United States District Court, S.D. California
ORDER GRANTING-IN-PART AND DENYING-IN-PART
PLAINTIFF'S MOTION TO STRIKE AFFIRMATIVE DEFENSES [DOC.
J. Whelan United States District Judge
before the Court is Plaintiff's motion to strike
Defendant's affirmative defenses under Federal Rule of
Civil Procedure 12(f). (Mot. [Doc. 17].) Defendant
opposes. (Opp'n [Doc. 18].) The Court decides
the matter on the papers submitted and without oral argument.
See Civ. L. R. 7.1(d.1). For the reasons discussed
below, the Court GRANTS-IN-PART and
DENIES-IN-PART Plaintiff's motion [Doc.
March 2, 2017, Plaintiff Philadelphia Indemnity Insurance
Company (the “Surety”) initiated this action for
negligent misrepresentation against Defendant Gregory
Herrman, P.C. a/k/a Herrman & Associates
(“Herrman”), a certified public accountant.
(Compl. [Doc. 1].) The Surety alleges Herrman failed
to meet the standard of care in reviewing NEI Contracting and
Engineering, Inc.'s (“NEI”) financial
statements (the “Reviews”), which caused the
Surety to issue bonds it would not otherwise have issued.
(Id., ¶ 21.) Herrman's Amended Answer
raises nine affirmative defenses and reserves the right to
amend and supplement the answer as discovery progresses.
(See Am. Answer [Doc. 12].)
now seeks to strike all nine of the affirmative defenses on
the basis that the defenses “are not legally recognized
in the case of a negligent misrepresentation claim, ”
“facially invalid in light of the pleadings, ” or
“insufficiently pled so as to provide the Surety
‘fair notice' of the defenses.”
(P&A [Doc 17-1], 2:2-3:5.)
Federal Rule of Civil Procedure 12(f), a court “may
strike from a pleading an insufficient defense or any
redundant, immaterial, impertinent, or scandalous
matter.” “[T]he function of a 12(f) motion to
strike is to avoid the expenditure of time and money that
must arise from litigating spurious issues by dispensing with
those issues prior to trial.” Sidney-Vinstein v.
A.H. Robins Co., 697 F.2d 880, 885 (9th Cir. 1983). At
the same time, 12(f) motions are “generally regarded
with disfavor because of the limited importance of pleading
in federal practice, and because they are often used as a
delaying tactic.” Neilson v. Union Bank of Cal.,
N.A., 290 F.Supp.2d 1101, 1152 (C.D. Cal. 2003). Unless
it would prejudice the opposing party, courts freely grant
leave to amend stricken pleadings. Wyshak v. City
Nat'l Bank, 607 F.2d 824, 826 (9th Cir. 1979);
see also Fed.R.Civ.P. 15(a)(2).
affirmative defense may be insufficient as a matter of
pleading or as a matter of law. Sec. People, Inc. v.
Classic Woodworking, LLC, 2005 WL 645592, at *2 (N.D.
Cal. 2005). “The key to determining the sufficiency of
pleading an affirmative defense is whether it gives the
plaintiff fair notice of the defense.”
Wyshack, 607 F.2d at 827 (citing Conley v.
Gibson, 355 U.S. 41 (1957)) (emphasis added);
Simmons v. Navajo, 609 F.3d 1011, 1023 (9th Cir.
2010); Schutte & Koerting, Inc. v. Swett &
Crawford, 298 Fed.Appx. 613, 615 (9th Cir. 2008). Fair
notice generally requires that the defendant state the nature
and grounds for the affirmative defense. See Conley,
355 U.S. at 47. It does not, however, require a detailed
statement of facts. Id. at 47-48. On the other hand,
an affirmative defense is legally insufficient only if it
clearly lacks merit “under any set of facts the
defendant might allege.” McArdle v. AT&T
Mobility, LLC, 657 F.Supp. 1140, 1149-50 (N.D. Cal.
First Affirmative Defense
first affirmative defense alleges that “insofar as [the
Surety] bases its negligent misrepresentation claims upon a
statement of opinion by Herrman, there is no actionable
alleged false representation or misrepresentation of existing
fact.” (Am. Answer 5:11-14.) The Surety argues
this affirmative defense is facially invalid in light of the
pleadings under Bily, which clarified that an independent
accountant's professional opinion is actionable under a
negligent misrepresentation cause of action.
(P&A 8:3-6.) The Court is not persuaded.
Bily v. Aruthur Young & Co., 3 Cal.4th 370
(1992), the California Supreme Court stated that
“[u]nder certain circumstances, expressions of
professional opinions are treated as representations of
fact.” Id. at 408. As the moving party, the
Surety bears the burden of demonstrating that this case fits
within the “certain circumstances” limitation
described in Bily. The Surety has not done so and
thus has not established that the first affirmative defense
is conclusively negated. The Court DENIES
the Surety's motion to strike the first affirmative
Second and Third Affirmative Defenses
second and third affirmative defenses assert the Surety's
negligent misrepresentation claim is barred because Herrman
provided the Reviews for the benefit of NEI, and it had no
specific intent for the Surety to rely upon the Reviews.
(Am. Answer 5:16-26.) The Surety argues that because
Herrman admits it knew NEI would provide the reviewed
financial statements to third parties, the second and ...