Eastman Chemical Company v. Nestle Waters Management & Technology
OPINION AND ORDER: For the reasons set forth above, Nestle's objections are denied and Judge Pitman's Order denying Nestle's motion to amend is affirmed. SO ORDERED. (Signed by Judge Katherine Polk Failla on 4/1/2014) (ja)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
EASTMAN CHEMICAL CO.,
NESTLÉ WATERS MANAGEMENT &
DOC #: _________________
April 1, 2014
DATE FILED: ______________
11 Civ. 2589 (KPF)
OPINION AND ORDER
KATHERINE POLK FAILLA, District Judge:
Defendant Nestlé Waters Management & Technology objects to
Magistrate Judge Henry Pitman’s Order dated January 21, 2014, denying
Nestlé’s motion to amend its Answer and Counterclaims. Judge Pitman did not
clearly err in denying Nestlé’s motion and so his Order is affirmed.
The lengthy history of the relationship and dispute between the parties is
only partially relevant to this motion and so the Court will not set it out in full
here. In short, Nestlé contracted with Plaintiff Eastman Chemical Company
from 2007 through 2009, and again from 2010 through 2013, to supply certain
The facts are drawn from Eastman’s Amended Complaint (“Am. Compl.”), Nestlé’s
Answer and Counterclaims (“Def. Answer” and “Def. Counterclaims”), the transcript of
the January 17, 2014 conference before Judge Pitman (“1/17/14 Tr.”), and the
transcript of the December 18, 2013 conference before this Court (“12/18/13 Tr.”).
Nestlé’s objections to Judge Pitman’s Order are referred to as “Def. Obj.” and Eastman’s
response to those objections as “Pl. Resp.”
resin products to Nestlé and its affiliated entities for manufacturing purposes.
(Am. Compl. ¶ 6). Eastman maintains in this litigation that Nestlé breached its
contract with Eastman through certain alleged deceptive and abusive
negotiating practices. (Id. at ¶¶ 28-41). Nestlé disclaims any such liability
(Def. Answer ¶¶ 28-41), and counterclaims fraud and fraudulent inducement
against Eastman regarding its representations during negotiation of the
contracts and fulfillment of its contractual obligations (Def. Counterclaims
The Court 2 entered an Order of Reference to a Magistrate Judge on
September 9, 2011, referring this case to Magistrate Judge Henry Pitman for
general pretrial purposes (including non-dispositive pretrial motions), as well
as for a report and recommendation on any dispositive motion. (Dkt. #19).
The Instant Dispute
On December 23, 2013, Nestlé moved to amend its Answer and
Counterclaims by adding a third counterclaim against Eastman for breach of
contract. (Dkt. #90-92). As Judge Pitman put it in his oral order denying
Nestlé’s motion, “[t]he claim here is basically the claim of an aggrieved buyer
for cover damages, that is[,] the difference between the contract price and
the … price the aggrieved buyer paid or the allegedly aggrieved buyer paid for
This action was at that time before the Honorable Victor Marrero, United States District
Judge for the Southern District of New York. It was transferred to the Honorable J.
Paul Oetken, United States District Judge for the Southern District of New York, on
October 4, 2011 (Dkt. #21), and then to the undersigned on June 19, 2013 (Dkt. #61).
conforming goods to substitute for the nonconforming goods that the seller
offered.” (1/17/14 Tr. 51:25-52:5).
Eastman opposed (Dkt. #95-96, 98) and Nestlé filed a reply in further
support of its motion (Dkt. #93-94). The parties appeared for oral argument
before Judge Pitman on January 17, 2014, where Judge Pitman denied Nestlé’s
motion to amend, based on both Rule 15 and Rule 16 of the Federal Rules of
Civil Procedure, from the bench in an oral Order. (Dkt. #101). He
memorialized this decision in a written Order four days later. (Dkt. #100).
Nestlé filed objections to that Order on February 4, 2014 (Dkt. #106), and
Eastman responded to those objections on February 14, 2014 (Dkt. #108).
The Standard of Review
The Second Circuit has suggested, though it has not explicitly held, that
a motion to amend is a nondispositive motion and thus district courts must
subject the orders of magistrate judges respecting such motions to clear error
review. Fielding v. Tollaksen, 510 F.3d 175, 178 (2d Cir. 2007); 3 see Bridgeport
Music, Inc. v. Universal Music Grp., Inc., 248 F.R.D. 408, 410 (S.D.N.Y. 2008)
(“[T]he weight of opinion appears to favor treating … rulings [denying motions
to amend the pleadings] as nondispositive.”); see also Sokol Holdings, Inc. v.
An unpublished Second Circuit decision also explicitly treated motions to amend as
nondispositive and analyzed a magistrate judge’s denial of such a motion under that
standard. Kilcullen v. New York State Dep’t of Transp., 55 F. App’x 583, 585 (2d Cir.
