Meeper, LLC v. Lester et al

Filing 113

ORDER granting 94 Motion to Amend/Correct/Modify. Status Report due by 10/20/2014. By Magistrate Judge Kathleen M. Tafoya on 10/10/2014. (athom, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Magistrate Judge Kathleen M. Tafoya
Civil Action No. 12BcvB01732BWYDBKMT

MEEPER, LLC, a Delaware limited liability company,
Plaintiff,
v.
CHARLES C. POWERS, and
DAVIS ENGINEERING SERVICE, INC., a Colorado corporation,
Defendants.

ORDER

This matter is before the court on “Plaintiff’s Motion for Leave to File First Amended
Complaint.” (Doc. No. 94, filed May 9, 2014.) “Defendants Charles C. Powers’s Response to
Plaintiff’s Motion for Leave to File First Amended Complaint” was filed on June 24, 2014 (Doc.
No. 101) and “Defendant Davis Engineering, Inc.’s Response to Plaintiff’s Motion for Leave to
file a First Amended Complaint” was filed on June 26, 2014 (Doc. No. 102). Plaintiff’s Reply
was filed on July 14, 2014 (Doc. No. 110). For the following reasons, Plaintiff’s Motion to
Amend is GRANTED.
In its Complaint, filed July 3, 2012 (Doc. No. 1), Plaintiff has asserted eleven claims
against Defendants Charles Powers, Davis Engineering Service, Inc., and three other individuals
who have since been dismissed as defendants, arising out of a real estate transaction in Rio
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Grande County, Colorado. Plaintiff now seeks leave to file its proposed Amended Complaint
(Doc. No. 94-1), which (1) removes the claims against the dismissed defendants; (2) asserts
additional allegations that Defendant Powers acted negligently in his alleged role as the title
and/or closing agent and in obtaining certain water rights for Plaintiff; (3) asserts additional
allegations in support of its existing claims against Defendant Davis Engineering; and (3) adds a
respondeat superior claim against a new defendant, Attorneys Title Guaranty Fund, Inc., based
on the alleged actions of Defendant Powers.
LEGAL STANDARD
Pursuant to Federal Rule of Civil Procedure 15(a), “The court should freely give leave [to
amend the pleadings] when justice so requires.” See also York v. Cherry Creek Sch. Dist. No. 5,
232 F.R.D. 648, 649 (D. Colo. 2005); Aspen Orthopaedics & Sports Medicine, LLC v. Aspen
Valley Hosp. Dist., 353 F.3d 832, 842 (10th Cir. 2003). The grant or denial of an opportunity to
amend is within the discretion of the court, but “outright refusal to grant the leave without any
justifying reason appearing for the denial is not an exercise of discretion; it is merely abuse of
that discretion and inconsistent with the spirit of the Federal Rules.” Foman v. Davis, 371 U.S.
178, 182 (1962). “Refusing leave to amend is generally only justified upon a showing of undue
delay, undue prejudice to the opposing party, bad faith or dilatory motive, failure to cure
deficiencies by amendments previously allowed, or futility of amendment.” Frank v. U.S. West,
Inc., 3 F.3d 1357, 1365 (10th Cir. 1993). Notably,
The Federal Rules reject the approach that pleading is a game of skill in which
one misstep by counsel may be decisive to the outcome and accept the principle
that the purpose of pleading is to facilitate a proper decision on the merits.
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Conley v. Gibson, 355 U.S. 41, 48 (1957) abrogated on other grounds by Bell Atl. Corp. v
Twombly, 550 U.S. 544 (2007).
ANALYSIS
A.

Undue Delay
Defendants Davis Engineering and Powers both argue that Plaintiff’s proposed

amendments are unduly delayed because Plaintiff knew of the facts supporting its proposed
amendments over two years ago, at the time it filed its original Complaint. The court disagrees
that the proposed amendments are unduly delayed.
At the Scheduling Conference held on March 25, 2014, Defendants objected to the court
setting a renewed deadline for joinder of parties and amendment of pleadings. Defendants
argued that because this case had been pending for over two years, Plaintiff already had sufficient
time to amend the pleadings. The court rejected Defendants’ arguments because, based on the
phased-discovery approach agreed to by the parties—whereby discovery would initially proceed
on Plaintiff’s equitable claims before turning to Plaintiff’s remaining legal claims—Plaintiff’s
legal claims are effectively “new.” Accordingly, in the Phase Two Scheduling Order, the court
set a deadline of May 9, 2014 for joinder of parties and amendment of pleadings. (Doc. No. 90,
§ 9(a).)
Plaintiff’s Motion to Amend was filed in compliance with that deadline. The court
declines to reject Plaintiff’s proposed amendments on grounds of undue delay when it has fully
complied with the pertinent court-ordered deadline. See Handy v. Diggins, Case No.
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10–cv–02022–WYD–KMT, 2011 WL 7201986, at *2 (D. Colo. Dec. 21, 2011), recommendation
aff’d and adopted at 2013 WL 415343 (Feb. 8, 2012) (Daniel, J.).
B.

