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Johnson v. Johnson

United States District Court, E.D. California

June 28, 2016

EDWARD J. JOHNSON, Plaintiff,
v.
GERALD JOHNSON, Defendant. GERALD JOHNSON, Counterclaimant,
v.
EDWARD J. JOHNSON, Counterdefendant.

          ORDER ON COUNTERDEFENDANT'S MOTION TO STRIKE COUNTERCLAIMS AND AFFIRMATIVE DEFENSES (ECF No. 33)

          Michael J. Seng UNITED STATES MAGISTRATE JUDGE

         I. INTRODUCTION

         On November 30, 2015, Defendant and Counterclaimant Gerald Johnson removed Plaintiff and Counterdefendant Edward Johnson's complaint to this Court.[1] On December 7, 2015, Defendant moved the Court pursuant to Federal Rule of Civil Procedure 12(b)(6) to dismiss Plaintiff's complaint for failure to state a claim upon which relief can be granted. On March 32, 2016, the Court denied the motion to dismiss.

         On April 6, 2016, Defendant filed an answer and counterclaims against Plaintiff. (ECF Nos. 26-27, 31.[2]) On April 27, 2016, Plaintiff filed a motion to strike and/or dismiss the counterclaims and the affirmative defenses to the original complaint. (ECF No. 33-35.) Defendant filed an opposition to the motion to strike on June 10, 2016, and Plaintiff filed a reply on June 16, 2016. (ECF Nos. 36-37.) On June 20, 2016, the Court took the matter under submission without oral argument. (ECF No. 38.) Accordingly, the matter stands ready for adjudication.

         The parties have consented to Magistrate Judge jurisdiction for all purposes under 28 U.S.C. § 636(c)(1). (ECF Nos. 12, 16.)

         II. FACTUAL AND PROCEDURAL BACKGROUND

         The essential allegations as set forth in the Complaint were summarized in this Court's prior order on Defendant's motion to dismiss and are briefly described here to the extent relevant to the counterclaims and affirmative defenses at issue in this motion.

         Plaintiff and Defendant are brothers. (Compl. ¶ 7.) In 2005 they entered into an oral partnership to invest in real estate in hopes of increasing their individual retirement funds. (Id. ¶ 8.) Unfortunately, things did not go well, and it appears that most of the investments resulted in losses for the partnership.

         The Partnership held properties in Fresno, California ("Fresno Properties") and Pittsburgh, Pennsylvania ("Pittsburgh Property"). (Id. at ¶¶ 18-25, 31-44).[3] On December 20, 2012, Defendant and his wife jointly filed for Chapter 7 bankruptcy protection in the Bankruptcy Court for the Eastern District of Pennsylvania. (Id. at ¶¶ 48-68.) In May 2013, Defendant obtained a discharge from bankruptcy.

         Plaintiff asserted that the Fresno and Pittsburgh Properties and the loan obligations thereto were "passed-through" the bankruptcy and returned to Defendant.

         On September 14, 2015, Plaintiff filed a complaint in the Mariposa County Superior Court. (ECF No. 1-2.) The complaint alleged five causes of action against Defendant: 1) contribution for breach of the partnership obligation of good faith and fair dealing; 2) promissory estoppel to assume partnership obligations based on Defendant's post-bankruptcy petition actions; 3) damages for Defendant's intentional misconduct and misrepresentations during his bankruptcy proceeding in breach of his duty of care to the partnership; 4) wrongful dissociation from the partnership; and 5) unjust enrichment. (Id.)

         On November 30, 2015, Defendant removed the matter to federal court. (ECF No. 1.) On December 7, 2015, Defendant filed a motion to dismiss the complaint for failure to state a claim upon which relief can be granted under Fed.R.Civ.P. 12(b)(6). (ECF No. 7.) On March 23, 2016, the Court denied the motion to dismiss.

         Based on Plaintiff's factual contentions alleging Defendant's ratification of the partnership after bankruptcy, the Court determined Plaintiff established facial plausibility on his claims for contributions to the partnership based on Defendant's post-bankruptcy actions and allowed the claims of the original complaint to proceed.

