Alamo-Cruz et al v. Alterra Excess & Surplus Insurance Company
Filing
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ORDER granting 87 Defendant's Motion to Amend/Correct. Clerks Notice: Filer must separately re-file the amended pleading pursuant to Local Rule 15.1, unless otherwise ordered by the Judge. Signed by Magistrate Judge Edwin G. Torres on 8/2/2019. See attached document for full details. (js02)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 17-60671-Civ-WILLIAMS/TORRES
EFRAIN ALAMO-CRUZ and
MARIA ALAMO-CRUZ,
as assignees of ROBIN A. CROCE,
Plaintiffs,
v.
EVANSTON INSURANCE COMPANY
F/K/A ALTERRA EXCESS & SURPLUS
INSURANCE COMPANY,
Defendant.
___________________________________________/
ORDER ON DEFENDANT’S MOTION
FOR LEAVE TO AMEND ITS AFFIRMATIVE DEFENSES
This matter is before the Court on Evanston Insurance Company F/K/A
Alterra Excess & Surplus Insurance Company’s (“Defendant”) motion for leave to
amend its affirmative defenses to Efrain Alamo-Cruz’s (“Mr. Cruz”) and Maria
Alamo-Cruz’s (“Mrs. Cruz”) (collectively, “Plaintiffs”) second amended complaint.
[D.E. 87]. Plaintiffs responded to Defendant’s motion on July 15, 2019 [D.E. 98] to
which Defendant replied on July 22, 2019.
motion is now ripe for disposition.
[D.E. 103].
Therefore, Defendant’s
After careful consideration of the motion,
response, reply, relevant authority, and for the reasons discussed below,
Defendant’s motion is GRANTED.
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I. BACKGROUND
Plaintiffs filed this action on April 5, 2017 [D.E. 1] seeking declaratory relief
in count 1, breach of contract in count 2, and common law bad faith in count 3
because of Defendant’s denial of insurance coverage for the claims Plaintiffs
asserted in a state court action against Affordable Treemen, Inc. (“Affordable
Treemen”), and its president Robin A. Croce (“Ms. Croce”). This action relates back
to an incident that occurred on June 1, 2011 when Mr. Cruz was performing tree
trimming services for Affordable Treemen. On that date, an electric saw came loose
and/or malfunctioned, cutting Mr. Cruz’s harness and causing him to fall 30 feet to
the ground. [D.E. 20-1]. Mr. Cruz suffered severe and permanent injuries as a
result of the fall.
Plaintiffs’ accident was reported to Defendant which denied insurance
coverage for Mr. Cruz’s claim against Affordable Treemen on August 29, 2012 on
the basis that the applicable insurance policy (the “Policy”) excludes any recovery
for independent contractors:
This insurance does not apply to ‘bodily injury’, ‘personal and
advertising injury’, or ‘medical payments’ to any independent
contractor, subcontractor, casual laborer or volunteer worker, or to any
employee of any independent contractor, subcontractor, while
performing work for you.
[D.E. 20-2] (the “Independent Contractors Exclusion”).
The Policy was issued to Affordable Treemen for the period of May 11, 2011
through May 11, 2012 and has an aggregate limit of liability of $1,000,000. [D.E.
20-2]. Section I of the Policy provides, in relevant part, the following:
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Insuring Agreement
a. We will pay those sums that the insured becomes legally obligated to
pay as damages because of ‘bodily injury’ or ‘property damage’ to which
this insurance applies. We will have the right and duty to defend the
insured against any “suit” seeking those damages. However, we will
have no duty to defend the insured against any ‘suit’ seeking damages
for ‘bodily injury’ or ‘property damage’ to which this insurance does not
apply . . . .
Id. Section II of the Policy, under the section entitled “Who Is An Insured?” states,
in pertinent part, that “[i]f you are designated in the Declarations as . . . [a]n
organization other than a partnership, joint venture or limited liability company,
you are an insured. Your ‘Executive officers’ and directors are insureds, but only
with respect to their duties as your officers or directors.” Id.
