Citynet, LLC v. Frontier West Virginia, Inc., et al.

Filing 146

MEMORANDUM OPINION AND ORDER granting the Frontier Defendants' 120 MOTION for leave to amend their answer to plaintiff's amended Qui Tam complaint; directing that defendants' motion for leave to file first amended answer and affirmative defenses is granted. Signed by Judge John T. Copenhaver, Jr. on 10/23/2018. (cc: counsel of record; any unrepresented parties) (taq)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF WEST VIRGINIA
AT CHARLESTON

CITYNET, LLC, on behalf of
the United States of America,
Plaintiff/Relator,
v.

Civil Action No. 2:14-cv-15947

FRONTIER WEST VIRGINIA INC.,
a West Virginia Corporation,
and KENNETH ARNDT, individually,
and DANA WALDO, individually,
and MARK McKENZIE, individually,
and JIMMY GIANATO, individually,
and GALE GIVEN, individually,
Defendants.

MEMORANDUM OPINION AND ORDER

Pending is defendant Frontier West Virginia Inc.’s
motion for leave to amend their answer to plaintiff's amended
Qui Tam complaint in order to “add a fourteenth affirmative
defense: ‘Citynet’s claims for relief are barred because Citynet
has failed to name or join an indispensable party or parties to
the present action, including but not limited to the State of
West Virginia.’” (Memo. in Support of Mot., ECF # 121, at 2),
filed June 11, 2018.

Plaintiff filed a response in opposition

on June 25, 2018, to which the Frontier defendants replied on
July 2, 2018.

I.

Background

The facts underlying this action are fully set forth
in a memorandum opinion and order granting in part and denying
in part the two motions to dismiss filed by the Frontier
defendants (Frontier West Virginia, Inc., Kenneth Arndt, Dana
Waldo, and Mark McKenzie) and the state employee defendants
(Kelly Goes, Jimmy Gianato, and Gale Given)1.

See Citynet, LLC

on behalf of United States v. Frontier W. Virginia Inc., No. CV
2:14-15947, 2018 WL 1582527 (S.D.W. Va. Mar. 30, 2018).

On May

11, 2018, the court entered a scheduling order pursuant to a
scheduling conference held the same day.

(ECF # 111).

The

scheduling order set June 11, 2018 as the deadline for amending
the pleadings or joining parties.

II.

Governing Standard

Federal Rule of Civil Procedure 15(a)(2) provides
pertinently as follows: "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."
Fed. R. Civ. P. 15(a)(2) (emphasis added).

1

Ordinarily, leave

Kelly Goes has been dismissed, and the two remaining state
employees have appealed this decision. The case has been stayed
as to them, pending the conclusion of their interlocutory
appeal. (ECF # 112).
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should be given unless “amendment would be prejudicial to the
opposing party, there has been bad faith on the part of the
moving party, or the amendment would have been futile.”

Laber

v. Harvey, 438 F.3d 404, 426 (4th Cir. 2006) (en banc) (quoting
Johnson v. Oroweat Foods Co., 785 F.2d 503, 509 (4th Cir.
1986)); see also Foman v. Davis, 371 U.S. 178, 182 (1962).
Indeed, “a lack of prejudice would alone ordinarily warrant
granting leave to amend[.

M]ere delay absent any resulting

prejudice or evidence of dilatoriness [is] not sufficient
justification for denial.”

Ward Elecs. Serv., Inc. v. First

Commercial Bank, 819 F.2d 496, 497 (4th Cir. 1987) (citing
Foman, and Davis v. Piper Aircraft Corp., 615 F. 2d 606, 613
(4th Cir. 1980)).

III.

Analysis

As noted, on June 11, 2018, the Frontier defendants
moved for leave to amend their answer to include as an
affirmative defense the failure to join an indispensable party.
This motion was filed on the deadline for amending the pleadings
or joining parties.
Plaintiff presents two arguments for why the court
should not grant the motion: the request was untimely and the
amendment would be futile.
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Disposing of the first argument, the court sees no
reason why the request should be deemed untimely.

The motion

was filed within the deadline for amending the pleadings and
there is no prejudicial undue delay.

Typically, undue delay is

found when a party seeks leave to amend following the close of
discovery.

See e.g., Simmons v. Justice, 196 F.R.D. 296, 297

(W.D.N.C. 2000) (“In this case, the ‘undue delay’ is apparent:
the moving defendants waited nearly five months, until discovery
closed and the last day for filing dispositive motions[.]”), and
Remington Arms Co. v. Modern Muzzleloading, Inc., No. 2:97-CV00660, 1998 WL 1040949, at *2 (M.D.N.C. Dec. 17, 1998) (“While
cognizant of the fact that leave to amend ordinarily is to be
liberally granted, amendments of pleadings are particularly
inappropriate, absent exceptional circumstances, once discovery
has closed.”)

