Nationwide Mut. Ins. Co. v. Korzan
| Decision Date | 04 August 2016 |
| Docket Number | CIV. 15-4124-KES |
| Parties | NATIONWIDE MUTUAL INSURANCE COMPANY, Plaintiff, v. CURTIS KORZAN and LORIE KORZAN, Defendants. |
| Court | U.S. District Court — District of South Dakota |
ORDER GRANTING MOTION TO AMEND DEFENDANTS' ANSWER AND COUNTERCLAIMS AND DENYING DEFENDANTS' PARTIAL JUDGMENT ON THE PLEADINGS
Defendants, Curtis Korzan and Lorie Korzan, seek to amend their answer and counterclaims to include affirmative defenses and also move for partial judgment on the pleadings. Plaintiff, Nationwide Mutual Insurance Company, resists the motions. For the following reasons, the court grants defendants' motion to amend their answer and counterclaims and denies defendants' motion for partial judgment on the pleadings.
FACTS
The facts as alleged in the pleadings, taken in favor of plaintiff, are as follows:
Defendants own Grand Slam Hunts, LLC, a hunting lodge, located in rural Kimball, South Dakota. In 2014, defendants purchased additional property near the lodge that included an outbuilding and a dwelling. Defendants obtained a Nationwide farm insurance policy on the new property. On March 24, 2015, a fire destroyed the outbuilding valued at $250,000. On March 27, 2014, a second fire destroyed the dwelling and its contents. Both the defendants and Nationwide agree that the dwelling was valued at $394,586, but disagree as to the value of the contents. Nationwide states that the contents were valued at $5,170 while defendants assert the contents were worth significantly more.
Nationwide investigated the second fire and found that the dwelling had not been occupied for at least 120 consecutive days before the fire. The policy included an unoccupancy and vacancy provision:
If a dwelling is 'vacant' or 'unoccupied' beyond a period of 120 consecutive days, we will reduce the amount we would otherwise pay for damage to the dwelling and its contents by 50%, unless we extend the period of 'vacancy' or 'unoccupancy' by endorsement made a part of this Coverage Form.
Docket 1-1 at 38 (Farm Property Coverage Form). The policy defined "unoccupied" as "a 'dwelling' (except while being constructed) not being lived in." Id. at 41. Per the unoccupancy provision, Nationwide paid a total of $199,878, which was 50% of the $394,586 for the dwelling plus 50% of the $5,170 in contents coverage.
Defendants subsequently filed a complaint with the South Dakota Department of Labor and Regulation Division of Insurance (DOI). In the DOI complaint, defendants alleged that Nationwide was required to pay the full amount for the dwelling and its contents under SDCL 58-10-10.1 Defendantsclaim that the DOI found in their favor. Defendants also assert, however, that the DOI shared its decision solely with Nationwide.
On July 16, 2015, Nationwide filed a complaint with this court asking for a declaratory judgment on whether the unoccupancy provision is valid under South Dakota law. Docket 1. On September 14, 2015, defendants filed an answer and counterclaims. Docket 7. Defendants did not, however, plead the affirmative defenses of res judicata or failure to exhaust administrative remedies. See Id. On October 28, 2015, the scheduling order set the deadline for prediscovery disclosures as November 17, 2015, the deadline for motions to amend the pleadings as February 2, 2016, and all discovery to be commenced by April 4, 2016. Docket 13.
On March 4, 2016, defendants moved for partial judgment on the pleadings. Docket 14. On March 30, 2016, defendants moved to amend the answer and counterclaims to include the affirmative defenses of res judicata and failure to exhaust administrative remedies.2 Docket 18.
Fed. R. Civ. P. 8(c) requires a defendant to plead affirmative defenses in its answer otherwise, "[g]enerally, [the] failure to plead an affirmative defenseresults in a waiver of that defense." First Union Nat'l Bank v. Pictet Overseas Trust Corp., 477 F.3d 616, 622 (8th Cir. 2007). A "technical failure to comply with Rule 8(c) is not fatal[,]" however, if it is done "in a manner that does not result in unfair surprise." Sherman v. Winco Fireworks, Inc., 532 F.3d 709, 715 (8th Cir. 2008) (quoting First Union Nat'l Bank, 477 F.3d at 622) (citations omitted)). The Eighth Circuit has "recognized that Rule 8(c) is not an absolute bar to a party's belated attempt to plead an affirmative defense . . . ." Id.
