WATKINS AND SHEPARD TRUCKING, INC., Plaintiff, v. JOFRAN SALES, INC., d/b/a JOFRAN INC., a Massachusetts corporation, Defendant.

 

Cause No. CDV-2016-46

 

FIRST JUDICIAL DISTRICT COURT OF MONTANA, LEWIS AND CLARK COUNTY

 

2017 Mont. Dist. LEXIS 20

 

 

August 10, 2017, Decided

August 10, 2017, Filed

 

 

PRIOR HISTORY: Jofran Sales, Inc. v. Watkins & Shepard Trucking, Inc., 2016 U.S. Dist. LEXIS 88123 (D. Mass., July 7, 2016)

 

JUDGES:  [*1] KATHY SEELEY, District Court Judge.

 

OPINION BY: KATHY SEELEY

 

OPINION

 

ORDER ON MOTION FOR SUMMARY JUDGMENT

This matter arises out of a dispute between a trucking and freight management company, Watkins and Shephard Trucking, Inc., a Montana corporation (Watkins), and a wholesale furniture supplier, Jofran Sales, Inc., a Massachusetts corporation (Jofran). On January 19, 2016, Watkins filed a complaint against Jofran alleging Jofran breached contractual obligations to Watkins for transportation services and storage of Jofran’s furniture, and asking for a declaratory judgment that two contracts between the companies be rescinded and for restitution of amounts owed. On March 9, 2016, Jofran filed a motion to dismiss for lack of personal jurisdiction. The issue was briefed and oral argument held. On October 26, 2016, this Court ordered the motion to dismiss be converted to a motion for summary judgment, allowing for submission of supplemental materials. After a voluntary 90-day stay of the proceedings, Jofran filed a motion for summary judgment on February 15, 2017. Additional materials were filed, oral argument was heard on the motions for summary judgment, and the matter was deemed submitted on May 31, 2017. [*2]

This Court takes judicial notice of the proceedings in the United States District Court for the state of Massachusetts. On June 21, 2016, Jofran filed an action in Massachusetts alleging claims against Watkins for breach of contract, violation of implied covenant of good faith and fair dealing, negligence, tortious interference with prospective business relationship, and violations of consumer protection statutes under Massachusetts, Montana and California law. On July 7, 2016, Jofran obtained a trustee process attachment on Watkins’ bank account in the amount of $658,301. Watkins filed a motion to dismiss the action in Massachusetts on the basis of forum non conveniens, which was denied by the Massachusetts court on November 2, 2016.

 

STANDARD OF REVIEW

Summary judgment is appropriate when “the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Mont. R. Civ. P. 56(c)(3).

The party moving for summary judgment must establish the absence of any genuine issue of material fact and entitlement to judgment as a matter of law. Tin Cup County Water and/or Sewer Dist, v. Garden City Plumbing & Heating, Inc., 2008 MT 434, ¶ 22, 347 Mont. 468, 200 P.3d 60. Once the moving party has met its burden, [*3]  the party opposing summary judgment must present affidavits or other testimony containing material facts that raise a genuine issue as to one or more elements of its case. Id. (citing Fielder v. Bd. of Cnty Comm’rs, 2007 MT 118, ¶ 12, 337 Mont. 256, 162 P.3d 67).

 

DISCUSSION

Watkins is a trucking company with its principal place of business in Montana. Jofran is a furniture wholesaler incorporated in Massachusetts. The parties have had a contractual relationship for years which included Watkins transporting and providing storage for Jofran’s goods. Watkins’ complaint alleges Jofran owes significant arrearages on payment owed for storage and freight, thus breaching its contracts with Watkins. Jofran counters that Montana lacks personal jurisdiction of Jofran under Montana Rule of Civil Procedure 4(b) and the federal Due Process Clause. Watkins disagrees, alleging waiver of jurisdiction by Jofran and, in the alternative, specific jurisdiction due to Jofran’s contact with the forum state — Montana. The issues to be resolved by this Court are whether Jofran waived objection to jurisdiction; whether the LTL Transportation Service Agreement is incorporated by reference into the Storage Pricing Agreement; whether there is long-arm jurisdiction of Jofran pursuant to Montana Rule of Civil Procedure 4(b); and whether the federal Due Process Clause contraindicates personal jurisdiction. [*4]

 

Did Jofran Waive Objection to Personal Jurisdiction Pursuant to the LTL Transportation Services Agreement?

Jofran’s initial argument for lack of personal jurisdiction centers on the premise that there are two distinct contracts at issue — the Storage Pricing Agreement (Storage Agreement); and the LTL (less than load) Transportation Service Agreement (Transportation Agreement). Watkins argues the Storage Agreement is incorporated into the Transportation Agreement in which Jofran waived objection to personal jurisdiction in Montana. Jofran argues the versions of the Transportation Agreement submitted by Watkins through employee affidavits cannot be verified as “true and accurate.”

