Cedar Ridge, LLC v. Landmark American Insurance Company et al

Filing 89

ORDERED that 56 Motion for Leave to File First Supplemental and Amending Third Party Complaint is GRANTED. Signed by Magistrate Judge Karen Wells Roby. (cml, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
CEDAR RIDGE, LLC.

CIVIL ACTION

VERSUS

NO: 13-672

LANDMARK AMERICAN
INSURANCE COMPANY, ET AL.

SECTION: “I” (4)
ORDER

Before the Court is a Motion for Leave of Court to File First Supplemental and Amending
Third Party Complaint and Request for Expedited Hearing (R. Doc. 56), filed by Defendants /
Third Party Plaintiffs, Landmark American Insurance Company, (“LAIC”) and RSUI Indemnity
Company, (“RSUI”), seeking leave of the Court to file a third party complaint against National Fire
Insurance Company of Hartford, (“National Fire”) the insurer of third-party defendant, Roof
Technologies, Inc., (“Roof Tech”). Roof Tech opposed the motion. (R. Doc. 63). LAUI filed a reply
to the opposition. (R. Doc.75). The motion was heard on the briefs on December 11, 2013.
I.

Background
Cedar Ridge instituted the instant action for damages which were sustained to its commercial

property in the Riverlands Shopping Center in Laplace, Louisiana, on or around August 29, 2012, from
the aftermath of Hurricane Isaac. (R. Doc. 1). Landmark allegedly issued a commercial property
insurance policy, No. LHD387065, on these properties to Cedar Ridge. (R. Doc. 51-1, p. 1).
Following Hurricane Isaac, Cedar Ridge hired Roof Tech Technologies, Inc., (“Roof Tech”)

to make temporary repairs to the shopping center’s roof. Id. On September 14, 2012, Cedar Ridge
retained Mr. Ray Gonzales of Property Damage Consultants, LLC, (“PDC”), to determine the repair
costs of the roof damage, as well as the cost of replacing the entire roof. (R. Doc. 17-2, p. 5; R. Doc.
51-1, p. 2).
Shortly thereafter, LAUI retained its own alleged expert, Engle Martin & Associates, Inc.,
(“Engle”) to adjust Cedar’s claim of loss at Riverlands. (R. Doc. 1, p. 3). On behalf of Engle, Unified
Building Services (“UBS”) and Unified Building Sciences & Engineering (“UBSE”) inspected the roof
and the temporary repairs by Roof Tech. (R. Doc. 17-2, p. 5; see also R. Doc. 51-1, p. 2). UBSE
issued an investigative report that allegedly “opined the splits in the roof caused by Hurricane Isaac
were minimal and could have been repaired, but additional damage was caused by Roof Tech’s
installation of the tarps with nailing strips, screws and asphalt roof cement.” Id. at 5.
Furthermore, when UBSE returned in October 2012, LAUI alleges that UBSE observed a “peel
and stick” type material that was installed by Roof Tech had “multiple installation related deficiencies
throughout the temporary repair locations which allowed moisture intrusion.” (R. Doc. 51-1, p. 2).
Based on this report and its purported policy exclusions, LAUI was advised that its liability was
approximately $378,000.00, which is less than the policy deductible. Id. Therefore, LAUI argues that
no payment is owed under the policy.
Cedar Ridge filed the instant action in federal court on April 10, 2013, alleging that it paid
$772,079.00 for roof repairs, and that it faced an additional $1,000,000 in repair costs, as well as
seeking damages against LAUI & RSUI for breach of contract, breach of the duty of good faith and
fair dealing pursuant to La. R.S 22:1973, and for breach of its statutory duty owed under La. R.S
22:1892. Id. LAUI subsequently filed a third-party demand against Roof Tech on September 10, 2013.
(R. Docs. 31, 36).

