On July 24, 2007, unknown to Martin, GCC tendered the defense and demanded indemnity from Fletcher General, Inc. and Fletcher Construction Company North America (FCCNA). The letter stated that under a stock purchase agreement from 1996, Fletcher General, Inc. remained liable for events occurring before 1996, and that because WSH installed the machine around 1980, Fletcher General, Inc. was responsible for the resulting liability.
On October 19, 2007, more than two months after the statute of limitations had run, GCC filed its answer and included a third-party claim for indemnity against Fletcher General, Inc. This was the first time that Martin had notice of a Fletcher entity’s potential liability.
The complex corporate history is described below. When WSH installed the machine in 1981, WSH was a subsidiary of Wright Schuchart, Inc. (WSI), which WSI purchased the assets of a corporation known as General Construction Company in 1981. Thus, WSH and GCC were subsidiaries of WSI.
In 1987, WSI was sold to Fletcher Construction Company (Delaware), Ltd., which was a subsidiary of FCCNA, and FCCNA was a subsidiary of Fletcher Challenge, a New Zealand multi-national corporation.
In 1993, Fletcher merged several of its subsidiaries, including WSI, which included WSH and GCC, as subsidiaries, into Fletcher General, Inc, which assumed WSH’s preexisting liabilities.
In 1996, Fletcher sold the majority of Fletcher General, Inc.’s assets to Fletcher General’s managers, and the managers created a new company named General Construction Company. Thus, there were two GCCs. Originally GCC was a subsidiary of WSI. That GCC merged into Fletcher General, Inc. in 1993. However, a new GCC was formed in 1996 when Fletcher General, Inc.’s managers purchased the majority of Fletcher General, Inc.’s assets and formed a completely different company named GCC. It is this GCC that Martin sued in 2007, before the statute of limitations expired.
Fletcher General, Inc. continued to exist, and agreed under the asset purchase agreement to assume all of its preexisting liabilities occurring before July 1, 1996.
In 2001, Fletcher General, Inc. merged into FCCNA, and FCCNA thereby assumed Fletcher General, Inc.’s preexisting liabilities.
GCC filed a motion for summary judgment contending that Martin sued the wrong party, as GCC was not a successor in interest to WSH under the asset purchase agreement. The trial court granted GCC’s motion.
On January 22, 2010, Martin filed an amended complaint adding FCCNA as a defendant. On November 23, 2010, FCCNA filed a motion for summary judgment to dismiss it from the case based on the statute of limitations. The trial court granted FCCNA’s motion. The court of appeals affirmed. The supreme court reversed, holding that Martin’s amended complaint related back to the date of her initial complaint under CR 15(c), thus making it timely.
The standard of review for CR 15(c) determinations is de novo.
There are two textual requirements and a judicially-created requirement for relation back pursuant to CR 15(c). The textual requirements are that (1) the added party must have received notice of the action within the limitations period such that he or she will not be prejudiced in maintaining his or her defense on the merits, and (2) the added party must have known or should have known that but for a mistake concerning his or her identity, the action would have been brought against him or her. The party seeking to amend its complaint has the burden to prove these two elements are satisfied.
The non-textual requirement is that a plaintiff may not add a new defendant if he delays in adding him “due to inexcusable neglect.”
The court found that both textual requirements were met. The court then turned to whether the inexcusable neglect prong applied. Inexcusable neglect exists when the identity of a defendant is readily available, and the plaintiff provides no reason for failing to name the defendant. Delay due to a conscious decision, strategy, or tactic constitutes inexcusable neglect. The court noted that it has held that when a plaintiff could have discovered the identity of a defendant from any one of a variety of public sources and fails to do so, the plaintiff’s failure is inexcusable neglect.
The court noted that Haberman v. Wash. Pub. Power Supply Sys., 109 Wn.2d 107, 174, 744 P.2d 1032, 750 P.2d 254 (1987), first required that the record indicate that the defendant’s identity was easily ascertainable during the limitations period before requiring the plaintiff to give a reason for failing to name the defendant. The court noted that the defendant bears the initial burden of showing neglect by producing evidence that the defendant’s identity was easily ascertainable by the plaintiff. Once the defendant has produced that evidence, the burden shifts to the plaintiff to give a reason for failing to ascertain the identity of the defendant. If the plaintiff fails to give a reasonable excuse or show that he or she exercised due diligence, it is inexcusable neglect.
The court noted that it originally adopted the “inexcusable neglect” requirement from the federal courts and their analogous Federal Rule of Civil Procedure. The court noted that the U.S. Supreme Court has now eliminated “inexcusable neglect” from its analogous rule. Because the parties did not ask the court to consider eliminating its “inexcusable neglect” requirement, it left that issue for another day.
Applying the “inexcusable neglect” standard, the court found that FCCNA failed to show that its identity was easily ascertainable during the limitations period. As a result, Martin did not need to give a reason for failing to identify FCCNA, and there was no inexcusable neglect.
Keywords: Correcting Defendant, Adding Party, Statute of Limitations
Paul R. Cressman Jr. is with Ahlers & Cressman PLLC, Seattle.