UNITED STATES DISTRICT COURT WESTERN DISTRICT OF MISSOURI WESTERN DIVISION FEDERAL TRADE COMMISSION, CASE NO. 4:14-cv-00815-BCW Plaintiff, Vv. BF LABS, INC., et al. Defendants. FTC’S SUGGESTIONS IN SUPPORT OF ITS MOTION TO STRIKE AFFIRAMTIVE DEFENSES OF DEFENDANTS BF LABS, INC., DARLA DRAKE, AND SONNY VLEISIDES 1 Case 4:14-cv-00815-BCW Document 336 Filed 06/22/15 Page 1 of 24 TABLE OF CONTENTS TABLE OP AUTOR UTES i csu tease cesiwcetete i acntarvrtantaatoaie as echigcadieedess anes ge geeeaeeegat li Me Mss CATIA isc scccipssoccesuicatvnedbacsaredveaeonu sand eecasn ex enuceimaeeswasbsnsanaunduncuosnereansinanecatreloeaneadone mentee 1 Il. Defendants’ Affirmative Defenses Should Be Stricken 0.0... eee eeeeeeeeeeeeneecneeeeneeeeeeeenees 3 A. — The Court Has Already Ruled That The FTC’s Complaint States A Claim For Which Relief May Be Granted (1° Defense).......c.ccccsscsssssscssesessssescssesesssscscesesesssseacescsesueneaceseseatenesceeenees a B. Defendants 2™ and 3“ Defenses Are Legally Insufficient as a Defense to FTC Act UREA LA as andceea case vs ga sv sice ec ae gg ede va ee wd geal cui vode hedates acess deg eee cnet acteraeeenae 4 C. Defendants’ 4", 6", 9", 10", 13", 14", 15", and 16"" Defenses Are Not Applicable in an PRCRION By GS FNC ga pac aacescepsa cael darcnciaided sade dante Tadeactngudcstinee dedeus Gd cetendteaesvseeneeeis acneinGase oan 5 D. Defendants’ 5™ and 12™ Defense Are Inadequately Pled.......c.sc.sscssessssssessessesseessesseesessees 6 E Defendants’ 7" Defense Is Insufficient.........cccccssesssessessesssessessessessssssessessecsessssesessessneeseess | Ve Defendants’ 8" and 17" Defenses Are Legally Insufficient ..........cccccsscsssessessssssesseeseeseen 8 G. Defendants’ 11" Defense Is Unavailable in a Government Law Enforcement Action ... 9 H Defendants’ 18" Defense Is Inadequately Pled And Immaterial .........cc.ccscsssscsessesseeeees 12 I. Defendants 19" Defense Is an Improper Attempt to Circumvent Federal Rule of Civil PEC COUT VE ag asva secesirsusg cave eveasdn nessa acebi snandaaess udeetisanaaetaee acevermgaeneeade aden aoa 13 I. Allowing The Affirmative Defenses To Remain Will Prejudice The FTC... 14 TV: (COnelusiOtniccse.cceceertiiee ie eae eee ee dees dee ee ee 15 i Case 4:14-cv-00815-BCW Document 336 Filed 06/22/15 Page 2 of 24 TABLE OF AUTHORITIES Cases Ashcroft v. Iqbal, ih 0 aot ceucetesick es sa ccpeaese up ee esicae vosdeone Sos mecca eens avateeeaneueuaneeneeatartenacees 2, 6, 12 Bartlett v. United States Dep't of Agric., TAG FAG 464 Vo Cit, DOTS) ov scseccseaserasainaincsaessvgndsrposncelersdasnanineuiadaimnadauaineaeananets 10 Bates v. State Bar of Arizona, EDT NT iBOLT FV ccsscrsaietssncesueeutveesuctecetnva eeu cietesees uae sava cas ao ove oe naeaee nee aetna 8 Bell Atlantic Corp. v. Twombly, 94 2007 nicdectareccecaieeaieuaeeoan eee eS 2 Boldstar Tech., LLC v. Home Depot, Inc., S17 F, Supp. 2d 12835 (5s Flas 2007 ) yscececcnncesslcestesscuesatssccanzeysierieuemnicevtesecutnetsommaneam anemones) 4 Bostwick Irrigation District v. United States, OOO Fe 2d Tes (et ar TOD } oxic ieaicaiccateaaceteudcoagacdecaectelasveanie taxssacwsoupsaietesaeisenesoeaawiauee aes Li Bristol- Myers Co. v. FTC, I TS FG I scasecat cco cecsencg spn onsets cuore gemma a cain cavcia aguante ede 7 Canadian St. Regis Band of Mohawk Indians v. New York, 208 Poppe 2031S CNIIN, ¥ , 2009) .. ccoswetsadaeiiuncesnesuacnctvnnaaheiinrdaciadecaanedusareeinneansaextuctoenaas 14 Capital Funds, Inc. v. SEC, SEG E20 562. Cty 1968) vic jcsyressavetensinere anccvaeonaaarancesoensGinesanedaaaeeaneseneeontanewaen 11 Central Hudson Gas & Elec. Corp. v. Public Serv. Comm. of New York, FN) cs icccsspussetesscatensarvaiticeacseiastus tauauetisauenestissey ease ei-cenicranar a aecny 7 Chrysler Corp. v. FTC, DOE 97 DA Cie 197 7) cccecenuscrancaes nares a ees 4 County Vanlines Inc. v. Experian Info. Solutions Inc., 205: Re TABS NY, 2002) soaccveretertarcuncsevadencassaiaatiniaheeesada aeeann aes 13 Crow v. Wolpoff & Abramson, 2007 U.S. Dist. LEXIS 31356 (D. Minn. Apr. 19, 2007) .......ceceeecceeseeeseeceeeceeeceeeeeeaeecsaeceeeeneees 3 Curtis Lumber Co., Inc. v. Louisiana Pac. Corp., Ole Foe 702 (Ot ih DOM). 5 cecascacecacaiescaleiabaccenuiesvevsoocaecdtensonioiea ee eae ae 4 il Case 4:14-cv-00815-BCW Document 336 Filed 06/22/15 Page 3 of 24 Cynergy Ergonomics, Inc. v. Ergonomic Partners, Inc., 2008 U.S. Dist. LEXIS 70995 (E.D. Mo. July 21, 2008)... eee EEOC vy. Prod. Fabricators, Inc., B73 F.Supp: 2d 1099 (De Wan QOD os ecserecassean tds acvcadevs edaeedcamucadarpenncedses EEOC v. Waffle House, Inc., DOTS, 219 (2002) wsivesss csestsdnrvesaacsvanarieieaneien vie dace anveee Elmo Co. v. FTC, S89 F200 550 (DC Cite VOGT) snpiesiehcovvsssaaseracassioneontspiiactasiaaerrauaniseens Fano v. O'Neill, Me Freee V6 (othe Cie VIG Fy sicies ccacecacevce de cacnesaicetcepeccceadtaccesasunied eeescbcaete FDIC v. Hulsey, eh MO NC at SY a aches cadets cde dee cide ccaccenteceuccaleiecsevacevianecaceaade Folk v. Target Corp., 2012 U.S. Dist. LEXIS 77100 (W.D. Mo. Jun. 4, 2012)... eee FTC vy. Accusearch, Inc., 2007 U.S. Dist. LEXIS 74905 (D. Wyo. Sep. 28, 2007)... cece eee FTC v. Affordable Media, M2 ila at I) co, ca cerca ned ence teceeucssiaceaceuebeatioreccanqtadneses FTC v. American Microtel, Inc., 1992 U.S. Dist. LEXIS 11046 (D. Nev. June 10, 1992)... eee FTC v. Bay Area Bus. Council, Inc., 2003 U.S. Dist. LEXIS 7261 (N.D. Ill. May 1, 2003)... eee eeeeeee FTC v. Bay Area Bus. Council, Inc., M23 Fo O27 (Ue 200) ) gees tease accede tetesciiateritecsueaacee eee FTC v. Bronson Partners, LLC, 2006 U.S. Dist. LEXIS 3315 (D. Conn. Jan. 25, 2006)... ceceeeeneees FTC v. CEO Group, Inc., 2007 U.S. Dist. LEXIS 10619 (S.D. Fla. Feb. 15, 2007) ..... eee FTC v. Crescent Publ’g Group, Inc., 129 Fo upp 20a VE CoN, FDOT) sages cr cet seas cttuicunte sexe eespioreutareteesel ill Case 4:14-cv-00815-BCW Document 336 Filed 06/22/15 Page 4 of 24 FTC v. Cyberspace.com, LLC, Oso 3d. DIGG (Ot Cit, 2U0G ) sessseanscrasdesstsacscassnavt sve toeccgacsectavesatiaaiiavesdaetaspsaicsasdanttiseesseeonees 