Debra
C. Poplin, United States Magistrate Judge
This
case is before the undersigned pursuant to 28 U.S.C. §
636, the Rules of this Court, and Standing Order 13-02.
Now
before the Court is Plaintiffs' Motion to Strike Certain
Affirmative Defenses [Doc. 40], filed on December 22, 2020.
Defendants subsequently filed a Response [Doc. 44] in
opposition, to which Plaintiffs filed a Reply [Doc. 45]. The
matter is now ripe for adjudication. Accordingly, the Court
RECOMMENDS that Plaintiff's Motion [Doc. 40] be GRANTED
IN PART and DENIED IN PART.
The
Court has previously set forth in detail Plaintiffs'
claims and the facts alleged in the Complaint in its order
denying Defendants' motion to dismiss on November 9
2020. [Doc. 34]. For background, Plaintiff Diamond Resorts
Management, Inc. manages timeshare resorts and Plaintiffs
Diamond Resorts U.S. Collection Development, LLC and Diamond
Resorts Hawaii Collection Development, LLC “market and
sell vacation membership points.” [Doc. 1 at ¶
29]. Defendant Wesley Financial Group, LLC is a timeshare
cancellation company and Defendant Charles William McDowell
III is the founder and CEO of the company.[1]
Plaintiffs
argue that Defendants' actions of directing Diamond's
owners to stop making payments on their promissory notes,
mortgages, and fees that they contracted to pay “have
directly and proximately damaged Diamond Resorts in the form
of the Diamond Owners' unpaid financial obligations, for
Wesley's own pecuniary benefit.” [Id. at
¶ 58]. Plaintiffs filed their complaint on June 8, 2020,
asserting claims against Defendants for false advertising
under the Lanham Act, 15 U.S.C. § 1125(a), and
violations of the Tennessee Consumer Protection Act
(“TCPA”), Tenn. Code Ann. §§ 47-18-101,
et seq. [Id.].
Plaintiffs'
Motion to Strike [Doc. 40], filed pursuant to Federal Rule of
Civil Procedure 12(f), seeks to strike several of
Defendants' affirmative defenses-namely, Affirmative
Defenses 1-5, 9, and 11-16. The Court will address the
parties' respective arguments regarding each challenged
affirmative defense.
The
Court has considered the parties' filings, and for the
reasons explained below, the Court
RECOMMENDS Plaintiff's Motion
[Doc. 40] be GRANTED IN PART and
DENIED IN PART.
Plaintiff
has objected to the following affirmative defenses:
First Defense: Plaintiffs engage in a systematic course of
inequitable, unfair, dishonest, fraudulent or deceitful
conduct in marketing, selling, financing, and managing
timeshares. As a routine business practice, Diamond Resorts
and its affiliates sell timeshare interests in a
high-pressure environment laden with misrepresentation and
deception.
Wesley's timeshare cancellation services are focused on
assisting timeshare owners who have been the victims of
deceptive or improper conduct in exiting their timeshare
interest. Plaintiffs' inequitable, unfair, dishonest,
fraudulent, and deceitful conduct has harmed the consumers to
whom Wesley offers and provides its services, and injunctive
relief would allow Plaintiffs to continue engaging in
misconduct in marketing, selling, financing, and managing
timeshares. Put another way, Wesley only offers its services
to, and is only able to obtain relief for, customers to whom
Plaintiffs have lied and whom Plaintiffs have defrauded. As a
result, Plaintiffs' claims for injunctive relief based on
purported violations of the Lanham Act and the Tennessee
Consumer Protection Act are barred in whole or in part by the
doctrine of unclean hands.
Second Defense: Defendants reallege and incorporates by
reference the allegations contained in their First Defense as
if set forth herein. Any injury alleged by Plaintiffs as a
result of Wesley's timeshare cancellation services has
been caused in at least substantially equal part by the
misconduct of Plaintiffs and their agents in marketing,
selling, financing, and managing timeshares. As a result,
Plaintiffs' claims for injunctive relief based on
purported violations of the Lanham Act and the Tennessee
Consumer Protection Act are barred in whole or in part by the
doctrine of in pari delicto
Third Defense: Wesley engages in a timeshare cancellation
service business and Wesley has a privilege to engage in the
business practices and methods employed by it to assist its
customers in severing their timeshare relationships in order
to promote its financial and economic interests. Wesley does
not use improper means in conducting its timeshare
cancellation services. As a result, Plaintiffs' claims
for injunctive relief based on purported violations of the
Lanham Act and the Tennessee Consumer Protection Act are
barred in whole or in part by Defendant's privilege to
protect its economic interest.
