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HCC Specialty Underwriters, Inc. v. Woodbury

United States District Court, D. New Hampshire

December 4, 2017

HCC Specialty Underwriters, Inc.
John Woodbury, et al.



         Before the court is a motion to amend the complaint filed by plaintiff HCC Specialty Underwriters, Inc. (“HCC”). See doc. no. 46. In the original complaint, HCC alleges that defendant John Woodbury, a former employee of HCC, violated his 1996 non-compete agreement and misused confidential information while working for defendant Buttine Underwriters Agency, LLC d/b/a Prize and Promotion Insurance Services (“Buttine”), a competitor of HCC. Based upon information it claims to have learned during discovery, HCC seeks to amend the complaint to allege that Woodbury also violated a 2001 release and misappropriated trade secrets. Defendants object and argue that HCC's motion is untimely. For the following reasons, HCC's motion is granted.


         Because HCC moves to amend the complaint after the deadline set out in the scheduling order, “the court evaluates [HCC's] request . . . under the Rule 16 ‘good cause' standard.” Ashley v. Spaulding Youth Ctr., No. 16-cv-37-JL, 2016 WL 5477574, at *5 (D.N.H. Sept. 29, 2016) (emphasis omitted); see also Fed. R. Civ. P. 16(b)(4) (“A schedule may be modified only for good cause and with the judge's consent.”). The purpose of this standard is to “preserve[] the integrity and effectiveness of Rule 16(b) scheduling orders.” O'Connell v. Hyatt Hotels of P.R., 357 F.3d 152, 155 (1st Cir. 2004); see also Cruz v. Bristol-Myers Squibb Co., PR, Inc., 699 F.3d 563, 570 (1st Cir. 2012) (“A scheduling order is not a frivolous piece of paper, idly entered, which can be cavalierly disregarded by counsel without peril.” (quotation omitted)).

         “Rule 16(b)'s ‘good cause' standard emphasizes the diligence of the party seeking the amendment.” O'Connell, 357 F.3d at 155. The question is whether the deadline could not have been reasonably met “despite the diligence of the party seeking the extension.” Id. at 154 (quotation omitted). “Prejudice to the opposing party remains relevant but is not the dominant criterion.” Id. at 155. As the party seeking leave to amend, HCC bears the burden of establishing good cause. See Forrester Envtl. Servs., Inc. v. Wheelabrator Techs., Inc., No. 10-cv-154-JL, 2012 WL 928080, at *2 (D.N.H. Mar. 19, 2012).


         The following facts are taken from the original complaint, unless otherwise noted. HCC is a provider of specialized insurance products, including insurance related to “event cancellation, weather, travel, event liability, prize indemnity, contractual bonus and over-redemption insurance.” Doc. no. 1 at ¶ 13. Prior to his resignation in 2016, Woodbury was employed for more than two decades by HCC, or one of its predecessors. Woodbury's work appears to have involved developing and managing client relationships.

         The present litigation arises from an employment agreement between Woodbury and a predecessor of HCC, American Specialty Underwriters, Inc. The agreement was executed in 1996 and is titled “Employment, Incentive Compensation, Confidentiality and Non-Competition Agreement” (hereinafter the “1996 Agreement”). Woodbury agreed that, during his employment and for a period of two years following his termination, he would not divert business from his employer, would not “interfere in any material respect with any business relationship between [the employer] and any other person, ” and would not render services to another whose activities would violate the agreement if performed by Woodbury. Id. at ¶ 16. Woodbury also agreed that he would not use confidential company information on behalf of any future employer.

         Woodbury resigned from HCC in June 2016. Shortly thereafter, he began working for Buttine, which soon launched a new set of insurance products. HCC alleges that these insurance products are “direct competitive offerings to that of HCC, ” and that Woodbury was hired to develop this area of Buttine's business. Id. at ¶ 25. HCC asserts that, since Woodbury's resignation, defendants have met with reinsurers and clients that have business relationships with HCC. HCC thus alleges that Woodbury is violating the 1996 Agreement by helping Buttine compete against HCC in this niche insurance market.

         HCC further alleges that defendants have used or will use HCC's confidential information to compete against HCC. HCC bases this allegation on the fact that Woodbury engaged in unusual activity on his work computer shortly before, and directly after, he tendered his resignation. Specifically, Woodbury accessed information that he had no need to access, including contracts for prior clients, HCC's budget information, and a spreadsheet containing HCC's rates for a certain insurance product. Although HCC did not allege a claim for misappropriation of trade secrets in the original complaint, it did allege that some of the information Woodbury accessed would constitute trade secrets under state law.

         Based on defendants' alleged conduct, HCC brought the present action. In the original complaint, HCC raises claims for specific performance of the 1996 Agreement (Count I); breach of the 1996 Agreement by Woodbury (Count II); tortious interference with the 1996 Agreement by Buttine (Count III); a declaratory judgment that the 1996 Agreement is valid and enforceable (Count IV); and a claim against both defendants under the New Hampshire Consumer Protection Act (Count V).


         HCC moves to amend its complaint to add two new claims, as well as additional factual allegations relevant to those claims. HCC asserts that it only recently discovered the information supporting these claims.

         The first new claim is for breach of contract. HCC alleges that Woodbury breached a release executed by Woodbury and ASU International, Inc.-another of HCC's predecessors-in 2001 (hereinafter “the 2001 Release”). The 2001 Release was executed as part of a security purchase agreement between ASU International and HCC's parent company, under which HCC's parent company would acquire ASU International's stock. HCC alleges that the 2001 Release reaffirms Woodbury's ...

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