United States District Court, S.D. Alabama, Southern Division
July 25, 2014
JASPER WOOD PRODUCTS, LLC, Plaintiff,
JORDAN SCRAP M INC., et al., Defendants.
WILLIAM H. STEELE, Chief District Judge.
This matter comes before the Court on Plaintiff's Motion for Leave to File Amended Complaint (doc. 87). All three named defendants oppose the Motion ( see docs. 91, 92), which has been briefed and is now ripe for disposition.
I. Relevant Background.
Plaintiff, Jasper Wood Products, LLC ("JWP"), filed its Complaint (doc. 1) against defendants, Jordan Scrap M Inc. ("Jordan"), Peterman Mill Project, LLC ("Peterman"), and James Norman ("Norman") back on June 4, 2013. The Complaint alleged an assortment of state-law tort, contract, and statutory claims, arising from a fire that destroyed certain plywood manufacturing equipment (the "Equipment") owned by JWP. According to the well-pleaded allegations of the Complaint, JWP had purchased the Equipment from Norman, and such Equipment was being stored at a facility owned by Peterman, when Jasper (a contractor performing "hot work" at Peterman's mill) failed to extinguish certain materials properly at the end of the workday on December 12, 2012. The Peterman facility burned down during the overnight hours, and JWP's Equipment was a total loss. As originally formulated, JWP's eight-count Complaint was configured as follows: a bailment claim against Peterman and Norman, negligence and wantonness claims against all defendants, misrepresentation and breach of contract claims against Peterman and Norman, a breach of warranty claim against Peterman and Norman, a claim against Jordan for violation of Alabama Code § 7-2-222,  and a claim against Peterman and Norman for violation of Alabama Code § 7-2-714.
In the ordinary course of this federal litigation, Magistrate Judge Cassady entered a Rule 16(b) Scheduling Order (doc. 23) on October 23, 2013. The Scheduling Order provided, in relevant part, that "Motions for leave to amend the pleadings and to join other parties must be filed not later than December 20, 2013." (Doc. 23, ¶ 4.) At no time prior to that December 20 deadline did JWP or anyone else request relief from, or an extension of, the time for amendments or joinder. To be sure, on March 13, 2014 (nearly three months after that deadline for amending pleadings had passed), the parties submitted a Joint Motion for Amended Rule 16(b) Scheduling Order (doc. 47), requesting enlargement of certain discovery and dispositive motions deadlines because "[t]o date, the parties have not taken any depositions, instead having agreed to mediate the case at this point.... Mediation is currently set for April 1, 2014." (Doc. 47, ¶ 3.) However, nothing in the March 13 Joint Motion requested a revival of the long-lapsed period for amending the pleadings or joining additional parties, or even referenced that particular deadline. At any rate, Judge Cassady denied the request to amend the Scheduling Order, explaining that "[w]hile the Court encourages settlement efforts, the parties cannot disregard the scheduling order. If the parties wished to participate in mediation before taking depositions, they should have scheduled their mediation earlier, as the Court advised." (Doc. 50, at 5.)
Ultimately, Jordan pulled out of the mediation at the eleventh hour, citing an unspecified "scheduling conflict." (Doc. 101, Exh. C.) To date, the mediation evidently has never been rescheduled, with the litigants instead focusing on discovery. ( See doc. 54.) In late April 2014, Jordan filed a motion to extend expert disclosure deadlines, and the parties later submitted a supplemental Rule 26(f) report, once again omitting any request for relief from the deadline for amending pleadings and joining parties. ( See doc. 62; doc. 62-1, ¶ 4; doc. 76.) On May 23, 2014, Judge Cassady entered a Supplemental Scheduling Order (doc. 79), enlarging deadlines for, inter alia, completion of discovery, submission of expert reports and pretrial disclosures, as well as the final pretrial conference and trial settings. The Supplemental Scheduling Order did not reopen the long-expired deadline for amending pleadings, nor is there any indication in the court file that any party requested same.
