Maley: 7th Circuit addresses amending pleadings after deadline

In Allen v. Brown Advisory, LLC, 41 F.4th 843 (7th Cir. 2022), the plaintiff appealed from the dismissal of his action and denial of his motion to amend his complaint. The 7th Circuit Court of Appeals affirmed; the discussion on seeking to amend pleadings after the amendment deadline has passed is relevant procedurally and provides an excellent primer.

Plaintiff had amended his complaint twice, and later, after the deadline for amendments, sought an additional amendment. Assisting the Southern District of Indiana due to its heavy caseload, Senior Judge Robert L. Miller Jr. denied amendment under both Federal Rules of Civil Procedure 16(b)(4) and Rule 15(a).

In affirming, the 7th Circuit wrote extensively on amending after the deadline has passed. This portion of the opinion is worthy of verbatim quotation as follows:

“We begin with Rule 16(b)(4), which provides that a party seeking to amend the pleadings after the expiration of the deadline in the scheduling order must show ‘good cause’ for the late amendment. The central consideration in assessing whether good cause exists is the diligence of the party seeking to amend. Id. at 720; Trustmark Ins. Co. v. Gen. & Cologne Life Re of Am., 424 F.3d 542, 553 (7th Cir. 2005); see also Fed. R. Civ. P. 6(b)(1) (providing that a district court may extend a missed deadline for ‘good cause’ when a ‘party failed to act because of excusable neglect’).

“Allen claims that his proposed second amended complaint was inspired by documents that he had recently obtained from his old law firm (a third party to this litigation). He received the documents in batches, with the last batch arriving about a month before the deadline to amend (and more than two months before he moved to amend). Allen claims that he needed the time to review and understand the documents before moving to amend.

“Generally speaking, it is reasonable to conclude that a plaintiff is not diligent when he in silence watches a deadline pass even though he has good reason to act or seek an extension of the deadline. See Bell v. Taylor, 827 F.3d 699, 706 (7th Cir. 2016); Adams v. City of Indianapolis, 742 F.3d 720, 734 (7th Cir. 2014); Brosted v. Unum Life Ins. Co. of Am., 421 F.3d 459, 463–64 (7th Cir. 2005). That is what happened here. As the deadline to amend approached, Allen received and reviewed the documents purportedly inspiring his motion to amend; yet he did not move to amend or seek an extension of the deadline to do so.

“… Though Rule 16(b)(4) alone justifies the denial of Allen’s motion to amend, the judge additionally concluded that the motion should be denied under the more lenient standard in Rule 15(a)(2), which provides that ‘[t]he court should freely give leave [to amend] when justice so requires.’ As the text indicates, the rule favors amendment as a general matter. See Foman v. Davis, 371 U.S. 178, 182 (1962). Nevertheless, a district court is within its discretion to deny leave to amend when it has a ‘good reason’ for doing so, such as futility, undue delay, prejudice to another party, or bad-faith conduct. Liebhart v. SPX Corp., 917 F.3d 952, 964 (7th Cir. 2019). Prejudice to the nonmoving party caused by undue delay is a particularly important consideration when assessing a motion under Rule 15(a)(2). See, e.g., id. at 965; Dubicz v. Commonwealth Edison Co., 377 F.3d 787, 792 (7th Cir. 2004).

“An amended pleading is less likely to cause prejudice if it comes without delay or asserts claims related to allegations asserted in prior pleadings. See Empress Casino Joliet Corp. v. Balmoral Racing Club, Inc., 831 F.3d 815, 832 (7th Cir. 2016). Conversely, prejudice is more likely when an amendment comes late in the litigation and will drive the proceedings in a new direction. See, e.g., McCoy v. Iberdrola Renewables, Inc., 760 F.3d 674, 687 (7th Cir. 2014) (affirming the denial of a motion to amend brought at a late stage that introduced new theories of liability); Johnson v. Cypress Hill, 641 F.3d 867, 872–73 (7th Cir. 2011) (similar). Such an amendment will often require significant discovery on new issues.

“Allen’s proposed second amended complaint sought to take the litigation into new factual territory, implicating Brown Advisory in various financial decisions made by Allen or his family. Those allegations are arguably futile because they appear to rest on the questionable assumption that the company had a duty to stop decisions made by others. In any case, inserting these issues into the case so late in the day would have prejudiced Brown Advisory by driving the litigation in a new direction as discovery on the original issues was nearing completion. Furthermore, once the judge issued his dismissal order — which came after the deadline for amending the pleadings had passed — Brown Advisory withdrew actions it had initiated in other jurisdictions to enforce subpoenas to uncooperative third parties. If the judge had granted Allen’s motion to file a second amended complaint, the revived suit would have required Brown Advisory to refile those actions.

“Moreover, Allen has not said why he could not have obtained the documents from his own law firm earlier in the litigation. Without any explanation, the proposed second amended complaint looks more like an effort to keep Brown Advisory locked in litigation rather than an understandable delay beyond Allen’s control. See McCoy, 760 F.3d at 687.

“Resisting this conclusion, Allen points to our precedents explaining that ordinarily a plaintiff whose original complaint has been dismissed for failure to state a claim should be given at least one chance to amend. E.g., Runnion ex rel. Runnion v. Girl Scouts of Greater Chi. & Nw. Ind., 786 F.3d 510, 519 (7th Cir. 2015). Amendment is often warranted under those circumstances because the dismissal order may reveal deficiencies that the plaintiff can rectify with an amended pleading, allowing the dispute to be resolved on the merits. See, e.g., Bausch v. Stryker Corp., 630 F.3d 546, 562 (7th Cir. 2010). Allen’s situation does not fit with those cases, however, because he had already amended once and because the deadline for amending the pleadings had passed. Adams, 742 F.3d at 734. It’s also worth noting that the rationale of those cases does not apply here because the proposed second amended complaint would have added new theories of liability rather than shored up the deficiency of the allegations in the prior complaint.”•

__________

John Maley — [email protected] — is a partner with Barnes & Thornburg LLP, practicing federal and state litigation, employment matters and appeals. He clerked for Judge Larry McKinney from 1988-90, serves as chair of the Local Rules Advisory Committee, S.D. Indiana, and is a member of the Local Rules Advisory Committee, N.D. of Indiana. Opinions expressed are those of the author.