Barry et al v. EMC Mortgage et al, No. 8:2010cv03120 - Document 29 (D. Md. 2011)

Court Description: MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 9/15/11. (sat, Chambers)
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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND : TIMOTHY BARRY, et al. : v. : Civil Action No. DKC 10-3120 : EMC MORTGAGE : MEMORANDUM OPINION Presently pending and ready for resolution is a motion to strike affirmative Susan Barry. defenses (ECF No. 26). filed by Plaintiffs Timothy and The issues are fully briefed and the court now rules pursuant to Local Rule 105.6, no hearing being deemed necessary. For the reasons that follow, Plaintiffs motion will be granted in part and denied in part. I. Background1 This case arises from the efforts of Plaintiffs Timothy and Susan Barry to refinance the mortgage on their Maryland home. After contacting several lenders, Plaintiffs spoke with a representative at First Ohio Banc and Lending ( First Ohio ), who allegedly informed them that they could obtain $75,000 in 1 The background of this case is discussed at greater length in the court s earlier memorandum opinion denying Defendant EMC Mortgage Corp. s ( EMC ) motion for a more definite statement and granting its motion to dismiss various counts in Plaintiffs complaint. See Barry v. EMC Mortg., No. DKC 10-3120, 2011 WL 2669436, at *1-2 (D.Md. July 6, 2011). equity from Plaintiffs the and refinance. First Ohio (ECF agreed No. on 1 a ¶¶ 5, 7, settlement 13-14). date and, although unnerved by the settlement officer s lack of knowledge about the transaction and certain discrepancies between the planned and official loan transactions, such as a lower equity cash out, Plaintiffs proceeded with the refinance. 24). (Id. ¶¶ 18- Plaintiffs subsequently realized that they were making interest only payments on a negatively amortizing loan and contacted EMC, to whom First Ohio had sold the loan, to discuss a potential restructuring. Plaintiffs allegedly (Id. ¶¶ 29-30, 33-35). reached agreements with EMC Although designed to modify the loan and lower the loan s principal, the principal nonetheless continued to increase, as did Plaintiffs monthly payments. (Id. ¶¶ 33-35, 37, 40-44). Unable to make these payments, Plaintiffs defaulted on the loan. On November 3, 2010, complaint in federal court. Plaintiffs (Id. ¶ 45). filed (ECF No. 1). a thirty-count Count I alleged that EMC breached the loan modification agreement. Count II alleged that both EMC and First Ohio were liable for gross negligence. Count III alleged that both Defendants were liable intentional violation of the duty of good faith. for an Counts IV, V, VI, and VII alleged that First Ohio was liable for fraud, fraudulent concealment, fraudulent 2 misrepresentation, and negligent misrepresentation. Count VIII alleged that EMC was liable for violations of the Maryland Consumer Protection Act. Counts IX through XXIX violations of Truth Settlement Procedures the alleged in that Lending Act, and EMC Act, was the corresponding liable Real for Estate regulations. Counts XVI, XXV, XXVII, and XXVIII also implicated First Ohio. Finally, count XXX sought injunctive relief to prohibit EMC from foreclosing on the property, submitting negative credit reporting, or engaging in any other complained of activity. First Ohio moved to dismiss all counts raised against it, claiming that the relevant statutes of limitation had expired. (ECF No. 9). EMC filed a motion for a more definite statement as to counts I and VIII and also sought to dismiss counts II, III, and IX through XXX. Ohio s motion dismissed. was (ECF No. 6). granted, (ECF No. 22). and all On July 6, 2011, First counts against it were EMC s motion for a more definite statement was denied, but its motion to dismiss counts II, III, and IX through XXX was granted. (Id.). With counts I and VIII still pending against it, EMC answered Plaintiffs complaint on July 20, 2011, asserting six affirmative defenses : (1) the complaint s failure to state a claim upon which relief can be granted, (2) EMC s good faith compliance with all applicable laws, (3) estoppel, (4) release, (5) statute of frauds, and (6) 3 waiver. (ECF No. 24 ¶¶ 170-172).2 Plaintiffs moved to strike these six affirmative defenses (ECF No. 26), and EMC opposed this motion (ECF No. 28). II. Standard of