Sacerdote et al v. New York UniversityMEMORANDUM OF LAW in Opposition re: 83 MOTION to Amend/Correct 39 Amended Complaint, . . DocumentS.D.N.Y.September 22, 2017UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK DR. ALAN SACERDOTE, et al., Plaintiffs, v. NEW YORK UNIVERSITY, Defendant. : : : : : : : : : : Case No.: 1:16-cv-06284 ECF Case MEMORANDUM IN OPPOSITION TO PLAINTIFFS’ MOTION FOR LEAVE TO FILE SECOND AMENDED COMPLAINT Mark Muedeking (pro hac vice) Ian C. Taylor (pro hac vice) DLA Piper LLP (US) 500 8th Street, NW Washington, DC 20004 (202) 799-4000 Brian Kaplan (BK4922) Evan D. Parness (EP6680) DLA Piper LLP (US) 1251 Avenue of the Americas New York, New York 10020 (212) 335-4500 Attorneys for Defendant Case 1:16-cv-06284-KBF Document 93 Filed 09/22/17 Page 1 of 10 1 INTRODUCTION Plaintiffs have neither acknowledged nor satisfied their burden of proving “good cause” in their Motion for Leave to File Second Amended Complaint (the “Motion to Amend”). Almost ten months after Plaintiffs knew about the NYU Retirement Plan Committee (“the Retirement Committee”), nine months after this Court issued a Scheduling Order, eight months after Plaintiffs attached materials referencing the Retirement Committee to an opposition to Defendant’s Motion to Dismiss, and after Defendant filed an Answer to Plaintiffs’ Amended Complaint, Plaintiffs now seek leave from this Court to join the Retirement Committee and its members as defendants. Plaintiffs have failed to prove that they acted with diligence and, therefore, do not to satisfy Federal Rule of Civil Procedure 16(b)’s good cause standard. Even if Plaintiffs could satisfy Rule 16(b)’s good cause standard, Plaintiffs failed to plead the required facts to join new defendants. Finally, Plaintiffs’ request to include the dismissed claims in Counts V and VII of the First Amended Complaint should be denied as futile. Accordingly, for the reasons stated below, this Court should deny Plaintiffs’ Motion to Amend in its entirety. STANDARD OF REVIEW “Rule 16(b) governs leave to amend after a scheduling order has been entered in the case.” Nairobi Holdings Ltd. v. Brown Bros. Harriman & Co., No. 02 Civ. 1230(LMM), 2006 WL 2242596, at *2 (S.D.N.Y. Aug. 3, 2006). It is well-settled that when a party’s deadline to amend its pleading has passed, “the Rule 16(b) ‘good cause’ standard, rather than the more liberal standard of Rule 15(a), governs a motion to amend filed after the deadline[.]” Wolk v. Kodak Imaging Network, Inc., 840 F. Supp. 2d. 724, 735 (S.D.N.Y. 2012). “Under this framework, a court first considers whether the movant has shown good cause under Rule 16, and, only after finding that the good cause standard is met, proceeds to the analysis under Rule 15.” Case 1:16-cv-06284-KBF Document 93 Filed 09/22/17 Page 2 of 10 2 Tardif v. City of New York, No. 13-CV-4056 (KMW)(FM), 2016 WL 2343861, at *4 (S.D.N.Y. May 3, 2016) (emphasis added). Rule 16(b)’s good cause standard is intended to provide “a measure of certainty in pretrial proceedings, ensuring that at some point both the parties and the pleadings will be fixed.” Sokol Holdings, Inc. v. BMB Munai, Inc., No. 05 Civ. 3749 (KMW)(DF), 2009 WL 2524611, at *7 (S.D.N.Y. Aug. 17, 2009). Under the good cause standard, the burden shifts to the movant to demonstrate “diligence.” See Wolk, 840 F. Supp. 2d. at 735. A party fails to demonstrate diligence when its proposed pleading rests on information that the party knew or should have known earlier. See id. at 735 (“[G]ood cause . . . is not satisfied when the proposed amendment rests on information ‘that the party knew, or should have known, in advance of the deadline.’”). While Plaintiffs filed a motion to amend under the standards established by Rule 15, that is the wrong standard for joining new parties and asserting claims against those parties. Plaintiffs’ Motion to Amend, therefore, is also governed by Rules 18 and 20 of the Federal Rules of Civil Procedure. Under Rule 20, a party may only join additional parties if the new parties satisfy two conditions: (1) “any right to relief is asserted against them jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences;” and (2) “any question of law or fact common to all defendants will arise in the action.” FED. R. CIV. P. 20(a)(2)(A)-(B). Similar to Rule 15(a), Rule 16’s good cause standard supersedes the lenient standards governing Rules 18 and 20. Mason Tenders Dist. Council of Greater New York v. Phase Constr. Servs., Inc., 