Commercial Litigation and Arbitration

Does Rule 15(b)(2), Which Governs Amendment of Pleadings by Consent by Trying Unpled Issues, Apply at Pretrial Stage? Circuit Split — Reconsideration Standards under Rule 59(e)

ACE USA v. Union Pacific RR, 2011 U.S. Dist. LEXIS 141228 (D. Kan. Dec. 7, 2011):

Insurance companies ACE USA and ACE European Group Limited, as subrogees of AGC Soda Corporation ("AG Soda"), bring suit against Union Pacific Railroad Company, Inc. Plaintiffs allege that defendant is liable under the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. § 11706, for water damage to soda ash that Union Pacific transported from Wyoming to Texas in June and July of 2007, for the cost of removing the damaged ash from the railcars and for the cost of remediating soil contamination caused by the damaged ash.***

On April 5, 2011, plaintiffs moved for partial summary judgment on defendant's defenses and on May 31, 2011, defendant moved for summary judgment on plaintiffs' Carmack Amendment claim. Among other things, defendant a\rgued that plaintiffs' claim, if any, arose under contract — not the Carmack Amendment. ***

This matter comes before the Court on Plaintiffs' Motion To Alter Or Amend Judgment And Leave To Amend Their Theory Of Recovery (Doc. #167) filed September 2, 2011, and plaintiffs' Request For Oral Argument (Doc. #170) filed September 12, 2011.***

Legal Standards

Under Rule 59(e), the Court has discretion to reconsider a final decision if the moving party can establish (1) an intervening change in the controlling law; (2) the availability of new evidence that could not have been obtained previously through the exercise of due diligence; or (3) the need to correct clear error or prevent manifest injustice. Servants of Paraclete v. Does, 204 F.3d 1005, 1012 (10th Cir. 2000); see Phelps v. Hamilton, 122 F.3d 1309, 1324 (10th Cir.1997). Rule 59(e) does not allow a losing party to rehash arguments previously addressed or to present new legal theories or facts that could have been raised earlier. Brown v. Presbyterian Healthcare Servs., 101 F.3d 1324, 1332 (10th Cir.1996); Resolution Trust Corp. v. Greif, 906 F. Supp. 1446, 1456 (D. Kan. 1995). A party's failure to present its strongest case in the first instance does not entitle it to a second chance in the form of a motion to reconsider. Cline v. S. Star Cent. Gas Pipeline, Inc., 370 F. Supp.2d 1130, 1132 (D. Kan. 2005). ***

I. Rule 15(b)(2) Implied Amendment Of Pleadings And Pretrial Order

Plaintiffs argue that the Court erred by not reaching "threshold issues regarding the viability of a Bill of Lading contract." Plaintiffs never asserted a breach of contract claim, however, and in fact repeatedly repudiated the contract claim that they now argue the Court should have considered. Plaintiffs' motion asserts that under Rule 15(b)(2), Fed. R. Civ. P., the Court should have treated the pleadings and pretrial order as though they were impliedly amended to include a breach of contract claim. Plaintiffs' motion for reconsideration makes this argument for the first time. Their summary judgment briefing argued that the Carmack claim, which they pled, and the contract claim, which they did not plead, were essentially the same claim; they maintained, however, that "[i]t is Plaintiffs' position that this is not a breach of contract case." Plaintiffs' Reply Brief In Support Of Their Motion For Partial Summary Judgment On Defendant's Defenses (Doc. #147) filed June 21, 2011 at 69. Rule 59(e) does not allow plaintiffs to refine old arguments, or make new arguments they could have made earlier.

*** Rule 15(b)(2) *** provides as follows:

When an issue not raised by the pleadings is tried by the parties' express or implied consent, it must be treated in all respects as if raised in the pleadings. A party may move -- at any time, even after judgment -- to amend the pleadings to conform them to the evidence and to raise an unpleaded issue. But failure to amend does not affect the result of the trial of that issue.

Fed. R. Civ. P. 15(b)(2).

