Sprint Solutions, Inc. et al v. Precise Wireless International, Inc. et al

Filing 22

MEMORANDUM OPINION AND ORDER granting in part and denying in part 15 MOTION to Strike 12 Answer to Complaint, granting in part and denying in part 17 MOTION for Leave to File Defendants' First Amended Answer to Complaint (Amended Answer due by 5/22/2015.) (Signed by Judge Sim Lake) Parties notified. (aboyd, 4)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION

SPRINT SOLUTIONS, INC. and
SPRINT COMMUNICATIONS
COMPANY L.P.,

§
§
§
§

Plaintiffs,

§
§
§
§
§
§
§
§
§
§

v.

PRECISE WIRELESS INTERNATIONAL
INC., PRECISE WIRELESS TRADING,
INC., NUMAN HAIDER, HARIS
JAMAL, and AFRAZ ALI,
Defendants.

CIVIL ACTION NO. H-15-0032

MEMORANDUM OPINION AND ORDER

Plaintiffs Sprint Solutions,
Company

L.P.

Defendants

(collectively,

Inc. and Sprint Communications

"Sprint"

Precise Wireless Trading,

or

"Plaintiffs")

sued

Inc.,

Numan Haider,

Haris

Jamal, and Afraz Ali (collectively, "Defendants") on various state
and federal claims stemming from Defendants' alleged unlawful sale
of Sprint cell phones.
Motion

to

Strike")

Strike Affirmative

Defenses

("Plaintiffs'

Motion

to

(Docket Entry No. 15) and Defendants' Motion for Leave to

Amend Defendants'
Leave to Amend")
below,

Pending before the court are Plaintiffs'

Answer to Complaint
(Docket Entry No. 17).

( "Defendants'

Motion for

For the reasons explained

Plaintiffs' Motion to Strike will be granted in part and

otherwise denied as moot, and Defendants' Motion for Leave to Amend
will be granted in part and denied in part.

I.

Background

Sprint's Complaint for Damages and Injunctive Relief alleges
that "Defendants and their co-conspirators are perpetrators of an
. to profit from the illegal acquisition and

unlawful scheme .

resale of new Sprint Phones."l

Sprint claims that "Defendants have

acquired and sold large quantities of Sprint Phones through various
co-conspirators. "2

In support of its Complaint Sprint~ refers to

and attached evidence from an undercover investigation in which
Defendants

agreed

to

buy

and

sell

Sprint

phones

offered

and

requested by Sprint's investigators. 3 Based on its factual allegations Sprint has pleaded fifteen causes of action under state and
federal law,

including fraud,

tortious interference,

and various trademark violations. 4

conversion,

Defendants answered Sprint's

Complaint, denying that Defendants are perpetrators of an unlawful
scheme,

but

admitting

investigators. s

to

having

engaged

with

Sprint's

Defendants asserted several affirmative defenses,

three of which are relevant to the pending motions:
THIRD AFFIRMATIVE DEFENSE: Plaintiffs' claims are barred
by the doctrine of equitable estoppel [], laches and
unclean hands.

lComplaint for Damages and Injunctive Relief
Docket Entry No. I, p. 1 ~ 1.
2Id. at 11

~

("Complaint"),

38.

3Id. at 12-15 and referenced exhibits.
4See id. at 19-44.
SSee, e. g., Defendants' Answer
No. 12, pp. 1 ~ I, 5-6 ~~ 35-50.
-2-

to

Complaint,

Docket

Entry

FIFTH AFFIRMATIVE DEFENSE: The trademarks alleged by the
Plaintiffs have been abandoned or are not valid [ly]
registered.
SIXTH AFFIRMATIVE DEFENSE: The trademarks alleged by the
Plaintiffs have been misused. 6
Plaintiffs moved to strike Defendants' third, fifth, and sixth
affirmative defenses pursuant to Federal Rule of Civil Procedure
12(f).7