Fourth Defense: Plaintiffs allege that their claims concern a
matter involving competition between Plaintiffs and Wesley.
Without employing wrongful means or creating or continuing an
unlawful restraint of trade, Wesley assists timeshare owners
in cancelling their timeshares with Plaintiffs for the
purposes of advancing its business interests. As a result,
Plaintiffs' claims for injunctive relief based on
purported violations of the Lanham Act and the Tennessee
Consumer Protection Act are barred in whole or in part by the
privilege to compete.
Fifth Defense: Any loss or damage allegedly suffered by
Plaintiffs, including to their reputation or goodwill, was
caused or contributed to by individuals or entities over whom
Defendants have no control.
There are a number of individuals and entities throughout the
United States and beyond its borders who are extraordinarily
critical of the timeshare industry, including with respect to
sales and marketing practices, financial pressures exerted on
timeshare members and their lineal descendants, and the
discordance between timeshare products that are marketed and
promoted versus the products that are received and are
actually usable by the consumer. Damage to Plaintiffs'
reputation and loss of goodwill is attributed, in whole or in
part, to these other individuals or entities. As a result, in
the event of an adverse finding on any Count in the
Complaint, Defendants are not liable or, alternatively, are
only liable for their pro rata share.
Ninth Defense: The Complaint is barred, in whole or in part,
by Plaintiffs' failure to mitigate their damages.
Eleventh Defense: Plaintiffs' claims are barred, in whole
or in part, by the doctrine of laches.
Twelfth Defense: Plaintiffs' claims are barred by the
First Amendment to the United States Constitution.
Thirteenth Defense: Plaintiffs do not have standing to assert
the claims alleged in the Complaint.
Fourteenth Defense: Plaintiffs' claims are barred because
Defendants' alleged statements were truthful, were not
misleading or deceptive in any way, and constitute
non-actionable opinion and puffery.
Fifteenth Defense: Plaintiffs' claims are barred because
Plaintiffs have adequate remedies at law, have no substantial
likelihood of success on the merits, will not suffer
irreparable injury, and because the requested relief will not
serve the public interest.
Sixteenth Defense: Plaintiffs' claims are barred because
Plaintiffs have suffered no harm from the conduct alleged
and, to the contrary, have likely received a financial
benefit from the cancellation of the timeshare contracts at
issue, which (upon information and belief) are subsequently
resold for a profit.
[Doc. 35 at 11-14].
Rule
12(f)(2) provides that the “court may strike from a
pleading an insufficient defense or any redundant, immaterial
impertinent, or scandalous matter” and that the court
may act “on motion made by a party . . . within 21 days
after being served with the pleading.” Fed.R.Civ.P.
12(f)(2). Motions to strike are viewed with disfavor and are
not frequently granted. Brown & Williamson Tobacco
Corp. v. United States, 201 F.2d 819, 822 (6th Cir.
1953). “Striking a pleading is considered ‘a
drastic remedy to be resorted to only when required for the
purposes of justice' and it ‘should be sparingly
used by the courts.'” E.E.O.C. v. FPM Grp.,
Ltd., 657 F.Supp.2d 957, 966 (E.D. Tenn. 2009) (quoting
Brown & Williamson Tobacco Corp, 201 F.2d at
822). Motions to strike generally “will be denied
unless the allegations have ‘no possible relation or
logical connection to the subject matter of the controversy
and may cause some form of significant prejudice to one or
more of the parties to the action.'” Mayes v.
Envtl. Prot. Agency, No. 3:05-CV-478, 2006 WL 2709237,
at *4 (E.D. Tenn. Sept. 20, 2006) (quoting 5C Charles A.
Wright & Arthur R. Miller, Federal Practice &
Procedure § 1382 (3d ed. 2004)), cited in
Almanza v. Baird Tree Serv. Co., No. 3:10-CV-311, 2012
WL 4758276, at *3 (E.D. Tenn. Oct. 5, 2012).
In
determining the sufficiency of an affirmative defense, some
courts apply what is known as the
“Twombly/Iqbal” standards, requiring the
application of a heightened plausibility pleading
standard.[2] In other words, the courts applying the
“Twombly/Iqbal” standards require an
affirmative defense to provide enough notice to the opposing
party that there is some plausible, factual basis for the
asserted defense and not simply a suggestion of possibility
that some defense may apply to the case. HCRI TRS
Acquirer, LLC v. Iwer, 708 F.Supp.2d 687, 691 (N.D. Ohio
April 28, 2010) (citing Hayne v. Green Ford Sales
Inc., 263 F.R.D. 647, 650 (D.Kan. 2009)). As many courts
have noted, however, there is a split amongst the districts
courts as to whether the standard set forth in
Tw...
