Summary
recommending granting and part and denying in part Plaintiffs' motion to strike Defendants' Eighth and Eleventh Affirmative Defenses
Summary of this case from Dorce v. City of New YorkOpinion
Civil Action 19 Civ. 2216 (JLR) (SLC)
10-14-2022
McCONNELL DORCE, et al., Plaintiffs, v. CITY OF NEW YORK, et al., Defendants.
REPORT AND RECOMMENDATION
SARAH L. CAVE, United States Magistrate Judge.
TO THE HONORABLE JENNIFER L. ROCHON, United States District Judge:
I. INTRODUCTION
Plaintiffs McConnell Dorce, Cecilia Jones, and Sherlivia Thomas-Murchison (“Plaintiffs”) brought this putative class action against defendants the City of New York (the “City”), the Commissioners of the City's Department of Finance and Department of Housing Preservation and Development (together with the City, the “City Defendants”), the Neighborhood Restore Housing Development Fund Co. Inc. (“Neighborhood Restore”), and the BSDC Kings Covenant Housing Development Fund Company, Inc. (together with “Neighborhood Restore, the “Transferee Defendants,” and the City Defendants and Transferee Defendants together, “Defendants”).
Before the Court is Plaintiffs' letter-motion pursuant to Federal Rule of Civil Procedure 12(f) seeking to strike (i) Defendants' Eighth Affirmative Defense based on waiver, estoppel, and laches (the “Eighth Defense”), and (ii) the City Defendants' Eleventh Affirmative Defense asserting failure to join indispensable parties (the “Eleventh Defense”). (ECF No. 190 (the “Motion to Strike”)). Defendants oppose the Motion to Strike the Eighth Defense (ECF Nos. 193-1; 198), and the City Defendants have agreed to withdraw the Eleventh Defense without prejudice to renewal if a class is certified. (ECF Nos. 193-1 at 7 n.2; 197 at 1). For the reasons set forth below, I respectfully recommend that the Motion to Strike be GRANTED IN PART and DENIED IN PART, and that the Eighth Defense and Eleventh Defense be STRICKEN without prejudice.
II. BACKGROUND
The Court incorporates by reference the factual background set forth in the opinion and order of the Honorable John G. Koeltlgranting Defendants' motions to dismiss the Complaint, see Dorce v. City of New York, 460 F.Supp.3d 327, 334-37 (S.D.N.Y. 2020) (“Dorce I”),and Judge Koeltl's opinion and order granting in part and denying in part Defendants' motions to dismiss the Amended Complaint, see Dorce v. City of New York, No. 19 Civ. 2216 (JGK) (SLC), 2022 WL 2286381, at *1-5 (S.D.N.Y. June 24, 2022) (“Dorce III”). In brief, Plaintiffs allege that Defendants “used and conspired to use in rem proceedings to seize the [P]laintiffs' properties based on asserted tax debts, and that the [D]efendants have failed to compensate the [P]laintiffs for the excess value of their properties, in violation of the [P]laintiffs' rights under the United States Constitution, the New York State Constitution, and New York State law.” Dorce III, 2022 WL 2286381, at *1. In Dorce III, Judge Koeltl held that: (i) the Rooker-Feldman doctrine did not deprive the Court of subject matter jurisdiction over Plaintiffs' Municipal Home Rule, Due Process, conversion, and unjust enrichment claims; (ii) Plaintiffs Cecilia Jones and Sherlivia Thomas-Murchison adequately pled derivative standing to assert claims on behalf of the housing development fund corporations of which they are shareholders (the “HDFCs”); (iii) Plaintiffs adequately pled their claims for violation of the Takings Clause, Due Process Clause (as-applied), Equal Protection Clause, and Excessive Fines Clause, and for conspiracy under 42 U.S.C. § 1985(3), conversion, unjust enrichment, and violation of the Municipal Home Rule Law (against the City Defendants only); and (iv) Plaintiffs failed to state a facial due process claim or conspiracy claim under New York law. 2022 WL 2286381, at *7-20.
On September 19, 2022, the action was reassigned to the Honorable Jennifer L. Rochon. (ECF min. entry Sept. 19, 2022).
On June 23, 2021, the Second Circuit affirmed in part, vacated in part, and remanded Dorce I. See Dorce v. City of New York, 2 F.4th 82 (2d Cir. 2021) (“Dorce II”).
