MAE A. D'AGOSTINO, District Judge.
Plaintiff commenced this action on November 5, 2013, seeking damages in connection with a construction project in which Plaintiff performed work as a subcontractor of Varish Construction, Inc. (together with owner/principal, Tom Varish) on property owned at the time by AVA Realty Ithaca, LLC (together with AVA Development LLC and Ajesh Patel, collectively "AVA"). See Dkt. No. 1. In a July 24, 2015 Memorandum-Decision and Order, the Court granted in part and denied in part AVA's motion for judgment on pleadings and granted Plaintiff's cross motion for leave to file a second amended verified complaint. See Dkt. No. 68.
On August 4, 2015, Plaintiff filed its second amended complaint. See Dkt. No. 69. In the second amended complaint, Plaintiff added Wilmington Savings Fund Society, FSB ("WSFS") as a Defendant in this action. See id. Currently before the Court is Defendant WSFS's motion to dismiss the claims asserted against it in the second amended complaint. See Dkt. No. 82.
Thereafter, Plaintiff sought leave to file a third amended complaint. See Dkt. No. 115. On December 7, 2016, Magistrate Judge Peebles heard oral argument in connection with the motion. See Dkt. No. 129. At the close of argument, Magistrate Judge Peebles issued an oral decision denying Plaintiff's motion to amend and to join a party. See id.; see also Dkt. No. 128. Plaintiff has since appealed Magistrate Judge Peebles' December 7, 2016 decision. See Dkt. No. 130.
Currently before the Court is Plaintiff's appeal of Magistrate Judge Peebles' December 7, 2016 order and Plaintiff's motions for default judgment against Defendants Tom Varish and 359 Hospitality. See Dkt. Nos. 117-118, 130.
This action arises out of the construction of a Fairfield Inn & Suites hotel in Ithaca, New York (the "Project"). Defendant AVA was the owner of the Project. AVA hired Varish as its general contractor which, in turn, hired Mid Atlantic to construct the building frame and shell.
In 2012, Defendant Varish, as general contractor, entered into a contract with Defendants AVA and AVA Development, as owner, for the construction of the Fairfield Inn & Suites. See Dkt. No. 69 at ¶ 17. In furtherance of the Project, in September 2012, Varish hired Plaintiff Mid Atlantic pursuant to a written subcontract, wherein Mid Atlantic agreed to furnish and install certain framing and/or carpentry work at the Property for the agreed upon subcontract price of $721,000.00 (the "Subcontract"). See id. at ¶ 18. According to Mid Atlantic, during the course of the Project, Varish directed Mid Atlantic to perform extra work in the amount of $11,740.00, thereby adjusting the contract price upward to $732,740.00. See id. at ¶ 19. Mid Atlantic contends that it "duly performed its agreement with Varish and substantially completed all of the work required of it under the subcontract, including the extra work, no part of which has been paid except the sum of $115,000.00, thereby leaving a balance due and owing Mid Atlantic in the sum of $617,740.00." Id. at ¶ 20; see also Dkt. No. 117-5 at ¶¶ 3-7.
The standard of review employed by this Court when considering appeals from the decision of a magistrate judge depends upon whether the challenged order is dispositive or nondispositive. Compare Fed. R. Civ. P. 72(a) (providing that "clearly erroneous" or "contrary to law" standard applies to review of nondispositive determinations by a magistrate judge), with Fed. R. Civ. P. 72(b) (providing that a magistrate judge's determination on dispositive matters subject to de novo review); see also 28 U.S.C. § 636(b)(1)(A) & (C). Courts in the Second Circuit have generally considered motions to amend a complaint as nondispositive. See Fielding v. Tolkaksen, 510 F.3d 175, 178 (2d Cir. 2007) (noting in dicta that a motion to amend is nondispositive that may be referred to a magistrate judge without the parties' consent and that a magistrate judge's order on such a motion is to be set aside only if it is clearly erroneous or contrary to law); Point 4 Data Corp. v. Tri-State Surgical Supply & Equipment, LTD., No. 11 CV 726, 2012 WL 3306612, *1 (E.D.N.Y. Aug. 13, 2012) (collecting cases and noting that cases treating motions to amend as dispositive predated Fielding); Miles v. Levac, No. 11-cv-671, 2014 WL 1338808, *1 n.2 (W.D.N.Y. Mar. 31, 2014).
