United States of America ex rel, Bobby Garrison and Rudolfo Gaona, Jr. v Crown Roofing

Filing 95

MEMORANDUM AND ORDER on 82 MOTION to Strike Defendants' Affirmative Defenses.(Signed by Judge Ewing Werlein, Jr) Parties notified.(kcarr, )

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
UNITED STATES OF AMERICA
ex re1 . , BOBBY GARRISON,
and RUDOLF0 GAONA, JR.,

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Plaintiffs,

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v.

CIVIL ACTION NO. H-07-1018

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CROWN ROOFING SERVICES, INC.,
RAY PALMER, R.D. CHATMON,
USS ENGINEERING, LLC, and
JAMEEL HATTAB,

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Defendants.

MEMORANDUM AND ORDER
Pending is the United States's Motion to Strike Defendants'
Affirmative Defenses (Document No. 82). The factual background of
this qui tam action is outlined in this Court's Memorandum and
Order dated March 16, 2011 (Document No. 84), in which the Court
denied

Defendants

Crown,

Palmer, and

Chatmonls (the "Crown

Defendants") motion to dismiss.
The Crown Defendants raise several affirmative defenses in
their Answer: (1) failure to state a cause of action on which
relief may be granted; (2) failure to mitigate; (3) waiver and
ratification;
(6)

(4) privilege

and

justification;

(5) estoppel;

actions of Shelmire and/or Hattab are a new and independent

cause of the Government's alleged injury; and (7) due process
limitations on damages and exemplary damages.'
The Government moves to strike these defenses, contending that
they do not meet the pleading requirements of Rule 8 of the Federal
Rules of Civil Procedure and that four of the defenses--waiver and
ratification, estoppel, new and independent cause, and failure to
mitigate--are unavailable as a matter of law. The Crown Defendants
concede that the defenses of failure to state a claim and privilege
and justification do not apply at this time, but assert that the
other defenses are available and are sufficiently pled.

They

alternatively request leave to amend their answer in order to
comply with the pleading standards.
I.
"Although

motions

Leqal Standard

to

strike

a

defense

are

generally

disfavored, a Rule 12 (f) motion to dismiss a defense is proper when
the defense is insufficient as a matter of law." Kaiser Aluminum
&

Chem. Sales, Inc. v. Avondale Shi~yards,Inc., 677 F.2d 1045,

1057 (5th Cir. 1982), c e r t . denied, 103 S. Ct. 729 (1983).

A

motion to strike under Rule 12(f) is a "drastic remedy to be
resorted to only when required for the purposes of justice

. . . .

The motion to strike should be granted only when the pleading to be

See Document No. 79

1 101 (Answer).

stricken has no possible relation to the controversy." Auqustus
v. Bd. of Pub. Instruction, 306 F.2d 862, 868 (5th Cir. 1962)
(quotations omitted); Pam Am. Life Ins. Co. v. Blanco, 311 F.2d
424, 428 n. 13 (5th Cir. 1962) (I
'f

there is any doubt as to

whether under any contingency the matter may raise an issue, the
motion should be denied.") (quotation omitted).
"A defendant must 'plead an affirmative defense with enough
specificity or factual particularity to give the government "fair
notice" of

the defense that is being

advanced.'" Roqers v.

McDorman, 521 F.3d 381, 385 (5th Cir. 2008) (quoting Woodfield v.
Bowman, 193 F.3d 354, 362 (5th Cir. 1999)) ; see also E.E.O.C. v.
Courtesy Bldq. Serv., Inc., No. 3:lO-CV-1911-D,2011 WL 208408, at
*4-5 (N.D. Tex. Jan. 21, 2011)

(striking defenses of waiver,

release, estoppel, and unclean hands because they were

"not

accompanied by an factual allegations giving notice of the nature
of

the defense")

defenses
to

. .

identify

.

[B]aldly

'naming' the broad

affirmative

. falls well short of the minimum particulars needed
the

affirmative defense

in question

. . . ."

Woodfield, 193 F.3d at 362. However, "an affirmative defense may
be pleaded in general terms and will be held to be sufficient, and
therefore invulnerable to a motion to strike, as long as it gives
the plaintiff fair notice of the nature of the defense."

