United States Fire Insurance Company v. Icicle Seafoods Inc

Opinion

1 2

6 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON 7 AT SEATTLE

8 UNITED STATES FIRE INSURANCE IN ADMIRALTY 9 COMPANY, et al.,

10 Plaintiffs/Counterclaim NO. C20-00401-RSM Defendants, 11 v. ORDER DENYING DEFENDANTS- 12 COUNTERCLAIM PLAINTIFFS ICICLE SEAFOODS, INC., et al., ICICLE’S MOTION TO AMEND 13 CASE SCHEDULE AND FILE Defendants/Counterclaim AMENDED COUNTERCLAIMS 14 Plaintiffs.

15 16 I. INTRODUCTION 17 This matter comes before the Court on Defendants-Counterclaim Plaintiffs Icicle 18 Seafoods, Inc., and ISVesselCo, Inc. (collectively, “Icicle”)’s Motion to Amend Case 19 Scheduling Order and File First Amended Counterclaims. Dkt. #130. Plaintiff-Counterclaim 20 21 Defendants United States Fire Insurance Company, National Union Fire Insurance Company of 22 Pittsburgh, PA, Great American Insurance Company of New York, Argonaut Insurance 23 Company, Endurance American Insurance Company, Houston Casualty Company, and Certain 24 Underwriters at Lloyd’s, London (“Insurers”) oppose Icicle’s motion. Dkt. #132. The Court 25 26 ORDER DENYING DEFENDANTS- finds oral argument unnecessary to resolve the relevant issues. For the reasons set forth below, 1 the Court DENIES Icicle’s Motion. 2 3 II. BACKGROUND 4 A full background of this case isn’t necessary given the Court’s previous orders in this 5 matter. See Dkt. #127. This action arises out of an insurance claim for Loss of Hire (“LOH”) 6 damages claimed by Icicle as a result of engine damage on the vessel R.M. THORSTENSON 7 (“the THORSTENSON”) in December 2016 that interrupted Icicle’s fish processing operations 8 in 2017 and 2018. From 2018 until 2020, parties unsuccessfully attempted to settle the LOH 9 claim. Insurers adjusted Icicle’s LOH claim in the amount of $966,638.48, which Icicle refused 10 11 to accept on the basis that their damages approximated $4 million. Dkt. #1 at ¶ 11, Dkt. #18 at 12 ¶ 86. 13 On March 13, 2020, Insurers filed a declaratory judgment action in this Court seeking 14 a declaration of Icicle’s actual loss of net earnings sustained as a result of the 15 THORSTENSON’s December 2016 engine damage and as limited by the policy terms and 16 conditions between the parties. Dkt. #1 at ¶ 30. On June 5, 2020, Icicle counterclaimed for 17 violations under breach of contract, breach of duty of good faith and fair dealing, the 18 19 Washington Consumer Protection Act, RCW 18.86, and the Insurance Fair Conduct Act 20 (“IFCA”), RCW 48.30.015.1 Dkt. #18 at ¶¶ 88-98. 21 On January 21, 2021, Icicle moved for partial summary judgment seeking a 22 determination that (1) Washington law applies to this dispute; (2) Icicle is entitled to a jury trial; 23 (3) the 14-day deductible contained in the LOH endorsement was triggered by the 24 25

