FARRAR v. MLLER-ST. NAZIANZ INC.

• Decision Date: 31 March 2011
• Docket Number: No. 5:06-CV-160-D,5:06-CV-160-D
• Court: U.S. District Court — Eastern District of North Carolina
• Parties: FARRAR & FARRAR DAIRY, INC. and FARRAR & FARRAR FARMS, a North Carolina general partnership, Plaintiffs, v. MLLER-ST. NAZIANZ, INC., Defendant.

FARRAR & FARRAR DAIRY, INC. and FARRAR & FARRAR FARMS, a North Carolina general partnership, Plaintiffs,

v.MLLER-ST. NAZIANZ, INC., Defendant.

No. 5:06-CV-160-D

UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF NORTH CAROLINA

WESTERN DIVISION

Date: March 31, 2011

ORDER

Farrar & Farrar Dairy, Inc. ("Farrar Dairy") and Farrar & Farrar Farms ("Farrar Farms") (collectively plaintiffs) sued Miller-St. Nazianz, Inc. ("Miller" or defendant) alleging that Miller sold them defective silage bags that failed despite their normal use. Plaintiffs claim negligence, breach of express warranty, breach of implied warranty of merchantability, unfair trade practices in violation of Wisc. Stat. § 100.20, and unjust enrichment. On August 20,2010, Miller filed a motion to exclude the testimony of plaintiffs' expert at trial [D.E. 154] and a motion for summary judgment [D.E. 149]. On October 11, 2010, plaintiffs responded in opposition to the motion for summary judgment [D.E. 163]. On October 12, 2010, plaintiffs responded in opposition to the motion to exclude [D.E. 168]. On November 1, 2010, Miller replied in support of the motion for summary judgment [D.E. 171]. On November 22,2010, plaintiffs filed a sur-reply [D.E. 175], and requested leave of court to file a third amended complaint [D.E. 176]. On December 16, 2010, Miller responded in opposition to the motion to file a third amended complaint [D.E. 178], to which the plaintiffs replied [D.E. 180]. For the reasons stated below, the court denies leave to amend the complaint, grants the motion for summary judgment, and denies the motion to exclude testimony of plaintiffs' expert at trial as moot.

I.

In its motion for leave to file a third amended complaint, plaintiffs primarily seek to replace their unfair trade practices claim in violation of Wisconsin law with an unfair trade practices claim in violation of North Carolina law. Plaintiffs argue the court must grant their motion because Federal Rule of Civil Procedure 15(a)(2)'s liberal standard requires it. Pls.' Mem. Supp. Mot. Leave Am. 2. In opposition, Miller cites Rule 15 and claims that the proposed amended complaint is untimely, offered in bad faith, futile, and prejudicial. Def.'s Mem. Opp'n Mot. Am. 3.

Provided certain time requirements are met, a party may amend a pleading once as a matter of course. Fed. R. Civ. P. 15(a)(1). Additional amendments are allowed only with the permission of the opposing party or with leave of court, and such leave should be freely given "when justice so requires." Fed. R. Civ. P. 15(a)(2). However, when a party files a motion to amend "after the deadlines provided by a scheduling order have passed, [Rule 16(b)'s] good cause standard must be satisfied to justify leave to amend the pleadings." Nourison Rug Corp. v. Parvizian, 535 F.3d 295, 298 (4th Cir. 2008). Here, the original scheduling order required that motions "to amend pleadings ... be made promptly after the information giving rise to the motion becomes known to the party or counsel. Any such motion filed after October 20,2006, must meet the standards of Fed. R. Civ. P. 15 and 16." [D.E. 22] at 2. On November 30,2006, the court extended the deadlines set forth in that order by 60 days [D.E. 53]. Therefore, any motion to amend filed after December 19,2006, had to meet Rule 16(b)'s good cause standard.¹

"Rule 16(b)'s good cause standard focuses on the timeliness of the amendment and the reasons for its tardy submission; the primary consideration is the diligence of the moving party."Montgomery v. Anne Arundel County. 182 F. App'x 156, 162 (4th Cir. 2006) (per curiam) (unpublished). Good cause exists when a party's reasonable diligence before the expiration of the amendment deadline would not have resulted in the discovery of the evidence supporting a proposed amendment. United States v. Godwin, 247 F.R.D. 503, 506 (E.D.N.C. 2007). The burden to demonstrate good cause is on the moving party. Id. Prejudice, futility, and bad faith are "Rule 15(a) consideration[s]," and the court should not consider them unless the movant meets its initial burden under Rule 16(b). Stonecrest Partners. LLC v. Bank of Hampton Roads. No. 7:10-CV-63-FL, 2011 WL 923950, at *4 (E.D.N.C. Mar. 14, 2011) (quoting Nourison Rue Corp., 535 F.3d at 299).