2003) (summary order).
BMB Munai, Inc., No. 05 Civ. 3749 (KMW) (DCF), 2009 WL 3467756, at *4
(S.D.N.Y. Oct. 28, 2009) (collecting cases); but cf. Wilson v. City of New York,
No. 06 Civ. 229 (ARR) (VVP), 2008 WL 1909212, at *3 (E.D.N.Y. Apr. 30, 2008)
(“Courts in this Circuit are divided on the issue of whether, and under what
circumstances, motions to amend a pleading are dispositive or
nondispositive.”). Some courts in this Circuit have concluded that it is
appropriate to treat a motion to amend as dispositive when the magistrate
judge decided it based on “a substantive evaluation of the proposed claims,”
Sokol Holdings, 2009 WL 3467756, at *4 n.2 (collecting cases), such as on the
basis of the futility of the proposed amendment, Dais v. Lane Bryant, Inc., No.
97 Civ. 2011 (PKL) (RLE), 2000 WL 145755, at *1 (S.D.N.Y. Feb. 8, 2000), while
other grounds for denying a motion to dismiss should receive “clearly
erroneous” review, Wilson, 2008 WL 1909212, at *4.
In light of the Second Circuit’s strong indications and the weight of
authority from courts within the Circuit, the Court concludes that motions to
amend should generally be reviewed as nondispositive. This standard of review
is especially justified where, as here, denial of leave to amend was based on
procedural issues like failure to comply with a scheduling order and prejudicial
delay. See Sokol Holdings, 2009 WL 3467756, at *4 (“Here, the Magistrate
Judge’s denial of leave to amend is based on a procedural violation — to wit,
non-compliance with a scheduling order without a showing of ‘good cause’ —
rather than a substantive determination on the merit of Plaintiffs’ claims. The
specific circumstances of the instant motion and the weight of opinion in this
Circuit suggest that application of the ‘clearly erroneous’ standard of review is
appropriate.”). Accordingly, the Court will review Judge Pitman’s ruling here
for clear error.
Motions to Amend
Rule 16(b) of the Federal Rules of Civil Procedure requires a court to
issue a scheduling order to “limit the time to join other parties, amend the
pleadings, complete discovery, and file motions.” Fed. R. Civ. P. 16(b)(1),
(b)(3)(A). Once a schedule is imposed under Rule 16, it “may be modified only
for good cause and with the judge’s consent.” Fed. R. Civ. P. 16(b)(4). “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). Courts
considering motions to amend “also may consider other relevant factors
including, in particular, whether allowing the amendment of the pleading at
this stage of the litigation will prejudice [the non-moving party].” Kassner v.
2nd Ave. Delicatessen Inc., 496 F.3d 229, 244 (2d Cir. 2007). Rule 16(b) is
designed, at least in part, “to offer a measure of certainty in pretrial
proceedings, ensuring that at some point both the parties and the pleadings
will be fixed.” Parker v. Columbia Pictures Indus., 204 F.3d 326, 339-40 (2d
Cir. 2000) (internal quotation marks omitted).
In the absence of a valid scheduling order, the parties are subject to the
more “lenient standard of Rule 15(a),” Grochowski, 318 F.3d at 86, which
provides that a court “should freely give leave [to amend] when justice so
requires.” Fed. R. Civ. P. 15(a)(2). “When determining whether to grant leave
to amend, district courts consider: (i) whether the party seeking the
amendment has unduly delayed; (ii) whether that party is acting in good faith;
(iii) whether the opposing party will be prejudiced; and (iv) whether the
amendment will be futile.” Baez v. Delta Airlines, Inc., No. 12 Civ. 3672 (KPF),
2013 WL 5272935, at *4 (S.D.N.Y. Sept. 18, 2013) (citing Foman v. Davis, 371
U.S. 178, 182 (1962)).
Judge Pitman denied Nestlé’s motion to amend under both Rules 16 and
15 of the Federal Rules of Civil Procedure. 4 Nestlé contests those rulings on
the grounds that Rule 16 should not have been implicated, and, even if so,
good cause existed for Nestlé’s delay; and that Nestlé’s delay in moving to
amend created no prejudice to Eastman. Judge Pitman did not commit clear
error with respect to any of these issues. Accordingly, the Order denying
Nestlé’s motion to amend is affirmed.
Judge Pitman Did Not Commit Clear Error by Denying
Nestlé’s Motion Under Rule 16
A Scheduling Order Existed
At the outset, Nestlé questions whether a valid scheduling order was
indeed in place governing the time to move to amend the pleadings. (Def.
