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Halloran v. Harleysville Preferred Insurance Co.

United States District Court, D. Connecticut

February 8, 2018

MICHAEL HALLORAN, et al., Plaintiffs,
v.
HARLEYSVILLE PREFERRED INSURANCE COMPANY, et al., Defendants.

          RULING ON PLAINTIFFS' MOTION FOR LEAVE TO AMEND

          Victor A. Bolden United States District Judge.

         On January 29, 2016, Plaintiffs, homeowners in Hartford, Tolland or Windham Counties in Connecticut brought a Class Action Complaint against their homeowners' insurance companies (collectively “Defendants”). ECF No. 1. Currently pending before the Court is Plaintiffs' motion for leave to file a Fourth Amended Complaint. See ECF No. 462.

         The motion will be GRANTED for the reasons stated below.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         A. Factual Allegations

         Plaintiffs are individuals who either own homes or previously owned homes in Hartford, Tolland and Windham Counties in Connecticut. See Substituted Third Amended Class Action Complaint (“STAC”) ¶ 1, ECF No. 352. They allege that each of their homes' basement walls are crumbling due to the oxidation of iron sulfide minerals present in the concrete; the oxidation causes the concrete to swell and crack and, “[u]ltimately, the Plaintiffs' homes will fall into their basements.” Id. ¶ 2. Additionally, Plaintiffs claim their homes are impossible to sell and that the only solution to fix the cracking is to replace the basement walls. Id. ¶ 4.

         Plaintiffs allege that they held homeowners insurance policies with Defendants, various insurance companies. They claim that, despite the damage and the policy coverage, Defendants wrongly denied coverage or will deny coverage. Id. ¶ 3. Plaintiffs filed this lawsuit against Defendants “individually and on behalf of others who are similarly-situated because they (1) have basement walls that are irreversibly deteriorating and failing and (2) have claims that have been denied or will be denied by the Defendant Insurance Companies.” Id. ¶ 4. They allege breach of contract, breach of the implied warranty of good faith and fair dealing, and violations of the Connecticut Unfair Trade Practices Act (CUTPA) and the Connecticut Unfair Insurance Practice Act (CUIPA).

         B. Procedural History

         Plaintiffs filed the first complaint in this case on January 29, 2016. See Compl. ECF No. 1. The initial complaint included seven named plaintiffs and more than one hundred defendants, all insurance companies. Id. ¶¶ 2. Before Defendants had responded, Plaintiffs filed an amended complaint that included additional defendants and claims on March 17, 2016. See First Amend. Class Action Compl., ECF No. 122. Plaintiffs then moved to certify a class, which they defined as:

All individuals who own a home in the Connecticut towns of Manchester, Andover, Ellington, Stafford Springs or any other Connecticut town located east of the Connecticut River whose homes are insured by any of the Insurance Defendants, and whose homes have sustained ‘pattern cracking' including but not limited to horizontal and vertical cracks on their basement walls, and whose bad foundation claims have been denied or will be denied by the Insurance Defendants, which denials are or will be based on the same standardized language regarding the term ‘collapse', the term ‘basement', the term ‘foundation', the term ‘decay', the term ‘hidden', and the term ‘retaining wall.'

Pls. Mot. for Class Certification, ECF No. 158.

         The parties then sought different case management orders. See Pls. Proposed Case Management Order, ECF No. 239; Certain Defs. Non-Consented Mot. For Entry of Proposed Case Management Plan, ECF No. 240. The Court, in addressing these motions, provided that any motion for leave to file an amended complaint would be due by May 6, 2016. Order, ECF No. 254. It also denied Plaintiffs' motion for class certification without “prejudice to renewal following the Court's resolution of any motion to amend, and motions to dismiss directed at the amended complaint.” Id.

         Plaintiffs then moved for leave to file a second amended complaint on May 7, 2016. See Pl Mot. for Leave to Amend, ECF No. 290. Plaintiffs sought to add nine additional plaintiffs and four additional defendants, and to remove three defendants. Id. at 4-5. Plaintiffs also sought to add additional causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing. Id. Defendants did not oppose amendment. See Defs. Resp., ECF No. 309. The Court granted the motion, noting the lack of objection. Order, ECF No. 323.

