Mohamed v. Reinhart Boerner Van Deuren SC et al

Filing 65

ORDER signed by Judge Rudolph T Randa on 4/26/2012 Granting 46 Motion to Amend Complaint. The Clerk of Court is DIRECTED TO FILE the proposed amended complaint 47 as the Amended Complaint in this action. (cc: all counsel) (nts)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN

TIMUR MOHAMED,
Plaintiff,
v.

Case No. 10-C-0753

REINHART BOERNER
VAN DEUREN S.C.,
and CHICAGO TITLE
INSURANCE COMPANY,
Defendants.

DECISION AND ORDER
This diversity action,1 arising from the alleged failure of the Defendants,
Reinhart Boerner Van Deuren (“Reinhart”) and Chicago Title Insurance Company (“Chicago
Title”) (collectively, the “Defendants”) to record a million dollar security interest that the
Plaintiff Timur Mohamed (“Mohamed”) had in a California residence owned by Carl Freer
(“Freer”). The Complaint alleges that Reinhart engaged in legal malpractice/professional
negligence, and that Chicago Title was negligent.
This matter is before the Court on Mohamad’s motion to file an amended
complaint to add breach of fiduciary duty, equitable estoppel, intentional misrepresentation,

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Jurisdiction is afforded by 28 U.S.C. § 1332 because there is complete diversity of the parties and the
amount in controversy, exclusive of interest and costs, exceeds $75,000. Venue is proper in this District under 28
U.S.C. § 1361(a).

and principal-agent liability claims against Reinhart. Additionally, Mohamed would like to
add a breach of contract claim against Chicago Title, and to expand his negligence claim
against Chicago Title.
Mohamed states that he first learned the information upon which his proposed
amendments are based during the December 1, 2011, deposition of Anthony Handzlik
(“Handzlik”), the Reinhart attorney with primary responsibility for the legal services that
Reinhart provided for Mohamed. Specifically, Mohamed states that, until the Handzlik
deposition, he was not aware that Chicago Title was a long-time client of Reinhart. He
indicates that Reinhart’s representation of him and its attorney-client relationship with Chicago
Title created a conflict of interest that Reinhart should have addressed by either formally
withdrawing as counsel for Mohamed, or by requesting that both Mohamed and Chicago Title
waive the conflict.
Reinhart opposes the proposed amendment contending that, contrary to
Mohamed’s assertion, he was aware of the information for years; Reinhart will be unduly
prejudiced by the undue delay; and, the proposed amendments are futile. Chicago Title
also opposes the motion, contending that Mohamed unduly delayed in requesting leave to
amend his complaint and that the delay will unduly prejudice it.
Courts must freely give leave to amend under Rule 15(a) where interests of
justice so require. McCauley v. City of Chicago, 671 F.3d 611, 627 (7th Cir. 2011) (citing
Fed. R. Civ. P. 15(a); Foman v. Davis, 371 U.S. 178, 181-82 (1962)). The liberal policy

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toward amending pleadings, especially in a first effort to amend, should remain in effect even
if a district court elects to enter judgment upon granting a motion to dismiss. See, e.g., Bausch
v. Stryker Corp., 630 F.3d 546, 562 (7th Cir. 2010) (holding that the district court erred by
entering judgment after a Rule 12(b)(6) dismissal where the plaintiff sought to amend
complaint to address perceived mistakes and the proposed amendment to complaint was not
futile).
“District courts have broad discretion to deny leave to amend where there is
undue delay, bad faith, dilatory motive, repeated failure to cure deficiencies, undue prejudice
to the defendants, or where the amendment would be futile.” Hukic v. Aurora Loan Servs.,
588 F.3d 420, 432 (7th Cir. 2009) (internal citation omitted). And, as stated in Johnson v.
Cypress Hill, 641 F.3d 867, 872 (7th Cir. 2011), “while delay on its own is usually not reason
enough for a court to deny a motion to amend, Dubicz v. Commonwealth Edison Co., 377 F.3d
787, 792-93 (7th Cir.2004), the ‘longer the delay, the greater the presumption against granting
leave to amend.’ King v. Cooke, 26 F.3d 720, 723 (7th Cir.1994).” A district court should
deny a motion for leave to amend if the proposed amendment is futile, as when, for example,
the amended pleading would not survive a motion to dismiss. See, e.g., Arlin-Golf, LLC v.
Village of Arlington Heights, 631 F.3d 818, 823 (7th Cir. 2011); London v. RBS Citizens, N.A.,
600 F.3d 742, 747 n.5 (7th Cir. 2010). However, the bottom line is that, while a court may
deny a motion for leave to file an amended complaint, such denials are disfavored. Bausch,
630 F.3d at 563.

