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Toledo v. CSX Transportation, Inc.

United States District Court, E.D. Tennessee

March 28, 2018

WENDY TOLEDO, MANUEL TOLEDO, and KAYLEE GREEN (a minor), Plaintiffs,
v.
CSX TRANSPORTATION, INC., and UNION TANK CAR COMPANY, Defendants.

          MEMORANDUM OPINION AND ORDER

          THOMAS A. VARLAN, CHIEF UNITED STATES DISTRICT JUDGE.

         Before the Court are defendant Union Tank Car Company (“UTC”)'s motions for partial summary judgment [Doc. 44] and to amend its answer [Doc. 53]. Defendant CSX Transportation, Inc. (“CSX”), has filed notice that it joins in UTC's summary judgment motion [Doc. 46]. Plaintiff Wendy Toledo[1] has responded in opposition to both motions [Docs. 51, 55], and defendants have replied [Docs. 52, 54, 56]. For the reasons explained below, the Court will grant both of defendants' motions.

         I. Background

         The facts at issue in the instant motions are not in dispute. This case is one of many pending before this Court that arose out of a train derailment and resulting chemical fire on July 1, 2015, in Maryville, Tennessee, which prompted the evacuation of thousands of local residents [Doc. 1 pp. 13-16].[2] Plaintiffs here were Maryville residents at the time of the derailment [Id. at 11]. They have brought this lawsuit against the operator of the train, defendant CSX, and the owner of the tank car that derailed and caught fire, defendant UTC, asserting claims of negligence, battery, nuisance, negligent infliction of emotional distress, and gross negligence under Tennessee law [Id. at 16-30].

         On February 8, 2016, plaintiff filed a voluntary Chapter 13 bankruptcy petition in the United States Bankruptcy Court for the Eastern District of Tennessee [No. 3:16-bk-30300, Doc. 1].[3] One part of the petition form-specifically, Question 33 in Schedule A/B: Property-asked plaintiff whether she had any “[c]laims against third parties, whether or not [she had] filed a lawsuit or made a demand for payment, ” including “[a]ccidents, employment disputes, insurance claims, or rights to sue” [Id. at 21]. Plaintiff checked the box marked “no” [Id.] Thus, the parties do not dispute that she omitted from her petition the claims she has raised against CSX and UTC in this case [See Doc. 45 p. 2; Doc. 51 pp. 2-3]. In an affidavit attached to her response brief, however, plaintiff submits that this omission was “an honest mistake not intended or used to gain any unfair advantage” [Doc. 51-2 ¶ 8]. Plaintiff further provides that she completed the petition after one consultation meeting with a bankruptcy lawyer and one follow-up meeting when she returned certain documents for review [Id. ¶ 5]. In addition, plaintiff notes that she has only a high school education, with no formal legal training [Id. ¶ 3].

         Plaintiffs originally filed a complaint against CSX and UTC in the Circuit Court for Blount County, Tennessee, on June 24, 2016 [Doc. 1 p. 1]. CSX then removed the case to this Court under 28 U.S.C. §§ 1441 and 1446 [Id.]. On July 12, the Bankruptcy Court entered an order discharging plaintiff's debts, and her case was closed on August 22 [No. 3:16-bk-30300, Docs. 19, 22]. Up to this point, plaintiff had not sought to amend her bankruptcy petition or notify the Bankruptcy Court of her claims against CSX and UTC. Meanwhile, UTC answered plaintiff's complaint in this case on August 10, but did not assert as a defense plaintiff's failure to schedule her claims against UTC in her bankruptcy petition [Doc. 16]. CSX, on the other hand, filed its answer on August 17 and expressly raised equitable estoppel as an affirmative defense [Doc. 19 ¶ 100].

         Plaintiff later disclosed her pending bankruptcy petition in response to CSX's first set of interrogatories [Doc. 51-3 p. 2]. On March 14, 2017, UTC moved for summary judgment solely as to Wendy Toledo, arguing that her claims against UTC were barred by judicial estoppel because she had failed to schedule them in her bankruptcy petition [Docs. 44-45]. On March 23, CSX filed notice that it was joining in UTC's motion [Doc. 46]. Then, on April 5, the United States Trustee moved to reopen plaintiff's bankruptcy case, noting that it had been “notified about the existence of additional assets that are likely property of the bankruptcy estate” [No. 3:16-bk-30300, Doc. 23 p. 1]. The Bankruptcy Court reopened the case that same day [No. 3:16-bk-30300, Doc. 24].[4] In addition, the bankruptcy trustee[5] has since hired plaintiff's counsel to represent the bankruptcy estate's interests in this litigation [No. 3:16-bk-30300, Doc. 32].

         Plaintiff then responded in opposition to defendants' summary judgment motion, arguing that: (1) UTC had failed to assert judicial estoppel in its answer as an affirmative defense; (2) judicial estoppel is not warranted on the facts of this case; and (3) such a remedy is now moot, given the reopening of her bankruptcy case [Doc. 51]. CSX and UTC replied [Docs. 52, 54], and in response to plaintiff's first argument, UTC simultaneously filed a motion to amend its answer to include an affirmative defense of judicial estoppel [Doc. 53]. Plaintiff has now responded to that motion [Doc. 55], and UTC has replied [Doc. 56]. Therefore, UTC's motion to amend and defendants' joint motion for summary judgment are both fully briefed and ready for disposition. E.D. Tenn. L.R. 7.1(a). The Court will resolve both motions in this opinion.

