Caribbean Parts Egency Inc. v. Hastings Manufacturing Company, LLC

Filing 44

OPINION AND ORDER. GRANTED 15 MOTION to Amend/Correct Complaint, NOTED and GRANTED 29 Supplemental Motion to Amend Pleadings; MOOT 30 MOTION for Summary Judgment; DENIED 32 MOTION for Sanctions; MOOT 38 MOTION Leave for Discovery; GRANTED [ 43] MOTION requesting Order re Status Conference. Status Conference set for 8/13/2009 at 2:30 PM in SEC's Chambers in Old San Juan, before Judge Salvador E Casellas. NEW DEADLINES: Discovery due by 9/25/2009. Motions for Summary Judgment due by 10/23/2009. Joint Proposed Pretrial Order due by 11/24/2009. Signed by Judge Salvador E Casellas on 7/7/2009.(LB)

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IN THE UNITED STATES DISTRICT COURT F O R THE DISTRICT OF PUERTO RICO C A R IB B E A N PARTS AGENCY, INC. Plaintiff v. Civil No. 08-1281 (SEC) H A S T IN G S MANUFACTURING C O M P A N Y , LLC. D e f e n d a n ts

O P I N IO N and ORDER P e n d in g before this Court is Plaintiff Carribean Parts Agency, Inc.'s ("CPA") Motion to Amend the Pleadings (Docket # 15), Defendant Hastings Manufacturing Company, LLC's (" H M C " ) objection thereto (Docket # 18), and Plaintiff's Supplemental Motion to Motion to A m e n d Pleadings (Docket # 29). Upon reviewing the filings, and the applicable law, Plaintiff's m o tio n to amend is GRANTED. F a c tu a l Background O n February 20, 2008, CPA filed a suit against Defendant in state court, alleging that D e f e n d a n t terminated their exclusive sales contract, without just cause, in violation of the P u e rto Rico Dealers' Contracts Act ("Law 21"), P.R. Laws Ann. tit. 10, § 278 et seq. Docket # 1, Exhibit A. Shortly thereafter, Defendant filed a notice of removal. Docket # 1. On April 4, 2 0 0 8 , Defendant also filed the answer to the complaint. Docket # 6. On April 23, 2008, a s c h e d u lin g order was filed in this Court stating that all amendments to the pleadings were due b y June 2, 2008. Docket # 7. Thereafter, the parties began to conduct discovery. During the September 9, 2008 d e p o s i t i o n of Mr. Emilio Colón (President of CPA), it was revealed that Plaintiff had been in c o rre c tly named as Carribean Parts Agency, a variation of the trademark name "Carribean

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P a r t s Plus Agency," a "doing business as," or commercial name of ECL Enterprises, Inc. ("E C L " ). A s a result, on September 11, 2008, Plaintiff filed a motion to amend the pleadings, re q u e stin g that the their name be modified to read as follows "ECL Enterprises, Inc. d/b/a/ C a rrib e a n Parts Agency, Inc." Docket # 15. That same day, Defendant filed an objection to P la in tif f 's request, alleging that said motion was brought in bad faith by Plaintiff. Docket # 18. O n October 15, 2008, Plaintiff filed a supplemental motion to their original motion to amend p le a d in g s , alleging that the misnomer was a "good faith error made when drafting the original c o m p la in t." Docket # 29. Standard of Review F ED. R. CIV. P.15(a) provides that a party may amend its pleadings once, as a matter of c o u rse , before being served with a responsive pleading. However, after a responsive pleading h a s been filed, a party may only amend its pleading with leave of court, or with the opposing p a rty's written consent. Pursuant to said rule, leave to amend pleadings "shall be freely given w h e n justice so requires." The First Circuit has held that "the rule reflects a liberal amendment p o lic y, [sic] but even so, the district court enjoys significant latitude in deciding whether to g ra n t leave to amend." ACA Fin. Guar. Corp. v. Advest, Inc., 512 F.3d 46, 55 (1st Cir. 2008) (c itin g O'Connell v. Hyatt Hotels of P.R., 357 F.3d 152, 154 (1st Cir. 2004)). The timing and th e context in which a motion to amend is filed are crucial to the court's ruling on the issue. S te ir v. Girl Scouts of the USA, 383 F.3d 7, 12 (1st Cir. 2004). Requests for leave to amend have b e e n denied due to "undue delay, bad faith or dilatory motive...repeated failure to cure d e f ic ie n c ie s by amendments previously allowed, undue prejudice to the opposing party...[and] f u tility of amendment." Advest, Inc., 512 F.3d at 56 (citing Foman v. Davis, 371 U.S. 178, 182 (196 2 )).

