Martin K. Eby Construction Company, Inc. v. OneBeacon Insurance Company
Filing
176
MEMORANDUM AND ORDER granting 127 Motion for Leave. Signed by Magistrate Judge Kenneth G. Gale on 11/21/2011. (df)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
MARTIN K. EBY CONSTRUCTION
COMPANY, INC., et al.,
)
)
)
Plaintiffs,
)
)
vs.
)
)
)
ONEBEACON INSURANCE CO., et al., )
)
Defendants.
)
___________________________________ )
Case No. 08-1250-WEB-KGG
(Consolidated with Case No.
08-2392-CM)
MEMORANDUM AND ORDER
Before the Court is “Plaintiff and Defendant Eby’s Motion for Leave to
Amend its Answer to the Cross-claim Against it by Travelers Insurance Company
in its Successor Capacities” with supporting memorandum. (Docs. 127, 128.)
Travelers has responded in opposition, arguing that Plaintiff’s motion fails under
the standard set out by Fed.R.Civ.P. 16 in addition to being futile. (Doc. 130.)
After a careful review of the submissions of the parties, the Court GRANTS
Plaintiff Eby’s motion.
BACKGROUND
This extensive procedural history of this case is adequately summarized in
the parties’ filings (Doc. 128, at 1; Doc. 130, at 2-3) and is incorporated by
reference herein. Central to the Court’s determination of the issues relevant to this
motion are the following facts.
The original deadline for filing motions to amend the pleadings expired on
October 22, 2009. (Doc. 48, at 8.) Various dispositive motions were filed by the
parties, resulting in the District Court’s ruling on February 22, 2011. (Doc. 119.)
That decision, in part, held that Eby had a contractual obligation to indemnify KBR
in the underlying action, which ripened an indemnity claim for coverage.
Subsequently, this Court entered the First Amended Scheduling Order on June 28,
2011, which included a deadline of July 29, 2011, to amend the pleadings but
included the qualifier that any such motions would need to meet the “good cause”
standard. (Doc. 124, at 6.) The present motion was filed within that deadline.
DISCUSSION
Federal Rule 15(a) provides, in pertinent part, that “a party may amend its
pleading only with the opposing party’s written consent or the court’s leave.” In
the absence of any apparent or declared reason, such as undue delay, undue
prejudice to the opposing party, bad faith or dilatory motive, failure to cure
deficiencies by amendments previously allowed, or futility of amendment, leave to
amend should be freely given, as required by the federal rule. Foman v. Davis,
371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962); Frank v. U.S. West,
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Inc., 3 F.3d 1357, 1365 (10th Cir. 1993). A court is justified in denying a motion to
amend as futile if the proposed amendment could not withstand a motion to
dismiss or otherwise fails to state a claim. Ketchum v. Cruz, 961 F.2d 916, 920
(10th Cir. 1992); see 6 Wright, Miller & Kane, FEDERAL PRACTICE AND
PROCEDURE § 1487 at 642 (1990).
A.
“Good Cause.”
As discussed above, the First Amended Scheduling Order was entered in this
case on June 28, 2011. (Doc. 124.) It included a deadline of July 29, 2011, to
amend the pleadings but included the qualifier that any such motions would need
to meet the “good cause” standard. (Id., at 6.) The “good cause” standard is
employed when deciding motions to amend a Scheduling Order. See Denmon v.
Runyon, 151 F.R.D. 404, 407 (D. Kan. 1993) (stating that a motion to amend filed
after the deadline established in the scheduling order must meet the standard of
“good cause” under Fed. R. Civ. P. 16(b)).
Although Plaintiff is technically not seeking to amend the First Amended
Scheduling Order, the Court will rely on case law applying that standard in
determining the merits of Plaintiff’s motion because of the inclusion of the “good
cause” standard in the First Amended Scheduling Order.
When the deadline for amending pleadings set in
the scheduling order has passed, as is the case here,
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Federal Rule of Civil Procedure 16(b)(4) is implicated.
