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Allstate Insurance Co. v. Regions Bank

United States District Court, S.D. Alabama, Southern Division

August 19, 2014

REGIONS BANK, Defendant.


WILLIAM H. STEELE, Chief District Judge.

This matter comes before the Court on Plaintiff's Motion for Leave to Amend Complaint (doc. 90). The Motion has been extensively briefed and is now ripe.

I. Relevant Background.

Plaintiff, Allstate Insurance Company, brought this action against defendant, Regions Bank, alleging fraudulent and deceptive conduct. The subject of the Complaint is the parties' involvement in financing a failed real estate project known as the Town of Saltaire, on the western shore of Mobile Bay in coastal Alabama. In particular, the Complaint alleges that Regions misled or tricked Allstate into authorizing the release of $11.3 million in proceeds of Saltaire infrastructure bonds that Allstate had purchased in December 2007.

At the time that Allstate purchased the bonds, the Complaint states, Allstate entered into a so-called "Side Agreement" with the developer. That Side Agreement imposed tight restrictions on the release of those bond proceeds to the Saltaire project, including most notably a requirement that the final $11.3 million would not be made available until Regions (which was depicted in the Side Agreement as controlling a $14.5 million line of credit in Saltaire's favor) reached a $16 million commitment to the project. Simply put, Allstate forbade the release of its funds ( i.e., the bond proceeds) until Regions had committed more than $16 million. According to the Complaint, Regions issued a "bogus" $2 million commitment letter to the developer on January 30, 2008, for the purpose of deceiving Allstate into believing that Regions had reached the requisite $16 million funding level and green-lighting release of the $11.3 million in bond proceeds. The Complaint alleges that Regions' scheme worked to perfection: Allstate released the bond proceeds, Regions never funded the $2 million commitment letter or otherwise came close to a $16 million commitment to the project, Regions ultimately walked away, Saltaire failed, and Allstate lost millions of dollars. Based on those allegations, Allstate asserts state-law claims against Regions on theories of fraudulent representation, negligent misrepresentation, and fraudulent concealment/suppression.

This case was originally filed in the U.S. District Court for the Northern District of Illinois on July 18, 2013; however, venue was transferred to this District Court pursuant to the discretionary transfer provisions of 28 U.S.C. § 1404(a) some seven months later on Regions' motion. On April 22, 2014, Magistrate Judge Cassady entered a Rule 16(b) Scheduling Order (doc. 69), providing in relevant part as follows: "Motions for leave to amend the pleadings and to join other parties must be filed not later than June 20, 2014." (Doc. 69, at 5 ¶ 4.)[1] The Scheduling Order also fixed a November 3, 2014 discovery cutoff date and a May 2015 trial setting.

On July 11, 2014, exactly three weeks after the Scheduling Order deadline for motions to amend pleadings or join additional parties, Allstate filed a Motion for Leave to Amend the Complaint. The stated objective of the proposed amendment is to name George Jones as an additional party defendant, with allegations that "Jones and Regions... conspired to trigger the release of all the bond proceeds through a fraudulent scheme." (Doc. 94-1, ¶ 20.) Allstate thus proposes naming Jones as an additional defendant for the existing claims of fraudulent misrepresentation, negligent misrepresentation, and fraudulent concealment/suppression, and adding a new claim against Jones and Regions for civil conspiracy. Regions opposes the amendment on a host of grounds recited in a 25-page memorandum of law.

II. Analysis.

A. Governing Legal Standard.

Ordinarily, motions to amend pleadings are subject to a permissive, liberal standard, pursuant to which "the court should freely give leave when justice so requires." Rule 15(a)(2), Fed.R.Civ.P.; see also Bowers v. U.S. Parole Com'n, Warden, ___ F.3d ___, 2014 WL 3339497, *5 (11th Cir. July 9, 2014) ("District courts have limited discretion in denying leave to amend, and should grant a motion to amend unless there are substantial reasons to deny it.") (citation and internal marks omitted). However, the relaxed Rule 15(a)(2) standard must yield to a more stringent analysis where, as here, the applicable deadline for amending pleadings expired before the motion was filed. In that scenario, "[a] plaintiff seeking leave to amend its complaint after the deadline designated in a scheduling order must demonstrate good cause' under Fed.R.Civ.P. 16(b)." Southern Grouts & Mortars, Inc. v. 3M Co., 575 F.3d 1235, 1241 (11th Cir. 2009); see also 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).").[2] Pursuant to that rule, "[a] schedule may be modified only for good cause and with the judge's consent." Rule 16(b)(4), Fed.R.Civ.P.

Allstate filed its Motion for Leave to Amend Complaint on July 11, 2014, some 21 days after the applicable Scheduling Order deadline had lapsed. Accordingly, the Court's evaluation of Allstate's Motion is informed in the first instance by Rule 16(b) "good cause" principles. If Allstate has made an adequate showing of good cause for modification of the Scheduling Order to allow its untimely request for amendment, then the Court will turn its attention to the Rule 15(a) inquiry of whether the interests of justice favor allowing such an amendment.

B. Rule 16(b)(4) "Good Cause" Analysis.

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).[3] "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). The burden of establishing the requisite good cause/diligence rests on Allstate, the party seeking relief from the Scheduling Order. See, e.g., Race ...

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