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