Bergner v. Derr

• Court: U.S. District Court — Western District of Kentucky
• Writing for the Court: Rebecca Grady Jennings, District Judge United States District Court
• Decision Date: 14 August 2020
• Docket Number: CIVIL ACTION NO. 3:19-CV-593-RGJ
• Citation: Bergner v. Derr, CIVIL ACTION NO. 3:19-CV-593-RGJ (W.D. Ky. Aug 14, 2020)
• Parties: JAMIE BERGNER Plaintiff v. ABIGAIL DERR AND A&J SALES Defendants

JAMIE BERGNER Plaintiff v. ABIGAIL DERR AND A&J SALES Defendants

CIVIL ACTION NO. 3:19-CV-593-RGJ

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF KENTUCKY LOUISVILLE DIVISION

August 14, 2020

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MEMORANDUM OPINION AND ORDER

Defendant Abigail Derr moves to dismiss Plaintiff Jamie Bergner's Complaint. [DE 10]. Bergner moves for leave to file her Second Amended Complaint¹. [DE 21]. Briefing is complete and the matter is ripe. [DE 16; DE 20; DE 22; DE 23]. For the reasons below, Derr's Motion to Dismiss [DE 10] is DENIED AS MOOT and Bergner's Motion for Leave to Amend [DE 21] is GRANTED.

I. BACKGROUND

Derr alleges that in February 2015 she formed a partnership called "A&J Sales" with Bergner. [DE 21-1 at 126]. The "A" in A&J Sales referred to Abigail; the "J" to Jaimie. Id. A&J sold "Mon Cheri products to bridal stores in the Midwest and Southwest regions of the United States." Id. Under their oral partnership agreement, Derr was entitled to 60% of the profits and Bergner was entitled to 40%. Id. They agreed that they were each responsible for 50% of the expenses and that they would each contribute $700 to open a business checking account. Id.

A&J Sales rented office space at 215 S. Clay Street, Louisville, Kentucky. Id. at 127. It had a common email address, phone number, and fax number. Id. And it had a company creditcard, multiple employees, company business cards, and a company Instagram account.² Id. Derr and Bergner held each other out as partners, and the Chief Executive Officer of Mon Cheri recognized them as such in "correspondence and otherwise." Id.

In December 2018, "Derr informed Bergner that she intended to end the partnership." Id. at 128. But, Derr "continued to use the name of the partnership on correspondence and other marketing materials following her dissociation of Bergner from the partnership." Id. Derr and A&J Sales did not "distribute to Bergner her share of the income derived from the partnership business." Id. When Bergner demanded information about the partnership, Derr denied its existence and refused to provide her information about it. Id.

In May 2019, Bergner sued in Jefferson County Circuit Court, alleging violations of their partnership agreement and the Kentucky Uniform Partnership Act. [DE 1-2 at 9]. Derr removed the case [DE 1] to this Court and moved to dismiss [DE 10]. After Bergner responded [DE 16] and Derr replied [DE 20], Bergner moved for leave to amend [DE 21].

II. STANDARD

Federal Rule of Civil Procedure 15 provides that "a party may amend its pleading only with the opposing party's written consent or the court's leave. The court should freely give leave when justice so requires." Fed. R. Civ. P. 15(a)(2). "In deciding whether to grant a motion to amend, courts should consider undue delay in filing, lack of notice to the opposing party, bad faith by the moving party, repeated failure to cure deficiencies by previous amendments, undue prejudice to the opposing party, and futility of amendment." Brumbalough v. Camelot Care Centers, Inc., 427 F.3d 996, 1001 (6th Cir. 2005) (citing Coe v. Bell, 161 F.3d 320, 341-42 (6th Cir. 1998). "The grant or denial of leave to amend is within the discretion of the trial court, andreview is for abuse of discretion." Sec. Ins. Co. of Hartford v. Kevin Tucker & Assocs., Inc., 64 F.3d 1001, 1008 (6th Cir. 1995) (citing Roth Steel Prods. v. Sharon Steel Corp., 705 F.2d 134, 155 (6th Cir. 1983). "When there are pending before the court both a dispositive motion and a motion to amend the complaint, the court must first address the motion to amend complaint." Gallaher & Assocs., Inc. v. Emerald TC, LLC, No. 3:08-CV-459, 2010 WL 670078, at *1 (E.D. Tenn. Feb. 19, 2010) (citing Ellison v. Ford Motor Co., 847 F.2d 297, 300 (6th Cir.1988)). If the court grants a motion to amend, "the original pleading no longer performs any function in the case." Clark v. Johnston, 413 Fed.Appx. 804, 811 (6th Cir. 2011) (internal quotation marks and citation omitted). Thus, "when the court grants leave to amend the complaint, a motion to dismiss the original complaint will be denied as moot if the amended complaint adequately addresses the grounds for dismissal." Stepp v. Alibaba.com, Inc., No. 3:16-CV-00389-CRS, 2016 WL 5844097, at *2 (W.D. Ky. Oct. 4, 2016).

