Construction Industry Laborers Pension Fund et al v. Explosive Contractors, Inc.
Filing
30
MEMORANDUM AND ORDER granting in part and denying in part 14 Motion to Strike. Defendant has until 8/15/2013 to comply with this order. See Order for details. Signed by District Judge Eric F. Melgren on 8/1/2013. (cm)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
CONSTRUCTION INDUSTRY
LABORERS PENSION FUND, et al.,
Plaintiffs,
vs.
Case No. 12-2624-EFM
EXPLOSIVE CONTRACTORS, Inc.
Defendant.
MEMORANDUM AND ORDER
Plaintiffs filed suit alleging that they are owed unpaid employee benefit contributions
pursuant to the Employee Retirement Income Security Act of 1974 (“ERISA”)1 and Defendant
responded with several affirmative defenses.
Plaintiffs moved to strike certain affirmative
defenses as irrelevant, immaterial and unavailable as a matter of law; or in the alternative to
require Defendant to make a more definite statement of its affirmative defenses (Doc. 14). For
the reasons stated below, the Court grants the motion to strike with respect to Defendant’s fourth
affirmative defense, and denies the motion with respect to the fifth, sixth, seventh, and eighth
affirmative defenses. However, the Court orders Defendant to make a more definitive statement
in regards to those affirmative defenses.
1
29 U.S.C. §§ 1132, 1145.
I.
Factual and Procedural Background
Four employee fringe benefit funds and their respective Trustees collectively filed a
complaint asserting that Defendant Explosive Contractors, Inc., neglected to pay employee
benefit contributions pursuant to a collective bargaining agreement entered into between the four
respective funds and Defendant. Plaintiff claims that an audit revealed that Defendant underpaid
the pension fund from January 1, 2010, to September 30, 2012. In its answer to Plaintiffs’
amended complaint, Defendant asserted numerous defenses, including the following affirmative
defenses: (1) defect in contract formation, (2) fraud in the execution, (3) contract interpretation,
(4) dereliction of fiduciary duties, and (5) various equitable defenses. Pursuant to Rule 12(f) of
the Federal Rules of Civil Procedure,2 Plaintiffs filed a motion to strike these five affirmative
defenses. In the alternative, they requested that the Court order Defendant to make a more
definitive statement regarding each affirmative defense.
II.
Legal Standard
Rule 12(f) permits the Court to strike from a pleading “any redundant, immaterial,
impertinent or scandalous matter.”3 The decision of whether to strike material from a pleading is
within the discretion of the Court.4
It is also well-settled that motions to strike are generally
2
See Fed. R. Civ. P. 12(f)(“Upon a motion made by a party within twenty-one (21) days after the
service of the pleading upon the party or upon the court’s initiative at any time, the court may order stricken from
any pleading any insufficient defense . . . .”).
3
Id.
4
Geer v. Cox, 242 F.Supp.2d 1009, 1025 (D.Kan. 2003) (“Although motions to strike are generally
disfavored, the decision to grant a motion to strike is within the discretion of the court.”).
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disfavored because they are drastic measures and can be used as a dilatory tactic.5 But the
motion before the Court today raises unsettled questions regarding the application of the
Iqbal/Twombly standard to affirmative defenses. This standard was introduced in Bell Atlantic
Corp. v. Twombly, in which the Supreme Court held that a complaint must be “plausible on its
face” and rise above “labels and conclusions.”6 Ashcroft v. Iqbal clarified that the standard
articulated in Twombly was an interpretation of Fed. R. Civ. P. 8, and therefore applied to all
civil actions, and not merely the case before the Court in Twombly.7 Together, Twombly and
Iqbal overturned the comparatively lenient notice pleading standard previously set out in Conley
v. Gibson.8 Both Twombly and Iqbal, however, addressed the pleading requirements for claims
for relief—neither case discussed affirmative defenses. Since Twombly and Iqbal were decided,
district courts have split over whether the heightened pleading standard applies to affirmative
defenses, with most courts holding that the more rigorous Twombly/Iqbal standard does apply to
affirmative defenses.9 Neither the Supreme Court nor the Tenth Circuit have yet addressed the
issue.
