IVEY v. LYNCH
Filing
23
MEMORANDUM OPINION AND ORDER signed by JUDGE N. C. TILLEY, JR on 08/08/2018, that Plaintiff's Motion Seeking Authority to Amend Complaint 19 is DENIED. FURTHER that Defendant's Motion to Dismiss Amended Complaint [5-1] is GRANTED. A judgment dismissing this action with prejudice will be filed contemporaneously with this order. (Coyne, Michelle)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
CHARLES M. IVEY, III, Trustee for
The Carolina Golf Development
Company,
Plaintiff,
v.
ANDREW C. LYNCH,
Defendant.
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1:17CV439
MEMORANDUM OPINION AND ORDER
This matter began in Moore County, North Carolina when The Carolina Golf
Development Company (“the Debtor”) sued 71st Partners, LLC (“71st Partners”)
challenging the sale of real property. 71st Partners moved to dismiss the
complaint, but before the motion was heard, one of the Debtor’s creditors initiated
an involuntary bankruptcy proceeding and the state court case was removed to the
United States Bankruptcy Court for the Middle District of North Carolina. There,
71st Partners filed a third-party complaint against Defendant Andrew Lynch and
his law firm, after which Plaintiff Charles M. Ivey, III (“Trustee”) amended its
complaint to add claims against Lynch. Lynch moved to dismiss the claims against
him, in part based on immunity from suit, for which the Bankruptcy Court held
hearings on at least two occasions.1 During those hearings, the question arose as
In the meantime, the Bankruptcy Court approved a settlement between the
Trustee and 71st Partners, and 71st Partners dismissed without prejudice its ThirdParty Complaint against Lynch and his law firm.
1
to that court’s authority to make a jurisdictional determination as to Lynch. After a
hearing before this Court, the reference to the Bankruptcy Court was withdrawn,
and the Trustee’s action against Lynch has, consequently, found its way here.
Before the Court are Lynch’s Motion to Dismiss the Amended Complaint and
Cross Complaint [Doc. #5-1], initially filed in the Bankruptcy Court, and the
Trustee’s Motion Seeking Authority to Amend Complaint [Doc. #19]. In opposition
to the Trustee’s motion to amend, Lynch argues that such an amendment would
be prejudicial and futile, (see Def.’s Br. in Opp’n [Doc. #21]), and relies in large
part on the same arguments advanced in support of his motion to dismiss the
Amended Complaint, (compare id. with Def.’s Supporting Mem. [Doc. #5-12]). For
the reasons explained below, the Trustee’s motion is denied and Lynch’s motion is
granted.
I.
On March 9, 2012, the Insolvency Court of Hannover, Germany (“Insolvency
Court”) commenced an insolvency proceeding over the assets of Ingolf Boex, a
German resident, and appointed Dr. Christian Willmer as permanent insolvency
administrator. (Decl. of Andrew C. Lynch (Ex. 1 of Def.’s Supporting Br.) ¶ 2;
Order of Dist. Ct. of Hannover (Mar. 9, 2012) (Ex. A to Lynch Decl.) [Doc. #5-13
2
Lynch filed his motion to dismiss and its supporting brief with the Bankruptcy
Court as one document. Throughout this Opinion, page numbers from Doc. #5-1
are also cited for ease of reference to specific material Lynch filed in support of his
motion to dismiss.
3
In support of his motion to dismiss, Lynch filed his own declaration with
attachments and the declaration of H. Philipp Esser with attachments. Several of
2
at 27-36].) In so doing, the Insolvency Court forbade Boex from availing himself of
his assets during the pendency of the proceedings and transferred “[t]he power”
“to the insolvency administrator.” (Order of Dist. Ct. of Hannover.) The Insolvency
Court then entered an order certifying that Willmer, as the insolvency administrator
over the property of Boex and under German law, had “full powers to take
possession, make use of and realize all and any items of property of the debtor and
[to] do so world-wide.” (Ct. Order (Mar. 7, 2013) (Ex. D to Decl. of H. Philipp
Esser4) [Doc. #5-1 at 81-84].)
