. at 1951 (internal quotation marks omitted) . . . . Similarly, plaintiffs’ allegation that the 1821 Constitution “further restricted the suffrage of minorities by permitting the state legislature to disenfranchise persons ‘who have been, or may be, convicted of infamous crimes’” is conclusory, for whether the facially neutral disenfranchisement provision “restricted the suffrage of minorities” in effect and intent is the very assertion that plaintiffs must prove. Finally, plaintiffs allege that New York Election Law § 5-106(2) “was enacted pursuant to . . . the New York State Constitution with the intent to disenfranchise Blacks,” which is not only a bare assertion, but is the only allegation in plaintiffs’ amended complaint that New York’s felon disenfranchisement statutory provisions were enacted with discriminatory intent. Id. at 161–62 (alterations and first and third omissions in original) (internal citations omitted). The court explained that after setting aside the conclusory allegations, it still found that the plaintiffs had alleged enough facts to show that the 1821, 1846, and 1874 constitutional provisions were enacted with a racially discriminatory purpose, but that, “fatal to plaintiffs’ intentional discrimination claim, they ha[d] failed to allege that this invidious purpose motivated the enactment of either the 1894 constitutional provision or any of the statutory provisions.” Id. at 162. The court also concluded that the “plaintiffs d[id] not plausibly allege that the 1971 or 1973 amendments to New York Election Law § 5-106(2) were enacted because of the 1894 Constitution’s mandate that the legislature enact felon disenfranchisement laws.” Id. With respect to Iqbal’s second prong, the court concluded that although “plaintiffs undoubtedly ha[d] alleged sufficient facts to establish the disproportionate impact of New York’s felon disenfranchisement laws on Blacks and Latinos, as compared with Whites[,] [t]he question remain[ed] . . . as to whether plaintiffs ha[d] sufficiently ‘traced’ that impact ‘to a purpose to discriminate on the basis of race,’ thereby stating a plausible claim of intentional race discrimination.” Id. at 164 (internal citations omitted). The court explained: As an initial matter, we find that plaintiffs have alleged sufficient facts to support a plausible claim that the 1821, 1846, and 1874 felon disenfranchisement constitutional provisions were passed at least in part because of their adverse effects on Blacks. First, plaintiffs allege that during the New York Constitutional Convention in 1821, there were “heated discussions” during which delegates expressed the view that Blacks were “natural[ly] inferior[ ] and unfit[ ] for suffrage.” Plaintiffs further allege that specific property and 129

citizenship requirements tied to voting, which expressly applied only to Blacks, were incorporated in the Constitution of 1821. Second, plaintiffs assert that at the Constitutional Convention in 1846, “heated debates” continued regarding Blacks’ unfitness for suffrage, “including a declaration that the proportion of [felonies committed] in the minority population was more than thirteen times that in the White population.” Finally, plaintiffs state that New York’s explicit discriminatory suffrage requirements were in place until voided by the adoption of the Fifteenth Amendment in 1870, but that “two years after the passage of the Fifteenth Amendment, an unprecedented committee convened and amended the disenfranchisement provision of the New York Constitution to require the state legislature, at its following session, to enact laws excluding persons convicted of infamous crimes from the right to vote.” Drawing all reasonable inferences in favor of plaintiffs based on these well-pleaded factual allegations, we find that plaintiffs satisfy the Iqbal plausibility standard as to the alleged discriminatory intent behind the pre-1894 constitutional provisions. Id. at 164–65 (alterations in original) (internal citations omitted). The court noted that “[a]lthough plaintiffs’ allegations as to the 1874 enactment [we]re less direct than their allegations as to prior constitutional enactments, [it was] satisfied that the alleged close temporal proximity to the passage of the Fifteenth Amendment and the ‘unprecedented’ nature of the committee convened indicate[d] a ‘[d]eparture[ ] from . . . normal procedur[es],’ which ‘might afford evidence that improper purposes [we]re playing a role.’” Hayden, 594 F.3d at 165 n.13 (fifth, sixth, and seventh alterations and omission in original). But the court explained that the plausibility of the allegations regarding the pre-1894 constitutional provisions did not resolve the relevant issue: The issue we are confronted with here, though, is whether the enactment of the 1894 constitutional provision, albeit preceded by earlier provisions that plausibly admit of racist origins, can support an equal protection claim. More specifically, the issue here is whether plaintiffs adequately allege intentional discrimination where they have pleaded sufficient factual matter to plausibly show that the 1821, 1846, and 1874 enactments were motivated by a discriminatory purpose, but where they have not made any adequately supported factual allegations of impermissible motive affecting the delegates to the 1894 convention. Id. at 165. The court concluded that “under these circumstances, plaintiffs fail[ed] to state a plausible claim of intentional discrimination as to the enactment of the 1894 constitutional provision, which continues in effect today.” Id. at 165–66. The court stated: 130

Here, the 1894 amendment to New York’s constitutional provision was not inconsequential. The provision that existed until that time, as amended in 1874, provided that the legislature was required to pass a felon disenfranchisement law at its next session, but thereafter the passage of such laws was left to the legislature’s discretion, as it had always been. In 1894, however, the constitutional delegates made permanent the mandatory aspect of the provision, and felon disenfranchisement laws have been required in New York ever since. This amendment served to substantively change how legislatures were permitted to consider, or no longer consider, whether felon disenfranchisement laws should be passed—such laws were mandated. Given this substantive amendment to New York’s constitutional provision and the lack of any allegations by plaintiffs of discriminatory intent “reasonably contemporaneous with the challenged decision,” we cannot hold that plaintiffs state a plausible claim of intentional discrimination as to the 1894 constitutional provision, which is the bridge necessary for plaintiffs to sufficiently trace any disparate impact of New York Election Law § 5-106(2) “to a purpose to discriminate on the basis of race[.]” Id. at 167 (internal citations omitted). The court said it was not concerned about the possibility that lawmakers might avoid challenges by reenacting a law originally enacted with discriminatory intent, without significant changes, because “(i) plaintiffs ha[d] not alleged any such bad faith on the part of the 1894 delegates; (ii) the 1894 amendment was not only deliberative, but was also substantive in scope; and (iii) there [we]re simply no nonconclusory allegations of any kind as to discriminatory intent of the 1894 delegates . . . .” Id. The court noted that there was a more likely explanation for the constitution provision, citing both Iqbal and pre-Twombly case law: Moreover, not only is a discriminatory purpose not alleged with respect to the 1894 enactment, but an “‘obvious alternative explanation’” exists to support the propriety of the 1894 enactment. See Iqbal, 129 S. Ct. at 1951–52 (quoting Twombly, 550 U.S. at 567, 127 S. Ct. 1955). As defendants contend, “prisoner disenfranchisement is more likely the product of legitimate motives than invidious discrimination,” as demonstrated by its adoption in virtually every state, its affirmative sanction in § 2 of the Fourteenth Amendment, and its widespread support among New York politicians. In some cases, “notwithstanding [discriminatory] impact[,] the legitimate noninvidious purposes of a law cannot be missed.” [Pers. Adm’r of Mass. v.] Feeney, 442 U.S. [256,] 275, 99 S. Ct. 2282 [(1979)] (explaining that the distinction made by the Massachusetts veterans preference law “is, as it seems to be, quite simply between veterans and nonveterans, not between men and 131

women”); see also Soberal-Perez v. Heckler, 717 F.2d 36, 42 (2d Cir. 1983) (affirming dismissal of equal protection challenge to Secretary of Health and Human Services’ failure to provide forms in Spanish because plaintiffs failed to suggest any evidence of discriminatory intent and legitimate noninvidious purpose was obvious), cert. denied, 466 U.S. 929, 104 S. Ct. 1713, 80 L. Ed. 2d 186 (1984). Absent any adequately supported factual allegations as to discriminatory intent behind the enactment of the 1894 constitutional provision, we are compelled to find that the New York Constitution’s requirement that the legislature pass felon disenfranchisement laws is based on the obvious, noninvidious purpose of disenfranchising felons, not Blacks or Latinos. Id. at 167–68 (first and second alterations in original) (internal citations and footnote omitted). The court continued: Finally, there is another independent basis for our holding that plaintiffs fail to state a plausible claim of intentional discrimination. The 1894 constitutional provision, and all earlier constitutional provisions, simply authorize the New York legislature to enact felon disenfranchisement laws. That is, the constitutional provision does not operate to deny plaintiffs the right to vote, rather the statutory enactment pursuant to the constitutional provision does. Therefore, plaintiffs either must allege that the statutory enactments were motivated at least in part by discriminatory intent—which they have completely failed to do in their amended complaint—or they must state a plausible claim that New York Election Law § 5-106 and all of its prior amendments were in fact passed because of the 1894 constitutional provision’s mandate. It is possible that the legislature has acted since 1894 to enact felon disenfranchisement laws because it was required to under the constitutional provision. But given the more likely explanations discussed above and the laws’ obvious, noninvidious distinction between felons and non-felons, it is not plausible, at least as plaintiffs’ allegations presently read, that the New York legislature would have rejected a felon disenfranchisement statute if the statute had not been constitutionally required. Hayden, 594 F.3d at 168–69 (footnote omitted). The court determined that the appropriate course was to remand to allow the plaintiffs to seek leave to amend: Accordingly, plaintiffs’ amended complaint fails to state a plausible claim that New York’s felon disenfranchisement laws were enacted 132

with discriminatory intent. Although they have alleged sufficient facts to support a claim that the 1821, 1846, and 1874 constitutional provisions were motivated at least in part by discriminatory intent, they fail to allege any facts to support a claim that the 1894 constitutional provision or any of the New York legislature’s statutory enactments were passed because of racial animus. However, in light of Federal Rule of Civil Procedure 15’s suggestion that a “court should freely give leave [to amend] when justice so requires,” FED . R. CIV . P. 15(a)(2), and our preference to allow a district court to evaluate such a motion by plaintiffs in the first instance, see Iqbal v. Ashcroft, 574 F.3d 820, 822 (2d Cir. 2009) (per curiam), we will remand to the District Court to allow plaintiffs to seek leave to amend their deficient complaint as to this claim. Id. at 169 (alteration in original). With respect to the claim that New York’s statute violated the Equal Protection Clause of the Fourteenth Amendment because it distinguishes among felons, the court found that under the relevant case law, rational basis review applied. See id. at 169–70. The legislative history explained the reasons for enactment of the statutes, and the Second Circuit concluded that the statutes passed the rational basis review, and that dismissal was appropriate. See id. at 171. •

Starr v. Sony BMG Music Entm’t, 592 F.3d 314 (2d Cir. 2010), cert. denied, 131 S. Ct. 901 (2011). The complaint alleged a claim under Section 1 of the Sherman Act, asserting a conspiracy by major recording labels to fix prices and terms under which their music would be sold over the Internet. Id. at 317. The complaint alleged: “Defendants produce, license and distribute music sold as digital files (‘Digital Music’) online via the Internet (‘Internet Music’) and on compact discs (‘CDs’). Together, defendants EMI, Sony BMG Music Entertainment (‘Sony BMG’), Universal Music Group Recordings, Inc. (‘UMG’), and Warner Music Group Corp. (‘WMG’), control over 80% of Digital Music sold to end purchasers in the United States.” Id. at 318. The complaint further alleged that “defendants Bertelsmann, Inc. (‘Bertelsmann’), WMG, and EMI agreed to launch a service called MusicNet,” and “Defendants UMG and Sony Corporation (‘Sony’) agreed to launch a service called Duet, later renamed pressplay,” and that “[a]ll defendants signed distribution agreements with MusicNet or pressplay and sold music directly to consumers over the Internet through these ventures (the ‘joint ventures’).” Id. The complaint explained that “[t]o obtain Internet Music from all major record labels, a consumer initially would have had to subscribe to both MusicNet and pressplay, at a cost of approximately $240 per year,” and that “[b]oth services required customers to agree to unpopular Digital Rights Management terms (‘DRMs’).” Id. The DRMs included limitations such as prohibiting customers from copying more than two songs from the same artist within a month, providing that music would expire unless repurchased, and prohibiting the transfer of songs from a customer’s computer to portable music players. Id. According to the complaint, “[o]ne industry 133

commentator observed that MusicNet and pressplay did not offer reasonable prices, and one prominent computer industry magazine concluded that ‘nobody in their right mind will want to use’ these services.” Id. The complaint also alleged that despite the dramatic decrease in costs of selling music over the Internet as compared to selling CDs, “these dramatic cost reductions were not accompanied by dramatic price reductions for Internet Music, as would be expected in a competitive market.” Starr, 592 F.3d at 318. “Eventually, defendants and the joint ventures began to sell Internet Music to consumers through entities they did not own or control,” but “the entities could only sell defendants’ music if they contracted with MusicNet to provide Internet Music for the same prices and with the same restrictions as MusicNet itself or other MusicNet licensees,” and “[i]f the licensee attempted to license music from another company, defendants forced them to pay penalties or terminated their licenses.” Id. The complaint also stated that “each defendant was paid shares of the total revenue generated by a joint venture licensee, rather than on a per song basis, linking each defendant’s financial interest in the joint venture to the total sales of all labels rather than to its own market share.” Id. at 318–19. In addition, the complaint alleged that “Defendants also used Most Favored Nation clauses (‘MFNs’) in their licenses that had the effect of guaranteeing that the licensor who signed the clause received terms no less favorable than the terms offered to other licensors,” and that “Defendants attempted to hide the MFNs because they knew they would attract antitrust scrutiny.” Id. at 319. Further, “[a]fter services other than defendants’ joint ventures began to distribute defendants’ Internet Music, defendants ‘agreed’ to a wholesale price floor of 70 cents per song, which they enforced in part through MFN agreements.” Id. (footnote omitted). According to the complaint, “[w]hereas eMusic, the most popular online music service selling Internet Music owned by independent labels, currently charges $0.25 per song and places no restrictions on how purchasers can upload their music to digital music players (like the iPod) or burn to CDs, defendants’ wholesale price is more than double, about $0.70 per song,” and “all defendants refuse to do business with eMusic, the # 2 Internet Music retailer behind only the iTunes store.” Id. The complaint also alleged that the defendants’ activities were being investigated by the New York State Attorney General and the Department of Justice. Starr, 592 F.3d at 319. The complaint asserted claims under Section 1 of the Sherman Act and state antitrust and unfair and deceptive trade practices statutes, and also asserted state common law claims for unjust enrichment. Id. at 320. At oral argument in the district court, the plaintiffs sought leave to amend paragraph 99 of the complaint to allege a parallel price increase. Id. The district court held that the complaint did not state a claim under Twombly, finding that the “plaintiffs did not challenge the existence or creation of the joint ventures and the operation of the joint ventures therefore did not yield an inference of illegal agreement,” and that “the plaintiffs’ ‘bald allegation that the joint ventures were shams [wa]s conclusory and implausible.’” Id. The district court also concluded that the “plaintiffs did not challenge the joint ventures’ ‘explicit agreement,’ and any inference ‘of subsequent agreement based on prior, unchallenged explicit agreement [wa]s unreasonable’”; that “other circumstances alleged by plaintiffs were ‘equivocal’ and did not justify the inference of agreement”; and that “the imposition of the unpopular DRMs and pricing structure was not against 134

defendants’ individual economic self-interest when viewed against the backdrop of widespread music piracy.” Id. The district court denied the motion for leave to amend as futile. Id. at 320–21. The Second Circuit cited Twombly to differentiate between the standards for summary judgment and dismissal on the pleadings: “While for purposes of a summary judgment motion, a Section 1 plaintiff must offer evidence that ‘tend[s] to rule out the possibility that the defendants were acting independently,’ to survive a motion to dismiss under Rule 12(b)(6), a plaintiff need only allege ‘enough factual matter (taken as true) to suggest that an agreement was made.’” Starr, 592 F.3d at 321 (internal citation omitted). The court concluded that the district court had erred by dismissing the complaint under Twombly: Applying the language and reasoning of Twombly to the facts of this case leads us to conclude respectfully that the district court erred in dismissing the complaint for failure to state a Section 1 claim. The present complaint succeeds where Twombly’s failed because the complaint alleges specific facts sufficient to plausibly suggest that the parallel conduct alleged was the result of an agreement among the defendants. As discussed above, the complaint contains the following non-conclusory factual allegations of parallel conduct. First, defendants agreed to launch MusicNet and pressplay, both of which charged unreasonably high prices and contained similar DRMs. Second, none of the defendants dramatically reduced their prices for Internet Music (as compared to CDs), despite the fact that all defendants experienced dramatic cost reductions in producing Internet Music. Third, when defendants began to sell Internet Music through entities they did not own or control, they maintained the same unreasonably high prices and DRMs as MusicNet itself. Fourth, defendants used MFNs in their licenses that had the effect of guaranteeing that the licensor who signed the MFN received terms no less favorable than terms offered to other licensors. For example, both EMI and UMG used MFN clauses in their licensing agreements with MusicNet. Fifth, defendants used the MFNs to enforce a wholesale price floor of about 70 cents per song. Sixth, all defendants refuse to do business with eMusic, the # 2 Internet Music retailer. Seventh, in or about May 2005, all defendants raised wholesale prices from about $0.65 per song to $0.70 per song. This price increase was enforced by MFNs. Id. at 323 (footnote omitted). The court also held that “[b]ecause the proposed amendment to paragraph ninety-nine of the [complaint] contained, along with the remainder of the complaint, ‘enough fact to raise a reasonable expectation that discovery will reveal evidence of illegal agreement,’ the district court erred in denying the motion to amend on the ground of futility.” Id. at 323 n.3 (internal citation omitted). The court elaborated: 135

More importantly, the following allegations, taken together, place the parallel conduct “in a context that raises a suggestion of a preceding agreement, not merely parallel conduct that could just as well be independent action.” Twombly, 550 U.S. at 557, 127 S. Ct. 1955. First, defendants control over 80% of Digital Music sold to end purchasers in the United States. Second, one industry commentator noted that “nobody in their right mind” would want to use MusicNet or pressplay, suggesting that some form of agreement among defendants would have been needed to render the enterprises profitable. Third, the quote from Edgar Bronfman, the current CEO of WMG, suggests that pressplay was formed expressly as an effort to stop the “continuing devaluation of music.” Fourth, defendants attempted to hide their MFNs because they knew they would attract antitrust scrutiny. For example, EMI and MusicNet’s MFN, which assured that EMI’s core terms would be no less favorable than Bertelsmann’s or WMG’s, was contained in a secret side letter. “EMI CEO Rob Glaser decided to put the MFN in a secret side letter because ‘there are legal/antitrust reasons why it would be bad idea to have MFN clauses in any, or certainly all, of these agreements.” According to the executive director of the Digital Music Association, seller-side MFNs are “inherently price-increasing and anticompetitive.” Fifth, whereas eMusic charges $0.25 per song, defendants’ wholesale price is about $0.70 per song. Sixth, defendants’ price-fixing is the subject of a pending investigation by the New York State Attorney General and two separate investigations by the Department of Justice. Finally, defendants raised wholesale prices from about $0.65 per song to $0.70 per song in or about May 2005, even though earlier that year defendants’ costs of providing Internet Music had decreased substantially due to completion of the initial digital cataloging of all Internet Music and technological improvements that reduced the costs of digitizing new releases. This complaint does not resemble those our sister circuits have held fail to state a claim under Twombly. See, e.g., Rick-Mik Enters., Inc. v. Equilon Enters., LLC, 532 F.3d 963, 975–976 (9th Cir. 2008) (dismissing Section 1 price fixing complaint under Twombly where complaint alleged only that defendant conspired with “numerous” banks to fix the price of credit and debit card processing fees and received kickbacks from “numerous” banks as consideration for its unlawful agreement); Kendall v. Visa U.S.A., Inc., 518 F.3d 1042, 1048–50 (9th Cir. 2008) (where plaintiffs alleged no facts to 136

support their theory that defendant banks conspired or agreed with each other, dismissing Section 1 claim because plaintiffs pleaded only legal conclusions, and “failed to plead the necessary evidentiary facts to support those conclusions”). Id. at 323–24 (internal citations omitted). The court rejected the defendants’ arguments for dismissal: Defendants’ arguments that plaintiffs have failed to state a claim are without merit. Defendants first argue that a plaintiff seeking damages under Section 1 of the Sherman act must allege facts that “tend[ ] to exclude independent self-interested conduct as an explanation for defendants’ parallel behavior.” This is incorrect. Although the Twombly court acknowledged that for purposes of summary judgment a plaintiff must present evidence that tends to exclude the possibility of independent action, 550 U.S. at 554, 127 S. Ct. 1955, and that the district court below had held that plaintiffs must allege additional facts that tended to exclude independent self-interested conduct, id. at 552, 127 S. Ct. 1955, it specifically held that, to survive a motion to dismiss, plaintiffs need only “enough factual matter (taken as true) to suggest that an agreement was made,” id. at 556, 127 S. Ct. 1955; see also 2 Areeda & Hovenkamp § 307d1 (3d ed. 2007) (“[T]he Supreme Court did not hold that the same standard applies to a complaint and a discovery record. . . . The ‘plausibly suggesting’ threshold for a conspiracy complaint remains considerably less than the ‘tends to rule out the possibility’ standard for summary judgment.”). Defendants next argue that Twombly requires that a plaintiff identify the specific time, place, or person related to each conspiracy allegation. This is also incorrect. The Twombly court noted, in dicta, that had the claim of agreement in that case not rested on the parallel conduct described in the complaint, “we doubt that the . . . references to an agreement among the [Baby Bells] would have given the notice required by Rule 8 . . . [because] the pleadings mentioned no specific time, place, or person involved in the alleged conspiracies.” 550 [U.S.] at 565 n. 10. In this case, as in Twombly, the claim of agreement rests on the parallel conduct described in the complaint. Therefore, plaintiffs were not required to mention a specific time, place or person involved in each conspiracy allegation. Defendants then argue that inferring a conspiracy from the facts alleged is unreasonable because plaintiffs’ allegations “are the very same claims that were thoroughly investigated and rejected by 137

the Antitrust Division of the Department of Justice,” which closed its inquiry in December 2003 and publicly announced that it had uncovered no evidence that the joint ventures had harmed competition or consumers of digital music. Even if we could consider this evidence on a motion to dismiss, defendants cite no case to support the proposition that a civil antitrust complaint must be dismissed because an investigation undertaken by the Department of Justice found no evidence of conspiracy. Second, this argument neglects the fact that the complaint alleges that the Department of Justice has, since 2003, launched two new investigations into whether defendants engaged in collusion and price fixing and whether defendants misled the Department about the formation and operation of MusicNet and pressplay. Id. at 325 (first, second, third, and fourth alterations in original) (internal citations omitted). The court also rejected the defendants’ argument that “the conduct alleged in the complaint ‘would be entirely consistent with independent, though parallel, action.’” Id. at 327. The court explained that “[u]nder Twombly, allegations of parallel conduct that could ‘just as well be independent action’ are not sufficient to state a claim,” but that “in this case plaintiffs ha[d] alleged behavior that would plausibly contravene each defendant’s self-interest ‘in the absence of similar behavior by rivals.’” Starr, 592 F.3d at 327. The court explained that “[f]or example, it would not be in each individual defendant’s self-interest to sell Internet Music at prices, and with DRMs, that were so unpopular as to ensure that ‘nobody in their right mind’ would want to purchase the music, unless the defendant’s rivals were doing the same.” Id. The court remanded the case for additional proceedings. Id. Judge Newman wrote a separate concurring opinion “to explore a perplexing aspect of the Supreme Court’s decision in Bell Atlantic v. Twombly . . . .” Id. at 328 (Newman, J., concurring). Judge Newman was concerned about the statement in the Twombly opinion that “‘[w]hile a showing of parallel ‘business behavior is admissible circumstantial evidence from which the fact finder may infer agreement,’ it falls short of ‘conclusively establish[ing] agreement or . . . itself constitut[ing] a Sherman Act offense.’” Id. (second and third alterations and omission in original) (quoting Twombly, 550 U.S. at 553). Judge Newman noted that the Twombly Court had relied on a case involving dismissal of an antitrust claim at the directed verdict stage: If, as the Court states in the first part of this sentence, a fact-finder is entitled to infer agreement from parallel conduct, one may wonder why a complaint alleging such conduct does not survive a motion to dismiss. The answer is surely not supplied by the remainder of the Court’s sentence. That portion states the unexceptional proposition that parallel conduct alone is not conclusive evidence of an agreement to fix prices. To support that proposition, the Court cites Theatre Enterprises. But that case was an appeal by an antitrust plaintiff 138

whose complaint had survived a motion to dismiss. Indeed, that plaintiff had been permitted to present its evidence to a jury, only to have the jury reject on the merits the claim of a section 1 violation. The plaintiff sought review on the ground that the trial court had erred in not granting a motion for a directed verdict in the plaintiff’s favor. See Theatre Enterprises, 346 U.S. at 539, 74 S. Ct. 257. The Supreme Court understandably found no error. See id. at 539–42, 74 S. Ct. 257. In Twombly, the Court noted the extraordinary claim that the Theatre Enterprises plaintiff had made. “An antitrust conspiracy plaintiff with evidence showing nothing more than parallel conduct is not entitled to a directed verdict.” Twombly, 550 U.S. at 554, 127 S. Ct. 1955 (emphasis added). The fact that an allegation of parallel conduct was held insufficient to require a directed verdict in the plaintiff’s favor is hardly a basis for ruling that such an allegation is insufficient to survive a motion to dismiss for failure to state a claim on which relief may be granted. Id. Judge Newman noted that the Twombly decision was based on the context of the claim at issue: In view of the Court’s initial observation in Twombly that parallel conduct is sufficient to support a permissible inference of an agreement, the reason for the rejection of the complaint in Twombly must arise from something other than the plaintiff’s reliance on parallel conduct. That reason is not difficult to find. It is the context in which the defendants’ parallel conduct occurred. “[W]hen allegations of parallel conduct are set out in order to make a § 1 claim, they must be placed in a context that raises a suggestion of a preceding agreement, not merely parallel conduct that could just as well be independent action.” Id. at 557, 127 S. Ct. 1955. The context in Twombly was the aftermath of the divestiture of A[T] & T’s local telephone service, resulting in the creation of seven Regional Bell Operating Companies, the so-called “Baby Bells” or Incumbent Local Exchange Carriers (“ILECs”). See id. at 549, 127 S. Ct. 1955. Originally restricted to providing local telephone service, the ILECs were later permitted by the Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (Feb. 8, 1996), to enter the long-distance market upon compliance with conditions concerning the opportunity for competitive local exchange carriers (“CLECs”) to make use of an ILEC’s network. See Twombly, 550 U.S. at 549, 127 S. Ct. 1955.

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In that context, it was entirely understandable for the Court to cast a jaundiced eye on the claim that the parallel conduct of these newly created ILECs would suffice to permit an inference of agreement. Starr, 592 F.3d at 328–29 (Newman, J., concurring) (alteration in original). Judge Newman noted that the Court had reemphasized in Iqbal that the sufficiency of a complaint will depend on the context. Id. at 329. Judge Newman explained: I believe it would be a serious mistake to think that the Court has categorically rejected the availability of an inference of an unlawful section 1 agreement from parallel conduct. Even in those contexts in which an allegation of parallel conduct will not suffice to take an antitrust plaintiff’s case to the jury, it will sometimes suffice to overcome a motion to dismiss and permit some discovery, perhaps leaving the issue for later resolution on a motion for summary judgment. In the pending case, . . . the context in which the defendants’ alleged parallel conduct occurred, amplified by specific factual allegations making plausible an inference of agreement, suffices to render the allegation of a section 1 violation sufficient to withstand a motion to dismiss. Id. •

Turkmen v. Ashcroft, 589 F.3d 542, 2009 WL 4877787 (2d Cir. Dec. 18, 2009) (per curiam). Seven named plaintiffs, who were non-citizens detained on immigration charges following September 11, 2001, filed a putative class action alleging “that on account of their Arab or Muslim background (or perceived background), they were subjected to excessively prolonged detention, abused physically and verbally, subjected to arbitrary and abusive strip searches, and otherwise mistreated while in custody.” Id. at *1. The plaintiffs acknowledged that they were in the country illegally and subject to removal, but asserted constitutional violations based on the conditions of their confinement and the length of their detention, which they alleged was “illegally prolonged so that the Government could investigate any potential ties to terrorism.” Id. Among the 31 identified defendants were the United States, former Attorney General John Ashcroft, FBI Director Robert Mueller, former Immigration and Naturalization Service Commissioner James Ziglar, and officials and corrections officers from the Metropolitan Detention Center. Id. “The United States, Ashcroft, Mueller, and Ziglar, as well as four high-ranking MDC officials . . . moved to dismiss certain claims on grounds that include[d] qualified immunity and failure to state a claim.” Id. (footnote omitted). The district court denied the motions with respect to the conditions of confinement, but granted dismissal with respect to the length of detention. Id. Both sides appealed. 140

In considering the defendants’ challenge to the denial of dismissal for the claims based on conditions of confinement, the court noted: The district court ruled on the defendants’ motions to dismiss prior to the Supreme Court’s decisions in Twombly and Iqbal. It applied a standard of review under which it would not dismiss a claim “unless it appears beyond doubt . . . that the plaintiff can prove no set of facts which would entitle him to relief.” Now, following the district court’s decision, Twombly and Iqbal require “a heightened pleading standard in those contexts where factual amplification is needed to render a claim plausible.” Ross v. Bank of America, N.A. (USA), 524 F.3d 217, 225 (2d Cir. 2008) (internal quotation marks, citations, brackets, and emphasis omitted). We could undertake to decide whether the challenged claims satisfy the pleading standard of Twombly and Iqbal; however, in the circumstances of this case—where plaintiffs have already announced their intent to file a Fourth Amended Complaint to preserve for the putative class the claims asserted only by the settling plaintiffs—we think it better to vacate that portion of the district court’s order denying dismissal of the conditions of confinement claims on the ground that an outdated pleading standard was applied, and to remand the case for further proceedings consistent with the standard articulated in Twombly and Iqbal. Turkmen, 2009 WL 4877787, at *2 (internal citation omitted). The court stated that the district court might, on remand, “grant plaintiffs leave to file the proposed Fourth Amended Complaint to satisfy the heightened pleading standard,” but “decline[d] to consider whether plaintiffs should be allowed to replead yet again because ‘[i]n the ordinary course, [the court was] accustomed to reviewing a district court’s decision whether to grant or deny leave to amend, rather than making that decision for [itself] in the first instance.’” Id. at *3 (quoting Iqbal v. Ashcroft, 574 F.3d 820, 822 (2d Cir. 2009)). The court directed: If the district court denies leave to file the proposed Fourth Amended Complaint, it should evaluate the sufficiency of the Third Amended Complaint in light of the settlement and the heightened pleading standard. The district court can then address whether, under Twombly and Iqbal, the Third Amended Complaint fails to state a claim, or inadequately alleges the personal involvement of the moving defendants, or entitles the moving defendants to qualified immunity with respect to the conditions of confinement claims. Id. The court emphasized that “[a]t this stage of proceedings, [the court] d[id] no more than vacate the order denying the motions to dismiss with respect to the conditions of confinement 141

claims, and remand to the district court for further proceedings.” Id. With respect to the dismissed claims based on the length of detention, the court noted that these claims “allege[d] generally that defendants detained plaintiffs longer than necessary to effect their removal (or voluntary departure) from the United States.” Id. The complaint alleged that the defendants used the plaintiffs’ acknowledged “immigration violations ‘as a cover, as an excuse’ to investigate whether plaintiffs were tied to terrorism.” Id. The complaint alleged that the detentions constituted a seizure under the Fourth Amendment, a violation of the Due Process Clause of the Fifth Amendment, and a violation of the equal protection right encompassed in the Fifth Amendment. Turkmen, 2009 WL 4877787, at *3 & n.4. By statute, aliens ordered removed are to be removed by the Attorney General within a 90-day “removal period,” and “[t]he government is required to detain an alien ordered removed until removal is effected, at least for the removal period.” Id. at *3. Relevant regulations provide that a review is conducted of the alien’s record to determine whether detention is appropriate after the removal period, if removal cannot be completed during that period. Id. The Second Circuit noted that in Zadvydas v. Davis, 533 U.S. 678 (2001), the Supreme Court “accorded a presumption of reasonableness to six months’ detention for an alien subject to an order of removal,” and that “thereafter, the alien’s continued detention would be deemed unlawful ‘if (1) an alien demonstrate[d] that there [wa]s no significant likelihood of removal in the reasonably foreseeable future and (2) the government [wa]s unable to rebut this showing.’” Turkmen, 2009 WL 4877787, at *4 (quoting Wang v. Ashcroft, 320 F.3d 130, 146 (2d Cir. 2003)) (footnote omitted). The court noted that “Turkmen, Sachdeva, and two of the settling plaintiffs were detained for less than six months,” and that their detentions “thus were presumptively reasonable.” Id. at *4 & n.5. The court explained the district court’s analysis: The district court, relying on Zadvydas and Wang, concluded that plaintiffs failed to state a claim because “the complaint does not allege that during the period of their detention there was no significant likelihood of removal in the reasonably foreseeable future.” The complaint alleged simply that the detentions were “longer than necessary” to effectuate removal. As the district court reasoned, recognizing such a claim as a violation of due process would “flood the courts with habeas petitions brought by aliens seeking to be removed as soon as they deemed it practicable.” The district court explained that: [Plaintiffs] assume that all that is required for the Attorney General to secure removal is a deportation order and an airplane. This assumption ignores legitimate foreign policy considerations and significant administrative burdens involved in enforcing immigration law in general, and, specifically, those concerns immediately following a 142

terrorist attack perpetrated on the United States by non-citizens, some of whom had violated the terms of their visas at the time of the attack. Id. at *4 (internal citations omitted) (alteration in original). On appeal, the plaintiffs “argue[d] that they were detained for a criminal investigation, and their detentions thus constituted separate seizures requiring their own justification and probable cause.” Id. at *5. The plaintiffs “assert[ed] that the Zadvydas standard identifies constitutional violations only ‘when removal is impossible’; they submit[ted] that it is inadequate to identify constitutional violations where, as alleged here, defendants employ[ed] ‘detention as an alternative to removal.’” Id. (citation omitted). The Second Circuit disagreed: In Whren v. United States, 517 U.S. 806, 813, 116 S. Ct. 1769, 135 L. Ed. 2d 89 (1996), the Supreme Court held that a law enforcement official’s actual motivation for the Fourth Amendment seizure of a person is constitutionally irrelevant if the seizure is supported by probable cause. To the extent plaintiffs challenge their prolonged detention after final orders of removal (or voluntary departure) were entered against them, it is clear from the complaint that such detention was supported by the IJs’ findings of removability, which constitute a good deal more than probable cause. Because plaintiffs were thus lawfully detained as aliens subject to orders of removal (or voluntary departure), they could not state a claim for unconstitutionally prolonged detention without pleading facts plausibly showing “no significant likelihood of removal in the reasonably foreseeable future.” Wang, 320 F.3d at 146; see also Zadvydas, 533 U.S. at 699. In the absence of such a pleading, plaintiffs’ challenge to their detention was properly dismissed under Federal Rule of Civil Procedure 12(b)(6). Moreover, we need not decide whether or under what circumstances aliens subject to removal (or voluntary departure) orders could state claims for unconstitutional detentions without satisfying Zadvydas. To the extent plaintiffs’ claims are not based on Zadvydas, the moving defendants are entitled to qualified immunity. Id. The court continued: In light of the analysis above, plaintiffs can point to no authority clearly establishing a due process right to immediate or prompt removal (following an order of removal or voluntary departure). The moving defendants therefore are entitled to qualified immunity with respect to claim 2. Assuming arguendo that the Fourth Amendment applies to 143

post-arrest detention, probable cause would be required only if the detentions at issue were not otherwise authorized. For reasons stated above, the moving defendants had an objectively reasonable belief that the detentions were authorized, and therefore are entitled to qualified immunity with respect to claim 1. Similarly, plaintiffs point to no authority clearly establishing an equal protection right to be free of selective enforcement of the immigration laws based on national origin, race, or religion at the time of plaintiffs’ detentions. The moving defendants therefore are entitled to qualified immunity with respect to claim 5 (to the extent that claim 5 is based on the length of plaintiffs’ detentions). Turkmen, 2009 WL 4877787, at *5–6 (internal citations omitted). •

Arar v. Ashcroft, 585 F.3d 559 (2d Cir. 2009) (en banc), cert. denied, 130 S. Ct. 3409, 2010 WL 290379 (2010). The plaintiff filed suit against the Attorney General of the United States, the Secretary of Homeland Security, the Director of the FBI, and others, including senior immigration officials, after he was allegedly detained while changing planes in New York. Id. at 563. Arar alleged that he was mistreated for 12 days while in U.S. custody, then removed to Syria via Jordan with the understanding that he would be detained, interrogated, and tortured in Syria. Id. The complaint alleged violations of the Torture Victims Protection Act (“TVPA”) and of his Fifth Amendment substantive due process rights based on the conditions of his detention in the United States, the denial of access to counsel and the courts in the United States, and his detention and torture in Syria. Id. The district court dismissed the complaint, and on appeal, the Second Circuit panel unanimously found that the district court had jurisdiction over the Attorney General, the former Acting Attorney General, and the Director of the FBI; that Arar failed to state a claim under the TVPA; and that Arar failed to establish subject matter jurisdiction over his request for a declaratory judgment. Id. A majority of the panel dismissed Arar’s Bivens14 claims. Id. On rehearing en banc, the Second Circuit affirmed the district court’s holding. Arar, 585 F.3d at 563. On rehearing, the majority stated: We have no trouble affirming the district court’s conclusions that Arar sufficiently alleged personal jurisdiction over the defendants who challenged it, and that Arar lacks standing to seek declaratory relief. We do not reach issues of qualified immunity or the state secrets privilege. As to the TVPA, we agree with the unanimous position of the panel that Arar insufficiently pleaded that the alleged conduct of United States officials was done under color of foreign

14

In Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388 (1971), the Supreme Court recognized a cause of action for damages against federal officers for violation of the Fourth Amendment.

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law. We agree with the district court that Arar insufficiently pleaded his claim regarding detention in the United States, a ruling that has been reinforced by the subsequent authority of Bell Atlantic Corp. v. Twombly,15 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007). Our attention is therefore focused on whether Arar’s claims for detention and torture in Syria can be asserted under Bivens . . . . Id. (emphasis added). Arar alleged that he was a dual citizen of Canada and Syria, and resided in Canada. Id. at 565. While on vacation in Tunisia, he was called back to work in Canada and had to change planes in New York. Id. During his stop in New York, Arar was detained by immigration officials and transferred the next day to a detention center in Brooklyn, where he was kept for a week and a half. Id. The INS began removal proceedings based on its conclusion that Arar belonged to a terrorist organization. Id. Despite Arar’s request for removal to Canada, the INS ordered his removal to Syria, found that removal would be consistent with Article 3 of the Convention Against Torture (“CAT”), and barred Arar from reentering the United States for five years. Arar, 585 F.3d at 566. The INS Regional Director determined that Arar was a member of Al Qaeda and inadmissible in the United States, and the Deputy Attorney General stated that the removal to Syria would be consistent with the CAT, despite the fact that Arar stated that he feared torture in Syria. Id. According to the complaint, Arar was transferred to Jordan and then to Syria, where he remained for a year and where he was tortured. See id. “Arar allege[d] that United States officials conspired to send him to Syria for the purpose of interrogation under torture, and directed the interrogations from abroad by providing Syria with Arar’s dossier, dictating questions for the Syrians to ask him, and receiving intelligence learned from the interviews.” Id. Arar eventually signed a confession stating that he had been trained as a terrorist in Afghanistan. Id. Arar was later released to the custody of a Canadian embassy official. Id. at 566–67. Arar’s complaint contained four counts against federal officials and sought damages resulting from Arar’s detention and torture. Arar, 585 F.3d at 567. The counts included claims for: (1) relief under the TVPA, (2) relief under the Fifth Amendment for torture in Syria, (3) relief under the Fifth Amendment for detention in Syria, and (4) relief under the Fifth Amendment for the detention in the United States prior to the removal to Syria. Id. Arar also sought a declaratory judgment that the defendants violated his “‘constitutional, civil, and human rights.’” Id. As to the first count, which alleged that the defendants conspired with Jordanian and Syrian officials to have Arar tortured in violation of the TVPA, the court noted that “[a]ny allegation arising under the TVPA requires a demonstration that the defendants acted under color of 15

The Second Circuit’s note that Twombly was decided after the district court’s decision in Arar shows that the district court found the allegations regarding the detention in the United States insufficient even under pre-Twombly standards, and that the Second Circuit majority agreed under post-Twombly standards.

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foreign law, or under its authority.” Id. at 568 (citation omitted). The court held that Arar failed to state a claim under the TVPA: Accordingly, to state a claim under the TVPA, Arar must adequately allege that the defendants possessed power under Syrian law, and that the offending actions (i.e., Arar’s removal to Syria and subsequent torture) derived from an exercise of that power, or that defendants could not have undertaken their culpable actions absent such power. The complaint contains no such allegation. Arar has argued that his allegation of conspiracy cures any deficiency under the TVPA. But the conspiracy allegation is that United States officials encouraged and facilitated the exercise of power by Syrians in Syria, not that the United States officials had or exercised power or authority under Syrian law. The defendants are alleged to have acted under color of federal, not Syrian, law, and to have acted in accordance with alleged federal policies and in pursuit of the aims of the federal government in the international context. At most, it is alleged that the defendants encouraged or solicited certain conduct by foreign officials. Such conduct is insufficient to establish that the defendants were in some way clothed with the authority of Syrian law or that their conduct may otherwise be fairly attributable to Syria. We therefore agree with the unanimous holding of the panel and affirm the District Court's dismissal of the TVPA claim.16 Id. (internal citation and footnote omitted) (emphasis added). With respect to the fourth count, which alleged that the conditions of confinement in the United States and the denial of access to courts during the detention violated Arar’s substantive due process rights, the district court dismissed the claim as insufficiently pleaded and gave Arar an opportunity to replead, which Arar declined. Id. at 569. The Second Circuit majority agreed that the claim was insufficiently pleaded: Arar alleges that “Defendants”—undifferentiated—“denied Mr. Arar effective access to consular assistance, the courts, his lawyers, and family members” in order to effectuate his removal to Syria. But he fails to specify any culpable action taken by any single defendant, and does not allege the “meeting of the minds” that a plausible conspiracy claim requires. He alleges (in passive voice) that his requests to make phone calls “were ignored,” and that “he was told” that he was not entitled to a lawyer, but he fails to link these 16

It appears that the court concluded that the conduct alleged was insufficient to state a claim for relief because the applicable law— the TVPA— provided no grounds for relief where “United States officials encouraged and facilitated the exercise of power by Syrians in Syria,” not that the facts alleged were insufficiently detailed or implausible.

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denials to any defendant, named or unnamed. Given this omission, and in view of Arar’s rejection of an opportunity to re-plead, we agree with the District Court and the panel majority that this Count of the complaint must be dismissed. Arar, 585 F.3d at 569 (emphasis added). The court “expressed no view as to the sufficiency of the pleading otherwise, that is, whether the conduct alleged (if plausibly attributable to defendants) would violate a constitutionally protected interest.” Id. Having dismissed the claims based on Arar’s detention in the United States, the court noted that the “remaining claims s[ought] relief on the basis of torture and detention in Syria . . . .” Id. The court declined to definitively resolve complex jurisdictional questions because it determined that the case had to be dismissed for other reasons. See id. at 570–71. The court framed the remaining issue as “whether allowing this Bivens action to proceed would extend Bivens to a new ‘context,’ and if so, whether such an extension is advisable.” Id. at 572. As to context, the court concluded that “the context of extraordinary rendition in Arar’s case is the complicity or cooperation of United States government officials in the delivery of a non-citizen to a foreign country for torture (or with the expectation that torture will take place),” and concluded that this was a “new context” because “no court ha[d] previously afforded a Bivens remedy for extraordinary rendition.” Id. The court concluded that “special factors” counseled against creation of a Bivens remedy in this context. See Arar, 585 F.3d at 573. Specifically, the court found that a Bivens action in the context of extraordinary rendition “would have the natural tendency to affect diplomacy, foreign policy, and the security of the nation,” which “counsel[ed] hesitation” in creating a Bivens remedy. Id. at 574. The court explained that “[a]bsent clear congressional authorization, the judicial review of extraordinary rendition would offend the separation of powers . . . and inhibit this country’s foreign policy.” Id. at 576. The court also cited the fact that classified information was involved, id.; the fact that “reliance on information that cannot be introduced into the public record is likely to be a common feature of any Bivens actions arising in the context of alleged extraordinary rendition,” in view of the “preference for open rather than clandestine court proceedings,” id. at 577; the fact that extending Bivens into the extraordinary rendition context would require assessing assurances made by foreign countries that the alien would not be tortured, id. at 578; the possibility that Bivens suits would “make the government ‘vulnerable to ‘graymail,’ i.e., individual lawsuits brought to induce the [government] to settle a case (or prevent its filing) out of fear that any effort to litigate the action would reveal classified information that may undermine covert operations,’ or otherwise compromise foreign policy efforts,” Arar, 585 F.3d at 578–79 (alteration in original) (citation omitted); and its conclusion that “Congress is the appropriate branch of government to decide under what circumstances (if any) these kinds of policy decisions—which are directly related to the security of the population and the foreign affairs of the country—should be subjected to the influence of litigation brought by aliens,” id. at 580–81. Several dissenting opinions were filed. Judge Sack dissented, joined by Judges Calabresi, 147

Pooler, and Parker, and disagreed with the majority’s finding that there was no Bivens remedy, finding that the majority reached its conclusion “by artificially dividing the complaint into a domestic claim that does not involve torture . . . and a foreign claim that does . . . .” Id. at 582–83 (Sack, J., dissenting). Judge Sack’s dissent noted that after dividing the claims, “[t]he majority then dismisse[d] the domestic claim as inadequately pleaded and the foreign claim as one that cannot ‘be asserted under Bivens’ . . . .” Id. at 583. Judge Sack argued that even if the claim regarding Arar’s treatment in the United States were treated separately, “it was adequately pleaded in [Arar’s] highly detailed complaint.” Id. But Judge Sack asserted that it was improper to consider the claim regarding Arar’s treatment in the United States in isolation, and that, viewed in the context of the entire complaint, the allegations did “not present a ‘new context’ for a Bivens action.” Id. Judge Sack’s dissent also concluded that even if a new context were presented, the majority’s approach to determining whether to create a Bivens remedy was improper. See Arar, 585 F.3d at 583 (Sack, J., dissenting). Judge Sack noted that Arar declined to replead his fourth claim because he wanted early appellate review of the dismissal of the first three claims. See id. at 590 n.13. Judge Sack asserted that “Arar should not have been required to ‘name those defendants [who] were personally involved in the alleged unconstitutional treatment’” because under § 1983, courts “allow plaintiffs to ‘maintain[ ] supervisory personnel as defendants . . . until [they have] been afforded an opportunity through at least brief discovery to identify the subordinate officials who have personal liability.’” Id. at 591 (alterations in original). Judge Sack’s dissent explained the impact of Iqbal: To be sure, the Supreme Court has recently set a strict pleading standard for supervisory liability claims under Bivens against a former Attorney General of the United States and the Director of the FBI. See Iqbal, supra. We do not think, however, that the Court has thereby permitted governmental actors who are unnamed in a complaint automatically to escape personal civil rights liability. A plaintiff must, after all, have some way to identify a defendant who anonymously violates his civil rights. We doubt that Iqbal requires a plaintiff to obtain his abusers’ business cards in order to state a civil rights claim. Put conversely, we do not think that Iqbal implies that federal government miscreants may avoid Bivens liability altogether through the simple expedient of wearing hoods while inflicting injury. Some manner of proceeding must be made available for the reasons we recognized in Davis [v. Kelly, 160 F.3d 917, 921 (2d Cir. 1998)]. Id. at 591–92. Judge Sack’s dissent asserted that the complaint’s allegations were sufficient: Whether or not there is a mechanism available to identify the “Doe” defendants, moreover, Arar’s complaint does sufficiently name some individual defendants who personally took part in the alleged violation of his civil rights. The role of defendant J. Scott Blackman, formerly Director of the Regional Office of INS, for example, is, as 148

reflected in the district court’s explication of the facts, set forth in reasonable detail in the complaint. So are at least some of the acts of the defendant Edward J. McElroy, District Director of the INS. Id. at 592 (internal citation and footnotes omitted). Judge Sack’s dissent pointed out that the complaint alleged: Early on October 8, 2002, at about 4 a.m., Mr. Arar was taken in chains and shackles to a room where two INS officials told him that, based on Mr. Arar’s casual acquaintance with certain named individuals, including Mr. Almalki as well as classified information, Defendant Blackman, Regional Director for the Eastern Region of Immigration and Naturalization Services, had decided to remove Mr. Arar to Syria. Without elaboration, Defendant Blackman also stipulated that Mr. Arar’s removal would be consistent with Article 3 of CAT . . . . Id. at 592 n.15 (quoting Arar’s complaint at ¶ 47) (quotation marks omitted). The complaint also alleged: The only notice given [Arar’s counsel prior to his interrogation late on the evening of Sunday, October 6, 2002] was a message left by Defendant McElroy, District Director for Immigration and Naturalization Services for New York City, on [counsel’s] voice mail at work that same [Sunday] evening. [She] did not retrieve the message until she arrived at work the next day, Monday morning, October 7, 2002—long after Mr. Arar’s interrogation had ended. Arar, 585 F.3d at 592 n.16 (Sack, J., dissenting) (quoting Arar’s complaint at ¶ 43) (quotation marks omitted) (alterations in original). The dissent found the allegations sufficient: [A]n identification of the unnamed defendants by their “roles” should be sufficient to enable a plaintiff to survive a motion to dismiss, and subsequently to use discovery to identify them. And while the majority is correct that the complaint does not utter the talismanic words “meeting of the minds” to invoke an agreement among the defendants, it is plain that the logistically complex concerted action allegedly taken to detain Arar and then transport him abroad implies an alleged agreement by government actors within the United States to act in concert. Id. at 592 (internal citation omitted).

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Judge Sack also argued that the denial of access to courts and counsel claim was improperly dismissed because such a claim requires pleading “(1) a ‘nonfrivolous, arguable underlying claim’ that has been frustrated by the defendants’ actions, and (2) a continued inability to obtain the relief sought by the underlying claim,” and Judge Sack thought the pleadings were sufficient. Id. at 592–93 Judge Sack explained: But taking the allegations in the complaint as true, as we must, the complaint clearly implies the existence of an underlying claim for relief under CAT. The defendants can hardly argue that under Arar’s assertions, which we take to be true, they lacked notice of such a claim, since the complaint says that it was they who first notified Arar about it: Arar alleges that on October 8, 2002, “two INS officials told him that . . . Defendant Blackman . . . had decided to remove [him] to Syria,” and “Defendant Blackman also stipulated that [such action] would be consistent with Article 3 of CAT.” Compl. ¶ 47. Indeed, the complaint alleges that Arar asked defendants for reconsideration of that decision—i.e., relief from it—in light of the prospect of torture in Syria, but the officials said that “the INS is not governed by the ‘Geneva Conventions.’” Id. Id. at 593 (alterations in original). Judge Sack’s dissent concluded: Contrary to the district court’s ruling, then, Arar’s complaint put the defendants on notice of claims seeking relief to bar his removal that were frustrated by the defendants’ actions. Whatever the ultimate merits of those claims, they would not have been “frivolous.” And absent a remedy for the rendition and torture themselves—the district court, and the majority, of course, conclude there is none—no contemporaneous legal relief is now possible except through the access to courts and counsel claim. The Fourth Claim for Relief therefore states a sufficient due process access claim. Id. at 593–94 (internal citation omitted). Judge Sack’s dissent explained that the allegations were sufficient under Iqbal: More generally, we think the district court’s extended recitation of the allegations in the complaint makes clear that the facts of Arar’s mistreatment while within the United States—including the alleged denial of his access to courts and counsel and his alleged mistreatment while in federal detention in the United States—were pleaded meticulously and in copious detail. The assertion of relevant places, times, and events—and names when known—is lengthy and specific. Even measured in light of Supreme Court case law post-dating the district court’s dismissal of the fourth claim, which 150

instituted a more stringent standard of review for pleadings, the complaint here passes muster. It does not “offer[ ] ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of action.’” Iqbal, 129 S. Ct. at 1949 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)). Nor does it “tender[ ] ‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Id. (quoting Twombly, 550 U.S. at 557, 127 S. Ct. 1955). Its allegations of a constitutional violation are “‘plausible on [their] face.’” Id. (quoting Twombly, 550 U.S. at 555, 127 S. Ct. 1955). And, as we have explained, Arar has pled “factual content that allows the court to draw the reasonable inference that the defendant[s] [are] liable for the misconduct alleged.” Id. (quoting Twombly, 550 U.S. at 556, 127 S. Ct. 1955). We would therefore vacate the district court’s dismissal of the Fourth Claim for Relief. Id. at 594 (emphasis added) (alterations in original). With respect to the second and third claims, Judge Sack stated that even if the fourth claim were properly dismissed, the dissenters “would still not concur in [the majority’s] crabbed interpretation of Arar’s complaint in light of the facts alleged in it.” Arar, 585 F.3d at 594 (Sack, J., dissenting). Judge Sack noted that although Arar pleaded his fourth claim for domestic detention separately from his other claims, the complaint had to be construed as a whole. See id. at 595. Judge Sack explained: According to the complaint: (1) Arar was apprehended by government agents as he sought to change planes at JFK; (2) he was not seeking to enter the United States; (3) his detention was for the purpose of obtaining information from him about terrorism and his alleged links with terrorists and terrorist organizations; (4) he was interrogated harshly on that topic—mostly by FBI agents—for many hours over a period of two days; (5) during that period, he was held incommunicado and was mistreated by, among other things, being deprived of food and water for a substantial portion of his time in custody; (6) he was then taken from JFK to the MDC in Brooklyn, where he continued to be held incommunicado and in solitary confinement for another three days; (7) while at the MDC, INS agents sought unsuccessfully to have him agree to be removed to Syria because they and other U.S. government agents intended that he would be questioned there along similar lines, but under torture; (8) U.S. officials thwarted his ability to consult with counsel or access the courts; and (9) thirteen days after Arar had been intercepted and incarcerated at the airport, defendants sent him against his will to Syria, where they allegedly intended that he be questioned under torture and while enduring brutal and inhumane conditions of 151

captivity. This was, as alleged, all part of a single course of action conceived of and executed by the defendants in the United States in order to try to make Arar “talk.” Id. Judge Sack explained that while “[i]t may not have been best for Arar to file a complaint that structure[d] his claims for relief so as to charge knowing or reckless subjection to torture, coercive interrogation, and arbitrary detention in Syria (the second and third claims) separately from charges of cruel and inhuman conditions of confinement and ‘interfere[nce] with access to lawyers and the courts’ while in the United States (the fourth claim)[,] . . . such division of theories [wa]s of no legal consequence.” Id. (third alteration in original). Judge Sack asserted that the factual allegations supporting the second and third claims were much more comprehensive when the complaint was viewed as a whole: The assessment of Arar’s complaint must, then, take into account the entire arc of factual allegations that it contains—his interception and arrest; his interrogation, principally by FBI agents, about his putative ties to terrorists; his detention and mistreatment at JFK in Queens and the MDC in Brooklyn; the deliberate misleading of both his lawyer and the Canadian Consulate; and his transport to Washington, D.C. and forced transfer to Syrian authorities for further detention and questioning under torture. Such attention to the complaint’s factual allegations, rather than its legal theories, makes perfectly clear that the remaining claims upon which Arar seeks relief are not limited to his “detention or torture in Syria,” . . . but include allegations of violations of his due process rights in the United States. The scope of those claims is relevant in analyzing whether a Bivens remedy is available. Id. at 595–96. After considering the complaint as a whole, Judge Sack’s dissent concluded that the complaint did not present a new context for a Bivens remedy. See id. at 596. Even if the context were new, Judge Sack thought “it mistaken to preclude Bivens relief solely in light of a citation or compilation of one or more purported examples of . . . ‘special factors.’” Id. at 600. Judge Sack disagreed with the majority’s conclusion with respect to most of the special factors.17 He felt that secrecy issues should be dealt with through the state secrets privilege. Arar, 585 F.3d at 603 (Sack, J., dissenting).

17

Judge Sack stated that the majority’s finding that extending a Bivens remedy in this context would essentially be a constitutional challenge to executive policies was the strongest argument for denying a Bivens remedy. Arar, 585 F.3d at 602 (Sack, J., dissenting). Judge Sack noted that “[a]fter Iqbal, it would be difficult to argue that Arar’s complaint can survive as against defendants who are alleged to have been supervisors with, at most, ‘knowledge’ of Arar’s mistreatment” but concluded that this did “not dispose of the cases against the lower-level defendants.” Id. (citation omitted). Judge Sack further noted that “[i]t also may be that to the extent actions against ‘policymakers’ can be equated with lawsuits against policies, they may not survive Iqbal either,” but asserted that “the relief Arar himself [sought was] principally compensation for an unconstitutional implementation of [the extraordinary rendition] policy,” and that “[t]hat is what Bivens actions are for.” Id.

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Judge Parker also filed a dissent, which was joined by Judges Calabresi, Pooler, and Sack. Judge Parker asserted that the majority’s decision to dismiss the fourth count and “proceed[] as though the challenged conduct [wa]s strictly extraterritorial . . . [went] far beyond any pleading rule [the court was] bound to apply, and it [wa]s inconsistent with both Rule 8 of the Federal Rules of Civil Procedure and recent Supreme Court decisions.” Id. at 616 (Parker, J., dissenting) (footnote omitted). Judge Parker explained: Even after Ashcroft v. Iqbal, --- U.S. ----, ----, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009), which dismissed discrimination claims against policymakers on account of inadequate pleading, Claim Four readily exceeds any measure of “plausibility.” Claim Four seeks to hold Defendants John Ashcroft, Larry Thompson, Robert Mueller, James Ziglar, J. Scott Blackman, Edward McElroy, and John Does 1-10 responsible for the extreme conditions under which Arar was held in the United States. While the majority finds that Arar failed to allege the requisite “meeting of the minds” necessary to support a conspiracy, see Maj. Op. 24, it ignores the fact that Arar pleaded multiple theories of liability. Formal conspiracies aside, he also alleges that the defendants commonly aided and abetted his detention and removal—that is, that the defendants were personally involved in his mistreatment both in the United States and abroad. Id. (footnote and citations omitted). Judge Parker further stated: In support of his claim for mistreatment and due process violations while in American custody, Arar includes factual allegations that are anything but conclusory. Indeed, he provides as much factual support as a man held incommunicado could reasonably be expected to offer a court at this stage. The complaint alleges that Defendant McElroy was personally involved in Arar’s failure to receive the assistance of counsel. It alleges that Defendants Blackman and Thompson personally approved Arar’s expedited transfer from the United States to Syria, implicating these officials in his inability to access the courts. And it recounts statements by Arar’s American interrogators that they were discussing his situation with “Washington D.C.” More broadly, Arar details the harsh conditions under which he was held, including shackling, strip searches, administrative segregation, prolonged interrogation, and a near communications blackout. Notably, these are not “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements.” Iqbal, 129 S. Ct. at 1949. They easily satisfy the requirements of both Iqbal and also Rule 8, whose “short and plain statement” remains the baseline for notice-pleading. See FED . 153

R. CIV . P. 8(a)(2). Moreover, as Iqbal made clear, plausibility is “context-specific,” requiring the reviewing court “to draw on its judicial experience and common sense.” Iqbal, 129 S. Ct. at 1950. There, the Supreme Court rejected Iqbal’s discrimination claims against high-ranking federal officials because his complaint lacked sufficient factual allegations supporting the inference of discriminatory intent. Id. at 1952. Central to the majority’s decision was the fact that these officials faced a devastating terrorist attack “perpetrated by 19 Arab Muslim hijackers.” Id. at 1951. Against this backdrop, the majority found Iqbal’s claim overwhelmed by the “obvious alternative explanation”—that his arrest stemmed from a “nondiscriminatory intent to detain aliens . . . who had potential connections to those who committed terrorist acts.” Id. at 1951 (quoting Twombly, 550 U.S. at 567, 127 S. Ct. 1955). Apparently having their own views about the defendants’ state of mind, the majority simply found Iqbal’s discrimination claim incredible. Plausibility, in this analysis, is a relative measure. Allegations are deemed “conclusory” where they recite only the elements of the claim. They become implausible when the court’s commonsense credits far more likely inferences from the available facts. Plausibility thus depends on a host of considerations: The full factual picture presented by the complaint, the particular cause of action and its elements, and the available alternative explanations. See Iqbal, 129 S. Ct. at 1947–52. As Rule 8 implies, a claim should only be dismissed at the pleading stage where the allegations are so general, and the alternative explanations so compelling, that the claim no longer appears plausible. See FED . R. CIV . P. 8(a); Twombly, 550 U.S. at 556, 127 S. Ct. 1955 (requiring simply “enough fact to raise a reasonable expectation that discovery will reveal evidence” supporting the claims). Arar’s claim readily survives this test, particularly in light of the Court’s obligation to “draw[ ] all reasonable inferences in the plaintiff’s favor” on a motion to dismiss. Id. at 616–17 (additional internal citations omitted) (emphasis added) (alterations in original). Judge Parker argued that “[t]he notion that high-ranking government officials like Defendants Ashcroft and Mueller were personally involved in setting or approving the conditions under which suspected terrorists would be held on American soil—and even oversaw Arar’s detention and removal—is hardly far-fetched,” id. at 617–18, and distinguished Iqbal: 154

In contrast to Iqbal, it is the alternative here that is difficult to fathom. To think that low-level agents had complete discretion in setting the conditions for holding a suspected member of al Qaeda defies commonsense. It requires the Court to believe that, while high-level officials were involved in arranging Arar’s removal to Syria—a premise the majority does not question—they were oblivious to the particulars of his detention. The majority was, of course, bound to credit all reasonable inferences from the allegations in the complaint, understanding that their factual basis would be thoroughly tested in discovery. See Twombly, 550 U.S. at 555, 127 S. Ct. 1955 (a court must proceed “on the assumption that all the allegations in the complaint are true (even if doubtful in fact)”). The inference that, in 2002, high-level officials had a role in the detention of a suspected member of al Qaeda requires little imagination. Further, unlike Iqbal, Arar’s due process claims do not ask the Court to speculate about the mental state of government officials. Rather, Claim Four rests on objective factors—the conditions of confinement and his access to the courts—that are independent of motive. Compare Iqbal, 129 S. Ct. at 1948 (claim of invidious discrimination requires the plaintiff to “plead and prove that the defendant acted with discriminatory purpose”), with Kaluczky v. City of White Plains, 57 F.3d 202, 211 (2d Cir. 1995) (government conduct that is “arbitrary, conscience-shocking, or oppressive in a constitutional sense” violates substantive due process). The complaint contains more than sufficient factual allegations detailing these deprivations. Finally, it should not be lost on us that the Department of Homeland Security’s Office of Inspector General has itself confirmed the broad contours of Arar’s mistreatment, producing a lengthy report on the conditions of his detention in American custody. This report provides a powerful indication of the reliability of Arar’s factual allegations at this stage . . . . Ultimately, it is unclear what type of allegations to overcome a motion to dismiss by high-level officials could ever satisfy the majority. In refusing to credit Arar’s allegations, the majority cites the complaint’s use of the “passive voice” in describing some of the underlying events. This criticism is odd because the occasional use of the passive voice has not previously rendered pleadings defective, particularly where the defendants’ roles can be easily ascertained from the overall complaint. See . . . Yoder v. Orthomolecular Nutrition Institute, Inc., 751 F.2d 555, 561 (2d Cir. 1985) (“It is 155

elementary that, on a motion to dismiss, a complaint must be read as a whole, drawing all inferences favorable to the pleader.”) (citations omitted). Specifically, the majority faults Arar for not pinpointing the individuals responsible for each event set out in the complaint and for failing to particularize more fully when and with whom they conspired. The irony involved in imposing on a plaintiff—who was held in solitary confinement and then imprisoned for ten months in an underground cell—a standard so self-evidently impossible to meet appears to have been lost on the majority. Id. at 618–19 (additional internal citations and footnotes omitted). Judge Parker expressed concern with the majority’s approach: The flaws in the majority’s approach are not unique to Arar, but endanger a broad swath of civil rights plaintiffs. Rarely, if ever, will a plaintiff be in the room when officials formulate an unconstitutional policy later implemented by their subordinates. Yet these closeted decisions represent precisely the type of misconduct that civil rights claims are designed to address and deter. Indeed, it is this kind of executive overreaching that the Bill of Rights sought to guard against, not simply the frolic and detour of a few “bad apples.” The proper way to protect executive officials from unwarranted second-guessing is not an impossible pleading standard inconsistent with Rule 8, but the familiar doctrine of qualified immunity. Even if the majority finds that Arar’s factual allegations fall short of establishing the personal involvement of Defendants Ashcroft and Mueller, they plainly state a claim against defendants such as Thompson, Blackman, McElroy, and John Doe FBI and ICE agents. The direct involvement of these defendants is barely contested by the appellees and barely mentioned by the majority. For this reason alone, there is no legal justification for the majority to dismiss Claim Four outright. Arar, 585 F.3d at 619 (Parker, J., dissenting) (internal citations omitted) (emphasis added). Judge Pooler separately dissented, joined by Judges Calabresi, Sack, and Parker. Judge Pooler asserted: I would hold the Arar should have a Bivens remedy—to reinforce our system of checks and balances, to provide a deterrent, and to redress conduct that shocks the conscience. I understand the majority’s opinion today to be a result of its hyperbolic and speculative 156

assessment of the national security implications of recognizing Arar’s Bivens action, its underestimation of the institutional competence of the judiciary, and its implicit failure to accept as true Arar’s allegations that defendants blocked his access to judicial processes so that they could render him to Syria to be tortured, conduct that shocks the conscience and disfigures fundamental constitutional principles. This is a hard case with unique circumstances. The majority’s disappointing opinion should not be interpreted to change Bivens law. Id. at 627 (Pooler, J., dissenting). Judge Pooler also disagreed with the majority’s decision to dismiss the TVPA claim, noting that “[i]n the Section 1983 context, the Supreme Court has held that private individuals may be liable for joint activities with state actors even where those private individuals had no official power under state law.” Id. at 628. Judge Pooler noted that “[b]ecause plaintiffs must meet a plausibility standard for claims against federal officials under Ashcroft v. Iqbal, supra, [she was] not concerned that subjecting federal officials to liability under the TVPA would open the floodgates to a waive of meritless litigation.” Id. at 629 n.7. Judge Calabresi filed a separate dissent, joined by Judges Pooler, Sack, and Parker. Judge Calabresi stated: “[B]ecause I believe that when the history of this distinguished court is written, today’s majority decision will be viewed with dismay, I add a few words of my own, ‘ . . . more in sorrow than in anger.’” Id. at 630 (Calabresi, J., dissenting) (quoting Hamlet, act 1 sc. 2). Judge Calabresi argued that the majority decided a constitutional question unnecessarily. See id. at 633–34. Judge Calabresi’s dissent did not separately address pleading issues. •

Meijer, Inc. v. Ferring B.V. (In re DDAVP Direct Purchaser Antitrust Litig.), 585 F.3d 677 (2d Cir. 2009), cert. denied, 130 S. Ct. 3505, 2010 WL 1220530 (2010). The plaintiffs, direct purchasers of the antidiuretic prescription medication desmopressin acetate (DDAVP), filed a class action against Ferring B.V. and Ferring Pharmaceuticals (collectively, “Ferring”) and Aventis Pharmaceuticals (“Aventis”), alleging that the defendants abused the patent system to unlawfully maintain a monopoly over DDAVP. Id. at 682. Ferring developed, patented, and manufactured DDAVP, and Aventis had FDA approval for DDAVP tablets and a license from Ferring to market and sell the drug. Id. The plaintiffs asserted that the defendants inflated the price of DDAVP by suppressing generic competition for the tablets, in violation of antitrust laws. Id. The district court dismissed the suit, finding that the plaintiffs lacked standing and that they failed to state a claim upon which relief could be granted. Id. Ferring had filed an earlier patent infringement suit against Barr Laboratories (“Barr”), which was heard by the same district court that dismissed the present suit. Id. Barr had filed an Abbreviated New Drug Application (“ANDA”) for a generic version of the DDAVP drug, and filed a certification stating that Ferring’s patent for the DDAVP drug (the “’398 patent”) was invalid, unenforceable, and/or would not be infringed by Barr’s generic version. Meijer, 157

