Hydro Engineering v. Petter Investments
Filing
55
MEMORANDUM DECISION granting 37 Motion for Leave to File its Third Amended Complaint within fourteen (14) days of this Order. Signed by Judge Ted Stewart on 07/12/2012. (tls)
IN THE UNITED STATES COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION
HYDRO ENGINEERING, INC., a Utah
corporation,
Plaintiff,
MEMORANDUM DECISION AND
ORDER GRANTING PLAINTIFF’S
MOTION FOR LEAVE TO FILE
AMENDED COMPLAINT AND TO
ADD PARTIES
vs.
PETTER INVESTMENTS, INC., a Michigan
corporation,
Case No. 2:11-CV-139 TS
Defendant.
This matter is before the Court on Plaintiff’s Motion for Leave to File Amended
Complaint and to Add Parties. For the reasons discussed below, the Court will grant the Motion.
I. BACKGROUND
Plaintiff originally filed this action on February 4, 2011. Plaintiff sought declaratory
judgment that its use of certain terms did not infringe any existing valid trademark of Defendant
Petter Investment, Inc. d/b/a Riveer Environmental (“Riveer”). Plaintiff filed an Amended
Complaint on May 12, 2011. In the Amended Complaint, Plaintiff added claims for
1
misappropriation of trade secrets and intentional interference with economic relations. A Second
Amended Complaint was filed on August 17, 2011, in which Plaintiff added a claim seeking
cancellation of trademark. Defendant has filed an Answer and asserted affirmative defenses and
counterclaims.
The Original Scheduling order in this case required amended pleadings and joinder of
parties by October 28, 2011, and trial was scheduled for January 28, 2013. On December 22,
2011, the parties filed a stipulated motion stating that they wished to explore the possibility of
settlement. As a result, the parties requested extending all deadlines in this case. An Amended
Scheduling Order was entered requiring amendment of pleadings and joinder of parties by April
30, 2012, and setting a trial date for June 3, 2013. Plaintiff filed the instant Motion seeking to
amend their Second Amended Complaint and to add parties on April 30, 2012, the last day
allowed under the Amended Scheduling Order.
In the mean time, Plaintiff has been pursuing litigation in Utah state court against a
former employee, Carl Pelletier, and his company, PellTech Solutions, LLC (“PellTech”). In its
most recent state court complaint, Plaintiff brings claims against Pelletier and PellTech for
breach of contract, misappropriation of trade secrets, breach of fiduciary duty, and intentional
interference with economic relations.
Plaintiff now moves to file a Third Amended Complaint in this action. The proposed
Third Amended Complaint adds Pelletier and PellTech as Defendants, largely including the
claims against those entities that are currently pending in the state court action. However, the
proposed Third Amended Complaint does more than simply incorporate the state court complaint
2
into this case. In addition to bringing claims against Pelletier and PellTech, the proposed Third
Amended Complaint adds claims for civil conspiracy and fraud against all Defendants and adds a
claim for tortious interference with contractual relations against Defendant Riveer.
II. DISCUSSION
Where, as in this case, a responsive pleading has been served, Federal Rule of Civil
Procedure 15(a)(2) dictates that “a party may amend its pleading only with the opposing party’s
written consent or the court’s leave.” The Rule specifies that “[t]he court should freely give
leave when justice so requires.”1 “The purpose of the Rule is to provide litigants ‘the maximum
opportunity for each claim to be decided on the merits rather than on procedural niceties.’”2
However, the Court may refuse to grant leave to amend where it finds evidence of “undue delay,
bad faith or dilatory motive on the part 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, [or] futility of amendment.”3 “‘Lateness does not of itself justify the denial of
[an] amendment.’”4 However, “denial of leave to amend is appropriate ‘when the party filing the
motion has no adequate explanation for the delay.’”5
1
Fed.R.Civ.P. 15(a)(2).
2
Minter v. Prime Equip. Co., 451 F.3d 1196, 1204 (10th Cir. 2006) (quoting Hardin v.
Manitowoc-Forsythe Corp., 691 F.2d 449, 456 (10th Cir. 1982)).
3
Id. (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)).
4
Id. at 1205 (quoting R.E.B., Inc. v. Ralston Purina Co., 525 F.2d 749, 751 (10th Cir.
5
Id. at 1206 (quoting Frank v. U.S. West, 3 F.3d 1357, 1365-66 (10th Cir. 1993)).
1975)).
3
The “most important . . . factor in deciding a motion to amend the pleadings, is whether
the amendment would prejudice the nonmoving party.”6 “Courts typically find prejudice only
when the amendment unfairly affects the defendants ‘in terms of preparing their defense to the
amendment.’”7
Defendant opposes Plaintiff’s Motion to Amend arguing that Plaintiff has unduly delayed
filing its motion, has acted in bad faith, and that it, Defendant, will suffer undue prejudice. In
addition, Defendant argues that Plaintiff’s claims against Pelletier are barred by the Colorado
River abstention doctrine.
A.
UNDUE DELAY AND BAD FAITH
Defendant first argues that amendment should be denied because it is untimely and
brought for dilatory motives. As set forth above, untimeliness may provide a basis for denying
amendment. However, the Court must look to the reason behind the delay in determining this
issue.
In its Motion, Plaintiff argues that its request is timely under the Amended Scheduling
Order and that the facts supporting the proposed Third Amended Complaint were not known
until shortly before the parties agreed to attempt settlement. Plaintiff further argues that it could
not have met the heightened pleading standard under Rule 9 without the recently disclosed
information.
