Elmhurst Lincoln-Mercury, Inc. Employees 401(k) Profit Sharing Plan and Trust v. Mears et al
MEMORANDUM Opinion and Order Written by the Honorable Gary Feinerman on 8/29/2016.Mailed notice.(jlj, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
ELMHURST LINCON-MERCURY, INC. EMPLOYEES
401(k) PROFIT SHARING PLAN & TRUST,
DAVID G. MEARS, ELMHURST LINCOLNMERCURY, INC., UNIVERSAL UNDERWRITERS
INSURANCE COMPANY, and JAMES F. BEST, P.C.,
16 C 2390
Judge Gary Feinerman
MEMORANDUM OPINION AND ORDER
On February 18, 2016, Elmhurst Lincoln-Mercury, Inc. Employees 401(k) Profit Sharing
Plan and Trust (“the Plan”), by its acting trustee, Thomas Potts, Jr., filed this ERISA and
negligence suit against its former trustee David Mears, Elmhurst Lincoln-Mercury (“ELM”),
ELM’s insurer Universal Underwriters Insurance Company, and James F. Best P.C., a law firm
that represented Universal in earlier litigation related to the Plan. Doc. 1. A default has been
entered against ELM and Mears under Federal Rule of Civil Procedure 55(a). Doc. 40.
Universal and Best move under Rules 12(b)(6) and 16(f) to dismiss the claims against them on
several grounds, including that the Plan, by filing this suit, improperly split claims that it could
and should have brought in a closely related case, Weir v. Elmhurst Lincoln-Mercury, Inc., No.
13 C 2694 (N.D. Ill. filed Apr. 10, 2013). Docs. 35, 38. The motions are granted.
In resolving a Rule 12(b)(6) motion, the court assumes the truth of the operative
complaint’s well-pleaded factual allegations, though not its legal conclusions. See Zahn v. N.
Am. Power & Gas, LLC, 815 F.3d 1082, 1087 (7th Cir. 2016). The court must also consider
“documents attached to the complaint, documents that are critical to the complaint and referred
to in it, and information that is subject to proper judicial notice,” along with additional facts set
forth in the Plan’s brief opposing dismissal, so long as those facts “are consistent with the
pleadings.” Phillips v. Prudential Ins. Co. of Am., 714 F.3d 1017, 1020 (7th Cir. 2013) (internal
quotation marks omitted); see also Defender Sec. Co. v. First Mercury Ins. Co., 803 F.3d 327,
335 (7th Cir. 2015). The facts are set forth as favorably to the Plan as those materials allow.
See Pierce v. Zoetis, 818 F.3d 274, 277 (7th Cir. 2016). In setting forth those facts, the court
does not vouch for their accuracy. See Jay E. Hayden Found. v. First Neighbor Bank, N.A., 610
F.3d 382, 384 (7th Cir. 2010). Because the Weir suit provides much of the background for this
suit and underpins the motions to dismiss, the court takes judicial notice of the filings in Weir.
See Ennenga v. Starns, 677 F.3d 766, 773-74 (7th Cir. 2012) (holding that public court
documents are judicially noticeable); Henson v. CSC Credit Servs., 29 F.3d 280, 284 (7th Cir.
1994) (same, and collecting cases).
ELM is a defunct Delaware corporation that was registered with the Illinois Secretary of
State until August 13, 2010, when the Secretary revoked its authority to do business in Illinois.
Doc. 32 (16 C 2390) at ¶ 5. The Plan is ELM’s ERISA-qualified profit-sharing plan, which
provided benefits to eligible ELM employees. Id. at ¶ 7.