5 CHARLES

ALANWRIGHT AL. , FEDERAL
ET
PRACTICE PROCEDURE 1274, at 616- 17 (3d ed.
AND
S
2004) (footnote omitted) .

11.

A.

Discussion

Sufficiency of the Pleadinqs
The Crown Defendants merely list their affirmative defenses

without any factual basis to put the Government on fair notice of
the defenses; this is insufficient.

All defenses on this "list"

are therefore susceptible to being DISMISSED.

See Woodfield, 193

F.3d at 362. However, the Court will allow the Crown Defendants to

replead to meet this defect as to certain of the defenses.

See

Lyn-Lea Travel Corp. v. Am. Airlines, Inc., 283 F.3d 282, 286 (5th
Cir. 2002), cert. denied, 123 S. Ct. 659 (2002) ("The district
court must have a 'substantial reason' to deny a request for leave
to amend.,, (quoting Jamieson v. Shaw, 772 F.2d 1205, 1208 (5th Cir.
1985))); see

also

Auqustus,

306

F.2d

at

868

("Under such

circumstances [where a court would be determining a question of
fact or disputed and substantial questions of law], the court may
properly, and we think should, defer action on the motion and
leave the sufficiency of the allegations for determination on the
merits.
B.

.

Defenses
Failure to Mitiqate
The Government has no duty to mitigate damages in cases where

fraud is alleged.

See Toepleman v. United States, 263 F.2d 697,

700 (4th Cir. 1959), cert. denied, 79 S. Ct. 1119 (1959) ("Having
by his

fraud thrust this burden on the United

States, the

[defendant] cannot be exonerated by the failure of the Government
to cast it off at the most propitious time."); United States v.
Asins Care Home Health, Inc., No. 3-02-2199,2006 WL 2915674, at *1
(W.D. La. Oct. 6, 2006) ("[Als to the fraud claims under the False

Claims Act, the government has no duty, in any event, to mitigate
its losses."). Accordingly, failure to mitigate is not available
to the Crown Defendants in the causes of action that involve fraud.
The Government concedes, however, that the Crown Defendants'
failure to mitigate

defense arguably could be applicable to

Government's contract claims.

Accordingly, the Crown Defendants

will be allowed to plead facts to support their failure to mitigate
defense as it pertains to Plaintiff's contract claims, if they are
able to do so consistent with Rule ll(b).
2.

Waiver and Ratification

The Crown Defendants argue that waiver and ratification are
applicable to

the Government's

claims, contending that

"the

Government agency and representatives charged with overseeing and
approving the specific work in question properly waived a right to
disavow the quality of the work perf~rmed."~Courts have found
waiver in government contracts where the "responsible officer

Document No. 87 at 6.

assigned to the function of overseeing the essentials of contract
performance" waived a contract provision. Gresham

&

Co., Inc., v.

United States, 470 F.2d 542, 555 (Ct. C1. 1972) ("Such a waiver by
one with such authority will estop the Government."); see also
Miller Elevator Co. v. United States, 30 Fed. C1. 662, 687-88 (Ct.
C1. 1994) ("The Court of Claims has long recognized the application
of waiver, either express or implied, to Government contracts."
(citing Harvev Radio Laboratories, Inc. v. United States, 115 F.
Supp. 444, 449 (Ct. C1. 1953), cert. denied, 74 S. Ct. 377 (1954);
Industrial Uranium Co. v. United States, 376 F.2d 868, 876 (Ct. C1.
1967))); F.D.I.C. v. Niblo, 821 F. Supp. 441, 452 (N.D. Tex. 1993)
(declining to strike defendant's affirmative defense of waiver,
"because the issue of waiver is a question of fact" and "does not
rest upon any duty owed to the other party, but rather a party's
duty to itself to act upon or lose a specific right").

The Crown

Defendants will be allowed to replead this defense to state,
consistent with Rule ll(b), the factual basis for the defense in
order to place the Government on fair notice of the defense
asserted.

Generally, estoppel against the Government is not available as
a defense where public money is at stake.
Mqmt. v. Richmond,

See Office of Pers.