585 F.3d at 682. Ferring’s suit alleged patent infringement, but the district court found on summary judgment that the ’398 patent was unenforceable due to inequitable conduct before the Patent and Trademark Office (PTO) by Ferring. Id. at 683. In “Ferring I,” the Federal Circuit affirmed. Id. The ’398 patent had initially been rejected by PTO examiners as anticipated by or obvious from another patent (the “’491 patent”), and this decision was affirmed by the Board of Patent Appeals and Interferences on different grounds. Id. at 683. Two Ferring employees then submitted declarations from several scientists stating that the ’491 patent and another article did not suggest the ’398 patent, but the employees failed to disclose that four of the five declarants “previously had either ‘been employed or had received research funds from Ferring.’” Id. Based on the declarations, the PTO issued the ’398 patent. Id. The district court found the failure to disclose the declarants’ relation to Ferring to be inequitable conduct in the Barr litigation. On appeal in the Barr litigation, the Federal Circuit held that the undisclosed affiliations would have been material to the decision to issue the ’398 patent and that the relationships were “‘deliberately concealed.’” Id. The Federal Circuit affirmed the district court’s decision to find the patent unenforceable as against Barr and all other parties. Meijer, 585 F.3d at 683. In the instant lawsuit, the plaintiffs alleged that the defendants’ conduct made the ’398 patent unenforceable and violated the antitrust laws. Specifically, [t]hey allege[d] that defendants Ferring and Aventis “engaged in an exclusionary scheme” that included (1) “[p]rocuring the ’398 patent by committing fraud and/or engaging in inequitable conduct before the PTO,” (2) “[i]mproperly listing the fraudulently obtained ’398 patent in the [FDA’s] Orange Book,” thereby enabling patent infringement claims against potential competitors, (3) prosecuting sham infringement litigation against generic competitors, and (4) “filing a sham citizen petition to further delay FDA final approval of Barr’s ANDA.” Id. (citation omitted) (third, fourth, and fifth alterations in original). The plaintiffs alleged that “the lack of competing, generic versions of DDAVP injured them by forcing them to pay monopolistic prices for the drug.” Id. The district court acknowledged that under Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 173 (1965), a patentee loses First Amendment immunity for obtaining and enforcing a patent, and can incur antitrust liability for enforcing a patent, if the patent was obtained by fraud on the PTO. Id. at 684. But the district court concluded that the plaintiffs failed to plead fraud on the PTO with particularity, “noting that fraud requires a greater showing of culpability than the inequitable conduct that can render a patent unenforceable.” Id. Although the district court found this sufficient for dismissal, it also concluded that the plaintiffs lacked antitrust standing. Id. The district court also rejected the non-Walker Process claims, including the Orange Book listing, the sham infringement litigation, and the sham citizen’s petition, finding that the defendants had “not acted ‘in subjective bad faith.’” Id. The district court also dismissed the claims against Aventis because the plaintiffs had failed to sufficiently allege that Aventis was 158

complicit in Ferring’s fraud on the PTO. Meijer, 585 F.3d at 684. In addressing jurisdiction, the Second Circuit found that it had jurisdiction because the plaintiffs’ theory that the defendants failed to supplement, amend, or withdraw their citizen petition, which asked the FDA to conduct additional testing of the generic drug after the defendants knew that the patent was unenforceable, “could plausibly constitute a Sherman Act violation,” and therefore “support[ed] a patent-independent theory of liability.” See id. at 687 (citing Twombly, 550 U.S. at 566 (“suggesting that either ‘action or inaction’ could be plausibly alleged as an antitrust violation”)). The Second Circuit also found that the plaintiffs had standing. In considering the adequacy of the complaint, the Second Circuit found that the antitrust claim was plausible under Iqbal. The plaintiffs’ first theory, Walker-Process fraud, required showing: (1) a representation of a material fact, (2) the falsity of that representation, (3) the intent to deceive or, at least, a state of mind so reckless as to the consequences that it is held to be the equivalent of intent (scienter), (4) a justifiable reliance upon the misrepresentation by the party deceived which induces him to act thereon, and (5) injury to the party deceived as a result of his reliance on the misrepresentation. Id. at 692 (quoting Nobelpharma AB v. Implant Innovations, Inc., 141 F.3d 1059, 1069–70 (Fed. Cir. 1998)) (quotation marks omitted). The court noted that Rule 9 requires “[a] party ‘alleging fraud or mistake . . . [to] state with particularity the circumstances constituting fraud or mistake.’” Id. (quoting FED . R. CIV . P. 9(b)). The court found that the plaintiffs had “alleged a series of ‘highly material’ omissions, without which ‘the ’398 patent would not have issued,’” and that “[t]he Federal Circuit agreed on the ‘high[] material[ity]’ of the omissions when it found the ’398 patent unenforceable.” Id. (second and third alterations in original). The court further found that “[t]he Ferring I litigation also addressed the third element of intent, as the district court found ‘clear and convincing evidence of an intent to mislead the examiners.’” Id. (citation omitted). Finally, the court found that “[r]eliance and injury, the fourth and fifth elements, [we]re straightforward here: the PTO was justified in relying on the information the defendants provided, and injury is a ‘matter of course whenever the other four elements are met.’” Meijer, 585 F.3d at 692 (citation omitted). The Second Circuit rejected the defendants’ argument that the district judge’s involvement in both the patent litigation finding the patent unenforceable and the instant litigation “enabled him to validly conclude that his previous findings could not support a claim of fraudulent procurement in the instant case.” Id. The Second Circuit described the defendants’ argument as “a logical non sequitur,” explaining that “[t]he district court could be correct in determining that inequitable conduct occurred and yet mistaken that such conduct did not amount to fraud,” and that “the defendants’ argument ignore[d] the distinction between findings and pleadings” because “[e]ven if the district court was correct that the earlier 159

record did not show fraud, the record in this case could be different following discovery.” Id. (emphasis added). The court also rejected the defendants’ argument that “simply adding a conclusory allegation of fraud to the previous findings is inadequate to meet the plaintiffs’ obligation to ‘allege facts that give rise to a strong inference of fraudulent intent,” noting that courts are “‘lenient in allowing scienter issues to withstand summary judgment based on fairly tenuous inferences,’ because such issues are ‘appropriate for resolution by the trier of fact,’” and “[t]he same holds true for allowing such issues to survive motions to dismiss.” Id. at 693 (quoting Press v. Chem. Inv. Servs. Corp., 166 F.3d 529, 538 (2d Cir. 1999)). The court concluded that “[t]he district court found ‘an intent to deceive’ in the patent litigation,” and that “[g]ranting the plaintiffs all favorable inferences as we must on a motion to dismiss, and given that the omissions at issue occurred repeatedly over a period of years, this intent is sufficient to plausibly support a finding of Walker Process fraud.” Id. The Second Circuit also rejected the defendants’ argument that the plaintiffs needed to allege intent separate from the omission itself. Id. The court noted that “[w]hile a false or clearly misleading statement can permit an inference of deceptive intent, a misrepresentation in the form of an omission is more likely to be innocent and cannot support Walker Process fraud without ‘evidence of intent separable from the simple fact of the omission.’” Meijer, 585 F.3d at 693 (quoting Dippin’ Dots, Inc. v. Mosey, 476 F.3d 1337, 1347 (Fed. Cir. 2007)). The court further noted that “[t]he issue in the initial infringement litigation was inequitable conduct, not Walker Process fraud,” and that “the district court in that litigation correctly noted that high materiality could overcome a lesser showing of intent.” Id. The court concluded that “[w]hile such balancing is impermissible with Walker Process claims, we think the plaintiffs’ allegations are nonetheless sufficient.” Id. The court explained that “Dippin’ Dots concerned findings, not pleadings; even if the district court’s findings in the Ferring I litigation could not satisfy Dippin’ Dots, the plaintiffs’ pleadings could plausibly lead to additional findings that would satisfy Dippin’ Dots, which is all that is required at this stage of the litigation.” Id. (internal citation omitted) (emphasis added). The Second Circuit further rejected the defendants’ argument that the allegations of materiality were insufficient to support a claim for Walker Process fraud. The defendants had argued that because the plaintiffs did not dispute the patentability of the ’398 patent on the merits or claim that, but for the fraud, no patent could have issued to anyone, the plaintiffs’ claim had to fail. Id. The court explained that “Walker Process fraud must concern a material issue of patentability; otherwise, a patent would have issued regardless of any fraud, and potential plaintiffs would have suffered the same monopoly effects (but legitimately).” Id. The court found that even though “the plaintiffs [did] not address patentability directly in their complaint, the issue [was] implicit in their allegations.” Meijer, 585 F.3d at 693. The court explained: The defendants’ allegedly fraudulent affidavits were attempts to explain away prior art. The Federal Circuit found them ‘absolutely critical’ to the defendants’ overcoming the patent application’s initial rejection. Ferring I, 437 F.3d at 1189. Whether or not these 160

declarations, if accompanied by full disclosure, would have resulted in an enforceable patent is debatable, but we think that, at the pleading stage, the fact of non-disclosure is sufficient to properly allege materiality. Overall, then, the plaintiffs have sufficiently alleged Walker Process fraud to survive the defendants’ motion to dismiss on the pleadings. Id. at 693–94 (emphasis added). The Second Circuit also concluded that the sham litigation claim was properly pleaded. This claim required alleging that “‘the litigation in question is: (i) ‘objectively baseless,’ and (ii) ‘an attempt to interfere directly with the business relationships of a competitor through the use of the governmental process . . . as an anticompetitive weapon.’’” Id. at 694 (quoting Primetime 24 Joint Venture v. Nat’l Broadcasting Co., 219 F.3d 92, 100–02 (2d Cir. 2000)). The court found that “[b]ased on the same facts alleged to sustain a Walker Process claim, . . . in the circumstances of this case, the plaintiffs’ allegations are also sufficient to make out a sham litigation claim,” and that “[t]he defendants effectively concede[d] as much” by arguing that the sham litigation claim was duplicative of the patent fraud claim. Id. The court further concluded that the Orange Book claim could proceed, finding that “[h]aving determined that the Walker Process and sham litigation theories are still in play, . . . the plaintiffs ha[d] adequately alleged that the defendants improperly listed the ’398 patent in the FDA’s Orange Book.” Id. Finally, the Second Circuit concluded that the citizen petition theory was adequately pleaded. The court explained: The district court dismissed this theory on the basis that it concerned petitioning activity protected by the First Amendment. To reach this conclusion, the district court presumably reasoned that the plaintiffs could not plausibly show the petition to be a sham, i.e., objectively and subjectively baseless, a proposition with which we disagree. The FDA found that the citizen petition “had no convincing evidence” and lacked “any basis” for its arguments. In the Ferring I litigation, the district court suggested that the petition might have been “nothing more than a hardball litigation tactic, motivated by a desire to keep out competition for as long as possible after the expiration of the patent and raise transactional costs for Barr.” Ferring B.V., 2005 WL 437981, at *17. Together these findings indicate the plaintiffs could plausibly show the citizen petition to have been a sham. Id. (internal citations omitted). The defendants argued that the citizen petition could not be the basis for antitrust liability because “it could not have impacted the FDA’s decision, as the FDA ultimately rejected the petition.” Meijer, 585 F.3d at 694. The court rejected that argument, explaining that it “ignore[d] the possibility that the sham petition caused a delay 161

in generic competition, a possibility reinforced by the fact that the FDA approved the generic drug on the same day that it rejected the petition.” Id. (citation omitted). The court found: Whether the ’398 patent was valid on the date the petition was filed is immaterial to this theory’s success, because the plaintiffs can plausibly show the patent to have been fraudulently procured. It may turn out at trial that this petition was not a sham, or that the FDA’s approval of the generic drug was not delayed by the petition, but the possibility that the petition was a sham, and that it impacted the FDA’s decision, is sufficiently plausible to defeat the motion to dismiss. Id. at 694–95 (emphasis added). The court concluded that “[o]verall, the plaintiffs have stated an antitrust claim upon which relief may be granted,” noting that “[b]ased on the pleadings, each of their four theories could plausibly succeed.” Id. at 695. The Second Circuit also found that the district court had erred by dismissing the claims against Aventis on the basis that the fraud had not been pleaded with sufficient particularity under Rule 9. The district court had concluded that the theory “‘[t]hat Aventis would pay to license a patent which it knew to be unenforceable fl[ew] in the face of reason,’” but the Second Circuit found the “allegations plausible, and sufficient to survive a motion to dismiss on the pleadings.” Id. The Second Circuit explained: At the time Aventis filed its [new drug application] and listed DDAVP in the Orange Book, the ’398 patent’s validity was already in question with the patent having been rejected twice, and the PTO having raised concerns of bias. Yet, the plaintiffs assert that Aventis apparently made no effort to independently investigate and attest to the validity of the ’398 patent. Rule 9(b) requires only the circumstances of fraud to be stated with particularity; knowledge itself can be alleged generally. Especially considering the longstanding relationship between Aventis and Ferring, the plaintiffs have adequately stated circumstances that give rise to a plausible inference of knowledge and liability. At this early stage, the plaintiffs need only state a plausible claim of monopolization, and they have alleged enough for their suit against Aventis to proceed. Id. (internal citation omitted). •

Selevan v. N.Y. Thruway Auth., 584 F.3d 82 (2d. Cir. 2009). The plaintiffs challenged an interstate highway toll policy that provided a discount to residents of a particular New York city. The defendant’s policy allowed residents of Grand Island, New York to pay as little as nine cents per trip on the Grand Island Bridges, while others were required to pay 75 cents. Id. at 86–87. The plaintiffs, individuals who had paid the non-resident toll during trips 162

through New York to New Jersey for shopping, tourism, and other activities, brought suit under § 1983, alleging that the policy violated the dormant Commerce Clause and the plaintiffs’ rights under the Equal Protection Clause and the Privileges and Immunities Clause of the Fourteenth Amendment, the Privileges and Immunities Clause of Article IV of the Constitution, and the Equal Protection Clause of the New York Constitution. Id. at 87. The district court dismissed the complaint, finding that the plaintiffs lacked standing under the “prudential standing” doctrine18 because the claims were not within the “zone of interests” protected by the Commerce Clause, the Fourteenth Amendment’s Equal Protection Clause, or the Privileges and Immunities Clause of Article IV. Id. at 87–88. The district court did not consider whether the complaint stated a claim under the Privileges and Immunities Clause of the Fourteenth Amendment because the complaint merely recited that provision, and the court concluded that even if the plaintiffs had standing to bring their equal protection claim, they failed to state a claim. Id. at 88. On appeal, the Second Circuit held that the plaintiffs had met the Article III standing requirements. The court concluded that the district court had improperly dismissed the complaint for lack of prudential standing, noting that “the zone-of-interests requirement invoked by the District Court in this case is ‘not a rigorous one.’” Id. at 91 (quoting Nat’l Weather Serv. Employees Org., Branch 1-18 v. Brown, 18 F.3d 986, 989 (2d Cir. 1994)) (additional citation omitted). The Second Circuit also noted that “[b]ecause this cause comes before us following a decision on a motion to dismiss, we need only consider whether the complaint alleges a plausible claim that the regulation violates the Commerce Clause,” Selevan, 584 F.3d at 92 (citing Iqbal, 129 S. Ct. at 1950), and that “[w]hether the 75-cent toll is actually a burden on interstate commerce is a question left for later proceedings.” Id. (emphasis added). The Second Circuit also reasoned that dismissal was not appropriate based on the argument that the defendants were acting as “market participants.” Id. at 93–94. “The [market participant] doctrine ‘differentiates between a State’s acting in its distinctive governmental capacity, and a State’s acting in the more general capacity of a market participant; only the former is subject to the limitations of the [dormant] Commerce Clause.’” Id. at 93 (quoting New Energy Co. of Ind. v. Limbach, 486 U.S. 269, 277 (1988)). The court concluded that “at least in this stage of the litigation, a finding that [the defendant] acted as a ‘market participant’ (rather than in its governmental capacity) is not warranted,” explaining that “the toll may well be permissible, but, absent a finding that [the defendant] acted as a market participant, it is subject to scrutiny under the dormant Commerce Clause.” Id. at 94. In considering whether the complaint stated a claim under the dormant Commerce Clause, the court noted that the plaintiffs had alleged that the “toll policy discriminates against interstate commerce and that, in the alternative, it imposes a burden on interstate commerce

18

“The Supreme Court has held that ‘prudential standing encompasses the general prohibition on a litigant’s raising another person’s legal rights, the rule barring adjudication of generalized grievances more appropriately addressed in the representative branches, and the requirement that a plaintiff’s complaint fall within the zone of interests protected by the law invoked.’” Selevan, 584 F.3d at 91 (quoting Elk Grove Unified Sch. Dist. v. Newdow, 542 U.S. 1, 12 (2004)).

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that is not justified by any benefits it creates.” Id. at 95. The court noted that “in order to state a claim for discrimination in violation of the Commerce Clause, a plaintiff must ‘identify an[ ] in-state commercial interest that is favored, directly or indirectly, by the challenged statutes at the expense of out-of-state competitors,’” id. (quoting Grand River Enters. Six Nations, Ltd. v. Pryor, 425 F.3d 158, 169 (2d Cir. 2005) (internal quotation marks omitted)), and found that the plaintiffs had “failed to ‘identify an[ ] in-state commercial interest that is favored,’” and had not “point[ed] to a particular ‘out-of-state competitor’ that [wa]s harmed by [the defendant’s] toll policy.” Selevan, 584 F.3d at 95. As a result, the court concluded that the plaintiffs had failed to allege that the “toll policy ‘discriminates’ against interstate commerce.” Id. The Second Circuit explained that while the district court had correctly determined that the plaintiffs failed to allege that the policy discriminated against interstate commerce, the district court had failed to inquire whether the policy otherwise violated the Commerce Clause. Id. The court noted that under Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970), “a nondiscriminatory regulation that ‘regulates even-handedly to effectuate a legitimate local public interest,’ is nevertheless unconstitutional if ‘‘the burden imposed on interstate commerce is clearly excessive in relation to the putative local benefits.’’” Id. (internal citations omitted). The court found the allegations sufficient to survive dismissal: As noted, plaintiffs have alleged that [the defendant’s] policy of charging non-residents of Grand Island tolls that are more than eight times greater than the tolls charged to Grand Island residents “place[s] burdens on interstate commerce that exceed any local benefit that allegedly may be derived from them.” Because at this state of a suit we are required to assume all “well-pleaded factual allegations” are true and assess the complaint only to “determine whether [the allegations] plausibly give rise to an entitlement to relief” at this stage of litigation, Iqbal, 129 S. Ct. at 1950, we conclude that plaintiffs’ allegations are sufficient to survive a motion to dismiss. Id. (internal citation omitted) (emphasis added) (second and third alterations in original). The court further explained that although the lead plaintiffs in the putative class had alleged only a small injury to themselves, the court was “confident that neither the number of prospective class members nor the cumulative difference between the tolls they paid and those paid by Grand Island residents [wa]s negligible,” and noted that “whether a state policy violates the dormant Commerce Clause does not depend on the extent of its impact on an individual plaintiff,” but “must be judged by its overall economic impact on interstate commerce in relation to the putative local benefits conferred.” Id. at 95–96 (citing Pike, 397 U.S. at 142). The Second Circuit directed the district court on remand to “undertake the inquiry prescribed by the Supreme Court for determining whether a fee imposed by a governmental entity to 164

defray the cost of facilities used by those engaged in interstate commerce violates the dormant Commerce Clause or the right to travel . . . .” Selevan, 584 F.3d at 96. Under the relevant Supreme Court precedent, “states are always permitted to require interstate travelers ‘to bear a fair share of the costs of providing public facilities that further travel,’” id. (quoting Evansville-Vanderburgh Airport Auth. District v. Delta Airlines, Inc., 405 U.S. 707, 712 (1972)), and “a fee is reasonable and constitutionally permissible ‘if it (1) is based on some fair approximation of use of the facilities, (2) is not excessive in relation to the benefits conferred, and (3) does not discriminate against interstate commerce.’”19 Id. (quoting Northwest Airlines, Inc. v. County of Kent, 510 U.S. 355, 369 (1994)). The court noted that “[w]hether the fee schedule exception provided to Grand Island residents violates the dormant Commerce Clause will depend in part on whether the fee represents a fair approximation of that group’s use of the bridge—an inquiry that is too fact-dependent to be decided upon examination of the pleadings.” Id. at 98 (citing Northwest Airlines, 510 U.S. at 369) (emphasis added). The Second Circuit also disagreed with the district court’s determination that the complaint failed to assert a claim for violation of the right to travel under the Fourteenth Amendment’s Privileges and Immunities Clause, finding that the “plaintiffs’ complaint supplied a detailed description of [the defendant’s] Grand Island Bridge toll policy,” and “[u]nder the heading ‘Causes of Action,’ the complaint alleged that [the defendant’s] toll policy deprived plaintiffs of ‘their constitutional rights under the Privileges and Immunities Clause of Article IV and/or the Fourteenth Amendment by charging them more for traveling than [the defendant] charged certain New York State residents.’” Id. at 99. The court held that “[t]aken together, plaintiffs’ allegations clearly implicate[d] a violation of plaintiffs’ right to travel under the Fourteenth Amendment’s Privileges and Immunities Clause . . . .” Id. The Second Circuit noted that the plaintiffs had not alleged that they routinely paid the full toll to commute to work or that the toll had some other significant financial impact on them, but only that they paid the toll on the way to New Jersey for shopping and other activities, and concluded that “[t]hese facts suggest at most a ‘minor restriction’ on plaintiffs’ right to travel, rather than a ‘penalty.’” Id. at 101 (footnote omitted). But the court held: “Nevertheless, plaintiffs’ allegations implicate a possible violation of the right to travel in the context discussed in Evansville inasmuch as they contend that they have been charged an excessive toll for use of the Grand Island Bridge while residents of New York are charged substantially less.” Selevan, 584 F.3d at 101–02. The court concluded that “the District Court erred in applying rational basis review to [the defendant’s] toll policy,” and directed the district court on remand to “determine whether the toll policy implicates the right to travel in the context discussed in Evansville and, if so, . . . to apply strict scrutiny.” Id. at 102. The court further directed that if the district court “[found] that the toll [wa]s merely a ‘minor restriction on travel’ that d[id] not amount to the denial of a fundamental right, then the District Court [should] apply the Northwest Airlines test to determine if the toll discriminate[d] against 19

The Second Circuit noted that it had already determined that the amended complaint failed to allege that the policy discriminated against interstate commerce, and that, as a result, unless the plaintiffs were given leave to amend their complaint, the district court only had to assess the other two factors on remand. Selevan, 584 F.3d at 98 n.4.

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interstate commerce.” Id. (internal citation omitted). Finally, the Second Circuit held that the district court had properly dismissed the claim alleged under the Privileges and Immunities Clause of Article IV by one of the plaintiffs, who was a U.S. citizen residing in Canada, because “neither the text nor the purpose of the Privileges and Immunities Clause of Article IV—integrating the various states into a coherent whole—would be served by extending its protection to residents of foreign countries, even U.S. citizens residing in foreign countries.” Id. at 103. •

Panther Partners Inc. v. Ikanos Commc’ns, Inc., 347 F. App’x 617, No. 08-3398, 2009 WL 2959883 (2d Cir. Sept. 17, 2009) (unpublished summary order). The plaintiff alleged that defendant Ikanos, and various directors and underwriters, negligently made false statements in connection with the company’s initial public offering and its secondary offering, in violation of the Securities and Exchange Act of 1933. Id. at *1. The district court dismissed the complaint under Rule 12(b)(6), denied leave to amend, and denied a request to reconsider. Id. The Second Circuit concluded that the standard applied by the district court was too strict, but nonetheless concluded that the complaint was not sufficient under the more lenient standard described in Twombly. See id. at *2. The complaint alleged that “‘[b]y January 2006, Ikanos learned that the VDSL Version Four chips were failing,’” and that “‘Ikanos determined that the VDSL Version Four chips had a failure rate of 25 % [to] 30%, which was extremely high.’” Id. (alteration in original). The Second Circuit found that the district court had improperly required the plaintiff to allege when Ikanos knew the failure rate was specifically 25 to 30%, and explained that the plaintiff only needed to allege that Ikanos knew of abnormally high failure rates before the company published the registration statement accompanying its secondary offering. Id. The court explained: “The plausibility standard would not require that plaintiff assert, for example, exactly when the company knew the difference in defect rates between the VDSL chips and other chips was statistically significant. The plausibility standard, however, does require a statement alleging that they knew of the above-average defect rate before publishing the registration statement.” Id. The court concluded that “the amended complaint failed to meet the plausibility requirements of Twombly because it did not allege facts sufficient to complete the chain of causation needed to prove that defendants negligently made false statements.” Panther Partners, 2009 WL 2959883, at *2. In reviewing the district court’s denial of reconsideration, the Second Circuit noted that the proposed second amended complaint alleged additional facts, but none of those facts resolved the critical issue of when the company knew that the defect rates were unusually high. Id. at *3. However, the court found that amendment might cure the defect, stating: “[C]ourts may consider all possible amendments when determining futility. Because it seems to us possible that plaintiff could allege additional facts that Ikanos knew the defect rate was above average before filing the registration statement, and that this allegation, if made, would be sufficient to meet the high standards that Iqbal and Twombly require for 166

pleadings, further amendment may not be futile.” Id. at *4 (emphasis added). The court concluded: “[W]e recognize that Iqbal and Twombly raised the pleading requirements substantially while this case was pending,” and vacated the district court’s denial of the motion to reconsider its decision to deny leave to amend. Id. (emphasis added). •

Bruno v. Metro. Transp. Auth., 344 F. App’x 634, No. 08-1993-cv, 2009 WL 2524009 (2d Cir. Aug. 19, 2009) (unpublished summary order). The plaintiff sued his employer under the Federal Employers’ Liability Act, which provides that a railroad engaged in interstate commerce will be liable “‘to any person suffering injury while he is employed by such carrier in such commerce . . . for such injury or death resulting in whole or in part from the negligence of any of the officers, agents, or employees of such carrier,” id. at *1 (quoting 45 U.S.C. § 51), and which requires “‘the plaintiff [to] prove the traditional common law elements of negligence: duty, breach, foreseeability, and causation,’” id. (quoting Tufariello v. Long Island R.R., 458 F.3d 80, 87 (2d Cir. 2006)). The Second Circuit concluded that the plaintiff’s claim that “he suffered ‘severe and disabling injuries’ as a result of the [defendant’s] policy that requires its employees who are not on active work status to remain at home during working hours, unless they receive a ‘no work’ status” was “implausible on its face.” Id. The court justified dismissal by noting that the complaint did not allege that the defendant had any duty to grant the “no work” status or that there was a causal link between the policy and the plaintiff’s injuries, and that the plaintiff alleged “no facts apart from conclusory assertions as to how the MTA’s denial of his no work status caused unspecified ‘severe and disabling injuries.’” Id. The court concluded that the claim was frivolous. Id. The Second Circuit concluded that the plaintiff’s second claim, “that on or prior to September 13, 2001, the [defendant] assigned [the plaintiff] to work at or near the World Trade Center, and that he sustained ‘severe and disabling injuries’ by reason of the [defendant’s] negligence,” should also be dismissed. Bruno, 2009 WL 2524009, at *1. The court explained that the plaintiff had conceded that he was precluded from bringing this claim in the absence of fraud because of a release he signed, and that he had not pleaded fraud. Id.



South Cherry Street, LLC v. Hennessee Group LLC, 573 F.3d 98 (2d Cir. 2009). The plaintiff alleged breach of contract and violation of § 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 promulgated by the SEC, in connection with the defendant’s alleged failure to learn and disclose that a hedge fund in which the plaintiff invested on the defendant’s recommendation was part of a Ponzi scheme. Id. at 99–100. The district court dismissed the contract claim as barred by the Statute of Frauds, and dismissed the securities fraud claim on the ground that the complaint failed to plead scienter as required by the PSLRA. Id. at 100. The Second Circuit affirmed. The PSLRA requires that “‘[i]n any private action arising under this chapter in which the plaintiff may recover money damages only on proof that the defendant acted with a particular 167

state of mind, the complaint shall, with respect to each act or omission alleged to violate this chapter, state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.’” Id. at 110 (quoting 15 U.S.C. § 78u-4(b)(2)) (emphasis added by South Cherry Street court). The court explained that “‘[a] plaintiff alleging fraud in a § 10(b) action . . . must plead facts rendering an inference of scienter at least as likely as any plausible opposing inference.’” Id. at 111 (quoting Tellabs, 551 U.S. at 328) (emphasis added by South Cherry Street court). “And in determining whether this standard has been met, the court must consider whether ‘all of the facts alleged, taken collectively, give rise to a strong inference of scienter, not whether any individual allegation, scrutinized in isolation, meets that standard.’” Id. (quoting Tellabs, 551 U.S. at 323). The court concluded that the complaint “lack[ed] sufficient factual allegations to give rise to a strong inference of either fraudulent intent or conscious recklessness.” South Cherry Street, 573 F.3d at 112. The court found that the complaint failed to allege intentional misrepresentation because it alleged only that the defendant would have learned about the problems with the recommended funds if it had performed the due diligence it promised, and did not allege that the defendant had any knowledge that its representations about the funds were untrue. See id. The court also found that the complaint failed to allege recklessness because the complaint alleged only that the defendant breached its contractual obligation by failing to take obvious investigative steps and ignoring clear red flags, but did not allege that the defendant did not believe the funds’ representations were accurate or any facts that the defendant knew that either made the falsity of the funds’ representations obvious or that should have alerted the defendant that the representations were questionable. Id. The court concluded that while it might be plausible to infer that the defendant had acted negligently, it was “far less plausible to infer that an industry leader that prides itself on having expertise that is called on by Congress, that emphasizes its thorough due diligence process, that values and advertises its credibility in the industry—and that evaluates 550 funds—would deliberately jeopardize its standing and reliability, and the viability of its business, by recommending to a large segment of its clientele a fund as to which it had made, according to South Cherry, little or no inquiry at all.” Id. at 113. Although the court was examining the heightened pleading requirements under the PSLRA, it focused on the plausibility standard and discussed the need to plead more than speculation in order to meet the requirements of Rule 8. The Second Circuit noted that the plaintiff’s assertion on appeal that it would be appropriate to draw the inference that the defendant acted illegally appeared nowhere in the complaint and the plaintiff had conceded that the inference was speculative. Id. The court continued: [The plaintiff] argues that because such facts would be peculiarly within the knowledge of the defendants, it had no obligation to include such an allegation in the Complaint, intimating that it might hope to develop some such evidence in discovery. To be sure, South Cherry should not include such an allegation in its pleading without having a “factual basis or justification,” FED . R. CIV . P. 11 Advisory Committee Note (1993). But “before proceeding to discovery, a 168

complaint must allege facts suggestive of illegal conduct,” Twombly, 550 U.S. at 564 n.8, 127 S. Ct. 1955; and a plaintiff whose “complaint is deficient under Rule 8 . . . is not entitled to discovery,” Iqbal, 129 S. Ct. at 1954. South Cherry’s confessed inability to offer more than speculation that there may have been such unlawful conduct underscores, rather than cures, the deficiency in the Complaint. Id. at 113–14 (emphasis added). •

Harris v. Mills, 572 F.3d 66 (2d Cir. 2009). The plaintiff, formerly licensed by the state of New York as a doctor of osteopathic medicine, had his medical license revoked because he committed fraud and engaged in improper medical practices. The New York State Education Department denied the plaintiff’s petition to reinstate his license, and the plaintiff brought a pro se action under the Americans with Disabilities Act (ADA), the Rehabilitation Act, and 42 U.S.C. § 1983, claiming that he was illegally denied a reasonable accommodation for his cognitive disabilities and unconstitutionally deprived of due process. Id. at 68. The district court dismissed the accommodation claims under the ADA and the Rehabilitation Act against the individual defendants because the statutes did not provide for individual liability, and dismissed the Rehabilitation Act claim and the remaining claims for failure to state a claim. The Second Circuit affirmed the finding that the claims were legally insufficient, “even when read with the lenity that must attend the review of pro se pleadings.” Id. The plaintiff’s first accommodation claim alleged that “the Education Department wrongly denied him an ‘understanding of the impact of [his] disabilities,’” which deprived him of a fair reinstatement hearing, and prevented the Department from properly assessing his “‘rehabilitation.’” Id. at 74 (citation omitted). The Second Circuit noted that the complaint did not identify how the plaintiff’s disabilities affected the behavior that caused the revocation of his license or how those disabilities could be accommodated to reform that behavior. Id. The court explained that “[g]enerally construed, this allegation amount[ed] only to the contention that Harris’s medical licensing qualifications should be relaxed in light of his disability,” but “[t]his [wa]s not a reasonable accommodation claim.” Id. The plaintiff’s second accommodation claim—based on denial of the opportunity “to read to the Committee on Professions a written explanation so his case ‘would be more organized and clearly presented’”—failed because, even liberally construed, there was no allegation that the plaintiff was denied the opportunity to read his statement “‘by reason’ of his disability, let alone ‘solely by reason’ of his disability, as the Rehabilitation Act requires.” Harris, 572 F.3d at 74–75. It was also unclear how the requested accommodation would have helped, since the plaintiff alleged “‘difficulty with comprehending the written word’ and ‘a related problem with written expression.’” Id. at 75 (citations omitted). The plaintiff’s due process claim was dismissed because the plaintiff “was given notice and an opportunity to be heard before his petition for reinstatement was denied,” and state law 169

provided an adequate post-deprivation hearing for the denial of his petition to reinstate his license. Id. at 76. Finally, the court found dismissal appropriate for the “cause of action that the defendants’ decisions were ‘[a]rbitrary and capricious’ inasmuch as the defendants failed to follow their own procedural rules.” Id. (citation omitted). The court found that “[i]nsofar as this [wa]s intended to be a stand-alone legal claim based solely on violations of state regulations, it [wa]s not actionable in federal court,” and “therefore state[d] no claim upon which relief c[ould] be granted.” Id.

Third Circuit •

Argueta v. U.S. Immigration and Customs Enforcement, 643 F.3d 60, 2011 WL 2315125 (3d Cir. Jun. 14, 2011). The plaintiffs were New Jersey residents of Latino origin who alleged that between 2006 and 2008 they had been subjected to unlawful and abusive raids conducted by Immigration and Customs Enforcement (“ICE”) under a Department of Homeland Security program known as “Operation Return to Sender.” The plaintiffs filed a Bivens action against several high-level ICE and Department of Homeland Security officials (Myers, Torres, Weber, and Rodriguez), alleging in general that these defendants had failed to adequately supervise the conduct of the raids. More specifically, the plaintiffs alleged that each ICE agent was ordered to arrest a quota of fugitive aliens each year, and that in or around 2006 this quota was drastically increased from 125 to 1,000 under the Operation Return to Sender program. The court of appeals summarized the further allegations of the complaint as follows: Plaintiffs explained that the “practice” of unlawful and abusive raids flourished as a predictable consequence of the “arbitrary” and “exponentially-increased” quotas. “Under pressure from these quotas immigration agents have regularly disregarded the obligation to secure a judicial warrant or probable cause in carrying out unlawful entries and dragnet searches of homes in which the agents only loosely suspect immigrant families may reside.” Plaintiffs alleged that their own personal experiences (also described in some detail in their pleading) “are typical of the ‘Operation Return to Sender’ home raid modus operandi throughout the state and the nation, which has been comprehensively documented through media reports and first-hand accounts from other victims.” Specifically, the raids allegedly violated the Fourth and Fifth Amendments to the United States Constitution. Due to the flaws in the database and other deficiencies, the unconstitutional conduct allegedly began even before the team of ICE agents arrived at a 170

particular residence. In other words, “[a]gents regularly raid homes where the purported ‘fugitive’ target is not present and could not be present.” It is uncontested that the agents must obtain consent in order to enter a person's home. According to Plaintiffs, the agents typically failed to obtain the requisite consent. The pattern of unconstitutional conduct then allegedly continued once the ICE agents actually entered the home. Plaintiffs claimed that this whole process was then repeated at other homes until the agents’ van was filled. According to Plaintiffs, the agents’ actions had an especially devastating impact on children (most of them citizens), who had to watch “law enforcement agents sweeping through their homes with guns, ordering them and their parents to gather together and suddenly handcuffing and dragging away their parents in the middle of the night.” With respect to [defendants], Plaintiffs asserted that, “[d]espite aggressively increasing the arrest quotas and the number of agents participating in ‘Operation Return to Sender,’ and thereafter being notified—via press reports, lawsuits, and congressional testimony—of the widespread allegations of unconstitutional and abusive conduct by ICE agents as part of this program, the DHS supervisory officials named in this Complaint have continued to foster an institutional culture of lawlessness.” In short, these supervisory officials allegedly failed to develop meaningful guidelines or oversight mechanisms to ensure that home searches were conducted in a constitutional fashion, to furnish their agents with adequate training (and, in the case of some newer agents, any training whatsoever) on the lawful execution of lawful operations, and to provide some sort of basic accountability for violations of the Constitution. Appellants instead “have proudly publicized the increasing numbers of arrests made as a result of the unconstitutional raids that continue to be carried out in the shadows and in the dark of night.” Plaintiffs sought to hold accountable “those who conducted, directed, and sanctioned the complained-of conduct.” According to Plaintiffs, the “nationwide pattern and practice” of unconstitutional conduct described above “has been the subject of widespread media reporting as well as multiple lawsuits filed in other federal district courts.” Plaintiffs cited to five lawsuits, all from outside this Circuit. Members of Congress also allegedly raised questions about the raids. In a letter dated June 11, 2007, three legislators expressed their concerns about reports of misconduct occurring during raids executed in New Haven, Connecticut, on June 6, 2007 (i.e., ICE agents pushing their way into homes without search 171

warrants, inappropriately treating both adults and children, and ultimately catching only four fugitives out of the thirty-one arrested). The raids were also allegedly criticized in a March 5, 2008 report by the United Nations Special Rapporteur on the Human Rights of Migrants. Plaintiffs alleged that reports of raids—and related misconduct—were especially prevalent in New Jersey, and they specifically cited to a number of newspaper articles purportedly describing incidents of misconduct dating from May 2006 to February 2008. Plaintiffs included a whole section in their Second Amended Complaint entitled “Defendants’ Supervisory Responsibility.” (JA561 (emphasis omitted).) In this section, they again attempted to explain in more detail the four [defendants’] alleged involvement in the unconstitutional conduct described above. Accordingly, Plaintiffs made the following specific allegations with respect to Myers and Torres: (1) these two Appellants oversaw the implementation of a five-fold increase in the number of FOTs between 2005 and 2007 and approved a “remarkable” 800% increase in the arrest quota for each team without providing the necessary training to prevent ICE agents, who now faced new pressures from the drastically increased quota, from acting abusively and unlawfully; (2) Myers and Torres “facilitated the creation of a culture of lawlessness and lack of accountability within an agency they supervise”; (3) in recent years, they “have been repeatedly on notice of the routine unconstitutional home-raid practices by ICE agents throughout the country,” specifically because “defendants Myers and Torres have been sued numerous times for their roles in these practices”; (4) the National Immigration Forum sent a letter on June 11, 2007 to Chertoff questioning the conduct of ICE agents in the June 2007 New Haven raids; (5) Myers herself responded to the National Immigration Forum correspondence in a letter dated July 6, 2007, in which she acknowledged that only five of the twenty-nine individuals arrested in New Haven were fugitive aliens, agents routinely lacked judicially-issued warrants and thereby had to obtain voluntary and knowing consent before entry, and (as emphasized by Plaintiffs) “such consent was ensured simply by assigning a Spanish-speaking officer to each Fugitive Operations Team”; (6) Torres possessed “direct responsibility for the execution of fugitive operations” and, like Myers, he was made aware of the unconstitutional home raid practices of his subordinates through the media and lawsuits filed against him dating back to November 2006; (7) also like Myers, Torres received specific notice of the misconduct 172

in New Haven by means of a June 2007 telephone call from the city’s own mayor claiming that ICE agents “barged into houses without warrants and verbally abused the people and children were manhandled” and asking whether “Torres's office should continue to allow such home raids to be conducted with these allegations pending”; (8) despite their awareness of the unconstitutional home raid practices through lawsuits, Congressional inquiries, national media reports, and other sources, Myers and Torres repeatedly failed to conduct any meaningful investigations or provide any specific guidelines or training to ensure that such raids satisfied constitutional requirements and also, upon information and belief, failed to discipline any responsible agents in a meaningful fashion; and (9) on the contrary, Myers and Torres, “have contributed to such unlawful conduct by continuing to publicize, and laud as ‘successful,’ their department’s dramatic increase in immigration arrests over the past two years” in several press releases, and their behavior further confirmed “that the high number of arrests were made pursuant to the nationwide interior immigration enforcement strategy announced by defendant Myers and Secretary Chertoff.” Plaintiffs advanced a similar set of allegations with respect to Weber and Rodriguez: (1) as Newark DRO Field Office Directors, the two men were directly responsible for overseeing fugitive operations and the execution of Operation Return to Sender in New Jersey, and they both made frequent reports and public comments regarding the number of arrests and related matters; (2) “[c]omments to the media by each of them regarding allegations of inappropriate action by their fugitive operations personnel, including unconstitutional home raids, suggest that defendants Rodriguez and Weber at best acquiesced, and at worst, encouraged such behavior”; (3) for example, when Weber was confronted by the press with specific allegations regarding a pattern of raids conducted without search warrants or consent, he was quoted in a newspaper article as saying that “‘I don’t see it as storming a home. . . . We see it as trying to locate someone.’”; and (4) upon information and belief, Weber and Rodriguez (a) knew that ICE agents were entering and searching New Jersey homes without search warrants and without the requisite consent, (b) failed to implement any guidelines, protocols, training, oversight, or record-keeping requirements to ensure that agents acted within constitutional limitations, (c) failed to conduct any substantial investigations into allegations of unconstitutional home raids of which they were made aware or otherwise discipline any responsible agent in a meaningful fashion, and (d) instead simply continued to publicize the “successful” increase in arrests in New Jersey over the 173

past two years “while allowing the unconstitutional means for many of the arrests to continue unchecked.” Id. at *3–5 (footnotes and citations omitted). The district court—in a decision that came after Twombly and Iqbal—denied defendants’ motion to dismiss the complaint on grounds of qualified immunity. The court of appeals characterized the district court’s ruling as follows: In its opinion, the District Court rejected Appellants’ theory that the Supreme Court’s decision [in Iqbal] worked a substantial change in the existing law governing the qualified immunity analysis and the liability of supervisors, at least in the specific circumstances presented by the current proceeding. Because Plaintiffs advanced claims under the Fourth Amendment, they were not required to show discriminatory purpose (unlike their counterpart in Iqbal who brought a claim of invidious discrimination under the First and Fifth Amendments). According to the District Court, they therefore adequately “allege that [defendants] had actual knowledge, initiated, and directed their subordinate agents to go beyond the limits of their non-judicial warrants in violation of Plaintiffs’ Fourth Amendment rights to be free from illegal searches and seizures.” Argueta v. U.S. ICE, No. 08–1652, 2010 WL 398839, at *6 (D.N.J. Jan. 27, 2010). In other words, “there are sufficient factual allegations set forth in the Complaint for the Court, in applying its experience and common sense, to conclude that there is a plausible claim against each [defendant] that their personal involvement, direction and knowledge or acquiescence permitted a search of the residence of plaintiffs without consent in violation of the Fourth Amendment.” Id. at *6. The Third Circuit reversed the ruling of the district court and dismissed the complaint on the basis of qualified immunity. The court reasoned: Initially, certain allegations in the Second Amended Complaint were conclusory in nature and merely provided, at best, a “framework” for the otherwise appropriate factual allegations. Iqbal, 129 S. Ct. at 1950. For instance, the broad allegations regarding the existence of a “culture of lawlessness” are accorded little if any weight in our analysis. We further note that the relevant counts in the pleading contained boilerplate allegations mimicking the purported legal standards for liability, which we do not assume to be true. We also must reject certain broad characterizations made by the District 174

Court, which were not supported by either the actual factual allegations in the Second Amended Complaint or reasonable inferences from such allegations. Most significantly, the District Court went too far by stating that Myers and Torres “worked on these issues everyday.” Argueta, 2010 WL 398839, at *8. Turning to the non-conclusory factual allegations in the Second Amended Complaint, we begin with the critical issue of notice. Plaintiffs did reference an impressive amount of documentation that allegedly provided notice to Appellants of their subordinates’ unconstitutional conduct. However, these alleged sources of notice were fatally flawed in one way or another. Broadly speaking, we must point out the typical “notice” case seems to involve a prior incident or incidents of misconduct by a specific employee or group of employees, specific notice of such misconduct to their superiors, and then continued instances of misconduct by the same employee or employees. The typical case accordingly does not involve a “knowledge and acquiescence” claim premised, for instance, on reports of subordinate misconduct in one state followed by misconduct by totally different subordinates in a completely different state. Although there were some New Jersey-specific allegations in the Second Amended Complaint, we are generally confronted here with an attack on the alleged misconduct of numerous ICE agents at different raids executed across the country over a period of years. As Appellants further point out, the court cases specifically cited in Plaintiffs’ pleading either did not involve individual capacity claims against Myers and Torres, were filed after at least some of the New Jersey raids specifically alleged in the Second Amended Complaint took place, or did not even involve Operation Return to Sender. All of these cases were also filed outside of New Jersey, and certain other alleged sources of notice implicated raids that took place in other states, especially in New Haven, Connecticut. Likewise, some alleged sources (like the February 2008 hearing and the March 2008 UN report) post-dated most of the specific New Jersey raids that allegedly harmed Plaintiffs themselves. In the end, we conclude that Plaintiffs did not plausibly allege that the Appellants had legally sufficient notice of the underlying unconstitutional conduct of their subordinates. Second, we observe that allegations specifically directed against Appellants themselves (unlike the allegations directed at the agents who actually carried out the raids) described conduct consistent with otherwise lawful behavior. See, e.g., Iqbal, 129 S. Ct. at 1950. In other words, a federal official specifically charged with 175

enforcing federal immigration law appears to be acting lawfully when he or she increases arrest goals, praises a particular enforcement operation as a success, or characterizes a home entry and search as an attempt to locate someone (i.e., a fugitive alien). In fact, the qualified immunity doctrine exists to encourage vigorous and unflinching enforcement of the law. See, e.g., id. at 1953–54. We add that, far from adopting a facially unconstitutional policy or expressly ordering ICE agents to engage in unconstitutional home entries and searches, Myers clearly stated in her response to the National Immigration Forum correspondence that agents were required to obtain consent before entering private residences and that all allegations of misconduct were taken seriously and fully investigated (and that, among other things, similar statements were made by Weber in connection with his “[w]e see it as trying to locate someone” comment to the press). We also agree with Appellants’ assertion that Plaintiffs themselves did not really identify in their pleading what exactly Appellants should have done differently, whether with respect to specific training programs or other matters, that would have prevented the unconstitutional conduct. See, e.g., Beers–Capitol v. Whetzel, 256 F.3d 120, 134 (3d Cir. 2001); Sample v. Diecks, 885 F.2d 1099, 1118 (3d Cir. 1989). For instance, the Inspector General’s report, emphasized in the Second Amended Complaint, actually stated that all FOT members were required to complete a special three-week basic training course within two years of their assignment, most officers had completed the requisite training, and, in any case, all team members had previously undergone some form of basic law enforcement training (which presumably would have covered basic principles governing, among other things, the entry into a private residence without a judicial warrant). Far from recommending a complete training overhaul, the Inspector General ultimately recommended a “refresher course,” and ICE accepted this recommendation. We also cannot overlook the fact that Appellants themselves occupied relatively high-ranking positions in the federal hierarchy. Following the example set by the District Court, Plaintiffs assert that Appellants cannot be compared with Attorney General Ashcroft, who held the highest position in the federal law enforcement hierarchy. They add that the Iqbal Court emphasized that both Ashcroft and Mueller had to make quick policy decisions to respond to an unprecedented national emergency, while, on the other hand, Appellants oversaw Operation Return to Sender over a number of 176

years. We certainly acknowledge that it is crucial to consider context and the particular circumstances of each and every case. See, e.g ., Iqbal, 129 S. Ct. at 1950. However, the context here involved, at the very least, two very high-ranking federal officials based in Washington D.C. who were charged with supervising the enforcement of federal immigration law throughout the country (as well as two other officials responsible for supervising such enforcement throughout an entire state). Appellants accordingly note that Myers and FBI Director Mueller reported directly to their respective agency heads (the Secretary of Homeland Security and the Attorney General), were appointed by the President and confirmed by the Senate, and were responsible for setting national and international polices. In fact, it appears uncontested that Myers and Torres oversaw an agency with more than 15,000 employees and a budget of more than $3.1 billion. In Rode v. Dellarciprete, 845 F.2d 1195 (3d Cir. 1988), a civilian employee of the Pennsylvania State Police filed a civil rights action under § 1983 and 42 U.S.C. § 1985 against several defendants, including Pennsylvania Governor Thornburgh and Attorney General Zimmerman, id. at 1197–98. Among other things, she alleged that she was a victim of unlawful retaliation in the form of an unlawful work suspension and impermissible changes in her duties and working conditions. Id. Affirming the district court’s dismissal of her claims against these two state officials, this Court specifically determined that she failed “to allege knowledge and acquiescence with the required particularity” as to her claim against the Governor. Id. at 1208. We observed that “Rode’s assertion that the Governor had ‘responsibility for supervising’ the other defendants is irrelevant.” Id. We then expressly rejected her “hypothesis” that the Governor had personal knowledge of the retaliation “directed against Hileman [Rode’s co-plaintiff] because of numerous articles that appeared in newspapers throughout the state and through the introduction of a legislative resolution seeking an investigation into racially motivated retaliation against [Pennsylvania State Police] employees, the filing of grievances with the Governor’s office of administration, and telephone calls and correspondence with the office of the Lieutenant Governor.” Id. In the end, we concluded that, “[i]n a large state employing many thousands of employees, a contrary holding would subject the Governor to potential liability in any case in which an aggrieved employee merely transmitted a complaint to the Governor’s office of administration or to the Lieutenant Governor’s office.” Id. We add that the Ninth Circuit reached the same result in a 177

recent post- Iqbal decision. In al-Kidd v. Ashcroft, 580 F.3d 949 (9th Cir. 2009), rev’d on other grounds, --- U.S. ––––, 131 S. Ct. 2074, 179L. Ed. 2d 1149 (2011), the Ninth Circuit expressly rejected a “conditions of confinement” claim against Ashcroft brought by an individual detained under the material witness statute following September 11 because “the complaint does not allege any specific facts—such as statements from Ashcroft or from high-ranking officials in the DOJ—establishing that Ashcroft had personal involvement in setting the conditions of confinement.” Id. at 978. The Ninth Circuit acknowledged that al-Kidd made several allegations regarding media reports and other sources of information describing the conditions of confinement, but it then explained that “the non-specific allegations in the complaint regarding Ashcroft’s involvement fail to nudge the possible to the plausible, as required by Twombly.” Id. at 978–79; see also, e.g., Santiago, 629 F.3d at 134 (concluding that “allegation that Lt. Springfield was placed in charge of the operation, coupled with what happened during the operation, [failed to make it] plausible that Lt. Springfield knew of and acquiesced in the use of excessive force against Santiago.”). We acknowledge that the specific circumstances presented in this prior case law may be distinguishable in one way or another. For instance, the appointed head of a federal agency, charged with enforcing the law and specifically implementing a particular enforcement operation, clearly possessed different responsibilities than the elected governor of a state. See, e.g., Atkinson, 316 F.3d at 270–71 (distinguishing state correctional commissioner and lower-ranking officials from governor and state attorney general). However, we cannot overlook the marked similarities between the allegations at issue here and the allegations deemed to be insufficient in Rode and al-Kidd. Furthermore, we again note that Myers and Torres, in particular, had national and even international policymaking and supervisory responsibilities. In the end, we believe that this prior case law supports our conclusion that Plaintiffs failed to meet the plausibility requirement. Finally, we wish to emphasize that our ruling here does not leave Plaintiffs without any legal remedy for the alleged violation of the United States Constitution. [Certain of the plaintiffs] are still free to pursue their official capacity claims for injunctive relief against any further intimidation or unlawful entry into their home. Also, we do not address Plaintiffs’ individual capacity claims for damages against the lower-ranking ICE agents named in the Second Amended Complaint. See, e.g., Iqbal, 129 S. Ct. at 1952 (“It is important to 178

note, however, that we express no opinion concerning the sufficiency of respondent’s complaint against the defendants who are not before us. Respondent’s account of his prison ordeal alleges serious official misconduct that we need not address here. Our decision is limited to the determination that respondent’s complaint does not entitle him to relief from petitioners [Ashcroft and Mueller].”). Id. at *12–15. •

Cotter v. Newark Hous. Auth., 422 F. App’x 95, 2011 WL 1289731 (3d Cir. Apr. 6, 2011) (unpublished). James Cotter and his company filed suit against the Newark Housing Authority (the “NHA”) for breach of contract and promissory estoppel. The dispute arose out of negotiations for the sale of 30 acres of land from the NHA to Cotter. The district court granted the defendant’s motion to dismiss, concluding that the allegations of the amended complaint did not sufficiently allege the existence of a contract or a clear and definite promise that could provide the basis for a claim of promissory estoppel. The Third Circuit, by a vote of 2-1, affirmed the district court’s grant of the motion to dismiss. The court reasoned: When do negotiations turn into a contract? The answer is only when there is a valid offer and acceptance. Here there was neither. In its January 2001 letter, NHA stated “we request that Cotter give us an offer to purchase.” (J.A. 22, 45). This was not an offer, but merely a request for an offer. Id. Similarly, the March 2001 letter from NHA said that the Authority was “willing” to convey the 22 acres for $2,486,000, yet another signal that NHA was ready to negotiate. (J.A. 22, 48.). Paragraph 23 of the Amended Complaint references the June 1 letter Cotter sent to NHA, which states that an agreement had been reached between the parties. But if this is an allegation that an agreement had been reached, it is a legal assertion, not a factual one, which the District Court properly ignored. See Ashcroft v. Iqbal, --- U.S. ----, ----, 129 S. Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L.Ed.2d 929 (2007)). The June 4, 2001 letter from NHA to Cotter stated that “subject to final approval by the Authority’s Board of Commissioners, the Authority will enter into a contract” that will have certain features. (J.A. 24, 54.) The use of the future tense makes it clear that, once again, NHA was simply setting the stage for the an actual agreement. Nowhere does this letter allege an offer or acceptance. The March 17, 2004 letter states that the parties had 179

“previously negotiated an agreement” but, once again, any allegation that an agreement had been reached is a legal conclusion, not a factual one. (J.A. 9, 65). Later in the letter (and the allegation of the Amended Complaint incorporating the letter), NHA pitched the following: At this time, the NHA is requiring that if your client has a continued interest in this property, it must close on or before May 1, 2004. Please advise me before the close of business on April 15, 2004 if your client desires to acquire this property in its current condition based upon the terms and conditions of our proposed agreement. (J.A. 9, 65). This is the first offer—a “manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it”—alleged in the Amended Complaint. Restatement (Second) of Contracts § 24 (1981). Paragraph 34 of the Amended Complaint then references an April letter in which Cotter stated that he was “ready to close May 1, 2004” but then pointed to problems with the contract proposed in the March 17 letter before drawing attention to a copy of the contract enclosed with “requisite changes.” (J.A. 10, 67). This was a counter-offer, which the next paragraph of the Amended Complaint states was not executed by NHA. Fletcher–Harlee Corp., 482 F.3d at 250; Restatement (Second) of Contracts § 59 (“A reply to an offer which purports to accept it but is conditional on the offeror’s assent to terms additional to or different from those offered is not an acceptance but is a counter-offer.”). With this factual and legal framework established, we agree with the District Court that the Amended Complaint failed to state a plausible breach of contract claim because the Amended Complaint nowhere alleged a valid offer and acceptance. As the District Court concluded, this makes the instant case similar to 4 Orchard where there was a course of dealing culminating in a “flurry of letters” but the context made it apparent that the parties intended to be bound only by a written contract. 180 N.J. 118, 849 A.2d 164. Here, the allegations are that no offer was made until March 17, 2004, that the offer included a written contract, and that the offer was rejected in favor of a counter-offer. “No offer and no acceptance means no contract.” Fletcher–Harlee, 482 F.3d at 251. The District Court properly dismissed Cotter’s breach of contract claim because there was no plausible entitlement to relief on such a claim, based on the 180

allegations in the Amended Complaint. Id. at *2–3 (footnote and citations omitted). One judge (Pollak, J., sitting by designation) dissented from the court of appeals’ affirmance of the grant of the motion to dismiss. The dissent explained: The majority holds that documents exchanged between the parties do not plausibly support the assertion that an agreement had been reached because whether “an agreement had been reached ... is a legal assertion, not a factual one, which the District Court properly ignored.” Maj. Op. at ---- (citing Ashcroft v. Iqbal, --- U.S. ----, ----, 129 S. Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) and Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L.Ed.2d 929 (2007)). However, Twombly and Iqbal prohibit courts only from crediting a complaint’s “[t]hreadbare recital[ ] of the elements of a cause of action, supported by mere conclusory statements.” Iqbal, 129 S. Ct. at 1949 (citing Twombly, 550 U.S. at 570, 127 S. Ct. 1955). Far from simply making a threadbare recital of the elements of a breach of contract claim, the complaint here referenced multiple documents in which both parties referred to an “agreement,” and it made factual recitals of the actions that both parties took in reliance upon that agreement. Accordingly, I respectfully dissent. Id. at *4 (Pollack, J., dissenting). •

Wilson v. City of Philadelphia, 415 F. App’x 434, 2011 WL 692998 (3d Cir. Mar. 1, 2011) (unpublished). Harold Wilson was convicted of murder in 1989 and sentenced to death. Fifteen years later, he was granted a new trial, acquitted, and released from prison. He filed an action under § 1983 against former members of the Philadelphia District Attorney’s Office alleging they committed misconduct during their investigation of the crime. The district court denied the defendants’ motion to dismiss the complaint. The court of appeals summarized the district court’s findings: The District Court in this case, looking to the issue of entitlement to relief, accurately reviewed the legal principles with respect to prosecutor’s immunity in stating that “absolute immunity may not apply when a prosecutor is not acting as ‘an officer of the court,’ but is instead engaged in other tasks, say, investigative or administrative tasks.” Van de Kamp v. Goldstein, 555 U.S. 335, ----, 129 S. Ct. 855, 861, 172 L.Ed.2d 706 (2000) (quotation omitted). 181

After applying those principles to dismiss many of the allegations as to the appealing defendants, the District Court stated that: “plaintiff’s Amended Complaint also alleges that ‘[i]n an effort to arrest and imprison Plaintiff for the crimes he did not commit, Defendants, acting personally, as well [sic] by and through conspiracy with others, manipulated and coached witnesses, and then withheld from Plaintiff that they had done so’” (quoting from complaint). The District Court concluded that to the extent that Wilson’s amended complaint alleges conduct relating to manipulation and coaching of witnesses in an investigative capacity, defendants were not entitled to either absolute or qualified prosecutorial immunity. The District Court recognized the paucity of factual allegations but permitted the complaint to stand, liberally viewing the allegations. Id. at *2 (citation omitted). On appeal, the Third Circuit vacated the district court’s denial of the defendants’ motion to dismiss and remanded to the district court with instructions that the district court grant the plaintiff leave to file an amended complaint. The court of appeals stated: We believe the Supreme Court’s jurisprudence requires us to apply a more exacting scrutiny of the complaint. An examination of the Supreme Court’s treatment of allegations in Iqbal is instructive. There, Iqbal alleged that John Ashcroft, the former United States Attorney General, and Robert Mueller, the Director of the FBI, “knew of, condoned, and willfully and maliciously agreed to subject [Iqbal] to harsh conditions of confinement as a matter of policy, solely on account of [Iqbal’s] religion, race, and/or national origin and for no legitimate penological interest,” that Ashcroft was the “principal architect” of this policy, and that Mueller was “instrumental” in adopting and executing it. 129 S. Ct. at 1951 (quotations omitted). The Supreme Court concluded that these allegations were conclusory. Id. The Supreme Court also held that Iqbal’s factual allegations that were well-pleaded failed to plausibly allege that his arrest was the result of an invidious policy of unconstitutional discrimination. Id. at 1951–52. We agree with Appellants that Wilson’s complaint, like Iqbal’s, falls short of what is required to survive a motion to dismiss. Wilson’s allegations against Appellants are conclusory, are not entitled to an assumption of truth, and are insufficient to support his claims. Nonetheless, this court has held that when a civil rights complaint will be dismissed for failure to state a claim, a plaintiff 182

should be granted the opportunity to amend the complaint unless amendment would be inequitable or futile. See Fletcher-Harlee Corp. v. Pote Concrete Contractors, Inc., 482 F.3d 247, 251–52 (3d Cir. 2007). Although that assessment is for the District Court in the first instance, Wilson has not specified on appeal what supplemental factual averments he would make by way of amendment. It may be that the District Court will grant defendants’ motion to dismiss, but granting him leave to amend certainly would not be inequitable here. As Wilson explains, he filed his amended complaint just two months after Iqbal was decided, “well before this Circuit had an opportunity to flesh out the pleading requirements in light of that case.” Accordingly, we will vacate that part of the District Court’s judgment denying Appellants’ motion to dismiss and remand with instructions to grant Wilson leave to amend his amended complaint if he can do so to comport with the pleading requirements. Id. at *2–3 (emphasis added) (citation omitted). •

Abulkhair v. Bush, 413 F. App’x 502, 2011 WL 453477 (3d Cir. 2011) (unpublished) (per curiam), cert. denied, 131 S. Ct. 2884 (2011). Plaintiff Assem Abulkhair filed a complaint challenging the denial by the U.S. Customs and Immigration Service of his application for naturalization as a U.S. citizen. Abulkhair sought monetary damages under Bivens against President Bush and a number of Customs and Immigration Service officials for violation of his constitutional rights. All of his claims were premised on his assertion that his application was denied because he is a “Moslem living in the U.S.” The district court dismissed his complaint for failure to state a claim, and also granted a motion for summary judgment against him. The Third Circuit affirmed the dismissal for failure to state a claim, reasoning as follows: The defendants moved to dismiss Abulkhair’s Bivens claims based on, among other things, his failure to allege any facts that the named federal defendants were personally involved in the alleged violations of his constitutional rights. We agree with the district court that Abulkhair failed to sufficiently plead a claim against any defendant under Bivens. “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, ‘to state a claim to relief that is plausible on its face.’” [Iqbal, 129 S. Ct.] at 1949 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “Threadbare 183

recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. Further, to state a Bivens claim based on alleged unconstitutional discrimination, the petitioner “must plead sufficient factual matter to show that [a defendant] adopted and implemented the ... policies at issue not for a neutral . . . reason but for the purpose of discriminating on account of race, religion, or national origin.” Id. at 1948–49. Abulkhair did not make specific claims against any of the named defendants. Rather, reading the complaint liberally, he appears to be asserting that the defendants adopted an unconstitutional policy of discrimination against Muslim applicants for naturalization. As in Iqbal, Abulkhair’s conclusory assertions against the federal officials have not “nudged [his] claims of invidious discrimination across the line from conceivable to plausible,” so as to be entitled to a presumption of truth, as is required to survive a motion to dismiss. Id. at 1950–51 (internal quotations omitted) (alteration in original). Accordingly, the district court appropriately dismissed these claims under Rule 12(b)(6). Id. at *3–4. •

Santiago v. Warminster Township, 629 F.3d 121 (3d Cir. 2010). Plaintiff Gloria Santiago filed a complaint under § 1983 and state tort law against Warminster Township and three of its senior police officers, including the police chief, alleging that she suffered a heart attack after being subjected to excessive force during a police raid on her home. Her claims against the police officers who actually conducted the raid—a group that operated under the moniker “Alpha Team”—were dismissed as untimely. Her remaining claims were against the Township and against three senior police officers who were not present at the raid but who allegedly planned and supervised the raid. The district court dismissed all of these claims for failure to state a claim. The purpose of the raid was to apprehend one of Santiago’s grandsons, for whom the police had a warrant. According to the complaint, at the commencement of the raid, the occupants of Santiago’s home were awakened by police using a public address system. Santiago, who was 60 years old, looked through a window and saw an armored vehicle and police officers wearing combat uniforms and carrying automatic weapons. A police officer ordered everyone to exit the house one at a time. Santiago came out first and was commanded, at gun point, to raise her hands and walk toward the officers. When she did not raise them high enough, she was ordered to raise them higher or else be shot. When Santiago reached the officers, an officer conducted an invasive pat down search. He then restrained her hands behind her back and seated her on the ground next to the police vehicle. Santiago was frightened and complained of chest pain. She sat with her hands tied for approximately 30 minutes while her home was searched. She continued to complain of 184

pain and told another of her grandsons that she felt pain in her heart. The grandson told the officers that Santiago was having a heart attack, and the officers summoned an ambulance to take her to the hospital. The Third Circuit began by summarizing Santiago’s allegations against the three police officers: Chief Michael Murphy is Police Chief of Warminster Township Police Department. . . . Although Chief Murphy was not present at the scene on May 13, 2006, he ordered and approved the plan to execute the arrest warrants. This early morning “surround and call out” operation specifically sought to have all occupants exit the Plaintiff’s home, one at a time, with hands raised under threat of fire, patted down for weapons, and then handcuffed until the home had been cleared and searched. Chief Murphy violated Plaintiff’s Fourth Amendment rights in that this plan used excessive force in restraining Plaintiff, a non-target occupant who presented no threat or risk, for a lengthy period of time and used coercion in obtaining her consent to search the premises. Christopher Springfield was a police officer with Warminster Township Police Department. On May 13, 2006, he held the rank of Lieutenant and was in [sic] placed in charge of the “surround and call out” operation by Chief Murphy. . . . Lt. Springfield violated Plaintiff’s Fourth Amendment rights in that he permitted the use of excessive force in restraining Plaintiff, a non-target occupant who presented no threat or risk, for a lengthy period of time and used coercion in obtaining her consent to search the premises. Lt. James Donnelly is an officer with the Warminster Township Police Department. . . . Chief Murphy ordered Lt. Donnelly to plan and help execute an early morning “surround and call out” operation which sought to have all occupants exit the Plaintiff’s home, one at a time, with hands raised under threat of fire, patted down for weapons, and then handcuffed until the home had been cleared and searched. Lt. Donnelly violated Plaintiff’s Fourth Amendment rights in that this plan used excessive force in restraining Plaintiff, a non-target occupant who presented no threat or risk, for a lengthy period of time, and used coercion in obtaining her consent to search the premises. As Tactical Team Leader . . . , Lt. Donnelly was responsible for the actions of Alpha Team. The Third Circuit affirmed the district court’s dismissal of the complaint, reasoning as follows: 185