On April 10, 2013, James Weir, a former ELM employee and Plan beneficiary, brought
the Weir suit against ELM, the Plan, ELM’s successor corporation Bright Leasing, Inc., and
Mears (ELM’s former owner and the Plan’s then-trustee), alleging ERISA violations. Doc. 1 (13
C 2694) at ¶¶ 4-5, 7, 19-50. The suit also sought injunctive relief against Oppenheimer & Co.,
an investment firm that held the Plan’s funds on deposit. Id. at ¶¶ 6, 51-58. Weir filed a
corrected complaint the following day, Doc. 5 (13 C 2694); a first amended complaint on July 1,
2013, Doc. 18 (13 C 2694); and then, with the court’s approval, a second amended complaint on
May 9, 2014, Doc. 51-52 (13 C 2694). The second amended complaint added Universal as a
defendant, alleging that Universal, in its role in the defense and settlement of two earlier federal
and state court suits brought on behalf of Plan participants Michael Lureau and Martin Felt (the
“Lureau/Felt litigation”), breached its ERISA fiduciary duty to the other beneficiaries, including
Weir. Doc. 51 at ¶¶ 14-19, 43-51. On August 11, 2014, the court in Weir set deadlines for
written discovery, dispositive motions, and motions to amend the pleadings and add new parties.
Doc. 68 (13 C 2694). In particular, the order set a December 8, 2014 deadline for motions to
amend the pleadings or add new parties. Ibid.
On November 25, 2014, Weir moved to remove Mears as the Plan’s trustee and to
replace him with Larry Shippe. Doc. 77 (13 C 2694). The court granted the motion on
December 2, 2014, and in the same order granted the parties’ joint oral motion to extend the
deadlines and, in particular, extended the deadline for filing motions to amend the pleadings or
add new parties to February 2, 2015. Doc. 80 (13 C 2694). On January 16, 2015, Weir moved to
vacate the order appointing Shippe as the Plan’s trustee and to instead appoint Potts. Doc. 81 (13
C 2694). On January 22, 2015—eleven days before the February 2, 2015 deadline for moving to
amend the pleadings or add new parties—the court granted the motion to appoint Potts. Doc. 84
(13 C 2694). Neither Weir nor the Plan moved to extend the February 2, 2015 deadline.
On February 12, 2015, the court referred the case to Magistrate Judge Cox for a
settlement conference. Docs. 85-86 (13 C 2694). On March 18, 2015, Weir’s counsel, Glenn
Gaffney, filed an appearance on behalf of the Plan; Gaffney also represents the Plan in this case.
Doc. 90 (13 C 2694); Doc. 2 (16 C 2390). On March 26, 2015, the court, on the parties’
agreement, extended the discovery and dispositive motion deadlines, but neither Weir nor the
Plan sought to extend the deadline for moving to amend the pleadings or add parties. Doc. 93
(13 C 2694). A settlement conference was held on May 6, 2015, and the parties proceeded
before Magistrate Judge Cox through September 2015 regarding the parties’ continued
settlement discussions. Docs. 100, 111, 113 (Case 13 C 2694).
In the meantime, on December 8, 2014, Universal brought suit in the Circuit Court of
Cook County, Illinois (the “Coverage Action”), seeking a declaration that Universal has no
coverage obligations to indemnify ELM, Bright, Mears, and the Plan in the Weir suit. Universal
Underwriters Ins. Co. v. Elmhurst Lincoln-Mercury, Inc., No. 2014 CH 19590 (Cir. Ct. Cook
Cnty. filed Dec. 8, 2014). Weir and Potts removed the Coverage Action to federal court, where
it was assigned to District Judge Dow. Doc. 1 (15 C 2400). On April 9, 2015, Weir moved to
reassign and consolidate the Coverage Action with Weir. Doc. 95 (13 C 2694). At a hearing on
that motion on April 15, 2015, Doc. 99 (13 C 2694), the Plan (through Gaffney) orally sought
leave to file an ERISA cross-claim against Universal (its co-defendant) in Weir. Doc. 38-2 (16 C
2390) at 11. The court denied the oral motion, reminded counsel that the time to amend the
pleadings had closed, and suggested that the Plan file a written motion for leave to file a crossclaim against Universal. Id. at 11-12. The Plan did not file that motion.
On June 1, 2015, Judge Dow remanded the Coverage Action to state court. Doc. 18 (15
C 2400). After the remand, on September 18, 2015, Weir and the Plan filed counterclaims
against Universal in the Coverage Action. Docs. 38-3, 38-4 (16 C 2390). The counterclaims
alleged, among other things, common law fraud and civil conspiracy, and were premised on
allegations materially identical to those underpinning Weir’s ERISA claim against Universal in
the Weir suit. Compare Doc. 52 (13 C 2694) at ¶¶ 13-19, with Doc. 38-3 (16 C 2390) at 66-68,
and Doc. 38-4 (16 C 2390) at 67-70.
