Summary
In Capstead, the court found that the plaintiffs insufficiently pled scienter when they argued that the individual defendants were motivated to commit fraud by the possibility of reaping $10 million in salaries and bonuses.
Summary of this case from Financial Acquisition Partners v. BlackwellOpinion
Civil Action No. 3:98-CV-1716-L Consolidated With: Civil Action No. 3:98-CV-1718-L, Civil Action No. 3:98-CV-1761-L, Civil Action No. 3:98-CV-1802-L, Civil Action No. 3:98-CV-1809-L, Civil Action No. 3:98-CV-1827-L, Civil Action No. 3:98-CV-1828-L, Civil Action No. 3:98-CV-1847-L, Civil Action No. 3:98-CV-1849-L, Civil Action No. 3:98-CV-1860-L, Civil Action No. 3:98-CV-1885-L, Civil Action No. 3:98-CV-1886-L, Civil Action No. 3:98-CV-1948-L, Civil Action No. 3:98-CV-1958-L, Civil Action No. 3:98-CV-1977-L, Civil Action No. 3:98-CV-1978-L, Civil Action No. 3:98-CV-2029-L, Civil Action No. 3:98-CV-2054-L, Civil Action No. 3:98-CV-2087-L, Civil Action No. 3:98-CV-2109-L, Civil Action No. 3:98-CV-2122-L, Civil Action No. 3:98-CV-2196-L, Civil Action No. 3:98-CV-2232-L, Civil Action No. 3:98-CV-2538-L, Civil Action No. 3:01-CV-0698-L
September 19, 2003
ORDER
Before the court is Lead Plaintiffs' Motion Under Fed.R.Civ.P. Before the court is Lead Plaintiffs-Motion Under Fed.R.Civ.P. 15 and 59(e) to Vacate the Judgment and Modify the Court's March 31, 2003 Order to Permit Filing of an Amended Complain ("Motion to Vacate"), filed May 14, 2003. After careful consideration of the parties' written submissions, the court's Memorandum Opinion and Order of March 31, 2003 ("Memorandum Opinion"), and the applicable law, the court denies Lead Plaintiffs— Motion to Vacate.
In its Memorandum Opinion, the court dismissed Plaintiffs' securities fraud claims with prejudice because Plaintiffs failed to satisfy the pleading requirements for pleading such claims pursuant to the Private Securities Litigation Reform Act of 1995 ("PSLRA"). Specifically, the court held that Plaintiffs failed to satisfy the heightened pleading requirements of Fed.R.Civ.P. 9(b) and the PSRLA concerning a number of statements or omissions contained in their Consolidated Amended Complaint, and that Plaintiffs failed to plead with particularity facts giving rise to a strong inference that Defendants acted with scienter, that is "a mental state embracing intent to deceive, manipulate, or defraud." See Ernst Ernst v. Hochfelder, 425 U.S. 185, 193 n. 12 (1976). In addition, the court denied Plaintiffs' request to amend their Complaint, finding that under the circumstances amendment would be futile and would result in undue delay. Plaintiffs now request, pursuant to Fed.R.Civ.P. 15(a) and 59(e), that the court vacate its judgment, and modify its Memorandum Opinion to grant them leave to file an amended complaint.
Rule 59(e) provides that a party may move to amend or alter a judgment within ten days after entry of the judgment. Fed.R.Civ.P. 59(e). "A district court has considerable discretion in deciding whether to grant or deny a motion to alter a judgment." Hale v. Townley, 45 F.3d 914, 921 (5th Cir. 1995). In exercising this discretion, a district court must "strike the proper balance between the need for finality and the need to render just decisions on the basis of all the facts." Id. With this balance in mind, the Fifth Circuit recognizes that Rule 59(e) "favor[s] the denial of motions to alter or amend a judgment." Southern Constructors Group, Inc. V. Dynalectric Co., 2 F.3d 606, 611 (5th Cir. 1993).
