National Casualty Company v. National Strength and Conditioning Association

[7] 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA [10] 11 NATIONAL CASUALTY COMPANY, Case No.: 18-CV-1292 JLS (KSC) 12 Plaintiff, ORDER GRANTING MOTION FOR 13 v. LEAVE TO FILE FIRST AMENDED COUNTERCLAIM 14 NATIONAL STRENGTH AND CONDITIONING ASSOCIATION, 15 (ECF No. 30) Defendant, [16] 17 NATIONAL STRENGTH AND CONDITIONING ASSOCIATION, [18] Counter-Claimant, [19] v. [20] NATIONAL CASUALTY COMPANY, [21] Counter-Defendant. [23] 24 Presently before the Court is Defendant and Counter-Claimant National Strength 25 and Conditioning Association’s (“NSCA”) Motion for Leave to File First Amended 26 Counterclaim (“Mot.,” ECF No. 30). Also before the Court is Plaintiff and Counter27 Defendant National Casualty Company’s (“NCC”) Opposition to (“Opp’n,” ECF No. 39) 28 and the NSCA’s Reply in Support of (“Reply,” ECF. 42) the Motion. Having carefully 1 considered the NSCA’s proposed amendments, the Parties’ arguments, and the law, the 2 Court GRANTS the NSCA’s Motion. 3 BACKGROUND 4 This case came before the Court on June 14, 2018, when NCC filed its original 5 declaratory relief action against the NSCA regarding NCC’s duty as the NSCA’s insurer 6 to prosecute, indemnify, and/or defend the NSCA in two underlying civil lawsuits. See 7 generally ECF No. 1 (“Compl.”). The NSCA filed its initial Counterclaim on July 12, 8 2018, see generally ECF No. 7, and the instant Motion on June 24, 2019. See generally 9 ECF No. 30. 10 LEGAL STANDARD 11 Under Federal Rule of Civil Procedure 15(a), a plaintiff may amend their complaint 12 once as a matter of course within specified time limits. Fed. R. Civ. P. 15(a)(1). “In all 13 other cases, a party may amend its pleading only with the opposing party’s written consent 14 or the court’s leave. The court should freely give leave when justice so requires.” Fed. R. 15 Civ. P. 15(a)(2). Courts generally grant leave to amend absent a showing of “undue delay, 16 bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies 17 by amendments previously allowed, undue prejudice to the opposing party by virtue of 18 allowance of the amendment, [or] futility of amendment.” Foman v. Davis, 371 U.S. 178 , 19 182 (1962). “Rule 15(a) ‘is to be applied with extreme liberality,’ and whether to permit 20 amendment is a decision ‘entrusted to the sound discretion of the trial court.’” EFG Bank 21 AG, Cayman Branch v. Transam. Life Ins. Co., No. 216CV08104CASGJSX, 2019 WL 22 5784739, at *3 (C.D. Cal. Nov. 4, 2019) (quoting Morongo Band of Mission Indians v. 23 Rose, 893 F.2d 1074, 1079 (9th Cir. 1990); Jordan v. Cty. of Los Angeles, 669 F.2d 1311 , 24 1324 (9th Cir. 1982)). 25 DISCUSSION 26 The NSCA requests leave to file its First Amended Counterclaim (“FACC”) to 27 include new allegations concerning NCC’s alleged breaches of its duty to defend and its 28 other obligations to the NSCA in the two underlying civil lawsuits. Mot. at 5–6. The 1 FACC also includes a new counterclaim for violations of California’s Unfair Competition 2 Law (“UCL”), California Business and Professions Code § 17200, based on the same 3 conduct giving rise to the NSCA’s counterclaims. Id. at 6. Lastly, the FACC makes clear 4 that the NSCA is seeking punitive damages from NCC. Id. 5 The NSCA contends that it should be granted leave to amend because NCC will not 6 suffer prejudice because no discovery has been taken in the action, and both parties will 7 have ample opportunity to conduct extensive discovery concerning the issues raised in the 8 FACC.1 Id. at 8–9. Further, the NSCA contends that it has not acted in bad faith because 9 it sought leave to amend at an early stage in the litigation and it raises valid claims against 10 NCC. Id. at 9. The NSCA also asserts that the instant Motion is timely and does not unduly 11 delay the litigation. Id. at 9. Finally, the NSCA maintains that the proposed FACC is not 12 futile because “the facts pled support the relief sought, and NSCA should have the 13 opportunity to seek all available relief in this Court for [NCC]’s misconduct.” Id. at 10. 