The foundation of every lawsuit is the complaint, which declares the nature of the claims alleged by the plaintiff. The federal pleading standard, articulated by the U.S. Supreme Court in Bell Atlantic Corp. v. Twombly1 and Ashcroft v. Iqbal,2 is a heightened standard, requiring more specificity in the complaint. Wisconsin, long considered a “notice pleading state,” appeared to be moving toward a similar heightened pleading standard in Data Key Partners v. Permira Advisers LLC,3 requiring the allegations of the complaint to plausibly suggest a violation of the applicable law.
However, in 2019, the Wisconsin Supreme Court, in Cattau v. National Insurance Services of Wisconsin Inc.,4 unanimously declared Data Key did not change the pleading standard articulated 36 years earlier in Strid v. Converse.5 This declaration may surprise many lawyers, who viewed the decision in Data Key as adopting the heightened federal pleading standard articulated in Twombly and Iqbal. The Cattau decision leaves unresolved the question of how to reconcile the “plausibility standard” set forth in Data Key with the “notice pleading” standard of Strid.
This article starts with a brief history of the federal and Wisconsin pleading standards, provides an overview of the procedural history of the Cattau dispute, and concludes with a discussion of the present pleading standard in Wisconsin.
Federal Pleading Standard
In 1957, the U.S. Supreme Court, in Conley v. Gibson,6 reiterated “the accepted rule 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.” The respondents in Conley had argued that the complaint failed to set forth specific facts to support its general allegations of discrimination and that dismissal, therefore, was proper. The Court rejected this argument.
“The decisive answer to this is that the Federal Rules of Civil Procedure do not require a claimant to set out in detail the facts upon which he bases his claim. To the contrary, all the Rules require is ‘a short and plain statement of the claims that will give the defendant fair notice of what the plaintiff’s claim is and the grounds upon which it rests….’ Such simplified ‘notice pleading’ is made possible by the liberal opportunity for discovery and the other pretrial procedures established by the Rules to disclose more precisely the basis of both claim and defense and to define more narrowly the disputed facts and issues.”7
Although “questioned, criticized and explained away” by other courts, the “no set of facts” language remained the standard in federal court until 2007 when the Conley decision was abrogated by the U.S. Supreme Court in Twombly.8 The Twombly Court held the factual allegations in a complaint must be sufficient to raise a right to relief above the speculative level. The plaintiff must set forth more than labels, conclusions, and a formulaic recitation of the elements of a cause of action. Instead, the plaintiff must demonstrate that it has plausible grounds to show that the pleader is entitled to relief.9
Two years later, the Supreme Court underscored this pleading standard in Iqbal.10 The Iqbal Court held a claim has facial plausibility when the factual content of the complaint allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not a “probability requirement,” but it asks for more than a sheer possibility that a defendant has acted unlawfully. The Iqbal Court identified a two-prong approach to analyze the sufficiency of a complaint and confirmed the plausibility standard articulated in Twombly applied to “all civil actions.”11 As discussed below, however, Wisconsin has not been quick to embrace the federal plausibility standard.
Wisconsin’s Pleading Standard
Wisconsin has long been a notice-pleading state, meaning a motion to dismiss for failure to state a claim “usually will be granted only when it is quite clear that under no conditions can the plaintiff recover.”12 The Wisconsin Supreme Court, in Wilson v. Continental Insurance Cos., attempted to distance the state pleading standard from Conley, stating“the ‘quite clear’ standard … for testing the sufficiency of a complaint falls short of the all-inclusive ‘beyond doubt’ test established in Conley….”13 However, in its 1983 decision in Strid, the supreme court moved closer to Conley, stating “the complaint should be dismissed as legally insufficient only if it appears to a certainty that no relief can be granted under any set of facts that the plaintiff can prove in support of her allegations.”14
Thirty years later, in Data Key Partners v. Permira Advisors LLC,15 the supreme court tightened the pleading standard. The Data Key court held “the sufficiency of a complaint depends on substantive law that underlies the claim made because it is the substantive law that drives what facts must be pled.”16 Similarly, “[b]are legal conclusions set out in a complaint provide no assistance in warding off a motion to dismiss.”17
Instead, a plaintiff must “allege facts that, if true, plausibly suggest a violation of applicable law.”18 The factual assertions must be “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action.”19 “Factual assertions are evidenced by statements that describe: who, what, where, when, why, and how.”20
Lawyers viewed Data Key as a move away from the notice pleading outlined in Strid and toward the heightened pleading standard articulated in Twombly and Iqbal.
