Regions Bank v. Commonwealth Land Title Insurance Company
Filing
192
ORDER denying 151 Motion for Leave to Plead Additional Affirmative Defenses, filed by Commonwealth Land Title Insurance Co.; and granting 180 Motion to Strike, filed by Regions Bank. See attached ORDER for details. Signed by Judge Robert N. Scola, Jr. on 11/5/2012. (jky)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 11-23257-CIV-SCOLA
REGIONS BANK,
Plaintiff,
vs.
COMMONWEALTH LAND
TITLE INSURANCE CO.,
Defendant.
_____________________________/
ORDER DENYING MOTION FOR LEAVE TO PLEAD ADDITIONAL
AFFIRMATIVE DEFENSES; GRANTING MOTION TO STRIKE
THIS MATTER is before the Court on the Motion for Leave to Plead Two Additional
Affirmative Defenses [ECF No. 151], filed by Defendant Commonwealth Land Title Insurance
Co. (“Commonwealth), and the Motion to Strike Commonwealth’s Answer, Affirmative
Defenses, and Counterclaim in Response to Plaintiff’s Amended Complaint [ECF No. 180], filed
by Plaintiff Regions Bank (“Regions”). For the reasons explained below, Commonwealth’s
Motion for Leave is denied and Regions’s Motion to Strike is granted.
Introduction
The deadline to amend the pleadings was March 16, 2012. On September 20, 2012,
Commonwealth filed its motion for leave to plead two additional affirmative defenses. The two
defenses relate to mitigation of damages and contract illegality. Commonwealth’s putative
mitigation defense is that:
Regions’s damages claims are barred because Regions failed to mitigate damages,
if any, by rejecting Commonwealth’s April 17, 2012 offer to provide a defense in
the Foreclosure Case against certain defensive and affirmative assertions by
Freeman and for Counts I and V of Freeman’s counterclaim in the Foreclosure
Case. Under a reservation of rights, Commonwealth engaged counsel to provide a
defense to Regions against such claims and contentions by Freeman, but
Commonwealth’s offer was rejected (hereinafter “Affirmative Defense 8”).
See Mot. ¶ 6 [ECF No. 151]. Meanwhile, Commonwealth’s proposed illegality defense is that:
Regions’s claims are barred because Endorsement 5 constitutes an illegal
contract. Pursuant to § 627.784, Fla. Stat. title insurers are prohibited from
issuing title insurance without regard to the possible existence of adverse matters
of title. Moreover, title insurers are prohibited from providing affirmative
coverage over known claims directly or indirectly, unless the title insurer is
holding security commensurate with the risk. Rule 69O-186.005(15)(b) and
(16)(g), Fla. Admin. Code. If taken as written, rather than as a scrivener’s error as
asserted by Fidelity and its agent, Endorsement 5 is an illegal insurance contract.
As such, Regions cannot rely on Endorsement 5 to prosecute its claims against
Commonwealth (hereinafter, “Affirmative Defense 9”).
See id. ¶ 7.
On the same day Commonwealth filed its motion for leave, the Court allowed Regions to
amend its Complaint by interlineation to reflect that two policy endorsements were allegedly
issued in 2008, not 2006. Fact discovery in this case closed on September 28, 2012. Three days
later, on October 1, 2012, without awaiting a ruling from the Court, Commonwealth filed an
amended responsive pleading asserting the two additional affirmative defenses that are the
subject of its motion for leave.
According to Commonwealth, the Court’s order granting
Regions leave to amend the Complaint by interlineation reopened the pleadings and rendered
moot Commonwealth’s request for leave to assert the new defenses. Regions disagrees, arguing
that Commonwealth had no right to, in essence, “grant” its own motion for leave. Therefore,
Regions asks the Court to strike Commonwealth’s amended pleading.
Legal Standards
A. Motion to Amend Standard
When leave to amend is sought after the deadline to amend the pleadings has passed, the
movant must do more than argue leave is due under Federal Rule of Civil Procedure 15(a). He must
also show “good cause” under Federal Rule of Civil 16(b) in order to obtain the right to amend.
