Ameriwood Industries Intern. v. Arthur Andersen
| Decision Date | 11 March 1997 |
| Docket Number | No. 1:95-CV-67.,1:95-CV-67. |
| Citation | 961 F.Supp. 1078 |
| Parties | AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION, a Michigan corporation, Plaintiff, v. ARTHUR ANDERSEN & CO., n/k/a Arthur Andersen LLP, a partnership, Defendant. |
| Court | U.S. District Court — Western District of Michigan |
Gregory L. Curtner, Gary W. Faria, Miller, Canfield, Paddock & Stone, Detroit, MI, Marta M. Manildi, Miller, Canfield, Paddock & Stone, Ann Arbor, MI, for Plaintiff.
Richard A. Glaser, Geoffrey A. Fields, Dickinson, Wright, Moon, Van Dusen & Freeman, Grand Rapids, MI, for Defendant.
This case has been pending for 25 months and is scheduled for a jury trial beginning April 8, 1997. Presently before the court are five motions. Plaintiff Ameriwood Industries ("Ameriwood") has filed four separate motions to dismiss or for summary judgment on various counterclaims and affirmative defenses. Defendant Arthur Andersen & Co. ("Andersen") has moved to partially dismiss the complaint as barred by the statute of limitations.
The present malpractice and breach of contract case arose out of securities violations allegedly committed by Ameriwood (formerly Rospatch Corporation), its accountants (Andersen) and legal counsel. Shareholder actions were instituted against all three, and settlements eventually were entered.
The history of this litigation has been discussed in the previous opinions of this court dismissing plaintiff's contribution claim and various other matters. Essentially, however, Ameriwood alleges that Andersen is liable for damages to Ameriwood caused by Andersen's audits in the years 1986, 1987, 1988 and 1989, which failed to discover the existence of high-level fraud at Ameriwood. Andersen, for its part, denies negligence and raises various counterclaims based on its detrimental reliance upon fraudulent documents and information provided to it by Ameriwood.
At this time, Ameriwood has filed four separate motions to dismiss or for summary judgment. First, Ameriwood has moved to dismiss counterclaims I through IV because Andersen's own allegations fatally undermine its claims. Second, Ameriwood has moved to dismiss counterclaims V, VI and VII for failure to state a claim on which relief can be granted, and has requested sanctions. Third, Ameriwood has moved to dismiss most of Andersen's affirmative and special defenses for various assorted and overlapping reasons. Fourth, Ameriwood moves for summary judgment on counterclaims I through IV.
Andersen, for its part, has moved to dismiss Ameriwood's claims of professional negligence and breach of contract based on Andersen's performance of company audits for 1986, 1987 and 1988 fiscal years on the basis of the statute of limitations.
I will address each motion in turn.
Plaintiff's first motion requires little attention. Ameriwood contends that Andersen's counterclaims alleging fraud are fatally flawed because elsewhere in its answer and counterclaim, Andersen denies that its financial statements were materially incorrect, even in light of the after-discovered fraud.
Ameriwood's argument, however, is patently frivolous. Andersen is entitled to plead its claims and defenses in the alternative. See Fed.R.Civ.P. 8(e)(2). Accordingly, mere contradiction in theories does not bar a claim.
Moreover, as I read Andersen's counterclaim, it denies that its audits contained material or misleading misstatements. It asserts, however, that should a jury conclude that any misstatements were material or misleading, Ameriwood itself was responsible for the misstatements. Such an argument is not contradictory.
Accordingly, Ameriwood's motion to dismiss counterclaim counts I through IV is denied as unfounded.
Ameriwood has moved to dismiss or for summary judgment of counterclaim counts V, VI and VII, contending that Andersen's claims are insufficient as a matter of law. Ameriwood also seeks sanctions for costs associated with bringing the motion to dismiss, ostensibly made necessary by Andersen's refusal to agree to voluntary dismissal of the counts. Ameriwood presents extensive arguments concerning why Andersen's counts V, VI and VII are legally and factually insupportable as a matter of law. Ameriwood also attaches copies of its correspondence to Andersen seeking voluntary dismissal of the action.
The counts at issue involve three theories under which Andersen seeks contribution and attempts to avoid the effects of a contribution bar order entered at the time Ameriwood settled its part of the underlying securities litigation. In response to Ameriwood's motion to dismiss, Andersen contends that its contribution counterclaims expressly were contingent on this court's denial of Andersen's then-pending motion to dismiss Ameriwood's claim for contribution directed at Andersen. As a result, Andersen acknowledges that the counterclaims at issue, by their own terms, are now moot in light of this court's March 1996 order dismissing Ameriwood's contribution claim.
