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First Technology Capital, Inc. v. Banctec, Inc.

United States District Court, E.D. Kentucky, Central Division, Lexington

June 26, 2017

FIRST TECHNOLOGY CAPITAL, INC., Plaintiff,
v.
BANCTEC, INC., Defendant.

          OPINION AND ORDER

          Robert E. Wier, United States Magistrate Judge

         Rocky Balboa thrived on second chances: it took him two bouts to best both Apollo Creed and, later, Clubber Lang. See Rocky (Chartoff-Winkler Productions 1976); Rocky II (Chartoff-Winkler Productions 1979). As much as this litigation may resemble heavyweight boxing, hype included, it differs in, at least, one critical way: litigants rarely get what Rocky depended on-a second opportunity to come out on top.

         BancTec, weeks after discovery closed and after the filing of dispositive motions, asked the Court to reconsider its prior denial of the untimely motion to modify the schedule to permit an amended answer. FTC opposed, and BancTec replied. The Court assumes familiarity with the background (the road to DE #69), evaluates each contention, and wholly DENIES BancTec any relief via reconsideration.

         Standard of Review

         “The Federal Rules of Civil Procedure do not explicitly address motions for reconsideration of interlocutory orders.” Rodriguez v. Tenn. Laborers Health & Welfare Fund, 88 F. App'x 949, 959 (6th Cir. 2004). However, “[d]istrict courts have inherent power to reconsider interlocutory orders and reopen any part of a case before entry of a final judgment.” Mallory v. Eyrich, 922 F.2d 1273, 1282 (6th Cir. 1991); see also, e.g., In re Life Investors Ins. Co. of Am., 589 F.3d 319, 326 n.6 (6th Cir. 2009) (“[A] district court may always reconsider and revise its interlocutory orders while it retains jurisdiction over the case.”). “This authority allows district courts to afford such relief from interlocutory orders as justice requires. Traditionally, courts will find justification for reconsidering interlocutory orders when there is (1) an intervening change of controlling law; (2) new evidence available; or (3) a need to correct a clear error or prevent manifest injustice.” Rodriguez, 88 F. App'x at 959 (internal quotation marks and alteration removed); Louisville/Jefferson Cnty. Metro Gov't v. Hotels.com, L.P., 590 F.3d 381, 389 (6th Cir. 2009) (same). “This standard obviously vests significant discretion in district courts.” Rodriguez, 88 F. App'x at 959 n.7; see also, e.g., Kerns v. Caterpillar Inc., 144 F.Supp.3d 963, 967 (M.D. Tenn. 2015) (applying the standard); Simmerman v. Ace Bayou Corp., 304 F.R.D. 516, 518 (E.D. Ky. 2015) (same).

         Analysis

         As background, BancTec had until September 16, 2016, by its own agreement, to file any motion(s) to amend pleadings. See DE ##20, at ¶ 3; 14, at ¶ 5. Nearly a month after that deadline passed, BancTec filed an untimely motion for leave to amend its answer. DE ##49, 50. The Court, accordingly, undertook an extensive evaluation of and ultimately denied BancTec's belated motion to change the schedule and tardily amend the answer. See DE #69 (Memorandum Opinion & Order denying BancTec's motion). BancTec now asserts that the Court should reconsider DE #69 based on (1) two alleged clear errors of law, (2) newly available evidence, and (3) manifest injustice. DE #77 (Motion). FTC opposes on each ground. DE #86 (Response); see also DE #94 (Reply).

         First-Clear Error of Law

         BancTec first contends that the Court committed two clear errors of law: (1) finding prejudice, which BancTec claims FTC “failed to address and cannot prove, ” and (2) applying Fed.R.Civ.P. 6(b). DE #77-1, at 4-8.

         First-Prejudice.

         The Court, indeed, determined that, if it permitted BancTec's tardy amendment, “FTC would suffer undue prejudice.” DE #69, at 15. “Most obviously, ” this prejudice resulted from the “additional discovery time and expense” FTC would face “if the Court granted BancTec's motion.” Id. The Court continued: “Especially at this late stage of the case, with mere days left in discovery, adding new claims would unquestionably require a substantial schedule reset, reopening discovery for additional weeks or months and expanding the appropriate scope of discovery.” Id. at 15-16 (concluding that the brand-new claims BancTec wanted to introduce would require FTC “to expend significant additional resources to conduct discovery and prepare for trial and significantly delay the resolution of the dispute” (internal alteration omitted)).

