Bear Ranch, LLC v. Heartbrand Beef, Inc. et al
Filing
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MEMORANDUM AND ORDER denying 42 MOTION for Judgment, granting 43 MOTION for Leave to File Amended Complaint. (Signed by Judge Gregg Costa) Parties notified.(arrivera, )
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
VICTORIA DIVISION
BEAR RANCH, LLC,
Plaintiff,
VS.
HEARTBRAND BEEF, INC., et al,
Defendants.
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§ CIVIL ACTION NO. 6-12-14
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MEMORANDUM AND ORDER
This case involving alleged antitrust violations and fraud in the marketing of
Akaushi cattle is nearing the end of discovery.
In June 2013, Defendants
HeartBrand Beef, Inc., American Akaushi Association, and Ronald Beeman moved
for judgment on the pleadings with respect to Plaintiff Bear Ranch’s request for a
declaration regarding its affirmative defense of fraudulent inducement. Plaintiff
subsequently moved for leave to amend its complaint in order to drop its antitrust
claims and add a new damages claim for fraudulent inducement. Defendants
object, arguing that Plaintiff has unduly delayed amending its complaint and that
they will suffer prejudice if the amendment is allowed. For the reasons set forth
below, the Court GRANTS Plaintiff’s motion for leave to amend.
I.
BACKGROUND
As this Court noted in a previous Order, Defendant HeartBrand Beef, Inc.
“is the self-proclaimed sole source of 100% pure Akaushi beef in the United
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States.” Bear Ranch, LLC v. HeartBrand Beef, Inc., 286 F.R.D. 313, 314 (S.D.
Tex. 2012). Plaintiff Bear Ranch purchased almost 1,200 Akaushi cattle from
Defendants and other, related suppliers in 2010 and 2011.
As part of the
purchases, they agreed to certain use and alienation restrictions on the cattle.
In March 2012, Plaintiff filed suit under the Sherman Act and the Packers &
Stockyards Act seeking declaratory and injunctive relief to invalidate the
restrictions, arguing that Defendants were “monopolizing the market for Akaushi
beef products in the United States and engaging in unfair practices in the livestock
industry.”
Docket Entry No. 1 at ¶ 1.
Alternatively, Plaintiff requested a
declaration that the restrictions were unenforceable because Defendants were not
actually the sole source of Akaushi cattle, and as a result Plaintiff was fraudulently
induced to enter into the contract. See id. at ¶¶ 47–52.
After a year of discovery, focus has shifted from the antitrust claims, which
formed the bulk of Plaintiff’s complaint, to fraudulent inducement. On June 18,
2013, Defendants moved for judgment on the pleadings on Plaintiff’s request for a
declaration of fraudulent inducement. See Docket Entry No. 42. In response,
Plaintiff requested leave to amend their complaint to add a new damages claim for
fraudulent inducement. See Docket Entry No. 43. Defendants oppose granting
leave to amend, arguing that Plaintiff “finds itself needing to start over with a new
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theory.” Docket Entry No. 49 at 2. In the alternative, Defendants request a
continuance so that they may properly defend Plaintiff’s new damages claim.
II.
DISCUSSION
The parties analyze the motion for leave to amend under Rule 16, which
allows modifying the scheduling order “only for good cause and with the judge’s
consent.” Fed. R. Civ. P. 16(b)(4). However, because the Court never set a
deadline for seeking leave to amend the pleadings, the more lenient Rule 15
standard applies.1 See Tr. of Aug. 9, 2012 Scheduling Conference, Docket Entry
No. 56 at 13 (“So, I am going to set a deadline of October 1st for an amended
complaint to be filed, which means, if you file by that deadline, you don’t need to
seek leave of court, and anything after that deadline you would need to file for
leave of court.”). Thus, the Court should allow amendment if “justice so requires,”
Fed. R. Civ. P. 15(a)(2), but may deny amendment for “undue delay, bad faith or
dilatory motive on the part of the movant . . . [or] undue prejudice to the opposing
party.” United States ex rel. Steury v. Cardinal Health, Inc., 625 F.3d 262, 270
(5th Cir. 2010).
