Opinion
CIVIL ACTION No. 00-6053
January 5, 2004
MEMORANDUM
Presently before this Court is Regulus Group LLC's Motion for Reconsideration of the Court's Order Granting a New Trial. For the reasons that follow, the Motion is granted.
I. INTRODUCTION
On October 1, 2003, the Court granted Plaintiff, David B. Still ("Still"), a new trial on the Pennsylvania Uniform Commercial Code ("UCC") issues of "commercial reasonableness" and "manifest unreasonableness" ("UCC issues") with respect to his claims for Conversion and Wrongful Seizure set forth in Counts XX and XXII of the Second Amended Complaint. See Still v. Regulus Group LLC, No. 00-6053, 2003 WL 22249198 (E.D. Pa. Oct. 1, 2003). Defendant, Regulus Group LLC ("Regulus"), argues that reconsideration of the Court's Order and Opinion granting a new trial is necessary to correct clear errors and to prevent prejudice to Regulus. Specifically, Regulus argues that Still's purported UCC claims should never have been submitted to the jury because Still was improperly permitted to amend his pleadings during trial to include the UCC claims. Regulus asserts that this amendment was improper because it neither expressly nor impliedly consented to trial of Still's purported UCC claims. In addition, Regulus asserts that the amendment was erroneous since Regulus was prejudiced because it had neither the opportunity to depose Still's expert nor retain its own expert on the UCC issues. The Court agrees with Regulus and, therefore, grants its Motion for Reconsideration.
The Court granted a new trial based upon the finding that plain error was committed during the trial due to the accompanying direction to Question Number 8 of the Special Verdict form. See Still, 2003 WL 22249198, at *4-5. The Court concluded that the accompanying direction prohibited the jury from deciding issues pertaining to the disposition and valuation of Still's shares under the UCC in direct contradiction to the jury instructions. Id.
II. STANDARD
A motion for reconsideration is appropriate only where: (1) there has been an intervening change in controlling law; (2) new evidence is available; or (3) there is need to correct a clear error of law or prevent manifest injustice. N. River Ins. Co. v. Cigna Reinsurance Co., 52 F.3d 1194, 1218 (3d Cir. 1995). "The purpose of a motion for reconsideration is to correct manifest errors of law or fact or to present newly discovered evidence." Drysdale v. Woerth, 153 F. Supp.2d 678, 682 (E.D. Pa. 2001) (citation omitted). However, motions for reconsideration should be granted sparingly "[b]ecause federal courts have a strong interest in the finality of judgments." Id. (citation omitted).
III. DISCUSSION
Still's Second Amended Complaint did not include any claim under the UCC. Although Still's pleadings did not include any UCC claims, Still was permitted to amend his pleadings during trial to include the UCC issues of "commercial reasonableness" and "manifest unreasonableness" with respect to his claims for Conversion and Wrongful Seizure set forth in Counts XX and XXII of the Second Amended Complaint. This amendment was pursuant to Federal Rule of Civil Procedure 15(b). A. Amendment Pursuant to Federal Rule of Civil Procedure 15(b)
Still argues that Counts XX and XXII of the Second Amended Complaint adequately state his claims for violations of the UCC. However, Still's argument is belied by his counsel's statements to the contrary. During trial, Still's counsel admitted that the Conversion and Wrongful Seizure claims were "both alleged as torts" and that "the Uniform Commercial Code was not mentioned in those counts." (N.T. 2/12/03, p. 8; N.T. 2/14/03, p. 100). Still's counsel also stated that the issue regarding cancellation of Still's shares "was not an issue that was pleaded or discussed in the pleadings before the motion for summary judgment." (N.T. 2/10/03, p. 129). The Court also acknowledged that the Second Amended Complaint did not include the UCC by voicing concern that the purported UCC claims did not fit within any of the twenty-nine counts. (N.T. 2/14/03, p. 100) (the Court stated "we were trying to figure out where that fits. And, you know, it's got to go in, if it goes anywhere, to a breach of the escrow agreement. But we couldn't find any count that alleged a breach of the escrow agreement").
Federal Rule of Civil Procedure 15(b), entitled "Amendments to Conform to the Evidence," states:
[w]hen issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure so to amend does not affect the result of the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so freely when the presentation of the merits of the action will be subserved thereby and the objecting party fails to satisfy the court that the admission of such evidence would prejudice the party in maintaining the party's action or defense upon the merits. The court may grant a continuance to enable the objecting party to meet such evidence.
FED. R. CIV. P. 15(b).
