-DLB Abarca, et. al. vs. Franklin County Water District, et.al., No. 1:2007cv00388 - Document 1442 (E.D. Cal. 2011)
Court Description: ORDER GRANTING Plaintiff's Motion to Amend Eight Amended Complaint 1371 , signed by Judge Oliver W. Wanger on 8/10/2011. (Kusamura, W)
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1 2 3 4 5 UNITED STATES DISTRICT COURT 6 FOR THE EASTERN DISTRICT OF CALIFORNIA 7 8 9 ABARCA, RAUL VALENCIA, et al., 1:07-cv-0388 OWW DLB Plaintiffs, 10 ORDER GRANTING PLAINTIFFS MOTION TO AMEND EIGHT AMENDED COMPLAINT (DOC. 1371) 11 v. 12 MERK & CO., INC., et al., 13 Defendants. 14 15 I. INTRODUCTION. 16 Pursuant to the discussions at the hearing on July 11, 2011, 17 18 Plaintiffs move for leave to amend the current, operative 19 complaint, the Eighth Amended Complaint (“Complaint”) to allege 20 specific claims against Defendants Merk & Co., Inc. (“Merk”), 21 Amsted Industries, Inc. (“Amsted”) and Baltimore Aircoil Company 22 (“BAC”), based upon their alleged vicarious and direct liability 23 24 for the actions and activities at the former BAC-Pritchard, Inc. facility (the “Site”). Plaintiffs have identified each change to 25 26 27 28 the existing allegations of the Complaint, as well as the substance of new claims sought to be added to the Complaint. // 1 1 2 II. FACTUAL BACKGROUND A. 3 4 5 6 Background. Plaintiffs allege exposure to chemicals and other substances as a result of environmental releases related to wood treating activities at the Site. Plaintiffs have amended their complaint several times for various reasons. The Complaint names Merk, 7 8 9 Amsted, BAC, and Track Four as Defendants affiliated with the Site. It is disputed whether, to what extent, and at when 10 Defendants, Merk, Amsted and BAC owned, directed actions, 11 remediated, and/or operated the Site. 12 13 14 15 16 17 18 Corporate liability and/or responsibility for causing releases at the Site has been at issue since the inception of this action. Some discovery was conducted on the issue which was largely curbed when Defendants filed a Cottel motion in March of 2009 and shifted the focus of discovery to the scientific evidence concerning exposure issues. A discovery stay then went 19 into effect around August of 2009 which discontinued all 20 discovery regarding non-exposure issues. 21 22 23 24 25 26 27 28 B. Plaintiffs Amendments. Plaintiffs have added the following statement to identify Defendants as follows: 10. Defendant MERCK & CO., INC., (“MERCK”) is a New Jersey corporation authorized to and doing business in the State of California, County of Merced. From 1970 to 1985, MERCK owned 100% of the issued outstanding shares of common stock of defendant Baltimore Aircoil, Inc. (“BAC”). BACPritchard, Inc. was a wholly-owned subsidiary of BAC from 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 its incorporation in September of 1975 until its dissolution in October of 1993. At all times relevant to this Complaint, MERCK and BAC exercised dominance and control over all the activities of BAC-Pritchard, Inc. Further, BAC-Pritchard, Inc. acted as the agent and/or joint venturer and/or alter ego of MERCK and BAC during all times relevant to this complaint. Further, at all times relevant to this Complaint, MERCK and BAC had knowledge of and ratified the operations, conduct and activities of BAC-Pritchard, Inc. Liability under each claim against this entity as hereinafter alleged, is sought based upon the independent conduct of MERCK, as well as the vicarious liability of MERCK and BAC with regard to the operations, activities and conduct of BAC-Pritchard, Inc.” 11. Defendant Amsted Industries, Inc. (“AMSTED”) is an Illinois corporation authorized to and doing business in the State of California, County of Merced. From 1985 to the present, defendant Baltimore Aircoil, Inc. (“BAC”) has been a wholly-owned subsidiary corporation of AMSTED. BAC-Pritchard, Inc. was a wholly-owned subsidiary of BAC from its incorporation in September of 1975 until its dissolution in October of 1993. At all times relevant to this Complaint, AMSTED and BAC exercised dominance and control over all the activities at BAC-Pritchard, Inc. Further, AMSTED acted as the agent and/or joint venture and/or alter ego of MERCK and BAC during all times relevant to this complaint. Further, at all times relevant to this Complaint, AMSTED and BAC had knowledge of and ratified the operations, conduct and activities of BAC-Pritchard, Inc. Liability under each claim against this entity as hereinafter alleged, is sought based upon the independent conduct of AMSTED, as well as the vicarious liability of AMSTED and BAC with regard to the operations, activities