Nat'l Union Fire Ins. Co. of Pittsburgh v. Bowling Green Recycling, LLC

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Docket Number

CIVIL ACTION NO. 1:15CV-00024-GNS

Judges

Henry Brent Brennenstuhl

Acts

Judiciary And Judicial Procedure — District Courts; Jurisdiction — Jurisdiction And Venue — Diversity Of Citizenship; Amount In Controversy; Costs

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Smart Summary

Factual and Procedural Background

This subrogation action concerns approximately $1,935,272.15 in copper wire allegedly stolen from Plaintiff’s insured, Belden, Inc., on more than 50 occasions and sold to Defendants. Plaintiff asserts claims for conversion, unjust enrichment, and negligence. [1]

A Kentucky grand jury indicted Jimmy Lee Pruitt and Christopher C. Pruitt in connection with the thefts, including an organized-crime charge involving the copper-wire thefts. [2] Defendants moved to join Jimmy Pruitt and Charles C. “Chad” Pruitt under Federal Rules of Civil Procedure 19 or 20. Plaintiff opposed the motion, and Defendants filed a reply. [3][4][5][6]

Legal Issues Presented

Whether Defendants demonstrated good cause under Federal Rule of Civil Procedure 16(b)(4) to modify the scheduling-order deadline for joining additional parties. [7][8]
Whether the Court should consider joinder under Rule 19 or Rule 20 after determining whether the scheduling order could be modified. [9]

Arguments of the Parties

Defendants’ Arguments

Complete relief could not be afforded without joining Jimmy and Chad Pruitt because Defendants maintained that they were the sole legal causes of Plaintiff’s loss. [4]
Proceeding without the Pruitts would allegedly prejudice Defendants by omitting two tortfeasors and exposing Defendants to excessive liability. [4]
Joinder would not defeat diversity jurisdiction because both proposed defendants were Kentucky citizens. [4]
Joinder under Rule 20 would promote trial convenience, expedite resolution, and prevent multiple lawsuits. [6]
Good cause allegedly existed because of the litigation’s complexity, potential prejudice, changes in counsel, the status of discovery, and the lack of prejudice to Plaintiff. [6]

Plaintiff’s Arguments

Joint tortfeasors generally are not necessary parties under Rule 19. [5]
The motion was untimely because the scheduling order required motions to join parties to be filed by October 5, 2015, while Defendants filed their motion on February 20, 2017. [5]
Defendants failed to establish the good cause required by Rule 16(b)(4) to modify the scheduling deadline. [5]