On June 19, 2014, JWP filed its Motion for Leave to File Amended Complaint. Although the Motion is vague as to what modifications are being proposed and why, JWP explains that during the course of "document production and the depositions of corporate representatives, information has come to light which necessitates the filing of the instant motion... in order to amend certain factual allegations, which were either unclear or unknown at the time of the filing of the initial Complaint." (Doc. 87, ¶ 2). Review of the Motion, as well as a side-by-side comparison of the original and proposed amended complaints, reveals that JWP's proposed modifications to its pleading include, inter alia, the following: (i) joinder of two additional parties plaintiff, Natron Wood Products, LLC, and Dunollie Resources, Inc., both of which are owned by Richard McDougal, who also owns JWP; (ii) correction of Jordan's name from "Jordan Scrap M Inc." to "Jordan Scrap, Inc."; (iii) new factual allegations that the Louisville, Mississippi facility where JWP had planned to move the Equipment was not going to be run by JWP, but was actually going to be operated by Natron under a lease executed by Dunollie; (iv) reduction in claims for fair market value of the Equipment from $5, 230, 000 to $2, 113, 000; and (v) new lost-profit allegations in Counts I, II, III, IV, and VII, including new references to lost profits and valuation of that category of damages at $6.8 million. ( Compare doc. 1 with doc. 87-1.)
The sole authority cited by JWP in support of the Motion for Leave to File Amended Complaint is Rule 15 of the Federal Rules of Civil Procedure. All defendants oppose the Motion as untimely and otherwise improper.
A. Rule 16(b)(4) Governs, at Least in the First Instance.
In both its Motion and its Reply, JWP invokes the relaxed, permissive amendment standard prescribed by Rule 15(a)(2), Fed.R.Civ.P., and argues that its Motion must be granted unless defendants prove prejudice or unfair surprise. ( See doc. 87, ¶ 3; doc. 101, at 3-4.) As all defendants point out, however, plaintiff's argument recites the wrong legal standard. A critical fact that plaintiff's filings overlook is that the original Rule 16(b) Scheduling Order fixed a deadline of December 20, 2013 for amending pleadings or joining additional parties, yet JWP did not move to amend its Complaint until fully six months later, on June 19, 2014.
The Scheduling Order deadline for amending pleadings and joining parties was neither aspirational nor advisory. Rather, the Federal Rules of Civil Procedure are clear that such deadlines "may be modified only for good cause and with the judge's consent." Rule 16(b)(4), Fed.R.Civ.P. Where, as here, a motion to amend "comes long after the deadlines for filing motions to amend established in the scheduling orders entered in this case, " a plaintiff must "show good cause under Federal Rule of Civil Procedure 16(b)." Mann v. Taser Int'l, Inc., 588 F.3d 1291, 1312 (11th Cir. 2009). Simply put, JWP's Motion is governed in the first instance by Rule 16(b)(4)'s "good cause" requirement, not by Rule 15(a)(2)'s "freely give leave" standard. See Smith v. School Bd. of Orange County, 487 F.3d 1361, 1367 (11th Cir. 2007) ("despite Smith's argument on appeal that the district court should have granted his motion to amend his complaint in accordance with the liberal amendment instructions of Rule 15(a), Smith still had to comply with Rule 16(b)'s good cause requirement because he filed his motion to amend... after the court's deadline for such motions"); Sosa v. Airprint Systems, Inc., 133 F.3d 1417, 1419 (11th Cir. 1998) ("[B]ecause Sosa's motion to amend was filed after the scheduling order's deadline, she must first demonstrate good cause under Rule 16(b) before we will consider whether amendment is proper under Rule 15(a).").
