Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_06-cv-01383/USCOURTS-caed-1_06-cv-01383-5/pdf.json

Nature of Suit Code: 470
Nature of Suit: Civil (Rico)
Cause of Action: 18:1961 Racketeering (RICO) Act

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IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF CALIFORNIA

JOSE HERNANDEZ, individually )

and on behalf of all others )

similarly situated, )

)

)

)

Plaintiff, )

)

vs. )

)

)

LEO BALAKIAN, ANTHONY )

BALAKIAN, and VINCE BALAKIAN, )

)

)

Defendants. )

)

)

No. CV-F-06-1383 OWW/DLB

ORDER DENYING PLAINTIFF'S

MOTION TO STRIKE DEFENDANTS'

AFFIRMATIVE DEFENSES (Doc.

50)

Before the court is Plaintiff’s motion to strike pursuant to

Rule 12(f), Federal Rules of Civil Procedure, the seven 

affirmative defenses asserted by Defendants in their Answer to

Plaintiff’s First Amended Complaint (FAC).

The FAC is a class action for violation of the Racketeer

Influenced and Corrupt Organizations Act (RICO) on behalf of “all

legal hourly-paid workers, who have been employed by Fruit Patch,

Inc. of Reedley, California. The FAC alleges that Plaintiff “was

legally authorized to be employed in the U.S. when he was

employed by Fruit Patch, Inc., as an hourly paid farmworker”,

that his “wages as an agricultural worker for Fruit Patch, Inc.

were set by the Balakians at a level which was depressed as a

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direct result of the Illegal Hiring Scheme they perpetrated”, FAC

¶ 3, and that “if the Balakians were not hiring large numbers of

illegal immigrants, their business would have to pay the

Plaintiff Class significantly higher wages, and their profits

would be sharply reduced.” FAC ¶ 14. 

A. GOVERNING STANDARDS.

Rule 12(f), Federal Rules of Civil Procedure provides that

“the court may order stricken from any pleading any insufficient

defense or any redundant, immaterial, impertinent, or scandalous

matter.” 

Rule 8(b), Federal Rules of Civil Procedure, provides that

“[a] party shall state in short and plain terms the party’s

defenses to each claim asserted ....” Rule 8(c) requires the

affirmative pleading of 19 separate defenses and of “any matter

constituting an avoidance or affirmative defense.” 

“Affirmative defenses plead matters extraneous to the

plaintiff’s prima facie case, which deny plaintiff’s right to

recover, even if the allegations of the complaint are true.” 

FDIC v. Main Hurdman, 655 F.Supp. 259, 262 (E.D.Cal.1987), citing

Gomez v. Toledo, 446 U.S. 635, 640-641 (1980). “The key to

determining the sufficiency of pleading an affirmative defense is

whether it gives plaintiff fair notice of the defense.” Wyshak

v. City National Bank, 607 F.2d 824, 827 (9 Cir.1979), citing th

Conley v. Gibson, 355 U.S. 41 (1957). As explained in Wright &

Miller, Federal Practice and Procedure: Civil 3d § 1381, pp. 421-

425:

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Motions to strike a defense as insufficient

are not favored by the federal courts because

of their somewhat dilatory and often

harassing character. Thus, even when

technically appropriate and well-founded,

Rule 12(f) motions often are not granted in

the absence of a showing of prejudice to the

moving party. Nonetheless, these motions are

a useful and appropriate tool when the

parties disagree only on the legal

implications to be drawn from uncontroverted

facts. But even when the defense seems to

present a purely legal question, federal

courts are very reluctant to determine

disputed or substantial issues of law on a

motion to strike; these questions quite

properly are viewed as best determined only

after further development by way of discovery

and a hearing on the merits, either on a

summary judgment motion or at trial.

B. MERITS OF MOTION.

1. FIRST AFFIRMATIVE DEFENSE.

As the First Affirmative Defense, the Complaint alleges

“Plaintiff fails to state a claim upon which relief may be

given.”

Plaintiff, citing Quintana v. Baca, 233 F.R.D. 562, 563

(C.D.Cal.2005), contends that a failure to state a claim upon

which relief can be granted is not a valid affirmative defense. 

Quintana v. Baca held:

The Court agrees with the plaintiff that this

defense is not an affirmative defense that

must be pled or waived. Nor all contentions

that attack a plaintiff’s cause of action are

affirmative defenses. Rather, a defense is

an affirmative defense if it will defeat the

plaintiff’s claim even where the plaintiff

has stated a prima facie case for recovery

under the applicable law ... The first

affirmative defense directly attacks the

merits of the plaintiff’s case, and therefore

is not subject to the requirements of

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Fed.R.Civ.P., Rule 8(c).

