VIZANT TECHNOLOGIES, LLC et al v. WHITCHURCH et al

Filing 131

MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE HARVEY BARTLE, III ON 7/23/15. 7/24/15 ENTERED AND COPIES MAILED TO PRO SE AND E-MAILED.(mbh, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA

VIZANT TECHNOLOGIES, LLC,
et al.
v.
JULIE P. WHITCHURCH, et al.

:
:
:
:
:
:

CIVIL ACTION

NO. 15-431

MEMORANDUM
Bartle, J.

July 23, 2015
Before the court are defendants’ “Motion for Leave to

File Amended Answer with Counterclaim to Plaintiffs’ Complaint”
and their “Motion for Leave to Join Indispensable Parties.”
Plaintiffs Vizant Technologies, LLC (“Vizant”) and its
chief executive officer Joseph Bizzarro (“Bizzarro”) have filed
this action against defendants Julie P. Whitchurch
(“Whitchurch”) and Jamie Davis (“Davis”), sisters who are former
Vizant employees.

Defendants are representing themselves.

Plaintiffs’ ten-count complaint alleges:

violations of the

Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18
U.S.C. §§ 1961-1968; breach of contract; misappropriation of
trade secrets in violation of the Delaware Uniform Trade Secrets
Act (“DUTSA”), Del. Code Ann. tit. 6, §§ 2001 et seq.;
defamation; tortious interference with existing and prospective
contractual relationships; abuse of process; conversion; fraud;
and civil conspiracy.

Plaintiffs’ claims arise out of Vizant’s December 2013
termination of defendants’ employment.

Both Whitchurch and

Davis were fired shortly after Whitchurch began making claims
that Vizant and its upper management were engaged in a Ponzi
scheme and were defrauding investors and employees. 1

After their

separation from the company, defendants began threatening to
publicize their accusations of misconduct by contacting
investors, potential investors, clients, and potential clients
of Vizant.

They made clear that notwithstanding the existence

of confidentiality agreements to which each defendant was a
party, they had retained a number of documents and other
materials which Vizant considers confidential.

Defendants also

detailed their allegations on their website
(www.nocapitalsolutions.com), on social media, and in postcards
which they mailed to certain Vizant officers.
Vizant initially filed suit against defendants in
early 2014 in the Superior Court of Cobb County, Georgia.

It

sought injunctive relief and damages in connection with
defendants’ efforts to publicize their allegations against the
company and their alleged breach of their employment agreements. 2

1. The record does not make clear whether the allegations
levied by Whitchurch were the reason behind defendants’
termination.
2. The five-count complaint filed by Vizant in Georgia state
court included claims for breach of contract, defamation,
-2-

Vizant obtained a temporary restraining order and a preliminary
injunction and thereafter an order of contempt against
defendants.
While the Georgia litigation was pending, defendants
contacted officers of Vizant and threatened to file a RICO suit
against the company.

Defendants then docketed in the Georgia

state court a “Notice of Permissive Counterclaim Complaint” in
March 2014.

That document contains claims for:

“outstanding

out of pocket expense[s]”; “on going [sic] retaliation by
plaintiffs, plaintiffs [sic] attorneys of record, and plaintiffs
[sic] previous attorneys of record”; “unpaid wages”; and
“reduction in compensation without prior notice.”
In December of 2014 Vizant filed a Notice of Voluntary
Dismissal Without Prejudice in the Georgia action.

Defendants

objected to this dismissal on the ground that counterclaims
against Vizant were still pending.

The state court, rejecting

that argument, concluded:
Defendants’ answer contained no
counterclaims or pleas for relief.
Defendant Whitchurch did file a Notice of
Counterclaim stating various counterclaims.
However, the Defendants at no time filed an
amended answer or asked the Court for relief
to amend their answer and the Court has at
no time recognized the Defendants’ Notice of
Counterclaim.
tortious interference with business relations, and
misappropriation of trade secrets, as well as a count styled
“attorney’s fees and costs.”
-3-

Accordingly, the state court dismissed the action without
prejudice.
In January 2015 plaintiffs filed a complaint against
defendants in this court.

On March 1, 2015 defendants moved to

dismiss the complaint pursuant to Rules 12(b)(2), 12(b)(6), and
12(b)(7) of the Federal Rules of Civil Procedure.
denied that motion on April 1, 2015.

