IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

HOME DEPOT U.S.A., INC., §

 §

Plaintiff, §

 §

VS. §

 §

NATIONAL FIRE INSURANCE §

COMPANY OF HARTFORD, §

 § Civil Action No. 3:06-CV-0073-D

Defendant- §

Third-Party Plaintiff §

 §

VS. §

 §

EXPRESS SITE PREPARATION, INC. §

and AMERICAN EQUITY INSURANCE §

COMPANY, §

 §

Third-Party Defendants. §

MEMORANDUM OPINION

 AND ORDER 

The court revisits this case in response to plaintiff’s second

motion for summary judgment, which addresses a limited issue left

unresolved by the court’s prior summary judgment ruling, and to

decide whether defendant should be granted leave to amend its

answer. For the reasons that follow, the court grants plaintiff’s

second motion for summary judgment and denies defendant’s motion

for leave to amend.

I

Plaintiff Home Depot U.S.A., Inc. (“Home Depot”) sues

defendant National Fire Insurance Company of Hartford (“National

Fire”), contending that National Fire failed to comply with a

contractual duty to defend Home Depot against claims asserted in a
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Texas state court lawsuit, Boxcars Properties, Ltd. v. W. Hills

Joint Venture, No. 22433 (278th Dist. Ct., Walker County, Tex.)

(the “Boxcars Litigation”). In a prior opinion in this case, Home

Depot U.S.A., Inc. v. National Fire Ins. Co., 2007 WL 846525 (N.D.

Tex. Mar. 21, 2007) (Fitzwater, J.) (“Home Depot I”), the court

granted Home Depot’s motion for summary judgment on its breach of

contract claim against National Fire “to the extent of holding that

National Fire breached its duty to defend Home Depot in the Boxcars

Litigation.” Id. at *9. The court “limit[ed] its grant of summary

judgment to liability alone.” Id. at *8. It declined to award all

the relief that Home Depot sought in its motion, explaining:

Home Depot maintains that it is entitled to

recover $128,708.47 for the attorney’s fees

and costs it incurred in defending its

interests in the Boxcars Litigation. This

figure, however, appears to include not only

expenses that Home Depot incurred in defending

itself in the Boxcars Litigation but some of

the attorney’s fees and costs it has incurred

in prosecuting the instant case. This

potentially blends two different decisions,

one to be made by the trier of fact and the

other to be made by the court. Attorney’s

fees and costs incurred in the Boxcars

Litigation defense are determined by the trier

of fact as part of Home Depot’s breach of

contract claim. Those expended in prosecuting

the present lawsuit are awarded by the court

under the procedures specified in Fed. R. Civ.

P. 54(d) and N.D. Tex. Civ. R. 54.1. The

court is therefore unable to grant summary

judgment awarding Home Depot specific relief

on its breach of contract claim without the

possibility of awarding duplicative attorney’s

fees and costs. It will therefore limit its

grant of summary judgment to liability alone.

Id. 

Home Depot later obtained leave of court under N.D. Tex. Civ.
1Although it does not affect the disposition of this motion,

the court notes that use of the term “original” is a misnomer in

federal practice. The term “original” probably emanates from Texas

state procedure. See Tex. R. Civ. P. 46 (referring to “original

answer”); but cf. Tex. R. Civ. P. 97(a) and (b) (referring to “a

counterclaim”). Federal procedure, however, does not use the term

“original” when referring to an answer or a counterclaim. See Fed.

R. Civ. P. 7(a) (“There shall be . . . an answer . . . .”); 13(a)

and (b) (referring to “a counterclaim”).

2National Fire also seeks leave to assert new affirmative

defenses. In considering National Fire’s motion for leave,

however, the court will focus on the counterclaim, because it is

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R. 56.2(b) to file a second motion for summary judgment on the

remaining issue of attorney’s fees and expenses. See Home Depot

U.S.A., Inc. v. Nat’l Fire Ins. Co. of Hartford, 2007 WL 1969752,

at *2 (N.D. Tex. June 27, 2007) (Fitzwater, J.). Home Depot then

filed its second motion for summary judgment. Nine days after Home

Depot obtained leave to file the motion, National Fire sought leave

to file a first amended original answer, affirmative defenses, and

original counterclaim.1 

The original deadline established by the court’s Fed. R. Civ.

