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Smith v. Tarter

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

June 4, 2018

ANNA LOU TARTER SMITH et al., Plaintiffs,
v.
JOSHUA DONALD TARTER, et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          Danny C. Reeves United States District Judge.

         This matter is pending for consideration of the plaintiffs' motions to alter or amend the Judgment, for leave to file an amended complaint, and to join C-Ville Fabricating, Inc. d/b/a Tarter Industries (“Tarter Industries”) as a plaintiff in this action or to allow Tarter Industries to intervene. [Record Nos. 29, 30] The motions will be denied for the reasons that follow.

         I.

         The plaintiffs commenced this action on August 11, 2017, asserting that Defendants Joshua Donald Tarter (“Joshua Tarter”), Thomas Lewis Gregory (“Gregory”), and Hong Kong QMC Industry Company, Ltd. (“QMC”) violated the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(c) and (d), the Defend Trade Secrets Act, 18 U.S.C. § 1836, et seq., the Kentucky Uniform Trade Secrets Act, KRS § 365.880 et seq., and Kentucky common law. [Record No. 1] The plaintiffs purported to bring these claims in their individual capacities and derivatively on behalf of various affiliated entities known as the Tarter Companies.[1] [Id.] The Court granted Joshua Tarter and Gregory's motions to dismiss the plaintiffs' claims, without prejudice, for lack of standing on January 22, 2018. [Record No. 26] Dismissal was predicated on the fact that the plaintiffs lacked individual capacity standing because they failed to allege that they sustained any injury that was separate and distinct from that allegedly sustained by the Tarter Companies. Further, the plaintiffs lacked derivative capacity standing because they failed to plead with particularity that they made a demand on the Tarter Companies to sue on their own behalf, or that making such a demand would have been futile. [Id.] The plaintiffs' claims against QMC were subsequently dismissed for these same reasons, and the Court entered a final and appealable Judgment. [Record Nos. 27, 28]

         After Joshua Tarter and Gregory's motions to dismiss were granted, the plaintiffs took certain actions to allegedly “remedy the jurisdictional issue identified by the Court.” [Record No. 29, p. 3] They conducted “an extensive review” of “the Tarter Companies' complicated corporate structure, ” [id.], and attempted to call a special meeting of each of the Tarter Companies to authorize a direct corporate action litigating the claims asserted in this proceeding. [Record No. 29-1, ¶¶ 111-69] According to the plaintiffs, Tarter Industries called such a meeting and authorized the litigation. [Id. ¶¶ 111-35]

         But the plaintiffs' efforts to call a special meeting of Tarter Management, Tarter Tube, and Tarter Gate were unsuccessful. [Id. ¶¶ 136-169] They contend that, due to the opposition of Donald Tarter, Joy Tarter, Keith Tarter, Joshua Tarter, and Nell Tarter Duggins, any further demand would be futile. [See Id. ¶¶ 23, 96, 100, 104, 106-110, 138-39, 149-54, 165-69.]

         The plaintiffs have now tendered a proposed amended complaint that incorporates the information they learned about the Tarter Companies' corporate structure, their efforts to make a demand for litigation on the Tarter Companies, and the reasons they believe any further demand would be futile.[2] [See Id. ¶¶ 19-169.] They ask that the Court reopen this matter under Federal Rule of Civil Procedure 59(e), and grant them leave to file the proposed amended complaint under Federal Rule of Civil Procedure 15(a)(2). [Record No. 29] Additionally, they ask the Court to join Tarter Industries as a plaintiff under Federal Rules of Civil Procedure 19(a) and 20(a) or permit Tarter Industries to intervene under Rules 24(a) and (b), based on their allegation that Tarter Industries has now authorized litigation. [Record No. 30]

         II.

         The Court must “freely give” parties leave to amend their pleadings before trial “when justice so requires.” Fed.R.Civ.P. 15(a)(2). “But this permissive standard does not apply when a party seeks to amend its complaint after an adverse judgment.” Energy Conversion Devices Liquidation Tr. v. Trina Solar Ltd., 833 F.3d 680, 688 (6th Cir. 2016). The Sixth Circuit has explained that:

[c]ourts in that setting must consider the competing interest of protecting the finality of judgments and the expeditious termination of litigation. If a permissive amendment policy applied after adverse judgments, plaintiffs could use the court as a sounding board to discover holes in their arguments, then reopen the case by amending their complaint to take account of the court's decision. That would sidestep the narrow grounds for obtaining post-judgment relief under Rules 59 and 60, make the finality of judgments an interim concept and risk turning Rules 59 and 60 into nullities.

Leisure Caviar, LLC v. U.S. Fish & Wildlife Serv., 616 F.3d 612, 615-16 (6th Cir. 2010).

         “A party seeking such an amendment thus must satisfy both the ‘modest requirements of Rule 15' and the ‘heavier burden' that applies to requests ‘for reopening a case.'” Energy Conversion Devices Liquidation Tr., 833 F.3d at 688 (quoting Leisure Caviar, 616 F.3d at 616). The “heavier burden” provided in Federal Rule of Civil Procedure 59 permits the Court to reopen a case based on: “(1) a clear error of law; (2) newly discovered evidence; (3) an intervening change in controlling law; or (4) a need to prevent manifest injustice.” Leisure Caviar, 616 F.3d at 615 (quotation marks and citation omitted).

         III.

         The plaintiffs do not contend that it is necessary to reopen this case because the Court made a clear error of law, there was an intervening change in controlling law, or to prevent manifest injustice. Instead, they ask the Court to alter the Judgment to allow them to amend their complaint based on “newly discovered evidence.” They argue that, because “certain actions were taken to remedy [the jurisdictional] issue after the filing of the initial Complaint, a majority of the facts added to the Proposed Amended Complaint could not have been included in ...


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