United States District Court, D. Nebraska
MICHAEL J. TRACY, an individual and Derivatively as a shareholder of Telemetrix and Convey; Plaintiff,
TELEMETRIX, Inc.; et al., Defendants.
MEMORANDUM AND ORDER
CHERYL R. ZWART UNITED STATES MAGISTRATE JUDGE.
This matter is before the court on the following motions:
Filing No. 255: Plaintiff’s Motion for Sanctions against all defendants;
Filing No. 260: Plaintiff’s Motion for Leave to File Third Amended Complaint;
Filing No. 276: Motion to Compel Defendants Larry Becker, Becker Capital Management, LLC, Green Eagle Networks, Inc., and Green Eagle Communications, Inc. (collectively “the Green Eagle Defendants”);
Filing No. 277: Motion to Compel Defendants William Becker, Gary Brown, and Telemetrix, Inc. (collectively “the Telemetrix Defendants”);
Filing Nos. 259, 279, 283: Plaintiff’s Motions to Restrict certain exhibits and other filings;
Filing No. 296: Defendants’ Motion to Restrict certain exhibits.
The parties long and contentious history of litigation, albeit in different forms, apparently began in 2004. Shortly thereafter, a 2004 Telemetrix Shareholder’s Agreement was executed - the result of litigation with creditors of Telemetrix. Pursuant to the Shareholder’s Agreement, Plaintiff lost control of Telemetrix and became a minority shareholder. Since assuming this status, Tracy has alleged various acts of malfeasance on the part of the controlling shareholders.
The suit now before the court involves various loans and the transfer of Telemetrix assets, including its FCC broadcasting license. Plaintiff brings claims against all Defendants both individually and derivatively on behalf of Telemetrix. The crux of the case is based on allegations that Defendants mismanaged and defrauded Telemetrix for the benefit of the individual defendants and the Defendant companies.
The parties’ pending discovery disputes are addressed below.
A. Motion to Amend (Filing No. 260)
This case was removed from the District Court for Scotts Bluff County, Nebraska on October 8, 2012. (Filing No. 1). Putative Defendant Gayle Becker was named in the original complaint. Plaintiff filed an amended complaint on November 13, 2012, (Filing No. 29), and a second amended complaint on November 28, 2012, (Filing No. 37). Defendants Gayle Becker, Larry Becker, Becker Capital Management, Green Eagle Communications and Green Eagle Networks filed a motion to dismiss on December 7, 2012, (Filing No. 50). Likewise, Defendants William W. Becker, Gary Brown, Convey Communications, and Telemetrix filed a motion to dismiss that same day. (Filing No. 52).
By order entered on April 11, 2013, the Hon. Richard G. Kopf held Plaintiff had not properly pleaded claims pursuant to the Racketeer Influenced and Corrupt Organizations (“RICO”) Act. (Filing No. 117). Specifically, he found Plaintiff “failed to plead mail or wire fraud as predicate acts . . . [and] failed to sufficiently plead a RICO ‘enterprise, ’ ‘a pattern’ of racketeering acts, a RICO conspiracy, and that his injuries were proximately caused by defendants’ racketeering activity.” (Filing No. 117 at CM/ECF p. 16). The court afforded Plaintiff the opportunity to file another amended complaint in an attempt to cure the defects in his operative complaint, and it denied Defendants’ Motions to Dismiss without prejudice to reassertion.
In response, Plaintiff filed its Amended Complaint (Second) on June 7, 2013, (Filing No. 122). In it, Plaintiff voluntarily dismissed several defendants including Gayle Becker.Defendants again moved to dismiss the complaint for failure to plead fraud with the requisite particularity. Those motions were denied. (Filing No. 148).
The parties completed a Rule 26(f) report and the Final Progression Order was entered on September 24, 2014. (Filing No. 166). Pursuant to the Progression Order, the deadline for moving to amend or add parties was December 19, 2014. (Id.). Discovery was to close by April 17, 2015. The discovery dates have been continued, but the motion to amend deadline has not. The parties completed initial disclosures in October of 2014, and Plaintiff served his first set of Requests for Production on November 26, 2014. (Filing No. 170). Within a few months, the parties’ discovery disputes began. (Filing Nos. 186 & 189). Plaintiff received at least partial responses to the requested discovery intermittently from February of 2015 until August of 2015. (Filing Nos. 210, 219, 223, 233, 238, 240, & 241). Defendants have apparently produced several thousand pages of documents, many of which Plaintiff did not receive until July and August of 2015. Plaintiff filed a motion for leave to file a third amended complaint on August 7, 2015. (Filing No. 243). That motion was then amended and the current motion for leave to file an amended complaint was filed on September 4, 2015, (Filing No. 260), well after the deadline set forth in the Final Progression Order.
Pursuant to Rule 16(b)(4), a case management order setting progression deadlines “may be modified only for good cause and with the judge's consent.” Fed.R.Civ.P. 16(b)(4). The movant's level of diligence and the degree of prejudice to the parties are both factors to consider when assessing if good cause warrants extending a case management deadline, with the movant’s diligence being the first consideration and the extent of prejudice to either party considered only following a requisite threshold finding of due diligence. Sherman v. Winco Fireworks, Inc., 532 F.3d 709, 716-17 (8th Cir. 2008); Marmo v. Tyson Fresh Meats, Inc., 457 F.3d 748, 759 (8th Cir. 2006). Where there is “no change in the law, no newly discovered facts, or any other changed circumstance” the court will generally not find good cause to amend. Id.