Although there are discrepancies with the versions of the Transportation Agreement submitted by Watkins, the critical language has remained the same. Jofran did not submit any version of the Transportation Agreement which contradicts language waiving objection to personal jurisdiction. Further, in considering a motion for summary judgment based on written materials rather than an evidentiary hearing, as in a motion to dismiss, “[c]onflicts between parties over statements contained in affidavits must be resolved [*5]  in the plaintiff’s favor.” Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004) (citations omitted).

The Transportation Agreement contains the clause:

 

This agreement shall be construed and governed in accordance with the laws of the State of Montana to the extent such laws do not conflict with the law set forth in Title 49 of the United States Code and Part 49 of the Code of Federal Regulations, in which case the latter shall prevail. Shipper waives any objection to the jurisdiction of the Courts of Montana.

 

 

Jofran asserts that “shipper” means this agreement applies only when goods are shipped, not stored, and therefore the term “shipper” used in the waiver clause supports Jofran’s contention that any waiver of jurisdiction, if found, could only apply to shipping a product, not storage of inventory. Watkins counters that “shipper” refers to Jofran, regardless of the exact service being provided to Jofran. Clearly, “shipper” refers to the company securing services through the agreement, which is Jofran. And also clearly, the services contemplated by the Transportation Agreement are shipping. The language is also clear that Jofran, as the “shipper” contemplated by this clause, has waived objection to jurisdiction of the “Courts of Montana.” [*6]

 

Does the Storage Pricing Agreement Incorporate the Transportation Agreement?

Watkins argues that Montana has personal jurisdiction of Jofran for claims brought pursuant to the Storage Agreement because Jofran waived any objection to jurisdiction in the Transportation Agreement. Watkins further asserts the Storage Agreement incorporates the language of the Transportation Agreement. The Storage Agreement states:

 

I acknowledge I have received a copy of and agree to the terms outlined in the following documents:

– Watkins and Shephard Zone Guide

– Watkins and Shephard Fuel Surcharge Schedule

– Watkins and Shephard Accessorial Guide

– Watkins and Shephard LTL Freight Agreement

– Watkins and Shephard Claims Policy

Current copies of these documents can be retrieved from our website at www.wksh.com

 

 

Acknowledging receipt of a document and agreeing to the terms of the documents does not clearly incorporate that document by reference. If Watkins intended Jofran to be bound by a clause in the Transportation Agreement for legal disputes arising under the Storage Agreement, Watkins could have clearly so stated. The Transportation Agreement signed by the parties delineates that several of the documents listed [*7]  above are specifically incorporated by reference.

The Transportation Agreement states:

 

3. Rates, Rules and Accessorial Charges. As compensation for services provided by WST, Shipper shall pay WST the rates set forth in the attached Rate Schedule. . . . In addition, all shipments made by WST at the request of Shipper are subject to the rules and accessorial charges applicable to the shipment as set forth in the attached Applicable Rules and Accessorial Charges. In addition, all shipments made by WST at the request of the Shipper are subject to the applicable Fuel Surcharge as set forth in the Fuel Surcharge Matrix attached hereto. All rates and other applicable charges and fuel surcharges are payable by Shipper in U.S Funds not later than twenty (20) days from . . . . The Rate Schedule and Applicable Rules and Accessorial Charges and Fuel Surcharge Matrix are incorporated herein and made a part of this Agreement.

 

 

(Emphasis added.)

The Transportation Agreement was entered into before the Storage Agreement and makes clear Watkins is familiar with when and how to specify which extrinsic documents are specifically incorporated by precise reference into an agreement.1

 

1   The executed Transportation Agreement submitted by Watkins includes signed “appendices” entitled “Applicable Notes and Accessorial Charges — Furniture” and “Cargo Claims Policy and Procedures Bulletin.” Watkins does not explain whether these are documents also claimed to be incorporated in the Storage Agreement as identified on that Agreement as “Accessorial Guide” and “Claims Policy.”

The Storage Agreement does [*8]  not specifically or clearly state the extrinsic documents listed, including the Transportation Agreement, are incorporated by reference. Although there is no “magic” language necessary to incorporate documents by reference, there must be some language expressing the parties’ intent to be bound by the terms of the incorporated document. In the context of government contracts, the US Court of Appeals for the Federal Circuit summarized the requirement for specificity of language when incorporating documents by reference.

 

[T]he language used in a contract to incorporate extrinsic material by reference must explicitly, or at least precisely, identify the written material being incorporated and must clearly communicate that the purpose of the reference is to incorporate the referenced material into the contract (rather than merely to acknowledge that the referenced material relevant to the contract, e.g., as background law or negotiating history).

 

 

Northrop Grumman Info. Tech., Inc. v. United States, 535 F.3d 1339, 1345, 2008 U.S. App. LEXIS 16493, *14-15 (Fed. Cir. 2008). “I . . . agree to the terms outlined in the following documents” does not clearly communicate intent to incorporate.