4 FTC v. Hang-Up Art Enter., 1995 U.S. Dist. LEXIS 2144 (CoD Cal Sep. 27, 1995S \ccsissasesscnaacavusncasanended cosvsndutassnseasenssecacans 5 FTC v. Hayes, 1997 WS. Dist. LE MIS’ 768 5-(E,D. Mio. Way 7, 1997) ssccsicekicnctnrheasscudasanecaG eae 3 FTC v. Hope Now Modifications, 2009 US. Dist, LEXIS 102596. (DI. INOv: 4, 2009). cccccenasater nee 4 FTC v. Kitco of Nevada, Inc., 612 F,. Supp; 1282 (Dc Minin, 1955 \isssiwascstassasiesnsntveroasvennva thaauisaacivde ssuvesedasarantvenccdaarsoicasennnsnaouieas 9 FTC v. Magazine Solutions, LLC, 2007 U.S. Dist. LEXIS 70977 CW.D. Pa. Sep. 25, 2007) vcscccsccconcsascssnscsstessenecosecancessasenacenanvens 11 FTC v. Magazine Solutions, LLC, 2009 U.S. Dist. LEXIS 23708 (W.D. Pa. Mar. 20, 2009) .....cccccsscsscessacescesscessercencseeenaeaacesncesseae 5 FTC v. Moneymaker, 20141 UWS. Dist. LEXIS 83913-(D. Ney, July 28, 2011 op sosesnacsascnnscsansveadsneennacsiesasecaunscersaneaante 11 FTC v. N. Am. Mktg. & Assocs., 2012 U.S. Dist. LEXIS 150102 (D, Ariz, Oct, 17, 2012) caccsssissssssccrsscssssvecsssevsdoescorss 4, 8, 12, 13 FTC v. N.E. Telecomms., Ltd., 1997 U.S. Dist. LEXIS 10531 (S.D. Fla. Jun. 23, 1997) oo... cccccececececeseseseceseceseeueueess 11 FTC v. NCH, Inc., 1995 WS. Dist. LEXIS 21096. (D. Nev: May 23. 1995) .c ia R ee eee 4 FTC v. Sabal, 92 Sup 2d TOC CIN Me VIDS ) ssiietcsatsess cece sicscicasisadienncapasetecs scan boyshacqseonsevas eee ceeiadanteanennees 4 FTC v. Sec. Rare Coin & Bullion Corp., 1989 U.S. Dist. LEXIS 15958 (D. Minn. Sep. 11, 1989), aff'd 931 F.2d 1312 (8th Cir. 1991). 9 FTC v. Sec. Rare Coin & Bullion Corp., O91 FO VAT2 (Bt Cit, 1981) ve sascaccususnsezdeascauassnsaven'nensaccebasveond va hubexsaehoabte wanaveebasinnndenieeeseussevaas 5 FTC v. Stefanchik, 2004 U.S. Dist. LEXIS 30710 (W.D. Wash. Nov. 12, 2004)... cece eeeseeceeeeeeeeteeeeeeeeeens 7, 8, 13 iv Case 4:14-cv-00815-BCW Document 336 Filed 06/22/15 Page 5 of 24 FTC vy. U.S. Oil & Gas Corp., 1987 U.S. Dist. LEXIS 16137 (S.D. Fla, Jul, 10, 198 7 \iisssiscsssosssssacvosessinnticasssvatesscevancvsessuncs 5,11 FTC v. World Travel Vacation Brokers, Inc., GL Ed TOA il Coil, POSS ) sain: sacdavtcnonaspavcancuesdtiengssnnavad tovstnunsananeantiresedansangeat way dorasaiessanasifosnate 4 Handi-Craft Co. v Travelers Cas. & Sur. Co., 2012 U.S- Dist. LEXIS 37911 (ED.. Mo. Apt, 25, 2012) sce ccnstzvateasscodenseunnemavsreinntinieeance 14 Heller Fin., Inc. v. Midwhey Powder Co., Inc., 660 F.2d 1256 (inn, 1989) 2ciccisesharadvedaieaa eaaseian ese mae waco aa ee 6, 12 Herman v. South Carolina Nat’l Bank, Os VATS i, T9908) as. cz iccdasseneets caacuxsabeersesrsceccstoxgantersihousiaaavianiciaateeavvateancagatalaeeane 6 Hiramanek v. Clark, 2015 US. Dist. LEXIS 19985 (N.D.-Cal, Keb, 15, 2015) soicsaisisassaccssaceadeentssandsereanietsrwrsaiancsades 2 In re Metagenics, Inc., 1S 2) ait 00) SP, a [S92 2 be emer ee eee en er CREA ELE RP RPT RR eee AER RR 8 In re Rawson Food Svc., Inc., Bh 2d 1 1 i 19S Sc cicscanesvsnsseccznncabosdnaddernisesdiesteseommncaiw deagdeberssaiaditacdeaesie adie: 4 In re Uranium Antitrust Litig., 552 Supp. 16 CN DUN, WO G2) s. vassScascchsaeetecnarantess tens iasetrancebatenauntanioeguevtanntesebvancensteoaianazcniens 13 INS v. Habibi, Ty 5A WS Sys sz oa cacicansdaves sy sammenssckagebsidaaageracisebtacdanwieninasbeenaisauantenea panne anaes 9, 11 Izzard v. Credit Fin. Servs., 2014. U.S. Dist, LEXIS 45215 OVLD.N.C, Apr. 2, 2OTA) s.iiscsesisessactuaicasecsncensinsbedeiescouseeteswesse 14 Krisa v. Equitable Life Assurance Society, LISP. Suppy 20 GOA (MIND, Pag DOU ) x.asaaisssicestysntansadesavantsauedeguesaileehayaetansrecatnenerieeseemiadianters 13 Lakeside Roofing Co. v Nixon, 2011 US. Dist. LEXIS 69913 (ED, Mo, Jum. 29, 2011) scssssaieiscspdacsisdadinienceatadesiieamestaseueleonn 14 Lee v. Spellings, TE OT (BUC ir QUOD) aevacceceta stents concn todavia sosicaaatecpesraeseaueealeavicaneoreeta aan accent 11 Lemery v. Duroso, 2009 U.S. Dist. LEXIS 50771 (E.D. Mo. June 16, 2009)...........cccccccccesssececeessececeesssseceessaeeeenes 3 V Case 4:14-cv-00815-BCW Document 336 Filed 06/22/15 Page 6 of 24 Liberty Motor & Mach. Co. v. The Hartford Accident & Indem. Co., 1992 US. Dist. LEXIS 22529 (5, TL, Mat 18) 1992) «cas sasessscsinansisaseeatgananirniestdevesnseasinniss 13 Lorillard Tobacco Co. v. Reilly, Ss 25 (200 cecectavesnsaipesu ed aaeaeesesinaiegasesaearasacedeonsiasaiesdaaanasuanaaanawneay 7 Lucas v. Jerusalem Café, LLC, 201108. Dist, LEXIS 39504 (WD: Mo. Apr 11, 2011) esiccscsevadenssssdeasexnaamessnedcetaniatarscabenss 2 Lucas v. Jerusalem Café, LLC, 2011 U.S. Dist. LEXIS 88684 (W.D. Mo. Aug. 10, 2011)... eeceeeeeeeeereeeteeceseeeteeeeees 2, 6, 12 Lunsford v. United States, BF Ut i 77 sacs Gavawocvaiesicn ned vncevsietausoscatnct tasanne voto laetatansecanicaendserennnesnieanetee reek 1 Mejia-Perez v. Gonzales, BOO F 3a TOL (Se Cir 2007) ceive iidssteraiessansaedssipectedssangud csnsdieaiecteiaseovanse ueeaeisoaspie sees 10 Metro. Cas. Ins. Co. v. Combs, 2014 U.S. Dist. LEXIS 32594 (E.D. Mo. Mar. 14, 2014) ..........c.cccsscesssscesssscesssseessseeesseessseeeess 7 Novartis Corp. v. FTC, PAVE SG 762 (DCs Cate, 2000 ) oscrersicanernersdchesnuctiadtandatalnsaniesstavacennninio Seasenn ness Reese esaesie esa f Openmethods, LLC v. Mediu, LLC, 2011 U.S. Dist. LEXIS 60980 (WD... Mo: Jun, 8, 2011) ssicccaseccsssnvsassocivasestsovsaccsasesseannevevenvsvie 2 OPM y. Richmond, I Fe acces alves tances otc st latte va sdtcaa panacea hee castiadysntene he sanienaag a eteaieaea 10 PNC Bank, N.A. v. El Tovar, Inc., 2014 U.S. Dist. LEXIS 16921 (E.D. Mo. Feb. 11, 2014)... eceesceessscessseeessseeesseessneeeess a Removatron Int’! Corp. v. FTC, B84 F.2d TASS (1st Cire O89 | scssevsdeiesaVadenvivedadavsiescdcewivivecaissesdcevesvialessuiaderdeta ast anisoeeleeteae 4 Robertson v. LTS Mgmt. Servs. LLC, 642 F.Supp, 2d 922 (WD. Ma, 2008 ) cicccsscussaciacdipectanceuadesnadetinsiedectaveneadssdeeniuancupletnretacuspeeaieas 1 Sanz v. United States Sec. Ins. Co., O28 Fee. a AT Cit 2005) sescesccte staves ieee eee 10 Sch. of the Ozark, Inc. v. Greatest Generation Foundation, 2011 U.S. Dist. LEXIS 37850 (W.D. Mo, Apts 7, 2011) scccascsecesenaceacssecssetanseoanesstesactoenqsstassiassee Z vi Case 4:14-cv-00815-BCW Document 336 Filed 06/22/15 Page 7 of 24 SEC v. Morgan, Lewis & Bockius, DOSE eA GHA NSD), fa icascsiedschusetyve costes also inet hsiemsais oud ag varssee aes saat vaeeiS ex aabackoesaaidacidensauoeedaiesaind 11 SEC vy. Princeton Econ. Int'l Ltd., 2001 US. Dist, LEXIS 948 (SDNY. Feb: 3. 