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Cavi v. Evolving Systems NC Inc.

United States District Court, D. Delaware

May 23, 2018

LARS CAVI, Plaintiff,
v.
EVOLVING SYSTEMS NC, INC., RATEINTEGRATION, INC., AND THOMAS THEKKETHALA, Defendants.

          MEMORANDUM ORDER

         Presently before the Court is Defendants Evolving Systems NC and RateIntegration's motion to amend their answer and add counterclaims. (D.I. 69). Plaintiff filed a response. (D.I. 72).

         Defendants seek to add counterclaims against Plaintiff for unjust enrichment, fraudulent inducement, equitable fraud, and negligent misrepresentation. (D.I. 69-1, pp. 31-33 at ¶¶ 16-35). The counterclaims arise out of Plaintiff s allegedly filing false "Commission Statements, " resulting in $207, 869 in overpaid commissions. (Id., p. 30 at ¶¶ 8-12).

         Defendants filed their motion on October 23, 2017. (D.I. 69). The deadline was June 22, 2017. (D.I. 51 at 1).

         A court-ordered schedule "may be modified only for good cause and with the judge's consent." Fed.R.Civ.P. 16(b). "[T]he good cause standard under Rule 16(b) hinges on diligence of the movant, and not on prejudice to the non-moving party." Roquette Freres v. SPI Pharma, Inc., 2009 WL 1444835, at *4 (D. Del. May 21, 2009). "Only after having found the requisite showing of good cause will the court consider whether the proposed amended pleading meets the standard under Fed.R.Civ.P. 15." Intellectual Ventures I LLC v. Toshiba Corp., 2016 WL 4690384, at *1 (D. Del. Sept. 7, 2016) (citing E. Minerals & Chems. Co. v. Mahan, 225 F.3d 330, 340 (3d Cir. 2000)).

         As an initial matter, I think the good cause standard under Rule 16(b) has been met. In their motion, Defendants represent that they only recently discovered the factual bases supporting their proposed counterclaims. In particular, Defendants maintain that in preparing responses to Plaintiffs discovery requests in late-August 2017, Defendant Ratelntegration's finance team discovered that Plaintiff had submitted several false Commission Statements resulting in $207, 869 in overpaid commissions. (See D.I. 69 at 2-3). While it appears the facts underlying the counterclaims were in Defendants' possession prior to the expiration of the deadline to amend, it seems to me that Defendants acted diligently once they became aware of the overpaid commissions.

         Having concluded Defendants have met the Rule 16(b) good cause standard, I now turn to Rule 15. Under Rule 15, "[t]he court should freely give leave [to amend] when justice so requires." Fed.R.Civ.P. 15(a)(2). A court may deny leave to amend, however, for reasons of undue delay, bad faith on part of the moving party, undue prejudice to the non-moving party, or futility of amendment. Foman v. Davis, 371 U.S. 178, 182 (1962). "The decision to grant a motion for leave to amend is within the sound discretion of the District Court." Winer Family Trust v. Queen, 503 F.3d 319, 331 (3d Cir. 2007).

         Plaintiffs opposition to Defendants' motion to amend implicates three of the factors that weigh against permitting amendments. They are undue delay, prejudice, and futility of amendment. (See D.I. 72 at 13-18).

         As to undue delay, I think Defendants' delay is "neither so egregious nor unexplained as to warrant refusal of leave to amend." See Arthur v. Maersk, Inc., 434 F.3d 196, 204 (3d Cir. 2006). As noted above, Defendants did not discover the facts underlying their proposed counterclaims until discovery was underway. Further, "[t]he liberality of Rule 15(a)... allows for misunderstandings and good-faith lapses in judgment, so long as the party thereafter acts reasonably and diligently." Id. at 206. While it appears Defendants possessed the relevant facts prior to expiration of the deadline, I think the record demonstrates that Defendants acted reasonably and diligently in filing their motion relatively soon after they uncovered the unpaid commissions at issue. In any event, "[d]elay alone is not sufficient to justify denial of leave to amend." Id. at 204.

         Further, I do not think Plaintiff is particularly prejudiced by Defendants' delay in seeking to add their counterclaims. Prejudice to the non-moving party occurs when "allowing the amended pleading would (1) require the non-moving party to expend significant additional resources to conduct discovery and prepare for trial, (2) significantly delay the resolution of the dispute, or (3) prevent [a party] from bringing a timely action in another jurisdiction." Intellectual Ventures, 2016 WL 4690384, at *1 (quoting Long v. Wilson, 393 F.3d 390, 400 (3d Cir. 2004)). To show undue prejudice, Plaintiff must demonstrate that he will be "unfairly disadvantaged or deprived of the opportunity to present facts or evidence" unless leave to amend is denied. Bechtel v. Robinson, 886 F.2d 644, 652 (3d Cir. 1989).

         Here, Defendants' proposed counterclaims seem closely related to several of Plaintiff s already asserted claims related to unpaid commissions. Plaintiff claims he is owed $136, 737.72 in unpaid commissions while Defendants claim Plaintiff was in fact overpaid in commissions by $207, 869. In light of the interrelatedness of these claims, I do not think allowing Defendants leave to amend would unfairly disadvantage Plaintiff, deprive him the opportunity to present facts related to the commissions at issue, or require him to expend significant additional resources. Nor do I think allowing leave to amend would significantly delay resolution of the dispute.

         I agree with Plaintiff, however, that Defendants' proposed amendment would be futile. A proposed amendment would be futile if "the complaint as amended is frivolous, advances a claim that is legally insufficient on its face, or fails to state a claim upon which relief can be granted." Intellectual Ventures, 2016 WL 4690384, at *1.

         In his opposition, Plaintiff argues amendment would be futile because Defendants' proposed counterclaims do not meet the heightened pleading standard under Federal Rule of Civil Procedure 9(b) and "are otherwise barred by the applicable statute of limitations." (D.I. 72 at 16).

         As to Rule 9(b), I agree with Plaintiff that Defendants' counterclaims fail to meet the heightened pleading standard required by the Rule.

         As an initial matter, I agree with Plaintiff that not only must Defendants' fraudulent inducement and equitable fraud claims meet the 9(b) standard but so too must their claims for negligent misrepresentation and unjust enrichment. The heightened pleading standard required by Rule 9(b) extends to claims of negligent misrepresentation and unjust enrichment that "sound in fraud." See Travelers Indent. Co. v. Cephalon, Inc.,32 F.Supp.3d 538, 550-51 (E.D. Pa. 2014), aff'd,620 Fed.Appx. 82 (3d Cir. 2015) (applying Rule 9(b) standard to plaintiffs' negligent misrepresentation claim where claim was based on allegations that the defendant made "deliberate mispresentat[ions]"); Zuniga v. Am. Home ...


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