Opinion
Order Filed: January 22, 2013
For Interstate Packaging Company, Plaintiff: Douglas Ray Pierce, Patrick W. Ogilvy, Richard S. Busch, King & Ballow, Nashville, TN.
For Century Indemnity Company, Ace Fire Underwriters Insurance Company, Ace Property & Casualty Insurance Company, Defendants: George Andrew Rowlett, Howell & Fisher, Nashville, TN; Michael R. Orlando, Cohn, Baughman & Martin, Chicago, IL.
For United States Fire Insurance Company, Defendant: Garry K. Grooms, LEAD ATTORNEY, Stites & Harbison, PLLC (Nashville), Nashville, TN; Brian S. Martin, Thompson Coe, Houston, TX; Jamie R. Carsey, Thompson, Coe, Cousins & Irons, LLP, Houston, TX.
For American Casualty Company of Reading, PA., Continental Casualty Company, Defendants: Barry L. Howard, Howard, Tate, Sowell, Wilson, Leathers & Johnson, PLLC, Nashville, TN; Charles T. Blair, Michael R. Kenneth, Troutman Sanders LLP (DC), Washington, DC.
For The American Insurance Company, Defendant: Janice McGuckin-Greenberg, Rivkin Radler, LLP, Uniondale, NY; John Roy Tarpley, Mary Beth Haltom, Lewis, King, Krieg & Waldrop, P.C. (Nashville), Nashville, TN.
For Century Indemnity Company, Ace Fire Underwriters Insurance Company, Ace Property & Casualty Insurance Company, Cross Plaintiffs: George Andrew Rowlett, Howell & Fisher, Nashville, TN; Michael R. Orlando, Cohn, Baughman & Martin, Chicago, IL.
For Ace Property & Casualty Insurance Company, Century Indemnity Company, Ace Fire Underwriters Insurance Company, Cross Defendants: George Andrew Rowlett, Howell & Fisher, Nashville, TN; Michael R. Orlando, Cohn, Baughman & Martin, Chicago, IL.
For United States Fire Insurance Company, Cross Defendant: Garry K. Grooms, LEAD ATTORNEY, Stites & Harbison, PLLC (Nashville), Nashville, TN; Brian S. Martin, Thompson Coe, Houston, TX; Brian S. Martin, Thompson, Coe, Cousins & Irons, LLP, Houston, TX.
For Continental Casualty Company, Cross Defendant: Barry L. Howard, Howard, Tate, Sowell, Wilson, Leathers & Johnson, PLLC, Nashville, TN; Charles T. Blair, Troutman Sanders LLP (DC), Washington, DC.
For The American Insurance Company, Cross Defendant: Janice McGuckin-Greenberg, Rivkin Radler, LLP, Uniondale, NY; John Roy Tarpley, Mary Beth Haltom, Lewis, King, Krieg & Waldrop, P.C. (Nashville), Nashville, TN.
For American Casualty Company of Reading, PA., Cross Defendant: Barry L. Howard, Howard, Tate, Sowell, Wilson, Leathers & Johnson, PLLC, Nashville, TN; Charles T. Blair, Michael R. Kenneth, Troutman Sanders LLP (DC), Washington, DC.
For Century Indemnity Company, Ace Fire Underwriters Insurance Company, Ace Property & Casualty Insurance Company, Counter Plaintiffs: George Andrew Rowlett, Howell & Fisher, Nashville, TN; Michael R. Orlando, Cohn, Baughman & Martin, Chicago, IL.
For Interstate Packaging Company, Counter Defendant: Douglas Ray Pierce, Patrick W. Ogilvy, Richard S. Busch, King & Ballow, Nashville, TN.
For The American Insurance Company, Counter Plaintiff: Janice McGuckin-Greenberg, Rivkin Radler, LLP, Uniondale, NY; John Roy Tarpley, Mary Beth Haltom, Lewis, King, Krieg & Waldrop, P.C. (Nashville), Nashville, TN.
JOHN T. NIXON, SENIOR UNITED STATES DISTRICT JUDGE. Magistrate Judge Knowles.
OPINION
JOHN T. NIXON, SENIOR UNITED STATES DISTRICT JUDGE.
JURY DEMAND
ORDER
Pending before the Court is Plaintiff Interstate Packaging Company's Motion to File Amended and Supplemental Complaint (" Motion" or " Motion to Amend" ) (Doc. No. 104), filed with a Memorandum in Support (Doc. No. 105). On January 22, 2013, Magistrate Judge Knowles issued a Report and Recommendation (" R& R" ), recommending that Plaintiff's Motion be denied. (Doc. No. 159.) Plaintiff filed Objections to the R& R (Doc. No. 165), to which several Defendants filed Responses (Doc. Nos. 168; 170; 172; 173.) For the reasons below, the Court ADOPTS the R& R and DENIES Plaintiff's Motion.
I. Background
All facts in this section are undisputed and are taken from Plaintiff's Response to certain Defendants' Statement of Undisputed Material Facts (Doc. No. 79), unless otherwise noted.
The NRDC Plaintiffs subsequently settled their claims, and the NRDC lawsuit was dismissed in November 2011.
1. Underlying Litigation
Interstate Packaging Company (" Interstate" or " Plaintiff" ) manufactures packaging, labels, bags, and pouches for customers in the food and beverage, health and beauty, textile, household product, and pet product industries in Tennessee. (Doc. No. 1-1 at 3.) On October 28, 2009, Natural Resources Defense Council, Inc., Beatrice Holt, and Sheila Holt-Orsted (" NRDC Plaintiffs" ) filed suit against Interstate in this District (" NRDC Lawsuit" ). The Complaint in the NRDC Lawsuit (" NRDC Complaint" ) alleged that Interstate disposed of waste containing trichloroethylene (" TCE" ) and perchloroethylene (" PCE" ) at a landfill owned and operated by the City of Dickson, Tennessee, in the 1970s and 1980s.
