Opinion
CV-16-427
06-06-2019
INFOBRIDGE, LLC, Plaintiff v. CHIMANI, INC. f/k/a CHIMANI, LLC, Defendant
ORDER ON DEFENDANT'S MOTION TO AMEND ANSWER
Nancy Mills, Justice
Before the court is defendant Chimani, Inc.'s motion to amend its answer and add affirmative defenses. For the following reasons, the motion is denied.
I. Procedural Background
On November 4, 2016, plaintiff InfoBridge, LLC filed a complaint and alleged three causes of action: count I, breach of contract; count II, quantum meruit; and count III, unjust enrichment. Plaintiff concurrently moved for attachment and trustee process. On November 28, 2016, defendant moved to compel arbitration and dismiss the complaint. On December 29, 2016, defendant filed a motion to seal, On February 15, 2017, plaintiff moved for clarification on the court's pending order on defendant's motion to compel arbitration, On March 6, 2017, the court granted plaintiff's motion for attachment and trustee process and defendant's motion to seal but denied defendant's motions to compel arbitration and dismiss the complaint.
On March 9, 2017, defendant filed a notice of appeal of the court's order for attachment and trustee process. The Law Court affirmed the judgment on October 24, 2017. InfoBridge. LLC v. Chimani. Inc.. 2017 Me. Unpub. LEXIS 92, Mem 17-93. On June 21, 2017, plaintiff moved for clarification of the court's order for attachment and trustee process to ensure the order included defendant's trademarks. On July 12, 2017, defendant moved for attachment by trustee process and moved to vacate the March 6, 2017 order granting plaintiff's motion for attachment and trustee process. On July 13, 2017, defendant filed its answer to plaintiff's complaint. Defendant also filed a counterclaim and a third-party complaint against Shaun Meredith and alleged four causes of action: count I breach of contract against plaintiff; count II, negligence against plaintiff and Mr. Meredith; count III, breach of fiduciary duty against plaintiff and Mr. Meredith; and count IV, constructive trust against Mr. Meredith. On August 2, 2017, plaintiff moved to dismiss defendant's counterclaim and third-party complaint. On January 5, 2018, defendant filed an amended counterclaim and third-party complaint, in which defendant changed count II of its original counterclaim and third-party complaint from negligence to professional negligence and added one count of negligent misrepresentation against plaintiff and Mr. Meredith.
On March 14, 2018, the court issued an order on pending motions. The court: (1) found that plaintiff's motion for clarification on the court's pending order on defendant's motion to compel arbitration was moot; (2) denied plaintiff's motion for clarification of the attachment order; (3) denied defendant's motion for attachment by trustee process; (4) denied defendant's motion to vacate the March 6, 2017 order for attachment and trustee process; and (5) denied plaintiff's motion to dismiss defendant's amended counterclaim and third-party complaint. On May 1, 2018, the court issued an order on the parties' discovery dispute regarding subpoenas that plaintiff had served on third parties.
On May 21, 2018, defendant filed a second amended counterclaim and third-party complaint against Shaun Meredith, in which no causes of action were added or removed. On July 5, 2018, the court signed the parties' proposed consent protective order. On December 27, 2018, the court issued a Rule 26(g) discovery order, in which the court required that defendant provide plaintiff with a username and password for remote read only access to defendant's iOS codes. On January 16, 2019, plaintiff answered defendant's second amended counterclaim and third-party complaint.
On February 28, 2019, plaintiff filed a motion for partial summary judgment on count I of its complaint. On March 6, 2019, parties attended a court required judicial settlement conference. On March 15, 2019, defendant moved to dismiss voluntarily its counterclaim and third-party complaint against Mr. Meredith without prejudice and also moved for protection from the courts December 27, 2018 Rule 26(g) discovery order. On March 21, 2019, defendant opposed plaintiff's motion for partial summary judgment and filed a cross motion for summary judgment. On April 8, 2019, plaintiff opposed defendant's cross motion for summary judgment and replied to defendant's opposition to plaintiff's motion for partial summary judgment. On April 11, 2019, defendant moved to amend its answer and add the affirmative defenses of estoppel and waiver. On April 22, 2018, defendant replied to plaintiff's opposition to defendant's cross motion for summary judgment. On May 1, 2019, plaintiff filed an opposition to defendant's motion to amend its answer and add additional defenses. On May 6, 2019, the court issued an order denying both defendant's motion to dismiss its counterclaim and third-party complaint and defendant's motion for protection from the court's December 27, 2018 Rule 26(g) discovery order.
On May 23, 2019, parties moved for a consented to motion to dismiss defendant's counterclaim and third-party complaint against Shaun Meredith. On May 30, 2019, the court granted the parties' consented to motion to dismiss defendant's counterclaim and third-party complaint against Shaun Meredith.