The plain language of the Rule suggests that because "this case is not at trial, Rule 15(b) does not apply." Zhu v. Countrywide Realty Co., Inc., Nos. 00-2290-KHV, 01-2067-KHV, 2001 WL 950231 (D. Kan. July 23, 2001) at *2 n.2. A circuit split exists, however, with respect to whether Rule 15(b) applies at the pretrial stage of litigation, and the Tenth Circuit has not squarely addressed the issue. See Ahmad v. Furlong, 435 F.3d 1196, 1203 & n.1 (10th Cir. 2006) (citing Suiter v. Mitchell Motor Coach Sales, Inc., 151 F.3d 1275, 1279-80 (10th Cir. 1998)). Both the Tenth Circuit and this Court have sent mixed messages on the issue — sometimes applying Rule 15(b) to pretrial motions, but at other times restricting application of the Rule to trial and post-trial proceedings. Compare Faustin v. City and Cnty. of Denver, Colo., 423 F.3d 1192, 1196 (10th Cir. 2005) (reviewing grant of summary judgment, finding plaintiff impliedly amended complaint under Rule 15(b)), Smith v. Denver Pub. Sch. Bd., 41 F.3d 1516 (Table), 1994 WL 651978 (10th Cir. 1994) (under Rule 15(b), issue not raised in pleadings was properly before court based on evidence at summary judgment), and McCormick v. City of Lawrence, No. 022135-JWL, 2008 WL 1793143 (D. Kan. April 18, 2008) (applying Rule 15(b) to amend pretrial order in ruling on motion for summary judgment) with Gold v. Local 7, United Food Workers Union, 159 F.3d 1307, 1309-10 (10th Cir.1998) (Rule 15(b) totally inappropriate vehicle for a motion to amend prior to trial), abrogated on other grounds by Styskal v. Weld Cnty., 365 F.3d 855, 857-58 (10th Cir. 2004), and Zhu, 2001 WL 950231 at *2 n.2. In light of this uncertainty, the Court assumes that Rule 15(b)(2) applies at summary judgment.

Rule 15(b) is intended to promote deciding cases on the merits. Green Country Food Mkt., Inc. v. Bottling Grp., LLC, 371 F.3d 1275, 1280 (10th Cir. 2004). The Tenth Circuit has interpreted the rule to contain two mechanisms for amending a complaint or pretrial order to conform to the evidence. Id. at 1280-81; Hardin v. Manitowoc-Forsythe Corp., 691 F.2d 449, 457 (10th Cir. 1982). First, a complaint may be impliedly amended if an issue has been tried with the express or implied consent of the parties. Fed. R. Civ. P. 15(b)(2) (first sentence); Green Country Food Mkt., 371 F.3d at 1280-81; Hardin, 691 F.2d at 457. This mechanism is not available, however, if the opposing party objects. Green Country Food Mkt., 371 F.3d at 1280. Instead, upon objection by the opposing party, the party wishing to amend the pleadings must resort to the second mechanism of Rule 15(b) — an explicit motion to amend. Id. at 1280-81; Fed. R. Civ. P. 15(b)(2) (second sentence). The Court will grant such motion unless the objecting party satisfies the Court that it will be prejudiced by the amendment. Green Country Food Mkt., 371 F.3d at 1280-81. Where the opposing party objects to the amendment and the party wishing to amend the pleadings does not file a motion to amend, lack of prejudice to the objecting party is not sufficient to permit amendment. Id.

Here, plaintiffs argue that their complaint was impliedly amended to include a breach of contract claim under the first mechanism, i.e. the breach of contract claim was tried with the implied consent of the parties. *** Implied consent cannot, however, be based on the introduction of evidence that is relevant to an issue already in the case if the party presenting the evidence does not indicate that it intended to raise a new issue. ***

Plaintiffs argue that their summary judgment briefs presented a breach of contract claim and that defendant argued breach of contract issues without objection. *** Defendant counters that (1) plaintiffs never affirmatively argued that its claim sounded in contract; (2) throughout the litigation plaintiffs have insisted that their claim arose under the Carmack Amendment, not as a breach of contract; and (3) defendant objected to any further amendment of the pleadings after the First Amended Complaint (Doc. #16) which plaintiffs filed November 12, 2009.***

Plaintiffs clearly made a strategic litigation decision to bring only a Carmack Amendment claim, and Rule 15(b)(2) does not permit them to renege on that decision now that the Court has granted defendant summary judgment on that claim. See Saurini v. Adams Cnty. Sch. Dist. No. 12, 191 Fed. Appx. 628, 636-37 (10th Cir. 2006) (plaintiffs not permitted to wait until last minute to ascertain and refine theories on which they intend to build case) (quoting Green Country Food Mkt., 371 F.3d at 1280); Norton v. City of Marietta, Okla., 432 F.3d 1145, 1151-52 (10th Cir. 2005) (responsibility for ensuring claims are properly presented lies with litigant, not court).

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