Mack et al v. Marquand et al
Filing
47
ORDER granting 38 Motion to Amend/Correct; denying 40 Motion to Dismiss. Signed by U. S. District Judge Jeffrey L. Viken on 9/28/11. (SB)
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
WESTERN DIVISION
RANDY MACK and CHERYL
FISCHBACH, as Guardians Ad
Litem for GERALD MACK, an
incapacitated person, and
MARJORIE MACK,
Plaintiffs,
vs.
KEITH MARQUAND and
SENIOR SECURITY ESTATE
PLANS, INC.
Defendants.
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CIV. 09-5079-JLV
ORDER
FACTS AND PROCEDURAL BACKGROUND
Plaintiffs (“Macks”) filed their complaint in Circuit Court, Seventh
Judicial Circuit, Pennington County, South Dakota, asserting a number of
claims against the defendants, Keith Marquand, Senior Security Estate
Plans, Inc. (“SSEP”), and OM Financial Life Insurance Company (“OM”),
jointly and severally, including negligence, undue influence, breach of
fiduciary duty, practicing law without a license, selling annuities insurance
without a license, breach of professional responsibilities, intentional
infliction of emotional distress, unjust enrichment, and negligent
supervision. (Docket 1-1). The complaint alleges that defendant Marquand
was an employee and agent of defendants SSEP and OM. Id. at ¶ 3. In that
capacity, Marquand is alleged to have moved Macks’ monies from a number
of investments into annuities contracts managed by OM. Id. at ¶ 14.
Macks allege those transactions were detrimental to plaintiffs’ best financial
interests. Id. at ¶ 24. Defendants removed the case to federal district court
pursuant to 28 U.S.C. §§ 1441 and 1146 (diversity of citizenship).
Marquand admits he is a shareholder of SSEP. (Docket 8, ¶ 4). While
admitting to a business relationship with plaintiffs, Marquand denies any
allegations of improper conduct. Id. at ¶ 27.
During the course of discovery, OM filed a motion to stay proceedings.
(Docket 20). The basis for the motion to stay was OM’s assertion that
plaintiffs’ claims were adjudicated and discharged as part of a settled action
in United States District Court, Central District of California, in litigation
captioned Negrete v. Fidelity and Guaranty Life Insurance Company, No.
CV-05-6837-CAS-MANx (“Negrete”). Id.
On August 9, 2010, the Honorable Christina A. Snyder, United States
District Judge for the Central District of California, conducted a show cause
hearing which was attended by counsel for plaintiffs in this South Dakota
proceeding. (Docket 31-1). The civil minutes of the hearing reflect the oral
findings of the court. Id. Judge Snyder found that Macks owned three
annuities which were included in the class action settlement agreement,
thus making Macks members of the class. (Docket 31-1, p. 7). Judge
Snyder denied Macks’ motion to opt out of class member status. Id. at 10.
2
Judge Snyder’s oral order of August 9, 2010, “preliminarily enjoins the
Macks . . . from taking any action in their case[ ] presently pending in the
District[ ] of South Dakota . . . without first giving notice to this Court.” Id.
at 13. Judge Snyder finally required Macks on September 13, 2010, to:
SHOW CAUSE why they should not be enjoined from prosecuting,
pursuing, or participating in any way in any action, proceeding,
hearing, or other matter now pending or subsequently filed in any
venue . . . including the Mack . . . litigation now . . . pending in
the United States District Court for the District of South Dakota
. . . relating to, referring to, or arising out of in any way the
Release [sic] Claims . . . in the Settlement Agreement.
Id. Those released claims, as defined in the Settlement Agreement, include:
a.
any and all past or present claims, complaints, or
causes of action, allegations of liability, damages,
restitution, equitable, legal or interest, demands or
rights whether known or unknown,
b.
that concern, refer or relate to, or arise out of, in
whole or in part, the offering of advice in any manner
related to the Annuities, or the design, marketing,
solicitation and sale of the Annuities, as well as the
crediting of interest to policy accounts,
c.
including, but not limited to, all claims that were
asserted in this Action, or that could have been
asserted against OM before any court, arbitration
panel, or regulatory or administrative agency based
on or related to facts alleged in the complaint filed in
this Action, whether or not brought directly,
indirectly, on a representative basis, or otherwise
including but not limited to, actions brought on
behalf of Plaintiff and/or Class Members by any state
or federal government officials or agencies.