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Leary v. Daeschner, 349 F.3d 888, 909 (6th Cir. 2003)	A party must show good cause under Rule 16(b) before a court considers amendment or relief under Rule 15(a); denial of an untimely motion is permissible absent good cause.	The Court relied on Leary in requiring Defendants to satisfy Rule 16(b)(4) before addressing joinder and in evaluating prejudice. [9][10][11]
Inge v. Rock Fin. Corp., 281 F.3d 613, 625 (6th Cir. 2002)	Rule 16 good cause primarily measures the moving party’s diligence and also requires consideration of prejudice.	The Court applied Inge to conclude that Defendants had not shown diligence and that Plaintiff would be prejudiced by reopening discovery. [9][12][11]
McLean v. Alere, Inc., No. 3:12-CV-566-DJH, 2015 WL 1638341, at *1 (W.D. Ky. April 13, 2015)	Good cause must be shown before relief is considered after a scheduling-order deadline.	The Court cited McLean as part of the Sixth Circuit authority supporting this sequencing. [9]
Grant v. Rathbun, No. 3:15-CV-4025-D, 2016 WL 71750572, at *2-5 (N.D. Texas May 3, 2016)	Rule 16(b)(4) must be addressed before a late Rule 20(a) joinder motion.	The Court cited Grant as persuasive authority from another circuit. [9]
Nieves v. John Bean Technologies, Corp., No. 3:13-CV-4059-D, 2014 WL 2587577, at *1-4 (N.D. Texas June 10, 2014)	A court must first decide whether to modify the scheduling order under Rule 16(b)(4) before considering a late Rule 20(a) motion.	The Court cited Nieves as additional persuasive authority supporting that approach. [9]
Woodcock v. Kentucky Dept. of Corr., No. 5:12-CV-00135-GNS-LLK, 2016 WL 3676768, at *2 (W.D. Ky. July 6, 2016)	Good cause primarily concerns diligence and is distinct from the propriety of amendment under Rule 15.	The Court used Woodcock to evaluate Defendants’ diligence and to reject their reliance on delay principles applicable to Rule 15. [12][10]
Tschantz v. McCann, 160 F.R.D. 568, 571 (N.D. Ind. 1995)	Good cause requires showing that, despite diligence, the scheduling timetable could not reasonably have been met.	The Court adopted this formulation through its discussion of Woodcock. [12]
Hutson, Inc. v. Windsor, No. 5:12-CV-GNS-LLK, 2015 U.S. Dist. LEXIS 131033, at *3 (W.D. Ky. Sept. 29, 2015)	Good cause under Rule 16 is distinct from the Rule 15 amendment inquiry.	The Court cited Hutson in support of that distinction. [12]
Moore v. City of Paducah, 790 F.2d 557, 559 (6th Cir. 1986)	Courts may not deny an amendment solely because of delay in the Rule 15(a) context.	The Court found Defendants’ reliance misplaced because this case involved an untimely joinder motion governed by Rule 16(b)(4), not a Rule 15(a) amendment. [10]

Court’s Reasoning and Analysis

Rule 16(b) requires scheduling orders to establish deadlines for joining parties and permits modification only for good cause and with the judge’s consent. [7] The operative scheduling order set October 5, 2015 as the deadline for motions to join parties or amend pleadings, and that deadline had not been modified. Defendants filed their motion more than a year and four months late. [8]

The Court held that it had to determine good cause under Rule 16(b)(4) before considering whether joinder was proper under Rule 19 or Rule 20; otherwise, the scheduling order and Rule 16(b)(4)’s good-cause requirement would be rendered ineffective. [9]

Good cause primarily depends on the moving party’s diligence, and the movant must show that the deadline could not reasonably have been met despite diligence. [12] Defendants did not explain what diligence they exercised or why the relevant information could not have been obtained before the deadline. [13]

The Court found that Defendants knew from the beginning of the action that Jimmy Pruitt allegedly stole the copper wire, and the conversion and negligence claims appeared in the original complaint. Their basis for seeking Jimmy Pruitt’s joinder therefore existed before the scheduling deadline. Although the complaint did not identify Chad Pruitt, Defendants could have obtained that information from their records, the grand-jury indictment, or written discovery. [14]

The Court rejected Defendants’ reliance on Moore because that case concerned delay under Rule 15(a), whereas the present motion was governed by Rule 16(b)(4). [10]

The Court also considered prejudice to Plaintiff. Discovery was substantially complete, and joining the Pruitts would require reopening discovery and substantially delay resolution of an action that had already been pending for more than two years. The resulting prejudice further supported denial of the requested modification. [11]

Holding and Implications

DENIED: The Court denied Defendants’ motion to join Jimmy Pruitt and Chad Pruitt under Rule 19 or, alternatively, Rule 20. [15]

The direct effect was that the proposed additional parties were not joined, because Defendants failed to show Rule 16(b)(4) good cause and Plaintiff would suffer prejudice from modifying the scheduling order. [13][11][15] No broader implications were discussed, and the order did not establish a new precedent.

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NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PENNSYLVANIA PLAINTIFF v. BOWLING GREEN RECYCLING, LLC; BOWLING GREEN RECYCLING II, LLC; BOWLING GREEN RECYCLING OF WARREN COUNTY, INC.; BOWLING GREEN RECYCLING OF LAUREN COUNTY, INC.; and SML PROPERTIES, LLC. DEFENDANTS

H. Brent Brennenstuhl United States Magistrate Judge

MEMORANDUM OPINION AND ORDER

BACKGROUND

Defendants have filed a motion for joinder of parties pursuant to Federal Rule of Civil Procedure 19 or alternatively Rule 20 (DN 46). Plaintiff has filed a response in opposition to the motion (DN 48). Defendants have filed a reply in support of their motion (DN 49).