III. DISCUSSION

Bergner moves for leave to file her Second Amended Complaint. [DE 21]. In her Second Amended Complaint, Bergner: 1) "properly includes a necessary party, A&J Sales, the partnership"; 2) "alleges more robust facts to support her allegations that Derr and Bergner formed the partnership A&J Sales"; and 3) "alternatively, adds a claim for breach of contract to the extent the court finds that a partnership did not exist between Bergner and Derr." Id. at 123. Derr argues that "justice requires that Plaintiff's motion be denied because Plaintiff's proposed amendments are untimely" and "there is no excuse for the delay." [DE 22 at 136].

Bergner filed the motion for leave to amend two months after Derr's motion to dismiss became ripe. Under the circumstances, two months is not an undue delay. See Mersen USA - Midland-MI Inc. v. Graphite Machining Servs. & Innovations, LLC, No. 12-10961, 2012 WL3060922, at *2 (E.D. Mich. July 26, 2012) ("Undue delay is typically found where years have passed, discovery has been substantially conducted, and dispositive motion deadlines have passed"). Derr has neither argued nor established that Bergner acted in bad faith, and there have not been repeated failures to cure deficiencies by previous amendments. Courts in the Sixth Circuit have found prejudice where a motion to amend is filed after a discovery deadline or close in time to trial. That is not the case here, and so Derr will not be prejudiced by amendment. See McLean v. Alere Inc., No. 3:12-CV-566-DJH, 2015 WL 1638341, at *3 (W.D. Ky. Apr. 13, 2015) (finding no prejudice where plaintiff had yet to be deposed, no dispositive motions had yet been ruled on, and much discovery had been produced); Jimkoski v. State Farm Mut. Auto. Ins. Co., 247 Fed.Appx. 654, 660-61 (6th Cir.2007) (no abuse of discretion when district court denied motion to amend filed one year after deadline for filing dispositive motions, after close of discovery, and eight days before start of trial).

Derr also argues that amendment is futile. Because the standard for futility mirrors the review applied in motions to dismiss, the Court will address Bergner's amended allegations as if in her Complaint. See Saunders v. Ford Motor Co., No. 3:14-CV-00594-JHM, 2015 WL 1980215, at *4 (W.D. Ky. May 1, 2015) (addressing plaintiff's amended allegations as if they were in the complaint); Midkiff v. Adams Cnty. Reg'l Water Dist., 409 F.3d 758, 767 (6th Cir.2005) (quoting Martin v. Associated Truck Lines, Inc., 801 F.2d 246, 249 (6th Cir.1986)) ("A motion for leave to amend may be denied for futility 'if the court concludes that the pleading as amended could not withstand a motion to dismiss'").

In her Second Amended Complaint, Bergner asserts five claims³: 1) refusal to allow partner to inspect partnership documents; 2) refusal to pay net amount from partnership; 3) purchase of Bergner's interest; 4) dissolution; and 5) breach of contract. [DE 21-1 at 129-130].

A. Count One—Refusal to Allow Partner to Inspect Partnership Documents

Bergner claims that A&J Sales violated KRS § 362.1-403 (Partner's rights and duties with respect to information), which provides: "A partnership shall provide partners and their agents and attorneys access to its books and records. It shall provide former partners and their agents and attorneys access to books and records pertaining to the period during which they were partners." In support of this claim, Bergner alleges:

27. Following Defendants actions, Bergner made a demand for information pursuant to KRS 362.1-403.

28. On March 5, 2019, Derr, through her counsel, denied the existence of a partnership between the two individuals and refused to provide the information requested by Bergner.

29. On March 17, 2019, Bergner, through her counsel, made a second attempt to receive the information to which she is entitled under KRS 362.1-403. Counsel for Derr indicated that he would speak with Derr and follow up within a week. Counsel for Derr never followed up.. . .

32. A&J Sales refused to allow Bergner to inspect the partnership documents for A&J Sales in violation of KRS 362.1-403.

33. Bergner has suffered damages as a result of Defendant's actions.

[DE 21-1 at 128-129].

Derr does not address this claim in her response to Bergner's motion to amend. However, she does in her motion to dismiss, arguing: "With respect to the Plaintiff's claim against Derr for alleged denial of access to partnership books and records, it is the alleged partnership (not Derr) that would (if the Plaintiff were a partner, and she is not) have the obligation to make available its books and records." [DE 10-1 at 65]. In her Second Amended Complaint, Bergner modifies this claim to allege that A&J Sales, not Derr, violated KRS 362.1-403. Thus, because Bergner has sufficiently alleged the essential elements of a claim under KRS 362.1-403, the Court finds that amendment is not futile, grants her motion for leave to amend as to this claim, and denies Derr's motion to dismiss as moot.

B. Count Two—Refusal to Pay Net Amount from Partnership

Bergner claims that A&J Sales and Derr violated KRS § 362.1-401 (Partner's rights and duties), which provides that "[e]ach partner is entitled to an equal share of the partnership profits and is chargeable with a share of the partnership losses in proportion to the partner's share of the profits."⁴ In support of this claim, Bergner alleges:

24. On or about December 2, 2018, Derr informed Bergner that she intended to end the partnership.

25. Derr continued to use the name of the partnership on correspondence and other marketing materials following her dissociation of Bergner from the partnership. For example, Derr sent out marketing

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