         The parties then moved to amend the scheduling order, and Plaintiffs stated that they intended to file a third amended complaint. ECF No. 325. The Court granted the request and stayed responsive pleadings regarding the Second Amended Complaint. See Order, ECF No. 326.

         Plaintiffs moved to amend the complaint and join additional parties on October 31, 2016; they sought to add nineteen new plaintiffs and reduce the overall number of defendants to thirty. See Pls. Mot. for Leave to Amend., ECF No. 332. Defendant State Farm Fire and Casualty Company opposed amendment, but other parties stated they had no opposition. Compare State Farm Fire and Casualty Co. Mem. of L. in Opp., ECf No. 337 (opposing Plaintiffs' motion for leave) with Defs. Resp., ECF No. 338 (“In the interest of judicial efficiency and economy for all parties and this Court, the Defendants listed in Exhibit 1 do not oppose Plaintiff's Motion insofar as it seeks leave to file a Third Amended Complaint.”).

         Before the Court addressed the motion, however, Plaintiffs moved for leave to file a substituted third complaint on December 12, 2016. See Pl. Mot., ECF No. 339. Plaintiffs stated that the proposed “Substituted Third Amended Complaint” corrected a number of errors, deleted references to individuals and companies not in the case, corrected a number of errors in dates, damage estimates, and party names, and dropped a number of claims. Id. Defendants, in large part, again did not oppose amendment, although they noted that “the proposed Substituted Third Amended Complaint is Plaintiffs' fifth complaint in this case” and “[e]ach such amendment has not only delayed joinder of issue, but has caused Defendants to incur significant and unnecessary expenses in defending themselves.” Defs. Resp. ¶ 1, ECF No. 340. Defendants did request, however, that further amendment be barred unless Plaintiffs demonstrated good cause under Federal Rule of Civil Procedure 16. Id. ¶ 2.

         The Court granted Plaintiffs' motion and allowed the Substituted Third Amended Complaint to be filed. See Order on Mot. Amend Compl., ECF No. 350. The Court noted Defendants' consent. Id. at 1. This Court denied the Defendants' request to preclude future amendments unless Plaintiffs could show good cause: “Defendants cite no authority supporting their request that the Court preemptively impose a good cause standard on Plaintiffs' potential future requests to further amend the complaint in this case. The Court will not, therefore, order that Plaintiffs be precluded from any further amendments to the complaint in the absence of good cause.” Id. at 2. Plaintiffs subsequently filed the Substituted Third Amended Complaint, ECF No. 352.

         Defendants then filed numerous motions to dismiss. This included joint motions to dismiss several shared counts, ECF No. 373, and to strike the class allegations, ECF No. 375. Individual defendants also filed separate motions to dismiss. See Travelers Defs. Mot. Dismiss, ECF No. 377; Citizens Ins. Co. Mot. Dismiss., ECF No. 379; Bunker Hill Ins. Co., ECF No. 381; New London Cty. Mutual Ins. Co. Mot. Dismiss, ECF No. 384; Trumbull Ins. Co. Mot. Dismiss, ECF No. 387; Allstate Ins. Co. Mot. Dismiss, ECF No. 391; Metropolitan Group Mot. Dismiss, ECF No. 394; Kemper Independence Ins. Co. Mot. Dismiss, ECF No. 397; Liberty Entities' Mot. Dismiss, ECF No. 399; Homesite Ins. Co. Mot. Dismiss, ECF No. 401; Amica Ins. Co. Mot. Dismiss, ECF No. 403; State Farm Mot. Dismiss, ECF No. 405;[1] Merrimack Mutual Fire Ins. Co. Mot. Dismiss, ECF No. 409; American Commerce Ins. Co. Mot. Dismiss, ECF No. 411; NGM Ins. Co. Mot. Dismiss, ECF No. 413; CSAA Fire and Cas. Ins. Co. Mot. Dismiss, ECF No. 415; Nationwide Property And Cas. Ins. Co. and Harleysville Preferred Ins. Co. Mot. Dismiss, ECF No. 416; Middlesex Mutual Assurance Co. Mot. Dismiss, ECF No. 420. Plaintiffs responded to these motions on September 15, 2018. See Pl. Mem. in Opp. re Mot. to Strike, ECF No. 475; Pls. Resp. to Mot. to Dismiss and Mot. to Sever, ECF No. 456; Pl. Mem. in Opp. Combined, ECF No. 458.

