Camelot Homes v. Genaro’s Framing Construction LLC, No. 1 CA-CV 19-0704 (June 9, 2020) – Memorandum

Recently, the Arizona Court of Appeals upheld a trial court’s denial of leave to amend a complaint where it was unduly delayed and the proposed amendments were futile. Under Arizona Rule of Civil Procedure 15(a)(2):

… a party may amend its pleading only with leave of court or with the written consent of all opposing parties who have appeared in the action. Leave to amend must be freely given when justice requires.

In Camelot Homes v. Genaro’s Framing Construction LLC, Mark Hancock Development Corporation hired Younger Brothers to perform work at a residential development. Plaintiff Camelot (“Camelot”) was listed on the contract as the seller associated with the residential development. Younger Brothers subcontracted with defendant Genaro’s (“Genaro’s”) to perform framing work. Genaro’s further subcontracted with Alvarez Framing Services. Younger Brothers and Genaro’s never performed framing work at the development.

On July 3, 2014, Alvarez Framing Services’ employee Vicente Cabrera (“Cabrera”) was injured as he attempted to lift a framing wall off the ground without mechanical assistance. Cabrera filed a complaint against Camelot alleging negligence and agency/joint venture liability. Camelot answered and filed a third-party complaint against Genaro’s alleging common law indemnity and negligence.

Three years of after litigation commenced, Genaro’s moved for summary judgment on Camelot’s third-party complaint. Soon after, Camelot and Younger Brothers entered into an assignment agreement in which Younger Brothers assigned to Camelot rights in claims, contracts, and damages with and against Genaro’s, including contract, tort, and indemnity claims. The agreement cited to the subcontract between Younger Brothers and Genaro’s which included an express indemnity provision for work performed on the residential development project.

After executing the agreement, Camelot moved to amend its third-party complaint to assert express indemnity, gross negligence, and breach of contract against Genaro’s. The trial court denied Camelot’s motion to amend, and it granted Genaro’s motion for summary judgment, and awarded Genaro’s $70,000 in attorneys’ fees.

On Camelot’s appeal, the Court affirmed the trial court’s decision to deny leave to amend. The Court supported the trial court’s finding of Camelot unduly delayed in seeking amendment and the proposed new allegations were futile.

In Arizona, it is within the superior court’s discretion to grant leave to amend, and “leave to amend must be freely given when justice requires.” Ariz. R. Civ. P. 15(a)(2); ELM Ret. Ctr., LP v. Callaway, 226 Ariz. 287, 292 (App. 2010). Arizona Court of Appeals will affirm the denial to leave to amend absent clear abuse of discretion. In re Estate of Torstenson v. Valley Nat’l Bank, 125 Ariz. 373, 376 (App. 1980). It is not an abuse of discretion when denying leave to amend if the movant has unduly delayed or the amendment is futile. Id. at 376-77.

The Court of Appeals first focused on whether Camelot’s request to leave was timely or an unduly delay. The injury happened in 2014. The lawsuit was filed in 2016. It was not until 2019 when Camelot executed the assignment agreement with Younger Brothers and sought leave to add new claims based on the terms of assignment agreement. The Court found the five-year gap since the incident and the three-year gap since the lawsuit was filed to be an unduly delay.

The Court of Appeals also analyzed the new allegations which Camelot sought to plead in its third-party complaint. Younger Brothers had not been sued. Thus, it could not have been liable to employee Cabrera on claims arising out of contract, tort, or indemnity. Camelot’s proposed allegations of express indemnity, breach of contract premised on express indemnity, and gross negligence claim premised on contractual relationship were futile as a matter of law.

Additionally, the Court of Appeals found Camelot was not a third-party beneficiary of the Younger Brothers and Genaro’s and the Genaro’s and Alvarez agreements, which prevents Camelot from bringing a breach of contract claim. Further, the gross negligence claim failed because Genaro’s did not owe Camelot a duty since Camelot was not a party to the contract between Younger Brothers and Genaro’s.

Tyson & Mendes Takeaway: Frequently, plaintiffs seek leave to amend the complaint to add more allegations against our insureds or move to add the insureds. It is important your defense counsel analyze under Arizona law whether the motion for leave to amend is untimely or whether the amendments are futile.

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