Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Cornerstone Staffing Solutions, Inc. v. James

United States District Court, Ninth Circuit

July 2, 2013

CORNERSTONE STAFFING SOLUTIONS, INC., a California corporation, Plaintiff,
v.
LARRY THAXTER JAMES, an individual, et. al., Defendants.

ORDER DENYING IN PART AND GRANTING IN PART MOTION TO STRIKE PORTIONS OF FIRST AMENDED COUNTERCLAIM

RICHARD SEEBORG, District Judge.

I. INTRODUCTION

Defendants and counterclaimants Larry James, et. al., filed a First Amended Counterclaim (FACC) asserting 18 claims against Mary Anderson and Cornerstone Staffing Solutions, Inc. CornerStone moves to strike many of the FACC's averments as impertinent, immaterial, and scandalous under Rule 12(f). Pursuant to Civil Local Rule 7-1(b), this matter is suitable for decision without oral argument and is submitted accordingly. For the reasons discussed below, Cornerstone's motion to strike is granted in part and denied in part.

II. BACKGROUND

CornerStone contends that James, its former manager, in conjunction with a number of individual and entity defendants, perpetrated an ongoing scheme to appropriate Cornerstone's resources and customers. Defendants counterclaimed against CornerStone and its owner and president, Anderson, averring breach of contract and other claims. Recently, James moved to amend the counterclaim to plead additional facts and claims for relief, including breach of fiduciary duty. The motion was granted in part and denied in part. In particular, James was denied leave to amend to include statements of the "necessity" of Cornerstone's tax returns, described as a "blatant attempt to have [the tax returns] deemed discoverable." Dkt. 145, 8. Prior to moving to amend the counterclaims, James' motion to compel discovery of the tax returns had been denied by a magistrate judge. Id. James' subsequent motion for relief from the magistrate judge's order was denied. CornerStone moves to strike several statements in the FACC, on the grounds that (1) their inclusion represents an improper attempt to establish the discoverability of Cornerstone's tax returns; (2) averments related to cash-method accounting are irrelevant to James' claims which are based on accrual-method accounting; and (3) certain averments are scandalous and prejudicial to Anderson and CornerStone. Mot. 8-12.

III. LEGAL STANDARD

Federal Rule of Civil Procedure 12(f) allows any "insufficient defense, or any redundant, immaterial, impertinent, or scandalous matter" to be stricken from a pleading. Fed.R.Civ.P. 12(f). Striking a matter under Rule 12(f) avoids spending time and money litigating spurious issues. See Sidney-Vinstein v. A.H. Robins Co., 697 F.2d 880, 885 (9th Cir. 1983). A matter is immaterial if it has no essential or important relationship to any of the pleaded claims for relief. Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir. 1993) rev'd on other grounds, 510 U.S. 517 (1994). A matter is impertinent if it does not pertain, and is not necessary, to the issues in question in the case. Id. A matter is scandalous if it "unnecessarily reflects] on the moral character of an individual... including] allegations that cast a cruelly derogatory light on a party or other person." Brambila v. Wells Fargo Bank, 2012 WL 5383306, at *2 (N.D. Cal. Nov. 1, 2012). Ultimately, the decision on a motion to strike vests within the court's discretion. Guzman v. Bridgepoint Educ, Inc., No. 11cv69 WQH (WVG), 2013 WL 593431, *3 (S.D. Cal. Feb. 13, 2013) (citing Fantasy, Inc., 984 F.2d at 1528).

Motions under Rule 12(f) are "generally disfavored because the motions may be used as delaying tactics and because of the strong policy favoring resolution on the merits." See Barnes v. AT&T Pension Ben. Plan-Nonbargained Program, 718 F.Supp.2d 1167, 1170 (N.D. Cal. 2010) (citing Stanbury Law Firm v. I.R.S., 221 F.3d 1059, 1063 (8th Cir. 2000)). They "should not be granted unless it is clear that the matter to be stricken could have no possible bearing on the subject matter of the litigation[, ]" and "courts are reluctant to determine disputed or substantial questions of law on a motion to strike." Guzman, 2013 WL 593431 at *4.

IV. DISCUSSION

A. Claims Explicitly Referencing Tax Returns or Tax Improprieties.

In denying leave to amend James' counterclaim to state the "necessity" for Cornerstone's tax returns, the prior order noted:

The portions of the proposed pleading to which the CornerStone parties object are conclusory assertions that [a]ccess to Cornerstone's tax returns is necessary' and are a blatant attempt to have them deemed discoverable. These averments are not connected in any meaningful way to the new factual allegations or claims for relief advanced by the proposed amended counterclaims. This attempt to amend the pleadings to define the tax documents in such a way as to bestow relevance artificially upon them is simply silly.

Dkt. 145. All but two of the references to Cornerstone's tax returns or tax improprieties allegedly committed by Anderson are a similar attempt to render CornerStone's tax returns discoverable, despite the repeated denial of James' motion to compel their production. Such averments are immaterial and impertinent, because they have "no essential or important relationship to the claims for relief." Guzman, 2013 WL 593431 at *5 (quoting Fantasy, Inc., 984 F.2d at 1527-28). As was explained in denying James' request for discovery of the tax returns, "You have to show the underlying fraud independent of what was put in the tax returns.... If you don't, it doesn't matter what the tax returns say... the government is not the victim in this case, so what was reported to the IRS is not by itself relevant...." Dkt. 108, 5-6.

Unlike some of James' other averments discussed below, these statements are also immaterial and impertinent to James' claim that Anderson breached her fiduciary duty to him. The basis of this claim is that Anderson is averred to have improperly paid forward expenses and delayed depositing checks, in order to deplete Cornerstone's cash reserves and unnecessarily force CornerStone to take loans from her at a high interest rate. FACC ΒΆ 147; Opp. Mot. 9. In paragraph 32 of the FACC, James avers Anderson made unnecessary deposits with Cornerstone's insurance carrier, but whether those deposits were reflected as deductions on Cornerstone's tax returns is immaterial to whether they created an artificial need for loans from Anderson. Similarly, whether Anderson prematurely deducted workers' compensation premiums, discussed in paragraph 35, is ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.