The Lampo Group, LLC v. Marriott Hotel Services Inc.

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF TENNESSEE

NASHVILLE DIVISION

THE LAMPO GROUP, LLC, d/b/a )

RAMSEY SOLUTIONS, a Tennessee )

Limited Liability Company, )

)

Plaintiff/Counter-defendant, )

)

v. ) Case No. 3:20-cv-00641

) Judge Aleta A. Trauger

MARRIOTT HOTEL SERVICES, )

INC., a Delaware Corporation, )

)

Defendant/Counter-plaintiff. )

MEMORANDUM

Before the court is the Motion to Amend Affirmative Defenses to Counterclaim and

Memorandum of Law in Support Thereof (“Motion to Amend”) (Doc. No. 54) filed by

plaintiff/counter-defendant The Lampo Group, LLC, d/b/a Ramsey Solutions (“Ramsey

Solutions”). Citing Rule 15(a) of the Federal Rules of Civil Procedure, Ramsey Solutions seeks to

amend its affirmative defenses to the Counterclaim asserted by defendant/counter-plaintiff

Marriott Hotel Services, Inc. (“Marriott”) to include three additional affirmative defenses.

For the reasons set forth herein, the motion will be granted.

I. FACTUAL AND PROCEDURAL BACKGROUND

Ramsey Solutions filed its original Complaint initiating this case on July 22, 2020 and its

Amended Complaint (Doc. No. 10) within a week of that date. It seeks declarations from the court

regarding the “meaning and interpretation” of specific provisions in three contracts governing the

parties’ relationship (Claims I, II, and IV), to which the parties refer as the “Palms Agreement,”

the “Texan Agreement,” and the “Rockies Agreement” (collectively, the “Gaylord Agreements”).

The Gaylord Agreements, executed in 2017, all pertain to conferences or events that Ramsey

Solutions agreed to hold at different hotel/conference centers operated by Marriott in 2020 (at the

Gaylord Palms Resort & Convention Center (“Gaylord Palms”) in Florida), 2021 (at the Gaylord

Texan Resort & Convention Center (“Gaylord Texan”) in Texas), and 2022 (at the Gaylord

Rockies Resort & Convention Center (“Gaylord Rockies”) in Colorado). Ramsey Solutions also

asserts a claim for breach of the Palms Agreement (Claim III). Marriott filed its timely Answer

and Counterclaim, in which it disputes Ramsey Solutions’ proposed interpretation of the relevant

contract provisions, denies liability for breach of contract, asserts numerous affirmative defenses,

and brings counterclaims for breach of contract. (Doc. No. 21.) Ramsey Solutions filed its original

Answer and Affirmative Defenses to Counterclaim on September 18, 2020. (Doc. No. 27.)

The Initial Case Management Order proposed by the parties and adopted by the court on

October 19, 2020, established a deadline for amending pleadings of December 15, 2020 and a

discovery cut-off date of June 30, 2021 (Doc. No. 31), among other deadlines. The trial was set

for February 15, 2022. (Doc. No. 32.) Since entry of the Initial Case Management Order, virtually

all of the scheduling deadlines have been extended by agreement or by court order except the

deadline for amending pleadings. The trial has been reset for August 2, 2022 (Doc. No. 58), and,

more recently, the court entered an Order on September 14, 2021, extending the fact discovery

deadline to March 1, 2022 and the deadline for Daubert motions and dispositive motions to April

1, 2022 (Doc. No. 65). In the same Order, the court noted that it would not extend the deadline for

amending pleadings but would rule on Ramsey Solutions’ Motion to Amend. (Doc. No. 65 ¶ 5.)

In its Counterclaim, as relevant here, Marriott states claims for breach of the three Gaylord

Agreements and further expressly asserts that it is entitled to liquidated damages under the terms

of those contracts, based on the Cancellation Policy provisions thereof. (Doc. No. 21,

Counterclaim ¶¶ 25–26, 58–59, 90–91.) In addition, Marriott pleads “in the alternative” that it is

entitled to its “actual damages in an amount to be proven at trial” for breach of each of these

contracts. (Id. ¶¶ 27, 60, 92.)

The Cancellation Policy provisions are largely the same in each of the three contracts. They

provide, in relevant part, that Ramsey Solutions (“Group”)

bears responsibility for the Room Block and the F&B [Food and Beverage] Guarantee.1

Group also agrees that the Hotel will suffer actual harm that will be difficult to determine

if the Group cancels this Agreement after the date hereof for reasons other than those

specified in this Agreement. The Group will pay as liquidated damages to the Hotel,

depending upon the timing of such cancellation, the following amounts, as a reasonable

estimate of harm to Hotel for the cancellation:

Time Period of Cancellation Amount of Liquidated Damages Due

0–180 days prior to arrival 100% of total room revenue2 plus 75% of F&B Guarantee

181–365 days prior to arrival 75% of total room revenue plus 50% of F&B Guarantee

366–551 days prior to arrival 40% of total room revenue

552 or more days prior to arrival 10% of total room revenue

(Doc. No. 10-1, at 14.3)

1 The F&B Guarantee in each contract is a minimum of $700,000. (See, e.g., Doc. No. 10-

1, at 12.)

2 “Total room revenue” is defined as “the dollar amount equal to the Room Block

multiplied by the Group’s average room rate, exclusive of resort fee.” (Doc. No. 10-1, at 14.) The

“Room Block” is the number of sleeping rooms reserved by Ramsey Solutions for conference

attendees.

3 The timelines in the Texan and Rockies Agreements differ slightly. The Texan Agreement

also requires liquidated damages of $25,000 for cancellations made 913 to 1095 days (2.5 to 3

years) in advance of the event and of $10,000 for cancellations 1096 days or more (3 to 3.5 years)

from the signing of the contract. (Doc. No. 10-6, at 12.) The Rockies Agreement calls for liquidated

damages of 40% of the total room revenue for cancellations 366 to 729 days prior to arrival, 10%

of total room revenue for cancellations 730 to 1,094 days prior to arrival, $25,000 for cancellations

1,095 to 1,459 days prior to arrival, and $10,000 for cancellations more than 1,460 days prior to

arrival. (Doc. No. 10-5, at 11.)

