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noting that although the movants expert may not have become aware of information that would support the claim sought to be made by amendment, "there is no justifiable reason for this information not to have been obtained far earlier"
Summary of this case from Curol v. Energy Resource Technology, Inc.Opinion
CIVIL ACTION NO. 02-0916, SECTION "N" (5).
July 11, 2003.
MINUTE ENTRY
Before the Court are the Objections to Magistrate Judge's Ruling filed by Defendant Schubert's Marine Sales Service, Inc. ("Schubert") on June 18, 2003 (Rec. Doc. No. 79), and the opposition memorandum filed by Plaintiff, Royal Insurance Company of America ("Royal"), on July 1, 2003 (Rec. Doc. No. 84). Schubert objects to Magistrate Judge Chasez's ruling of June 11, 2003 (Rec. Doc. No. 70), which denied Schubert's May 27, 2003 Motion for Leave to Amend Answer (Rec. Doc. No. 62). With that motion, Schubert sought to amend its answer to raise the following affirmative defense: "The failure [of] the engine room high bilge alarm to properly function is a superseding cause."
The Parties' Arguments
Magistrate Judge Chasez denied Schubert's motion for leave to amend as "untimely." Schubert concedes that it filed its motion subsequent to the April 21, 2003 deadline for amendments set in the Court's March 21, 2003 scheduling order (Rec. Doc. No. 44). It argues that it nonetheless should be allowed to amend because its expert, Ben C. Haveman, first discovered the basis for the affirmative defense during his May 19, 2003 inspection of the yacht FIRST CLASS, which occurred before the June 10, 2003 discovery deadline, and timely reported the results of his investigation in his supplemental expert report. Schubert further contends that it did not unduly delay in seeking leave to amend, and that the amendment will not unduly prejudice Royal, because Schubert previously asserted, as an affirmative defense, that Plaintiff's insured failed to take reasonable steps to see to the safety and seaworthiness of the FIRST CLASS prior to and after the casualty. According to Schubert, its proposed amendment should be allowed because it seeks only to identify the "specific and latent unseaworthiness asserted and the legal ramifications thereof" recently revealed through discovery. Reasoning that Plaintiff's April 11, 2003 deadline for submitting expert reports has passed, and that no extension has been requested for supplementation of reports, Schubert additionally rejects Royal's contention that it will be prejudiced by the amendment because its "experts might have to re-think and amend their expert reports." Thus, given Rule 15(a)'s policy favoring amendment, Schubert contends that it should be allowed to assert its additional affirmative defense.
In response, Royal argues that leave to amend is not required by Rule 15(a) when the district court has a "substantial reason" for denying that relief. Royal maintains that Schubert's amendment should not be allowed because it is untimely, and because Royal should not be forced to attempt to investigate this "new defense" subsequent to the deadline for discovery and amidst trial preparation. Royal further urges that amendment is inappropriate because it would be futile. Specifically, it argues that Haveman's opinion is inadmissible under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and Federal Rules of Evidence 702 and 403, because it lacks reliability and relevance, and because its prejuducial effect outweighs its alleged probative value. Additionally, according to Royal, the failure of one of the FIRST CLASS's three bilge alarms is not a superceding cause.
Analysis
Rule 15(a) of the Federal Rules of Civil Procedure instructs that leave of court to amend a party's pleading should be freely given when justice requires. See Fed.R.Civ.P. 15(a). Although the decision to grant or deny a motion for leave to amend is a matter of the district court's discretion, the Fifth Circuit has emphasized that Rule 15(a) "`evinces a bias in favor of granting leave to amend.'" Martin's Herend Imports, Inc. v. Diamond Gem Trading United States of America Company, 195 F.3d 765, 770 (5th Cir. 1999) (quoting Dussouy v. Gulf Coast Inv. Corp., 660 F.2d 594, 597 (5th Cir. 1981)).
Recently, however, the Fifth Circuit clarified that when, as here, a scheduling order has been issued by the district court, Rule 16(b) governs amendment of pleadings. See SW Enterprises, L.L.C. v. Southtrust Bank of Alabama, 315 F.3d 533, 535-36 (5th Cir. 2003). Under Rule 16(b), a scheduling order "shall not be modified except upon a showing of good cause." See Fed.R.Civ.P. 16(b). Thus, when a party's request to amend will require modification of a deadline established in a Rule 16 scheduling order, Rule 15(a)'s liberal standard for amendment will apply only if Rule 16(b)'s good cause requirement has been satisfied. SW Enterprises, L.L.C., 315 F.3d at 536.
Rule 16 requires district courts to enter a scheduling order that, among other things, limits the time to join other parties and to amend pleadings. See Fed.R.Civ.P. 16(b).
