Misle v. Schnitzer Steel Industries, Inc. et al, No. 4:2015cv06031 - Document 75 (N.D. Cal. 2017)

Court Description: ORDER GRANTING, IN PART, AND DENYING, IN PART 62 Motion for Leave to File Amended Answer. Signed by Judge Jeffrey S. White on February 17, 2017. (jswlc3S, COURT STAFF) (Filed on 2/17/2017)
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Misle v. Schnitzer Steel Industries, Inc. et al Doc. 75 1 2 3 4 NOT FOR CITATION 5 UNITED STATES DISTRICT COURT 6 NORTHERN DISTRICT OF CALIFORNIA 7 8 Plaintiff, 9 10 United States District Court Northern District of California 11 Case No. 15-cv-06031-JSW HOWARD MISLE, ORDER GRANTING, IN PART, AND DENYING, IN PART, MOTION FOR LEAVE TO FILE AMENDED ANSWER TO COUNTERCLAIM v. SCHNITZER STEEL INDUSTRIES, INC., Re: Dkt. No. 62 Defendant. 12 13 14 Now before the Court for consideration is the motion for leave to file an amended answer 15 filed by Plaintiff Howard Misle (“Misle”), in which he seeks to amend his answer to Defendant 16 Schnitzer Steel Industries, Inc.’s (“SSI”) counterclaim. The Court has considered the parties’ 17 papers, relevant legal authority, the record in this case, and it has had the benefit of oral argument. 18 For the reasons set forth herein, the Court GRANTS, IN PART, AND DENIES, IN PART, 19 Misle’s motion. BACKGROUND 20 21 On November 19, 2015, Misle filed the Complaint in this action in the Superior Court of 22 the State of California, County of San Francisco. (Dkt. No. 1, Notice of Removal, Ex. A, 23 Complaint.) Misle asserted claims for breach of contract, declaratory relief, and conversion. On 24 December 23, 2015, SSI removed the case to this Court and asserted the Court has diversity 25 jurisdiction over the matter. (Notice of Removal, ¶¶ 4-9.) SSI filed its answer on December 30, 26 2015. (Dkt. No. 8.) 27 28 On April 15, 2016, the parties appeared before the Court for the initial case management 1 Dockets.Justia.com 1 conference. (Dkt. No. 29.) In the joint case management conference statement, SSI stated that it 2 might amend its pleadings, if the parties could not resolve certain issues. (Dkt. No. 28, Joint Case 3 Management Conference Statement at 8:18-25.) In its minute order, the Court stated that a 4 “stipulation re cross-complaint or amended complaint” would be due by May 16, 2016. (Dkt. No. 5 29.) On May 16, 2016, the parties submitted a stipulation permitting SSI to file an amended 6 answer and counterclaim, which the Court approved on May 19, 2016. (Dkt. Nos. 32-33.) SSI 7 filed its Amended Answer and Counterclaim (the “Counterclaim”) on May 20, 2016, in which it 8 asserted counterclaims against Misle for breach of contract, equitable indemnity, and declaratory 9 relief. (Dkt. No. 34.) On June 6, 2016, Misle filed his Answer to SSI’s Counterclaim. (Dkt. No. 35.) Misle did 10 United States District Court Northern District of California 11 not include any affirmative defenses in his Answer. (See id.) The parties proceeded with 12 discovery and filed motions for summary judgment. The Court heard oral argument on those 13 motions, in conjunction with the oral argument on this motion. The parties are scheduled to go to 14 trial in May 2017. Approximately a week after the parties filed their motions for summary judgment, Misle 15 16 filed the motion for leave to amend his answer to SSI’s Counterclaim to include eleven affirmative 17 defenses, which he argues were inadvertently omitted from his original answer.1 At the hearing on 18 this motion, SSI stated that he will no longer pursue three of those proposed affirmative defenses: 19 (1) the proposed third affirmative defense of laches; (2) the proposed sixth affirmative defense, 20 that damages were caused by third parties; and (3) the proposed seventh affirmative defense that 21 SSI’s claims are barred by the doctrines of res judicata and collateral estoppel. Misle still seeks to add the following affirmative defenses: (1) SSI has failed to state a 22 23 claim; (2) SSI’s claims are barred by the statute of limitations; (3) SSI is barred from asserting 24 claims based on the doctrines of waiver and estoppel; (4) SSI is barred from recovery by the 25 26 27 28 1 Misle initially filed the motion on December 30, 2016, but he was advised to “re-notice [the] motion properly and schedule it for hearing according to Judge White’s calendar availability.” (See ECF Docket entry between Dkt. Nos. 61, 62.) Instead of merely re-noticing the motion, which would not have altered the original briefing schedule, on January 4, 2017, Misle refiled the motion in its entirety, thereby triggering a new briefing schedule. 