Long Rockwood VII, LLC et al v. Rockwood Lodge, LLC et al

Filing 71

MEMORANDUM DECISION AND ORDER denying 64 Motion to Amend. Signed by Judge Ronald E. Bush. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (cjs)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

LONG ROCKWOOD VII, LLC, et al.,
Plaintiffs,

Case No 2:14-cv-00318-REB
MEMORANDUM DECISION AND
ORDER

vs.
ROCKWOOD LODGE, LLC, et al,
Defendants.

Pending before the Court is Plaintiffs’ Motion for Leave to File a Second
Amended Complaint, (Dkt. 64), filed on February 20, 2016. On January 26, 2016, the
Court issued a Memorandum Decision on Defendant’s Motion for Summary Judgment. In
this decision, the Court ruled that while Plaintiff’s fraud-based causes of action could
proceed to trial, certain other claims, notably Count II, which was pled as a breach of
contract claim but in fact alleged a violation of the covenant of good faith and fair
dealing, would be dismissed. The case is currently set for a seven-day bench trial, to
begin on November 28, 2016. Although the deadline to amend the pleadings passed on
October 15, 2014, Plaintiffs now seek leave to amend their Complaint a second time in
order to bring a claim for breach of contract. Having fully reviewed the record, the Court
finds that the facts and legal arguments are adequately presented in the briefs and other
written submissions. Accordingly, in the interest of avoiding further delay, and because

ORDER ON MOTION TO AMEND - 1

the Court conclusively finds that the decisional process would not be significantly aided
by oral argument, this matter shall be decided on the briefs and affidavits. Dist. Idaho
Loc. Civ. R. 7.1. For the reasons that follow, the Court denies the motion.
ANALYSIS
Although Rule 15(a) of the Federal Rules of Civil Procedure provides that leave to
amend a complaint or other pleading shall be freely given where justice so requires, Rule
15(a) is not the only operative rule in this context. In order to establish a right to amend
their Complaint at this point, Plaintiffs must first demonstrate that they are entitled to
relief from deadlines imposed by the Case Management Order (Dkt. 14). When it comes
to seeking relief from Court imposed deadlines, Rule 16, not Rule 15, is the primary
operative rule. “A party seeking to amend a pleading after the date specified in the
scheduling order must first show good cause for amendment under Rule 16, then if good
cause be shown, the party must demonstrate that amendment was proper under Rule 15.”
Johnson v. Mammoth Recreation, Inc., 975 F.2d 604, 608 (9th Cir. 1992). Rule 16's good
cause inquiry focuses primarily on the diligence of the party requesting the amendment.
Id. at 609. As the Ninth Circuit has explained:
Unlike Rule 15(a)'s liberal amendment policy which focuses on the bad
faith of the party seeking to interpose an amendment and the prejudice to
the opposing party, Rule 16(b)' s “good cause” standard primarily considers
the diligence of the party seeking the amendment. The district court may
modify the pretrial schedule if it cannot reasonably be met despite the
diligence of the party seeking the extension. . . . Although the existence or
degree of prejudice to the party opposing the modification might supply
additional reasons to deny a motion, the focus of the inquiry is upon the
moving party's reasons for seeking modification. If that party was not
ORDER ON MOTION TO AMEND - 2

diligent, then the inquiry should end.
Id.
Plaintiffs’ initial briefing simply skips the Rule 16 analysis, focuses entirely on the
liberal amendment policy of Rule 15(a). (Dkt. 64). That brief, as well as the Declaration
of Milton Rowland (Dkt. 65) both argue that prior to the time when the deadline for
amending the pleadings passed, Plaintiffs’ counsel had no information about what
information the Defendants had disclosed to the Wolff Company (an entity that is not a
party to this lawsuit) regarding the decking conditions at a similar apartment complex.
(Rowland Decl., Dkt. 65 at ¶¶ 3-4). Mr. Rowland also contends in his declaration in
support of the motion that even though he had not drafted the initial complaint, he
believed that “[u]nder the liberal notice pleading standards of the Federal Rules of Civil
Procedure...Count I of Plaintiffs’ First Amended Complaint was broad enough to cover breach of
the contract by failing to make the same disclosures to plaintiffs that were made to The Wolff
Company during the summer of 2011.”1 (Id., ¶ 6.)
1

