Bensinger v. Denbury Res., Inc.
| Decision Date | 03 July 2013 |
| Docket Number | 10-CV-1917 |
| Parties | ELI BENSINGER, Individually and on Behalf of All Others Similarly Situated, Plaintiffs, v. DENBURY RESOURCES INC., Defendants. |
| Court | U.S. District Court — Eastern District of New York |
FOR ONLINE PUBLICATION ONLY
APPEARANCES
WEISSLAW LLP
By: David Corey Katz
Joshua M. Rubin
Joseph Harry Weiss
BAKER & HOSTETLER LLP
By: Jessica Morgan Gabriel
Mark Kornfeld
Jerry R. Linscott
On May 9, 2013, Eli Bensinger moved for leave to file a third amended complaint to add a new plaintiff who has standing to assert a violation of Section 14 of the Securities and Exchange Act of 1934,1 or, in the alternative, to assert a violation of Section 10(b) of the Securities and Exchange Act of 1934. See Mot. to Amend, May 9, 2013, ECF No. 100. For thereasons that follow, the motion to amend to add a new plaintiff is granted.2 As discussed herein, a copy of the amended complaint naming the new plaintiff must be filed by July 16, 2013.
In this class action against Denbury Resources Inc. ("Denbury"), named plaintiff Eli Bensinger alleges that Denbury disseminated a Registration Statement and Proxy (the "Proxy") containing material misstatements and omissions relating to a proposed merger (the ") of Encore Acquisition Company ("Encore") into Denbury. The Merger occurred on March 9, 2010.
On April 28, 2010, Bensinger filed complaint on behalf of all persons who received Denbury common stock in the Merger, asserting, inter alia, violations of Section 11 of the Securities Act of 1933, see 15 U.S.C. § 77k and Section 14 of the Securities and Exchange Act of 1934, see 15 U.S.C. § 78n(a).3 On August 17, 2011, I denied Denbury's motion to dismiss the complaint, holding that the Proxy contained misrepresentations and that these misrepresentations were not immaterial as a matter of law. See Bensinger v. Denbury Res., Inc., No. 10 Civ 1917, 2011 WL 3648277, at *8 (E.D.N.Y., Aug. 17, 2011).
Thereafter, Magistrate Judge Viktor V. Pohorelsky issued a series of scheduling orders pursuant to Rule 16(b) of the Federal Rules of Civil Procedure.4 Magistrate Judge Pohorelsky selected February 14, 2012 as the deadline for Bensinger to request a promotionconference regarding "join[ing] additional parties, or otherwise amend[ing] the pleadings to add claims or defenses." Scheduling Order, Sept. 21, 2011, ECF No. 37.
On January 13, 2012, Bensinger moved for judgment on the pleadings and for class certification. On February 8, 2012 Bensinger requested that Magistrate Judge Pohorelsky's February 14th deadline for adding claims or parties be extended until "30 days after Judge Gleeson rules on Plaintiff's pending motion for class certification and judgment on the pleadings." Letter, Feb. 8, 2012, ECF No. 54.5 Judge Pohorelsky declined to grant Bensinger's request for an extension of time to add a plaintiff but extended the deadline to add any additional claims until March 30, 2012. See Order, March 23, 2012, ECF No. 65.6
On March 30, 2012, Bensinger wrote to this Court seeking permission to amend the pleadings. Letter 1, ECF No. 66. Bensinger "object[ed] to the Magistrate Judge's ruling limiting [his] right to" seek amendment at a later date and requested that I "overrule" Magistrate Judge Pohorelsky's decision and grant him "until thirty (30) days after [this Court] rules on" its motion for judgment on the pleadings to seek leave to amend the complaint. On April 3, 2012, I granted plaintiff's requested relief, overruling Magistrate Judge Pohorelsky's order and extending the deadline to add claims or parties. I indicated that plaintiff could move to amend "after decision on the pending motions." Order, April 3, 2012.
Approximately six months later, on September 28, 2012, I issued a decision on Bensinger's motion for judgment on the pleadings. Bensinger v. Denbury Res., Inc., No. 10 Civ 1917, 2012 WL 4483811 (E.D.N.Y. Sept. 28, 2012). With respect to the claim under § 14(a), I concluded that, "[t]he kind of voting right that Bensinger possessed - the right to choose whetherhe personally would prefer to receive his allotment of $50 per Encore share in all cash, cash and Denbury stock, or all Denbury stock - is not the kind of voting right that Congress intended to protect through § 14(a)." Id. at *4. Accordingly, I held that Bensinger lacked standing to bring a § 14(a) claim and dismissed the claim.7
Bensinger did not move to amend the complaint to add a new plaintiff within 30 days of this decision. Instead, the parties proceeded with discovery and expert disclosures; attempted mediation; and Judge Pohorelsky set a deadline of May 23, 2013 for either party to seek a promotion conference with respect to any proposed dispositive motions. See Order, March 22, 2013.
