Smith v. Emc Corp.

• Decision Date: 10 December 2004
• Docket Number: No. 03-10979.,03-10979.
• Citation: 393 F.3d 590
• Parties: George Michael SMITH, Plaintiff-Appellant, v. EMC CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

393 F.3d 590

George Michael SMITH, Plaintiff-Appellant, v. EMC CORPORATION, Defendant-Appellee.

No. 03-10979.

United States Court of Appeals, Fifth Circuit.

December 10, 2004.

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David John Schenck (argued), Jones Day, Bobby M. Rubarts, Christopher Donald Kratovil (argued), Hughes & Luce, Dallas, TX, for Plaintiff-Appellant.

Paul M. Gleason (argued), Dominick Cameron Capozzola, Ogletree, Deakins, Nash, Smoak & Stewart, Los Angeles, CA, Scott A. Brutocao, Ogletree, Deakins, Nash, Smoak & Stewart, Austin, TX, for Defendant-Appellee.

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

Before DeMOSS, DENNIS and CLEMENT, Circuit Judges.

EDITH BROWN CLEMENT, Circuit Judge:

Appellant George Michael Smith sued his employer, EMC Corporation ("EMC"), for breach of contract. Smith now appeals the district court's denial of three motions: for leave to amend his complaint to include a fraud claim; for attorney's fees; and for leave to amend his complaint to include a Massachusetts Wage Act claim. Because the district court did not abuse its discretion in denying each of Smith's motions, we AFFIRM.

I. FACTS AND PROCEEDINGS

Smith worked for EMC as a commissioned salesman of technology products from 1994 through 2002. Smith's annual compensation was governed by one of EMC's North American Sales Compensation Plans, which detailed the salary, commissions, and bonuses for which Smith was eligible. Each year, Smith met with EMC representatives to sign a Goal Acknowledgment Form ("GAF"), which formalized and executed the year's Compensation Plan.

In March 2001, Smith and EMC entered into a series of negotiations about the terms of Smith's 2001 Compensation Plan. A GAF was signed by Smith and Greg Johnson, the Director of Financial Services, in September 2001. The parties contest this Compensation Plan's terms: Smith contends the agreement provided him $250,000 per year, while EMC alleges the version offered only $165,000.

The parties also dispute the document's validity. Johnson testified at trial that the Compensation Plan could not have been approved or authorized without the signature of Bill Connell, the Director of Operations. Smith asserts that he never knew that Johnson lacked the authority to execute the September GAF.

In March 2002, Smith sued EMC for breach of contract, defamation, intentional infliction of emotional distress, negligence, and gross negligence. He filed suit in Texas state district court, invoking Texas state law. EMC removed the case to the United States District Court for the Northern District of Texas based on diversity jurisdiction. On October 9, EMC filed an unsuccessful motion to abate and compel arbitration. EMC then filed a motion for partial summary judgment on Smith's tort claims and on two of his breach of contract claims. Smith withdrew his contract and negligence claims. The district court granted summary judgment on his defamation and intentional infliction of emotional distress allegations. Smith's five remaining breach of contract claims, alleging that EMC failed to compensate him fully from 1998 to 2002, proceeded to trial.

On June 12, 2003, EMC filed a motion in limine to exclude evidence relating to Smith's attorney's fees. Massachusetts law prohibits awarding attorney's fees in breach of contract cases. Because the Compensation Plans contained Massachusetts choice-of-law provisions, the district court granted EMC's motion for purposes of evidence admitted at trial, but reserved judgment on Smith's legal entitlement to receive attorney's fees.

The jury trial began on June 23, 2003. On June 26, EMC employee Greg Johnson testified that he lacked authority to execute the September 2001 GAF that he and Smith had signed. Based on this evidence, on June 27, Smith sought leave to amend his complaint to include a cause of action for fraud. The district court denied Smith leave to amend.

On June 27, the jury returned a verdict in favor of Smith on his 2000 breach of contract claim and awarded him $76,979. The jury denied Smith relief on his 2001 and 2002 claims. EMC agreed to pay Smith additional compensation under his 1998 and 1999 contracts. On July 10, the district court entered a final judgment, consisting of the jury's award of $76,979, EMC's stipulated $46,303, and pre- and post-judgment interest. The final judgment provided that Smith could submit evidence on his claim for attorney's fees within fourteen days.

On July 21, Smith filed a motion to alter and amend the judgment, arguing that Texas, rather than Massachusetts, contract law applied to his claims. Smith also filed a motion to recover attorney's fees pursuant to Texas law and a motion for a new trial. The district court denied these motions. The court found that the law of Massachusetts, rather than Texas, governed Smith's claims because they arose from the 1998, 1999, and 2000 Compensation Plans.

