Travelers Casualty & Surety Company of America v. Hub Mechanical Contractors, Inc. et al
Filing
209
ORDER denying Plaintiff's 197 Motion to Strike, or in the Alternative, for Entry of Amended Case Management Order and for a More Definite Statement. Signed by District Judge Keith Starrett on May 18, 2015 (dsl)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
EASTERN DIVISION
TRAVELERS CASUALTY & SURETY COMPANY
OF AMERICA
V.
PLAINTIFF
CIVIL ACTION NO. 2:13cv101-KS-MTP
HUB MECHANICAL CONTRACTORS, INC.,
HUB REFRIGERATION & FIXTURES, INC.,
GEORGE C. CURRY, CINDY B. CURRY,
AND ARTHUR C. HENDERSON
DEFENDANTS
OPINION AND ORDER
This matter is before the Court on the Plaintiff Travelers Casualty & Surety
Company of America’s Motion to Strike or, in the Alternative, for Entry of Amended Case
Management Order and for a More Definite Statement (“Motion to Strike”) [197].
Having
considered the submissions of the parties, the record, and the applicable law, the Court
finds that the motion should be denied.
On May 15, 2013, Travelers Casualty & Surety Company of America (“Travelers”)
filed suit against George Curry, Cindy Curry, and others, alleging that the Defendants are
liable to it as “Indemnitors” pursuant to certain Indemnity Agreements made in connection
with Travelers’ issuance of payment and performance bonds on behalf of Hub Mechanical
Contractors, Inc. On March 31, 2014, George Curry and Cindy Curry (the “Currys”) filed
their Answer [32] to the Complaint [1]. In addition to denying any and all liability, the
Currys asserted a counterclaim for abuse of process. On October 31, 2014, Hub
Refrigeration & Fixtures, Inc. (“HUB”) sought leave to intervene in this cause as a
counterclaimant. HUB asserted, in pertinent part, that George Curry is its sole
shareholder and that it has been unable to obtain bonds to secure construction jobs due
to Travelers’ placement of a lien on the Currys’ properties. HUB’s motion was granted
without opposition from any party. On December 4, 2014, HUB and the Currys filed an
Amended Answer [125], including a counterclaim for abuse of process. On March 31,
2015, approximately four (4) months after the case management deadline for amendment
of the pleadings, Travelers filed its Motion for Leave to File Amended Complaint [168].
Travelers argued that it should be allowed to assert a fraud claim against George Curry
and to include HUB as an “Indemnitor” in the action based on information it learned at
George Curry’s deposition on March 5, 2015. Travelers’ motion was granted over the
objections of HUB and the Currys. On April 9, 2015, Travelers filed its Amended
Complaint [184], alleging that the Indemnitors, including HUB, are liable to it for all
amounts owed and incurred in connection with the issuance of a bond; adding a fraud
claim against George Curry; and, including a request for punitive damages against
George Curry for his alleged fraud. On April 23, 2015, the Currys and HUB
(“Defendants”) filed their Answer and Counterclaim to Amended Complaint [193]. This
pleading includes three (3) new counterclaims (1- Intentional Tort, 2- Interference with
Business Relations, 3- Conspiracy) and adds a request for punitive damages.
On May 7, 2015, Travelers filed the subject Motion to Strike [197]. Travelers
principally argues that the new counterclaims asserted in the Answer and Counterclaim to
Amended Complaint [193] should be stricken from this action. Travelers contends that
the counterclaims are untimely because they were filed approximately five (5) months
subsequent to the amendment deadline, without leave of court, and Defendants cannot
show good cause for the amendment in accordance with Federal Rule of Civil Procedure
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16(b)(4).1 Travelers also asserts that the new counterclaims are compulsory pursuant to
Federal Rule of Civil Procedure 13(a) and the Defendants have waived them by failing to
assert them earlier in the litigation. Travelers’ Rule 13 waiver argument is unsupported by
citation to authority and not well taken. The “failure to raise a counterclaim covered by
Rule 13(a) generally prevents a party from raising that counterclaim in a subsequent
action, not necessarily later in the same action.” Kimberly-Clark Worldwide Inc. v. First
Quality Baby Prods. LLC, No. 14cv1466, 2015 WL 1582368, at *12 (E.D. Wis. Apr. 9,
2015) (citing 6 Charles Alan Wright et al., Federal Practice and Procedure § 1417 (3d ed.
