In re Montagne, Case No. 08-10916 (Bankr.Vt. 2/8/2010)
| Decision Date | 08 February 2010 |
| Docket Number | Case No. 08-10916.,Adversary Proceeding 08-1024. |
| Court | U.S. Bankruptcy Court — District of Vermont |
| Parties | In re: Michael F. Montagne, Chapter 12, Debtor. Bourdeau Brothers, Inc., Plaintiff, v. Michael F. Montagne, Diane Montagne, and Montagne Heifers, Inc., Defendants. |
James Spink, Esq. and Mary Peterson, Esq., for Bourdeau Brothers, Inc.
John R. Harrington, Esq. and Jess T. Schwidde, Esq., for Michael F. Montagne.
Plaintiff Bourdeau Brothers, Inc. ("BBI") filed a complaint in Vermont state court against Michael F. Montagne (the "Debtor"), his wife Diane Montagne, and Montagne Heifers, Inc. ("MHI"), seeking payment for feed, grain, and other farm supplies sold to Michael and Diane Montagne for use in their farming operations (doc. # 4). The original complaint asserted three causes of action: the first sought payment on two promissory notes, while the second and third sought payment on open accounts BBI had with Michael and Diane Montagne. Id. BBI subsequently filed an amended complaint (doc. # 40), which added an unjust enrichment cause of action. Id. After that proceeding was removed to this Court, BBI filed a second amended complaint (doc. # 263), and Debtor-Defendant Michael Montagne responded by filing an answer, affirmative defenses and counterclaim (the "Affirmative Defenses") (doc. # 270). BBI filed a motion to strike Michael Montagne's Amended Affirmative Defenses and requested reimbursement of the reasonable attorney's fees it had incurred in bringing the motion to dismiss (doc. # 291). For the reasons that follow, the Court grants in part and denies in part BBI's motion to strike the Debtor's Affirmative Defenses, and denies BBI's request for attorney's fees.
This Court has jurisdiction over this adversary proceeding and this motion to dismiss under 28 U.S.C. § 1334, 28 U.S.C. § 157(b)(2)(B) and (C), and the parties' stipulation to this Court's entry of a final judgment on the causes of action relating to this Title 11 case. See doc. # 205, pp. 2-3.
BBI filed its complaint in December 2007, under the caption of BBI v. Michael Montagne, Diane Montagne, and Montagne Heifers, Inc., # S610-07 FC. Shortly thereafter, BBI moved for an ex parte writ of attachment against the defendants' property (doc. # 6), which the state court granted (doc. # 7). Michael Montagne filed an answer, affirmative defenses, and counterclaim (doc. # 18); BBI later successfully moved to amend its complaint (doc. # 32, 36, 40),1 and extensive litigation on a variety of issues ensued in state court. On October 2, 2008, Michael Montagne sought protection under chapter 12 of the Bankruptcy Code and filed a notice of removal of the BBI lawsuit (doc. # 1). In December 2008, Michael Montagne moved to dissolve the ex parte writ of attachment in favor of BBI (doc. # 186); BBI opposed that motion (doc. # 197). After additional briefing (docs. # 202, 207), this Court denied the motion (doc. # 225).
On March 26, 2009, BBI moved to amend its complaint a second time (doc. # 245, refiled a few days later as doc. # 253) to remedy certain "factual inaccuracies" contained in its earlier amended complaint. BBI explained that the previous amended complaint (doc. # 40) referred to the terms of two notes originally underlying its account with the Montagnes and that "BBI became aware that the notes themselves were paid off, and that the amounts shown due in its ledgers on the `note account' were for subsequent purchases under invoice." Id. The second amended complaint clarified that the promissory notes were no longer in issue. Id.
Michael Montagne filed an amended answer, affirmative defenses, counterclaim, third party complaint, and jury demand on April 4, 2009 (doc. # 258); however, this filing occurred before the Court had granted BBI's motion to amend. Michael Montagne filed his answer to the second amended complaint, with affirmative defenses and counterclaim, on May 7, 2009 (doc. # 270), which superseded the previously-filed amended pleading (doc. # 258). He listed the following Affirmative Defenses: (A) unclean hands; (B) laches; (C) statute of limitations; (D) breach of contract by Plaintiff, including breach of contractual duty of good faith and fair dealing; (E) estoppel; (F) waiver; (G) duress; (H) illegality; (I) payment and/or set-off; (J) homestead exemption; (K) statute of frauds; (L) failure to state a claim upon which relief may be granted, including but not limited to, any claim for attorney's fees and costs of collection; (M) acquiescence; (N) failure to mitigate damages and failure to act in a commercially reasonable manner; (O) usury, in regard to charging interest in excess of that permitted by 9 V.S.A. 41a; and (P) violation of the Vermont Licensed Lender Act (doc. # 270, ¶ 32). BBI filed a motion to dismiss Michael Montagne's amended counterclaims (doc. # 273). The Court granted that motion (doc. # 307). To further narrow the issues, BBI had also filed the instant motion to strike the Debtor's affirmative defenses (doc. # 291). Michael Montagne filed an objection to BBI's motion to strike (doc. # 299) and BBI filed a reply (doc. # 303). In his objection to BBI's motion to strike his affirmative defenses, Michael Montagne withdrew two and a half of his affirmative defenses: he withdrew the breach of contract (D) and duress (G) affirmative defenses in their entirety, and withdrew part of the failure to mitigate (N) affirmative defense, leaving intact the portion of that defense focused on commercial unreasonableness (doc. # 299 n.2).