In its original Answer to the Counterclaim, Ramsey Solutions generally denies any

allegations or liability inconsistent with the terms of the contracts themselves. (See, e.g., Doc. No.

27, Answer to Counterclaim ¶¶ 25–27.) Its Affirmative Defenses did not expressly incorporate a

defense objecting to the enforceability of the liquidated damages provisions in the Gaylord

Agreements. However, for its Thirteenth Affirmative defense, Ramsey Solutions asserted that

Marriott’s claims are “barred because of illegality.” (Doc. No. 27, at 28.) It narrowed the defense,

however, to the Palms Agreement, explaining: “As contemplated and written the ‘Palms

Agreement,’ the fulfillment of the same would have been illegal [sic].” (Id. at 28–29.) Curiously,

it does not assert that “fulfillment” of the other two Gaylord Agreements, which are materially

identical, would be “illegal.”

However, Ramsey Solutions filed its Motion to Amend and proposed Amended Answer

and Affirmative Defenses on August 11, 2021, seeking to add three new affirmative defenses:

Eighteenth Affirmative Defense. As and for its eighteenth affirmative defense,

Ramsey Solutions states that the liquidated damages provisions in the Palms

Agreement, Texan Agreement and Rockies Agreement that are being sued upon in

the Counterclaim are illegal.

Nineteenth Affirmative Defense. As and for its nineteenth affirmative defense,

Ramsey Solutions states that the liquidated damages provisions in the Palms

Agreement, Texan Agreement and Rockies Agreement are unenforceable. The

provisions provide for a windfall to Marriott as they fail to deduct any of the

expenses associated with generating the revenue and, therefore, have no rationale

[sic] relationship to Marriott’s actual damages. The stipulated damages sought in

the Counterclaim are actually a penalty and, accordingly, the provisions cannot be

enforced.

Twentieth Affirmative Defense. As and for its twentieth affirmative defense,

Ramsey Solutions states that the purposes of the agreements were frustrated or

otherwise made impossible to perform and should be rescinded because, among

other things, (1) on July 2, 2020, Michael Wainwright and Michael Stengel, on

behalf of Marriott, told Ramsey Solutions during a telephone call to discuss the

Palms Event that Marriott may still cancel the Palms Event (even as late as during

the event itself) and that Marriott may continue to impose additional restrictions

and limitations on the Palms Event as the event was now only a week or so away;

and, (2) despite being familiar with Ramsey Solutions’ live events and the

importance of the guest experience to attendees, Marriott imposed a myriad of

restrictions and limitations on the event that removed the benefit of the bargain

including, without limitation, closing of on-site restaurants, closing and/or

limitation of the spa facilities, room service and valet, removal of the food service

as outlined in the agreement and limitation on gym and pool access. None of these

restrictions or limitations were required by federal, state or local laws, regulations

or ordinances and severely limited the benefit of the bargain to Ramsey Solutions

and frustrated the purposes of the Palms Agreement such that it should be rescinded

as it would otherwise be inequitable.

(Doc. No. 54-1, at 29–30.)

Marriott filed a Memorandum of Law in Opposition to the Motion to Amend (Doc. No.

60), and Ramsey Solutions filed a Reply in further support of its motion (Doc. No. 62).

II. STANDARD OF REVIEW

“[W]hen a party seeks to amend its pleadings . . . after the expiration of scheduling order

deadlines, it must show good cause under Rule 16(b).” Garza v. Lansing Sch. Dist., 972 F.3d 853,

879 (6th Cir. 2020) (citing Inge v. Rock Fin. Corp., 281 F.3d 613, 625 (6th Cir. 2002); Fed. R. Civ.

P. 16(b)(4)). “The primary measure of Rule 16’s ‘good cause’ standard is the moving party’s

diligence in attempting to meet” the scheduling order’s requirements, but courts also consider

‘possible prejudice to the party opposing the modification.’” Id. (quoting Inge, 281 F.3d at 625).

To be clear, “[w]hile the absence of prejudice to a non-moving party may be relevant in

determining whether leave to amend should be granted . . . , it does not fulfill the ‘good cause’

requirement of Rule 16(b).” Woodcock v. Ky. Dep’t of Corrs., No. 5:12-CV-00135-GNS-LKK,

2016 WL 3676768, at *1 (W.D. Ky. July 6, 2016) (citation omitted).

Assuming the movant clears the Rule 16 “good cause” hurdle, the court must then consider

whether the proposed amendment is permissible under Rule 15. Leary v. Daeschner, 349 F.3d 888,

909 (6th Cir. 2003). Under that rule, the court should “freely give leave [to amend] when justice

so requires.” Fed. R. Civ. P. 15(a)(2). Rule 15(a)(2) “embodies a ‘liberal amendment policy.’”

Brown v. Chapman, 814 F.3d 436, 442 (6th Cir. 2016) (citation omitted). To determine whether to

grant leave under this liberal policy, courts weigh several factors, including: “[u]ndue delay in

filing, lack of notice to the opposing party, bad faith by the moving party, repeated failure to cure

deficiencies by previous amendments, undue prejudice to the opposing party, and futility of

amendment.” Wade v. Knoxville Utils. Bd., 259 F.3d 452, 458–59 (6th Cir. 2001) (citation

omitted).

III. THE PARTIES’ POSITIONS

In its Motion to Amend, Ramsey Solutions cites only Rule 15 as providing the governing

standard, although it also asserts, in passing, that “there is good cause” to allow it to amend. (Doc.

