Opinion
Civil Action No. 3:01-CV-0853-R
February 14, 2002
ORDER
Pursuant to the District Court's Scheduling Order, filed May 8, 2001, Defendants' Motion for Leave to File Amended Answer and Counterclaim and Supporting Brief, filed December 31, 2001, has been referred to this Court for hearing, if necessary, and for determination. For the following reasons, the motion is GRANTED.
The background facts are taken from Defendants' Motion for Leave to File Amended Answer and Counterclaim and Supporting Brief, filed December 31, 2001; from Plaintiff's Response to Defendants' Motion for Leave to File Amended Answer and Counterclaim, filed January 18, 2002; and from the Reply in Support of Defendants' Motion for Leave to File Amended Answer and Counterclaim, filed February 4, 2002. The background facts are undisputed unless otherwise indicated.
Plaintiff Carl Marvin Applewhite (Applewhite) filed this breach of contract and negligence action against Defendants Computer Associates International (CA) and Sterling Software (Sterling) on March 29, 2001, in state court. (P1's Resp. at 2.) Applewhite, a former President of Sterling's Applications International Division, alleges that he executed a Stock Option Agreement with Sterling on March 20, 1998, and that Sterling became a subsidiary of CA in the spring of 2000. (Id. at 2, Ex. A.) He further alleges that he had been unable to exercise his stock options before CA's stock "plummeted" in July 2000 because the Defendants had "lost his records." (Id. at 1.)
On May 4, 2001, the Defendants removed this case to the United States District Court for the Northern District of Texas, and, on May 14, 2001, they filed their original answer. By agreement of the parties, the deadline for filing amended pleadings was extended to January 15, 2002, and the deadline for completing discovery was extended to April 15, 2002.
The Defendants seek leave to file an amended answer and counterclaim, which would include the addition of four affirmative defenses and one counterclaim. The four additional affirmative defenses are: (1) the action is barred because conditions precedent to bringing the action did not occur, (2) the negligence claim is barred because the dispute is contractual, (3) exemplary damages are barred because the dispute is contractual, and (4) the negligence claim is barred in any event because it is barred by the Separation Agreement and General Release. (Defs.' Am. Ans. at 7-8.) The counterclaim seeks damages in the event the negligence claim is construed as separate from the breach of contract claim. (Id. at 8-9.) As noted above, the Defendants allege that a separate negligence claim is barred by the Separation Agreement and General Release. (Id. at 8.) In their counterclaim the Defendants claim that the Separation Agreement and General Release provide for damages should a contractually-barred suit be brought against them. (Id. at 9.)
The Defendants primarily argue that Applewhite has not asserted a negligence claim. Rather, they argue that "the negligence claim . . . is actually a part of Plaintiff's breach of contract claim." (Defs.' Am. Ans. at 9.)
The Defendants admit that the Separation Agreement and General Release do not prohibit Applewhite from bringing a breach of contract claim arising out of his Stock Option Agreement. (Defs.' Am. Ans. at 8-9.)
Applewhite challenges the Defendants' motion for leave to amend on three grounds. Specifically, he contends that: (1) the motion was unduly delayed, (2) the motion is unduly prejudicial, and (3) the amendment is futile. (P1.'s Resp. at 3, 4, 5.)
The Court now turns to the legal standards that guide this analysis.
II. Legal Standards
"Leave [to amend] shall be freely given when justice so requires." Fed.R.Civ.P. 15(a); Coghlan v. Wellcraft Marine Corp., 240 F.3d 449, 452 (5th Cir. 2001) (noting how Fed.R.Civ.P. 15(a) limits a court's discretion to deny leave to amend). Denying leave to amend is not appropriate "where the underlying facts or circumstances relied upon by the plaintiff may be a proper subject of relief." Coghlan, 240 F.3d at 452 . Moreover, a court must have "substantial reason" to deny leave to amend. State of Louisiana v. Litton Mortgage Co., 50 F.3d 1298, 1303 (5th Cir. 1995). However, a court may deny leave to amend where there is "undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [and] futility of amendment." Id .
The Court now turns to the merits of the motion.
III. Analysis
As detailed above, Applewhite challenges the Defendants' motion for leave to amend on three grounds: undue delay, undue prejudice, and futility.