In May 2012, Willmer, in his role as insolvency administrator, engaged Liles
Parker, LLC, and Lynch, a Washington, D.C. partner in the firm, to represent and
aid him with respect to Boex’s estate located in the United States. (Lynch Decl.
¶¶ 1, 3.) On September 25, 2014, as “insolvency administrator of Ingolf Boex,
acting as controlling shareholder . . . pursuant to his appointment as insolvency
administrator under authority of Court Order”, Willmer executed a Resolution of
Controlling Shareholder of The Carolina Golf Development Company and Carolinas
Corporation (“Resolution”) for the purpose of selling to 71st Partners the Carolina
Golf Course owned by The Carolinas Golf Development Company. (Id. ¶ 4.) The
Resolution explains that Willmer “was appointed by” the Insolvency Court “as
the attachments are English translations of court orders, corporate documents, and
the German Insolvency Code. The Trustee neither acknowledges nor challenges
the contents, authenticity, or accuracy of any of the attachments.
4
Lynch apparently intended to attach this March 7, 2013 court order to his own
declaration as Exhibit B. (See Lynch Decl. ¶ 2.) While there are exhibits labeled AD attached to his declaration, none appears to be the March 7, 2013 order.
3
insolvency administrator with full authority to take possession and control of the
assets of Dr. Ingolf Boex”. (Resolution (Ex. B5 to Lynch Decl.) [Doc. #5-1 at 3839].) As part of the Resolution, Wilmer appointed and designated Lynch as a Vice
President of The Carolina Golf Development Company “for the limited purpose of
executing and delivering the Purchase Agreement Documents” and as “the sole
officer . . . having legal authority to execute and deliver such Purchase Agreement
Documents”. (Lynch Decl. ¶ 4; Resolution.) Lynch was “authorized and directed
to take all actions necessary or appropriate to carry out the foregoing resolution[].”
(Resolution.)
On October 9, 2014, Willmer authorized the execution of a Purchase
Agreement between The Carolina Golf Development Company and 71st Partners
for the Carolina Golf Course. (Lynch Decl. ¶ 5.) At Willmer’s direction, Lynch
executed certain necessary closing documents, including the Special Warranty
Deed and the Seller’s Closing Certificate, in connection with his representation of
Willmer and pursuant to Lynch’s limited purpose authority. (Id. ¶ 6.) On behalf of
The Carolina Golf Development Company, Lynch signed each document as “Vice
President and Authorized Representative, acting at the direction of Dr. Christian
Willmer”. (Special Warranty Deed (Ex. A to Third-Party Compl.) [Doc. #5-1 at 8993]; Seller’s Closing Certificate (Ex. B to Third-Party Compl.) [Doc. #5-1 at 94].)
The Special Warranty Deed was further notarized as Lynch having “personally
5
Lynch cites this as Exhibit C.
4
appeared before [the notary] and acknowledged that he is Vice President and
Authorized Representative, acting at the direction of Dr. Christian Willmer of The
Carolina Golf Development Company . . . and that he, as Vice President and
Authorized Representative, acting at the direction of Dr. Christian Willmer, being
authorized to do so,” executed the deed. (Special Warranty Deed.)
At the close of the sale, Willmer himself executed a Closing Certificate in his
capacity as “insolvency administrator for Ingolf Boex in the proceeding 903 IN
83/12 -6 in the District Court of Hannover Germany (‘Insolvency Proceeding’)”.
(Lynch Decl. ¶ 10; Closing Certificate (Ex. D to Lynch Decl.) [Doc. #5-1 at 47-48].)
The Closing Certificate goes on to state, in part, that “[p]ursuant to the Insolvency
Proceeding,” Willmer has “legal authority to sell assets of Ingolf Boex wherever
located” and “to sell and/or vote corporate shares owned or controlled by Ingolf
Boex, including the corporate shares of Seller”. It also notes that “[t]he sale of the
Property under the Purchase Agreement has been brought before the board of
creditors in the Insolvency Proceeding”. (Closing Certificate.)
