SIEBEL v. WORK AT HOME VINTAGE EMPLOYEES, LLC
Filing
23
OPINION. Signed by Magistrate Judge Mark Falk on 11/18/2013. (nr, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
ROGER J. SIEBEL,
Plaintiff,
Civil Action No. 12-1199 (CCC)
v.
WORK AT HOME VINTAGE
EMPLOYEES, LLC d/b/a WAHVE,
LLC,
Defendant.
___________________________________
Civil Action No. 12-1210 (CCC)
ROGER J. SIEBEL,
Plaintiff,
OPINION
v.
SHARON EMEK,
Defendant.
FALK, U.S.M.J.
This matter comes before the Court upon Plaintiff’s motions for leave to amend his
Complaints in the above captioned cases [Docket 12-1199 CM/ECF No. 19; Docket 121210 CM/ECF No. 17.] Both motions are opposed. The motions are decided on the
papers. Fed.R.Civ.P. 78(b). For the reasons set forth below, both motions are granted.
1
BACKGROUND
A. Factual
In 2010, Plaintiff Roger J. Siebel (“Plaintiff” or “Siebel”) and Defendant Sharon
Emek (“Emek”) formed Defendant WAHVE, LLC (“WAHVE”), a limited liability
company which provided contract staffing for the insurance industry.1 (Compl. ¶¶ 6-7.)2
Siebel was a member of its Board of Managers.3 (Id. ¶ 7.)
In April 2010, WAHVE issued a Private Placement of Common Units offering to
raise funds. (Id. ¶ 8.) Three months later, Siebel and Emek entered into a Member Units
Repurchase Agreement pursuant to which WAHVE was to pay a premium on a life
insurance policy owned by Siebel; upon Siebel’s death, the policy proceeds would be paid
to Siebel’s estate and Siebel’s ownership interest would be returned to WAHVE. In May
2011, Emek and Siebel entered into a WAHVE Operating Agreement (“Operating
Agreement”) which governed, among other things, removal of a manager, and the
valuation, sale and repurchase of member units.4 (Id. ¶ 12.) Under the Operating
Agreement, WAHVE was given the right to repurchase Siebel’s units if he were
terminated for cause or voluntarily resigned. The following month, Plaintiff met with
Emek to discuss their intent to negotiate the end of their business relationship at which
time Siebel offered to sell Emek his units for $600,000. (Id. ¶ 14.) According to
Plaintiff, Emek subsequently made false and defamatory statements about him, including
accusing him of stealing confidential WAHVE files. On July 5, 2011, Emek allegedly
1
WAHVE, LLC subsequently changed its name to Work At Home Vintage Employees, LLC
doing business as WAHVE, LLC. (Compl. ¶ 7.)
2
Citations are to the Complaint filed in Civil Action No. 12-1210 unless otherwise noted.
3
According to Plaintiff, Siebel and Emek entered into a WAHVE Operating Agreement pursuant
to which Siebel was made a member of the Board of Managers. (Compl. ¶ 7.)
4
According to the Complaint, this Operating Agreement “updated” an earlier WAHVE Operating
Agreement between the parties. (Compl. ¶¶ 7-12.)
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terminated Siebel without cause, using her false accusations about Plaintiff as a grounds
for the discharge. (Id. ¶ 18.)
B. Procedural
On February 27, 2012, Siebel commenced two separate actions: one against Emek5
and the other against WAHVE.6 Both Complaints contain multiple counts for breach of
the Operating Agreement by Emek and WAHVE. Specifically, Plaintiff asserts various
breaches including removing Siebel as Manager without cause and “in furtherance of a
scheme to misappropriate Siebel’s WAHVE ownership.” Plaintiff’s Complaint against
Emek contains additional counts for defamation and fraudulent inducement. Among
other things, Plaintiff seeks a declaratory judgment relative to the value of his units.
Defendants Emek and WAHVE filed Answers on May 14, 2012, and May 15,
2012, respectively. The Court consolidated the cases for pretrial purposes and entered a
Pretrial Scheduling Order on June 19, 2012. Pursuant to the Pretrial Scheduling Order,
fact discovery closed on February 28, 2013, and any motions to amend pleadings were to
be filed by October 1, 2012. The Court subsequently entered an Order on January 17,
2013 directing that the depositions of Siebel, Emek and the former Chief Financial
Officer of WAHVE, Mr. Caragliano, were to be completed by April 1, 2013. On June 29,
2013, Siebel filed the instant motions seeking to amend his pleadings pursuant to Federal
Rule of Civil Procedure 15(a).
C. Current Motions
Plaintiff seeks leave to amend his Complaint against WAHVE to add a count for
breach of contract and estoppel, and to include a claim for compensatory damages for the
value of his units in WAHVE. Siebel contends that discovery conducted in March 2013,
after the deadline for amending pleadings, revealed that WAHVE had transferred
5
Siebel v. Emek, 12-1210 (CCC).