See Sosa v. Air Print Sys., Inc., 133 F.3d 1417, 1418 (11th Cir. 1998); Fed. R. Civ. P. 16(b)(4)
(“A schedule may be modified only for good cause and with the judge’s consent.”). The standard
delineated in Rule 16(b) “precludes modification [of the scheduling order] unless the schedule
cannot ‘be met despite the diligence of the party seeking the extension.’” See Sosa, 133 F.3d at
1418. Thus, “diligence is the key to satisfying the good cause requirement.” De Varona v.
Discount Auto Parts, LLC, 2012 WL 4039807, at *2 (S.D. Fla. Sept. 13, 2012) (Ungaro, J.).
“If the court finds that the party lacked due diligence, then the inquiry into good cause is
ended.” Shehada v. City of Miami Beach, Fla., 2012 WL 3801726, at *2 (S.D. Fla. Aug. 30, 2012)
(Lenard, J.) (citation omitted). Lack of diligence is not just shown by “a plaintiff who has full
knowledge of the information with which it seeks to amend its complaint before the deadline
passes,” but also by “a plaintiff’s failure to seek the information it needs to determine whether
an amendment is in order.” See Southern Grouts & Mortars, Inc., 575 F.3d 1235, 1241, n.3
(11th Cir. 2009).
If “good cause” for an untimely amendment is shown under Rule 16(b), Rule 15(a) instructs
that leave should be freely given when justice so requires. See Fed. R. Civ. P. 15(a)(2). While this
standard is lenient, “a motion to amend may be denied on numerous grounds such as undue delay,
undue prejudice to the [opposing party], and futility of the amendment.” See Maynard v. Bd. of
Regents, 342 F.3d 1281, 1287 (11th Cir. 2003) (citations omitted).
B. Motion to Strike Standard
Under Federal Rule of Civil Procedure 12(f), the district court may strike from a pleading
“any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.”
See Fed. R. Civ. P. 12(f). Although “courts consider striking a pleading to be a ‘drastic remedy
to be resorted to only when required for the purposes of justice,’” see Exhibit Icons, LLC v. XP
Cos., 609 F. Supp. 2d 1282, 1300 (S.D. Fla. 2009) (Marra, J.), such action is appropriate is some
circumstances to remove “unnecessary clutter” from the docket, see Heller Fin., Inc. v. Midwhey
Powder Co., 883 F.2d 1286, 1294 (7th Cir. 1989). Striking is appropriate where, for example, a
party fails to seek leave of court before filing an unauthorized pleading. See Rogers v. Hartford
Life & Accident Ins. Co., 2012 WL 2395194, at *1 n.1 (S.D. Ala. June 22, 2012) (“There is no
doubt that striking an improper amended pleading filed without leave of court is appropriate and
necessary to enforce Rule 15(a)(2).”). In the end, the decision to strike a pleading rests with the
district court’s broad discretion. See Microsoft Corp. v. Jesse’s Computers & Repair, Inc., 211
F.R.D. 681, 683 (M.D. Fla. 2002) (Jones, J.) (“District courts have broad discretion in disposing
of motions to strike under Fed. R. Civ. P. 12(f).”) (citation omitted).
