Durham Commercial Capital Corp. v. Select Portfolio Servicing, Inc.

          ORDER

          MARIA MORALES HOWARD, UNITED STATES DISTRICT JUDGE.

         THIS CAUSE is before the Court on Plaintiff Durham Commercial Capital Corp.'s Renewed Motion for Leave to Supplement and Amend the Complaint (Doc. 194; Motion), filed on June 22, 2017. Defendant Select Portfolio Servicing, Inc. (SPS) filed a response in opposition to the Motion on August 2, 2017. See Defendant Select Portfolio Servicing, Inc.'s Response in Opposition to Plaintiff's Renewed Motion for Leave to Supplement and Amend the Complaint (Doc. 204; Response). With leave of Court, see Order (Doc. 207), Durham Commercial Capital Corp. (Durham) filed a reply in support of its Motion on September 15, 2017. See Plaintiff Durham Commercial Capital Corp.'s Reply in Support of its Renewed Motion for Leave to Supplement and Amend the Complaint [D.E. 194] (Doc. 209; Reply). Despite the tortured history of this case which the Court will discuss below, this matter is ripe for review.^[1]

         I. Procedural History^[2]

         Durham initiated this action on July 25, 2014, by filing a two-count Complaint naming Connolly, Geaney, Ablitt and Willard, P.C. (CGAW) and SPS as Defendants. See Complaint (Doc. 1). In the Complaint, Durham alleges a breach of contract claim against CGAW and a claim for “breach of statutory duty to pay accounts” under § 9-406 of the Uniform Commercial Code (UCC) against SPS. See generally Complaint.^[3] Stated succinctly, Durham claims that, as the assignee of CGAW's accounts receivable, it is entitled to recover from SPS, the account debtor, payments SPS made to CGAW on those accounts after SPS received Durham's Notice of Assignment. On October 27, 2014, SPS filed an answer to the Complaint raising numerous affirmative defenses. See Defendant Select Portfolio Servicing, Inc.'s Answer and Affirmative Defenses (Doc. 14; Answer).

         In accordance with the requirements of Rule 16, Federal Rules of Civil Procedure (Rule(s)), the Court entered a Case Management and Scheduling Order (Doc. 18; CMSO) on December 3, 2014. Significantly, the CMSO set a February 17, 2015 deadline for motions to amend the pleadings. See CMSO at 1. Neither party requested leave to amend before this deadline expired. Indeed, the case generally proceeded in accordance with the CMSO, and following extensive discovery both parties filed motions for summary judgment. See Defendant Select Portfolio Servicing, Inc.'s Motion for Final Summary Judgment (Doc. 58; SPS Summary Judgment Motion), filed October 28, 2015; Plaintiff, Durham Commercial Capital Corp.'s Motion (Renewed) for Final Summary Judgment Against Defendant, Select Portfolio Servicing, Inc. and Incorporated Memorandum of Law (Doc. 64; Durham Summary Judgment Motion), filed November 2, 2015.^[4] Over seven months after filing their Summary Judgment Motions, the parties jointly requested leave to file additional briefing regarding choice-of-law issues that they had previously failed to identify. The Court granted this request, and the parties filed their supplemental briefs on July 29, 2016. See Defendant Select Portfolio Servicing, Inc.'s Memorandum on Choice of Law Issues (Doc. 109); Plaintiff Durham Commercial Capital Corp.'s Brief Concerning Choice-of-Law Issues (Doc. 110). One month later, SPS filed a notice of supplemental authority citing a recently-decided case from the Fourth Circuit Court of Appeals: Forest Capital, LLC v. BlackRock, Inc., 658 Fed.Appx. 675 (4th Cir. Aug. 10, 2016). See Defendant's Notice of Supplemental Authority (Doc. 111), filed September 1, 2016. In Forest Capital, the Fourth Circuit held that UCC § 9-406, the provision on which Durham bases its claim against SPS, does not provide a private right of action against an account debtor. See Forest Capital, 658 Fed.Appx. at 676, 680-81.