Rule 16(b)(4) provides that a scheduling order ‘may be
modified only for good cause and with the judge's
consent.’ To date, the Tenth Circuit has declined to
decide whether a party seeking to amend its pleadings
after the scheduling order deadline must show ‘good
cause’ for the amendment under Rule 16(b)(4) in
addition to satisfying Rule 15(a); however, in those
particular cases the parties failed to raise the ‘good cause’
issue in the district court and raised it for the first time
only on appeal.
Notwithstanding the lack of definitive guidance
from the Tenth Circuit, Judges in this District have
consistently applied a two-step analysis based on both
Rule 16(b) and Rule 15(a) when deciding a motion to
amend a complaint filed past the scheduling order
deadline. Thus, when a motion to amend is filed beyond
the scheduling order deadline, this Court will first
determine whether the moving party has established
‘good cause’ within the meaning of Rule 16(b)(4) so as
to justify allowing the untimely motion. Only after
determining that good cause has been established will the
Court proceed to determine if the more liberal Rule 15(a)
standard for amendment has been satisfied.
To establish good cause under Rule 16(b)(4), ‘the
moving party must show that the amendment deadline
could not have been met even if it had acted with due
diligence.’ ‘Carelessness is not compatible with a
finding of diligence and offers no reason for a grant of
relief.’ Furthermore, the lack of prejudice to the
nonmovant does not show ‘good cause.’ A district
court's determination as to whether a party has
established good cause sufficient to modify a scheduling
order amendment deadline is within the court's
discretion, and will be reviewed only for an abuse of
discretion.
Likewise, the ultimate decision whether to allow a
proposed amendment addresses the sound discretion of
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the court. In exercising its discretion, the court must
keep in mind that the Federal Rules of Civil Procedure
are designed to facilitate decisions on the merits rather
than on pleading technicalities. Indeed, the Tenth Circuit
has recognized that Rule 15 is intended ‘to provide
litigants ‘the maximum opportunity for each claim to be
decided on its merits rather than on procedural niceties.’ ’
Carefusion 213, LLC v. Professional Disposables, Inc., No. 09-2616-KHV-DJW,
2010 WL 4004874, at *3-4 (D.Kan. Oct. 12, 2010) (internal citations omitted).
Counsel for Defendant Travelers argues that Plaintiff’s brief entirely ignores
discussion of the “good cause” standard, which it contends is sufficient reason to
deny the motion. Further, Travelers argues that Plaintiff’s proposed pleading is
futile because Plaintiff “cannot recover additional defense costs it is not owed” and
Plaintiff does not have standing to bring a breach of contract claim “based on
KBR’s purported contractual rights as an additional insured . . . .” (Doc. 130, at 9.)
In regard to the latter argument, the Court does not agree that Plaintiff has
failed to address the issue of “good cause” or that good cause does not exist.
Although Plaintiff could have predicted certain claims in this case, those issues did
not ripen until the District Court’s summary judgment ruling on February 22, 2011.
(Doc. 119.) These circumstances constitute “good cause” in the Court’s opinion.
Although Plaintiff did not specifically use the phrase “good cause” in its
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memorandum, it specifically addressed these circumstances. As such, good cause
not only exists, it has been established by Plaintiff.
B.
Futility.
Defendant also argues that Plaintiff’s proposed amendment is futile. Thus,
the Court must also determine whether it could withstand a motion to dismiss. In
light of two recent Supreme Court cases, the Tenth Circuit has restated the standard
for ruling on motions to dismiss under Fed. R. Civ. P. 12(b)(6), and now looks at
what is described as a “plausibility” standard:
Turning to our standard of review and applicable legal
principles involving motions to dismiss, we review de novo a
district court's denial of a motion to dismiss a complaint under
Federal Rule of Civil Procedure 12(b)(6) for failure to state a
claim. See Dias v. City and County of Denver, 567 F.3d 1169,
1178 (10th Cir.2009); Gann v. Cline, 519 F.3d 1090, 1092
(10th Cir.2008); Alvarado v. KOB-TV, LLC, 493 F.3d 1210,
1215 (2007). "We assume the truth of all well-pleaded facts in
the complaint, and draw reasonable inferences therefrom in the
light most favorable to the plaintiff[ ]." Dias, 567 F.3d at 1178
(alteration added). This assumption, however, is inapplicable
when the complaint relies on a recital of the elements of a cause
of action supported by mere conclusory statements. See
Ashcroft v. Iqbal, --- U.S. ----, 129 S.Ct. 1937, 1949, 173
L.Ed.2d 868 (2009).
