Lauren v. PNC Bank, N.A. et al
Filing
117
OPINION AND ORDER granting 78 Motion for Leave to File First Amended Class Action Complaint & 80 Sealed Motion for Leave to File First Amended Class Action Complaint. To the extent that Plaintiff believes redactions to be required under the Stipulated Protective Order, Plaintiff is granted permission to file a redacted copy on the public docket & an unredacted copy under seal. Signed by Magistrate Judge Terence P Kemp on 5/12/2014. (kk2)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
Xi Chen Lauren,
:
Plaintiff,
:
v.
:
:
PNC Bank, N.A., et al.,
Defendants.
Case No. 2:14-cv-0230
JUDGE GREGORY L. FROST
Magistrate Judge Kemp
:
OPINION AND ORDER
This case is before the Court to consider Plaintiff’s motion
for leave to amend the complaint.
For the following reasons, the
motion for leave to amend will be granted.
I.
BACKGROUND
This paragraph summarizes the background allegations in the
complaint.
Plaintiff, Xi Chen Lauren, owned property in
Columbus, Ohio, for which she had a mortgage loan from Defendant
PNC Bank, N.A.
The mortgage agreement provided that Ms. Lauren
was to maintain hazard insurance, and if she did not maintain the
required coverage, PNC could purchase lender-placed or “forceplaced” hazard insurance for the property.
Ms. Lauren had a
homeowners policy with Allstate Insurance that expired on
November 17, 2011, and she did not immediately renew or replace
this policy.
Ms. Lauren purchased a new homeowners insurance
policy from State Farm that took effect on March 26, 2012.
On or
about December 25, 2012, about eight months after Ms. Lauren
purchased the new policy, PNC purchased lender-placed insurance
for the property from Defendant American Security Insurance
Company (“ASIC”), backdated to November 22, 2011.
The lender-
placed insurance policy that PNC purchased was backdated despite
the fact that there was no damage to the property or claims
arising out of the property for the lapse period.
Ms. Lauren
alleges that PNC charged her for the LPI policy covering the
period from November 22, 2011 to March 26, 2012.
The premium for
the lender-placed insurance policy was six times the amount of
Ms. Lauren’s prior Allstate Policy premium and covered more than
the amount required by the lender.
Ms. Lauren alleges that in
connection with the lender-placed insurance, PNC arranged to give
or receive kickbacks (the proposed amended complaint alleges that
those kickbacks were falsely disguised as reinsurance) that had
the effect of artificially inflating the insurance premium that
PNC charged to Ms. Lauren.
On June 4, 2013, Ms. Lauren filed a class action complaint
in the United States Court for the Western District of
Pennsylvania against three entities, PNC Bank, N.A., Assurant,
Inc., and American Security Insurance Company alleging breach of
contract, breach of fiduciary duty, aiding and abetting breach of
fiduciary duty, violation of Ohio’s Consumer Sales Practices Act,
R.C. 1345.09(B), and unjust enrichment.
the indirect parent company of ASIC.
motions to dismiss.
Defendant Assurant is
All three Defendants filed
That Court granted the motion as to
Defendant Assurant, Inc., which was dismissed from the action,
and granted in part and denied in part the motions to dismiss as
to the remaining two Defendants.
(Doc. 41).
After numerous
additional filings were made, the case was transferred to this
Court on February 25, 2014.
(Doc. 82).
Ms. Lauren has moved for leave to amend in order to add two
types of allegations to the proposed amended complaint: (1)
allegations brought under the Racketeer Influenced and Corrupt
Organizations Act, 18 U.S.C. §1962(c)-(d) (“RICO”) on behalf of a
nationwide class; and (2) allegations adding Assurant, Inc. as a
defendant to the RICO claims.
II.
(Doc. 79 at 5).
STANDARD
Generally, motions to amend pleadings are governed by Rule
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15(a) of the Federal Rules of Civil Procedure, which provides
that after the time for amending as a matter of course has
passed, “a party may amend its pleading only with the opposing
party's written consent or the court's leave. The court should
freely give leave when justice so requires.”
