United States District Court, W.D. Virginia, Harrisonburg Division
C. Hoppe United States Magistrate Judge.
matter is before the Court on Plaintiff RLI Insurance
Company's (“RLI”) Motion for Leave to Amend
the Complaint and Add Parties, Amend Scheduling Order, and
Reset Trial Date (“Motion to Amend”). ECF No.
161. On February 27, 2019, the Court held a hearing on the
motion, and the parties appeared by counsel. The Special
Master also participated in the hearing. In an Order entered
March 1, 2019, the Court granted in part RLI's motion,
amending the Scheduling Order and continuing the trial date.
ECF No. 175. The Court took under advisement RLI's
request to amend its complaint and add parties. Id.
This opinion further explains the Court's rationale for
finding that good cause supports RLI's request to modify
the Scheduling Order and continue the trial date.
Additionally, the Court finds that RLI may amend its
complaint and add party defendants.
Background and Procedural History
action concerns RLI's issuance of more than 2, 400
immigration bonds on behalf of Defendant Nexus Services, Inc.
(“Nexus”), and Nexus's agreement to indemnify
RLI on those bonds. As part of the indemnity agreement, Nexus
agreed to allow RLI access to its books, records, and
accounts. On April 12, 2018, RLI filed its Complaint and
Motion for Preliminary Injunction against Nexus. ECF Nos. 1,
4. RLI alleges that Nexus has denied RLI access to its books,
records, and accounts and did not indemnify RLI from losses
on some bonds. As relief for the alleged violations of the
indemnity agreement, RLI seeks an injunction, specific
performance, and damages.
April 27, 2018, Chief United States District Judge Michael F.
Urbanski held a hearing on RLI's initial Motion for
Preliminary Injunction. ECF No. 15. After an unsuccessful
mediation, Nexus moved for leave to amend its Answer and
assert a counterclaim, and Judge Urbanski held a second
hearing on RLI's initial preliminary injunction motion.
ECF Nos. 43, 45. In an Order entered July 2, 2018, Judge
Urbanski granted in part and denied in part RLI's motion.
Judge Urbanski ordered that RLI have full access to
Nexus's books, records, and accounts, but noted that the
preliminary injunction did not extend to “other
Nexus-related entities.” Order 2, ECF No. 60. Judge
Urbanski also appointed a Special Master to ensure compliance
with the order.
July 2018 to February 2019, the Special Master presided over
Nexus's production of more than 170, 000 documents to
RLI. See Sixth Status Report by Special Master 1-3,
ECF No. 191. This task presented a significant undertaking
not only because of the volume of documents, but also because
many of Nexus's documents were disorganized and some
needed to be recreated. Nexus provided some documents
regarding its affiliates, Libre by Nexus, Inc.
(“Libre”) and Homes by Nexus, Inc.
(“Homes”), but it refused to provide many others
for those entities. At a hearing on November 28, 2018, the
Special Master reported that Nexus's production was
substantially complete. After that hearing, RLI and Nexus
continued to work through the Special Master, and on December
12, 2018, RLI requested numerous additional documents and
other information from Nexus. See generally Sixth
Status Report by Special Master. In January and February
2019, Nexus produced some of those documents and refused to
the Special Master was working with the parties to facilitate
Nexus's production of documents, the parties presented a
few discovery disputes to the Court for resolution. Following
a status conference in August, Judge Urbanski ordered Nexus
to produce certain financial information as well as certain
information about Libre. ECF No. 79. On October 25, the
undersigned Magistrate Judge granted in part and denied in
part Nexus's motion to quash RLI's subpoenas to
twelve banks. ECF No. 98.
