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JPMorgan Chase Bank, N.A. v. Mal Corp.

March 26, 2009

JPMORGAN CHASE BANK, N.A., INDIVIDUALLY AND DERIVATIVELY ON BEHALF OF MAL CORPORATION, PLAINTIFF,
v.
MAL CORPORATION, AND MILTON A. LEVENFELD, DEFENDANTS.



The opinion of the court was delivered by: James F. Holderman, Chief Judge

MEMORANDUM OPINION AND ORDER

For the reasons set forth below, plaintiff JPMorgan Chase Bank's Motion to Strike Defendant MAL Corporation's Affirmative Defenses (Dkt. No. 79) is granted in part and denied in part. MAL's Fourth and Sixth Affirmative Defenses are stricken, because they do not adequately set forth affirmative defenses to Chase's claims. MAL's First, Second, Third, Fifth, and Seventh Affirmative Defenses remain pending.

BACKGROUND

This court has previously set forth in detail the facts alleged in the First Amended Complaint. (See 10/31/2008 Order.) By way of background, the condensed version is presented here:

On December 4, 2006, defendant Milton A. Levenfeld ("Levenfeld") presented an endorsed cashier's check in the amount of $375,890.00 to plaintiff JPMorgan Chase Bank, N.A. ("Chase") for deposit. The Check was made payable to defendant MAL Corporation ("MAL"), a corporation for which Levenfeld served as President. The Check was originated by an entity that had contacted Levenfeld through an unsolicited email, asking for assistance in facilitating an international transfer of funds and offering a 10% commission to anyone who would act as a "payment agent" for the entity. On behalf of MAL, Levenfeld had agreed to serve in this capacity.

On December 5, 2006, Chase made the proceeds of the deposit available for withdrawal. That same day, Levenfeld authorized a payment order in MAL's name for the transfer of approximately 90% of the Check's value to a Japanese bank. Chase accepted and executed the payment order, and debited MAL's account accordingly. On December 11, 2006, the Check was returned unpaid to Chase as unauthorized. Chase charged back the amount of the Check to MAL's account, which is now overdrawn by $338,155.32. At the time of the deposit, neither Levenfeld nor Chase is alleged to have known that the Check was illegitimate.

In its First Amended Complaint, Chase alleges claims against MAL for breach of contract (Count I), breach of indorser obligations and transfer warranties (Count II), right of charge back pursuant to 810 ILL. COMP. STAT. 5/4-214 and 12 C.F.R. 229.19 (Count III), and duty to pay payment order pursuant to UCC Article 4A (Count IV). Chase's claims against Levenfeld have been severed and stayed at this point in the proceedings. MAL has alleged seven affirmative defenses in its Answer, including: (1) unclean hands/in pari delicto; (2) estoppel; (3) inadequate notice; (4) set-off/ recoupment/unjust enrichment; (5) failure to mitigate damages; (6) failure of consideration/bad faith; and (7) waiver.

Now pending before the court is Chase's Motion to Strike Defendant MAL Corporation's Affirmative Defenses. (Dkt. No. 79.)

LEGAL STANDARD

A legal argument constitutes an affirmative defense if it "rais[es] new facts and arguments that, if true, will defeat the plaintiff's or prosecution's claim, even if all allegations in the complaint are true." BLACK'S LAW DICTIONARY 430 (7th ed. 1999). Under Rule 12(f), a court may strike from a pleading "an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed. R. Civ. P. 12(f). Motions to strike are generally disfavored because of their potential to cause delay; however, they will be granted where they serve to remove affirmative defenses that only add "unnecessary clutter" to a case. Heller Fin., Inc. v. Midwhey Powder Co., 883 F.2d 1286, 1294 (7th Cir. 1989).

"Courts apply a three-part test in examining the sufficiency of affirmative defenses under Rule 12(f); (1) whether the matter is properly pled as an affirmative defense; (2) whether the affirmative defense complies with Federal Rules of Civil Procedure 8 and 9; and (3) whether the affirmative defense can withstand a Rule 12(b)(6) challenge." Rudzinski v. Metro. Life Ins. Co., No. 05 C 0474, 2007 WL 2973830, at *1 (N.D. Ill. Oct. 4, 2007). "Affirmative defenses will be stricken only when they are insufficient on the face of the pleadings," such that they do not meet the pleading requirements set forth in the Federal Rules of Civil Procedure. Heller, 883 F.2d at 1294.

As pleadings, affirmative defenses are required to set forth "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a); see Renalds v. S.R.G. Rest. Group, 119 F. Supp. 2d 800, 802 (N.D. Ill. 2000). In reviewing a motion to strike, "the court must accept all factual allegations as true and draw all reasonable inferences in favor of the pleader." Renalds, 199 F. Supp. 2d at 802. "[F]ederal courts adhere to a system of notice pleading, whereby parties need only notify the other side of the nature of their claims or defenses and need not plead with particularity." Mobley v. Kelly Kean Nissan, Inc., 864 F. Supp. 726, 732 (N.D. Ill. 1993). This means that an affirmative defense need only articulate "a plausible set of underlying facts." SEG Liquidation Co., LLC v. Stevenson, No. 07 C 3456, 2008 WL 623626, at *2 (N.D. Ill. Mar. 6, 2008) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007)).

ANALYSIS

In a section entitled "Facts Common to All Defenses," MAL generally alleges that Chase "acted in bad faith and was negligent" in its interactions with MAL regarding the Check. (Def.'s Ans. & Affirmative Defenses, Dkt. No. 66 at 26-27.) Among other things, MAL alleges that Chase was in a superior position to warn its customers about "Nigerian" or "419" check schemes and to recognize such a scheme when it saw one. (Id.) MAL further alleges that "agents of Chase did recognize the indicia of such a scheme while processing the Check and/or wire transfer, and continued without taking appropriate action." (1st Affirmative Defense ΒΆ 1.) According to MAL, recognizable indicia of a "Nigerian" or "419" check scheme include the deposit of a check for ...


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