and conduct of BAC-Pritchard, Inc.” 12. Defendant Baltimore Aircoil Company, Inc. (“BAC”) is an Illinois corporation authorized to and doing business in the State of California, County of Merced. From 1970 to 1985, MERCK owned 100% of the issued outstanding shares of common stock of defendant Baltimore Aircoil, Inc. (“BAC”). BACPritchard, Inc. was a wholly-owned subsidiary of BAC from its incorporation in September of 1975 until its dissolution in October of 1993. From 1985 to the present, defendant Baltimore Aircoil, Inc. (“BAC”) has been a wholly-owned subsidiary of AMSTED. At all times relevant to this Complaint, MERCK, AMSTED and BAC exercised dominance and control over all the activities at BAC-Pritchard, Inc. 3 1 6 Further, AMSTED and MERCK acted as the agent and/or joint venturer and/or alter ego of MERCK and BAC during all times relevant to this complaint. Further, at all times relevant to this Complaint, MERCK, AMSTED and BAC had knowledge of and ratified the operations, conduct and activities of BACPritchard, Inc. Liability under each claim against this entity as hereinafter alleged, is sought based upon the independent conduct of BAC, as well as the vicarious liability of BAC with regard to the operations, activities and conduct of BAC-Pritchard, Inc. 7 In those claims in which Merk, Amsted and BAC have been 2 3 4 5 8 named, Plaintiffs now identify Defendants as follows: 9 14 MERCK, individually, and by and through its wholly-owned subsidiaries, BAC, and BAC s wholly-owned subsidiary BACPritchard, Inc., AMSTED, individually, and by and through its wholly-owned subsidiary BAC and BAC s wholly-owned subsidiary BAC-Pritchard, Inc., and BAC, individually, and by and through its wholly-owned subsidiary BAC-Pritchard, Inc. and DOES 51 - 100, and each of them, through their employees, agents including their wholly-owned subsidiaries BAC and BAC-Pritchard, Inc. 15 Plaintiffs now identify BAC-Pritchard, Inc., as a member of 10 11 12 13 16 17 the alleged conspiracy in Plaintiffs Sixteenth Claim for Civil Conspiracy. Plaintiffs have added claims for Principal/Agent 18 19 20 21 Liability; Joint Venture Liability and Alter Ego Liability. The facts supporting each of these claims are specifically alleged within the proposed amendments. 22 23 III. LAW AND ANALYSIS. A. Standards of Fed. R. Civ. Pro. Rule 15 And 16. 24 25 Once a pretrial scheduling order pursuant to Rule 16 has 26 been entered, the standards of Rule 16 rather than Rule 15 govern 27 amendment of the pleadings. See Johnson v. Mammoth Recreations, 28 4 1 Inc. 975 F.2d 604, 607-08 (9th Cir. 1992); Eckert Cold Storage, 2 Inc. v. Behl, 943 F. Supp. 1230, 1232-33 (E.D. Cal. 1996). The 3 4 good cause requirement of Rule 16 primarily considers the diligence of the party seeking the amendment. The pretrial 5 6 7 8 9 scheduling order can only be modified “if it cannot reasonably be met despite the diligence of the party seeking the extension.” Mammoth Recreations, 975 F.2d at 609. After the moving party has demonstrated diligence under Rule 10 16 the standard under Rule 15 is applied to determine whether 11 amendment is proper. See Mammoth Recreations, 975 F.2d at 608; 12 13 14 15 16 17 Eckert Cold Storage, 943 F.Supp. at 1232 n. 3. The Ninth Circuit has instructed that the policy favoring amendments “is to be applied with extreme liberality.” Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir.1990). A court should consider the following four factors in 18 determining whether to grant leave to amend: (1) undue delay, (2) 19 bad faith, (3) futility of amendment, and (4) prejudice to the 20 21 opposing party. United States v. Pend Oreille Public Utility Dist. No. 1., 926 F.2d 1502, 1511 (9th Cir.1991). Delay alone is 22 23 24 not sufficient grounds for denying leave to amend. Id. It must be accompanied by one of the other three factors; prejudice to the 25 opposing party is the most important consideration. Eminence 26 Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir.2003) 27 (“Prejudice is the „touchstone of the inquiry under [R]ule 15(a) 28 5 1 ”) (citing Lone Star Ladies Inv. Club v. Schlotzsky's Inc., 238 2 F.3d 363, 368 (5th Cir.2001)). In the absence of prejudice or a 3 4 strong showing of any of the remaining factors, there is a presumption under Fed R. Civ. P. 15(a) in favor of granting leave 5 6 7 to amend. Id. “„Where there is a lack of prejudice to the opposing party and the amended complaint is obviously not 8 frivolous, or made as a dilatory maneuver in bad faith, it is an 9 abuse of discretion to deny leave to amend.” Pend Oreille, 926 10 F.2d at 1511–1512 (citing Howey v. United States, 481 F.2d 1187, 11 1190–1191 (9th Cir.1973)). 