Prithvi Catalytic, Inc. v. Microsoft Corp. (In re Prithvi Catalytic, Inc.)
Prithvi Catalytic, Inc. v. Microsoft Corp. (In re Prithvi Catalytic, Inc.)
Opinion of the Court
MEMORANDUM OPINION
GREGORY L. TADDONIO, UNITED STATES BANKRUPTCY JUDGE
Before the Court is Plaintiffs’ Motion to Reinstate Counts Nine and Ten of Plaintiffs’ Complaint Against Beyondsoft Consulting Inc. Pursuant to Federal Rules of Bankruptcy Procedure 7015 and 7016,
The Court considers the Motion to be a request to amend the complaint under Civil Rule 15(a)(2), which is applicable to this proceeding pursuant to Bankruptcy Rule 7015.
A.
The Plaintiffs commenced this adversary proceeding on August 21, 2014.
On April 8, 2015, the Court entered its Memorandum Opinion which dismissed Counts Nine and Ten as to Beyondsoft.
In the months that followed, the parties engaged in extensive discovery pursuant to a Joint Discovery Plan and Statement of Estimated Time of Trial dated May 21, 2015 (the “Joint Plan”) which included a schedule of pre-trial deadlines agreed to by the parties.
The Court conducted a second pre-trial status conference on October 29, 2015. At the status conference, Plaintiffs proposed an extension of the deadlines established in the Joint Plan because the exchange of written discovery was taking longer than originally anticipated.
Each of the defendants opposed an extension of the discovery period that benefited only the Plaintiffs. Collabera also opposed an extension of the date to file an amended complaint because the deadline had already expired one month before.
As the case progressed, the parties agreed to modify the Joint Plan on two additional occasions.
Except as expressly modified herein or as modified in the previous Amended Joint Plan and adopted in the Amended Order, all other terms of the Original Joint Plan and Original Order shall remain in full effect and [remain] binding on the parties.20
Pursuant to the Third Amended Joint Plan, the factual discovery period concluded on June 17, 2016.
On July 13, 2016, Plaintiffs filed the current Motion, seeking to reinstate Counts Nine and Ten as to Beyondsoft. Plaintiffs claim that during the course of discovery, they obtained deposition testimony from employees of Microsoft and Beyondsoft which demonstrates that Bey-ondsoft had knowledge of Prithi Catalytic, Inc.’s bankruptcy ease prior to committing the alleged actions which serve as the basis for Plaintiffs’ complaint. Beyondsoft, the only defendant targeted in the Motion, opposes the requested relief.
Subsequent to the filing of the Motion, each of the parties filed a motion for summary judgment with the Court.
This Court has jurisdiction of this matter under 28 U.S.C § 1334 and 157(b). This is a core proceeding under 28 U.S.C § 157(b)(2)(A).
B.
Civil Rule 15(a)(2) provides that a party may amend a pleading (including a complaint) “only with the opposing party’s written consent or the court’s leave.” Whether to grant leave to amend under Civil Rule 15(a)(2) is within the discretion of the Court.
C.
After review of the procedural history of this case, the Court finds that Plaintiffs unduly delayed their request to amend the Complaint. In the nearly 16 months that elapsed before the Motion was filed, Plaintiffs had at least four opportunities to amend the Complaint to reinstate Counts Nine and Ten against Beyondsoft. The failure to timely act now precludes them from asserting the claims at this late juncture.
As noted above, the deadline to file an amended complaint was established early in the case. Pursuant to the Joint Plan, the parties agreed that September 30,2015 would be the last day to amend the pleadings.
Plaintiffs sought an extension of the deadline to file an amended complaint on only one occasion, and it was after the deadline had already expired. At the October 29, 2015 status conference, Plaintiffs proposed to extend the deadline in conjunction with an extension of the discovery period to accommodate several depositions.
Although the parties agreed to modify the Joint Plan on two subsequent occasions, they did not alter the deadline to file amended pleadings.