A motion to alter or amend a judgment "must clearly establish either a manifest error of law or fact or must present newly discovered evidence." Rosenzweig v. Azurix Corp., 332 F.3d 854, 863 (5th Cir. 2003); Simon v. United States, 891 F.2d 1154, 1159 (5th Cir. 1990) (citations omitted). A Rule 5 9(e) motion may not be used to relitigate old matters, raise arguments, or present evidence that could have been raised prior to entry of judgment. See Rosenzweig, 332 F.3d at 863; Simon, 891 F.2d at 1159 ("These motions cannot be used to raise new arguments which could, and should, have been made before the judgment issued."); see generally, 11 C. Wright, A. Miller M., Kane § 2810.1 at 127-28 (2d ed. 1995). A party seeking to alter or amend a judgment based on "newly discovered evidence" must explain why the evidence was not available prior to the date the district court entered the judgment. See, e.g., Russ v. Int'l Paper Co., 943 F.2d 589, 693 (5th Cir. 1991) (stating "the unexcused failure to present evidence [that] is available at the time summary judgment is under consideration constituted a valid basis for denying a motion to reconsider").
Plaintiffs do not seek to alter or amend the judgment based on "newly discovered evidence"; rather, they contend that the court abused its discretion by denying their request to amend under Fed.R.Civ.P. 15(a), despite the timely request made in their opposition memorandum. Plaintiffs argue that their Consolidated Amended Complaint was in effect their "original complaint," because it was the first one filed by Lead Plaintiffs. They contend that because Rule 15(a) allows an amendment "once as a matter of course," they had an "absolute" right to substantively amend their "original complaint" to cure any pleading defects. The court disagrees. This case is a consolidated action of twenty-four separate lawsuits, in which twenty-four separate "original complaints" were initially filed. Plaintiffs filed their Consolidated Amended Complaint in this case in October 2000, more than two years after this litigation commenced. Notwithstanding Plaintiffs' assertion that the Consolidated Amended Complaint "simply combined the separate complaints of other plaintiffs," it nevertheless provided Plaintiffs an opportunity replead their case, and to craft a pleading sufficient to withstand a motion to dismiss. The court therefore finds Plaintiffs' contention that they have been denied an opportunity to amend "once as a matter of course" unpersuasive.
Plaintiffs also contend that they should be allowed to amend because the pleading standards have changed dramatically in the two years between the filing of the amended complaint and the court's order of dismissal, In particular, Plaintiffs contend that since the amended complaint was filed, the Fifth Circuit has issued decisions which represent an intervening change in the law, namely, Abrams v. Baker Hughes, Inc., 292 F.3d 424 (5th Cir. 2002); ABC Arbitrage Plaintiffs Group v. Tchuruk, 291 F.3d 336 (5th Cir. 2002); and Nathenson v. Zonagen, Inc., 267 F.3d 400 (5th Cir. 2001). The Fifth Circuit recently rejected this same type of argument in Schiller v. Physcians Resource Group Inc.,___ F.3d__, 2003 WL 21946821, at *3 n. 3 (5th Cir. Aug. 29, 2003). The court stated:
The Alpert Group argues that leave to amend is warranted because this Court's decision in Nathenson v. Zonagen, Inc., 267 F.3d 400 (5th Cir. 2001) represents an intervening change in the law. We reject Alpert Group's argument for two reasons. First, Nathenson was decided on September 25, 2001, approximately five months before the district court granted the motions to dismiss, and thus cannot constitute an intervening change in the law. Second, we conclude that Nathenson did not change the law with respect to pleading requirements in securities fraud cases. Nathenson held that the enactment of the Private Securities Litigation Reform Act ("PSLRA") did not generally alter the substantive scienter pleading requirements for § 10(b) and Rule 10(b)(5). See Goldstein v. MCI WorldCom, [ 340 F.3d 238 (5th Cir. 2003)]. The court in Nathenson merely confirmed that scienter of severe recklessness remained a valid basis for liability under § 10(b) and Rule 10(b)(5) in light of the plain language of the PSRLA. Id.; see also Nathenson, 267 F.3d at 410. We likewise reject Alpert Group's argument that ABC Arbitrage Plaintiffs Group v. Tchuruk, 291 F.3d 336 (5th Cir. 2002) and Abrams v. Baker Hughes, Inc., 292 F.3d 424 (5th Cir. 2002) represent an intervening change in the law. Alpert Group was well aware of the pleading standards, but simply failed to meet them.Schiller, 2003 WL 21946821, at *3 n. 3. For the reasons stated in Schiller, the court rejects Plaintiffs' contention that amendment should be allowed based on an intervening change in the law.
Like the Plaintiffs in Schiller, Plaintiffs were "well aware of the pleading standards, but simply failed to meet them. Id.
