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Novva Ausrustung Group, Inc. v. Kajioka

United States District Court, D. Nevada

July 13, 2017

DEAN KAJIOKA, Defendant.



         This matter concerns the allegedly fraudulent transfer of funds from Mojave Aluminum Company, Inc. to Defendant Dean Kajioka. Before the Court are Kajioka's Motion to Strike (ECF No. 14), Plaintiff Novva Ausrustung Group. Inc.'s (“Novva's”) Opposition to Defendant's Motion to Strike (ECF No. 16), and Defendant's Reply (ECF No. 18). For the reasons stated below, the motion to strike is denied.

         I. Background

         The instant dispute involves the planned development and construction of a 500, 000 square-foot aluminum foundry plant in Barstow, California. See ECF No. 1 at 2, 4. In 2015, the complaint states that Eric Po-Chi Shen, an individual and nonparty to the instant action, created Mojave Aluminum Company, Inc. (“Mojave”), a California company, to build the aluminum foundry. Id. To fund this project, Mojave entered into a loan agreement with Novva on May 4, 2015. Id. at 4. Under the agreement, Novva allegedly loaned Mojave $1.8 million to be used “exclusively on the Barstow project.” Id. After Mojave failed to make the scheduled principal and interest payments on May 3, 2016, Novva alleges that it investigated and discovered that “Mojave's funds and assets were gone.” Id. A couple months later, Novva sued Mojave and Shen for breach of contract and fraud in California state court. Id. As part of the California litigation, Novva discovered various transfers of monies from Mojave to various persons and entities, including Defendant Kajioka, a Nevada licensed attorney associated personally and professionally with Shen. See ECF No. 1 at 4.

         According to the complaint, in 2015 and 2016, in a series of transfers, Shen caused $1.2 million of Mojave's funds to be transferred to an entity formed by Kajioka, International Constructor Group, LLC. Id. at 5, 6. It also alleges that Shen caused $514, 834.68 of Mojave's funds to be transferred directly to Kajioka despite Kajioka never performing any legitimate legal work for Mojave. Id. at 6. The complaint alleges that these funds were transferred to Kajioka with actual intent to defraud, hinder or delay Novva and other Mojave creditors. Id. Kajioka allegedly operated as a close confidant and insider to Shen in misappropriating Mojave's assets. Id. at 2. In May 2017, Novva filed the instant action against Kajioka for fraudulent transfer under Cal. Civ. Code § 3439.04 and Nev. Rev. Stat. § 112.180. Id. at 6-7.

         II. Legal Standard

         Federal Rule of Civil Procedure 12(f) states that “[t]he court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” The purpose of a Rule 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 ….” See Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970, 973 (9th Cir. 2010) (quoting Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir. 1993), rev'd on other grounds, Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994)); see also 2 James Wm. Moore, Moore's Federal Practice, § 12.37[3], 128-29 (3d ed. 2017) (“To prevail on this motion to strike, the movant must clearly show that the challenged matter ‘has no bearing on the subject matter of the litigation and that its inclusion will prejudice the defendants.'”).

         Rule 12(f) is not, however, “an appropriate avenue to challenge the truth of an allegation.” See F.D.I.C. v. Johnson, No. 2:12-cv-00209-KJD, 2012 WL 5818259, at *6 (D. Nev. Nov. 15, 2012); see also Boyd v. United States, 861 F.2d 106, 109 (5th Cir. 1988) (holding that falsity of a pleading does not provide a sufficient basis for granting a motion to strike under Rule 12(f)); Manuel v. Lucenti, 2004 WL 2608355, *3 (N.D.Ill. 2004) (“Defendants therefore are moving to strike the disputed paragraphs from plaintiffs' complaint on the basis that it is highly improbable that the allegations are true, but Rule 12(f) is not the appropriate mechanism to request such relief”); 2 Moore, supra, § 12.37[4], 132 (noting that Rule 12(f) does not provide “any authority to strike a pleading or any allegations within it as … false … [a]s the Ninth Circuit has pointed out, striking pleadings or allegations on this basis is effectively a resolution of the merits, which is not appropriate at the pleading stage.”).

         In deciding a motion to strike, courts may not resolve disputed and substantial factual or legal issues. See Whittlestone, Inc., 618 F.3d at 973. If courts are “in doubt as to whether challenged matter may raise an issue of fact or law, the motion to strike should be denied, leaving an assessment of the sufficiency of the allegations for adjudication on the merits.” See Sliger v. Prospect Mortg., LLC, 789 F.Supp.2d 1212, 1216 (E.D. Cal. 2011) (citing Whittlestone, Inc., 618 F.3d at 973). Rule 12(f) motions should not, at bottom, be used as a means to have certain portions of a complaint dismissed or to obtain summary judgment as to those portions of the suit-these actions are better suited for a Rule 12(b)(6) motion or a Rule 56 motion, not a Rule 12(f) motion. See Whittlestone, Inc., 618 F.3d at 974; see also Yamamoto v. Omiya, 564 F.2d 1319, 1327 (9th Cir. 1977) (“Rule 12(f) is []neither an authorized nor a proper way to procure the dismissal of all or a part of a complaint.[]” (citing 5A Charles Alan Wright, Arthur R. Miller & Richard L. Marcus, Federal Practice and Procedure, § 1380, at 782 (3d ed. 2010))).

         A matter stricken under Rule 12(f) must be either: (1) an insufficient defense; (2) redundant; (3) immaterial; (4) impertinent; or (5) scandalous. See Whittlestone, Inc., 618 F.3d at 973-74. An allegation is “immaterial” it if “has no essential or important relationship to the claim for relief or the defenses being pleaded.” See Fogerty, 984 F.2d at 1527. “Impertinent” matters consist of statements that do not pertain, and are not necessary, to the issues in question. Id. The concepts of “impertinent” and “immaterial” matters have considerable overlap. See 5C Wright et al., supra, § 1382, 463-64.

         A Rule 12(f) motion to strike is an extreme and drastic remedy-it is heavily disfavored. See Armed Forces Bank, N.A. v. FSG-4, LLC, No. 2:11-cv-654-JCM-CWH, 2011 WL 5513186, at *4 (D. Nev. Nov. 10, 2011) (citing Colaprico v. Sun Microsystems, Inc., 758 F.Supp. 1335, 1339 (N.D.Cal. 1991) (“[M]otions to strike should not be granted unless it is clear that the matter to be stricken could have no possible bearing on the subject matter of the litigation.”).[1]“Given their disfavored status, courts often require a showing of prejudice by the moving party before granting the requested relief.” See Roadhouse v. Las Vegas Metro. Police Dep't, 290 F.R.D. 535, 543 (D. Nev. 2013) (quotation omitted). Whether to grant a motion to strike lies within the discretion of the district court. See Whittlestone, Inc., 618 F.3d at 973; see also 5C Wright et al., supra, § 1382 at 433 (“The district court possesses considerable discretion in disposing of a Rule 12(f) motion to strike ….”).

         III. Discussion

         The parties present one issue: In the context of a fraudulent transfer action under Nevada and California law, whether certain factual allegations in the complaint are “immaterial” or “impertinent” and should be stricken under Fed.R.Civ.P. 12(f). A couple general points must be noted. First, the purpose of a complaint is to show that “the pleader is entitled to relief.” See Fed. R. Civ. P. 8(a)(2). Second, this case is in its infancy at the pleadings stage. The motion to strike concerns the following allegations in the complaint:

i. Part of Paragraph 3 Evidence obtained from Mojave and other sources revealed that Kajioka operated as a close confidant and insider in depleting Mojave's ...

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