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As to the instant motion, Defendants LAUI and RSUI contend that on September 18, 2013, it
propounded discovery on Roof Tech, which included a request for a copy of its policy of insurance
in effect at the time of the incident. (R. Doc. 56, p 1.) Roof Tech allegedly objected to producing its
policy on November 11, 2013. Id. at 2. However, on November 19, 2013, Roof Tech ultimately
produced a copy of the insurance policy, which was issued by National Fire Insurance Company of
National Fire (“National Fire”). Id. at 2, ¶4. As such, LAUI and RSUI now seek to amend their
complaint and file a third-party demand against National Fire to seek indemnity from them for the
damages that its insured, Roof Tech, allegedly caused to the property. Id. at ¶ 5.
II.

Standard of Review
Federal Rule of Civil Procedure (“Rule”) 14(a)(1) states that “[a] defending party may, as a

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. But the third-party plaintiff must, by motion, obtain the court’s leave
if it filed the third-party complaint more than 14 days after serving its original answer.” Id (emphasis
added). Courts are granted wide discretion in determining whether to permit third-party claims.
McDonald v. Union Carbide Corp., 734 F.2d 182, 184 (5th Cir. 1984).
Courts have applied several factors when deciding whether to allow a third-party complaint.
The factors are: “(1) prejudice placed on the other parties, (2) undue delay by adding the third-party
plaintiff, (3) lack of substance to the third-party claim, and (4) advancing the purposes of Rule 14 (such
as avoiding duplicative suits on closely related issues).” Id. at 183 (citation omitted). “The mere fact
that the alleged third-party claim arises from the same transaction or set of facts as the original claim
is not enough.” Vinmar Overseas, Ltd. v. OceanConnect, LLC, 2012 WL 5989206, at *3 (S.D. Tex.
Nov. 29, 2012) (citation omitted).
A court’s discretion is improper where the third-party plaintiff “cannot show a basis for the

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third-party defendant’s liability to the third-party plaintiff.” McCain v. Clearview Dodge Sales, Inc.,
574 F.2d 848, 849-50 (5th Cir. 1978). Thus, a third-party defendant “must necessarily be liable over
to the defendant for all or part of the plaintiff’s recovery, or that the defendant must attempt to pass
on to the third party all or part of the liability asserted against the defendant.” United States v. Joe
Grasson & Son, Inc., 380 F.2d 749, 750-52 (5th Cir. 1967); United States ex rel. Branch Consultants,
LLC v. Allstate Insurance Co., 265 F.R.D. 266, 272 (E.D. La. 2010) (quoting Joe Grasson).
Rule 14(a) exists to bring in “third parties who are derivatively liable to the impleading party.”
Vinmar, at 2012 WL 5989206, *3 (citing Hassan v. La. Dep’t of Transp.& Dev., 1999 WL 642861,
at *2 (5th Cir. July 26, 1999))(emphasis in original); see also Briones v. Smith Dairy Queens, Ltd.,
2008 WL 4200931, at *2 (S.D. Tex. Sept. 9, 2008) (“[s]uch complaints require that the ‘defendant is
attempting to transfer to the third-party defendant the liability asserted against him by the original
plaintiff.’”) (quoting Anadarko Petrol. Corp. v. Great Plains Gas Compression, Inc., 2007 WL 38327,
at *1 (S.D. Tex. Jan. 4, 2007)).
III.

Analysis
A.

The Untimely Filed Motion for Leave to File Amended Third Party Complaint

Before considering the merits of the motion, in accordance with the presiding Judge’s
Scheduling Order, amendments to pleadings were due no later than November 4, 2013. (R. Doc. 41,
p.2). No extensions were granted, and the Scheduling Order expressly stated that any motion, or in this
instance, amendment would necessitate a showing of good cause. Id. LAUI’s motion however, was
filed on November 26, 2013, and is thus, untimely.
Fed. R. Civ. P. (“Rule”) 16(b) requires the district court to, among other things, limit the time
for the parties to join other parties should a party attempt to amend its pleadings to join another party
after the deadline for taking such an action has expired. The district court must first determine whether