         On October 17, 2016, the Court entered an Order (Doc. 119; Summary Judgment Order) granting, in part, and denying, in part, the Summary Judgment Motions. Although the Court addressed numerous arguments in resolving the Summary Judgment Motions, for purposes of the instant Motion, two findings in particular are relevant. In the Summary Judgment Order, the Court struck SPS's Notice of Supplemental Authority because SPS had not argued in its Summary Judgment Motion that UCC § 9-406 did not create a private right of action, and thus, the case was not “supplemental authority” on any argument before the Court at that time. See Summary Judgment Order at 17 n.8. In addition, the Court denied Durham's request for summary judgment on its prima facie case, finding that a “genuine dispute exists as to whether Durham factored the accounts for which it now seeks payment.” Id. at 39. The Court explained that to recover the payments that SPS made to CGAW despite the Notice of Assignment, Durham must prove that those payments were on invoices that had actually been assigned to Durham. See id. at 38-39. However, the Court reviewed the record and found that Durham had not “provided any evidence that the amounts SPS paid were actually on accounts purchased by and assigned to Durham.” Id. at 38. In light of this factual issue, among others, the case could not be resolved on summary judgment and the Court set the matter for a bench trial on the February 2017 Trial Term. See Order (Doc. 120).

         However, trial in February was not to be. Rather than proceed to trial on the issues remaining in the case, the docket in this action began hemorrhaging new motions from the parties. On November 23, 2016, Durham moved for permission to file additional briefing to address the Court's finding that Durham must prove which accounts it purchased. See Plaintiff Durham Commercial Capital Corp.'s Motion to Authorize Additional Limited Briefs in Order to Enable the Court to Consider Clarification of the Court's Sua Sponte Ruling in Section C.1 of the Order Granting in Part, and Denying in Part, the Parties' Cross-Motions for Summary Judgment [D.E. 119] (Doc. 121; Motion to Clarify). Durham argued that the Court erred in finding that UCC § 9-406 required “proof that Durham purchased particular accounts from CGAW, before it could qualify as an assignment under Section 9-406(a) of the UCC.” See Motion to Clarify at 2-3. According to Durham, because the Factoring Agreement granted Durham a security interest in all of CGAW's Purchased and non-purchased accounts, under the UCC, Durham qualified as an “assignee” and had the right to payment on all accounts. Id. at 3. In Durham's view, the Court made a legal error in failing to recognize that Durham's security interest gave rise to a valid assignment of the right to payment under the UCC.

         For its part, SPS filed a renewed motion for summary judgment, a motion to amend its answer and affirmative defenses, and a motion for judgment on the pleadings. See Defendant Select Portfolio Servicing, Inc.'s Renewed Motion for Final Summary Judgment (Doc. 125), filed December 29, 2016; Defendant Select Portfolio Servicing, Inc.'s Motion for Judgment on the Pleadings with Incorporated Memorandum of Law (Doc. 128), filed January 3, 2017; Defendant Select Portfolio Servicing, Inc.'s Motion for Leave to Amend Answer and Affirmative Defenses (Doc. 129), filed January 3, 2017. In these motions, SPS attempted to raise two defenses that it had not previously asserted. SPS argued that: (1) based on the Forest Capital decision, Durham's claim fails because UCC § 9-406 does not provide a private cause of action, and (2) based on the Summary Judgment Order, Durham cannot recover because it has no evidence of which accounts it purchased. Durham filed a motion to strike SPS's motions on January 10, 2017, arguing inter alia, that they were untimely, which prompted SPS to file a motion to extend the CMSO deadlines nunc pro tunc. See Plaintiff Durham Commercial Capital Corp.'s Motion to Strike Defendant Select Portfolio Servicing, Inc.'s: (1) Renewed Motion for Final Summary Judgment [D.E. 125]; (2) Motion for Leave to Amend Answer and Affirmative Defenses [D.E. 129]; and (3) Motion for Judgment on the Pleadings [D.E. 128] and, Alternatively Conditional Motion for Enlargement of Time to Substantively Respond to Each of Defendant's Untimely Motions (Doc. 135); Defendant Select Portfolio Servicing, Inc.'s Motion for Limited Extension of Deadlines in Scheduling Order Nunc Pro Tunc (Doc. 136), filed January 11, 2017.