Under Federal Rule of Civil Procedure 15(b), "the district court may . . . permit amendments to conform to the evidence only if an issue has been tried with the express or implied consent of the parties and the opposing party will not thereby be prejudiced." Evans Prods. Co. v. W. Am. Ins. Co. 736 F.2d 920, 924 (3d Cir. 1984). Regarding the pivotal role played by consent, either express or implied, to a Rule 15(b) amendment, the Court of Appeals for the Third Circuit has stated that "[i]f the issue . . . has not been tried with the consent of the parties, then an amendment to conform to the pleadings will not be permitted no matter when made." Douglas v. Owens, 50 F.3d 1226, 1236 (3d Cir. 1995) (quotation and internal quotation marks omitted). Determining whether an issue has been tried by implied consent depends upon "whether the parties recognized that the unpleaded issue entered the case at trial, whether the evidence that supports the unpleaded issue was introduced at trial without objection, and whether a finding of trial by consent prejudiced the opposing party's opportunity to respond." Id. (quoting Portis v. First Nat'l Bank, 34 F.3d 325, 332 (5th Cir. 1994)) (internal quotation marks omitted). "The primary consideration in determining whether leave to amend under Fed.R.Civ.P. 15(b) should be granted is prejudice to the opposing party." Evans Prods, 736 F.2d at 924 (citation omitted). "The principal test for prejudice in such situations is whether the opposing party was denied a fair opportunity to defend and to offer additional evidence on that different theory." Id. (citation omitted).
B. Analysis of Amendment
1. Express Consent
The Court concludes that the UCC issues of "commercial reasonableness" and "manifest unreasonableness" were not expressly tried with Regulus' consent. Regarding the issue of express consent, Regulus argues, and the Court agrees, that it consistently and repeatedly objected to Still's attempts to assert the UCC issues. (See N.T. 2/6/03, p. 2-6 (regarding the UCC issue of "manifest unreasonableness," defense counsel stated that Still "never raised this issue in twenty-nine counts, never. It's not in this case"); N.T. 2/10/03, p. 127-33 (defense counsel objected to Still's filing of a supplemental expert report by Gilbert Matthews regarding the UCC issue of "commercial reasonableness" stating that "it's late, we think it's prejudicial, we think it should be stricken"); N.T. 2/12/03, p. 5-8 (when Still's counsel tried to argue that the UCC claims were tried with Regulus' express consent, the Court reminded counsel that Regulus objected to Still's supplemental expert report regarding the UCC issues), p. 5-6 (during a discussion about amending the pleadings, Regulus' counsel pointed out that the UCC issues were "not in the case. And [Still] moved to amend the evidence to conform to the trial. We objected to it")). The clearest example of a lack of express consent by Regulus is found in the trial transcript where Regulus' counsel stated that Regulus opposed Still's motion to amend the pleadings to conform to the evidence under Rule 15(b). (N.T. 2/11/03, p. 150, lines 17-23).
In addition to objecting to the supplemental expert report of Gilbert Matthews during trial, Regulus also opposed Still's attempts to introduce the supplemental report in a Motion in Limine. In its Motion in Limine, Regulus opposed the introduction of Gilbert Matthews' supplemental report based, in part, upon the premise that it improperly addressed the UCC issue of "commercial reasonableness." (Defs.' Mot. in Limine to Exclude Expert Reports and Test. by Gilbert Matthews at 6). Regarding "commercial reasonableness," Regulus argued that "[p]ermitting Mr. Still to amend his complaint to add an entirely new claim at this stage would subject defendants to the utmost prejudice." (Id.). Furthermore, during trial, the Court responded to the argument by Still's counsel that Regulus had expressly consented to the amendment of the pleadings to include the UCC by reminding counsel that Regulus had objected to Gilbert Matthews' supplemental expert report regarding the UCC. (N.T. 2/12/03, p. 8, lines 15-25).
In light of the aforementioned, Regulus clearly opposed amendment of Still's pleadings to include issues under the UCC. In this same vein, Regulus also opposed the introduction of Gilbert Matthews' supplemental report based, in part, upon the premise that it improperly addressed the UCC issue of "commercial reasonableness" which, Regulus argued, was not in the case. As a result, the record does not support a finding that the UCC issues were tried with the express consent of Regulus. Thus, the Court turns to whether the UCC issues were tried with Regulus' implied consent.
2. Implied Consent
As mentioned earlier, determining whether an issue has been tried by implied consent depends upon the following factors: (1) whether the parties recognized that the unpleaded issue entered the case at trial; (2) whether the evidence that supports the unpleaded issue was introduced at trial without objection; and (3) whether a finding of trial by consent prejudiced the opposing party's opportunity to respond. Douglas, 50 F.3d at 1236. Similar to the analysis pertaining to express consent, the record does not support a finding that the UCC issues were tried with the implied consent of Regulus. Regarding the first factor, the parties clearly recognized that the unpleaded UCC issues entered the case at trial because Still moved to amend his Second Amended Complaint. The Court heard argument on this issue and ruled on the motion. As for the second factor, the record shows that Regulus objected to the introduction of evidence that supported the unpleaded issues during trial. (N.T. 2/10/03, p. 127-33; N.T. 2/12/03, p. 5-8; see also Defs.' Mot. in Limine to Exclude Expert Reports and Test. by Gilbert Matthews).
