UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA
December 24, 2008
NAOKO ITO, ET AL., PLAINTIFFS,
BRIGHTON/SHAW, INC., ET AL., DEFENDANTS.
The opinion of the court was delivered by: Dennis L. Beck United States Magistrate Judge
ORDER GRANTING DEFENDANT CARSON'S MOTION TO WITHDRAW DEEMED ADMISSIONS
On November 5, 2008, Defendant Robert Carson ("Carson") filed the instant motion to withdraw deeded admissions. The matter was heard on December 12, 2008, before the Honorable Dennis L. Beck, United States Magistrate Judge. Thornton Davidson appeared on behalf of Carson. Mandy Jeffcoach appeared on behalf of Defendant Craig Davis ("Davis").
This action for declaratory and other relief to establish the ownership rights in 12 limited partnership units was filed on August 25, 2006. To date, most of the claims have been resolved by prior summary judgment motions and settlements. The only remaining claims are cross-claims between Carson and Davis. Carson has brought cross-claims against Davis for malpractice and breach of contract, and Davis has brought cross-claims against Carson for fraud-related causes of action.
Davis filed a motion for summary judgment on October 17, 2008, based on newly discovered facts from Carson's deemed admissions. The motion will be heard after the instant motion to withdraw the admissions is decided.
Carson filed this motion to the deemed admissions on November 5, 2008.
Davis filed his opposition on November 25, 2008. No reply has been filed.
The pre-trial conference is set for January 8, 2009, and trial is set for February 24, 2009.
Federal Rule of Civil Procedure 36(a) states that a matter is deemed admitted "unless, within 30 days after service of the request ... the party to whom the request is directed serves upon the party requesting the admission a written answer or objection addressed to the matter, signed by the party or by the party's attorney." Once admitted, the matter "is conclusively established unless the court on motion permits withdrawal or amendment of the admission" pursuant to Rule 36(b). Rule 36(b) provides, in pertinent part:
[T]he court may permit withdrawal or amendment if it would promote the presentation of the merits of the action and if the court is not persuaded that it would prejudice the requesting party in maintaining or defending the action on the merits.
Rule 36(b) is permissive, not mandatory, with respect to the withdrawal of admissions. Conlon v. United States, 474 F.3d 616, 621 (9th Cir. 2007). The rule permits the district court to exercise its discretion to grant relief from an admission made under Rule 36(a) only when (1) "the presentation of the merits of the action will be subserved," and (2) "the party who obtained the admission fails to satisfy the court that withdrawal or amendment will prejudice that party in maintaining the action or defense on the merits." Conlon, 474 F.3d at 621-622. Although these two factors are central to the analysis, in deciding whether to exercise its discretion when the moving party has met the two-pronged test of Rule 36(b), the district court may consider other factors, including whether the moving party can show good cause for the delay and whether the moving party appears to have a strong case on the merits. Conlon, 474 F.3d at 625.
Rule 36 "seeks to serve two important goals: truth-seeking in litigation and efficiency in dispensing justice." Conlon, 474 F.3d at 622; see Fed.R.Civ.P. 36(b) advisory committee note.
Thus, a district court must specifically consider both factors under the rule before deciding a motion to withdraw or amend admissions.
The first half of the test in Rule 36(b) is satisfied when upholding the admissions would practically eliminate any presentation of the merits of the case. Conlon, 474 F.3d at 622 (citing Hadley v. United States, 45 F.3d 1345, 1348 (9th Cir. 1995). As to the second prong, the party relying on the deemed admission has the burden of proving prejudice. Conlon, 474 F.3d at 622. The prejudice contemplated by Rule 36(b) is "not simply that the party who obtained the admission will now have to convince the factfinder of its truth. Rather, it relates to the difficulty a party may face in proving its case, e.g., caused by the unavailability of key witnesses, because of the sudden need to obtain evidence' with respect to the questions previously deemed admitted." Hadley, 45 F.3d at 1348.