On July 18, 2022, Judge Koeltl denied the Transferee Defendants' application to certify Dorce III for interlocutory appeal pursuant to 28 U.S.C. § 1292(b). See Dorce v. City of New York, No. 19 Civ. 2216 (JGK) (SLC), 2022 WL 3133063 (S.D.N.Y. July 18, 2022) (“Dorce IV”).
Following Dorce III, Defendants filed their answers to the Amended Complaint. (ECF Nos. 178 (the “Transferee Defendants' Answer”); 182 (the “City Defendants' Answer”, together, the “Answers”)). Both Answers included the Eighth Defense that “Plaintiffs' claims are barred, in whole or in part, by the doctrines of waiver, estoppel, and laches.” (ECF No. 178 ¶ 214; see ECF No. 182 ¶ 392 (asserting “principles of waiver, estoppel, and laches”)). The City Defendants' Answer also included the Eleventh Defense that the HDFCs “are indispensable parties to this action” and “Plaintiffs' derivative claims must be dismissed for failure to join these indispensable parties.” (ECF No. 182 ¶ 395).
On August 15, 2022, Plaintiffs filed the Motion to Strike. (ECF No. 190). As to the Eighth Defense, Plaintiffs argue that “Defendants' ‘bald, boilerplate allegations' that Plaintiffs' claims are barred by waiver, estoppel and/or laches are insufficiently pled, unsupported, and conclusory.” (ECF No. 190 at 2 (quoting Lee v. Can. Goose US, Inc., No. 20 Civ. 9809 (VM), 2021 WL 6881256, at *2 (S.D.N.Y. Oct. 19, 2021)). In addition, Plaintiffs argue that the defenses are inapplicable because “the claims for injunctive relief in this case have been dismissed and the remaining claims are limited to monetary damages.” (Id.) As to the Eleventh Defense, Plaintiffs note that the HDFCs are named as nominal defendants in, and were served with, the Amended Complaint. (ECF Nos. 91 at 1; 101; 102).
Plaintiffs initially filed the Motion to Strike on August 8, 2022 at ECF No. 187, but refiled it due to a filing error. (ECF No. 187; ECF min. entry Aug. 8, 2022).
On August 17, 2022, the City Defendants opposed the Motion to Strike. (ECF No. 193-1 (the “City Defendants' Opposition”)).The City Defendants first argue that “[g]iven that this litigation remains in the early stages of discovery, any determination as to whether there is any question of fact or law which might allow an affirmative defense to succeed would be premature[,]” and “there is no prejudice to Plaintiffs here since the defenses were asserted in a timely manner and discovery is ongoing.” (ECF No. 193-1 at 7). Second, the City Defendants argue that because Plaintiffs maintain an unjust enrichment claim, which is equitable, the equitable defenses in the Eighth Defense are appropriate. (Id. at 9). Finally, the City Defendants “agree[d] to withdraw the [E]leventh [] [D]efense as it relates to the claims asserted on behalf of the named plaintiffs but reserve the right to assert this defense as to claims purported to be asserted on behalf of any other Housing Development Fund Corporation, in the event that a class is certified.” (ECF No. 193-1 at 6 n.2).
The City Defendants initially filed their Opposition on August 15, 2022, but refiled it in accordance with Judge Koeltl's directive on August 17, 2022 due to Plaintiffs' refiling of the Motion to Strike. (ECF Nos. 191; 192; 193; 193-1).
On August 30, 2022, the Transferee Defendants opposed the Motion to Strike, advancing substantially similar arguments as the City Defendants in support of the Eighth Defense. (ECF No. 198 (the “Transferee Defendants' Opposition”)). Plaintiffs filed letters in reply to both the City Defendants' Opposition and the Transferee Defendants' Opposition. (ECF Nos. 197; 203).
Fact discovery is ongoing and is due to be completed by February 15, 2023. (ECF Nos. 138 ¶ 6(A); 212 at 3).
III. DISCUSSION
A. Legal Standard
Pursuant to Federal Rule of Civil Procedure 12(f), a court may strike “an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” Fed.R.Civ.P. 12(f). “Courts disfavor motions to strike[.]” Rich v. New York, No. 21 Civ. 3835 (AT) (GWG), 2022 WL 4241380, at *2 (S.D.N.Y. Sept. 15, 2022). The Second Circuit has cautioned that district courts “should not tamper with the pleadings unless there is a strong reason for so doing.” Lipsky v. Commonwealth United Corp., 551 F.2d 887, 893 (2d Cir. 1976). “The moving party bears the burden on a motion to strike.” Rich, 2022 WL 4241380, at *2 (citing Jablonski v. Special Couns., Inc., No. 16 Civ. 5243 (ALC), 2020 WL 1444933, at *3 (S.D.N.Y. Mar. 25, 2020)).
