Law School Case Brief
Lockheed Martin Corp. v. United States - 973 F. Supp. 2d 591 (D. Md. 2013)
The standards applicable to motions to strike, as well as notice pleading principles, should usually suffice to weed out frivolous, vexatious, and/or unfairly prejudicial affirmative defenses.
Plaintiff Lockheed Martin Corp. ("Lockheed"), a Maryland corporation headquartered in Bethesda, brought an action against defendant United States (U.S.) for a refund of federal income taxes allegedly overpaid in the years 2004 through 2008 in the amount of $16,157,226. Lockheed alleged that the Internal Revenue Service improperly applied various tax credits, deductions, and exclusions. The U.S. filed a second affirmative defense stating: "should the court determine that plaintiff raised a meritorious argument that would otherwise establish that plaintiff overpaid its taxes, the U.S. is entitled to reduce that overpayment based on any additional tax liabilities that the plaintiff may owe, whether or not previously assessed or alleged. The U.S. is entitled to such reduction because the redetermination of plaintiff's entire federal income tax liability for the litigated tax years is at issue in this refund suit." Lockheed filed a motion to strike that second affirmative defense arguing that the pleading standards enunciated in Twombly and Iqbal, two decisions from the Supreme Court of the United States, applied to affirmative defenses and that the second affirmative defense was a facially implausible legal conclusion.
Should the court grant Lockheed's motion to strike the U.S.' second affirmative defense?
The court denied the motion to strike. The court first held that the plausibility standard enunciated in Twombly and Iqbal did not apply to affirmative defenses. Although the court was mindful of the cost and efficiency concerns that blithe or shotgun assertions of affirmative defenses may raise, the standards applicable to motions to strike, as well as notice pleading principles, should usually suffice to weed out frivolous, vexatious, and/or unfairly prejudicial affirmative defenses. In denying the motion to strike, the court observed that, under 26 U.S.C. § 6402(a), it appeared that the U.S. had a statutory right to offset. In keeping with that authority, the court noted, the U.S. asserted that it was entitled to offset any overpayment by any additional tax liabilities Lockheed might owe, regardless of whether the U.S. previously assessed or alleged such liabilities. The court found no flaw in that approach.
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