(Docket 22-5, p. 58).
3
On August 24, 2010, this court entered an order staying the South
Dakota proceedings. (Docket 32). Following completion of the Negrete court
proceedings, this court required the parties to submit briefing on two
issues. Id. Those issues were:
1.
Whether these proceedings should continue against
OM; and
2.
Whether these proceedings should continue against
Marquand and SSEP, separate from and independent
of any decision of the Negrete court relating to OM.
Id. at 6.
On September 28, 2010, Judge Snyder entered an order enjoining
class members Gerald and Marjorie Mack from pursuing litigation. Negrete
at Docket 378. That order was filed on October 26, 2010. See Docket 36.
On October 27, 2010, this court entered an order dismissing OM from
plaintiffs’ complaint and allowing plaintiffs to file a motion to amend
complaint. (Docket 37). On November 1, 2010, plaintiffs filed a motion to
amend complaint, together with a copy of the proposed amended
complaint.1 (Dockets 38 and 39-1).
The amended complaint removed the references to OM and the
annuities which were the subject of the Negrete order. (Docket 44-1). Also
removed were the OM associated causes of action–Count Five: Selling
1
Plaintiffs filed a corrected amended complaint to properly include the
allegations necessary for diversity jurisdiction of 28 U.S.C. § 1332. See Docket
44-1. All future references to the amended complaint will refer to Docket 44-1.
4
Annuities Insurance Without License; Count Eight: Unjust Enrichment;
Count Eleven: Unfair Trade Practices; and Count Twelve: Interference With
a Prospective Business Advantage. Id.
Included in the amended complaint were allegations about Mr.
Marquand’s financial advice to Gerald Mack and Marjorie Mack (the “elder
Macks”) and his recommendation to place title to their home in a Revocable
Living Trust (the “Macks’ home allegations”). Id. at ¶¶ 26-30. Included as a
damage allegation was an additional paragraph relating to the Department
of Social Services claiming Macks’ home as an assessable asset for recovery
of Medicaid expenses incurred for Gerald Mack’s nursing home care. Id. at
¶ 33. Retained in the amended complaint from the original complaint and
renumbered are the following causes of action:
Count One:
Negligence;
Count Two:
Undue Influence;
Count Three:
Breach of Fiduciary Duty;
Count Four:
Practicing Law Without a License;
Count Five:
Breach of Professional Responsibilities;
Count Six:
Intentional Infliction of Emotional Distress;
Count Seven:
Negligent Supervision;
Count Eight:
Fraud and Deceit; and
Count Nine:
Civil Conspiracy.
Id., passim.
5
Defendants Marquand and SSEP object to the amended complaint
claiming the allegations are within the prohibitions of the Negrete order and
the statute of limitations expired because the allegations do not relate back
to the original complaint under Fed. R. Civ. P. 15. (Docket 42).
DISCUSSION
Motions to amend pleadings are governed by Fed. R. Civ. P. 15. That
rule, as pertinent to this case, provides “a party may amend its pleading
only with the opposing party’s written consent or the court’s leave. The
court should freely give leave when justice so requires.” Fed. R. Civ. P.
15(a)(2).
Leave to amend pleadings should be denied only “in those limited
circumstances in which undue delay, bad faith on the part of the moving
party, futility of the amendment, or unfair prejudice to the non-moving
party can be demonstrated.” Roberson v. Hayti Police Department, 241
F.3d 992, 995 (8th Cir. 2001) (internal citations omitted). “The burden of
proof of prejudice is on the party opposing the amendment.” Id. “If the
underlying facts or circumstances relied upon by a plaintiff may be a proper
subject of relief, [they] ought to be afforded an opportunity to test [their]
claim on the merits.” Foman v. Davis, 371 U.S. 178, 182 (1962).
