UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION
July 21, 2011
GUIFU LI, MENG WANG, FANG DAI, LIN CUI, AND ZHONG YU, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED,
A PERFECT FRANCHISE, INC, A CALIFORNIA CORPORATION; A PERFECT DAY, INC., A ANSWERS AND AFFIRMATIVE CALIFORNIA CORPORATION; MINJIAN HAND HEALING INSTITUTE, INC., A CALIFORNIA CORPORATION; TOM SCHRINER, AN INDIVIDUAL; TAILING LI, AN INDIVIDUAL; JIN QUI, AN INDIVIDUAL; HUAN ZOU, AN INDIVIDUAL; CHUANYU LI, AN INDIVIDUAL; JUN MA, AN INDIVIDUAL; AND DOES 1 TO 10, INCLUSIVE,
The opinion of the court was delivered by: Lucy H. Koh United States District Judge
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO STRIKE DEFENDANTS' CERTAIN DEFENSES TO PLAINTIFFS' SECOND AMENDED COMPLAINT
have moved to strike certain answers and affirmative defenses made by Defendants A Perfect Franchise, Incorporated (Defendants), in response to Plaintiffs' Second Amended Complaint. See Dkt. No. 196 ("Motion"). After considering the parties' briefs relating to Plaintiffs' Motion, the Court finds this matter suitable for decision without oral argument. See CIV. L. R. 7-1(b). 26
Accordingly, the hearing on this Motion, set for July 28, 2011 is hereby VACATED. For the 27 reasons set forth below, the Court GRANTS-IN-PART and DENIES-IN-PART Plaintiffs' Motion. 28 Plaintiffs Guifu Li, Meng Wang, Fang Dai, Lin Cui, and Zhong Yu (together, Plaintiffs)
I. BACKGROUND 2
Plaintiffs in this putative class action are current and former workers for A Perfect Day Franchise, Inc. ("Perfect Day"). Perfect Day owns and operates spas in Fremont, Santa Clara, and 4 Millbrae, California. Plaintiffs claim that Perfect Day has mis-categorized them as independent 5 contractors rather than employees. According to Plaintiffs, Perfect Day failed to pay them and other putative class members minimum wages and overtime, wrongly subtracted materials costs from Plaintiffs' wages, wrongly took Plaintiffs' tips, and committed other violations of California wage and hour laws. Based on these allegations, Plaintiffs claim violations of both the Fair Labor Standards Act (FLSA, 29 U.S.C. §§ 201-19) and California law. Perfect Day denies any unlawful conduct. 10
March 22, 2010, and a First Amended Complaint
Plaintiffs filed their first complaint on (FAC) on May 12, 2010. Defendants were ineffectively served with Plaintiffs' first complaint on 12 March 27, 2010, but were properly served with the FAC on June 3, 2010. The Court granted 13 Plaintiffs permission to file a Second Amended Complaint ("Complaint"), and Plaintiffs did so on 14 April 12, 2011. See Dkt. No. 179. 15
Defendants filed multiple Answers to Plaintiffs' Second Amended Complaint. Defendants A Perfect Day Franchise, Inc., Minjian Hand Healing Institute, Inc., Tailiang Li, and Jin Qui filed 17 answers on April 26, 2011 ("Answers"). See Dkt. Nos. 183-86. Defendant Tom Schriner filed an 18 Answer on May 2, 2011. See Dkt. No. 190. 19
Plaintiffs moved to strike certain of Defendants' answers and affirmative defenses on May 17, 2011. See Dkt. No. 196.
II. ANALYSIS 22
A. Legal Standard
Federal Rule of Civil Procedure 12(f) permits a court to "strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." A defense 25 may be insufficient as a matter of pleading or as a matter of law. Sec. People, Inc. v. Classic Woodworking, LLC, No. C-04-3133, 2005 U.S. Dist. LEXIS 44641, at *5-*8 (N.D. Cal. 2005). 27
"The key to determining the sufficiency of pleading an affirmative defense is whether it gives 28 plaintiff fair notice of the defense." Wyshak v. City Nat'l Bank, 607 F.2d 824, 827 (9th Cir. 1979).