The scheduling orders are significant for two reasons. First, each time Plaintiffs consented to a modification of the Joint Plan, they affirmatively approved the language in paragraph 10 which kept all remaining dates in place. At no time did
Plaintiffs’ dilatory behavior was never justified. It was possible to amend the Complaint prior to the September 30, 2015 deadline to correct the defect noted in the Court’s Memorandum OpinionJ
This litigation strategy is explicitly rejected in this circuit.
After the Court dismissed Counts Nine and Ten against Beyondsoft, Plaintiffs failed to take any overt action to reinstate the claims over the ensuing year while discovery remained open.
Depositions and other discovery are completed. During the past year, the parties exchanged thousands of documents and arranged for several cross-country and at least one cross-border deposition of numerous witnesses. The Court now observes that if an amendment is permitted at this juncture, Beyondsoft claims it will need to reopen discovery.
The Court is also on the verge of considering the summary judgment motions filed by each of the parties. Reopening discovery at this stage of the proceedings would require a further change to the Joint Plan with its concomitant domino effect on the Court’s schedules and burden.
The purpose of a pretrial scheduling order is to provide a framework for the litigants to follow. It also instills a sense of finality at certain stages of the proceeding, allowing the parties to transition from one phase of the case to the next. In this instance, the discovery phase is over and it is time to focus on dispositive motions and trial preparations. Given this posture, the Court is unwilling to rewind the clock and revisit discovery, especially when Beyond-soft and possibly other defendants would be prejudiced by the additional discovery expenses associated with an amended complaint.
D.
The claims Plaintiffs now seek to assert were not uncovered through written discovery, nor did deposition testimony reveal the existence of a cause of action that was previously unknown. To the contrary, Plaintiffs identified potential stay violations against each defendant from the outset of the case. After the Court dismissed the claims as to Beyondsoft, Plaintiffs neglected to pursue a timely amendment to keep the claims viable. When balancing the equities- and the potential harm to each party caused by the prospect of a late amendment, the Court cannot ignore that Plaintiffs could have easily avoided controversy with prompt action, whereas Bey-ondsoft could reasonably expect that Plaintiffs were no longer interested in pursuing those claims when the amendment deadline expired without extension.
Based on the foregoing, the Court concludes that Plaintiffs unduly delayed, without acceptable explanation, the filing of their request to amend the Complaint to assert claims for violations of the automatic stay and civil contempt against Beyond-soft. Plaintiffs had numerous opportunities to file the amendment and failed to do so. As it also appears that an amended complaint will cause undue prejudice to Bey-ondsoft by adding to the discovery costs at this late juncture, the Court finds the Motion is not well taken.
An appropriate Order will follow.
. For the purposes of this Memorandum, the Federal Rules of Bankruptcy Procedure will be referred to as the "Bankruptcy Rules” and the Federal Rules of Civil Procedure will be designated as the "Civil Rules.”
. Dkt. No. 215.
. Dkt. No. 254.
. Because Plaintiffs filed the Motion long after the responsive pleadings were filed, they are not eligible to amend the complaint as a matter of course under Civil Rule 15(a)(1).
. Dkt. No. 1 (the "Complaint”).
. Id. at ¶¶ 110-113.
. Dkt. No. 36.
. Dkt. No. 62. The Court also dismissed Count Four as to Beyondsoft, but that is not at issue in this Motion.
. Id. at p. 22.
. Dkt. No. 89.
. Id. at ¶ 9.
. See Order (I) Approving Joint Discovery Plan and Statement of Estimated Time of Trial Dated May 21, 2015; (II) Setting Deadline for Filing Certain Motions; and (III) Scheduling a Final Pretrial Conference; and (TV) Setting a Date Certain for Trial dated June 22, 2015, Dkt. No. 93 (the "First Pretrial Order").
. Transcript of October 29, 2015 hearing, Dkt. No. 144.
