Matter of Positive Directions Unlimited, Inc., Bankruptcy No. 82-0809.

• Decision Date: 12 December 1985
• Docket Number: Bankruptcy No. 82-0809.
• Citation: 56 BR 421
• Parties: In the Matter of POSITIVE DIRECTIONS UNLIMITED, INC., Debtor. Jordan BERNSTEIN, as a shareholder of Positive Directions Unlimited, Inc., a New Jersey Corporation, and Jordan Bernstein, individually, Plaintiffs, v. POSITIVE DIRECTIONS UNLIMITED, INC., a New Jersey Corporation, Maria Poskanzer and Eileen Coyle, individually in their corporate capacity as shareholders, Defendants.
• Court: U.S. Bankruptcy Court — District of New Jersey

56 B.R. 421 (1985)

In the Matter of POSITIVE DIRECTIONS UNLIMITED, INC., Debtor.

Jordan BERNSTEIN, as a shareholder of Positive Directions Unlimited, Inc., a New Jersey Corporation, and Jordan Bernstein, individually, Plaintiffs, v. POSITIVE DIRECTIONS UNLIMITED, INC., a New Jersey Corporation, Maria Poskanzer and Eileen Coyle, individually in their corporate capacity as shareholders, Defendants.

Bankruptcy No. 82-0809.

United States Bankruptcy Court, D. New Jersey.

December 12, 1985.

Weiner, Staubach, Edelson & Hopmayer by Ronald A. Cohen, Roselle Park, N.J., for plaintiffs.

D. Gayle Loftis, for Maria Poskanzer and Eileen Coyle.

OPINION AND ORDER

D. JOSEPH DeVITO, Bankruptcy Judge.

Maria Poskanzer and Eileen Coyle, defendants in the above captioned proceedings, move to dismiss the complaint for the plaintiff's failure to comply with Federal Rules of Civil Procedure 4, 9, 12b, 19 and 23.1. The complaint charges defendants with fraud and mismanagement in the conduct of the affairs of the debtor corporation. Plaintiff Bernstein brings this action on behalf of himself and the debtor corporation.

Following a hearing on the motion, a consent decree was entered on April 8, 1983, directing Bernstein to (1) submit a more definite statement of the matters alleged pursuant to Rules 9b and 23.1 within ten days of the entry of the order; (2) serve the amended complaint upon the defendants' attorney within the same ten day period; and (3) serve the debtor's trustee with the amended complaint within that ten day period.

A review of the records of the Clerk's office indicates that the amended complaint was filed on April 25, 1983. An affidavit filed by the defendants' attorney alleged that service was not made until April 30, 1983. A certification of Jordan Bernstein's counsel was filed on May 19, 1983, setting forth service upon the defendants' attorney and this Court on April 5, 1983, a full three days prior to the entry of the consent order. Further, Bernstein's counsel alleges the statement of defendants' attorney to be "materially false and misleading and is nothing more than an effort to set up a smoke screen."

On June 21, 1983, the defendants moved to dismiss the complaint on grounds including noncompliance with the consent order of April 8, 1983. The Court now deals with that issue, specifically, whether the law of federal civil procedure calls for the dismissal of a complaint for failure to timely serve in accordance with the order of this Court.

From its inception, Rule 15, pertaining to the amendment of pleadings, has been given a liberal interpretation by the federal courts. See 6 Wright & Miller, Federal Practice and Procedure: Civil § 1471 (1971). Rule 15 itself states that leave to amend shall be given freely. F.R.C.P. 15a. This does not, however, suggest that leave be given in all cases. Wright & Miller, supra at § 1487. Rule 15a gives the court extensive discretion to decide whether to grant leave to amend and, furthermore, to impose conditions on the allowance of a proposed amendment. Id. at § 1486. It has been observed that the failure to comply with conditions imposed by the court will generally result in a dismissal of the complaint.¹ The case law appears to be totally supportive.

In Rossi v. McCloskey and Co., 149 F.Supp. 638 (E.D.Pa.1957), union members brought an antitrust action against their employer, the union, and officers of the union. The court granted plaintiffs leave to file an amended complaint within twenty days, deeming such a time limit to be reasonable. Finding that plaintiffs failed to comply with the court's directive, the complaint was dismissed. Id. at 641. Accord Thompson v. Johnson, 253 F.2d 43 (D.C. Cir.1958).

With respect to the proper test for determining compliance with a condition placed on a leave to amend, Nagoya Associates, Inc. v. Esquire, Inc., 191 F.Supp. 379 (S.D.N.Y.1961), provides a concise and rational standard. In Nagoya, Judge Dimock ruled that he would only examine the face of the...