The imprecise language in the Storage Agreement, combined with the inconsistent labeling of the various extrinsic documents, and [*9]  the fact that Watkins’ clearly incorporated documents into the Transportation Agreement and submitted evidence that there are signed appendices to the Transportation Agreement, support the conclusion that Watkins did not clearly convey intent to incorporate the Transportation Agreement into the Storage Agreement.

The facts presented, collectively, support a finding that the Storage Pricing Agreement does not expressly and clearly incorporate by reference the terms of the LTL Transportation Service Agreement, and the Court finds the Storage Agreement does not incorporate the Transportation Agreement.

 

Is There Personal Jurisdiction of Jofran Based on Montana Rule of Civil Procedure 4(b)?

Montana applies a two-part test to determine whether a court may exercise personal jurisdiction over a nonresident defendant. First, the court determines whether personal jurisdiction exists pursuant to Montana Rule of Civil Procedure 4(b)(1), and then, if personal jurisdiction is found, “whether exercising personal jurisdiction comports with traditional notions of fair play and substantial justice embodied in the due process clause.” Threlkeld v. Colo., 2000 MT 369, ¶ 9, 303 Mont. 432, 16 P.3d 359 (citations omitted).

Personal jurisdiction can be either general or specific. General jurisdiction exists over “all persons found within the state of Montana. . . [*10]  .” Mont. R. Civ. P. 4(b)(1). A nonresident defendant is “found within” Montana for general jurisdiction purposes if its activities in the state are either “substantial” or “continuous and systematic.” Simmons Oil Corp v. Holly Corp., 244 Mont. 75, 83, 796 P.2d 189, 194 (1990). Although there is evidence of some business activity and affiliations in Montana by Jofran, the parties apparently agree there is inadequate contact with Montana to extend general jurisdiction over Jofran and that there is not sufficient evidence that Jofran’s limited affiliation with Montana renders Jofran “at home” in Montana.2

 

Absent general jurisdiction, Montana courts may exercise specific jurisdiction over any person “as to any claim for relief arising from the doing personally, or through an employee or agent, of any of the . . . acts” listed in the state’s “long-arm statute” adopted in Montana through this Court’s Rules of Civil Procedure. M. R. Civ. P. 4(b)(1) (A)-(G).

 

 

Milky Whey, Inc. v. Dairy Partners, LLC, 2015 MT 18, ¶ 21, 378 Mont. 75, 342 P.3d 13. Specifically, “long-arm” jurisdiction exists over a nonresident defendant when the plaintiff’s cause of action arises from the specific circumstances set forth in Montana Rule of Civil Procedure 4(b)(1), which states:

Additionally, any person is subject to the jurisdiction of Montana courts as to any claim for relief arising from the doing personally, or through an employee or agent, of any of the following [*11]  acts:

(A) the transaction of any business within Montana;

(B) the commission of any act resulting in accrual within Montana of a tort action;

(C) the ownership, use, or possession of any property, or of any interest therein, situated within Montana;

(D) contracting to insure any person, property, or risk located within Montana at the time of contracting;

(E) entering into a contract for services to be rendered or for materials to be furnished in Montana by such person;

(F) acting as director, manager, trustee, or other officer of a corporation organized under the laws of, or having its principal place of business within, Montana; or

(G) acting as personal representative of any estate within Montana.

 

 

Mont. R. Civ P. 4(b)(1)(A)-(G).

Specific jurisdiction . . . depends on an affiliation between the forum and the underlying controversy, principally, activity or an occurrence that takes place in the forum state and is therefore subject to the state’s regulation. Thus, . . . in contrast to general, all-purpose jurisdiction, specific jurisdiction is confined to adjudication of issues deriving from, or connected with, the very controversy that establishes jurisdiction.

 

 

Senne v. Kan. City Royals Baseball Corp., 105 F. Supp. 3d 981, 1015, (N.D. Cal. 2015) (citing International Shoe Co. v. Washington, 326 U.S. 310, 317, 66 S. Ct. 154, 90 L. Ed. 95 (1945)).

 

2   Initial briefing by Watkins raised the possibility of general jurisdiction of Jofran, but in subsequent briefing opposing the motion for summary judgment and responding to Jofran’s notice of supplemental authority, Watkins stated: “While both of these recent opinions primarily deal with general jurisdiction, which is not at issue here. . . .” (Emphasis added.)