2001s csciseeacasssensasenvvesansenucstesteessinaingeaersieded 12 SEC v. Tiffany Industries, Inc., 239 F.Supp 116) (ED, Mo. T9872) ccc cessdarcenra aaah ee 13 Semco, LLC v. Huntair, Inc., 2011. US, Dist, LEXIS 62795: (WD: Mo, Jul, 28, 2011 ascuecsiniacenaeatarnteeamnarenasenee Z Shaw v. Prudential Ins. Co. of Am., 2011 U.S. Dist. LEXIS 29203 (W.D. Mo. Mar. 21, 2011).........cccccccsssecssscecssssecssseeeseeseesseeees 2 Shaw v. Prudential Ins. Co. of Am., 2011 U.S. Dist. LEXIS 136163 (W.D. Mo. Nov. 28, 2011).......c.ccccssecssssecsseecsseeeesseeeeseeeesseeess 2 Smithville 169 v. Citizens Bank & Trust Co., 2012 U.S. Dist, LEXIS 512-(W.D, Mo, Jan, 4, 2012). cccsccssnccetedscosvsesenaencassacseneaasearcensees 2, 6, 12 Southard v. City of Oronogo, 2013 U.S. Dist. LEXIS 11395 (W.D. Mo. Jan. 29, 2013) .........cessssssccssseesscesseceencsensseessessecesnees 2 United States ex rel. FTC v. Larkin & Hoffman, Be a. 899 CD. Titi: 1993) se iacacesssedcacaardaserseauzeanenancuSuveantczanasonveensGandraieevoreaaseouiaaniasy S United States ex rel. Kraxberger v. Kansas City Power & Light Co., 2012 U.S. Dist. LEXIS 128230 CW.D. Mo, Sept, 10, 2012) v....cccsscsnncsascosecegensasasssovedsaconsecegeesss 1 United States v. Concentrated Phosphate Export Ass’n, Inc., BOF ie 18 9G) Ge ) aces. catheessiaascepeaouseoaeseo ene ees 9 United States v. Global Mortg. Funding, 2008 U.S. Dist. LEXIS 102897 (C.D: Cal. May 15, 2008) wiss.cssscdceivssedanssscsdeenssndetecsaseninnvs 10, 11 United States v. Lopez, OE Oo 261 CT Cit, 1998) 5c sseczivseccaysspcnte cea eeieleaiesavadmcveckcasa wea pee ene 13 United States vy. One 1973 Buick Riviera Auto., SOO F297 (Ot ie OT 1) ccsce eset ieee eee 11 United States v. Raymond, 228 PS COA Fi Ci 2000) x.2.scasectehenatesschiysncaiemexenndainesintatretenaieseetinnalenGascomnaannes 7 vil Case 4:14-cv-00815-BCW Document 336 Filed 06/22/15 Page 8 of 24 United States v. Reader’s Digest Ass’n, Inc., 464 F. Supp. 1037 (D. Del. 1978) , aff'd, 662 F.2d 955 (3d Cir. 1981) 0. United States v. Schiff, SID Pe O21 (Ui, DOG ectic cs sdeaceadarecdeced nuances peace tec daacna sd ceasuoucndan eam eduateead United States v. Summerlin, SO US AEE (1939 ) wcicsevatevascan ceveeseaceasvennateadyaeiestannveraehcus wader alae eiaeaiieuaaaees Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer Council, Inc., AAS Ne TAS ALOIS) cevessacecciethet ste deatogecendeeeteeGeie easiest eee Willis v. Quad Lakes Enters., LLC, 2011 U.S. Dist. LEXIS 100536 (W.D. Mo. Sep. 7, 2011) we. eee eeeeeeeeeereeeeeeees Zauderer v. Office of Disciplinary Counsel, BP MS GLO 1198S Vissi s cede s xatatsceltcesedebsssteuceaacebdectebiaedseieeaieaaciecceauepsledeumeacdastes Statutes Fee ety Pe UO) sagactt deca seutiedeseiet cgalevees Saaecc yeas vetedecent aicacondeanauegoabteedeaeeh eae vteece Vill Case 4:14-cv-00815-BCW Document 336 Filed 06/22/15 Page 9 of 24 Plaintiff Federal Trade Commission (“FTC”) moves under Federal Rule of Civil Procedure 12(f) to strike all of the affirmative defenses in the Answers filed by Defendants BF Labs, Inc. (DE 324), Darla Drake (DE 325), and Sonny Vleisides (DE 326). These affirmative defenses fail as a matter of law, and, unless stricken, will needlessly prolong the litigation and waste assets that otherwise would be available to compensate injured consumers. I. Legal Standard Federal Rule of Civil Procedure 12(f) provides that a party may move to strike “any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f). In determining whether to strike affirmative defenses, Eighth Circuit courts eee examine whether “‘the defense is sufficient as a matter of law or if it fairly presents a question of law or fact which the court ought to hear.’” Lunsford v. United States, 570 F.2d 221, 229 (8th Cir. 1977). Accordingly, defenses should be stricken if they are immaterial or cannot succeed under any circumstances. Robertson v. LTS Mgmt. Servs. LLC, 642 F. Supp. 2d 922, 933 (W.D. Mo. 2008) (citations omitted). eee Motions to strike “‘should be granted when doing so will make trial of the action less 999 complicated or otherwise streamline the ultimate resolution of the action.’” United States ex rel. Kraxberger v. Kansas City Power & Light Co., 2012 U.S. Dist. LEXIS 128230, at *4 (W.D. Mo. Sept. 10, 2012) (citation omitted); accord EEOC v. Prod. Fabricators, Inc., 873 F. Supp. 2d 1093, 1097 (D. Minn. 2012). Thus, striking a defense is proper to “prevent a party from engaging in burdensome discovery, or otherwise expending time and resources litigating irrelevant issues ....” Cynergy Ergonomics, Inc. v. Ergonomic Partners, Inc., 2008 U.S. Dist. LEXIS 70995, at *6 (E.D. Mo. July 21, 2008). 