Shield Technologies Corporation v. Paradigm Positioning LLC et al
Filing
111
MEMORANDUM OPINION Signed by the Honorable John F. Grady on September 19, 2012. Mailed notice(cdh, )
11-6183.121-RSK
September 19, 2012
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
SHIELD TECHNOLOGIES CORP.,
Plaintiff,
v.
PARADIGM POSITIONING, LLC, THOMAS
W. NELSON, JEFFERY D. VOLD,
TRANSHIELD, INC.
Defendants.
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)
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No. 11 C 6183
MEMORANDUM OPINION
Before the court are the motions of plaintiff and counterdefendant Shield Technologies Corp. (“Shield”) to dismiss the
defendants’ counterclaims and to strike their affirmative defenses.
For the reasons explained below, we grant Shield’s motions in part
and deny them in part.
BACKGROUND
Shield manufactures and sells corrosion protective covers for
the United States and foreign militaries, industry, and consumer
gun purchasers.
(First. Am. Compl. ¶ 1.)
The United States
Department of Defense (“DOD”) is Shield’s largest customer.
(Id.
at ¶ 2.) Defendant Transhield, Inc. manufactures and sells “shrink
wrap covers” for a range of applications and it is currently
marketing its products to the DOD as an alternative to Shield’s
product.
(Id. at ¶¶ 3, 5.)
Shield alleges that two former Shield
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executives,
defendants
Jeffery
Vold
and
Thomas
Nelson,
and
defendant Paradigm Positioning, LLC (“Paradigm”), their alter ego,
have
unlawfully
disclosed
Shield’s
trade
confidential information to Transhield.
secrets
and
other
(Id. at ¶¶ 10, 15.)
Shield’s six-count complaint, which is the subject of a pending
motion to dismiss, alleges: (1) breach of certain employment
agreements executed by Nelson and Vold (Counts I (Nelson) and II
(Vold));
(2)
trade
secret
misappropriation
(Count
III);
(3)
tortious interference with a prospective business relationship
(Count IV); (4) civil conspiracy (Count V); and (5) common law
fraud (Count VI, against Nelson only).
The defendants have filed
various affirmative defenses and counterclaims in response to
Shield’s complaint.
has
filed
baseless
In general, the defendants allege that Shield
claims
against
competition for the DOD’s business.
count
counterclaim
against
them
in
order
to
chill
Transhield has filed a three-
Shield
alleging:
(1)
tortious
interference with its business relationship with the DOD (Count I);
(2)
tortious
interference
with
its
prospective
business
relationship with Vold (Count II); and (3) tortious interference
with its contractual relationship with Vold (Count III).
Nelson
and Paradigm have jointly filed a nine-count counterclaim alleging:
(1) abuse of process (Count I); (2) breach of contract (Counts II
and
III);
(3)
defamation
(Count
IV);
(4)
“interference
with
contract” (Count V); (5) “intentional interference with prospective
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economic advantage” (Count VI); (6) violation of the Minnesota and
Illinois employee-records statutes; (7) “injunctive relief” (Count
VIII); and (8) Sherman Act violations (Count IX).
Vold has filed
a four-count counterclaim alleging: (1) tortious interference with
his “business relationship” with the DOD (Count I);1 (2) tortious
inference with his “current and prospective” business relationship
with Transhield (Count II); (3) tortious interference with his
contractual relationship with Transhield (Count III); and (4)
“misappropriation of identity” under 765 ILCS 1075/30-55 (Count
IV).
This last claim is based on Shield’s alleged use of Vold’s
identity to market its products after Vold stopped working for the
company on November 30, 2009.
(See Vold Counterclaim ¶ 23.)
DISCUSSION
Shield
has
filed
motions
to
dismiss
the
defendants’
counterclaims and to strike their affirmative defenses.
We will
discuss its Rule 12(b)(6) motions, and its Rule 12(f) motions,
separately.
A.
Shield’s Motions to Dismiss Defendants’ Counterclaims
1.
Legal Standard
The purpose of a Rule 12(b)(6) motion to dismiss is to test
the sufficiency of the complaint, not to resolve the case on the
1/
Count I his headed “Tortious Interference with Business Relationship
with Transhield,” but it is apparent that Count I is based on Shield’s alleged
interference with Vold’s business relationship with the DOD.
(See Vold
Counterclaim ¶ 5 (Alleging that “Vold has a valid business expectancy with his
work with the DOD.”)
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merits.
5B Charles Alan Wright & Arthur R. Miller, Federal
Practice and Procedure § 1356, at 354 (3d ed. 2004).
To survive
such a motion, “a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on
its face.’
A claim has facial plausibility when the plaintiff
pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (citing Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570, 556 (2007)).
When evaluating
a motion to dismiss a complaint, the court must accept as true all
factual allegations in the complaint.
However,
we
need
not
accept
as
Iqbal, 129 S. Ct. at 1949.
true
its
legal
conclusions;
“[t]hreadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice.”
