Abb Turbo Systems Ag v. Turbousa, Inc. ( 2014 )

United States Court of Appeals
for the Federal Circuit
______________________
ABB TURBO SYSTEMS AG,
a Switzerland corporation, AND
ABB INC., a Delaware corporation,
Plaintiffs-Appellants,
v.
TURBOUSA, INC., a Florida corporation,
AND WILLEM FRANKEN,
Defendants-Appellees.
______________________
2014-1356
______________________
Appeal from the United States District Court for the
Southern District of Florida in No. 0:13-cv-60394-KMM,
Judge K. Michael Moore.
______________________
Decided: December 17, 2014
______________________
KURT L. GLITZENSTEIN, Fish & Richardson, P.C., of
Boston, Massachusetts, argued for plaintiffs-appellants.
Of counsel on the brief was WILLIAM R. TRUEBA, JR.,
Espinosa│Trueba, PL, of Miami, Florida.
JOHN H. PELZER, Greenspoon Marder, P.A., of Fort
Lauderdale, Florida, argued for defendants-appellees.
______________________
2 ABB TURBO SYSTEMS AG v. TURBOUSA, INC.
Before PROST, Chief Judge, NEWMAN and TARANTO, Cir-
cuit Judges.
TARANTO, Circuit Judge.
In this action, ABB Turbo Systems AG and ABB Inc.
(collectively ABB) allege, among other things, state-law
torts of misappropriation of trade secrets and conspiracy
to misappropriate trade secrets. Before discovery was
conducted or an answer filed on those allegations, the
district court dismissed the complaint, under Federal
Rule of Civil Procedure 12(b)(6), for failure to state a
claim on which relief can be granted. We reverse, con-
cluding that the district court relied on judgments about
the merits that go beyond what is authorized at the
complaint stage. We remand for further proceedings. We
do not rule on the defendants’ arguments for upholding
the dismissal on grounds that the district court did not
adopt.
BACKGROUND
ABB designs, produces, and sells exhaust-gas turbo-
chargers and turbocharger parts, primarily for use in
large, ocean-going vessels and in power plants. In 2012,
ABB filed a complaint in the Middle District of Florida
accusing TurboUSA, Inc., and TurboNed Service B.V. of
infringing two of ABB’s turbocharger-related patents.
Complaint, ABB Turbo Sys. AG v. TurboNed Serv. B.V.,
No. 12-cv-01322 (M.D. Fla. June 13, 2012) (Complaint);
see 28 U.S.C. § 1338 (jurisdiction over patent cases).
TurboNed (“Ned” referring to the Netherlands) and Tur-
boUSA manufacture, sell, and service parts for turbo-
chargers, including ABB turbochargers. Complaint
¶¶ 23–24. As one basis for its allegation that the in-
fringement was willful, ABB alleged that one of its former
employees had improperly obtained and transferred to
TurboUSA confidential information relating to ABB parts
embodying its patented inventions. Id. ¶¶ 26–30. The
Middle District court transferred the case to the Southern
ABB TURBO SYSTEMS AG v. TURBOUSA, INC. 3
District of Florida. Order Granting Motion to Transfer
Venue, ABB Turbo, No. 12-cv-01322 (M.D. Fla. Feb. 18,
2013).
After filing its original complaint, ABB received in-
formation that, it alleges, suggested that Johan (“Hans”)
Franken, who is TurboNed’s former owner and Tur-
boUSA’s current indirect owner, and Willem Franken,
who is TurboUSA’s current president (and the son of
Hans), had collaborated in the covert misappropriation of
ABB’s trade secrets concerning the design, manufacture,
servicing, and pricing of ABB’s turbochargers and parts.
Motion to Amend Complaint, ABB Turbo Sys. AG v.
TurboNed Serv. B.V., No. 13-cv-60394 (S.D. Fla. May 28,
2013). ABB sought and was granted leave to amend its
complaint to add claims of misappropriation of trade
secrets under Fla. Stat. §§ 688.001–688.009 and of civil
conspiracy to misappropriate trade secrets, and to join
Hans and Willem Franken as defendants for those claims.