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to modify its scheduling order, under the standards of Rule 16(b). Howell v. Standard Motor Products,
Inc., 2001 WL 196969, at *1 (N.D. Tex. Feb. 26, 2001).
Rule 16(b) states that a party seeking to modify a scheduling order after the deadlines have
expired, must show good cause. Id. See also Matias v. Taylors Intern. Serv’s, Inc., 2010 WL 3825402,
at *3 (E.D. La. Sept. 24, 2010); see S & W Enters., 315 F.3d at 536; Valcho v. Dallas County Hosp.
Dist., 658 F.Supp.2d 802, 814 (N.D. Tex. 2009) (“when as here, the deadline for seeking leave to
amend pleadings has expired, a court considering the motion to amend must first determine whether
to modify the scheduling order under the good cause standard for [Rule] 16(b)(4)”).
The good cause standard focuses on the diligence of the party seeking to modify the scheduling
order. The mere inadvertence by the movant does not satisfy the good cause requirement. See id.
Instead, the moving party may “demonstrate good cause by showing that, despite his diligence, he
could not have met the scheduling deadline.” Howell, at *1; McCombs v. Allwaste Recovery Sys., 1999
WL 102816 at *2; Am. Tourmaline Fields, at *1 (internal citations omitted).
Here, LAUI and RSUI contend that on September 18, 2013, it propounded discovery on Roof
Tech, which included a request for a copy of its policy of insurance in effect at the time of the incident.
(R. Doc. 56, p 1.) Roof Tech allegedly objected to producing its policy on November 11, 2013. Id. at
2. However, on November 19, 2013, Roof Tech ultimately produced a copy of the insurance policy,
which was issued by National Fire. Id. at 2, ¶4. Because LAUI and RSUI did not learn the identity of
the insurer, National Fire, until November 19, 2013, the Court finds that LAUI has presented good
cause to justify the modification of this Court’s Scheduling Order. The Court will now address the
merits of the underlying motion for leave.
B.

The Merits of the Motion for Leave to File Amended Third Party Complaint

To determine whether or not National Fire is a proper third-party defendant, the Court must

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determine if it may be liable to LAUI & RSUI, the impleading parties. Here, LAUI & RSUI contend
that they are not liable to Cedar Ridge under the terms of the insurance policy. However, LAUI &
RSUI contend that in the event that they may be, Roof Tech, and its insurer National Fire, are or may
be liable to them for damage to the roof of the property allegedly caused by the defective workmanship
and improper installation of tarps after Hurricane Isaac. (R. Doc. 56-1, p. 3).
To determine whether or not Roof Tech is a proper third party defendant, the court weighs the
four factors below:
1.

Prejudice Placed on the Other Parties

LAUI & RSUI seek to amend and file a third-party complaint for indemnity from National Fire,
Roof Tech’s insurer, for the alleged damages that Roof Tech may have caused to the roof of the
property that it repaired. (R. Doc. 56-1, p. 2-3). Neither LAUI or Roof Tech address the prejudice
factor with specificity.
“Prejudice” against other parties is somewhat fact-intensive. Courts weigh the prejudice factor
against the potential risk of a party being forced to litigate separate suits, thereby increasing expenses
and or legal costs, in the event the third-party defendant is not implead in the action. Vinmar, at 6.
Prejudice may also exist where the addition of the third-party will inconvenience the parties in the
action by delaying recovery, or otherwise complicating litigation. Id.; see also Crews v. Country of
Nassau, 612 F. Supp. 2d 199 (E.D. N.Y. 2009); Hancock v. Chicago Title Ins. Co., 263 F.R.D. 383
(N.D. Tex. 2009).
Likewise, when the addition of a third-party defendant will not unnecessarily complicate or
otherwise cause disadvantages amongst the parties, any potential prejudice may be outweighed by the
advantages of efficient resolution of the action. See Wright & Miller, 6 Fed. Prac. & Proc. Civ. § 1443,
n.10 (3d ed. 2010); see also Am. Fid. & Cas. Co. v. Greyhound Corp., 232 F.2d 89, 92 (5th Cir. 1956).

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Neither Roof Tech or LAUI address this argument. However, the Court finds that to the degree
National Fire has concerns about its ability to defend the claim, it may alleviate this issue by seeking
a short continuance. Therefore, its addition will not prejudice existing parties. As such, the Court finds
this factor weighs in favor of granting leave to amend.
2.

