Leave To Amend Complaint Is Freely Given Where There Is No Prejudice To The Non-moving Party
PCT v. Authentic Specialty Foods, Inc. (In re Fleming Cos., Inc.), 347 B.R. 163 (Bankr. D. Del. 2006) (Judge Mary F. Walrath)
In this adversary proceeding, after eight months of litigation, the plaintiff sought leave to amend its complaint to add three additional causes of action. The Court found that, where discovery deadlines had not expired and where the plaintiff was willing to allow defendant to take additional discovery, the Court held there was no prejudice to the defendant, no undue delay by plaintiff, and amendment would not be futile and allowed the amendment.
Plaintiff, the PCT, filed its complaint against defendant, Authentic Specialty Foods, Inc., on March 28, 2005. On December 13, 2005, the PCT moved to amend its complaint to add additional counts for (i) avoidance of overpayments under 11 U.S.C. §§ 544, 548 and 549 (“Count 7”); (ii) breach of contract (“Count 8”); and (iii) quantum meruit (“Count 9”). Authentic opposed the motion.
Noting that “prejudice to the non-moving party is the touchstone for the denial of an amendment,” the Court looked at whether the case was at a point at which allowing the amendment would unduly prejudice Authentic.
Authentic argued that amendment would prejudice Authentic’s ability to present its case because it had already used up its allotment of agreed discovery requests. The Court noted, however, that it had already extended discovery for a period of time after mediation of the case was completed and that, realistically, the case could not be mediated until after the issues relating to the amendment were addressed. Second, the Court accepted the PCT’s offer to stipulate to extend the number of discovery requests that Authentic was permitted to make, thereby alleviating any prejudice.
Authentic also argued that the PCT unduly delayed filing its motion. The Court disagreed, noting that the PCT filed its motion to amend before the completion of discovery. Noting the myriad case law that hold delays of significantly longer periods, without prejudice, have been acceptable, and in light of the fact that the parties had actually engaged in settlement negotiations over the issues raised by the proposed amendment, the Court held that the PCT did not unduly delay by waiting 8 months to file its motion.
Authentic also asserted that Counts 7 and 9 were meritless, and that amendment would therefore be futile. Authentic argued that the claim contained in Count 7 could only be pursued under section 549, and therefore would be time-barred by section 549(d). The Court found, however, that there was a question as to the timing of transaction, and thus whether the statute of limitation had run, precluding a finding that amendment would be futile.
Authentic also argued that adding Count 9 was futile because it too was time-barred. The Court held that California law applied. Authentic proposed that the two-year statute of limitation governed Count 9 as a claim arising from an unwritten contract. The PCT countered that Count 9 related to a written contract with a four-year statute of limitation. While the Court ultimately agreed with Authentic that the two-year limitation period applied, the Court found that the assertions in Authentic’s brief were insufficient to enable the Court to determine whether the applicable period had run. Therefore, the Court granted the PCT leave to amend its complaint to add Counts 7, 8 and 9.