26 1 Icicle also served a Notification of IFCA Violations Letter dated March 16, 2020 on the Washington Insurance Commissioner’s Office and on the Insurers that demanded payment of the LOH claim. Dkt. #18 at ¶ 82. ORDER DENYING DEFENDANTS- THORSTENSON’s engine failure; (4) the 14-day deductible does not require proof of 1 economic loss; and (5) the 14-day deductible was exhausted during the 2017 cod season. Dkt. 2 3 #74. The Insurers filed a cross-motion for summary judgment on February 8, 2021 arguing that 4 (1) federal law—not Washington law—applies to this LOH insurance dispute; (2) Icicle’s 5 counterclaim is cognizable only under admiralty jurisdiction such that Icicle’s jury demand 6 must be stricken; and (3) the policy’s deductible language is clear and unambiguous and 7 requires evidence of an actual loss sustained by showing lost profits during the 14-day 8 applicable deductible period before any payment can be made. Dkt. #86. 9 Months after parties filed their dispositive motions, Icicle filed the instant motion 10 11 seeking leave to amend its counterclaims. Dkt. #130. This filing immediately followed the 12 Court’s August 13, 2021 ruling on parties’ cross-motions to compel. Dkt. #128. In its August 13 13, 2021 order, the Court addressed Icicle’s Requests for Admission (“RFAs”) requesting 14 admissions from Insurers that counsel for Insurers, Matt Crane, coordinated information- 15 sharing between experts retained to assist in evaluating the LOH claim. Specifically, the RFAs 16 sought admission that all acts and omissions committed by Mr. Crane in investigating, 17 evaluating, negotiating, and/or processing the LOH claim were performed within the scope of 18 19 his retention with Insurers, that Insurers had the right to control the manner in which he 20 performed these tasks, that Mr. Crane operated as an agent for the Insurers, and that the Insurers 21 are vicariously liable for all acts and omissions on the part of Mr. Crane with respect to those 22 tasks. See Dkts. #128 at 13-14. Icicle conceded in its briefing that it sought those admissions 23 “to avoid having to name Matt Crane individually either as a third party defendant in this action 24 or as a defendant in a separate action.” Dkt. #81 at 12-13. Icicle also conceded that it sought 25 26 agreement from Insurers to amend its counterclaims to add a claim for negligent handling ORDER DENYING DEFENDANTS- against Mr. Crane and his firm, Bauer Moynihan & Johnson LLP (“Bauer Moynihan”), but that 1 Insurers refused to agree. Dkt. #91 at 7, n.17. 2 3 In considering parties’ briefing on the cross-motions to compel, the Court determined 4 that Icicle’s counterclaims failed to allege vicarious liability, respondeat superior, or “any other 5 theory alleging that Insurers are liable for Mr. Crane’s actions or omissions.” Dkt. #128 at 14. 6 For that reason, “[t]o the extent Icicle now wishes to amend its counterclaims and defenses, it 7 may not do so through requests for admission to ‘avoid’ the task of naming Mr. Crane or his 8 firm as third-party defendants, revising its counterclaims or defenses, or otherwise amending 9 its Answer.” Id. The Court consequently denied Icicle’s RFAs regarding Mr. Crane’s actions, 10 11 reasoning that because Icicle’s defenses and counterclaims allege bad faith by Insurers, not 12 Bauer Moynihan or Mr. Crane, Icicle’s RFAs seeking admissions as to Mr. Crane’s actions 13 were “beyond the scope of relevance” required under Fed. R. Civ. P. 12(b)(1). Id. 14 Following the Court’s order denying Icicle’s RFAs, Icicle filed the instant Motion to 15 Amend its counterclaims, Dkt. #130. 16 III. DISCUSSION 17 A. Legal Standard 18 19 “[A] party may amend its pleading only with the opposing party's written consent or the 20 court's leave.” Fed. R. Civ. P. 15(a)(2). “Five factors are taken into account to assess the 21 propriety of a motion for leave to amend: bad faith, undue delay, prejudice to the opposing 22 party, futility of amendment, and whether the plaintiff has previously amended the complaint.” 23 Johnson v. Buckley, 356 F.3d 1067, 1077 (9th Cir. 2004). “Denial of leave to amend on this 24 ground [futility] is rare. Ordinarily, courts will defer consideration of challenges to the merits 25 26 ORDER DENYING DEFENDANTS- of a proposed amended pleading until after leave to amend is granted and the amended pleading 1 is filed.” Netbula, LLC v. Distinct Corp., 212 F.R.D. 534, 539 (N.D. Cal. 2003). 2 3 However, “[o]nce a district court has issued a scheduling order, FRCP 16 controls.” 