Defendants argue that Plaintiff, knowing its original claims to be
unmeritorious, engaged in undue delay by waiting to amend until “only thirty days
This Court’s normal practice, which it followed in this case, is to set a deadline by which the
parties may amend their pleadings without leave, and after which the parties may still amend as
long as they obtain leave from the Court.
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before the discovery and summary judgment deadlines.” Docket Entry No. 49 at
10.
Plaintiff argues in response that it has been diligently prosecuting its
fraudulent inducement claim and only recently learned the full extent of
Defendants’ alleged misrepresentations concerning the supposed exclusive nature
of their Akaushi cattle. See Docket Entry No. 53 at 4–6. Because it does appear
that some new information relevant to fraudulent inducement has come to light
during discovery, the Court finds that Plaintiff did not unduly delay in seeking
leave to amend in this case.
Defendants also argue they will be unduly prejudiced if Plaintiff is granted
leave to amend because (i) they will suffer additional costs defending against the
new damages claim; (ii) discovery is nearly over and the deadline for designating
expert witnesses, one of which Defendants would need to respond to Plaintiff’s
new claim for damages, has passed; and (iii) they have spent a great deal of money
defending against the antritrust claims which Plaintiff, by amending its complaint
rather than seeking voluntary dismissal under Rule 41(a)(2), will be able to drop
without consequence.
Most of Defendants’ concerns can be satisfied or mitigated. The amended
complaint will not require substantial additional discovery. Plaintiff is not adding
a new claim based on a previously unpleaded transaction, but is merely adding a
damages component to the fraudulent inducement allegations pleaded in its
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original complaint, and on which the parties have conducted discovery. Compare
Bamm, Inc. v. GAF Corp., 651 F.2d 389, 391 (5th Cir. 1981) (“We are unable to
perceive undue prejudice to [defendant] in allowing the addition of fraud and
negligence claims to a warranty action involving the same transaction.”), and
Rimkus Consulting Grp. v. Cammarata, 257 F.R.D. 127, 135 (S.D. Tex. 2009)
(“Although [defendant’s] excuse for the delay is less than compelling, adding the
counterclaim will not substantially delay the suit because it involves the same
transaction or occurrence as the claims at issue.”), with McDade v. Wells Fargo
Bank, N.A., No. H-10-3733, 2011 WL 4860023, at *4 (S.D. Tex. Oct. 13, 2011)
(denying leave to amend when the plaintiff attempted to bring new claims based on
a different set of facts than that alleged in the original complaint). The main
problem in allowing Plaintiff to add the damages component is that Defendants
will need to retain a valuation expert to defend this claim. But, because the Court
will give Defendants ample time to retain an expert, any prejudice the amendment
may cause will be mitigated. Moreover, allowing the amendment will also have
some beneficial effects that will help offset any increased costs. The proposed
amended complaint will, as Plaintiff argues, narrow the issues to be decided at
trial. It will, among other things, eliminate the need for Defendants to file a costly
motion for summary judgment, or to conduct a lengthy trial, on Plaintiff’s antitrust
claims. Finally, as Plaintiff suggests, the Court will restrict Plaintiff’s ability to
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refile its antitrust claims in the future, thus alleviating any potential harm to
Defendants on that issue.
III.
CONCLUSION
Under Rule 15, which “evinces a bias in favor of granting leave to amend,”
Jones v. Robinson Prop. Grp., 427 F.3d 987, 994 (5th Cir. 2005) (internal
quotation marks omitted), the Court finds that Plaintiff should be allowed to amend
its complaint. It therefore GRANTS Plaintiff’s motion for leave to amend (Docket
Entry No. 43) on the condition that, if Plaintiff ever wishes to reassert the nowabandoned claims detailed in its original complaint, it may only do so before this
Court, in the Victoria Division of the Southern District of Texas. Because leave to
amend is granted, the Court DENIES Defendants’ motion for judgment on the
now-superseded original pleadings (Docket Entry No. 42) without prejudice to
reasserting those arguments with respect to the amended complaint. The Court
will enter an appropriate continuance by separate Order.
IT IS SO ORDERED.
SIGNED this 26th day of August, 2013.
______________________________
Gregg Costa
United States District Judge
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