Bensinger v. Denbury Resources Inc. et al

Filing 110

ORDER granting #100 Motion to Amend/Correct/Supplement. For the reasons discussed in the attached memorandum, the motion to amend to add a new plaintiff is granted. A copy of the amended complaint naming the new plaintiff shall be filed by July 16, 2013. Ordered by Judge John Gleeson on 7/3/2013. (O'Reilly, Helen)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

FOR ONLINE PUBLICATION ONLY

MEMORANDUM & ORDER
10-CV-1917
ELI BENSINGER, Individually and on Behalf
of All Others Similarly Situated,
Plaintiffs,
-versusDENBURY RESOURCES INC.,
Defendants.
APPEARANCES
WEISSLAW LLP
551 Fifth Avenue, Suite 1600
New York, New York 10176
By:
David Corey Katz
Joshua M. Rubin
Joseph Harry Weiss
Attorneys for Plaintiffs
BAKER & HOSTETLER LLP
45 Rockefeller Plaza
New York, New York 10111
By:
Jessica Morgan Gabriel
Mark Kornfeld
Jerry R. Linscott
Attorneys for Defendant
JOHN GLEESON, United States District Judge:
On May 9, 2013, Eli Bensinger moved for leave to file a third amended complaint
to add a new plaintiff who has standing to assert a violation of Section 14 of the Securities and
Exchange Act of 1934,1 or, in the alternative, to assert a violation of Section 10(b) of the
Securities and Exchange Act of 1934. See Mot. to Amend, May 9, 2013, ECF No. 100. For the

1

On September 28, 2012, I held that Bensinger lacked standing to bring a § 14(a) claim and dismissed this
claim. Bensinger v. Denbury Res., Inc., No. 10 Civ 1917, 2012 WL 4483811 (E.D.N.Y. Sept. 28, 2012).

reasons that follow, the motion to amend to add a new plaintiff is granted.2 As discussed herein, a
copy of the amended complaint naming the new plaintiff must be filed by July 16, 2013.
BACKGROUND
In this class action against Denbury Resources Inc. (“Denbury”), named plaintiff
Eli Bensinger alleges that Denbury disseminated a Registration Statement and Proxy (the
“Proxy”) containing material misstatements and omissions relating to a proposed merger (the
“Merger”) of Encore Acquisition Company (“Encore”) into Denbury. The Merger occurred on
March 9, 2010.
A.

Facts & Procedural History
On April 28, 2010, Bensinger filed complaint on behalf of all persons who

received Denbury common stock in the Merger, asserting, inter alia, violations of Section 11 of
the Securities Act of 1933, see 15 U.S.C. § 77k and Section 14 of the Securities and Exchange
Act of 1934, see 15 U.S.C. § 78n(a).3 On August 17, 2011, I denied Denbury’s motion to dismiss
the complaint, holding that the Proxy contained misrepresentations and that these
misrepresentations were not immaterial as a matter of law. See Bensinger v. Denbury Res., Inc.,
No. 10 Civ 1917, 2011 WL 3648277, at *8 (E.D.N.Y., Aug. 17, 2011).
Thereafter, Magistrate Judge Viktor V. Pohorelsky issued a series of scheduling
orders pursuant to Rule 16(b) of the Federal Rules of Civil Procedure.4 Magistrate Judge
Pohorelsky selected February 14, 2012 as the deadline for Bensinger to request a promotion

2

Since I conclude that the plaintiff may amend the complaint to add a plaintiff with standing to state a § 14(a)
claim, I need not and do not consider his arguments in support of alternative relief.
3
Section 14(a) of the Exchange Act provides:
It shall be unlawful for any person, by the use of the mails or by any means or
instrumentality of interstate commerce or of any facility of a national securities
exchange or otherwise, in contravention of such rules and regulations as the
Commission may prescribe as necessary or appropriate in the public interest or for
the protection of investors, to solicit or to permit the use of his name to solicit any
proxy or consent or authorization in respect of any security (other than an
exempted security) registered pursuant to section 78l of this title
15 U.S.C. § 78n(a) (2008)
4
This rule provides, in relevant part as follows: “The scheduling order must limit the time to join other
parties, amend the pleadings, complete discovery, and file motions . . . . (4) Modifying a Schedule. A schedule may
be modified only for good cause and with the judge’s consent.” See Fed. R. Civ. P. 16(b)(3), (c).
2