What constitutes fair notice depends on the particular defense in question. 5C Charles Alan Wright 2 & Arthur R. Miller, Federal Practice and Procedure § 1381 (3d ed. 2004). While a defense need 3 not include extensive factual allegations in order to give fair notice, bare statements reciting mere 4 legal conclusions may not be sufficient. CTF Dev., Inc. v. Penta Hospitality, LLC, No. C 09- 02429, 2009 U.S. Dist. LEXIS 99538, at *21-22 (N.D. Cal. 2009). Because motions to strike a defense as insufficient are disfavored, they "will not be granted if the insufficiency of the defense is not clearly apparent." 5C Wright & Miller § 1381; accord Salcer v. Envicon Equities Corp., 744 F.2d 935, 939 (2d Cir. 1984), vacated on other grounds, 478 U.S. 1015 (1986).
A court may also strike matter in an answer that is immaterial or impertinent. Fed. R. Civ. Pro. 12(f). Immaterial matter is "that which has no essential or important relationship to the claim 10 for relief or the defenses being pleaded." Fantasy, Inc. v. Fogerty
, 984 F.2d 1524, 1527 (9th Cir.
1993), rev'd on other grounds, 510 U.S. 517 (1994). Impertinent matter does not pertain, and is 12 not necessary, to the issues in question. Id.
impertinent, or scandalous," the Court must construe the pleadings "so as to do justice." Fed. R. 15 Civ. P. 8(e). Where a court strikes an affirmative defense, leave to amend should be freely given 16 so long as there is no prejudice to the moving party. Wyshak, 607 F.2d at 826; Qarbon.com Inc. v. 17 eHelp Corp., 315 F. Supp. 2d 1046, 1049 (N.D. Cal. 2004). 18
In deciding whether a defense is insufficient, or whether material is "redundant, immaterial,
B. Defendants' References to "Legal Conclusions"
Plaintiffs request the Court strike Defendants' statements that certain paragraphs of the Complaint "amount to legal conclusions to which no answer is required." Mot. at 2. As Plaintiffs 21 are not moving to strike a defense, this material must be "redundant, immaterial, impertinent, or 22 scandalous" before it may be stricken. Fed. R. Civ. P. 12(f). Defendants respond that these 23 answers are not "immaterial, impertinent, or scandalous," and that they provide Plaintiffs with 24 adequate notice of the matters in dispute. Opp'n at 3. 25
The Court initially notes that Defendants responded to 66 of Plaintiffs' 124 paragraphs with the assertion that the paragraph contained a legal conclusion and required no answer. However, several of these paragraphs do not appear to contain a legal conclusion. Paragraphs 61, 69, 104,
1. Paragraphs not containing legal conclusions and 110 merely quote or paraphrase a statute. Compl. ¶¶ 61, 69, 104, 110. These paragraphs do 2 not appear to contain legal conclusions or factual allegations. The Court construes these 3 paragraphs as Plaintiffs' allegation that this is the law. It is not clear what Defendants mean by 4 denying the factual allegations contained in these paragraphs. The Court believes Defendants intended to admit the accuracy of Plaintiffs' quotations, but deny either that Defendants had violated this law, or that this law applies to this case. As it is not clear what Defendants intended to deny in their answers to these paragraphs, Defendants do not appear to have responded "to the substance of the allegation." Fed. R. Civ. P. 8(b)(2). The Court therefore GRANTS Plaintiffs' Motion to Strike Defendants' answers to paragraphs 61, 69, 104, and 110, and asks Defendants to 9 replead their answers to these paragraphs to clarify the nature of their denial. 10
conclusions. See Answers ¶¶ 1, 2, 3, 15, 18, 20, 21, 22-34, 52, 53, 57-59, 61, 66, 67, 69, 75-77, 79-13 82, 84-87, 89, 92, 94, 95, 97-101, 103, 104, 108-10, 115-26. The Court must therefore decide 14 whether nonresponse to a legal conclusion is so impertinent or scandalous as to justify striking 15
