Motion to Strike Affirmative Defenses (D.E. 162) — OTO Analytics v. Benworth

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U.S. District Court for the District of Puerto Rico · No. 3:23-cv-01034-GMM · Doc. 162 · 2024-09-09 · Docket on CourtListener

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IN THE UNITED STATES DISTRICT COURT 
FOR THE DISTRICT OF PUERTO RICO 
 
OTO ANALYTICS, LLC,  
Plaintiff, 
v. 
BENWORTH CAPITAL PARTNERS PR, 
LLC; BENWORTH CAPITAL PARTNERS, 
LLC; BERNARDO NAVARRO and 
CLAUDIA NAVARRO, 
Defendants. 
FEDERAL RESERVE BANK OF SAN 
FRANCISCO,  
Plaintiff-Intervenor, 
v. 
OTO ANALYTICS, LLC; BENWORTH 
CAPITAL PARTNERS PR, LLC; 
BENWORTH CAPITAL PARTNERS, LLC; 
BERNARDO NAVARRO and CLAUDIA 
NAVARRO, 
Defendants in Intervention. 
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Civil No. 23-01034 (GMM) cons. Civil 
No. 24-01313 (GMM) 
 
 
 
 
 
 
 
 
  
 
PLAINTIFF OTO ANALYTICS, LLC’S MOTION TO STRIKE DEFENDANTS’ 
AFFIRMATIVE DEFENSES OF UNCLEAN HANDS, SET OFF, AND PUBLIC POLICY 
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Alexander L. Cheney (admitted pro hac vice) 
333 Bush St 
San Francisco, CA 94104 
(415) 858-7400 
acheney@willkie.com 
Stuart R. Lombardi (admitted pro hac vice) 
Willkie Farr & Gallagher LLP 
787 7th Avenue 
New York, NY 10019 
(212) 728-8000 
slombardi@willkie.com 
Joshua S. Levy (admitted pro hac vice) 
1875 K Street, N.W. 
Washington, D.C. 20006 
(202) 303-1000 
jlevy@willkie.com 
Dated: September 9, 2024 
Alejandro J. Cepeda Diaz 
USDC-PR 222110 
McConnell Valdés LLC 
270 Muñoz Rivera Ave. 
Hato Rey PR 00918 
Tel: (787) 250-5637 
Email: ajc@mcvpr.com 
 
Attorneys for Plaintiff and Defendant in 
Intervention Oto Analytics, LLC  
 
 
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TABLE OF CONTENTS 
PRELIMINARY STATEMENT .....................................................................................................1 
BACKGROUND .............................................................................................................................3 
A. 
The Agreements .......................................................................................................3 
B. 
The Arbitration.........................................................................................................4 
C. 
Defendants’ Affirmative Defenses ..........................................................................7 
LEGAL STANDARD ......................................................................................................................8 
ARGUMENT ...................................................................................................................................9 
I. 
Benworth FL And Mr. Navarro Are Barred And Precluded From Asserting The 
Affirmative Defenses. ..........................................................................................................9 
A. 
Benworth FL And Mr. Navarro’s Affirmative Defenses Are Barred Because 
They Are Subject To A Binding Arbitration Agreement.........................................9 
B. 
Benworth FL And Mr. Navarro Are Estopped From Asserting The  
Affirmative Defenses. ............................................................................................11 
II. 
Benworth PR and Mrs. Navarro Lack Standing To Assert The Affirmative Defenses. ....13 
III. 
Defendants’ Affirmative Defenses Fail As A Matter Of Law. ..........................................15 
CONCLUSION ..............................................................................................................................16 
CERTIFICATE OF SERVICE ......................................................................................................18 
 
 
 
 
 
 
 
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TABLE OF AUTHORITIES 
 
Page(s) 
Cases 
ACEMLA de P.R., Inc. v. Banco Popular de P.R., Inc., 
2015 WL 10037151 (D.P.R. Oct. 30, 2015) ............................................................................13 
Álvarez-Maurás v. Banco Popular of P.R., 
919 F.3d 617 (1st Cir. 2019) ..................................................................................................2, 9 
Arthur Andersen LLP v. Carlisle,  
556 U.S. 624 (2009)  ................................................................................................................14 
Barnstable Cnty. v. 3M Co., 
2017 WL 6452245 (D. Mass. Dec. 18, 2017) ............................................................................4 
Bleavins v. Demarest, 
196 Cal. App. 4th 1533 (2011) ..........................................................................................13, 14 
Bryan Corp. v. Chemwerth, Inc., 
2013 WL 6489785 (D. Mass. Dec. 9, 2013) ..................................................................8, 15, 16 
Citizens Bank v. Strumpf, 
516 U.S. 16 (1995) ...................................................................................................................16 
Grand Wireless, Inc. v. Verizon Wireless, Inc., 
748 F.3d 1 (1st Cir. 2014) ............................................................................................10, 11, 14 
Kalkey v. Euromodas, Inc., 
706 F. Supp. 3d 305 (D.P.R. 2023) ..........................................................................................13 
Manganella v. Evanston Ins. Co., 
700 F.3d 585 (1st Cir. 2012) ..............................................................................................11, 13 
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 
473 U.S. 614 (1985)  ..................................................................................................................9 
Merigan v. Liberty Life Assur. Co. of Boston, 
839 F. Supp. 2d 445 (D. Mass. 2012) ......................................................................................16 
Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 
324 U.S. 806 (1945) .................................................................................................................15 
Ray v. Austin Indus., Inc., 
2018 WL 4701375 (D.S.C. Sept. 29, 2018) .............................................................................10 
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Rodríguez-García v. Miranda-Marín, 
610 F.3d 756 (1st Cir. 2010) ................................................................................................2, 13 
Safeguard Props. Mgmt., LLC v. MidFirst Bank, 
2017 WL 4541592 (N.D. Ohio Oct. 11, 2017) ........................................................................10 
Sourcing Unlimited, Inc. v. Asimco Int’l, Inc., 
526 F.3d 38 (1st Cir. 2008) ......................................................................................................10 
Taylor v. Sturgell, 
553 U.S. 880 (2008) .................................................................................................................15 
Rule 
Fed. R. Civ. P. 12(f) .................................................................................................................1, 4, 8 
Other Authority 
5C Charles A. Wright, Arthur R. Miller, et al., Federal Practice and Procedure 
§ 1381 (3d ed. 2024) ..................................................................................................................8 
 
