FLAME S.A. v. INDUSTRIAL CARRIERS, INC. et al
Filing
420
ORDER re 349 MOTION for Leave to File Second Amended Complaint and for Joinder of Additional Parties filed by FLAME S.A.. The Court DENIED Flame's Motion for Leave to File Second Amended Complaint and for Joinder of Additional Parties. ECF No. 349. Signed by District Judge Robert G. Doumar on 8/21/14 and filed 8/22/14. Copies distributed to all parties 8/22/14. (ldab, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
NORFOLK DIVISION
FLAME S.A.,
Plaintiff,
GLORY WEALTH SHIPPING PTE LTD.,
CIVIL NO. 2:13-cv-658
Consolidated Plaintiff,
NOBLE CHARTERING, INC.,
Intervening Plaintiff
INDUSTRIAL CARRIERS, INC., VISTA
SHIPPING, INC., and FREIGHT BULK
PTE. LTD.,
Defendants.
MEMORANDUM OPINION
This matter comes before the Court on Flame S.A.'s ("Flame") Motion for Leave to File
Second Amended Complaint and for Joinder of Additional Parties (the "Motion"). ECF No. 349.
The Court DENIED the Motion at the Final Pretrial Conference orally. This opinion
memorializes the Court's reasons for doing so.
I.
PROCEDURAL HISTORY
The parties being familiar with the complicated and complex procedural history of this
case, the Court turns to the most relevant portions for the instant Motion.
Flame seeks leave to amend its Amended Complaint to bring the total number of
defendants to sixty-one (61), from four (4). Flame alleges that the Vista Group is actually
1
defunct and that there are in reality sixty-one (61) corporations all run by Mr. Baranskiy under
the umbrella of the Palmira Group. Flame avers that it: 1) did not know of this reality until
recently; 2) its ignorance was a result of FBP's decision to withhold key documents and delay
discovery; and 3) any amendment will not prejudice FBP because it will not raise a new legal
theory but will only add defendants, which Flame learned about through documents obtained via
FBP. FBP did not respond to the Motion.
II.
THE LEGAL STANDARD
The Fourth Circuit has ruled that Rule 15(a) applies to amendments seeking to add
parties. Galustian v. Peter. 591 F.3d 724, 730 (4th Cir. 2010). Rule 21, which provides "On
motion or on its own, the court may at any time, on just terms, add or drop a party,"
Fed.R.Ov.P. 21, is irrelevant for the instant inquiry. See Produce Alliance. LLC v. Let-Us
Produce. Inc.. 2010 WL 7504802, at *2 (E.D. Va. Nov. 22, 2010) ("Millison argues that an
amended complaint adding new parties is governed by Rule 21 of the Federal Rules of Civil
Procedure, which addresses the joinder and misjoinder of parties, and not Rule 15. But the
Fourth Circuit recently rejected this very same argument in Galustian v. Peter. 591 F.3d 724, 730
(4thCir.2010)").'
A.
Rule 15(a)(2)
Federal Rule of Civil Procedure 15(a)(2) 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.Ov.P. 15(a)(2). The Fourth Circuit has interpreted Supreme
Court precedent "to provide that 'leave to amend a pleading should be denied only when the
amendment would be prejudicial to the opposing party, there has been bad faith on the part of the
1 In addition, Rule 16(b)(4) may apply, which requires a party demonstrate good cause to modify a
Scheduling Order deadline when that deadline has passed. Funderburk. 2014 WL 174676. at *2; see Fed.R.CIV.P.
16(b)(4). To do so, the party must show diligence. Id,
moving party, or the amendment would have been futile."' Laber v. Harvey. 438 F.3d 404, 426
(4th Cir. 2006) (quoting Johnson v. Oroweat Foods Co.. 785 F.2d 503, 509 (4th Cir. 1980)
(citing Foman, 371 U.S. at 182.)).