Obj. 6 (“[T]here was some uncertainty on the part of both parties as to whether
Eastman also argued to Judge Pitman that Nestlé’s motion should be denied on the
basis of futility. Judge Pitman ruled that Eastman had not “shown that the proposed
amendment would be futile.” (1/17/14 Tr. 55:5). Eastman’s submission to the Court
withdraws its futility objection to Nestlé’s proposed amendment, without prejudice to
asserting it later in this action. (Pl. Resp. 16). The Court will not consider Eastman’s
waived futility argument here.
the Scheduling Order was in fact applicable.”)). Nestlé presents a long and
complex narrative of private scheduling discussions between the parties,
multiple revised scheduling orders submitted over a period of months with
proposed new dates, and actual scheduling orders signed after the expiration of
their relevant dates. (Id. at 6-8). This narrative, Nestlé contends, demonstrates
that there was “well-founded” “uncertainty on the part of both parties as to
whether the Scheduling Order was in fact applicable.” (Id. at 6).
Judge Pitman held otherwise. He ruled that “the deadline for making
motions to amend” had come and gone “two-and-a-half months” before Nestlé
made the motion to amend at issue here — in other words, the deadline was
September 11, 2013, exactly when the last-signed scheduling order provided.
(1/17/14 Tr. 52:20-21; Dkt #65). Any other result, Judge Pitman concluded,
would require accepting that “the parties by their conduct could somehow alter
the deadline for motions to amend” without seeking the presiding judge’s
permission. (1/17/14 Tr. 52:22-23).
Nestlé contends that Judge Pitman “misunderstood Nestlé’s argument
with regard to Rule 16, rejecting an argument that Nestlé did not actually
advance.” (Def. Obj. 1). Nestlé never claimed that the parties’ conduct could
alter a valid scheduling order; its position, to the contrary, was merely that the
parties were uncertain whether a valid scheduling order was in place. (Id. at 59). Judge Pitman’s mistake, Nestlé insists, is illustrated by his reliance on
Parker v. Columbia Pictures Indus., 204 F.3d 326 (2d Cir. 2000). Nestlé argues
that Parker supports its position and undermines the result Judge Pitman
reached. (Def. Obj. 9). Parker instructs that “limiting the time for
amendments … is designed to offer a measure of certainty in pretrial
proceedings.” Id. at 340. In Nestlé’s view, because the parties were mutually
uncertain about whether, and to what effect, a scheduling order bound their
freedom to amend, there was no valid interest in defending an arbitrary
deadline that had not provided certainty to either party about when the
pleadings would be fixed. (Def. Obj. 9).
Nestlé’s argument misses the mark. Irrespective of what Nestlé may
argue it believed, misunderstood, mutually planned with Eastman, asked
Judge Pitman to do or not to do, said to Judge Pitman’s law clerk, or wrote in a
letter to the Court, the fact remains that Judge Pitman signed a Third
Amended Case Management Plan and Scheduling Order on August 12, 2013
(the “August 12 Order”; Dkt. #65), which provided that “[a]ny motion to amend
or to join additional parties to the pleadings shall be filed within 30 days from
the date of” that Order. Judge Pitman expressly found that that Order
governed the progress of this action, and, by extension, that motions to amend
were due not later than September 11, 2013. (1/17/14 Tr. 51:18-19). The
Court cannot say that he was clearly wrong to do so. Absent any order or
endorsement from Judge Pitman providing or suggesting that the relevant
deadline had moved, Nestlé simply has no basis to assert that the deadline for
amendments even arguably was anything other than September 11, 2013.
Nestlé argued before Judge Pitman that the August 12 Order “had been
superseded through subsequent appearances in this courtroom.” (1/17/14
Tr. 15:21-22). But as Judge Pitman pointed out immediately afterward, no
discussions regarding proposed alterations to the August 12 Order ever
addressed the deadline to amend the pleadings. (Id. at 15:23-16:3). Though
Nestlé’s counsel resolutely responded that the deadline for motions to amend
“was always carried forward” in previous revised scheduling orders, the fact
remains that no such order was ever signed.
Finally, Nestlé submits that because Eastman “took advantage of the
uncertainty and confusion to file its submissions on a schedule inconsistent
with the [August 12 Order], it should be estopped from nevertheless arguing
that Nestlé may not do the same.” (Def. Obj. 9). This argument fails as well.
First, the Second Circuit has explained that a district court “must exercise its
discretion under Rule 16(b) to determine whether … to allow an amended
[pleading,]” and should evaluate, among other things, whether granting such a
motion would prejudice the non-moving party. Kassner, 496 F.3d at 244.
Whether Eastman’s conduct of discovery in this action was correct has no
bearing on the Court’s obligation to assess whether granting Nestlé’s motion to
amend would comport with the requirements of the Federal Rules. Second, as
Judge Pitman found — and was not clearly wrong to do so — the issue of
Eastman’s expert reports and depositions submitted after the deadline in the
August 12 Order is not “properly wrapped up in the motion to amend.”