         Plaintiffs then filed the pending motion to amend on September 25, 2017, seeking leave to file a Fourth Amended Complaint, ECF No. 462. They stated they sought leave to amend to delete parties and claims that are no longer being pursued in light of the issues raised in various motions to dismiss, delete references to individuals and companies not in the case, add counts between existing parties, and correct errors, missing, or confusing information. Id. at 1-2.

         Defendants then moved to stay briefing on the pending motions to dismiss until the Court issued its ruling on the motion to amend. See Defs. Mot. to Stay, ECF No. 463. Plaintiffs opposed the Defendants' motion to stay briefing. ECF No. 467.

         On September 29, 2017, the Court amended the scheduling order. Order Amen. Sched. Order, ECF No. 470. The Court ordered Defendants to respond to the motion for leave to file a Fourth Amended Complaint within forty-five days. Id. at 2. Furthermore, the Court ordered that, should the Court deny leave to amend, Defendants would have thirty (30) days to file replies to the pending motions or, if the Court granted the motion, Defendants would have forty-five (45) days to answer, move to dismiss, or otherwise respond to the Fourth Amended Complaint. Id.

         Defendants filed two objections to the leave to amend. First, a group of defendants jointly argue that, while the Court has the discretion to grant leave, it should not do so here because granting Plaintiffs' motion would lead to significant delay and increased litigation costs. Certain Defs. Opp. to Pls. Mot. (“Certain Defs. Opp.”), ECF No. 480.[2] Certain Defendants note that “[a]fter nearly two years, this case has not progressed beyond the threshold pleadings phase.” Id. at 2. They note that multiple defendants filed motions to dismiss, which they argue would have to be completely redrafted should the Court grant leave. But they argue that “[f]urther delay and re-briefing make no sense in terms of judicial economy and sound case management.” Id. at 3. Alternatively, Certain Defendants argue that the Court should prospectively bar any further amendment, id. at 6, and ask that the Court declare the pending motions to dismiss and motions to strike moot and allow them to be refiled. Id. at 7.

         Second, Middlesex Mutual Assurance Company (“MMAC”) filed an additional response to the motion for leave. Middlesex Mutual Assurance Co. Response (“MMAC Resp.”), ECF No. 481. MMAC states that “Plaintiffs seek to amend the complaint to allow Plaintiffs David and Patricia Kandrysawtz and Plaintiff Kathleen Noblet to add eight entirely new claims against MMAC.” MMAC Resp. at 1. MMAC argues that leave to amend should be denied because it asserts that both Ms. Noblet's and the Kandrysawtzs' claims were unreasonably delayed and those plaintiffs' claims are based upon facts they should have known at the filing of the Substituted Third Amended Complaint. See MMAC Resp. at 6-7. MMAC also argues that leave to amend should be denied as to the Kandrysawtzs' claims because it argues that their claims are time-barred and do not relate back to the original complaint, and the amendment therefore would be futile. MMAC Resp. at 7-12. Finally, MMAC argues, along similar lines as Certain Defendants, that it will be prejudiced if leave were to be granted because “MMAC would have to redraft and re-file dispositive motion papers addressing wholly new allegations . . . inexplicably omitted from the first five versions of this Complaint.” MMAC Resp. at 14.

         Plaintiffs filed a reply. See Pls. Rep., ECF No. 474. They argue that both Certain Defendants and MMAC have failed to show that they would be prejudiced by the amendment, and that the alleged burden-redrafting and refiling motions to dismiss-does not qualify as prejudice. Id. at 1. They also argue that the Kandrysawtzs' claims are not frivolous, and therefore not futile. Id. Finally, Plaintiffs argue the Court should “deny Certain Defendants' request that the Court enter an order barring all further amendments of the Complaint unless ‘good cause' is shown as unwarranted and unnecessarily punitive.” Id.

         II. ...


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