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BMO Harris Bank, National Association v. Bonan

United States District Court, N.D. California, San Jose Division

July 1, 2014



PAUL S. GREWAL, Magistrate Judge.

Pending before the court is Plaintiff BMO Harris Bank National Association's motion to strike Defendants Charles and Carol Bonans' affirmative defenses.[1] The docket reflects the Bonans have not filed an opposition. The court finds the matter suitable for disposition on the papers pursuant to the local rules.[2]


A. The Federal Rules Permit a Failure to State a Claim as an Affirmative Defense

BMO urges the Bonans' affirmative defense for failure to state a claim is not an affirmative defense.[3] "Although such a defense is permitted by Fed.R.Civ.P. 12(h)(2), there is a split of authority in this District as to whether it is simply a denial of the complaint's allegations and not a separate affirmative defense."[4] Because the Federal Rules expressly permit it, Defendants' motion to strike the failure to state a claim defense is not warranted.

B. Defendants' California Consumer Legal Remedies Act ("CLRA") Affirmative Defense Challenges a Transaction Subject to Exemption

BMO argues that the Bonans' affirmative defense for an alleged violation of the CLRA fails because the disputed transaction is exempt under California Civil Code Section 1754. The CLRA prohibits certain "unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services" to any consumer.[5] But Section 1754 provides:

The provisions of this title shall not apply to any transaction which provides for the construction, sale, or construction and sale of an entire residence or all or part of a structure designed for commercial or industrial occupancy, with or without a parcel of real property or an interest therein, or for the sale of a lot or parcel of real property, including any site preparation incidental to such sale.[6]

The case law suggests that the court must engage with the facts of the case to determine whether the exception is applicable.[7] The magnitude of the lender's involvement and the sophistication of the loan product offered to the consumer thus are relevant to a determination of whether the CLRA, or its exception, applies.[8] Because the complaint does not speak to deep lender involvement or the marketing of a sophisticated loan product, the application of the CLRA is not warranted - the facts of this case fall within the statutory exemption such that the defense must be struck. Because the court is not yet persuaded, however, that amendment would be futile, leave to amend this affirmative defense is warranted.[9]

C. The Bonans' Attempt to Reserve Future Affirmative Defenses Must be Struck Without Leave to Amend

The Bonans raise "a further affirmative defense to the Complaint" that they presently lack "information on which to for a belief as to whether it may have additional defenses not stated" herein and reserve "the right to assert additional defenses in the event investigation or discovery indicates that it would be appropriate to do so."[10] "An attempt to reserve affirmative defenses for a future date is not a proper affirmative defense in itself. Instead, if at some later date defendants seek to add affirmative defenses, they must comply with Rule 15 of the Federal Rules of Civil Procedure."[11] The Bonans' attempt to reserve future defenses cannot is not warranted. Because amendment as to this defense would be futile, it is struck without leave to amend.

D. The Bonans' Additional Conclusory Affirmative Defenses Must be Struck With Leave to Amend

BMO also challenges several of the Bonans' other affirmative defenses including: 3 (violations of the Truth in Lending Act), 4 (real estate settlement procedures), 6 (unfair business practices), 7 (waiver), 8 (estoppel), 9 (unclean hands) and 10 (good faith and fair dealing). Because the conclusory allegations stand unsupported by facts pled with particularity, [12] the defenses shall be struck.[13] Because the court is not yet persuaded that amendment as to these defenses would be futile, leave to amend is warranted.

Any amended answer shall be filed within fourteen days of this order.


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