Cognizant of the “curious evolution” of the standard for a motion to strike an affirmative defense, the Second Circuit recently clarified that standard in GEOMC Co. v. Calmare Therapeutics Inc., 918 F.3d 92 (2d Cir. 2019). Now, the party moving to strike an affirmative defense must show three elements: (i) “there is no question of fact which might allow the defense” to satisfy the plausibility standard applied to pleadings under Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007); (ii) “there is no question of law which might allow the defense to succeed;” and (iii) “the plaintiff would be prejudiced by the inclusion of the defense.” GEOMC, 918 F.3d at 95-96; see Rich, 2022 WL 4241380, at *3 (summarizing GEOMC's holding).
Concerning the first requirement, “GEOMC Co. makes clear that the plausibility standard for pleadings applies to affirmative defenses, but GEOMC Co. emphasizes that the application of the plausibility standard must be a ‘context-specific' one.” Rich, 2022 WL 4241380, at *3 (quoting GEOMC, 918 F.3d at 98). Courts must consider both when the affirmative defense was raised, i.e., whether in “the brief period in which a defendant must file an answer in contrast with the much longer window during which a plaintiff can gather the facts necessary for their complaint[,]” as well as “the nature of the affirmative defense at issue.” Id. (citing GEOMC, 918 F.3d at 98). As a result, courts “apply a lower plausibility threshold” to affirmative defenses, as to which “the pleader has less time to gather facts and craft a response.” Sec. & Exch. Comm'n v. Ripple Labs, Inc., No. 20 Civ. 10832 (AT) (SN), 2022 WL 748150, at *4 (S.D.N.Y. Mar. 11, 2022). Nevertheless, “a party must support affirmative defenses ‘with some factual allegations to make them plausible.'” Town & Country Linen Corp. v. Ingenious Designs LLC, No. 18 Civ. 5075 (LJL), 2020 WL 3472597, at *10 (S.D.N.Y. June 25, 2020) (quoting GEOMC, 918 F.3d at 99). Even where an affirmative defense lacks factual allegations, a court may still decline to strike it where “sufficient factual content is pled elsewhere to support the defense.” Id. at *12 (citing Jablonski, 2020 WL 1444933, at *4).
As to the second requirement, the Second Circuit explained in GEOMC that “an affirmative defense is improper and should be stricken if it is a legally insufficient basis for precluding a plaintiff from prevailing on its claims.” 918 F.3d at 98. A motion to strike, however, “‘should not be used as an opportunity for the determination of disputed, substantial questions of law.'” Rich, 2022 WL 4241380, at *3 (quoting E.E.O.C. v. Kelley Drye & Warren, LLP, No. 10 Civ. 655 (LTS) (MHD), 2011 WL 3163443, at *2 (S.D.N.Y. July 25, 2011)).
Third and finally, prejudice “will normally depend on when the defense is presented.” GEOMC, 918 F.3d at 98. The Second Circuit explained that “[a] factually sufficient and legally valid defense should always be allowed if timely filed even if it will prejudice the plaintiff by expanding the scope of the litigation.” Id. Conversely, “prejudice may be considered, and in some cases, determinative, where a defense is presented beyond the normal time limits of the Rules[.]” Id. at 99.
Although not raised in the Motion to Strike, the Court observes that “there is abundant case law holding that a defense of a ‘failure to state a claim' should not be the subject of a motion to strike because, like a denial of factual allegations, the defense functions as a general denial of liability.” Rich, 2022 WL 4241380, at *4 (collecting cases).