(1/17/14 Tr. 17:1-2). Nestlé relies heavily on the “compelling” strength and
“fundamental fairness” of its argument that Nestlé and Eastman should be
held to the same standard. (Def. Obj. 2, 8-9). But Judge Pitman concluded
that this argument was irrelevant to Nestlé’s motion to amend. (See 1/17/14
Tr. 16:21-23 (“So if you wanted to make some supplemental motion depending
upon how your motion to amend comes out you’re free to do so….”)). This was
not clear error. 5
Nestlé’s Motion Fails Under Rule 16
Nestlé cannot unseat Judge Pitman’s determination that a valid
scheduling order existed. In consequence, Nestlé’s motion to amend was
properly evaluated under “the more exacting Rule 16 standard.” CastroSanchez v. N.Y.S. Dep’t of Corr. Servs., No. 10 Civ. 8314 (DLC), 2012 WL
4474154, at *1 n.1 (S.D.N.Y. Sept. 28, 2012). Rule 16(b)’s “good cause”
standard requires the court to inquire into the “diligence of the moving party”
Grochowski, 318 F.3d at 86, in addition to considering “other relevant factors
including, in particular, whether allowing the amendment of the pleading at
this stage of the litigation will prejudice [the non-moving party],” Kassner, 496
F.3d at 244.
Nor, it bears noting, does it necessarily follow that such a motion to strike Eastman’s
expert submissions would be successful. It is at least possible that Eastman could
argue that the parties’ conversations with Judge Pitman regarding adjournments to the
deadlines for fact and expert discovery provided a reasonable basis to believe that those
deadlines had been extended. But Nestlé acknowledged to Judge Pitman that no such
discussion took place regarding the deadline to amend the pleadings. (See, e.g.,
1/17/14 Tr. 7:5-15 (“The Court: Well was there any subsequent amendment of the …
date to amend the pleading…. [Counsel for Nestlé]: No. But … if we had submitted a
proposed order … I think we can presume it would have extended those dates….”)).
Nestlé treats these issues as logical correlatives when in fact the success or failure of a
potential subsequent motion by Nestlé to strike Eastman’s expert testimony is a
Judge Pitman found that Nestlé could not demonstrate good cause and
that the delay in moving to amend prejudiced Eastman. The Court affirms
No Good Cause Was Shown
Counsel for Nestlé admitted to Judge Pitman at oral argument on the
present motion that the information providing the basis for the counterclaim it
seeks to add was “within [Nestlé’s] files” even before this action was filed.
(1/17/14 Tr. 3:16-23). Nestlé noted that it had actually informed Judge
Pitman during conferences on September 9 and September 11 that it “might
amend” its counterclaims. (Id. at 9:25-10:6). When asked why it waited 10
weeks after those representations — and the expiration of the deadline for
motions to amend — before it actually sought to make the contemplated
amendment, Nestlé explained that it had been “engaged in responding to
[Judge Pitman’s] directives,” apparently in the belief that complying with
discovery orders could provide good cause for a 10-week delay. (Id. at 11:812:5, 12:16-13:6).
On the basis of these representations and the record of the case, Judge
Pitman found that all the information necessary to perceive the counterclaim at
issue was “in Nestlé’s possession from before the inception of the case,” and
that “there really hasn’t been a good explanation proffer[ed], a good cause
shown for the delay in the motion.” (1/17/14 Tr. 52:6-7, 17-18; see also id. at
53:6-9 (“This was not new information. The counterclaim is not based on new
information produced in discovery. It’s based on information that [Nestlé]
either had in its possession or was always accessible….”)). These findings were
not clearly erroneous.
Nestlé unsurprisingly contends to the contrary, citing to the Court’s
decision in Affiliated FM, which held that, in the narrow factual circumstance
present there, “‘[i]t would contravene the purpose of the Federal Rules [and] …
be unjust … to deny amendment because of … counsel’s delayed recognition’”
of the defense at issue. (Def. Obj. 11 (quoting Affiliated FM Ins. Co. v. Liberty
Mechanical Contractors, Inc., No. 12 Civ. 5160 (KPF), 2013 WL 4526246, at *6
(S.D.N.Y. Aug. 27, 2013))). The facts here are markedly different. Nestlé’s
recognition of its would-be counterclaim was not “delayed”; Nestlé avowedly
intended to amend before the deadline, and by way of excuse for failing to do so
offered only that it was busy doing other things. 6 Good cause requires more.
See Rent-A-Ctr., Inc. v. 47 Mamaroneck Ave. Corp., 215 F.R.D. 100, 104
(S.D.N.Y. 2003) (holding that the good cause standard requires that a “movant
must show that the deadlines cannot be reasonably met despite its diligence”).
There Was Prejudice
Briefing its opposition to Nestlé’s motion to dismiss before Judge Pitman,
Eastman noted that “[t]o defend against Nestlé’s ‘new’ claim, Eastman would
need the detailed [substitute good] purchase data that Nestlé refused to
Nestlé also noted in this context “a certain degree of uncertainty” regarding the deadline
for motions to amend, and represented that “had [Nestlé] believed that the amendment
was due to be done by September 11,” this motion would have been made earlier.