* * * *
In reviewing a motion to dismiss, it is important to
note "Federal Rule of Civil Procedure 8(a)(2) provides
that a complaint must contain 'a short and plain statement
of the claim showing that the pleader is entitled to relief.'
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" Robbins v. Oklahoma, 519 F.3d 1242, 1246 (10th
Cir.2008). In the past, we "generally embraced a liberal
construction of [this] pleading requirement," and held "a
complaint containing only conclusory allegations could
withstand a motion to dismiss unless its factual
impossibility was apparent from the face of the
pleadings...." Id. However, the Supreme Court has
recently "clarified" this standard, stating that "to
withstand a motion to dismiss, a complaint must contain
enough allegations of fact 'to state a claim to relief that is
plausible on its face.' " Id. at 1247 (quoting Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955,
167 L.Ed.2d 929 (2007)). Specifically, "[f]actual
allegations must be enough to raise a right to relief above
the speculative level," Twombly, 550 U.S. at 555, so that
"[t]he allegations must be enough that, if assumed to be
true, the plaintiff plausibly (not just speculatively) has a
claim for relief." Robbins, 519 F.3d at 1247. Under this
standard, "a plaintiff must nudge his claims across the
line from conceivable to plausible in order to survive a
motion to dismiss." Smith, 561 F.3d at 1098. Therefore, a
plaintiff must "frame a 'complaint with enough factual
matter (taken as true) to suggest' that he or she is entitled
to relief." Robbins, 519 F.3d at 1247 (quoting Twombly,
550 U.S. at 556).
On the other hand, we have also held "granting a
motion to dismiss is a harsh remedy which must be
cautiously studied, not only to effectuate the spirit of the
liberal rules of pleading but also to protect the interests of
justice." Dias, 567 F.3d at 1178 (quotation marks and
citation omitted). "Thus, 'a well-pleaded complaint may
proceed even if it strikes a savvy judge that actual proof
of those facts is improbable, and that a recovery is very
remote and unlikely.' " Id. (quoting Twombly, 550 U.S. at
556).
In discussing the sufficiency of a complaint's
allegations, we look to two Supreme Court decisions,
Twombly and Iqbal, which provide the determinative test
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for whether a complaint meets the requirements of
Federal Rules of Civil Procedure 8(a)(2) and 12(b)(6) for
assessing whether it is legally sufficient to state a claim
for which relief may be granted.
Phillips v. Bell, No. 08-1042, 2010 WL 517629, * 3,4 (10th Cir., 2010). The
burden is on Defendant to establish the futility of Plaintiff’s proposed amendment.
Pekareck v. Sunbeam Products., No. 06-1026-WEB, 2006 WL 1313382, at *3 (D.
Kan. May 12, 2006).
As stated above, Defendant argues that the proposed amendment is futile
because Plaintiff “cannot recover additional defense costs it is not owed” and
Plaintiff does not have standing to bring a breach of contract claim “based on
KBR’s purported contractual rights as an additional insured . . . .” (Doc. 130, at 9.)
While these claims may, in fact, fail to survive a subsequent dispositive motion, the
Court agrees with Plaintiff’s contention that it would be premature to foreclose
these claims prior to the parties engaging in appropriate and relevant discovery.
(See Doc. 135, at 4.) As such, the Court, in it’s sound discretion, holds that these
indemnification issues would be better adjudicated through a motion to dismiss or
a motion for summary judgment as opposed to Plaintiff’s motion to amend.
Plaintiff’s motion is, therefore, GRANTED. The amended pleading shall be filed
in the form attached to the motion on or before December 5, 2011.
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IT IS SO ORDERED.
Dated at Wichita, Kansas, on this 21st day of November, 2011.
S/ KENNETH G. GALE
Kenneth G. Gale
United States Magistrate Judge
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