White v. NYLIFE Securities, LLC

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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ALASKA
TERRY WHITE,
Plaintiff,
v.
NYLIFE SECURITIES, LLC,
Defendant.
Case No. 3:21-cv-00012-TMB
ORDER ON MOTION TO STRIKE
(DKT. 15)
I. 	INTRODUCTION
Before the Court is Plaintiff Terry White’s Motion to Strike (the “Motion”).1 Defendant
NYLIFE Securities, LLC opposes the Motion.2 For the reasons stated below, the Court DENIES
the Motion.
II. 	BACKGROUND
White’s Complaint arises out of allegations that Ronald “Buddy” Bailey Jr., an employee
of NYLIFE, gave fraudulent investment advice to White and that White paid $588,000 in exchange
for an ownership stake in a seafood processing company that is now worthless.3 Among claims for
intentional misrepresentation, breach of fiduciary duty, and a violation of the Alaska Securities
Act, White brings a claim for damages under the Alaska Unfair Trade Practices and Consumer
Protection Act (“UTPA”), Alaska Statute 45.50.471, et seq.4 At issue in this Motion is NYLIFE’s
1 Dkt. 15 (Motion); Dkt 17 (Reply).
2 Dkt. 16 (Opposition).
3 See generally Dkt. 7-1 (Complaint). White’s factual allegations are discussed in more detail in
the Order at Docket 11 and will not be repeated here.
4 Dkt. 7-1 ¶¶ 43–49.
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statutory affirmative defense to White’s UTPA claim.5 This defense—that the claim is barred by
an exemption to the UTPA—was also the basis for NYLIFE’s unsuccessful motion to dismiss.6
In February 2021, NYLIFE moved to dismiss White’s UTPA claim, asserting the claim is
barred by AS 45.50.481(a)(1). That provision exempts from the UTPA “an act or transaction
regulated by a statute or regulation administered by the state, including a state regulatory board or
commission, unless the statute or regulation does not prohibit the practices declared unlawful in
AS 45.50.471[.]”7 The Alaska Supreme Court has held that to qualify for this exemption, a
defendant must show (1) that its conduct is subject to ongoing, careful regulation and (2) that such
regulation prohibits the specific conduct that the plaintiff alleges violates the UTPA.8 In the motion
to dismiss, NYLIFE argued the exemption applies here because the alleged conduct is subject to
ongoing, careful regulation and prohibited by Alaska securities law.9 In opposition, White argued
that “securities-related claims are not exempt from the UTPA because the Alaska Securities Act
fails the two-prong test necessary for UTPA exemption”10 and that “regardless, the UTPA applies
to Plaintiff’s other causes of action.11
5 NYLIFE asserts the following: “UTPA Exemption: Plaintiff’s claim under the Alaska Unfair
Trade Practices Act is barred by AS 45.50.481(a)(1).” Dkt. 12 at 6 (Answer) (emphasis in
original).
6 See generally Dkt. 8 (Motion to Dismiss).
7 AS 45.50.481(a)(1).
8 Adkins v. Collens, 444 P.3d 187, 195–96 (Alaska 2019).
9 Dkt. 8 at 3.
10 Id.
11 Id. at 7.
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Applying the Alaska Supreme Court’s interpretation of the UTPA, the Court denied the
Motion to Dismiss.12 The Court cautioned its ruling was “narrow” and explained, “Based on the
specific facts alleged and arguments made by the Parties, the Court cannot conclude that the
alleged conduct is exempt from the UTPA.”13 The Court found NYLIFE had not established either
requirement underlying the exemption.14 And the Court also reasoned it was premature to decide
the issue without the benefit of discovery: “the Alaska Supreme Court cases addressing the UTPA
exemption make clear that the Court should undertake a close review of the facts before applying
the UTPA [exemption], which is best done with the benefit of discovery.”15 As the Court
explained, “discovery will allow the Court to better understand the ‘specific conduct’ that gives
rise to this case.”16 After the Court denied the motion, NYLIFE answered the Complaint and raised
the UTPA exemption as its second affirmative defense.17
White now moves under Federal Rule of Civil Procedure (“Rule”) 12(f) to strike the UTPA
affirmative defense from NYLIFE’s Answer.18 White asserts that in the Order denying NYLIFE’s
motion to dismiss, the “[C]ourt determined that Alaska law would not exempt the Transaction
from the UTPA in light of the alleged conduct in Plaintiff’s complaint” and that “[n]either the
