Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_12-cv-00914/USCOURTS-azd-2_12-cv-00914-0/pdf.json

Nature of Suit Code: 450
Nature of Suit: Interstate Commerce
Cause of Action: 15:0045 Federal Trade Commission Act

---

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Federal Trade Commission

Plaintiff, 

v. 

North America Marketing and Associates, 

LLC, a Nevada limited liability company, et 

al.; 

Defendants and Relief 

Defendants. 

No. CV-12-0914-PHX-DGC

ORDER 

 Plaintiff Federal Trade Commission has filed a motion to strike affirmative 

defenses. Doc. 104. The motion is now ripe for decision. Doc. 104; Doc. 107; 

Doc. 114; Doc. 116; Doc. 119; Doc. 125; Doc. 126. For the reasons discussed below, the 

motion will be granted in part and denied in part. 

I. Background. 

 Plaintiff Federal Trade Commission has alleged that Defendants violated 15 

U.S.C. § 45(a), prohibiting unfair or deceptive acts or practices in or affecting commerce. 

15 U.S.C. § 45(a) (2006). Doc. 3, at 11-14. Specifically, Plaintiff alleges that 

Defendants were engaged in a common enterprise to deceptively market home-based 

Internet business opportunities and accompanying marketing services. Doc. 3, at 8-11. 

Plaintiff alleges that Relief Defendants Sheila Ann Lowry, Carl Edward Morris, Jr., and 

Marketing Strategies, LLC, received funds that can be traced directly to Defendants’ 

deceptive practices and that each has no legitimate claim to the funds. Doc. 3, at 8. 

Case 2:12-cv-00914-DGC Document 150 Filed 10/18/12 Page 1 of 8
- 2 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

 In the various answers to the complaint, Defendants and Relief Defendants raise a 

number of affirmative defenses. Plaintiff moves to strike some of these defenses as 

addressed below. 

II. Legal Standard. 

 Plaintiff argues that Defendants’ affirmative defenses are not adequately pled 

under Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). Doc. 104-1, at 5. 

Defendants argue that the factual basis and showing of plausibility required by Twombly

do not apply to affirmative defenses. Doc. 107, at 5-6. The Ninth Circuit has not yet 

decided whether the pleadings standards of Twombly and Ashcroft v. Iqbal, 556 U.S. 662 

(2009), apply to affirmative defenses, but this Court has held that they do not. See G & G 

Closed Circuit Events, LLC, v. Mitropoulos, No. CV12-0163-PHX DGC, 2012 WL 

3028368, at *1 (D. Ariz. July 24, 2012); Ameristar Fence Products, Inc. v. Phoenix 

Fence Co., No. CV10-299-PHX DGC, 2010 WL 2803907, at *1 (D. Ariz. July 15, 2010). 

The Court will “leave any extension of Twombly to the Supreme Court or the Ninth 

Circuit.” G & G Closed Circuit Events, 2012 WL 3028368, at *1. 

 But this does not absolve Defendants of all pleading requirements. Ninth Circuit 

precedent requires that Defendants’ pleading give “fair notice” of the affirmative defense 

to Plaintiff. Wyshak v. City Nat’l Bank, 607 F.2d 824, 827 (9th Cir. 1979). “Fair notice 

generally requires that the defendant state the nature and grounds for the affirmative 

defense.” Kohler, 280 F.R.D. at 564. Further, an affirmative defense may be legally 

insufficient if it clearly lacks merit under any set of facts the defendant might allege, or 

does not plead matters extraneous to the plaintiff’s prima facie case which deny the 

plaintiff’s right to recover, even if the allegations of the complaint are true. Id.; Federal 

Deposit Ins. Corp. v. Main Hrudman, 655 F. Supp. 259, 262 (E.D. Cal. 1987). 

III. Discussion. 

A. Failure to State a Claim Upon Which Relief May Be Granted. 

 Defendants North American Marketing and Associates, LLC, NAMAA, LLC, TM 

Multimedia Marketing, LLC (Nevada), National Opportunities, LLC (Nevada), World 

Case 2:12-cv-00914-DGC Document 150 Filed 10/18/12 Page 2 of 8
- 3 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

Wide Marketing and Associates, LLC, Wide World of Marketing, LLC, Precious Metals 

Resource, LLC, Superior Multimedia Group, LLC, Joseph Wayne Lowry, and Relief 

Defendant Sheila Ann Lowry (collectively “the Lowry Defendants”) assert the 

affirmative defense of failure to state a claim upon which relief can be granted. Doc. 89, 

at 12. Defendants Daniel Vigil and National Opportunities (collectively “the Vigil 

