Select Creations, Inc. v. Paliafito America, Inc., 91-C-1240

Citation830 F. Supp. 1213
Decision Date25 June 1993
Docket Number92-C-214.,No. 91-C-1240,91-C-1240
PartiesSELECT CREATIONS, INC., a Wisconsin corporation, Plaintiff, v. PALIAFITO AMERICA, INC., an Illinois corporation, Defendant/Third Party Plaintiff, v. Miryoung (a/k/a "Joy") Lee; Jerrold Lee; Mantae Company, Limited; Sam Petrovich; Thomas Meisenheimer and Select Creations, Inc., Third Party Defendants. PALIAFITO AMERICA, INC., an Illinois corporation, Defendant/Counterplaintiff, v. DAYTON HUDSON CORPORATION, a Minnesota corporation doing business as Target Stores, a division of Dayton Hudson Corporation, Defendant.
CourtUnited States District Courts. 7th Circuit. United States District Court of Eastern District of Wisconsin

Robert H. Storm, Canellos & Storm, Wauwatosa, WI, for Select Creations, Inc., Samuel Petrovich and Thomas Meisenheimer.

Harold A. Laufer, Davis & Kuelthau, Milwaukee, WI, David E. Springer, John K. Lyons Skadden, Arps, Slate, Meagher & Flom, Chicago, IL, for Paliafito America, Inc.

David F. Loeffler, Krukowski & Costello, Milwaukee, WI, for Joy and Jerrold Lee.

Scott W. Hansen, Patrick Hodan, Reinhardt, Boerner, Van Druren, Norris & Rieselbach, Milwaukee, WI, for MCL.

Thomas G.A. Herz, Grant Killoran, Michael, Best & Friedrich, Milwaukee, WI, for Target/Dayton-Hudson.

Arnold M. Quittner, Alison Zirn, Stroock & Stroock & Lavan, Los Angeles, CA, for MAI.

Stephen P. Juech, Mary Flanner-Strack, Frisch Dudek, Ltd., Milwaukee, WI, for Keith D. Nowak, Lieberman, Rudolph & Nowak.

DECISION AND ORDER

WARREN, Senior District Judge.

Now before the Court is the motion of defendant-counterplaintiff Paliafito1 pursuant to Rule 15(a), Fed.R.Civ.P., for an order granting leave to file its "Second Amended Counterclaim and Third-Party Complaint." For the following reasons, Paliafito's motion will be granted.

I. BACKGROUND

The facts underlying this dispute are (already) complex. (See Order of December 1, 1992, 828 F.Supp. 1301, 1305-54.) For purposes of the motion now before the Court, however, only the following procedural history, as set out in greater detail in the Civil Docket, is relevant.

On December 2, 1991, Paliafito filed a counterclaim and third-party complaint against Select in this case, Case No. 91-C-1240. Thereafter, on December 11, 1991, Paliafito filed a first amended counterclaim and third-party complaint, and moved for a writ of attachment and preliminary injunction.

On February 21, 1992, Paliafito commenced an action against Target in Case No. 92-C-214. Target then filed a third-party complaint therein against MAI on March 24, 1992. Six (6) days later, on March 30, 1992, Paliafito moved to consolidate this case with the first.

A six-day hearing on the motion for a writ of attachment and preliminary injunction commenced on April 6, 1992. Thereafter, on April 17, 1992, Paliafito moved for leave to file its second amended counterclaim and third-party complaint in the first case, i.e., the motion now before the Court.

On December 1, 1992, the Court granted in part and denied in part Paliafito's motion for a writ of attachment and a preliminary injunction.

Thereafter, on February 8, 1993, the Court ordered the consolidation of Case No. 92-C-214 with Case No. 91-C-1240.

On February 19, 1993, the Court granted Paliafito's motion for a writ of attachment, preliminary injunction, and appointment of receiver, and on April 7, 1993, Paliafito's motion for a first supplemental writ of attachment, preliminary injunction, and appointment of receiver.

At a discovery schedule hearing before the Court on April 27, 1993, the Court ordered, inter alia, that all proceedings be stayed for sixty (60) days pursuant to MAI's bankruptcy filing in the Central District of California.

Another discovery schedule hearing is scheduled for June 25, 1993. Paliafito's motion, therefore, is now before the Court for resolution.

II. DISCUSSION
A. Legal Framework of Rule 15(a)

Rule 15(a), Federal Rules of Civil Procedure ("Rule 15(a)"), reads, in relevant part: "A party may amend the party's pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires."2 Fed.R.Civ.P. 15(a). Whether to grant or deny leave to amend thereunder is ostensibly within the sound discretion of the district court. Zenith Radio Corp. v. Hazeltine Research, 401 U.S. 321, 330, 91 S.Ct. 795, 802, 28 L.Ed.2d 77 (1971); Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962) (dictum3); Villa v. City of Chicago, 924 F.2d 629, 632 (7th Cir.1991); Campbell v. Ingersoll Mill, Mach. Co., 893 F.2d 925, 927 (7th Cir.1990). "Discretion," however, may be a misleading description of the district court's authority. Dussouy v. Gulf Coast Inv. Corp., 660 F.2d 594, 597 (5th Cir.1981). The plain language of the rule directs the court to grant leave "when justice so requires," Fed.R.Civ.P. 15(a), and the court must respect the spirit of the rule, which is tolerant toward amendments. Jafree v. Barber, 689 F.2d 640, 644 (7th Cir. 1982). Rule 15(a) thus evinces a bias in favor of granting leave to amend. Dussouy, 660 F.2d at 597. Unless there is a substantial reason to deny leave to amend, therefore, the discretion of the district court is not broad enough to permit denial. Id. at 598.

