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Presby Environmental, Inc. v. Advanced Drainage Systems, Inc.

United States District Court, D. New Hampshire

September 30, 2014

Presby Environmental, Inc.
v.
Advanced Drainage Systems, Inc. Opinion No. 2014 DNH 122.

ORDER

LANDYA McCAFFERTY, District Judge.

Presby Environmental, Inc. ("Presby") has sued Advanced Drainage Systems, Inc. ("ADS") based on ADS's alleged violation of a settlement agreement previously entered into by the parties. Now pending before the court are ADS's Motion for Judgment on the Pleadings and Presby's Motion for Leave to Amend Complaint. For the reasons that follow, the Motion for Judgment on the Pleadings is GRANTED IN PART and DENIED IN PART and the Motion for Leave to Amend Complaint is DENIED.

Factual Background[1]

This dispute is the latest iteration in a long-running legal feud between Presby and ADS. Presby is a New Hampshire-based company that develops, manufactures, tests and sells products for septic systems. Compl. ¶ 2. ADS is a Delaware corporation and occupies a similar niche in the market. ADS manufactures pipe that is used in agricultural, commercial and highway drainage systems, as well as septic and leaching systems. Id . ¶ 3.

Presby has developed an in-ground waste treatment disposal system known as "Enviro-Septic." Id . ¶ 7. ADS competes with Presby by marketing and selling its own in-ground septic system known as "GEO-Flow." Id . ¶ 8. Both Enviro-Septic and GEO-Flow are innovative products designed to replace traditional septic systems, and both are subject to regulation by certain environmental authorities. Id . ¶ 10.

Presby and ADS first found themselves on opposite sides of a courtroom in the mid-1990s in a patent infringement dispute brought by ADS. Id . ¶ 11. Then, in 2008, Presby brought a suit of its own (the "2008 Litigation").[2] Id . ¶ 12. Presby alleged that ADS was securing approvals for the GEO-Flow system from various state environmental regulators by improperly relying on testing that Presby had conducted on its own Enviro-Septic system. Id . In essence, Presby alleged that ADS was seeking to avoid the cost of conducting its own tests of GEO-Flow, and instead was bootstrapping Presby's test results by falsely representing to regulators that Enviro-Septic and GEO-Flow were functionally equivalent. Id . ¶ 13. Presby also alleged that ADS infringed several of its copyrights by including Presby's materials in certain product manuals. Id . ¶ 14.

The 2008 Litigation came to a close in May 2009 when the parties entered into a Settlement Agreement and Mutual Release (the "Settlement Agreement"). Id . ¶ 16. Two provisions of the Settlement Agreement are of central importance to this dispute. First, the Settlement Agreement provided that "ADS will not represent in the marketplace that GEO-Flow is the functional equivalent' of Enviro-Septic." Id . ¶ 17. Second, it provided that "[w]ith respect to any regulatory or approval processes regarding the use and approval of [GEO-Flow], ADS agrees that it will not use any test data relative to Enviro-Septic, as though such data were applicable to [GEO-Flow]." Id . ¶ 18.

The instant dispute involves alleged breaches of the Settlement Agreement by ADS. Specifically, Presby alleges that, in 2009, an individual by the name of Dick Batchelder ("Batchelder"), on behalf of ADS, made a series of representations to the Vermont Department of Environmental Conservation (the "Vermont DEC") regarding the functional equivalence of GEO-Flow and Enviro-Septic. Id . ¶¶ 19-31. These representations included providing the Vermont DEC with a copy of a document prepared by the New Hampshire Department of Environmental Services (the "NH DES") that compared the two systems. Id . ¶ 21.

Also in 2009, Batchelder (again allegedly acting on behalf of ADS) provided a copy of the NH DES report to the Indiana State Department of Health in connection with regulatory proceedings there. Id . ¶¶ 32-34. Batchelder also allegedly made various additional statements to Vermont and Indiana regulators suggesting that GEO-Flow and Enviro-Septic were similarly-sized and functionally equivalent. Id . ¶¶ 33-34.

Finally, the complaint alleges that ADS provided similar information to environmental regulators in Massachusetts and New York. Id . ¶¶ 36-37. Presby has brought this action seeking damages for breach of the Settlement Agreement and violation of the Lanham Act, 15 U.S.C. § 1125 et seq.

Presby's Motion for Leave to Amend Complaint

Presby has moved for leave to amend its complaint in order to add several allegations, including those relating to additional statements made by employees and other representatives of ADS regarding the functional equivalence of Enviro-Septic and GEO-Flow. Many of these statements were allegedly made at an industry "field day" event in New Hampshire in October 2013.

Certain aspects of the procedural posture are of relevance to this discussion. First, the court previously issued a scheduling order that gave Presby until December 30, 2013, to amend its pleadings. Second, however, Presby's motion for leave to amend was not filed until May 2014, after ADS had filed its dispositive motion for judgment on the pleadings.

I. Legal Standard

The parties dispute the applicable standard of review. Presby contends that the matter should be governed by Federal Rule of Civil Procedure 15. Rule 15(a)(2) provides that "a party may amend its pleading only with the opposing party's written consent or the court's leave. The court should freely give leave when justice so requires." Fed.R.Civ.P. 15(a)(2). And, Rule 15(d) further provides that "[o]n motion and reasonable notice, the court may, on just terms, permit a party to serve a supplemental pleading setting out any transaction, occurrence, or event that happened after the date of the pleading to be supplemented." Id. at 15(d). Rule 15 generally presents a favorable standard for parties seeking to amend a pleading, as "leave to amend is to be freely given unless it would be futile or reward... undue or intended delay." Resolution Trust Corp. v. Gold , 30 F.3d 251, 253 (1st Cir. 1994) (citations omitted) (internal quotation marks omitted).

Unfortunately for Presby, Rule 15 no longer governs these proceedings, because "[o]nce a scheduling order is in place, the liberal [Rule 15 standard] is replaced by the more demanding good cause' standard of Fed.R.Civ.P. 16(b)." Steir v. Girl Scouts of the USA , 383 F.3d 7, 12 (1st Cir. 2004); see also O'Connell v. Hyatt Hotels , 357 F.3d 152, 155 (1st Cir. 2004) (holding the same and noting that "[f]or Rule 16(b) to operate effectively, litigants cannot be permitted to treat a scheduling order as a frivolous piece of paper idly entered, which can be cavalierly disregarded without peril") (citations omitted) (internal quotation marks omitted). Thus, Presby's motion for leave to amend must be governed by Rule 16(b)(4), which provides that "[a] schedule may be modified only for good cause and with the judge's consent." Fed.R.Civ.P. 16(b)(4).

This good cause standard represents a high hurdle. As an initial matter, a court "may extend a scheduling order deadline on a showing of good cause if the [deadline] cannot reasonably be met despite the diligence of the party seeking the extension.'" O'Connell , 357 F.3d at 154 (quoting Advisory Committee Notes to the 1983 Amendments to Fed.R.Civ.P. 16(b)). And, the hurdle to show good cause becomes even higher where it can be demonstrated that the party seeking leave to amend knew (or should have known) about the facts at issue prior to the deadline for amendments. See, e.g., Trans-Spec Truck Serv. v. Caterpillar Inc. , 524 F.3d 315, 327 (1st Cir. 2008). Finally, a showing of good cause is made even more difficult where the ...


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