When undertaking a prejudice inquiry under Rule 36(b), district courts should focus on the prejudice that the nonmoving party would suffer at trial. Conlon, 474 F.3d at 623 (citing Sonoda v. Cabrera, 255 F.3d 1035, 1039-40 (9th Cir.2001) (holding, without further analysis, that the district court did not abuse its discretion by granting the Rule 36(b) motion to withdraw deemed admissions because the motion was made before trial and the nonmoving party would not have been hindered in presenting its evidence)); Hadley, 45 F.3d at 1348 (focusing the prejudice inquiry on the unavailability of key witnesses and a sudden need to obtain evidence); see also Raiser v. Utah County, 409 F.3d 1243, 1247 (10th Cir.2005) (finding no prejudice when the nonmoving party had relied on the deemed admissions for only a two-week period in preparing its summary judgment motion); In re Durability, 212 F.3d 551, 556 (10th Cir.2000) (holding categorically that preparing a summary judgment motion by relying on admissions does not constitute prejudice).
Carson contends, and the Court agrees, that the first prong of the 36(b) test is met because the request for admissions addresses many issues which, if admitted, would eviscerate his claims.*fn1 For example, the admissions purportedly prove that Carson knew that Quiring had no authority to transfer the investors' partnership units, yet he asserts in his cross-complaint that Davis committed legal malpractice in part because he failed to determine whether Quiring could legally transfer the units. Indeed, most, if not all of the admissions, are completely contrary to the claims made in his cross-complaint.
The admissions are also contrary to Carson's own sworn testimony, in which he explained that he believed that Quiring had authority to transfer the units but hired Davis to review the transfer and prepare the documents. He further testified that he expected Davis to confirm Quiring's authority, but he instead took Quiring at his word despite knowing that Quiring had a strong financial motivation to accomplish the transfer. The admissions, not surprisingly, wholly unravel Carson's claims.
The impact of the admissions on Carson's claims, then, strongly demonstrates that the presentation of the action on the merits would be effectively prevented.
Turning to prejudice, the Court finds that Davis has not met his burden of demonstrating prejudice for a number of reasons. Insofar as Davis believes that he will be prejudiced because the discovery deadline has passed and he conducted discovery based on the existing admissions, this does not constitute prejudice under these circumstances, and, in any event, is easily rectified. See Conlon, 474 F.3d at 623-624 (where court can reopen discovery and trial is not imminent, reliance on deemed admissions in not conducting discovery before trial generally does not constitute sufficient prejudice to bar a motion to withdraw).
Nor does Davis' assertion that he filed a motion for summary judgment based on the admissions demonstrate prejudice in light of the strong preference to move forward on the merits of the action. See Conlon, 474 F.3d at 623 (citing Kirtley v. Sovereign Life Ins. Co. (In re Durability Inc.), 212 F.3d 551, 556 (10th Cir.2000) (holding categorically that preparing a summary judgment motion by relying on admissions does not constitute prejudice) and FDIC v. Prusia, 18 F.3d 637, 640 (8th Cir.1994) (same)). In fact, Davis' motion for summary judgment includes arguments not based on the admissions, such as whether Carson can prove that Davis' representation fell below the standard of care without an expert.
Davis also relies heavily on the circumstances of Carson's failure to file timely responses to the request for admissions. Davis also believes that the Court should focus on what he believes to be "inconsistent" statements about Carson's responses in his opposition to the motion for summary judgment and the instant motion. While there may have been confusion as to whether the responses were prepared and served timely but not received by Davis, or not prepared until after they were due, these issues do not rise to the level of prejudice necessary to overcome the presumption that a case should be tried on the merits.
The Court therefore finds that the motion to withdraw Carson's admissions should be GRANTED. As discussed at the hearing, the current dates will remain in effect.
However, the Court further finds that Davis should be compensated for time spent in reliance on the admissions. The parties indicated that they would meet and confer on this issue and attempt to resolve it within thirty days of the hearing. If an agreement cannot be reached, the parties may file additional briefing.
IT IS SO ORDERED.