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Scopia Mortgage Corp. v. Greentree Mortgage Co.

November 17, 1998

SCOPIA MORTGAGE CORP. AND FEDERAL DEPOSIT INSURANCE CORP., AS RECEIVER OF SECURITY FEDERAL SAVINGS BANK, ETC.,
PLAINTIFFS/COUNTERCLAIM DEFENDANTS,
V.
GREENTREE MORTGAGE COMPANY, L.P.,
DEFENDANT/COUNTERCLAIMANT,



The opinion of the court was delivered by: Jerome B. Simandle U.S. District Judge

OPINION

SIMANDLE, District Judge:

Following extensive dispositive motion practice and motions in limine, plaintiffs/counterclaim defendants have filed a motion which seeks to amend the Joint Final Pretrial Order (filed 14 months ago) by enlarging the areas of expert opinion testimony by plaintiffs' expert, David Lawrence, who was deposed more than a year ago on his theories of liability. Lawrence's new proposed area of expert opinion testimony would extend to the issue of contractual damages upon the defendant's counterclaim. This motion calls upon the court to determine whether plaintiffs have demonstrated that this amendment is necessary to prevent manifest injustice under Rule 16(e), Fed. R. Civ. P.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

This case involves a commercial dispute between contracting parties concerning alleged mistakes and fraudulent representations in an agreement to purchase the assets of a company in the business of originating, servicing, and selling home mortgage loans on a volume basis. This action was filed on March 14, 1994. It grew out of the purchase of most of the assets of plaintiff Greentree Mortgage Corporation (now known as Scopia Mortgage, but to which I will refer as "GMC" for the purposes of this Opinion) by defendant Greentree Mortgage Company, L.P. (known as "LP" in this Opinion) pursuant to a Restated Asset Purchase Agreement. The historical facts of this case are set out at length in this Court's opinions filed September 22, 1994; February 10, 1995; August 15, 1995; and June 25, 1998, and they do not need repeating here. However, I will lay out the relevant aspects of the procedural history.

After GMC filed the complaint in this case, defendant LP filed counterclaims arising from the Purchase Agreement, alleging that plaintiffs fraudulently misrepresented the nature of GMC's New Jersey State tax liability, calling it a deferred tax liability instead of taxes past due, which allegedly constituted a breach of the Purchase Agreement and caused defendant to pay an inflated purchase price for GMC's assets in the amount of $1,543,923. LP counterclaimed for fraud, negligent misrepresentation, misrepresentation, and breach of contract. After dismissal of plaintiffs' claims in this 1994 action, only LP's counterclaims remained.

In a Final Scheduling Order dated January 27, 1997, this Court ordered that all pretrial factual discovery must be concluded by April 30, 1997. (See Isaacs Cert. Ex. C.) On February 25, 1997, the Court directed that LP's expert report should be served by May 30, 1997, that GMC's expert's report should be served by June 30, 1997, and that depositions of all experts should be concluded by July 31, 1997. Magistrate Judge Joel Rosen had extended discovery numerous times and, in a May 15, 1997 Order responding to another extension request by GMC, Judge Rosen stated that "discovery is . . . closed." At the conclusion of discovery, plaintiffs submitted the expert report of David Lawrence dated June 24, 1997. (Gilson Cert. Ex. B, p. 1.) That report, responding to defendant LP's expert report submitted by Michael Dinkes on May 30, 1997, principally addressed the question of whether GMC had properly deferred its New Jersey tax liability in 1990. LP's counsel notes that liability was the only issue addressed by Mr. Dinkes. The Lawrence report likewise did not address damages. Both experts were deposed in July of 1997.

Throughout July and August of 1997, the parties and Judge Rosen worked on the Joint Final Pre-trial Order, which was ultimately entered on September 4, 1997. The 75 page order listed in detail the facts and witnesses which the parties intended to call, including expert witnesses, as well as summaries of that testimony. The plaintiffs stated in that Order their position that LP had suffered no damages as a result of the breach of warranty (Order at p. 38), but stated that they intended to call no witnesses in regard to damages. (Order at p. 48.)

The parties next filed summary judgment cross-motions, upon which oral argument was heard on November 19, 1997, together with numerous motions in limine. On June 25, 1998, this Court denied summary judgment to the plaintiffs on defendant's counterclaims but granted partial summary judgment to defendant LP on its breach of contract claim. I found that GMC had represented the tax liability as "deferred," when in fact GMC's tax liability was overdue as a matter of law, and that this representation was both incorrect as a matter of law and material to the Purchase Agreement, thus constituting a breach of the Agreement as a matter of law; however, I found that a genuine issue of material fact existed as to the issue of damages because it was not apparent that this breach caused harm to LP, and thus denied summary judgment on that issue. Also in June 25, 1998, a separate Memorandum Opinion and Order addressed the cross-motions in limine.

Thereafter, on September 2, 1998, plaintiff GMC, now known as Scopia Mortgage, substituted new counsel, Robert J. Gilson, into this case. *fn1 Four months after this Court issued the June 25 partial summary judgment Order, a year after the filing of the Joint Final Pre- trial Order, and 1 ½ years after the close of discovery, plaintiffs, on October 22, 1998, moved to amend the Joint Final Pre-trial Order in a number of ways. During the pendency of this motion, on October 29, 1998, this Court also heard argument and granted LP's October 14, 1998 application pursuant to Rule 42, Fed. R. Civ. P., to bifurcate the trial. *fn2 The trial date for the first phase, on the claim of LP for damages arising from GMC's breach of contract, was set for November 30, 1998. LP's other counterclaims pertaining to liability and damages for fraud, misrepresentation and punitive damages, will be heard, if at all, in a second trial. Also, LP's claim for liability and quantum of contractual attorney's fees will be heard by motion, if necessary, if LP has succeeded upon its claim for contractual damages in the first phase of trial. *fn3

During a telephone conference on November 9, 1998, I ruled from the bench on most of proposed amendments to the Joint Final pretrial order (see Order filed November 9, 1998) and reserved judgment on one proposed amendment in particular: the proposed new expert opinion by plaintiffs' expert David Lawrence. Mr. Lawrence has now supplemented his report in order to address the issue of damages as well. Plaintiffs seek leave to amend the joint final pretrial order in order to enlarge the scope of Mr. Lawrence's testimony to cover issues on which he has previously expressed no opinion, namely, opinions related to GMC's contention that LP suffered no damages because LP did not pay the overdue tax liability of GMC. For the following reasons, I will deny the plaintiffs' motion to amend the Joint Final Pretrial Order to include expert testimony at the November 30th trial, upon subjects that have been in this case for years, upon which neither side anticipated expert testimony until GMC's present belated submission after all discovery and motion practice had been concluded.

II. DISCUSSION OF LAW

A. Standard for the Motion

A motion to amend the final pretrial order is governed by Rule 16(e), Fed. R. ...


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