State Street Global Advisors Trust Company v. Visbal

Background

State Street Global Advisors Trust Company moved to strike Kristin Visbal’s fourteenth affirmative defense from her Third Amended Answer. An affirmative defense is a legal reason why a defendant argues that a plaintiff should not prevail, even assuming the plaintiff’s claims are otherwise properly presented.

Visbal’s defense asserted that State Street’s claims were barred because State Street fraudulently induced her to enter the Master Agreement, Copyright License Agreement, and Trademark License Agreement. The defense relied on an attribution theory: Visbal alleged that State Street falsely represented that it would provide her proper attribution for the Fearless Girl statue. Visbal had previously also relied on a shared-goals theory involving State Street’s alleged commitment to gender diversity and women’s equality, but she conceded that theory was not viable and relied only on the attribution theory here.

In a prior related proceeding, the court had struck Visbal’s fraudulent-inducement defenses but allowed her to replead. Visbal did not replead her fraud counterclaims, but she included the fraudulent-inducement defense in her Third Amended Answer.

Legal Standard

Federal Rule of Civil Procedure 12(f) allows a court to strike an insufficient, redundant, immaterial, impertinent, or scandalous matter from a pleading. The court explained that an affirmative defense must have plausible factual support, must be legally sufficient to prevent the plaintiff from prevailing, and may be rejected for prejudice in circumstances recognized by the governing standard. A fraud-based defense must also satisfy Rule 9(b), which requires the circumstances of the alleged fraud to be stated with particularity.

The court also applied the requirements identified in Bridgestone/Firestone v. Recovery Credit Services. For a fraudulent-inducement theory, the party must show either a duty separate from the contractual duty to perform, a fraudulent statement collateral or outside the contract, or special damages caused by the misrepresentation that cannot be recovered as contract damages.

Court’s Analysis

The court held that the Bridgestone/Firestone requirements apply when fraudulent inducement is pleaded as an affirmative defense. It rejected Visbal’s argument that New York law does not require those elements for such a defense.

The court distinguished the authority Visbal cited because the alleged defense in that case involved activity occurring before the agreement was signed. Here, the court found that Visbal’s fraudulent-inducement defense mirrored language in the parties’ agreements and duplicated her separate defense based on State Street’s alleged material breach of those agreements. The court concluded that the fraudulent-inducement defense was therefore legally insufficient.

The court also noted that Visbal’s Third Amended Answer did not plead the fraud allegations with the particularity required by Rule 9(b). But the court said it likely would have allowed Visbal to amend that defect, so it struck the defense instead on the alternative ground that the defense failed on the merits under the Bridgestone/Firestone requirements. Because the defense was legally insufficient, the court did not need to decide whether State Street would be prejudiced by its inclusion.

Disposition

Judge Gregory H. Woods granted State Street’s motion to strike Visbal’s fourteenth affirmative defense. The court denied Visbal leave to replead, stating that further amendment would likely be futile and noting that Visbal had already amended her answer three times. The clerk was directed to terminate the pending motion.