Legal Analysis
The Court rejects Commonwealth’s suggestion that the non-substantive amendment of
Regions’s Complaint by interlineation somehow automatically reopened the pleadings and
rendered moot its request for leave to assert new defenses. Commonwealth’s reliance upon
Krinsk v. Suntrust Banks, Inc., 654 F.3d 1194, 1202 (11th Cir. 2011), and Brown v. E.F. Hutton
& Co., 610 F. Supp. 76, 78 (S.D. Fla. 1985), is misplaced. Neither decision supports its view
that the pleadings are reopened, no matter what, whenever a plaintiff files an amended
complaint. In Krinsk, the Eleventh Circuit in fact recognized that “the filing of an amended
complaint does not automatically revive all defenses or objections that the defendant may have
waived in response to the initial complaint,” and that the defendant is “allowed to plead anew in
response to an amended complaint” only when the amended complaint “changes the theory or
scope of the case.” Krinsk, 654 F.3d at 1202. Similarly, in Brown the district court observed
that “when a plaintiff files an amended complaint which changes the theory or scope of the case,
the Defendant is allowed to plead anew as though it were the original complaint filed by the
Plaintiff.” Brown, 610 F. Supp. at 78. Those cases have no application here because Regions’s
amendment to the Complaint only changed the issuance date of a policy endorsement from 2006
to 2008. It did not change “the theory or scope of the case” such that Commonwealth could, sua
sponte, raise new defenses. “If every amendment, no matter how minor or substantive, allowed
defendants to assert counterclaims or defenses as of right, claims that would otherwise be barred
or precluded could be revived without cause. This would deprive the Court of its ability to
effectively manage the litigation.” E.E.O.C. v. Morgan Stanley & Co., 211 F.R.D. 225, 227
(S.D.N.Y. 2002).1
Here, Commonwealth does not explain how, if at all, the newly raised affirmative
defenses have anything to do with the fact that Regions now contends the policy endorsement
was issued in 2008 instead of 2006. Commonwealth’s sole argument is that the amendment “has
1
To the extent that the decision in Joseph Bancroft & Sons Co. v. M. Lowenstein & Sons, Inc.,
50 F.R.D. 415, 418-19 (D. Del. 1970), suggests a contrary result, the Court declines to follow it.
Numerous other courts have endorsed the view, followed here, that non-substantive amendments do not
create a pleading free-for-all for defendants. See, e.g., Sirona Dental Sys., Inc. v. Dental Imaging Techs.
Corp., 2012 WL 3929949, at *2 n.3 (D. Del. Sept. 10, 2012) (“the court is impressed by the weight of
authority, from both judges and commentators, declining to endorse an interpretation of Rule 15(a)(3) that
would throw the door open to entirely new claims and defenses each time a ministerial amendment was
made to a pleading.”); Elite Entm’t, Inc. v. Khela Bros. Entm’t, 227 F.R.D. 444, 446 (E.D. Va. 2005)
(“the moderate, and most sensible, view is that an amended response may be filed without leave only
when the amended complaint changes the theory or scope of the case, and then, the breadth of the changes
in the amended response must reflect the breadth of the changes in the amended complaint”); see also
3 James Wm. Moore et al., Moore’s Federal Practice ¶ 15.17[6] (3d ed. 2012) (“Normally, a party served
with an amended pleading has the duty and the right only to ‘respond’ to the amendment or the changes in
the amended pleading. Service of an amended pleading does not automatically re-open the time for
asserting matters that should have been asserted in response to the original pleading.”).
actually changed the alleged timeline of events as originally pled with respect to one of the
documents [Regions] relies most heavily on to establish a duty on Commonwealth’s part,” and,
therefore, “it is only fair that [Commonwealth] be permitted to file its amended answer too,
especially since Commonwealth’s [contract illegality defense] goes directly to [the policy
endorsement].” Reply at 4. This line of argument is unconvincing. It does not leave the Court
persuaded that Commonwealth’s new defenses were in any way necessitated by an allegation
that the endorsement was issued in 2008, as opposed to 2006. As such, Commonwealth was not
at liberty to self-adjudicate its motion and file a new pleading without permission from the Court.
See, e.g., Uniroyal Chem. Co. v. Syngenta Crop Prot., Inc., 2005 WL 677806, at *2 (D. Conn.
Mar. 23, 2005) (when “the amended complaint does not change the scope of the action, a
defendant should obtain leave of court before adding a new counterclaim that would change the
scope of the case.”); Carr v. Hazelwood, 2008 WL 4556607, at *4 (W.D. Va. Oct. 8, 2008)
(“[Defendant] cannot now, as a matter of right, add a previously unmentioned affirmative
defense in response to an amended complaint that in no way changes [the plaintiff’s] theory of
the case.”).
