Firemen's Ins. Co. of Wash. D.C. v. Glen-Tree Invs., LLC
| Decision Date | 19 September 2012 |
| Docket Number | No. 7:11-CV-59-D,7:11-CV-59-D |
| Court | U.S. District Court — Eastern District of North Carolina |
| Parties | FIREMEN'S INSURANCE COMPANY OF WASHINGTON D.C., and UNION INSURANCE COMPANY, Plaintiffs, v. GLEN-TREE INVESTMENTS, LLC, DICKY S. WALIA, SANJAYN. MUNDRA, PERKINS & WILL NORTH CAROLINA, INC., and PERKINS & WILL, INC., Defendants. |
Firemen's Insurance Company of Washington, D.C., ("Firemen's") and Union Insurance Company ("Union") (collectively, "plaintiffs") ask the court to declare that they are not obligated to defend or indemnify Glen-Tree Investments, LLC ("GTI"), Dicky S. Walia ("Walia"), and Sanjay N. Mundra ("Mundra") (collectively, "defendants") in litigation in Mecklenburg County Superior Court stemming from a construction project. According to the amended complaint filed in Mecklenburg County Superior Court, Walia and Mundra are principals and agents of GTI. See [D.E. 1-2] ¶¶ 4-5, 10. Perkins & Will North Carolina, Inc. and Perkins & Will, Inc. are affiliated companies that provided architectural design services to GTI and, thereafter, sued GTI, Walia, and Mundra in Mecklenburg Country Superior Court to collect payment for their services.
Firemen's and Union filed a motion for judgment on the pleadings, which Walia and Mundra oppose. Walia and Mundra filed a motion to amend their answer, which Firemen's and Union oppose. As explained below, Walia and Mundra's motion to amend is denied, and Firemen's and Union's motion for judgment on the pleadings is granted.
On February 14, 2005, GTI hired Perkins & Will, Inc., ("PW") to provide architectural design services for a mixed-use development in Raleigh, North Carolina, called the Soleil Center. See id. ¶¶10-11,25-31.1 On July 1, 2008, GTI suspended work on the Soleil Center because GTI could not secure construction financing. Id. ¶21. GTI attempted to obtain alternative financing, but ultimately terminated the Soleil Center as designed by PW and proceeded with a smaller development. Id. ¶ 22.
On December 20, 2008, PW filed suit against GTI in Mecklenburg County Superior Court seeking payment under its contract with GTI. Id. ¶ 23: see Compl. [D.E 1] ¶ 11. On May 1, 2009, GTI filed an answer denying liability and asserted counterclaims. [D.E. 1-2] ¶ 24. Thereafter, GTI repeatedly failed to comply with discovery orders, and on June 11, 2010, the Mecklenburg County Superior Court sanctioned GTI by striking its answer and entering default against GTI. See Compl. ¶ 13; [D.E. 1-1].
On July 1, 2010, PW filed an amended complaint in Mecklenburg County Superior Court, in which it added Walia and Mundra as defendants. See [D.E. 1-2]. In the amended complaint, PW seeks damages for breach of contract, id. ¶¶ 77-82, breach of a covenant of good faith and fair dealing, id. ¶¶ 83-87, and unfair and deceptive trade practices, id. ¶¶ 101-105, as well as damages in quantum meruit. Id. ¶¶ 88-98. In order to collect the alleged damages, PW also seeks enforcement of a real-property lien, id. ¶¶ 72-76, enactment of an equitable lien, id. ¶¶ 99-100, and piercing of the corporate veil. Id. ¶¶ 106-109.
Firemen's issued a commercial general liability policy listing GTI and the Soleil Group, Inc., (the "Soleil Group") as named insureds, with effective dates of January 27, 2005, to June 27, 2005 (the "Firemen's Policy"). See Compl, ¶ 22; [D.E. 1-3] 9. Union issued a commercial general liability policy listing GTI and the Soleil Group as named insureds, with effective dates of June 27, 2006 to June 27, 2009 (the "Union Policy"). See Compl. ¶¶ 35-38; [D.E. 1-5] 32,35; [D.E. 1-11] 2, 7; [D.E. 2] 27, 30.2 Walia and Mundra, to the extent they were acting within the scope of their duties as either members of GTI or officers of the Soleil Group, are additional named insureds under the Firemen's Policy and the Union Policy (collectively, the "Policies"). See, e.g., [D.E. 1-4] 5; [D.E. 1-8] 31; Compl. ¶¶ 33, 49. Under the Policies, plaintiffs agree to pay "those sums that the insured becomes legally obligated to pay as damages because of... 'property damage' to which this insurance applies." E.g., [D.E. 1 -4] 1; [D.E. 1 -8] 23; see Compl. ¶¶ 24, 40. Plaintiffs E.g., [D.E. 1-4] 1; [D.E. 1-8] 23.