318 F.R.D. 28, 36 (S.D.N.Y. 2016); see also Point 4 Data Corp. v. Tri-State Surgical Supply & Equip., Ltd., No. 11-CV-726 (CBA), 2012 WL 2458060, at *5 n.6 (E.D.N.Y. June 27, 2012) (“[T]he analysis for Rule 15 is substantially the same as that for Rule 20.”). The Case 1:16-cv-06284-KBF Document 93 Filed 09/22/17 Page 3 of 10 3 Second Circuit reasons that focusing solely on Rules 15(a), 18, or 20, “would render scheduling orders meaningless and effectively would read Rule 16(b) and its good cause requirement out of the Federal Rules of Civil Procedure.” Parker v. Columbia Pictures Indus., 204 F.3d 326, 340 (2d Cir. 2000). Therefore, once the scheduling order’s deadline has passed, a party is not entitled to the lenient amendment standards of Rules 15(a), 18, or 20 until a party satisfies Rule 16(b)’s good cause standard. See Wolk, 840 F. Supp. 2d. at 735; Tardif, 2016 WL 2343861, at *4. The movant’s diligence is the “primary consideration” in a Rule 16(b) good cause inquiry, and courts “also may consider other relevant factors including, in particular, whether allowing the amendment of the pleading at this stage of the litigation will prejudice defendants.” Kassner v. 2nd Ave. Delicatessen Inc., 496 F.3d 229, 244 (2d Cir. 2007). Further, motions to amend should be denied “in instances of futility, undue delay, bad faith or dilatory motive, repeated failure to cure deficiencies by amendments previously allowed, or undue prejudice to the non-moving party.” Burch v. Pioneer Credit Recovery, Inc., 551 F.3d 122, 126 (2d Cir. 2008). Courts have recognized that the longer the period of unexplained delay, the less is required of the non-movant in showing prejudice. See In re “Agent Orange” Prod. Liab. Litig., 220 F.R.D. 22, 25 (E.D.N.Y. 2004), aff’d, 517 F.3d 76 (2d Cir. 2008). ARGUMENT I. Plaintiffs’ Motion to Amend Offers No Evidence that Plaintiffs Exercised Diligence in Bringing Their Second Amended Complaint. A. Plaintiffs Pleaded the Wrong Legal Standard and Failed to Meet their Burden to Obtain Leave to Amend under the Correct Standard. Plaintiffs’ Motion to Amend should be denied in its entirety because Plaintiffs failed to provide any evidence of “good cause” required under Rule 16(b). Plaintiffs completely ignore the “good cause” requirement, citing only Rule 15(a)’s liberal amendment standard. Compare (Doc. 84 at 1) (“Plaintiffs respectfully seek leave under Federal Rule of Civil Procedure 15(a)(2) Case 1:16-cv-06284-KBF Document 93 Filed 09/22/17 Page 4 of 10 4 to file a Second Amended Complaint.”) with Phase Constr. Servs., Inc., 318 F.R.D. at 36 (requiring the court to balance Rule 16(b)’s good cause standard against the lenient Rule 15(a) standard when a scheduling order is entered). Plaintiffs’ failure to plead the correct standard, let alone elicit any facts proving that the good cause standard was met, is fatal. This Court’s Scheduling Order is clear. “Amended pleadings may not be filed, and no party may be joined, without leave of Court. . . .” (Doc. 43 at 1). Rule 16(b)’s good cause requirement, therefore, must be met before this Court can consider the more lenient factors established by Rules 15(a), 18, and 20. See Phase Constr. Servs., 318 F.R.D. at 36; Tardif, 2016 WL 2343861, at *4. Under Rule 16(b), Plaintiffs bear the burden of proving Rule 16(b)’s good cause standard by proving they acted with diligence. See Wolk, 840 F. Supp. 2d. at 735. When, as here, a movant’s proposed pleading rests on information that a party knew or should have known earlier, the movant fails to demonstrate diligence. See id. at 735 (“[T]he good cause standard is not satisfied when the proposed amendment rests on information that the party knew, or should have known, in advance of the deadline.”). B. The Litigation Timeline Proves that Plaintiffs did not Act with Diligence. Plaintiffs claim that they were unable to “ascertain the identities of all fiduciaries to the Retirement Plans” until after Defendant’s first production of documents on February 27, 2017. (Doc. 84 at 2). Plaintiffs, however, “knew or should have known” about the Retirement Committee before Defendant’s Motion to Dismiss and before the ten-day period following the issuance of the Scheduling Order elapsed, barring amended pleadings without leave of Court. Defendant moved to dismiss the original complaint on October 14, 2016. (Doc 32). In response Plaintiffs, as a matter of right, filed their First Amended Complaint on November 9, 2016. (Doc. 