Under well-settled law, the "good cause" standard prescribed by Rule 16(b) "precludes modification unless the schedule cannot be met despite the diligence of the party seeking the extension." Sosa, 133 F.3d at 1418 (citation and internal quotation marks omitted). "This rule is strictly enforced, particularly where, as here, the nonmovant has objected to the proposed amendment as untimely under the applicable scheduling order." Roberson v. BancorpSouth Bank, Inc., 2013 WL 4870839, *1 (S.D. Ala. Sept. 12, 2013); see also Will-Burn Recording & Pub. Co. v. Universal Music Group Records, 2009 WL 1118944, *2 n.5 (S.D. Ala. Apr. 27, 2009) ("Particularly where a nonmovant objects to a proposed amendment as untimely under the applicable scheduling order, this Court has strictly applied the Rule 16(b) good cause' standard to belated amendments to the pleadings.").
B. Application of Rule 16(b)(4) Standard.
As noted supra, a key feature of JWP's proposed Amended Complaint is its inclusion of Natron and Dunollie as additional parties plaintiff, along with JWP. That pleading would set forth factual allegations describing the roles of each would-be plaintiff in the contemplated Louisville, Mississippi plywood manufacturing plant to which the Equipment was to have been shipped had it not been destroyed by fire. Under a Rule 16(b)(4) analysis, the obvious problem with JWP's attempt to inject Natron and Dunollie into the case now is that it has not shown (and, by all appearances, cannot show) that the amendment could not have been made prior to December 20, 2013, despite diligence by JWP. In its Motion, JWP makes hazy allusions that "additional information has come to light" during discovery relating to the roles of Natron and Dunollie as to the Louisville facility. (Doc. 87, at 2-3.) But the source of that "additional information" was not defendants; rather, it appears to have been plaintiff itself. Plaintiff did not need discovery from defendants to know that Natron was to operate the Louisville, Mississippi mill, or that the lease had been executed by Dunollie, for the simple reason that JWP, Natron and Dunollie are all owned by the same person. Accordingly, plaintiff has not demonstrated good cause to amend its pleading now to add allegations concerning Natron and Dunollie that were or should have been known by JWP from the outset. See, e.g., Kendall v. Thaxton Road LLC, 2011 WL 3903400, *5 (11th Cir. Sept. 7, 2011) (no good cause for untimely amendment where "the facts with which Kendall wished to amend his complaint were known to Kendall at the time he filed his initial complaint").
Rather than establishing diligence, plaintiff's filings on the Motion for Leave to Amend argue that defendants would not be prejudiced by the proposed amendment. ( See doc. 87, at 4; doc. 101, at 4-6.) However, "[d]iligence, not lack of prejudice, is the touchstone of the Rule 16(b)(4) inquiry." Roberson, 2013 WL 4870839, at *2 (citations omitted); see also De Varona v. Discount Auto Parts, LLC, 285 F.R.D. 671, 672-73 (S.D. Fla. 2012) ("diligence is the key to satisfying the good cause requirement"); Southern Track & Pump, Inc. v. Terex Corp., 722 F.Supp.2d 509, 521 (D. Del. 2010) ("the good cause standard under Rule 16(b) hinges on diligence of the movant, and not on prejudice to the non-moving party") (citation omitted). Without a threshold showing of diligence to warrant modification of the Scheduling Order under Rule 16(b), whether defendants would or would not be prejudiced by the amendment (a relevant criterion under Rule 15(a)(2)) is inconsequential.
In its reply brief, JWP again incorrectly asserts that the Rule 15(a) standard governs its Motion (doc. 101, at 3-4), but then (without acknowledging Rule 16(b)(4)) argues that "the testimony of Steve Jordan clearly establishes any justification or good cause' which may be required of JWP in seeking to amend its Complaint" ( id. at 8). This assertion does not withstand scrutiny. Steve Jordan (who is apparently the owner of defendant Jordan Scrap, Inc.) was deposed on April 1, 2014, several months after the deadline for amending pleadings had passed. ( See doc. 101, Exh. E.) At that time, Steve Jordan did not testify about the relationship between and among JWP, Natron and Dunollie as it relates to the Louisville, Mississippi plywood production facility; therefore, his deposition testimony certainly could not establish "good cause" for that aspect of the proposed amendment. Instead, JWP would rely on Steve Jordan's deposition to evince good cause for the untimeliness of the proposed amendment as it relates to claims of lost profits against defendant Jordan.
