Antitrust Law Daily Wrap Up, ADVERTISING—S.D. Tex.: FTC’s motion to strike accused spammers’ affirmative defenses denied, (Nov 15, 2013)

By Peter Reap, J.D., LL.M.

In its action against accused text messaging spammers Verma Holdings, LLC and Rishab Verma, the FTC was not entitled to the striking of certain of the defendants’ affirmative defenses, the federal district court in Houston has decided (FTC v. Verma Holdings, LLC, November 14, 2013, Atlas, N.).

On March 6, 2013, the FTC filed a complaint against the defendants, seeking injunctive and equitable relief. The FTC seeks an injunction barring the defendants from sending spam text messaging to consumers with promises of “free” gift cards from retailers. The FTC alleges that this spam text messaging campaign is deceptive and that consumers cannot receive the promised gift cards without paying money or fulfilling other previously undisclosed requirements.

On August 22, 2013, the court issued an order granting the FTC’s First Motion to Strike in part and denying the motion in part. Specifically, the court denied the motion as to the defendants’ first, third, fourth (in part), eighth, eleventh, twelfth, and sixteenth affirmative defenses; granted the motion without leave to amend as to their second, ninth, and fifteenth affirmative defenses; and granted the motion with leave to amend as to their fourth (in part), fifth, sixth, seventh, tenth, thirteenth, and fourteenth affirmative defenses.

On September 12, 2013, the defendants filed an amended answer in which they abandoned their fourth, seventh, tenth, thirteenth, and fourteenth affirmative defenses; amended their fifth and sixth affirmative defenses; and made slight changes to their sixteenth affirmative defense, the court noted.

Motion to Strike

Rule 12(f) of the Federal Rules of Civil Procedure permits the district court to strike “an insufficient defense or any redundant, immaterial, impertinent or scandalous matter.” Fed. R. Civ. P. 12(f). To sufficiently assert an affirmative defense, a party must “[i]n responding to a pleading affirmatively state any avoidance or affirmative defense.” Fed. R. Civ. P. 8(c)(1). Rule 8(c) requires a defendant to plead an affirmative defense with enough specificity or factual particularity to give the plaintiff “fair notice” of the defense that is being advanced, according to the court. Fair notice is satisfied if the defense is sufficiently articulated so that the plaintiff is not a victim of unfair surprise.

Abandoned affirmative defenses. As noted, in its previous order, the court granted the FTC’s first motion to strike with respect to the defendants’ fourth (in part), fifth, sixth, seventh, tenth, thirteenth, and fourteenth affirmative defenses, but granted the defendants leave to amend with respect to those defenses. Rather than replead certain defenses, the defendants abandoned their third, fourth, seventh, tenth, thirteenth, and fourteenth affirmative defenses.

Inexplicably, the FTC asked the court to strike the affirmative defenses that the defendants had explicitly chosen not to assert, the court observed. The court could not strike an affirmative defense that was not pleaded. Accordingly, the FTC’s request to strike the defendants’ third, fourth, seventh, tenth, thirteenth, and fourteenth affirmative defenses was denied.

Sixteenth affirmative defense. In their amended answer, the defendants made two changes to their sixteenth affirmative defense. First, the defendants stated that they “give notice that they intend to rely upon any other defense that may become applicable as the facts of this case develop during the course of discovery proceedings,” instead of “that may become available or appear during the course of discovery proceedings.” Second, the defendants added a proviso that their notice extended to “any defense waived in this Amended Answer.”

The court did not previously address whether the defendants could amend this affirmative defense because it denied the FTC’s first motion to strike as to this defense. In any event, the defendants’ changes to their sixteenth affirmative defense were merely stylistic, not substantive. The defendants merely clarified that, pursuant to Rule 15, they retained the right to assert other affirmative defenses, including those defenses the defendants chose to abandon in their amended answer. The defendants did not actually assert any new defense through their amended sixteenth affirmative defense.

Furthermore, as before, the FTC failed to explain why this affirmative defense, even as amended, failed to provide sufficient notice. Accordingly, the court denied the FTC’s request to strike this defense.

Fifth and sixth affirmative defenses. The defendants’ fifth and sixth affirmative defenses are, respectively, that they did not breach a duty owed to consumers and that they acted in conformance with commercial standards and reasonableness. In accordance with the court’s prior order, the defendants amended these defenses to provide greater detail. The FTC provided no reason why these affirmative defenses should now be stricken. Therefore, the request to strike the fifth and sixth affirmative defenses was denied, the court ruled.

The case is Civil Action No. 4:13-cv-00594.

Attorneys: Eliseo Noel Padilla for FTC. James A. Kaminski (Hughes & Bentzen, PLLC) for Verma Holdings, LLC.

Companies: Verma Holdings, LLC

Cases: ConsumerProtection Privacy Advertising FederalTradeCommissionNews