HADEED et al v. ADVANCED VASCULAR RESOURCES OF JOHNSTOWN, LLC et al

Filing 77

MEMORANDUM OPINION AND ORDER denying 47 Motion for Leave to Amend, and as more fully stated in said Memorandum Opinion and Order. Signed by Judge Kim R. Gibson on 9/26/2017. (dlg)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
SAMIR HADEED, MD, and JOHNSTOWN
HEART AND VASCULAR CENTER, INC.,
Plaintiffs,
v.
ADVANCED VASCULAR RESOURCES
OF JOHNSTOWN, LLC; AVR
MANAGEMENT, LLC; WASHINGTON
VASCULAR INSTITUTE, LLC; and
MUBASHAR CHOUDRY, MD,
Defendants.

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Case No. 3:15-cv-22
JUDGE KIM R. GIBSON

MEMORANDUM OPINION
I.

Introduction
In this contract dispute, Defendants have moved for leave to file an amended answer 19

months after filing their original answer, 16 months after the deadline for amending pleadings,
9 months after fact discovery closed, and on the day summary judgment motions were due (and
filed). If the Court were to grant Defendants’ Motion for Leave to Amend Defendants’ Answer,
Affirmative Defenses and Counter-Claims to Plaintiff’s Complaint (ECF No. 47) (“Motion for
Leave to Amend”), Plaintiff would suffer prejudice from the need to reopen discovery and
supplement their dispositive motions. Yet, Defendants offer no explanation for the 9-month
delay from the close of fact discovery to the filing of their Motion for Leave to Amend.
For the following reasons, Defendants’ Motion for Leave to Amend (ECF No. 47) is
DENIED.

II.

Relevant Background
This case stems from disputes over the operation of a vascular-services center located in

Johnstown, Pennsylvania. Plaintiff Dr. Samir Hadeed (“Hadeed”) is a licensed physician who
owns and operates a cardiology practice in Johnstown: Johnstown Heart and Vascular Center,
Inc. (“Johnstown Heart”). (ECF No. 1 ¶¶ 2-3.) In November 2013, Hadeed and Johnstown
Heart partnered with Advanced Vascular Resources Management, LLC (“AVR Management”)
to open a new vascular-services center in Johnstown under the name Advanced Vascular
Resources of Johnstown, LLC (“AVR Johnstown”). (ECF No. 1-6 at 2, 30-31; ECF No. 1-7 at 1, 8.)
Incidental to AVR Johnstown’s formation, Hadeed and Johnstown Heart executed
several other agreements. A decision was made to locate AVR Johnstown’s vascular-services
center in the same building as Johnstown Heart. Thus, Johnstown Heart and AVR Johnstown
entered into a sublease for a portion of Johnstown Heart’s building. (ECF No. 1-3 at 2, 11.)
Hadeed and Johnstown Heart also entered into an employment agreement with a separate
entity, Washington Vascular Institute, LLC (“Washington Vascular”). (See ECF No. 1-5 at 2, 1718.) Washington Vascular in turn contracted with AVR Johnstown for the medical services at
AVR Johnstown. (Id. at 2, 19.) In this way, Hadeed and Johnstown Heart agreed to provide
cardiology and vascular services at AVR Johnstown. (Id.) Under AVR Johnstown’s Operating
Agreement, AVR Management was responsible for managing the business affairs of AVR
Johnstown. (ECF No. 1-6 at 6, 12-13.) Stated simply, AVR Management handled the business
side of AVR Johnstown while Hadeed and Johnstown Heart handled the medical side.
The relationships among the parties deteriorated after AVR Johnstown was formed. On
January 23, 2015, Hadeed and Johnstown Heart filed this case against AVR Johnstown, AVR

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Management, Washington Vascular, and Dr. Mubashar Choudry—who partially owns or
operates those entities.

(ECF No. 1 ¶ 6; ECF No. 7 ¶ 92.)

