Aligned Bayshore Holdings, LLC v. Westchester Surplus Lines Insurance Company

Filing 122

ORDER Adopting Magistrate Judge's 79 Order. Order overruling Defendant's 112 Objections; denying 65 Motion for Leave to Amend. Dispositive Motions due by 12/6/2019. Signed by Judge Robert N. Scola, Jr on 11/14/2019. See attached document for full details. (kpe)

United States District Court
for the
Southern District of Florida
Aligned Bayshore Holdings, LLC,
Plaintiff,
v.
Westchester Surplus Lines
Insurance Company, Defendant.

)
)
)
) Civil Action No. 18-21692-Civ-Scola
)
)
)

Order Adopting Magistrate Judge’s Order
This matter is before the Court on Defendant’s Objections to Magistrate
Judge Torres’ Order denying the Defendant’s motion to amend its Answer and
Affirmative Defenses. (ECF No. 112.) The Plaintiff has responded (ECF No. 117)
and the Defendant timely replied. (ECF No. 120.) Upon consideration of the
parties’ briefs, the relevant legal authority, and the record, the Court affirms and
adopts Judge Torres’s Order.
I.

Background and Relevant Procedural History

Westchester issued an insurance policy to Aligned that provided coverage
for Aligned’s windstorm and flood damage claims, including physical damage
and business interruption to both Monty’s Restaurant (the building) and the
marina area. (ECF No. 6 at ¶ 7). On September 10, 2017, Aligned sustained
losses due to the impacts of Hurricane Irma. (Id. at ¶ 8.) Aligned notified
Westchester of its losses but Westchester, according to the complaint, did not
promptly pay all covered losses to Aligned. (Id. at ¶¶ 9-11.) Aligned alleges that
its damages exceed $15.5 million, with the majority of the damage sustained by
the marina. (ECF No. 49 at ¶ 35.) Westchester has paid over $3 million in
insurance claims to Aligned. (ECF No. 48 at 4.)
Aligned alleges in its breach of contract claim that Westchester willfully
misinterpreted the insurance policy by (1) imposing limits on flood coverage
where the policy provides for blanket flood coverage and (2) improperly relying
on an unverified statement of values to cap its coverage. (See id. at ¶ 19–20.)
Westchester maintains that it properly interpreted the contract and has paid out
the policy maximum under the insurance policy’s flood coverage and operative
statement of values. (ECF No. 48 at 1.)
The parties cross moved for summary judgment. (ECF Nos. 48 and 49.)
The Court entered an order granting the Defendant’s motion for partial summary
judgment and held that the flood coverage was not blanket coverage and was

subject to a statement of values. (ECF No. 86 at 5.) On the second issue, the
Court held that the applicable statement of values (“SOV”) was the AmRisc form
created by Glenn Peterson, not the Premises Schedule included in Aligned’s
insurance application. (Id. at 8.)
On reconsideration, the Court vacated Part B of its Summary Judgment
Order regarding which statement of values applied. (ECF No. 109 at 4.) The basis
for the Court’s decision was Westchester’s “inadvertent” admission in its
Amended Answer and Affirmative Defenses. (Id.) In its motion for
reconsideration, Aligned argued that Westchester’s Answer admitted that the
operative statement of values was included in the Commercial Insurance
Application and it was not Aligned’s burden to prove otherwise. (Defendant’s
Amended Answer at ¶ 20, ECF No. 27.) In response, Westchester argued that it
moved to amend its Answer when it realized its mistake, but Judge Torres denied
its motion to amend. This Court ruled on the motions for summary judgment
before any objections to Judge Torres’s order were ever filed. Accordingly, the
Court determined, on reconsideration, that it should fully resolve the issue of
Judge Torres’s order and Westchester’s admission. Westchester’s objections to
Judge Torres’s order are now properly before this Court.
II.