In its appeal, Plaintiff contends that Magistrate Judge Peebles order is clearly erroneous or contrary to law in the following respects:
Dkt. No. 130-1 at 7.
Initially, Plaintiff argues that Magistrate Judge Peebles failed to follow Rule 15(a)(2)'s standard requiring courts to "freely give leave [to amend] when justice so requires," where, as here, there is no prejudice or bad faith. Dkt. No. 130-1 at 8.
Leave to amend should be "freely give[n] . . . when justice so requires." Fed. R. Civ. P. 15(a)(2). Notwithstanding this lenient standard, the decision to grant or deny leave to amend is within the discretion of the district court. See Foman v. Davis, 371 U.S. 178, 182 (1962). A district court may properly deny leave to amend for "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 by virtue of allowance of the amendment, futility of amendment, etc." Id.; see also SCS Commc'ns, Inc. v. Herrick Co., Inc., 360 F.3d 329, 345 (2d Cir. 2004) ("[U]nder Fed. R. Civ. P. 15(a), leave to amend a pleading may only be given when factors such as undue delay or undue prejudice to the opposing party are absent"). However, "mere delay is not, of itself, sufficient to justify denial of a Rule 15(a) motion." Parker v. Columbia Pictures Indus., 204 F.3d 326, 339 (2d Cir. 2000).
"Although Rule 15(a) governs the amendment of pleadings, Rule 16(b) also may limit the ability of a party to amend a pleading if the deadline specified in the scheduling order for amendment of the pleadings has passed." Kassner v. 2nd Ave. Delicatessen Inc., 496 F.3d 229, 243 (2d Cir. 2007). Rule 16(b)(4) provides that "[a] schedule may be modified only for good cause [.]" The Second Circuit has held that, where a district court has set a deadline for amending pleadings, "the Rule 16(b) `good cause' standard, rather than the more liberal standard of Rule 15(a), governs a motion to amend filed after the deadline[.]" Parker, 204 F.3d at 340.
"A finding of good cause depends on the diligence of the moving party." Grochowski v. Phoenix Constr., 318 F.3d 80, 86 (2d Cir. 2003) (affirming denial of leave to amend where the plaintiffs delayed more than one year, discovery had been completed and a summary judgment motion was pending). "[T]he good cause standard is not satisfied when the proposed amendment rests on information `that the party knew, or should have known, in advance of the deadline.'" Enzymotec Ltd. v. NBTY, Inc., 754 F.Supp.2d 527, 536 (E.D.N.Y. 2010) (citation omitted) (finding that the plaintiff acted with diligence in seeking leave to amend within two months of discovering the facts underlying its new cause of action); but see Jackson v. Roslyn Bd. of Educ., 596 F.Supp.2d 581, 586 (E.D.N.Y. 2009) (finding that the plaintiff's delay of nearly five months to evince "a lack of diligence").
Although the moving party's diligence is a district court's "primary consideration" in its Rule 16(b) good cause inquiry, a court "also may consider other relevant factors including, in particular, whether allowing the amendment of the pleading at this stage of the litigation will prejudice defendants." Kassner, 496 F.3d at 244. An amendment is prejudicial to the non-moving party if it "would `require the opponent to expend significant additional resources to conduct discovery and prepare for trial' or `significantly delay the resolution of the dispute.'" Ruotolo v. City of New York, 514 F.3d 184, 192 (2d Cir. 2008) (quotation omitted).
In the present matter, Magistrate Judge Peebles held that, although the standard under Rule 16 applies to Plaintiff's motion, Plaintiff failed to satisfy even the less rigorous standard under Rule 15. See Dkt. No. 129 at 19-21. Specifically, Magistrate Judge Peebles ruled as follows:
Id.
