HSBC Bank USA v. Resh
| Decision Date | 02 December 2013 |
| Docket Number | CIVIL ACTION NO. 3:12-cv-00668 |
| Court | U.S. District Court — Southern District of West Virginia |
| Parties | HSBC BANK USA, NATIONAL ASSOCIATION, Plaintiff, v. RON RESH and VALARIE REYNOLDS-RESH, Defendants; Counter Claimants; and Third Party Plaintiffs, v. REALTY CONCEPTS, LTD; ANDREW BROSNAC; COLLIERS INTERNATIONAL VALUATION & ADVISORY SERVICES, LLC; PHILIP STEFFEN; LAWYER'S TITLE INSURANCE CORPORATION; and HELEN SULLIVAN, Third Party Defendants. |
Pending before the Court is a motion (ECF No. 219) by Third Party Defendant Lawyer's Title Insurance Corporation ("Lawyer's Title") to amend its answer to the Third Party Complaint. Also pending is a motion (ECF No. 237) by Third Party Plaintiffs Ron Resh and Valarie Reynolds-Resh ("the Reshes") to strike the Supplement filed by Lawyer's Title. For the reasons explained below, the Motion to Amend (ECF No. 219) is GRANTED and the Motion toStrike (ECF No. 237) is DENIED. The Court accordingly DIRECTS Lawyer's Title to file its Amended Answer within 14 days of the entry of this Memorandum Opinion and Order.
HSBC Bank USA, National Association ("HSBC Bank"), commenced the instant litigation by filing a Complaint against the Reshes, seeking over $2.6 million in unpaid principal due on three promissory notes executed by the Reshes, as well as interest, costs, fees, and expenses. The Reshes executed the notes in order to purchase three commercial properties containing "Jiffy Lube" franchises.
The Reshes subsequently filed an amended answer, affirmative defenses, and third party complaint collectively as one document, alleging that property appraisals conducted before the purchase fraudulently over-valued the properties. Third Party Compl., ECF No. 20. The Third Party Complaint asserts claims against Lawyer's Title, in addition to other parties. Lawyer's Title filed its Answer on September 20, 2012. ECF No. 36.
Third Party Defendants Colliers International Valuation & Advisory Services, LLC ("Colliers"), and Philip Steffen filed their own respective Answers on February 15, 2013, following resolution of a motion to dismiss. ECF Nos. 122, 123. They thereafter filed a Motion to Amend their respective Answers on July 30, 2013, for the following reason:
[Colliers and Mr. Steffen move to amend] in order to assert the Affirmative Defenses of accord and satisfaction, payment and release and to assert Counterclaims against Ron Resh and Valarie Reynolds-Resh, individually and in their capacities as Trustees, for breach of a settlement agreement (breach of contract) and for breach of the duty of good faith and fair dealing implied in all contracts.
ECF No. 193 at 2. In support of their motion, Colliers and Mr. Steffen stated that, in December 2010, the Reshes signed a Settlement Agreement and Mutual Release with PGP Valuation, Inc.—the predecessor in interest to Colliers—, but that Colliers and Mr. Steffen did not learn about that Release until on or about June 18, 2013, in the midst of discovery. The Release was completed in the course of a civil action filed by the Reshes in the Court of Common Pleas in Medina County, Ohio. The Reshes opposed the Motion to Amend. This Court found that amendment satisfied the standards in Rules 15(a)(2) and 16(b) of the Federal Rules of Civil Procedure and accordingly granted the motion to amend. Mem. Op. & Order, ECF No. 215.
Two days after the Court granted that Motion to Amend, Lawyer's Title filed the pending Motion to Amend, requesting leave to amend in order to assert the following:
Lawyer's Title files this Motion for Leave to Amend their Affirmative Defenses in this matter so as to assert the affirmative defenses of accord and satisfaction, payment and release and to assert counterclaims against Ron Resh and Valarie Reynolds[-]Resh, individually and in their capacities as trustees, for breach of a settlement agreement (breach of contract) and for the breach of their duties of good faith and fair dealing that is implied in all contracts.
Mot. Amend ¶ 1, ECF No. 219. In support of its motion, Lawyer's Title asserts that the Reshes signed a Settlement and Release Agreement ("Release Agreement") on January 11, 2011, in which the Reshes allegedly released all claims against Lawyer's Title. The Release Agreement was filed as an exhibit to the motion. The Reshes filed a Response in Opposition to the Motion to Amend, arguing that the amendment would be futile and that the motion is untimely. Lawyer's Title then filed a Reply and separate "Supplement." The Reshes filed a Motion to Strike the Supplement, and Lawyer's Title filed a Response in Opposition to the Motion to Strike. These two motions are now ripe for resolution.
