Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-3_04-cv-01795/USCOURTS-azd-3_04-cv-01795-5/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Insurance Contract

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Robert and Linda Mason, 

Plaintiffs, 

vs.

American Family Mutual Insurance

Company, 

Defendant. 

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No. 04-1795-PCT-ECV

ORDER

Pending before the court is Defendant's Motion to Amend Answer and Assert

Counterclaim (Doc. #44). Defendant claims that Plaintiffs engaged in fraudulent conduct

with respect to their claim for coverage under their homeowner's insurance policy.

Defendant contends that it only recently learned of the fraudulent conduct through

depositions and documents obtained from a subpoena. Plaintiffs argue that Defendant's

motion is untimely, would create an undue delay, and is futile.

Rule 15(a) of the Federal Rules of Civil Procedure provides that “leave [to amend a

pleading] shall be freely given when justice so requires.” However, the policy toward

permitting liberal amendment of pleadings “must be tempered with considerations of ‘undue

delay, bad faith, dilatory motive on the part of the movant, repeated failure to cure

deficiencies by amendments previously allowed, undue prejudice to the opposing party by

virtue of allowance of the amendment, futility of amendment, etc.’” Schlacter-Jones v.

Case 3:04-cv-01795-ECV Document 58 Filed 07/25/06 Page 1 of 3
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General Telephone, 936 F.2d 435, 443 (9th Cir. 1991) (quoting Foman v. Davis, 371 U.S.

178, 182 (1962)). “The following factors guide a court’s determination of whether a motion

to amend should be granted: (1) undue delay; (2) bad faith; (3) futility of amendment; and

(4) prejudice to the opposing party.” Forsyth v. Humana, Inc., 114 F.3d 1467, 1482 (9th Cir.

1997).

Plaintiffs first contend that Defendant's motion must be denied because it was filed

nearly nine months after the deadline set in the scheduling order. If the basis for Defendant's

motion was known before the deadline in the scheduling order and Defendant simply

neglected to file a timely motion, the court would likely agree with Plaintiff. Here, however,

Defendant did not learn about the sale of the property and other relevant information until

Plaintiffs' depositions in March 2006. Defendant then issued a subpoena for documents

pertaining to the sale and received those documents in May 2006. Defendant filed the instant

motion on June 1, 2006. The court finds that Defendant sought to amend within a reasonable

time of discovering the basis for the proposed amendment. The court has the authority to

modify its own deadlines where appropriate and finds that it is appropriate here.

Plaintiffs next contend that an amended answer and counterclaim at this stage would

greatly expand the scope of the issues in the case and cause an undue delay. Defendant

asserts in its reply, however, that any additional depositions can be completed before the

current discovery deadline. Even if the additional discovery creates a slight delay, the court

finds that such a delay is not "undue" and is warranted to explore the issue raised by

Defendant. Similarly, while the court agrees that the counterclaim will expand the scope of

issues in the case, the seriousness of the allegation justifies the expansion.

Finally, Plaintiffs argue that an amended answer and counterclaim alleging fraudulent

conduct would be futile. They claim that the facts fail to support an allegation of fraud.

However, after reviewing the factual assertions by both parties and the documentary evidence

in support of those assertions, the court cannot say that permitting a counterclaim alleging

fraud and misrepresentation would be futile. Defendant has alleged facts that, if true, may

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support such a claim. In addition, Defendant has not sufficiently demonstrated that the

statute of limitations would render Defendant's counterclaim futile. 

Based on the strong policy of permitting liberal amendment of pleadings and the

absence of any significant factors weighing against amendment in this case, the court

concludes that the motion should be granted. Defendant will be permitted to file a signed

version of the Proposed Amended Answer and Counterclaim attached to its motion to amend.

IT IS THEREFORE ORDERED:

That Defendant's Motion to Amend Answer and Assert Counterclaim (Doc. #44) is

granted; and

That an Amended Answer and Counterclaim must be filed on or before Tuesday,

August 1, 2006. 

DATED this 25th day of July, 2006.

Case 3:04-cv-01795-ECV Document 58 Filed 07/25/06 Page 3 of 3