12 13 14 15 The non-moving party bears the burden of showing why leave to amend should not be granted. Genetech, Inc. v. Abbott Labs., 127 F.R.D. 529, 530–31 (N.D.Cal.1989). Id. 16 1. 17 Neither party addresses the good cause standard of Rule 16. 18 19 20 21 Rule 16: Good Cause. The relevant facts are as follows: The Phase 1 Final Pretrial Order pertains only to Phase 1 of this multi-phase action. The Phase 1 Pretrial Order focused on general causation, i.e., 22 contaminates of concern “reach[ing] any location where plaintiffs 23 could have been exposed to them, and if so, when such 24 contaminants arrived, how such contaminants arrived at the 25 location, how long they were present, and at what levels they 26 27 28 were present.” (Doc. 540 at 1.) Discovery in Phase 1 was limited to “the issues relevant to exposure” including: 6 1 2 3 4 (b) BAC Site operations and history relevant to identification of the presence, amount and concentration of contaminants at the BAC Site and in the environment. (Phase 1 Pretrial Order at 2:14-16). Significant confusion arose regarding the exact evidence to 5 6 7 be presented at trial. The parties and the Court were not in unison about whether evidence of corporate liability – e.g., 8 theories of vicarious liability, principal/agency, piercing the 9 corporate veil, and the like – would be tried in Phase 1 or 10 corporate responsibility for exposure – e.g., a basic jury 11 decision regarding who owned and/or operated the Site during the 12 13 14 15 16 relevant time period. Defendants argue they understood that the Phase 1 jury would be asked to identify the entities that caused the release of contaminants at the BAC Site and assign legal responsibility. 17 Defendants filed a trial brief, which they believe was “clearly 18 framed . . . in accordance with the [Order],” that “contain[s] a 19 detailed discussion of the relationships among Merk, Amsted, 20 21 Baltimore Aircoil, and the various facility owners and operators [and] discusse[s] controlling California case law.” 22 23 24 The Court understood, as Defendants point out, that Phase 1 would not “assign legal responsibility,” but would include “who 25 owned, who operated [the Site], what was done through the period 26 that the lawsuit encompasses.” 27 Rough Transcript at 42:5-9.) 28 (Lewis Decl., Ex. 1, Feb. 1, 2011 7 1 2 3 4 Plaintiffs acknowledge that corporate liability and/or exposure responsibility was an issue for one of the phases at trial and at certain times Plaintiffs represented that they would be able to present sufficient evidence on the subject during 5 6 7 Phase 1. Yet once Phase 1 began, Plaintiffs had not completed discovery on the issue and did not present a case. (Doc. 1371-1, 8 MTA at 5:26-27.) Plaintiffs argue that discovery was not complete 9 because Defendants filed their Cottel motion on March 23, 2009 10 which wholly shifted the focus of discovery to the complex and 11 consuming medical and scientific evidence. 12 13 14 followed by a stay of discovery in or around August of 2009 which discontinued discovery on corporate liability issues. During discussion on jury instructions after Phase 1 15 16 The Cottel motion was evidence closed, the Court determined that, due to confusion 17 about the specifics of corporate liability/responsibility 18 evidence to be presented in combination with the discovery stay 19 and Cottel motion, insufficient evidence was presented for a jury 20 21 determination on the subject at that time. U.S. v. Dang, 488 F.3d 1135, 1143 (9th Cir. 2007) (“the district court is given broad 22 23 24 discretion in supervising the pretrial phase of litigation.”); and see Fed. R. Civ. Pro. 42(b). In light of the above, 25 Plaintiffs were diligent in complying with the Phase 1 Pretrial 26 Order. 27 28 B. Rule 15: Undue Delay And Prejudice. 8 1 2 3 4 Once the requisite showing is made under Rule 16, the inquiry turns to Rule 15. Defendants argue that (1) Plaintiffs have unduly delayed in requesting leave to amend to add their corporate liability claims and (2) allowing Plaintiffs to amend 5 6 7 8 9 10 will cause undue delay of trial, both of which amount to prejudice to Defendants. 1. Undue Delay in Amending. Defendants argue that Plaintiffs have unduly delayed in filing for leave to amend. They contend that the stay on 11 12 13 discovery does not excuse a failure to amend the Complaint to allege the proper claims. Defendants pointed out at the August 14 1, 2011 hearing that in their answer to the second amended 15 complaint in October of 2007, they alleged that they were not 16 successors in any of the entities Plaintiffs had named. 