Id.; Amended Complaint, ABB Turbo, No. 13-cv-60394
(S.D. Fla. July 12, 2013) (Amended Complaint); see 28
U.S.C. § 1367 (supplemental jurisdiction).
ABB’s amended complaint makes allegations of vari-
ous deceptive and improper transactions—allegations
that, at this stage of the case, we simply assume to be
true. Thus: Hans Franken stopped working for ABB in
1986 to found TurboNed and compete with ABB in the
market for parts and servicing of ABB-sold turbochargers.
Amended Complaint ¶¶ 36–42. For more than twenty
years, from 1986 until the sale of TurboNed to a third
party in 2009, Hans Franken and employees of TurboNed
paid at least one ABB employee for confidential infor-
mation related to ABB parts, servicing, and pricing. Id.
¶¶ 32, 72–73. At least one such transaction occurred in
the garage of a hotel in Switzerland, and on multiple
occasions TurboNed employees carried envelopes of cash
to exchange for ABB’s confidential information. Id. ¶¶ 76,
78; see also id. ¶ 82 (alleging other exchanges that oc-
4 ABB TURBO SYSTEMS AG v. TURBOUSA, INC.
curred electronically, by mail, and in Cyprus). TurboNed
employees altered confidential ABB documents in their
possession to obscure references to ABB, in part to conceal
the source of the information, in connection with the sale
of TurboNed to a new owner in 2009. Id. ¶¶ 96–98.
TurboNed soon went into bankruptcy in Europe. See id.
¶ 3. 1
The confidential information that TurboNed obtained
was passed along to TurboUSA, id. ¶¶ 101–103—a com-
pany that Hans Franken established in the 1990s, helped
to run as an officer and director at times, id. ¶¶ 46–48,
and continues to own through his control of an intermedi-
ate holding company, id. ¶¶ 54–55. TurboUSA used and
continues to use ABB’s trade-secret information to ad-
vance its business interests. Id. ¶¶ 60–62, 103–05. In
2008, TurboUSA hired a former ABB employee who
provided TurboUSA with confidential data that he had
stolen from ABB before he left ABB’s employment. Id.¶¶ 115–17. Moreover, in 2009, Hans Franken used his
control over TurboUSA—which his son Willem was man-
aging—to artificially inflate the prices TurboUSA paid to
TurboNed for goods or services, thereby increasing Tur-
boNed’s revenues to levels required for Hans to receive
1 Along with its motion to amend the complaint,
ABB submitted to the district court a public letter from
the new owner of TurboNed. Public Letter from Tur-
boNed Global Benelux B.V. (Dec. 7, 2012) (at J.A. 315).
The letter indicates that, after the sale, the new owner,
prompted by new information that led it to launch an
investigation, “confirmed certain material allegations of
ABB” about the acquisition of protected ABB information
by TurboNed employees and management, leading to a
termination of business relations between ABB and
TurboNed and to the latter’s filing for bankruptcy. Id.ABB TURBO SYSTEMS AG v. TURBOUSA, INC. 5
contingent, revenue-dependent compensation for his sale
of TurboNed to the new owner. Id. ¶¶ 66–67.
After ABB filed its amended complaint, and after ABB
stipulated to the bankrupt TurboNed’s dismissal without
prejudice, the three remaining defendants filed motions to
dismiss the entire amended complaint under Rule 12(b)(6)
for insufficient pleading. TurboUSA and Willem Frank-
en’s Motion to Dismiss the Amended Complaint, ABB
Turbo, No. 13-cv-60394 (S.D. Fla. Aug. 12, 2013); Johan
Franken’s Motion to Dismiss the Amended Complaint,
ABB Turbo, No. 13-cv-60394 (S.D. Fla. Sep. 12, 2013).