We take as true all the factual allegations of the Third Amended Complaint and the reasonable inferences that can be drawn from them, Sheridan v. NGK Metals Corp., 609 F.3d 239, 262 n. 27 ([3d Cir.] 2010), but we disregard legal conclusions and “recitals of the elements of a cause of action, supported by mere conclusory statements.” Iqbal, 129 S. Ct. at 1949. “To survive a motion to dismiss, ‘a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.’” Sheridan, 609 F.3d at 262 n. 27 (quoting Iqbal, 129 S. Ct. at 1949). “‘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.’” Id. .... We address first the dismissal of Santiago’s claims against the Supervising Officers. The District Court dismissed those claims because it held that Santiago had not pled any basis of liability in the Supervising Officers’ own acts but, instead, had alleged only a theory of respondeat superior liability, which cannot serve as the basis of a claim for constitutional violations. See Iqbal, 129 S. Ct. at 1948 (“Government officials may not be held liable for the unconstitutional conduct of their subordinates under a theory of respondeat superior.”). While we conclude that the Third Amended Complaint can be read as alleging liability based on the Supervising Officers’ own acts, we will nevertheless affirm the District Court’s ruling because those allegations fail to meet the pleading requirements set forth by the Supreme Court in Twombly and Iqbal. .... . . . . Santiago’s allegations appear to invoke a theory of liability under which “a supervisor may be personally liable . . . if he or she participated in violating the plaintiff’s rights, directed others to violate them, or, as the person in charge, had knowledge of and acquiesced in his subordinates' violations.” A.M. ex rel. J.M.K. v. Luzerne Cnty. Juvenile Det. Ctr., 372 F.3d 572, 586 (3d Cir. 2004). Specifically, Santiago alleges that Chief Murphy and Lt. Donnelly developed a plan that “sought to have all occupants exit the Plaintiff’s home, one at a time, with hands raised under threat of fire, patted down for weapons, and then handcuffed until the home had been cleared and searched.” The claim is thus that, through the creation and authorization of the plan, Chief Murphy and Lt. Donnelly 186

“directed others to violate [Santiago’s rights].” A.M., 372 F.3d at 586. The related allegation that Lt. Springfield, as the person in charge of the operation, “permitted the use of excessive force” appears to be a claim that Lt. Springfield “acquiesced in his subordinates’ violations.” A.M., 372 F.3d at 586. Consequently, although the Third Amended Complaint seeks a species of supervisory liability, it is not respondeat superior liability. That Santiago has alleged supervisory liability claims does not mean that she has supported those allegations with “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face,’” Sheridan, 609 F.3d at 262 n. 27 (quoting Iqbal, 129 S. Ct. at 1949), as is required by the seminal Supreme Court decisions in Iqbal and Twombly. To determine the sufficiency of a complaint under the pleading regime established by those cases, a court must take three steps: First, the court must “tak[e] note of the elements a plaintiff must plead to state a claim.” Iqbal, 129 S. Ct. at 1947. Second, the court should identify allegations that, “because they are no more than conclusions, are not entitled to the assumption of truth.” Id. at 1950. Finally, “where there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief.” Id. .... To state a claim of supervisory liability against Chief Murphy and Lt. Donnelly, at least of the kind that it appears Santiago is advancing, she must plead that they “directed others to violate [her rights],” A.M., 372 F.3d at 586. Of course, Chief Murphy and Lt. Donnelly could only be liable if the people they supposedly directed to violate her rights actually did so; otherwise, “the fact that [Chief Murphy and Lt. Donnelly] might have [directed] the use of constitutionally excessive force is quite beside the point.” City of Los Angeles v. Heller, 475 U.S. 796, 799, 106 S. Ct. 1571, 89 L. Ed. 2d 806 (1986). Thus, any claim that supervisors directed others to violate constitutional rights necessarily includes as an element an actual violation at the hands of subordinates. In addition, a plaintiff must allege a causal connection between the supervisor’s direction and that violation, or, in other words, proximate causation. Proximate causation is established where the supervisor gave directions that the supervisor “knew or should reasonably have 187

known would cause others to deprive the plaintiff of her constitutional rights.” Conner v. Reinhard, 847 F.2d 384, 397 (7th Cir. 1988); see also Snell v. Tunnell, 920 F.2d 673, 700 (10th Cir. 1990). Particularly after Iqbal, the connection between the supervisor's directions and the constitutional deprivation must be sufficient to “demonstrate a ‘plausible nexus’ or ‘affirmative link’ between the [directions] and the specific deprivation of constitutional rights at issue.” Hedges v. Musco, 204 F.3d 109, 121 (3d Cir. 2000) (internal quotation marks and citation omitted). Therefore, to state her claim against Chief Murphy and Lt. Donnelly, Santiago needs to have pled facts plausibly demonstrating that they directed Alpha Team to conduct the operation in a manner that they “knew or should reasonably have known would cause [Alpha Team] to deprive [Santiago] of her constitutional rights.” Conner, 847 F.2d at 397. As to her claim against Lt. Springfield, Santiago must allege facts making it plausible that “he had knowledge of [Alpha Team's use of excessive force during the raid]” and “acquiesced in [Alpha Team's] violations.” A.M., 372 F.3d at 586. Having identified the elements of Santiago’s claims, Iqbal directs that the next step is to identify allegations that, “because they are no more than conclusions, are not entitled to the assumption of truth.” Iqbal, 129 S. Ct. at 1950. In other words, “[we] must accept all of the complaint’s well-pleaded facts as true, but may disregard any legal conclusions.” Fowler, 578 F.3d at 210–11. We also disregard “naked assertions devoid of further factual enhancement” and “threadbare recitals of the elements of a cause of action, supported by mere conclusory statements.” Iqbal, 129 S. Ct. at 1949. Santiago alleges that the plan developed and authorized by Chief Murphy and Lt. Donnelly “specifically sought to have all occupants exit the Plaintiff’s home, one at a time, with hands raised under threat of fire, patted down for weapons, and then handcuffed until the home had been cleared and searched.” Because this is nothing more than a recitation of what Santiago says the Alpha Team members did to her, it amounts to a conclusory assertion that what happened at the scene was ordered by the supervisors. While the allegations regarding Alpha Team’s conduct are factual and more than merely the recitation of the elements of a cause of action, the allegation of supervisory liability is, in essence, that “Murphy and Donnelly told Alpha team to do what they did” and is thus a “formulaic recitation of the elements of a [supervisory liability] claim,” Iqbal, 129 S. Ct. at 1951 (internal quotation marks 188

omitted)—namely that Chief Murphy and Lt. Donnelly directed others in the violation of Santiago’s rights. Saying that Chief Murphy and Lt. Donnelly “specifically sought” to have happen what allegedly happened does not alter the fundamentally conclusory character of the allegation. Our conclusion in this regard is dictated by the Supreme Court’s decision in Iqbal. The plaintiff’s claim in that case required proving that the defendants, Attorney General John Ashcroft and FBI Director Robert Mueller, had “adopted a policy because of, not merely in spite of, its adverse effects upon an identifiable group.” 129 S. Ct. at 1951. The Court disregarded allegations that “petitioners knew of, condoned, and willfully and maliciously agreed to subject [respondent] to harsh conditions of confinement as a matter of policy, solely on account of [his] religion, race, and/or national origin” and that “Ashcroft was the principal architect of this invidious policy, and that Mueller was instrumental in adopting and executing it.” Id. (internal quotation marks omitted). The Supreme Court called those allegations “nothing more than a formulaic recitation of the elements of a constitutional discrimination claim.” Id. (internal quotation marks omitted). The Court emphasized that the claims required dismissal not because they were fanciful, but because they were conclusory. Id. Likewise, in this case where Santiago is required to prove that the Supervising Officers directed others to use excessive force, an allegation that the plan “specifically sought” that use of force is nothing more than a formulaic recitation of the elements of a supervisory liability claim and hence is not entitled to the assumption of truth. The same is true for Santiago’s allegation that Lt. Springfield “permitted the use of excessive force,” which is nothing more than a conclusory statement that he acquiesced in his subordinates’ violations. In short, Santiago’s allegations are “naked assertion[s]” that Chief Murphy and Lt. Donnelly directed Alpha Team to conduct the operation in the allegedly excessive manner that they did and that Lt. Springfield acquiesced in Alpha Team’s acts. As mere restatements of the elements of her supervisory liability claims, they are not entitled to the assumption of truth. However, it is crucial to recognize that our determination that these particular allegations do not deserve an assumption of truth does not end the analysis. It may still be that Santiago’s supervisory liability claims are plausible in light of the non-conclusory factual allegations in the complaint. We therefore turn to those allegations to determine whether the claims are plausible. 189

“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.” Iqbal, 129 S. Ct. at 1949. . . . .... . . . . [T]he allegations against Alpha Team are that the officers ordered everyone to exit the house one at a time; that Santiago exited first under threat of fire; that Santiago was patted down in a demeaning fashion, found to be unarmed, and subsequently handcuffed; that the remaining occupants of the home then exited, some of whom were handcuffed while others were not; that Santiago’s daughter was coerced into consenting to a search of the home; and that Santiago was left restrained for thirty minutes while her home was searched, during which time she had a heart attack. The question then becomes whether those allegations make it plausible that Chief Murphy and Lt. Donnelly directed Alpha Team to conduct the operation in a manner that they “knew or should reasonably have known would cause [Alpha Team] to deprive [Santiago] of her constitutional rights,” Conner, 847 F.2d at 397, or that Lt. Springfield “had knowledge [that Alpha Team was using excessive force during the raid]” and “acquiesced in [Alpha Team’s] violations.” A.M., 372 F.3d at 586. First, with respect to Chief Murphy and Lt. Donnelly, we consider whether the fact that they planned the operation coupled with the fact that the operation resulted in excessive force against Santiago makes it plausible that the plan called for the use of excessive force. We conclude that it does not. Santiago has only alleged that excessive force was used against her. The complaint does not allege that any other occupant was threatened with fire. It specifically states that the other women were not handcuffed. It does allege that the two grandsons were handcuffed, but one of them was the subject of the arrest warrant and there are no allegations stating whether the other was found to be armed or a risk of flight. Consequently, there is no basis in the complaint to conclude that excessive force was used on anyone except Santiago. Even if someone else had been subjected to excessive force, it is clear that the occupants were not being treated uniformly. Thus, Santiago’s allegations undercut the notion of a plan for all occupants to be threatened with fire and handcuffed. While it is possible that there was such a plan, and that Alpha Team simply chose not to follow it, 190

“possibility” is no longer the touchstone for pleading sufficiency after Twombly and Iqbal. Plausibility is what matters. Allegations that are “merely consistent with a defendant's liability” or show the “mere possibility of misconduct” are not enough. Iqbal, 129 S. Ct. at 1949–50 (internal quotation marks omitted). Here, given the disparate treatment of the occupants of the home, one plausible explanation is that the officers simply used their own discretion in determining how to treat each occupant. In contrast with that “obvious alternative explanation” for the allegedly excessive use of force, the inference that the force was planned is not plausible. Id. at 1951-52 (quoting Twombly, 550 U.S. at 567, 127 S. Ct. 1955). Where, as here, an operation results in the use of allegedly excessive force against only one of several people, that use of force does not, by itself, give rise to a plausible claim for supervisory liability against those who planned the operation. To hold otherwise would allow a plaintiff to pursue a supervisory liability claim anytime a planned operation resulted in excessive force, merely by describing the force used and appending the phrase “and the Chief told them to do it.” Iqbal requires more. We next ask whether the allegation that Lt. Springfield was placed in charge of the operation, coupled with what happened during the operation, makes it plausible that Lt. Springfield knew of and acquiesced in the use of excessive force against Santiago. Again, we conclude that it does not. The complaint implies but does not allege that Lt. Springfield was present during the operation. Assuming he was present, however, the complaint still does not aver that he knew of the allegedly excessive force, nor does it give rise to the reasonable inference that he was aware of the level of force used against one individual. See McKenna v. City of Philadelphia, 582 F.3d 447, 460 (3rd Cir. 2009) (holding that a supervisor’s presence “in the vicinity of the arrest at some point after [plaintiff] was handcuffed . . . is not a legally sufficient evidentiary basis” to find knowledge and acquiescence). Consequently, the allegations are insufficient to “nudge [Santiago’s] claims across the line from conceivable to plausible.” Twombly, 550 U.S. at 570, 127 S. Ct. 1955. In sum, while Santiago’s complaint contains sufficient allegations to show that the Supervising Officers planned and supervised the operation and that, during the operation, Alpha Team used arguably excessive force, her allegations do nothing more than assert the element of liability that the Supervising Officers specifically called for or acquiesced in that use of force. As a result, 191

her allegations may “get[ ] the complaint close to stating a claim, but without further factual enhancement [they] stop[ ] short of the line between possibility and plausibility of entitlement to relief.” Twombly, 550 U.S. at 557, 127 S. Ct. 1955 (internal quotation marks and alterations omitted). Because the Third Amended Complaint does not give rise to a plausible claim for relief against the Supervising Officers, the District Court did not err in dismissing the claims against them. We now turn to the dismissal of Santiago’s claim against Warminster [Township]. The District Court dismissed that claim because Santiago had failed to allege that Chief Murphy was a final policymaker, which, under Monell, was necessary to the survival of her claim against the Township. Santiago offers two arguments for why the dismissal was improper. First, she argues that, while she may not have used the words “final policymaker,” “the factual averments of the complaint are more than sufficient to show that Chief Murphy was the ‘final policymaker’ with respect to the tactical decisions made here.” Second, she argues that the District Court applied the wrong standard—considering whether Chief Murphy was a final policymaker as a factual question instead of a legal one, as required under Supreme Court precedent. Not only are those arguments inconsistent, they miss the point. The dispositive point is that, whether or not Chief Murphy is a final policymaker, Santiago has failed to plead facts showing that his plan caused her injury. Under Monell, for municipal liability to attach, any injury must be inflicted by “execution of a government’s policy or custom.” 436 U.S. at 694, 98 S. Ct. 2018. Drawing all factual inferences in favor of Santiago, as is required at this juncture, we nevertheless cannot conclude that the Third Amended Complaint alleges municipal liability. The complaint does not allege that Chief Murphy had policymaking authority, nor does it allege what action he took that could fairly be said to be policy. The allegation that Chief Murphy ordered a plan to execute arrest warrants does not imply the existence of an official policy in violation of Santiago’s constitutional rights. See McTernan v. City of York, 564 F.3d 636, 658 (3d Cir. 2009) (a claimant “must identify a custom or policy, and specify what exactly that custom or policy was”); see also McGreal v. Ostrov, 368 F.3d 657, 685 (7th Cir. 2004) (“[T]he plaintiff must first allege that a defendant is a final policymaker. Only then can a court proceed to the next question of whether the single act or single decision of that defendant constituted municipal policy.”). More to the point, though, we have already held that Santiago’s pleadings fail to plausibly allege 192

that Chief Murphy directed others to violate her rights. Thus, even if Chief Murphy were a final policy maker and his plan were deemed to be official Warminster policy, Santiago has failed to properly plead that the plan was the source of her injury. Therefore, she has not shown that her injury was inflicted by “execution of [Warminster’s] policy or custom,” Monell, 436 U.S. at 694, 98 S. Ct. 2018, and she has no claim against the Township. Santiago, 629 F.3d at 128–35 (emphasis added) (footnotes and internal citations omitted). •

West Penn Allegheny Health System, Inc. v. UPMC, 627 F.3d 85, 2010 WL 4840093 (3d Cir. Nov. 29, 2010), cert. denied, --- S. Ct. ----, No. 10-1341, 2011 WL 4530161 (Oct. 3, 2011). West Penn Allegheny Health System, Pittsburgh’s second-largest hospital system, alleged that Pittsburgh’s dominant hospital system (UPMC) and dominant insurer (Highmark) violated sections 1 and 2 of the Sherman Act by forming a conspiracy to protect one another from competition. Id. at *1. The district court dismissed for failure to state a claim. Id. The Third Circuit reversed. Id. In its opinion dismissing the complaint, the district court stated that “judges presiding over [antitrust] cases have a duty to act as gatekeepers” and must subject pleadings in such cases to heightened scrutiny. Id. at *6-7. The Third Circuit disagreed: Although Twombly acknowledged that discovery in antitrust cases “can be expensive,” 550 U.S. at 558, it expressly rejected the notion that a “ ‘heightened’ pleading standard” applies in antitrust cases, id. at 569 n. 14, and Iqbal made clear that Rule 8’s pleading standard applies with the same level of rigor in “‘all civil actions,’” 129 S. Ct. at 1953. See also Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512-13 (2002); Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 167-68 (1993) (rejecting Fifth Circuit’s adoption of a heightened pleading standard for civil rights cases alleging municipal liability); 5 Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 1221 (3d ed.2004) (noting that Rule 8’s pleading standard applies with the same degree of rigor “in every case, regardless of its size, complexity, or the numbers of parties that may be involved”). It is, of course, true that judging the sufficiency of a pleading is a context-dependent exercise. See Iqbal, 129 S. Ct. at 1950; Twombly, 550 U.S. at 567-68; Phillips, 515 F.3d at 232. Some claims require more factual explication than others to state a plausible claim for relief. See In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 320 n. 18 (3d Cir.2010). For example, it generally takes fewer factual allegations to state a claim for simple battery than to state a claim for 193

antitrust conspiracy. See A. Benjamin Spencer, Understanding Pleading Doctrine, 108 MICH . L. REV . 1, 13-18 (2009). But, contrary to the able District Court’s suggestion, this does not mean that Twombly’s plausibility standard functions more like a probability requirement in complex cases. We conclude that it is inappropriate to apply Twombly’s plausibility standard with extra bite in antitrust and other complex cases. We now turn to address whether West Penn’s complaint satisfies the plausibility standard. Id. at *7-8. The court first considered the conspiracy claims. With respect to the Section 1 claims, the court explained: Section 1 provides that “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States ... is declared to be illegal.” Despite its seemingly absolute language, section 1 has been construed to prohibit only unreasonable restraints of trade. Standard Oil Co. v. United States, 221 U.S. 1, 58 (1911); United States v. Brown Univ., 5 F.3d 658, 668 (3d Cir.1993). Some agreements are so plainly anticompetitive that they are condemned per se; that is, they are conclusively presumed to unreasonably restrain trade. E.g., United States v. Trenton Potteries Co., 273 U.S. 392, 397-400 (1927) (horizontal agreements to fix prices); Palmer v. BRG of Ga., Inc., 498 U.S. 46, 49-50 (1990) (per curiam) (horizontal agreements to divide markets). Other agreements are condemned only if evaluation under the fact-intensive rule of reason indicates that they unreasonably restrain trade. E.g., Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007) (vertical agreements to maintain resale prices). West Penn, 2010 WL 4840093 at *8. With respect to the Section 2 claims, liability is imposed on “[e]very person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States.” Id. (quoting 15 U.S.C. § 2). Defendants argued that the complaint failed to allege an agreement, which is required for both the Section 1 and 2 claims. Id. With aspect to the agreement between UPMC and Highmark, West Penn alleged that: West Penn asked Highmark to refinance the loan that was used to 194

fund the 2000 merger, that Highmark agreed that refinancing was a good idea, but that Highmark would not sign off on the refinancing. Highmark explained that if it helped West Penn out financially, UPMC, which was “obsessed” with driving West Penn out of business, would retaliate against it for violating their agreement - an agreement that Highmark admitted was “probably illegal.” Indeed, UPMC had sent Highmark a letter warning that if it extended financial assistance to West Penn, UPMC would enter a provider agreement with a Highmark competitor, thus reducing Highmark’s dominance in the insurance market. The complaint also alleges that in 2005 and 2006, West Penn asked Highmark to increase its reimbursement rates, that Highmark acknowledged that the rates were too low and suggested that it would raise them, but that Highmark refused to follow through, explaining that if it increased West Penn’s rates, UPMC would retaliate against it for violating their agreement. Finally, the complaint alleges that at an employees’ meeting, UPMC’s CEO admitted that he decided to shrink UPMC Health Plan as a result of “negotiations” with Highmark, during which Highmark had agreed to take Community Blue off the market. Id. at *9. The court concluded that “these allegations of direct evidence are sufficient to survive a motion to dismiss on the agreement element.” Id. The court next determined that the complaint alleged that the conspiracy unreasonably restrained trade: Here, the complaint alleges that the relevant markets are, on one hand, the Allegheny County market for specialized hospital services and, on the other hand, the Allegheny County market for health insurance. The complaint plausibly suggests that by denying West Penn capital, the conspiracy caused West Penn to cut back on its services (including specialized hospital services) and to abandon projects to expand and improve its services and facilities. The complaint also plausibly suggests that by shielding Highmark from competition, the conspiracy resulted in increased premiums and reduced output in the market for health insurance. These allegations are sufficient to suggest that the conspiracy produced anticompetitive effects in the relevant markets. Id. at *10 (footnote omitted). The court next considered whether the complaint alleged antitrust injury. West Penn, 2010 WL 4840093 at *10. The court explained that “[a]n antitrust injury is an ‘injury of the type the antitrust laws were intended to prevent and that flows from that which makes [the] defendants’ acts unlawful.’” Id. (quoting Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977)) (second alteration in original). Plaintiff alleged that “three aspects of 195

the conspiracy caused it antitrust injury.” Id. The court rejected West Penn’s argument that it was “injured as a result of Highmark’s decision to take a low-cost insurance plan [used by West Penn, but not by UPMC] off the market because “West Penn participates in the insurance market not as a consumer or a competitor but as a supplier” and a supplier’s losses are “merely byproducts of the anticompetitive effects of the restraint.” Id. at *11. The court also rejected West Penn’s argument that it sustained an anti-trust injury based on Highmark’s refusal to refinance a loan it made to West Penn before the alleged conspiracy began. Id. The court noted that “[b]ecause Highmark was just one of many possible sources of financing, we conclude that - even if it acted with anticompetitive motives - Highmark’s refinancing refusals could not have been ‘competition-reducing aspect[s] ... of the conspiracy, and thus did not give rise to an antitrust injury.’” Id. (quoting Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 344 (1990)) (second alteration and emphasis in original). However, the court then decided that West Penn’s assertion that Highmark artificially depressed reimbursement rates, resulting in underpayments, did allege an antitrust injury: Here, the complaint suggests that Highmark has substantial monopsony power. It alleges that Highmark has a 60%-80% share of the Allegheny County market for health insurance, that there are significant entry barriers for insurers wishing to break into the market (including UPMC's unwillingness to deal competitively with non-Highmark insurers), and that medical providers have very few alternative purchasers for their services. The complaint also alleges that Highmark paid West Penn depressed reimbursement rates, not as a result of independent decisionmaking, but pursuant to a conspiracy with UPMC, under which UPMC insulated Highmark from competition in return for Highmark’s taking steps to hobble West Penn. In these circumstances, it is certainly plausible that paying West Penn depressed reimbursement rates unreasonably restrained trade. Such shortchanging poses competitive threats similar to those posed by conspiracies among buyers to fix prices, and other restraints that result in artificially depressed payments to suppliers - namely, suboptimal output, reduced quality, allocative inefficiencies, and (given the reductions in output) higher prices for consumers in the long run. Id. at *12 (citations omitted). The court next considered whether West Penn’s claims were barred by the statute of limitations. The court explained that a limitations defense may be raised in a Rule 12(b)(6) motion to dismiss. West Penn, 2010 WL 4840093 at *14, n.13. To prevail, “the plaintiff’s tardiness in bringing the action must be apparent from the face of the complaint.” Id. The court decided that West Penn’s case was timely “even though the acts that occurred within the limitations period were reaffirmations of decisions originally made outside the limitations 196

period.” Id. at *15. Turning to West Penn’s allegation that “UPMC violated section 2 of the Sherman Act by attempting to monopolize the Allegheny County market for specialized hospital services,” the court explained that “[t]he elements of attempted monopolization are (1) that the defendant has a specific intent to monopolize, and (2) that the defendant has engaged in anticompetitive conduct that, taken as a whole, creates (3) a dangerous probability of achieving monopoly power.” Id. at *16. And noted that “anticompetitive conduct can include a conspiracy to exclude a rival.” Id. at *17. The court concluded that the following allegations, “viewed as a whole,” plausibly suggested that UPMC had engaged in anticompetitive conduct: First, the defendants engaged in a conspiracy, a purpose of which was to drive West Penn out of business. Second, UPMC hired employees away from West Penn by paying them bloated salaries. UPMC admitted to hiring some of the employees not because it needed them but in order to injure West Penn; UPMC could not absorb some of the employees and had to let them go; and UPMC incurred financial losses as a result of the hiring. .... Relatedly, UPMC tried unsuccessfully to lure a number of employees away from West Penn; UPMC could not have absorbed the additional employees, and although the employees remained with West Penn, they did so only after West Penn raised their salaries to supracompetitive levels. Third, UPMC approached community hospitals and threatened to build UPMC satellite facilities next to them unless they stopped referring oncology patients to West Penn and began referring all such patients to UPMC. Nearly all of the community hospitals caved in, which deprived West Penn of a key source of patients. Moreover, under pressure from UPMC, several of the community hospitals have stopped sending any of their tertiary and quaternary care referrals to West Penn and have begun sending them all to UPMC. Finally, on several occasions, UPMC made false statements about West Penn's financial health to potential investors, which caused West Penn to pay artificially inflated financing costs on its debt. Id. at 18. •

Shahin v. Delaware Dep’t. of Transportation, 405 F. App’x 587, No. 10-1699, 2010 WL 4630242 (3d Cir. Nov. 17, 2010) (per curiam) (unpublished). Plaintiff Shahin alleged that the Delaware Department of Transportation discriminated against her on the basis of her age and national origin by refusing to employ her. Id. at *1. The Department filed a motion to dismiss the complaint for failure to state a claim and Shahin did not file a response. Id. The district court granted the motion without prejudice and gave Shahin thirty days to file an amended complaint before the dismissal became with prejudice. Id. Shahin did not file an 197

amended complaint, but did file a notice of appeal. Id. The Third Circuit affirmed. Id. The Third Circuit explained that “[i]n order to state a claim of employment discrimination, Shahin must allege (1) that she belongs to a protected class; (2) that she applied for a position for which the employer was seeking applicants and was qualified for that position; (3) she was rejected; and (4) the employer continued to seek applicants of her qualifications.” Shahin, 2010 WL 4630242 at *1. Shahin’s claim failed because she “did not identify her membership in a protected class, any position for which she applied, or her qualifications. Id. And she did not allege that any application was rejected.” Id. The court rejected Shahin’s contention that the first two elements were established by her job application and the complaint procedures at the Departments of Transportation and Labor because these details were not included in her complaint. Id. at *2. The court noted that Shahin might have been able to cure these deficiencies, but she chose to not file a response to the motion to dismiss or an amended complaint. Id. The court concluded that, “[u]nder Iqbal, it is not sufficient to simply recite the elements of a cause of action and support them with conclusory statements. Here, Shahin has done even less.” Id. (internal citation omitted). •

Antoine v. Star Ledger of New Jersey, 409 F. App’x 492, No. 10-2588, 2010 WL 4342308 (3d Cir. Nov. 3, 2010) (per curiam) (unpublished). Plaintiff Antoine, proceeding pro se, filed a complaint against the New York Morning Ledger Company, publisher of The Star-Ledger, and Reporter Brubaker for alleged violations of his First, Fourth, Fifth, and Fourteenth Amendment rights; and various federal and state laws, regulations and protocols. Id. at *1. Defendants filed a motion to dismiss pursuant to Rules 12(b)(1) and 12(b)(6). Id. The District Court granted defendants’ 12(b)(6) motion with respect to Antoine’s federal claims and declined to exercise supplemental jurisdiction over the remaining state law claims. Id. Antoine appealed and the Third Circuit affirmed. The court explained that “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Id. (quoting Iqbal, 129 S.Ct at 1949). The Third Circuit agreed with the district court that “Antoine failed to sufficiently allege that defendants acted under color of state law – an allegation essential to maintain an action under 42 U.S.C. § 1983.” Id. And also “agree[d] with the district court’s analyses and conclusions with respect to the remaining federal claims asserted under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e. et. seq., federal antitrust law, and the Federal Video Privacy Protection Act, and will not repeat them here.” Antoine, 2010 WL 4342308 at *1.



PA Prison Society v. Cortes, 622 F.3d 215 (3d Cir. 2010), cert. denied, 131 S. Ct. 1808 (2011). Plaintiffs challenged the constitutionality of an amendment to the Constitution of the Commonwealth of Pennsylvania that altered the voting procedure employed by the Pennsylvania Board of Pardons to require unanimity in recommending pardons and commutations for life-sentenced prisoners to the Governor. Id. at 219. The district court ruled that the amendment violated the Ex Post Facto clause of the United States Constitution for prisoners sentenced to a term of life imprisonment prior to its effective date. Id. The 198

Third Circuit reversed and remanded. Id. The court first explained the pleading standard from Twombly and Iqbal: “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, --- U.S. ----, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)). In deciding a motion to dismiss, a court must determine whether the complaint “pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. “While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.” Id. at 1950. Plaintiffs alleged that: The changes in the pardons process effectuated by the Amendment impose additional punishment on the Prisoner Plaintiffs since there is distinctly less of an opportunity to obtain a pardon or commutation. Plaintiffs also allege that prior to the Amendment, it was distinctly more likely that the Prisoner Plaintiffs could obtain a pardon or commutation. However, since the Amendment became law, the Prisoner Plaintiffs are virtually shut out from that opportunity. Id. at 233 (quotations and citations omitted). The court found these allegations insufficient: These allegations fail to state a viable claim as a matter of law because the legal conclusion that the “Amendment impose[s] additional punishment” is not supported by any of the factual allegations in the Second Amended Complaint. The 1997 Amendment does not lengthen the sentences imposed upon the prisoners represented by the Pennsylvania Prison Society, who have been sentenced to serve a term of life imprisonment without parole. Id. The court decided that “[t]here is no ex post facto violation where the retroactively applied law does not make one’s punishment more burdensome, but merely creates a disadvantage.” Cortes, 622 F.3d at 233 (quoting Spuck v. Ridge, 347 F. App’x 727, 729 (3d Cir. 2009). The court explained that The Ex Post Facto Clause of the Constitution, U.S. Const. art. 199

I §§ 9 and 10, forbids the government from passing any law “which imposes a punishment for an act which was not punishable at the time it was committed; or imposes additional punishment to that then prescribed.” Weaver v. Graham, 450 U.S. 24, 28, 101 S. Ct. 960, 67 L. Ed. 2d 17 (1981) (internal quotation omitted). The Ex Post Facto Clause is intended to provide fair warning about new punishments and to discourage arbitrary and oppressive legislation. Weaver, 450 U.S. at 28, 101 S. Ct. 960. To fall within the ex post facto prohibition, “two critical elements must be present ...: it must be retrospective, that is, it must apply to events occurring before its enactment, and it must disadvantage the offender affected by it.” Id. at 29, 101 S. Ct. 960 (footnotes omitted). And agreed with defendants that there were “three distinct reasons why Plaintiffs’ ex post facto claim is not viable.” Id. at 234. First, the 1997 Amendment is not an ex post facto law “[g]iven the ad hoc nature of [executive] clemency, the retroactive application of the amendment cannot, as a matter of law, have any widespread effect on the period of incarceration for prisoners serving life sentences....” Second, “[P]laintiffs cannot show that the passage of the Amendment has resulted or will result in a longer period of incarceration for life sentenced prisoners” because a life sentence, absent the executive grant of a commutation, is still a life sentence and nothing more. The adoption of the 1997 Amendment did not increase the punishment. A term of life imprisonment is no less than and no more than natural life. Third, the 1997 Amendment does not trigger an ex post facto inquiry because changes in the law that alter procedures for obtaining commutation, but do not eliminate the possibility of commutation, are procedural and thus not ex post facto laws. Cortes, 622 F.3d at 234 (alterations in original) (internal citations omitted). •

Mayercheck v. Judges of the Pennsylvania Supreme Court, 395 F. App’x 839, No. 093575, 2010 WL 3258257 (3d Cir. Aug. 18, 2010) (per curiam) (unpublished), cert. denied, 131 S. Ct. 945 (2011). Plaintiff Mayercheck, proceeding pro se, sued his former wife and judges in their divorce proceedings for conspiring to deprive him of his federal constitutional rights during the divorce proceedings. Id. at *1. Defendants filed motions to dismiss, which the magistrate recommended that the district court grant, finding that the district court lacked jurisdiction over Mayercheck’s claims and that, “even if the court did have subject matter jurisdiction, Mayercheck failed to state a claim for civil rights violations on which relief 200

could be granted under Federal Rule of Civil Procedure 12(b)(6).” Id. The district court accepted the magistrate’s recommendations. Id. The Third Circuit affirmed. Id. With respect to the 12(b)(6) dismissal, the Third Circuit instructed that “[t]o survive dismissal under Rule 12(b)(6), a complaint must contain more than ‘[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements.’” Id. at *3 (quoting Iqbal, 129 S. Ct. at 1949) (second alteration in original). The court agreed that Mayercheck “failed to sufficiently plead a claim against any defendant under the doctrine in Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388 (1971)” because a Bivens claim must be brought against a federal agent. Mayercheck, 2010 WL 3258257 at *3. Mayercheck made no allegations about a federal agent and thus failed to plead a plausible claim for relief under Bivens. Id. The Third Circuit also concluded that Mayercheck failed to plead sufficient facts to allow an inference that the judicial defendants were not acting within their judicial capacity. Id. The court next concluded that Mayercheck failed to state a claim under 42 U.S.C. §§ 1983, 1985, or 1986 because (1) Mayercheck did not show that defendants were acting under color of state law; (2) Mayercheck’s assertions of conspiracy were “mere conclusory allegations;” and (3) Mayercheck’s claims under sections 1985 and 1986 were speculative. Id. •

In re Ins. Brokerage Antitrust Litig., 618 F.3d 300 (3d Cir. 2010). Purchasers of commercial and employee benefit insurance filed numerous federal actions against insurers and insurance brokers, alleging unlawful schemes to allocate purchasers among particular groups of insurers. Id. at 308. The private actions were transferred by the Judicial Panel on Multidistrict Litigation to the District Court of New Jersey for consolidated pretrial proceedings. Id. at 309. The district court split the actions into two consolidated dockets – the first pertaining to claims regarding property and casualty insurance (the “Commercial Case”), and the second pertaining to claims regarding employee benefits insurance (the “Employee Benefits Case”). Id. Plaintiffs filed amended complaints in each of the Commercial and Employee Benefits cases. Id. Each complaint alleged violations of the Sherman Act and the RICO Act, as well as violations of various state-law antitrust statutes and common law duties. Id. Defendants moved to dismiss the Sherman Act and RICO Act claims in both cases under Rule 12(b)(6). In re Ins. Brokerage, 618 F.3d at 309. The district court granted the motions and dismissed the claims without prejudice because “it found the complaints lacked the requisite factual specificity.” Id. at 310. The Second Circuit noted that “[i]n granting leave to amend, the District Court instructed plaintiffs to file in each case a supplemental statement of particularity for their federal antitrust claims and an amended RICO case statement for their RICO claims.” Id. Plaintiffs did so, and the district court again granted 12(b)(6) motions to dismiss, and again allowed plaintiffs an opportunity to amend their pleadings. Id. Plaintiffs filed a Second Amended Complaint and a Revised Particularized Statement and Amended RICO Case Statement augmenting the Second Amended Complaint’s allegations. Id. The district court again dismissed the antitrust and RICO claims, this time with prejudice. Id. It applied the pleading standard set forth in Twombly, which had been decided after the court’s second dismissal order, and “concluded 201

that plaintiff’s allegations in both the Commercial and the Employee Benefits cases were insufficient with respect to both the Sherman Act and RICO claims.” In re Ins. Brokerage, 618 F.3d at 310. The Third Circuit affirmed in part, vacated in part, and remanded. While the Third Circuit agreed that purchasers failed to allege horizontal broker-centered conspiracies as to claims not involving bid-rigging and as to global conspiracy claims, it decided that purchasers had alleged horizontal conspiracies, actionable enterprise, and actionable conduct as to bid-rigging. The Third Circuit noted that the complexity of the case: Plaintiffs’ pleadings are of a substantial volume. The complaint in each case is more than 200 pages (including attached exhibits), and to this total must be added the pages in the Revised Particularized Statements and Amended RICO Case Statements. Significantly, the District Court allowed discovery to proceed while the motions to dismiss were pending. Plaintiffs’ amended pleadings were thus able to draw on documents produced and depositions taken pursuant to these discovery orders, as well as material unearthed in the course of the public investigations. As reflected by the length of this opinion - and of the caption - this is extraordinarily complex litigation involving a large swath of the insurance provider and brokerage industries, elaborate allegations of misconduct, and challenging legal issues. The District Court skillfully managed the consolidated proceedings. We take particular note of the court’s thorough treatment of defendants’ motions to dismiss, which comprised five separate opinions examining three successive rounds of pleadings. The court's patient and meticulous analysis has greatly aided our review. Id. at 311. The court first examined the legal standards for making a plausible antitrust claim. It explained that, to state a claim under Section 1 of the Sherman Act, a plaintiff must show (1) that the defendant was a party to “some form of concerted action” and (2) that the conspiracy to which the defendant was a party “imposed an unreasonable restraint on trade.” Id. at 315. There are three standards for determining whether a challenged practice unreasonably restrains trade: rule of reason, per se, and quick look. See id. at 315-18. The court explained that the rule of reason was the “usual standard” and required the plaintiff to show “that the alleged [agreement] produced an adverse, anticompetitive effect within the relevant geographic market.” Id. at 315 (quoting Gordon v. Lewistown Hosp., 423 F.3d 184, 210 (3d Cir. 2005)). The per se standard is applicable to practices that “have redeeming competitive benefits so rarely that their condemnation does not require application of the full-fledged rule of reason,” such as “horizontal agreements among competitors to fix prices or to divide 202

markets.” Id. at 316. Under the per se standard, “plaintiffs are relieved of the obligation to define a market and prove market power.” In re Ins. Brokerage, 618 F.3d at 316. However, the court explained that, if a plaintiff pleads exclusively per se violations and the court determines that the restraint at issue is “sufficiently different from the per se archetypes to require application of the rule of reason, the plaintiff’s claims will be dismissed.” Id. at 317. The quick look standard is applied to restraints of trade that are “highly suspicious” yet “sufficiently idiosyncratic that judicial experience with them is limited..” Id. Under a quick look analysis, “competitive harm is presumed and the defendant must set forth some competitive justification for the restraints.” Id. at 317-18 (quoting Gordon, 423 F.3d at 210). Plaintiffs abjured “a full-scale rule of reason analysis” and claimed that defendant’s behavior was per se unlawful, or alternatively, that the court should apply a “quick look” analysis. Id. at 318. “Plaintiffs do not dispute that in order to succeed under either of these approaches, they need to show the existence of a horizontal agreement, that is, an agreement between ‘competitors at the same market level.’” Id. (quoting In re Pharmacy Benefit Managers Antitrust Litig., 582 F.3d 432, 436 n.5 (3d Cir. 2009)). The court determined that, “[i]n the factual context of this case,” a horizontal agreement means an agreement among the insurers in the broker-centered conspiracies, and an agreement among either the brokers or the insurers in the global conspiracy. Agreements between brokers and insurers, on the other hand, are vertical and would have to be analyzed under the traditional rule of reason, which plaintiffs have disclaimed. In re Ins. Brokerage, 618 F.3d at 318-19. The court then explained that plaintiffs’ obligation to show the existence of a horizontal agreement “is not only an ultimate burden of proof but also bears on their pleadings”: “[A] plaintiff's obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555, 127 S. Ct. 1955 (quoting FED . R. CIV . P. 8(a)(2)). Because Federal Rule of Civil Procedure 8(a)(2) “requires a ‘showing,’ rather than a blanket assertion, of entitlement to relief,” courts evaluating the viability of a complaint under Rule 12(b)(6) must look beyond conclusory statements and determine whether the complaint’s well-pled factual allegations, taken as true, are “enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555 & n. 3, 127 S. Ct. 1955. The test, as authoritatively formulated by Twombly, is whether the complaint alleges “enough fact[ ] to state a claim to relief that is plausible on its face,” id. at 570, 127 S. Ct. 1955, which is to say, “ ‘enough fact to 203

raise a reasonable expectation that discovery will reveal evidence of illegal[ity],’ ” Arista Records, LLC v. Doe 3, 604 F.3d 110, 120 (2d Cir.2010) (quoting Twombly, 550 U.S. at 556, 127 S. Ct. 1955) (alteration in Arista Records). As we have recognized, this plausibility standard is an interpretation of Federal Rule of Civil Procedure 8. Phillips, 515 F.3d at 234; see Twombly, 550 U.S. at 557, 127 S. Ct. 1955 (stating that the plausibility standard “reflects the threshold requirement of Rule 8(a)(2) that the ‘plain statement’ possess enough heft to ‘sho[w] that the pleader is entitled to relief.’ ” (alteration in original)). In re Ins. Brokerage, 618 F.3d at 319-20 (footnotes omitted) (alterations in original). The court then noted Twombly’s increased relevance in this case: “Twombly’s importance to the case before us, however, goes beyond its formulation of the general pleading standard. Twombly is also an essential guide to the application of that standard in the antitrust context, for in Twombly the Supreme Court also had to determine whether a Sherman Act claim alleging horizontal conspiracy was adequately pled.” Id. at 320. The court examined Twombly and determined that “allegations of conspiracy are deficient if there are ‘obvious alternative explanation[s]’ for the facts alleged.” Id. at 322-23 (quoting Twombly, 550 U.S. at 567). The court determined that, “by rejecting the Court of Appeal’s conclusion that parallel conduct alone was sufficient to plead a § 1 conspiracy,” Twombly necessarily required plaintiffs who plead conspiracy on the basis of mere parallelism to plead “plus factors.” Id. at 323 n.22. Plus factors are “circumstances under which ... the inference of rational independent choice [is] less attractive than that of concerted action.” Id. at 323 (quoting Bogosian v. Gulf Oil Corp., 561 F.2d 434, 446 (3d Cir. 1977)) (alteration in original). To determine what kind of allegations would satisfy Twombly’s plausibility standard, the court examined the shortcomings identified in the Twombly complaint: The Twombly plaintiffs proffered two basic theories of anticompetitive collusion. First, they charged that the defendant regional telephone companies (ILECs) conspired to “inhibit the growth of upstart” competitors (CLECs). 550 U.S. at 550, 127 S. Ct. 1955. Second, they asserted that the ILECs agreed not to compete with one another so as to preserve the preexisting regional monopoly each enjoyed. Id. at 551, 127 S. Ct. 1955. At the outset of its analysis, the Court remarked that the complaint’s sufficiency would “turn[ ] on the suggestions raised by [defendants’ alleged] conduct when viewed in light of common 204

economic experience.” Id. at 565, 127 S. Ct. 1955. Under this lens, the complaint’s first theory immediately revealed its inadequacy because “nothing in the complaint intimate[d] that the resistance to the upstart [CLECs] was anything more than the natural, unilateral reaction of each ILEC intent on keeping its regional dominance.... [T]here [was] no reason to infer that the companies had agreed among themselves to do what was only natural anyway....” Id. at 566, 127 S. Ct. 1955. A rudimentary economic analysis also fatally undermined the complaint’s second charge, namely that the ILECs agreed not to enter one another’s markets. The Court recognized that “[i]n a traditionally unregulated industry with low barriers to entry, sparse competition among large firms dominating separate geographical segments of the market could very well signify illegal agreement.” Id. at 567, 127 S. Ct. 1955. But in the telecommunications industry at issue in Twombly, monopoly had been “the norm ..., not the exception.” Id. at 568, 127 S. Ct. 1955. Noting that “[t]he ILECs were born in that world, doubtless liked the world the way it was, and surely knew the adage about him who lives by the sword,” the Court found that “a natural explanation for the noncompetition alleged is that the former Government-sanctioned monopolists were sitting tight, expecting their neighbors to do the same thing.” Id. In fact, “the complaint itself” bolstered this conclusion. Id. Not only did it “not allege that competition [against other ILECs] as CLECs was potentially any more lucrative than other opportunities being pursued by the ILECs during the same period,” but “the complaint [was] replete with indications that any CLEC faced nearly insurmountable barriers to profitability owing to the ILECs’ flagrant resistance to the network sharing requirements” of federal law. Id. In short, both “common economic experience” and the complaint’s own allegations showed that each defendant ILEC was independently motivated to behave in the ways alleged. Accordingly, neither of plaintiffs’ theories successfully pled a § 1 conspiracy because in each case, defendants’ parallel conduct “was not only compatible with, but indeed was more likely explained by, lawful, unchoreographed free-market behavior.” Ashcroft v. Iqbal, --U.S. ----, ----, 129 S. Ct. 1937, 1950, 173 L. Ed. 2d 868 (2009) (summarizing Twombly). In re Ins. Brokerage, 618 F.3d at 325-26 (alterations in original). The court concluded: Twombly makes clear that a claim of conspiracy predicated on parallel conduct should be dismissed if “common economic experience,” or the facts alleged in the complaint itself, show that independent self-interest is an “obvious alternative explanation” for 205

defendants’ common behavior. Id. at 326. The court then examined plaintiffs’ allegations. Plaintiffs’ “‘broker-centered conspiracies’ are alleged as hub-and-spoke conspiracies, with the broker as the hub and its insurer-partners as the spokes.” Id. at 327. The court noted that, with respect to the broker-centered schemes, plaintiffs’ allegations fall into two different categories: First, plaintiffs assert that the very nature of the contingent commission agreements between the broker and each of its insurer-partners implies an agreement among the brokers. Second, plaintiffs rely on specific details about the operation of the customer steering schemes, particularly the “devices” used to ensure that a particular piece of business was placed with the designated insurer. Id. The Third Circuit agreed with the district court that most of plaintiffs’ allegations “did not give rise to a plausible inference of horizontal conspiracy,” but disagreed with respect to the Marsh-centered commercial conspiracy. Id. The court first considered and rejected plaintiffs’ assertions that the “very nature” of the contingent agreements between the broker and each of its insurer-partners implied an agreement: Contrary to plaintiffs’ arguments, one cannot plausibly infer a horizontal agreement among a broker’s insurer-partners from the mere fact that each insurer entered into a similar contingent commission agreement with the broker. As the District Court concluded, the first stage of the alleged broker-centered conspiracies - the consolidation of the groups of insurers to which each broker referred business - evinces nothing more than a series of vertical relationships between the broker and each of its “strategic partners.” According to the complaints, the defendant brokers decided to consolidate the pool of insurers to which they referred business in order to improve efficiency and extract higher commissions from each of their insurer-partners. As defendants point out, “[o]nce a broker decided to organize its business in this fashion, each insurer had sound, independent business reasons to pay contingent commissions to become and remain a ‘preferred insurer.’ Paying such commissions helped the insurer to compete for and retain a larger share of its partners’ business than if it had no such vertical relationships.” In short, the obvious explanation for each insurer’s decision to enter into a contingent commission agreement with a broker that was consolidating its pool of insurers was that each insurer independently calculated that it would be more profitable to 206

be within the pool than without. The complaints themselves reinforce this conclusion with their portrait of a concentrated brokerage market, in which a handful of brokers controlled the majority of client business, and an unconcentrated, more competitive market of insurers vying for premium dollars. According to plaintiffs’ own account, “[t]he Insurer Defendants are thus largely dependent on the Broker Defendants to assure access to business and protect their market share.” Given this economic landscape, each insurer had an obvious incentive to enter into the “strategic partnerships” offered by the defendant brokers, irrespective of the actions of its competitors. Refusing to concede this point, plaintiffs argue that the parallel decisions of insurers to join the broker-centered conspiracies plausibly imply a horizontal agreement among the insurers because “an insurer would not pay enormous contingent commissions in order to access premium volume if its major rivals were getting the same access for free.” This contention is implausible. Although each insurer would be motivated to achieve the best deal possible with the broker - and would doubtless like to obtain terms at least as favorable as those negotiated by other insurers - the determinative consideration would be whether the insurer is better off paying contingent commissions for privileged access to the broker’s clients than it would be saving those payments and foregoing the broker’s assistance in winning and retaining business. Especially in light of the market dynamics alleged by plaintiffs, the obvious explanation for the decision of the defendant insurers to enter into contingent commissions agreements with the consolidating brokers is that each insurer found that the benefits justified the costs. In fact, the complaints relate incidents in which insurers who were reluctant to conform to the contingent commission demands of a broker nonetheless did so when faced with the prospect of losing their privileged access to the broker's book of business. These anecdotes only strengthen the obvious conclusion that no horizontal agreement was necessary to induce the insurers to become “strategic partners.” Moreover, plaintiffs’ argument proves too much. If the parallel decisions by several insurers to pay contingent commissions imply a horizontal agreement, then it is difficult to see why parallel decisions to pay standard commissions (that is, a fixed percentage of each policyholder's premium payment) would not also imply an agreement. For that matter, plaintiffs’ logic would divine a horizontal agreement from virtually any parallel expenditures for marketing services, on the mistaken ground that a firm would not pay for advertising, for example, in the absence of an agreement with its 207

competitors to enter into similar contracts with the advertising company. Cf. Twombly, 550 U.S. at 566, 127 S. Ct. 1955 (noting that “resisting competition is routine market conduct,” and that “if alleging parallel decisions to resist competition were enough to imply an antitrust conspiracy, pleading a § 1 violation against almost any group of competing businesses would be a sure thing”). The District Court correctly found that the brokers’ alleged consolidation of the insurers with which they did business did not plausibly imply an agreement susceptible to per se condemnation. In re Ins. Brokerage, 618 F.3d at 327-28 (alterations in original) (citations and footnotes omitted). The court next considered plaintiffs’ allegations that “devices” and “techniques” used to conduct the customer-steering schemes gave rise to a plausible inference of horizontal conspiracy: According to the complaints, several of the devices that allegedly facilitated the schemes are common to all of the broker-centered conspiracies. For instance, plaintiffs allege that brokers often afforded insurer-partners “first looks” and “last looks” in bidding on policies. Once again, however, the practices identified by plaintiffs are strictly vertical in nature. On the complaint’s own account, first and last looks were techniques utilized by brokers to ensure that a given client’s policy was placed (or remained) with a designated insurer-partner. The complaints describe “[t]he close bond between broker and client,” which “gives brokers tremendous influence, and often decisive control, over the placement of their clients’ insurance business. Given the high degree of financial investment and trust placed in their broker, clients will rarely if ever seek quotes from insurers other than those recommended by the broker.” In other words, the complaints themselves provide obvious reasons to conclude that the brokers were able to steer clients to preferred insurers without the need for any agreement among the insurers. Whatever the vices of these steering techniques, they do not give rise to a plausible inference of horizontal conspiracy. Id. at 334-35. The court then considered allegations of “bid manipulation” and other strategies used by brokers and insurers and held that these allegations were also insufficient to allege a horizontal agreement. Also insufficient are two allegations of certain “bid manipulation” within the broker-centered conspiracies in the Employee Benefits Case. In the first example, the complaint asserts only that a broker unilaterally refused to submit an insurer's bid to the client. In the second, a broker successfully persuaded one of its 208

insurer-partners not to withdraw a bid the insurer had come to view as unacceptably low. If the insurer had withdrawn the bid, another, non-partner insurer would have become a “finalist,” an outcome the broker wished to avoid. To allay the insurer-partner’s concerns, the broker assured it that it would not end up winning the contract because another insurer had submitted an even lower bid. Shortly afterward, the broker placed a large account with the insurer-partner. Neither example provides a plausible basis for inferring anything more than vertical agreements between brokers and individual insurers. In the Employee Benefits Case, plaintiffs allege that defendant insurers used similar strategies to evade their obligation to report contingent commission payments on Form 5500. But the asserted fact that the insurers intended to violate their reporting obligations, and that they all adopted the same deceptive reporting model, does not plausibly suggest a horizontal agreement. If anything, the allegations suggest that each insurer would be independently motivated to evade the requirement, and that each had access to the same effective model of how to accomplish this deception. The insurers would be disinclined to expose their competitors' reporting violations for fear of calling attention to their own self-interested deception. Cf. Twombly, 550 U.S. at 568, 127 S. Ct. 1955 (finding that the failure of the defendants to compete in one another's regions was most plausibly explained by the fact that the defendants “liked the world the way it was, and surely knew the adage about him who lives by the sword”). In re Ins. Brokerage, 618 F.3d at 335 (alteration in original) (citations omitted). The court next considered the Marsh-centered commercial conspiracy, in which “plaintiffs provide detailed allegations of bid rigging by the insurer-partners.” Id. at 336. The court noted that “Bid rigging - or more specifically, as alleged in this case, bid rotation - is quintessentially collusive behavior subject to per se condemnation under § 1 of the Sherman Act.” Id. The court noted that “defendants do not dispute that the bid-rigging allegations plausibly imply a horizontal agreement among insurers,” however, defendants “contend that plaintiffs have no standing to challenge this activity because plaintiffs do not assert that the bids were rigged on any of the policies they purchased.” Id. The court rejected defendants’ argument because it concluded that plaintiffs’ bid-rigging allegations adequately support the more general allegation of an agreement among the defendant insurers to allocate customers in the Marsh-centered commercial conspiracy. Id. The court then considered plaintiffs’ claim of a “global conspiracy” in which the defendant brokers, “with the complicity of the Defendant Insurers,” agreed “to conceal from the general 209

public and other brokers” the existence of the broker-centered controversies. Id. at 348. The Third Circuit agreed with the district court that “the complaints’ factual allegations fail to plausibly imply horizontal non-disclosure agreements among the defendant brokers or defendant insurers” because none of the plaintiffs’ “plus factors” plausibly implied a horizontal agreement among the brokers. The court explained why the allegations in the Commercial complaint failed to state a claim: The Commercial complaint alleges that the defendant brokers “issued substantially similar purported ‘disclosure’ statements modeled after the CIAB’s position statement” advising brokers on how to respond to questions regarding contingent commissions. According to plaintiffs, these statements misleadingly disguised the existence and effect of the contingent commission agreements. But neither defendants’ membership in the CIAB, nor their common adoption of the trade group’s suggestions, plausibly suggest conspiracy. Cf. Twombly, 550 U.S. at 567 n. 12, 127 S. Ct. 1955 (rejecting the contention that the defendants’ common membership in a trade union, combined with parallel conduct, plausibly suggests conspiracy); Elevator Antitrust Litig., 502 F.3d at 51 (finding that allegations that the defendants used similar contractual language did not plausibly imply conspiracy because “similar contract language can reflect the copying of documents that may not be secret”). While these allegations indicate that the brokers had an opportunity to conspire, they do not plausibly imply that each broker acted other than independently when it decided to incorporate the CIAB’s proposed approach as the best means of protecting its lucrative arrangements from hostile scrutiny. See Petruzzi’s, 998 F.2d at 1242 n. 15 (“Proof of opportunity to conspire, without more, will not sustain an inference that a conspiracy has taken place.” (internal quotation marks omitted)). Even if we read the complaint to assert that the defendant brokers collaborated in crafting these allegedly misleading disclosures (insofar as these defendants allegedly “control the affairs of ... CIAB,” which produced the “position statement” allegedly incorporated into defendants’ disclosures to clients), this still would be insufficient to show a horizontal agreement not to disclose one another's contingent commissions. If proven, this allegation would plausibly show that defendants agreed to work together to determine the best way of disguising activity in which each engaged. But this allegation would not plausibly imply that the decision to disguise that activity (namely, the alleged use of contingent commissions as part of a scheme to steer customers to particular insurers) was itself the product of an agreement-not, at least, in the face of the complaint's 210

many allegations showing that each defendant had ample independent motive to conceal its own contingent commission arrangements. A contrary holding would be tantamount to finding that any collaborate effort to refine a “pernicious industry practice,” In re Ins. Brokerage Antitrust Litig., 2007 WL 2892700, at *24 (so describing the conduct alleged by plaintiffs), plausibly suggests a conspiracy among all industry participants not to reveal the fact that other participants engage in the same practice. Where, as here, the “obvious alternative explanation” for such an industry practice is that each member of the industry believes its profits would suffer without the practice, it is not plausible to infer that each member's decision not to expose its competitors’ use of the practice - that is, not to engage in mutually assured destruction - is the product of an agreement. In re Insurance Brokerage, 618 F.3d at 349-50 (footnotes omitted). The court then considered the allegations in the Employee Benefits case and determined that they also failed to state a claim: In the Employee Benefits Case, plaintiffs allege that “Defendants executed substantially similar disclosure policies regarding contingent compensation matters, including failing to disclose contingent compensation information to ERISA plan administrators on Form 5500s, as required by governmental regulations.” Plaintiffs also allege instances in which defendants exchanged information about how they accounted for, and reported, this compensation. These allegations, like the other allegations of shared information and similar disclosure practices, are insufficient. They imply only that each defendant had a similar motive to obfuscate the structure of the brokers’ compensation, and that they sought the most effective means to achieve this obfuscation. They do not provide a “reason to infer that the [defendants] had agreed among themselves to do what was only natural anyway.” Twombly, 550 U.S. at 566, 127 S. Ct. 1955. In re Ins. Brokerage, 618 F.3d at 350 (footnote omitted). The court concluded: Having reviewed the entirety of the Global Conspiracy pleadings, we concur with the District Court’s conclusion: “While Plaintiffs present facts to support the possibility of inadequate disclosures by the brokers to the insureds, the Complaints are bereft of allegations to demonstrate that this was more than brokers adopting sub-par disclosure methods to protect their own, lucrative agreements.” 2007 WL 2533989, at *19. Plaintiffs’ attack on the pervasive use of 211

contingent commissions to exploit insurance brokers' power over their clients - and the use of similar techniques to disguise this activity - may allege a “pernicious industry practice,” but they do not plausibly imply an industry-wide conspiracy. In re Ins. Brokerage, 618 F.3d at 351. The court next considered whether the defendants’ alleged conduct was exempt from antitrust regulation under the McCarran-Ferguson Act, and decided that it was not. Id. at 351-61. Because the McCarran-Ferguson Act does not bar plaintiffs’ claims, the court concluded that the big-rigging allegations should be reinstated, summarizing its “Twombly analysis” of plaintiffs’ conspiracy claims as follows: The Supreme Court has made clear that courts confronted with a motion to dismiss must assess whether the complaint contains “enough factual matter (taken as true) to suggest that an agreement was made.” Twombly, 550 U.S. at 556, 127 S. Ct. 1955. “Determining whether a complaint states a plausible claim to relief will ... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 129 S. Ct. at 1950; see also Arar v. Ashcroft, 585 F.3d 559, 617 (2d Cir.2009) (Parker, J., dissenting) (“Plausibility . . . depends on a host of considerations: The full factual picture presented by the complaint, the particular cause of action and its elements, and the available alternative explanations [for the facts alleged].”), cert. denied, --U.S. ----, 130 S. Ct. 3409, 177 L. Ed. 2d 349 (2010). Some claims will demand relatively more factual detail to satisfy this standard, while others require less. In the context of claims brought under § 1 of the Sherman Act, plausibility is evaluated with reference to well-settled antitrust jurisprudence that “limits the range of permissible inferences from ambiguous evidence.” Matsushita, 475 U.S. at 588, 106 S. Ct. 1348. In particular, “when allegations of parallel conduct are set out in order to make a § 1 claim,” that conduct must be placed in “some setting suggesting the agreement necessary to make out a § 1 claim.” Twombly, 550 U.S. at 557, 127 S. Ct. 1955. In other words, the complaint must allege some “further circumstance,” “something more than merely parallel behavior,” “pointing toward a meeting of the minds.” Id. at 557, 560, 127 S. Ct. 1955. If, in the circumstances alleged, the asserted “parallel conduct ... could just as well be independent action,” then the complaint has failed to plead a § 1 claim. Id. at 557, 127 S. Ct. 1955.

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Here, the bid-rigging allegations supply the requisite “further circumstance.” Because they plausibly suggest an unlawful horizontal conspiracy not to compete for incumbent business, plaintiffs have adequately met Rule 8(a)(2)’s requirement for setting forth a § 1 claim against those defendants in the asserted Marsh-centered commercial conspiracy who are alleged to have participated in bid rigging. This agreement to divide the market, if proven, would be a naked restraint of trade subject to per se condemnation. See Leegin, 551 U.S. at 886, 127 S. Ct. 2705; In re Japanese Elec. Prods. Antitrust Litig., 723 F.2d 238, 310-11 (3d Cir. 1983) (observing that “a horizontal agreement to allocate customers” is “ordinarily ... a per se violation” (citing United States v. Topco Assocs., 405 U.S. 596, 606-12, 92 S. Ct. 1126, 31 L. Ed. 2d 515 (1972))), rev’d on other grounds sub nom. Matsushita, 475 U.S. 574, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). With respect to the remaining antitrust claims, however, plaintiffs have failed to plead facts plausibly supporting their allegations of horizontal conspiracies to unreasonably restrain trade, notwithstanding their conclusory assertions of agreement. Given plaintiffs’ exclusive reliance on a per se or quick look analysis, the absence of a horizontal agreement is fatal to their § 1 claims. Accordingly, these antitrust claims must be dismissed, as the District Court concluded. Id. at 361-62 (footnotes omitted). The court then considered plaintiffs’ RICO claims. It explained that “[t]o plead a RICO claim under § 1962(c), ‘the plaintiff must allege (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.’” Id. at 362 (quoting Lum v. Bank of Am., 361 F.3d 217, 223 (3d Cir. 2004)). In the Commercial Case, plaintiffs alleged the existence of one legal-entity enterprise, the Council of Insurance Agents and Brokers (CIAB), and six association-in-fact enterprises corresponding to the six broker-centered antitrust conspiracies. In the Employee Benefits Case, plaintiffs plead five association-in-fact enterprises corresponding to the broker-centered conspiracies alleged in their antitrust claims. Id. Defendants argued that “plaintiffs had failed adequately to plead the enterprise and conduct elements of their § 1962(c) claims, and that they had failed adequately to plead predicate acts of racketeering.” Id. at 364. The Third Circuit agreed, except with respect to the Marshcentered enterprise alleged in the commercial complaint. Id. at 374. The court relied extensively on Boyle v. United States, --- U.S. ----, 129 S. Ct. 2237 (2009), which was decided after the district court dismissed plaintiffs’ claims, and after the Tenth Circuit heard argument in this appeal. In re Ins. Brokerage, 618 F.3d at 365. It explained: With respect to all but the Marsh-centered enterprise alleged 213

in the Commercial complaint, we agree with the District Court that plaintiffs’ allegations of broker-centered enterprises are fatally defective. In our analysis of the antitrust claims, we determined that, with the exception of the alleged Marsh-centered commercial conspiracy, the facts alleged in the complaints do not plausibly imply a horizontal agreement among the insurer-partners. In seeking to establish a “rim” enclosing the insurer-partners in the alleged RICO enterprises, plaintiffs rely on the same factual allegations we found deficient in the antitrust context: that each insurer entered into a similar contingent-commission agreement in order to become a “strategic partner”; that each insurer knew the identity of the broker’s other insurer-partners and the details of their contingent-commission agreements; that each insurer entered into an agreement with the broker not to disclose the details of its contingent-commission agreements; that the brokers utilized certain devices, such as affording “first” and “last looks,” to steer business to the designated insurer; and that, in the Employee Benefits Case, insurers adopted similar reporting strategies with regard to Form 5500. As noted, these allegations do not plausibly imply concerted action-as opposed to merely parallel conduct-by the insurers, and therefore cannot provide a “rim” enclosing the “spokes” of these alleged “hub-and-spoke” enterprises. Even under the relatively undemanding standard of Boyle, these allegations do not adequately plead an association-in-fact enterprise. They fail the basic requirement that the components function as a unit, that they be “put together to form a whole.” Boyle, 129 S. Ct. at 2244 (internal quotation marks omitted). Because plaintiffs’ factual allegations do not plausibly imply anything more than parallel conduct by the insurers, they cannot support the inference that the insurers “associated together for a common purpose of engaging in a course of conduct.” Id. (quoting Turkette, 452 U.S. at 583, 101 S. Ct. 2524); see id. at 2245 n. 4 (stating that “several individuals” who “engaged in a pattern of crimes listed as RICO predicates” “independently and without coordination” “would not establish the existence of an enterprise”); Elsevier, 692 F. Supp. 2d at 307 (stating that, as with a § 1 Sherman Act claim, a RICO claim pleading “nothing more than parallel conduct by separate actors” is insufficient: “there has to be something that ties together the various defendants allegedly comprising the association in fact into a single entity that was formed for the purpose of working together-acting in concert-by means of” racketeering acts); Gregory P. Joseph, Civil RICO: A Definitive Guide 106 (3d ed. 2010) (stating that a “rimless hub-and-spoke configuration would not satisfy the ‘relationships’ 214

prong of Boyle’s structure requirement”); see also Rao, 589 F.3d at 400 (finding the plaintiff had failed to plead an association-in-fact enterprise because the “allegations do not indicate how the different actors are associated and do not suggest a group of persons acting together for a common purpose or course of conduct”). Were the rule otherwise, competitors who independently engaged in similar types of transactions with the same firm could be considered associates in a common enterprise. Such a result would contravene Boyle’s definition of “enterprise.” In re Ins. Brokerage, 618 F.3d at 375-75. The court then determined that the bid-rigging allegations in the Commercial complaint adequately pled the enterprise element fo the RICO claim. Id. at 375. It explained: As with the antitrust claims, we reach a different conclusion with respect to the claims alleging bid rigging - the bid-rigging allegations in the Commercial complaint suffice to plead a “Marsh-centered enterprise.” As Boyle clarified, a RICO “enterprise” must have a structure, but it need not have any particular structural features beyond “a purpose, relationships among those associated with the enterprise, and longevity sufficient to permit these associates to pursue the enterprise's purpose.” Boyle, 129 S. Ct. at 2244. We think the allegations of bid rigging provide the “rim” to the Marsh-centered enterprise’s hub-and-spoke configuration, satisfying Boyle’s requirements. The Commercial complaint alleges that Marsh prepared “broking plans” governing the placement of insurance contracts that came up for renewal. According to plaintiffs, “[t]he broking plans assigned the business to a specific insurer at a target price and outlined the coverage. The broking plans also included instructions as to which preferred Insurers would be asked to provide alternative [i.e., intentionally uncompetitive, or sham] quotes. If the incumbent Insurer hit the ‘target,’ it would get the business and then [Marsh employees] would solicit ‘alternative’ ... quotes from other members of the conspiracy.” The complaint also alleges the reasons why the insurers agreed to provide sham bids. For example, it relates a statement by a former employee of a defendant insurer that his employer had agreed to “provide[ ] losing quotes” to Marsh in exchange for, among other things, Marsh’s “getting ‘quotes from other [insurance] carriers that would support the [employer, at least when it was the incumbent carrier] as being the best price.’ ” This statement plausibly evinces an expectation of reciprocity and cooperation among the insurers.