Review Motions to strike are governed by Federal Rule of Civil Procedure 12(f), which gives the court discretion to strike from a pleading an insufficient defense or any immaterial, impertinent, or scandalous matter. generally accepted that a motion to strike redundant, While it is is neither an authorized nor proper way to procure the dismissal of all or part of a pleading, 5C Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 1380, 391 (3d ed. 2004), some courts have found that an untimely answer may be stricken in its entirety under certain circumstances, see Canady v. Erbe Elektromedizin GmbH, 307 F.Supp.2d 2, 8 (D.D.C. 2004). In any context, remedy however, Rule 12(f) motions seek a drastic which is disfavored by the courts and infrequently granted. Clark v. Milam, 152 F.R.D. 66, 70 (S.D.W.Va. 1993); see also Waste Mgmt. Holdings v. Gilmore, 252 F.3d 316, 347 (4th Cir. 2001). 2 EMC also reserved the right to raise additional defenses that it discovered through the course of discovery. (Id. ¶ 173). 4 III. Analysis Plaintiffs have moved to strike the six affirmative defenses asserted by EMC by contending that they fail to satisfy the pleading requirements set forth by the United States Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009). EMC argues, in response, that Twombly and Iqbal do not apply to affirmative defenses because they merely interpreted Rule 8(a)(2), which addresses the requirements for pleading a claim for relief. Before addressing the merits of these arguments, a brief review of Supreme Twombly Court and Iqbal considered is warranted. whether a In Twombly, complaint the asserting violations of ¶ 1 of the Sherman Act could survive a motion to dismiss when it alleged parallel conduct and contained only a conclusory assertion that contract, combination, or the defendants conspiracy. had 550 entered U.S. into at a 550. Reasoning that a complaint must set forth facts demonstrating that the claim is plausible on its face, the Court concluded that the Twombly plaintiffs had failed to nudge[] their claims across the line from conceivable to plausible because their parallel defendants behavior. conduct allegation natural, more unilateral Id. at 565-66. likely engagement suggested in the free-market The Court also rejected legal labels 5 and conclusions that were devoid of supporting facts, thereby refusing to credit the plaintiffs mere assertion contract, combination, or conspiracy existed. that a Id. at 555-57, 564. The Court clarified Twombly in the Iqbal opinion, setting forth a two-pronged analytical approach sufficiency of a complaint under Rule 8. for evaluating the 129 S.Ct. at 1950. First, bare legal conclusions that do nothing more than recite the elements of a cause of action need not be credited, and the courts may exclude them from the Rule 8 analysis entirely. Id. Second, in order to state a claim, the complaint must plausibly give rise to an entitlement to relief, a showing that requires more than the mere possibility of misconduct. Id. Neither Twombly nor Iqbal expressly addressed the pleading requirements applicable to affirmative defenses, and district courts throughout the country have since debated the issue.3 majority of circuit, have district concluded courts, that apply to affirmative defenses. including the those Twombly-Iqbal The within this approach does See, e.g., Bradshaw v. Hilco Receivables, LLC, 725 F.Supp.2d 532, 536 (D.Md. 2010); Racick v. Dominion 3 Law Assocs., 270 F.R.D. 228, 233 (E.D.N.C. 2010). To date, the Supreme Court and the circuit courts of appeals have not addressed this issue. 6 These opinions have principally relied on two justifications to reach this conclusion. First, they reason that it makes neither sense nor is it fair to require a plaintiff to provide the defendant with enough notice that there is a plausible, factual basis for [a] claim under one pleading standard and then permit a defendant under another pleading standard simply to suggest that some defense may possibly apply in the case. Racick, 270 F.R.D. at 233 (quoting Palmer v. Oakland Farms, Inc., No. 5:10cv00029, 2010 WL 2605179, at *4 (W.D.Va. June 24, 2010). Second, they cite the importance of litigation efficiency, explaining that boilerplate defenses serve only to clutter the requiring docket opposing and . . . create counsel to conduct unnecessary