Plaintiffs’ allegations can be

summarized as claims of chronic mismanagement of AVR Johnstown by Defendants. The
Complaint is divided into five counts: (1) breach of contract based on Defendants’
mismanagement of AVR Johnstown; (2) breach of contract based on Defendants’ failure to pay
Plaintiffs’ wages; (3) fraudulent misrepresentation; (4) requesting an accounting; and (5) seeking
dissolution/partition. (ECF No. 1 ¶¶ 44-64.) Plaintiffs seek compensatory damages, including
lost wages and revenues, as well as attorneys’ fees and costs. (Id. ¶ 64.)
Defendants filed their Answer on March 16, 2015, denying all liability and bringing five
counterclaims against Plaintiffs, namely (1) breach of contract based on the sublease and
Plaintiffs’ employment agreement with Washington Vascular; (2) tortious interference with
contractual relations; (3) conversion; (4) unjust enrichment; and (5) breach of fiduciary duty.
(ECF No. 10 ¶¶ 114-36.) The Court entered an Initial Scheduling Order on May 6, 2015, which
set June 5, 2015, as the deadline for the parties to move to amend their pleadings. (ECF No. 17
at 2.) No party moved to amend their pleadings before that deadline. Fact discovery closed on
January 29, 2016. (ECF No. 28.) Plaintiffs and Defendants moved for summary judgment on
October 17, 2016. (ECF Nos. 40, 44.)
On October 17, 2016, Defendants also requested leave to amend their answer.
Defendants purportedly seek to “add and clarify new allegations related to AVR of Johnstown
LLC’s Operating Agreement, and Plaintiffs’ breach of that Operating Agreement.” (ECF No. 47
¶ 9.) Defendants’ proposed amended answer varies from the original answer only in regard to
counterclaims. (See ECF No. 47-2.)

The proposed amended answer does not add any new

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counts, but includes two new bases for their breach-of-contract claim. (See id.) Specifically,
Defendants seek to include allegations that Plaintiffs have violated the Operating Agreement by
(1) preventing AVR Management from performing its duties as manager of AVR Johnstown
and (2) establishing a competing vascular-services center in violation of the Operating
Agreement’s non-compete provision. (Id.)
III.

Legal Standard
Federal Rule of Civil Procedure 15 governs amending pleadings. See Fed. R. Civ. P. 15.

But, when a party seeks leave to amend the pleadings after the deadline set by a court’s
scheduling order, that party must first satisfy Rule 16(b)(4)’s requirements for modifying a
scheduling order. See Graham v. Progressive Direct Ins. Co., 271 F.R.D. 112, 118 (W.D. Pa. 2010)
(citing cases); see also Race Tires Am., Inc. v. Hoosier Racing Tire Corp., 614 F.3d 57, 84 (3d Cir.
2010). Rule 16(b)(4) provides that a scheduling order “may be modified only for good cause
and with the judge’s consent.” Fed. R. Civ. P. 16(b)(4). In the Rule 16(b)(4) context, “good
cause” looks to the diligence of the party seeking modification of the scheduling order. Graham,
271 F.R.D. at 119 (citation omitted). The moving party has the burden to demonstrate “good
cause” under Rule 16(b)(4) before a court will consider amending under Rule 15. Id.
Looking to Rule 15, Rule 15(a)(2) applies in the present case, which provides that “a
party may amend its pleading only with the opposing party’s written consent or the court’s
leave.” Fed. R. Civ. P. 15(a)(2). Rule 15(a)(2) provides further that “[t]he court should freely
give leave when justice so requires.” Id.
As Rule 15(a)(2)’s language suggests, motions to amend are considered under a liberal
standard. See Arthur v. Maersk, Inc., 434 F.3d 196, 204 (3d Cir. 2006) (citing Foman v. Davis, 371