No. 54, at 4.) The focus of its argument, however, is on the lack of any possible prejudice to

Marriott if Ramsey Solutions is permitted to amend. It argues that its proposed amendment would

not prejudice Marriott, because discovery is ongoing, no depositions have been taken, and Marriott

was on notice of Ramsey Solutions’ position regarding the enforceability of the liquidated damages

provisions in the Gaylord Agreements based on the “discovery served directed to the issue” and

on notice of the allegations underlying the proposed Twentieth Affirmative Defense since the filing

of the initial Complaint. (Id. at 3–4, 13–15). It also asserts that it did not unduly delay in seeking

to amend, despite the passage of the deadline for amending pleadings, because it sought leave to

amend “expeditiously after learning of Marriott’s position regarding the [unenforceability]

defense.” (Id. at 4; see also id. at 15–16.) It also asserts that the proposed amendment is not futile,

frivolous or brought in bad faith (id. at 4, 17–19), that “strong public policy” supports having cases

tried on their merits (id. at 15), and that it would be significantly prejudiced if not permitted to

amend.

Under the heading “Illegality Defense,” which appears to be inserted in support of Ramsey

Solutions’ claim that Marriott would not be prejudiced by the proposed amendment and that it

acted promptly in seeking to amend, Ramsey Solutions represents that it served discovery on

Marriott requesting, among other things, evidence regarding its damages and the quantification of

its damages in the summer of 2021. Marriott served its answers to Ramsey Solutions’ Second Set

of Interrogatories on August 6, 2021, in which it responded to all requests for information

regarding its damages by objecting that the information sought was “not relevant to the subject

matter of the lawsuit” and “not reasonably calculated to lead to the discovery of admissible

evidence.” (See, e.g., Doc. No. 54-3, at 11 (Answer to Interrog. No. 18).) More specifically,

Marriott asserted that the requested information about damages was not relevant, because Ramsey

Solutions had not preserved its objection to Marriott’s claim for liquidated damages by raising it

as an affirmative defense, as follows:

In order to preserve any challenge to the enforceability of liquidated damage

clauses in the Gaylord Agreements, Ramsey was required to assert, as an

affirmative defense in its Answer to Counterclaim, that liquidated damages are

unenforceable.

. . . .

Because Ramsey failed to raise an affirmative defense that the liquidated damage

clauses contained in the Gaylord Agreements are unenforceable, the affirmative

defense has been waived and the amount of actual damages suffered by Marriott is

irrelevant.

(Id.) In its August 10, 2021 Responses and Objections to Ramsey Solutions’ Second Request to

Produce, Marriott objected to providing documents relating to its actual damages on the same

grounds. (See, e.g., id. at 34 (Response to Request No. 1).)

Ramsey Solutions now maintains that, indeed, the liquidated damages provisions are

unenforceable “on their face” under Florida and Tennessee law, because they provide damages

well in excess of what Marriott’s actual damages would be if, in fact, it is able to establish its

claims for breach of contract. (Doc. No. 54, at 7.)4 Ramsey Solutions argues that “unreasonably

4 Ramsey Solutions actually states that Marriott’s position is that Ramsey Solutions was

required, but failed, to raise a defense of “illegality.” (Doc. No. 54, at 7.) In response to that

large liquidated damages [are] not just compensation and operate[] as a penalty. Under these

circumstances, the liquidated damages clause is unenforceable, and the nonbreaching party is not

entitled to recover the damages specified in the contract but must prove actual damages.” (Doc.

No. 54, at 11 n.10 (citation omitted).) Ramsey Solutions appears to be arguing that, because the

invalidity of the liquidated damages provisions is “facially obvious from a review of the

agreements,” it had no obligation to raise their unenforceability, and the matter is, instead, one of

“law for this Court.” (Id. at 11.) Ramsey Solutions insists that it is Marriott’s burden to prove that

the damages it seeks in its Counterclaim, including damages under the liquidated damages

provisions of the Gaylord Agreements, “accurately reflect[] its actual damages.” (Doc. No. 54, at

11 (citing MCA Television Ltd. v. Pub. Int. Corp., 171 F.3d 1265, 1276 (11th Cir. 1999) (“Under

Florida law, when a damages clause is held to be an unenforceable penalty, the party seeking to

recover for the breach must allege and prove his actual damages.”); Keck v. Meek, No. E2017-

01465-COA-R3-CV, 2018 WL 3199220, at *15 (Tenn. Ct. App. June 28, 2018)).) Alternatively,

Ramsey Solutions argues that, “even if Marriott’s position were correct that the illegality defense

applies” (although it has now acknowledged that this is not Marriott’s position), “there is authority

for the proposition that the defense of illegality cannot be waived [by the failure to raise it as an

affirmative defense] because a court may not enforce a contract that is illegal or contrary to public

policy.” (Id. (citations omitted).)

argument, Ramsey Solutions states that it “does not believe that illegality is the appropriate

defense” and that, instead, its position is that the “liquidated damages provisions are unenforceable

on their face because they purport to provide as damages more than Marriott could have ever

recovered if it fully performed the contracts.” (Id.) In a Notice of Scrivenors’ Error, Ramsey

Solutions now acknowledges that Marriott used the term “enforceability” rather than “illegality”

it its discovery responses. (Doc. No. 55, at 1.) It also states that this “error” does not “in any way

change the outcome or merits” of its motion (id. at 2), but the court must acknowledge that this

“error” does make its argument in its Motion to Amend all the more difficult to follow.

Although Ramsey Solutions does not expressly address whether the failure to raise

unenforceability as an affirmative defense results in waiver of the defense when the penalizing

nature of the liquidated damages provision is not facially obvious, it asserts that, “in an abundance

of caution, given Marriott’s objection to Discovery,” Ramsey Solutions now seeks to amend its

defenses to include both unenforceability and illegality as affirmative defenses. It also argues, in

the context of whether amendment would prejudice Marriott, that Marriott at all times has the

affirmative burden of proving its damages or that its actual damages are not readily ascertainable,

in order to enforce the liquidated damages provisions. That is, “[t]he very same evidence is needed

for Marriott [to prove its damages] as Ramsey Solutions will need to establish its defenses, so there

is no prejudice to Marriott.” (Doc. No. 54, at 14.)