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Pursuant to Federal Rule of Civil Procedure 12(f), Plaintiff Oto Analytics, LLC (f/k/a Oto 
Analytics, Inc. d/b/a Womply) (“Womply”), by and through its undersigned counsel, respectfully 
requests that this Court strike Defendants Benworth Capital Partners PR, LLC (“Benworth PR”), 
Benworth Capital Partners, LLC (“Benworth FL”), Bernardo Navarro (“Mr. Navarro”), and 
Claudia Navarro’s (“Mrs. Navarro”; collectively “Defendants”) affirmative defenses of unclean 
hands, set off, and public policy (collectively, the “Affirmative Defenses”). 
PRELIMINARY STATEMENT 
This case is about Defendants’ fraudulent transfer of more than $171 million from 
Benworth FL to Benworth PR (and likely into the pockets of Mr. and Mrs. Navarro) to keep those 
funds from Benworth FL’s creditors.  Benworth FL owes Womply approximately $118 million 
under a final arbitration award (the “Final Award”) and owes the Federal Reserve Bank of 
San Francisco (“Federal Reserve”) approximately $67 million under its Paycheck Protection 
Program (“PPP”) lending facility.  Womply and the Federal Reserve are seeking to recover those 
funds and bring claims for actual fraudulent transfer, constructive fraudulent transfer, and 
additional declaratory and equitable relief, which turn on Benworth FL’s fraudulent intent, 
Benworth FL’s solvency, and whether Benworth FL received reasonably equivalent value. 
In response to Womply’s claims, and to distract from their own fraudulent conduct, 
Defendants assert Affirmative Defenses of unclean hands, set off, and public policy that are 
completely irrelevant to Womply’s claims.  Defendants’ unclean hands/set off defense alleges that 
Womply did not sufficiently screen out fraudulent loan applications it referred to Benworth FL 
and has not provided unspecified “loan files” to Benworth FL.  Defendants’ second set off defense 
speculates that the U.S. Small Business Administration (“SBA”) could find in the future that 
Womply’s fees to Benworth FL violated SBA regulations.  And Defendants’ public policy defense 
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asserts that Womply’s fees to Benworth FL violate SBA regulations.  These purported Affirmative 
Defenses are irrelevant to the issues in this case:  whether Benworth FL fraudulently transferred 
funds to Benworth PR to avoid creditors, whether Benworth PR is the alter ego of Benworth FL, 
and whether Mr. and Mrs. Navarro should be held responsible for Benworth FL’s and Benworth 
PR’s debts.  Worse, the issues raised by the Affirmative Defenses are subject to a binding 
arbitration agreement.  Indeed, many of them were already rejected by the arbitrator in the 
arbitration between Womply and Benworth FL (the “Arbitration”) that led to this action.   
This Court should strike the Affirmative Defenses for at least three reasons. 
First, Benworth FL and Mr. Navarro are barred and precluded from asserting the 
Affirmative Defenses in this action because they agreed to arbitrate those issues.  All of the 
Affirmative Defenses are based on agreements between Womply and Benworth FL, which contain 
a broad arbitration provision covering “any dispute between parties to the subject matter” of the 
agreements.  Because the Affirmative Defenses “fall within the expansive ambit of this arbitration 
provision,” they cannot “be pursued outside the arbitration framework” and must be stricken.  
Álvarez-Maurás v. Banco Popular of P.R., 919 F.3d 617, 624 (1st Cir. 2019).  In fact, Benworth 
FL and Mr. Navarro already “litigated and lost” on many of the same issues they now raise in their 
Affirmative Defenses, so they are precluded from “relitigating [these] issues that have been 
previously adjudicated.”  Rodríguez-García v. Miranda-Marín, 610 F.3d 756, 770–71 (1st Cir. 
2010) (cleaned up; collecting cases). 
Second, Benworth PR and Mrs. Navarro lack standing to assert the Affirmative Defenses.  
The Affirmative Defenses are based on agreements between Womply and Benworth FL, a 
nonparty to an agreement lacks standing to assert claims based on those agreements, and Benworth 
PR and Mrs. Navarro admit that each “was not a party to” these agreements.  To the extent 
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Benworth PR and Mrs. Navarro try to obtain the benefits of these agreements in their Affirmative 
Defenses, this helps proves Womply’s alter ego, successor liability, and piercing the corporate veil 
claims that Benworth FL and Benworth PR are not separate entities. 
Finally, should this Court reach the merits of the Affirmative Defenses, they all fail as a 
matter of law.  Accordingly, the Affirmative Defenses should be stricken. 
BACKGROUND 
A. 
The Agreements 
On April 14, 2021, Benworth FL and Womply entered into an Amended and Restated PPP 
Loan Referral Agreement (the “Referral Agreement”) and a Womply Developer Order Form (the 
“Order Form”; together with the Referral Agreement, the “Agreements”).  (Amended Complaint 
(“Am. Compl.”; ECF No. 125) ¶ 92 & Exs. 2–3; Benworth FL’s Answer ¶ 92, ECF No. 150; 
Mr. Navarro’s Answer ¶ 92, ECF No. 152.)  Mr. Navarro, Benworth FL’s sole member, founder, 
President, and CEO, signed the Agreements.  (Id.; Am. Compl. ¶ 24; Benworth FL’s Answer ¶ 24; 
Mr. Navarro’s Answer ¶ 24; Referral Agreement at 4; Order Form at 1.) 
Under the Agreements, Womply agreed to provide certain referral and technology services 
to Benworth FL in connection with PPP loans and loan applications, and Benworth FL agreed to 
pay Womply certain fees for these services.  (Am. Compl. ¶¶ 95–119; Benworth FL’s Answer 
¶¶ 96, 98–99, 106, 109, 111–12, 119; Mr. Navarro’s Answer ¶¶ 96, 98–99, 106, 109, 111–12, 119; 
Referral Agreement §§ 2.1–2.3; Order Form §§ 2.1–2.3.)  The Agreements provide that “Womply 
shall return any portion of the [] Fees paid that the SBA or other governmental agency determines 
were not in compliance with applicable SBA and/or PPP Loan Program Requirements.”  (Referral 
Agreement § 2.3; Order Form § 2.3.)  After termination of the Agreements, Benworth FL “may 
request from Womply, and Womply shall reasonably provide to [Benworth FL], a plan for 
transmitting to [Benworth FL] electronic copies of loan files in its possession that related to the 
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Referred Loans, to the extent not otherwise in the possession of [Benworth FL].”  (Referral 
Agreement § 4.3.) 
The Agreements contain a broad arbitration provision (the “Arbitration Provision”), 
which provides that: 
Without limiting a party’s right to seek injunctive or other equitable 
relief in court, any dispute between the parties related to the subject 
matter of this Agreement will be resolved by binding arbitration in 
the English language in San Francisco County, California under the 
rules of JAMS; the decision of the arbitrator will be enforceable in 
any court.  The prevailing party in any action to enforce this 
Agreement shall be entitled to costs and attorneys’ fees. 
(Am. Compl. ¶ 27 (emphasis added); Benworth FL’s Answer ¶ 27; Mr. Navarro’s Answer ¶ 27; 
Referral Agreement § 10; Order Form § 4.)  The Agreements also contain a choice-of-law 
provision, which states that they “shall be governed by and construed in accordance with the laws 
of the State of California.”  (Referral Agreement § 9; Order Form § 4.) 
B. 
The Arbitration 
On August 25, 2021, Womply commenced JAMS arbitration proceedings against 
Benworth FL alleging that Benworth FL breached the Agreements by failing to pay Womply its 
fees.  (Am. Compl. ¶¶ 2, 157–58; Benworth FL’s Answer ¶¶ 2, 157–58; Mr. Navarro’s Answer 
¶¶ 2, 157–58; Declaration of Joshua S. Levy (“Levy Decl.”) ¶ 3 Ex. A (“Final Award”) at 4–5, 29–
30.)1  In response, Benworth FL asserted “two affirmative defenses (illegality and set off) and four 
counterclaims (declaratory relief, breach of contract, severance and enforcement, and money had 
and received), all alleging that Womply’s fees under the Agreements are ‘unlawful,’ ‘illegal,’ and 
 
