United States District Court, M.D. Florida, Jacksonville Division
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 ...