The court

On April 29, 2015, on

plaintiffs’ motion and following a hearing, we issued a
preliminary injunction against defendants (Doc. #60).

On the

same day, we ordered defendants to file and serve an answer on
or before May 15, 2015.
second motion to dismiss.

Also on April 29, defendants docketed a
We ordered the second motion to

dismiss stricken pursuant to Rule 12(g)(2) of the Federal Rules
of Civil Procedure on May 6, 2015. 3
filed an answer to the complaint.

On May 14, 2015, defendants
Meanwhile, following a

hearing conducted in late May, we held defendants in civil
contempt on June 2, 2015 (Doc. #82) for the failure to comply
with the preliminary injunction.

Discovery in this matter is

scheduled to conclude on August 31, 2015.

3. Rule 12(g)(2) provides that “a party that makes a motion
under [Rule 12] must not make another motion under [Rule 12]
raising a defense or objection that was available to the party
but omitted from its earlier motion.”
-4-

On July 12, 2015, nearly two months after they filed
their answer, defendants filed without leave of court a document
entitled “Defendants’ Counterclaim and Motion for Leave to Join
Indispensable Parties.”

Defendants’ purported counterclaim,

which contains 31 pages and 23 counts, relates to the alleged
misconduct of plaintiffs which first prompted Whitchurch to
complain to her superiors about fraud within Vizant.

The

counterclaim also concerns the interactions between plaintiffs
and defendants following defendants’ termination, including the
litigation in Georgia state court. 4

Defendants name Capital

4. The purported counterclaim includes 23 counts which allege
the following: tampering with a witness, victim, or informant
in violation of 18 U.S.C. § 1512; retaliation against a witness,
victim, or informant in violation of 18 U.S.C. § 1513; mail
fraud in violation of 18 U.S.C. § 1341; wire fraud in violation
of 18 U.S.C. § 1343; fraud and related activity in connection
with identification documents, authentication features, and
information in violation of 18 U.S.C. § 1028; reproduction of
naturalization or citizenship papers in violation of 18 U.S.C.
§ 1426; theft by extortion in violation of 18 Pa. Cons. Stat.
Ann. § 3923; mailing threatening communications in violation of
18 U.S.C. § 876; fraud; obstruction of proceedings before
departments, agencies, and committees in violation of 18 U.S.C.
§ 1505; “perjury generally” in violation of 18 U.S.C. § 1621;
false swearing in violation of 18 Pa. Cons. Stat. Ann. § 4903;
tampering with or fabricating evidence in violation of 18 Pa.
Cons. Stat. Ann. § 4910; theft by deception in violation of 18
Pa. Cons. Stat. Ann. § 3922; criminal solicitation in violation
of 18 Pa. Cons. Stat. Ann. § 902; criminal conspiracy in
violation of 18 Pa. Cons. Stat. Ann. § 903; unauthorized
practice of law in violation of 18 Pa. Cons. Stat. Ann. § 2524;
wrongful use of civil proceeding in violation of 42 Pa. Cons.
Stat. Ann. § 8351; abuse of process; negligent hiring,
retention, and supervision; defamation; intentional infliction
of emotional distress; and “First amendment retaliation against
a private citizen.”
-5-

Solutions, Inc. (“Capital Solutions”) (an entity which owns a
majority of Vizant) and Elarbee, Thompson, Sapp & Wilson LLP
(“Elarbee Thompson”) (the Atlanta law firm that represented
Vizant in the Georgia litigation) as counterclaim defendants.
It appears that defendants consider these two entities to be
“indispensable parties.”
Immediately after filing their purported counterclaim,
defendants realized that Rule 15 of the Federal Rules of Civil
Procedure precluded them at this late stage from amending their
pleading without leave of court or the written consent of the
opposing party.

As a result, they filed on July 13, 2015 a

“Motion for Leave to File Amended Answer with Counterclaim to
Plaintiffs’ Complaint.”

That motion, together with defendants’

Motion for Leave to Join Indispensable Parties, is now before
the court.
I.
Rule 13 of the Federal Rules of Civil Procedure
governs the pleading of counterclaims.

