Opinion
No. 00-CV-784 (NAM/RFT)
May 14, 2002
Jeffrey S. Shelly, Esq., Boies, Schiller Lexner, LLP, Albany, NY, for Plaintiffs.
Michael J. Cunningham, Esq., Iseman, Cunningham, Riester, Hyde, LLP, Albany, NY, for Defendants.
MEMORANDUM-DECISION AND ORDER
Presently pending is Plaintiffs' motion for leave to file a second amended complaint pursuant to Fed.R.Civ.P. 15(a) to add as plaintiffs Richard K. Askin ("Askin") and William Tapella ("Tapella"). Docket Nos. 119-21. Defendants oppose the motion. Docket No. 130. For the reasons that follow, Plaintiffs' motion is granted.
DISCUSSION
Fed.R.Civ.P. 15(a) states, in pertinent part, that leave to amend the pleadings should be "freely given when justice so requires." Indeed, leave to amend should be denied only in the face of undue delay, bad faith, undue prejudice to the nonmovant, futility of amendment or where the movant has repeatedly failed to cure deficiencies in previous amendments. Foman v. Davis, 371 U.S. 178, 182 (1962); Day v. Morgenthau, 909 F.2d 75, 78 (2d Cir. 1990). Moreover, the party opposing the amendment has the burden of demonstrating that leave would be prejudicial or futile. Blaskiewicz v. County of Suffolk, 29 F. Supp.2d 134, 137-38 (E.D.N.Y. 1998) (citing Harrison v. N.B.D. Inc., 990 F. Supp. 179, 185 (E.D.N.Y. 1998)).
Defendants assert that a higher standard, i.e., "good cause," applies here because Plaintiffs filed their motion after the October 1, 2001 deadline for filing motions to amend the pleadings. This "good cause" standard, however, applied in determining whether the Pre-Trial Scheduling Order should be amended, not whether leave to file an amended complaint should be granted. In essence, a motion filed after the Scheduling Order's deadline would require the movant to establish "good cause" for the motion's untimeliness prior to any decision on the merits of the motion. Here, Plaintiffs sought and were granted an extension of time until November 15, 2001 to file this motion. Docket No. 116. Therefore, Plaintiffs' motion is timely.
Here, Defendants contend that Plaintiffs' motion should be denied because the proposed amendments are futile. A proposed amendment is futile where it fails to cure deficiencies in the original complaint, Acito v. Imcera Group, Inc., 47 F.3d 47, 54-55 (2d Cir. 1995), or where it would not survive a motion to dismiss. Milanese v. Rust-Oleum Corp., 244 F.3d 104, 110 (2d Cir. 2001). Therefore, to determine whether a proposed amendment is futile, it must be analyzed under the same standard as a Fed.R.Civ.P. 12(b)(6) motion to dismiss. See id. Defendants assert that the proposed addition of Askin and Tapella as plaintiffs is futile because their claims are barred by the applicable statute of limitations.
Civil RICO Claims
The statute of limitations for civil RICO claims is four years. See Agency Corp. v. Malley-Duff Assocs., Inc., 483 U.S. 143, 146-47 (1987). "The limitations period begins to run when the plaintiff discovers or should have discovered the RICO injury." Merrill Lynch Ltd. Partnerships Litigation v. Merrill Lynch Co., Inc., 154 F.3d 56, 58 (2d Cir. 1998) (citing Bankers Trust Co. v. Rhoades, 859 F.2d 1096, 1102 (2d Cir. 1988)). The face of the proposed second amended complaint alleges that Plaintiffs learned of the alleged violations in July 1998. See Proposed Second Am. Compl. (Docket No. 121, Ex. 1), ¶ 99. Askin and Tapella moved to amend the complaint on November 15, 2001, within the four year statute of limitations period. Defendants may have evidence that Plaintiffs knew or should have known of the civil RICO claims prior to July 1998. Such evidence was not presented here and is outside the face of the complaint and not properly considered in this decision.
Accordingly, Askin and Tapella's motion to amend the complaint to be added as plaintiffs in the civil RICO claims against Defendants is granted.
Fraud Claim
The statute of limitations for fraud claims is either six years from the fraudulent act or two years after the plaintiff discovered or should have discovered the fraudulent act, whichever is longer. N.Y. Civ. Prac. L. R. §§ 203(g) 213. Askin and Tapella contend that the limitations period began to run here on May 22, 2000, when the original complaint was filed. The face of the proposed complaint, however, states that between April and July 1998, "[s]everal minority general partners, including Plaintiffs, were skeptical of Congel's intentions and concerned about how any sales proceeds would be accounted for and distributed." Proposed Second Am. Compl., ¶ 98. Moreover, Askin and Tapella state that they "did not know that the present Plaintiffs were even contemplating the present action." Reply Mem. of Law (Docket No. 136), p. 4. Thus, there is no reason why Askin and Tapella should be afforded until May 2000 for the two year statute of limitations to accrue.