         On January 30, 2017, the Court entered an Order denying the Motion to Clarify because Durham misapprehended the basis for the Court's ruling. See Order (Doc. 143; Clarification Order). The Court explained that “[w]hether Durham had a right to collect on all accounts receivable-both purchased and non-purchased-based on its security interest in those accounts is irrelevant.” Id. at 3. Rather, the Court found it necessary for Durham to “prove it actually purchased accounts receivable to recover payment from SPS because that is the basis of its claim against SPS as pled.” See Clarification Order at 3 (emphasis added). In the Complaint, Durham defined the term “Purchased Accounts” to mean “certain of [CGAW's] accounts, ” which Durham purchased under the Factoring Agreement, and drew a distinction between “Purchased Accounts” and “non-purchased accounts.” See Complaint ¶¶ 9-11. Although Durham alleged the existence of a security interest in both Purchased and non-purchased accounts, it specifically limited its claim against SPS to those payments made on “certain Purchased accounts.” See Clarification Order at 4. As such, “Durham's claim as pled is based on CGAW's purported assignment of a right to payment arising from Durham's purchase of accounts, and SPS's alleged wrongful payment on those purchased accounts.” Id. at 5. The Court found that “[n]either the Complaint nor Durham's Summary Judgment Motion indicated that Durham sought payment based on a security interest in all accounts receivable.” Id. at 4. Thus, the Court would not permit Durham to “change its theory of recovery ‘through argument at the summary judgment phase of proceedings.'” Id. at 4 (quoting Flintlock Constr. Servs., LLC v. Well-Come Holdings, LLC, 710 F.3d 1221, 1228 (11th Cir. 2013)).

         Less than a week after the Court entered the Clarification Order, on February 3, 2017, Durham filed Plaintiff's Motion to Modify the Court's Scheduling Order and For Leave to File an Amendment to the Plaintiff's Complaint (Doc. 145; First Motion to Amend).^[5] In the First Motion to Amend, Durham sought leave to amend under Rule 15(a)(2) and 16(b) in order to expand its claim beyond Purchased Accounts and include the non-purchased accounts as well. The Court held a hearing on February 8, 2017, to address the myriad pending motions. See Minute Entry (Doc. 148); see also Transcript of February 8, 2017 Court Proceedings (Doc. 150; February Tr.). At the hearing, in an effort to avoid any further delay of trial, Durham affirmatively withdrew its First Motion to Amend and stated its intention to proceed to trial on the current pleadings. See February Tr. at 37-40. The Court denied SPS's untimely motions and set the case for trial in May 2017. Id. at 4-7, 34-36, 51-52; see also Minute Entry (Doc. 148).

         Once again, trial was not to be. As the parties began to submit their pre-trial filings, it became evident to the Court that this case was not trial ready. See Joint Pretrial Statement (Doc. 154; Joint Stipulation), filed March 8, 2017; Defendant Select Portfolio Servicing, Inc.'s Motion in Limine (Doc. 155), filed March 17, 2017; Select Portfolio Servicing, Inc.'s Proposed Findings of Fact and Conclusions of Law (Doc. 174) and Durham Commercial Capital Corp.'s Proposed Findings of Fact and Conclusions of Law (Doc. 175; Durham's Proposed Findings), both filed April 26, 2017. Specifically, despite Durham's stated decision to withdraw the First Motion to Amend and intention to proceed to trial on the Complaint, the Joint Stipulation and Durham's Proposed Findings revealed that Durham fully intended to reassert its request to amend the Complaint during trial by invoking Rule 15(b). Thus, rather than streamlining the issues for trial, Durham's decision to withdraw its First Motion to Amend simply delayed resolution of those issues until trial. As such, the Court set this case for a status conference which was held on May 25, 2017, and addressed this problem with Durham. See Minute Entry (Doc. 186; May Status Conference).^[6]