The defendants also argued that the trade-secret and
conspiracy claims should be dismissed because they were
time-barred by Fla. Stat. § 688.007, and Hans argued for
dismissal for lack of personal jurisdiction. The motions
made no specific arguments about the patent claims in
the amended complaint.
The district court granted the motions as to ABB’s
trade-secret and conspiracy claims. It held that ABB’s
trade-secret claim is “not well-formulated” with regard to
two requirements of Florida trade-secret law: (1) a trade-
secret claim must be brought “within 3 years after the
misappropriation is discovered or by the reasonable
exercise of diligence should have been discovered,” Fla.
Stat. § 688.007; and (2) the allegedly misappropriated
information must have been “the subject of efforts that
are reasonable under the circumstances to maintain its
secrecy,” Fla. Stat. § 688.002(4)(b). Order Granting in
Part and Denying in Part Defendants’ Motion to Dismiss,
ABB Turbo, No. 13-cv-60394, slip op. at 6 (S.D. Fla. Jan.
5, 2014) (Dismissal Order). The district court saw two
ways to view the factual allegations in light of those
requirements. In one view, ABB’s claims were filed too
late, because ABB claimed misappropriation of its secrets
over a period of nearly thirty years, with involvement of
high-level ABB employees. Had ABB exercised reasona-
ble diligence, the court reasoned, it “should have at least
6 ABB TURBO SYSTEMS AG v. TURBOUSA, INC.
had an inkling that something was amiss” at some point
before 2012, when ABB claimed it first knew of the mis-
appropriations. Id. In the alternative view, given “the
enormity of the scope of the misappropriations[,] in terms
of geographic area and number of individuals involved,”
and perhaps also assuming no detection by ABB, “it would
seem highly unlikely that the Trade Secrets were the
subject of reasonable efforts to protect their secrecy.” Id.
at 7. For those reasons, the district court dismissed the
trade-secret claim, and the claim of conspiracy to misap-
propriate trade secrets then also fell, because Florida law
does not recognize a conspiracy claim independent of
another underlying legal claim. Id. at 7 n.7 (citing Beh-
rman v. Allstate Life Ins. Co., 388 F. Supp. 2d 1346, 1353
(S.D. Fla. 2005)).
The parties subsequently agreed to settle the patent-
infringement claims. Final Judgment, ABB Turbo, No.
13-cv-60394 (S.D. Fla. Feb. 21, 2014). The district court
issued a final judgment approving the settlement and
dismissing all remaining claims with prejudice. Id. ABB
timely appealed the dismissal of its trade-secret and
conspiracy claims.
We have jurisdiction under 28 U.S.C. § 1295(a)(1).
Two simplifications are worth noting. It is undisputed
here that, if the trade-secret claim is revived on appeal,
revival of the conspiracy claim automatically follows. And
during this appeal, pursuant to a partial settlement, Hans
Franken has been dismissed from the case. See Order
Granting Motion to Withdraw Party, ABB Turbo Sys. AG
v. TurboUSA, Inc., No. 2014-1356 (Fed. Cir. Nov. 10,
2014). Accordingly, the only issue we need to address is
whether the district court erred in dismissing the trade-
secret claim against TurboUSA and Willem Franken.
