ARZADI et al v. EVANSTON INSURANCE COMPANY et al
Filing
83
OPINION. Signed by Judge Susan D. Wigenton on 4/29/2021. (bt, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
CHAMBERS OF
MARTIN LUTHER KING COURTHOUSE
50 WALNUT ST.
NEWARK, NJ 07101
973-645-5903
SUSAN D. WIGENTON
UNITED STATES DISTRICT JUDGE
April 29, 2021
Philip Nettl, Esq.
Benedict & Altman, Esqs.
247 Livingston Avenue
New Brunswick, NJ 08901
Counsel for Plaintiffs
Christina R. Salem, Esq.
Kennedys CMK LLP
570 Lexington Avenue, 8th Floor
New York, NY 10022
Counsel for Defendant
LETTER OPINION FILED WITH THE CLERK OF THE COURT
Re:
Arzadi v. Evanston Insurance Company, No. 17-5470 (SDW) (CLW)
Counsel:
Before this Court is Plaintiffs’ 1 Appeal of Magistrate Judge Cathy L. Waldor’s (“Judge
Waldor”) Opinion and Order dated February 25, 2021 (D.E. 74; D.E. 75) denying Plaintiffs’
Motion for Leave to Amend the Complaint. For the reasons discussed below, Judge Waldor’s
Opinion and Order are AFFIRMED.
DISCUSSION
A. Background and Procedural History
This Court assumes the parties’ familiarity with the factual background and procedural
history in this matter and summarizes only those facts necessary to decide the instant appeal.
Defendant Evanston Insurance Company (“Defendant”) along with defendant Markel Corporation,
who has since been dismissed from the action, removed this matter from New Jersey Superior
Court in July 2017. (D.E. 1; D.E. 13.) Plaintiffs filed suit seeking a declaratory judgment stating
that Defendant has a duty to defend or indemnify Plaintiffs in an underlying lawsuit filed against
Plaintiffs by Allstate of New Jersey (“Allstate Suit”) under a Professional Insurance Liability
Policy issued by Defendant. (D.E. 23 at 2.) Defendant answered the Complaint on August 3,
The Plaintiffs are Karim Arzadi, Joworisak & Associates, LLC, f/k/a Arzadi, Joworisak & Associates, and the Law
Offices of Karim Arzadi (together, “Plaintiffs”).
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2017. (D.E. 4.) Thereafter, pursuant to Judge Waldor’s September 22, 2017 pre-trial scheduling
order (“Scheduling Order”), any motion to amend the pleadings was due no later than January 18,
2018, approximately six months after the close of fact discovery. (D.E. 12.) Following this
Court’s Opinion and Order on the parties’ cross-motion for partial summary judgment issued in
February 2018 (D.E. 23; D.E. 24), this matter was administratively terminated in June 2018
pending resolution of the Allstate Suit in state court. (D.E. 40.) After the Allstate Suit settled and
upon Defendant’s motion, Judge Waldor issued a Letter Opinion in May 2020 reopening the case,
among other directives. (D.E. 42; D.E. 55.) In September 2020, upon Plaintiffs’ appeal, this Court
affirmed Judge Waldor’s Letter Opinion in-part, allowing the matter to proceed. (D.E. 60; D.E.
61.) Defendant’s subsequent motion for reconsideration was denied in October 2020. (D.E. 65.)
Plaintiffs filed a motion to amend their pleading on November 25, 2020, seeking to add
two claims against Defendant, including proposed Counts Seven and Eight for alleged breach of
the duty of good faith and violation of the New Jersey Consumer Fraud Act (“NJCFA”). (D.E.
66; D.E. 66-2.) Judge Waldor denied Plaintiffs’ motion to amend on February 25, 2021. (D.E.
74; D.E. 75.) Plaintiffs appealed (D.E. 76), and the appeal was fully briefed on April 12, 2021.
(D.E. 81; D.E. 82.)
B. Standard of Review
Magistrate judges may hear non-dispositive motions under 28 U.S.C. § 636(b)(1)(A) and
Rule 72(a). A district court may reverse a Magistrate Judge’s determination of a non-dispositive
motion only where it is “clearly erroneous or contrary to law.” 28 U.S.C. § 636(b)(1)(A); Haines
v. Liggett Grp. Inc., 975 F.2d 81, 83 (3d Cir. 1992). A ruling is clearly erroneous “when although
there is evidence to support it, the reviewing court on the entire evidence is left with the definite
and firm conviction that a mistake has been committed.” Dome Petroleum Ltd. v. Emp’rs Mut.