After Evanston denied insurance coverage, Plaintiffs filed suit against
Affordable Treemen, but that action was later dismissed without prejudice following
a notice of dismissal that Plaintiffs filed on February 24, 2014. On December 8,
2014, Plaintiffs sent a settlement demand to Evanston requesting $1 million dollars
to settle the claims against Ms. Croce and Affordable Treemen. Evanston denied
Plaintiffs’ demand on December 24, 2014 and disclaimed coverage under the
Independent Contractors Exclusion.
Thereafter, Plaintiffs filed suit against Affordable Treemen and Ms. Croce on
January 20, 2015 in the Circuit Court of the Seventeenth Judicial Circuit in and for
Broward County, Florida. [D.E. 20-1]. The state complaint included claims for
negligence against Affordable Treemen in Count 1 and negligence against Ms. Croce
in Count 2.
Plaintiffs alleged that Ms. Croce was the President of Affordable
Treeman and that she breached her duties and responsibilities owed to Mr. Cruz.
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The state complaint also alleged that Mr. Cruz’s relationship with Affordable
Treemen was that of an independent contractor. [D.E. 20-1] (“Mr. Alamo-Cruz’s
relationship with [Affordable Treemen] was that of an independent contractor.”).
Evanston refused to defend either Affordable Treemen or Ms. Croce based on the
terms of the underlying insurance policy.
On February 17, 2017, a jury awarded Mr. Cruz $20,565,991 against
Affordable Treemen and Ms. Croce, jointly and severally. The jury also awarded
Mrs. Cruz a final judgment in the amount of $2,500,000 against Affordable
Treemen and Ms. Croce, jointly and severally. [D.E. 20-4]. On May 25, 2017, Ms.
Croce assigned Plaintiffs “all rights, claims, actions, or causes of action” that she
may have against Evanston relating to the events of the state court action. [D.E.
20-5].
Accordingly, Plaintiffs seek to enforce Ms. Croce’s assignment against
Evanston in this action.
II. APPLICABLE PRINCIPLES AND LAW
Federal Rule of Civil Procedure 15(a) governs amendments to pleadings. A
party may amend any pleading once as a matter of right before a responsive
pleading has been filed or within twenty-one (21) days after serving the pleading if
no responsive pleading is allowed.
See Fed. R. Civ. P. 15(a)(1).
In all other
situations, the amending party must obtain written consent from the opposing
party or leave of the court to amend the pleading. See Fed. R. Civ. P. 15(a)(2). The
rule declares that leave to amend Ashall be freely given when justice so requires.”
Id. If the underlying facts or circumstances relied upon by a plaintiff may be a
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proper subject of relief, he ought to be afforded an opportunity to test his claim on
the merits. See Foman v. Davis, 371 U.S. 178, 182 (1962).
Any amendments leading to a modification of the required pretrial
scheduling order are subject to a “good cause” standard of scrutiny. Fed. R. Civ. P.
16(b)(4). That means that after the deadline for amending pleadings set forth in a
scheduling order has passed the party seeking the amendment must show good
cause why leave to amend the complaint should be granted. See e.g., Ray v. Equifax
Info. Servs., LLC, 2009 WL 977313, *1 (11th Cir. 2009) (citing Sosa v. Airprint Sys.,
Inc., 133 F.3d 1417, 1419 (11th Cir. 1998)). And a district court need not allow an
amendment where allowing the amendment would cause undue prejudice to the
opposing party. See Bryant v. Dupree, 252 F.3d 1161, 1163 (11th Cir. 2001).
