Brooks v. Harlon Rip Caswell, an Individual, Rip Caswell Sculptures, Inc.

Decision Date03 September 2015
Docket NumberCase No. 3:14-cv-01232-AC
CourtUnited States District Courts. 9th Circuit. United States District Court (Oregon)
PartiesGRETCHEN BROOKS, an individual, Plaintiff, v. HARLON RIP CASWELL, an individual, RIP CASWELL SCULPTURES, INC., an Oregon corporation d/b/a CASWELL GALLERY, an Oregon assumed business name, and CASWELL PROPERTIES, LLC, a Washington limited liability company, and DOES 1-5, Defendants.

GRETCHEN BROOKS, an individual, Plaintiff,
an Oregon corporation d/b/a CASWELL GALLERY,
an Oregon assumed business name, and CASWELL PROPERTIES, LLC,
a Washington limited liability company, and DOES 1-5, Defendants.

Case No. 3:14-cv-01232-AC


September 3, 2015


ACOSTA, Magistrate Judge:


Plaintiff Gretchen Brooks ("Brooks") brings this action against Rip Caswell Sculptures, Inc., d/b/a Caswell Gallery, Caswell Properties, LLC, and Harlon Rip Caswell (collectively "Defendants") stemming from a prior lawsuit which was resolved when the parties entered into a Settlement

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Agreement and Mutual Release dated September 21, 2011 (the "Agreement"). In their Second Amended Answer, Defendants assert an affirmative defense that Brooks breached the Agreement by failing to engage in good faith mediation prior to filing this lawsuit. Brooks argues the defense is moot, the mediation requirement does not apply, an exception to the mediation requirement excuses her filing the lawsuit before mediation, and Defendants waived the defense.

Currently before the court is Brooks's motion to strike the affirmative defense under Federal Rule of Civil Procedure 12(f) ("Rule 12(f)"). Brooks alternatively moves for partial judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c) ("Rule 12(c)") and partial summary judgment under Federal Rule of Civil Procedure 56(a) ("Rule 56(a)").1 The court finds Brooks's Rule 12(f) motion is untimely, Defendants' affirmative defense is not moot because relief could be granted, Defendants did not waive the defense, and whether an exception applies to the Agreement's mediation requirement is a question of fact. Accordingly, the court denies Brooks's motion.


Brooks loaned more than five million dollars to Defendants to facilitate development of Harlon Rip Caswell's sculpture business. (Am. Compl. ¶ 1.) Defendants failed to repay the loan. (Am. Compl. ¶ 1.) Brooks filed a lawsuit in state court against Defendants, which the parties ultimately settled. (Am. Compl. ¶ 1.) Pursuant to the Agreement, Rip Caswell Sculptures, Inc. ("RCS"), executed a nonrecourse promissory note in the amount of $650,000 payable to Brooks (the "Note"), and a security agreement governing the collateral for the Note (the "Security Agreement"). (Am. Compl. ¶¶ 1, 51.) RCS defaulted on the Note on August 6, 2012. (Am. Compl. ¶ 31.)

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Brooks filed this action on July 31, 2014, seeking "to obtain the full settlement which defendants' wrongful actions deprived her." (Compl. ¶ 2). Brooks alleged claims for fraudulent and negligent misrepresentations which induced her to execute the Agreement; breach of the Agreement, Note, and Security Agreement; breach of the duty of good faith and fair dealing implied in the Agreement;2 common-law conversion; and statutory elder financial abuse. (Compl. ¶¶ 29-57.)

Immediately after filing this lawsuit, Brooks sent a "courtesy" copy of the complaint to Defendants but did not officially serve the complaint on Defendants at that time. (Fite Decl. dated April 3, 2015, (ECF No. 46) ("Fite Decl.") ¶ 4.) The July 31, 2014 cover letter accompanying the complaint explained:

Enclosed is a courtesy copy of the complaint filed by Gretchen Brooks today against Mr. Caswell, Rip Caswell Studio, Inc., and Caswell Properties, LLC. Plaintiff is refraining at this time from formal service of the summons and complaint. This is to allow the parties to mediate and outlined in section 31 of the September 21, 2011 Settlement Agreement and Mutual Release. Because of concerns regarding a potential statute of limitation, it was necessary to file the complaint without delay, consistent with the provision of section 31 allowing the parties to take actions necessary to protect their rights.

Plaintiff hereby demands mediation under section 31. Plaintiff proposes the following mediators" Jeff Batchelor (Portland), Teresa Wakeen (Seattle). Please let us know if you wish to propose alternate mediators or locations.