On December 9, 2015, in the Weir suit, the Plan moved in writing for leave to file an
ERISA cross-claim against Universal based on Universal’s alleged role in the defense and
settlement of the Lureau/Felt litigation, and a third-party claim against Best, which, as noted, had
represented Universal in that litigation. Doc. 134-2 (13 C 2694); Doc. 32 (16 C 2390) at ¶ 43;
Doc. 38-6 (16 C 2390). The court set a briefing schedule for that motion. Doc. 137 (13 C 2694).
At the presentment hearing, the court observed that Gaffney at the time was representing both
Weir, the plaintiff, and the Plan, a defendant; the court observed that such dual representation
might be problematic. Gaffney apparently agreed, see Ill. Rules of Professional Conduct
1.7(b)(3) (“[A] lawyer may represent a client if … the representation does not involve the
assertion of a claim by one client against another client represented by the lawyer in the same
litigation.”), for on December 21, 2015, Weir (via Gaffney) moved to dismiss his claim against
the Plan. Doc. 138 (13 C 2694). The court granted the motion. Doc. 141 (13 C 2694). And
because that dismissal resulted in the Plan no longer being a party in Weir, the court denied as
moot the Plan’s motion for leave to file a cross-claim against Universal and a third-party claim
against Best. Ibid. Before doing so, the court asked Gaffney on the record whether that was
proper course of action; Gaffney agreed that it was, and acknowledged that the Plan’s next step
was to file a motion to intervene. Ibid.
But the Plan did not and has not filed a motion to intervene Weir. Rather, after Universal
moved to enforce the settlement that it believed (incorrectly) it had negotiated with Weir and the
Plan at the May 2015 settlement conference, Doc. 144 (13 C 2694); Doc. 160 (13 C 2694)
(denying the motion), the Plan filed this suit. Doc. 1 (16 C 2390). The operative complaint
asserts ERISA claims against ELM and Mears (Count I), and ERISA claims against Universal
(Count II), and ERISA and negligence claims against Best (Counts III-IV) based on Universal’s
and Best’s roles in the defense and settlement of the Lureau/Felt litigation. Doc. 32 (16 C 2390).
On May 23, 2016, Weir moved in Weir to consolidate this case with Weir. Doc. 180 (13 C
2694). After Universal indicated that it would move to dismiss this case, the court denied Weir’s
motion to consolidate without prejudice to renewal after the resolution of the motions to dismiss.
Doc. 182 (13 C 2694).
Universal contends that the Plan’s claims against Universal and Best are duplicative of
claims brought in Weir and also violate the rule against claim splitting. Doc. 38 (16 C 2390) at
6-9; Doc. 47 (16 C 2390) at 1-4. The court examines each ground in turn.
“As a general rule, a federal suit may be dismissed for reasons of wise judicial
administration whenever it is duplicative of a parallel action already pending in another federal
court.” Serlin v. Arthur Andersen & Co., 3 F.3d 221, 223 (7th Cir. 1993) (internal quotation
marks omitted). “District courts are accorded a great deal of latitude and discretion in
determining whether one action is duplicative of another, but generally a suit is duplicative if the
claims, parties, and available relief do not significantly differ between the two actions.” Ibid.
(internal quotation marks omitted). The Seventh Circuit has cautioned that “[n]o rule requires
that district courts dismiss duplicative lawsuits,” Wallis v. Fifth Third Bank, 443 F. App’x 202,
205 (7th Cir. 2011), and that “[e]ven when prudence calls for putting a redundant suit on hold, it
must be stayed rather than dismissed unless there is no possibility of prejudice to the plaintiff,”
Gleash v. Yuswak, 308 F.3d 758, 760 (7th Cir. 2002). The court need not confront that issue,
however, because this suit and Weir are not duplicative.
Universal argues that because the Plan’s claims against Universal in this suit rest on the
same allegations as Weir’s claims against Universal in Weir, where the Plan was formerly a
party, the Plan’s claims in this suit are necessarily duplicative. Doc. 38 (16 C 2390) at 6-7; Doc.