NATURE OF THE MOTION

This is a subrogation case in which the Plaintiff seeks reimbursement from Defendants for copper wire worth approximately $1,935,272.15 that two thieves stole on more than 50 occasions from Plaintiff's insured, Belden, Inc., and then sold to the Defendants (DN 1 Complaint, DN 28 First Amended Complaint). An investigation revealed that on more than 50 occasions, over several years, Beldon's manufacturing manager, Jimmy Pruitt, stole reels of copper wire intended for production and provided them to accomplices who then transported the copper in a rental truck to Defendants (DN 1 Complaint, DN 28 First Amended Complaint). Plaintiff alleges defendants knew the reels of copper were from Beldon's plant, but would nevertheless pay Jimmy Pruitt and his accomplice, Christopher Pruitt, for the stolen copper wire at a significantly discounted price (DN 1 Complaint, DN 28 First Amended Complaint). In this subrogation action, Plaintiff asserts claims of conversion, unjust enrichment, and negligence against Defendants (DN 1 Complaint, DN 28 1st Amended Complaint).

On May 19, 2014, a grand jury in the Circuit Court in Wayne County, Kentucky issued a multiple count indictment against Jimmy Lee Pruitt and Christopher C. Pruitt for stealing the reels of copper wire from Beldon's plant (DN 46-1, 46-2). Count 44 of the indictment alleges that Jimmy Pruitt, Christopher C. Pruitt, Patrick Pruitt and other unnamed co-conspirators committed the offense of engaging in organized crime with regard to the thefts of the copper wire between December 7, 2006 and November 20, 2013 (DN 46-2 PageID # 200).

On February 20, 2017, Defendants filed their motion for joinder of Jimmy Pruitt and Charles C. [Chad] Pruitt as defendants pursuant to Federal Rule of Civil Procedure 19 or alternatively Rule 20 (DN 46). Defendants contend that Plaintiff must establish legal causation in order to sustain its burden as it relates to both the conversion and negligence claims (DN 46 PageID # 178). Defendants assert complete relief cannot be afforded herein absent Jimmy and Chad Pruitt's joinder because Defendants maintain that the sole legal cause of Plaintiff's loss was Jimmy and Chad Pruitt (Id.). Defendants contend that proceeding in this matter in the absence of Jimmy and Chad Pruitt would be unduly prejudicial to Defendants because their absence omits two tortfeasors and exposes the Defendants to excessive liability for the actions taken by Jimmy and Chad Pruitt (Id.). Finally, Defendants argue the joinder of Jimmy and Chad Pruitt would not deprive the court of subject matter jurisdiction pursuant to 28 U.S.C. § 1332 because both Jimmy and Chad Pruitt are citizens of the Commonwealth of Kentucky (DN 46 PageID # 178-79).

Plaintiff argues that joinder of Jimmy and Chad Pruitt fails under Rule 19 as the great weight of authority shows that joint tortfeasors are not necessary parties (DN 48 PageID # 208-10). Plaintiff also contends that the motion should be denied because it is untimely under the Court's scheduling orders and Defendants have failed to make a showing of "good cause" as required by Fed.R.Civ.P. 16(b)(4) (DN 48 PageID #210-11). Plaintiff explains that October 5, 2015 was the scheduling order deadline for filing all motions to join additional parties (DN 48 PageID #210-11, citing DN 20 ¶ 2). Plaintiff points out that, Defendants filed their motion on February 20, 2017, more than sixteen months after the deadline, and they have not attempted to show "good cause" for modifying the deadline as required by Fed. R. Civ. R. 16(b)(4) (Id.).