However, Rule 12(h)(2), Federal Rules of Civil Procedure,

provides:

A defense of failure to state a claim upon

which relief can be granted ... may be made

in any pleading permitted or ordered under

Rule 7(a), or by motion for judgment on the

pleadings, or at the trial of the merits.

One of the pleadings permitted by Rule 7(a) is an Answer. 

Consequently, Quintana’s reasoning is legally inaccurate and not

persuasive. Plaintiff’s motion to strike the First Affirmative

Defense on this ground is DENIED.

Plaintiff further moves to strike the First Affirmative

Defense because the Order filed on March 27, 2007 concluded that

Plaintiff had stated a claim upon which relief can be granted

under RICO. Therefore, Plaintiff contends, this ruling is now

law of the case. See Christianson v. Colt Industries Operating

Corp., 486 U.S. 800, 815-816 (1988)(‘As most commonly defined,

the doctrine of the law of the case posits that when a court

decides upon a rule of law, that decision should continue to

govern the same issues in subsequent stages in the same case”).

Defendants respond that the March 27, 2007 Order does not

preclude the First Affirmative Defense because the Court has not

been asked to rule on the sufficiency of the allegations of the

First Amended Complaint. Further, referring to Jones v. Tozzi,

2006 WL 2472752 (E.D.Cal.2006), Defendant argues that Plaintiff’s

implicit assumption that the law of the case doctrine precludes a

challenge to an amended complaint when the original complaint has

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survived a motion to dismiss, is incorrect.

Plaintiff replies that Defendants should have brought a Rule

12(b)(6) motion to challenge the sufficiency of the First Amended

Complaint and further notes that the plaintiff in Jones v. Tozzi

made substantially different allegations in his amended

complaint.

The motion to strike the First Affirmative Defense is

DENIED. There is no prejudice to Plaintiff.

2. SECOND AND THIRD AFFIRMATIVE DEFENSES.

The Second Affirmative Defense alleges: “Plaintiff has not

sustained damages as alleged in the Amended Complaint.” The

Third Affirmative Defense alleges: “Plaintiff has not suffered

any injury proximately cause by any conduct alleged in the

Amended Complaint under the Racketeer Influenced and Corrupt

Organizations Act.”

Plaintiff moves to strike these affirmative defenses on the

ground that they merely deny the allegations in the First Amended

Complaint that Plaintiff must prove to prevail on his claims. 

Defendants argue that these affirmative defenses should not

be stricken because they are not “immaterial, impertinent, or

scandalous”, their presence in the Answer does not prejudice

Plaintiff in any way, and whether notice of these defenses should

be in the Answer “is an example of unnecessary formalism.”

While it appears that Plaintiff’s position is legally

correct, it also appears that Plaintiff’s motion with regard to

these affirmative defenses is, as Defendant asserts, an

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“unnecessary formalism” wasting the time and resources of the

parties and the Court. The motion is DENIED without prejudice to

resolution by dispositive motion.

3. FOURTH AFFIRMATIVE DEFENSE.

The Fourth Affirmative Defense alleges: “Plaintiff’s claims

are barred, in whole or in part, because at all times during his

employment plaintiff was paid a lawful wage and a wage for which

he agreed to work.” 

Plaintiff argues that the Fourth Affirmative Defense should

be stricken because the fact that he was paid a legal wage will

not defeat the RICO claim, as is required for a valid affirmative

defense. See discussion supra. The FAC does not allege that the

wage paid to Plaintiff was not “legal” but, rather, that the wage

was lower than it would have been had Defendants not hired

illegal aliens. Plaintiff contends that the fact he agreed to

work at a legal wage does not defeat the RICO claim because the

RICO claim cannot be waived or defeated by Plaintiff’s conduct.

Plaintiff cites case authority that broad common law

defenses such as unclean hands are not recognized in actions

under federal statues, such as antitrust and securities fraud.

In Perma Life Mufflers, Inc. v. International Parts Corp.,

392 U.S. 134, 138 (1968), the Supreme Court held:

There is nothing in the language of the

antitrust acts which indicates that Congress

wanted to make the common-law in pari delicto

doctrine a defense to treble-damages actions

... We have often indicated the

inappropriateness of invoking broad commonlaw barriers to relief where a private suit

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serves important public purposes.

