IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
December 18, 2009
No. 09-40164 Charles R. Fulbruge III
Clerk
MARATHON FINANCIAL INSURANCE, INC., RRG,
Plaintiff-Appellant
v.
FORD MOTOR CO., FORD MOTOR CREDIT CO., PRIMUS FINANCIAL
SERVICES, FORD EXTENDED SERVICE PLAN, FORD MOTOR SERVICE
COMPANY, AUTOMOBILE PROTECTION CORPORATION, AMERICAN
ROAD INSURANCE COMPANY,
Defendants-Appellees
Appeal from the United States District Court
for the Eastern District of Texas
Before HIGGINBOTHAM and STEWART, Circuit Judges, and ENGELHARDT,
District Judge.*
CARL E. STEWART, Circuit Judge:
Marathon Financial Insurance Company, Inc. (“Marathon”) insures vehicle
service contracts sold by Automotive Professionals, Inc. (“API”), which were sold
at the dealerships of Ford Motor Company.1 In 2004, Ford changed its policy and
would no longer finance purchases of vehicle service contracts unless the insurer
*
District Judge, Eastern District of Louisiana, sitting by designation.
1
For the sake of brevity, and because the distinctions are not relevant to the issues
before the Court, the defendants are collectively referred to as “Ford.”
No. 09-40164
had a stability rating of A- or better. Marathon did not have an A- or better
rating. Marathon filed suit against Ford, bringing claims of tortious interference
with contract and tortious interference with prospective business relations. In
March 2006 the district court dismissed the latter claim under Rule 12(b)(6).
More than two years later, Marathon filed motions to amend to reassert tortious
interference with prospective business relations and to reopen discovery. The
motions were denied and the district court later granted summary judgment in
favor of Ford. Marathon appeals on the grounds that, under Illinois law, the
district court erred by placing the burden of proof on Marathon to show lack of
justification for Ford’s alleged tortious interference with contract, and by
concluding that Ford’s conduct was justified as a matter of law, and that the
court abused its discretion by denying Marathon additional discovery and
denying Marathon leave to file its Fifth Amended Complaint.
FACTUAL AND PROCEDURAL BACKGROUND
A. The Vehicle Service Contract Business
Marathon is a Risk Retention Group (“RRG”) insurer that insures payment
for repairs on vehicle service contracts (“VSCs”), also known as extended service
contracts. VSCs are contracts that cover the cost of repairs after the original
manufacturer’s warranty on a vehicle expires; Marathon provides coverage in
the event that the contract’s seller cannot meet its obligations. Marathon
insured VSCs sold by API. API’s VSCs, and Marathon’s accompanying
insurance, were sold at dealerships marketing various vehicle brands, including
Ford’s brands. Ford also sold insured VSCs, in competition with API and
Marathon.
Ford finances transactions involving combined purchases of Ford-brand
vehicles and VSCs, which could be from Ford, API, or other providers. These
financing transactions do not take the form of a direct loan of cash to consumers.
Rather, Ford purchases retail installment sales contracts from dealers. Once it
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No. 09-40164
purchases the contract, Ford pays the dealer and then bears the risk of collecting
the payments from the vehicle purchaser.
Before January 1, 2005, Ford regularly financed vehicle purchases that
included the sale of a VSC if the VSC in question was backed by an insurance
company with an A.M. Best rating of A- or better, or if the insurer of the contract
was backed by a reinsurer with an A.M. Best rating of A- or better. A.M. Best is
a recognized insurance rating agency, and its ratings are widely used to assess
the financial strength and stability of insurance companies. Under that policy,
Ford regularly financed vehicle purchases that included the sale of API VSCs
insured by Marathon.