(1/17/14 Tr. 13:3-8). But a claim that a party would have complied with a deadline is
not enough to make up for failing to do so. And the Court has already determined that
Judge Pitman was not clearly incorrect to conclude that the August 12 Order was the
governing scheduling order for this purpose.
produce” earlier in discovery on the grounds that it was not, then, relevant to
any claim at issue in the action. (Dkt. #96 at 15; see also id. at 14 (“Adding
Nestlé’s proposed new claim will delay [this action] … because it will require
additional fact discovery, and possibly depositions” regarding “Nestlé’s 20092010 purchases of [substitute] resins, including the identity of the supplier, the
quantities purchased, and the prices paid”), 3 (“Nestlé prevented Eastman from
getting discovery on Nestlé’s purchases of [substitute goods] from another
supplier in 2010, but Eastman will need the denied discovery — documents,
and possibly testimony — on that subject to prepare a defense to Nestlé’s
proposed new counterclaim.”). At oral argument, Eastman again indicated its
belief that the proposed amendment would require additional discovery,
especially because the only information Nestlé had previously produced
regarding its orders of the alleged substitute goods was “a summary document
without any of the underlying data.” (1/17/14 Tr. 38:20-21; see also Pl.
Resp. 10-11 (“[T]he information Nestlé never produced … represents a large
part of the discovery from Nestlé and third parties Eastman will need to obtain
if Nestlé’s proposed amendment is permitted.”)). Indeed, counsel for Nestlé told
Judge Pitman that he could not recall what backup data existed for the
summary chart Nestlé had produced or what form that backup data might
take. (1/17/14 Tr. 45:5-46:7).
For example, Eastman argued it would be compelled to obtain paper
discovery from a third party, APT, that had actually ordered the materials
Nestlé claims it was compelled to purchase in substitution for Eastman’s
allegedly nonconforming goods; this discovery would be necessary, Eastman
explained, to determine how Nestlé’s purported substitute orders would have
been priced, based on the exact dates on which Nestlé purchased and paid for
specific quantities. (1/17/14 Tr. 29:25-30:11; see also Pl. Resp. 10-11).
Eastman also explained that it might have to obtain paper discovery from
another third party, Invista, the alternative supplier of the substitute goods, as
well as possible depositions regarding order discussions and quantities.
(1/17/14 Tr. 30:10-17; see also Pl. Resp. 11). All this discovery would be
necessary, Eastman argued, because of the need to confirm whether “what the
aggrieved party did” in response to alleged contractual nonperformance “was
reasonable” with respect to establishing damages. (1/17/14 Tr. 39:15-16
(answering Judge Pitman’s question regarding why discovery would be
necessary given the Uniform Commercial Code’s provision that aggrieved sellers
may obtain “the difference between the cost [of] covering and the contract
Based on these representations, Judge Pitman concluded that Nestlé’s
delay had prejudiced Eastman because Eastman, should Nestlé be permitted to
amend, “would be entitled to take discovery as to the commercial
reasonableness of” Nestlé’s alleged substitute purchases. (1/17/14 Tr. 53:2425; see also id. at 54:1-23). This determination was not clearly wrong.
Nestlé objects to Judge Pitman’s conclusion on several grounds. The
first and most perplexing is its contention that that Judge Pitman “found
prejudice based on an argument that [Eastman] never even raised.” (Def.
Obj. 13; see also id. at 15 (“Relying on a Basis for Prejudice Which [Eastman]
Did Not Identify Was Unfair and Created an Inconsistency Between Rulings.”),
17 (“[A]ny allegation of prejudice not relied upon by [Eastman] should not have
been relied upon by the Court.”)). Nestlé goes so far as to suggest that Judge
Pitman “potentially compromis[ed] [his] neutrality,” or intruded on Eastman’s
“litigation strategy,” by raising a form of prejudice Eastman failed to identify.
(Id. at 15).
Nestlé’s argument cannot prevail. Eastman, throughout its argument to
Judge Pitman, focused on the prejudice of being compelled to conduct
substantial new discovery at this late point in the proceeding to identify
Nestlé’s ordering and purchasing patterns, payment contracts, and associated
price data. (1/17/14 Tr. 29:24-31:12, 35:10-39:1). Eastman specifically
explained that this discovery was necessary, among other things, to determine
whether Nestlé’s approach to covering its alleged losses “was reasonable.” (Id.
at 39:12-16). And Judge Pitman certainly did not clearly err in relying on that
explicit position in ruling against Nestlé. (Id. at 51:25-52:21). This argument,
apparently the heart of Nestlé’s objections to Judge Pitman’s Rule 16 ruling,
badly misreads the record.