II.
It is this very sale that began the litigation in Moore County, and it is
Lynch’s role in that sale that has brought the matter before this Court. In the
Amended Complaint, the Trustee asserted against Lynch claims of unjust
enrichment, fraudulent transfer, and, in the alternative, breach of fiduciary duty.6
6
Characterized as the “Second Claim for Relief” is also a request “Denying any
Equitable Relief for Defendants as it Relates to Said Real Property”, but this is not
5
(Am. Compl. & Cross-Compl. [Doc. #5].) In response, Lynch has asserted, among
other arguments, that he is protected from this suit by common law foreign official
immunity.
Although the Supreme Court determined in Samantar v. Yousuf, 560 U.S.
305, 308 (2010), that the Foreign Sovereign Immunities Act of 1976 (“FSIA”), 28
U.S.C. §§ 1330, 1602 et seq., “does not govern the determination of” a foreign
official’s immunity from suit, the Court recognized that such a suit “may still be
barred by foreign sovereign immunity under the common law”, id. at 324. After
the Court’s decision, the Fourth Circuit Court of Appeals revisited the question of
whether a foreign official was immune from suit under the common law. Yousuf v.
Samantar, 699 F.3d 763 (2012). In so doing, the court explained that immunity
from “claims arising out of . . . official acts while in office” – often referred to as
conduct-based immunity – “derives from the immunity of the State”. Id. at 774.
The doctrine of the imputability of the acts of the individual to the
State . . . in classical law . . . imputes the act solely to the state, who
alone is responsible for its consequence. In consequence any act
performed by the individual as an act of the State enjoys the immunity
which the State enjoys.
Id. (ellipses in original). As the court acknowledged,
By the time the FSIA was enacted, numerous district courts had
embraced the notion stemming from international law, that ‘[t]he
immunity of a foreign state . . . extends to . . . any . . . public
minister, official, or agent of the state with respect to acts performed
in his official capacity if the effect of exercising jurisdiction would be
to enforce a rule of law against the state.
a claim against Lynch for which relief can be granted and the Trustee removed this
purported claim from its proposed Second Amended Complaint.
6
Id. (quoting Restatement (Second) of Foreign Relations Law § 66(f) (1965) (“the
Restatement”)) (ellipses in original). While these earlier expositions on foreign
official immunity “almost all involved the erroneous (pre-Samantar) application of
the FSIA to individual foreign officials claiming immunity”, “these decisions are
instructive for post-Samantar questions of common law immunity.” Id.
This conduct-based, common law foreign official immunity applies to suits
where “(1) the actor [is] a public minister, official, or agent of the foreign state; (2)
the act [has] been performed as part of the actor’s official duty; and (3) exercising
jurisdiction would have the effect of enforcing a rule of law against the foreign
state.” Lewis v. Mutond, 258 F. Supp. 3d 168, 172 (D.D.C. 2017) (citing § 66(f)
of the Restatement). Here, the first step is to determine if Willmer, at whose
direction Lynch acted, is himself protected by foreign official immunity, the
analysis of which begins with a basic explanation of German insolvency
proceedings.
A.
Pursuant to Rule 44.1 of the Federal Rules of Civil Procedure, when a court
determines a matter of foreign law, it “may consider any relevant material or
source, including testimony, whether or not submitted by a party or admissible
under the Federal Rules of Evidence.” See, e.g., World Fuel Servs. Trading, DMCC
v. Hebei Prince Shipping Co., Ltd., 783 F.3d 507, 518-19 (4th Cir. 2015)
(affirming the district court’s application of Greek law which was based, in part, on
7
“submitted declarations from Greek attorneys stating their respective opinions on”
relevant Greek law); Basch v. Westinghouse Elec. Corp., 777 F.2d 165, 170 (4th
Cir. 1985) (reviewing conclusions by retained experts on Iranian law); Burke v.
Practical Concepts, Inc., 717 F.2d 938, 941 n.3 (4th Cir. 1983) (supporting its
conclusion as to the application of Bolivian law with the opinions of two Bolivian
lawyers).