1 On a motion to strike, like on a Rule 12(b)(6) motion to dismiss, this Court “may take judicial 
notice of proceedings in other courts,” including “an arbitration award,” to “establish the existence 
of the related litigation, what claims were asserted, and what issues were argued and decided.”  
Barnstable Cnty. v. 3M Co., 2017 WL 6452245, at *4 (D. Mass. Dec. 18, 2017) (cleaned up; 
collecting cases). 
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‘not in compliance with SBA Regulations’ because they exceed the limits established by the SBA 
Administrator in the Interim Final Rule” (the “Fee Cap Argument”).  (Final Award at 33 (quoting 
Benworth’s Arbitration Answer at 6–11).)  Benworth FL also argued that “the parties’ Agreements 
are not valid under SBA regulations because Womply was a Lender Service Provider and failed to 
submit the Agreements to the SBA” (the “Lender Service Provider Argument”).  (Id. at 41.)  
After a “seven-day in-person evidentiary hearing” (the “Hearing”) with six live witnesses, more 
than 350 documents “introduced and admitted into evidence,” and extensive pre- and post-Hearing 
briefing, the Arbitrator rejected all of Benworth FL’s affirmative defenses and counterclaims and 
awarded Womply approximately $118 million.  (Id. at 7–8, 72–73.)2  
Benworth FL also asserted a counterclaim “for declaratory relief” under “Section 4.3 of 
the Referral Agreement” seeking “a declaration that Womply is obligated to promptly reinstate 
Benworth’s access to Womply technology platform or in the alternative to transmit electronic 
copies of borrowers’ loan files” (the “Loan File Claim”).  (Id. at 6 & n.4, 52, 58.)  Benworth FL 
“abandoned” its “request for declaratory relief concerning its delivery of borrower files” during 
“the Hearing” and “previous proceedings.”  (Id. at 58.)  Benworth FL then “sought 
reconsideration” of this claim, arguing that “because of missing loan files, the SBA has denied the 
guaranteed purchase of thousands of Womply-referred loans,” and, “if the SBA ultimately does 
not buyback these loans, Benworth will have to refund the principal loan amounts that the Federal 
Reserve advanced to Benworth for funding PPP loans,” and “Womply’s recovery should therefore 
 