II. Discussion
A. Defendant's Motion to Amend Answer
Defendant seeks to amend its answer to add two additional affirmative defenses, estoppel and waiver. Defendant argues that justice requires granting its motion to amend and that plaintiff will not be unduly prejudiced. (Def .'s Mot. to Amend 2.) Plaintiff argues that defendant's motion is untimely and that plaintiff would by unduly prejudiced if the court grants defendant's motion to amend. (Pl.'s Opp'n Mot. to Amend 1-2.)
Defendant claims that it was alerted to the defenses of waiver and estoppel when third-party defendant Shaun Meredith sent a letter on March 5, 2019, for indemnification pursuant to an Indemnification Agreement between defendant and Mr, Meredith. (Def .'s Mot. to Amend 2.) The Indemnification Agreement was included as part of defendant's conversion and stock purchase agreement on March 31, 2015. (Def.'s Mot. to Amend 2.) Mr. Meredith's request for indemnification prompted defendant to review its corporate offering documents. Defendant noted that the Software Development Agreement with plaintiff was listed under the transactions and agreements sections only of the Disclosure Schedule but not under the liabilities section. (Def.'s Mot. to Amend 3.) Defendant argues that because Mr, Meredith, a member of Chimani, LLC, and a shareholder and officer of Chimani, Inc., had an opportunity to review the offering documents and did not ensure that the payments plaintiff is now claiming were listed under the former LLC's liabilities, Mr. Meredith and plaintiff waived those payments and/or are estopped from trying to claim them now. (See Def.'s Mot. to Amend); (Def.'s Opp'n to Pl.'s Mot. Summ. J. & Cross Mot. Summ. J.)
Defendant references its argument contained in its Opposition to Plaintiff's Motion for Summary Judgment and Cross Motion for Summary Judgment to support its motion to amend. (Def.'s Mot. to Amend. 1) See M.R.Civ. P, 10(c).
A party may amend its pleadings by leave of court and such leave "shall be freely given when justice so requires." M.R. Civ. P. 15(a). Therefore, "if the moving party is not acting in bad faith or for delay, the motion will be granted in the absence of undue prejudice." Kelly v. Michaud's Ins. Agency. Inc., 651 A.2d 345, 347 (Me. 1994). "When faced with both a motion for a summary judgment and a Rule 15(a) motion to amend pleadings, considerations of finality and judicial economy suggest that a court should dispose of the pending Rule 15(a) motion prior to entertaining a summary judgment." id. at 346.
"Waiver is a voluntary or intentional relinquishment of a known right and may be inferred from the acts of the waiving party." Blue Star Corp. v. CKF Props.. LLC. 2009 ME 101, ¶ 26, 980 A.2d 1270 (quotation marks omitted), "To bar enforcement of a known right, the waiver, however established, must have induced a belief in the party who is claiming reliance on that waiver that the waiving party intended voluntarily to relinquish his rights." Id. (quotation marks omitted). Equitable estoppel "precludes a party from asserting rights which might perhaps have otherwise existed, . . against another person who has in good faith relied upon such conduct, and has been led thereby to change his position for the worse, and who on his part acquires some corresponding right." Dep't of Health & Human Servs. v. Pelletier, 2009 ME 11, ¶17, 964 A .2d 630 (quotation marks omitted).
To support its argument, defendant cites bankruptcy, patent, and security litigation cases. (See Def.'s Opp'n to Pl.'s Mot. Summ. J. & Cross Mot. Summ. J. 8-13.) Contrary to defendant's arguments, Delaware law clearly states that "[t]he conversion of any other entity to a corporation of this State shall not be deemed to affect any obligations or liabilities of the other entity incurred prior to its conversion to a corporation of this State or the personal liability of any person incurred prior to such conversion." Del. Code tit. 8, § 265(e) (2017), The debt incurred by Chimani, LLC was not affected by the conversion to Chiniani, Inc.
Moreover, defendant's Disclosure Schedule was created by defendant, not plaintiff and is a representation by defendant, not plaintiff. (Def.'s A.S.M.F. ¶ 42, Ex. F.) ("[Chimani] hereby represents and warrants to each Purchaser that, except as set forth on the Disclosure Schedule attached as Exhibit C to this Agreement (the 'Disclosure Schedule')] which exceptions shall be deemed to be part of the representations and warranties made hereunder, the following representations are true and complete as of the date of the Closing, except as otherwise indicated.") Defendant's waiver and equitable estoppel defenses have no merit.
The granting of defendant's motion to amend also would unduly prejudice plaintiff. Defendant attempts to raise two new defenses more than two years after plaintiff's initial complaint was filed and fewer than two months before the case is scheduled for trial. Since its initial answer, defendant has amended its counterclaim and third-party complaint twice and participated in mediation and settlement conferences without raising the defenses of waiver or estoppel. These affirmative defenses arc not the result of recently discovered information and could have been raised in the initial answer. The defenses defendant proposes to add arise from a document defendant has had access to for the entirety of this proceeding. To allow defendant to raise these defenses now would potentially result in the reopening of discovery and a further delay to trial.
The entry is
Defendant Chimani, Inc.'s Motion to Amend its Answer to Add Affirmative Defenses is DENIED.