Id.
(citing Twombly, 550 U.S. at 555).
2.
Nelson’s and Paradigm’s Counterclaims
Shield has moved to dismiss Counts I, IV, V, VI, VII, VIII,
and IX of Nelson’s and Paradigm’s counterclaims.
a.
Count I: Abuse of Process
The court in Reed v. Doctor's Associates, Inc., 824 N.E.2d
1198, 1206 (Ill. App. Ct. 2005) succinctly explained the parameters
of abuse of process under Illinois law:
In order to state a claim for abuse of process, the
pleading must allege the existence of an ulterior purpose
or motive and some act in the use of legal process not
proper in the regular prosecution of the proceedings. The
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mere institution of proceedings, even with a malicious
intent or motive, does not alone constitute abuse of
process. The test is whether process has been used to
accomplish some end which is beyond the purview of the
process or which compels the party against whom it is
used to do some collateral thing that he could not
legally and regularly be compelled to do. In other words,
the defendant must have intended to use the action to
accomplish some result that could not be accomplished
through the suit itself.
Id. (internal citations omitted) (emphasis added).
“Absent an
‘inappropriate act’ in the regular prosecution of a suit, an abuse
of process action will not lie.”
Evans v. West, 935 F.2d 922, 923
(7th Cir. 1991). Shield argues, and we agree, that the defendants’
counterclaim merely alleges that Shield filed its complaint with an
“ulterior
motive”
(i.e.,
to
chill
competition),
insufficient to state a claim for abuse of process.
which
is
“The mere
institution of a proceeding, even if brought simply to harass the
other party or to coerce a settlement, does not constitute abuse of
Harmon v. Gordon, 10 C 1823, 2011 WL 290432, *3 (N.D.
process.”
Ill. Jan. 27, 2011); see also Evans, 935 F.2d at 923; (similar);
Vasarhelyi v. Vasarhelyi, No. 09 C 2440, 2010 WL 1474652, *2-3
(N.D. Ill. Apr. 7, 2010) (similar).
Nelson and Paradigm have made
no attempt to distinguish the authorities that Shield has cited.
Shield’s motion to dismiss Count I of Nelson’s and Paradigm’s
counterclaim is granted.
b.
Count IV: Defamation
Nelson
and
Paradigm
allege
that
Shield
has
“willfully,
wantonly and maliciously” published false statements about them.
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(Nelson/Paradigm Counterclaim ¶ 25.)
The examples they cite
essentially mirror the allegations in Shield’s complaint.
They
accuse Shield of falsely stating that the defendants (1) “stole”
and “used” Shield’s trade secrets, (2) committed fraud and breached
their
contracts
with
Shield,
(3)
“engaged
in
unlawful
conspiracies,” and (4) were “dishonest in their professional and
business undertakings . . . .”
25.)
(Nelson/Paradigm Counterclaim ¶
Shield has invoked the so-called “litigation privilege” in
response to this claim: “anything said or written in a legal
proceeding,
privilege
including
against
pleadings,
defamation
is
protected
actions,
by
subject
an
only
absolute
to
the
qualification that the words be relevant or pertinent to the
matters in controversy.” Defend v. Lascelles, 500 N.E.2d 712, 71415 (Ill. App. Ct. 1986) (collecting cases).
“The privilege is
based upon the ‘public policy of securing to attorneys as officers
of the court the utmost freedom in their efforts to secure justice
for their clients.’”
Kurczaba v. Pollock, 742 N.E.2d 425, 438
(Ill. App. Ct. 2000) (quoting
Restatement (Second) of Torts, §
586,
that
cmt.
a).
Anticipating
Shield
would
assert
this
privilege, the defendants allege on information and belief that the
allegedly false statements “were published to others separate from
or
apart
from
this
instant
legal
proceeding
.
.
.
.”
(Nelson/Paradigm Counterclaim ¶ 25.) The defendants rely primarily
on Punski v. Karbal, No. 07-C-5409, 2009 WL 196317, *5 (N.D. Ill.
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Jan. 28, 2009), a case applying New York law,2 in support of their
argument that such statements are not privileged. The plaintiff in
Punski attended two therapy sessions with the defendant, who held
herself out as a licensed therapist.
later
submitted
a
letter
to
an
Id. at *1.
attorney
The defendant
representing
the
plaintiff’s ex-wife in child custody proceedings that allegedly
contained false statements about matters discussed during the
plaintiff’s therapy sessions.
Id. at *1-2.
The Punski court
concluded that the letter itself was privileged because it was “at
least pertinent to the [child-custody] litigation.”
Id. at *4.
But it went on to hold that the plaintiff’s defamation claim could
proceed to discovery insofar as it was premised on the allegation
that the defendant discussed the subject matter of the letter with
the plaintiff’s ex-wife prior to the litigation “and that [the
defendant] made defamatory statements [to his ex-wife] outside the
context of any lawsuit.”