conference regarding “join[ing] additional parties, or otherwise amend[ing] the pleadings to add
claims or defenses.” Scheduling Order, Sept. 21, 2011, ECF No. 37.
On January 13, 2012, Bensinger moved for judgment on the pleadings and for
class certification. On February 8, 2012 Bensinger requested that Magistrate Judge Pohorelsky’s
February 14th deadline for adding claims or parties be extended until “30 days after Judge
Gleeson rules on Plaintiff’s pending motion for class certification and judgment on the
pleadings.” Letter, Feb. 8, 2012, ECF No. 54.5 Judge Pohorelsky declined to grant Bensinger’s
request for an extension of time to add a plaintiff but extended the deadline to add any additional
claims until March 30, 2012. See Order, March 23, 2012, ECF No. 65.6
On March 30, 2012, Bensinger wrote to this Court seeking permission to amend
the pleadings. Letter 1, ECF No. 66. Bensinger “object[ed] to the Magistrate Judge’s ruling
limiting [his] right to” seek amendment at a later date and requested that I “overrule” Magistrate
Judge Pohorelsky’s decision and grant him “until thirty (30) days after [this Court] rules on” its
motion for judgment on the pleadings to seek leave to amend the complaint. On April 3, 2012, I
granted plaintiff’s requested relief, overruling Magistrate Judge Pohorelsky’s order and extending
the deadline to add claims or parties. I indicated that plaintiff could move to amend “after
decision on the pending motions.” Order, April 3, 2012.
Approximately six months later, on September 28, 2012, I issued a decision on
Bensinger’s motion for judgment on the pleadings. Bensinger v. Denbury Res., Inc., No. 10 Civ
1917, 2012 WL 4483811 (E.D.N.Y. Sept. 28, 2012). With respect to the claim under § 14(a), I
concluded that, “[t]he kind of voting right that Bensinger possessed – the right to choose whether

5

Denbury opposed the motion, arguing that it was a “futile pretext aimed at gaining additional time to try and
replace Bensinger as the purported class representative now that Denbury has discovered . . . that Bensinger does not
have standing to bring these claims.” Letter 1-2, Feb. 15, 2012, ECF No. 61.
6
That same day, on March 23, 2012, I held oral argument on Bensinger’s motion for judgment on the
pleadings and for class certification. At the argument, I questioned whether Bensinger had standing to bring a
Section 14 claim even though he was not a shareholder on the date of the Merger and, as he concedes, was not
eligible to vote on Merger. See Tr. of Oral Argument, 4:13-5:20. Bensinger explained his theory that, since he
voted on what form of compensation he wanted for his Encore shares, he believed that he had standing to bring a
claim under § 14(a).
3

he personally would prefer to receive his allotment of $50 per Encore share in all cash, cash and
Denbury stock, or all Denbury stock – is not the kind of voting right that Congress intended to
protect through § 14(a).” Id. at *4. Accordingly, I held that Bensinger lacked standing to bring a
§ 14(a) claim and dismissed the claim.7
Bensinger did not move to amend the complaint to add a new plaintiff within 30
days of this decision. Instead, the parties proceeded with discovery and expert disclosures;
attempted mediation; and Judge Pohorelsky set a deadline of May 23, 2013 for either party to
seek a promotion conference with respect to any proposed dispositive motions. See Order, March
22, 2013.
B.

