1; ('' r'LED ,- I • SUPi:FllOR COU\T OF GUAM 1
2 2023 APR -4 Ml II: 38 CLERi( or· CyefRT 3
4 IN THE SUPERIOR COURT OF GUAM BY: ___ 0___ _,,
5 GUAM HOUSING AND URBAN Civil Case No. CV0844-20 6 RENEWAL AUTHORITY, DEPARTMENT OF PUBLIC HEAL TH AND SOCIAL 7 SERVICES, GOVERNMENT OF GUAM, DECISION AND ORDER 8 Plaintiffs, GRANTING PLAINTIFF'S MOTION FOR LEAVE TO AMEND COMPLAINT & 9 v. MOTION TO STRIKE PORTIONS OF 10 FIRST NET'S OPPOSITION REX INTERNATIONAL, INC.; FIRST NET 11 INSURANCE COMPANY; AND DOES 1-30, 12 Defendants. 13 14 INTRODUCTION
15 This matter came before the Honorable Alberto C. Lamorena, III on January 6, 2023 for 16 hearing on plaintiffs' Department of Public Health and Social Services and Guam Housing and 17 Urban Renewal Authority (collectively the "Plaintiffs") Motion for Leave to Amend Complaint 18 ("Motion to Amend") and Motion to Strike Portions of First Net's Opposition ("Motion to Strike"). 19 Attorney Thomas M. Tarpley Jr. represents First Net Insurance Company ("First Net"). Attorney 20 Phillip Torres represents Rex International, Inc. ("Rex International") but was not present. 21 Assistant Attorney General Yusuke Haffeman-Udagawa represents the Plaintiffs. Having duly 22 considered the parties' briefs, oral arguments, and the applicable law, the Court now issues the 23 following Decision and Order and GRANTS the Plaintiffs' Motions to Amend and to Strike. 24 BACKGROUND
25 In 2013, the parties entered into a contract in which Rex International was to construct a 26 Guam Environmental Public Health Laboratory, for use investigating mosquito disease outbreaks 27 (the "Mosquito Lab Facility"). See Complaint at 4 (Nov. 13, 2020). Construction of the Mosquito 28 Lab Facility began in 2014 and ended in 2016. See Decision & Order at 1 (Oct. 4, 2022).
Decision and Order Granting Plaintiffs Motion for Leave to Amend Complaint & Motion to Strike Portions of First Net's Opposition CV0844-20, Guam Housing and Urban Renewal Authority, et. al. v. Rex International, Inc. et. al. Page 1 of9 ,, •
1 However, Plaintiffs allege the Mosquito Lab Facility Rex International created failed to meet 2 several of the building requirements specified in the contract. See Complaint at 8-10 (Nov. 13, 3 2020). Plaintiffs eventually terminated the contract in 2018. Id. at 7.
4 On November 13, 2020, the Plaintiffs brought suit against Rex International for breach of 5 contract. Id. at 1. The Plaintiffs also filed suit against First Net for breach of surety responsibilities 6 after First Net failed to pay out a Performance and Payment Bond related to Rex International's 7 supposed breach of contract. Id. at 12-14. Plaintiffs claimed $2,178,200 in damages against First 8 Net, the full penal amount under the Performance and Payment Bond. Id. at 14.
9 On August 4, 2022 the Plaintiffs filed their Motion for Leave to Amend Complaint. 1O Plaintiffs now wish to plead three additional causes of action against First Net, including claims of 11 tortious interference with contract ("Claim Six"), tortious breach of duty of good faith and fair 12 dealing ("Claim Seven"), and contractual breach of implied covenant of good faith and fair dealing 13 ("Claim Eight"). See Motion to Amend (Ex. A: Amended Complaint) at 16-21 (Aug. 4, 2022). 14 The Plaintiffs also requested to remove the Government of Guam as a party in the Amended
15 Complaint. See Motion to Amend at 3 (Aug. 4, 2022).
16 The Plaintiffs' newly requested claims stem from allegations that First Net purposefully 17 failed to investigate Rex International's supposed contract breach, going directly against their 18 normal business practices. See Motion to Amend (Ex. A: Amended Complaint) at 16-21 (Aug. 4, 19 2022). Plaintiffs assert this was purposefully done because First Net did not want to damage an 20 ongoing business relationship with Rex International. Id. at 17-18.