August 20, 2018, the Court issued a Scheduling Order setting
a jury trial for May 20 to 24, 2019. ECF No. 77. A week
later, Judge Urbanski granted Nexus's motion for leave to
file an amended answer and counterclaim, ECF No. 81, which
Nexus filed on September 7, ECF No. 83. On October 30, RLI
filed a motion seeking a second preliminary injunction. ECF
No. 106. During a hearing on November 28, Judge Urbanski
heard argument and took evidence, and the following day he
granted in part and denied in part RLI's motion for a
second preliminary injunction. ECF No. 139. He found that RLI
was likely to succeed on its claim that Nexus breached the
indemnity agreement. Judge Urbanski ordered Nexus to pay
certain past-due bond penalties. Additionally, for each
succeeding month before trial, Nexus was required to pay all
bond penalties invoiced by the Department of Homeland
January 2019, both parties issued written discovery. Nexus
responded to RLI's discovery requests on February 21,
2019, and objected, at least in part, to each of RLI's
twenty-five interrogatories and eighty-six requests for
production of documents. See ECF No. 169-2. RLI sent
Nexus meet-and-confer letters on February 22 and 25, and in
the second letter, RLI addressed Nexus's objections at
length. ECF No. 169-1. On March 12, RLI filed a motion to
compel that is pending. ECF No. 179.
February 11, 2019, RLI issued third-party subpoenas to Libre
and Homes. Libre objected to the subpoena, ECF No. 180-2, and
Homes did not respond, see ECF No. 181. RLI filed
motions to compel both Nexus affiliates to comply with the
subpoenas, and those motions are pending.
February 11, RLI filed its Motion to Amend. As grounds for
its motion, RLI asserts that documents and other information
it obtained from Nexus confirmed its suspicions that Libre
and Homes operated as alter egos of Nexus. RLI further
contends that Nexus has withheld documents and made
incomplete or late productions under the Special Master
process so that RLI does not have complete information to
assess whether Nexus has the financial ability to satisfy its
bond obligations to RLI. For those reasons, RLI seeks leave
to amend its complaint to add Libre and Homes as Defendants,
and it seeks additional time to complete discovery. Nexus
opposes the Motion to Amend. Nexus contends that RLI has not
diligently pursued discovery or timely sought leave to amend,
and it asserts that RLI's proposed amendments are made in
bad faith and would cause undue prejudice.
RLI's Motion to Extend Deadlines and Continue the Trial
seeks an extension of time beyond the deadline established in
the Court's Scheduling Order to complete discovery and a
continuance of the trial date. A scheduling order may be
amended only upon a showing of good cause and with the
court's consent. Fed.R.Civ.P. 16(b)(4). Demonstrating
good cause to amend a scheduling order “requires the
party seeking relief to show that the deadlines cannot
reasonably be met despite the party's diligence, and
whatever other factors are also considered, the good-cause
standard will not be satisfied if the district court
concludes that the party seeking relief (or that party's
attorney) has not acted diligently in compliance with the
schedule.” Cook v. Howard, 484 Fed.Appx. 805,
815 (4th Cir. 2012) (per curiam) (internal quotation marks
and brackets omitted). “In making that determination,
courts may consider ‘whether the moving party acted in
good faith, the length of the delay and its effects, and
whether the delay will prejudice the non-moving
party.'” Ademiluyi v. Pennymac Mortg. Inv. Tr.
Holdings I, LLC, Civ. No. 12-0752, 2015 U.S. Dist. LEXIS
16386, at *12 (D. Md. Feb. 10, 2015) (quoting Elat v.
Ngoubene, 993 F.Supp.2d 497, 520 (D. Md. 2014)).
contends that it acted diligently in pursuing discovery, and
a review of the case's procedural history largely
confirms its assertion. At the inception of this lawsuit, RLI
vigorously pursued access to Nexus's books, records, and
accounts. It sought and obtained a preliminary injunction
granting that access. Judge Urbanski appointed a Special
Master to ensure Nexus produced the documents and information
to which RLI was entitled under the indemnity agreement. RLI
also issued some third-party subpoenas to a dozen banks used
by Nexus, but the focus of RLI's efforts to obtain
information was the Special Master process. The parties fully
engaged in this process from July to December 2018, and RLI
obtained over 170, 000 documents from Nexus. The disorganized
state of many of the documents increased the difficulty and
time for RLI to review and make use of them. As of November
28, 2018 the Special Master considered Nexus's production
substantially complete, with the caveat that Nexus had
refused to produce much of the information related to ...