The NRDC Plaintiffs claimed that the TCE and PCE contaminated the Holts' drinking well and the subsurface of their property. They further claimed that members of the Holt family had experienced serious health problems that they believed were related to their long-term exposure to the contaminated water supply. The NRDC Plaintiffs sought an order requiring various defendants, including Interstate, to investigate the extent of contamination, remediate the present contamination, and abate future contamination. The NRDC Plaintiffs subsequently settled their claims, and the NRDC Lawsuit was dismissed in November 2011.
2. Insurance Policies
The Defendants are insurers who--at various points relevant to the underlying litigation--insured Plaintiff. Plaintiff's insurance policies with Defendants each contained an identical exclusion to coverage for injury or property damage caused by the insured's polluting activities. Specifically, the policies exclude from coverage:
bodily injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, tonic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.
(Doc. No. 1-1 at 4.) Defendants declined to defend or indemnify Plaintiff against the NRDC Lawsuit, on the basis that the NRDC Complaint alleged polluting activities that were excluded from coverage, and did not fall within the " sudden and accidental" exception to the exclusion. ( See, e.g., Doc. No. 1-5 at 637.) Defendants' denial of coverage precipitated the instant case.
B. Procedural History
Plaintiff filed the instant action in the Chancery Court of Dickson County on May 18, 2011, seeking a declaratory judgment that coverage for the NRDC Lawsuit exists under the policies. (Doc. No. 1-1.) Plaintiffs allege generally that Defendants wrongfully denied insurance coverage for the damages alleged in the NRDC Lawsuit and that Defendants are liable for the policy limits, along with damages for their failure to defend and indemnify. ( Id. ) Defendants removed the action to this Court on June 17, 2011, on the grounds of diversity jurisdiction. (Doc. No. 1.)
Defendants Great American Insurance Company (" GAIC" ), and Great American Insurance Company of New York (" GANY" ), filed a Motion for Summary Judgment on December 5, 2011 (Doc. No. 65), which the Court granted on March 14, 2012. (Doc. No. 88.) The Court held that the exclusions contained in Plaintiff's insurance policies applied to bar coverage for the claims as alleged in the NRDC Lawsuit. ( Id. at 10.) The Court therefore found that neither policy gave rise to a duty to defend or to indemnify. ( Id. at 10-11.) The Court held, in the alternative, that it could not find a duty to indemnify when no " true facts" had been determined in the NRDC Lawsuit prior to the suit's settlement. ( Id. at 12.) Finally, the Court held that even if the policies gave rise to a duty to defend to indemnify, GAIC was entitled to summary judgment because Plaintiff did not create a genuine dispute of fact as to whether GAIC, rather than GANY, issued either policy. ( Id. )
Less than three weeks after the Court's summary judgment Order was entered, Defendants American Casualty Company (" ACC" ) and Continental Casualty Company (" CCC" ) filed a Motion for Summary Judgment on the same grounds as the earlier motion. (Doc. No. 94.) Two days later, on April 11, 2012, Plaintiff filed a Motion for Reconsideration of the Court's Order on Summary Judgment or in the Alternative, for Certification of State Law Questions to the Tennessee Supreme Court. (Doc. No. 99.) On April 20, 2012, Plaintiff filed the instant Motion to Amend (Doc. No. 104), with a Memorandum in Support (Doc. No. 105). Defendants filed Responses in Opposition to the Motion to Amend on May 4, 2012 (Doc. Nos. 112-115), to which Plaintiff filed a Reply on May 11, 2012 (Doc. No. 122). Magistrate Judge Knowles issued the R& R on January 22, 2013 (Doc. No. 159), to which Plaintiff filed Objections on February 5, 2013 (Doc. No. 164). Defendants filed Responses to the Objections on February 19, 2013 (Doc. Nos. 168; 170; 172; 173), to which Plaintiff filed a Reply on February 28, 2013. (Doc. No. 177-1).
II. Judge Knowles's Report and Recommendation
In his R& R, Judge Knowles explains that Plaintiff seeks to amend and supplement the original Complaint--in relevant part--in order to " [indicate] that [Plaintiff] is pursuing alternative theories of relief concerning the coverage as it applies to the claims made in the underlying case." (Doc. No. 159 at 4 (citing Doc. No. 104 at 1-2).) The R& R explains that Plaintiff hopes to pursue " alternative theories of relief relevant to" this Court's prior Order granting summary judgment to Defendants GANY and GAIC, and relevant to the pending Motion for Reconsideration and the remaining Defendants' motions for summary judgment. ( Id. (citing Doc. No. 105 at 3).)
Judge Knowles has recommended denying Plaintiff's Motion to Amend for several reasons. First, Judge Knowles found the Motion untimely. (Doc. No. 159 at 5-9.) The Scheduling Order in this case set a deadline of March 14, 2012, for motions to amend the pleadings. (Doc. No. 73 at 9.) Plaintiff's Motion to Amend (Doc. No. 104) was not filed until April 21, 2012, more than one month after the deadline passed, and only after the Court granted summary judgment to two Defendants. Judge Knowles rejected Plaintiff's argument that the Scheduling Order required only good cause for an amendment after the deadline, rather than a showing of good cause for filing the Motion to Amend after the deadline. (Doc. No. 159 at 6-8.)
