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Avatar Business Connection, Inc. v. Uni-Marts

June 30, 2006


The opinion of the court was delivered by: Simandle, District Judge


This matter comes before the Court upon a motion by Plaintiff Avatar Business Connection, Inc. for leave to file an Amended Complaint. For the reasons discussed below, Plaintiff's motion will be granted in part and denied in part. The Court will allow Plaintiff to amend its Complaint consistent with the proposed Amended Complaint filed on October 17, 2005 [Docket Item No. 24] but only with respect to (1) amending the Complaint to name Uni-Marts, LLC as the defendant and (2) to add a claim for breach of the covenant of good faith and fair dealing (Count IV of the proposed Amended Complaint). Plaintiff is not granted leave to amend its Complaint to add claims of fraud or unjust enrichment/quantum meruit (Counts II and III, respectively, of the proposed Amended Complaint).


The parties are familiar with the facts of the underlying dispute and the Court need not repeat them here. A brief summary of the two brokerage agreements, however, is in order. While pursuing a plan to divest 170 stores, Defendant Uni-Marts, Inc. engaged Plaintiff to serve as its business broker charged with marketing the business assets of 67 of Uni-Marts' stores. The agreement between Uni-Marts and Plaintiff was memorialized in a September 19, 2002 exclusive brokerage agreement (the "Expired Brokerage Agreement"). The Expired Brokerage Agreement contained a provision that is central to the dispute now before the Court. Specifically, because Uni-Marts was also exploring the possibility of selling the entire company (either through an asset sale, stock sale or other business combination), the parties negotiated (and the agreement contained) a so-called "wind-up" provision ("Section 3.3."). Section 3.3. stated that, in the event Uni-Marts sells all of the assets of the company or undergoes another business combination resulting in a change of control of equity ownership (e.g., a stock sale or merger) during the term of the Expired Brokerage Agreement or any renewal period, Uni-Marts will pay Plaintiff a flat fee of $2,500 for any unsold store listed in an exhibit to the agreement in lieu of a commission. The Expired Brokerage Agreement expired by its terms on March 19, 2003.

On March 26, 2003, Uni-Marts and Avatar entered into a second brokerage agreement (the "Second Brokerage Agreement"). The Second Brokerage Agreement, which also had a six month-term, expressly replaced and superseded the Expired Brokerage Agreement containing a merger clause stating that the agreement "contains the entire agreement and understanding between the parties with respect to the subject matter identified and referenced in this Agreement." One major difference exists between the Expired Brokerage Agreement and the Second Brokerage Agreement that is relevant here. Specifically, the Second Brokerage Agreement did not contain a "windup" provision analogous to Section 3.3.

On October 13, 2005 at 8:05 p.m., literally on the eve of oral argument on the parties' cross-motions for summary judgment, Plaintiff filed a Motion to Amend/Correct its Complaint seeking to (a) add Uni-Marts, LLC as a defendant and (b) add causes of action for in quantum meruit, fraud and breach of the covenant of good faith and fair dealing. (See Amended Compl. ¶ 13-35.) The Court heard oral argument on the parties' cross-motions on October 14, 2005 as scheduled and did not address Plaintiff's Motion to Amend/Correct its Complaint. Instead the Court (1) reserved judgment on the cross-motions, (2) ordered Plaintiff to serve its proposed Amended Complaint and brief in support of its Motion for Leave to Amend/Correct its Complaint on Uni-Marts and (3) ordered Uni-Marts to file opposition to Plaintiff's Motion for Leave to Amend/Correct by November 3, 2005 and Plaintiff to file a reply, if any, by November 14, 2005. The parties complied with this Court's order and the Court has reviewed all submissions received.*fn1


