United States District Court, D. Delaware
before the Court is Defendant Ronald Fontanella's Motion
for Leave to Amend and Supplement His Answer and
Counterclaims. (D.L 73). The matter is fully briefed. (D.I.
74, 81, 88). For the reasons stated herein, it is
HEREBY ORDERED that Defendant's motion
is DENIED as to proposed Counts Four, Five,
Seven, Eight, and Nine, and is otherwise
of background, Plaintiff Heritage Handoff Holdings filed this
suit against Defendant on August 10, 2016. (D.I. 1). On
September 30, 2016, Defendant answered Plaintiffs complaint
and asserted two counterclaims. (D.I. 8). Plaintiff
subsequently moved for summary judgment on those
counterclaims. (D.I. 68). On July 25, 2018, 1 granted
Plaintiffs motion as to Defendant's claim for breach of
the covenant of good faith and fair dealing, and denied it as
to his claim for breach of contract. (D.I. 130). Defendant
seeks to assert seven new counterclaims and to amend his
previously asserted counterclaims. (See D.I. 74,
Exh. B). Defendant filed his motion to amend on
November 21, 2017. (D.I. 73). The deadline was March 15,
2017. (D.I. 13).
court-ordered schedule "may be modified only for good
cause and with the judge's consent." Fed.R.Civ.P.
16(b)(4). "[T]he good cause standard under [Federal Rule
of Civil Procedure] 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 [Federal Rule of Civil Procedure]
15." Intellectual Ventures I LLC v. Toshiba
Corp., 2016 WL 4690384, at *1 (D. Del. Sept. 7, 2016)
(citing E. Minerals & Chems. Co. v. Mohan, 225
F.3d 330, 340 (3d Cir. 2000)).
initial matter, I think the good cause standard under Rule
16(b) has been met. While it appears that Defendant possessed
at least some of the relevant facts and documents prior to
the expiration of the deadline to amend, it seems to me that
Defendant acted diligently once he became aware of the issues
underlying his proposed amendments.
concluded Defendant has 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).
opposition to Defendant's motion to amend implicates two
of the factors under Rule 15 that weigh against permitting
amendments. They are undue prejudice and futility of
prejudice 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 it 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). 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 (citation omitted).
"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
proposed Counts One and Two relate to the issue of
pre-closing tax refunds, which was the subject of Plaintiff s
motion for partial summary judgment. Those counts seek
reformation of Section 4.1(d) of the parties' stock
purchase agreement based on mutual mistake and unilateral
mistake, respectively. (D.I. 74, Exh. A at 23-24 ¶¶
56-68). As to those counts, Plaintiff argues undue prejudice
under Rule 15. (D.I. 81 at 8-9). I am not persuaded. The
payment of pre-closing tax refunds pursuant to Section 4.1(d)
has been an issue in this case since Defendant filed his
answer in September 2016. While Plaintiff has not taken any
deposition testimony specifically on the issue of the
scrivener's error that forms the basis of Defendant's
counterclaims, I do not think allowing Defendant to pursue
those claims would require Plaintiff to expend significant
additional resources or delay the resolution of the dispute.
Indeed, Plaintiff does not make any argument to that effect.
Nor do I think Plaintiff would be disadvantaged or otherwise
deprived of the opportunity to present facts or evidence at
trial. Thus, Defendant's motion is
GRANTED as to proposed Counts One and Two.
proposed Count Three similarly relates to the issue of
pre-closing tax refunds. (D.I. 74, Exh. A at 25-26
¶¶ 69-72 (asserting claim for breach of Section
4.1(d) of the parties' agreement)). In his answer to
Plaintiffs complaint, Defendant asserted a nearly identical
breach of contract counterclaim and now seeks to amend that
claim. (See id., Exh. B at 27 ¶¶ 69-72).
Plaintiff argues Defendant has failed to show good cause
under Rule 16. (D.I. 81 at 9-10). As stated above, I think
Defendant has satisfied the Rule 16 good cause standard. I
note, however, that paragraph 70 of Defendant's proposed
amendment, which states that "Section 4.1(d) of the
Agreement states that Heritage 'shall' pay any tax
refunds or credits 'received by the Company' to
Fontanella within 15 days of receipt," conflicts with
the express terms of Section 4.1(d) as it is currently
written. (See D.I. 74, Exh. A at 19). I therefore
understand Defendant's proposed Count Three to come into
play only if Defendant prevails on his claim for reformation
of Section 4.1(d). Defendant's motion is
GRANTED as to Count Three.