2 (See also Final Award at 41 (“[T]he Technology Services provided by Womply to Benworth 
were not subject to the SBA’s 1% Agent Fee Cap . . . .  The Technology Fees are not illegal and 
therefore, they need not be severed from the Order Form.”); id. at 44–45 (“Womply was not an 
LSP”); id. at 47 (“Benworth has failed to prove that, even if Womply was an LSP, the parties’ 
failure to submit the Agreements to the SBA would have rendered the Agreements invalid or 
void.”); id. at 53 & n.15 (“[T]he Technology Fee provision in the Order Form and the parties’ 
Agreements as a whole are not void, illegal, or unenforceable”).)   
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be offset by the amount that Benworth is ultimately required to repay, if anything.”  (Id.; Levy 
Decl. ¶ 4 Ex. B (“Feb. 20, 2024 Arbitration Order”) at 3–4 & n.1.)  “Womply consent[ed] to 
declaratory judgment being entered,” the Arbitrator ordered Womply to “transmit copies of 
borrowers’ loan files to Benworth,” and Womply promptly did so.  (Feb. 20, 2024 Arbitration 
Order at 4.) 
Benworth FL initially asserted an affirmative defense of “Promissory Fraud: arguing that 
Womply is barred, in whole or in part, from recovering outstanding Referral Fees because Womply 
promised Benworth that it would materially improve its technology platform to reduce the risk of 
loss” from fraudulent PPP loan applications “but did not, in fact, intend to honor that promise when 
it was made” (the “Fraudulent Loan Argument”) (Final Award at 5.)  However, Benworth FL 
refused to comply with the Arbitrator’s discovery order to produce “its list of fraudulent loans to 
Womply,” and Benworth FL instead “voluntarily dismissed its Promissory Fraud affirmative 
defense.”  (Id.) 
On July 1, 2024, Womply filed a Petition To Confirm Arbitration Award And For Entry 
Of Judgment in federal courts in the Northern District of California.  Oto Analytics, LLC v. 
Benworth Capital Partners LLC, No. 3:24-cv-03975 (N.D. Cal. July 1, 2024), ECF No. 1.  In 
response, Benworth FL filed a separate Petition to Vacate Final Arbitration, which argued, among 
other things, that “the Final Award is unenforceable because it compels Benworth to violate public 
policy,” because “SBA Regulations and interpretations of those regulations [] require agents, 
lender service providers, and lenders to submit compensation agreements for review by the SBA.”  
(Levy Decl. ¶ 5 Ex. C at 62–63 (capitalization omitted).)  On September 6, 2024, Benworth FL 
filed an opposition to Womply’s Petition raising the same arguments.  (Id. ¶ 6 Ex. D at 24.) 
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C. 
Defendants’ Affirmative Defenses 
On August 19, 2024, each Defendant filed an Answer raising the same sixteen affirmative 
defenses.  (ECF Nos. 149–52.)  As relevant to this Motion, Defendants assert defenses of “unclean 
hands” (Second Affirmative Defense), “set off” (Fourteenth and Fifteenth Affirmative Defenses), 
and “public policy” (Sixteenth Affirmative Defense) that seek to re-litigate the same Fee Cap 
Argument, Lender Service Provider Argument, Loan File Claim, and Fraudulent Loan Argument 
that that were the subject of the Arbitration.  (Id.)  For their unclean hands and set off defenses, 
Defendants allege that: 
The fees Womply seeks from Benworth FL include fees gained 
through missing loan files and fraudulent applications for PPP loans 
that Womply referred.  The SBA has denied the guaranteed purchase 
of thousands of Womply-referred loans totaling more than 
$51 million, and it may deny an additional $68 million more.  Thus, 
if the SBA ultimately does not buyback these loans, Benworth FL 
will have to refund the principal loan amounts that the Federal 
Reserve advanced to Benworth FL for funding these Womply-
referred fraudulent PPP loans. 
(Benworth FL’s Answer at 37, 39–40; Mr. Navarro’s Answer at 35–36, 38–39; Benworth PR’s 
Answer at 40–41, 44, ECF No. 149; Mrs. Navarro’s Answer at 42, 45–46, ECF No. 151.)  For their 
second set off defense, Defendants allege that: 
Section 2.3 of the Referral Agreement and Section 2.3 of the Order 
Form provide that Womply shall return any fees paid by Benworth 
FL that the SBA or other governmental agency determines were not 
in compliance with applicable SBA and/or PPP Loan Program 
Requirements.  Benworth FL has paid Womply approximately 
$465 million in fees and those fees are currently the subject of an 
investigation by the SBA and/or other governmental agencies.  If the 
SBA and/or another governmental agency determines that the fees 
Benworth FL paid Womply, in whole or in part, were not in 
compliance with applicable SBA and/or PPP Loan Program 
Requirements, Womply must return those fees to Benworth FL and 
any damages awarded to Womply here should therefore be set off 
by the amount of fees that Womply is required to return to 
Benworth FL 
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(Benworth FL’s Answer at 40; Mr. Navarro’s Answer at 39; Benworth PR’s Answer at 44; Mrs. 
Navarro’s Answer at 46.)  And for their public policy defense, Defendants allege that: 
[C]ompelling Benworth FL to pay Womply fees would require 
Benworth FL to violate public policy.  The SBA has an explicit, 
well-defined policy that specifically militates against the relief 
Womply seeks here.  That public policy expressly provides that 
agents, including lender service providers, like Womply, are only 
entitled to fees from lenders in connection with SBA loans that are 
owed under agreements that were submitted to and approved by the 
SBA.  See 13 C.F.R. §§ 103.5(a), (c); Small Business 
Administration, Office of Capital Access, SOP 50 10 6: Lender and 
Development Company Loan Programs at p. 185 (Oct. 1, 2020).  
Womply acted as an agent and lender service provider under the 
Parties’ Agreements.  The relief Womply seeks here is the payment 
of fees under agreements that indisputably were never submitted to 
or approved by the SBA.  Ordering Benworth FL to pay Womply 
those fees as damages here would thus require Benworth FL to 
