Certain Underwriters at Lloyd's Subscribing to Policy No. TCN034699 et al v. Bell et al
Filing
31
ORDER granting in part and denying in part 14 Motion to Strike. Signed by Honorable David C. Bramlette, III on September 10, 2014. (AA)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
WESTERN DIVISION
CERTAIN UNDERWRITERS AT LLOYD’S SUBSCRIBING
TO POLICY NO. TCN034699 AND
TAPCO UNDERWRITERS, INC.
VS.
PLAINTIFFS
CIVIL ACTION NO: 5:13-cv-113-DCB-MTP
EMMA BELL AND
JOHN BELL
DEFENDANTS
ORDER GRANTING IN PART AND DENYING IN PART
MOTION TO STRIKE THIRD DEFENSE
Before the Court is the Plaintiffs’, Certain Underwriters at
Lloyd’s Subscribing to Policy No. TCN034699 and TAPCO Underwriters,
Inc., Motion to Strike Third Defense [docket entry 14]. Having
carefully
considered
the
Motion,
the
Defendants’
response,
applicable statutory and case law, and being otherwise fully
advised in the premises, the Court finds as follows:
Factual Background
In May 2012, Defendants John and Emma Bell (collectively, “the
insureds”) filed a claim for damage resulting from the collapse of
an 8,900 square foot wood framed barn. The insureds had previously
obtained
Services,
a
policy
LLC
through
Southgroup
(“Southgroup”),
which
Insurance
acted
as
and
agent
Financial
for
the
Plaintiffs Certain Underwriters at Lloyd’s Subscribing to Policy
1
No. TCN034699 (“Lloyd’s”) and TAPCO Underwriters, Inc., (“TAPCO”)
(collectively, “the underwriters”). Defs.’ Resp. 3, ECF No. 19. The
dispute arises from whether this barn is covered by the insureds’
policy. After the insureds filed their claim, an insurance adjuster
came to inspect the property and determined that there were two
unattached buildings: (1) a 900 square foot steel framed building
and (2) the 8,900 square foot wooden barn. Compl. ¶13, ECF No. 1.
Although the steel framed building is not the subject of a claim,
the underwriters do not contest that it is covered by the insureds’
policy; rather they argue that the policy covers the steel framed
building exclusively. The insureds’ claim was denied, based on this
interpretation of the policy. Compl. ¶15.
The underwriters initiated this declaratory judgment action on
July 29, 2013, asserting diversity jurisdiction. They are seeking
a judgment that they bear no liability for the claim filed by the
insureds and that the Court award the underwriters their attorneys’
fees and costs related to this suit. Compl. p. 8. The insureds
previously filed an action in state court against the underwriters
and Southgroup on April 16, 2013. Defs.’ Resp. p. 4, ECF No. 19.
Lloyd’s and TAPCO are foreign corporations, whereas Southgroup is
a Mississippi corporation. Defs.’ Resp. p. 2.
In their answer to the complaint in this case, the insureds
asserted a Third Defense:
“Defendants assert that Plaintiffs have unclean
2
hands in that they have filed this matter in this Court
with full knowledge of a corollary suit previously filed
in State court. In filing this action, Plaintiffs have
failed to join a necessary State Court defendant in a
blatant attempt to invoke the jurisdiction of this Court.
In doing so Plaintiffs have also failed to join an
indispensable party to this action. Defendants therefore
move to have this matter consolidated with the earlier
filed State Court Action.”
Answer p. 2, ECF No. 12. The underwriters have moved to strike this
defense.
Analysis
This Court has the power to “strike from a pleading an
insufficient defense or any redundant, immaterial, impertinent, or
scandalous matter.” Fed. R. Civ. P. 12(f). The Court may act of its
own volition or in response to a motion from a party. Id., at
12(f)(1)-(2). However, motions to strike defenses are disfavored as
a drastic remedy. See Kaiser Aluminum & Chem. Sales, Inc. v.
Avondale Shipyards, Inc., 677 F.2d 1045, 1057 (5th Cir. 1982); Fed.
Deposit Ins. Corp. v. Niblo, 821 F. Supp. 441, 449 (N.D. Tex.
1993); Equal Emp’t Opportunity Comm’n v. LHC Group, Inc., No.
1:11cv355-LG-JMR, 2012 WL 3242168, at *1 (S.D. Miss. Aug. 7, 2012).
“Where there are disputed questions of law or fact, the court
3
should leave the sufficiency of the allegations for determination
on the merits.” LHC Group, 2012 WL 3242168, at *1 (citing Solis v.
Bruister, No. 4:10cv77-DPJ-FKB, 2012 WL 776028, at *7 (S.D. Miss.
Mar. 8, 2012)). Further, the movant must show that it would be
prejudiced if the defense is not struck. Id., at *1. A motion to
strike a defense is “proper when the defense is insufficient as a
matter of law.” Kaiser Aluminum, 677 F.2d at 1057.
