Munster Steel Co Inc v. Crane 1 Services Inc

Filing 91

OPINION AND ORDER: The Court GRANTS Dft's Motion for Leave to File Amended Answer to Pla's Complaint, Affirmative Defenses and Jury Demand 53 and Dft's FRCP Rule 14 Motion for Leave to File Third-Party Complaint Against Cincinnati Cr ane & Hoist, LLC 78 . The Court ORDERS Dft to file its Amended Answer, currently on the docket as an attachment to the instant Motion, by 8/7/2018, and REMINDS Dft of the need to provide summons and effect service on the third-party dft in accordanc e with FRCP Rule 4. The Court GRANTS, for relief different than requested, Pla's Motion to Extend Discovery Deadlines 90 . Noting that the introduction of an additional party may result in further discovery, the Court SETS this matter for a tel ephonic status conference, to be initiated by the Court on 9/20/2018, at 10:00 a.m. (CST), to establish new deadlines for discovery, as outlined. The parties are ORDERED to file a proposed joint discovery plan by 9/14/2018. The Court DENIES as moot, with leave to re-file, the three discovery motions currently pending: Pla's Motion to Compel Answers to Certified Questions, to Compel Answers to Pla's Second Set of Interrogatories, and for Fees and Costs 69 ; Dft's Motion to Quash Subpoena Issued to Kenneth Hessevick or Alternatively Modify the Subpoena to Protect Privileged Communications 82 ; and Dft's Motion to Quash Subpoena Issued to Gregory Tonner 83 . Signed by Magistrate Judge John E Martin on 7/25/2018. (lhc)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
MUNSTER STEEL CO., INC.,
Plaintiff,
v.
CRANE 1 SERVICES, INC.,
Defendant.

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CAUSE NO. 2:16-CV-345

OPINION AND ORDER
This matter is before the Court on a Motion for Leave to File Amended Answer to Plaintiff’s
Complaint, Affirmative Defenses and Jury Demand [DE 53], filed by Defendant Crane 1 Services,
Inc., on February 27, 2018; a FRCP Rule 14 Motion for Leave to File Third-Party Complaint
Against Cincinnati Crane & Hoist, LLC [DE 78], filed by Defendant on June 1, 2018; and a Motion
to Extend Discovery Deadlines [DE 90], filed by Plaintiff Munster Steel Co., Inc., on July 13, 2018.
Defendant seeks to amend its Answer to reflect that the party that answered was not the party with
which Plaintiff contracted. Plaintiff filed a response objecting to the Motion to Amend on March 20,
2018, and on April 6, 2018, Defendant replied. In the other motions, Defendant seeks to file a
complaint against a third party, which Plaintiff does not oppose, and Plaintiff seeks to extend
discovery deadlines, which Defendant does not oppose.
I.

Background
On October 1, 2013, Plaintiff Munster Steel signed a contract with an entity called “Crane

1 Services” that required Crane 1 Services to design, supply, and install cranes and related
equipment to Plaintiff’s new facility. According to Plaintiff, work began by September 2014, but
by October 2014, Plaintiff had identified “serious deficiencies” with the cranes and the manner in
which they were installed. Plaintiff filed its Complaint on July 26, 2016, alleging breach of contract.

On September 16, 2016, Defendant Crane 1 Services answered, identified itself as a Delaware
corporation, and admitted that it had contracted with Plaintiff.
As Defendant now admits, that identification was wrong. Crane 1 Delaware was only
incorporated in 2015, two years after the contract with Plaintiff was signed. In September 2017,
Defendant disclosed that Plaintiff had in fact contracted with “Crane 1 Ohio,” and that Crane 1
Delaware purchased the majority of Crane 1 Ohio’s assets in October 2015. Crane 1 Ohio also
transferred assets and stock to two other entities, changed its name to “RNM Holdings,” and
eventually dissolved in June 2016. Defendant now seeks to amend its complaint to correct the
misidentification, and to file a third-party complaint against Cincinnati Crane & Hoist LLC, which
Defendant alleges supplied several of the cranes at issue in this case.
II.

Standard of Review
Federal Rule of Civil Procedure 15 provides that “a party may amend its pleading only with

. . . the court’s leave.” Fed. R. Civ. P. 15(a)(2). The Rule further provides that the Court “should
freely give leave when justice so requires.” Id. The decision to grant or deny a motion to amend lies
within the Court’s sound discretion, but leave to amend is “inappropriate where there is undue delay,
bad faith, dilatory motive on the part of the movant, repeated failure to cure deficiencies by
amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of
the amendment, or futility of the amendment.” Villa v. City of Chicago, 924 F.2d 629, 632 (7th Cir.
1991); Campbell v. Ingersoll Milling Mach. Co., 893 F.2d 925, 927 (7th Cir. 1990). Federal Rule
of Civil Procedure 14 provides that a defendant “may, as third-party plaintiff, serve a summons and
complaint on a nonparty who is or may be liable to it for all or part of the claim against it.”

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III.