21 On September 23, 2022, First Net filed their Opposition to Plaintiffs' Motion to Amend 22 ("Opposition to Motion to Amend"). First Net believes no good cause exists for the Amended 23 Complaint, and that allowing it would substantially prejudice them by expanding the scope of the 24 trial. See Opposition to Motion to Amend at 2 (Sep. 23, 2022). First Net also asserts the Plaintiffs 25 failed to accurately plead their new claims. First Net believes Plaintiffs failed to state the actual 26 amount of damages suffered, instead blindly requesting the full penal amount of the Performance 27 and Payment Bond. Id. at 3-7. First Net believes Claims Seven and Eight cannot stand because the 28 Guam Supreme Court does not recognize such claims against sureties. Id. at 11-15. First Net also
Decision and Order Granting Plaintiff's Motion for Leave to Amend Complaint & Motion to Strike Portions of First Net's Opposition CV0844-20, Guam Housing and Urban Renewal Authority, et. al. v. Rex International, Inc. et. al. Page 2 of9 1 challenges these claims as being redundant. Id. at 16. First Net calls Claim Six unfounded, stating 2 they never induced Rex International to breach the contract. Id. at 15-16. Lastly, First Net 3 challenges the claims of negligence and breach of contract against the unnamed Does ("Claims 4 Four and Five"), for not joining the Does and for noncompliance with the Economic Loss Doctrine.
5 Id. at 16-17.
6 On October 14, 2022 Plaintiffs filed their Reply in Support of Motion to Amend and Motion 7 to Strike. Plaintiffs believe focus should be limited to the three new claims in the proposed 8 Amended Complaint, and that First Net's arguments concerning the already present claims go 9 beyond the scope of the matter. See Motion to Strike at 1-3 (Oct. 14, 2022). When focusing only 1O on the new claims, Plaintiffs believe First Net failed to demonstrate any factors justifying denial of
11 the Amendment Complaint. Id. at 3-4.
12 On October 26, 2022, First Net filed their Opposition to Motion to Strike. First Net believes 13 they can dispute the entire Amended Complaint, and that opposition is not limited to only the new 14 portions. See Opposition to Motion to Strike at 2-3 (Oct. 26, 2022). First Net proceeds to say that
15 the Plaintiffs failed to plead their causes of action. Id. at 3-7.
16 On November 28, 2022, Plaintiffs filed their Reply in Support of Motion to Strike. Plaintiffs 17 reiterated that First Net's Opposition to Motion to Amend exceeds the scope of the matter by 18 challenging portions of the original Complaint. See Reply in Support of Motion to Strike at 2 (Nov. 19 28, 2022). Plaintiffs believe First Net's Opposition to Motion to Amend is structured as a GRCP 20 Rule 12(b)(6) Motion to Dismiss, which should be denied for falling outside the motion filing
21 deadlines. Id. at 4-5.
22 The Court held a hearing on January 6, 2023. After hearing the arguments of the parties, the
23 Court took the matters under advisement.
24 DISCUSSION
25 I. The Court strikes the portions of First Net's Opposition to Motion to Amend which do
26 not concern Claims Six, Seven, or Eight, as only those three claims are the subject of
27 Plaintiffs' Motion to Amend.
28 Decision and Order Granting Plaintiffs Motion for Leave to Amend Complaint & Motion to Strike Portions of First Net's Opposition CV0844-20, Guam Housing and Urban Renewal Authority, et. al. v. Rex International, Inc. et. al. Page 3 of9 1 "Upon motion made by a party within 20 days after the service of the pleading upon
2 the party ... the court may order stricken from any pleading any insufficient defense or any
3 redundant, immaterial, impertinent, or scandalous matter." See GRCP Rule 12(f). GRCP
4 12(f) substantially mirrors Civil Rule of Procedure Rule 12(f), which courts have utilized to
5 strike oppositions to motions, despite such oppositions not technically being pleadings. See
6 Davidson v. D.C., 2010 WL 11583333, at *3 (D.D.C. June 4, 2010).
7 Many of First Net's arguments are redundant, immaterial, or otherwise impertinent to
8 the subject at hand. The Plaintiffs seek to add three new claims (Claims Six, Seven, and
9 Eight) to their proposed Amended Complaint. See Motion to Amend (Ex. A: Amended
10 Complaint) (Aug. 4, 2022). The pleadings regarding Claims One through Five remain
11 unchanged. Id.