violate the SBA’s explicit, well-defined policy.  Accordingly, 
Womply is barred from recovering damages in this action from 
Benworth FL. 
(Benworth FL’s Answer at 40–41; Mr. Navarro’s Answer at 39–40; Benworth PR’s Answer at 45; 
Mrs. Navarro’s Answer at 46–47.)  These defenses should be stricken. 
LEGAL STANDARD 
Under Rule 12(f), this “[C]ourt may strike from a pleading an insufficient defense.”  “A 
motion to strike offers the primary opportunity for a plaintiff to object to affirmative defenses and 
is governed by the same standards as a motion to dismiss filed pursuant to Fed. R. Civ. P. 12(b)(6).”  
Bryan Corp. v. Chemwerth, Inc., 2013 WL 6489785, at *1, *7 (D. Mass. Dec. 9, 2013) (cleaned 
up; collecting cases) (striking “affirmative defense of unclean hands”).  Courts permit “the 
successful use of motion to strike in connection with insufficient affirmative defenses” in “a wide 
range of different factual and substantive contexts.”  5C Charles A. Wright, Arthur R. Miller, et 
al., Federal Practice and Procedure § 1381 (3d ed. 2024) (collecting cases). 
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ARGUMENT 
I. 
Benworth FL And Mr. Navarro Are Barred And Precluded From Asserting The 
Affirmative Defenses. 
A. Benworth FL And Mr. Navarro’s Affirmative Defenses Are Barred Because They 
Are Subject To A Binding Arbitration Agreement. 
The Federal Arbitration Act (“FAA”) reflects “a strong federal policy favoring arbitration,” 
such that “‘any doubts concerning the scope of arbitrable issues should be resolved in favor of 
arbitration.’”  Álvarez-Maurás, 919 F.3d at 624 n.9 (quoting Mitsubishi Motors Corp. v. Soler 
Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985)).  Benworth FL admits that it agreed that “any 
dispute between the parties related to the subject matter of this Agreement will be resolved by 
binding arbitration.”  (See supra at 4 (emphasis added).)  Benworth FL’s Affirmative Defenses 
“fall within the expansive ambit of this arbitration provision,” and therefore cannot “be pursued 
outside the arbitration framework.”  Álvarez-Maurás., 919 F.3d at 624 (citing Mitsubishi, 473 U.S. 
at 628). 
There can be no serious dispute that the Affirmative Defenses are related to the subject 
matter of the Agreements.  Benworth FL’s unclean hands/set off defense (Second and Fourteenth 
Affirmative Defenses) is based on purportedly “missing loan files and fraudulent applications for 
PPP loans that Womply referred” to Benworth FL.  (Benworth FL’s Answer at 37, 39–40.)  This 
defense is therefore based on Section 1.1 of the Referral Agreement pursuant to which Womply 
referred PPP loan applications to Benworth FL; Section 4.3 of the Referral Agreement under which 
Womply is obligated to provide Benworth FL with borrowers’ loan files; and the “API Package” 
in the Order Form, including “Business Fraud Analytics” and “Account Verification.”  (Referral 
Agreement §§ 1.1, 4.3; Order Form at 1.)  It also implicates Section 1.2 of the Referral Agreement 
and Section 1.1 of the Order Form in which Womply disclaimed the “accuracy, lawfulness, or 
completeness of any information accompanying a referral.”  (Referral Agreement § 1.2 
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(capitalization omitted); Order Form § 1.1 (same); see also id. § 1.2 (disclaiming “responsibility 
for the action, errors, or omissions of the third party providers”) (capitalization omitted).) 
Benworth’s FL’s second set off defense (Fifteenth Affirmative Defense) is explicitly based 
on “Section 2.3 of the Referral Agreement and Section 2.3 of the Order Form.”  (Benworth FL’s 
Answer at 40.)  Thus, even if the SBA were to make some determination regarding Womply’s 
fees, the extent to which Benworth FL would have any cause of action against Womply would 
have to be resolved in arbitration.  And Benworth FL’s public policy defense (Sixteenth 
Affirmative Defense) challenges the legality of “the payment of fees under [the] [A]greements.”  
(Id. at 40–41.)  Because all of Benworth FL’s Affirmative Defenses are “related to the subject 
matter of th[e] Agreement[s],” they are subject to the Arbitration Provision and Benworth FL 
cannot pursue them in court.  See Grand Wireless, Inc. v. Verizon Wireless, Inc., 748 F.3d 1, 4, 8–
9 (1st Cir. 2014) (compelling arbitration based on “broadly worded” arbitration provision 
governing “any controversy or claim arising out of or relating to this agreement”) (cleaned up; 
collecting cases); see also Ray v. Austin Indus., Inc., 2018 WL 4701375, at *4 (D.S.C. Sept. 29, 
2018) (holding that “unclean hands” defense must “be decided by the arbitrator rather than the 
court”); Safeguard Props. Mgmt., LLC v. MidFirst Bank, 2017 WL 4541592, at *1–2 (N.D. Ohio 
Oct. 11, 2017) (dismissing claims where defendants raised “affirmative defenses” regarding “a 
right of setoff” that “are subject to mandatory arbitration”). 
Mr. Navarro is likewise bound by the Arbitration Provision, which bars his Affirmative 
Defenses.  Mr. Navarro admits that he signed the Agreements and that he is Benworth FL’s sole 
member.  (See supra at 3.)  Federal courts routinely “estop a signatory from avoiding arbitration” 
where, as here, “the subject matter of the suit is intertwined with the subject matter within the 
scope of the arbitration clause.”  Sourcing Unlimited, Inc. v. Asimco Int’l, Inc., 526 F.3d 38, 47 
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(1st Cir. 2008) (cleaned up; collecting cases).  At a minimum, Mr. Navarro signed the Agreements 
in his capacity as President and/or CEO of Benworth FL.  (See supra at 3.)  Because a company 
can “operate only through the actions of its employees,” it is settled law “founded on general state 
law principles of agency,” that “when a principal is bound under the terms of a valid arbitration 
clause, its agents, employees, and representatives are also covered under the terms of such 
agreements.”  Grand Wireless, 748 F.3d at 11 (cleaned up; collecting cases). 
B. Benworth FL And Mr. Navarro Are Estopped From Asserting The Affirmative 
