National Frozen Foods Corporation v. Berkley Assurance Company

Filing 105

ORDER denying Defendant Berkley Assurance Company's 73 Motion for Leave to File Cross-Claim. Signed by Judge Ricardo S. Martinez. (PM)

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

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Case No. C17-339 RSM

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ORDER DENYING MOTION FOR LEAVE
TO FILE CROSS-CLAIM

NATIONAL FROZEN FOODS
CORPORATION, A WASHINGTON
CORPORATION,

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Plaintiff,

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v.

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BERKLEY ASSURANCE COMPANY, an
Iowa Corporation,

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Defendant.

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I.

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INTRODUCTION

This matter comes before the Court on Defendant Berkley Assurance Company

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(“Berkley”)’s Motion for Leave to File Cross-Claim. Dkt. #73. Plaintiff National Frozen Foods

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Corporation (“National Frozen”) does not oppose this Motion. Dkt. #75. Defendants AmWINS

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Brokerage of Arizona, AmWINS Brokerage of Illinois, and AmWINS Group, LLC (collectively
“AmWINS”) oppose. Dkt. #78. For the reasons stated below, the Court DENIES Berkley’s
Motion.

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ORDER DENYING MOTION FOR LEAVE TO FILE CROSS-CLAIM - 1

II.

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BACKGROUND

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National Frozen is a supplier of frozen vegetables. Dkt. #1-1 at ¶ 2. In May 2016,

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National Frozen purchased a Contaminated Products Insurance Policy from Defendant Berkley.

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Id. at ¶ 6; see also Dkt. #19 at 7. National Frozen used AmWINS Brokerage of Arizona to

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broker the sale and negotiation of the insurance coverage. Dkt. #45 at 6; Dkt. #62 at 3.
National Frozen suffered a recall during the period Berkley contracted to insure. See

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Dkt. #1-1 at ¶¶ 17–29 (describing recall of peas contaminated with listeria monocytogenes).

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Berkley denied coverage for the loss. Id. at ¶¶ 30–32.

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On February 2, 2017, National Frozen filed a suit against Berkley in King County
Superior Court, and Berkley later removed to this Court. Dkt. #1. The AmWINS Defendants

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were not parties to the lawsuit at that time. National Frozen later sent subpoenas to AmWINS

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and on November 6, 2017, filed its First Amended Complaint adding claims against AmWINS.

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Dkt. #45. Specifically, National Frozen alleged that AmWINS received National Frozen’s “loss

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runs” showing a prior recall of green beans, and that AmWINS should have submitted those to

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Defendant Berkeley as part of the application for insurance. Id. at 3, 5–6, and 10–11. National

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Frozen alleged that AmWINS was specifically made aware of the mistake in the application but

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failed to alert Berkley. Id. at 10–11.

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On December 4, 2017, Berkley filed its Answer to the First Amended Complaint with a
counterclaim against National Frozen but no cross-claim against AmWINS. Dkt. #51.
On December 20, 2017, the Court issued an Amended Scheduling Order, based on a

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stipulation filed by the parties, extending the deadline for joining additional parties and

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amending the pleadings from November 6, 2017, to May 14, 2018. Dkt. #53.

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ORDER DENYING MOTION FOR LEAVE TO FILE CROSS-CLAIM - 2

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On January 22, 2018, AmWINS filed an Answer admitting receiving National Frozen’s

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loss runs. Dkt. #55. Initial disclosures and discovery proceeded. The deadline for amending

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pleadings passed. The parties conducted depositions between June and July of 2018. Berkley

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filed the instant Motion on July 11, 2018. Dkt. #73.

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III.

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DISCUSSION

A. Legal Standard

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“When a party seeks to amend a pleading after the pretrial scheduling order’s deadline

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for amending the pleadings has expired, the moving party must satisfy the ‘good cause’

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standard of Federal Rule of Civil Procedure 16(b)(4), which provides that ‘[a] schedule may be
modified only for good cause and with the judge's consent,’ rather than the liberal standard of

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Federal Rule of Civil Procedure 15(a).” Learjet, Inc. v. Oneok, Inc. (In re W. States Wholesale

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Natural Gas Antitrust Litig.), 715 F.3d 716, 737 (9th Cir. 2013). “Unlike Rule 15(a)’s liberal

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amendment policy which focuses on the bad faith of the party seeking to interpose an

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amendment and the prejudice to the opposing party, Rule 16(b)’s ‘good cause’ standard

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primarily considers the diligence of the party seeking the amendment.” Id. (citing Johnson v.