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In at least one sense, plaintiffs’ allegations regarding the “Marsh-centered enterprise” exceed Boyle’s requirements. Boyle explicitly disavowed the need for any particular organizational structure. Boyle, 129 S. Ct. at 2245-46. It upheld the conviction of a “loosely and informally organized” group of bank robbers that neither “had a leader [n]or hierarchy,” nor “ever formulated any long-term master plan or agreement”; the group would meet before each robbery to “assign the roles that each participant would play (such as lookout and driver).” Id. at 2241. Here, by contrast, plaintiffs allege a hierarchical structure according to which Marsh, in accordance with its “broking plan,” decided from which insurer each sham bid would be requested. Plaintiffs adequately allege a “common interest” or “purpose,” id. at 2244, namely to increase profits by deceiving insurance purchasers about the circumstances surrounding their purchase. The alleged reciprocal bid rigging also adequately suggests “relationships among” the insurers “associated with the enterprise[s]”; if proved, it would plausibly demonstrate the insurers “joined together” in pursuit of the aforementioned common purpose. Boyle, 129 S. Ct. at 2244 (internal quotation marks omitted). Finally, the complaint alleges that the bid rigging occurred over a period of several years, plausibly alleging “that the enterprise had ‘affairs' of sufficient duration to permit an associate to ‘participate’ in those affairs through ‘a pattern of racketeering activity.’ ” Id. (quoting § 1962(c)). Accordingly, plaintiffs have adequately pled the enterprise element of the RICO claims based on the alleged Marsh-centered commercial enterprise. In re Ins. Brokerage, 618 F.3d at 375-76 (alterations in original) (footnotes omitted). The court next considered the “conduct” element of the RICO claims and decided that “plaintiffs have adequately pled that defendants engaged in activities constituting participation in the conduct of the enterprise.” Id. at 378. It explained: [B]ased on the complaint’s allegations, plaintiffs have adequately pled that defendants engaged in activities constituting participation in the conduct of the enterprise. The allegations that defendant broker Marsh directed the placement of insurance contracts and solicited rigged bids from insurers plausibly imply that Marsh “participated in the operation or management of the enterprise itself.” Reves, 507 U.S. at 183, 113 S. Ct. 1163. And by allegedly supplying the sham bids, Marsh’s insurer-partners are also adequately alleged to have “operated” the enterprise within the meaning of Reves. Cf. id. at 184, 113 S. Ct. 1163 (stating that “[a]n enterprise is ‘operated’ not just by upper management but also by lower rung participants in the enterprise who are under the direction of upper management”); e.g., 216

MCM Partners, Inc. v. Andrews-Bartlett & Assocs., 62 F.3d 967, 978-79 (7th Cir.1995) (finding that two businesses participated in the conduct of an association-in-fact enterprise “by knowingly implementing decisions” by the enterprise's managers to commit crimes). We thus find plaintiffs have sufficiently pled that defendants in the Marsh-centered enterprise satisfied the “conduct” requirement set forth in Reves. Id. at 378-79 (second alteration in original). The court next addressed Plaintiffs’ allegations in the Commercial Case that the Council of Insurance Agents and Brokers (CIAB) was a RICO enterprise. Id. at 379. After describing the “significant questions” it had about whether plaintiffs had adequately pled these claims, the court vacated the dismissal of the CIAB-based claims because “[n]one of these questions was squarely addressed by the parties on appeal, and we believe the District Court is best positioned to decided them in the first instance.” Id. at 383. •

Great Western Mining & Mineral Co. v. Fox Rothschild LLP, 615 F.3d 159 (3d Cir. 2010), cert. denied, 131 S. Ct. 1798 (2011). Having lost in state court, Great Western Mining and Mineral Company brought a civil rights action in federal court under 42 U.S.C. § 1983, alleging deprivations of procedural and substantive due process. Id. at 161-62. Great Western’s claims arose out of a Pennsylvania lawsuit and arbitration award. Id. In the state court litigation, Active Entertainment, Inc. retained Brownstein & Vitale, P.C. (“B&V”) to represent it against an entity that Active had hired to build a miniature golf course. Id. Following that litigation, Active brought a malpractice suit against B&V and the individual lawyers representing him, Brownstein and Vitale. Id. The parties agreed to binding arbitration before Rutter and his company, ADR Options. Id. “According to the Complaint, ADR Options is the largest provider of alternative dispute services in Pennsylvania, New Jersey, and Delaware” and “many of ADR Options’s arbitrators are former federal and state judges.” Wiley represented Active; Paradise, a partner at Fox Rothschild, represented Vitale. Id. The arbitration resulted in an award for Brownstein, Vitale, and B&V. Great Western, 615 F.3d at 161-62. Great Western became the assignee of Active’s interest. Id. at 162. Great Western filed a petition in Pennsylvania state court to vacate the arbitration award on the ground of improper failure to disclose potential conflicts because the managing partner at Fox Rothschild, Fryman, was concurrently employed at ADR Options as an arbitrator, and Paradise maintained a professional relationship with Rutter. Id. The state court ruled against Great Western and affirmed the arbitration award. Id. The Supreme Court of Pennsylvania denied Great Western’s petition for allowance of appeal. Id. Great Western filed another state action against defendants and it was denied as collaterally estopped. Id. Great Western alleged that, shortly thereafter, defendants’ counsel informed Great Western’s counsel that “[t]here [was] no way that a Philadelphia court [was] ever going to find against Rutter given his relationship with the Philadelphia court system.” Great Western, 615 F.3d at 162.

217

In its § 1983 complaint, Great Western alleged that “the Pennsylvania state-court decisions were corrupted by the improper influence of Defendants, arising both from the Pennsylvania courts’ reliance on Rutter’s services and from Pennsylvania judges’ prospect of future employment with ADR Options. Id. The district court granted Defendants’ motion to dismiss for failure to state a claim, holding that Great Western had not sufficiently alleged that Defendants acted under color of state law. Id. Great Western filed a motion for reconsideration and for leave to amend its complaint and attached a draft amended complaint. Id. at 162-63. Before the court ruled, Great Western filed a second, and then third, motion for leave to amend, each time seeking to substitute a new amended complaint, and each time attaching the proposed amended complaint. Id. at 163. In the third motion, Great Western presented new evidence – Rutter’s admission under oath in another lawsuit that some of the judges who had ruled against Great Western had already approached Rutter about the prospect of employment upon leaving the bench. Id. The district court denied the motion for reconsideration and all three motions for leave to amend. Great Western, 615 F.3d at 163. In ruling on the motion for reconsideration, the district court considered the second proposed amended complaint, but not the third, because “[t]o allow plaintiff to repeatedly submit drafts of its complaint while plaintiff’s original motions are still pending would be prejudicial to defendants.” Id. The Second Circuit affirmed. With respect to the motion for leave to amend, the court explained that Federal Rule of Civil Procedure 15(a) instructs that “The court should freely give leave [to amend] when justice so requires.” Id. at 174. The court relied upon the Supreme Court’s interpretation of 15(a): In the absence of any apparent or declared reason - such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc. - the leave sought should, as the rules require, be “freely given.” Of course, the grant or denial of an opportunity to amend is within the discretion of the District Court, but outright refusal to grant the leave without any justifying reason appearing for the denial is not an exercise of discretion; it is merely abuse of that discretion and inconsistent with the spirit of the Federal Rules. Id. at 174 (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)). And decided that the district court’s refusal to consider the third proposed amended complaint was erroneous because allowing Great Western to amend would not prejudice defendants. Id. But it nevertheless affirmed on the ground that granting leave to amend would have been futile. Id. The Second Circuit explained that, “[u]nder Rule 15(a), futility of amendment is a sufficient basis to deny leave to amend. Futility ‘means that the complaint, as amended, would fail to state a claim upon which relief could be granted.’ Great Western, 615 F.3d at 174-75 (quoting In re Merck & Co. Sec., Derivative, & ERISA Litig., 493 F.3d 393, 400 (3d Cir. 2007)). In determining that the substitution of the third proposed amended complaint would have been 218

futile, the court considered the merits of Great Western’s reconsideration and the additional allegation in the third proposed amended complaint. Id. at 175. The court explained that “[t]o prevail on a § 1983 claim, a plaintiff must allege that the defendant acted under color of state law, in other words, that there was a state action.” Id. at 175-76. And that “acting under color of state law” includes private parties who corruptly conspire with a judge in connection with an official judicial act. Id. at 176. “Thus, in order to state a claim under § 1983, Proposed Amended Complaint 3 must have adequately pled the existence of a conspiracy between Defendants, who are private parties, and the judges of the Pennsylvania court system.” Id. And “to properly plead an unconstitutional conspiracy, a plaintiff must assert facts from which a conspiratorial agreement can be inferred.” Id. at 178. The Second Circuit noted that “[t]his holding remains good law following Twombly and Iqbal, which in the conspiracy context, require ‘enough factual matter (taken as true) to suggest that an agreement was made,’ in other words, ‘plausible grounds to infer an agreement.’” Great Western, 615 F.3d at 178 (quoting Twombly, 550 U.S. at 556). The court then decided that the third proposed amended complaint failed to meet the standard. Id. In reaching this conclusion, the court, following Iqbal, refused to consider any conclusory allegations of conspiracy, agreement, or understanding. Id. Instead, it explained that “Great Western must plead an agreement between the state court judges and Defendants to rule in favor of ADR Options and Rutter. To properly plead such an agreement, ‘a bare assertion of conspiracy will not suffice.’” Id. (quoting Twombly, 550 U.S. at 556). Great Western’s claim rested on the following factual allegations: “(1) according to [Great Western’s counsel], on or about March 1, 2006, Tintner stated that there was ‘no way that a Philadelphia court is ever going to find against Thomas Rutter given his relationship with the Philadelphia court system’; (2) ADR Options is the largest provider of ADR services in Pennsylvania, has a large roster of former judges employed as arbitrators, and pays its arbitrators handsomely; and (3) in May 2009, Rutter testified at a deposition that some of the judges who had ruled for ADR Options and against Great Western had already approached him about employment after they leave the bench.” Id. The Second Circuit determined that At most, Great Western has alleged that Pennsylvania state-court judges hoped to secure employment with ADR Options after leaving the bench and thus had an incentive to rule in the company’s favor. Id. Fatal to this claim, however, Great Western failed to make any factual contentions concerning conduct by Rutter or any of the other Defendants. Great Western, 615 F.3d at 178. The Second Circuit also noted that “Great Western has not pleaded any facts that plausibly suggest a meeting of the minds between Rutter and members of the Pennsylvania judiciary,” but sets forth merely conclusory allegations of agreement. Id. at 179. And concluded that: “Great Western's Proposed Amended Complaint 3 lacks 219

sufficient factual allegations to create “plausible grounds to infer an agreement,” as is required by Twombly. Any effort to amend by substituting Proposed Amended Complaint 3 therefore was futile, and we in turn affirm the District Court's denial of leave to amend on that ground.” Id. (internal citation omitted). •

Bob v. Kuo, 387 F. App’x 134, No. 10-1615, 2010 WL 2825644 (3d Cir. Jul. 20, 2010) (unpublished) (per curiam). Plaintiff Bob was a detainee at a detention facility operated by Corrections Corporation of America (“CCA”). Id. at *1. Bob filed a Bivens action against CCA, the warden (Collins), and a physician who cared for him (Kuo). Id. Bob alleged that Kuo deliberately disregarded his medical needs by refusing to prescribe Celebrex for his complaints of swelling, stiffness, and a poor range of motion in his hand due to an old, workrelated injury. Id. According to the complaint, Kuo refused to prescribe Celebrex due to the risk of serious side effects and instead offered to prescribe two other pain relievers. Id. When Bob complained that he could not tolerate the alternate medications, Kuo suggested soaking his hand in warm water. Id. The district court dismissed the complaint, concluding that “Bob’s ‘allegations demonstrate[d] that Dr. Kuo did not violate his rights under the Eighth Amendment,’ that Bob ‘made no allegations whatsoever concerning Warden Collins,’ and that Bivens does not provide a cause of action against a private corporation such as CCA.” Bob, 2010 WL 2825644, at *1. The Third Circuit affirmed. It held that “[t]here [wa]s nothing in the complaint’s specific allegations from which [it could] plausibly infer that the defendants were deliberately indifferent to Bob’s serious medical needs.” Id. at *2. The court noted that “‘claims of negligence or medical malpractice, without some more culpable state of mind, do not constitute ‘deliberate indifference.’’” Id. (citation omitted). Because Bob did “not allege that he was intentionally denied medical treatment for his pain”; “the allegations contained in the complaint, taken as true, simply assert[ed] inadequate treatment because Dr. Kuo would not prescribe the specific medication Bob desired”; and “Bob’s own allegations also reveal[ed] a medical reason for Dr. Kuo’s refusal to prescribe the requested medication,” Bob’s claims against Kuo could not survive. Id. The court noted that disagreement with a medical decision is not enough to establish an Eighth Amendment violation. Id. The court also affirmed the dismissal of the claims against Collins because the complaint contained no allegations regarding Collins, and under Iqbal, “‘vicarious liability is inapplicable to Bivens and § 1983 suits, [and] a plaintiff must plead that each Government-official defendant, through the official’s own individual actions, has violated the Constitution.’” Id. (quoting Iqbal, 129 S. Ct. at 1948). The court also affirmed dismissal of CCA because the Supreme Court has refused to extend Bivens actions to private corporations. Bob, 2010 WL 2825644, at *2 (citation omitted).



Culinary Serv. of Delaware Valley, Inc. v. Borough of Yardley, 385 F. App’x 135, No. 094182, 2010 WL 2600683 (3d Cir. Jun. 30, 2010) (unpublished). Plaintiff Culinary Services distributed amusement, arcade, and redemption games to establishments licensed by the Pennsylvania Liquor Control Board (“PLCB”). Id. at *1. The plaintiffs entered into an agreement with the Knowles-Doyle American Legion in Yardley, Pennsylvania (“Yardley 220

American Legion”) for the Yardley American Legion to lease two games from Culinary Services in exchange for fifty-percent of the net revenue from the games. Id. The agreement contained an automatic termination provision in the event authorities provided notice that the games were prohibited. Id. Before entering into the agreement, the plaintiffs tried to obtain opinions from several Pennsylvania regulatory agencies as to the legality of the games, but received no substantive responses. See id. Before installing the games, one of the plaintiffs informed the local police chief of his intent to install the games and of the fact that the plaintiffs had received a “no comment” opinion from the state police’s Bureau of Liquor Code Enforcement as to the legality of the games. Id. After the plaintiffs installed the games, the Borough Manager “informed the board of directors of the Yardley American Legion that the Games had been ‘deemed illegal by Yardley Borough, Yardley Borough Police Department, and the Pennsylvania State Police.’” Culinary Serv., 2010 WL 2600683, at *1. Upon official notification of the illegality of the games, the contract between the plaintiffs and the Yardley American Legion was effectively terminated. Id. at *2. After the plaintiffs requested further investigation, they were informed by the Borough Solicitor that “‘The Borough of Yardley [wa]s in no position to make a determination as to the legality of the[ Games] and the effect of possible use of the [Games] in the [Yardley] American Legion hall,’” but the Borough continued to refuse to rescind the official notification. Id. (second, third, and fourth alterations in original). The plaintiffs alleged: As a consequence of the Borough’s actions, Plaintiffs lost their only contract in Pennsylvania and have since been unable to enter into additional contracts. Although several other potential customers have indicated their willingness to enter into agreements with Plaintiffs, they have declined to do so because of the Borough’s assessment of the Games. As a result, Plaintiffs have been unable to distribute its inventory of fifty-four Games and have been deterred from manufacturing “hundreds more.” Id. Based on these allegations, the plaintiffs sued the Borough and several of its officers, asserting a § 1983 claim for violation of procedural due process against all defendants; tortious interference with contract against the Borough Manager and the Police Chief; commercial disparagement against the Borough Manager, the Police Chief, and President of the Borough Council; and a request for declaratory relief against all defendants that the games were “‘games of skill that [we]re legal under the laws of the Commonwealth of Pennsylvania.’” Id. The district court dismissed the complaint, finding that the plaintiffs failed to identify a protected property or liberty interest to support the § 1983 procedural due process claim and that the defendants were entitled to qualified immunity on that claim; that the individual defendants were entitled to statutory immunity on the tortious interference and commercial disparagement claims; and that the plaintiffs failed to join indispensable parties for the declaratory relief claim. Id. at *3. The district court also denied leave to amend. Culinary Serv., 2010 WL 2600683, at *3. On appeal, the court summarized the relevant pleading standards, noting that “[a]t this stage 221

of the litigation, we focus on whether the non-moving party sufficiently pled its claims, not whether it can prove its claims.” Id. (citing Fowler v. UPMC Shadyside, 578 F.3d 203, 213 (3d Cir. 2009). The Third Circuit agreed with the district court that the plaintiffs failed to plead a property or liberty interest protected by the Fourteenth Amendment sufficient to maintain their § 1983 procedural due process claim. The plaintiffs argued that the defendants “deprived them of their property and liberty interest in the right to engage in a legitimate business free from arbitrary state deprivation.” Id. at *4. The court explained that “[e]ntitlements . . . are not established by the Constitution; rather, they are created and defined by existing rules or understandings that stem from an independent source, such as state law.” Id. Because the “Plaintiffs cite[d] no statute, regulation, government policy, or mutually explicitly understanding in their complaint that would demonstrate an entitlement to pursue their business interests,” and because they had not “cited any source for their entitlement to th[e] Court,” the court concluded that “Plaintiffs pled only a unilateral expectation of an interest in operating their business, which is not sufficient to plead an entitlement to a property interest under the Fourteenth Amendment.” Id. With respect to the liberty interest, the court noted that it had “recognized a relevant liberty interest—the right to hold specific private employment and to follow a chosen profession free from unreasonable government interference,” but explained that “the Constitution only protects this liberty from state actions that threaten to deprive persons of the right to pursue their chosen occupation; state actions that exclude a person from one particular job are not actionable in due process claims.” Id. at *5 (citations omitted). The court further explained that “it is the liberty interest to pursue a calling or occupation, not the right to a specific job, that is secured by the Fourteenth Amendment,” and that “Plaintiffs must allege an inability to obtain employment within the field, not just a particular job or at a specific location or facility.” Culinary Serv., 2010 WL 2600683, at *5. The court noted that “[a]ssuming Plaintiffs’ allegations [we]re true, they ha[d] been unable to lease additional Games in Pennsylvania because of Defendants’ official notification letter . . . [and] several businesses ha[d] acknowledged their willingness to enter into commercial relationships with Plaintiffs but for Defendants’ declaration that the machines [we]re illegal.” Id. The court concluded that “at best, Plaintiffs ha[d] been precluded from distributing only two Games, and counsel conceded at argument that Plaintiffs [could] sell other Games in other locations,” and that “[a]s such, Plaintiffs ha[d] only been deprived of the specific job of distributing the Games in Pennsylvania, but they [could] still engage in the general distribution business, to say nothing of their ability to lease Games in other states.” Id. (citations omitted). As a result, the court held that the plaintiffs had “failed to assert a protected property or liberty interest, an essential element to their procedural due process claim,” and affirmed this holding of the district court. Id. The court noted that because it had concluded that the plaintiffs did not identify a protected property or liberty interest, they had not alleged violation of a constitutional right, and that it could therefore alternatively dismiss the procedural due process claim based on qualified immunity. Id. at *5 n.5. With respect to the tort claims, the court noted that the relevant inquiry involved the applicability of an exception to statutory immunity that applied if an act of the employee caused the injury and the act constituted a crime, actual fraud, actual malice, or willful 222

misconduct. Id. at *6. The court stated that its “inquiry focuse[d] on whether Plaintiffs pled sufficient facts to show these Defendants desired the termination of the Agreement or to cause Plaintiffs to suffer pecuniary loss, or that Defendants knew or should have known that those results were substantially certain to follow. Culinary Serv., 2010 WL 2600683, at *6 (citations omitted). The court concluded that “[w]ith regard to the tortious interference claim, Plaintiffs ma[de] bare assertions that Manager Winslade and Chief O’Neill acted willfully to bring about the termination of the Agreement, which is not sufficient under Iqbal.” Id. (citing Iqbal, 129 S. Ct. at 1950, 1953). Because the plaintiffs “merely allege[d] that the Agreement automatically terminated after Defendants notified the Yardley American Legion that the Games [we]re illegal,” which did “not reveal that Manager Winslade or Chief O’Neill desired or was substantially certain the Agreement would terminate as a result of his conduct,” “the allegations fail[ed] to show an entitlement to relief.” Id. With respect to the commercial disparagement claim, the court explained that the allegations were insufficient under Iqbal to invoke the exception to statutory immunity: Plaintiffs allege that President Hunter adopted Manager Winslade’s and Chief O’Neill’s actions, and that the adoption was published on the Borough’s website. They further allege that Defendants refused to rescind the official notification notwithstanding Solicitor McNamara’s disclaimer of authority. Plaintiffs then make a bare assertion that Defendants engaged in this conduct to cause, or should have known their conduct would cause, Plaintiffs to suffer pecuniary loss. Plaintiffs assert no facts to support this alleged intent and, therefore, they failed to show an entitlement to relief. [Iqbal, 129 S. Ct. at 1950, 1953.] Accordingly, we will affirm the dismissal of Counts II and III. Id. With respect to the claim for declaratory relief, the court rejected the argument for abstention, see id. at *7–8, and concluded that the district court had erred in holding that certain parties were indispensable, id. at *8–9. As a result, the court vacated the dismissal of the claim for declaratory relief and remanded for the district court to consider whether it wished to continue to exercise jurisdiction over this claim and whether it should exercise its discretion and decline to grant declaratory relief. See Culinary Serv., 2010 WL 2600683, at *6 & n.6, *9. In analyzing the motion for leave to amend, the court stated that “[i]f a complaint is subject to a Rule 12(b)(6) dismissal, a district court must permit a curative amendment, even if the party does not request leave, unless such an amendment would be inequitable or futile.” Id. The court agreed with the district court that the proposed amendment was futile, explaining that “[t]he amended complaint still d[id] not identify a protected liberty or property interest essential to Plaintiffs’ procedural due process claim” and “the amended complaint still only ma[de] bare assertions that the conduct of President Hunter, Manager Winslade, and Chief 223

O’Neill constituted willful misconduct.” Id. at *10. The court noted that “Plaintiffs allege[d] that their new allegations establish[ed] that the conduct was ‘unlawful’ and ‘unreasonable,’ but nothing they allege[d] show[ed] that these Defendants desired the termination of the Agreement or desired to cause pecuniary loss, or that they were substantially certain such results would occur.” Id. (citations omitted). The court concluded that the defendants would “remain entitled to immunity under Pennsylvania law” under the allegations of the amended complaint, and noted that the claim for declaratory relief was not included in the amended complaint. Id. •

Brookhart v. Rohr, 385 F. App’x 67, No. 10-1449, 2010 WL 2600694 (3d Cir. Jun. 30, 2010) (unpublished) (per curiam). The case arose out of the foreclosure and Sheriff’s sale of the plaintiff’s property. Brookhart sued various individuals who were involved in the foreclosure and Sheriff’s sale, “[a]lleging fraud, conspiracy, bank fraud, and violations of the Hobbs Act, 18 U.S.C. § 1951, the Racketeer Influenced and Corrupt Organizations Act (‘RICO’), 18 U.S.C.§§ 1961–1968, and the civil rights statutes, 42 U.S.C. §[§] 1983, 1985(3), and 1986 . . . .” Id. at *1. “Brookhart claimed that Perry County officials conspired with employees and attorneys of PNC Bank and the purchaser to deprive him of his property.” Id. After all defendants moved to dismiss, the district court “dismissed the complaint without leave to amend against the state court judge who presided over a hearing to resolve a declaratory judgment action involving Brookhart,” reasoning that the judge “did not act in the clear absence of jurisdiction and thus was immunized from a suit for money damages.” Id. The district court dismissed the claims against the remaining defendants, but granted leave to amend “to provide factual allegations in support of [Brookhart’s] claims.” Id. Brookhart filed a response to the dismissal order “complain[ing] that Judge Rehkamp should not have been dismissed and . . . [seeking] to clarify each defendant’s role in the foreclosure and sale of his property . . . [by] contend[ing] that the judgment in the state mortgage foreclosure action was fraudulent because of the absence of an ‘original wet ink signature’ on the ‘Note front and back.’” Id. The district court granted the defendants’ renewed motion to dismiss, “reasoning that the fraud claim had not been pled with particularity as required by Rule 9(b), FED . R. CIV . PRO ., and Brookhart’s other allegations were equally conclusory or speculative.” Brookhart, 2010 WL 2600694, at *1. Brookhart appealed in forma pauperis. The Third Circuit dismissed the appeal as frivolous, noting that “the in forma pauperis statute provides that the Court shall dismiss the appeal at any time if the Court determines that it is frivolous.’” Id. (citing 28 U.S.C. § 1915(e)(2)(B)(i)). The court explained: “The District Court reasoned, and we agree, that Brookhart failed to allege any facts from which to infer any kind of fraud or conspiracy in the foreclosure action and Sheriff’s sale of his property.” Id. With respect to the claims under § 1983, the court found that “the majority of the defendants [we]re private citizens and not state actors,” and that while “[l]iability would attach if a private party conspired with a state actor, . . . the District Court properly concluded that the vague allegations of a conspiracy to defraud Brookhart of his property did not satisfy the plausibility standard of Rule 12(b)(6).” Id. at *2 (citing Iqbal, 129 S. Ct. at 1949) (internal 224

citation omitted). The court also held that “[a]s to the remaining defendants—the sheriff and the court officials— . . . Brookhart’s conclusory allegations that his constitutional rights were violated fail[ed] to state a plausible claim.” Id. (citing Iqbal, 129 S. Ct. at 1949). The court also held that “judges are absolutely immunized from a suit for money damages arising from their judicial acts,” and that “[t]heir orders may not serve as a basis for a civil action for damages.” Id. (citations and footnote omitted). With respect to the § 1985 claims, the court concluded that “Brookhart did not allege that he was a member of a protected class, and his conclusory allegations of a deprivation of his constitutional rights [we]re insufficient to state a section 1985(3) claim.” Brookhart, 2010 WL 2600694, at *2. In addition, “[b]ecause Brookhart failed to allege a section 1985(3) violation, he could not assert a cause of action under . . . § 1986,” which requires the existence of a § 1985 conspiracy. Id. The court explained that the Hobbs Act claim was properly dismissed because the statute provided only criminal sanctions, not civil relief. Id. The RICO claim failed because the statute only “authorize[d] civil suits by any person injured in his business or property by reason of a violation of 18 U.S.C. § 1962, but Brookhart failed to allege (1) conduct; (2) of an enterprise; (3) through a pattern; (4) of racketeering activity.” Id. (internal citation omitted). The court cited a pre-Twombly case to explain that “[c]onclusory allegations of a pattern of racketeering activity, in this case, a fraudulent scheme, are insufficient to survive a Rule 12(b)(6) motion.” Id. (citing Lum v. Bank of Am., 361 F.3d 217, 223–24 (3d Cir. 2004)). •

Howard Hess Dental Labs. Inc. v. Dentsply Int’l, Inc., 602 F.3d 237 (3d Cir. 2010). The appeal involved two related antitrust cases (Hess and Jersey Dental). The plaintiffs in both cases were two dental laboratories, and one of the defendants in both cases was Dentsply International, Inc., a manufacturer of artificial teeth sold to the plaintiffs and other labs through a network of dealers (the “Dealers”). Id. at 244. Several of the Dealers were named as defendants only in the Jersey Dental case. Id. “In both cases, the Plaintiffs essentially allege[d] that Dentsply ‘foreclosed its competitors’ access to [D]ealers by explicitly agreeing with some [D]ealers that they [would] not carry certain competing brands of teeth and by inducing other [D]ealers not to carry those competing brands of teeth’ and that Dentsply ‘by agreement [with] its [D]ealers, . . . set[ ] the [D]ealers’ resale prices.’” Id. (omission and second, third, fifth, sixth, seventh, eighth, and ninth alterations in original) (citation omitted). The plaintiffs alleged that “Dentsply ‘caused [the] Plaintiffs to purchase Dentsply’s teeth at artificially high prices and lose profits from unrealized sales of Dentsply’s competitors’ teeth.’” Id. (alteration in original) (citation omitted). “The Plaintiffs brought the Hess suit against Dentsply in 1999, alleging several antitrust conspiracies and seeking both monetary and injunctive relief.” Id. The district court granted summary judgment on the damages claim in favor of Dentsply in Hess, finding that the plaintiffs lacked standing under Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977). Howard Hess Dental Labs., 602 F.3d at 244. The plaintiffs brought the Jersey Dental case in 2001 against Dentsply and several of its Dealers, alleging several antitrust conspiracies, and seeking damages and injunctive relief. Id. The 225

district court dismissed the damages claims based on Illinois Brick and denied leave to amend because it concluded that amendment would have been futile. Id. In an interlocutory appeal, the Third Circuit held that the plaintiffs could not recover any damages in Hess and most damages in Jersey Dental. Id. On remand, the plaintiffs filed an amended complaint in Jersey Dental, alleging conspiracies to restrain trade in violation of Section 1 of the Sherman Act and conspiracies to monopolize under Section 2 of the Sherman Act. Id. at 244–45. The district court denied the plaintiffs’ motion for summary judgment in Hess and granted the defendants’ motions to dismiss in Jersey Dental. Id. at 245. The district court also denied the plaintiffs’ motion for reconsideration in Hess, and suggested that the parties enter a stipulation or submit proposed orders to close the Hess case. Howard Hess Dental Labs., 602 F.3d at 245. The defendants in Hess then moved for dismissal of the complaint. Id. The plaintiffs opposed the motion to dismiss, but also submitted a proposed order to dismiss the case with prejudice, to comply with the district court’s request. Id. The district court dismissed the Hess complaint by approval of the plaintiffs’ proposed order. Id. On appeal, the Third Circuit affirmed the denial of the plaintiffs’ motion for summary judgment in the Hess case on the monopolization claims against Dentsply. See id. at 251. The court also affirmed the denial of the motion for reconsideration in Hess. See id. at 252. With respect to the district court’s subsequent dismissal of the complaint in Hess, the Third Circuit stated that “[t]o the extent the Plaintiffs thought that the District Court’s denial of their summary judgment motion entitled them to pursue their claims any further, they were mistaken, as a plaintiff asserting antitrust claims does not get to a jury simply by filing a complaint and hoping for the best.” Howard Hess Dental Labs., 602 F.3d at 252 (citing Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 467–69 (1992); Town Sound & Custom Tops, Inc. v. Chrysler Motors Corp., 959 F.2d 468, 481 (3d Cir. 1992) (en banc)). In Jersey Dental, the plaintiffs alleged a conspiracy to monopolize in violation of Section 2 of the Sherman Act and a conspiracy to restrain trade in violation of Section 1. Id. at 253. The district court dismissed the four counts on various grounds, including that the plaintiffs did not sufficiently allege specific intent by the Dealers, as required for a Section 2 claim, and that the plaintiffs failed to allege the agreement element of the Section 1 and Section 2 claims. Id. The Third Circuit noted that “[t]he plaintiffs s[ought] to revive their conspiracy claims essentially by reference to their allegations that ‘every Dealer agreed to the same plan—Dealer Criterion 6’; that ‘every Dealer knew that every other Dealer agreed, or would agree, to this same plan’; and that ‘it . . . was obvious to each Dealer that—only if all of the other Dealers complied—would the purpose of Dealer Criterion 6 be achieved.’” Id. at 254. The court noted that Section 1 claims always require an agreement, and that the Section 2 claim here—conspiracy to monopolize—also required an agreement. Id. (alteration in original). The court stated that “[t]o allege such an agreement between two or more persons or entities, a plaintiff must allege facts plausibly suggesting ‘a unity of purpose or a common design and understanding, or a meeting of minds in an unlawful arrangement.’” Id. (quoting Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 771 (1984) (quotation omitted)). The court described the allegations of conspiracy: 226

The amended complaint in this case alleges a two-tiered conspiracy. First, it alleges that the defendants conspired to “maintain Dentsply’s monopoly of the manufacture of artificial teeth and/or premium artificial teeth for sale in the United States, to restrain trade for the sale of artificial teeth and/or premium artificial teeth in the United States by the implementation of an exclusive dealing arrangement, and to exclude Dentsply’s competitors from the markets for such teeth in the United States[.]” Second, it alleges that the defendants conspired “to sell such teeth to dental laboratories at anticompetitive prices determined by Dentsply and agreed to by the Dealer Defendants.” To carry out this conspiracy, Dentsply allegedly has sold teeth to the Dealers on the condition “that [the Dealers] restrict their dealings with rival manufacturers[.]” The Dealers, the Plaintiffs allege, “knew that this exclusive dealing arrangement was and is an illegal restraint of trade designed to maintain Dentsply’s monopoly.” Howard Hess Dental Labs., 602 F.3d at 254 (alterations in original) (internal citations omitted). The court “understood the Plaintiffs to allege a hybrid of both vertical and horizontal conspiracies,” which it explained is also called a “hub-and-spoke” conspiracy. Id. at 254–55. The court found the allegations of agreement insufficient: Here, even assuming the Plaintiffs have adequately identified the hub (Dentsply) as well as the spokes (the Dealers), we conclude that the amended complaint lacks any allegation of an agreement among the Dealers themselves. The amended complaint states only in a conclusory manner that all of the defendants—Dentsply and all the Dealers included—conspired and knew about the alleged plan to maintain Dentsply’s market position. The amended complaint alleges, for instance, that “Dentsply made clear to each . . . dealer that every other Dentsply dealer was . . . required to agree to the same exclusive dealing arrangement, and that every other Dentsply dealer had so agreed.” Iterations of this allegation are sprinkled throughout the amended complaint. But to survive dismissal it does not suffice to simply say that the defendants had knowledge; there must be factual allegations to plausibly suggest as much. See Twombly, 550 U.S. at 564, 127 S. Ct. 1955. There are none here. In other words, the “rim” connecting the various “spokes” is missing. Id. at 255 (omissions in original) (internal citations omitted). The court concluded that the inference suggested by the plaintiffs was not warranted, explaining: Instead of underscoring factual allegations plausibly suggesting the existence of an agreement, the Plaintiffs invite us to 227

infer that the Dealers were aware of each other’s involvement in the conspiracy because, as market participants, they all knew that Dentsply was the dominant player in the artificial tooth market and because they all had an economic incentive to create and maintain a regime in which Dentsply reigned and the Dealers did its bidding. In that regime, the Plaintiffs tell us, the Dealers would all benefit from Dentsply’s policies because they would all be able to charge dental laboratories artificially inflated prices for teeth in their various regions of operation. We do not disregard the logical appeal of this argument. Certainly, the objective of many antitrust conspiracies is to control pricing with an eye to increasing profits. But simply because each Dealer, on its own, might have been economically motivated to exert efforts to keep Dentsply’s business and charge the elevated prices Dentsply imposed does not give rise to a plausible inference of an agreement among the Dealers themselves. Cf. Twombly, 550 U.S. at 566, 127 S. Ct. 1955 (noting the “logic” of the complaint’s allegation of an agreement but finding it insufficient because it did not suggest actual joint action). Notwithstanding Twombly’s requirement that an antitrust plaintiff state “enough fact to raise a reasonable expectation that discovery will reveal evidence of illegal agreement[,]” id. at 556, 127 S. Ct. 1955 (footnote omitted), the Plaintiffs’ allegations do not offer even a gossamer inference of any degree of coordination among the Dealers. Those allegations are not “placed in a context that raises a suggestion of a preceding agreement” among the Dealers. Id. at 557, 127 S. Ct. 1955. Instead, they do no more than intimate “merely parallel conduct that could just as well be independent action.” Id. As a consequence, the Plaintiffs have fallen short of their pleading obligations. Id. at 255–56 (alteration in original) (footnote omitted). The court also rejected the plaintiffs’ alternative argument that “even if they ha[d] not alleged an overarching conspiracy between and among Dentsply and all of its Dealers, they at least ha[d] adequately alleged several bilateral, vertical conspiracies between Dentsply and the Dealers.” Id. at 256. The court explained that it did not need to decide whether the alternative theory could legally proceed: [W]e need not weigh in on the alternative theory the Plaintiffs now press, for even assuming it is legally viable or even relevant here, the Plaintiffs cannot pursue it under the circumstances of this case because the amended complaint cannot be fairly understood to allege the existence of several unconnected, bilateral, vertical conspiracies between Dentsply and each Dealer. While pleading in the alternative is, of course, authorized by the Federal Rules of Civil Procedure, see 228

FED . R. CIV . P. 8(a)(3), we have an obligation to read allegations not in isolation but as a whole and in context, see Chabal v. Reagan, 822 F.2d 349, 357 (3d Cir.1987); Pace Res., Inc. v. Shrewsbury Twp., 808 F.2d 1023, 1026 (3d Cir. 1987). As we read the amended complaint, we see no indication of the Plaintiffs’ intention to allege that every single agreement between Dentsply and each Dealer had anticompetitive effects. All throughout the amended complaint are substantially similar variations on the allegation that the “Defendants have agreed, each with all of the others, to implement an exclusive dealing arrangement[.]” Indeed, the amended complaint is rife with additional references to “the conspiracy” between “[t]he Defendants, . . . each with all of the others[.]” These allegations are just not the stuff of several mini-agreements lacking a horizontal tether. In other words, the Plaintiffs simply did not draft their amended complaint to encompass their alternative legal theory. In short, the Plaintiffs are bound by the four corners of their amended complaint, which clearly seeks to allege one conspiracy to which Dentsply and all of the Dealers, as a collective, were parties. To the extent the Plaintiffs are recasting their allegations in an effort to circumvent a motion to dismiss, we must reject that approach. See Leegin Creative Leather Prods. v. PSKS, Inc., 551 U.S. 877, 907–08, 127 S. Ct. 2705, 168 L. Ed. 2d 623 (2007); In re New Motor Vehicles Canadian Exp. Antitrust Litig., 533 F.3d 1, 5 (1st Cir. 2008). Id. at 256–57 (alterations in original) (internal citations omitted). The court concluded that “[t]he Plaintiffs ha[d] failed to allege any facts plausibly suggesting a unity of purpose, a common design and understanding, or a meeting of the minds between and among Dentsply and all of the Dealers,” and affirmed the determination that the plaintiffs had not adequately alleged an agreement. Howard Hess Dental Labs., 602 F.3d at 257. The court also affirmed the district court’s decision to dismiss the conspiracy to monopolize claims on the alternative ground that they failed to adequately allege specific intent by the Dealers. Id. at 257–58. The court noted that “[s]pecific intent in the antitrust context may be inferred from a defendant’s unlawful conduct,” but concluded that the inference was not warranted in these circumstances: Here, the Plaintiffs point us to their allegations that the defendants “have acted with the specific intent to unlawfully maintain a monopoly[,]”; that “the intended effect of th[e] exclusive dealing arrangement . . . has been the elimination of any and all competition[,]”; and that the defendants “knew that this exclusive dealing arrangement was and is an illegal restraint of trade designed to maintain Dentsply’s monopoly[,]”. In essence, the Plaintiffs allege that Dentsply’s pricing policies were unlawful, that the Dealers knew 229

as much, and that they signed on to those policies knowing full well they were unlawful. But that allegation, in its many iterations, is conclusory. There are no facts behind it, so it does not plausibly suggest knowledge of unlawfulness on the Dealers’ part. We could feasibly infer the Dealers’ specific intent to further Dentsply’s monopolistic ambitions if the Plaintiffs had stated enough factual matter to suggest some coordination among the Dealers, something to suggest that they knew that Dentsply was spearheading an effort to squash its competitors by pressing the Dealers into its service and keeping prices artificially inflated. We have already determined, however, that the Plaintiffs’ allegations that the Dealers conspired with Dentsply are deficient, so we cannot infer the Dealers’ specific intent from their mere participation in the conspiracy, as the Plaintiffs urge. In fact, the only actual conduct the Plaintiffs have alleged on the part of the Dealers is that each one of them, acting on its own, signed a bilateral dealing agreement with Dentsply. The only plausible inference from that conduct is that each Dealer sought to acquire, retain and/or increase its own business. Significantly, the antitrust laws do not prohibit such conduct. At bottom, the Plaintiffs’ allegations of specific intent rest not on facts but on conclusory statements strung together with antitrust jargon. It is an axiom of antitrust law, however, that merely saying so does not make it so for pleading-sufficiency purposes. See Twombly, 550 U.S. at 555, 127 S. Ct. 1955 (“[A] plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do[.]” (internal quotation marks, alteration and citation omitted)). Id. at 257–58 (alterations and omission in original) (internal citations and footnote omitted). The court also held that the coconspirator exception to the Illinois Brick doctrine did not apply because “the amended complaint d[id] not adequately allege that the Dealers [we]re members of a conspiracy with Dentsply.” Id. at 258–59. The court explained that “the Plaintiffs could come within Illinois Brick’s coconspirator exception only if the Dealers were precluded from asserting claims against Dentsply because their participation in the conspiracy was ‘truly complete,’” but “the amended complaint d[id] not give rise to a plausible inference that the Dealers’ involvement in the conspiracy was truly complete.” Id. at 259. Because the plaintiffs could not come within the coconspirator exception, they were “in essence . . . asserting their claims against the Dealers as mere middlemen,” which was prohibited under the relevant case law. See id. •

Mann v. Brenner, 375 F. App’x 232, No. 09-2461, 2010 WL 1220963 (3d Cir. Mar. 30, 2010) (unpublished). The plaintiff appealed the dismissal of his claims under § 1983 against the City of York, its agents, and York College. Id. at *1. The Third Circuit affirmed. Mann 230

owned a house in York that York College sought to purchase to use for student housing, but the parties could not agree on a price. Id. Mann’s home was later cited for violation of the City code and was declared “blighted” by the City. Id. The City began condemnation proceedings against Mann in the Court of Common Pleas for York County. Id. Mann stipulated to the blight determination, but argued that the City and York College had conspired to harass and intimidate him into selling his property for a reduced price. Id. The Court of Common Pleas found the taking to be proper and concluded that the City had not acted in bad faith or committed fraud by pursuing condemnation proceedings against Mann. Mann, 2010 WL 1220963, at *1. At the conclusion of the condemnation proceedings, Mann was paid $166,000 for his property. Id. Mann’s district court complaint alleged, under § 1983, that the defendants conspired to intimidate and harass him into accepting a significantly reduced price for his property. Id. Mann asserted that “‘[t]heir plan, plainly put, was to drive [me] crazy.’” Id. (alterations in original). The district court granted the defendants’ motion to dismiss, but granted leave to amend. Id. Mann filed two amended complaints, and the third version of his complaint was dismissed and the subject of the appeal. Id. On appeal, Mann argued that the district court applied the wrong standard to dismiss his complaint, erred in dismissing his complaint under that standard, and improperly stayed discovery pending ruling on the motions to dismiss. Mann, 2010 WL 1220963, a t*1. The Third Circuit held that the district court had applied the correct standard by noting that motions to dismiss are governed by Rule 12(b)(6) as interpreted in Twombly and Phillips v. County of Allegheny, 515 F.3d 224, 230 (3d Cir. 2008). Mann, 2010 WL 1220963, at *2. The court noted that “Mann fail[ed] to cite either Twombly or the ‘plausibility standard it ushered in, instead choosing to rely on the now defunct ‘no-set-of-facts’ standard of Conley v. Gibson, which the Supreme Court squarely rejected in Twombly.” Id. at *2 n.3 (internal citation omitted). The Third Circuit also rejected the argument that the district court improperly applied the standard. Mann asserted a First Amendment retaliation claim, asserting that after he defended himself in court against $2,000 in fines for code violations, one of the City defendants cited him with another $2,000 in fines in retaliation for his successful defense. Id. The court noted that “[n]owhere in Mann’s third amended complaint d[id] he allege facts that could reasonably support the necessary ‘causal link’ between his protected speech (successfully defending the initial fines) and the unlawful retaliation (an additional $2,000 fine).” Id. The court explained that “[i]nstead, Mann ma[de] vague and conclusory allegations that he was assessed some unreasonable fine for some unspecified violation, in retaliation for ‘cho[osing] to use legal process as a way to protect and extend his rights.’” Id. (third alteration in original) (citing Iqbal, 129 S. Ct. at 1950). The court held that “[t]hese allegations f[e]ll far short of what is required to put the defendants on notice of the claims and the bases for them.” Id. (citations omitted). The court affirmed dismissal of the First Amendment retaliation claim. 231

Mann also asserted a claim under the Fourth Amendment for malicious prosecution against certain of the City’s agents, alleging that they cited him with thousands of dollars in fines and brought other “‘frivolous criminal charges’” against him. Mann, 2010 WL 1220963, at *3. The Third Circuit concluded that “[e]ven though on its third iteration, Mann’s complaint wholly fails to allege that the defendants acted without probable cause in citing him for code violations,” and that “Mann did not allege that he suffered a ‘deprivation of liberty consistent with the concept of a seizure’ as a result of the criminal citation proceedings.” Id. (citation omitted). The court noted that “[t]he only deprivation Mann claims to have suffered is ‘legal fees, court costs, and interminable inconvenience,’” and explained that “[s]uch deprivations are insufficient to establish that Mann was the victim of a malicious prosecution under the Fourth Amendment.” Id. (citing DiBella v. Borough of Beachwood, 407 F.3d 599, 603 (3d Cir. 2005)). The court affirmed the dismissal of the malicious prosecution claim. Mann also asserted a substantive due process claim “based on the defendants’ unlawful agreement ‘to deprive [him] of his rights through the unlawful use of state authority as a way to coerce him into compliance with their wishes.’” Id. (alteration in original). The court concluded that the allegation that the plaintiff was unlawfully harassed into a condemnation proceeding was barred by collateral estoppel, explaining that the “record ma[de] clear that the identical issue Mann s[ought] to raise on appeal was actually litigated in the state condemnation proceeding.” Id. at *4 (footnote omitted). Finally, Mann raised a “class of one” equal protection claim, relying on “general allegations that ‘he was subjected to unequal and unauthorized mistreatment on a selective basis because of the defendant[’]s unlawful desire for his property,’ in violation of his right to equal protection.” Id. (alteration in original). The court noted that “[a]lthough [Mann] allege[d] that ‘[o]ther citizens are not treated in this fashion, particularly the political leaders of the City of York,’ Mann fail[ed] to plead that he was treated differently than other similarly situated individuals, that is, other property owners of blighted structures in the City of York.” Mann, 2010 WL 1220963, at *4 (third alteration in original) (internal record citation omitted). The court explained that “[w]hile [Village of Willowbrook v.] Olech[, 528 U.S. 562 (2000) (per curiam)] may not require plaintiffs to ‘identify in the complaint specific instances where others have been treated differently,’ the complaint [wa]s still deficient.” Id. (internal citation omitted). The court cited both a post-Twombly case and a pre-Twombly case to conclude that “[w]ithout any allegation regarding other blighted property owners, Mann simply [could not] ‘nudge [his] claims across the line from conceivable to plausible.’” Id. (third alteration in original) (citing Phillips, 515 F.3d at 234 (quoting Twombly, 550 U.S. at 570); Hill v. Borough of Kutztown, 455 F.3d 225, 239 (3d Cir. 2006) (“‘class of one’ claim failed because plaintiff, a Borough Manager, did ‘not allege the existence of similarly situated individuals—i.e., Borough Managers—who [the Mayor] treated differently than he treated [plaintiff]’”) (alterations in original)). The court found that “Mann’s bald assertions that the defendants violated his right to equal protection because ‘he was selectively and vindictively cited and prosecuted by the City in an effort to force him into cooperation with York College’ ‘amount to nothing more than a ‘formulaic recitation of the elements’ of a constitutional discrimination claim.’” Id. (quoting Iqbal, 129 S. Ct. at 1951) (citation 232

omitted). The court affirmed dismissal of the equal protection claim. With respect to Mann’s objection to the district court’s refusal to allow discovery before deciding the motions to dismiss, the Third Circuit noted that “[i]n certain circumstances it may be appropriate to stay discovery while evaluating a motion to dismiss where, if the motion is granted, discovery would be futile.” Id. at *5 (citing Iqbal, 129 S. Ct. at 1954 (“‘Because respondent’s complaint is deficient under Rule 8, he is not entitled to discovery.’”)). The court found this to be such a case, explaining that “none of Mann’s claims entitle him to relief.” Id. The court cited a case decided just before Twombly, and noted that Mann’s contention that “he could have produced ‘a litany of facts’ substantiating his claims if he had more time to conduct discovery, misses the mark.” Mann, 2010 WL 1220963, at *5 (citing Mitchell v. McNeil, 487 F.3d 374, 379 (6th Cir. 2007)) (internal citation omitted). The court cited pre-Twombly case law to explain that “[a] motion to dismiss pursuant to Rule 12(b)(6) tests the legal sufficiency of a claim, and therefore may be decided on its face without extensive factual development.” Id. (citing Neitzke v. Williams, 490 U.S. 319, 326–27 (1989) (“the purpose of Rule 12(b)(6) is to ‘streamline[ ] litigation by dispensing with needless discovery and factfinding.’”) (alteration in original); Chudasama v. Mazda Motor Corp., 123 F.3d 1353, 1367 (11th Cir. 1997) (“‘A motion to dismiss based on failure to state a claim for relief should . . . be resolved before discovery begins.’”); Rutman Wine Co. v. E. & J. Gallo Winery, 829 F.2d 729, 738 (9th Cir. 1987) (“the idea that discovery should be permitted before deciding a motion to dismiss ‘is unsupported and defies common sense [because t]he purpose of F.R. Civ. P. 12(b)(6) is to enable defendants to challenge the legal sufficiency of complaints without subjecting themselves to discovery’”) (alterations in original)). The court concluded that the district court did not abuse its discretion in staying discovery. Id. The Third Circuit also noted that the district court did not abuse its discretion in denying leave to amend, explaining that “[b]ecause Mann was permitted to [amend] twice before the present motions to dismiss were filed, . . . the District Court was well within its discretion in finding that allowing Mann a fourth bite at the apple would be futile.” Id. at *5 n.9. •

Franco-Calzada v. United States, 375 F. App’x 217, No. 09-4409, 2010 WL 1141384 (3d Cir. Mar. 25, 2010) (unpublished) (per curiam). The district court dismissed sua sponte the plaintiff’s prisoner civil rights complaint for failure to state a claim under 28 U.S.C. § 1915A(b)(1)–(2).20 Franco-Calzada, 2010 WL 1141384, at *1. The Third Circuit dismissed

20

Under 28 U.S.C. § 1915A, “[t]he court shall review, before docketing, if feasible or, in any event, as soon as practicable after docketing, a complaint in a civil action in which a prisoner seeks redress from a governmental entity or officer or employee of a governmental entity.” 28 U.S.C. § 1915A(a). Subsection (b) provides grounds for dismissal, including if the complaint “is frivolous, malicious, or fails to state a claim upon which relief may be granted; or . . . seeks monetary relief from a defendant who is immune from such relief.” Id. § 1915A(b).

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the appeal under 28 U.S.C. § 1915(e)(2)(B).21 Franco-Calzada fell from a ladder in prison and fractured two fingers. Id. He alleged that the ladder was too small for an adult and that it caused his fall and injuries. Id. He alleged, on information and belief, that at least two other inmates had fallen because of the ladder problem, and asserted that the defendants failed to inspect the ladders and rectify the problem. Id. Franco-Calzada also claimed that his medical treatment was unnecessarily delayed in deliberate indifference to his serious medical needs. Id. Specifically, he alleged that the defendants failed to send him to the emergency room on the night of his fall, that they took no x-rays until the following Monday, and that they delayed his surgery to fix the fractures for two weeks. Id. He also claimed that the plaintiffs made him purchase pain medication, after first providing it for free, and that he suffered permanent stiffness and pain in his fingers. Franco-Calzada, 2010 WL 1141384, at *1. The magistrate judge recommended dismissal, finding that “Franco-Calzada had no Bivens claim because the factual allegation of a thirteen-day delay in obtaining surgery, alone, was ‘inadequate to allege deliberate indifference on the part of any defendant.’” Id. The magistrate judge also treated the slip-and-fall allegations as a Bivens claim, and concluded that “Franco-Calzada ‘again fail[ed] to allege any facts that would permit an inference of deliberate indifference.’” Id. The district court adopted the magistrate judge’s report and dismissed the complaint. Id. The Third Circuit concluded that dismissal was appropriate, explaining: There is nothing in the Complaint’s specific allegations from which we can plausibly infer that the defendants were deliberately indifferent to Franco-Calzada’s serious medical needs or to prison conditions pertaining to the use of an allegedly unsafe ladder in his cell. The protections afforded prisoners by the Due Process Clause of the Fourteenth Amendment are not triggered by the mere negligence of prison officials. See Daniels v. Williams, 474 U.S. 327, 330–31 (1986). Likewise, Eighth Amendment liability requires “more than ordinary lack of due care for the prisoner’s interests or safety.” Whitley v. Albers, 475 U.S. 312, 319, 106 S. Ct. 1078, 89 L. Ed. 2d 251 (1986). Regarding medical mistreatment claims in particular, “[i]t is well-settled that claims of negligence or medical malpractice, without some more culpable state of mind, do not constitute ‘deliberate indifference.’” Rouse v. Plantier, 182 F.3d 192, 197 (3d Cir.1999); see also White v. Napoleon, 897 F.2d 103, 108 (3d Cir.1990) (concluding that mere medical malpractice cannot give rise to a violation of the Eighth Amendment). Only “unnecessary and 21

Section 1915 addresses proceedings in forma pauperis, and subsection (e)(2)(B) provides that a court shall dismiss the case if the action or appeal “is frivolous or malicious; . . . fails to state a claim on which relief may be granted; or . . . seeks monetary relief against a defendant who is immune from such relief.” 28 U.S.C. § 1915(e)(2)(B).

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wanton infliction of pain” or “deliberate indifference to the serious medical needs” of prisoners is sufficiently egregious to rise to the level of a constitutional violation. White, 897 F.2d at 108–09 (quoting Estelle v. Gamble, 429 U.S. 97, 103, 97 S. Ct. 285, 50 L. Ed. 2d 251 (1976)). Here, the allegations contained in the Complaint, taken as true, assert a simple negligence claim at most, and thus, do not state a claim of a constitutional violation under the Eighth Amendment. Id. at *2. The Third Circuit noted that the district court did not consider granting leave to amend, but saw no need to remand because amendment would have been futile. Id. at *3. The court explained: Here, no additional allegations would cure the defects in the Complaint as to the slip and fall claim. Moreover, the BOP’s grievance responses that Franco-Calzada attached to his Complaint, lead to the plausible inference that the medical staff treated Franco-Calzada promptly and without unnecessary delay. The medical defendants treated . . . him with first-aid and started him on antibiotics on the day he was injured. The orthopedic specialist evaluated Franco-Calzada’s injuries on January 6, 2009. After a pre-operative visit on January 12, Franco-Calzada underwent surgery on January 15, 2009. Franco-Calzada, 2010 WL 1141384, at *3. The Third Circuit affirmed dismissal. •

Donnelly v. O’Malley & Langan, PC, 370 F. App’x 347, No. 09-3910, 2010 WL 925869 (3d Cir. Mar. 16, 2010) (unpublished) (per curiam). The plaintiff appealed dismissal of his legal malpractice claim and other claims asserted against his workers compensation attorneys. The appellate court affirmed. The defendants represented the plaintiff in a workers compensation claim that ultimately settled. Id. at *1. The complaint alleged that the attorneys failed to investigate the plaintiff’s claim before settling, disclosed his letter of resignation to his employer before settlement, and improperly obtained and disclosed confidential information about him. Id. After terminating his contract with the defendants, the plaintiff filed a pro se penalty petition claiming that his employer failed to send him his settlement check at the proper time. Id. The employer then delivered the check to the plaintiff’s former attorneys, who allegedly opened it without permission and threw away the envelope. Id. “Donnelly claimed that the O’Malley defendants deliberately interfered with the penalty proceedings by destroying the envelope, which, according to him, constituted material evidence in his case,” and that “when they no longer represented him, the O’Malley defendants obtained a copy of the settlement hearing transcript and improperly discussed his case ex parte with an employment attorney, a workers compensation judge, and the employer’s lawyer.” Id. The pro se district court complaint asserted claims for invasion of privacy under state law, breach of contract, legal malpractice, and violation of state and 235

federal constitutional rights. Donnelly, 2010 WL 925869, at *1. The Third Circuit held that to the extent the plaintiff sought to pursue a claim that his privacy was violated under the Freedom of Information Act (FOIA), the court “agree[d] with the District Court that the FOIA applies only to the release of government records by the federal government, and, thus, Donnelly’s claim fail[ed] as a matter of law.” Id. at *1 n.2. The court also found that Donnelly had “no meritorious claim under the Privacy Act, which protects individuals from the misuse of identifying information contained in computer information systems that are maintained by federal agencies.” Id. (internal citation omitted). The district court dismissed the breach of contract/legal malpractice claim because the plaintiff failed to file a certificate of merit, as required by a local rule. Id. The district court also held that Donnelly failed to state an invasion of privacy claim under state law, “reject[ing] as meritless Donnelly’s claim that the O’Malley defendants invaded his privacy by obtaining information about him from the Department of Labor & Industry, which was needed in order to represent him in workers compensation proceedings, and by procuring the transcript of the workers compensation hearing, a matter of public record.” Id. “As for his claim of ex parte communications between the O’Malley defendants (whose services had been terminated) and an employment attorney, a workers compensation judge, and the employer’s lawyer, the District Court held that Donnelly’s ‘naked assertions’ were insufficient to show that any private facts had been disseminated to the public or that he was placed in a false light as a result of such communications.” Id. With respect to the federal constitutional claim, which the district court treated as a claim under § 1983, the district court held that Donnelly failed to show that the defendants “acted ‘under color of state law.’” Donnelly, 2010 WL 925869, at *2. For similar reasons, the district court dismissed the state constitutional claim, explaining that the relevant provision “‘govern[ed] only the actions of the state government.’” Id. (citation omitted). The Third Circuit held that the district court applied the appropriate standard of review to the complaint and properly dismissed the claims. However, with respect to the dismissal based on failure to submit a certificate of merit under the relevant local rule, the court found that involuntary dismissal under that rule is not a dismissal with prejudice, and modified that dismissal to be without prejudice. Id. The court saw “no need to remand the matter for amendment of the Complaint regarding Donnelly’s privacy and § 1983 claims because amendment would be futile,” explaining that “no additional allegations would cure the defects in the Complaint regarding the state action requirement under § 1983,” and that “Donnelly relie[d] on pure conjecture . . . and there [wa]s nothing in th[e] record indicating that he could have amended his Complaint to state a viable invasion of privacy claim.” Id. at *3 n.3. •

Laffey v. Plousis, 364 F. App’x 791, No. 08-1936, 2010 WL 489473 (3d Cir. Feb. 12, 2010) (unpublished). Laffey was a court security officer assigned to a United States courthouse and employed by MVM, Inc., a private company working under contract with the Marshals Service. Id. at *1. He was also president of the Security Officers, Police and Guards Union, 236

Local No. 1536, and in that capacity, opposed the transfer of another court security officer (Torriero) to the plaintiff’s courthouse. Id. Laffey alleged that after he opposed the transfer, “MVM and the Marshals Service harassed and retaliated against him.” Id. Specifically, he alleged: [H]e was told that the Deputy Chief United States Marshal for the District of New Jersey, Donald Rackley, wanted Torriero to work in Camden, blamed Laffey for blocking the transfer, and instructed Laffey’s supervisor “to do something about Officer Laffey or have something done to him.” In November 2004, Laffey allegedly was told that “things would get worse and worse until” Rackley, James Plousis (the United States Marshal for the District of New Jersey), and MVM “get you.” Laffey also alleged that James Elcik, a Marshals Service employee who liaised with MVM, told him that Rackley was “upset with him because he would not allow Torriero to transfer.” Finally, Laffey claimed that in the fall of 2004, Elcik criticized him for mishandling CSO time sheets and told him not to attend security meetings at the Camden courthouse. In January 2005, Plousis allegedly asked Elcik: “what are we going to do now” about punishing Laffey? Laffey also alleged that MVM investigated Laffey’s performance at the request of the Marshals Service in early January 2005. According to Laffey, “most” of the charges against him were “not sustained.” Laffey concludes that this campaign of retaliation resulted in his suspension without pay for over two weeks in January 2005 and his removal from the LC SO position by MVM in February 2005. Id. Based on these allegations, Laffey sued Plousis, Rackley, and Torriero in their individual capacities under Bivens, alleging violations of his First Amendment rights to freedom of speech and freedom of association. Id. at *2. The district court granted the defendants’ motion to dismiss, “finding that Laffey’s complaint failed to allege that Plousis, Rackley, Torriero, or any Marshals Service employee either was directly involved in Laffey’s suspension and demotion or had the ability to control or influence disciplinary actions taken by MVM,” and also denied Laffey’s motion to amend the complaint. Laffey, 2010 WL 489473, at *2. The Third Circuit noted that “Laffey did not allege any specific facts which identif[ied] any employee of the Marshals Service who was directly involved in Laffey’s demotion or suspension,” and that he also did not “allege that Plousis, Rackley, or Elcik were able to intervene in MVM’s internal disciplinary proceedings.” Id. The court noted that under Iqbal, vicarious liability was inapplicable in Bivens actions, and that “‘a plaintiff must plead that each Government-official defendant, through the official’s own individual actions, has violated the Constitution.’” Id. (quoting Iqbal, 129 S. Ct. at 1948). The court found that “the 237

complaint did not allege that the individual defendants were personally and directly involved in any retaliatory employment actions taken against Laffey, as Iqbal requires.” Id. (citing Iqbal, 129 S. Ct. at 1948). The court noted that under Iqbal, allegations that are merely consistent with unlawful conduct are not sufficient: Laffey did allege that Plousis and Rackley were displeased with his opposition to Torriero’s transfer request and that they told Laffey’s supervisor to “do something” to or about Laffey. He also alleged that Elcik criticized his handling of CSO time sheets and prevented him from attending courthouse security meetings. Such allegations are consistent with a conclusion that Plousis, Rackley, and Elcik sought to retaliate against Laffey. But Iqbal makes clear that allegations that are “merely consistent with” liability are insufficient to “state a claim for relief that is plausible on its face” in a Bivens action. Id. at 1949 (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 557 (2007)). Under this standard, Laffey’s complaint is deficient because it fails to allege specific facts suggesting that Plousis, Rackley, and Elcik actually did—or even could—personally intervene to cause MVM to discipline Laffey in violation of his First Amendment rights. Id. at *3. The Third Circuit declined to accept Laffey’s suggestion that the court adopt an approach used by several other circuits in the § 1983 context, in which “one can be held liable for a constitutional violation by ‘setting in motion’ certain events which he knows or should know will result in a constitutional violation.” Id. The court was “hesitant to adopt this standard following Iqbal, a Bivens action in which the Supreme Court emphasized ‘a plaintiff must plead that each Government-official defendant, through the official’s own individual actions, has violated the Constitution.’” Laffey, 2010 WL 489473, at *2 (quoting Iqbal, 129 S. Ct. at 1948). The court noted that “although Laffey argues that Plousis, Rackley, and Elcik ‘pressured’ MVM into disciplining him, his complaint alleges insufficient facts to support such an inference.” Id. Laffey sought leave to amend his complaint to allege that he was denied a promotion in retaliation for his opposition to Torriero’s transfer, and to add Elcik, a Marshals Service employee, as a defendant. Id. at *4. The Third Circuit held that the district court’s denial of leave to amend was not an abuse of discretion because “Laffey failed to allege sufficient facts to show that Elcik or any other Marshals Service employee was directly involved in MVM’s decision to discipline him[,] . . . [making] any amendment adding Elcik as a defendant or alleging that MVM denied Laffey a promotion . . . futile.” Id. •

Boring v. Google Inc., 362 F. App’x 273, No. 09-2350, 2010 WL 318281 (3d Cir. Jan. 28, 2010) (unpublished), cert. denied, 131 S. Ct. 150 (2010). The complaint was originally 238

brought in state court and asserted claims against Google for invasion of privacy, trespass, injunctive relief, negligence, and conversion. Id. at *1. The claims arose from Google’s “Street View” program, which “offers free access on the Internet to panoramic, navigable views of streets in and around major cities across the United States.” Id. “To create the Street View program, representatives of Google attach panoramic digital cameras to passenger cars and drive around cities photographing the areas along the street.” Id. The complaint alleged that Google had taken, without permission, colored photographs of the plaintiffs’ residence, including the pool, from a vehicle in their driveway. Id. The Borings alleged that their road is marked as “Private Road, No Trespassing,” and that Google invaded their privacy by driving on the road to take photographs and by making them available to the public. Id. The case was removed to federal court, the Borings amended their complaint to substitute an unjust enrichment claim for the conversion claim, and the district court dismissed all of the claims. Boring, 2010 WL 318281, at *1. With respect to the invasion of privacy claim, the district court found that “the Borings were unable to show that Google’s conduct was highly offensive to a person of ordinary sensibilities.” Id. The district court dismissed the negligence claim, finding that Google did not owe a duty to the Borings. Id. The district court dismissed the trespass claim because “‘the Borings ha[d] not alleged facts sufficient to establish that they suffered any damages caused by the alleged trespass.’” Id. The district court dismissed the unjust enrichment claim because the parties had no contractual relationship and the Borings did not confer anything of value on Google. Id. Finally, the district court “held that the Borings had failed to plead a plausible claim for injunctive relief under Pennsylvania’s ‘demanding’ standard for a mandatory injunction, and dismissed the punitive damages claim because the Borings failed to ‘allege facts sufficient to support the contention that Google engaged in outrageous conduct.’” Id. The district court found that amendment would be futile. Boring, 2010 WL 318281, at *1. On reconsideration, the court clarified its holding on the trespass claim, stating that “it had dismissed the trespass claim because the Borings had ‘failed to allege facts sufficient to support a plausible claim that they suffered any damage as a result of the trespass’ and because they failed to request nominal damages in their complaint.” Id. at *2. On appeal, the court explained that while Pennsylvania state law recognizes four invasion of privacy torts, the two relevant torts were “unreasonable intrusion upon the seclusion of another” and “unreasonable publicity given to another’s private life.” Id. at *3. The court cited a pre-Twombly state court case to note that an intrusion upon seclusion claim requires pleading certain facts: “To state a claim for intrusion upon seclusion, plaintiffs must allege conduct demonstrating ‘an intentional intrusion upon the seclusion of their private concerns which was substantial and highly offensive to a reasonable person, and aver sufficient facts to establish that the information disclosed would have caused mental suffering, shame or humiliation to a person of ordinary sensibilities.’” Id. (quoting Pro Golf Mfg., Inc. v. Tribune Review Newspaper Co., 809 A.2d 243, 247 (Pa. 2002)). The court concluded that “[n]o person of ordinary sensibilities would be shamed, humiliated, or have suffered mentally as a result of a vehicle entering into his or her ungated driveway and photographing the view 239

from there.” Id. The court explained: Indeed, the privacy allegedly intruded upon was the external view of the Borings’ house, garage, and pool—a view that would be seen by any person who entered onto their driveway, including a visitor or a delivery man. Thus, what really seems to be at the heart of the complaint is not Google’s fleeting presence in the driveway, but the photographic image captured at that time. The existence of that image, though, does not in itself rise to the level of an intrusion that could reasonably be called highly offensive. Id. (footnote omitted). The court found it significant that the Borings did not allege that they were viewed inside their home. Boring, 2010 WL 813281, at *4. The court cited a preTwombly case to note that “[c]ourts do in fact, decide the ‘highly offensive’ issue as a matter of law at the pleading stage when appropriate.” Id. The appellate court also rejected the Borings’ challenge to the district court’s expression of skepticism “about whether the Borings were actually offended by Google’s conduct in light of the Borings’ public filing of the present lawsuit,” noting that the district court’s comments were made after it had already concluded that Google’s conduct would not be highly offensive to a person of ordinary sensibilities and that the district court had properly applied an objective standard in determining whether the conduct was highly offensive. Id. The court concluded that the intrusion on seclusion claim failed as a matter of law. Id. With respect to the claim based on publicity given to private life, the Third Circuit agreed that “the Borings ha[d] failed to allege facts sufficient to establish the third element of a publicity to private life claim, i.e., that the publicity would be highly offensive to a reasonable person,” and concluded that “accepting the Borings’ allegations as true, their claim for publicity given to private life would not be highly offensive to a person of ordinary sensibilities.” Id. at *4–5. The Third Circuit concluded that the district court had erred in making damages an element of the trespass claim, although the district court claimed not to have done so. Id. at *5. The court found that “the Borings ha[d] alleged that Google entered upon their property without permission” and noted that “[i]f proven, that is a trespass, pure and simple.” Boring, 2010 WL 318281, at *5. The court concluded: “[I]t may well be that, when it comes to proving damages from the alleged trespass, the Borings are left to collect one dollar and whatever sense of vindication that may bring, but that is for another day. For now, it is enough to note that they ‘bear the burden of proving that the trespass was the legal cause, i.e., a substantial factor in bringing about actual harm or damage’ if they want more than a dollar.” Id. (internal citation and footnote omitted). The Third Circuit agreed that “the facts alleged by the Borings provide[d] no basis for an unjust enrichment claim against Google,” and explained: The complaint not only fails to allege a void or unconsummated contract, it does not allege any benefit conferred upon Google by the 240

Borings, let alone a benefit for which the Borings could reasonably expect to be compensated. The complaint alleges that Google committed various torts when it took photographs of the Borings’ property without their consent. The complaint does not allege, however, that the Borings gave or that Google took anything that would enrich Google at the Borings’ expense. An unjust enrichment “claim makes sense in cases involving a contract or a quasi-contract, but not, as here, where plaintiffs are claiming damages for torts committed against them by [the] defendant[ ].” Id. at *6 (alterations in original) (citation and footnote omitted). The court also affirmed the dismissal of the request for injunctive relief, stating: The District Court held that the complaint failed to set out facts supporting a plausible claim of entitlement to injunctive relief. We agree that the Borings have not alleged any claim warranting injunctive relief. The complaint claims nothing more than a single, brief entry by Google onto the Borings’ property. Importantly, the Borings do not allege any facts to suggest injury resulting from Google’s retention of the photographs at issue, which is unsurprising since we are told that the allegedly offending images have long since been removed from the Street View program. Id. at *7. Finally, the court affirmed dismissal of the request for punitive damages, explaining: The Borings’ complaint fails to allege conduct that is outrageous or malicious. There is no allegation that Google intentionally sent its driver onto their property or that Google was even aware that its driver had entered onto the property. Moreover, there are no facts suggesting that Google acted maliciously or recklessly or that Google intentionally disregarded the Borings’ rights. Id. The court rejected the argument that punitive damages must always be determined by a jury after discovery, and noted that “under the pleading standards we are bound to apply, there is simply no foundation in this complaint for a demand for punitive damages.” Id. (citing Iqbal, 129 S. Ct. at 1950; Twombly, 550 U.S. at 556). The court affirmed dismissal of the claims for invasion of privacy, unjust enrichment, injunctive relief, and punitive damages; reversed the dismissal of the trespass claim; and remanded to allow the trespass claim to proceed. Id.

