Wolfeboro, Town of v. Wright-Pierce, Inc.

Filing 40

ORDER: Plaintiff's motion to supplement (document no. 37) is granted. The plaintiff's motion to amend (document no. 28) is granted except that Count VI, Fraud, is futile as alleged, and therefore is struck from the proposed amended complaint. So Ordered by Judge Joseph A. DiClerico, Jr.(ko)

UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF NEW HAMPSHIRE
Town of Wolfeboro
v.

Civil No. 12-cv-130-JD
Opinion No. 2013 DNH 111

Wright-Pierce
O R D E R
The Town of Wolfeboro brought suit against Wright-Pierce,
the company that designed a wastewater disposal system for the
town, alleging professional negligence, breach of contract,
negligent misrepresentation, and breach of warranty.

Wolfeboro

moves for leave to amend its complaint to add claims of fraud,
fraudulent misrepresentation, and gross negligence, and a claim
that Wright-Pierce violated the New Hampshire Consumer Protection
Act, RSA 358-A.1

Wright-Pierce objects to the motion to amend,

arguing that Wolfeboro has not shown good cause for the delay in
filing the motion, that the amendments are brought in bad faith,
and that the amendments are futile.

Wolfeboro also moves to

supplement its motion to amend, and Wright-Pierce objects.

1

Wolfeboro initially moved to amend its complaint based on
the liberal standard for amendments provided by Federal Rule of
Civil Procedure 15(a). Because the scheduling order deadline for
amending pleadings was November 30, 2012, the court denied the
motion without prejudice to filing a properly supported motion.

Background2
As alleged in the complaint, Wolfeboro operates a wastewater
treatment facility for the town.

In April of 2005, the New

Hampshire Department of Environmental Services (“NHDES”) ordered
Wolfeboro to submit a Wastewater Treatment and Disposal
Management Plan by December 31, 2005.

Wolfeboro was required to

bring its wastewater treatment facilities into compliance with
the Water Pollution Act and RSA 485-A and to submit a plan and
schedule to meet future capacity requirements for wastewater
treatment by May 1, 2007.

Wolfeboro hired Wright-Pierce to

assist Wolfeboro in responding to and complying with the NHDES
order.
Wright-Pierce began work on the wastewater treatment project
in December of 2005.

In April and May of 2006, Wolfeboro entered

into additional contracts with Wright-Pierce for services related
to the wastewater project.

Wolfeboro alleges that Wright-Pierce

did not fully and adequately investigate the potential sites for
effluent discharge and made other errors in developing and
implementing the project.

2

The background information is a summary of allegations in
the complaint for purposes of this order only and does not
provide factual findings or a factual background for any other
purpose.
2

Wright-Pierce submitted a preliminary design report and
three engineering reports in March of 2007 for rapid infiltration
basins as part of the disposal system.

Based on the reports,

Wright-Pierce obtained NHDES approval for construction of the
basins.

Three rapid infiltration basins were completed in 2009

and operation began on March 3, 2009.

On April 20, 2009,

Wolfeboro staff saw that one area had a “slope failure,” meaning
that the system was not working properly.
found on June 6, 2009.

Other defects were

Wolfeboro could not operate the

wastewater disposal system as it was designed to operate and had
to construct two additional basins to remedy the problems with
the system Wright-Pierce designed.

I.

Motion to Supplement
After filing its motion to amend, Wolfeboro was provided

with additional discovery materials from Wright-Pierce’s
consultant, Jesse Schwalbaum, on July 3, 2013, which it had first
requested in a deposition subpoena, duces tecum, served on
February 20, 2013.

Wolfeboro then moved to supplement its motion

to amend to add documents produced by Schwalbaum.

Wright-Pierce

objects to the motion to supplement on the grounds that
“Wolfeboro should not be given carte blanche by this Court to

3

endlessly brief its Motion to Amend the Complaint” and that the
additional documents do not support Wolfeboro’s claims.
The additional documents are an email dated February 6,
2007, from Schwalbaum to Gary Smith at Wright-Pierce about the
limits of the load rate for the waste disposal sites, Gary
Smith’s response, and a note hand written by Schwalbaum that is
dated June 2, 2009.

