ZEIGENFUSE v. KEMP & ASSOCIATES, INC.

Filing 55

MEMORANDUM AND/OR OPINION SIGNED BY HONORABLE GERALD J. PAPPERT ON 11/25/15. 11/25/15 ENTERED AND COPIES E-MAILED.(ti, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
DAVID ZEIGENFUSE
Plaintiff,

CIVIL ACTION
NO. 14-05954

v.
KEMP & ASSOCIATES, INC.
Defendant.
PAPPERT, J.

November 25, 2015
MEMORANDUM

Defendant Kemp & Associates, Inc. (“Kemp”) seeks leave, after the close of discovery, to
file an amended answer to Plaintiff David Zeigenfuse’s (“Zeigenfuse”) complaint. The purported
amended answer would also include, for the first time, counterclaims alleging common law
fraud, conspiracy, wire fraud under the Racketeer Influenced and Corrupt Organizations Act
(“RICO”), breach of contract and quantum meruit. Kemp contends that it should be allowed to
bring these new claims because information allegedly revealed during discovery supports them.
Kemp had all of the information it needed to assert its counterclaims well before the close
of discovery yet failed to previously seek leave to amend. It has also failed to provide any
explanation for the delay in seeking amendment. Allowing Kemp leave to expand the scope of
the case at this stage would place an undue burden on the Court and prejudice Zeigenfuse. The
Court accordingly denies the motion.
I.
After the death of Alabama resident Cary Douglas Piper (“Piper”) in 2007, the Probate
Court of Covington County, Alabama issued a Decree of Final Settlement declaring that Piper
had no known living heirs. (Am. Compl. ¶¶ 7–9.) Piper however did have living heirs, one of
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whom was Zeigenfuse, a Pennsylvania resident.1 (Id. ¶ 12.) Zeigenfuse was unaware of his
status as an heir until March 2008, when a representative from Kemp, an “heir hunter,” called
and told him he had an interest in an estate. (Id. ¶ 15.) The representative would not disclose the
identity of the estate until Zeigenfuse signed an Assignment and Power of Attorney (the
“Assignment”). The Assignment allowed Kemp to receive 33% of the value of any assets
Zeigenfuse eventually inherited. (Id. ¶ 16.) Once Zeigenfuse executed the Assignment, Kemp
initiated the process of validating his interest as an heir.
After Kemp retained an attorney, Gilbert Sullivan, to validate Zeigenfuse’s intestate
interests, the Alabama probate court entered an Order Determining Heirs, finding that Zeigenfuse
was entitled to a 10% share of the Piper estate. (Id. ¶¶ 19, 23.) The probate court then entered a
Decree of Partial Settlement directing that the estate administrator pay Sullivan $2,000,000.
(Mot. to Dismiss Ex. D.) Sullivan was to distribute this money to the heirs according to their
respective shares of the estate, including a payment of $200,000 to Zeigenfuse (the “First
Distribution”). (Id.) Kemp took 33% of the First Distribution per the Assignment and
distributed the remainder to Zeigenfuse. (Hr’g Tr. at 25:23–25.)
In 2012, Zeigenfuse retained his own counsel, Rick Clifton, to ensure that he had
recovered everything to which he was entitled from the Estate. (Id. at 20:9–23:7.) In 2013, the
Alabama probate court issued a second Decree of Final Settlement distributing the remaining
assets in the Estate (the “Second Distribution”)—a sum significantly smaller than the First
Distribution. (Id. at 24:12–25:11.) For the Second Distribution, Zeigenfuse renegotiated Kemp’s
33% fee down to 25%. Kemp took its 25% share of the Second Distribution and the remainder
went to Zeigenfuse. (Id. at 25:15–26:5.)

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In addition to Zeigenfuse, heirs to the Piper estate include: James R. Murin, Richard York, Dale E.
York, Sr., Carol J. Walters Adams and Pamela G. Walters. (Mot. to Dismiss, Ex. C.)