Analysis
Defendant seeks to amend its Answer to indicate that only the Ohio entity was involved in

the design and installation of the cranes. Plaintiff opposes the motion, citing bad faith, prejudice, and
undue delay. Plaintiff also argues that the “mend the hold” doctrine forecloses Defendant from
amending its answer. In its response brief, Plaintiff requests that the Court impose sanctions
pursuant to Federal Rule of Civil Procedure 11 against Defendant, alleging failure to make a
reasonable inquiry into the facts before taking a position in litigation.
As an initial matter, the Court addresses Defendant’s argument that it can amend without
seeking leave of court. Defendant points to this Court’s scheduling order of February 2, 2017, which
states in pertinent part: “Any amendments to the pleadings to be filed by 3/31/2017 or 30 days after
the Court’s ruling on the pending motion to dismiss, whichever is later.” To the extent Defendant
interprets that statement to contradict the plain language of Rule 15(a)(2), it is mistaken. For the
Court to permit an amendment to the pleadings, the request had to be filed within 30 days of the
ruling on the motion to dismiss, and satisfy Rule 15 and all other applicable rules of procedure, just
as any other pleading would.
Defendant claims the misidentification of the contracting entity was an oversight. Defendant
states that because Crane 1 Delaware and Crane 1 Ohio had the same brand name, facilities,
equipment, and business records, the business itself “did not undergo a significant or even apparent
change.” As a result, the distinction between the two entities “did not resonate” with former counsel,
who withdrew in January 2018, or with the employees who approved the pleadings and discovery
responses.

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Plaintiff argues that Defendant offers its proposed amendment in bad faith. Plaintiff points
to the prior pleadings and verified discovery responses that did not properly acknowledge Crane 1
Ohio’s role. Plaintiff accuses Defendant of deliberately misidentifying the contracting party to
obscure the transactions among the Crane 1 entities. In essence, Plaintiff accuses Defendant of
fraudulently litigating as Crane 1 Delaware to detract attention from the inability of Crane 1 Ohio
to satisfy a potential judgment.
Defendant does offer a reason for its errors: its prior counsel and its employees did not
understand the distinction between the Crane 1 entities because the asset sale did not make an
apparent difference in the operations of the business. Without evidence that the relevant individuals
did in fact understand the distinction, the Court is not prepared to conclude that Defendant is acting
in bad faith. If Plaintiff’s discovery reveals otherwise, it will have other avenues in which to address
any impropriety in the asset transfer.
Plaintiff also argues that Defendant’s proposed amendment should be rejected for prejudice
and undue delay. The passage of time is not enough to deny leave to amend; the non-moving party
must be prejudiced in some way by the delay. McCoy v. Iberdola Renewables, Inc., 760 F.3d 674,
687 (7th. Cir. 2014); Dubicz v. Commonwealth Edison Co., 377 F.3d 787, 793 (7th Cir. 2004).
Therefore, the factors of prejudice and undue delay are often considered together. Dubicz, 377 F.3d
at 792. When the alleged prejudice arises from the lateness of the amendment, undue prejudice is
typically found when the amendment is sought after discovery has closed, or when one of the parties
has moved for summary judgment. See, e.g., Crest Hill Land Dev., LLC v. City of Joliet, 396 F.3d
801, 804 (7th Cir. 2005) (denying leave to amend was not an abuse of discretion when discovery had
closed and summary judgment briefing had begun); Johnson v. Methodist Med. Ctr. of Ill., 10 F.3d

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1300, 1304 (7th Cir. 1993) (same); J.P. Morgan Chase Bank, N.A. v. Drywall Serv. & Supply Co.,
265 F.R.D. 341, 353-54 (N.D. Ind. 2010) (collecting cases).
The actual length of delay in this case is a open to interpretation. Plaintiff points to the time
that passed between the filing of the lawsuit in July 2016 and Defendant’s motion to amend, filed
on February 27, 2018. Defendant states that its counsel did not realize the distinction between the
entities until September 2017, approximately five months before Defendant’s motion. In any case,
discovery is still ongoing, and the parties have in fact agreed to seek an extension of the discovery
deadlines, so the delay will not cause undue prejudice.
Plaintiff asserts that discovery taken prior to the amendment would be rendered essentially
useless as it concerns a party that will now seek to deny liability and deny that it had signed a
contract with Plaintiff. However, the operative facts of the case relate to the design and installation
of the cranes at Plaintiff’s facility, and those facts were apparently common to both Crane 1 entities.
As Plaintiff admits, the two Crane 1 entities had the same officers and employees and performed the
same work, including the work at issue in this case. While additional discovery is appropriate, and
some of it may be duplicative, the prior discovery is not useless. Furthermore, although more
discovery was inevitable after Defendant disclosed the existence of Crane 1 Ohio, much of it arises
because of the disputed transaction between the Crane 1 entities, not from the proposed amendment
itself. Even if Defendant were held to the responses in its prior Answer, Plaintiff would still seek
discovery about the relationships among the various Crane 1 entities and their employees and the
implications for potential liability for those entities. (In fact, it has already done so; some of that
discovery is the subject of pending Motion to Compel.) Because the additional discovery would have

