In 2007, the United States Supreme Court applied a new, stricter standard to motions to dismiss, and extended and further explained that standard in 2009. While some state courts have followed suit, others have reaffirmed the older, more forgiving standard. Until now, the Colorado Supreme Court had not taken a position on this question, but just recently decided in Warne v. Hall, 2016 CO 50, that Colorado would adopt the federal standard and require a greater factual showing before a case can proceed in Colorado state court.

The Case

In 2006, Bill Hall entered into an agreement to sell land he owned to Ensign United States Drilling Company, Inc. (Ensign) for Ensign to enter into a land-use plan and development agreement with the town of Gilcrest, Colorado. After the development deal with the town stalled and Ensign terminated its agreement with Hall, he brought various claims, including one for intentional interference with contract against Gilcrest’s then-Mayor, Menda Warne. Warne moved to dismiss, and the District Court granted the motion. The Court of Appeals reversed, holding that under Colorado’s “no set of facts” standard, Hall stated a claim for relief. Warne then sought the Supreme Court’s intervention, arguing that Colorado should adopt the stricter federal standard, which Warne believed would result in dismissal of the claim against her.

The Issue

The Colorado Rules of Civil Procedure “are patterned on the federal rules,” and it is for that reason the Colorado Supreme Court has long said that state courts are to “look to the federal rules and federal decisions interpreting those rules for guidance”^[1]—guidance our state’s high court has called “highly persuasive.”^[2] For decades, Colorado federal courts applied the same standard to motions to dismiss for failure to state a claim: a complaint should not be dismissed “unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief.”^[3] That standard, expressed in the United States Supreme Court’s 1957 decision in Conley v. Gibson and adopted by the Colorado Supreme Court 15 years later in Davidson v. Dill^[4], is undoubtedly a lenient one, allowing a plaintiff to pursue discovery unless the claims asserted were legally barred.

In 2007, however, federal and state practice diverged. The United States Supreme Court in Bell Atlantic Corp. v. Twombly expressly abandoned the Conley “no set of facts” test: “The phrase is best forgotten as an incomplete, negative gloss on an accepted pleading standard.”^[5] Instead, the Court held that in order to state a claim under Fed. R. Civ. P. 8, a complaint cannot merely offer “labels and conclusions, and a formulaic recitation of a cause of action’s elements will not do,” but must contain sufficient factual allegations to present a “plausible entitlement to relief.”^[6] Two years later, in Ashcroft v. Iqbal, the high court directed courts to apply Twombly to all federal cases and to identify conclusions masquerading as factual allegations and decline to assume the truth of such allegations.^[7]

Following Twombly and Iqbal, state courts have faced a choice: continue to apply the long-used “no set of facts” standard or continue practicing deference to federal interpretations of similar federal rules and thereby abandon the old standard. Prior to the Colorado Supreme Court’s decision, 13 state high courts squarely addressed this same question and divided over the answer. Eight of them—Arizona, Delaware, Iowa, Minnesota, Tennessee, Vermont, Washington and West Virginia—continued to apply the “no set of facts” standard, either expressly rejecting the federal “plausibility” standard or holding that any change in the applicable standard ought to come through changing the language of the rule itself rather than reinterpreting the rule.^[8] The other five, however—Massachusetts, Nebraska, South Dakota and Wisconsin, as well as the District of Columbia—adopted the “plausibility” standard and discarded the “no set of facts” test.^[9]

The Colorado Supreme Court’s Decision

In Warne v. Hall, a divided Colorado Supreme Court decided, on a 4-3 vote, that it would follow the federal standard and require complaints to “state a plausible claim for relief” in order to survive a motion to dismiss.^[10]