47 (16 C 2390) at 1-2. But as Universal acknowledges, the Plan in this suit is “seeking to
recover damages that were not originally disclosed in the Weir action,” Doc. 47 (16 C 2390) at 3,
including damages under ERISA for Universal’s and Best’s alleged “knowing participation” in
Mears’s alleged breaches of his fiduciary duty to the Plan. As a result, the relief sought differs
between the two cases, and so the claims are not duplicative. See McReynolds v. Merrill Lynch
& Co., Inc., 694 F.3d 873, 889 (7th Cir. 2012) (“[A]llowing a separate suit seeking the same
remedy would be redundant.”) (emphasis added); Wallis, 443 F. App’x at 205 (affirming
dismissal because “claims and available relief do not differ significantly between the two
actions”) (emphasis added).
“The rule against claim splitting prohibits a plaintiff from prosecuting its case piecemeal
and requires that all claims arising out of a single wrong be presented in one action.” Lee v.
Norfolk S. Ry. Co., 802 F.3d 626, 635 (4th Cir. 2015) (internal quotation marks omitted).
Simply put, “plaintiffs have no right to maintain two actions on the same subject in the same
court, against the same defendant at the same time.” Curtis v. Citibank, N.A., 226 F.3d 133, 139
(2d Cir. 2000); see also Walton v. Eaton Corp., 563 F.2d 66, 70 (3d Cir. 1977); CIVIX-DDI, LLC
v. Expedia, Inc., 2005 WL 1126906, at *4 (N.D. Ill. May 2, 2005) (“Courts prohibit a litigant
from splitting its claims into multiple actions when the litigant should have brought the claims in
a single action.”). Relevant here, “[o]ften, the rule against claim splitting applies to prevent a
plaintiff from filing a new lawsuit after the court in an earlier action has denied the plaintiff's
request for leave to amend to add the claims later asserted in the second lawsuit.” Sensormatic
Sec. Corp. v. Sensormatic Elecs. Corp., 273 F. App’x 256, 265 (4th Cir. 2008); see also N.
Assurance Co. of Am. v. Square D Co., 201 F.3d 84, 87-88 (2d Cir. 2000) (collecting cases).
Although the Supreme Court long ago recognized the rule against claim splitting, see The
Haytian Republic, 154 U.S. 118, 124 (1894); Stark v. Starr, 94 U.S. 477, 485 (1876), claim
splitting is now viewed as “an aspect of the law of preclusion.” Horwitz v. Alloy Automotive Co.,
992 F.2d 100, 103 (7th Cir. 1993); see also Chi. Title Land Tr. Co. v. Potash Corp. of Sask. Sales
Ltd., 664 F.3d 1075, 1081 (7th Cir. 2011) (“Claim splitting is not a way around res judicata. To
the contrary, the principle that res judicata prohibits a party from later seeking relief on the basis
of issues which might have been raised in a prior action also prevents a litigant from splitting a
single cause of action into more than one proceeding.”) (internal quotation marks omitted); Palka
v. City of Chicago, 662 F.3d 428, 437 (7th Cir. 2011) (“This case is a quintessential example of
claim splitting in duplicative lawsuits, a litigation tactic that res judicata doctrine is meant to
prevent.”); Carr v. Tillery, 591 F.3d 909, 913-14 (7th Cir. 2010) (“‘[C]laim splitting’ … is
barred by the doctrine of res judicata.”); Alvear-Velez v. Mukasey, 540 F.3d 672, 678 (7th Cir.
2008) (“[C]laim splitting … is one component of res judicata.”); Rogers v. Desiderio, 58 F.3d
299, 300 (7th Cir. 1995) (“Plaintiffs hope that more suits will improve their chances: they seek
the better of the outcomes. To discourage the tactic, judges award plaintiffs not the better
outcome but the first outcome: whichever suit goes to judgment first is dispositive, and the
doctrine of claim preclusion (res judicata) requires the other court to dismiss the litigation.
Instead of improving plaintiffs’ chances, claim-splitting reduces them.”) (citations omitted).