Having reviewed Magistrate Judge Peebles' oral decision, the Court finds that he correctly determined that Plaintiff failed to demonstrate good cause. Plaintiff's counsel admitted during oral argument that they first learned about the existence of the lien discharge bond in August or September of 2015. See Dkt. No. 129 at 10. Despite this knowledge, Plaintiff did not file its motion seeking leave to file a third amended complaint until October 31, 2016. Such a lengthy delay does not demonstrate diligence by Plaintiff.
Moreover, on October 23, 2015, a telephone conference was held before Magistrate Judge Peebles to discuss the status of the case. In the text minute entry, it states that Plaintiff's counsel expressed his intent to amend the complaint to, among other things, add the surety as a party in this action and that Plaintiff's counsel anticipates filing the proposed amended complaint "within the next week to 10 days." As noted above, Plaintiff did not file its motion for leave to amend until October 31, 2016, some 374 days after Plaintiff first indicated its intention to add the surety as a party to this action. Plaintiff fails to provide any sufficient explanation for its delay.
Additionally, the record also makes clear that the nonmoving parties would be prejudiced if the Court were to permit Plaintiff to file a third amended complaint and add a new defendant. As Magistrate Judge Peebles noted, this case is nearly four-years old and amending the complaint at this stage will undoubtedly lead to another motion to dismiss and additional discovery by the newly added party. Such a course of action would undoubtedly result in months, if not years of delay in reaching a final resolution of this matter. Requiring the nonmoving parties to expend considerable additional resources and the significant delay would be unduly prejudicial. See Ruotolo, 514 F.3d at 192 (quotation omitted).
Finally, the Court finds that, even if the more liberal standard under Rule 15 applied to the present matter, Magistrate Judge Peebles still correctly determined that Plaintiff's motion should be denied. As discussed, Plaintiff's considerable delay after its discovery of the lien discharge bond and the prejudice that the nonmoving parties would suffer warrant denying Plaintiff's motion.
Based on the foregoing, the Court finds that Magistrate Judge Peebles did not clearly err in denying Plaintiff's motion for leave to file a third amended complaint.
"Generally, `Federal Rule of Civil Procedure 55 provides a two-step process that the Court must follow before it may enter a default judgment against a defendant.'" United States v. Carpineta, No. 3:14-CV-0517, 2015 WL 500815, *1 (N.D.N.Y. Feb. 5, 2015) (quotation omitted). "`First, under Rule 55(a), when a party fails to "plead or otherwise defend . . . the clerk must enter the party's default."'" Id. (quotation omitted); Fed. R. Civ. P. 55(a). "Second, under Fed. R. Civ. P. 55(b)(1), `[u]pon request of the plaintiff, a default judgment may be entered by the clerk when (1) the plaintiff's claim against the defendant is for a sum certain, (2) the plaintiff has submitted an affidavit of the amount due, and (3) the defendant has been defaulted for failure to appear.'" Id.
When entry by the clerk is inappropriate, "`pursuant to Rule 55(b)(2), the party seeking default is required to present its application for entry of judgment to the court.'" United States v. Simmons, No. 5:10-CV-1272, 2008 WL 685498, *2 (N.D.N.Y. Mar. 2, 2012) (quotation omitted). "`Notice of the application must be sent to the defaulting party so that it has an opportunity to show cause why the court should not enter a default judgment.'" Id. (quotation omitted); see also Fed. R. Civ. P. 55(b)(2).
When seeking a default judgment, the Local Rules require the party to submit an affidavit attesting to the following:
N.D.N.Y. L.R. 55.2(a).
