In re Mass. Mut. Life Ins. Co.'s Motions to Strike, Civil Action No.: 11-cv-30035-MAP (Document No. 84)

• Decision Date: 17 October 2012
• Docket Number: Civil Action No.: 11-cv-30126-MAP (Document No. 97),Civil Action No.: 11-cv-30285-MAP (Document No. 47),Civil Action No.: 11-cv-30094-MAP (Document No. 119),Civil Action No.: 11-cv-30141-MAP (Document No. 44),Civil Action No.: 11-cv-30039-MAP (Document No. 66),Civil Action No.: 11-cv-30047-MAP (Document No. 60),Civil Action No.: 11-cv-30048-MAP (Document No. 80),Civil Action No.: 11-cv-30127-MAP (Document No. 43),Civil Action No.: 11-cv-30035-MAP (Document No. 84),Civil Action No.: 11-cv-30044-MAP (Document No. 56)
• Citation: In re Mass. Mut. Life Ins. Co.'s Motions to Strike, Civil Action No.: 11-cv-30035-MAP (Document No. 84), Civil Action No.: 11-cv-30039-MAP (Document No. 66), Civil Action No.: 11-cv-30044-MAP (Document No. 56) (D. Mass. Oct 17, 2012)
• Parties: IN RE MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY'S MOTIONS TO STRIKE
• Court: U.S. District Court — District of Massachusetts

IN RE MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY'S MOTIONS TO STRIKE

Civil Action No.: 11-cv-30035-MAP (Document No. 84)

Civil Action No.: 11-cv-30039-MAP (Document No. 66)

Civil Action No.: 11-cv-30044-MAP (Document No. 56)

Civil Action No.: 11-cv-30047-MAP (Document No. 60)

Civil Action No.: 11-cv-30048-MAP (Document No. 80)

Civil Action No.: 11-cv-30094-MAP (Document No. 119)

Civil Action No.: 11-cv-30126-MAP (Document No. 97)

Civil Action No.: 11-cv-30127-MAP (Document No. 43)

Civil Action No.: 11-cv-30141-MAP (Document No. 44)

Civil Action No.: 11-cv-30285-MAP (Document No. 47)

UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS

October 17, 2012

MEMORANDUM AND ORDER WITH REGARD TO

MASSACHUSETTS MUTUAL LIFE INSURANCE

COMPANY'S MOTIONS TO STRIKE CERTAIN DEFENSES

NEIMAN, U.S.M.J.

Presently before the court with regard to the above captioned matters - - comprising the same Plaintiff (Massachusetts Mutual Life Insurance Company) but various defendants - - are Plaintiff's above-numbered motions to strike certain affirmative defenses. While there are some differences as to how the targeted affirmative defenses are numbered in the various cases, the defenses are generally the same. Unless noted otherwise, therefore, the court will first address the defenses as numbered in Civil Action 11-cv-30035-MAP, namely, the Third, Fourth, Eleventh, Twelfth, Fourteenth, Fifteenth, Sixteenth, Seventeenth, Nineteenth, Twentieth, Twenty-First, and Twenty-Sixth defenses, and then note the parallel defenses raised in the other actions. Second, the court will address yet other defenses as numbered in Civil Action 11-cv-30141-MAP and, again, then note parallel defenses raised in otheractions. For the reasons which follow, the court will allow Plaintiff's motions in part and deny them in part.

DISCUSSION

By way of summary, Plaintiff argues that its motions to strike are narrowly tailored so as to remove from the various defendants' answers a series of, what Plaintiff calls, "boiler plate and legally inapplicable" defenses. In essence, Plaintiff asserts that, pursuant to Fed. R. Civ. P. 12(f), the court "may strike from any pleading any insufficient defenses or any redundant, immaterial, impertinent, or scandalous matter," with primary reliance on the adjective "insufficient." Where as here, Plaintiff argues, a defendant's answer asserts purported defenses that cannot succeed, a motion to strike "serve[s] a useful purpose by eliminating insufficient defenses and saving the time and expense which would otherwise be spent litigating issues that would not affect the outcome of the case." DGM Inv., Inc. v. N.Y. Futures Exch., Inc., 2004 WL 635743, at *1 (S.D.N.Y. Mar. 31, 2004) (internal quotations omitted).

In response, the various defendants in these cases (together "Defendants") argue that, as a general rule, "motions to strike defenses are disfavored." Honeywell Consumer Prods., Inc. v. Windmere Corp., 993 F.Supp. 22, 24 (D. Mass. 1998). A motion to strike affirmative defenses, Defendants argue, "should be granted only when it is beyond cavil that the defendants could not prevail on them." Id. (internal quotation marks omitted). Moreover, Defendants assert, motions to strike affirmative defenses are particularly disfavored prior to discovery when facts are in dispute. See Friends of Santa Fe City v. LAC Minerals, Inc., 892 F.Supp. 1333, 1343 (D.N.M. 1995); Turner v.Wall, 2009 WL 3401184, at *1 (D.R.I. Oct. 20, 2009). In addition, Defendants maintain, courts frequently deny motions to strike affirmative defenses where the movant fails to demonstrate that it will be prejudiced by the pleading of such defenses. See, e.g., Bose Corp. v. Lightspeed Aviation, Inc., 691 F.Supp. 2d 275, 278 (D. Mass. 2010). Plaintiff, in turn, argues that motions to strike are not disfavored with respect to plainly inapplicable defenses and that, in any event, its motions ought to be allowed since no amount of discovery can rescue the defenses. The parties do appear to agree, however, that courts "possess considerable discretion" when addressing motions to strike. Zurich American Insurance Co. v. Watts Regulator Co., 796 F. Supp. 2d 240, 246 (D. Mass. 2011).