Id. at *5.
Shield emphasizes that the defendants do not allege that
Shield
made
lawsuit.
allegedly
defamatory
statements
“prior
to”
this
While this is true, we do not believe that it is
dispositive.
The question is whether Shield made the allegedly
defamatory statements “in a legal proceeding.”
N.E.2d at 714-15.
See Defend, 500
The defendants allege that it did not, at least
not exclusively. Shield cites Vasarhelyi, 2010 WL 1474652, at *3-4
2/
Shield has not cited any authority indicating that the privilege is
applied differently under Illinois law.
- 8 -
for the proposition that “privileged statements made in litigation
should not lose their protection by virtue of being communicated to
persons
not
involved
in
(Nelson/Paradigm) at 4.)
statements
were
the
lawsuit.”
(Shield
Mem.
In that case, the “alleged defamatory
contained
in
letters
soliciting
information
pertaining to litigation pending in the state court, in which
plaintiff had moved to intervene, and the proposed litigation in
the instant action.”
know
in
what
Vasarhelyi, 2010 WL 1474652, *4.
context,
or
for
what
statements alleged in the complaint.
purpose,
Shield
We do not
made
the
However, the defendants are
not required to anticipate and refute Shield’s affirmative defenses
in their counterclaim.
See Horowitz v. Animal Emergency and
Treatment Centers of Chicago, LLC, No. 12 C 2561, 2012 WL 3598807,
*4-5 (N.D. Ill. Aug. 20, 2012) (a plaintiff is not required to
anticipate
a
defendant’s
litigation-privilege
defense).
We
conclude that the litigation privilege does not bar the defendants’
defamation counterclaim at this stage of the case.
See id. at *5
(concluding that a motion for summary judgment is the appropriate
vehicle for asserting the privilege).
Shield’s motion to dismiss
is denied as to Count IV of Nelson’s and Paradigm’s counterclaim.
c.
Counts V and VI: Tortious Interference with Contract and
Prospective Economic Advantage
In Count V, Nelson and Paradigm allege that Shield tortiously
interfered
with
the
defendants’
“direct[]
and
indirect[]”
contractual relationships with the DOD “by commencing this lawsuit
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and by publishing and republishing [] false information . . . .”
(Nelson/Paradigm Counterclaim ¶¶ 28-29.)
Shield argues that Count
V does not state a claim because the act of filing this lawsuit
cannot support a claim for tortious interference: “[u]nder Illinois
law, the only cause of action recognized for the wrongful filing of
a lawsuit is one for malicious prosecution or abuse of process.”
Havoco of America, Ltd. v. Hollobow, 702 F.2d 643, 647 (7th Cir.
1983) (citing Lyddon v. Shaw, 372 N.E.2d 685, 690 (Ill. App. Ct.
1978)); see also UTStarcom, Inc. v. Starent Networks Corp., No. 07
CV 2582, 2008 WL 5142194, *2 (N.D. Ill. Dec. 5, 2008) (citing
Havoco and dismissing a counterclaim for tortious interference
insofar as it was based on the filing of a lawsuit).
The
defendants have elected to withdraw Count V, ostensibly because the
contract that is the subject of this claim “has not actually been
breached yet.”
(See Nelson/Paradigm Resp. at 7-8.)
They argue,
however, that Count VI — alleging tortious interference with
prospective economic advantage — is valid. First, it is clear that
the principle discussed in Havoco applies whether the alleged
interference
involves
business relationship.
an
existing
contract
or
a
prospective
In their response to Shield’s motion, the
defendants attempt to articulate alternative grounds for their
claim.
(Nelson/Paradigm Resp. 8-9.)
Defendants’ response is
confusing and, as far as we can tell, not based upon the actual
allegations in its counterclaim.
prejudice.
Count VI is dismissed without
- 10 -
d.
Count VII (Unlawful Disclosure of Employee Records)
In Count VII, Nelson alleges that Shield unlawfully disclosed
personnel file information without giving Nelson prior notice and
an opportunity to review the materials.
The defendants have
withdrawn that claim, purportedly “without prejudice to their
rights to represent them in the future.” (Nelson/Paradigm Resp. at
9.)
Shield asks us to dismiss Count VII with prejudice, but we do
not believe that drastic remedy is warranted. The facts alleged in
the defendants’ counterclaim do not permit us to rule as a matter
of law that the defendants cannot recover under the statutes they
have cited.
e.
Count VIII: Injunctive Relief
The defendants have also voluntarily withdrawn Count VIII,
(see Nelson/Paradigm Resp. at 9), tacitly acknowledging that an
injunction is form of relief and not a distinct claim.
See, e.g.,
CustomGuide v. CareerBuilder, LLC, 813 F.Supp.2d 990, 1002 (N.D.
Ill. 2011).
Shield again requests dismissal with prejudice.