B. Ford’s Policy Change
Ford claims that events in 2003 forced it to reevaluate its financing
standards. National Warranty Insurance Company (“NWIC”), another RRG that
wrote insurance for third-party sellers of VSCs, filed for bankruptcy protection
in the Cayman Islands. The NWIC bankruptcy left many consumers with
essentially worthless VSCs. The bankruptcy impacted Ford and its dealers
because consumers who had purchased NWIC-backed VSCs from Ford dealers
looked to the dealers to satisfy the obligations of those contracts. Many dealers
were concerned about the effect on their reputations, and chose to bear the cost
of the repairs themselves, or sought assistance from Ford, in order to keep their
customers happy. Ford effectively assumed responsibility for the liability on
numerous NWIC-backed contracts.
NWIC, like many insurers, had been rated by A.M. Best. Although A.M.
Best had downgraded NWIC’s rating to a grade below A-, Ford had continued to
finance transactions that included NWIC-backed VSCs because NWIC had
reinsurance from an insurance carrier that had an A.M. Best rating of A- or
better. When NWIC went bankrupt, however, the reinsurer did not cover
NWIC’s obligations on the VSCs it had insured. Instead, the reinsurance
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No. 09-40164
obligations flowed only to NWIC, rather than to the consumers, meaning the
vehicles would not be properly serviced and consumers would be left to make
claims in bankruptcy court after NWIC filed for bankruptcy protection.
Ford determined that beginning January 1, 2005, it would no longer
finance the purchase of VSCs unless the contracts were backed by an insurer
with an A.M. Best rating of A- or better; the A.M. Best rating of a reinsurer
would no longer be sufficient.
Marathon has no A.M. Best rating of any kind and has never had or
sought such a rating. Marathon sought an exemption from the A- financial
stability rating requirement. Marathon claimed to Ford that despite having no
rating, the VSCs it backed for API were secure. Ford extended the operative date
of the A- financial stability rating requirement to Marathon-backed VSCs, but
Marathon could not obtain the rating within the allotted time. Although
Marathon offered to provide Ford a letter of credit securing its obligations on the
VSCs that it insured, it never obtained such a letter of credit. Ultimately, the
A.M. Best A- rating was impossible for Marathon to obtain.
API found an insurer rated A- or better by A.M. Best and continued its
business relationship with Ford.2 Marathon lost other business as well;
Marathon-backed VSCs could not be sold to other auto brands because
dealerships found it too cumbersome to sell one VSC product to Ford and
another to the other auto brands.
C. Procedural History
Marathon filed this action on January 26, 2005, asserting several federal
antitrust claims and other state-law counts. Marathon amended its complaint
2
In 2007, API filed for bankruptcy protection in the United States Bankruptcy Court
for the Northern District of Illinois. API ceased paying claims on its VSCs. On the API
contracts that Marathon had insured, Marathon has made payments for consumer claims in
only seven states. For those API contracts that it insured in other states, it has not made any
payments to cover consumer claims.
4
No. 09-40164
on four occasions to eliminate the antitrust claims. Marathon ultimately alleged
that Ford interfered with the Marathon-API contractual relationship by willfully
and intentionally causing API to stop using Marathon as the insurer of its VSCs
in order to increase the sales volume of Ford’s competing products, and that Ford
interfered with a prospective business relationship between Marathon and API.
Marathon’s primary contention was that Ford, having authorized the formation
of competitive contracts which qualified for Ford financing, was not entitled to
withdraw that authority on a blanket basis because of the obvious damage that
such withdrawal would have on the business of the contracting parties.
Marathon asserted that only if, on an individual basis, there was actual cause
for denying approval, could withdrawal of existing approval be justified.
On March 28, 2006, the district court dismissed the tortious interference
with prospective business relations claim on Ford’s Motion to Dismiss under
Rule 12(b)(6). The court later entered a scheduling order, setting the deadline
for filing amended pleadings for September 3, 2006. On July 17, 2008, less than
two months before the then-scheduled trial date and 22 months after expiration
of the deadline for amending the pleadings, Marathon sought leave to amend its
complaint for a fifth time. Marathon’s proposed Fifth Amended Complaint
sought to reassert the previously dismissed claim for tortious interference with
prospective business relations. Contemporaneously filed with its Motion for
Leave, Marathon also filed a Motion to Clarify, Modify, or to Set Aside In Part
the Order of March 28, 2006, as well as a Motion for Continuance. The
continuance motion requested time to conduct additional discovery, as the
discovery cut-off passed on July 8, 2008. The district court heard oral argument
on all of Marathon’s motions on August 25, 2008, and later denied the Motion for
Leave to File Fifth Amended Complaint and Motion for Continuance.