In Bateman Eichler, Hill Richards, Inc. v. Berner, 472 U.S. 299

(1985), the District Court dismissed an action by investors for

violation of Section 10(b) of the Securities Exchange Act and

Rule 10b-5, on the ground that, because the investors themselves

had violated the same laws under which recovery was sought by

trading on inside information, they were in pari delicto and thus

were barred from recovery. The Ninth Circuit reversed the

District Court. The Supreme Court affirmed the Ninth Circuit,

holding in pertinent part:

Nothing in Perma Life suggested that public

policy considerations should govern only

where Congress expressly provides for private

remedies; the classic formulation of the in

pari delicto doctrine itself required a

careful consideration of such implications

before allowing the defense ... Moreover, we

repeatedly have emphasized that implied

private actions provide ‘a most effective

weapon in the enforcement’ of the securities

laws and are ‘a necessary supplement to

Commission action.’ ... In addition, we have

eschewed rigid common-law barriers in

construing the securities laws ... We

therefore conclude that the views expressed

in Perma Life apply with full force to

implied causes of action under the federal

securities laws. Accordingly, a private

action for damages in these circumstances may

be barred on the grounds of the plaintiff’s

own culpability only where (1) as a direct

result of his own actions, the plaintiff

bears at least substantially equal

responsibility for the violations he seeks to

redress, and (2) preclusion of suit would not

significantly interfere with the effective

enforcement of the securities laws and

protection of the investing public. 

472 U.S. at 310-311. 

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Plaintiff acknowledges that neither the Ninth Circuit or the

Supreme Court have considered the applicability of the Perma Life

line of cases to a private claim for violation of RICO. 

Plaintiff cites In re National Mortgage Equity Corp. Mortgage

Pool Certificates Securities Litigation, 636 F.Supp. 1138, 1156

(C.D.Cal.1986):

This argument although not framed as such is,

in essence, the assertion of the in pari

delicto defense and can be answered by

another analogy to antitrust law. The

Supreme Court has held that the common law

doctrine of in pari delicto is not a defense

in antitrust treble damage actions. Perma

Life Mufflers, Inc. v. International Parts

Corp., 392 U.S. 134 ... (1968). The Court

cautioned against ‘invoking broad common-law

barriers to relief where a private suit

serves important public purposes.’ Id. at 138

... Thus, even though a plaintiff seeking

treble damages in an antitrust suit may be as

morally reprehensible as the defendant, his

suit nonetheless should be encouraged to

advance the predominant public policy in

favor of competition. Id. at 139 ....

The reasoning is equally applicable to RICO

treble damages actions. The fact, if it be a

fact, that B of A may to some extent be

embarking on this litigation with unclean

hands should not by itself prohibit the Bank

from bringing an action that otherwise

advances RICO’s broad anti-racketeering

policies. 

Plaintiff also cites the “Order re Affirmative Defenses” filed 

on February 23, 2004 in Mendoza v. Zirkle Fruit Company, No. CY00-3024-FVS, United States District Court for the Eastern

District of Washington:

COMMON LAW DEFENSES

The defendants allege the plaintiffs knew

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about the presence of illegal workers at both

Zirkle Fruit Company and Matson Fruit

Company. The defendants claim the plaintiffs

had a duty to report immigration violations

to their employers or to an appropriate

government agency. To the extent the

plaintiffs failed to do so, say the

defendants, they are barred from recovery by

the doctrines of contributory fault,

contributory negligence, waiver, consent,

acquiescence, ratification, estoppel, in pari

delicto, unclean hands, equal involvement,

payment, failure to mitigate, and/or

assumption of the risk. 

...

Neither the Supreme Court nor the Ninth

Circuit has decided whether the affirmative

defenses listed above may be invoked in a

civil RICO case. Case law in other circuits

is inconclusive. See, e.g., Sikes v.

Teleline, Inc., 281 F.3d 1350, 1366 n.41

(11 Cir.2002)(positing that a gambler might th

be barred by the doctrine of unclean hands

from bringing a civil RICO claim predicated

on illegal gambling because it takes two

parties to gamble); Roma Const. Co. v.

aRusso, 96 F.3d 566, 575 (1 Cir.1986)(even st

if RICO’s civil remedies are limited to

innocent parties, the district court erred by

dismissing the plaintiffs’ claims); Northeast

Women’s Ctr., Inc. v. McMonagle, 868 F.2d

1342, 1355-56 (3 Cir.)(unclean hands rd

doctrine inapplicable where plaintiff’s

unlawful conduct was insufficiently related

to the litigation), cert. denied, 493 U.S.