The
defendants simply mislabeled a prayer for relief as a separate
claim, a technical error that they have corrected by withdrawing
Count VIII.
f.
Dismissal with prejudice is not warranted.
Count IX: Antitrust Violations
In Count IX, the defendants allege that Shield has violated
the Sherman Act, 15 U.S.C. §§ 2 and 15.
Section 2 of the Act
authorizes criminal sanctions against “[e]very person who shall
monopolize, or attempt to monopolize, or combine or conspire with
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any other person or persons, to monopolize any part of the trade or
commerce among the several States, or with foreign nations . . . .”
15 U.S.C. § 2.
Section 15 authorizes private suits for damages by
“any person who shall be injured in his business or property by
reason of anything forbidden in the antitrust laws . . . .”
U.S.C. § 15.
15
Shield argues that the defendants’ Sherman Act claim
is barred by the Noerr-Pennington doctrine, which “extends absolute
immunity
under
associations
the
when
antitrust
they
join
laws
to
together
businesses
to
petition
and
other
legislative
bodies, administrative agencies, or courts for action that may have
anticompetitive effects.”
Mercatus Group, LLC v. Lake Forest
Hosp., 641 F.3d 834, 841 (7th Cir. 2011).
However, the doctrine
does not apply to sham litigation instituted merely to harm a
competitor, see id. at 842, which is what the defendants have
alleged here.
(See Nelson/Paradigm Counterclaim ¶ 43.)
Moreover,
the application of the doctrine is a question of fact that we will
not resolve on a motion to dismiss.
See Wabash Pub. Co. v.
Flanagan, No. 89-C-1823, 1990 WL 19977, *3 (N.D. Ill. Feb. 27,
1990); see also New West v. City of Joliet, Nos. 05 C 1743, 07 C
7214, 11 C 5305, 2012 WL 366733, *6 (N.D. Ill. Jan. 30, 2012)
(“Courts routinely reserve resolution of Noerr’s application for
summary judgment.”).
In the alternative, Shield argues that the defendants’ claim
is
insufficiently
pled.
“In
order
to
state
a
claim
of
monopolization, [the defendants] must plead ‘(1) the possession of
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monopoly
power
in
the
relevant
market
and
(2)
the
willful
acquisition or maintenance of that power.’” In re Dairy Farmers of
America, Inc. Cheese Antitrust Litigation, 767 F.Supp.2d 880, 901
(N.D. Ill. 2011) (quoting United States v. Grinnell Corp., 384 U.S.
563, 570–71 (1966)).
The defendants argue, in essence, that Rule
8(a) does not require them to formally recite the elements of § 2
claim.
But the real problem with their claim is that they have not
alleged any facts corresponding to the elements of a § 2 claim,
which requires more factual detail to state a claim for relief than
run-of-the-mill commercial claims like breach of contract and the
like.
See Swanson v. Citibank, N.A., 614 F.3d 400, 405 (7th Cir.
2010)
(“A more complex case involving financial derivatives, or
tax fraud that the parties tried hard to conceal, or antitrust
violations, will require more detail, both to give the opposing
party notice of what the case is all about and to show how, in the
plaintiff’s mind at least, the dots should be connected.”).
Therefore, we grant Shield’s motion to dismiss Count IX of Nelson’s
and Paradigm’s counterclaim.
3.
Shield’s Motion to Dismiss Vold’s Counterclaims
Shield
has
moved
to
dismiss
all
four
counts
of
Vold’s
counterclaim.
a.
Vold
interests
integrity,
Counts I-III: Tortious Interference
alleges
by
that
“filing
Shield
this
truthfulness
and
interfered
baseless
with
lawsuit,
reliability,
and
his
business
questioning
authorizing
his
on
- 13 -
information and belief press releases containing false accusations
against [him] relating to [Shield’s] baseless claims . . . .” (See
Vold Counterclaim ¶¶ 8 (Count I), 14 (Count II); see also id. at ¶
20
(Count
III)
(alleging
that
Shield
interfered
with
Vold’s
business interests “by filing this baseless lawsuit and issuing
press releases relating to the lawsuit to various media outlets.”).
As we discussed previously, the filing of this lawsuit cannot
support a claim for tortious interference. As Vold points out, the
court in Cacique, Inc. v. Gonzalez, No. 03 C 5430, 2004 WL 609278,
*3 (N.D. Ill. Mar. 26, 2004) reached a different conclusion.3
The
Cacique court reasoned that a claim for tortious interference could
not be based on the allegation that the other party filed a
baseless lawsuit, but could be based on the allegation that the
suit was filed maliciously.
Id.
We see no basis for making an
exception to rule recognized in Havoco for suits allegedly filed
with malice. Indeed, such an exception would swallow the rule. If
a plaintiff can plausibly allege that the defendant filed a
baseless lawsuit, then he can also plausibly allege that the
defendant did so “maliciously.”
