Woods et al v. FacilitySource, Inc. et al
Filing
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OPINION AND ORDER granting 26 Defendants' Motion for Leave to Amend Answer & granting 31 Plaintiffs' Motion for Leave to File Sur-Reply. Parties will have 60 DAYS from the date of this Order to conduct discovery related to Defendants' Counterclaim against Plaintiff Woods. Signed by Magistrate Judge Elizabeth Preston Deavers on 5/5/2014. (er1)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
GARY W. WOODS, et al.,
Plaintiffs,
Civil Action 2:13-cv-621
Judge James L. Graham
Magistrate Judge Elizabeth P. Deavers
v.
FACILITYSOURCE, LLC., et al.,
Defendants.
OPINION AND ORDER
Plaintiffs, Gary W. Woods and Nicholas E. Lorenzo, bring this action alleging that
Defendants violated their rights under Title VII of the Civil Rights Act of 1964, 42 U.S.C. §
2000e, et seq. (“Title VII”) and under state law by paying them less than other similarly-situated
employees. This matter is before the Court for consideration of Defendants’ Motion for Leave to
File Amended Complaint (ECF No. 26), Plaintiffs’ Memorandum in Opposition (ECF No. 27),
and Defendants’ Reply (ECF No. 30). The Court also considers Plaintiffs’ Motion for Leave to
File Sur-Reply. (ECF No. 31.) Plaintiffs’ Motion is GRANTED. The Clerk is DIRECTED to
file Plaintiffs’ Sur-Reply, which is attached to their Motion as Exhibit 1. (ECF No. 31-1.) The
Court therefore considers Plaintiffs’ arguments set forth in their Sur-Reply. For the reasons that
follow, Defendants’ Motion is GRANTED.
I.
Plaintiffs filed their Complaint on June 28, 2013, alleging that Defendants discriminated
against Woods on the basis of race and against Lorenzo on the basis of his association with
Woods. They assert that their salaries are significantly lower than the rate paid to new hires in
the same position. Defendants filed their initial Answer on September 6, 2013. In their Answer,
Defendants asserted nine affirmative defenses and reserved the right to supplement to add
defenses uncovered during discovery. Defendants did not assert a counterclaim in their initial
Answer.
Defendants filed the subject Motion on April 10, 2014. In their Motion, Defendants seek
leave to file an Amended Answer to Plaintiffs’ Complaint based on new information of which
they learned during discovery. Specifically, Defendants assert that Plaintiff Woods falsely
misrepresented that he had graduated from high school on his employment application. They
maintain that Plaintiff Woods provided inconsistent testimony regarding the reasons he left his
previous job, which heightened their suspicion. Defendants therefore subpoenaed Plaintiff
Woods’ former employer for documents related to his termination. Defendants describe the
newly acquired information as follows:
On March 27, 2014, FacilitySource received information in response to a thirdparty subpoena purporting to show that Plaintiff Woods engaged in dishonest
behavior vis-à-vis FacilitySource, including but not limited to falsification of his
employment application . . . . On March 28, 2014 and March 31, 2014, Plaintiff
Woods was provided opportunities to provide evidence that he had not engaged in
the alleged dishonesty. He failed to do so and was terminated as a result. This
Motion was filed just ten (10) days later. Prior to receiving the information on
March 27, 2014 in response to the subpoena to Plaintiff Woods’ former employer,
the Defendants had no knowledge of his dishonest behavior.
(Defs.’ Mot. 2-3, ECF No. 26.) As a result of this alleged deception, Defendants now seek to
add the following affirmative defenses as to Plaintiff Woods, asserting that all of his claims are
barred because of (1) his own misconduct; (2) he was not qualified for his employment; (3) the
doctrines of unclean hands, laches, and/or estoppel; (4) his claims are barred by the after
acquired evidence doctrine; and (5) his claims are barred by fraudulent inducement.
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Additionally, Defendants seek to add a counterclaim against Plaintiff Woods for fraudulent
inducement.
