Opinion
96 Civ. 4062 (JFK)
August 16, 2001
RIKER, DANZIG, SCHERER, HYLAND PERRETTI LLP, Morristown, New Jersey, Of Counsel: Shawn L. Kelly, Esq., Michael R. O'Donnell, Esq., Thomas J. Perry, Esq., for Plaintiff.
DAVIS, CEDILLO MENDOZA, INC., San Antonio, Texas, Of Counsel: Ricardo G. Cedillo, Esq., Jason R. Cliffe, Esq., for Defendant.
OPINION and ORDER
Before the Court is the Plaintiff American Centennial Insurance Company's ("ACIC") motion to amend its complaint for a third time pursuant to Fed.R.Civ.P. 15(a). The Defendant, Aseguradora Interacciones, S.A., Grupo Financiero Interacciones, S.A. ("Interacciones"), opposes the motion. For the reasons that follow in this Opinion and Order, ACIC's motion to amend is granted.
BACKGROUND
This case arises out of a complex reinsurance transaction in which Seguros La Republica ("SLR"), a Mexican corporation that was Interacciones' predecessor-in-interest, issued a series of reinsurance contracts to ACIC, a Delaware corporation. Jurisdiction in this case is premised on diversity of citizenship pursuant to 28 U.S.C. § 1332. The Court will only set forth those facts that are relevant to the present motion, as the background to this case has been discussed in previous decisions in this case. See, e.g., American Centennial Ins. Co. v. Aseguradora Interacciones. S.A.. Grupo Financiero Interacciones, S.A., No. 96 Civ. 4062, 2000 WL 1425078 (S.D.N Y Sept. 28, 2000); id. 1997 WL 742530 (S.D.N.Y. Dec. 1, 1997).
ACIC filed its original complaint against Interacciones on May 30, 1996, asserting claims for breach of contract, declaratory judgment, account stated, and monies due and owing in connection with thirty-four facultative reinsurance certificates (the "Original Certificates"). ACIC sought to recover $4,034,633.08 in damages, plus interest, under that complaint. However, ACIC stated in that complaint that the damage amount would "continue to increase as ACIC pays additional losses and expenses to, or on behalf of, its insureds. . . ." Perry Cert. Ex. B at ¶ 11.
The Court shall refer to the Perry Certification dated December 27, 2000 as the "Perry Cert." The Court will refer to the second Perry Certification, dated February 20, 2001, as the "Perry Reply Cert."
ACIC first amended its complaint in September 1996, adding the same claims as in the original complaint but this time in connection with a 1978 reinsurance treaty. ACIC sought an additional $3,144,507.97 in damages under those added claims. Like the original complaint, ACIC's amended complaint stated that the damages attributable to the facultative certificates would increase as ACIC continued to pay or incur additional losses from the underlying insurance policies. See Perry Cert. Ex. C at ¶ 15.
ACIC amended its complaint for a second time on May 20, 1998 with Interacciones' consent. This second amendment added claims of unjust enrichment and restitution in connection with the premiums that ACIC paid to Interacciones under the Original Certificates and the 1978 reinsurance treaty.
ACIC now seeks to amend its complaint for a third time. This new amendment would add claims against Interacciones in connection with eight additional facultative reinsurance certificates ("Additional Certificates"). All eight of the Additional Certificates were issued within the same time period as the Original Certificates. See Perry Cert. Ex. A (Ex. A); Fuller Cert. Exs. A, B, C. ACIC incurred losses on three of the Additional Certificates before even filing its original complaint, and incurred its losses on the other five Additional Certificates by April 1997. See Fuller Cert. ¶¶ 3-4, Exs. B, D.
The Court shall refer to the Fuller Certification dated December 27, 2000 as the "Fuller Cert."
ACIC first notified Interacciones of its desire to add claims under the Additional Certificates some fifteen months later, by a letter dated August 24, 1998. See Perry Cert. Ex. E. Interacciones refused to consent to the amendment. After further correspondence, ACIC filed a motion to amend the complaint in that fashion on December 16, 1998. See id. ¶ 13.
While that motion was pending before this Court, ACIC requested the Court's permission to move to compel Interacciones to post security pursuant to New York Ins. L. § 1213. This Court directed that the motion to amend be withdrawn, with ACIC's consent, until after resolution of the motion to compel Interacciones' compliance with New York Ins. L. § 1213. See id. Ex. K. The Court stated that "[th]e withdrawal shall not in any way prejudice ACIC at a later date. . . ." Id.
The Court ultimately ordered Interacciones to post security in the amount of $7.5 million by December 22, 2000 in order to avoid default.See id. Ex. L. Interacciones failed to do so. ACIC subsequently requested that the Court hold the default in abeyance so that it could file the present motion.
DISCUSSION
A court, in its discretion, may permit a party to amend its pleading pursuant to Fed.R.Civ.P. 15. See Zahra v. Town of Southold, 48 F.3d 674, 685 (2d Cir. 1995). A court should freely permit such amendments "when justice so requires." See Rachman Bag Co. v. Liberty Mutual Insurance Co., 46 F.3d 230 (2d Cir. 1995). However, a court may properly refuse permission when an amendment is the result of undue delay, when it would prejudice the opposing party, or when it would be futile. See id.; Tokio Marine Fire Ins. Co. v. Employers Ins. of Wasau, 786 F.2d 101, 103 (2d Cir. 1986).
