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Ionian Corp. v. Country Mut. Ins. Corp.

United States District Court, D. Oregon

February 13, 2015

IONIAN CORP., an Oregon corporation, Plaintiff,
COUNTRY MUTUAL INSURANCE CORPORATION, a foreign corporation, Defendant/Interpleader Plaintiff
IONIAN CORP., an Oregon corporation, PRECISION SEED CLEANERS, INC., an Oregon corporation, Interpleader Defendants

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[Copyrighted Material Omitted]

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For Plaintiff: Gordon T. Carey, Attorney at Law, Portland, Oregon.

For Precision Seed Cleaners, Inc., Interpleader Defendant: Frederick M. Millard, Douglas M. Bragg, Oregon City, Oregon.

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Marco A. Hernandez, United States District Judge.

Following entry of Judgment in favor of Precision Seed Cleaners and against Ionian Corporation, both parties appealed certain rulings to the Ninth Circuit. In an unpublished Memorandum Disposition filed May 12, 2014, that Court affirmed in

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part, reversed in part, and remanded the case back to this Court. Ionian Corp. v. Country Mut. Ins. Co., 572 F.App'x 513 (9th Cir. 2014). One of the issues on appeal was this Court's denial of Ionian's motion to amend its crossclaims against Precision Seed to assert a new claim of unjust enrichment. The Ninth Circuit reversed that ruling and remanded to this Court to grant Ionian leave to add the unjust enrichment crossclaim. The mandate issued on June 9, 2014.

On July 11, 2014, Ionian filed its amended pleading asserting its unjust enrichment crossclaim against Precision Seed.[1] Precision Seed moved against the crossclaim. At an October 8, 2014 hearing, I granted Precision Seed's motion in part and denied it in part. See Oct. 8, 2014 Min. Ord. [ECF 229]. I ordered Ionian to file an amended crossclaim, which it did on October 16, 2014.[2]

Precision Seed filed a responsive pleading on October 27, 2014.[3] ECF 232. Ionian now moves to strike, for a more definite statement as to, or for judgment on the pleadings regarding, some of the allegations and affirmative defenses asserted in Precision Seed's responsive pleading. For the reasons explained below, I grant the motion in part and deny it in part. I. New/Amended Unjust Enrichment Crossclaim

In its October 27, 2014 Answer, Precision Seed brings an unjust enrichment crossclaim against Ionian. Oct. 27, 2014 Ans. at ¶ ¶ 25-49. Prior to the filing of the October 27, 2014 Answer, Precision Seed's operative pleading was its Answer filed on May 24, 2011, entitled " Interpleader Defendant Precision Seed Cleaners, Inc.'s First Amended Answer to Interpleader, and Cross-Claims." ECF 87. There, Precision Seed brought five crossclaims against Ionian. Id. After summary judgment motions were resolved, only the unjust enrichment and conversion crossclaims remained at issue. On July 17, 2012, I granted Precision Seed's Second Motion for Partial Summary Judgment which effectively granted summary judgment to Precision Seed on its unjust enrichment crossclaim against Ionian.[4] Following that ruling, I granted Precision Seed's unopposed motion to dismiss its conversion crossclaim. Final Judgment in

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Precision Seed's favor was entered on August 29, 2012.

Several of the allegations in the October 27, 2014 Answer's crossclaim are identical to the crossclaim allegations in the May 24, 2011 Answer. Many of the allegations, however, are new. Oct. 27, 2014 Ans. at ¶ ¶ 25-37, 38-49. Generally, they raise issues concerning the appropriate distribution of the policy proceeds. Id.

Pursuant to Federal Rules of Civil Procedure 12(e) and (f), Ionian moves to strike, or for a more definite statement, several of the allegations in support of the new/amended unjust enrichment crossclaim brought by Precision Seed in its October 27, 2014 Answer. I grant the motion. Additionally, I strike all the allegations asserted by Precision Seed that were not in its May 24, 2011 Answer for the reason that Precision Seed did not have leave to amend its crossclaims.

The crossclaims brought by Precision Seed which survived summary judgment were either decided in Precision Seed's favor (the unjust enrichment crossclaim) or voluntarily dismissed by Precision Seed (the conversion claim). Before Judgment was entered, Precision Seed did not seek leave to amend its crossclaims before this Court. Other than contending that this Court erred in concluding that Ionian owned the warehouse at the time of the fire, Precision Seed pursued no issue related to its crossclaims before the Ninth Circuit. The remand from the Ninth Circuit was limited to two issues: (1) granting Ionian leave to add a crossclaim for unjust enrichment; and (2) determining each parties' insured financial interest in the proceeds and awarding them accordingly. 572 F.App'x 513. Precision Seed has not requested leave to amend its crossclaims since the Ninth Circuit remanded the case to this Court.

While the parties' pleadings are technically answers to the interpleader claim, no claims remain in the case other than the only claim the Ninth Circuit ordered be allowed: Ionian's unjust enrichment claim against Precision Seed. Thus, any amendment to the allegations answering the interpleader claim or any amendment by Precision Seed to its previously-asserted crossclaims, is inconsistent with the procedural posture of the case and the Ninth Circuit's limited remand issues. Therefore, I strike all the allegations in support of the new/amended crossclaim Precision Seed brings in its October 27, 2014 Answer to the extent the allegations vary from the previously-adjudicated unjust enrichment crossclaim brought in the May 24, 2011 Answer. The only new allegations that Precision Seed is able to bring in its Answer are affirmative defenses to the now-allowed unjust enrichment crossclaim brought by Ionian against Precision Seed upon remand by the Ninth Circuit.

