HSBC Bank USA, National Association v. Resh et al
Filing
215
MEMORANDUM OPINION AND ORDER granting Third Party Defendants Colliers International Valuation & Advisory Services, LLC and Philip Steffen's 193 MOTION to Amend Answers to Count I of the Third Party Complaint and directing the Clerk to file the amended answers of Colliers and Mr. Steffen. Signed by Judge Robert C. Chambers on 9/10/2013. (cc: attys; any unrepresented parties) (mkw)
IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF WEST VIRGINIA
HUNTINGTON DIVISION
HSBC BANK USA,
NATIONAL ASSOCIATION,
Plaintiff,
v.
CIVIL ACTION NO. 3:12-cv-00668
RON RESH and
VALERIE REYNOLDS-RESH,
Defendants; Counter Claimants;
and Third Party Plaintiffs,
v.
REALTY CONCEPTS, LTD; ANDREW
BROSNAC; COLLIERS INTERNATIONAL
VALUATION & ADVISORY SERVICES, LLC;
PHILIP STEFFEN; LAWYER’S TITLE
INSURANCE CORPORATION; and HELEN
SULLIVAN,
Third Party Defendants.
MEMORANDUM OPINION AND ORDER
Pending before the Court is a motion (ECF No. 193) by Third Party Defendants Colliers
International Valuation & Advisory Services, LLC (“Colliers”), and Philip Steffen1 to amend
their respective answers to the Third Party Complaint. For the reasons explained below, the
Court GRANTS the motion to amend.
I.
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Statement of Facts
Mr. Steffen was an employee of PGP Valuation, Inc., and is a currently employee of Colliers.
ECF No. 193 ¶ 4.
HSBC Bank USA, National Association (“HSBC Bank”) commenced the instant
litigation by filing a Complaint against Third Party Plaintiffs Ron Resh and Valerie ReynoldsResh (“the Reshes”), seeking over $2.6 million in unpaid principal due on three promissory notes
executed by Third Party Plaintiffs, as well as interest, costs, fees, and expenses. The Reshes
executed the notes in order to purchase three commercial properties containing “Jiffy Lube”
franchises.
The Reshes subsequently filed an amended answer, affirmative defenses, and third party
complaint collectively as one document, alleging that property appraisals conducted before
purchase fraudulently over-valued the properties. ECF No. 20 (“Third Party Complaint”). This
Third Party Complaint asserts claims against Colliers and Mr. Steffen, in addition to other
parties. Colliers and Mr. Steffen filed a motion to dismiss the Third Party Complaint, ECF No.
37, which this Court granted in part, ECF No. 109. Colliers and Mr. Steffen thereafter filed
separate answers to the Third Party Complaint. ECF Nos. 122, 123.
Colliers and Mr. Steffen filed the pending motion to amend their answers on July 30,
2013, requesting leave to do so for the following reason:
[Colliers and Mr. Steffen move to amend] in order to assert the Affirmative
Defenses of accord and satisfaction, payment and release and to assert
Counterclaims against Ron Resh and Valarie Reynolds-Resh, individually and in
their capacities as Trustees, for breach of a settlement agreement (breach of
contract) and for breach of the duty of good faith and fair dealing implied in all
contracts.
ECF No. 193 at 2 (hereinafter “Mot.”). In support of their motion, Colliers and Mr. Steffen state
that in December 2010, the Reshes signed a contract with PGP Valuation, Inc., in which “the
Reshes released all of their claims, known or unknown, against PGP and its employees, officers,
successors and assigns, among others.” Mot. ¶ 1. This contact is included as an exhibit to the
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motion to amend. Settlement Agreement and Mutual Release, Dec. 2, 2010, Ex. A, ECF No. 193
(hereinafter “Release”). Colliers represents that it is a successor of PGP Valuation, Inc., Mot. ¶ 3,
and the Reshes do not dispute this assertion. Colliers and Mr. Steffen assert that they first learned
about the Release during discovery on or about June 18, 2013. Mot. ¶ 10. On June 19, 2013, they
notified the Reshes of its existence and asked the Reshes to dismiss claims asserted against
Colliers and Mr. Steffen based on the language of the Release. Mot. ¶¶ 10, 11. The Reshes
refused on July 8, 2013. Mot. ¶ 12. Colliers and Mr. Steffen then sought written consent to
amend on July 11, 2013, which the Reshes refused on July 26, 2013. Mot. ¶ 13. Colliers and Mr.
Steffen filed the pending motion to amend a few days later, on July 30, 2013.
