Houston Specialty Insurance Company v. Titleworks of Southwest Florida, Inc. et al

Filing 113

OPINION AND ORDER overruling 109 Objection; denying 99 Motion for Leave to File Amended Complaint; adopting and incorporating 108 Report and Recommendations. The stay of deadlines is lifted and the remaining deadlines are reset as set forth in the Opinion and Order. Signed by Judge John E. Steele on 12/6/2016. (RKR)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
HOUSTON SPECIALTY INSURANCE
COMPANY,
Plaintiff,
v.

Case No: 2:15-cv-219-FtM-29MRM

TITLEWORKS
OF
SOUTHWEST
FLORIDA,
INC.,
MIKHAIL
TRAKHTENBERG, and WESTCOR
LAND
TITLE
INSURANCE
COMPANY,
Defendants.
OPINION AND ORDER
This matter is before the Court on consideration of the
Magistrate Judge’s Report and Recommendation (Doc. #108), filed
October 17, 2016, recommending that plaintiff's Motion for Leave
to File Amended Complaint (Doc. #99) be denied.
Specialty

Insurance

Company

(plaintiff

or

Plaintiff Houston
Houston)

filed

an

Objection to the Magistrate Judge’s Report and Recommendations
(Doc. #109).

Defendant Westcor Land Title Insurance Company

(Westcor) filed a Response in Opposition (Doc. #110) and defendant
Mikhail Trakhtenberg (Trakhtenberg) also filed a Response (Doc.
#111) in opposition.

Defendant Titleworks of Southwest Florida,

Inc. (Titleworks) filed a Notice of Joinder (Doc. #112) joining
both responses.

On October 17, 2016, the Magistrate Judge recommended denial
of plaintiff’s request to file a Third Amended Complaint.

In the

proposed Third Amended Complaint, Houston seeks to add allegations
regarding a September 1, 2016, suit filed by Westcor against
Titleworks, and seeks declaratory relief that it is not obligated
to

defend

or

indemnify

Titleworks

for

this

second

suit,

or

obligated to pay Westcor’s attorney’s fees and costs incurred in
this declaratory judgment action.

The magistrate judge found that

the motion was untimely, that Houston failed to articulate good
cause for also changing the theory of the case in the proposed
amended

complaint,

and

that

such

an

amended

complaint

was

prejudicial to defendants.
After conducting a careful and complete review of the findings
and recommendations, a district judge may accept, reject or modify
the magistrate judge’s report and recommendation.

28 U.S.C. §

636(b)(1); United States v. Powell, 628 F.3d 1254, 1256 (11th Cir.
2010).

A district judge “shall make a de novo determination of

those portions of the report or specified proposed findings or
recommendations
636(b)(1)(C).

to

which

objection

is

made.”

28

U.S.C.

§

See also United States v. Farias-Gonzalez, 556 F.3d

1181, 1184 n.1 (11th Cir. 2009).

This requires that the district

judge “give fresh consideration to those issues to which specific
objection has been made by a party.”

Jeffrey S. v. State Bd. of

Educ. of Ga., 896 F.2d 507, 512 (11th Cir. 1990) (quoting H.R.

- 2 -

1609, 94th Cong., § 2 (1976)).

The district judge reviews legal

conclusions de novo, even in the absence of an objection.

See

Cooper-Houston v. Southern Ry. Co., 37 F.3d 603, 604 (11th Cir.
1994).
The Court finds no legal error by the magistrate judge.
Plaintiff argues that the good cause standard under Rule 16(b)
does not apply because there was no deadline for the parties to
amend their pleadings, and therefore leave must be freely granted
under Rule 15(a).

Plaintiff ignores, however, the clear language

of the Case Management and Scheduling Order (Doc. #54) setting
forth “all unexpired deadlines” after having accepted the parties’
Case

Management

following.

Report

that

(Id., p. 1 & n.1.)

the

parties

had

thus

far

been

Therefore, as of the entry of this

first Case Management and Scheduling Order (Doc. #54) on April 1,
2016, the deadline to amend pleadings had already passed.

The

objection is overruled.
Plaintiff also asserts that defendants have not alleged any
“real prejudice” that would result from a delay in the proceedings
because

trial

is

not

scheduled

until

March

2017.

More

specifically, plaintiff argues that it is not seeking to pursue a
new theory, but rather that it is simply providing clarification
of its theory.

The reason articulated to the Magistrate Judge for

amending the complaint was to simply add the new lawsuit of
Westcor; however plaintiff also elected to add additional language

- 3 -

in the proposed document to alter the allegations. 1

The Second

Amended Complaint states that Houston is “not obligated to defend
or indemnify Titleworks for any claims possessed by Westcor for
the

same

reason

it

is

not

obligated

to

defend

or

indemnify

Titleworks, as the Titleworks claim and a claim by Westcor are a
single Claim as defined by the Policy.”