901 ... (1989). Since the law in this area

is unsettled, district courts have looked to

antitrust cases for guidance. See, e.g., In

re National Mortgage Equity Corp. Mortgage

Pool Cert. Sec. Litig., 636 F.Supp. 1138,

1156) (C.D.Cal.1986). The defendants

challenge the validity of the analogy to

antitrust cases. They submit the policy

considerations that drive antitrust

jurisprudence are much different from the

policy considerations that drive civil RICO

jurisprudence. The defendants’ argument is

not without merit. There are significant

differences between the Clayton Act and RICO. 

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See Loren E. Kalish, Comment, Plaintiffs in

Complicity: Should there be an innocent party

requirement for civil RICO actions?, 47 Emory

L.J. 785, 802-08 (1998). However, even if

the analogy to the Clayton Act is imperfect,

Roma Constr. Co., 96 F.3d at 583 (Lynch, J.,

concurring), the fact remains that the

Supreme Court has relied upon Clayton Act

cases when interpreting RICO. Id. at 581;

Imagineering, Inc. v. Kiewit Pacific Co., 976

F.2d 1303, 1311 (9 Cir.1992), cert. denied, th

507 U.S. 1004 ... (1993). Given this wellestablished practice, antitrust jurisprudence

appears to provide the best guidance with

respect to the Supreme Court’s likely

response to a request to incorporate commonlaw defenses into civil RICO actions.

One of the common-law defenses that has been

discussed in federal antitrust cases is the

defense of in pari delicto, which means

literally ‘of equal fault.’ ... In Perma

Life, the Supreme Court held that Congress

did not intend to incorporate this defense

into antitrust laws. ‘We have often

indicated,’ said the Supreme Court, ‘the

inappropriateness of invoking broad commonlaw barriers to relief where a private suit

serves important public purposes.’ ... 

Despite this observation, five Justices

opined, in separate opinions, ‘that where a

plaintiff truly [bears] at least

substantially equal responsibility for the

violation, a defense based on such fault –-

whether or not denominated in pari delicto –-

should be recognized in antitrust

litigation.’ Batemen Eichler, Hill Richards,

Inc. v. Berner, 472 U.S. 299, 308-09 ...

(1985) ... In Bateman Eichler, the Supreme

Court addressed the issue that had been left

open in Perma Life. It held a private action

for damages based upon the violation of

federal securities laws may be barred on the

grounds of the plaintiff’s own culpability if

the defendant proves ‘(1) as a direct result

of his own actions, the plaintiff bears at

least substantially equal responsibility for

the violations he seeks to redress, and (2)

preclusion of suit would not significantly

interfere with the effective enforcement of

the securities laws and protection of the

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investing public.’ Id. at 310-11 ... The

Supreme Court continues to adhere to the

Bateman Eichler test. Pinter v. Dahl, 486

U.S. 622, 633-35 ... (1988).

Assuming the Supreme Court continues to look

to antitrust cases when interpreting RICO, it

is unlikely the Supreme Court will approve

the broad common-law barriers to relief

proposed by the defendants. Consequently,

the affirmative defenses listed above will be

stricken. This is not to say the plaintiffs’

behavior as job applicants and employees is

irrelevant. It seems likely that, in actions

such as this, the Supreme Court will adopt

the Bateman Eichler test, or some variation

thereon. Whether the defendants will be able

to qualify for a jury instruction based on

Bateman Eichler is doubtful, but not

impossible. Since it cannot be said as a

matter of law, that the defendants will be

unable to satisfy the requirements of Bateman

Eichler, the defendants will be allowed to

amend their answers to add this defense.

Relying on these cases, Plaintiff argues that the Fourth

Affirmative Defense must be stricken:

If the Balakian’s [sic] argument, that a

plaintiff consents, and therefore waives his

right to later sue, by purchasing something

at a anticompetitive price, then no antitrust

action could ever prevail, because this is

the factual scenario in the majority of

antitrust disputes ... Accordingly, the

agreement to purchase as good or service at

an anticompetitive price is not an antitrust

defense, and the same rule applies in RICO. 

Mr. Hernandez did not waive his right to

challenge his wage rate by accepting it.