B. Application
1. Eighth Defense
The defenses in the Eighth Defense-laches, waiver, and estoppel-are affirmative defenses and, therefore, “Defendants must plead facts sufficient to make [them] plausible.” Town & Country Linen, 2020 WL 3472597, at *13. The Court finds that Defendants' “boilerplate statement[s]” in the Eighth Defense lack “any factual basis in support,” and are therefore deficient. Silva v. Hornell Brewing Co., No.20-CV-756 (ARR) (PK), 2020 WL 8079823, at *4 (E.D.N.Y. Dec. 1, 2020) (granting motion to strike estoppel affirmative defense). (See ECF Nos. 178 ¶ 214 (asserting that “Plaintiffs' claims are barred by the doctrines of waiver, estoppel and/or laches”); 182 ¶ 392 (asserting that “Plaintiffs' claims are barred, in whole or in part, by principles of waiver, estoppel and laches”)). Defendants offer no factual basis on which the Court could conclude that they “relied, to their detriment or otherwise, on any conduct by the Plaintiffs.” Coach Inc. v. Kmart Corps., 756 F.Supp.2d 421, 426-27 (S.D.N.Y. 2010) (finding estoppel affirmative defense “insufficient as a matter of law” where the defendant offered “no question of fact or law that might allow an estoppel defense to succeed”). Indeed, Defendants do not even “indicate whether they intend to rely on all of the equitable defenses or only some of them,” or “whether all defenses or only one is an equitable defense to each claim ....” Town & Country Linen, 2020 WL 3472597, at *13. Nor do Defendants “adequately identify, using other facts from their [A]nswer[s], a legal theory under which any of these equitable defenses is well-pleaded.” Id. As in Town & Country Linen, “Defendants would keep Plaintiffs guessing as to which affirmative defenses they intend to rely on, and how they intend to prove each of them.” Id. Accordingly, the Court finds that Defendants have failed to support the defenses of laches, waiver, and estoppel “with at least ‘some factual allegations to make them plausible' under Twombly.” Silva, 2020 WL 8079823, at *4 (quoting GEOMC, 918 F.3d at 99 (emphasis added in Silva)); see Paul Rudolph Found. v. Paul Rudolph Heritage Found., No. 20 Civ. 8180 (CM), 2022 WL 4109723, at *12 (S.D.N.Y. Sept. 8, 2022) (granting motion to strike laches and waiver defenses where the “Defendants' pleading [was] nothing more than a formulaic recitation of the elements of laches” and “there [were] no facts relating to the purported ‘undue prejudice' to Defendants from any delay” or “any facts pled that specifically relate[d] to waiver”); Canada Goose, 2021 WL 6881256, at *2 (granting motion to strike “bald, boilerplate allegation that ‘Plaintiff's claims may be barred, in whole or in part, by the equitable doctrines of laches, unclean hands, waiver, and/or estoppel'”); Art Media, LLC v. Brant, No. 19 Civ. 11218 (VM) (RWL), 2021 WL 746261, at *5 (S.D.N.Y. Feb. 12, 2021) (finding defendant did “not sufficiently plead a waiver defense” where “he merely allege[d] that [plaintiff] ‘may' have waived, which is unduly speculative”), adopted by, 2021 WL 2193020 (S.D.N.Y. Mar. 5, 2021).
Turning to the second GEOMC requirement, the Court cannot say at this juncture that, as a matter of law, Defendants cannot avail themselves of the defenses of laches, waiver, and estoppel. Defendants point out that Plaintiffs' unjust enrichment claim survived Dorce III and remains in the case. (ECF Nos. 193-1 at 9; 198 at 5-6; see ECF No. 91 ¶¶ 363-67). See Dorce III, 2022 WL 2286381, at *17. As Plaintiffs note (ECF No. 203 at 2), laches requires Defendants to prove that they have “been prejudiced by the plaintiff's unreasonable delay in bringing the action.” Zuckerman v. Metro. Museum of Art, 928 F.3d 186, 193 (2d Cir. 2019) (citation omitted). At least one court has recognized that, because an “unjust enrichment claim sounds in equity[,] . . . laches is a possible defense.” State Farm Mut. Auto. Ins. Co. v. Kalika, No. 04 CV 4631 (CBA), 2006 WL 6176152, at *7 (E.D.N.Y. Mar. 16, 2006); cf. Canada Goose, 2021 WL 6881256, at *2 (striking laches defense where unjust enrichment claim had been dismissed). Similarly, Plaintiffs' arguments concerning the factual deficiency in the Eighth Defense do not preclude the possibility that Defendants could plead facts supporting the defenses of waiver and estoppel. Accordingly, Plaintiffs have not met their burden on the Motion to Strike to show that there is no question of law that the defenses might succeed. See GEOMC, 918 F.3d at 98-99; cf. Rich, 2022 WL 4241380, at *4-5 (recommending denial of motion to strike defenses that were not legally precluded).
