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Cox v. Sherman Capital LLC

United States District Court, S.D. Indiana, Indianapolis Division

September 3, 2014



MARK J. DINSMORE, Magistrate Judge.

This matter comes before the Court on Andrew Cox, Lucinda Cox, and Stephanie Snyder's ("Plaintiffs") Motion for Leave to Amend the Complaint. [Dkt. 272.] For the following reasons, the Court GRANTS IN PART and DENIES IN PART Plaintiffs' motion.

I. Background

In November of 2012, Plaintiffs, on behalf of themselves and others similarly situated, filed claims alleging fraud, unjust enrichment, violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act, and violations of the Fair Debt Collection Practices Act (FDCPA) against Sherman Capital LLC, Meeting Street Partners II Inc., Sherman Financial Group LLC, Sherman Capital Markets LLC, LVNV Funding LLC, Resurgent Capital Services LP, Sherman Originator III LLC, Sherman Acquisition LLC, and Sherman Originator LLC's ("Entity Defendants") and Benjamin W. Navarro, Leslie G. Gutierrez, Scott E. Silver, Kevin P. Branigan, Robert A. Roderick, and Kennett Kendall's ("Individual Defendants") (collectively "Defendants"). [ See Dkt. 1.] However, on March 30, 2014, the District Judge issued an order dismissing with prejudice the Individual Defendants, Defendant Sherman Capital Markets LLC, Defendant Sherman Originator III LLC, Defendant Sherman Acquisition LLC, and two of Plaintiffs' three FDCPA claims against all Defendants. [Dkt. 237 at 20.] Additionally, the District Judge dismissed without prejudice all three of Plaintiffs' RICO claims, as well as Plaintiffs' common law fraud claim, for failure to meet the heightened pleading requirements of Rule 9(b). [ Id. at 7-11.]

Because the District Judge's order was issued only fifteen days before the April 14, 2014 deadline for the filing of motions for leave to amend, Plaintiffs filed an Agreed Motion to Extend Deadline for the Filing of Motions for Leave to Amend the Pleadings and/or to Join Additional Parties [Dkt. 259, 267], which the Court granted [Dkt. 262, 268]. On May 6, 2014, Plaintiffs timely filed their Motion for Leave to Amend the Complaint, which proposed amended complaint adds three named plaintiffs and fourteen entity defendants, re-alleges RICO, common law fraud, and FDCPA claims, and re-alleges all claims against the Individual Defendants, Sherman Capital Markets LLC, and Sherman Originator III LLC. [Dkt. 272.] The remaining Defendants strongly oppose Plaintiffs' proposed amendments [Dkt. 285], and Defendants' arguments in opposition are addressed herein.

II. Discussion

Rule 15 of the Federal Rules of Civil Procedure states that the Court should freely grant leave to amend the pleadings "when justice so requires." Fed.R.Civ.P. 15(a). The default procedure is to grant such motions to amend, unless one of the few exceptions applies. See Bethany Pharmacal Co., Inc. v. QVC, Inc., 241 F.3d 854, 861 (7th Cir. 2001). The Supreme Court determined that these exceptions are limited to "undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of amendment." Ferguson v. Roberts, 11 F.3d 696, 706 (7th Cir. 1993) (quoting Forman v. Davis, 371 U.S. 178, 182 (1962)). When a party opposes an amendment to the pleadings under Rule 15, it is the opposing party's burden to prove that one of these exceptions applies. See Short v. N. Pointe Ins. Co., 1:11-cv-00545-SEB-MJD, 2013 WL 1828024 at *13 (S.D. Ind. Apr. 29, 2013).