1 Case 4:14-cv-00815-BCW Document 336 Filed 06/22/15 Page 10 of 24 Although no Circuit Court has ruled on the issue, the majority of district courts have ruled that the pleading requirements set out in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), apply to affirmative defenses. See, e.g., Hiramanek v. Clark, 2015 U.S. Dist. LEXIS 19985, at *3 (N.D. Cal. Feb. 15, 2015). Courts in this district do as well. See, e.g., Folk v. Target Corp., 2012 U.S. Dist. LEXIS 77100, at *2 (W.D. Mo. Jun. 4, 2012).! Under Twombly and Iqbal, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678. Rather, pleadings must contain factual allegations sufficient to make the defense “plausible on its face.” Twombly, 550 U.S. at 570. “A defendant must simply provide a short, plain statement of facts giving rise to the affirmative defense.” See Lucas, 2011 U.S. Dist. LEXIS 88684, at *2. “[A] party attempting to address an affirmative defense lacking factual allegations is placed in the same position as a defendant trying to address a complaint with the same deficiencies. ‘[I]n both instances, the purpose of pleading requirements is to provide enough notice to the opposing party that indeed there is some plausible, factual basis for the assertion and not simply a suggestion of possibility that it may apply to the case.’” Smithville 169, 2012 U.S. Dist. LEXIS 512, at *3 (citations omitted). ' See also Smithville 169 v. Citizens Bank & Trust Co., 2012 U.S. Dist. LEXIS 512, at *3 (W.D. Mo. Jan. 4, 2012); Shaw v. Prudential Ins. Co. of Am., 2011 U.S. Dist. LEXIS 136163, at *9 (W.D. Mo. Nov. 28, 2011); Lucas v. Jerusalem Café, LLC, 2011 U.S. Dist. LEXIS 88684, at *2 (W.D. Mo. Aug. 10, 2011); Semco, LLC v. Huntair, Inc., 2011 U.S. Dist. LEXIS 82795, at *3-4 (W.D. Mo. Jul. 28, 2011); Openmethods, LLC v. Mediu, LLC, 2011 U.S. Dist. LEXIS 60980, at *5 (W.D. Mo. Jun. 8, 2011); Lucas v. Jerusalem Café, LLC, 2011 U.S. Dist. LEXIS 39504, at *3-4 (W.D. Mo. Apr. 11, 2011); Sch. of the Ozark, Inc. v. Greatest Generation Foundation, 2011 U.S. Dist. LEXIS 37850, at *2-3 (W.D. Mo. Apr. 7, 2011); Shaw v. Prudential Ins. Co. of Am., 2011 U.S. Dist. LEXIS 29203, at *7 (W.D. Mo. Mar. 21, 2011). But see Southard v. City of Oronogo, 2013 U.S. Dist. LEXIS 11395, at *5 (W.D. Mo. Jan. 29, 2013) (decision of Magistrate Judge Hays); Willis v. Quad Lakes Enters., LLC, 2011 U.S. Dist. LEXIS 100536, at *4 (W.D. Mo. Sep. 7, 2011) (same). Z Case 4:14-cv-00815-BCW Document 336 Filed 06/22/15 Page 11 of 24 II. Defendants’ Affirmative Defenses Should Be Stricken The FTC moves to strike all of Defendants’ affirmative defenses because they are legally incorrect, redundant denials of the Complaint’s allegations, or incomprehensible. A. The Court Has Already Ruled That The FTC’s Complaint States A Claim For Which Relief May Be Granted (1* Defense) Defendants previously moved to dismiss the FTC’s complaint for failure to state a claim (DE 80), and the Court denied that motion. (DE 219.) Further, the Court granted the FTC’s motion to amend its complaint over Defendants’ objection that such amendment was futile. (DE 308.) In denying Defendants’ motion to dismiss, the Court expressly found that the FTC “sufficiently alleged its Section 5(a) claims” (DE 219 at 3), that the FTC “has plausibly stated a claim to relief under Section 5(a)” (id. at 4), and that the FTC “has sufficiently stated a Section 5(a) violation based on each theory” alleged in its complaint. (/d.) Similarly, in granting the FTC’s motion to amend the complaint to add additional counts, the Court held that the “amended complaint adequately alleges each Section 5(a) claim” (DE 308 at 2), that “[t]he allegations for each count are sufficient and would survive a Rule 12(b)(6) challenge,” (id. at 3), and that each count “contains ‘sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’’” (/d.) Defendants had their bite at the apple and lost, and they should not get another. Accordingly, their first defense (failure to state a claim) should be stricken. FTC v. Hayes, 1997 U.S. Dist. LEXIS 7883, at *2 (E.D. Mo. May 7, 1997) (striking affirmative defense where court previously denied Rule 12(b)(6) motion to dismiss). * Further, this defense, failure to state a claim, is a negative defense, not an affirmative defense, and should be stricken on that ground as well. See, e.g., Lemery v. Duroso, 2009 U.S. Dist. LEXIS 50771, at *8 (E.D. Mo. June 16, 2009) (“failure to state a claim is not a proper affirmative defense”); Crow v. Wolpoff & Abramson, 2007 U.S. Dist. LEXIS 31356, at *7 (D. Minn. Apr. 19, 2007) (citation omitted) (“‘an affirmative defense should accept, rather than contradict, well-pleaded allegations of the complaint’); see also In re Rawson Food Svc., Inc., a Case 4:14-cv-00815-BCW Document 336 Filed 06/22/15 Page 12 of 24 B. Defendants 2"! and 3‘ Defenses Are Legally Insufficient as a Defense to FTC Act Liability Defendants’ 2"! and 3™ defenses are premised on their purported “good faith” — they acted in good faith and informed consumers of shipping updates (2"*) and they acted in good faith towards consumers (3™). These defenses are legally insufficient because good faith is not a defense to liability for violating Section 5 of the FTC Act. See, e.g., Curtis Lumber Co., Inc. v. Louisiana Pac. Corp., 618 F.3d 762, 779 (8th Cir. 2010) (noting consensus that “‘a defendant’s good faith is immaterial to whether a ‘deceptive act’ has occurred under § 5 of the Federal Trade Commission Act because that statute does not require an intent to deceive”); FTC v. Cyberspace.com, LLC, 453 F.3d 1196, 1202 (9th Cir. 2006); FTC v. Bay Area Bus. Council, Inc., 423 F.3d 627, 635 (7th Cir. 2005); Removatron Int’l Corp. v. FTC, 884 F.2d 1489, 1495 (1st Cir. 1989); FTC v. World Travel Vacation Brokers, Inc., 861 F.2d 1020, 1029 (7th Cir. 1988) (“To be actionable under Section 5, these misrepresentations or practices need not be made with an intent to deceive”); Chrysler Corp. v. FTC, 561 F.2d 357, 363 (D.C. Cir. 1977) (“An advertiser’s good faith does not immunize it from responsibility for its misrepresentations”); FTC v. Hope Now Modifications, 2009 U.S. Dist. LEXIS 102596, at *3 (D.N.J. Nov. 4, 2009) FTC v. CEO Group, Inc., 2007 U.S. Dist. LEXIS 10619, at *4 (S.D. Fla. Feb. 15, 2007); FTC v. Sabal, 32 F. Supp. 2d 1004, 1007 (N.D. Ill. 1998) (“the subjective good faith of the advertiser is not a valid defense to an enforcement action brought under [FTC Act] section 5”); FTC v. NCH, Inc., 1995 U.S. Dist. LEXIS 21098, at *20-21 (D. Nev. May 25, 1995) (“As a matter of law, a defendant’s good faith 846 F.2d 1343, 1349 n.9 (11th Cir. 1988) (failure to state a claim is not an affirmative defense); FTC v. N. Am. Mktg. & Assocs., 2012 U.S. Dist. LEXIS 150102, at *6 (D. Ariz. Oct. 17, 2012) (striking defense of failure to state a claim); Boldstar Tech., LLC v. Home Depot, Inc., 517 F. Supp. 2d 1283, 1291 (S.D. Fla. 2007) (“Failure to state a claim is a defect in the plaintiff’s claim; it is not an additional set of facts that bars recovery notwithstanding the plaintiff's valid prima facie case. Therefore, it is not properly asserted as an affirmative defense.”’). 