With respect to the request for sanctions, Andersen attaches its replies to the letters written by Ameriwood seeking voluntary dismissal. In those replies, which Ameriwood has not contested, Andersen states that it would be willing to agree to voluntary dismissal if the parties could agree either that Ameriwood would abandon its intent to appeal this court's decision on Ameriwood's claim for contribution or to dismiss without prejudice with an appropriate tolling agreement. Andersen expressly advised Ameriwood that it considered the counterclaims moot, that it had conducted no discovery on those claims and that they were no longer in issue in the case. Andersen advised Ameriwood that its only requirement for dismissing the claims voluntarily was to preserve its ability to reinstate the counterclaims in the event of a successful appeal by Ameriwood of its own contribution claim.
Ameriwood has not disputed the documents submitted by Andersen. Yet Ameriwood neglected to mention in its motion that Andersen was not pursuing the claims and considered them moot. Nor has Ameriwood contended that the claims should be dismissed as moot based on this court's March 1996 decision holding that contribution claims were insupportable where a party had not completely settled the claims of the nonsettling defendant. Instead, Ameriwood has asked this court to decide its motion on the merits of three claims that are no longer at issue in the case.
As Andersen observes, motions on the merits of the counterclaims are not ripe. The claims are moot on their face. The claims also are moot insofar as this court previously has held that no contribution action will lie where the settling party has not resolved the complete liability of the party from whom it seeks contribution. As a consequence, there exists no actual case or controversy before the court for deciding the legal sufficiency of such claims generally.
In addition, Ameriwood's request for sanctions is without merit. Andersen was not required to prejudice its rights in the event Ameriwood prevailed on appeal. Once Andersen abandoned its claims, both by the terms of the counts themselves and by express notification to Ameriwood, Ameriwood could have obtained dismissal on the basis of mootness in light of the court's March 1996 decision. Ameriwood, however, did not seek such dismissal, moving instead for this court to render a decision on the merits of issues no longer in controversy. Such a motion was ill-founded and obviously not ripe.
Accordingly, because counterclaim counts V, VI and VII are now moot both by their terms and by the reasoning of this court's opinion and order entered March 19, 1996, the court will grant Ameriwood's motion to dismiss for reasons other than those stated in the motion. Ameriwood's request for sanctions is denied.
In its third motion, Ameriwood seeks to dismiss most of Arthur Andersen's affirmative and special defenses, asserting varying multiple reasons.
Federal Rule of Civil Procedure 12(f) provides that "the court may order stricken from any pleading any insufficient defense." Fed.R.Civ.P. 12(f). Although motions to strike affirmative defenses pursuant to Rule 12(f) are generally disfavored, such motions are within the sound discretion of the district court. Federal Sav. & Loan Ins. Corp. v. Burdette, 696 F.Supp. 1183, 1186 (E.D.Tenn.1988); FDIC v. Butcher, 660 F.Supp. 1274, 1277 (E.D.Tenn.1987); FDIC v. Berry, 659 F.Supp. 1475, 1479 (E.D.Tenn. 1987). An affirmative defense is insufficient if, as a matter of law, the defense cannot succeed under any circumstances. Brown & Williamson Tobacco Corp. v. United States, 201 F.2d 819, 822 (6th Cir.1953). A motion to strike under Rule 12(f) is proper where it will eliminate spurious issues before trial and streamline the litigation. Kelley v. Thomas Solvent Co., 714 F.Supp. 1439, 1442 (W.D.Mich.1989).
In response to Ameriwood's motion, Andersen first asserts that the motion should be denied as untimely. I disagree. Fed. R.Civ.P. 12(f) requires motions to strike pleadings to be filed within 20 days after service, but the rule also authorizes the district court to strike pleadings "upon the court's own initiative at any time...." Id. This grant of judicial discretion has been interpreted to allow the district court to consider untimely motions to strike and to grant them if doing so seems proper. See United States v. Lot 65 Pine Meadow, 976 F.2d 1155, 1157 (8th Cir.1992); 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1380, at 652-54 (2d ed.1990). Accordingly, this court has authority to consider such late motions.
Andersen concedes that defenses # # 11, 14, 30,...
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