Defendants”) assert this defense as well. Doc. 93, at 7; Doc. 94, at 7. “Failure to state a 

claim is not a proper affirmative defense but, rather, asserts a defect in [Plaintiff’s] prima 

facie case.” Barnes v. AT & T Pension Ben. Plan—Nonbargained Program, 718 

F.Supp.2d 1167, 1176 (N.D. Cal. 2010) (citing Boldstar Tech, LLC v. Home Depot, Inc., 

517 F.Supp.2d 1283, 1291 (S.D. Fla. 2007)). The Court will strike the Lowry and Vigil 

Defendants’ affirmative defense of failure to state a claim upon which relief can be 

granted. 

B. Commercial Speech. 

 Plaintiff has challenged Defendants’ speech as “false and or misleading.” 

Doc. 104-1, at 9. Defendant Birdsong asserts that any communication was “nondeceptive, and thus protected commercial speech under the U.S. Constitution.” Doc. 91, 

¶ XXVI. Defendant Birdsong’s affirmative defense is a factual disagreement with the 

merits of Plaintiff’s case and not the proper subject of an affirmative defense. The Court 

will strike Defendant Birdsong’s affirmative defense of commercial speech. 

C. Mootness. 

 The Lowry Defendants assert that Plaintiff’s claims are moot “to the extent that 

the challenged practices no longer occur or have never occurred.” Doc. 89, at 13. This 

defense is logically separable into two distinct parts: (1) that Plaintiff’s claims are moot 

because the challenged practices no longer occur, and (2) that Plaintiff’s claims are moot 

because the challenged practices never occurred. 

 Addressing part 1, the cessation of activities may have some effect on the scope of 

the allowed remedies. See FTC v. Bronson Partners, LLC, No. 3:04CV1866(SRU), 2006 

WL 197357, at *3 (D. Conn. Jan. 25, 2006)(refusing to strike an affirmative defense of 

Case 2:12-cv-00914-DGC Document 150 Filed 10/18/12 Page 3 of 8
- 4 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

mootness because the cessation of activities “may be relevant with respect to an 

appropriate remedy”). Here, the cessation of activities may be relevant to whether or not 

an injunction is granted. This part of the affirmative defense will not be stricken. 

 Part 2 is a factual argument that disputes Plaintiff’s claims and is not an 

appropriate subject of an affirmative defense. The Court accordingly will strike the 

language “or have never occurred” from the Lowry Defendants’ affirmative defense that 

the claims are moot. 

D. Estoppel, Waiver, or Laches. 

 The Vigil Defendants, the Lowry Defendants, and Defendant Carl Morris each 

assert that Plaintiff’s claims are barred by estoppel, waiver, or laches. Doc. 93, at 7; 

Doc. 94, at 7; Doc. 89, at 12; Doc. 86, at 6-7. These defenses contain no reference to 

supporting facts, see Doc. 93, at 7; Doc. 94, at 7; Doc. 89, at 12; Doc. 86, at 6-7, and thus 

provide no notice concerning the basis of the defenses. See Desert European Motorcars, 

LTD v. Desert European Motorcars, Inc., No. EDCV 11-197 RSWL, 2011 WL 3809933, 

at **2-4 (C.D. Cal. Aug. 25, 2011) (granting a motion to strike affirmative defenses of 

estoppel, waiver, and laches for failure to state any facts that provide fair notice). The 

Court will strike the Lowry and Vigil Defendants’ and Defendant Carl Morris’ 

affirmative defenses of estoppel, waiver, or laches. 

E. Unclean Hands. 

 The Lowry Defendants assert that Plaintiff’s claims are barred by the doctrine of 

unclean hands, Doc. 89, at 12, but provide no factual basis for the defense. See Kohler, 

280 F.R.D. at 571-72 (striking an affirmative defense of unclean hands for failure to state 

any facts that provide fair notice). The Court will strike the Lowry Defendants’ 

affirmative defense of unclean hands. 

F. Statute of Limitations. 

 The Lowry Defendants assert that Plaintiff’s claims are barred by the statute of 

limitations, Doc. 89, at 12, but do not identify the applicable statute of limitations. This 

does not provide fair notice to Plaintiff. See Wyshak, 607 F.2d at 827 (holding that citing 

Case 2:12-cv-00914-DGC Document 150 Filed 10/18/12 Page 4 of 8
- 5 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

the applicable statute of limitations provided fair notice of the defense). The Court will 

strike the Lowry Defendants’ affirmative defense of the statute of limitations. 