Defenses. 
“Issue preclusion (also called collateral estoppel) prevents a party from relitigating issues 
that have been previously adjudicated.”  Manganella v. Evanston Ins. Co., 700 F.3d 585, 591 (1st 
Cir. 2012) (cleaned up; collecting cases).  The doctrine “bar[s] relitigation of an issue decided in 
an earlier action where:  (1) the issues raised in the two actions are the same; (2) the issue was 
actually litigated in the earlier action; (3) the issue was determined by a valid and binding final 
judgment; and (4) the determination of the issue was necessary to that judgment.”  Id. (collecting 
cases).  It applies “where the subsequent proceeding involves a cause of action different from the 
first” so long as the “issues presented in the two actions are in substance the same.”  Id. (cleaned 
up; collecting cases).  “[F]inal arbitral awards are afforded the same preclusive effects as are prior 
court judgments.”  Id. (collecting cases).  “Under modern preclusion doctrine, the central question 
is whether a party has had a full and fair opportunity for judicial resolution of the same issue.”  Id. 
(cleaned up; collecting cases).  All of these requirements are satisfied for each of Benworth FL’s 
Affirmative Defenses, which are therefore precluded. 
Benworth FL’s unclean hands/set off defense asserts that “the fees Womply seeks from 
Benworth FL include fees gained through missing loan files and fraudulent applications for PPP 
loans that Womply referred,” for which the SBA may “not buyback these loans,” and “Benworth 
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FL will have to refund the principal loan amounts that the Federal Reserve advanced to Benworth 
FL.”  (Benworth FL’s Answer at 37, 39–40.)  Benworth FL made the same Loan File Claim and 
Fraudulent Loan Argument in the Arbitration.  There, Benworth FL sought a declaratory judgment 
requiring Womply to produce borrowers’ loan files, arguing that “if the SBA ultimately does not 
buyback these loans, Benworth will have to refund the principal loan amounts that the Federal 
Reserve advanced to Benworth for funding PPP loans.”  (See supra at 5.)  Womply consented to 
the declaratory judgment, the Arbitrator ordered Womply to produce such loan files, and Womply 
did so.  (Id.)  Benworth FL also alleged in the Arbitration that Womply referred to Benworth FL 
fraudulent applications for PPP loans and this claim was dismissed.  (Id.) 
Benworth FL’s public policy defense asserts that SBA regulations “provide[] that agents, 
including lender service providers, like Womply, are only entitled to fees from lenders in 
connection with SBA loans that are owed under agreements that were submitted to and approved 
by the SBA,” “Womply acted as an agent and lender service provider under the Parties’ 
Agreements,” and “[t]he relief Womply seeks here is the payment of fees under agreements that 
indisputably were never submitted to or approved by the SBA.”  (Benworth FL’s Answer at 40–
41.)  Benworth FL made the same Lender Service Provider Argument in the Arbitration.  There, 
Benworth FL likewise argued that “the parties’ Agreements are not valid under SBA regulations 
because Womply was a Lender Service Provider and failed to submit the Agreements to the SBA.”  
(Final Award at 41.)  The Arbitrator rejected this argument, holding that “Womply was not an 
LSP,” and “Benworth has failed to prove that, even if Womply was an LSP, the parties’ failure to 
submit the Agreements to the SBA would have rendered the Agreements invalid or void.”  (Id. at 
44–45, 47.) 
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Mr. Navarro is also precluded from asserting the Affirmative Defenses.  As discussed 
above (see supra Section I.A), Mr. Navarro is the sole member, President, and CEO of Benworth 
FL.  He is therefore “bound by a judgment in a previous case,” because he is Benworth FL’s 
“privy” or agent.  Rodríguez García, 610 F.3d at 770–71 (cleaned up; collecting cases).  In fact, 
Mr. Navarro attended every day of the Hearing and was a key witness.  (See Final Award at 24, 
29, 37, 39, 48, 50–51 (citing Mr. Navarro’s testimony).)  In any event, “[t]here is no longer a strict 
mutuality requirement for collateral estoppel,” which precludes Mr. Navarro from relitigating the 
same issues that Benworth FL “litigated and lost” in the Arbitration.  ACEMLA de P.R., Inc. v. 
Banco Popular de P.R., Inc., 2015 WL 10037151, at *4 (D.P.R. Oct. 30, 2015) (citing Rodríguez 
García, 610 F.3d at 771). 
In sum, “the arbitration presented” Benworth FL and Mr. Navarro with “the full and fair 
opportunity for adjudication of the issue[s] at hand,” and “allowing [them] to contest these 
questions now would contravene the twin goals of issue preclusion: protecting litigants from the 
burden of relitigating settled issues and promoting judicial economy by preventing needless 
litigation.”  Manganella, 700 F.3d at 594–95 (cleaned up; collecting cases). 
II. 
Benworth PR and Mrs. Navarro Lack Standing To Assert The Affirmative Defenses. 
Under California law, which governs the Agreements, “[s]omeone who is not a party to a 
contract has no standing” to “assert any claim concerning the contractual relationship.”  Bleavins 
v. Demarest, 196 Cal. App. 4th 1533, 1542 (2011) (cleaned up; collecting cases); see also Kalkey 
v. Euromodas, Inc., 706 F. Supp. 3d 305, 321 (D.P.R. 2023) (“In general, ex contractu actions can 
only be brought by one contracting party against the other. A stranger to the contractual 
relationship . . . may demand the fulfillment of a contract successfully only if the contract contains 
a stipulation in his favor.”) (cleaned up; collecting cases).  Benworth PR and Mrs. Navarro assert 
repeatedly that each “was not a party to the Referral Agreement or Order Form” and “was not a 
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party to the arbitration.”  (See, e.g., Benworth PR’s Answer ¶¶ 14–15, 19, 29, 92, 94–123; Mrs. 
Navarro’s Answer ¶¶ 14–15, 19, 29, 92, 94–123.)  Accordingly, they “have no standing to 