Of course, the grant or denial of an opportunity to amend is within the
discretion of the district 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. Id. In the absence of any apparent or declared reason the leave sought
should, as the rules require, be “freely given.” Id. Substantial reasons justifying a
court’s denial of a request for leave to amend include undue delay, bad faith or
dilatory motive on the part of the movant, and repeated failure to cure deficiencies
by amendments previously allowed. See, e.g., Well v. Xpedx, 2007 WL 1362717, *1
(M.D. Fla. 2007) (citing Burger King Corp. v. Weaver, 169 F.3d 1310, 1319 (11th Cir.
1999)).
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Even when the amendment is sought because of new information obtained
during discovery, it is not an abuse of discretion to deny leave to amend if the
moving party unduly delays pursuit of the amended pleading.
See, e.g., United
States v. $172,760 in U.S. Currency, 2007 WL 1068138 (M.D. Ga. 2007).
Additionally, a district court may properly deny leave to amend when an
amendment would be futile. See Hall v. United Ins. Co. of Am., 367 F.3d 1255,
1262-3 (11th Cir. 2004); see also Eveillard v. Nationstar Mortg. LLC, 2015 WL
1191170, at *6 (S.D. Fla. Mar. 16, 2015) (“The law in this Circuit is clear that ‘a
district court may properly deny leave to amend the complaint under Rule 15(a)
when such amendment would be futile.’”) (quoting Hall, 367 F.3d at 1263). “When a
district court denies the plaintiff leave to amend a complaint due to futility, the
court is making the legal conclusion that the complaint, as amended, would
necessarily fail.” St. Charles Foods, Inc. v. Am.’s Favorite Chicken Co., 198 F.3d
815, 822 (11th Cir. 1999). This determination is akin to a finding that the proposed
amendment would not survive a motion to dismiss. See Christman v. Walsh, 416 F.
App’x 841, 844 (11th Cir. 2011) (“A district court may deny leave to amend a
complaint if it concludes that the proposed amendment would be futile, meaning
that the amended complaint would not survive a motion to dismiss.”).
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III. ANALYSIS
Defendant’s motion seeks leave to add two affirmative defenses: (1) fraud in
the inducement and (2) duress. Defendant argues that it has recently discovered
that there was a secret agreement between Plaintiffs and the insureds in the prior
action that is replete with fraud and duress.
More specifically, Defendant alleges
that Plaintiffs and Ms. Croce conspired in April 2016 to not execute a judgment
against Ms. Croce or her personal belongings:
In an effort to move this forward without any further delay, my clients
are willing to reach an agreement whereby my clients agree not to
execute on the judgment against her assets, as detailed in the letter.
That is a tremendous protection that has been offered to her, the value
of which she obviously has no understanding. Rejecting the
opportunity will only result in a judgment against her that will be
filed, and that my clients will execute upon.
[D.E. 87].
Plaintiff then alleges that a month before trial (where the parties agreed to
only litigate damages), the parties reached a more formalized agreement to not
execute any judgment against Ms. Croce or Affordable Treemen:
This letter sets forth the essential terms of the parties’ agreement, which are
as follows:
(1) The case will proceed to a trial on damages in this case, which shall
proceed if permitted by the Court, on the current trial docket.
(2) With respect to the monetary judgment entered and filed following the
trial on damages, the plaintiffs agree not execute the judgment on the assets
of Ms. Croce or Affordable Treemen, Inc. Ms. Croce and Affordable Treemen,
Inc. agree not to appeal the final judgment.
...
(5) The terms of this agreement will apply for the full pendency of this action,
which includes any subsequent coverage or extra-contractual suits against
Ms. Croce and Affordable Treemen, Inc.’s insurer.
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Id. Defendant suggests that this agreement made the trial a sham and that the
underlying judgment that awarded Plaintiffs more than $23 million dollars is
tainted.
Because of this conspiracy Defendant seeks to include two additional
affirmative defenses.1
Defendant argues that there is good cause for an amended answer because of
new information revealed at the depositions of Plaintiffs’ counsel, Michael Hersh
(“Mr. Hersh”) and Ms. Croce that took place on June 19, 2019. Defendant believes
that the underlying judgment is unenforceable because (1) Plaintiffs fraudulently
induced Ms. Croce to enter into an agreement to collect damages, and (2) Ms. Croce
did so under duress. That is, Ms. Croce entered into an agreement to eliminate her
financial exposure in exchange for an agreement she that not contest any damages
at trial or on appeal.