In reply, Defendants contend that joinder of the Pruitts under Rule 20(a) is appropriate because it will promote trial convenience and expedite the final determination of disputes, thereby preventing multiple lawsuits (DN 49 PageID #216-18). Defendants argue that good cause exists for modification of the scheduling order to allow for joinder of the Pruitts (Id.). Specifically, Defendants assert that good cause exists because of the complexity of the litigation, the risk of prejudice to Defendants if joinder does not occur, the lack of prejudice to Plaintiff if joinder does occur, changes to counsel on behalf of both parties, the fact that the current discovery deadline was stricken by agreement of the parties, and the current stage of discovery in the case (Id.). Further, Defendants point out that much discovery still needs to occur in this case, including but not limited to the taking of numerous depositions of witnesses identified by Plaintiff, and the joinder of Jimmy and Chad Pruitt would not unduly delay discovery (Id.).

DISCUSSION

Rule 16(b) guides pretrial scheduling orders, and directs that "[t]he scheduling order must limit the time to join other parties, amend the pleadings, complete discovery, and file motions." Fed. R. Civ. P. 16(b)(3)(A). Furthermore, Rule 16(b) indicates that a pretrial scheduling order "may be modified only for good cause and with the judge's consent." Fed. R. Civ. P. 16(b)(4).

The original scheduling order established an August 31, 2015 deadline for the parties to file all motions to "join additional parties" and "amend pleadings" (DN 17 ¶ 4). The Court subsequently granted Plaintiff's motion to modify that deadline (DN 20). Specifically, the Court extended the deadline to October 5, 2015 (DN 20 ¶ 2). Although there have been subsequent modifications to some of the deadlines in the scheduling order, the Court has not modified the October 5, 2015 deadline for filing motions to join additional parties and amending pleadings (DN 30, 38). Thus, Defendants' motion to join additional parties is untimely under the Court's scheduling orders because they filed it more than a year and four months after the deadline passed (DN 46).

The law in the Sixth Circuit is well settled. Once the scheduling order's deadline passes, a party "must first show good cause under Rule 16(b) for failure to earlier seek leave to amend before a court will consider whether amendment is proper under Rule 15(a)." See Leary v. Daeschner, 349 F.3d 888, 909 (6th Cir. 2003); Inge v. Rock Fin. Corp., 281 F.3d 613, 625 (6th Cir. 2002); McLean v. Alere, Inc., No. 3:12-CV-566-DJH, 2015 WL 1638341, at *1 (W.D. Ky. April 13, 2015). While courts within the Sixth Circuit have yet to extend this reasoning to a Rule 19 or Rule 20 motion to join additional parties filed after the scheduling order's deadline, courts within other circuits have done so. See e.g. Grant v. Rathbun, No. 3:15-CV-4025-D, 2016 WL 71750572, at *2-5 (N.D. Texas May 3, 2016) (court must first address whether to modify the scheduling order under the Rule 16(b)(4) good cause standard because plaintiffs filed their Rule 20(a) motion to join additional parties almost one month after the deadline in the scheduling order); Nieves v. John Bean Technologies, Corp., No. 3:13-CV-4059-D, 2014 WL 2587577, at *1-4 (N.D. Texas June 10, 2014) (court must first decide whether to modify the scheduling order under the Rule 16(b)(4) good cause standard because plaintiff filed her Rule 20(a) motion to join an additional party two months after the scheduling order deadline). Moreover, if the Court considered only Rule 19(a) or Rule 20(a) without regard to Rule 16(b), the Court would render the scheduling order meaningless and effectively would read Rule 16(b)(4) and its "good cause" requirement out of the Federal Rules of Civil Procedure. Therefore, the Court must first address whether Defendants have demonstrated good cause under Rule 16(b)(4) to modify the scheduling order before the Court will consider whether joinder of additional parties is proper under Rule 19(a) or Rule 20(a).

