National Credit Union Administration Board v. Cumis Insurance Society, Inc.
- Donovan Frank
- 0:16-cv-00139
- U.S. District Court · District of Minnesota
- 9
In National Credit Union Administration Board v. CUMIS Insurance Society, Inc., Judge Frank granted the motion and dismissed two counterclaims with prejudice.
CUMIS Insurance Society, Inc.’s breach-of-contract and promissory-estoppel counterclaims were dismissed with prejudice; the ruling addressed the timing and authorization of the amendment rather than deciding the claims’ merits.
What happened
National Credit Union Administration Board v. CUMIS Insurance Society, Inc. concerns CUMIS’s attempt to add breach-of-contract and promissory-estoppel counterclaims about checks sent during a dispute over insurance coverage and a refund. CUMIS had already filed an unjust-enrichment counterclaim, and the court had previously set a deadline for amending pleadings.
CUMIS filed the two additional claims after that deadline without the other side’s written consent or the court’s permission. CUMIS argued that it could amend automatically because it filed the claims within 21 days after receiving an answer. The court rejected that argument and found that CUMIS had not shown the required good cause because it already knew the relevant facts when it sought permission to file its original counterclaim.
Judge Donovan W. Frank granted the National Credit Union Administration Board’s motion to strike, or alternatively dismiss, and dismissed Counts 2 and 3 of CUMIS’s amended counterclaim with prejudice. The court did not decide the parties’ alternative arguments about whether those claims stated valid legal claims, although it said in a footnote that it would have found them insufficient under the applicable pleading standard.
The detailed version
- National Credit Union Administration Board v. Cumis Insurance Society, Inc. · No. 0:16-cv-00139
- Donovan Frank
- Oct. 4, 2018
Background
St. Francis Campus Credit Union was insured by CUMIS Insurance Society, Inc. under a fidelity bond covering, among other things, employee theft. St. Francis discovered that its manager, Margurite Cofell, had embezzled more than $3 million. The National Credit Union Administration Board (NCUAB) was appointed receiver of St. Francis. CUMIS later sought to rescind the fidelity bond, stating that Cofell had falsely answered “no” to renewal-application questions about possible claims and misconduct.
CUMIS sent NCUAB a check for $18,795 representing premiums paid by St. Francis. A second check for the same amount was mistakenly generated and sent later. After CUMIS discovered the mistake, it asked NCUAB to return the funds. NCUAB sent CUMIS a check for $37,590, but CUMIS refused to accept it and returned it.
CUMIS moved to amend its answer to add an unjust-enrichment counterclaim, and the court granted that motion. CUMIS then filed an amended pleading without seeking leave from the court, adding counterclaims for breach of contract and promissory estoppel. NCUAB moved to strike those two additional counterclaims or, alternatively, to dismiss them.
Analysis
The court applied Federal Rule of Civil Procedure 15, which generally allows one amendment as a matter of course, and Rule 16, which governs amendments sought after a deadline in a court scheduling order. The scheduling order set August 1, 2016, as the deadline for amending pleadings. The court concluded that its later order allowing CUMIS to file the original counterclaim did not create a new period during which CUMIS could amend automatically. CUMIS therefore needed NCUAB’s written consent or the court’s permission.
The court also treated CUMIS’s amended pleading as including a request for permission to amend. Because the filing came after the scheduling deadline, CUMIS had to show “good cause.” The court explained that good cause principally depends on the moving party’s diligence and that information available earlier generally does not justify a late amendment.
The court found that CUMIS was not diligent. CUMIS knew about the November 2017 check and the facts supporting the new counterclaims when it sought permission to file its original counterclaim. The court rejected CUMIS’s arguments that NCUAB’s denial of making a promise and the departure of NCUAB’s then-attorney from the case were sufficient changes in circumstances. It characterized CUMIS’s decision to delay the claims because the attorney might become a witness as a strategic choice, not good cause under Rule 16.
The court declined to address NCUAB’s alternative argument that the claims should be dismissed for failure to state a claim. In a footnote, however, the court stated that it would have concluded that CUMIS had not alleged sufficient facts for breach of contract or promissory estoppel under that analysis.
Ruling
The court concluded that CUMIS failed to comply with Rule 16 and the scheduling order and had not shown good cause to file the amended counterclaim. Judge Donovan W. Frank granted NCUAB’s motion to strike, or alternatively dismiss, Counts 2 and 3 of CUMIS’s amended counterclaim. The order also states that Counts 2 and 3 were dismissed with prejudice.
Read the full 9-page opinion on CourtListener, the free public archive maintained by the Free Law Project.