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In September 2014, Zeigenfuse filed suit in the Philadelphia County Court of Common
Pleas seeking to invalidate the Assignment. On October 20, 2014, Kemp removed the case to
this Court. (ECF No. 1.) Zeigenfuse filed his First Amended Complaint on November 28, 2014
seeking, in part, rescission, restitution, fraud by misrepresentation, and a declaratory judgment
that the Assignment is void and unenforceable as well as an order for Kemp to pay Zeigenfuse
the money it received from the Estate. (See generally Am. Compl.)
The other heirs to the Piper estate also sued Kemp and Sullivan in state court in Alabama
(the “Alabama Litigation”) seeking the same relief that Zeigenfuse seeks here. (Mem. Mot. for
Leave at 3, ECF No. 31.) Those heirs entered into similar arrangements whereby they agreed to
give Kemp a portion of their inheritance in exchange for his services identifying the Estate.
(Mot. to Dismiss, Ex. F ¶ 17, ECF No. 8.) Like Zeigenfuse, they allege that the “agreements
[with Kemp] were champertous” and should be declared “void as being unlawful and/or against
public policy.” (Id. ¶¶ 36(c), 65(a).) On May 22, 2015, Kemp filed counterclaims in the
Alabama Litigation alleging fraud, RICO, breach of contract and quantum meruit. (Opp. Mem.
Mot. for Leave at 4–5, Ex. A, ECF No. 32.) The counterclaims rely in part on a March 28, 2013
email from Clifton to Sullivan as evidence of a greater conspiracy to obtain the funds pursuant to
the “settlement” whereby Kemp agreed to reduce his fee prior to the Second Distribution, and
then file suit against Kemp and Sullivan to void the Assignment altogether. (Id. ¶¶ 13–19.)
In the litigation before this Court, Kemp filed a motion to dismiss on a number of
jurisdictional grounds. (ECF No. 8.) He argued that the “complaint should be dismissed in its
entirely because it is an attempt to annul the judgment of the Alabama Circuit Court’s decree of
final settlement.” (Id. at 5.) The Court denied Kemp’s motion to dismiss, and thereafter issued a
Scheduling Order on March 18, 2015. (ECF No. 28.) The Scheduling Order provides, in part,

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that all discovery shall be completed by August 14, 2015, and motions for summary judgment
submitted by September 14, 2015. (Id.) On April 10, 2015, Kemp filed an answer to the
complaint, which did not contain any counterclaims. (ECF No. 30.)
On August 24, 2014, ten days after the close of fact discovery, Kemp filed its motion for
leave to amend, attaching the proposed answer and counterclaims (the “Motion”). (ECF No. 31,
Ex. A.) Zeigenfuse responded to the Motion on September 8, 2015. (ECF No. 32.) The Court
heard oral argument on November 18, 2015.
II.
Under Federal Rule of Civil Procedure 15(a), “courts may grant . . . amendments ‘when
justice so requires.’” Fraser v. Nationwide Mut. Ins. Co., 352 F.3d 107, 116 (3d Cir. 2003), as
amended (Jan. 20, 2004) (citing Fed. R. Civ. P. 15(a)). While Rule 15 states that “leave to amend
should be ‘freely given,’ a district court has discretion to deny a request to amend if it is apparent
from the record that (1) the moving party has demonstrated undue delay, bad faith or dilatory
motives, (2) the amendment would be futile, or (3) the amendment would prejudice the other
party.” Id.; see also Grayson v. Mayview State Hosp., 293 F.3d 103, 108 (3d Cir. 2002) (citing
Foman v. Davis, 371 U.S. 178 (1962)). “When a party fails to take advantage of previous
opportunities to amend, without adequate explanation, leave to amend is properly denied.”
Arthur v. Maersk, Inc., 434 F.3d 196, 204 (3d Cir. 2006). The Third Circuit has left the decision
of whether to grant or deny a motion for leave to amend within the sound discretion of the
district court. Cureton v. Nat’l Collegiate Athletic Ass’n, 252 F.3d 267, 272 (3d Cir. 2001)
(citations omitted).
Generally, “[d]elay alone is not sufficient to justify denial of leave to amend.” Id.
(referencing Adams v. Gould Inc., 739 F.2d 858, 868 (3d Cir. 1984)). However, “at some point,

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the delay will become ‘undue,’ placing an unwarranted burden on the court, or will become
‘prejudicial,’ placing an unfair burden on the opposing party.” Adams, 739 F.2d at 868; see also
Cureton v. Nat’l Collegiate Athletic Ass’n, 252 F.3d 267, 273 (3d Cir. 2001). Thus, “the question
of undue delay requires that we focus on the movant’s reasons for not amending sooner.”
Cureton, 252 F.3d at 273 (referencing Adams, 739 F.2d at 868).
III.
Kemp could have sought leave to file its amended answer and counterclaims far sooner
than it did and has failed to provide a reason for the delay in seeking leave. Critically, it
unnecessarily waited until after the close of fact discovery and shortly before the filing of
summary judgment motions to file its Motion. Kemp argues that the Motion should be granted
because “[d]uring the course of the parties’ discovery, it has come to light that Plaintiff and his
fellow heirs conspired to defraud Kemp. Evidence of this conspiracy has been found in emails
obtained by Kemp from the [Alabama Litigation].” (Mem. Mot. for Leave at 4, ECF No. 31.)
According to Kemp, those emails show that Zeigenfuse intended to allow Kemp to provide “its
genealogical services,” and then sue Kemp to invalidate the Assignment once he received the
inheritance.2 (Id.)
However, Kemp was aware of these potential claims by, at the latest, May 22, 2015—
more than three months before it filed the Motion. (Hr’g. Tr. 33:8–13). In the Alabama
Litigation, Kemp filed counterclaims on that date alleging the same facts and theories of
recovery in the proposed counterclaims here. (Opp. Mem. Mot. for Leave at 4–5, Ex. A, ECF
No. 32.) Notably, it relies in its proposed counterclaims in part on the same March 28, 2013 mail

