ACADIA INSURANCE COMPANY v. FLUID MANAGEMENT INC et al
Filing
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ORDER granting 53 Motion to Amend Complaint. REMINDER: After entry of this Order, if Amending a COMPLAINT, counsel are REQUIRED to separately file the AMENDED COMPLAINT Document. By JUDGE JOHN A. WOODCOCK, JR. (MFS)
UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
ACADIA INSURANCE COMPANY, )
as subrogee of ELDREDGE LUMBER )
AND HARDWARE, INC.,
)
)
Plaintiff,
)
)
v.
)
)
FLUID MANAGEMENT, INC.,
)
et al.,
)
)
Defendants.
)
2:15-cv-00008-JAW
ORDER GRANTING MOTION TO AMEND COMPLAINT
Now that both parties are satisfied that a plastic wire nut caused a paint mixer
to catch fire and burn down a hardware store, the Plaintiff, the hardware store’s
insurer, seeks a late amendment to its Complaint to add an allegation that the
Defendant, the seller and servicer of the paint machine, improperly serviced the
machine by installing the defective wire nut. Even though the Plaintiff’s motion to
amend the complaint is untimely, the Court concludes there is good cause to grant it
because the Plaintiff acted with due diligence in seeking information that should have
revealed the existence of the Defendant’s service contract and maintenance records
and because the prejudice to the Defendant from a focused and brief period of
discovery is justified to determine who is responsible for the wire nut that caused the
fire.
I.
BACKGROUND
On November 20, 2014, Acadia Insurance Company (Acadia) filed a complaint
in York County Superior Court for the state of Maine against Fluid Management, Inc.
(Fluid Management) and Merkle-Korff Industries (Merkle-Korff), alleging that they
were civilly liable for damages to Eldredge Lumber and Hardware (Eldredge), an
Acadia insured, resulting from a fire on March 18, 2012. State Ct. R. Attach. 1 Docket
R. York Superior Ct., Attach. 2 Compl. (ECF No. 2). Acadia claimed that the fire
started in a paint mixer sold by Fluid Management and containing a motor
manufactured by Merkle-Korff.
Compl. at 1-6.
On January 7, 2015, Fluid
Management removed the case to this Court. Notice of Removal (ECF No. 1). On
November 2, 2015, the parties filed a stipulation of dismissal, dismissing MerkleKorff with prejudice from the case. Stip. of Dismissal of Def. Merkle-Korff Indus.,
Inc., Only (ECF No. 39).
On January 20, 2015, the Court through the Magistrate Judge issued a
Scheduling Order. Sch. Order (ECF No. 11) (January Sch. Order). The Order set
February 17, 2015 as the deadline for initial disclosure; April 7, 2015 as the deadline
for amendment of the pleadings and the deadline for expert designation for Acadia;
May 12, 2015 as the deadline for expert designation for Fluid Management; June 23,
2015 as the deadline to complete discovery; June 30, 2015 as the deadline to file a
notice of intent to file summary judgment; and July 14, 2015 as the deadline for all
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dispositive motions and Daubert1 and Kumho2 motions. Id. at 2-3. An October 2015
trial date was anticipated. Id. at 3.
On June 23, 2015, the parties filed a joint motion to amend the scheduling
order. Joint Pet. to Modify the Sch. Order (ECF No. 23). On June 29, 2015, the
Magistrate Judge granted the motion and extended the discovery deadline to
September 30, 2015 but warned the parties that he expected all the discovery to be
completed by the new September 30, 2015 deadline. Order (ECF No. 27). He also
extended certain other deadlines: the notice of summary judgment deadline was
extended to October 7, 2015; the dispositive/Daubert/Kumho motion deadline was
extended to October 21, 2015; and the trial-ready date was extended to November 30,
2015, with an anticipated trial date during the month of December 2015. Id.
On October 1, 2015, the parties again moved for scheduling extensions. Joint
Mot. to Modify the Sch. Order (ECF No. 33). On October 20, 2015, the Magistrate
Judge expressly allowed some additional discovery to be undertaken within specific
deadlines but rejected the parties’ request to extend the discovery, summary
judgment notice, and dispositive motion deadlines. Report of Hr’g and Order Re: Mot.
to Modify Sch. Order (ECF No. 37). The Magistrate Judge indicated he would revisit
the deadlines once the parties had completed the authorized discovery. Id.
On November 5, 2015, the Magistrate Judge held a further telephone hearing
on the status of the case. Report of Hr’g and Order Re: Status (ECF No. 44). He reset
the deadlines as follows: (1) December 15, 2015, the deadline to complete discovery;
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2
Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993).
Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999).