Second, Judge Knowles found that Plaintiff did not show " good cause" for modification of the Scheduling Order, as required under Federal Rule of Civil Procedure 16. ( Id. at 8-10.) Specifically, Judge Knowles rejected Plaintiff's argument that its prior counsel was " misled" by Defendants into mistakenly believing that this case turned on the " sudden and accidental" exception to the pollution exclusion. ( Id. at 9.) Judge Knowles reasoned that " Plaintiff was obviously fully aware of the provisions of the insurance policies at the time it filed the Complaint," and that " Plaintiff obviously could have stated in its Complaint whatever claims it wished to make based upon the policy language." ( Id. ) Finally, Judge Knowles concluded that the reasons proffered by Plaintiff for seeking to amend the Complaint were unavailing, and that ultimately the Motion to Amend was " an improper attempt under the guise of an 'amendment' to evade the Court's summary judgment ruling on the central issues in this case." ( Id. at 10 (quoting Doc. No. 112 at 2.)
III. Legal Standards
Federal Rule of Civil Procedure 16(b)(4) permits modification of scheduling orders " for good cause and with consent of the judge." The Sixth Circuit prescribes two relevant considerations for a determination of good cause. First, the movant must establish that the existing schedule order " cannot reasonably be met despite the diligence" of that party. Leary v. Daeschner, 349 F.3d 888, 906 (6th Cir. 2003) (citation omitted). Second, the court must consider " whether the opposing party will suffer prejudice by virtue of the amendment." Id.
If a movant shows good cause for a modification to the scheduling order, the Court then must determine whether an amendment should be permitted under Rule 15. See Fed.R.Civ.P. 15. Rule 15(a)(2) provides that " [t]he court should freely give leave [to amend] when justice so requires." Again, the Sixth Circuit suggests factors for the Court to consider when entertaining a motion to amend, including: 1) " the delay in filing, 2) the lack of notice to the opposing party, 3) bad faith by the moving party, 4) repeated failure to cure deficiencies by the previous amendments, 5) undue prejudice to the opposing party, and 6) futility of the amendment." Miller v. Admin. Office of the Courts, 448 F.3d 887, 898 (6th Cir. 2006) (citation omitted).
Under Rule 72(b) and Local Rule 72.03(b), after considering a party's written objections to a report and recommendation, the district judge shall make a de novo determination of any part of the report and recommendation that was properly objected to. Fed.R.Civ.P. 72(b)(3). The District Judge " may accept, reject, or modify, in whole or in part, the recommended disposition" of the magistrate judge. Id.
IV. Plaintiff's Objections to the R& R
The Court proceeds by describing Plaintiff's Objections to the R& R and Defendants' various Responses, before analyzing the R& R and Plaintiff's Motion to Amend.
A. Plaintiff's Objection for Failure to Find Good Cause for Modification
Plaintiff first objects to Judge Knowles's finding that Plaintiff did not show good cause for modification of the Scheduling Order to permit an untimely Motion to Amend. (Doc. No. 165 at 5.) Plaintiff argues that " the proposed amendments do not contain new causes of action, but are simply intended to clarify the basis for [Plaintiff's] existing causes of action in light of the Court's [previous summary judgment order.]" ( Id. ) Plaintiff proposes amending the Complaint to plead that this case does not depend just on whether there was a " sudden and accidental" discharge of pollutants, but also whether the NRDC's allegation of " disposal" is actually excluded from coverage under the exclusion for " discharge, dispersal, release or escape." ( Id. at 6.)
With respect to its delay in raising this theory, Plaintiff argues that the Defendants " misled" Plaintiff and its former counsel into focusing on the " sudden and accidental" exception, rather than the issue of coverage for " disposal," and further that this theory did not come to Plaintiff's attention until after the Court entered summary judgment in favor GANY and GAIC. ( Id. at 7.) Plaintiff asserts that " while Defendants now claim that Interstate Packaging has no excuse for not having presented its argument that the pollution exclusion does not apply, they fail to acknowledge that it was Defendants who first claimed that the exclusion did apply," and further that " prior counsel simply missed the issue due to the Defendants' representations in their letters denying coverage." ( Id. at 10-11.) Plaintiff goes so far as to claim that " Defendants are seeking to profit from their own misleading communications to their insured." ( Id. at 10.)
Plaintiff also contends that it exercised diligence and did not delay in seeking modification of the Scheduling Order. ( Id. at 9.) Plaintiff points out that its Motion to Amend was filed several months prior to the deadlines for discovery and dispositive motions in the case, leaving " an abundance of time" for the parties to conduct discovery and prepare dispositive motions. ( Id. at 10.) Plaintiff asserts that it has been proactive in attempting to remedy the mistake by obtaining new counsel and filing the Motion to Amend within approximately one month of the Court's summary judgment order and the deadline for amending the pleadings. ( Id. )
B. Plaintiff's Objection for Failure to Consider Lack of Prejudice to Defendants
Plaintiff next contends that Judge Knowles erred by not considering whether Defendants would actually be prejudiced by allowing Plaintiff to amend the Complaint and, not surprisingly, offers several reasons why Defendants would not be prejudiced. ( Id. at 12.) First, Plaintiff asserts that it is not adding any new claims and that its proposed amendments are meritorious. ( Id. at 13.) Plaintiff argues that the amended complaint would simply " require [Defendants] to address one additional legal argument in their summary judgment motions," reiterating that it merely " seeks to assert the alternative legal theory that the pollution exclusion does not apply to allegations of 'disposal' at all." ( Id. at 13-14.) Plaintiff argues that the proposed amendment would require no additional discovery, because whether " disposal" implicates the pollution exclusion is a purely legal issue. ( Id. at 14.) Next, Plaintiff argues that Defendants will not be prejudiced by the proposed amendments because, under the current Scheduling Order, there is still sufficient time to conduct discovery and prepare dispositive motions. ( Id. at 15.) Plaintiff argues that because Defendants have " resisted" additional discovery efforts and filed a motion to stay discovery, that they will not be prejudiced by the potential of duplicative discovery efforts. ( Id. )
Currently, the discovery deadline in this case is April 15, 2013, and the dispositive motions deadline is September 1, 2013.