Waiver “requires the voluntary and intentional abandonment of a known right[.]” Schroder Bank & Tr. Co. v. Fairfield Cmtys., Inc., 178 F.3d 78, 84 (2d Cir. 1999). Estoppel requires proof of “(1) An act constituting a concealment of facts or a false misrepresentation; (2) An intention or expectation that such acts will be relied upon; (3) Actual or constructive knowledge of the true facts by the wrongdoers; [and] (4) Reliance upon the misrepresentations which causes the innocent party to change its position to its substantial detriment.” Gen. Elec. Cap. Corp. v. Armadora, S.A., 37 F.3d 41, 45 (2d Cir. 1994). (See ECF No. 203 at 1-2).
Finally, the Court finds that the third GEOMC factor warrants striking the Eighth Defense without prejudice and giving Defendants a final opportunity to plead “some factual allegations” to render laches, waiver, or estoppel plausible affirmative defenses to Plaintiffs' claims. GEOMC, 918 F.3d at 99. Plaintiffs do not dispute that fact discovery is ongoing, and will continue until at least February 2023. (ECF No. 138 ¶ 6(A); see generally ECF Nos. 190; 197; 203). Given ongoing discovery, Plaintiffs do not, and cannot, articulate how they would be prejudiced from permitting Defendants to amend the Eighth Defense at this stage of the action. See Rich, 2022 WL 4241380, at *4 (recommending denial of motion to strike “in light of the early stage of this case and plaintiff's failure to show prejudice from inclusion of the defense”); Art Media, LLC, 2021 WL 746261, at *7 (recommending that waiver defense “be stricken without prejudice as the deficiencies in pleading are ones that potentially could be cured with elaboration and specification (assuming, of course, such facts can be asserted in good faith)”).
Accordingly, after evaluating each of the factors the Second Circuit has instructed district courts to consider before striking an affirmative defense, the Court recommends that the Eighth Defense be stricken, but without prejudice, and that Defendants be given a final opportunity to replead the defenses of laches, waiver, and/or estoppel with a sufficient factual basis.
2. Eleventh Defense
As discussed above, the City Defendants “agree to withdraw the [E]leventh [] [D]efense as it relates to the claims asserted on behalf of the named plaintiffs but reserve the right to assert this defense as to claims purported to be asserted on behalf of any other Housing Development Fund Corporation, in the event that a class is certified.” (ECF No. 193-1 at 7 n. 2). In their reply to the City Defendants' Opposition, Plaintiffs argue that, “if a class is certified, the class representatives will necessarily be proceeding on behalf of similarly-situated property owners that need not be joined as parties.” (ECF No. 197 at 1). Plaintiffs are correct that, in the event of class certification, the City Defendants may be unable to raise this defense as it relates to the putative class members. See Fed.R.Civ.P. 19 (joinder requirements are “subject to Rule 23”); Fed.R.Civ.P. 23 (class certification requires, inter alia, a class “so numerous that joinder of all members is impracticable”). Plaintiffs do not argue, however, and the Court cannot at this stage determine, that, in the event of class certification, there is no party who must be joined. See Fed.R.Civ.P. 19(a) (enumerating parties required to be joined if feasible).
Accordingly, the Court respectfully recommends that the Eleventh Defense be stricken but without prejudice to renewal on a showing of good cause, if a class is certified.
IV. CONCLUSION
For the reasons set forth above, the Court respectfully recommends that Plaintiffs' Motion to Strike be GRANTED IN PART and DENIED IN PART as follows:
(1) the Eighth Defense in the City Defendants' Answer (ECF No. 182 ¶ 392) and the Transferee Defendants' Answer (ECF No. 178 ¶ 214) be STRICKEN, and Defendants be granted leave to replead; and
(2) the Eleventh Defense in the City Defendants' Answer (ECF No. 182 ¶ 395) be STRICKEN, without prejudice to renewal on a showing of good cause, if a class is certified in this action.
SO ORDERED.
* * *
NOTICE OF PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMENDATION
The parties shall have fourteen (14) days (including weekends and holidays) from service of this Report and Recommendation to file written objections pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure. See also Fed.R.Civ.P. 6(a), (d) (adding three additional days when service is made under Fed.R.Civ.P. 5(b)(2)(C), (D) or (F)). A party may respond to another party's objections within fourteen (14) days after being served with a copy. Fed.R.Civ.P. 72(b)(2). Such objections, and any response to objections, shall be filed with the Clerk of the Court. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), (d), 72(b). Any requests for an extension of time for filing objections must be addressed to Judge Rochon.
FAILURE TO OBJECT WITHIN FOURTEEN (14) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), (d), 72(b); Thomas v. Arn, 474 U.S. 140 (1985).