The parties' respective arguments, as they concern particular affirmative defenses, will be addressed below. It will also become evident that some of the affirmative defenses will be grouped when parallel defenses have been raised by several defendants.

A. Civil Action 11-cv-30035-MAP

1. Eleventh and Sixteenth Affirmative Defenses

The Eleventh and Sixteenth affirmative defenses in Civil Action 11-cv-30035-MAP - - which assert that Plaintiff's claims are barred in whole or in part because Defendants neither owed nor breached any duty to Plaintiff - - have been raised, respectively, by UBS Securities, LLC ("UBS"), and Residential Funding Securities, LLC ("Residential Securities"). Plaintiff argues that the defenses should be stricken because section 410(a) of the Massachusetts Uniform Securities Act, Mass Gen. Lawsch. 110A § 410(a)(2), under which Plaintiff asserts its single claim, forecloses such a defense. section 410(a), Plaintiff maintains, establishes liability for any person who offers or sells a security by means of a false or misleading statement. Once a plaintiff makes such a showing, Plaintiff asserts, it need not prove that the defendant owed the plaintiff a duty; accordingly, "no duty" is not a valid defense.

As might be expected, Defendants disagree, arguing that they are relying not on any common law duty, but on the plain words of section 410, which provides that a duty to disclose omitted facts can arise in certain instances, namely, when omitting to state those facts which would make affirmative statements misleading. Here, Defendants assert, Plaintiff's claim is based at least in part on alleged omissions in the offering documents. In short, Defendants argue, Plaintiff has not demonstrated that there are no circumstances in which the defense could succeed or that Plaintiff would be prejudiced by permitting Defendants to pursue it.

In the court's view, the language of section 410 does not give rise to a "no duty" defense. section 410 merely requires a plaintiff to plead and prove "any untrue statement of material fact or any omission to state a material fact necessary in order to make the statement made . . . not misleading." Mass Gen. Laws ch. 110A § 410(a)(2). This language more accurately gives rise to a defense that the allegedly omitted information did not render any statement misleading, and Defendants have asserted that defense in various other ways unchallenged by Plaintiff. (See Fourth, Sixth, Eighth, Ninth, and Twenty-Second Defenses in Civil Action 11-30035-MAP.) Thus, Defendants are free to argue that omitted facts were not material or that they were notnecessary to make the statements made not misleading, but the statutory language does not give rise to a "no duty" defense. Accordingly, Plaintiff's motion is ALLOWED with respect to the Eleventh and Sixteenth Affirmative Defenses in Civil Action 11-30035-MAP and parallel defenses in the other actions.¹

2. Fifteenth and Twenty-First Affirmative Defenses

Plaintiff asserts that the Fifteenth and Twenty-First Affirmative Defenses by, respectively, UBS and Residential Securities in Civil Action No. 11-30035-MAP - - in which Defendants raise Plaintiff's failure to mitigate - - are unavailable because section 410 establishes specific formulas for calculating recovery under the Act, namely, recission (for securities still held) and damages (for securities previously held). Mass. Gen. Laws ch. 110A § 410(a)(2). In short, Plaintiff argues, there is no requirement that a securities purchaser mitigate such statutory damages.

The court believes that it is too early in the litigation to strike these defenses. First, the fact that section 410 does not expressly provide for such a defense does not bar them. See United States v. Walerko Tool and Engineering Corp., 784 F. Supp. 1385, 1388 (N.D. Ind. 1992) (declining to strike affirmative defenses solely on grounds that they are not contained in the statute itself). Second, as Defendants argue, Plaintiffcites no decision which has ruled out failure to mitigate as an affirmative defense with respect to a section 410 claim. In short, at least one federal court has held that plaintiffs have a duty to mitigate under section 12 of the Securities Act, 15 U.S.C. § 77l(2), the federal counterpart to section 410. See In re Olympia Brewing Co. Sec. Litig., 1985 WL 3928, at * 11 (N.D. Ill. Nov. 13, 1985) (denying plaintiff's motion to strike a failure to mitigate defense). To be sure, Plaintiff argues, forcefully, that Olympia Brewing Co. did not uphold a failure to mitigate defense because it was relevant to section 12, as Defendants assert, but because it was potentially relevant to securities fraud claims that measure damages based on diminution of value, which is not applicable to a section 410 claim. Nonetheless, given the prior ruling in this case that federal courts sitting in diversity jurisdiction "must look to Massachusetts state precedent and to federal precedent under section 12(2) of the Federal Securities Act of 1993 when interpreting section 410 (a)," Mass. Mut. Life Ins. Co. v. Residential Funding Co., LLC, 2012 WL 479106, at * 2 (D. Mass. Feb. 14, 2012), this court is reluctant to knock out the defense at this nascent stage of the litigation. See In re All Maine Asbestos Litig., 575 F. Supp. 1375, 1377 (D. Me. 1983) (finding that an affirmative defense that presents a purely legal question that is "close or new" should survive a motion to strike). In addition, the court is not at all convinced that the defense will unnecessarily expand discovery or otherwise cause Plaintiff any prejudice. Accordingly, Plaintiff's motion to strike is DENIED with respect to the Fifteenth andTwenty-First Affirmative Defenses in Civil Action 11-30035-MAP.²

3. Seventeenth Affirmative Defense (UBS)

Plaintiff also...