“The doctrine of claim preclusion provides that a final judgment on the merits rendered by a
court of competent jurisdiction bars any subsequent actions between the same parties or their
privies on the same cause of action.” Walczak v. Chi. Bd. of Educ., 739 F.3d 1013, 1016 (7th
Cir. 2014) (internal quotation marks omitted); see also Palka, 662 F.3d at 437.
As the Plan does not dispute, Weir and this suit involve (or involved) the same parties,
are based on the same cause of action, and “arise from a single group of operative facts.”
Walczak, 739 F.3d at 1016 (internal quotation marks omitted). Moreover, for purposes of claim
splitting, the court’s two denials of leave to amend in Weir—as to the Plan’s oral motion at the
April 15, 2015 hearing, Doc. 99 (13 C 2694); Doc. 38-2 (16 C 2390) at 11-12, and the Plan’s
December 9, 2015 motion for leave to file, Doc. 134-2 (13 C 2694); Doc. 141 (13 C 2694)—are
entitled to preclusive effect. See Hatch v. Trail King Indus., Inc., 699 F.3d 38, 45-46 (1st Cir.
2012) (“It is well settled that denial of leave to amend constitutes res judicata on the merits of the
claims which were the subject of the proposed amended pleading.”) (internal quotation marks
omitted); Prof’l Mgmt. Assocs., Inc. v. KPMG LLP, 345 F.3d 1030, 1032 (8th Cir. 2003) (same);
N. Assurance Co., 201 F.3d at 88 (“Where the plaintiff is seeking to add additional claims
against the same defendant and leave to amend is denied, claim preclusion is appropriate.”); King
v. Hoover Grp., Inc., 956 F.2d 219, 222-23 (8th Cir. 1992) (“It is well settled that denial of leave
to amend constitutes res judicata on the merits of the claims which were the subject of the
proposed amended pleading.”). The rule against claim splitting thus bars the Plan’s claims
against Universal and Best in this case, for those claims rest on precisely the same conduct as the
claims that the Plan unsuccessfully tried to bring in Weir. “[I]f [the Plan] disagreed with the
district court’s denial of leave to amend to include these claims, it could have appealed that
issue; it did not.” Roboserve, Inc. v. Kato Kagaku Co., Ltd., 121 F.3d 1027, 1035 (7th Cir.
The Plan protests that several “special factors” made its filing of this suit, rather than
moving to intervene and file the claims in Weir, proper or even required. Doc. 44 (16 C 2390) at
4 (quoting Serlin, 3 F.3d at 224). This argument fails to persuade. “Special factors” may excuse
duplicative claims, Serlin, 3 F.3d at 224, but the Plan cites no precedent holding that they may
also excuse claim splitting. And although “the rule against claim-splitting has been relaxed
where it would be inequitable to apply the rule,” Walczak, 739 F.3d at 1018 (alteration and
internal quotation marks omitted); see also Parker v. Lyons, 757 F.3d 701, 706 (7th Cir. 2014)
(“[I]n Illinois claim preclusion is an equitable doctrine that is not applied when it is
fundamentally unfair to do so.”) (internal quotation marks omitted), the factors on which the Plan
relies do not come close to justifying relaxation of the rule.
First, the Plan argues that its claims against Universal and Best differ from those being
pressed in Weir because “[o]nly one” of the Plan’s claims “is operatively duplicative of Weir’s.”
Doc. 44 (16 C 2390) at 4. That is beside the point, because the Plan could have joined its claims
against Universal and Best in Weir had it done so in a procedurally proper manner (of which
more below). See Barr v. Bd. of Trs. of W. Ill. Univ., 796 F.3d 837, 839 (7th Cir. 2015) (“Under
res judicata, a final judgment on the merits of an action precludes the parties or their privies from
relitigating issues that were or could have been raised in that action.”) (quoting Allen v.
