Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_04-cv-03435/USCOURTS-cand-3_04-cv-03435-18/pdf.json

Parties Involved:
AAI Corporation
Counter-claimant
American Home Assurance Company
Plaintiff
American International Group, Inc.
3rd party defendant
Czech Export Bank
Defendant
Electric Transit Incorporated
Defendant
National Union Fire Insurance Company of Pittsburgh, Pennsylvania
Counter-defendant
SKODA, a.s.
Defendant
Skoda Ostrov, S.R.O.
Defendant

Document Text:

United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

NATIONAL UNION FIRE INSURANCE

COMPANY OF PITTSBURGH,

PENNSYLVANIA, a corporation, and

AMERICAN HOME ASSURANCE

COMPANY, a corporation,

Plaintiffs,

 v.

ELECTRIC TRANSIT INCORPORATED, an

Ohio corporation and joint venture of SKODA,

a.s., a corporation, SKODA, a.s., SKODA

OSTROV, s.r.o., a corporation, AAI

CORPORATION, a corporation, and CZECH

EXPORT BANK, a corporation,

Defendants. /

No. C 04-03435 JSW

ORDER GRANTING MOTION TO

STRIKE

Now before the Court is the motion to strike filed by Defendant, Counterclaim Plaintiff

and Third-Party Plaintiff AAI Corporation (“AAI”). The motion seeks to strike certain of the

claims and defenses of Plaintiffs and Counterclaim Defendants National Union Fire Insurance

Company of Pittsburgh, Pennsylvania and American Home Assurance Company, and ThirdParty Defendant, American International Group, Inc. (collectively “AIG”). Having carefully

considered the parties’ arguments, the relevant legal authority, the Court hereby GRANTS

AAI’s motion to strike. 

Case 3:04-cv-03435-JSW Document 165 Filed 06/04/07 Page 1 of 4
United States District Court

For the Northern District of California

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BACKGROUND

The basic underlying facts are known to the parties and to the Court. The central

dispute now before this Court is the effect of its prior order denying summary judgment to AIG

on the basis that AAI functioned as an insider and is therefore not entitled to payment on the

subject bond as a matter of law. The Court, in its order dated March 7, 2007, determined that

federal case law interpreting the Miller Act did not act to import a specific limitation on a

possible bond claimant’s rights where the subject bond did not cover a federal public works

project, where the United States was not a party, and where the bond, by its own terms, was

subject to the California Civil Code. The Court adopted as persuasive the reasoning of the New

York district court and the Second Circuit in finding that the Court may not import federal

authority to preclude recovery to a joint venturer on a bond under unsettled state law.

AAI moves this Court to strike all references to AIG’s proposed claims, prayers for

relief and affirmative defenses which rely upon whether AAI functioned as an insider and was

therefore precluded from recovering on the bond as a matter of law. AAI contends that in

rejecting AIG’s “insider” defense and the federal cases upon which AIG relied, the Court

determined that AIG should not be permitted to introduce the theory of defense relating to the

joint venture or alter ego defense that the Court held inapplicable as a matter of law. AAI

moves therefore to strike the following claims, prayers for relief and affirmative defenses of

AIG: Counts I, II at ¶ 29, III and paragraphs 1, 2, 3, 5 and 6 of AIG’s “prayer” as set forth in

AIG’s complaint for declaratory relief and the Second, Third, Fourth, Seventh, Eighth, Ninth,

Eleventh, Twelfth, Thirteenth, Fourteenth, and Thirty-First affirmative defenses, as set forth in

AIG’s answer to AAI’s counterclaims and third party complaint.

The Court will address additional specific facts as required in the analysis. 