4 Actuate Corp. v. Aon Corp., No. C 10-05750 WHA, 2011 WL 4916317, at *1 (N.D. Cal. Oct. 5 17, 2011). In this matter, parties’ scheduling order set the deadline to file amended pleadings 6 as September 25, 2020. Dkt. #26. Rule 16 provides that a scheduling order “may be modified 7 only for good cause and with the judge’s consent.” Fed. R. Civ. P. 16(b)(4). Yet where a 8 motion is made to extend deadlines after the deadlines have expired, the party seeking the 9 extension must show excusable neglect. See Fed. R. Civ. P. 6(b)(1)(B). Icicle does not dispute 10 11 that its deadline to file amended counterclaims has long since expired. Excusable neglect is an 12 equitable concept and is “remedial in nature and . . . must be liberally applied.” Ahanchian v. 13 Xenon Pictures, Inc., 624 F.3d 1253, 1262 (9th Cir. 2010) (citation omitted). [A]bsent bad faith 14 on the part of the movant or undue prejudice to the other parties to suit, discretionary extensions 15 should be liberally granted.” Johnson v. Bay Area Rapid Transit Dist., No. C-09-0901 EMC, 16 2014 U.S. Dist. LEXIS 50541, at 10 (N.D. Cal. Apr. 10, 2014) (quoting Nat’l Equipment Rental, 17 Ltd. v. Whitecraft Unlimited, Inc., 75 F.R.D. 507, 510 (E.D.N.Y. 1977)). 18 19 B. Analysis 20 As an initial matter, Icicle argues that it has demonstrated good cause under Rule 16 to 21 modify the scheduling order. However, the deadline to amend under the scheduling order has 22 already expired. See Dkt. #26. For that reason, the proper inquiry is whether Icicle has shown 23 excusable neglect in seeking an extension of the time to file amended counterclaims. See Fed. 24 R. Civ. P. 6(b)(1)(B). For the reasons set forth below, the Court concludes that Icicle has failed 25 26 to carry its burden. ORDER DENYING DEFENDANTS- To determine whether a party’s failure to meet a deadline constitutes “excusable 1 neglect,” courts apply a four-factor equitable test that weighs (1) the danger of prejudice to the 2 3 opposing party; (2) the length of the delay and its potential impact on the proceedings; (3) the 4 reason for the delay; and (4) whether the movant acted in good faith. Ahanchian v. Xenon 5 Pictures, Inc., 624 F.3d 1253, 1261 (9th Cir. 2010) (citing Pioneer Inv. Servs. Co. v. Brunswick 6 Assocs. Ltd. P’ship, 507 U.S. 380, 395 (1993)). The balancing of all four factors is “left to the 7 discretion of the district court in every case.” Pincay v. Andrews, 389 F.3d 853, 860 (9th Cir. 8 2004) (en banc). Requiring an opposing party to defend a claim on its merits does not constitute 9 “prejudice” under the excusable neglect standard. Smith v. Dzurenda, No. 10 11 218CV01692APGVCF, 2021 WL 4301478, at *2 (D. Nev. Sept. 21, 2021) (citing Bateman v. 12 U.S. Postal Serv., 231 F.3d 1220, 1224-25 (9th Cir. 2000)). 13 i. Danger of Prejudice 14 Icicle argues that Insurers will suffer no prejudice if their Motion is granted. Dkt. #130 15 at 12. The Court disagrees. Icicle’s proposed amended counterclaims add allegations that 16 Crane acted as an agent for Insurers such that they are vicariously liable for his actions. See id. 17 at ¶ 84. Icicle also adds a counterclaim for negligent claims handling which alleges that 18 19 Insurers, through their agent, Crane, failed to use ordinary care in adjusting Icicle’s damages 20 claim. Id. at ¶ 99. Icicle argues that adding this new claim at this stage of the litigation would 21 pose no prejudice because (a) no depositions have been taken and the discovery cutoff is not 22 until 2022; (b) trial briefs are not due until June 2022; and (c) Insurers have “long been aware” 23 that Icicle seeks to hold them responsible for Crane’s actions—particularly with respect to his 24 handling of the Manos report. Id. at 12. 25 26 ORDER DENYING DEFENDANTS- At this stage of the case, the Court finds that permitting Icicle to add legal theories of 1 vicarious liability, respondeat superior, or agency to their counterclaims would prejudice 2 3 Insurers. Parties have already briefed cross-motions for summary judgment that address the 4 merits of their original claims. See Dkts. #74, #86. Furthermore, given the August 27, 2021 5 deadline for expert reports, parties’ expert reports were not drafted to address the counterclaim 6 Icicle now seeks to add. Indeed, Insurers’ expert Rob Dietz opines on the actions of Insurers’ 7 lead underwriter in its claims handling, with only minimal reference to Crane and Bauer 8 Moynihan. See Dkt. #133-11, #133-12 (mentioning Crane with respect to Icicle’s effort to seek 9 disqualification and counsel’s communications). While Icicle insists that Insurers need not 10 11 prepare a new expert report given that Mr. Dietz uses the terms “USF [U.S. Fire Insurance]” 12 and “counsel” interchangeably, Dkt. #132 at 10-11, this argument disregards the fact that 13 Icicle’s proposed amended counterclaims inject new legal theories of liability that Insurers may 14 have chosen to address differently when preparing their expert reports. Icicle’s belief that 15 Insurers’ current reports adequately address the claims does not dissuade the Court that no 16 prejudice exists. 