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Flanders Corporation v. EMI Filtration Products LLC

United States District Court, E.D. North Carolina, Eastern Division

April 22, 2014

FLANDERS CORPORATION, Plaintiff,
v.
EMI FILTRATION PRODUCTS LLC, et al., Defendants.

ORDER

W. EARL BRITT, Senior District Judge.

This matter is before the court on plaintiff's motions for judgment on the pleadings or, alternatively, to strike and for a preliminary injunction. (DE ## 33, 35.)

I. BACKGROUND

In July 2013 and by verified complaint, plaintiff, a North Carolina corporation with its principal place of business in North Carolina, filed this action in North Carolina state court, asserting claims against EMI Filtration Products LLC, EMI Filtration Products Management Company, Inc., EMI Filtration Products Holding Company, Inc., EMI Filtration Products Equipments Leasing, Inc., EMI Filtration Products-SLC, Inc., EMI Filtration Products-Kent, Inc. (collectively, the "EMI Defendants"), Darren Fitch ("Darren"), Laurie Fitch ("Laurie"), Cody Fitch ("Cody"), Jordan Fitch ("Jordan"), and Integrity Air Filtration, LLC ("Integrity"). (Compl., DE # 1-13.) Plaintiff's claims arise out of a promissory note and related documents that the EMI Defendants, Darren, and Laurie entered into with plaintiff. In August 2013, defendants removed the action to this court.

Shortly thereafter, in lieu of filing an answer, Cody, Jordan, and Integrity moved to dismiss the claim against them for lack of personal jurisdiction. (DE # 16.) The court recently allowed that motion, dismissing those defendants from this action. (DE # 46.)

In the meantime, the other defendants filed answers, asserting therein a number of defenses. (DE ## 20, 28.) Thereafter, plaintiff filed the instant motions, and Darren and Laurie filed a notice with the court stating that they had filed a voluntary petition under Chapter 7 of the United States Bankruptcy Code, (DE # 37). In October 2013, counsel for the EMI Defendants moved to withdraw, (DE # 38), and in support thereof stated, "The undersigned is now moving to withdraw as counsel of record for the EMI Defendants because those defendants have now elected not to pursue a defense in this matter, and they have instructed the undersigned to discontinue their representation." (Mem., DE # 39, at 2). On 1 November 2013, U.S. Magistrate Judge James E. Gates allowed the motion to withdraw; directed the EMI Defendants to retain new counsel no later than 22 November 2013; informed them of their obligation to comply with applicable rules and orders of the court; and, directed the Clerk to serve a copy of the order on the EMI Defendants at the address provided by counsel. (DE # 42.) Since that time, nothing has been filed on behalf of the EMI Defendants, including any response to the instant motions.

II. DISCUSSION

A. Motion for Judgment on the Pleadings or, Alternatively, to Strike

Pursuant to Federal Rules of Civil Procedure 12(c) and 12(f), plaintiff requests that the court enter judgment in its favor on, or strike, certain affirmative defenses that the EMI Defendants[1] assert, namely, failure to state a claim upon which relief may be granted; breach of the implied covenant of good faith and fair dealing; novation; estoppel; failure to mitigate damages; and, the reservation of the right to amend their answer. (Mot., DE # 33, at 4-5.) Plaintiff's motion is based on the argument that the EMI Defendants have not adequately pled these defenses in accordance with the standards of Ashcroft v. Iqbal , 556 U.S. 662 (2009), and Bell Atl. Corp. v. Twombly , 550 U.S. 544 (2007). It does not appear that the Fourth Circuit Court of Appeals has addressed the issue. The district courts within this Circuit are divided. Compare Warren v. Tri Tech Labs., Inc, No. 6:12-cv-00046, at *7 n.7 (W.D. Va. May 15, 2013) (noting that "the district judges in the Western and Eastern Districts of Virginia who have considered the argument have not applied the Twombly and Iqbal pleading requirements to affirmative defenses raised in an answer" (citing cases)), with Racick v. Dominion Law Assocs. , 270 F.R.D. 228, 234 (E.D. N.C. 2010) ("This court... agrees with the district courts within the Fourth Circuit that have considered the question and concludes that the considerations of fairness, common sense and litigation efficiency underlying Twombly and Iqbal ' mandate that the same pleading requirements apply equally to complaints and affirmative defenses." (citation omitted)). Fortunately, the court can save its resolution of the issue for another day. Given the current posture of the case and the Fourth Circuit Court of Appeals' recognition that motions to strike[2] are not favored, see Waste Mgmt. Holdings, Inc. v. Gilmore , 252 F.3d 316, 347 (4th Cir. 2001) ("Rule 12(f) motions are generally viewed with disfavor because striking a portion of a pleading is a drastic remedy and because it is often sought by the movant simply as a dilatory tactic.'" (quoting 5A Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 1380 (2d ed. 1990))), the court sees no useful purpose in striking the defenses. Accordingly, the court will deny plaintiff's motion to strike without prejudice to its renewal should the EMI Defendants decide to defend the case and/or should the case ultimately proceed against Darren and Laurie.

B. Motion for Preliminary Injunction

Plaintiff requests that pursuant to Federal Rule of Civil Procedure 65, the court preliminarily enjoin the EMI Defendants[3] from "interfering with Flanders' efforts to collect and preserve Defendants' collateral;" "withholding their Collateral from Flanders;" "selling or disposing of Defendants' Collateral; and" "using any of Defendants' Collateral including customer lists, contact lists, and general goodwill of the EMI Defendants." (Mot., DE # 35, at 7-8.) "To obtain a preliminary injunction, a moving party must establish the presence of the following: (1) a clear showing that it will likely succeed on the merits'; (2) a clear showing that it is likely to be irreparably harmed absent preliminary relief'; (3) the balance of equities tips in favor of the moving party; and (4) a preliminary injunction is in the public interest." United States v. South Carolina , 720 F.3d 518, 533 (4th Cir. 2013) (citation omitted). The court examines these factors in turn.[4]

As to the likelihood of success, the court considers only plaintiff's breach of contract claim.[5] Under North Carolina law, [6] the elements of a breach of contract claim are "(1) existence of a valid contract and (2) breach of the terms of that contract." Ahmadi v. Triangle Rent A Car, Inc. , 691 S.E.2d 101, 103 ( N.C. Ct. App. 2010) (internal quotation marks and citation omitted).

According to plaintiff's verified complaint and the sworn declaration of its Director of Financial Reporting, plaintiff and defendants EMI Filtration Products LLC and EMI Filtration Products Holding Company, Inc. executed a promissory note pursuant to which those defendants agreed to pay plaintiff the principal amount of $5, 056, 360.17. (Compl., Ex. A, DE # 1-14; Harper Decl., DE # 35-1, ¶ 5.) As security for that note, the EMI Defendants executed a security agreement by which they each granted to plaintiff

a continuing security interest in and lien upon the following described property, whether now owned or hereafter acquired, and any additions, replacements, accessions, or substitutions thereof and all cash and non-cash ...

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