ABB TURBO SYSTEMS AG v. TURBOUSA, INC. 7
DISCUSSION
Following the law of the regional circuit in which the
case arose, we review the dismissal under Rule 12(b)(6) de
novo, accepting the complaint’s allegations as true and
construing them in the light most favorable to the plain-
tiff. Speaker v. U.S. Dep’t of Health & Human Servs., 623
F.3d 1371, 1379 (11th Cir. 2010); see Scheuer v. Rhodes,
416 U.S. 232, 236 (1974).
A
Federal Rules of Civil Procedure 8(a)(2) and 12(b)(6)
together establish a notice-pleading standard that is
applied, in a context-specific manner, with the recognition
that the imposition of litigation costs must be justified at
the threshold by the presence of factual allegations mak-
ing relief under the governing law plausible, not merely
speculative. Thus, Rule 8(a)(2) requires that a plaintiff
provide a “short and plain statement of the claim showing
that the pleader is entitled to relief,” which requires that
the complaint “ ‘give the defendant fair notice of what the
. . . claim is and the grounds upon which it rests.’ ” Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting
Conley v. Gibson, 355 U.S. 41, 47 (1957)). To avoid dis-
missal under Rule 12(b)(6), the complaint must contain
sufficient factual allegations “to raise a right to relief
above the speculative level.” Id. Rule 8’s pleading stand-
ard “does not require ‘detailed factual allegations.’ ”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Twombly, 550 U.S. at 555); see also Erickson v. Pardus,
551 U.S. 89, 93 (2007) (per curiam) (“Specific facts are not
necessary . . . .”); Speaker, 623 F.3d at 1380 (quoting
Iqbal). But it requires more than “barren recitals of the
statutory elements, shorn of factual specificity,” Speaker,
623 F.3d at 1384, and more than the mere possibility of
liability or mere consistency with liability, Iqbal, 556 U.S.
at 678; Twombly, 550 U.S. at 557, 570. What is needed is
“facial plausibility” of the claim, which exists “when the
8 ABB TURBO SYSTEMS AG v. TURBOUSA, INC.
plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing
Twombly, 550 U.S. at 556). Rule 8 “simply calls for
enough fact to raise a reasonable expectation that discov-
ery will reveal evidence” of the alleged violation.
Twombly, 550 U.S. at 556.
B
Applying those standards to the trade-secret claim
here, we conclude that the district court erred in its
dismissal of the amended complaint. A plaintiff claiming
misappropriation of trade secrets under Florida law must
allege facts giving rise to a reasonable inference that (1)
“the plaintiff possessed secret information and took
reasonable steps to protect its secrecy,” Medimport S.R.L
v. Cabreja, 929 F. Supp. 2d 1302, 1322 (S.D. Fla. 2013)
(quotation marks and citation omitted); (2) “the secret it
possessed was misappropriated, either by one who knew
or had reason to know that the secret was improperly
obtained or by one who used improper means to obtain it,”
id.; see Fla. Stat. § 688.002; and (3) the secret “[d]erives
independent economic value” from not being generally
known or ascertainable through proper means, Fla. Stat.
§ 688.002(4)(a). Neither of the reasons the district court
gave supports the conclusion that ABB’s amended com-
plaint is insufficient.
1
The district court’s first ground for dismissal concerns
the timeliness of the complaint. But “[a] statute of limita-
tions bar is ‘an affirmative defense, and . . . plaintiff[s]
[are] not required to negate an affirmative defense in
[their] complaint.’ ” La Grasta v. First Union Secs., Inc.,
358 F.3d 840, 845–46 (11th Cir. 2004) (alterations in
original) (quoting Tregenza v. Great Am. Commc’ns Co.,
12 F.3d 717, 718 (7th Cir. 1993)). Dismissal at the plead-
ing stage on statute-of-limitations grounds ordinarily is
ABB TURBO SYSTEMS AG v. TURBOUSA, INC. 9
improper unless it is “apparent from the face of the com-
plaint that the claim is time-barred.” Id. (quotation
marks and citation omitted). Here, to approve dismissal
on timeliness grounds, we would have to conclude that
ABB’s complaint alleges facts making it apparent that
ABB discovered, or “by the exercise of reasonable dili-
gence should have . . . discovered,” the alleged misappro-
priations at least three years before it sued in June 2012.
Fla. Stat. § 688.007. We cannot so conclude.
The amended complaint says nothing to identify an
actual or constructive discovery before June 2009. It does
not allege when or how ABB discovered the misappropria-
tions. ABB’s only factual allegations regarding when it
learned of the alleged misappropriations appear in its
motion to amend its original complaint, which state that
it did not know of the misconduct until after filing its
initial complaint in 2012. Even if those allegations were
considered, they would not support the district court’s
conclusion: they controvert rather than indicate actual or
constructive discovery before June 2009.
