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United States v. Stabl, Inc.

United States District Court, D. Nebraska

August 8, 2018

UNITED STATES OF AMERICA, Plaintiff,
v.
STABL INC., LANT, INC., LEON JOHNSON, and ANN JOHNSON, Defendants. STATE OF NEBRASKA, Plaintiff,
v.
STABL, INC., LANT, INC., LEON JOHNSON, and ANN JOHNSON, Defendants.

          ORDER

          Michael D. Nelson United States Magistrate Judge.

         This matter comes before the Court on the State of Nebraska's Motion to Quash and Motion for Protective Order (Filing No. 88 in the Lead Case; Filing No. 96 in the Member Case), the United States' Motion to Quash and for Protective Order (Filing No. 89 in the Lead Case; Filing No. 97 in the Member Case), and the United States' Motion to Strike Affirmative Defenses (Filing No. 98 in the Lead Case; Filing No. 104 in the Member Case).[1] Both government entities request a protective order barring any Rule 30(b)(6) deposition of current and former attorneys of the United States, EPA, the State of Nebraska, and Nebraska Department of Environmental Quality (“NDEQ”). The United States separately moves to strike eight of the Defendants' affirmative defenses as legally insufficient, factually irrelevant, and prejudicial. The Court will grant the motions, in part.

         BACKGROUND

         As outlined by the Court's previous orders, the United States and Nebraska filed the instant actions to recover their respective portions of a more than $2 million judgment awarded against Stabl Inc. (“Stabl”) in a prior action as civil penalties for violations of the Clean Water Act. See United States of America and State of Nebraska v. Stabl, Inc. f/k/a Nebraska ByProducts, Inc., No. 8:11CV274 (Judgment affirmed by 8th Circuit Mandate issued October 21, 2015). The United States and Nebraska both allege that in July 2010, five days after Stabl received notice of the potential civil enforcement action, Stabl fraudulently transferred nearly all its assets to Leon and Ann Johnson to avoid paying penalties, and that Lant, Inc. is an alter ego of the Johnsons. (Filing No. 47).

         The United States' Action

         The United States filed its Complaint on May 26, 2016, (Filing No. 1), and an Amended Complaint on June 6, 2017 (Filing No. 47). The United States' Amended Complaint alleges three claims for fraudulent transfers under the Federal Debt Collection Practices Act (“FDCPA”)[2] and one claim entitled “Piercing Stabl's Corporate Veil, ” which claim Defendants sought to dismiss as time-barred by a four-year statute of limitations. Chief Judge Smith Camp denied the motion to dismiss because piercing a corporate veil is simply a “remedy to enforce a substantive right, ” rather than an independent cause of action. Accordingly, Chief Judge Smith Camp concluded that the FDCPA's six-year statute of limitations applies to all the United States' claims, and that all the claims were timely. (Filing No. 69 at p. 8).

         Defendants thereafter filed an answer raising the following affirmative defenses to the United States' claims: (1) waiver, (2) estoppel, (3) statute of limitations, (4) failure to state a claim, (5) unclean hands and failure to act in good faith and fair dealing, (6) the Defendants did not act in bad faith, (7) presumption that corporations are separate from shareholders and officers, (8) there was no improper unity of interest and ownership, (9) unclean hands, and (10) reliance on counsel and professional accountants. (Filing No. 71 at pp. 16-19).

         The State's Action

         The State of Nebraska filed its Complaint on July 15, 2016, (Filing No. 1 in the Member Case), and an Amended Complaint on August 19, 2016 (Filing No. 15 in the Member Case). The State's Amended Complaint states one claim for fraudulent transfers under the Nebraska Uniform Fraudulent Transfer Act (“NUFTA”).[3] The State alleges in its Amended Complaint that it discovered the July 2010 transfers on May 26, 2016, when the United States filed its action in this Court. (Id. at p. 6 ¶ 36).

