West Virginia Supreme Court Rejects Federal “Plausible On Its Face” Standard For Motions to Dismiss Under State Counterpart of F.R.C.P. 12(b)(6)
The Rules of Civil Procedure adopted by the West Virginia Supreme Court of Appeals are derived to a large extent from the Federal Rules of Civil Procedure. In fact, many of the West Virginia Rules of Civil Procedure track almost verbatim to the corresponding Federal Rule. However, a November 20, 2020 decision of the West Virginia Supreme Court demonstrates that practitioners should not assume that all courts will necessarily interpret the same words the same way.
In Mountaineer Fire & Rescue Equipment, LLC v. City National Bank of West Virginia, Walter and Brian Cavender and Joe Beam had agreed to form Mountaineer Fire & Rescue Equipment, LLC as a West Virginia limited liability company to sell fire and rescue equipment. The LLC opened a deposit account with City National Bank. The Resolution presented to City National when the account was opened identified Brian Cavender and Joe Beam as the individuals authorized to act on behalf of the LLC.
Two years later, Joe Beam opened another deposit account with City National in the name of the LLC without authorization from Brian Cavender and with Joe Beam being designated as the only party authorized to act on behalf of the LLC. After the relationship between the Cavenders and Joe Beam soured, the Cavenders discovered that Joe Beam had deposited payment for a fire engine sold by the LLC to this second account and distributed many of the proceeds to himself. The Cavenders also discovered that Joe Beam had filed a lawsuit in the LLC’s name against a major customer of the LLC. The customer won that suit. In addition to seeking to require the LLC to pay its legal fees, the customer refused to do business with the LLC.
The LLC and the Cavenders sued Joe Beam and City National. They asserted claims against Joe Beam for: (a) breach of fiduciary duties owned by members of an LLC to the LLC and the other members; (b) conversion of the assets of the LLC; (c) tortious interference with the LLC’s business relationships; and (d) fraud. They asserted claims against City National for: (a) breach of contract; (b) aiding and abetting Joe Beam’s breach of fiduciary duties; and (c) aiding and abetting Joe Beam’s tortious interference with the LLC’s business relationships.
Joe Beam and City National filed motions to dismiss the claims against them under West Virginia’s counterpart to Rule 12(b)(6) of the Federal Rules of Civil Procedure which authorizes dismissal of a complaint if it “fails to state a claim upon which relief may be granted.” The trial court granted those motions and dismissed all claims asserted by the LLC and the Cavenders. The LLC and the Cavenders then appealed to the West Virginia Supreme Court.
The West Virginia Supreme Court conceded that the complaint filed by the LLC and the Cavenders was “poorly drafted.” The Court also acknowledged that in Ashcroft v. Iqbal and Bell Atl. Corporation v. Twombly, the United States Supreme Court had, to use its words, “grafted an additional standard onto the analysis of federal Rule 12(b)(6) motions” that a pleading’s factual allegations must “state a claim that is plausible on its face.” Presaging the distain for this standard that became evident later in its decision in Mountaineer Fire, the Supreme Court referred to this additional standard as “Twiqbal.”
The Supreme Court conceded that, because of the similarities in the language of the corresponding Federal and West Virginia Rules of Civil Procedure, the Court “gives clout to federal cases in interpreting the meaning and scope of our rules.” However, the Court said, that “does not mean that our legal analysis in this area should amount to…Pavlovian responses to federal decisional law.”
After canvassing both federal court decisions and its own prior decisions, the West Virginia Supreme Court concluded that West Virginia Rules of Civil Procedure 8 and 12 “are more generous and weighted toward resolving cases on their merits than what is allowed by federal courts under the federal rules.” “Taken as a whole,” the Court said, “the West Virginia Rules of Civil Procedure establish the principle that a plaintiff pleading a claim for relief need only give general notice as to the nature of his or her claim.” Under West Virginia law, “when measuring the sufficiency of a complaint, all that is required by a plaintiff is fair notice.” Under this more generous standard, a party moving dismiss a complaint under West Virginia Rule 12(b)(6) may succeed only if it “shows beyond doubt that [plaintiffs] can prove no set of facts in support of their claims which would entitle them to relief.” Notwithstanding “Twiqbal,” the Supreme Court said “We continue to firmly abide by this standard.” Accordingly, the Supreme Court reversed the decision of the trial court and reinstated all claims asserted by the LLC and the Cavenders against Joe Beam and City National.
Often, parties have a choice between suing in state or federal court. If a basis for federal court jurisdiction exists, a defendant sued in state court may have the option of removing the case to federal court. The Mountaineer Fire & Rescue Equipment decision demonstrates that procedural differences between state and federal procedural rules, even identically worded ones, can make the difference between a complaint being dismissed at the outset of a case or surviving a motion to dismiss.