P. 16(b) scheduling order for filing motions for leave to amend

pleadings was April 1, 2007, but the court extended the deadline to

August 15, 2007 in response to National Fire’s unopposed motion.

National Fire sought this relief on the ground that it needed time

to develop its third-party claims. Among the amendments that

National Fire seeks to make is one asserting a new counterclaim

against Home Depot. National Fire relies on this proposed

counterclaim to oppose summary judgment.2 Therefore, the court
alone sufficient to warrant denying the motion.

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must first address National Fire’s motion for leave to amend before

considering Home Depot’s second motion for summary judgment.

II

A

National Fire alleges in its proposed counterclaim that its

duty to defend Home Depot in the Boxcars Litigation gives rise to

a contractual subrogation right——that is, a right to step into Home

Depot’s shoes——regarding any of Home Depot’s claims against other

insurers arising out of the Boxcars Litigation. One of the

insurers against whom Home Depot allegedly has a claim is American

Equity Insurance Company (“American Equity”), who was joined as a

third-party defendant in November 2006. National Fire maintains

that Home Depot impaired its subrogation rights by failing to give

American Equity timely notice of the Boxcars Litigation. The

Boxcars Litigation commenced on or about February 17, 2004, but

Home Depot did not notify American Equity of the lawsuit until

August 8, 2005. National Fire asserts that this effectively

precludes any recovery for litigation costs incurred before August

8, 2005. Accordingly, it seeks to offset its liability on the

insurance contract by the amount of defense costs it will be unable

to recover due to the delayed notice.

B

“It is settled that the grant of leave to amend the pleadings

pursuant to Rule 15(a) is within the discretion of the trial
3Because National Fire filed its motion for leave to amend

before the court-ordered deadline, the motion is analyzed under

Rule 15(a).

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court.” Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S.

321, 330 (1971).3

 Leave to amend pleadings “shall be freely given

when justice so requires.” Rule 15(a). Granting leave to amend,

however, “is by no means automatic.” Wimm v. Jack Eckerd Corp., 3

F.3d 137, 139 (5th Cir. 1993) (quoting Addington v. Farmer’s

Elevator Mut. Ins. Co., 650 F.2d 663, 666 (5th Cir. Unit A July

1981)). The district court may consider factors such as undue

delay, bad faith or dilatory motive on the part of the movant,

repeated failure to cure deficiencies by amendments previously

allowed, undue prejudice to the opposing party, and futility of

amendment. Id. (citing Foman v. Davis, 371 U.S. 178, 182 (1962)).

“Perhaps the most important factor listed by the Court [in

Foman] and the most frequent reason for denying leave to amend is

that the opposing party will be prejudiced if the movant is

permitted to alter his pleading.” 6 Charles Alan Wright et al.,

Federal Practice and Procedure § 1487, at 613 (2d ed. 1990). For

example, a change may be deemed prejudicial “if the amendment

substantially changes the theory on which the case has been

proceeding and is proposed late enough so that the opponent would

be required to engage in significant new preparation.” Id. at 623.

Leave may also be denied “if the court determines that the proposed

amendment would result in defendant being put to added expense and
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the burden of a more complicated and lengthy trial.” Id. at 626.

“As a general rule, the risk of substantial prejudice increases

with the passage of time.” Id. § 1488, at 670. 

Additionally, “[t]his court will ‘carefully scrutinize a

party’s attempt to raise new theories of recovery by amendment when

the opposing party has filed a motion for summary judgment.’”

Barrow v. Greenville Indep. Sch. Dist., 2001 U.S. Dist. LEXIS

20120, at *3 (N.D. Tex. Dec. 4, 2001) (Fitzwater, J.) (quoting

Parish v. Frazier, 195 F.3d 761, 764 (5th Cir. 1999) (per curiam)).