The underwriters make four arguments in support of their
motion to strike which will be taken in turn. First, they argue
that the Third Defense is improper because therein contained is a
motion contra to Local Rule 7(b)(2)(A). Second, they argue that the
defense is facially insufficient under Rule 8(b)(1)(A)1 because it
does not name the party which should have been joined. Third, they
argue that joinder is not required under Rule 19 and the defense is
therefore legally insufficient. Fourth, the underwriters argue that
the insureds are not entitled to relief based on this defense
because the state court suit is substantially different from the
present action.
I. Local Rule 7(b)(2)(A) Prohibits Motions within an Answer
The underwriters correctly note that this Court will not
recognize a motion contained in the answer. Local Rule 7(b)(2)(A)
1
All references in this opinion are to the Federal Rules of
Civil Procedure unless otherwise noted.
4
states that “[a]ffirmative defenses must be raised by motion.
Although the affirmative defense may be enumerated in the answer,
the court will not recognize a motion included within the body of
the answer, but only those raised by a separate filing.” L. U. Civ.
R. 7(b)(2)(A); see also United States v. Stanley, No. 4:11cv117DCB-RHW, 2013 WL 3471467, at *1 (S.D. Miss. Jul. 10, 2013) (“[A]n
affirmative defense should be raised by motion.”).
The insureds do not contest this argument in their response.
Therefore, this Court finds that it will not recognize the motion
contained in the answer and will accordingly grant Plaintiffs’
motion to strike as to the final sentence of the Defendants’ Third
Defense.
II. Third Defense Meets the Pleading Standard of Rule 8(b)(1)(A)
Rule 8(b) requires that a party “state in short and plain
terms its defense to each claim asserted against it.” Fed. R. Civ.
P. 8(b)(1)(A). Although the underwriters did not specifically argue
that the Third Defense should be required to meet the heightened
Rule 8(a) standard, they did state that the Third Defense failed to
meet the short and plain terms requirement of Rule 8(b). Therefore,
the Court finds it necessary to determine with what standard the
Third Defense should be judged.
Some courts have applied the Supreme Court’s rulings from Bell
Atlantic Corp. v. Twombly and Ashcroft v. Iqbal on the short and
5
plain statement required by Rule 8(a) to Rule 8(b). The question of
whether the heightened pleading standard established in Twombly and
Iqbal applies to pleading defenses has not been answered by the
Fifth Circuit. However, another court in the Southern District of
Mississippi
has
resolved
this
issue.
See
LHC
Group,
2012
WL
3242168, at *2-3. Judge Guirola states in LHC Group that the
heightened standard should not apply because of (1) the different
language used in Rules 8(a) and 8(b), (2) the simplicity and
brevity of example defenses provided in the Rule 84 forms, (3) the
diminished need for notice of an affirmative defense, and (4) the
encouragement given to defendants to plead affirmative defenses to
prevent
waiver.
Id.
Further,
there
is
evidence
that
this
interpretation is the majority view. See Janssen, William M., The
Odd State of Twiqbal Plausibility in Pleading Affirmative Defenses,
70 Wash. & Lee L. Rev. 1573, 1604-06 (2013) (“[T]here is indeed
today a national majority on the issue of [Twombly and Iqbal]’s
applicability to affirmative defenses, but it is decidedly in the
direction of refusing to apply ‘plausibility’ to such pleadings.”)
Therefore, the Court will apply the fair notice standard, which
requires a defendant to “plead an affirmative defense with enough
specificity or factual particularity to give the plaintiff ‘fair
notice’ of the defense that is being advanced . . . [M]erely
pleading
the
name
of
the
affirmative
defense
.
.
.
may
be
sufficient.” Woodfield v. Bowman, 193 F.3d 354, 362 (5th Cir.
6
1999).
Here, the insureds clearly state in their Third Defense that
the
underwriters
failed
to
join
“a
necessary
State
Court
defendant.” Answer p. 2, ECF No. 12. Also in the Third Defense, the
insureds reference the antecedent pending state court suit. The
underwriters argue that the failure of the insureds to name this
necessary party is fatal under Rule 8(b). The Court disagrees. The
plaintiffs have sufficient information as to who the insureds will
argue is indispensable to this action. Furthermore, the insureds
have named the missing party as Southgroup in their response to the
motion to strike. See Defs.’ Resp. p. 1, ECF No. 19 (“[Southgroup]
is
a
Necessary
and
Indispendable
Party
to
this
Dispute.”).
Therefore, the Third Defense meets the notice pleading requirements
of Rule 8(b).
III. Third Defense is not Insufficient as a Matter of Law
As noted above, a motion to strike a defense is appropriate
when the defense is insufficient as a matter of law. But “a motion
to strike will not be granted if the insufficiency of the defense
is not clearly apparent. . . .” 5C C. Wright & A. Miller, Federal
Practice and Procedure §1381 at 427-28 (3d ed. 2004). A defense is
insufficient as a matter of law if it “clearly appears that the
plaintiff would succeed despite any state of facts which could be
proved in support of the defense.” Fed. Deposit Ins. Corp. v.
