Stonecrest Partners Llc v. the Bank of Hampton Roads

• Decision Date: 14 March 2011
• Docket Number: No. 7:10–CV–63–FL.,7:10–CV–63–FL.
• Citation: 770 F.Supp.2d 778
• Court: U.S. District Court — Eastern District of North Carolina
• Parties: STONECREST PARTNERS, LLC, Plaintiff,v.The BANK OF HAMPTON ROADS, Successor in Interest by Merger to Gateway Bank & Trust Co., Defendant and Third–Party Plaintiff,v.Dennis Chisum, Blanche Chisum, Elliot W. Coleman, Tracy Coleman, Dana J. Jones, Kristi Jones, and Dennis Crocker, Third–Party Defendants.

770 F.Supp.2d 778

STONECREST PARTNERS, LLC, Plaintiff,

v.The BANK OF HAMPTON ROADS, Successor in Interest by Merger to Gateway Bank & Trust Co., Defendant and Third–Party Plaintiff,

v.Dennis Chisum, Blanche Chisum, Elliot W. Coleman, Tracy Coleman, Dana J. Jones, Kristi Jones, and Dennis Crocker, Third–Party Defendants.

No. 7:10–CV–63–FL.

United States District Court, E.D. North Carolina.

March 14, 2011.

Matthew W. Buckmiller, Shipman and Wright, LLP, Wilmington, NC, for Plaintiff.Camden R. Webb, Elizabeth Connolly Stone, Williams Mullen, Julia Renee Wicker Lee, Raleigh, NC, for Defendant.

ORDER

LOUISE W. FLANAGAN, Chief Judge.

This matter comes before the court upon the objections and appeal of plaintiff and third-party defendants (collectively, “movants”) of the decision by the magistrate judge denying their motion for leave to amend the complaint (DE # 65).¹ The court has considered the briefings presented by the parties to the magistrate judge as well as movants' objections to the magistrate judge's order. The time for further briefing has passed, and the issues raised now are ripe for adjudication. For the reasons that follow, the court upholds the magistrate judge's determination.

STATEMENT OF THE CASE

Plaintiff filed this breach of contract and negligence action against Gateway Bank & Trust Co. (“Gateway Bank”) in Brunswick County Superior Court on March 25, 2010. Plaintiff alleges that Gateway Bank failed to follow through with a loan commitment agreement. Defendant, the successor in interest by merger to Gateway Bank, removed the action to federal court on April 5, 2010. This court's jurisdiction is invoked under 28 U.S.C. §§ 1332 and 1441, based on allegations of complete diversity of citizenship and an amount in controversy exceeding $75,000.00.

Defendant answered the complaint on April 23, 2010, denying liability. In its responsive pleading, defendant counterclaimed against plaintiff, seeking to collect on a promissory note that is allegedly in default. Defendant also initiated a third-party complaint against third-party defendants, alleging that they are liable for plaintiff's indebtedness pursuant to a commercial guarantee executed contemporaneously with the promissory note. On May 12, 2010, plaintiff and third-party defendants jointly answered defendant's counterclaim and third-party complaint.²

On July 14, 2010, following a telephonic conference with the parties, the court entered a Rule 16(b) scheduling order in this case. Among those deadlines set by the court, as required by Rule 16(b)(3)(A), was the deadline for any motion seeking to amend the pleadings. The court ordered that any such motion be filed by September 21, 2010.

Plaintiff sought leave to amend its complaint by motion filed September 20, 2010, the day before the deadline set by the scheduling order. In its proposed amended complaint, plaintiff continued to assert the original claims for breach of contract and negligence against defendant, but sought to add allegations of fraud, unfair and deceptive trade practices, and constructive fraud. The proposed amended complaint also sought punitive damages.

On September 28, 2010, Mr. Bruce Robinson, lead counsel for plaintiff and third-party defendants, unexpectedly passed away. The court, on the uncontested motions of defendant, extended the time within which to complete discovery and to respond to the motion for leave to amend. Plaintiff's uncontested motion to extend the time to disclose its experts was similarly extended. A later joint motion to further extend expert disclosures was also allowed.

On November 5, 2010, plaintiff and third-party defendants were able to obtain new counsel to assist them in this matter. Defendant requested a further extension of time to respond to the complaint in light of new counsel and defendant's understanding that plaintiff was considering further amendments to the complaint. The motion was consented to, and the court extended the response time as requested.

Plaintiff, this time joined by third-party defendants, once again requested leave to amend the complaint on November 30, 2010. The second proposed amended complaint contains claims for declaratory judgment, unfair and deceptive trade practices, fraud, fraud in the inducement, rescission, constructive fraud, breach of contract, negligence, and negligent misrepresentation. It also contains allegations seeking a temporary restraining order and injunctive relief. Finally, the second proposed amended complaint contains new claims by the third-party defendants, and movants seek to realign the parties with themselves on one side of the caption and defendant on the other. By notice entered December 1, 2010, plaintiff indicated that it was withdrawing the previous motion to amend filed by Mr. Robinson.