Instead of deciding whether it would “abandon the Conley standard,” the court, in an opinion authored by Justice Coats, described the question it faced as “whether our pleading standard has always represented an attempt to mirror the accepted federal construction of the virtually identical federal pleading rules, rather than to adopt the particular interpretation of the corresponding federal rule that was prevalent at the time.”^[11] Framed in that light, the court then held that “the desirability and importance of procedural uniformity in our unique, federal form of government” outweighed any concerns about departing from the Conley standard.^[12] The court also stated the plausibility standard was not a “meaningful departure” from existing Colorado practice, in light of past Colorado cases disregarding “conclusory allegations” or complaints merely alleging a theory without supporting facts.^[13] That, combined with the risk of different pleading standards encouraging forum shopping, persuaded the court to continue to conform to federal practice. Applying that standard to the case at bar, the court then reversed the Court of Appeals, holding that Hall’s allegations of the wrongfulness of Warne’s conduct were “conclusory and therefore not at all entitled to an assumption that they were true” and were also consistent with non-tortious conduct.^[14]

In dissent, Justice Gabriel decried the majority’s approach, arguing that the plausibility standard was inconsistent with notice pleading and C.R.C.P. 8(a)(2)’s requirement of only a “short and plain” statement of the claim.^[15] Because of the “information asymmetry” that exists when a plaintiff lacks information that is in the defendant’s sole possession, Justice Gabriel argued that requiring more factual allegations in a complaint would have the effect of barring plaintiffs with meritorious claims from obtaining the discovery necessary to prove them—a “sea change in pleadings practice” that would result in a “loss of clarity, stability, and predictability.”^[16]

Moving Forward

Based on the court’s decision, plaintiffs in both federal and state court in Colorado will need to meet the same standard—whether the complaint alleges sufficient facts to state a plausible claim for relief—in order to survive a motion to dismiss for failure to state a claim. Whether the change in standards will truly bring about a change in outcomes remains to be seen, but Colorado has now joined an increasing minority of states that have expressly adopted the plausibility standard and aligned its pleading rules to the federal ones.

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Notes:

^[1] Garcia v. Schneider Energy Servs., Inc., 2012 CO 62 ¶ 10, 287 P.3d 112, 115.

^[2] Leaffer v. Zarlengo, 44 P.3d 1072, 1081 (Colo. 2002).

^[3] Conley v. Gibson, 355 U.S. 41, 42–43 (1957)

^[4] 503 P.2d 157, 162 (1972).

^[5] 550 U.S. 544, 563 (2007).

^[6] Id. at 555, 559.

^[7] 556 U.S. 662, 679 (2009).

^[8] See Walsh v. U.S. Bank, N.A., 851 N.W.2d 598, 601-06 (Minn. 2014); Hawkeye Foodservice Distrib., Inc. v. Iowa Educators Corp., 812 N.W.2d 600, 607-09 (Iowa 2012); Central Mortg. Co. v. Morgan Stanley Mortg. Capital Holdings LLC, 27 A.3d 531, 536-37 (Del. 2011); Webb v. Nashville Area Habitat for Humanity, Inc., 346 S.W.3d 422, 425-37 (Tenn. 2011); McMurry v. Chevy Chase Bank, FSB, 233 P.3d 861, 862-64 (Wash. 2010); Roth v. DeFeliceCare, Inc., 700 S.E.2d 183, 189 n.4 (W. Va. 2010); Cullen v. Auto-Owners Ins. Co., 189 P.3d 344, 346-47 (Ariz. 2008); Colby v. Umbrella, Inc., 955 A.2d 1082, 1086 n.1 (Vt. 2008).

^[9] Data Key Partners v. Permira Advisers, LLC, 849 N.W.2d 693, 698-701 (Wis. 2014); Potomac Dev. Corp. v. Dist. of Columbia, 28 A.3d 531, 543-45 (D.C. 2011); Doe v. Bd. of Regents of Univ. of Neb., 788 N.W.2d 264, 274-78 (Neb. 2010); Iannacchino v. Ford Motor Co., 888 N.E.2d 879, 890 (Mass. 2008); Sisney v. Best, Inc., 754 N.W.2d 804, 807-08 (S.D. 2008).

^[10] Justice Coats wrote for the majority, consisting of himself, Chief Justice Rice, and Justices Eid and Boatright. Justice Gabriel dissented, joined by Justices Marquez and Hood.

^[11] 2016 CO 50, at ¶ 13.

^[12]Id. at ¶ 15.

^[13]Id. at ¶ 19.

^[14]Id. at ¶ 27.

^[15]Id. at ¶ 36.

^[16] Id. at ¶¶ 31, 38-41.