Hasan v. Aig Prop. Cas. Co.

MALIK M. HASAN, M.D., and SEEME G. HASAN, Plaintiffs, v. AIG PROPERTY CASUALTY COMPANY, a Pennsylvania corporation, Defendant.

Civil Action No. 1:16-cv-02963-RM-MLC

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

May 8, 2018

AMENDED RECOMMENDATION TO DENY MOTION FOR LEAVE TO AMEND

Magistrate Judge Mark L. Carman

This case comes before the court on the referred motion of Plaintiffs Malik M. Hasan, M.D. and Seeme G. Hasan ("Plaintiffs") to amend their complaint. Doc. 41 (referred to hereafter as the "Motion"). Defendant AIG Property Casualty Company ("AIG") opposes. Doc. 43. Plaintiffs have replied in support of their motion. Doc. 44. For the reasons that follow, the court RECOMMENDS denying the motion.

I. BACKGROUND

Plaintiffs are suing their insurer Defendant regarding Plaintiffs' claim under a "Private Collections Insurance Policy." Under the Final Pretrial Order entered December 12, 2017, Plaintiffs

assert[] claims for (i) breach of express contract, (ii) breaches of fiduciary duty, (iii) breaches of implied covenant of good faith and fair dealing, (iv) tort of bad faith, and (v) violation of C.R.S. §10-3-1115. Plaintiffs seek recovery of compensatory damages, special damages, consequential damages, statutory damages, attorneys' fees and costs of suit."

Doc. 38 (Final Pretrial Order) at 4. The deadlines for discovery and dispositive motions have passed. The case is set for a five-day jury trial before Judge Raymond P. Moore to begin October 1, 2018. Doc. 36 (Order Setting Case For Trial). Judge Moore will hold a trial preparation conference on August 31, 2018, and 60 days prior to that conference (July 2, 2018), motions to exclude expert testimony are due. Id. Currently, neither side has designated expert witnesses. Final Pretrial Order at 14.

On January 29, 2018, Plaintiffs filed their motion for leave to file amended complaint. Doc. 41. They assert

[t]he litigation dispute arises out of substantial losses (in excess of $1.8 million) sustained by the Hasans in connection with the Hasans' purchases of fine wine from Premier Cru, a wine merchant that operated from Berkeley, California. When Premier Cru failed to deliver substantial wines that had been ordered and paid for in full, the Hasans timely lodged claims under their AIG Private Collection Insurance Policy ( the "Policy"), and their AIG homeowners insurance policy. AIG denied all coverage under the Policy, and paid only a modest amount under the homeowners coverage ($62,500).

Motion at 1-2. Plaintiffs have not, nor propose to bring a claim for breach of the referenced homeowners policy; the parties' exhibit lists reflect they have settled Plaintiffs' claim under the homeowners policy outside this case. See Final Pretrial Order at Docs. 38-1, 38-2 (Pl. Ex. 56; Def. Ex. A-4).

Plaintiffs seek to amend their complaint regarding Defendant's nonrenewal of the homeowners and Private Collections¹ policies with Plaintiffs.

On or about January 11, 2018, AIG prepared Notices of Nonrenewal of the Hasans' coverage under the AIG insurance policies (these were received by the Hasans several days later). The AIG insurance coverage for the Hasans will expire on February 18, 2018. The non-renewal will cause the Hasans to incursubstantial additional losses associated with replacing (if possible) the insurance coverage that had been provided by AIG.

Motion at 2 ¶ 6. Plaintiffs attach the nonrenewal notices (doc. 41-2, hereafter the "Notices"); the documents state "[t]he reason for nonrenewal is due to losses and multiple late payments." Id. Each Notice identifies the dates that Defendant sent late payment notices and paid losses or expenses on the respective policies.

Plaintiffs attach their proposed amended complaint (doc. 41-1), but do not provide a redline version.² They apparently propose to add new Paragraphs 33-35, alleging AIG's decision to not renew their policies, and a new fifth claim for relief for the "tort of bad faith nonrenewal of insurance." Doc. 41-1 at 12. Plaintiffs summarize the new claim:

The decision not to renew the Hasans' insurance coverage was plainly retaliatory, and further evidences AIG's bad faith handling of the Hasans' insurance claims. Notices of Nonrenewal specifically identify and link: (i) the loss and expenses paid under the fraud endorsement to the AIG homeowners' policy ($72,119.60), and (ii) the open loss expenses paid to defend the Hasans' claim under the Policy ($158,812.82), as bases for the nonrenewal decision.

Motion at 2-3 ¶ 7.

II. ANALYSIS

A. Legal Standards Applicable to the Motion

The "Final Pretrial Order will control the subsequent course of this action and the trial, and may not be amended except by consent of the parties and approval by the court or by order of the court to prevent manifest injustice. The pleadings will be deemed merged herein." Id. at 15-16. By its terms, amending the Final Pretrial Order is appropriate only to "prevent manifest injustice." See also Fed. R. Civ. P. 16(e) (setting the same standard).

