United States District Court, S.D. California
ORDER DENYING MOTION TO STRIKE OR DISMISS; AND ORDER
GRANTING MOTION FOR LEAVE TO AMEND [DOCKET NUMBERS 40,
HONORABLE LARRY ALAN BURNS United States District Judge
Plaintiff Leading Manufacturing Solutions, LP
(“LMS”) filed a second amended complaint
(“SAC”) that added Theodore B. Smith, Jr. as a
Defendant, Smith filed a motion to strike certain allegations
and to dismiss. Smith contends that he was added as a
Defendant solely on the basis of what LMS learned during
settlement negotiations. He argues that this violates
Fed.R.Evid. and that the allegations should therefore be
stricken. After those allegations are stricken, he argues,
the SAC fails to state a claim against him. He also seeks
dismissal of the SAC's two claims against him.
Defendants, HITCO, LTD. and HITCO, INC. (the “HITCO
Defendants”) did not move to dismiss, but instead filed
that, LMS sought leave to file a third amended complaint
(“TAC”), which Defendants all opposed.
Motion to Strike and to Dismiss
Rule12(b)(6) motion to dismiss tests the sufficiency of the
complaint. Navarro v. Block, 250 F.3d 729, 732 (9th
Cir. 2001). Under Fed.R.Civ.P. 8(a)(2), only "a short
and plain statement of the claim showing that the pleader is
entitled to relief, " is required, in order to
"give the defendant fair notice of what the . . . claim
is and the grounds upon which it rests." Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 554-55 (2007).
The well-pleaded facts must do more than permit the Court to
infer "the mere possibility of conduct"; they must
show that the pleader is entitled to relief. Ashcroft v.
Iqbal, 556 U.S. 662, 679 (2009).
determining whether a complaint states a claim, the Court
accepts all allegations of material fact in the complaint as
true and construes them in the light most favorable to the
non-moving party. Cedars-Sinai Medical Center v. National
League of Postmasters of U.S., 497 F.3d 972, 975 (9th
Cir. 2007) (citation omitted). But the Court is "not
required to accept as true conclusory allegations which are
contradicted by documents referred to in the complaint,
" and does "not . . . necessarily assume the truth
of legal conclusions merely because they are cast in the form
of factual allegations." Warren v. Fox Family
Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir.2003)
(citations and quotation marks omitted).
pleading stage, the Court may consider not only the complaint
itself, but also documents it refers to, whose authenticity
is not questioned, and matters judicially noticed. Zucco
Partners LLC v. Digimarc Corp., 552 F.3d 981, 990 (9th
Cir. 2009). The Court also need not accept as true
allegations that contradict properly subject to judicial
notice, or incorporated into the complaint. Gonzalez v.
Planned Parenthood of Los Angeles, 759 F.3d 1112, 1115
(9th Cir. 2014).
Fed.R.Civ.P. 12(f), the Court can strike from a pleading any
"redundant, immaterial, impertinent, or scandalous
matter, " either sua sponte or in response to a motion.
Discussion: Motion to Strike
after LMS filed its amended complaint, Smith says, the
parties engaged in settlement negotiations, during which
financial information was exchanged. This, he says, led to
LMS's discovering that the two Defendants, HITCO, LTD.
and HITCO, INC., were insolvent. As a result, LMS soon
requested leave to amend. Among other things, the SAC added
Smith as a Defendant. Smith argues that information LMS
obtained during the settlement discussions led to LMS
pointing the finger at Smith. This, he argues, violates
Fed.R.Evid. 408, and he asks the Court to strike all
allegations that Smith is the alter ego of the two HITCO
entities. Smith's motion identifies particular
allegations he says were made only after LMS learned of the
HITCO entities' insolvency. (Mot. (Docket no. 40-1) at
Fed.R.Evid. 408(a), statements made during settlement
negotiations cannot be admitted for certain purposes. These
include proof of the validity or amount of a disputed claim,
or impeachment by prior inconsistent statement. But under
Rule 408(b), the evidence may be admitted for other purposes.
Smith relies on McCrary v. Elations Company, LLC,
2013 WL 6403073 (C.D. Cal., July 12, 2013); Vaxiion
Therapeutics, Inc. v. Foley & Lardner LLP, 2009 WL
1292913 (S.D. Cal., May 6, 2009); and the unpublished
Ford v. United States, 917 F.2d 566 (9th
McCrary nor Vaxiion helps Smith's
position. In part, both stand for the unremarkable
proposition that statements made in connection with
settlement discussions are not admissible as evidence. Here,
LMS is not seeking to admit any documents or statements from
settlement discussions as evidence.
Vaxiion, the plaintiff asked the court to allow an
expert witness to rely on a confidential document that was
disclosed in connection with settlement discussions and
subject to a protective order. The court refused, noting
first that the witness was not an expert, and also that
allowing the witness to rely on the document would violate
the protective order. The court also opined that even though
expert witnesses can rely on inadmissible evidence, allowing
the expert to rely on evidence excluded under Rule 408 and