The district court rested its untimeliness conclusion
on the amended complaint’s allegations that misconduct
occurred over a long period and through geographically
dispersed meetings. The court reasoned that ABB “should
have at least had an inkling that something was amiss.”
Dismissal Order at 6. We need not explore the relation-
ship between that formulation and the governing “should
have discovered” standard to conclude that the district
court’s rationale is inadequate to support dismissal.
The court’s rationale exceeds the limits on factual as-
sessments appropriate when ruling on a motion to dis-
miss. The amended complaint alleges distinct acts of
misappropriation of distinct trade secrets through clan-
destine communications and cash payments, with further
concealment efforts undertaken after acquisition of the
secrets; and nothing in the amended complaint makes
10 ABB TURBO SYSTEMS AG v. TURBOUSA, INC.
clear that the trade secrets were the kind that would
readily reveal themselves in the marketplace conduct of
the users of the information. 2 This seems enough to go
beyond the “conclusory” and “factually neutral” to make
affirmatively plausible the lack of actual or constructive
discovery, Twombly, 550 U.S. at 558 n.5, but ABB did not
need to meet even that standard in order to avoid a time-
liness dismissal. It is enough that ABB’s amended com-
plaint certainly does not state facts making apparent that
ABB actually or constructively discovered the alleged
misappropriations by June 2009. Not surprisingly, sever-
al courts have treated comparable issues as factual ones
not appropriate for resolution at the complaint stage. See
Marks v. CDW Computer Ctrs., Inc., 122 F.3d 363, 367
(7th Cir. 1997) (“Whether a plaintiff had sufficient facts to
place him on inquiry notice of a claim for securities fraud
. . . is a question of fact, and as such is often inappropriate
for resolution on a motion to dismiss under Rule
12(b)(6).”), quoted approvingly in La Grasta, 358 F.3d at
848; Puterman v. Lehman Bros., Inc., 332 F. App’x 549,
552 n.3 (11th Cir. 2009) (“Inquiry notice [is] a fact ques-
tion [that] generally is inappropriate for resolution on a
Rule 12(b)(6) motion.”); cf. Raytheon Co. v. Indigo Sys.
Corp., 688 F.3d 1311, 1318 (Fed. Cir. 2012) (reversing
summary judgment for defendant because of factual
2 The 2012 Public Letter, to the extent it may be
considered, may suggest that the new owner, with pre-
sumably full pre-acquisition access to TurboNed’s internal
documents and employees, did not detect the alleged
misappropriations before buying the company or, indeed,
until ABB and a forensic investigation revealed the
problem. If detection evaded a third party with the
means and incentive to detect possible liability and crip-
pling of a business relationship, that fact may help render
it reasonable that detection evaded ABB.
ABB TURBO SYSTEMS AG v. TURBOUSA, INC. 11
dispute over whether the plaintiff knew or should have
known of trade-secret misappropriation).
2
The district court’s second, alternative ground for
dismissal is also insufficient to support the judgment.
The district court held that ABB did not sufficiently allege
facts showing that it reasonably protected its trade-secret
information. Dismissal Order at 6–7. The court’s analy-
sis was too demanding of specificity and too intrusive in
making factual assessments. ABB has alleged “enough
facts to state a claim to relief that is plausible on its face”;
it has “nudged [its] claims across the line from conceivable
to plausible.” Twombly, 550 U.S. at 570; see Iqbal, 556
U.S. at 680.