Plaintiffs oppose the Motion, chiefly as to Defendants attempt to assert a counterclaim
against Plaintiff Woods. In their Memorandum in Opposition, Plaintiffs assert that Defendants
have been dilatory in moving for leave to amend because the deadline for amending the
pleadings was December 2, 2013 and because they have had Plaintiff Woods’ employment
application in hand since 2005. They maintain that Defendants have not provided good cause for
the amendment. Plaintiffs contend that they will be prejudiced by the amendment and that it will
result in undue delay because further discovery will be required. Specifically, they indicate that
Plaintiff Woods “would need to conduct discovery on any alleged damages asserted by
Defendants related to their counterclaim.” (Pls.’ Mem. in Opp. 5, ECF No. 27.) Plaintiffs assert
that the proposed amendments are futile. Finally, Plaintiffs contend that the Court should decline
to exercise jurisdiction over Defendants’ state-law counterclaim. Plaintiffs indicate that the
counterclaim does not derive from the same nucleus of operative fact as the instant federal
action.
In Defendants’ Reply, they assert that they were not dilatory because they filed the
subject Motion ten days after learning about the inconsistencies in Plaintiff Woods’ application
for employment. As to Plaintiffs’ contention that they need discovery on alleged damages,
Defendants maintain that further discovery is unnecessary because they are not seeking damages
on their counterclaim. To that end, they have attached a Revised Proposed Counterclaim making
clear that they seek rescission of the employment contract and not damages. Finally, Defendants
assert that the proposed counterclaim is “inextricably intertwined” with Plaintiff Woods’ claims
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because it relates to “the contractual employment relationship between Woods and
FacilitySource,” which will be rescinded if Defendants prevail. (Defs.’ Reply 4, ECF No. 30.)
In their Sur-Reply, Plaintiffs again maintain that Defendants have failed to show good
cause to modify the Court’s scheduling Order. They assert that Plaintiffs will be prejudiced by
the amendment because it will be necessary to conduct discovery on the injury element of
Defendants’ proposed counterclaim, even if Defendants only seek rescission of the employment
relationship. Further, Plaintiffs again assert that the amendment would be futile and the
counterclaim should be brought in state court.
II.
Although Federal Rule of Civil Procedure 15(a) governs amendments to the pleadings,
when, as here, a motion to amend is brought after the deadline set within the court’s scheduling
order, a party must satisfy the standards of both Rule 15(a) and 16(b)(4). Korn v. Paul Revere
Life Ins. Co., 382 F. App’x 443, 449 (6th Cir. 2010) (citing Leary v. Daeschner, 349 F.3d 888,
905–09 (6th Cir. 2003)). “Once the scheduling order’s deadline to amend the complaint passes, .
. . a plaintiff first must show good cause under Rule 16(b) for failure earlier to seek leave to
amend and the district court must evaluate prejudice to the nonmoving party before a court will
[even] consider whether amendment is proper under Rule 15(a).” Commerce Benefits Grp. Inc.
v. McKesson Corp, 326 F. App’x 369, 376 (6th Cir. 2009) (internal quotation marks and citation
omitted) (emphasis added); cf. Johnson v. Metro. Gov’t of Nashville & Davidson Cnty., Nos. 106102 & 11-5174, 2012 WL 4945607, at *17 (6th Cir. Oct. 18, 2012) (“Rule 15 is augmented by
Rule 16, which states that the generally wide latitude to amend may be restricted by the court’s
other scheduling orders.”).
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Under Rule 16(b)(4), the Court will modify a case scheduling “only for good cause . . . .”
Fed. R. Civ. P. 16(b)(4). The party seeking modification of the case schedule has the “obligation
to demonstrate ‘good cause’ for failing to comply with the district court’s scheduling order . . . .”