In addition, Ramsey Solutions seeks to add “frustration of purpose” as an affirmative

defense, based on facts that have admittedly been in its possession since before it filed this lawsuit.

It asserts that the facts supporting this “defense” are included in its affirmative pleading, but it now

seeks to “add the defense to the Counterclaim as well.” (Doc. No. 54, at 12.) It asserts that it would

be “inequitable and prejudicial to enforce the Palms Agreement where the benefit of the bargain

was removed by Marriott.” (Id.)

In response, Marriott argues that granting leave to amend would “greatly prejudice” it,

essentially because it would be required to compute its actual damages, “prepare a financial

analysis demonstrating that the liquidated damages are enforceable,” identify witnesses who could

testify about damages, and decide whether to retain a damages expert. (Id. at 16–17.) In addition,

it would have to respond to Ramsey Solutions’ second set of discovery, and the discovery deadlines

are all fast-approaching. It posits that permitting amendment would “jeopardize the existing trial

date.” (Id. at 18.)5

Marriott also contends that, regardless, Ramsey Solutions has failed to establish “good

cause” for an amendment following expiration of the deadline for amending pleadings, as required

by Rule 16(b)(4), because “[t]he only plausible explanation for Ramsey’s failure to raise an

affirmative defense challenging the enforceability of the liquidated damage clauses is that Ramsey

completely misapprehends the law governing liquidated damages,” and mere ignorance of the law

does not constitute “good cause.” (Id.) In particular, it argues that Ramsey Solutions is “mistaken

about which party bears the burden of proof on enforceability of liquidated damages” and about

whether the “non-breaching party is required to put on evidence of actual damages in the absence

of a proper affirmative defense.” (Id. at 3.)

Marriott also argues that Ramsey Solutions has not acted “diligently” to protect its

interests. (Id. at 9, 13–15.) In addition to pointing out the length of time between the expiration of

the amendment deadline and the Motion to Amend, Marriott takes issue with Ramsey Solutions’

timeline, stating that Marriott responded to Ramsey Solutions’ first set of discovery in March 2021,

at which time, in support of the request that it provide documents supporting its claim for damages,

it provided “all documents supporting its claim for liquidated damages, including copies of the

Gaylord [Agreements], cancellation invoices and documents reflecting how liquidated damages

5 Marriott also asserts that the Motion to Amend should be denied outright simply because

Ramsey Solutions failed to file a motion to amend the scheduling order first, prior to seeking leave

to amend. (Doc. No. 60, at 2.) The plaintiff is correct that the failure to style its motion as one

seeking leave to amend the scheduling order, per se, is not fatal to its motion. Rather, in the Sixth

Circuit, courts are simply required to apply the Rule 16 standard to motions to amend filed after

the deadline for amending pleadings has expired. See, e.g., Leary, 349 F.3d at 909 (holding that

the district court had not abused its discretion in applying the Rule 16 “good cause” standard to

deny the plaintiffs’ motion for leave to amend their complaint).

were computed” under the Agreements. (Doc. No. 60, at 13.) In June, Ramsey Solutions sent a

letter objecting that this response did not adequately support Marriott’s claim for damages (see

Doc. No. 60-1, at 4), to which Marriott responded by letter dated June 28, 2021 in which it

expressly pointed out the reason for its response:

Marriott’s claim is for liquidated damages. The enforceability of a liquidated

damage clause is an affirmative defense, which must be asserted in the answer or

the defense is waived.

Ramsey did not assert an affirmative defense challenging liquidated damages

sought by Marriott in its counterclaim. [Since Ramsey] failed to do so, Marriott is

only required to establish that the contract contains a liquidated damage clause and

that liquidated damages have been properly computed. Marriott has produced all

such documents.

(Doc. No. 60-2, at 3–4.) Counsel for the parties then held a telephone conference call on June 29,

2021, in which Marriott’s response to Ramsey Solutions’ request for documentation of damages

was further discussed. (See Doc. No. 60, at 14.) Rather than immediately seeking to amend its

affirmative defenses at that time, Ramsey Solutions served a second set of discovery expressly

asking for additional information and documentation of damages and, upon receiving the responses

to that discovery, filed its Motion to Amend on August 11, 2021, six weeks after first learning of

Marriott’s position. Marriott asserts that this delay demonstrates Ramsey Solutions’ lack of

diligence. (Doc. No. 60, at 15.)

Regarding the “frustration of purpose” proposed amendment, Marriott maintains that

Ramsey Solutions has not provided good cause for failing to seek to amend within the deadline;

that Marriott has not been “on notice” of the “underpinnings” of this defense; and that the proposed

amendment is futile. (Id. at 18–21.)

While Marriott nominally focuses on the Rule 16(b)(4) standard and whether Ramsey

Solutions should be permitted to amend, Marriott’s true focus is on waiver. It argues that Ramsey

Solutions’ failure to raise the proposed affirmative defenses within the deadline for amending

pleadings means, not only that it should not be allowed to amend its Answer to the Counterclaim,

but also that it has waived its ability to argue that the liquidated damages provisions in the Gaylord

Agreements are unenforceable as a penalty or otherwise.

