Federal Issues

    Litigation Pleading Standards 

    AICPA Position

    Congress is considering the Notice Pleading Restoration Act, S. 1504, introduced by Senator Arlen Specter, a Pennsylvania Democrat, and Open Access to Courts Act, H.R. 4115, introduced by Representative Jerrold Nadler, a New York Democrat, that would overturn two recent Supreme Court decisions upholding the position that plaintiffs need to establish plausible facts in order to sue a defendant.  AICPA opposes both bills in their current form and does not support overturning these decisions.

    Background

    In the Supreme Court’s 2007 Bell Atlantic v. Twombley, an antitrust case, the Court ruled that in order to meet the appropriate pleading standard, the complaint must contain enough facts to “raise a reasonable expectation that discovery will reveal evidence of illegal agreement" and a pleading must “state a claim to relief that is plausible on its face."

    In the 2009, the Supreme Court built on Twombley in the Ashcroft v. Iqbal case.  In Iqbal, the claimant maintained that the Twombley’s "facial plausibility" test should be limited to the pleadings made in an antitrust dispute, as had been involved in the Twombley case. The Supreme Court held that the argument that Twombley was limited to antitrust actions "is not supported by Twombley and is incompatible with the Federal Rules of Civil Procedure", and the Court also held definitively that Twombley applies to all civil actions.

    Claimants now must explicitly include in their initial pleadings substantial factual assertions, not "threadbare," that give "facial plausibility" to their claims instead of notice pleading, which required only a simple statement of the case against the defendant.

    Legislative Action

    S. 1504 and H.R. 4115, if enacted, would shift the governing legal standard and open the floodgates to frivolous litigation because complaints no longer would need to be specific. Previously established statutory pleading standards would be eviscerated.  Filing a complaint to engage in a “fishing expedition” would become an accepted practice increasing litigation burdens on both defendants and the courts.

    Further, under existing law, if a federal statute requires a more specific form of pleading and if a claim brought under such statute does not meet the specificity requirements of such a statute, it would be dismissed because the claim would fail to meet the standards upon which relief can be granted.  However, S. 1504 and H.R. 4115 would override these previously enacted pleading standards.

    For example, the Private Securities Litigation Reform Act (“PSLRA”) was enacted in 1995 and includes a specific pleading standard.   If either of these bills were to become law the balanced pleading standard of PSLRA found in 15 U.S.C. § 78u-4(b), which requires the claimant, amongst other requirements, to “state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind”, would be nullified.

    Resources

    Copy of Legislation

    A copy of these bills are available on THOMAS.  The most recent version of the bill, and all Congressional actions, are available by searching for S.1504 and H.R. 4115 by bill number.

    Staff Contacts

    Matthew Iandoli
    Director, Congressional Affairs
    202.434.9274
    miandoli@aicpa.org

     

     

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    Congressional and Political Affairs Advocacy

    Overview The AICPA monitors and advocates on legislative and other matters that affect the accounting profession. Working with state CPA societies and other professional organizations, the AICPA provides information to and educates federal, state and local policymakers regarding key issues.
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    Preserving the Cash Basis Method of Accounting for CPA Firms

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    Cash Accounting Bipartisan Letter to the House of Representatives

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    Federal Legislative and Regulatory Issues

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    Cash Accounting Senate Letter

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    Published on August 07, 2014

    XBRL

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    Camp Letter On Cash Basis April 25, 2014

    Legislative Letters The American Institute of CPAs (AICPA) voices strong opposition to draft legislation that would limit the use of the cash method of accounting for pass-through entities and personal service corporations.
    Published on May 08, 2014

    Convergence of International and US Accounting Principles and IFRS

    Article International Financial Reporting Standards (IFRS) set by the International Accounting Standards Board (IASB) in London is a response to worldwide demand from regulators, investors, businesses, and auditing firms for a single set of high-quality, globally-accepted accounting standards.
    Published on April 17, 2014

    AICPA Letter to SEC on Proposed Regulation Crowdfunding

    Comment Letter AICPA comments on the SEC's proposed new Regulation Crowdfunding under the Securities Act of 1933 and the Securities Exchange Act of 1934 to implement the requirements of Title III of the JOBS Act as published in SEC File No. S7-09-13.
    Published on February 06, 2014

    Jan 2014 - AICPA Statement for the Record regarding Conferences and Travel

    Article AICPA provided a Statement for the Record to the Senate Homeland Security and Government Affairs Committee in  response  to the hearing held on January 14, 2014 entitled, "Examining Conference and Travel Spending Across the Federal Government."
    Published on January 28, 2014

    Cash Basis Letter to Senate Finance Committee from Associations-Jan7-2014

    Legislative Letters Cash Basis Letter to Senate Finance Committee dated Jaunary 7, 2014 from American Council of Engineering Companies, American Dental Association, American Farm Bureau Federation, American Institute of Architects, American Institute of CPAs and S Corporation Association.
    Published on January 22, 2014

    Municipal Advisors

    Issue Brief The AICPA generally supports the SEC’s proposed rules as a means to strengthen investor protections in the municipal securities market.  The AICPA is concerned, however, because the proposed rule would require that accountants performing customary and usual accounting services would be required to register as municipal advisors.
    Published on January 07, 2014

    ERISA Fiduciary Definition - Appraisers of Employee Stock Ownership Plans

    Article The AICPA believes that the U.S. DOL should implement rules that would require appraisers of ESOPs to meet minimum qualification requirements, including holding relevant credentials and training, and comply with applicable professional valuation standards.
    Published on December 30, 2013

    Take Action Legislation Affecting ESOP Appraisers

    Article The AICPA urges FVS section members to seek congressional support of legislation to fix DOL fiduciary proposal on ESOP appraisers S. 273/HR 2041.
    Published on September 18, 2013

    CPAs Count! Make Your Voice Heard on Capitol Hill.

    Overview The AICPA PAC is the profession’s political action committee. This describes frequently asked questions about the AICPA PAC.
    Published on July 30, 2013

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