Luo v. City of Pleasant Hill

Background

In 2021, Luo opened a cryptocurrency trading account with Binance. Binance locked the account in April 2022. Luo learned that Stephen Vuong, identified in the opinion as an officer with the Pleasant Hill Police Department, had commanded Binance to lock the account because of an ongoing criminal investigation involving the account. The account remained frozen and contained $9.5 million in cryptocurrency, according to the opinion.

Luo’s amended complaint alleged an unconstitutional seizure under the Fourth Amendment and under 42 U.S.C. § 1983. Vuong filed an answer asserting three affirmative defenses: qualified immunity, failure to mitigate damages, and unclean hands.

Motion to Strike

Luo moved under Federal Rule of Civil Procedure 12(f) to strike all three defenses. A motion to strike asks the court to remove an insufficient defense or other improper matter from a pleading. Luo argued that the defenses did not satisfy Rule 8(b) and the heightened pleading standard from Twombly and Iqbal. Vuong argued that the Twombly/Iqbal standard did not apply to affirmative defenses.

The court followed the majority of decisions in the Northern District of California and applied the Twombly/Iqbal standard to Vuong’s affirmative defenses. Under that standard, a defense must include enough facts to make it plausible on its face, although it does not require extensive factual allegations.

Court’s Analysis

The court examined Vuong’s three defenses. The qualified-immunity defense stated that individual defendants were immune from liability under 42 U.S.C. § 1983. The mitigation defense stated that Luo failed to mitigate damages. The unclean-hands defense stated that Luo’s claims were barred by that doctrine.

The court found that all three were bare references to legal doctrines without any facts or discussion explaining how the doctrines applied to this case. It therefore concluded that the defenses were inadequately pleaded under Rule 8. Because the court resolved the unclean-hands defense on that basis, it did not address Luo’s separate argument that the defense also had to satisfy Rule 9(b)’s particularity requirement for fraud allegations.

Disposition

Judge Thomas S. Hixson granted Luo’s motion to strike Vuong’s affirmative defenses and granted Vuong leave to amend. Vuong was ordered to file an amended answer within 14 days of the order. The ruling addressed the adequacy of the defenses as pleaded; it did not decide the merits of Luo’s seizure claim or determine whether any amended defense would succeed.