Kansas City Live Block 124 Retail, LLC v. Kobe Kansas, LLC et al
Filing
56
MEMORANDUM OPINION. Signed by Judge George Levi Russell, III on 6/29/2016. (hmls, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
KANSAS CITY LIVE BLOCK
124 RETAIL, LLC,
:
:
Plaintiff and
Counter-Defendant,
:
v.
:
KOBE KANSAS, LLC, et al.,
:
Defendants and
Counter-Plaintiffs.
Civil Action No. GLR-14-3236
:
:
MEMORANDUM OPINION
THIS
MATTER
is
before
the
Court
on
Plaintiff/Counter-
Defendant’s, Kansas City Live Block 124 Retail, LLC (“KC Live”),
Motion for Leave to File Second Amended Complaint (ECF No. 35) and
Motion for Summary Judgment on Defendant/Counter-Plaintiffs’, Kobe
Kansas,
LLC,
Young
W.
Bae,
Counterclaim (ECF No. 36).
and
Chan
H.
Bae
(the
Also pending is the Baes’ Motion for
Leave to File an Amended Counterclaim (ECF No. 42).1
are
ripe
for
disposition.
“Baes”),
Having
reviewed
the
The Motions
Motions
and
supporting documents, the Court finds no hearing necessary pursuant
to Local Rule 105.6 (D.Md. 2016).
For the reasons outlined below,
the Court will grant the Motions for Leave to Amend and deny KC
Live’s Motion for Summary Judgment.
1
Also pending is the parties’ Consent Motion for Extension of
Time (ECF No. 39). The Court will deny this Motion as moot.
I.
BACKGROUND2
The Baes asserted their original Counterclaim on January 30,
2015, raising one claim for fraudulent inducement.
(ECF No. 17).
On October 16, 2015, the Court denied KC Live’s Motion to Dismiss
the Baes’ Counterclaim.
the Court
concluded
(ECF No. 27).
In its Memorandum Opinion,
the following statements by KC Live are
actionable for purposes of the Baes’ fraudulent inducement claim:
(1) most of the available premises were already leased to wellknown nationally-operated franchises and only a few areas in the
District were still available; and (2) there were commitments for
85% of the total lease space in the District.
(Oct. 16, 2015 Mem.
Op. [“Mem. Op.”] at 10–11, ECF No. 26).
After the Court denied KC Live’s Motion to Dismiss, the Court
entered the parties’ jointly proposed Scheduling Order on January
13, 2016.
(ECF No. 31).
The Scheduling Order establishes a
February 16, 2016 deadline for amending pleadings.
(Id.).
On this
deadline, KC Live filed its unopposed Motion for Leave to File
Second Amended Complaint (ECF No. 35).
KC Live also filed a Motion
for Summary Judgment on February 18, 2016 (ECF No. 36).
On March
22, 2016—over a month after the Scheduling Order deadline—the Baes
filed their Motion for Leave to File an Amended Counterclaim (ECF
No. 42).
2
On this same date, the Baes filed an Opposition to KC
The Court discusses only the procedural background of this
case. The Court set forth the facts that gave rise to this action
in its October 16, 2015 Memorandum Opinion (ECF No. 26).
2
Live’s Motion for Summary Judgment (ECF No. 41).
On April 15 and
18, 2016, KC Live filed its Response in Opposition to the Baes’
Motion for Leave to File an Amended Counterclaim (ECF No. 48) and
its
Reply
in
respectively.
Support
of
Summary
Judgment
(ECF
No.
50),
Finally, the Baes submitted their Reply in Support
of their Motion for Leave to File an Amended Counterclaim on May 2,
2016 (ECF No. 53).
II.
A.
DISCUSSION
Motions for Leave to Amend
1.
Standard of Review
Motions for leave to amend counterclaims are subject to the
same standards as motions for leave to amend complaints.
See
Ground Zero Museum Workshop v. Wilson, 813 F.Supp.2d 678, 706
(D.Md. 2011).
When a party moves to amend its complaint or
counterclaim after the scheduling order deadline has passed, the
party has the burden of satisfying a two-prong test.
Odyssey
Travel Ctr., Inc. v. RO Cruises, Inc., 262 F.Supp.2d 618, 631
(D.Md. 2003).
The first prong is Federal Rule of Civil Procedure
16(b)(4), which provides that “[a] schedule may be modified only
for good cause and with the judge’s consent.”