“[A] motion to amend should be denied on the merits ‘only if it asserts
clearly frivolous claims or defenses.’ ” Becker v. University of Nebraska at
6
Omaha, 191 F.3d 904, 908 (8th Cir. 1999) (citing Gamma-10 Plastics, Inc.
v. American President Lines, Ltd., 32 F.3d 1244, 1255 (8th Cir. 1994)).
“Futility is a valid basis for denying leave to amend.” United States ex rel.
Roop v. Hypoguard USA, Inc., 559 F.3d 818, 822 (8th Cir. 2009). “A district
court does not abuse its discretion in refusing to allow amendment of
pleadings to change the theory of a case . . . and no valid reason is shown
for the failure to present the new theory at an earlier time.” Dairy Farmers
of America, Inc. v. Travelers Insurance Company, 292 F.3d 567, 576 (8th
Cir. 2002) (internal quotation marks omitted).
Defendants assert two grounds2 as justification to deny plaintiffs’
motion to file their amended complaint. Those grounds are: (1) the statute
of limitations has expired; and (2) the relation back provisions of Fed. R.
Civ. P. 15(c)(1)(B) do not save plaintiffs’ claims from the statute of
limitations. (Docket 42, pp. 2-3). Defendants filed a motion to dismiss the
plaintiffs’ original complaint. (Docket 40). The basis of that motion is the
Negrete court order. (Docket 41). Because the relation back provisions of
Rule 15(c)(1)(B) are significant in the analysis of the statute of limitations
issue and the motion to dismiss, the applicability of Rule 15(c)(1)(B) will be
addressed first.
2
Defendants’ brief also included a failure of the amended complaint to
allege proper jurisdiction. (Docket 42, p. 5). Plaintiffs corrected this deficiency
by the filing of the corrected amended complaint (Docket 44-1). See also
footnote 1, supra.
7
1.
Rule 15(c)(1)(B)
Defendants argue the relation back provisions of Rule 15(c)(1)(B) are
not applicable to plaintiffs’ proposed amended complaint. (Docket 42, p. 3).
This argument is divided into two subsections: first, the new claims are
encompassed within the settlement agreement and are barred by the
Negrete order; and second, if not included in the Negrete “released claims,”
the claims are separate, new claims to which Rule 15(c)(1)(B) does not apply.
Id. at 3-5. These arguments will be separately addressed.
A.
THE NEGRETE COURT DECISION
Judge Snyder’s order specifically addressed Macks’ claims relating to
the financial advice given by Mr. Marquand concerning the Macks’ home. At
the show cause hearing held on September 13, 2010, Judge Snyder entered
findings which are relevant to the current motion to amend plaintiffs’
complaint. Among those findings were the following:
15.
Although not explicitly plead in the Mack Complaint,
the Macks also allege that Marquand advised the
Macks to transfer title of their home from their
children to themselves, which advice resulted in
damages to the Macks.
16.
Although not explicitly plead in the Mack Complaint,
the Macks also allege that SSEP negligently
supervised Marquand in connection with Marquand’s
advice to the Macks to transfer title of their home
from their children to themselves, which advice
resulted in damages to the Macks.
22.
Class Members such as the Macks are enjoined and
barred from pursuing claims against OM agents such
as Marquand and, by extension, SSEP, who were
8
involved in the solicitation, purchase or sale of an OM
Annuity, as defined in the Class Settlement
Agreement, and as alleged in the Mack Litigation.
25.
All of the Macks’ allegations against Marquand and
SSEP “concern, refer or relate to, or arise out of, in
whole or in part, the offering of advice in any manner
related to the Annuities or the design, marketing,
solicitation and sale of the Annuities,” with the
exception of allegations regarding advice Marquand
allegedly gave to the Macks regarding the Macks’
home and allegations that SSEP negligently
supervised Marquand in connection with advice that
Marquand allegedly gave to the Macks regarding their
home.
26.