G. Mens Rea and Intent to Deceive. 

 The Vigil Defendants and Defendant Carl Morris assert that Plaintiff cannot prove 

mens rea and that Defendants acted with intent to deceive. Doc. 93, at 6; Doc. 94, at 6; 

Doc. 86, at 6. This affirmative defense, even if applicable to Plaintiff’s claims, is a mere 

factual disagreement with the claims. The Court will strike this affirmative defense 

without reaching the question of whether Plaintiff’s claims require mens rea or intent to 

deceive. 

H. Release. 

 The Vigil Defendants and Carl Morris both assert that Plaintiff’s claims are barred 

by the doctrine of release. Doc. 93, at 7; Doc. 94, at 7; Doc. 86, at 7. Neither Defendant 

provides any facts in support of the defense. Smith v. Walmart Stores, No. C06-2069 

SBA, 2006 WL 2711468, at **8-9 (N.D. Cal. Sept. 20, 2006) (citing Woodfield v. 

Bowman, 193 F.3d 354, 361 (5th Cir. 1999) and holding that “baldy naming the doctrine 

of release falls well short” of the fair notice standard). The Court accordingly will strike 

the Vigil Defendants’ and Defendant Carl Morris’ affirmative defense of release. 

I. Reservation of Rights. 

 The Vigil and Lowry Defendants reserve their rights to additional affirmative 

defenses. Doc. 93, at 8; Doc. 94, at 8; Doc. 89, at 12. “An attempt to reserve affirmative 

defenses for a future date is not a proper affirmative defense in itself. Instead, if at some 

later date defendants seek to add affirmative defenses, they must comply with Rule 15 of 

the Federal Rules of Civil Procedure. Defendants cannot avoid the requirements of 

Rule 15 simply by ‘reserving the right to amend or supplement their affirmative 

defenses.’” Solis v. Zenith Capital, LLC, No. C08-4854 PJH, 2009 WL 1324051, at *7 

(N.D. Cal. May 8, 2009) (citations omitted). The Court will strike the Vigil and Lowry 

Defendants’ reservation of the right to allege additional affirmative defenses. 

Case 2:12-cv-00914-DGC Document 150 Filed 10/18/12 Page 5 of 8
- 6 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

J. Non-parties at Fault. 

 The Lowry and Vigil Defendants assert that the alleged damages were caused by 

non-parties and/or required parties. Doc. 93, at 7; Doc. 94, at 7; Doc. 89, at 13. Neither 

provides any indication of who those parties might be. See Doc. 93, at 7; Doc. 94, at 7; 

Doc. 89, at 13. Though the Lowry Defendants argue in their response that the Relief 

Defendants should be included as true defendants, their answer makes no mention of this 

argument. “A ruling on a motion to strike affirmative defenses must be based on matters 

contained in the pleadings.” J & J Sports Productions, Inc. v. Jimenez, No. 10cv0866 

DMS (RBB), 2010 WL 5173717, at *1 (S.D. Cal. Dec. 15, 2010) (citing Kelly v. Kosuga, 

358 U.S. 516 (1959)). The Court will strike the Vigil and Lowry Defendants’ affirmative 

defense that the damages were caused by non-parties and/or required parties. See 

Security People, Inc. v. Classic Woodworking, LLC, No C-04-3133 MMC, 2005 WL 

645592, at *5 (N.D. Cal. March 4, 2005) (striking an affirmative defense of failure to join 

required parties because the defendant failed to name any required parties). 

K. Mitigation of Damages. 

 The Lowry and Vigil Defendants assert that Plaintiff failed to mitigate damages. 

Doc. 93, at 8; Doc. 94, at 8; Doc. 89, at 13. They allege no facts in support. Doc. 93, at 

8; Doc. 94, at 8; Doc. 89, at 13. Courts have split on whether additional facts are 

necessary to meet the fair notice standard. Compare Desert European Motorcars, LTD 

2011 WL 3809933, at *2 with Kohler, 280 F.R.D. at 570. In this case, the Court finds 

that more facts are needed. Though alleging failure to mitigate may provide Plaintiff fair 

notice in a typical contract suit, it is unclear what Plaintiff, the Federal Trade 

Commission, could have done to mitigate the damages arising out of the Federal Trade 

Commission Act (“FTC Act”) and the Telemarketing and Consumer Fraud and Abuse 

Prevention Act (“Telemarketing Act”). Because of this lack of clarity, Defendants must 

provide some explanation of their defenses if Plaintiff is to receive fair notice. The Court 

accordingly will strike the Lowry and Vigil Defendants’ affirmative defense of failure to 

mitigate. 