Pittman ex rel. Sykes v. Franklin, 282 F. App’x 418, 425 n.5 (6th Cir. 2008). In determining
whether good cause exists, the primary consideration “is the moving party’s diligence in
attempting to meet the case management order’s requirements.” Commerce, 326 F. App’x at 377
(internal quotation marks and citation omitted); see also Leary, 349 F.3d at 906 (quoting 1983
advisory committee notes to Fed. R. Civ. P. 16) (“But a court choosing to modify the schedule
upon a showing of good cause, may do so only ‘if it cannot reasonably be met despite the
diligence of the party seeking the extension.’”). Finally, the Court must also consider “potential
prejudice to the nonmovant . . . .” Leary, 349 F.3d at 909. Even if an amendment would not
prejudice the nonmoving party, a plaintiff must still provide good cause for failing to move to
amend by the Court’s deadline. Korn, 382 F. App’x at 450; see also Wagner v. Mastiffs, Nos.
2:08-cv-431, 2:09-cv-0172, 2011 WL 124226, at *4 (S.D. Ohio Jan. 14, 2011) (“[T]he absence
of prejudice to the opposing party is not equivalent to a showing of good cause.”).
If the proponent of a belated amendment demonstrates good cause under Rule 16(b)(4), a
court will then evaluate the proposed amendment under Rule 15(a). Commerce, 326 F. App’x at
376. Pursuant to Rule 15(a), the Court should freely grant a party leave to amend his or her
pleadings when justice so requires. Fed. R. Civ. P. 15(a). Rule 15(a) sets forth “a liberal policy
of permitting amendments to ensure the determination of claims on their merits.” Oleson v.
United States, 27 F. App’x 566, 569 (6th Cir. 2001) (internal quotations omitted). As the United
States Court of Appeals for the Sixth Circuit has noted, “[f]actors that may affect [a Rule 15(a)]
determination include undue delay in filing, lack of notice to the opposing party, bad faith by the
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moving party, repeated failure to cure deficiencies by previous amendment, undue prejudice to
the opposing party, and futility of the amendment.” Seals v. Gen. Motors Corp., 546 F.3d 766,
770 (6th Cir. 2008). In determining prejudice, the Court examines “whether the assertion of the
new claim would: require the opponent to expend significant additional resources to conduct
discovery and prepare for trial; significantly delay the resolution of the dispute; or prevent the
plaintiff from bringing a timely action in another jurisdiction.” Phelps v. McLellan, 30 F.3d 658,
662–63 (6th Cir. 1994).
III.
Applying the foregoing authority, the Court concludes that Defendants have
demonstrated good cause to modify the scheduling order pursuant to Rule 16(b)(4). Defendants
seek leave to amend based on information about which they learned during the discovery
process. The record provides no basis from which this Court could conclude that Defendants
lacked diligence in conducting discovery or in moving the Court after they discovered their
claim. They were able to gather the relevant information and file the instant Motion prior to the
Court’s April 25, 2014 discovery deadline. Moreover, Defendants filed the instant Motion only
ten days after acquiring the new information. Finally, no trial date has been established.
In order to avoid any prejudice to the parties, the Court will permit an extension of the
discovery deadline. Defendants assert that no further discovery is necessary because they are
merely seeking rescission of Plaintiff Woods’ employment contract. Defendants fail to provide
authority, however, to support their assertion that no further discovery is warranted on any aspect
of their Counterclaim.1 In any event, the requirement for further discovery in and of itself does
1
Defendants cite to Sims v. The Kroger Co., No. 1:07-CV-00338, ECF No. 71 (S.D. Ind. Dec. 3,
2008) to indicate that merely employing Plaintiff Woods is sufficient to show injury on a claim
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not constitute prejudice for the purposes of whether the Court should permit amendment. See
Janikowski v. Bendix Corp., 823 F.2d 945, 952 (6th Cir. 1987) (concluding that the burden of
additional discovery was not by itself sufficient to constitute undue prejudice). Any prejudice
may be mitigated by adjusting the discovery schedule. As the discovery deadline has already
passed, the Court will grant the parties an additional SIXTY (60) DAYS from the date of this
Order to conduct discovery on Defendants’ Counterclaim against Plaintiff Woods.