5
See Fed. Deposit Ins. Corp. v. Niver, 685 F. Supp. 766, 768 (D. Kan. 1987) (“A motion to strike will
usually be denied unless the allegations have no possible relation to the controversy and may cause prejudice to one
of the parties.”).
6
550 U.S. 544, 570 (2007).
7
Ashcroft v. Iqbal, 556 U.S. 662 (2009) (holding that the petitioner’s pleadings did not comply with
Rule 8 under Twombly).
8
355 U.S. 41 (1957).
9
See, e.g., Barnes v. AT&T Pension Benefit Plan-Nonbargained Program, 718 F. Supp. 2d 1167, 1172
(N.D. Cal. 2010) (“The court can see no reason why the same principles applied to pleading claims should not apply
to the pleading of affirmative defenses which are also governed by Rule 8.”); Racick v. Dominion Law Assoc., 270
F.R.D. 228, 234 (E.D. N.C. 2010) (“This court, however, agrees with the district courts within the Fourth Circuit
that have considered the question and conclude that . . . the same pleading requirements apply equally to complaints
and affirmative defenses.”); HCRI TRS Acquirer, LLC v. Iwer, 708 F. Supp. 2d 687, 691 (N.D. Ohio 2010) (“While
the language in Civil Rule 8(a) differs from the language in Civil Rule 8(b) & (c), this difference is minimal and
simply reflects the fact that an answer is a response to a complaint. Furthermore, the shared use of the ‘short and
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Furthermore, there is a split within our own district regarding the applicability of the
Iqbal/Twombly standard regarding affirmative defenses. In Falley v. Friends University, Judge
Murguia held that the heightened standard did not apply to affirmative defenses.10 The Falley
opinion compared language the language found in Rule 8(a), which governs claims for relief, and
Rule 8(c), which applies to affirmative defenses, and found the two rules to be sufficiently
different to justify different pleading standards.11 But in Hayne v. Green Ford Sales, Inc., Judge
Rushfelt held that the Iqbal/Twombly standard did apply to affirmative defenses.12
Judge
Rushfelt also looked to the language of Rule 8, and noted that Rule 8(b)(1), which applies to
defenses in general, “does require a defendant to ‘state in short and plain terms its defenses to
each claim.’”13 The court in Hayne further noted that “[a]pplying the standard for heightened
pleading to affirmative defenses serves a valid purpose in requiring at least some valid factual
plain’ language—the essence of the pleading standard—indicates the pleading requirements for affirmative defenses
are the same as for claims of relief.”); Tracy v. NVR, Inc., 667 F. Supp. 2d 244, 247 (W.D. N.Y. 2009) (striking
affirmative defenses that were “plainly deficient” under the Iqbal standard); Hayne v. Green Ford Sales, Inc., 263
F.R.D. 647, 650 (D. Kan. 2009) (holding that the Iqbal/Twombly standard is applicable to affirmative defenses);
FDIC v. Bristol Home Mortg. Lending, LLC, 2009 WL 2488302, at *2–4 (S.D. Fla. 2009) (applying Twombly to
affirmative defenses).
But see Falley v. Friends Univ., 787 F. Supp. 2d 1255 (D. Kan. 2011) (holding that the Iqbal/Twombly
standard is not applicable to affirmative defenses); Wells Fargo & Co. v. U.S., 750 F. Supp. 2d 1049 (D. Minn.
2010) (holding that the Iqbal/Twombly standard does not apply to affirmative defenses, because plaintiffs have more
time to research their claims than defendants have to research their affirmative defenses); Odyssey Imaging, LLC v.
