Bennett v. Sprint Nextel Corporation et al

Filing 110

MEMORANDUM AND ORDER denying # 87 Motion to Strike. See Order for details. Signed by District Judge Eric F. Melgren on 9/29/2011. (cm)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

CORA E. BENNETT, individually and on
behalf of all others similarly situated,
Plaintiff,

vs.

CASE NO. 09-2122-EFM

SPRINT NEXTL CORPORATION, GARY
D. FORSEE, PAUL N. SALEH, and
WILLIAM G. ARENDT,
Defendants.

MEMORANDUM AND ORDER
This is a class action suit brought on behalf of all persons who purchased or acquired Sprint
Nextel Corp. (“Sprint Nextel”) securities between 2006 and 2008. Plaintiffs allege that during the
stated time, Defendants, Sprint Nextel, Gary Forsee, Sprint Nextel’s former CEO and Chairman, Paul
Saleh, Sprint Nextel’s former CFO, and Qilliam Arendt, Sprint Nextel’s former Senior Vice President
and Controller, made a litany of false and misleading statements in violation of the federal securities
laws, namely section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C.
§ 78j(b), the SEC’s Rule 10b-5, 17 C.F.R. § 240.10b-5, and section 20(a) of the Exchange Act, 15
U.S.C. § 78t(a). This matter is now before the Court on Plaintiffs’ motion to strike (Doc. 87). For
the reasons stated below, the Court denies Plaintiffs’ motion.

In their motion, Plaintiffs make two main arguments. First, Plaintiffs claim that a number of
the defenses asserted by Defendants in their answer should be stricken or amended because they lack
the necessary factual support. Second, Plaintiffs aver that the majority of Defendants’ responses to
their factual allegations do not comply with Rule 8 because they refer the Court to documents cited
by Plaintiffs in their complaint, and, as such, do not clearly admit or deny Plaintiffs’ contentions.
Plaintiffs’ first argument is premised upon the belief that the heightened pleading standard
articulated by the Supreme Court in Bell Atlantic Corp. v. Twombly1 and Ashcroft v. Iqbal2 apply to
a defendant’s answer.3 In Twombly and Iqbal, the Supreme Court reversed its earlier position on
what Rule 8(a) required,4 and held that, in order to survive a motion to dismiss, “a complaint must
contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its
face.’ ”5 Since Twombly and Iqbal, district courts across the country, including this one, have been
split on the question of whether the newly minted, more demanding standard applies equally to
answers, which are governed by Rule 8(b) and (c), or is limited to just complaints.6 For the reasons

1

550 U.S. 544 (2007).

2

--- U.S. ----, 129 S. Ct. 1937 (2009).

3

For purposes of this Order, when the Court refers to an answer, it is referring to a pleading filed by a defendant
that merely responds to a plaintiff’s allegations against it, not a pleading that also contains counterclaims.
4

See Conley v. Gibson, 355 U.S. 41, 45-46 (1957) (“[A] complaint should not be dismissed for failure to state
a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would
entitle him to relief.”).
5

Iqbal, 129 S. Ct. at 1949 (quoting Twombly, 550 U.S. at 570).

6

Compare Bowers v. Mort’g Elec. Registration Sys., 2011 WL 2149423, at *5 (D. Kan. June 1, 2011) (limiting
the heightened pleading requirements to complaints only); Falley v. Friends Univ., --- F. Supp. 2d ----, 2011 WL
1429956, at *4 (D. Kan. Apr. 14, 2011) (same) with Hayne v. Green Ford Sales Inc., 263 F.R.D. 647, 649-50 (D. Kan.
2009) (finding that the new standard does apply to defenses stated in an answer).

