Markel Am. Ins. Co. v. XDS, LLC

516 F.Supp.3d 507

MARKEL AMERICAN INSURANCE COMPANY a/s/o National Football League, Plaintiff,

v.XDS, LLC; CGS Premier, Inc.; Black's Tire Service, Inc. ; and Pomp's Tire Service, Inc., Defendants.

Case No. 7:20-cv-00075-M

United States District Court, E.D. North Carolina, Southern Division.

Signed January 28, 2021

Alexandra Torriero, Michael F. Wallace, Stutman Law, Berlin, NJ, F. William DeVore, IV, DeVore, Acton & Stafford, PA, Charlotte, NC, for Plaintiff.

Daniel Edward Peterson, Parker Poe Adams & Bernstein LLP, Charlotte, NC, Jonathan E. Hall, Parker Poe Adams & Bernstein LLP, Raleigh, NC, for Defendant XDS, LLC.

David Michael Fothergill, Michael Charles Gruman, Yates, McLamb & Weyher, LLP, Raleigh, NC, for Defendant Black's Tire Service, Inc.

R. Gregory Lewis, David Michael Harmon, Vernis & Bowling of Charlotte, PLLC, Charlotte, NC, for Defendant Pomp's Tire Service, Inc.

OPINION AND ORDER

RICHARD E. MYERS II, CHIEF UNITED STATES DISTRICT JUDGE

This matter comes before the court on Plaintiff's motion seeking leave to file an amended complaint, filed September 9, 2020. [DE-58] For the reasons that follow, Plaintiff's motion is GRANTED IN PART and DENIED IN PART.

I. Background

A full background is set forth in full within the court's August 24, 2020 order dismissing Plaintiff's claims brought within the initial complaint against Defendant CGS Premier, Inc. ("CGS"). [DE-48] The proposed amended complaint that Plaintiff attaches to its motion adds factual allegations missing from the initial complaint and breaks out certain claims brought therein, some of which the court described within the August 24, 2020 order as insufficient to withstand CGS's Federal Rule of Civil Procedure 12(b)(6) (" Rule 12(b)(6)") motion to dismiss. [DE-58-2]

II. Legal standard

The Fourth Circuit has said:

A plaintiff may amend his complaint one time as a matter of course before the defendant files a responsive pleading. Fed. R. Civ. P. 15(a). Once the defendant files a responsive pleading, however, the plaintiff may amend his complaint only by leave of the court or by written consent of the defendant, id. , but Rule 15(a) directs that leave to amend shall be freely given when justice so requires. This liberal rule gives effect to the federal policy in favor of resolving cases on their merits instead of disposing of them on technicalities.

We have interpreted Rule 15(a) to provide that leave to amend a pleading should be denied only when

[1] the amendment would be prejudicial to the opposing party,

[2] there has been bad faith on the part of the moving party, or

[3] the amendment would have been futile.

Laber v. Harvey , 438 F.3d 404, 426 (4th Cir. 2006) (en banc ) (internal quotation marks and citations omitted).

III. Analysis

a. Prejudice

This court recently discussed what constitutes a prejudicial amendment within the meaning of Laber :

Under Rule 15(a)(2), prejudice means that the party opposing the amendment would be hindered in the preparation of its case, or would have been prevented from taking some measure in support of its position. Thus, undue prejudice may justify denying a motion to amend if the amendment would require the non-moving party to expend significant additional resources to conduct discovery and prepare for trial, or would significantly delay the resolution of the dispute. A change in the theory of recovery may obviously sometimes cause substantial prejudice to a defendant, justifying denial of a motion to amend to assert that theory. An amendment is not prejudicial, by contrast, if it merely adds an additional theory of recovery to the facts already pled and is offered before any discovery [h]as occurred.

Hatteras/Cabo Yachts, LLC v. M/Y Epic , No. 4:17-CV-00025-BR, 2020 WL 1668045, 2020 U.S. Dist. LEXIS 59044, at *9-10 (E.D.N.C. Apr. 3, 2020) (internal quotation marks, brackets, and citations omitted). The Laber court made clear that "[w]hether an amendment is prejudicial will often be determined by the nature of the amendment and its timing[,]" but that "[d]elay alone ... is an insufficient reason to deny [a] motion to amend." 438 F.3d at 427.

None of Defendants have raised meaningful arguments that the proposed amendment would hinder their case preparations or prevent them from taking any action. And rather than changing its theory of the case, Plaintiff seeks leave to (1) plead additional factual detail and (2) make more discrete certain of its legal claims, all of which were previously brought within Plaintiff's initial complaint.