Cardiology Assocs. Of Johnston, LLC, 752 F. Supp. 2d 721 (W.D. Va. 2010) (holding that the Iqbal/Twombly
standard is not applicable to affirmative defenses because the “[k]nowledge at the pleading stage” disproportionately
favors the plaintiff); Leon v. Jacobson Transp. Co., 2010 WL 4810600, at *1 (N.D. Ill. 2010) (holding that the
Iqbal/Twombly standard does not apply to affirmative defenses because while the plaintiff has the length of the
statute of limitations to research their claim, the defendant has twenty-one days).
10
787 F. Supp. 2d at 1257–58.
11
Id.
12
263 F.R.D. at 650.
13
Id. (quoting Fed. R. Civ. P. 8(b)(1)).
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basis for pleading an affirmative defense and not adding it to the case simply upon some
conjecture that it may somehow apply.”14
This Court agrees with Hayne and those jurisdictions that have interpreted the
Twombly/Iqbal standard as applicable to affirmative defenses.15 Claims for relief and affirmative
defenses are both pleadings governed by Fed. R. Civ. P. 8. As noted earlier, Iqbal held that
Twombly was an interpretation of Rule 8 generally, and not merely an application of Rule 8 to
the specific case before the Court at that time.16 In other words, Iqbal holds that all Rule 8
pleadings must comport with the standard articulated by Twombly. In both stages of pleading—
claims for relief and affirmative defenses—the opposing party must be given notice, at
minimum, that there is a plausible basis for the claim or defense.17 Proper notice, then, is given
only when the opposing party shows that there is a plausible basis for the claim or the defense.
Conclusory, vague statements do not sufficiently provide adequate notice.18 Because Twombly
was an interpretation of Rule 8 generally, and because both stages of pleadings are governed by
Rule 8, it does not make sense to argue that mere conclusory statements do not equate to fair
14
Id.
15
Neither party explicitly mentioned the issue of whether the Twombly/Iqbal standard applies to
affirmative defenses. But Plaintiff, in requesting the Court order Defendant to make a more definite statement, is
functionally asserting that mere notice of the affirmative defenses Defendant will use is insufficient. Additionally,
Defendant relies on Falley, 787 F. Supp. 2d 1255, to support the fact that he is under no obligation to allege the
existence of factual support for his affirmative defenses. Falley was specifically addressing whether the
Twombly/Iqbal standard applies to affirmative defenses, and found that it did not.
16
Iqbal, 556 U.S. at 684 (“Though Twombly determined the sufficiency of a complaint sounding in
antitrust, the decision was based on our interpretation and application of Rule 8. That rule in turn governs the
pleading standard in all civil actions . . . .”).
17
See Barnes, 718 F.Supp.2d at 1172 (asserting that because both forms of pleading—claims for relief
and affirmative defenses—are governed by Rule 8, and because the Twombly/Iqbal standard is an interpretation of
Rule 8, the same pleading standard should apply).
18
Robbins v. Okla., 519 F.3d 1242, 1246-47 (holding that although under Conley “a complaint
containing only conclusory allegations” gave sufficient notice, under Twombly such a complaint did not give
sufficient notice, but was now held to a more-stringent, plausibility standard).
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notice when it comes to claims for relief, but then somehow do equate to fair notice when it
comes to affirmative defenses.19 The Twombly/Iqbal standard, then, should apply to both claims
for relief and affirmative defenses. A Rule 12(f) determination of whether to strike matter from
a pleading, no matter which Rule 8 pleading the determination is being applied to, should be
consistent.
III.
Analysis
Plaintiffs move to strike five of the affirmative defenses asserted by Defendant. The five
defenses they wish to strike are as follows: (1) defect in contract formation, (2) fraud in the
execution of the agreement, (3) Plaintiffs’ claims are barred by operation of the contract, (4)
Plaintiffs’ claims are barred because Plaintiffs failed to perform required duties, and (5) various
equitable defenses. The Court will address each defense in turn.
A.
