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Waynesborough Country Club of Chester County v. Diedrich Niles Bolton Architects

May 17, 2011

WAYNESBOROUGH COUNTRY CLUB OF CHESTER COUNTY PLAINTIFF,
v.
DIEDRICH NILES BOLTON ARCHITECTS, INC., NILES BOLTON ASSOCIATES, INC., A. RAY DOUGLAS, JR.,
DEFENDANTS AND DIEDRICH NILES BOLTON ARCHITECTS,
INC., NILES BOLTON ASSOCIATES, INC., A. RAY DOUGLAS, JR.,
THIRD-PARTY PLAINTIFFS
v.
EHRET CONSTRUCTION COMPANY, INC., THIRD-PARTY DEFENDANT.



The opinion of the court was delivered by: Hon. Gene E.K. Pratter U.S. District Court Judge

MEMORANDUM

Introduction

Construction projects, including the one at issue here, sometimes go awry. When they do, the various stakeholders point the fingers of liability all around. The same is true here. The project that is the root of this dispute concerns a major renovation to the clubhouse at Waynesborough Country Club ("Waynesborough"). Waynesborough has sued the project architect, Diedrich Niles Bolton Architects, Niles Bolton Associates and A. Ray Douglas, Jr. (collectively "Architect"), alleging professional negligence and breach of contract. Waynesborough contends that faults in the design and negligent oversight of the construction process by the Architect resulted in substantial problems with and ongoing damage to the Waynesborough Clubhouse facility (the "Property") following completion of construction.

Architect, in turn, filed a third party complaint against the general contractor on the project, Ehret Construction, Inc. ("Ehret"), claiming that any problems with the facility were a result of Ehret's construction services. This third party complaint was filed on March 30, 2007. Thus, the Architect seeks contribution and indemnity to the extent that the Architect is found liable to Waynesborough. To assert these claims, the Architect relies upon rights it contends flow from the construction contract between Waynesborough and Ehret, and upon common law rights of indemnity and contribution. Ehret's motion to dismiss the third-party complaint was granted in part and denied in part.*fn1

All parties took discovery from March 2007 to April 2009, and thereafter both the Architect and Waynesborough produced expert reports in which the experts largely attribute the defects in the Property to the actions and decisions of Ehret during construction. These reports are dated September 21, 2009, October 8, 2009, and April 21, 2010. Waynesborough contends that discovery in this matter revealed, according to expert reports produced as long as seventeen months ago, that significant construction deficiencies were attributable to Ehret. Accordingly, Waynesborough now seeks to amend its complaint at this extremely late juncture -- after the close of expert discovery -- "to assert claims against Ehret for: (1) breach of contract; (2) negligence; (3) gross negligence and (4) fraud." Pl.'s Br. at 3, Doc. No. 83. The Architect supports and Ehret objects to the proposed amendment.

As discussed in detail below, because a valid arbitration agreement exists between Waynesborough and Ehret and encompasses the proposed new claims within its scope, the proposed amendment to the Complaint would be futile. Therefore, the Court denies Waynesborough's Motion.

Factual and Procedural Background

Well before the issuance of the expert reports, Waynesborough had already experienced substantial problems with the Property. As a result of significant leaks that developed at the clubhouse after the June 2004 completion of construction, Waynesborough retained TBS Services ("TBS") to identify and evaluate the source of the leaks and to recommend a solution to the water infiltration problem. As a result of TBS's findings, Waynesborough and Ehret entered an agreement whereby Ehret would perform remedial work under the supervision of TBS. This agreement was executed in June 2007, and in it the parties agreed that "Ehret shall prepare and present, and [Waynesborough] shall execute, a change order under the Construction Agreement to perform certain work[.]" 2007 Agreement, attached as Ex. C to Pl.'s Br. (emphasis added). The Agreement further provides that "Ehret and [Waynesborough] covenant and agree that any and all claims each may have against the other, arising out of or related to the Construction Agreement, including without limitation the Change Order, shall be preserved and maintained through both the completion of work pursuant to the Change Order and any legal proceedings between [Waynesborough] and [the Architect]." Id. (emphasis added). The agreement also provides that "[t]he limitation period concerning any and all claims which Ehret and/or [Waynesborough] may have against each other shall be tolled from the date of this Agreement until the resolution, by litigation, settlement, agreement or otherwise, of [Waynesborough]'s claims against [the Architect], or any such earlier date as to which the parties may agree." Id.