Here, while the Trustee has neither submitted support for or against nor
argument about the application of German insolvency law, Lynch attached to his
motion the declaration of H. Philipp Esser, Ph.D., a German attorney admitted to
the bar in Germany and the State of New York. (Esser Decl. ¶ 1 [Doc. #5-1 at 4957].) He studied at the Universities of Tübingen and Leipzig, holds a Ph.D. in law,
and received an L.L.M. from the University of Chicago Law School. (Id.) He is a
director in the law firm Schultze & Braun, “Germany’s largest insolvency law firm
(by appointments as insolvency administrator for corporate insolvencies)”, where
he specializes in insolvency law, “particularly in German-American cross-border
insolvencies, financial instruments in insolvency and distressed M&A.” (Id.) He
“regularly represent[s] insolvency administrators appointed by the German courts
and other participants in insolvency proceedings in Germany and abroad.” (Id.) He
has provided information based on his personal knowledge as well as information
“derived from documents or information [he] obtained or that was supplied to [him]
by” Lynch’s representatives. (Id.)
8
German insolvency law is governed by the Insolvency Code of October 5,
1994, as amended (“InsO”). (Esser Decl. ¶ 3 [Doc. #5-1 at 49-57].) An insolvency
proceeding begins with the filing of an insolvency petition with the insolvency
court. (Id. ¶ 4.) “The purpose of insolvency proceedings is the collective
satisfaction of the debtor’s creditors through realization of the debtor’s assets and
distribution of the proceeds . . . .” (InsO § 1 (Ex. B to Esser Decl. [Doc. #5-1 at
60-777].) “Upon the filing of the insolvency petition, the preliminary insolvency
proceeding . . . begins.” (Esser Decl. ¶ 4.) During this time, the insolvency court
reviews the matter and, “[i]f the requirements for the commencement of an
insolvency proceeding are met, the insolvency court formally opens the case with
the commencement order and appoints a (permanent) insolvency administrator.”
(Id. (citing InsO §§ 16-19, 26, 27).)
“The insolvency administrator is subject to the supervision of the insolvency
court” which can “impose a penalty payment” on him if, after a warning, he does
not fulfill his “duties” and can ultimately “remove the insolvency administrator from
office for good cause.” (InsO §§ 58, 59.)
Once insolvency proceedings are commenced, “the right of the debtor to
manage and dispose of the assets of the insolvency estate vests in the insolvency
7
Exhibit B to Esser’s Declaration is entitled, “Relevant Provisions of the Germany
Insolvency Code”, and provides the self-described “relevant” provisions both in
German and in English. The source of the translation is unknown, unlike the
certifications provided with other translated documents, but, as noted above, the
Trustee does not challenge the content or the accuracy of the translations.
9
administrator.” (InsO § 80.) “Following the report meeting8, the insolvency
administrator shall realise the assets forming the insolvency estate without delay
. . . .” (InsO § 159.) “As a result of these provisions, under German law”, an
insolvency administrator “has the right to exercise full control over any of the
assets of [the debtor] that belong to the insolvency estate (excluding only personal
assets exempted from enforcement or released to the debtor because of lack [of]
value), including the right to vote stocks owned by the debtor.” (Esser Decl. ¶ 8.)
“These rights extend to property wherever located.” (Id.)
The “insolvency court may establish a creditors’ committee” whose
“members . . . shall support and supervise the insolvency administrator in the
execution of his/her office.” (InsO §§ 67, 69.) If the insolvency administrator
“wishes to undertake legal acts that are of particular importance for the insolvency
proceedings”, (InsO § 160), such as, for example, the sale of “the business of the
debtor as a whole” or “real estate of the bankruptcy estate without a bidding
procedure”, or the settlement of “a legal dispute with a significant value”, (Esser
Decl. ¶ 7), he “must obtain the consent of the creditors’ committee”, (InsO
§ 160). If the insolvency administrator violates this duty, he may be liable to
creditors, but “the relevant transaction is legally valid even without the necessary
approval”. (Esser Decl. ¶ 7 (citing InsO § 164).)