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occurred with or without the proposed amendment, the amendment itself would not prejudice
Plaintiff in that regard.
Plaintiff also argues that the “mend-the-hold doctrine” forecloses Defendant from amending
its Answer. Under the mend-the-hold doctrine, which is typically used in the insurance context, a
defendant in a breach of contract case is limited from changing its position once the litigation has
started if the other party would be prejudiced. See, e.g., Ryerson Inc. v. Fed. Ins. Co., 676 F.3d 610,
614 (7th Cir. 2012). However, the doctrine has not typically been applied in Indiana. See Amerisure
Ins. Co. v. Nat’l Sur. Corp., 695 F.3d 632, 636 (7th Cir. 2012) (declining to adopt the doctrine in the
absence of Indiana state court precedent). Plaintiff cites to a case in which it was enforced in Illinois,
Harbor Ins. Co. v. Cont’l Bank Corp., 922 F.2d 357 (7th Cir. 1990), but does not provide compelling
authority showing that it should be applied in Indiana. Accordingly, the Court declines to apply the
mend-the-hold doctrine.
Plaintiff urges the Court to sanction Defendant pursuant to Rule 11 for failing to make a
reasonable inquiry into the facts before filing its Answer. Plaintiff cites Federal Rule of Civil
Procedure 11(b)(3) and (4), which requires that any representations have evidentiary support or are
reasonably based on belief or a lack of information. However, under federal and local rules, a motion
for sanctions must be made separately from a response brief. Fed. R. Civ. P. 11(c)(2); N.D. Ind. L.R.
7-1(a). The Court declines to consider Plaintiff’s request, and reminds Plaintiff to follow all
applicable rules of procedure should it wish to seek sanctions.
Accordingly, the Court finds that Defendant’s amendment was not offered in bad faith, that
it will not result in undue delay or undue prejudice to Plaintiff, and that the mend-the-hold doctrine
does not apply in Indiana. On that basis, Defendant may amend its answer.

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Defendant also seeks leave to file a Third-Party Complaint against Cincinnati Crane & Hoist,
LLC, claiming that many of the alleged defects complained of by Plaintiff arise out of work
performed by that entity. If true, it appears that the proposed third party “is or may be liable to
[Defendant] for all or part of the claim against [Defendant],” and Defendant represents that Plaintiff
does not object to the proposed addition, so allowing the third-party complaint is appropriate. Fed.
R. Civ. P. 14(a)(1).
In its Motion to Extend Discovery Deadlines, Plaintiff requests extensions of various
discovery-related deadlines to accommodate the additional discovery that followed the withdrawal
of Defendant’s prior counsel, and to allow the parties to engage in mediation before that discovery
is taken. Plaintiff represents that Defendant agrees to the requested extensions. Particularly in view
of the additional claims and party being added to the suit, the Court agrees that additional time is
needed.
IV.

Conclusion
For the foregoing reasons, the Court hereby GRANTS Defendant’s Motion for Leave to File

Amended Answer to Plaintiff’s Complaint, Affirmative Defenses and Jury Demand [DE 53] and
Defendant’s FRCP Rule 14 Motion for Leave to File Third-Party Complaint Against Cincinnati
Crane & Hoist, LLC [DE 78]. The Court ORDERS Defendant to file its Amended Answer,
currently on the docket as an attachment to the instant Motion, by August 7, 2018, and REMINDS
Defendant of the need to provide summons and effect service on the third-party defendant in
accordance with Federal Rule of Civil Procedure 4. The Court GRANTS, for relief different than
requested, Plaintiff’s Motion to Extend Discovery Deadlines [DE 90]. Noting that the introduction
of an additional party may result in further discovery, the Court SETS this matter for a telephonic

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status conference, to be initiated by the Court on September 20, 2018, at 10:00 a.m. (CST), to
establish new deadlines for discovery. Any change of contact information is to be provided to the
Court’s case manager at [e-mail] or [phone] no earlier than forty-eight
(48) hours in advance of the conference. The parties are ORDERED to file a proposed joint
discovery plan by September 14, 2018.
Given that the amendment to Defendant’s Answer and the introduction of the additional
party may affect the discovery disputes pending in this case, the Court DENIES as moot, with leave
to re-file, the three discovery motions currently pending: Plaintiff’s Motion to Compel Answers to
Certified Questions, to Compel Answers to Plaintiff’s Second Set of Interrogatories, and for Fees
and Costs [DE 69]; Defendant’s Motion to Quash Subpoena Issued to Kenneth Hessevick or
Alternatively Modify the Subpoena to Protect Privileged Communications [DE 82]; and Defendant’s
Motion to Quash Subpoena Issued to Gregory Tonner [DE 83].
So ORDERED this 25th day of July, 2018.
s/ John E. Martin
MAGISTRATE JUDGE JOHN E. MARTIN
UNITED STATES DISTRICT COURT
cc: All counsel of record

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