The Centech Group, Inc. v. United States ( 2022 )

In the United States Court of Federal Claims
No. 19-1752
(Filed: August 25, 2022)
NOT FOR PUBLICATION
*************************************
THE CENTECH GROUP, INC., *
*
Plaintiff, *
* Motion for Leave to Amend Answer; RCFC
v. * 15(a); Affirmative Defenses; Undue Delay;
* Prejudice; Futility.
THE UNITED STATES, *
*
Defendant. *
*************************************
Kenneth A. Martin, The Martin Law Firm, PPLC, McLean, VA, counsel for Plaintiff. James C.
Fontana and L. James D’Agostino, Fontana Law Group, LLC, McLean, VA, of counsel. David
Warner and Heather Mims, Centre Law & Consulting, LLC, Vienna, VA, of counsel.
Amanda L. Tantum, U.S. Department of Justice, Civil Division, Washington, DC, counsel for
Defendant. Michael J. Farr, Senior Trial Attorney, Air Force Commercial Litigation Field
Support Center, of counsel.
MEMORANDUM OPINION AND ORDER
DIETZ, Judge.
Before the Court is the government’s motion for leave to amend its answer and assert
affirmative defenses pursuant to Rule 15(a)(2) of the Rules of the United States Court of Federal
Claims (“RCFC”). Because the Court finds that the government’s delay in asserting the
affirmative defenses does not constitute an undue delay and that granting the government’s
motion will not result in incurable prejudice, the government’s motion is GRANTED.
I. BACKGROUND
Plaintiff, THE CENTECH GROUP, Inc. (“CENTECH”), filed its first amended
complaint on March 11, 2020, alleging breach of contract and, alternatively, constructive
termination for convenience and cancellation. See Am. Compl., ECF No. 8. The government
filed its answer on July 10, 2020. See Answer, ECF No. 23. In its answer, the government did not
assert any affirmative defenses. See id. Subsequently, in the joint preliminary status report, the
parties disagreed if the Court should defer proceedings until the case Communications
Supply Corp. v. Iron Bow Technologies, LLC, Civil Action No. 2:18-cv-10374-CB (W.D. Pa.)
was resolved. 1 See Joint Prelim. Status Rep. at 2-3, ECF No. 24. After considering the parties’
positions, the Court permitted the parties to conduct limited written discovery pending the
resolution of the CSC v. Iron Bow case. See Aug. 26, 2020 Status Rep. Order, ECF No. 28.
The Court held a discovery hearing on May 11, 2021, during which the Court determined
that the limitations on discovery should be lifted. See May 12, 2021 Status Rep. Order, ECF No.
49. After receiving input from the parties, the Court adopted their proposed discovery schedule.
See June 14, 2021 Sched. Order, ECF No. 55. After receiving two motions from the government
to extend the discovery schedule, which were opposed by CENTECH, the Court granted the
motions and modified the schedule. See Jan. 12, 2022 Order, ECF No. 61; June 3, 2022 Order,
ECF No. 73. Under the current schedule, fact discovery was to be completed by June 24, 2022,
and expert discovery is scheduled to be completed on September 26, 2022. See June 3, 2022
Order. Motions for summary judgment, if any, are scheduled to be filed by October 24, 2022. Id.
On May 31, 2022, the government filed a motion for leave to amend its answer and assert
affirmative defenses pursuant to RCFC 15(a)(2). See Def.’s Mot. to Amend at 1, ECF No. 71
[hereinafter Def.’s Mot.]. The government seeks to clarify its answers and to assert five 2
affirmative defenses, including failure to satisfy conditions precedent, waiver, equitable estoppel,
failure to mitigate damages, and estoppel under the Severin doctrine. Def.’s Mot. at 4; see also
Def.’s Mot. Ex. A at 15-18. CENTECH does not oppose the government’s clarifications. Pl.’s
Opp’n to Def.’s Mot to Amend at 4, ECF No. 74 [hereinafter Pl.’s Opp’n]. However, CENTECH
does oppose the government’s assertion of affirmative defenses on the grounds of undue delay,
prejudice, and futility. Pl.’s Opp’n at 1-2, 4-7.