ABB alleged that its secrecy-maintenance efforts “in-
clud[ed] imposing confidentiality and nondisclosure
obligations on ABB employees that have access to ABB’s
Turbocharger Trade Secrets, marking documents consti-
tuting ABB’s Turbocharger Trade Secrets with confiden-
tiality designations and/or other indicia prohibiting the
reproduction or dissemination of such documents or
information to third parties, [and] restricting physical and
electronic access by third parties to ABB’s Turbocharger
Trade Secrets.” Amended Complaint ¶ 35. The district
court cited no authority suggesting that such measures
are not reasonable precautions to protect trade secrets
under the governing law, and other courts have held
allegations of similar protective measures sufficient at the
pleading stage. Sensormatic Elecs. Corp. v. TAG Co. US,
632 F. Supp. 2d 1147, 1185 (S.D. Fla. 2008); PartyLite
Gifts, Inc. v. MacMillan, No. 10-cv-1490, 2010 WL
5209364, at *4 (M.D. Fla. Nov. 24, 2010). We follow those
authorities, noting that Florida law requires only “rea-
sonable” protections and that the complaint stage is not
well-suited to determining what precautions are reasona-
ble in a given context. See Rockwell Graphic Sys., Inc. v.
12 ABB TURBO SYSTEMS AG v. TURBOUSA, INC.
Dev Indus., Inc., 925 F.2d 174, 179 (7th Cir. 1991) (“[O]nly
in an extreme case can what is a ‘reasonable’ precaution
be determined on a motion for summary judgment, be-
cause the answer depends on a balancing of costs and
benefits that will vary from case to case and so require
estimation and measurement by persons knowledgeable
in the particular field of endeavor involved.”).
We see no basis in this case to deem ABB’s direct fac-
tual allegations insufficient to nudge the claim into the
realm of a plausible inference that ABB adequately pro-
tected its trade secrets. The district court reasoned that
the scope of the alleged misappropriations, perhaps
together with the lack of detection by ABB, made it “high-
ly unlikely” that ABB was “actually restricting physical
and electronic access to the information and taking other
protective measures.” Dismissal Order at 6–7. But it is
simply not implausible that adequate protections were in
place and yet a series of misappropriations occurred
without ABB’s detection.
The rationale for a contrary conclusion, at least at the
complaint stage, is not convincing. Protections may be
legally adequate to confer legal status as secrets, but still
not perfectly prevent misappropriation. Indeed, trade-
secret law is premised on that possibility; there would be
no actionable misappropriation otherwise. Moreover,
once the protections are overcome by those engaged in
misappropriation, detectability turns on the acts of the
miscreants, such as their furtiveness and concealment
efforts. But those acts have no particular bearing on
whether the actions of the secret owner in seeking to
protect against disclosure were adequate. The sheer
number and scope of misappropriations, considered apart
from detectability, may well have a logical bearing on
assessing the reasonableness of protective measures. But
that presents a classic factual question turning on the
details of the misappropriations. It cannot be answered
by judicial assessment at the complaint stage in this case.
ABB TURBO SYSTEMS AG v. TURBOUSA, INC. 13
ABB’s specific factual allegations of protective
measures are enough to survive a motion to dismiss. To
be sure, Twombly and Iqbal indicate that, in separating
conclusions from facts and deciding whether the alleged
facts make affirmatively plausible the asserted basis of
liability, Twombly, 550 U.S. at 557 n.5, courts deciding a
motion to dismiss for insufficient pleading may consider
the strength of alternative explanations of the alleged
facts. See Twombly, 550 U.S. at 567–68 (claim of parallel
business conduct not enough to support conspiracy claim
where no facts alleged that suggested reason something
other than individual self-interest); Iqbal 556 U.S. at 681–
82 (claim of discriminatory policy insufficient where no
official communications or other facts alleged beyond
allegation of disproportionate effect on Arab Muslim men
from investigation of 9/11 attacks carried out by Arab
Muslim men). But such consideration is limited, because
the court’s role is only to determine if the factual allega-
tions go beyond being “merely consistent with” liability to
“plausibly suggest[ing]” liability. Twombly, 550 U.S. at
557. Making that distinction requires a “context-specific”
assessment of the particular complaint, Iqbal, 556 U.S. at
679, made with the recognition that “a well-pleaded
complaint may proceed even if it strikes a savvy judge
that actual proof of the facts alleged is improbable,”
Twombly, 550 U.S. at 556. In this case, for the reasons
given, the factual allegations meet the pleading standard
regarding protection of the alleged trade secrets.