Lawyers viewed Data Key as a move away from the notice pleading outlined in Strid and toward the heightened pleading standard articulated in Twombly and Iqbal. The Wisconsin Court of Appeals (District Two) agreed and, in June 2018 in an unpublished decision in the Cattau litigation, found that under Data Key, Wisconsin had adopted the plausibility standard and rejected the standard articulated in Conley and reiterated in Strid.
“Twombly was a move away from mere ‘labels and conclusions, and a formulaic recitation of the elements of a cause of action.’ The short and plain statement required by the federal rules, the Court explained, demands more than just the possibility of a claim. The mere possibility of a claim could allow ‘a plaintiff with a largely groundless claim ... to take up the time of a number of other people, with the right to do so representing an in terrorem increment of the settlement value.’ In other words, broad-based legal impleading where only a possible, but not plausible, factual basis is stated for claims against each defendant is not consistent with Fed. R. Civ. P. 8(a)(2) – the federal analog to our own Wis. Stat. § 802.02(1). This same approach is now the law in Wisconsin.”
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“And in adopting the plausibility standard, the Wisconsin Supreme Court joined the United States Supreme Court in rejecting the old adage 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,’ a statement taken from Conley v. Gibson, and reiterated in this state under Strid. The correct standard now mandates that ‘Plaintiffs must allege facts that plausibly suggest they are entitled to relief.’”21
Not so fast, said the Wisconsin Supreme Court in its 2019 Cattau decision. In Cattau, the supreme court declared that its decision in Data Key did not change Wisconsin’s pleading standard as previously articulated in Strid.22
“To explain further, the pleading standard we set out in Data Key is consistent with the pleading standard in Strid, and is grounded in Wis. Stat. § 802.02(1)(a)’s (2017-18) requirement that a complaint contain ‘[a] short and plain statement of the claim, identifying the transaction or occurrence or series of transactions or occurrences out of which the claim arises and showing that the pleader is entitled to relief.’”23
The Cattau court attempted to reconcile Data Key and Strid, pointing to the decision in Data Key for the proposition that Twombly was consistent with Strid, and, “[t]herefore, Data Key controls Wisconsin’s pleading standard and it reaffirmed Strid.”24
Wisconsin’s Pleading Standard: Best Practices
Here are tips for complying with Wisconsin’s pleading standard, no matter how it is labeled by the courts.
The Cattau31court identified key aspects of the pleading standard in Wisconsin as follows:
A complaint must contain a short and plain statement of the claim, identifying the transaction or occurrence or series of transactions or occurrences out of which the claim arises and showing that the pleader is entitled to relief.32
When determining whether a complaint states a claim upon which relief may be granted, courts must accept as true all facts well pleaded in the complaint and reasonable inferences from those facts.33
If the facts reveal an apparent right to recover under any legal theory, they are sufficient as a cause of action.34
Courts cannot add facts to a complaint and do not accept as true legal conclusions that are stated in the complaint.35
A formulaic recitation of the elements of a cause of action is not enough to state a claim upon which relief may be granted.36
The sufficiency of a complaint depends on the substantive law that underlies the claim made because it is the substantive law that drives which facts must be pleaded.37
If proof of the well-pleaded facts in a complaint would satisfy each element of a cause of action, then the complaint has stated a claim upon which relief may be granted.38
The Cattau court declared Strid to be consistent with Twombly and confirmed by Data Key. Lawyers, therefore, should be guided by Twombly and its progeny when drafting a claim for relief. The substantive law drives which facts must be pleaded.39
However, the pleading must include enough factual matter (taken as true) to suggest a plausible right to relief and raise a reasonable expectation that discovery will reveal evidence to support the claim. This means the factual allegations must plausibly suggest, not merely be consistent with, the elements needed for the court to grant relief.40
Although the Wisconsin Supreme Court was unanimous in its conclusion that Data Key did not change Wisconsin’s pleading standard, the supreme court was equally divided as to whether the plaintiffs met this standard when filing suit against the plan administrators. Accordingly, the dismissal of the plaintiffs’ claims against two of the defendants (the basis for the appeal) was affirmed.25 A brief review of the Cattau litigation demonstrates how complex the procedural disputes became – before the substantive issues were addressed.