         At the May Status Conference, the Court expressed its unwillingness to proceed to trial on a case where “nobody can agree on what the claims are, ” and where new legal theories would be raised and addressed for the first time in the middle of trial. See Transcript of May 25, 2017 Status Conference (Doc. 188; May Tr.) at 31-32, 48. In addition, the Court expressed some skepticism regarding Durham's apparent contention that Rule 15(b) would allow a party to forgo seeking leave to amend under Rule 15(a) and instead wait until the middle of trial to seek to amend when the party knew of the need for amendment well in advance of the trial. See id. at 50-51; see also Transcript of June 6, 2017 Telephonic Status Conference (Doc. 195; June Tr.) at 22. The Court discussed potential avenues for moving the case forward, set the matter for a follow-up status conference in two weeks, and stayed the case for thirty days until the question of how to proceed could be resolved. See Order (Doc. 187), entered May 26, 2017. At the June 6, 2017 Status Conference, the Court again clarified Durham's options in terms of how to get this case trial ready. In the Court's view, Durham could either proceed to trial on the current Complaint, in which its claim against SPS is limited to Purchased Accounts, or it could seek leave to amend the Complaint to expand its claim to include both Purchased and non-purchased accounts. See Minute Entry (Doc. 190), entered June 6, 2017; June Tr. at 17, 22. A few days later, Durham indicated that it would be filing a motion to amend its Complaint, and the instant Motion followed on June 22, 2017. See Durham Commercial Capital Corp.'s Notice of Intent to File a Motion for Leave to Amend the Complaint (Doc. 192), filed June 9, 2017.

         II. Applicable Law

         When the Court has established a specific deadline for amendments to pleadings, the movant must first establish good cause for seeking leave to amend after that deadline pursuant to Rule 16(b). See Walters v. Altec Indus., Inc., No. 3:01-CV-371-J-12TEM, 2003 WL 22012046, at *1 (M.D. Fla. Mar. 3, 2003); Perez v. Pavex Corp., No. 801CV0069T27MSS, 2002 WL 31500404, at *1 (M.D. Fla. Oct. 18, 2002). “This good cause standard precludes modification unless the schedule cannot ‘be met despite the diligence of the party seeking the extension.'” SeeSosa v. Airprint Systems, Inc.,133 F.3d 1417, 1418 (11th Cir. 1998) (quoting Fed.R.Civ.P. 16 advisory committee's note). Once the movant establishes good cause under Rule 16, the Court will consider whether the amendment is proper under Rule 15. See Sosa, 133 F.3d at 1419. Rule 15(a)(1) establishes that “[a] party may amend its pleading once as a matter of course within: (A) 21 days after serving it, or (B) if the pleading is one to which a responsive pleading is required, 21 days after service of a responsive pleading or 21 days after service of a motion under Rule 12(b), (e), or (f), whichever is earlier.” Thereafter, a party may amend its pleadings only upon leave of court or by obtaining written consent of the opposing party. See Rule 15(a)(2). The Rule provides that “[t]he court should freely give leave when justice so requires.” Id. As a result, “[t]here must be a substantial reason to deny a motion to amend.” Laurie v. Ala. Ct. of Crim. App., 256 F.3d 1266, 1269, 1274 (11th Cir. 2001) (per curiam). Substantial reasons justifying a court's denial of a request for leave to amend include “undue delay, bad faith or dilatory motive ...