Liab. Ins. Co. of Wis., 131 F.R.D. 63, 65 (D.N.J. 1990) (quoting United States v. U.S. Gypsum Co.,
333 U.S. 364, 395 (1948)) (internal quotations omitted). “A district judge’s simple disagreement
with the magistrate judge’s findings is insufficient to meet the clearly erroneous standard of
review.” Andrews v. Goodyear Tire & Rubber Co., Inc., 191 F.R.D. 59, 68 (D.N.J. 2000). An
order is contrary to law “when the magistrate judge has misinterpreted or misapplied the applicable
law.” Doe v. Hartford Life & Accident Ins. Co., 237 F.R.D. 545, 548 (D.N.J. 2006). This Court
conducts a de novo review of legal conclusions. Cooper Hosp./Univ. Med. Ctr. v. Sullivan, 183
F.R.D. 119, 127 (D.N.J. 1998) (citations omitted).
C. Discussion
On appeal, Plaintiffs do not dispute Judge Waldor’s determination that their motion to
amend is governed by the “good cause” standard pursuant to Rule 16(b)(4) where, as here,
Plaintiffs sought leave to amend well after the established deadline in the Scheduling Order. (D.E.
76-1 at 9.) Unlike the liberal standard under Rule 15(a)(2) “and its focus on the question of
prejudice to the non-moving party, Rule 16(b)(4) focuses on the moving party’s burden to show
due diligence.” See Race Tires Am., Inc. v. Hoosier Racing Tire Corp., 614 F.3d 57, 84 (3d Cir.
2010); Premier Comp Sols., LLC v. UPMC, 970 F.3d 316, 319 (3d Cir. 2020).
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“In assessing diligence, courts ask whether the movant possessed, or through the exercise
of reasonable diligence should have possessed, the knowledge necessary to file the motion to
amend before the deadline expired.” Smith v. Honeywell Intern. Inc., No. 10-3345, 2014 WL
301031, at *6 (D.N.J. Jan. 27, 2014) (internal quotation omitted). “Good cause” to amend a
scheduling order may be found where “the movant learns of the facts supporting [an amendment]
after expiration of the relevant filing deadline[.]” In re: Paulsboro Derailment Cases, No. 130784, 2015 WL 6163962, at *1 (D.N.J. Oct. 20, 2015). However, “courts regularly find that the
standard is not satisfied when a party was aware of the facts that would lead it to amend and failed
to act on it.” Roggio v. F.B.I., No. 08-4991, 2011 WL 3625042, at *5 (D.N.J. Aug. 17, 2011)
(collecting cases). As the Third Circuit has stated, “scheduling orders are at the heart of case
management. If they can be disregarded without a specific showing of good cause, their utility
will be severely impaired.” Koplove v. Ford Motor Co., 795 F.2d 15, 18 (3d Cir. 1986); accord
First Bank Puerto Rico v. Misite, 813 F. App’x 758, 764 (3d Cir. 2020) (citing Parker v. Columbia
Pictures Indus., 204 F.3d 326, 340 (2d Cir. 2000) (“Disregard of the [scheduling] order would
undermine the court’s ability to control its docket, disrupt the agreed-upon course of the litigation,
and reward the indolent and the cavalier. Rule 16 was drafted to prevent this situation[.]”)).
Judge Waldor’s conclusion that Plaintiffs failed to satisfy Rule 16(b)(4)’s good cause
standard was neither clearly erroneous nor contrary to law. The operative Scheduling Order was
entered on September 22, 2017 and required that any motions to amend the pleading be filed by
January 18, 2018. (D.E. 12.) As Judge Waldor explained, Plaintiffs’ arguments below reveal that
they were aware of the underlying facts in support of their proposed claims “no later than June
2017.” (D.E. 74 at 7; id. at 6–7 (highlighting Plaintiffs’ concession that Defendant could not
“claim surprise” to a proposed count for bad faith because the Complaint alleges Defendant
breached the covenant of good faith and fair dealing and conducted unfair and deceptive claims
settlement practices) (noting that the basis of Plaintiffs’ proposed NJCFA claim was Defendant’s
decision to disclaim insurance coverage, which Plaintiffs admit was known to them on or about
June 30, 2017).)
On appeal, Plaintiffs argue that their proposed Count Seven is merely a “housekeeping
amendment” intended “to bring greater clarity to the original Complaint.” (D.E. 76-1 at 7–8.) As
an initial matter, Plaintiffs’ failure to raise the same argument below (see D.E. 66-3; D.E. 71)
renders it inappropriate for consideration on appeal. See Weiss v. First Unum Life Ins. Co., No.