On August 8, 2008, Ford filed its Motion for Summary Judgment. Ford
presented evidence that Marathon had in fact continued to write insurance on
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No. 09-40164
API-issued VSCs until API ceased business operations in April 2007.
Additionally, Ford presented evidence that Marathon’s own agreements with
API required API to obtain insurance coverages that would cover obligations to
Marathon from carriers rated with an A.M. Best rating of A- or better.
Marathon’s Chief Executive Officer conceded that such requirements are “pretty
much established in the industry.” Marathon’s expert also conceded that the
business decision that Ford made was not “an unrealistic decision to make.”
On December 12, 2008, Marathon filed another Motion for Continuance in
order to conduct additional discovery. That motion sought specific discovery that
Marathon conceded had been at issue in its July 17, 2008 Motion for
Continuance.
On January 27, 2009, the court denied Marathon’s latest Motion for
Continuance and granted Ford’s Motion for Summary Judgment. The court held
that Marathon failed to show good cause as to why the allegedly necessary
depositions could not have taken place during the four years of litigation.
Further, in granting Ford’s Motion for Summary Judgment, the district court
determined that “regardless of whether Marathon or Ford bears the burden of
proof on the issue of justification, Marathon has still failed to meet its summary
judgment burden.” The district court noted even if Marathon bears the burden
of proof only when “privilege” is established by the complaint, Marathon’s Fourth
Amended Complaint established the issue of privilege. Alternatively, the district
court held that even if Ford has the burden as an affirmative defense, it “has
established such a defense” and Marathon has not rebutted it. The district court
concluded that “Marathon has proffered no evidence whatsoever . . . to support
the allegations . . . that Ford lacked justification or privilege for its conduct in
implementing the A- Policy,” and granted Ford’s motion for summary judgment
on Marathon’s claims.
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No. 09-40164
DISCUSSION
A. Burden of Proof to Show Lack of Justification
The allocation of the burden of proof is a legal issue reviewed de novo.
Grilletta v. Lexington Ins. Co., 558 F.3d 359, 364 (5th Cir. 2009).
Marathon asserts that the district court misapplied Illinois substantive
law on the placement of the burden of proof for justification, and that the district
court erred by requiring Marathon to come forward with summary judgment
evidence to support the lack of justification. Marathon claims that the district
court failed to assess the status of Illinois law to determine whether the law was
clear or whether an Erie guess was necessary; instead, observing that the state
law was “confusing,” the court misapplied Illinois authorities. Additionally,
Marathon avers that the district court incorrectly held that use of the word
“privilege” in the complaint was enough to implicate the existence of a statutory
or common law privilege.
Ford initially insists that—as the district court held—whether Marathon
or Ford had the burden of proof, Marathon failed to demonstrate a genuine issue
of material fact. Ford then contends that Marathon bears the burden of proving
lack of justification under Illinois law for two reasons: Ford’s actions were
privileged, and Marathon specifically raised the issue of privilege in its
pleadings, thereby conferring upon itself the burden of proving lack of
justification.
As Illinois intermediate courts, the district court, and the parties all
admit, there is “rampant confusion in this area of the law.” Roy v. Coyne, 630
N.E.2d 1024, 1030 (Ill. Ct. App. 1994). However, “[i]n Illinois . . . where the
conduct of a defendant in an interference with contract action was privileged, it
is the plaintiff’s burden to plead and prove that the defendant’s conduct was
unjustified or malicious.” HPI Health Care Servs., Inc. v. Mt. Vernon Hosp., Inc.,
545 N.E.2d 672, 677 (Ill. 1989). Thus, as the Illinois Supreme Court noted, the
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No. 09-40164
threshold question on the burden of proof is whether the defendant’s conduct is
privileged. See id. (“Therefore, before we can determine who has the burden of
pleading justification (or a lack thereof), we must first decide whether the
defendants’ conduct here was protected by a privilege.”).
