or scandalous matter." Fed.R.Civ.P. 12(f); China Trust Bank of
New York v. Standard Chartered Bank, PLC, No. 96 Civ. 9764, 1998
WL 574391, at *2 (S.D.N.Y. Sept.4, 1998). Motions to strike
defenses are generally not favored. See William Z. Salcer,
Panfeld, Edelman v. Envicon Equities Corp., 744 F.2d 935, 939
(2d Cir. 1984), vacated on other grounds, 478 U.S. 1015, 106
S.Ct. 3324, 92 L.Ed.2d 731 (1986). In order to prevail on a
motion to strike, a plaintiff must show that: (1) there is no
question of fact which might allow the defense to succeed; (2)
there is no question of law which might allow the defense to
succeed; and (3) the plaintiff would be prejudiced by inclusion
of the defense. See id. An increase in the time, expense and
complexity of a trial may constitute sufficient prejudice to
warrant granting a plaintiff's motion to strike. See SEC v.
Toomey, 866 F. Supp. 719, 722 (S.D.N.Y. 1992); SEC v. Thrasher,
1995 WL 456402, at * 5. However, in evaluating such motions, the
Court construes the pleadings liberally to give the defendant a
full opportunity to support its claims at trial, after full
discovery has been made. Bennett v. Spoor Behrins Campbell &
Young, Inc., 124 F.R.D. 562, 564 (S.D.N.Y. 1989).
B. Statute of Limitations Defense
No statute of limitations applies to the SEC's claims for
equitable remedies, see SEC v. Schiffer, No. 97 Civ. 5853, 1998
WL 226101, at *2 (S.D.N.Y. 1998); SEC v. Lorin, 869 F. Supp. 1117,
1120-23 (S.D.N.Y. 1994), and thus, the defense fails as a
matter of law and fact. The inclusion of the defense would
increase the time, expense and complexity of this litigation and
thus, the statute of limitations defense asserted in response to
the SEC's claims for equitable remedies is stricken.
The parties agree that the five year statute of limitations
embodied in 28 U.S.C. § 2462 applies to the civil penalty claims.
The SEC filed this action on September 1, 1998. Therefore, only
civil penalty claims based on conduct which is alleged to have
occurred on or after September 1, 1993 are timely. Review of the
complaint reveals that all SEC civil penalty claims appear to be
have been brought within the statute of limitations. See
Complaint, at ¶¶ 25, 127-28. However, given the fact that
discovery has not yet commenced so as to confirm or refute these
alleged dates, striking the statute of limitations defense at
this stage would be premature. Accordingly, the SEC's motion to
strike defendants' statute of limitations defense to the SEC's
civil penalties claims is denied.
C. Estoppel Defense
To succeed on a defense of equitable estoppel asserted against
a private plaintiff, a defendant must prove (1) that the
plaintiff made a material misrepresentation, (2) upon which the
defendant relied, (3) to his detriment. See General Elec.
Capital Corp. v. Armadora, S.A., 37 F.3d 41, 45 (2d Cir. 1994).
However, a defendant's burden is greater where he seeks to assert
the defense against the government. See Office of Personnel
Management v. Richmond, 496 U.S. 414, 419, 110 S.Ct. 2465, 2469,
110 L.Ed.2d 387 (1990). To be successful, the defendant must
prove that the government's conduct was egregious and that the
resulting prejudice to the defendant was of a constitutional
magnitude. See SEC v. Elecs. Warehouse, Inc. 689 F. Supp. 53, 73
(D.Conn. 1988), aff'd sub nom., SEC v. Calvo, 891 F.2d 457 (2d
Cir. 1989), cert. denied, 496 U.S. 942, 110 S.Ct. 3228, 110
L.Ed.2d 674 (1990).
Here, the defendants have offered nothing to suggest they
detrimentally relied on any misrepresentation by the SEC, let
alone that such reliance resulted in prejudice to their case of a
constitutional magnitude. Thus, the defense has no basis in fact.
Likewise, there is no question of law which might allow
defendants' estoppel defense to succeed. Moreover, allowing the
defense to remain would prejudice the SEC by needlessly
and complicating the discovery process and trial of this matter.
Therefore, defendants' equitable estoppel defense is stricken.
D. Laches Defense
Laches is an equitable doctrine, concerned principally with the
fairness of permitting a claim to be enforced. See Holmberg v.
Armbrecht, 327 U.S. 392, 396, 66 S.Ct. 582, 584, 90 L.Ed. 743
(1946). To succeed with a defense of laches, the Court must find
that the plaintiff delayed unreasonably and inexcusably in
commencing the action and that the defendant suffered prejudice
as a result. See Lottie Joplin Thomas Trust v. Crown Publishers,
Inc., 592 F.2d 651, 655 (2d Cir. 1978).
"The settled precedent in this circuit holds that laches is not
an available defense in an SEC enforcement action seeking
injunctive relief." SEC v. Sarivola, No. 95 Civ. 9270, 1996 WL
304371, at *1 (S.D.N.Y. June 6, 1996). However, even if permitted
to be asserted against the SEC, the utter lack of support for the
defense in this case would require that it be struck. Because all
SEC claims for civil penalties appear to have been brought within
the statute of limitations, the Court presumes that this action
was commenced without unreasonable delay. However, even assuming
unreasonable delay, defendants' laches defense nevertheless must
fail because defendants do not allege that they have suffered any
prejudice as a result of the SEC's decision to commence this
action when it did. Moreover, inclusion of this defense would
prejudice the SEC by needlessly lengthening and complicating the
discovery process and trial of this matter. Accordingly, the
laches defense is stricken.
For the reasons set forth above, the SEC's and Gruntals'
motions to dismiss the third-party complaint and the SEC's motion
to dismiss the counterclaim are granted. The SEC's motion to
strike defendants' affirmative defenses of estoppel, laches is
granted. The SEC's motion to strike defendants' statute of
limitations defense is granted as to the SEC's equitable claims
but denied as to the SEC's claims for civil penalties. The
caption is amended to reflect the dismissal of the third-party
complaint and counterclaim. On May 26, 1999, the parties shall
appear in Room 906, 40 Centre Street, New York, New York at 2:00
p.m. for a case conference.