Defendant also suggests that leave to amend should be
granted because the proposed defenses will not delay discovery or cause any
material prejudice.
Plaintiffs oppose Defendant’s motion for several reasons.
First, Plaintiffs
argue that the motion to amend is five months late because the deadline to amend
pleadings passed on February 15, 2019. [D.E. 56]. Second, Plaintiffs claim that the
email that Defendant relies upon for its proposed defenses was produced back in
October 2017 and that Defendant should have discovered it long ago.
Third,
Plaintiffs contend that Defendant sat on its hands for nearly two years between the
Defendant notes that when it deposed Ms. Croce, she testified that Plaintiffs’
counsel threatened her into signing the 2016 agreement because, prior to trial,
Plaintiffs’ counsel informed her that if she refused to do so, he would “watch her
burn.”
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filing of this case on April 5, 2017 and the deadline to amend pleadings on February
15, 2019. Plaintiffs further accuse Defendant of jeopardizing the existing trial date
of January 21, 2020 [D.E. 56] because the proposed defenses may require the
reopening of discovery to learn what took place in December 2016.
Finally,
Plaintiffs argue that – even if one ignores the untimeliness, lack of good cause, and
the potential prejudice to Plaintiffs at this stage of the case – Defendant’s motion
should be denied because the affirmative defenses are futile as a matter of law.
There is no dispute that the deadline to amend pleadings passed long ago.
The only question is whether Defendant has established good cause and met the
requirements of Rule 15(a) and 16(b). See, e.g., Sosa v. Airprint Sys., Inc., 133 F.3d
1417, 1419 (11th Cir. 1998) (“If we considered only Rule 15(a) without regard to
Rule 16(b), we would render scheduling orders meaningless and effectively would
read Rule 16(b) and its good cause requirement out of the Federal Rules of Civil
Procedure.”). The good cause standard precludes modification unless the schedule
cannot be met despite the diligence of the requesting party. See Fed. R. Civ. P. 16
Advisory Committee Notes to 1983 Amendment; see also Johnson v. Mammoth
Recreations, Inc., 975 F.2d 604, 609 (9th Cir. 1992) (“If [a] party was not diligent,
the [good cause] inquiry should end.”).
Here, Defendant’s motion is well taken because it was not until the
depositions of Ms. Croce and Mr. Hersh that concrete evidence of a conspiracy came
to light. Plaintiffs argue, on the other hand, that the email Defendant relies upon
was produced in October 2017 and that Defendant should have known of this
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conspiracy long ago. This argument is unpersuasive because fraud by its nature
involves deception, trickery, and concealment. This single email does not, without
more, give rise to a cognizable defense of fraud; further discovery was required.
While Plaintiffs claim that Defendant should have deposed Ms. Croce and Mr.
Hersh prior to June 2019 (to discover the conspiracy at an earlier date), Defendant
did so well in advance of the discovery period. And it is unthinkable to suggest that
Defendant should have discovered a fraud long ago when the deposition testimony
of non-party witnesses was the light that revealed the conspiracy that took place
between Ms. Croce and Mr. Hersh in December 2016.
We are also unpersuaded that Defendant’s delay will materially jeopardize
the Scheduling Order in this case. Discovery closed on July 5, 2019 and trial does
not commence until January 21, 2020. [D.E. 20]. Plaintiffs suggest that several
dates will need to be extended to account for any additional discovery that may be
needed. But, Plaintiffs never articulate what additional discovery is required. All
relevant witnesses have been deposed and Defendant does not seek an extension of
the discovery period based on the proposed defenses. It also appears that there are
a limited number of witnesses with personal knowledge of the facts related to these
defenses – meaning it is entirely unclear what additional discovery is needed at this
stage of the case. We therefore conclude that inclusion of the proposed defenses will
not jeopardize the trial date and that there is no material prejudice in allowing
these defenses to be litigated on the merits.