. Id. atp. 10.
. Id.
. IcL at p. 13. Beyondsoft did not take a position on the deadline to file an amended complaint.
. The Court’s ruling on the matter was as follows:
With respect to the extent of the extension of the discovery period, I will extend it through the end of January, but I will extend it to all parties. I’m not going to set one set of rules for one party and a different set for the others. I don't see any basis at this point to extend the deadline to file an amended complaint. So that deadline will remain as is.
Id. at p. 24-25.
. See Amended Order Modifying the Prior Joint Discovery Plan (II) Setting Modified Deadlines for Filing Certain Motions; and (III) Scheduling a Final Pretrial Conference dated November 9, 2015, Dirt. No. 146 (the "First Amended Joint Plan”).
. See Modified Amended Joint Scheduling Order Modifying the Prior Amended Joint Discovery Plan Between the Parties dated January 28, 2016, Dirt. No. 193 (the "Second Amended Joint Plan”); Second Amended Joint Scheduling Order Modifying the Prior Amended Joint Discovery Plan Between the Parties dated June 10, 2016, Dirt. No. 209 (the "Third Amended Joint Plan”).
. Second Amended Joint Plan at ¶ 10; Third Amended Joint Plan at ¶ 10.
. Id. at ¶ 2.
. See Dkt. Nos. 259, 262, 268, and 271.
. Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962).
. Fed. R. Civ. P. 15(a)(2).
. IcL at 182, 83 S.Ct. 227; see also Lorenz v. CSX Corp„ 1 F.3d 1406, 1414 (3d Cir. 1993).
. Foman, 371 U.S. at 182, 83 S.Ct. 227.
. Arthur v. Maersk, Inc,, 434 F.3d 196, 204 (3d Cir. 2006) (quoting Cornell & Co. v. Occupational Safety & Health Review Comm'n, 573 F.2d 820, 823 (3d Cir. 1978)).
. Wakeen v. Hoffman House, Inc., 724 F.2d 1238, 1244 (7th Cir. 1983) ("It is not an abuse of discretion to refuse a request to amend when the proffered amendment ... reasserts a claim previously determined.”); PCD Progs,, Ltd, v. Leighton, 833 F.2d 183, 188 (7th Cir. 1987); McDonald v. Thomas, 1991 WL 60412, at *3-4, 1991 Dist. LEXIS 4433, at *10 (S.D.N.Y. Apr. 8, 1991).
. Chancellor, 501 F.Supp.2d at 701-02.
. Dkt. No. 89.
.Dkt. No. 93.
. Hr’g Tr. 11:17-19 (Oct. 29, 2015).
. Hr’g Tr. 13:7-9.
. Hr’g Tr. 25:1-2.
. Dkt. 143, 146.
. See Second Amended Joint Plan, Dkt. Nos.' 192, 193; Third Amended Joint Plan, Dkt Nos. 206, 209.
. Third Amended Joint Plan, Dkt. No. 209 at ¶10.
.It is important to understand that the Court was ruling on a fundamental deficiency in the pleading. Knowledge of the bankruptcy is an essential element in establishing a willful violation of the stay. In re University Medical Center, 973 F.2d 1065, 1087-88 (3d Cir. 1992) (holding that a willful violation of the automatic stay occurs when a creditor violates the stay with knowledge that a bankruptcy petition has been filed.). This deficiency could have been cured early in the proceeding by making an amendment to the Complaint prior to September 30, 2015 which alleged that Beyondsoft knew of the bankruptcy at the time it committed the acts upon which this action is based. Detailed proof, such as deposition testimony or other similar evidence, is not required at the complaint stage. Bankruptcy Rule 7008 (incorporating Civil Rule 8(a)).