The Illinois Supreme Court “will recognize a privilege in intentional
interference with contract cases where the defendant was acting to protect an
interest which the law deems to be of equal or greater value than the plaintiff’s
contractual rights.” Id. (citing Swager v. Couri, 395 N.E.2d 921, 927 (Ill. 1979)).
The Illinois Supreme Court has repeatedly
recognized a privilege for corporate officers and directors to use
their business judgment and discretion on behalf of their
corporations. The existence of the privilege was based upon [the]
recognition that the duty of corporate officers and directors to their
corporations’ shareholders outweighs any duty they might owe to
the corporations’ contract creditors.
Id. at 677; see also Swager, 395 N.E.2d at 927 (privilege of corporate officer to
exercise “business judgment and discretion” applies to decision to dissolve
entity); H.F. Philipsborn & Co. v. Suson, 322 N.E.2d 45, 50 (Ill. 1974) (privilege
of corporate officer to obtain loan with better terms than in allegedly broken
contract); Loewenthal Secs. Co. v. White Paving Co., 184 N.E. 310, 315 (Ill. 1932)
(privilege of corporate officer to refuse to bid on work in attempt to force creditor
to waive contractual rights). In addition, the Court has extended that reasoning
to recognize a privilege for hospital management to their hospital. See HPI
Health Care Servs., 545 N.E.2d at 677 (privilege of hospital managers to decline
to pay hospital’s contract creditors).
The district court noted that Illinois law is “less than clear” on the issue
of burdens of proof on justification. Attempting to traverse the legal confusion,
the district court held:
First, if Marathon’s prima facie case must follow the elements of
tortious interference, as stated by the HPI Court, then Marathon
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No. 09-40164
has the burden of proving a lack of justification as part of its case.
Second, even if Marathon only bears the burden of proving the lack
of justification when “privilege” is established by the complaint, the
Court finds Marathon’s complaint establishes the issue of privilege.
Third, even if Marathon’s complaint does not establish “privilege”
and justification is Ford’s burden—as an affirmative defense—the
Court finds that Ford has established such a defense and that
Marathon has failed to show the existence of a genuine issue of
material fact in rebuttal.
The district court went on to conclude that the factual allegations in
Marathon’s complaint established Ford’s privilege because Marathon alleges
that “Defendants have no justification or privilege for interfering with any of
these contracts or relationships,” and a section of the complaint was titled
“There is No Legitimate Business Reason or Justification For Defendants’
Conduct,” in which “Marathon alleges facts to imply a lack of justification or
legitimate business judgment.”
The approach employed by the district court, and discussed by one Illinois
Court of Appeals, in which the mere allegation in the complaint that the
defendant acted without privilege then serves to “introduce” privilege, misses the
mark.3 See Zdeb v. Baxter Int’l, Inc., 697 N.E.2d 425, 433 (Ill. App. Ct.1998)
(criticizing Roy v. Coyne, 630 N.E.2d 1024 (Ill. App. Ct. 1994)).
Application of the proper privilege analysis, however, results in the same
outcome. Ford’s actions fall squarely within the parameters of the Illinois
Supreme Court’s caselaw on corporate officer privilege. Here, Ford’s officers and
directors made the decision regarding the rating change in accordance with their
business judgment and the company benefitted from the challenged action. As
the Illinois Supreme Court has observed, “[t]he situation alleged here does not
present an instance of ‘outsiders intermeddling maliciously in the contracts or
3
The district court utilized the approach outlined in Roy v. Coyne, 630 N.E.2d 1024 (Ill.
App. Ct. 1994). However, the Roy approach has not been adopted or addressed by the Illinois
Supreme Court.
