Clapper v. Am. Realty Inv'rs, Inc.
| Decision Date | 16 November 2018 |
| Docket Number | Civil Action No. 3:14-CV-2970-D |
| Parties | DAVID M. CLAPPER, Individually, et al., Plaintiffs, v. AMERICAN REALTY INVESTORS, INC., et al., Defendants. |
| Court | U.S. District Court — Northern District of Texas |
In this memorandum opinion and order,1 the court addresses the following motions and objection to a magistrate judge order: (1) defendants' September 12, 2018 motion to amend the scheduling order and extend expert discovery;2 (2) plaintiffs' October 8, 2018 objection to footnote 1 of the magistrate judge's September 24, 2018 order; (3) plaintiffs' October 10, 2018 motion to clarify or correct the court's statement as to the operative complaint in the court's August 14, 2018 summary judgment ruling pursuant to Fed. R. Civ. P. 60(a) or Fed. R. Civ. P. 54(b), or in the alternative, motion to file fifth amended complaint,or in the alternative, motion for entry of default; and (4) defendant Gene Phillips' ("Phillips'") October 10, 2018 motion to reconsider in part the court's denial of his motion for summary judgment in the August 14, 2018 memorandum opinion and order. Except as pertinent to the decisions in this memorandum opinion and order, the court will not set out the background facts and procedural history because they can be found in the court's prior opinions in this case.3
The court turns first to plaintiffs' motion to clarify or correct the court's statement as to the operative complaint in the summary judgment ruling, or, in the alternative, motion to file fifth amended complaint, or, in the alternative, for entry of default. This motion concerns Atlantic XIII, LLC's ("Atlantic XIII's") party status.
For the reasons that follow, the court grants plaintiffs' alternative motion to file a fifth amended complaint.
On December 5, 2017, when the court ordered that plaintiffs file an amended complaint to properly allege the citizenship of certain parties, plaintiffs' operative pleading was their third amended complaint ("3AC"), filed March 24, 2017. When in response to the court's order plaintiffs filed their fourth amended complaint ("4AC") on December 26, 2017, they dropped Atlantic XIII as a plaintiff. When plaintiffs moved on December 27, 2017 to confirm the court's December 5, 2017 order, or, in the alternative, for leave to remove plaintiff Atlantic XIII as a party in plaintiffs' 4AC pursuant to Fed. R. Civ. P. 21, the court denied the motion. In its order it stated that it did not intend by its December 5, 2017 order to permit plaintiffs to remove a party; it intended to require that they properly plead the citizenship of certain parties to this lawsuit so that the court could ensure that it had subject matter jurisdiction based on complete diversity of citizenship. The court also stated that a ruling on plaintiffs' alternative motion for leave to remove Atlantic XIII as a party in plaintiffs' 4AC pursuant to Rule 21 would be made in due course, after receiving briefing under the usual rules and time limits. Dec. 27, 2017 Order at 1.
The court never explicitly addressed plaintiffs' alternative motion, however, due to the course that the litigation took thereafter. On February 28, 2018 the court granted defendants' motions to dismiss for lack of subject matter jurisdiction. See Clapper v. Am.Realty Inv'rs, Inc., 2018 WL 1083609, at *5 (N.D. Tex. Feb. 28, 2018) (Fitzwater, J.) ("Clapper V").4 Because the case had been pending since August 19, 2014, however, the court gave plaintiffs an opportunity to move for any available relief that would enable the court to exercise subject matter jurisdiction, including demonstrating sufficient grounds for the exercise of supplemental jurisdiction under 28 U.S.C. § 1367(a). Id. at *6.
On March 21, 2018 plaintiffs filed a motion for leave to file a fifth amended complaint ("5AC"), or, in the alternative, to remove Atlantic XIII and Atlantic Midwest, LLC as parties in plaintiffs' 5AC pursuant to Rule 21. When on June 6, 2018 the court issued its decision in Clapper VI concluding that it would exercise supplemental jurisdiction, it denied that motion without prejudice. Clapper v. Am. Realty Inv'rs, Inc., 2018 WL 2739014, at *5 (N.D. Tex. June 6, 2018) (Fitzwater, J.) ("Clapper VI"). Although the court did not elaborate on its reasoning for doing so, its intent is reflected in the following introductory statement in Clapper VI: "Concluding in its discretion that it should exercise supplemental jurisdiction under 28 U.S.C. § 1367(a), the court denies plaintiffs' motion for leave to file a fifth amended complaint and their motion to remove the Atlantic entities from the lawsuit." Id. at *1. In other words, the court was expressing the view that, because it had decided to exercise supplemental jurisdiction over the case as it stood—with non-diverse parties—it saw no need for plaintiffs to file a 5AC or to remove the Atlantic entities from the lawsuit.