2010)). Moreover, it has been clear since 2009 that a party may amend its counterclaim
in accordance with Rule 15. See Fed. R. Civ. P. 13 advisory committee’s note to 2009
Amendments (“An amendment to add a counterclaim will be governed by Rule 15.”).2
Both Travelers’ Rule 13 and Rule 16 arguments overlook that the subject counterclaims
were part and parcel of Defendants’ responsive pleading to the Amended Complaint
[184], and that the responsive pleading was timely filed under Rule 15(a)(3).3 Only in
rebuttal does Travelers address the salient issue of whether a defendant must seek leave
of court when it “desires to amend its counterclaim in response to the filing of an amended
1
“A schedule may be modified only for good cause and with the judge’s consent.”
Fed. R. Civ. P. 16(b)(4).
2
In fact, the compulsory nature of a counterclaim supports amendment because “if
amendment is not allowed the counterclaim will be barred in subsequent actions.” See
Kimberly-Clark Worldwide Inc., 2015 WL 1582368, at *12 (citing Jupiter Aluminum Corp.
v. Home Ins. Co., 181 F.R.D. 605, 609 (N.D. Ill 1998)).
3
“Unless the court orders otherwise, any required response to an amended pleading
must be made within the time remaining to respond to the original pleading or within 14
days after service of the amended pleading, whichever is later.” Fed. R. Civ. P. 15(a)(3).
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complaint.” (Pl.’s Reply in Supp. of Mot. to Strike [206] at p. 2.)
The Court typically does “not consider arguments raised for the first time in a reply
brief . . . .” United States v. Transocean Deepwater Drilling, Inc., 767 F.3d 485, 492 (5th
Cir. 2014) (citation omitted). However, the Court will make an exception here and
consider Travelers’ rebuttal argument. The Defendants have submitted a letter brief
addressing the authorities only cited by Travelers in its reply brief. See Lawlis v. Moore
Iron & Steele Corp., No. CIV-13-823-D, 2014 WL 7403854 (W.D. Okla. Dec. 30, 2014);
Bern Unlimited, Inc. v. Burton Corp., 25 F. Supp. 3d 170 (D. Mass. 2014).
Both Lawlis and Bern recognized varying court approaches to determining if leave
must be sought to file a new or amended counterclaim in response to an amended
complaint. The permissive approach “allows a defendant served with an amended
complaint to amend its counterclaims without leave of court, regardless of the scope of
changes made to the amended complaint.” Lawlis, 2014 WL 7403854, at *2 (citations
omitted). Under the “moderate approach, an amended response may be filed without
leave only when the amended complaint changes the theory or scope of the case, and
then, the breadth of the changes in the amended response must reflect the breadth of the
changes in the amended complaint.” Bern Unlimited, Inc., 25 F. Supp. 3d at 177 (citation
and internal quotation marks omitted).4 The district court in Bern found neither approach
satisfactory and held that the better method is to require leave of court pursuant to Rule
15(a)(2) whenever a new or different counterclaim is sought to be asserted. See 25 F.
Supp. 3d at 179. In Lawlis, the district court found the approach described in Bern to be
4
The parties have not cited, and the Court has not identified, any Fifth Circuit opinion
addressing this issue.
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the “most appropriate.” Lawlis, 2014 WL 7403854, at *3.
Neither Lawlis nor Bern justifies the striking of Defendants’ new counterclaims.
Although the court in Lawlis expressed a preference for requiring a party to seek leave
whenever he desires to file a new or amended counterclaim, it found the following
circumstances to warrant the denial of leave “under any approach”: “Plaintiff’s Second
Amended Complaint removed claims and a party, this case is in its late stages, discovery
is now complete and the dispositive motion deadline has passed . . . .” 2014 WL
7403854, at *3. Travelers’ Amended Complaint cannot be construed to have “narrowed
the issues in the case” since it seeks to impose liability against HUB for the first time and
adds a fraud claim and request for punitive damages as to George Curry. Id. The
addition of three counterclaims and a request for punitive damages by the Defendants in
response to Travelers’ Amended Complaint compares unfavorably with the assertion of
six new counterclaims in response to a case-narrowing pleading in Lawlis. Furthermore,
the discovery deadline and deadline for all motions other than motions in limine have yet
to expire in this action. Lawlis is clearly distinguishable and inapplicable.