challenge the performance” or legality of the Agreements in their Affirmative Defenses.  Bleavins, 
196 Cal. App. 4th at 1542–43 (cleaned up; collecting cases). 
Benworth PR and Mrs. Navarro are trying to have it both ways.  They insist that they are 
separate from Benworth FL and are not parties to the Agreements (see Benworth PR’s Answer 
¶¶ 11, 185–99, 241–55; Mrs. Navarro’s Answer ¶¶ 11, 185–99, 241–55), but also want the benefits 
of the Agreements, including “loan files” from Womply pursuant to Section 4.3 of the Referral 
Agreement and fee reductions under “Section 2.3 of the Referral Agreement and Section 2.3 of the 
Order Form” (Benworth PR’s Answer at 44; Mrs. Navarro’s Answer at 45–46).  By seeking to 
obtain the benefits of the Agreements, Benworth PR and Mrs. Navarro effectively admit that “[t]he 
separation of Benworth FL and Benworth PR as distinct corporate entities is an illusion—they are 
effectively the same company,” and Benworth PR and Mrs. Navarro can be held liable under alter 
ego, successor liability, and piercing the corporate veil principles.  (Am. Compl. ¶¶ 11, 185–99, 
241–55.)  Thus, even if Benworth PR and Mrs. Navarro have standing to assert the Affirmative 
Defenses, those defenses are barred by the Arbitration Provision, which can be “enforced by or 
against nonparties to the contracts through assumption, piercing the corporate veil, alter ego, 
incorporation by reference, third-party beneficiary theories, waiver and estoppel.”  Grand 
Wireless, 748 F.3d at 12 (quoting Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631 (2009)).  
For the same reasons, Benworth PR and Mrs. Navarro’s Affirmative Defenses are also precluded 
by the Arbitration.  See Taylor v. Sturgell, 553 U.S. 880, 894 (2008) (holding that “nonparty 
preclusion may be justified on a variety of pre-existing substantive legal relationships between the 
person to be bound and a party to the judgment”) (cleaned up; collecting authority).  
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III. 
Defendants’ Affirmative Defenses Fail As A Matter Of Law. 
Should this Court reach the merits of the Affirmative Defenses (which it should not) they 
all fail as a matter of law because they are not valid defenses or they are inadequately pleaded. 
First, “the doctrine of unclean hands” is “an equitable remedy that allows a court to refuse 
to aid ‘one tainted with inequitableness or bad faith relative to the matter in which he seeks relief.’”  
Bryan, 2013 WL 6489785, at *2 (quoting Precision Instrument Mfg. Co. v. Auto. Maint. Mach. 
Co., 324 U.S. 806, 814 (1945)).  “In order to deny relief to a party because of inequitable conduct, 
the conduct at issue must directly affect the claim being brought.”  Id. (cleaned up; collecting 
cases).  Defendants fail to allege that Womply engaged in any “inequitable conduct,” let alone 
conduct directly relevant to this action.  Rather, Defendants allege that borrowers submitted 
“fraudulent applications for PPP loans that Womply referred.”  (See supra at 7.)  Defendants also 
allege that Womply is “missing loan files,” which is at most a breach-of-contract claim under the 
Agreements, not “inequitable conduct.”   
Moreover, none of Defendants’ allegations “relate[] to the conduct at issue in this 
litigation.”  Bryan, 2013 WL 6489785, at *3.  Womply alleges that Benworth FL fraudulently 
transferred funds to Benworth PR to render Benworth FL judgment-proof so Womply could not 
collect the Final Award from Benworth FL.  (See Am. Compl. ¶¶ 165–204.)  The fact that the SBA 
may “not buyback” certain Womply-referred loans and Benworth FL may “have to refund the 
principal loan amounts that the Federal Reserve advanced to Benworth FL” (see supra at 5) is 
“unrelated to the events raised in this case,” so “the unclean hands defense sh[ould] be stricken.”  
Bryan, 2013 WL 6489785, at *3. 
Second, Defendants cannot repackage the same flawed unclean hands defense as a set off 
defense.  “The right of setoff (also called ‘offset’) allows parties that owe each other money to 
apply their mutual debts against each other thereby avoiding the absurdity of making A pay B 
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when B owes A.”  Merigan v. Liberty Life Assur. Co. of Boston, 839 F. Supp. 2d 445, 448 (D. 
Mass. 2012) (quoting Citizens Bank v. Strumpf, 516 U.S. 16, 18 (1995)).  This defense is 
inapplicable here because Womply does not owe Defendants any debts.  Defendants seek to reduce 
the debts Benworth FL owes to Womply based on the additional debts Benworth FL owes to the 
Federal Reserve.  (See supra at 7.)  This is not a valid set off defense; it is a refusal to pay debts. 
Third, Defendants’ second set off defense similarly fails because there are no offsetting 
debts.  Defendants speculate that “[i]f the SBA and/or another governmental agency determines 
that the fees Benworth FL paid Womply, in whole or in part, were not in compliance with 
applicable SBA and/or PPP Loan Program Requirements, Womply must return those fees to 
Benworth FL and any damages awarded to Womply here should therefore be set off by the amount 
of fees that Womply is required to return to Benworth FL.”  (Id. (emphasis added).)  Thus, 
Defendants implicitly admit that the SBA has not made any such determination, Womply currently 
has no obligation to return any fees to Benworth FL, and therefore there are no offsetting debts. 
Finally, Defendants vaguely allege “public policy” (see supra at 8), which is not a valid 
defense to any of Womply’s claims.  Defendants have simply relabeled Benworth FL’s “illegality” 
contract defense from the Arbitration as “public policy,” and copied Benworth FL’s “public 
policy” arguments for vacating the Final Award into theirs Answers.  (See Final Award at 5, 32–
33, 46; Levy Decl. Ex. C at 62–63; id. Ex. D at 24.)  None of this is relevant to whether Benworth 
FL fraudulently transferred funds to Benworth PR. 
CONCLUSION 
For the foregoing reasons, Womply respectfully requests that this Court strike Defendants’ 
affirmative defenses of unclean hands, set off, and public policy. 
 
