QA3 Financial Corp. et al v. Financial Network Investment Corporation et al
ORDER granting the Plaintiff's 35 Motion to Amend Complaint. Plaintiff's shall file their amended complaint by or before November 5, 2012. Amended Complaint due by 11/5/2012. Ordered by Magistrate Judge F.A. Gossett. (MKR)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
QA3 FINANCIAL CORP., QA3
FINANCIAL, LLC, QUANTUM
INSURANCE DESIGN, LLC, and
CETERA FINANCIAL GROUP, and
Plaintiffs have filed a motion requesting that they be granted leave to file an amended
complaint. (Filing 35.) Plaintiffs’ motion will be granted.
On January 5, 2012, Plaintiffs filed their Complaint (filing 1), alleging claims based
on promissory estoppel; the Nebraska Consumer Protection Act (“NCPA”), Neb. Rev. Stat.
§ 59-1601 to 1623; breach of contract; and unjust enrichment. This Court entered an order
on May 3, 2012 (filing 26), dismissing Plaintiffs’ promissory estoppel claim with prejudice.
In doing so, the Court reasoned that it could not be inferred from the Complaint that
Defendant Financial Network Investment Corporation (“FNIC”) made a promise to Plaintiffs
upon which Plaintiffs could reasonably rely. (Id. at CM/ECF p. 13.) The Court stated that
the inference drawn from the Complaint was that “Plaintiffs and FNIC engaged in good-faith
contract negotiations that ultimately broke down.” (Id.) The Court also dismissed Plaintiffs’
NCPA claim with prejudice and the breach of contract claim as it related to Defendants
Multi-Financial Securities Corporation and Cetera Financial Group.
Plaintiffs seek to amend their Complaint to remove the theories of recovery dismissed
by the Court and to add theories of recovery for fraudulent misrepresentation, fraudulent
concealment and negligent misrepresentation based upon the facts previously alleged in the
Complaint. Defendants oppose Plaintiffs’ proposed amendment.
Under Federal Rule of Civil Procedure 15, the Court should “freely give leave” to
amend a pleading “when justice so requires.” Fed. R. Civ. P. 15. Nevertheless, a party does
not have an absolute right to amend and “denial of leave to amend may be justified by undue
delay, bad faith on the part of the moving party, futility of the amendment or unfair prejudice
to the opposing party.” Amrine v. Brooks, 522 F.3d 823, 833 (8th Cir. 2008) (internal
quotation and citation omitted).
Defendants argue that amendment would be futile because reasonable reliance is an
element that applies to fraud and negligent misrepresentation claims and the Court previously
found that Plaintiffs failed to plead reasonable reliance. The Court will not deny Plaintiffs’
motion to amend on this basis. While leave to amend may be denied based on futility, a
motion to amend should be denied on the merits “only if it asserts clearly frivolous claims
or defenses.” Gamma–10 Plastics, Inc. v. Am. President Lines, 32 F.3d 1244, 1255 (8th Cir.
1994) (quotations and citations omitted). “Likelihood of success on the new claim or
defenses is not a consideration for denying leave to amend unless the claim is clearly
frivolous.” Becker v. Univ. of Neb., 191 F.3d 904, 908 (8th Cir. 1999). The Court is unable,
at this time, to conclude that the proposed amendments are clearly frivolous. The question
of whether Plaintiffs have asserted viable causes of action “should be determined on the
merits rather than as part of a motion to amend.” Doyle v. Eli Lilly & Co., No. 8:06CV412,
2008 WL 215802 (D. Neb. Jan. 24, 2008). In this case, the sufficiency of Plaintiffs’
proposed amendments can be best considered in the context of a motion to dismiss or motion
for summary judgment.
Defendants also assert that amendment would be prejudicial because the proposed
amended complaint involves new theories of recovery and would therefore broaden
discovery and increase costs. The Court finds this argument unpersuasive. This action was
filed on January 5, 2012. The parties did not submit their Fed. R. Civ. P. 26(f) report until
July 16, 2012. Discovery is in its early stages and the Court has yet to hold a planning
conference. At such an early stage in this proceeding, Defendants will not be prejudiced by
a possible expansion of discovery.
Defendants further argue that they will be prejudiced by the delay which would result
by the submission of an amended complaint. Defendants contend that the current progression
schedule requires completion of discovery and trial in seven months. Defendants maintain
that if Plaintiffs are given leave to amend, the scope of this suit will remain unclear until the
Court rules on their second motion to dismiss, which Defendants represent will be filed
should amendment be permitted. The Court finds this argument likewise unpersuasive. A
planning conference has not occurred, trial has only been tentatively scheduled and other
deadlines have yet to be firmly established through a final progression order. Defendants
will not be unduly prejudiced by any delay caused by the submission of an amended
Finally, Defendants assert that the motion to amend should be denied due to Plaintiffs’
delay in asserting the new theories of recovery. Defendants maintain that Plaintiffs’
proposed fraud and negligent misrepresentation counts are not based on any new facts or law
and that Plaintiffs should have brought these counts in the Complaint or immediately
following the Court’s dismissal order. However, Plaintiffs’ motion was filed in advance of
the deadline for amending pleadings. This deadline was proposed by the parties and adopted
by the Court in its initial progression order. The Court is unable to conclude that Plaintiffs
unduly delayed in filing their motion to amend.
IT IS ORDERED that Plaintiffs’ Motion to Amend Complaint (filing 35) is granted.
Plaintiffs shall file their amended complaint by or before November 5, 2012.
DATED November 2, 2012.
BY THE COURT:
S/ F.A. Gossett
United States Magistrate Judge
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