CitiMortgage, Inc. v. Chicago Bancorp, Inc.

Filing 149

MEMORANDUM AND ORDER. (see order for details) IT IS HEREBY ORDERED that plaintiff CitiMortgage, Inc.'s motion for leave to add parties and file first amended complaint [#100 ] is granted and the proposed amended complaint is deemed filed as of today. Plaintiff is reminded of its obligation to promptly effect service on the newly added defendants. IT IS FURTHER ORDERED that the pending motions for summary judgment are deemed addressed to Count I of the amended complaint and remain under submission. IT IS FINALLY ORDERED that the August 12, 2013 trial date and the deadline for filing pretrial submissions are vacated, and no later than July 22, 2013, the parties shall file a new joint scheduling plan with their proposal for the remaining deadlines in this case. The court will hold a telephone conference to discuss all remaining scheduling issues on Tuesday, July 30, 2013 at 9:00 a.m. Counsel for the plaintiff is responsible for placing the call and having all parties on the line before contacting my chambers at 314-244-7520. Signed by District Judge Catherine D. Perry on 07/02/2013. (CBL)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
CITIMORTGAGE, INC,
Plaintiff,
vs.
CHICAGO BANCORP, INC.,
Defendant.

)
)
)
)
)
)
)
)
)

Case No. 4:12CV246 CDP

MEMORANDUM AND ORDER
This action is now before me on plaintiff CitiMortgage Inc.’s motion to
amend its complaint. CMI alleges that defendant Chicago Bancorp, Inc. became
insolvent, or nearly so, by fraudulently transferring its assets to other entities.
According to CMI, Chicago Bancorp effected these transfers so it would not have
to pay any judgment rendered against it in this case.
As such, CMI seeks to amend its complaint to add three Missouri state law
claims related to the alleged fraudulent transfers. CMI wishes to bring these
additional counts against the transferee entities, The Federal Saving Bank (FSB)
and National Bancorp Holdings, Inc. (NBH), as well as Chicago Bancorp and its
owners and sole shareholders, Stephen Calk and John Calk.
In addition to the original allegations in this case, that Chicago Bancorp
breached its contract with CMI (Count I), CMI now alleges that Chicago Bancorp,
–1–

FSB, NBH, and the Calks conspired to transfer away Chicago Bancorp’s assets in
order to avoid any judgment awarded to CMI (proposed Count II); that FSB, NBH,
Chicago Bancorp, and the Calks are alter egos (proposed Count III); and that FSB
is liable as successor for any judgment against Chicago Bancorp (proposed Count
IV).
Although the deadline for amending pleadings is long past, I find that CMI
acted with diligence in attempting to meet that deadline, and its proposed
amendments rely on newly discovered facts. I also find that permitting the
amendment will not lead to undue prejudice to Chicago Bancorp and that the
amendments are not futile. Accordingly, I will grant CMI’s motion to amend its
complaint. I will vacate the August 12, 2013 trial date and will set the case for a
scheduling conference. Additionally, because Count I has not been changed in any
substantive way, I will not deny as moot the pending motions for summary
judgment. Instead, they remain under submission and I will consider them as
being directed at Count I of the amended complaint.
I.

Discussion
As a general rule, leave to amend a party's pleadings should be freely given

when justice so requires. See Fed. R. Civ. P. 15(a). Different considerations
apply, however, when a party moves to amend his pleadings after a deadline
established in a scheduling order. In particular, because Fed. R. Civ. P. 16(b)(4)
–2–

provides that a scheduling order ―may be modified only for good cause and with
the judge's consent,‖ the Eighth Circuit Court of Appeals requires parties to show
good cause before amending their pleadings if they move to amend after the
deadline established in the scheduling order. See Popoalii v. Corr. Med. Servs.,
512 F.3d 488, 497 (8th Cir. 2008); Sherman v. Winco Fireworks, Inc., 532 F.3d
709, 716 (8th Cir. 2008).
A.

Diligence of Party Moving to Amend Pleading

In considering whether a movant has shown good cause, a district court must
first examine the movant's diligence in attempting to meet the requirements of the
scheduling order. Sherman, 532 F.3d at 716.
In this case, the cut-off date for joining parties and amending the pleadings,
which was agreed upon by both parties, was set by case management order for
October 15, 2012. However, the case was not referred to mediation until two
months after that date. (See Order Referring Case to ADR, July 6, 2012, Doc. No.
17; Order Granting Joint Mot. to Extend ADR Deadline, Dec. 29, 2012, Doc. No.
37.) CMI contends – and Chicago Bancorp does not refute – that CMI first learned
of Chicago Bancorp’s dissolution at the mediation, which took place February 11,
2013. The dissolution itself had not officially taken effect until January 4, 2013, so
there would have been no way for CMI to learn of it before the pleadingamendment deadline.
–3–