In response Defendants moved to amend their answer "to

cure defects

in its pleading that

Motion to Strike.,,8

Plaintiff has

raised in its

Defendants' proposed amended answer eliminates

entirely the objected-to fifth and sixth affirmative defenses. 9
The amended answer pleads in more detail the defenses of equitable
estoppel
laches. 1o

and unclean hands,

and

it

eliminates

the

defense

of

Plaintiffs are unopposed to Defendants' elimination of

affirmative

defenses,

but

Plaintiffs

object

that

Defendants'

repleaded defenses remain subject to a motion to strike. 11
6Id. at 17-18

~~

222, 224-25.

7Plaintiffs' Motion to Strike, Docket Entry No. 15.
Under
Rule 12(f) "[t]he court may strike from a pleading an insufficient
defense."
8Defendants' Motion for Leave to Amend, Docket Entry No. 17,
p. 1

~

3.

9S ee Defendants' First Amended Answer to Complaint, Exhibit A
to Motion for Leave to Amend, Docket Entry No. 17-1, pp. 18-20
~~ 220-26.
lOSee id. ~~ 222-23.
Defendants have also removed any
reference to laches in their third affirmative defense.
See id.
llMemorandum of Law in Opposition to Motion to Defendants'
Motion for Leave to Amend Answer ("Plaintiffs' Opposition"), Docket
Entry No. 19, pp. 5-11.
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II.
A.

Standard of Review

Motion for Leave to Amend

A party may amend its answer once as a matter of course within
21

days

after

Thereafter,

serving

it.

See

R.

Civ.

P.

Rule

15(a).

the party may only amend with the opposing party's

consent or the court's leave.

Id.

leave when justice so requires."
Rule 15(a)

Fed.

"The court should freely give
Id.

Although the language of

"evinces a bias in favor of granting leave to amend,"

"decisions concerning motions to amend are entrusted to the sound
discretion of the district court."
590,

595

(5th Cir.

2004)

Smith v. EMC Corp., 393 F.3d

(internal quotation marks and citation

In reviewing a motion for

omitted) .

leave

to amend,

district

courts are to consider five factors, only one of which -- futility
of

amendment

is

relevant

here.

If

the proposed

amendment would be futile, a motion for leave to amend is properly
denied.

Avatar Exploration,

Inc. v.

Chevron,

U.S.A.,

Inc.,

933

F.2d 314, 321 (5th Cir. 1991)
B.

Motion to Strike Under Rule 12(f)

Plaintiffs argue that Defendants' proposed amendments to their
third affirmative defense are futile because those defenses remain
subj ect

to

Procedure

a

motion

12(f),

a

insufficient defense."

to

strike.

"court

may

Under

Federal

strike

from

Rule
a

of

Civil

pleading

an

"[A] Rule 12(f) motion to dismiss a defense

is proper when the defense is insufficient as a matter of law."
-4-

Kaiser Aluminum & Chern. Sales,

Inc. v. Avondale Shipyards,

Inc.,

677 F.2d 1045, 1057 (5th Cir. 1982).
Whether to grant a motion to strike is committed to the sound
discretion of the trial court.

See Cambridge Toxicology Grp., Inc.

v. Exnicios, 495 F.3d 169, 178 (5th Cir. 2007).

Motions to strike

are disfavored and infrequently granted "[b]oth because striking a
portion of a pleading is a drastic remedy and because it often is
sought by the movant simply as a dilatory or harassing tactic."
5C Charles A.
Procedure

§

Wright

1380

Arthur R.

&

(3d ed.

2004).

Miller,

Federal Practice and

"[W]hen there is no showing of

prejudicial harm to the moving party, the courts generally are not
willing to determine disputed and substantial questions of law upon
a

motion to

strike."

Augustus

v.

Bd.

of

Pub.