Even if the Court were to accept Plaintiff's reading of the Case Management Order, Plaintiff has failed to show good cause for filing the amendment itself.
Finally, Plaintiff argues that Defendants have not been prejudiced with respect to their pending motions for summary judgment. ( Id. at 16-17.) Plaintiff asserts that the Sixth Circuit has never held that entry of summary judgment alone is a sufficient basis to deny an amendment. ( Id. at 17.) Plaintiff further argues that the pendency of its Motion for Reconsideration cuts in favor of allowing an amendment to the Complaint. ( Id. at 18.) Plaintiff's rationale appears to be that because the Court has not yet ruled on the Motion for Reconsideration, amending the Complaint to include theories presented in that motion would not prejudice Defendants. Finally, Plaintiff argues that this Court's grant of summary judgment to the GANY and GAIC was interlocutory and not a final judgment because of the presence of other Defendants, and that therefore the Court should be amenable to revising its earlier ruling. ( Id. at 19.)
Defendants have, however, already responded to the Motion for Reconsideration.
C. Plaintiff's Objection for Failure to Consider the Unique Circumstances of this Case
Finally, Plaintiff alleges that Judge Knowles erred by failing to consider the " circumstances of this case and the very limited nature of the amendment Interstate Packaging seeks to make." ( Id. at 21.) Plaintiff argues that under the Federal Rule of Civil Procedure 15(b)(1), parties should be granted latitude to amend the pleadings when doing so will aid in presenting the merits of the case and will not prejudice defendants. ( Id. at 22.) Plaintiff reasserts that it seeks only to alter its legal theory of recovery and asserts that Defendants have been unable to present " any case that has refused an amendment under circumstances such as those present in this case." ( Id. at 23.) Plaintiff concludes that if the Court denies the instant Motion, Plaintiff " will be denied the opportunity to fully present its claims on the merits, which is antithetical to the interests of justice." ( Id. at 25.)
V. Defendants' Responses to Plaintiff's Objections
Because several Defendants filed a Responses to Plaintiff's Objections (Doc. Nos. 168; 170; 172; 173), the Court will summarize them generally and collectively, but notes that each has been fully considered for purposes of deciding the instant Motion.
Defendants assert that Plaintiff's Objections raised for the first time the argument that Plaintiff's prior counsel missed crucial issues. (Doc. No. 168 at 2-3.) Defendants argue that this does not meet the " good cause" requirement for the untimely filing of the Motion to Amend, and further that this Court should not consider arguments not made before Judge Knowles. ( Id. ) Further, Defendants dispute Plaintiff's claim that Judge Knowles failed to consider the issue of prejudice to Defendants. ( Id. at 3.) Defendants specifically cite to the portion of the R& R in which Judge Knowles states: " Defendants have further shown that they will be prejudiced by such a modification [to the Scheduling Order]." (Doc. No. 159 at 10.) They further assert that the Court is not required to consider prejudice as a second prong of the Rule 16 analysis if Plaintiff first fails to meet the " good cause" requirement. (Doc. No. 168 at 8.)
The Response from Defendants Century Indemnity Company (" CIC" ) and ACE Fire Underwriters Insurance Company (" ACE" ) also challenges Plaintiff's assertion that it was misled by Defendants' letters denying coverage. (Doc. No. 173.) CIC and ACE cite the language of the letter sent to Plaintiff, which--in explaining the why the pollution exclusion applies--states in relevant part: " a review of the [NRDC] allegations demonstrate[s] that [Plaintiff] . . . routinely disposed of TCE and PCE . . . over a significant number of years. Nowhere in the allegations is there any reference to either a 'sudden' or 'accidental' discharge of contaminants." ( Id. at 5-6 (citing Doc. No. 1-5 at 637).) Thus, Defendants argue, Plaintiff was on notice that Defendants believed the " disposal" of contaminants triggered the exclusion and that the " sudden and accidental" exception did not apply. ( Id. )
Beyond those matters, Defendants largely reiterate and endorse the findings and conclusions of Judge Knowles. Defendants reiterate that the Motion to Amend was untimely under the Scheduling Order and that Plaintiff has not shown good cause for modifying the order. (Doc. No. 170 at 2.) Specifically, Defendants argue that Plaintiff's arguments regarding its prior counsel being " misled" and " missing issues" fall short of good cause because the theory has always been available to Plaintiff. ( See Id. at 6.) Instead, Defendants assert that Plaintiff is asking for nothing more than a " do over." ( Id. )
Finally, Defendants argue that allowing the amendment would result in " clear prejudice." (Doc. No. 170 at 2.) Defendants assert that they have " incurred substantial costs" in preparing motions directed at the original Complaint, and that if a new complaint was permitted, " Defendants will be forced to incur the additional costs of re-starting the entire summary judgment process." ( See Id. at 12.)
VI. Analysis
As an initial matter, the Court agrees entirely with Judge Knowles's determination that the " good cause" requirement from the Scheduling Order clearly refers to good cause for filing a motion to amend after the deadline, rather than good cause for the amendment itself. ( See Doc. No. 159 at 6-7; 73 at 9 (" The deadline for filing Motions to amend the pleadings shall be March 14, 2012, unless leave of Court is obtained for good cause shown." ).) Plaintiff's assertion to the contrary is curious. Certainly Judge Knowles is well-apprised of the meaning of provisions within his scheduling orders. Thus, the Court proceeds to analyze Plaintiff's untimely filing of the instant Motion to Amend under Rule 16, rather than the more permissive standard of Rule 15.