The requirement of judicial approval, however, means that the right to amend is not absolute. Mertens v. Hummell, 587 F.2d 862, 865 (7th Cir.1978). Leave to amend is appropriately denied, for apparent or declared reasons, Foman, 371 U.S. at 182, 83 S.Ct. at 230; Figgie International, Inc. v. Miller, 966 F.2d 1178, 1180 (7th Cir.1992), where there is undue delay, bad faith, 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, or futility of the amendment. Foman, 371 U.S. at 182, 83 S.Ct. at 230; Figgie International, Inc., 966 F.2d 1178, 1180 (7th Cir.1992); Villa, 924 F.2d at 632. If there are substantial reasons to deny amendment, it court may weigh in the movant's favor any prejudice that will arise from denial. Dussouy, 660 F.2d at 598; Bamm v. GAF, 651 F.2d 389, 391 (5th Cir.1981). Finally, it is appropriate for the court to consider judicial economy and the most expeditious way to dispose of the merits of the litigation. Dussouy, 660 F.2d at 598; see, also, Zenith Radio, 401 U.S. at 329, 91 S.Ct. at 801; Summit Office Park v. United States Steel, 639 F.2d 1278, 1286 (5th Cir.1981) (Wisdom, J., dissenting); Lone Star Motor Import v. Citroen Cars, 288 F.2d 69 (5th Cir.1961); see, generally, Rule 1, Fed.R.Civ. P.4

1. Undue delay

The public, of course, has an interest in the prompt resolution of legal disputes. Tamari v. Bache & Co., S.A.L., 838 F.2d 904, 909 (7th Cir.1988). Thus, the longer the delay, the greater the presumption against granting leave to amend. Perrian v. O'Grady, 958 F.2d 192, 194 (7th Cir.1992) (citing Tamari, 838 F.2d at 908); see also, Bohen v. City of East Chicago, Ind., 799 F.2d 1180, 1184 (7th Cir.1986) ("considerations of delay and prejudice may preclude automatic grant of an amendment"); 6 Wright & Miller, Federal Practice and Procedure § 1488 at 439 (1971) ("The risk of substantial prejudice increases with the passage of time"). Mere passage of time, however, need not result in refusal, Feldman v. Allegheny Int'l, Inc., 850 F.2d 1217, 1225 (7th Cir.1988); on the contrary, it is only undue delay that forecloses amendment. Dussouy, 660 F.2d at 598.

The burden to the judicial system itself, e.g., from delaying resolution of the case, can justify denial of leave to amend, even if the amendment would not prejudice the opposing party. Perrian, 958 F.2d at 194, 195 (relying on Nolin v. Douglas Co., 903 F.2d 1546, 1550 (11th Cir.1990); Tamari, 838 F.2d at 908. Leave to amend sought shortly before trial may be denied, Campbell, 893 F.2d at 927, for example, because it would serve to defeat the public's interest in the expedient resolution of legal disputes. Fort Howard Paper Co. v. Standard Havens, Inc., 901 F.2d 1373, 1379 (7th Cir.1990). Thus, with the passage of time (and acceptance of earlier amendments), the party seeking leave to amend must justify that request by more than invocation of the concept of the liberality of Rule 15(a). The burden is then on the movant to show a valid reason for the neglect and delay. Te-Moak Bands of Western Shoshone Indians v. United States, 948 F.2d 1258, 1263 (Fed.Cir.1991); Dussouy, 660 F.2d at 598 n. 2. Such a shift becomes appropriate, however, only if the delay imposes on the court, e.g., requiring it to try the case on various theories seriatim, or presents the possibility of serious prejudice to the opponent. Dussouy, 660 F.2d at 598 n. 2; see also, Gregory v. Mitchell, 634 F.2d 199, 203 (5th Cir.1981).

2. Failure to cure

As with any complaint, of course, where the proposed amendment fails to allege facts which could support a proper theory of liability or fails to demonstrate substantial merit, leave to amend is properly denied. Goulding v. Feinglass, 811 F.2d 1099, 1103 (7th Cir.1987) (citing Verhein v. South Bend Lathe, Inc., 598 F.2d 1061, 1063 (7th Cir. 1979)); Glick v. Koenig, et al., 766 F.2d 265, 268 (7th Cir.1985); Brandt v. Grounds, 687 F.2d 895, 899 (7th Cir.1982). Similarly, the proposed amendment is properly rejected where it fails to cure the original pleading. Glick, 766 F.2d 265, 268 (7th Cir.1985); Shashoua v. Quern, 612 F.2d 282, 285 (7th Cir.1979). Even where the proposed amendment satisfies the latter condition, it may be rejected for failing to do so earlier. Te-Moak Bands, 948 F.2d at 1261 (movants' failure to make known claims earlier falls under "possibility of earlier curing" apparent exception) (citing Carson v. Polley, 689 F.2d 562, 584 (5th Cir.1982)); see also, Chitimacha Tribe of Louisiana v. Harry L. Laws Co., 690 F.2d 1157, 1163 (5th Cir.1982) (movants failed to correct pleading deficiencies even though information was available before the first...

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