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No. 09-40164
affairs of other parties.’” Fellhauer v. City of Geneva, 568 N.E.2d 870, 880 (Ill.
1991) (quoting Loewenthal Secs. Co., 184 N.E. at 310)).
Thus, because “the conduct of [Ford] was privileged, it is the plaintiff’s
burden to plead and prove that the defendant’s conduct was unjustified. . . .” HPI
Health Care Servs., 545 N.E.2d at 677. On that basis, the district court did not
err in ruling that HPI required Marathon to negate justification.
B. Ford’s Justification
The Court reviews de novo a grant of summary judgment. Croft v.
Governor of Texas, 562 F.3d 735, 742 (5th Cir. 2009). The Court affirms the
district court’s judgment if the record reveals no genuine issue of material fact
and that the movant is entitled to judgment as a matter of law. Id. When
conducting its review, the Court evaluates the evidence in the light most
favorable to the non-movant. Breaux v. Halliburton Energy Servs., 562 F.3d 358,
364 (5th Cir. 2009).
Marathon argues that Ford was not “justified” as a matter of law because
it was insufficient for Ford to claim that Marathon had no evidence to prove lack
of justification. Marathon alleges that Ford willfully and intentionally devised
a plan that would necessarily disrupt the contractual relationships of outside
VSC providers and their insurers, including Marathon and API, and the A-
rating was instituted in order to drive RRGs out of the market. According to
Marathon, if Ford had a benign intent, it would have considered each RRG
separately, or at least would have considered the time necessary for qualification
for the A- rating.
In favor of affirming that it was justified as a matter of law, Ford argues
that its actions were justified business decisions and no evidence exists to the
contrary, and Marathon produced no evidence to carry its burden or negate
Ford’s evidence.
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No. 09-40164
In order to prevail on an Illinois claim for intentional interference with
contractual relations, the plaintiff must show that: (1) there was an enforceable
contract; (2) the defendant was aware of that contract; (3) the defendant
intentionally and unjustifiably induced a breach of the contract; (4) breach
resulted from the defendant’s wrongful conduct; and (5) the plaintiff has been
damaged. Smock v. Nolan, 361 F.3d 367, 372 (7th Cir. 2004) (citing HPI Health
Care Servs., 545 N.E.2d at 676).
With respect to justification, “[a] defendant who is protected by a privilege
. . . is not justified in engaging in conduct which is totally unrelated or even
antagonistic to the interest which gave rise to defendant’s privilege.” HPI Health
Care Servs., 545 N.E.2d at 677. Additionally, upon examining “the privilege of
corporate officers to act on behalf of a corporation in accordance with their
business judgment,” the Illinois Supreme Court determined that “if the company
benefitted from the challenged action of the corporate officer in breaking the
contract, the officer . . . could not be liable in tort.” Fellhauer, 568 N.E.2d at
878-79.
As discussed above, Marathon has the burden to demonstrate Ford’s lack
of justification. HPI establishes that the defendant’s lack of justification is one
of the required elements in Marathon’s intentional interference claim.
Celotex states the fundamental guidelines governing summary judgment:
[T]he plain language of Rule 56(c) mandates the entry of summary
judgment, after adequate time for discovery and upon motion,
against a party who fails to make a showing sufficient to establish
the existence of an element essential to that party’s case, and on
which that party will bear the burden of proof at trial. In such a
situation, there can be “no genuine issue as to any material fact,”
since a complete failure of proof concerning an essential element of
the nonmoving party’s case necessarily renders all other facts
immaterial. The moving party is “entitled to a judgment as a matter
of law” because the nonmoving party has failed to make a sufficient
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No. 09-40164
showing on an essential element of her case with respect to which
she has the burden of proof.
Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); see also St. Paul Mercury
Ins. Co. v. Williamson, 224 F.3d 425, 440 (5th Cir. 2000) (“Before the non-moving
party is required to produce evidence in opposition to the motion, the moving
party must first satisfy its obligation of demonstrating that there are no factual
issues warranting trial.”). Therefore, Ford’s proffer of evidence in addition to
pointing out Marathon’s lack of evidence is a proper basis for summary
judgment.