Before analyzing the case under Rule 16, the Court acknowledges disagreement among the parties about the significance of the prejudice element in Rule 16 analysis. Plaintiff asserts that Sixth Circuit case law, namely Leary, establishes a two-part analysis, in which the Court first determines whether good cause is shown for motion to amend, and then whether Defendants will be prejudiced by the amendment. (Doc. No. 165 at 7.) Defendants disagree, asserting that controlling precedent requires a showing of good cause by Plaintiff, regardless of whether defendant is prejudiced by the amendment. ( See, e.g., Doc. No. 170 at 6-7.) Instead, Defendants argue, prejudice " is merely a consideration that informs . . . the 'good cause' requirement" under Leary. ( Id. at 7 (quoting Korn v. Paul Revere Life Ins. Co., 382 F.Appx. 443, 449 (6th Cir. 2010).)
Rule 16 states, in relevant part, " [t]he district judge--or a magistrate judge when authorized by local rule--must issue a scheduling order . . . [t]he scheduling order must limit the time to join other parties, amend the pleadings, complete discovery, and file motions . . . ." Fed.R.Civ.P. 16(b). The Rule is designed to ensure that " at some point both the parties and the pleadings will be fixed." Fed.R.Civ.P. 16, 1983 advisory committee's notes. The Rule permits modification to the scheduling order " only for good cause and with the judge's consent." Fed.R.Civ.P. 16(b)(4). Further, a court may modify the scheduling order only if the deadlines " cannot reasonably be met despite the diligence of the party seeking the extension." Leary, 349 F.3d at 906 (citing Fed.R.Civ.P. 16, 1983 advisory committee's notes). The Sixth Circuit has linked these two requirements, stating that good cause is measured by the movant's diligence in attempting to meet the deadlines. Inge v. Rock Fin. Corp., 281 F.3d 613, 625 (6th Cir. 2002).
In addition, the Leary court concluded that " while prejudice to the defendant is not an express component of Rule 16, it is nonetheless a 'relevant consideration,'" so much so that it " is required" to be considered by a court in determining whether to permit a Rule 16 motion to amend. Leary, 349 F.3d at 906, 909. Later, in Korn, the Sixth Circuit appeared to clarify the role of the prejudice element in good cause analysis, holding that " prejudice . . . is merely a consideration that informs whether [a plaintiff] has satisfied the 'good cause' requirement." 382 F.Appx. at 450. Ultimately then, the Court believes Plaintiff must justify its failure to file a timely Motion to Amend, independent of the resultant prejudice--or lack thereof--to Defendants. In addition, however, the Court will consider any such prejudice in determining whether the amendment is warranted.
The Court finds that under Rule 16 and the Sixth Circuit's decision in Leary, Plaintiff has not shown good cause for modification of the Scheduling Order to permit its Motion to Amend. Plaintiff has not argued that it could not through reasonable diligence have previously raised its theory, but merely discusses why it did not. Plaintiff acknowledges that its proposed amendment is an effort to advance a different legal theory of recovery than was argued at the summary judgment stage. Plaintiff's only justification for the untimeliness of its motion is that its original counsel " missed" this new theory, because prior counsel was allegedly " misled" by Defendants into focusing solely on the " sudden and accidental" exception. The Court finds this argument simply unavailing.
Plaintiff is the master of the Complaint. Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987). As Judge Knowles pointed out, Plaintiff knew of Defendants' theories of defense upon the filing of GANY and GAIC's motion for summary judgment in December 2011. (Doc. No. 159 at 9-10.) Moreover, the issues of defense and indemnity ultimately turn on the allegations in the NRDC Complaint, and whether the allegations potentially fall within the pollution exclusion. See Travelers Indem. Co. of Am. v. Moore & Assocs. Inc., 216 S.W.3d 302, 305 (Tenn. 2007). The theory that NRDC Plaintiffs' allegation of " disposal" does not fall within the exclusion for " discharge, dispersal, release, or escape" is a theory that could have been developed by simply comparing the language of the exclusion to the NRDC Complaint, independent of any representations by Defendants. Therefore, that theory has been available to Plaintiff since the NRDC Plaintiffs filed their complaint in 2009.
Further, based in part on the language of the CIC and ACE letter denying coverage, the Court rejects Plaintiff's argument that its counsel was " misled" concerning the ultimate issue of the case. ( See Doc. 1-5 at 467.) It is not Defendants' responsibility to inform the opposition of promissing legal arguments. Moreover, there is simply nothing in the language of the letter that appears misleading, deceptive, or untoward. Instead, the letter appears to notify Plaintiff simply that--in the opinion of Defendants--the " disposal" of pollutants alleged by the NRDC Plaintiffs fell within the exclusion to coverage, but did not fall within the exception for " sudden and accidental" " discharge, dispersal, release or escape." Plaintiff's assertions to the contrary are without merit.
To the extent Plaintiff's new theory is viable--which the Court finds doubtful--it is perhaps unfortunate that Plaintiff's prior counsel did not raise it. However, the Court cannot conclude that this failure to raise the theory--or conscious choice not to raise it, as the case may have been--amounts to " good cause" for the purposes of amending the Scheduling Order under Rule 16. A scheduling order should be amended when a party " cannot meet the deadlines despite [its] diligence." Leary, 349 F.3d at 906. That standard is simply not satisfied here. It is not that Plaintiff could not have brought this theory before the deadline, it just did not, or chose not to, or in Plaintiff's words, " missed it." Only after this Court ruled that Plaintiff's alleged polluting activities were excluded from coverage did Plaintiff attempt to raise the new theory. That Plaintiff's new counsel would have litigated this case differently than prior counsel--in the Court's view and in the absence of any persuasive case law--does not constitute the " good cause" required to allow an untimely amendment and force defendants to relitigate the case. After all, as at least one Defendant pointed out, such a strategy could be pursued by any unsuccessful litigant.
