MEMORANDUM DECISION ON MOTION FOR LEAVE TO AMEND COUNTERCLAIM AND RECOMMENDED DECISION ON MOTION TO DISMISS
The plaintiff, Northern Utilities, Inc., moves to dismiss the claim forpunitive damages asserted by defendants Richard Hollis and LewistonRadiator Works, Inc. (the "Lewiston defendants") in their counterclaim.The Lewiston defendants move for leave to amend that section of theircounterclaim. I grant the motion for leave to amend and recommend thatthe court deny the motion to dismiss.
I. Applicable Legal Standard
The motion to dismiss appears to invoke Fed.R.Civ.P. 12(b)(6), whichprovides for dismissal for failure to state a claim on which relief may begranted. Northern Utilities, Inc.'s Motion to Dismiss Claims for PunitiveDamages, etc. ("Motion to Dismiss") (Docket No. 23) at 1. "[I]n ruling ona motion to dismiss [under Rule 12(b)(6)], a court must accept as trueall the factual allegations in the complaint and construe all reasonableinferences in favor of the plaintiffs." Alternative Energy, Inc. v. St.Paul Fire & Marine Ins. Co., 267 F.3d 30, 33 (1st Cir. 2001). Thedefendants are entitled to dismissal for failure to state a claimPage 2only if "it appears to a certainty that the plaintiff[s] would not beunable to recover under any set of facts." State St. Bank & Trust Co.v. Denman Tire Corp., 240 F.3d 83, 87 (1st Cir. 2001); see also Wall v.Dion, 257 F. Supp.2d 316, 318 (D. Me. 2003).
Leave to amend a pleading "shall be freely given when justice sorequires." Fed.R.Civ.P. 15(a). A court acts within its discretion to denysuch leave under the following circumstances: undue delay, bad faith ordilatory motive on the part of the movant, repeated failure to curedeficiencies by amendments previously allowed, undue prejudice to theopposing party and futility of the proposed amendment. Foman v. Davis,371 U.S. 178, 182 (1962). When leave to amend is sought before discoveryis complete and neither side has moved for summary judgment, as is thecase here, futility is "gauged by reference to the liberal criteria ofFederal Rule of Civil Procedure 12(b)(6)." Hatch v. Department forChildren, Youth & Families, 274 F.3d 12, 19 (1st Cir. 2001). "In thissituation, amendment is not deemed futile as long as the proposed amendedcomplaint sets forth a general scenario which, if proven, would entitlethe plaintiff to relief against the defendant on some cognizable theory."Id.
II. Leave to Amend
In response to the plaintiff's motion to dismiss, the Lewistondefendants filed a motion to amend their counterclaim. Defendants' Motionto Amend Counterclaim, etc. ("Motion to Amend") (Docket No. 32). Theplaintiff opposes the motion, contending that it would be futile.Plaintiff Northern Utilities, Inc.'s Opposition to the Defendants' Motionto Amend Counterclaim, etc. ("Amendment Opposition") (Docket No. 38) at1. Specifically, the Lewiston defendants seek to revise paragraphs 17 and19 of their counterclaim, as follows (proposed new material in italics):
The injury and damage to the person of Hollis and property of Radiator Works and Hollis were caused by acts or omissions of servants and agents of Northern Utilities, including, without limitation, use for many years of distributionPage 3 mains known by Plaintiff not to be suited to the safe transport of natural gas, failure for many years to maintain its distribution system, systematic failure to inspect its distribution system, and failure to warn counterclaimants or other members of the public of the long known danger posed by its said distribution system.
* * *
The injury to person and destruction of property belonging to Radiator Works and Hollis was caused by the negligent acts or omissions of servants and agents of Northern Utilities including, without limitation, use for many years of distribution mains known by Plaintiff not to be suited to the safe transport of natural gas, failure for many years to maintain its distribution system, systematic failure to inspect its distribution system, and failure to warn counterclaimants or other members of the public of the long known danger posed by its said distribution system.Amended Counterclaim of Lewiston Radiator Works, Inc. and Richard Hollisand Demand for Jury Trial (attached to Motion to Amend), ¶¶ 17, 19(emphasis added); Answer on Behalf of Defendants Lewiston Radiator Worksand Richard Hollis to Plaintiff's Complaint, etc. (Docket No. 11),Counterclaim ¶¶ 17, 19. The plaintiff contends that this amendment wouldbe futile because the proposed language would not state a claim forpunitive damages under Maine law. Amendment Opposition at 1-3.