Fed.R.Civ.P. 15(c) permits an amendment of a pleading that changes a party to relate back to the date of the original pleading where the non-movant has received notice, is not prejudiced and where the non-movant "knew or should have known that but for a mistake concerning the identity of the proper party," that party would have been included in the original pleading. Defendants assert that Askin and Tapella cannot satisfy the "mistaken identity" requirement of Rule 15(c); and thus, the amendment does not relate back.
Rule 15(c) only specifically addresses amendments that change defendants. Nonetheless, the Advisory Committee's Note to the 1966 Amendment to Rule 15(c) states that the Rule is "extend[ed] by analogy to amendments changing plaintiffs." Furthermore, "courts in this Circuit, and elsewhere, have liberally construed this relation back provision as also extending to amendments that add parties asserting claims grounded in the same conduct, transaction, or occurrence." Olsen v. F.D.I.C., No. 91CIV3741, 1995 WL 494017, at *4 (S.D.N.Y. Aug. 17, 1995) (citations omitted). Thus, where the proposed amendment seeks to add new plaintiffs, courts have considered notice and prejudice to the defendants and the absence of inexcusable neglect by the movant. See id. at 5-7.
Defendants do not contend and the record does not establish either lack of notice or undue prejudice to the Defendants. Askin and Tapella do not assert any additional claims and their claims arise out of the same conduct, occurrence and transactions contained in the original complaint. Indeed, the only paragraphs proposed by this motion merely add Askin and Tapella as parties. Furthermore, Askin and Tapella are both partners in the Independence Mall Group and the original complaint repeatedly refers to the Plaintiffs as Partners. The original complaint also alleges that the Plaintiffs as well as other Partners were defrauded by Defendants scheme. Thus, Defendants have had adequate notice of the claims and that additional partners could join this action. Moreover, the addition of Askin and Tapella will not add any substantial discovery, which is still ongoing. Therefore, there is no undue prejudice to Defendants.
The more perplexing issue is Askin and Tapella delay in filing suit. As mentioned above, the original complaint states that the Plaintiffs became aware of the allegations in July 1998. Therefore, it is unclear why Askin and Tapella did not move to join this action until November 2001. This Court is reluctant to extend the relation back doctrine to reward prospective plaintiffs in waiting beyond the statute of limitations period before joining an action. Nonetheless, Askin and Tapella assert that "[i]t was only after the actions of Defendants in August and September [2001] that [they] realized they had no choice other than to join this action. . . ." Reply Mem. of Law, p. 4. It is unclear what specifically triggered Askin and Tapella concerns. The amended complaint, however, does include factual allegations as late as August 2001. See Am. Compl., ¶ 140-46. Furthermore, this action is one for fraud and Askin and Tapella could argue that they are entitled to a toll of the statute of limitations due to Defendants' misrepresentations under the doctrine of equitable estoppel. See Simcusk v. Saelli, 406 N.Y.S.2d 259 (1978). Since Defendants are not precluded from raising a statute of limitations defense and in light of the liberal standard for Rule 15 motions, Askin and Tapella motion to assert a fraud claim is granted.
Conversion Claim
The statute of limitations for conversion claims is three years. N.Y. Civ. Prac. L. R. § 214(3). The cause of action accrues at the time the conversion occurs. See Sporn v. MCA Records, Inc., 462 N.Y.S.2d 413, 416 (1983). Askin and Tapella contend that the discovery rule applies to conversion claims and thus, the limitations period does not begin until they discovered the conversion. The cases relied upon by Askin and Tapella, however, do not support this contention. Nonetheless, the underlying nature of this action is for fraud and as mentioned above, Plaintiffs may be entitled to a tolling of the statute of limitations due to Defendants alleged misrepresentations. Moreover, Defendants failed to specifically address the conversion claim and thus, have failed to meet their burden of establishing futility.
Accordingly, Askin and Tapella's motion on this ground is granted.
Remaining Claims
Generally, the statute of limitations for the remaining claims is six years. N.Y. Civ. Prac. L. R. § 213. Defendants do not assert that all claims by Askin and Tapella are time barred, but only that they "should be barred from asserting claims for any purported breaches that occurred prior to November 14, 1995." See Docket No. 151, p. 3. However, the discovery rule or equitable estoppel may be applicable to these claims.
Accordingly, Askin and Tapella's motion on this ground is granted.
WHEREFORE, it is hereby
ORDERED that the motion for leave to amend the complaint to add Askin and Tapella as plaintiffs in this action is GRANTED; Plaintiffs shall file and serve a second amended complaint on or before April 1, 2002.
IT IS SO ORDERED.