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The Defendants contend that Mohamed unduly delayed in amending his
complaint. At first blush, if one focuses on the roughly 15-month interval between the
September 1, 2010, filing of this action and the December 12, 2011, filing of the motion to
amend, the assertion of undue delay seems merited. However, when the chronology of the
events in this action is more closely considered, the contention dissolves.
After being served with the Complaint, Chicago Title and Reinhart responded
in November 2010, by filing motions to dismiss for failure to state a claim. Those motions
were fully briefed by December 17, 2010.
In a May 9, 2011, Decision and Order, the Court denied the motions to dismiss,
converted the motions to motions for summary judgment. The Court also indicated that the
parties should engage in some discovery on the statute of limitations issue before briefing the
motions.
Later in May 2011, the Court set a schedule for limited discovery relevant to the
statute of limitations issue, to be followed by briefing and other submissions on the statute of
limitations issue presented by the Defendants’ converted summary judgment motions. No
deadline for amendment of the pleadings was included.
Reinhart filed its answer on May 23, 2011. Chicago Title filed its answer on
June 2, 2011.
In July 2011, the Court granted Mohamed and Reinhart’s joint motion for
amendment of the scheduling order to allow additional time to conduct the limited discovery.

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Again, in October 2011, Mohamed with the agreement of Reinhart and Chicago Title, with the
latter having recently retained new counsel, requested an extension of the deadlines for limited
discovery and briefing of the summary judgment motions. The Court granted the request,
extending the discovery deadline until December 5, 2011. On December 12, 2011, Mohamed
filed his motion to amend the complaint relying on the information that he states was disclosed
for the first time at Handzlik’s deposition. Based on the foregoing chronology, the Court
concludes that Mohamed did not “unduly delay” in requesting permission to amend his
complaint. Compare, Cypress Hill, 641 F.3d at 872 (collecting cases) (upholding the denial
of motion to amend because of undue delay, and relying on a four-year wait, the close of
discovery, the filing of a motion for summary judgment by the defendant, and failure to file
the motion until seven months after the plaintiff learned the information upon which
amendment was based).
Here, discovery was delayed by the pending motions to dismiss and other
actions of the parties. Although Reinhart suggests that Mohamed knew much earlier of its
attorney-relationship with Chicago Title, it has not conclusively refuted Mohamed’s showing
that he first learned of it in the December 5, 2011, deposition. Mohamed filed his motion to
amend and proposed amended complaint within a week of Handzlik’s deposition.
Furthermore, the Court is not persuaded that either Reinhart or Chicago Title
will be unduly prejudiced by amendment of the complaint. Although both parties maintain
that they will have to re-depose certain witnesses, the prior discovery permitted under the

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scheduling order was extremely limited – there is little discovery to redo. Moreover, the
proposed amended complaint was available to Chicago Title for several days before the
December 19, 2011, deposition of its Rule 30(b)(6) witness, and the January 2012, deposition
of Mohamed’s representative, Michael Fleming.