Three days after the unsuccessful mediation, counsel for CMI asked Chicago
Bancorp for supplemental responses and documents relating to its dissolution and
alleged transfers of assets, which CMI asserted were responsive to previously sent
discovery requests. (See Pl.’s Mem. in Support of Mot. to Compel, Ex. 5, Doc.
No. 63-5, p. 1.) After more communication between counsel, Chicago Bancorp
declined to respond by February 18, 2013 as requested. (Id., at pp. 1, 3; see also
Mem. in Opp. to Mot. to Compel, Doc. No. 64.)
Later that same week, on February 22, 2013, CMI filed a motion to compel
responses. The following week, Chicago Bancorp filed a motion for a protective
order, arguing that it should not be required to produce a witness to respond to
certain topics listed in CMI’s notice of a Rule 30(b)(6) deposition. The topics to
which Chicago Bancorp objected also related to its dissolution and alleged
transfers of assets, as well as the types of loans held by Chicago Bancorp.
I granted each party’s motion in part on March 21, 2013. (See Order, Doc.
No. 72.) I ordered Chicago Bancorp to respond to certain interrogatories and
requests for production relating to its dissolution and alleged transfers of assets. I
also ordered Chicago Bancorp to produce a 30(b)(6) witness who could respond to
some of the listed topics but agreed with Chicago Bancorp that it was not required
to provide discovery about the loans it currently held. On March 22, 2013, the day

–4–

after I issued my order, CMI deposed John Calk, co-owner of Chicago Bancorp
and one of the proposed additional defendants. (See Doc. No. 92-2, p. 1.)
CMI apparently received the responses to the discovery requests I ordered
Chicago Bancorp to answer sometime in April. (See Pl.’s Mot. to Amend, Doc.
No. 100, ¶ 4.) On April 29, 2013, CMI deposed Stephen Calk, co-owner and
president of Chicago Bancorp and another of the proposed additional defendants.
(See Pl.’s Ex. A, Mot. for Sanctions, Doc. No. 95, p. 1.) CMI contends now that
Calk was underprepared and has moved for sanctions against Chicago Bancorp,
requesting the costs associated with the deposition.
Although I am not ruling upon that motion now, I find that the time CMI
spent deposing the Calks, whose testimony forms part of the basis for its motion to
amend, underscores its diligence in bringing the motion as soon as practicable.
Less than two weeks passed between Stephen Calk’s deposition and the filing of
this motion to amend. Before that, CMI was negotiating with Chicago Bancorp
over related discovery issues and awaiting my ruling on its related motion to
compel.
CMI’s proposed amendments are based on newly discovered facts that were
not discovered – and indeed, did not happen – until after the pleading-amendment
deadline. In sum, I find that CMI was diligent in moving to amend. See
McCormack v. United States, 4:10CV1068 CAS, 2011 WL 2669447, at *2 (E.D.
–5–

Mo. July 7, 2011) (though it was four months after deadline, plaintiff was diligent
in moving to amend complaint when proposed amendments were based on late
discovery produced by defendant); Simpson v. Home Depot, Inc., 203 F.R.D. 643,
645 (D. Kan. 2001) (where proposed new claims were based on information only
discovered after court granted plaintiff’s motion to compel, plaintiff was diligent in
moving to amend seven months after deadline); Enzymotec Ltd. v. NBTY, Inc., 754
F. Supp. 2d 527, 537 (E.D.N.Y. 2010) (though nine months past deadline,
plaintiff’s filing of motion to amend ―within two months of acquiring the
information‖ underlying proposed new claims was ―sufficient to show diligence‖).
B.

Undue Prejudice to Non-Moving Party

The diligence of the party seeking amendment to its pleading is the ―primary
measure of good cause.‖ Sherman, 532 F.3d at 716 (citing Rahn v. Hawkins, 464
F.3d 813, 822 (8th Cir. 2006)). But because a party seeking amendment out of
time must also satisfy the requirements of Rule 15(a), prejudice to the nonmovant
resulting from the amendment ―may also be a relevant factor.‖ Id. at 717; see also
Foman v. Davis, 371 U.S. 178, 182 (1962).
Here, Chicago Bancorp argues that allowing the amendments would cause
undue prejudice because it will have to spend time and money defending the new
claims; new discovery and motion practice will be required; and the trial –
currently set for August 12, 2013 – will be pushed back. Although permitting the
–6–

