U.S. v. Cushman & Wakefield, Inc.

Decision Date28 August 2002
Docket NumberNo. CIV.A. 3:01-CV-2342G.,CIV.A. 3:01-CV-2342G.
Citation275 F.Supp.2d 763
PartiesUNITED STATES of America, Plaintiff, v. CUSHMAN & WAKEFIELD, INC., et al., Defendants. Cushman & Wakefield, Inc., et al., Third-Party Plaintiffs, v. Bank of America, N.A., et al., Third-Party Defendants.
CourtU.S. District Court — Northern District of Texas

Shane Read, U.S. Attorney's Office, Department of Justice, Dallas, Michael L Minsker, Cozen O'Connor, Charlotte, NC, Peter A Winn, U.S. Attorney's Office, Department of Justice, Dallas, Stacey M Bosshardt, U.S. Department of Justice, Civil Division Torts Branch, Washington, DC, for United States of America, Plaintiff.

Terence J Hart, Munsch Hardt Kopf & Harr, Jeffrey M Goldfarb, Akin Gump Strauss Hauer & Feld, S Cass Weiland, Patton Boggs, Dallas, for Cushman & Wakefield Inc, Cushman & Wakefied of Michigan Inc, Interior Systems Inc, William F Marcellino, Defendants.

MEMORANDUM ORDER

FISH, Chief Judge.

Before the court are the motions of the plaintiff United States of America ("United States") to strike the affirmative defenses of the defendants Cushman & Wakefield, Inc. and Cushman & Wakefield of Michigan, Inc. (collectively, "C & W") and to dismiss the counterclaims of C & W. For the reasons discussed below, the motion to strike is granted and the motion to dismiss is granted in part and denied in part.

I. BACKGROUND

The United States filed this action on November 20, 2001 against C & W, Interior Systems, Inc. ("ISI"), and William F. Marcellino ("Marcellino"). Complaint at 1. The United States asserts violations of the False Claims Act ("FCA"), 31 U.S.C. §§ 3729-3733, and common law causes of action for fraud and unjust enrichment. Id. According to the complaint, from 1997 until 2001, C & W managed and operated a mail-presort business that sorted mail for customers in the Dallas area and then presented that mail to the United States Postal Service ("USPS") for mailing (the "Presort Operation"). Id. ¶ 8. From August 1999 until October 2000, C & W ran the Presort Operation through a joint venture with ISI and its subsidiary, Cushman & Wakefield of Michigan (the "Joint Venture"). Id. ¶ 8.

The Presort Operation handled permit and metered mail.1 Id. ¶ 30. The Postal Service maintained advance deposit accounts in the name of C & W and the Joint Venture for both permit and metered mail handled by the Presort Operation. Id. ¶¶ 32, 39. The accounts were funded by the Presort Operation with checks presented by its customers. Id. ¶¶ 34, 40. The USPS required the Presort Operation to submit postage statements with the mail it presented, reporting the amount of mail submitted and the amount of postage due. Id. ¶¶ 36, 42. Based on these submissions, the USPS would deduct postage due from the advance deposit accounts. Id.

The United States alleges that from July 1998 until about January 2000, the defendants were involved in a scheme to defraud the USPS by avoiding payment of $6.2 million in postage in connection with the Presort Operation. Id. ¶ 9. Specifically, the United States alleges that the defendants submitted, or caused to be submitted, postage statements to the USPS that knowingly under-reported the amount of mail they presented to the USPS for mailing and, as a result, avoided paying postage due on that mail. Id. ¶¶ 12, 45, 47, 55. The complaint itemizes hundreds of withheld postage statements, providing the date of the statement, the number of unreported pieces of mail, and the postage due on that mail. Id. ¶ 46 and Exhibit A attached to Complaint. Ralph Ebert ("Ebert"), the manager of the Presort Operation, and Marcellino each allegedly received over $1 million from two accounts maintained by the USPS in the name of C & W or the Joint Venture. Id. ¶ 13.

On January 31, 2002, C & W filed its first amended answer to the United States' complaint. First Amended Answer of Defendants Cushman & Wakefield, Inc. and Cushman & Wakefield of Michigan, Inc. ("Answer") at 1. In the answer, C & W raised seven affirmative defenses, including waiver, estoppel, ratification, intervening/supervening causes, contributory/comparative fault, unclean hands, and setoff and recoupment. Id. at 16-20. Less than a month later, the United States moved to strike, under FED. R. CIV. P. 12(f), six of the affirmative defenses asserted by C & W. United States' Memorandum in Support of its Motion to Strike Affirmative Defenses ("Motion to Strike"). C & W filed its response to the motion on March 12, 2002, see Defendant Cushman & Wakefield, Inc. and Cushman & Wakefield of Michigan, Inc.'s Response and Brief in Opposition to the Motion to Strike of the United States ("Response to Strike"), and the United States filed its reply approximately two weeks later. United States' Reply to Defendants' Opposition to Motion to Strike Affirmative Defenses ("Reply to Strike").

