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USI International Inc. v. Festo Didactic Inc.

United States District Court, D. New Jersey

June 12, 2018

USI INTERNATIONAL INC., Plaintiff,
v.
FESTO DIDACTIC INC., Defendant.

          MEMORANDUM OPINION

          HONORABLE TONIANNE J. BONGIOVANNI UNITED STATES MAGISTRATE JUDGE.

         Currently pending before the Court is Plaintiff USI International Inc.'s (“Plaintiff”) motion to file a First Amended Complaint. [Docket Entry No. 24]. Defendant Festo Didactic, Inc. (“Defendant”) opposes Plaintiff's motion. [Docket Entry No. 28] The Court has fully reviewed the arguments made in support of and in opposition to Plaintiff's motion. The Court considers Plaintiff's motion without oral argument pursuant to L.Civ.R. 78.1(b). For the reasons set forth more fully below, Plaintiff's motion to amend is GRANTED.

         I. Background and Procedural History

         On December 3, 2015, Plaintiff filed a Complaint alleging breach of contract (count one), breach of good faith and fair dealing (count two), unjust enrichment (count three), and fraudulent inducement (count four) against Defendant. [Docket Entry No. 1]. Defendant filed a motion to dismiss Plaintiff's second, third, and fourth claims on January 11, 2016 [Docket Entry No. 7]. On August 24, 2016, the District Court dismissed counts two and four without prejudice and denied Defendant's motion to dismiss count three of Plaintiff's Complaint. [Docket Entry No. 14].

         A discovery Scheduling Order was entered on November 8, 2016 and discovery commenced. [Docket Entry No. 17]. Pursuant to the Scheduling Order, motions to amend were to be filed by February 10, 2017. On February 1, 2017, the deadline to move to amend was extended to March 24, 2017. While that deadline was not formally extended again prior to the April 13, 2017 telephone conference, during the status conference, the Court noted that it would address the remaining scheduling and any warranted extensions during the next telephone conference, which it set for June 15, 2017. On June 15, 2017, the Court, aware that certain discovery remained outstanding, noted that it would address the remaining schedule during a telephone conference scheduled for September 20, 2017.

         On September 20, 2017, Plaintiff indicated a desire to amend its Complaint based on discovery it received over the summer. The Court directed Plaintiff to provide a copy of its proposed amended pleading to Defendant and for the parties to advise whether Plaintiff's proposed amendments could be made by consent. After reviewing Plaintiff's proposed Amended Complaint, Defendant advised that it would not consent to its filing. The Court therefore entered an Order on October 25, 2017, granting Plaintiff permission to file a motion to amend by November 10, 2017. In that Order, the Court also stayed all depositions that would be affected by Plaintiff's proposed amendments. [Docket Entry No. 22]. Plaintiff filed the instant motion on November 10, 2017 in compliance with the Court's Order. [Docket Entry No. 24].

         Plaintiff states that through document discovery that occurred during the summer of 2017, Plaintiff learned that Defendant intentionally provided false information to Plaintiff. (Pl.'s Br. in Supp. of Mot. at 1). As a result, Plaintiff seeks to add new factual allegations, increase its damages claim, and add an additional cause of action for fraud. (Id.) Plaintiff argues that its motion should be granted because there has been no undue delay, bad faith or dilatory motive, the amendment would not be futile and the amendment would not prejudice Defendant. (Id. at 10). Plaintiff notes that it filed the motion to amend soon after the discovery of facts that were previously unavailable to it. (Id.) Plaintiff further notes that document discovery had only recently concluded and no depositions have been conducted, therefore, no prejudice or undue delay will result from the amendment. (Id. at 11). Plaintiff argues that its amendment is not futile as it has alleged with specificity all of the elements of fraud. (Id. at 12).

         Defendant argues that Plaintiff's motion should be denied because it is untimely, futile, prejudicial, and filed in bad faith. (Def.'s Br. in Opp'n at 1). Specifically, Defendant notes that the Court's November 8, 2016 Scheduling Order provided that motions to amend were to be filed by February 10, 2017, therefore Plaintiff's motion to amend was filed eight months late and that Plaintiff cannot show good cause for the delay. (Id. at 2). Defendant asserts that contrary to Plaintiff's assertion that it did not know about the apparent extent of the mark-up in the contract over Defendant's list price for the equipment until July 2017, Plaintiff actually had the component information since January 2017 when Defendant produced, as part of its first production of documents, a copy of its contract with the U.S government. (Id.).

         Defendant argues that Plaintiff's new breach of contract claim is implausible. (Id. at 3). Defendant states that Plaintiff seeks to increase its claim for damages on a theory that it was entitled not only to the twenty-five percent commission it has been claiming from the outset but also to an additional mark-up margin. (Id.). In its assertion that Plaintiff's amended breach of contract claim is implausible on its face, Defendant explains the following:

Plaintiff's allegations begin with a transaction in which it was dealing with the government of Oman. Plaintiff then acknowledges that funding for the project changed to U.S. government funds, which also required a change in the parties. The government's counterparty would have to be a U.S. entity. As a result the transaction became one between Defendant and the U.S. government. Thus, the negotiating and contracting parties changed entirely.

(Id. at 4). Defendant argues that Plaintiff's allegations apply to a mark-up by Plaintiff. (Id.). Defendant asserts that because it had become not only the negotiating, but also the contracting party, there could be no mark-up by Plaintiff. (Id.).

         Defendant further argues that Plaintiff's fraud claim is futile because it lacks the requisite particularity, fails to show causation, and is barred by the economic loss doctrine. As the District Court stated in Its August 23, 2016 Opinion, Plaintiff must allege the five elements of fraud with the particularity required by Rule 9(b)'s heightened pleading standard and Plaintiff has failed to do so. (Id. at 5). Defendant states that Plaintiff failed to identify the individual speaker who made the alleged misrepresentation. (Id. at 5-6). Defendant argues that Plaintiff has failed to allege how it relied on the alleged misrepresentation, how it changed its position, what it would have done differently that would have avoided harm, what facts and circumstances made the reliance reasonable, or how the reliance harmed Plaintiff. (Id. at 6). Defendant further argues that Plaintiff has failed to allege a material misrepresentation of a presently existing fact as well as resulting damages. (Id. at 7).

         Finally, Defendant argues that the proposed amended complaint includes a provably false allegation. Defendant asserts that the statement “despite repeated requests both pre-litigation and through this litigation, [Plaintiff] has not been provided with a copy of the contract” is false and amounts to bad faith as Defendant's counsel provided a copy of the contract to Plaintiff's counsel in January 2017. (Id. at 9).

         Plaintiff responds arguing that the Defendant does not assert that the amendment is prejudicial, will cause undue delay, or is the result of bad faith or dilatory motive. (Pl.'s Reply Br. at 1). Instead, Plaintiff states that Defendant's arguments involve factual disputes that are not appropriate in considering a motion to amend. (Id.). Plaintiff argues that the motion is not untimely as the Court gave it permission to file the motion by November 10, 2017, which it did. (Id.). Plaintiff notes that although the original deadline to file a motion to amend was February 10, 2017, Plaintiff did not receive the documents that form the basis of the amendment until the summer of 2017. (Id. at 3). Plaintiff argues that contrary to Defendant's assertion, the documents provided to Plaintiff in January 2017 “were only a portion of the puzzle, camouflaged in a document dump, with inconsistencies and incompleteness apparent on the face of the document.” (Id. at 4). ...


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