"Whether an amendment is prejudicial will often be determined by the nature of the
amendment and its timing. A common example of a prejudicial amendment is one that 'raises a
new legal theory that would require the gathering and analysis of facts not already considered by
the [defendant, and] is offered shortly before or during trial.'" Id. at 427 (citing Johnson. 785
F.2d at 509). An amendment is not prejudicial, by contrast, if it merely adds an additional theory
of recovery to the facts already pled and is offered before any discovery has occurred. Id. (citing
Davis v. Piper Aircraft Corp.. 615 F.2d 606, 613 (4th Cir. 1980)).
Bad faith will result when a party has delayed in seeking an amendment after the basis for
the amendment becomes known. See id. at 428 (finding no bad faith when plaintiff sought leave
to amend soon after the Fourth Circuit overruled itself to permit plaintiff to seek recovery under
a second theory). Bad faith and prejudice are more likely to be found the further a case has
progressed. Id. at 427
Courts have found that reopening discovery and extending deadlines to protect the rights
of new parties conflict with the interest of keeping a case on schedule and have therefore denied
motions to amend complaints to add parties. Funderburk v. Helms. 2014 WL 174676, at *2
(M.D.N.C. Jan. 13, 2014). However, significant discovery having taken place alone may not be
enough for prejudice to be found, although it is a factor. Mavfield v. NatM Ass'n for Stock Car
Auto Racine. Inc.. 674 F.3d 369, 380 (4th Cir. 2012) (citing Equal Rights Center v. Niles Bolton
Assoc's. 602 F.3d 597, 603 (4th Cir. 2013)). Finally, amendments close to trial are subject to
special scrutiny. Howard v. Inova Health Care Servs.. 302 F. App'x 166, 181 (4th Cir. 2008)
3
(citing Deasv v. Hill. 833 F.2d 38, 41 (4th Cir. 1987)). In Howard, however, the Fourth Circuit
affirmed a denial to amend a complaint because the amendment was based not on newly
discovered facts but a theory of liability plaintiff had known about for almost a year. Id
Futility will result "if the proposed amended complaint fails to satisfy the requirements of
the federal rules." U.S. ex rel. Wilson v. Kellogg Brown & Root. Inc.. 525 F.3d 370, 376 (4th
Cir. 2008).
III.
ANALYSIS
The Court proceeds to analyze these prongs in reverse order, but first the Court notes that
Flame's Motion is subject to special scrutiny. The Motion was filed July 30, 2014 and became
ripe August 14, 2014 when FBP filed no response. With trial set for August 26, 2014 and
discovery already closed, Flame's Motion came upon the eve of trial. This late of a motion to
amend a complaint is subject to special scrutiny. Howard. 302 F. App'x at 181 (citing Deasv. 833
F.2dat41).
A.
Futility
Futility seems irrelevant to the Court's inquiry. Flame seeks to add more parties to the
suit, and having determined the validity of Flame's attachment and Amended Complaint, the
Court does not find that an amendment would be futile. However, the Court does not make a
finding as to any defense the various other entities sought to be added to the lawsuit would have
pursued.
B.
Bad Faith
There appears to be no bad faith on Flame's part in seeking this amendment. The first
references in this case to the Palmira Group appear in consolidated plaintiff, Glory Wealth Pte
Ltd's ("Glory Wealth") memorandum in support of its motion for reconsideration and sanctions
against Defendants. That document was submitted on July 16, 2014, and called for broader
4
discovery parameters. In particular, Glory Wealth submitted that Ekaterina Bobrenko, a
deponent, considered herself CFO of Palmira Group as well as some sort of accountant for many
other entities. Her deposition took place on July 4, 2014, and was conducted by Flame's counsel.
Flame filed a similar motion, the same day as Glory Wealth, which Judge Leonard granted and
denied in part. Flame sought discovery responses from all companies wholly-owned by or
affiliated with Palmira Group, rather than the named defendants alone. Flame also attached a
document purportedly showing that all 500 shares of Hachi Holding, a company in the web of
entities at issue, were transferred from Palmira to Liliya Dariy, Mr. Baranskiy's mother, for 1
Euro, which Flame learned about on July 14, 2014. Flame also allegedly learned that Vista is
now defunct but the Palmira Group has absorbed it. Two weeks later Flame's Motion to Amend
was filed. There appears to be no bad faith under this rapid timeframe.