Watkins argues that the [*12]  facts in this matter are most similar to those in Bitterroot Int’l Systems v. W. Star Trucks, Inc., 2007 MT 48, 336 Mont. 145, 153 P.3d 627. In Bitterroot Int’l the Supreme Court upheld the exercise of personal jurisdiction wherein an out-of-state corporation transacted business in Montana with a Montana based company and a dispute arose out of those business transactions. Bitterroot is distinguishable from the facts of this case. The business transactions in the Bitterroot case related to an informal agreement for transportation logistics to be developed and performed by Bitterroot. The services implemented by Bitterroot in Montana were more extensive, and there were daily communications with Montana employees. Further, Bitterroot employees “performed a significant portion of the obligations required” pursuant to the informal agreement at issue in Montana. Id., ¶¶ 8-10

Here, as in Milky Whey, the claim arises out of transactions, or performance of services pursuant to a contract, that took place outside of Montana. “[E]xercise of personal jurisdiction is proper under M. R. Civ. P. 4(b)(1)(A) where substantial interactions occur within Montana.” Milky Whey, ¶ 27 (citations omitted). “Even extensive interstate communications, however, do not give rise to jurisdiction where the contract is to be [*13]  performed in another state.” Id., ¶ 27 (citing Edsall Constr. Co. v. Robinson, 246 Mont. 378, 382, 804 P.2d 1039, 1042 (1991)).

The complaint filed by Watkins is for recission of the contracts between Watkins and Jofran and restitution of the amounts allegedly owed, or in the alternative, breach of contract for breach of both the storage and transportation contracts. The amount allegedly owed by Jofran to Watkins is a combination of arrearages for accounts receivable based on Watkins’ transportation and storage of Jofran’s furniture. Watkins contends the contracts were entered into via negotiation and communication via phone and email with Watkins’ Montana employees, invoices were generated in and mailed from the Montana offices, Jofran had made payments under the contracts to Watkins in Montana, Watkins’ accounting staff were located in Montana, and payments were processed in Montana. The evidence also shows that the dispute at issue is primarily related to storage of Jofran’s inventory provided by Watkins at a warehouse in Fontana, California. Watkins does not claim any storage or transportation of Jofran’s inventory occurs in Montana.

Entering into a contract and doing business with a Montana entity does not by itself command jurisdiction of the out-of-state [*14]  party.

 

[A] non-resident does not subject himself to the jurisdiction of Montana by merely entering into a contract with a resident of Montana. Moreover, interstate communication is an almost inevitable accompaniment to doing business in the modern world, and cannot by itself be considered a “contact” for justifying the exercise of personal jurisdiction. Personal jurisdiction is not acquired through interstate communications made pursuant to a contract that is to be performed in another state.

 

 

Tackett v. Duncan, 2014 MT 253, ¶ 30, 376 Mont. 348, 334 P.3d 920 (citations omitted).

There is insufficient evidence that any of the conditions of Montana Rule of Civil Procedure 4(b)(1)(A) through (G) were met regarding the services provided pursuant to either the Storage Agreement or the Transportation Agreement. This Court finds it does not have personal jurisdiction pursuant to Rule 4(b)(1) over Jofran for the claims at issue.

 

Does Exercise of Long-Arm Jurisdiction of Jofran Regarding Actions Arising from the Transportation Agreement Violate Due Process?

Jofran waived objection to jurisdiction in the Transportation Services Agreement. Even with such waiver, the Court will consider the due process concerns of fair play and substantial justice raised by exercising jurisdiction over Jofran for only the part of the complaint [*15]  dealing with allegations of amounts owed pursuant to the Transportation Agreement.

“The reasonableness of asserting jurisdiction over a nonresident defendant must be assessed in the context of our federal system of government. The Due Process Clause of the Fourteenth Amendment constrains a state’s authority to bind a nonresident defendant to a judgment of its courts.” Tackett v. Duncan, 2014 MT 253, ¶ 18, 376 Mont. 348, 334 P.3d 920 (citations omitted). Although it is not up to this Court to decide whether jurisdiction is appropriate in Massachusetts, it is relevant to consider the pending litigation in Massachusetts arising out of the same transaction as the claims in the Montana complaint when determining whether the exercise of jurisdiction would offend traditional notions of fair play and substantial justice. In denying Watkins’ motion to dismiss based on a forum non conveniens (inconvenient forum), the Massachusetts court carefully considered all arguments raised, including the possibility that Montana could also have jurisdiction. The Massachusetts court concluded, however, that Watkins “has not made a strong showing that the balance of factors strongly weighs in favor of litigating this action in Montana.” The denial of Watkins’ motion to dismiss in Massachusetts is not dispositive of [*16]  the case before this Court.3 However, allegations by both parties for breach of contract directly related to the amounts owed to Watkins by Jofran pursuant to the Transportation and Storage Agreements are raised in both lawsuits in both jurisdictions. Although there could be simultaneous legal action in more than one jurisdiction related to the same matters, this Court has found it lacks personal jurisdiction over Jofran, except for the waiver contained in the Transportation Agreement. Keeping jurisdiction of only Watkins’ action for declaratory judgment for rescission and equitable restitution of the amounts due under the Transportation Agreement, or breach of the Transportation Agreement, would carve up or bifurcate the proceedings between two jurisdictions in a manner which does not comport with traditional due process notions of fair play and substantial justice. Competing or conflicting orders would be a likely outcome. It offends the notions of fair play and substantial justice to intentionally set up that possible scenario. In this particular situation, due process demands dismissal of the matter for lack of personal jurisdiction.