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U.S. 178, 182 (1962)) (“Leave to amend must generally be granted unless equitable
considerations render it otherwise unjust.”). However, denial of a motion to amend may be
appropriate if the party’s delay in moving to amend “is undue, motivated by bad faith, or
prejudicial to the opposing party.” Langbord v. U.S. Dep’t of Treasury, 832 F.3d 170, 188 (3d Cir.
2016) (quoting Cureton v. Nat’l Collegiate Athletic Ass’n, 252 F.3d 267, 272-73 (3d Cir. 2001)).
While the undue delay and bad faith factors focus on the movant’s motives for not seeking
leave to amend earlier, the prejudice factor focuses on the effects allowing amendment would
have on the non-movant. Id. (citing Adams v. Gould Inc., 739 F.2d 858, 868 (3d Cir. 1984)).
The passage of time alone is an insufficient ground to deny leave to amend. Cureton, 252
F.3d at 273 (citing Cornell & Co., Inc. v. Occupational Safety & Health Review Comm’n., 573 F.2d 820,
823 (3d Cir. 1978)). However, at some point, the delay becomes “undue.” Id. (citing Adams, 739
F.2d at 868). Delay may become “undue” when the movant had previous opportunities to
amend but failed to do so, amends by “repleading facts that could have been pled earlier,” or
delays until after summary judgment has been granted to the non-movant. Id. (citing cases).
In regard to prejudice, the U.S. Court of Appeals for the Third Circuit has “consistently
recognized . . . that prejudice to the non-moving party is the touchstone for the denial of an
amendment.” Arthur, 434 F.3d at 204 (quoting Cornell, 573 F.2d at 823). Prejudice can justify
denial of a motion to amend if the amendment would result in additional discovery, costs,
preparation to defend against new facts or theories, or would otherwise place an unfair burden
on the non-movant. See Cureton, 252 F.3d at 273; Adams, 739 F.2d at 868 (finding no prejudice
because no new facts or additional discovery were required); Rolo v. City Investing Co.
Liquidating Trust, 155 F.3d 644, 655 (3d Cir. 1998) (finding duration of case and substantial effort

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and expense in resolving underlying motion to dismiss could constitute undue delay or
prejudice to defendants); Cornell, 573 F.2d at 823-24 (finding significant prejudice because
proposed amendment changed legal and factual basis of claim and prevented defendant from
presenting defense). The party opposing amendment bears the burden of showing prejudice,
undue delay, bad faith, or futility. Graham, 271 F.R.D. at 122 (citing Chancellor v. Pottsgrove Sch.
Dist., 501 F. Supp. 2d 695, 700 (E.D. Pa. 2007)).
IV.

Discussion
a. Rule 16 Analysis
As explained supra Part III, a party seeking leave to amend the pleadings after the

deadline set by a court’s scheduling order must first satisfy Rule 16(b)(4)’s requirements for
modifying a scheduling order by demonstrating “good cause.” See Graham, 271 F.R.D. at 118-19.
The moving party bears the burden to meet this preliminary hurdle prior to reaching a Rule 15
analysis. Id. at 119.
In the present case, the Court entered an Initial Scheduling Order on May 6, 2015, setting
June 5, 2015 as the deadline for the parties to move to amend their pleadings. (ECF No. 17 at 2.)
Defendants did not file their Motion for Leave to Amend until October 17, 2016, therein missing
the Court’s deadline by over 16 months. (ECF No. 47.) Thus, Defendants must demonstrate
“good cause,” which, under Rule 16(b)(4), focuses on the diligence of the party seeking the
modification of the scheduling order. Graham, 271 F.R.D. at 119 (citation omitted).
Defendants argue that “good cause” for modification of the scheduling order exists and
that no equitable considerations make amendment improper. (ECF No. 47; ECF No. 57-1.)
However, Defendant offer little explanation beyond these bare assertions. Defendants seek to

