Unicredit Bank AG, New York Branch et al v. Bucheli et al
Filing
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MEMORANDUM AND ORDER granting in part and denying in part 17 Motion to Dismiss defendants' counterclaims - The motion is granted with respect to defendants counterclaims for breach of contract (Count I) and fraud (Count IV), and those claims a re hereby dismissed, although defendants are granted leave to amend those counterclaims in accordance with this opinion on or before September 23, 2011. The motion is denied in all other respects. It is further ordered that the 15 Motion to Strik e defendants' affirmative defenses is granted in part and denied in part. The motion is granted with respect to defendants second, third, and seventh affirmative defenses to the extent based on fraud, and those defenses are hereby deemed strick en, although defendants are granted leave to amend those affirmative defenses in accordance with this opinion on or before September 19, 2011. The motion is denied in all other respects. Signed by District Judge John W. Lungstrum on 9/12/2011. (ses)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
UNICREDIT BANK AG, NEW YORK
BRANCH, f/k/a BAYERISCHE
HYPO-UND VEREINSBANK AG,
as agent for THE BANK OF NEW YORK
MELLON, et al.,
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Plaintiffs,
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v.
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FAUSTO R. BUCHELI, JR., et al.,
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Defendants.
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_______________________________________)
Case No. 10-2436-JWL
MEMORANDUM AND ORDER
In this matter, three plaintiffs have brought various claims against two insurance
companies, their principals, and certain guarantors. Plaintiffs seek to recover collateral
and enforce loans initially made by the failed Brooke entities to defendants, which loans
plaintiffs purport to hold as the result of the Brooke entities’ default on notes acquired
by plaintiffs. The matter presently comes before the Court on plaintiffs’ motion to
dismiss defendants’ counterclaims (Doc. # 17) and plaintiffs’ motion to strike
defendants’ affirmative defenses (Doc. # 15). Both motions are granted in part and
denied in part as set forth herein, and defendants are granted leave to amend their
counterclaims and affirmative defenses in accordance with this opinion on or before
September 23, 2011.
I.
Motion to Dismiss Counterclaims
Plaintiffs seek dismissal of defendants’ counterclaims for failure to state a claim
pursuant to Fed. R. Civ. P. 12(b)(6). The Court will dismiss a cause of action for failure
to state a claim only when the factual allegations fail to “state a claim to relief that is
plausible on its face,” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007), or
when an issue of law is dispositive, see Neitzke v. Williams, 490 U.S. 319, 326 (1989).
The complaint need not contain detailed factual allegations, but a plaintiff’s obligation
to provide the grounds of entitlement to relief requires more than labels and conclusions;
a formulaic recitation of the elements of a cause of action will not do. See Twombly, 550
U.S. at 555. The Court must accept the facts alleged in the complaint as true, even if
doubtful in fact, see id., and view all reasonable inferences from those facts in favor of
the plaintiff, see Tal v. Hogan, 453 F.3d 1244, 1252 (10th Cir. 2006). Viewed as such,
the “[f]actual allegations must be enough to raise a right to relief above the speculative
level.” Twombly, 550 U.S. at 555. The issue in resolving a motion such as this is “not
whether [the] plaintiff will ultimately prevail, but whether the claimant is entitled to offer
evidence to support the claims.” Swierkiewicz v. Sorema N.A., 534 U.S. 506, 511 (2002)
(quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).
A.
Count I – Breach of Contract
Defendants allege a breach of contract in Count I of their counterclaim, but the
particular contract at issue is unclear. Defendants allege that plaintiffs breached the
Restated Settlement Agreement by failing to remit to defendants commissions and other
2
funds, but defendants then allege in the following paragraph that they have been
damaged as a result of breaches of the “Financing Agreements and Franchise
Agreements.” Plaintiffs argue that they are not parties to any financing or franchise
agreement with defendants, and defendants have not responded to that argument for
dismissal. Accordingly, the Court dismisses any counterclaim for breach of defendants’
financing agreements or franchise agreements.