Leave to amend pursuant to Rule 15(a) should be freely granted. See Foman v. Davis, 371 U.S. 178 (1962); see also Adams v. Gould, Inc., 739 F.2d 858, 864 (3d Cir. 1984), cert. denied, 469 U.S. 1122 (1985). Although liberally granted, the decision to grant leave to amend a complaint rests within the sound discretion of the trial court under Fed. R. Civ. P. 15(a). See Massarsky v. General Motors Corp., 706 F.2d 111, 125 (3d Cir. 1983). Although it may be unorthodox to present a motion to amend at this late stage, precedent makes clear that such a motion must be considered, and its timeliness is only one factor among many that the court is to consider under Rule 15(a). See Arther v. Maersk, Inc., 434 F.3d 196, 203 (3d Cir. 2006)(noting that the Rule 15(a) standard "encompasses a broad range of equitable factors, including a party's delay in seeking leave to amend and any prejudice to the opposing party.") The Court of Appeals has determined that it could be an abuse of discretion to refuse to entertain a motion to amend even after summary judgment is entered. See Adams, 739 F.2d at 869; see also Newark Branch, NAACP v. Town of Harrison, 907 F.3d 1408, 1417 (3d Cir. 1990). This is especially true where no explicit deadline for filing motions to amend was set in the Scheduling Orders under Rule 16(b)(1), Fed. R. Civ. P., and the Final Pretrial Order has not yet been entered (an amendment to pleadings after the Rule 16(b)(1) deadline expires requires a showing of "good cause," see Rule 16(b)). After entry of the Final Pretrial Order, an amendment to add an unstated claim would be permitted "only to prevent manifest injustice." Fed. R. Civ. P. 16(e).

Such a liberal amendment philosophy limits the district court's discretion to deny leave to amend. See Adams, 739 F.2d at 864. The district court may only deny leave to amend (A) "if a plaintiff's delay in seeking amendment is undue, motivated by bad faith, or prejudicial" to the defendant or (B) if the amendment would be futile (i.e., the amendment fails to state a cause of action). Id.; see also Massarsky, 706 F.2d at 125.

A. Whether Plaintiff's Delay in Seeking Amendment to its Complaint is Undue, Motivated by Bad Faith or Prejudicial to Uni-Marts

In analyzing whether plaintiff's delay was deemed undue or motivated by bad faith, a court must focus on the actions of the plaintiff. See Adams, 739 F.2d at 869. In contrast, when determining whether Plaintiff's delay in seeking to amend was prejudicial, the court must focus on the impact of a plaintiff's action on a defendant. See id. As such, the Court will analyze these factors -- (1) undue delay/bad faith by Plaintiff and (2) prejudice to Uni-Marts -- separately. In the present case, however, in which plaintiff's timing does not exceed any limit upon motions to amend pleadings set by Court Order, and in which Defendant does not claim any undue delay or bad faith, the only issue is whether the allowance of the amendments sought would unduly prejudice Defendant.

Uni-Marts argues that it would be prejudiced if the Court allowed Plaintiff to amend the Complaint at this point in the litigation. (Def.'s Opp. Br. at 4-5.) Uni-Marts asserts no particular prejudice except that allowing Plaintiff's proposed amendment "would require much new discovery into the conduct...and intent of the principals of Uni-Marts and Raj Vakharia." (Id. at 5.) The Court views the crux of Uni-Marts' arguments as objection to (1) the additional counsel fees necessary to conduct further discovery, (2) the inconvenience to Uni-Marts' principals in complying with additional discovery requests (i.e., scheduling time for depositions), and (3) new discovery serving to prolong this litigation. The Third Circuit has previously rejected arguments (1) and (3) as reasons for a district court denying a plaintiff leave to amend its complaint. See Adams, 739 F.2d at 868.

Uni-Marts cites Berger v. Edgewater Steel Co. for the proposition that a district court would not abuse its discretion by denying a motion to amend if the amendment "would inject new issues into the case requiring extensive discovery and 'new and substantially broader claims would put an unwarranted burden on the trial court and be likely to result in prejudice to [defendant.]'" (Def.'s Br. at 5 citing Berger v. Edgewater Steel Co., 911 F.2d 911, 924 (3d Cir. 1990)). In Berger, the Third Circuit Court of Appeals upheld a district court's denial of a plaintiff's motion for leave to amend their complaint to add a discrimination claim. Id. Because the dispute centered on changes an employer was making to its retirement plan under ERISA, the court held that the addition of a discrimination claim (which it deemed a substantially broader claim) "would require 'extensive discovery.'" Id.

This Court finds the facts in present situation distinguishable from those in Berger. This Court does not anticipate that extensive additional discovery is necessary regarding Plaintiff's additional claims of in quantum meruit, fraud, and breach of covenant. Because all new claims involve either (1) facts surrounding two brokerage agreements, (2) the intent of various parties with respect to the two brokerage agreements, or (3) the activities of Raj Vakharia and his dealings with the principals of Uni-Marts, the Court does not anticipate wide-ranging additional discovery.*fn2 The Court finds that such a limited amount of additional discovery certainly was not what was contemplated by the Third Circuit in Berger when it denied plaintiff's leave to amend because ...

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