C.
Prejudice & the Case Schedule
There appearing to be no futility or bad faith, the Court nevertheless denied Flame's
Motion. The Court did so because it FINDS that this Motion would prejudice FBP and derail this
case's conclusion. There are a number of reasons for these findings. In particular, the facts in this
case are distinguishable from Fourth Circuit precedent and compel a denial of the Motion under
the special scrutiny this Motion receives. Howard, 302 F. App'x at 181 (citing Deasv. 833 F.2d at
41).
In Scott v. Family Dollar Stores. Inc.. the Fourth Circuit emphasized that where a new
legal theory was presented in an amended complaint, where discovery was still ongoing, and
where trial was not close, no undue prejudice would result, even though the motion to amend
came three years into the case. 733 F.3d 105, 118 (4th Cir. 2013). Those are not the facts here.
Although no new legal theory is sought to be introduced, Howard, 302 F. App'x at 181,
discovery is closed, Laber, 438 F.3d at 427, trial is upon us, and the addition of fifty-seven new
defendants by force of sheer volume and the concomitant time needed to accommodate these
would-be defendants is prejudicial to FBP.
Indeed, lest the parties lose sight of the gravamen of this matter, the M/V CAPE
VIEWER remains attached in the Eastern District of Virginia. This ship and its cargo are
awaiting resolution of this litigation, as the quasi-in-rem action must proceed before the ship's
fate can be determined. Any additional delay will only further prejudice FBP, should the
defendant ultimately prevail, as well as increase costs which ultimately may become excessive in
relation to the value of the attached ship.
In addition, the litigation has been contentious to the point of toxicity, and the time to
bring the matter to conclusion has come. Extensive discovery has taken place and the addition of
fifty-seven entities, no matter their purported linkages with the named defendants, likely
introduces at least portions of a separate nucleus of facts and should be prevented. Mavfield. 674
F.3d at 380 (4th Cir. 2012). That Flame had not previously discovered this information allegedly
linking the parties is outweighed by the contentious nature of the proceedings, id, and the trial's
advanced procedural posture.
Finally, Discovery was closed when Flame made its Motion; reopening discovery to
protect the rights of fifty-seven more defendants would surely derail the proceedings.
Nevertheless, Flame argues that all the companies share the same lawyer, and so no new
discovery would be needed. The Court cannot agree. Each party may have separate defenses to
offer, different documents to discover, and separate litigation strategies. Indeed, they may engage
separate litigation counsel. Simply put, protecting the rights of these fifty-seven entities conflicts
with this trial's already once-continued schedule, and the Court's interest in keeping the case on
2One need only see the many motions to compel, motions for sanctions, and the Court's admonitions to
both parties to understand this fact.
schedule trumps Flame's desire to amend its Amended Complaint this late into the proceedings.
Funderburk. 2014 WL 174676, at *2.3
Flame's Motion simply cannot survive the special scrutiny the Court must apply. The
Motion seeks too much too late.
IV.
CONCLUSION
For the reasons above, the Court DENIED Flame's Motion for Leave to File Second
Amended Complaint and for Joinder of Additional Parties. ECF No. 349.
The Clerk is DIRECTED to forward a copy of this Order to all Counsel of Record.
IT IS SO ORDERED.
Robert
Senior
istrict Judge
UNITED STATES DISTRICT JUDGE
Norfolk, YA
August _££ 2014
3 Indeed, Magistrate Judge Leonard performed a herculean task of keeping the discovery moving in this
case, see e^g., Order, ECF No. 353; Order at 5, ECF No. 355, and the Court is not inclined to add to his labors or
convert them to what the Court suspects would amount to a Sisyphean ordeal.
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