Forward Financing LLC v. Maxx Powersport LLC et al
Judge F. Dennis Saylor, IV: ORDER entered. MEMORANDUM AND ORDER. Defendants' Motion for Leave to File Second Amended Counterclaims is GRANTED [ECF 36]. Plaintiff's Motion to Dismiss is DENIED as moot without prejudice to its renewal in whole or in part as to the amended counterclaims [ECF 25].(FDS, law2)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
FORWARD FINANCING LLC,
Plaintiff and Counterclaim)
MAXX POWERSPORT LLC, and
Civil Action No.
MEMORANDUM AND ORDER ON DEFENDANTS’ MOTION FOR LEAVE TO FILE
SECOND AMENDED COUNTERCLAIMS
This is an action for breach of contract. Plaintiff Forward Financing LLC alleges that
defendants Maxx Powersport LLC and Robert Landis, the sole member of Maxx Powersport,
breached a “Future Receipt Sales Agreement” (the “Agreement”) executed by the parties on
October 5, 2016, and attached to the complaint as Exhibit A.
In their answer, defendants assert counterclaims on behalf of themselves and a potential
class of similarly situated merchants who had signed similar agreements with Forward
Financing. Defendants allege that the Agreement is not a sales agreement, but in fact a usurious
loan that is unenforceable.
Maxx Powersport seeks leave to file second amended counterclaims. Because this
litigation is in its early stages and leave to amend should be freely given, defendant’s motion will
Forward Financing LLC filed a complaint on May 2, 2017, against Maxx Powersport
LLC and Robert Landis alleging breach of contract. On August 9, Maxx Powersport filed an
answer and two class-action counterclaims: one for violation of Mass. Gen. Laws ch. 93A, §§ 2
and 11 (unfair trade practices), and one for violation of Mass. Gen. Laws ch. 271, § 49 (criminal
usury). On August 28, before Forward Financing answered the counterclaims, Maxx Powersport
filed amended counterclaims. The amended counterclaims asserted the same two causes of
action but specified the alleged classes and their commonality more precisely.
On September 18, Forward Financing filed a motion to dismiss the counterclaims. Maxx
Powersport filed an opposition on October 10, and Forward Financing filed a reply on October
17. The Court held a hearing on October 19 and took the matter under advisement.
On November 3, Maxx Powersport filed the present motion for leave to file second
amended counterclaims. The proposed amendment does not add any new counts, but rather
alleges a substantial number of new facts, alleged to have been recently discovered by counsel
and related to the arguments advanced by the parties in the motion-to-dismiss papers.
Standard of Review
Rule 15 of the Federal Rules of Civil Procedure addresses amendments to pleadings.1
Under Rule 15(a), a party may amend a “pleading” without leave of court in certain relatively
narrow circumstances.2 “In all other cases, a party may amend its pleadings only with the
Once a court issues a scheduling order pursuant to Rule 16, however, a party who moves to modify the
deadline to amend the pleadings or to amend the pleadings after the deadline must show “good cause.” Fed. R. Civ.
A party may amend a pleading once as a matter of course within “21 days after serving it,” or “if the
pleading is one to which a responsive pleading is required, 21 days after service of a responsive pleading or 21 days
after service of a motion under Rule 12(b), (e), or (f), whichever is earlier.” Fed. R. Civ. P. 15(a)(1).
opposing party’s written consent or the court’s leave. The court should freely give leave when
justice so requires.” Fed. R. Civ. P. 15(a)(2). “In the absence of any apparent or declared
reason—such as undue delay, bad faith or dilatory motive on the part of the movant, repeated
failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing
party by virtue of allowance of the amendment, futility of amendment, etc.—the leave sought
should, as the rules require, be ‘freely given.’” Foman v. Davis, 371 U.S. 178, 182 (1962). In
determining whether to grant a motion to amend, the court must examine the totality of the
circumstances and “exercise its informed discretion in constructing a balance of pertinent
considerations.” Palmer v. Champion Mortg., 465 F.3d 24, 30-31 (1st Cir. 2006).
Defendants request leave to amend to include (1) factual allegations from several non-
confidential depositions of witnesses in an action involving similar issues, which were taken in
late September and received by defendants’ counsel in early October; and (2) factual allegations
from e-mails provided to defendants’ counsel from Maxx Powersport. Defendants argue that
these facts “further establish that the form of the transaction is a sham, and that, in economic
reality, the transaction is a loan.” Def. Mot. for Leave to Amend at 1.
Plaintiff opposes the motion for leave to amend on the grounds that it is futile and would
cause undue delay.