Undue Prejudice
Defendant Powers maintains that he will be unduly prejudiced if Plaintiff’s proposed

amendments are permitted. The court disagrees.
Undue prejudice is the “most important” factor in deciding a motion to amend the
pleadings. Minter v. Prime Equip. Co., 451 F.3d 1196, 1208 (10th Cir. 2006). Courts typically
find undue prejudice only when the amendment unfairly affects non-movants “in terms of
preparing their defense to the amendment.” Id. (citing Patton v. Guyer, 443 F.2d 79, 86 (10th
Cir. 1971) (finding no prejudice because the amendment was authorized several months prior to
trial)). This most often occurs “when the amended claims arise out of subject matter different
from what was set forth in the complaint and raises significant new factual issues.” Id.
Defendant Powers argues that he will face undue difficulty mustering evidence in
response to Plaintiff’s proposed amendments because he closed down his law firm, Charles C.
Powers, Attorney at Law, LLC, in April 2012, without “any notice that Plaintiff might
subsequently assert claims related to the title policy or the transaction’s closing.” (Powers’
Resp. at 10.) However, Defendant Powers does not argue that he actually lacks access to
evidence necessary to support his defense; instead, he vaguely and tentatively asserts only that he
“might have better maintained relevant files and contact information for certain witnesses.”
(Id.) (emphasis added.) This argument fails to demonstrate the sort of prejudice necessary for
the court to reject an amendment of the pleadings. Indeed, because a trial has not yet been set,
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the court finds that Defendant Powers has ample time to adjust to Plaintiff’s proposed
amendments, which, as discussed below, arise out of the same real estate transaction at issue in
its original Complaint.
C.

Futility
Defendant Powers also argues that Plaintiff’s proposed amendments are futile because

they are barred by the statute of limitations and otherwise fail to state a claim for relief. A
proposed amendment is futile if the complaint, as amended, would be subject to dismissal.
Gohier v. Enright, 186 F.3d 1216, 1218 (10th Cir. 1999) (citing Jefferson Cnty. Sch. Dist. No.
R-1 v. Moody’s Investor’s Servs., 175 F.3d 848, 859 (10th Cir. 1999)). “The futility question is
functionally equivalent to the question of whether a complaint may be dismissed for failure to
state a claim” for relief under Fed. R. Civ. P. 12(b)(6). Id. (citations omitted). See also Aldrich
v. McCulloch Props., Inc., 627 F.2d 1036, 1041 n.4 (10th Cir. 1980) (although the statute of
limitations is an affirmative defense, questions regarding the statute of limitations may be
resolved under Rule 12(b)(6) where the dates given in the complaint make clear that the right
sued upon has been extinguished).
1.