This principle applies with equal force to a new counterclaim that

could defeat a summary judgment motion. The court has frequently

found prejudice when a party seeks leave to amend after the

opposing party has filed a summary judgment motion. See, e.g., AMS

Staff Leasing, NA, Ltd. v. Associated Contract Truckmen, Inc., 2005

WL 3148284, at *11 (N.D. Tex. Nov. 21, 2005) (Fitzwater, J.)

(denying motion for leave to amend after summary judgment motion

filed); see also Overseas Inns S.A. P.A. v. United States, 911 F.2d

1146, 1151 (5th Cir. 1990) (holding that “‘[t]o grant . . . leave

to amend is potentially to undermine [a party’s] right to prevail

on a motion that necessarily was prepared without reference to an

unanticipated amended complaint . . . . A party should not,

without adequate grounds, be permitted to avoid summary judgment by

the expedient of amending its complaint.’”) (quoting this court’s

opinion below). A fortiori, prejudice can easily be found where,
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as here, leave is first sought after the court has granted summary

judgment. 

C

Home Depot filed this lawsuit on January 15, 2006. Only after

Home Depot moved for and obtained summary judgment in Home Depot I,

obtained leave to file a second summary judgment motion on June 27,

2007, and over 18 months had elapsed since suit was filed, did

National Fire move for leave to amend. Following the court’s

decision in Home Depot I, the only issue that remains between Home

Depot and National Fire is the amount of attorney’s fees and costs

that Home Depot is entitled to recover from National Fire for

defending its interests in the Boxcars Litigation and for

prosecuting the instant breach of contract claim. Home Depot I,

2007 WL 846525, at *8. Granting National Fire leave to assert a

new counterclaim after Home Depot has obtained summary judgment and

after Home Depot has filed a second summary judgment motion that,

if granted, will result in a final judgment in its favor, would be

patently prejudicial. 

National Fire maintains that its dilatory conduct is justified

because it could not have raised the counterclaim earlier. It

posits that, until the court decided in Home Depot I that it was

contractually liable to Home Depot, National Fire had no

subrogation rights to assert and could not have sued Home Depot for

impairing these rights. The court disagrees.

First, the premise that National Fire’s subrogation rights
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arose only after the court found it liable on the insurance

contract is mistaken. The court’s ruling in Home Depot I did not

create National Fire’s duty to defend Home Depot in the Boxcars

Litigation; rather, the duty was created by the parties’ contract,

which was already in existence at the time of the Boxcars

Litigation. See Home Depot I, 2007 WL 846525, at *9 (holding that

National Fire had duty to defend Home Depot in Boxcars Litigation).

Consequently, any subrogation rights corresponding with that duty

would also have existed at the time of the Boxcars Litigation.

National Fire could have asserted these rights at any time.

Apparently, it opted not to do so because this would have required

that it acknowledge the underlying duty.

Second, it was unnecessary for the court to determine

contractual liability before National Fire became aware of, or

raised, a claim based on its alleged subrogation rights. This is

demonstrated by National Fire’s third-party complaint filed against

American Equity in November 2006, in which it asserted a contingent

right of subrogation in the event it was held liable on the

insurance contract. National Fire could similarly have brought a

counterclaim against Home Depot based on the impairment of that

right, which was in fact required under Rule 13(a) (with

inapplicable exceptions, making compulsory any counterclaim arising

out of same transaction or occurrence as opposing party’s claim).