On March 22, 2002, C & W filed its first amended counterclaims against the United States and the USPS for negligence, negligent supervision, negligent monitoring and entrustment, breach of contract and trust, breach of bailment duties, conversion, and recoupment and offset.2 First Amended Counterclaims of Cushman & Wakefield, Inc. and Cushman & Wakefield of Michigan, Inc. ("Counterclaims") at 10-15. In the counterclaims, C & W contends that the United States is liable for failing to prevent the submission of false statements as to the amount of mail tendered for delivery and for giving Ebert refund checks made out to C & W, which checks were subsequently converted by Ebert to his own use. Counterclaims at 3-10.

On April 10, 2002, the United States moved to dismiss, under FED. R. CIV. P. 12(b)(1) and (6), the counterclaims filed against it by C & W for failure to state a claim. United States' Memorandum in Support of its Motion to Dismiss First Amended Counterclaims of Cushman & Wakefield, Inc. & Cushman & Wakefield of Michigan ("Motion to Dismiss"). C & W responded to this motion on May 15, 2002, see The Cushman & Wakefield Parties' Response and Brief in Opposition to the United States' Motion to Dismiss Counterclaims ("Response to Dismiss"), and the United States filed its reply a few weeks later. United States' Reply Memorandum in Support of its Motion to Dismiss First Amended Counterclaims of Cushman & Wakefield, Inc. and Cushman & Wakefield of Michigan, Inc. ("Reply to Dismiss").

The court will address each of these motions in turn.

II. ANALYSIS
A. Motion to Strike Affirmative Defenses
1. Standard for Motion to Strike Under Rule 12(f)

Rule 12(f) of the Federal Rules of Civil Procedure provides:

(f) Motion to Strike. Upon motion made by a party before responding to a pleading or, if no responsive pleading is permitted by these rules, upon motion made by a party within 20 days after the service of the pleading upon the 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. CIV. P. 12(f).

Motions to strike are disfavored and infrequently granted. Augustus v. Board of Public Instruction of Escambia County, Florida, 306 F.2d 862, 868 (5th Cir.1962); Federal Deposit Insurance Corporation v. Niblo, 821 F.Supp. 441, 449 (N.D.Tex.1993) (Cummings, J.) ("Both because striking a portion of a pleading is a drastic remedy, and because it often is sought by the movant simply as a dilatory tactic, motions under Rule 12(f) are viewed with disfavor and are infrequently granted.").3 To succeed on a motion to strike, the movant must show "that the allegations being challenged are so unrelated to plaintiff's claims as to be unworthy of any consideration as a defense and that their presence in the pleading throughout the proceeding will be prejudicial to the moving party." Niblo, 821 F.Supp. at 449 (addressing the standard in the context of a motion to strike defenses in an answer). A court must deny a motion to strike a defense if there is any question of law or fact. Id. A Rule 12(f) motion to strike a defense is proper, however, when the defense is insufficient as a matter of law. Kaiser Aluminum & Chemical Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1057 (5th Cir. 1982), cert. denied, 459 U.S. 1105, 103 S.Ct. 729, 74 L.Ed.2d 953 (1983). The granting of a motion to strike is within the discretion of the court. Niblo, 821 F.Supp. at 449.

2. The Affirmative Defenses
(a) Estoppel

In its second affirmative defense, C & W asserts that the United States' claims are barred by the defense of estoppel. Answer at 17. According to C & W, the conduct of the United States, "including the acts and omissions of the USPS, were willful, wanton, reckless, and rise to the level of gross negligence."4 Id. at 18. These acts and omissions include, among other things, the failure of the USPS to inspect the mail received from the Presort Operation and the USPS' failure to stop the illegal transfer of funds by Marcellino and Ebert. Id. The United States moves to strike this defense on two grounds: (1) estoppel may not be asserted against the government where public money is at stake; and (2) even if estoppel were available, C & W failed to plead and establish affirmative government misconduct. Motion to Strike at 3-6; Reply to Strike at 1-6.

Estoppel is generally not available as a defense against the government. Heckler v. Community Health Services of Crawford County, Inc., 467 U.S. 51, 60, 104 S.Ct. 2218, 81 L.Ed.2d 42 (1984) ("When the Government is unable to enforce the law because the conduct of its agents has given rise to an estoppel, the interest of the citizenry as a whole in obedience to the rule of law is undermined. It is for this reason that it is well settled that the Government may not be estopped on the same terms as any other litigant."). While estoppel may be available against the government in some instances, courts have not entertained the defense where public money is at stake. Office...

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