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Delmar Properties Management and Construction, LLC v. Phoenix Insurance Co.

United States District Court, E.D. Missouri, Eastern Division

May 19, 2015

DELMAR PROPERTIES MANAGEMENT AND CONSTRUCTION, LLC, Plaintiff,
v.
THE PHOENIX INSURANCE CO., Defendant.

MEMORANDUM AND ORDER

RODNEY W. SIPPEL, District Judge.

There are two pending motions before me in this insurance dispute: plaintiff Delmar Properties Management and Construction, LLC ("Plaintiff")'s Motion for Leave to Amend Petition to Join Insurance Brokers, and defendant The Phoenix Insurance Company ("Phoenix")'s Motion for Leave to File Counterclaim for Declaratory Judgment and Modify Scheduling Order. For the following reasons, I will grant both motions. However, because joinder of the Insurance Brokers will destroy subject matter jurisdiction, I will also remand this action to state court pursuant to 28 U.S.C. § 1447(e).

Background

Plaintiff owns a twelve-unit rental property located at 5561-5565 Chamberlain in Saint Louis, Missouri. On January 18, 2014, while Plaintiff was renovating the property, it was vandalized and several appliances from the apartments were stolen. At the time of the loss, Plaintiff had a policy of insurance with Phoenix. Plaintiff submitted a claim to Phoenix for the damage to the property. Phoenix denied the claim, stating that the property was "vacant" and that, pursuant to the policy's vacancy exclusion clause, the loss was not covered.

Plaintiff, a Missouri limited liability company, filed suit against Phoenix in the Circuit Court for the City of St. Louis, Missouri on March 5, 2014. Plaintiff's complaint brings claims of breach of contract and vexatious refusal based on Phoenix's refusal to cover the loss. Phoenix, a citizen of Connecticut, removed this case to this Court on April 16, 2014, based on diversity jurisdiction pursuant to 28 U.S.C. § 1332. There is no federal question at issue in this case.

Now, approximately one year after suit was brought, both parties move to amend their pleadings. Although both motions are untimely under the deadlines set in the case management order entered in this case, both parties argue that leave to amend should be granted because of newly discovered evidence.

Legal Standard

Leave to amend is to be freely granted under Federal Rule of Civil Procedure 15(a), and "should normally be granted absent good reason for a denial." Popp Telcom v. Am. Sharecom, Inc., 210 F.3d 928, 943 (8th Cir. 2000). "The classic good reasons' for rejecting an amendment are: undue delay, bad faith or dilatory motive, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the non-moving party, or futility of amendment.'" Id . "Delay alone is not a sufficient reason for denying leave." Buder v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 644 F.2d 690, 695 (8th Cir. 1981). "Rather, the party opposing the motion must show it will be unfairly prejudiced." Dennis v. Dillard Dept. Stores, Inc., 207 F.3d 523, 525 (8th Cir. 2000) (internal citations omitted). The decision of whether to grant leave to amend is within the court's discretion. Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 330-32 (1971).

Discussion

A. Phoenix's Motion for Leave to File a Counterclaim

Phoenix seeks leave to file a counterclaim for declaratory judgment against Plaintiff. The proposed counterclaim alleges that the insurance policy is void because Plaintiff misrepresented material facts regarding the occupancy of the property in its insurance application. Specifically, Phoenix alleges that Plaintiff told Robert Butler and Stephanie Rorabacher, Plaintiff's insurance brokers (collectively with Smith McGhee, LLC, the "Insurance Brokers") to list the property as 50% occupied when in fact it was vacant. Phoenix claims that it only recently learned this information from the Insurance Brokers' depositions, and therefore good cause exists to allow it to file its untimely counterclaim. Fed.R.Civ.P. 16(b).

Phoenix further argues that it should be allowed to file the counterclaim under Federal Rule of Civil Procedure 15(a) because none of the good reasons for rejecting amendment exist. In particular, Phoenix argues that granting leave would not result in undue delay or undue prejudice because the trial is not set until September 14, 2015, and because Plaintiff has equal access to all depositions and discovery forming the basis of the counterclaim. See Dennis v. Dillard Dept. Stores, Inc., 207 F.3d 523, 525 (8th Cir. 2000) (internal citations omitted). Additionally, Phoenix asserts that there is no bad faith or dilatory motive on its part since the motion is based on newly discovered facts. See id.

Plaintiff opposes Phoenix's motion, arguing that it is based on facts that were available to Phoenix months prior to filing its motion. Plaintiff argues that Phoenix had the "tenant schedule, " which lists the property as being 50% occupied, as early as April 2013. As a result, Plaintiff argues that Phoenix has failed to be diligent and lacks good cause.

Although it appears that Phoenix has had access to the tenant schedule for some time, it is not clear that Phoenix knew or should have known how or on what basis the Insurance Brokers made the occupancy representation, or that, as alleged, it was Plaintiff who told the Insurance Brokers that the property was 50% occupied. Additionally, even if Phoenix delayed in bringing this counterclaim, delay alone is not a sufficient basis for denying a party leave to bring a viable claim. See Buder v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 644 F.2d 690, 695 (8th Cir. 1981) ("We are not convinced that a party's ...


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