II. LEGAL STANDARDS
Under RCFC 8(c), a defendant who fails to raise an affirmative defense in its answer
risks waiving that defense. Cooke v. United States, 79 Fed. Cl. 741, 742 (2007); see Shell Oil Co.
v. United States, 896 F.3d 1299, 1315 (Fed. Cir. 2018); Crocker v. United States, 127 F. Supp.
568, 573 (Ct. Cl. 1955). But a failure to plead an affirmative defense does not automatically
extinguish the defense. Al-Kurdi v. United States, 25 Cl. Ct. 599, 604 (1992) (citing Cities Serv.
Helex, Inc. v. United States, 543 F.2d 1306, 1313 (Ct. Cl. 1976)). “When a party fails to plead an
affirmative defense, it may cure the defect by moving to amend its pleading under RCFC 15(a).”
Cooke, 79 Fed. Cl. at 742. RCFC 15(a)(2) states that “the court should freely give leave [to
amend pleadings] when justice so requires.” This rule is liberally construed, and courts generally
grant leave to amend unless there is an “apparent or declared reason” not to permit the
amendment, such as “undue delay, bad faith or dilatory motive on the part of the movant,
repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the
1
This case involved a dispute in the United States District Court for the Western District of Pennsylvania between
CENTECH’s subcontractor, Iron Bow Technologies, LLC (“Iron Bow”), and Iron Bow’s supplier, Communications
Supply Corp. (“CSC”). See Joint Prelim. Status Rep. at 2-3, ECF No. 24.
2
The government initially sought to assert seven affirmative defenses but withdrew two of them in its reply. See
Def.’s Reply at 1 n.1, ECF No. 77.
2
opposing party by virtue of allowance of the amendment, futility of amendment, etc.” Foman v.
Davis, 371 U.S. 178, 182 (1962); see A & D Auto Sales, Inc. v. United States, 748 F.3d 1142,
1158 (Fed. Cir. 2014). It is within the discretion of the trial court to grant or deny an opportunity
to amend a pleading. Foman, 371 U.S. at 182; FilmTec Corp. v. Hydranautics, 67 F.3d 931, 935
(Fed. Cir. 1995).
III. DISCUSSION
CENTECH argues that “it is clear that [the government] has unduly delayed bringing this
[m]otion” because the government “had knowledge of these potential affirmative defenses for
over two years[] yet” it “waited to request leave to amend its [a]nswer.” Pl.’s Opp’n at 5.
Whether a party has unduly delayed seeking leave to file an amended pleading is subject to the
discretion of the court, and viewed, on a case-by-case basis, in the context of whether the
amended pleading would cause undue prejudice. LW Constr. of Charleston, LLC v. United
States, 139 Fed. Cl. 254, 296 (2018) (citing Alaska v. United States, 15 Cl. Ct. 276, 280 (1988)).
In some cases, “delay alone, even without a demonstration of prejudice, has been sufficient
grounds to deny amendment of pleadings.” Te-Moak Bands of W. Shoshone Indians of Nev. v.
United States, 948 F.2d 1258, 1262 (Fed. Cir. 1991) (denying the plaintiff’s motion to amend
after a “significant” delay and failure to cure within a reasonable time); see Cencast Servs., L.P.
v. United States, 729 F.3d 1352, 1363 (Fed. Cir. 2013). However, mere delay is not enough to
bar amendment of the pleadings when the non-movant has not demonstrated that it has been or
will be prejudiced. Hess v. United States, 537 F.2d 457, 461 (Ct. Cl. 1976).
In this case, the timing of the government’s motion does not constitute an undue delay
that, by itself, is sufficient grounds to deny the government an opportunity to assert its
affirmative defenses. The government is seeking to amend its answer for the first time at the
conclusion of fact discovery. See also Senza-Gel Corp. v. Seiffhart, 803 F.2d 661, 667 (Fed. Cir.
1986) (“The mere fact that an amendment is offered late in the case is not enough to bar it;
amendments may be offered at trial, or even after reversal and remand.”). The government
explains the timing of its motion stating that, prior to fact discovery, it did not have sufficient
evidence to include the affirmative defenses in its answer. See Def.’s Reply at 20, ECF No. 77.