In its Reply, Ramsey Solutions contends that, by the time Marriott filed its Opposition to

the Motion to Amend, the trial date had already been pushed back to August 2, 2022, basically a

full year after the filing of the Motion to Amend, as a result of which it is clear that Marriott would

not suffer prejudice if Ramsey Solutions is permitted to amend its affirmative defenses. Regarding

good cause, Ramsey Solutions maintains that the parties have a “legitimate dispute about

applicable law” and that it is only because Marriott’s position is contrary to that of Ramsey

Solutions that it has, “in an abundance of caution,” sought leave to amend. (Doc. No. 62, at 3; see

id. (“[U]nder Rule 16(b)(4), Ramsey Solutions has established good cause for amending its

affirmative defenses as it only recently learned the information necessitating the amendment when

Marriott served its discovery objections to the Second Set of Discovery.”).) Regarding waiver, it

argues that the failure to raise an affirmative defense does not, under federal law, always result in

a waiver of that defense. (Doc. No. 62, at 4.) And, even if it might theoretically have waived the

defense, it continues to assert that it is nonetheless “within this Court’s discretion to invalidate a

liquidated damages provision regardless of whether a defense was asserted.” (Id. (citation

omitted).)

IV. ANALYSIS

A. Waiver

In reality, the dispute here is about waiver: whether Ramsey Solutions has waived its

objections to the enforceability of the liquidated damages provisions and its “frustration of

purpose” defense by failing either to assert appropriate defenses in its original Answer and

Affirmative Defenses or to move to amend its pleading prior to the expiration of the deadline for

doing so, irrespective of whether the court finds that it has failed to establish good cause for

amending its pleading. Even if the court were inclined to formalistically apply the law to conclude

that Ramsey Solutions has not offered sufficiently “good cause” to amend the scheduling order

and therefore is not entitled to amend its Answer and Affirmative Defenses, such a holding would

not answer the question of whether Ramsey Solutions has actually waived the defenses it seeks to

bring. That is the issue that most engages the parties and regarding which they seek resolution.

The parties, in other words, have invited the court to address what essentially amounts to a

dispositive motion disguised as a Motion to Amend, but prior to the conclusion of discovery and

in the absence of even minimally adequate briefing.

To avoid building suspense, the court will cut to the chase: Ramsey Solutions has not

waived its ability to raise these defenses. The court will now endeavor to explain how it arrived at

that conclusion.

First, it is clear that, in this diversity action, state law governs which defenses must be

pleaded affirmatively to avoid waiver. Brent v. Wayne Cty. Dep’t of Human Servs., 901 F.3d 656,

680 (6th Cir. 2018); see also Roskam Baking Co. v. Lanham Mach. Co., 288 F.3d 895, 901 (6th

Cir. 2002) (“[I]n a diversity case[,] [d]etermining whether a contention is an affirmative defense

for Rule 8(c) purposes is a matter of state law.” (citation and internal quotation marks omitted)).

The defendant maintains, and the plaintiff does not dispute, that Tennessee choice-of-law rules

apply and that, under Tennessee choice-of-law rules, the substantive laws of the states in which

the three Gaylord Agreements were executed and in which they were intended to be performed

govern the construction of the agreements individually. Thus, the Palms Agreement is governed

by Florida law; the Texan Agreement is governed by Texas law; and the Rockies Agreement is

governed by Colorado law.

Under the laws of all three of these states, the defense of the unenforceability of a contract

provision generally, and of a liquidated damages provisions specifically, is an affirmative defense

that must be pleaded or otherwise preserved to avoid waiver of the defense. See, e.g., Paul Gottlieb

& Co. v. Alps S. Corp., 985 So. 2d 1, 5 (Fla. Dist. Ct. App. 2007) (“[A]ffirmative defenses must

be pleaded either in the answer or as separate affirmative defenses and, if not pleaded, the issue is

deemed waived.”); J.M. Beeson Co. v. Sartori, 553 So. 2d 180, 181 (Fla. Dist. Ct. App. 1989)

(“[W]here liquidated damages are attacked, it is the burden of the defendant to raise the

excessiveness of the damages as an affirmative defense.”); Godoy v. Wells Fargo Bank, N.A., 542

S.W.3d 50, 54 (Tex. Ct. App. 2017) (“An allegation that a provision in a contract is void,

unenforceable, or unconscionable is a matter in the nature of avoidance and must be affirmatively

pleaded. If a party fails to plead the affirmative defense, it is waived.”); Phillips v. Phillips, 820

S.W.2d 785, 790 (Tex. 1991) (holding that the defense that a liquidated damages provision is an

unenforceable penalty generally will be waived if not affirmatively pleaded); Garden Ridge, L.P.

v. Advance Int’l, Inc., 403 S.W.3d 432, 437–38 (Tex. Ct. App. 2013) (“The party asserting that a

liquidated-damages clause is a penalty provision bears the burden of pleading and proof.” (citing

Phillips, 820 S.W.2d at 789; Tex. R. Civ. P. 94)); Town of Carbondale v. GSS Props., LLC, 169

P.3d 675, 681 (Colo. 2007) (“[A]ffirmative defenses must be timely pleaded, and failure to do so

results in waiver.”); Bartch v. Barch, No. 18-CV-3016-MSK-NYW, 2020 WL 7055442, at *5 (D.

Colo. Nov. 30, 2020) (“Illegality of a contract or its unenforceability due to public policy is

generally treated as an affirmative defense, such that the party asserting unenforceability bears the

burden of proof.” (citations omitted; applying Colorado law)).

In sum, Ramsey Solutions’ protestations to the contrary notwithstanding, under the law of

every state relevant to this dispute, the unenforceability or illegality of a contractual liquidated

damages clause is an affirmative defense that must be affirmatively pleaded and proved by the

party asserting it, and, under state law, a failure to do so will generally result in waiver of the

defense. The only exception to this general rule is where the penalizing nature of the liquidated

damages provision is facially obvious from the language of the provision itself, without need for

any further factual development.6 See Phillips, 820 S.W.2d at 789–90 (reaffirming that the defense

that a liquidated damages provision is an unenforceable penalty will be waived unless affirmatively

pleaded, except in the rare case where the illegality of the provision is “apparent on the face” of

the complaint and “established as a matter of law”); Rohauer v. Little, 736 P.2d 403, 410 (Colo.