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(2) December 15, 2015, the deadline to produce Local Rule 44 records; (3) December
18, 2015, the deadline to file a notice of intent to file summary judgment; (4)
December 18, 2015, the deadline to file dispositive and Daubert/Kumho motions; and
he set February 2016 as the expected trial date. Id. at 1-2.
On November 13, 2015, Attorney Hopkins, representing Acadia, wrote the
Court on behalf of both parties, stating that they had been unable to schedule the
depositions of Fluid Management’s experts before the expiration of the December 15,
2015 discovery deadline and requesting a status conference. Letter from Att’y Michael
J. Hopkins to the Hon. John H. Rich, II (Nov. 13, 2015) (ECF No. 48).
Magistrate
Judge Rich held a telephone conference on November 23, 2015. Min. Entry (ECF No.
50). Magistrate Judge Rich fashioned an order to move the case along. Report of Hr’g
and Order Re: Sch. (ECF No. 51). He ordered counsel to file any notice of intent to
file motions under Daubert and/or Kumho by December 18, 2015, the same day the
notice of intent to file a motion for summary judgment was due. Id. at 1. He noted
that if a notice of intent to file a motion for summary judgment is filed, the case will
be scheduled for a Local Rule 56(h) conference and the Court would discuss both the
motion for summary judgment and any Daubert/Kumho motions at the conference.
Id. at 1-2. However, if no summary judgment notice were filed, the Magistrate Judge
set deadlines for any Daubert/Kumho motions.
Id.
He noted that absent filed
motions, the case would remain on the February 2016 trial list. At the close of the
Order, the Magistrate Judge noted: “Attorney Hopkins intends to file a motion for
leave to amend the complaint to add an additional claim in the very near future. The
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usual responsive filing deadlines will apply if and when that motion is filed.” Id. at
2.
On November 25, 2015, Acadia filed a motion for leave to amend the complaint.
Pl.’s Mot. for Leave to File an Am. Compl. (ECF No. 53) (Pl.’s Mot.). Acadia contended
that it recently discovered that Fluid Management not only sold the paint mixing
machine but also serviced the machine; this fact led to Acadia’s argument that Fluid
Management’s faulty preventative maintenance and repairs of the paint mixing
machine contributed to the fire. Id. at 5-6. Acadia wished to amend its Complaint to
broaden the allegation against Fluid Management to include negligent service,
repair, inspection and/or maintenance of the paint mixer. Id. Attach. 1 Am. Compl.
(ECF No. 53).
Fluid Management filed a response on December 16, 2015. Def. Fluid Mgmt.,
Inc.’s Opp’n to Pl.’s Mot. to Am. Compl. (ECF No. 57) (Def.’s Opp’n).
Fluid
Management revealed that:
After his deposition and after reading the report of Fluid Management’s
experts, Plaintiff’s expert realized for the first [time] that rather than
being caused by a defect in the motor[,] the fire was caused by a plastic
wire nut that an unknown person improperly installed on a wire at some
unknown point after the machine was sold. . . . Experts for both sides
now agree that fire was caused by the wire nut.
Id. at 1. Fluid Management argued that Acadia’s motion is untimely and that the
amendment would be futile. Id. at 2-6.
On December 28, 2015, Acadia filed a reply, urging the Court to reject Fluid
Management’s contentions. Pl.’s Reply in Supp. of its Mot. for Leave to File an Am.
Compl. (ECF No. 61) (Pl.’s Reply).
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On December 30, 2015, Fluid Management filed a Local Rule 56(h)
memorandum, indicating that it intended to file a motion for summary judgment (and
perhaps a motion to exclude expert testimony) and proposed the following briefing
schedule: (1) January 30, 2016—Fluid Management’s motions due; (2) February 25,
2016—Acadia’s opposition due; and (3) March 10, 2016—Fluid Management’s reply.
Pre-Filing Conference Mem. Regarding Mot. for Summ. J. (ECF No. 62) (Pre-Filing
Mem.). The Court scheduled a Local Rule 56(h) conference for January 21, 2016.
Procedural Order (ECF No. 60).
II.
DISCUSSION
A.
Applicable Law
Under the January 26, 2015 Scheduling Order, the deadline for amending the
pleadings in this case expired on April 7, 2015 and has never been extended. January
Sch. Order at 2. The parties recognize that “Rule 16(b)’s ‘good cause’ standard, rather
than Rule 15(a)’s ‘freely give[n]’ standard, governs motions to amend filed after
scheduling order deadlines.” Trans-Spec Truck Serv. v. Caterpillar, Inc., 524 F.3d
315, 327 (1st Cir. 2008); Pl.’s Mot. at 4-5; Def.’s Opp’n at 3; see also FED. R. CIV. P.
