Ohio Cas. Ins. Co. v. Eagle Mist Corp.

THE OHIO CASUALTY INSURANCE COMPANY, et al., Plaintiffs, v. EAGLE MIST CORPORATION, et al., Defendants.

Case No. 4:19-cv-02974-MTS

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MISSOURI EASTERN DIVISION

March 31, 2021

MEMORANDUM AND ORDER

This matter is before the Court on Plaintiffs' Motion for Leave to Amend to add a counterclaim for unjust enrichment, Doc. [41]. For the reasons detailed below, the Court will grant the Motion.

I. BACKGROUND

The Ohio Casualty Insurance Company and Ohio Security Insurance Company ("Plaintiffs") filed a Complaint against Eagle Mist Corporation and Kevin Laughlin ("Defendants") on November 5, 2019. Doc. [1]. In their Complaint, Plaintiffs sought a declaratory judgment as to whether they had a duty arising under certain insurance policies to defend Defendants in an underlying proceeding in California state court. Doc. [1] ¶¶ 6-7. Plaintiffs argue they had no such duty because Defendants do not qualify as "insureds" under the insurance policies. Doc. [1] ¶¶ 23-33. Defendants filed an Answer on May 28, 2020 in which they added counterclaims for bad faith and declaratory relief. Doc. [31]. Plaintiffs then filed an Answer to Defendants' Counterclaims on June 18, 2020. Doc. [35]. On June 25, 2020, Plaintiffs filed a Motion for Summary Judgment. Doc. [37]. The Court issued its Case Management Order ("CMO") on July 6, 2020 and set July 17, 2020 as the deadline to amend pleadings and add parties. Doc. [40]. On July 16, 2020, the day before the deadline to amend the pleadings, Plaintiffs filed the instant Motion for Leave to Amend, seeking to add a counterclaim for unjust enrichment to recoup defense fees and costs they expended in defending Defendants in the underlying state proceeding. Defendants challenged the Motion, arguing that, for numerous reasons, the Court should deny Plaintiffs' request to add the unjust enrichment counterclaim.

II. LEGAL STANDARD

Federal Rule of Civil Procedure 15(a) adopts a liberal amendment policy. Robertson v. Hayti Police Dep't, 241 F.3d 992, 995 (8th Cir. 2001). It permits a party to amend its pleading once as a matter of course within twenty-one days of serving the pleading or within twenty-one days after service of a responsive pleading or a Rule 12(b), (e), or (f) motion. Fed. R. Civ. Pro. 15(a)(1). Otherwise, "a party may amend its pleading only with the opposing party's written consent or the court's leave." Fed. R. Civ. Pro. 15(a)(2). The Rule directs Courts to "freely give leave when justice so requires." Id. And "[d]enial of leave to amend pleadings is appropriate only in those limited circumstances in which undue delay, bad faith on the part of the moving party, futility of the amendment, or unfair prejudice to the non-moving party can be demonstrated." Hillesheim v. Myron's Cards & Gifts, Inc., 897 F.3d 953, 955 (8th Cir. 2018) (quoting Robertson, 241 F.3d at 995). Meanwhile, the Eighth Circuit has concluded "that Rule 16(b)'s good-cause standard governs when a party seeks leave to amend a pleading outside of the time period established by a scheduling order, not the more liberal standard of Rule 15(a)." Sherman v. Winco Fireworks, Inc., 532 F.3d 709, 716 (8th Cir. 2008) (citing Popoalii v. Correctional Med. Servs., 512 F.3d 488, 497 (8th Cir. 2008)). Under Rule 16(b)'s good-cause standard, "[i]f a party files forleave to amend outside the court's scheduling order, the party must show cause to modify the schedule." Id.

III. DISCUSSION

At the outset, the Court acknowledges the debate over whether a plaintiff can advance a counterclaim in reply to a defendant's counterclaim.¹ See Lincoln Sav. Bank v. Open Sols., Inc., 956 F. Supp. 2d 1032, 1038-40 (N.D. Iowa 2013) (providing overview of counterclaim-in-reply issue). Rather than delve into that quagmire, the Court finds the more prudent course is to simply treat Plaintiff's Motion as a motion for leave to amend the Complaint. See id. (noting that "several courts have treated counterclaims to counterclaims as an amendment to the pleadings" (citing Erickson v. Horing, No. 99-1468 (JRT/FLN), 2000 WL 35500986 (D. Minn. Oct. 23, 2000) and Turner & Boisseau, Chartered v. Nationwide Mut. Ins. Co., 175 F.R.D. 686, 687 (D. Kan. 1997))); Heath v. Audatax N. Am., Inc., No. 11-2779, 2012 WL 177413, at *2-3 (E.D. Pa. Jan. 23, 2012) (construing motion for leave to file counterclaim as motion to amend complaint and noting that "this [c]ourt has previously stated that a plaintiff's counterclaim in reply to a defendant's counterclaim should be deemed an amendment to the complaint"). Accordingly, the Motion is subject to Rule 15's liberal standard for amendments.

