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Gonda v. The Permanente Medical Group, Inc.

United States District Court, N.D. California

February 9, 2015

THOMAS A. GONDA, JR., M.D., Plaintiff,
v.
THE PERMANENTE MEDICAL GROUP, INC.; and THE PERMANENTE MEDICAL GROUP, INC. LONG TERM DISABILITY PLAN FOR PHYSICIANS, Defendants.

ORDER GRANTING LEAVE TO AMEND

SAMUEL CONTI, District Judge.

I. INTRODUCTION

Now before the Court is Defendants The Permanente Medical Group, Inc. ("TPMG") and The Permanent Medical Group, Inc. Long Term Disability Plan for Physicians' ("TMPG Plan") motion for summary judgment. ECF No. 67. That motion is premised on the argument that a settlement agreement (the "Settlement Agreement") between Plaintiff Dr. Thomas A. Gonda, Jr., M.D. and TPMG releases all of Dr. Gonda's claims in this action. The Court has previously held that Defendants must amend their answer if they wish to raise release as an affirmative defense, and the Court ordered supplemental briefing as to whether Defendants should be permitted to amend their answer. See ECF No. 84 ("Supp. Br. Order"). Both Defendants and Dr. Gonda timely filed briefs on the issue. See ECF Nos. 85, 91. For the reasons set forth below, the Court finds that Defendants should be permitted to amend their answer to add the relevant affirmative defense.

II. LEGAL STANDARD

Federal Rule of Procedure 15(a) permits a party to amend its pleading once as a matter of course within 21 days of serving it. Rule 15 allows amendments beyond the 21-day period only with the opposing party's consent or the court's leave, and the rule instructs courts to "freely give leave when justice so requires." Fed.R.Civ.P. 15(a)(2). "The purpose of pleadings is to facilitate a proper decision on the merits, ' and not to erect formal and burdensome impediments in the litigation process. Unless undue prejudice to the opposing party will result, a trial judge should ordinarily permit a party to amend its complaint." Howey v. United States , 481 F.2d 1187, 1190 (9th Cir. 1973) (internal quotations and citations omitted). The Ninth Circuit has identified "several factors" used to determine whether leave to amend should be granted. "These criteria include undue delay, bad faith, futility of amendment, and prejudice to the opposing party. While all these factors are relevant, the crucial factor is the resulting prejudice to the opposing party." Id.

III. DISCUSSION

A. Undue Delay

This action was filed in March of 2011. Defendants answered Dr. Gonda's complaint on June 16. They could not have raised the Settlement Agreement as a defense at that time, because the Settlement Agreement had not yet been executed. When the Settlement Agreement was executed in November of 2011, this case was stayed pending the outcome of Dr. Gonda's arbitration proceedings against Defendants, and then the stay was continued during his administrative appeals. See ECF Nos. 19 ("Stay Order"); 21. Defendants argue that "it would have been improper" to move for leave to amend at that time. That is correct, but the parties could have moved to lift the stay and dismiss the case, given that they had apparently agreed to release this lawsuit.

Regardless, on May 20, 2013, Dr. Gonda reported that his administrative appeals had been exhausted and requested a case management conference. See ECF No. 24. On May 30, the Clerk set a case management conference on the Court's calendar. See ECF No. 25. Once the case was restored to the Court's calendar, Defendants still did not seek leave to amend their answer. On November 11, 2013, Defendants filed a motion for summary judgment. ECF No. 35. That summary judgment motion did not mention the Settlement Agreement, nor did Defendants seek leave to amend their answer at that time. It was not until November 6, 2014 - almost three years after the Settlement Agreement was executed - that Defendants finally raised the issue in their motion for summary judgment. See ECF No. 67 ("SJ Mot."). Even accepting that it would have been improper to move for leave to amend during the stay, Defendants waited almost a year and a half after the exhaustion of Dr. Gonda's administrative appeals to raise this issue.

TPMG argues that its attorneys did not obtain a copy of the release until August 2014. Because Defendants filed their motion for summary judgment about two months thereafter, Defendants argue that any delay was not undue. See Defs. Supp. Br. at 5-6. However, Defendant TPMG was a party to the Settlement Agreement and was therefore aware of it from the date it was executed. Failure to turn over the agreement to counsel does not excuse the delay. The Court finds that the sheer length of the delay in this case - either three years or one and a half years, depending on when you start counting - counsels against granting leave to amend. Cf. Toth v. Glazer, 163 F.R.D. 549, 550 (E.D. Wis. 1995) (two month delay in moving to amend answer supported denial of motion).

B. Bad Faith

The Life Insurance Company of North America ("LINA") provides long-term disability benefit insurance coverage for the TPMG Plan. As the TPMG Plan's insurer, LINA agreed to provide TPMG and the TPMG Plan with counsel in this case, and so TPMG was represented by different attorneys in Dr. Gonda's wrongful termination action. Defs. Supp. Br. at 2-3. LINA requested a copy of the Settlement Agreement from TPMG for use in this action in December of 2013 (still two years after the agreement's execution). Id. at 3. TPMG did not respond. After LINA followed up with TPMG, TPMG referred LINA to the counsel who represented TPMG in the wrongful termination arbitration. However, TPMG's attorneys refused to turn over a copy of the Settlement Agreement. Defendants' attorneys also sought a copy of the agreement from Kaiser Foundation Hospitals ("KFH"), but KFH's attorneys also refused to turn it over. Id.

In April of 2014, Defendants served a request for production on Dr. Gonda that sought, among other things, a copy of the Settlement Agreement. That is rather remarkable. Defendant TPMG was a party to the Settlement Agreement and alleges in its motion for summary judgment that the Settlement Agreement applies to this action. But TPMG could not obtain a copy of a contract to which it was a party for use in its own defense and was put in the position of requesting that contract from the adverse party.[1] While that does not necessarily indicate that bad faith caused the delay in raising this defense, it certainly gives the Court pause. TPMG's inability to obtain its own contract for its own defense casts some doubt on the forthrightness of the release argument. If the Settlement Agreement was truly intended to cover this litigation, then is difficult to understand why TPMG's attorneys had such difficulty getting a copy.

Dr. Gonda suggests that Defendants are using the Settlement Agreement in a last-ditch effort to avoid adjudication on the merits because a court in this District issued a decision that adversely affected Defendants' chances in this litigation. See Pl.'s Supp. Br. at 3-4. However, other than the timing (the decision, Polnicky v. Liberty Life Assurance Co. of Boston , 999 F.Supp.2d 1144 (N.D. Cal. 2013) was issued November 26, 2013, and Defendants' first attempts ...


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