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Next, Plaintiffs claim that the proposed defenses are futile as a matter of law.
Plaintiffs argue that an email dated April 12, 2016 cannot support a fraudulent
inducement claim because it does not contain a material misrepresentation, nor
does it provide any evidence of justifiable reliance. See Tomasini v. Mount Sinai
Med. Cntr., 315 F. Supp. 2d 1252 (S.D. Fla. 2004) (finding that a fraudulent
inducement claim must include “a a misrepresentation of a material fact.”).
Plaintiffs argument is misplaced, however, because – if we accept the allegations as
true – the proposed defense alleges every required element for a fraudulent
inducement
claim.
Plaintiffs,
of
course,
take
issue
with
whether
the
misrepresentation was material or not, and whether Ms. Croce could have
justifiably relied on it. But, those are factual inquiries that are best reserved on
either a motion for summary judgment or for the jury to decide.
Neither of
Plaintiff’s argument undermines the plausibility that Plaintiffs engaged in
fraudulent inducement. Therefore, we cannot conclude that Defendant’s fraudulent
inducement defense fails as a matter of law.
Plaintiffs’ argument with respect to the duress defense is equally unavailing.
There are three required elements to allege duress under Florida law: (1) that one
side involuntarily accepted the terms of another, (2) that circumstances permitted
no other alternative, and (3) that the circumstances were the result of coercive acts
of the opposite party. See, e.g., City of Miami v. Kory, 394 So. 2d 494, 497 (Fla. 3rd
DCA 1981).
Plaintiffs contend that duress cannot exist because an attorney
represented Ms. Croce at all material times and that her lawyer spent nine months
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negotiating the agreement with opposing counsel.
While we agree that “the
opportunity to consult an attorney is a factor for the Court to consider and weigh
along with the other evidence in the case . . . it does not foreclose a finding of
duress.” Corporacion Peruana de Aeropuertos y Aviacion Comercial v. Boy, 180 So.
2d 503, 506 (Fla. 2nd DCA 1965).
Plaintiffs also argue that the duress defense fails because there was no
involuntary act nor anything in the record to show that a coercive statement had
any effect on Ms. Croce. But, this is a weak argument at the pleading stage because
Plaintiffs ignore Ms. Croce’s deposition testimony that Plaintiffs threated to watch
her burn if she refused to sign the agreement. Plaintiffs suggest that the threat is
not credible, but we do not have a factual record to make that determination.
Accordingly, the proposed defense is plausible, and it includes each required
element to state a claim.
The final issue is whether Defendant has standing to raise these affirmative
defenses. Plaintiffs argue that Ms. Croce did not interpret Plaintiffs’ remarks –
about watching her burn – as a threat. Instead, Plaintiffs claim that Defendant is
making unsupported inferences and that – if Ms. Croce felt coerced or under duress
– it is her responsibility to file a lawsuit. Plaintiff’s argument fails for so many
reasons that we need not consider it with any serious attention.
We do note,
however, that Plaintiffs failed to support their argument with any relevant legal
principles or case law. And we decline to do the research that Plaintiffs should have
done in the first instance. Accordingly, Defendant’s motion for leave to amend its
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affirmative defenses is GRANTED. The ultimate merit, or lack thereof, behind
these defenses will have to be assessed at summary judgment or at trial.
IV. CONCLUSION
For the foregoing reasons, Defendant’s motion for leave to amend its
affirmative defenses is GRANTED.
Defendant shall promptly file an amended
answer on the docket.
DONE AND ORDERED in Chambers at Miami, Florida, this 2nd day of
August, 2019.
/s/ Edwin G. Torres
EDWIN G. TORRES
United States Magistrate Judge
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