McCurry, 449 U.S. 90, 94 (1980)) (internal quotation marks omitted); Walczak, 739 F.3d at 1017
(“Claim preclusion applies not only to matters that were actually decided in the original action
but also to matters that could have been decided.”); Kratville v. Runyon, 90 F.3d 195, 197-98
(7th Cir. 1996) (same) (internal quotation marks omitted). Indeed, the Plan attempted to do so
twice: orally on April 15, 2015, and in its December 9, 2015 written motion. Doc. 99 (13 C
2694); Doc. 134-2 (13 C 2694); Doc. 38-2 (16 C 2390) at 11-12. Because “[t]here is likely to be
good reason when the court that has control of the first action concludes that a party should not
be allowed to advance matters so closely related to the action as to be part of a single claim …
[u]nless the court can be persuaded to direct that denial of leave to amend is without prejudice to
advancing the new matter in a separate action, preclusion should apply” to the second case. 18
Charles Alan Wright et al., Federal Practice & Procedure § 4412 (3d ed. 2016). The Plan did
not ask that denial of its requests to bring claims against Universal and Best in Weir be made
without prejudice to filing the same claims in a separate suit; nor did it even discuss such a
possibility with the court.
The court, moreover, had good reason to deny the Plan’s motions. The April 15, 2015
oral motion came more than two months after the deadline to move to amend the pleadings or
add new parties had passed. Doc. 80 (13 C 2694). Even so, the court proposed that the Plan file
a written motion to file a cross-claim against Universal. Doc. 38-2 (16 C 2390) at 11-12. That
written motion would have had a reasonable chance of success; although the amendment
deadline had passed, the Plan could have filed a written motion well in advance of the June 30,
2015 discovery deadline, and the court very well could have granted the motion pursuant to Rule
16(b)(4). See Bell v. Taylor, ___ F.3d ___, 2016 WL 3568139, at *4 (7th Cir. July 1, 2016)
(“[W]hen a district court denies a motion for leave to amend filed after the deadline, the
generous standard in Rule 15(a)(2) for allowing amendments is in some tension
with Rule 16(b)(4), which governs scheduling orders and requires a showing of good cause to
justify modifying time limits. In this situation, the court is entitled to apply the heightened goodcause standard of Rule16(b)(4) before considering whether the requirements of Rule
15(a)(2) were satisfied.”) (citations and internal quotation marks omitted); Adams v. City of
Indianapolis, 742 F.3d 720, 733-34 (7th Cir. 2014) (same).
The Plan contends that it would have been “disingenuous to bring such a motion when it
appeared the parties were close to settling.” Doc. 44 (16 C 2390) at 5. That is nonsensical; after
all, the Plan made an oral motion, which if granted would have had precisely the same effect as a
written motion. The Plan was under no obligation to file a written motion, but “[i]t is axiomatic
that claim preclusion doctrine requires a party to live with its strategic choices.” Hatch, 699 F.3d
at 45 (internal quotation marks omitted); see also Garcia v. Vill. of Mount Prospect, 360 F.3d
630, 644 (7th Cir. 2004) (“[A] plaintiff is free to pursue his claims strategically, but he must
abide by the consequences of those choices.”); Davis v. City of Chicago, 53 F.3d 801, 803 (7th
Cir. 1995) (“Davis split his claim for his own reasons …. That is an understandable strategy, but
not a good reason for foisting two suits on the judicial system and his adversary. Having made a
tactical choice …, Davis must accept the consequences.”).
As for the December 9, 2015 written motion, it became moot when Weir—represented by
the same counsel as the Plan—voluntarily dismissed the Plan from Case 13 C 2694. Doc. 141
(13 C 2694). The Plan contends that this was an “unexpected result,” Doc. 44 (16 C 2390) at 6,
but that cannot or at least should not have been so, because it is axiomatic a non-party cannot file
cross-claims or third-party claims. See In re Bergeron, 636 F.3d 882, 883 (7th Cir. 2011) (“A
nonparty cannot inject himself into a case without intervening.”) (citing Marino v. Ortiz, 484
U.S. 301, 304 (1988) (per curiam)). Regardless, the Plan concedes that it recognized that it
needed to intervene in Weir pursuant to Rule 24, but that it decided not to do so because it “was
unsure of whether … such a motion would also be granted with the complication of bringing
claims against” Best and “was reasonably certain that [Best and Universal] would be raising
statute of limitations defenses.” Doc. 44 (16 C 2390) at 6.