Ford has presented abundant uncontroverted evidence of justification. A
sample of such evidence includes:
• Ford’s decision making process following the NWIC bankruptcy, which
prompted a thorough review of Ford’s policies for the financing of
transactions that included VSCs. Ford recognized that the bankruptcy
of a VSC provider raised significant issues for consumers, dealers, and
Ford as a whole. If the dealer honored the contracts, it would absorb
the cost of repairs. If it did not honor the contracts, the dealer and
Ford faced the prospect of angry customers who, in the future, would
take their business elsewhere or would stop making payments on the
vehicle. The NWIC bankruptcy exposed flaws in relying on a
reinsurance arrangement. Concerned about the effects of such a
bankruptcy, Ford determined that it would no longer finance
transactions that included the sale of a VSC unless the VSC was
insured by carrier with an A.M. Best rating of A- or better.
• Ford rejected Marathon’s proposal to offer a letter of credit because it
did not believe that it had the manpower or skill set to monitor the
letter of credit adequately or to review Marathon’s financial status
periodically.
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No. 09-40164
• Allen Kreke, Marathon’s Chief Executive Officer, testified that terms
requiring an A- rating by A.M. Best were “pretty much established in
the industry” in such contracts and “relatively standard terms.”
• Marathon’s industry expert, Kurt Schwamberger, testified as follows:
Q: And you had either the option to do business with a
hundred A.M. Best rated companies or go through the
process of analyzing the letters of credit from 100 unrated,
we’ll take RRGs, which would you prefer?
A: If I didn’t have the resources, I would have to go with
the A.M. Best rated companies.
Q: And ultimately it’s a business decision that [Ford] or any
other company would make.
A: I don’t think that would be an unrealistic decision to make.
• Ford had neither the personnel nor internal expertise to duplicate the
type of financial review performed by A.M. Best. It could not take on
the constant monitoring necessary to ensure that VSC providers
continued to be insured by companies on sound financial footing.
Marathon disputed none of this evidence. The evidence supports a finding that
Ford’s decision regarding changing the rating requirement was based on
business considerations—particularly in light of the NWIC bankruptcy
problems.
Although Marathon vehemently insists that Ford “willfully and
intentionally devised a plan that would necessarily disrupt the contractual
relationships of outside VSC providers and their insurers, including Marathon
and API,” it provides no evidence that Ford lacked justification. In support of its
claims, Marathon asserts that John Hanlon, Director of Ford Credit’s Global
Process Management department, admitted that management discussed that the
A- rating requirement might have the effect of removing some RRGs from the
marketplace. Marathon also points to the statements of Larry King, the Director
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No. 09-40164
of Ford’s VSC business, in which he admitted that he informed dealers that
there were risks associated with using RRGs in order to get more business.
The portion of Hanlon’s deposition that Marathon relies upon merely
establishes Ford was aware that the rating change might cut many RRGs out of
the marketplace for Ford-backed financing of Ford vehicles, “to the extent that
they couldn’t or wouldn’t meet the standard of getting, of submitting whatever
was required to A.M. Best in obtaining the requisite rating.” This knowledge is
undisputed; the fact that Ford contemplated a possible outcome of a business
decision does not, as Marathon asserts, “compel the conclusion that Ford knew,
and intended, that the A- edict would stop performance of the AMI/Marathon
contract. . . .”
The only other concrete evidence proffered by Marathon is the testimony
of King, who stated in his deposition:
Q: What did you mean when you say ‘scare some of our dealers?’
A: We would basically show them that there are risks associated
with writing these companies’ vehicle service contracts.