In the counterclaim, defendants allege that the Special Master and Trustee for the
Brooke entities entered into a Restated Settlement Agreement (the “RSA”) with creditors
of those entities, including two of the plaintiffs here. Plaintiffs thus seek dismissal of the
counterclaim for breach of the RSA on the basis that defendants were not parties to it.
Defendants respond that they seek to enforce the RSA as third-party beneficiaries of that
contract. Last year, the Kansas Court of Appeals summarized Kansas law1 concerning
third-party beneficiaries as follows:
Intended beneficiaries of contracts may maintain an action to
enforce a contract even if they had no knowledge of the contract when it
was made and paid no part of the consideration. Nevertheless, parties are
presumed to contract for themselves, and their intent that a third person
receive a direct benefit must be clearly expressed in the contract.
Furthermore, knowledge by the contracting parties that a contract will
benefit a third party does not necessitate the contracting parties’ intent to
1
Because it sits in Kansas, this Court applies that state’s choice-of-law rules. See
Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). Under Kansas law, the
Court applies the substantive law of the state in which the particular insurance contract
was made. See Simms v. Metropolitan Life Ins. Co., 9 Kan. App. 2d 640, 642-46 (1984).
Because the agreement was entered into as a part of a Kansas action, the parties agree
that Kansas law governs this claim.
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benefit the third party.
A third-party beneficiary does not need to be personally named in
the contract to have standing, as long as he or she is a member of a
designated class or identifiable as a benefitted person.
Byers v. Snyder, 44 Kan. App. 2d 380, 387 (2010) (citations omitted).
In describing the RSA, defendants have alleged that various court orders in the
Brooke litigation were intended to give plaintiffs greater control over the distribution of
commissions, and defendants have quoted a provision from the RSA that states that
certain funds shall be disbursed as the particular creditor “may direct.” Based on those
allegations, plaintiffs argue that they had no obligation to pay commissions to
defendants, and therefore defendants could not have been intended beneficiaries of the
agreement. The fact that plaintiffs may have had some discretion with respect to the
allocation of funds, however, does not mean that they may not have had a duty to make
payments to defendants. Neither party has undertaken any analysis of the RSA as a
whole with respect to whether it clearly expresses an intent to benefit defendants, and
the Court therefore declines to undertake such an analysis at this time.
The Court does agree with plaintiffs, however, that defendants have failed to
allege that they were third-party beneficiaries of the agreement or that the agreement was
intended to benefit them. Accordingly, defendants have failed to state a plausible claim
for breach of contract. Nevertheless, because it is not clear that defendants could not do
so, defendants are granted leave to amend their counterclaim, on or before September 23,
2010, to state a plausible claim for breach of the RSA as a third-party beneficiary.
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B.
Count II – Monies Had and Received
In Count II of their counterclaim, defendants assert a claim for monies had and
received, again based on the theory that plaintiffs have wrongfully withheld commissions
from them. In seeking dismissal of this claim, plaintiffs again argue they had no
obligation to pay such commissions, based on defendants’ allegations suggesting that
plaintiffs had discretion under the RSA concerning such payments.
The Court rejects this argument.
Defendants have asserted a relatively
straightforward claim here, which does not require a greatly-detailed factual basis. See
Robbins v. Oklahoma, 519 F.3d 1242, 1247-48 (10th Cir. 2008) (degree of specificity
required in pleading depends on the type of case). Defendants have alleged that
plaintiffs have wrongfully withheld their commissions, and the other allegations in the
counterclaim do not make that claim fatally implausible. Accordingly, the Court denies
plaintiffs’ motion to dismiss Count II of the counterclaim.
C.
Count III – Unjust Enrichment
Similarly, the Court concludes that defendants have adequately pleaded their
counterclaim for unjust enrichment, in which they again allege that defendants have
wrongfully withheld their commissions. One can reasonably and plausibly infer from
the allegations that a benefit was conferred on plaintiffs in the form of commissions
owed to defendants.
Plaintiffs also argue that defendants have failed to allege an absence of an
adequate legal remedy, which plaintiffs contend must be shown to prevail on the
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equitable claim of unjust enrichment. See Nelson v. Nelson, 288 Kan. 570, 597 (2009)
(“Generally, equitable remedies are not available if there is an adequate remedy at
law.”). Whether or not defendants must make such a showing in this case, plaintiffs
have not cited any authority requiring defendants to plead specifically a lack of an
adequate legal remedy. Indeed, the Kansas case cited by plaintiffs for the elements of
this cause of action does not include as an element the lack of an adequate legal remedy.
