JNS Holding Corp (JNSH)

[roytoy6969]

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
CAR CHARGING GROUP, INC., a
Nevada corporation, 350 HOLDINGS,
LLC, a Florida limited liability company
and 350 GREEN, LLC, a Virginia
limited liability company,
v. Plaintiffs,
JNS HOLDING CORPORATION,
a Delaware corporation, and
JNS POWER & CONTROL
SYSTEMS, INC., an Illinois
Corporation,
Defendants.
(Consolidated With)
JNS POWER & CONTROL SYSTEMS,
INC., an Illinois Corporation,
Plaintiffs,
v.
350 Green, LLC, a Virginia limited
liability company
Defendant.
)
Case No.: 13-cv-03124
(Consolidated with)
Case No.: 13-cv-04020
Hon. Elaine Bucklo
350 GREEN, LLC’S RESPONSE IN OPPOSITION TO JNS POWER & CONTROL
SYSTEMS, INC.’S MOTION TO STRIKE CERTAIN AFFIRMATIVE DEFENSES
[D.E.#24]
Come now, 350 Green, LLC (“350 Green”), by and through their undersigned counsel,
and file their Response in Opposition to Defendant JNS Power & Control Systems, Inc. (“JNS
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Power”)’s Motion to Strike Certain Affirmative Defenses [D.E. #24], and as grounds would state
as follows:
I. Introduction
As set forth more fully in the numerous filings that the parties to this litigation have
submitted in the consolidated cases before this Court, the instant consolidated litigation centers
on the validity of an Asset Purchase Agreement (the “APA”). The APA executed between 350
Green and JNS Power on or about April 17, 2013, in an attempt by JNS Power’s to purchase
certain assets of 350 Green despite full knowledge and awareness that 350 Green had already
contracted to sell these same assets to350 Holdings, LLC (“350 Holdings”) an affiliated entity of
Car Charging Group, Inc. (“CCGI”) (collectively, the “CCGI entities”) via a prior Equity
Exchange Agreement whereby 350 Green had agreed to sell all of its membership equity and the
company’s assets to 350 Holdings. As Plaintiffs in the underlying action, CCGI, 350 Holdings
and 350 Green have sought, in part, to have this Honorable Court to declare the APA void as a
matter of law, in that the APA was executed during the period subsequent to the execution but
prior to the closing under the Equity Exchange Agreement. JNS Power responded to the action
filed by the CCGI Entities by filing an entirely new action as of May 30, 2013 against 350
Green, alleging in part, that 350 Green had defaulted under the terms of the APA thereby
entitling JNS Power to seek specific performance under its terms as well as indemnification for
legal fees incurred as a result of such alleged default.
On June 11, 2013, JNS Holdings and JNS Power filed a Motion for Relatedness Pursuant
to Local Rule 40.4 [D.E. #21], seeking that this Court find that CCGI and 350 Holdings’ action
was related to the action filed by JNS Power against 350 Green. On that same day, CCGI and
350 Holdings filed a Motion for Reassignment and Consolidation Pursuant To L.R. 40.4 And
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Fed. R. Civ. P. 42 [D.E. #23]. On June 26, 2013, over an objection by JNS Power, this
Honorable Court entered and Order granting CCGI and 350 Holdings’ motion for reassignment
and to consolidate [D.E. #31].
On June 28, 2013, after the Court consolidated the cases, JNS Power moved to dismiss
350 Green’s First, Second, Third, Fourth, Fifth, Sixth, Ninth, Tenth, Eleventh, and Twelfth
Affirmative Defenses [D.E. # 24] (the “Motion”). The crux of JNS Power’s Motion is that since
350 Green failed to adequately plead its affirmative defenses, JNS Power is prevented from
adequately responding to same since it has insufficient knowledge as to the basis of 350 Green’s
asserted affirmative defenses. As demonstrated herein, the Motion is without merit and should
be denied in its entirety. However, to the extent that this Court grants any portion of JNS
Power’s Motion, 350 Green respectfully requests that this Court permit 350 Green to amend its
affirmative defenses.
II. Standard of Review
JNS Power contends that several of 350 Green’s affirmative defenses should be struck
because (i) some of the affirmative defenses are not enumerated in the list set forth under Fed. R.
Civ. P. 8(c)(1); and (ii) some of the affirmative defenses fail to meet the pleading standards set
forth by the United States Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127
S.Ct. 1955, 1964, 167 L. Ed. 2d 929 (2007).
