United States District Court, D. Colorado
Kristen L. Mix United States Magistrate Judge.
matter is before the Court on Defendant Thomas R.
Jarboe's (“Jarboe”) Motion for Leave
to Amend Answer to Complaint [#64] (the
“Motion”). Plaintiff filed a Response [#66] in
opposition to the Motion, and Plaintiff filed a Reply [#69].
The Motion is thus fully briefed and ripe for resolution. For
the reasons set forth below, the Motion [#64] is
Cherry Creek Mortgage Co., Inc. alleges that on April 18,
2016, the parties entered into a Non-Producing Branch Manager
Agreement. whereby Plaintiff agreed to employ Defendant
Jarboe (“Jarboe”) and Defendant Alvaro C. Barajas
(“Barajas”) to manage certain loan origination
branch offices in California, which eventually accumulated
“net losses.” See generally Compl. [#3].
To recover the losses, Plaintiff filed this lawsuit on
January 19, 2018, asserting three claims against Defendants:
(1) breach of contract, (2) breach of fiduciary duty, and (3)
unjust enrichment. Id. ¶¶ 15-33.
March 1, 2019, this action was consolidated with Civil Action
No. 19-cv-00291-RBJ, an action which itself had been
transferred in February 2019 to the District of Colorado from
the Central District of California. Minute Order
[#62]. In that action, Defendant Jarboe was the plaintiff,
and he had sued Plaintiff Cherry Creek Mortgage Co., Inc. for
the following five claims: (1) failure to pay wages pursuant
to Cal. Labor Code §§ 204 & 218.5; (2) failure
to pay business expenses pursuant to Cal. Labor Code §
2802; (3) declaratory judgment pursuant to 28 U.S.C. §
2201; (4) conversion; and (5) unfair competition.
See [#64-3] at 2.
March 1, 2019, the same day the actions were consolidated,
the Court extended the deadline for Defendant Jarboe to file
an amended answer and counterclaims to March 8, 2019.
Minute Order [#62]. Defendant Jarboe timely filed
the present Motion [#64], in which he seeks leave to amend
his answer and add counterclaims. Plaintiff does not oppose
amendment to the extent Defendant Jarboe seeks leave to
formally add the five claims from the California action as
counterclaims here. Response [#66] at 1-2. However,
Plaintiff opposes Defendant Jarboe's other proposed
amendments: (1) an affirmative defense that Plaintiff's
claims are barred by applicable Federal Housing
Administration (“FHA”) and United States
Department of Housing and Urban Development
(“HUD”) regulations, (2) a counterclaim for
breach of contract, and (3) a counterclaim for breach of the
implied duty of good faith and fair dealing. Id. at
2; Motion [#64] at 1. Plaintiff opposes these
amendments on the grounds of undue delay and undue prejudice.
Response [#66] at 7-11. Because Defendant
Jarboe's Motion [#64] is timely with respect to the
deadline for joinder of parties and amendment of pleadings,
see Minute Order [#62], the Court proceeds directly
to consideration of the arguments pursuant Fed.R.Civ.P.
15(a)(2). See Birch v. Polaris Indus., Inc., 812
F.3d 1238, 1247 (10th Cir. 2015).
Court has discretion to grant a party leave to amend its
pleadings. Foman v. Davis, 371 U.S. 178, 182 (1962);
see Fed. R. Civ. P. 15(a)(2) (“The court
should freely give leave when justice so requires.”).
The purpose of the rule is to provide litigants “the
maximum opportunity for each claim to be decided on its
merits rather than on procedural niceties.” Minter
v. Prime Equip. Co., 451 F.3d 1196, 1204 (10th Cir.
2006). “Refusing leave to amend is generally only
justified upon 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.” Frank v. U.S. West,
Inc., 3 F.3d 1357, 1365 (10th Cir. 1993) (citation
outset, it is worth noting that Defendant Jarboe's
proposed amendment regarding the affirmative defense, i.e.,
that Plaintiff's claims are barred by applicable FHA and
HUD regulations, is more of a clarification than a new
affirmative defense. The original defense broadly states:
“Plaintiff's claims are barred in whole or in part
by statute and regulation, including, but not limited to
applicable California labor laws, federal labor laws, and
other state and federal statutes and regulations.”