In order to raise the two new defenses, then, Commonwealth must demonstrate “good
cause” for leave to amend under Rule 16(b), which requires a showing of diligence. See Sosa,
133 F.3d at 1418. As to the mitigation affirmative defense, Commonwealth contends that leave
to amend should be allowed because the defense was not available until June 4, 2012, when
Regions declined Commonwealth’s April 17, 2012 offer to defend and provide coverage under a
reservation of rights. This Court disagrees. Commonwealth’s duty to defend and indemnify
Regions in the state court suit goes to the heart of this litigation. Under such circumstances, a
failure to mitigate defense should have been reasonably obvious to Commonwealth the minute
that Regions declined its offer, if not before that time. Indeed, it might have been a reasonably
anticipatory defense even as early as April, when Commonwealth tendered the offer. Yet,
Commonwealth waited an additional three-and-a-half months after Regions refused the offer
before requesting leave to amend. Such conduct does not evince diligence.
In arguing otherwise, Commonwealth points out that by the time Regions rejected the
coverage and defense offer in June, the deadline to amend the pleadings had already passed and,
thus, it was impossible to meet the deadline set forth in the scheduling order no matter what.
Commonwealth misunderstands the legal standard under Rule 16(b). A very similar argument
was rejected by the Eleventh Circuit in Oravec v. Sunny Isles Luxury Ventures, L.C., 527 F.3d
1218, 1232 (11th Cir. 2008), and again in Southern Grouts & Mortars, 575 F.3d at 1241-42.
In both cases, it was of no consequence that the deadline to amend the pleadings had already
passed at the time the plaintiff came upon the information necessitating amendment. In both
cases, there was delay between discovering that information and in asking the court for leave to
amend. See Oravec, 527 F.3d at 1232 (finding lack of diligence where the plaintiff waited some
three months after learning of the need to amend before requesting leave); Southern Grouts &
Mortars, 575 F.3d at 1241 n.3, 1242 (finding lack of diligence where the plaintiff “dallied too long”
by waiting over a month after discovering the need to amend before requesting leave).
As to the contract illegality affirmative defense, Commonwealth merely argues that it should
be allowed to amend because it is “a pure legal defense.” Mot. at 6. But to admit as much dooms
Commonwealth’s request. Commonwealth does not even attempt to explain why it did not know
about, or assert, this defense from the get-go. As “a purely legal defense,” Commonwealth could
be expected to assert it at the time it originally answered Regions’s Complaint in April, not some
five months later. So the Court finds that here, too, Commonwealth has failed to show the diligence
required by Rule 16(b).
In attempting to avoid this result, Commonwealth expends much energy to show that
amendment would not prejudice Regions in the least. This argument is a nonstarter, however,
because “even if the opposing party would not be prejudiced by the modification of a scheduling
order, good cause is not shown if the amendment could have been timely made.” Ameritox, Ltd. v.
Aegis Servs. Corp., 2008 WL 2705435, at *2 (S.D. Fla. July 9, 2008) (Marra, J.). In any case, the
Court does not agree that no prejudice would befall Regions if amendment were allowed. Fact
discovery is now closed. While Commonwealth muses that Regions won’t need much discovery if
amendment is allowed, that decision is not Commonwealth’s to make. To inject two new defenses
into the case at this stage will either prejudice Regions if discovery remains closed, or will
unnecessarily and further delay this case if discovery is reopened. This Court is not interested in
either scenario.
In sum, Commonwealth has not established “good cause” under Rule 16(b) and, therefore, is
not entitled to leave to amend. Because Commonwealth filed the amended pleading without
awaiting a ruling on its motion, the Court finds it appropriate to call upon the sparingly-used tool
offered by Rule 12(f). See Rogers, 2012 WL 2395194, at *1 n.1. Commonwealth’s amended
pleading shall be stricken from the docket forthwith.
Conclusion
Accordingly, for the reasons stated above, it is hereby ORDERED and ADJUDGED
that Commonwealth’s Motion for Leave to Plead Two Additional Affirmative Defenses
[ECF No. 151] is DENIED and Regions’s Motion to Strike Commonwealth’s Answer,
Affirmative Defenses, and Counterclaim in Response to Plaintiff’s Amended Complaint
[ECF No. 180] is GRANTED. The Clerk shall STRIKE from the docket Commonwealth’s
Answer, Affirmative Defenses, and Counterclaim [ECF No. 162].
DONE and ORDERED in chambers at Miami, Florida on November 5, 2012.
________________________________
ROBERT N. SCOLA, JR.
UNITED STATES DISTRICT JUDGE
Copies to:
Counsel of record
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