Amcast Industrial Corp. v. Detrex Corp.

Citations: 132 F.R.D. 213; 1990 U.S. Dist. LEXIS 15480; 1990 WL 126274Docket: Civ. No. S88-620

Court: District Court, N.D. Indiana; August 30, 1990; Federal District Court

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Plaintiffs Amcast Industrial Corporation and its subsidiary, Elkhart Products Corporation (EPC), sought permission to file an amended complaint in a case involving contamination at EPC's Elkhart, Indiana plant, where trichloroethylene (TCE) had polluted the soil and groundwater. After acquiring EPC, Amcast discovered the pollution and initiated legal action on October 13, 1988, against EPC's former shareholders (the "Former Shareholder Defendants"), certain shareholders who allegedly made misrepresentations (the "Representing Shareholder Defendants"), Detrex Corporation for supplying TCE, and unidentified truck drivers (the "Doe Defendants"). 

Count III of the complaint asserts that the Former Shareholder Defendants are strictly liable under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) for reimbursement of remediation costs. Count XIII seeks a declaratory judgment for indemnification against all defendants for future claims related to the TCE spills. Counts X, XI, and XII request indemnification from the Representing Shareholder Defendants based on alleged misrepresentations and breaches of warranties in the Share Purchase Agreement.

On December 27, 1988, the plaintiffs requested a pretrial and discovery conference due to the complexity of the case, involving over 90 parties. The court agreed on January 17, 1989, to stay all discovery until a formal scheduling order was issued and instructed parties to provide written status reports. The court indicated that amendments to the scheduling order would require a written showing of good cause, and that it would establish deadlines and conduct discovery management during the upcoming conference.

Any schedule established by the court during or following a status conference can only be modified with permission from the judge or magistrate upon showing good cause, as per Rule 16(b). Although the Former Shareholder Defendants and Detrex filed their status reports as required, the plaintiffs did not comply. The Former Shareholder Defendants reported on February 13, 1989, their intention to file a motion for summary judgment regarding the responsibility of the former shareholders for claims in Counts III and XIII. A preliminary pretrial conference on February 21, 1989, resulted in a scheduling order that set discovery deadlines and mandated that all amendments to pleadings be filed by June 1, 1989. 

On July 17, 1989, the Former Shareholder Defendants filed a motion for summary judgment on Counts III and XIII, while the Representing Shareholder Defendants moved to dismiss claims in Counts X, XI, and XII under Fed. R. Civ. P. 12(b)(1). The motions argued that the defendants, as shareholders, could not be considered "owners" under corporate law principles, thus precluding liability under Count III, which is based on allegations of ownership under CERCLA. They contended that since Count III was the sole basis for the plaintiffs’ common law indemnification claim in Count XIII, they were entitled to summary judgment. The Representing Shareholder Defendants echoed this in their dismissal motion, asserting that the court lacked jurisdiction over the pendent claims if they could not be held liable as "owners" under Count III.

On January 30, 1990, nearly a year after the Former Shareholder Defendants announced their intent to seek summary judgment, Amcast and EPC sought leave to file an amended complaint. Their motion claimed no undue delay in amending the complaint but failed to acknowledge the June 1, 1989 deadline for amendments or to request a modification of the January 17, 1989 scheduling order. The memorandum supporting the plaintiffs' motion indicated their aim to assert additional claims for contribution linked to an April 1989 EPA investigation and to drop certain claims and parties from the case.

The plaintiffs' memorandum outlines the reasons for seeking leave to amend their complaint, highlighting the addition of contribution claims related to hazardous substance releases at their manufacturing facility in Elkhart, Indiana. They reference a 1989 CERCLA 104(e) information request about contamination at the Main Street Well Field, where the USEPA may identify them as Potentially Responsible Parties. The plaintiffs argue that if the Defendants caused the hazardous spills during their ownership or operation of the facility, they are entitled to seek contribution from the Defendants for their Superfund liability. The proposed amendment also removes several state claims and eliminates the Doe truck driver Defendants from the case.