The Present Motion
On May 2, 2013 – more than seven months after this Court’s decision on the

motion for judgment on the pleadings – Bensinger moved to amend the complaint “to reassert a
Section 14 claim with a new plaintiff who indisputably has standing . . . ; or, alternatively, to
assert a new claim against Denbury for violation of Section 10(b) of the Exchange Act.” Letter,
May 2, 2013, ECF No. 97. In support of this motion, Bensinger argues that it would not be futile
to re-assert a §14(a) claim at this stage because “[the claim] plainly ‘relates back’ to the original
filing and so is timely filed.” Pl. Mem. of Law 2, May 9, 2013, ECF No. 101 (citing Fed. R. Civ.
P. 15(c)); see also id. at 8-9 (citing Advanced Magnetics, Inc. v. Bayfront Partners, Inc., 106 F.3d
11 (2d Cir 1997)). In the alternative, Bensinger moves for leave to amend to assert a violation of
Section 10(b) of the Exchange Act.8
Denbury opposes the motion, arguing, inter alia, that Bensinger’s decision to bring
a § 14(a) claim as the sole plaintiff was a “litigation tactic.” Since Bensinger did not make a

7

In addition, I held that Bensinger had standing to bring a claim under Section 11; however, since the
materiality of the misrepresentation in the Proxy Agreement presented a question of fact, I denied Bensinger’s motion
for judgment as a matter of law. Bensinger, 2012 WL 4483811, at *5. I also certified a class on the Section 11 claim,
appointing Bensinger as Class Representative. Id. at *6. On February 13, 2013 the Second Circuit granted
Denbury’s application for interlocutory review of the order certifying the class. That appeal is still pending.
8
Section 10(b) of the Exchange Act provides that no person or entity may, in connection with the purchase or
sale of a security, “use or employ . . . any manipulative or deceptive device or contrivance in contravention of [a
Securities and Exchange Commission rule].” 15 U.S.C. § 78j(b)
4

“mistake concerning the proper party’s identity,” see Fed. R. Civ. P. 15(c)(1)(c), Denbury
contends that Rule 15(c)’s relation back principle does not apply and, thus, Beninsger’s proposal
to re-assert a 14(a) claim is barred by the statute of limitations. Def. Mem. of Law 4, 19-20, May
16, 2013, ECF No. 105. Denbury also advances a series of arguments as to why leave to allege a
Section 10(b) claim ought also be denied. See id. at 7-15.
DISCUSSION
This motion presents two issues for decision. The first is whether Bensinger is
obliged to satisfy the “good cause” standard in Rule 16(a) and, if so, whether he has met this
standard. The second is whether the proposed amendment adding a plaintiff with standing to raise
a § 14(a) claim relates back to the filing of the original complaint pursuant to Rule 15(c).9
A.

Jurisdiction
As a preliminary matter, I must address whether this Court has jurisdiction to

decide the present motion. Denbury suggests that, “based on Denbury’s appeal of class
certification, this Court may not have subject matter jurisdiction over the only claim pending
against Denbury.” Def.’s Mem. of Law 1. Its proposed cure is for me to “stay the current action
until it knows whether there is an actual case or controversy,” unless I am inclined to rule in its
favor, in which case it argues that I ought to “deny Bensinger’s motion with prejudice.” Id.
According to the plain language of Rule 23(f) of the Federal Rules of Civil
Procedure, “[a]n appeal does not stay proceedings unless the district court or the court of appeals
so orders.” Fed. R. Civ. P. 23(f). Denbury has not requested a stay, nor has one been entered by
this Court or the court of appeals. Accordingly, Defendant’s interlocutory appeal of class
certification does not divest this Court of subject matter jurisdiction to decide the present motion.

9
The limitations periods for “private right[s] of action that involve[ ] a claim of fraud, deceit, manipulation,
or contrivance in contravention of a regulatory requirement concerning the securities laws” is two years. See 28
U.S.C. § 1658(b). Bensinger does not dispute that the addition of a new plaintiff would be untimely as of the date it
was filed, but argues that “since it is the same claim as originally asserted, but for the addition of a new name, it
plainly ‘relates back’ to the original filing and so is timely,” Pl. Mem. of Law 6, ECF No. 101; see also id. at 13
(“The renewed §14(a) claim asserts the same damages claim against the same defendant for the same conduct as the
§14(a) claim previously dismissed for lack of standing. As such, it ‘relates back’ to the original pleading.”).

5

B.

