Borrowers/Guarantors Beware: Federal Magistrate Judge Strikes Undeveloped Affirmative Defenses

 

The Cincinnati Ins. Co. v. Kreager Bros., 2013 U.S. Dist. LEXIS 85743 (N.D. Ind. 2013) (.pdf), provides an entrée to the basics of affirmative defenses, which workout professionals may hear their foreclosure lawyers mention during the course of litigation.  The result in Kreager was surprising and is a lesson for defense attorneys, particularly those practicing in the Northern District of Indiana. 

Definition.  Generally, an affirmative defense is a defense for which the proponent bears the burden of proof and which, in effect, admits the essential allegations of the opposition’s claim, but asserts additional matter(s) barring relief.  Defendants must plead affirmative defenses in their answers to complaints.  See Fed. R. Civ. P. 8.

Procedural background.  The plaintiff in Kreager brought an action for the defendant’s default on a promissory note.  The defendant, in its answer to the plaintiff’s complaint, asserted four affirmative defenses, which can be found on pages 1 and 2 of the opinion.  The listed defenses were recognized affirmative defenses under Indiana law and were well written.   Nevertheless, the plaintiff moved to strike the defenses, under Rule 12(f), for an alleged failure to comply with Rule 8(a), which deals with pleading requirements. 

Pleading rules.  Under Rule 12(f), courts may strike from a pleading certain matters.  Although such motions generally are disfavored, “they may be granted if they remove unnecessary clutter from a case and expedite matters, rather than delay them.”  Affirmative defenses will be stricken “only when they are insufficient on the face of the pleadings.”  Federal pleading requirements require grounds for the court’s jurisdiction and must contain enough facts that the relief is plausible on its face.  “Bare legal conclusions” are insufficient, and affirmative defenses must involve a “short plain statement” of all material elements. 

Insufficient.  I must confess that the four affirmative defenses articulated in Kreager, a federal not a state court case, were generally consistent with custom and practice that I have observed, and frankly are not unlike my own approach to pleading affirmative defenses in answers to a complaint.  In Kreager, the plaintiff sought to have the affirmative defenses stricken.  The Court granted plaintiff’s motion.  While the affirmative defenses were concise, the Court found that they did not have “any surrounding factual support.”  “Boilerplate defenses without any support anywhere in the pleadings do not comply with Rule 8(a).” 

Successful tactic.  Plaintiff’s tactics in Kreager were a bit unusual because a determination of the viability of affirmative defenses probably could have been adjudicated in plaintiff’s subsequent motion for summary judgment.  But, the plaintiff and its lawyers decided to deal with the affirmative defenses at an early stage and were successful in doing so.  It was a good move in this particular case and before this particular Magistrate Judge (Andrew P. Rodovich).  For lawyers who represent secured lenders in foreclosure actions venued in federal court, Kreager represents an example of a procedural tactic one might want to consider.  For lawyers representing borrowers and guarantors, Kreager suggests that you might provide more beef when pleading affirmative defenses.  Boilerplate language, again something I admittedly have been guilty of and which would likely pass muster in state court, may subject you to an order to strike in federal court. 

Summary judgment on note.  As an aside, a year later (.pdf) the Court in Kreager granted summary judgment to the plaintiff.  The opinion cited to some good points of law:  (1) “a promissory note is a written promise by one person to pay another person, absolutely and unconditionally, a certain sum of money at a specific time,” (2) “an unconditional promissory note is a negotiable instrument rather than a contract,” and (3) “to enforce a negotiable instrument, the plaintiff must show that the instrument was endorsed and delivered” (see, Ind. Code § 26-1-3.1-201).