In Bern, the district court construed the new counterclaims filed without leave as
motions to amend under Rule 15(a)(2). See 25 F. Supp. 3d at 180. A “court should freely
give leave [to amend] when justice so requires.” Id. (quoting Fed. R. Civ. P. 15(a)(2)).
Grounds for denial of leave to amend include undue delay and prejudice to the opposing
party. See id. (citation omitted). The court rejected the plaintiffs’ argument that several of
the counterclaims should be stricken based on unfair prejudice and delay pursuant to the
following rationale:
Plaintiff will therefore suffer some prejudice if the counterclaims are allowed
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because some discovery would have to be taken, delaying the resolution of the
case. That prejudice, however, must be balanced against the purposes of
Rule 13(a). “The purpose of Rule 13(a) is ‘to prevent multiplicity of actions and
to achieve resolution in a single lawsuit of all disputes arising out of common
matters.’” While some discovery might have to be taken on an expedited basis
if the counterclaims are allowed, much of the discovery on those counterclaims
has already been done in this case. It would be a waste of resources for both
the judicial system and the litigants to require defendants to file new actions to
pursue their false-advertising claims.
Id. at 185-86 (internal citations omitted). Here too, it would be a waste of judicial
resources to require the Defendants to file a new, independent action based on the claims
Travelers describes as compulsory in nature. Travelers’ assertion that two of the three
counterclaims “have their genesis in Travelers’ initiation of the lawsuit” and the facts
surrounding the third counterclaim “were known in June of 2014 at the latest,” also leads
the Court to conclude that any additional discovery necessitated by the counterclaims
should be very limited in nature given the substantial proceedings to date. (Pl.’s Reply in
Supp. of Mot. to Strike [206] at p. 6.) In sum, the Court rejects Travelers’ undue delay and
prejudice objections to the new counterclaims for essentially the same reasons presented
in the above-quoted passage from Bern.
Based on the foregoing, the Court denies Travelers’ request for an order striking
the new counterclaims asserted in the Defendants’ Answer and Counterclaim to Amended
Complaint [193]. The Court does not adopt, reject, or state a preference for any of the
above-discussed approaches to considering a new counterclaim filed in response to an
amended complaint in reaching this ruling. Instead, the Court merely concludes that
Travelers, as the moving party, has failed to present sufficient grounds to warrant the
striking of the counterclaims from the pleadings.
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The Court also rejects Travelers’ alternative argument that the Defendants should
be required to plead the new counterclaims more definitely pursuant to Federal Rule of
Civil Procedure 12(e). Rule 12(e) states in pertinent part: “A party may move for a more
definite statement of a pleading to which a responsive pleading is allowed but which is so
vague or ambiguous that the party cannot reasonably prepare a response.” Fed. R. Civ.
P. 12(e). Travelers’ existing Answer [199] to the counterclaims defeats any contention
that they are too vague or ambiguous to enable the preparation of a responsive pleading.
Finally, Travelers’ alternative request for an amended case management order so
that it may conduct discovery on the new counterclaims is declined. The Court is
unconvinced that any case management deadlines need to be altered so that Travelers
can mount an adequate defense given Travelers’ assertion that the factual bases for the
claims have existed for at least eleven (11) months. The discovery previously conducted
in connection with these known facts should be sufficient. Nonetheless, this alternative
ground for relief is denied without prejudice to Travelers’ ability to present a request for
additional time to conduct discovery to the United States Magistrate Judge, who is more
familiar with the discovery record.
IT IS THEREFORE ORDERED AND ADJUDGED that the Motion to Strike [197] is
denied.
SO ORDERED AND ADJUDGED this the 18th day of May, 2015.
s/Keith Starrett
UNITED STATES DISTRICT JUDGE
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