Having demonstrated good cause and given the liberal policy permitting amendment
under Rule 15(a), the Court will permit Defendants to amend their Answer to assert additional
affirmative defenses and the counter-claim. Plaintiffs’ argument that the proposed amendments
are futile is unpersuasive. Because “denying a motion for leave to amend on grounds that the
proposed new claim is legally insufficient is, at least indirectly, a ruling on the merits of that
claim,” this Court has recognized the “conceptual difficulty presented” when a Magistrate Judge,
who cannot ordinarily rule on a motion to dismiss, is ruling on such a motion. See, e.g.,
Durthaler v. Accounts Receivable Mgmt., Inc., No. 2:10-cv-1068, 2011 WL 5008552, at *4 (S.D.
Ohio Oct. 20, 2011) (recognizing the “conceptual difficulty presented”), and 28 U.S.C. §
636(b)(1)(A) (“[A] judge may designate a magistrate judge to hear and determine any pretrial
matter pending before the court, except a motion . . . to dismiss for failure to state a claim upon
which relief can be granted . . . .”). Accordingly, the Court will permit Defendants to amend
their Answer to include a fraudulent inducement counterclaim with the understanding that
Plaintiffs are free to challenge this claim through a motion to dismiss.2 See Durthaler, 2011 WL
of fraudulent inducement. (Defs.’ Reply 5, ECF No. 30.) The Sims Court, however, does not
address whether it found mere employment sufficient to constitute an injury.
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Similarly, if Plaintiffs have objections with regard to the sufficiency of Defendants’ new
affirmative defenses, they are free to move to strike such defenses.
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5008552 at *4 (“[I]t is usually a sound exercise of discretion to permit the claim to be pleaded
and to allow the merits of the claim to be tested before the District Judge by way of a motion to
dismiss.”); Morse/Diesel, Inc. v. Fidelity and Deposit Co. of Md., 715 F.Supp. 578, 581
(S.D.N.Y. 1989) (“The trial court has the discretion to grant a party leave to amend a complaint,
even where the amended pleading might ultimately be dismissed.”).
Plaintiffs’ assertion that the Court should decline to exercise supplemental jurisdiction
over Defendants’ state law counterclaim is equally unavailing. Under 28 U.S.C. §1367(a),
“district courts shall have supplemental jurisdiction over all claims that are so related to claims in
the action within such original jurisdiction that they form part of the same case or controversy . .
. .” Id. In the proposed counterclaim, Defendants allege that Plaintiff Woods’ employment
contract with Defendant FacilitySource, LLC was fraudulently induced. Without making any
determination regarding the merits of the claim, the Court concludes that the counterclaim arises
from the same controversy as Plaintiffs’ claims, which are based on their employment with
FacilitySource, LLC. See Packard v. Farmers Ins. Co. of Columbus, Inc., 423 F. App’x 580, 583
(6th Cir. 2011) (concluding that “[the same case or controversy] requirement is met when state
and federal law claims arise from the same contract, dispute, or transaction.”). In the interest of
judicial economy, the Court concludes that Defendants are entitled to amend their Answer to
include a counterclaim of fraudulent inducement.
IV.
Accordingly, Defendants’ Motion for Leave to Amend Answer is GRANTED. (ECF
No. 26.) The Clerk is DIRECTED to file Defendants’ Amended Answer and Counterclaim,
which is attached to their Reply as Exhibit 4. (ECF No. 30-4.) Plaintiffs’ Motion for Leave to
File Sur-Reply is GRANTED. (ECF No. 31.) The Clerk is DIRECTED to file Plaintiff’s Sur-
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Reply, which is attached to their Motion as Exhibit 1. (ECF No. 31-1.) The parties will have
SIXTY (60) DAYS from the date of this Order to conduct discovery related to Defendants’
Counterclaim against Plaintiff Woods.
IT IS SO ORDERED.
Date: May 5, 2014
/s/ Elizabeth A. Preston Deavers
Elizabeth A. Preston Deavers
United States Magistrate Judge
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