Here, Schubert's May 27, 2003 motion for leave to amend was filed more than a month after the April 21, 2003 deadline for amendments. Accordingly, the Court must consider whether Schubert has established good cause for modifying that order. To demonstrate good cause, a party must "`show that the deadlines cannot reasonably be met despite the diligence of the party needing extension.'" SW Enterprises, 315 F.3d at 535 (quoting 6A CHARLES ALLEN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 1522.1 (2d ed. 1990)). Regarding untimely motions to amend pleadings, the Fifth Circuit has considered the following factors in evaluating whether good cause for modification exists: (1) the movant's explanation for its failure to timely move for leave to amend; (2) the importance of the amendment; (3) the potential prejudice in allowing the amendment; and (4) the availability of a continuance to cure that prejudice. See SW Enterprises, 315 F.3d at 536.
Having considered all of these factors, and finding the first two to be particularly important in this case, the Court concludes that Schubert has not shown good cause for modifying the Court's scheduling order. First, the Court finds Schubert's explanation for its failure to file its motion for leave to amend prior to the April 21, 2003 deadline to be inadequate. Schubert offers only that Mr. Haveman first discovered that the vessel's bilge was compartmentalized, rather than one open bilge as he originally thought, when he inspected the vessel on May 19, 2003. It was Mr. Haveman's discovery of this additional bit of information, when considered in light of other information previously provided to him, that purportedly led him to opine for the first time that the engine room bilge pump alarm must have been inoperable on March 14, 2000. Eight days after Mr. Haveman's inspection of the vessel, Schubert filed its motion for leave to amend.
Although Mr. Haveman may not have become aware of the configuration of the vessel bilge until May 19, 2003, there is no justifiable reason for this information not to have been obtained far earlier. The incident giving rise to this suit occurred on March 14-15, 2000 — more than three years ago. Indeed, Schubert's first surveyor, Perry Beebe, inspected the vessel immediately after the sinking incident, and issued a report in early April 2000.
Although Mr. Haveman was not retained until on or around October 2002, sufficient time and opportunity remained for him to become fully apprised of all relevant information about the vessel. At the time he was retained, trial was scheduled for March 17, 2003, discovery was to end on February 4, 2003, and the defendants' expert reports were due on January 6, 2003. In late November 2002, the Court extended the expert report deadlines by one month at Royal's request. Mr. Haveman then submitted his first expert report on January 16, 2003. Although Mr. Haveman purportedly reviewed numerous depositions, witness statements, and other documents, as well as talking to the Schubert's yard manager, in connection with his preparation of that report, he apparently did not seek to inspect the vessel itself (or, apparently, to obtain a reliable diagram of the vessel's bilge layout). Still more time was allowed for discovery and inspection when Alphonse Roberts requested a continuation of the trial, in February 2003, and a new trial date and pretrial deadlines, including amendment, discovery, and expert report deadlines, were set.
Thus, because of the continuation requested by Mr. Roberts, Schubert essentially was given two different opportunities during this litigation — spanning over more than a year's time — to obtain all the discovery it and its expert needed, make any necessary amendments to its pleadings, and obtain/submit appropriate expert reports. Significantly, however, other than saying that it was "unable" to arrange Mr. Haveman's inspection of the FIRST CLASS between its April 28, 2003 request therefor and the May 12, 2003 expert report deadline, Schubert fails to explain why it was approximately six months after Mr. Haveman was retained, seven days after the second deadline for amendments, April 21, 2003, and only fourteen days before Schubert's third expert report deadline, May 12, 2003, that it first requested that Mr. Haveman be allowed to inspect the vessel. Indeed, it is not as if the vessel has been destroyed, or its bilge configuration changed, in the more than three years since the March 14-15, 2000 incident. Nor has Schubert made any assertion that Royal or its insured has sought to withhold pertinent documents from Mr. Haveman or previously has objected to or improperly delayed his inspection of the vessel.
Second, and even more important, the Court is not convinced of the necessity of the amendment that Schubert seeks. In explaining its objection to the magistrate judge's ruling to this Court, Schubert argues that its proposed amendment does nothing more than provide additional notice of the specific and latent unseaworthiness that was more generally alleged in affirmative defense number seven of its answer to Royal's second amended complaint, as well as the legal ramifications of that information. According to Schubert, under notice pleading principles, the parties long "should have been on notice of any defense arising from the asserted unseaworthiness of the vessel prior to the casualty."
See Schubert's February 13, 2003 Answer to Second Amended Complaint of Royal Insurance Company of America (Rec. Doc. No. 38), Affirmative Defense No. 7.
These statements are telling. If Schubert already put the other parties on notice of Royal's insured's alleged failure to ensure the seaworthiness of the vessel, and the specifics of that theory have now been communicated through Mr. Haveman's supplemental expert report and his June 24, 2003 deposition, the Court sees no need for the additional affirmative defense. The Court notes, moreover, that Schubert additionally asserted affirmative defenses alleging Royal's insured's negligence, as well as the complete or partial bar to any recovery from Schubert that Royal's insured's fault purportedly would provide. Thus, Schubert's prior pleadings should allow it to introduce all properly admissible evidence necessary to prove any contributing fault, whether based on a negligence or unseaworthiness theory, by Royal's insured.
See Schubert's May 24, 2002 Answer (Rec. Doc. No. 5), Affirmative Defenses Nos. 1 2.