2 1 doctrine of unclean hands; (5) SSI failed to perform its own contractual obligations; (6) Misle 2 performed his obligations or his obligations were excused; (7) SSI failed to mitigate its damages; 3 and (8) SSI was contributorily negligent. ANALYSIS 4 5 A. Applicable Legal Standards. Federal Rule of Civil Procedure 15(a) permits a party to amend its pleading once as a 7 matter of right any time before a responsive pleading has been served. Once a responsive pleading 8 has been served, however, the amendment requires written consent of the adverse party or leave of 9 the court, and leave “shall be freely given when justice requires.” Fed. R. Civ. P. 15(a). “Rule 10 15’s policy of favoring amendments to pleadings should be applied with ‘extreme liberality.’” 11 United States District Court Northern District of California 6 United States v. Webb, 655 F.2d 977, 979 (9th Cir. 1981) (citation omitted). 12 The Court considers five factors to determine whether it should grant leave to amend: “‘(1) 13 bad faith, (2) undue delay, (3) prejudice to the opposing party, (4) futility of amendment[,]’” and 14 (5) whether the moving party previously amended a pleading. In re Western States Wholesale 15 Nat. Gas Antitrust Litig., 715 F.3d 716, 738 (9th Cir. 2013) (quoting Allen v. City of Beverly Hills, 16 911 F.2d 367, 373 (9th Cir. 1990)); see also DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 17 (9th Cir. 1987) (listing the first four factors as factors to be considered). Each factor is not given 18 equal weight. Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003); Bonin 19 v. Calderon, 59 F.3d 815, 845 (9th Cir. 1995). “Absent prejudice, or a strong showing of any of 20 the remaining … factors, there exists a presumption under Rule 15(a) in favor of granting leave to 21 amend.” Eminence Capital, 316 F.3d at 1052 (emphasis in original). 22 Once a court has entered a scheduling order, the standards set forth in Rule 16 apply, and a 23 court can modify the scheduling order only for good cause. Fed. R. Civ. P. 16(b)(4). Under Rule 24 16, a court’s inquiry should focus on a party’s diligence. See, e.g., Johnson v. Mammoth 25 Recreations, Inc., 975 F.2d 604, 609 (9th Cir. 1992). “The pretrial schedule may be modified ‘if it 26 cannot reasonably be met despite the diligence of the party seeking the extension.’” Zivkovic v. 27 Southern California Edison Co., 302 F.3d 1080, 1087 (9th Cir. 2002) (quoting Johnson, 975 F.2d 28 at 609). If the moving party fails to show diligence, the inquiry should end. Zivkovic, 302 F.3d at 3 1 1087; Johnson, 975 F.2d at 609. 2 B. The Court Grants, in part, and Denies, in part, the Motion. 3 SSI argues Misle must satisfy Rule 16’s good cause standard, because the Court set a 4 deadline of May 16, 2016 to amend the pleadings. An answer to a counterclaim is a pleading. See 5 Fed. R. Civ. P. 7(a)(3). The Court’s minute order referred a deadline to file the proposed counter- 6 claim or amended complaints. The parties filed their stipulation on May 16, 2016, and because the 7 Court did not approve the stipulation on that date, SSI filed its Amended Answer and 8 Counterclaim on May 20, 2016. Misle was permitted to file his answer within the time frame 9 permitted by Federal Rules of Civil Procedure. However, under SSI’s interpretation of the Court’s minute order, Misle would have been required to file a final answer by May 16, 2016, to a 11 United States District Court Northern District of California 10 counterclaim that had not yet been filed. The Court shall analyze this motion under Rule 15. 