The questioning was as to why King, upon receiving notice that another RRG
was in trouble, forwarded that information on to dealers. He admitted that he
hoped that information would help get more business. However, seeking to gain
a competitive advantage in this manner would not be “totally unrelated or even
antagonistic to the interest which gave rise to [Ford’s] privilege,” HPI Health
Care Servs., 545 N.E.2d at 677, because “the company [would benefit] from the
challenged action. . . .” Fellhauer, 568 N.E.2d at 878-79.4
4
Ford also notes that even if the rating change was for competitive advantage, which
it maintains was not the case, it would fall within the “competitor’s privilege” under the
Restatement (Second) of Torts § 768. See Prudential Ins. Co. of Am. v. Sipula, 776 F.2d 157,
162 (7th Cir. 1985) (noting in dicta that, under Illinois law, “[a] defendant’s inducement of the
cancellation of an at-will contract constitutes at most interference with a prospective economic
advantage, not interference with contractual relations”).
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No. 09-40164
The summary judgment evidence also demonstrates that Ford did not
implement the credit rating change to steal Marathon’s business. In fact, API
found another insurer that met the rating requirement and continued to do
business with Ford. Further, Marathon’s insistence that “the A- rating was
instituted in order to drive RRGs out of the market, because a benign intent
would have considered each RRG separately” essentially demands that Ford
should be required to, “on an individual basis,” determine if there was good
cause to deny financing for each insurer of VSCs. As Ford contends, that’s
exactly what it did. Those insurers that met the A- standard continued to be
financed, and those that did not meet the standard were declined. Based on this
“individual” information, Ford decided that Marathon was not worth the risk.
Thus, Marathon has—as the district court held—“proffer[ed] absolutely no
evidence . . . .” Therefore, the district court’s grant of summary judgment was
appropriate based on Ford’s justification as a matter of law.5
C. Denial of Additional Discovery
“The standard of review poses a high bar; a district court’s discretion in
discovery matters will not be disturbed ordinarily unless there are unusual
circumstances showing a clear abuse.” Seiferth v. Helicopteros Atuneros, Inc., 472
F.3d 266, 276 (5th Cir. 2006) (internal quotations and citations omitted). This
court will disregard a district court’s discovery error unless that error affected
the “substantial rights of the parties.” Dresser-Rand Co. v. Virtual Automation
Inc., 361 F.3d 831, 842 (5th Cir. 2004); United States v. Garcia, 567 F.3d 721,
734 (5th Cir. 2009). The burden of proving substantial error and prejudice is
upon the appellant. Id. (citing Bell v. Swift & Co., 283 F.2d 407, 409 (5th Cir.
1960)).
5
Ford alternatively argues that summary judgment is appropriate because, under
Illinois law, there was allegedly no termination or breach of contract. Because we affirm on
the justification issue, we do not reach Ford’s alternative arguments.
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No. 09-40164
Marathon maintains that the district court abused its discretion by
denying its request to reopen discovery for two limited purposes: to resume the
deposition of two Ford executives, and to require the production of relevant
financial data. The first request was allegedly due to the late production of
documents by Ford, after the depositions had been taken. Marathon asserts that
the documents implicated executives in a top-level meeting that focused on
finding means of enhancing the lagging sales of Ford’s VSCs. The second request
involved a Rule 30(b)(6) request made by Marathon for information regarding
Ford’s revenues from its VSC sales between 2002-2007, that Ford objected to
producing and then produced just three days before the dispositive hearing.
Ford argues that Marathon failed to show good cause for reopening
discovery because: (1) Marathon has waived the issue by failing to appeal the
trial court’s denial of a motion to reopen discovery that covered the exact same
material that it now claims was improperly denied; (2) the trial court’s grant of
summary judgment on the interference claim resolves this issue; and (3) denial
of Marathon’s motion to reopen discovery made five months after the discovery
cutoff and on the eve of trial was not an abuse of discretion.
Marathon fails to explain how the discovery that it seeks bears on the
grant of summary judgment on the justification issue. While Marathon claims
that it needs to reopen two depositions because there was “a top-level meeting
dealing with a significant emphasis on increasing the sales of Ford’s VSC
products,” it never demonstrates how such evidence would show a lack of
justification for the rating requirement change.
