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The Humane Society of United States v. National Union Fire Insurance Co. of Pittsburgh

United States District Court, D. Maryland

July 11, 2016



          DEBORAH K. CHASANOW United States District Judge.

         In this multi-faceted insurance coverage dispute, several matters are ready for resolution.[1] First, Plaintiffs The Humane Society of the United States (“HSUS”), Jonathon Lovvorn, and Kimberly Ockene (collectively, the “Plaintiffs”) seek leave to amend their complaint. (ECF No. 90). Second, the parties dispute whether Plaintiffs have satisfied - or can satisfy -their discovery obligations concerning legal defense costs being sought. (ECF Nos. 89; 92; 93). For the following reasons, Plaintiffs’ motion for leave to amend will be denied, and the court will grant the parties 60 days of additional discovery regarding defense costs in the underlying Feld Litigation.

         I. Plaintiffs’ Motion for Leave to Amend

         A. Background

         A more complete recitation of the factual background can be found in the court’s prior memorandum opinion on summary judgment. (See ECF No. 84, at 1-7). The initial complaint in this case was filed in the Circuit Court for Montgomery County, and Defendant National Union Fire Insurance Company of Pittsburgh, PA (“National Union” or “Defendant”) removed the action to this court. (ECF No. 1). As currently applicable, Plaintiffs assert a claim for insurance coverage against Defendant in connection with a lawsuit filed against them by Feld Entertainment, Inc. HSUS is a national nonprofit organization dedicated to protecting animals, and Mr. Lovvorn and Ms. Ockene are employed as attorneys with HSUS. According to Plaintiffs, Defendant:

breached the terms of the [Management Liability, Professional Liability, Crime Coverage and Kidnap and Ransom/Extortion Coverage for Non Profit Organizations, Policy No. 01-932-56-98, for the policy period June 1, 2009, to June 1, 2010 (the “2009-2010 D&O Policy”)] by refusing to pay the losses that Plaintiffs may, are, or will be obligated to pay because of the Feld Litigation.

(ECF No. 2 ¶ 36). Plaintiffs also seek a declaratory judgment that Defendant is obligated to pay all losses that Plaintiffs may become legally obligated to pay in the Feld Litigation. (Id. ¶ 46).

         The original scheduling order set August 15, 2013, as the deadline for the amendment of pleadings. (ECF No. 11, at 2). Although the discovery deadlines were extended, the deadline to amend pleadings and add parties was not modified. A subsequent scheduling order established that the parties would complete discovery on or before October 10, 2014, and file dispositive motions by November 20. (ECF No. 62).

         After discovery concluded, Defendant moved for summary judgment. (ECF No. 68). On July 30, 2015, the court issued a memorandum opinion and order granting in part and denying in part Defendant’s motion for summary judgment. (ECF Nos. 84; 85). The court entered judgment in favor of Defendant on a portion of Plaintiffs’ breach of contract claim, concluding that “no coverage is available for HSUS under [Coverage C of] the 2009-2010 [D&O] Policy.” (ECF No. 84, at 25). Defendant’s summary judgment motion was denied as to the individual plaintiffs, Mr. Lovvorn and Ms. Ockene. (See Id. at 25-39).[2]The parties participated in telephonic conferences on August 26 and September 9. On September 8, Plaintiffs for the first time expressed their intent to seek leave to file an amended complaint. (See ECF No. 86).

         In response to the court’s letter order confirming matters discussed during the conference call, Plaintiffs filed the pending motion for leave to amend. (ECF No. 90). Defendant responded in opposition (ECF No. 91), and Plaintiffs replied (ECF No. 94). In the proposed amended complaint, Plaintiffs seek to add claims for breach of contract and declaratory judgment under two additional insurance policies that Defendant sold to HSUS: Policy No. 965-95-51, for the period January 1, 2007, to January 1, 2008 (the “2007-2008 D&O Policy”); and Professional Liability Insurance for Corporate Counsel, Policy No. 01-950-29-84, for the period June 1, 2009, to June 1, 2010 (the “Employed Lawyers Policy”). (See ECF No. 90-2).[3]

         B. Standard of Review

         The deadline established by the scheduling order for the amendment of pleadings was August 15, 2013, and that deadline has long since passed. (ECF No. 11). Consequently, Plaintiffs must do more than satisfy the liberal standard of Fed.R.Civ.P. 15(a); they must first meet the mandates of Fed.R.Civ.P. 16(b)(4), which calls for “good cause” to modify a scheduling order. See Nourison Rug Corp. v. Parvizian, 535 F.3d 295, 298-99 (4th Cir. 2008); Elat v. Ngoubene, 993 F.Supp.2d 497, 519-20 (D.Md. 2014) (applying a two-prong test under Rules 16(b)(4) and 15(a) in analyzing an untimely motion for leave to amend).