Therefore, the only arguable prejudice to Defendants results from Defendants' expenditure of resources litigating the initial complaint prior to the motion. Only CGS moved to dismiss the complaint on the basis of Plaintiff's pleading deficiencies prior to the court's August 24, 2020 order discussing those deficiencies. [DE-48] The resources expended by the non-CGS Defendants opposing the initial complaint were therefore minimal, and those parties' arguments regarding prejudice accordingly ring hollow.¹ The court therefore concludes that allowing the proposed amendments would not cause undue prejudice to the non-CGS Defendants.

By contrast, because CGS expended significant resources opposing the initial complaint leading up to the court's August 24, 2020 order, CGS can make a meaningful argument that it will be prejudiced by having to relitigate claims that it has already litigated because Plaintiff did not bring plausible claims against it in a more-timely manner. The court is empathetic to CGS's argument, as it also expended significant resources addressing Plaintiff's initial claims against CGS, which could have been more productively spent had Plaintiff moved to amend the complaint in response to CGS's motions rather than electing to argue in defense of deficient claims by invoking long-rejected interpretations of the federal pleading standard. [see DE-48 at 4 n.2]

Nevertheless, Plaintiff's motion seeking leave to amend (1) is Plaintiff's first such motion, (2) was filed approximately five months after the initial complaint was filed, and (3) came before the case progressed significantly into discovery. [see DE-46 (discovery deadline is August 2021)] For these reasons, and because the amendments sought merely expand upon the allegations made and theories invoked by the initial complaint, the court is persuaded that CGS would not be unduly prejudiced by granting Plaintiff leave to amend. See Scott v. Family Dollar Stores, Inc. , 733 F.3d 105, 118–19 (4th Cir. 2013) (reversing denial of motion seeking leave to amend finding no undue prejudice noting that (1) motion seeking leave to amend was plaintiff's first, (2) the "proposed amended complaint merely elaborates on [an] allegation in the original complaint[,]" and (3) "[t]he legal theory remains the same"); Davis v. Piper Aircraft Corp. , 615 F.2d 606, 613 (4th Cir. 1980) ("Because defendant was from the outset made fully aware of the events giving rise to the action, an allowance of the amendment could not in any way prejudice the preparation of defendant's case."). The court's ultimate conclusion that Plaintiff may bring amended claims against CGS² is in keeping with the Fourth Circuit's "policy to liberally allow amendment[,]" Galustian v. Peter , 591 F.3d 724, 729 (4th Cir. 2010), and the "federal policy in favor of resolving cases on their merits instead of disposing of them on technicalities[,]" Laber , 438 F.3d at 426.

b. Bad faith

Defendants have not argued that Plaintiff's motion seeking leave to amend was filed in bad faith, so the court does not consider that prospect.

c. Futility

"Futility is apparent if the proposed amended complaint fails to state a claim under the applicable rules and accompanying standards[.]" Katyle v. Penn Nat'l Gaming, Inc. , 637 F.3d 462, 471 (4th Cir. 2011). The applicable rules, of course, include Federal Rules of Civil Procedure 8 and 12(b)(6).³ See Perkins v. United States, 55 F.3d 910, 917 (4th Cir. 1995) (proposed amendments are futile if they "could not withstand a motion to dismiss").

Only Defendant XDS, LLC ("XDS") responded in opposition to Plaintiff's motion seeking leave to amend arguing that Plaintiff's proposed amendments would be futile. [DE-65] XDS argues that proposed counts II (negligence), III (N.C. Gen. Stat. § 99B products liability), and IV (breach of the implied warranty of fitness for a particular purpose) do not state plausible claims for relief and that the court should deny Plaintiff leave to bring those proposed claims. [DE-65] In reply, Plaintiff concedes that proposed counts II and III are deficient, but argues that proposed count IV would not be a futile amendment.

The court agrees with XDS. Both North Carolina and New York's versions of the Uniform Commercial Code set forth as follows:

Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose.

N.C. Gen. Stat. § 25-2-315 ; N.Y. U.C.C. § 2-315. Courts in this circuit interpreting this provision have said that "to state a claim for breach of the implied warranty of fitness for a particular purpose, a plaintiff must allege the particular purpose for which the goods were bought as opposed to any ‘ordinary use’ covered by the warranty of merchantability." Gregory Wood Prods. v. Advanced Sawmill Mach. Equip., Inc. , No. 5:06-CV-00087, 2007 WL 1825179, 2007 U.S. Dist. LEXIS 46245 at *15 (W.D.N.C. June 25, 2007).

Plaintiff's proposed count IV fails to allege the NFL's particular purpose for purchasing the Mediacruiser. Instead, Plaintiff alleges that "Defendant XDS impliedly warranted that the Mediacruiser and its component parts were ... properly designed so as to be fit for the purpose for which [the Mediacruiser] was intended. " [DE-58-2 ¶ 92 (...