Defendants respond that Plaintiff has misread the Fourth

Affirmative Defense because it does not pertain to waiver or

consent but to a “different and much broader point.” Defendants

assert:

The labor market in which both Plaintiff and

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In a footnote to the reply brief, Plaintiff argues that the 1

Fourth Affirmative Defense is ambiguous and should be stricken on

this basis. Because this ground was raised for the first time in

the reply brief, it is not considered.

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the Balakians participated is vast and is

highly regulated by the Federal Government

and the State of California. Plaintiff

effectively concedes that the Balakians

complied with all of these laws when

Plaintiff argues that the alleged wrong was

not that he was paid below applicable

statutory limits, but that the wage he was

paid was lower than it otherwise would have

been ... The Fourth Defense goes to any

claim, direct or indirect, that the payment

of wages was unlawful as a result of some

antecedent alleged wrongdoing. It is clearly

proper. As with the other defenses,

Defendant will be able to litigate this

defense even if stricken from the Answer. 

The Court should avoid flyspecking the

pleadings, permit discovery to identify the

precise issues for trial, and decline to

strike the Fourth Defense.

Plaintiff replies that, because Defendants did not respond

to the grounds asserted by Plaintiff for striking the Fourth

Affirmative Defense, i.e., it is not valid to defeat the RICO

claim, and a waiver defense is not available under RICO,

Defendants have conceded the validity of these grounds. 

Plaintiff further replies that Defendants’ position is really a

denial of fact and should be stricken as redundant.1

Because this is an unsettled area of the law Plaintiff’s

motion to strike the Fourth Affirmative Defense is DENIED. 

Whether the Fourth Affirmative Defense is valid will depend on

the development of facts through discovery, summary judgment

and/or trial. No prejudice results.

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Plaintiff asserts that the Eastern District of Washington 2

“strayed” from its prior holding in Mendoza v. Zirkle Fruit Co.

However, the two decisions were issued by different District Court

Judges. A District Court Judge is not bound by a decision of

another District Court Judge, even in the same district. 

13

4. FIFTH AFFIRMATIVE DEFENSE.

The Fifth Affirmative Defense alleges: “Assuming, arguendo,

that plaintiff sustained any injury, he failed to mitigate it.”

Plaintiff moves to strike the Fifth Affirmative Defense

because it fails to provide any real notice as to how Plaintiff

failed to mitigate his damages. 

Defendants respond that the Fifth Affirmative Defense

provides as much notice to Plaintiff as is available to

Defendants without discovery. Defendants assert that Plaintiff

could have sought to work for another employer if he wanted to

make more money and that the details of Plaintiff’s efforts will

be a subject for discovery.

Relying on the cases cited in connection with the Fourth

Affirmative Defense, Plaintiff further contends that failure to

mitigate is not a valid defense to a RICO claim.

However, as Plaintiff acknowledges and Defendants point out, 

the United States District Court for the Eastern District of

Washington recognized a failure to mitigate affirmative defense

to a civil RICO action in Marin v. Evans, 2007 WL 655456

(E.D.Wash.2007).2

In Marin v. Evans, the District Court refused to strike the

affirmative defense of duty to mitigate:

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Plaintiffs argue that a duty to mitigate

defense cannot be asserted against a RICO

claim. RICO prohibits individuals or

enterprises from engaging in a pattern of

racketeering activity ... The purpose of RICO

is to protect: (1) lawful enterprises from

being utilized by individuals for unlawful

purposes; and (2) the public from individuals

who would use an enterprise as a tool to

facilitate illegal activity ....

The Court did not find any federal case law

dealing with the precise issue of whether a

duty to mitigate is a legally sufficient

defense against a RICO claim. Generally,

when there is an unsettled area in RICO law,

the federal courts can turn to antitrust law

for guidance. Imagineering, Inc. v. Kiewit

Pacific Co., 976 F.2d 1303, 1311 (9th

Cir.1992). In dealing with the question of

whether broad common law defenses are allowed

in antitrust claims, the courts examine

whether the common law defense controverts

the primary purposes underlying the

particular federal statute in question. 

Perma Life Mufflers, Inc. v. Int’l Parts

Corp. ....

Plaintiffs cite to Perma Life and Bateman

Eichler, Hill Richards, Inc. v. Berner ....

for the proposition that a failure to

mitigate ‘is not a recognized affirmative

defense to RICO claims.’ In Perma Life, the

Supreme Court rejected the idea that courts

have the power to undermine the antitrust

acts by denying recovery to injured parties

merely because they were in pari delicto ...