Id.
“[A] court’s
scheduling order ‘is not a frivolous piece of paper, idly entered,
which can be cavalierly disregarded by counsel without peril[.]’”
Rassoull v. Maximus, Inc., 209 F.R.D. 372, 374 (D.Md. 2002)
(quoting Potomac Elec. Power Co. v. Elec. Motor Supply, Inc., 190
3
F.R.D. 372, 375–76 (D.Md. 1999)).
Thus, the good cause analysis
under Rule 16(b)(4) is “less concerned with the substance of the
proposed amendment” and more concerned with “the timeliness of the
amendment and the reasons for its tardy submission.”
74.
Id. at 373–
Indeed, “[t]he primary consideration of the Rule 16(b) ‘good
cause’ standard is the diligence of the movant.”
Id. at 374.
“Lack of diligence and carelessness are ‘hallmarks of failure to
meet the good cause standard.’”
Id. (quoting W.Va. Hous. Dev. Fund
v. Ocwen Tech. Xchange, Inc., 200 F.R.D. 564, 567 (S.D.W.Va.
2001)).
If a party was not diligent in seeking to modify the
scheduling order, “the inquiry should end.”
Id. (quoting Marcum v.
Zimmer, 163 F.R.D. 250, 254 (S.D.W.Va. 1995)).
There is good cause for amending a complaint or counterclaim
after the scheduling order deadline when “at least some of the
evidence needed for a plaintiff to prove his or her claim did not
come to light until after the amendment deadline.”
Tawwaab v. Va.
Linen Serv., Inc., 729 F.Supp.2d 757, 768 (D.Md. 2010).
The Court
may consider the following factors when determining whether there
is good cause: “danger of prejudice to the non-moving party, the
length of delay and its potential impact on judicial proceedings,
the reason for the delay, and whether the movant acted in good
faith.”
Id. at 768–69 (quoting Rothenberg v. Marriott Int’l, Inc.,
No. CCB-08-173, 2008 WL 687033, at *1 (D.Md. Feb. 29, 2008)).
4
Once a party has demonstrated good cause for an untimely
amended pleading, the party then bears the burden of satisfying the
second prong: Rule 15(a).
Odyssey, 262 F.Supp.2d at 631.
Under
this Rule, “[t]he court should freely give leave [to amend a
complaint]
when
justice
so
requires.”
Fed.R.Civ.P.
15(a)(2).
Although the federal rules favor granting leave to amend, the
decision lies within the sound discretion of the district court.
Medigen of Ky., Inc. v. Pub. Serv. Comm’n of W. Va., 985 F.2d 164,
167–68 (4th Cir. 1993) (citing Nat’l Bank v. Pearson, 863 F.2d 322,
327 (4th Cir. 1988)).
Leave to amend is properly denied when
amendment would prejudice the opposing party, the moving party has
exhibited bad faith, or amendment would be futile.
Edell &
Assocs., P.C. v. Law Offices of Peter G. Angelos, 264 F.3d 424, 446
(4th Cir. 2001) (citing Edwards v. City of Goldsboro, 178 F.3d 231,
242 (4th Cir. 1999)).
An amendment would be futile if it would
fail to survive a motion to dismiss.
See Perkins v. United States,
55 F.3d 910, 917 (4th Cir. 1995).
2.
Analysis
The Baes must satisfy the foregoing two-prong test because
they filed their Motion for Leave to File an Amended Counterclaim
approximately one month after the Scheduling Order deadline for
amending pleadings (the “Amendment Deadline”).
KC Live argues the
Baes have not shown good cause because they seek leave to allege
facts they knew of months or years prior to the Amendment Deadline.
5
KC Live also contends that the Baes’ delay evinces a lack of
diligence and even assuming the Baes have shown good cause, the
Baes’ amendment would be futile because their fraudulent inducement
claim would not survive a motion for summary judgment.
The Baes counter that amending their Counterclaim would not
prejudice KC Live or delay the resolution of this case because the
Baes do not add a new cause of action, discovery has recently
commenced, and KC Live is already aware of many of the new facts in
the Baes’ Amended Counterclaim.
The Baes provide two explanations
for their tardy Amended Counterclaim.
First, it would have been
imprudent to “raise the stakes by doubling-down on litigation”
while settlement negotiations were pending.