A. Determination of Debt Ownership

Defendants first argue that the Court should stay a ruling on Plaintiffs' motion to amend in order to first determine "the dispositive issue of whether Defendant LVNV owns the named Plaintiffs' credit card debt." [Dkt. 285 at 5.] Specifically, because Plaintiffs' claims are widely predicated on the allegation that Defendant LVNV Funding LLC ("LVNV") falsely represented that it owned Plaintiffs' debt when it and its agents attempted to collect on such debt, Defendants, in their brief in opposition to Plaintiffs' motion for leave to amend, present "evidence showing that LVNV did own the Plaintiffs' credit card debt" so that the Court may make such a finding. [ Id. at 5-9 (emphasis added).] Thus, Defendants conclude that, as a matter of sound case management, the Court should defer ruling on the motion to amend the Complaint pending consideration of whether Plaintiffs can survive a motion for summary judgment on the issue of whether LVNV owns Plaintiffs' credit card debt." [ Id. at 9.] In response, Plaintiffs assert that Defendants' desire to file a motion for summary judgment is an improper basis for the denial of a motion to amend, and Plaintiffs are confident that, after discovery is complete, they will be able to prove the alleged lack of ownership. [Dkt. 291.]

In short, the Court refuses to turn this motion to amend into a factfinding expedition that would better be suited for a jury. Defendants' argument is not only procedurally improper, but nonsensical-regardless of how confident Defendants are in the strength of their case, Plaintiffs are afforded the right to pursue their claims pursuant to the protections afforded them by the Federal Rules of Civil Procedure and the Local Rules of the Southern District of Indiana. First, although Rule 56(b) permits Defendants to file a motion for summary judgment at any time until thirty days after the close of discovery, Defendants have filed no such motion. Instead, and in violation of the Local Rules, Defendants have seemingly asked for summary judgment within an opposition brief to a motion to amend, when Local Rule 7-1(a) clearly instructs that "motions must be filed separately." Further, Federal Rule of Civil Procedure 15 declares, in no uncertain terms, that "the Court should freely grant leave" to amend the pleadings when justice so requires, and binding precedent reiterates that only in certain exceptional circumstances should the Court deny a motion to amend. See Bethany Pharmacal, 241 F.3d at 861. A preemptory, procedurally improper request for summary judgment that precludes the Plaintiffs from their rights to discovery is not one of the enumerated exceptions to the Court's duty to freely grant leave to amend pleadings. Therefore, the Court refuses to comment further on Defendants' request for premature factfinding on the issue of whether LVNV owned the debts upon which it attempted to collect, and any objection to Plaintiffs' motion to amend on such ground is overruled.

B. Claims and Parties Dismissed with Prejudice

Defendants then assert that Plaintiffs, by including claims and Defendants in their proposed amended complaint that the District Judge dismissed with prejudice, have improperly moved for reconsideration of the District Judge's order. [Dkt. 285 at 9-12.] In response, Plaintiffs admit that they are requesting reconsideration, but claim that "the requests to reconsider two issues ruled upon in [the District Judge's order] are not inappropriate." [Dkt. 291 at 3-4.] Whether or not the requests are appropriate is not for the Court to decide in this motion. Again, the Court reiterates that "motions must be filed separately." S.D. Ind. R. 7-1(a). If Plaintiffs wish for the Court to reconsider any aspect of the District Judge's order, then they must file a separate motion for reconsideration. Thus, Plaintiffs' motion to amend is DENIED with regard to its inclusion of the Individual Defendants, Defendant Sherman Capital Markets LLC, Defendant Sherman Originator III LLC, and any iteration of Claims I or II of Plaintiffs' original Complaint, without prejudice to Plaintiffs' proper filing of a motion for reconsideration of the District Judge's order dismissing those claims and defendants with prejudice.

C. Additional Entity Defendants

Although Defendants acknowledge that Plaintiffs have added over a dozen new defendants to their proposed amended complaint, they make no specific argument against their addition to the case. [ See Dkt. 285 at 2, 12-16.] In general, Plaintiffs assert that the Court has personal jurisdiction over all of the defendants named in the proposed amended complaint, both through RICO's nationwide service of process and as they have made direct or indirect attempts to collect Plaintiffs' debt. [Dkt. 291 at 7.] With regard to the new entity defendants specifically, Plaintiffs allege that the additional entity defendants were "created after this litigation was filed by the defendants ...

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