Please contact us at your earliest opportunity so we can get a mediation scheduled within the next 30 days as required by the settlement agreement.

(Seidl Decl. dated March 16, 2015 (ECF No. 42) Ex. 5.)3 On September 2, 2014, the parties

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unsuccessfully engaged in mediation for three hours before retired Multnomah County Circuit Judge Douglas Beckman. (Fite Decl. ¶¶ 6-7.) Brooks served Defendants, through a waiver of summons, effective September 4, 2014. (Fite Decl. ¶ 8.)

In their initial answer, filed October 7, 2014, and first amended answer, filed October 31, 2014, Defendants asserted counterclaims alleging that Brooks breached the Agreement by failing to mediate in good faith prior to filing suit. (Def.'s Answer ¶ 86; Def.'s Am. Answer ¶ 73.) In their Second Amended Answer, filed March 12, 2015, Defendants asserted this theory as an affirmative defense for the first time, alleging the Agreement required Brooks to engage in good faith mediation before filing a lawsuit, and Brooks breached this condition by filing this lawsuit without notice or engaging in mediation. (Def.'s Second Am. Answer ¶¶ 68-69.) The relevant section of the Agreement provides:

If any dispute, controversy, or claim arises out of or relat[es] to this Agreement, the Parties agree first to try in good faith to settle the dispute by non-binding mediation before resorting to arbitration, litigation, or some other dispute resolution procedure . . . . No Party shall be obligated to attend more than one mediation session to fulfill any good faith requirement under this Paragraph, and in the event mediation does not settle the dispute, each Party retains all rights to seek to resolve the dispute through the court process. Nothing in this Paragraph shall prevent either Party from seeking emergency relief, including injunctive relief, from a court in the event a Party reasonably believes that such relief is necessary to protect his, her, or its rights under this Agreement. In addition, this Paragraph does not in any way affect or inhibit Plaintiff's right to enforce any rights under the Promissory Note or Brooks Security Agreement in the event of a default thereunder without mediation or court or other legal process.

(Hahs Decl. dated Dec. 11, 2014, (ECF No. 16)("Hahs Decl.") Ex. A at 24.)4

Defendants contend Brooks's failure to mediate before filing this action violates this

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provision and, therefore, her claims arising out of or relating to the Agreement should be dismissed. Brooks filed her reply to Defendants' Second Amended Answer on March 30, 2015, and her motion to strike Defendants' affirmative defense on May 1, 2015.

Legal Standard

I. Rule 12(f) Motion to Strike

Under Rule 12(f), a party may move to strike an affirmative defense for insufficiency before responding to a pleading or, where no response is allowed, within twenty-one days after the moving party is served with a pleading. FED. R. CIV. P. 12(f). In the alternative, a court may strike a defense on its own motion. Id. A court should grant a Rule 12(f) motion to "avoid the expenditure of time and money that must arise from litigating spurious issues by dispensing with those issues prior to trial." Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970, 973 (9th Cir. 2010) (quoting Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir. 1993)). However, Rule 12(f) motions "are disfavored and infrequently granted" by the courts. Legal Aid Servs. of Or. v. Legal Srvs. Corp., 561 F. Supp. 2d 1187, 1190 (D. Or. 2008).

In Hayden v. U.S., No. 3:14-cv-1060-AC, 2015 WL 350665 (D. Or. Jan. 26, 2015), this court applied the "plausibility" pleading standard announced in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and explained in Ashcroft v. Iqbal, 556 U.S. 5662 (2009), to affirmative defenses. In doing so, this court rejected the application to Rule 12(f) of the fair notice standard articulated in Wyshak v. City Nat'l Bank, 607 F.2d 824 (9th Cir. 1979). Under the Twombly and Iqbal standard, an affirmative defense must contain "enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570.

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II. Rule 12(c) Motion for Judgment on the Pleadings

A court may grant partial judgment on the pleadings in a Rule 12(c) motion when the non-moving party fails "to state a legal defense to a claim." FED. R. CIV. P. 12(h)(2)(B). Because Rule 12(c) and Federal Rule of Civil Procedure 12(b)(6) are "functionally identical," courts must apply "the same standard of review" to both motions. United States ex rel. Cafasso v. Gen. Dynamics C4 Sys, Inc., 637 F.3d 1047, 1054 n.5 (9th Cir. 2011).

A pleading must contain "enough [factual allegations] to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. The proposition that a court must accept all allegations in a complaint does not force a court to accept allegations which are mere labels or legal conclusions as true. Id. Facts do not need to be detailed, and the "complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and 'that a recovery is very remote and...

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