12 See Dkt. 11 at 11, 24 (Order).
13 Id. at 24.
14 Id. at 16, 22 (internal quotations omitted) (emphasis in original).
15 Id. at 23.
16 Id. at 24, n.139.
17 Dkt. 12 at 6.
18 Dkt. 15 at 1.
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alleged facts of this case nor Alaska law have changed in the weeks following this Court’s
Order.”19 Thus, according to White, the defense should be stricken.20
III. 	LEGAL STANDARD
Rule 12(f) permits a court, by timely motion from a party, to “strike from a pleading an
insufficient defense.”21 “The function of a 12(f) motion to strike is to avoid the expenditure of time
and money that must arise from litigating spurious issues by dispensing with those issues prior to
trial[.]”22 Motions to strike are generally disfavored and “should not be granted unless the matter
to be stricken clearly could have no possible bearing on the subject of the litigation. If there is any
doubt whether the portion to be stricken might bear on an issue in the litigation, the court should
deny the motion.”23
IV. 	DISCUSSION
White misreads the Court’s Order denying NYLIFE’s motion to dismiss. In that Order, the
Court concluded that “at this stage of the litigation,” it lacked a “sufficient basis” to conclude the
UTPA exemption applied.24 As NYLIFE aptly states, “the Court held that NYLIFE had not
‘carried its burden’ to prevail on a Motion to Dismiss. . . . The Court has not held that NYLIFE
19 Id. at 2.
20 Id.
21 White’s motion is timely. See Fed. R. Civ. P. 12(f)(2).
22 Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970, 973 (9th Cir. 2010) (quoting Fantasy, Inc.
v. Fogerty, 984 F.2d 1524, 1527 (9th Cir.1993)), rev’d on other grounds by Fogerty v. Fantasy,
Inc., 510 U.S. 517 (1994).
23 Platte Anchor Bolt, Inc. v. IHI, Inc., 352 F. Supp. 2d 1048, 1057 (N.D. Cal. 2004).
24 See Dkt. 11 at 16, 18.
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cannot meet its burden.”25 The Court agrees with NYLIFE that “the denial of its Motion to Dismiss
does not prejudice NYLIFE from developing the record and pursuing a defense.”26 Rather, the
Court was simply unwilling to “categorically bar White from bringing a claim under the UTPA”
without the “benefit of discovery.”27 The Court remains without the benefit of discovery.
Consequently, the Court DENIES White’s Rule 12(f) Motion and reiterates it lacks a
sufficient basis at this stage in the litigation to hold that the UTPA exemption either does or does
not bar Plaintiff’s UTPA claim. The Court will not take the disfavored step of striking an
affirmative defense under these circumstances.
V. 	CONCLUSION
For the forgoing reasons, the Court DENIES the Motion at Docket 15.
IT IS SO ORDERED.
Dated at Anchorage, Alaska, this 27th day of January, 2022.
/s/ Timothy M. Burgess
TIMOTHY M. BURGESS
UNITED STATES DISTRICT JUDGE
25 Dkt. 16 at 4 (citing Dkt. 11 at 21) (emphasis in original).
26 Id.
27 Id. at 23, 24. The Court concluded it would be premature at this stage to decide both whether
the relevant conduct is subject to ongoing, careful regulation, see Dkt. 11 at 16, and whether the
conduct would, in fact, be prohibited, see Dkt. 11 at 22. Thus, White’s argument in reply—that, at
minimum, the Court decided the conduct is not subject to ongoing, careful regulation, see Dkt. 17
at 3—is unavailing. See Dkt. 11 at 18 (“[I]t is unclear at this stage of the litigation, based on the
record before the Court, that the conduct alleged is subject to ‘ongoing, careful regulation’ such
that White should be unable to bring a claim under the UTPA.”) (emphasis added).
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