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Brahma Group, Inc. v. Cargill Meat Solutions Corp.

United States District Court, D. Kansas

June 28, 2019

BRAHMA GROUP, INC., Plaintiff,


          Angel D. Mitchell U.S. Magistrate Judge.

         This matter comes before the court on defendant Cargill Meat Solutions Corp.'s (“Cargill”) Motion to Amend Cargill's Answer and for Leave to File Counterclaim (ECF No. 94). For the reasons discussed below, the court grants Cargill's motion.

         I. BACKGROUND

         This case arises out of a payment dispute for construction work that Plaintiff Brahma Group, Inc. (“Brahma”) performed in 2016 at a Cargill beef-processing plant located in Dodge City, Kansas. Brahma filed its complaint on April 4, 2017, and an amended complaint on September 14, 2017. Brahma asserts claims for breach of contract, unjust enrichment, account stated, and violation of the Kansas Fairness in Private Construction Contract Act (“KFPCCA”). (Am. Compl. (ECF No. 14).) Brahma also seeks to foreclose on a mechanic's lien. (Id.)

         The scheduling order required the parties to file any motions for leave to amend the pleadings by April 6, 2018. (Sched. Order (ECF No. 29) ¶ 3(b).) Brahma timely filed an unopposed motion for leave to file a second amended complaint to clarify that it sought attorneys' fees under the KFPCCA. The court granted Brahma's motion, and Brahma filed its second amended complaint-the operative complaint in this action-on April 11, 2018. (See Second Am. Compl. (ECF No. 34).)

         Well over a year after the deadline for filing a motion for leave to amend the pleadings, Cargill now seeks leave to file an amended answer that adds two affirmative defenses and asserts three counterclaims against Brahma. Cargill contends that it discovered in April 2019 forged signatures of Cargill employee Fred Wines on two Brahma invoices from 2016. Cargill had paid these invoices but disputed others for Brahma's work at the plant. Cargill alleges that, during negotiations between the parties to resolve payment disputes prior to litigation, a Brahma employee digitally copied Mr. Wines' signature onto the invoices. Brahma then allegedly presented the invoices with forged signatures to Cargill along with other documents, all in an effort to induce Cargill to make additional payments to Brahma. In light of these allegations, Cargill seeks to amend its answer to add the affirmative defenses of unclean hands and setoff, as well as to assert three counterclaims for (1) breach of the covenant of good faith and fair dealing, (2) fraud, and (3) negligent misrepresentation. Cargill believes these proposed counterclaims are compulsory.

         II. ANALYSIS

         When the scheduling order deadline to file a motion to amend the pleadings has passed, the party seeking leave to amend must (1) demonstrate good cause for modifying the scheduling order under Federal Rule of Civil Procedure 16(b)(4), and (2) satisfy the standards for amendment under Rule 15(a). Gorsuch, Ltd., B.C. v. Wells Fargo Nat. Bank Ass'n, 771 F.3d 1230, 1240 (10th Cir. 2014). Whether to grant a motion to amend is within the court's sound discretion. See id.

         A. Rule 16(b)(4)

         A scheduling order “may be modified only for good cause and with the judge's consent.” Fed.R.Civ.P. 16(b)(4). To establish good cause, the moving party must show that it could not have met the motion to amend deadline despite “diligent efforts.” Husky Ventures, Inc. v. B55 Invs., Ltd., 911 F.3d 1000, 1020 (10th Cir. 2018). Because Rule 16 requires diligence, if a party knows of “the underlying conduct but simply failed to raise [its] claims, . . . the claims are barred.” Gorsuch, 771 F.3d at 1240. On the other hand, “Rule 16's good cause requirement may be satisfied . . . if a [party] learns new information through discovery or if the underlying law has changed.” The parties do not address the April 6, 2018, scheduling order deadline for filing any motions for leave to amend the pleadings. Nor do they address the Rule 16 good cause standard for seeking leave to amend after that deadline. Nevertheless, the court finds that Cargill has satisfied the Rule 16 good cause standard. Cargill states that it did not learn until it retained a handwriting expert in April 2019 that Mr. Wines' signature was forged on the two invoices at issue. (Def.'s Mot. to Amend (ECF No. 94) ¶ 3.) Cargill promptly disclosed the forgery theory to Brahma when it timely served an expert report directed to that issue on May 8, 2019.

         Thereafter, Cargill demonstrated a reasonable explanation for its further delay in filing the instant motion. The parties' rebuttal expert disclosure deadline was June 3, 2019. (Third Am. Sched. Order (ECF No. 29) ¶ (b).) Cargill states that it expected Brahma to either rebut the Cargill's handwriting expert's conclusion or otherwise provide a plausible explanation for the alleged forgeries. (See Def.'s Mot. to Amend (ECF No. 94) ¶ 3.) When Brahma did neither, Cargill proceeded to file the instant motion.

         Cargill did not discover the alleged forgeries until approximately a year after the motion to amend deadline, and then it waited a short period of time to confirm that Brahma had no other explanation for the alleged forgeries prior seeking leave to amend. Brahma does not dispute the date of Cargill's discovery. As Cargill could not have met the April 6, 2018 motion to amend deadline because it was unaware of the alleged forgeries at that time, the court finds good cause for Cargill's failure to timely seek amendment.

         B. Rule 15(a)

         Because Cargill has satisfied the Rule 16 good cause standard, the court now analyzes whether its proposed amendment should be allowed under Rule 15(a).[1] When a party can no longer amend its pleading as a matter of course under Rule 15(a)(1), amendment is allowed “only with the opposing party's written consent or the court's leave.” Fed.R.Civ.P. 15(a)(2). “The court should freely give leave [to amend pleadings] when justice so requires.” Id. In freely allowing leave to amend, the court provides litigants “the maximum opportunity for each claim to be decided on its merits rather than on procedural niceties.” Hardin v. Manitowoc-Forsythe Corp., 691 F.2d 449, 456 (10th Cir. 1982). A court may only withhold leave to amend for reasons 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 opposing ...

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