         As an initial matter, the Court finds BancTec wrong on the law regarding a prejudice determination.[1] Under the Sixth Circuit's authoritative interpretation, the Court merely must “evaluate prejudice to the opponent” and make “a determination of the potential prejudice to the nonmovant” before modifying a scheduling order. Leary v. Daeschner, 349 F.3d 888, 909 (6th Cir. 2003) (emphases added). The Sixth Circuit found the district court in Leary to have “properly applied the governing law” even though the court only “implicitly . . . commented on the prejudice that Daeschner would suffer[.]” Id. In fact, the Circuit has called “prejudice to the party opposing” simply a “relevant consideration” in the Rule 16 analysis, subsidiary to the “primary measure” of the moving party's diligence. Inge v. Rock Fin. Corp., 281 F.3d 613, 625 (6th Cir. 2002). In Inge, the Circuit itself made a determination of prejudice: “we envision no prejudice to Defendant from granting leave to amend.” Id. at 626 (emphasis added). Both Leary and Inge decline to particularly pin the prejudice burden to either side, instead explicitly countenancing a court independently evaluating the circumstances, in the totality, and making that determination. See also Duggins v. Steak ‘N Shake, Inc., 195 F.3d 828, 834 (6th Cir. 1999) (“To deny a motion to amend, a court must find at least some significant showing of prejudice to the opponent.” (emphasis added; internal quotation marks removed)); Moore v. City of Paducah, 790 F.2d 557, 562 (6th Cir. 1986) (same); Tefft v. Seward, 689 F.2d 637, 639-40 & 639 n.2 (6th Cir. 1982) (“The amended cause of action is not so different as to cause prejudice to the defendants, nor do we find the delay particularly ‘undue' considering the course of this case through a prior appeal to this Court.” (emphases added)).

         Very recently, the Sixth Circuit has confirmed this understanding, expressing that when a party “moves to amend the complaint after the deadline established by a scheduling order, [that party] first must show good cause . . . and the district court must evaluate prejudice to the nonmoving party[.]” Ross v. Am. Red Cross, 567 F. App'x 296, 306 (6th Cir. 2014) (emphasis added). The Court of Appeals was explicit: “In order to demonstrate good cause, the [movant] must show that the original deadline could not reasonably have been met despite due diligence and that the opposing party will not suffer prejudice by virtue of the amendment.” Id. (emphases added). Ross, thus, explicitly places the burden of demonstrating the lack of prejudice on the moving party.[2]

         As these cases harmoniously indicate, an evaluation of and a finding on prejudice to the nonmovant is, indeed, required to deny a motion to amend, but that is an evaluation and finding the Court conducts and makes. Foundationally, the burden to establish Rule 16(b)(4) “good cause” inarguably is on the movant. Leary, 349 F.3d at 909.[3] Cases (though, admittedly, they are perhaps not as clear or consistent as may be desired) indicate that a prejudice determination is either (1) an “addition[al]” obligation, a distinct evaluation the Court “also is required” to undertake in this context, id., or (2) a component of good cause on which the movant bears the burden, Ross, 567 F. App'x at 306.[4] Perhaps the nonmovant (as the party hoping to avoid amendment by making prejudice evident to a court) typically would press the prejudice case, but the Sixth Circuit makes clear, at a minimum, that the prejudice determination is ultimately for the Court, considering the totality, the parties' offerings, and the case record and status. In fact, the Circuit appears to squarely put the burden to prove a lack of prejudice on the movant. The Court is satisfied that it properly, in these circumstances, applied the law regarding prejudice.

         However, even hypothetically assuming (contrary to Sixth Circuit case law) that BancTec is correct that FTC had the burden to establish prejudice, FTC did satisfactorily raise prejudice in the response and earlier proceedings in the case. FTC argued, albeit in the Rule 6 context, that potential prejudice, as one “of the excusable neglect factors[, ] weigh[s] against granting the Second Motion for Leave.” DE #61, at 8 n.3. The Court has re-reviewed the entirety of DE #61 and finds considerations of prejudice implicit throughout. Obviously, to the Court, FTC strenuously opposed the motion to amend and predicted prejudice if the Court had granted the motion.

         In fact, in opposition to BancTec's first motion for leave to file an amended answer (DE #38), which BancTec later withdrew (DE #47), FTC explicitly argued: “FTC will suffer prejudice if the Second Motion to File Late is granted.” DE #45, at 2 (emphasis added); see also Id. at 17 (“FTC will potentially suffer prejudice if the Second Motion to File Late is granted.” (emphases removed)). FTC cited the pending motion for summary judgment (DE #42), the looming discovery deadline, scheduled depositions, the likely deadline continuances granting an amended answer would require, and the increases in attorney fees, expenses, and costs to FTC as the sources of potential prejudice. Id. at 18-19; see also Id. at 19 (“The ‘potential prejudice' to FTC is obvious.”). Prejudice to FTC was a palpable enough issue to BancTec for it to anticipatorily address the alleged lack of prejudice in DE #50, at 11. The Court agrees that the prejudice FTC would have faced is manifest in this record. Indeed, many of the prejudice markers are mere observations of case status or state of the record (in FTC's creative phraseology, “judicially noticeable indicia”), things that need not necessarily be “proven” by a nonmovant but rather can be perceived by the Court as it manages the case. See Leary, 349 F.3d at 908 (holding, in the court's own record evaluation, that “[o]bviously Daeschner would suffer prejudice” if the court permitted an amendment that introduced “new claims, ” finding such prejudice “apparent” in context).

         Additionally, FTC made its position on prejudice perfectly clear at the October 31, 2016, discovery conference. As one example, the Court queried FTC's counsel on the likely posture if the Court permitted BancTec's proposed amendment. Mr. Gartland responded that there was “[n]o question” that if the Court permitted an amended answer, FTC would “say [it] need[s] additional discovery.” DE #65, at 37. The Court specifically relied on the discovery conference colloquy in making the prejudice determination. DE ...


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