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Valley Electrical Consolidated, Inc. v. TFG-Ohio, LP

United States District Court, D. Utah

May 24, 2017

VALLEY ELECTRICAL CONSOLIDATED, INC., Plaintiff,
v.
TFG-OHIO, LP and TETRA FINANCIAL GROUP, LLC, Defendants,
v.
TFG-OHIO, LP, Defendant and Counterclaimant,
v.
VALLEY ELECTRICAL CONSOLIDATED, INC.; EVETS ELECTRIC, INC.; and J.L. ALLEN CO., LLC, Counterclaim-Defendants.

          MEMORANDUM DECISION AND ORDER

          Paul M. Warner Chief United States Magistrate Judge

         District Judge Jill N. Parrish Chief Magistrate Judge Paul M. Warner District Judge Jill N. Parrish referred this matter to Chief Magistrate Judge Paul M. Warner pursuant to 28 U.S.C. § 636(b)(1)(A).[1] Before the court is Plaintiff and Counterclaim-Defendant VEC, Inc.'s (“VEC”)[2] Motion for Leave to Amend Complaint and Answer to Counterclaim.[3] Having reviewed the parties' briefs and the relevant law, the court renders the following Memorandum Decision and Order.[4]

         BACKGROUND

         In 2011, VEC and Defendants and Counterclaimants TFG-Ohio, LP and Tetra Financial Group, LLC[5] (collectively “TFG”) entered into a Master Lease Agreement (“MSA”) wherein TFG agreed to lease certain property to VEC.[6] The dispute in this case surrounds the parties' rights and obligations at the conclusion of the lease term.

         VEC alleges that at the conclusion of the lease term, the MSA provided VEC with the option to purchase “all but not less than all” of the leased property for a price agreed upon by VEC and TFG.[7] In 2015, VEC claims that it notified TFG that it intended to purchase all of the leased property for a price agreed upon by the parties.[8] VEC further alleges that despite VEC's notice of its intent to exercise its purchase rights under the MSA, TFG continued to charge VEC's account for monthly lease payments and failed to negotiate in good faith a price for the leased property.[9]

         On December 10, 2015, VEC filed the above-captioned lawsuit against TFG in Ohio state court claiming that TFG breached the terms of the MSA and violated the implied covenant of good faith and fair dealing.[10] Additionally, VEC is seeking a declaratory judgment stating that VEC's obligations under the MSA will be satisfied once VEC pays TFG the fair value of the leased property.[11]

         TFG removed the action to federal court in the Northern District of Ohio.[12] On June 30, 2016, the Northern District of Ohio transferred the case to the District of Utah because the MSA contains a forum selection clause in favor of Utah.[13] Subsequently, TFG filed a countersuit against VEC alleging breach of contract and breach of the covenant of good faith and fair dealing.[14] TFG also filed countersuit against the MSA's guarantors J.L. Allen Co., LLC and Evets Electric, Inc.[15]

         On November 11, 2016, the court entered in a Scheduling Order specifying that the parties had until December 30, 2016, to file amended pleadings.[16] The Scheduling Order further specifies that the parties have until June 9, 2017, to complete fact discovery.[17]

         On March 30, 2017, VEC filed the instant motion seeking leave to amend the complaint and answer to TFG's counterclaim.[18] VEC argues that through the course of discovery it has obtained new information justifying new claims and defenses. VEC's proposed First Amended Complaint adds a fraud claim against TFG.[19] VEC claims that TFG's agent, Rick Razzeca, told VEC that it could purchase the leased property at the end of the lease term “for the sum of $1.00, or some other nominal amount.”[20] Furthermore, VEC's First Amended Answer to TFG's Counterclaim adds fraudulent inducement defenses.[21] VEC claims that TFG's counterclaims are barred because TFG fraudulently induced VEC into entering into the MSA.[22]

         DISCUSSION

         Pursuant to Rule 15(a)(2) of the Federal Rules of Civil Procedure, the court “should freely give leave [to amend] when justice so requires.” Whether to provide a party leave to amend its pleadings “is within the discretion of the trial court.” Minter v. Prime Equip. Co., 451 F.3d 1196, 1204 (10th Cir. 2006) (quotations and citation omitted). The court may deny leave to amend only where there is a “‘showing of undue delay, undue prejudice to the opposing party, bad faith or dilatory motive, failure to cure deficiencies by amendments previously allowed, or futility of amendment.'” Bylin v. Billings, 568 F.3d 1224, 1229 (10th Cir. 2009) (quoting Frank v. U.S. W., Inc., 3 F.3d 1357, 1365 (10th Cir.1993)).

         In the court's view, whether VEC's motion should be granted depends on whether VEC was justified in waiting until after December 30, 2016, to seek permission from the court to amend its pleadings. VEC claims three sources of information provide justification for VEC's delay in filing a motion to amend. First, VEC claims that in the course of searching VEC's records responsive to TFG's discovery requests, VEC discovered documents supporting an additional fraud claim and several fraud defenses.[23] Second, VEC argues that TFG produced certain emails in response to VEC's discovery requests that further demonstrate the need to amend.[24] Specifically, VEC cites the following emails:

• October 7, 2011, email from VEC's former CFO, Brenda Spencer (“Spencer”), to TFG's employee, Rick Razzeca (“Razzeca”).
• November 29, 2011, email from Razzeca to Spencer.
• November 30, 2011, email from Spencer to Razzeca.
• December 1, 2011, email from Spencer to Razzeca.

         Finally, VEC claims that in February of 2017, VEC interviewed Spencer in preparation for her upcoming deposition and discovered new information warranting a claim ...


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