6
Siebel v. Work at Home Vintage Employees, LLC, 12-1199 (CCC).
3
ownership of his shares to one or more officers of WAHVE in violation of the Operating
Agreement. According to Plaintiff, he first learned that WAHVE sold his shares during
an interview of a non-party witness, Mr. Caragliano, in March 2013. Plaintiff claims that
Defendants failed to reveal this information in their Rule 26 disclosures and prior
discovery responses and that any delay in raising the proposed new claims is not
attributable to Plaintiff but is due to Defendants’ failure to disclose the facts earlier in
discovery.
Plaintiff also seeks leave to amend his Complaint against Emek to assert claims
for breach of fiduciary duty and breach of the covenant of good faith and fair dealing, and
to seek punitive damages on the defamation count. Plaintiff maintains that discovery
conducted subsequent to the amendment deadline revealed that Emek had engaged in
several wrongful acts in derogation of Seibel’s contract rights, including manipulating
company records to reduce the projected value of Siebel’s shares, engaging in secret
merger negotiations, and undervaluing his shares in WAHVE. In particular, Plaintiff
claims that the deposition of Emek and a supplemental production of documents by
Defendants, both which occurred in March 2013, revealed information supporting
Plaintiff’s proposed new claims—information which was unknown to Plaintiff until
receipt of Defendants’ belated discovery responses.
Pointing out that Plaintiff’s motion to amend was filed on June 29, 2013, nearly
nine months after the deadline elapsed, and that Plaintiff waited until three months after
the completion of fact depositions before filing his motion, Defendants argue that
Plaintiff cannot satisfy the “good cause” standard of Federal Rule of Civil Procedure 16
to amend. Defendants also oppose the motions arguing that Plaintiff merely is attempting
to recast the same facts into new claims. Defendants contend that the purported factual
bases for the new amendments have been known to Plaintiff for some time—and in many
cases since before the initiation of the litigation. Lastly, Defendants contend that Plaintiff
cannot satisfy the standard to amend under Rule 15 because the claims are untimely and
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futile.
DISCUSSION
A. Legal Standard for Amendment
Once a responsive pleading has been filed, “a party may amend its pleadings only
with the opposing party’s written consent or the court’s leave.” Fed. R. Civ. P. 15(a)(2).
Leave to amend is generally granted unless there is: (1) undue delay or prejudice; (2) bad
faith; (3) dilatory motive; (4) failure to cure deficiencies through previous amendment; or
(5) futility. Foman v. Davis, 371 U.S. 178, 182 (1962). The ultimate decision to grant or
deny leave to amend is a matter committed to the Court’s sound discretion. See, e.g.,
Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 330 (1970).
A party seeking to amend the pleadings after the deadline must satisfy the
requirements of Rule 16(b)(4)—the party must show good cause. See Fed.R.Civ.P. 16;
Grasso v. Consolidated Rail Corp., No. 12-398, 2013 WL 3167761 at *5 (D.N.J. June 20,
2013); see also Dimensional Commc’n, Inc. v. OZ Optics, Ltd., 148 F. App’x 82, 85 (3d
Cir. 2005) (good cause standard when determining the propriety of a motion to amend
after the deadline elapsed). Whether “good cause” exists under Rule 16 rests primarily on
the diligence, or lack thereof, of the moving party. GlobespanVirata, Inc. v. Texas
Instruments, Inc., No. 03-2854, 2005 WL 1638136, at *3 (D.N.J. July 12, 2005). In
determining whether good cause exists, courts typically consider whether the movant
possessed, or through the exercise of reasonable diligence should have possessed, the
knowledge necessary to file the motion to amend before the deadline expired. See
Stallings ex rel. Estate of Stallings v. IBM Corp., No. 08-3121, 2009 WL 2905471, at *16
(D.N.J. Sept. 8, 2009) (denying plaintiff’s motion to amend because they “had sufficient
information to state the proposed claims well in advance of the Scheduling Order
deadline”).
The futility analysis on a motion to amend is essentially the same as a Rule
12(b)(6) motion. See In re NAHC, Inc. Sec. Litig., 306 F.3d 1314, 1332 (3d Cir. 2002)
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(“An amendment would be futile when ‘the complaint, as amended, would fail to state a
claim upon which relief could be granted.’”). For a complaint to survive dismissal, it
“must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662 (2009) (citing Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570, (2007)). Given the liberal standard for the amendment of
pleadings, “courts place a heavy burden on opponents who wish to declare a proposed
amendment futile.” See Pharmaceutical Sales and Consulting Corp. v. J.W.S. Delavau
Co., Inc., 106 F. Supp. 2d 761, 764 (D.N.J. 2000) (citations omitted). Thus, “[i]f a
proposed amendment is not clearly futile, then denial of leave to amend is improper.”