There, the Supreme Court indicated that it

would be inappropriate to invoke broad

common-law barriers to relief where a private

suit served important purposes ... More

importantly, however, the Court reserved

ruling on whether truly complete involvement

and participation could be a basis for

barring a plaintiff’s antitrust action

because the record before the Court did not

support such a finding ....

In so ruling, the Supreme Court in Perma Life

implied that a factual inquiry would be

necessary to determine whether an affirmative

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defense based on the plaintiff’s culpability

could be asserted against an antitrust claim. 

This conclusion finds further support in

Bateman. Indeed, the Supreme Court in

Bateman explicitly held that a [sic] in pari

delicto [sic] could be asserted in a federal

securities case when certain factual

circumstances were present ....

Moreover, other circuits have recognized the

affirmative defense of failure to mitigate in

claims brought under federal statutes. See

In re Visa Check/MasterMoney Antitrust

Litigation, 280 F.3d 124, 149-50 (2nd

Cir.2001)(noting that a duty to mitigate in

antitrust claims serves the important purpose

of preventing plaintiffs from seeking treble

damages and profiting by refusing to

mitigate)(Jacobs, CJ., dissenting); Fishman

v. Estate of Wirtz, 807 F.2d 520, 559 (7th

Cir.1987)(the plaintiff is required to

mitigate damages, but the plaintiff is not

required to engage in undue risk to

mitigate); Litton Systems v. AT&T, 700 F.2d

785, 820 n.47 (2 Cir.1983)(stating without nd

explanation that a defendant has a duty to

mitigate in an antitrust claim); see also

Bieter Co. v. Blomquest, 987 F.2d 1319, 1329

(8 Cir.1993)(appearing to operate under the th

assumption that a duty to mitigate is a valid

defense in RICO claims).

Here, there is no case law on point that

directly supports the argument that the Court

should rule, as a matter of law, that the

affirmative defense of failure to mitigate

can never be asserted in a civil RICO claim. 

Even if the Court were to analogize to an

antitrust case, those cases relied upon by

Plaintiffs do not establish that such an

affirmative defense can never be asserted as

a matter of law. Instead, these cases

support the conclusion that the Court should

consider the facts of the case in determining

whether a defendant can assert an affirmative

defense at trial. Thus, the Court declines

to strike this affirmative defense at this

stage in the proceedings.

Plaintiffs argue that the law regarding application of the

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failure to mitigate defense is “unclear” and that Marin is

wrongly decided. Plaintiff asserts that “most” of the cases

cited in Marin as allowing the defense in an antitrust case

predate Bateman Eichler.

Plaintiff’s position is without merit. Bateman Eichler was

decided in 1985. Only one of the cases cited in Marin was

decided before Bateman Eichler. Further, as Marin notes, Bateman

Eichler does not preclude the in pari delicto defense in a

securities violation case as a matter of law.

Plaintiff further argues that Bieter Co. v. Blomquest,

supra, 987 F.2d at 1329, cited in Marin, does not actually hold

that failure to mitigate is an available affirmative defense to a

civil RICO claim. The Eighth Circuit, discussing RICO’s

requirement of injury to “business or property”, held:

Other courts have recognized that civil RICO

is ‘a statutory tort remedy - simply one with

particularly drastic remedies’ ... It

follows, then, that limitations on damages

suggested by tort law would also apply to

civil RICO. Defendants’ arguments that

Bieter’s failure to reapply results in no

cognizable injury under RICO would be better

made to a jury under the rubric of failure to

mitigate damages ... Through we find that

Bieter was injured, a jury would certainly be

expected to consider evidence of the

potential uses of Bieter’s property that may

not have been pursued, as opposed to simply

granting damages for the difference between

the undeveloped and developed property

values.

Plaintiff further argues that Bhan v. NME Hospitals, Inc.,

669 F.Supp. 998, 1014 (E.D.Cal.1987), aff’d, 929 F.2d 1404 (9th

Cir.1991), cited by Defendants in opposition to Plaintiff’s

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motion, does not recognize the affirmative defense of failure to

mitigate in an antitrust action:

Bhan has demonstrated without a doubt that he

suffered actual damages as a result of the

alleged conspiracy of the defendants. The

conduct in issue destroyed Bhan’s business at

Manteca Hospital, causing him to lose all

that he would have made at the Hospital

absent the decision to prohibit nurse

anaesthetists from providing anesthesia. The

fact that Bhan was able to mitigate his

damages by successfully creating another

business does not negate the fact that he

sustained damages. Indeed, the principle of

mitigation of damages presumes that there are

damages to mitigate. To provide an antitrust

violator immunity from suit simply because

the victim successfully mitigates his damages

would undermine the antitrust laws’ broad

goal of restraining anticompetitive conduct.