"When a default is entered, the defendant is deemed to have admitted all of the well-pleaded factual allegations in the complaint pertaining to liability." Bravado Int'l Group Merch. Servs. v. Ninna, Inc., 655 F.Supp.2d 177, 188 (E.D.N.Y. 2009) (citing Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992)). "While a default judgment constitutes an admission of liability, the quantum of damages remains to be established by proof unless the amount is liquidated or susceptible of mathematical computation." Flaks v. Koegel, 504 F.2d 702, 707 (2d Cir. 1974) (citations omitted); see also Bravado Int'l, 655 F. Supp. 2d at 189-90 (citation omitted). "[E]ven upon default, a court may not rubber-stamp the non-defaulting party's damages calculation, but rather must ensure that there is a basis for the damages that are sought." Overcash v. United Abstract Group, Inc., 549 F.Supp.2d 193, 196 (N.D.N.Y. 2008) (citing Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999)). "The burden is on the plaintiff to establish its entitlement to recovery." Bravado Int'l, 655 F. Supp. 2d at 189 (citing Greyhound Exhibitgroup, Inc., 973 F.2d at 158). "While `the court must ensure that there is a basis for the damages specified in a default judgment, it may, but need not, make the determination through a hearing.'" Id. at 190 (quotation omitted).
As to Defendant Tom Varish, Plaintiff has established through its complaint and moving papers that it is entitled to judgment in its favor. According to the second amended complaint, Plaintiff was hired by Varish Construction, Inc. to perform wood framing for the Project, for the base contract price of $721,000.00, which was later increased to $732,740.00. See Dkt. No. 69 at ¶¶ 18-19. Defendant Varish was a direct, officer and/or shareholder of Varish Construction at all relevant times.
On March 28, 28, 2013, Plaintiff filed a mechanic's lien on the property where the Project was located in the amount of $600,960.00 outstanding and due Plaintiff (the "Mechanic's Lien"). See Dkt. No. 117-1 at ¶ 6. According to the Affidavit of Plaintiff's Regional General Manager of Operations Gerald Simmer, sworn to on July 26, 2013, submitted in support of Plaintiff's motion to dismiss the petition of AVA Realty for summary discharge of Plaintiff's mechanic's lien, Plaintiff performed all of the work under the contract with the exception of minor punchlist work, as well as extra work. See id. at ¶ 7; Dkt. No. 117-5. Further, Plaintiff contends that the total value of work performed was $732,740.00, but Defendant Varish paid Plaintiff only $115,000.00. See id. As such, Plaintiff claims that the outstanding contract balance owed to it is $617,740.00. Additionally, Plaintiff alleges that the "total amount invoiced by [P]laintiff was $715,960.00, of which Varish paid [P]laintiff only $115,000.00, leaving a balance due and owing to [P]laintiff of $600,960.00. See id.; see also Dkt. No. 117-5 at ¶ 4.
The allegations in the second amended complaint are sufficient to establish Defendant Varish's liability as a matter of law.
Additionally, the Court finds that Defendant Varish has not answered or otherwise responded to the summons and complaint and the time to do so has since long expired. Further, Plaintiff personally served Defendant Varish with the summons, complaint and amended complaint at his dwelling. See Dkt. No. 20.
In addition to seeking default judgment as to liability against Defendant Varish, Plaintiff argues that "there is no just reason to delay holding an inquest to determine damages to be assessed against defendant Tom Varish." Dkt. No. 117-1 at ¶ 26. The Court disagrees. Courts regularly defer the damages inquest when default is entered against some but not all of the named defendants. See, e.g., Pacific M. Intern. Corp. v. Raman Intern. Gems, Ltd., 888 F.Supp.2d 385, 399-400 (S.D.N.Y. 2012); Miele v. Greyling, No. 94 Civ. 3674, 1995 WL 217554, *2-*3 (S.D.N.Y. Apr. 13, 1995). In addition to the desire to avoid inconsistent judgment, deferring the damages inquest pursuant to Rule 55(b)(2) with the damages aspect of the trial against the non-defaulting party is generally in the interests of judicial economy. See id. (quoting 6 Moore's Federal Practice, ¶ 55-06 at 55 n.22). Accordingly, the Court denies Plaintiff's request for a damages inquest at this time.
Defendant 359 Hospitality is a limited liability company organized and existing under the laws of the State of New York, with its principal place of business at 359 Elmira Road, Ithaca, New York 14850. See Dkt. No. 118-1 at ¶ 5. Defendant 359 Hospitality is or was the fee owner of the Property, having an ownership interest in the Property by virtue of a deed made by AVA Realty as grantor, and 359 Hospitality as grantee, made on August 22, 2013, and recorded on September 30, 2013, in the Office of the Clerk of Tompkins County, New York. See id.