12 However, First Net's seventh argument concerns Claims Four and Five, which are
13 not the subject matter of the Amended Complaint. See Opposition to Motion to Amend at
14 16-17 (Sep. 23, 2022). Even if the Court were to agree with First Net and strike down the
15 Amended Complaint, the original Complaint (containing Claims Four and Five) would still
16 remain. Therefore, First Net's seventh argument in their Opposition to Motion to Amend
17 should be stricken as immaterial.
18 First Net's first and second arguments in their Opposition to Motion to Amend
19 should also be stricken as immaterial. These arguments challenge whether Plaintiffs have
20 submitted sufficient evidence proving the damages they are requesting. See Opposition to
21 Motion to Amend at 5-8 (Sep. 23, 2022). However, the Court has already addressed these
22 issues via the Decision & Order Denying First Net's Motion for Partial Summary Judgment
23 Re: Damages. The Court ruled that Plaintiffs submitted evidence of $2,988,003 in damages,
24 creating a material factual dispute for a factfinder to rule on. See Decision and Order at 3-4
25 (Oct. 4, 2022). Even if the Court were to agree with First Net and strike down the Amended
26 Complaint, the original Complaint (and the same requested damages) would still remain.
27 Therefore, First Net's first and second arguments in their Opposition to Motion to Amend
28 should too be stricken as immaterial.
Decision and Order Granting Plaintiff's Motion for Leave to Amend Complaint & Motion to Strike Portions of First Net's Opposition CV0844-20, Guam Housing and Urban Renewal Authority, et. al. v. Rex International, Inc. et. al. Page 4 of9 1 II. Standard to Amend Complaints: When Justice So Requires
2 When a responsive pleading has already been served, as in this case, a party may
3 amend their complaint "only by leave of court or by written consent of the adverse party; and 4 leave shall be freely given when justice so requires." See Rule 15(a) GRCP (emphasis 5 added). "Leave to amend pleadings should be liberally granted" provided the following 6 factors are not present: "undue delay, bad faith or dilatory motive on the part of the movant, 7
8 repeated failures to cure deficiencies by amendments previously allowed, undue prejudice to
9 the opposing party by virtue of allowance of the amendment, or futility of amendment." See 10 Arashi & Co., Inc. v. Nakashima Enterprises, Inc., 2005 Guam 21 ,r 16 (citing Forman v. 11 Davis, 371 U.S. 178,182 (1962)). 12 III. Application: 13 a. Forman Factor One: Undue Delay, Bad Faith, or Dilatory Motive on the Part 14 of the Movant 15 The first Forman factor to consider is whether there is any "undue delay, bad 16 faith or dilatory motive on the part of the movant". See Forman 371 U.S. at 182. 17 Perceived delays, even those attributable to oversight from the moving party, 18 are alone not sufficient reason to deny motions to amend complaints. See M Elec. 19 Corp. v. Guam Int'! Trading Corp., 2016 Guam 35 ,r 49 (the non-moving party 20 "must evidence something more than delay based on mere oversight in order to 21 justify a denial of leave to amend."). When bringing motions to amend complaints, 22 timeliness is "relevant only insofar as it suggests either bad faith on the part of the 23 moving party or potential prejudice to the non-moving party should an amendment 24 be allowed." See Caribbean Broad. Sys. Ltd. v. Cable & Wireless P.L.C., 148 F.3d 25 1080, 1084 (D.C. Cir. 1988). 26 There is no undue delay here because "undue delay cannot exist where 27 discovery has not ended" and discovery in this case remains ongoing. See Dauth v. 28 Decision and Order Granting Plaintiffs Motion for Leave to Amend Complaint & Motion to Strike Portions of First Net's Opposition CV0844-20, Guam Housing and Urban Renewal Authority, et. al. v. Rex International, Inc. et. al. Page 5 of9 I Convenience Retailers, LLC, 2013 WL 12440997 at *3 (N.D. Cal. Jul. 31, 2013);
2 Amended Discovery Plan and Order (Mar. 23, 2022). Although First Net is likely
3 correct that this proposed amendment will result in the postponement of the trial
4 tentatively scheduled for December, 2023, that alone does not rise to the level of
5 undue delay necessary to block the amendment.
