The opinion of the court was delivered by: JOAN H. LEFKOW, District Judge
MEMORANDUM DECISION AND ORDER
Plaintiff/third-party defendant, James Cape & Sons Company ("Cape"),
seeks leave to file an Amended Complaint against American Home Assurance
Company ("American Home") and leave to file Consolidated and Amended
Affirmative Defenses to American Home's Third Party Complaint. For the
reasons stated below, the motion is granted in part and denied in part.
On or about July 22, 1999, Bowles Construction Services, Inc.
("Bowles") entered into a contract with the United States Army Corps of
Engineers ("Army") to perform certain construction improvements on a
project commonly referred to as the Chicago Shoreline Improvements in
Chicago, Illinois (the "Project"). Pursuant to its contract with the Army
and the Miller Act, 40 U.S.C. § 3131, Bowles was required to obtain a
performance bond guaranteeing its performance of its obligations under the
contract and a payment bond guaranteeing Bowies' payments to persons or
entities providing labor or materials to the project. On or about August 25, 1999, Bowles and Cape entered into a written
subcontract whereby Cape agreed to perform certain work on the Project.
To assist Bowles in obtaining the payment bond for the Project, Cape
requested that American Home issue the payment bond on behalf of Bowles.
To secure issuance of the payment bond, Cape, Curkeet Services, Inc.,
Cape Brothers Realty & Equipment Co., Christopher C. Cape, W. Robert
Cape, William R. Cape, and Amy Cape (collectively, the "Cape
Indemnitors") executed a General Contract of Indemnity ("Indemnity
Agreement") for the benefit of American Home. American Home then executed
and provided a payment bond pursuant to the Miller Act,
40 U.S.C. § 270(a)-(d), in the amount of $2,500,000 (the "Payment
Beginning in or around August, 2000, Bowles ceased to pay Cape for its
labor or materials, except for two miscellaneous fund transfers. Despite
not paying Cape, Bowles continued to submit pay applications to the Army
for reimbursement and continued to receive payment for Cape's work. Cape
notified American Home of Bowies' failure to pay. American Home then
contacted the Army to notify it of Bowies' failure and to "request that
[the Army] take such actions as necessary to prevent prejudice to either
American Home or to Cape, its indemnitor." (Def. Group Ex. 7.)
On February 21, 2001, Cape filed against Bowles a Demand for
Arbitration with the American Arbitration Association to resolve the
dispute arising out of Bowies' failure to pay Cape. The arbitrators found
in favor of Cape and awarded compensatory damages, equitable remedies,
and attorneys' fees in the amount of $2,560,279.62. On June 21, 2002, the
Circuit Court of Cook County, Illinois confirmed the arbitration award,
which was subsequently modified in other respects on October 21, 2002. To
date, Bowles has failed to pay. On March 15, 2002, while the matter between Cape and Bowles was pending
in state court, Cape filed its initial Complaint against American Home
seeking payment for its work on the Project under the Payment Bond.
Between April 24, 2002, and November 26, 2002, several other
subcontractors filed claims against the Payment Bond. Since the total sum
of the pending claims against the Payment Bond exceeded the total limit
of American Home's exposure of $2,500,000, American Home consolidated
several of the suits and filed a counterclaim against all known Bond
claimants seeking a determination of each claimant's rights, if any,
against the Payment Bond. In addition, American Home filed a Third Party
Complaint against the Cape Indemnitors seeking an order requiring the
Cape Indemnitors to indemnify American Home from all claims against the
Payment Bond. On September 17, 2002, Cape filed its answer and
affirmative defenses to American Home's indemnity complaint.
By virtue of the assertion of liability under the Indemnity Agreement,
Cape entered into settlement agreements with the four of the
subcontractors seeking payment under the Payment Bond (the "subcontractor
claimants"). Cape settled these claims between October 3, 2002, and
October 2, 2003. The subcontractor claimants' suits against American Home
were subsequently dismissed with prejudice. Cape has also agreed in
principle to settle another of the claims against the Payment Bond.
On May 14, 2003, Cape submitted its first discovery request to American
Home. American Home failed to produce any documents. On January 15, 2004,
this court ordered American Home to respond to Cape's discovery requests
by January 30, 2004. On February 4, 2004, Cape received from American
Home certain discovery materials that Cape alleges demonstrate that American Home breached the Indemnity Agreement by
failing to take action to rectify Bowies' nonpayment.
Cape now seeks leave to amend its Complaint against American Home to
include a subrogation count for the four claims that Cape settled with
the subcontractor claimants and to include counts alleging that American
Home breached its contractual and legal duty to exercise good faith and
fair dealing by failing to take action to rectify Bowies' failure to pay
Cape. Cape also seeks to amend its affirmative defenses to American
Home's indemnity action to include the defenses that American Home
breached the indemnity contract and that American Home acted in bad
Rule 15(a) of the Federal Rules of Civil Procedure provides that leave
to amend a pleading "shall be freely given when justice so requires." The
Seventh Circuit has held that leave to amend pleadings should be
liberally granted unless (1) the movant unduly delayed filing its motion
for leave to amend; (2) the opposing party would suffer undue prejudice;
or (3) the amended pleading would be futile. Campania Management Co. v.
Rooks, Pitts & Poust, 290 F.3d 843, 849 (7th Cir. 2002)(citing Forman
v. Davis, 371 U.S. 178, 182 (1962)). Undue prejudice "is the most
important factor in determining whether to allow an amendment to a
complaint." Ameritech Mobile Communications, Inc. v. Computer Sys.
Solutions, Inc., 188 F.R.D. 280, 283 (N.D. Ill. 1999).
Cape did not unduly delay filing its motion. On May 14, 2003, Cape
submitted its first discovery request to American Home. American Home
failed to produce any documents to Cape until February 4, 2004. According to Cape, the documents produced on
February 4 contain information that it believes demonstrate that American
Home breached the indemnity agreement and acted in bad faith. Cape
promptly sought to add these claims to its complaint, filing its motion
for leave to amend on February 17, 2004. Furthermore, during the period
from October, 2002, to October, 2003, Cape settled four outstanding bond
claims and thus became subrogated to the rights of those claimants. The
combination of Cape's successful year-long effort to settle the bond
claims and the fact ...