First, with respect to undue delay, Applewhite argues that the Defendants were aware of the substance of their affirmative defenses and their counterclaim when they filed their original answer and, thus, could have pled these allegations at that time. (P1.'s Resp. at 2-3.) Defendants counter that they did not receive Applewhite's discovery responses until the end of November 200 land that those responses provided factual support for the allegations they included in the amended answer and counterclaim. (Defs.' Reply at 9.) ". . . [W]hen determining whether a delay ought to bar an amendment to the pleadings, a court may properly consider . . . whether the facts underlying the amended complaint were known to the party when the original complaint was filed." Hartsell v. Dr. Pepper, No. 3:96-CV-1524P, 2000 WL 1194537 at *6 (N.D. Tex. 2000) (citing Matter of Southmark Corp., 88 F.3d 311, 316 (5th Cir1996)). The Court finds no undue delay. More to the point, although the parties dispute the extent of the Defendants' knowledge as to the facts supporting their affirmative defenses and counterclaim at the time they filed their original answer, there appears to be no disagreement that the Defendants' discovery efforts yielded information on these claims at the end of November 2001. The Court does not find it unreasonable that the Defendants had to undertake some discovery efforts, which necessarily caused delay, in order to confirm the facts upon which they based their affirmative defenses and counterclaim. The Defendants initiated their discovery in October 2001 some five months after they filed their original answer. Perhaps their discovery efforts could have been commenced earlier but the mere passage of time does not constitute undue delay. Chitimacha Tribe v. Harry L. Laws Co., 690 F.2d 1157, 1163 (5th Cir. 1982). When, however, "there has been an apparent lack of diligence on the part of the movant, the burden shifts to the movant to prove that the delay was due to excusable neglect." Id . (citing Daves v. Payless Cashways, Inc., 661 F.2d 1022, 1025 (5th Cir. 1981) and Dussouy v. Gulf Coast Investment Corp., 660 F.2d 594, 598 n. 2 (5th Cir. 1981). There is no indication of a lack of diligence by the Defendants in this case. Furthermore, Applewhite does not contest that the Defendants filed their motion for leave to amend before the agreed deadline of January 15, 2002. Applewhite also admits that he did not oppose the extension of the amended pleadings deadline to January 15, 2002. (P1.'s Resp. at 4.) As such, the Court does not find undue delay in the Defendants' filing of this motion for leave to amend.
The Court notes that the deadline for completion of discovery is April 15, 2002.
Next, with respect to undue prejudice, Applewhite argues that he was unable to address the merits of the amended answer in his motion for summary judgment, which, in accordance with the joint submission procedures, he served on the Defendants on November 21, 2001. (Id. at 3-4.) However, on November 14, 2001, the parties agreed to extend the amended pleadings deadline to January 15, 2002. Therefore, one week before sewing his motion for summary judgment on the Defendants, Applewhite was not only put on notice that a motion for leave to file an amended pleading might be contemplated by the Defendants, but he also agreed to the circumstances of which he now complains by not opposing the extension of the deadline. As such, the Court does not find that Applewhite would be unduly prejudiced by granting the motion for leave to amend.
Applewhite also contends that the Defendants inappropriately addressed "unpled matters" in their response to his motion for summary judgment. (P1's Resp. at 4.) However, this argument goes to the merits of the motion for summary judgment, not to the merits of this motion for leave to amend.
Finally, with respect to futility of amendment, Applewhite argues that the four additional affirmative defenses and the counterclaim are futile because they are based on an unenforceable, inconspicuous contract clause. (Id. at 5.) The futility of an amended pleading is examined under the same standard as applies to Rule 12(b)(6) motions. Stripling v. Jordan, 234 F.3d 863, 873 (5th Cir. 2000). Therefore, "[t]he question . . . is whether in the light most favorable to the [movant] and with every doubt resolved in his behalf, the [amended pleading] states any valid claim for relief." Id . In reviewing Rule 12(b)(6) motion, the court does not look beyond the face of the pleadings to determine whether relief should be granted. Spivey v. Robertson, 197 F.3d 772, 774 (5th Cir. 1999).
In the instant motion, the Defendants contend that: (1) the contract bars Applewhite from bringing a separate negligence claim against them, (2) the contract provides for damages in the event that Applewhite brings a barred claim against them, (3) the contract clause is conspicuous, and (4) Applewhite had actual knowledge of the contract clause. (Ds' Reply at 8.) In view of the parties' dispute over whether the contract clause is enforceable and conspicuous, which is not resolved on the face of the pleadings, the Court cannot find that the Defendants have stated no claims in their affirmative defenses or counterclaim upon which relief can be granted. Therefore, resolving all doubts regarding the contract in favor of the amending party, i.e, the Defendants, the Court cannot conclude that the four additional affirmative defenses and the counterclaim are futile as a matter of law.
IV. Conclusion
For the foregoing reasons, the Defendants' Motion for Leave to File Amended Answer and Counterclaim, filed December 31, 2001, is GRANTED.
SO ORDERED.