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Novva Ausrustung Group, Inc. v. Kajioka

United States District Court, D. Nevada

September 20, 2017

DEAN KAJIOKA, Defendant.


          Cam Ferenbach, United States Magistrate Judge.

         This matter concerns the allegedly fraudulent transfer of funds from Mojave Aluminum Company, Inc. (“Mojave”) to Defendant Dean Kajioka. Before the Court are Plaintiff Novva Ausrustung Group. Inc.'s (“Novva's”) Motion to Strike (ECF No. 29), Kajioka's opposition (ECF No. 30), and Novva's reply (ECF No. 31). For the reasons stated below, the Court recommends that Novva's motion to strike be granted in part and denied in part.

         I. Background

         In May 2015, Novva entered into a loan agreement with Mojave and transferred $1.8 million to Mojave to develop an aluminum plant in California. (ECF No. 1 at 4). Mojave failed to pay back the loan on time. (Id.). Novva discovered Mojave was insolvent and sued Mojave and its operator, Mr. Shen, for breach of contract, fraud, and related claims. (Id.). While investigating its case against Mojave and Mr. Shen, Novva discovered that Mr. Shen had transferred over $500, 000 of Mojave's funds to Kajioka, a licensed attorney. (Id. at 4-5). In May 2017, Novva brought a claim for fraudulent transfer against Kajioka, asserting the funds were (1) not for legitimate services rendered and (2) transferred “with actual intent to defraud, hinder, or delay” Mojave's creditors, including Novva. (Id. at 6). As proof of Mojave's intent to defraud, Novva asserted the funds were transferred to an insider (Kajioka), and the “value of purported legal services received by Mojave were not reasonably equivalent to the value of funds transferred to Kajioka.” (Id. at 7).

         Kajioka filed an answer in July 2015. (ECF No. 21). In his answer, Kajioka asserts a number of affirmative defenses claiming he received funds from Mr. Shen based on legitimate and extensive legal services, Novva was negligent in supervising Mr. Shen's spending, and Kajioka was not an insider of Mojave. (Id. at 6-8). Novva also asserts “[t]his litigation…is retaliatory by Liu [Zhongtian] indirectly based upon Kajioka having both a personal and profession relationship with Shen and a falling out occurring between Shen and Liu.” (Id. at 9). Kajioka goes on to explain how Liu, through his “network of affiliates and agents, ” controls Novva. (Id.). Novva subsequently filed a motion to strike many of Kajioka's affirmative defenses. (ECF No. 29).

         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.” 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.'”).

         A matter stricken under Rule 12(f) must be either: (1) an insufficient defense; (2) redundant; (3) immaterial; (4) impertinent; or (5) scandalous. 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.” Fogerty, 984 F.2d at 1527 (quoting 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1382, at 706-07 (1990)). “Impertinent” matters consist of statements that do not pertain, and are not necessary, to the issues in question. Id. (quoting 5A Federal Practice and Procedure § 1382, at 711).

         Whether to grant a motion to strike lies within the discretion of the district court. Whittlestone, Inc., 618 F.3d at 973. Though Rule 12(f) motions are generally disfavored, “[a]ffirmative defenses that are insufficient as a matter of law should be stricken.” D.E. Shaw Laminar Portfolios, LLC v. Archon Corp., 570 F.Supp.2d 1262, 1271 (D. Nev. 2008). “[C]ourts 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).

         III. Discussion

         Novva's motion to strike addresses several[1] of Kajioka's affirmative defenses. To understand the parties' arguments, the Court must first evaluate the necessary elements and possible defenses to Novva's fraudulent transfer claim against Kajioka. The Court will then address the affirmative defenses based on their subject matter and the legal theory under which they can survive or must be dismissed.

         A. Fraudulent Transfer

         Under NRS 112.180(1)(a), [2] a “transfer made…by a debtor is fraudulent to a creditor…if the debtor made the transfer…[w]ith actual intent to hinder, delay or defraud any creditor.” NRS 112.180(2) lists several factors the court may consider in determining the debtor's intent, including whether the transfer was to “an insider, ” and whether “[t]he value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred.” However, “[a] transfer or obligation is not voidable under paragraph (a) of subsection 1 of NRS 112.180 against a person who took in good faith and for a reasonably equivalent value.” NRS 112.220(1).

         B. Defenses Based on Legal Services Kajioka ...

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