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Arango v. Winstead, 352 F. App’x 664, No. 09-3506, 2009 WL 3863335 (3d Cir. Nov. 19, 2009) (unpublished) (per curiam), cert. denied, No. 09-9772, 130 S. Ct. 3331, 2010 WL 1180647 (May 24, 2010). A state prisoner, proceeding pro se, filed a civil rights action against the prison’s superintendent, alleging that the plaintiff’s civil rights were violated when prison officials wrongly accused her of sexual harassment, failed to follow proper procedures in investigating, punished her with a 30-day cell restriction, and removed her from participating in a Sex Offender Program for six months. Id. at *1. The district court dismissed the complaint, finding that it was not cognizable under section § 1983 because the “favorable termination rule” provided that “a § 1983 plaintiff cannot seek damages for harm caused by actions that implicate the validity of the fact or length of her confinement, unless she can prove that the sanction has been reversed, invalidated, or called into question by a grant of federal habeas corpus relief.” Id. “[C]laims that relate only to the conditions, and not the fact or duration, of incarceration are not subject to the favorable termination rule.” Id. (citations omitted). The Third Circuit concluded that the district court had erred in applying the favorable termination rule because the challenged actions did not alter the length of the plaintiff’s incarceration. Id. at *2. But the court affirmed on another ground, finding that the complaint did not state a claim for relief. The court explained: The Supreme Court has recognized that “[a]s long as the conditions or degree of confinement to which the prisoner is subjected is within the sentence imposed upon him and is not otherwise violative of the Constitution, the Due Process Clause does not in itself subject an inmate’s treatment by prison authorities to judicial oversight.” Asquith v. Dep’t of Corr., 186 F.3d 407, 410 (3d Cir. 1999) (quoting Hewitt v. Helms, 459 U.S. 460, 468 (1983)). Due process applies only where the conditions of confinement impose “atypical and significant hardship[s] on the inmate in relation to the ordinary incidents of prison life.” Sandin v. Connor, 515 U.S. 472, 484 (1995). Placement in administrative segregation for days or months at a time or transfers to more restrictive custody do not implicate a protected liberty interest. See Torres, 292 F.3d at 150; Fraise v. Terhune, 283 F.3d 506, 522–23 (3d Cir. 2002). Nor does removal from a prison program, as restriction from participation in prison programs is among the conditions of confinement that an inmate may reasonably anticipate during her incarceration. See James v. Quinlan, 866 F.2d 627, 629 (3d Cir. 1989). Therefore, Arango’s complaint, alleging that she was removed from a program and placed in thirty days restrictive housing, did not state a plausible violation of a protected liberty interest.22 Id. (alterations in original).

22

Although the court concluded that the complaint did not state a “plausible” claim, it appeared to base its decision on the fact that the law did not provide for the relief requested, not based on a lack of plausible facts.

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United States ex rel. Lobel v. Express Scripts, Inc., 351 F. App’x 778, No. 09-1047, 2009 WL 3748805 (3d Cir. Nov. 10, 2009) (unpublished). The plaintiff, a former employee of the defendant pharmacy benefit manager, claimed that the defendant had falsely certified its compliance with a regulation governing filling prescriptions. Id. at *1. The district court dismissed under Rule 12(b)(6), and the Third Circuit affirmed. The Third Circuit explained that to state a claim under the False Claims Act, the plaintiff “must allege that: (1) defendant violated the regulation; (2) defendant certified its compliance with the regulation to a federal payor in spite of its violation of the regulation; and (3) defendant’s certification of compliance was a condition of payment.” Id. (citation omitted). The express certification claim failed because the complaint did not “identify a single claim submitted by ESI in which it represented falsely to the Government that it complied with regulations that affect its eligibility for payment.” Id. The court noted that the case law clearly did not provide a cause of action without such an identification. See id. The district court also found that the implied certification claim failed, noting that the plaintiff relied on Conley, which had been overruled by Twombly. Id. The court concluded: “Lobel’s failure even to cite Twombly and Iqbal in either of his two briefs is a telling omission. When Lobel’s amended complaint is analyzed under the more exacting standard established by those cases, it falls well short.” Id. The court explained that of the seven paragraphs that the plaintiff relied upon to state a claim, two merely quoted the False Claims Act; four “allege[d] in a conclusory fashion that [the defendant] violated the False Claims Act by submitting claims for prescriptions filled in violation of § 1306.05,” and therefore were not presumed to be true under Iqbal, and the one alleging materiality was “a legal conclusion which the District Court was not obliged to accept as true.” Lobel, 2009 WL 3748805, at *2 (citing Iqbal, 129 S. Ct. at 1949). The court also found the allegations legally deficient, noting that “[i]n addition to these factual deficiencies, . . . we agree with [the defendant] that the violation of § 1306.05 Lobel alleges cannot, as a matter of law, give rise to liability under the False Claims Act because compliance with the regulation is not a ‘condition of payment.’” Id. (citation omitted).



Twillie v. Ohio, 351 F. App’x 596, No. 09-3182, 2009 WL 3683782 (3d Cir. Nov. 6, 2009) (unpublished) (per curiam). The pro se complaint against various FBI field offices “alluded generally to ‘retaliation tactics’ and ‘harassment.’” Id. at *1. The claims arose out of “circumstances that precipitated [the plaintiff’s] arrest for indecent assault in Pennsylvania, his sentence for the crime, his decision to go to California after his sentencing, and his subsequent arrest and extradition in Pennsylvania.” Id. The district court construed the complaint as seeking relief under Bivens for harassment and retaliation against the FBI, and dismissed because a Bivens claim cannot be maintained against a federal agency. Id. The district court denied leave to amend, finding that any amendment to state a Bivens claim would be futile. Id. On appeal, the Third Circuit found that the district court had “explicitly and obviously construed Twillie’s claims liberally, affording him the allowances due a pro se litigant,” and then found, “[s]imilarly construing the complaint liberally,” that “Twillie presented claims against a federal agency, not against individual officers or agents of a federal agency,” and that such claims could not “be raised under Bivens.” Id. at *2 (citation omitted). Although the court found the allegations legally insufficient, it also noted that an alternative basis for affirming the district court was that the claims were not plausible. See 243

Twillie, 2009 WL 3683782, at *2. The court concluded that the “allegations, rife with suppositions (he even uses the word ‘guess’ in presenting one aspect of his claim) and lacking in specificity, are simply not plausible.” Id. The court held that “[t]he facts he plead[ed], even construed liberally, d[id] not allow [the court] to infer more than the mere possibility of misconduct, which d[id] not show [the court] that he [wa]s entitled to relief.” Id. (citing Iqbal, 129 S. Ct. at 1950). The Third Circuit also affirmed the denial of leave to amend, finding that the FBI could not be sued under Bivens and that “it [wa]s not apparent how Twillie could transform his implausible claims into plausible claims.” Id. The court concluded that “[t]o the extent that Twillie makes us aware, through his informal brief, of claims that he would have wanted to present in an amendment, we note that those claims are similarly speculative and implausible.” Id. •

Shahin v. Darling, 350 F. App’x 605, No. 09-3298, 2009 WL 3471297 (3d Cir. Oct. 29, 2009) (unpublished) (per curiam), petition for cert. filed, (Mar. 31, 2010) (No. 09-10032). The pro se complaint asserted claims against nine Delaware judges, two law firms, and two court reporters, and sought damages for alleged violations of the plaintiff’s federal and constitutional rights. Id. at *1. The plaintiff alleged that in connection with three lawsuits she had filed in Delaware state court, the “defendants engaged in coercion, criminal conspiracy, retaliation, and witness tampering, resulting in rulings against Shahin in all three actions.” Id. (footnote omitted). The district court dismissed the complaint and denied leave to amend. The Third Circuit affirmed. With respect to the judges, the court found that they were absolutely immune from suits for monetary damages, absent allegations of bad faith or malice, and “there [we]re no facts in the complaint to support inferences that any of the named judges acted outside the scope of his or her judicial capacity or in the absence of jurisdiction.” Id. (citing Mireles v. Waco, 502 U.S. 9, 11 (1991)). The claims against the law firms and the court reporters failed because the “complaint fail[ed] to allege any facts to support [the plaintiff’s] federal or constitutional claims.” Id. The court explained: Shahin alleges that during the state proceedings, one lawyer was substituted for another lawyer, a lawyer filed a motion without affording her proper notice, and a lawyer engaged in ex parte communications with the presiding judge. Even taking the allegations as true, the complaint does not contain any facts that would allow one to reasonably infer that the defendants violated federal or constitutional law. Shahin’s conclusory allegations are insufficient to plausibly demonstrate that any of the defendants violated Shahin’s civil or constitutional rights. See Iqbal, 129 S. Ct. at 1949. Id. (footnote omitted). The Third Circuit agreed that amendment would have been futile, “[g]iven that . . . there [we]re no facts to infer that any of the defendants violated Shahin’s federal or constitutional rights . . . .” Id. at *2.



Merritt v. Fogel, 349 F. App’x 742, No 08-3622, 2009 WL 3383257 (3d Cir. Oct. 22, 2009) 244

(unpublished) (per curiam). The plaintiff, a Pennsylvania state prisoner serving a life sentence, filed a pro se lawsuit against medical professionals and Department of Corrections employees under § 1983, asserting that the defendants were deliberately indifferent to the plaintiff’s medical needs, in violation of the Eighth Amendment, and asserting a state law claim for medical malpractice. Id. at *1. The complaint alleged that the plaintiff had Hepatitis C and had been repeatedly refused treatment. Id. The magistrate judge recommended that the Eighth Amendment claim be dismissed for failure to state a claim, that the state law claim be dismissed for failure to comply with a state certificate of merit requirement, and that the motions to amend be denied. Id. at *2. The district court accepted these recommendations. Id. The Third Circuit first noted that the district court had improperly dismissed the complaint because it should have construed the plaintiff’s initial motion for leave to amend as an amended complaint, given that the plaintiff was entitled to file his first amended complaint as of right, and that the amended complaint would have rendered the defendants’ motions to dismiss moot. Id. Despite this procedural error, the Third Circuit considered the merits, and also found that the district court had improperly dismissed on that basis. Merritt, 2009 WL 3383257, at *3. With respect to the Eighth Amendment claim, the district court had found that the allegations of deliberate indifference were inadequate. “Deliberate indifference . . . requires more than mere malpractice or disagreement with a particular course of treatment,” and “the Magistrate Judge reasoned that Merritt’s allegations show[ed] that he merely disagree[d] with defendants’ medical judgment and insist[ed] on the treatment of his choice.” Id. But the Third Circuit explained that the plaintiff had alleged much more: If that were all that Merritt alleged, then the Magistrate Judge would be right. Merritt, however, makes many other specific factual allegations that the Magistrate Judge did not discuss and that, taken as true as they must be at this stage, raise an inference of deliberate indifference. For example, Merritt alleges that one of defendants’ own specialists recommended him for treatment as long ago as 1996 but that defendants fraudulently concealed that information from him until he finally filed suit. He also alleges that he is within the protocol for treatment, though various defendants have falsely told him otherwise. Thus, as Merritt argues, he claims to seek, not merely the treatment of his own choice, but treatment that has been recommended by a specialist and that is called for by the Department of Corrections protocol. Moreover, his allegations permit the inference that defendants may have nonmedical reasons for refusing to provide this treatment. For example, he alleges that defendant Falor told him both that medical staff merely “shrug their shoulders, indicating nothing” when the subject of HCV treatment arises at staff meetings and that Merritt would not receive treatment though his liver numbers were “all out 245

of wack” and that he should instead “pray.” He also alleges that he overheard a physician’s assistant admit to having shredded his sick call requests. Finally, he alleges that has been denied treatment for at least five different reasons over the years, most of which he alleges were fabricated. Taken together, and in light of Merritt’s pro se status, we believe that these specific factual allegations permit the inference that at least some defendants have acted with deliberate indifference to Merritt’s medical needs. Thus, for pleading purposes, Merritt’s factual allegations have “‘nudged his claim . . . across the line from conceivable to plausible.’” Iqbal, 129 S. Ct. at 1951 (quoting Twombly, 550 U.S. at 570). For that reason, the District Court should not have dismissed Merritt’s complaint without leave to amend and should not have denied his motions for leave to amend as futile. Accordingly, we will vacate the dismissal of Merritt’s complaint and remand with an instruction to allow him to file an amended complaint. Id. at *3–4 (footnote omitted). •

Lawson v. Nat’l Continental-Progressive Ins. Co., 347 F. App’x 741, No. 09-2239, 2009 WL 3182930 (3d Cir. Oct. 6, 2009) (unpublished) (per curiam). After the plaintiff’s state court suit alleging that the defendant had wrongfully terminated an insurance policy held by the plaintiff’s bus company was dismissed, the plaintiff filed a pro se complaint against the same defendant insurance company in federal court. Id. at *1. The federal complaint alleged the same breach of contract claim brought in state court, and asserted claims under the First, Fourth, Eighth, and Fourteenth Amendments, as well as violations of 42 U.S.C. § 1881, 1855, 1982, 1986, and 1988. Id. The district court dismissed the complaint on the defendant’s motion, finding that the complaint failed to allege any facts to support the federal and constitutional claims, and that the breach of contract claim was barred by res judicata. Id. The Third Circuit agreed that the federal and constitutional claims lacked factual support: We agree with the District Court that Lawson’s complaint fails to allege any facts to support his federal or constitutional claims. While Lawson alleges that National Insurance denied Nate’s Transportation insurance coverage and added a premium without reason, the complaint does not contain any facts that would allow one to reasonably infer that its actions violated federal or constitutional law. Lawson’s conclusory allegations are insufficient to plausibly demonstrate that National Insurance violated Lawson’s civil or constitutional rights. Id. at *2. The appellate court also agreed that the breach of contract claim was barred by res 246

judicata. Id. The Third Circuit concluded that leave to amend would be futile, “[g]iven that . . . Lawson previously litigated th[e] breach of contract claim in New Jersey Superior Court and there [we]re no facts to infer that National Insurance violated his federal or constitutional rights . . . .” Lawson, 2009 WL 3182930, at *2. •

Bates v. Paul Kimball Hosp., 346 F. App’x 883 (3d Cir. 2009) (unpublished) (per curiam). The plaintiff filed suit against Monmouth Ocean Hospital Services Corp. (“Monoc”), the Jackson Township Police Department (“Jackson Township”), the State of New Jersey (“the State”), Kimball Medical Center (“Kimball”), and St. Barnabas Health Care System (“St. Barnabas”), alleging that he was deprived of constitutional rights through his involuntary civil commitment. Id. at 884. The complaint specified that “‘nine Jackson Township police cars along with one civilian car with a social worker’ arrived at his residence and requested that he come with them to Kimball”; “he was taken from his house ‘against [his] will,’”; “he was detained for eight days at both Kimball and St. Barnabas”; and “he was ‘forced to take medication, being told all alone [sic], if you resist we will write you up as uncooperative and you will be here longer.’” Id. (alterations in original). The district court dismissed all of the claims, either through dismissal on the pleadings or through summary judgment, finding that the defendants were immune from liability and that Bates failed to allege bad faith on the part of the defendants and failed to assert any theory of liability against the State. Id. The appellate court determined that the district court erred by finding the defendants immune from suit, and evaluated the merits of the claims. With respect to Monoc, the Third Circuit found “[m]ost persuasive . . . Monoc’s indication that it is never specifically mentioned outside the caption of Bates’ amended complaint.” Id. at 886. The complaint “refer[red] to Monoc only by implication in describing his transport from one medical facility to the next, and in complaining that he was unjustly ‘billed for the ambulance service which delivered [the plaintiff] from Kimball Hospital to St. Barnabas.” Id. The court found that the allegations “fail[ed] to state a claim of a constitutional violation that is plausible on its face as against Monoc” because the complaint was “devoid of factual allegations concerning Monoc that would support a claim under § 1983.” Bates, 346 F. App’x at 886 (citing Iqbal, 12 S. Ct. at 1949, 1950). With respect to the claims against Jackson Township, the court found the pleadings insufficient to survive summary judgment, noting that “[w]hile a municipality may be liable for establishing a policy or custom that results in a constitutional violation, the allegations in Bates’ amended complaint do not even imply the existence of such a policy or custom in Jackson Township.” Id. Bates also “failed to show the existence of a genuine issue of material fact or that he was entitled to judg[]ment as a matter of law.” Id. With respect to the claims against the State, the court held that the claims should have been dismissed because the district court lacked jurisdiction over them based on the Eleventh Amendment. Id. at 886–87. With respect to the claims against the Kimball and Barnabas, the court held that “[t]he 247

allegations in Bates’ amended complaint [we]re wholly insufficient to carry his burden of demonstrating that the Medical Facilities acted under color of state law [as required to state a claim under § 1983] in conjunction with his involuntary confinement . . . .” Id. at 887. •

Gelman v. State Farm Mutual Auto. Ins. Co., 583 F.3d 187 (3d Cir. 2009). The plaintiff’s putative class action complaint alleged that the defendant violated the Fair Credit Reporting Act (FCRA) by obtaining a copy of the plaintiff’s credit report from a credit reporting agency and using it to select the plaintiff to receive materials regarding insurance products that the plaintiff might want. Id. at 188–89. The plaintiff “contend[ed] that the State Farm mailing [wa]s nothing more than promotional material soliciting him to contact State Farm regarding its various insurance products and that it [wa]s therefore not the kind of firm offer of insurance that would legitimize State Farm’s access to his credit report under federal law.” Id. at 189. The district court dismissed the complaint, holding that “Gelman failed to state a claim for his false pretenses and permissible purpose claims because State Farm’s mailer constituted an offer of insurance under the FCRA, and that was a ‘permissible purpose’ for disclosing Gelman’s credit report.” Id. at 190. The Third Circuit agreed that the false pretenses and permissible purpose claims failed, rejecting the plaintiff’s argument that the mailer did not have any value to him and therefore did not constitute a firm offer of insurance. Id. at 193–94. Besides the fact that the plaintiff did not “explain what ‘value’ the mailer should have provided him,” the court found that the statute did “not mention ‘value,’ or anything akin to it.” Gelman, 583 F.3d at 194. The court also explained that “even assuming arguendo that Congress intended to limit a firm offer to one that has value pursuant to the analysis in [another case], Gelman’s argument would still be undermined by subsequent decisions limiting the reach of [that other case] to circumstances that do not exist here.” Id. The court noted that the statute defined a “firm offer” as “‘any offer of . . . insurance to a consumer that will be honored if the consumer is determined, based on information in a consumer report, to meet the specific criteria used to select the consumer for the offer.’” Id. at 195 (quoting 15 U.S.C. § 1681a(l)). “The mailer . . . stated that the offer of insurance contained therein would be honored if Gelman met certain criteria.” Id. The court noted that “Gelman did not allege that he responded to State Farm’s mailing and was denied insurance even though he satisfied the pre-screening criteria,” noting that “[t]hat would present a very different scenario that we need not now consider.” Id. The Third Circuit affirmed the district court’s dismissal.23 Id. at 196.



Cann v. Hayman, 346 F. App’x 822, No. 08-3032, 2009 WL 3115752 (3d Cir. Sept. 30, 2009) (unpublished) (per curiam), cert. denied, 130 S. Ct. 2411 (2010). A state prison inmate filed a pro se lawsuit against several prison officials under § 1983, alleging violations of his civil rights, including First Amendment retaliation, Fourth Amendment unreasonable search, Eighth Amendment cruel and unusual punishment, and Fourteenth Amendment due

23

Although the Third Circuit cited Iqbal in its discussion of the standard of review for motions to dismiss, the dismissal appeared to be on the grounds that the law provided no relief for the asserted claims, not that the factual allegations were implausible. The court did not cite Iqbal in the “discussion” portion of its opinion.

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process/equal protection claims. Id. at *2. The district court dismissed the complaint for failure to state a claim; the Third Circuit affirmed and found that granting leave to amend would be futile. The plaintiff alleged that he had filed a grievance in which he accused prison officials of tampering with his inmate account. Id. at *1. The plaintiff further alleged that nearly two months after the grievance was filed, he set off a metal detector three times and then refused to comply with an officer’s order regarding another search method. Id. Based on this refusal, the plaintiff was placed in a special cell and subjected to additional searches, but none of these measures resulted in finding contraband. Id. The plaintiff was charged with disciplinary infractions for failure to comply with the officer’s order. In reviewing the complaint, the Third Circuit noted that pro se pleadings are liberally construed. Id. at *2 (citing Erickson v. Pardus, 551 U.S. 89 (2007)). The court found that the complaint “lack[ed] facial plausibility because the complained-of actions by the prison officials were not improper, let alone unconstitutional, given Cann’s ‘triple-triggering’ of the metal detector in the yard and his subsequent refusal to comply with Martain’s order . . . .” Cann, 2009 WL 3115752, at *2 (internal citation to Iqbal, 129 S. Ct. at 1949, omitted). The court held that “[t]he responsive actions take[n] by prison officials were rationally related to legitimate penological interests and goals,” and concluded that the district court had appropriately dismissed the complaint. Id. •

Miles v. Twp. of Barnegat, 343 F. App’x 841, No. 08-1387, 2009 WL 2840733 (3d Cir. Sept. 4, 2009) (unpublished) (per curiam). The plaintiffs, siblings who inherited six contiguous properties in the Township of Barnegat, alleged that the Township created public rights of way on their property, approved plans for water drainage from adjacent properties, and granted easements to private development corporations for water drainage on their property. Id. at *1. The overflow from detention basins allegedly flooded the plaintiffs’ property, creating a wetland, and the county’s underground storm tunnels allegedly contributed to the flooding. Id. The plaintiffs also alleged that neighboring landowners improperly encroached on their property and granted easements to the property; that cable and electric companies placed utility lines, cables, and telephone wires on their property without consent; that the surveyor defendants omitted or misstated information to diminish the plaintiffs’ property value; and that the engineering defendants encroached on their property by placing detention basins too close to the boundary, causing water runoff to flood their land. Id. The plaintiffs filed suit under § 1983, alleging violations of their Fifth Amendment rights under the Takings Clause, violations of procedural due process, and a § 1983 conspiracy to encroach on and diminish the property. Id. The plaintiffs also alleged that the Township fraudulently changed the boundaries of their property on Township maps. Id. The district court dismissed the takings claims for lack of jurisdiction because they were unripe; dismissed the procedural due process claims because New Jersey provided a judicial mechanism for challenging the Township’s decision to build a road on their property; and dismissed the remainder of the § 1983 claims for failure to state a plausible claim of state action by private party defendants. The district court declined to exercise jurisdiction over the pendant state law claims. Miles, 2009 WL 2840733, at *2. The Third Circuit affirmed. After describing the pleading standards in Twombly and Iqbal, the Third Circuit concluded 249

that the district court had properly dismissed the procedural due process claims because “[v]iewing the allegations as true, the factual matter f[ell] far short of permitting [the court] to infer a plausible connection among the private party defendants and a governmental agency or official such that their private actions would constitute ‘state action.’” Id. at *3 (citations omitted). “[T]he single-sentence conclusory allegations of a conspiracy contained in the Amended Complaint [we]re insufficient to allege a plausible conspiracy among the defendants to deprive the Plaintiffs of their constitutional rights under § 1983.” Id. (citing Iqbal, 129 S. Ct. at 1949; Kost v. Kozakiewicz, 1 F.3d 176, 185 (3d Cir. 1993)). •

McTernan v. City of York, 577 F.3d 521 (3d Cir. 2009). The complaint alleged that the plaintiffs have devout religious beliefs, including a belief that their religion requires them to share their beliefs with others, and that based on these beliefs, they protested against abortions outside a Planned Parenthood facility (the “Facility”). Id. at 524. The Facility was next to a public sidewalk and had a ramp leading to its front entrance that ran parallel to the sidewalk. Id. The plaintiffs alleged that a survey they conducted showed that 2.9 feet of this ramp were constructed on the public right of way. Id. The plaintiffs also alleged that they contacted the Commissioner of the city police department to request that the encroaching portion of the ramp be removed. Id. Because the ramp and a banner allegedly encroached on the public right of way, the plaintiffs asked a city policy officer if they could go on the ramp to communicate with clients entering the Facility. Id. The officer refused and stated that he would arrest the plaintiffs if they entered the ramp. McTernan, 577 F.3d at 524. The plaintiffs sued the officer, the commissioner of the police department, and the city, claiming violations of their rights to free exercise of religion, peaceful assembly, and freedom of speech. Id. The defendants moved to dismiss, relying on regulations under the ADA that placed certain restrictions on the ramp at issue. Id. at 524–25. The district court denied the plaintiffs’ request for a preliminary injunction, and dismissed the complaint based on finding that the ramp was a nonpublic forum and that plaintiffs had not suffered any constitutional injury. Id. at 525–26. The Third Circuit affirmed. The Third Circuit rejected the plaintiffs’ argument that the district court was required to accept as true the statement in the complaint that the ramp was a public forum. Id. at 531. Relying on Iqbal, the court found that this statement was a legal conclusion that did not need to be accepted as true. Id. The finding that the ramp was nonpublic was supported by attachments to the complaint that depicted the ramp and its overlap with the public sidewalk. McTernan, 577 F.3d at 531. The court concluded that “[i]f Plaintiffs were not excluded from a public forum, they ha[d] failed ‘‘to state a [First Amendment] claim to relief that [wa]s plausible on its face.’’” Id. (quoting Iqbal, 129 S. Ct. at 1949). The Third Circuit also concluded that the claim of a violation of the plaintiffs’ right to free exercise of religion failed because: In the complaint, Plaintiffs do not allege that they are treated differently than others, and instead claim only that “Defendants’ actions target and are intended to chill, restrict, and inhibit Plaintiffs 250

from exercising their religion in this way” and that “Defendants’ actions constituted a substantial burden on Plaintiffs[’] religious exercise, and Defendants lacked a compelling justification.” App. at 48. Once again, these are merely conclusory allegations, and, as the Court stated in Iqbal, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 129 S. Ct. at 1949 (citing Twombly, 550 U.S. at 555, 127 S. Ct. 1955). Id. at 532 (alterations in original) (footnote omitted). •

Fowler v. UPMC Shadyside, 578 F.3d 203 (3d Cir. 2009). The plaintiff was employed by UPMC as a janitor at the Shadyside Hospital. She was injured and placed on Family/Medical Leave and short-term disability, and eventually given a clerical position. Id. at 206. UPMC eliminated the plaintiff’s clerical position, and the plaintiff alleged that before her position was eliminated, she applied for a similar job but was never contacted about that position. Id. The district court dismissed the complaint because the Rehabilitation Act’s two-year statute of limitations had run, the restriction to sedentary work did not constitute a disability under the Rehabilitation Act, and the class action allegations were not appropriate claims under the Rehabilitation Act. Id. The Third Circuit vacated the dismissal and remanded. The Third Circuit noted that it was “obligated to discuss recent changes in pleading standards.” Id. at 209. The court stated: Standards of pleading have been in the forefront of jurisprudence in recent years. Beginning with the Supreme Court’s opinion in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007), continuing with our opinion in Phillips [v. County of Allegheny, 515 F.3d 224 (3d Cir. 2008)], and culminating recently with the Supreme Court’s decision in Ashcroft v. Iqbal, --- U.S. ----, 129 S. Ct. 1937, 1955, 173 L. Ed. 2d 868 (2009), pleading standards have seemingly shifted from simple notice pleading to a more heightened form of pleading, requiring a plaintiff to plead more than the possibility of relief to survive a motion to dismiss. Id. at 209–10 (emphasis added). The court described Iqbal’s holding: The Supreme Court’s opinion [in Iqbal] makes clear that the Twombly “facial plausibility” pleading requirement applies to all civil suits in the federal courts. After Iqbal, it is clear that conclusory or “bare-bones” allegations will no longer survive a motion to dismiss: “threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 129 S. Ct. at 251

1949. To prevent dismissal, all civil complaints must now set out “sufficient factual matter” to show that the claim is facially plausible. This then “allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. at 1948. The Supreme Court’s ruling in Iqbal emphasizes that a plaintiff must show that the allegations of his or her complaints are plausible. See [i]d. at 1949–50; see also Twombly, 550 U.S. at 555, & n.3, 127 S. Ct. 1955. Fowler, 578 F.3d at 210. The court continued: Iqbal additionally provides the final nail-in-the-coffin for the “no set of facts” standard that applied to federal complaints before Twombly. See also Phillips, 515 F.3d at 232–33. Before the Supreme Court’s decision in Twombly, and our own in Phillips, the test as set out in Conley v. Gibson, 355 U.S. 41, 45–46, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957), permitted district courts to dismiss a complaint for failure to state a claim only if “it appear[ed] beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Id. Under this “no set of facts” standard, a complaint effectively could survive a motion to dismiss so long as it contained a bare recitation of the claim’s legal elements. The Supreme Court began its rejection of that test in Twombly, holding that a pleading offering only “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555, 127 S. Ct. 1955; Phillips, 515 F.3d at 232. In Phillips, we discussed the appropriate standard for evaluating Rule 12(b)(6) or 12(b)(1) motions in light of the anti-trust context presented in Twombly, holding that the acceptable statement of the standard remains: “courts accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief.” Phillips, 515 F.3d at 233 (internal quotations and citation omitted). The Supreme Court’s opinion in Iqbal extends the reach of Twombly, instructing that all civil complaints must contain “more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Iqbal, 129 S. Ct. at 1949. Therefore, after Iqbal, when presented with a motion to dismiss for failure to state a claim, district courts should conduct a two-part analysis. First, the factual and legal elements of a claim should be separated. The District Court must accept all of the 252

complaint’s well-pleaded facts as true, but may disregard any legal conclusions. Id. Second, a District Court must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a “plausible claim for relief.” Id. at 1950. In other words, a complaint must do more than allege the plaintiff’s entitlement to relief. A complaint has to “show” such an entitlement with its facts. See Phillips, 515 F.3d at 234–35. As the Supreme Court instructed in Iqbal, “[w]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not ‘show[n]’—‘that the pleader is entitled to relief.’” Iqbal, 129 S. Ct. at 1949. This “plausibility” determination will be “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. Id. at 210–11 (emphasis added) (alterations in original). The Fowler court then examined the effect of Twombly and Iqbal on the holding in Swierkiewicz v. Sorema N.A., 534 U.S. 506 (2002), in which the Supreme Court held that “a complaint alleging unlawful employment discrimination did not have to satisfy a heightened pleading requirement.” Fowler, 578 F.3d at 211. The court explained that the continuing vitality of some of the holdings in Swierkiewicz might be questionable: The Supreme Court in Swierkiewicz expressly adhered to Conley’s then-prevailing “no set of facts” standard and held that the complaint did not have to satisfy a heightened standard of pleading. Id. Swierkiewicz and Iqbal both dealt with the question of what sort of factual allegations of discrimination suffice for a civil lawsuit to survive a motion to dismiss, but Swierkiewicz is based, in part, on Conley, which the Supreme Court cited for the proposition that Rule 8 “relies on liberal discovery rules and summary judgment motions to define disputed facts and issues and to dispose of unmeritorious claims.” 534 U.S. at 512, 122 S. Ct. 992. We have to conclude, therefore, that because Conley has been specifically repudiated by both Twombly and Iqbal, so too has Swierkiewicz, at least insofar as it concerns pleading requirements and relies on Conley. Id. The Third Circuit found that the complaint in Fowler had “alleged sufficient facts to state a plausible failure-to-transfer claim,” noting that “[a]lthough Fowler’s complaint is not as rich with detail as some might prefer, it need only set forth sufficient facts to support plausible claims.” Id. at 211–12 (footnote omitted). The court explained:

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Taking her allegations as true, we find (1) that she was injured at work and that, because of this injury, her employer regarded her as disabled within the meaning of the Rehabilitation Act; (2) that there was an opening for a telephone operator at UPMC, which was available prior to the elimination of her position and for which she applied; (3) that she was not transferred to that position; (4) that UPMC never contacted her about the telephone operator position or any other open positions; and (5) that Fowler believed UPMC’s actions were based on her disability. Under the “plausibility paradigm” . . . , these averments are sufficient to give UPMC notice of the basis for Fowler’s claim. The complaint pleads how, when, and where UPMC allegedly discriminated against Fowler. She avers that she was injured on the job and that her doctor eventually released her to perform “sedentary work.” She pleads that UPMC gave her a light-duty clerical position. She also avers that before the elimination of her light duty clerical position, she applied for a telephone operator position, but “was never contacted by UPMC regarding that position.” Fowler further alleges that she contacted “Susan Gaber, a Senior Human Resources Consultant with the Defendant, UPMC Shadyside, regarding [a] number of vacant sedentary jobs,” but that she was “never contacted by UPMC regarding any open positions.” Fowler’s complaint alleges that UPMC “failed to transfer” her to another position in September of 2003. Fowler further pleaded that she was “terminated because she was disabled” and that UPMC discriminated against her by failing to “transfer or otherwise obtain vacant and funded job positions” for her. The complaint repeatedly references the Rehabilitation Act and specifically claims she was terminated because of her disability. Therefore, she has nudged her claims against UPMC “across the line from conceivable to plausible.” Twombly, 550 U.S. at 570. The factual allegations in Fowler’s complaint are “more than labels and conclusions” or “a formulaic recitation of the elements of a cause of action.” Twombly, 550 U.S. at 564, 127 S. Ct. 1955. We have no trouble finding that Fowler has adequately pleaded a claim for relief under the standards announced in Twombly and Iqbal, supra. Id. at 212 (internal citation omitted) (second alteration in original). The Third Circuit concluded that the district court had erred by relying on Conley in finding that the plaintiff had insufficiently pleaded that she was disabled, and by relying on a case (and the cases cited therein) that had disposed of claims either at the summary judgment stage or at the judgment as a matter of law stage. Id. at 212–13. The court explained that the standard at these later stages is much more rigid, while “‘[a] well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts alleged is improbable 254

and that a recovery is very remote and unlikely.’” Id. at 213 (quoting Twombly, 550 U.S. at 556 (internal quotations omitted)). The court discussed the focus at the pleadings stage: At this stage of the litigation, the District Court should have focused on the appropriate threshold question—namely whether Fowler pleaded she is an individual with a disability. The District Court and UPMC instead focused on what Fowler can “prove,” apparently maintaining that since she cannot prove she is disabled she cannot sustain a prima facie failure-to-transfer claim. A determination whether a prima facie case has been made, however, is an evidentiary inquiry—it defines the quantum of proof plaintiff must present to create a rebuttable presumption of discrimination. See Powell v. Ridge, 189 F.3d 387, 394 (3d Cir. 1999) (overruled on other grounds). Even post-Twombly, it has been noted that a plaintiff is not required to establish the elements of a prima facie case but instead, need only put forth allegations that “raise a reasonable expectation that discovery will reveal evidence of the necessary element.” See Graff v. Subbiah Cardiology Associates, Ltd.[,] No. 08-207, 2008 WL 2312671 (W.D. Pa. June 4, 2008) [(]citing Phillips, 515 F.3d at 234[)]. Under the Federal Rules of Civil Procedure, an evidentiary standard is not a proper measure of whether a complaint fails to state a claim. Powell, 189 [F.3d] at 394. Fowler, 578 F.3d at 213 (emphasis added). The Third Circuit emphasized that the plaintiff was not required “at this early pleading stage, to go into particulars about the life activity affected by her alleged disability or detail the nature of her substantial limitations.” Id. Instead, the complaint was sufficient because it “identifie[d] an impairment, of which UPMC allegedly was aware and allege[d] that such impairment constitute[d] a disability under the Rehabilitation Act.” Id. The court found that the plaintiff’s “alleged limitation to sedentary work plausibly suggest[ed] that she might be substantially limited in the major life activity of working.” Id. (citations omitted). The court explained that the plaintiff would of course ultimately have to prove that she was substantially limited in a major life activity, but that at the pleadings stage, the allegation regarding disability was sufficient. Id. at 214 (citation omitted). The court emphasized that “[t]his [wa]s so even after Twombly and Iqbal.” Id.24

24

In a more recent case, the Third Circuit confirmed that the holdings of Twombly and Iqbal apply to employment discrimination complaints. See Guirguis v. Movers Specialty Servs., Inc., 346 F. App’x 774, No. 09-1104, 2009 W L 3041992, at *1 n.6 (3d Cir. Sept. 24, 2009) (unpublished) (“W e have applied Twombly and Iqbal’s pleading requirements to employment discrimination claims, but the quantum of facts that a discrimination complaint should contain must bear further development.”) (internal citations omitted). The court did not resolve the facts needed for a discrimination complaint because “[t]h[e] case . . . provide[d] a poor vehicle for that task because Guirguis relie[d] in large measure upon bare legal conclusions that would likely have been insufficient even under the pre-Twombly pleading standard.” Id. (citing Papasan v. Allain, 478 U.S. 265, 286 (1986) (“holding, prior to Twombly, that courts were not required to accept the truth of legal conclusions contained in a plaintiff’s complaint”)). The court concluded that the allegations “that Guirguis is an Egyptian native of Arab descent, that [the defendant] discharged him, and that his termination occurred

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Hodges v. Wilson, 341 F. App’x 846, No. 08-4868, 2009 WL 2445114 (3d Cir. Aug. 11, 2009) (unpublished) (per curiam). The plaintiff, an inmate at a prison run by the Pennsylvania Department of Corrections (the “DOC”), filed a civil rights complaint under § 1983, asserting that DOC employees violated his First, Eighth, and Fourteenth Amendment rights. Id. at *1. The complaint alleged that the plaintiff originally had his own cell because he had “‘‘Z’ code’” status, but that this status was revoked and the plaintiff then had to share a cell. Id. The complaint also alleged that the plaintiff’s security status was elevated, which prevented him from being eligible for certain jobs, and that the defendants changed his security status in retaliation for the plaintiff stating that he intended to file a lawsuit. Id. The plaintiff claimed that he suffered psychological and physical harm from sharing a cell and that his new cell mate assaulted him. Id. The district court adopted the magistrate judge’s recommendation to dismiss defendant Dr. Saavedra and to grant summary judgment in favor of the other defendants. Id. With respect to Dr. Saavedra, the complaint alleged that he “‘supported’ the prison’s decision to revoke [the plaintiff’s] ‘Z’ code status,” that his “male secretary impersonated him during [the plaintiff’s] examinations[,] and that Dr. Saavedra allowed prison officials to view [the plaintiff’s] medical records for the purpose of making a determination about [the plaintiff’s] cell status.” Hodges, 2009 WL 2445114, at *2. The Third Circuit held that “[a]bsent any assertion of attendant harm, Hodges’ allegation that an imposter stood in for Dr. Saavedra d[id] not raise a federal claim,” noting that the plaintiff did “not allege that Dr. Saavedra failed to provide treatment or disregarded a known risk of harm.” Id. (citations omitted). With respect to the allegations that Dr. Saavedra conspired with the other defendants to revoke the plaintiff’s “Z” code status and that he put the plaintiff at risk by allowing others to access the plaintiff’s psychiatric records, the court found that the plaintiff “fail[ed] to plead sufficient factual content to allow [it] to ‘draw the reasonable inference that the defendant [wa]s liable for the misconduct alleged.’” Id. (quoting Iqbal, 129 S. Ct. at 1949). The court explained: Hodges never states who was given access to his medical information, nor does he allege that Dr. Saavedra’s actions put him at risk of harm from the prison population. He does not specify what harm he faced, other than the revocation of his “Z code” status. It is apparent that his claim against Dr. Saavedra hinges upon his belief that he has a liberty interest in being single-celled. As explained in greater detail below, Hodges does not have a liberty interest in being

in violation of his civil rights,” were “certainly deficient in the post-Twombly era,” and that the last allegation was “precisely the type of factually unsupported legal conclusion that is inadequate to surmount a Rule 12(b)(6) challenge.” Id. at *1 n.6, *2. The court noted that “the complaint never intimate[d] in any way why Guirguis believe[d] that national origin motivated [the termination].” Id. at *2. The court recognized that it had previously reassessed Swierkiewicz in Fowler, but noted that “Swierkiewicz remains instructive because Guirguis’s complaint contain[ed] significantly less factual content than the pleading at issue in that case . . . , bolstering [the court’s] conclusion that his claims would not have survived under the pre-Twombly pleading regime.” Id. at *2 n.7.

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single-celled. As a result, he does not state a claim against Dr. Saavedra. Id. The court also affirmed the district court’s denial of the plaintiff’s motion for leave to file an amended complaint and his motion to amend the complaint because the proposed amendment to add a defendant and claim that the defendant “violated his rights by permitting non-medical prison staff members to review his psychiatric records for the purpose of reviewing his cell status” was “without merit for the same reasons . . . [explained] with respect to Dr. Saavedra.” Id. at *1 n.3. With respect to the other defendants, the plaintiff alleged that they violated the plaintiff’s Fourteenth Amendment due process rights by revoking his “Z” code status and placing him in a shared cell. Id. at *2. The court noted that “[i]t [wa]s well-settled that prisoners do not have a due process right to be single-celled,” and “agree[d] with the District Court that Hodges ha[d] not been subjected to atypical and significant hardship because his ‘Z’ code status ha[d] been revoked and he must now share a cell.” Hodges, 2009 WL 2445114, at *2 (footnote omitted). The court also concluded that the allegations of an Eighth Amendment violation were not supported, “agree[ing] with the District Court that Hodges’ complaints of depression, paranoia, and physical discomfort d[id] not rise to the level of an Eighth Amendment violation.” Id. at *3. The court also found that “[t]he single, two year-old incident with [the plaintiff’s] cell mate that [the plaintiff] assert[ed] d[id] not establish that prison officials ‘kn[e]w of and disregard[ed] an excessive risk to [his] health or safety.” Id. (sixth, seventh, and eighth alterations in original). Finally, the Third Circuit agreed with the district court’s grant of summary judgment on the plaintiff’s retaliation claim “[b]ecause the uncontested evidence show[ed] that Hodges’ temporary placement in segregated housing and the change in his work status were the result of his own misconduct . . . .” Id. The court dismissed the appeal under 28 U.S.C. § 1915(c), denied the plaintiff’s motion for an injunction to return him to a single cell, and denied the plaintiff’s motion for a return of legal documents. Id. (footnote omitted). •

Marangos v. Swett, 341 F. App’x 752, No. 08-4146, 2009 WL 1803264 (3d Cir. Jun. 25, 2009) (unpublished) (per curiam). The plaintiff sued his ex-wife, the state judge presiding over his divorce, and a variety of financial institutions that participated in refinancing the plaintiff’s home mortgage. Id. at *1. The plaintiff alleged that his ex-wife conspired with the state judge to obtain favorable rulings in the divorce proceeding, and that she conspired with the refinancing defendants to obtain the proceeds from the refinanced home. Id. The plaintiff further alleged that “the refinancing defendants failed to inform him of a lis pendens [the plaintiff’s ex-wife] had placed on the marital home before he signed a loan agreement for refinancing, held the refinancing proceeds in escrow instead of giving the money to him, and ultimately paid out the majority of the proceeds to [the ex-wife] and to the Child Support Agency with no notice to him.” Id. The plaintiff alleged violations of § 1983, the Federal Truth in Lending Act (TILA), and civil RICO. Id. The plaintiff also brought state law claims against all defendants, alleging violations of New Jersey’s Unfair and Deceptive Acts and Practices Act, intentional and/or negligent infliction of emotional distress, fraud, 257

deception, and violation of privacy laws, as well as “‘malicious abuse, misuse, and use of process’” by his ex-wife and the judge. Id. Finally, the plaintiff alleged “‘Public Employee Wrongfully Enforcing the Law’” and “‘Continuous Tort’” claims. Id. The district court dismissed the claims against the judge as barred by absolute immunity, and dismissed the remaining claims for failure to state a claim. The Third Circuit affirmed. The Third Circuit found that the plaintiff failed to state a claim under § 1983 as to the title company, the mortgagor, the loan servicer, and the ex-wife. Marangos, 2009 WL 1803264, at *2. The court noted that there was no factual content in the complaint showing that the loan servicer or the mortgager were involved in the divorce proceedings. Id. The only relevant allegation was that the state judge made two phone calls in chambers during family court hearings to the title company to confirm the amount held in escrow. Id. The court concluded that “[v]iewing these allegations as true, the factual matter f[ell] far short of permitting [the court] to infer a plausible connection among [the title company, the mortgagor,] and/or [the loan servicer], all private corporations, and a governmental agency or official such that their private actions would constitute ‘state action.’” Id. (footnote omitted). The Third Circuit also concluded that the facts in the complaint were not sufficient to allege a plausible connection or conspiracy among the defendants to deprive him of his constitutional rights under § 1983. Id. at *3 (citing Twombly, 550 U.S. at 556–57; Kost v. Kozakiewicz, 1 F.3d 176, 185 (3d Cir. 1993)). The court also held that the claims that the plaintiff’s ex-wife used the court system to ruin the plaintiff and that the state judge unlawfully issued decisions in favor of the plaintiff’s ex-wife failed to state a claim. Id. (citing Dennis v. Sparks, 449 U.S. 24, 28 (1980) (“noting that ‘merely resorting to the courts and being on the winning side of a lawsuit does not make a party a co-conspirator or a joint actor with the judge’”)). To the extent that the plaintiff sought relief against the title company, the mortgagor, or the loan servicer under TILA, the court concluded that “Marangos failed to state a claim for relief that [wa]s plausible on its face” (even assuming the claims were not time-barred) because TILA requires creditors to meaningfully disclose all credit terms to consumers in order to avoid the uninformed use of credit, but Marangos did not allege that these defendants failed to comply with the statute’s disclosure requirements. Marangos, 2009 WL 1803264, at *3. The Third Circuit also found dismissal of the civil RICO claims appropriate because such claims require “‘a pattern of racketeering activity that include[s] at least two racketeering acts,’” and Marangos alleged theft and wire and mail fraud as predicate acts, but the theft allegations did not constitute predicate acts under RICO, and the mail and wire fraud allegations required pleading with particularity under Rule 9(b). See id. The court emphasized that it did not need to accept legal conclusions couched as factual allegations as true, giving this example from the complaint: “‘Defendants Swett, Land Options, and Judge Guadagno, are involved in a cover-up and criminal and civil conspiracy to violate Plaintiff’s 258

Due Process and Equal Protection Rights, along with violating his fundamentally secured Property Rights.’” Id. at *4. The court explained that this statement was “merely a recitation of legal terms that enjoys no assumption of veracity.” Id. The court noted that the complaint contained no facts to allow the court to reasonably infer, under Rule 9(b), that the title company, the mortgagor, and the loan servicer engaged in wire or mail fraud. Id. The court also noted that the complaint alleged that the judge spoke on the phone with the title company and had ex parte communications with the ex-wife, but found that “[a]ssuming, arguendo, that these allegations me[t] the standard of particularity required by Rule 9(b), and assuming their veracity, [it] agree[d] with the District Court that they [we]re insufficient under the less rigid pleading standard set forth in Rule 8(a)(2) to permit a plausible inference of a scheme or an intent to defraud . . . .” Id. •

Lopez v. Beard, 333 F. App’x 685, No. 08-3699, 2009 WL 1705674 (3d Cir. Jun. 18, 2009) (unpublished) (per curiam). The pro se plaintiff alleged that various officers in the Pennsylvania Department of Corrections violated his rights under the ADA and the Eighth and Fourteenth Amendments. Id. at *1. Specifically, the plaintiff alleged that he had HIV/AIDS, that the prison officials and inmates knew this, that on one occasion his family was denied a contact visit with him, that on another occasion his family was erroneously told that they were not on the visitors list, and that individuals not named as defendants made disparaging statements about the plaintiff’s medical condition. Id. The magistrate judge recommended that the claims against four of the defendants be dismissed for failure to allege any personal involvement; that the claims against the remaining defendants be dismissed because denial of visitation did not rise to the level of a constitutional violation and the plaintiff had failed to allege physical injury in connection with his emotional distress; and that the ADA claims be dismissed for failure to allege any nexus between the denials of visitation and his disability. Id. The district court allowed the plaintiff to file an amended complaint, in which he alleged that he was deliberately denied contact with family members “‘in retaliation and discrimination of plaintiff being HIV-AIDS positive and having a history of problems with staff, including the filing of numerous complaints against staff.’” Id. at *2. “The only specific claim [the plaintiff] made with respect to any individually-named defendant was that Correctional Officer Alvarez made ‘belittling and discriminating remarks and gestures about plaintiff to his then-girlfriend’ and altered his approved visitors list, thus preventing his sister and brother-in-law from visiting him.” Id. The amended complaint also alleged that the prison officials falsified their grievance response “to cover up their bad acts.” Id. The district court dismissed the complaint, and the Third Circuit affirmed. The Third Circuit explained: What Lopez has alleged in his complaint and amended complaints are theories and conclusions, not facts. While Lopez claims that he has been subject to “prejudice, discrimination and retaliation” at the hands of certain defendants, and that Officer Alvarez made “belittling and discriminating remarks and gestures about plaintiff to his then-girlfriend,” he does not offer any specifics about these alleged incidents which would permit a court to reach the 259

conclusion that they were discriminatory. See Iqbal, 129 S. Ct. at 1952 (“He would need to allege more by way of factual content to ‘nudg[e]’ his claim of purposeful discrimination ‘across the line from conceivable to plausible.’”). Accordingly, we agree that the District Court properly dismissed his claims of violations of his rights under the First, Eighth and Fourteenth Amendments of the U.S. Constitution and Title II of the ADA for failure to state a claim. Lopez, 2009 WL 1705674, at *3 (footnote omitted) (alteration in original).

Fourth Circuit • Foster v. Wintergreen Real Estate Company, 363 F. App’x 269, 2010 WL 325959 (4th Cir. 2010) (unpublished) (per curiam). The plaintiffs brought a claim under the Racketeer Influenced and Corrupt Organizations Act (RICO) against Wintergreen Real Estate Company (“WREC”), Richard Carroll, Timothy Hess, and Kyle Lynn. Id. at *1. The district court dismissed the complaint and denied leave to amend, and the Fourth Circuit affirmed. Id. The complaint alleged that during a period of three years, the plaintiffs, who were real estate investors, purchased and sold properties in the Wintergreen Resort (“Resort”) using the services of WREC and the other defendants. Id. The court stated: Plaintiffs allege that, during the course of their business dealings, Defendants made various false statements and/or concealed material facts, which include, generally: that Defendants are members of the Multiple Listing Service (“MLS”) and that all of the properties would be listed on the MLS (hereinafter “MLS scheme”); that WREC is the dominant real estate company in the Resort; that Carroll is the top real estate agent at WREC; that WREC engages in an “effective marketing program”; that Defendants fraudulently assured Plaintiffs that the Summit House property was the “last piece of developable multifamily land left at [the] Resort”; that Defendants failed to disclose that there was a noisy stump grinder operating next to property Plaintiffs purchased in the Stoney Creek area of the Resort; and that Defendants violated dual representations restrictions and other realtor standards of conduct. Id. (alteration in original) (internal citations and footnotes omitted). The plaintiffs alleged that at least some of these acts were done “through interstate communication via the mail and wire, and were perpetrated on ‘hundreds’ of other out-of-state clients,” and that “all of these acts were committed so that Defendants would earn a higher commission, at the expense of potential profit for Plaintiffs.” Id. The complaint contained the following claims: (1) conducting or participating in a RICO enterprise; (2) investment of proceeds of racketeering activity; (3) conspiracy to violate RICO; and (4) false advertisement in violation of the 260

Lanham Act. Foster, 2010 WL 325959, at *1. The district court dismissed because the plaintiffs did not allege facts supporting the RICO claims and did not have standing to assert the Lanham Act claim. Id. at *2. After the district court dismissed, the plaintiffs moved for reconsideration and for leave to amend. The court explained the proposed amendments: The Amended Complaint contained the same basic allegations made in the Complaint, with greater detail and certain notable additions: it included additional details about the properties allegedly involved in the MLS scheme; charged that the MLS scheme took place for eight years instead of three years and that Defendants perpetrated the scheme on hundreds of other clients; included the names and addresses of some of these persons; included allegations of how each individual Defendant was personally involved in the scheme; included an affidavit from Wesley C. Boatwright . . . ; and included an affidavit from Ivo Romanesko . . . , attesting that “the use of marketing tools, such as including properties in MLS . . . are essential” and “the standard in the industry.” Id. (internal citations omitted). The district court denied reconsideration and leave to amend, finding that the amendment would be futile because “‘the additional allegations [we]re insufficient to show that the alleged scheme extended beyond the Plaintiffs in scope or degree adequate to constitute a pattern of racketeering activity.’” Id. On appeal, the Fourth Circuit noted: “Although Plaintiffs allege[d] multiple instances of mail and wire fraud over the course of an arguably substantial period of time, ‘we are cautious about basing a RICO claim on predicate acts of mail and wire fraud because it will be the unusual fraud that does not enlist the mails and wires in its service at least twice.’” Id. at *4 (citation omitted). The court concluded that the case involved only “‘garden-variety fraud’” because the plaintiffs alleged that the defendants misrepresented their efforts to market properties, misrepresented or failed to disclose material facts about specific properties, and breached fiduciary duties. Id. The court found that “[t]hese [we]re quintessential state law claims, not a ‘scheme[ ] whose scope and persistence set [it] above the routine.’” Foster, 2010 WL 325959, at *4 (third and fourth alteration in original) (citation omitted). The court explained: This conclusion is bolstered by the fact that Plaintiffs failed to plead with particularity that any other persons were similarly harmed by Defendants’ alleged fraud, and thus failed to show “a distinct threat of long-term racketeering activity.” The Complaint summarily draws the conclusion that other persons were harmed by the MLS scheme because “a comparison of the MLS listings for Nelson County with the Nelson County property transfer records during the relevant period reveals hundreds of properties . . . which were, on information and belief, listed with Defendants but were not 261

included in MLS.” Based on this fact and the vague reference to “interview[s] [with] a number of sellers,” Plaintiffs argue that Defendants “did not obtain those sellers’ consent to the omission of those properties from MLS.” However, a complaint must plead sufficient facts to allow a court to infer “more than the mere possibility of misconduct.” Iqbal, 129 S. Ct. at 1950. Id. (internal citations omitted). The court concluded that the proposed amended complaint would not fix these deficiencies: Plaintiffs attempted to rectify this deficiency in the Amended Complaint by including lists of properties handled by Defendants that were not listed on MLS and the names and addresses of the sellers associated with those properties. However, regardless of these lengthy exhibits, Plaintiffs nevertheless fail to plead with particularity that any specific person was defrauded other then themselves, much less give any particulars of the fraud. Therefore, “[t]hese allegations lack the specificity needed to show a ‘distinct’ threat of continuing racketeering activity.” Menasco [Inc. v. Wasserman], 886 F.2d [681,] 684 [(4th Cir. 1989)]. Id. at *5 (first alteration in original). The court held that the case was “‘not sufficiently outside the heartland of fraud cases to warrant RICO treatment,’” and that “[t]he district court thus did not err in granting the motion to dismiss.” Id. (citation omitted). The Fourth Circuit also affirmed dismissal of the Lanham Act claim, noting that “as consumers, Plaintiffs lack[ed] standing to sue under the Lanham Act . . . .” Id. Finally, the Fourth Circuit affirmed the denial of leave to amend, explaining that “neither the Complaint nor the Amended Complaint allege a pattern of racketeering activity sufficient to support a RICO claim, nor did the Amended Complaint cure Plaintiffs’ lack of standing under the Lanham Act.” Id. at *6. •

Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 2009 WL 5126224 (4th Cir. Dec. 29, 2009). Defendant Consumeraffairs.com “operate[d] a website that allow[ed] customers to comment on the quality of businesses, goods, and services.” Id. at *1. The plaintiff was a company that sold or serviced cars and that received negative reviews on the defendant’s website. See id. The plaintiff sued for defamation and tortious interference with a business expectancy, and the defendant moved to dismiss on the basis of section 230 of the Communications Decency Act of 1996 (the “CDA”), which “precludes plaintiffs from holding interactive computer service providers liable for the publication of information created and developed by others.” Id. (footnote and citations omitted). The district court dismissed the complaint and granted leave to amend. Id. The defendant moved to dismiss the amended complaint on the basis of section 230 of the CDA, and the district court granted 262

dismissal because “‘the allegations contained in the Amended Complaint [did] not sufficiently set forth a claim asserting that [Consumeraffairs.com] authored the content at issue,” and because “‘the allegations [we]re insufficient to take th[e] matter outside of the protection of the Communications Decency Act.’” Id. (record citation omitted). The Fourth Circuit affirmed. Section 230 of the CDA “prohibits a ‘provider or user of an interactive computer service’ from being held responsible ‘as the publisher or speaker of any information provided by another information content provider.’” Nemet, 2009 WL 5126224, at *2 (quoting 47 U.S.C. § 230(c)(1)). The court explained that “[a]ssuming a person meets the statutory definition of an ‘interactive computer service provider,’ the scope of § 230 immunity turns on whether the person’s actions also make it an ‘information content provider,’” which is defined as “‘any person or entity that is responsible, in whole or in part, for the creation or development of information provided through the Internet or any other interactive computer service.’” Id. (quoting 47 U.S.C. § 230(f)(3)). The court explained that “[t]aken together, these provisions bar state-law plaintiffs from holding interactive computer service providers legally responsible for information created and developed by third parties.” Id. (citation omitted). The court emphasized that it “aim[s] to resolve the question of § 230 immunity at the earliest possible stage of the case because that immunity protects websites not only from ‘ultimate liability,’ but also from ‘having to fight costly and protracted legal battles.’” Id. (citation omitted). The plaintiff acknowledged that Consumeraffairs.com was an interactive computer service provider, but argued that Consumeraffairs.com was also an information content provider with respect to the twenty posts at issue in the litigation, and therefore was not immune from liability under § 230. Id. at *3. The Fourth Circuit noted that the district court had dismissed the complaint before Iqbal, but that on appeal, the court was obligated to follow the law as it existed at the time of the appeal. Id. at *3 n.5 (citation omitted). In examining the appropriate legal standard, the Fourth Circuit noted that while “a court accepts all well-pled facts as true and construes these facts in the light most favorable to the plaintiff,” it “conclude[d] from the analysis in Iqbal that legal conclusions, elements of a cause of action, and bare assertions devoid of further factual enhancement fail to constitute well-pled facts for Rule 12(b)(6) purposes.” Nemet, 2009 WL 5126224, at *3 (citing Iqbal, 129 S. Ct. at 1949). The court framed the issue before it: “We must determine, in a post-Iqbal context, whether the facts pled by Nemet, as to the application of CDA immunity, make its claim that Consumeraffairs.com is an information content provider merely possible or whether Nemet has nudged that claim ‘across the line from conceivable to plausible.’” Id. at *4 (quoting Iqbal, 129 S. Ct. at 1951). The court explained the appropriate framework under Iqbal: Following the example set by the Supreme Court in Iqbal we begin our analysis by “identifying the allegations” of the amended complaint that are either extraneous or “not entitled to the assumption of truth.” 129 S. Ct. at 1951. We then proceed to determine the plausibility of the factual allegations of Nemet’s amended complaint 263

pertaining to Consumeraffairs.com’s responsibility for the creation or development of the comments at issue. Id. The complaint alleged in the “Development Paragraph”: Upon information and belief, Defendant participated in the preparation of this complaint by soliciting the complaint, steering the complaint into a specific category designed to attract attention by consumer class action lawyers, contacting the consumer to ask questions about the complaint and to help her draft or revise her complaint, and promising the consumer that she could obtain some financial recovery by joining a class action lawsuit. Defendant is therefore responsible, in whole or in part, for developing the substance and content of the false complaint . . . about the Plaintiffs. Id. (record citation and quotation marks omitted). The plaintiff argued that this paragraph of its complaint “show[ed] Consumeraffairs.com’s culpability as an information content provider either through (1) the ‘structure and design of its website,’ or (2) its participation in ‘the preparation of’ consumer complaints: i.e., that Consumeraffairs.com ‘solict[ed]’ its customers’ complaints, ‘steered’ them into ‘specific categor[ies] designed to attract attention by consumer class action lawyers, contact[ed]’ customers to ask ‘questions about’ their complaints and to ‘help’ them ‘draft or revise’ their complaints, and ‘promis[ed]’ customers would ‘obtain some financial recovery by joining a class action lawsuit.’” Id. (record citation omitted) (alterations in original). The Fourth Circuit first analyzed the plaintiff’s argument that the structure and design of the website prevented granting immunity to the defendant, explaining that “the facts pled . . . d[id] not show Consumeraffairs.com developed the content of the posts by the structure and design of its website.” Id. at *5. In contrast to a case relied on by the plaintiff, Fair Housing Council v. Roommates.com, LLC, 521 F.3d 1157, 1174 (9th Cir. 2008), which involved a website that “required users to input illegal content as a necessary condition of use,” the court found that the plaintiff here had “merely alleged that Consumeraffairs.com structured its website and its business operations to develop information related to class-action lawsuits.” Nemet, 2009 WL 5126224, at *5. The court explained that “there [wa]s nothing unlawful about developing this type of content; it [wa]s a legal undertaking: Federal Rule of Civil Procedure 23, for instance, specifically provide[d] for class-action suits.” Id. The court held: “Even accepting as true all of the facts Nemet pled as to Consumeraffairs.com’s liability for the structure and design of its website, the amended complaint ‘d[id] not show, or even intimate,’ that Consumeraffairs.com contributed to the allegedly fraudulent nature of the comments at issue.” Id. (citing Iqbal, 129 S. Ct. at 1952). The court explained that “as to these claimed facts in the Development Paragraph, Nemet’s pleading not only fail[ed] to show it [wa]s plausible that Consumeraffairs.com [wa]s an information content provider,” 264

but it also failed to show “that it [wa]s even a likely possibility.” Id. The court next analyzed the arguments that Consumeraffairs.com was “an information content provider because it contacted ‘the consumer to ask questions about the complaint and to help her draft or revise her complaint.’” Id. (record citation omitted). The court concluded: Nemet fails to make any cognizable argument as to how a website operator who contacts a potential user with questions thus “develops” or “creates” the website content. Assuming it to be true that Consumeraffairs.com contacted the consumers to ask some unknown question, this bare allegation proves nothing as to Nemet’s claim Consumeraffairs.com is an information content provider. Id. at *6. The court further held: The remaining claim, of revising or redrafting the consumer complaint, fares no better. Nemet has not pled what Consumeraffairs.com ostensibly revised or redrafted or how such affected the post. “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 129 S. Ct. at 1949. Nemet’s claim of revising or redrafting is both threadbare and conclusory. Nemet, 2009 WL 5126224, at *6. The court noted: Moreover, in view of our decision in Zeran [v. Am. Online, Inc., 129 F.3d 327, 330 (4th Cir. 1997)], Nemet was required to plead facts to show any alleged drafting or revision by Consumeraffairs.com was something more than a website operator performs as part of its traditional editorial function. See 129 F.3d at 330. It has failed to plead any such facts. “Congress enacted § 230’s broad immunity ‘to remove disincentives for the development and utilization of blocking and filtering technologies that empower parents to restrict their children’s access to objectionable or inappropriate online material.’ 47 U.S.C. § 230(b)(4). In line with this purpose, § 230 forbids the imposition of publisher liability on a service provider for the exercise of its editorial and self-regulatory functions.” Id. at 331. We thus conclude that the Development Paragraph failed, as a matter of law, to state facts upon which it could be concluded that it was plausible that Consumeraffairs.com was an information content provider. Accordingly as to the Development Paragraph, the district 265

court did not err in granting the Rule 12(b)(6) motion to dismiss because Nemet failed to plead facts sufficient to show Consumeraffairs.com was an information content provider and not covered by CDA immunity. Id. The plaintiff argued that even if the Development Paragraph was insufficient to allow the case to proceed, “as to eight of the twenty posts, the amended complaint pled other facts which show[ed] Consumeraffairs.com [wa]s an information content provider.” Id. With respect to these eight posts, “Nemet pled as to each that ‘[b]ased upon the information provided in the post, [Nemet] could not determine which customer, if any, this post pertained to.’” Id. (record citation omitted) (alterations in original). The complaint alleged in the “Fabrication Paragraph”: “Because Plaintiffs cannot confirm that the [customer] complaint . . . was even created by a Nemet Motors Customer based on the date, model of car, and first name, Plaintiffs believe that the complaint . . . was fabricated by the Defendant for the purpose of attracting other consumer complaints. By authoring the complaint . . . the Defendant was therefore responsible for the substance and content of the complaint.” Id. at *7 (footnote omitted) (alteration in original). The Fourth Circuit noted that “Nemet’s sole factual basis for the claim that Consumeraffairs.com [wa]s the author, and thus an information content provider not entitled to CDA immunity, [wa]s that Nemet [could not] find the customer in its records based on the information in the post.” Id. The court explained: Because Nemet was unable to identify the authors of these comments based on “the date, model of car, and first name” recorded online, Nemet alleges that these comments were “fabricated” by Consumeraffairs.com “for the purpose of attracting other consumer complaints.” But this is pure speculation and a conclusory allegation of an element of the immunity claim (“creation . . . of information”). 47 U.S.C. § 230(f)(3). Nemet has not pled that Consumeraffairs.com created the allegedly defamatory eight posts based on any tangible fact, but solely because it (Nemet) can’t find a similar name or vehicle of the time period in Nemet’s business records. Of course, the post could be anonymous, falsified by the consumer, or simply missed by Nemet. There is nothing but Nemet’s speculation which pleads Consumeraffairs.com’s role as an actual author in the Fabrication Paragraph.