See Haz-Mat Response, Inc. v. Certified Waste Servs. Ltd., 259 Kan. 166, 177 (1996)
(referring to unjust enrichment claim as one in quasi-contract). The Court therefore
denies plaintiffs’ motion to dismiss Count III of the counterclaim.
D.
Count IV – Fraud
In Count IV, defendants assert a counterclaim for fraud, based on their allegations
that the signature of defendant Ann Bucheli was forged on loan documents by one or
more plaintiffs, and that Ms. Bucheli was therefore damaged by having to defend the
claims by which plaintiffs seek to enforce loans against her. Plaintiffs argue that
defendants have not pleaded this claim with particularity, as required by Fed. R. Civ. P.
9(b), because they have not alleged the time and place of the forgery or the identity of
the forger. See, e.g., Koch v. Koch Indus., 203 F.3d 1202, 1236 (10th Cir. 2000)
(complaint alleging fraud must set forth “the time, place and contents of the false
representation, the identity of the party making the false statements and the consequences
thereof”). Defendants respond that the particular loan documents containing the forged
signatures were attached by plaintiffs to their complaint, and that defendants have “pled
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all facts known to them and need to conduct discovery to learn the time and place of the
forgery as well as the identity of the person who committed it.”
Although plaintiffs rely on the Tenth Circuit’s statement in Koch of the details
that must ordinarily be included under Rule 9(b), the following excerpt from that case
is more pertinent here:
The Plaintiffs cite Scheidt v. Klein, 956 F.2d 963 (10th Cir. 1992)
for the proposition that Rule 9(b) particularity requirements are relaxed
when the facts supporting a fraud claim are within the opponent’s
knowledge and control. Scheidt, however, is not so generous. It merely
holds that “[a]llegations of fraud may be based on information and belief
when the facts in question are peculiarly within the opposing party’s
knowledge and the complaint sets forth the factual basis for the plaintiff’s
belief.” Id. at 967. Unlike the complaint in Scheidt, paragraph twenty-two
did not state that the Plaintiff’s allegations of fraud were based on
information and belief, nor did it set forth any factual basis to support such
a belief.
Koch, 203 F.3d at 1237 (quoting Scheidt v. Klein, 956 F.2d 963, 967 (10th Cir. 1992)).
In this case, defendants could not be expected to know where and when or by whom Ms.
Bucheli’s signatures were forged. Nevertheless, defendants have failed to state that their
fraud allegations were based on information and belief, and they have failed to set forth
any factual basis for their belief that the signatures were forged2 and that plaintiffs are
the parties responsible for the forgeries or otherwise have knowledge concerning the
forgeries. Thus, applying Koch, the Court concludes that defendants’ fraud counterclaim
2
For instance, defendants state in their brief (but did not state in their
counterclaim) that Ms. Bucheli did not accompany her husband when he signed the
documents and that she was out of the country at that time.
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does not satisfy Rule 9(b), and the counterclaim is subject to dismissal for that reason.
See, e.g., Tucci v. Smoothie King Franchises, Inc., 215 F. Supp. 2d 1295, 1302 (M.D.
Fla. 2002) (complaint did not satisfy Rule 9(b) where there were no facts alleged to
support that the defendant knew that a signature on an agreement had been forged or that
the defendant had anything to do with the alleged forgery). Defendants are granted
leave, however, to amend this counterclaim on or before September 23, 2011, to attempt
to cure this deficiency.
E.
Count V – Setoff
Finally, plaintiffs seek dismissal of Count V of defendants’ counterclaim, by
which defendants request a setoff of any amounts owed by the parties to each other. The
parties agree that this request for a setoff as a form of relief does not assert an
independent cause of action. Accordingly, there is no claim to be dismissed, and because
other claims asserted by defendants remain, there is no basis for dismissal of the
counterclaims in their entirety.