On March 28, 2013, Plaintiff filed a mechanic's lien on the property where the Project was located, i.e., upon certain real property and premises situated at 359 Elmira Road, Ithaca, New York and which is known as Tax Parcel Nos.: 129.-1-8 and 129.-1-9 on the Land and Tax Map of the City of Ithaca, Tompkins County, New York, and a portion of Tax Parcel Nos.: 129.-1-10.2, 129.-1-1-1, 129.-1-6.2 and 129.-1-7.2 on the Land and Tax Map of the City of Ithaca, Tompkins County, New York (the "Property") in the amount of $600,960.00 outstanding and due Plaintiff (the "Mechanic's Lien"). See id. at ¶ 6; Dkt. No. 69 at ¶¶ 89-100. As discussed above, the second amended complaint provides that Plaintiff provided materials and services for the improvement of the Property, which Plaintiff alleges are valued at $732,740.00. See Dkt. No. 69 at ¶ 90. To date, only $115,000.00 has been paid, leaving an mount due and owing to Plaintiff of $617,740.00, plus interest. See id. at ¶ 91.
Plaintiff duly filed a Notice of Mechanic's Lien in the Office of the County Clerk, Tompkins County, against the Property in the sum of $600,960.00. See id. at ¶ 92. Copies of the Mechanic's Lien were served upon AVA Realty Ithaca, LLC, as well as Varish Construction by certified mail and first class mail. See id. at ¶ 93. The Mechanic's Lien contains all of the information required by the relevant sections of the Lien Law of the State of New York. See id. at ¶ 94. According to the Second Amended Complaint, to date, Defendants have not paid $600,960.00 which is currently due and owing to Plaintiff and the Mechanic's Lien has not been paid, discharged, satisfied or cancelled. See id. at ¶ 95. By reason of the foregoing, Plaintiff "Mid Atlantic demands judgment declaring that it has a just and valid lien upon the Property in the amount of $600,960.00 with interest from March 1, 2013, and that the equities of all defendants named in this action, and all persons claiming an interest in the Property be foreclosed of all equity or redemption or other interest in the Property; that the Property be sold as provided by law, and that, from the proceeds of such sale, Mid Atlantic be paid the amount of $600,960.00, plus interest thereon from March 1, 2013, and have judgment against defendant, Barish, AVA and 359 Hospitality for any deficiency." Id. at ¶ 100. Having reviewed the well-pleaded allegations in the second amended complaint, the Court finds that Plaintiff has sufficiently alleged Defendant 359 Hospitality's liability as to the ninth cause of action. See Macquesten Gen. Contracting, Inc. v. HCE, Inc., 128 Fed. Appx. 782, 787 (2d Cir. 2005).
Further, the Court finds that Defendant 359 Hospitality has not answered or otherwise responded to the summons and complaint and the time to do so has since long expired. Additionally, since Defendant 359 Hospitality is a domestic limited liability company, Plaintiff properly effected service by personally serving the New York Secretary of State on November 19, 2013, with duplicate copies of the summons, complaint, amended complaint, and other case initiating documents, together with the statutory fee. See N.Y. Limited Liability Law § 303(a); Dkt. No. 15. Moreover, the affidavit in support of the motion for default judgment attests that Defendant 359 Hospitality is not an infant, not in military service, and not an incompetent person. See Dkt. No. 118-1 at ¶ 16. Finally, the Clerk of the Court entered default on October 13, 2016. See Dkt. No. 108. As such, the Court finds that Plaintiff has established that it is entitled to judgment as to liability at this point. Although it will enter judgment as to liability against Defendant 359 Hospitality as to the ninth cause of action, the Court finds that an assessment of damages is inappropriate at this time.
Accordingly, the Court grants Plaintiff's motion for default judgment as to liability against Defendant 359 Hospitality as to the ninth cause of action.
After carefully reviewing the entire record in this matter, the parties' submissions and the applicable law, and for the reasons set forth above, the Court hereby