 

3   Watkins argues that Jofran’s claim in the Massachusetts lawsuit alleging violation of the Montana Consumer Protection Act shows that Jofran considers itself to have transacted business in Montana, thereby giving rise to jurisdiction of Montana courts. This is not dispositive of the matter.

Based on the foregoing, Jofran’s motion for summary [*17]  judgment is GRANTED.

DATED this 10 day of August 2017.

/s/ Kathy Seeley

KATHY SEELEY

District Court Judge

 

JESSICA ESTRADA, Plaintiff, vs. VASILY BUKATY and ROTEX TRANSPORTATION, INC., Defendants.

 

Civil No. 14-CV-242-KHR

 

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF WYOMING

 

2015 U.S. Dist. LEXIS 191485

 

 

October 20, 2015, Decided

October 20, 2015, Filed

 

 

COUNSEL:  [*1] For Jessica Estrada, Plaintiff: Dustin T Lujan, LEAD ATTORNEY, HALL & EVANS LLC, Laramie, WY; Richard J Gage, LEAD ATTORNEY, Cheyenne, WY.

 

For Cheyenne, WY, Rotex Transportation Inc, Defendants: Keith J Dodson, Scott E Ortiz, LEAD ATTORNEY, Erica Rachel Day, WILLIAMS PORTER DAY & NEVILLE PC, Casper, WY.

 

For Global Hawk Insurance Co, Defendant: Lance E Shurtleff, LEAD ATTORNEY, HALL AND EVANS LLC, Denver, CO; Paul T Yarbrough, Timothy M Murphy, LEAD ATTORNEY, PRO HAC VICE, HALL & EVANS LLC, Denver, CO.

 

JUDGES: Kelly H. Rankin, United States Magistrate Judge.

 

OPINION BY: Kelly H. Rankin

 

OPINION

 

ORDER GRANTING PLAINTIFF’S MOTION TO AMEND COMPLAINT TO ADD PARTY [DOC. 42]

This matter is before the Court on Plaintiff’s Motion to Amend Complaint to Add Party [Doc. 42]. The Court, having carefully considered the Motion, Response, Reply, and being fully advised in the premises, FINDS:

 

BACKGROUND

This case arises out of a car crash that occurred on December 6, 2010. Plaintiff and her husband were travelling East on Interstate 80. They stopped to assist a semi-truck driver who had been in an accident. Plaintiff called emergency responders and waited in her vehicle for them to arrive. Defendant Bukaty was allegedly driving a semi-truck [*2]  owned by Defendant Rotex Transportation, Inc. (Rotex) and insured by Global Hawk Insurance Company (Global Hawk). Plaintiff alleges Defendant Bukaty failed to change lanes even though the left lane was closed due to the original accident. Defendant Bukaty’s semi-truck struck the rear of the fire truck that had responded to the original accident. Plaintiff asserts the crash between Defendant Bukaty and the fire truck caused the fire truck to crash into her vehicle, sending it into the previously overturned semi-truck. Plaintiff further asserts she suffered severe and permanent injuries as a result of the crash. Subsequently, Plaintiff brought claims of negligence, respondeat superior, negligent hiring, training, and supervision, and punitive damages.

During discovery depositions, Plaintiff’s counsel questioned Diana Zhidovlenko, the

President and Safety Manager of Defendant Rotex. Plaintiff alleges Ms. Zhidovlenko’s testimony establishes that Defendant Rotex relied on its insurer, Global Hawk, to conduct the background check on Defendant Bukaty’s driving record. An excerpt from Ms.

Zhidovlenko’s testimony provides:

 

1. So you–it sounds like to me that you trusted [Global Hawk’s] call on

[*3] Vasily Bukaty?

1. I did.
2. Okay. And that would be normal for any driver that comes to you that you would expect the insurance carrier to [do] their job and pull the DMV records and let you know?
3. Correct.

 

 

Zhidovlenko Dep. 67:1-8, Sept. 23, 2015, ECF No. 42. Accordingly, Plaintiff seeks to add

Global Hawk as a defendant to this case and has filed the Motion to Amend Complaint to Add Party [Doc. 42] presently before the Court.

 

PLAINTIFF’S MOTION TO AMEND COMPLAINT TO ADD PARTY [DOC. 42]

In her Motion, Plaintiff asserts Global Hawk should be added as a defendant to this case pursuant to Rule 15(c) of the Federal Rules of Civil Procedure and the Restatement (Second) of Torts § 324A. Specifically, Plaintiff posits that because Defendant Rotex relied on Global Hawk to conduct the background check of Defendant Bukaty as evidenced by the testimony of Ms. Zhidovlenko, Global Hawk undertook and owed a duty to properly screen Defendant Bukaty’s driving record. Plaintiff believes this duty was breached because of Defendant Bukaty’s poor driving record and suspended California Driver’s License. Plaintiff also suggests any claims brought against Global Hawk can be related back to the Complaint filed against Defendants and thus do not violate the statute of limitations.