Accordingly, all of the Macks’ claims against
Marquand and SSEP were released as part of the
Released Claims in the Negrete Class Settlement
Agreement, with the exception of allegations
regarding advice Marquand allegedly gave to the
Macks regarding the Macks’ home and allegations
that SSEP negligently supervised Marquand in
connection with advice that Marquand allegedly gave
to the Macks regarding their home.
(Docket 36) (italics in original; emphasis added). Based on those findings,
Judge Snyder’s order contained the following provisions:
1.
The Macks are hereby permanently banned and
enjoined from maintaining their claims asserted
against OM in the Mack Litigation.
2.
The Macks are hereby permanently barred and
enjoined from maintaining their claims asserted
against Marquand and SSEP in the Mack Litigation
that “concern, refer or relate to, or arise out of, in
whole or in part, the offering of advice in any manner
related to the Annuities or the design, marketing,
solicitation and sale of the Annuities.”
3.
Accordingly, the Macks are hereby permanently
barred and enjoined from maintaining their claims
9
asserted against Marquand and SSEP in the Mack
Litigation, with the exception of allegations regarding
advice Marquand allegedly gave to the Macks
regarding the Macks’ home and allegations that SSEP
negligently supervised Marquand in connection with
advice that Marquand allegedly gave to the Macks
regarding their home.
Id. (italics in original; emphasis added).
The record is clear that Judge Snyder did not find the Macks’ home
issues included within the class settlement in Negrete. The Macks’ home
allegations did not “concern, refer or relate to, or arise out of, in whole or in
part, the offering of advice in any manner related to the Annuities or the
design, marketing, solicitation and sale of the Annuities. . . .” See Dockets
22-5, p. 58 ¶ 2(b), and 36, p. 8 ¶ 25. This court finds Macks’ home
allegations are not encompassed within the Negrete settlement agreement
and order.
B.
SEPARATE NEW CLAIMS
Rule 15(c) provides, in relevant part, the following:
(1)
When an Amendment Relates Back. An amendment
to a pleading relates back to the date of the original
pleading when:
...
(B)
the amendment asserts a claim or
defense that arose out of the conduct,
transaction, or occurrence set out--or
attempted to be set out--in the original
pleading; . . . .
Fed. R. Civ. P. 15(c)(1)(B). “[I]f plaintiff attempts to allege an entirely
different transaction by amendment, Rule 15(c)(1)(B) will not authorize
10
relation back.” 6A C. Wright, A. Miller & M. Kane, Federal Practice and
Procedure, § 1497 (2010). “For example, amendments alleging the separate
publication of a libelous statement, the breach of an independent contract,
the infringement of a different patent, or even a separate violation of the
same statute may be subject to the defense of statute of limitations because
of a failure to meet the transaction standard.” Id. “On the other hand,
amendments that merely . . . expand or modify the facts alleged in the
earlier pleading meet the Rule 15(c)(1)(B) test and will relate back.” Id.
“Because the rationale of the relation-back rule is to ameliorate the
effect of the statute of limitations, rather than to promote the joinder of
claims . . . , the standard for determining whether the amendments qualify
under Rule 15(c) is not simply an identity of transaction test. Although not
expressly mentioned in the rule, the courts also inquire into whether the
opposing party has been put on notice regarding the claim . . . raised by the
amended pleading.” Id. “[A] failure of notice will prevent relation back.” Id.
“To say that notice is key does not answer the question what level of
notice is sufficient . . . . It has been suggested that the requisite notice must
be given by the content of the original pleadings. Other cases have taken a
broader view and have held that it is sufficient if the opposing party was
made aware of the matters to be raised by the amendment from sources
other than the pleadings. This position seems sound since it is unwise to
11
place undue emphasis on the particular way in which notice is received.”
Id. “[T]he better approach is to determine whether the adverse party, viewed
as a reasonably prudent person, ought to have been able to anticipate or
should have expected that the character of the originally pleaded claim
might be altered or that other aspects of the conduct, transaction, or
occurrence set forth in the original pleading might be called into question.”
Id.