02-4249, 2008 WL 5188857, *3 (D.N.J. Dec.10, 2008) (“[A] party’s failure to present arguments
to the magistrate judge constitutes a waiver of those arguments on appeal.”) (citing Lithuanian
Com. Corp. v. Sara Lee Hosiery, 177 F.R.D. 205, 209–13 (D.N.J. 1997)). Nonetheless, implicit
in Plaintiffs’ argument and consistent with Judge Waldor’s finding is that the underlying facts in
support of a separate claim for bad faith were apparent when the Complaint was filed in June 2017.
(See D.E. 82 at 4 (admitting that “[u]nlike the Bad Faith claim, Plaintiffs’ proposed [NJCFA] claim
is indeed new”)); see, e.g., Barry v. Pennsauken Bd. of Educ., No. 16-9230, 2018 WL 6332511, at
*3 (D.N.J. Nov. 7, 2018) (denying motion to amend where plaintiff failed to assert “that he recently
learned of new facts” where he sought “to add a new cause of action based on the same facts found
within the initial complaint”).
Similarly, Plaintiffs’ argument that their proposed NJCFA claim is based “[i]n part” on
“Defendant’s conduct subsequent to this Court’s Summary Judgment Order in February of 2018”
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is unavailing. (See D.E. 76-1 at 10.) Again, the phrase “in part” reveals that Plaintiffs’ proposed
NJCFA claim is founded on events that occurred before February 2018. Furthermore, and
paramount here, Plaintiffs fail to explain why their motion to amend was delayed nearly 11 months
after Defendant moved to reopen the instant matter in December 2019. (See D.E. 76-1 at 11
(admitting that “[s]oon after [Defendant] engaged in the[] actions [underpinning the proposed
NJCFA claim], the case was administratively terminated [in June 2018]”); see also D.E. 82.)
Indeed, Plaintiffs could have moved to amend their pleading in conjunction with the various
motions filed and adjudicated between December 2019 and October 2020. 2 (See, e.g., D.E. 55;
D.E. 60; D.E. 65.) Thus, Plaintiffs’ inexplicable delay following resolution of the Allstate Suit is
detrimental to their proposed amendment. See Cap. Health Sys., Inc. v. Veznedaroglu, No. 158288, 2019 WL 6324006, at *8 (D.N.J. Nov. 26, 2019) (denying leave to amend where plaintiff
obtained relevant evidence after the deadline to amend and “sat on the evidence for an inexplicable
amount of time”); Fermin v. Toyota Material Handling, U.S.A., Inc., 2012 WL 1393074, at *6
(D.N.J. Apr. 23, 2012) (“While information obtained after a deadline to amend can constitute good
cause, that good cause does not extend indefinitely.”).
Finally, Plaintiffs could have requested a modification to the Scheduling Order at any point
prior to January 18, 2018 given that the underlying basis for adding the proposed counts existed
long ago. Because Plaintiffs failed to establish good cause in seeking to add proposed Counts
Seven and Eight to the Complaint, Judge Waldor properly denied their motion to amend. See, e.g.,
Eastern Minerals & Chems. Co. v. Mahan, 225 F.3d 330, 340 (3d Cir. 2000) (finding no abuse of
discretion where the district court denied plaintiff’s motion to amend, filed six months after the
deadline, absent good cause and unexplained delay); Strategic Prod. & Servs., LLC v. Integrated
Media Techs., Inc., No. 18-694, 2020 WL 5810561, at *3–4 (D.N.J. Sept. 30, 2020) (affirming
denial of plaintiff’s motion for leave to amend where the record reflected it “had sufficient
knowledge to assert claims . . . before the deadline [to amend] expired”); Roggio, 2011 WL
3625042, at *5 (finding no good cause where plaintiffs knew facts “long before” leave to amend
was sought).
CONCLUSION
For the reasons set forth above, Judge Waldor’s February 25, 2021 Opinion and Order are
AFFIRMED. An appropriate order follows.
/s/ Susan D. Wigenton
SUSAN D. WIGENTON, U.S.D.J.
Orig: Clerk
cc:
Cathy L. Waldor, U.S.M.J.
Parties
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Plaintiffs’ contention that “they relied primarily upon” the Third Circuit’s November 15, 2018 decision in AlpizarFallas v. Favero, 908 F.3d 910 (3d Cir. 2018) in moving to include an NJCFA claim furthers this point. (See D.E.
76-1 at 12). Notwithstanding whether Alpizar-Fallas indeed provides any relevant guidance, the decision was
rendered not only one year prior to Defendant’s motion to reopen this action, but nearly two years before Plaintiffs
moved to amend in November 2020.
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