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Vivint, Inc. v. Northstar Alarm Services, LLC

United States District Court, D. Utah

March 23, 2018

VIVINT, INC., a Utah corporation, Plaintiff,
v.
NORTHSTAR ALARM SERVICES, LLC, a Utah limited liability company, Defendant.

          MEMORANDUM DECISION AND ORDER DENYING MOTION FOR LEAVE TO AMEND ANSWER TO ASSERT COUNTERCLAIMS AND AFFIRMATIVE DEFENSES

          Jill N. Parrish United States District Court Judge

         I. BACKGROUND

         On November 20, 2015, Plaintiff Vivint, Inc. filed a complaint against Defendant NorthStar Alarm Services, LLC. Vivint alleged that NorthStar engaged in deceptive trade practices. NorthStar answered the complaint and did not assert any counterclaims in its answer. Shortly after NorthStar answered, Vivint amended its complaint. NorthStar did not assert any counterclaims in its answer to the amended complaint.

         Vivint's amended complaint contains six causes of action. Vivnt's first cause of action seeks a declaratory judgment. NorthStar allegedly merged with another company, Vision Security, LLC. And Vivint claims that NorthStar is bound by a settlement agreement that Vision Security entered into with Vivint. According to Vivint, the settlement agreement requires that the parties submit to binding arbitration. Vivint's remaining causes of action, which include claims under the Utah Deceptive Trade Practices Act and the Lanham Act, are based on allegations that NorthStar employees made false statements about Vivint.

         On April 1, 2016, Magistrate Judge Evelyn J. Furse entered a scheduling order (the “Scheduling Order”). It provides, in relevant part, “The cutoff date for filing amended pleadings: August 1, 2016. All other requests to amend pleadings must be made pursuant to Fed.R.Civ.P. 15.” The Scheduling Order set December 20, 2016, as the last day to serve written discovery, but this deadline was later extended to October 20, 2017.

         On September 20, 2017, one month before the close of fact discovery, NorthStar filed a motion for leave to amend its answer. NorthStar seeks to add three affirmative defenses: (1) accord and satisfaction, (2) release, and (3) payment. These defenses relate to a purported dispute resolution agreement that NorthStar entered into with Vivint. NorthStar claims that it recently learned additional information about this agreement when it deposed two Vivint employees. NorthStar also seeks to assert six counterclaims against Vivint. Five of the counterclaims are based on allegations that Vivint targeted NorthStar customers with deceptive and misleading sales practices. The sixth counterclaim alleges abuse of process against Vivint based on its alleged improper use of information it learned during this lawsuit. Vivint opposes NorthStar's motion as untimely, unduly prejudicial, and futile.

         This matter was referred to Judge Furse under 28 U.S.C. § 636(b)(1)(A). She issued a Report and Recommendation on February 5, 2018. In it, she recommends that the court deny NorthStar's motion on two grounds. First, she recommends that the court deny leave to amend on the grounds that the cutoff date for filing amended pleadings has passed and NorthStar has not shown good cause to modify the cutoff date. Second, assuming that NorthStar has shown good cause to modify the cutoff date, she nevertheless recommends that the court deny leave to amend on the grounds that the proposed amendment is untimely and will unduly prejudice Vivint. NorthStar objects to the Report and Recommendation.

         II. DISCUSSION

         NorthStar raises three arguments in its objection. First, it contends that it does not seek to modify the cutoff date for filing amended pleadings and thus it need not show good cause under Rule 16(b)(4). Second, assuming that it is required to show good cause, NorthStar contends that it has done so. Third, irrespective of whether it is required to show good cause, NorthStar argues that the court should grant leave to amend under Rule 15(a)(2) because the proposed amendment is timely and will not unduly prejudice Vivint.

         A. Standard of Review

         Under § 636(b)(1)(A), a district judge “may designate a magistrate judge to hear and determine any pretrial matters pending before the court, ” except for eight enumerated motions that are considered to be “dispositive” of a party's claims. Ocelot Oil Corp. v. Sparrow Indus., 847 F.2d 1458, 1461 (10th Cir. 1988). In short, § 636(b)(1)(A) allows a district judge to refer non-dispositive matters to a magistrate judge who then rules on them. Under Rule 72(a), when a party objects to a magistrate's ruling on non-dispositive matters (i.e., those referred under § 636(b)(1)(A)), the district court must “modify or set aside any part of the order that is clearly erroneous or is contrary to law.” See also § 636(b)(1)(A) (“A judge of the court may reconsider any pretrial matter under this subparagraph (A) where it has been shown that the magistrate judge's order is clearly erroneous or contrary to law.”).

         Under § 636(b)(1)(B), a district judge may designate a magistrate judge to conduct hearings and submit “proposed findings of fact and recommendations” for the disposition of the eight motions that are excepted from § 636(b)(1)(A). In short, § 636(b)(1)(B) allows a district judge to refer “dispositive” matters to a magistrate judge who then issues a report and recommendation to the district judge. If a district judge refers dispositive matters (i.e., those referred under § 636(b)(1)(B)) to a magistrate judge for a report and recommendation, the district court “must determine de novo any part of the magistrate judge's disposition that has been properly objected to.” Fed.R.Civ.P. 72(b)(3); see also § 636(b)(1) (“A judge of the court shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made.”).

         “Notwithstanding Rule 72's clear division between dispositive and non-dispositive matters, ” motions that are not designated on their face as one of the eight enumerated dispositive motions “are nevertheless to be treated as such when they have an identical effect.” Birch v. Polaris Indus., Inc., 812 F.3d 1238, 1246 (10th Cir. 2015); see also Ocelot, 847 F.2d at 1462 (“[M]otions not designated on their face as one of those excepted in subsection (A) are nevertheless to be treated as such a motion when they have identical effect.”). Consequently, a district judge must review de novo a magistrate-judge order that has an effect that is identical to that of a dispositive order. See Id. (magistrate judge's sanctions order that struck pleadings with prejudice as to one defendant was dispositive because the order “has the effect of dismissing [the plaintiff's] action, contrary to [its] wishes, and operates as res judicata”); Birch, 812 F.3d at 1246.

         Here, the court must review de novo the Report and Recommendation. The magistrate judge's decision to issue the Report and Recommendation in conjunction with NorthStar's objection to it forecloses the court's ability to conduct anything but a de novo review. The court referred NorthStar's motion for leave to amend to the magistrate judge under § 636(b)(1)(A) because the motion was not one of the eight enumerated “dispositive” motions. But instead of “hear[ing] and determin[ing]” the matter, the magistrate judge issued a report and recommendation. Issuing a report and recommendation, as opposed to an order, is arguably consistent with the requirement that “motions not designated on their fact as [dispositive] are nevertheless to be treated as such . . . when they have identical effect.” Birch, 812 F.3d at 1246 (quoting Ocelot, 847 F.2d at 1462); Ocelot, 847 F.2d at 1462 (holding that it is “beyond the power of a magistrate” to issue “dispositive” orders).[1] And NorthStar filed an objection to the Report and ...


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