On that point, JWP maintains that this deposition "provided JWP with additional facts (testimony) in support of its claim for lost profits against Jordan - Jordan's admission that he was aware that the subject equipment was not to be scrapped, " but was to be moved elsewhere. (Doc. 101, at 7-8.) This argument is unpersuasive for at least two independent reasons. First, the deposition excerpts supplied by JWP do not support the proposition that Steve Jordan knew what JWP intended to do with the Equipment. Upon questioning by plaintiff's counsel, Steve Jordan pointedly testified, "So I don't know what they were going to do with them is what I'm saying." (Doc. 101, Exh. E, at 247.) He then said, "I didn't know anything but I guessed that they were going to take it and use it." ( Id. ) For the witness to testify that he "guessed" (but did not know) that JWP intended to use the Equipment somewhere else is hardly proof of knowledge of JWP's intentions. Second, and more fundamentally, plaintiff does not explain why evidence of Steve Jordan's subjective knowledge or understanding was needed before JWP could plead a claim for lost profits against defendant Jordan. While JWP appears to imply that such knowledge is an essential element of proof for it to recover lost profits, it offers no showing, discussion or explanation to that effect, leaving the Court to guess why evidence of what Steve Jordan guessed might happen to the Equipment matters one whit. On this fragmentary, unexplained rationale, the Court cannot find that Steve Jordan's April 1, 2014 deposition supplies the necessary good cause for JWP's requested modification of the Scheduling Order deadline for amending pleadings.
Nor does plaintiff strengthen its claims for relief by attempting to shift the blame to defendants for its own noncompliance with Scheduling Order deadlines. In its reply, JWP takes defendants to task for "omit[ting] significant facts establishing their contribution to approximately ten (10) months of the twelve (12) month delay." (Doc. 101, at 2.) In plaintiff's words, "Defendants completely ignore the fact that the parties agreed to mediate this matter prior to conducting formal discovery" and further overlook Jordan's "unilateral, unexplained, eleventh-hour cancelation of the April 1, 2014 mediation." ( Id. at 7.) But these facts do not favor amendment of the pleadings. Taken at face value, plaintiff's contention is that the parties basically agreed to do nothing from the time of entry of the Rule 16(b) Scheduling Order in October 2013 until the scheduled mediation date of April 1, 2014. By assenting to such an arrangement, JWP allowed various Scheduling Order deadlines to expire without conducting any formal discovery. Whatever else may be said about plaintiff's decision, it does not exhibit the sort of diligence required by Rule 16(b)(4). Nor does the fact that the April 1 mediation never happened (apparently because of the unilateral act of one defendant) absolve JWP of the natural, foreseeable consequences of the risk it assumed in allowing crucial Scheduling Order deadlines to go by the boards while it sat back waiting for mediation. See generally Secord v. Cockburn, 747 F.Supp. 779, 786 (D.D.C. 1990) ("where a party fails to pursue discovery in the face of a court-ordered cutoff, as here, that party may not be heard to plead prejudice resulting from his own inaction").
Simply put, the parties' agreement to take no discovery for nearly half a year after the Rule 16(b) Scheduling Order was entered in no way constitutes good cause for extending long-expired Scheduling Order deadlines simply because things did not work out as plaintiff had hoped. At any rate, as discussed supra, plaintiff has not shown that the discovery process belatedly commencing on April 1, 2014 yielded necessary information on which its proposed Amended Complaint is predicated; therefore, the issue of defendants' complicity in the timing of discovery is nothing more than a red herring.