That is unpersuasive. Gaffney, who was representing the plaintiff (Weir) and one
defendant (the Plan) in Weir, could have solved the problem by pursuing a course other than
having Weir dismiss his claims against the Plan. For example, the Plan (or Weir) could have
retained another lawyer, or the Plan could have moved to realign itself as a party plaintiff. In
addition, any complications arising from the Plan’s intervening and bringing claims against
Best—and the Plan does not indicate what those complications might have been—resulted
directly from the Plan’s failure to join Best in Weir before the deadline for moving to add new
As noted, if the Plan “disagreed with” either of the court’s “denial[s] of leave to amend
…, it could have appealed that issue.” Roboserve, 121 F.3d at 1035. It did not. Instead, it filed
a new suit “on the same subject in the same court, against the same defendant[s] at the same
time.” Curtis, 226 F.3d at 139. These circumstances present a textbook example of improper
claim splitting. “When a party chooses to move for leave to amend its complaint and then not to
appeal denial of that motion, the party is not entitled to a second opportunity in a later action to
litigate the claim that the party sought to add. Instead, the party’s recourse is to appeal, not to
start a new action.” Hatch, 699 F.3d at 45 (citation and internal quotation marks omitted); see
also Sensormatic, 273 F. App’x at 265 (“Presuming that SSC felt that this denial [of leave to
amend] was in error, it should have waited to appeal the decision.”); Sommerfield v. City of
Chicago, 2013 WL 4047606, at *12-13 (N.D. Ill. Aug. 9, 2013) (“Generally, when a plaintiff is
denied leave to amend claims, the proper remedy is to appeal that decision, not to file a separate
lawsuit.”); 18 Wright et al., supra, § 4412 (“Any error [in a denial of leave to amend] should be
corrected by appeal in the first proceeding.”).
As a second “special factor,” the Plan argues that by the time Potts was appointed as
trustee and appeared through counsel in Weir, Doc. 90 (13 C 2694), the deadline to move to
amend the pleadings or add new parties had expired. Doc. 44 (16 C 2390) at 4, 7. But Potts was
appointed as trustee on January 22, 2015, eleven days before the February 2, 2015 deadline to
move to amend the pleadings. Doc. 84 (13 C 2694). Potts (through Gaffney) could have moved
to extend the deadline, but he did not do so. Moreover, because Gaffney also represented Weir,
Potts was well aware (through Gaffney) of the operative deadlines. Further, the Plan and Weir
both appeared content with the February 2, 2015 deadline, as they did not ask to extend the
deadline to amend the pleadings or add new parties even when, on March 26, 2015, the court
granted the parties’ agreed motion to extend the discovery and dispositive motion deadlines.
Doc. 93 (13 C 2694).
Third, the Plan contends that when Potts was appointed as trustee, the settlement
conference before Magistrate Judge Cox had already been scheduled for May 6, 2015. Doc. 44
(16 C 2390) at 4. That is incorrect. The May 6, 2015 settlement conference was not scheduled
until February 24, 2015, over a month after Potts’s appointment. Doc. 89 (13 C 2694). In any
event, the pendency of a settlement conference does not automatically stay a case, and no party
asked the court for a stay. In fact, as noted, the parties moved to extend the discovery and
dispositive motion deadlines after the settlement conference had been set but before it had taken
place. Likewise unpersuasive is the Plan’s contention that the court should excuse the Plan’s
non-compliance with deadlines because Potts was dealing with various other legal issues related
to the Coverage Action. Doc. 44 (16 C 2390) at 4-5. The Plan cites no authority holding that a
litigant’s (or lawyer’s) obligation to deal with other matters justifies failure to adhere to
deadlines set by the court, particularly when the litigant does not even move to extend them.
Fourth, the Plan notes that it has moved under Rule 42 to consolidate this case with Weir,
Doc. 180 (13 C 2694), and that this “further establishes that there was never an attempt” to split
the claims. Doc. 44 (16 C 2390) at 6-7. But the cases are separate and in need of consolidation
only because the Plan filed a separate suit instead of taking appropriate action during its tenure as
a party in Weir or seeking to intervene after its dismissal. And contrary to the Plan’s
contentions, id. at 7, consolidation is not “more appropriate” than dismissal in these
circumstances, because consolidation would render toothless Rule 16(b)(4), which provides that
a court’s “schedule may be modified only for good cause and with the judge’s consent.”
