Outboard Marine Corp. v. Pezetel

• Decision Date: 29 March 1982
• Docket Number: Civ. A. No. 77-51.
• Citation: 535 F. Supp. 248
• Parties: OUTBOARD MARINE CORP., a Delaware corporation, Plaintiff, v. PEZETEL, a Foreign Trade Organization of the People's Republic of Poland; Melex USA, Inc., a Delaware corporation; Defendants.
• Court: U.S. District Court — District of Delaware

535 F. Supp. 248

OUTBOARD MARINE CORP., a Delaware corporation, Plaintiff, v. PEZETEL, a Foreign Trade Organization of the People's Republic of Poland; Melex USA, Inc., a Delaware corporation; Defendants.

Civ. A. No. 77-51.

United States District Court, D. Delaware.

March 29, 1982.

William O. LaMotte, III, and Lawrence A. Hamermesh, Morris, Nichols, Arsht & Tunnell, Wilmington, Del., for plaintiff; Charles Owen Verrill, Donald A. Lofty and Peter J. P. Brickfield, Patton, Boggs & Blow, Washington, D. C., David J. Armstrong, M. Richard Dunlap and Susan K. Wright, Dickie, McCamey & Chilcote, Pittsburgh, Pa., of counsel.

James T. McKinstry, Richards, Layton & Finger, Wilmington, Del., for defendants Pezetel and Melex, U. S. A., Inc., Henry W. Sawyer, III, Stewart Dalzell and John Chesney, Drinker, Biddle & Reath, Louis B. Schwartz, Philadelphia, Pa., Carl Schwarz, Metzger, Shadyac & Schwarz, Washington, D. C., of counsel.

OPINION

MURRAY M. SCHWARTZ, District Judge.

This opinion marks yet another milestone in the progress of this case through the federal courts. Plaintiff, Outboard Marine Corporation ("OMC"), filed the original complaint on February 14, 1977 alleging antitrust claims under sections one and two of the Sherman Act, 15 U.S.C. §§ 1, 2, violations of the Wilson Tariff Act, 15 U.S.C. § 8, and the Antidumping Act of 1916, 15 U.S.C. § 72. Defendants filed various motions to dismiss which were granted, in part, in an opinion issued September 27, 1978. Outboard Marine Corp. v. Pezetel, 461 F.Supp. 384 (D.Del.1978). Defendants Pezetel Foreign Trade Enterprise of the Aviation Industry ("Pezetel") and Melex USA, Inc. ("Melex") (hereinafter collectively referred to as "the Polish defendants") answered and filed a counterclaim on November 21, 1978. Plaintiff's motion to dismiss the counterclaim was filed on December 11, 1978, and the Court's Opinion granting the motion, in part, issued on June 22, 1979. Outboard Marine Corp. v. Pezetel, 474 F.Supp. 168 (D.Del.1979). Plaintiff filed a motion for summary judgment on the counterclaim on January 22, 1981. On April 30, 1981 the Polish defendants filed a motion for leave to file an amended counterclaim which was granted June 15, 1981. On May 21, 1981 Pezetel and Melex filed a motion for summary judgment on the complaint and on June 30 plaintiff filed a motion for leave to amend.¹ Finally, on July 6 plaintiff filed a motion to stay the amended counterclaim pursuant to the doctrine of primary jurisdiction. Presently before the Court are plaintiff's motions to file an amended complaint and stay the amended counterclaim.

The factual background has been described at some length in the Court's two previously published opinions and will only be briefly summarized here. Plaintiff OMC is an American manufacturer whose subsidiary, Cushman, formerly manufactured gas and electric golf carts. In 1970 Elektrim began manufacturing an electric golf cart similar to one sold in the United States. Pezetel succeeded Elektrim as the Polish manufacturing entity in 1973 and created Melex, a wholly owned subsidiary incorporated in Delaware. It is alleged that in 1973 Melex carts accounted for seventeen percent of the United States electric golf cart market and thirty-five percent by 1975. It is further alleged that OMC went out of the golf cart business in 1975 because it was unable to meet Pezetel's prices. As noted, in 1977 OMC filed this suit alleging that the conduct of Pezetel, Melex and others violated various federal statutes.

Amendment

The fact that a plaintiff in a complex antitrust case seeks to amend its complaint five years after filing and in response to a motion for summary judgment is neither unusual nor surprising. Pezetel and Melex did precisely the same thing with their counterclaim a few months earlier. It is the interplay of the somewhat unusual factual background of this case and the legal theories sought to be added to the complaint which makes this case unique.