It states in relevant

part:
(a)

Compulsory Counterclaim.
(1) In General. A pleading must state
as a counterclaim any claim that—at
the time of its service—the pleader
has against an opposing party if the
claim:

-6-

(A) arises out of the transaction
or occurrence that is the
subject matter of the opposing
party’s claim; and
(B) does not require adding
another party over whom the
court cannot acquire
jurisdiction.
(2) Exceptions. The pleader need not
state the claim if:
(A) when the action was
commenced, the claim was the
subject of another pending
action; or
(B) the opposing party sued on
its claim by attachment or other
process that did not establish
personal jurisdiction over the
pleader on that claim, and the
pleader does not assert any
counterclaim under this rule.
(b)

Permissive counterclaim. A pleading
may state as a counterclaim against an
opposing party any claim that is not
compulsory.

Fed. R. Civ. P. 13 (emphasis in original).
Aside from other requirements, a counterclaim, to be
compulsory, must “bear[] a ‘logical relationship’ to an opposing
party’s claim.”

Great Lakes Rubber Corp. v. Herbert Cooper Co.,

286 F.3d 631, 634 (3d Cir. 1961).

Such a “logical relationship”

exists “where separate trials on each of the[] respective claims
would involve a substantial duplication of effort and time by
the parties and the courts.”

M.R. v. Ridley Sch. Dist., 744

-7-

F.3d 112, 121 (3d Cir. 2014) (quoting Great Lakes Rubber Corp.,
286 F.2d at 634) (alteration in original).

When claims “involve

the same factual issues, the same factual and legal issues, or
are offshoots of the same basic controversy between the
parties,” such duplication is likely to arise.

Transamerica

Occidental Life Ins. Co. v. Aviation Office of Am., Inc., 292
F.3d 384, 389-90 (3d Cir. 2002) (internal citations omitted).

A

counterclaim that is not compulsory is considered a permissive
counterclaim.

See Fed. R. Civ. P. 13(b).

Under Rule 15(a), after a party has filed its
pleading, it may amend that pleading once as a matter of course
within 21 days after serving it or, “if the pleading is one to
which a responsive pleading is required, 21 days after service
of a responsive pleading or 21 days after service of” a motion
to dismiss, whichever is earlier.

Fed. R. Civ. P. 15(a)(1).

Otherwise, a party may amend its pleading “only with the
opposing party’s written consent or with the court’s leave.”
Fed. R. Civ. P. 15(a)(2).

It cannot be disputed that because of

the time lapse defendants must obtain the permission of the
court in order to proceed with their counterclaim.
While “leave to amend shall be freely given when
justice so requires,” the Supreme Court has made it clear that
district courts have discretion to deny such leave for reasons
“such as undue delay, bad faith or dilatory motive on the part
-8-

of the movant, repeated failure to cure deficiencies by
amendments previously allowed, undue prejudice to the opposing
party by virtue of allowance of the amendment, futility of
amendment, etc.”

Foman v. Davis, 371 U.S. 178, 182 (1962); see

also Cureton v. Nat’l Collegiate Athletic Ass’n, 252 F.3d 267,
272 (3d Cir. 2001); Fed. R. Civ. P. 15(a)(2).
II.
Plaintiffs first argue that defendants’ purported
counterclaim is procedurally barred because it is a compulsory
counterclaim and was not included in defendants’ pleading.
Fed. R. Civ. P. 13(a).

See

Defendants, in response, urge that

the counterclaim is permissive, rather than compulsory, and that
it need not have been filed with their answer.
P. 13(a)(1), (b).

See Fed. R. Civ.

Specifically, defendants take the position

that the allegations contained in the counterclaim do not arise
out of the same transaction or occurrence that gives rise to
plaintiffs’ claim.

See Fed. R. Civ. P. 13(a)(1)(A).

A reading of the counterclaim demonstrates that it
“arises out of the transaction or occurrence that is the subject
matter of [plaintiffs’] claim.”
13(a)(1)(A).

See Fed. R. Civ. P.

The allegations in the plaintiffs’ complaint and

in defendants’ counterclaim overlap in that they involve similar
factual and legal issues and arise from “the same basic
controversy between the parties.”
-9-

See Transamerica Occidental

Life Ins. Co., 292 F.3d at 389-90.

For this reason, separate

trials on the two sets of claims would likely “involve a
substantial duplication of effort and time” by the parties and
the court.

See M.R., 744 F.3d at 121; Great Lakes Rubber Corp.,

286 F.3d at 634.
In any event, we need not decide whether the
counterclaim is compulsory or permissive within the meaning of
Rule 13.

The instant motion concerns defendants’ request for

leave to amend their answer.