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Mammoth Recreations, Inc., 975 F.2d 604, 609 (9th Cir. 1992)). While a court may take into

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account any prejudice to the party opposing modification of the scheduling order, “the focus of

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the [Rule 16(b)] inquiry is upon the moving party’s reasons for seeking modification . . . [i]f

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that party was not diligent, the inquiry should end.” Id.
B. Analysis

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Berkley seeks relief from the existing deadline for amending pleadings “based on newly

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discovered facts arising from recently taken depositions of former AmWINS employees.” Dkt.

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#73 at 2. Berkley asserts that “testimony elicited during these depositions produced previously

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ORDER DENYING MOTION FOR LEAVE TO FILE CROSS-CLAIM - 3

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unknown facts establishing that AmWINS negligently failed to provide Berkley with

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information related to National Frozen’s loss history, specifically its July 2015 claim related to

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a recall of green beans contaminated with listeria, as part of National Frozen’s application for

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insurance coverage.” Id. Berkley argues the Rule 15(a) “extreme liberality” standard for

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amendments and the Rule 16 “good cause” standard for amendments after a scheduling order
deadline has passed. Id. at 7–8. Berkley asserts it was “was diligent in its discovery related to

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AmWINS,” but glosses over the gap in time between AmWINS Answer in January and the June

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depositions that apparently alerted Berkley to the need for a cross claim. Id. at 8.

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In Response, AmWINS argues that Berkley has failed to demonstrate that it could not
have met the Court’s deadline and that it was not diligent in amending to assert this

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counterclaim. AmWINS argues that Berkley should have been alerted by National Frozen’s

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pleading and other notice, via written discovery, that “AmWINS received copies of [National

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Frozen]’s loss runs, did not include those loss runs with [National Frozen]’s Application to

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Berkley, was told… that [National Frozen]’s Application was inaccurate, and allegedly did not

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alert the various markets to the inaccuracies in the Application.” Dkt. #78 at 8. AmWINS

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points out that “if Berkley believed it needed the depositions… to move to amend, then Berkley

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could have sought the depositions earlier.” Id.

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On Reply, Berkley asserts that the “depositions were necessary to confirm unwritten
communications, or the lack of unwritten communications, that support Berkley’s claim for
negligent misrepresentation.” Dkt. #83 at 2. Berkley argues that “diligence does not require a

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party to include a claim or defense based upon a mere inkling of its existence.” Id. Berkley

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argues that documents produced in discovery, which Berkley had before the depositions, did not

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ORDER DENYING MOTION FOR LEAVE TO FILE CROSS-CLAIM - 4

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“prove the absence of conversations or communications or provide context…”

Id. at 3.

Berkley also addresses the Rule 15(a) standard.

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The key here is the diligence of the party seeking the amendment. In this case there

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have been numerous stipulations filed to extend deadlines, including the deadline for amending

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pleadings. The parties have appeared fully capable of working together to jointly seek that type
of relief. However, with the specific issue in this Motion, Berkley failed to assert cross-claims

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against AmWINS until nearly two months after the deadline. The Court agrees with AmWINS

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that all of the information was available to Berkley to pursue such claims, or seek further

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extension, if Berkley had been diligent. Berkley’s briefing indicates a belief that it needed to
conduct the depositions before filing crossclaims, using language such as “establishing” that

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AmWINS was negligent, “confirm[ing]” facts, and “prov[ing] the absence of conversations or

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communications. Such level of proof is unnecessary to plead a claim, and delaying a crossclaim

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until discovery is complete unreasonably delays a case and would create a second phase of

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discovery. The Court concludes that Berkley was not diligent, and that this is dispositive.

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Berkley has failed to demonstrate good cause to modify the case schedule.
IV.

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CONCLUSION

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Having reviewed the relevant pleadings and the remainder of the record, the Court

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hereby finds and ORDERS that Defendant Berkley’s Motion for Leave to File Cross-Claim

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(Dkt. #73) is DENIED.
DATED this 12th day of September 2018.

A

RICARDO S. MARTINEZ
CHIEF UNITED STATES DISTRICT JUDGE

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