Opinion
89 Civ. 5996 (JSM)
August 7, 2002
OPINION ORDER
Defendant-third party plaintiff Trendi Sportswear, Inc. has made an application for an Order vacating the Final Judgment in this case, entered April 11, 2002, because claims asserted by Trendi directly against Bank of Baroda in its Second Third Party Complaint remained pending at the time of that judgment. Trendi is correct that the Court's decision of January 18, 2002, Bank of India v. Trendi Sportswear, Inc., No. 89 Civ. 5996, 2002 WL 84631 (S.D.N.Y. Jan. 18, 2002), dismissing Indu Craft's First Amended Fourth Party Complaint, did not deal with the issues raised by Trendi's Second Third Party Complaint.
Bank of India ("BOI") commenced this action against Trendi in September 1989, seeking payment of funds owed to BOI by Trendi pursuant to a Note and other credit facilities. On May 4, 1990, Trendi filed a Third Party Complaint against Indu Craft, alleging that Indu Craft's failure to supply goods to Trendi in accordance with their contract had caused Trendi to default on its obligations to BOI. In addition, the Third Party Complaint sought lost profit damages in the amount of $2,818,640, and $2,300,000 for loss of business reputation and good will, both of which were alleged to be the direct result of Indu Craft's breach of contract. On June 21, 1990, Indu Craft, in turn, filed a fourth party complaint against Bank of Baroda ("Baroda"), seeking indemnification in the event that Indu Craft was found liable to Trendi.
In April 1991, the Court awarded summary judgment for BOI against Trendi. This left only the third and fourth party claims, which had been stayed in October 1990, pending the resolution of a related action before Judge Duffy. Despite the termination of that action in Indu Craft's favor after a trial before Magistrate Judge Bernikow in July 1992, Indu Craft filed for protection under Chapter 11 of the Bankruptcy Code on July 25, 1997. Trendi then filed a claim in the bankruptcy proceeding for the damages alleged in the Third Party Complaint in this case. Indu Craft subsequently consented to entry of judgment against it in that proceeding in the amount of $21,101,348.47 for damages to Trendi's business as a result of Indu Craft's inability to deliver goods as required pursuant to contracts between Indu Craft and Trendi. Bankruptcy Judge Gallet entered Final Judgment in favor of Trendi in that amount.
The stay was lifted on December 2, 1997.
In the Plan of Reorganization in the Indu Craft bankruptcy, Trendi agreed that it would limit its enforcement of its judgment against Indu Craft to "the net proceeds of any recovery in Baroda II" (which was defined in the Plan, § 1.37, as the fourth party action in this case). Pursuant to that Plan, Indu Craft was discharged and released from bankruptcy on May 17, 2000.
Meanwhile, this Court granted summary judgment in Baroda's favor on grounds of res judicata, and Final Judgment was entered against Indu Craft on March 29, 2000. That judgment recited that "the claims in the Third-Party action between Trendi and Indu hav[e] been resolved by final judgment entered in the U.S. Bankruptcy Court case 97 B 44958 in favor of Trendi against Indu on 1/18/00 in the amount of $21,101,348.47 . . ."
Subsequently, the Order granting summary judgment in favor of Baroda was reversed by the Second Circuit and remanded for further consideration. Bank of India v. Trendi, 239 F.3d 428 (2d Cir. 2000). Indu Craft then filed a First Amended Fourth Party Complaint adding claims under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(c), (d). In addition, on July 30, 2001, Trendi filed a Second Third Party Complaint, to assert, for the first time, claims directly against Baroda. By an Opinion and Order dated January 18, 2002, Indu Craft's Amended Complaint was dismissed in its entirety. Trendi's Second Third Party Complaint against Baroda, in which Trendi asserts claims of prima facie tort, tortious interference with contract, and claims pursuant to the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962 et seq., remains.
Baroda argues, as it has before, that the impleader is improper. It adds that the Second Third Party Complaint should be stricken because it was filed without leave of the Court, and argues that Trendi's claims, which relate to events that took place 15 years ago, are time-barred. Trendi responds that pursuant to Rule 14, Fed.R.Civ.P., which governs third party practice, it (as plaintiff in the third party action) may bring a complaint against Baroda, the fourth party defendant (third party defendant in the third party action) at any time without leave of court. Furthermore, Trendi argues that under Fed.R.Civ.P., Rule 15(c), its Second Third Party Complaint against Baroda relates back to the date of its original Third Party Complaint against Indu Craft.