Statute of Limitations

Defendant Powers contends that Plaintiff knew or should have known in 2011 of
Defendant Power’s alleged negligence arising out of his role as the closing and/or title agent.
Because Plaintiff did not file its Motion to Amend until May 9, 2014, Defendant Powers argues
that these proposed amendments are barred by the 2-year statute of limitations governing
negligence claims, Colo. Rev. Stat. § 13-80-102. Plaintiff contends that these proposed
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allegations are timely because they relate back to the filing of the Original Complaint in July
2012. The court agrees with Plaintiff.
Under Rule 15(c)(1)(B) an amendment relates back to the date of the timely filed original
complaint when “the amendment asserts a claim or defense that arose out of the conduct,
transaction, or occurrence set out—or attempted to be set out—in the original pleading.” Fed.
R. Civ. P. 15(c)(1)(B). The rationale behind Rule 15(c)(1)(B) is that “a party who has been
notified of litigation concerning a particular occurrence has been given all the notice that statutes
of limitation were intended to provide.” Baldwin Cnty. Welcome Ctr. v. Brown, 466 U.S. 147,
149 n.3 (1984) (citation omitted). As long as there is a “factual nexus” between the original and
amended complaints, the amended claim “is liberally construed to relate back to the original
complaint if the defendant had notice of the claim and will not be prejudiced by the amendment.”
Benton v. Bd. of Cnty. Comm’rs, No. 06-cv-01406-PSF, 2007 WL 4105175, at *3 (D. Colo.
Nov. 14, 2007) (quoting Grattan v. Burnett, 710 F.2d 160, 163 (4th Cir. 1983)) aff’d, 303 F.
App’x 625 (10th Cir. 2008).
As a general rule, amendments will relate back if they amplify the facts previously
alleged, correct a technical defect in the prior complaint, assert a new legal theory
of relief, or add another claim arising out of the same facts. For relation back to
apply, there is no additional requirement that the claim be based on an identical
theory of recovery. On the other hand, amendments generally will not relate back
if they interject entirely different facts, conduct, transactions or occurrences. It is
a matter committed to the district court’s discretion to decide whether a new claim
arises out of the same transaction or occurrence.
Id. (quoting Kidwell v. Bd. of Cnty. Comm’rs of Shawnee Cnty., 40 F. Supp. 2d 1201, 1217 (D.
Kan. 1998)).
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The court finds that Plaintiff’s proposed amendments relate back to the filing of
Plaintiff’s original Complaint, and are therefore timely. Notably, Plaintiff’s original Complaint
expressly alleges that Defendant Powers provided legal advice in connection with the real estate
transaction and also “served as an agent and/or attorney for Attorney Title Guaranty Fund, Inc.”
(Compl. ¶ 10.) Further, the original Complaint also alleges that Defendant Powers had a
conflict of interest due to these dual roles. (Id. ¶ 27.) Finally, Plaintiff’s original Complaint
alleges that there were errors in the deeds conveying the property and related interests (see, e.g.,
id. ¶¶ 32, 36, 42, & 53), which were allegedly drafted by Defendant Powers (id. ¶ 103).
Ultimately, Plaintiff’s proposed amendments simply clarify that Defendant Power’s allegedly
negligent conduct may have occurred through his role as the title and/or closing agent, rather than
solely through his role as Plaintiff’s legal counsel. Altogether, the court finds that there is
plainly a factual nexus between the allegations of the original Complaint and Plaintiff’s proposed
allegations.
2.

Failure to State a Claim

Defendant Powers also argues that Plaintiff’s proposed amendments are futile because
they fail to state a claim for relief. More specifically, with respect to Plaintiff’s proposed
allegations that he acted negligently in his role as the title and/or closing agent, Defendant
Powers asserts that the closing documents and title policy demonstrate that he was not the title
agent or closing agent. Defendant Powers also argues that Plaintiff’s proposed allegations
regarding his failure to acquire certain water rights for Plaintiff fail to state a claim because the
Purchase Contract demonstrates that Plaintiff indeed obtained these water rights.
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The court declines to address these remaining futility arguments at this juncture. First, as
discussed above, Defendant Powers will not face any undue prejudice if Plaintiff’s proposed
amendments are permitted. See Stender v. Cardwell, No. 07-cv-02503-WJM-MJW, 2011 WL
1235414, at *3 (D. Colo. Apr. 1, 2011) (citing Minter v. Prime Equip. Co., 451 F.3d 1196, 1207
(10th Cir. 2006)) (prejudice to the opposing part is the single most important factor in deciding
whether to allow leave to amend and, in its absence, an opposition to a motion to amend is
“grievously weakened”).
Second, Plaintiff has set forth colorable rebuttals to Defendant Powers’ futility
arguments—namely, Plaintiff asserts that (1) Defendant Powers may be held liable even if he
was not technically the closing or title agent, and (2) that its proposed allegations concerning the
water rights do not relate to whether Defendant Powers erred in contracting for the water rights,
but instead whether he properly recorded those rights. Because they were raised for the first
time in Plaintiff’s Reply, Defendant Powers has not had an opportunity to respond to these
arguments.
As such, under the circumstances, the court declines to find that Plaintiff’s proposed
amendments are futile at this juncture. Instead, the court finds that the best practice is to defer
consideration of Defendant Powers’ futility arguments until after Plaintiff’s Amended Complaint
is in place, if and when Defendant Powers files an appropriate Rule 12(b)(6) motion to dismiss.
Therefore, for the foregoing reasons, it is
ORDERED that “Plaintiff’s Motion for Leave to File First Amended Complaint” (Doc.
No. 94) is GRANTED. The Clerk of Court is directed to file Plaintiff’s Amended Complaint
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(Doc. No. 94-1) and all exhibits thereto (Doc. Nos. 94-2 -94-9). No later than October 20, 2014
the parties shall file a Joint Status Report regarding resetting the outstanding Phase Two
Scheduling Order deadlines and the Final Pretrial Conference.
Dated this 10th day of October, 2014.

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