The UTStarcom court, applying
Havoco, dismissed a tortious-interference claim premised on the
plaintiff’s allegation that the defendant “filed with malicious
intent three lawsuits . . . .”
UTStarcom, 2008 WL 5142194, *2.
We
3/
Vold also cites Lynchval Sys., Inc. v. Chicago Consulting Actuaries,
Inc., No. 95 C 1490, 1998 WL 151814, *8 (N.D. Ill. Mar. 27, 1998).
While
Lynchval held that a lawsuit allegedly filed in bad faith supported claims for
unfair competition and tortious interference, it did so without analyzing the
issue presented here.
- 14 -
believe
that
UTStarcom
is
the
better
reasoned
authority
and
respectfully decline to follow Cacique.4
Vold separately argues that his allegation that the defendants
made false statements in press releases supports his claims for
tortious interference.
Shield effectively concedes that this
allegation takes Vold’s claim outside the policy discussed in
Havoco,
but
argues
that
Vold’s
complaint
is
nevertheless
insufficiently detailed to support a claim for relief.
With
respect to the press releases, it faults Vold for not alleging “who
authorized them, to whom they were authorized, their subject
matter, the dates of their releases, or their intended audience.”
(Shield’s Mem. (Vold) at 4.)
Essentially, Shield is attempting to
hold Vold to the heightened pleading standard applicable to fraud
claims.
See
Fed.
R.
Civ.
P.
9(b).
But
Vold’s
tortious-
interference claims, which are based upon Shield’s alleged false
statements about Vold, are more akin to defamation than fraud. Cf.
Borsellino v. Goldman Sachs Group, Inc., 477 F.3d 502, 507 (7th
Cir. 2007) (concluding that Rule 9(b) applied to the plaintiffs’
tortious interference claims because they “sound[ed] in fraud”).
We believe that there is sufficient detail in the complaint to
support Vold’s claims for tortious interference.
Shield’s motion
to dismiss Counts I, II, and III of Vold’s counterclaim is denied.
4/
The only case that has cited Cacique since it was published likewise
rejected its analysis. See Rubloff Development Group, Inc. v. SuperValu, Inc.,
--- F.Supp.2d ---, 2012 WL 1032784, *11 (N.D. Ill. Mar. 2, 2012).
- 15 -
b.
Count IV: Illinois Right of Publicity Act
Vold alleges that Shield continued to use his name and image
to sell its product after he stopped working for the company.
See
765 ILCS 1075/30 (prohibiting a person from using “an individual’s
identity for commercial purposes during the individual’s lifetime”
without consent).
Shield argued in its opening brief that this
claim is time-barred, but has withdrawn its motion to dismiss Count
IV in light of contested facts about whether the statute of
limitations was tolled during Vold’s miliary service in 2010 and
2011.
(See Shield’s Reply at 6-7); see also 50 App. U.S.C.A. § 526
(tolling statutes of limitation during military service).
4.
Shield’s Motion to Dismiss Transhield’s Counterclaim
Transhield’s counterclaim is substantially similar to Vold’s.
As we discussed supra, we believe that the allegation that Shield
has made false statements against Transhield in press releases is
sufficient to take its counterclaim outside the rule discussed in
Havoco.
We also conclude, as we did with respect to Vold’s
counterclaim, that Transhield’s allegations, while not as detailed
as they might be, are sufficient to state a claim for tortious
interference. Shield’s motion to dismiss Transhield’s counterclaim
is denied.
B.
Shield’s Motion to Strike the Defendants’ Affirmative Defenses
1.
Legal Standard
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Rule 12(f) authorizes us to “strike from a pleading an
insufficient defense . . . .”
Fed. R. Civ. P. 12(f).
The parties
disagree about how much factual detail the defendants must provide
in their pleadings to support their affirmative defenses.
In
Heller Financial, Inc. v. Midwhey Powder Co., Inc., 883 F.2d 1286,
1294
(7th
Cir.
1989),
our
Court
of
Appeals
stated
that
“[a]ffirmative defenses are pleadings and, therefore, are subject
to
all
pleading
Procedure.
requirements
of
the
Federal
Rules
of
Civil
Thus, defenses must set forth a ‘short and plain
statement,’ Fed.R.Civ.P. 8(a), of the defense.”
Id. (citing
Bobbitt v. Victorian House, Inc., 532 F.Supp. 734, 736-37 (N.D.Ill.
1982))
(internal
citations
omitted).
Applying
Heller
(and
Bobbitt), courts in this District applied a three-part test to
evaluate affirmative defenses: “(1) the matter must be properly
pleaded
as
an
affirmative
defense;
(2)
the
matter
must
be
adequately pleaded under the requirements of Federal Rules of Civil
Procedure 8 and 9; and (3) the matter must withstand a Rule
12(b)(6) challenge — in other words, if it is impossible for
defendants to prove a set of facts in support of the affirmative
defense that would defeat the complaint, the matter must be
stricken as legally insufficient.”