As discussed in the Court’s ruling on the summary judgment issues, the “notice”
of the claim contained in the Amended Complaint was specific only in the context of the
breach of contract claim being described as invoking a duty of “good faith and fair
dealing,” and a breach of that duty. There was no specific mention of any particular duty
owed under the specific contract provisions, nor any specific allegations of any
corresponding breach. At a minimum, a complaint must state “who is being sued, for what
relief, and on what theory, in enough detail to guide discovery.” McHenry v. Renne 84 F.3d
1172, 1178 (9th Cir. 1996). Although one might believe that a claim denominated as

“breach of contract” was sufficient to make a claim for breach of an express contract
provision under notice pleading requirements, the Court is required to primarily consider
not the title or label affixed to the cause of action, but the definition to that claim given in
the body of that claim, which in this case referred only to the duty of good faith and fair
dealing. And, as explained in the Court’s Memorandum Decision on the Motion for
ORDER ON MOTION TO AMEND - 3

Though the briefing on this point is not entirely clear, Plaintiffs make these
assertions presumably to suggest that the basis for the breach of contract claim could not
have been discovered prior to obtaining the information about disclosures made to the
Wolff Company. However, the alleged failure on the part of Defendants to disclose the
defects in the decks at the Rockwood Lodge has been part of this case from its inception.
The allegation that Defendants knowingly failed to disclose known material defects was
central to Plaintiffs’ fraud-based claims, and indeed, the fraud-based counts in the
Amended Complaint specifically alleged that Defendants had a duty to speak because the
fact of the faulty deck construction was known to them. (Dkt. 19 at p. 10-11). Further, the
Purchase and Sale Agreement, including the critical language at Clause 12 that Plaintiffs
identify as the source of express contractual duties, clearly has been in their possession all
along. The fact that Plaintiffs may have discovered information that strengthened the
knowledge prong of their claims after the deadline for amending the pleadings passed has
no bearing on the question of whether a straight breach of contract claim could have been
asserted earlier. Even under the liberal Rule 15 standards, “late amendments to assert new
theories are not reviewed favorably when the facts and the theory have been known to the

Summary Judgment, that theory is not co-extensive with a claim for an express
contractual breach. Hence, even if reasonable minds might have differed as to whether
Count I of the Amended Complaint would suffice to allege a breach of contract claim
under notice pleading standards, as Plaintiffs now contend they believed, there was no
guarantee that the claim would withstand a challenge from Defendants, as ultimately
followed.
ORDER ON MOTION TO AMEND - 4

party seeking amendment since the inception of the cause of action.” See Acri v.
International Ass'n. of Machinists and Aerospace Workers, 781 F.2d 1393, 1398 (9th
Cir.1986).
In their reply brief, Plaintiffs respond to Defendants’ focus upon Rule 16 standards
and cite several decisions for the proposition that a party meets the good cause/diligence
standards if he or she can demonstrate that the new defense or cause of action did not
come to light until after the deadline for amendments had passed. These cases, however,
are distinguishable. Capistrano Unified School District, 656 F.Supp.2d 1190, 1194-95
(C.D. Cal. 2009) involved First Amendment claims against a school district, based upon a
teacher’s “continuous and incessant” statements of personal beliefs that allegedly violated
the Establishment Clause. After the court ruled on summary judgment that only one of the
“continual and incessant” comments actually violated the Establishment Clause, the
defendants moved to include a defense of qualified immunity. (The reason for this request
was that it was not “clearly established” at the time of the events giving rise to the lawsuit
that a single, isolated statement of a teacher’s personal beliefs in a year-long course could
trigger an Establishment Clause violation). Though the deadline for amending the
pleadings had passed at that point, the court allowed the defendants to amend because the
qualified immunity defense only became clear when the district court’s ruling
significantly shifted the landscape of the claims, whittling down numerous allegedly
unconstitutional statements to a single one.
Similarly, in T. Dorfman, Inc. v. Melaleuca, 2013 WL 5676808 (D. Idaho 2013),
ORDER ON MOTION TO AMEND - 5