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Nemet, 2009 WL 5126224, at *7 (internal citation omitted). The court also rejected the plaintiff’s argument that supporting allegations “show[ed] [that] the Fabrication Paragraph plead[ed] adequate facts that Consumeraffairs.com [wa]s the author of the eight posts.” Id. The court explained: These allegations include (1) that Nemet has an excellent professional reputation, (2) none of the consumer complaints at issue have been reported to or acted upon by the New York City Department of Consumer Affairs, (3) Consumeraffairs.com’s sole source of income is advertising and this advertising is tied to its webpage content, and (4) some of the posts on Consumeraffairs.com’s website appeared online after their listed creation date. Nemet’s allegations in this regard do not allow us to draw any reasonable inferences that would aid the sufficiency of its amended complaint. That Nemet may have an overall excellent professional reputation, earned in part from a paucity of complaints reported to New York City’s Department of Consumer Affairs, does not allow us to reasonably infer that the particular instances of consumer dissatisfaction alleged on Consumeraffairs.com’s website are false. Furthermore, Nemet’s allegations in regard to the source of Consumeraffairs.com’s revenue stream are irrelevant, as we have already established that Consumeraffairs.com’s development of class-action lawsuits does not render it an information content provider with respect to the allegedly defamatory content of the posts at issue. Finally, the fact that some of these comments appeared on Consumeraffairs.com’s website after their listed creation date does not reasonably suggest that they were fabricated by Consumeraffairs.com. Any number of reasons could cause such a delay, including Consumeraffairs.com’s review for inappropriate content. See Iqbal, 129 S. Ct. at 1951. We are thus left with bare assertions “devoid of further factual enhancement,” which are not entitled to an assumption of truth. Id. at 1949. Such conclusory statements are insufficient as a matter of law to demonstrate Nemet’s entitlement to relief. See id. As recently emphasized by the Supreme Court, Rule 8 requires “more than conclusions” to “unlock the doors of discovery for a plaintiff.” Id. at 1950. Viewed in the correct “factual context,” id. at 1954, Nemet’s stark allegations are nothing more than a “formulaic recitation” of one of the elements of its claims. Id. at 1951. A plaintiff must offer more than “[t]hreadbare recitals of the elements of a cause of action” and “conclusory statements,” however, to show its entitlement to relief. Id. at 1949. 267

Id. at *7–8 (footnote omitted) (alteration in original). The court noted that the amended complaint contained allegations regarding several comments made by Consumeraffairs.com on its website, in which it provided commentary on the other posts, but stated that “[b]ecause Nemet failed to argue in its opening brief that these comments contributed to the sufficiency of its amended complaint, [the court] would not consider them in th[e] appeal.” Id. at *8 n.7. The court concluded: Viewed in their best light, Nemet’s well-pled allegations allow us to infer no more than “the mere possibility” that Consumeraffairs.com was responsible for the creation or development of the allegedly defamatory content at issue. Nemet has thus failed to nudge its claims that Consumeraffairs.com is an information content provider for any of the twenty posts across the line from the “conceivable to plausible.” As a result, Consumeraffairs.com is entitled to § 230 immunity and the district court did not err by granting the motion to dismiss. Id. at *8 (internal citations omitted). Judge Jones filed a separate opinion, concurring in part and dissenting in part. Judge Jones agreed that the complaint was insufficient with respect to the twelve posts that the plaintiff connected to its customers because “[t]he facts alleged d[id] not show that as to these posts it [wa]s plausible that Consumeraffairs.com [wa]s an information content provider within the meaning of the Communications Decency Act.” Id. at *8 (Jones, J., concurring in part and dissenting in part). But with respect to the other eight posts, Judge Jones disagreed with the majority’s conclusion, stating that “the allegations of the Amended Complaint adequately set forth a claim that Consumeraffairs.com was responsible for the eight posts from fictitious customers.” Nemet, 2009 WL 5126224, at *9 (Jones, J., concurring in part and dissenting in part). Judge Jones stated: In the first place, we are required to accept as true, at least at this stage of the case, Nemet’s allegation that these eight posts did not represent real customers. Nemet alleged that it documented each vehicle sale with forms that give the customer’s full name, address, description of the vehicle sold, and the date of sale, as well as other information. Each of the eight posts described in the Amended Complaint gave the first name and hometown of the putative customer as well as the make and model of the vehicle sold by Nemet. All of the posts were dated and all but one set forth the alleged date of the sale. In spite of Nemet’s careful documentation of each sale and comparison with the information provided in the posts, Nemet was unable to connect any of these posted complaints with a real transaction. 268

Moreover, these were not the sole pertinent factual allegations. Nemet also alleged the following in its Amended Complaint: (1) The eight complaints at issue were never reported to the New York City Department of Consumer Affairs, which, according to Nemet, is responsible for policing consumer issues where Nemet does business, and which has recently pursued highly publicized consumer litigation against other car dealers. (Am. Compl. ¶¶ 12-14, J.A. 49.); (2) Consumeraffairs.com’s website encourages consumers to complete complaint forms, but the website does not contain a place for positive reviews. (Am. Compl. ¶ 28, J.A. 53.); (3) The website “entices visitors with the possibility of participating in a class-action lawsuit, with the potential for a monetary recovery,” by promising to have “class action attorneys” review all submitted complaints. (Am. Compl. ¶ 29, J.A. 53.); (4) Consumeraffairs.com earns revenue by selling ads tied to its webpage content, including the content posted by consumers. (Am. Compl. ¶¶ 21, 22, J.A. 51.); (5) Consumeraffairs.com wrote derogatory statements about Nemet on the website in connection with the alleged consumer complaints .... Id. Judge Jones thought these allegations were sufficient under Iqbal: While Twombly and Iqbal announced a new, stricter pleading standard, they did not merge the pleading requirements of Rule 8 with the burden of proof required for summary judgment. In fact, the Court in Twombly stated that “[a]sking for plausible grounds to infer” a claim’s existence “does not impose a probability requirement at the pleading stage.” Twombly, 550 U.S. at 556. The plausibility standard “simply calls for enough fact to raise a reasonable expectation that discovery” will lead to information supporting the plaintiff’s claim. Id. Nemet’s pleading accomplishes this. By stating sufficient factual assertions, Nemet has created the reasonable inference that Consumeraffairs.com wrote the eight posts to attract additional complaints. It is true that there may be alternative explanations for these 269

posts that show that they are not attributable to Consumeraffairs.com. Nemet may have simply overlooked eight actual customers in its review of the company sales documents. The fictitious posts may have come from mischief makers unrelated to Consumeraffairs.com, or from real consumers who wished to remain anonymous by falsifying the details of their transactions. But I don’t believe that any of these alternatives are any more plausible than Nemet’s claim. It cannot be the rule that the existence of any other plausible explanation that points away from liability bars the claim. Otherwise, there would be few cases that could make it past the pleading stage. Indeed, as Iqbal teaches, it is only where there are “more likely explanations” for the result that the plausibility of the claim is justifiably suspect. Iqbal, 129 S. Ct. at 1951. While the present federal pleading regime is a significant change from the past, it remains true that a plaintiff in federal court need not allege in its initial pleading all of the facts that will allow it to obtain relief. Otherwise, the summary judgment process under Rule 56 would have little meaning. Of course, I don’t know whether Nemet could have ultimately prevailed on its claim that Consumeraffairs.com made up the eight posts in question, or even if it could have withstood a motion for summary judgment, but under the circumstances it ought to have been allowed to attempt to prove its case. Id. at *10 (emphasis added) (alteration in original). •

Francis v. Giacomelli, 588 F.3d 186, 2009 WL 4348830 (4th Cir. Dec. 2, 2009). The mayor of Baltimore, Martin O’Malley, terminated the employment of the city’s police commissioner, Kevin Clark, as well as two of Clark’s deputies, Joel Francis and Anthony Romano. Id. at *1. O’Malley and City Solicitor Ralph Tyler sent members of the police department to Clark’s offices to retrieve Clark’s, Francis’s, and Romano’s “badges, police identifications, firearms, computers, and other official property, and to escort them from the building.” Id. Clark sued O’Malley and the City Council in state court, seeking reinstatement and damages based on violation of the city’s laws and breach of contract. Id. “The Maryland Court of Appeals ultimately concluded that, despite Commissioner Clark’s contract with the Mayor and City Council of Baltimore, which authorized the Mayor to discharge the Commissioner without cause, Clark had not been discharged in accordance with Baltimore City Public Local Law, which required cause.” Id. Clark and his deputies also sued in federal court, “alleging that the Mayor, the City Solicitor, and several members of the Baltimore City Police Department violated their constitutional rights by seizing property from the Commissioner and his deputies and by seizing them and removing them from Police Department offices.” Id. The complaint alleged “that the plaintiffs’ Fourth and 270

Fourteenth Amendment rights were violated insofar as the searches of the plaintiffs’ offices and the seizures of the plaintiffs and their personal property were not justified by any criminal charges or any warrant and were, therefore, unreasonable.” Francis, 2009 WL 4348830, at *3. In the second count, “Clark and Francis, who are African-American, claim[ed] conclusorily that they were removed from their offices and terminated from their positions because of their race, in violation of 42 U.S.C. § 1981.” Id. In Count III, the plaintiffs alleged “that they were denied due process insofar as their employment was terminated without prior notice and a prior hearing,” and “in Count IV, the plaintiffs allege[d] conclusorily that the defendants conspired to violate their civil rights based on the acts otherwise alleged, in violation of 42 U.S.C. § 1985.” Id. The district court dismissed because the complaint did not state plausible claims for relief and because the Mayor was entitled to qualified immunity with respect to Clark’s allegation that the Mayor denied him due process. Id. at *1. The Fourth Circuit affirmed. On appeal, the plaintiffs argued that a motion to dismiss “must be denied unless ‘‘it is clear that no relief could be granted under any set of facts that could be proved consistent with the [well-pleaded] allegations’ in the Complaint,’” id. at *3 (quoting Swierkiewicz v. Sorema, N.A., 534 U.S. 506, 514 (2002)) (alteration in original), but the court noted that “[t]he standard that the plaintiffs quoted from Swierkiewicz . . . was explicitly overruled in Twombly,” id. at *3 n.1. The plaintiffs also argued that “it was error to dismiss a complaint alleging civil rights violations unless it appear[ed] ‘to a certainty that the plaintiff[s] would not be entitled to relief under any legal theory which might plausibly be suggested by the facts alleged.’” Francis, 2009 WL 4348830, at *3 (quoting Veney v. Wyche, 293 F.3d 726, 730 (4th Cir. 2002)) (second alteration in original). In discussing the appropriate legal framework, the Fourth Circuit explained that providing notice to the defendant is only one of the many purposes of adequate pleadings: Even though the requirements for pleading a proper complaint are substantially aimed at assuring that the defendant be given adequate notice of the nature of a claim being made against him, they also provide criteria for defining issues for trial and for early disposition of inappropriate complaints. See 5 CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE, § 1202, at 88 (3d ed. 2004). Overlooking the broad range of criteria stated in the Federal Rules for a proper complaint, some have suggested that the Federal Rules, when adopted in 1938, simply created a “notice pleading” scheme, pointing for support to Rule 8(a)(2), which requires only “a short and plain statement of the claim showing that the pleader is entitled to relief,” and Rule 8(d)(1), which provides that “[n]o technical form [for stating allegations] is required.” But the “notice pleading” characterization may itself be too simplistic, failing to recognize the many other provisions imposing requirements that permit courts to evaluate a complaint for 271

sufficiency early in the process. Rule 8 itself requires a showing of entitlement to relief. Rule 9 requires that allegations of fraud, mistake, time, place, and special damages be specific. Rule 11 requires that the pleading be signed and provides that the signature “certifies” (1) that the claims in the complaint are not asserted for collateral purposes; (2) that the claims asserted are “warranted”; and (3) that the factual contentions “have evidentiary support.” And Rule 12(b)(6) authorizes a court to dismiss any complaint that does not state a claim “upon which relief can be granted.” The aggregation of these specific requirements reveals the countervailing policy that plaintiffs may proceed into the litigation process only when their complaints are justified by both law and fact. Id. at *4 (first and third emphasis added) (alterations in original). The court noted that “[i]n recent years, with the recognized problems created by ‘strike suits,’25 and the high costs of frivolous litigation, the Supreme Court ha[d] brought to the forefront the Federal Rules’ requirements that permit courts to evaluate complaints early in the process.” Id. (internal citation to 5A WRIGHT & MILLER, FEDERAL PRACTICE AND PROCEDURE § 1296, at 46 & n.9 omitted). In evaluating Count I, the Fourth Circuit noted that the complaint “allege[d] that members of the Baltimore City Police Department, under the direction of Mayor O’Malley and City Solicitor Tyler, ‘broke into and entered’ the Police Commissioner’s offices, seized personal property, and ‘detained, held in custody and seized’ the Police Commissioner and his deputies while ordering them to ‘surrender their weapons, badges, identification cards’ and similar property—all without the benefit of criminal charges or a warrant,” in violation of the plaintiffs’ Fourth and Fourteenth Amendment rights. Id. at *5. The court found that no plausible claim had been stated, explaining: While the Commissioner and his deputies conclusorily alleged that the searches and seizures violated their constitutional rights because no charges had been filed against them, nor had any warrant issued, their complaint did not allege that the defendants were engaged in a law-enforcement effort. Indeed, the facts show to the contrary, that the defendants’ actions against the plaintiffs were employment actions based on the Mayor’s perceived right to fire the Police Commissioner without cause, as stated in the Memorandum of Understanding between Commissioner Clark and Baltimore City. ....

25

The court explained that “[a] ‘strike suit’ is an action making largely groundless claims to justify conducting extensive and costly discovery with the hope of forcing the defendant to settle at a premium to avoid the costs of the discovery.” Francis, 2009 W L 4348830, at *4 n.2 (citations omitted).

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The plaintiffs’ complaint relies on the allegations that no criminal charges had been filed and no warrant had issued in order to state a violation of the Fourth Amendment. But this assertion is both conclusory and erroneous, especially when the complaint itself does not allege that the searches and seizures were law-enforcement related. On the contrary, the complaint suggests throughout that the searches and seizures were taken in furtherance of Mayor O’Malley’s employment action of firing Commissioner Clark.26 Id. The court noted that “[t]he plaintiffs allege[d] nowhere that these actions were inconsistent with the Mayor’s efforts to terminate the plaintiffs’ employment,” and that “it is common practice for an employer to take the employer’s property away from discharged employees and to deny them access to the place of employment.” Id. The court further noted that while the City had an interest in protecting the police department’s property and in removing discharged employees, “the complaint fail[ed] to allege any countervailing privacy interests that would outweigh the City’s interests,” and instead “relie[d] simply on the absence of any charges or any warrant, which [wa]s irrelevant in the factual context of th[e] complaint.” Francis, 2009 WL 4348830, at *6. The court also concluded that the fact that the state court of appeals had found that the firing was inconsistent with Baltimore’s local laws did “not alone support the claim that the searches and seizures conducted in connection with the Mayor’s effort to terminate Clark’s employment violated the Fourth Amendment.” Id. at *7. In support of the discrimination claim under section 1981, “the only factual allegations asserted . . . [we]re (1) that Commissioner Clark and Deputy Francis are African-American males; (2) that the defendants are all white males; and (3) that the defendants ha[d] never initiated or undertaken the actions of terminating employment and physically removing the employee against white members of the Police Department.” Id. The Fourth Circuit found that “[t]hese allegations [we]re not only conclusory and insufficient to state a § 1981 claim, see Jordan [v. Alternative Resources Corp., 458 F.3d 332, 345 (4th Cir. 2006)], they [we]re patently untrue, given that Deputy Romano, who [wa]s not alleged to be within a protected class, complained of the exact same treatment in every other count of the complaint, belying any claim of discriminatory treatment.” Id. (footnote omitted). The court held that “[t]he allegations in this count [we]re nothing more than the sort of unadorned allegations of wrongdoing to which Twombly and Iqbal [we]re directed,” and that “Count II d[id] not on its face state a plausible claim for relief.” Id. With respect to the claim that the plaintiffs’ due process rights were violated, the Fourth Circuit agreed with the district court that qualified immunity applied, because even though the state court later determined that the contract “was subservient to the requirements of the

26

The court seemed to rely on the fact that the law did not provide relief for the conduct alleged, rather than a lack of factually specific details.

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Public Local Law of Baltimore City, at the time that Mayor O’Malley fired Commissioner Clark, no law or decision had determined that the contract between Clark and the City of Baltimore was not enforceable.” Id. at *8. With respect to the fourth count, the complaint “allege[d] that the defendants conspired to violate the plaintiffs’ civil rights, in violation of 42 U.S.C. § 1985,” but made “no other allegations and contain[ed] no facts to support the conspiracy alleged.” Francis, 2009 WL 4348830, at *8. The court cited pre-Twombly case law to note that pleading a violation of section 1985 requires “demonstrat[ing] with specific facts that the defendants were ‘motivated by a specific class-based, invidiously discriminatory animus to [ ] deprive the plaintiff[s] of the equal enjoyment of rights secured by the law to all.’” Id. (quoting Simmons v. Poe, 47 F.3d 1370, 1376 (4th Cir. 1995)) (second and third alterations in original). The court held: “Since the allegation in Count IV amounts to no more than a legal conclusion, on its face it fails to assert a plausible claim.” Id. (citing Iqbal, 129 S. Ct. at 1950; Gooden v. Howard County, Md., 954 F.2d 960, 969–70 (4th Cir. 1992) (en banc)). Finally, with respect to the argument that the district court erred in denying leave to amend, the Fourth Circuit noted that although the plaintiffs concluded their opposition to the motion to dismiss by stating that if the motion was granted, the plaintiffs requested leave to amend or to file an amended complaint, they “filed no separate motion, and they attached no proposed amendment or statement indicating how they might wish to amend their complaint.” Id. at *9. The plaintiffs had violated a local district court rule which required a party requesting leave to amend to provide a copy of the proposed amendment, and the Fourth Circuit held that “[i]n the circumstances, . . . the district court did not abuse its discretion in failing to give the plaintiffs a blank authorization to ‘do over’ their complaint.” Id. •

Monroe v. City of Charlottesville, Va., 579 F.3d 380 (4th Cir. 2009), cert. denied, 130 S. Ct. 1740 (2010). The plaintiff sued the city and individual police officers under § 1983, alleging violations of the Fourth and Fourteenth Amendments, because he was approached at his home by a police officer and asked to give a DNA sample because he matched the description of a serial rapist given by victims who described their assailant as “a youthfullooking black male.” Id. at 382. The plaintiff alleged that his equal protection rights were violated because he was stopped based on his race, and because officers did not perform similar stops when victims describe an assailant as white. Id. The plaintiff also alleged that he was subject to an unreasonable seizure when the officer came to his home and when the plaintiff gave a sample for DNA analysis. Id. The district court concluded that the plaintiff could not proceed on his equal protection claim based on being stopped on account of his race because the Equal Protection Clause is not violated when the police limit their investigation to those matching a victim’s description, but found that the plaintiff could proceed on the claim that the City did not investigate crimes in the same way when the assailant is described as white. Id. at 382–83. The district court dismissed the seizure claim based on the officer coming to the plaintiff’s home because “Monroe failed to state facts sufficient to show the consensual encounter escalated to a seizure,” but his claim that his 274

bodily fluids were unreasonably seized was allowed to proceed. Id. at 383. The plaintiff amended his complaint, and the defendant again moved to dismiss. The district court again dismissed the portion of the equal protection claim asserting that the officers only approached him based on his race, but allowed the rest of the equal protection claim to proceed; dismissed the claim that the plaintiff was unreasonably seized because “the newly alleged facts did not cure the original deficiencies”; and allowed the seizure claim based on the officer’s taking bodily fluids to proceed. Monroe, 579 F.3d at 383. The plaintiff appealed the dismissal of his Fourth Amendment claim and the dismissal of his equal protection claim; the Fourth Circuit affirmed. On appeal, the plaintiff asserted that the district court improperly “required him to plead facts sufficient to prove his claim, instead of merely requiring ‘enough facts from which the trial court could infer a basis for [Monroe’s] claim’ when viewed in conjunction with the potentially discoverable facts . . . .” Id. at 385 (alteration in original). Citing a pre-Twombly case, the Fourth Circuit noted that “the court ‘need not accept legal conclusions drawn from the facts, and [ ] need not accept as true unwarranted inferences, unreasonable conclusions, or arguments.’” Id. at 385–86 (quoting Jordan v. Alternative Res. Corp., 458 F.3d 332, 338 (4th Cir. 2006)) (alteration in original). With respect to the seizure claim, the court noted that the plaintiff had alleged that “he ‘was visited in his home and coerced into giving a DNA sample’”; “[t]he encounter was not consensual because ‘Monroe had both an objectively and subjectively reasonable belief that he was not free to decline the officer’s request or otherwise terminate the encounter”; “[t]he officer was in uniform and did not tell Monroe that he could terminate the encounter”; “[t]he encounter was at Monroe’s home and he was concerned neighbors would view him ‘as a snitch’”; “Monroe, based on his and others’ interactions with police, believed he had to comply with the officers, and the fact that he was approached at his home meant he ‘was not free to terminate the interaction’”; and “Monroe’s belief that he could not terminate the encounter was objectively reasonable based on ‘[t]he state of relations between law enforcement and members of the minority communities.’” Id. at 386 (fourth alteration in original). The Fourth Circuit noted that “[t]o elevate . . . an encounter to a seizure, a reasonable person must feel he is not free to disregard the officer and terminate the encounter,” and that because the inquiry is an objective one, the plaintiff’s subjective beliefs were irrelevant. Id. The court rejected the plaintiff’s theory that it was enough to plead that a sufficient proportion of the population shared his beliefs, stating that “[t]o agree that Monroe’s subjective belief that he was not free to terminate the encounter was objectively reasonable because relations between police and minorities are poor would result in a rule that all encounters between police and minorities are seizures.” Id. at 386–87. The court concluded that “while Monroe’s subjective beliefs may be facts, they are irrelevant facts that neither plausibly give rise to a right to relief nor suggest there are discoverable facts that may plausibly give rise to a right to relief.” Monroe, 579 F.3d at 387. The court found that the remaining allegations in the complaint did not meet the Twombly standard: The remaining facts in the complaint regarding the alleged 275

seizure do not satisfy the Twombly test either. First, Officer Mooney’s failure to tell Monroe that he could terminate the encounter has been rejected as a means of establishing a seizure, and does not imply there are discoverable facts that establish otherwise. Second, the allegations that Monroe was “coerced,” that his belief was “objectively reasonable,” and that the encounter “was not [ ] consensual” are legal conclusions, not facts, and are insufficient. The remaining two facts—that Officer Mooney was in uniform and he approached Monroe at his home—merely describe many consensual encounters, are insufficient to survive a Rule 12(b)(6) motion, and do not imply there are other discoverable facts that “raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555, 127 S. Ct. 1955. Thus, the district court did not err in dismissing Monroe’s Fourth Amendment claim. Id. (internal citations omitted) (alteration in original). With respect to the equal protection claim, the Fourth Circuit concluded that the officer did not approach the plaintiff based on his race, but based on the victims’ descriptions. The court noted that an equal protection claim requires “‘express racial classification,’ which occurs when the government distinguishes among the citizenry on the basis of race,” and concluded that “it [wa]s clear that the officers in this case made no such distinction when establishing the suspect’s characteristics—any descriptive categorization came from the rape victims who described their assailant.” Id. at 388. The court found this conclusion supported by Iqbal, where the Supreme Court “noted that Arab-Muslim men were responsible for the September 11 attacks, and ‘[i]t should come as no surprise that a legitimate policy directing law enforcement to arrest and detain individuals because of their suspected link to the attacks would produce a disparate, incidental impact on Arab Muslims . . . .’” Id. at 389 (quoting Iqbal, 129 S. Ct. at 1951) (alteration in original). •

Walker v. Prince George’s County, 575 F.3d 426 (4th Cir. 2009). The owners of a pet wolf initiated suit in state court against the county animal control officer and the county after the officer seized their pet wolf. The plaintiffs alleged civil trespass, violation of the Maryland Constitution, and violation of their Fourth Amendment rights under § 1983. Id. at 428. The defendants removed the case to federal court and moved for summary judgment. Id. The district court granted the defendants’ motion for summary judgment because the officer was entitled to qualified immunity and the complaint failed to adequately plead a claim against the county under Monell v. New York City Department of Social Services, 436 U.S. 658 (1978), by failing to allege the county’s policy, custom, or practice. Walker, 575 F.3d at 428. The plaintiffs appealed the grant of the defendants’ motion for summary judgment on the Fourth Amendment § 1983 claim and the denial of their own motion for summary judgment on that claim, and also argued that they were entitled to summary judgment. Id. at 428–29. The Fourth Circuit affirmed.

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In discussing the Monell claim, the Fourth Circuit noted that “a municipality’s liability ‘arises only where the constitutionally offensive actions of employees are taken in furtherance of some municipal ‘policy or custom,’” id. at 431 (citation omitted), but that the plaintiffs “‘failed to make any allegations in their complaint in regards to the existence of the County’s policy, custom, or practice, therefore failing to plead’ a viable Monell claim,” id. (citation omitted). The court rejected the plaintiffs’ assertion that “a County policy to seize animals without inquiring whether their owners have valid permits for those animals ‘[could] be inferred from Officer Jacobs’ testimony’ and that it should be ‘presumed that the County never checks to see if owners lawfully possess wild or exotic animals before seizing them,’” because the plaintiffs “fail to explain the basis of their inference or the justification for their presumption.” Id. The court noted: “Critically lacking is any support for the proposition that Officer Jacobs’ common practice ‘implemented an official government policy or custom.’” Id. (citation omitted). The court concluded that the allegations “‘d[id] not permit [it] to infer more than the mere possibility of misconduct,” Walker, 575 F.3d at 431 (citing Iqbal, 129 S. Ct. at 1950), and “[t]his mere possibility [wa]s inadequate to subject the County to appellants’ suit for monetary damages,” id. •

Shonk v. Fountain Power Boats, 338 F. App’x 282 (4th Cir. 2009) (unpublished) (per curiam). The plaintiff brought a breach of warranty case based on defects in a boat he purchased. Id. at 283. The plaintiff sued Fountain Power Boats (“Fountain”), the manufacturer of the boat; Yanmar American Corporation (“Yanmar”), the manufacturer of the boat’s engines; and Mercury Marine (“Mercury”), the manufacturer of the boat’s stern drives. Id. The complaint asserted breach of warranty under the Magnuson-Moss Warranty–Federal Trade Commission Improvement Act (the “MMWA”), breach of warranty under the Maryland Uniform Commercial Code–Sales (the “Maryland UCC”), and unfair or deceptive trade practices under the Maryland Consumer Protection Act (the “Maryland CPA”). Id. The district court granted dismissal under Rule 12(b)(6) of the claims against Yanmar and Mercury, denied leave to amend, and granted summary judgment in favor of Fountain on the MMWA claim. Id. at 284. The complaint alleged one count under the MMWA, one count under the Maryland UCC, and one count under the Maryland CPA, and each count “indiscriminately used the term ‘Defendant.’” Id. After the district court had dismissed the claims against Yanmar and Mercury, the plaintiff sought to file a Second Amended Complaint, which “newly alleged that Fountain manufactured the Boat, Yanmar manufactured the Boat’s engines, and Mercury manufactured the Boat’s stern drives”; “listed Shonk’s claims under the MMWA against Fountain, Yanmar, and Mercury in separate counts”; and left the remaining claims “lumped together.” Shonk, 338 F. App’x at 285. In the proposed Second Amended Complaint, “Shonk’s claims against Yanmar and Mercury under the MMWA, the Maryland CPA, and the Maryland UCC continued to focus solely upon the Boat.” Id. The district court overturned the magistrate judge’s decision to allow filing of the Second Amended Complaint, finding, among other things, that amendment would be futile. Id. With respect to the claims against Yanmar and Mercury under the MMWA, the district court 277

had dismissed “because the Initial Complaint failed to identify a consumer product supplied or manufactured by Yanmar or Mercury.” Id. at 287. The plaintiff argued on appeal that “‘when a specific boat is identified, Yanmar and Mercury should be able to determine what role they played in the manufacture of the specific boat by tracing a serial number or otherwise.’” Id. The Fourth Circuit rejected this argument: Shonk’s contention is fatally flawed in two respects. First, it ignores his burden at the Rule 12(b)(6) stage to allege sufficient factual matter “to raise a right to relief above the speculative level . . . .” Twombly, 550 U.S. at 555, 127 S. Ct. 1955. At best, Shonk’s allegations in the Initial Complaint pertaining to his claims under the MMWA against Yanmar and Mercury constitute “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements,” which decisively fail to meet his pleading burden. Iqbal, 129 S. Ct. at 1940. Second, Shonk’s contention ignores Rule 10(b)’s mandate to state, in a separate count, each claim founded on a separate transaction or occurrence, “[i]f doing so would promote clarity.” FED . R. CIV . P. 10(b). Given the fact that Fountain manufactured the Boat, Yanmar manufactured the Boat’s engines, and Mercury manufactured the Boat’s stern drives, each claim under the MMWA against Fountain, Yanmar, and Mercury should have been stated in a separate count. Accordingly, it cannot be doubted that the district court properly dismissed Shonk’s claims against Yanmar and Mercury under the MMWA, as pleaded in the Initial Complaint. We, therefore, affirm the district court’s dismissal of those claims. Id. (alterations in original). With respect to the claims against Yanmar and Mercury under the Maryland CPA, the Fourth Circuit noted that the claims “all pertain[ed] to the sale of the Boat,” and that “each violation of the Maryland CPA alleged by Shonk in the Initial Complaint require[d] that the defendant have made the untrue representation about a ‘[c]onsumer good [ ].’” Shonk, 338 F. App’x at 287–88 (second and third alterations in original). The district court dismissed these claims because “the Initial Complaint failed to identify a consumer good sold to Shonk by Yanmar or Mercury.” Id. at 288. The Fourth Circuit affirmed, explaining that the complaint could not “be reasonably read to identify a consumer good sold to Shonk by Yanmar or Mercury.” Id. With respect to the breach of warranty claims against Yanmar and Mercury under the Maryland UCC, the district court dismissed the claims because the complaint “failed to identify a good warranted by Yanmar or Mercury.” Id. The plaintiff raised the same argument that Yanmar and Mercury ought to be able to determine their role by tracing a serial number, but the Fourth Circuit “remain[ed] unimpressed with such arguments and 278

reject[ed] them on the same grounds that [it] previously rejected them in the context of [the plaintiff’s] claim under the MMWA and the Maryland CPA against Yanmar and Mercury.” Id. The Fourth Circuit also affirmed the district court’s denial of leave to amend, even though “the Proposed Second Amended Complaint [wa]s far more detailed than the Initial Complaint or the Proposed First Amended Complaint.” Id. at 289. The court explained that the additional detail did not avoid the futility of the amendment because “Shonk’s claims against Yanmar and Mercury under the MMWA, the Maryland CPA, and the Maryland UCC continued to focus solely upon the Boat.” Shonk, 338 F. App’x at 289. The court continued: For example, although Shonk set forth his breach of warranty claim against Yanmar under the MMWA in a separate count, he did not allege that the Boat’s engines were consumer products under the MMWA. Rather, he alleged that the Boat (which the Proposed Second Amended Complaint identifies Fountain as having manufactured and warranted) is a consumer product under the MMWA. Because neither Yanmar nor Mercury manufactured nor warranted the Boat (per Shonk’s allegations in the Proposed Second Amended Complaint), Shonk’s sole focus on the Boat in his claims against Yanmar and Mercury rendered the Proposed Second Amended Complaint futile. Accordingly, we uphold, as not an abuse of discretion, the district court’s refusal to grant Shonk leave to proceed under the Second Amended Complaint. Id. The court also affirmed the grant of summary judgment in favor of Fountain. See id. at 289–90.

Fifth Circuit •

Higgenbotham v. Connatser, 420 F. App’x 466, 2011 WL 1239872 (5th Cir. Apr. 4, 2011) (unpublished) (per curiam). Higgenbotham worked as a sign language interpreter for both the Clear Creek Independent School District (“CCISD”) and a local government cooperative for the hearing-impaired (“the Coop”). Her employment was terminated after an incident in which she allegedly pulled on a student’s blouse, leaving the student exposed. Higgenbotham filed suit against various officials of CCISD and the Coop, alleging that the defendants had deprived her of due process by refusing to conduct a hearing at which she would have an opportunity to clear her name. The defendants filed a motion to dismiss on the basis of qualified immunity. The district court denied the motion, concluding that Higgenbotham pleaded sufficient facts to justify discovery concerning her allegation that was she was deprived of a liberty interest without due process of law. 279

The Fifth Circuit reversed the district court’s denial of defendants’ motion to dismiss. The court summarized the allegations of Higgenbotham’s complaint as follows: [Higgenbotham’s] employment ended following an incident on March 11, 2009, in which she allegedly pulled on a student's blouse, exposing part of the student’s breast. On that afternoon, Appellant Sandra Connatser, the Director of the Coop, asked Higgenbotham to explain the earlier events. Higgenbotham obliged, telling Connatser and the Coop’s assistant principal about her contact with the student. Following Higgenbotham's verbal explanation, Connatser asked her to write down her version of the events. Later that day, a person from the CCISD human resources department instructed Higgenbotham that she would be suspended pending an investigation of the allegations against her. Connatser then invited Higgenbotham to amend her written statement, an opportunity Higgenbotham accepted. CCISD’s investigation concluded with Higgenbotham’s termination several weeks later. Id. at *1. In holding that the motion to dismiss Higgenbotham’s complaint should be granted, the Fifth Circuit stated: The Constitution’s due process clause affords a right to notice and a hearing following the termination of government employment. Bd. of Regents v. Roth, 408 U.S. 564, 92 S. Ct. 2701, 33 L.Ed.2d 548 (1972). According to the Supreme Court, “where a person’s good name, reputation, honor, or integrity is at stake because of what the government is doing to him, notice and an opportunity to be heard are essential.” Id. at 573, 92 S. Ct. 2701. The sole fact that the employee was fired, however, will not suffice to implicate a liberty interest. The employee’s reputation must have been unfairly impugned as well. A constitutional violation exists only where a plaintiff can show: (1) that she was discharged; (2) that stigmatizing charges were made against her in connection with the discharge; (3) that the charges were false; (4) that she was not provided notice or an opportunity to be heard prior to her discharge; (5) that the charges were made public; (6) that she requested a hearing to clear her name; and (7) that the employer refused her request for a hearing. Hughes v. City of Garland, 204 F.3d 223, 226 (5th Cir. 2000). A 280

plaintiff must allege facts to support each of these elements in order to state a claim. Higgenbotham’s complaint fails to assert facts that would support several elements listed in Hughes. First, the only direct statement regarding publication in Higgenbotham’s complaint is devoid of facts: “Since Plaintiff’s discharge it is believed that the alleged event has been reported to the offender database and Plaintiff has been unable to locate and/or secure employment in her chosen profession as an interpreter in public schools.” This assertion fails to specify who reported the incident and which “offender database” now contains a record of it. In particular, the complaint does not allege that any of the individual Defendants-Appellants had any connection with the alleged publication. Furthermore, Appellee cannot rest on the assumption that CCISD reported her conduct to a publicly available database on the theory that Texas law requires the disclosure of incidents involving sexual misconduct toward a minor. CCISD never indicated that it terminated Higgenbotham for sexual impropriety. The letter informing Higgenbotham of her termination stated only that “your conduct was inappropriate toward a student . . . .” This statement does not raise a presumption that any of the Appellants reported the details of Higgenbotham’s termination in a publicly available database. Thus, the complaint has no factual assertions to convince a court that Higgenbotham’s claim might succeed. In addition to the complaint’s inadequate treatment of publication, other elements of the claim are unsupported by facts. In particular, concerning the linked requirements that a plaintiff request an opportunity to clear her name and that her employer deny such a request, Higgenbotham’s complaint asserts only that “her respective employers have refused her request for a meaningful hearing to clear her name.” Higgenbotham fails to assert a connection between the denial of a name-clearing hearing and the particular defendants in this case. Moreover, she does not identify the request for a hearing or its denial. The allegations in the complaint point toward the opposite conclusion—that Higgenbotham was able to present her side of the story both verbally before the assistant principal and in writing. These facts cast doubt on the fourth element listed in Hughes. Additional facts would be necessary to establish that Higgenbotham did not have an opportunity to be heard and that Appellants refused such a hearing when requested. On several elements, therefore, the complaint resembles a “formulaic recitation” of elements rather than 281

the fact-based pleading envisioned in Twombly and Iqbal. Id. at *2. The court concluded that because it had found that “Appellee failed to plead the factual assertions necessary to ‘allow[ ] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged,’” it had to “reverse and render the district court’s denial of Appellants’ motion to dismiss.” Id. at *3 (citing Iqbal, 129 S. Ct. at 1949) (alteration in original). •

City of Clinton, Ark. v. Pilgrim’s Pride Corp., 632 F.3d 148 (5th Cir. 2010). Defendant Pilgrim’s Pride Corp. owned a facility in the City of Clinton, Arkansas for growing and processing poultry. Pilgrim’s had acquired this facility in 2004 from another poultry processing company, ConAgra. In 2008, Pilgrim’s announced that it would close its facility and its operations in the City of Clinton. Subsequently, Pilgrim’s filed for bankruptcy relief under Chapter 11. The closure of the facility caused economic distress for the City of Clinton, which had difficulty repaying bond debts it had incurred in the construction of a water purification system designed to meet the needs of Pilgrim’s poultry plant. The City sued Pilgrim’s, alleging fraud, promissory estoppel, unjust enrichment, and violation of the Arkansas Deceptive Trade Practices Act. The district court dismissed the City’s complaint for failure to state a claim. In support of its claims, the City’s complaint relied entirely upon two oral statements, one made by an officer of ConAgra, the prior owner of the facility and not a party to the case, and the other made by a Pilgrim’s officer. The ConAgra officer, Hooper, when asked by a City councilman in 1985 how the City would repay the 40-year municipal bonds it had issued if ConAgra “pulled up stakes and left,” allegedly responded, “We will not go off and leave you holding the bag.” Later, in 2004, the Pilgrim’s officer, Hendrix, allegedly stated at a meeting that Pilgrim’s would “have a long-term commitment to the City of Clinton” as its “community partner.” The City alleged that by this statement, Pilgrim’s ratified ConAgra’s earlier promise. The Fifth Circuit, while citing the Twombly plausibility standard, stated that “[f]raud claims must also meet the heightened pleading standard of Rule 9(b).” The court then explained why the City’s fraud claims did not meet that standard: First, the City’s amended complaint fails to sufficiently plead that there has been a false representation of a material fact, because the statements by Hooper and Hendrix upon which the City relies simply do not contain any material facts. Because a false statement is, by definition, material only “if a reasonable person would attach importance to and be induced to act on the information,” we have held that statements that are so inherently vague and ambiguous cannot be material. Shandong Yinguang Chem. Indus. Joint Stock Co. v. Potter, 607 F.3d 1029, 1033 (5th Cir. 2010). Hooper’s January 1985 statement that ConAgra “will not go off and leave you holding 282

the bag,” even when considered in the context of the meeting at which it was stated, is inherently vague because it admits of a variety of interpretations. For example, an equally plausible meaning to the one the City urges is that ConAgra was promising not to close the plant right away after the City issued the bonds; indeed, the plant did not close for over twenty-three years after the statement was allegedly made. Hendrix’s January 2004 statement that Pilgrim’s would “have a long-term commitment to the City of Clinton” as its “community partner” is even more vague—it not only contains no facts on its face, but also is devoid of context that would link it to the water system expansion in any way. This court has held similarly vague and attenuated statements to be insufficient to survive a motion to dismiss under the standards of Rules 12(b)(6) and 9(b). See, e.g. Potter, 607 F.3d at 1033. (“[Plaintiff] did not plead that [Defendant] presented any detailed, corroborating information, facts or figures to support the statement [that the company was in sound financial condition] that might entice a reasonable person to attach importance to the statement. Further, the statement is significantly attenuated from the execution of [the contracts at issue] which occurred, respectively, seven and ten months later”). Moreover, the City does not allege any facts to provide a basis for its claim that Hendrix’s oral statement constituted a “ratification” by Pilgrim’s of the oral statement made nineteen years early by Hooper, as a representative of ConAgra. Indeed, the City does not allege any facts indicating that Hendrix was even aware that Hooper’s 1985 statement had been made. The City has failed to allege a basis for holding Pilgrim’s liable for a ConAgra plant manager's alleged oral “promise” made nineteen years previously. Even if the context surrounding Hooper’s 1985 statement could be seen as providing the requisite specificity for the statement, the City’s fraud claim would still fail because the statements, which do not purport to be promises at all, in any event wholly relate to future events, which cannot form the basis of a fraud action. See Distrib. Co. v. Miller Brewing Co., 366 Ark. 560, 237 S.W.3d 63, 74 (2007). There is an exception to this rule where the plaintiff can show that the defendant knew the promise was false when made, but the City has insufficiently alleged that Hooper had any knowledge that the statement was false at the time it was made. While the City alleges that “[a]t the time the representation and promise was made, Mr. Hooper and ConAgra intended to ‘leave the City holding the bag’ of indebtedness . . . at the time the poultry processor closed the plant,” this allegation is meaningless absent any factual allegations 283

concerning any then intent to close the plant, and the allegation is essentially nothing more than a conclusory statement of the element of the cause of action, and therefore lacks sufficient specificity. See Dorsey v. Portfolio Equities, Inc., 540 F.3d 333, 339 (5th Cir. 2008) (“simple allegations that defendants possess fraudulent intent will not satisfy Rule 9(b)”). While Rule 9(b) provides that intent and knowledge “may be alleged generally,” this is not license to base claims of fraud upon conclusory allegations. The court did not explicitly state whether the City’s other claims—for promissory estoppel, unjust enrichment, and violations of the Arkansas Deceptive Trade Practices Act—also were properly analyzed under Rule 9(b) rather than under Rule 8. In any case, the court affirmed their dismissal on the basis of the same reasoning quoted above. The court found that “[l]ike the fraud cause of action, the promissory estoppel cause of action fails because the statements by Hooper and Hendrix, upon which the City bases its claims, are impermissibly vague and ambiguous. Such vague and attenuated statements cannot be considered to be promises that the defendant would reasonably expect to induce action.” Furthermore, “[b]ecause the meanings of the statements were vague and ambiguous, and because the statements were so attenuated from the eventual closure of the facility, they do not amount to a sufficient ‘operative act’” or other circumstance necessary to support an unjust enrichment claim. Finally, the court affirmed the dismissal of the City’s claims under the Arkansas Deceptive Trade Practices Act “because the statements by Hooper and Hendrix are too vague and ambiguous to satisfy the specificity requirements of Rule 12(b)(6). These alleged statements simply had no capacity to deceive a reasonable consumer, and no facts are alleged which plausibly suggest otherwise.” (citing Twombly, 127 S. Ct. at 1966.). •

Gentilello v. Rege, 627 F.3d 540, 2010 WL 4868151 (5th Cir. Dec. 1, 2010). Tenured professor Gentilello brought § 1983 action against supervisors, alleging that he was wrongfully demoted from two chair positions without due process of law in violation of the Fourteenth Amendment. Id. at *1 The district court granted supervisors’ motion for judgment on the pleadings and denied professor leave to file an amended or supplemental complaint. Id. at *2. The Fifth Circuit affirmed. The court first noted that it evaluated a 12(c) motion using the same standard as a 12(b)(6) motion to dismiss. Id. It next explained that it was undisputed that the tenured professor had a protected property interest in continuing employment. Id. at *3. But that “the due process clause does not protect Gentilello’s specific job duties or responsibilities absent a statute, rule, or express agreement reflecting an understanding that he had a unique property interest in those duties or responsibilities.” Id. The court concluded that Gentillelo never identified his alleged property interest in the chair positions: Nowhere in Gentilello’s Complaint, filed September 13, 2007, 284

his Amended Complaint, filed October 22, 2007, or his proposed Supplemental Complaint, filed April 21, 2009, did Gentilello plead the factual basis for his alleged property interest in the Chair Positions. In his Amended Complaint, Gentilello alleged the bare legal conclusion that the Defendants “wrongfully removed Plaintiff from his [Chair Positions], positions in which Plaintiff had a constitutionally protected property interest in occupying for a previously-determined period of time.” He further alleged that “Defendants’ conduct caused Plaintiff to be deprived of his vested, constitutionally protected property right in his [Chair Positions],” and as a result, that he “was not merely deprived of duties and responsibilities, but rather, was deprived of the economic interests in and benefits associated with such positions.” Gentilello did not substantiate these allegations by pointing to any ordinance, official policy, state or local law, contract, or other enforceable agreement to support his claim of entitlement to the Chair Positions. Therefore, his pleadings fail to state a due process claim. See Blackburn v. City of Marshall, 42 F.3d 925, 940 (5th Cir.1995) (“Because [plaintiff] does not allege that his property interest ... stems from a state statute or regulatory scheme, a contract, or any other independent source, we find that [plaintiff] has failed to allege a property interest protected by the Due Process Clause of the Fourteenth Amendment.”). Nor did Gentilello alert the district court to the factual basis for his claim of entitlement to the Chair Positions in his extensive briefing in opposition to Defendants’ motion for judgment on the pleadings. At best, Gentilello asserted that he had a property interest in the Chair Positions “based upon letters from Defendants,” the contents of which he has not disclosed to the district court or even (when we made inquiry at oral argument) to this court. Apparently as a result of these letters, Gentilello asserted that he had a contract with UT Southwestern “which was subject to certain rules and regulations” - which Gentilello has not identified - “that required ‘good cause’ before his chaired positions could be terminated.” Contrary to Gentilello’s contentions, these “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice” to state a due process claim. Iqbal, 129 S. Ct. at 1949 (citing Twombly, 550 U.S. at 555, 127 S. Ct. 1955). Gentilello, 2010 WL 4868151, at *3-4 (alterations in original). The court next determined that the district court did not err in refusing to allow a second amendment more than a year after Gentilello initially amended his complaint: “At some point a court must decide that a plaintiff has had a fair opportunity to make his case; if, after that time, a cause of action has not been established, the court should finally dismiss the suit.” Id. at *4 (quoting Jacquez 285

v. Procunier, 801 F.2d 789, 792 (5th Cir. 1986)). Finally, the court found that the district court did not err in denying Gentilello’s request for leave to supplement his pleadings because Gentilello provided no justification for delaying months after the action giving rise to his new claim before seeking leave to supplement. Id. at *5. •

Castro ex rel. R.M.G. v. United States, 608 F.3d 266 (5th Cir. 2010) (per curiam), cert. denied, 131 S. Ct. 902 (2011). The plaintiff, on her own behalf and on behalf of her minor daughter, filed suit under the Federal Tort Claims Act (FTCA), alleging that the government negligently caused the wrongful deportation of her daughter, R.M.G., a United States citizen. Id. at 267. The government moved to dismiss under Rule 12(b)(1) or, alternatively, for summary judgment. Id. at 267–68. The district court held that the government was protected from suit under the discretionary function exception of the FTCA, dismissed the tort claims for lack of subject matter jurisdiction, and dismissed the constitutional and injunctive claims as moot. Id. at 268. A Fifth Circuit panel reversed and remanded, but the court granted rehearing en banc, vacating the panel opinion. Id. As explained by Judge Stewart in his dissent, Border Patrol agents took R.M.G. into custody, despite knowledge of her United States citizenship, when they arrested her undocumented father (Gallardo) and detained him for removal. Id. at 270 (Stewart, J., dissenting). Castro, a United States citizen, pleaded with the Border Patrol to return her daughter to her and allow her daughter to remain in the United States. Castro, 608 F.3d at 270 (Stewart, J., dissenting). “But on the very same day that R.M.G. and Gallardo were detained, and although Gallardo did not have a custody order in his favor, the Border Patrol deported R.M.G. and Gallardo to Mexico,” and “Castro could not locate her daughter for the next three years.” Id. On rehearing, the majority affirmed the district court’s decision to dismiss the FTCA claims for want of jurisdiction, “essentially for the reasons given by the district court,” and also agreed with the district court that the constitutional claims and the claim for injunctive relief were moot. Id. at 268 (majority opinion). Judge Dennis concurred in the judgment in part and dissented in part. Judge Dennis asserted that there was federal jurisdiction over the plaintiffs’ claims for abuse of process, assault, and false imprisonment because the government has waived immunity through the FTCA’s law enforcement proviso, and that the district court had therefore erred by dismissing those claims under Rule 12(b)(1) for lack of subject matter jurisdiction. Id. at 269 (Dennis, J., concurring in judgment in part and dissenting in part). Because it was not clear whether the claims for abuse of process and assault would survive a Rule 12(b)(6) motion to dismiss, Judge Dennis would have remanded those claims. Id. But with respect to the false imprisonment claim, Judge Dennis would have dismissed under Rule 12(b)(6) because “the plaintiffs ha[d] clearly failed to state a claim on which relief [could] be granted.” Id. Judge Dennis asserted that R.M.G. was a baby and could not consent independently, but that her father could and did consent on her behalf to her remaining with him. Castro, 608 F.3d at 269 (Dennis, J., concurring in judgment in part and dissenting in part). Judge Dennis concluded that “[b]ecause R.M.G.’s presence in the Border Patrol station was not without consent, it did not amount to false imprisonment.” Id. With respect to the remaining claims, 286

which did not fall within the law enforcement proviso, Judge Dennis agreed with Judge Stewart that the discretionary function exception to the FTCA “does not encompass actions by government agents that are ‘unconstitutional, proscribed by statute, or exceed the scope of an official’s authority.’” Id. (citations omitted). As a result, Judge Dennis believed that the district court erred by “failing to consider whether the Border Patrol agents’ actions violated any statutory or constitutional requirements before it decided that the plaintiffs’ claims were barred by the discretionary function exception.” Id. at 269–70. But Judge Dennis believed that the claims not covered by the law enforcement proviso should have been dismissed for lack of subject matter jurisdiction because they were barred by the discretionary function exception, explaining that “[t]he facts as alleged by the plaintiffs d[id] not disclose any constitutional or statutory violations that would make the discretionary function exception inapplicable.” Id. at 270. Judge Dennis explained that the Border Patrol had merely maintained the status quo by allowing Gallardo to keep R.M.G. with him, and it could not have made a custody decision to transfer the baby to Castro without a court order or other legal authority. Id. In Judge Stewart’s dissent, he asserted that Castro plausibly alleged that the Border Patrol exceeded the scope of its authority under the Immigration and Nationality Act of 1953 (INA) and the Fourth and Fifth Amendments, and that the majority therefore erred by applying the discretionary function exception without analyzing whether the Border Patrol agents acted outside their authority. Castro, 608 F.3d at 271 (Stewart, J., dissenting). Judge Stewart also asserted that the majority “erroneously applie[d] the principles of Rule 12(b) according to . . . Twombly . . . and . . . Iqbal . . . , and disregard[ed] the Supreme Court’s instruction to ‘narrowly construe[ ] exceptions to waivers of sovereign immunity . . . in the context of the sweeping language of the [FTCA].’” Id. at 270 (second and third alterations and fifth omission in original) (citation omitted). Judge Stewart explained: The majority acknowledges that we have before us a Rule 12(b)(1) dismissal, but it erroneously concludes that Castro has not met her burden under Twombly and Iqbal. To the contrary, based on the allegations contained in Castro’s complaint, the Border Patrol agents’ actions in detaining and deporting R.M.G. implicate both statutory and constitutional concerns. The facts included in the complaint—in particular the undisputed fact that the Border Patrol agents knew R.M.G[.]’s citizenship status and did not doubt that she was a United States citizen—support a plausible claim that the Border Patrol agents exceeded the scope of their statutory and constitutional authority and their actions were therefore non-discretionary. Id. at 272–73. Judge Stewart believed that Castro’s complaint alleged a plausible violation of the Fourth Amendment right to be free from seizure and the Fifth Amendment right to due process, noting that the complaint alleged: 287

Defendant United States’ detention of Plaintiff R.M.G. without due process violated her Fourth Amendment constitutional interest in remaining free from bodily seizure. . . . Detention of Plaintiff R.M.G. was not due to an act of wrongdoing that warranted detention nor was detention based on an emergency. The United States did not and cannot show that seizure of the minor child was necessary to protect Plaintiff R.M.G.’s health, safety and welfare; indeed, Defendant United States placed R.M.G. in imminent danger by deporting her with a man it knew was wanted in connection with a homicide. . . . Plaintiff Castro made a claim of citizenship to Defendant United States on behalf of her minor child, Plaintiff R.M.G. Despite that claim, and despite Defendant’s recognition of Plaintiff R.M.G.’s status as a U.S. citizen, Defendant United States intentionally, maliciously, and recklessly violated Plaintiffs’ right to procedural due process guaranteed by the Fifth Amendment. . . . Defendant United States willfully detained R.M.G. without her consent or the consent of her U.S. citizen parent, and the detention was without legal authority or justification. . . . From the moment Defendant United States knew or should have known that R.M.G. was a U.S. citizen and that a U.S. citizen parent was present to take possession of her and did not release her, Defendant United States had no legal authority or justification to continue its detention of the child. Id. at 273 (quotation marks omitted) (omissions in original). Judge Stewart further pointed out that the complaint alleged that “the Border Patrol agents acted outside of their statutory grant of authority under the INA, averring that ‘[n]o section of [the INA] provides authority for the United States to detain or remove a U.S. citizen.’” Id. (alterations in original). Judge Stewart argued that “[d]espite the Border Patrol agents’ conceded knowledge of R.M.G.’s citizenship and Castro’s plausible allegations of constitutional and statutory violations, the district court opinion—relied upon by the majority—failed to address whether the Border Patrol agents exceeded their scope of authority,” and that “[t]his crucial omission in the district court’s Rule 12(b)(1) analysis allow[ed] any actions taken by the Border Patrol agents in excess of their authority to nonetheless benefit from the protection of the discretionary function exception.” Id. at 274. Because “[t]he majority opinion weaken[ed] a critical, inherent safeguard of the discretionary function exception and neglect[ed] Castro’s patently plausible allegations of unauthorized actions by the Border Patrol agents in addressing the 12(b)(1) dismissal,” Judge Stewart would have vacated the district court’s order and remanded for a ruling on whether the Border Patrol agents acted within the scope of their authority. Id.

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Shandong Yinguang Chem. Indus. Joint Stock Co. v. Potter, 607 F.3d 1029 (5th Cir. 2010) (per curiam). Plaintiff Shandong Yinguang Chemical Industries Joint Stock Co., Ltd. (“Yinguang”) sold explosive chemicals to Beston Chemical Corporation (“Beston”). Id. at 1031. Beston was wholly owned by Michael Potter. Id. After Beston failed to make payments on two contracts and declared bankruptcy, Yinguang sued Potter for common law fraud and fraudulent inducement, and sought to pierce the corporate veil. Id. The district court dismissed the complaint, finding that Yinguang failed to meet Rule 9(b)’s pleading requirements for the fraud claim and did not have standing to bring the veil-piercing claim. Id. The Fifth Circuit affirmed. According to the complaint, Beston and Yinguang entered into eight contracts. Id. Beston made untimely payments for the first six contracts, but the dispute arose with respect to the last two contracts. See Yinguang, 607 F.3d at 1031. The complaint alleged that Potter made two types of misrepresentations during the negotiation of the last two contracts: “First, on July 20, 2003, Potter represented that Beston was in ‘sound financial condition’ and that Beston would pay for current and future shipments. Second, Potter represented repeatedly that Beston would make regular payments on its purchases.” Id. “Despite Potter’s assurances, he omitted to tell Yinguang that Beston had been unprofitable in 2003,” and “Beston made no regular payments on either contract.” Id. at 1032. After Beston filed for bankruptcy and left Yinguang with an unsecured claim, Yinguang sued Potter personally in federal court, alleging that Potter committed fraud and fraudulent inducement by lying to Yinguang’s president to entice Yinguang to enter into the contracts. Id. Yinguang also sought to impose Beston’s contractual liability on Potter by piercing the corporate veil through allegations that Potter used Beston to perpetrate a fraud by funneling money out of Beston into other Potter-owned corporate entities. Id. On appeal, the Fifth Circuit explained that “[t]he court’s task [in ruling on a Rule 12(b)(6) motion] is to determine whether the plaintiff has stated a legally cognizable claim that is plausible, not to evaluate the plaintiff’s likelihood of success.” Id. (citing Iqbal, 129 S. Ct. at 1949). In addition, with respect to the fraud and fraudulent inducement claims, the court noted that the plaintiff must meet the requirements of Rule 9(b), which requires “‘stat[ing] with particularity the circumstances constituting the fraud.’” Yinguang, 607 F.3d at 1032. In considering the fraud claim, the court noted that “Yinguang allege[d] that Potter committed fraud both by affirmative misrepresentation and by omission,” and “assert[ed] that Potter’s statement that Beston was in ‘sound financial condition’ was a misrepresentation because Beston was unprofitable in 2003 and failed to obtain a line of credit.” Id. The court concluded that “Yinguang’s allegations fail[ed] to meet the pleading requirements of Rule 9(b) as to several of the fraud elements.” Id. at 1033. The court explained that the alleged statement was “inherently vague and ambiguous,” noting that “Yinguang did not plead that Potter presented any detailed, corroborating information, facts or figures to support the statement that might entice a reasonable person to attach importance to the statement”; that the “statement [wa]s significantly attenuated from the execution of Contract Nos. 7 and 8”; that “the statement was made during a meeting to assure Yinguang that a late payment on 289

Contract No. 6 would be forthcoming”; and that “in the parties’ course of dealing on prior contracts, Beston’s payments had repeatedly been late although it ‘generally’ met its obligations to Yinguang.” Id. The court concluded that “[u]nder all of these circumstances, Yinguang’s bare assertion of materiality r[ang] hollow.” Id. The court also found that Yinguang failed to properly allege that the statement was false when made, explaining that the facts “[t]hat Beston was unprofitable for the year 2003 and unable to obtain a line of credit sometime in 2004 d[id] not support a conclusion [that] Beston was not in ‘sound financial condition’ in July 2003.” Id. The court rejected Yinguang’s attempt to rely on statements regarding Beston’s current and future willingness to pay, explaining that the theory that they were false when made “suffer[ed] from a lack of supporting details from which an inference of falsity could derive” because “Yinguang offer[ed] no contemporary financial data undercutting Potter’s assertion about the company’s willingness to pay.” Yinguang, 607 F.3d at 1033. The court also rejected the alternative theory that Beston had no intention of paying, explaining that while “‘funneling’ money from one entity to another could be ‘slight circumstantial evidence of fraud,’ . . . Yinguang’s pleadings d[id] not rise above the level of a conclusory description,” and “[p]leading standards demand ‘more than an unadorned, the defendant-unlawfully-harmed-me accusation.’” Id. at 1034 (quoting Iqbal, 129 S. Ct. at 1949). The court further explained that “Rule 9(b) imposes an additional burden on the plaintiff to detail facts and lay out . . . ‘the who, what, when, where, and how of a fraud.’” Id. (citation omitted). The court concluded that the allegations were insufficient under the applicable pleading standards: That Potter transferred money away from Beston is not, standing alone, sufficient under Rule 9(b) and Iqbal. Moving money from one company to another may be consistent with fraud, but it does not create a reasonable inference that Potter is liable for fraud. Beston could have had legitimate or illegitimate reasons for transferring money. Yinguang has alleged no details that would corroborate a fraudulent scheme, such as when or why Potter moved the money, how much money was transferred, or whether this action was inconsistent with the company’s past practices. Id. (footnote omitted). The court also emphasized that Yinguang pleaded evidence that contradicted a fraudulent intent not to perform. See id. The court concluded that although the case might be a close one in light of a Texas Supreme Court case indicating that “slight circumstantial evidence” of fraud is enough to find fraudulent intent, “given the heightened pleading requirements of Rule 9(b), and the equipoise, on all the facts pleaded read as a whole, between an inference of fraud and one of Beston’s business as usual, we conclude that Yinguang’s allegations do not plausibly plead fraudulent intent not to pay at the time of Potter’s representations.” Id. at 1035. The court also rejected Yinguang’s assertion that Potter committed a fraud by omission by failing to disclose Beston’s financial condition. Yinguang, 607 F.3d at 1035. The court explained that a duty to disclose arises when a party learns that his previous affirmative 290

statement was false or misleading. Id. (citations omitted). The court concluded that the statements that Beston was in sound financial condition and that no letter of credit was needed were not pleaded to be false when made. Id. Although Potter admitted at a later date that Beston was having financial difficulties, the court stated that “[f]or this statement to have involved a fraudulent omission, Yinguang would have to assert facts showing its obvious insufficiency and patent insincerity (amounting to fraudulent intent),” and concluded that “[v]iewed in the totality of the parties’ dealings—frequent late payments, full eventual payment on the first six contracts, no relevance to the execution (in February) of Contract No. 7—and the absence of corroborating financial facts aside from the eventual default, [the court] [wa]s reluctant to transform this admission into a fraudulent omission claim.” Id. The court concluded that the veil-piercing claim should be dismissed because Yinguang failed to allege an actual fraud, and failed to provide a basis for holding Potter personally liable, as required for a veil-piercing claim under the relevant statute. See id. at 1035–36. •

Burns v. Mayes, 369 F. App’x 526, No. 09-20126, 2010 WL 445629 (5th Cir. Feb. 8, 2010) (unpublished) (per curiam). The plaintiffs brought claims under § 1983 and various state torts against a Texas state judge. The lawsuit was commenced after the plaintiff was stopped by a law enforcement officer for speeding, which led to the discovery of cocaine in the plaintiff’s possession. Id. at *1. He was charged with possession of a controlled substance, and his case was assigned to Judge Mayes. Id. Burns pleaded guilty, received deferred adjudication, and agreed to three years of probation instead of incarceration. Id. Burns agreed to certain conditions, including that he would not consume alcohol or narcotics and would submit to monthly urinalyses to verify compliance. Id. The agreed conditions stated that a diluted urine sample would be presumed to be a violation, and that community supervision might be revoked as a result. Id. During the following year, two urinalyses revealed that Burns had violated the terms of his probation. Id. at *2. After the second violation, Burns was jailed for a week and had to undergo a drug and alcohol treatment program, and Judge Mayes modified the terms of Burns’s probation by extending the probation for one year and requiring Burns to participate in a lengthy substance-abuse recovery program (the “SAP Program”) that Judge Mayes had developed. Burns, 2010 WL 445629, at *2. The terms of the SAP Program provided that a diluted urine sample would result in immediate jailing. Id. Burns eventually submitted a diluted urine sample, the first in over a year of urinalysis, and Judge Mayes had Burns arrested and jailed, and ordered him to refrain from contact with family or friends during his incarceration. Id. In his complaint, Burns alleged that he was not notified that he would not be able to receive visits or calls from family and friends during his incarceration, that he was not notified of the standard as to what would constitute a diluted urine sample, and that he suffered from low creatinine in his urine. Id. The state later moved to revoke Burns’s probation and Burns was sentenced to 365 days in jail, with credit for time served when he was on probation. Id. at *3. Judge Mayes and the County moved to dismiss Burns’s claims against them, Burns moved to compel depositions, and upon the defendants’ request, the district court stayed all deadlines. Id. The district court granted the defendants’ motion to dismiss, but gave Burns the opportunity to replead the injunctive claims. Burns, 2010 WL 445629, at *3. “Burns instead re-asserted 291

his original claims and added more, without supplementing the original facts alleged,” and the district court dismissed all claims against Judge Mayes and the County. Id. In evaluating whether absolute judicial immunity applied, the court noted that Burns failed to allege facts regarding whether the judge was acting in his judicial capacity and had “utterly failed to identify even a scintilla of evidence that Judge Mayes’s actions were taken in anything but his capacity as the judge charged with adjudicating and overseeing the terms of Burns’s probation as a defendant properly appearing in the court that had jurisdiction over him and his case.” Id. at *4. The court explained that “Burns’s unsupported, conclusional assertions that Judge Mayes acted in an ‘administrative’ or ‘ultra vires’ capacity [we]re therefore unavailing.” Id. (citing Twombly, 550 U.S. at 555). The court also found that “the very fact that Burns ha[d] served his time and [wa]s no longer chafing against the conditions of community supervision imposed by Judge Mayes support[ed] the district court’s dismissal of his claims for declaratory and injunctive relief on grounds of mootness.” Id. With respect to the claims against the County, the court concluded that “[t]he overwhelming majority of the facts advanced by Burns firmly establish[ed] that the SAP Program was designed by Judge Mayes in his capacity as a Texas state judge responsible for one of the state’s drug-court programs.” Id. The court rejected Burns’s arguments that the SAP Program was a County policy because “(1) County law enforcement officers carried out Judge Mayes’s orders, (2) a description of the SAP Program appear[ed] on a County website, and (3) a description of the SAP Program on Judge Mayes’s website b[ore] the copyrights of both Judge Mayes and the County.” Burns, 2010 WL 445629, at *4. The court explained that Burns described “the SAP Program as one ‘created’ by Judge Mayes ‘in the 410th District Court,’” and concluded that “[a]s a protocol of the 410th Judicial District applicable to criminal defendants appearing before a judge of the 410th Judicial District, the SAP Program [wa]s clearly a state judicial policy, not a County policy.” Id. The court also noted that “[f]or identical reasons, Burns ha[d] not adduced facts which suggest[ed] that the SAP Program [wa]s a ‘persistent widespread practice’ that may be properly attributed to the County.” Id. The court concluded: “Burns has not ‘plead[ed] the factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.’” Id. at *5 (quoting Iqbal, 129 S. Ct. at 1949). •

Hole v. Tex. A&M Univ., 360 F. App’x 571, No. 09-40311, 2010 WL 148656 (5th Cir. Jan. 13, 2010) (unpublished) (per curiam), cert. denied, 130 S. Ct. 3395 (2010). The plaintiffs sued Texas A&M University (“TAMU”) and several of its officers under § 1983, seeking to recover attorneys’ fees and costs they incurred in a state court action that the plaintiffs initiated and lost. Id. at *1. The district court dismissed the complaint and the Fifth Circuit affirmed. The appellees had received a complaint that a TAMU student organization was hazing its recruits, and the appellees initiated disciplinary proceedings against members of the organization, including the appellants. Id. Before the disciplinary proceedings were complete, the appellants filed a state court suit alleging constitutional violations. Id. The 292

state court enjoined the appellees from pursuing disciplinary actions and from enforcing any sanctions, but the state appellate court reversed on the grounds that the suit was not ripe because no appellant had completed TAMU’s disciplinary process. Id. After the state trial court’s decision, but before the state appellate court’s reversal, the appellants filed suit in federal court, seeking injunctive relief under § 1983, compensatory damages under § 1988, including attorneys’ fees and expenses, and declaratory relief under 28 U.S.C. § 2201. Id. The district court stayed proceedings until the state appellate court reversed the state trial court’s judgment. Hole, 2010 WL 148656, at *1. The district court then granted the defendants’ motion for judgment on the pleadings, finding that the dispute never ripened into an actual case or controversy, that the appellants had graduated from TAMU, that the state appellate court’s dismissal made the request for injunctive or declaratory relief moot, and that because the appellants did not prevail in state court, they could not receive attorneys’ fees under § 1988. Id. The Fifth Circuit concluded that the appellants’ attorneys’ fees and costs from the state court suit did not constitute a legally-cognizable injury to confer standing under § 1983 because the relevant case law provided that “a party who voluntarily initiates litigation and does not win a judgment cannot then sue to recover attorney’s fees as a compensable injury.” Id. at *2. The court also rejected the appellants’ argument that their damages were not limited to attorneys’ fees and costs because their complaint alleged that their damages “include” attorneys’ fees and expenses. Id. at *3. The court pointed out that “[a]lthough the Amended Complaint hint[ed] at other damages—injuries to Appellants’ reputations, liberty interests, and educations—these hints d[id] not reach the level of specificity required in a complaint.” Id. (citing Iqbal, 129 S. Ct. at 1950). The court also held that because the appellants did not have an enforceable judgment from their state court action and because they were not the prevailing party in that action, they were not entitled to recover attorneys’ fees under § 1988. Id. •

Rhodes v. Prince, 360 F. App’x 555, 2010 WL 114203 (5th Cir. 2010) (unpublished) (per curiam). The plaintiff sued under § 1983, alleging that the defendants violated his Fourth Amendment right to be free from false arrest. Id. at *1. The district court dismissed because the plaintiff failed to allege an arrest under the Fourth Amendment and the defendants were entitled to qualified immunity. Id. Rhodes was the civilian crime scene investigator for the Investigative Services Bureau of the Arlington Police Department (the “Department”), and alleged that after he raised concerns about the standards, procedures, and personnel in the Department, members of the Crime Scene Unit conspired to frame him by obtaining his fingerprints and putting them at the scene of a burglary. Id. Certain of the defendants notified Rhodes that he was a suspect in the burglary and that Defendant Roach would conduct a criminal investigation. Id. Rhodes was placed on administrative leave, and internal affairs investigators interviewed him. Id. The complaint alleged that Rhodes appeared at the police station for questioning, that he was fingerprinted and palm printed, and that Roach questioned him for two hours, but did not allege that he appeared involuntarily or that Roach restrained him. Rhodes, 2010 WL 293

114203, at *1. On appeal, the Fifth Circuit noted that Iqbal had set out a “two-pronged approach” to determine whether a complaint states a plausible claim and that the task of applying this approach is “context-specific.” Id. at *2. The court rejected the defendants’ argument that Rhodes could not have been “seized” under the Fourth Amendment without a formal arrest because of Rhodes’s employment relationship with the police department. Id. at *3. The court noted that the objective inquiry into whether a reasonable person in Rhodes’s position would have believed he was the subject of a criminal or administrative investigation is factintensive. Id. at *4 (citation omitted). The court stated that under Iqbal, its first task was to determine which allegations in the complaint were entitled to a presumption of truth. Id. (citing Iqbal, 129 S. Ct. at 1951). The court explained that some of the allegations were legal conclusions: Rhodes alleges that Defendant Roach “intentionally and falsely arrested” him, “when he knew such conduct was a violation of [his] Fourth Amendment right to be free from unlawful search and seizures,” and that Defendant Roach did so with the support of the other Defendants. Because an “arrest” is a legal conclusion under the Fourth Amendment and a necessary element of a false arrest claim, Rhodes’s allegation of “arrest” is “nothing more than a ‘formulaic recitation of the elements’ of a constitutional . . . claim . . . . and [is] not entitled to be assumed true.” Iqbal, 129 S. Ct. at 1951 (quoting Twombly, 550 U.S. at 555). Rhodes describes Defendant Roach’s questioning as an “interrogation.” “Interrogation” is a word with mixed connotations in the law, typically used to describe the questioning of a person while in custody. Rhodes’s use of “interrogation” to describe the questioning by Defendant Roach does not necessarily equate to an arrest because, absent facts indicative of a Fourth Amendment seizure, Rhodes’s description amounts to little more than a matter of word choice, without additional legal weight. Cf. Iqbal, 129 S. Ct. at 1951. Id. (alterations and omissions in original) (internal citations omitted). But the court noted that the factual allegations were entitled to a presumption of truth: Some of the alleged facts in Rhodes’s Rule 7(a) reply are, however, entitled to a presumption of truth. Rhodes alleges that on December 4, 2003, Defendants Krohn, Carroll, and Roach notified him that he was a suspect in the burglary, and that he asserted his Fifth Amendment right to remain silent. Defendant Roach advised Rhodes that he would head a criminal investigation into the matter. 294

The Department then informed Rhodes that he was subject to an internal affairs investigation, placed him on administrative leave and conducted an interview on the matter. Rhodes further alleges that he was fingerprinted and palm printed “without consent” before Defendant Roach questioned him. Rhodes alleges that the questioning lasted approximately two hours. Although it is not clear from the Rule 7(a) reply, Rhodes’s counsel appears to have been present during the questioning. Rhodes, 2010 WL 114203, at *5. The court concluded that “[v]iewing the pleadings in the light most favorable to Rhodes, . . . he ha[d] not sufficiently pled that he was ‘seized’ under the Fourth Amendment” because the district court required Rhodes to come forward with factual allegations in his Rule 7(a) reply27 to overcome the qualified immunity claim but Rhodes had not met his burden to show that an objective person would not have felt free to leave the exchange with Roach. Id. The court explained: Significantly, Rhodes never alleged that he appeared at the Eastside Police Station involuntarily or felt that he was being detained. Rhodes also does not allege any show of force by the police. The taking of fingerprints and palm prints traditionally accompany an arrest, but standing alone, they do not suffice to establish an arrest. Rhodes was aware of both the criminal and administrative investigations and, in his Rule 7(a) reply, Rhodes had the burden to distinguish between his compliance with workplace obligations and a show of police force sufficient to demonstrate a Fourth Amendment arrest. Rhodes failed to do so. Even viewing the pleadings in the light most favorable to Rhodes, we find that a reasonable person would have felt free to leave the encounter. Thus, Rhodes has not sufficiently alleged that he was “seized” under the Fourth Amendment. Id. (internal citation omitted). The court affirmed the dismissal of the Fourth Amendment claim. •

27

Oceanic Exploration Co. v. Phillips Petroleum Co. ZOC, 352 F. App’x 945 (5th Cir. 2009) (unpublished) (per curiam), cert. denied, 130 S. Ct. 3278 (2010). The Fifth Circuit affirmed the district court’s dismissal under Rule 12(c) of a complaint under the Racketeer Influenced and Corrupt Organizations Act (RICO). In 1974, Oceanic received an exclusive concession from Portugal to explore for and extract oil and gas in the Timor Gap, a disputed area of seabed north of Australia and south of the eastern part of the island of Timor. Id. at 947. The border across surrounding ocean was settled by a treaty between Indonesia and Australia, but the border between East Timor and Australia was not settled. Id. At the time Oceanic

A court may order a reply to an answer to a complaint under Rule 7(a). See F ED . R. C IV . P. 7(a)(7).