4 Case 4:14-cv-00815-BCW Document 336 Filed 06/22/15 Page 13 of 24 is not a defense to liability for a violation of 15 U.S.C. § 45(a)”).’ Accordingly, the Court should strike these defenses. C. Defendants’ 4", 6, 9", 10, 13", 14", 15", and 16 Defenses Are Not Applicable in an Action by the FTC Defendants next assert several vague defenses (4", 6", 9", 10", 13", 14", 15", and 16") that appear to be based on the misapprehension that the FTC represents consumers as parties in this suit. The Complaint makes clear that the FTC brings this enforcement action in its own name. Nor does the FTC stand in the shoes of consumers when bringing enforcement actions. Although the FTC acts to protect consumers, its mission is distinct from that of a private party. Elmo Co. v. FTC, 389 F.2d 550, 552 (D.C. Cir. 1967). The FTC is a body charged with protection of the public and does not act in a representative capacity for consumers. FTC v. Sec. Rare Coin & Bullion Corp., 931 F.2d 1312, 1316 (8th Cir. 1991); United States ex rel. FTC v. Larkin & Hoffman, 841 F. Supp. 899, 907 (D. Minn. 1993). Thus, defenses that may be available to Defendants in an action by consumers have no application in this law enforcement action by the FTC. FTC v. U.S. Oil & Gas Corp., 1987 U.S. Dist. LEXIS 16137, at *77-78 (S.D. Fla. Jul. 10, 1987) (“In a government enforcement action, enforcing releases executed by individual customers of a fraudulent scheme who receive partial refunds would only serve to encourage their use in similar fraudulent schemes and thereby permit the retention of the bulk of the fraudulent proceeds without liability. . . [accordingly] they do not apply in a section 13(b) restitution action’); see also EEOC v. Waffle House, Inc., 534 U.S. 279 (2002) (holding that * At best, good faith may be relevant when offered against the scope of injunctive relief. See FTC v. Magazine Solutions, LLC, 2009 U.S. Dist. LEXIS 23708, at *3 (W.D. Pa. Mar. 20, 2009); CEO Group, 2007 U.S. Dist. LEXIS 10619, at *4; FTC v. Hang-Up Art Enter., 1995 U.S. Dist. LEXIS 21444, at *11 (C.D. Cal. Sep. 27, 1995). When offered as an affirmative defense to liability, however, this defense should be stricken. Hang-Up Art Enter., 1995 U.S. Dist. LEXIS 21444, at *11 (“To the extent good faith is offered as an affirmative defense to violation of section 5 of the FTC Act, the second affirmative defense should be stricken’). 5 Case 4:14-cv-00815-BCW Document 336 Filed 06/22/15 Page 14 of 24 employee’s entry into mandatory arbitration agreement with employer does not limit EEOC enforcement authority); Herman v. South Carolina Nat’l Bank, 140 F.3d 1413, 1424-28 (11th Cir. 1998) (holding government in ERISA action not barred by private litigation or settlements under principles of res judicata or release from obtaining equitable relief, including disgorgement, rescission, and restitution).* Accordingly, the Court should strike these defenses. D. Defendants’ 5" and 12" Defense Are Inadequately Pled As discussed above, courts in this District require affirmative defenses to contain more than “[t]hreadbare recitals of elements of a cause of action, supported by mere conclusory statements,” [gbal, 556 U.S. at 678, more than “textbook examples of labels and conclusions.” Smithville 169, 2012 U.S. Dist. LEXIS 512, at *7. Defendants “must simply provide a short, plain statement of facts giving rise to the affirmative defense.” Jerusalem Café, 2011 U.S. Dist. LEXIS 88684, at *2. Defendants’ 5" and 12" defenses are just such a “textbook example of labels and conclusions.” Their bare assertions that the FTC’s requested relief is unconscionable provide no notice to the FTC as to how or why that is so, making it impossible to negate. Similarly, they assert that the Court “lacks personal jurisdiction over some or all of the Defendants,” yet fail to identify over which Defendant or Defendants the Court lacks jurisdiction. Further, these defenses are nothing but “bare bones conclusory allegations,” “omit[ting] any short and plain statement of facts,” and “‘fail[ing] totally to allege the necessary elements” of the asserted defenses. Midwhey Powder, 883 F.2d at 1295. Accordingly, the Court should strike these defenses. “In addition, these defenses are so conclusory that the FTC has no fair notice or ability to meaningfully respond to them. Instead, they are nothing but “bare bones conclusory allegations,” “omit[ing] any short and plain statement of facts,” and “fail[ing] totally to allege the necessary elements” of the asserted defenses. Heller Fin., Inc. v. Midwhey Powder Co., Inc., 883 F.2d 1286, 1295 (7th Cir. 1989). 6 Case 4:14-cv-00815-BCW Document 336 Filed 06/22/15 Page 15 of 24 E. Defendants’ 7™ Defense Is Insufficient In their 7" defense, Defendants assert that the FTC’ s Complaint infringes upon their First Amendment rights. This affirmative defense should be stricken because it is insufficient. The FTC has challenged the marketing of Defendants’ Bitcoin mining machines as false and misleading commercial speech and has alleged in the Complaint that the marketing violates the FTC Act. The law is well-settled that the government may prevent the dissemination of false or misleading commercial speech. See United States v. Schiff, 379 F.3d 621, 629-30 (9th Cir. 2004); United States v. Raymond, 228 F.3d 804, 815-16 (7th Cir. 2000). Commercial speech receives protection under the First Amendment only if it concerns lawful activity and is not misleading.” Thus, Defendants’ deceptive marketing practices® are not privileged or protected by the First Amendment. See, e.g., Bristol- Myers Co. v. FTC, 738 F.2d 554, 562 (2d Cir. 1984) (“[D]eceptive advertising enjoys no constitutional protection and it may be regulated.... Even in the absence of a finding of