A number of cases are helpful in analyzing the relation back
provisions of Rule 15(c)(1)(B). See Slayton v. American Express Company,
460 F.3d 215 (2d Cir. 2006); Belmont Commons, L.L.C. v. Axis Surplus
Insurance Company, 569 F. Supp. 2d 637 ( E.D. La. 2008); Ruta v. Delta
Airlines, Inc., 322 F. Supp. 2d 391 (S.D. N.Y. 2004); and Pucci v. Litwin,
828 F. Supp. 1285 (N.D. Ill. 1993).
In Slayton, plaintiffs’ original class action complaint asserted claims
related to “high-yield, high-risk instruments such as below-investmentgrade bonds–popularly termed ‘junk bonds’–and collateralized debt
obligations (“CDOs”).” Slayton, 460 F.3d at p. 219.
The [original] complaint alleged three material misstatements
and/or omissions of material fact: (i) “failing to disclose that
[Amex] had invested in a risky portfolio of high-yield or ‘junk’
bonds that carried the potential for substantial losses if default
rates in the junk bond market increased”; (ii) failing to disclose the
true extent of Amex’s total exposure as a result of the risky
portfolio after Amex wrote down its junk bond portfolio by $182
million in April 2001; and (iii) “failing to disclose that [Amex] was
12
taking a substantial and unnecessary risk by investing in
high-yield securities involving complex risk factors that [Amex]
management and personnel did not fully comprehend.”
Id. at 220. “These allegations formed the basis of claims for damages
asserted under Section 10(b) of the Securities Exchange Act of 1934
(“Exchange Act”), 15 U.S.C. § 78j(b), Section 20(a) of the Exchange Act,
15 U.S.C. § 78t (a), and common law fraud.” Id.
The amended complaint in Slayton “set out ‘four primary
misrepresentations or omissions of material fact,’ namely that Amex:
‘(1) misrepresented Amex’s high-yield investments as conservative when, in
fact, they were high-risk; (2) concealed the extent of Amex’s high-yield
exposure; (3) failed to disclose the lack of risk management controls; and
(4) failed to disclose the lack of proper valuation methods, and the fact that
Amex’s accounting was not in accordance with GAAP [‘Generally Accepted
Accounting Principles’].’ ” Id. at 221.
The amended complaint added details not present in the original
complaint, . . . . First, because so much of AEFA’s portfolio
consisted of high-yield investments–ten to twelve percent–there
was a need to monitor these investments closely in order to
determine current value and assess their risks accurately. . . .
Second, the suspect valuation methods and lack of risk controls
caused Amex to misrepresent its high-yield, high-risk investments
as conservative and thereby to conceal the extent of its high-risk
exposure. . . . Third, the amended complaint enumerated specific
departures from GAAP in Amex’s valuation techniques that led to
a failure to account for impairments in the value and to its
disregard for adverse events impacting the high-yield market– e.g.,
failing to specify the probabilities of losses in high-yield
investments and failing to take a provision of losses in its
high-yield investments in interim financial statements.
Id. at 221-22.
13
The Slayton court determined “the relation back issue is more
analogous to a dismissal on the pleadings than a balancing of factors
involving the conduct of a lawsuit. If facts provable under the amended
complaint arose out of the conduct alleged in the original complaint, relation
back is mandatory.” Id. at 227. “Under Rule 15, the ‘central inquiry is
whether adequate notice of the matters raised in the amended pleading has
been given to the opposing party within the statute of limitations by the
general fact situation alleged in the original pleading.’ . . . Where the
amended complaint does not allege a new claim but renders prior
allegations more definite and precise, relation back occurs.” Id. at 228
(internal citation omitted).
[W]here an initial complaint alleges a ‘basic scheme’ of defrauding
investors by misrepresenting earnings and profitability, an
allegation of accounts receivable manipulation in an amended
complaint will relate back because it is a ‘natural offshoot’ of that
scheme. . . . And where an initial complaint alleges ‘inadequate
internal controls’ leading to overstatement of accounts receivable,
a defendant is on notice of a claim in an amended complaint that
it improperly recognized revenues and failed to establish sufficient
reserves for doubtful accounts in violation of GAAP and industry
standards. . . . In contrast, even where an amended complaint
tracks the legal theory of the first complaint, claims that are based
on an ‘entirely distinct set’ of factual allegations will not relate
back.