It is unclear to what the “report meeting” refers, because the preceding code
section is not included in the self-described relevant portions.
8
10
The insolvency court convenes and chairs the creditors’ meeting, which the
insolvency administrator can request and, if so, it “shall be convened”. (InsO § 7476.) For example, while the decision to sell an asset of the insolvency estate “is
left to the sole discretion of the insolvency administrator”, he “will generally
consult with the insolvency creditors in the creditors’ committee or in the creditors’
meeting”. (Esser Decl. ¶ 9.) “The creditors’ meeting is [also] entitled to request
specific information and a status and management report from the insolvency
administrator”. (InsO § 79.)
“Under the prevailing legal view, the insolvency administrator is considered
to be a court-appointed office holder” with “certain [transferred] judicial sovereign
powers”, his “task is official in nature with judicative authority”, and he “serves a
public purpose or public function.” (Esser Decl. ¶ 5 (citing German Constitutional
Ct., order of Jan. 12, 2016 – 1 BvR 3102/13 (NJW 2016, 930, ¶ 45); Sternal, in:
K. Schmidt, Insolvenzordnung – Kommentar, 19th ed. 2016, s. 80 margin note
(mn.) 19).)
An insolvency administrator “has the sole authority to appoint legal counsel
to assist the insolvency administration and to protect the legal interests of the
insolvency estate.” (Id. ¶ 10.) It is considered “common and good practice” for an
insolvency administrator to retain “foreign legal counsel in connection with a sale
of property located abroad and governed by the laws of a country other than that
of the insolvency proceeding, unless the property does not have a significant
value.” (Id.) This engagement usually “includes the designation of counsel to
11
negotiate on behalf of the insolvency administrator and to act as an authorized
signatory.” (Id.)
Applying these principles here, Willmer is an official or agent of Germany.
The Insolvency Court appointed him insolvency administrator of the assets of
Boex’s insolvency estate. With that court appointment, Willmer received certain
judicial sovereign powers to act, and those acts are, therefore, official in nature.
Under the prevailing legal view in Germany, he is considered to be a courtappointed office holder. As such, he has the right to exercise full control over any
of Boex’s assets that belong to the insolvency estate, no matter where in the
world they are located. The Insolvency Court explicitly specified such authority in
its additional order in which it said that, as insolvency administrator “under the law
in Germany”, Willmer has full powers to take possession, make use of, and realize
all of Boex’s property and to do so world-wide. The Insolvency Court supervises
his work, as does the court-created creditors’ committee before which the sale of
the real property at issue was brought.
Willmer’s conduct relevant to this action was part of his official duties as
insolvency administrator. He retained Lynch and his firm, as is the usual practice
of a German insolvency administrator tasked with the sale of assets outside of
Germany. As part of his responsibility to take possession and control of and
realize Boex’s assets, he executed the Resolution, the language of which makes
abundantly clear the role in which Willmer was acting. It explains that “the
Insolvency Proceeding 903 IN 83/12 -6 has not been concluded” and that Willmer
12
“was appointed by” the Insolvency Court “as insolvency administrator with full
authority to take possession and control of the assets of Dr. Ingolf Boex (‘Debtor’)
which include the shares of CGDC and CC”. Further, “the Insolvency
Administrator desires that CGDC sell the Carolina Golf Course” and has accordingly
“adopted this Resolution in order to authorize the legal and valid execution,
delivery and performance of the Purchase Agreement Documents”, takes
“possession and control of the Debtor’s share ownership”, and “exercises control
of CGDC . . . in connection with the closing of the sale of the Carolina Golf Course
pursuant to the authority granted by the [Insolvency Court] in said insolvency
proceeding”. Finally, Willmer executed the Resolution as “insolvency administrator
of Ingolf Boex, acting as controlling shareholder of CGDC and CC pursuant to his
appointment as insolvency administrator under authority of Court Order9”.