Finding that Plaintiff has not shown good cause for untimely filing its instant Motion, the Court proceeds to consider prejudice as required under Leary. Here, the prejudice to Defendants, while perhaps not onerous, should not be minimized. Whereas the initial briefings focused on the issue of whether Plaintiff's polluting activities were " sudden and accidental," Defendants would be required under the proposed amended complaint to litigate whether the polluting activities were excluded at all. At a minimum, this would require further briefing. And although only two Defendants have obtained summary judgment at this point, several others have filed motions for summary judgment, presumably upon the same legal theories as prevailed in the first such motion. Changing the focus of the litigation from whether alleged polluting activities were sudden and accidental to whether the activities triggered the coverage exclusion at all is not an insignificant change.
Additionally, contrary to Defendants assertions, litigating the new theory would not necessarily be " purely legal." ( See Doc. No. 165 at 14.) If the Court found the language of the insurance contract was not plain and unambiguous, the parties would be required to present proof of their intent upon entering into the contract, potentially necessitating deposition testimony of witnesses and experts. See Kiser v. Wolfe, 353 S.W.3d 741, 747 (Tenn. 2011). The Court acknowledges Plaintiff's argument that the discovery deadline in the case has not lapsed, and agrees that this fact may mitigate the potential prejudice to Defendants from an amended complaint. However, allowing a shift in the focus of the litigation, after the point at which the pleadings were supposed to be fixed, necessarily requires additional expenditure of time and resources by Defendants. Thus, the Court finds that Defendants would be prejudiced by allowing Plaintiff to amend its Complaint.
VII. Conclusion
For the reasons above, the Court finds that Plaintiff has not shown good cause for amending the Scheduling Order to permit filing of a motion to amend its Complaint. Accordingly, the Court ADOPTS Judge Knowles's Report & Recommendation (Doc. No. 159), and DENIES Plaintiff's Motion to File Amended and Supplemental Complaint (Doc. No. 104).
It is so ORDERED.
JURY DEMAND
REPORT AND RECOMMENDATION
E. Clifton Knowles, United States Magistrate Judge.
This matter is before the Court upon Plaintiff's " Motion to File Amended and Supplemental Complaint." Docket No. 104. Plaintiff has filed a supporting Memorandum of Law (Docket No. 105) and a proposed " First Amended and Supplemental Complaint for Declaratory Judgment and for Damages" (Docket No. 104-1). Four Defendants, or sets of Defendants, have filed Responses in opposition to the Motion. Docket Nos. 112, 113, 114, 115. Plaintiff has filed a Reply to Defendants' Responses. Docket No. 122.
More than eight months after the above briefing was complete, Plaintiff filed a Motion for Leave to File a Supplemental Brief in Support of the instant Motion. Docket No. 146. That Motion for Leave has been denied in a separate Order (Docket No. 158), and the Court will decline to consider the proposed supplemental brief.
The background information regarding the instant action has been set forth in Judge Nixon's Order that granted Motions for Summary Judgment filed by two Defendants, Great American Insurance Company (" GAIC" ) and Great American Insurance Company of New York (formerly known as American National Fire Insurance Company) (" GANY" ). Docket No. 88. Briefly and generally, Plaintiff manufactures packaging, labels, bags, and pouches for customers in the food and beverage, health and beauty, textile, household product, and pet product industries in Tennessee. On October 28, 2009, several Plaintiffs, including Natural Resources Defense Counsel, Inc., filed suit against Plaintiff in this Court (" NRDC Lawsuit" ). The Complaint in the NRDC lawsuit alleged that Interstate had disposed of waste containing trichloroethylene and perchloroethylene at a landfill owned and operated by the City of Dickson, Tennessee, in the 1970's and 1980's. 1
Interstate filed the instant action in state court in May 2011 against nine insurance companies, seeking damages and a declaratory judgment that Defendants were obligated to defend Interstate in the NRDC lawsuit, and that Defendants " possessed coverage" for any loss incurred as a result of that lawsuit. Docket No. 1-1. The case was removed to this Court on June 17, 2011. Docket No. 1
In its Complaint, Plaintiff recognized that at least some (and perhaps all) of the insurance policies sued upon contained a coverage exclusion for the discharge of toxic chemicals, but that exclusion did not apply if the discharge was " sudden and accidental." The language of the GAIC policy, which is typical of the language of the other policies that Plaintiff quoted in its Complaint, provides an exclusion for which " this insurance shall not apply." Docket No. 1-1, p. 9. Thus, the GAIC policy contains an exclusion for:
bodily injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxins chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutant into or upon land, the atmosphere or any water course or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.
Id.
On December 5, 2011, GAIC and GANY filed a Motion for Summary Judgment, arguing that the damages sought in the NRDC lawsuit were excluded, because the discharge, dispersal, release, or escape of the contaminants or pollutants was not sudden and accidental. Docket No. 65. Plaintiff argued that GAIC and GANY were not entitled to summary judgment, stating, " The pollution exclusion does not apply because the actions of [Plaintiff] fall within the 'sudden and accidental' acts exception." Docket No. 86, p. 2. As discussed above, Judge Nixon granted that Motion in an Order entered March 14, 2012. Docket No. 88. Judge Nixon essentially determined in his summary judgment Order that GAIC and GANY had no duty to defend Interstate or to indemnify Interstate because the discharges, disposals, releases or escapes that were the subject of the NRDC lawsuit were not sudden or accidental.
Approximately two weeks after Judge Nixon's summary judgment Order was entered, Defendants American Casualty Company and Continental Casualty Company filed a Motion for Summary Judgment on the same grounds. Docket No. 94.
Approximately one month thereafter, on April 11, 2012, Plaintiff filed a " Motion for Reconsideration of the Court's Order on Summary Judgment [Doc. No. 88] or in the Alternatively, for Certification of State Law Questions to the Tennessee Supreme Court." Docket No. 99. That Motion is pending before Judge Nixon.
