UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

UNITED STATES ex rel. LANDIS , Plaintiff s ,

v. TAILWIND SPORTS CORP., et al. , Defendant s . Case No. 1: 10

- cv - 00976 ( CRC )

MEMORANDUM OPINION AND ORDER Before the Court is the United States and Relator’s Joint Motion to Strike, o r in the Alternative for Partial Judgment on the Pleadings, a s to Certain Affirmative Defenses [ECF No. 213]. Upon consideration of the motion, the opposition , and the reply, the Court will grant the motion in part and deny it in part.
I. Background In June 2010, Relator Floyd Landis filed this qui tam action again st Lance Armstrong, his former teammate on the United States Postal Service ( “ USPS ” ) professional cycling team, and associated defendants , including Capital Sports & Entertainment Holdings, Inc., William Stapleton, and Barton Knaggs ( “CSE Defendants”) . After closing a criminal investigation of Armstrong in the Central District of California, the Government intervened in this case in February 2013. In June 2014, t he Court denied Armstrong’s M otion to D ismiss the
Government’s C omplaint, denied Armstrong’s M otion to D ismiss Relator’s Second Amended Complaint, and granted in part and denied in part the CSE Defendants ’ Motion to Dismiss Relator’s Second Amended Complaint. Me m . Op. June 19, 2014. Armstrong and the CSE Defendants a nswer ed the C omplaints the following month. P laintiff s now move to strike certain affirmative defenses from the A nswers . I n response , Armstrong and the CSE Defendants2 voluntarily withdr a w several affirmative defenses , but oppose the motion to strike the remain ing

ones . II. Standard of Review The Court may strike insufficient defenses or “any redundant, immaterial, impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f). “‘The decision to grant or deny a motion to strike is vested in the trial judge ’ s sound discretion’ . . . [h]owever, a motion to strike is a drastic remedy that courts disfavor.” Gates v. D istrict of Columbia , 825 F. Supp. 2d 168, 169 (D.D.C. 2011) (quoting Naegele v. Albers , 355 F. Supp. 2d 129, 142 (D.D.C. 2005)). Such motions are granted “‘where it is clear that the affirmative defense is irrelevant and frivolous and its removal from the case would avoid wasting unnecessary time and money litigating the invalid defense.’” U.S. ex rel. Head v. Kane Co. , 668 F. Supp. 2d 146, 150 (D.D.C. 2009) (quoting SEC v. Gulf & Western Indus., Inc. , 502 F. Supp. 343, 344 (D.D.C. 1980)).
III. Analysis The United States move d to strike 24 of Armstrong’s affirmative defenses and Relator moved to strike 21 of Armstrong’s affirmative defenses. Relator also moved to strike 23 of the CSE Defendants’ affirmative defenses. In response, Armstrong withdr a w s seven affirmative defenses to the United States’ C omplaint and five affirmative defenses to Relator’s S econd Amended C omplaint . T he CSE Defendants withdr a w nine of the affirmative defenses that Relator had sought to strike, as well as o ne additional defense that was not a subject of the motion

. The Court will address the remaining defenses in turn

.3 A. Failure to State a Claim 1
All d efendants assert failure to state a claim as an affirmative defense. P laintiffs argue that failure to st ate a claim is not a proper affirmative defense and, regardless, that the Court has already rejected th e defense by denying the defendants’ motions to dismiss. Defendants r espond with U n ited States ex rel. Spay v. CVS Caremark Corp oration , No. 09

- 4672, 2013 WL 1755214 (E.D. Pa. Apr. 24, 2013) (citation omi tted) , a False Claims Act (“FCA”) case h o ld ing that “ a party can set forth the defense of failure to state a claim as an affirmative defense in the answer,” id. at *2

. As p laintiffs point out , however, that case also holds that “ [w] here . . . a court has previously made a legal determination that a Plaintiff’s complaint stated a claim for relief, a subsequent affirmative defense claiming failure to state a claim or to prop erly plead should be stricken.” Id. at *3. Consequently , t he Court will grant the motion to strike as to this defense.
B. Waiver, Ratification, Consent, and Release 2
Defendants assert waiver , consent, ratification, and release as affirmative defenses. As plaintiffs note, another court in this district recently struck simil ar defense s in a n FCA case because the d efendant “ fail [ed] to identify any clear and intentional relinquishment or abandonment by the Attorney General of the right to sue under the FCA ” and had not “ presented any support for the proposition that Department of Justice employees acted with the Attorney General ’ s authority to waive the right to bring an FCA case [

. ] ” United States v. Hone ywell Int ’l , Inc. , 841 F. Supp . 2d 112, 115 (D.D.C. 2012). Thus, plaintiffs argue, defendants may continue

1 Armstrong’s First Affirmative Defense to the United States, Armstrong’s First Affirm ative Defense to Relator, and CSE Defendants’ First Affirmative Defense to Relator.