Fourth Affirmative Defense: Defect in Contract Formation
Plaintiffs first move to strike Defendant’s Fourth Affirmative Defense, which alleges a
defect in contract formation. Defendant claims that the “underlying obligations upon which
plaintiffs’ claim arise were entered into through unilateral and or mutual mistake and are
therefore void and unenforceable.”20 Both unilateral and mutual mistake are contract formation
defenses.
But § 515 of ERISA states that “[e]very employer who is obligated to make
contributions to a multiemployer plan . . . under the terms of a collectively bargained agreement
19
See Hayne, 263 F.R.D. at 650 (“It makes no sense to find that a heightened pleading standard applies
to claims but not to affirmative defenses. In both instances, the purpose of pleading requirements is 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.”).
20
Def.’s Answer to Am. Compl., Doc. 9 at 3.
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shall . . . make such contributions” according to the terms agreed upon.21 The Tenth Circuit has
agreed with all other circuit courts in interpreting § 515 to mean that there is a right of action to
collect on unpaid contributions that is separate from general breach of contract rights and
remedies.22 The purpose of § 515 is to avoid the costly litigation that contract formation disputes
can cause, and to “simplify actions to collect delinquent contributions.”23 In other words, § 515
is designed to “strengthen the position of multiemployer plans” by eliminating the possibility of
dispute over the terms and formation of the contract, and instead “holding employers and unions
to the literal terms of their written commitments.”24 Because Defendant’s Fourth Affirmative
Defense is a contract formation dispute—which is exactly what § 515 was designed to avoid—
the purpose of § 515 would be destroyed if the Court allowed this defense to be asserted.
According to § 515, the actual terms of the contract are what govern whether Plaintiff has a right
to collect the allegedly delinquent funds, regardless of the intent of the parties or any mistake
either party may have made during contract formation.25 Therefore, the Court grants the motion
to strike the Fourth Affirmative Defense.
21
29 U.S.C. § 1145.
22
See Tr. of Colo. Tile, Marble & Terrazo Workers Pension Fund v. Wilkinson & Co., Inc., 134 F.3d
383, at *5 (10th Cir. 1998) (“Though this circuit has not yet had cause to interpret and apply § 515, we agree with all
of the circuits who have, that it makes it easier for multiemployer plans to collect delinquent contributions and limits
the defenses available to employers.”); see also Bituminous Coal Operators Ass’n, Inc. v. Connors, 867 F.2d 625,
633 (D.C. Cir. 1989) (stating that section 515 “creates a federal right of action independent of the contract on which
the duty to contribute is based”).
23
Cent. State S.E. & S.W. Areas Pension Fund v. Indep. Fruit & Produce Co., 919 F.2d 1343, 1348 (8th
Cir. 1990).
24
Trs. of Colo. Tile, 134 F.3d at *5.
25
Cent. State S.E. & S.W. Areas Pension Fund v. Gerber Truck Serv., Inc., 870 F.2d 1148, 1153 (7th Cir.
1989) (“If the employer simply points to a defect in [the contract’s] formation—such as fraud in the inducement,
oral promises to disregard the text, or the lack of majority support for the union and the consequent ineffectiveness
of the pact under labor law—it must still keep its promise to the pension plans.”).
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B.
Fifth Affirmative Defense: Fraud in the Execution
Plaintiffs next move to strike Defendant’s Fifth Affirmative Defense. In the alternative,
Plaintiffs request that the Court order Defendant to provide a more definite statement of the
defense. Defendant’s Fifth Affirmative Defense argues “that the agreements upon which the
plaintiffs’ rely . . . are void ab initio due to fraud in the execution of the agreements.”26 Fraud in
the execution occurs if “a misrepresentation as to the character or essential terms of a proposed
contract induces conduct that appears to be a manifestation of assent by one who neither knows
nor has reasonable opportunity to know the character or essential terms of the proposed
contract.”27
Plaintiffs counter that such a defense “could not succeed under any circumstances”
because Defendant “remitted a portion of the contributions to the Funds under the terms of the
collective bargaining agreement.”28 In other words, Plaintiffs argue that Defendant cannot claim
fraud in the execution because Defendant paid at least a portion of the contributions, indicating
that they were aware of their obligation to contribute to the pension fund. But parties to a
collective bargaining agreement are always permitted to argue defenses that render a contract
void, and not merely voidable, because a void agreement imposes no legal obligations.29
Whether a party was aware of any alleged obligations is immaterial to the question of whether
26
Def.’s Answer to Am. Compl., Doc. 9 at 3.