However, Twombly is not the legal standard applied by this Honorable Court when ruling
on a party’s motion to strike affirmative defenses. In Laporte v. Bureau Veritas North America,
Inc., 2013 U.S. Dist. 9378 (N.D. Ill. January 18, 2013), in an order denying a plaintiff’s motion
to strike a defendant’s affirmative defenses, Judge Marovich addressed the issue of the standard
for pleading affirmative defenses. This Honorable Court held that:
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Although a number of district courts agree with plaintiff's position, this
Court disagrees. This Court is among the courts that have declined to
extend the pleading requirements of Twombly and Iqbal to affirmative
defenses (see Leon v. Jacobson Transportation Co., Inc., Case No. 10 C
4939, 2010 U.S. Dist. LEXIS 123106, 2010 WL 4810600 (N.D. Ill. Nov.
19, 2010)) and will continue to be unless the Seventh Circuit or the
Supreme Court rules differently.
****
The primary reason that this Court will not require defendants to plead
affirmative defenses with enough facts to make them plausible is that the
language of the rule that sets the standard for pleading claims is different
from the language of the rule that sets the standard for pleading
affirmative defenses. Rule 8(a)(2), which applies to claims, states that "a
claim for relief must contain: . . . (2) a short and plain statement of the
claim showing that the pleading is entitled to relief." Fed.R.Civ.P. 8(a)(2)
(emphasis added). The Supreme Court relied on that italicized language
when it decided Bell Atlantic. Bell Atlantic, 550 U.S. 544, 555, 127 S. Ct.
1955, 167 L. Ed. 2d 929 (2007) ("The need at the pleading stage for
allegations plausibly suggesting (not merely consistent with) agreement
reflects the threshold requirement of Rule 8(a)(2) that the 'plain statement'
possess enough heft to 'sho[w] that the pleader is entitled to relief.'").
The rule for pleading affirmative defenses, on the other hand, does not
require a "showing that the pleader is entitled to relief." Instead, the
Federal Rules of Civil Procedure states that the answering party "must:
(A) state in short and plain terms its defenses to each claim asserted
against it." Fed.R.Civ.P. 8(b)(1)(A). Rule 8(b)(1)(A) contains no
requirement that the pleader show that its affirmative defenses have merit.
The rule requires merely a short and plain statement of what the
affirmative defense is.
In addition to the plain language of the Federal Rules, the Court has
several other reasons why it does not require that affirmative defenses be
stated with sufficient facts so as to be plausible. As this Court has said
before:
this Court respectfully disagrees with the proposition that a defendant
must include sufficient factual allegations in affirmative defenses to
make them plausible. First, the driving force behind Twombly and
Iqbal was to make it more difficult to use a bare-bones complaint to
open the gates to expensive discovery and force an extortionate
settlement. The point was to reduce nuisance suits filed solely to
obtain a nuisance settlement. The Court, though, has never once lost
sleep worrying about defendants filing nuisance affirmative defenses
and considers the risk that defendants would file nuisance defenses
sufficiently small so as not to warrant extending Twombly and Iqbal.
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Second, a plaintiff has the length of the statute of limitations to
investigate claims and ensure that it has sufficient facts to state a
plausible claim. A defendant, on the other hand, has only twenty [one]
days to file an answer. Third, the Court would like to avoid having to
rule on multiple motions to amend the answer during the course of
discovery as the defendant obtains additional information that would
support those affirmative defenses (such as mitigation of damages)
that defendant has no practical way of investigating before discovery.
The Court would also like to avoid the discovery disputes that would
inevitably develop as a defendant seeks discovery related to
affirmative defenses it had not stated in its answer. It is to everyone's
benefit to have defendant plead its affirmative defenses early, even if
defendant does not have detailed facts. Thus, the Court will not strike
any affirmative defenses for not having enough detail or for being
speculative.
Leon v. Jacobson Transportation Co. Inc., case no. 10 C 4939, 2010 U.S.
Dist. LEXIS 123106, 2010 WL 4810600 at *1 (N.D. Ill. Nov. 19, 2010).
Accordingly, the Court does not agree with plaintiff's assertion that
defendant's affirmative defenses failed to meet the pleading standard and
will not strike the affirmative defenses on that basis. Id at *4-6.
Further, as this Court noted in Van Schouwen v. Connaught Corp. 782 F. Supp. 1240,
1245 (N.D. Ill. October 11, 1991):
‘Motions to strike are generally disfavored because they are often
interposed to create a delay. See United States v. 416.81 Acres of Land,
514 F.2d 627 (7th Cir. 1975). Indeed, motions to strike can be nothing
other than distractions. If a defense is clearly irrelevant, then it will likely
never be raised again by the defendant and can be safely ignored. If a
defense may be relevant, then there are other contexts in which the
sufficiency of the defense can be more thoroughly tested with the benefit
of a fuller record -- such as on a motion for summary judgment.