2 Armstrong’s Second, Twentieth, and Twenty

- Third Affirmative Defense to United States; Armstrong’s Second, Eighteenth, and Twenty

- First Affirmative Defense to Relator; CS E’s Fourth and Twenty

- First Affirmative Defense to Relator.4 to seek discovery to negat e elements of plaintiffs’ claims , but they cannot assert waiver, consent, ratification, or release as affirmative defenses

. Yet, several cases from outside the district reveal that this proposition is subject to some dispute. E.g. , U .S. e x rel. Jordan v. Northrop Grumman Corp

. , No. 95

- 2985 , 2002 U.S. Dist. LEXIS 26622, at * 21

– 22 (C.D. Cal. Aug. 5, 2002) ( describing a “ line of cases [that] show that courts consider ratification and waiver in determining whether a defendant possessed the requisite sciente r to violate the FCA”) (citing Wang ex rel. United States v. FMC Corp. , 975 F.2d 1412 (9th Cir . 1992) ); U.S. ex rel. Monahan v. Robert Wood Johnson Univ. Hosp. at Hamilton , No. 02

- cv - 5702, 2009 WL 4576097, at *7 (D.N.J. Dec. 1, 2009) (denying a motion to strike an affirmative defense of waiver in an FCA case because “[i]t is possible that e vidence procured through discovery will show that the Department of Justice, under the direction of the Attorney General, waived the Government's claims”). In light of the high standard for striking a defense, the Court is persuaded by this authority to a llow these defense s to proceed at this stage of the litigation.
C. Estoppel 3 Armstrong and the CSE Defendants assert equitable estoppel as an affirmative defense. Defendants correctly observe that “ ‘ the fundamental principle of equitable estoppel applies to government agencies, as well as private parties.’” Honeywell , 841 F. Supp. 2d a t 114 (quoting ATC Petroleum, Inc. v. Sanders , 860 F.2d 1104, 1111 (D.C. Cir. 1988) (internal quotations omitted)); see also Morr is Commc ’ ns, Inc. v. FCC , 566 F.3d 184, 191 (D.C. Cir. 2009); Graham
v. SEC , 222 F.3d 994, 1007 (D.C. Cir. 2000)

. Notwithstanding that general principle , t he standard for establishing estoppel against the Government “is an exacting one,” and “‘[t]here is a

3 Armstrong’s Third Affirmative Defense to the United States, Armstrong’s Third Affirmative Defense to Relator, and CSE Defendants’ Fifth Affirmative Defense to Relator.5 clear presumption in this Circuit against invoking the doctrine [of equitable estoppel] against government actors in any but the most extreme circumstances.’” Honeywell , 841 F. Supp. 2d at 114 (citing Int’l Union v. Clark , No. 02

- cv - 1484, 2006 WL 2598046, at *12 (D.D.C. Sep. 11, 2006) (alteration in original)). D efendants must show that the G overnment “‘engaged in affirmative misconduct’” in addition to showing that it made a definite representation that the defendants reaso nably relied on in a manner that changed their position for the worse. Id. (quoting Morris , 566 F.3d at 191 )

. A s in Honeywell , defendants here have not a lleged facts that could establish a reasonabl e reliance on the Government that changed their position ; i nstead, defendants “merely describe[] continuing a course of action . . . that [they] had embarked on earlier. ” Id. As a result, the Court will grant the motion to strike as to this defense.
D. Conduct of Relator 4 Armstrong asserts as an affirmative defense that the United States’ claims are barred by 31 U.S.C. § 3730(d)(3), which requires dismissal of a relator convicted of criminal conduct

a rising from his role in the allege d FCA violation

. The CSE Defendants also assert as an

a ffirmative defense that illegal activity by Relator underpinning the lawsuit bars him from
recovery . As plaintif fs argue, t he plain la nguage of Section 3730(d)(3) requires the relator to have been “convicted ” in order to warrant his dismissal from the case. Here, Landis has entered into a deferred prosecution agreement ; he has not been convicted

. Defendants’ Opp’n Ex. T. Although defendants have already withdrawn several unclean hands and in pari delicto defenses , Defendants’ Opp’n at 1 n.1, they maintain that they “may have a defense premised on Section 3730(d)( 3) or relator’s illegal conduct based on Landis’ deferred prosecution agreement with the

4 Armstrong’s Ninth Af firmative Defense to United States; Armstrong’s Seventh Affirmative Defense to Relator; CSE’s Twenty