On February 1, 2010, the Court issued a decision granting in part and denying in part BBI's motion to strike Diane Montagne's affirmative defenses (doc. # 318). Apparently in response to that decision, on February 2, Michael Montagne filed an "Expedited Motion to Amend Answer to Second Amended Complaint, Affirmative Defenses, Counterclaim and Jury Demand," where he proposed to add "certain allegations supporting Mr. Montagne's affirmative defenses in paragraph 31 of the Answer" (doc. # 320, p. 1). BBI filed an opposition to the expedited motion on February 2 (doc. # 321), and the Debtor filed a reply (doc. # 322). On February 4, 2010, the Court denied the Debtor's expedited motion to amend his affirmative defenses (doc. # 325).
Fed. R. Bankr. P. 7012(f) incorporates Fed. R. Civ. P. 12(f) and addresses motions to strike; it provides:
Upon motion . . . made by a party . . . or upon the court's own initiative at any time, the court may order stricken from any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.
Fed. R. Bankr. P. 7012(f). "Immaterial matter is that which has no essential or important relationship to the claim for relief." Donnelly v. Commonwealth Fin. Sys., Inc., 2008 WL 762085, * 4 (M.D. Pa. Mar. 20, 2008).
In Tracy v. NVR, Inc., 2009 WL 3153150 (W.D.N.Y. Sept. 30, 2009), the court set out the pleading standard for affirmative defenses as well as motions to strike affirmative defenses, concluding that the same standard applies to both:
Rule 8(c) of the Federal Rules of Civil Procedure governs the pleading of affirmative defenses. "Affirmative defenses are . . . subject to the general pleading requirements of Rules 8(a) [and] 8(e) . . ., generally requiring only a short and plain statement of the facts." Saratoga Harness Racing, Inc. v. Veneglia, 1997 WL 135946, *6 (N.D.N.Y.1997) (quoting Instituto Nacional De Comercializacion Agricola v. Continental Illinois Nat'l Bank & Trust Co., 576 F.Supp. 985, 988 (N.D.Ill.1983)). . . .
Although motions to strike affirmative defenses are "generally disfavored," Barber v. RLI Ins. Co., 2008 WL 5423106, *5 (N.D.N.Y.2008) (citing Quanta Specialty Lines Ins. Co. v. Investors Capital Corp.,> 2008 WL 1910503, *4 (S.D.N.Y.2008)), affirmative defenses that contain only "bald assertions" unaccompanied by supporting facts will be stricken. Schecter v. Comptroller of City of New York, 79 F.3d 265, 270 (2d Cir.1996) ().
Indeed, the [Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)] plausibility standard applies with equal force to a motion to strike an affirmative defense under Rule 12(f). Aspex Eyewear, Inc. v. Clariti Eyewear, Inc., 531 F.Supp.2d 620, 622 (S.D.N.Y.2008). See also FSP, Inc. v. Societe Generale, 2005 WL 475986, *8 (S.D.N.Y.2005) (); Solvent Chem. Co. v. E.I. Dupont De Nemours & Co., 242 F.Supp.2d 196, 212 (W.D.N.Y.2002) ().
Id. at * 7. Although Twombly was very recently decided, this standard is not new with respect to affirmative defenses. In Saks v. Franklin Covey Co., 316 F.3d 337, 350 (2d Cir. 2003), the Second Circuit approvingly cited Satchell v. Dilworth, 745 F.2d 781, 784 (2d Cir. 1984), which held that a general denial of allegations is insufficient to plead an affirmative defense.
"The majority of cases applying the Twombly pleading standard to affirmative defenses and striking those defenses have permitted the defendant leave to amend." Hayne v. Green Ford Sales, Inc., ___ F. Supp. 2d ___, 2009 WL 517779 *4 (D. Kan. Dec. 22, 2009). Fed. R. Civ. P. 15, incorporated into Fed. R. Bankr. P. 7015, instructs that leave to amend pleadings "shall...
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