Under Maine law, punitive damages are available "based upon tortiousconduct only if the defendant acted with malice." Tuttle v. Raymond,494 A.2d 1353, 1361 (Me. 1985). Malice may be proved by evidence that thedefendant's conduct was motivated by ill will toward the plaintiff orthat the defendant's deliberate conduct, while not motivated by ill willtoward the plaintiff, was so outrageous that malice toward the personinjured by that conduct can be implied. Id. Reckless disregard of thecircumstances is insufficient. Id. In this case, the plaintiff focuses onparagraph 22 of the Lewiston defendants' counterclaim, AmendmentOpposition at 2-3, which states: "The negligent acts and omissions ofNorthern Utilities, its servants and agents, were malicious, outrageous,intentional, wanton, willful, reckless and done so as to entitlecounterclaimants to punitive damages," Counterclaim ¶ 22. It is truethat "mere"Page 4negligence is insufficient to create an entitlement to punitive damagesunder Maine law, but the plaintiff reads both Tuttle and the counterclaimtoo narrowly. The use of the word "negligent" in paragraph 22 does notread paragraphs 17 and 19 out of the counterclaim. Tuttle dealt with thelegal standard of proof for recovery of punitive damages; it did notaddress the adequacy of any particular form of pleading an entitlement topunitive damages. Considering the amended counterclaim as a whole, Iconclude that it sets forth a general scenario which, if proven, wouldjustify the award of punitive damages.
The motion for leave to amend the counterclaim is granted.
III. Motion to Dismiss
The motion to dismiss addresses the Lewiston defendants' counterclaimin its unamended form, but the plaintiff makes the same arguments againstboth versions. Amendment Opposition at 1, ¶ 2. If the counterclaimfailed to state a claim for punitive damages under Maine law before itwas amended, that deficiency has been resolved by the amendment. Theplaintiff's argument to that effect, Motion to Dismiss at 2-3, fails forthe reasons already discussed.
The plaintiff contends in the alternative that Maine's common-lawstandard for the award of punitive damages violates the federalconstitution. Id. at 4-16. This is an issue that will only be reached inthis case after trial, if the trial court concludes that the evidence issufficient to allow the punitive damages issue to go to the jury. At thattime, the plaintiff may argue that, even if the Maine common-law standardis met, the only constitutionally acceptable standard, as defined by theSupreme Court, has not been met and may submit proposed jury instructionssetting out its view of the proper standard. If the issue is notpresented to the factfinder, or if the factfinder awards no punitivedamages, the issue will have no impact on this case. If the jury doesaward punitive damages, the plaintiff then has a basis upon which to seekresolution of the constitutional issue on appeal.Page 5
Perhaps anticipating the possibility that its extensive constitutionalargument would be deemed premature, the plaintiff contends that requiringit to wait for resolution of this issue, if it arises at all, through theappellate process "do[es] not satisfy due process of law requirements."Motion to Dismiss at 16. The plaintiff asserts that it will otherwise be"subject[ed] . . . to an increased burden of proof because [it] mustoverturn a jury verdict in order to prevail." Id. at 17. Verdicts areregularly overturned when jury instructions are found to have beenimproper. There is nothing in the nature of the Lewiston defendants'claim for punitive damages that distinguishes it from other claims inthis regard. The plaintiff characterizes its possible resort to theappellate process in this case as "after-the-fact Due Process," id., anovel concept which the plaintiff contends itself deprives a party whomust take an appeal of his right to due process. The plaintiff does notsuggest any reason why this argument would not apply to any party takingan appeal and contending that a lack of due process in the proceedingsbelow is one of the grounds for appellate relief.