Nestlé tries to recharacterize Eastman’s explicit reliance on this theory of
prejudice in two equally unsuccessful ways. First, Nestlé waves away the fact
that Eastman explicitly identified a need to determine whether Nestlé’s efforts
to obtain substitute goods “was reasonable” (1/17/14 Tr. 39:15-16); this
reference, Nestlé submits, related to “the reasonableness of Nestlé’s actions
rather than the reasonableness of the cover price” (Def. Obj. 13 n.8). Nestlé
offers no further explanation of what “actions” Eastman could possibly have
been identifying other than Nestlé’s efforts to obtain substitute products, nor
how these “actions” could have been reasonable or unreasonable except with
respect to the price Nestlé paid for such goods. Nestlé’s argument is all the
more unavailing when considered in context. Eastman’s reference to
reasonableness arose in response to Judge Pitman’s question about Nestlé’s
cost of cover and came immediately after Eastman specifically referred to its
need for discovery on Nestlé’s “ordering patterns … to determine pricing.”
(1/17/14 Tr. 38:24-25). Eastman very clearly relied, both in its submission to
and its argument before Judge Pitman, on the need to conduct discovery to
determine the reasonableness of Nestlé’s cost to cover, and Nestlé cannot
Nestlé also argues that Judge Pitman invented the basis for finding
prejudice himself because it was he, not Eastman, who cited the relevant
provision of the Uniform Commercial Code. (Def. Obj. 13 n.8). But by grasping
at this narrow, technical straw, Nestlé implicitly acknowledges what it cannot
credibly contest: Eastman did identify discovery regarding Nestlé’s cost of cover
as a form of prejudice Nestlé’s proposed amendment would create, whether or
not in doing so Eastman cited the proper section of the UCC. In short, the
basis for Judge Pitman’s ruling on prejudice was perfectly appropriate.
Next, Nestlé contends that Judge Pitman’s ruling is based on a factual
misunderstanding: under the August 12 Order, fact discovery had already
closed by the deadline to amend, and so further discovery would have been
unavailable even had Nestlé made a timely motion. (Def. Obj. 13). And, Nestlé
points out, though Eastman could of course have moved to extend fact
discovery in response to such a timely motion, Eastman could just as easily
have done the same when Nestlé ultimately filed its motion to amend on
November 26. (Id. at 14).
This argument, while facile, misses the point. As Judge Pitman put it
during oral argument, “most people would say it’s different being two days late
than being two months late.” (1/17/14 Tr. 12:10-11). The fact is that Nestlé
did not seek to introduce this new counterclaim in mid-September; it sought to
introduce it in late November. 7 The Court set a briefing schedule for the
parties’ anticipated respective motions for summary judgment only three weeks
later. (Dkt. #88). Had Judge Pitman permitted Nestlé’s proposed amendment
on January 17, the parties would have had only eight weeks remaining before
motions for summary judgment were due. Nestlé’s tardy effort to amend
would, if successful, have thrown the briefing schedule into disarray and forced
Eastman both to embark upon a substantial new discovery initiative and to
It also bears pointing out that, even had its motion been timely, Nestlé would always
have had to contend with Rule 15’s prohibition of prejudice to the nonmoving party. It
is by no means a foregone conclusion, had Judge Pitman confronted this motion on
September 11, that he would have found no prejudice to Eastman posed by a new
counterclaim introduced 13 months after Nestlé’s Answer was first filed (Dkt. #51),
especially given that the nature of the counterclaim would have required reopening fact
discovery late in the game. But those facts are not confronted here and the Court
concludes only that Judge Pitman did not commit clear error in finding prejudice posed
by a new counterclaim introduced in November 2013.
develop new factual and legal theories in opposition to the new counterclaim.
Judge Pitman was not clearly wrong to find that this constituted prejudice.
Third, Nestlé objects to Judge Pitman’s decision because, on several
occasions, he posed the question of prejudice by asking whether Eastman
would have acted different in February 2013, had Nestlé added its proposed
counterclaim at that point. (Def. Obj. 14). These questions, Nestlé contends,
prove that Judge Pitman’s analysis was flawed: the proper comparison was
between what Eastman would have done differently had Nestlé made a timely
motion to amend on September 11, 2013, instead of 10 weeks later on
Here, too, Nestlé seems to misunderstand Judge Pitman’s comments at
the January 17 oral argument, or at least to miss their explanatory context.
Judge Pitman asked, early in the oral argument, “Wouldn’t it have impacted
the discussion we had last February on … [Eastman’s] document request if the
third counterclaim had been asserted at that time?” (1/17/14 Tr. 18:6-9).