A significant focus of the amendment is the re-characterization of the Former Shareholder Defendants as "operators" of the facility, expanding their potential liability under CERCLA beyond mere ownership. Despite the Defendants not filing objections within the standard 15-day response period, the court granted the amendment on February 15, 1990, unaware of an informal agreement for an extension of objection time. Following a hearing on March 12, 1990, the court took the matter under advisement, treating the Defendants' objections as a reconsideration request after the motion had already been granted.

The determination of the plaintiffs' motion hinges on Federal Rules of Civil Procedure 16(b) and 15(a). Rule 16(b) mandates that a district court establish a scheduling order that limits amendments, allowing modifications only upon a showing of good cause. The court's previous actions suggest a need to evaluate whether the plaintiffs have met the requirements for such an amendment within the established timeline.

Rule 16(b) mandates that a schedule can only be modified with the judge's or magistrate's permission upon demonstrating good cause. The June 1, 1989 deadline for amending pleadings was set during an initial scheduling conference requested by the plaintiffs. At a subsequent conference on June 15, 1989, the plaintiffs did not raise the issue of amending their complaint, nor did they alter the established deadline. When the plaintiffs filed their motion for leave to amend on January 30, 1990, they neglected to address the expired deadline. The Shareholder Defendants raised this issue in their objections, but the plaintiffs contended that the amendment would not prejudice the defendants and cited a U.S. EPA investigation as justification for their late amendment request. However, the court found that the plaintiffs' explanations did not establish good cause for modifying the deadline. The plaintiffs failed to provide a reasonable justification for the nine-month delay in seeking leave to amend, particularly regarding their new claim about the defendants being "operators" under CERCLA. The plaintiffs had initially chosen not to include this allegation in their original complaint, despite being aware of the liability implications under Section 107(a) of the Superfund Act. The court emphasized that while the absence of prejudice may be considered under Rule 15(a), it does not satisfy the good cause requirement of Rule 16(b), as illustrated in Forstmann v. Culp. Thus, the plaintiffs must demonstrate valid reasons for not adhering to the pretrial scheduling order.

A party seeking to file an untimely amendment must show 'good cause' for not meeting established deadlines despite exercising due diligence. This 'good cause' evaluation under Rule 16(b) is distinct from the analysis of whether the amendment itself is permissible under Rule 15, which allows for amendments to pleadings with court permission and states that such leave should be freely granted when justice requires. However, limitations exist, including undue delay, bad faith, and potential prejudice to the opposing party. Courts have upheld denials of leave to amend due to factors such as futility, adding new claims close to trial, and the timing of the amendment being prejudicial.

In the context of Amcast and EPC's situation, they argue that no prejudice would arise due to the stay in discovery and lack of a trial date. Nonetheless, precedent shows that courts may deny leave to amend due to unexplained delays, as illustrated in Doelle v. Mountain States Tel. Tel., where the court denied an amendment sought over three months past the deadline. The court emphasizes that its scheduling order aims to maintain orderly and timely proceedings, and the plaintiffs' request for leave to amend is ultimately denied as untimely.

Plaintiffs failed to provide a valid justification for their delay in seeking to amend their complaint, which was submitted eight months after the amendment deadline and six months after the Shareholder Defendants filed for summary judgment. Their motion referenced an April 1989 EPA study but did not clarify the significant delay until January 30, 1990. The plaintiffs could have included their claim regarding the Former Shareholder defendants as "operators" of EPC’s plant in their original complaint and could have pursued their contribution claim before the June 1, 1989 deadline. Furthermore, they could have dismissed the Doe Defendants without needing an amendment or court order under Fed. R. Civ. P. 41(a)(1). The court referenced Kleinhans v. Lisle Sav. Profit Sharing Trust, highlighting that the plaintiffs' delay appeared to be an attempt to circumvent the forthcoming summary judgment. Citing Glesenkamp v. Nationwide Mutual Insurance Company, the court emphasized that the liberal amendment policy of the Federal Rules should not be exploited to evade summary judgment. Consequently, the court denied the plaintiffs' motion for leave to amend their complaint due to the unjustified delay and the untimeliness of the request, vacating a prior order that had granted them leave. The court also noted that CERCLA holds liable any person owning or operating a facility where hazardous substances were disposed of, and defined 'owner or operator' in a way that implies ordinary meanings rather than technical interpretations.