Examination of the third factor, prejudice, reveals that Regulus was prejudiced when the Court permitted Still to amend the pleadings. "It is well-settled that prejudice to the non-moving party is the touchstone for the denial of an amendment." Katz v. Food Sciences Corp., No. 99-622, 2000 WL 1022986, at *3 (E.D. Pa. July 13, 2000) (quoting Cornell Co. v. Occupational Safety and Health Review Comm'n, 573 F.2d 820, 823 (3d Cir. 1978)). As previously explained, the principal test for prejudice is whether the opposing party was denied a fair opportunity to defend and to offer additional evidence on the different theory. Evans Prods., 736 F.2d at 924. Regulus argues that it has been clearly prejudiced because it was not able to depose Gilbert Matthews on his supplemental report or to retain a UCC expert of its own on the UCC issues.
Regulus argues that it has been prejudiced by its inability to depose Gilbert Matthews regarding his supplemental report, which dealt, in part, with the unpleaded UCC issue of "commercial reasonableness." In support of its argument, Regulus points out that the Court recognized such prejudice when stating to Still's counsel that "if he [Gilbert Matthews] made no reference to it in his original report — then I think that the defense is at a disadvantage." (N.T. 2/10/03, p. 131-32). Due to Regulus' inability to depose Still's expert regarding his supplemental report, specifically as it pertains to the UCC, it was denied a fair opportunity to defend itself.
The fact that Regulus was unable to retain a UCC expert of its own also reveals prejudice. Through the inability to retain its own UCC expert, Regulus was denied a fair opportunity to defend itself. Regulus was also denied a fair opportunity to offer any additional evidence that its own UCC expert may have provided. As a result of Regulus' inability to depose Gilbert Matthews regarding his supplemental report or to retain a UCC expert of its own on the UCC issues, it was denied a fair opportunity to defend itself and to offer additional evidence on the UCC issues. Thus, Regulus' opportunity to defend against Still's UCC claims was prejudiced. IV. CONCLUSION
Failing to cite to any authority, Still argues that Regulus was not prejudiced because there was no verdict against Regulus regarding the UCC issues. Still further argues that Regulus was not prejudiced because the Court granted a new trial on the UCC issues. As a result, Still asserts that Regulus will have the opportunity to depose any expert whom Still offers on the UCC, as well as be able to retain, if necessary, an additional expert. Regulus' response to Still's argument is that "[t]o imply that imposing on Regulus the cost of two trials and another expert on an unpleaded claim in order to remedy an admitted litigation error by plaintiff does not constitute prejudice to Regulus is absurd." (Def.'s Reply Br. Support Mot. for Recons. at 4). After review of Regulus' claim, the Court concludes that Regulus was prejudiced by the amendment of the pleadings to include the UCC issues.
As previously explained, "the district court may, under Fed.R.Civ.P. 15(b), permit amendments to conform to the evidence only if an issue has been tried with the express or implied consent of the parties and the opposing party will not thereby be prejudiced." Evans Prods., 736 F.3d at 924. Regulus did not consent, either expressly or impliedly, to trial of the UCC issues. In fact, Regulus strongly opposed the amendment of Still's Second Amended Complaint and it suffered the resultant prejudice when the amendment was granted. Since the UCC issues were tried without Regulus' express or implied consent and Regulus was prejudiced, amendment under Rule 15(b) was improper.
As a result, Regulus' Motion for Reconsideration requesting that the Court reconsider its Order granting Still's Motion for a New Trial regarding the UCC issues is granted. The Court's October 1, 2003 Order granting a new trial on the UCC issues of "commercial reasonableness" and "manifest unreasonableness" with respect to Still's claims for Conversion and Wrongful Seizure set forth in Counts XX and XXII of the Second Amended Complaint is vacated and Still's Motion for a New Trial is denied.
On December 3, 2003, Still filed a Third Amended Complaint. (See Doc. No. 201). The Third Amended Complaint incorporates Still's previous twenty-nine counts, as well as an entirely new Count XXX which is a claim for relief under the UCC. (Id.). According to Still, the filing of the Third Amended Complaint is in accordance with the Court's grant of leave allowing him to amend his Complaint to conform to the evidence. (Id.). As previously mentioned, the Court permitted Still to amend the pleadings, specifically Counts XX and XXII of the Second Amended Complaint, to include the UCC. Even though Counts XX and XXII were amended to include the UCC in February, 2003, Still's recently filed Third Amended Complaint includes a thirtieth claim explicitly alleging a UCC claim. Examination of Still's Third Amended Complaint does not alter the Court's conclusion that permitting the Rule 15(b) amendment to the pleadings to include the UCC was improper. In light of the above, Still's filing of a Third Amended Complaint was unnecessary and superfluous. As a result, Still's Third Amended Complaint is stricken.
An appropriate Order follows.
ORDER
AND NOW, this 5th day of January, 2004, upon consideration of Defendant Regulus Group LLC's Motion for Reconsideration of the Court's Order Granting a New Trial (Doc. No. 193), and the Responses and Replies thereto, it is hereby ORDERED that:1. the Motion for Reconsideration is GRANTED;
2. the Court's October 1, 2003 Order granting a new trial on the UCC issues of "commercial reasonableness" and "manifest unreasonableness" with respect to Still's claims for Conversion and Wrongful Seizure set forth in Counts XX and XXII of the Second Amended Complaint is VACATED;
3. Still's Motion for a New Trial is DENIED; and
4. Still's Third Amended Complaint (Doc. No. 201) is STRICKEN.