Renalds v. S.R.G. Restaurant
Group, 119 F.Supp.2d 800, 802-03 (N.D. Ill. 2000).
As Vold and
Transhield point out, some courts continue to apply this precise
formulation even though the Supreme Court has since retired the “no
set of facts” formulation of the Rule 12(b)(6) standard.
See,
- 17 -
e.g., Davis v. Elite Mortg. Services, Inc., 592 F.Supp.2d 1052,
1058
(N.D.
Ill.
2009)
(post-Twombly
case
applying,
without
analysis, the “no set of facts” formulation of the pleading
standard to affirmative defenses). And in Leon v. Jacobson Transp.
Co., Inc., No. 10 C 4939, 2010 WL 4810600, *1 (N.D. Ill. Nov. 19,
2010), the court suggested several practical reasons for not
applying Twombly’s “plausibility” standard to affirmative defenses.
See id. (reasoning, for example, that the policy articulated in
Twombly
of
avoiding
affirmative defenses).
in this District.
nuisance
lawsuits
is
inapplicable
to
However, Leon represents the minority view
See Champion Steel Corp. v. Midwest Strapping
Products, Inc., No. 10 C 50303, 2011 WL 5983297, *2 n.2 (N.D. Ill.
Nov. 28, 2011) (collecting cases).
Applying
Heller’s
reasoning,
we
believe
that
the
test
applicable to affirmative defenses should reflect current pleading
standards, and therefore adopt the majority view that Twombly and
Iqbal apply to affirmative defenses.
We add, however, that there
is not as much at stake in this question as the parties appear to
believe.
For many affirmative defenses, it is likely that the
factual allegations that were sufficient before Twombly to support
the defense will continue to be sufficient.
See Swanson, 614 F.3d
at 404 (“[I]n many straightforward cases, it will not be any more
difficult today for a plaintiff to meet [its pleading] burden than
it was before the Court's recent decisions.”).
Even before
Twombly, “bare bones” affirmative defenses did not pass muster.
- 18 -
Illinois Wholesale Cash Register, Inc. v. PCG Trading, LLC, No. 08
C 363, 2009 WL 1515290, *1 (N.D. Ill. May 27, 2009) (quoting
Heller, 883 F.2d at 1294–95).
Moreover, we have substantial
discretion when ruling on a Rule 12(f) motion. See Riemer v. Chase
Bank, N.A., 275 F.R.D. 492, 494 (N.D. Ill. 2011).
It would be a
waste of scarce judicial resources to devote significant amounts of
time evaluating affirmative defenses that may not affect the scope
of discovery or the ultimate outcome of the case.
Accordingly,
even after Twombly, we think it is appropriate to resolve close
questions in the defendant’s favor.
See id. (“It is only when the
defense on its face is patently frivolous or clearly invalid, that
Rule 12(f) requires that it be stricken.”).
With these principles
in mind, we will evaluate each defendant’s affirmative defenses.
2.
Shield’s Motion to
Affirmative Defenses
Strike
Nelson’s
and
Paradigm’s
Nelson’s and Paradigm’s affirmative defenses are set forth in
two paragraphs. The first paragraph asserts in omnibus fashion all
affirmative defenses available “at law:”
The allegations of Plaintiff fail or are barred due to
Plaintiff’s illegality and unlawfulness (Please see
Counterclaims, violation of federal antitrust laws,
regarding 15 U.S.C. Section 2 of the Sherman Antitrust
Act, and Abuse of Process; Counts I and IX among other
provisions herein.), willful breaches of Contract;
Statute of Frauds; fraud, unfair dealing, estoppel,
failure of consideration, duress, laches, release,
statues of limitations, waiver; and economic loss
doctrine; and also fail due to other affirmative defenses
as set forth in Rule 8(c)(1) of the Fed. R. Civ. P. or
otherwise at law; which are hereby incorporated by
reference.
- 19 -
(Nelson/Paradigm
Answer
at
51-52.)
First,
the
defendants’
counterclaims are just that: claims, not recognized affirmative
defenses.
Second, the defendants’ “bare bones” list of every
possible affirmative defense is plainly deficient.
See Ill.
Wholesale Cash Register, 2009 WL 1515290, *1. The second paragraph
of the defendants’ affirmative defenses asserts that Shield filed
this lawsuit in bad faith:
This action, moreover, is unlawfully commenced in bad
faith, without the requisite due diligence, or upon false
information supplied by Plaintiff Shield Technologies,
Inc. and upon information and belief, Samuel Sax and
Thomas Sax; to cause chill, fear, and outright harm to
Defendant Thomas W. Nelson, a very responsible,
respected, gracious person and American Citizen; and
others.
(Nelson/Paradigm Answer at 52.)
We agree with Shield that the
defendants are essentially asserting a Rule 11 violation in the
guise of an affirmative defense.
See Fed. R. Civ. P. 11(b).