Plaintiff seeks to amend his complaint to add parties Gayle Becker, Diane Larkowski, and Mitchell Bennett. Gayle Becker is the wife of Larry Becker and Plaintiff asserts she “is integral in assisting Larry in the operation and administration of Defendant Green Eagle.” (Filing No. 243, ¶22 at CM/ECF pp. 5-6). Larkowski allegedly “was the accountant for Becker Capital Management and Telemetrix from no later than 2005 through June 2008.” (Filing No. 243, ¶16 at CM/ECF p. 4). Bennett was allegedly the president of Telemetrix from June 2008 through January 2011. (Id.). In support of its motion, Plaintiff filed its proposed Amended Complaint and supporting index of evidence containing fifty-six (56) new exhibits, the majority of which are emails or other documents that were solely in the possession of Defendants and produced during the discovery process.
Defendants argue Plaintiff has not made the necessary showing of good cause for filing a motion to amend over eight months after the expiration of the deadline set forth in the Final Progression Order. Defendants assert Plaintiff has not worked diligently to comply with the case progression deadlines or to seek relief from the court to extend the deadlines. That is, Defendants assert Plaintiff should have moved for a continuance of the motion to amend deadline due to the continued discovery deadlines in light of Plaintiff’s admitted suspicions about the proposed new defendants’ roles in the alleged conspiracy and racketeering activity.
Plaintiff asserts he has been diligent in pursuing and reviewing discovery. Citing to the court’s previous dismissal of his complaint for failure to plead the requisite specificity, Plaintiff argues he waited to add parties until he could, in good faith, assert causes of action against them. He further argues Defendants produced thousands of pages of documents incrementally, requiring Plaintiff to commit large amounts of time culling through the documents and determining if additional claims or parties should be added.
The question before the court is whether Plaintiff has been diligent in meeting the Progression Order deadlines. See Sherman, 532 F.3d at 716-17. Although the motion to amend was filed well-after the expiration of the deadline and comes on the heels of several previous amendments, the nature of the claims in this case - i.e., RICO violations - necessitated filing multiple pleadings and amendments after discovery had been analyzed. Plaintiff admits he had suspicions about the proposed new defendants’ respective roles in the alleged conspiracy in the early stages of this litigation. However, Plaintiff initially had a complaint dismissed for his failure to plead the RICO allegations with sufficient specificity. (Filing No. 117). He amended his complaint in an attempt to conform with the Judge Kopf’s order, and in doing so, removed parties and allegations he could not support; including removing Gayle Becker (who he now seeks to add) as a named defendant. As evidenced by Plaintiff’s proposed amended complaint, Plaintiff has added numerous exhibits comprised of documents he acquired through the discovery process to support his claims against the three proposed new defendants. The vast majority of the newly cited exhibits are email exchanges, loan documents, and other internal documents otherwise unavailable to Plaintiff.
Defendants do not contend that Plaintiff had access to the documents used in support of the proposed amended complaint through other means or knew the precise facts which led to the proposed amendment. Rather, Defendants argue Plaintiff generally knew of the proposed additional defendants’ alleged involvement and should have served its discovery earlier and/or moved the court to amend the Final Progression Order to allow him to add parties after conducting discovery, thereby gathering the information for asserting all claims and naming all potential defendants before the deadline for moving to amend expired.
While Plaintiff may have had suspicions about the proposed new defendants’ role in the alleged scheme, he did not have a good faith belief that he possessed sufficient evidence to fulfill his obligations under the heighted pleading standard required for RICO claims. Particularly since Plaintiff’s previous complaint had been dismissed for lack of specificity, the court finds Plaintiff was diligent in serving discovery and moving to file an amended complaint to add defendants only after he had enough information to support his claims.
While Plaintiff could have moved to amend the progression order, it is unlikely Defendants or the court would have agreed to an open ended extension absent good cause shown - good cause that the Plaintiff did not have until discovery progressed. Plaintiff’s failure to request a continuance does not evidence lack of due diligence. Plaintiff has made the requisite showing of diligence necessary to support his untimely motion for leave to amend.
To find good cause, the court must also determine what prejudice, if any, the parties will suffer if the amendment is permitted. Defendants assert, and Plaintiff does not refute, that adding new parties will lead to additional discovery and another continuation of the trial. However, this case is currently bogged down in discovery disputes with several discovery related deadlines currently stayed until several pending motions can be resolved. (Filing No. 271). And, although the court loathes continuing the trial in this case further, such action may be inevitable at this point irrespective of whether the court grants Plaintiff’s motion to amend. Accordingly, the court sees no real prejudice to Defendants.
Finally, Defendants argue the amendment will be futile because the claims against the proposed new defendants were not filed within the applicable statutes of limitation. This case is extremely fact intensive and the court will not make a determination on any statute of limitation questions at the pleading stage. Such argument is better addressed on a motion to dismiss or a motion for summary judgment. Accordingly, the court is unwilling to find the proposed amended complaint is futile at this point in the litigation.
B. Motions to Compel
The parties have battled over discovery during the course of this litigation. In an attempt to resolve a number of the points of contention, the undersigned Magistrate Judge conducted a hearing on the record on July 14, 2015. (Filing No. 235). As a result of the hearing, the undersigned issued an order addressing the production of bank records, certain deficiencies with Telemetrix’s privilege log, and the production of certain emails. (Filing No. 237).
That hearing did not resolve all the parties’ disputes. Plaintiff has filed Motions to Compel the production of documents from two the different Defendant groups - the Telemetrix Defendants (Filing No. 277) and the Green Eagle Defendants (Filing No. 276). The motions seek the production of certain electronic communications alleged to be in existence and numerous documents listed on the defendants’ respective privilege and redaction logs.
1. Requests for Production
Plaintiff seeks to compel Defendants Gary Brown and William Becker to respond fully to certain requests ...