Case 2:12-cv-00914-DGC Document 150 Filed 10/18/12 Page 6 of 8
- 7 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

L. The Damages Sought Are Not Authorized by Law. 

 The Vigil and Lowry Defendants assert that the damages sought are not authorized 

by law. Doc. 93, at 8; Doc. 94, at 8; Doc. 89, at 13. In its complaint, Plaintiff requests 

“temporary, preliminary, and permanent injunctive relief, rescission or reformation of 

contracts, restitution, the refund of monies paid, disgorgement of ill-gotten monies, and 

other relief[.]” 15 U.S.C. §§ 53(b) and 57(b) expressly list these “damages” as relief 

available for violations of Sections 13(b) and 19 of the FTC Act and the Telemarketing 

Act. If the Vigil and Lowry Defendants are asserting that these “damages” are not 

authorized by the FTC Act and Telemarketing Act, they must be arguing that they did not 

violate the FTC Act or the Telemarketing Act. This is a factual argument about the 

merits of Plaintiff’s claim. If the Vigil and Lowry Defendants are arguing that some 

other law makes the “damages” unauthorized, then they have failed to provide fair notice 

of what law they mean. The Court accordingly will strike the Vigil and Lowry 

Defendants’ affirmative defense that the damages sought are not authorized by law. 

M. Omissions of Third Parties. 

 The Lowry Defendants assert that Plaintiff’s claims are bared by acts or omissions 

of third parties over whom Defendants had no control. Doc. 89, at 13. The Lowry 

Defendants provide no facts to support this defense and therefore fail to provide fair 

notice. Joe Hand Promotions, Inc. v. Estradda, 1:10-CV-02165-OWW, 2011 WL 

2413257, at *4 (E.D. Cal. June 8, 2011) (holding that an affirmative defense that 

damages were cause by third parties over whom the defendant has no control is 

insufficiently pled if defendant asserts no other facts). The Court accordingly will strike 

the Lowry Defendants’ affirmative defense that Plaintiff’s claims are barred by the action 

or omission of third parties. 

N. No Knowledge of or Control over Corporate Defendant’s Actions. 

 Plaintiff alleges that Defendant Birdsong “formulated, directed, controlled, had the 

authority to control, or participated in the acts and practices set forth in this Complaint.” 

Doc. 3, at 6-7. Defendant Birdsong asserts that she had no knowledge or control over the 

Case 2:12-cv-00914-DGC Document 150 Filed 10/18/12 Page 7 of 8
- 8 - 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

corporate defendants’ actions. Doc. 91, at 6-7. This defense directly contradicts facts 

alleged by Plaintiff and is not the proper subject of an affirmative defense. The Court 

accordingly will strike Defendant Birdsong’s affirmative defense that she had no 

knowledge or control over the corporate defendant’s actions. 

O. Other Affirmative Defenses Asserted by Defendant Carl Morris. 

 In the last paragraph of his answer, Carl Morris asserts that Plaintiff’s claims are 

barred by doctrines of (a) accord and satisfaction; (b) arbitration and award; 

(c) assumption of risk; (d) contributory negligence; (e) duress; (f) failure of 

consideration; (g) fraud; (h) illegality; (i) license; (j) payment; (k) res judicata; and 

(l) statute of frauds. Doc. 86, at 6-7. Defendant Morris provides no facts or explanation 

of these defenses, and did not file a response to Plaintiff’s motions to strike. The Court 

will strike these affirmative defenses for failure to provide fair notice. 

P. Affirmative Defenses Asserted by Defendant Tracy Morris. 

 Defendant Tracy Morris argues in his reply that Plaintiff makes no mention of his 

affirmative defenses in the motion to strike. Instead, Plaintiff moves to strike the 

affirmative defenses of other Defendants. Although Defendant Tracy Morris’s reply is 

untimely, his factual assertion is true. Doc. 104. In response, Plaintiff argues that the 

Court should still strike Defendant Tracy Morris’ affirmative defenses because Plaintiff 

addressed substantially similar affirmative defenses in their motion to strike. But if 

Plaintiff wishes to strike Defendant Tracy Morris’s affirmative defenses, it must file a 

motion specifically requesting that the Court strike those affirmative defenses. 

 IT IS ORDERED that Plaintiff’s Motion to Strike (Doc. 104) is granted in part 

and denied in part as set forth above. 

 Dated this 17th day of October, 2012. 

Case 2:12-cv-00914-DGC Document 150 Filed 10/18/12 Page 8 of 8