"The primary measure of Rule 16's 'good cause' standard is the moving party's diligence in attempting to meet the case management order's requirements." Inge, 281 F.3d at 625 (citations omitted). As two recent opinions from the Western District of Kentucky have observed, the evaluation of Rule 16's "good cause is not co-extensive with an inquiry into the propriety of the amendment under . . . Rule 15." Woodcock v. Kentucky Dept. of Corr., No. 5:12-CV-00135-GNS-LLK, 2016 WL 3676768, at *2 (W.D. Ky. July 6, 2016) (quoting Tschantz v. McCann, 160 F.R.D. 568, 571 (N.D. Ind. 1995)); see also Hutson, Inc. v. Windsor, No. 5:12-CV-GNS-LLK, 2015 U.S. Dist. LEXIS 131033, at *3 (W.D. Ky. Sept. 29, 2015). This "good cause" standard "primarily considers the diligence of the party seeking the amendment. In other words, in order to demonstrate 'good cause' a party must show that despite their diligence the time table could not reasonably have been met." Woodcock, 2016 WL 3676768, at *2 (quoting Tschantz, 160 F.R.D. at 571).

Defendants failed to articulate how they exercised diligence to obtain the information giving rise to their motion for joinder of Jimmy and Chad Pruitt. Additionally, Defendants have made no effort to demonstrate that, despite their diligence in obtaining this information, the October 5, 2015 deadline for joinder of parties could not have been met.

In assessing Defendants' diligence, the Court cannot ignore the fact that from the outset of this action Defendants have been on notice that Jimmy Pruitt stole the reels of copper wire from Belden (DN 1). Further, the conversion and negligence claims are set forth in the original complaint (Id.). Clearly, Defendants' basis for joining Jimmy Pruitt as an additional party existed months before the original scheduling order deadline passed on August 31, 2015 (DN 17). While the complaint did not identify Chad Pruitt as the accomplice, Defendants could have easily obtained this information through their own records, the Wayne County grand jury indictment, or written discovery. Thus, Defendants' basis for joining Chad Pruitt probably existed before the original deadline and undoubtedly existed before the modified scheduling order deadline passed on October 5, 2015. In sum, Defendants have failed to meet their burden under Rule 16(b)(4) to show good cause why their motion was not filed until more than a year and 4 months after the October 5, 2015 deadline had passed.

Defendants suggest that in Moore v. City of Paducah, the Sixth Circuit indicated, at least in dicta, that "courts may not deny an amendment solely because of delay." 790 F.2d 557, 559 (6th Cir. 1986). Defendants reliance on Moore is misplaced because the Sixth Circuit was discussing undue delay within the context of a Rule 15(a) analysis. Id. Here, the Court is discussing an untimely motion for joinder of additional parties within the context of a Rule 16(b)(4) analysis. The Sixth Circuit has clearly indicated that it is not an abuse of discretion for a district court to deny a motion filed after the applicable Rule 16 deadline has passed provided the movant has failed to show good cause. Leary, 349 F.3d at 909; Inge, 281 F.3d at 625; Woodcock, 2016 WL 3676768, at *2.

In addition to Rule 16(b)(4)'s explicit "good cause" requirement, the Sixth Circuit has held that a determination of the potential prejudice to the party opposing the modification is required. Leary, 349 F.2d at 909; Inge, 281 F.3d at 625. Contrary to Defendants assertion, there has been a substantial completion of discovery in this case. Certainly, the parties may need to briefly extend the discovery deadline in order to complete some discovery depositions. However, that is substantially different than having to completely reopen discovery to accommodate the Pruitts if they are joined as parties to this action. More than two years have already passed since Plaintiff filed this subrogation action (DN 1), and a complete reopening of discovery to accommodate the Pruitts would substantially delay resolution of this case. Thus, Plaintiff will undoubtedly be prejudiced if the scheduling order deadline is modified to allow the joinder of the Pruitts.

ORDER

IT IS HEREBY ORDERED that Defendant's motion for joinder of parties pursuant to Federal Rule of Civil Procedure 19 or alternatively Rule 20 (DN 46) is DENIED.

/s/

H. Brent Brennenstuhl

United States Magistrate Judge

April 12, 2017 Copies: Counsel