Fay Avenue Properties, LLC. et al v. Travelers Property Casualty Company of America et al, No. 3:2011cv02389 - Document 122 (S.D. Cal. 2014)
Court Description: ORDER Denying Defendant's Ex Parte Motion For Leave To File Counterclaim Against Plaintiff La Jolla Spa, MD, Inc And Continuance Of Case Management Order Dates (Re Doc. 116 ). Signed by Judge Gonzalo P. Curiel on 7/24/2014. (mdc)
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Fay Avenue Properties, LLC. et al v. Travelers Property Casualty Company of America et al Doc. 122 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 FAY AVENUE PROPERTIES, LLC., LA JOLLA SPA MD, INC., 12 13 Plaintiffs, vs. 14 15 16 17 TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA; AND DOES 1 through 100, inclusive, CASE NO. 3:11-cv-02389-GPC-WVG ORDER DENYING DEFENDANT’S EX PARTE MOTION FOR LEAVE TO FILE A COUNTERCLAIM AGAINST PLAINTIFF LA JOLLA SPA, MD, INC AND CONTINUANCE OF CASE MANAGEMENT ORDER DATES [Dkt. No. 116.] Defendants. 18 19 20 Before the Court is Defendant’s ex parte motion for leave to file a counterclaim 21 against Plaintiff La Jolla Spa MD, Inc. (“Plaintiff” or “LJS”) and continuance of case 22 management order dates. (Dkt. No. 116.) Plaintiff filed an opposition. (Dkt. No. 118.) 23 On July 23, 2014, Defendant filed a request to file a reply. (Dkt. No. 119.) On the 24 same day, Plaintiff filed an opposition to the request to file a reply. (Dkt. No. 120.) 25 After a review of the request and opposition, the Court GRANTS Defendant’s request 26 to file a reply. 27 28 Based on the reasoning below, the Court DENIES Defendant’s ex parte motion for leave to file a counterclaim and continuance of case management order dates. -1- 3:11-cv-02389-GPC-WVG Dockets.Justia.com 1 Factual Background 2 Plaintiff La Jolla Spa operated a high-end medical spa and boutique in 3 downtown La Jolla and Plaintiff Fay Avenue Properties, LLC (“Fay Ave Property”) 4 owned the two story building where La Jolla Spa was located. Both Plaintiffs were 5 named insured under an insurance policy issued by Travelers Property Casualty 6 Company of America (“Travelers”). Dianne York is the President of La Jolla Spa and 7 sole member of Fay Avenue Properties. 8 Plaintiff occupied the first floor of 7630 Fay Avenue, La Jolla, California where 9 it operated a spa and retail shop. The second floor of the Fay Ave Property was 10 partially occupied by the medical practice of York’s former husband, Dr. Mitchell 11 Goldman (“Goldman”). On or about September 18, 2009, Goldman vacated the Fay 12 Ave Property, and moved his medical practice and equipment to another location, in 13 accordance with the terms of York’s and Goldman’s divorce judgment. Plaintiff 14 contends that Goldman, and/or persons acting on his behalf, stole medical and office 15 equipment from the Fay Ave Property. 16 On or about January 26, 2010, Plaintiff filed an insurance claim with Defendant 17 where she alleged that her husband stole property from the insured location. On March 18 29, 2010, Plaintiffs submitted an insurance claim spreadsheet, detailing roughly 230 19 line items totaling $2.8 million in damages as a result of the claimed loss. (Dkt. No. 20 116-1, Agness Decl., Ex. 2.) At an August 25, 2010 Examination Under Oath 21 (“EUO”), Ms. York testified that the tangible items listed in the March 29, 2010 claim 22 inventory was prepared by Karen Wise, the CFO. (Id., Agness Decl., Ex. 3, Aug. 25, 23 2010 EUO at 12:8-22; 13:4-14:4.) York and Wise “walked through the entire building 24 room by room, and we itemized everything that was in that building” and the list is 25 what we were asked to provide by Defendant. (Id. at 13:7-14:4.) 26 On April 29, 2011, Plaintiff submitted a revised claim inventory, detailing over 27 1,000 line items. (Id., Agness Decl., Ex. 4.) When asked on May 4, 2011 by email if 28 the entire inventory being claimed was wrongfully damaged or stolen by Dr. Goldman, -2- 3:11-cv-02389-GPC-WVG 1 York responded “Yes.” (Id., Agness Decl., Ex. 5.) Thereafter, on June 2, 2011, Plaintiffs submitted another revised inventory 2 3 27 including over 1,100 line items, totaling over $13 million in damages. (Id., Agness 4 Decl., Ex. 6.) During York’s fourth EUO session on July 12, 2011, York stated that 5 the inventory list contained all physical property for which she was making a claim and 6 all these items were owned by Plaintiffs as of September 18, 2009. (Id., Agness Decl., 7 Ex. 7, June 2, 2011 EOU at 373:4-373:3.) On December 20, 2011, Defendant denied 8 Plaintiff’s claim. (Id., Agness Decl., Ex. 8.) 