There is some support for Plaintiffs' contention that Rule 8(b) requires defendants to respond even to legal conclusions with an admission, a denial, or a denial for lack of information. 18
*9-10 (N.D. Ind. July 10, 2008); Lane v. Page, 272 F.R.D. 581, 585 (D.N.M. 2011) (both holding 20 that averring "a legal conclusion to which no response is required" does not meet 8(b)'s 21 requirements); Ill. Wholesale Cash Register, Inc. v. PCG Trading, LLC, 2009 U.S. Dist. LEXIS 22
44509 at *5 (N.D. Ill. May 27, 2009) (holding that Rule 8(b) makes "no exception for 'legal 23 conclusions.'"); Farrell v. Pike, 342 F. Supp. 2d 433, 440-441 (M.D.N.C. 2004) ("a party must 24 respond to both the factual and legal allegations."). However, Defendants' answers specifically 25 deny the factual allegations of each paragraph in addition to stating that these paragraphs contain 26 legal conclusions to which no answer is required. Courts in this Judicial District have found such 27 responses to be sufficient.
2. Paragraphs containing legal conclusions
A number of the paragraphs that provoked the disputed response do contain legal Defendants' answers. 16
See N. Ind. Metals v. Iowa Express, Inc., No. 2:07-CV-414-PRC, 2008 U.S. Dist. LEXIS 54708, at 19
2 conclusions which the defendant believed did not require a response. Barnes v. AT&T Pension 3
Benefit Plan, 718 F. Supp. 2d 1167, 1170 (N.D. Cal. 2010). The court held that the plaintiff's 4 motion "misconstrues [defendant's] answer when read in its entirety. While [defendant] has refused to either admit or deny the ultimate legal conclusions alleged by [plaintiff], [defendant] has denied all of the factual allegations on which those legal conclusions rest." Id. at 1175. The court held that, as legal conclusions must rest on some factual basis, admitting the legal conclusions would require admitting some of the factual allegations which the defendant had expressly denied. Id. 9
For example, in Barnes v. AT&T Pension Plan, the plaintiff moved to admit those legal Here, as in Barnes, Defendants did not merely refuse to answer Plaintiffs' legal conclusions. Defendants specifically stated, "[t]o the extent that this paragraph contains factual allegations DEFENDANT denies." See generally Answers. To find that Defendants had admitted Plaintiffs' legal conclusions, this Court would have to find some factual allegation on which those 13 conclusions could be based. As Defendants have denied Plaintiffs' factual allegations wherever 14 they have declined to respond to a legal conclusion, admitting Plaintiffs' legal conclusions would 15 necessarily involve striking Defendants' well-pleaded denials. "To do this would not construe the 16 pleadings in the interests of justice as required by Rule 8(e)." Barnes, 718 F. Supp. 2d at 1175.
Where defendants deny factual allegations in addition to identifying legal conclusions, Ninth Circuit district courts generally decline to strike defendants' answers. Sykes v. Cigna Life 19 ("taking the Answer as a whole, Defendants have denied Plaintiff's legal conclusions."). 21
"Pleadings must be construed so as to do justice," and requiring Defendants to admit Plaintiffs' 22 legal conclusions does not appear to be an act of justice. Fed. R. Civ. P. 8(e). Accordingly, the 23 C. Defendant Perfect Day's Response to Paragraph Fifteen Plaintiffs request the Court strike Defendant A Perfect Day's response to paragraph fifteen 26 of the Complaint and deem the allegations admitted, declaring A Perfect Day "cannot deny the 27 knowledge about Huan Zou's role in its operation." Mot. at 4.