Nor does the Court find inclusion of the assertion that the bilge alarm's failure to function properly constitutes a "superceding cause" in the proposed affirmative defense to warrant a different result. Based on the parties' pleadings, pretrial order, and other submissions demonstrating the evidence that will be presented at trial, the Court cannot find the alleged improper functioning of one of the alarms to be a superseding cause. See Exxon Co., U.S.A. v. Sofec, Inc., 517 U.S. 830, 837, 116 S.Ct. 1813, 1818 (1996) (superseding cause doctrine, which cuts off the liability of an admittedly negligent defendant, applies where injury was brought about by a later cause of independent origin that was not foreseeable); Nunley v. M/V DAUNTLESS COLOCOTRONIS, 727 F.2d 455, 463-66 (5th Cir. 1984) (en banc) (discussing when an intervening force supersedes prior negligence), cert. denied, 469 U.S. 832 (1984).
With respect to the third factor — prejudice from allowing amendment — Royal emphasizes the impending July 21 trial date and argues that allowing the amendment would require its experts to investigate this "new" defense, despite the passage of the discovery deadline, rather than focusing on necessary trial preparation. Mr. Haveman's supplemental report, which purportedly motivated Schubert's motion for leave to amend, was timely issued, however, on May 19th, and Schubert's motion was made on May 27th. Both occurred more than six weeks ago and, more importantly, prior to the Court's June 10, 2003 discovery deadline. Further, the Court is aware that the parties have continued limited discovery, including the deposition of Mr. Haveman, after the passage of the Court's discovery deadline, and, as of July 10, 2003, still were considering deposing at least one other witness. Despite having had this opportunity to investigate and evaluate Mr. Haveman's revised theory regarding the events leading the vessel's partial sinking, the Court notes that, to its knowledge, Royal has made no effort to supplement its own expert reports. In any event, as the Court explained above, assuming Mr. Haveman's testimony otherwise is admissible and that the theory is not rejected for other reasons, Schubert's previously alleged affirmative defenses are broad enough to allow introduction of evidence tending to establish that an inoperable bilge alarm was a causal factor in the partial sinking of the FIRST CLASS. Thus, the Court does not find that allowing the additional affirmative defense would cause substantial prejudice to Royal.
To the extent that Schubert's proposed amendment, if allowed, would warrant a continuance of the trial, the Court finds that the fourth factor weighs against Schubert. This action was filed on March 27, 2002, more than two years after the partial sinking of the FIRST CLASS, and already has been continued once. All of the pretrial deadlines, included those for expert reports and discovery, likewise have been extended one or more times. A further continuance in all likelihood would unnecessarily delay the trial and possibly result in the loss of evidence. Indeed, the Court notes that one apparently important witness has died since the March 2000 incident.
Despite the Court's conclusion that allowing Schubert's belated amendment would not unduly prejudice Royal, the Court believes that the other factors weighing heavily against the amendment preclude a determination that Schubert has satisfied Rule 16(b)'s show cause requirement. Because the Court finds that good cause does not exist to modify the April 21, 2003 deadline for amendments, the Court is not required to decide whether amendment would be justified under Rule 15(a)'s liberal standards. Nevertheless, the Court notes that Rule 15(a) does not require the district court to allow an untimely amendment that would be futile. See Martin's Herend Imports, Inc., 195 F.3d at 771; Jamieson v. Shaw, 772 F.2d 1205, 1208-09 (5th Cir. 1985). Because the Court does not find the alleged failure of one of the three bilge alarms on the FIRST CLASS to function properly to qualify as a superseding cause in this case, Schubert's proposed amendment would be futile. Accordingly, given the futility of the amendment proposed by Schubert, as well as the absence of prejudice that will result from denying leave to amend, the Court likewise finds that Rule 15(a) does not require it to grant Schubert's motion.
Finally, the Court does not find it necessary, for purposes of addressing Schubert's objections to the magistrate judge's ruling on its motion for leave to amend, to decide whether Mr. Haveman's opinion is inadmissible under Daubert and the Federal Rules of Evidence. The Court, however, will treat Royal's assertion of this argument as a motion in limine that will be considered at trial at such time as those evidentiary objections are made with respect to Mr. Haveman's testimony.
Conclusion
For the foregoing reasons, the Court finds that Schubert's effort to amend its answer to assert an additional affirmative defense is untimely and should not be allowed. Accordingly, Schubert's objections to Magistrate Judge Chasez's June 11, 2003 ruling are OVERRULED.
As explained herein, however, the Court finds the scope of the affirmative defenses already asserted by Schubert to be sufficiently broad enough to allow the introduction of evidence establishing Royal's insured's alleged comparative fault. Such evidence may include that demonstrating the failure of one of the bilge pump alarms to function properly on March 14-15, 2000, if that evidence otherwise is admissible. Royal's argument that Daubert and/or Federal Rule 403 render Mr. Haveman's expert testimony regarding that theory inadmissible will be addressed at trial when and if Mr. Haveman's testimony is offered. Any other evidentiary objections to that evidence, if properly raised at trial or through a timely filed motion in limine, will be addressed at the appropriate time.