United States District Court, S.D. Indiana, Indianapolis Division
ORDER ON MOTION FOR LEAVE TO AMEND
Mark
J. Dinsmore, United States Magistrate Judge
This
matter is before the Court on Plaintiffs' Motion for
Leave to File Second Amended Complaint [Dkt. 85], as
supplemented by [Dkt. 94]. For the reasons set forth below,
the motion is DENIED.
I.
BACKGROUND
This is
an action to recover damages incurred by Plaintiffs as a
result of a lawsuit filed by Defendants. In the prior
lawsuit, Defendants asserted a variety of claims against
Plaintiffs Ryan Gookins, Richard Rectenwal, and Indiana
Precast, Inc., that arose out of the fact that Gookins and
Rectenwal left the employ of Defendants[1] and went to work for
Defendant Indiana Precast, a competing business in which
Gookins and Rectenwal had an ownership interest. That case
went to trial and was resolved in favor of Plaintiffs; the
issue of attorneys' fees in that matter remains pending
before the state court.
In the
First Amended Complaint in this case, Plaintiffs asserted
three Counts: (1) a claim for abuse of process under Indiana
common law; (2) a claim for damages under Indiana's Crime
Victims' Relief Act (the “ICVRA”), Ind. Code
§ 34-24-3-1, based upon Defendants' alleged
commission of criminal deception; and (3) claims for civil
conversion and for damages under the ICVRA based upon
Defendants' alleged commission of criminal conversion.
[Dkt. 29.] The undersigned issued a Report and
Recommendation, which ultimately was adopted by Judge Hanlon,
that denied the motion to dismiss as to Counts I and II and
granted the motion to dismiss as to Count III. [Dkt. 56, Dkt.
82.]
II.
DISCUSSION
In the
instant motion, Plaintiffs seek leave to amend their
complaint to replead Count III. Plaintiffs were given leave
to file a motion to amend with regard to Count III because
“‘[u]nless it is certain from the face of the
complaint that any amendment would be futile or otherwise
unwarranted, the district court should grant leave to amend
after granting a motion to dismiss.'”
O'Boyle v. Real Time Resolutions, Inc., 910 F.3d
338, 347 (7th Cir. 2018) (quoting Barry Aviation v. Land
O'Lakes Mun. Airport Comm'n, 377 F.3d 682, 687
(7th Cir. 2004)). However, “[d]istrict courts may deny
leave to amend when such amendment would be futile.”
Loja v. Main St. Acquisition Corp., 906 F.3d 680,
684-85 (7th Cir. 2018) (citing, e.g., Gonzalez-Koeneke v.
West, 791 F.3d 801, 807 (7th Cir. 2015) (“District
courts, nevertheless, ‘have broad discretion to deny
leave to amend where . . . the amendment would be
futile.'”) (quoting Arreola v. Godinez,
546 F.3d 788, 796 (7th Cir. 2008))). Defendants argue that
permitting Plaintiffs to file their proposed Second Amended
Complaint would be futile. The Court agrees.
In
their First Amended Complaint, Plaintiffs alleged in Count
III that Defendants committed civil and criminal conversion
by “knowingly and intentionally exercis[ing]
unauthorized control over [Gookins' and Rectenwal's]
property” and “intentionally and without right
and consent deprived [Gookins and Rectenwal] of the full use
of their property to their detriment and damage.” [Dkt.
29 at 38.] In their response to Defendants' motion to
dismiss, Plaintiffs explained that “Paragraphs 101, 202
and 203 of the Amended Complaint set forth the property of
[Gookins and Rectenwal], including their knowledge, skill,
expertise, industry information and know-how, which
Defendants converted by intentionally exerting unauthorized
control, asserting ownership over, extending a claim of right
to such property and depriving [Gookins and Rectenwal] of the
full use of their property to their detriment.” [Dkt.
45 at 8.] In their objection to the Report and
Recommendation, Plaintiffs additionally pointed to paragraphs
96, 178, 184, 187, 241, and 242 of the First Amended
Complaint as asserting “specific facts and information
on the unauthorized property, how it was used, and when it
was used.” [Dkt. 58 at 4.] Judge Hanlon found as
follows:
As the Magistrate Judge noted, the paragraphs in support of
Count III do not lay out facts that allow the Court to draw a
reasonable inference that Defendants are liable for
conversion. Each of the paragraphs that Plaintiffs rely upon
only repeat that Defendants advanced their previous
underlying lawsuit by making statements about owning
Plaintiffs' “knowledge, skill-set and
expertise.” Additionally, while alleging that
Defendants appropriated or exercised dominion or control over
Plaintiffs' “knowledge, skill-set and expertise,
” the complaint does not describe what is included in
Plaintiffs' “knowledge, skill-set and expertise,
” or how this knowledge, skills, and expertise were
converted. The complaint does not state any set of facts that
amount to a tortious or criminal conversion by Defendants.
Dkt. 82 at 3-4.
Plaintiffs
have attempted to eliminate these deficiencies in their
proposed Second Amended Complaint. They have added additional
descriptions of the property-the “knowledge, skill-set
and expertise”-they allege was converted. See, e.g.,
[Dkt. 94-1 at 37-38].
They
also have added allegations that make it clear that they
allege that Defendants converted this property by filing and
pursuing a lawsuit in which they asserted that Defendants,
rather than Plaintiffs, owned the property. By adding these
additional factual allegations, Plaintiffs have succeeded in
expressing their claims more clearly than they did in their
First Amended Complaint. However, they also have made it
clear that their conversion claim could not withstand a
motion to dismiss and is, therefore, futile.
Under
Indiana law, “[c]onversion, as a tort, consists either
in the appropriation of the personal property of another to
the party's own use and benefit, or in its destruction,
or in exercising dominion over it, in exclusion and defiance
of the rights of the owner or lawful possessor, or in
withholding it from his possession, under a claim and title
inconsistent with the owner's.” Computers
Unlimited, Inc. v. Midwest Data Sys., Inc., 657 N.E.2d
165, 171 (Ind.Ct.App. 1995). With regard to criminal
conversion, “[a] person who knowingly or intentionally
exerts unauthorized control over property of another person
commits criminal conversion, a Class A misdemeanor.”
Ind. Code § 35-43-4-3(a). “[E]xert control over
property” means to obtain, take, carry, drive, lead
away, conceal, abandon, sell, convey, encumber, or possess
property, or to secure, transfer, or extend a right to
property.” Ind. Code § 35-43-4-1(a). Plaintiffs do
not allege that Defendants did any of these things. By filing
their lawsuit, Defendants sought a judgment from a court that
they owned the property at issue, but simply alleging that
one owns property is not an exertion of control over that
property. Defendants asserted in court that they had a right
to control the property at issue, but at no time did
Defendants actually exercise control over the property or
prevent Plaintiffs from doing so. Accordingly, taking all of
the facts asserted in the proposed Second Amended Complaint
as true, Defendants alleged actions do not satisfy the
definition of criminal or civil conversion, and
Plaintiffs' conversion claim fails as a matter of law.
III.
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