This, as counsel for Nestlé explained moments later and as is clear from the
docket, was a reference to the discovery hearing held before Judge Pitman on
February 19, 2013. (Id. at 18:12-13; Dkt. #54). In that hearing, among other
things, Eastman sought to enforce certain document requests regarding the
price Nestlé paid for substitute goods to cover Eastman’s alleged breach and
the quantities of those goods Nestlé purchased. (Dkt. #54 at 66:3-5). This
information is, of course, precisely the information now implicated by Nestlé’s
proposed counterclaim. At that time, however, granular data were irrelevant to
the counterclaims then at issue in the action, and so Eastman only sought
high-level information, specifically eschewing “the underlying documents and a
lot of detail….” (Id. at 76:5-6). Accordingly, Judge Pitman directed Nestlé to
produce “an affidavit setting forth the amount of [substitute resin products] i[t]
bought in 2009 and 2010 and the average price in each year.” (Id. at 77:7-9).
This summary affidavit was necessary because Nestlé’s allegations made “some
price information relevant.” (Id. at 77:10). Data at that high level of generality,
it is now clear, will not aid Eastman in substantiating an argument about the
reasonableness of cover prices paid in specific months for specific orders.
(1/17/14 Tr. 40:6-12).
In other words, Judge Pitman’s first mention of February during the oral
argument was a reference to a particular occasion on which he denied certain
of Eastman’s document requests for specific documentation regarding Nestlé’s
orders of substitute goods and the prices Nestlé paid. In place of those
documents, he required Nestlé instead to submit an affidavit providing
compilation ordering data and average pricing data. (See 1/17/14 Tr. 26:1821 (“The Court: Well, you did get summary information on that score last
winter or last spring. That was what we discussed last February and there was
an affidavit and summary information produced as I recall.”)). But had Nestlé’s
proposed counterclaim been at issue during that exchange, such compilation
and average data would obviously have been insufficient. (See id. at 26:2527:2 (“[T]hat’s certainly not enough discovery to deal with a claim now
[regarding] the cost of cover of stuff they never ordered.”)). Nestlé would have
had to produce different documents (id. at 35:10-12), and Eastman would have
conducted subsequent discovery differently; this included the questions asked
at the deposition of one Bouzekri, a Nestlé deponent (id. at 31:4-5) who was,
counsel for Eastman alleged, involved in “virtually every email dealing with
monthly pricing” (Dkt. #54 at 79:7), and who would, Eastman represented to
Judge Pitman, have been the subject of questioning on the issue of Nestlé’s
proposed counterclaim for breach of contract (1/17/14 Tr. 30:14-19, 35:12-18,
When Judge Pitman referred to February again in the oral argument, he
was asking how Eastman would have framed its discovery requests and
conducted subsequent discovery differently had that February hearing been
held in the context of a third asserted counterclaim regarding the cost of
coverage. (See 1/17/14 Tr. 29:21-30:19). And Nestlé’s answers, contrary to its
objections here, make clear that Nestlé understood those questions in just that
way. (See id. at 18:6-13 (“The Court: Wouldn’t it have impacted the discussion
we had last February on [Eastman’s] document request if the third
counterclaim had been asserted at that time? … [Counsel for Nestlé]: I’ve spent
time over this week reviewing the transcript from February 19th, Your
Honor….”)). Judge Pitman did not choose an incorrect date from which to
reckon his analysis of the prejudice posed by Nestlé’s motion to amend. He
was illustrating the specific form of that prejudice by citing one major discovery
ruling that would have come out the other way had Nestlé amended earlier.
Nor would it necessarily have been clear error had Judge Pitman assessed
prejudice to Eastman with respect to a specific unit of time different from that
Nestlé submits is appropriate. No matter when Nestlé moved or what date
provided the beginning of the window within which prejudice might inure to
Eastman, Nestlé would always have had to show that the timing of the
amendment did not prejudice Eastman. Judge Pitman found prejudice here
and was not wrong to do so.
Fourth, Nestlé submits that it has already produced “precisely the
pricing data which relates to its proposed third counterclaim,” such that any
“prejudice had in fact been ameliorated by the time Nestlé in fact moved to
amend in November.” (Def. Obj. 14). This argument is a nonstarter. As
discussed at length above, Judge Pitman correctly concluded that Eastman
would have to conduct substantial additional discovery if Nestlé’s proposed
counterclaim were approved.
Fifth, Nestlé argues that any potential prejudice could, and should,
properly have been ameliorated simply by giving Eastman time to conduct the
necessary discovery. (Def. Obj. 15-18). Nestlé cites State Teachers Ret. Bd. v.