actual deception, agencies may properly regulate speech that is merely potentially deceptive”); FTC v. Stefanchik, 2004 U.S. Dist. LEXIS 30710, at *4-5 (W.D. > Central Hudson Gas & Elec. Corp. v. Public Serv. Comm. of New York, 447 U.S. 557, 563-64 (1980) (“The government may ban forms of communication more likely to deceive the public than to inform it, or commercial speech related to illegal activity.”’) (citation omitted); see Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 554 (2001) (“For commercial speech to come [under the protection of the First Amendment], it at least must concern lawful activity and not be misleading.”); Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626, 638 (1985) (“The States and the Federal Government are free to prevent the dissemination of commercial speech that is false, deceptive, or misleading.”’) (citation omitted); see also Novartis Corp. v. FTC, 223 F.3d 783, 789 (D.C. Cir. 2000) (finding no First Amendment impediment to the FTC’s cease and desist order). ° In evaluating whether an affirmative defense is legally sufficient, the Court must accept that the FTC will prevail on the merits of the action (i.e., that Defendants engaged in deceptive and unfair practices) and then determine whether some extrinsic factor (i.e., the affirmative defense) defeats the claim. See PNC Bank, N.A. v. El Tovar, Inc., 2014 U.S. Dist. LEXIS 16921, at *20 (E.D. Mo. Feb. 11, 2014) (affirmative defense defined as “[a] defendant’s assertion raising new facts and arguments that, if true, will defeat the plaintiff's . . . claim, even if all allegations in the complaint are true’). 7 Case 4:14-cv-00815-BCW Document 336 Filed 06/22/15 Page 16 of 24 Wash. Nov. 12, 2004) (“The law is well settled that, once speech is deemed to be false, misleading, and commercial, it is not constitutionally protected.”). The First Amendment does not prohibit the government from “insuring that the stream of commercial information flow cleanly as well as freely.” Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748, 772 (1976). Appropriate time, place, and manner restrictions may be imposed on commercial speech, and false or misleading advertisements may be forbidden, as long as the restrictions are justified and leave open ample alternative channels for communicating the information.’ Commercial speech has a “hardiness” and durability that makes it unlikely to be “chilled by proper regulation.” Virginia, 425 U.S. at 772, n.24. Indeed, courts have stricken this defense in cases brought under Section 13(b) of the FTC Act. N. Am. Mktg. & Assocs., 2012 U.S. Dist. LEXIS 150102, at *6-7; Stefanchik, 2004 U.S. Dist. LEXIS 30710, at *4-5; see also In re Metagenics, Inc., 1995 FTC LEXIS 2, at *2-3 (1995) (striking affirmative defense that claimed proposed FTC order would violate the defendant’s free speech rights). Accordingly, the First Amendment defense is inappropriate and should be stricken. F. Defendants’ 8" and 17" Defenses Are Legally Insufficient Next, Defendants’ 8" and 17" defenses are premised on the argument that voluntary cessation of the alleged violative activity moots the case. This argument is without merit. Even if Defendants ceased all illegal conduct before initiation of this case, “[m]Jere voluntary cessation 7 See United States v. Reader’s Digest Ass’n, Inc., 464 F. Supp. 1037, 1049 (D. Del. 1978) (“Appropriate time, place, and manner restrictions may be imposed on commercial speech, and false or misleading advertisements may be forbidden.”’), aff’d, 662 F.2d 955 (3d Cir. 1981); Virginia, 425 U.S. at 771 (“We have often approved restrictions [on advertising] provided ... they leave open ample alternative channels for communication of the information.”); Bates v. State Bar of Arizona, 433 U.S. 350, 384 (1977) (“[T]here may be reasonable restrictions on the time, place, and manner of advertising.”). 8 Case 4:14-cv-00815-BCW Document 336 Filed 06/22/15 Page 17 of 24 of allegedly illegal conduct does not moot a case; if it did, the courts would be compelled to leave the defendant . . . free to return to his old ways. ” United States v. Concentrated Phosphate Export Ass’n, Inc., 393 U.S. 199, 203 (1968) (internal quotations omitted). On the contrary, the test for mootness “‘is a stringent one” and defendants must show that “subsequent events have made it absolutely clear that the allegedly wrongful behavior cannot reasonably be expected to recur.” FTC v. Affordable Media, 179 F.3d 1228, 1238 (9th Cir. 1999). Thus, “[e]ven if the defendants have altered some of their deceptive practices, injunctive relief is still appropriate when there is a ‘cognizable danger of recurrent violation.’” FTC v. Kitco of Nevada, Inc., 612 F. Supp. 1282, 1296 (D. Minn. 1985) (citation omitted); see also FTC v. Sec. Rare Coin & Bullion Corp., 1989 U.S. Dist. LEXIS 15958, at *19 (D. Minn. Sept. 11, 1989), aff'd 931 F.2d 1312 (8th Cir. 1991); FTC v. Bay Area Bus. Council, Inc., 2003 U.S. Dist. LEXIS 7261, at *8 (N.D. Ill. May 1, 2003) (striking mootness defense in FTC action). Accordingly, the Court should strike these defenses. G. Defendants’ 11" Defense Is Unavailable in a Government Law Enforcement Action Defendants’ 11" defense asserts the estoppel, laches, and waiver defenses. First, Defendants simply refer to these legal doctrines without setting forth the elements of each and without alleging any facts to support these defenses. Moreover, estoppel, laches, and waiver are generally unavailable as defenses against a government agency in a civil suit to enforce a public right or protect a public interest. The law is well settled that the principles of equitable estoppel are generally not available as defenses in a suit brought by the government to enforce a public right or a public interest. See INS v. Habibi, 414 U.S. 5, 8 (1973). Courts have long held that the government may not be estopped when it acts in its sovereign capacity for the benefit of the public unless some egregious 9 Case 4:14-cv-00815-BCW Document 336 Filed 06/22/15 Page 