In the paragraph at issue, Plaintiffs assert:
Ins. Co., No. C 10-01126 CRB, 2010 U.S. Dist. LEXIS 94047, *8-*9 (N.D. Cal. Aug. 23, 2010) 20
Court DENIES Plaintiffs' motion with respect to these responses. 24
Defendant Huan Zou is an individual resident of California and a manager of Perfect Day Spa. Upon information and belief, Huan Zou is the nephew of Tailiang Li. Upon information and belief, Huan Zou has operational control of Perfect Day Spa's payroll and labor practices, including but not limited to directing Perfect Day Spa to treat massage therapists and other workers as independent contractors rather than employees which has resulted in the unlawful failure to pay minimum wage, overtime wages and benefits to Plaintiffs and the proposed class. Huan Zou knew or should have known of these unlawful employment practices.
Compl. ¶ 15. Defendants responded that this statement amounted to a legal conclusion, and that 7 they were without information sufficient to form a belief as to any factual allegations. Answers ¶ 8
Plaintiffs point out that a corporation may not claim lack of knowledge when a matter is "presumptively within the knowledge of" its officer. Id. (citing Nat'l Millwork Corp. v. Preferred Mut. Fire Ins. Co., 28 F. Supp. 952, 953 (D.N.Y. 1939); Sloane v. S. Cal. R.R. Co., 111 Cal. 668, 685-86 (1896). However, in this case the Court does not find that Defendant A Perfect Day had 13 knowledge as to each factual allegation. First, the Complaint indicates that Tom Schriner is the principal of Perfect Day, and Tailiang Li is the principal of Minjian Institute, Compl. ¶¶ 12-13; even if Mr. Zou is a manager at Perfect Day Spa, Perfect Day does not necessarily know its employee's family relationship to the principal of a separate legal entity. Second, in order to admit the latter half of paragraph 15, Defendant would have to assume that unlawful acts had occurred, that Mr. Zou had knowledge of the difference between independent contractors and employees, 18 that he acted on this knowledge, that he was aware these actions were unlawful, and that his 19 affiliation with Perfect Day is such that his knowledge may be presumed also to be Perfect Day's. 20
Defendants' response could easily reflect an unwillingness or inability to make these assumptions, 21 rather than a fallacious denial of knowledge. As Perfect Day could be answering within its actual 22 knowledge, the Court does not find Defendants' response "redundant, immaterial, impertinent, or 23 scandalous." Fed. R. Civ. P. 12(f). Nor will the Court investigate the extent of Defendants' 24 knowledge at this time. To do so would be to "make factual determinations that go to merits of the 25 case, and such challenges are not appropriate under a Rule 12(f) motion to strike." Swain v. 26 CACH, LLC, 699 F. Supp. 2d 1117, 1124-25 (N.D. Cal. 2009) (internal citation omitted).
effect as a denial. Opp'n at 5 (citing Fed. R. Civ. P. 8(b)(5)). A Perfect Day has therefore denied 3
Plaintiffs' allegation. Were the Court to strike Defendants' answer to paragraph fifteen with leave 4 to amend, Defendants cannot provide a different answer unless they admit these allegations. Were the Court to strike Defendants' answer without granting leave to amend, this would effectively force Defendant to admit Plaintiffs' allegations. Fed. R. Civ. P. 8(b)(6). The Court will not force Defendant to admit that its manager engaged in "unlawful employment practices," and will therefore not strike Defendants' answer.
For the foregoing reasons, Plaintiffs' request that the Court strike Defendants' answer to
Further, Defendants have correctly stated that a denial for lack of knowledge has the same paragraph fifteen of the Complaint is DENIED. 10
D. Defendants' Thirteenth Affirmative Defense
As their thirteenth affirmative defense, Defendants state that Plaintiffs' claims under California Business and Professional Code § 17200, et. seq., "are barred because Plaintiffs have an 13 adequate remedy at law." Answers at 12. As Defendants proceed to state in their fourteenth 14 affirmative defense that the statute bars any claims by the Plaintiffs for legal relief exceeding 15 restitution, the Court construes this paragraph as an intended defense to any claims for equitable 16 relief.
