Schiller v. Physicians Resource Group Inc.

• Decision Date: 29 August 2003
• Docket Number: No. 02-11049.,02-11049.
• Citation: 342 F.3d 563
• Parties: Jeffrey SCHILLER, et al., Plaintiffs, Alpert Group, on behalf of themselves and all others similarly situated, Plaintiff-Appellant, v. PHYSICIANS RESOURCE GROUP INC.; Emmett E. Moore; Richard M. Owen; Richard J. D'Amico; John N. Bingham; and Arthur Andersen & Co., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

342 F.3d 563

Jeffrey SCHILLER, et al., Plaintiffs Alpert Group, on behalf of themselves and all others similarly situated, Plaintiff-Appellant, v. PHYSICIANS RESOURCE GROUP INC.; Emmett E. Moore; Richard M. Owen; Richard J. D'Amico; John N. Bingham; and Arthur Andersen & Co., Defendants-Appellees.

No. 02-11049.

United States Court of Appeals, Fifth Circuit.

August 29, 2003.

Pamela Mante Parker (argued), William S. Lerach, G. Paul Howes, Randall J. Baron, Milberg, Weiss, Bershad, Hynes & Lerach, San Diego, CA, Marc R. Stanley, Roger L. Mandel, Stanley, Mandel & Iola, Dallas, TX, for Plaintiff-Appellant.

Dennis N. Ryan (argued), Robert Benton Weathersby, Andrews & Kurth, Dallas, TX, for Physicians Resource Group, Inc.

Gregg C. Laswell (argued), James Stephen Barrick, Akin, Gump, Strauss, Hauer & Feld, Houston, TX, Edward Saul Koppman, Akin, Gump, Strauss, Hauer & Feld, Dallas, TX, for Moore, Owen and D'Amico.

Charles W. Schwartz, Skadden, Arps, Slate, Meagher & Flom, James Stephen Barrick, Akin, Gump, Strauss, Hauer & Feld, Houston, TX, for Bingham.

Timothy W. Mountz (argued), Aimee Williams Moore, Baker Botts, Dallas, TX, for Arthur Anderson & Co.

Appeal from the United States District Court for the Northern District of Texas.

Before JOLLY, HIGGINBOTHAM and STEWART, Circuit Judges.

CARL E. STEWART, Circuit Judge:

In this appeal, we determine whether the district court erred by 1) dismissing Alpert Group's Third Amended Complaint with prejudice without granting leave to amend, and 2) denying Alpert Group's Rule 59(e) motion to vacate and modify the judgment. After reviewing the claims, we affirm the judgments of the district court.

FACTUAL AND PROCEDURAL BACKGROUND

This is a private securities fraud action brought on behalf of all persons who purchased or otherwise acquired common stock of Physicians Resource Group ("PRG"), a Dallas-based provider of physician practice management services to eye-care doctors. Alpert Group alleges that during the class period, September 15, 1995 through November 1, 1997, the defendants — PRG, PRG's independent auditor, Arthur Andersen L.L.P. ("Andersen"), Emmett Moore ("Moore"), Richard M. Owen ("Owen"), Richard J. D'Amico ("D'Amico"), and John N. Bingham ("Bingham") — made a series of false and misleading statements to the investment community about PRG's integration of some 150 practices it acquired nationwide and about PRG's business operations, in an effort to inflate the price of PRG's common stock. When PRG revealed its true financial and business condition, beginning in December 1996 and continuing through March 1997, the price of its common stock declined more than ninety-three percent from its class period high and caused investors to lose millions.

In December 1997, Jeffrey Schiller ("Schiller") and Diversified Investments Holdings LP ("Diversified") filed the initial class action complaint against PRG, Moore, Owen, D'Amico, and Bingham, alleging violations of §§ 10(b) and 20(a) of the Securities and Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5. The initial complaint was amended in July 1998. Schiller and Diversified filed a separate action against Andersen, which was transferred to the district court and consolidated with the instant case. In May 1999, the Alpert Group ("Alpert Group") was appointed as lead counsel. The Second Amended Complaint was filed on September 29, 2000. The Third Amended Complaint was filed on December 21, 2000. On February 5, 2001, the defendants moved to dismiss the Third Amended Complaint for failure to state a claim upon which relief could be granted. In its response in opposition to the motion to dismiss, Alpert Group requested that the court allow further amendment of the complaint if the court believed that the Third Amended Complaint did not state a claim upon which relief could be granted. Alpert Group did not, however, formally move for leave to amend, and did not attach a copy of any proposed amended complaint.

The district court granted the defendants' motions to dismiss the Third Amended Complaint on February 26, 2002, more than a year after the defendants' motions were filed. In that order, the district court stated:

Plaintiffs have requested the court to allow further amendment of their Complaint if it believes that they have not stated a claim upon which relief can be granted....