Willmer’s execution of the Closing Certificate was also part of his official
duties, as is evident from the language of that document. It notes that he “is
insolvency administrator for Ingolf Boex in the proceeding 903 IN 83/12 -6 in the
District Court of Hannover Germany” which “has not been terminated and
continues” and that, “[p]ursuant to the Insolvency Proceeding”, he “has legal
authority to sell assets of Ingolf Boex wherever located” and “to sell and/or vote
corporate shares owned or controlled by Ingolf Boex”. It further provides that, as
9
The translation of the Resolution’s signature line apparently incorrectly dates the
Court Order as July 3, 2013, rather than March 7, 2013, as has been described
elsewhere.
13
insolvency administrator, he approves the Purchase Agreement and the sale of the
property which was brought before the board of creditors in the Insolvency
Proceeding and for which any necessary approval had been obtained. Finally, he
executed the Closing Certificate “in his capacity as insolvency administrator of
Ingolf Boex.”
B.
The next issue is whether Lynch derives any immunity from Willmer. Lynch
argues that, according to the Fourth Circuit Court of Appeals in Butters v. Vance
Int’l, Inc., 225 F.3d 462 (2000), “foreign official immunity extends to the private,
domestic agents of foreign officials”. (Supporting Mem. at 12.) In response, the
Trustee does not acknowledge Butters and, instead, quotes Yousuf, 699 F.3d at
77710, in support of its argument that Lynch is not immune because he is a United
States citizen, and further argues that he was not acting on behalf of Germany, but
on behalf of a private individual from Germany, as well as on behalf of the Debtor.
(Pl.-Tr.’s Resp. in Opp’n at 6-8 [Doc. #5-2].) The excerpt from Yousuf on which
the Trustee relies is from the portion of the opinion addressing the United States
Department of State’s response to claims of immunity by Samantar, a former highranking government official in Somalia – presently a legal permanent resident of
the United States – allegedly responsible for the torture, arbitrary detention, and
extrajudicial killings of the plaintiffs or their families, whose alleged actions violated
The Trustee incorrectly cites page 767 of the opinion.
10
14
just cogens norms of international law, and whose former state had no thenrecognized government from which immunity would flow. See 699 F.3d at 766,
777. Not only are the facts of Yousuf too distinct from those of the instant
action, but neither Lynch nor the Court requested an opinion from the State
Department and, even had such a response been provided, such an opinion on
conduct-based immunity is not controlling. Id. at 773.
Much more informative is the court’s opinion in Butters where the plaintiff
brought suit against her employer for discrimination. 225 F.3d at 464. Butter’s
employer, Vance International (“Vance”), was hired by Saudi Arabia to provide
security to a member of the royal family at her residence in the United States. Id.
When Vance recommended that Butters be assigned to the command post, Saudi
military officials stationed at the residence rejected the recommendation as
“unacceptable under Islamic law”. Id. They considered it inappropriate for Saudi
officers to spend long periods of time in the command post with a woman and
were concerned about political ramifications at home for the royal family. Id. After
repeated rejection, Vance’s detail leader informed Butters “that because of the
Saudi decision, [she] could not be assigned a rotation in [the residence’s] command
post” after which she quit and sued Vance for gender discrimination. Id.
According to the court, because “Vance was following Saudi Arabia’s orders
not to promote Butters, Vance [was] entitled to derivative immunity under the
15
FSIA11.” Id. at 466. It is “well-settled law that contractors and common law
agents acting within the scope of their employment for the United States have
derivative sovereign immunity.” Id.
It is but a small step to extend this privilege to the private agents of
foreign governments. All sovereigns need flexibility to hire private
agents to aid them in conducting their governmental functions. This
is especially true for foreign sovereigns given their lack of human
resources while operating within the United States. To abrogate
immunity would discourage American companies from entering lawful
agreements with foreign governments and from respecting their
wishes even as to sovereign acts.
Id.
Here, as is common practice in German insolvency proceedings, Lynch was
“appointed and designated by Dr. Willmer as a Vice President of CGDC for the
limited purpose of executing and delivering the Purchase Agreement Documents”
and “authorized and directed [by Willmer] to take all actions necessary or
appropriate to carry out the [Resolution]”. In this limited capacity, he executed the
Special Warranty Deed and Seller’s Closing Certificate “acting at the direction of
Dr. Christian Willmer”.
