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Munster Steel Co Inc. v. Crane 1 Services Inc.

United States District Court, N.D. Indiana, Hammond Division

July 25, 2018

MUNSTER STEEL CO., INC., Plaintiff,
v.
CRANE 1 SERVICES, INC., Defendant.

          OPINION AND ORDER

          JOHN E. MARTIN MAGISTRATE JUDGE UNITED STATES DISTRICT COURT

         This matter is before the Court on a Motion for Leave to File Amended Answer to Plaintiff s Complaint, Affirmative Defenses and Jury Demand [DE 53], filed by Defendant Crane 1 Services, Inc., on February 27, 2018; a FRCP Rule 14 Motion for Leave to File Third-Party Complaint Against Cincinnati Crane & Hoist, LLC [DE 78], filed by Defendant on June 1, 2018; and a Motion to Extend Discovery Deadlines [DE90], filed by Plaintiff Munster Steel Co., Inc., on July 13, 2018. Defendant seeks to amend its Answer to reflect that the party that answered was not the party with which Plaintiff contracted. Plaintiff filed a response obj ecting to the Motion to Amend on March 20, 2018, and on April 6, 2018, Defendant replied. In the other motions, Defendant seeks to file a complaint against a third party, which Plaintiff does not oppose, and Plaintiff seeks to extend discovery deadlines, which Defendant does not oppose.

         I. Background

         On October 1, 2013, Plaintiff Munster Steel signed a contract with an entity called "Crane 1 Services" that required Crane 1 Services to design, supply, and install cranes and related equipment to Plaintiffs new facility. According to Plaintiff, work began by September 2014, but by October 2014, Plaintiff had identified "serious deficiencies" with the cranes and the manner in which they were installed. Plaintiff filed its Complaint on July 26, 2016, alleging breach of contract.

         On September 16, 2016, Defendant Crane 1 Services answered, identified itself as a Delaware corporation, and admitted that it had contracted with Plaintiff.

         As Defendant now admits, that identification was wrong. Crane 1 Delaware was only incorporated in 2015, two years after the contract with Plaintiff was signed. In September 2017, Defendant disclosed that Plaintiff had in fact contracted with "Crane 1 Ohio," and that Crane 1 Delaware purchased the majority of Crane 1 Ohio's assets in October 2015. Crane 1 Ohio also transferred assets and stock to two other entities, changed its name to "RNM Holdings," and eventually dissolved in June 2016. Defendant now seeks to amend its complaint to correct the misidentification, and to file a third-party complaint against Cincinnati Crane & Hoist LLC, which Defendant alleges supplied several of the cranes at issue in this case.

         II. Standard of Review

         Federal Rule of Civil Procedure 15 provides that "a party may amend its pleading only with ... the court's leave." Fed.R.Civ.P. 15(a)(2). The Rule further provides that the Court "should freely give leave when justice so requires." Id. The decision to grant or deny a motion to amend lies within the Court's sound discretion, but leave to amend is "inappropriate where there is undue delay, bad faith, 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, or futility of the amendment." Villa v. City of Chicago, 924 F.2d 629, 632 (7th Cir. 1991); Campbell v. IngersollMilling Mack Co., 893 F.2d 925, 927 (7th Cir. 1990). Federal Rule of Civil Procedure 14 provides that a defendant "may, as third-party plaintiff, serve a summons and complaint on a nonparty who is or may be liable to it for all or part of the claim against it."

         III. Analysis

         Defendant seeks to amend its Answer to indicate that only the Ohio entity was involved in the design and installation of the cranes. Plaintiff opposes the motion, citing bad faith, prejudice, and undue delay. Plaintiff also argues that the "mend the hold" doctrine forecloses Defendant from amending its answer. In its response brief, Plaintiff requests that the Court impose sanctions pursuant to Federal Rule of Civil Procedure 11 against Defendant, alleging failure to make a reasonable inquiry into the facts before taking a position in litigation.

         As an initial matter, the Court addresses Defendant's argument that it can amend without seeking leave of court. Defendant points to this Court's scheduling order of February 2, 2017, which states in pertinent part: "Any amendments to the pleadings to be filed by 3/31/2017 or 30 days after the Court's ruling on the pending motion to dismiss, whichever is later." To the extent Defendant interprets that statement to contradict the plain language of Rule 15(a)(2), it is mistaken. For the Court to permit an amendment to the pleadings, the request had to be filed within 30 days of the ruling on the motion to dismiss, and satisfy Rule 15 and all other applicable rules of procedure, just as any other pleading would.

         Defendant claims the misidentification of the contracting entity was an oversight. Defendant states that because Crane 1 Delaware and Crane 1 Ohio had the same brand name, facilities, equipment, and business records, the business itself "did not undergo a significant or even apparent change." As a result, the distinction between the two entities "did not resonate" with former counsel, who withdrew in January 2018, or with the employees who approved the pleadings and discovery responses.

         Plaintiff argues that Defendant offers its proposed amendment in bad faith. Plaintiff points to the prior pleadings and verified discovery responses that did not properly acknowledge Crane 1 Ohio's role. Plaintiff accuses Defendant of deliberately misidentifying the contracting party to obscure the transactions among the Crane 1 entities. In essence, Plaintiff accuses Defendant of fraudulently litigating as Crane 1 Delaware to detract attention from the inability of Crane 1 Ohio to satisfy a potential judgment.

         Defendant does offer a reason for its errors: its prior counsel and its employees did not understand the distinction between the Crane 1 entities because the asset sale did not make an apparent difference in the operations of the business. Without evidence that the relevant individuals did in fact understand the distinction, the Court is not prepared to conclude that Defendant is acting in bad faith. If Plaintiff ...


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