In Section II, the Court will discuss the propriety of the Supplement filed by Lawyer's Title. Section III discusses the legal standard applicable to the Motion to Amend. In Section IV, the Court applies that standard to the facts of this case.
On October 3, 2012, Lawyer's Title filed its Reply in Support of its Motion to Amend, in which it is discussed inconsistencies between Ms. Reynolds-Resh's affidavit—submitted by the Reshes—and her deposition testimony. ECF No. 234. A few weeks later—on October 21, 2013—, Lawyer's Title filed a so-titled "Supplement," which explained that Lawyer's Title did not have the deposition transcript when the Reply was filed, but that the transcript was now available. ECF No. 234. Lawyer's Title attached portions of the transcript as an exhibit to the Supplement.
The Reshes filed a Motion to Strike the Supplement, pointing out that Lawyer's Title did not first seek leave of Court before filing the Supplement, which allegedly violates the Local Rules of Civil Procedure. ECF No. 237. Local Rule of Civil Procedure 7.1(a)(7) states in pertinent part that "[s]urreply memoranda shall not be filed except by leave of court." The Reshes argue that the filing is repetitive and will cause confusion. Lawyer's Title responds that its filing is a supplement—not a surreply—and that the supplement does not add new argument but rather merely supports already-asserted arguments. ECF No. 240. Lawyer's Title also asserts that the filing does not cause confusion.
Neither party cites any authority other than the rule itself. The Court will treat the Supplement as it would treat a "notice of additional authority," because the Supplement merely adds newly-released authority that was not available when the earlier pleadings were filed. The Reply referenced the transcript, which was simply unavailable at the time the Reply was filed. Therefore, the Supplement will be considered by the Court, and the Motion to Strike is denied.
Under Rule 15(a)(2) of the Federal Rules of Civil Procedure, after the time to amend as a matter of course has expired, Rule 16(b)(4) states that a scheduling order "may be modified only for good cause and with the judge's consent." As this Court explained in Stewart v. Coyne Textile Services, "a motion to amend . . . filed after the deadline established in the scheduling order, must satisfy the tests of both Rule 16(b) and Rule 15(a)" in order to be granted. 212 F.R.D. 494, 496 (S.D. W. Va. 2003).
As the Supreme Court has explained in discussing Rule 15(a), "In the absence of any apparent or declared reason—such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc.—the leave sought should, as the rules require, be 'freely given.'" Foman v. Davis, 371 U.S. 178, 182 (1962). In contrast, Rule 16(b)'s "good cause" standard focuses on the diligence of the moving party. Stewart, 212 F.R.D. at 496-97 (citing Marcum v. Zimmer, 163 F.R.D. 250, 254 (S.D. W. Va. 1995)). Rule 16(b) provides a higher hurdle for movants, and the Fourth Circuit affirms that this higher standard applies when the deadline to amend has expired. Branch Banking & Trust Co. v. First Am. Title Ins. Co., No. 5:11-CV-00473, 2013 WL 85342, at *2 (S.D. W. Va. Jan. 7, 2013) (). Again, "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 thediligence of the moving party." Id. at *2 (quoting Montgomery v. Anne Arundel Cnty., 182 Fed. App'x 156, 162 (4th Cir. 2006) (per curiam)).
First, the Court clarifies that both Rule 15(a)(2)'s standard and Rule 16(b)'s "good cause" standard apply in the instant case. Although the most recent scheduling order does not include a deadline for amending pleadings, an earlier scheduling order did establish a September 19, 2012, deadline for amending pleadings. ECF No. 21 ¶ 1. Subsequent amended scheduling orders were filed after that deadline passed and so it was not necessary for those orders to discuss a deadline for amendment. ECF Nos. 67, 176, 226. Therefore, just as with the earlier Memorandum Opinion and Order granting amendment, the Court will apply Rule 16(b)'s "good cause" standard here in addition to Rule 15(a)(2)'s standard.
This is the first amendment sought by Lawyer's Title. The Reshes do not argue that Lawyer's Title acted in bad faith, but rather argue that Lawyer's Title did not act with due diligence in seeking amendment. By the time Lawyer's Title sought leave to amend, nearly a year had passed since Lawyer's Title filed its original answer and since the deadline for amendment expired. Lawyer's Title claims that when Colliers and Mr. Steffen filed their own motion for leave to amend based on their own...
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