9 Defendant argues that York directly contradicted pre-litigation testimony given 10 under oath as well as other material representations made during the investigation of 11 the insurance claim. At the recent deposition of York, in July 2014, she testified that 12 the items identified in the June 2, 2011 inventory reflected an inventory of all items in 13 the entire building on September 18, 2009. (Dkt. No. 116-1, Agness Decl., Ex. 10, 14 York Depo., 7/9/14 at 272:8-273:1.) She stated that Dr. Goldman did not take all items 15 in the June 2, 2011 inventory and that some of the items were rightfully taken. (Id., 16 Ex. 10, York Depo. 7/9/14 at 274:24-275:15; 7/10/14 at 57:11-17.) Moreover, during 17 the deposition, York also testified that the Vitaphenol and Obagi products that had 18 been claimed as stolen during the claim process were not stolen by Goldman. (Id., Ex. 19 10, York Depo., 7/10/14 at 56:14-25; 75:1-7.) 20 affirmative statements that contradict pre-litigation testimony now support a cause of 21 action for fraud against LJS. 22 A. Defendant contends that these Legal Standard 23 Federal Rule of Civil Procedure 15 and 16 govern the amendment of pleadings. 24 The Ninth Circuit has explained that once a pretrial schedule order has been filed 25 which sets a deadline for amending pleadings, a party must first show “good cause” for 26 amendment under Rule 16(b)1, and then if good cause is shown, the party must 27 28 Rule 16(b) provides, “[a] schedule may be modified only for good cause and with the judge’s consent.” Fed. R. Civ. P. 16(b)(4). 1 -3- 3:11-cv-02389-GPC-WVG 1 demonstrate that amendment would be proper under Rule 15(a). Johnson v. Mammoth 2 Recreations, Inc., 975 F.2d 604, 607-08 (9th Cir. 1991); Jackson v. Laureate, Inc., 186 3 F.R.D. 605, 607 (E.D. Cal. 1999); Coleman v. Quaker Oats Co., 232 F.3d 1271, 1294 4 (9th Cir. 2000). “If [the Court] considered only Rule 15(a) without regard to Rule 5 16(b), [it] would render scheduling orders meaningless and effectively would read Rule 6 16(b) and its good cause requirement out of the Federal Rules of Civil Procedure.” 7 Jackson, 186 F.R.D. at 607 (quoting Sosa v. Airprint Sys., Inc., 133 F.3d 1417, 1419 8 (11th Cir. 1998)). 9 Rule 16(b)’s good cause standard considers the diligence of the party seeking the 10 amendment. Johnson, 975 F.2d at 609. If a party acted diligently but still cannot 11 reasonably meet the scheduling deadlines, the court may modify the scheduling order. 12 Id. Carelessness is not compatible with a finding of diligence and offers no reason for 13 a grant of relief. Id. One district court noted that the Court may look at the following 14 factors: “(1) that [the movant] was diligent in assisting the Court in creating a workable 15 Rule 16[O]rder; (2) that [the movant’s] noncompliance with a Rule 16 deadline 16 occurred or will occur, notwithstanding [the movant’s] diligent efforts to comply, 17 because of the development of matters which could not have been reasonably foreseen 18 or anticipated at the time of the Rule 16 scheduling conference; and (3) that [the 19 movant] was diligent in seeking amendment of the Rule 16[O]rder, once it became 20 apparent that [the movant] could not comply with the [O]rder.” Jackson, 186 F.R.D. 21 at 608. 22 On August 2, 2013, a case management scheduling order pursuant to Rule 16 23 was filed. (Dkt. No. 85.) The deadline to file any motion to amend pleadings passed 24 on September 6, 2013. (Id.) The fact discovery deadline recently passed on July 20, 25 2014 with expert discovery closing on September 25, 2014. (Id.) A final pretrial 26 conference is currently set for November 15, 2014. (Id.) 27 Since the deadline set in the original scheduling order to amend the pleadings 28 has passed, the Court must first determine whether Defendant has shown “good cause” -4- 3:11-cv-02389-GPC-WVG 1 to modify the scheduling order. See Johnson, 975 F.2d at 608-09. 2 The Court concludes that Defendant has not demonstrated good cause to modify 3 the scheduling order to grant it leave to file a counterclaim. While the parties raise 4 numerous portions of the record to support their positions, and whether Travelers knew 5 whether the inventory lists were all items claimed to have been taken by Goldman was 6 accurate or not, the Court concludes the denial letter provides a comprehensive analysis 7 as to what Travelers knew in December 2011. 