17 of 2008, Defendants stated, Plaintiffs counsel took a number of 18 19 20 21 In April depositions to lay the ground work that Merck and Amsted were directly responsible for the claims regarding the Site. In June of 2008, Plaintiffs counsel learned that BAC-Prichard was a 22 dissolved corporation. 23 the discovery process and amending the Complaint several times 24 for other reasons, Plaintiffs only now request leave to add their 25 corporate liability claims. 26 27 28 Defendants contend that despite beginning Plaintiffs agree that some discovery has been conducted on this issue. They rejoin, however, that they were in the process 9 1 of discovering facts related to the ownership and operation of 2 the Site when the Cottel motion was filed and shifted the focus 3 4 of discovery and Plaintiffs resources to the scientific evidence of the case. This was followed by the stay on discovery, 5 6 7 8 9 including discovery on corporate liability, which resulted in a loss of focus on the liability issues and caused delay in requesting leave to amend. The nature of Plaintiffs assertions and counter-assertions 10 were made as far back as October of 2007 and Plaintiffs have had 11 many opportunities to amend the Complaint. 12 13 14 15 16 17 18 19 20 21 acknowledged. Plaintiffs delay is However, the fact that Plaintiff could have moved to amend at an earlier time does not by itself constitute an adequate basis for denying leave to amend. Owens v. Kaiser Foundation Health Plan, Inc., 244 F.3d 708, 712-13 (9th Cir. 2001). 2. Undue Delay of Trial. Defendants assert that allowing amendment would delay trial and require additional discovery which is unduly prejudicial to 22 Defendants, citing M/V American Queen v. San Diego Marine Const. 23 Corp., 708 F.2d 1483, 1492 (9th Cir. 1983); Acri v. International 24 Ass n of Machinists & Aerospace Workers, 781 F.d 1393, 1398 (9th 25 Cir. 1986); and Kaplan v. Rose, 49 F.3d 1363, 1370 (9th Cir. 26 27 28 1994). Defendants cited cases are distinguishable. 10 Acri found no 1 abuse of discretion in denying leave to amend where the 2 plaintiffs' attorney admitted that plaintiffs' delay in bringing 3 4 the new cause of action was a tactical choice in that he felt the causes of action already stated were sufficient, and the new 5 6 7 8 claim would necessitate further discovery. 781 F.d at 1398. No such admission was given in this case. Kaplan upheld denial of leave to amend where the parties had 9 “engaged in voluminous discovery. . . trial was only two months 10 away, and discovery was completed.” 11 added). 12 13 14 15 16 49 F.3d at 1370 (emphasis Here, while much discovery has been conducted, it is not complete on the issue of corporate liability due to the discovery stay on non-exposure issues. M/V American Queen found that the trial court properly exercised its discretion in refusing to allow amendment of the 17 complaint where there was delay in moving to amend of one and a 18 half years after the case was filed; new allegations would 19 totally alter the basis of the action, in that they covered 20 21 different acts, employees and time periods necessitating additional discovery; and motion for summary judgment was pending 22 23 24 for possible disposition of case. The only similar fact here is delay in requesting leave to 25 amend. 26 the action. 27 around October of 2007 when Defendants filed an answer to 28 The new allegations will not “totally alter” the basis of The corporate liability issues came into focus 11 1 Plaintiffs second amended complaint. 2 have already begun discovery on the issue and all parties 3 4 Plaintiffs and Defendants acknowledge that corporate liability is an issue for trial. Defendants state that they prepared for Phase 1 with corporate 5 6 7 liability in mind. (See Doc. 1406 at 4:15-17.) Defendants cannot assert that adding these claims totally alters the action. 8 Finally, while completion of discovery is needed, any prejudice 9 can be avoided though a limited and focused discovery plan that 10 is not duplicative. 11 12 Plaintiffs motion for leave to amend the Complaint is GRANTED. 13 14 15 16 17 18 19 20 21 IV. CONCLUSION. For the reasons stated: 1. Plaintiffs motion for leave to amend is GRANTED. 2. Discovery shall be re-opened to allow Plaintiffs to conduct discovery on the issue of corporate liability. Re-opening of discovery on this issue is reciprocal for all parties. 22 Plaintiffs shall submit an order in conformity with this 23 decision within five (5) calendar days following electronic 24 service of this order. 25 26 27 28 SO ORDERED. DATED: August 10, 2011. ____/s/ Oliver W. Wanger__ _ Oliver W. Wanger United States District Judge 12
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