Additionally, defendants' motion to amend "implicated both Rule 15(a) and Rule 16(b)." Id. "Rule 15(a) governs the pretrial amendment of pleadings and states that where an amendment is not sought 'as a matter of course'—as defined by the Rule—'a party may amend its pleading only with the opposing party's written consent or the court's leave.' " Id. (quoting Fed. R. Civ. P. 15(a)(2)). "A district court appropriately denies the movant leave to amend if 'there are compelling reasons such as undue delay, bad faith, or dilatory motive, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the non-moving party, or futility of the amendment.' " Id. (quoting Moses.com Sec., Inc. v. Comprehensive Software Sys., Inc., 406 F.3d 1052, 1065 (8th Cir. 2005) (citations omitted)).
Rule 16(b), on the other hand, requires that scheduling orders "be modified only for good cause and with the judge's consent." Fed. R. Civ. P. 16(b)(4) (emphasis added). The Eighth Circuit has ruled that "in cases in which the deadline to amend pleadings has past," then "the primacy of Rule 16(b) over Rule 15(a)" establishes that the "good cause" standard applies. Sherman,532 F.3d at 715-16 (citing Fin. Holding Corp. v. Garnac Grain Co., 127 F.R.D. 165, 165-66 (W.D. Mo.1989)).
The principal measurement of good cause is "the movant's diligence in attempting to meet the order's requirements." Rahn v. Hawkins, 464 F.3d 813, 822 (8th Cir. 2006). In Sherman, the Eighth Circuit found the defendant failed to establish good cause to amend its answer to include an affirmative defense for a number of reasons: (1) the motion to amend was filed over seventeen months after the scheduling deadline for amending pleadings; (2) defendant admitted awareness of the defense eight months prior to moving for the amendment; (3) defendant did not apply the defense until the summary judgment stage; and (4) "no change in the law, no newly discovered facts, or any other circumstance made the [affirmative] defense more viable after the scheduling deadline for amending pleadings." Sherman, 532 F.3d at 717-18.
In Barstad v. Murray County, the court ruled the plaintiffs did not have good cause to amend the complaint when they were almost two months past the deadline, but had known about the claim they sought to add for twenty-one months. Barstad v. Murray Cty., 420 F.3d 880, 883 (8th Cir. 2005). In Hartis v. Chicago Title Insurance Co., the court found the plaintiffs were not diligent when they waited to amend their complaint until two years after the scheduling order deadline. The court found their actions to be a deliberate, tacticaldecision that was made to avoid the possibility of the court denying class certification. Hartis v. Chi. Title Ins. Co., 694 F.3d 935, 948-89 (8th Cir. 2012).
Here, defendants assert there is good cause to amend the answer to include the affirmative defenses of res judicata and failure to exhaust administrative remedies because defendants were not made aware of the DOI decision until November 2015.3 Defendants still waited, however, to amend their answer until March 30, 2015—nearly four months after receiving the DOI decision and almost two months after the deadline passed for amending the pleadings.
Although the defendants were somewhat dilatory, their delay fails to compare to situations where courts have not found good cause. In Sherman, the motion to amend came eight months after the defendant was aware of the defense, and seventeen months after the deadline. Sherman, 532 F.3d at 717-18. In Barstad, plaintiffs were aware of the claim for twenty-one months before they moved to amend the complaint two months past the deadline. Barstad, 420 F.3d at 883. In Lillibridge v. Nautilus Insurance Co., this court denied defendant's motion to amend its answer and withdraw a defense when it was made twelve months after the scheduling order deadline. Lillibridge v. Nautilus Ins. Co., No. 10-4105-KES, 2013 WL 870439, at *6 (D.S.D. March 7, 2013). InPucket v. Hot Springs School District No. 23-2, this court refused defendant's motion to amend its pleadings when the motion was not made until "over three years past the court's deadline." Pucket v. Hot Springs Sch. Dist. No. 23-2, 239 F.R.D. 572, 589-90 (D.S.D. 2006). In this case, defendants' delay was relatively brief.
Additionally, there is no evidence that defendants deliberately delayed making the motion to amend or chose to delay as a tactical matter as the plaintiffs did in Hartis. Hartis, 694 F.3d at 948-49. Also, defendants have not missed any other scheduling order deadlines. Thus, the court finds the defendants were diligent "in attempting to meet the order's requirements." See Hawkins, 464 F.3d at 822.
A secondary measure of good cause is "prejudice to the nonmovant resulting from modification of the scheduling order." Sherman, 532 F.3d at 717 (). "The burden of proving prejudice lies with the party opposing the motion." Lillibridge, 2013 WL 870439, at *6 (citing Roberson v. Hayti Police Dep't, 241 F.3d 992, 995 (8th Cir.2001)). Plaintiffs do not cite any reason why the amendment would prejudice them through further delay or additional discovery. Docket 22.
In Pucket, the court found that allowing defendants to raise third-party complaints three years after the pleadings deadline passed, after "[d]iscovery is closed and the motions deadline has passed," while "[t]here are three pending...
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