295

received its exploration rights from Portugal, East Timor was a Portugese colony. Id. However, “[i]n 1975, Indonesia invaded and annexed East Timor, effectively thwarting Oceanic’s rights in the Timor Gap.” Id. Although the United Nations refused to recognize the annexation, Australia and Indonesia collaborated to exploit oil and gas in the Timor Gap. Id. In 1989, Australia and Indonesia created a “Joint Authority,” which awarded Timor Gap exploration and extraction rights to ConocoPhillips. Oceanic Exploration, 352 F. App’x at 947–48. According to the complaint, ConocoPhillips had extracted large quantities of oil and gas from the Timor Gap, and known reserves at the Timor Gap were valued at over $50 billion. Id. at 948. In 1999, East Timor obtained independence from Indonesia, and was temporarily governed by the United Nations through the United Nations Transitional Administration of East Timor (“UNTAET”). Id. “UNTAET agreed essentially to step into Indonesia’s shoes as Australia’s counterpart in administering and receiving revenues from the Joint Authority.” Id. In 2002, East Timor entered into a treaty with Australia that created a “Designated Authority” to replace the Joint Authority. Id. (footnote omitted). “One of the Designated Authority’s first acts was to enter into numerous production sharing contracts with ConocoPhillips, facilitating ongoing extraction efforts that were predicted to provide billions of dollars of revenue to East Timor.” Id. According to the complaint, “[t]here was no bidding or reassessment; all Designated Authority production sharing contracts were awarded to organizations with previous contracts under the Australian-Indonesian Joint Authority.” Oceanic Exploration, 352 F. App’x at 948. Oceanic approached officials in East Timor and sought to implement a different plan. Id. Oceanic’s plan “would have involved a suit in the International Court of Justice (ICJ), asking the court to declare a border between East Timor and Australia, such that East Timor would acquire sole rights over lucrative production areas in the Timor Gap.” Id. The East Timorese officials rejected Oceanic’s plan, and Australia later withdrew from the maritime boundary jurisdiction of the ICJ. Id. at 948–49. Oceanic engaged in numerous efforts, explained in the complaint, to obtain rights to be involved in Timor Gap oil and gas operations, but with no success. See id. at 949. Oceanic ultimately filed an amended complaint that was not based on historical interests related to the Portuguese concession, but which “assert[ed] that East Timorese independence abrogated ConocoPhillips’s rights in the Timor Gap, and that Oceanic was positioned to pull East Timor away from ConocoPhillips, but that ConocoPhillips prevented this by bribing East Timorese officials.” Id. Oceanic alleged that “‘East Timorese political leaders, including [Prime Minister] [Alkatiri], were adamant that East Timor would not recognize any interest that had been awarded in the Timor Gap while Indonesia occupied East Timor, including the ConocoPhillips defendants’ production sharing contracts.’” Oceanic Exploration, 352 F. App’x at 949 (second alteration in original) (footnote omitted). According to the complaint “ConocoPhillips delivered millions of dollars in cash and goods to East Timorese officials in secret transactions and transactions disguised as humanitarian aid. . . . [because] it feared the political transition could upset its lucrative operations in the Timor Gap.” Id. at 950. The complaint raised seven causes of action, with the following at issue on appeal: “(1) violation and (2) conspiracy to violate [RICO], (3) violation of the Robinson-Patman Act, and common law (4) intentional interference with prospective economic advantage and (5) unfair competition.” Id. (footnote omitted). The district court dismissed Oceanic’s claims on the pleadings, finding that Oceanic failed to plead proximate 296

causation. Id. The Fifth Circuit affirmed. The Fifth Circuit explained the district court’s analysis: The district court below concluded that Oceanic failed to plead proximate causation because the alleged bribery, assuming it occurred, could only have caused the alleged harm to Oceanic by means of a highly improbable series of hypothetical events and decisions by the affected countries and entities. It determined that in order for Oceanic to prevail, [the] facts must be that if ConocoPhillips had not bribed East Timor: (a) East Timor would have chosen to abrogate the concessions, (b) Australia would have acquiesced, (c) East Timor would have reopened bidding, (d) Oceanic would have been permitted to bid, (e) Oceanic would have won the bid, and (f) Oceanic would have correctly developed the concession so that it was profitable. 2008 WL 1777003[,] at *4. The court concluded that the Complaint failed to adequately plead any of these circumstances. Id. at 951 (first alteration in original). The Fifth Circuit agreed that “at least some of these circumstances [we]re not plausibly pleaded in Oceanic’s Complaint, and conclude[d] that Oceanic’s failure to properly plead one of them in particular require[d] affirmance.” Id. (footnote omitted). The court explained that “Oceanic’s claims fail[ed] to rise above the speculative level, because they fail[ed] to address the interests and influence of Australia.” Oceanic Exploration, 352 F. App’x at 951. The court continued: Oceanic repeatedly alleges that, absent bribery of Alkatiri, Oceanic would have been allowed to bid, and would successfully have bid, to displace ConocoPhillips’s ongoing, multibillion-dollar operations in the Timor Gap. In particular, Oceanic claims in conclusory terms that the East Timor Constitution abrogated ConocoPhillips’s contracts, and that Alkatiri had unilateral power to determine whether those contracts would be renewed. These allegations fail the test of common sense plausibility when considered together with other allegations in the Complaint concerning Australia. The quoted portion of the East Timor Constitution merely indicates that contracts over East Timor’s natural resources were obviated unless reaffirmed. But, as pleaded in the Complaint, the Timor Gap is a “gap” because the border between East Timor and Australia is uncertain—the two countries claim overlapping territory. 297

Assuming, absent bribery, that East Timor was willing to consider replacing ConocoPhillips with Oceanic, the Complaint presents no reason to believe Australia would have allowed this to happen. To the contrary, the Complaint describes Oceanic and Australia as adversaries at every historical stage. It alleges that Australia defied international opinion and subverted Oceanic’s Portuguese concession by collaborating with Indonesia after an illegitimate invasion. It alleges that Oceanic supported an unsuccessful ICJ suit to declare that Portugal, rather than Indonesia and Australia, had rights to the Timor Gap. And it alleges, more recently, that Oceanic tried to convince East Timor to turn its back on Australia and build a pipeline to East Timor and a liquified natural gas facility on East Timorese soil, rather than accepting proceeds from a pipeline leading to a new facility in Australia. The Complaint provides no plausible grounds to believe Australia would have desired—or tolerated—disruption of its long-standing, extremely lucrative collaboration with ConocoPhillips in response to East Timor, which Oceanic describes as a “new and impoverished island nation,” replacing Indonesia as its counterpart across the Gap. Thus, even assuming ConocoPhillips attempted to influence East Timor through bribery, the Complaint provides no plausible grounds to conclude that, absent such bribery, Oceanic could have usurped ConocoPhillips’s operations. Id. at 951–52 (footnote omitted). The court noted that “the Complaint implicitly acknowledge[d] that Oceanic had no genuine expectation of disrupting Australia’s relationship with ConocoPhillips; it instead allege[d] that Oceanic tried to convince East Timor to start a formal border dispute and claim large portions of the Timor Gap for itself”; that “Portugal previously tried to assert rights to the Timor Gap in the ICJ, but that the ICJ rejected the suit because Indonesia did not submit to its jurisdiction”; and that “Oceanic’s plan involved an ICJ suit against Australia, and that shortly after Oceanic presented the plan, Australia announced its withdrawal from the jurisdiction of the ICJ maritime boundaries.” Id. at 952. The court cited a pre-Twombly case to note that it had “often said that a party cannot state a claim by pleading legal conclusions.” Id. (citing Ferrer v. Chevron Corp., 484 F.3d 776, 780 (5th Cir. 2007)). The court explained that “[i]t t[ook] conclusory pleading to new levels to have proximate causation rest on a politically disruptive, hypothetical lawsuit between nations.” Id. The court held: “Because Oceanic fails to plead facts plausibly demonstrating that it would have had an opportunity to replace ConocoPhillips in the Timor Gap in the absence of bribery, we conclude that the causal link is ‘overly attenuated,’ and that the alleged violation did not ‘le[a]d directly to the plaintiff’s injuries.’” Id. (alteration in original) (internal citations omitted). Because proximate causation was not adequately alleged, the Fifth Circuit affirmed the grant of the motion for judgment on the pleadings. Id. at 953. 298



Jebaco, Inc. v. Harrah’s Operating Co., 587 F.3d 314 (5th Cir. 2009). The plaintiff brought federal antitrust claims against Pinnacle Entertainment, Harrah’s Operating Company, and several subsidiaries of Harrah’s. The district court dismissed under Rule 12(c), finding the claims barred by the state action doctrine and Noerr-Pennington petitioning immunity. Id. at 315–16. The complaint alleged that under a contract with Harrah’s predecessor, the plaintiff was entitled to receive a portion of the rent at two berths in Lake Charles, Louisiana. Id. at 316. The rent was a per-patron fee. Id. Harrah’s eventually took over the payment obligation. Id. After Hurricane Rita damaged one of Harrah’s riverboats docked at the berths, Harrah’s ceased operating at that location, stopped its per-patron fee payments to the plaintiff, and solicited bids for two riverboats, the associated gaming licenses, and the real property associated with the berths. Id. Jebaco placed a bid, but Harrah’s sold to Pinnacle for $70 million, which Jebaco asserted was greater than the property’s value. Jebaco, 587 F.3d at 316. “Jebaco’s complaint alleged that Harrah’s and Pinnacle violated the Sherman Act, 15 U.S.C. §§ 1–2, by dividing the Louisiana casino market and by monopolizing, attempting to monopolize, and conspiring to monopolize that market. Jebaco assert[ed] [that] this alleged anticompetitive conduct deprived it of both the revenue from a casino operating at Jebaco’s berths and the ability to purchase Harrah’s assets.” Id. at 317. Jebaco also asserted state law claims, but the district court declined to exercise supplemental jurisdiction over those claims after it dismissed the federal claims under Rule 12(c). Id. at 317–18. The Fifth Circuit did not decide whether the state action doctrine or Noerr-Pennington petitioning immunity applied, but affirmed the dismissal on the alternate ground that the complaint did not establish a plausible claim of antitrust standing. Id. at 318 (citing Iqbal, 129 S. Ct. at 1949–50). Notably, “[n]either Pinnacle nor Harrah’s contend[ed] that Jebaco’s allegations of Sherman Act violations [we]re insufficiently detailed to ‘state a claim to relief that [wa]s plausible on its face,’” and the Fifth Circuit “assume[d] that Jebaco’s allegations [we]re legally sufficient under FED . R. CIV . P. 8.” Id. at 318 n.8 (quoting Iqbal, 129 S. Ct. at 1949). Standing required showing: “1) injury-in-fact, an injury to the plaintiff proximately caused by the defendants’ conduct; 2) antitrust injury; and 3) proper plaintiff status, which assures that other parties are not better situated to bring suit . . . .” Id. at 318 (quoting Doctor’s Hospital of Jefferson, Inc. v. Southeast Med. Alliance, 123 F.3d 301, 305 (5th Cir. 1997)) (quotation marks omitted). With respect to the antitrust injury element, the Fifth Circuit noted that Jebaco alleged that “Harrah’s and Pinnacle’s alleged market division deprived Jebaco of the per-patron fee it used to receive before Harrah’s ceased operating at the Lake Charles berths in which Jebaco had an interest,” and that “Jebaco was deprived of the opportunity to compete by purchasing Harrah’s Lake Charles assets because only Pinnacle could provide Harrah’s with the opportunity to engage in anticompetitive conduct.” Jebaco, 587 F.3d at 319. The Fifth Circuit held that “[n]either allegation fit[] comfortably within a ‘classical’ antitrust fact pattern, and both fail[ed] to allege antitrust injury.” Id. The court noted that the first allegation related to Jebaco’s position as a landlord/supplier of a berth, and that “Jebaco characterize[d] the loss of its per-patron fee ‘interest’ as injury to its ‘competitive position,’” but stated that “how it was competing or against whom in receipt 299

of the fees is a blank.” Id. at 320. The court noted that “[u]nder Twombly, . . . we must accept Jebaco’s factual allegations but are not bound to its legal conclusions.” Id. The court found that “[t]he closest, albeit imperfect, market analogies to the Jebaco-casino operator relationship are those of landlord-tenant or supplier customer,” but that “[t]hose relationships, when terminated or modified as a byproduct of ‘downstream’ anticompetitive conduct, have rarely been held to inflict antitrust injury.” Id. (citation omitted). The court further explained that in the present case, “the market division ha[d] little or nothing to do with Jebaco’s lost per-patron fees” because “[h]ad Pinnacle remained at Jebaco’s preferred berths and kept paying the fees, the alleged market division would still have occurred, and Jebaco would be uninjured.” Id. The court also explained that “[a]lternatively, if a different firm had purchased Harrah’s assets, it too might have chosen not to operate at Jebaco’s preferred berths,” and “[n]o antitrust violation would have occurred, but Jebaco would have suffered the same injury.” Jebaco, 587 F.3d at 320 (citation omitted). The court concluded that “Pinnacle’s choice to change berths, a choice wholly independent of any antitrust violation, was the cause of Jebaco’s injury.” Id. The court stated: The federal antitrust laws protect competition, not competitors. A lessor’s or supplier’s injury is not injury to competition except, for instance, where the injury is the direct result of an illegal refusal to deal or a tying violation. Jebaco did not allege that Pinnacle’s choice to reposition its licenses in Lake Charles was itself an anticompetitive act. Id. at 320–21. Because “Jebaco’s loss of its per-patron fees [wa]s neither the type of injury antitrust law was designed to prevent, nor did it flow from any anticompetitive conduct of Harrah’s and Pinnacle[,] . . . Jebaco did not have antitrust standing to sue.” Id. at 321. Jebaco also “characteriz[ed] itself, in wholly conclusional terms, as a ‘potential competitor’ of Harrah’s and Pinnacle [as] a ‘potential bidder’ for the casino assets,” and “assert[ed] that their market division conspiracy eliminated its ability to enter the market utilizing its Lake Charles berthing interest.” Id. The court stated that “[c]ertain theoretical objections” could be “raised against this claim”: For instance, potential competitors must meet a threshold of preparedness to enter a market before they may seek damages from anticompetitive exclusion. Jayco Systems, Inc. v. Savin Business Machines Corp., 777 F.2d 306, 313–16 (5th Cir. 1985) (citing Martin v. Phillips Petroleum Company, 365 F.2d 629, 633 (5th Cir. 1966)). Such threshold proof is necessary to protect antitrust litigation from frivolous claims. Following Twombly and Iqbal, it is likely that Jebaco’s mere allegations of potential competitor status, without any facts to demonstrate its financial status or its ability to fulfill the demanding requirements of Louisiana gaming law, are insufficiently pled. Further, any potential competitor’s antitrust claim would have 300

to be viewed skeptically in a market where entry is fully controlled by a regulatory body. Id. (emphasis added). Despite the theoretical objections, the court “assume[d] arguendo that Jebaco satisfactorily pled its preparedness and ability to compete in the casino operating market,” Jebaco, 587 F.3d at 321, but still found the allegations insufficient. The court held that “[e]ven as a potential competitor, . . . Jebaco’s injury did not ‘flow [ ] from’ an antitrust law violation,” id. (citation omitted) (second alteration in original), because “Jebaco would have suffered the same harm whether Harrah’s retained its Lake Charles assets or sold them to any party other than Pinnacle.” Id. The court further held that “Harrah’s selection of Pinnacle from among a number of bidders [wa]s distinct from the decision to maintain or reject berths where Jebaco owned an interest, and it [wa]s that interest alone which support[ed] Jebaco’s status as a potential competitor.” Id. at 322. The court concluded: “Put differently, any conspiracy between Harrah’s and Pinnacle to dominate the casino market operated independently of Jebaco’s interest. Jebaco, even as a potential competitor, was at most a collateral casualty of the Harrah’s-Pinnacle market division agreement.” Id. •

Floyd v. City of Kenner, La., 351 F. App’x 890, 2009 WL 3490278 (5th Cir. 2009) (unpublished) (per curiam). The plaintiff brought a civil rights action against the City of Kenner and four police officers. Id. at *1. The plaintiff was the City’s chief administrative officer and oversaw a center that distributed food and supplies after Hurricane Katrina. Id. The complaint alleged that in delivering items, the plaintiff ran into then-Chief of Police Nick Congemi, and the two had a verbal exchange based on Congemi viewing the plaintiff as a political nemesis. Id. The next day, National Guardsman from the center complained that the plaintiff was illegally distributing some supplies. Id. One of the National Guardsman was patrolling the plaintiff’s neighborhood and, together with another defendant, entered the plaintiff’s property, allegedly in response to a house alarm, and saw relief items in plain view. Id. Based on this incident, a search warrant was procured, the police seized the supplies from the plaintiff’s home, and the plaintiff was arrested, but never prosecuted. Floyd, 2009 WL 3490278, at *1. The plaintiff’s complaint named the City, the then-police chief of investigations (Caraway), Congemi, the police detective who filed the affidavits in support of the search and arrest warrants (Cunningham), and the police officer who entered the plaintiff’s property with the National Guardsman (Deroche). Id. The plaintiff sued the police officers in both their official and individual capacities, and these defendants asserted a defense of qualified immunity. Id. at *1–2. The court noted that in reviewing the claims against the officers, it was “guided both by the ordinary pleading standard and by a heightened one.” Id. at *2 (citing Schultea v. Wood, 47 F.3d 1427, 1433–34 (5th Cir. 1995) (en banc)). The court “emphasize[d] that this heightened pleading standard applie[d] only to claims against public officials in their individual capacities,” explaining that “[t]he Supreme Court’s decision in Leatherman v. Tarrant County Narcotics and Intelligence Coordination Unit, 507 U.S. 163 (1993), made clear that a heightened pleading standard was inapplicable to suits against municipalities.” Id. at *2 n.2. The court also noted that “the heightened pleading standard [wa]s inapplicable to claims 301

against public officials in their official capacity,” because “‘official-capacity lawsuits are typically an alternative means of pleading an action against the governmental entity involved . . . .’” Id. (quoting Baker v. Putnal, 75 F.3d 190, 195 (5th Cir. 1996)). The court explained that “once a defendant asserts the defense of qualified immunity, a district court may order the plaintiff to submit a reply after evaluating the complaint under the ordinary pleading standard”; that “more than mere conclusions must be alleged”; that “‘a plaintiff cannot be allowed to rest on general characterizations, but must speak to the factual particulars of the alleged actions, at least when those facts are known to the plaintiff and are not peculiarly within the knowledge of defendant’”; and that “‘[h]eightened pleading requires allegations of fact focusing specifically on the conduct of the individual who caused the plaintiff’s injury.’” Floyd, 2009 WL 3490278, at *2 (citations omitted). With respect to Deroche, the district court held that although there was a possible constitutional violation, qualified immunity applied because the conduct “‘was not objectively unreasonable in light of clearly established law.’” Id. at *3. The Fifth Circuit held that the plaintiff adequately responded in his reply to Deroche’s statement in his answer that Deroche had only responded to an alarm, explaining that the reply “directly challenge[d] the claim that the alarm created the probable cause for Deroche to go to Floyd’s residence.” Id. The court rejected the argument that Deroche’s actions had to be considered in light of the chaos that followed Hurricane Katrina, finding that there may be no support for the plaintiff’s claims that Deroche took advantage of the chaos, “[b]ut the claim exists.” Id. at *4. The court noted that in certain cases, it may be appropriate to grant discovery before dismissing a claim: In Schultea, we adopted the rationale that, “in some cases, such as in search cases, probable cause and exigent circumstances will often turn on facts peculiarly within the knowledge of the defendants. And if there are conflicts in the allegations regarding the actions taken by the police officers, discovery may be necessary.” Schultea, 47 F.3d at 1432 (citing Anderson v. Creighton, 483 U.S. 635, 646 n.6, 107 S. Ct. 3034, 97 L. Ed. 2d 523 (1987)). Here, the Defendants ask us to accept that Deroche entered the property for the sole purpose of determining if relief items were present. At the time, Deroche alleged he entered because of the alarm. Floyd asserts that Deroche knew that Floyd was not misappropriating relief items; instead, the entry into the property was all about embarrassing Floyd because of his past run-ins with then-Chief of Police Congemi. Id. (emphasis added). The court concluded that “[t]his is the type of conflict that warrants discovery,” and that “[t]he district court should not have dismissed the claim.” Id. With respect to Cunningham, the district court held that the complaint did not allege sufficient facts to support a constitutional violation. Floyd, 2009 WL 3490278, at *5. The Fifth Circuit concluded that the allegation that “an affiant intentionally acted by way of an 302

omission in order to cause a constitutional violation” was a claim in which “state of mind is a critical element . . . .” Id. The court held that “[a]t a later stage, Floyd w[ould] be required to ‘produce specific support for his claim of unconstitutional motive,’” but that “[a]t the pleading stage, his allegation that Cunningham’s actions were spurred by Congemi’s ill will suffice[d].” Id. (citation omitted). The court concluded that while some allegations were insufficient, the allegations as a whole stated a claim against Cunningham: To be sure, certain portions of Floyd’s Schultea reply are insufficient to state a plausible claim. Floyd, for example, averred that Cunningham’s affidavit contained “statements of which he had no personal knowledge” that were “sworn to by him in reckless disregard of the truth.” The Supreme Court emphasized in Iqbal that such “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” 129 S. Ct. at 1949. But viewed in their entirety, Floyd’s pleadings contain more. The Schultea reply points out that Cunningham’s affidavit stated that Floyd was observed loading supplies in a City of Kenner truck on September 19, 2005, at the center, which is located at 2500 Williams Boulevard. Cunningham’s affidavit also stated that the items seen in plain view by Deroche at Floyd’s home “were identical to the ones observed on the bed of the City of Kenner truck” at the center on September 19. Floyd’s pleadings allege that Cunningham knew this statement to be false because the center was relocated from 2500 Williams Boulevard on September 17 and 18, so a City of Kenner truck certainly was not present at 2500 Williams Boulevard on September 19. Floyd further alleges that Cunningham knew Floyd was the managing supervisor of the center and that he possessed “full authority to handle[,] dispose and deliver all hurricane supples.” It is said that Cunningham nonetheless left this relevant if not critical information out of his affidavit in order to mislead the magistrate. Taken as true, these facts are sufficient at least to survive Rule 12(b)(6) dismissal. Floyd’s complaint alleges, with factual specificity, the type of harm that was found unconstitutional in Franks [v. Delaware, 438 U.S. 154 (1978)]. Accordingly, the alleged violation was “clearly established” at the time Cunningham acted. In addition, Cunningham’s alleged intentional actions were not objectively reasonable. We therefore reverse the district court’s dismissal of the claims against Cunningham. Id. (first and second alterations in original).

303

With respect to Caraway, Floyd alleged that Caraway participated in the applications for the arrest and search warrants based on facts he knew were false, which resulted in Floyd’s arrest without probable cause. Id. at *6. Floyd also alleged that Caraway failed to return the items seized from Floyd’s property. Id. The court noted that “‘[b]ecause vicarious liability is inapplicable to . . . § 1983 suits, a plaintiff must plead that each Government-official defendant, through the official’s own individual actions, has violated the Constitution.’” Floyd, 2009 WL 3490278, at *6 (quoting Iqbal, 129 S. Ct. at 1948). Citing Schultea, a preTwombly case, the court stated it had to “determine whether Floyd alleged the ‘factual particulars’ necessary to state a valid Fourth Amendment claim against Caraway.” Id. The court examined Iqbal, noted that “[i]t [wa]s clear, . . . that in the arena of qualified immunity (but surely not solely in this arena), discovery [wa]s not the place to determine if one’s speculations might actually be well-founded,” and concluded that “[c]onsistent with [its] holding in Schultea, the pleadings must have sufficient precision and factual detail to reveal that more than guesswork is behind the allegation.” Id. at *7 (citing Schultea, 47 F.3d at 1434). The court noted that limited discovery can, at times, be appropriate before ruling on a defense of qualified immunity, but explained: The importance of discovery in such a situation is not to allow the plaintiff to discover if his or her pure speculations were true, for pure speculation is not a basis on which pleadings may be filed. Rule 11 requires that any factual statements be supported by evidence known to the pleader, or, when specifically so identified, “will likely have evidentiary support” after discovery. FED . R. CIV . P. 11(b)(3) (emphasis added). There has to be more underlying a complaint than a hope that events happened in a certain way. Instead, in the “short and plain” claim against a public official, “a plaintiff must at least chart a factual path to the defeat of the defendant’s immunity, free of conclusion.” Schultea, 47 F.3d at 1430. Once that path has been charted with something more than conclusory statements, limited discovery might be allowed to fill in the remaining detail necessary to comply with Schultea. Id. at 1433–34. Id. (emphasis added). The court concluded that the allegations against Caraway were insufficient: Under these standards, Floyd’s allegations against Caraway amount to nothing more than speculation. The conclusory assertion that Caraway “participated in, approved and directed” the filing of false and misleading affidavits is consistent with finding a constitutional violation, but it needed further factual amplification. See Iqbal, 129 S. Ct. at 1949. Floyd might not know everything about what occurred, but the bare allegation does not make it plausible that he knows anything. Unlike his allegations against Cunningham, this bare assertion does not provide any detail about what Caraway, as 304

chief of investigations, did to seek to control Cunningham’s filing of an affidavit. Put differently, the conclusion presents nothing more than hope and a prayer for relief. Id. at *8 (emphasis added). The court held that because “Floyd ha[d] shown nothing in his complaint to indicate a basic plausibility to the allegation[,] . . . [h]is Section 1983 claim premised on a Fourth Amendment violation . . . fail[ed].” Id. With respect to the allegation that Caraway had failed to return Floyd’s property, the court concluded that Louisiana provided a remedy, barring relief under § 1983. Floyd, 2009 WL 3490278, at *8. Because Floyd “failed to allege specific facts that constitute[d] a deprivation of either his Fourth or Fourteenth Amendment rights,” the court found that “the district court’s dismissal with respect to the claims against Caraway was correct.” Id. at *9. With respect to Congemi, Floyd alleged that Congemi personally directed efforts to have the false affidavits filed, and that the affidavits led to Floyd’s arrest. Id. at *9. The district court held, and the Fifth Circuit agreed, that “‘none of the ‘facts’ alleged as to Congemi amount[ed] to a violation of a clearly established constitutional right.’” Id. The Fifth Circuit explained: Floyd has failed to provide sufficient factual detail concerning Congemi’s alleged attempts at personally directing his subordinate officers to file misleading affidavits. Other than a general background of why Congemi would have animosity towards Floyd, no facts are alleged that reveal any specifics of how Congemi personally told other officers to conspire against Floyd. Moreover, Floyd’s sweeping statement that Congemi attempted to persuade the district attorney to prosecute him, even though Congemi knew that Floyd was authorized to handle the supplies, does not shed further light on the subject. The claims against Congemi lack the detail needed to render them plausible. See Iqbal, 129 S. Ct. at 1949. Accordingly, they were appropriately dismissed. Id. Finally, with respect to the claims against the City, the court concluded that “Floyd ha[d] alleged no facts that would support an inference that the police offers acted pursuant to a policy or custom,” and that the claim against the City was properly dismissed. Id. •

Gonzalez v. Kay, 577 F.3d 600 (5th Cir. 2009), cert. denied, 130 S. Ct. 1505 (2010). The plaintiff alleged that one of the defendants sent him a collection letter that violated the Fair Debt Collection Practices Act (FDCPA). The district court dismissed the case for failure to state a claim, but the Fifth Circuit reversed. “Gonzalez asserted in his complaint that the letter was deceptive in that the Kay Law Firm ‘pretended to be a law firm with a lawyer handling collection of the Account when in fact no lawyer was handling the Account or 305

actively handling the file.’” Id. at 602. The Fifth Circuit explained that “Gonzalez essentially contends that the Kay Law Firm is not actually a law firm at all but instead is a debt collection agency that used the imprimatur of a law firm to intimidate debtors into paying their debts.” Id. at 602–03. The FDCPA, in relevant part, “prohibits ‘[t]he false representation or implication that any individual is an attorney or that any communication is from an attorney,’” and “‘[t]he use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.’” Id. at 603–04 (citing 15 U.S.C. §§ 1692e(3), 1692e(10)) (alterations in original). There was “no dispute that Gonzalez [wa]s a ‘consumer’ under the FDCPA and that Kay and the Kay Law Firm [we]re ‘debt collectors’ under the [FDCPA].” Id. at 604 (citing 15 U.S.C. § 1692a(3), (6)). The court discussed the Twombly/Iqbal standard for dismissal in the “standard of review” section of the opinion, but did not cite those cases later in the opinion. The court examined the case law regarding letters under the FDCPA, and concluded that “the main difference between the cases is whether the letter included a clear prominent, and conspicuous disclaimer that no lawyer was involved in the debt collection at that time.” Id. at 606. The court explained that some letters were not deceptive as a matter of law, some were so deceptive and misleading as to violate the FDCPA as a matter of law, and others fell in the middle. Gonzalez, 577 F.3d at 606–07. The Fifth Circuit concluded that the letter at issue fell in the middle ground, and that the district court had therefore prematurely dismissed the complaint. Id. at 607.

Sixth Circuit •

Patterson v. Novartis Pharm. Corp., No. 10-5886, 2011 WL 3701884 (6th Cir. Aug. 23, 2011) (unpublished). Plaintiff Margaret Patterson filed a complaint against defendant Novartis Pharmaceuticals Corp, a drug manufacturer, alleging that she suffered harm as a result of infusions of Aredia, a drug manufactured by defendant Novartis. The plaintiff, invoking the court’s diversity jurisdiction, alleged products liability under Massachusetts state law. The court of appeals explained: This case arises out of a series of lawsuits filed by individuals who developed osteonecrosis of the jaw, a severe bone disease affecting the jaw, allegedly as a result of taking Zometa and Aredia. Zometa and Aredia are prescription bisphosphonate drugs produced by Novartis that are given intravenously, most often to patients with cancerous conditions. The drugs are effective at preventing pathological fractures, spinal cord compression, and other bone pains. Although the Food and Drug Administration approved both drugs, many individuals claim to have developed osteonecrosis of the jaw as a result of receiving this medication. Osteonecrosis of the jaw results in the gums being eaten away until the bone is exposed. 306

Patterson alleges that she developed osteonecrosis of the jaw as a result of drug infusions she received, and brought suit against Novartis as well as several pharmaceutical companies that began marketing generic versions of Aredia after Novartis’s patent protection expired. In pertinent part, Patterson's complaint states that she was infused with “Aredia and/or generic Aredia (pamidronate).” Id. at *1 (footnote omitted). The district court granted the defendant’s motion to dismiss on the ground that the complaint did not contain sufficient facts to allege that the plaintiff had taken Aredia manufactured by Novartis, as distinguished from some generic version of Aredia manufactured by another company. The district court also denied the plaintiff’s motions for leave to conduct discovery and leave to amend her complaint. The Sixth Circuit affirmed the district court’s dismissal of plaintiff’s complaint. The court of appeals stated: The district court properly granted Novartis’s motion to dismiss because Patterson’s complaint does not sufficiently allege that she received infusions of Aredia manufactured by Novartis. Massachusetts law requires that a plaintiff suing a manufacturer in a product-liability action be able to prove that his or her injury can be traced to that specific manufacturer. Mathers v. Midland–Ross Corp., 532 N.E.2d 46, 48–49 (Mass. 1989). Here, the complaint alleges only a possibility that the infusions Patterson received were of Aredia manufactured by Novartis. The complaint does not allege when Patterson received these infusions, how many infusions she received, or any other facts specific to her treatment. The plausibility pleading standard set forth in Twombly and Iqbal requires that Patterson have pled enough facts to state a claim for relief that is plausible on its face. Iqbal, 129 S. Ct. at 1950. A complaint that allows the court to infer only a “mere possibility of misconduct” is insufficient to “show” that the complainant is entitled to relief and fails to meet the pleading requirements of Rule 8. Id. The assertion that Patterson received “Aredia and/or generic Aredia (pamidronate)” means that Patterson could have received only Aredia manufactured by Novartis. Or, she could have received both Aredia and generic Aredia, which would be sufficient to state a claim against Novartis. However, as pled, it is also entirely plausible that Patterson received infusions of only generic Aredia that Novartis did not manufacture: it is this possibility that is fatal to her complaint. Because the complaint only permits us to infer the possibility that 307

Patterson received infusions of Aredia manufactured by Novartis, it fails to satisfy the pleading standards set forth in Twombly and Iqbal. Therefore, the district court properly granted judgment on the pleadings in favor of Novartis. In reaching this conclusion we stress that “plausibility,” however, “is not akin to a probability requirement.” Iqbal, 129 S. Ct. at 1949. To proceed past the pleading stage a plaintiff need not establish that the alleged acts actually occurred or likely occurred with a sufficiently high probability. See Weston Carpet & Floor Covering, Inc. v. Mohawk Indus., ––– F.3d ––––, Nos. 09–6140, 09–6173, 2011 WL 2462833, *5 (6th Cir. June 22, 2011); Courie, 577 F.3d at 629–30. While Patterson’s complaint strongly suggests that she received Aredia manufactured by Novartis, she pled herself out of relief by specifically asserting that she may have received infusions of only generic Aredia. In this case, it is the “/or” that prevents Patterson’s claim from proceeding. Although the Supreme Court has continued to stress that “Rule 8 marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era,” Iqbal, 129 S. Ct. at 1950, we have, to some extent, crept back towards those earlier standards. However, construing this complaint in a light most favorable to Patterson, it fails to allege anything more than a possibility that she received Aredia infusions and, therefore, does not meet the requirements of Twombly and Iqbal. Id. at *2 (emphasis added). The court of appeals also affirmed the district court’s denials of the plaintiff’s motions for leave to conduct discovery and for leave to amend her complaint. The court reasoned, Patterson was not entitled to conduct discovery and gather the facts necessary to cure the defects in her pleading, and the district court properly refused to consider materials outside the pleadings when addressing Novartis’s motion to dismiss. Finally, because Patterson did not request leave to amend her complaint until after the district court granted Novartis’s motion to dismiss, the district court did not abuse its discretion by denying permission to amend. A. Leave to Conduct Discovery. Patterson is not entitled to discovery to determine whether her doctors infused her with Aredia manufactured by Novartis. The Supreme Court’s decisions in Twombly and Iqbal do not permit a plaintiff to proceed past the pleading stage and take discovery in 308

order to cure a defect in a complaint. E.g., Iqbal, 129 S. Ct. at 1950; see New Albany Tractor, 2011 WL 2448909, at *3 (“The language of Iqbal, ‘not entitled to discovery,’ is binding on the lower federal courts.”). Therefore, the district court did not err by denying Patterson leave to conduct discovery. B. Reliance on Information Outside the Pleadings. Patterson argues that her medical records show that she received Aredia infusions before Novartis’s patent protection expired and, therefore, Novartis must have manufactured the drug she received at that time. However, Patterson never requested that Novartis’s motion to dismiss be converted to a motion for summary judgment. District courts may only consider matters outside the pleadings in deciding a motion to dismiss if they treat the motion as one for summary judgment under Rule 56. Fed.R.Civ.P. 12(d); Jones v. City of Cincinnati, 521 F.3d 555, 562 (6th Cir. 2008). Therefore, because the district court did not convert the motion to dismiss into a motion for summary judgment, it properly ruled on this motion without considering these other documents. C. Leave to Amend. .... The district court did not abuse its discretion by denying Patterson’s initial request for leave to amend because that request was not sufficiently particular. The Rules provide that when requested, courts “should freely give leave [to amend] when justice so requires.” FED . R. CIV . P. 15(a)(2). However, a motion for leave to amend must state with particularity the grounds for amendment. FED . R. CIV . P. 7(b), 15(a)(2); Evans v. Pearson Enters., Inc., 434 F.3d 839, 853 (6th Cir.2006). In Evans, this Court held that requesting leave to amend in a single sentence without providing the grounds for the amendment or a proposed amended complaint was not a sufficiently particular request, and the district court did not abuse its discretion by denying the motion. 434 F.3d at 853. Here, Patterson only mentioned the possibility of amendments in the very last sentence of her opposition brief to the district court when she stated, “[i]n the alternative, Plaintiffs request an opportunity to amend the Complaint.” This is not a sufficiently particular request. Additionally, Patterson also had not included a proposed amended complaint with this request. Therefore, because this request was not sufficiently particular, the district court did not abuse its discretion in denying this request. 309

Similarly, the district court did not abuse its discretion by denying the formal motion to amend that Patterson filed after the district court had already granted Novartis’s motion to dismiss. This Court has previously noted that ‘[p]laintiffs [are] not entitled to an advisory opinion from the district court informing them of the deficiencies of the complaint and then an opportunity to cure those deficiencies.” Winget v. JP Morgan Chase Bank, N.A., 537 F.3d 565, 573 (6th Cir. 2008) (alteration in original, citation and internal quotation marks omitted). After a district court grants a motion to dismiss, a party may not seek to amend his or her complaint without first moving to alter, set aside, or vacate the judgment pursuant to Rule 59 or 60. Benzon v. Morgan Stanley Distribs., Inc., 420 F.3d 598, 613 (6th Cir. 2005). The district court noted that Patterson had not shown a clear error of law, newly discovered evidence, intervening change in controlling law, or need to alter the opinion to prevent manifest injustice. Cf. Roger Miller Music, Inc. v. Sony/ATV Publ’g, LLC, 477 F.3d 383, 395 (6th Cir. 2007) (requiring that motion under Rule 59(e) establish a manifest error of law or present newly discovered evidence). Therefore, the district court did not abuse its discretion by denying Patterson’s motion to amend. Id. at *3 (emphasis added). •

Havard v. Wayne Cnty., No. 09-1235, 2011 WL 3648226 (6th Cir. Aug. 19, 2011) (unpublished). Chelsie Barker, a minor, through her guardian, plaintiff Loraine Havard, filed a complaint under § 1983 against three employees of the Wayne County Jail—Deputy Puntuer, Deputy Griffin, and nurse C. Frazier. The complaint alleged that the defendants were deliberately indifferent to baby Chelsie’s serious medical needs after she was born in the Wayne County Jail. The court of appeals summarized the allegations of the complaint as follows: The complaint alleges that Chantrienes Barker, mother of Chelsie, was being involuntarily detained in the Wayne County Jail while she was pregnant. On December 2, 1998, at approximately 3:00 a.m., Barker alerted Griffin, the guard on duty, that she was having labor pains. Griffin told the jail’s nursing station. The nursing station made Barker remain in her cell to wait until her pre-scheduled doctor’s appointment, which was more than seven hours away. Griffin did nothing more. While she waited, Barker was experiencing contractions. At approximately 9:28 p.m. on December 2, the Wayne County Jail staff took Barker to Hutzel Hospital, where she was evaluated by a physician. There she was electronically monitored, given pain medication, and noted to be dilated to 2 centimeters. At roughly 11:28 p.m., the physician ordered that Barker be returned to 310

the Wayne County Jail. Upon her return to jail, Barker was locked up. Neither Defendants nor anyone else checked on her, despite the fact that she was in labor. Back in her cell, Barker experienced continued contractions. The other inmates on Barker’s cell block screamed and banged on toilets and cell bars to alert Defendants that Barker required immediate medical attention. Defendants did not respond. When they eventually did, Barker told them that “the baby was coming out.” Defendants ordered her to stand up, quiet down, and get dressed. She told them she could not move because the baby was “coming out.” Defendants then put Barker into a wheelchair and, at approximately 1:30 a.m. on December 3, 1998, took Barker to the nurses’s station. Frazier contacted EMS, but did not perform any medical assessment or provide any care to Barker, despite the fact she was in the final stages of labor. EMS did not arrive until approximately 1:57 a.m. As soon as EMS arrived, the EMS medical personnel realized that Barker’s baby “was crowning or had already crowned,” and baby Chelsie was delivered at the Wayne County Jail. EMS noted that Chelsie was not breathing, but neither EMS nor the jail had equipment to resuscitate her. Barker and Chelsie were transported back to Hutzel Hospital. Chelsie was cyanotic, with no heart rate or respirations. At the hospital, Chelsie was immediately intubated and CPR was initiated. Chelsie was later transferred to Children’s Hospital of Michigan for further care. The amended complaint alleges that, as a proximate result of Defendants’ deliberate indifference to Chelsie’s serious medical needs, she sustained serious injuries, including severe mental retardation and cerebral palsy. Id. at *1. The defendants sought judgment on the pleadings on the basis of qualified immunity and on the grounds that baby Chelsie was a fetus when the injuries to her allegedly occurred, and therefore not a “person” within the meaning of the Fourteenth Amendment. The district court denied the defendants’ motion. The district court analyzed Chelsie’s claims under the Fourteenth Amendment, reasoning that non-convicted persons have analogous protections to prisoners under the Due Process Clause of the Fourteenth Amendment. The court held that “when the injuries allegedly occurred, the minor child Chelsie was being held in jail along with her mother and that, therefore, the state actors had a duty 311

to protect and care for Chelsie.” The district court then held that Chelsie was a “person” within the Fourteenth Amendment at the time her claims accrued, namely at and after her birth. The district court held that “the complaint states a claim that Barker’s injuries were sustained during the time period following her birth, while she was transported to the hospital, and that the cause of her injuries was the lack of adequate medical care during and immediately after birth.” The court concluded that the complaint adequately alleged facts to support a claim for deliberate indifference to Chelsie’s serious medical needs. .... The district court also rejected Defendants’ qualified immunity defense, reasoning that the complaint alleged facts that could be construed to constitute deliberate indifference to Chelsie’s serious medical needs. The district court held that a reasonable person would have known that failing to obtain medical care in that situation constituted deliberate indifference. The court therefore rejected as “without merit” Defendants’ argument that they were entitled to qualified immunity because Chelsie was a fetus at the time of their actions. Id. at *2 (citations omitted). The Sixth Circuit held that the complaint stated a cognizable constitutional claim, that the district court properly held that the defendants were not entitled to qualified immunity, and that the complaint adequately stated a claim under § 1983. In reviewing the district court’s decision to deny judgment on the pleadings, the Sixth Circuit set out the standards for reviewing a motion to dismiss: To survive a motion to dismiss, the plaintiff must plead “enough factual matter” that, when taken as true, “state[s] a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007). “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.” Ashcroft, 129 S.Ct. at 1949. Plausibility requires showing more than the “sheer possibility” of relief but less than a “probab[le]” entitlement to relief. Id. “Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 1950. However, if “the 312

well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct,” the complaint has not shown that the pleader is entitled to relief. Id. (citing FED . R. CIV . P. 8(a)(2)). We recently explained that: While recent decisions of the Supreme Court establish that, to survive a motion to dismiss, plaintiffs must state “plausible” grounds for relief, the decisions do not alter the basic rule that plaintiffs must plead only the basic elements of a claim, not develop all of the facts necessary to support the claim. See Ashcroft v. Iqbal, 556 U.S. 662, ––––, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556–57, 562, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007). Nor do Iqbal and Twombly displace the general rule that we construe all reasonable inferences, including those related to a plaintiff’s legal theory, in favor of the claimants. See Beaudry v. TeleCheck Servs., Inc., 579 F.3d 702, 704 (6th Cir. 2009). Hebron v. Shelby Cnty. Gov’t, 406 F. App’x 28, 30 (6th Cir. 2010). At the same time, “to survive a motion to dismiss, the complaint must contain either direct or inferential allegations respecting all material elements to sustain a recovery under some viable legal theory.” Eidson v. State of Tenn. Dep’t of Children's Servs., 510 F.3d 631, 634 (6th Cir. 2007) (citation omitted). Id. at *6 (emphasis added). The Sixth Circuit concluded that the complaint met this standard and affirmed the district court’s denial of defendants’ motion for judgment on the pleadings. The court stated: Accepting the facts in the First Amended Complaint as true, a reasonable factfinder could conclude that Chelsie’s imminent birth was so obvious that any reasonable person would have recognized the need for her immediate and proper medical attention at birth; that Defendants actually knew of the risk; and that they were deliberately indifferent to it. Or as the district court put it: In the present case, the complaint alleges facts that could be construed to constitute deliberate indifference to Chelsie’s serious medical needs. The complaint alleges that the infant’s mother was in active labor, 313

crying out for help, to the knowledge of the defendants, and was left by the defendants in her cell for two hours; that the paramedics did not arrive until the infant was being delivered and did not have the equipment to resuscitate the child when she was delivered; and that all of this resulted in severe injuries to the infant. These facts establish both the objective and subjective components of the [deliberate indifference] test. Thus, the allegations establish a violation of a constitutional right. Havard, 600 F. Supp. 2d at 859. This case is before us upon the district court’s denial of Defendants’ motion for judgment on the pleadings. We therefore must construe the complaint in the light most favorable to Plaintiff and accept her factual allegations as true. Hill v. Blue Cross & Blue Shield of Mich., 409 F.3d 710, 716 (6th Cir. 2005). Based on those facts, Defendants are not entitled to dismissal. Id. at *7. •

Ctr. for Bio-Ethical Reform, Inc. v. Napolitano, 648 F.3d 365, 2011 WL 3330114 (6th Cir. 2011). Plaintiffs are the Center for Bio-Ethical Reform, Inc. (the “CBR”), Gregg Cunningham, its executive director, and Kevin Murray, a supporter. The CBR is a non-profit corporation devoted to anti-abortion activities, including displaying large, colorful, and graphic images of aborted fetuses on trucks and on banners towed behind aircraft. Some of these images are juxtaposed alongside images and quotations of President Obama. The CBR also sponsors a traveling exhibit that compares abortion to the Holocaust. The CBR filed a complaint against defendants Janet Napolitano, Secretary of the Department of Homeland Security, and Attorney General Eric Holder alleging, among other things, that the defendants violated the CBR’s constitutional rights under the First Amendment as part of an Obama Administration policy and practice that targets for disfavored treatment those individuals and groups deemed to be “right wing extremists” (the “RWE policy”). The plaintiffs sought damages under Bivens and various forms of injunctive relief. The district court granted the defendants’ motion to dismiss the complaint under Rule 12(b)(6) for failure to state a claim on which relief could be granted. The district court explained: Plaintiffs fail to address affirmative conduct undertaken by the defendants. They fail to allege any time, place, or manner restrictions that Defendants have imposed on their speech. They fail to allege that 314

Defendants taxed or punished their First Amendment activities. They fail to allege that Defendants imposed any prior restraint on their protected speech. They fail to allege any form of retaliation by Defendants for their exercise of protected speech on identified occasions. Id. at *2 (quotation marks omitted) (quoting Ctr. for Bio-Ethical Reform, Inc. v. Napolitano, No. 09-11441, 2010 WL 1257361, at *3 (E.D. Mich. Mar. 30, 2010)). The Sixth Circuit affirmed the district court’s dismissal for failure to state a claim. The court’s opinion examined the complaint and failed to discern any allegation that could survive a motion to dismiss. The court reasoned: We begin with Plaintiffs’ First Amendment claim, which we evaluate under the framework set forth by the Supreme Court in Mount Healthy City School District Board of Education v. Doyle, 429 U.S. 274, 97 S. Ct. 568, 50 L.Ed.2d 471 (1977). See Ctr. for Bio-Ethical Reform, Inc. v. City of Springboro, 477 F.3d 807, 821 (6th Cir. 2007). Under Mount Healthy and its progeny, a plaintiff must show that (1) the plaintiff was participating in a constitutionally protected activity; (2) the defendant’s action injured the plaintiff in a way likely to deter a person of ordinary firmness from further participation in that activity; and (3) the adverse action was motivated at least in part by the plaintiff’s protected conduct. .... . . . . [A] First Amendment retaliation claim requires an “adverse action” by the defendant that “would deter a person of ordinary firmness from continuing to engage in the kinds of protected conduct in which [the plaintiff] was engaging.” Id. (internal quotation marks and citations omitted). Adverse actions that may deter a person of ordinary firmness from exercising protected conduct may include “harassment or publicizing facts damaging to a person's reputation.” Id. at 724 (citing Thaddeus–X, 175 F.3d at 396). . . . As applied to this case, the operative question is whether Plaintiffs have adequately pleaded that Defendants’ actions would be sufficient to deter a citizen of ordinary firmness from participating in meetings or otherwise criticizing federal officials about matters relevant to Plaintiffs’ political views. Id. On appeal, Plaintiffs group their allegations of Defendants’ alleged unconstitutional actions, taken pursuant to the RWE Policy, into three categories: first, “officially designating political opponents as dangerous ‘rightwing extremists,’” 315

(Pls.’ Br. at 32); second, “conducting intrusive and coercive investigations and surveillance to dissuade political opposition,” (id.); and third, “sharing official files and records with political opponents.” (Id. at 36.) Consistent with Iqbal, “[w]e begin our analysis by identifying the [relevant] allegations in the complaint that are not entitled to the assumption of truth.” Iqbal, 129 S. Ct. at 1951. In this case, those allegations are numerous. Most significantly, Plaintiffs have failed to plausibly allege the existence of the claimed RWE policy pursuant to which they allege constitutional violations. Indeed, it is altogether unclear what constitutes the RWE Policy in light of Plaintiffs’ vague and conclusory allegations and arguments on appeal. As best we can tell, the policy is alleged to be an Orwellian monster that consists of some amorphous combination of a “policy, practice, procedure, and/or custom of Defendants.” (Am. Compl. ¶ 1; see also Pls.’ Br. at 38 (arguing that the RWE Policy “takes us a step closer to 1984”).) The Amended Complaint identifies no document, policy directive, or anything else that would constitute the RWE Policy. As explored below, even if we assume arguendo the existence of the RWE Policy, Plaintiffs have failed to show that any actions taken pursuant to the RWE Policy would entitle them to relief. The Amended Complaint alleges that “[a]ccording to the RWE Policy, Plaintiffs are ‘rightwing extremists’” (Am. Compl. ¶ 20.) Without any plausible statements as to when, where, in what, or by whom such a designation was made, this allegation amounts to a “naked assertion[ ] devoid of further factual enhancement” that is not entitled to a presumption of truth. Iqbal, 129 S. Ct. at 1949 (internal quotation marks, citations, and alterations omitted). Cf. Meese v. Keene, 481 U.S. 465, 107 S. Ct. 1862, 95 L.Ed.2d 415 (1987) (considering a First Amendment challenge to the federal government’s official labeling of a movie as “political propaganda” pursuant to a statute authorizing such a designation). Next, the Amended Complaint makes numerous conclusory and bare allegations about law enforcement activities, including surveillance, that have been directed towards Plaintiffs. (See, e .g., Am. Compl. ¶ 31 (“covert surveillance”); id. (“collect data”); id. ¶ 32 (“targeting anti-abortion organizations as potential domestic terrorists”); id. ¶ 33 (“emerging patter [sic] of abuse”); id. ¶ 35 (“conducting surveillance”); id. (“taking law enforcement actions”); 316

id. ¶ 36 (“conducting surveillance on public events, such as the national TEA parties and anti-abortion protests and demonstrations”); id. ¶ 37 (“target of federal and local law enforcement actions”); id. ¶¶ 46–48 (“increasing government surveillance and scrutiny”); id. ¶ 51 (“encourag[ing] the reporting of information concerning ‘suspicious’ or ‘criminal’ activity of ‘rightwing extremists’”); id. ¶ 69 (collecting “personal information”); id. ¶ 76 (“greater target for law enforcement action” as a result of the “Obama Awareness Campaign”); id. ¶ 81 (“target of surveillance and enforcement actions”); id. ¶ 85 (“increased government scrutiny, investigation, surveillance, and intimidation”); id. ¶ 95 (law enforcement “slow to investigate threats to CBR”); id. ¶¶ 99, 106 (“government scrutiny, investigation, surveillance, and intimidation”); id. ¶ 105 (“DHS-sanctioned . . . harass[ment]”).) None of these bare allegations provide the factual context that would render them plausible and thus entitle them to a presumption of truth at this stage in the litigation. See Iqbal, 129 S. Ct. at 1950; Nagim v. Napolitano, No. 10–CV–00329, 2011 WL 841285, at * 1–2 (D. Colo. Mar. 8, 2011) (dismissing similar challenge to claimed “rightwing extremist policy”). Unlike Fritz v. Charter Township of Comstock, where the plaintiff alleged three specific retaliatory phone calls to her employer, Plaintiffs in this case rely on vague and undated assertions of law enforcement activities directed at them. See Fritz, 592 F.3d at 723. The Amended Complaint is silent about the location, manner, duration, extent or timing of the alleged government harassment, surveillance, and scrutiny. With regard to information sharing, the Amended Complaint similarly offers conclusory and bare allegations, which are consequently not well-pleaded, and “disentitle[d] . . . to the presumption of truth.” Iqbal, 129 S. Ct. at 1951. (See, e.g., Am. Compl. ¶ 50 (“share information”); id. ¶ 52 (information is gathered, and then “it is shared with certain private organizations that are political adversaries of Plaintiffs”); id. ¶ 57 (“no safeguards for the use or distribution of the information collected pursuant to the policy”); id. ¶ 69 (information “is shared with private organizations . . . such as SPLC, NAF, and ADL”); id. ¶ 70 (“sharing of information”); id. ¶ 109 (“improper sharing of private information and data”).) Plaintiffs do not describe the type of information that “is shared,” who shared this information, or why any claimed “sharing” would operate to chill their First Amendment rights. The allegations in the Amended Complaint amount to nothing more than the type of “unadorned, the defendant-unlawfully-harmed-me” accusations that Iqbal deemed insufficient. See Iqbal, 129 S. Ct. at 1949. Plaintiffs do not even 317

explain how the alleged information sharing has resulted in any concrete harm. See Gordon v. Warren Consol. Bd. of Educ., 706 F.2d 778, 781 (6th Cir. 1983) (holding that the plaintiffs’ “subjective fear” about misuse of information collected pursuant to a law enforcement operation “is insufficient to establish a First Amendment claim”). Finally, the Amended Complaint makes numerous conclusory and bare allegations that Defendants’ actions have had the effect of chilling Plaintiffs’ speech. (See, e.g., Am. Compl. ¶¶ 88–89, 108 (“negatively affected CBR’s reputation, thereby making it difficult to recruit volunteers, to raise money, and to obtain permission to engage in speech activity at public locations, such as college and university campuses”); id. ¶¶ 91, 108 (“negatively affected CBR’s ability to raise money through donations to support its anti-abortion speech activities”); id. ¶ 92 (“negatively affected CBR’s present effort to forge working relationships with mega-churches, which do not want to be associated with ‘extremist’ groups of any sort”); id. ¶¶ 100–04 (“Plaintiff Murray is deterred from attending, participating in, or associating with those who participate in TEA parties . . . [and] those who engage in anti-abortion protests and activities ... for fear that he would be denied employment” in the federal government on account of his expressive activities); id. ¶ 105 (“deterrent effect on political speech and expressive association”); id. ¶ 106 (“deterrent effect on . . . activities and . . . rights to freedom of speech and expressive association”).) These allegations are not well-pleaded, and their conclusory nature “disentitles them to the presumption of truth.” Iqbal, 129 S. Ct. at 1951. Having set aside the conclusory and unadorned allegations that are not entitled to a presumption of truth as well-pleaded allegations, we “consider the [remaining] factual allegations . . . to determine if they plausibly suggest an entitlement to relief.” Id. To be sure, the Amended Complaint does contain certain allegations that are relatively more specific, but none of them give the Amended Complaint the ring of plausibility as to the second element of a First Amendment retaliation claim. We consider the remaining allegations in turn. First, in Paragraphs 28 and 29, the Amended Complaint alleges: ¶ 28. Pursuant to the RWE Policy, on or about March 23, 2009, a confidential directive was issued by FBI headquarters in Washington, D.C. to each of its 56 field offices, instructing the Special Agent in Charge (SAC) to verify the date, time, and location of each 318

TEA party within his or her region and to supply that information to FBI headquarters. The directive instructed the field office to obtain and confirm the identity of the individual(s) involved in the actual planning and coordination of the event in its region. The directive was tightly controlled. ¶ 29. Pursuant to the RWE Policy, a second directive was issued by FBI headquarters on or about April 6, 2009. This directive instructed each SAC to coordinate and conduct, either at the field office level and/or with the appropriate resident agency, covert video surveillance and data collection of the participants of the TEA parties. This information was to be submitted to Washington, D.C. These allegations describe Defendants’ actions on certain dates—March 23, 2009 and April 6, 2009—but fail to adequately plead that the actions of Defendants were likely to deter a person of ordinary firmness from further participation in expressive activities. The allegations refer to “confidential” directives that were “tightly controlled,” making it implausible that Plaintiffs, or others, were aware of these directives, in the absence of any allegation that the directives were publicly disclosed. The “mere presence of an intelligence data-gathering activity” does not give rise to constitutional liability. Gordon, 706 F.2d at 781. Without additional allegations with regard to these “directives,” their mere existence is insufficient to state a claim. Second, perhaps related to the above-allegations, the Amended Complaint alleges in Paragraphs 22 and 24: ¶¶ 22, 24. The DHS Assessment was “leaked” to the public approximately one week prior to the TEA (Taxed Enough Already) parties that were scheduled to be held across the country on April 15, 2009.... The public release of the DHS Assessment had the intended and calculated effect of deterring people, such as Plaintiffs and those who associate with them, from participating in events such as the national TEA parties and anti-abortion protests and demonstrations. Although perhaps more than a bare conclusion, this allegation is insufficient to plead that Defendants’ action injured Plaintiffs in a way 319

likely to deter a person of ordinary firmness from further participation in constitutionally protected activity. Plaintiffs allege only that the DHS Assessment “was leaked,” but make no allegation as to who or what leaked the document, or whether that person or entity was affiliated with Defendants, or how and to what degree the information was disseminated. Moreover, Plaintiffs fail to explain why the release of the DHS Assessment would deter them from attending “TEA parties,” or any specific TEA party event that they, or anyone else, would have otherwise attended. Third, regarding President Obama’s commencement speech at the University of Notre Dame in 2009, the Amended Complaint alleges in Paragraphs 77, 79, and 80: ¶ 77. According to sources within FEMA . . . a number of violent “right-wing,” anti-abortion individuals and groups arrived in South Bend, Indiana in May 2009 to protest President Obama’s participation in the commencement ceremony at the University of Notre Dame. ¶¶ 79–80. CBR was one of the “right-wing” groups that arrived in South Bend, and it deployed its “Obama Awareness Campaign” to protest the [P]resident and his policies on abortion. Although there were no reported acts of violence committed during the ceremony, the anti-abortion groups that participated in the protest, such as CBR, were publicly described by federal officials as “right-wing” and “violent.” But the Amended Complaint does not allege any action by Defendants—it merely refers to “federal officials,” who might work for myriad federal agencies unconnected to Defendants. Moreover, the Amended Complaint refers only to one action of these “federal officials,” namely “publicly describ[ing]” anti-abortion groups protesting at the commencement as “right-wing” and “violent.” The Amended Complaint does not state when, or by what means, such a “public” pronouncement was made, nor does the Amended Complaint allege the identity or activities of the other “anti-abortion groups that participated in the protest,” rendering it impossible to evaluate the plausibility of the allegation that any public pronouncement had or was likely to have had an adverse effect on protected speech. See Brown v. Matauszak, No. 09–2259, 2011 WL 285251, at *5–6 (6th Cir. Jan. 31, 2011) (dismissing complaint for failure to state a claim, where 320

prisoner alleged that prison[ ] officials improperly withheld court documents sent to him, but failed to plead facts about the nature of the withheld documents). Fourth, the Amended Complaint alleges in Paragraph 81: ¶ 81. CBR and its employees and volunteers have been detained by agents from the FBI, who described CBR as a domestic terrorist organization on account of CBR’s opposition to abortion. The Department of Justice defended the actions of the FBI, claiming that the FBI agents reasonably believed that CBR was involved in domestic terrorism. This allegation is likewise deficient. The Amended Complaint does not identity, for example, who the FBI has detained, when or for how long the FBI did so, whether any charges were filed, and what the circumstances were surrounding the detentions, including whether a proper law enforcement purpose was served. The Amended Complaint also does not allege that any of the individual detentions were connected to CBR or the individual Plaintiffs in this case. In fact, the Amended Complaint appears to allege that CBR, a corporate entity, was somehow itself detained by the FBI, but provides no further elaboration. The Amended Complaint makes no allegation, aside from conclusory statements made throughout, that these arrests had the effect of chilling their speech, or would reasonably be expected to do so. Fifth, with regard to Plaintiff Murray, the Amended Complaint alleges in Paragraph 103: ¶ 103. . . . To date, Plaintiff has been denied employment with the U.S. Border Patrol and with the U.S. Immigration and Customs Enforcement. But the Amended Complaint makes no allegation that these agencies denied federal employment to Plaintiff Murray on account of his expressive associations or activities, or pursuant to any alleged unconstitutional policy, or that Plaintiff Murray was otherwise qualified for these positions that he claims to have sought. In fact, the Amended Complaint contains no allegation that Plaintiff Murray is in any way connected to CBR. Accordingly, based on a review of the allegations in the 321

Amended Complaint, we conclude that Plaintiffs have failed to adequately plead that any of Defendants’ actions injured Plaintiffs in any way that would deter a person of ordinary firmness from further participation in constitutionally protected activity. .... Alternatively, even if Plaintiffs could satisfy the second element of a First Amendment retaliation claim, we conclude that Plaintiffs have failed to adequately plead the third element, namely that any adverse action by Defendants was motivated at least in part by Plaintiffs’ constitutionally protected activity. Plaintiffs present nothing more than unadorned allegations concerning Defendants’ intent and motivation. (See, e.g., Am. Compl. ¶ 40 (“Defendants seek to officially censor, correct, and/or condemn certain political views and ideas and thereby prescribe what shall be orthodox in politics, nationalism, religion, and other matters of opinion”); id. ¶ 41 (“The RWE Policy is designed to deter, prevent, and preempt activities that government officials deem to be in opposition to . . . the current administration”); id. (“Defendants seek to influence domestic public opinion in support of . . . the current administration”); id. ¶ 42 (“tool of intimidation” to “stifle political opinion and opposition”); id. ¶ 44 (“deter ‘rightwing extremist’ speech activities”); id. ¶¶ 51–52 (“in order to deter”); id. ¶ 105 (“silence political opposition” “marginalize political opponents”; “deter and diminish political opponents”); id. ¶ 107 (“designed to marginalize them and their opposition to the policies and practices of the federal government”).) These vague and conclusory allegations of nefarious intent and motivation by officials at the highest levels of the federal government are not well-pleaded, and are therefore insufficient to “plausibly suggest an entitlement to relief.” Iqbal, 129 S. Ct. at 1951; see also Moss v. U.S. Secret Serv., 572 F.3d 962, 970 (9th Cir. 2009) (“The bald allegation of impermissible motive . . ., standing alone, is conclusory and is therefore not entitled to an assumption of truth.”). In Iqbal, the plaintiff alleged that high ranking federal officials had adopted a policy of unconstitutional detention based on race, religion and/or national origin. In declining to credit as true the plaintiff’s allegations of intent, the Supreme Court held that “conclusory” allegations of intent “without reference to [ ] factual context” are deficient. See Iqbal, 129 S. Ct. at 1954. In this case, 322

similar to Iqbal, nothing in the Amended Complaint states a plausible claim that Defendants personally, or through their respective departments, took any actions on account of Plaintiffs’ constitutionally protected activities, or that any policy was adopted or enforced on an improper basis. Nothing in the alleged conduct of relevant federal law enforcement officers plausibly suggests that they were motivated by anything other than a proper law enforcement motive. Indeed, the Amended Complaint makes no plausible allegation that the relevant actions of law enforcement were not supported by probable cause, or otherwise taken pursuant to a valid law enforcement purpose. The Ninth Circuit confronted a similar claim in Moss v. U.S. Secret Service, where protestors who were removed by the U.S. Secret Service claimed that the agency had a policy of removing protestors who were critical of President George W. Bush in violation of the First Amendment. 572 F.3d at 962. The Ninth Circuit rejected the claim on a motion to dismiss, reasoning: The allegation of systematic viewpoint discrimination at the highest levels of the Secret Service, without any factual content to bolster it, is just the sort of conclusory allegation that the Iqbal Court deemed inadequate, and thus does nothing to enhance the plausibility of Plaintiffs’ viewpoint discrimination claim against the Agents. Id. at 970. Likewise in this case, and for the reasons discussed herein, the Amended Complaint fails to adequately plead that any adverse actions by Defendants were motivated by a desire to discriminate or retaliate against Plaintiffs on account of their constitutionally protected expressive activities. See Iqbal, 129 S. Ct. at 1950–51 (stating that the plaintiff has not “nudged his claims of invidious discrimination across the line from conceivable to plausible”) (internal quotation marks, citations, and alterations omitted). Accordingly, Plaintiffs have failed to adequately plead that any adverse action by Defendants was motivated at least in part by Plaintiffs’ constitutionally protected activity. .... Plaintiffs have failed to state a claim against Defendants, in 323

either their official or individual capacities, under the First Amendment. To the extent Plaintiffs seek to challenge the constitutionality of the alleged RWE Policy, Plaintiffs have failed to plausibly allege the existence of such a policy. And to the extent Plaintiffs seek to challenge the alleged retaliation by Defendants on account of Plaintiffs’ protected activities, Plaintiffs’ allegations are likewise deficient. Plaintiffs have failed to plausibly allege that any actions by Defendants injured Plaintiffs in a way that would deter a person of ordinary firmness from further participation in constitutionally protected activity. Nor have Plaintiffs plausibly alleged that any adverse action by Defendants was motivated at least in part by Plaintiffs’ constitutionally protected activity. Id. at *5–13 (emphasis added) (citations omitted). •