18 of 24 injustice would result. Sanz v. United States Sec. Ins. Co., 328 F.3d 1314, 1319-20 (11th Cir. 2003) (equitable estoppel available only if affirmative and egregious conduct by the government exists). In the Eighth Circuit, in order to establish a claim of equitable estoppel against the government, a party must prove: (1) a false representation by the government; (2) the government's intent to induce the party to act on the misrepresentation; (3) the party's lack of knowledge or inability to obtain the true facts; (4) the party's detrimental reliance; and (5) affirmative misconduct by the government. Mejia-Perez v. Gonzales, 490 F.3d 1011, 1012 (8th Cir. 2007). Further, affirmative misconduct “requires something more than mere negligence.” Bartlett v. United States Dep’t of Agric., 716 F.3d 464, 476 (8th Cir. 2013). See also Fano v. O'Neill, 806 F.2d 1262, 1265 (Sth Cir. 1987) (holding that “to state a cause of action for estoppel against the government, a private party must allege more than mere negligence, delay, inaction, or failure to follow an internal agency guideline”); FTC v. Accusearch, Inc., 2007 U.S. Dist. LEXIS 74905, at *27 (D. Wyo. Sep. 28, 2007) (“Erroneous advice by a government official is insufficient’) (citing FDIC v. Hulsey, 22 F.3d 1472, 1489 (10th Cir. 1994)). The burden is so high that the Supreme Court and the Eighth Circuit have warned “that courts should be cautious when evaluating estoppel claims against the government.” Bartlett, 716 F.3d at 475 (citing OPM v. Richmond, 496 U.S. 414, 422 (1990) (“Courts of Appeals have taken our statements as an invitation to search for an appropriate case in which to apply estoppel against the Government, yet we have reversed every finding of estoppel that we have reviewed’’)). Thus, courts have stricken estoppel defenses asserted against the FTC. See, e.g., United States v. Global Mortg. Funding, 2008 U.S. Dist. LEXIS 102897, at *10-11 (C.D. Cal. May 15, 2008); Accusearch, 2007 U.S. Dist. LEXIS 74905, at *27; FTC v. American Microtel, Inc., 1992 U.S. Dist. LEXIS 11046, at *3 (D. Nev. June 10, 1992); Reader’s Digest Ass’n, 464 F. Supp. at 1043. 10 Case 4:14-cv-00815-BCW Document 336 Filed 06/22/15 Page 19 of 24 It is a general rule that laches is no defense against the government in a civil suit to enforce a public right or protect a public interest. See Habibi, 414 U.S. at 8; United States v. Summerlin, 310 U.S. 414, 416 (1939); Lee v. Spellings, 447 F.3d 1087, 1090 (8th Cir. 2006) (“a laches defense may not be asserted against the government); Bostwick Irrigation District v. United States, 900 F.2d 1285, 1291 (8th Cir. 1990) (“Whatever the application of this doctrine to private parties, we have recognized the long-standing rule that laches does not apply in actions brought by the United States”); United States v. One 1973 Buick Riviera Auto., 560 F.2d 897, 899 (8th Cir. 1977) (“It is the general rule . . . that the defense of laches may not be asserted against the United States when it acts in its sovereign capacity.”). Numerous courts have stricken the defense of laches when asserted in FTC actions. See, e.g., FTC v. Moneymaker, 2011 U.S. Dist. LEXIS 83913, at *5-6 (D. Nev. July 28, 2011); Global Mortg. Funding, 2008 U.S. Dist. LEXIS 102897, at *6-7; FTC v. Magazine Solutions, LLC, 2007 U.S. Dist. LEXIS 70977, at *4 (W.D. Pa. Sep. 25, 2007); FTC v. Bronson Partners, LLC, 2006 U.S. Dist. LEXIS 3315, at *3-4 (D. Conn. Jan. 25, 2006); FTC v. Crescent Publ’g Group, Inc., 129 F. Supp. 2d 311, 324 (S.D.N.Y. 2001); FTC v. N.E. Telecomms., Ltd., 1997 U.S. Dist. LEXIS 10531, at *O(S.D. Fla. Jun. 23, 1997); Am. Microtel, Inc., 1992 U.S. Dist. LEXIS 11046, at *3; U.S. Oil & Gas, 1987 U.S. Dist. LEXIS 16137, at *81; Reader’s Digest Ass’n., 464 F. Supp. at 1043. Finally, waiver is unavailable as a defense when the government is enforcing an act of Congress. Capital Funds, Inc. v. SEC, 348 F.2d 582, 588 (8th Cir. 1965) (government agency may not waive violations of federal law); SEC v. Morgan, Lewis & Bockius, 209 F.2d 44, 49 (3d Cir. 1953) (same); Bronson Partners, LLC, 2006 U.S. Dist. LEXIS 3315, at *6 (“The FTC may not waive the requirement of an act of Congress”); Reader’s Digest Ass’n., 464 F. Supp. at 1043. Thus, the FTC cannot relinquish its right, and its duty, to enforce the laws of the United States 11 Case 4:14-cv-00815-BCW Document 336 Filed 06/22/15 Page 20 of 24 prohibiting unfair or deceptive acts or practices.* Accordingly, the Court should strike this defense. H. Defendants’ 18'" Defense Is Inadequately Pled And Immaterial Defendants’ 18" affirmative defense pins fault on “others” without the slightest indication of who the others might be. This alone is enough to warrant striking the defenses. N. Am. Mktg., 2012 U.S. Dist. LEXIS 150102, at *11-12 (striking affirmative defense that damage cause by unnamed parties). But the defense also declines to explain how the innominate “others” were involved beyond generically stating that they “caused” or “contributed” to cause the alleged harm. Defendants’ failure to explain how the involvement of others relieves them of liability renders their 18" affirmative defense insufficient under even the most liberal reading of Rule 8. Moreover, the defense is also immaterial. Assuming that others were in fact ensnared in Defendants’ misconduct, that does not absolve Defendants. The FTC is not required to name as defendants all parties who may be jointly and severally liable. See SEC v. Princeton Econ. Int’l Ltd., 2001 U.S. Dist. LEXIS 948, at *2-4 (S.D.N.Y. Feb. 5, 2001) (in rejecting defendant’ s argument that he “could not have violated the law[] . . . without the willful and knowing participation” of a number of other entities that were “indispensable parties,” the court ruled that “determinations by regulatory agencies . . . about which parties to name in an enforcement action are presumed immune from judicial review” and that the unnamed entities “are akin to coconspirators and their presence . . . is not required to ascertain [the defendant's] liability for the alleged fraudulent conduct and the potential applicability of injunctive relief, restitution, * Moreover, the FTC’s right to bring this action is not derivative of the rights of individual consumers, and thus whether any consumer “waived” his or her own claim is irrelevant to this case. Bronson Partners, 2006 U.S. Dist. LEXIS 3315, at *6 (“[t]he FTC’s authority to bring an action under section 13(b) of the FTC Act is not derived from the defendants’ contracts with individual consumers... .”). 