27
Colo. Plasterers’ Pension Fund v. Plasterers’ Unlimited, Inc., 655 F. Supp 1184, 1186 (D. Colo.
28
Pls.’ Mot. to Strike Affirm. Defenses, Doc. 14, at 4.
1987).
29
Trs. of Colo. Tile 134 F.3d at *5; see also La. Bricklayers & Trowel Trades Pension Fund & Welfare
Fund v. Alfred Miller Gen. Masonry Contracting Co., 157 F.3d 404, 408 (5th Cir. 1998); Indep. Fruit 919 F.2d at
1349 (“In sum, the courts recognize only two defenses to a collection action: that the pension contributions are
themselves illegal or that the collective bargaining agreement is void.” (Emphasis added.)).
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such obligations ever came into being.30
Because the law permits an affirmative defense
asserting that the collective bargaining agreement is void due to fraud in the execution, the Court
declines to strike the defense.
Nevertheless, the fraud in the execution defense, as pleaded by Defendant, is so vague or
ambiguous that Plaintiffs could not possibly be expected to prepare a response to it. Moreover,
the Federal Rules of Civil Procedure prohibit such vagueness and ambiguity.31 Defendant relies
on an understanding of Rule 8(b) and (c) that does not conform to the Iqbal/Twombly standard as
articulated above, and which this Court has found to be applicable to the pleading of affirmative
defenses.32 Specifically, Defendant argues that it is “not required to plead facts supporting a
defense” and that “Plaintiffs can obtain further clarification through the discovery process.”33
But Defendant’s affirmative defense was a bare statement that the collective bargaining
agreement is void because of fraud in the execution. Defendant does not even allege the
existence of facts that would support their claim. This view of the pleading standard for
affirmative defenses—that conclusory, stand-alone statements are sufficient, and that Defendant
is not required to allege even the existence of supporting facts—does not meet the
Iqbal/Twombly standard. Thus, the Court, pursuant to Fed. R. of Civ. P. 12(e), orders Defendant
to provide a more definite statement of its Fifth Affirmative Defense that, at the very least,
alleges the existence of facts that would support the defense.
30
See Agathos v. Starlite Motel, 977 F.2d 1500, 1505 (3d Cir. 1992) (distinguishing between contract
formation defenses and fraud in the execution defenses); S.W. Adm’r Inc. V. Rozay’s Transfer, 791 F.2d 769, 773-75
(9th Cir. 1986) (distinguishing between “fraud in the inducement” and “fraud in the execution,” and holding that
Defendant’s awareness of the contractual obligations was immaterial), cert. denied, 479 U.S. 1065 (1987).
31
Fed. R. Civ. P. 12(e).
32
See Def.’s Resp. to Mot. to Strike, Doc. 17, at 4.
33
Id.
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C.
Sixth Affirmative Defense: Operation of the Contract
Plaintiffs next move to strike Defendant’s Sixth Affirmative Defense, which alleges “that
plaintiffs’ claims are barred, as the agreements are no longer in operation or effect.”34 In the
alternative, Plaintiffs request that the Court order Defendant to provide a more definite statement
regarding their Sixth Affirmative Defense. Plaintiffs argue that Defendant is asserting another
contract formation affirmative defense, which, as the Court noted above, is not an allowable
defense.