U.S. Dist. LEXIS 91327, at * (N.D. Cal. Dec. 12, 2007) ("Section 17200 claims permit 20 restitutionary and injunctive relief, but not damages"). Equitable relief is not barred automatically 21 simply because Plaintiffs are otherwise granted legal relief. It is conceivable that Plaintiffs could 22 be awarded restitution, and could also require an injunction. For example, should Plaintiffs prove 23 past and continuing wrongful actions taken by Defendants, an injunction may be required to 24 prevent further wrongful behavior. Plaintiffs could be granted this equitable relief in addition to 25 damages, or could be awarded restitution. In this context, Defendants' affirmative defense fails. 26
equitable relief that duplicates any legal relief they may receive. In this context, Defendants may have a future need to assert this affirmative defense, and it is neither insufficient nor immaterial.
California's Unfair Competition Law specifically provides for injunctive relief. Cal. Bus. & Prof. Code § 17203. See G&C Auto Body, Inc v. GEICO Gen. Ins. Co., No. C06-04898 MJJ, 2007 19
However, it is possible Defendants intended to plead that Plaintiffs are not entitled to Construing the defense in this light, the Court DENIES Plaintiffs' Motion to Strike Defendants' 2 thirteenth affirmative defense. 3
Defendants' Fourteenth affirmative defense states that Plaintiffs' claims under the UCL
"are barred to the extent that these claims constitute damages." Answers at 13. Plaintiffs, confusingly, move to strike this affirmative defense on the grounds that damages may include restitution. Mot. at 6.
Defendants correctly state that the UCL limits monetary recovery to restitution. Opp'n at 7. As discussed above, recovery under the UCL is limited to injunctive relief and restitution. 9
E. Defendants' Fourteenth Affirmative Defense
However, Plaintiffs' discussion of their Ninth Cause of Action, proceeding under the UCL, makes 10 no request for penalties or any monetary relief other than restitution. See Compl. ¶¶ 109-16. As 11
Plaintiffs have not requested penalties under the UCL, Defendants' fourteenth affirmative defense 12 seems superfluous. 13
14 it may in fact be necessary. In their motion, Plaintiffs argue they "are not barred from recovering 15 restitution damages under the UCL only because Plaintiffs' claims may also constitute damages." 16
Mot. at 6. In their Reply to Defendants' Opposition, however, Plaintiffs state they "do not seek 17 restitution for any penalties." Reply at 2. It appears there may be a future need to clarify the 18 difference between restitution and penalties, since Plaintiffs cannot "double dip" and recover twice 19 for the same injury. To the extent Plaintiffs try to do this, Defendants' fourteenth affirmative 20 defense will be relevant. 21
22 immaterial, the Court DENIES Plaintiffs' Motion to Strike Defendants' 14th affirmative defense. 23
Defendants asserted, as their twenty-first affirmative defense, "that Plaintiffs' claims are barred and preempted by the exclusive remedies provided by the Workers' Compensation 26
Statutes." Answers at 14. Plaintiffs moved to strike this defense on the grounds that they have 27 pleaded no workers' compensation claims. Mot. at 6. Defendants did not reply to this portion of the Motion in their Opposition.
While at first glance this affirmative defense appears immaterial, Plaintiffs' Motion shows Because Defendants' fourteenth affirmative defense is not clearly insufficient or
F. Defendants' Twenty-First Affirmative Defense resulting from his employment." Union Iron Works v. Indus. Accident Commission, 190 Cal. 33, 3 39 (1922). The California Constitution calls for a workers' compensation system "to compensate 4 any or all of their workers for injury or disability, and their dependents for death incurred or sustained by the said workers in the course of their employment." Cal. Const., art. XIV, § 4. A claim could therefore be brought under Workers' Compensation only if the worker is physically or mentally injured in the course of employment. Cal. Lab. Code §§ 3208, 3208.3.