Although Ehret executed the corrective work, Waynesborough continued to experience substantial leaks at the facility. Waynesborough retained various professionals to re-examine the facility. These inspections revealed substantially more problems than had been discovered originally. In the interim, Waynesborough filed the instant suit against the Architect, alleging that the Architect was liable for the flaws with the facility which resulted from professional negligence and breach of contract. As the reports from Waynesborough's experts came in, however, Waynesborough concluded that Ehret, in fact, was "grossly negligent in constructing the low roof joists and the veneer walls" and that Ehret must have known or reasonably should have known "that this work was improperly constructed and that they presented significant safety issues for [Waynesborough] and its patrons."

Due to the above-described conclusions, Waynesborough seeks to add Ehret as a defendant in its proposed Amended Complaint. See Proposed Am. Compl., attached as Ex. A to Pl.'s Br., ¶ 5. In Counts III-VI of the proposed Amended Complaint, Waynesborough alleges that Ehret is liable for breach of contract due to faulty construction; for unjust enrichment -- in the alternative to breach -- on account of having been paid in full when it failed to perform its obligations under the contract; for negligence in its performance of the construction work; for gross negligence in the anchoring of the veneer walls and in its departure from the design drawings for the roof joists over the kitchen area; and, finally, for fraud in its representations regarding the proper construction of the roof joists and veneer walls. Id. ¶¶ 40-86.

Legal Standard

Granting leave to amend is within the discretion of the district court. See Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321 (1971). Federal Rule of Civil Procedure 15(a) provides that the Court should "freely give leave" for a party to file an amended pleading "when justice so requires." Fed. R. Civ. P. 15(a)(2). The "burden is generally on the non-moving party to demonstrate why leave to amend should not be granted." Rizzo v. PPL Service Corp., No. 03-5779, 2005 WL 1397217, at *3 (E.D. Pa. June 10, 2005).

Notwithstanding the aura of indulgence, the Court may deny a request to amend a pleading when the following circumstances exist: "'(1) the moving party has demonstrated undue delay, bad faith, or dilatory motives, (2) the amendment would be futile, or (3) the amendment would prejudice the other part[ies].'" Juan v. Sanchez, 339 F. App'x 182, 187 (3d Cir. 2009) (quoting Lake v. Arnold, 232 F.3d 360, 373 (3d Cir. 2000)). Delay alone typically is an insufficient basis on which to deny a plaintiff's motion to amend a complaint. USX Corp. v. Barnhart, 395 F.3d 161, 167 (3d Cir. 2004). However, if "delay . . . [has] become 'undue,' placing an unwarranted burden on the court, or . . . [has] become 'prejudicial,' placing an unfair burden on the opposing party," delay may be sufficient to deny a motion to amend. Adams v. Gould, Inc., 739 F.2d 858, 868 (3d Cir. 1984).

To determine whether an amendment would be futile, the Court applies the same analysis that it would invoke in the context of a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), see In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1420 (3d Cir. 1997), i.e., "[a]n amendment of the complaint is futile . . . if the amended complaint cannot withstand a . . . motion to dismiss," Riley v. Taylor, 62 F.3d 86, 92 (3d Cir. 1995) (permitting amendment where new claims "may have arguable merit"). Where, as here, the proposed parties have signed an agreement to arbitrate at least some of their disputes, the Court must consider whether the additional claims are arbitrable to determine whether amending the complaint to add that party and/or otherwise arbitrable claims would be futile. See Smith v. The Equitable, 209 F.3d 268, 272 (3d Cir. 2000) (interpreting the Federal Arbitration Act and stating, "when 'all the claims involved in an action are arbitrable, a court may dismiss the action instead of staying it'") (citations omitted); see also Mills v. Marjam Supply Co., Inc., 08-5726, 2009 WL 235593 (D.N.J. Jan. 30, 2009) (denying a motion to amend where "any possible claim Plaintiff could plead would be subject to ...


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