12 Case 4:14-cv-00815-BCW Document 336 Filed 06/22/15 Page 21 of 24 disgorgement, civil monetary penalties, etc.”); SEC v. Tiffany Industries, Inc., 535 F. Supp. 1167, 1168 (E.D. Mo. 1982). See also United States v. Lopez, 6 F.3d 1281, 1288 (7th Cir. 1993) (government does not need to charge or even identify co-conspirators to convict a defendant of conspiracy); In re Uranium Antitrust Litig., 552 F. Supp. 518, 522 (N.D. Ill. 1982) (“an antitrust defendant is jointly and severally liable for the acts of its co-conspirators ... in furtherance of the alleged price fixing conspiracy, whether or not thatco-conspirator is named as a defendant’). I. Defendants 19" Defense Is an Improper Attempt to Circumvent Federal Rule of Civil Procedure 15 In their final defense, Defendants reserve the right to “amend their Answer to assert additional defenses” that might arise later in this proceeding. This is not a proper defense but at best an attempt to circumvent the amendment procedures set forth in Federal Rule of Civil Procedure 15. As such, courts routinely have struck down similar attempts, finding that Rule 15 provides the proper avenue by which a defendant may add defenses to his answer. See, e.g., N. Am. Mktg., 2012 U.S. Dist. LEXIS 150102, at *10-11; County Vanlines Inc. v. Experian Info. Solutions Inc., 205 F.R.D. 148, 157-158 (S.D.N.Y. 2002); Stefanchik, 2004 U.S. Dist. LEXIS 30710, at *7-8; Bay Area Business Council, 2003 U.S. Dist. LEXIS 7261, at *10 (“[i]t is not listed in Rule 8(c) of the Federal Rules of Civil Procedure as an affirmative defense; and pursuant to Rule 15(a), only the Court may grant leave to amend pleadings”); Krisa v. Equitable Life Assurance Society, 113 F. Supp. 2d 694, 708 (M.D. Pa. 2000) (“There is neither a need nor a right to express such a ‘reservation’ in an affirmative defense.”); Liberty Motor & Mach. Co. v. The Hartford Accident & Indem. Co., 1992 U.S. Dist. LEXIS 22529, at *6-7 (S.D. Ill. Mar. 18, 1992) (“This general attempt to reserve the right to set forth further affirmative defenses does not satisfy the requirement of Rule 8(c)”). If Defendants discover an additional affirmative defense during discovery, they must petition the Court for leave to amend their answer under Rule 13 Case 4:14-cv-00815-BCW Document 336 Filed 06/22/15 Page 22 of 24 15(a)(2). They cannot use their so-called 19" affirmative defense to flaunt these procedural rules. See, e.g., Handi-Craft Co. v. Travelers Cas. & Sur. Co., 2012 U.S. Dist. LEXIS 57911, at *19 (E.D. Mo. Apr. 25, 2012) (striking “reservation of rights” defense as “insufficient as a matter of law”). Accordingly, the Court should strike this defense. II. Allowing The Affirmative Defenses To Remain Will Prejudice The FTC Litigation regarding Defendants’ nineteen affirmative defenses would prejudice the FTC and consumers harmed by Defendants’ scheme. As discussed above, because many of Defendants’ defenses are nothing but “threadbare recitals,” “bare bones conclusory allegations,” and “textbook examples of labels and conclusions,” the FTC will be forced to expend considerable resources in discovery just to be put on fair notice of what Defendants are alleging. And because Defendants’ affirmative defenses fail as a matter of law, allowing them to remain will needlessly prolong the litigation, require the FTC to expend its limited resources, and waste assets that otherwise would be available to compensate injured consumers. This is the very prejudice that courts have found justify striking insufficient defenses. See, e.g., Lakeside Roofing Co. v. Nixon, 2011 U.S. Dist. LEXIS 69913, at *4 (E.D. Mo. Jun. 29, 2011) (“The prejudice requirement is satisfied if striking the defense would, for example, prevent a party from engaging in burdensome discovery, or otherwise expending time and resources litigating irrelevant issues that will not affect the case’s outcome’’); Canadian St. Regis Band of Mohawk Indians v. New York, 278 F. Supp. 2d 313, 325 (N.D.N.Y. 2003) (striking affirmative defenses appropriate where an “irrelevant affirmative defense . . . ‘result[s] in increased time and expense of trial, including the possibility of extensive and burdensome discovery’”); Izzard v. Credit Fin. Servs., 2014 U.S. Dist. LEXIS 45215, at *4 (M.D.N.C. Apr. 2, 2014) (same). 14 Case 4:14-cv-00815-BCW Document 336 Filed 06/22/15 Page 23 of 24 IV. Conclusion Accordingly, for the reasons set forth herein, the Court should strike, pursuant to pursuant to Federal Rule of Civil Procedure 12(f), all of Defendants’ affirmative defenses. Respectfully submitted, JONATHAN E. NUECHTERLEIN General Counsel Dated: June 22, 2015 /s/ Gregory A. Ashe Helen Wong, DC Bar # 997800 Leah Frazier, DC Bar# 492540 Gregory A. Ashe, VA Bar #39131 Jason M. Adler, IL Bar #6295738 Federal Trade Commission 600 Pennsylvania Ave., N.W. Mail Stop CC-10232 Washington, D.C. 20580 202-326-3779 (Wong) 202-326-2187 (Frazier) 202-326-3719 (Ashe) 202-326-3231 (Adler) Facsimile: 202-326-3768 hwong @ftc.gov Ifrazier @ftc.gov gashe @ftc.gov jadler@ftc.gov TAMMY DICKINSON United States Attorney Dated: June 22, 2015 /s/ Charles M. Thomas Charles M. Thomas, MO Bar #28522 Assistant United States Attorney Charles Evans Whittaker Courthouse 400 East Ninth Street, Room 5510 Kansas City, MO 64106 Telephone: (816) 426-3130 Facsimile: (816) 426-3165 E-mail: charles.thomas @usdoj.gov Attorneys for Plaintiff FEDERAL TRADE COMMISSION 15 Case 4:14-cv-00815-BCW Document 336 Filed 06/22/15 Page 24 of 24