Pulte Homes, Inc. v. Laborers’ Int’l Union, 648 F.3d 295, 2011 WL 3274014 (6th Cir. Aug. 2, 2011). Plaintiff Pulte Homes, Inc., a home building company, filed a complaint against defendants Laborers’ International Union and two of its officers under the federal Computer Fraud and Abuse Act (CFAA) for orchestrating an onslaught of phone calls and e-mails on the plaintiff company’s telephone and e-mail systems. The district court dismissed the complaint with prejudice on the grounds that the complaint failed to allege facts sufficient to state a claim under CFAA. The court of appeals summarized the allegations of plaintiff’s complaint as follows: Pulte Homes, Inc.’s (Pulte[’s]) complaint stems from an employment dispute. Pulte alleges that in September 2009 it fired a construction crew member, Roberto Baltierra, for misconduct and poor performance. Shortly thereafter, the Laborers’ International Union of North America (LIUNA) began mounting a national corporate campaign against Pulte—using both legal and allegedly illegal tactics—in order to damage Pulte’s goodwill and relationships with its employees, customers, and vendors. Just days after Pulte dismissed Baltierra, LIUNA filed an unfair-labor-practice charge with the National Labor Relations Board (NLRB). LIUNA claimed that Pulte actually fired Baltierra because he wore a LIUNA t-shirt to work, and that Pulte also terminated seven other crew members in retaliation for their supporting the union. Pulte maintains that it never terminated any of these seven additional employees. Not content with its NLRB charge, LIUNA also began using an allegedly illegal strategy: it bombarded Pulte’s sales offices and 324

three of its executives with thousands of phone calls and e-mails. To generate a high volume of calls, LIUNA both hired an auto-dialing service and requested its members to call Pulte. It also encouraged its members, through postings on its website, to “fight back” by using LIUNA’s server to send e-mails to specific Pulte executives. Most of the calls and e-mails concerned Pulte’s purported unfair labor practices, though some communications included threats and obscene language. Yet it was the volume of the communications, and not their content, that injured Pulte. The calls clogged access to Pulte’s voicemail system, prevented its customers from reaching its sales offices and representatives, and even forced one Pulte employee to turn off her business cell phone. The e-mails wreaked more havoc: they overloaded Pulte’s system, which limits the number of e-mails in an inbox; and this, in turn, stalled normal business operations because Pulte’s employees could not access business-related e-mails or send e-mails to customers and vendors. Four days after LIUNA started its phone and e-mail blitz, Pulte’s general counsel contacted LIUNA. He requested, among other things, that LIUNA stop the attack because it prevented Pulte’s employees from doing their jobs. When the calls and e-mails continued, Pulte filed this suit . . . . Id. at *1. The Sixth Circuit reversed the district court’s dismissal of the plaintiff’s claim seeking damages under the CFAA for transmissions that intentionally caused damage to a protected computer (while affirming the district court’s dismissal of a second, independent claim asserted by plaintiff under the CFAA). In support of its reversal, the court of appeals explained: To state a transmission claim, a plaintiff must allege that the defendant “knowingly cause[d] the transmission of a program, information, code, or command, and as a result of such conduct, intentionally cause[d] damage without authorization, to a protected computer.” 18 U.S.C. § 1030(a)(5)(A). We assume, because it is not disputed, that LIUNA’s communications constitute “transmissions,” see id., and that Pulte’s phone and e-mail systems qualify as “protected computers,” see id. § 1030(e)(2). According to LIUNA and the district court, however, Pulte fails to allege that LIUNA “intentionally caused damage.” We address damages and intent—in that order—and conclude that Pulte properly alleges both. 325

Pulte describes the effects of LIUNA’s conduct at length in its complaint. Summarized, the calls impeded access to voicemail, prevented Pulte’s customers from reaching its sales offices and representatives, and forced an employee to turn off her cell phone. And LIUNA’s e-mails—which overloaded Pulte’s system—curtailed normal business operations because Pulte's employees could not access and respond to e-mails. The parties dispute whether this constitutes damage under the CFAA. To understand “damage,” we consult both the statutory text and ordinary usage. Under the CFAA, “any impairment to the integrity or availability of data, a program, a system, or information” qualifies as “damage.” Id. § 1030(e)(8). Because the statute includes no definition for three key terms—“impairment,” “integrity,” and “availability”—we look to the ordinary meanings of these words. . . . Applying these ordinary usages, we conclude that a transmission that weakens a sound computer system—or, similarly, one that diminishes a plaintiff’s ability to use data or a system—causes damage. LIUNA’s barrage of calls and e-mails allegedly did just that. At a minimum, according to the complaint's well-pled allegations, the transmissions diminished Pulte’s ability to use its systems and data because they prevented Pulte from receiving at least some calls and accessing or sending at least some e-mails. Cf. Czech v. Wall St. on Demand, Inc., 674 F. Supp. 2d 1102, 1117–18 (D. Minn. 2009) (dismissing a CFAA transmission claim because the plaintiff failed to allege that the defendant’s text messages stopped her from receiving or sending any calls or text messages). The diminished-ability concept that we endorse here is not novel: several district courts have already adopted it. Moreover, our interpretation comports with two decisions from sister circuits. The Third Circuit sustained a transmission conviction where the defendant “admitted that in using the direct e-mailing method and sending thousands of e-mails to one inbox, the targeted inbox would flood with e-mails and thus impair the user’s ability to access his other ‘good’ e-mails.” United States v. Carlson, 209 F. App’x 181, 185 (3d Cir. 2006). And the Seventh Circuit, in United States v. Mitra, upheld the defendant’s transmission conviction because he impaired the availability of an emergency communication system when “[d]ata that [he] sent interfered with the way the computer allocated communications to the other 19 [radio] channels and stopped the flow of information among public-safety officers.” 326

405 F.3d 492, 494 (7th Cir. 2005). That these decisions involve criminal prosecutions is irrelevant. See Leocal v. Ashcroft, 543 U.S. 1, 11 n. 8, 125 S. Ct. 377, 160 L.Ed.2d 271 (2004) (“[W]e must interpret [a] statute consistently, whether we encounter its application in a criminal or noncriminal context . . . .”). In both cases, the government proved beyond a reasonable doubt that the transmissions impaired the availability of the computer equipment; here, Pulte adequately alleges that result. Because Pulte alleges that the transmissions diminished its ability to send and receive calls and e-mails, it accordingly alleges an impairment to the integrity or availability of its data and systems—i.e., statutory damage. .... Damage alone, however, is not enough for a transmission claim. A defendant must also cause that damage with the requisite intent. The district court found Pulte’s intent allegations deficient: it dismissed Pulte’s claim because Pulte failed to allege that LIUNA knew its calls and e-mails would harm Pulte’s computer systems. See Pulte Homes, Inc. v. Laborers’ Int'l Union, No. 09–13638, 2010 WL 1923814, at *3 (E.D. Mich. May 12, 2010) (“Plaintiff did not inform Defendants that their conduct was harmful to any of Plaintiff’s computer systems.”). In other words, Pulte made no allegation that LIUNA fully grasped the actual consequences of its e-mail campaign. This is too high a standard. The transmission subsection prohibits causing damage “intentionally.” 18 U.S.C. § 1030(a)(5)(A). We turn, again, to ordinary usage because the CFAA does not define the term. To act “intentionally” commonly means to act “on purpose”—i.e., with a purpose or objective. The Third Circuit, for example, sustained a CFAA transmission conviction where the jury instructions provided that “[a] person acts intentionally when what happens was the defendant’s conscious objective.” Carlson, 209 F. App’x at 184–85 (internal quotation marks and citation omitted). Thus, to satisfy its pleading burden, Pulte must allege that LIUNA acted with the conscious purpose of causing damage (in a statutory sense) to Pulte’s computer system—a standard that does not require perfect knowledge. Pulte met its burden. The following allegations illustrate 327

LIUNA’s objective to cause damage: (1) LIUNA instructed its members to send thousands of e-mails to three specific Pulte executives; (2) many of these e-mails came from LIUNA’s server; (3) LIUNA encouraged its members to “fight back” after Pulte terminated several employees; (4) LIUNA used an auto-dialing service to generate a high volume of calls; and (5) some of the messages included threats and obscenity. And although Pulte appears to use an idiosyncratic e-mail system, it is plausible LIUNA understood the likely effects of its actions—that sending transmissions at such an incredible volume would slow down Pulte’s computer operations. LIUNA’s rhetoric of “fighting back,” in particular, suggests that such a slow-down was at least one of its objectives. The complaint thus sufficiently alleges that LIUNA—motivated by its anger about Pulte’s labor practices—intended to hurt Pulte’s business by damaging its computer systems. LIUNA attempts—but fails—to justify its conduct. Though it maintains that the calls and e-mails are “fully consistent with an ongoing, lawful, organizing campaign” through which it “is attempting [only] to organize Pulte employees,” LIUNA offers no explanation of how targeting Pulte’s executives and sales offices—rather than employees eligible for recruitment—advances its campaign. And an equally, if not more, plausible explanation is that LIUNA intended to disrupt Pulte’s business by bogging down its computer systems. Rule 12(b)(6) demands nothing more. See Iqbal, 129 S. Ct. at 1949. Id. at *4–6 (emphasis added) (citations omitted). •

Watson Carpet & Floor Covering, Inc. v. Mohawk Indus., Inc., 648 F.3d 452, 2011 WL 2462833 (6th Cir. 2011). Plaintiff Watson Carpet & Floor Covering, Inc. was a carpet dealer in competition with Carpet Den, Inc., and its owner, Rick McCormick. Mohawk Industries, Inc. was a carpet supplier. Watson sued Carpet Den, McCormick, and Mohawk for conspiring to restrain trade in violation of section 1 of the Sherman Antitrust Act. The court of appeals summarized Watson’s allegations as follows: Watson Carpet alleges that, in 1998, the defendants explicitly agreed to force Watson Carpet out of business by slandering and refusing to deal to Watson Carpet. After Mohawk refused to sell carpet to Watson Carpet the next year, Watson Carpet brought state claims in state court against all three defendants. Carpet Den and McCormick settled the state-court action with Watson Carpet in March 2007, and Watson Carpet released all then-existing claims against those two defendants. While the state-court litigation was ongoing in 2005 and 2006, and in May 2007 after the litigation had ended, 328

Mohawk again refused to sell to Watson Carpet. The 2005, 2006, and 2007 incidents form the basis of the present lawsuit. . . . .... According to the complaint, in 1998, McCormick met with Brad Matthaidess, Mohawk’s Vice President and Senior Manager, and Fred Woods, a Mohawk sales representative. Mohawk is one of two suppliers that dominate 95% of Nashville's market for production-homebuilder carpet. Wielding that power, the men designed a plan to “run [Watson Carpet] out of business.” R. 1 (Compl.¶ 15). To carry out the plan, Mohawk would refuse to sell to Watson Carpet. Meanwhile, McCormick, Carpet Den, and Woods “would maliciously make false derogatory accusations about [Watson Carpet and its owner] to Plaintiff’s customers and potential customers and others in the industry.” Id. at ¶ 16. The complaint does not make clear when the defendants began to follow through on their plan, but between paragraphs about events in 1998 and 1999, Watson Carpet claims that McCormick and other Carpet Den and Mohawk agents made “false derogatory accusations” about the company to potential customers, with the goal of hurting Watson Carpet’s business. Id. at ¶¶ 16–17. Their accusations included “that [Watson Carpet’s owner] used drugs, sold drugs, cheated his customers, slept with his employees, had financial problems, had trouble with the IRS, and was in the mob.” Id. at ¶¶ 18–19. McCormick also “instructed his sales people that if they were competing with Plaintiff for a sale they should ‘lowball’ the price . . . to keep Plaintiff from getting the sale, even if it meant losing money on the sale.” Id. at 20. In 1999, McCormick told the president of Turnberry Homes, Watson Carpet's client, that Watson Carpet had stolen money “by pocketing rebates . . . that should have been going to Turnberry Homes.” Id. at ¶ 21. The attempt to undercut Watson Carpet’s business did not succeed: the president of Turnberry Homes believed that McCormick’s accusations were false, and the client continued to purchase from Watson Carpet. Watson Carpet had less success that same year when it tried to purchase Portico carpet from Mohawk to supply Centex Homes. “Pursuant to and in furtherance of the conspiracy, Defendant Mohawk refused to sell Plaintiff the Portico carpet needed to service Centex,” costing Watson Carpet the client, potential profits, and “almost” its own company. Id. at ¶ 22.

329

Although the complaint omits this fact, Watson Carpet sued Mohawk, Carpet Den, and McCormick in state court in 1999 for the Centex incident, alleging “tortious interference with business relationships and civil conspiracy.” Watson’s Carpet & Floor Coverings, Inc. v. McCormick, et al., 247 S.W.3d 169, 173 (Tenn. Ct. App. 2007). A jury found for Watson Carpet on both bases against all three defendants, awarding $1,384,180 in past damages and $249,314 in future damages. It also awarded $3,750,000 in punitive damages against Mohawk. On appeal, the Tennessee Court of Appeals reversed the judgment against Mohawk for tortious interference because Mohawk had a state-law supplier’s privilege to make “decisions on what companies to deal with and what to sell them.” Id. at 179. Relying on Mohawk’s privilege, the Tennessee Court of Appeals also reversed for all defendants on the claim of conspiracy to interfere tortiously with Watson Carpet’s prospective relationship with Centex. However, the court upheld the verdicts against Carpet Den and McCormick for tortiously interfering with Watson Carpet’s relationship with Mohawk. The Tennessee Court of Appeals issued its decision in January 2007. In March 2007, Carpet Den and McCormick settled with Watson Carpet. In exchange, Watson Carpet released the two defendants “from and against any and all claims . . . which [Watson Carpet] may have against them whether such claims are contingent or actual, anticipated or unanticipated, and of whatever kind or nature.” Settlement at ¶ 1. Rather than settling, Mohawk sought review from the Tennessee Supreme Court, which denied permission to appeal. During the course of the state-court litigation, Mohawk had refused to sell to Watson Carpet for Newmark Homes in 2005 and Pulte Homes in 2006. After the settlement, in May 2007, Mohawk refused to fill Watson Carpet’s order for Wieland Homes. According to the complaint, all three refusals were “[p]ursuant to and in furtherance of the conspiracy.” R. 1 (Compl. ¶¶ 32, 40, 48). Id. at *1–3. The district court granted Mohawk’s motion to dismiss, holding that the complaint failed to allege adequate particulars to suggest that the 2005–2007 events arose out of the alleged original conspiracy and were not simply unilateral refusals to sell to a litigious customer. The district court found that the plaintiff “‘failed to allege facts supporting its conclusory assertions that actions taken by [Mohawk] were related to or in furtherance of the conspiracy allegedly formed in 1998,’ or that Carpet Den or McCormick had taken ‘any actionable steps in furtherance of the alleged conspiracy after the date of the settlement agreement.’” Id. at *3. 330

The Sixth Circuit reversed the district court’s dismissal of the complaint. The court of appeals held: Watson Carpet adequately stated a claim for relief. Watson Carpet specifically alleged both an agreement to restrain trade and later acts that furthered the conspiracy. In response, Mohawk proffered alternative explanations for its refusals to sell to Watson Carpet. However, to survive a motion to dismiss, Watson Carpet needs to allege only that the defendants' agreement plausibly explains the refusals to sell, not that the agreement is the probable or exclusive explanation. Id. at *1 (emphasis added). The court of appeals explained: Section 1 of the Sherman Act forbids conspiracies “in restraint of trade or commerce among the several States.” 15 U.S.C. § 1. A Section 1 conspiracy requires more than a manufacturer’s unilateral refusal to deal. Monsanto Co. v. Spray–Rite Serv. Corp., 465 U.S. 752, 761, 104 S. Ct. 1464, 79 L.Ed.2d 775 (1984). “There must be evidence that tends to exclude the possibility that the manufacturer and nonterminated distributors were acting independently.” Id. at 764. For example, in Twombly, the Supreme Court “[a]cknowledg[ed] that parallel conduct” between two businesses “was consistent with an unlawful agreement, [but] nevertheless concluded that it did not plausibly suggest an illicit accord because it was not only compatible with, but indeed was more likely explained by, lawful, unchoreographed free-market behavior.” Ashcroft v. Iqbal, ––– U.S. ––––, 129 S. Ct. 1937, 1950, 173 L.Ed.2d 868 (2009); see Twombly, 550 U.S. at 557. To plead unlawful agreement, a plaintiff may allege either an explicit agreement to restrain trade, or “sufficient circumstantial evidence tending to exclude the possibility of independent conduct.” In re Travel Agent, 583 F.3d at 907 (listing four circumstantial “plus factors” that can demonstrate “concerted action”). Under either approach, the facts alleged must “plausibly suggest [ ],” rather than be “merely consistent with,” an agreement to restrain trade in violation of the Sherman Act. Id. at 908. Unlike the plaintiffs in Twombly and In re Travel Agent, Watson Carpet clearly has alleged an express agreement to restrain trade. The contentious issue, then, is whether the complaint adequately alleges that the refusals to sell carpet were undertaken as part of that agreement, or whether they were independent actions on 331

Mohawk’s part. We hold that the complaint sufficiently alleges a connection between the original agreement and the later refusals to sell. Proof that the conspiracy was ongoing is unnecessary because conspiracies presumptively are ongoing until the participants achieve their objective. United States v. Hayter Oil Co., 51 F.3d 1265, 1270–71 (6th Cir. 1995) (stating in a criminal Sherman Act § 1 case that, “once a conspiracy has been established, it is presumed to continue until there is an affirmative showing that it has been abandoned”) (citing United States v. Kissel, 218 U.S. 601, 608, 31 S. Ct. 124, 54 L.Ed. 1168 (1910)); see also United States v. True, 250 F.3d 410, 424 (6th Cir. 2001) (quoting Hayter Oil). But see United States v. Therm–All, Inc., 373 F.3d 625, 635–36 (5th Cir.) (reading this language in Hayter Oil as unpersuasive dicta because other coconspirators admitted that they had committed overt acts within the statute-of-limitations period), cert. denied, 543 U.S. 1004, 125 S. Ct. 632, 160 L.Ed.2d 464 (2004). The cases supporting this rule are criminal ones about the affirmative defense of withdrawal from a conspiracy, but their logic is equally sensible in the civil context. Cf. Chiropractic Coop. Ass’n of Mich. v. Am. Med. Ass’n, 867 F.2d 270, 274–75 (6th Cir. 1989) (placing on civil defendants, like criminal defendants, the burden “to demonstrate withdrawal from the conspiracy”). Therefore, because conspiracies are presumptively ongoing, a plaintiff plausibly alleges that defendants acted pursuant to a conspiracy if the plaintiff alleges both (1) a conspiratorial agreement and (2) later actions that are consistent with the conspiracy. We conclude that Watson Carpet’s complaint plausibly alleges that the 2005, 2006, and 2007 refusals stemmed from Mohawk’s 1998 agreement with Carpet Den. In each count alleged in its complaint, Watson Carpet asserts that Mohawk “refused to sell” carpet “[p]ursuant to and in furtherance of the conspiracy.” R. 1 (Compl .¶¶ 32, 40, 48). The defendants argue that the phrase “[p]ursuant to and in furtherance of the conspiracy” is a legal conclusion, which this court “need not accept as true,” In re Travel Agent, 583 F.3d at 903. Similarly, the district court determined that Watson Carpet did not “point to any actual facts that support th[e] conclusory assertion” that the refusals to sell were pursuant to the 1998 conspiracy. R. 35 (Dist. Ct. Op. # 1 at 11). There was, however, nothing more for Watson Carpet to plead. It articulated in detail the facts of the 1998 agreement. That the actions were taken pursuant to the plan is evident from the fact that the actions were the same ones contemplated as part of the plan. The agreement called for Mohawk to refuse to sell carpet, 332

which is exactly what Mohawk allegedly did. A smoking gun—such as an email documenting that the conspiracy was ongoing—would aid Watson Carpet’s case, but its absence does not render implausible that a business continued to adhere to the conspiratorial plan. The district court gave improper weight to the absence of reaffirmation. See R. 35 (Dist. Ct. Op. # 1 at 11) (“Watson does not allege the existence of any meetings between the parties or any overt acts giving rise to an inference that the parties reaffirmed the conspiracy at any time after 1998.”). The district court also found Watson Carpet’s allegations inadequate because the state-court litigation itself was “an eminently plausible reason for the refusal to deal.” R. 35 (Dist. Ct. Op. # 1 at 11 (citing Zoslaw v. MCA Distributing Corp., 693 F.2d 870, 889–90 (9th Cir. 1982), cert. denied, 460 U.S. 1085, 103 S. Ct. 1777, 76 L.Ed.2d 349 (1983))). However, Twombly insists that pleadings be plausible, not probable. Iqbal, 129 S. Ct. at 1949 (“[T]he plausibility standard is not akin to a probability requirement.”); Twombly, 550 U.S. at 556 (holding that plaintiffs can “proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely” (internal quotation marks omitted)). Often, defendants’ conduct has several plausible explanations. Ferreting out the most likely reason for the defendants’ actions is not appropriate at the pleadings stage. In this case, the plausibility of Watson Carpet’s litigiousness as a reason for the refusals to sell carpet does not render all other reasons implausible. In fact, the litigation arguably renders Watson Carpet’s theory more plausible than if the parties had been incommunicado from 1998 to 2005. Whatever reasons Mohawk originally had to enter the agreement may have remained salient because of the state-court litigation or been exacerbated by the litigation. The passage of time between an agreement and a defendant’s later actions may affect the plausibility of an inference that the actions were connected to the agreement. Cf. In re Travel Agent, 583 F.3d at 911 (finding a statement made twenty-five years earlier “too remote in time to support a plausible inference of agreement” to restrain trade, although other factors influenced the determination as well). At the same time, it is not uncommon—and therefore not implausible—for antitrust conspiracies to last many years. See, e.g., United States v. Broce, 488 U.S. 563, 580, 109 S. Ct. 757, 102 L.Ed.2d 927 (1989) (Stevens, J., concurring) (upholding guilty pleas to charges of a single, twenty-five year conspiracy “among Kansas highway contractors to rig bids” in violation of the Sherman Act); In re Scrap Metal Antitrust 333

Litig., 527 F.3d 517, 523–24 (6th Cir. 2008) (affirming a judgment for a class “consisting of all [industrial-scrap] generators who sold scrap metal to Defendants and/or their co-conspirators” during a period exceeding seven years because the defendants violated the Sherman Act by setting prices and rigging bids); Amarel v. Connell, 102 F.3d 1494, 1503 (9th Cir. 1997) (affirming Sherman Act liability for “a far-reaching, decades-long conspiracy” to shut down independent rice purchasers and mills); Hayter Oil, 51 F.3d at 1266 (affirming a conviction for a five-year “conspiracy to control retail gasoline prices”). Nothing about the parties’ relationship in this case suggests that a conspiracy would have proceeded more rapidly. The seven years that elapsed between the defendants’ alleged agreement and the 2005 refusal to sell certainly do not render Watson Carpet’s claims implausible. It is not necessary for us to consider Watson Carpet’s argument that post–1998 facts confirmed the existence of a conspiracy. Because conspiracies are presumptively ongoing, the complaint plausibly alleges that Mohawk refused to sell to Watson Carpet in 2005, 2006, and 2007 as part of the original, ongoing conspiracy. Id. at *4–6 (emphasis added). •

New Albany Tractor, Inc. v. Louisville Tractor, Inc., 650 F.3d 1046, 2011 WL 2448909 (6th Cir. 2011). Plaintiff New Albany Tractor, Inc. filed a complaint against defendants Scag Power Equipment and Louisville Tractor, Inc., alleging violation of the Robinson-Patman Act, an antitrust statute. The district court granted the defendants’ motion to dismiss with prejudice. The plaintiff appealed to the Sixth Circuit, arguing that the dismissal should be vacated or that, at the very least, the dismissal should be made without prejudice and the plaintiff afforded an opportunity to amend its complaint. The court of appeals summarized the allegations of the complaint as follows: The Robinson-Patman Act prohibits, among other things, a seller from selling the same product to two different buyers at different prices. Its primary purpose is to stop large buyers from receiving discriminatory preferences over smaller buyers due to the larger buyers’ greater purchasing power. Defendant Scag, a Wisconsin corporation, manufactures mowing equipment that it sells to distributors that in turn sell to retailers. Defendant, Louisville Tractor, wears two hats: it is the exclusive wholesale distributor of Scag equipment to retailers in the Louisville area, and it is also a retailer of Scag equipment in the Louisville market. Plaintiff, New Albany Tractor, is solely a retailer, selling Scag mowers as well as other brands in the Louisville area. 334

Scag requires New Albany to buy its Scag product line and parts from Louisville Tractor, its exclusive distributor in the Louisville area. Scag will not sell directly to New Albany Tractor (or any other retailer) and it will not allow New Albany Tractor to purchase Scag equipment from a Scag distributor outside the Louisville area. Essentially, New Albany Tractor’s complaint alleges a discriminatory pricing scheme between defendant Scag, the manufacturer, and defendant Louisville Tractor, in its role as the exclusive wholesaler of Scag equipment in the Louisville market, with the effect of reducing competition. In order to satisfy the requirement in the language of the Act that the sales must be to “different purchasers,” plaintiff alleges that Louisville Tractor, which is the only purchaser of Scag products in the Louisville market due to its exclusive distributorship, is a “dummy” or strawman operation that is controlled by Scag so that any sale from Louisville Tractor to plaintiff is a fiction. Plaintiff alleges that it is Scag, not Louisville Tractor, selling directly to New Albany Tractor and the other retailers in the Louisville area. This “dummy” or “strawman” arrangement is known as “the indirect purchaser doctrine” for purposes of the Robinson–Patman Act. Id. at *1. The court of appeals affirmed the ruling of the district court that plaintiff did not allege sufficient facts to plausibly suggest that Scag controlled the prices charged by Louisville Tractor to an extent adequate to render Louisville Tractor a mere “dummy” or “strawman” for Scag for purposes of the indirect purchaser doctrine. The court specifically noted that its result probably would have been different before Twombly and Iqbal. The court stated: Two recent decisions have changed the long-standing rule of Conley v. Gibson, in which the Supreme Court stated, “a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim . . . .” 355 U.S. 41, 45–46, 78 S. Ct. 99, 2 L.Ed.2d 80 (1957). In Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L.Ed.2d 929 (2007), the Supreme Court said that a plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.” In Twombly, the Court changed the standard applicable to Rule 12(b)(6) motions to dismiss Sherman Act claims by directing that Rule 12(b)(6) must be read in conjunction with Rule 8(a), which requires “a short and plain statement of the claim showing that the pleader is entitled to relief.” FED . R. CIV . P. 8(a)(2). Acknowledging that material allegations must be accepted as true and 335

construed in the light most favorable to the nonmoving party, the Court nevertheless held that complaints in which plaintiffs have failed to plead enough factual detail to state a claim that is plausible on its face may be dismissed for failure to state a claim. 550 U.S. at 569–70. The Court explained that courts may no longer accept conclusory legal allegations that do not include specific facts necessary to establish the cause of action. This new “plausibility” pleading standard causes a considerable problem for plaintiff here because defendants Scag and Louisville Tractor are apparently the only entities with the information about the price at which Scag sells its equipment to Louisville Tractor. This pricing information is necessary in order for New Albany to allege that it pays a discriminatory price for the same Scag equipment, as required by the language of the Act. This type of exclusive distribution structure makes it particularly difficult to determine whether discriminatory pricing exists. Before Twombly and Iqbal, courts would probably have allowed this case to proceed so that plaintiff could conduct discovery in order to gather the pricing information that is solely retained within the accounting system of Scag and Louisville Tractor. It may be that only Scag and Louisville Tractor have knowledge of whether Scag exercises control over the terms and conditions of Louisville Tractor’s sales to retailers, including the retail operations of Louisville Tractor. The plaintiff apparently can no longer obtain the factual detail necessary because the language of Iqbal specifically directs that no discovery may be conducted in cases such as this, even when the information needed to establish a claim of discriminatory pricing is solely within the purview of the defendant or a third party, as it is here. Ashcroft v. Iqbal, 129 S. Ct. at 1954 (“Because respondent’s complaint is deficient under Rule 8, he is not entitled to discovery, cabined or otherwise.”). By foreclosing discovery to obtain pricing information, the combined effect of Twombly and Iqbal require plaintiff to have greater knowledge now of factual details in order to draft a “plausible complaint.” See Arthur R. Miller, From Conley to Twombly to Iqbal: A Double Play on the Federal Rules of Civil Procedure, 60 Duke L.J. 1, 105 (2010) (discussing the need for greater factual information after Twombly). Without discovery, pricing information or any fact that would support an allegation of illegal economic collusion becomes far harder to obtain. Under the new Twombly standard set forth by the Supreme Court in an antitrust case, even though a complaint need not contain detailed factual allegations, its “[f]actual allegations must be enough to raise a right to relief 336

above the speculative level on the assumption that all the allegations in the complaint are true.” 550 U.S. at 555. In this case that means, as the district court held, that plaintiff must allege specific facts of price discrimination even if those facts are only within the head or hands of the defendants. The plaintiff may not use the discovery process to obtain these facts after filing suit. The language of Iqbal, “not entitled to discovery,” is binding on the lower federal courts. .... It is a violation of Robinson-Patman for a seller to provide the same product to two customers at different prices in a manner that gives one buyer a competitive advantage over the other. To make out a claim under Robinson–Patman, the plaintiff must allege: (1) two or more contemporaneous sales by the same seller; (2) at different prices; (3) of commodities of like grade and quality; (4) the discrimination had the requisite anticompetitive effect; and (5) the discrimination caused injury to the plaintiff. Rutledge v. Elec. Hose & Rubber Co., 511 F.2d 668, 677 (9th Cir. 1975) (citations omitted). To survive a motion to dismiss, plaintiff’s complaint must allege each of these elements with sufficient detail “to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true.” Assoc. of Cleveland Fire Fighters v. City of Cleveland, Ohio, 502 F.3d 545, 548 (6th Cir.2007) (quoting Twombly, 550 U.S. at 555). Defendants contend that plaintiff has failed adequately to plead that there were two sales by the same seller because the complaint lacks allegations of a contemporaneous sale to two different buyers, instead alleging only that Scag sold equipment directly to Louisville Tractor and that Louisville Tractor in turn sold equipment to plaintiff. To get around this deficiency, plaintiff relies on the “indirect purchaser doctrine.” As our Court previously explained, “The purpose of the indirect doctrine is to prevent a manufacturer from insulating itself from Robinson–Patman liability by using a ‘dummy’ wholesaler to make sales at terms actually controlled by the manufacturer.” Barnosky Oils, Inc. v. Union Oil Co. Of Cal., 665 F.2d 74, 84–85 (6th Cir. 1981) (affirming the District Court’s dismissal of the plaintiff's Robinson–Patman Act claims for failure to allege with sufficient factual detail that the manufacturer set or controlled the distributor’s prices); see also Lewis v. Philip Morris, Inc., 355 F.3d 515, 524 (6th Cir. 2004) (stating that the indirect purchaser doctrine “considers a plaintiff who has purchased through a middleman to be a ‘purchaser’ for Robinson–Patman purposes if the supplier ‘sets or controls' the 337

resale prices paid by the plaintiff.”) (citing Barnosky Oils, 665 F.2d at 84). Where the manufacturer’s control of pricing is not clearly alleged, the complaint should be dismissed. The issue is whether plaintiff sufficiently pled that Scag actually controls the price of products by Louisville Tractor to plaintiff so that plaintiff pays a higher price than another retail purchaser. Plaintiff must allege that Scag controls Louisville Tractor to such an extent that Louisville Tractor is reduced to a strawman simply doing the bidding of Scag in the Louisville market. Plaintiff alleges that Scag refuses to allow retailers in Louisville’s exclusive sales area to purchase from any other Scag distributor. This does not show that Scag controls Louisville Tractor. Merely demonstrating the existence of an exclusive distributorship in a market area does not violate Robinson–Patman—or any other antitrust provision. In addition, plaintiff alleges that Scag “encouraged,” “was aware of” and “allowed” Louisville Tractor to sell at the prices it did, but this does not show that Louisville Tractor was selling at a discriminatory price set by Scag. There is no allegation that it forced Louisville Tractor to sell at a certain price or that this price was discriminatory. Plaintiff contends that the affidavit of its president, Richard Kesselring, alleges that Scag controls the warranty programs for its products, sets suggested retail prices, and performs and controls some advertising. The district court found that the allegations did not demonstrate the requisite control. They showed only that Louisville Tractor sets it own prices, which are monitored by Scag, but not set by Scag. Jan. 5, 2010, Order at 2. Plaintiff argues on appeal that the district court looked at the control issue too narrowly by focusing on whether Scag set or controlled in some way the prices at which Louisville Tractor sold Scag equipment. In order to violate the Act, plaintiff must allege discriminatory pricing set by Scag. To come within the indirect purchaser doctrine, both a discriminatory price and control of the price by the manufacturer of the selling price of the product in the hands of the distributor is necessary. Here we have insufficient allegations of both price discrimination and control. Id. at *2–4 (emphasis added). Finally, the court of appeals affirmed the district court’s decision to dismiss with prejudice and to deny the plaintiff leave to amend its complaint. The court stated: As to the leave-to-amend issue, Federal Rule of Civil Procedure 15(a) authorizes the court to freely grant leave to amend when there is no 338

“undue delay, bad faith, or dilatory motive on the part of the movant.” Foman v. Davis, 371 U.S. 178, 182, 83 S. Ct. 227, 9 L.Ed.2d 222 (1962). In this case, however, plaintiff never formally requested leave to amend below and defendant argues that the argument has been waived. Because plaintiff does not raise the leave-to-amend argument again in its reply brief, focusing instead on the dismissal with prejudice, we conclude that plaintiff concedes that it has waived the issue. As to the dismissal-with-prejudice issue, we review the district court’s decision for abuse of discretion, so the bar is high for reversal. The district court gave the plaintiff substantial additional time to come up with more specific evidence of control by Scag over Louisville Tractor or of a differential in price paid between plaintiff and other retailers. Plaintiff was unable to do so because the facts are unavailable to plaintiff. Without discovery, the plaintiff may have no way to find out the facts in the hands of competitors, but Iqbal specifically orders courts, as quoted above, to refuse to order further discovery. If the plaintiff should be able to find out the facts it needs to state a claim, it will have to file another complaint. Id. at *5 (emphasis added). •

Rondigo, L.L.C. v. Twp. of Richmond, 641 F.3d 673 (6th Cir. Jun. 1, 2011). Plaintiffs Rondigo, L.L.C. and Dolores Michaels operated a farm in Richmond Township, Michigan. In 2006, township officials became concerned about composting operations at the farm and conducted inspections of the farm. The inspections led to regulatory action by the state of Michigan and then to a state court action brought by the township to prohibit composting at the farm. Plaintiffs then filed a complaint in federal court asserting, among other claims, claims under § 1983 against various state and county officials. The district court dismissed all of the claims against the state and county officials on grounds of qualified immunity, with one exception. The district court denied defendants’ motion to dismiss the plaintiffs’ claim of denial of equal protection. The court of appeals characterized the district court’s refusal to dismiss plaintiffs’ equal protection claim as follows: Although the complaint is lengthy, the factual allegations pleaded specifically in support of plaintiffs’ equal protection claim under 42 U.S.C. § 1983 are minimal. Plaintiffs allege the state defendants knew Dolores Michaels is a woman and knew Rondigo is a woman-owned business. R. 4, Amended Complaint ¶¶ 208–09. They allege the state defendants took actions “based on considerations other than those proper to the good faith administration of justice, . . 339

. far outside the scope of legitimate law enforcement or prosecutorial discretion.” Id. at ¶ 212. These actions were allegedly taken under color of state law and resulted in the denial of plaintiffs’ right to equal protection of the law. Id. at ¶ 213. In support of the charge that defendants’ actions were discriminatory, plaintiffs allege that Rick Minard, “who operated a similarly situated farm operation which conducted on-farm composting,” received more favorable treatment than they did. Id. at ¶¶ 117, 118. Specifically, they allege that Minard’s compost operations plan was approved without having to meet new and additional requirements imposed on them, including an engineered site plan, soil borings and a nutrient management plan. Id. at ¶ 133. The district court held these allegations were sufficient: “Plaintiffs have articulated a cognizable, constitutional claim for violation of equal protection by alleging that the State Defendants discriminated against them in investigations/proceedings by gender.” R. 95, Report and Recommendation pp. 41–42. The court also held the equal protection right asserted by plaintiffs was clearly established: “It was clearly established that the Equal Protection Clause prohibited intentional gender discrimination unless it was substantially related to a legitimate government objective.” Id. at 42. Accordingly, the district court rejected defendants’ qualified immunity defense at the pleading stage. Id. at 680–81. The defendants appealed the district court’s refusal to dismiss, on grounds of qualified immunity, plaintiffs’ equal protection claim. The defendants argued on appeal that the plaintiffs did not set out a non-speculative basis for relief. The Sixth Circuit agreed, and reversed the district court’s decision not to dismiss the equal protection claim. The court of appeals reasoned: [T]he fundamental question presented in this case is whether plaintiffs’ complaint alleges sufficient facts to make out [a] valid equal protection claim—i.e., sufficient facts to “raise the right to relief above the speculative level,” sufficient facts to make out a “plausible claim,” one beyond the line of “sheer possibility.” The Equal Protection Clause prohibits discrimination by government which either burdens a fundamental right, targets a suspect class, or intentionally treats one differently than others similarly situated without any rational basis for the difference. Radvansky v. City of Olmsted Falls, 395 F.3d 291, 312 (6th Cir. 2005). 340

Plaintiffs’ allegations arguably implicate the second and third types of equal protection claim, alleging Rondigo was discriminated against as a woman-owned business or was treated differently as a “class of one” without rational basis. The district court construed the claim solely as one for gender-based discrimination and held the allegations facially sufficient without identifying a single fact allegation of gender-based discriminatory animus by any of the five state defendants. Indeed, among the 250 paragraphs of the amended complaint, there is no single allegation of action taken by any of the defendants that hints at gender-based discriminatory animus. Plaintiffs’ mere allegations that Dolores Michaels is a woman and Rondigo is a woman-owned business do not make out a claim for gender-based discrimination targeting them as members of a suspect class. In their appellate brief, the Rondigo plaintiffs do not argue otherwise, but rely on their allegations that Rick Minard was treated more favorably, despite being similarly situated, as justifying an inference of unlawful discrimination. That is, plaintiffs now argue that their allegations make out a valid “class of one” theory of discrimination. To prevail based on such a theory, plaintiffs must show that Minard was similarly situated in all relevant respects. See Ercegovich v. Goodyear Tire & Rubber Co., 154 F.3d 344, 352 (6th Cir. 1998). In addition, plaintiffs must show that the adverse treatment they experienced was “so unrelated to the achievement of any combination of legitimate purposes that the court can only conclude that the government’s actions were irrational.” Warren v. City of Athens, 411 F.3d 697, 710–11 (6th Cir. 2005) (quoting Kimel v. Florida Bd. of Regents, 528 U.S. 62, 84, 120 S. Ct. 631, 145 L.Ed.2d 522 (2000)). This showing is made either by negativing every conceivable reason for the government’s actions or by demonstrating that the actions were motivated by animus or ill-will. Id. at 711. The state defendants contend plaintiffs’ equal protection claim falls short because their bald allegation that Minard is similarly situated, without more, is insufficient. Of course, plaintiffs’ allegation that Minard is similarly situated does not exactly stand alone. Even though Rule 12(b)(6) scrutiny is limited to the pleadings, the pleadings in this case include numerous exhibits attached to the complaint, as well as exhibits attached to defendants’ motion to dismiss that are referred to in the complaint. Plaintiffs allege they were subject to less favorable treatment than Minard in three ways. First, whereas Minard’s 17–page hand-written compost management plan was approved without any 341

requirements that he provide an engineered site plan, soil boring results, and a nutrient management plan, plaintiffs’ compost operations plan was not approved, even though it is more thorough and professional and meets the additional requirements placed on them. Second, Minard’s compost operation, unlike plaintiffs’, has allegedly not been subject to the scrutiny of repeated site inspections. Third, Minard’s compost operation has allegedly not been referred by MDA to MDEQ for investigation of potential pollution. Yet, even accepting that Minard was not in fact subjected to any of these various adverse treatments, an inference of discriminatory animus arises only if the state defendants’ proffered reasons for the actions are negatived or shown to be irrational. Here, however, according to exhibits attached to plaintiffs’ own complaint, as summarized above, the state defendants gave facially legitimate reasons for their actions. The requirements for an updated site plan, soil borings and revised nutrient management plan were triggered by the discoveries, during site inspections, that plaintiffs had stockpiled large amounts of leaves in an area with a seasonal high water table, creating potential for groundwater pollution. Plaintiffs’ allegations neither impugn the genuineness or significance of these discoveries nor aver that Minard’s composting operation was subject to similar problems or deficiencies that should have also forestalled MDA approval of his composting operation. Second, according to plaintiffs’ own exhibits, defendants’ frequent inspections of their property were precipitated by township residents’ complaints of odors. Plaintiffs allege these complaints were false and unsubstantiated, as verified by the site inspections, but this does not alter the facial legitimacy of the state defendants’ purpose for conducting the inspections. And again, there is no allegation that Minard's operation was the subject of neighbors’ complaints, false or otherwise, that went unheeded by the state defendants. Third, exhibits attached to the complaint show that the [plaintiffs’] operation was referred to MDEQ for investigation only after the Rondigo plaintiffs’ persistent failure to remove leaves rendered their operation out of compliance with GAAMPs. Plaintiffs have not alleged that they did in fact remove the leaves and that the potential for groundwater pollution was remedied. Nor do they allege that Minard was found to be in compliance with GAAMPs despite similar deficiencies, or that his operation was not referred to MDEQ despite a finding that he was similarly out of compliance with GAAMPs. 342

Although plaintiffs’ amended complaint contains 250 paragraphs and occupies 54 pages, it contains precious little factual support for the theory that the state defendants’ more favorable treatment of Minard demonstrates they were victims of unlawful discrimination. Although plaintiffs conclusorily allege that Minard is similarly situated, exhibits attached to their complaint substantiate undisputed and facially legitimate reasons for the state defendants’ complained-of actions in regulating plaintiffs’ compost operation . . . —reasons that appear to be unique to that property. Although plaintiffs make various allegations that the state defendants, acting in concert with Richmond Township and its residents, have been unfairly demanding in their enforcement of agricultural and environmental standards, no inference of unlawful discrimination can legitimately arise where the only asserted comparable, Minard, is shown by plaintiffs’ own pleadings to be dissimilarly situated in several relevant respects. In short, plaintiffs’ allegations that Minard is similarly situated and that his more favorable treatment by defendants evidences unlawful discrimination are exposed as little more than “legal conclusions couched as factual allegations” and need not be accepted as true under Rule 12(b)(6) scrutiny. See Twombly, 550 U.S. at 555, 127 S. Ct. 1955. Plaintiffs’ factual allegations fail to “raise the right to relief above the speculative level.” Id. They fail to warrant a “reasonable inference that [defendants are] liable for the misconduct alleged.” See Iqbal, 129 S. Ct. at 1949. When the allegations are viewed in light of the exhibits attached to the complaint, they fall far short of making out a “plausible claim of entitlement to relief” under either equal protection theory. See id. As such, plaintiffs’ “insubstantial” equal protection claim was ripe for dismissal under the doctrine of qualified immunity at the earliest possible stage in the litigation. See Pearson, 129 S. Ct. at 815. The district court’s contrary ruling is based in part on a failure to apply the Supreme Court’s teaching in Twombly and Iqbal. The district court expressly recognized the applicability of Twombly, recognized that legal conclusions need not be accepted as true, and recognized that the complaint must set forth “some factual basis” for the claims asserted. Yet, the court accepted plaintiffs’ alleged legal conclusions that Minard was similarly situated and that they were treated differently because of gender-based discrimination without requiring supporting factual allegations. This casual acceptance of plaintiffs’ conclusory allegations of unlawful discrimination is at odds 343

with the district court’s earlier determination (in dismissing other claims against the state defendants) that “there is nothing to suggest that these Defendants’ actions were not taken in good faith and pursuant to applicable statutes.” R. 95, Report and Recommendation at 31–32. In fact, this precise characterization applies to the equal protection claim as well. Nothing but legal conclusions suggests that the state defendants acted with unlawful discriminatory animus. By accepting these legal conclusions as sufficient, the district court failed to heed the teaching of Iqbal, 129 S. Ct. at 1950 (“[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not ‘shown’—‘that the pleader is entitled to relief.’” (quoting FED . R. CIV . P. 8(a)(2))). .... Based on the foregoing analysis, we conclude the district court erred by denying the state defendants’ motion to dismiss based on qualified immunity. The factual allegations in the complaint, viewed in conjunction with the exhibits attached to the complaint, are insufficient to make out a valid equal protection claim under the “plausibility standard” prescribed by the Supreme Court in Twombly and Iqbal. Id. at 681–84 (emphasis added). •

Williams v. Curtin, 631 F.3d 380 (6th Cir. 2011). Petitioner Michael Anthony Williams, a state inmate proceeding pro se, alleged that he “was subject to Cruel and Unusual Punishment” when prison officers used a “chemical agent to disable him and gain his compliance” in the process of transferring him from one prison unit to another. Williams alleged that upon being ordered to “pack up” his cell, he responded, “What for, sir?” At that point, an officer stated, “order you [sic] to leave this cellblock.” Officers then entered the cellblock with an “assault squad” and released a “chemical agent,” which caused Williams “to cough” and resulted in a “shortage of oxygen.” The district court dismissed Williams’s complaint on two grounds. First, the district court found that Williams’s alleged injuries were de minimis. Second, the district court found that the prison officers’ conduct was reasonable, since they applied the chemical agent in a goodfaith effort to maintain or restore discipline, not to maliciously or sadistically cause harm. The district court reasoned that Williams had admitted in his complaint that he was noncompliant with the officers’ orders. The Sixth Circuit, citing the Twombly plausibility standard, reversed the dismissal of Williams’s complaint: 344

With regard to the subjective component of an Eighth Amendment claim, Petitioner has sufficiently alleged that Respondents acted with a culpable state of mind. Contrary to the statements of the district court, Petitioner does not admit that he disobeyed a direct order. Petitioner alleges that, when instructed to “pack up,” he inquired, “What for, sir?,” at which point an “assault team” entered the cell and used a chemical agent on him. These facts, if true, may permit a finding that the use and/or amount of force was unnecessary, which may suggest that Respondents’ actions were not taken in good faith and were perhaps motivated by the malicious purpose of causing harm. Likewise, with regard to the objective component of an Eighth Amendment claim, Petitioner has sufficiently alleged that Respondents inflicted “sufficiently serious” pain. Although the district court found that Petitioner’s allegations of injury – namely, coughing and shortage of oxygen—constitute a “de minimus [sic] injury,” this finding is an insufficient basis upon which to dismiss the Complaint. See Wilkins [v. Gaddy], 130 S. Ct. [1175,] 1178 [(2010) (per curiam)]. If it were a sufficient basis, as the Supreme Court has explained, “the Eighth Amendment would permit any physical punishment, no matter how diabolic or inhuman, inflicting less than some arbitrary quantity of injury.” Hudson [v. McMillian], 503 U.S. [1,] 9, 112 S. Ct. 995 [(1992)]. Indeed, the Supreme Court recently reversed a sua sponte dismissal of a prisoner’s Eighth Amendment claim, where the lower court did so on the basis of de minimis injury. See Wilkins, 130 S. Ct. at 1178–80. The Court rejected the argument that the Eighth Amendment requires a showing of significant injury, holding instead that the judicial inquiry should focus on “the nature of the force rather than the extent of the injury.” Id. at 1177. The district court thus should have considered the degree of force applied. Here, Petitioner alleges that an “assault squad” used a “chemical agent to disable” him. Viewing Petitioner's Complaint in the light most favorable to him—and assuming he can prove that Respondents acted with a culpable state of mind—his allegations of a violent extraction, complete with use of a chemical agent that caused some degree of injury to Petitioner, are adequate to plead that the pain inflicted was “sufficiently serious.” See id. at 1178–79 (“Injury and force . . . are only imperfectly correlated, and it is the latter that ultimately counts. An inmate who is gratuitously beaten by guards does not lose his ability to pursue an excessive force claim merely because he has the good fortune to escape without serious injury.”). Williams, 631 F.3d at 384 (footnote omitted). 345



Fabian v. Fulmer Helmets, Inc., 628 F.3d 278 (6th Cir. 2010). Robert Fabian, suing as a representative of a putative class, sought recovery from a motorcycle helmet manufacturer for misrepresenting the safety of its helmets. The district court dismissed the complaint for failure to state a claim. The complaint alleged that the helmets come in at least two sizes, large and small. In 2000, the National Highway Traffic Safety Administration (“NHTSA”) tested the large helmets, which passed each component of the test. In 2002, the NHTSA tested the small helmets, which failed two components of the test. The helmet company took no action in response to this 2002 test. The district court held that Fabian failed to state a claim because he had purchased two large helmets, and only small helmets failed the 2002 test. The Sixth Circuit reversed the dismissal of the complaint, explaining that in the face of competing inferences, it had to allow the case to proceed: In granting the motion to dismiss, the district court used the following chain of reasoning: (1) NHTSA performed a safety test on a large AF-50 helmet in 2000, and the helmet passed all components of the test; (2) NHTSA performed a safety test on a small AF-50 helmet in 2002, and the helmet failed at least one component of the test; and (3) because Fabian premises his claim on the purchase of large AF-50 helmets, his claim is implausible on its face given that Fulmer Helmets passed a 2000 NHTSA test on a large AF-50 helmet. The problem with this chain of reasoning is that it turns on potential inferences, not necessary ones. There are at least two legitimate ways to think about the significance of the NHTSA tests, and they point in opposite directions when it comes to the merits of this lawsuit. One is that the difference between the 2000 and 2002 test results turns on differences between the performance of the small and large AF-50 helmets. If so, that would support the district court’s ruling that the disparity between the size of the helmet bought and the size of the helmet tested is fatal to Fabian’s claims. The other reasonable inference, however, is that helmets of the same model, even if differently sized, perform the same. Two differently sized helmets, for example, may be no more distinct as a matter of performance than two differently sized pairs of shoes or two differently sized pairs of pants. If so, the failed 2002 test potentially exposed a defect in all AF-50 helmets, no matter their size. In the absence of further development of the facts, we have no basis for crediting one set of reasonable inferences over the other. Because either assessment is plausible, the Rules of Civil Procedure entitle Fabian to pursue his claim (at least with respect to this theory) to the next stage—to summary judgment or, if appropriate, a trial after the parties have engaged in any relevant discovery to support one or 346

the other interpretation. So long as we can “draw the reasonable inference that the defendant is liable for the misconduct alleged,” Iqbal, 129 S. Ct. at 1949, a plaintiff’s claims must survive a motion to dismiss. That inference is reasonable here because “common sense,” id. at 1950, tells us that a mass-manufactured consumer product, whether it is shoes, pants or helmets, may utilize the same design (and carry the same flaw) regardless of its size. Fulmer Helmets stresses that Fabian's large helmet has “passed all tests” and that the 2002 test is irrelevant. Fulmer Helmets Br. 16. But that does not necessarily end the inquiry. The company may have changed its design or manufacturing process for all AF-50s between 2000 and 2002, giving rise to a defect in all of its helmets and negating the relevance of the successful 2000 test result. Or the same test conducted on two randomly selected helmets (otherwise exactly the same) might yield different outcomes due to nothing more than natural statistical variances. The successful 2000 test thus may reflect an aberration unrelated to helmet size, while the failed 2002 test may point to a real flaw in all AF-50s. Because Fabian has “nudged his claims . . . across the line from conceivable to plausible,” Iqbal, 129 S. Ct. at 1950-51, he deserves a shot at additional factual development, which is what discovery is designed to give him. Fabian, 628 F.3d at 280–81 (emphasis added). •

In re NM Holdings Co., 622 F.3d 613 (6th Cir. 2010). Stuart Gold, as the trustee in bankruptcy for a group of companies collectively known as Venture, alleged that Venture’s former auditor, Deloitte & Touche LLP (1) negligently performed its audits by failing to uncover and report unsound related-party transactions entered into by Venture’s sole shareholder and CEO, and (2) aided and abetted the CEO's breach of his fiduciary duty to Venture. Id. at 615. Deloitte filed a motion to dismiss pursuant to Rule 12(b)(6). Id. The district court granted Deloitte’s motion and the Sixth Circuit affirmed. Id. Gold alleged that, for a number of years before Venture filed for bankruptcy, Winget, the CEO of Venture and the sole beneficiary of the trust owning Venture, “caused Venture to enter into a series of transactions with companies that were wholly owned or controlled by Winget.” Id. at 616. And that “Venture received little or no consideration and/or less than reasonably equivalent value in these related party transactions.” Id. Gold also alleged that Venture’s public financial statements “contained false and materially misleading statements and information about the numerous related party transactions.... Many of the related party transactions were not disclosed at all, and, as to those that were partially disclosed, the financial statements falsely stated that the transactions were fair to Venture from a financial standpoint.” In re NM Holdings Co., 622 F.3d at 616. Gold alleged that Venture’s auditor, Deloitte, “violated Generally Accepted Auditing Standards (GAAS) by failing (1) to properly 347

design its audits in order to determine whether Venture’s financial statements contained false statements, (2) to utilize appropriate procedures for analyzing related-party transactions, and (3) to properly qualify its opinions on Venture’s financial statements from 1995 until 2001.” Id. Gold also alleged that Deloitte “knew of Winget's impropriety in entering into the related-party transactions.” Id. Finally, Gold alleged that “Deloitte’s auditing failures were the proximate cause of Venture’s precarious financial situation and ultimate bankruptcy.” Id. Gold also alleged that “Venture’s independent “Fairness Committee,” which was established pursuant to one or more of the loan agreements, was similarly unaware of the harmful transactions and would have acted to stop Winget had it been informed of them..” Id. With respect to his professional negligence claim, Gold alleged that “Deloitte committed professional negligence by failing to properly conduct its audits of Venture.” Id. at 618. The court explained that, to succeed on a professional-negligence claim under Michigan law, Gold must show: “(1) a duty owed by Deloitte to Venture, (2) a breach of that duty, (3) causation, and (4) damages.” In re NM Holdings Co., 622 F.3d at 618. The court noted that the third prong, causation, was the “source of the instant dispute between the parties.” Specifically, the parties disagreed about whether Venture must prove reliance to establish causation. Id. The court agreed with the district court that proof of reliance was necessary in this case. Id. at 618-20. And explained that, in a professional-negligence case: Proof of causation requires both cause in fact and legal, or proximate, cause. Cause in fact requires that the harmful result would not have come about but for the defendant’s negligent conduct. On the other hand, legal cause or “proximate cause” normally involves examining the foreseeability of consequences, and whether a defendant should be held legally responsible for such consequences. Id. at 618-19 (quoting Haliw v. Sterling Heights, 627 N.W.2d 581 (Mich. 2001)). The court noted that, while proof of reliance is not per se an element of professional negligence, “proof of reliance is necessary here in order to show that Deloitte’s allegedly deficient audits were the cause in fact of Venture’s tenuous financial position and resulting bankruptcy.” Id. at 619. Having decided that reliance was “a critical part of establishing causation in this professionalnegligence action,” the court next determined that Winget’s knowledge could be imputed to Venture so as to bar any recovery by Venture. Id. The court explained that, under Michigan law, the knowledge of a corporate agent can be imputed to the entire corporation: A corporation can only act through its employees and, consequently, the acts of its employees, within the scope of their employment, constitute the acts of the corporation. Likewise, knowledge acquired by employees within the scope of their employment is imputed to the corporation. In consequence, a corporation cannot plead innocence by asserting that the information obtained by several employees was not acquired by any one individual employee who then would have 348

comprehended its full import. Rather, the corporation is considered to have acquired the collective knowledge of its employees and is held responsible for their failure to act accordingly. In re NM Holdings Co., 622 F.3d at 620 (quoting Upjohn Co. v. N.H. Ins. Co., 476 N.W.2d 392, 400 (Mich. 1991)). But there is an exception where the corporate officer’s actions were adverse to the corporation’s interests. Id. And there is an exception to the exception, the “sole actor rule”: The sole actor rule is an exception to the adverse interest exception.... The sole actor rule comes into play where the wrongdoer is, in essence, the corporation (the “sole actor”). Indeed, it has its roots in cases where the agent and the principal are literally the same person (literally a “sole actor”) and thus information obtained by a person in his role as an agent is treated as also being obtained in his role as principal, even if his activities as agent are contrary to his interests as a principal. Therefore, where the wrongdoer acts contrary to the interests of the corporation, under the adverse interest exception the wrongdoer's conduct would not ordinarily be imputed to the corporation. But where the wrongdoer is a sole actor, the adverse interest exception is not applied and his wrongdoing is nevertheless imputed to the corporation. Id. at 620-21 (quoting MCA Fin. Corp. v. Grant Thornton, L.L.P., 687 N.W.2d 850, 860 (Mich. 2004)). The court explained that where, for example “a sole shareholder loots the corporation of its assets [,] the adverse interest exception will not apply” and the knowledge of the shareholder will be imputed to the corporation. In re NM Holdings, 622 F.3d at 621 (quoting MCA Fin. Corp., 687 N.W.2d at 860.). Gold alleged that Winget, as the sole beneficiary of a trust owning all of the equity interest in Venture, used his power to cause Venture to enter into the related-party transactions. Id. at 615, 622. Gold also alleged that Winget’s transactions were “solely in his own interest and entirely against the interests of Venture.” Id. at 622. Deloitte argued that Winget was clearly a “sole actor” so that the adverse interest exception did not apply. Id. The court agreed, noting that “Gold does not seriously dispute that Winget was the sole actor,” but contends that the adverse interest exception should apply because “Venture’s creditors and the Fairness Committee were innocent decision-makers because they had the authority to stop Winget from entering into the related-party transactions.” Id. And “given the presence of these innocent parties, Winget cannot be considered to be Venture’s sole actor, ... Winget’s knowledge should not be imputed to Venture so as to bar any recovery by Venture.” Id. The court noted that “no Michigan court has thus far adopted the innocent-decision-maker exception,” but decided that Gold’s claim would be insufficient “even if the Michigan courts would apply the innocent-decision-maker exception” because Gold did not make a plausible claim of reliance, which was necessary to satisfy the causation element for a professional-negligence claim. See 349

In re NM Holdings Co., 622 F.3d at 622. With regard to the reliance by the Fairness Committee via its “sole and independent member, Maurice Williams,” Gold alleged that 312. Section 4.12 of [the NBD loan indenture agreement] ... required the formation of a “Fairness Committee” to review related party transactions. The Indentures required at least one member of the Fairness Committee to be independent of Venture and its principals, which independent member effectively wielded veto power over related party transactions. .... 320. Not only would timely and proper disclosure of these transactions have caused NBD, the noteholders and indenture trustees to force Winget to cease the unfair related party transactions, but ... such disclosures would have caused the independent member of the Fairness Committee to act to avoid or at the very least reduce the corporate injury suffered by Venture as a result of Winget's improper related party transactions. 321. As required under certain of its indentures and loan agreements ..., Venture maintained a Fairness Committee, which had a sole and independent member, Maurice Williams, who was empowered to evaluate and approve or disapprove of any related party transactions undertaken by Winget. Because Venture was required to retain an independent member of the Fairness Committee, Mr. Williams ... could not be terminated at the whim of Winget without placing Venture in default under various agreements. In this capacity, Mr. Williams possessed greater corporate power than an officer or director of Venture, because he had the unilateral and absolute authority to prevent Winget from undertaking or continuing any unfair related party transactions. On information and belief, Mr. Williams was innocent of Winget's misconduct ..., and was able to prevent it had the misconduct been known. 322. Deloitte was fully aware of the existence and powers of the Fairness Committee. Deloitte obtained minutes of the meetings of the Fairness Committee, knew of Mr. Williams' identity and role, and was fully able to communicate with Mr. Williams about the related party transactions it was auditing. Id. at 622-23. The court decided that these allegations were “insufficient in a critical way: They contain no statement that Williams actually relied on Deloitte’s audits in choosing not 350

to act. Even more fundamental, there is no allegation that Williams ever saw the audits.” Id. at 623. The court concluded that Gold’s allegations of reliance by the Fairness Committee were insufficient: The amended complaint does allege that properly conducted audits “would have caused the independent member of the Fairness Committee to act,” but this statement is, at most, a mere “formulaic recitation” of the causation element of a professional-negligence claim and is not sufficient to state a claim for relief. See Ashcroft v. Iqbal, --- U.S. ----, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009) (citation omitted) (holding that the plaintiff's complaint failed to state a claim for relief because it contained conclusory allegations that were not entitled to the assumption of truth). An allegation that Williams in fact saw and relied on the audits would be the “further factual enhancement” that is needed to support this “naked assertion.” See id. (citation omitted). In sum, Gold’s amended complaint can hardly “contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face” if it does not even allege that Williams saw the audits. See id. (citation and internal quotation marks omitted). This deficiency is especially glaring in comparison to the explicit statements regarding creditor reliance. The amended complaint, for example, alleged that Deloitte “issued certain opinions directly to NBD Bank and to the noteholders,” that “Venture was obligated to supply audited financial statements to the noteholders,” and that Deloitte “directly reported” to Venture’s creditors. In addition, the amended complaint alleged that Deloitte specifically represented to the creditors “that it was not aware of any violation of applicable covenants, including covenants prohibiting Venture from making distributions to Winget.” Most importantly, the amended complaint alleged that “the noteholders relied upon Deloitte’s representations in determining whether Venture was in compliance with the covenants set forth in the indenture.” These specific allegations of creditor reliance are in sharp contrast to the allegations regarding the Fairness Committee. Particularly striking is the fact that Gold amended his complaint to add specific examples of creditor reliance. In Gold’s original complaint, there were no allegations of reliance on the audits by anyone. Deloitte subsequently filed a motion to dismiss Gold’s original complaint, arguing that because the complaint did not (and could not) allege that Venture itself relied on the audits, Gold had failed to state a claim. Presumably in response to this contention, Gold amended his 351

complaint to add allegations of reliance. These new allegations, however, related only to reliance by Venture creditors, not by Williams as the sole member of the Fairness Committee. Williams, in other words, might or might not be considered an innocent decision-maker within Venture for the purpose of overcoming the sole-actor rule. But without any allegations that Williams relied on Deloitte’s audits, Gold has failed to satisfy the causation element for a professional-negligence claim even if Williams were so considered. Id. at 623-24. The court next examined whether reliance on the audits by Venture’s creditors would establish causation. Id. The court decided that it could not, adopting the reasoning of the Fifth Circuit in FDIC v. Ernst & Young, 967 F.2d 166 (5th Cir. 1992): The FDIC argues that even if neither Woods [, as Western’s sole shareholder,] nor Western relied upon the audit, [EY’s] alleged negligence caused the losses because had the audits been accurate, someone, such as Western’s creditors or government regulators, would have “rescued” Western. This argument is flawed because it is not an appropriate argument for Western, or its assignee, to make. Western cannot claim it should recover from EY for not being rescued by a third party for something Western was already aware of and chose to ignore. Neither can Western’s assignee make the claim. The FDIC in its own capacity or Western’s creditors might be able to make this claim, but the FDIC brought this suit only on Western’s behalf. In re NM Holdings, 622 F.3d at 624-25 (alterations in original). Having decided that Gold’s amended complaint failed to state a claim for professional negligence, the court turned to Gold’s aiding and abetting claim and agreed with the district court that this claim was time-barred. Id. at 625. •

Albrecht v. Treon, 617 F.3d 890 (6th Cir. 2010), cert. denied, 131 S. Ct. 1047 (2011). Plaintiffs alleged that the defendant coroner’s retention and destruction of their son’s brain, without their knowledge, deprived them of the right to dispose of the brain, in violation of the Due Process Clause of the Fourteenth Amendment. Id. at 892. The question of whether the Plaintiffs had a constitutionally protected property interest in their son’s brain was an issue of first impression in Ohio, so the district court certified the question to the Ohio Supreme Court, which decided that there is no protected property interest in human remains retained by the state of Ohio for criminal investigation purposes. Id. In accordance with this ruling, the district court held that the Plaintiffs had no property interest in the brain and that defendants were entitled to judgment on the pleadings. Id. The Sixth Circuit affirmed. Id. at 893. 352

The court explained that it was analyzing the motion for judgment on the pleadings under the standard set forth in Iqbal and Twombly: “Motions for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c) are analyzed under the same de novo standard as motions to dismiss pursuant to Rule 12(b)(6).” Sensations, Inc. v. City of Grand Rapids, 526 F.3d 291, 295 (6th Cir.2008). Courts “must construe the complaint in the light most favorable to plaintiff,” League of United Latin Am. Citizens v. Bredesen, 500 F.3d 523, 527 (6th Cir.2007) (citation omitted), “accept all well-pled factual allegations as true[,]” id., and determine whether the “complaint states a plausible claim for relief[,]” Ashcroft v. Iqbal, --- U.S. ----, 129 S. Ct. 1937, 1950, 173 L. Ed. 2d 868 (2009). However, the plaintiff must provide the grounds for its entitlement to relief, Bovee v. Coopers & Lybrand C.P.A., 272 F.3d 356, 361 (6th Cir.2001), and that “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007). A plaintiff must “plead [ ] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 129 S. Ct. at 1949. A plaintiff falls short if she pleads facts “merely consistent with a defendant’s liability” or if the alleged facts do not “permit the court to infer more than the mere possibility of misconduct ....” Id. at 1949, 1950. Albrecht, 617 F.3d at 893 (alterations in original). The court then explained that “[f]ederal law is clear that the states define property rights in their respective jurisdictions.” Id. at 898. And noted that the “Ohio Supreme Court explicitly delineated the lack of property rights in this case.” Id. The Sixth Circuit concluded that the Albrechts’ claim “fail[ed] as a matter of law. ‘[I]f state actors ... do not infringe on the life, liberty, or property of the plaintiffs, there can be no due process violation.’” Id. (quoting Whaley v. County v. Tuscola, 58 F.3d 1111, 1113 (6th Cir. 1995)). •

White v. United States, 601 F.3d 545, No. 09-3158, 2010 WL 1404377 (6th Cir. Apr. 9, 2010). The plaintiffs challenged the anti-animal fighting provisions of the Animal Welfare Act (AWA), in a suit against the United States, the Secretary and Department of Agriculture, the Attorney General and Department of Justice, and the Postmaster General and the United States Postal Service. Id. at *1. The district court dismissed for lack of standing and the Sixth Circuit affirmed. The plaintiffs sought a declaratory judgment that the AWA’s provisions were unconstitutional “insof