Undue Delay

Neither LAUI or Roof Tech address whether the addition of National Fire would cause an
undue delay of this action. Undue delay is a factor that would weigh against the addition of a thirdparty defendant when the addition of this party would delay completion of discovery, or would
unnecessarily complicate the litigation between parties that are already present.1
The Scheduling Order issued by this Court provides that the deadlines for depositions and
taking discovery are to be completed no later than January 21, 2014. (R. Doc. 41, p. 2). The underlying
motion for leave to file the third-party complaint against National Fire was filed on November 26,
2013, and noticed for submission on December 11, 2013. (R. Doc. 69). This time frame only gives the
parties one month to issue summons, propound additional discovery and / or schedule depositions as
to a new potential defendant.
However, the Court finds that the interests of Roof Tech and of National Fire, as the insurer
of Roof Tech, are aligned. As such, there would be an overlap of witnesses and permitting the
amendment would not result in an undue delay. Furthermore, the Court finds that this request was not
filed with a substantial delay, as the policy of insurance was not produced until November 19, 2013,
1

See Wright & Miller, 6 Fed. Prac. & Proc. Civ. § 1443, n.13 (3d ed. 2010); see also Highlands Ins. Co. v.
Lewis Rail Serv. Co., 10 F.3d 1247 (7th Cir.1993) (defendant’s motion for leave to file third-party complaint was
denied because he waited until after discovery and three weeks before summary-judgment motions were due, with
no excuse other than to save money); see also DeRubeis v. Witten Tech’s, Inc., 244 F.R.D. 676 (N.D. Ga. 2007)
(denying leave to file third-party complaint because the addition of the third-party would expand the scope and
create uncertainty in an already contentious discovery process); Saunders v. Jim Emes Petroleum Co., Inc., 101
F.R.D. 405 (W.D. Pa. 1983); Connell v. Bernstein-Macauley, Inc., 67 F.R.D. 111 (S.D.N.Y. 1975).

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and the instant motion was filed on November 26, 2013. As such, the Court finds this factor weighs
in favor of granting leave to add National Fire.
3.

Lack of Substance to the Third Party Claim

In support of their motion, Defendants LAUI and RSUI seek to add National Fire, the insurer
of Roof Tech for indemnity of the damages Roof Tech allegedly caused to the roof of Cedar Ridge’s
property, pursuant to Rule 14(a)(1). (R. Doc. 56-1, p. 3).
In opposition, Roof Tech argues that because LAUI and RSUI do not have a claim against Roof
Tech, nor even if they were to establish that Roof Tech’s alleged faulty repairs caused damages to
Cedar Ridge’s roof, LAUI and RSUI do not and will not ever possess a claim against National Fire.
(R. Doc. 63, p. 1). Roof Tech argues that LAUI and RSUI did not apprise the Court of the existence
of State v. Reliance Ins. Co., 487 So.2d 160 (La. App. 4th Cir. 1986), where a Louisiana Appellate
Court dismissed as a matter of law, an insurer’s third-party claim against contractors and architects,
where the insurance carrier issued a multi-peril policy of insurance which Roof Tech argues is directly
applicable to the instant action. Id. Therefore, Roof Tech contends that because LAUI and RSUI
cannot show a basis for liability against Roof Tech, “consequently” it cannot show a basis of liability
against National Fire. Id.; citing McCain v. Clearview Dodge Sales, Inc., 574 F.2d 848, 849 (5th Cir.
1978).
LAUI and RSUI filed a reply to Roof Tech’s opposition, which argues that State v. Reliance
Ins. Co., is factually distinguishable from the facts in this case as the facts in Reliance involved the
State of Louisiana, as the insured, suing its insurer, Reliance Insurance Company for hailstorm damage
to the roof of the Louisiana Superdome. (R. Doc. 75, p. 3, citing State v. Reliance Ins. Co., 487 So.2d
at 161). In Reliance, the insurer answered the State’s claim by denying liability on the policy, and then
brought a series of third party demands against several Superdome architects, engineers, materials