- Sixth Affirmative Defense to Relator.6 Government” and thus are “entitled to discover whether Landis is subject to conviction.” Defendants’ Opp’n at 15

– 16. Not so. T he possibility that Landis may be subject to conviction and that the Government would choose to pr osecute him falls short of Section 3730(d)(3)’s unambiguous language with respect to dismissing a relator . Moreover, even if relator were to be dismissed , Section 3730(d)(3) exp licitly provides that “such dismissal shall not prejudice the right of the United States to continue the action, represented by the Department of Justice .” Consequently, the Court will grant the motion to strike with respect to the se defense s . E. Existenc e of United States ’ Injuries and Damages 5 Armstrong asserts as affirmative defenses that the Government has suffered no injury, that its alleged damages are speculative, uncertain and/or contingent and are not recoverable, and that the Government has received full payment for services rendered. Both Armstrong and the CSE Defenda nts also assert as an affirmative defense that they provided all services due to the Government with respect to the transactions and occurrences that are the subject of this lawsuit. Plaintiffs ask the Court to strike these defenses because “actual damag e to the United States is

not ” necessary to establish liability in a n FCA cause of action. United States’ and Relator’s Joint Mot. to Strike at 17 (citing Rex Trailer Co. v. United States , 350 U.S. 148, 152

– 53 (1956) )

. While this may be true, a showing of damage i s necessary to obtain treble damages , which are based on “‘the amount of damages which the Government sustains because of the act of [the defendant]. ’ ” U .S. ex rel. Davis v. District of Columbia , 679 F.3d 832, 839 (D.C. Cir. 2012)) (quoting United States v. Sci. Applications Int ’ l Corp. , 626 F.3d 1257, 1277

– 78 (D.C. Cir. 2010)) ; see also 31 U.S.C. 3729 (a)(1)

. Consequently, and i n light of the high bar for striking a

5 Armstrong’s Eleventh, Twelfth, Thirteenth, and Twenty

- Sixth Affirmative Defense to United States; Armstrong’s Ni nth, Tenth, Eleventh, and Twenty

- Fourth Affirmative Defense to Relator; CSE’s Twelfth and Thirteenth Affirmative Defense to Relator.7 defense and the significant discretion of the C ourt in deciding whether to do so , the Court will permit d efendants to maintain these defenses at this point in the litigation

. F. Failure to Mitigate Damages 6 All defendants assert as an affirmative defense that the United States failed to mitigate its all eged damages. P laintiffs largely cite cases from o ther circuit s holding that failure to mitigate cannot be used as an affirmative defense i n FCA and fraud actions. E .g. Toepleman v. United
States , 263 F.2d 697, 700

– 01 (4th Cir. 1959 ); U .S. ex rel. Garrison v. Crown Roofing Services,
Inc. , No. H

- 07

- 1018, 2011 WL 4914971 at *2 (S.D. Tex. Oct. 14, 2011). D efendants respond with cases , also f rom outside this circuit, holding that the Government does have a duty to mitigate, including a case denying a motion to strike an affirmative defense of failure to mitigate in the context of similar common law fraud, breach of contract, and unjust enrichment claims asserted by the Government

. See Robinson v. United States , 305 F.3d 1330, 1335 (Fed. Cir. 2002); U .S. ex rel. Jordan , 2002 U.S. Dist. LEXIS 26622 at * 52

- 56

. I n light of the high bar for striking a defense and the conflicting , non - binding authority o n this issue, t he Court will deny the motion to strike as to this defense.
G. Failure to Plead Fraud with Particularity; Vagueness 7
All Defendants assert as an affirmative defense that the United States and Relator have failed to plead fraud with particulari ty as required by Federal Rule of Civil Procedure 9(b). The CSE Defendants also assert as an affirmative defense that Relator’s allegations are vague, uncertain, and unclear. The Court previously ruled at the motion to dismiss stage that that Rule

6 Armstrong’s Sixteenth Affirmative Defense to United States; Armstrong’s Fourteenth Defense to Relator; CSE Defendants’ Fourteenth Defense to Relator.

