Elite Entertainment, Inc. v. Khela Bros. Entertainment

227 F.R.D. 444, 2005 U.S. Dist. LEXIS 9143, 2005 WL 1147774
CourtDistrict Court, E.D. Virginia
DecidedMay 13, 2005
DocketNo. 1:04CV764
StatusPublished
Cited by18 cases

This text of 227 F.R.D. 444 (Elite Entertainment, Inc. v. Khela Bros. Entertainment) is published on Counsel Stack Legal Research, covering District Court, E.D. Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Elite Entertainment, Inc. v. Khela Bros. Entertainment, 227 F.R.D. 444, 2005 U.S. Dist. LEXIS 9143, 2005 WL 1147774 (E.D. Va. 2005).

Opinion

ORDER

ELLIS, District Judge.

In this dispute over concert promotion rights, the parties over several months and ultimately with the aid of new counsel, have whittled down and refined their claims through a series of complaints, amended complaints, and counterclaims. Although the already-twice-extended period for discovery is nearly expired and the matter is scheduled for trial scarcely seven weeks from now,1 defendants on April 27, 2005 filed an amended counterclaim without seeking leave to do so, alleging four additional counterclaims never previously alleged. Defendants’ original counterclaim, filed on December 27, 2004, alleged (i) three breach of contract claims and (n) one claim for tortious interference with active or prospective business relations. In defendants’ amended counterclaim,2 they [446]*446seek to add six new claims under four new theories of liability: (i) unjust enrichment, (ii) fraud, (iii) common counts, and (iv) an action for accounting. They also seek additional forms of relief not included in their original counterclaim, namely restitution and punitive damages.

According to defendants, they filed the amended counterclaim in response to plaintiffs’ fourth amended complaint, which plaintiffs were given leave to file as a matter of grace after plaintiffs retained new counsel so that plaintiffs could simplify the pleadings and claims in anticipation of trial. See Elite Entm’t, Inc. v. Khela Bros. Entm’t, Case No. 1:04cv764, 2005 WL 1147774 (E.D.Va. May 13, 2005) (Order). Specifically, plaintiffs in their fourth amended complaint removed most of the claims they had previously pled and re-alleged only claims for breach of contract and unjust enrichment, which claims were included in every previous version of the complaint.

The matter is now before the Court on plaintiffs’ motion to strike defendants’ amended counterclaim. In response, defendants argue that they are entitled to amend their counterclaims as of right because their amended counterclaim was filed in response to plaintiffs’ fourth amended complaint. In the alternative, defendants seek leave to amend their counterclaim. For the reasons that follow, plaintiffs’ motion to strike the amended counterclaims must be granted and defendants’ motion for leave to amend must be denied with the narrow exception that they may amend to simplify and clarify factual allegations by conforming their counterclaim to the evidence learned during discovery.

No appellate court has squarely addressed whether counterclaims filed in response to an amended complaint pursuant to Rule 15, Fed.R.Civ.P., must be permitted as of right or only with leave of court. And district courts have taken variant positions on the issue. See, e.g., Uniroyal Chem. Co. v. Syngenta Crop Prot., Inc., 2005 WL 677806, 2005 U.S. Dist. LEXIS 4545 (D.Conn.2005) (discussing three competing approaches and adopting “moderate” view). Courts that have interpreted the rule permissively have held that once a plaintiff amends a complaint, the defendant always has a right to amend to bring new counterclaims, without regard to the scope of the amendments. See, e.g., American Home Prod. Corp. v. Johnson & Johnson, 111 F.R.D. 448, 453 (S.D.N.Y.1986) (holding that a defendant is entitled to respond to an amended complaint even with “eleventh-hour” additions). Courts that have interpreted the rule narrowly have held that an amended counterclaim must be confined specifically to responses that are related to changes in the amended complaint. See, e.g., Nolan v. City of Yonkers, 1996 WL 120685, at *4, 1996 U.S. Dist. LEXIS 3221, at *4 (S.D.N.Y.1996) (“Defendants [do] not have a right to assert new counterclaims unrelated to the amendment in their answers ... in the same way that they had a right to assert counterclaims in them original answer.”). Yet, the moderate, and most sensible, view is that an amended response may be filed without leave only when the amended complaint changes the theory or scope of the case, and then, the breadth of the changes in the amended response must reflect the breadth of the changes in the amended complaint.3 Thus, if major changes are made to the complaint, then major changes may be made to the response. Uniroyal, 1996 WL 120685, at *4, 2005 U.S. Dist. LEXIS 4545, at *5. Not only is this moderate approach predominant in the caselaw,4 the requirement that an [447]*447amended response reflect the change in theory or scope of the amended complaint is consistent with Rule 15’s requirement that an amended pleading must “plead in response” to the amended pleading. See id. at 1996 WL 120685, at *4-5, 2005 U.S. Dist. LEXIS 4545, at *5-6. Commentators also agree that the moderate view is the appropriate view. In the view of one prominent commentator, Professor James Moore, “[njormally, a party responding to. an amended pleading must ‘plead in response’ to the amended pleading, and must request leave of court if it wishes to add any new counterclaims in its response to the amended pleading.” See 3 James W. Moore, et al., Moore’s Federal Practice § 15.17[6] (3d ed.1997). Yet, “when a plaintiff’s amended complaint changes the theory of the case, it would be inequitable to require leave of the court before the defendant could respond with appropriate counterclaims.” Id.

This principle applied here points persuasively to the conclusion that defendants’ amended counterclaim is not permissible as a matter of right. Significantly, plaintiffs’ fourth amended complaint did not add any new claims nor did it expand the scope or theory of the case; to the contrary, plaintiffs eliminated most of the claims alleged in the third amended complaint, re-alleging only the breach of contract and unjust enrichment claims they had included in every version of their complaint, and streamlined their factual allegations. In contrast, defendants seek to add six new claims under four new theories of liability and two new claims for relief, including punitive damages. To be sure, defendants are entitled to file an amended counterclaim “in response to” plaintiffs’ amended complaint if they wish to clarify and simplify the factual allegations contained therein or to remove claims previously alleged. What they may not do as of right, however, is amend their counterclaim to bring new claims never previously alleged. Because the fourth amended complaint did not expand the scope or theory of the case, defendants are not entitled to raise without cause additional claims they failed to raise previously or to expand the scope of the case.

In the alternative, defendants argue that if they may not amend their counterclaim as of right, then they are entitled to leave of court to do so. See Rule 13(f), Fed. R.Civ. P., (“When a pleader fails to set up a counterclaim through oversight, inadvertence, or excusable neglect, or when justice requires the pleader may by leave of court set up the counterclaim by amendment.”). While it is true that Rule 15(a) requires that leave to amend “be freely given when justice so requires,” leave is not warranted here. See Rule 15(a), Fed.R.Civ.P. The following factors guide a court’s determination of whether a motion to amend should be granted: (1) undue delay; (2) bad faith; (3) futility of amendment; and (4) prejudice to the opposing party. Edwards v. City of Goldsboro, 178 F.3d 231 (4th Cir.1999). Delay alone is not enough; it must be accompanied by prejudice, bad faith, or futility. Id.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
227 F.R.D. 444, 2005 U.S. Dist. LEXIS 9143, 2005 WL 1147774, Counsel Stack Legal Research, https://law.counselstack.com/opinion/elite-entertainment-inc-v-khela-bros-entertainment-vaed-2005.