Here, plaintiffs have failed to demonstrate good cause for waiting until November 22,2010, to seek leave to file their third amended complaint in order to add a claim under the North Carolina unfair trade practices statute. Indeed, plaintiffs fail to offer any reason for their delay, much less attempt to prove reasonable diligence. Cf. Nourison Rug Corp., 535 F.3d at 298-99; Godwin. 247 F.R.D. at 505-08. Plaintiffs filed their motion for leave to file a third amended complaint only after concluding that they lack a cause of action for unfair trade practices under Wisc. Stat. § 100.20. See Pls.' Mem. Opp'n Summ. J. 2 n. 1² Furthermore, plaintiffs state that the Wisconsin and the North Carolina unfair trade practices statutes "involve[] substantially similar facts and analysis." Pls.' Mem. Supp. Mot. Leave Am. 4. Thus, by definition, if plaintiffs had been reasonably diligent, they would have sought to amend their complaint to add the North Carolina claim before the expiration of the amendment deadline of December 19,2006. The tardy discovery of a desire to pursue a claimunder North Carolina's unfair trade practices statutes falls "far short of what is required to satisfy the good cause standard." Nourison Rug Corp., 535 F.3d at 298; Godwin. 247 F.R.D. at 505-08. Therefore, plaintiffs' motion for leave to file a third amended complaint is denied.

II.

Summary judgment is appropriate when, after reviewing the record taken as a whole, no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). The party seeking summary judgment bears the initial burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett. 477 U.S. 317,323 (1986). Once the moving party has met its burden, the nonmoving party may not rest on the allegations or denials in its pleading, Anderson. 477 U.S. at 248-49, but "must come forward with specific facts showing that there is a genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (emphasis removed) (quotation omitted). A trial court reviewing a motion for summary judgment should determine whether a genuine issue of material fact exists for trial. Anderson. 477 U.S. at 249. In making this determination, the court must view the evidence and the inferences drawn therefrom in the light most favorable to the nonmoving party. Scott v. Harris. 550 U.S. 372, 378 (2007).

Plaintiffs operated a dairy farm during the time period relevant to this action. Second Am. Compl. ¶¶ 7-9. Miller is a Wisconsin corporation that sells farm equipment and products. Id. ¶ 10; Malesevich Aff. ¶ 2. By approximately November 30,2004, Miller had purchased certain assets of a company called Ag-Bag International, Inc. ("Ag-Bag"), which sold agricultural silage bags under the name "Ag-Bag." Malesevich Aff. ¶¶ 4-6; Second Am. Compl. ¶ 21.

Silage is green forage or fodder that has been chopped and compacted into an anaerobic container such as a bunker or fixed silo. Second Am. Compl. ¶ 12. Silage undergoes an acid fermentation process inside of the anaerobic container that prevents it from spoiling. Id. This process is called "ensilage." Id. ¶ 13. "Silage bags" are a common type of anaerobic container used in the ensilage process. See id. ¶¶ 12,14. Silage bags were developed as an alternative to storing silage in bunkers or fixed silos. Sutton Aff. f 3. However, Silage bags are extremely sensitive. "Anything that weakens the plastic can cause the bag to split." Def.'s Mem. Supp. Summ. J. 12. Silage bags fail for numerous reasons, most often the overfilling of the bag, but failures are also caused by excessive moisture content of the silage, silage that is too dry, the type of crop used to make the silage, damage to the bags caused by weather or animals, or damage to the bag caused by a damaged bagging machine. Schuette Dep. (2007) 128-135; Pesik Dep. 193; see Farrar & Farrar Dairy, Inc. v. Miller-St. Nazianz. Inc., 254 F.R.D. 68,70 (E.D.N.C. 2008) (listing examples of why silage bags fail).

Although Miller's main goal in purchasing Ag-Bag was to acquire its farm equipment business, Miller decided to continue distributing silage bags under the "Ag-Bag" name. See Malesevich Aff. ¶ 6. When Miller purchased most of Ag-Bag's assets, Ag-Bag had a supply agreement with a company called Up North Plastics, Inc. ("Up North"). Second Am. Compl. ¶ 21; Malesevich Aff. ¶ 6. Up North manufactured the plastic that Ag-Bag used for its silage bags. Second Am. Compl. ¶¶ 21-22; see Malesevich Aff. ¶ 6. Miller did not assume Ag-Bag's supply agreement with Up North when it purchased Ag-Bag's assets, and Miller therefore began looking for another plastic supplier to manufacture the material for the silage bags. Second Am. Compl. ¶ 23; Malesevich Aff. ¶¶ 6-7. In October 2004, Miller entered a business relationship with a Belgian company called Hyplast NV ("Hyplast"), whereby Hyplast agreed to manufacture plastic for the silage bags. See Malesevich Aff. ¶¶ 7, 9,14,17.

Miller did not receive a formula for the plastic that Ag-Bag used in making its silage bags when Miller purchased Ag-Bag's assets. Id. ¶ 16. Instead, Miller gave Hyplast an Ag-Bag silage bag that Up North had manufactured, and Hyplast reverse-engineered a formula. Id. ¶¶ 15-16. According to plaintiffs, Hyplast's reverse-engineered plastic formula did not properly address many of the necessary qualities that a plastic formula for silage bags requires. See Second Am. Compl. ¶ 24.³ However, according to plaintiffs, Miller used the Hyplast-formulated plastic to...