Bear Stearns Mortgage Funding Trust 2007 –AR2 v. EMC Mortgage LLC, C.A. No. 6861-CS (Del. Ch. Jan. 17, 2013).

Why This Case is Noteworthy   

This case deals with a rather unusual motion under Rule 12(f) to strike portions of a complaint that are alleged to be: “Immaterial, impertinent, and scandalous.”  These motions are rarely made and even less often granted.  Not surprisingly, the motion in this case was denied but this ruling is useful for purposes of reviewing the applicable standard.

Brief Summary

The complaint in this case dealt with a breach of contractual obligations in a “Pooling and Servicing Agreement” to repurchase mortgages that did not comply with representations and warranties made.  The defendant claimed that allegations in the complaint were immaterial and impertinent because the plaintiff could prevail without making those allegations.  The Court observed that this alone does not make them immaterial or impertinent.

The standard to apply to a motion to strike under Rule 12(f) is whether the challenged allegations “have no possible relation to the subject matter of the case.”  See footnote 15.  The Court explained that the defendant failed to establish that the allegations at issue had no bearing on the case.

Nor, the Court explained, were the allegations “unduly prejudicial.”  See footnote 21.  In order for a Court to strike allegations based on a claim that they are “scandalous” as contemplated by Rule 12(f), they must be “cruelly derogatory.”  It is not enough that they may put the moving party in an unflattering light.  See footnotes 22 and 23.

Although the Court also addressed in this letter opinion a motion to dismiss and an indemnification claim, because that claim was based on an agreement governed by New York law, that aspect of the ruling will not be covered in this post.