Given the unsettled state of the law and the holding in

Bateman Eichler, Plaintiff’s motion to strike the Fifth

Affirmative Defense is DENIED. Failure to mitigate does not

negate the claim; rather it requires that the claimant not act or

omit to unjustifiably increase damages. Whether the Fifth

Affirmative Defense is valid will depend on the development of

facts through discovery, summary judgment and/or trial.

5. Sixth Affirmative Defense.

The Sixth Affirmative Defense alleges: “To the extent that

plaintiff alleges that this is a class action, the prerequisites

to a class action provided by Fed.R.Civ.P Rule 23(a) do not exist

in this action.” 

Plaintiff moves to strike on the ground that this is not a

valid affirmative defense. Plaintiff notes that Rule 23(c)(1)(A)

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provides that class certification must occur “at an early

practicable time”. Therefore, the issue of class certification

will be decided before resolution of the merits of this action

and will not defeat Plaintiff’s underlying RICO claim.

Defendants respond that the Sixth Affirmative Defense “is a

short and plain way of emphasizing that the prerequisites for

class certification and whether Plaintiff can meet them is a

significant issue.” Because, Defendants contend, Plaintiff is

not prejudiced by the Sixth Affirmative Defense, it should not be

stricken.

This is not an affirmative defense. The issue will be

resolved in Rule 23 certification proceedings. Nonetheless,

there is no prejudice to Plaintiff and striking this affirmative

defense is an empty formalism. Therefore, Plaintiff’s motion to

strike is DENIED.

6. Seventh Affirmative Defense.

The Seventh Affirmative Defense alleges: “To the extent that

plaintiff seeks to pursue any claims beyond the applicable

statute of limitations period, those claims may be barred by a

statute of limitations defense.”

Plaintiff seeks to strike this affirmative defense as

“frivolous.” The statute of limitations for civil RICO is four

years. Agency Holding Corp. v. Malley-Duff & Assoc., 483 U.S.

143, 156 (1987). Plaintiff asserts the FAC alleges that

Defendants violated civil RICO continuously, starting in 2002. 

This action was commenced on October 5, 2006. 

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Pincay notes that the “injury discovery” rule has not been 3

overruled by the Supreme Court although the Supreme Court has

explicitly reserved the question of whether the standard is

correct. Id., at n.3, citing Rotella v. Wood, 528 U.S. 549, 554

n.2 (2000).

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However, as Defendants note, the FAC does not specifically

allege that the Illegal Hiring Scheme commenced in 2002. 

Paragraph 25 of the FAC alleges: “The Scheme is ongoing, openended, and has been perpetuated continuously for the last four

years.” 

In opposition, Defendants cite Pincay v. Andrews, 238 F.3d

1106 (9 Cir.), cert. denied, 534 U.S. 885 (2001): th

We have continuously followed the ‘injury

discovery’ statute of limitations rule for

civil RICO claims ... Under this rule, ‘the

civil RICO limitations period begins to run

when a plaintiff knows or should know of the

injury that underlies his cause of action.’

... Thus, the ‘injury discovery’ rule creates

a disjunctive two-prong test of actual or

constructive notice, under which the statute

begins running under either prong.

Id., at 1109. In addition, “a new cause of action accrues for 3

each new and independent injury, even if the RICO violation

causing the injury happened more than four years before.” 

Grimmett v. Brown, 75 F.3d 506, 510 (9 Cir.1996). th

In Marin v. Evans, supra, 2006 WL 655456, the District Court

ruled:

Plaintiffs argue that Defendants’ statute of 

limitation defense is legally insufficient as

a matter of law and should be stricken ...

The Ninth Circuit follows the ‘injury

discovery’ rule which has two components. 

Grimmett v. Brown, 75 F.3d 506, 510-512 (9th

Cir.1996). First, the four year statute of

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limitations period begins to run when a

plaintiff knows, or should have known of his

or her injury. Id. at 510. Second, ‘a new

cause of action accrues for each new and

independent injury, even if the RICO

violation causing the injury happened more

than four years before.’ Id.