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T h e burden on a plaintiff seeking to amend a complaint becomes more exacting as the c a s e progresses. Scheduling orders typically establish a cut-off date for amendments, which re p la c e s the liberal default rule with the more demanding "good cause" standard of FED. R. CIV. P . 16(b)(4). Steir, 383 F.3d at 12 (citing O'Connell, 357 F.3d at 154-155). Whereas Rule 15(a) f o c u se s on the moving party's bad faith, and the prejudice to the opposing party, Rule 16(b)(4)'s " g o o d cause" standard emphasizes the diligence of the party seeking the amendment. O'Connell, 3 5 7 F.3d at 155. Therefore, the more a plaintiff delays, the more likely the motion to amend will b e denied. This, added to factors such as whether the amendment requires the re-opening of d isc o v e ry, additional costs, and substantial changes to the course of the case, will necessarily in f lu e n c e the court's decision. Steir, 383 F.3d at 12. Moreover, when the motion to amend is f ile d after the opposing party has timely moved for summary judgment, a plaintiff is required to show "substantial and convincing evidence" to justify a belated attempt to amend a c o m p la in t. Steir, 383 F.3d at 12. H o w e v e r, Rule 16(b)(4) recognizes "that the parties will occasionally be unable to meet th e s e deadlines because scheduling order deadlines are established relatively early in the litig a tio n ." O'Connell, 357 F.3d at 155. Therefore, a scheduling order deadline may be extended b y the court when the moving party shows that the deadline cannot reasonably be met despite e x e rc is in g due diligence. Id. Applicable Law and Analysis P l a i n t i f f requests leave to amend the complaint to state that CPA is a d/b/a of ECL E n te rp ris e s , Inc. Thus Plaintiff requests that the caption to this case should read: ECL E n te rp ris e s , Inc. d/b/a Carribean Parts Agency, Inc. v. Hastings Manufacturing Company, LLC. In its original motion to amend, Plaintiff contends that the proceedings will not be delayed, that th e other party's rights will not be harmed, and that the proposed amendment is in the interest

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o f judicial economy. In opposition, Defendant argues that Plaintiff's request to amend has been b ro u g h t in bad faith, advances a claim that is legally insufficient, and is untimely, insofar as the s c h e d u lin g order issued by this Court established a June 2, 2008 cut-off date to amend the p le a d in g s . In the reply thereto, Plaintiff states that the error made in identifying Plaintiff as C P A , instead of as ECL d/b/a/ CPA, was made in good faith when drafting the original c o m p la in t. Plaintiff further explains that said error was due to the fact that ECL officers c o n s is te n tly use the name of CPA for all of its commercial purposes. Since the deadline of June 2, 2008 to amend the pleadings established by the scheduling o rd e r had already passed when this motion to amend was filed on September 11, 2008, the more d e m a n d in g "good cause" standard of FED. R. CIV. P. 16(b)(4) applies in this case, instead of the lib e ra l standard under FED. R. CIV. P. 15(a). Steir, 383 F.3d at 12 (citing O'Connell, 357 F.3d a t 154-155). Under the "good cause" standard, this Court must consider whether (1) the party s e e k in g the amendment has been diligent in filing said motion, (2) the amendment requires the re -o p e n in g of discovery, (3) there will be additional costs, and (4) there will be substantial c h a n g e s to the course of the case. Id. (1) Has the party seeking the amendment been diligent in filing said motion? Defendant avers that Plaintiff's motion to amend is untimely insofar as the scheduling o rd e r issued by this Court established a June 2, 2008 cut-off date to amend the pleadings. H o w e v e r, Defendant is wrong to believe that the June 2, 2008 deadline is a decisive "cut-off" d a te . Rather, as stated above, after the deadline set in the scheduling order has passed, the party s e e k in g leave to amend must meet the higher burden imposed by Rule 16(b)(4) of "good cause" to amend, as opposed to Rule 15(a)'s more liberal standard of allowing amendments "if justice s o requires." Moreover, as mentioned above, Rule 16(b)(4) recognizes that there are times when a party cannot meet the deadlines set out in the scheduling order since they are established

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re la tiv e ly early in the litigation. O'Connell, 357 F.3d at 155. As such, it is within this Court's d isc re tio n to extend these deadlines when the moving party shows that they will not be able to m e e t the deadline. Id. Therefore, while this motion has been brought by Plaintiff after the June 2 , 2008 deadline, and could thus be considered untimely, it will still be taken into consideration b y this Court. In the initial motion to amend, Plaintiff states that the reasons for the amendment were o n ly identified during discovery, when the deadline to amend the pleadings had already passed. D e f e n d a n t, however, states that Plaintiff's request to amend was brought in bad faith since P la in tif f knew or should have known from the inception of this suit that CPA was not Plaintiff's tru e name. In response to defendant's allegation Plaintiff takes great effort to evince why the initial m is n o m e r occurred, and why it should be understood as an error committed in good faith. To s u p p o rt this argument, Plaintiff points to numerous exhibits establishing that ECL consistently u s e d the name CPA during its regular course of business. According to Plaintiff, this caused the m is n o m e r at the outset of this case.1 T h e evidence provided is sufficient to show that Plaintiff's initial error in naming P la in tif f as CPA instead of as ECL d/b/a CPA, was a good faith error. Moreover, the record s h o w s that Plaintiff filed the motion to amend at issue exactly two days after this error was