The Reshes filed a response in opposition to the motion to amend, arguing that Colliers
and Mr. Steffen did not exercise diligence, that the amendment would cause prejudice, and that
the amendment would be futile. ECF No. 201 (hereinafter “Resp.”). Colliers and Mr. Steffen
filed a reply. ECF No. 207 (hereinafter “Reply”). The motion to amend is now ripe for
resolution.
II.
Standard of Review
Under Rule 15(a)(2) of the Federal Rules of Civil Procedure, after the time to amend as a
matter of course has expired, “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.”
Rule 16(b)(4) states that a scheduling order “may be modified only for good cause and with the
judge’s consent.” As this Court explained in Stewart v. Coyne Textile Services, “a motion to
amend the complaint, filed after the deadline established in the scheduling order, must satisfy the
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tests of both Rule 16(b) and Rule 15(a)” in order to be granted. 212 F.R.D. 494, 496 (S.D. W.
Va. 2003).
As the Supreme Court has explained in discussing Rule 15(a), “[i]n the absence of any
apparent or declared reason—such as 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 amendment,
etc.—the leave sought should, as the rules require, be ‘freely given.’” Foman v. Davis, 371 U.S.
178, 182 (1962). In contrast, Rule 16(b)’s “good cause” standard focuses on the diligence of the
moving party. Stewart, 212 F.R.D. at 496-97 (quoting Marcum v. Zimmer, 163 F.R.D. 250, 254
(S.D. W. Va. 1995) (quotation omitted)). Rule 16(b) provides a higher hurdle for movants, and
the Fourth Circuit affirms that this higher standard applies when the deadline to amend has
expired. Branch Banking & Trust Co. v. First Am. Title Ins. Co., No. 5:11-CV-00473, 2013 WL
85342, at *2 (S.D. W. Va. Jan. 7, 2013) (slip copy) (citing Nourison Rug Corp. v. Parvizian, 535
F.3d 295, 298 (4th Cir. 2008), among other cases). Again, “Rule 16(b)’s good cause standard
focuses on the timeliness of the amendment and the reasons for its tardy submission; the primary
consideration is the diligence of the moving party.” 2013 WL 85342, at *2 (quoting Montgomery
v. Anne Arundel Cnty., 182 Fed. App’x 156, 162 (4th Cir. 2006) (per curiam) (unpublished
decision)).
III.
Discussion
First, the Court clarifies that Rule 15(a)(2)’s standard and Rule 16(b)’s “good cause”
standard apply in the instant case. Colliers and Mr. Steffen suggest that amendment of their
answers would not constitute an amendment of the scheduling order—and therefore not trigger
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Rule 16—because “[t]he current scheduling order in effect does not contain any deadline for
amendment of pleadings.” Reply ¶ 8. An earlier scheduling order, however, did establish a
September 19, 2012, deadline for amending pleadings. ECF No. 21 ¶ 1. Subsequent amended
scheduling orders were filed after that deadline passed and so it was not necessary for those
orders to discuss a deadline for amendment. ECF Nos. 67, 176. Therefore, this Court believes the
sounder approach is to apply Rule 16(b)’s “good cause” standard here in addition to Rule
15(a)(2)’s standard.
This is the first amendment that Colliers and Mr. Steffen have sought. The Reshes argue
that Colliers and Mr. Steffen have not acted with due diligence in seeking amendment, faulting
Colliers and Mr. Steffen for not seeking amendment until July 30, 2013, over two and a half
years after the Release was signed in December 2010. However, Colliers and Mr. Steffen were
not parties to the Release and represent that they did not discover the Release until June 2013.
Furthermore, Colliers and Mr. Steffen outline the steps they promptly took after discovering the
Release to seek dismissal and amendment. The Reshes fault Colliers and Mr. Steffen for
providing no “explanation of the circumstances” in which they finally found the Release, Resp. ¶
9, suggesting that Colliers and Mr. Steffen should have been aware of the Release much sooner.
The Court, however, is satisfied that Colliers and Mr. Steffen acted in good faith and with due
diligence and sought amendment at the soonest opportunity possible,
Colliers and Mr. Steffen argue that no prejudice will result from the amendment because
discovery is set to continue until December 2013 and no parties to the Release have yet been
deposed. Additionally, they state that there will be no need to extend any deadlines in this matter.
The Reshes counter that they have already engaged in much discovery and served discovery
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related to Colliers and Mr. Steffen; also, some depositions have already been conducted.
Additionally, the Reshes argue that the Release involves new issues not previously covered in
this case.
In their response opposing amendment, the Reshes also cite at length from Georgia
Pacific Consumer Products, LP v. Von Drehle Corporation, 710 F.3d 527, 536 (4th Cir. 2013).