Plaintiffs’ complaint alleges that

‘defendants have depressed their wages by

knowingly employing vast numbers of illegal

immigrants, more than 5,000 in the last four

years.’ ... Plaintiffs’ complaint was filed

on September 29, 2006. Given that it is

possible that there may be questions of fact

regarding when Plaintiffs knew about the

injury, and whether Plaintiffs are relying on

the ‘new and independent injury’ to assert

the basis for the RICO violations that

occurred prior to 2002, it is premature to

strike this affirmative defense at this stage

of the proceedings.

Defendants argue that the Marin rationale applies to

Plaintiff’s motion to strike the Seventh Affirmative Defense:

“Given the apparent absence of any ‘new and independent’ injury,

there may definitely be questions of fact when Plaintiff knew or

should have known about his alleged injury and the relationship

of that injury to any conduct falling within the limitations

period.” Defendants note also that Plaintiff’s discovery

requests seek information for the past ten years.

Plaintiff responds that Defendants’ reliance on Marin is

misplaced because Marin omitted any discussion of Trollinger v.

Tyson Foods, Inc., 2006 WL 319022 (E.D.Tenn.2006). Plaintiff’s

counsel represents that he was counsel for the Plaintiff in

Marin. Plaintiff’s counsel represents: “The issue of the

‘discovery rule’ was not briefed (or raised) by either side in

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Marin v. Evans. If the issue was raised, Plaintiffs would have

referred the Court to Trollinger v. Tyson Foods, Inc., which

decided this exact issue in the context of a motion for summary

judgment.”

However, the Plaintiff in Marin did move to strike the

statute of limitations affirmative defense. Although the

Defendant in Marin did not respond, it is apparent that the

District Court conducted its own research concerning the position

of the Ninth Circuit.

In Trollinger v. Tyson Foods, Inc., the District Court

analyzed whether the “separate accrual” rule should be applied. 

After noting that a number of Circuit Courts of Appeal, including

the Ninth Circuit in Grimmett v. Brown, supra, 75 F.3d 506, 512,

apply the “separate accrual” in civil RICO actions, the District

Court ruled:

The question remains whether the separate

accrual rule applies in this action. 

Plaintiffs’ theory is that Tyson engaged in

an illegal immigrant hiring scheme in which

Tyson allegedly hired illegal aliens which in

turn depressed the wages that legal U.S.

citizens could earn by working at Tyson. 

They argue that each time Tyson hired an

illegal immigrant, such hiring constituted a

new and independent injury causing

independent damages. The Court agrees that,

based on Plaintiffs’ alleged theory and

viewing the facts in the light most favorable

to Plaintiffs, each time Tyson unlawfully

hired an illegal immigrant, the Plaintiffs

sustained an injury to their business.

Plaintiff, relying on this ruling, argues that “because the

Amended Complaint alleges injury caused by conduct (illegal

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Defendants’ Answer also “reserve[s] the right to add any 4

additional defenses, cross-claims, and/or to amend this Answer to

the First Amended Complaint.” Plaintiff contends that Defendants

have waived any affirmative defenses not raised in the Answer,

citing Roberts v. College of the Desert, 870 F.2d 1411, 1414 (9th

Cir.1988). Roberts held that “the statute of limitations is an

affirmative defense which was not specially pleaded in the district

court and cannot be raised for the first time on appeal.” Roberts

does not preclude Defendants from amending their Answer to allege

additional affirmative defenses. Plaintiff further contends that

Defendant must seek leave of court to amend the Answer pursuant to

Rule 15(a), Federal Rules of Civil Procedure. This issue is not

relevant to resolution of the motion to strike and is not addressed

further. 

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hiring) occurring within the last four years ..., the fact that

illegal hiring may have begun more than four years ago does not

bar [Plaintiff’s] claim.”

Plaintiff cited Trollinger in his reply brief. Therefore,

Defendants have not had the opportunity to address it. This

Court is not bound by Trollinger’s ruling and, as noted, the

ruling was made at summary judgment, not in the context of a

motion to strike an affirmative defense. The underlying facts

are not developed. Striking the Seventh Affirmative Defense may

be premature. The validity of the defense should be determined

by dispositive motion. The motion to strike the Seventh 4

Affirmative Defense is DENIED.

CONCLUSION

For the reasons stated above, Plaintiff’s motion to strike

affirmative defenses is DENIED.

IT IS SO ORDERED.

Dated: June 1, 2007 /s/ Oliver W. Wanger 

668554 UNITED STATES DISTRICT JUDGE

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