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amend their Answer 16 months after the deadline for amending pleadings, 9 months after fact
discovery closed, and on the day summary judgment motions were due. But, despite being
granted leave to file a reply brief, Defendants offer only a single sentence as explanation:
“Discovery has yielded information concerning Plaintiffs’ breach of the Advanced Vascular
Resources of Johnstown, LLC Operating Agreement . . . not previously known by Defendants.”
(ECF No. 47 at 3.) Defendants never elaborate or even vaguely hint at what information they
discovered, when they discovered the information, how they discovered the information, why
they had not previously been privy to the information, or what effect this information had such
that it was a necessary catalyst for the proposed amendments to their Answer. The only
information available to the Court about this new information learned through discovery is that
Defendants did not act on this newly discovered information until the day that both parties
filed motions for summary judgment—9 months after the end of fact discovery.
Furthermore, despite identifying the proper legal standard for modification of a
scheduling order—i.e., the moving party must establish “due diligence ‘in seeking leave to
amend as soon as practicable’ once discovery has been completed,” (id. at 2 (quoting Trask v.
Olin Corp., Civil Action No. 12-340, 2016 WL 1255302, at *3 (W.D. Pa. Mar. 31, 2016))—
Defendants fail to offer any explanation as to how they acted with due diligence.

Most

glaringly, Defendants fail to even mention the lapse of 9 months between the end of fact
discovery—when they presumably discovered the new information forming the basis for their
amendment—and the filing of their Motion for Leave to Amend.
Courts find “good cause” pursuant to Rule 16(b) lacking when motions to amend
pleadings are filed late in litigation without explanation for the tardiness. See, e.g., Peters v. Wal–

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Mart Stores East, LP, No. 12–2715, 2013 WL 1150224, at *4 (7th Cir. Mar.19, 2013) (affirming
district court’s denial of the plaintiff’s motion to amend when the plaintiff failed to show “good
cause” as she did “not explain why she delayed seven months . . . to propose her new claim”
and “the motion came very late in the litigation”); Unger v. Taylor, 368 F. App'x 526, 530 (5th Cir.
2010) (affirming district court denial of the plaintiff’s motion to amend for failure to show
“good cause” when the motion was tardy, the trial was imminent, the defendants did not
consent to the amendment, and the plaintiff failed to explain the untimeliness of his motion).
“Good cause” is lacking here.
The Court finds that Defendants failed to demonstrate “good cause” to permit
amendment because Defendants have failed to articulate any reasons why the Motion for Leave
to Amend was submitted 9 months after the close of fact discovery and on the day that motions
for summary judgment were due (and submitted).

The Defendants have provided no

explanation or evidence of their due diligence. To the contrary, the Court notes that Defendants
failed to request that the Court modify the final date to amend the pleadings of June 5, 2015 or
to otherwise extend their ability to amend the pleadings until filing this Motion for Leave to
Amend on October 17, 2016.
Consequently, Defendants fail to satisfy the initial requirement of showing “good cause”
under Rule 16(b)(4), and the Court denies Defendants’ Motion for Leave to Amend.
b. Rule 15 Analysis
Even had Defendants met their initial burden under Rule 16, Defendants’ Motion for
Leave to Amend would still be denied because Plaintiffs have demonstrated that allowing
Defendants’ proposed amended answer to be filed would cause Plaintiffs undue delay and

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unfair prejudice.

