Several years ago, legal commentators wrote extensively about the U.S. Supreme Court’s decisions in Ashcroft v. Iqbal, 556 U.S. 662 (2009) and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), which revised the standard for a motion to dismiss under Fed. R. Civ. P. 12(b)(6).  Commentators have debated the extent to which these decisions have altered how motions to dismiss are decided.  A recent Second Circuit decision applying Iqbal in a title insurance class action provides some guidance to district courts and demonstrates how the new standard can be used effectively by defendants in class actions.

In Galiano v. Fidelity National Title Insurance Company, No. 10-4941-cv, 2012 U.S. App. LEXIS 13614 (2d Cir. July 3, 2012), the plaintiffs brought a putative class action against various title insurance companies doing business in New York, alleging that title insurance rates were improperly inflated due to “kickbacks” that violated the Real Estate Settlement Procedures Act (RESPA).  The complaint alleged that commissions paid to title agents violate RESPA because the commissions exceed the value of services rendered by title agents and in effect constituted “kickbacks” for referring business to the title insurer.  Id. at *5-6.  The district court dismissed the complaint.  The Second Circuit affirmed, based entirely on the plaintiffs’ failure to satisfy Iqbal.  Judge Chin’s opinion explained that:

In this case, the district court did not err in dismissing the Complaint because it did not contain sufficient factual matter to state a plausible claim for relief under § 8(a). See Iqbal, 556 U.S. at 678; Fed. R. Civ. P. 12(b)(6). While the Complaint did allege a kickback scheme, it did so in a wholly conclusory and speculative manner. See Iqbal, 556 U.S. at 678-79.

First, the Complaint failed to allege facts sufficient to establish the elements of a § 8(a) claim. The Complaint failed to identify: (1) a payment or thing of value; (2) given by defendants and received by plaintiffs’ title agents, lawyers, brokers, lenders, or other third parties pursuant to an agreement to refer settlement business; and (3) an actual referral.  . . .

Second, the Complaint failed to allege any specifics as to the date, time, or amount of the alleged § 8(a) violations, or any connections between these plaintiffs — or their title agents, lawyers, brokers, or lenders — and these defendants.  . . . The Complaint contained no allegations that defendants charged any plaintiff a rate inflated by kickbacks.

Third, plaintiffs are essentially relying on a supposed industry-wide practice of kickbacks and referrals to sustain their § 8(a) claim. In effect, the Complaint presumed that (1) there were substantial differences between title insurance rates and the actual costs incurred by title insurers — namely, the costs associated with the risk of loss and the search and examination of prior ownership records — and (2) these differences represented kickbacks for referrals rather than profit margins.  . . . Without facts as to the alleged kickbacks, referral agreements, or referrals, however, plaintiffs are engaging in mere conjecture; this speculation is insufficient to state a plausible claim.

Id. at *12-14.

Galiano explains that, under Iqbal, a properly drafted complaint must: (1) allege facts (not mere conclusory assertions) that, if proven, would establish the elements of the cause of action; (2) allege specifics as to basic details such as dates, times and amounts; and (3) when alleging an improper practice, allege facts, not “mere conjecture” or “speculation.”  This opinion should be helpful to district courts adjudicating motions to dismiss in the Second Circuit, as well as to plaintiffs seeking to plead a complaint in compliance with Iqbal and defendants seeking dismissal of complaints under Iqbal.

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Photo of Wystan Ackerman Wystan Ackerman

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you…

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you have something to say.  For those looking for my detailed law firm bio, click here.  If you want a more light-hearted and hopefully more interesting summary, read on:

People often ask about my unusual first name, Wystan.  It’s pronounced WISS-ten.  It’s not Winston.  There is no “n” in the middle.  It comes from my father’s favorite poet, W.H. (Wystan Hugh) Auden.  I’ve grown to like the fact that because my name is unusual people tend to remember it better, even if they don’t pronounce it right (and there is no need for anyone to use my last name because I’m always the only Wystan).

I grew up in Deep River, Connecticut, a small town on the west side of the Connecticut River in the south central part of the state.  I’ve always had strong interests in history, politics and baseball.  My heroes growing up were Abraham Lincoln and Wade Boggs (at that time the third baseman for the Boston Red Sox).  I think it was my early fascination with Lincoln that drove me to practice law.  I went to high school at The Williams School in New London, Connecticut, where I edited the school newspaper, played baseball, and was primarily responsible for the installation of a flag pole near the school entrance (it seemed like every other school had one but until my class raised the money and bought one at my urging, Williams had no flag pole).  As a high school senior, my interest in history and politics led me to score high enough on a test of those subjects to be chosen as one of Connecticut’s two delegates to the U.S. Senate Youth Program, which further solidified my interest in law and government.  One of my mentors at Williams was of the view that there were far too many lawyers and I should find something more useful to do, but if I really had to be a lawyer there was always room for one more.  I eventually decided to be that “one more.”  I went on to Bowdoin College, where I wrote for the Bowdoin Orient and majored in government, but took a lot of math classes because I found college math interesting and challenging.  I then went to Columbia Law School, where I was lucky enough to be selected as one of the minions who spent their time fastidiously cite-checking and Blue booking hundred-plus-page articles in the Columbia Law Review.  I also interned in the chambers of then-Judge Sonia Sotomayor when she was a relatively new judge on the Second Circuit, my only connection to someone who now has one-ninth of the last word on what constitutes the law of our land.  I graduated from Columbia in 2001, then worked at Skadden Arps in Boston before returning to Connecticut and joining Robinson+Cole, one of the largest Connecticut-based law firms.  At the end of 2008, I was elected a partner at Robinson+Cole.

I’ve worked on class actions since the start of my career at Skadden.  Being in the insurance capital of Hartford, we have a national insurance litigation practice and I was fortunate to have the opportunity to work on some prominent class actions arising from the 2004 hurricanes in Florida and later Hurricane Katrina, including cases involving the applicability of the flood exclusion, statutes known as valued policy laws, and various other issues.  My interest and experience in class actions gradually led me to focus on that area.

In Connecticut courts I’ve defended various kinds of class actions that go beyond insurance, including cases involving products liability, securities, financial services and consumer contracts.

My insurance class action practice usually takes me outside of Connecticut.  I’ve had the pleasure of working on cases in various federal and state courts and collaborating with great lawyers across the country.  While class actions are an increasingly large part of my practice, I don’t do exclusively class action work.  The rest of my practice involves litigating insurance coverage cases, often at the appellate level.  That also frequently takes me outside of Connecticut.  A highlight of my career thus far was working on Standard Fire Ins. Co. v. Knowles, the U.S. Supreme Court’s first Class Action Fairness Act case.  I was Counsel of Record for Standard Fire on the cert petition, and had the pleasure of working with Ted Boutrous on the merits briefing and oral argument.

I started this blog because writing is one of my favorite things to do and I enjoy following developments in class action law, writing about them and engaging in discussion with others who have an in interest in this area.  It’s a welcome break from day-to-day practice, keeps me current, broadens my network and results in some new business.

When I’m not at my desk or flying around the country trying to save insurance companies from the plaintiffs’ bar, or attending a conference on class actions or insurance litigation (for more on those, see the Seminars/Programs page of this blog), I often can be found playing or reading with my young daughter, helping my wife with her real estate and mortgage businesses, reading a book about history or politics, or watching the Boston Red Sox (I managed to find bleacher seats for Game 2 of the 2004 World Series when Curt Schilling pitched with the bloody sock).  When the weather is good I also love to take the ferry to Block Island, Rhode Island and ride a bike or walk the trails there. If you go, I highly recommend the Clay Head Trail.