Instruction of

Escambia County, Fla., 306 F.2d 862, 868 (5th Cir. 1962).
such circumstances,
defer

action

on

"Under

the court may properly, and we think should,

the

motion

and

leave

the

sufficiency

allegations for determination on the merits."

of

the

"In sum,

a

motion to strike will not be granted if the insufficiency of the
defense is not clearly apparent,

or if it raises factual issues

that should be determined on a hearing on the merits."
Miller, supra,
Although

§

Wright &

1381.
Plaintiffs

argue

that

Defendants'

proposed

affirmative defenses are "insufficient as a matter of law,,,12 the
substance of Plaintiffs'

obj ections goes

to the sufficiency of

12Plaintiffs' Opposition, Docket Entry No. 19, p. 5.
-5-

Defendants' pleading of those defenses.l3

To comply with Federal

Rule of Civil Procedure 8(c) a defendant must "plead an affirmative
defense with enough specificity or factual particularity to give
the plaintiff 'fair notice' of the defense that is being advanced."
Woodfield v.
'fair

notice'

Bowman,

193 F.3d 354,

pleading

requirement

362
is

(5th Cir.
met

if

1999) .14
the

"The

defendant

'sufficiently articulated the defense so that the plaintiff was not
a victim of unfair surprise.'"
III.

Id.
Analysis

Because Defendants filed their Motion for Leave to Amend more
than 21 days after serving their original answer,
discretion whether to grant or deny the motion.

the court has

Plaintiffs argue

that Defendants' proposed amendments to their affirmative defenses

l3See id. at 5-10.
Compare Kaiser, 677 F.2d at 1057-61
(holding that "antitrust defense" was insufficient as a matter of
law because defense was not applicable to the type of contract at
issue),
and Ruscher v. Omnicare Inc.,
No. H-08-3396,
2014
WL 5364152, at *2-*3 (S.D. Tex. Oct. 21, 2014) (holding that
unclean hands defense is not available against qui tam relator in
False Claims Act case), with SEC v. Cuban, 798 F. Supp. 2d 783,
792-797 (N.D. Tex. 2011)
(holding that defendant failed to
adequately plead unclean hands defense although such a defense is
available in that type of action) .
14The Fifth Circuit has not yet addressed whether the plausible
pleading standard of Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009), and
Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955 (2007), applies to
affirmative defenses. While there is some disagreement, district
courts continue to apply the "fair notice" standard.
See, e.g.,
Ruscher, 2014 WL 5364152, at *2; Osborne v. Thomas, No. 3:14-CV3432-K-BK, 2015 WL 2130962, at *1 (N.D. Tex. May 6, 2015).
Plaintiffs have not pressed the issue, and they rely on a postIqbal case that applies the "fair notice" standard in precisely
this context. See Cuban, 798 F. Supp. 2d at 795 n.13.
-6-

of equitable estoppel and unclean hands are futile because they
remain subject to a motion to strike and that leave to amend should
therefore be denied.

Defendants have not responded to Plaintiffs'

arguments.
A.

Equitable Estoppel

Under Texas
" (1)

a

false

law15

the

elements

representation or

of

equitable

concealment

of

estoppel are:

material

facts;

(2) made with knowledge, actual or constructive, of those facts;
(3) with the intention that it should be acted on;

(4) to a party

without knowledge or means of obtaining knowledge of the facts;
(5 )

who

Johnson

&

detrimentally

relies

Higgins of Texas,

Inc.

S.W.2d 507, 515-16 (Tex. 1998)

on
v.

the

representations."