The
court in Seehawer v. Magnecraft Elec. Co., 714 F.Supp. 910, 916
(N.D. Ill. 1989) held that “Rule 11 cannot by itself constitute an
affirmative defense.”
The court reasoned that Rule 11 “is more
along the lines of a denial of the claim, challenging the factual
or legal basis of the claim asserted, rather than an additional
basis for denying relief.”
Id.; see also Northlake Marketing &
Supply, Inc. v. Glaverbel S.A., No. 92 C 2732, 1993 WL 222532, *1
(N.D. Ill. June 18, 1993) (an affirmative defense admits what the
plaintiff has alleged, but nevertheless asserts that the defendant
is not liable; a party asserting a Rule 11 violation contends that
- 20 -
the
complaint’s
sanctionable).
allegations
are
not
only
untenable,
but
The defendants do not address Seehawer in their
response to Shield’s motion, nor do they cite any legal authority
indicating that “bad faith” is a recognized affirmative defense to
the claims Shield has asserted. Shield’s motion to strike Nelson’s
and Paradigm’s affirmative defenses is granted.
Shield also asks us to strike the portion of the defendants’
answer that appears under the heading “Lack of Jurisdiction.”
(Nelson/Paradigm Answer at 50-51.)
A party may assert lack of
personal jurisdiction in a responsive pleading, rather than by
motion. See Fed. R. Civ. P. 12(b) and (h)(1); see also Continental
Bank, N.A. v. Meyer, 10 F.3d 1293, 1296-97 (7th Cir. 1993). Shield
argues that the defense is meritless because it has alleged that
the defendants conduct business in Illinois and that Nelson (and
Paradigm, as Nelson’s alleged alter ego) have submitted to this
court’s
jurisdiction
by
contract.
(See
Shield’s
Mem.
(Nelson/Paradigm) at 14-15; Shield’s Reply (Nelson/Paradigm) at 1112.).)
Shield
defendants’
is
essentially
jurisdictional
properly pled.
attacking
defense,
not
the
merits
whether
it
of
has
the
been
We do not believe that it would be appropriate to
decide that question at this time.
See Riemer, 275 F.R.D. at 494
(“A motion to strike under Rule 12(f) is not a mechanism for
deciding disputed issues of law or fact, especially where, as here,
there has been no discovery, and the factual issues on which the
motion to strike largely depends are disputed.”).
Shield’s motion
- 21 -
to strike the “Lack of Jurisdiction” portion of Nelson’s and
Paradigm’s answer is denied.
3.
Shield’s Motion to Strike Vold’s Affirmative Defenses
Shield contends that each of Vold’s affirmative defenses is
deficient.
We have previously held that failure to state a claim
is not a true affirmative defense.
Register, 2009 WL 1515290, *2.
See Ill. Wholesale Cash
As Transhield points out, there is
a split of authority in this District on this question. See, e.g.,
Wylie v. For Eyes Optical Co., No. 11 CV 1786, 2011 WL 5515524, *2
(N.D. Ill. Nov. 10, 2011) (concluding that failure to state a claim
may be asserted as an affirmative defense).
Transhield
cites
decision.
Therefore, we will strike Vold’s first affirmative
defense.
do
not
persuade
us
to
However, the cases
abandon
our
earlier
Vold asserts other affirmative defenses that are more
properly characterized as denials of Shield’s allegations: Shield’s
second affirmative defense (asserting that Shield is estopped from
asserting its claims because Vold “is not restricted from competing
against
Plaintiff
nor
doing
business
with
the
Department
of
Defense”); fifth affirmative defense (denying breach of contract
because the relevant contract terms had expired), sixth affirmative
defense (asserting that the “vast majority of the information
relied upon by Plaintiff in supports of its claims is public
information . . .”), and thirteenth affirmative defense (asserting
that Vold did not misappropriate any trade secrets).
See, e.g.,
Allstate Ins. Co. v. Electrolux Home Products, Inc., No. 11 C 7494,
- 22 -
2012 WL 1108424, *1 (N.D. Ill. Apr. 2, 2012) (“A court may strike
an affirmative defense that ‘merely raises matters already at issue
under a denial.’”) (quoting Bobbitt, 532 F.Supp. at 736).
Vold
also asserts that Shield’s claims “are barred in whole or in part
because at all times Vold acted in good faith.”
(Vold’s Answer at
23 (seventh affirmative defense).) We are not aware of any general
affirmative defense of “good faith” that would defeat Shield’s
various claims.
Similarly, Vold has not cited, nor are we aware
of, any legal authority supporting his “unlawful prior restraint of
trade” defense to Shield’s claim for injunctive relief.
(Vold’s
Answer at 23.) In his fourth affirmative defense, Vold essentially
restates his Publicity Act claim as an affirmative defense. Again,
we are not aware of any legal authority recognizing such a defense
to the claims that Shield has asserted.