1987) (“Unless the contract on its face establishes that the stipulated liquidated damages are so

disproportionate to any possible loss as to constitute a penalty, the party challenging the liquidated

damages provision bears the burden of proving that fact.” (emphasis added)).7

However, federal law, rather than state law, governs whether a defense has been waived in

a diversity action brought in federal court. Brent, 901 F.3d at 680 (6th Cir. 2018). Federal Rule of

Civil Procedure 8(c) generally requires defendants to “affirmatively state any avoidance or

affirmative defense” in their first response to a pleading. The failure to do so may result in waiver

of the defense. Brent, 901 F.3d at 680 (citing Horton v. Potter, 369 F.3d 906, 911 (6th Cir. 2004);

6 For instance, in Phillips, the liquidated damages clause provided for liquidated damages

in the amount of ten times the actual damages found by a jury. Phillips, 820 S.W.2d at 787–88.

On its face, therefore, the clause did not meet either of the legal requirements for enforceable

liquidated damages: that the harm caused by the breach be “incapable or difficult of estimation”

and that the liquidated amount constitute a “reasonable forecast of just compensation,” id. at 788,

since the clause required computation of actual damages in order to compute the liquidated

damages, and the liquidated damages multiplied actual damages by ten.

7 Thus, the plaintiff’s presumption that the court must always determine as a matter of law

whether a liquidated damages provision is an unenforceable penalty is not correct. Moreover, the

court declines to address sua sponte whether the liquidated damages provisions in the Gaylord

Agreements are illegal on their face, so as to fall within the exception recognized by Phillips and

Rohauer.

Kennedy v. City of Cleveland, 797 F.2d 297, 300 (6th Cir. 1986) (“Since immunity must be

affirmatively pleaded, it follows that failure to do so can work a waiver of the defense.”)).

But this failure does not always result in waiver. See id. (citing Moore, Owen, Thomas &

Co. v. Coffey, 992 F.2d 1439, 1445 (6th Cir. 1993), as amended on denial of reh’g (Aug. 31,

1993)). Because the “purpose of Rule 8(c) is to give the opposing party notice of the affirmative

defense and a chance to rebut it,” the operative question is whether that party “receives notice of

an affirmative defense by some means other than pleadings” and, therefore, is not prejudiced by

the defendant’s failure to comply with Rule 8(c). Id. (quoting Moore, Owen, 992 F.2d at 1445). In

Brent, the court found that, although the defendant had not raised its statutory immunity as a

defense to the plaintiff’s state law claims in its answer to the initial complaint, it responded to the

amended complaint by filing a motion to dismiss, raising absolute immunity as the grounds for

dismissal of the state law claims and, therefore, that the plaintiffs were not prejudiced by the

defendant’s failure to raise the defense sooner. The court found no waiver under the circumstances,

distinguishing the case from those in which a defendant raises an immunity defense for the first

time “days before the trial was scheduled to commence” or “after the close of discovery, when a

plaintiff’s opportunity to gather relevant evidence in rebuttal would be harmed.” Id. at 680 (quoting

Yates v. City of Cleveland, 941 F.2d 444, 449 (6th Cir. 1991); citing Henricks v. Pickaway Corr.

Inst., 782 F.3d 744, 751 (6th Cir. 2015)).

The Sixth Circuit, in fact, appears to construe the matter of notice liberally to permit

defendants to raise defenses that were not formally preserved in their pleadings. See, e.g., Rogers

v. Internal Revenue Serv., 822 F.3d 854, 856–57 (6th Cir. 2016) (holding that the district court did

not abuse its discretion in finding that the defense of “release” had not been waived and that, while

the defendant “could have been more diligent in raising its defense,” raising the affirmative defense

for the first time in a summary judgment motion did not result in prejudice, as the plaintiff had

ample opportunity to respond); Smith v. Sushka, 117 F.3d 965, 969 (6th Cir. 1997) (“While we

agree that Sushka should have been more diligent in raising these defenses, we do not believe that

the district court abused its discretion by permitting them to be raised in the second motion for

summary judgment. Sushka’s failure to raise either affirmative defense did not result in surprise

or unfair prejudice to Smith, especially since the district court extended the trial date in order to

give Smith the opportunity to fully respond to and brief the issues.”); Moore, Owen, 992 F.2d at

1445 (concluding that counterclaimants “were aware, or at least should have been aware,” that the

opposing party “intended to rely on a fraud defense” where he “raised the issue of fraud in his

response to the[ir] motion for summary judgment and in his affidavit in opposition to the[ir]

motion,” and they did not claim to have been prejudiced by the failure to plead the defense);

In this case, it should have been clear to Ramsey Solutions both from the face of the

Counterclaim and the Gaylord Agreements themselves that the enforceability of the liquidated

damages provisions would give rise to disputed questions of fact as well as a legal dispute as to

their enforceability. Although Ramsey Solutions did not expressly contest the enforceability of

those clauses, it did signal its understanding that Marriott would be required to prove its actual

damages when it served two sets of discovery requesting detailed information about Marriott’s

actual damages. In light of the fact that, as the party opposing the enforceability of liquidated

damages, Ramsey Solutions apparently has the burden of proving what the actual damages are and

that the liquidated damages are disproportionate to actual damages, Ramsey Solutions’ discovery

requests arguably put Marriott on notice that Ramsey Solutions intended to dispute the

enforcement of the liquidated damages provisions.

In addition, by seeking to amend its pleading to raise the defenses of unenforceability and

illegality, Ramsey Solutions has inarguably put Marriott on notice of its intent to rely on these

defenses. Given that the parties have stipulated to the extension of virtually every other scheduling

deadline in this case, and the trial date has been postponed until approximately a year after Ramsey

Solutions first filed its Motion to Amend, it was not patently unreasonable for Ramsey Solutions

to expect that Marriott would be amenable to its proposed amendment. Moreover, given that the

discovery and dispositive motion deadlines are still months in the future and the trial date

postponed until August 2022, Marriott cannot realistically claim to be prejudiced by Ramsey

Solutions’ belatedly raising these defenses, nor does the court believe that allowing the amendment

will jeopardize the current trial setting. That Marriott may be required to make some effort to

compute its actual damages and potentially to retain a damages expert does not constitute

“prejudice” of the type envisaged by the rules. These activities fall within the anticipated scope of

litigation generally.