7 Armstrong’s Nineteenth Affirmative Defense to United States; Armstrong’s Seventeenth Defense to Relator; CSE Defendants’ Second and Third Defense to Relator.8 9(b) d efenses were waived by Armstrong and the non

- intervened defendants. Mem. Op

. June 19, 2014 at 59 & n.33. While defendants assert that they have not waived these defenses with respect to arguments that may be developed based on additional discovery, the Government correctly notes that “[i]f a party fails to raise a Rule 9(b) objection in the first responsive pleading or in an early motion . . . the issue will be deemed waived

. ” U.S. ex rel. Purcell v. MWI Corp. , 824 F. Supp. 2d 12, 25 (D.D.C. 2011) (citations omitted). Regardless , the D.C. Circuit has held that “a plaintiff may satisfy Rule 9(b) simply by setting forth the ‘time, place, and contents of the false representations.’” Id. (quoting U .S. ex rel. Totten v. Bombardier Corp. , 286 F.3d 542, 551

– 52 (D.C. Cir. 2002) )

. P laintiffs clearly have provided this basic information in this case. See United States’ Compl. ¶ 75 (“Defendants knowingly (as ‘knowingly’ is defined by 31 U.S.C. § 3729(b)(1)) made, used, or caused to be made or used, false records or statements material to false or fraudulent claims paid or approved by the United States. Sp ecifically, Defendants submitted invoices pursuant to the 1995 and 2000 Agreements while in violation of material terms of those agreements, or knowingly caused these invoices to be submitted.”). As a result, the Court will grant the motion as it relates to these defenses.
H. Government’s Lack of Diligence 8 Armstrong asserts as an affirmative defense the Government’s lack of diligence. While both sets of d efendants have already withdrawn their laches defense, Armstrong asserts that lack of diligence is a separate “defense to [the Government’s] claim for pre

- judgment interest.” Defendants’ Opp’n at 23. While Armstrong may raise his pre

- judgment interest argument i f this litigation reaches the damages stage , t he proposition that the Government is not barred by lack of

8 Armstrong’s Eighteenth Affirmative Defense to United States and Sixteenth Affirmative Defense to Relator.9 diligence from enforcing a public right is well

- established. United States v. Philip Morris Inc. , 300 F. Supp. 2d 61, 72

– 73 (D.D.C. 2004) (citing Utah Power & Light Co. v. United States , 243 U.S. 389, 409 (1917) (“As a general rule, laches or neglect of duty on the part of officers of the government is no defense to a suit by it to enforce a public right or protect a public interest.” ) ); United States v. Summerlin , 310 U.S. 414, 416 (1940) (it is “well settled that the United States is not . . . subject to the defense of laches in enforcing its rights”); Illinois Central Railroad Co. v. Rogers , 253 F.2d 349, 353 (D.C. Cir. 1958) (“ N o rule is better established than that the United
State s are not bound by limitations or barred by laches where they are asserting a public right.” ). Consequently, the Court will grant the motion to strike th is defense.
I. Recoupment and Set

- Off 9 Armstrong also asserts the doctrines of recoupment and set

- off a s an affirmative defense

. Plaintiffs contend that the United States has not waived sovereign immunity, which protects it from recoupment or set

- off claims. A nother c ourt in this district has h e ld that the G overnment ’s filing of a qui tam action may constitute a waiver of its sovereign immunity as to rec oupment

. See United States v. Intrados/Int ’ l Mgmt. Grp. , 277 F. Supp. 2d 55, 63 (D.D.C. 2003) (citations omitted). In light of this reasoning and the rigorous standard for striking a defense , the Court will deny the motion as to recoupment and set

- off

. J. Failure to Choose Between Inconsistent Remedies 10 Armstrong also asserts as an affirmative defense the United States and Relator’s failure to choose between inconsistent remedies. Courts in this district have routinely held that the

9 Armstrong’s Twenty

- Fourth Affirmative Defense to United States and Twenty

- Second Affirmative Defense to Relator.

10 Armstrong’s Twenty

- Fifth Affirmative Defense to United States and Twenty

- Third Affirmative Defense to Relator.10 Governmen t may plead alternative theories of liability in FCA cases. See , e.g. , U

. S. ex rel. Miller v. Bill Harbert Int ’ l Const., Inc. , 505 F. Supp. 2d 20, 24 (D.D.C. 2007) (“[T]he government in an FCA case generally may plead theories in the alternative, even if different claims seek relief for the same injury, so long as there is ultimately only one recovery.”); U.S. ex rel. Purcell v. MWI Corp. , 254 F. Supp. 2d 69, 79 (D.D.C. 2003) (inability to recover damages from inconsistent theories does not bar inconsiste nt claims). As a result, the Court will grant the motion as to this defense.
K. Public Disclosure 11 Armstrong asserts as an affirmative defense to the United States’ Complaint that the claims , allegations , and transactions described in it were publicly disclosed prior to the filing of the lawsuit in violation of the Court’s sealing order. T he Court previously denied Armstrong’s motion to compel regarding public disclosure “ to the extent it [ sought] disclosure beyond which the Government has already agreed , ” noting that “‘ [t] he rationale behind sealing FCA cases is to allow the United States ample time to investigate the allegations,’ not to provide protection to defendants.” Op . and Order Sept. 30, 2014 at 14

