United States District Court, E.D. New York
MEMORANDUM AND ORDER
FEUERSTEIN, DISTRICT JUDGE 
February 8, 2017, plaintiffs John Campbell and Elizabeth
Campbell (collectively “Plaintiffs” or the
“Campbells”) commenced this diversity breach of
contract action against their homeowner's insurance
carrier, defendants Mercury Casualty Company and Mercury
Insurance Group (collectively “Mercury”). On
November 6, 2017, Mercury moved to amend its answer to assert
a counterclaim against Plaintiffs, and to file a third-party
action against Long Island Public Adjusters, LLC
(“LIPA”), Kevin Godfrey (“Godfrey”),
and Just Right Carpentry & Painting, Inc. (“Just
Right”) (collectively, the “third-party
defendants”). See Motion, Docket Entry
(“DE”) . The motion was referred by District
Judge Wexler to Magistrate Judge Arlene R. Lindsay for a
report and recommendation. For the reasons stated herein,
Magistrate Judge Lindsay's Report and Recommendation
(“Report”), DE , is accepted.
claims in this action arise from Mercury's denial of
insurance coverage for water damage suffered at the
Campbells' home due to a burst pipe on February 20, 2016.
Plaintiffs claim that they immediately filed a claim with
Mercury, and that Mercury immediately retained non-party
Advanced Restoration Corporation (“Advanced
Restoration”) to perform initial remediation at the
house. Mercury claims that before providing notice to it,
Plaintiffs contacted Godfrey, who is the owner of LIPA, to
assist them in the handling of their insurance claim. Godfrey
contacted Just Right and instructed that company to begin
remediation at the house. See Proposed Third Party
Complaint and Counterclaim (“Prop. 3rd Party
Compl.”), ¶9, DE [32-5]. Representatives of Just
Right and Advanced Restoration were at the house the same
day, although the parties dispute whether they were there at
the same time.
claims that after the initial remediation and the day before
it was to inspect the damage, Just Right gutted the kitchen,
including the cabinets. Prop. 3rd Party
Compl. ¶23. Godfrey, on behalf of Just Right,
subsequently submitted an estimate in an amount over $73, 000
for a new kitchen. Id. ¶28. From March 2016
through August 2016, Mercury paid Plaintiffs over $39, 000 to
cover rent for temporary housing. Id. ¶38.
receiving invoices from both Just Right and Advance
Restoration for similar remediation work performed by each on
the same date, Mercury began to investigate both the work
performed and the claim. Prop. 3rd Party Compl.
¶18. Mercury ultimately determined that Just Right had
submitted invoices for work it did not perform. Id.
¶19. After investigation, Mercury also “determined
that the kitchen was not damaged in the manner described by
plaintiffs and certainly did not warrant a new
kitchen.” Id. ¶31. In August 2016,
Mercury denied coverage for failing to preserve the damage
for Mercury's review.
their complaint, Plaintiffs seek contractual damages of $150,
000 and punitive damages for Mercury's “bad faith
conduct directed at the public generally and at the
plaintiffs specifically to deny coverage where no legitimate
basis exists for such denial.” Complaint, ¶39, DE
. Mercury now moves for leave to add a counterclaim
against Plaintiffs for breach of contract to recover the
rental payments, claiming that it would not have made those
payments but for the material misrepresentations made by
Plaintiffs. In addition, Mercury requests permission to file
a third-party complaint against the third-party defendants
alleging claims of breach of contract against LIPA and
Godfrey, and fraudulent misrepresentation against Just Right.
Prop. 3rd Party Compl. ¶¶ 38, 43.
Report, Magistrate Judge Lindsay recommended that
Mercury's motion be (1) granted to the extent it seeks to
add a counterclaim against plaintiffs; (2) granted to the
extent it seeks to file a third party action against
third-party defendants for fraudulent misrepresentation; and
(3) denied to the extent that it seeks to assert a claim for
breach of contract against third-party defendants. Report and
Recommendation (“Report”), DE . Magistrate
Judge Lindsay further sua sponte recommended that
the Clerk of the Court be directed to amend the caption to
reflect the proper names of the defendants.
to 28 U.S.C. § 636, a “judge of the court shall
make a de novo determination of those portions of the report
or specified proposed findings or recommendations to which
objection is made.” 28 U.S.C. § 636(b)(1); see
also Fed.R.Civ.P. 72(b) (“The district judge must
determine de novo any part of the magistrate judge's
disposition that has been properly objected to”). Upon
reviewing the report, a district judge may “accept,
reject, or modify, in whole or in part, the findings or
recommendations made by the magistrate judge.” 28
U.S.C. § 636(b)(1); see also Fed.R.Civ.P.
72(b). “[I]n providing for a ‘de novo
determination' . . . Congress intended to permit whatever
reliance a district judge, in the exercise of sound judicial
discretion, chose to place on a magistrate's proposed
findings and recommendations.” United States v.
Raddatz, 447 U.S. 667, 676, 100 S.Ct. 2406, 65 L.Ed.2d
to assert the counterclaim is governed by Rule 15, which
provides that leave to amend pleadings should be freely given
“when justice so requires.” Fed.R.Civ.P. 15
(a)(2). “A district court has discretion to deny leave
for good reason, including futility, bad faith, undue delay,
or undue prejudice to the opposing party.” McCarthy
v. Dun & Bradstreet Corp., 482 F.3d 184, 200-01 (2d
Cir. 2007). The party opposing the motion has the burden of
establishing that amendment should be denied. See
Blaskiewicz v. Cnty. of Suffolk, 29 F.Supp.2d 134,
137-38 (E.D.N.Y. 1998).
14(a) provides that a defendant may serve a third-party
complaint “on a nonparty who is or may be liable to it
for all or part of the claim against it.” Fed.R.Civ.P.
14(a). The defendant must obtain leave of court to commence a
third-party action more than fourteen days after serving its
answer. Fed.R.Civ.P. 14(a)(1). Motions to implead non-parties
“should be freely granted to promote efficiency unless
to do so would prejudice the plaintiff, unduly complicate the
trial, or would foster an obviously unmeritorious
claim.” New York v. Pride Solvents & Chem.
Co., 15-CV-6569, 2017 WL 6403515, at *2 (E.D.N.Y. Dec.
15, 2017) (quoting Shafarman v. Ryder Truck Rental,
Inc., 100 F.R.D. 454, 459 (S.D.N.Y. 1984)).