Geomc Co. v. Calmare Therapeutics Inc.

• Decision Date: 12 March 2019
• Docket Number: August Term 2018,Docket No. 17-3502-cv
• Citation: 918 F.3d 92
• Parties: GEOMC CO., LTD., Plaintiff-Counter-Defendant-Appellee, v. CALMARE THERAPEUTICS INCORPORATED, Defendant-Counter-Claimant-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

918 F.3d 92

GEOMC CO., LTD., Plaintiff-Counter-Defendant-Appellee,

v.CALMARE THERAPEUTICS INCORPORATED, Defendant-Counter-Claimant-Appellant.¹

Docket No. 17-3502-cv

August Term 2018

United States Court of Appeals, Second Circuit.

Argued: September 11, 2018

Decided: March 12, 2019

William Feldman, Haynes and Boone, LLP, New York, NY for Defendant-Counter-Claimant-Appellant Calmare Therapeutics, Inc.

Kristen B. Weil, (Richard M. Zuckerman, on the brief), Dentons US LLP, New York, NY for Plaintiff-Counter-Defendant-Appellee GEOMC Co., Ltd.

Before: NEWMAN, JACOBS, and POOLER, Circuit Judges.

JON O. NEWMAN, Circuit Judge:

This appeal in complicated litigation concerning a contract dispute merits an opinion to clarify the standards for pleading affirmative defenses and granting a motion to strike them, see Fed. R. Civ. P. 12(f), and for presenting and challenging new counterclaims filed, or sought to be filed, in a responsive pleading to a second amended complaint, see Fed. R. Civ. P. 15(a). Other matters raised by the appeal have been adjudicated in a summary order filed this day.

Defendant-Appellant Calmare Therapeutics, Inc. ("Calmare"), a Delaware corporation, appeals from the Sept. 29, 2017, judgment of the District Court for the District of Connecticut (Victor A. Bolden, District Judge) in favor of Plaintiff-Appellee GEOMC Co., Ltd. ("GEOMC"), a South Korean corporation, entered after a bench trial. The litigation concerns a dispute arising from sales of medical devices for managing pain.

Background

Consideration of the District Court's ruling striking two of Calmare's affirmative defenses and five of its counterclaims requires explication of the procedural context of the ruling. GEOMC filed an amended complaint in October 2014, asserting five causes of action. Calmare filed an answer in December 2014, asserting nine affirmative defenses, but no counterclaims. In September 2015, almost a year later, Calmare sought leave to amend its answer to the amended complaint to add several additional affirmative defenses and several counterclaims. GEOMC opposed Calmare's request and at the same time sought leave to amend its amended complaint by adding a sixth cause of action.

Confronting an unusual situation, Judge Bolden fashioned an unusual response. On June 13, 2016, he denied Calmare's motion for leave to amend its answer to GEOMC's amended complaint, granted GEOMC's motion for leave to file a second amended complaint, and permitted Calmare to file an amended answer to the second amended complaint "subject to [GEOMC's] ability to move, under Rule 12(f), to strike material in [Calmare's] answer that [GEOMC] believes exceeds the scope of permissible amendment." Dist. Ct. Dkt. ECF Nos. 135, 136. In effect, he authorized the Plaintiff to use a motion to strike under Rule 12(f) of the Federal Rules of Civil Procedure to raise whatever issues it would have raised in opposition to the Defendant's motion to amend its answer under Rule 15(a)(2).²

On June 15, 2016, GEOMC filed a second amended complaint, adding, as a sixth cause of action, a claim for breach of contract. On June 30, 2016, Calmare filed an answer to the second amended complaint, adding six affirmative defenses and six counterclaims. On July 25, 2016, GEOMC moved to strike all of Calmare's six new affirmative defenses and five of its six new counterclaims. On Oct. 19, 2016, the District Court granted in part and denied in part GEOMC's motion to strike. The Court denied the motion with respect to four affirmative defenses, and, pertinent to the pending appeal, struck Calmare's sixth and seventh affirmative defenses and five counterclaims. See GEOMC Co. v. Calmare Therapeutics, Inc. , No. 3:14-CV-01222 (VAB), 2016 WL 6122930, at *5-6 (D. Conn. Oct. 19, 2016). Calmare seeks review of that ruling.

Discussion

I. Striking Calmare's Affirmative Defenses

The standards for determining the proper pleading of an affirmative defense and for granting a motion to strike an affirmative defense have had a curious evolution in this Circuit.³ Uncertainty has sometimes resulted from the fact that district courts, which have made most of the rulings on sufficiency of affirmative defenses and motions to strike them, have not always distinguished between affirmative defenses in a timely filed answer and those later filed, either with or without court permission to amend an answer, especially those filed in late stages of litigation. Rule 12(a)(1)(A)(i) requires an answer to be filed within 21 days after service of a summons and complaint. Rule 15(a)(1)(A) provides that a party is entitled to amend its answer 21 days after serving it, Rule 15(a)(2) permits an amended answer thereafter with the opposing party's consent or leave of court, which should be "freely give[n] ... when justice so requires," and Rule 15(a)(3) provides: "Unless the court orders otherwise, any required response to an amended pleading must be made within the time remaining to respond to the original pleading or within 14 days after service of the amended pleading, whichever is later."