ANALYSIS

A. Standard Applicable to Motions to Strike.

Federal Rule of Civil Procedure 12(f) provides that a court may “order stricken from any

pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous

matter.” Immaterial matter “is that which has no essential or important relationship to the claim

Case 3:04-cv-03435-JSW Document 165 Filed 06/04/07 Page 2 of 4
United States District Court

For the Northern District of California

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for relief or the defenses being pleaded.” California Dept. of Toxic Substance Control v. ALCO

Pacific, Inc., 217 F. Supp. 2d 1028, 1032 (C.D. Cal. 2002) (internal citations and quotations

omitted). Impertinent material “consists of statements that do not pertain, or are not necessary

to the issues in question.” Id. Motions to strike are regarded with disfavor because they are

often used as delaying tactics and because of the limited importance of pleadings in federal

practice. Colaprico v. Sun Microsystems Inc., 758 F. Supp. 1335, 1339 (N.D. Cal. 1991). The

possibility that issues will be unnecessarily complicated or that superfluous pleadings will cause

the trier of fact to draw unwarranted inferences at trial is the type of prejudice that is sufficient

to support the granting of a motion to strike. California Dept. of Toxic Substances Control, 217

F. Supp. at 1028.

B. Scope of the Alleged Insider Defense.

AIG contends that although the Court made a specific ruling on the inapplicability of the

insider defense, the Court did not make specific findings of fact regarding the relationship

between AAI and ETI, nor did it rule on the legal defenses and obligations applicable to joint

venturers and alter egos. However, the cases upon which the Court relied in its order denying

summary judgment clearly anticipate that the insider defense would include defenses by virtue

of the claimant’s status as a joint venturer or alter ego. 

In Cleveland Wrecking Co. v. Nova Casualty Co., the New York district court reasoned

that “[t]here is nothing under the laws of New York, either supported by defendant or found by

this Court, which supports the proposition that a joint venturer, sublet or alter ego of the

principal cannot collect on the Bond and defendant’s reliance on [federal cases relied upon by

AIG for the federal exclusion] is misplaced.” 2001 WL 1823604, at *4 (W.D.N.Y. Nov. 21,

2001) (emphasis added). The New York district court found, and this Court adopted the same

reasoning, that both joint venturer and alter ego theories are legally insufficient to bar a

potential claimant’s standing under a bond. According to the case relied upon by this Court, the

same theory and reasoning applies for all forms of “insidership,” whether they be based on

status as a joint venturer, sublet or alter ego.

Case 3:04-cv-03435-JSW Document 165 Filed 06/04/07 Page 3 of 4
United States District Court

For the Northern District of California

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 By this Order, the Court makes no ruling on the admissibility at trial of any specific

piece or category of evidence, as that is not properly before the Court at this time. 

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In Toporoff Engineers, P.C. v. Fireman’s Fund Insurance Co., the Second Circuit Court

of Appeals reasoned that the circumstances under which a joint venturer may be precluded from

claiming under a surety bond is not settled under New York law, and therefore the federal

preclusion under the Miller Act does not apply. 371 F.3d 105, 109 n.1 (2d Cir. 2004). The

Toporoff court made no distinction between joint venturers and the general “insider” defense as

cited by the federal cases also relief upon by AIG. Id. Even the federal Miller Act cases relied

upon by AIG in its briefing, and found inapposite by this and the New York courts, fail to draw

a distinction among “a wholly owned subsidiary, alter ego, joint venture, or other related

‘friendly company.’” See, e.g., Johnson Pugh Mechanical, Inc. v. Landmark Construction

Corp., 318 F. Supp. 2d 1057, 1072-73 (D. Colo. 2004).

Because there is no indication that the law relied upon both by the parties and the Court

supports the contention that there is a legally significant distinction between the alleged insider

defense and the status of a potential bond claimant as a joint venturer, alter ego, or some other

similar sort of relation of insidership, the Court does not adopt such a distinction. By its order

denying summary judgment issued on March 7, 2007, this Court determined that AIG should

not be permitted to introduce the theory of defense relating to the joint venture or alter ego

relationship between AAI and ETI.

CONCLUSION

For the foregoing reasons, Defendant, Counterclaim Plaintiff and Third-Party Plaintiff

AAI’s motion to strike is HEREBY GRANTED.1

IT IS SO ORDERED.

Dated: June 4, 2007 

JEFFREY S. WHITE

UNITED STATES DISTRICT JUDGE

Case 3:04-cv-03435-JSW Document 165 Filed 06/04/07 Page 4 of 4