Wolfeboro interprets the emails and the note

as supporting its new claims in the proposed amended complaint.
Wright-Pierce provides benign explanations for the documents.
Because the documents were not produced until July 3,
Wolfeboro could not have included them in its motion to amend the
complaint.

Despite Wright-Pierce’s explanations of the documents

and its claim of prejudice, the late disclosure of the documents,
along with no suggestion that Wolfeboro knew or should have known
of the documents earlier, provide good cause to allow Wolfeboro
to supplement its motion to amend.

See, e.g., Insight Tech.,

Inc. v. SureFire, LLC, 2008 WL 4526185, at *2-*5 (D.N.H. Oct. 2,
2008) (good cause necessary to supplement previously filed
motion).

II.

Motion to Amend
When a party seeks leave to amend pleadings after the

deadline for amendment in the scheduling order, the moving party
4

first must show good cause to modify the scheduling order.

Fed.

R. Civ. P. 16(b)(4); Flores-Silva v. McClintock-Hernandez, 710
F.3d 1, 3 (1st Cir. 2013).

Good cause, for purposes of modifying

a scheduling order, “focuses on the diligence (or lack thereof)
of the moving party more than it does on any prejudice to the
party-opponent.”

Id.

The court will deny leave to amend if the

amendment is proposed in bad faith or would be futile.

Calderon-

Serra v. Wilmington Tr. Co., 715 F.3d 14, 19 (1st Cir. 2013).
In the original complaint, Wolfeboro alleged claims of
professional negligence, breach of contract, negligent
misrepresentation, and breach of warranty.

Wolfeboro moves to

amend its complaint to add claims that Wright-Pierce was grossly
negligent, violated the New Hampshire Consumer Protection Act,
engaged in a scheme to defraud Wolfeboro, and fraudulently
misrepresented the capacity of the disposal system that it
designed.

Wolfeboro contends that it has good cause to modify

the scheduling order to allow its late motion for leave to amend
because it received a disc of discovery information from WrightPierce in January of 2013 that provided grounds for the new
allegations and claims.

In response, Wright-Pierce contends that

good cause is lacking and that the new claims are alleged in bad
faith and would be futile.

5

A.

Good Cause
The Rule 16(b)(4) good cause standard requires the moving

party to show that he has acted diligently.

O’Connell v. Hyatt

Hotels of P.R., 357 F.3d 152, 155 (1st Cir. 2004).

Although

diligence is the primary focus, prejudice to the opposing party
caused by the delay is also relevant.

Id.

Delay may be

justified when it was caused by the opposing party’s production
of critical information through discovery after the scheduling
deadline.

See StockFood Am., Inc. v. Pearson Educ., Inc., 2012

WL 5986791, at *9 (D. Me. Nov. 29, 2012); Keele v. Colonial
Imports Corp., 2012 WL 2192449, at *1 (D.N.H. June 14, 2012).
As is noted above, the deadline for amending pleadings in
this case was November 30, 2012.

In response to discovery

requests by Wolfeboro, Wright-Pierce allowed Wolfeboro’s counsel
to inspect twelve bankers boxes of documents and produced a disc
of 18,000 electronic documents in January of 2013, which included
internal emails that are the bases of Wolfeboro’s new allegations
and claims.

The discovery included 100,000 pages.

Wolfeboro

represents that until those emails were produced it did not know
and could not have known “that WP had manipulated and concealed
problematic data from Wolfeboro during the project’s design and
construction.”

6

Wolfeboro argues that it acted with due diligence in filing
its initial motion to amend on April 23, 2013, because of the
time necessary to review the documents produced by Wright-Pierce.
It also contends that no prejudice will result because discovery
will not close until November 1, 2013.
Wright-Pierce argues that Wolfeboro should have requested
the discovery earlier and that the four months between disclosure
of the documents on the disc and filing the motion to amend shows
that Wolfeboro was not diligent.

Wright-Pierce also contends

that Wolfeboro’s new claims are simply “rehashing” or
“repackaging” allegations already in the complaint that WrightPierce artificially depressed conditions in the model of the
disposal system and under predicted the likelihood of a break
out.