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Eckert Seamans Cherin & Mellott, 754 F. Supp. 22, 23 (E.D.N.Y.
1990). Whether a defense is sufficient “depends, of course, on the
nature of . . . the particular defense that is in question.”
Federal Practice and Procedure §1381, at 410. If the insureds have
plead, at a minimum, sufficient facts to show that Southgroup may
be an indispensable party, then the underwriters’ motion should be
denied. See 7 C. Wright, A. Miller, & M.K. Kane, Federal Practice
and Procedure §1609 at 129 (3d ed. 2001) (“The [initial] burden is
on the party raising the defense to show that the person who was
not joined is needed for a just adjudication.”) The Court will not
determine in a motion to strike whether Southgroup should be joined
or whether the case should be dismissed.
“There
is
no
precise
formula
for
determining
whether
a
particular party must be joined under Rule 19(a).” Faloon v.
Sunburst Bank, 158 F.R.D. 378, 380 (N.D. Miss. 1994). A court is to
look to the two tests set out in Rule 19(a)(1) and make its
decision “in terms of the general policies of avoiding multiple
litigation, providing the parties with complete and effective
relief in a single action, and protecting the absent persons from
the possible prejudicial effect of deciding the case without them.”
Id. The Court finds that the insureds have sufficiently pled that
Southgroup is a required party to survive this motion to strike.
Southgroup served as the agent for Lloyd’s in selling the policy to
the insureds. Defs.’ Resp. p. 3, ECF No. 19. Further, the insureds
8
allege that they relied on the “advice and representation” of
Southgroup, which “induced [the insureds] to purchase the policies”
believing that the wooden barn would be covered. Defs.’ Resp. p. 3.
IV. Motion to Strike is Inappropriate Forum to Decide Whether
Court should Abstain because of Pending State Court Litigation
The underwriters’ final argument is that the Court should not
abstain from hearing this case for the reason that it is distinct
from the state court litigation involving these same parties.
Ultimately, the decision whether to grant a motion to strike is
within the court’s discretion. Niblo, 821 F. Supp. at 449. Further,
when a motion to strike contains a substantial question of law,
courts are unwilling to resolve the question on the motion but
should “leave the sufficiency of the allegations for determination
on the merits.” Augustus v. Bd. of Public Instruction of Escambia
Cnty., Fla., 306 F.2d 862, 868 (5th Cir. 1962). The Court finds
that an abstention question is a substantial legal question best
raised in a dispositive motion, rather than a motion to strike.
V. The Underwriters Have Not Shown Any Prejudice
The Court alternatively finds that the motion to strike should
be denied, excluding the argument related to Local Rule 7, because
the underwriters have not demonstrated how they are prejudiced by
the Third Defense. Absent a showing of prejudice to the moving
party, a court generally should not grant a motion to strike
9
pleadings. Conn v. United States, 823 F. Supp. 2d 441, 446 (S.D.
Miss. 2011); see also Federal Practice and Procedure § 1381, at
421-22 (“[E]ven when technically appropriate and well-founded, Rule
12(f) motions often are not granted in the absence of a showing of
prejudice to the moving party.”). Prejudice results to the moving
party where the allegation or defense would have “the effect of
confusing the issues or is so lengthy and complex that it places an
undue burden on the responding party.” Cumis Ins. Soc., Inc. v.
Peters, 983 F. Supp. 787, 798 (N.D. Ill. 1997). Further, to be
prejudicial, the defense must hamper a party’s ability to try their
case, most often related to some delay in the case. See Conn, 823
F.
Supp.
2d
at
446
(holding
that
delay
in
case
was
not
prejudicial); Am. So. Ins. Co. v. Buckley, 784 F. Supp. 2d 610, 628
(E.D. Tex. 2010) (holding that the untimeliness of the pleadings
was not sufficiently prejudicial). The only reference to what
prejudice could result to the underwriters is “be[ing] faced with
pretrial dispositive motions.” Pls.’ Reply p. 1, ECF No. 21. The
Court finds this unpersuasive.
Order
Based on the foregoing reasons,
IT IS HEREBY ORDERED that plaintiffs, Certain Underwriters at
Lloyd’s Subscribing to Policy No. TCN034699 and TAPCO Underwriters,
Inc.’s, motion to strike is DENIED in part and GRANTED in part.
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FURTHER ORDERED that the sentence “Defendants therefore move
to have this matter consolidated with the earlier filed State Court
Action.” is stricken from the defendants’, Emma and John Bell,
Third Defense in their answer.
SO ORDERED, this the 10th day of September 2014.
/s/ David Bramlette
UNITED STATES DISTRICT JUDGE
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