Federal Deposit Insurance Corporation as Receiver for Indymac Bank FSB v. Warren et al

Filing 27

ORDER by Judge Claudia Wilken DENYING PLAINTIFF'S 13 MOTION TO STRIKE. (ndr, COURT STAFF) (Filed on 10/25/2011)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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FEDERAL DEPOSIT INSURANCE
CORPORATION, as receiver for
INDYMAC BANK, F.S.B,

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United States District Court
For the Northern District of California

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Plaintiff,

No. C 11-3260 CW
ORDER DENYING
PLAINTIFF'S MOTION
TO STRIKE (Docket
No. 13)

v.
JUDITH A. WARREN, an individual
d/b/a J WARREN APPRAISAL SERVICE,
type of entity unknown; PATRICIA
L. DENNIS, an individual d/b/a
BOHANNON APPRAISAL, type of
entity unknown; and DOES 1
through 10, inclusive,
Defendants.
________________________________/
Plaintiff Federal Deposit Insurance Corporation, as receiver
for IndyMac Bank, F.S.B., has sued Judith A. Warren, an individual

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doing business as J. Warren Appraisal Service, and Patricia L.
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Dennis, an individual doing business as Bohannon Appraisal, for

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claims arising from the appraisal of certain real property.

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FDIC's first cause of action alleges that Defendants breached

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their contracts by failing to describe the property adequately,

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misrepresenting the property's value, using improper and

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negligently selected comparable sales, failing to comply with the

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The

Uniform Standards of Professional Appraisal Practice and failing

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to discuss adequately the fact that the property was a bed-and26
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breakfast, not a single family home.

The FDIC's second cause of

action alleges that Defendants negligently misrepresented the

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value of the property.

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the complaint.

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the FDIC moves to strike Warren's second affirmative defense,

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contributory or comparative negligence, and her ninth affirmative

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defense, comparative indemnification.

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Defendants have filed separate answers to

Pursuant to Federal Rule of Civil Procedure 12(f),

Docket No. 13.

Having

considered all of the parties' submissions, the Court DENIES the

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motion.
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LEGAL STANDARD

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United States District Court
For the Northern District of California

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Federal Rule of Civil Procedure 12(f) states that a "court

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may strike from a pleading an insufficient defense or any

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redundant, immaterial, impertinent, or scandalous matter."

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R. Civ. P. 12(f).

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to avoid the expenditure of time and money that must arise from

Fed.

"The function of a 12(f) motion to strike is

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litigating spurious issues by dispensing with those issues prior
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to trial."

Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th

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Cir. 1993) (internal alterations and quotation marks omitted),

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overruled on other grounds by 510 U.S. 517 (1994).

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immaterial if it has no essential or important relationship to a

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claim for relief or defense.

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Co., 618 F.3d 970, 974 (9th Cir. 2010).

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Matter is

Whittlestone, Inc. v. Handi-Craft
Impertinent matter is

that which does not pertain to issues in question.

Id.

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DISCUSSION
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Warren pleads IndyMac's comparative fault in her second and

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ninth affirmative defenses in a general manner that appears

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directed at both causes of action.
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The FDIC contends that the

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defenses are insufficient as to its breach of contract and

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negligent misrepresentation claims.

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indicating that comparative fault, in general, is not a defense to

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a claim for breach of contract.

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Lines Ins. Co., 23 Cal. 4th 390, 402 (2000).

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The FDIC cites authority

Kransco v. Am. Empire Surplus
Kransco does not

establish that comparative fault is never a defense, under

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California law, to contract claims.
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The FDIC also argues that Van Meter v. Bent Constr. Co., 46

United States District Court
For the Northern District of California

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Cal. 2d 588, 595 (1956), demonstrates that Warren cannot assert an

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affirmative defense to the FDIC's negligent misrepresentation

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claim based on comparative fault.

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a species of the tort of deceit.

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Cal. 4th 370, 407 (1992).

Negligent misrepresentation is
Bily v. Arthur Young & Co., 3

"Where the defendant makes false

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statements, honestly believing that they are true, but without
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reasonable ground for such belief, he may be liable for negligent
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misrepresentation, a form of deceit."

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marks omitted).

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that a defendant who misrepresents facts and induces the plaintiff

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to rely on the misrepresentations is barred from asserting that

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the plaintiff's reliance was negligent unless the plaintiff's

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Id. (internal quotation

In Van Meter the California Supreme Court held

conduct, in light of his or her intelligence and information, is

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preposterous or irrational.

46 Cal. 2d at 595.

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Warren's opposition brief makes clear that her comparative

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negligence defense will challenge IndyMac's conduct and actions in

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underwriting the loans.

Although Warren's answer and brief do not
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specify what actions will be challenged, she may seek to defend

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herself by asserting that IndyMac failed to follow underwriting

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procedures or neglected to review borrower loan applications.

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FDIC is correct that Warren cannot prevail if this defense is

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limited to evidence that IndyMac did not review borrower loan

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applications.

The

Such an oversight would not make IndyMac's reliance

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on Warren's appraisal irrational or preposterous.

However, the

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Court does not assume that Warren's defense is so limited.

United States District Court
For the Northern District of California

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Discovery may reveal evidence about what IndyMac knew or did, such

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that its reliance on the appraisal was irrational or preposterous.

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If discovery does not produce such evidence, the FDIC may move for

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summary judgment to dispose of the issue.

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The district court in FDIC v. Kirkland, 2010 U.S. Dist. LEXIS

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143691, *5-6 (C.D. Cal.), reached a different conclusion,
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reasoning that the defendant's affirmative defense of comparative
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fault was precluded as a matter of law and granting the FDIC's

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motion to strike the defense.

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proposition that, with respect to an allegation of deceit, the

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plaintiff's behavior is considered as part of the analysis of

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whether the plaintiff's reliance was reasonable.

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The court cited Van Meter for the

The court did

not acknowledge Van Meter's holding that a defense based on

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comparative fault is permissible when the plaintiff's reliance is
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irrational or preposterous.

Therefore, Kirkland overlooked that

the defense is cognizable, albeit in limited circumstances.

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FDIC v. Munoz, 2011 U.S. Dist. LEXIS 105500 (C.D. Cal.) is

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also unpersuasive.

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who misrepresents facts and induces the plaintiff's reliance on

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those facts may assert a defense based on the plaintiff's conduct

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if the plaintiff's reliance is preposterous or irrational.

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The court there recognized that a defendant

However, the court then stated that the risk of falsity is on the

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one who makes a representation, disregarding law that, as a matter
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United States District Court
For the Northern District of California

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of law, the risk is not placed in all circumstances solely on the
person who makes a negligent misrepresentation.
Striking Warren's second and ninth affirmative defenses is

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unwarranted.

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Practice and Procedure § 1381 (noting that motions to strike are

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disfavored and "will not be granted if the insufficiency of the

5C Charles Alan Wright & Arthur R. Miller, Federal

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defense is not clearly apparent.").
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CONCLUSION
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The FDIC's motion, Docket No. 13, is DENIED.

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IT IS SO ORDERED.

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Dated: 10/25/2011

CLAUDIA WILKEN
United States District Judge

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