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DGM Investments, Inc. v. New York Futures Exchange Inc.

United States District Court, S.D. New York
Mar 31, 2004
01 Civ. 11602 (RWS) (S.D.N.Y. Mar. 31, 2004)

Opinion

01 Civ. 11602 (RWS)

March 31, 2004

MICHAEL A. LACKER, ADAM J. RADER, LACKER LOVELL-TAYLOR, New York, NY, for Plaintiff

HOWARD R. HAWKINS, JR. CADWALADER, WICKERSHAM TAFT, New York, NY, for NYBOT Defendants


OPINION


DGM Investments, Inc. ("DGM"), Triumph-WEF Venture LLC ("Triumph-WEF"), DGM Trading Specialist Fund LLC ("DGM-TSF"), Triumph Futures Fund Ltd. ("TFF"), Triumph Premier Traders Ltd. ("TPT"), Triumph Investment Fund Ltd. ("TIF"), and Triumph-MM Venture Ltd. ("T-MM") (collectively, the "Plaintiffs") have moved pursuant to Rule 12(f), Fed.R.Civ.P., to strike the Third, Fourth, Sixth, Seventh, Eighth, and Twelfth Affirmative Defenses as set forth in the answer of the defendants Board of Trade of the City of New York, Inc. ("NYCBOT"), New York Futures Exchange, Inc. ("NYFE"), New York Clearing Corporation ("NYCC"), and the New York Futures Exchange Settlement Committee and its members except for Norman Eisler (the "Settlement Committee") (collectively, the "NYBOT Defendants"). For the reasons set forth below, the motion is granted.

Prior Proceedings

This action was commenced in December 2001, and the NYBOT Defendants moved to dismiss the complaint. Their motion was granted on October 17, 2002. Another action was commenced, the two actions were consolidated, and an amended complaint was filed on December 20, 2002.

The NYBOT Defendants again moved to dismiss on the grounds that the amended complaint failed to allege adequately tad faith, standing, and fraud. The motion was denied in an opinion of May 27, 2003, DGM Investments, Inc. v. New York Futures Exchange Inc., 265 F. Supp.2d 254 (S.D.N.Y. 2003) (the "May 27 Opinion"), and the NYBOT Defendants moved for reconsideration or interlocutory appeal which motion was denied by an opinion of October 23, 2003, PGM Investments, Inc. v. New York Futures Exchange, Inc., 288 F. Supp.2d 519 (S.D.N.Y. 2003) (the "October 23 Opinion").

The instant motion to strike the Third Affirmative Defense of failure to allege bad faith, the Fourth Affirmative Defense of lack of standing, the Sixth Affirmative Defense of failure to allege fraud, the Seventh Affirmative Defense of failure to comply with Rule 9(b), Fed.R.Civ.P., the Eighth Affirmative Defense of failure to plead scienter, and the Twelfth Affirmative Defense reserving a right to add additional affirmative defenses and the NYBOT Defendants' opposition were submitted on January 28, 2004.

Standard

Pursuant to Fed.R.Civ.P. 12(f), "the court may order stricken from any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." It is well established in this Circuit that "[a] motion to strike an affirmative defense under Rule 12(f), Fed.R.Civ.P. for legal insufficiency is not favored." William Z. Salcer, Panfeld, Edelman v. Envicon Equities Corp., 744 F.2d 935, 939 (2d Cir. 1984),vacated on other grounds, 478 U.S. 1015 (1986); see also Estee Lauder, Inc. v. Fragrance Counter, Inc., 189 F.R.D. 269, 271 (S.D.N.Y. 1999); SEC v. Toomey, 866 F. Supp. 719, 722 (S.D.N.Y. 1992). Even so, such motions will be granted where "it appears to a certainty that plaintiff would succeed despite any state of the facts which could be proved in support of the defense." William Z. Salcer. Panfeld. Edelman, 744 F.2d at 939 (quotation marks and citations omitted). "Indeed, motions to strike 'serve a useful purpose by eliminating insufficient defenses and saving the time and expense which would otherwise be spent in litigating issues that would not affect the outcome of the case.'" Simon v. Manufacturers Hanover Trust Co., 849 F. Supp. 880, 882 (S.D.N.Y. 1994) (quoting United States v. Union Gas Co., 743 F. Supp. 1144, 1150 (E.D.Pa. 1990)).