Our analysis is therefore governed

by Rule 15, which, as noted above, provides that a party who is
out of time to amend her pleading as a matter of course may
amend it “only with the opposing party’s written consent or with
the court’s leave.”

Fed. R. Civ. P. 15(a)(2).

This rule does

not differentiate between compulsory and permissive
counterclaims.
Defendants, in support of their motion to amend,
direct our attention to the language of Rule 15(a)(2), which
states that leave to amend a pleading “should freely [be]
give[n] . . . when justice so requires.” 5

Here, however, there

has been undue delay in defendants’ filing of their
counterclaim.

See Foman, 371 U.S. at 182.

Nearly two months

elapsed between the time defendants’ answer was filed and the
5. Defendants also rely on Rule 13(f) of the Federal Rules of
Civil Procedure. However, Rule 13(f) was abrogated in 2009.
See Fed. R. Civ. P. 13 advisory committee note, 2009 Amendment.
-10-

date on which they attempted to file their counterclaim.

In

addition, discovery is scheduled to conclude on August 31, 2015,
less than two months after their July 12, 2015 purported filing
of the counterclaim.

Significantly, defendants were aware of

the facts and allegations underlying their counterclaim well
before they docketed their answer, as they attempted to file a
similar counterclaim in the Georgia litigation in March 2014.
To explain their delay, defendants state that “through
an oversight and/or excusable neglect [they] failed to set up a
counterclaim and file with their Answer.”

They assert that as

pro se litigants they were simply unaware that their compulsory
counterclaim must be included with their answer.

Defendants

have articulated no reason, aside from lack of familiarity with
the Federal Rules of Civil Procedure, why they could not have
filed their counterclaim at the time they filed their answer.
Most, if not all, of the conduct addressed by the counterclaim
took place before or immediately after defendants’ December 2013
termination.

Indeed, defendants had formulated their claims in

early 2014 when they attempted to file a counterclaim in the
Georgia litigation.
Defendants’ misunderstanding of their responsibilities
under the Federal Rules of Civil Procedure does not excuse their
delay.

As our Court of Appeals has cautioned, pro se litigants

“cannot flout procedural rules – they must abide by the same
-11-

rules that apply to all other litigants.”

Mala v. Crown Bay

Marina, Inc., 704 F.3d 239, 245 (3d Cir. 2013) (internal
citations omitted).
In addition to defendants’ undue delay, the proposed
amendment would cause undue prejudice to plaintiffs.
371 U.S. at 182.

See Foman,

The risk of such prejudice arises when

“allowing an amendment would result in additional discovery,
cost, and preparation to defend against new facts or new
theories.”

Cureton, 252 F.3d at 273.

Here, as noted above,

defendants have sought to file their proposed 31-page
counterclaim, which includes 23 counts, only one and one-half
months before the August 31, 2015 close-of-discovery date.

The

discovery process has already been extensive, contentious, and
costly.

Plaintiffs have an interest in concluding this lawsuit

as expeditiously as possible and getting on with their business.
We remind the parties that Rule 1 of the Federal Rules of Civil
Procedure cautions that the rules “should be construed and
administered to secure the just, speedy, and inexpensive
determination of every action and proceeding.”

Allowing

defendants to add a massive counterclaim at this late stage
would indisputably “result in additional discovery, cost, and
preparation” and would unduly prejudice Vizant and Bizzarro.
See Cureton, 252 F.3d at 273.

Granting defendants’ motion would

also run counter to Rule 1.
-12-

Accordingly, the motion of defendants for “Leave to
File Amended Answer with Counterclaim to Plaintiffs’ Complaint”
will be denied.
III.
Defendants have also moved for leave to add Capital
Solutions and Elarbee Thompson as indispensable parties.
Defendants have not submitted a supporting brief in this regard,
although it appears that they consider Capital Solutions and
Elarbee Thompson to be indispensable parties to their purported
counterclaims. 6

Because we are denying defendants’ motion for

leave to file their counterclaims and striking those
counterclaims, we will deny as moot their motion to add Capital
Solutions and Elarbee Thompson.

6. When defendants filed their counterclaim without leave of
court on July 12, it was captioned “Defendants’ Counterclaim
Motion for Leave to Join Indispensable Parties.” They state
therein, without any further discussion, that they seek “leave
to join co-parties Capital Solutions, Inc. and Elarbee,
Thompson, Sapp & Wilson LL[P].”
-13-