Kanaan v. Yaqub

Background

Nabih Kanaan and Nizar Yaqub co-founded an LLC in 1998. Kanaan alleged that he owned a 30% member interest, but that Yaqub falsified documents in 2017 to make it appear that Kanaan owned only 8%. Kanaan asserted claims for breach of fiduciary duty, breach of contract, breach of the implied covenant of good faith and fair dealing, violation of California’s Unfair Competition Law, declaratory and injunctive relief, and fraud through concealment.

Yaqub’s answer asserted 13 defenses and one counterclaim for declaratory relief. The defenses included failure to state a claim, lack of proximate cause, third-party conduct, comparative fault, apportionment, lack of substantial-factor causation, estoppel, statute of limitations, laches, failure to join a necessary party, lack of standing, and punitive damages being inappropriate.

Motion to Strike and Governing Standard

Kanaan moved under Federal Rule of Civil Procedure 12(f) to strike all of the defenses. Rule 12(f) permits a court to strike an insufficient, redundant, immaterial, impertinent, or scandalous matter from a pleading. The court explained that an affirmative defense is sufficiently pleaded when it gives the plaintiff fair notice of the defense. Motions to strike generally should not be granted unless the challenged matter could have no possible bearing on the litigation.

Pleading Standard for Defenses

Kanaan argued that defenses 2–5, 7–9, and 13 failed under the heightened pleading standard from Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal. The court held that this plausibility standard does not apply to affirmative defenses. It reasoned that the Federal Rules use different language for claims and defenses, defendants typically have less time to answer than plaintiffs have to prepare complaints, and defendants risk waiving defenses if they omit them from their answers.

Applying the more lenient fair-notice standard, the court found defenses 2–5, 7–9, and 13 adequately pleaded and denied the motion to strike those defenses.

Defenses 1, 6, 11, and 12

The court granted the motion in part as to defense 1, failure to state a claim. It held that Yaqub could raise that issue in his answer, but that failure to state a claim is not technically an affirmative defense because it challenges whether Kanaan adequately alleged the required elements. The court therefore struck only the word “affirmative” from the description of defense 1 and denied the motion in all other respects as to that defense.

The court reached the same result for defense 11, lack of standing. It held that lack of standing could be asserted as a defense, but was not properly characterized as an affirmative defense. The court struck only the word “affirmative” from that defense and otherwise denied the motion as to defense 11.

The court denied the motion to strike defense 6, which asserted that Yaqub’s conduct was not a substantial factor in causing the alleged damages. The court treated that argument as a valid defense concerning lack of causation. The court also denied the motion to strike defense 12, which asserted that punitive damages were inappropriate.

Defense 10

The court granted the motion to strike defense 10, failure to join a necessary party. Yaqub argued that the LLC was an indispensable party, but the court had already rejected that argument in an earlier order denying Yaqub’s motion to dismiss. The court had determined that Kanaan’s claims against Yaqub were direct rather than derivative and that the LLC was therefore not an indispensable party. The court struck defense 10 as redundant.

Disposition

The court denied Kanaan’s motion to strike affirmative defenses 2–9 and 12–13. It granted the motion in part as to defenses 1 and 11, striking only the characterization of those defenses as “affirmative.” It granted the motion to strike defense 10. The court otherwise denied the motion as to defenses 1, 6, 11, and 12.