Wright-Pierce asserts that it will be prejudiced because

the deadline for disclosing expert witnesses has passed, and it
will need experts to address the new claims.
To show good cause, the moving party must have been diligent
in seeking the information that underlies the proposed amendment
as well as in moving to amend.

Southern Grouts & Mortars, Inc.

v. 3M Co., 575 F.3d 1235, 1241-42 (11th Cir. 2009).
for amending the pleadings was November 30, 2012.

The deadline
The parties

submitted a supplemental electronic discovery plan on October 5,
2012, which was approved on October 9, 2012.
7

The plan provided

the process and procedures for preserving and producing
electronically stored information.

Wolfeboro requested

production of documents, which included the emails that are the
subject of the motion to amend, on November 29, 2012.
Pierce responded to the request in January of 2013.

WrightThese

circumstances do not necessarily show a lack of diligence.
The four-month delay between production of the emails that
form the basis of Wolfeboro’s new claims and the date Wolfeboro
filed the original motion to amend is significant.

See Wang

Hartmann Gibbs & Cauley, PC v. Silver Point Capital, L.P., 2009
WL 3517674, at *4 (C.D. Cal. Oct. 26, 2009).

The volume of

discovery that Wright-Pierce produced in January, however,
required time to review and to consider the implications for the
case.

Nothing in the original allegations, which focus on

negligence and breach of contract, suggests that Wolfeboro was
aware of the grounds for its new claims before it discovered the
emails on the disc that Wright-Pierce disclosed in January.
Therefore, Wolfeboro has shown good cause for the delay in
moving to amend the scheduling order.

B.

Bad Faith and Prejudice
“Unlike Rule 15(a)’s liberal amendment policy which focuses

on the bad faith of the party seeking to interpose an amendment
8

and the prejudice to the opposing party, Rule 16(b)’s ‘good
cause’ standard primarily considers the diligence of the party
seeking the amendment.”

In re Western States Wholesale Nat. Gas

Antitrust Litig., 715 F.3d 716, 737 (9th Cir. 2013); see also
Steir v. Girl Scouts of the USA, 383 F.3d 7, 12 (1st Cir. 2004).
“Prejudice to the opposing party remains relevant but is not the
dominant criterion.”

O’Connell, 357 F.3d at 155.

Wright-Pierce argues that the motion to amend should not be
allowed because Wolfeboro is acting in bad faith.

In support,

Wright-Pierce contends that Wolfeboro knowingly overloaded the
disposal sites in violation of the prescribed limits, that emails
cited in support of the new claims do not support Wolfeboro’s
interpretations of gross negligence and fraud, and that Wolfeboro
is “cherry picking” the evidence when it knows other evidence is
contrary to the new claims.

Wolfeboro responds that Wright-

Pierce is misrepresenting the circumstances leading to failure of
the disposal sites and misrepresenting the meaning of the emails.
Based on the record presented for purposes of the motion to
amend, the meaning of the emails and the import of the parties’
conduct is not sufficiently clear to support Wright-Pierce’s
charge of bad faith.

Therefore, the motion cannot be denied

based on bad faith.

9

Wright-Pierce also argues that it will be prejudiced if
Wolfeboro is allowed to add the four new claims now, after the
deadline for expert disclosure has passed, because expert
testimony will be necessary to address the claims.

Wolfeboro

contends that there would be no prejudice because discovery is
ongoing, with the deadline on November 1, 2013.
That additional discovery will be needed to address new
claims is not a sufficient reason, standing alone, to deny a
motion for leave to amend.

CitiMortgage, Inc. v. Chicago

Bancorp, Inc., 2013 WL 3338501, at *3 (E.D. Mo. July 2, 2013).
To the extent additional expert discovery is necessary to address
the new claims, the parties can propose stipulated deadlines for
expert disclosures and related discovery as an amendment to the
scheduling order.

C.

Futility
Wright-Pierce contends that the new claims are futile

because the new claims are not plausible, Wolfeboro cannot prove
fraud, Wolfeboro’s allegations do not state a violation of RSA
358-A, and the fraud claims are not pleaded with sufficient
particularity.