The Court considers Plaintiffs’ concern that, without proof to back up the allegations in the Complaint, they might be subject to sanctions under Bankruptcy Rule 7011 (Civil Rule 11). If Plaintiffs were uncertain that Beyondsoft knew of the bankruptcy when they prepared the Complaint, they should not have included Beyondsoft as a , defendant in Count Nine in the first place. Chancellor v. Pottsgrove Schl. Dist., 501 F.Supp.2d 695, 701 (E.D.Pa. 2007) (holding that "a party is presumptively not diligent if, at the commencement of the lawsuit, the party knows or is in possession of the information that is the basis for that party’s later motion to amend.”).
. Maersk, 434 F.3d at 204 (“When a party fails to take advantage of previous opportunities to amend, without adequate explanation, leave to amend is properly denied.”); Delaware Display Grp. LLC v. Lenovo Grp. Ltd., 2016 WL 720977, at *9 (D.Del. February 23, 2016) (same); Trunzo v. Citi Mortg., 43 F.Supp.3d 517, 521 (W.D.Pa. 2014) (same); see also Jang v. Boston Scientific Scimed, Inc., 729 F.3d 357, 368 (3d Cir. 2013) (Discussing an unjustified delay in seeking to amend a pleading, "This court has declined to reward a wait-and-see approach to pleading.”); In re Adams Golf, Inc, Secs. Litig., 381 F.3d 267, 280 (3d Cir. 2004) (“Plaintiffs relied at their peril on the possibility of adding to their complaintf]”).
. Maersk, 434 F.3d at 204 (quoting Cureton v. National Collegiate Athletic Ass'n, 252 F.3d 267, 273 (3d Cir. 2001)).
. Maersk, 434 F.3d at 204 (quoting Cornell & Co. v. Occupational Safety & Health Rev. Comm'n., 573 F.2d 820, 823 (3d Cir. 1978)).
. Cureton, 252.F.3d at 273.
. Plaintiffs maintain that in the course of identifying areas of inquiry for its Civil Rule 30(b)(6) deposition of Beyondsoft, it listed “knowledge of the bankruptcy case” as a potential topic. Through their subsequent questioning on this subject, Plaintiffs believe they put Beyondsoft on notice that they had not yet abandoned their claims under Counts Nine and Ten. The Court rejects this argument because there is nothing on the docket which reflects Plaintiffs intent to preserve these claims after the September 30, 2015 deadline had passed and their request for a belated extension was denied. While it is not uncommon for litigants to pursue questioning on a wide array of relevant topics during discovery, it was not reasonably foreseeable that Plaintiffs would attempt to resuscitate Counts Nine and Ten when they previously acknowledged that the deadline to file an amended complaint had passed and would not be extended in subsequent modifications of the 'Joint Plan.
. Glosser v. S & T Bank (In re Ambulatory Medical & Surgical Health Care. Inc.), 187 B.R. 888, 900 (Bankr.W.D.Pa. 1990) ("it is significant if the nature of the litigation would be greatly altered and defendants would have to pursue an entirely new and different defen-seat the eleventh hour.”).
. In its opposition to the Motion, Beyondsoft indicates that it would likely seek to reopen discovery and take additional depositions. Plaintiffs argue that Beyondsoft needs no additional discovery to internally discern whether it had knowledge of the bankruptcy case. Although Plaintiffs’ argument has some initial appeal, knowledge is only one element required to establish a stay violation. Based on the record before it, the Court cannot safely conclude that Beyondsoft had a sufficient opportunity to conduct discovery on the remaining elements, nor can it conclude that the cost of additional discovery would be insignificant.
Reference
- Full Case Name
- IN RE: PRITHVI CATALYTIC, INC. n/k/a Abilius, Inc., Reorganized Debtor. Prithvi Catalytic, Inc. n/k/a Abilius, Inc., Kyko Global, Inc., and Kyko Global GMBH v. Microsoft Corporation, Collabera, Inc., Beyondsoft Corporation, Ian Olson, and Shannon Krohn
- Cited By
- 2 cases
- Status
- Published