Furthermore, in evaluating the potential prejudice to Home

Depot arising from granting leave to amend, the court also

considers the circumstances and effect of granting National Fire’s
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March 30, 2007 motion to extend pretrial deadlines. Had the motion

been denied, National Fire’s present motion for leave to amend

would have been filed after the court-ordered deadline for filing

such motions. To obtain the relief that National Fire now seeks,

it would have been required first to satisfy the Rule 16(b) goodcause standard for amending the scheduling order and then to have

met the Rule 15(a) standard for obtaining leave to amend. See,

e.g., S&W Enters., L.L.C. v. SouthTrust Bank of Ala., N.A., 315

F.3d 533, 536 (5th Cir. 2003) (“Only upon the movant’s

demonstration of good cause to modify the scheduling order will the

more liberal standard of Rule 15(a) apply to the district court’s

decision to grant or deny leave.”). National Fire’s motion for an

extension was not opposed, however, and the court granted it. Home

Depot maintains that it did not oppose the motion because National

Fire had agreed to stipulate to its claimed attorney’s fees and

costs. National Fire denies the existence of such an agreement.

Regardless whether there was such an agreement, Home Depot

will plainly suffer prejudice due to National Fire’s reliance on an

erroneous (or at least incomplete) basis to justify extending the

deadline for filing motions for leave to amend. National Fire

represented only that it needed more time to pursue its third-party

claims, and it neither suggested nor disclosed that it intended to

file a new counterclaim against Home Depot. It is inconceivable to

conclude that, had Home Depot known its own interests were at risk,

it would not have opposed the motion. 
4If National Fire desires to revise its proposed amended

pleading to address claims against other parties who remain in the

case, it may move for leave to amend within 14 days of the date

this memorandum opinion and order is filed. If, as to parties

other than Home Depot, the revised pleading is substantially the

same as the one the court is now denying, the court will treat it

as if it was filed before the August 15, 2007 deadline, meaning

that National Fire need only satisfy the Rule 15(a), not the Rule

16(b), standard.

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Accordingly, for the reasons explained, the court holds that

National Fire’s motion for leave to amend should be denied based on

the clear prejudice that Home Depot will suffer if National Fire is

allowed at this late date to assert a new counterclaim.4

 

III

The court now turns to Home Depot’s motion for summary

judgment on the issue of attorney’s fees and expenses incurred in

the Boxcars Litigation. 

As the party bearing the burden of proof on damages, Home

Depot must establish the amount of its fees and expenses “‘beyond

peradventure.’” Bank One, Tex., N.A. v. Prudential Ins. Co. of

Am., 878 F. Supp. 943, 962 (N.D. Tex. 1995) (Fitzwater, J.)

(quoting Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir.

1986)). 

Home Depot seeks $109,482.39 in consequential damages from

defending itself in the Boxcars Litigation, composed of $93,097.00

in attorney’s fees and $16,385.39 in litigation expenses. It also

seeks its attorney’s fees, court costs, and expenses incurred in

litigating the present case. National Fire does not dispute the

amount of damages that Home Depot seeks for defending itself in the
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Boxcars Litigation. Rather, as discussed above, it relies on a

proposed new counterclaim to defeat summary judgment, for which

leave to file the pleading has been denied. Considering the

evidence on which Home Depot relies, and in the absence of a

genuine issue of material fact, the court holds that Home Depot is

entitled to summary judgment awarding it $109,482.39 in damages

from National Fire. The court also holds that Home Depot is

entitled to recover its attorney’s fees, taxable costs, and

recoverable litigation expenses for prosecuting the instant breach

of contract action against National Fire. Those fees, costs, and

expenses will be awarded in response to timely motions filed under

Rule 54(d)(2) and N.D. Tex. Civ. R. 54.1.

* * *

For the reasons set out, Home Depot’s July 9, 2007 second

motion for summary judgment is granted, and National Fire’s July 6,

2007 motion for leave to file first amended original answer,

affirmative defenses, and original counterclaim is denied. A Rule

54(b) final judgment in favor of Home Depot against National Fire

will be filed today. Home Depot may seek its attorney’s fees,

costs, and expenses incurred in prosecuting the instant action by
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filing timely motions under Rule 54(d)(2) and N.D. Tex. Civ. R.

54.1.

SO ORDERED.

September 10, 2007.

_________________________________

SIDNEY A. FITZWATER

UNITED STATES DISTRICT JUDGE