Id. at 228 (internal citations omitted).
The Slayton court concluded “that [plaintiffs’] allegation in the
amended complaint that Amex failed to disclose the lack of proper valuation
14
methods and non-compliance with GAAP relates back to the original
complaint. . . .[T]he allegations in the amended complaint that Amex used
faulty accounting and valuation techniques simply provide a more detailed
description of allegations made in the original complaint. Moreover, all of
these allegations–both in the amended and original complaints–arise out of
the same set of operative facts.” Id. at 229. “Finally, the original complaint
alleged that Amex misstated and/or omitted material facts in its filings with
the SEC in violation of SEC regulations requiring accurate representations
of Amex’s operations and financial conditions. Although these were very
general allegations, the assertions in the amended complaint that some of
these misstatements and/or omissions relate to valuation and accounting
irregularities simply delineate with more detail those general allegations.”
Id.
Plaintiff’s claim in Belmont originally related to “the Hurricane Katrina
insurance claim . . . .” Belmont, 569 F. Supp. 2d at p. 638. The amended
complaint sought to include a claim the defendant insurance agent failed to
provide “flood excess coverage.” Id. at 638-39. “The amendment added a
claim for additional damages for failure to procure enough flood insurance
arising out of the same transaction or occurrence as the allegations in the
original complaint. The original complaint alleges that [the insurance agent]
breached its duties and obligations to [plaintiff] which caused damages. The
15
amended complaint adds the flood excess claim as a [sic] additional basis
for the breach of agent duty claim . . . .” Id. at 644. “The same general facts
and circumstances that deal with procuring insurance that was in effect at
the time of Hurricane Katrina which are at issue with the . . . surplus policy
are also at issue with the flood policy. . . . Accordingly, the Court finds the
amendment relates back.” Id.
In Ruta, the plaintiff’s original complaint, among other claims,
asserted the tort claim of slander. Ruta, 322 F. Supp. 2d at 403. The
allegation was that a flight attendant, in the front of other passengers,
declared that Ruta was intoxicated, a statement which Ruta claimed was
“false and defamatory.” Id. at 404. In her proposed amended complaint,
Ruta’s allegation was that the flight attendant falsely claimed that plaintiff
“kicked him as he walked down the aisle of the airplane.” Id.
The Ruta court concluded that “despite the fact that Ruta did not
plead the ‘kicking’ remark in her original complaint, those words clearly
arise from the same transaction and same core set of operative facts as [the
flight attendant’s] ‘intoxication’ statement.” Id. “The facts alleged in
Plaintiff's original complaint provided sufficient notice to Defendant that any
defamatory statements made by [the flight attendant] arising from his
interaction with Plaintiff on the airplane would be subject to litigation, and
therefore relate back to the original complaint.” Id. at 405. Based on this
analysis, the court granted leave to amend plaintiff’s complaint. Id.
16
In Pucci, the district court was faced with an earlier amended
complaint which alleged a number of violations of federal laws relating to
plaintiffs’ investment in a real estate tax shelter. Pucci, 828 F. Supp. at pp.
1287-88. Additional claims of “breach of fiduciary duty . . . ; negligent
misrepresentation and malpractice . . . ; consumer fraud and deceptive
business practices . . . and constructive trust . . . .” were also pled. Id. at
1288. In the second amended complaint, plaintiffs sought to add a “civil
RICO3 claim,” based on other counts within the complaint, and separately
alleged “seven ‘coal mining schemes’ . . . .” Id. at 1296. Defendants argued
these “coal mining investments . . . [were] new because none of the RICO
allegations relating to the coal mining investments appeared [in either the
original complaint or the first amended complaint]”. Id. The court allowed
the amendment to relate back to the original complaint.