Fluor Corp., 654 F.2d 843, 856 (2d Cir. 1981), as authority for this proposition,
quoting the Second Circuit’s observation that a nonmovant is not prejudiced by
a delayed motion to amend the pleadings when the “amended claim was
obviously one of the objects of discovery and related closely to the original
claim.” Id. The facts here are dispositively different. Nestlé’s proposed
counterclaim was exactly not one of the objects of discovery. In fact, as
discussed above, at the February 19 discovery hearing Judge Pitman
specifically foreclosed much of the discovery Eastman would need to take
regarding Nestlé’s proposed counterclaim because, at that time, the
information in question was not relevant to any claim at issue. Nor is it true
here, as it was in State Teachers, that “the amendment will not involve a great
deal of additional discovery.” Id. at 856. On the contrary, Judge Pitman found
that substantial additional discovery would be required if Nestlé’s proposed
counterclaim were approved. As the Court has explained at length throughout
this Opinion, Judge Pitman was not clearly wrong to do so. State Teachers, if
anything, illustrates exactly why the prejudice posed by this proposed
counterclaim had no simple solution: unlike in State Teachers, permitting
Nestlé’s proposed counterclaim would have required a significant amount of
paper discovery, potential new depositions or the reopening of old depositions,
and appreciable delay in pursuing even partial resolution of this action.
In a last-ditch effort, Nestlé argues that forbidding its proposed
counterclaim is inconsistent with the Court’s solution to the problem posed by
Eastman’s production on December 17, 2013, of a supplemental expert report
disclosing previously unproduced data. (Def. Obj. 15-17). There, though the
new data certainly should have been produced much earlier, Eastman
represented that the data in question had only been obtained and assessed by
their expert in the recent past, and were produced as soon as was practicable.
(Dkt. #110 at 4:1-8:17). The Court decided that the best approach to this new
data and associated analysis was to permit Nestlé time to digest the report,
obtain further deposition testimony from Eastman’s expert, and, if necessary,
amend its own expert report in response. (Id. at 22:23-23:1). From this, Nestlé
now argues that the only appropriate solution to the prejudice to Eastman
produced by Nestlé’s proposed counterclaim is to permit amendment and grant
Eastman time to conduct the requisite discovery. (Def. Obj. 15-16).
Nestlé’s final argument is no more successful than any other because it
treats two meaningfully different forms of prejudice as commensurate. (See Pl.
Resp. 15 n.5). The problem Eastman generated by its late data production and
supplemental expert report of December 2013 was not insignificant: Nestlé
needed more time to consider the new data and obtain additional deposition
testimony from Eastman’s expert. The prejudiced posed by Nestlé’s
amendment was far more extensive. As Judge Pitman found, the proposed
counterclaim would require that Eastman take “substantial additional
discovery” (1/17/14 Tr. 54:16-17) involving multiple third parties, new
depositions, and the reopening of earlier depositions. Moreover, as Judge
Pitman put it, Eastman is at this point in the litigation “really unable to take
the discovery” necessary to mount an adequate defense against the proposed
counterclaim. (Id. at 54:22-23).
The much more limited prejudice to Nestlé created by Eastman’s late
expert report was easily solved by a short expansion of the time provided to the
parties to prepare their motions for summary judgment. (12/18/13 Tr. 24:1119). Here, though, it is not possible to reopen fact discovery as extensively as
would be required to avoid prejudice to Eastman from Nestlé’s new
counterclaim. The summary judgment briefing schedule would have to be
cancelled, presumably to begin again at some point in the future. The parties
would be forced to identify documents and their custodians in two countries.
The parties would have to return before Judge Pitman for more disputes over
properly discoverable documents. And the delays in resolving this litigation
would simply concatenate.
The Court cannot find clear error in Judge Pitman’s conclusions that
Nestlé’s amendment, if permitted, would work irremediable prejudice to
Eastman’s ability to defend itself at trial. (1/17/14 Tr. 54:21-23). Accordingly,
Judge Pitman was correct to deny Nestlé’s motion to amend under Rule 16.
See Kassner, 496 F.3d at 244 (noting that courts should examine the prospect
of prejudice from a proposed amendment as part of Rule 16 analysis).
Judge Pitman’s Ruling Under Rule 15 Was Also Not Clearly
As extensively discussed above, Judge Pitman did not clearly err in
ruling that Eastman would be prejudiced were Nestlé’s new counterclaim
permitted. For the same reason, Nestlé’s amendment was also appropriately
denied under Rule 15. (1/17/14 Tr. 54:24-55:3). See Block v. First Blood
Assocs., 988 F.2d 344, 350 (2d Cir. 1993) (“The rule in this Circuit has been to
allow a party to amend its pleadings in the absence of a showing by the
nonmovant of prejudice or bad faith.”); see generally AEP Energy Serv. Gas
Holding Co. v. Bank of Am., N.A., 626 F.3d 699, 725 (2d Cir. 2010) (identifying
prejudice to the opposing party resulting from a proposed amendment as
among the “most important” reasons to deny leave to amend (internal
quotation marks omitted)).
For the reasons set forth above, Nestlé’s objections are denied and Judge
Pitman’s Order denying Nestlé’s motion to amend is affirmed.
April 1, 2014
New York, New York
KATHERINE POLK FAILLA
United States District Judge
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