unnecessary work by discovery. Bradshaw, 725 F.Supp.2d at 536 (internal quotation marks and citations omitted). In response, the small minority of courts within this circuit rejecting the application of the Twombly-Iqbal pleading standard absence to of concluded affirmative an that appellate Twombly defenses court and have opinion Iqbal relied on on issue confined the either themselves sufficiency of claims for relief under Rule 8(a). or to the have the See Amason v. PK Mgmt., No. 3:10-1752-MJP-JRM, 2011 WL 1100211, at *8 (D.S.C. Mar. 1, 2011); Lopez v. Asmar s Mediterranean Food, Inc., No. 7 1:10cv1218, 2011 WL 98573, at *2 (E.D.Va. Jan. 10, 2011). For instance, in Lopez, the court focused on the wording differences between Rule 8(a), which requires the pleader to show entitlement to relief, and Rule 8(b), which requires only a statement of the defense in short and plain terms. The Lopez court then stated that both Twombly and Iqbal focused on Rule 8(a) s entitlement conclusion that interpretations of to relief these Rule language opinions begin 8(a)(2) s pleader is entitled to relief. to justify its end with and required showing that the Id. The majority s resolution of this issue presents the more reasoned view, and the text of the Federal Rules supports this conclusion. certainly While not the language identical, those of Rules sections 8(a) and contain 8(b) is important textual overlap, with both subsections requiring a short and plain statement of the claim or defense. Additionally, Form 30, appended to the Federal Rules pursuant to Rule 84, strongly suggests that bare-bones assertions of at least some affirmative defenses will not suffice, as the Form s illustration of a statute of limitations defense sets forth not only the name of the affirmative defense, but also facts in support of it. Given Rule 84 s focus on illustrating the simplicity and brevity that these rules contemplate, the 8 additional factual detail contained in Form 30 is hardly superfluous. conclusory, implausible allegations, In prohibiting Twombly and Iqbal thus merely made explicit principles long implicit in the general pleading requirements of the Federal Rules. Additionally, Twombly and Iqbal recognize the fairness and efficiency concerns highlighted by district courts that have subsequently applied those standards to affirmative defenses. All pleading requirements exist to ensure that the opposing party receives fair notice of the nature of a claim or defense. Bradshaw, 725 F.Supp.2d at 536. recognized this concern, The Supreme Court has long Conley v. Gibson, 355 U.S. 41, 47 (1957), abrogated on other grounds by Twombly, 550 U.S. 544, and it did not application Twombly, go of 550 unnoticed that U.S. at in approach 561 Twombly, to thus affirmative (acknowledging notice within a plaintiff s complaint). supporting defenses. the need for the See fair Litigation efficiency is also an important rationale underlying the Twombly and Iqbal opinions. See Twombly, 550 U.S. at 558-59 (discussing the need for some specificity in pleading before allowing a potentially massive factual controversy to proceed (internal quotation marks and citations omitted)); Iqbal, 129 S.Ct. at 1950 ( Rule 8 . . . does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions. ). 9 Cases refusing to apply the Twombly-Iqbal approach to affirmative defenses attempt to downplay opposing limited these party efficiency can discovery simply forms concerns obtain such as Lopez, 2011 WL 98573, at *2. by noting additional contention that facts the through interrogatories. This response, however, ignores precisely the type of unnecessary discovery that troubled the Supreme Court in Twombly and Iqbal and that has since troubled courts applying their approach to affirmative defenses. e.g., Twombly, (explaining 550 that U.S. the at 572 majority s (Stevens, holding did J., not See, dissenting) even permit limited discovery to determine whether a conspiracy existed among the defendants). Therefore, although Twombly and Iqbal specifically addressed the sufficiency of a complaint under Rule 8(a), the Court likely did not intend to confine its holdings to complaints alone. Plaintiffs here seek to strike six affirmative defenses set forth by Defendants: (1) failure to state a claim upon which relief can applicable be granted, laws, (3) good