12 1. 13 It is undisputed that this is Misle’s first request for leave to amend his answer. That fact 14 Prior Amendments. weighs in favor of granting leave to amend. 15 2. 16 In order for a court to find that a moving party filed for leave to amend in bad faith, the Bad Faith. 17 adverse party must offer evidence that shows “wrongful motive” on the part of the moving party. 18 See DCD Programs, 833 F.2d at 187. Misle argues that the omission of affirmative defenses from 19 the answer was inadvertent. SSI has not pointed to anything in the record that would suggest 20 otherwise. Indeed, the record suggests that SSI also did not realize that Misle’s answer did not 21 include any affirmative defenses. (See Declaration of Donnelly A. Gillen, ¶¶ 6-7, Exs. A-B.) The 22 Court finds that this factor weighs in favor of amendment. 23 3. 24 As noted, Misle has withdrawn three of the affirmative defenses. In its opposition, SSI did Futlity. 25 not argue that it would be futile to grant Misle leave to amend. However, at the hearing, SSI 26 argued it could not raise an argument about futility about the remaining affirmative defenses, 27 because it does not know what facts support the affirmative defenses. As SSI correctly noted, 28 Misle’s affirmative defenses consist of legal conclusions and contain no underlying facts. As a 4 1 result, this Court also cannot evaluate whether amendment would be futile. With the exception of three affirmative defenses discussed in Section B.5, below, the Court 2 3 finds this factor weighs against granting leave to amend. 4 4. 5 When assessing whether a party unduly delayed in seeking leave to amend, courts focus on Undue Delay. 6 “‘whether the moving party knew or should have known the facts and theories raised by the 7 amendment in the original pleading,’” rather than on whether the motion to amend was timely 8 filed. AmerisourceBergen Corp. v. Dialysis West, Inc., 465 F.3d 946, 953 (9th Cir. 2006) (quoting 9 Jackson v. Bank of Hawaii, 902 F.2d 1385, 1388 (9th Cir. 1990)).2 Misle filed his answer in June 2016, but he did not seek leave to amend until after the parties filed motions for summary 11 United States District Court Northern District of California 10 judgment. He attests that the omission was inadvertent, and as noted there is nothing to contradict 12 that assertion. However, the record also shows Misle was aware of this omission by mid- 13 November 2016. (Declaration of Bao M. Vu (“Vu Decl.”), ¶ 3, Ex. A.) Misle did not seek leave 14 to amend until December 30, 2016. 15 At the hearing, Misle suggested that expert discovery may uncover facts that will support 16 these defenses. Misle has not provided the Court with any evidence that would show he was not 17 aware of the facts that would support these affirmative defenses prior to November 2016. Indeed, 18 to the extent Misle intends to assert he “performed all of [his] obligations under his contract with 19 SSI or that his performance was excused,” he presumably has been aware of the facts to support 20 that defense at a much earlier point in this litigation. The Court finds the same would be true for 21 his proposed affirmative defense that SSI failed to perform its contractual obligations. Therefore, the Court finds Plaintiff has unduly delayed in seeking leave to amend. 22 23 Because delay alone generally is not sufficient to deny leave to amend, the Court examines 24 whether amendment would cause SSI prejudice. See Morongo Band of Mission Indians v. Rose, 25 893 F.2d 1074, 1079 (9th Cir. 1990). 26 2 27 28 If Rule 16 did apply, Misle’s assertion of inadvertence would not amount to “good cause,” and his subsequent delay in seeking leave to amend also demonstrates his lack of diligence. See, e.g., Johnson, 975 F.2d at 609 (“carelessness is not compatible with a finding of diligence and offers no reason for a grant of relief”). 