United States v. Peters

— 1 — — 2 — — 3 — — 4 — — 5 — — 6 — — 7 — 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- — 11 — 12 UNITED STATES OF AMERICA, No. 2:24-cv-00287 WBS CKD 13 Plaintiff, 14 v. MEMORANDUM AND ORDER RE: PLAINTIFF’S MOTION TO STRIKE 15 MATTHEW H. PETERS, BAYVIEW AFFIRMATIVE DEFENSES1 SPECIALTY SERVICES LLC, 16 COASTLINE SPECIALTY SERVICES LLC, STRAND VIEW CORPORATION, 17 INNOVATIVE SPECIALTY SERVICES LLC, PARAGON PARTNERS LLC (D/B/A 18 PARAGON MEDICAL PARTNERS), CARDEA CONSULTING LLC, PRAXIS 19 MARKETING SERVICES LLC, PROFESSIONAL RX PHARMACY LLC, 20 INLAND MEDICAL CONSULTANTS LLC (D/B/A ADVANCED THERAPEUTICS), 21 PORTLAND PROFESSIONAL PHARMACY LLC, SUNRISE PHARMACY LLC, 22 PROFESSIONAL 205 PHARMACY LLC (D/B/A PROFESSIONAL CENTER 205 23 PHARMACY), SYNERGY MEDICAL SYSTEMS LLC (D/B/A SYNERGY RX), 24 SYNERGY RX LLC (D/B/A SYNERGY RX), PRESTIGE PROFESSIONAL 25 PHARMACY, JMSP LLC (D/B/A PROFESSIONAL CENTER 205 — 26 — 27 1 The motion is decided on the papers without oral argument pursuant to Local Rule 230(g). The scheduled October 28 28, 2024 hearing on the motion is hereby VACATED. 1 PHARMACY), MPKM, LLC (D/B/A PROFESSIONAL CENTER PHARMACY), 2 ONE WAY DRUG LLC (D/B/A PARTELL PHARMACY), PARTELL PHARMACY LLC, 3 OPTIMUM CARE PHARMACY INC. (D/B/A MARBELLA PHARMACY), 4 GLENDALE PHARMACY LLC, and LAKE FOREST PHARMACY (D/B/A 5 LAKEFOREST PHARMACY), 6 Defendants. — 7 — 8 ----oo0oo---- 9 The United States brought this action against Matthew 10 Peters and several pharmacies and other corporate entities, 11 alleging that they operated a kickback scheme that submitted 12 claims for prescription medications to federal government 13 insurance programs in violation of the False Claims Act. (Docket 14 No. 50.) Answers were filed by One Way Drug LLC (Docket No. 52 15 (“One Way Def.”)) and Matthew Peters and the other corporate 16 defendants, with the exception of those subject to default2 17 (Docket No. 53 (“Peters Def.”)). The government now moves to 18 strike several affirmative defenses asserted in defendants’ 19 answers. (Docket No. 56.) 20 Rule 12(f) authorizes the court to “strike from a 21 pleading an insufficient defense or any redundant, immaterial, 22 impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f). “The 23 function of a 12(f) motion to strike is to avoid the expenditure 24 of time and money that must arise from litigating spurious issues 25 by dispensing with those issues prior to trial . . . .” Fantasy, — 26 — 27 2 The Clerk entered default as to Inland Medical Consultants LLC, Professional Rx Pharmacy LLC, Synergy Medical 28 Systems LLC, and Synergy RX LLC. (Docket No. 63.) 1 Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir. 1993) (cleaned 2 up), rev’d on other grounds, Fogerty v. Fantasy, Inc., 510 U.S. 3 517, 114 (1994). 4 “Affirmative defenses may be insufficient ‘as a matter 5 of law’ or ‘as a matter of pleading.’” Bruno v. Equifax Info. 6 Servs., No. 2:17-cv-0327 WBS EFB, 2017 WL 2833393 , at *2 (E.D. 7 Cal. June 30, 2017) (quoting Harris v. Chipotle Mexican Grill, 8 Inc., 303 F.R.D. 625, 627 (E.D. Cal. 2014)). 9 I. Legal Insufficiency 10 “An affirmative defense is insufficient as a matter of 11 law ‘if it lacks merit under any set of facts the defendant might 12 allege.’” Bruno, 2017 WL 2833393 , at *2 (quoting Dodson v. 13 Munirs Co., No. 13-cv-0399 LKK DAD, 2013 WL 3146818 , at *7 (E.D. 14 Cal. June 18, 2013)). 15 Here, the affirmative defense of laches (One Way Def. 16 15) is insufficient as a matter of law because “[t]he government 17 is not subject to the defense of laches when enforcing its 18 rights.” See United States v. Menatos, 925 F.2d 333, 335 (9th 19 Cir. 1991) (citing United States v. Summerlin, 310 U.S. 414 , 416 20 (1940); United States v. McLeod, 721 F.2d 282, 285 (9th Cir. 21 1983)). Accordingly, One Way’s fifteenth affirmative defense 22 will be stricken.3 23 II. Inadequate Pleading 24 The government argues that defendants have failed to — 25 — 3 The government also argues that several other equitable defenses, including estoppel, bad faith, unclean hands, and — 26 — failure to mitigate damages, are unavailable as a matter of law. 27 While these defenses may ultimately be unavailable, the case law cited is not persuasive enough to warrant striking these defenses 28 on the grounds of legal insufficiency at the pleading stage. 