Harrison Beverage Co. v. Dribeck Importers, Inc., 133 F.R.D. 463, 468 (D.N.J.1990)
(emphasis added); see also 6 Wright, Miller & Kane Federal Practice and Procedure,
§1487 (2d ed. 1990).
B. Analysis
1. Good cause/undue delay
The Pretrial Scheduling Order in this case provided that any motion to add new
parties, whether by amended or third-party complaint, must be filed by October 1, 2012.
Plaintiff’s motions were filed on June 29, 2013, some nine months after the cut-off.
Plaintiff readily concedes his motions were filed well beyond the time to amend.
However, Plaintiff maintains that any delay in filing is due to Defendants’ dilatory and
spotty production of discovery. For instance, Plaintiff states that he timely served his
written discovery on July 9, 2012, with Defendants’ responses due on August 9, 2012.
Defendants requested several extensions of time to respond, to which Plaintiff consented.
As a result, Defendants did not provide their responses until October 16, 2012, more than
two months after their original due date and two weeks after the deadline for filing
motions to amend. Having received no discovery from Defendants, it is reasonable that
Plaintiff had not moved to amend prior to the deadline to do so.
The Court finds that Plaintiff exercised reasonable diligence in filing his motions
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to amend. Plaintiff maintains that the information that forms the bases of his new claims
did not become known to him until at least March 2013 when he interviewed and deposed
Mr. Caragliano, deposed Emek, and received Defendants’ untimely production of
documents—all of which occurred nearly six months after the October 1, 2012 deadline
for amending pleadings had passed. Plaintiff identifies a number of instances after the
deadline when he first learned of facts giving rise to his new claims.
With respect to Emek, Plaintiff specifically points to Emek’s deposition on March
12, 2013 at which she allegedly testified that she never had any factual basis for her
accusations that Plaintiff stole WAHVE documents—information Plaintiff maintains
supports his proposed demand for punitive damages. Plaintiff also identifies newly
discovered information relative to Emek’s purported attempt to distort the value of
Plaintiff’s units. For instance, Plaintiff points to information revealed by Mr.
Caragliano—that Emek had made payments on Siebel’s life insurance policy despite her
purported deposition testimony to the contrary—which Plaintiff asserts is relevant to the
valuation of his shares. According to Plaintiff, emails produced by Defendants for the
first time on March 22, 2013 purportedly demonstrate that Emek conspired with her
evaluation expert to intentionally alter WAHVE’s records to grossly undervalue
Plaintiff’s units. This newly revealed information, all which was discovered after the
deadline to amend pleadings, could conceivably support Plaintiff’s new demand for
punitive damages on his slander count, and his proposed claims for breach of fiduciary
duty and breach of the covenant of good faith and fair dealing against Emek.
With respect to the claims against WAHVE, Plaintiff states that he discovered that
WAHVE had sold his shares during the March 2013 interview of Mr. Caragliano. Thus,
according to Plaintiff, he only first learned of the alleged conversion of his shares giving
rise to his claim for compensatory damages in March 2013, long after the time to amend
had elapsed. On June 12, 2013, the Court entered an Order permitting Plaintiff to file
motions for leave to amend. Plaintiff filed his motions less than three weeks later on June
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29, 2013. For the reasons stated above, the Court finds that Plaintiff did not unduly delay
and has demonstrated good cause to amend.
2. Futility
Defendants argue that the proposed breach of contract and estoppel claim against
WAHVE are futile. Defendants essentially contend that Plaintiff’s claim for conversion
of his shares in breach of the Operating Agreement is futile because the terms of the
agreement permit such a transfer. According to Defendants, Plaintiff’s claim is nothing
more than an acknowledgment that Defendants acted in accordance with the Operating
Agreement.
Plaintiff’s proposed causes of action against WAHVE are not so “clearly futile” so
as to deny the motion to amend. See Harrison Beverage Co., 133 F.R.D. at 468.
Plaintiff alleges the existence of a contract, namely the Operating Agreement. Plaintiff
further alleges that WAHVE converted his shares without paying him in breach of the
Operating Agreement and that he suffered damage as a result. Plaintiff plausibly pled a
breach of contract cause of action. The Court is satisfied that Plaintiff has alleged
sufficient facts, at least in this limited context of a motion to amend, to conclude that the
claim is not so clearly futile so as to deny the leave requested.7
CONCLUSION
For the reasons set forth above, Plaintiff’s motions for leave to amend are granted.
s/Mark Falk
MARK FALK
United States Magistrate Judge
Dated: November 18, 2013
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Plaintiff’s allegations, at least for purposes of this motion, state a plausible claim for breach of
contract. While it is conceivable that Defendants may succeed in defending against this claim,
the claim is not so plainly frivolous or insufficient on its face so as to deny leave to amend.
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