         “A schedule may be modified only for good cause and with the judge’s consent.” Fed.R.Civ.P. 16(b)(4); see Nourison, 535 F.3d at 298 (“[D]istrict courts require the effective case management tools provided by Rule 16. Therefore, after the deadlines provided by a scheduling order have passed, the good cause standard must be satisfied to justify leave to amend the pleadings.”). The movant satisfies the good cause requirement by showing that, despite due diligence, it could not have brought the proposed claims in a reasonably timely manner. See Montgomery v. Anne Arundel County, Md., 182 F.App’x 156, 162 (4thCir. 2006); Rassoull v. Maximus, Inc., 209 F.R.D. 372, 374 (D.Md. 2002); Potomac Elec. Power Co. v. Elec. Motor Supply, Inc., 190 F.R.D. 372, 375 (D.Md. 1999) (“Properly construed, ‘good cause’ means that scheduling deadlines cannot be met despite a party’s diligent efforts.” (citation and internal quotation marks omitted)). The factors courts consider in determining good cause are the “danger of prejudice to the non-moving party, the length of delay and its potential impact on judicial proceedings, the reason for the delay, and whether the movant acted in good faith.” Tawwaab v. Va. Linen Serv., Inc., 729 F.Supp.2d 757, 768-69 (D.Md. 2010) (citation and internal quotation marks omitted). As Judge Williams explained:

Courts in the [United States Court of Appeals for the] Fourth Circuit deny leave to amend a complaint past the deadline established by a scheduling order where the moving party has been careless in developing his claims or where he has failed to satisfactorily account for his failure to do so. Compare Whichard v. Specialty Restaurants Corp., 220 F.R.D. 439, 441 (D.Md. 2004) (denying plaintiff’s motion to join an additional defendant five months after the court imposed deadline because plaintiff had ample notice before the deadline that the original defendant might not be the right party) with Long v. Blair, No. 2:09-CV-00349, 2010 WL 1930220 (S.D.W.Va. May 12, 2010) (holding that good cause existed where the plaintiff did not establish a sufficient evidentiary basis to support new claims until after the deadline for amending his complaint and moved to amend immediately after the new evidence came to light).

Id. at 769. The dictates of Rule 16(b) are not to be taken lightly, as “a judge’s scheduling order is not a frivolous piece of paper, idly entered, which can be cavalierly disregarded by counsel without peril.” Potomac Elec., 190 F.R.D. at 375 (citation and internal quotation marks omitted).

         If Rule 16(b) is not satisfied, there is no need to consider Rule 15(a). See Nourison, 535 F.3d at 299; Marcum v. Zimmer, 163 F.R.D. 250, 254 (S.D.W.Va. 1995) (“[T]he focus of the inquiry is upon the moving party’s reasons for seeking modification. If that party was not diligent, the inquiry should end.”). Once the movant has met the burden of showing good cause, however, the inquiry shifts to Rule 15(a), which provides that “court[s] should freely give leave [to amend a pleading] when justice so requires.” Fed.R.Civ.P. 15(a)(2). Denial of leave to amend is appropriate “only when the amendment would be prejudicial to the opposing party, there has been bad faith on the part of the moving party, or the amendment would be futile.” Edwards v. City of Goldsboro, 178 F.3d 231, 242 (4thCir. 1999) (emphasis in original) (quoting Johnson v. Oroweat Foods Co., 785 F.2d 503, 509 (4th Cir. 1986)). Leave to amend may be denied as futile “if the proposed amended complaint fails to satisfy the requirements of the federal rules, ” including federal pleading standards. Katyle v. Perm Nat. Gaming, Inc., 637 F.3d 462, 471 (4th Cir. 2011) (quoting United States ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 376 (4th Cir. 2008)).

         C. Analysis

         Plaintiffs’ proposed amendments add claims for breach of contract and declaratory judgment under two additional insurance policies that Defendant sold to HSUS, the 2007-2008 D&O Policy and the Employed Lawyers Policy. In their motion, Plaintiffs addressed only the liberal standards of Rule 15(a) regarding amendments to pleadings. According to Plaintiffs:

The [c]ourt should grant Plaintiffs’ motion for leave to amend because: (1) Plaintiffs have a good-faith basis to add claims under the 2007-2008 D&O Policy and the Employed Lawyer[s] Policy because [Defendant] has breached . . . its coverage obligations under these policies;[4] (2) [Defendant] will not be prejudiced by amendment; and (3) amendment is not futile.
. . . [I]n granting [Defendant] summary judgment [on Plaintiffs’] claim for coverage under Coverage C . . . in the 2009-2010 D&O Policy, the [c]ourt opened the prospect for coverage under the 2007-2008 D&O Policy, causing Plaintiffs to give notice under [the 2007-2008 D&O Policy].

(ECF No. 90-1, at 4-5). Plaintiffs further assert that “granting Plaintiffs’ motion to amend will promote interests of judicial economy by allowing disputes over coverage under all three [p]olicies to be resolved in one litigation, thereby avoiding costly and unnecessarily duplicative litigation and the possibility of inconsistent results.” (Id. at 5). In the pending motion, however, Plaintiffs neglect to consider Rule 16(b) and their burden to show good cause to modify the existing scheduling order.

         According to Defendant, Plaintiffs’ failure to address good cause under Rule 16(b) in their pending motion is alone sufficient to warrant denial. Defendant argues that:

Plaintiffs would not have been able to meet their burden . . . because they cannot show that they were diligent in seeking leave to amend in light of their admission that they believed, as far back as 2010, that the 2007-2008 D&O Policy and the . . . Employed Lawyers Policy covered the Feld Litigation. Despite this belief, Plaintiffs waited more than two years after the [s]cheduling [o]rder deadline for amendments, close to a year after the 15-month discovery period ended, and nearly two months after this [c]ourt decided [Defendant’s] dispositive motion, to file a [m]otion for [l]eave to [a]mend their complaint.

(ECF No. 91, at 1). Assuming arguendo that Plaintiff can satisfy Rule 16(b), Defendant contends that Rule 15(a) mandates denial of Plaintiffs’ motion because Plaintiffs acted in bad faith and, furthermore, because the proposed amended ...

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