1 adequately plead the affirmative defenses of estoppel (One Way 2 Def. 10, Peters Def. 2); ratification (One Way Def. 12); waiver 3 and release (One Way Defs. 8-9); unclean hands (One Way Def. 11); 4 failure to mitigate damages (One Way Def. 14, Peters Def. 4); 5 damages and claims barred by express contract (Peters Def. 5); 6 contribution and indemnification (Peters Def. 11); bad faith (One 7 Way Def. 16); and “all other defenses enumerated in Rule 8(c)” 8 (One Way Drug Def. 17). 9 The parties agree that the “fair notice” standard 10 governs the pleading of affirmative defenses.4 Under this 11 standard, an affirmative defense is insufficient if it fails to 12 provide “fair notice” of its nature and grounds to the plaintiff. 13 Kohler v. Flava Enters., Inc., 779 F.3d 1016, 1019 (9th Cir. 14 2015). “[T]he ‘fair notice’ required by the pleading standards 15 only requires describing the defense in ‘general terms.’” Id. 16 (quoting 5 Charles Alan Wright & Arthur R. Miller, Federal 17 Practice and Procedure § 1274 (3d ed. 1998)). 18 While this standard is “less demanding” than that 19 applied under Rule 12(b)(6), “‘it still requires a party to plead 20 some factual basis for its allegations.’” Television Educ., Inc. 21 v. Contractors Intelligence Sch., Inc., No. 2:16-cv-1433 WBS EFB, — 22 — 2016 WL 7212791 , at *1 (E.D. Cal. Dec. 12, 2016) (quoting Beco — 23 — 24 4 The result here would be the same under the more demanding Rule 12(b)(6) pleading standard, which some courts have — 25 — applied in considering motions to strike affirmative defenses. See, e.g., Goobich v. Excelligence Learning Corp., No. 5:19-cv26 06771 EJD, 2020 WL 1503685 , at *2 (N.D. Cal. Mar. 30, 2020) 27 (“[T]he courts in [the Northern District] have generally applied the Twombly/Iqbal pleading standard to affirmative defenses.”) 28 (collecting cases). 1 Dairy Automation, Inc. v. Global Tech Sys., Inc., No. 1:12-cv2 1310 LJO SMS, 2015 WL 5732595 , at *10 (E.D. Cal. Sept. 28, 3 2015)); see also Est. of Jackson v. City of Modesto, No. 1:21-cv4 0415 AWI EPG, 2023 WL 2246872 , at *3 (E.D. Cal. Feb. 27, 2023) 5 (same). “Mere ‘reference to a [legal] doctrine . . . is 6 insufficient.’” Television Educ., 2016 WL 7212791 , at *1 7 (quoting Qarbon.com Inc. v. eHelp Corp., 315 F. Supp. 2d 1046 , 8 1049 (N.D. Cal. 2004)); see also In re Honest Co., Inc. Sec. 9 Litig., 343 F.R.D. 147, 152 (C.D. Cal. 2022) (“A defendant is not 10 free to conjure its responses out of thin air, as there must be 11 ‘at least some . . . factual basis in support of its affirmative 12 defense.’”) (quoting Rosen v. Masterpiece Mktg. Grp., LLC, 222 F. 13 Supp. 3d 793, 799 (C.D. Cal. 2016)). 14 Defendants have failed to adequately plead the defenses 15 at issue. Their answers merely refer to the name of each defense 16 with no supporting allegations whatsoever. Without providing any 17 factual basis for their assertion of these defenses, defendants 18 cannot be said to have provided “fair notice.” 19 The law does not require extensive pleading of 20 affirmative defenses. However, defendants must provide more than 21 bare boilerplate references to various doctrines. Accordingly, 22 the motion to strike the defenses enumerated above will be 23 granted. 24 IT IS THEREFORE ORDERED that the government’s motion to 25 strike (Docket No. 56) be, and the same hereby is, GRANTED. The 26 eighth, ninth, tenth, eleventh, twelfth, fourteenth, sixteenth, 27 and seventeenth affirmative defenses of One Way’s answer, and the 28 second, fourth, fifth, and eleventh defenses of Peters’ answer ee mE EE RODE IEEE NIE IRIE OSS NE OS EE I OE EO 1 are hereby STRICKEN. Defendants have twenty-one days from the 2 date of this Order to file amended answers, if they can do so 3 consistent with this Order. 4 | Dated: October 11, 2024 eb them th. Ld. bt—~ 5 WILLIAM B. SHUBB UNITED STATES DISTRICT JUDGE — 6 — — 7 — — 8 — — 9 — — 10 — — 11 — — 12 — — 13 — — 14 — — 15 — — 16 — — 17 — — 18 — — 19 — — 20 — — 21 — — 22 — — 23 — — 24 — — 25 — — 26 — — 27 — — 28 —