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Columbus Portfolio Services, Inc. v. Vis Holding Corp.

November 29, 2006


The opinion of the court was delivered by: Judge Marbley

Magistrate Judge King


This matter is presently before the Court on the motion and amended motion of defendant VIS Holding Corp. ["VIS"] for leave to file amended counterclaims. Doc. Nos. 92, 93. For the reasons stated infra, the Court concludes that the motions are without merit and they are therefore DENIED.

This action was filed in July 2004. Defendants filed a motion to dismiss the complaint in September 2004, Doc. No. 11, and, on the same date, counterclaims against plaintiffs as well SeaWest Financial Corporation ["SeaWest"]. Doc. No. 12. The Rule 16 conference was held on December 15, 2004. See Doc. No. 38. Addressing the issue of amendments to the pleadings, the order issued following that conference expressly stated:

If plaintiffs' claims remain pending following resolution of the motion to dismiss, defendants will answer within ten (10) days. Motions addressing the joinder of additional parties and amendments to the pleadings may be filed, if at all, within forty-five (45) days thereafter.

Preliminary Pretrial Order, at 2, Doc. No. 38 (emphasis added).

On November 8, 2005, the Court granted defendants' motion to dismiss but also granted plaintiffs leave to amend the complaint. Opinion and Order, Doc. No. 49. The amended complaint was filed on January 20, 2005. Doc. No. 55. Defendants, some of whom had been placed in receivership and all of whom were undergoing a change of counsel at the time, were thereafter expressly granted to May 3, 2006, to respond to the amended complaint. Order, Doc. No. 64. Defendants, acting through new counsel, filed an answer to the amended complaint and renewed their counterclaims on that date. Doc. Nos. 66, 67. Thus, applying the directives of the Preliminary Pretrial Order, a motion to amend the pleadings should have been filed within 45 days thereafter, or no later than June 17, 2006.

On July 24, 2006, defendants filed a motion to extend the discovery and dispositive motion filing deadlines, Doc. No. 79, which motion was granted, Doc. No. 80, with the express provision that there will "be no further extension of these deadlines." Doc. No. 80.

The original request for leave to file amended counterclaims was made by motion filed on September 29, 2006, Doc. No. 92; the amended motion was filed on October 10, 2006, Doc. No. 93. In those motions, VIS seeks to assert a number of additional counterclaims, including a claim for punitive damages, against not only the original defendants to the original counterclaim, but also against a number of additional parties, both corporate entities and individuals.

VIS insists that its motions for leave to amend the counterclaims are not untimely, and that "the forty-five day time limit . . . has not yet begun to run," because SeaWest has not yet filed a responsive pleading to the May 2006 renewed counterclaim. Defendants' Reply in Support of Amended Motion for Leave to Amend the Counterclaim, Doc. No. 104, at 5. This Court disagrees. The Preliminary Pretrial Order required that motions for leave to amend be filed within forty-five after defendants filed their answer to the amended complaint, which they did on May 3, 2006.

The United States Court of Appeals for the Sixth Circuit has considered the overlapping standards contained in F.R. Civ. P. 16(b)*fn1 and F.R. Civ. P. 15(a).*fn2 Leary v. Daeschner, 349 F.3d 888 (6th Cir. 2003). When the deadline established by a scheduling order has passed, a party must first show good cause under Rule 16(b) before a Court may consider whether a requested amendment is proper under Rule 15(a). Id., at 909. Moreover, consideration of "the potential prejudice to the non-movant also is required when a district court decides whether or not to amend the scheduling order." Id., at 909. Significantly, a proposed amendment that advances "brand-new claims ... more obviously creates prejudice because the [opponent] must contend with an entirely different substantive issue." Id., at 909 n.27.

Although VIS does not expressly address the good cause standard of Rule 16(b), it appears to rely upon the substitution, in April 2006, of some -- but not all -- of counsel for VIS.*fn3 Acknowledging that the renewed counterclaims were filed by substitute counsel in May 2006, VIS nevertheless explains that those counterclaims "were based in large part upon the work of their predecessor counsel." Amended Motion for Leave to File Amended Counterclaim, at 3, Doc. No. 93. Since May 2006, VIS argues, substitute counsel "has continued to analyze the file, interview the representatives of the VIS Defendants and other potential witnesses, and review the documents attached to the Plaintiffs' pleadings and produced to the VIS Defendants in discovery." Id.*fn4 After five months of review, and approximately 3 1/2 months after the date established by the Preliminary Pretrial Order for filing motions to amend, substitute counsel apparently concluded that the requested amendments were appropriate.

The Court is not persuaded that VIS has established good cause for its failure to comply with the deadline established in the Preliminary Pretrial Conference Order. The initial and renewed counterclaims were filed with the assistance of prior counsel, who is not alleged to have been in any respect derelict in its representation of VIS or the other defendants. Moreover, local counsel, at least, has not changed throughout the entire 21/2 years that this case has been pending. The fact that there was a substitution of some counsel is not, in the estimation of this Court, sufficient to either warrant a belated and dramatic expansion of the scope of the litigation or justify the failure to meet the Rule 16(b) deadline.

Under these circumstances, it cannot be denied that the current parties to this action, as well as entitities or individuals sought to be joined in the amended counterclaims, would suffer undue prejudice should the motions for leave to amend be granted. The proposed new counterclaims would greatly expand the scope of the litigation, both in the theories of recovery and in the relief sought. The current discovery deadlines --- which had previously been extended at the express request of the defendants -- anticipate the completion of discovery in approximately 30 days and the filing of dispositive motions in approximately 60 days. Order, Doc. No. 80. These deadlines, difficult to meet under the best of circumstances, would be impossible to meet should the proposed amendments be ...

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