 

DEFENDANTS’ RESPONSE [*4]  [DOC. 47]

In their Response [Doc. 47], Defendants argue Plaintiff’s Motion is futile and would cause Defendants undue prejudice. Defendants suggest Plaintiff’s Motion is futile because Global Hawk did not assume a duty toward the Plaintiff. Defendants assert Plaintiff’s Motion is unduly prejudicial because evidence of Defendants’ liability insurance, which would generally be inadmissible under Rule 411 of the Federal Rules of Evidence, will be presented if Global Hawk is named as a defendant. Finally, Defendants contend the statute of limitations bars any claims against Global Hawk.

 

PLAINTIFF’S REPLY [DOC. 50]

Plaintiff’s Reply argues amendment would not be futile because Defendant Rotex relied on Global Hawk to check Defendant Bukaty’s driving record. Thus, according to Plaintiff, a jury could determine Global Hawk breached a duty to properly check Defendant Bukaty’s driving record and report to Defendant Rotex. Finally, Plaintiff asserts it would be unjust to exclude Global Hawk from this litigation because Defendants could simply place fault with the insurance company’s failure to investigate Defendant Bukaty’s driving background.

 

RULING OF THE COURT

The issue before the Court is whether Plaintiff should be allowed to amend [*5]  her Complaint to add Global Hawk as a defendant. The Federal Rules of Civil Procedure note “a party may amend its pleading only with the opposing party’s written consent or the court’s leave [and] [t]he Court should freely give leave when justice so requires.” Fed. R. Civ. P. 15(a)(2). The Supreme Court has emphasized “this mandate is to be heeded.” Foman v. Davis, 371 U.S. 178, 182, 83 S. Ct. 227, 9 L. Ed. 2d 222 (1962). The grant or denial of leave to amend is within the sound discretion of the court. Id.; T.V. Commc’n, Inc. v. Turner Network Television, Inc., 964 F.2d 1022, 1028 (10th Cir. 1992); Minter v. Prime Equip. Co., 451 F.3d 1196, 1204 (10th Cir. 2006) (citing Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 330, 91 S. Ct. 795, 28 L. Ed. 2d 77 (1971)). However, leave to amend should be denied where courts find “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.” Frank v. U.S. West, Inc., 3 F.3d 1357, 1365 (10th Cir. 1993).

Defendants oppose Plaintiff’s Motion to Amend for three reasons. First, Defendants suggest amendment is futile because Global Hawk did not undertake to provide Defendant Rotex with a driving record check of Defendant Bukaty. Second, Defendants allege they will suffer undue prejudice if Global Hawk is added as a defendant. Third, Defendants argue the statute of limitations bars any of Plaintiff’s prospective claims against Global Hawk.

 

FUTILITY

Defendants first argue the addition of Global Hawk is futile because Global Hawk only acted [*6]  toward the insurability of Defendant Bukaty and did not undertake to render any additional services toward Defendant Rotex under Wyoming law as applied through the Erie Doctrine. Erie R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S. Ct. 817, 82 L. Ed. 1188 (1938) (holding federal courts exercising diversity jurisdiction apply substantive state law and procedural federal law). An amendment is futile “if it would be unable to “withstand a motion to dismiss or otherwise fails to state a claim.” Lyle v. Commodity Credit Corp., 898 F. Supp. 808, 810 (D. Kan. 1995). Thus, to avoid futility, Plaintiffs must demonstrate claims against Global Hawk will survive summary judgment.

Wyoming law has adopted the Restatement (Second) of Torts, which contains the following provision:

 

One who undertakes, gratuitously or for consideration, to render services to another which he should recognize as necessary for the protection of a third person or his things, is subject to liability to the third person for physical harm resulting from his failure to exercise reasonable care to protect his undertaking, if

 

(a) his failure to exercise reasonable care increases the risk of such harm, or

(b) he has undertaken to perform a duty owed by the other to the third person, or

(c) the harm is suffered because of reliance of the other or the third person upon the undertaking.