39). Defendant served its Statement of Initial Discovery Disclosure on November 28, 2016. (Attached hereto as Exhibit 1). In the Statement of Initial Discovery, Defendant Case 1:16-cv-06284-KBF Document 93 Filed 09/22/17 Page 5 of 10 5 disclosed the existence of the Retirement Plan Committee and named every individual member of the Retirement Plan Committee that Plaintiffs now seek to add as new defendants. (Id.). On December 5, 2016, this Court issued its Scheduling Order. (Doc. 43). The Order provided Plaintiffs ten days to amend its pleadings and join additional parties without requiring leave from the Court. (Id.). Once that ten-day period expired on December 15, 2016,1 no party could amend the complaint or join additional parties without leave. (Id.). Defendant moved to dismiss the Amended Complaint on December 12, 2016. (Doc. 44). Because Defendant did not file a responsive pleading prior to the Scheduling Order, Plaintiffs had the right to file an amended complaint in response to Defendant’s Motion to Dismiss by December 15, 2016 without seeking leave. (Doc. 43). Plaintiffs chose not to amend within the ten-day window, despite having knowledge of the Retirement Committee as early as November 28, 2016. Instead of amending their complaint as a matter of right, Plaintiffs filed their opposition to Defendant’s Motion to Dismiss on January 9, 2017. (Doc. 47). Ironically, Plaintiffs’ memorandum opposing Defendant’s Motion to Dismiss attached publicly available materials they possessed that referenced the Retirement Committee by name, and asked this Court to consider those materials as information that was “publicly announced on a party’s website.” (Doc. 47 at 1-2, n. 2 & 3; Doc. 47-3). If Plaintiffs were exercising diligence, they would have filed their Second Amended Complaint long ago. Plaintiffs admit that they “could have sought leave to amend earlier” but claimed they did not because “doing so would have mooted the briefing the parties already had submitted and interrupted the Court’s progress in reaching its decision.” (Doc. 84 at 4). As the 1 The Scheduling Order reads as followed: “Amended pleadings may not be filed, and no party may be joined, without leave of Court more than 10 days after the filing of this Order or the filing of a responsive pleading, whichever occurs first.” (Doc. 43). Because Defendant did not file a responsive pleading to the First Amended Complaint, the deadline to file amended pleadings was ten days from the date of the order, which was December 15, 2016. Case 1:16-cv-06284-KBF Document 93 Filed 09/22/17 Page 6 of 10 6 timeline demonstrates, however, Plaintiffs had multiple opportunities to amend. Plaintiffs could have amended their complaint before the Scheduling Order’s deadline for amended pleadings, before the parties briefed the motion to dismiss, before the Court heard arguments on February 16, 2017, before this Court issued its Order partially granting Defendant’s Motion to Dismiss on August 25, 2017, or before Defendant filed an Answer to Plaintiffs’ Amended Complaint. Plaintiffs have offered no evidence to establish that their Motion to Amend satisfies Rule 16(b)’s good cause standard and, therefore, the motion should be denied in its entirety. C. Plaintiffs Failed to Satisfy the Conditions for a Motion to Join New Defendants Under Federal Rule of Civil Procedure 20. Even if Plaintiffs’ actions satisfied the good cause standard–which they do not–Plaintiffs do not provide facts sufficient to support a motion to join new defendants under Federal Rule of Civil Procedure 20. Under Rule 20, a party may join additional defendants if “any right to relief is asserted against them jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences.” FED. R. CIV. P. 20(a)(2)(A)-(B); Jackson v. Odenat, No. 09 Civ. 5583 (JFK)(AJP), 2012 WL 505551, at *3 (S.D.N.Y. Feb. 14, 2012). Plaintiffs did not cite Rule 20 as the basis for adding the new proposed defendants, nor have they argued that the “right to relief” is asserted against the new proposed defendants “jointly, severally, or in the alternative,” as Plaintiffs have not alleged that any member of the Committee was acting in any capacity other than as an employee of NYU. Moreover, NYU has not argued that it is not liable for the actions of the Committee and these employees. Because Plaintiffs have not demonstrated that the new defendants satisfy Rule 20, Plaintiffs request to join new defendants should be denied. Case 1:16-cv-06284-KBF