On April 20, 2012, Plaintiff filed the instant Motion to Amend. Docket No. 104. According to the instant Motion:
This proposed Amended and Supplemental Complaint supplements the original Complaint so that it reflects the settlement of the underlying lawsuit upon which this case is based. Further, the proposed Amended and Supplemental Complaint amends the original Complaint by doing the following: (1) deleting one named Defendant (Great American Insurance Company, incorrectly named as Great Western Insurance Company), (2) clarifying certain identifying information of the Defendants as provided in their responses to the original Complaint, and (3) indicating that Interstate Packaging is pursuing alternative theories of relief concerning the coverage as it applies to the claims made in the underlying case.
Docket No. 104, p. 1-2.
Neither the instant Motion nor the supporting Memorandum, however, specifically identifies what " alternative theories of relief" Plaintiff is pursuing. It does, however, state that Plaintiff:
Is pursuing alternative theories of relief concerning the coverage as it applies to the claims made in the underlying case, which theories of relief are relevant to the Great American Defendants' Motion for Summary Judgment, Interstate Packaging's Motion for Reconsideration of the Court's Order granting that Motion and CNA and Continental's Motion for Summary Judgment.
Docket No. 105, p. 3 (emphasis added).
The supporting Memorandum also states:
The proposed amendments do not contain new causes of actions, but are simply intended to clarify the basis for Interstate Packaging's existing causes of action in light of the Court's Order granting the Great American Defendants' Motion for Summary Judgment and CNA and Continental's Motion for Summary Judgment.
Id., p. 4 (emphasis added).
With virtually no explanation, Plaintiff avers that it " has not unduly delayed in seeking leave to amend its Complaint." Docket No. 105, p. 4. Plaintiff further avers that Defendants will not be unduly prejudiced if Plaintiff is permitted to amend its Complaint. Id. At the same time, however, the supporting Memorandum states " [Plaintiff's] Motion for Reconsideration is based in part on the alternative theories of relief [Plaintiff] seeks to introduce through its proposed Amended and Supplemental Complaint." Id., p. 6. Thus, it is beyond question that Plaintiff seeks to attack Judge Nixon's summary judgment Order, at least in part, by means of the instant Motion to Amend.
In their Responses to the instant Motion, Defendants first argue that the instant Motion is untimely under the Case Management Order, which established March 14, 2012, as the deadline for filing Motions to amend the pleadings. Docket No. 112, p. 3-6. The instant Motion was filed more than a month later, on April 20, 2012. Docket No. 105. Defendants argue that, under Rule 16(b), the Court can allow the amendment only if the moving party demonstrates " good cause." In fact, Rule 16(b)(4) provides, " A schedule [in a scheduling order] may be modified only for good cause and with a judge's consent." Good cause is measured by the movant's " diligence in attempting to meet the case management order's requirements." Leary v. Daeschner, 349 F.3d 888, 906 (6th Cir. 2003) (citation omitted). In order to show good cause, the movant must demonstrate that, despite its diligence, it could not meet the original deadline. Id. at 907. As the Leary Court stated, " Once the scheduling order's deadline passes, a plaintiff first must show good cause under Rule 16(b) for failure earlier to seek leave to amend before a court will consider whether amendment is proper under Rule 15(a)." Id. at 909 (citations omitted). The Rule is designed to ensure that " at some point both the parties and the pleadings will be fixed." Id. at 906 (quoting Advisory Committee Notes).
Defendants argue that Plaintiff has made no attempt to address the issue of good cause, and that the instant Motion must be denied. Defendants further argue that Plaintiff cannot show good cause because the proposed amendments to the Complaint are based on information that has been available to Plaintiff for months or even years. Docket No. 112, p. 5.
With regard to Plaintiff's proposed alternative theories, Defendants argue:
[Plaintiff's] alternative theory of relief, as set forth in its First Amended and Supplemental Complaint for Declaratory Judgment and for Damages [Doc. No. 104-1] is that the underlying " NRDC Plaintiffs did not allege that any disposal by Interstate at the Dickson County landfill constituted a discharge, dispersal, release or escape of any sort of irritant, contaminant or pollutant," the exact language of the pollution exclusion at issue. . . . In effect, Interstate's " new" theory is that this case is not about " pollution" as the allegations of the underlying NRDC Complaint only alleged there was a " disposal" of contaminants and not a " discharge, dispersal, release or escape" of contaminants at the Dickson County landfill -- so the pollution exclusion doesn't apply. Regardless of the merit of this argument, it was available to Interstate from the inception of this litigation -- so it cannot be the basis for allowing an untimely amendment.
Docket No. 114, p. 2-3 (emphasis added).
Finally, Defendants argue that all Defendants will be prejudiced if the Court allows the amendment. Four Defendants filed Motions for Summary Judgment prior to the filing of the instant Motion to Amend. Two of those Motions have already been granted, while the other two remain pending. It also appears that Judge Nixon's reasoning in his summary judgment Order is a basis for all remaining Defendants to be dismissed from this action.
In its Reply, Plaintiff contends that Rule 16 and its requirement of " good cause" is not applicable in the case at bar. Plaintiff argues in part:
Plaintiff's motion is not untimely as alleged by Defendants. For the most part, Defendants have relied upon the hyper-technical argument that the deadline set in the Case Management Order for freely allowing amendments has expired. . . . Rule 16 only comes into play when modification of a scheduling order is necessary in order to permit a proposed amendment to a pleading because the deadline has expired. . . . In such cases, the party seeking to amend must show " good cause" for modifying the scheduling order before a Court will consider the proposed amendment. . . . Here, as further set forth below, the Case Management Order permits amendments to pleadings after March 14, 2012, upon a showing of " good cause" for the amendment itself, not for a modification to the scheduling order . . . . . . .