A motion to amend a complaint will not be allowed

if the new claims would be futile.

Univ. Commc’n Sys., Inc. v.

Lycos, Inc., 478 F.3d 413, 418 (1st Cir. 2007).
10

Futility of the

new claims is reviewed under the dismissal standard of Federal
Rule of Civil Procedure 12(b)(6).

Platten v. HG Bermuda Exempted

Ltd., 437 F.3d 118, 132 (1st Cir. 2006).
For purposes of a motion to dismiss, the court “separate[s]
the factual allegations from the conclusory statements in order
to analyze whether the former, if taken as true, set forth a
plausible, not merely conceivable, case for relief.”

Juarez v.

Select Portfolio Servicing, Inc., 708 F.3d 269, 276 (1st Cir.
2013) (internal quotation marks omitted).

“If the facts alleged

in [the complaint] allow the court to draw the reasonable
inference that the defendants are liable for the misconduct
alleged, the claim has facial plausibility.”
quotation marks omitted).

Id. (internal

In addition, the circumstances that

support claims of fraud must be alleged with particularity.

Fed.

R. Civ. P. 9(b).

1.

Plausibility

Wright-Pierce challenges the new allegations made in
paragraphs 97, 100, and 102 as failing to plausibly support
Wolfeboro’s claims of fraud and fraudulent misrepresentation.
Wright-Pierce argues that other evidence shows that the meaning
Wolfeboro ascribes to internal Wright-Pierce emails is not
plausible because Wright-Pierce’s interpretations of the
11

circumstances provide an obvious alternative and legitimate
explanation.

Wolfeboro contends that Wright-Pierce continued to

represent to Wolfeboro that the results from the models of the
disposal sites had good results when the models actually showed
failures and that Wright-Pierce participated in overloading the
waste disposal sites.
In Bell Atl. Corp. v. Twombly, as cited by Wright-Pierce,
the court concluded that the allegations in the complaint did not
sufficiently support the plaintiff’s conspiracy theory to nudge
the claim beyond being merely conceivable when legitimate goals
and actions were more strongly suggested.
(2007).

550 U.S. 544, 564-70

Although the parties interpret the evidence differently,

the circumstances and appropriate inferences here do not
obviously make Wolfeboro’s claims implausible.3

2.

Fraud - Reliance

To prove fraud and fraudulent misrepresentation, the
plaintiff must show that the defendant knowingly made a false
representation, intending the plaintiff to rely on it, and that

3

If the circumstances are as obvious as Wright-Pierce
believes them to be, the claims may be challenged in the context
of summary judgment, which can be supported and opposed with
additional evidence to show what happened and what the parties
understood and intended.
12

the plaintiff was injured by his justifiable reliance on the
misrepresentation.
(2011).

Tessier v. Rockefeller, 162 N.H. 324, 332

Wright-Pierce contends that Wolfeboro failed to allege

that it justifiably relied on any representations Wright-Pierce
made.

Wright-Pierce also contends that the evidence will show

that Wolfeboro “made a conscious decision to overload the [rapid
infiltration basins], and did not rely upon Wright-Pierce’s
information in the Phase Three Report,” which Wright-Pierce
interprets to warn against any discharge greater than 600,000
gallons per day.
Wright-Pierce is correct that Wolfeboro does not include an
allegation as part of its fraud claim in Count VI that it
justifiably relied on Wright-Pierce’s allegedly fraudulent
conduct.

Wolfeboro did not address that omission in its reply.

Therefore, Count VI is futile for failing to allege all elements
of a fraud claim.
In Count VII, Wolfeboro alleges fraudulent
misrepresentation.

Wright-Pierce acknowledges that Wolfeboro

includes an allegation of justifiable reliance in support of
fraudulent misrepresentation but argues that the evidence will
not support that claim.

As is discussed above, whether Wolfeboro

can prove its claim is a matter that is better addressed by a
motion for summary judgment.
13

3.

RSA 358-A and Gross Negligence

Wright-Pierce contends that Wolfeboro’s claim under RSA 358A is futile because Wolfeboro does not allege circumstances
beyond an ordinary breach of contract.