Interacciones argues that this Court should deny ACIC's motion to amend the complaint for any one of the following three reasons: (1) it is the result of undue delay; (2) it is prejudicial to Interacciones due to the extensive discovery it will require; and (3) it is futile because it divests this Court of subject-matter jurisdiction in this case. The Court will address these contentions in that order.
I Undue Delay
Interacciones states that it will be prejudiced by ACIC's undue delay in asserting these new claims. Those claims all arose over one year before August 24, 1998, the date upon which ACIC first notified Interacciones of its desire to add those claims. The claims from three out of the eight Additional Certificates arose two and one-half years before that date, even before ACIC filed its original complaint. Interacciones argues that this Court should deny ACIC's motion on these grounds. See Ansam Assocs., Inc. v. Cola Petroleum, Ltd., 760 F.2d 442, 446 (2d Cir. 1985); Evans v. Syracuse City Sch. Dist., 704 F.2d 44, 46-48 (2d. Cir. 1983)
This Court would be more inclined to agree with Interacciones if ACIC had originally sought this amendment after the close of discovery. InAnsam Associates, for example, the plaintiff sought, without success, to amend the complaint after discovery had completed and after the defendant had moved for summary judgment. See 760 F.2d at 446. In another case raised by Interacciones, Evans, the defendant sought, unsuccessfully, to amend its answer six days before trial. See 704 F.2d at 46.
In the present case, ACIC first notified Interacciones of its intention to add the claims at issue three months before the close of discovery. No adjudication of Interacciones' rights was delayed by either the original motion to amend or the current motion. There have been no trials or summary-judgment motions in this case, nor are there likely to be any. As a result, the Court finds no prejudice to Interacciones on grounds of undue delay.
II Extensive Discovery
Interacciones states that it will be prejudiced by ACIC's assertion of these new claims because of the extensive discovery that it will have to conduct at this late stage in the case. Interacciones states that it will have to investigate (1) the existence and terms of one of the reinsurance contracts involved, (2) the evidence of ACIC's payments to its insureds, and (3) the possible defenses to the proposed claims.
This Court need not blind itself to the likelihood that Interacciones will default in this case regardless of the outcome of this motion. It has already defaulted in a related case before this Court, British International Insurance Co. v. Seguros La Republica, S.A., for failure to post security in compliance with N.Y. Ins. L. § 1213. See 212 F.3d 138 (2d Cir. 2000) (reversing this Court in part on other grounds).
Interacciones has also failed to post security in this case, despite this Court's order of November 13, 2000 directing it to do so to avoid a default. The Court therefore finds that Interacciones will not be prejudiced by any additional discovery because there will not likely be much additional discovery.
III Subject-Matter Jurisdiction
Interacciones argues that the proposed amendment in this case will divest this Court of subject-matter jurisdiction. The Court's subject-matter jurisdiction was originally based on the diversity of citizenship between ACIC, a Delaware corporation, and Interacciones, an alien corporation. ACIC has since transferred its interest in the certificates at issue to the British International Insurance Co. ("BIIC"), which, like Interacciones, is an alien corporation.
As this Court has ruled previously, subject-matter jurisdiction is determined by the facts as they existed at the time of the complaint, and thus is unaffected by subsequent transfers of interest. See American Centennial Ins. Co., 1997 WL 742530 at **4-6 (citing Freeport-McMoran, Inc. v. K.N. Energy, Inc., 498 U.S. 426, 427 (1991)). A partial amendment of a complaint also does not affect subject-matter jurisdiction. See New Bank of New England v. Triteck Communications, Inc., 143 F.R.D. 13, 16 (D. Mass. 1992).
Where an amended complaint asserts a different action, however, a court should reassess its subject-matter jurisdiction on the basis of the amended complaint. See id. at 17. In New Bank of New England, a magistrate court dismissed an amended complaint in a loan dispute between a bank and a limited partnership for lack of subject-matter jurisdiction. Id. at 14-15. In addition to the loan agreement, the bank had entered into a pledge agreement with the shareholders of the corporation that served as the limited partnership's general partner.Id. at 15. Under that agreement, the shareholders pledged their shares to the bank as security for the loan. Id. at 15.
After the partnership defaulted on the loan, the bank demanded that the shareholders register their shares in the general partner to the bank's nominee. Id. The bank filed suit for declaratory and injunctive relief to enforce the pledge agreement, as well as for damages for breach of that agreement. Id.
The shareholders subsequently registered their shares to the bank's nominee, but not before amending the partnership agreement to substitute a new corporation as general partner. Id. With the shares now rendered worthless, the bank amended its complaint to allege a breach of the pledge agreement due to the formation and substitution of the new general partner. Id. The magistrate court held that the amended complaint was essentially a new action seeking different relief for a different injury, and thus reassessed its subject-matter jurisdiction over the case. Id. at 17-18.
Unlike New Bank of New England, the proposed amendment in this case does not replace the current action with an entirely new action. The amendment involves the same claims as have already been raised but this time in connection with the Additional Certificates. The eight Additional Certificates are similar in form to the thirty-four Original Certificates. They were issued between the same reinsurer and reinsured, SLR and ACIC, and they were issued in the same time period as the others. ACIC seeks only to add these eight certificates to this action, not to substitute them for the others as a new action. Under these circumstances, the Court sees no need to reassess its subject-matter jurisdiction in this case.
CONCLUSION
The Court grants the Plaintiff ACIC's motion to amend its complaint pursuant to Fed.R.Civ. p. 15(a). ACIC must file and serve its Third Amended Complaint by September 14, 2001. This will be the fourth complaint in this action, the Court anticipates that it will be the last.
SO ORDERED.