OPTIMISCORP, a Delaware corporation, ALAN MORELLI, and ANALOG VENTURES, LLC, Plaintiffs,
JOHN WAITE, WILLIAM ATKINS, GREGORY SMITH, and WILLIAM HORNE, Defendants.
Submitted: October 22, 2014
Anthony W. Clark, Esq., Douglas D. Herrmann, Esq., Amy C. Huffman, Esq., SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP, Wilmington, Delaware; Attorneys for Plaintiffs OptimisCorp, Alan Morelli, and Analog Ventures, LLC.
Stephen P. Brauerman, Esq., Vanessa R. Tiradentes, Esq., Sara E. Bussiere, Esq., BAYARD, P.A., Wilmington, Delaware; Attorneys for Defendants John Waite, William Atkins, and Gregory Smith.
Bruce E. Jameson, Esq., Eric J. Juray, Esq., PRICKETT, JONES & ELLIOTT, P.A., Wilmington, Delaware; Attorneys for William Horne.
PARSONS, Vice Chancellor.
Before the Court are the plaintiffs' motion to amend the complaint and the defendants' related motion in limine to exclude allegedly undisclosed causes of action. In short, the defendants moved for summary judgment, and the plaintiffs responded with evidence that the defendants do not believe fairly was pled or disclosed during discovery. Following argument on the motions for summary judgment, the plaintiffs moved to amend their complaint and the defendants sought to exclude the purportedly new allegations and claims. For the reasons that follow, the plaintiffs' motion to amend is denied and the defendants' motion in limine is granted in part and denied in part.
Plaintiff OptimisCorp ("Optimis" or the "Company") is a healthcare technology and service provider. Plaintiff Alan Morelli founded Optimis in 2006 and has been the CEO and chairman of the board ever since. Morelli also is the managing member of Plaintiff Analog Ventures, LLC ("Analog, " and together with Optimis and Morelli, "Plaintiffs"), a company that owns a significant percentage of Optimis's stock. Overall, Morelli directly or indirectly controls almost 7.4 million Optimis shares.
Defendants John Waite, William Atkins, and Gregory Smith (the "Director Defendants") served on the Optimis board from June 2007 until their resignations on June 25, 2013. Waite also served as the Company's Chief Operating Officer from 2009 until June 25, 2013. The Director Defendants became associated with Optimis after they had sold their company, Rancho Physical Therapy, Inc. ("Rancho"), to Optimis. As a result of that sale, the Director Defendants acquired nearly eight million shares of Optimis stock.
Defendant William Horne (together with the Director Defendants, "Defendants") started as a consultant to Optimis in 2006. From January 2008 until May 2013, he served as the company's Chief Financial Officer. Horne owns slightly less than 170, 000 shares of Optimis stock.
On August 5, 2013, Plaintiffs filed their Verified Complaint (the "Complaint") alleging that Defendants: (1) breached their fiduciary duties; (2) violated a stockholder agreement to which they were, and are, parties; (3) tortiously interfered with the Company's contracts and business relations; and (4) generally attempted an unlawful takeover of Optimis by, among other things, using the pretext of purportedly false sexual harassment allegations made by Tina Geller, an Optimis physical therapist. Roughly a year later, after substantial discovery, the Director Defendants and Horne separately moved for summary judgment. The briefing on those motions exceeded 280 pages. I heard argument on the motions for summary judgment on September 8, 2014, and by Order entered on the same day as this Memorandum Opinion, I deny both motions.
The crux of the current dispute relates to arguments made during the briefing on summary judgment. In connection with their opposition briefs, on August 24, 2014, Plaintiffs filed three affidavits, one each from Stephen Levine, Helene Fearon, and Catherine Gentry. The Fearon and Levine affidavits, which are almost identical, aver facts that Plaintiffs rely on to support their allegations that Defendants were involved in a conspiracy along with Joe Godges, George Rohlinger, Jeanine Gunn, Fearon, Levine, and others to undermine Morelli. Those affidavits also allegedly support Plaintiffs' tortious interference claims by detailing the circumstances of what the parties have called the "Fearon Rescission." Of particular note, Plaintiffs entered into Confidential Cooperation and Release Agreements with Fearon and Levine on May 2 and May 11, 2014, respectively, but the affidavits first appeared as exhibits to Plaintiffs' opposition briefs in late August. The Gentry affidavit purports to support Plaintiffs' allegations of continued interference with Rancho.