Finally, denying Lynch immunity and ultimately determining the merits of the
claims against him would have the effect of enforcing a rule of law against
Germany. Its insolvency proceedings are governed by the Insolvency Code
according to which Willmer was appointed insolvency administrator, the Insolvency
Although this case was decided under FSIA, it is “instructive for post-Samantar
questions of common law immunity.” Yousuf, 699 F.3d at 774.
11
16
Court delegated authority to him, and Willmer pursued the assets of Boex’s
insolvency estate which the creditors’ committee oversaw and apparently
approved. A decision that Lynch acted without proper authority necessarily, under
these facts, means that Willmer did the same. In turn, such a determination calls
into question the actions of the Insolvency Court and its creditors’ committee.
In sum, because Willmer is found to be protected by foreign official
immunity, so, too, is Lynch, as his agent in the United States, whose conduct
relevant to this action was at the direction of Willmer and against whom any
decision would have the effect of enforcing a rule of law against Germany.
Because it is determined that Lynch is immune from this suit based on common
law foreign official immunity, it is not necessary to address his other challenges to
the claims against him.
III.
Leave to amend a complaint should be “freely given when justice so
requires.” Fed. R. Civ. P. 15(a)(2). However, a district court may deny a motion to
amend “when the amendment would be prejudicial to the opposing party, there has
been bad faith on the part of the moving party, or the amendment would [be]
futile.” Laber v. Harvey, 438 F.3d 404, 426-27 (4th Cir. 2006). “A motion to
amend is futile, and thus should be denied, if the proposed amendment is clearly
insufficient because of substantive or procedural considerations.” Costello v. Univ.
of N. C. at Greensboro, 394 F. Supp. 2d 752, 756 (M.D.N.C. 2005). Lynch
17
argues the Trustee’s motion should be denied because of failure to comply with
Local Rule 7.312, prejudice, and futility. The Court agrees that allowing the
proposed amendments would be futile.
In addition to removing any allegations relevant to the Trustee’s claims
against 71st Partners, the proposed amendments clarify that 71st Partners has
now been dismissed, (proposed Second Am. Compl. ¶ 6), clarify the transfer of
Mrs. Boex’s shares in Carolinas Corporation, (id. ¶ 16), state the absence of a
petition under Chapter 15 of the Bankruptcy Code, (id. ¶ 30), remove the
purported Second Claim for Relief requesting a denial of any equitable relief, move
the allegations from the First Claim for Relief against 71st Partners to a new
factual paragraph, (id. ¶ 60), add allegations pertaining to Lynch’s fee, (id. ¶¶ 62,
64, 65, 65A, 70, 75, 87, 88, 89), and renumber the claims for relief. None of
these proposed amendments changes the analysis of the application of foreign
official immunity or the conclusion that Lynch is protected by such immunity.
Therefore, the Trustee’s motion to amend is denied.
12
While Local Rule 7.3(j) requires a motion to amend to “state good cause” and
“cite any applicable rule, statute, or other authority justifying the relief sought”,
the Trustee’s failure to do so does not doom its motion. The Trustee moved to
amend after the Court, during a hearing on February 2, 2018, afforded it the
opportunity to do so. Therefore, any failures to abide by the directives of Local
Rule 7.3(j) are harmless, particularly in light of the proposed amendments and the
finding that such amendments are futile.
18
IV.
For the reasons stated herein, IT IS HEREBY ORDERED that Plaintiff’s
Motion Seeking Authority to Amend Complaint [Doc. #19] is DENIED. IT IS
FURTHER ORDERED that Defendant’s Motion to Dismiss Amended Complaint [Doc.
#5-1] is GRANTED. A judgment dismissing this action with prejudice will be filed
contemporaneously with this order.
This the 8th day of August, 2018.
/s/ N. Carlton Tilley, Jr.
Senior United States District Judge
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