C. The Rule 17 Wrinkle.
In its Reply, JWP argues for the first time that the proposed amendment should be allowed pursuant to Rule 17, Fed.R.Civ.P. ( See doc. 101, at 8-10.) But plaintiff's Motion to Amend offers not a whiff of a suggestion that it is proceeding under any authority other than Rule 15. The Rule 17 theory expressed in plaintiff's Reply is a new argument raised for the first time in a reply brief, and therefore improper. See, e.g., Adams v. Homeward Residential, Inc., 2014 WL 460936, *5 n.10 (S.D. Ala. Feb. 5, 2014) ("Federal courts generally do not consider new arguments presented for the first time in a reply brief."); Gross-Jones v. Mercy Medical, 874 F.Supp.2d 1319, 1320 n.8 (S.D. Ala. 2012) ("District courts, including this one, ordinarily do not consider arguments raised for the first time on reply.").
Besides, the text of Rule 17 does not support plaintiff's bald statement that the rule "actually requires that a plaintiff be allowed to amend its pleadings in order to add the real party in interest." (Doc. 101, at 9.) The cited passage of the rule specifies that an action may not be dismissed "for failure to prosecute in the name of the real party in interest until, after an objection, a reasonable time has been allowed for the real party in interest to ratify, join, or be substituted into the action." Rule 17(a)(3), Fed.R.Civ.P. At this time, the Court does not have before it a motion to dismiss for failure to prosecute in the name of the real party in interest. Furthermore, plaintiff has made no showing and advanced no legal argument that the provisions of Rule 17(a)(3) would allow it to disregard Scheduling Order deadlines with impunity or override the "good cause" requirement of Rule 16(b)(4). To date, no party to this action has addressed any of (i) the timeliness of any "real party in interest" challenge that may now be interposed; (ii) the interplay between and among Rule 16(b)(4), Rule 17(a)(3) and Rule 19 as they may relate to any proposed joinder of additional plaintiffs at this time; or (iii) the propriety of a Rule 15 amendment, versus a "ratification, " a Rule 19 joinder, or a Rule 25 substitution to make any correction to the applicable real party in interest. And plaintiff has not explained how any failure on its part to identify the real party in interest from the outset of these proceedings was the sort of honest mistake that might render it eligible for relief under Rule 17(a)(3). See generally Gardner v. State Farm Fire and Cas. Co., 544 F.3d 553, 563 (3rd Cir. 2008) ("Rule 17(a) is the codification of the salutary principle that an action should not be forfeited because of an honest mistake") (citation omitted).
With none of these matters having been developed in the parties' briefing on the existing Rule 15 Motion, this Court will not travel so far afield from plaintiff's original motion by addressing such issues as these, that the parties have not properly presented or briefed.
JWP is asking that the Rule 16(b) Scheduling Order's deadline for motions to amend pleadings and add parties be modified some six months after expiration, to allow it name two new plaintiffs and alter its factual allegations and claims for damages. Plaintiff has not shown "good cause" to warrant such relief, and indeed has not directly addressed the applicable Rule 16(b)(4) standard at all. The orderly, efficient passage of lawsuits through federal courts demands that the Federal Rules of Civil Procedure be followed, and that parties work diligently to adhere to scheduling order deadlines. Yet plaintiff's dilatory amendment would subvert these case-management objectives and render scheduling order deadlines toothless by allowing noncompliance to be neatly sidestepped long after the fact. Granting plaintiff's motion would be tantamount to endorsing such a result; therefore, the Motion for Leave to File Amended Complaint (doc. 87) is denied, with one exception.
All parties apparently concur that the proper, correct name of defendant Jordan is "Jordan Scrap, Inc." rather than "Jordan Scrap M Inc." Because everyone is in agreement as to the propriety of this modest correction, the Motion to Amend is granted in part pursuant to Rule 15(b)(2), insofar as it relates to the name of defendant Jordan. The defendant originally named in the pleadings as "Jordan Scrap M Inc." is to be referenced hereinafter for all purposes in this action (including in court filings, in the style of the case, and at trial) by its correct name, "Jordan Scrap, Inc."
DONE and ORDERED.