         On April 12, 2016, at 11:16 a.m. Defendant filed an answer, and seven minutes later at 11:23 a.m. filed a separate counterclaim on the Court's electronic case filing system. (ECF Nos. 27-28.) In the answer, Defendant denies nearly all of Plaintiff's allegations, and states thirty-four (34) affirmative defenses. In his counterclaim, he states five causes of action. Defendant alleges that after the discharge of his bankruptcy, Plaintiff continued to act as attorney and agent of Defendant and the alleged partnership, incurring, and obligating Defendant to pay, costs, fees, and expenses in managing and operating the properties at issue. Defendant contends that the actions taken by Plaintiff were unnecessary, improper, and excessive. (ECF No. 31 at ¶¶ 8-13.)

         Based on these actions, Defendant alleges three causes of action in the counterclaim for negligence, legal malpractice, and breach of a fiduciary duty based on Plaintiff's alleged conduct as an agent or attorney for the alleged partnership. Causes of action four and five are for breach of a promissory note and breach of contract relating to Plaintiff's alleged failure to repay a note in the amount of $30, 000.

         Plaintiff alleges that none of the claims in the counterclaim state a claim and all should be stricken or dismissed. He also asks that all of the affirmative defenses in Defendant's answer be stricken.

         III. DISCUSSION

         A. Legal Standard

         1. Motion to Strike

         A motion to strike must involve (1) an insufficient defense, (2) a redundant matter, (3) an immaterial matter, (4) an impertinent matter, or (5) a scandalous matter. Fed.R.Civ.P. 12(f); Yursik v. Inland Crop Dusters Inc., 2011 U.S. Dist. LEXIS 132275, 2011 WL 5592888, at *3 (E.D. Cal. Nov. 16, 2011) (citing Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970, 973-74 (9th Cir. 2010)). A defendant may not move to strike factual allegations on the grounds that the allegations are insufficient. Kelley v. Corrections Corp. of America, 750 F.Supp.2d 1132, 1146 (E.D. Cal. 2010) ("The proper medium for challenging the sufficiency of factual allegations in a complaint is through Rule 12(b)(6) not Rule 12(f).") (citing Consumer Solutions REO, LLC v. Hillery, 658 F.Supp.2d 1002, 1020 (N.D. Cal. 2009)). "[W]here a motion is in substance a Rule 12(b)(6) motion, but is incorrectly denominated as a Rule 12(f) motion, a court may convert the improperly designated 12(f) motion into a Rule 12(b)(6) motion." Id. (citing Consumer Solutions, 658 F.Supp.2d at 1021).

         2. Federal Rule of Civil Procedure 12(b)(6)

         A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the claims alleged in the complaint. See Parks Sch. of Bus. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). When reviewing a motion to dismiss for failing to state a claim, the court must "accept as true all of the factual allegations contained in the complaint, " Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (per curiam) (citation omitted), and may dismiss the case "only where there is no cognizable legal theory or an absence of sufficient facts alleged to support a cognizable legal theory." Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010) (citation & quotation marks omitted). When a complaint presents a cognizable legal theory, the court may grant the motion if the complaint lacks "sufficient factual matter to state a facially plausible claim to relief." Id. (citing Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009)). A claim has facial plausibility when a plaintiff "pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949 (citation omitted).

         When evaluating such a motion, the court must accept all material allegations in the complaint as true, even if doubtful, and construe them in the light most favorable to the non-moving party. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007); Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). "[C]onclusory allegations of law and unwarranted inferences, " however, "are insufficient to defeat a motion to dismiss for failure to state a claim." Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir. 1996).

         3. Granting Leave to Amend

         If a court dismisses a complaint under Rule 12(b)(6), it must then decide whether to grant leave to amend. The Ninth Circuit has "repeatedly held that a district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts." Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (citations & quotation marks omitted).

         B. Judicial Notice

         Plaintiff requests the Court take judicial notice of a Uniform Statutory Form Power of Attorney recorded in Fresno County ...


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