Eighth Circuit Holds That Non-Conclusory Allegations “On Information And Belief” May Be Considered Among the Well-Pleaded Allegations of a Civil Complaint Under Twombly

In Ahern Rentals, Inc.  v.  EquipmentShare.com, Inc., No. 22-1399 (8th Cir. Feb. 7, 2023), the Eight Circuit joins other circuits in holding that “allegations pled on information and belief are not categorically insufficient to state a claim for relief where the proof supporting the allegation is within the sole possession and control of the defendant or where the belief is based on sufficient factual material that makes the inference of culpability plausible.”

The present case challenges an alleged anti-competitive conspiracy. Plaintiff “Ahern is one of the largest independently owned equipment rental companies in the United States. Ahern provides heavy equipment rental and repair services and sells new and used equipment. Ahern has locations across the United States and 60 years of experience in the equipment rental industry. To protect its sensitive data, Ahern requires its employees to sign non-disclosure, non-solicitation, and non-competition agreements. Ahern’s employee handbook also explicitly requires employees to safeguard the company’s confidential information, which includes customer and vendor lists, pricing and marketing data, sales systems, training materials, and personnel data.”

Ahern alleged that defendants EquipmentShare conspired with another entity, EZ, “to increase its market share at Ahern’s expense. Specifically, Ahern alleges that, in early- to mid-2017, EquipmentShare began recruiting Ahern’s employees to steal Ahern’s trade secrets before leaving Ahern to work for EquipmentShare. EquipmentShare then used Ahern’s trade secrets to develop its telematics systems and capture significant portions of Ahern’s business.”

The district court dismissed the action against EZ for failure to state a claim under Fed. R. Civ. P. 12(b)(6). It held “that Ahern’s complaint did not allege facts plausibly demonstrating EZ’s involvement in EquipmentShare’s alleged misappropriation of trade secrets and tampering of computer data, much less that there was a meeting of the minds sufficient for a conspiracy to exist. In particular, the district court took issue with several paragraphs in Ahern’s complaint alleging EZ’s involvement and knowledge, which are all pled ‘upon information and belief’.” Thereafter, the district court dismissed the claims against EquipmentShare on a Fed. R. Civ. P. 12(c) motion for judgment on the pleadings on the ground that the lawsuit was duplicative of an existing multidistrict litgation.

The Eighth Circuit reverses the dismissal of EZ, vacates the dismissal of EquipmentShare, and remands the case. The opinion considers initially whether various allegations “on information and belief” ought to be counted among the well-pleaded allegations for purposes of applying Twombly. The district court held no. But the panel notes that the Eight Circuit has “never fully articulated when plaintiffs may use upon-information-and-belief pleadings in a complaint to satisfy Twombly’s plausibility requirement.”

“Pleading on information and belief is expressly contemplated by the Federal Rules of Civil Procedure. See Fed. R. Civ. P. 11(b)(3) . . . . [W]e cannot always expect plaintiffs to provide robust evidentiary support for their allegations at the pleading stage because, in some contexts, that information may not be available to them before discovery . . . . Thus, based on the Federal Rules of Civil Procedure and our own precedent, pleading on information and belief must be permitted in at least some circumstances.”

Citing cases from seven other circuits, the panel notes that they “largely agreed that factual allegations pled on information and belief should not be summarily rejected under Twombly where ‘the facts are peculiarly within the possession and control of the defendant, or where the belief is based on factual information that makes the inference of culpability plausible.’” The panel adopts this standard. It nevertheless notes that for such allegations, the plaintiff must allege “some factual basis for the inference of liability or the reasonable belief that the information supporting such liability is in the sole possession of the defendant”; otherwise “pleadings made on information and belief cannot cure an otherwise threadbare complaint.”

“In light of the foregoing, the district court erred by summarily rejecting Ahern’s allegations pled on information and belief. If such allegations are based on information that is within the possession and control of the defendant or are supported by sufficient factual material that makes the inference of culpability plausible, they are permissible under Twombly and Iqbal. Applying this standard to Ahern’s complaint, Ahern pleads sufficient facts to state a plausible claim against EZ.”

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