Under Rule 15, Plaintiffs bear the burden of establishing undue delay or

prejudice and, generally, courts liberally permit amendment of pleadings. See supra Part III. In
the present case, Plaintiffs have met this burden and established both undue delay and
prejudice.
First, in regard to undue delay, as discussed supra, the passage of time alone does not
constitute undue delay. Cureton, 252 F.3d at 273. However, here, the delay became “undue”
because Defendants waited more than 9 months after the close of fact discovery to file their
Motion for Leave to Amend—a motion based on new information gained during this discovery
period. Therefore, based on the information presented to the Court, Defendants could have
amended their Answer earlier, rather than waiting until the deadline for the filing of motions
for summary judgment. See id. (stating that delay may become “undue” when the movant had
previous opportunities to amend but failed to do so).
Second, in regard to prejudice, the Third Circuit has established that prejudice can
justify denial of a motion to amend if the amendment would result in additional discovery,
costs, preparation to defend against new facts or theories, or would otherwise place an unfair
burden on the non-movant. See cases cited supra Part III. Plaintiffs persuasively assert:
Should this Honorable Court grant Defendants’ Motion to Amend, Plaintiffs will
be required to seek leave of Court in order to reconvene depositions outside of
the Western District (including in locations such as Philadelphia, Pennsylvania;
Rockville, Maryland; Albany, New York; and Tampa, Florida), file
supplementary interrogatories and requests for production of documents, retain
an expert for further discovery, and, to the extent appropriate, file
supplementary dispositive motions. (ECF No. 54 ¶ 20.)
Defendants, on the other hand, contend that “additionally [sic] discovery will not be needed”
because the “core universe of facts governing the dispute will not change” (ECF No. 57-1 ¶ 7)

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and that Plaintiffs are not “blindsided” by the amendments because they were aware of the
Operating Agreement and the facts relating to it (id. ¶ 5).
The Court initially notes that many litigants would likely find a substantial amendment1
of a counterclaim on the day motions for summary judgment are due based on “new”
information yielded by discovery to be quite surprising when fact discovery ended 9 months
prior.

More importantly, the Court finds Plaintiffs’ argument compelling because the

amended counterclaim would likely raise issues not adequately addressed in discovery and
would almost certainly require supplementary motions for summary judgment and briefing.
While additional discovery may not need to be as extensive as Plaintiffs assert, the Court
accepts that the proposed amendments would likely merit reopening of discovery to at least a
limited degree. The cost, time, and inconvenience of additional discovery and supplementary
dispositive motions and briefs constitutes unfair prejudice to Plaintiffs, especially at this late
stage in the case.
Accordingly, because Plaintiffs have demonstrated that they have suffered from undue
delay and unfair prejudice under Rule 15, the Court denies Defendants’ Motion for Leave to
Amend.
V.

Conclusion
Defendants have failed to demonstrated “good cause,” as required by Rule 16(b)(4), for

their delay in filing their Motion for Leave to Amend. Moreover, even had Defendants met this
initial burden, under Rule 15, Plaintiffs have demonstrated that they would suffer from undue

The Court labels the amendment as “substantial” because Defendants seek to allege in excess of $1
million in new damages with their amendments to Count 1. (ECF No. 47-2 ¶ 120.)

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delay and unfair prejudice were the Court to grant Defendants’ Motion. Therefore, the Court
denies Defendant’s Motion for Leave to Amend.
A corresponding order follows.

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IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
SAMIR HADEED, MD, and JOHNSTOWN
HEART AND VASCULAR CENTER, INC.,

Case No. 3:15-cv-22

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Plaintiffs,

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JUDGE KIM R. GIBSON

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v.

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ADVANCED VASCULAR RESOURCES
OF JOHNSTOWN, LLC, AVR
MANAGEMENT, LLC, WASHINGTON
VASCULAR INSTITUTE, LLC, and
MUBASHAR CHOUDRY, MD,

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Defendants.

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NOW, this

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ORDER

day of September, 2017, upon consideration of Defendants' Motion

for Leave to Amend Defendants' Answer, Affirmative Defenses and Counter-Claims to
Plaintiff's Complaint (ECF No. 47) and for the reasons set forth in the Memorandum Opinion
accompanying this Order, it is HEREBY ORDERED that Defendants' Motion for Leave to
Amend (ECF No. 47) is DENIED.

BY THE COURT:

KIM R. GIBSON
UNITED STATES DISTRICT JUDGE