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USA Service Finance, LLC v. Barrett

United States District Court, W.D. Kentucky

March 21, 2019

USA SERVICE FINANCE, LLC, PLAINTIFF
v.
CATHRINE BARRETT, ET AL., DEFENDANT

          MEMORANDUM OPINION AND ORDER

          THOMAS B. RUSSELL JUDGE

         This matter comes before the Court upon Plaintiff USA Service Finance, LLC’s (USASF) Motion for Leave to File First Amended Complaint. [R. 21.] Defendants Cathrine Barrett, Freddy Jreisat, and Valor Capital Holdings, LLC (Defendants) responded, [R. 25], and USASF replied, [R. 28]. Fully briefed, this matter is ripe for adjudication. For the reasons stated herein, USASF’s Motion for Leave to File First Amended Complaint, [R. 21], is GRANTED.

         BACKGROUND

         On July 19, 2018, USASF filed its Complaint against Defendants containing claims of defamation, unlawful access to a computer, misuse of computer information, conversion, breach of fiduciary duty, respondeat superior liability, and unjust enrichment. [R. 1 at 6-12.] On September 10, 2018, Defendants filed a Motion to Dismiss for Lack of Jurisdiction and Improper Venue and Failure to State a Claim. [R. 6.] That same day, Defendants also filed a Motion to Transfer the case. [R. 11.] Subsequently, USASF responded to both motions, [R. 16; R. 17], and Defendants replied, [R. 18; R. 19]. Within its response to Defendants’ Motion to Dismiss, filed on October 1, 2018, USASF requested that the Court allow it to amend its complaint to correct any errors, rather than dismiss it. [R. 16 at 25.] On October 25, 2018, USASF filed a Motion for Leave to File First Amended Complaint, which is currently before the Court. [R. 21.]

         The dispute in this matter arises from USASF’s relationship with Defendant Cathrine Barrett. According to USASF’s Complaint, USASF is “a business which specializes in assisting military, retired military, and government employees with obtaining financing for travel and accommodations. . . . USASF purchases loans originated by third-party companies and services these loans. USASF arranges for monthly or bi-monthly payment from the military member or government employee.” [R. 1 at 3 (Complaint).] USASF states that after experiencing an unacceptably high delinquency rate on loans during its first years of operation, it “engaged in talks with Cathrine Barrett for her to assist USASF with lowering the delinquency rate to below 9% of loans.” [Id. at 3.] This relationship eventually soured, as evidenced by the multiple claims against Barrett, one of her employees, Freddy Jreisat, and Valor Capital. [Id. at 4.][1]

         Regarding the instant motion, USASF seeks to add factual details, exhibits, and two new claims to its Complaint. Specifically, USASF requests to add a claim of breach of contract and a claim of tortious interference with a business relationship against Barrett. [R. 21-1 at 9; 16.] Furthermore, USASF seeks to add details regarding Defendants’ connections to Kentucky, exhibits relating to its defamation claims, a clarification that the claims for wrongful access and misuse of a computer are in the alternative, and a citation to Barrett’s affidavit in support of its breach of fiduciary duty claim.

         LEGAL STANDARD

         Federal Rule of Civil Procedure 15(a)(1) permits a party to “amend its pleading once as a matter of course within 21 days after serving it, or if the pleading is one to which a responsive pleading is required, 21 days after service of a responsive pleading or 21 days after service of a motion under Rule 12(b), (e), or (f), whichever is earlier.” However, where that time has passed, Rule 15(a)(2) provides that, “[i]n all other cases, a party may amend its pleading only with the opposing party's written consent or the court's leave. The court should freely give leave when justice so requires.” While the Federal Rules encourage a liberal construction of Rule 15, it may be appropriate to deny leave to amend a complaint “where there is undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of the amendment, etc.” Miller v. Champion Enters., Inc., 346 F.3d 660, 690 (6th Cir. 2003). The Sixth Circuit has stated that “[t]he thrust of Rule 15 is . . . that cases should be tried on their merits rather than the technicalities of pleading.” Jet, Inc. v. Sewage Aeration Sys., 165 F.3d 419, 425 (6th Cir. 1999) (quoting Tefft v. Seward, 689 F.2d 637, 639 (6th Cir. 1982)).

         DISCUSSION

         In its Motion for Leave to File First Amended Complaint, USASF requests to amend its Complaint both as a matter of right under Federal Rule of Civil Procedure 15(a)(1)(B) and as a matter of the Court’s discretion under Rule 15(a)(2). [R. 21 at 1.] Defendants oppose both proposals, contending that if the Court does not deny USASF’s motion, it should at least condition the amendment on USASF paying Defendants’ costs. [R. 25 at 1.] Although the Court does not agree that the Complaint should be amended as a matter of right, the Court finds that deciding this case on its merits requires the Court to allow USASF to amend its Complaint as a matter of the Court’s discretion.

         I. Amendment as a Matter of Right First, USASF asserts that it should be permitted to amend its Complaint as a matter of right. [R. 21 at 1.] As recited above, a party may amend its pleading “21 days after service of a responsive pleading or 21 days after service of a motion under Rule 12(b), (e), or (f), whichever is earlier.” Fed. R. Civ. P. 15(a)(1)(B). USASF argues that it should be permitted to amend its complaint as a matter of right because it “requested leave to file an amended complaint as part of its response to Defendant’s motion to dismiss.” [R. 21 at 1 (emphasis added).] Although this request within its brief may have occurred within 21 days after a Rule 12(b) motion, the Sixth Circuit has held that “an informal request contained in a brief in opposition to a motion to dismiss is not deemed a Rule 15 motion to amend.” Gonzalez v. Kovacs, 687 F. App'x 466, 470 (6th Cir. 2017) (citing Begala v. PNC Bank, 214 F.3d 776, 784 (6th Cir. 2000)); see also Robbins v. New Cingular Wireless PCS, LLC, 854 F.3d 315, 322 (6th Cir. 2017) (collecting cases). Thus, the Court will deny USASF’s request to file its First Amended Complaint as a matter of right pursuant to Rule 15(a)(1)(B).[2]

         II. Amendment as a Matter of Court’s Discretion

         Secondly, USASF argues that its Motion to Amend should be granted in this Court’s discretion. [R. 21 at 2.] In response, Defendants contend that the Court should deny this request due to USASF’s “undue delay in asserting allegations it has known from the beginning, as well as to prevent undue prejudice to Defendants, who have now fully briefed two substantive motions (i.e., their Motion to Dismiss and Motion ...


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