14 In its Opposition, NCC does not contest that the NSCA should be granted leave to 15 plead the new allegations contained in the FACC, including that NCC breached its duty to 16 the NSCA with respect to the underlying civil lawsuits. See generally Opp’n. Instead, 17 NCC opposes the Motion solely on the ground that the NSCA’s proposed UCL 18 counterclaim is futile because the remedies available under the UCL are limited to 19 restitution and injunctive relief. Id. at 3. NCC contends that, because restitution and 20 injunctive relief are equitable remedies, they are not available unless the NSCA lacks an 21 adequate remedy at law. Id. at 4. As a result, NCC claims that the proposed UCL cause 22 of action is futile because the NSCA has an adequate remedy at law in the form of monetary 23 damages for NCC’s alleged wrongful conduct. Id. 24 As the NSCA points out and as the Court agrees, however, NCC fails to consider 25 that the request for injunctive relief outlined in the FACC pertains not only to the NSCA, [28] 1 It appears that the Parties have since engaged in discovery and that fact discovery closed on March 6, 1 but also to other of NCC’s insureds. Reply at 4. The NSCA’s request for injunctive relief 2 should be denied only if “there is no reasonable probability that past acts complained of 3 will recur.” Cal. Serv. Station etc. Ass’n. v. Union Oil Co., 232 Cal. App. 3d 44, 57 (1991). 4 Here, NCC’s alleged wrongful acts are, by their very nature, capable of repetition. The 5 Court therefore is not persuaded that the proposed UCL counterclaim is futile. Regardless, 6 denial of a leave to amend on the basis of futility alone is rare and, “[o]rdinarily, courts 7 will defer consideration of challenges to the merits of a proposed amended pleading until 8 after leave to amend is granted and the amended pleading is filed.” Utterkar v. Ebix, Inc., 9 No. 14-CV-02250-LHK, 2015 WL 5027986 , at *3 (N.D. Cal. Aug. 25, 2015) (citing 10 Netbula, LLC v. Distinct Corp., 212 F.R.D. 534, 539 (N.D. Cal. 2003)). 11 In sum, “[a]bsent prejudice, or a strong showing of any . . . [other] factors, there 12 exists a presumption under Rule 15(a) in favor of granting leave to amend.” Eminence 13 Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003). In considering whether 14 prejudice, bad faith, undue relay, or futility exist, “it is the consideration of prejudice to the 15 opposing party that carries the greatest weight.” Id. Here, NCC concedes that the FACC 16 is not prejudicial or made in bad faith and that it will not cause undue delay. See generally 17 Opp’n. Consequently, the Court finds leave to amend appropriate. See Eminence Capital, [18] 316 F.3d at 1048 . 19 CONCLUSION 20 Based on the foregoing, the Court GRANTS the NSCA’s Motion for Leave to File 21 First Amended Counterclaim (ECF No. 30). The NSCA SHALL FILE the First Amended 22 Counterclaim, previously filed at ECF No. 38-1–7, within seven (7) days of the electronic 23 docketing of this Order. The Parties SHALL MEET AND CONFER2 and SHALL FILE 24 a joint status report within fourteen (14) days of the electronic docketing of this this Order 25 / / / [26] 27 2 In light of the current COVID-19 public emergency, see, e.g., Order of the Chief Judge No. 18 (S.D. 28 Cal. filed Mar. 17, 2020); Executive Order N-33-20, Executive Department of the State of California 1 |/concerning the impact, if any, of this Order and the NSCA’s FACC on the pending 2 ||summary judgment motions. See ECF Nos. 49, 56. 3 IT IS SO ORDERED. [4] 5 ||Dated: April 3, 2020 pace: Lo mereaitte6 on. Janis L. Sammartino United States District Judge