         Defendants moved to dismiss the State's action arguing, in part, that the State did not bring the action prior to the running of NUFTA's four-year statute of limitations or within one year after the transfer or obligation was or could reasonably have been discovered. The Court denied Defendants' motion because on a review of a motion to dismiss, the Court assumes as true those facts asserted in a complaint, including the State's allegation that “it filed the action within one year after the [allegedly fraudulent] transfers could reasonably have been discovered.” However, the Court's denial was “without prejudice to reassertion in a motion for summary judgment.” (Filing No. 35 at p. 8 in the Member Case). Thereafter, Defendants filed an answer raising the following affirmative defenses: (1) waiver, (2) estoppel, (3) statute of limitations, (4) failure to state a claim, and (5) unclean hands and failure to act in good faith and fair dealing. (Filing No. 45 in the Member Case).

         The instant dispute concerns Defendants' Rule 30(b)(6) Notices sent to the United States and the State. Both the United States and the State object to producing any 30(b)(6) deposition witness for a variety of reasons, which the Court will discuss further below. Relatedly, the United States has moved to strike several of the defendants' affirmative defenses to prevent the Defendants from seeking discovery related to those defenses.

         ANALYSIS

         I. United States' Motion to Strike

         The United States has moved to strike the Defendants' first, second, third, and fifth through ninth affirmative defenses. The United States argues that such defenses are legally insufficient and factually irrelevant, and that striking the defenses is necessary to avoid prejudice because Defendants are seeking discovery related to those defenses. (Filing No. 99 at p. 1).

         Under Federal Rule of Civil Procedure 12(f) “the court may order stricken from any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” Fed.R.Civ.P. 12(f). Although courts have “liberal discretion” to strike pleadings under Rule 12(f), “[s]triking a party's pleading . . . is an extreme and disfavored measure.” BJC Health Sys. v. Columbia Cas. Co., 478 F.3d 908, 917 (8th Cir. 2007). An affirmative defense may be stricken “where the defense has no basis in law, is insufficient as a matter of law, and the moving party will suffer prejudice in the absence of the court granting its motion to strike.” GGA-PC v. Performance Eng'g, Inc., No. 8:16CV567, 2017 WL 2773532, at *2 (D. Neb. June 26, 2017)(Bataillon, J.) (citing United States v. Dico, Inc., 266 F.3d 864, 880 (8th Cir. 2001); see Lunsford v. United States, 570 F.2d 221, 229 (8th Cir. 1977). Prejudice may be shown if striking the defense would “prevent a party from engaging in burdensome discovery” or “from expending time and resources litigating irrelevant issues that will not affect the case's outcome.” Cynergy Ergonomics, Inc. v. Ergonomic Partners, Inc., No. 4:08-CV-243 JCH, 2008 WL 2817106, at *2 (E.D. Mo. July 21, 2008)(citing Canadian St. Regis Band of Mohawk Indians ex rel. Francis v. New York, 278 F.Supp.2d 313, 325 (S.D.N.Y. 2003)).

         The United States seeks to strike Defendants' sixth, seventh, and eighth affirmative defenses because they were raised without sufficient explanation of their factual basis. Fed.R.Civ.P. 8(b) provides, “In responding to a pleading, a party must . . . state in short and plain terms its defenses to each claim asserted against it.” Fed.R.Civ.P. 8(b). Defenses “need not be articulated with any rigorous degree of specificity, and may be sufficiently raised for purposes of Rule 8 by their bare assertion.” Infogroup, Inc. v. DatabaseLLC, 95 F.Supp.3d 1170, 1193 (D. Neb. 2015)(Gerrard, J.) (citing Zotos v. Lindbergh Sch. Dist., 121 F.3d 356, 361 (8th Cir. 1997)).

         Applying the foregoing standards, the Court concludes that Defendants have adequately pled their sixth through eighth affirmative defenses pursuant to Fed.R.Civ.P. 8(b) and have provided the United States with fair notice of those defenses. Striking affirmative defenses is a disfavored measure. “Motions to strike are often considered time wasters, and should be denied unless the challenged allegations have no possible relation or logical connection to the subject matter of the controversy.” Infogroup, Inc., 95 F.Supp.3d at 1194. While several of Defendants' affirmative defenses do not state ...


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