Counts One through Three, Defendant's proposed Counts
Four, Five, and Nine all relate to issues that have not
previously been a part of this case. Count Four alleges that
Plaintiff breached Section 1.2(b) of the agreement by failing
to make quarterly note payments to Defendant. (D.I. 74, Exh.
A at 26 ¶¶ 73-77). Count Five alleges that
Plaintiff failed to fulfill its obligation to perform
"compliance activities," which, as I understand it,
relate to environmental remediation. (Id. at 27
¶¶ 78-84). In Count Nine, Defendant seeks to
recover money Plaintiff allegedly owes to Sperry Mitchell,
who assigned his claim to Defendant. (Id. at 30-31
¶¶ 104-110). As to these counts, Plaintiff makes
various arguments related to untimeliness, futility of
amendment, and undue prejudice. (See D.I. 81 at
10-16, 20-21). I am persuaded that allowing Defendant to
pursue these counts would be unduly prejudicial to Plaintiff.
That is because Plaintiff would be required to expend
significant resources to conduct discovery on various issues
wholly unrelated to any of the issues that have thus far been
a part of this case. Accordingly, Defendant's motion is
DENIED as to proposed Counts Four, Five, and
proposed Count Six alleges that in breach of the parties
agreement, Plaintiff failed to provide Defendant company tax
returns and information related to environmental compliance
activities. (D.I. 74, Exh. A at 28 ¶¶ 85-89).
Plaintiff argues this proposed count is untimely under Rule
16. (D.I. 81 at 16). As stated above, I think Defendant has
met the Rule 16 good cause standard. Accordingly,
Defendant's motion is GRANTED as to
proposed Count Six.
proposed Count Seven alleges that Plaintiff breached the
covenant of good faith and fair dealing by failing to provide
Defendant information related to the company's tax
returns and environmental compliance activities. (D.I. 74,
Exh. A at 28-29 ¶¶ 90-96). I previously granted
Plaintiffs motion for summary judgment on the implied
covenant counterclaim that Defendant asserted in his answer
to Plaintiffs complaint. (See D.I. 130 at 4-5). That
counterclaim related only to Plaintiffs refusal to provide
Defendant company tax returns, whereas Defendant's
amended counterclaim includes allegations related to the
company's compliance activities. (Compare D.I. 8
at 14 ¶¶ 15-18, with D.I. 74, Exh. A at
28-29 ¶¶ 90-96).
argues this proposed count is untimely and would otherwise be
futile. (D.I. 81 at 16-17). I agree with Plaintiff that it
would be futile. Defendant fails to identify any relevant gap
in the parties' agreement that the implied covenant might
fill. See Allied Capital Corp. v. GC-Sun-Holdings,
L.P., 910 A.2d 1020, 1032 (Del. Ch. 2006) (stating that
"implied covenant analysis will only be applied when the
contract is truly silent with respect to the matter at
hand"). Indeed, Defendant's amended counterclaim
seems to be based on the same facts that underlie proposed
Count Six, which alleges breach of contract. As Plaintiff
points out, a party generally cannot assert a claim for
breach of the implied covenant based on the same conduct
which is said to be in breach of express provisions in a
contract. Metro Commc'n Corp. BVI v. Advanced
Mobilecomm Techs. Inc., 854 A.2d 121, 141, n.32 (Del.
Ch. 2004) (citation omitted). Thus, the implied covenant cannot
be invoked to challenge Plaintiffs alleged failure to provide
Defendant information related to the company's
environmental compliance activities. Defendant's motion is
DENIED as to Count Seven.
Defendant's proposed Count VIII alleges that Plaintiff
has violated the Connecticut Unfair Trade Practices Act
("CUTPA"). (D.I. 74, Exh. A at 29-30 ¶¶
97-103). Plaintiff argues this claim is untimely and would
otherwise be futile. ...