Media Glow Digital, LLC v. Panasonic Corporation of North America

Background

The dispute concerns the design, fabrication, and installation of an LED sign in Times Square. Media Glow Digital, LLC agreed to build and operate the sign at the Millennium Broadway Hotel and then contracted with Panasonic Corp. of North America to purchase and install it. Panasonic subcontracted design, construction, and installation work to one or more ICON defendants. The first project was abandoned after the sign was found to be incompatible with air rights. Times Square LED later contracted with Panasonic to repurpose the sign for the DoubleTree Suites Hotel, where the sign was installed but allegedly had timing, functionality, and visual problems.

The plaintiffs’ Second Amended Complaint asserted contract, warranty, negligence, negligent misrepresentation, fraud, fraudulent inducement, and professional-malpractice claims against various defendants. Earlier rulings limited the claims and defenses remaining in the case. At the time described in this order, the remaining matters included the plaintiffs’ breach-of-contract and breach-of-warranty claims against Panasonic, a negligence claim against ICON, and Panasonic’s breach-of-contract counterclaim against Times Square LED.

Proposed Third Amended Complaint

The plaintiffs asked to file a Third Amended Complaint adding allegations that Panasonic and ICON were grossly negligent. The proposed allegations included claims that Panasonic used a fabrication company with a poor industry reputation; that ICON lacked relevant experience; that Panasonic and ICON relied on uncertain air-rights measurements without obtaining their own measurements or another survey; that proposed installation methods were found unacceptable; that permitting and staffing problems caused delays; and that the defendants again failed to install the sign properly and on time at the second hotel. The proposed complaint also alleged that required product testing and certifications were never completed or obtained.

Magistrate Judge Henry Pitman denied the amendment request. He found that the plaintiffs had not shown the diligence required to justify seeking amendment after the deadline in the scheduling order. He also found that amendment would be futile because the new allegations did not create a triable issue of gross negligence sufficient to overcome contractual limits on damages.

Standard of Review

The district court reviewed the objection under Federal Rule of Civil Procedure 72(a), which permits a district judge to change a magistrate judge’s ruling on a non-dispositive pretrial matter only if it is clearly erroneous or contrary to law. The court explained that a motion to amend is a non-dispositive pretrial matter.

Because the request to amend came after the scheduling-order deadline, Federal Rule of Civil Procedure 16(b), rather than the more flexible amendment standard in Rule 15(a), required the plaintiffs to show good cause. The main consideration in deciding good cause was whether the plaintiffs acted diligently. The court also stated that, if good cause existed, the proposed amendment would still have to satisfy Rule 15.

Analysis

The scheduling order set May 8, 2017, as the deadline for motions to amend. The plaintiffs did not request a pre-motion conference about the proposed Third Amended Complaint until May 21, 2018—more than a year later.

The plaintiffs argued that their diligence should be measured from the court’s May 11, 2018 ruling on Panasonic’s motion for judgment on the pleadings, rather than from Panasonic’s February 17, 2017 answer. The court rejected that argument. Panasonic’s answer had already asserted contractual limits on damages, so the plaintiffs knew or should have known by February 2017 that they would need a factual basis for gross negligence to seek damages beyond those limits. The plaintiffs also did not argue that the proposed allegations were based on information learned after the Second Amended Complaint was filed. Instead, they acknowledged that their need to plead additional facts did not arise from discovery.

The court therefore held that the plaintiffs had not shown diligence and that the proposed amendment was barred by Rule 16(b). Because that conclusion was sufficient, the court did not address the plaintiffs’ objections to Judge Pitman’s separate finding that the amendment would be futile under Rule 15.

Disposition

Judge Paul G. Gardephe overruled the plaintiffs’ objection to Judge Pitman’s ruling concerning Rule 16(b) and denied the plaintiffs’ motion to amend. The opinion does not state that the denial was with or without prejudice.