“In making a Rule 16(b) good-cause determination, the primary consideration for district
courts is the diligence of the party seeking amendment.” Alioto v. Town of Lisbon, 651 F.3d 715,
720 (7th Cir. 2011); see also Trustmark Ins. Co. v. Gen. & Cologne Life Re of Am., 424 F.3d
542, 553 (7th Cir. 2005). As detailed above, the Plan was not diligent here. It failed to move to
extend the February 2, 2015 deadline after Potts was appointed as trustee; it sought and obtained
extension of the discovery and dispositive motion deadlines without doing the same for the
deadline to move to amend or add new parties; it failed to move in writing to file a cross-claim
against Universal in April 2015; it failed to move to file cross-claims and third-party claims
against Universal and Best until December 2015, more than ten months after the deadline to
move to amend or add new parties had passed; and it then failed to move to intervene in Weir
after its dismissal from the suit. As the Plan itself concedes, “approximately 11 months
transpired … between the timeframe that [Potts] first appeared in the litigation and the filing” of
this suit. Doc. 44 (16 C 2390) at 8. “[C]ase management depends on enforceable deadlines,”
and “[i]n managing their caseloads, district courts are entitled to—indeed they must—enforce
deadlines.” Flint v. City of Belvidere, 791 F.3d 764, 768 (7th Cir. 2015) (internal quotation
marks omitted); see also Raymond v. Ameritech Corp., 442 F.3d 600, 605 (7th Cir. 2006); Reales
v. Consol. Rail Corp., 84 F.3d 993, 996 (7th Cir. 1996); Shine v. Owens-Ill., Inc., 979 F.2d 93, 96
(7th Cir. 1992) (“[J]udges must be able to enforce deadlines.”) (internal quotation marks
omitted). The Plan has not shown good cause for not adhering to the deadlines in Weir, and
preclusion is appropriate as a result.
Fifth, and finally, the Plan notes that “Universal has cited no cases that stand for the
proposition that it is claim splitting when a non-party fails to file a motion for leave to intervene,
but rather files its own action.” Doc. 44 (13 C 2694) at 7-8. That is true, but it does not describe
this case. The Plan was a party in Weir, but it did not abide by or move to extend the deadline to
move to amend the pleadings, and then arranged (through Weir, its lawyer’s other client) to
obtain its dismissal rather than move to realign itself as a party plaintiff or retain a separate
lawyer. It is difficult to fathom how that would not qualify as the Plan “prosecuting its case
piecemeal,” which the rule against claim splitting prohibits. Lee, 802 F.3d at 635.
Because the Plan’s claims against Universal in this suit violate the rule against claim
splitting, Universal’s motion to dismiss is granted. Best’s motion to dismiss did not make a
claim-splitting argument. Doc. 35. But the above analysis applies equally to the Plan’s claims
against Best, and so the court, consistent with the Seventh Circuit’s directive to enforce its own
deadlines effectively, see Flint, 791 F.3d at 768; Raymond, 442 F.3d at 605; Reales, 84 F.3d at
996; Shine, 979 F.2d at 96, also dismisses the Plan’s claims against Best. See S. Ill. Riverboat
Casino Cruises, Inc. v. Triangle Insulation & Sheet Metal Co., 302 F.3d 667, 677 (7th Cir. 2002)
(“[D]istrict courts … are not required to ignore … applicable law…. [O]ne could wonder why
Triangle’s attorney chose not to raise the remedy limitation issue. Whatever the reason, the
district court was certainly permitted to do so.”); Jones v. Page, 76 F.3d 831, 850 (7th Cir. 1996)
(“[W]hile a judge should never engage in advocacy from the bench, he or she has an obligation
to raise legal issues that the parties have overlooked or neglected.”). Because the rule against
claim splitting alone justifies granting the motions to dismiss, the court need not and does not
address Best’s and Universal’s additional arguments in support of dismissal.
For the foregoing reasons, Universal’s and Best’s motions to dismiss Counts II-IV are
granted. The Plan’s claims against Universal and Best are dismissed, and the dismissal is with
prejudice because the problem with those claims cannot be cured with repleading.
August 29, 2016
United States District Judge
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