 

 

 

 

Rice v. Collins Comm., Inc., 2010 WY 109, 236 P.3d 1009 (Wyo. 2010); Restatement (Second) of Torts § 324A (1965). [*7]  Accordingly, the Court must first determine whether the defendant, or potential defendant in this case, has undertaken to render a service. Paulson v. Andicoechea, 926 P.2d 955, 959 (Wyo. 1998); Deines v. Vermeer Mfg. Co., 752 F. Supp. 989, 994 (D. Kan. 1990). If the Court finds the defendant “undertook” to provide a service, the defendant is potentially liable under § 324A. Tooley v. Hill Truck Line, Inc., No. 88-1238-C, 1992 U.S. Dist. LEXIS 15421, 1992 WL 266605, at *18-19 (D. Kan. Sept. 30, 1992) (citing Anderson v. Scheffler, 248 Kan. 736, 811 P.2d 1125 (Kan. 1991)). A defendant undertakes a service when the defendant “agreed to or was obligated to perform services for another that were accepted.” Gooch v. Bethel A.M.E. Church, 246 Kan. 663, 792 P.2d 993, 998 (Kan. 1990). Courts have found insurance providers to have undertaken to render services where: (1) the insurance provider represents to the insured that it offers safety inspection services for the insured’s benefit and the insured relies on those representations or (2) the insurance provider conducts background checks for the insured’s employees and marketed those background checks as additional services to the insured. See Deines, 752 F. Supp. at 993-95 (holding insurer was potentially liable under § 324A because the insurer offered to conduct safety inspections ultimately relied on by the insured); Johnson v. Aetna Cas. & Sur. Co., 348 F. Supp. 627, 628 (M.D. Fla. 1972) (holding insurance provider potentially liable for an unlawful death after insurance provider contracted with insured to maintain safety engineering devises and conduct safety inspections of insured’s premises); Tooley, 1992 U.S. Dist. LEXIS 15421, 1992 WL 266605 at *20 (holding insurer of a trucking [*8]  company was potentially liable for negligent driver evaluations marketed as a “side benefit” to the insured and relied on by the trucking company).

Here, the Court finds amending the Complaint to add Global Hawk as a defendant is not futile. Based on the testimony of Ms. Zhidovlenko, there is enough evidence to support Plaintiff’s claim Global Hawk undertook to provide Defendant Rotex with a review and confirmation of Defendant Bukaty’s driving record. Ms. Zhidovlenko expressly stated she trusted Global Hawk’s “call on . . . Vasily Bukaty” and stated Global Hawk examined Defendant Bukaty’s driving record before reporting back to her. Zhidovlenko Dep. 66:11-15; 67:1-8. This fact is especially significant considering Defendant Rotex attempted to review Defendant Bukaty’s driving record but did not receive information from the State of California until five months after Defendant Bukaty was approved by Global Hawk. Zhidovlenko Dep. 32:8-21. Furthermore, Ms. Zhidovlenko revealed Global Hawk represented to her that it checks driving records and then reports back to the insured. Zhidovlenko Dep. 67:4-8. Evidence also suggests Global Hawk reported to Defendant Rotex regarding Defendant Bukaty’s [*9]  driving record, which indicates action by Global Hawk beyond underwriting Defendant Bukaty’s insurability. Zhidovlenko Dep. 61:3-15; 66:11-25; Defs.’ Response Ex. B. Thus, Ms. Zhidovlenko’s statements support Plaintiff’s position suggesting Global Hawk undertook to perform a background check of Defendant Bukaty relied on by Defendant Rotex Transportation, Inc.

Because Ms. Zhidovlenko’s testimony suggests Global Hawk undertook to provide a background check relied on by Defendant Rotex, Global Hawk is potentially liable under § 324A of the Restatement (Second) of Torts, which imposes liability on one who undertakes to render services to another and then causes injury to a third party. Therefore, Plaintiff has not failed to state a claim against Global Hawk and could potentially survive summary judgment, provided the remaining elements of the proposed negligence claim are satisfied. On the record presently before the Court, an amendment adding Global Hawk as a defendant would not be futile.

 

UNDUE PREJUDICE

Defendants also claim amending the pleadings to add Global Hawk as a defendant is unduly prejudicial because doing so would bring evidence of Defendants’ liability insurance before the jury. In the Tenth Circuit, an amendment is [*10]  unduly prejudicial if it “‘unfairly affects the defendants in terms of preparing their defense to the amendment.'” Minter v. Prime Equip. Co., 451 F.3d 1196, 1208 (10th Cir. 2006) (quoting Patton v. Guyer, 443 F.2d 79, 86 (10th Cir. 1971)). Defense preparation is unfairly effected when the proposed amendments “arise out of a subject matter different from what was set forth in the complaint and raise significant new factual issues.” Id. Furthermore, the Tenth Circuit has noted prejudice imposed by referencing liability insurance banned by Rule 411 of the Federal Rules of Evidence may be limited with an appropriate jury instruction. Rios v. Bigler, 67 F.3d 1543, 1550 (10th Cir. 1995).

