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Federal Deposit Insurance Corp. v. First Priority Financial, Inc.

United States District Court, E.D. California

June 16, 2016

FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for AMTRUST BANK, Plaintiff,
v.
FIRST PRIORITY FINANCIAL, INC., a California corporation, Defendant.

          ORDER GRANTING PLAINTIFF'S MOTION TO STRIKE DEFENDANT'S AFFIRMATIVE DEFENSES

          JOHN A MENDEZ UNITED STATES DISTRICT JUDGE

         This matter comes before the Court on Plaintiff Federal Deposit Insurance Corporation's (FDIC) ("Plaintiff") Motion to Strike Defendant First Priority Financial Inc.'s ("Defendant") twelfth, twenty-sixth, and twenty-seventh affirmative defenses (Doc. #12) from Defendant's answer (Doc. #5) to the complaint (Doc. #1). Defendant opposes the motion (Doc. #17).[1] For the reasons set forth below, Plaintiff's motion is GRANTED.

         I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND

         Plaintiff "is a corporation and instrumentality of the United States of America, . . . and is authorized to be appointed as receiver for insured depository institutions that have failed." Id. ¶ 5. "On December 4, 2009, the Office of Thrift Supervision closed AmTrust and appointed [Plaintiff] as Receiver." Id. Plaintiff is permitted to file a lawsuit in this court of law pursuant to 12 U.S.C. §§ 1819 and 1821(d)(2)(A)(i) and succeeded to all of AmTrust's claims. Plaintiff now owns the subject claims and has standing to prosecute this action as AmTrust's receiver.

         Plaintiff alleges that in both 2004 and 2007, AmTrust and Defendant entered into a written Master Broker Agreement which "set[] forth terms and conditions, pursuant to which [Defendant] would originate and submit and AmTrust would accept and fund mortgage loans." Compl. ¶¶ 7, 11. Plaintiff alleges Defendant breached the terms and conditions of the referenced Master Broker Agreements, id. ¶¶ 24, 34, 43, 52, accordingly, Plaintiff filed this lawsuit for breach of contract, id. ¶ 1.

         In Defendant's answer it denies the allegations in Plaintiff's complaint and asserts thirty-two affirmative defenses. Plaintiff seeks to strike Defendant's twelfth, twenty-sixth, and twenty-seventh affirmative defenses: (12) Negligence and Breach of Contract, (26) Comparative Indemnity, and (27) Fraud.

         II. OPINION

         A. Legal Standard

         A Motion to Strike is brought under Federal Rule of Civil Procedure ("Rule") 12(f), which provides in pertinent part: "The court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent or scandalous matter." Fed.R.Civ.P. 12(f). "A defense which demonstrates that plaintiff has not met its burden of proof is not an affirmative defense." Zivkovic v. S. Cal. Edison Co., 302 F.3d 1080, 1088 (9th Cir. 2002). "On the other hand, ‘[a]n affirmative defense, under the meaning of [Rule] 8(c), is a defense that does not negate the elements of the plaintiff's claim, but instead precludes liability even if all of the elements of the plaintiff's claims are proven.'" Barnes v. AT & T Pension Benefit Plan-Nonbargained Program, 718 F.Supp.2d 1167, 1173 (N.D. Cal. 2010) (first alteration in original) (quoting Roberge v. Hannah Marine Corp., No. 96-1691, 1997 WL 468330, at *3 (6th Cir. 1997)). "While courts rarely grant Rule 12(f) motions to strike affirmative defenses, if an affirmative defense is a negative defense and should instead be included as a denial in the answer, the motion to strike will be granted." Lexington Ins. Co v. Energetic Lath & Plaster, Inc., No. 2:15-CV-00861-KJM, 2015 WL 5436784, at *11-12 (E.D. Cal. Sept. 15, 2015) (citing Barnes, 718 F.Supp.2d at 1173).

         B. Evidentiary Objections

         Defendant objects (Doc. #18) to Plaintiff's Exhibit A attached to the Declaration of Lauren M. Gibbs (Plaintiff's attorney of record) in support of the Motion to Strike (Doc. #13-1). Exhibit A contains three pages of the seventeen page 2004 Master Broker Agreement between AmTrust bank and Defendant.

         Defendant contends that "[t]he complete document has not been disclosed to Defendant by Plaintiff[, and] Plaintiff should not be allowed to select favorable portions of the alleged agreement . . . while disregarding the rest . . . ." Def.'s Objection to Pl.'s Ex. A 1:25-28. Defendant cites Federal Rule of Evidence 106 as the basis for its objection.

         The advisory committee's note to Federal Rule of Evidence 106 states: "The rule is based on two considerations[-t]he first is the misleading impression created by taking matters out of context[; t]he second is the inadequacy of repair work when delayed to a point later in the trial." Fed.R.Evid. 106 advisory committee's note. Exhibit A is only relevant to this Court's analysis for the choice-of-law provision it contains. Further, Plaintiff also introduces Exhibit B-the 2007 Master Broker Agreement between AmTrust bank and Defendant-which contains an identical choice-of-law provision (Doc. #13-2). Defendant does not object to this Exhibit and Defendant does not contest Plaintiff's choice-of-law argument. Accordingly, neither of ...


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