The court denied Plaintiffs' request to amend based on futility and undue delay. The court reasoned that amendment would be inappropriate in light of Plaintiffs' perfunctory request to amend their pleadings without any attempt to demonstrate how they would cure the pleading deficiencies raised by Defendants' motions to dismiss, or replead scienter more specifically if given the opportunity. Plaintiffs did not suggest in their opposition memorandum any additional facts not initially pled that could, if necessary, cure the pleading defects raised by Defendants, or otherwise inform the court of the substance any proposed amendment. Moreover, at no time prior to the court's order of dismissal did Plaintiffs proffer a proposed second amended complaint, or formally seek leave to amend their pleadings, although they had ample opportunity to do so prior to the court's ruling. In such instances, the Fifth Circuit has found no abuse of discretion in the district court's denial of leave to amend. See, e.g., Schiller, 2003 WL 21946821, at *3; Goldstein v. MCI WorldCom, 340 F.3d 238 (5th Cir. 2003); Rosenzweig, 332 F.3d at 865; McKinney v. Irving Indep. Sch. Dist., 309 F.3d 308, 315 (5th Cir. 2002). The court is convinced that under the circumstances of this case, its decision to dismiss this action without permitting Plaintiffs' leave to amend was correct.
In the alternative, Plaintiffs now request leave to file their Consolidated Second Amended Complaint. The decision to allow a postjudgment pleading amendment is within the discretion of the court, and governed by the same considerations controlling the exercise of discretion under Rule 15(a). See Rosenzweig, 332 F.3d at 864. "Although leave to amend under Rule 15(a) is to be freely given, that generous standard is tempered by the necessity of a district court to manage a case." Schiller, 2003 WL 21946821, at *2. In deciding whether to grant leave to amend, the court may consider a variety of factors, including, undue delay, bad faith or dilatory motive on the part of the movant, repeated failures to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, and futility of the amendment. Id.
The court determines that amendment is not warranted because of undue delay. While Plaintiffs contend that the proposed amended complaint reflects the results of their ongoing investigation, Plaintiffs do not explain why the factual allegations contained in the proposed Consolidated Second Amended Complaint could not have been alleged in their first Amended Complaint. What the court finds most troubling, aside from the age of the case, is that Plaintiffs made a strategic decision to stand on their amended complaint as filed until after the court ruled on the pending motions to dismiss, even though they were aware of Defendants' arguments as to the defects in their amended complaint. Plaintiffs' counsel need not be clairvoyant to know that Plaintiffs' Consolidated Amended Complaint could be dismissed with prejudice, given Fifth Circuit authority and prior decisions of this court articulating its interpretation of the applicable pleading standards, and finding allegations similar to those pleaded in Plaintiffs' Amended Complaint insufficient to withstand a motion to dismiss. Further, the court informed the parties at least four months before it ruled on Defendants' motion that it expected to rule within a certain period of time; yet, Plaintiffs waited until after the court issued its judgment in this case before amending their pleadings to correct the deficiencies. To allow amendment under these circumstances would in effect reward Plaintiffs for their lack of diligence and undue delay.
Moreover, the court has reviewed Plaintiffs' proposed Consolidated Second Amended Complaint and finds that it, like their Consolidated Amended Complaint, fails to allege with sufficient particularity facts giving rise to a strong inference of scienter. In addition, many of the allegations contained in the proposed Consolidated Second Amended Complaint continue to rely on impermissible "group pleading." As this court stated in its Memorandum Opinion, it has held as early as 1999 that the group pleading doctrine did not survive the PSLRA. See Memorandum Opinion at 33-34 and cases therein cited. Based on its review of the proposed Second Amended Complaint, the court concludes, as it did in its Memorandum Opinion that any amendment to Plaintiffs' Amended Complaint would be futile. See Foman v. Davis, 371 U.S. 178, 182 (1962) (instructing district court to consider futility of amendment when determining whether to allow an amendment of the pleadings).
Because the court finds, after having reviewed the submissions of the parties and its Memorandum Opinion, no manifest error of law or fact or newly discovered evidence, it denies Lead Plaintiffs' Motion Under Fed.R.Civ.P. 15 and 59(e) to Vacate the Judgment and Modify the Court's March 31, 2003 Order to Permit Filing of an Amended Complaint.
so ordered.