(Defs.’ Reply Supp.
Mot. Leave File Am. Countercl. at 4, ECF No. 53).
Second, KC
Live’s Second Amended Complaint—filed on the Scheduling Order
deadline—necessitated additional counterclaim allegations from the
Baes.
Lastly, the Baes contend that amending their Counterclaim
would not be futile because their Counterclaim has already survived
a motion to dismiss.
The Court begins with the first prong of the two-prong test:
whether the Baes have shown good cause.
None of the facts the Baes
add in their Amended Counterclaim occurred after the Amendment
Deadline.
Nevertheless, the Court finds the Baes were diligent in
amending their Counterclaim.
On January 20, 2016, the Honorable
Beth P. Gesner scheduled a settlement conference for February 22,
6
2016.
dates.
(ECF No. 33).
The Amendment Deadline fell between these
The Baes explain they were concerned that amending their
Counterclaim
between
these
dates
could
undermine
settlement
negotiations because it might signal to KC Live that the Baes were
more interested in proceeding with the litigation than settling the
case.
The Court finds this explanation reasonable.
Also, the Baes
amended their Counterclaim exactly one month after the settlement
conference.
indicating
This
minor
carelessness
delay
or
a
does
lack
not
of
strike
diligence,
the
Court
as
particularly
because the Baes maintain that settlement negotiations were still
ongoing in late March 2016, (Defs.’ Reply Supp. Mot. Leave File Am.
Countercl. at 5), and the Baes were also preparing their Opposition
to KC Live’s Motion for Summary Judgment during this period.
In their Amended Counterclaim, the Baes do not add new claims.
They do, however, add allegations that could be material to KC
Live’s affirmative defenses of waiver and estoppel: the annual
sales figures the Baes’ restaurant generated after the parties
executed the 2011 Amendment.
The fact discovery deadline is August
1, 2016, which provides KC Live with ample time to discover these
sales figures, if necessary.
Because the Baes have not surprised
KC Live with a new cause of action near the end of discovery, the
Court finds no bad faith, prejudice, or risk of delay in the
proceedings.
Thus, the Court concludes the Baes have shown good
cause for amending their Counterclaim after the Amendment Deadline.
7
Turning to the second prong, the Court highlights that KC Live
confuses the standard for futility.
An amendment would be futile
if it would fail to survive a motion to dismiss, not a motion for
summary judgment.
See Perkins, 55 F.3d at 917.
In their Amended
Counterclaim, the Baes have not deleted any of the allegations that
led the Court to deny KC Live’s Motion to Dismiss the Baes’
original Counterclaim.
As such, the Court finds it would not be
futile to accept the Baes’ Amended Counterclaim and the Court will
grant the Baes’ Motion.
As for KC Live’s Motion for Leave to File Second Amended
Complaint, KC Live filed it before the Scheduling Order deadline
passed and it is unopposed.
Finding no prejudice, bad faith, or
futility, the Court will grant KC Live’s Motion.
B.
KC Live’s Motion for Summary Judgment
1.
Standard of Review
In reviewing a motion for summary judgment, the Court views
the facts in a light most favorable to the nonmovant, drawing all
justifiable inferences in that party’s favor.
Ricci v. DeStefano,
557 U.S. 557, 586 (2009); Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 255 (1986) (citing Adickes v. S.H. Kress & Co., 398 U.S. 144,
158–59 (1970)).
Summary judgment is proper when the movant
demonstrates, through “particular parts of materials in the record,
including
information,
depositions,
affidavits
documents,
or
electronically
declarations,
8
stipulations
stored
.
.
.
admissions, interrogatory answers, or other materials,” that “there
is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a),
(c)(1)(A).
When a defendant moves for summary judgment on an affirmative
defense, “it must conclusively establish all essential elements of
that defense.”
Ray Commc’ns, Inc. v. Clear Channel Commc’ns, Inc.,
673 F.3d 294, 299 (4th Cir. 2012).
The defendant bears the initial
burden of producing sufficient evidence supporting its affirmative
defense.
See id.; Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986).
The
affidavits,
defendant
depositions,
must
go
beyond
interrogatories
the
or
pleadings
other
with
admissible
evidence to show specific facts that amount to a genuine issue for
trial.
Celotex Corp., 477 U.S. at 324.