Regarding Ramsey Solutions’ “frustration of purpose” defense, articulated as its Twentieth

Affirmative Defense in its Proposed Amended Answer and Affirmative Defenses, it is even more

clear that Marriott has been on notice of this “defense” since the inception of the lawsuit. In its

Amended Complaint, Ramsey Solutions alleged the same facts as those set forth under the

proposed Twentieth Affirmative Defense, and it proffered these facts essentially for the purpose

of showing that its performance under the Palms Agreement was excused. Marriott cannot

legitimately claim to be surprised either by the factual allegations or the defense, nor is it

prejudiced by Ramsey Solutions’ belatedly raising the defense now.

In sum, Marriott’s effort to establish that these defenses have been waived is unavailing.

B. Rule 16(b)(4)

Marriott’s objections to the Motion to Amend are effectively rendered moot by the court’s

conclusion that the proposed defenses have not been waived, irrespective of whether Ramsey

Solutions is permitted to actually amend its affirmative defenses. The court nonetheless

acknowledges some tension between the liberal standard that applies to the waiver question and

the Sixth Circuit’s more rigid interpretation of the “good cause” standard set forth in Rule 16(b)(4)

for motions to amend pleadings that are filed after the expiration of scheduling deadlines for

amending pleadings.

Marriott is correct that “[a] misconception of the law” does not typically constitute “good

cause” for belatedly seeking to amend a pleading. See Shane v. Bunzl Distrib. USA, Inc., 275 F.

App’x 535, 538 (6th Cir. 2008) (quoting Troxel Mfg. Co. v. Schwinn Bicycle Co., 489 F.2d 968,

971 (6th Cir. 1973)). At the same time, “[t]he primary measure of Rule 16’s ‘good cause’ standard

is the moving party’s diligence in attempting to meet the case management order’s requirements.”

Inge v. Rock Fin. Corp., 281 F.3d 613, 625 (6th Cir. 2002) (citation omitted). Although Ramsey

Solutions’ counsel misunderstood the law and placed their client’s interests at risk by failing to

raise appropriate affirmative defenses at the appropriate time, they moved with relative diligence

to amend their client’s affirmative defenses after being unambiguously confronted with Marriott’s

position on damages. The court does not find the delay occasioned by serving the second set of

discovery, specifically focused on damages, to be significant in the greater scope of events in this

case.

Moreover, as this court has recognized on another occasion, the operative question is not

whether Ramsey Solutions has “good cause” to explain its failure to raise the appropriate

affirmative defenses more promptly, but whether good cause exists to amend the scheduling order.

See Palmeri v. Goodwill Indus. of Middle Tenn., No. 3:17-cv-00901, 2018 WL 4030571, at *6

(M.D. Tenn. Aug. 23, 2018) (Trauger, J.) (“The good cause required here, however, is not good

cause for Goodwill’s having omitted an important defense from its initial pleading, but good cause

for the court’s departing from its Scheduling Order to allow an amendment.” (citing Fed R. Civ.

P. 16(b)(4))). The court finds that the extension of the other scheduling deadlines, the repeated

postponement of the trial date at both parties’ request, and Ramsey Solutions’ relative diligence in

seeking to amend—once counsel became aware of the pleading deficiencies—together provide

good cause for authorizing amendment of the scheduling order for the purpose of allowing Ramsey

Solutions to amend its affirmative defenses. To find otherwise would potentially work substantial

injustice upon Ramsey Solutions at a relatively early stage in the proceedings, while permitting

the amendment does not prejudice Marriott other than by requiring it to litigate the merits of its

claims. See id. at *7 (“[I]nsofar as the court has some discretion under the Federal Rules of Civil

Procedure with regard to whether to depart from its own deadlines, the court can consider whether

it should apply the Rules in a way that would serve little purpose other than rewarding one litigant

for allowing the other’s error to go uncorrected.” (citing Leary, 349 F.3d at 908)).

C. Rule 15(a)—Futility of Amendment

The other Rule 15 factors pertaining to whether to permit amendment once Rule 16(b) is

shown to be satisfied also weigh in favor of permitting Ramsey Solutions to amend its affirmative

defenses. There is no showing of bad faith or repeated failure to cure deficiencies by previous

amendments. And, although Marriott argues that the proposed “frustration of purpose” amendment

(proposed Twentieth Amended Defense) would be futile, the court is not entirely persuaded.

Florida courts define the doctrine of “frustration of purpose” as “excus[ing] performance

by a party where the value of performance regarding the subject of an agreement has been

frustrated or destroyed.” Hopfenspirger v. West, 949 So. 2d 1050, 1053–54 (Fla. Dist. Ct. App.

2006) (citing Williston on Contracts, § 77.52 (2006)). “The doctrine of commercial frustration is

limited to cases where performance is possible but an alleged frustration, which was not

foreseeable, totally or nearly totally destroyed the purpose of the agreement.” Valencia Ctr., Inc.

v. Publix Super Markets, Inc., 464 So. 2d 1267, 1269 (Fla. Dist. Ct. App. 1985) (emphasis added);

see also 11 Fla. Jur. 2d Contracts § 262 (“[F]rustration of purpose arises when one of the parties

finds that the purposes for which he or she bargained, and which purposes were known to the other

party, have been frustrated because of the failure of consideration or impossibility of performance

by the other party.”). The defense is “usually not available ‘if the relevant business risk was

foreseeable at the inception of the agreement and could have been the subject of an express

contractual agreement.’” In re Cinemex USA Real Estate Holdings, Inc., 627 B.R. 693, 697–98

(Bankr. S.D. Fla. 2021) (quoting Home Design Ctr.–Joint Venture v. Cty. Appliances of Naples,

Inc., 563 So. 2d 767, 769 (Fla. Dist. Ct. App. 1990)). “As a general rule, a contract is not invalid,

nor is the obligor discharged from its binding effect, because the contract turns out to be difficult

or burdensome to perform.” Id. at 697–98 (quoting Home Design Ctr., 563 So. 2d at 769–70).