amendments will probably lead to some new discovery, this is not enough to show
undue prejudice. See, e.g., Dennis v. Dillard Dep't Stores, Inc., 207 F.3d 523, 525
(8th Cir. 2000) (―adverse party's burden of undertaking discovery, standing alone,‖
provides insufficient grounds to deny leave to amend). In fact, some of the
discovery necessitated by the new claims and parties has already been exchanged.
(See Order, March 21, 2013, Doc. No. 72.)
Further, it is undisputed that Chicago Bancorp knew of its own impending
dissolution at least six weeks before it disclosed that information (apparently
reluctantly) to CMI. In addition, Chicago Bancorp also refused to produce
discovery relating to its dissolution and alleged insolvency until I granted CMI’s
motion to compel. The fact that CMI’s new claims were delayed by Chicago
Bancorp’s own late actions weighs against a finding of prejudice. See Bell v.
Allstate Life Ins. Co., 160 F.3d 452, 454 (8th Cir. 1998). I find that allowing
CMI’s proposed amendments will not unduly prejudice Chicago Bancorp.
C.

Futility of Proposed Amendments

In addition to its other arguments against the proposed amendments,
Chicago Bancorp contends that they would be futile for two different reasons.
a.

Chicago Bancorp’s Net Worth

First, Chicago Bancorp argues that its net worth, as of May 23, 2013, makes
the proposed amendments futile because ―the essential premise of the proposed
–7–

new claims is that Chicago Bancorp’s net worth is insufficient to satisfy CMI’s
claim against Chicago Bancorp.‖ This argument misses the point. Futility is a
measure of the legal sufficiency of a proposed claim. See, e.g., Zutz v. Nelson, 601
F.3d 842, 850 (8th Cir. 2010). The fact that Chicago Bancorp had assets on a
certain date to cover a judgment rendered against it does not render futile the
proposed claims or the addition of the proposed defendants. At best, Chicago
Bancorp’s net worth after the fraudulent transfers are alleged to have occurred is a
piece of evidence Chicago Bancorp might use at some later stage in the case.
As a corollary, Chicago Bancorp argues that the proposed amendments are
―unnecessary‖ because CMI could enforce any judgment in post-judgment
proceedings ―just as efficiently and effectively.‖ Except as a possible indication of
undue prejudice – which is absent in this case – the existence of alternate
proceedings is not grounds to deny a motion to amend under either Rule 15 or Rule
16. See, e.g., United States ex rel. Knight v. Reliant Hospice, Inc., 3:08CV3724,
2011 WL 1321584, at *4–*5 (D.S.C. April 4, 2011) (granting plaintiff’s motion to
add veil-piercing claim while noting that plaintiff could have chosen to bring postjudgment proceedings instead).

–8–

b.

Personal Jurisdiction Over Proposed Defendants

Chicago Bancorp also argues that this court lacks personal jurisdiction over
the proposed defendants, who are all nonresidents. Therefore, Chicago Bancorp
contends, attempting to add them as defendants would be futile.
The Eighth Circuit has held that, at this stage, a plaintiff need only make a
prima facie showing of jurisdiction. See Dakota Indus., Inc. v. Dakota Sportswear,
Inc., 946 F.2d 1384, 1387 (8th Cir.1991) (―Jurisdiction need not be proved by a
preponderance of the evidence until trial or until the court holds an evidentiary
hearing.‖). CMI has made the requisite showing of personal jurisdiction over the
proposed nonresident defendants.
i.

Long-Arm Statute

Two conditions must be satisfied before a federal court may exercise
personal jurisdiction over a nonresident defendant. First, the forum state's longarm statute must be satisfied. Viasystems, Inc. v. EBM–Papst St. Georgen GmbH
& Co., KG, 646 F.3d 589, 593 (8th Cir. 2011). Second, the court must determine
whether the defendant has sufficient contacts with the forum state to comport with
due process. Johnson v. Arden, 614 F.3d 785, 794 (8th Cir. 2010).
Missouri’s long-arm statute provides for personal jurisdiction over any
person or firm who commits a tort within Missouri, see Mo. Rev. Stat. §
506.500.1(3), and covers ―extraterritorial acts that yield consequences in
–9–

Missouri.‖ Furminator v. Wahba, 4:10CV1941 AGF, 2011 WL 3847390, at *2
(E.D. Mo. Aug. 29, 2011) (quoting Bryant v. Smith Interior Design Grp., Inc., 310
S.W.3d 227, 232 (Mo. banc 2010)). CMI has alleged facts showing Chicago
Bancorp’s actions led to consequences within the state, including perpetuation of
fraud against CMI, a Missouri resident. Therefore, the Missouri long-arm statute is
satisfied. See Longshore v. Norville, 93 S.W.3d 746, 752 (Mo. Ct. App. 2002)
(nonresident defendant allowed his divorced daughter to use his address to collect
maintenance payments from her ex-husband, though defendant knew she was not
entitled to receive them, and though actions were extraterritorial, they satisfied
long-arm statute because they defrauded Missouri resident and Missouri state
court); Stucky v. Health Care Prods., Inc., 90CV1562, 1992 WL 124832, at *2 (D.
Kan. May 26, 1992) (applying Kansas long-arm statute, court had personal
jurisdiction over nonresident shareholders of corporation where corporation did
business in Kansas and plaintiff alleged shareholders were alter egos of corporation
and had used ―the corporate entity in promoting injustice or fraud‖).
ii.