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According to Kemp, one of the emails probative of Zeigenfuse’s fraudulent intent is an email from
Zeigenfuse to a fellow heir which states: “My thought process on all this is get what we can from the estate with a
‘Final Decree’ as quickly as possible and then move on to Gilbert Sullivan and [Kemp]. I am not sure how any of
this will play out.” (Mem. Mot. for Leave at 4, ECF No. 31.)

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from Clifton to Sullivan that it relied on in its May 22, 2015 counterclaims in the Alabama
Litigation. Although Kemp is not represented by the same counsel as it is in the Alabama
Litigation, counsel here acknowledged that “[c]ertainly we knew that they were asserting that
[counterclaim] down there. Absolutely.”3 (Hr’g. Tr. at 33:8–13).
Kemp is unable however to provide a reasonable explanation for its delay in filing the
Motion. It argues that its counterclaims “did not fully mature” until it took Zeigenfuse’s
deposition on August 5, 2015. (Reply. Mot. for Leave at 4, ECF No. 34.) Despite being “aware
of our ability [to assert a counterclaim], we needed [Zeigenfuse’s] deposition.” (Hr’g Tr. At
31:9–14.) Kemp claims that up until August 5, 2015, it “simply had no understanding of
Plaintiff’s explanation for the emails, including whether Plaintiff would attempt to disclaim
ownership of the emails.” (Reply. Mot. for Leave at 4, ECF No. 34.) There is, of course, no
requirement in the Federal Rules of Civil Procedure that a claim must “mature” or documents
must be “authenticated” before a pleading can be filed. Despite knowing that these same
counterclaims had been asserted in the Alabama Litigation, Kemp then “made a judgment that
[it] would wait” (for what turned out to be roughly three more weeks) until after it received the
transcript from Zeigenfuse’s deposition to file the motion for leave to amend. (Hr’g Tr. at 39:2–
12.) Kemp did not need to depose Zeigenfuse in this case before it sought leave to bring its
proposed counterclaims—and it certainly did not need to wait another several weeks to get the
transcript from the deposition.
Kemp’s unexplained delay resulted in the Motion being filed after the close of discovery.
“Forcing a party to reopen discovery . . . is significantly different from extending an approaching
deadline to allow the parties to conduct additional discovery.” AMS Const., 2006 WL 1967336,

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Counsel also acknowledged that he has “an open line of communication” to Kemp’s counsel in Alabama.
(Hr’g Tr. 4:15–21.)

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at *4 (denying motion for leave to amend because of undue prejudice on non-moving party); see
also Tarkett Inc. v. Congoleum Corp., 144 F.R.D. 289, 291 (E.D. Pa. 1992) (denying in part
motion for leave to amend) (“While Defendant has known of the existence of its documents
found in plaintiff's possession since July 30, 1992, it elected to wait until October 22, 1992, long
after the close of the previously established discovery cut-off . . . to file its motion for leave to
amend.”). If the Court grants leave to amend, Zeigenfuse would need additional discovery,
including the depositions of Clifton, Sullivan and the other heirs, in order to properly defend
himself against the new counterclaims. (See Opp. Mem. Mot. for Leave at 11, ECF No. 32.)
The expansion of the case in this manner would unduly prejudice Zeigenfuse after the entirety of
the litigation, including discovery and summary judgment briefing, has been focused on a
narrower set of issues.
Further, granting the Motion would place an “unwarranted burden on the court.” Adams,
739 F.2d at 868. “A court’s inherent power to manage its caseload, control its docket, and
regulate the conduct of attorneys before it, provides authority to fashion tools that aid the court in
getting on with the business of deciding cases.” Eash v. Riggins Trucking Inc., 757 F.2d 557,
567 (3d Cir. 1985). Granting Kemp’s Motion would likely result in briefing on another motion
to dismiss, and almost certainly result in re-opening discovery and re-briefing on the motions for
summary judgment. This would delay the resolution of this dispute and undermine the “inherent
power” of the Court to manage its docket and decide cases.
BY THE COURT
/s/ Gerald J. Pappert
GERALD J. PAPPERT, J

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