Document 93 Filed 09/22/17 Page 7 of 10 7 II. Plaintiffs Failed to Prove that the Previously Dismissed Claims in Count V and VII are not Futile. To determine whether an amended complaint is futile, the court considers whether the proposed amended complaint “would withstand a motion to dismiss.” Agerbrink v. Model Serv. LLC, 155 F. Supp. 3d 448, 456 (S.D.N.Y. 2016); see also AEP Energy Servs. Gas Holding Co. v. Bank of America, N.A., 626 F.3d 699, 726 (2d Cir. 2010) (“Leave to amend may be denied on grounds of futility if the proposed amendment fails to state a legally cognizable claim or fails to raise triable issues of fact.”). Plaintiffs, therefore, must plead sufficient facts to “state a claim to relief that is plausible on its face.” Agerbrink, 155 F. Supp. 3d at 456 (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In assessing futility, the rules governing a motion to dismiss apply. Id. This Court already dismissed Plaintiffs’ Count V retail share class claims. (Doc. 79 at 25-28). Plaintiffs’ proposed Amended Complaint made no substantive edits to the claims dismissed in this Court’s Order. (Compare Doc. 39 at ¶¶ 51, 128-129, 219, 223 with Doc. 84-1 at ¶¶ 56, 133-134, 211, 215). Instead, Plaintiffs include the dismissed Count V claims because “Plaintiffs believe strongly, for the reasons stated in their accompanying motion for reconsideration (Doc. 81), that they should be allowed to proceed.” (Doc. 84 at 5). For the reasons set forth in Defendant’s opposition to Plaintiffs’ Motion for Partial Reconsideration, this Court properly dismissed Plaintiffs’ retail share class claims. Because Plaintiffs have alleged no additional facts to make their retail share class claims viable, Plaintiffs’ claims will still not survive a motion to dismiss and are, therefore, futile. Agerbrink, 155 F. Supp. 3d at 456. Similarly, this Court already dismissed Plaintiffs’ Count VII monitoring claim. (Doc. 79 at 34-35). Unlike their Count V claims, Plaintiffs did make edits to their monitoring claims by adding the Retirement Committee as defendants and alleging that NYU failed to monitor the Case 1:16-cv-06284-KBF Document 93 Filed 09/22/17 Page 8 of 10 8 Retirement Committee. (Doc. 84-1 at ¶ 228). Even accepting the new allegations as true, Plaintiffs proposed Count VII is futile. Plaintiffs have not alleged that any member of the Retirement Committee was acting in any capacity other than as an employee of NYU. Accordingly, even if they were added as defendants to this action, the Committee members could move to dismiss on that basis, and NYU would need to answer Plaintiffs’ Second Amended Complaint. All of which would be a waste of time and resources that add nothing to the merits of this case given that NYU does not take the position that it is not liable for the actions of the Committee and these employees. And to the extent Plaintiffs contend they might recover personally from the proposed individual employee defendants rather than NYU, that is absurd. Moreover, as discussed in Defendant’s memorandum in opposition to the Motion for Partial Reconsideration, while Plaintiffs have now alleged that there was a delegation of authority to manage the Plan, Plaintiffs have not sufficiently pleaded how the monitoring fiduciaries could have prevented the alleged harm with prudent monitoring. Plaintiffs instead rely upon conclusory statements of how the Retirement Committee breached their duty of prudence, which “are not entitled to the assumption of truth,” Ashcroft v. Iqbal, 556 U.S. 662, 664 (2009), in an effort to imply that Defendant violated their duty to monitor the Retirement Committee. Because the new information did not cure the deficiencies that this Court found in its Order granting the motion to dismiss Plaintiffs’ monitoring claim, Plaintiffs’ amended monitoring claim will still not survive a motion to dismiss and is, therefore, futile. CONCLUSION For the reasons set forth above, Defendant respectfully requests that the Court deny Plaintiffs’ Motion to Amend. Case 1:16-cv-06284-KBF Document 93 Filed 09/22/17 Page 9 of 10 9 Respectfully submitted, /s/ Ian C. Taylor Mark Muedeking (pro hac vice) Ian C. Taylor (pro hac vice) DLA PIPER LLP (US) 500 8th Street, NW Washington, DC 20004 (202) 799-4000 Brian Kaplan (BK4922) Evan D. Parness (EP6680) DLA Piper LLP (US) 1251 Avenue of the Americas New York, New York 10020 (212) 335-4500 Attorneys for Defendant Case 1:16-cv-06284-KBF Document 93 Filed 09/22/17 Page 10 of 10