## Facts

- Blaine Otto died while inspecting an oil-storage tank at an oil site in North Dakota connected to Newfield Exploration Co. (Newfield).
- Otto’s estate filed a wrongful-death-related lawsuit against Newfield in federal court in Montana based on diversity jurisdiction.
- The estate’s original complaint included a claim seeking punitive damages under Montana law.
- The court determined that North Dakota substantive law governed the claims and damages.
- After that choice-of-law ruling, the estate moved to amend its complaint to plead punitive damages under North Dakota law.
- Federal Rule of Civil Procedure 15(a)(2) permits amendment with leave of court and directs that leave should be freely given when justice requires.
- North Dakota law imposed a stricter requirement for adding punitive damages by amendment, allowing such an amendment only if the trier of fact could find punitive damages proved by a preponderance of the evidence.
- Newfield opposed the amendment based on the North Dakota standard, arguing the estate had not made the required evidentiary showing.

## Issues

1. In a federal diversity action, does FRCP 15(a)(2) or North Dakota’s punitive-damages amendment standard govern a motion to amend the complaint to add a punitive-damages claim under North Dakota law?
2. If FRCP 15(a)(2) governs, should the court grant leave to amend under Rule 15’s standards (including considerations such as delay, prejudice, bad faith, or futility)?

## Decision

- The court held that FRCP 15(a)(2) supplies the governing standard for whether a party may amend a pleading in federal court, including amendments seeking to add a claim for punitive damages.
- The court treated North Dakota’s heightened, evidence-based threshold for adding punitive damages by amendment as a state procedural restriction that conflicts with Rule 15’s amendment framework.
- Because Rule 15 directly addresses amendments to pleadings and operates as a valid federal procedural rule in federal court, the court declined to apply the conflicting North Dakota amendment standard.
- Applying Rule 15(a)(2)’s liberal approach, the court granted the estate leave to amend to plead punitive damages under North Dakota substantive law.

## Legal Principles

- In diversity cases, federal courts apply state substantive law and federal procedural law.
- When a Federal Rule of Civil Procedure directly covers the matter in dispute and is valid under the Rules Enabling Act, the Federal Rule controls even if state law would impose a different procedural requirement.
- The standard for granting leave to amend pleadings is governed by FRCP 15(a)(2), which directs courts to freely grant leave when justice so requires, absent reasons such as undue delay, bad faith, repeated failure to cure deficiencies, undue prejudice, or futility.
- A state-law requirement that conditions the addition of punitive damages on a preliminary evidentiary showing operates as a pleading/amendment gatekeeping rule; when it conflicts with Rule 15’s amendment standard, it does not control in federal court.
- Applying federal amendment procedure does not displace state substantive law on punitive damages; state law still governs whether punitive damages are available and what must be proved to recover them at trial.

## Conclusion

The court concluded that, in a diversity action, FRCP 15(a)(2) governs a plaintiff’s request to amend a complaint to add a punitive-damages claim, and North Dakota’s stricter evidentiary prerequisite for such an amendment does not apply in federal court when it conflicts with Rule 15; applying Rule 15’s liberal standard, the court granted the estate leave to amend to seek punitive damages under North Dakota law.


Otto v. Newfield Exploration Co., 2017 WL 3616712 (2017)