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City of New York v. Fedex Ground Package System, Inc.

United States District Court, S.D. New York

February 14, 2017

THE CITY OF NEW YORK and THE PEOPLE OF THE STATE OF NEW YORK, Plaintiffs,
v.
FEDEX GROUND PACKAGE SYSTEM, INC., Defendant.

          OPINION AND ORDER

          Edgardo Ramos, U.S.D.J.

         Before the Court are FedEx's objections to an Order issued by Magistrate Judge Kevin Nathaniel Fox on January 15, 2016 precluding discovery of information that FedEx alleges is relevant to its seventh affirmative defense, as well as the City's motion to strike the seventh affirmative defense. For the reasons discussed below, the City's motion to strike the seventh affirmative defense is DENIED and FedEx's objections to the January 15, 2016 Order are SUSTAINED in part.

         I. BACKGROUND[1]

         On or about March 15, 2013, approximately nine months before filing this action, the City of New York (“City”) entered into an agreement with FedEx Ground Package System, Inc. (“FedEx” or “FedEx Ground”) to settle any claims the City might have against FedEx related to its shipments on behalf of a cigarette seller called Cigarettes Direct to You (“CD2U”). Proshansky Decl. (Doc. 178), Ex. 1. As part of that agreement, the City and FedEx made certain representations. The City represented that, aside from information about CD2U, it had “no information . . . suggest[ing] that FedEx Ground [had] delivered or transported unstamped cigarettes to New York City residents or into the geographic boundaries of New York City.” Id. ¶ 5. In turn, FedEx represented that, aside from information about CD2U, it had “no knowledge that it [was then] delivering or transporting unstamped cigarettes to New York City residents within the geographic boundaries of New York City.” Id. ¶ 6.

         The parties also undertook certain obligations going forward. FedEx agreed that “in the event that the City has a reasonable basis to believe that any person is using FedEx Ground to deliver unstamped cigarettes within the geographic boundaries of New York City, ” and “upon the City's notification of its reasonable basis and at its request, ” FedEx would “(1) provide the City with reasonably informative information concerning or relating to the date, weight, and recipients' addresses for deliveries into New York City by that person; and (2) terminate the use of its services by that person, if such deliveries contained unstamped cigarettes.” Id. ¶ 7. For its part, the City agreed that if FedEx complied with the foregoing provisions, the City would “not pursue any claim, cause of action, lawsuit or other demand against FedEx Ground related to shipments of cigarettes by that person.” Id.

         During the course of discovery in this action, FedEx requested from the City any materials showing that at the time the parties entered into their agreement, the City did have other information about FedEx's delivery of unstamped cigarettes, contrary to the City's contractual representation. See FedEx's Aug. 31, 2015 Ltr. (Doc. 114) at 7. On November 17, 2015, Magistrate Judge Fox, to whom all general pretrial matters were then assigned, held a telephone conference to discuss, among other things, the parties' dispute regarding the City's obligation to produce such materials. See Nov. 17, 2015 Tr. (Doc. 136). At that conference, FedEx argued that the requested information was relevant to its seventh affirmative defense, which Plaintiffs had never challenged.[2] Id. at 27:2-6. FedEx's seventh affirmative defense provides that:

The City's claims are barred, in whole or in part, by the settlement agreement with FedEx Ground, effective March 15, 2013, to the extent, inter alia, the City had any information prior to the date of that agreement, suggesting that FedEx Ground had delivered or transported unstamped cigarettes to New York City residents or into the geographic boundaries of New York City, and to the extent the City did not honor the cooperative framework established by that agreement.

Am. Answer (Doc. 101) at 22.

         Magistrate Judge Fox requested briefing on the issue, which the parties provided. See FedEx's Dec. 9, 2015 Ltr. (Doc. 146); City's Dec. 17, 2015 Ltr. (Doc. 148). On January 15, 2016, after considering the parties' arguments and letter briefs, Magistrate Judge Fox issued an Order denying “FedEx's request that the City be required to disclose information relating to the [a]greement” between the parties. Jan. 15, 2016 Order (Doc. 156). FedEx thereafter requested that Magistrate Judge Fox clarify or reconsider his ruling so that it not foreclose discovery relevant to FedEx's seventh affirmative defense, FedEx's Jan. 25, 2016 Ltr. (Doc. 157), but Magistrate Judge Fox denied the request, Mar. 4, 2016 Order (Doc. 172).

         On March 24, 2016, FedEx filed its objections to Magistrate Judge Fox's January 15, 2016 Order, arguing in large part that the ruling is erroneous because the agreement between FedEx and the City is the foundation of FedEx's seventh affirmative defense. FedEx's Objs. (Doc. 175) at 8. In response to FedEx's objections, the City moved to strike the seventh affirmative defense. City's Mem. (Doc. 179). Although the City's filing was procedurally improper, [3] the Court permitted the City to persist in its motion. Apr. 28, 2016 Tr. (Doc. 204) at 16:22-17:3. The City subsequently filed a corrected motion, FedEx filed an opposition brief, and the City filed a reply. City's Corr. Mem. (Doc. 197); FedEx's Opp'n Mem. (Doc. 206); City's Reply Mem. (Doc. 217).

         II. LEGAL STANDARD

         A. Motion to Strike an Affirmative Defense

          “An affirmative defense is an ‘assertion of facts and arguments that, if true, will defeat the plaintiff's . . . claim, even if all the allegations in the complaint are true.'” Tradewinds Airlines, Inc. v. Soros, No. 08 Civ. 5901 (JFK), 2013 WL 6669422, at *2 (S.D.N.Y. Dec. 17, 2013) (quoting Black's Law Dictionary 482 (9th ed. 2009)). Although a court may strike from a pleading “an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter, ” Fed.R.Civ.P. 12(f), “courts should not tamper with the pleadings unless there is a strong reason for so doing, ” Lipsky v. Commonwealth United Corp., 551 F.2d 887, 893 (2d Cir. 1976). Motions to strike an affirmative defense are generally disfavored, Cty. Vanlines Inc. v. Experian Info. Sols., Inc., 205 F.R.D. 148, 152 (S.D.N.Y. 2002), and “will not be granted unless it appears to a certainty that plaintiffs would succeed despite any state of the facts which could be proved in support of the defense, ” Salcer v. Envicon Equities Corp., 744 F.2d 935, 939 (2d Cir. 1984) (internal quotation marks omitted), vacated and remanded on other grounds, 478 U.S. 1015 (1986).

         To prevail on a motion to strike, the moving party must satisfy a stringent three-pronged test: “(1) there must be no question of fact that might allow the defense to succeed; (2) there must be no substantial question of law that might allow the defense to succeed; and (3) the plaintiff must be prejudiced by the inclusion of the defense.” Specialty Minerals, Inc. v. Pluess-Staufer AG, 395 F.Supp.2d 109, 111 (S.D.N.Y. 2005). In considering the first and second prongs, courts apply the same legal standard as that applicable to a motion to dismiss under Rule 12(b)(6). Coach, Inc. v. Kmart Corps., 756 F.Supp.2d 421, 425 (S.D.N.Y. 2010). The “sufficiency of a defense is to be determined solely upon the face of the pleading, ” and the Court “accepts as true all well-pleaded factual allegations and draws all reasonable inferences in the [non-moving party's] favor.” Id. In evaluating the third prong, the Court may consider whether inclusion of the legally insufficient defense would needlessly increase the “time and expense of trial” or “duration and expense of litigation.” Id. at 426 (citing Estee ...


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