Accordingly, courts are typically reluctant to decide disputed or
substantial issues of law on a motion to strike.
The Seventh Circuit has not expanded the heightened pleading standards to affirmative
defenses. 350 Green’s affirmative defenses are proper, sufficient, and meet the requirement that
they provide fair notice of the nature of the defense. As the Laporte court noted, when pleading
an affirmative defense, a pleader must: (A) state in short and plain terms its defenses to each
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claim asserted against it." Fed.R.Civ.P. 8(b)(1)(A). All of 350 Green’s affirmative defenses, of
which JNS Power is well aware, arise from CCGI and 350 Holdings’ argument that 350
Holdings’ purchase of 350 Green was valid, and therefore, 350 Green did not have authority to
enter into the APA. JNS Power’s Motion is nothing more than another attempt to create
additional layer of litigation in an attempt to distract the Court from the pertinent issue at bar,
namely the validity of the APA. As demonstrated herein, 350 Green has met this standard when
pleading its affirmative defenses. In the event this Court chooses to impose the heightened
pleading standards for affirmative defenses, 350 Green requests leave to amend its affirmative
defenses to meet the heightened standard.
III. 350 Green’s Affirmative Defenses
a. Failure to State a Claim
350 Green’s First Affirmative Defense is that JNS Power failed to state a claim upon
which relief could be granted. JNS Power has moved to strike this defense, claiming that it is not
a recognized affirmative defense. As set forth in United States v. Alacran Contr., LLC, 2011 U.S.
Dist. LEXIS 109993 *5, (N.D. Ill. September 27, 2011), “ ‘Form 30 to the Federal Rules of Civil
Procedure says it can be pled in an answer by simply stating "[t]he complaint fails to state a
claim upon which relief can be granted.’ The defense has been properly raised, and even if it had
not been, striking it would serve no purpose. "[T]he sufficiency of the defense can be more
thoroughly tested with the benefit of a fuller record." Van Schouwen, 782 F. Supp. at 1245.”
Consequently, 350 Green should be permitted to test the sufficiency of this defense with a more
complete record.
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b. Unclean Hands
350 Green’s Second Affirmative Defense, Unclean Hands should not be stuck. 350
Green’s Second Affirmative Defenses states “Plaintiff’s claims are barred against Defendant, in
whole or in part, by the doctrine of unclean hands, as Plaintiff had knowledge that Defendant had
a prior agreement with [CCGI] and [350 Holdings] but nonetheless attempted to enter into the
APA with Defendant because JNS Power is seeking equitable relief in the form of specific
performance of the APA.” [D.E.# 1, p. 13]. see, Mittlestaedt v. Gamla-Cedron Orleans, LLC,
2012 U.S. Dist. LEXIS 175808 (N.D. Ill. December 12, 2012) where this court denied a motion
to strike the affirmative defense of unclean hands that merely stated that “[t]he Affirmative
Defense in this case is that plaintiff comes to this court with unclean hands and is therefore
barred to enforce the contract that is the basis of her Complaint.” As set forth in Laporte, supra,
350 Green does not have to plead unclean hands with the same specificity set forth in Twombly.
However, to the extent that this Court chooses to impose the heightened pleading standards for
affirmative defenses and require an allegation of “bad faith,” 350 Green requests leave to amend
its affirmative defenses to meet a heightened standard.
c. Failure to Mitigate Damages
350 Green’s Third Affirmative Defense, Failure to Mitigate Damages, is not an available
affirmative defense. However, failure to mitigate damages may be a partial defense pled
affirmatively. It is well settled that “in cases where discovery has barely begun, the failure to
mitigate defense is sufficiently pled without additional facts.” Fleet Business Credit Corp. v.
National City Leasing Corp., 1999 U.S. Dist. LEXIS 19849 (N.D. Ill., December 23, 1999). In
the instant action, the parties have provided discovery responses as of the day of this response.
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Consequently, as a matter of law, this Honorable Court should deny JNS Power’s motion to
strike 350 Green’s Third Affirmative Defense, Failure to Mitigate Damages.
d. The APA is Void as a Matter of Law/ JNS Power had knowledge that 350 Green
had a prior agreement with CCGI/ Lack of Legal Capacity
350 Green’s Fourth Affirmative Defense is that the APA is void as a matter of law. 350
Green’s Fifth Affirmative Defenses is that at the time Plaintiff entered into the APA with
Defendant, Plaintiff had knowledge that Defendant had a prior agreement with CCGI and 350
Holdings. 350 Green’s Sixth Affirmative Defense is that “Plaintiff’s claims are barred against
Defendant, in whole or in part, because Defendant had no legal capacity to enter into the APA,
and Plaintiff had knowledge of same.”