17 ii. Length and Reason for Delay 18 19 The factors considering length and reason for delay also weigh heavily against extending 20 the deadline to file amended counterclaims. The deadline expired nearly a year before Icicle 21 finally moved for leave to amend. See Dkt. #26. Furthermore, Icicle has failed to demonstrate 22 a reasonable basis for its delay. Icicle argues that the Court only recently ruled on Icicle’s 23 motion to compel and that prior to receiving that order, Icicle “reasonably believed” that its 24 current pleading was sufficient to allege the claims it now seeks to add. Dkt. #130 at 10. Icicle’s 25 26 “reasonable belief” argument is confusing at best, given that the proposed amended ORDER DENYING DEFENDANTS- counterclaim seeks to add an entirely new count for negligent claims handling. While Icicle 1 cites Nikfard v. State Farm Fire & Cas. Co. for the proposition that it was not required to 2 3 expressly plead the allegations and counterclaim added to its proposed amended pleading, 4 Nikfard did not address pleading standards. See No. C19-6001RSL, 2021 WL 962676, at *1 5 (W.D. Wash. Mar. 15, 2021). On the contrary, Nikfard addressed a case at the summary 6 judgment stage, where the plaintiff had already asserted negligent claims handling. See id. at 7 *1. Lease Crutcher likewise does not appear to support Icicle’s argument that it reasonably 8 believed it had “impliedly” pleaded Insurers’ liability through Crane’s actions. The Lease 9 Crutcher plaintiff expressly alleged agency theory, including that the named defendant “acted 10 11 on behalf of and with authority from [named co-defendant] National Union in its dealings with 12 the insured.” Lease Crutcher Lewis WA, LLC v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 13 No. C08-1862RSL, 2009 WL 3444762, at *1 (W.D. Wash. Oct. 20, 2009). Here, neither Crane 14 nor Bauer Moynihan are named defendants in this action. For these reasons, Icicle’s reliance 15 on these cases is unavailing. 16 Furthermore, the Court observes that Icicle contemplated amendment as early as 17 November 2020, when it provided Insurers with a proposed amended pleading that included the 18 19 same negligent claims handling counterclaim that it now seeks to add. See Dkt. #133-8; #133- 20 9 at ¶¶ 99-100. Rather than move for leave to amend, Icicle sought disqualification of Crane 21 and his firm, which the Court denied. See Dkt. #97. To that end, Icicle’s contention that it 22 required the Court’s order on parties’ discovery motions to contemplate amendment— 23 specifically, the addition of a negligent claims handling counterclaim—is unpersuasive. Dkt. 24 #134 at 4. 25 26 // ORDER DENYING DEFENDANTS- iii. Good Faith 1 Finally, the Court is hesitant to conclude that Icicle acted in good faith by seeking to 2 3 amend its counterclaims at this late stage. As set forth above, Icicle contemplated adding a 4 negligent claims handling counterclaim months ago but chose not to do so. Only after the Court 5 denied its motion to disqualify and its motion to compel production of certain documents did it 6 attempt to revise its strategy. Nevertheless, given that the other three factors weigh heavily 7 against extending the expired deadline to file amended pleadings, the Court need not reach the 8 question of whether Icicle was merely negligent in its failure to seek leave to amend earlier or 9 whether its untimely motion was made in bad faith. 10 11 Having concluded that Icicle has failed to demonstrate excusable neglect to warrant 12 modification of the expired deadline to file amended pleadings, the Court need not reach the 13 Rule 15(a) analysis as to whether leave to amend is warranted. 14 IV. CONCLUSION 15 Having reviewed Defendants-Counterclaim Plaintiffs Icicle’s Motion to Amend Case 16 Scheduling Order and File First Amended Counterclaims, Insurers’ Response, Icicle’s Reply, 17 the declarations and exhibits in support thereof, and the remainder of the record, the Court 18 19 hereby finds and ORDERS that Icicle’s Motion to Amend, Dkt. #130, is DENIED; 20 21 DATED this 29th day of October, 2021. 22

23 24 A 25 RICARDO S. MARTINEZ 26 CHIEF UNITED STATES DISTRICT JUDGE ORDER DENYING DEFENDANTS-