But Defendant could also be arguing that the terms of the contract itself render the
agreement ineffective. Section 515 enforces the obligation to make contributions “in accordance
with the terms and conditions of such plan or agreement.”35 Thus, although contract formation is
not a permitted affirmative defense in the context of delinquent contributions to pension funds,
the contract must be enforced according to its own terms. If a proper interpretation of the terms
of the contract shows that Defendant does not owe any contributions to the pension fund, then
Plaintiff, of course, has no right to relief from the Court. Defendant is permitted to assert that
Plaintiff is barred from recovery by the express terms of the contract. Thus, the Court denies
Plaintiffs’ motion to strike Defendant’s Sixth Affirmative Defense.
Defendant, however, needs to clarify what theory this particular defense asserts, and
must do so in accordance with the Iqbal/Twombly standard for pleadings. Merely stating that the
agreement is “no longer in operation or effect” does not comport with that standard. Thus, the
Court orders Defendant to make a more definite statement as it relates to its Sixth Affirmative
Defense.
34
Def.’s Answer to Am. Compl., Doc. 9, at 3.
35
29 U.S.C. § 1145.
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D.
Seventh Affirmative Defense: Dereliction of Fiduciary Duties
Plaintiffs next move to strike Defendant’s Seventh Affirmative Defense, which alleges
that the “plaintiffs’ claims are barred by the plaintiffs’ violation of their duties under ERISA”
and “that to allow such a claim would be a windfall to the plaintiffs.”36 Plaintiffs moved to strike
this defense because they apparently misinterpreted Defendant as alleging that Plaintiffs do not
have standing to bring suit.
In briefing, however, Defendant clarified that it asserts that
Plaintiffs’ dereliction of their fiduciary duty prohibits them from collecting contributions. In a
seminal case discussing fiduciary duties under ERISA, the Third Circuit held that dereliction of
fiduciary duties is a proper defense to collection of contributions.37 The Court therefore declines
to strike Defendant’s seventh defense. But because Defendant made a conclusory statement
without alleging the existence of facially plausible supporting facts, the Court orders Defendant
to provide a more definite statement of its seventh affirmative defense.
E.
Eighth Affirmative Defense: Equitable Defenses
The final affirmative defense that Plaintiffs move to strike is the Eighth Affirmative
Defense proffered by Defendant. In the alternative, Plaintiffs request that the Court order
Defendant to make a more definite statement regarding the Eighth Affirmative Defense.
Defendant asserts as an affirmative defense “waiver, estoppel, laches, release, payment, accord
and satisfaction, statute of limitations and failure to give notice.”38 Plaintiff has moved to strike
waiver, estoppel, laches, and statute of limitations as defenses to their collection claim. The
36
Def.’s Answer to Am. Compl., Doc. 9, at 3.
37
See Agathos v. Starlite Motel 977 F.2d 1500, 1507 (3d Cir. 1992) (finding that the fiduciaries’
dereliction of their duties under ERISA would prohibit them from being able to collect on contributions to prevent
windfall).
38
Def.’s Answer to Am. Compl., Doc. 9, at 4.
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Eight Affirmative defense is an assertion with absolutely no supporting evidence. Given that it is
essentially the definition of a conclusory statement, the Court orders Defendant to provide a
more definite statement in accordance with the Iqbal/Twombly standard.
IT IS ACCORDINGLY ORDERED this 1st day of August, 2013, that Plaintiffs’
Motion to Strike Affirmative Defenses (Doc. 14) is hereby GRANTED IN PART and DENIED
IN PART.
Defendant’s Fourth Affirmative Defense is hereby stricken, and Defendant is
ordered to make a more definite statement of its Fifth, Sixth, Seventh, and Eighth Affirmative
Defenses.
Pursuant to Rule 12(e) of the Federal Rules of Civil Procedure, Defendant has fourteen
days from the date this order is filed in which to provide a more definite statement of the
aforementioned affirmative defenses. Thus, Defendant has until August 15, 2013, to comply
with this Court’s order.
IT IS SO ORDERED.
ERIC F. MELGREN
UNITED STATES DISTRICT JUDGE
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