Thus, for example, in a recent case arising within the context of the COVID-19 pandemic,

a business that operated movie theaters sought to set aside or suspend payments on unexpired

leases for the premises on which it operated its movie theaters, arguing both impossibility of

performance and frustration of purpose arising from orders issued by the Governor of Florida

closing movie theaters altogether for a period of several months due to the COVID-19 pandemic

and subsequently allowing them to reopen, but only at fifty-percent capacity. In re Cinemex, 627

B.R. at 696. The movie theater business argued that its performance under the leases was

impossible both because the theaters were closed and because, also due to the pandemic, no new

movie titles were being released. The movie theater business also sought to have its rent payments

excused or reduced for the period of time during which theaters were allowed to reopen at fifty-

percent capacity. Id.

The court acknowledged that Florida law recognizes both impossibility of performance and

frustration of purpose and that these are different doctrines. Impossibility covers situations in

which the purposes for which the contract was made have become, “on one side, impossible to

perform.” Id. at 697 (citations omitted). The landlord did not dispute that it was impossible for the

theater business to operate the movie theater while the shutdown was in place; the question was

whether the government-ordered shutdown was foreseeable and, thus, which party bore the burden

of assuming the risk of a shutdown. The court ultimately found that, although the pandemic, per

se, was not foreseeable, the lease itself contemplated that the parties “might not be able to perform

their obligations under the [lease] due to acts of God or governmental action.” Id. at 699. The lease

expressly excused performance by the theater business “while the theater was shut down by

government order,” as a result of which the court found it unnecessary to apply the doctrine of

impossibility of performance, at least as it pertained to the period of time during which theaters

were shut down entirely. Id.

After the closure order was modified to allow movie theaters to open at half-capacity,

however, the court found that it was not impossible for the theater business to operate its movie

theaters, nor was the purpose of the leases frustrated by the capacity limitation. Id. The theater

business argued that the costs of reopening made reopening impracticable, given the reduced

number of movies available, reduced capacity, and the need for more cleaning and social

distancing, as well as the risk of employees becoming infected. Id. The court rejected that

argument, too, noting that, while frustration of purpose may be premised upon “impracticability

of performance,” “courts are reluctant to excuse performance that is not impossible but merely

inconvenient, profitless, or expensive to the lessor.” Id. (quoting Valencia Ctr., Inc. v. Publix Super

Markets, Inc., 464 So. 2d 1267, 1269 (Fla. Dist. Ct. App. 1985)). It concluded that full rent was

due for the timeframe during which movie theaters were permitted to open at fifty-percent

capacity, regardless of whether the theater business had chosen not to reopen immediately:

There is no question that the COVID-19 pandemic was completely unforeseeable

(although a slow down in audience attendance or a dearth of new releases is not),

and certainly not the fault of either contract party. But, once the [theaters were]

allowed to reopen, it was possible for [the theater business] to reopen; [it] chose not

to do so for what appears . . . to be primarily economic concerns. Therefore [the

theater business’s] performance under the [lease] from [date on which reopening

was permitted] on is not excused under the doctrine of frustration of purpose.

Id. at 700.

As applied in this case, Marriott appears to be arguing only that the frustration of purpose

defense would not apply, because, at the time the parties renegotiated the Palms Agreement, the

COVID-19 pandemic was already well under way and, therefore, no longer unforeseeable. Ramsey

Solutions’ proposed “frustration” defense, however, does not reference the pandemic per se but

Marriott’s response to it by imposing “restrictions and limitations on [Ramsey Solutions’] event”

that were allegedly not required by federal, state, or local laws or ordinances—including the

closure of on-site restaurants, spa facilities, room service, and valet service and the limiting of

access to the gym and pool, and its threat of potentially implementing additional restrictions or

cancelling the Palms event altogether as late as during the event itself. (See Doc. No. 54-1, at 30;

see also Am. Compl., Doc. No. 10 ¶¶ 41–43.) The foreseeability of Marriott’s response, at this

juncture, is a disputed question of fact.

On the other hand, it is also fairly clear that what Ramsey Solutions is referring to as

“frustration of purpose” does not easily fit within the courts’ description of that defense. The event

center’s guest amenities may not have been what Ramsey Solutions anticipated they would be

when the parties contracted to hold the event at the Gaylord Palms, but Ramsey Solutions does not

24

allege facts suggesting holding the event would actually have been impossible, or even

impracticable. It would have been more plausible, perhaps, for Marriott to claim impossibility or

impracticability based on the imposition of local or state mandates pertaining to mask mandates

and social distancing.

In any event, regardless of whether the defense is properly labeled, the facts alleged in

support of the defense are addressed to the question of which party breached the Palms Agreement

first and whether any breach is excused by the circumstances. These questions are at the core of

the parties’ dispute regarding that Agreement. Accordingly, the court cannot conclude at this

juncture—particularly based on the minimal briefing thus far provided—that the defense as

actually articulated in Ramsey Solutions’ proposed Twentieth Affirmative Defense is completely

futile.

V. CONCLUSION

For the reasons set forth herein, the court will grant Ramsey Solutions’ Motion to Amend

its Affirmative Defenses (Doc. No. 54), despite expiration of the deadline for amending pleadings,

and deny Marriott’s implied motion to strike the proposed Affirmative Defenses as waived or

futile. An appropriate Order is filed herewith.

fel

United States District Judge