15(a).
Fed. R. Civ. P.
The higher standard set forth in Rule 16(b) for modifying
a scheduling order only applies when a court has issued a
scheduling order setting a deadline for motions to amend the
pleadings and the motion to amend is filed after the deadline.
Fed. R. Civ. P. 16(b).
place.
Here, there is no scheduling order in
Accordingly, the liberal standard set forth in Rule 15(a)
applies here.
Under this standard, motions for leave to amend may be
denied “where the court finds ‘undue delay, bad faith or dilatory
motive on the part of the movant, repeated failure to cure
deficiencies by amendments previously allowed, undue prejudice to
the opposing party by virtue of allowance of the amendment,
futility of the amendment, etc.’”
Marquette Gen. Hosp. v.
Excalibur Med. Imaging, LLC, 528 F. App'x 446, 448 (6th Cir.
2013) (quoting Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9
L.Ed.2d 222 (1962)).
On the other hand, “[i]n the absence of
reasons such as those listed above, leave should generally be
granted.”
Johnson v. Metro. Gov't of Nashville & Davidson Cnty.,
Tenn., 502 F. App'x 523, 541 (6th Cir. 2012) (citing Foman, 371
U.S. 178).
III. ANALYSIS
Ms. Lauren argues that she should be permitted to amend
because the additional allegations arise from the same conduct
and because there are no reasons to deny leave to amend.
Defendant PNC argues first that the motion should be denied
because of Ms. Lauren’s undue delay in seeking to amend.
PNC
argues that Ms. Lauren could have included RICO claims in the
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original complaint and failed to do so.
PNC also argues that the
current attempt to add RICO claims is motivated by Ms. Lauren’s
lawyers who, PNC asserts, would like to ensure that this case is
the “first filed” lawsuit with nationwide class allegations about
PNC.
Ms. Lauren responds that there was no undue delay, but
rather the motion for leave to amend was filed well before the
deadline the parties jointly proposed in their Rule 26 Report.
The parties’ Rule 26(f) Report (Doc. 46) and the supplement
thereto (Doc. 68) suggested that any motion to amend should be
filed within 60 days after the Rule 16 Initial Case Management
Conference.
That conference was scheduled for February 11, 2014
in the Western District of Pennsylvania (Doc. 61), but does not
appear to have occurred.
for May 13, 2014.
This Court’s Rule 16 conference is set
(Doc. 88).
The motion for leave to amend was
filed on February 20, 2014 (Docs. 78-81), which was well within
the suggested deadline.
In addition, Ms. Lauren argues that she
should not be penalized for waiting to add the RICO claims until
after initial discovery produced documents supporting those
claims.
“Ordinarily, delay alone, does not justify denial of leave
to amend.”
Morse v. McWhorter, 290 F.3d 795, 800 (6th Cir. 2002)
(citations omitted); see also Szoke v. United Parcel Serv. of
Am., Inc., 398 F. App'x 145, 153 (6th Cir. 2010) (“[d]elay by
itself is not sufficient reason to deny a motion to amend.”)
(citations and internal quotations omitted); Commercial Money
Ctr., Inc. v. Illinois Union Ins. Co., 508 F.3d 327, 347 (6th
Cir. 2007) (“Delay alone will ordinarily not justify the denial
of leave to amend”) (citation omitted).
“Notice and substantial
prejudice to the opposing party are critical factors in
determining whether an amendment should be granted.”
Wade v.
Knoxville Utilities Bd., 259 F.3d 452, 458-59 (6th Cir. 2001)
(quoting Head v. Jellico Hous. Auth., 870 F.2d 1117, 1123 (6th
4
Cir. 1989)).
“When amendment is sought at a late stage in the
litigation, there is an increased burden to show justification
for failing to move earlier.” Wade, 259 F.3d at 459 (quoting
Duggins v. Steak ‘N Shake, Inc., 195 F.3d 828, 834 (6th Cir.