II.
Motion to Strike Affirmative Defenses
By separate motion, plaintiffs move to strike all of defendants’ affirmative
defenses pursuant to Fed. R. Civ. P. 12(f) on the basis that they do not comply with the
pleading standards set forth by the Supreme Court in Twombly. District courts have split
on the question of whether the Twombly standards apply to affirmative defenses asserted
under Fed. R. Civ. P. 8(c), and it does not appear that any circuit court has addressed the
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issue. See 5 Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure §
1274 (3d ed. Supp. 2011).
Plaintiffs urge the Court to follow the opinion in Hayne v. Green Ford Sales, Inc.,
263 F.R.D. 647 (D. Kan. 2009), in which one judge in this district concluded that the
Twombly standards should apply to affirmative defenses. The court in Hayne noted that
a majority of district courts have concluded likewise, and it concluded that there was no
reason to treat affirmative defenses differently in this regard from the plaintiff’s claims,
as the purpose of pleading requirements in each case was to “provide enough notice to
the opposing party that indeed there is some plausible, factual basis for the assertion and
not simply a suggestion of possibility that it may apply to the case.” See id. at 649-50.
The court also stated in Hayne that although defendants may not yet know all of the
facts, the rules contemplate motions to amend based on facts learned during discovery.
See id. at 651. The court further clarified that, even applying the Twombly standard, the
assertion of evidentiary facts was not required, and a “minimal statement of only
ultimate facts should suffice.” See id.
It appears, however, that all other judges in this district who have addressed the
question have rejected the argument that Twombly should apply to affirmative defenses.
See United States ex rel. Minge v. TECT Aerospace, Inc., 2011 WL 2473076, at *2-3 (D.
Kan. June 21, 2011); Bowers v. Mortgage Electronic Reg. Sys., 2011 WL 2149423, at
*3-4 (D. Kan. June 1, 2011); Falley v. Friends University, __ F. Supp. 2d __, 2011 WL
1429956, at *2-4 (D. Kan. Apr. 14, 2011); United States ex rel. Smith v. Boeing Co., No.
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05-1073, slip. op. at 4-5 (D. Kan. Aug. 13, 2009). Thus, although at one time a majority
of district courts had concluded that the Twombly standards should apply to affirmative
defenses, the majority position in the District of Kansas is that those standards do not
apply here.
The Court believes that the Twombly standards should not apply to affirmative
defenses, for many of the reasons set forth in Falley. First, in Twombly, the Supreme
Court specifically relied on the language of Rule 8(a), which provides that “[a] pleading
that states a claim for relief must contain . . . a short and plain statement of the claim
showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2) (emphasis added);
see also Twombly, 550 U.S. at 557. On the other hand, Rule 8(b) requires only that
defenses be “state[d] in short and plain terms,” while Rule 8(c) requires affirmative
defenses to be “affirmatively state[d],” without any language similar to that from Rule
8(a) italicized above. See Fed. R. Civ. P. 8(b), (c). That difference does provide a
textual basis for a less rigorous pleading standard for affirmative defenses. See Falley,
2011 WL 1429956, at *2-3.
Other considerations also support this decision. For instance, a plaintiff may
investigate its claims for years before filing a complaint, while a defendant must serve
an answer within 21 days, while risking waiver if an affirmative defense is not stated,
see Fed. R. Civ. P. 12(a)(1)(A)(i), (g)(2), (h)(1); thus, “it makes sense to require more
factual description of a plaintiff than a defendant under these circumstances.” Falley,
2011 WL 1429956, at *3. This position is also supported by the traditionally high
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standards for motions to strike under Rule 12(f), which are generally disfavored and
considered a drastic remedy, and which are “usually denied unless the allegations have
no possible relation to the controversy and may prejudice one of the parties.” Home
Quest Mortg., L.L.C. v. American Family Mut. Ins. Co., 393 F. Supp. 2d 1096, 10991100 (D. Kan. 2005) (quoting PAS Communications, Inc. v. U.S. Sprint, Inc., 112 F.
Supp. 2d 1106, 1107 (D. Kan. 2000)); see also Falley, 2011 WL 1429956, at *3.