On or about May 14, 2010, plaintiffs received notice of PW's suit in Mecklenburg County Superior Court against defendants. See [D.E. 39-2] 2: cf. Compl. ¶ 21 (alleging May 13, 2010). On June 20,2010, plaintiffs notified Walia and Mundra that they were investigating the lawsuit, and they reserved their rights to deny coverage. See [D.E. 39-2] 9-10, 15-16; see also Compl. ¶ 21; Walia Answer [D.E. 21] ¶ 21; Mundra Answer [D.E. 22] ¶ 21. On August 30, 2010, plaintiffs notified Walia and Mundra that they had hired the law firm of Dean & Gibson to provide a legaldefense to defendants, but that plaintiffs were, again, reserving their rights to deny coverage. See [D.E. 39-2] 1-2, 7; see also Compl. ¶ 21; Walia Answer ¶ 21; Mundra Answer ¶ 21.
On March 18, 2011, plaintiffs filed this suit in the United States District Court for the Eastern District of North Carolina seeking a declaration that the Policies afford no coverage to defendants in the underlying action, and mat plaintiffs have no duty to defend or indemnify defendants in the underlying action. See Compl. ¶ 52. On March 25, 2011, Dean & Gibson moved to withdraw from their representation of Walia and Mundra in the Mecklenburg County Superior Court. See [D.E. 39-1] 4-5. The Mecklenburg County Superior Court granted the motion, subject to the conditions that Dean & Gibson (1) continue to represent Walia and Mundra through scheduled depositions on March 29 and 30, 2011, and (2) take "steps . . . reasonably practicable to protect each client's interests." See id. 2-3. On April 29, 2011, Dean & Gibson notified the Mecklenburg County Superior Court that it had represented Walia and Mundra at their depositions, taken steps to protect their rights, given them adequate notice and time to retain replacement counsel, and that it now was withdrawing as counsel. See id. 8-9.
On June 1, 2011, Walia and Mundra, proceeding pro se, filed separate answers to plaintiffs' complaint [D.E. 21, 22]. On June 7, 2011, plaintiffs moved for entry of default judgment against GTI because GTI failed to respond to plaintiffs' complaint [D.E. 23]. On July 12, 2011, the Clerk of Court entered default against GTI [D.E. 25]. On August 28, 2011, plaintiffs moved for default judgment against GTI [D.E. 28]. On October 28, 2011, the court granted default judgment against GTI and declared that plaintiffs had no duty to defend or indemnify GTI in the underlying action [D.E. 30].
On November 28, 2011, Walia and Mundra, represented by counsel, moved to amend their answers to add a counterclaim alleging that plaintiffs breached their duty to defend under the Policies[D.E. 33, 34]. On December 22, 2011, plaintiffs responded in opposition [D.E. 39].
On January 31, 2012, plaintiffs moved for judgment on the pleadings against Walia and Mundra [D.E. 40]. On February 21, 2012, Walia and Mundra responded in opposition [D.E. 42]. On March 8, 2012, plaintiffs replied [D.E. 43].
Walia and Mundra move to amend their answers to add a counterclaim. See Mem. Supp. Mot. Amend [D.E. 37]. Plaintiffs oppose the motion and cite this court's scheduling order and Federal Rule of Civil Procedure 16. See Pis.' Resp. [D.E. 39] 2-5.
Provided certain time requirements are met, a party may amend a pleading once as a matter of course. See Fed. R. Civ. P. 15(a)(1). However, when a party files a motion to amend a pleading "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 court's scheduling order required that motions [D.E. 27] 2. Therefore, Walia and Mundra's motion to amend, which they filed on November 28, 2011, must meet Rule 16(b)'s good cause standard.
"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 parry." Montgomery v. Anne Arundel Cnty., 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); see StonecrestPartners. LLC v. Bank of Hampton Roads, 770 F. Supp. 2d 778, 784 (E.D.N.C. 2011). The burden to demonstrate good cause is on the moving party. Godwin, 247 F.R.D. at 506. Prejudice, futility, and bad faith are Rule 15(a) considerations, and the court will not consider them unless the movant meets its initial burden of demonstrating "good cause" under Rule 16(b). See Nourison Rue Corp., 535 F.3d at 299; Stonecrest Partners, 770 F. Supp. 2d at 784-85.
Walia and Mundra's sole reason for moving to amend their answers after the October 3, 2011 deadline is that they did not recognize the potential counterclaim until they had retained counsel, which was after the deadline. See Mem. Supp. Mot. Amend 3; cf. [D.E. 31 ] (notice of appearance on November 28, 2011). However, Walia and Mundra's failure to timely recognize the counterclaim falls "short of what is required to satisfy the good cause standard." Nourison Rug Corp., 535 F.3d at 298; see ...
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