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that follow, the Court concludes that the standard set forth in Twombly and Iqbal should not apply
to answers.
First, Rule 8's language suggests that two different standards should apply to complaints and
answers. Section a of Rule 8 provides that complaints must contain “a short and plain statement of
the claim showing that the pleader is entitled to relief.”7 The sections governing answers, b and c,
however, do not demand such a showing; rather, at most, they merely require that the pleading state
in short and plain terms the responder’s defenses to each claim asserted against it.8 Therefore, in light
of the difference between the applicable provisions and the fact that the Supreme Court relied upon
Rule 8(a)’s showing and establishing requirement when formulating its plausibility standard,9 the
Court finds that Rule 8's language militates against the application of the new pleading standard to
answers.10
Second, the logic behind requiring a complainant to make a heightened showing – preventing
baseless claims from opening the gates to expensive discovery and force an extortionate settlement11
– does not apply with equal force to answers. For starters, unlike with a motion to dismiss, regardless

7

Fed. Rule Civ. Proc. 8(a)(2) (emphasis added).

8

See Fed. Rule Civ. Proc. 8(b)(1)(A).

9

See Iqbal, 129 S. Ct. at 1950 (“But where the well-pleaded facts do not permit the court to infer more than the
mere possibility of misconduct, the complaint has alleged – but it has not ‘show[n]’ – ‘that the pleader is entitled to
relief.’ ” (quoting Fed. Rule of Civ. Proc. 8(a)(2)) (alteration in original)); Twombly, 550 U.S. at 555 (“The need at the
pleading stage for allegations plausibly suggesting (not merely consistent with) agreement reflects the threshold
requirement of Rule 8(a)(2) that the ‘plain statement’ possess enough heft to ‘sho[w] that the pleader is entitled to relief.’
” (alteration in original)).
10

See, e.g., Wells Fargo & Co. v. United States, 750 F. Supp. 2d 1049, 1051 (D. Minn. 2010).

11

See, e.g., Twombly, 550 U.S. at 559 (“[I]t is only by taking care to require allegations that reach the level
suggesting conspiracy that we can hope to avoid the potentially enormous expense of discovery in cases with no
reasonably founded hope that the [discovery] process will reveal relevant evidence . . . .” (first alteration in original)
(internal quotation marks omitted)).

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of how the Court rules on a motion to strike, costly discovery is going to occur. Furthermore, it is
unlikely that the prospect of having to engage in discovery related to a defense that the plaintiff
believes to be baseless will motivate the plaintiff to settle their claim instead of fighting the defense
they think is without merit.12 Lastly, while it is possible that a plaintiff may incur some expense in
performing discovery on unfounded defenses,13 the Court believes that such costs pail in comparison
to those thrust upon the defendant from the filing of a suit,14 and that they can be greatly reduced
through contention interrogatories and other discovery mechanics.15 As a result, the Court finds that
the underlying purpose for applying heightened scrutiny to a complaint does not justify the extension
of the Twombly and Iqbal decisions into the responsive-pleading realm.
Third, practical and judicial economy considerations warrant against holding a defendant’s
answer to the same standard as a complaint. To begin with, principles of equity support limiting the
imposition of stricter pleading requirements to just a complaint because the plaintiff typically has

12

Leon v. Jacobson Transp. Co., Inc., 2010 WL 4810660, at *1 (N.D. Ill. Nov. 10, 2010) (“The point of
[adopting the plausibility standard] was to reduce nuisance suits filed solely to obtain a nuisance settlement. The Court,
though, has never once lost sleep worrying about defendants filing nuisance affirmative defenses and considers the risk
that defendants would file nuisance defenses sufficiently small so as not to warrant extending Twombly and Iqbal.”).
13

The Court is of the impression that the fear that allowing frivolous defenses to remain in the answer will exact
a measurable cost is greatly exaggerated. As noted by another court, typically, no discovery will take place on baseless
defenses because it will be readily apparent which affirmative defenses are not viable, and the parties will act
accordingly. See Wells Fargo & Co., 750 F. Supp. 2d at 1052; cf. Lane v. Page, 272 F.R.D. 581, 596 (D.N.M. 2011)
(noting that “[m]ost civil cases are resolved before trial, and the Court rarely has to deal with most affirmative
defenses”).
14

See, e.g., 2 JAMES WM. MOORE ET AL., MOORE’S FEDERAL PRACTICE § 8.08[1] (3d ed. 2011) (“There is no
significant additional burden in requiring a plaintiff, the party who initiated the suit, to use discovery to explore
underlying facts as to affirmative defenses that have been stated in the minimal or conclusory way contemplated by the
language of Rule 8(c)(1).”).
15