Once the defendant meets
this initial burden, “the burden of production shifts to the
plaintiff to ‘come forward with specific facts showing that there
is a genuine issue for trial.’”
Ray, 673 F.3d at 299 (quoting
Brinkley v. Harbour Recreation Club, 180 F.3d 598, 614 (4th Cir.
1999)).
If, however, the defendant “fails to fulfill its initial
burden of providing admissible evidence of the material facts
entitling it to summary judgment, summary judgment must be denied,
even if no opposing evidentiary matter is presented, for the nonmovant is not required to rebut an insufficient showing.”
9
Id. at
299–300 (quoting Giannullo v. City of New York, 322 F.3d 139, 140–
41 (2d Cir. 2003)).
A “material fact” is one that might affect the outcome of a
party’s case.
Anderson, 477 U.S. at 248; see also JKC Holding Co.
v. Wash. Sports Ventures, Inc., 264 F.3d 459, 465 (4th Cir. 2001)
(citing Hooven-Lewis v. Caldera, 249 F.3d 259, 265 (4th Cir.
2001)).
Whether
a
fact
is
considered
to
be
“material”
is
determined by the substantive law, and “[o]nly disputes over facts
that might affect the outcome of the suit under the governing law
will properly preclude the entry of summary judgment.”
477 U.S. at 248; accord Hooven-Lewis, 249 F.3d at 265.
Anderson,
A “genuine”
dispute concerning a “material” fact arises when the evidence is
sufficient to allow a reasonable jury to return a verdict in the
nonmoving party’s favor.
2.
Anderson, 477 U.S. at 248.
Analysis
KC Live moves for summary judgment on the Baes’ counterclaim
for fraudulent inducement on the basis of two affirmative defenses:
waiver and estoppel.
See Drannek Realty Co. v. Nathan Frank, Inc.,
139 S.W.2d 926, 929 (Mo. 1940) (stating that waiver and estoppel
are affirmative defenses).3
When a party to a contract enters into
a second contract regarding the same subject matter as the first
contract, the party is deemed as a matter of law to have waived the
3
In its October 16, 2015 Memorandum Opinion, the Court
concluded that the substantive law of Missouri applies to this
action. (See Memo Op. at 9 n.2).
10
right to maintain an action for fraudulent inducement with respect
to the first contract if the party had actual or imputed knowledge
of the fraud when executing the second contract.
Jadwin, 704 S.W.2d 708, 711–12 (Mo.Ct.App. 1986).
See Peck v.
The defense of
estoppel “arises from the unfairness of permitting a party to
assert rights belatedly if he knew of those rights but took no
steps to enforce them until the other party has, in good faith,
become disadvantaged by changed conditions.”
Speedie Food Mart,
Inc. v. Taylor, 809 S.W.2d 126, 131 (Mo.Ct.App. 1991) (citing
Stenger v. Great S. Sav. & Loan Ass’n, 677 S.W.2d 376, 383 (Mo.App.
1984)).
The party asserting estoppel must show that the opposing
party had actual knowledge of the rights it elected not to pursue.
See id. (citing Stenger, 677 S.W.2d at 383–84).
KC Live argues it is entitled to summary judgment because
there is no genuine dispute that the Baes had actual or imputed
knowledge of the facts constituting the alleged fraud when the Baes
signed the 2011 Amendment.
The Baes contend that summary judgment
is not warranted because discovery is not complete and KC Live has
failed to present any facts showing the Baes had actual or imputed
knowledge.
Ordinarily,
“summary
judgment
‘adequate time for discovery.’”
is
appropriate
only
after
Evans v. Techs. Applications &
Serv. Co., 80 F.3d 954, 961 (4th Cir. 1996) (quoting Celotex, 477
U.S. at 322).
A nonmovant, however, “cannot complain that summary
11
judgment was granted without discovery unless that party had made
an attempt to oppose the motion on the grounds that more time was
needed for discovery or moved for a continuance to permit discovery
before the district court ruled.”
Id.
A Rule 56(d) affidavit or
declaration is one way to raise adequately the issue that discovery
is needed.
See Hamilton v. Mayor of Balt., 807 F.Supp.2d 331, 341
(D.Md. 2011).
But, “Rule 56(d) affidavits cannot simply demand
discovery for the sake of discovery.”
Id. at 342 (quoting Young v.