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suppliers and construction contractors and their insurers, alleging that the damage to the roof would
not have occurred but for their negligence or other fault in construction. Id. The third party demands
sought indemnity or contribution as well as legal and conventional subrogation to the rights of the State
in the event Reliance was held liable under its insurance contract.
Reliance answered the third-party demand and filed its own series of third party demands
against several Superdome architects, engineers, materials, suppliers and construction contractors and
their insurers. Reliance sought indemnity or contribution as well as legal and conventional subrogation
to the rights of the State in the event Reliance was held liable under its insurance contract. The thirdparty defendants filed exceptions of no cause of action, which was granted by the Trial Court. In so
ruling, the trial judge found that Reliance’s policy undertook to insure against the risk of any
construction defects, and therefore it had no cause of action for defense and indemnity.
Reliance appealed the decision. The Appellate Court found that Reliance had no cause of action
against the parties who designed, constructed, and supplied the materials for the original construction
of the roof of the Superdome, because the State was seeking damages from the hailstorm alone, and
not for faulty construction. Therefore, the Court found that Reliance did not have an indemnity claim
against the third party defendants, because they could not be derivatively liable or secondarily liable
to Reliance for any part of the principal demand and that the law does not permit Reliance to bring in
the claim by alleging that these defendants are liable to the State directly. Id. at 4; Reliance, 487 So.
2d 162-63.
Rule 14(a) impleader does not require an identity of claims, or even that the third-party claim
rest of the same theory as the principal demand. Vinmar, at *5; citing Am. Fid., 232 F.2d at 92. But
impleader does require that the liability of the “third-party defendant be dependent on the liability of
the third-party plaintiff,” so that substance, or plausibility, exists as to the third-party demand. Vinmar,

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at *5; citing Fischbach v. Capital One Bank (USA), N.A., 2011 WL 71207, at *3 (D. Minn. Jan. 7,
2011)(citations omitted); see also Briones, 2008 WL 4200931, at *2; U.S. v. Sensient Colors, Inc.,
2009 WL 394317, at *11 (D.N.J. Feb 13, 2009); Am. Zurich Ins. Co. v. Cooper Tire & Rubber Co.,
512 F.3d 800, 805 (6th Cir. 2008)("[A] third-party complaint must be founded on a third party's actual
or potential liability to the defendant for all or part of the plaintiff's claim against the defendant ... [t]he
third-party complaint is in the nature of an indemnity or contribution claim." (citations omitted)).
Indemnity “may be ‘express, as in a contractual provision, or may be implied in law, even in
the absence of an indemnity agreement.’” Marco Ltd. Partnership v. Bruks-Klockner, Inc., 430 Fed.
App'x 332, 335 (5th Cir. 2011). Indemnity “is based on the principle that everyone is responsible for
his own wrongdoing, and if another person has been compelled to pay a judgment which ought to have
been paid by the wrongdoer, then the loss should be shifted to the party whose negligence or tortious
act caused the loss.” Marco, 430 Fed. App'x at 335; (citing 42 C.J.S. Indemnity at § 2 (1991)). A
claim for legal indemnity “arises only where the liability of the person seeking indemnification is
solely constructive or derivative and only against one who, because of his act, has caused such
constructive liability to be imposed.” Id. (citation omitted).
A third-party claim for indemnity should be dismissed if “[t]here is no foreseeable combination
of findings, viewing the allegations of the pleadings ... in the light most favorable to [the party seeking
indemnity], that could result in [that party] being cast in judgment for mere technical or passive fault.”
Threlkeld v. Haskins Law Firm, 922 F.2d 265, 267–68 (5th Cir.1991) (citation and internal quotation
marks omitted). In determining whether a theoretical basis for indemnity exists, “[s]crutiny is ...
directed at the nature ... of the fault, if any, of the party seeking indemnity.” Ducre v. Exec. Officers
of Halter Marine, Inc., 752 F.2d 976, 984–85 (5th Cir.1985) (construing Louisiana law). An action for
indemnity will lie so long as the party's fault “can be characterized as merely technical or

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constructive,” and where the party “was exposed to liability and compelled to pay damages . . . on
account of the negligent act of” the third-party defendant.” Id.