8 The denial letter dated December 20, 2011 demonstrates that Travelers knew that 9 Plaintiff had misrepresented or misstated or misunderstood the items on the inventory 10 lists. In a detailed 22 page single-spaced letter, Defendant denied Plaintiff’s claim for 11 numerous reasons, including misrepresentations by York during the course of the 12 Travelers’ investigation. (Dkt. No. 116-1, Agness Decl., Ex. 8.) In fact, a section 13 entitled “Misrepresentations Disclosed by Travelers’ Investigation” provides examples 14 of misrepresentations and include: “The Claim for All Equipment on the Second 15 Floor.” (Id. at 123-24.) Travelers noted that the stipulated marital dissolution awarded 16 Goldman, all of the equipment on the second floor except for equipment in the surgical 17 suite which Plaintiff acknowledged in a September 23, 2009 declaration in the divorce 18 proceedings; however, the claim inventory lists equipment from nearly every room on 19 the second floor “even though most of those items were clearly not awarded to you.” 20 (Id. at 123.) “You submitted those claims despite your admission under penalty of 21 perjury in a different proceeding that Dr. Goldman was allowed to take all of the non- 22 surgical suite equipment on the second floor.” (Id.) In sum, Travelers stated “your 23 clear intent, expressed under penalty of perjury is for Traverlers to pay for items which 24 you conceded in a different proceedings (and which the divorce judgement confirms) 25 were awarded to Dr. Goldman. (Id. at 124.) 26 In addition, as to “The Vitaphenol Claim”, Defendant noted that York claimed 27 that Vitaphenol was stolen by Dr. Goldman and sought $1.5 million as listed in the 28 inventory list. (Id.) However, Defendant later learned and York admitted in her -5- 3:11-cv-02389-GPC-WVG 1 examination that Vitaphenol was sold by the court appointed receiver on behalf of her 2 company. (Id.) Moreover, in her July 22, 2011 declaration submitted to the federal 3 bankruptcy court, she stated that Vitaphenol was sold in October 2008 for $1.5 million, 4 which is the amount sought from Travelers. (Id.) As to “The Obagi Claim” , the 5 inventory listed the product value at $96,000; however, in the January 8, 2010 6 declaration in the divorce proceedings, York stated that Dr. Goldman was authorized 7 to remove the Obagi products. (Id. at 125.) 8 This demonstrates that as of December 20, 2011, Travelers had notice that the 9 inventory lists did not constitute the total items taken by Goldman and that, according 10 to its investigation, Plaintiff had misrepresented that items contained in the inventory 11 claim lists were taken by Goldman. Since Travelers was on notice since the beginning 12 of the case about the potential misrepresentation or fraud by Plaintiff, it should have 13 diligently sought her deposition and any other discovery to determine whether a 14 counterclaim should be alleged.2 As Plaintiff points out, while Travelers listed York 15 as the first witness in its August 2012 initial disclosures, it did not notice her deposition 16 until May 2014 and due to scheduling, her deposition did not take place until July 9 17 and 10, 2014, two weeks prior to the fact discovery deadline. Moreover, in its answer 18 filed on March 26, 2012, Defendant asserts an affirmative defense of “Policy Terms, 19 Conditions and Exclusion” concerning “Concealment, Misrepresentation or Fraud” 20 where the policy provisions it references are the same as alleged in the proposed 21 counterclaim. (Dkt. Nos. 32; 116 at 15.) These facts reveal that Travelers has not been 22 proceeding with diligence in this case. 23 Therefore, the Court concludes that Travelers has not demonstrated diligence and 24 DENIES Defendant’s motion to modify the scheduling order. Since the Court declines 25 to exercise its discretion to modify its Rule 16 Scheduling Order, an analysis under 26 27 28 2 The Court also questions why a counterclaim was not filed prior to the scheduling order amendment deadline based on the fact that Travelers, at that time, was aware that Plaintiff allegedly made numerous misrepresentations during the investigation. Carelessness provides no reason for a grant of relief under Rule 16. See Johnson, 975 F.2d at 609. -6- 3:11-cv-02389-GPC-WVG 1 Rule 15(a) is not necessary. See Sosa, 133 F.3d at 1419 (holding that the Court need 2 not evaluate Rule 15(a) unless the movant first meets the “good cause” requirement of 3 Rule 16); see also MMMT Holdings Corp. v NSGI Holdings, Inc., No. C12-1570 RSL, 4 2014 WL 2573290, at *4 (W.D. Wash June 9, 2014) (because plaintiff cannot satisfy 5 Rule 16(b), it is not necessary to evaluate the plaintiff’s motion to amend under Rule 6 15). Conclusion 7 8 9 10 Based on the above, the Court DENIES Defendant’s ex parte motion for leave to file a counterclaim and continuing dates in the scheduling order. IT IS SO ORDERED. 11 12 DATED: July 24, 2014 13 14 HON. GONZALO P. CURIEL United States District Judge 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -7- 3:11-cv-02389-GPC-WVG
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