The principal change² in the amended complaint, other than the naming of three new Polish defendants, is the addition of a predatory pricing claim founded on allegations that Melex golf carts were sold at prices below cost. Although the proposed amended complaint nowhere specifies what cost is alleged, plaintiff's counsel represented to the Court at oral argument that after discovery plaintiff will be prepared to prove pricing below whatever cost is required by applicable case law, i.e., they believe they will be able to prove Melex golf carts were sold below variable, fixed, total, marginal and incremental cost.³

As might be expected, defendants have opposed the proposed amendment, arguing that to permit it at this late stage in the proceedings would cause undue prejudice and delay. More troubling to the Court, however, is defendants' assertion that the amendment is proposed in bad faith in order to evade an adverse determination on the merits and to continue to harass the defendants. After considering defendants' assertion in some detail, the Court has concluded that although their position is not totally without merit, plaintiff must be granted leave to amend.

The starting point, of course, must be Rule 15(a) of the Federal Rules of Civil Procedure, which provides in part that "a party may amend his pleading ... by leave of court ... and leave shall be freely given when justice so requires." The rule is now well established:

If the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits. In the absence of any apparent or declared reason — such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc. — the leave should, as the rules require, be "freely given."

Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962). Accord, Heyl & Patterson International, Inc. v. F. D. Rich Housing of the Virgin Islands, Inc., 663 F.2d 419 (3d Cir. 1981) (district court's granting leave to amend answer four years after filing of suit and after start of trial not reversible error).

Although such cases are rare and of necessity turn on their facts, bad faith has been relied upon to deny leave to amend. For example, in Sterling Products Corp. v. Sterling Drug, Inc., 6 Fed.R.Serv. 386.12 case 4 (S.D.N.Y.1942), the plaintiff sought leave to amend three days before trial. The court specifically found that the amendment which would have stricken the claim for injunctive relief was proposed solely because the plaintiff wanted a jury trial to which it was not entitled. Similarly, in Kuris v. Pepper Poultry Co., 2 F.R.D. 361 (S.D.N.Y.1941), defendant sought to amend its answer and incorporate, among other things, a counterclaim. The court found, based on plaintiff's unopposed affidavit, that defendant's allegation that its failure to amend previously was due to inadvertence and oversight was made in bad faith because plaintiff's attorney had informed defendant of the existence of an independent suit alleging the same cause of action a year earlier.

In Matlack v. Hupp Corp., 57 F.R.D. 151 (E.D.Pa.1972), the court analogized to the Rule 15(a) cases and concluded that an evidentiary hearing was required to determine whether plaintiff's amended answers to interrogatories, filed over five years after the commencement of the action, should be stricken. The amended answers in Matlack had the effect of completely altering the legal theory of the plaintiff's case from one of oral warranty to one of written warranty. The court, concerned with the time and expense defendant had been forced to expend to defend against the now-discarded theory, and aware of the potential prejudice involved in allowing a change in theory necessitating new discovery eleven years after the transactions in issue, held that given the proper factual showing it had the power to order the amended interrogatory answers stricken or, in the alternative, impose costs and counsel fees as a condition of filing them. 57 F.R.D. at 164-65. In so doing the court did not concern itself with the plaintiff's ability to prove its newly stated legal theory, but with its delay in announcing it.

In each of these cases the court was concerned with the motivation of counsel in proposing a material alteration of their case in a late stage of the proceedings. As noted, this case has been in litigation for almost five years. At the time that the original complaint was filed and at oral argument in 1978, plaintiff argued vigorously that it was impossible to determine any Polish costs. At that time plaintiff urged this Court to adopt an alternative predatory pricing model for use in cases where it is alleged that a "defendant is an agency or instrumentality of a state-controlled economy in which it is impossible to arrive at a meaningful determination of such costs...."⁴ The Court declined to do so in its September 27, 1978 Opinion. Outboard Marine Corp. v. Pezetel, 461 F.Supp. 384 (D.Del.1978). That Opinion did not question plaintiff's assertion, which was backed by virtual unanimity of opinion,⁵ that Polish costs are not determinable; it simply held that any such alternative model must be adopted by Congress rather than the courts. Now, four years later, OMC seeks leave to amend its complaint to allege predatory pricing based on allegations of below cost pricing, the very factual element whose impossibility of proof it urged as the justification for this Court to create a new legal theory in 1978.

It is to these facts that the Polish defendants point as evidence of bad faith. The Court shares some of defendants' skepticism as to plaintiff's ability to prove its predatory pricing claim, but the mere fact that a claim will be difficult to prove is not...