6 First Net must instead show either bad faith or dilatory motive attributable to
7 the Plaintiffs to block their Amended Complaint. However, the facts indicate that
8 the Plaintiffs acted in good faith, having pursued these new causes of action shortly
9 after their uncovering. See Dauth 2013 WL 12440997 at *3 ("Delay is especially
10 damaging ... where the facts were previously available and no reason is given for
11 their exclusion from antecedent complaints."). Plaintiffs first learned about these
12 additional causes of action after deposing Jessica Aguero and Nancy Tan, who acted
13 on behalf of First Net, in April and May of 2022. See Motion to Amend at 5 (Aug.
14 4, 2022); Motion to Amend (Ex. B & C) (Aug. 4, 2022). Only after those
15 depositions did the Plaintiffs become aware of new potential causes of action, as the
16 information was otherwise solely within the possession, custody, and control of First
17 Net and its related companies/employees. See Motion to Amend at 5-6 (Aug. 4,
18 2022). The Plaintiffs then researched, drafted, and filed their Motion to Amend all
19 within twelve weeks of uncovering these new causes of action. This quick action
20 indicates neither bad faith nor a dilatory motive to delay guided the Plaintiffs in
21 filing their Motion to Amend.
22 b. Forman Factor Two: Repeated Failures to Cure Deficiencies by Amendments
23 Previously Allowed
24 The second Forman factor to consider is whether there are any "repeated
25 failures to cure deficiencies by amendments previously allowed". See Forman 371
26 U.S. at 182.
27 This is the Plaintiffs' first request for leave to amend their complaint, so this
28 factor also weighs in favor of granting the Motion to Amend.
Decision and Order Granting Plaintiffs Motion for Leave to Amend Complaint & Motion to Strike Portions of First Net's Opposition CV0844-20, Guam Housing and Urban Renewal Authority, et. al. v. Rex International, Inc. et. al. Page 6 of9 1 c. Forman Factor Three: Undue Prejudice to the Opposing Party by Virtue of
2 Allowance of the Amendment
3 The third Forman factor to consider is whether there is any "undue prejudice
4 to the opposing party by virtue of allowance of the amendment". See Forman 371
5 U.S. at 182.
6 The prejudice must be "substantial" if leave to amend is denied on such
7 grounds. See Dauth 2013 WL 12440997 at *4. The party opposing amendment
8 bears the burden of showing prejudice. See DCD Programs. Ltd. v. Leighton, 833
9 F .2d 183, 187 (9'" Cir. 1987). Prejudice is substantial if Defendants "have to
10 radically change their litigation strategy in order to defend against ... new claims".
11 See Dauth 2013 WL 12440997 at *4. However, prejudice is not substantial if a
12 Defendant merely incurs additional time and expense. Id. at *4.
13 Here, the Plaintiffs' new claims arise out of the same subject matter already at
14 issue in this case (First Net's failure to pay out the Performance and Payment Bond).
15 Aside from the strong correlation between existing claims and the new claims, no
16 additional discovery is anticipated regarding these new claims. See Motion to
17 Amend at 7 (Aug. 4, 2022). First Net failed to meet their burden of proving specific
18 prejudice attributable to the Amended Complaint, instead relying on general claims
19 of prejudice credited to time and expense spent litigating the new claims. However,
20 the nature of the litigation will not be substantially altered if leave to amend is
21 granted, and therefore First Net will not suffer substantial prejudice.
22 d. Forman Factor Four: Futility of Amendment
23 The fourth and final Forman factor to consider is "futility of amendment".
24 See Forman 371 U.S. at 182. "A motion to amend is futile when the complaint as
25 amended would be subject to dismissal." See Lujan v. Calvo Fisher & Jacob LLP,
26 2018 Guam 27 ,r 13. Thus, "a court must analyze the proposed amendment as if it
27 were before the court on a motion to dismiss ... The court must accept as true all well-
28 pleaded factual allegations, and view them in the light most favorable to the pleading
Decision and Order Granting Plaintiff's Motion for Leave to Amend Complaint & Motion to Strike Portions of First Net's Opposition CV0844-20, Guam Housing and Urban Renewal Authority, et. al. v. Rex International, Inc. et. al. Page 7 of9 I party. The court must then look to the specific allegations in the complaint to
2 determine whether they plausibly support a legal claim for relief." Id. at ,r 13.