Once formulated, pretrial orders should not be changed lightly; but total inflexibility is undesirable. ... The exact words used to describe the standard for amending the pretrial order probably are less important than the meaning given them in practice. ... [T]he words "to prevent manifest injustice" ... adequately describe the restraint the trial judge should exercise.

1983 Advisory Comm. Note to Fed. R. Civ. P. 16(e).

The party moving for such modification bears the burden of proving that manifest injustice will result absent the amendment. The Tenth Circuit..., when reviewing a decision ... to deny a request to amend a Final Pretrial Order ... consider[s]: (i) the extent of prejudice or surprise to the nonmoving party if the amendment were permitted; (ii) the ability of that party to cure any prejudice: (iii) disruption to the litigation by inclusion of the new issue; and (iv) bad faith by the party seeking to modify the order.

Scavetta v. King Soopers, Inc., No. 10-cv-02986-WJM-KLM, 2013 WL 2896895, at *1 (D. Colo. June 13, 2013) (internal citations, quotation marks and note omitted, citing inter alia Davey v. Lockheed Martin Corp., 301 F.3d 1204, 1208-10 (10th Cir. 2002); Koch v. Koch Indus., Inc., 203 F.3d 1202, 1222 & n.10 (10th Cir. 2000)). "[T]he timing of the motion in relation to the commencement of trial is an important element in analyzing whether the amendment would cause prejudice or surprise." Palace Expl. Co. v. Petroleum Dev. Co., 316 F.3d 1110, 1117 (10th Cir. 2003).³

In practice, courts within the Tenth Circuit tend to find the Koch factors favor amendments that are (a) filed before trial has begun or is imminent, (b) do not seek to change the movant's theory of its case after discovery has closed, and (c) do not seek to avoid prior rulings or otherwise show bad faith by the movant. For instance in Davey, the court found abuse of discretion in the district court's denial of a motion to add an affirmative defense that was made possible by a Tenth Circuit case decided after the pretrial order. The plaintiff could have soughta continuance of the impending trial to cure the prejudice. Davey, 301 F.3d at 1211-1212. The Tenth Circuit analyzed Koch's "disruption" factor as regarding disruption of an ongoing trial, not merely disruption of the current schedule. Id. See also Rimbert v. Eli Lilly & Co., 647 F.3d 1247, 1255 (10th Cir. 2011) (abuse of discretion to not permit plaintiff to obtain substitute expert where trial had already been vacated for other reasons); Palace Expl., 316 F.3d at 1117-18 (abuse of discretion in denying addition of claim asserted seventeen days before trial; defendant could have sought continuance); Thomas v. Am. Family Ins. Co., No. 14-cv-2819-PAB-NYW, 2016 WL 614467, at *3 (D. Colo. Feb. 16, 2016) (allowing amendment to add a report published after the final pretrial order, on which the movant's expert wished to rely; there was sufficient time for the opposing party to conduct discovery before trial); Port-a-Pour, Inc. v. Peak Innovations, Inc., No. 13-cv-01511-WYD-BNB, 2016 WL 7868814, at *2-3 (D. Colo. June 29, 2016) (allowing amendment in part to permit removal of a stipulation based on recent discovery, but denying amendments that were potentially attempts "to evade my previous rulings"); Rush v. Speedway Buick Pontiac GMC, Inc., 525 F. Supp. 2d 1265, 1280 (D. Kan. 2007) (allowing amendment to add a defense because it would "ensure ... full and fair litigation" and trial was "still more than one month away").

Cases denying amendment of a final pretrial order most frequently involve motions to amend that were filed within days of or during trial, or motions that sought a sea change in the party's theories. See, e.g., Monfore v. Phillips, 778 F.3d 849, 852 (10th Cir. 2015) (motion to amend was filed only days before trial and changed the plaintiff's theory of the case); Koch, 203 F.3d at 1223 (district court appropriately denied plaintiff's attempt to amend final pretrial order by introduction of evidence during trial); Genesis Health Clubs, Inc. v. LED Solar & Light Co., 639 F. App'x 550, 557 (10th Cir. 2016) (proposed amendment after discovery would entirelychange plaintiff's theory of damages, no mention of newly discovered evidence or any other good reason for the plaintiff's late change of mind); Canales v. Principi, 220 F.R.D. 627, 629 (D. Colo. 2004) (denying plaintiff's request to amend to add expert in large part because trial was two weeks away); Scavetta, 2013 WL 2896895 (denying motion to add defense twelve days before trial).

However, in this case the requested amendment is essentially a request to file a supplemental pleading.⁴ The court thus treats the motion as subject to both Rule 16(e) and Rule 15(d)'s standards; if Plaintiffs meet Rule 16(e)'s standards, the court then considers whether they have also met the standard for supplemental pleadings. Cf., Perez v. Denver Fire Dep't, — F. App'x —, No. 17-1128, 2018 WL 739380, at *3 (10th Cir. Feb. 7,...