As discussed above, the corporate officer privilege encompasses virtually
all decisions benefitting the company. See Fellhauer, 568 N.E.2d at 878-79 (“if
the company benefitted from the challenged action of the corporate officer in
breaking the contract, the officer . . . could not be liable in tort”). All for-profit
businesses can be assumed to desire increased sales. That Ford would attempt
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No. 09-40164
to increase VSC sales is not probative of a lack of justification, and Marathon
cites no authority suggesting that such evidence could support an inference of
lack of justification.
Similarly, Marathon’s demand for revenue information has no bearing on
the judgment. Marathon has failed to identify any nexus between the requested
information and its inability to withstand Ford’s Motion for Summary Judgment.
D. Denial of Leave to File Fifth Amended Complaint
The denial of a motion to amend is reviewed for abuse of discretion. See
Ayanbadejo v. Chertoff, 517 F.3d 273, 276 (5th Cir. 2008).
Marathon insists that the district court abused its discretion by denying
Marathon’s request to file a Fifth Amended Complaint. In its Order partially
granting Ford’s Motion to Dismiss, the district court had ruled that “no set of
facts” would support Marathon’s claim for Ford’s interference with Marathon’s
prospective business relationship with API. Based on evidence obtained in
discovery, Marathon sought to set aside the court’s ruling on the motion to
dismiss and to amend its complaint to reassert that claim.
Ford urges this court to affirm the district court’s ruling because the grant
of summary judgment on the justification element of Marathon’s contractual
interference claim also resolves Marathon’s motion to amend to add a
prospective claim, and denial of the motion to amend was well within the trial
court’s discretion because Marathon failed to show good cause for not seeking
leave to amend before the deadline to amend the pleadings.
Federal Rule of Civil Procedure 16(b) governs amendment of pleadings
after a scheduling order’s deadline to amend has expired. Fahim v. Marriott
Hotel Servs., Inc., 551 F.3d 344, 348 (5th Cir. 2008). Rule 16(b) provides that
once a scheduling order has been entered, it “may be modified only for good
cause and with the judge’s consent.” Fed. R. Civ. P. 16(b). It requires a party “to
show that the deadlines cannot reasonably be met despite the diligence of the
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No. 09-40164
party needing the extension.” S&W Enters., LLC v. Southtrust Bank of Ala., NA,
315 F.3d 533, 535 (5th Cir. 2003) (internal citations omitted). Four factors are
relevant to good cause: “(1) the explanation for the failure to timely move for
leave to amend; (2) the importance of the amendment; (3) potential prejudice in
allowing the amendment; and (4) the availability of a continuance to cure such
prejudice.” Sw. Bell Tel. Co. v. City of El Paso, 346 F.3d 541, 546 (5th Cir. 2003)
(citing S&W Enters., 315 F.3d at 536).
The trial court acted well within its discretion in denying Marathon’s
motion for leave to file its Fifth Amended Complaint. The trial court dismissed
Marathon’s interference with a prospective business relationship claim on March
28, 2006, and denied it leave to replead those allegations. On April 18, 2007, the
court entered a scheduling order pursuant to Rule 16, setting September 3, 2006
as the deadline for amending the pleadings.
Marathon has offered no legitimate explanation for its delay in seeking
leave to amend. Marathon’s primary argument is that the district court erred by
dismissing its interference with a prospective business relationship claim on
March 28, 2006. Marathon was aware of the amendment deadline, but at no time
before July 2008 did Marathon either seek leave to refile its dismissed claim or
otherwise request relief from the March 28, 2006 order. Marathon sought leave
to reassert the dismissed claim 28 months after the claim had been dismissed,
22 months after the deadline for amending the pleadings, after the close of
discovery, and six weeks before the then-scheduled trial (after a continuance).
Marathon knew or should have known of the effect of the trial court’s order, and
had ample opportunity to revisit the issue well before the eve of trial. The
district court properly denied leave to amend at that late date.
CONCLUSION
For the foregoing reasons, the district court’s grant of summary judgment in
favor of Ford is AFFIRMED.
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