With respect to Vold’s
remaining affirmative defenses, we agree with Shield that Vold has
not pled sufficient facts to support these defenses.
(See Vold
Answer at 22-23 (affirmative defenses 3, 8, 9, 10, and 11.).)
These are the sorts of “bare bones” affirmative defenses that were
insufficient even before Twombly.
In sum, we will strike all of
Vold’s affirmative defenses without prejudice.
4.
Shield’s
Defenses
Motion
to
Dismiss
Transhield’s
Affirmative
Transhield’s affirmative defenses suffer from many of the same
defects as Vold’s.
true
affirmative
The following “affirmative defenses” are not
defenses
under
the
principles
we
have
just
- 23 -
discussed: Transhield’s first affirmative defense (asserting that
Transhield did not act with a culpable state of mind),5 third
affirmative defense (failure to state a claim), seventh affirmative
defense (asserting that Shield has not suffered damages), and tenth
affirmative defense (asserting that Shield’s allegedly confidential
commercial information is not entitled to trade secret protection).
Transhield’s fourth (laches) and fifth (estoppel) affirmative
defenses merely recite labels without pleading any facts suggesting
how or why Transhield believes the defenses are applicable.
Transhield’s eighth affirmative defense asserts that the injunction
Shield seeks “would constitute an unlawful prior restraint,” but
again, we are left to guess what Transhield’s theory actually is.
(See supra.)
However, Transhield (unlike Vold) does suggest some
basis for its unclean hands defense: the tortious interference that
is the subject of its counterclaims.
Shield argues that the
counterclaim is improperly pled, (see Shield’s Mem. (Transhield) at
7), and therefore the affirmative defense must fail also.
But we
have concluded otherwise. (See supra.) Also, Transhield’s defense
that Counts IV and V are preempted by the Illinois Trade Secrets
5/
Transhield also asserts in its first affirmative defense that it acted
in “good faith.” As we discussed in connection with Vold, we are not aware of
any legal authority recognizing a general “good faith” affirmative defense.
Indeed, from the context of Transhield’s pleading, it appears that “good faith”
is asserted merely to negate the mental state that Shield purportedly must prove
to establish liability. Transhield cites Federal Practice and Procedure for the
proposition that a assert both a denial and an affirmative defense in the
alternative. See 5 Wright & Miller, Fed. Prac. & Proc. Civ. § 1270 (3d Ed.).
But this ability to plead defenses in the alternative does not mean that denials
are affirmative defenses, and courts in this District continue to recognize the
difference between the two when ruling on Rule 12(f) motions.
See, e.g.,
Electrolux, 2012 WL 1108424, *1.
- 24 -
Act is a proper affirmative defense.
Corp.,
630
F.3d
546,
affirmative defense).
561
(7th
See, e.g., Bausch v. Stryker
Cir.
2010)
(preemption
is
an
Moreover, because the defense is based in
law, not fact, it is unnecessary to allege facts supporting it.6
In sum, we will strike the following affirmative defenses
without prejudice: 1, 3-5, 7-8, and 10.
Shield’s motion to strike
Transhield’s affirmative defenses is otherwise denied.
CONCLUSION
Shield’s
motion
to
dismiss
Nelson’s
and
Paradigm’s
counterclaim, and to strike their affirmative defenses, [59] is
granted in part and denied in part.
dismissed
withdrawn.
without
prejudice.
Counts I, VI, and IX are
Counts
V,
VII,
and
The motion is denied as to Count IV.
VIII
are
Nelson’s and
Paradigm’s affirmative defenses are stricken without prejudice.
However, Shield’s motion to strike is denied as to Nelson’s and
Paradigm’s “Lack of Jurisdiction” defense.
dismiss
Vold’s
counterclaim,
and
to
Shield’s motion to
strike
his
affirmative
defenses, [55] is granted in part and denied in part.
The motion
is denied as to Vold’s counterclaim, and granted as to Vold’s
affirmative defenses.
without
prejudice.
Vold’s affirmative defenses are stricken
Shield’s
motion
to
dismiss
Transhield’s
counterclaim, and to strike its affirmative defenses, [57] is
granted in part and denied in part.
6/
Shield’s motion is denied as
We express no opinion on the merits of these affirmative defenses.
- 25 -
to Transhield’s counterclaim.
Transhield’s following affirmative
defenses are stricken without prejudice: 1, 3-5, 7-8, and 10.
Shield’s motion is denied as to Transhield’s remaining affirmative
defenses.
The court will set a date for the defendants to amend
their pleadings after it has ruled on the pending motion to dismiss
Shield’s complaint.7
DATE:
September 19, 2011
ENTER:
___________________________________________
John F. Grady, United States District Judge
7/
We expect that the defendants now have sufficient guidance to
adequately plead their affirmative defenses. Unless their amended defenses are
patently deficient, the court is likely to deny summarily any further Rule 12(f)
motion by Shield as dilatory.
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