(Doc. #51, ¶ 29.)

On

April 28, 2016, Houston filed its Answer and Affirmative Defenses
(Doc. #65) to Westcor’s Counterclaim (Doc. #57), and included as
the

Fifth

Affirmative

Defense

is

Titleworks’

knowledge

wrongful act prior to the inception of the policy.
Third

Amended

Complaint

(Doc.

#99-1)

was

of

a

The proposed

presented

to

the

Magistrate Judge on October 8, 2016, and alleges that Houston in
not obligated to defend or indemnify Titleworks for the claims
against it in the first underlying action because Titleworks had
knowledge of a wrongful act, and that Houston is similarly not
obligated to defend or indemnify the new action for several reasons
including the known wrongful act.

1

(Doc. #99-1, ¶¶ 25-26.)

No

The Second Amended Complaint provides that Houston is not
obligated to defend or indemnify Titleworks because Titleworks had
actual knowledge of the Claim – meaning a written demand received
by an insured based on any actual or alleged Wrongful Act - prior
to the policy’s inception. (Doc. #51, ¶¶ 25, 28.) The proposed
Third Amended Complaint provides that Houston is not obligated to
defend or indemnify Titleworks because Titleworks had knowledge of
the actual or alleged Wrongful Act – meaning any actual or alleged
breach of duty, negligent act, error, omission or personal injury
committed by Titlewors - prior to the inception date of the policy.
(Doc. #99-1, ¶ 25.)

- 4 -

explanation is provided for the undue delay in seeking to amend
since Houston was clearly aware of its additional defense/position
since its filing of the December 23, 2015 Affirmative Defenses
(Doc. #34) to the original Counterclaim (Doc. #32).

The Court

finds that defendants would be prejudiced if plaintiff is permitted
to amend at this stage of the proceedings.

The objection will be

overruled.
Plaintiff suggests that judicial economy favors allowing the
amendment rather than compelling plaintiff to file a separate suit
because it will prolong matters.

Plaintiff makes this suggestion

based on the belief that consolidation with this case would be
appropriate upon filing the new suit.

In this case, discovery is

complete and the case will be trial ready if no dispositive motions
are filed.
that

It is not about the mere passage of time, but rather

plaintiff

unduly

delayed

seeking

the

amendment

after

asserting a wrongful act as an affirmative defense and after its
own corporate representative testimony pointed out the error in
June 2016.

(Doc. #109, p. 8.)

This case will likely be decided

and over before discovery is even completed in any new action
filed.

Therefore, the Court rejects this objection.

After a careful review of the findings and recommendations,
as well as a de novo review 2 of the record in this case, the Court

2

Defendant Trakhtenberg suggests that the standard of review
is clearly erroneous or contrary to law, see doc. #111, pp. 3-4,

- 5 -

agrees with the Report and Recommendation of the magistrate judge
and overrules the objection.

The Court finds that the amendment

would be highly prejudicial at this stage of the proceedings, and
would essentially restart the entire case.
the

ability

to

file

a

separate

suit,

Plaintiff maintains

and

therefore

is

not

prejudiced by the denial.
The remaining deadlines for the case were held in abeyance
pending resolution of the motion.

(Doc. #107.)

As the motion to

amend is now resolved, the remaining deadlines will be reset and
extended as set forth below.
Accordingly, it is now
ORDERED:
1. The Report and Recommendation (Doc. #108) is hereby adopted
and the findings incorporated herein.
2.

Plaintiff's Objection to Report and Recommendations is

overruled.
3.

Plaintiff's Motion for Leave to File Amended Complaint

(Doc. #99) is denied.

and defendant Westcor also suggests that this standard applies to
aspects of the ruling, doc. #110, pp. 4-5, 8, 12, 14, 16. This
standard does not apply where the Report and Recommendation is
issued on a dispositive matter, i.e. denial of leave to amend to
present a revised theory of litigation that would otherwise be
foreclosed in this case.

- 6 -

4.

The stay of deadlines in the Amended Case Management and

Scheduling Order (Doc. #97) is hereby lifted and the following
deadlines shall apply for the remainder of the case:

Dispositive motions
Meeting In Person to Prepare
Joint Final Pretrial Statement
Joint Final Pretrial Statement
Al Other Motions, including
motions in limine and trial
briefs
Final Pretrial Conference Date:
Time:
Judge:
Trial Term Begins
Estimated Length of Bench Trial

January 31, 2017
March 6, 2017
March 6, 2017
March 3, 2017

March 20, 2017
9:00 AM
John E. Steele 3
April 3, 2017
3 days

DONE and ORDERED at Fort Myers, Florida, this

6th

day of

December, 2016.

Copies:
All Parties of Record

3

The case may ultimately be tried by a visiting judge, the
Honorable Paul A. Magnuson.

- 7 -