1999)).
Here, the delay was not undue.
A motion for leave to amend
was contemplated by the parties as reflected in their joint Rule
26 Report, and Defendants have not argued that the delay would
cause them any prejudice.
Accordingly, Defendants’ undue delay
argument fails.
The remaining arguments raised by Defendants are arguments
that the amendment is futile.
There is some conceptual
difficulty presented when the primary basis for a party’s
opposition to the filing of an amended pleading is that the
pleading is futile, i.e. that it fails to state a claim upon
which relief can be granted.
A Magistrate Judge cannot
ordinarily rule on a motion to dismiss, see 28 U.S.C.
§636(b)(1)(A), and denying a motion for leave to amend on grounds
that the proposed new claim is legally insufficient is, at least
indirectly, a ruling on the merits of that claim.
Defendant
Assurant, Inc. also argues that this motion is more accurately
characterized as a motion for reconsideration of the order
dismissing Assurant, Inc.
A Magistrate Judge cannot rule on a
motion to reconsider a District Judge’s order granting a motion
to dismiss.
At least where the claim is arguably sufficient, it is
usually a sound exercise of discretion to permit the claim to be
pleaded and to allow the merits of the claim to be tested before
the District Judge by way of a motion to dismiss.
Even a
District Judge may choose to adopt this approach: “The trial
court has the discretion to grant a party leave to amend a
complaint, even where the amended pleading might ultimately be
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dismissed.”
Morse/Diesel, Inc. v. Fidelity and Deposit Co. of
Md., 715 F. Supp. 578, 581 (S.D.N.Y. 1989).
Consequently, rather
than determining the actual legal sufficiency of the new claim,
in many cases it will suffice to determine if there is a
substantial argument to be made on that question and, if so, to
allow the amended pleading to be filed with the understanding
that a motion to dismiss for failure to state a claim may follow.
Here, Ms. Lauren has made a colorable argument that the
proposed amended complaint sets forth enough factual allegations
to state a claim for the proposed RICO counts, and also that her
claims are not barred as a matter of law.
If Ms. Lauren is
correct, her proposed amendment may survive a motion to dismiss,
but if she is incorrect, her proposed amendment may be subject to
dismissal.
Under these circumstances, the Court finds it to be a
better exercise of discretion to permit the amendment and to
allow the sufficiency of the complaint to be tested by a motion
to dismiss.
Consequently, the motion for leave to amend will be
granted with the understanding that Defendants may pursue their
defenses by way of a motion to dismiss.
IV.
Conclusion
For the foregoing reasons, the motion for leave to amend
(Docs. 78 (redacted) and 80 (filed under seal)) is granted.
Plaintiff may file a copy of the First Amended Complaint
identical to the one attached the motion for leave to amend.
To
the extent that Plaintiff believes redactions to be required
under the Stipulated Protective Order, Plaintiff is granted
permission to file a redacted copy on the public docket and an
unredacted copy under seal.
Plaintiff is responsible for
obtaining service on, or a wavier of service from, the new
defendant in a timely manner.
V.
Procedure for Reconsideration
Any party may, within fourteen days after this Order is
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filed, file and serve on the opposing party a motion for
reconsideration by a District Judge.
28 U.S.C. §636(b)(1)(A),
Rule 72(a), Fed. R. Civ. P.; Eastern Division Order No. 91-3, pt.
I., F., 5.
The motion must specifically designate the order or
part in question and the basis for any objection.
Responses to
objections are due fourteen days after objections are filed and
replies by the objecting party are due seven days thereafter.
The District Judge, upon consideration of the motion, shall set
aside any part of this Order found to be clearly erroneous or
contrary to law.
This order is in full force and effect, notwithstanding the
filing of any objections, unless stayed by the Magistrate Judge
or District Judge.
S.D. Ohio L.R. 72.4.
/s/ Terence P. Kemp
United States Magistrate Judge
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