5 1 5. 2 Prejudice is the most significant factor for considering whether leave to amend should be Prejudice. 3 granted. Eminence Capital, 316 F.3d at 1052. Prejudice must be substantial in order for the Court 4 to justify denying leave to amend. Morongo, 893 F.2d at 1079. “A need to reopen discovery and 5 therefore delay the proceedings supports a district court's finding of prejudice from a delayed 6 motion to amend the complaint.” Lockheed Martin Corp. v. Network Solutions, Inc., 194 F.3d 7 980, 986 (9th Cir. 1999). In that case, the Ninth Circuit affirmed the district court’s decision to 8 deny the plaintiff’s request for leave to amend to include new domain name registrants, because 9 the motion was filed after defendants had filed a motion for summary judgment and the parties had not conducted discovery on the domain name registrants plaintiff was seeking to add to the case. 11 United States District Court Northern District of California 10 Id.; cf. Medtronic, Inc. v. AGA Med. Corp., No. 07-cv-0567 MMC, 2009 WL 416538, at *2 (N.D. 12 Cal. Feb. 18, 2009) (finding late amendment would cause prejudice, because it would require the 13 preparation of “a defense to a counterclaim with a factual basis distinct from that of [the] 14 underlying claims and whose inclusion in the action would substantially expand the issues for 15 trial”). 16 The deadline to complete non-expert discovery was October 14, 2016. (Dkt. No. 30.) 17 With the exception of one deposition, that deadline has not been extended. SSI argues that it 18 would be necessary to re-open discovery to depose Misle, HMH Engineers, and a representative 19 for the City of San Jose to obtain facts relevant to the affirmative defenses of waiver and estoppel, 20 failure to mitigate damages, and contributory negligence. At the hearing, Misle conceded that it 21 would be reasonable to permit SSI to propound contention interrogatories on those defenses. SSI 22 also argued that had it been aware that these and other affirmative defenses would be at issue, it 23 might have moved for summary judgment on some or all of them. Now, however, the deadline to 24 file dispositive motions has passed. 25 SSI did not articulate any additional discovery it would need with respect to Misle’s first 26 (failure to state a claim), eighth (SSI failed to perform its own contractual obligations), and ninth 27 (Misle performed or was excused from performing) proposed affirmative defenses. In addition, 28 6 1 the facts underlying those affirmative defenses are part and par of the co e a d rcel ompeting br reach of 2 con ntract claims Because SSI has not articulated th it would require addi s. S a hat itional discov very on 3 tho proposed affirmative defenses, th Court con ose d e he ncludes that i would not be prejudiced by it t 4 per rmitting Mis leave to amend his an sle a nswer to incl lude those af ffirmative de efenses. 5 However, the Court finds SSI would be pre t w ejudiced if th Court wer to grant M he re Misle leave to o 6 am mend to inclu the other five proposed affirmativ defenses: the statute o limitation waiver ude ve : of ns, 7 and estoppel, unclean hand failure to mitigate dam d u ds, mages, and c contributory negligence. The y . 8 Court’s conclu usion is based on the lack of factual s d k specificity as to the rema s aining affirm mative 9 def fenses and SSI’s argume that addi ents itional disco overy would be necessary to uncover the facts y r 10 sup pporting thos defenses. se CONCLU USION United States District Court Northern District of California 11 12 For the foregoing re easons, the Court GRAN C NTS, IN PAR AND D RT, DENIES, IN P PART, 13 Mi isle’s leave to file an ame ended answe Misle sh file its am er. hall mended answ by no la than wer ater 14 Feb bruary 24, 2017. 15 16 17 18 IT IS SO ORDER S RED. Da ated: Februa 17, 2017 ary 7 ___ __________ ___________ __________ ________ JEF FFREY S. W WHITE Un nited States D District Judg ge 19 20 21 22 23 24 25 26 27 28 7