Answer [#15] at 6. The amended version of this
defense more specifically states: “Plaintiff's
claims are barred in whole or in part by statute and
regulation, including, but not limited to applicable
California labor laws, federal labor laws, United States
Department of Housing and Urban Development regulations,
Federal Housing Administration regulations, and other state
and federal statutes and regulations.” Proposed Am.
Answer [#64-1] at 8. Thus, even were the Court to deny
amendment, the original Answer [#15] would still appear to
encompass the changes here requested by Defendant Jarboe with
respect to the affirmative defense.
Court may deny a motion to amend based solely on undue delay.
Minter, 451 F.3d at 1205. Delay is
“undue” only if it will place an unwarranted
burden on the Court or become prejudicial to the opposing
party. Id. The Tenth Circuit “focuses
primarily on the reason for the delay.” Id. A
motion to amend is untimely, if, among other reasons, the
moving party has made the complaint a “moving target,
” is trying to “salvage a lost cause by untimely
suggesting new theories of recovery, ” is trying to
present more theories to avoid dismissal, or is knowingly
waiting until the eve of trial to assert new claims.
Id. at 1206 (citations omitted). Other common
reasons for finding undue delay include lack of adequate
explanation for the delay or when a moving party knows or
should have known of the facts in the proposed amendment but
did not include them in the original complaint or any prior
attempts to amend. Id. (citations omitted). It is
well-settled that untimeliness alone is a sufficient reason
to deny leave to amend when the party filing the motion has
no adequate explanation for the delay. Woolsey v. Marion
Labs., Inc., 934 F.2d 1452, 1462 (10th Cir. 1991).
Jarboe premises the delay in seeking amendment with respect
to the affirmative defense and the two new counterclaims
primarily on a separate federal case still pending in
California. See generally Motion [#64]. On April 19,
2018, Defendant Jarboe filed a qui tam False Claims Act
(“FCA”) case against Plaintiff in the Central
District of California (the “FCA Action”).
Id. at 3. In part therein, Defendant Jarboe has
alleged that Plaintiff “falsely certified that it
complies with all HUD and FHA requirements.”
Id. Plaintiff asserts that “[t]he FCA action
is relevant to the present motion because one requirement for
bringing a qui tam false claims act case is that the case
must be filed under seal, be kept confidential, and cannot be
served on the Defendant (here, Cherry Creek) until the court
so orders.” Id. (citing 31 U.S.C. §
3730). Thus, at the time Defendant Jarboe filed his initial
Answer [#15] here on March 23, 2018, he worded the relevant
affirmative defense vaguely so as not to violate 31 U.S.C.
§ 3730 in connection with the then-forthcoming FCA
Action filed on April 19, 2018. Id. Ultimately, the
United States Attorney decided against intervening in the FCA
Action. Motion [#64] at 3. The court in the FCA
Action then ordered the claims unsealed on October 17, 2018.
Decl. of Avanzado [#70] ¶ 12. However, due to
an apparent procedural misstep at the court, the case was not
actually unsealed until December 20, 2018. Id.
¶¶ 15-18. Plaintiff here (the defendant there) was
served with the FCA Action on December 21, 2018.
Motion [#64] at 3.
in the present action prior to consolidation, on November 21,
2018, Defendant Jarboe served a first set of written
discovery on Plaintiff, in which, in part, Defendant Jarboe
“sought details relevant to [his] already-pled
affirmative defense that Cherry Creek violated federal
regulations and sought specific discovery on Cherry
Creek's HUD/FHA violations.” Decl. of
Avanzado [#70] ¶ 14. On November 29, 2018, the
Court denied Defendant Jarboe's motion to transfer the
case to the Central District of California. Order
[#59]. On February 1, 2019, Defendant Jarboe's other
non-FCA California case ...