Conspicuous by its absence from the plaintiff's submissions is anyattempt to distinguish Poe v. Ullman, 367 U.S. 497 (1961), in which theSupreme Court stated that limitations on the exercise of a federalcourt's powers have "special urgency in cases challenging . . . statejudicial action as repugnant to the Constitution" and reiterated itsdirection "not to entertain constitutional questions in advance of thestrictest necessity." 367 U.S. at 503 (citation omitted). The SupremeCourt decisions cited by the plaintiff do not contravene this basicprinciple and do not support the plaintiff's contention that it isentitled to have the validity of Maine's common law of punitive damagesunder the federal constitution resolved at this relatively early stage ofthe proceedings.
Baggett v. Bullitt, 377 U.S. 360 (1964), was a declaratory judgmentaction in which the plaintiffs brought a facial challenge to statestatutes that would unquestionably have been applied to them in theabsence of the action, id. at 361-66. Here, whether the defendants willbe entitled under Maine law to havePage 6their punitive damages claim reach the jury remains very much an openquestion. In Roberts v. United States Jaycees, 468 U.S. 609 (1984), anational organization brought a declaratory judgment action challenging astate statute that had already been applied to its chapters located inthat state, id. at 614-15. In Santosky v. Kramer, 455 U.S. 745 (1982),the issue was the appropriate standard of proof in an action broughtunder a state statute to terminate parental rights. The statute hadalready been applied to the petitioners. Id. at 751. In State Farm Mut.Auto. Ins. Co. v. Campbell, 538 U.S. 408 (2003), the court held that anaward of $145 million in punitive damages under state law in a case inwhich the compensatory award was $1 million was an irrational andarbitrary deprivation of the defendant's property, id. at 412, 429.1The specific language cited by the plaintiff from each of theseopinions, when considered in context, cannot reasonably be read to suggestthat a party raising a federal due process challenge to a principle ofstate common law is entitled to have that issue resolved before trial.2
This case more closely resembles Kundrat v. Halloran, 145 F.Supp.2d 865(E.D. Mich. 2001), where the defendant moved to dismiss an action inwhich the plaintiff contended that the defendant, a judge, deprived himof liberty and property in violation of the due process clause of thefederal constitution by applying a state statute that authorized theissuance of ex parte protective orders, id. at 868. Among otherarguments, the defendant contended that the statute was constitutionaland that the plaintiff therefore failed to state a claim on which reliefcould be granted. Id. at 870. The court, citing Ullman, held that thePage 7constitutional issue was not ripe for adjudication when it was possiblethat the case could be disposed of without the need to address thatissue. Id. The same reasoning is applicable to the instant case.
For the foregoing reasons, (i) the motion of defendants LewistonRadiator Works, Inc. and Richard Hollis for leave to amend theircounterclaim is GRANTED and I recommend that the plaintiff's motion todismiss the counterclaim of those defendants for punitive damages beDENIED without prejudice.
1. The Supreme Court's decision was based on its analysis of the factsof the case under the principles outlined in BMW of North Am., Inc. v.Gore, 517 U.S. 559 (1996). Those principles, 408 U.S. at 418, are notnecessarily facially inconsistent with the Maine Law Court's decision inTuttle.
2. The plaintiff also cites extensively to the dissenting opinion ofJustice O'Connor in Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 42-64(1991), e.g., Motion to Dismiss at 5, 6, 11, 12, 13-14, 15, 16, assertingthat "the Supreme Court adopted Justice O'Connor's dissenting positionexpressed in . . . Haslip" in Campbell, id. at 5, and that "JusticeO'Connor's dissent in Haslip was a substantial basis of the majorityopinion in Campbell," id. at 12 n. 6. While the majority opinion inCampbell does quote some general language from Justice O'Connor's dissentin Haslip, 538 U.S. at 417, it is not accurate to characterize theCampbell court as adopting the Haslip dissent's position on the merits.My analysis relies on the majority opinion in each case cited by theplaintiff.Page 1