On May 2, 2013 - more than seven months after this Court's decision on the motion for judgment on the pleadings - Bensinger moved to amend the complaint "to reassert a Section 14 claim with a new plaintiff who indisputably has standing . . . ; or, alternatively, to assert a new claim against Denbury for violation of Section 10(b) of the Exchange Act." Letter, May 2, 2013, ECF No. 97. In support of this motion, Bensinger argues that it would not be futile to re-assert a §14(a) claim at this stage because "[the claim] plainly 'relates back' to the original filing and so is timely filed." Pl. Mem. of Law 2, May 9, 2013, ECF No. 101 (citing Fed. R. Civ. P. 15(c)); see also id. at 8-9 (citing Advanced Magnetics, Inc. v. Bayfront Partners, Inc., 106 F.3d 11 (2d Cir 1997)). In the alternative, Bensinger moves for leave to amend to assert a violation of Section 10(b) of the Exchange Act.8
Denbury opposes the motion, arguing, inter alia, that Bensinger's decision to bring a § 14(a) claim as the sole plaintiff was a "litigation tactic." Since Bensinger did not make a"mistake concerning the proper party's identity," see Fed. R. Civ. P. 15(c)(1)(c), Denbury contends that Rule 15(c)'s relation back principle does not apply and, thus, Beninsger's proposal to re-assert a 14(a) claim is barred by the statute of limitations. Def. Mem. of Law 4, 19-20, May 16, 2013, ECF No. 105. Denbury also advances a series of arguments as to why leave to allege a Section 10(b) claim ought also be denied. See id. at 7-15.
This motion presents two issues for decision. The first is whether Bensinger is obliged to satisfy the "good cause" standard in Rule 16(a) and, if so, whether he has met this standard. The second is whether the proposed amendment adding a plaintiff with standing to raise a § 14(a) claim relates back to the filing of the original complaint pursuant to Rule 15(c).9
As a preliminary matter, I must address whether this Court has jurisdiction to decide the present motion. Denbury suggests that, "based on Denbury's appeal of class certification, this Court may not have subject matter jurisdiction over the only claim pending against Denbury." Def.'s Mem. of Law 1. Its proposed cure is for me to "stay the current action until it knows whether there is an actual case or controversy," unless I am inclined to rule in its favor, in which case it argues that I ought to "deny Bensinger's motion with prejudice." Id.
According to the plain language of Rule 23(f) of the Federal Rules of Civil Procedure, "[a]n appeal does not stay proceedings unless the district court or the court of appeals so orders." Fed. R. Civ. P. 23(f). Denbury has not requested a stay, nor has one been entered by this Court or the court of appeals. Accordingly, Defendant's interlocutory appeal of class certification does not divest this Court of subject matter jurisdiction to decide the present motion.
Rule 15(a) of the Federal Rules of Civil Procedure directs that leave to amend "shall be freely given when justice so requires," and as a general matter, amendments are favored in order "to facilitate a proper decision on the merits." See Conley v. Gibson, 355 U.S. 41, 48 (1957), overruled on other grounds by Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). However, Rule 15(a) must be balanced against the requirement under Rule 16(b) that a Court's scheduling order shall not be modified except upon a showing of good cause. See Fed. R. Civ. P. 16(b)(4). Where a plaintiff seeks leave to amend the pleadings after the deadline for amending the pleadings has passed, the plaintiff must meet Rule 16(b)'s "good cause" standard, rather than the more liberal standard of Rule 15(a). Parker v. Columbia Pictures Indus., 204 F.3d 326, 340 (2d Cir. 2000).10
This Court extended the deadline to add claims or parties until "after decision on the pending motions." Order, April 3, 2012. That order responded to Bensinger's request for an extension "until thirty (30) days after [this Court] rules on" its motion for judgment on the pleadings, but Bensinger failed to move within the requested 30-day time period. Accordingly, I find that the motion is not timely filed under this Court's case management order. Under these circumstances, a court must consider whether the plaintiff has shown "good cause" for the untimely motion. See Fed. R. Civ. P. 16(b). A finding of good cause "depends on the diligence of the moving party." Grochowski v. Phoenix Const., 318 F.3d 80, 86 (2d Cir. 2003).
At oral argument, counsel for plaintiff stated that he misunderstood this Court's April 3rd order and believed that the deadline to amend was not time-limited. As a result,Bensinger waited almost eight-months to move to amend. Considering all the circumstances, including the failure of my April 3rd order to explicitly impose a time constraint, I credit the explanation and conclude that a reasonably diligent attorney could have misunderstood the scheduling order. Accordingly, I find that plaintiff has established good cause for failing to...
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