Wisconsin Adopts Twombly, Though "No One Is Sure What Twombly Means"

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In Data Key Partners v. Permira Advisers LLC, 2014 WI 86, the Wisconsin Supreme Court adopted the “plausibility” pleading standard articulated by the United States Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), which overruled the Conley v. Gibson, 355 U.S. 41 (1957), “beyond doubt”/”no set of facts” standard. Now, in order to survive a motion to dismiss in Wisconsin courts, a pleading will need to “plausibly” state a claim.

This decision was not Wisconsin’s first departure from Conley‘s pleading standard. The Wisconsin Supreme Court recognized long ago that Wisconsin’s pleading standard was stricter than Conley‘s “all inclusive” test. In Wilson v. Continental Ins. Co., 87 Wis. 2d 310, 317, 326-27, 274 N.W.2d 679 (1979), the Court affirmed dismissal of a negligence complaint, without leave to amend, under Wisconsin’s pleading standard.

However, a full-fledged adoption of Twombly was unexpected in Data Key, not only because (as the Chief Justice recognized in dissent) Twombly was neither briefed nor argued before the Supreme Court, but also because just four months before Data Key, the Court unanimously quoted with approval Conley and pre-Wilson Court of Appeals precedent when the Court was describing principles of notice pleading in Wisconsin. CED Properties, LLC v. City of Oshkosh, 2014 WI 10.

Data Key was a lawsuit by shareholders alleging breach of fiduciary duty. The Court described the business-judgment rule as a procedural and substantive rule of law that a court is required to consider at the motion-to-dismiss stage. The Court made clear that shareholders will have a difficult time surviving a motion to dismiss in similar suits unless they plead around the business-judgment rule and plead a “plausible” claim.

The likely effect of Data Key outside of shareholder suits is less clear because, as the Chief Justice wrote in dissent, “no one is sure what Twombly means.” As Twombly did in federal court, Data Key is sure in Wisconsin courts to lead to many disputes over whether complaints have ”plausibly” stated a claim.

Foley & Lardner LLP and Skadden, Arps, Slate, Meagher & Flom LLP represented Permira Advisors LLC, Raphael Holding Co., and Raphael Acquisition Corp. in this case. The author, however, had no role in the representation.

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Topics:  SCOTUS, Shareholder Litigation, Shareholders, Twombly/Iqbal Pleading Standard

Published In: Business Torts Updates, Civil Procedure Updates, General Business Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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