Kenneco Energy,

Inc.,

962

In their proposed amended answer

Defendants recite the elements of equitable estoppel -- apparently
under

Michigan

law

but

they

correlate to those elements. 16

do

not

plead

any

facts

that

Amending this affirmative defense

15Because this case arises under both state and federal law,
a threshold issue is what body of law should govern equitable
defenses.
See generally John T. Cross, The Erie Doctrine in
Equity, 60 La. L. Rev. 173 (1999).
Plaintiffs primarily cite to
Texas law in support of their Opposition to Defendants' Motion for
Leave to Amend. Defendants have not argued for the application of
any other law, nor have they responded to Plaintiffs' Opposition.
Neither party has broached the thornier issue of which equitable
defenses are available against which causes of action, although
Plaintiffs suggest that federal law may bar "entrapment" as part of
an unclean hands defense in civil trademark cases. The court will
apply Texas law at this stage absent any objection or substantive
briefing by the parties.
16See Defendants' First Amended Answer to Complaint, Exhibit A
to Motion for Leave to Amend, Docket Entry No. 17-1, pp. 18-19
(continued ... )
-7-

as proposed would be futile because the Defendants' pleading still
does not give fair notice of the defense that is being advanced. 17
B.

Unclean Hands

"Under the doctrine of unclean hands, a court may refuse to
grant equitable relief, such as an injunction, sought by 'one whose
conduct in connection with the same matter or transaction has been
unconscientious, unjust, or marked by a want of good faith, or one
who has violated the principles of equity and righteous dealing.'"
Park v.

Escalera Ranch Owners'

2015 WL 737424,

at *17,

2015, no. pet. h.)

Ass'n,

S.W.3d

Inc.,

No.

03-l2-003l4-CV,

(Tex. App.-Austin Feb.

13,

"The plaintiff's alleged wrongdoing will not

bar relief unless the defendant also establishes harm or injury
from the plaintiff's conduct."

Condom Sense,

Inc. v. Alshalabi,

390 S.W.3d 734, 762 (Tex. App.-Dallas 2012, no pet.).
Defendants' Proposed First Amended Answer offers three bases
for the unclean hands defense:

(1) "Plaintiffs set[]up a scheme by

which they could entrap Defendants into a transaction Plaintiffs
now allege allows for their recovery;" (2) Plaintiffs "fraudulently

16( ... continued)
222.
Defendants do not cite any authority for the elements of
equitable estoppel listed in their proposed Amended Answer, but a
search of Westlaw using Defendants' language returns only cases
applying Michigan law. No party has argued for the application of
Michigan law in this case.
~

17Because Defendants have had two opportunities to plead this
defense, they will not be granted leave to replead it again.
The
defense will be struck.
-8-

induced Defendants into the transactions;" and (3) this was part of
an "ef fort

to eliminate the competition created by Defendants'

legi timate business." 18

These allegations give Plaintiffs fair

notice of the nature of Defendants' affirmative defense of unclean
hands such that Plaintiffs will not be victims of surprise. 19
While

Plaintiffs

jurisdictions
questionable,

cite

suggesting
Plaintiffs

a

number

cases

Defendants'

that
point

of

to

no

from

theories

controlling

other
are

authority

rendering those defenses insufficient as a matter of law. 20

The

18See Defendants' First Amended Answer to Complaint, Exhibit A
to Defendants' Motion for Leave to Amend, Docket Entry No. 17-1,
pp. 19-20 ~ 223.
19P1aintiffs argue that because Defendants refer to fraudulent
inducement in their Third Affirmative Defense, Defendants must
satisfy the heightened pleading requirements of Federal Rule of
Civil Procedure 9(b).
There is some authority for this
proposition, none of it controlling. See, e.g., F.D.I.C. v. Vann,
No. 11 C 3491, 2013 WL 704478, at *4 (N.D. Ill. Jan. 23, 2013) ("By
intertwining allegations
of
fraud
with his
unclean hands
affirmative defense, Vann triggers the pleading requirements of
Rule 9 (b) ." ) .
However, the same authority makes clear that
Rule 9(b) does not apply to general allegations of misconduct or
bad faith merely because they are combined with allegations of
fraud.
Id. at *4 n.8 (citing Kennedy v. Venrock Assoc., 348 F.3d
584, 593 (7th Cir. 2003)). The only allegation arguably subject to
Rule 9(b) in Defendants' proposed Amended Answer is the allegation
of "fraudulent inducement." Defendants' references to Plaintiffs'
exceedingly detailed complaint and exhibits make fairly obvious the
who, what, where, and when of the alleged fraudulent conduct. Even
if Rule 9(b) should apply, Defendants' proposed amendment survives
a hypothetical motion to strike in this instance. Granting such a
motion is wi thin the court's discretion, and the court is not
inclined to expend additional resources fine-tuning Defendants'
pleadings.
20See Plaintiffs' Opposition, Docket Entry No. 19, pp. 8-10.
For example, Plaintiffs argue that the mere use of undercover
(continued ... )
-9-