– 15 (quoting U .S. ex rel . Durham v. Prospect Waterproofing, Inc. , 818 F. Supp. 2d 64, 67 (D.D.C. 2011)) . As a result, striking this defense at this stage of the litigation is unlikely to generate significant additional efficiencies

. See U.S. ex rel. Head , 668 F. Supp. at 150 (holding that a court should strike an affirmative defense “‘where it is clear that

. . . its removal from the case would avoid wasting unnecessary time and money’” (quoting SEC v. Gulf & Western Indus., Inc. , 502 F. Supp

. at 344)). Accordingly, t he Court will deny the motion as to this defense

.

11 Armstrong’s Fifteenth Affirmative Defense to United States.11 L. Vicarious Liability and the Causes of the Alleged Damages 12
The CSE Defendants assert as affirmative defenses contributory negligence, no vicarious liability , and that the United States’ alleged damages were caused solely, directly, and proximately by the acts or omissions of other parties. Defendant Armstrong agreed to withdraw th ese types of defense s . The CSE Defendants’ argue simply that the issues “are relevant and necessitate discovery.” Defendants’ Opp ’ n at 26. They note that even the authority cite d by plaintiffs, Gates v. District of Columbia , denies a motion to strike similar defenses and construed them as denial s , as the issues surrounding the causes of the alleged damages would remain a subje ct of discovery regardless. 825 F. Supp. 2d at 170

– 171

. Th e same applies here. The Court will therefore deny the motion to strike and construe these defenses as denials.
M. Relator’s Bad Faith 13
The CSE Defendants assert as an affirma tive defense that Relator filed this suit in bad faith, therefore barring him from recovery. In their opposition, the CSE D efendants request that that this defense be c onverted to a request for attorneys’ fees under 31 U.S.C. § 3730(d)(4) if the Court strikes it in its original form

. Defendants’ Opp’n at 28 n.34. Section 3730(d) contains specific provisions for reducing the proceeds of a relator whose wrongdoing or bad faith is associated with the activity that forms the foundation of a n FCA case ; these procedures do not require dismissal of the action entirely

. And , as Relator correctly notes, a request for attorneys’ fees is not an affirmative defense, and only bec omes applicable “if the defendant prevails in the action.” 31 U.S.C. § 3730. In other words, the CSE Defendants have r equested attorneys’ fees too early in this litigation

. The Court will therefore grant the motion as to t his defense.

12 CSE Defendants’ Sixteenth, Seventeenth , and Twentieth Affirmative Defenses to Relator.

13 CSE Defendants’ Twenty

- Fifth Affirmative Defense to Relator.12 IV. Conclusion For the foregoing reasons, it is hereby ORDERED that United States and Relator’s Joint Motion to Strike, o r in the Alternative for Partial Judgment on the Pleadings, a s to Certain Affirmative Defenses [ECF No. 213] is GRANTED in part and DENIED in part. It is further ORDERED that, in light of Armstrong ’ s agreement to withdraw his Fifth, Sixth, Seventh, Eighth, Tenth, Twenty

- First, and Twen ty

- Second Affirmative Defense s to the United
States ’ Complaint and his Fifth, Sixth, Eighth, Nineteenth , and Twentieth Affirmative Defens e s to Relator ’ s Second Amended Complaint, these defenses are hereby stri c ken. It is further ORDERED that, in light of t he CSE Defendants ’ agreement to withdraw their Sixth, Eighth, Ninth, Tenth, Eleventh, Fif teenth, E i ghteenth, Twenty

- Second, Twenty

- Seventh, and Twenty

- Eighth Affirmative Defenses to Relator ’ s Second Amended Complaint, these defenses are hereby stri c ken. It is further ORDERED that Armstrong ’ s First, Third, Ninth, Eighteenth, Nineteenth, and Twenty

Fifth Affirmative Defense s to the United States ’ Complaint ; Armstrong ’ s First, Third, Seventh, Sixteenth, Seventeenth, and Twenty

- Third Defense s to Relator ’ s Second Amended C o mplaint ; and the CSE Defendan ts ’ First, Second, Third, Fifth, Twenty

- Fifth, and Twenty

- Sixth Defense s to Relator ’ s Second Amended C o mplaint are hereby stricken

. It is further ORDERED that Armstrong and the CSE Defendants shall amend their A nswers accordingly. SO ORDERED .

CHRISTOPHER R. COOPER United States District Judge Date: February 1 2 , 2015