Minimum Contacts

Satisfaction of a forum state’s long-arm statute alone is insufficient to
convey personal jurisdiction. Before exercising jurisdiction over a nonresident
defendant, a court must also determine whether a defendant has sufficient contacts
with the forum state to comport with due process. These contacts can take many
– 10 –

forms, but they must include ―some act by which the defendant purposely avails
itself of the privilege of conducting activities within the forum State, thus invoking
the benefits and protections of its laws.‖ J. McIntyre Mach., Ltd. v. Nicastro, 131
S. Ct. 2780, 2787 (2011) (internal quotation marks omitted).
The Eighth Circuit has established a five-factor test to determine the
sufficiency of a nonresident defendant's contacts with the forum state. The five
factors are: (1) the nature and quality of contacts with the forum state; (2) the
quantity of the contacts; (3) the relation of the cause of action to the contacts; (4)
the interest of the forum state in providing a forum for its residents; and (5)
convenience of the parties. Romak USA, Inc. v. Rich, 384 F.3d 979, 984 (8th Cir.
2004). The first three factors are most important. Id.
In certain circumstances, due process permits a forum state to assert personal
jurisdiction over a nonresident based on an extraterritorial tort that caused effects
in the forum state. Calder v. Jones, 465 U.S. 783, 791 (1984); Johnson, 614 F.3d
at 796 (this is known as the ―Calder effects test‖). To conform to due process, a
state may only claim personal jurisdiction based on an extraterritorial tort if the
tortious act was (1) ―intentional‖; (2) ―uniquely or expressly aimed at the forum
state‖; and which (3) ―caused harm, the brunt of which was suffered—and which
the defendant knew was likely to be suffered—in the forum state.‖ Viasystems,
646 F.3d at 594 (internal quotation marks and brackets omitted).
– 11 –

Here, CMI alleges that Chicago Bancorp, along with the proposed
defendants, intentionally and fraudulently transferred Chicago Bancorp’s assets to
FSB. CMI alleges that the asset transfers occurred after Chicago Bancorp had
been threatened with suit and that they were effected for the purpose of rendering
Chicago Bancorp judgment-proof in this case. CMI also alleges that FSB took up
where the dissolved Chicago Bancorp left off, continuing its business of mortgage
loan origination in the same locations, with the same employees, and using the
same assets.
This is more than enough to satisfy the Calder effects test, especially in the
context of a motion to amend the complaint. See Synthes, Inc. v. Marotta, 281
F.R.D. 217, 230 (E.D. Pa. 2012). Taking CMI’s factual allegations as true, the
transfers were expressly aimed at defrauding CMI – a Missouri citizen – and
specifically intended to undermine this lawsuit. Though extraterritorial, the
alleged transfers were targeted uniquely at Missouri. The nature and quality of
these contacts, as well as their direct relationship to this action, demonstrate an
intimate ―relationship among the defendant, the forum, and the litigation.‖ Shaffer
v. Heitner, 433 U.S. 186, 204 (1977). They constitute sufficient contacts with
Missouri to meet the demands of due process. See Longshore, 93 S.W.3d at 753;
see also Bryant, 310 S.W.3d at 232–33 (citing Int’l Shoe Co. v. Washington, 326

– 12 –

U.S. 310, 318 (1945) and noting that a single fraudulent act can convey personal
jurisdiction over a nonresident defendant in a suit related to that act).
II.

Conclusion
Based on the foregoing,
IT IS HEREBY ORDERED that plaintiff CitiMortgage, Inc.’s motion for

leave to add parties and file first amended complaint [#100] is granted and the
proposed amended complaint is deemed filed as of today. Plaintiff is reminded of
its obligation to promptly effect service on the newly added defendants.
IT IS FURTHER ORDERED that the pending motions for summary
judgment are deemed addressed to Count I of the amended complaint and remain
under submission.
IT IS FINALLY ORDERED that the August 12, 2013 trial date and the
deadline for filing pretrial submissions are vacated, and no later than July 22,
2013, the parties shall file a new joint scheduling plan with their proposal for the
remaining deadlines in this case. The court will hold a telephone conference to
discuss all remaining scheduling issues on Tuesday, July 30, 2013 at 9:00 a.m.
Counsel for the plaintiff is responsible for placing the call and having all parties on
the line before contacting my chambers at 314-244-7520.

CATHERINE D. PERRY
UNITED STATES DISTRICT JUDGE
Dated this 2nd day of July, 2013.
– 13 –