3 Accepting as true all of Plaintiffs' factual allegations and viewing them in the
4 light most favorable to the Plaintiffs, their additional causes of action do support a
5 legal claim for relief. Guam Courts recognize that sureties have a duty to act in good
6 faith, and have accordingly recognized claims of tortious bad faith against sureties.
7 See Tudor Construction Co. et al. v. Core Tech Int'! Corp. et al., CV0513-12,
8 Decision and Order on Motion for Summary Judgment (Feb. 12, 2014). Therefore,
9 the Plaintiffs can legally pursue Claims Seven and Eight.
10 Neither are claims Seven nor Eight redundant of each other. Claim Seven is
II based in tort, while Claim Eight is based in contract. See Motion to Amend (Ex. A)
12 at 18-21 (Aug. 4, 2022). The claims are not repetitive, as they both have different
13 elements and theories giving rise to liability.
14 First Net also failed to demonstrate why Claim Six should not be allowed.
15 The elements oftortious interference with contract are:"(!) a valid contract between
16 plaintiff and a third party; (2) defendant's knowledge of this contract; (3) defendant's
17 intentional acts designed to induce a breach or disruption of the contractual
18 relationship; (4) actual breach or disruption of the contractual relationship; and (5)
19 resulting damage." See Pacific Gas & Elec. Co. v. Bear Stearns & Co., 791 P.2d
20 587, 589-90 (Cal. 1990). The Plaintiffs' proposed Amended Complaint complies
21 with this standard, alleging (1) Plaintiffs and Rex International entered into a
22 contract; (2) First Net has knowledge of this contract; (3) First Net intentionally acted
23 in a manner it knew would disrupt Rex International's ability to perform; (4) Rex
24 International breached the contract; and (5) Plaintiffs suffered damages. See Motion
25 to Amend (Ex. A) at 16-18 (Aug. 4, 2022).
26 The Plaintiffs have sufficiently laid out allegations detailing claims of tortious
27 interference with contract, tortious breach of duty of good faith and fair dealing, and
28 contractual breach of implied covenant of good faith and fair dealing. See Motion
Decision and Order Granting Plaintiff's Motion for Leave to Amend Complaint & Motion to Strike Portions of First Net's Opposition CV0844-20, Guam Housing and Urban Renewal Authority, et. al. v. Rex International, Inc. et. al. Page 8 of9 I (Ex. A: Amended Complaint) at 16-21 (Aug. 4, 2022). Therefore, the amendment is
2 not futile, and triable issues exist here.
3 CONCLUSION
4 For the reasons stated above, the Court GRANTS the Plaintiffs' Motions to Amend and to
5 Strike. 6 • Portions of First Net's Opposition to Motion to Amend concerning Claims One 7 through Five (specifically, Arguments One, Two, and Seven), shall be stricken as 8 being immaterial. 9 • Leave is granted to include Claims Six, Seven, and Eight m the Amended 10 Complaint because they all pass the Forman factors. 11 • Leave is granted to remove the Government of Guam as Plaintiff in the Amended 12 Complaint, as no claims have been asserted by or against the Government of 13 Guam. 14 15 16 IT IS SO ORDERED this A ril 4, 2023 17 18 19 20 HONORABLE ALBERTO C. LAMORENA, III Presiding Judge, Superior Court of Guam 21 22 23 SERVICE VIA E-MAIL 24 I acknowledge that an electronic COPY. fthe original was e-mailed to: 25 r. ?b..ct~o/' -,vrre.s- £ 26 27 Date: Time: @J2..3 Joseph Bamba. Jr. Deputy Clerk, Superior Court of Guam 28
Decision and Order Granting Plaintiff's Motion for Leave to Amend Complaint & Motion to Strike Portions of First Net's Opposition CV0844-20, Guam Housing and Urban Renewal Authority, et. al. v. Rex International, Inc. et. al. Page 9 of9