When the court in Clapper VIII referred to the 4AC as the operative complaint, it didnot, as plaintiffs now maintain, do so mistakenly or erroneously. The 4AC was plaintiffs' operative complaint at that time, as it is now. But the effect of denying in Clapper VI plaintiffs' motion for leave to file the 5AC was to retain the 4AC in place. And leaving the 4AC in place as the operative pleading was ultimately incongruent with the court's intention to exercise supplemental jurisdiction despite the presence of all the parties who were plaintiffs at the time the 3AC was filed. That the court contemplated that these same three plaintiffs would continue to prosecute this case is apparent from the very first sentence of the court's opinion in Clapper VIII, in which it treated Atlantic XIII as one of the three plaintiffs: "This is an action by plaintiffs David M. Clapper ('Clapper'), Atlantic Midwest, LLC ('Atlantic Midwest'), and Atlantic XIII, LLC ('Atlantic XIII') against defendants . . . seeking to collect a multi-million judgment based on state-law claims for fraudulent transfer, unjust enrichment/constructive trust, and alter ego." Clapper VIII, 2018 WL 3868703, at *1 (emphasis added)). In sum, having decided to exercise supplemental jurisdiction despite the presence of non-diverse parties, the court did not intend by its rulings to prevent Atlantic XIII from participating as a plaintiff.
Having explained why Atlantic XIII should be allowed to participate as a plaintiff, the question becomes what relief should be granted in response to plaintiffs' motion. The court concludes that its opinion in Clapper VIII should not be clarified or corrected because the opinion is correct insofar as relevant here: the 4AC was (and is) plaintiffs' operative complaint. But because Atlantic XIII was dropped as a plaintiff before the court decided that it would exercise supplemental jurisdiction, and it is the court's intention that all threeplaintiffs named in the 3AC be allowed to participate as plaintiffs, the court concludes that it should permit the filing of a 5AC that includes Atlantic XIII as a plaintiff. The court therefore grants plaintiffs' alternative motion to file a fifth amended complaint. See, e.g., Ps. Mot. to Clarify or Correct at 15 (); see also id. at 9 (). The 5AC must be filed within 21 days of the date this memorandum opinion and order is filed.
In their motion to clarify or correct, plaintiffs request that the court "permit Plaintiffs to file their proposed Fifth Amended Complaint, which is identical to the 3AC and is attached to this Motion as Ex. 2." Ps. Mot. to Clarify or Correct at 11. The court grants plaintiffs leave to add Atlantic XIII as a plaintiff, but they may not include any claims that have not been previously pleaded in plaintiffs' complaint or in one of their amended complaints, nor may they include any claims (or parts thereof) that the court has already dismissed. See, e.g., Clapper VIII, 2018 WL 3868703 ().
The court prospectively grants defendants leave to file responsive pleadings to the 5AC. See infra § V ().5
In their motion to clarify or correct, plaintiffs contend that defendants' argument that Atlantic Midwest does not plead claims on behalf of ART Midwest, L.P. ("ART Midwest") is contrary to this court's and the Fifth Circuit's rulings. This contention appears to be advanced in response to defendants' answers to the 4AC, which plaintiffs maintain inexplicably argue that Atlantic Midwest has never pleaded that it was suing defendants for and/or on behalf of ART Midwest. Plaintiffs maintain that defendants' persistence in making this argument is "improper and sanctionable." Ps. Mot. to Clarify or Correct at 12.
In defendants' response to plaintiffs' motion, they devote most of their attention to this argument.6 Among the arguments they offer are the contentions that plaintiffs' complaints, including the 4AC, fail to satisfy Rule 8, or, alternatively, that any allegedpartnership claim should be dismissed because Atlantic Midwest has failed to comply with Rule 17(a).
The bulk of plaintiffs' reply brief is devoted to the question whether Atlantic Midwest can recover on behalf of ART Midwest, and to defendants' Rule 8 and Rule17(a) challenges, rather than to the question whether the court should clarify or correct its references in Clapper VIII to the 4AC as the operative complaint.
Despite the extensive...
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