Contrary to Defendants' contention, [Plaintiff] has not set forth the incorrect standard governing its Motion because the Case Management Order permits amendments to pleadings after March 14, 2012, where there is " good cause" for the amendment. . . . Rule 16, on the other hand, requires a showing of " good cause" for modifying the scheduling order to permit the amendment . . . .
Under the current Case Management Order, this Court can entertain motions to amend submitted after March 14, 2012, without the party further requesting a modification of the Order.
Docket No. 122, p. 2-3 (citations omitted) (italics in original).
With all due respect, it is Plaintiff which is relying upon a " hyper-technical argument," not Defendants. Defendants' arguments are quite simple. The Initial Case Management Order states in relevant part, " The deadline for filing Motions to amend the pleadings shall be March 14, 2012, unless leave of Court is obtained for good cause shown." Docket No. 73, p. 9. Plaintiff implies that the deadline set in the Case Management Order for " freely allowing amendments" has not expired. There is, however, no " deadline" in the Case Management Order for " freely allowing amendments." Instead, there is a " deadline" of March 14, 2012, " for filing Motions to amend the pleadings . . . ."
Plaintiff wishes to read the operative language of the Case Management Order to mean that the deadline for filing Motions to amend the pleadings is March 14, 2012, unless leave of Court for filing the amendment itself is obtained for good cause shown. The more logical reading of the language, however, is that the deadline for filing Motions to amend the pleadings is March 14, 2012, unless leave of Court for filing a Motion to Amend after March 14, 2012, is obtained for good cause shown.
Under Plaintiff's theory, the March 14, 2012, " deadline" is simply rendered inoperative, and any party can filed a Motion to Amend at any time (if they can show good cause for the filing of the amendment). This is certainly not what the Court intended when it entered the Case Management Order. Additionally, Fed.R.Civ.P. 16(b)(3)(A), which is headed in part " Required Contents," states in relevant part, " The scheduling order must limit the time to . . . amend the pleadings . . . ."
Moreover, " good cause" is a concept specifically referenced in Rule 16. The words " good cause," however, are nowhere to be found in Rule 15. Thus, it makes no sense to condition the allowance of an amendment upon a showing of good cause. It makes imminent sense, however, to condition a modification of the March 14, 2012, deadline for filing Motions to amend the pleadings on a showing of good cause. 2
While Plaintiff did not address the issue of good cause in its Motion or supporting Memorandum, it makes a belated attempt to do so in its Reply. Plaintiff argues in part as follows:
[I]f this Court were to determine [that the instant Motion] is not timely under the Case Management Order [Plaintiff] submits good cause exists to permit the proposed amendments . . . In this case, Defendants gladly accepted for many years [Plaintiff's] premium dollars for insurance. The purpose of insurances to insure against a loss. . . . Yet when faced with a valid claim each of Defendants offered a bogus excuse for refusing to provide the insurance coverage for which [Plaintiff] had paid: Specifically, they relied upon the pollution exclusion, which [Plaintiff] now asserts does not apply to this case. Because they all denied coverage based upon this exclusion, Defendants initially led [Plaintiff] to believe that the only issue in this case was whether the " sudden and accidental" exception to the exclusion applied to provide coverage. When Defendants now claim that [Plaintiff] has no excuse for not having presented in its argument that the pollution exclusion does not apply, they fail to acknowledge that it was Defendants who first claimed that the exclusion did apply. Therefore, Defendants are seeking to profit from their own misleading communications to their insured, Interstate Packaging.
Further, the need for the proposed amendments, which only refine [Plaintiff's] legal theories and do not add claims, became apparent after the Court granted the Great American Defendant's Motion for Summary Judgment on the basis of the pollution exclusion.
Docket No. 122, p. 4-5 (citations omitted).
Simply put, Plaintiff's arguments do not show good cause for modifying the scheduling order to permit the filing of the Amended Complaint. Plaintiff's claim that Defendants somehow misled it is not persuasive. Plaintiff was obviously fully aware of the provisions of the insurance policies at the time it filed the Complaint, which quotes a number of the insurance policies. Plaintiff obviously could have stated in its Complaint whatever claims it wished to make based upon the policy language.
Furthermore, Plaintiff certainly knew Defendants' position when GAIC and GANY filed their Motion for Summary Judgment on December 5, 2011. Plaintiff offers no explanation for why it did not assert its theory that there was a " disposal" of contaminants and not a " discharge, dispersal, release or escape" of contaminants in its Complaint or in its Response to the Motion for Summary Judgment.
It is obvious that Plaintiff was content with its original Complaint until Judge Nixon granted GAIC and GANY summary judgment. As discussed above, it appears that most or all of Defendants may be dismissed from this action on the same theory that there was no sudden and accidental discharge. The Court agrees with Defendants that the instant Motion " is an improper attempt under the guise of an 'amendment' to evade the Court's summary judgment ruling on central issues in this case." Docket No. 112, p. 2. But, Plaintiff is not entitled to a second bite at the apple.
Thus, the Court concludes that Plaintiff has not shown good cause for modifying the scheduling order to permit the filing of a Motion to Amend more than a month after the deadline set forth in the Case Management Order. Defendants have further shown that they will be prejudiced by such a modification.
For the foregoing reasons, Plaintiff's Motion to File Amended and Supplemental Complaint" (Docket No. 104) should be DENIED.
Under Rule 72(b) of the Federal Rules of Civil Procedure, any party has fourteen (14) days after service of this Report and Recommendation in which to file any written objections to this Recommendation with the District Court. Any party opposing said objections shall have fourteen (14) days after service of any objections filed to this Report in which to file any response to said objections. Failure to file specific objections within fourteen (14) days of service of this Report and Recommendation can constitute a waiver of further appeal of this Recommendation. See Thomas v. Arn, 474 U.S. 140, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985), reh'g denied, 474 U.S. 1111, 106 S.Ct. 899, 88 L.Ed.2d 933 (1986); 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72.