Pleading is no longer a formalistic game. Rule 15(c) allows relation
back if the actions described in the amended pleading “arose out
of the conduct . . . attempted to be set forth in the original
pleading. . . .” This rule is to be liberally construed. Although the
allegations involving the coal mining transactions are new, the
court concludes that the new allegations can be characterized as
the same conduct, transaction or occurrence as that attempted to
be set forth in the previous complaint. The original complaint and
the First Amended complaint involved the alleged inducement of
investors into a fraudulent investment scheme by defendants
. . . . So do the new allegations . . . involving the coal deals.
3
Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C.
§§ 1961-68.
17
Accordingly, [the new RICO count] relates back to the date of filing
of the original complaint . . . .
Id. (emphasis in original).
The court finds the Macks’ home allegations are similar to the
amended allegations in Slayton, Belmont, Ruta, and Pucci. The advice
allegedly given by Mr. Marquand to the elder Macks concerning the Macks’
home allegations occurred during the same time frame as the discussion of
the annuities investments. But the Macks’ home allegations are separate
and divisible from the annuities investments discussions. The original
complaint against Mr. Marquand and SSEP asserted claims for negligence,
undue influence, breach of fiduciary duty, practicing law without a license,
breach of professional responsibilities, intentional infliction of emotional
distress, negligent supervision, fraud and deceit, and civil conspiracy.
(Docket 1-1). These claims all focused on the relationship of Mr. Marquand
and his company SSEP with the elder Macks. The Macks’ home allegations
arose out of the financial consultant-client relationship occurring during the
time frame of the original complaint.
The original complaint alleged a “basic scheme” of negligence, fraud
and deceit, and the Macks’ home allegations are a “natural offshoot of that
scheme.” Slayton, 460 F.3d at 228. “[A]ll of these allegations–both in the
amended and original complaints–arise out of the same set of operative
facts.” Id. at 229. The Macks’ home allegations “clearly arise from the same
transaction and same core set of operative facts” and the allegations of the
original complaint “provided sufficient notice” to the defendants that any
18
financial shenanigans “would be subject to litigation.” Ruta, 322 F. Supp.
2d at 405. “Although the [Macks’ home allegations] are new, . . . the new
allegations can be characterized as the same conduct, transaction or
occurrence as that attempted to be set forth in the previous complaint.”
Pucci, 828 F. Supp. at pp. 1296. To allow the amendment at this stage
would not create “undue prejudice” to defendants. Foman, 371 U.S. at 182.
The Macks’ home allegations are not “clearly frivilous claims.”
Becker, 191 F.3d at 908. Plaintiffs “ought to be afforded an opportunity to
test [their] claim on the merits.” Foman, 371 U.S. at 182. The court finds
the Macks’ home allegations relate back to the same “conduct, transaction,
or occurrence set out . . . in the original [complaint].” Fed. R. Civ. P.
15(c)(1)(B).
2.
STATUTE OF LIMITATIONS
Because of the court’s decision under Rule 15(c)(1)(B), defendants’
resistance to the amended complaint on the statute of limitations is moot.
ORDER
Based on the above analysis, it is hereby
ORDERED that plaintiffs’ motion to amend the complaint (Docket 38)
is granted.
IT IS FURTHER ORDERED that plaintiffs’ amended complaint (Docket
44-1) shall be filed with the Clerk of Court and served on defendants.
IT IS FURTHER ORDERED that defendants’ motion to dismiss (Docket
40) is denied.
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IT IS FURTHER ORDERED that pursuant to Fed. R. Civ. P. 15(a)(3)
the defendants shall file their answer to the amended complaint within
fourteen (14) days after service.
IT IS FURTHER ORDERED that within fourteen (14) days after the
filing of defendants’ answer, the parties shall confer and recommend to the
court a modified schedule for completion of pretrial discovery and related
matters.
Dated September 28, 2011.
BY THE COURT:
/s/ Jeffrey L. Viken
JEFFREY L. VIKEN
UNITED STATES DISTRICT JUDGE
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