Therefore, the Defendants have not

established that they will be unduly prejudiced.
Reinhart also contends that the proposed new claims against it are futile because
they are redundant; and because Count III, the equitable estoppel claim, and Count IV, the
intentional misrepresentation claim, do not state a claim for relief. In addition, Reinhart
asserts that Mohamed may not base his claims on purported violations of the Wisconsin Rules
of Professional Conduct.
Reinhart does not expand on its contention that the claims are redundant. The
Court relies on the principle that a party may plead alternative theories of recovery, and that
Reinhart has not developed its redundancy argument. Therefore, the redundancy contention
is not persuasive.
Both Reinhart and Mohamed apply the substantive law of

Wisconsin in

addressing whether Counts III and IV state a cause of action. The Court will also apply
Wisconsin law.
Reinhart states that equitable estoppel is an affirmative defense, not a claim.
Equitable estoppel requires proof of: (1) an action or inaction (2) on the part of one against
whom estoppel is asserted (3) that induces reasonable reliance by another (4) which is to his

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or her detriment. Milas v. Labor Ass’n of Wis., Inc., 214 Wis. 2d 1, 11-12, 571 N.W. 2d 656
(Wis. 1997). Although the equitable estoppel doctrine may be used as affirmative defense, its
elements are broadly worded. Moreover, Hocking v. City of Dodgeville, 326 Wis.2d 155, 785
N.W.2d 398, 174 n.10 (Wis. 2010), contains the following language noting that the plaintiffs,
argued that “they satisfy the requirements of an equitable estoppel claim.” See generally also,
Kenseth v. Dean Health Plan, Inc., 610 F.3d 452, 456, 463 (7th Cir. 2010) (applying federal
common law). Consequently, at this juncture of the proceedings, Reinhart has not established
that equitable estoppel is only an affirmative defense.
Reinhart also states that the proposed amended complaint fails to state a cause
of action for intentional misrepresentation. With respect to a claim of intentional
misrepresentation, the elements under Wisconsin law are: (1) the defendant made a
representation of fact; (2) the representation of fact was untrue; (3) the defendant made the
representation either knowing that it was untrue, or recklessly not caring whether it was true
or false; (4) the defendant made the representation with the intent to deceive the plaintiff in
order to induce the plaintiff to act on it to plaintiff’s pecuniary damage; and (5) the plaintiff
believed that the representation was true and relied on it. Ramsden v. Farm Credit Servs. of
N. Cent. Wis. ACA, 223 Wis.2d 704, 718-719, 590 N.W.2d 1, 7 (Wis. Ct. App. 1998). An
intentional misrepresentation claim may arise either from a “failure to disclose a material fact”
or from a “statement of a material fact which is untrue.” Id. at 5.

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Count IV of the proposed amended complaint alleges that Reinhart intentionally
elected not to disclose the date by which the statute of limitations would expire on Mohamed’s
action, that because of the attorney-client relationship it had a duty to disclose the statute of
limitations on such action, that by failing to do so it placed its interests ahead of those of
Mohamed, and that Reinhart’s failure to disclose the statute of limitations was to induce
Mohamed to refrain from filing a lawsuit against Reinhart. Further, Mohamed alleges that
he justifiably did not file a lawsuit against Reinhart within the time that Reinhart now claims
the statute of limitation expired. The foregoing sufficiently alleges the elements of intentional
misrepresentation, including the existence of Reinhart’s duty to disclose the statute of
limitations to Mohamed.
Reinhart maintains that it had a duty not to disclose such information because
of the conflict of interest between its own interests and those of Mohamed. However, at this
stage of the proceedings, such contention does not establish that Mohamed’s intentional
misrepresentation claim fails to state a cause of action. Furthermore, Mohamed’s citations to
the Wisconsin Rules of Professional Conduct, suggest that he is using them to posit Reinhart’s
duty to him, see Tensfeldt v. Haberman, 319 Wis.2d 329, 768 N.W.2d 641, 656 n.25 (Wis.
2009), rather than to establish a cause of action or serve as a basis for civil liability.

Based

on the foregoing, Mohamed’s motion to amend his complaint is granted.
NOW, THEREFORE, BASED ON THE FOREGOING, IT IS HEREBY
ORDERED THAT:

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Mohamed’s motion to amend his complaint (ECF No. 46) is GRANTED.
The Clerk of Court is DIRECTED TO FILE the proposed amended complaint
(ECF No. 47) as the Amended Complaint in this action.
Dated at Milwaukee, Wisconsin this 26th day of April, 2012.
BY THE COURT

_______________________
Hon. Rudolph T. Randa
U.S. District Judge

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