In the First Circuit, it is well-established that “undue delay in moving to amend, even
standing alone, may be . . . an adequate reason” to deny a motion for leave to amend. In re
Lombardo, 755 F.3d 1, 3 (1st Cir. 2014) (citing Foman, 371 U.S. at 182; Acosta-Mestre v. Hilton
Int’l of P.R., Inc., 156 F.3d 49, 51-52 (1st Cir. 1998)); accord Calderon-Serra v. Wilmington
Trust Co., 715 F.3d 14, 20 (1st Cir. 2013) (“Appreciable delay alone, in the absence of good
reason for it, is enough to justify denying a motion for leave to amend.”). “[W]hen considerable
time has elapsed between the filing of the complaint and the motion to amend, the movant has [at
the very least] the burden of showing some valid reason for his neglect and delay.” In re
Lombardo, 755 F.3d at 3 (second alteration in original) (quoting Stepanischen v. Merchs.
Despatch Transp. Corp., 722 F.2d 922, 933 (1st Cir. 1983)) (internal quotation marks omitted).
While allowing defendants to amend their counterclaims would certainly cause some
delay, plaintiff has not shown that that delay would be “undue.” Plaintiff’s motion to dismiss
would be mooted and would have to be refiled, to the extent plaintiff still contends that the
counterclaim is inadequately pleaded. But this case is still at a very early stage. There is no
scheduling order in place, and there has been no discovery. Plaintiff vaguely complains that “six
months after filing” the case “is not yet at issue,” Pl.’s Opp. at 2-3, but does not even suggest that
it is being prejudiced in its case by the passage of time, much less offer any evidence that the
delay has caused or will cause harm. The motion to amend accordingly will not be denied on the
ground of undue delay.
Plaintiff’s principal argument is that amendment to add these additional factual
allegations would be futile. “‘Futility’ means that the complaint, as amended, would fail to state
a claim upon which relief could be granted.” Glassman v. Computervision Corp., 90 F.3d 617,
623 (1st Cir. 1996). “In reviewing for ‘futility,’ the district court applies the same standard of
legal sufficiency as applies to a Rule 12(b)(6) motion.” Id. On a motion to dismiss, the court
“must assume the truth of all well-plead[ed] facts and give . . . plaintiff the benefit of all
reasonable inferences therefrom.” Ruiz v. Bally Total Fitness Holding Corp., 496 F.3d 1, 5 (1st
Cir. 2007) (citing Rogan v. Menino, 175 F.3d 75, 77 (1st Cir. 1999)). To survive a motion to
dismiss, the complaint must state a claim that is plausible on its face. Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007). That is, “[f]actual allegations must be enough to raise a right to relief
above the speculative level, . . . on the assumption that all the allegations in the complaint are
true (even if doubtful in fact).” Id. at 555 (citations omitted). “The plausibility standard is not
akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant
has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S.
at 557). Dismissal is appropriate if the facts as alleged do not “possess enough heft to show that
plaintiff is entitled to relief.” Ruiz Rivera v. Pfizer Pharm., LLC, 521 F.3d 76, 84 (1st Cir. 2008)
(alterations omitted) (internal quotation marks omitted).
At this stage of the proceedings, it is by no means clear that the proposed amendment
would be futile. The principal question before the Court in the pending motion to dismiss is
whether the transaction at issue is a bona fide sale or in fact a disguised loan. See In re Burm,
554 B.R. 5, 16-19 (Bankr. D. Mass. 2016) (explaining that usury laws do not apply to sales and
explaining factors to consider in determining whether a transaction is a loan or a sale). Plaintiff
insists that the character of the transaction can be completely determined from the plain language
of the Agreement itself, and so there is no need to allow additional facts of the kind proposed to
be alleged by defendants. But the Agreement is convoluted and difficult to understand, and
seems to contain internal contradictions. The Court is not prepared to find that there is no
plausible basis to look to extrinsic evidence. To the extent there is ambiguity, of course,
allegations about how the parties understood or interpreted the Agreement would likely be
relevant. See Balles v. Babcock Power Inc., 476 Mass. 565, 571-72 (2017).3
Plaintiff contends that the deposition testimony cited by defendants does not support at least some of the
allegations they seek to include in their second amended counterclaims. But that is immaterial to the Court’s
decision here. The Court must take all the allegations in the proposed amended complaint as true and then
determine if that document fails to state a claim upon which relief can be granted.
Furthermore, although defendants are not seeking to add any additional counts, they do
seek to include another theory under which they might recover under Mass. Gen. Laws Chapter
93A—namely, that Forward Financing violated Chapter 93A “by unconscionably making,
servicing, or collecting, or attempting to collect, on loans issued to Massachusetts small
businesses and individual owners without appropriate evaluation of their ability to repay the
loans.” 2d Am. Counterclaims ¶ 111. Plaintiff does not address this additional allegation in its
opposition, or explain why such a theory would be futile.
In summary, because there is no apparent reason why leave to amend should not be given
in this case, the Court will allow defendants to amend their counterclaims.
For the foregoing reasons, defendants’ Motion for Leave to File Second Amended
Counterclaims is GRANTED, and defendants are directed to promptly file their second amended
counterclaims. Plaintiff’s Motion to Dismiss the Counterclaims is DENIED as moot without
prejudice to its renewal in whole or in part as to the amended counterclaims.
/s/ F. Dennis Saylor
F. Dennis Saylor, IV
United States District Judge
Dated: November 29, 2017
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