Howard v. Tanium, Inc.

Background

Daniel Howard, who was representing himself, filed a California state-court action against Tanium, Inc. He alleged fraud based on intentional misrepresentation, claiming that Tanium misrepresented the value of its stock for purposes of the compensation package offered with his employment. Tanium removed the case to federal court based on diversity jurisdiction and filed an answer.

Howard moved to strike all 19 affirmative defenses in Tanium’s answer, arguing that they were boilerplate and lacked enough factual support. An affirmative defense is a defense that can defeat or limit liability even if the plaintiff proves the basic elements of the claim. In response, Tanium moved for leave to file an amended answer. The proposed amended answer withdrew 11 defenses and added factual allegations supporting the remaining eight.

Analysis

The court applied Federal Rule of Civil Procedure 15, which generally allows amendments before trial when justice requires. The court found no undue delay, bad faith, or prejudice. It then considered whether the proposed defenses would be futile. An amendment is futile if no possible facts could make the proposed defense legally valid or sufficiently pleaded. The court explained that an affirmative defense generally must give the opposing party fair notice of its basis, but it need only describe the defense in general terms.

The court concluded that the statute-of-limitations defense was adequately pleaded because Tanium identified the statutes on which it relied and alleged that Howard may have learned facts about the stock’s value early enough to trigger the limitations period.

The court also allowed Tanium to plead waiver, estoppel, and unclean hands. Tanium alleged that Howard accepted an employment offer without a representation about the stock’s value, later accepted a position with Tanium, and knew the stock’s true value. The court stated that Howard had not shown that these defenses were legally unavailable for his fraud claim and that the amended answer gave him fair notice.

The court rejected the proposed laches defense. Laches is an equitable defense based on unreasonable delay, and the court stated that California law does not apply it to claims seeking money damages. Because Howard sought damages rather than equitable relief, the court found that adding laches would be futile.

The court allowed Tanium to plead assumption of risk, failure to mitigate damages, set-off, and unjust enrichment. It found that the first three were not shown to fail as a matter of law and were pleaded with sufficient notice. As to unjust enrichment, the court was not persuaded that it was an affirmative defense, but the final order did not exclude it from the defenses Tanium could add. The court noted that the question of whether Howard could recover reliance damages was not being decided at this stage.

The court rejected proximate cause as an affirmative defense. Proximate cause concerns whether Tanium caused Howard’s alleged injury, which is an element Howard would have to prove. A defense that merely argues that the plaintiff cannot prove an element of the claim is not an affirmative defense, so the court found amendment on this point futile.

Disposition

Judge Jacqueline Scott Corley granted in part and denied in part Tanium’s motion for leave to file an amended answer. Tanium could amend its answer except to add laches and proximate cause as affirmative defenses. The court denied Howard’s motion to strike as moot because the amended answer would replace the original answer. Tanium was ordered to file the amended answer within seven days, and the court stated that no further motions to strike the affirmative defenses could be filed. The order disposed of Docket Nos. 11 and 12.