amended answer adding a counterclaim and naming as counterdefendants The Cooper Companies, Cooper Life Sciences, Inc. (collectively referred to by Wausau as "the Cooper entities"), Sobrato Development Companies ("Sobrato"), and Transcontinental Insurance Company. The proposed counterclaim seeks a judicial declaration that Wausau has no obligation under various insurance policies to defend or indemnify the additional counterdefendants in connection with claims against the counterdefendants for environmental contamination at three additional sites in Mountain View, California, Cedar Knolls, New Jersey, and St. Croix, Virgin Islands ("the Sobrato and Berlex claims").
Courts have been quite liberal in granting leave to amend under Fed.R.Civ.P. 15(a) and 13(f). Fed.R.Civ.P. 15(a) provides that leave to amend is to "be freely given when justice so requires." Leave to amend should be denied only when there is a showing of undue delay, bad faith, futility of amendment, or prejudice to the opposing party. Hurn v. Retirement Fund Trust of Plumbing, Heating & Piping Industry of So. Calif., 648 F.2d 1252, 1254 (9th Cir. 1981). "'Where there is lack of prejudice to the opposing party and the amended complaint is obviously not frivolous, or made as a dilatory maneuver in bad faith, it is an abuse of discretion to deny such a motion.'" Id. (citation omitted). The decided cases reveal that a federal court will balance these several factors in deciding whether leave to amend should be granted. See, e.g., Wright and Miller, Federal Practice and Procedure § 1487 (1990). The facts of each case must be examined to determine if the threat of prejudice is sufficient to justify denying leave to amend. Id.
Cooper fails to show undue delay, bad faith, futility of amendment, or prejudice. Rather, the primary basis of its opposition to the amendment is that the new parties and claims are factually and legally distinct from the matters before the court, and Wausau has not met its burden to demonstrate a proper counterclaim and joinder of parties. For the reasons discussed below, the court finds these arguments meritless.
Wausau alleges that after it filed its answer, it became aware that the Cooper entities and Sobrato had made claims for defense and indemnity under their policies issued by Wausau in reference to the Sobrato and Berlex claims. In particular, Wausau avers that in connection with the Sobrato and Berlex actions, claims were made by the counterdefendants on Wausau policies No. 0624 00 039748 and No. 0625 00 039748, as to which Cooper Development, Cooper Companies, and Cooper Life Sciences, Inc., or their predecessors in interest, are named as additional insureds. These two policies are combination casualty policies and were issued to Cooper Laboratories, Inc., the alleged parent company to the predecessors of Cooper Development, Cooper Life Sciences, Inc., and Cooper Companies. The limits of liability insurance under each policy are $ 1,000,000 each occurrence with a $ 1,000,000 to $ 2,000,000 annual aggregate.
Cooper argues that the counterclaim involves unrelated sites, facts, legal issues, and parties. It fails to note, however, that all claims involve two of the same Wausau policies (the "transaction" in this case), and that those policies name the Cooper entities as additional insureds. For this reason, the legal issues involved are related, since recovery on any one of the claims could exhaust the policy limits and affect the amount available under the policy to the remaining counterdefendants. Cooper Development has an "actual controversy," as required by 28 U.S.C. § 2201, with Wausau in these claims as to whether it recovers first, before the policy limits are exhausted by another claim.
Cooper also argues that Transcontinental cannot be added as a counterdefendant because such an addition would force the court to realign Transcontinental with Wasau and thus would destroy diversity.
While such a realignment might possibly occur pursuant to a motion in the future, such a possibility does not preclude the court from allowing Wausau to add Transcontinental as a counterdefendant. If diversity is destroyed, the parties may still pursue their claims in state court.
For the foregoing reasons, the court finds that Wausau's motion for leave to amend its answer should be GRANTED.
In accordance with the foregoing, it is hereby ORDERED that Cooper's motions for partial summary judgment are DENIED, and Wausau's motion to file an amended answer is GRANTED. A further status conference is set for June 28, 1991 at 10:00 a.m. in Courtroom One.
IT IS SO ORDERED.