United States District Court, D. Delaware
TROY UNDERWOOD, TRANSCEND TECHNOLOGIES GROUP, INC., Plaintiffs,
BENEFIT EXPRESS SERVICES, LLC; LLR EQUITY PARTNERS IV, L.P.; LLR EQUITY PARTNERS PARALLEL IV, L.P.; MICHAEL STERNKLAR; SCOTT EVANS, Defendants. BENEFIT EXPRESS SERVICES, LLC, Defendant/Counterclaim-Plaintiff,
TROY UNDERWOOD, TRANSCEND TECHNOLOGIES GROUP, INC. Plaintiff/Counterclaim-Defendants.
before this Court is Plaintiffs' Motion for Leave to File
Second Amended Complaint. (D.I. 58). For the reasons to
follow, the Court will GRANT Plaintiffs' Motion.
Troy Underwoood and Transcend Technologies Group, Inc. moved
for leave to file a second amended complaint against LLR
Equity Partners IV, L.P., LLR Equity Partners Parallel IV,
L.P. (collectively, "LLR"), Benefit Express
Services, LLC, Michael Sternklar, and Scott Evans. (D.I. 58).
suit originated out of an August 4, 2016 Asset Purchase
Agreement through which Plaintiffs sold the assets of their
company, Benefits CONNECT, to Benefit Express. (D.I. 1). On
March 5, 2018, Plaintiffs filed their original complaint
against Benefit Express for breach of the Asset Purchase
Agreement and breach of the implied covenant of good faith
and fair dealing. (Id.). Benefit Express responded
to the two-count complaint with its Answer and Counterclaims
on April 30, 2018. (D.I. 7).
21, 2018, Plaintiffs filed a First Amended Complaint against
Defendants. (D.I. 15). In the First Amended Complaint,
Plaintiffs alleged five causes of action: fraud and negligent
misrepresentation against Benefit Express and Mr. Sternklar
(id. at ¶¶ 75-81, 87-91 (Counts I and
III)); aiding and abetting fraud against LLR and Mr. Evans
(id. at ¶¶ 82-86 (Count II)); and breach
of contract and breach of the covenant of good faith and fair
dealing against Benefit Express (id. at ¶¶
92-98, 99-105 (Counts IV and V)).
25, 2018, Defendants filed a motion to dismiss the first,
second, and third counts. (D.I. 24). On December 28, 2018,
Chief Magistrate Judge Thynge issued a Report and
Recommendation that recommended denying dismissal of Counts I
and III (fraud and negligent misrepresentation against
Benefit Express and Mr. Sternklar) and granting dismissal as
to Count II (aiding and abetting fraud against LLR and Mr.
Evans). (D.I. 49 at 13). I adopted the Report and
Recommendation on March 5, 2019. (D.I. 65). On February 6,
2019, Plaintiffs filed the motion at issue to include
additional allegations in support of their claims, to
re-assert their aiding and abetting claims against LLR and
Mr. Evans, and to add a sixth cause of action: tortious
interference with contract against LLR (D.I. 58-2 at
¶¶ 119-25 (Count VI)).
15(a) of the Federal Rules of Civil Procedure provides:
"A party may amend its pleading once as a matter of
course" within specified time frames during the early
stages of a case. A party seeking to amend after the
specified deadlines or more than once may only do so
"with the opposing party's written consent or the
court's leave." Fed.R.Civ.P. 15(a)(2). Leave to
amend "should [be] freely give[n] ... when justice so
requires." Id. The decision to grant or deny
leave to amend lies within the discretion of the court.
Foman v. Davis, 371 U.S. 178, 182 (1962); In re
Burlington Coat Factory Sees. Litig., 114 F.3d 1410,
1434 (3d Cir. 1997). The Third Circuit has adopted a generous
approach to the amendment of pleadings. Dole v.
Arco, 921 F.2d 484, 487 (3d Cir. 1990). In the absence
of "undue delay, bad faith, or dilatory motive on the
part of the movant," the leave sought should be
"freely given" unless it is futile or unfairly
prejudicial to the non-moving party. Foman, 371 U.S.
at 182; see also Burlington, 114 F.3d at 1434.
argue, "Documents produced by Defendants on or about
January 18, 2019, revealed certain information that further
supports Plaintiffs' claims and provides bases for an
additional claim for Tortious Interference against Defendants
LLR, Sternklar, and Evans." (D.I. 58 at ¶ 6).
Plaintiffs seek leave to file a second amended complaint that
reflects this newly discovered information.
factors to consider in weighing a motion for leave to amend
are: "(1) whether the amendment has been unduly delayed;
(2) whether the amendment would unfairly prejudice the
non-moving party; (3) whether the amendment is brought for
some improper purpose; and (4) whether the amendment is
futile." Cot'n Wash Inc. v. Henkel Corp.,
56 F.Supp.3d 613, 620 (D. Del. 2014).
in this case do not attempt to argue that they would be
prejudiced by the proposed amended complaint, or that
Plaintiffs delayed in amending, had a bad faith motive, or
repeatedly failed to cure deficiencies in previous
amendments. Defendants only argue that the proposed
amendments are futile with respect to Counts II and VI. (D.I.
59 at 2-3).
claim is not 'futile' merely because it will be
difficult to prove. In other words, the claim must be futile
as a matter of law rather than merely unlikely as a matter of
fact. The issue involved in a motion to dismiss is not
whether the plaintiff will ultimately prevail but whether he
is entitled to present evidence in support of his
claims." Schwartz v. D/FD Operating Services,
L.L.C., 205 F.R.D. 166, 167 (D. Del. 2002) (quoting
Microsurgical Sys., Inc. v. Cooper Companies, Inc.,
797 F.Supp. 333, 336-37 (D. Del. 1992)); In re PMTS
Liquidating Corp., 490 B.R. 174, 184 (D. Del. 2013).
matters are pleaded consistent with Rules 8 and 9(b) of the
Rules of Federal Procedure, the substantive merits of
allegations made in either an amended complaint or an amended
answer should be tested through a substantive motion
(pursuant to, e.g., Rules 12(b)(6) or 56), not a procedural
one." JP Morgan Chase & Co. v. Affiliated
Comput. Servs., Inc., 2009 WL 540673, at *l (D. Del.
Mar. 4, 2009) (rejecting futility arguments that present
substantive disputes of law or fact). Accordingly,
"futility arguments generally should be rejected 'if
they present substantive disputes, either of the law or of
the facts[.]'" Celgene Corp. v. Cyclacel Pharm.,
Inc., 2013 WL 12147602, at *l n. 1 (D. Del. Jan. 11,
2013) (quoting J ...