Here, discovery is not scheduled to close until

March 29, 2019; there is thus no apparent undue delay that would
prejudice Citynet.
Turning to the crux of Citynet’s argument in
opposition, the court considers whether the amendment would be
futile.

“Leave to amend should be denied on the ground of

futility when the proposed amendment is clearly insufficient or
frivolous on its face.” Friend v. Remac Am., Inc., 924 F. Supp.
2d 692, 696 (N.D.W. Va. 2013)(citing Johnson v. Oroweat Foods
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Co., 785 F.2d 503, 510 (4th Cir.1986)).

A finding of futility

is essentially a finding that the amendment would necessarily
fail as a matter of law.

See e.g., Univalor Tr., SA v. Columbia

Petroleum, LLC, 315 F.R.D. 374, 379 (S.D. Ala. 2016)(“a finding
of futility is, in effect, a legal conclusion that the proposed
defense [or claim] would necessarily fail.”)(quoting Bartronics,
Inc. v. Power–One, Inc., 245 F.R.D. 532, 534-535
(S.D.Ala.2007)(emphasis in original)).
An amendment fails as a matter of law “if the proposed
amended complaint fails to satisfy the requirements of the
federal rules.”

U.S. ex rel. Wilson v. Kellogg Brown & Root,

Inc., 525 F.3d 370, 376 (4th Cir. 2008) (quoting United States
ex rel. Fowler v. Caremark RX, LLC, 496 F.3d 730, 740 (7th
Cir.2007)).

The relevant federal rules for defenses are Rule

8(c) and the corresponding Rule 12(f), providing pertinently:
“The court may strike from a pleading an insufficient defense or
any redundant, immaterial, impertinent, or scandalous matter.”
Fed. R. Civ Pro. 12(f).

At this stage, the court only

determines whether the defense is “contextually comprehensible.”
See Odyssey Imaging, LLC v. Cardiology Assocs. of Johnston, LLC,
752 F. Supp. 2d 721, 726 (W.D. Va. 2010)(finding that the
stringent Iqbal and Twombly standards do not apply to a motion
to strike a defense under Rule 12(f): “the primary purpose of
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Rule 8(c) is to ensure that the plaintiff has adequate notice
that a defense will be raised at trial or in a subsequent
dispositive motion, and not to ‘show’ the court or the plaintiff
that the defendant is entitled to the defense.”).
Frontier seeks to add the affirmative defense that the
State of West Virginia is a necessary and indispensable party
such that, under Fed. R. Civ. Pro. 19(a)-(b), the action should
not proceed in their absence.

The parties disagree both as to

the facts surrounding any involvement by the State of West
Virginia, as well as the applicable law to determine whether the
state is an indispensable party.

(See Memo. in Opposition, ECF

# 124, at 2-3, and Reply Brief, ECF # 125, at 6-10).

Frontier

claims that West Virginia is an indispensable party because the
State of West Virginia has an interest in the Broadband
Technology Opportunities Program grant, the complaint alleges
fraud by State of West Virginia employees in applying for the
grant, and the pending administrative proceeding against the
State of West Virginia regarding the grant may subject Frontier
to double or inconsistent obligations if the State of West
Virginia cannot be joined.
121, at 2-4).

(Memo. in Support of Mot., ECF #

Citynet, on the other hand, contends that the

complaint does not implicate the interests of West Virginia and
that the court lacks jurisdiction over any claims against West
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Virginia pursuant to sovereign immunity, thereby precluding them
from being joined in this action.

(Memo. in Opposition, ECF #

124, at 2-3).
The court finds that the proposed defense is at least
contextually comprehensible.

Rule 19(b) pertinently states: “If

a person who is required to be joined if feasible cannot be
joined, the court must determine whether, in equity and good
conscience, the action should proceed among the existing parties
or should be dismissed.”

The crux of Citynet’s futility

argument is that the State of West Virginia cannot be joined
because it is immune to suit, yet Frontier’s defense does not
dispute this possibility.

Instead, Frontier claims that in the

event the State of West Virginia cannot be joined because of its
sovereign immunity, the case should be dismissed pursuant to
Rule 19(b).

(Reply Brief ECF #125, at 6-9).

This defense is

not on its face clearly insufficient or frivolous.

Accordingly,

the motion cannot be denied as futile.
Seeing no indication of prejudice to the plaintiff,
the motion is granted.

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IV.

Conclusion

For the reasons discussed above, it is ORDERED that
defendants’ motion for leave to file first amended answer and
affirmative defenses be, and it hereby is, granted.
The Clerk is directed to transmit copies of this
written opinion and order to all counsel of record and any
unrepresented parties.
ENTER: October 23, 2018

John T. Copenhaver, Jr.
United States District Judge

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