The Cattau plaintiffs are former Neenah School District (Neenah) teachers or administrators who retired and received postemployment compensation under a retirement plan. After an audit, the IRS determined that certain payments under the plan were not entitled to deferred tax treatment. Neenah entered into a closing agreement with the IRS pursuant to which Neenah paid the employer and employee share of the FICA tax due on ineligible payments and a separate penalty to the IRS. The Cattau plaintiffs alleged they individually were assessed additional income tax plus interest on certain payments deemed to have been “constructively received” by the retirees in the year of retirement. The plaintiffs brought suit to recover these payments from Neenah and the plan administrators.
In Cattau, the supreme court declared that its decision in Data Key did not change Wisconsin’s pleading standard as previously articulated in Strid.
The Cattau plaintiffs described this case as one which “… wades into Bleak House territory with its length and complexity.”26 The plaintiffs filed suit in September 2013, alleging numerous claims against Neenah, its insurer, and the two plan administrators. The defendants each filed a motion to dismiss the complaint in November 2013 on the grounds that the claims were preempted by federal law. The circuit court agreed and granted the motions to dismiss in May 2014. The Cattau plaintiffs appealed, and in April 2015, the court of appeals reversed and remanded the case to the circuit court.27
The defendants renewed their motions to dismiss, on different procedural grounds, and in December 2015, the circuit court dismissed all claims against the plan administrators28 for failure to state a claim upon which relief could be granted. The circuit court concluded that the negligence claim failed to allege enough facts to state a claim for relief. With respect to the misrepresentation claims, the court concluded that the complaint failed to “identify with specificity who said what to who” as required. Finally, the circuit court concluded that the facts pleaded in the complaint failed to establish the existence of a fiduciary duty.
The court of appeals affirmed the dismissal of the claims against the plan administrators, relying heavily on Data Key. The court of appeals said that in Data Key, the supreme court specifically adopted the heightened pleading standard articulated in Twombly.
The only way to reconcile these seemingly different interpretations of Wis. Stat. section 802.02 is to conclude Wisconsin adopted the heightened plausibility standard of Twombly in 1983 (in Strid), decades before the U.S. Supreme Court decided Twombly.
The court of appeals emphasized the distinction between Strid and Data Key, finding that Strid reiterated the “no set of facts” standard articulated in Conley,whereas Data Key adopted the plausibility standard of Twombly.29 The plaintiffs disagreed, and asked the supreme court to review, arguing that Wisconsin had not specifically adopted a heightened pleading standard or overruled Strid.
As noted above, the supreme court disagreed with the court of appeals’ conclusion that Data Key changed the pleading standard but affirmed (in a 3-3 decision) the dismissal of the claims against the plan administrators.
Reconciling Data Key and Strid
In Cattau, the Wisconsin Supreme Court strove to reconcile Data Key and Strid, first declaring Data Key to be consistent with Strid, interpreting Twombly as being consistent with Strid, and determining Data Key reaffirmed Strid.30 The supreme court rejected the conclusion reached by the court of appeals, that is that Strid had reiterated the “no set of facts” standard articulated in Conley whereas Data Key adopted the plausibility standard of Twombly.
The only way to reconcile these seemingly different interpretations of Wis. Stat. section 802.02 is to conclude Wisconsin adopted the heightened plausibility standard of Twombly in 1983 (in Strid), decades before the U.S. Supreme Court decided Twombly. It remains to be seen whether the Wisconsin Supreme Court continues to measure pleadings by the plausibility standard or whether Cattau spawns additional litigation in the future.
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My most unusual legal experience was visiting a ship damaged in the Port of Milwaukee during a wind-snow storm in December.
The ship, the Capetan Yiannis, was one of the last vessels in Lake Michigan before the St. Lawrence Seaway closed for the season. The Capetan Yiannis, a 590-foot ocean-going freighter, was docked inside the breakwater in the Port of Milwaukee, taking on cargo. A severe storm rolled into port, pounding the ship against the dock, causing severe damage and disabling the vessel.
The morning after the storm I accompanied one of our senior attorneys to the dock to investigate on behalf of the ship owners. We used one of the warehouse spaces alongside the pier to interview the captain and various crew members. The crew members’ ability to speak English decreased with a decrease in rank and, of course, our ability to speak Greek or Filipino was nonexistent.
The ship was towed through the Great Lakes to a shipyard in Montreal to avoid being ice bound in the Port of Milwaukee until spring, and I had another opportunity to visit the ship in January in Montreal. This time I accompanied a Master Mariner working with a firm of London solicitors. Although most of the crew had returned home, the captain and a skeleton crew remained with the vessel while it was undergoing repairs, and we re-interviewed the captain on board ship.