To be actionable under

RSA 358-A, “the objectionable conduct must attain a level of
rascality that would raise an eyebrow of someone inured to the
rough and tumble of the world of commerce.”

Axenics, Inc. v.

Turner Const. Co., 164 N.H. 659, 675-76 (2013) (internal
quotation marks omitted).

Fraudulent misrepresentations made to

induce a business relationship or to maintain the relationship
based on deception in some circumstances can violate RSA 358-A.
State v. Moran, 151 N.H. 450, 453-54 (2004).

Therefore,

Wolfeboro’s claim under RSA 358-A is not futile.
Wright-Pierce also asserts that Wolfeboro’s gross negligence
claim is futile but provides no support for that charge.

4.

Particularity

“To satisfy Rule 9(b) pleading requirements, the complaint
must specify the time, place, and content of an alleged false
representation.”

United States v. Guidant Corp., 718 F.3d 28, 35

(1st Cir. 2013) (internal quotation marks omitted).

Allegations

of fraud may be based on personal knowledge or on information and
belief.

United States v. Melrose-Wakefield Hosp., 360 F.3d 220,
14

226 (1st Cir. 2004) (abrogated on other grounds by Allison Engine
Co. v. United States, 553 U.S. 662, 671-72 (2008)).

When fraud

allegations are based on information and belief, however, the
complaint must also allege the factual basis for the belief.
Melrose-Wakefield Hosp., 360 F.3d at 226.
Wolfeboro alleges that Jesse Schwalbaum of Watershed
Hydrogeologic Inc. was working for Wright-Pierce to develop a
computer model of a site for a rapid infiltration basin as part
of the wastewater treatment plan.

On February 4, 2007,

Schwalbaum reported to Wright-Pierce by email that the computer
model he was working on showed a “break out” at 600,000 gallons
per day and suggested that he “could make the breakout go away by
opening up the drains, increasing the K values, or reducing the
discharge.”

Proposed Am. Complaint ¶¶ 91-93.

In paragraph 95,

Wolfeboro alleges, based on information and belief, that
Schwalbaum altered the computer model as described in his email.
On February 6, Wright-Pierce discovered an error in the data
provided to Schwalbaum for the model.
Wolfeboro further alleges that the errors and problems were
not reported to Wolfeboro.

Despite the lack of model results

supporting the result Wright-Pierce wanted, Wright-Pierce’s
internal emails suggest that it proceeded with the planned

15

loading rate to serve its own interests.4

When David Ford from

Wolfeboro asked on February 8 about the computer model results,
Wright-Pierce reported that the model showed that the site can
take up to 600,000 gallons per day.
Wolfeboro alleges that more false statements were made on
February 14 and February 20 and that internal Wright-Pierce
emails showed that Wright-Pierce knew the site could not handle
600,000 gallons per day but did not inform Wolfeboro.

Wolfeboro

alleges that Wright-Pierce’s report in March included knowingly
false statements about the load capacities and that Wright-Pierce
made additional knowingly false statements about repairing the
site after it failed on June 16, 2009.
In the context of the proposed amended complaint, which is
based on identified email exchanges and other communications, the
allegations are sufficiently particular to meet the requirements
of Rule 9(b).

To the extent any confusion or ambiguity remains,

those issues may be addressed in discovery.

4

Wolfeboro notes that the internal emails indicate that
Wright-Pierce wanted higher loading rates in order to exceed the
loading rate used in another project and to make Wright-Pierce
the designer of the project with the highest loading rate in the
country.
16

Conclusion
For the foregoing reasons, the plaintiff’s motion to
supplement (document no. 37) is granted.

The plaintiff’s motion

to amend (document no. 28) is granted except that Count VI,
Fraud, is futile as alleged, and therefore is struck from the
proposed amended complaint.

SO ORDERED.

____________________________
Joseph A. DiClerico, Jr.
United States District Judge
August 20, 2013
cc:

David H. Corkum, Esquire
Rhian M.J. Cull, Esquire
John W. Dennehy, Esquire
Patricia B. Gary, Esquire
Matthew F. Lenzi, Esquire
Kelly Martin Malone, Esquire
Seth Michael Pasakarnis, Esquire

17