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BJ Energy LLC v. PJM Interconnection

April 13, 2010

BJ ENERGY LLC, FRANKLIN POWER LLC, GLE TRADING LLC, OCEAN POWER LLC, PILLAR FUND LLC, AND ACCORD ENERGY, LLC, PLAINTIFFS,
v.
PJM INTERCONNECTION, LLC, DEFENDANT AND COUNTERCLAIM PLAINTIFF,
v.
MARK GORTON, TOWER RESEARCH CAPITAL LLC, TOWER RESEARCH CAPITAL INVESTMENTS LLC, ACCORD ENERGY LLC, BJ ENERGY LLC, FRANKLIN POWER LLC, GLE TRADING LLC, OCEAN POWER LLC, PILLAR FUND LLC, AND POWER EDGE LLC, COUNTERCLAIM DEFENDANTS.



The opinion of the court was delivered by: Norma L. Shapiro, S.J.

MEMORANDUM

This matter is before the court on the PJM Interconnection, LLC ("PJM") motion to strike certain of the counterclaim-defendants' affirmative defenses under Rule 12(f) or, in the alternative, for partial judgment on the pleadings under Rule 12(c).

I. INTRODUCTION

On April 16, 2008, PJM filed a complaint in the United States District Court for the District of Delaware (Civil Action No. 08-216-JJF, "the Delaware action") against Mark Gorton and various hedge funds under his direct or indirect ownership or control; it stated claims under RICO and Delaware state law. On July 2, 2008, BJ Energy LLC, Franklin Power LLC, GLE Trading LLC, Ocean Power LLC, Pillar Fund LLC, and Mark Gorton filed a complaint in the Philadelphia County Court of Common Pleas against PJM. PJM removed that action to this court on August 4, 2008 (Civil Action No. 08-3649, "the Pennsylvania action"). By Order of July 13, 2009, the former Delaware action was consolidated as a counterclaim in the Pennsylvania action.

In their answer to the counterclaim, the counterclaim-defendants assert that: the PJM counterclaim is based on allegations of market manipulation for which no private right of action exists; PJM fails to state a RICO claim and therefore this court will lack jurisdiction over the pendent state law claims once the RICO claim is dismissed; PJM has not suffered an injury-in-fact and, even if it has, PJM has failed to mitigate its damages; and the counterclaim-defendants' actions were taken in good faith. These claims are set forth in the answer as affirmative defenses two and four through seven. PJM seeks to strike these defenses, or in the alternative, asks for judgment on the pleadings as to these defenses.

II. DISCUSSION

PJM first moves to strike certain of the counterclaim-defendants' affirmative defenses under Rule 12(f) of the Federal Rules of Civil Procedure.

A. Rule 12(f) Standard

An affirmative defense constitutes a "defendant's assertion of facts and arguments that, if true, will defeat the plaintiff's or prosecution's claim, even if all the allegations in the complaint are true." BLACK'S LAW DICTIONARY 451 (8th ed. 2004).

Federal Rule of Civil Procedure 12(f) provides, in relevant part, that "[t]he court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent or scandalous matter." A court is reluctant to grant a motion to strike an affirmative defense because it requires a premature evaluation of the merits, before the necessary factual background is developed. See United States v. Sensient Colors, Inc., 580 F. Supp. 2d 369, 374 (D.N.J. 2008); see also North Penn Transfer, Inc. v. Victaulic Co. of Am., 859 F. Supp. 154, 158-59 (E.D. Pa. 1994) (striking a pleading is a "drastic remedy" to be used sparingly because of the difficulty of deciding a case without a factual record). A motion to strike will only be granted where the insufficiency of the defense is clearly apparent. Cipollone v. Liggett Group, Inc., 789 F.2d 181, 188 (3d Cir. 1986).

An affirmative defense is legally insufficient where it cannot succeed under any set of facts which may be inferred from the allegations of the pleading. Linker v. Custom-Bilt Machinery Inc., 594 F.Supp. 894, 898 (E.D.Pa. 1984). An affirmative defense stated in general terms will not be deemed insufficient as long as it gives plaintiffs fair notice of the nature of the defense. See U.S. v. Consolidation Coal Co., No. 89-2124, 1991 WL 333694, at *4 (W.D.Pa. July 5, 1991). Where a defense is nothing more than a bare bones conclusory allegation, it may be stricken. Cintron Beverage Group, LLC v. DePersia, No. 07-3043, 2008 WL 1776430, at *2, 2008 U.S. Dist. LEXIS 30716, at *5 (E.D. Pa. Apr. 15, 2008).

B. Timeliness

Counterclaim-defendants argue that the motion to strike is untimely under Rule 12(f) because it was asserted more than twenty days after service of the answer. Rule 12(f) provides that a party may move to strike within twenty days of being served with the pleading. Fed.R.Civ.P. 12(f). Counterclaim-defendants filed their Answer with Affirmative Defenses on April 24, 2009, in the Delaware action. PJM filed its motion to strike on November 25, 2009, in the consolidated action. PJM's motion is untimely.

However, Rule 12(f) permits the court to consider the sufficiency of a defense at any time. Courts have construed that section of the rule to mean that they may entertain motions to strike even if untimely. See Krauss v. Keibler-Thompson Corp., 72 F.R.D. 615, 617 (D. Del. 1976); see also 5C CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE ยง 1380 (3d ed.) ("The court may strike material from a pleading on its own initiative."). The "time limitations of Rule 12(f) should not be applied strictly when the motion to strike seems to have merit." Id. (collecting cases where courts ...


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