While the Supreme Court’s decisions in Bell Atlantic v. Twombly and Ashcroft v. Iqbal have left Rule 8 pleading in a state of flux and uncertainty, it hasn’t been obvious whether the “plausible on its face” standard of those cases will have much effect on securities cases governed by the already (expressly) heightened pleading requirements of the Private Securities Litigation Reform Act.  Kevin LaCroix of D & O Diary has a good discussion of this issue, including of last week’s McAdams v. McCord, in which the Eighth Circuit affirmed a dismissal for failure to satisfy the new plausibility requirement as to loss causation.  I recommend reading it in full if you’re interested in this issue.

He does draw a conclusion I don’t agree with, namely that by affirming without deciding whether the complaint satisfied the scienter pleading requirement of the PSLRA, the McAdams court implied “that Iqbal’s generalized pleading requirements must be considered analytically prior to the PSLRA’s more particularized requirements.”  That would probably be correct if the court had applied Twombly/Iqbal in analyzing the complaint’s scienter or misstatement allegations, because the PSLRA’s heightened standard applies to those elements.  By applying it to loss causation, though — to which the PSLRA standard does not apply (rule on Spindle) — I think the court simply asserted its authority to affirm on any legally sufficient basis and to pass on other issues.  (Whether there is any special specificity required in pleading loss causation is an issue as to which there has been some disagreement.)  Although there are issues that courts feel they ought to address first (e.g., jursidiction) or avoid if possible (e.g., undecided constitutional issues), the court here faced no such special-priority issues, just a choice among elements to analyze.  (It is notable that the court chose to decide the loss causation issue, because the district court did not reach that issue.  Assuming that loss causation was argued on appeal, though, it’s pretty much your basic affirmed-on-other-grounds.)

I also have a quibble with the rhetorical question that Mr. LaCroix, who supports the plausibility standard, poses to the standard’s opponents:  “are they suggesting that complaints that are not facially plausible should be allowed to go forward?” he asks.  The right question, I think, is whether enough meritorious cases appear implausible to judges prior to discovery to justify letting a case move forward if the complaint satisfies a notice pleading standard.  Reasonable people can disagree.

Those interested in the Twombly/Iqbal pleading standard in general might want to check out several posts and columns on the subject by Mike Dorf, who opposes the standard (and to whose blog I sometimes contribute).  You can find links from his post on strategies for overruling it.