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Federal Trade Commission v. Omics Group Inc.

United States District Court, D. Nevada

December 15, 2017

FEDERAL TRADE COMMISSION, Plaintiff,
v.
OMICS GROUP INC., et al., Defendants.

          REPORT AND RECOMMENDATION MOTION TO STRIKE AFFIRMATIVE DEFENSES (ECF NO. 55)

          Cam Ferenbach, United States Magistrate Judge.

         Before the Court is Plaintiff Federal Trade Commission's (“FTC”) Motion to Strike Affirmative Defenses. For the reasons stated below, the Court recommends that the FTC's motion be granted in part and denied in part.

         I. Background

         On August 25, 2016, the FTC filed a complaint against Defendants pursuant to the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. § 53(b). (ECF No. 1 at 2-4). The FTC alleged Defendants violated 15 U.S.C. § 45(a) by misrepresenting online journal publishing practices, failing to disclose publishing fees, and misrepresenting the scientific conferences they marketed. (Id. at 12-14). The FTC asked for injunctive and monetary relief including “restitution, the refund of monies paid, and the disgorgement of ill-gotten monies.” (Id. at 15). On October 16, 2017, Defendants filed an answer that included 20 Affirmative Defenses. (ECF No. 48 at 6-7).

         On November 6, 2017, the FTC filed a motion to strike 19 of Defendants' Affirmative Defenses. (ECF No. 55). Defendants filed a response on November 20, 2017 (ECF No. 59) and the FTC filed a reply on November 27, 2017 (ECF No. 60).

         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 court must view the pleading under attack in the light most favorable to the pleader' and should not weigh the sufficiency of evidence in evaluating a motion to strike.” D.E. Shaw Laminar Portfolios, LLC v. Archon Corp., 570 F.Supp.2d 1262, 1271 (D. Nev. 2008) (quoting Cardinale v. La Petite Acad., Inc., 207 F.Supp.2d 1158, 1162 (D. Nev. 2002)).

         Whether to grant a motion to strike lies within the discretion of the district court. Whittlestone, Inc., 618 F.3d at 973. “[F]ederal courts generally disfavor motions to strike.” D.E. Shaw Laminar Portfolios, LLC, 570 F.Supp.2d at 1271 (quoting Germaine Music v. Universal Songs of Polygram, 275 F.Supp.2d 1288, 1300 (D. Nev. 2003)). “[C]ourts often require a showing of prejudice by the moving party before granting the requested relief.” Roadhouse v. Las Vegas Metro. Police Dep't, 290 F.R.D. 535, 543 (D. Nev. 2013) (internal quotation omitted).

         III. Discussion

         The FTC's motion to strike addresses 19 of Defendants' Affirmative Defenses. To simplify its ruling, the Court will group the affirmative defenses based on the argument the FTC raises against them.

         As a preliminary matter, Defendants did not respond to the FTC's motion to strike with regard to Affirmative Defenses 19 and 20, which pertain to jurisdiction and asserting additional defenses that may arise later in the case. (ECF No. 55 at 16-20). Under LCR 47-3, “[t]he failure of an opposing party to include points and authorities in response to any motion constitutes a consent to granting the motion.” Therefore, the Court should grant FTC's motion to strike as to Affirmative Defenses 19 and 20.

         A. Already Addressed in a Motion to Dismiss

         Defendants' Affirmative Defense 1 is that the FTC “failed to state a claim against Defendants upon which relief can be granted.” (ECF No. 48 at 6). The FTC argues that the Court has already ruled that the complaint adequately presents the FTC's claims in its order addressing Defendants' previous motion to dismiss. (ECF No. 55 at 2). Defendants argue the Court's previous ruling is not binding on this matter. (ECF No. 59 at 12).

         Courts have reached inconsistent conclusions when evaluating affirmative defenses that were previously the subject of a motion to dismiss. The FTC cites two cases from other jurisdictions stating that the Court may strike a defense that was previously ruled against on a motion to dismiss. (ECF No. 55 at 2-3). However, the Court has found more persuasive authority stating that the fact that affirmative defenses “were already the subject of motions to dismiss, [] alone, is not sufficient to warrant striking them from the Answer.” Garity v. Donahoe, No. 2:11-CV-01805-MMD, 2013 WL 4774761, at *3 (D. Nev. Sept. 4, 2013); see also Ventures Edge Legal PLLC v. GoDaddy.com LLC, No. CV-15-02291-PHX-GMS, 2017 WL 1075059, at *3 (D. Ariz. Mar. 22, 2017) (“district courts have long allowed defendants to plead failure to state a claim as an affirmative defense even when a motion to dismiss on the same grounds had been previously denied.”). In addition, “[t]he defense of failure to state a claim upon which relief can be granted cannot be waived and can be asserted at the trial on the merits and hence neither the defendant nor the trial court is concluded by a prior ruling on a motion to dismiss from reconsidering the questions previously raised.” Van Voorhis v. D.C., 240 F.Supp. 822, 824 (D.D.C 1965).

         The Court's previous ruling on Defendants' motion to dismiss is not binding on its decision regarding Defendants' Affirmative Defenses. Because Affirmative Defense 1 is an otherwise appropriate defense, [1] the Court should deny the FTC's motion to strike as to Affirmative Defense 1.

         B. The First Amendment Does Not Protect Deceptive Speech

         Defendants' Affirmative Defense 9 is that “[t]he requested relief, if granted, would violate Defendants' First Amendment right to free speech.” (ECF No. 48 at 6). The FTC argues this defense is insufficient because “the First Amendment does not protect deceptive speech” and “[a]ppropriate time, place, and manner restrictions may be imposed on commercial speech.” (ECF No. 55 at 8-10). Defendants argue that this defense may be relevant to relief the FTC seeks in this case and should be allowed to proceed. (ECF No. 59 at 16-17).

         Again, there are inconsistent results from courts ruling on this issue. The FTC cites decisions from other jurisdictions accepting the FTC's argument and striking a First Amendment affirmative defense. (ECF No. 5 at 10). However, the Court is more persuaded by decisions within the United States District Court of Nevada: “Whereas the court agrees that the First Amendment argument may be relevant to the disposition of the case, and whereas the court sees no harm in allowing the defense to remain in the answer, the motion to strike is denied.” F.T.C. v. Ivy Capital, Inc., No. 2:11-CV-283-JCM-GWF, 2011 WL 2470584, at *2 (D. Nev. June 20, 2011). In addition, “the area of commercial speech is not exempt from first amendment protection.” Standard Oil Co. of California v. F. T. C., 577 F.2d 653, 659 (9th Cir. 1978).

         The First Amendment is clearly relevant to this case, as it involves Defendants' commercial speech. Therefore, the Court should deny the FTC's ...


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