These affirmative defenses are to a certain extent linked, and are not legally deficient.
JNS Power is, and has been since the inception of this case, on notice that 350 Green, CCGI and
350 Holdings have taken the position that the APA is void as a matter of law because it was
executed after the CCGI entities were to have closed on the transaction wherein the 350
Members sold their membership shares of 350 Green and all corresponding assets which were to
purportedly be sold to JNS Power under the APA to 350 Holdings. 350 Green did not have the
legal capacity to enter into the APA, because the APA was executed after the Equity Exchange
Agreement had been signed with the CCGI Entities. JNS Power’s prior knowledge of that 350
Green and the CCGI Entities were in contract prior to the execution of the APA is one of the
facts that makes the APA void as a matter of law. Consequently, 350 Green’s Fourth, Fifth and
Sixth Affirmative Defenses are adequately plead, and JNS Power’s motion to strike same should
be denied.
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e. Failure to Satisfy Conditions Precedent
350 Green’s Ninth Affirmative Defense is that “Plaintiff’s claims are barred against
Defendant, in whole or in part, for failure to satisfy conditions precedent set forth in the APA.”
Specifically, certain events required under the terms of the APA did not occur, including but not
limited to, written consent by the parties extending the closing date and obtaining consent from
the hosts for their license agreements. To the extent that this Court deems it necessary, 350
Green will amend its Ninth Affirmative Defense to add this additional information.
f. Lack of Privity of Contract
350 Green’s Tenth Affirmative Defense is a lack of privity of contract between 350
Green and JNS Power. First, contrary to the position implied by JNS Power, Fed. R. Civ. P.
8(c)(1) does not limit a party’s affirmative defenses to those listed therein. Second, there was no
privity between 350 Green and JNS Power at the time that the APA was executed because there
could be no buyer-seller relationship under the law as 350 Green could not have legally entered
into the APA because of its prior agreement with the CCGI entities, and, at the time the APA
was executed, JNS Power had knowledge of same.
g. Waiver and Estoppel
350 Green’s Eleventh Affirmative Defense is Waiver and Estoppel. 350 Green concedes
that these are separate defenses, and should be plead separately. However, 350 Green asserts
that it adequately plead an affirmative defense of waiver, as 350 Green states that “Plaintiff
waived any rights it had against Defendant when it entered into the APA knowing that Defendant
had a prior agreement with CCGI and 350 Holdings.” JNS Power is on notice as to the basis of
350 Green’s affirmative defense of waiver.
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h. Breach of Contract
Finally, JNS Power argues that 350 Green’s Twelfth Affirmative Defense, Breach of
Contract, is not adequately plead, despite the fact that 350 Green has put JNS Power on notice of
the specific section of the APA 350 Green believes was breached. This is completely
disingenuous, and highlights the futility of JNS Power’s entire Motion.
IV. Conclusion
As demonstrated by the foregoing, 350 Green, as a matter of law, has adequately set forth
all of its affirmative defenses, as same are not required to be pled with the specificity required in
affirmative counts that are alleged against a party. Consequently, this Court should deny JNS
Power’s Motion to Dismiss in its entirety.
Dated: July 22, 2013 Respectfully submitted,
Plaintiffs Car Charging Group, Inc. and
350 Holdings, LLC
By: s/Michael I. Bernstein
One of their attorneys
Michael I. Bernstein, admitted pro hac vice
The Bernstein Law Firm
1688 Meridian Avenue, Suite 418
Miami Beach, Florida 33139
Telephone: [phone]
Facsimile: [phone]
e-mail: [e-mail]
Steven L. Baron (ARDC No. 6200868)
Natalie A. Harris (ARDC No. 6272361)
Mandell Menkes LLC – Firm No. 38081
One North Franklin Street, Suite #3600
Chicago, Illinois 60606
Telephone: [phone]
Facsimile: [phone]
e-mail: [e-mail]
e-mail: [e-mail]
Case: 1:13-cv-04020 Document #: 30 Filed: 07/22/13 Page 10 of 11 PageID #:18211
CERTIFICATE OF SERVICE
The undersigned, an attorney, hereby certifies that he caused to be filed the
aforementioned document, electronically, with United States District Court for the Northern
District of Illinois, on July 22, 2013, which will be served via ECF on all counsel of record.