On December 10, 2010, the court entered an order after receiving a telephonic request for conference with the parties to discuss the status of the litigation and possible alterations to the case schedule in light of Mr. Robinson's untimely death. The court ordered the parties to file a supplemental joint report and plan, and suggested it would be amenable to a telephonic conference with the parties. The parties' supplemental joint report and plan, filed December 16, 2010, noted agreement about the need to extend some discovery deadlines; however, defendant contested movants' request to extend the deadline to amend the pleadings. The supplemental report was referred to Magistrate Judge Robert Jones for consideration.

On December 29, 2010, defendant responded in opposition to movants' request for leave to amend the complaint. Defendant argued that the motion was untimely under the scheduling order, and that movants had not provided good cause under Rule 16(b) to alter that deadline. Movants replied on January 6, 2011, and the motion was referred to the magistrate judge.

On January 31, 2010, the magistrate judge entered an order denying movants leave to amend the complaint. The magistrate judge found that movants had not met the “good cause” requirement of Rule 16(b) to amend their complaint after the deadline set by the scheduling order had passed, concluding that the evidence supporting the proposed amendment could have been discovered by reasonable diligence before that deadline. Movants appealed the magistrate judge's order, noting their objections to the magistrate judge's determination on February 14, 2011.

DISCUSSION

A. Standard of Review

The court must first determine the appropriate standard of review. Generally, a district court may designate a magistrate judge to hear and decide any “pretrial matter not dispositive of a party's claim or defense.” Fed.R.Civ.P. 72(a); see also 28 U.S.C. § 636(b)(1)(A). Upon timely objection by a party, the court must modify or set aside any part of a magistrate judge's order that is “clearly erroneous” or “contrary to law.” Fed.R.Civ.P. 72(a); see also Local Civil Rule 72.4(a). “A factual finding is clearly erroneous when [the court is] ‘left with the definite and firm conviction that a mistake has been committed.’ ” TFWS, Inc. v. Franchot, 572 F.3d 186, 196 (4th Cir.2009) (quoting Anderson v. Bessemer City, 470 U.S. 564, 573, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985)). Although the “contrary to law” standard permits plenary review of legal conclusions, see PowerShare, Inc. v. Syntel, Inc., 597 F.3d 10, 15 (1st Cir.2010), decisions related to discovery disputes and scheduling are accorded greater deference. See, e.g., In re Outsidewall Tire Lit., 267 F.R.D. 466, 470 (E.D.Va.2010).

Movants seek to avoid this deferential standard of review. They argue that the magistrate judge's order has the effect of disposing of whatever claims they will not be permitted to add to their complaint through amendment. Accordingly, movants contend that the court should review de novo the magistrate judge's determination. Compare Fed.R.Civ.P. 72(a) (providing for “clearly erroneous” and “contrary to law” review for non-dispositive motions) with Fed.R.Civ.P. 72(b) (providing for de novo review of dispositive motions and prisoner petitioners). Under the more deferential standard suggested by movants, the court may also consider arguments not raised before the magistrate judge. United States v. George, 971 F.2d 1113, 1118 (4th Cir.1992).

Movants provide no support for their argument that de novo review is appropriate where a magistrate judge denies a motion for leave to amend, and it appears that the weight of the authority is in fact contrary to their position. The courts of appeal that have addressed the issue have concluded that “a motion to amend a complaint is ‘a pretrial matter not dispositive of a claim or defense of a party’ within the purview of Fed.R.Civ.P. 72(a).” Pagano v. Frank, 983 F.2d 343, 346 (1st Cir.1993); see also Franke v. ARUP Labs., Inc., 390 Fed.Appx. 822, 828 (10th Cir.2010) (unpublished); Fielding v. Tollaksen, 510 F.3d 175, 178 (2d Cir.2007); Hall v. Norfolk S. Ry. Co., 469 F.3d 590, 594–95 (7th Cir.2006). Other district courts within the Fourth Circuit have reached the same conclusion. See, e.g., Schwartz & Schwartz of Va., LLC v. Certain Underwriters at Lloyd's, London, 677 F.Supp.2d 890, 893 (W.D.Va.2009); Everett v. Cherry, 671 F.Supp.2d 819, 820 n. 4 (E.D.Va.2009); Young v. James, 168 F.R.D. 24, 26 (E.D.Va.1996).

The decisions of the courts to have addressed the issue, although not binding on this court, are persuasive. As a general matter, a motion to amend is not “dispositive” of a party's claim or defense, because it does not adjudicate or otherwise dispose of any pending claim or defense but instead merely prevents different and/or additional claims or defenses from being asserted. See Hall, 469 F.3d at 595; Everett, 671 F.Supp.2d at 820 n. 4. As such, a motion for leave to amend may be submitted to a magistrate judge for decision under Rule 72(a), rather than for findings and recommended disposition. The resulting determination is...