Intimately intertwined with resolution of the summary judgment motions are Plaintiffs' motion to amend the complaint (the "Motion to Amend") and Defendants' joint motion in limine to exclude undisclosed causes of action ("Defendants' Motion in Limine"). Plaintiffs moved to amend on September 10, 2014, primarily to allege the existence of additional co-conspirators, and Defendants filed their Motion in Limine on September 26. The Motion in Limine represents, in effect, a further opposition to the Motion to Amend and both parties relied, in part, on arguments made in their respective summary judgment briefs regarding the motions to amend and in limine. After full briefing on the latter two motions, the Court heard oral argument on October 22.
Because of the close relationship between the summary judgment motions and the related motions to amend and to exclude undisclosed causes of action, I considered it most efficient to resolve the latter motions first. This Memorandum Opinion, therefore, constitutes my ruling on Plaintiffs' Motion to Amend and Defendants' Motion in Limine. In considering the motions at issue, the Court extensively reviewed the items in the discovery record to which the parties cited in their briefs. All told, this required review of over a thousand pages of material in addition to the already substantial briefing on the several pending motions in this case.
II. STANDARDS OF REVIEW
Because Plaintiffs filed their Motion to Amend after the scheduled date for completion of fact discovery and after briefing and argument on comprehensive motions for summary judgment, the pending motions require me to consider the intersection of the principles of notice pleading and the rules governing discovery. Considerations of that nature were important in deciding whether to allow the requested amendment of the Complaint.
A. Notice Pleading
A complaint must contain sufficient facts to place the opposing party on notice of the claims asserted and the basis for relief. This pleading standard is "minimal." The Court must "accept even vague allegations in the Complaint as
'well-pleaded' if they provide the defendant notice of the claim."
B. Amendment of Pleadings
Court of Chancery Rule 15 governs motions for leave to amend. After a responsive pleading has been filed, as it was long ago in this case, a party may amend its pleading "only by leave of Court or by written consent of the adverse party; and leave shall be freely given when justice so requires." Courts have interpreted this provision to allow for liberal amendment in the interest of resolving cases on the merits. "A motion to amend may be denied, however, if the amendment would be futile, in the sense that the legal insufficiency of the amendment is obvious on its face." That is, the motion may be denied if the proposed amendment immediately would fall to a Rule 12(b)(6) motion to dismiss. Leave to amend also may be denied if there is a showing of substantial prejudice, bad faith, dilatory motive, or repeated failures to cure by prior amendment.Ultimately, a motion for leave to amend is left to the sound discretion of the trial court.
In the specific circumstances of this case, I also consider Court of Chancery Rule 15(aaa) relevant by analogy. Plaintiffs filed their motion to amend after conclusion of the briefing and argument on Defendants' motions for summary judgment. While this procedural posture technically falls outside the scope of Rule 15(aaa),  I consider the theory underlying the rule instructive. "The purpose of the rule is to minimize situations where this Court must adjudicate multiple motions to dismiss in the same action."Here, granting the motion to amend would expand the scope of the issues the parties and the Court would have to face at trial, not to mention the difficulties it may have created for Defendants in the final stages of discovery. The trial in this action will begin on February 6, 2015. Accordingly, I am reluctant to afford Plaintiffs, who delayed moving to amend until after the conclusion of briefing and argument on motions for summary judgment, the full benefit of the liberal standards generally governing amendment of pleadings, especially when the amendments they seek relate directly to the issues addressed in the summary judgment motions and pose problems in terms of fair notice.
The "purpose of discovery is to advance issue formation, to assist in fact revelation, and to reduce the element of surprise at trial." Interrogatories are one method of discovery, and parties served with interrogatories must answer them fully and truthfully. Additionally, Court of Chancery Rule 26(e) requires supplementation ...