In order to prevail on a motion to strike an affirmative defense, the moving party must satisfy three prerequisites. "First, there may be no question of fact which might allow the defense to succeed. . . . Second, there may be no substantial question of law, a resolution of which could allow the defense to succeed. . . . Third, plaintiff must show that it is prejudiced by the inclusion of the defense." Toomey, 866 F. Supp. at 722. See also County Vanlines Inc. v. Experian Info. Solutions. Inc., 205 F.R.D. 148, 153 (S.D.N.Y. 2002); Estee Lauder, Inc., 189 F.R.D. at 271-72.

The Third, Fourth. Sixth. Seventh and Eighth Affirmative Defenses Are Stricken

The adequacy of the amended complaint was determined in the May 27 and October 23 Opinions. As to the issues raised by the affirmative defenses, Plaintiffs have the burden of proof by virtue of the NYBOT Defendants' general denial.

Plaintiffs would be prejudiced by the inclusion of the Third, Fourth, Sixth, Seventh, and Eighth Affirmative Defenses. The NYBOT Defendants' attempt to reargue those issues already considered will only serve to protract this litigation. "Increased time and expense of trial may constitute sufficient prejudice to warrant granting plaintiff's 12(f) motion." Toomey, 866 F. Supp. at 722. When a defense is insufficient as a matter of law, "'the defense should be stricken to eliminate the delay and unnecessary expense from litigating the invalid claim.'" Estee Lauder. Inc., 189 F.R.D. at 272 (quotingFDIC v. Eckert Seamans Cherin Mellott, 754 F. Supp. 22, 23 (E.D.N.Y. 1990)); see also Metric Hosiery Co. v. Spartans Indus., Inc., 50 F.R.D. SO, 51-52 (S.D.N.Y. 1970).

Of course, Plaintiffs must prove their pleaded allegations which have been found to be adequately pled. The Twelfth Affirmative Defense Is Stricken

A Defendants' Twelfth Affirmative Defense provides, "[t]he NYBOT Defendants assert all other affirmative defenses that may be revealed during the course of discovery." By the inclusion of this defense, NYBOT Defendants seek "to reserve the unilateral right to add new and different affirmative defenses as they become known to it at indeterminate times in the future, . . . [which would violate,] inter alia, the fair notice requirement of [Fed.R.Civ.P. 8] and circumvent [Fed.R.Civ.P. 15].'"County Vanlines Inc., 205 F.R.D. at 158 (quoting Boss Prods. Corp. v. Tapco. Int'l Corp., No. 00 Civ. 0689, 2001 WL 135819 at *3 (W.D.N.Y. Feb. 16, 2001)).

In the event additional affirmative defenses are warranted as a result of discovery, a Rule 15, Fed.R.Civ.P. motion is the appropriate remedy.

Conclusion

Plaintiffs' motion is granted and the Third, Fourth, Sixth, Seventh, Eighth and Twelfth Affirmative Defenses are stricken.

It is so ordered.


Summaries of

DGM Investments, Inc. v. New York Futures Exchange Inc.

United States District Court, S.D. New York
Mar 31, 2004
01 Civ. 11602 (RWS) (S.D.N.Y. Mar. 31, 2004)
Case details for

DGM Investments, Inc. v. New York Futures Exchange Inc.

Case Details

Full title:DGM INVESTMENTS, INC., Plaintiff, -against- NEW YORK FUTURES EXCHANGE…

Court:United States District Court, S.D. New York

Date published: Mar 31, 2004

Citations

01 Civ. 11602 (RWS) (S.D.N.Y. Mar. 31, 2004)

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