The court concludes that Plaintiffs have stated their best case after four bites at the apple. As the Fifth Circuit has stated, "[a]t some point, a court must decide that a plaintiff has had fair opportunity to make his case; if, after that time, a cause of action has not been established, the court should finally dismiss the suit." Jacquez v. Procunier, 801 F.2d 789, 792-93 (5th Cir.1986). The court believes that permitting a fifth pleading attempt would be an inefficient use of the parties' and the court's resources, would cause unnecessary and undue delay, and would be futile. For the reasons stated herein, Plaintiffs' claims are dismissed with prejudice.

On March 12, 2002, Alpert Group filed a motion to vacate the judgment and modify the order of dismissal. In that motion, the Alpert Group did not argue that the district court erred in dismissing the Third Amended Complaint — instead, it argued only that the district court erred by dismissing the complaint with prejudice. In that motion, Alpert Group requested leave to file the proposed Fourth Amended Complaint, which was attached to the motion. The district court denied the motion to vacate or modify on August 15, 2002. Alpert Group now appeals.

DISCUSSION

Alpert Group appeals the dismissal with prejudice of its Third Amended Complaint and the denial of its motion to vacate or modify the judgment and its request for leave to file the Fourth Amended Complaint. Specifically, Alpert Group argues that "the district court's refusal to allow amendment, both after dismissal of the Third Amended Complaint [with prejudice] and again on [its Rule 59(e) motion for] reconsideration when it presented the [district] court with the proposed Fourth Amended Complaint, merits reversal." We review the district court's denial of a leave to amend for abuse of discretion. See Cinel v. Connick, 15 F.3d 1338, 1346 (5th Cir.1994); see also 6 Charles Alan Wright et al., Federal Practice and Procedure: Civil 2d § 1486 (2d ed. 1990) ("Rule 15(a) gives the court extensive discretion to decide whether to grant leave to amend after the time for amendment as of course has passed.").

We likewise review "the district court's denial of [Alpert Group's] Rule 59(e) motion for abuse of discretion, in light of the limited discretion of Rule 15(a)." Rosenzweig v. Azurix Corp., 332 F.3d 854, 864 (5th Cir.2003).¹ Although leave to amend under Rule 15(a) is to be freely given, that generous standard is tempered by the necessary power of a district court to manage a case. See Shivangi v. Dean Witter Reynolds, Inc., 825 F.2d 885, 891 (5th Cir.1987). In deciding whether to grant leave to amend, the district court may consider a variety of factors in exercising its discretion, including undue delay, bad faith or dilatory motive on the part of the movant, repeated failures to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, and futility of the amendment. Id. at 891.

I. Did the district court err in dismissing Alpert Group's Third Amended Complaint with prejudice?

We initially note that Alpert Group does not contend that the district court erred in dismissing its Third Amended Complaint for failure to state a claim; rather, Alpert Group argues that the district court erred in dismissing its Third Amended Complaint with prejudice, which had the effect of denying it the opportunity to file another complaint. As noted above, the district court noted the following in rejecting Alpert Group's request to allow further amendment of its complaint:

The court concludes that Plaintiffs have stated their best case after four bites at the apple. As the Fifth Circuit has stated, "[a]t some point, a court must decide that a plaintiff has had fair opportunity to make his case; if, after that time, a cause of action has not been established, the court should finally dismiss the suit." Jacquez v. Procunier, 801 F.2d 789, 792-93 (5th Cir.1986). The court believes that permitting a fifth pleading attempt would be an inefficient use of the parties' and the court's resources, would cause unnecessary and undue delay, and would be futile.

In this case, the district court allowed Alpert Group to amend its complaint four times. Moreover, for more than a year before the district court's dismissal with prejudice, Alpert Group had the opportunity to seek leave to amend its complaint. Given the veracity of the defendants' challenge to the sufficiency of Alpert Group's Third Amended Complaint, Alpert Group should have sought leave to file its Fourth Amended Complaint.² It appears from the record, however, that instead of moving for leave to file a Fourth Amended Complaint, Alpert Group chose to stand by its Third Amended Complaint and risk an adverse ruling from the district court. Despite its present protestations, Alpert Group knew that an adverse ruling was possible as it was aware that identical allegations against PRG had already failed to withstand a Rule 12(b)(6) challenge. See RGB Eye Assocs., PA v. Physicians Resource Group, Inc., 1999 WL 980801 (N.D.Tex. Oct 27, 1999). As experienced securities litigators, Alpert Group's counsel must have known that the district court could dismiss its suit with prejudice, thereby depriving it of further opportunity to amend. In Jacquez v. Procunier, this Court held that "at some point a court must decide that a plaintiff has had fair opportunity to make his case; if, after that time, a cause of action has not been established, the court should finally dismiss the suit." 801 F.2d 789, 792 (5th Cir....