         II. UTC's Motion to Amend

         The Court will first address defendant UTC's motion for leave to amend its answer to assert an affirmative defense of judicial estoppel [Doc. 53]. For the reasons explained below, the Court will grant UTC's motion.

         A. Standard of Review

         Under Federal Rule of Civil Procedure 15, after the twenty-one-day window for amendment as of right has expired, “a party may amend its pleading 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 when justice so requires.” Id. The decision whether to grant leave rests within the district court's sound discretion. Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 330 (1971). Leave is generally appropriate “[i]n the absence of . . . 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, [or] futility of the amendment.” Leary v. Daeschner, 349 F.3d 888, 905 (6th Cir. 2003) (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)); accord Crawford v. Roane, 53 F.3d 750, 753 (6th Cir. 1995).

         “Amendment of a complaint is futile when the proposed amendment would not permit the complaint to survive a motion to dismiss.” Miller v. Calhoun Cty., 408 F.3d 803, 807 (6th Cir. 2005) (citing Neighborhood Dev. Corp. v. Advisory Council on Historic Pres., 632 F.2d 21, 23 (6th Cir. 1980)). In making this determination, the court must construe the complaint in the light most favorable to the plaintiff, accept all factual allegations as true, draw all reasonable inferences in the plaintiff's favor, and determine whether the complaint contains “enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570; accord Directv, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

         As noted above, an additional basis for denying leave to amend is a “likelihood of prejudice to the opponent, ” after weighing “the competing interests of the parties.” Moore v. City of Paducah, 790 F.2d 557, 559 (6th Cir. 1986). The Sixth Circuit has, however, required “at least some significant showing of prejudice to the opponent” to deny leave on this basis. Id. at 562. On the other hand, “[w]hen amendment is sought at a late stage in the litigation, there is an increased burden to show justification for failing to move earlier.” Wade v. Knoxville Utils. Bd., 259 F.3d 452, 459 (6th Cir. 2001); accord Szoke v. United Parcel Serv. of Am., Inc., 398 Fed.Appx. 145, 153 (6th Cir. 2010); Owens Corning v. Nat'l Union Fire Ins. Co., 257 F.3d 484, 496-97 (6th Cir. 2001).

         Undue delay is another, often related ground for denying leave. Foman, 371 U.S. at 182. But “[d]elay that is neither intended to harass nor causes any ascertainable prejudice is not a permissible reason, in and of itself[, ] to disallow an amendment.” Tefft v. Seward, 689 F.2d 637, 639 n.2 (6th Cir. 1982); see also Ziegler v. Aukerman, 512 F.3d 777, 786 (6th Cir. 2008) (noting that “delay alone, regardless of its length is not enough to bar it if the other party is not prejudiced” (quoting Moore, 790 F.2d at 560)). The court should consider whether amendment would “[1] require the opponent to expend significant additional resources to conduct discovery and prepare for trial; [2] significantly delay the resolution of the dispute; or [3] prevent the plaintiff from bringing a timely action in another jurisdiction.” Phelps v. McClellan, 30 F.3d 658, 662-63 (6th Cir. 1994).

         B. Analysis

         Here, UTC argues that “[t]he thrust of Rule 15 is to reinforce the principle that cases should be tried on their merits rather than the technicalities of pleadings.” Tefft, 689 F.2d at 639. UTC further asserts that none of the “limited circumstances” warranting denial of leave to amend are present here [Doc. 53 ¶ 4]. First, UTC argues that plaintiff received adequate notice of its judicial estoppel defense, both through CSX's answer and UTC's summary judgment motion and briefs. Second, UTC argues that plaintiff will suffer no prejudice from amendment because this case is still in the discovery stage, with the trial not set to begin until November 5, 2018 [Doc. 57]. Third, UTC argues that amendment would not be futile because its affirmative defense of judicial estoppel has merit. Fourth, UTC argues that it has not unduly delayed in seeking amendment, as it moved for summary judgment promptly after learning of plaintiff's bankruptcy petition and then sought leave to amend seven days after plaintiff first asserted that UTC had not pleaded this affirmative defense. Finally, UTC argues that it has not exhibited any bad faith, nor has it repeatedly failed to cure deficiencies in past amendments.

         Plaintiff responds that the Court should deny leave to amend on several grounds. First, plaintiff asserts it would be inconsistent to “hold the omission of an unsophisticated Plaintiff against her [via the judicial estoppel defense], but not hold the nearly nine month omission of an extremely sophisticated [d]efendant against it” [Doc. 55 p. 2]. Relatedly, plaintiff argues that if her attempts to correct the omission in her bankruptcy petition came too late, then that same logic would apply to UTC's belated attempt to correct its deficient answer. Second, plaintiff argues that “a failure to plead an affirmative defense as required by Federal Rule 8(c) results in the waiver of that defense and its exclusion from the case.” 5 Charles Alan Wright et ...


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