United States District Court, S.D. West Virginia, Bluefield
MEMORANDUM OPINION AND ORDER
A. Faber Senior United States District Judge.
before the court is plaintiff's motion for leave to file
an amended complaint. (Doc. No. 52). For the reasons that
follow, that motion is GRANTED.
and Procedural Background
instant dispute centers on fraudulent tax returns filed by
defendant Jeremy Evans, a former employee of defendant K R
Enterprises, doing business as Jackson Hewitt. Specifically,
former customers of K R Enterprises have alleged that Evans
improperly accessed the records of K R Enterprises to obtain
their personal and confidential information for the purpose
of fraudulently filing their 2014 income tax returns. All of
the former customers had sought assistance preparing their
2013 tax returns from K R Enterprises and their confidential
information had been saved in the company's database.
discovering Evans' conduct, certain customers of K R
Enterprises filed suit in the Circuit Court of McDowell
County, West Virginia, against Evans, K R Enterprises, and
Jackson Hewitt raising various state law claims including,
but not limited to, Breach of Fiduciary Duty, Negligence, and
Invasion of Privacy. There are six of these lawsuits
currently pending in the McDowell County Circuit
Court. All of the state lawsuits allege that
Evans was arrested on or about February 4, 2015, at a K R
Enterprise location and that Evans admitted to police that he
had used the customers' 2013 tax return information to
fraudulently file 2014 tax returns in their names.
Ohio Security Insurance Company (“Ohio Security”)
issued a BusinessOwners Liability Policy to K R Enterprises,
Policy Number BZS (15) 56 08 16 29. See Amended
Complaint at ¶ 60. The Ohio Security Policy also
included Data Compromise and CyberOne Coverage endorsements.
See id. at ¶¶ 73 and 75.
December 18, 2015, Ohio Security Insurance Company filed a
declaratory judgment action on the basis of diversity
jurisdiction pursuant to 28 U.S.C. § 1332 and, on March
14, 2016, it filed an amended complaint. Ohio Security asks
this court to determine that it has no duty to defend or
indemnify K R Enterprises, Evans, or Jackson
Hewitt under the BusinessOwners liability
coverage and/or or the Data Compromise and CyberOne coverage
for the six underlying lawsuits.
March 17, 2017, plaintiff filed a motion for leave to file a
second amended complaint seeking to add Cathy S. Goodman as a
defendant to the lawsuit. On February 27, 2017, Goodman had
filed an amended complaint in the Circuit Court of Wood
County raising allegations similar to the six underlying
lawsuits and naming Jackson Hewitt, Ohio Security, Evans, and
K R Enterprises as defendants. (ECF No. 52-1). Ohio Security
was served with the Goodman complaint on March 8, 2017, and
file its motion to amend on March 17, 2017. The defendants
who are plaintiffs in the underlying lawsuits oppose the
motion to amend. (ECF No. 56).
15(a) of the Federal Rules of Civil Procedure permits a party
to amend its pleading "once as a matter of course at any
time before a responsive pleading is served . . . [o]therwise
a party may amend the party's pleading only by leave of
court or by written consent of the adverse party; and leave
shall be freely given when justice so requires." In
Foman v. Davis, 371 U.S. 178, 182 (1962), the United
States Supreme Court noted that amendment under Rule 15(a)
should be freely given absent "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 opposing party by virtue of allowance of the
amendment, futility of amendment, etc."
in the Southern District of West Virginia, it is well
established that “[o]nce the scheduling order's
deadline for amendment of the pleadings has passed, a moving
party first must satisfy the good cause standard of Rule
16(b) [of the Federal Rules of Civil Procedure]. If the
moving party satisfies Rule 16(b), the movant then must pass
the tests for amendment under Rule 15(a).” Marcum
v. Zimmer, 163 F.R.D. 250, 254 (S.D. W.Va. 1995) (citing
Lone Star Transp. Corp. v. Lafarge Corp., Nos.
93-1505, 93-1506, 1994 WL 118475 (4th Cir. April 7, 1994)).
16(b) Good Cause
deadline for amended pleadings passed prior to the filing of
this motion, plaintiff must satisfy the “good
cause” standard of Rule 16(b) in addition to meeting
the requirements of Rule 15(a). “Unlike Rule
15(a)'s liberal amendment policy which focuses on the bad
faith of the party seeking to interpose an amendment and the
prejudice to the opposing party, Rule 16(b)'s ‘good
cause' standard primarily considers the diligence of the
party seeking the amendment.” Johnson v. Mammoth
Recreations, Inc., 975 F.2d 604, 609 (9th Cir. 1992);
Marcum, 163 F.R.D. at 254 (citing Johnson).
review of the record, it appears to the court that plaintiff
was diligent in filing its motion to amend the complaint. The
Goodman lawsuit was not even filed until after the deadline
for amendments had passed and, therefore, it was impossible
for plaintiff to seek leave time to amend within the
timeframe set forth in the scheduling order. Furthermore,
Ohio Security filed the instant motion shortly after being
served with Goodman's ...