Case 3:23-cv-01034-GMM     Document 162     Filed 09/09/24     Page 21 of 23

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Dated: September 9, 2024 
Of Counsel 
Willkie Farr & Gallagher LLP 
By: /s/ Alexander L. Cheney 
Alexander L. Cheney (admitted pro hac vice) 
333 Bush St 
San Francisco, CA 94104 
(415) 858-7400 
acheney@willkie.com 
Stuart R. Lombardi (admitted pro hac vice) 
Willkie Farr & Gallagher LLP 
787 7th Avenue 
New York, NY 10019 
(212) 728-8000 
slombardi@willkie.com 
Joshua S. Levy (admitted pro hac vice) 
1875 K Street, N.W. 
Washington, D.C. 20006 
(202) 303-1000 
jlevy@willkie.com 
Respectfully submitted, 
By: /s/ Alejandro J. Cepeda Diaz 
  
Alejandro J. Cepeda Diaz 
USDC-PR 222110 
McConnell Valdés LLC 
270 Muñoz Rivera Ave. 
Hato Rey PR 00918 
Tel: (787) 250-5637 
Email: ajc@mcvpr.com 
 
Attorneys for Plaintiff and Defendant in 
Intervention Oto Analytics, LLC  
 
 
Case 3:23-cv-01034-GMM     Document 162     Filed 09/09/24     Page 22 of 23

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CERTIFICATE OF SERVICE 
The undersigned certifies that on September 9, 2024 the foregoing document was filed with 
the Clerk of the Court using CM/ECF, which sent notices to all parties receiving notifications 
through the CM/ECF system. 
 
Dated: September 9, 2024  
 
 
 
 
By: /s/ Alejandro J. Cepeda Diaz 
Attorney for Plaintiff Oto Analytics, LLC 
 
Case 3:23-cv-01034-GMM     Document 162     Filed 09/09/24     Page 23 of 23

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