UPS, No. DKC-08-2586, 2011 WL 665321, at *20 (D.Md. Feb. 14,
2011)).
A “Rule 56(d) request for additional discovery is properly
denied ‘where the additional evidence sought for discovery would
not have by itself created a genuine issue of material fact
sufficient to defeat summary judgment.’”
Id. (quoting Strag v. Bd.
of Trs., Craven Cmty. Coll., 55 F.3d 943, 953 (4th Cir. 1995)).
The Baes submit a Rule 56(d) declaration in which counsel
states that in order to competently defend KC Live’s Motion for
Summary Judgment, the Baes require discovery regarding whether (1)
KC Live’s representations were false, (2) KC Live continued making
false statements up to the execution of the 2011 Amendment, and (3)
KC Live attempted to conceal the falsity of its representations.
(ECF No. 41-3).
While these facts could defeat a future motion for
summary judgment from KC Live, they are not material to KC Live’s
current Motion because they do not concern whether the Baes knew or
should have known that KC Live’s representations before the 2011
12
Amendment were false.
Thus, the Baes’ Rule 56(d) declaration does
not warrant denying KC Live’s Motion.
Regardless, the Court finds that KC Live has not met its
initial burden of identifying facts demonstrating that the Baes had
actual or imputed knowledge.
Because waiver and estoppel are
affirmative defenses, KC Live bears the initial burden of producing
sufficient evidence in support of these defenses.
F.3d at 299; Celotex, 477 U.S. at 323.
See Ray, 673
KC Live, however, points
only to paragraph 127 of the original Counterclaim in which the
Baes allege that “it was only during the period of June 2010 –
August 2011 . . . when other restaurants were failing that [the
Baes] first had reason to suspect that the national chains would
not be coming to the District.”
(Countercl. ¶ 127, ECF No. 17).
KC Live maintains this allegation concedes that the Baes had
imputed knowledge of their fraudulent inducement claim before they
executed the 2011 Amendment.
To be sure, on its face, this
allegation
appears
the
knowledge.
KC Live, however, has not gone beyond the pleadings to
to
address
material
issue
of
imputed
identify any admissible evidence showing that the Baes had imputed
knowledge.
See Celotex Corp., 477 U.S. at 324 (explaining that at
the summary judgment stage, the party bearing the burden of proof
on a claim or defense must go beyond the pleadings to show a
genuine dispute for trial).
13
Even assuming KC Live has met its initial burden, the Baes
generate a genuine dispute of material fact precluding summary
judgment for KC Live.
A consequent and proximately caused injury
is one of the elements of a fraud claim.
See Arnott v. Kruse, 730
S.W.2d 597, 600 (Mo.Ct.App. 1987) (listing the nine elements of a
fraud claim).
The Baes present affidavits stating they did not
know that they had been injured by KC Live’s false representations
“until annual sales from the Kobe restaurant dropped precipitously
and other tenants were fleeing the District.”
Nos.
41-1,
41-2).
According
to
the
(Bae Affs. ¶ 16, ECF
affidavits,
the
Baes’
restaurant in the District experienced its most profitable year
from October 2011 through September 2012, generating sales of
$935,000.
(Id. ¶ 9).
Sales then fell to $610,000 from October
2013 through September 2014 (id. ¶ 17) and to $490,000 from October
2014 through September 2015 (id. ¶ 19).
Because sales had fallen
by $300,000 in September 2014—almost three years after the parties
executed the 2011 Amendment—the Baes generate a genuine dispute as
to whether they knew before signing the 2011 Amendment that they
had been injured by KC Live’s allegedly false statements.
Accordingly, the Court concludes that KC Live is not entitled
to judgment as a matter of law on its affirmative defenses and will
deny without prejudice KC Live’s Motion for Summary Judgment.
14
III. CONCLUSION
For the foregoing reasons, the Court will GRANT KC Live’s
Motion for Leave to File Second Amended Complaint (ECF No. 35) and
the Baes’ Motion for Leave to File an Amended Counterclaim (ECF No.
42).
The Court will also DENY WITHOUT PREJUDICE KC Live’s Motion
for Summary Judgment (ECF No. 36) and DENY AS MOOT the parties’
Consent Motion for Extension of Time (ECF No. 39).
A separate
Order follows.
Entered this 29th day of June, 2016
/s/
_____________________________
George L. Russell, III
United States District Judge
15
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