court

is

not

inclined

to

address

"disputed

questions of law upon a motion to strike."
at 868.

and

substantial

See Augustus, 306 F.2d

As pleaded, Defendants' proposed affirmative defense of

unclean hands would survive a motion to strike by Plaintiffs and
therefore is not futile.
Nevertheless,

to succeed on such a defense, Defendants will

carry a heavy burden.

Whether or not to deny equitable relief is

within the discretion of the court.

Although not sufficient to bar

amendment, Plaintiffs' arguments and authority are persuasive, and
Defendants have identified no authority to the contrary.

The court

anticipates that discovery will allow the parties to narrow these
issues before trial.
IV.

Conclusions and Order

There being no objection from Plaintiffs, the court concludes
that Defendants' proposed elimination of affirmative defenses in
their proposed First Amended Answer to Complaint -- specifically,

20 ( • • • continued)
investigators is not unethical, improper, or even unusual in.
trademark cases.
But Defendants' argument is slightly more
nuanced,
and the
cases
cited by Plaintiffs are arguably
distinguishable. Similarly, Plaintiffs have demonstrated the high
threshold Defendants would have to meet if they hope to succeed on
an entrapment defense, including persuading the court to even
recognize such a defense, but Plaintiffs appear to concede that
such a defense is not foreclosed as a matter of law.
Similarly,
Plaintiffs' assertion that the Noerr-Pennington doctrine shields
them from antitrust liability for bringing this suit, regardless of
anticompetitive intent, is not immediately dispositive of the issue
before the court.

-10-

the Fifth, Sixth, and laches portion of the Third -- is warranted,
and they will be granted leave to do so.

Defendants'

proposed

amendment to their defense of unclean hands would survive a motion
to

strike,

is

not

futile,

and

will

be

allowed.

Defendants'

proposed amendment to their defense of equitable estoppel still
fails to give fair notice of the defense asserted,
futile, and it will not be allowed.

is therefore

Defendants' Motion for Leave

to Amend Defendants' Answer to Complaint (Docket Entry No. 17) is
therefore GRANTED IN PART and DENIED IN PART.

Plaintiffs' Motion

to Strike Affirmative Defenses (Docket Entry No. 15) is GRANTED IN
PART 21 and otherwise DENIED AS MOOT.

Defendants may file an amended

answer in conformity with this opinion within SEVEN DAYS.
Although this action has only been on file for four months, it
has

generated an unusual

amount

of

procedural

skirmishes

before the initial pretrial scheduling conference.

even

The court's

time, and the time of the parties and their attorneys,

is better

used in focusing on an early trial on the merits, where the factual
disputes
practice.

can

be

finally

resolved,

instead

of

further

motion

It is therefore the court's intention to dispense with

further motion practice under Rules 12 and 56.

Since Plaintiffs

seek injunctive relief because of Defendants' alleged continuous
violations, the court intends to set the case for trial under an

21Defendants have yet to sUfficiently plead the affirmative
defense of equitable estoppel, and it will be struck.
-11-

expedited schedule.

At

the May 29,

2015,

conference,

counsel

should be prepared to propose such a schedule.
SIGNED at Houston, Texas, on this the 15th day of May, 2015.

SIM LAKE
UNITED STATES DISTRICT JUDGE

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