Under these circumstances, the Court finds that the timing of the government’s motion does not
rise to the level of an undue delay.
CENTECH also argues that it will be prejudiced if the government is allowed to amend
its answer at this stage of the litigation because it will require the parties to extend discovery
again or require CENTECH to forgo discovery on the newly asserted affirmative defenses. Pl.’s
Opp’n at 7. “Undue prejudice may be found when an amended pleading would cause unfair
surprise to the opposing party, unreasonably broaden the issues, or require additional discovery.”
LW Constr., 139 Fed. Cl. at 279. “Mere annoyance and inconvenience . . . however, are
insufficient bases to warrant a denial of a motion to amend.” St. Paul Fire & Marine Ins. Co. v.
United States, 31 Fed. Cl. 151, 153 (1994). The cost and burden of undertaking additional
discovery do not establish the level of prejudice needed to overcome the liberal standard of
RCFC 15(a)(2). Veridyne Corp. v. United States, 86 Fed. Cl. 668, 681 (2009). The burden to
prove undue prejudice is on the non-moving party. Id.3
The Court is not convinced that allowing the government to assert its affirmative
defenses will prejudice CENTECH enough to deny the government’s motion. CENTECH asserts
that it will be “severely” prejudiced should the amendment be permitted, yet CENTECH fails to
explain what prospective hardships it may face other than the potential for additional discovery.
See Alaska, 15 Cl. Ct. at 280. CENTECH emphasizes that the government “has sought multiple
extensions of the discovery schedule due to its untimely discovery activities[,]” and that it will
“incur another round of substantial fees and costs for this litigation should this amendment be
permitted.” Pl.’s Opp’n at 7. While it may be fair to criticize the government’s conduct during
discovery in this case, the burden of undertaking additional discovery to address the affirmative
defenses is not sufficient to overcome the liberal standard of RCFC 15(a)(2). See Veridyne, 86
Fed. Cl. at 681; see also Alaska, 15 Cl. Ct. at 280. Further, at this stage in this case, the Court is
able to effectively mitigate any prejudice to CENTECH by enlarging the recently-expired fact
discovery period and extending the deadline for filing motions for summary judgment.
Finally, the government’s amendment is not futile. When assessing whether an
amendment is futile, courts do not engage in an extensive analysis of the merits but instead
simply decide whether the amendment is facially meritless and frivolous. See St. Paul Fire, 31
Fed. Cl. at 155 (citing Alaska, 15 Cl. Ct. at 280); see also Johnson v. Oroweat Foods Co., 785
F.2d 503, 510 (Fed. Cir. 1986) (“Leave to amend, however, should only be denied on the ground
of futility when the proposed amendment is clearly insufficient or frivolous on its face.”). The
government has provided sufficient support to demonstrate that its affirmative defenses are not
facially meritless or frivolous.
Because there are no sufficient reasons to deny the government’s motion for leave to
amend its answer, the liberal standard of RCFC 15(a)(2) compels that it be granted. See Senza-
Gel Corp., 803 F.2d at 667 (“Where there is lack of prejudice to the opposing party and the
amended [pleading] is obviously not frivolous, or made as a dilatory maneuver in bad faith, it is
an abuse of discretion to deny such a motion.”); Alaska, 15 Cl. Ct. at 280 (articulating that when
the court “lacks a ‘substantial reason’ to deny leave, its discretion ‘is not broad enough to permit
denial’”). This outcome ensures that the Court will be able to facilitate a proper decision on the
merits. See Foman, 371 U.S. at 181-82.
IV. CONCLUSION
Accordingly, the government’s motion for leave to amend its answer and assert
affirmative defenses is GRANTED. The government SHALL FILE its first amended answer by
September 2, 2022. The parties SHALL FILE a joint status report by September 9, 2022,
advising whether further discovery is needed and confirming the current schedule or proposing
an amended schedule for further proceedings.
IT IS SO ORDERED.
s/ Thompson M. Dietz
THOMPSON M. DIETZ, Judge
4