Although the Court is aware that

the Court in Reliance dismissed an insurer’s third party demand against the contractors, builders,
subcontractors, architects, etc., of the Superdome, the Court finds that the facts presented before the
Court therein are factually distinguishable from those presently before it. Specifically, LAUI and RSUI
are not seeking indemnity from the manufacturers, builders and contractors of Cedar Ridge’s shipping
center, rather they are seeking indemnity from Roof Tech, and its insurer, for their alleged faulty repair
/ workmanship that potentially caused extensive damage to the roof of the shopping center, which is
matter of this action.
Furthermore, the Court finds that Reliance does not stand for the proposition that an insurer
may not bring a third party demand as a matter of law against parties who may also be liable for the
damages, but instead, upholds the rationale of Gurtler, Hebert & Co. v. Weyland Machine Shop, 405
So. 2d 660 (La. App. 4th Cir. 1981), “which [upheld] third party demands by defendants against parties
allegedly responsible for the damages which were the basis of the principal demand. These cases
represent the proper liability-shifting use of third party practice . . .” and were found to be
distinguishable from the insurer’s attempt to “completely avoid liability for the hail damage.” See
Reliance, 487 So.2d at 163.
Stated similarly, the Fifth Circuit has stated that at the third-party complaint stage, “we are only
concerned whether [third-party plaintiff] has stated in its third-party complaint, a plausible basis for
an entitlement to legal indemnity . . . [and] we do not decide whether, or under what circumstances any
of the theories of relief will ultimately support an indemnity claim.” Marco, 430 Fed. App’x at 338
(where the Fifth Circuit overruled the District Court’s dismissal of a third-party complaint due to the
district court’s narrow interpretation of Louisiana indemnity law. . .which provided in pertinent part

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that “preparing defective designs is not a viable indemnity claim under Louisiana law . . . and for [third
party defendant] to have true derivative liability, it would have [had] to be directly liable to the
Plaintiff for the defective designs themselves.”) (Id. at 332, 336).
Here, the Court finds that this the addition of National Fire would not absolve any potential
liability LAUI & RSUI may have to Cedar Ridge. Instead, it provides a recourse for LAUI & RSUI
to recover reimbursement for payments it may be forced to pay for any damages allegedly caused by
Roof Tech.
Although National Fire will be forced to litigate a claim as the insurer of Roof Tech, if Roof
Tech’s repair was at least a contributing factor of Cedar Ridge’s damages, LAUI and RSUI could
institute a separate action against it and its insurer, National Fire, outside of the instant action. As such,
the Court finds that this factor weighs in favor of allowing National Fire to be joined as a third-party
defendant, as LAUI & RSUI validly stated a plausible claim for indemnity.
4.

Advancing the Purposes of Rule 14: Avoiding Duplicative Litigation

Neither LAUI and RSUI, or Roof Tech address whether the addition of National Fire would
cause duplicative litigation. Here, as analyzed under the substance factor, it is likely that denying the
Motion for Leave to File the Third-Party Complaint would produce duplicative litigation, as LAUI and
RSUI would be forced to bring any potential claim they may have against National Fire in a separate
suit. Id. Therefore, this factor heavily weighs in favor of granting the Motion for Leave to File ThirdParty Complaint.
Based on the above law and facts, this Court finds that all four factors were satisfied by LAUI
and RSUI. Therefore the Court herein grants the request for leave to file a Third-Party Complaint
against National Fire.
IV.

Conclusion

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Accordingly,
IT IS ORDERED that Defendants, LAUI and RSUI’s Motion for Leave of Court to File
First Supplemental and Amending Third Party Complaint and Request for Expedited Hearing
(R. Doc. 56) is GRANTED.
The Clerk is directed to file the proposed Third-Party Demand into the record.
New Orleans, Louisiana, this 8th day of January 2014.

KAREN WELLS ROBY
UNITED STATES MAGISTRATE JUDGE

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