Good Cause
1. Legal Standard
Rule 15(a) of the Federal Rules of Civil Procedure directs that leave to amend

“shall be freely given when justice so requires,” and as a general matter, amendments are favored
in order “to facilitate a proper decision on the merits.” See Conley v. Gibson, 355 U.S. 41, 48
(1957), overruled on other grounds by Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007).
However, Rule 15(a) must be balanced against the requirement under Rule 16(b) that a Court’s
scheduling order shall not be modified except upon a showing of good cause. See Fed. R. Civ. P.
16(b)(4). Where a plaintiff seeks leave to amend the pleadings after the deadline for amending
the pleadings has passed, the plaintiff must meet Rule 16(b)’s “good cause” standard, rather than
the more liberal standard of Rule 15(a). Parker v. Columbia Pictures Indus., 204 F.3d 326, 340
(2d Cir. 2000).10
2. Analysis
This Court extended the deadline to add claims or parties until “after decision on
the pending motions.” Order, April 3, 2012. That order responded to Bensinger’s request for an
extension “until thirty (30) days after [this Court] rules on” its motion for judgment on the
pleadings, but Bensinger failed to move within the requested 30-day time period. Accordingly, I
find that the motion is not timely filed under this Court’s case management order. Under these
circumstances, a court must consider whether the plaintiff has shown “good cause” for the
untimely motion. See Fed. R. Civ. P. 16(b). A finding of good cause “depends on the diligence
of the moving party.” Grochowski v. Phoenix Const., 318 F.3d 80, 86 (2d Cir. 2003).
At oral argument, counsel for plaintiff stated that he misunderstood this Court’s
April 3rd order and believed that the deadline to amend was not time-limited. As a result,

10

As the Second Circuit observed, “if [courts] considered only Rule 15(a) without regard to Rule 16(b), [it]
would render scheduling orders meaningless and effectively would read Rule 16(b) and its good cause requirement
out of the Federal Rules of Civil Procedure.” Parker, 204 F.3d at 340 (internal quotation marks and some brackets
omitted).
6

Bensinger waited almost eight-months to move to amend. Considering all the circumstances,
including the failure of my April 3rd order to explicitly impose a time constraint, I credit the
explanation and conclude that a reasonably diligent attorney could have misunderstood the
scheduling order. Accordingly, I find that plaintiff has established good cause for failing to
comply with this Court’s scheduling order.
C.

Leave to Amend to Add a Plaintiff
Even when the good cause standard is met, a district court has discretion to deny

leave to amend “for good reason, including futility,” see Holmes v. Grubman, 568 F.3d 329, 334
(2d Cir. 2009) (internal quotation marks omitted). For the reasons that follow, I conclude that the
amendment to add a plaintiff to raise a claim under § 14(a) is not futile and, accordingly, I grant
leave to amend the complaint to add a plaintiff who owned Encore stock as of the record date of
the Merger.
1. Legal Standard
Leave to amend should be freely granted when justice so requires. See Fed. R.
Civ. P. 15(a)(2). When a plaintiff moves to amend to add a claim that is otherwise barred by the
statute of limitations, the proposed amendment must be denied as futile unless the claim relates
back to the date on which the original complaint was filed (assuming that date was within the
limitations period). See Slayton v. Am. Express Co., 460 F.3d 215, 227-28 (2d Cir. 2006). Rule
15(c) provides a very “liberal rule of relation back policy.” See Villante v. Dep’t of Corr. of City
of New York, 786 F.2d 516, 520 (2d Cir. 1986).
Rule 15(c) provides, in relevant part, that “[a]n amendment to a pleading relates
back to the date of the original pleading when”:
(B) the amendment asserts a claim or defense that arose out of the conduct,
transaction, or occurrence set out—or attempted to be set out—in the
original pleading; or