C
TurboUSA and Willem Franken make two arguments
for affirmance of the dismissal on grounds that the dis-
trict court did not adopt. One is that ABB insufficiently
pleaded facts to meet the legal requirement that its trade-
secret information derived independent value from not
being generally known or ascertainable. See TurboUSA
Br. at 3–4, 12. ABB responds by, for example, pointing to
allegations that its secrets include information not rea-
14 ABB TURBO SYSTEMS AG v. TURBOUSA, INC.
sonably obtained by reverse engineering, that efforts at
reverse engineering failed, that ABB made significant
investments in creating the information and took steps to
protect it, and that TurboNed paid for the information, all
suggesting its value. The second argued alternative
ground for affirming dismissal is that ABB insufficiently
pleaded that TurboUSA or Willem Franken had the
knowledge of the misappropriations required for liability.
See TurboUSA Br. at 13–19. On this issue, TurboUSA
and Willem Franken stress that the majority of ABB’s
allegations refer to misconduct by TurboNed and Hans
Franken. ABB responds by stressing its claims of close,
longstanding relations between TurboNed, TurboUSA,
Hans, and Willem—illustrated, ABB alleges, by the facts
that Hans, who was central to TurboNed, was at times
also an officer, director, and indirect owner of TurboUSA,
and that, seemingly while Willem was President of Tur-
boUSA, Hans exerted enough control over TurboUSA to
influence the prices TurboUSA paid to TurboNed.
Because the district court did not address those alter-
native arguments, we do not decide whether, in light of
our opinion, the claims should be dismissed for either of
those reasons. We leave the matter to the district court.
We note the Supreme Court’s recent decision in John-
son v. City of Shelby, 135 S. Ct. 346, 347 (2014) (per
curiam) (“A plaintiff, [Twombly and Iqbal] instruct, must
plead facts sufficient to show that her claim has substan-
tive plausibility. Petitioners’ complaint was not deficient
in that regard. Petitioners stated simply, concisely, and
directly events that, they alleged, entitled them to dam-
ages from the city. Having informed the city of the factu-
al basis for their complaint, they were required to do no
more to stave off threshold dismissal for want of an ade-
quate statement of their claim.”). We note, too, the im-
portance of a “context-specific” application of Rule 8,
Iqbal, 556 U.S. at 679, and the particular need to apply
the plausibility standard with a recognition that direct
ABB TURBO SYSTEMS AG v. TURBOUSA, INC. 15
evidence of some facts—such as guilty knowledge, in some
cases—may be distinctively in the defendant’s possession,
requiring that the threshold standard of plausibility be
applied to more circumstantial evidence. See Matrixx
Initiatives, Inc. v. Siracusano, 131 S. Ct. 1309, 1324 &
n.15 (2011) (holding, even under a special statutory
heightened pleading standard requiring a “strong infer-
ence” of scienter, that plaintiff’s claim could not be dis-
missed where it pleaded facts “sufficient to render the
inference of scienter at least as compelling as the infer-
ence” of innocent conduct; and stating that determining
guilty knowledge requires courts to review “all the allega-
tions holistically” (quotation marks and citation omitted));
Lamm v. State Street Bank & Trust Co., 749 F.3d 938, 945
(11th Cir. 2014) (finding insufficient pleading in a particu-
lar case after noting: “We are also mindful of the chal-
lenge a plaintiff faces in establishing a defendant’s mental
state without the benefit of discovery.”); Honorable Mark
R. Kravitz, Report of the Civil Rules Advisory Committee
53 (May 2, 2011) (“How much fact is required to support a
reasonable inference of liability varies with context, and
in many types of action can be rather scant.”); McCauley
v. City of Chicago, 671 F.3d 611, 619 n.2 (7th Cir. 2011)
(highlighting commentary).
CONCLUSION
We reverse the district court’s judgment and remand
for further proceedings consistent with this opinion.
Costs to ABB.
REVERSED AND REMANDED