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Asko Processing, Inc. v. Kibble & Prentice Holding Co.

United States District Court, W.D. Washington, Seattle

February 12, 2018

ASKO PROCESSING, INC., a Washington corporation, Plaintiffs,
KIBBLE & PRENTICE HOLDING COMPANY, a Washington company; and CITIZENS INSURANCE COMPANY OF AMERICA, a foreign company, Defendant.



         This matter comes before the Court on Defendant Citizens Insurance Company of America (“Citizens”)'s Motion to Amend Answer (Dkt. #32), and Motion to Compel (Dkt. #17). Plaintiff Asko Processing, Inc. (“Asko”) opposes these Motions. Dkts. #34 and #20. For the reasons set forth below, the Court GRANTS both of Citizens' Motions.

         I. BACKGROUND

         The background facts of this case have recently been set forth it the Court's Order denying summary judgment (Dkt. #42), and are incorporated by reference.

         Asko originally filed this suit in King County Superior Court on September 29, 2016, against Defendants Citizens and Kibble & Prentice Holding Company (“Kibble”). Dkt. #9-1 at 2. After Asko amended its Complaint, Citizens filed an Answer on March 7, 2017. Dkt. #9-1 at 106-110. Citizens asserted several affirmative defenses, but did not assert the affirmative defense of offset. Id. The parties conducted substantial discovery. On July 20, 2017, Asko attended a mediation with Defendants, where it settled with Kibble only. Dkt. #35 at 2. Trial in state court was set for November 13, 2017. Id. The parties held a discovery conference on September 5, 2017, where counsel discussed Citizens' position on “the offset issue, ” including that Citizens believed it “was entitled to offset the settlement sum in the event Citizens was found liable to Asko.” Dkt. #33 at 2.

         Citizens removed to this Court on September 15, 2017. Dkt. #1. On October 26, 2017, Asko and Citizens each filed a Motion for Summary Judgment. Dkts. #12 and #15. These Motions were recently denied by the Court.

         On November 8, 2017, the parties filed a Joint Status Report that did not mention amending Citizens' Answer. Dkt. #19 at 6 (“Defendant's Proposed Schedule… Deadline for amending pleadings NA”). On November 14, 2017, the Court entered a Scheduling Order with a due date for amended pleadings of December 12, 2017. Dkt. #26. On November 22, 2017, Citizens filed the instant Motion.


         A. Legal Standard to Amend

         Pursuant to Fed.R.Civ.P. 15(a)(2), a “court should freely give leave [to amend] when justice so requires, ” Fed.R.Civ.P. 15(a)(2). Courts apply this policy with “extreme liberality.” Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003). Five factors are commonly used to assess the propriety of granting leave to amend: (1) bad faith, (2) undue delay, (3) prejudice to the opposing party, (4) futility of amendment, and (5) whether plaintiff has previously amended the complaint. Allen v. City of Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990); Foman v. Davis, 371 U.S. 178, 182 (1962). In conducting this five-factor analysis, the court must grant all inferences in favor of allowing amendment. Griggs v. Pace Am. Group, Inc., 170 F.3d 877, 880 (9th Cir. 1999). In addition, the court must be mindful of the fact that, for each of these factors, the party opposing amendment has the burden of showing that amendment is not warranted. DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 187 (9th Cir. 1987); see also Richardson v. United States, 841 F.2d 993, 999 (9th Cir. 1988).

         B. Citizens' Motion to Amend Answer

         Citizens seeks leave to amend their Answer to add the affirmative defense of “offset.” Dkt. #32 at 1; Dkt. #33-1 at 5 (“To the extent any judgment is entered against Citizens, the amount of the judgment will be offset and reduced by any amount Plaintiff has received in settlement from former Defendant Kibble & Prentice.”). This is the only change. This defense is necessary “in order to prevent double recovery and to preclude Citizens from being required to pay damages which are attributable to Kibble's conduct.” Dkt. #32 at 4-5. Citizens' Motion walks through the above factors the Court is to consider. First, Citizens argues its Motion is not in bad faith because “the affirmative defense has a basis in fact, and is not being interjected for an improper purpose such as delay.” Id. at 5. There is no undue delay, according to Citizens, because “Citizens' potential right to offset Kibble's settlement payment arose when Kibble settled the case on July 20, 2017, ” and because Citizens raised the issue promptly with Asko in the September discovery conference. Id. Citizens points out that this Motion is timely under the Court's Scheduling Order. Id. Citizens contends that Asko will suffer no undue prejudice and that this proposed amendment is not futile. Id. at 6.

         Asko argues there is undue delay if the Court considers the state court procedural history. Specifically, Asko states that “Citizens never asserted offset as an affirmative defense to any of Asko's complaints, nor did it seek to amend its answer to do so, until after Asko settled with K&P, ” that “Citizens also never mentioned offset in response to a discovery request from Asko specifically asking it to describe its affirmative defenses, and that “four months passed since the settlement with K&P before Citizens took any steps to amend its answer.” Dkt. #34 at 6. Asko argues there is undue prejudice because it settled its claims against Kibble “with the understanding that damages would no longer be in dispute because Citizens had never presented any expert witness to address damages… and had never at any time asserted offset as an affirmative defense either in its answer or in response to discovery requests…” Dkt. #34 at 5. Asko argues futility because Citizens' right to offset as an insurer only applies if the total damages available to Asko under the made whole doctrine is less than the $990, 000 sought in the instant case plus the settlement amount, or in other words “[i]f the K&P settlement was for anything less than $2, 970, 425, then Asko can never be made whole for its entire BI loss [calculated by Asko as $4, 160, 425].” Id. at 7-8 (citing Hall v. Encompass Ins. Co. of America, 2015 WL 5562221, *4 (W.D. Wash. Sept. 21, 2015); Dkt. #21, Ex. A at 68:14-23 and Ex. 133).

         In Reply, Citizens argues that “[t]he right to potentially offset a codefendant's settlement payment only arises after that codefendant enters a settlement agreement with the plaintiff.” Dkt. #36 at 2. Citizens argues that Asko will “not truly suffer any real prejudice” because: a) “[n]othing suggests Asko's settlement with Kibble was premised upon or dependent on the fact Citizens had not pled offset as an affirmative defense; b) “Asko was or should have been well aware at the time of mediation that Rule 15 liberally allows amendments to the pleadings;” and c) “Citizens' proposed amendment will not substantially alter the nature of this litigation” by “require[ing] new discovery that is not already required to be performed in order to ...

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