7

C) the amendment changes the party or the naming of the party against whom a
claim is asserted, if . . within the period provided by Rule 4(m) for serving
the summons and complaint, the party to be brought in by amendment:
(i) received such notice of the action that it will not be prejudiced
in defending on the merits; and
(ii) knew or should have known that the action would have been
brought against it, but for a mistake concerning the proper party's
identity.
Although Rule 15(c)’s express terms address only the addition of new defendants,
the Second Circuit has held that Rule 15(c) “is also applicable to a proposed change of plaintiffs.”
Advanced Magnetics, Inc. v. Bayfront Partners, Inc., 106 F.3d 11, 19 (2d Cir. 1997). The attitude
taken in the revised Rule 15(c) toward a change of defendants extends by analogy to amendments
that change plaintiffs. See Fed. R. Civ. P. 15 Advisory Committee Notes (1966).
Courts in this Circuit consistently allow relation back of new plaintiffs where
defendants had fair notice of the new plaintiffs’ claims and would not suffer undue prejudice.
See, e.g., Perkins v. S. New England Tel. Co., 2009 WL 3754097 (JCH), at *5 (D. Conn. Nov. 4,
2009); In re Gilat Satellite Networks, Ltd., 02 Civ. 1510 (CPS), 2005 WL 2277476, *25
(E.D.N.Y. Sept. 19, 2005). However, “there is disagreement concerning whether the failure
originally to name the newly added plaintiff must have been the result of mistake within the
meaning of Rule 15(c)(1)(c).” Lee v. Marvel Enterprises, Inc., 765 F.Supp.2d 440, 454 (S.D.N.Y.
2011) (internal quotation marks omitted); compare Levy v. U.S. Gen. Accounting Office, Nos. 97
Civ. 4016, 97 Civ. 4488, 1998 WL 193191 (MBM), at *5-6 (S.D.N.Y. Apr. 20, 1998) (holding
that in order for an amendment adding a new plaintiff to relate back to the original complaint, a
party must show, inter alia, that “but for a mistake concerning the new plaintiff’s identity, the
action would have been brought on that party’s behalf”), with In re Simon II Litig., 211 F.R.D. 86,
145 (E.D.N.Y. 2002), vacated on other grounds, 407 F.3d 125, (2d Cir. 2005) (“[The mistake]
provision, by its express language, appears not to be relevant when adding a plaintiff.”); see also
In re Gilat Satellite Networks, Ltd., 2005 WL 2277476, *25 (“[R]equiring the plaintiff to

8

demonstrate a ‘mistake’ [is not] consistent with the liberal ‘attitude’ of Rule 15, which is to
permit amendment of pleadings to encourage resolution of claims on the merits.”).
Here, the proposed third amended complaint adds a new plaintiff who owned
Encore stock at the time of the vote on the Merger. “Under Rule 15, the central inquiry is
whether adequate notice of the matters raised in the amended pleading has been given to the
opposing party within the statute of limitations by the general fact situation alleged in the original
pleading.” Slayton, 460 F.3d at 228 (internal quotation marks omitted). I conclude that
defendants had adequate notice that someone who held Encore stock at the time of the Merger
would bring a claim under § 14(a). Moreover, I conclude that the addition of this new plaintiff
will not frustrate reasonable possibilities for a defense. See In re South African Apartheid Litig.,
617 F.Supp.2d 228, 290 (S.D.N.Y. 2009) (noting that the prejudice inquiry under Rule 15(c) asks
only whether “the late addition of a plaintiff would surprise and frustrate reasonable possibilities
for a defense”) (internal quotation marks omitted). I agree with Judge Weinstein that “mistake”
need not be shown in this context, as Rule 15(c) extends to plaintiffs as long as defendants had
reasonable notice of the existence of the proper party. In re Simon II Litig., 211 F.R.D. at 145.
Thus, I conclude that Bensinger may amend his complaint to add a plaintiff who owned Encore
stock at the time of the Merger.
Plaintiff must file a copy of the amended complaint by July 16, 2013. See Smith v.
Planas, 151 F.R.D. 547, 550 (S.D.N.Y.1993) (noting that, in order to meet the requirements of
particularity in a motion to amend, “a complete copy of the proposed amended complaint must
accompany the motion”); Twohy v. First Nat’l Bank of Chicago, 758 F.2d 1185, 1197 (7th
Cir.1985) (observing that “normal procedure is for the proposed amendment or new pleading to
be submitted” with the motion for leave to amend, and that failure to do so may “indicate[] a lack
of diligence and good faith”).

9

For the foregoing reasons, the motion for leave to file a third amended complaint is
granted.
So ordered.
___________________
John Gleeson, U.S.D.J.
Dated: July 3, 2013
Brooklyn, New York

10