See, e.g., Vurimindi v. Fuqua Sch. of Bus., 2011 WL 3803668, at *3 (E.D. Pa. Aug. 29, 2011) (noting that
“while an insufficiently plead complaint may unfairly subject a defendant to expensive and time-consuming discovery,
the converse is not true with regard to affirmative defenses, in that a plaintiff may easily explore a defendant’s
affirmative defenses through contention interrogatories and other discovery” (citing Fed. Trade Comm’n v. Hope Now
Modifications, 2011 WL 883202, at *3-4 (D.N.J. Mar. 10, 2011))).

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significantly more time to develop factual support for their claims than a defendant does.16
Additionally, due to the fact that the party served with an answer is generally not required or
permitted to file a responsive pleading, the need for more factual development is greatly diminished
in the answer context.17 Finally, because the remedy for striking defenses at this stage of the
litigation is often to allow amendment, applying the plausibility standard here would likely have little
to no positive impact on the progression of the litigation.18 Therefore, for these reasons, the Court
finds that pragmatic considerations favor not applying the heightened-pleading standard to answers.

In sum, the Court concludes that the standard of review recently annunciated in Twombly and
Iqbal should not apply to answers. The Court is cognizant of the fact that a number, possibly a
majority, of other courts have reached a different conclusion. However, for the reasons discussed
above, the Court finds that the concerns cited by these courts in support of their decision – one, that
it is not fair to hold the plaintiff to a higher pleading standard than the defendant, and two, that
boilerplate defenses clutter the docket and create unnecessary work19 – are largely illusory. As a
result, the Court will adhere to the standard that it has traditionally applied to defenses asserted in an

16

See, e.g., Holdbrook v. SAIA Motor Freight Line, LLC, 2010 WL 865380, at *2 (D. Colo. Mar. 8, 2010)
(highlighting the fact that the defendant generally only has twenty days to file their responsive pleading, while the
plaintiff has as long as the applicable statute of limitation allows); Leon, 2010 WL 4810660, at *1 (same).
17

See, e.g., Tyco Fire Prods. LP v. Victaulic Co., 777 F. Supp. 2d 893, 901 (E.D. Pa. 2011).

18

See, e.g., Falley, 2011 WL 1429956, at *4 (“Applying the Twombly standard, therefore, would likely result
in increased motions practice with little practical impact on the case’s forward progression.”); Wells Fargo & Co., 750
F.Supp. 2d at 1052 (stating that applying the plausibility standard in this context “would radically change civil practice
in the federal courts” and likely lead to multiple rounds of motion practice being added to many cases, “increasing the
burdens on the federal courts, and adding expense and delay for the parties”).
19

See, e.g., Barry v. EMC Mort’g, 2011 WL 4352104, at *3 (D. Md. Sept. 15, 2011) (setting forth the prevailing
justifications for expanding Twombly and Iqbal to responsive pleadings).

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answer – a defense should be struck only if there are no circumstances under which it could
succeed.20
After reviewing the defenses challenged by Plaintiffs, and applying the applicable standard,
the Court concludes that the defenses at issue satisfy the relevant requirements. As a consequence,
to the extent Plaintiffs’ motion seeks to strike or compel amendment to the defenses contained in
Defendants’ answer on the ground that they lack the necessary factual predicate, it should be denied.
With regard to Plaintiffs’ second argument, the Court finds that it too fails. Rule 8(b) merely
requires that the responding party admit or deny the allegations asserted against it. Here, in their
answer, Defendants responded to each allegation lodged against them by admitting or denying it. The
fact that many of Defendants’ responses also referred the Court to documents cited to in Plaintiffs’
complaint does not render those responses insufficient. Accordingly, Plaintiffs’ second request
should also be denied.
IT IS THEREFORE ORDERED that Plaintiffs’ motion to strike (Doc. 87) is hereby
DENIED.
IT IS SO ORDERED.
Dated this 29th day of September, 2011.

ERIC F. MELGREN
UNITED STATES DISTRICT JUDGE

20

See, e.g., Falley, 2011 WL 149956, at *2.

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