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Kathy L. Nusslock, Davis & Kuelthau S.C., Milwaukee.
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1 Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).
2 Ashcroft v. Iqbal, 556 U.S. 662 (2009).
3 Data Key Partners v. Permira Advisers LLC, 2014 WI 86, 356 Wis. 2d 665, 849 N.W.2d 693.
4 Cattau v. National Ins. Servs. of Wis. Inc., 2019 WI 46, 386 Wis. 2d 515, 926 N.W.2d 756.
5 Strid v. Converse, 111 Wis. 2d 418, 331 N.W.2d 350 (1983).
6 Conley v. Gibson, 355 U.S. 41, 45-46 (1957) (emphasis added).
7 Id. at 41, 47-48 (internal citations and footnotes omitted).
8 Twombly, 550 U.S. 544. The Twombly Court noted that the “no set of facts” passage in Conley should be understood in light of the opinion’s preceding summary of the complaint’s concrete allegations, which the Court understood as amply stating a claim for relief. “But the passage so often quoted fails to mention this understanding on the part of the Court, and after puzzling the profession for 50 years, this famous observation has earned its retirement.” Id. at 562-63.
9 Id. at 557.
10 Iqbal, 556 U.S. 662.
11 Id. at 684.
12 Wilson v. Continental Ins. Cos., 87 Wis. 2d 310, 317, 274 N.W.2d 679 (1979).
13 Id. at 317.
14 Strid, 111 Wis. 2d at 422.
15 Data Key, 2014 WI 86, 356 Wis. 2d 665.
16 Id. ¶ 31 (citing Twombly, 550 U.S. 544).
17 Id. ¶ 21.
19 Id. ¶ 25 (quoting Twombly, 550 U.S. at 555).
20 Id. ¶ 21 n.9 (citing State v. Allen, 2004 WI 106, ¶ 23, 274 Wis. 2d 568, 682 N.W.2d 433).
21 Cattau v. National Ins. Servs. of Wis. Inc.,No. 2016AP493, 2018 WL 2997574, ¶¶ 19, 20 (Wis. Ct. App. June 13, 2018) (unpublished) (internal citations omitted).
22 Cattau, 2019 WI 46, ¶ 3, 386 Wis. 2d 515.
23 Id. ¶ 4.
24 Id. ¶ 7 (citing Data Key, 2014 WI 86, ¶ 30, 356 Wis. 2d 665).
25 Id. ¶ 2.
26 Brief of Petitioners filed with the Wisconsin Supreme Court on Jan. 16, 2019.
27 Cattau v. National Ins. Servs. of Wis. Inc., 2015 WI App 40, 362 Wis. 2d 524, 865 N.W.2d 215.
28 The circuit court also dismissed the tort claims alleged against Neenah on the grounds that these claims were precluded by the economic loss doctrine but did not dismiss the sole breach-of-contract claim. Consequently, the 2015 circuit court decision was final as to the plan administrators, such that the plaintiffs could appeal that aspect of the decision as a matter of right. Wis. Stat. § 808.03. The plaintiffs could not appeal the dismissal of the tort claims against Neenah in light of the remaining contract claim, so the court of appeals could only consider the dismissal of the claims against the plan administrators.
29 Cattau, 2018 WL 2997574, ¶ 20.
30 Cattau, 2019 WI 46, ¶¶ 4, 7, 386 Wis. 2d 515 (internal citations omitted).
31 Cattau, 2019 WI 46, 386 Wis. 2d 515.
32 Id. ¶ 4 (citing Wis. Stat. § 802.02(1)(a) (2017-18)).
33 Id. (citing Data Key, 2014 WI 86, ¶ 19, 356 Wis. 2d 665).
34 Id. (citing Strid, 111 Wis. 2d at 423).
35 Id. ¶ 5 (citing Data Key, 2014 WI 86, ¶ 19, 356 Wis. 2d 665).
36 Id. (citing Data Key, 2014 WI 86, ¶ 25, 356 Wis. 2d 665).
37 Id. ¶ 6 (citing Data Key, 2014 WI 86, ¶ 31, 356 Wis. 2d 665).
38 Id. (citing Data Key, 2014 WI 86, ¶ 21, 356 Wis. 2d 665, and Strid, 111 Wis. 2d at 422-23).
39 Data Key, 2014 WI 86, ¶ 31, 356 Wis. 2d 665.
40 Twombly, 550 U.S. at 556-57.