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Class Produce Group, LLC v. Harleysville Worcester Ins. Co.

United States District Court, D. Maryland

November 5, 2018

CLASS PRODUCE GROUP, LLC, Plaintiff,
v.
HARLEYSVILLE WORCESTER INSURANCE COMPANY, Defendant.

          MEMORANDUM AND ORDER

          Stephanie A. Gallagher United States Magistrate Judge

         Plaintiff Class Produce Group, LLC (“CPG”) brought this action against Defendant Harleysville Worcester Insurance Company (“Harleysville”), alleging that Harleysville failed to indemnify CPG pursuant to an insurance contract, and failed to pay CPG's insurance claim. [ECF 38]. The parties consented to proceed before a magistrate judge. [ECF 68]. Presently pending is CPG's Motion for Leave to File a Second Amended Complaint, [ECF 89], and Harleysville's Opposition, [ECF 92]. CPG did not file a Reply. I find that no hearing is necessary. See Loc. R. 105.6 (D. Md. 2016). For the reasons set forth herein, CPG's Motion for Leave to File a Second Amended Complaint will be DENIED.

         I. BACKGROUND[1]

         CPG operates a business that processes produce and resells the produce to customers and end users. [ECF 38, ¶ 7]. Harleysville sold CPG a Commercial Lines Insurance Policy (the “Policy”), which indemnified CPG against “loss for various covered perils occurring at its facilities.” Id., ¶ 6. The limit of insurance for property coverage under the Policy exceeds $1 million. Id. On September 14, 2012, CPG leased warehouse space located at 8441 Dorsey Run Road, Jessup, Maryland (the “Warehouse”). Id., ¶ 8.

         On September 23, 2013, the Warehouse flooded because of a sewer line back-up. Id., ¶ 11. CPG contends that the flooding was a result of “hidden, latent defects, ” namely drainage pipes that were the wrong diameter and were “old and dilapidated, ” sump pumps that were “old, undersized, dilapidated, and worn out, ” and grease traps that were clogged with grease. Id., ¶¶ 10-11. CPG alleges that it spent a total of $338, 475.42 to investigate and repair the sewer line back-up and to install temporary water drainage facilities. Id., ¶¶ 12-13. CPG also alleges that it spent $7, 800.00 to clean up and restore the flooded space leased by its neighboring tenant. Id., ¶ 14.

         On October 11, 2013, CPG sought indemnification from Harleysville under the Policy. Id., ¶ 15. Harleysville denied coverage. Id., ¶ 16; see also [ECF 89-2] (letter dated October 23, 2013, from Harleysville denying coverage). After several attempts by CPG in 2015 and 2016 to persuade Harleysville to reconsider its denial, on August 15, 2016, CPG filed suit in the Circuit Court for Howard County against Harleysville. [ECF 2, 38 ¶¶ 18-21]. Harleysville timely removed the case to this Court on October 12, 2016, based on diversity of citizenship. [ECF 1]; 28 U.S.C. § 1332. On May 31, 2017, Judge Hollander granted CPG's Motion for Leave to File a First Amended Complaint. [ECF 36].

         CPG's First Amended Complaint added three factual allegations: (1) the limit of insurance for property coverage under the Policy exceeds $1 million; (2) CPG paid $7, 800 to clean up and restore the neighboring tenant's property; and (3) an allegation citing to the particular contractual provision of the Policy at issue. Id. at 6. Judge Hollander deemed these amendments “relatively minor, ” and found no reason not to allow CPG to amend its Complaint accordingly. Id. at 6-18. On June 19, 2017, Harleysville filed a Motion to Dismiss CPG's Amended Complaint, [ECF 39], which Judge Hollander granted in part and denied in part. [ECF 54]. Judge Hollander dismissed Count II of CPG's Amended Complaint, a claim for bad faith failure to pay an insurance claim. Id. at 19-28.

         On May 16, 2018, Judge Hollander issued a Scheduling Order, setting a deadline of July 16, 2018 for amendment of pleadings. [ECF 62]. The parties have since engaged in discovery efforts, including filing CPG's Rule 26(a)(2) disclosures, serving written discovery, and producing documents. On September 10, 2018, this Court held a telephonic conference to address discovery and scheduling issues. As a result of that conference, this Court issued an Amended Scheduling Order, setting a discovery deadline of December 24, 2018. [ECF 79].

         CPG first moved to file a Second Amended Complaint on August 17, 2018, to add claims related to a separate “umbrella policy.” [ECF 72]. After Harleysville submitted an opposition on August 31, 2018, [ECF 73], CPG withdrew its motion on September 17, 2018. See [ECF 83]. On September 25, 2018, CPG filed the instant motion for leave to file a Second Amended Complaint in order to clarify its obligation under the lease for the flooded Warehouse. [ECF 89]. Specifically, CPG seeks to add the following allegations: (1) “The Lease was defined as ‘Business Personal Property' under the Policy.”; (2) “CPG's Lease required that CPG remediate, repair and clean up any damage caused by its operations in its leased space, and indemnify its landlord for any resulting loss. CPG's Lease obligation included remediating the conditions causing damage, if these conditions, when combined with CPG's operations, including its extraordinary waste water discharge, would cause damage.”; and (3) “CPG had to repair the resulting damage and remediate the conditions causing it, or face eviction and loss of valuable rights under the Lease which would have exceeded the costs of remediation and repair.” [ECF 89-7]. In addition, CPG seeks to modify an allegation in paragraph 11 to read: “On September 23, 2013, CPG's intensive use of its leased premise stressed the latent, hidden defects, and caused waste water to back up in the Warehouse Sewer System and into the Warehouse and its surrounding areas, causing CPG and the other tenant in the Warehouse damage and loss.” Id.

         In the Second Amended Complaint, CPG also seeks to remove the claim of bad faith failure to pay an insurance claim, which Judge Hollander had dismissed, [ECF 54]. See [ECF 89-7]. Harleysville opposes CPG's motion, citing undue delay, prejudice, and futility. [ECF 92]. CPG did not file a Reply.

         II. STANDARD OF REVIEW

         Federal Rule of Civil Procedure 15 provides that a party seeking to amend its pleading after twenty-one days following service may do so “only with the opposing party's written consent or the court's leave.” Fed.R.Civ.P. 15(a)(1)(B). The Rule requires courts to “freely give leave when justice so requires.” Fed.R.Civ.P. 15(a)(2). The Fourth Circuit has liberally construed this standard, such that leave to amend should be denied only if prejudice, bad faith, or futility is present. See Johnson v. Oroweat Foods Co., 785 F.2d 503, 509 (4th Cir. 1986) (interpreting Foman v. Davis, 371 U.S. 178 (1962)); Hart v. Hanover Cnty. Sch. Bd., 495 Fed.Appx. 314, 315 (4th Cir. 2012).

         Nonetheless, “[u]nder Rule 15(a), the district court has ‘broad discretion concerning motions to amend pleadings[.]' … A district court may deny a motion to amend for reasons ‘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 or futility of the amendment.'” Griaznov v. J-K Technologies, LLC, 2017 WL 915000, at *3 (D. Md. Mar. 8, 2017) (citing Booth v. Maryland, 337 Fed.Appx. 301, 312 (4th Cir. 2009) (per curiam) (quoting Foman, 371 U.S. at 182)).

         III. ...


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