Certificate of Merchant's Registry, # 0312041-0016, issued by the Department of the Treasury of Puerto Rico in which CPA appears as the commercial name of ECL. Exhibit I. Municipal License issued by the Municipality of Bayamón from 2004-2005 in which it appears that CPA is a d/b/a/ name of ECL. Exhibit II. A demand deposit account agreement executed by ECL with Banco Popular, a check used by CPA, and a money transfer from HMC to ECL, all using the same account number. Exhibits III, IV, and VI. An e-mail sent to Mr. Jeff Gunther, a representative of HMC, in which Plaintiff explains that its name is being changed from Carribean Parts Plus to Carribean Parts Agency. Exhibit V.

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re v e a le d during the deposition of Mr. Colón. As such, this Court finds that Plaintiff was diligent in the filing of said motion. (2) Will there be a need to re-open discovery if the amendment is granted? In its supplemental motion, Plaintiff also points out that, were these amendments to be g ra n te d , there would be no need for further discovery since the parties and the evidence in this c a s e will remain the same. Defendant does not contest this fact. The evidence provided by Plaintiff shows that CPA is the d/b/a/ or commercial name of E C L . This, in turn, supports Plaintiff's averment that the proposed amendments serve to correct P la in tif f 's name, and will not bring into the case any new persons of interest, nor any new e v id e n c e , since ECL is the same entity as CPA. Therefore, this Court finds that granting the a m e n d m e n t would not entail the need for any further discovery. (3) Will there be additional costs if the amendment is granted? Plaintiff also points out that granting their motion to amend will actually contribute to ju d ic ia l economy since ECL may bring the same suit against the Defendant, for the same cause o f action as CPA. In support thereof, Plaintiff notes that, since the tolling period for actions u n d e r the Puerto Rico Sales Representative Act, 10 P.R. Laws Ann. § 279 et seq. (commonly re f e rre d to as "Law 21"), is three (3) years, and the letter of termination sent to the Plaintiff was d a te d November 14, 2006, ECL could re-file this suit against Defendant. According to Plaintiff, th is would entail an incursion of unnecessary costs and time by both parties and this Court. D e f e n d a n t does not contest this fact either. Considering that the statute of limitations has not tolled for the action for which Plaintiff is suing Defendant, this Court finds that there would actually most likely be higher costs if the a m e n d m e n t were not granted, since it will presumptively precipitate ECL to bring the same case a g a in st Defendant.

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(4 ) Will there be substantial changes to the course of the case if the amendment is g r a n te d ? P la in tif f points out that the amendments sought would not interfere with other deadlines s e t by this Court. Plaintiff further states that granting this amendment would not "delay . . . the p ro s e c u tio n of the case because there is no need to bring other persons whose presence in the p ro c e e d in g s would cause, for example, additional discovery or a necessity of service of p ro c e ss ." Docket # 29. Defendant does not contest this fact. W h ile there have been delays in the proceedings of this case since the filing of Plaintiff's in itia l motion to amend, none of these delays were directly caused by Plaintiff. As mentioned a b o v e , the amendment only seeks the correction of Plaintiff's name, and would not entail a c h a n g e or addition to any of the parties, or any of the evidence. Therefore, all proceedings may h a v e continued as planned, and all dates in the scheduling order may have been met. C o n s id e rin g the foregoing, this Court finds that Plaintiff has met the "good cause" s ta n d a rd required by Rule 16(b)(4). As such, Plaintiff's request to amend the complaint is GRANTED. Notwithstanding the above, this Court further notes that Plaintiff's proposed amendment is appropriate under Rule 17(a). Said rule provides that: "[t]he court may not dismiss an action f o r failure to prosecute in the name of the real party in interest until, after an objection, a re a s o n a b le time has been allowed for the real party in interest to ratify, join, or be substituted in to the action." This rule has been interpreted as a means to avoid injustice when a good faith e rro r has been made in selecting the party in whose name the action should have been brought. 6 A Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane, Federal Practice & Procedure § 1555 (2d ed. 2008). Under this interpretation, where an honest mistake or inadvertent error

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is concerned, injustice is to be avoided by allowing the real party in interest to be substituted in to the action. Thus courts must liberally grant substitution when the error in naming the real party in in te re s t has been committed in good faith. As previously held, the evidence presented by P la in tif f supports its contention that the initial naming of the Plaintiff as CPA was a good faith e rro r in its part. As such, substitution would also be appropriate in this case. Conclusion B a s e d on the foregoing, Plaintiffs' motion to amend is GRANTED. IT IS SO ORDERED. S a n Juan, Puerto Rico, this 7 th day of July, 2009. S /S a lv a d o r E. Casellas S a lv a d o r E. Casellas U .S . District Judge