While the Complaint frequently refers to the "injury" suffered by Plaintiffs, it is clear from the text that Plaintiffs mean to indicate an economic injury, rather than one which is physical or 9 mental. See Compl. ¶¶ 21, 34, 89, 91, 114. While Plaintiffs assert that they had "no workers' 10
Workers' Compensation aims to "provid[e] . . . compensation to an employee for injuries compensation insurance coverage," they do not plead a claim specifically related to this assertion. 11
Compl. ¶ 48. Defendants' twenty-first affirmative defense therefore appears immaterial and 12 impertinent; it has no "essential or important relationship to the claim for relief," does not pertain 13 and is not necessary to the issues in question. Fantasy, Inc. 984 F.2d at 1527.
Because it is immaterial and impertinent, the Court GRANTS Plaintiffs' Motion to Strike Defendants' twenty-first affirmative defense. 16
18 immaterial, impertinent, or scandalous," but because Defendants have failed to file notice of this 19 claim with the Court and to serve it on the State Attorney General, as required by Civil Local Rule 20
3-8(b). Plaintiffs state that "Defendants should be required to serve such notices or this 34th AD 21 should be stricken." Mot. at 4. 22
23 failure to comply with this rule is a directive to comply, rather than a striking of the defense. 24
(N.D. Cal. May 7, 1998) ("The remedy for failure to notify the state attorney general is a directive 26 to defendant to comply."). Motions to strike a defense "will not be granted if the insufficiency of 27 the defense is not clearly apparent." 5C Wright & Miller § 1381, at 428; accord Salcer v. Envicon Equities Corp., 744 F.2d at 939. Defendants' thirty-fourth affirmative defense is not obviously G. Defendants' Thirty-Fourth Affirmative Defense
Plaintiffs challenge Defendants' thirty-fourth affirmative defense not for being "redundant,
Defendants' response claims that the Northern District has held the appropriate remedy for
Opp'n at 6 (citing Friend v. Kreger, No. C-98-0877-VRW, 1998 U.S. Dist. LEXIS 6764, at *3 n.1 25 insufficient; should the statute be determined to be unconstitutional, Plaintiffs' claim under the 2 statute will be barred. Moreover, the Court does not find that Defendants have waived this defense 3 by not filing the appropriate notification before filing their answer. Local Rule 3-8 does not 4 specify a time in which this notification must occur. Civil Local Rule 1-4 states that failure to comply with a local rule "may be ground for imposition of any authorized sanction." Civ. L.R. 1-4 (emphasis added). The permissive nature of this statement indicates that the Court has the discretion to determine whether and how to sanction parties for failing to comply with Local Rule 3-8. Here, the Court will not hold that Defendants have waived this defense in failing to comply with Local Rule 3-8 within the three-week gap between the filing of their Answers and Plaintiffs' 9 filing their Motion. 10
The Court therefore DENIES Plaintiffs' Motion to Strike Defendants' thirty-fourth affirmative defense. However, the Court directs Defendants to comply with Civil Local Rule 3-8 12 within two weeks of the date of this Order.
For the reasons set forth above, the Court orders as follows:
(1) The Court DENIES Plaintiffs' Motion to Strike Defendants' answers, except to paragraphs 61, 69, 104, and 110. As for these paragraphs, Defendants must replead their answers to these paragraphs to clarify the nature of their denial. Defendants shall submit their amended answers within one week of the date of this Order.
(2) The Court DENIES Plaintiffs' Motion to Strike Defendants' thirteenth, fourteenth, and thirty-fourth affirmative defenses.
(3) The Court GRANTS Plaintiffs' Motion to Strike Defendants' twenty-first affirmative defense.
(4) The Court directs Defendants to comply with Civil Local Rule 3-8 within two weeks of the date of this Order.
IT IS SO ORDERED.
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