On September 8, Smith supplemented his motion to alter and amend the judgment. He argued that if Massachusetts law did apply, he should be able to add a claim under the Massachusetts Wage Act for attorney's fees and treble damages. The district court denied Smith's motions. Smith timely appeals.

II. STANDARD OF REVIEW

This Court reviews a district court's decision to deny leave to amend for abuse of discretion. United States ex rel. Adrian v. Regents of Univ. of Cal., 363 F.3d 398, 403 (5th Cir.2004). A district court's choice-of-law determination is reviewed de novo. Spence v. Glock, Ges.m.b.H., 227 F.3d 308, 311 (5th Cir.2000).

III. DISCUSSION

A. Denial of Smith's Motion for Leave to Amend a Fraud Claim

Smith contends that the district court erred in denying his motion to amend a fraud claim both because 1) the district court lacked any valid reason to do so under Federal Rule of Civil Procedure 15(a); and 2) the parties tried the fraud claim by consent under Federal Rule of Civil Procedure 15(b). The district court did not abuse its discretion in denying Smith's motion under either subsection of Rule 15.

1. Federal Rule of Civil Procedure 15(a)

Rule 15(a) requires a trial court "to grant leave to amend `freely,' and the language of this rule `evinces a bias in favor of granting leave to amend.'" Lyn-Lea Travel Corp. v. Am. Airlines, 283 F.3d 282, 286 (5th Cir.2002) (quoting Chitimacha Tribe of La. v. Harry L. Laws Co., Inc., 690 F.2d 1157, 1162 (5th Cir.1982)). A district court must possess a "substantial reason" to deny a request for leave to amend. Id. (quoting Jamieson v. Shaw, 772 F.2d 1205, 1208 (5th Cir.1985)). However, decisions concerning motions to amend are "entrusted to the sound discretion of the district court...." Quintanilla v. Tex. Television, Inc., 139 F.3d 494, 499 (5th Cir.1998) (quoting Wimm v. Jack Eckerd Corp., 3 F.3d 137, 139 (5th Cir.1993)).

As outlined by the Supreme Court, this Circuit examines five considerations to determine whether to grant a party leave to amend a complaint: 1) undue delay, 2) bad faith or dilatory motive, 3) repeated failure to cure deficiencies by previous amendments, 4) undue prejudice to the opposing party, and 5) futility of the amendment. Rosenzweig v. Azurix Corp., 332 F.3d 854, 864 (5th Cir.2003) (citing Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962)). Absent any of these factors, the leave sought should be "freely given." Foman, 371 U.S. at 182, 83 S.Ct. 227. The district court correctly denied Smith's motion based on his undue delay in filing the motion to amend, as well as the proposed amendment's undue prejudice to EMC.

a. Undue delay

Although "`it is generally true that leave to file amendments should be freely given, amendments should be tendered no later than the time of pretrial, unless compelling reasons why this could not have been done are presented.'" Glass v. Petro-Tex Chem. Corp., 757 F.2d 1554, 1562 (5th Cir.1985) (quoting Nevels v. Ford Motor Co., 439 F.2d 251, 257 (5th Cir.1971)) (citation omitted). Although Rule 15(a) does not impose a time limit "for permissive amendment, `at some point, time delay on the part of a plaintiff can be procedurally fatal.'" Whitaker v. City of Houston, 963 F.2d 831, 836 (5th Cir.1992) (quoting Gregory v. Mitchell, 634 F.2d 199, 203 (5th Cir.1981)). In such a situation, the plaintiff bears the burden of showing the delay to be "`due to oversight, inadvertence, or excusable neglect.'" Id. (quoting Gregory, 634 F.2d at 203).

To excuse the lateness of his motion to add a fraud claim, Smith argues that any delay was caused by EMC. He contends that he was unable to plead a fraud claim prior to trial for two reasons: EMC failed to fulfill its discovery obligations and EMC waited until trial to argue that the September 2001 GAF required Connell's signature. We find both arguments unpersuasive.

Although EMC was sanctioned for discovery violations, Smith does not argue that EMC failed specifically to provide him with the 2001 GAF document at issue. As to Smith's second argument, it is undisputed that Smith had not discovered prior to trial that Johnson would testify that he alone could not authorize the September GAF. Smith's lack of information does not excuse his delay in recognizing a potential fraud claim. Considering that the only claims with sufficient merit to proceed to trial focused entirely on the Compensation Plans, Smith should have explored the documents' validity during discovery. Instead, Smith focused on fruitless tort claims and alternate contract theories. In the parties' pretrial order, Smith contended that he and EMC possessed merely an oral contract which governed his 2001 claims. Per his own litigation strategy, Smith did not make the 2001 GAF an issue prior to trial and did not question Johnson about the 2001 GAF during his deposition. The district court did not abuse its discretion in finding that Smith's insufficient discovery did not excuse his adding a claim near the close of...