Bryant v. Dupree, No. 00-13834

• Decision Date: 18 May 2001
• Docket Number: No. 00-13834
• Citation: 252 F.3d 1161
• Parties: (11th Cir. 2001) JOHN BRYANT, On behalf of Himself and all others similarly situated, ROBERT C. EAST, et al., Plaintiffs-Appellants, v. THOMAS E. DUPREE, JR., DAVID P. FRAZIER, et al., Defendants-Appellees,
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1161

252 F.3d 1161 (11th Cir. 2001)

JOHN BRYANT, On behalf of Himself and all others similarly situated, ROBERT C. EAST, et al., Plaintiffs-Appellants, v. THOMAS E. DUPREE, JR., DAVID P. FRAZIER, et al., Defendants-Appellees,

No. 00-13834.

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT.

May 18, 2001.

Appeal from the United States District Court for the Middle District of Georgia. D.C. No. 97-00083 CV-DV-3

Before BARKETT, HILL and KRAVITCH, Circuit Judges.

PER CURIAM:

This is the second appeal of this case and the facts are set out fully in Bryant v. Avado Brands, Inc., 187 F.3d 1271 (11th Cir. 1999). Accordingly, we address only the facts necessary to our decision in the current appeal, in which the plaintiffs challenge the district court's dismissal of their complaint without leave to amend. Because we find that the district court should have allowed the plaintiffs an opportunity to amend their complaint, we reverse and remand.

I. BACKGROUND

Plaintiffs, who are shareholders of Apple South, Inc. (now known as "Avado Brands, Inc."), allege that the defendant officers of the corporation made false and misleading statements in violation of the Securities and Exchange Act of 1934. The district court denied the defendants' motion to dismiss, but certified its order for interlocutory review so that this court could address whether the Private Securities Litigation Reform Act of 1995, 15 U.S.C. § 78u-4 et seq. ("PSLRA") altered the scienter requirement for securities fraud cases. We held it did not. See Bryant, 187 F.3d at 1283. Specifically, we stated that in order to meet the PSLRA's heightened pleading requirement, a plaintiff must plead with particularity facts which give rise to a strong inference that the defendant acted in a severely reckless fashion, but that allegations of motivation and opportunity, without more, do not meet this burden.¹ Id. at 1285-87. Following remand, the defendants renewed their motion to dismiss. The plaintiffs filed a response which included a request for leave to amend. The district court dismissed the complaint with prejudice and denied plaintiffs leave to amend.

II. DISCUSSION

We review for abuse of discretion a district court's denial of a motion to amend. Henson v. Columbus Bank & Trust Co., 770 F.2d 1566, 1574 (11th Cir. 1985). A district court's discretion to dismiss a complaint without leave to amend "is 'severely restrict[ed]' by Fed. R. Civ. P. 15(a), which directs that leave to amend 'shall be freely given when justice so requires.'" Thomas v. Town of Davie, 847 F.2d 771, 773 (11th Cir.1988) (citation omitted). Generally, "[w]here a more carefully drafted complaint might state a claim, a plaintiff must be given at least one chance to amend the complaint before the district court dismisses the action with prejudice." Bank v. Pitt, 928 F.2d 1108, 1112 (11th Cir. 1991). A district court need not, however, allow an amendment (1) where there has been undue delay, bad faith, dilatory motive, or repeated failure to cure deficiencies by amendments previously allowed; (2) where allowing amendment would cause undue prejudice to the opposing party; or (3) where amendment would be futile. See Forman v. Davis, 371 U.S. 178, 182 (1962).

The district court gave several reasons for its refusal to grant the plaintiffs leave to amend. First, the district court stated that the plaintiffs already had been "given one opportunity to amend their complaint." This assertion apparently refers to the plaintiffs' Amended Complaint, filed in response to the defendants' original motion to dismiss. Under Rule 15(a), an amendment may be made either as "a matter of course" or "by leave of court." See Fed. R. Civ. P. 15(a).² The Amended Complaint was filed as a matter of course, and until the renewed motion to dismiss came before the court, the plaintiffs had not asked for leave to amend. Therefore, it cannot be said that the plaintiffs already had been given an opportunity to amend or that the plaintiffs repeatedly had failed to cure deficiencies through previously allowed amendments.

Second, the district court stated that dismissal with prejudice was appropriate because the plaintiffs already had been given notice of the possible deficiencies in their complaint. See Friedlander v. Nims, 755 F.2d 810, 811-12 (11th Cir.1985) (stating that dismissal with prejudice was appropriate where district court gave "specific and repeated warnings" that amendment was necessary). On the contrary, in denying the original motion to dismiss, the district court stated that the plaintiffs' allegations of internal reports showing that the defendants were aware of the falsity of their statements, coupled with evidence of motive and opportunity in the form of insider stock trades, satisfied the heightened pleading requirement. Bryant v. Apple South, Inc., 25 F. Supp. 2d 1372, 1381 (M.D. Ga. 1998). Rather than indicating infirmities in the complaint, the district court's prior opinion created the exact opposite impression. Nor did our opinion in the previous appeal suggest that the plaintiffs' complaint did not satisfy the PSLRA's heightened pleading requirement. See Bryant, 187 F.3d at 1287 ("Having thus set out the law, . . . we remand the case to the district court for proceedings consistent with this opinion."). Furthermore, once the defendants renewed their motion to dismiss, the plaintiffs responded with their first request for leave to amend, which the district court denied. Accordingly, it cannot be said that the plaintiffs failed to correct defects of which they had notice.

The district court also denied leave to amend because it determined that allowing further amendment would be futile in light of the fact that the Amended Complaint "contain[ed] few if any new allegations." This reasoning ignores the fact that the district court earlier had found the complaint sufficient, thus justifying, until this court's opinion, the plaintiffs' belief that they did not need to include any further allegations in the Amended Complaint. As mentioned above, once the defendants renewed their motion to dismiss, the plaintiffs requested leave to amend. The plaintiffs have indicated, moreover, that if given the chance to amend, they will meet the PSLRA's pleading requirement. Thus,...