In that case, the defendant von Drehle Corporation moved to amend its answer in November
2010 to assert the affirmative defenses of issue and claim preclusion, based on a judgment
entered in a separate case in July 2009. The district court denied the motion to amend as
untimely and because it would prejudice the nonmoving party. After a trial which resulted in a
verdict against von Drehle, von Drehle filed a motion again asking to be able to assert the
affirmative defenses of claim and issue preclusion. This time, the district court allowed von
Drehle to assert these affirmative defenses; it then vacated the trial judgment and entered
judgment as a matter of law for von Drehle because of this preclusion. The Fourth Circuit found
that the district court’s decision to vacate was in error partly because “von Drehle waived the
preclusion defenses by failing to assert them in a timely manner.” Id. at 529.
This Court finds that Georgia Pacific is distinguishable from the instant case. First, von
Drehle’s counsel was present at the trial which resulted in the July 2009 judgment; therefore, von
Drehl had knowledge of that July 2009 judgment when it happened, and yet for whatever reason
did not file a motion to amend based on that judgment until over a year later. In contrast, the
Release in this case was signed in December 2010, but Colliers and Mr. Steffen were not aware
of it until June 2013; upon discovering the Release, Colliers and Mr. Steffen immediately sought
voluntary dismissal and leave to amend. Therefore, it appears that Colliers and Mr. Steffen
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sought to raise these new claims as soon as possible. Compare with Georgia Pac., 710 F.3d at
534 (noting that “von Drehle did not raise its preclusion defenses ‘at the first reasonable
opportunity,’ [Aetna Cas. & Sur. Co. v. Gen. Dynamics Corp., 968 F.2d 707, 711 (8th Cir.
1992)], much less at the ‘earliest possible moment,’ [Evans v. Syracuse City Sch. Dist., 704 F.2d
44, 47 (2d Cir. 1983)]; [Home Depot, Inc. v. Guste, 773 F.2d 616, 620 n.4 (5th Cir. 1985)].”).
Second, discovery had proceeded to a much more significant degree in Georgia Pacific
when the motion to amend was made compared to the instant case. The first motion to amend in
Georgia Pacific was made well over a year after the district court decided cross-motions for
summary judgment, at a time when the “matter [was] finally ready for trial.” Id. at 531 (quoting
the district court’s March 2011 order denying the first motion to amend). The post-trial motion to
amend clearly occurred after discovery was long completed. Here, however, discovery will
continue for many more months. The parties will have ample opportunity to engage in discovery
to cover issues pertaining to the Release. Therefore, the Court does not find that the pending
motion to amend will cause undue prejudice.
The Reshes also suggest that amendment is futile because the Release is limited in scope
to the Ohio litigation from which it stemmed. Resp. ¶ 34. However, a full reading of the Release
suggests that the agreement was not so limited:
Plaintiffs . . . do hereby unconditionally release . . . PGP, [and] its . . . successors
and assigns . . . of any and all claims, demands, actions, causes of action, suits,
costs, damages, lawsuits, compensation, penalties, liabilities and/or obligations of
any kind or nature whatsoever, whether now known or not known or hereinafter
discovered, which the Plaintiff Releasors have, could have had or may have
against any or all of the PGP Releasees, from the beginning of time to the date
hereof.”).
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Release ¶ 3. This district has held that a proposed amendment is futile if it is “unable to survive a
motion for summary judgment.” Adkins v. Labor Ready, Inc., 205 F.R.D. 460, 462 (S.D. W. Va.
2001) (citations omitted). Another district in this circuit has held that an amendment is futile if it
does not survive Rule 12(b)(6), which is a less onerous standard. Schieszler v. Ferrum Coll., 233
F. Supp. 2d 796, 805 (W.D. Va. 2002). Regardless, this Court finds that the claims based on the
proposed amendment would, at this stage, survive a motion for summary judgment because
Colliers and Mr. Steffen have created an issue of material fact concerning whether the Release
prohibits the Reshes’s claims against Colliers and Mr. Steffen.
Based on the discussion above, the Court finds that the interests of justice favor
amendment in this case, and that there is good cause for amendment.2 Amendment will not cause
undue prejudice to the Reshes, and the amendment is not futile. Colliers and Mr. Steffen have
acted with due diligence in seeking amendment and have not acted in bad faith.
Conclusion
For the reasons stated above, the motion to amend (ECF No. 193) is GRANTED. The
Court accordingly DIRECTS the Clerk to file the amended answers of Colliers and Mr. Steffen.
The Court DIRECTS the Clerk to send a copy of this written Opinion and Order to
counsel of record and any unrepresented parties.
ENTER:
2
September 10, 2013
Because the Court is resolving the motion on the grounds outlined above, it need not discuss
what effect—if any—the reservation of the right to assert additional affirmative defenses has on
the ability to amend the answers.
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