16(b)(4) (“A schedule may be modified only for good cause and with the judge’s
consent”). As the First Circuit explained,
A motion to amend a complaint will be treated differently depending on
its timing and the context in which it is filed. . . . As the case progresses
and the issues are joined, the burden on a plaintiff seeking to amend a
complaint becomes more exacting. Scheduling orders, for example,
typically establish a cut-off date for amendments (as was apparently the
case here). Once a scheduling order is in place, the liberal default rule
is replaced by the more demanding “good cause” standard of Fed. R. Civ.
P. 16(b). O’Connell v. Hyatt Hotels of P.R., 357 F.3d 152, 154-55 (1st Cir.
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2004). This standard focuses on the diligence (or lack thereof) of the
moving party more than it does on any prejudice to the party-opponent.
Id.
Steir v. Girl Scouts of the USA, 383 F.3d 7, 11-12 (1st Cir. 2004) (footnotes omitted);
see also Somascan, Inc. v. Philips Med. Sys. Nederland, B.V., 714 F.3d 62, 64 (1st Cir.
2013) (setting out the same standard).
B.
Acadia’s Due Diligence
Assessing the moving party’s due diligence often requires the Court to follow
the parties down a rabbit hole.
Typically, the moving party claims that the
respondent violated the rules of discovery, and the respondent answers in kind by
asserting its own innocence and laying blame on the moving party. The Court is often
faced with the language of recrimination.
Here, Acadia accuses Fluid Management of failing to promptly turn over
requested discovery. Pl.’s Mot. at 2. Acadia says that it first learned about Fluid
Management’s preventive maintenance service agreement at the September 17, 2015
deposition of Fluid Management’s expert, Hamilton Laurent. Id. Acadia contends
that Fluid Management failed to turn over the service agreement until November 18,
2015 and the paint mixer’s maintenance records until October 26, 2015. Id. at 3-4.
In its opposition, Fluid Management notes that the paint machine was
installed almost ten years ago, and in response to this new issue, Fluid Management
was required to “search at the 11th hour through old storage boxes of documents
looking for old service records and to date has had limited success in finding them . .
. .” Def.’s Opp’n at 4. Fluid Management says that the service technicians who
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performed the work have left the company, and it has been unable to find them. Id.
It also claims that the amendment would be futile because Acadia has “not asserted
facts to support if/how [Fluid Management was] negligent [in its] inspection,
maintenance, service and/or repair.” Id. at 6.
In its reply, Acadia asserts that Fluid Management has asked the Court “to
reward [it] for its failure to comply with its discovery obligations under the Federal
Rules of Civil Procedure.” Pl.’s Reply at 1. Acadia says that at the deposition of Ryan
Hanawalt on December 1, 2015, Fluid Management revealed for the first time that a
Fluid Management service spreadsheet for the Eldredge paint mixer “existed or could
be generated” and that Fluid Management produced additional records on December
15, 2015, the last day of discovery. Id. at 2. Characterizing Fluid Management’s
position on maintenance as a defense, Acadia maintains that Fluid Management
should have identified and disclosed these records as early as February 2015. Id. at
3.
Acadia also says that Fluid Management should have produced the service
agreement and the maintenance records in response to Acadia’s request for
production of documents. Id. at 4.
The Court is chary of attempting to unravel the history of discovery in this
case. Short of placing the lawyers under oath and asking what they knew and when
they knew it, there is no good way to determine whether Acadia asked the right
questions and whether Fluid Management gave the right responses. For example,
the Court is skeptical about Acadia’s assertion that Fluid Management’s service
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agreement and maintenance records would constitute a defense that should have
been automatically revealed in discovery.
The Court is more sympathetic to Acadia’s argument that its request for
production, which asked for “[a]ll documents relating or referring to the make, model,
and serial number of the Product,” Pl.’s Reply Attach. 4 Def. Fluid Management, Inc.’s
Resps. to Pl.’s Req. for Produc., at 2 (ECF No. 61), should have disclosed the existence
of Fluid Management’s service agreement and service records. From the recitation
of the parties, the Court finds that Acadia did not find out about the service
agreement and maintenance records until September to December, 2015 and that
Fluid Management should have revealed the existence of those documents on July
16, 2015 when it responded to Acadia’s request for production of documents. The
Court is unable to conclude that Acadia should have been more diligent in securing
documents that it did not know existed. It may well be that Fluid Management has
a good explanation for why these documents were not produced earlier, but the focus
at this point is on whether Acadia as the moving party was reasonably diligent, not
on whether Fluid Management was.
In short, the Court finds that Acadia was reasonably diligent in seeking the
documents that now form the basis of its motion to amend the complaint.
C.
Prejudice to Fluid Management
The Court accepts Fluid Management’s contention that it will suffer some
prejudice from such a late amendment to the Complaint.