In making that decision, the Court disagrees with Defendants' broad assertion that Plaintiffs cannot amend the Complaint during the pendency of a motion for summary judgment. According to Defendants, "Plaintiff has appeared to choose to style its claim for unjust enrichment as a counterclaim-in-reply instead of opting to amend its original complaint so that it may avoid relevant law precluding Plaintiff from amending its complaint when, as here, a motion for summary judgment is pending." Doc. [44] at 2. In support of that argument, Defendants cite two cases denying a party leave to amend its complaint after the opposing party moved for summary judgment: Viehweg v. Mello, 5 F. Supp. 2d 752, 756 (E.D. Mo. 1998) and Moore v. Jackson, 123 F.3d 1082, 1089 (8th Cir. 1997).

To the extent Defendants contend that, based on those cases, the Court should deny leave to amend merely because there is a pending summary judgment motion here, Defendants misconstrue the analysis in Viehweg and Moore. After reciting the canonical "good reason[s] for denial" of leave to amend under Rule 15—namely, undue delay, bad faith, undue prejudice, or futility—the Viehweg court found "three good reasons for denying" leave to amend the complaint. 5 F. Supp. 2d at 756. Among those reasons was that "there would be undue prejudice to [d]efendant, who ha[d] moved twice for summary judgment and twice to dismiss." Id. The court also listed as reasons for denial (1) that it would not cause plaintiff to forfeit any claim and (2) that the amendment would be futile. Id. at 756-57. Thus, the Viehweg court did not deny the amendment simply because a summary judgment motion was pending; instead, as just one part of its Rule 15 analysis, it considered the undue prejudice the amendment would cause defendants since defendants had already moved twice to dismiss and twice for summary judgment. The Moore decision similarly does not support the proposition that leave to amend should be denied when a summary judgment motion is pending. After noting the Rule 15 standard, the Eighth Circuit, in avery brief discussion, found simply that the district court did not abuse its discretion by denying the plaintiff leave to amend his complaint to add three new defendants after the existing defendants had already moved for summary judgment.² Moore, 123 F.3d at 1089. That denial likely considered, in the context of the Rule 15 standard, the undue prejudice the amendment would have on the defendants if the amendment were permitted. The Court finds no basis in that opinion for denying leave to amend on the bare grounds that Plaintiffs' Motion for Summary Judgment is pending before it.

If Defendants instead cite Viehweg and Moore in an attempt to persuade the Court to deny leave to amend based on the similarity of the instant case to those cases, that attempt falls short. First, the parties' roles are reversed—in both Viehweg and Moore, the plaintiffs moved to amend their complaints after the defendants filed for summary judgment, but here Plaintiffs filed for summary judgment, not Defendants. See Viehweg, 5 F. Supp. 2d at 756; Moore, 123 F.3d at 1089. Second, in both cases the courts considered leave to amend in circumstances quite different from those here. For instance, in Viehweg, the plaintiff filed the motion to amend eight months after the CMO deadline for amendment of pleadings and after defendant had already moved for summary judgment twice. See Viehweg, 5 F. Supp. 2d at 756. Here, Plaintiffs moved to amend within the deadline set by the CMO, see Docs. [40] and [41], and only Plaintiffs have moved for summary judgment. As already discussed, the Moore court affirmed denial of leave to amend where the plaintiff sought to add three new defendants to the case, Moore, 123 F.3d at 1089, whereas here, Plaintiff wants to add only one additional claim. As made clear in the Court's analysis below, these are significant differences for purposes of amendment under Rule 15.

Turning now to its analysis, the Court reiterates that Plaintiffs brought their Motion within the CMO's amendment-of-pleadings deadline of July 17, 2020. The Court will therefore apply the liberal standard of Rule 15(a) rather than the good-cause standard of Rule 16(b) in deciding whether to grant Plaintiffs' Motion. It will therefore deny leave to amend only if Defendants have demonstrated undue delay, bad faith, futility of the amendment, or unfair prejudice as a result of the amendment. Hillesheim, 897 F.3d at 955.

A. Undue Prejudice

At the outset, the Court finds misplaced Defendants' argument that permitting the amendment will prejudice them by forcing them "to defend two separate lawsuits dealing with the same subject matter." See Doc. [44] at 4-5. That argument makes little sense when plaintiffs frequently join multiple claims arising out of the same circumstances in a single lawsuit, a result that is expressly contemplated and permitted by the Federal Rules of Civil Procedure. See Fed. R. Civ. P. 18(a) ("A party asserting a claim, counterclaim, crossclaim, or third-party claim may join, as independent or alternative claims, as many claims as it has against an opposing party.").³

Defendants make two other arguments falling under the undue-prejudice umbrella: first, that Plaintiffs have not explained the eight-month period between the filing of...