one basis for granting the motion was that Plaintiffs had immediately sought leave to
amend after the additional context supporting their new claims became clear. Here,
although Plaintiffs allege that the strength of the potential breach of contract claim
became clear once the Wolff Company representatives were deposed in early 2015, the
request to amend did not follow until over a year later, in February of 2016. The other
case cited by Plaintiffs, also out of the District of Idaho, involved a request to amend a
scheduling order that had been essentially inoperative for some time due to the case’s
unique procedural posture. See, Pinnacle v. Great Plains Operating Co., LLC v. Wynn
Dewsnup Revocable Trust, No. 4:13-CV-00106-EJL-CW, 2015WL 759003. Because of
that procedural posture, the plaintiff had been unable to pursue any discovery to confirm
that basis for its potential fraud-based claim before the amendment deadline passed and
the relief was granted. Id. at * 3.
Factual discovery in this case closed on August 1, 2015, and the deadline for
dispositive motions was September 1, 2015. (Case Management Order, Dkt. 27).
Consequently, some prejudice does flow from the late request to amend the complaint,
because the late nature of that motion effectively deprived Defendants of the opportunity
to fully contest the merits of an express breach of contract claim. The fact that there may
be, and likely is, overlap between the factual and legal issues raised by an express breach
claim and those raised by the fraud-based claims does not alter this conclusion. A
defendant to a lawsuit must to be given adequate opportunity to explore various avenues
of defense for each of the claims brought against him or her. The Court cannot simply
ORDER ON MOTION TO AMEND - 6

declare that the issues raised by a potential breach of contract claim have already been
covered.2 In any event, the existence of prejudice is less significant when a party was not
diligent in seeking to amend under Rule 16, given the Ninth Circuit’s instructions that the
trial court’s “inquiry should end” at that juncture.3
The question raised by Plaintiffs’ motion to amend is always a difficult one, but it
is a question that implicates the requirements imposed by the Court upon this case (and,
for that matter, every case) to identify and set out where deadlines are drawn about the
nature of the case as it begins, as it proceeds, and where it ends. To have any meaning at
all, there must be finality to such deadlines at various stages along the way and one such
important stage is the deadline for amendment of pleadings and the addition of new
parties. Indeed, Plaintiffs took several steps along the way to remodel the nature of their
claims and the parties against whom they were asserted before those deadlines, consistent
with the opportunity under the civil rules and the Court’s scheduling order. Only after the
Court granted summary judgment against Plaintiffs on their breach of contract claim, did
Plaintiffs seek to amend that claim. Under Rule 16, for relief from such deadlines

2

Additionally, the impact upon the Court’s docket is also an important consideration, as
the purpose of the scheduling order is in part to keep the parties on task and moving forward
with the case, and to keep the Court’s docket moving forward as well.
3

Plaintiffs rely on an Eighth Circuit case, Dennis v. Dillard Dept. Stores, Inc., 207 F.3d.
523 (8 Cir. 2000) for the proposition that if a failure to include a defense or claim is an
oversight that can be corrected by reopening discovery, or requiring the party seeking
amendment to pay costs, that Courts should in such cases allow the amendment. However, the
case does not discuss Rule 16 and would also appear to be at odds with the Ninth Circuit’s clear
instruction in Johnson that district courts focus on the diligence/good cause standards.
th

ORDER ON MOTION TO AMEND - 7

requires good reason to step back from the otherwise already settled landscape of the
lawsuit. In the exercise of the Court’s discretion, for the reasons set out in this decision,
the Court concludes that the good cause required for the Court to grant such a motion is
simply not present on this record.
ORDER
1.

The Motion to Amend (Dkt. 64) is DENIED.

DATED: June 7, 2016

Honorable Ronald E. Bush
Chief U. S. Magistrate Judge

ORDER ON MOTION TO AMEND - 8