Integrated Water Resources, Inc. v. Shaw Environmental, Inc. (In re the IT Group, Inc.)

361 B.R. 417, 2007 Bankr. LEXIS 859
CourtUnited States Bankruptcy Court, D. Delaware
DecidedMarch 19, 2007
DocketBankruptcy No. 02-10118 (MFW); Adversary No. 06-50785 (MFW)
StatusPublished

This text of 361 B.R. 417 (Integrated Water Resources, Inc. v. Shaw Environmental, Inc. (In re the IT Group, Inc.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Integrated Water Resources, Inc. v. Shaw Environmental, Inc. (In re the IT Group, Inc.), 361 B.R. 417, 2007 Bankr. LEXIS 859 (Del. 2007).

Opinion

MEMORANDUM OPINION 1

MARY F. WALRATH, Bankruptcy Judge.

Before the Court is the Motion of Integrated Water Resources, Inc. (“IWR”) for leave to amend its Complaint (the “Original Complaint”) against the IT Litigation Trust and AlixPartners LLC, its Trustee (collectively, the “Trust”) to add a breach of contract Count. For the reasons set forth below, the Court will grant the Motion.

I. BACKGROUND

In April 2001, IWR was a subcontractor to a prime contractor to the United States government. IWR retained IT Corporation of California as a subcontractor for the environmental remediation of government facilities located in Cape Canaveral, Florida (the “Contract”). IWR alleges that IT Corporation breached the Contract by not completing performance by June 2001. Moreover, IWR claims that IT Corporation never completed performance of the Contract and IWR ultimately was [419]*419forced to complete the construction project itself.

On January 16, 2002, the IT Group, Inc., and its subsidiaries, including IT Corporation of California (collectively, the “Debtors”) filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code. On January 23, 2002, the Debtors executed an agreement with Shaw Group, Inc. (“Shaw”), whereby Shaw agreed to acquire substantially all the Debtors’ assets. On April 25, 2002, the Court entered an Order approving the sale of assets to Shaw (the “Sale Order”).

On April 6, 2004, the Debtors’ chapter 11 plan was confirmed. According to the plan, the Debtors’ remaining assets were vested in the Trust. AlixPartners LLC is the current Trustee of the Trust. The Trust’s duties include pursuing all avoidance actions, liquidating the Debtors’ assets, and distributing payment to holders of allowed claims.

On July 20, 2005, the Court approved a stipulation to compromise controversies (the “Stipulation”) between the Trust and IWR. The Stipulation provided, among other things, that “[njeither the [Trust] nor the Debtors have assigned any claim against IWR, nor has IWR assigned any claim against the [Trust] or the Debtors.” (Stipulation at 2, ¶ 10.) The Stipulation also contained a release clause that released IWR from all present and future claims or actions that the Trust or Debtors may have against it. (Id. at 3-4, ¶ 3.)

On October 27, 2005, Shaw filed a complaint against IWR with respect to the Contract in the Superior Court of California, Los Angeles County, Central District, case number BC342091. The California Court scheduled a hearing for June 15, 2007, to determine whether that action should be dismissed so that this Court may decide the issue.

On July 24, 2006, IWR filed the Original Complaint against the Trust and Shaw seeking (i) indemnification of expenses and attorney’s fees incurred in defending the California action and bringing this adversary proceeding; (ii) indemnification for any liability to Shaw; (iii) determination of IWR’s rights and duties under the Contract, the Sale Order, and the Stipulation; and (iv) injunctive relief against Shaw with respect to the pending action in California state court. On July 24, 2006, IWR also filed a Motion for preliminary injunction against Shaw seeking a stay of prosecution of the California action. On August 16, 2006, the Motion was granted (“Preliminary Injunction Order”). On September 6, 2006, the Court approved a stipulation between IWR and Shaw which extended the Preliminary Injunction Order until such time as the Court enters a further Order in the above-captioned proceeding.

On September 6, 2006, the Trust filed a Motion seeking dismissal of the indemnification Count of the Complaint, as premature or unripe. On October 4, 2006, in response to the Motion to dismiss, IWR agreed to dismiss that Count without prejudice or to hold the Count in abeyance until the Court’s determination of the merits of the causes of action against Shaw. The Trust would not agree to IWR’s terms for dismissal.

On January 5, 2007, IWR filed the instant Motion for leave to amend its Complaint against the Trust to add a breach of contract Count asserting that if the Contract was assigned to Shaw pursuant to the Sale Order, the Trust breached paragraph 10 and the release clause of the Stipulation. The Trust opposes the Motion. Briefing on the Motion is complete. The matter is now ripe for decision.

II. JURISDICTION

The Court has subject matter jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 1334 & 157(b)(1). This is a core matter. 28 U.S.C. § 157(b)(2)(A).

[420]*420III. DISCUSSION

A. Standard of Review

After a responsive pleading is served, a party may amend its complaint “only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires.” Fed.R.Civ.P. 15(a). See also Fed. R. Bankr.P. 7015 (providing that Rule 15 is applicable to adversary proceedings). The grant or denial of leave to amend is discretionary. Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962). Absent “undue delay,” “bad faith or dilatory motive ... repeated failure to cure deficiencies by amendments previously allowed, undue prejudice,” and “futility,” leave to amend shall be freely given. Id. There is a general presumption in favor of granting the moving party leave to amend. Boileau v. Bethlehem Steel Corp., 730 F.2d 929, 938 (3d Cir.1984).

B. Motion for Leave to Amend

IWR contends that the Court should exercise its discretion and grant its Motion because none of the justifications for denial of leave to amend are present and the proposed amendment relates back to the original filing date. Foman, 371 U.S. at 182, 83 S.Ct. 227. The Trust disagrees, arguing that the proposed amendment results in undue delay, undue prejudice, and futility.

1. Undue Delay

IWR argues that the Motion, filed less than six months after the filing of the Complaint, was filed without undue delay. See, e.g., Adams v. Gould, Inc., 739 F.2d 858, 868 (3d Cir.1984) (“The passage of time, without more, does not require that a motion to amend a complaint be denied; however, at some point, the delay will become ‘undue,’ placing an unwarranted burden on the court, or will become ‘prejudicial,’ placing an unfair burden on the opposing party.”).

The Trust argues that IWR engaged in undue delay because the proposed amendment is requested more than one year after the commencement of the California state court action. Moreover, the Trust asserts that IWR knew of the alleged facts supporting the breach of contract claim at the time the original Complaint was filed.

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Bluebook (online)
361 B.R. 417, 2007 Bankr. LEXIS 859, Counsel Stack Legal Research, https://law.counselstack.com/opinion/integrated-water-resources-inc-v-shaw-environmental-inc-in-re-the-it-deb-2007.