Finally, because a litigant would ordinarily be allowed to amend its answer after a
successful motion to dismiss on this basis, applying Twombly to affirmative defenses
“would likely result in increased motions practice with little practical impact on the
case’s forward progression.” See Falley, 2011 WL 1429956, at *4.3
With respect to almost all of defendants’ affirmative defenses in this case,
plaintiffs’ arguments are based solely on a failure to plead sufficient facts to satisfy the
Twombly standards. Because it concludes that those standards do not apply here, the
Court rejects those arguments.
Plaintiffs also argue that defendants’ second, third, and seventh affirmative
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The Court emphasizes that its decision not to apply the Twombly standards does
not mean that no standards govern the pleading of affirmative defenses. In particular,
Rule 11 requires that “to the best of [the attorney’s] knowledge, information, and belief,
formed after an inquiry reasonable under the circumstances,” defenses must be warranted
by law and factual contentions must have “evidentiary support, or if specifically so
indentified, will likely have evidentiary support after a reasonable opportunity for further
investigation or discovery.” Fed. R. Civ. P. 11(b)(2), (3). Thus, an answer still may not
simply contain a laundry list of boilerplate defenses, or assert affirmative defenses
without any basis whatsoever.
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defenses—to the extent they are based on assertions of fraud—are not pleaded with
sufficient particularity to satisfy Rule 9(b). That rule applies to all allegations of fraud
contained in any “pleading”, see Fed. R. Civ. P. 9(b); thus, the rule applies to affirmative
defenses as well as affirmative claims. See, e.g., Fisherman Surgical Instruments, LLC
v. Tri-Anim Health Servs., 2007 WL 852666, at *3 (D. Kan. Mar. 21, 2007) (applying
Rule 9(b) to affirmative defenses); see generally 5A Charles A. Wright & Arthur R.
Miller, Federal Practice and Procedure § 1297. Defendants have not disputed that Rule
9(b) applies to their affirmative defenses.
Defendants’ second and third affirmative defenses assert fraud by the Brooke
entities as a defense, but defendants have not identified the specific content or the
specific occasion (date, place, by whom made) of any particular misrepresentation.
Accordingly, plaintiffs’ motion to strike is granted with respect to any defense of fraud
contained in the second and third affirmative defenses. In their seventh affirmative
defense, defendants simply state that “Plaintiffs forged the signature of defendant Anne
Bucheli on various loan documents.” Thus, it is unclear whether defendants are
asserting fraud or merely raising the defense that Ms. Bucheli should not be bound by
a document that she did not sign. To the extent that plaintiffs assert fraud, however, such
allegation fails to satisfy Rule 9(b), for the same reasons set forth above with respect to
defendants’ fraud counterclaim.
Defendants are granted leave to amend these affirmative defenses, on or before
September 23, 2011, to attempt to satisfy Rule 9(b) for any affirmative defense based on
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an allegation of fraud. If defendants fail to amend one of these affirmative defenses, that
defense will be deemed stricken to the extent based on an allegation of fraud.
IT IS THEREFORE ORDERED BY THE COURT THAT plaintiffs’ motion to
dismiss defendants’ counterclaims (Doc. # 17) is granted in part and denied in part.
The motion is granted with respect to defendants’ counterclaims for breach of contract
(Count I) and fraud (Count IV), and those claims are hereby dismissed, although
defendants are granted leave to amend those counterclaims in accordance with this
opinion on or before September 23, 2011. The motion is denied in all other respects.
IT IS FURTHER ORDERED BY THE COURT THAT plaintiffs’ motion to
strike defendants’ affirmative defenses (Doc. # 15) is granted in part and denied in
part. The motion is granted with respect to defendants’ second, third, and seventh
affirmative defenses to the extent based on fraud, and those defenses are hereby deemed
stricken, although defendants are granted leave to amend those affirmative defenses in
accordance with this opinion on or before September 19, 2011. The motion is denied
in all other respects.
IT IS SO ORDERED.
Dated this 12th day of September, 2011, in Kansas City, Kansas.
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s/ John W. Lungstrum
John W. Lungstrum
United States District Judge
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