110 S. Ct. 2465, 2470-73 (1990) (declining to

apply

estoppel

employee's

against

income

the

exceeded

Government
the

where

statutory

a

level

retired Navy
to

receive

disability payments, regardless of what he was told by a government
agent, noting that ' u recent cases evince a most strict approach
or
to claims involving public funds"); Rosas v. U. S. Small Bus.
Admin., 964 F.2d 351, 360 (5th Cir. 1992)

( " I

[C]laims for estoppel

cannot be entertained where public money is at stake.
and quoting Richmond, 110 S. Ct. at 2473).

N ,

(citing

Therefore, to the

extent that Defendants assert a defense of estoppel to recover
public funds that were rightfully withheld or to keep public funds
that

were

wrongfully

disbursed,

the

estoppel

defense

is

unavailable.
However, "[iln Government contracts, estoppel proscribes the
Government from escaping liability for statements, actions, or
inactions relied upon by another contracting party."
Elevator, 30 Fed. Cl. at 687 (citation omitted).

Miller

Courts have

recognized equitable estoppel against the Government in rare
instances where the Government engaged in affirmative misconduct.

See Fano v. OINeill, 806 F.2d 1262, 1265-66 (5th Cir. 1987)
(reversing summary judgment for the Government and finding that
plaintiff had adequately stated a claim for estoppel when he
alleged

that

negligently"

the

INS

delayed

"willfully, wantonly,

in

processing

Elevator, 30 Fed. C1. at 687

his

recklessly,

application);

(noting that

and

Miller

"provided a party

demonstrates some affirmative misconduct by the Government, the
United States Court of Federal Claims also continues to recognize
the doctrine" of equitable estoppel).

To establish estoppel

against the Government, a party must prove: ' 1 that the party to
()
be estopped was aware of the facts, and (2) intended his act or
omission to be acted upon; [and] (3) that the party asserting
estoppel did not have knowledge of the facts, and (4) reasonably
relied on the conduct of the other to his substantial injury;" and
(5) that the Government engaged in affirmative misconduct. Linkous

v. United States, 142 F.3d 271, 277-278 (5th Cir. 1998) (citing
United States v. Bloom, 112 F.3d 200, 205

(5th Cir. 1997)).

Therefore, equitable estoppel may be available to Defendants under
certain narrow circumstances.

Therefore, if they can do so

consistent with Rule ll(b), Defendants will be allowed to replead
a defense of equitable estoppel with facts sufficient to place the
Government on fair notice of the basis for the defense.
4.

New and Independent Cause

The Crown Defendants further plead as an affirmative defense
that "actions of Shelmire and/or Hattab [were] new and independent
cause[s] of Plaintiff's alleged i n j ~ r y . " ~
The acts of another are
a new and independent cause only when they are not reasonably
foreseeable. See Bornmann v. Great S .W. Gen. Hosp. , Inc . , 453 F.2d

See Document No. 79

1 101(g).
8

616, 622-23 (5th Cir. 1971). Whether a new and independent cause

I.
d

is reasonably foreseeable is a question for the jury.
Accordingly, if

they can do

so consistent with Rule

ll(b),

Defendants will be allowed to replead their new and independent
cause defense in order to put the Government on notice of the facts
supporting this defense.
111. Order
Accordingly, it is
ORDERED that Plaintiff United States of America's Motion to
Strike Defendants' Affirmative Defenses

(Document No. 82) is

GRANTED in part, and the defenses of (i) failure to state a claim
and (ii) privilege and justification are STRICKEN from the Crown
Defendants1 Answer as to all of the Government's claims.

It is

further
ORDERED that the Motion to Strike otherwise is CONDITIONALLY
GRANTED as to all other defenses listed by the Crown Defendants,
for

legal

insufficiency

or

failure

to

plead

facts

with

particularity in order to place the Government on fair notice of
the bases for such defenses, unless Defendants, within fourteen
(14) days after the entry of this Order, file an amended answer,
consistent with

this Memorandum

and Order, that pleads with

particularity the facts relied upon in support of any legally
sufficient affirmative defenses that are repled.
The Clerk will enter this Order, providing a correct copy to
all counsel of record.
SIGNED at Houston, Texas, on this

[#SY

of October, 2011.

/

G WERLEIN, JR.