6
7
Id. at 1207.
Id. at 1208 (quoting Patton v. Guyer, 443 F.2d 79, 86 (10th Cir. 1971)).
4
Defendant argues that Plaintiff had access to the information making up the proposed
Third Amended Complaint in early 2011 but delayed seeking amendment for strategic reasons.
The Court finds Defendant’s argument unpersuasive for a number of reasons. First, as
stated by Plaintiff, the Motion to Amend comes within the time period allowed under the
Amended Scheduling Order. It is difficult for the Court to accept Defendant’s argument that the
proposed amendment is untimely when it falls within the stipulated time frame for such
amendments. Defendant’s argument also ignores the fact that the parties attempted settlement
and, therefore, this case was largely put on hold from the end of 2011 until the filing of this
Motion. Defendant’s final argument is that Plaintiff has taken this action for “strategic reasons.”
However, this argument is not supported by the record.
Based on the above, the Court finds the Motion to be timely and that any untimeliness is
adequately explained by the circumstances.
B.
UNDUE PREJUDICE
Defendant next argues that it will be prejudiced if amendment were allowed. Defendant
argues that Plaintiff’s proposed Third Amended Complaint changes the nature of this case and
will require additional and different discovery.
As set forth above, courts generally find prejudice only when the amendment unfairly
affects the defendants in terms of preparing their defense to the amendment. “Most often, this
occurs when the amended claims arise out of a subject matter different from what was set forth in
the complaint and raise significant new factual issues.”8
8
Id.
5
Defendant argues that it “will be at an extreme disadvantage without time to propound,
collect and review documents relating to the proposed new claims. Moreover, new and much
different written discovery will be needed if Hydro is permitted to amend”9 Plaintiff counters
that these claims are not as new and different as Defendant suggests, as Pelletier’s relationship
with Defendant has been the subject of previous complaints.
It is true that Defendant will likely suffer some prejudice as a result of having to defend
new claims. However, the same can be said of any defendant who is forced to defend claims that
were not part of the original complaint. The Court’s focus is not on whether amendment would
be inconvenient, but whether there is any undue prejudice to Defendant if amendment were
allowed. At most Defendant suggests that it will be required to conduct additional discovery.
Generally speaking, the need to conduct additional discovery, without more, does not constitute
undue prejudice.10 In this case, where trial is nearly one year away, the Court finds that
Defendant has failed to show it will be unduly prejudiced if Plaintiff’s Motion is granted.
Further, any prejudice to Defendant can be ameliorated by amendments to the scheduling order,
something to which Plaintiff does not object.11
9
Docket No. 40, at 11.
10
See Cuffy v. Getty Ref. & Mktg. Co., 648 F. Supp. 802, 806 (D. Del. 1986).
11
See Docket No. 50, at 5 n.2.
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C.
COLORADO RIVER
Defendant’s final argument against amendment is that Plaintiff’s claims against Pelletier
are barred by the Colorado River abstention doctrine. Plaintiff argues that Colorado River has
no application here.
The Colorado River doctrine applies to “situations involving the contemporaneous
exercise of concurrent jurisdictions . . . by state and federal courts.”12 “The doctrine permits a
federal court to dismiss or stay a federal action in deference to pending parallel state court
proceedings, based on ‘considerations of [w]ise judicial administration, giving regard to
conservation of judicial resources and comprehensive disposition of litigation.’”13 This doctrine
is appropriate only in “exceptional” circumstances and “[o]nly the clearest of justifications will
warrant dismissal.”14
Defendant cites to no case applying Colorado River in relation to a motion to amend and
the Court’s own research has not revealed any case directly on point. However, the Tenth Circuit
has made clear that rather than dismiss claims under Colorado River, “the better practice is to
stay the federal action pending the outcome of the state proceedings.”15 Thus, invoking Colorado
River here is questionable where denial of Plaintiff’s Motion would be akin to dismissal.
12
Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976).
13
Fox v. Maulding, 16 F.3d 1079, 1080 (10th Cir. 1994) (quoting Colo. River, 424 U.S. at
14
Colo. River, 424 U.S. at 818, 819.
15
Fox, 16 F.3d at 1083.
817).
7
Assuming the Colorado River doctrine applies, the Court “must first determine whether
the state and federal proceedings are parallel.”16 “‘Suits are parallel if substantially the same
parties litigate substantially the same issues in different forums.’”17 In making this
determination, the Court “examine[s] the state proceedings as they actually exist to determine
whether they are parallel to the federal proceedings.”18
A review of the state proceeding reveals that, while similar, it is not substantially the
same as these proceedings. It is true that the proposed amendment adds claims against Pelletier
that are the subject of the state suit. However, the proposed amended complaint does more than
that. It also adds claims for civil conspiracy and fraud against both Pelletier and Riveer. Those
claims are not part of the state case, nor is Riveer a party to that case. As a result, the Court finds
that the state and federal proceedings are not parallel and Colorado River does not apply.
III. CONCLUSION
Based on the above, it is hereby
ORDERED that Plaintiff’s Motion for Leave to File Amended Complaint and to Add
Parties (Docket No. 37) is GRANTED. Plaintiff is directed to file its Third Amended Complaint
within fourteen (14) days of this Order.
16
Id. at 1081.
17
Id. (quoting New Buckley Mining Corp. v. Int’l Union, UMWA, 946 F.2d 1072, 1073
(7th Cir. 1992)).
18
Id.
8
DATED July 12, 2012.
BY THE COURT:
_____________________________________
TED STEWART
United States District Judge
9
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