No doubt Fluid
Management would be better off if it did not have to defend Acadia’s claim that its
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service of the paint machine caused the fire. Even so, based on the record before the
Court, it is difficult to assess the extent of that prejudice. There will necessarily be
some delay in the resolution of this case as a result of the amended pleading. By
Fluid Management’s proposed schedule, however, it intends to file a motion for
summary judgment, which will not be ready for decision until March 10, 2016 at the
earliest. Pre-Filing Mem. at 1. Thus, there is a built-in lag in the disposition of this
case.
Moreover, it appears from the filings that the experts in this case—both
Acadia’s and Fluid Management’s—have agreed on the cause for the fire, namely the
plastic wire nut that someone installed on the paint mixer. The critical question is
whether Acadia is able to put the plastic wire nut in the hands or under the oversight
of Fluid Management. To this end, the discovery should focus on Fluid Management’s
maintenance records to determine whether they reveal the installation of the plastic
wire nut, the whereabouts and recollections of the Fluid Management technicians
who serviced the paint mixer, and any attempts by Eldredge or others to service the
paint machine.
From the parties’ submissions, a short period of focused discovery on the plastic
wire nut should effectively resolve the dispute, either exonerating or implicating
Fluid Management. The Court anticipates that the additional discovery necessary to
resolve this narrow factual issue should be time-limited, intense, and direct.
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D.
Futility
Fluid Management is correct that a court should deny a motion to amend a
complaint if the amendment is futile. Giuffre v. Deutsche Bank Nat’l Trust Co., 759
F.3d 134, 139 (1st Cir. 2014); Glassman v. Computervision Corp., 90 F.3d 617, 623
(1st Cir. 1996) (a motion to amend should be denied as futile if “the complaint, as
amended, would fail to state a claim upon which relief could be granted”). In its
response, Fluid Management cites the deposition of Acadia’s expert, where he
acknowledged that he did not know “when and by whom the wire nut was installed,”
and asserts that Acadia will be unable to prove its case. Def.’s Opp’n at 4-5. But the
standard for futility at this stage is not whether the plaintiff will be able to prove its
allegations but whether the complaint states a claim upon which relief may be
granted, “the same standard of legal sufficiency as [the court] applies to a Rule
12(b)(6) motion.”
Glassman, 90 F.3d at 623 (citation omitted).
Here, Acadia’s
Complaint, as amended, would survive a motion to dismiss. See FED. R. CIV. P. 8(a)(2)
(requiring “a short and plain statement of the claim”).
In Fluid Management’s response, it also says that “if the amendment is
allowed, the defendant will be filing a motion to exclude [Acadia’s expert’s] opinion
and for summary judgment.” Def.’s Opp’n at 5. Fluid Management is, of course, free
to do so after the brief, renewed period of discovery during which the mystery of the
origin of the plastic wire nut may be resolved. In any event, Fluid Management’s
objections to problems of proof attendant to the allegations in the Amended
Complaint will be better addressed in its contemplated motion for summary
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judgment, where the Court is allowed to look beyond the allegations of the complaint.
At this stage, however, the Court rejects Fluid Management’s contention that
Acadia’s proposed amendment to the Complaint would be futile.
Nor is the Court impressed with Fluid Management’s protests that the
Amended Complaint is not sufficiently specific to place it on notice of the alleged
defect. Def.’s Opp’n at 5-6. Elsewhere, Fluid Management acknowledges that the
experts have agreed that “the fire was caused by a plastic wire nut.” Id. at 1. Fluid
Management then asserts that “an unknown person improperly installed . . . a wire
at some unknown point after the machine was sold.” Id. Fluid Management must
know that Acadia’s claim has now narrowed to whether it is responsible for the plastic
wire nut, either by actually installing the wire nut or by failing to properly inspect
the paint mixer to detect the improper installation.
E.
Rule 56(h) Conference
In anticipation of the Rule 56(h) conference on January 21, 2016, the Court
directs the parties to immediately initiate focused discovery on the gravamen of
Acadia’s amended allegations, to advise the Court as to their progress, and if
necessary, to present the Court with a discovery plan at the January 21, 2016
conference, including the then-current status of discovery and any proposed
additional deposition and document requests. The Court will review any proposals
for further discovery to determine whether such discovery is essential to the
resolution of the lawsuit. The Court reminds counsel of their respective obligations
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under Rule 26(e)(1) to immediately supplement their discovery responses in light of
the new allegations in the Amended Complaint.
To clarify the status of this case in light of this Order, the Court will schedule
a telephone conference with counsel.
III.
CONCLUSION
The Court GRANTS Plaintiff’s Motion for Leave to File an Amended Complaint
(ECF No. 53).
SO ORDERED.
/s/ John A. Woodcock, Jr.
JOHN A. WOODCOCK, JR.
UNITED STATES DISTRICT JUDGE
Dated this 5th day of January, 2016
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