Barclay v. Certain Underwriters at Lloyd's, London ( 2020 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 In Re Case No.: 3:19-cv-01008-WQH-AHG 12 SULLIVAN INTERNATIONAL GROUP, ORDER INC., 13 Debtor. 14 15 16 CHRISTOPHER R. BARCLAY, Chapter 7 Trustee, 17 Plaintiff, 18 v. 19 CERTAIN UNDERWRITERS 20 AT LLOYD’S, LONDON, 21 subscribing to Professional Liability Insurance Policy No. 22 B1216PRW167000, 23 Defendant. 24 HAYES, Judge: 25 The matters pending before the Court are the Motion for Leave to File a Second 26 Amended Complaint filed by Plaintiff Christopher R. Barclay, Chapter 7 Trustee (ECF No. 27 26) and the Motion for Partial Summary Judgment filed by Defendant Brit UW Limited 28 (ECF No. 27). 1 PROCEDURAL BACKGROUND 2 On March 8, 2019, Plaintiff Christopher R. Barclay, Chapter 7 Trustee, (“Trustee”) 3 initiated this proceeding in the United States Bankruptcy Court for the Southern District of 4 California (“Bankruptcy Court”) by filing a Complaint against Defendant Brit UW Limited 5 (“Brit”)1 for (1) breach of contract and (2) turnover of estate property. (Ex. A to Def.’s 6 Motion for Withdrawal of Reference, ECF No. 1 at 34-43). 7 On April 22, 2019, Defendant Brit filed a Motion to Withdraw the Reference. 8 (Bankr. Court ECF No. 12). On May 29, 2019, the Clerk of the Bankruptcy Court referred 9 and transmitted the Motion for Withdrawal of Reference to this Court. (ECF No. 1-2). On 10 October 31, 2019, this Court granted the Motion for Withdrawal of Reference filed by 11 Defendant Brit (ECF No. 1). (ECF No. 6). 12 On January 8, 2020, Plaintiff Trustee filed a Notice of Lodgment of the First 13 Amended Complaint (“FAC”) against Defendant Brit for (1) breach of contract and (2) 14 turnover of estate property. (ECF No. 13). Plaintiff Trustee alleges that Defendant Brit 15 breached a professional liability insurance policy by refusing to provide coverage for a 16 claim by Plaintiff Trustee against 3C Advisors & Associates, Inc. (“3C”) and refusing to 17 pay Plaintiff Trustee the amount due on the 3C Judgment. See id. at 12-13. Plaintiff 18 Trustee alleges that he is entitled to the turnover of $2,386,535.00 under the policy because 19 the sum “is matured, payable on demand, or payable on order” and “shall constitute 20 property of the Debtor’s bankruptcy estate that is in Defendant[] [Brit’s] possession . . . .” 21 Id. at 13. 22 On January 9, 2020, Defendant Brit filed a Notice of Lodgment of the Answer and 23 Affirmative Defenses to the FAC. (ECF No. 14). 24 25 26 27 1 Sued as Certain Underwriters at Lloyd’s, London, subscribing to Professional Liability Insurance Policy 28 1 On May 29, 2020, Plaintiff Trustee filed a Motion for Leave to File a Second 2 Amended Complaint (“SAC”). (ECF No. 26). On the same day, Defendant Brit filed a 3 Motion for Partial Summary Judgment. (ECF No. 27). 4 On June 22, 2020, Defendant Brit filed a Response in opposition to Plaintiff 5 Trustee’s Motion for Leave to File a SAC (ECF No. 26). (ECF No. 28). On the same day, 6 Plaintiff Trustee filed a Response in opposition to Defendant Brit’s Motion for Partial 7 Summary Judgment (ECF No. 27). (ECF No. 29). 8 On June 29, 2020, Defendant Brit filed a Reply to the Motion for Partial Summary 9 Judgment (ECF No. 27). (ECF No. 30). On the same day, Plaintiff Trustee filed a Reply 10 to the Motion for Leave to File a SAC (ECF No. 26). (ECF No. 31). 11 LEGAL STANDARD 12 Federal Rule of Civil Procedure 15 states that courts “should freely give leave [to 13 amend] when justice so requires.” Fed. R. Civ. P. 15(a)(2). “This policy is ‘to be applied 14 with extreme liberality.’” Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 15 (9th Cir. 2003) (quoting Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 712 (9th 16 Cir. 2001)). The Supreme Court has identified several factors courts should consider when 17 deciding whether to grant leave to amend “such as undue delay, bad faith or dilatory motive 18 on the part of the movant, repeated failure to cure deficiencies by amendments previously 19 allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, 20 [and] futility of amendment . . . .” Foman v. Davis, 371 U.S. 178, 182 (1962). “Not all of 21 the [Foman] factors merit equal weight. As this circuit and others have held, it is the 22 consideration of prejudice to the opposing party that carries the greatest weight.” Eminence 23 Capital, 316 F.3d at 1052 (citing DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 185 (9th 24 Cir. 1987)). “The party opposing amendment bears the burden of showing prejudice.” 25 DCD Programs, 833 F.2d at 187. “Absent prejudice, or a strong showing of any of the 26 remaining Foman factors, there exists a presumption under Rule 15(a) in favor of granting 27 leave to amend.” Eminence Capital, 316 F.3d at 1052. 28 1 RULING OF THE COURT 2 Plaintiff Trustee seeks to file a SAC to add a cause of action for breach of the 3 || covenant of good faith and fair dealing. Defendant Brit contends that Plaintiff Trustee has 4 || unduly delayed in seeking leave to add a cause of action. Defendant Brit contends that the 5 || proposed new cause of action will prejudice Defendant Brit by changing the nature of the 6 || action and amount of damages from a contractual dispute to a tort dispute. Defendant Brit 7 ||contends that Plaintiff Trustee has acted in bad faith by seeking leave to add a cause of 8 || action shortly before the close of discovery. 9 The Court finds that Defendant Brit has failed to make a “strong showing of any of 10 [ ] Foman factors” to warrant deviation from the “presumption under Rule 15(a) in 11 || favor of granting leave to amend.” Eminence Capital, 316 F.3d at 1052. The Motion for 12 Leave to File a Second Amended Complaint filed by Plaintiff Christopher R. Barclay, 13 || Chapter 7 Trustee (ECF No. 26) is GRANTED. Plaintiff Christopher R. Barclay, Chapter 14 ||7 Trustee may file a Second Amended Complaint within thirty (30) days of the entry of 15 || this Order. 16 The Motion for Partial Summary Judgment filed by Defendant Brit UW Limited 17 || ECF No. 27) is DENIED as moot. 18 || Dated: August 14, 2020 itt Z. A a 19 Hon. William Q. Hayes 0 United States District Court 21 22 23 24 25 26 27 28