The starting point for analysis is Rule 12(f), which provides that a court may strike "from a pleading" any "insufficient defense or any redundant, immaterial, impertinent, or scandalous matter."⁴ After the adoption of the Federal Rules of Civil Procedure in 1938, the first time we considered the propriety of striking an affirmative defense appears to be United States v. Oswego Falls Corp. , 113 F.2d 322 (2d Cir. 1940). We there ruled that a defense, apparently timely filed, was properly stricken because no facts were pleaded to support the defense. See id. at 325. Shortly thereafter, we ruled, apparently for the first time, that an affirmative defense was properly stricken because it was legally insufficient. See De Pasquale v. Williams-Bauer Corp ., 151 F.2d 578, 580 (2d Cir. 1945) ; see also Schram v. Schwartz , 68 F.2d 699, 702 (2d Cir. 1934) (same; pre-Rules decision).

Not until many years later did we endeavor to expand, even briefly, on the pleading standard necessary for an affirmative defense to survive a motion to strike. In William Z. Salcer, Panfeld, Edelman v. Envicon Equities Corp. , 744 F.2d 935 (2d Cir. 1984) (" Salcer "), vacated on other grounds , 478 U.S. 1015, 106 S.Ct. 3324, 92 L.Ed.2d 731 (1986), we stated that a motion to strike an affirmative defense, apparently timely filed, will not be granted unless "it appears to a certainty that plaintiffs would succeed despite any state of the facts which could be proved in support of the defense." Id . at 939 (internal quotation marks omitted). This formulation expansively phrased the pleading standard with the wording then used by the Supreme Court in Conley v. Gibson , 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), for testing the sufficiency of a complaint: "[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Id. at 45-46, 78 S.Ct. 99. That wording, the Court ruled in Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), "is best forgotten," id . at 563, 127 S.Ct. 1955, and was replaced with a "plausibility standard," id . at 560, 127 S.Ct. 1955 ; see Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (same).

Fifteen years after Salcer , a District Court in this Circuit purported to extract from that opinion a three-part test for striking a timely filed affirmative defense:

"In order to prevail on a motion to strike [an affirmative defense], a plaintiff must show that: (1) there is no question of fact which might allow the defense to succeed; (2) there is no question of law which might allow the defense to succeed; and (3) the plaintiff would be prejudiced by inclusion of the defense."

S.E.C. v. McCaskey , 56 F.Supp.2d 323, 326 (S.D.N.Y. 1999). This formulation divided Salcer 's reference to facts into two factors, one concerned with facts,⁵ and the other concerned with law. The McCaskey formulation also added a third factor, prejudice to the plaintiff, a factor not mentioned in Salcer .

After McCaskey , district courts in this Circuit repeated the three McCaskey factors, initially in identical wording and later with only slight variations, in a series of decisions, set out in the margin,⁶ culminating in Coach, Inc. v. Kmart Corps ., 756 F.Supp.2d 421, 425-26 (S.D.N.Y. 2010).

In the pending appeal, the District Court cited Coach for the proposition that " ‘ [i]f a court determines that a defense is legally insufficient, the court must next determine whether inclusion of the defense would prejudice the plaintiff.’ " Special App'x 5 (quoting Coach , 756 F.Supp.2d at 425-26 ). The District Court also stated the three relevant factors in terms somewhat different from those used in the McCaskey formulation or in Coach . The Court said that the party moving to strike a defense

"ordinarily must show that ‘(1) no evidence in support of the allegations would be admissible; (2) the allegations have no bearing on the issues in the case; and (3) permitting the allegations to stand would result in prejudice to the movant.’ "

Special App'x 4 (quoting Tucker v. American International Group, Inc. , 936 F.Supp.2d 1, 16 (D. Conn. 2013) ). The three Tucker factors can be traced back through a series of decisions, set out in the margin,⁷ that did not concern a motion to strike affirmative defenses, but concerned a motion to strike either an allegation of a complaint or material in a pleading.

Before adjudicating the propriety of the District Court's striking two of Calmare's affirmative defenses, we take this occasion to clarify the factors relevant to striking an affirmative defense. To avoid having district courts continue to repeat the three-factor formulation as worded in McCaskey , we consider each of those factors in turn.

Whether the first of the McCaskey factors should be reworded in...