Standard of Review

The parties disagree on which standard of review should apply. The denial
of a leave to amend a pleading is typically non-dispositive and therefore subject
to a “clearly erroneous” or “contrary to law” standard of review. Palmore v. Hicks,
383 F. App’x 897, 899-100 (11th Cir 2010). However, the Defendant argues that
because the Magistrate Judge’s denial forecloses a claim or defense, it is
dispositive in nature and should be reviewed de novo. (ECF No. 112 at 11.) In
response, the Plaintiff argues that the order’s effect should not determine the
standard of review because any order on a non-dispositive motion could later
affect a dispositive issue. (ECF No. 117 at 4-5.)
“It is unclear what standard of review should apply to the Magistrate
Judge’s [order] denying leave to amend. . . and it does not appear that the
Eleventh Circuit has considered this question.” Waters v. AIG Claims, Inc., No.
17-cv-133-WKW, 2018 WL 2986213, at *2 (M.D. Ala. June 14, 2018). However,
the Court need not decide this issue because the Magistrate Judge’s Order is
correct even if the Court conducts a de novo review, the less deferential standard.
See id. at *3. See also Action Nissan, Inc. v. Hyundai Motor America, 06-cv-1747,
2008 WL 11336609, at *2 (M.D. Fla. Aug. 6, 2008) (“Even assuming the de novo
standard applies, the Court has reviewed the relevant record and concludes that
Judge Spaulding’s reasoning and conclusions are correct for the reasons stated
below.”).

III.

Analysis

The Defendant’s motion for leave to amend its Answer and Affirmative
Defenses was filed on May 3, 2019 (ECF No. 65), eight months after the Court’s
deadline to amend pleadings. (ECF No. 29.) When a party files a motion for leave
to amend a pleading after the applicable scheduling deadline has passed, the
party is in effect seeking to modify the Court’s scheduling order. Sosa v. Airprint
Sys., Inc., 133 F.3d 1417, 1419 (11th Cir. 1998). Therefore, the appropriate
standard is “good cause” found in Federal Rule of Civil Procedure 16(b). Id. “Lack
of diligence in pursuing a claim is sufficient to show lack of good cause.” Donley
v. City of Morrow, 601 F. App’x 805, 811 (11th Cir. 2015). A party lacks diligence
when, prior to the deadline to amend, he had full knowledge of the information
with which he later sought to amend his pleading. Id. “A finding of lack of
diligence on the part of the party seeking modification ends the good cause
inquiry[.]” Sanchez v. H&R Maint., LC, 294 F.R.D. 677, 679 (S.D. Fla. 2013)
(Cooke, J.).
The Defendant’s motion for leave to amend fails to cite Rule 16(b) or
directly address the issue of good cause. (ECF No. 65.) In its motion, the
Defendant argues that it did not become aware of its inadvertent admission until
Aligned filed its response to the Defendant’s motion for summary judgment. (ECF
No. 65 at 1.) The Defendant further argues that the statement has since been
disproved by discovery. (Id. at 2.)
The Court finds that the Defendant’s failure to discover this “mistake” until
Aligned brought it to their attention demonstrates a lack of diligence. The
Defendant amended its original Answer to add the language that is currently at
issue. (Compare ECF No. 21 at ¶ 20 and ECF No. 27 at ¶ 20.) The parties’
depositions probed this issue and the Defendant moved for summary judgment
on this question. The Defendant’s failure to refer back to its Answer during the
course of the litigation and discover the error shows a lack of diligence. Moreover,
the Defendant continues to carelessly refer to the “SOV” without specifying which
SOV it is referencing. For example, in its Objections to the Magistrate’s Order,
currently before the Court, the Defendant states: “This inadvertent mistake
appears to have been compounded by the fact that the SOV was submitted by
Glenn Peterson as an attachment to an e-mail dated March 8, 2017[.]” (ECF No.
112 at 17.) The Court can infer which SOV the Defendant is referring to, but
these types of careless mistakes unnecessarily complicate and confuse the
issues before the Court.
The Court agrees with the Defendant that the parties were likely operating
under the impression that the question of which statement of values applied was
at issue throughout the case. Aligned did not even raise the Defendant’s

inadvertent admission in its motion for summary judgment and instead argued
the statement of values issue on the merits. (ECF No. 49 at 16-17.) The Court
finds, however, that the Defendant lacked diligence in discovering this sooner,
and therefore must deny the motion for leave to amend. Sanchez, 294 F.R.D. at
680 (“Having determined that [defendant] lacked diligence in discovering and
utilizing the information that forms the basis for seeking leave to amend, the
good cause inquiry required by Rule 16(b) ceases.”).
IV.

Conclusion

Accordingly, the Court affirms and adopts the Magistrate Judge’s Order.
(ECF No. 79) and overrules the Defendant’s objections (ECF No. 112). The
Defendant’s motion for leave to amend is denied. (ECF No. 65.) The parties are
directed to file any dispositive motions on the remaining issue in this case by
December 6, 2019.
Done and ordered in chambers at Miami, Florida on November 14, 2019.

________________________________
Robert N. Scola, Jr.
United States District Judge