estoppel, frauds, and (6) waiver.4 4 (2) faith (4) compliance release, (5) with all statute of In the wake of Twombly and Iqbal, many Defendants characterize Plaintiff s purported failure to state a claim for which relief can be granted as an affirmative defense, and Plaintiffs do not challenge this classification. Rule 8(c) does not define the contours of affirmative defenses, 10 courts have concluded that the assertion that a complaint fails to state a claim for which relief could be granted is merely conclusory, and they have stricken it accordingly. See Ulyssix Techs., Inc. v. Orbital Network Eng g, Inc., No. ELH-10-02091, 2011 WL 631145, at *15 (D.Md. Feb. 11, 2011); Racick, 270 F.R.D. at 234-35; Topline Solutions, Inc. v. Sandler Sys., Inc., No. L09-3102, 2010 WL 2998836, at *1-2 (D.Md. July 27, 2010). This conclusion, however, overlooks Form 30, which authorizes generic language regarding a complaint s failure to state a claim, thus implicitly demonstrating that such language satisfies pleading requirements set forth in the Federal Rules. the Twombly and Iqbal certainly clarified these requirements, but they did nothing to Federal Rules Plaintiff s defense alter or the its request must fail. to language contained appendix. strike The For Defendant s lack of within this reason first practical either the alone, affirmative consequence in striking this defense bolsters the conclusion that it need not and courts have frequently disagreed about whether failure to state a claim constitutes such a defense. Compare Martin v. Sw. Va. Gas Co., 135 F.3d 307, 309 (4th Cir. 1998) (recognizing failure to state a claim as an affirmative defense), with Cheney v. Vitro Am., Inc., No. 7:10-cv-00246, 2010 WL 5125281, at *1 (W.D.Va. Dec. 9, 2010) (noting that failure to state a claim is not an affirmative defense). This debate need not be resolved here, however, because the parties do not raise the issue and, as explained below, striking this defense (whatever the reason) would serve no practical purpose. 11 be stricken. Rule 12 expressly permits a party to raise the defense of failure to state a claim in any responsive pleading, as well as when moving for judgment on the pleadings and at trial. Although EMC waived the right to bring a Rule 12(b)(6) motion by filing its answer, that waiver does not impact EMC s ability to raise the same defense at a later time. EMC s defense that Plaintiffs have failed to state a claim thus will not be stricken. A different result must obtain in regard to EMC s five remaining defenses. Each of those defenses sets forth conclusory legal statements wholly devoid of any factual content to support them. As a result, they fail to set forth in short and plain terms the nature of the asserted defense and violate Rule 8 s general pleading requirements, as illustrated interpreted through Form 30, Twombly, and Iqbal. and See, e.g., Bradshaw, 725 F.Supp.2d at 536 (striking a defense that the defendant had [a]t all times . . . acted in good faith ); Francisco v. Verizon South, Inc., No. 3:09cv737, 2010 WL 2990159, at *8 (E.D.Va. July 29, 2010) (granting a plaintiff s motion to strike a defense of good faith efforts to comply with all applicable F.R.D. at 237 laws, rules, (striking and estoppel regulations ); and waiver Racick, defenses 270 as bare legal conclusion[s] ); Peoples State Bank of Wyalusing, PA 12 v. Wellsburg Truck Auto Sales, Inc., No. 3:10-CV-433, 2010 WL 4922877, at * 4 (M.D.Pa. Nov. 29, 2010) (striking a statute of frauds defense that did not state in any way why Defendants [were] entitled to [it] when Rule 8(b) requires a statement of the defense defenses estoppel, of in short good release, faith and plain compliance statute of terms ). Therefore, EMC s laws, with all applicable frauds, and waiver will be stricken. The deadline for amendment of pleadings in the scheduling order passed on September 9, 2011. (ECF No. 25). In light of this decision, EMC may have an additional twenty-one days to file a motion for leave to amend its answer. IV. Conclusion For the foregoing reasons, Plaintiffs motion to strike affirmative defenses will be granted in part and denied in part. EMC will be permitted to file a motion for leave to amend its answer in accordance with this Opinion. A separate Order will follow. /s/ DEBORAH K. CHASANOW United States District Judge 13