In this case, Defendants will not be unduly prejudiced by the addition of Global Hawk as a defendant. The addition of Global Hawk arises out of the same subject matter set forth in Plaintiff’s Complaint as Plaintiff’s claims against Global Hawk relate to the car accident and Defendant Bukaty’s fitness as a driver. Furthermore, significant new factual issues will not be raised if Global Hawk is added as a defendant. Even with the addition of Global Hawk, factual issues in this case will still center on whether Defendant Bukaty and Defendant Rotex were negligent and whether that negligence caused Plaintiff’s injuries. New factual issues will be limited to Global Hawk’s involvement and potential negligence in [*11]  advising Defendant Rotex regarding Defendant Bukaty. While the addition of Global Hawk will likely present evidence of Defendants’ liability insurance, the prejudice of that evidence can ultimately be limited through jury instructions and orders in limine. Accordingly, the current Defendants will not be unfairly affected in preparing a defense, and the addition of Global Hawk does not cause Defendants unfair prejudice.

 

STATUTE OF LIMITATIONS

Finally, Defendants assert Plaintiff’s potential claims against Global Hawk are barred by the statute of limitations. Under Wyoming law, tort claims for “[t]he recovery of personal property[,] for . . . injuring personal property[,] or [a]n injury to the rights of the plaintiff” must be brought within four years. Wyo. Stat. Ann. § 1-3-105(a)(iv) (West 2015). Since the accident giving rise to Plaintiff’s claims occurred on December 6, 2010, any claims Plaintiff seeks to assert against Global Hawk would seemingly be barred by the statute of limitations. However, pursuant to Rule 15 of the Federal Rules of Civil Procedure:

 

(1) An amendment to a pleading relates back to the date of the original pleading when:

 

(A) . . .

(B) the amendment asserts a claim or defense that arose out of the conduct, transaction, or occurrence set out–or [*12]  attempted to be set out–in the original pleading; or

(C) the amendment changes the party or naming of the party against whom a claim asserted if Rule 15(c)(1)(B) is satisfied and if, within the period provided by Rule 4(m) for serving the summons and complaint, the party to be brought in by amendment:

 

(i) received such notice of the action that it will not be prejudiced in defending on the merits; and

(ii) knew or should have known that the action would have been brought against it, but for a mistake concerning the proper party’s identity.

 

 

 

 

 

 

Fed. R. Civ. P. 15(c)(1)(B)-(C). Thus, Plaintiff’s proposed claims against Global Hawk are not barred by the statute of limitations if (1) the proposed claims arise out of the same conduct referenced in Plaintiff’s Complaint, (2) Global Hawk had notice of this case, and (3) Global Hawk knew or should have known the action should have been brought against it. Id.

Plaintiff’s claims against Global Hawk are not barred by the statute of limitations. As discussed above, Plaintiff’s proposed claims against Global Hawk arise out of the same conduct in Plaintiff’s Complaint. Additionally, as noted by Plaintiff, Global Hawk had notice of this case. Global Hawk was given written notice of the pending case in January, [*13]  2011 and hired counsel pertaining to this matter in March, 2011. Plaintiff also alleges counsel for Plaintiff and Global Hawk communicated in February, 2012. These facts sufficiently demonstrate Global Hawk had sufficient notice of this case.

While Global Hawk may not have known this case would be brought against it, Plaintiff’s argument suggesting Global Hawk should have known is persuasive. Contact from Plaintiff’s counsel could have suggested to Global Hawk litigation was a possibility. More significantly, Global Hawk was aware Global Hawk provided a background check of Defendant Bukaty relied on by Defendant Rotex. Because of this, Global Hawk should have been aware of potential liability under § 324A. Since Plaintiff’s claims against Global Hawk arise from the same subject matter provided in the Complaint, Global Hawk had notice of the pending litigation via contact from Plaintiff’s counsel, and Global Hawk should have known of potential liability under § 324A, Plaintiff’s claims against Global Hawk relate back to Plaintiff’s Complaint and are not barred by the statute of limitations.

 

CONCLUSION

The Court finds the addition of Global Hawk as a defendant will not be futile. Testimony elicited [*14]  from Ms. Zhidovlenko by Plaintiff suggested Global Hawk undertook to report to Defendant Rotex with a background check of Defendant Bukaty that was ultimately relied on by Defendant Rotex. Furthermore, Defendants will not be prejudiced by the addition of Global Hawk as a defendant because Plaintiff’s claims against Global Hawk arise from the same subject matter alleged in the original complaint and any prejudice caused by evidence of Defendants’ liability insurance may be mitigated through the Court’s instructions. Finally, Plaintiff’s claims against Global Hawk relate back to Plaintiff’s Complaint and are not barred by the statute of limitations because the claims arise from the same subject matter alleged in the Complaint, Global Hawk had notice of potential litigation, and Global Hawk should have known about potential liability under § 324A after approving Defendant Bukaty to drive for Defendant Rotex.

THEREFORE, IT IS ORDERED Plaintiff’s Motion for Leave to Amend Complaint [Doc. 42] is GRANTED.

IT IS FURTHER ORDERED that Plaintiff shall file an Amended Complaint on or before October 23, 2015.

Dated this 20th day of October, 2015.

/s/ Kelly H. Rankin

Kelly H. Rankin

United States Magistrate [*15]  Judge