II. Affirmative Defenses

Precision Seed asserts eight affirmative defenses in response to Ionian's unjust enrichment crossclaim. Ionian moves for judgment on the pleadings pursuant to Rule 12(c), or alternatively to strike under Rule 12(f), all of the affirmative defenses except the First Affirmative Defense (Failure to State a Claim) and the Eighth Affirmative Defense (Reservation of Rights). For the reasons explained below, I grant the motion in part and deny it in part.

A motion for judgment on the pleadings may be brought after the pleadings are closed but within such time as not to delay the trial. Fed.R.Civ.P. 12(c).[5]

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Rule 12(c) is " functionally identical" to Rule 12(b)(6) and " the same standard of review" applies to motions brought under either rule. United States ex rel. Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1054 n.4 (9th Cir. 2011) (internal quotation marks omitted). If matters outside the pleadings are presented to and not excluded by the court, the motion is to be treated as one for summary judgment. Fed.R.Civ.P. 12(d). " A judgment on the pleadings is properly granted when, taking all the allegations in the pleadings as true, the moving party is entitled to judgment as a matter of law." Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 713 (9th Cir. 2001) (internal quotation marks omitted). To survive a Rule 12(c) motion, " the complaint's factual allegations, together with all reasonable inferences, [must] state a plausible claim for relief." Cafasso, 637 F.3d at 1054 (citing Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)). The complaint must contain " well-pleaded facts" which " permit the court to infer more than the mere possibility of misconduct[.]" Iqbal, 556 U.S. at 679 (citing Fed.R.Civ.P. 8(a)(2)).

Under Rule 12(f), " a court may strike affirmative defenses . . . if they present an 'insufficient defense, or any redundant, immaterial, impertinent, or scandalous matter.'" Gessele v. Jack in the Box, Inc., No. 03:10-cv-00960-ST, 2011 WL 3881039, *1 (D. Or. Sept. 2, 2011) (quoting Rule 12(f)).

A. Second Affirmative Defense - Financial Interest Calculation & Offset

Ionian moves against the allegations in Paragraphs 59 and 60 of the Second Affirmative Defense in which Precision Seed contends that Ionian's interest in the insurance proceeds should be limited to the $330,000 " purchase price" agreed to by the parties in the original Purchase Agreement and reduced by payments Precision Seed made under that Purchase Agreement.[6] Oct. 27, 2014 Ans. at ¶ ¶ 59, 60. Ionian argues that in prior rulings by both this Court and the Ninth Circuit, Precision Seed has no claim under the Purchase Agreement and thus, any affirmative defense asserting any rights under the Purchase Agreement must be stricken, or Ionian is entitled to judgment on that defense. I agree with Ionian.

In her September 27, 2011 Findings & Recommendation (F& R) regarding summary judgment motions, Judge Stewart ruled against Precision Seed on its crossclaim alleging that Ionian breached the Purchase Agreement. One of the foundational issues before Judge Stewart was whether the Purchase Agreement between Ionian and Paul Kloft, owner of Precision Seed, or the Lease between Ionian and Precision Seed, controlled the parties' business relationship at the time of the fire. Ionian's Vice-President John Skourtes drafted the " Purchase Agreement" in December 2004. See Sept. 27, 2011 F& R at 5-7 (outlining history of

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parties' agreements and conduct regarding the property). The Lease was entered into on May 26, 2009. Id. at 7.

Judge Stewart rejected Precision Seed's argument that the Purchase Agreement was valid at the time of the fire. Id. at 15-18. She concluded that statutes regarding " Forfeiture Under Land Sale Contract," at Oregon Revised Statutes § § (O.R.S.) 93.905 - 93.945, did not apply because the " Purchase Agreement was not a land sale contract" subject to the Oregon statutes. Id. at 15-16. Instead, it was only a " preliminary sales agreement." Id. at 16. She explained:

Although the Purchase Agreement names the parties and describes the property and payment terms, it lacks many other provisions normally found in a land sale contract, such as maintenance obligations, remedies in the event of default or destruction, and insurance. More importantly, it specifically states that Ionian is only " prepared to sell," not " sells" or " is selling" the property and [it] requires the preparation of an " official real estate contract" on January 1, 2006, upon receipt of the balloon payment, and the " figures on this agreement will be incorporated in the real estate contract to reflect the outstanding balance as of 1 Jan 06." The Purchase Agreement is nothing more than an earnest money agreement providing for the later execution of a land sale installment contract. It contains sufficient essential terms to entitle the purchaser to specific performance. However, it is not a land sale contract subject to ORS 93.910.

Id. (citation omitted).

She then rejected Precision Seed's arguments that the Lease was invalid because of a lack of consideration and that it should be rescinded because of a mutual mistake of fact. Id. at 16-17. Addressing the second argument first, Judge Stewart made several observations and then stated that

Ionian and Mr. Kloft did not enter into a land sale contract in January 2006 as contemplated by the Purchase Agreement. As a result, the Purchase Agreement expired and was replaced with or merged into the Lease. Precision Seed challenges any termination of the Purchase Agreement due to the lack of any writing signed by the parties as required by the Statute of Frauds, ORS 41.580(e). However, as discussed above, the Purchase Agreement was merely an earnest money agreement [which] may be rescinded or superseded by an oral agreement without violating the Statute of Frauds. Regardless, a material term of the Purchase Agreement was not performed, resulting in its abandonment. The parties' relationship converted to a month-to-month tenancy until May 2009 when Ionian and Precision Seed ...

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