The propriety of both the third and fourth party complaints in this action was previously decided in the January 18, 2002 Opinion and Order. Bank of India v. Trendi, 2002 WL 84631, at *3
Rule 14(a)
Trendi is correct that under Fed.R.Civ.P. Rule 14(a), once Indu Craft properly asserted its fourth party claim against Baroda, Trendi was not required to seek leave of court to either amend its original third party complaint or to file a supplemental complaint against Baroda. Marriott Corp. v. Jennifer Dale, Inc., 103 F.R.D. 15, 17 (E.D. Pa. 1984) ("[T]he rule imposes no burden upon plaintiff to seek leave of court to file a claim against a third party defendant.") (citing Straub v. Desa Industries, Inc., 88 F.R.D. 6, 8 (M.D. Pa. 1980)). See also Wasik v. Borg, 423 F.2d 44, 46 (2d Cir. 1970) ("Rule 14(a) specifically contemplates that [t]he plaintiff may assert any claim against the third-party defendant arising out of the transaction or occurrence that is the subject matter of the plaintiff's claim against the third-party plaintiff."). Thus, in Northbrook Nat'l Ins. Co. v. J R Vending Corp., 167 F.R.D. 643, 646 (E.D.N.Y. 1996), the court stated that:
The court declines to hold that Northbrook must amend its original complaint and instead finds that Northbrook has the option — exercised here — to proceed by a direct action in a separate complaint against the fifth party defendant, Robertshaw, as was recognized by Dysart v. Marriott, supra. In the absence of any statutory indication that leave is required, the court is reluctant to impose any such requirement under Rule 14(a) Fed.R.Civ.P. Nor would it be appropriate to incorporate the leave requirements of Rule 15(a) of the Federal Rules of Civil procedure since this provision is only applicable to an amendment to a party's pleading. The plaintiff here has not chosen to proceed by amendment of its pleading, but instead by asserting a direct claim against the third-party defendant in a new pleading.
Similarly, here, Trendi has filed a new pleading — its Second Third Party Complaint — against Baroda, and the same reasoning applies.
Moreover, Trendi is correct that Fed.R.Civ.P. 14(a) does not impose a time limit within which the plaintiff must assert any claims that it may have against the third party defendant. In the Marriott case, the court stated:
Whereas, F.R.C.P. 14(a) provides a grace period of ten (10) days for a defending party to join a third-party defendant without leave of court, it does not specifically require that a plaintiff seek leave of court, regardless of when he files. Thus, it appears to follow that the plaintiff may do so at any time before the statute of limitations has run.103 F.R.D. at 18.
In this case, however, at the time that Trendi filed its Second Third Party Complaint on July 30, 2001, the statutes of limitations clearly had run on claims based in the events that are alleged in that pleading, all of which took place in 1987. Trendi argues that, the statute. of limitations does not bar its claims because, pursuant to Rule 15(c), Fed.R.Civ.P., the Second Third Party Complaint relates back to the date of Trendi's original pleading, i.e., its original Third Party Complaint against Indu Craft.
In the January 18, 2002 Opinion and Order granting Baroda's motion to dismiss Indu Craft's First Amended Fourth Party Complaint, the Court held that Indu Craft's RICO claims, first asserted in 2001, were time-barred. Pursuant to the same reasoning, Trendi's similar claims also are barred, unless they relate back to Trendi's original pleading in this action. As stated in that Opinion, Trendi's claim that it suffered an additional later injury when this Court dismissed Indu Craft's First Amended Fourth Party Complaint in January 2002, does not withstand scrutiny in light of this Circuit's adoption of the "injury discovery rule" for RICO cases. See Bank of India v. Trendi, 2002 WL 84631, at *8-9.
Rule 15(c)
The problem with Trendi's contention that it can rely on Rule 15(c), is that the Rule applies only to an "amendment of a pleading." As set forth above, the reason Trendi did not need to obtain leave of the Court to file its Second Third Party Complaint under Rule 15(a), was that it was not amending its pleading. Instead, it was filing an independent third party complaint pursuant to Rule 14. It is difficult to see how Trendi's Second Third Party Complaint could be an amendment of a pleading under Rule 15(c) if it was not an amendment under Rule 15(a).
The court need not resolve that issue, however. The fact that Bankruptcy Judge Gallet entered judgment in Trendi's favor against Indu Craft on the claims included in the Third Party Complaint on July 12, 1999, and the Bankruptcy Court entered Final Judgment on those claims on January 18, 2000, would, in any event, be fatal to Trendi's claim that it can rely on Rule 15(c). As the court held in United States v. Int'l Brotherhood of Electrical Workers, 72 F.R.D. 507, 513 (E.D. La. 1976), aff'd, 573 F.2d 1308 (5th Cir. 1978), "neither Rule 15(c), permitting the relation back of amendments, nor Rule 15(d), permitting supplemental amendments, is applicable in a post-judgment situation." Cf. Illinois Conference of Teamsters and Employers Welfare Fund v. Steve Gilbert Trucking, 71 F.3d 1361, 1368 (7th Cir. 1995); First Nat'l Bank v. Continental Ill. Nat'l Bank, 933 F.2d 466 (7th Cir. 1991) (The presumption in favor of liberality in granting motions to amend under Rule 15(a) is reversed after judgment has been entered.). This rule reflects the fact that a party who waits to amend its pleadings until after judgment has been entered defeats the purpose of Rule 14, which is to avoid circuitry and multiplicity of actions.
Once judgment has been entered, a party seeking to amend its pleadings must move to vacate the judgment under Fed.R.Civ.P. Rule 59(e) or Rule 60(b). Id. at 468; see also Rogue v. City of Redlands, 79 F.R.D. 433, 435 (C.D. Cal. 1978). This Trendi has explicitly chosen not to do. In his letter to the Court dated July 30, 2001, conveying a copy of the Second Third Party Complaint, Trendi's counsel stated, "Trendi has served this Complaint in the alternative and without prejudice to Trendi' s judgment against Indu Craft, . . . and Trendi's rights to participate in and protect the judgment from the United States Bankruptcy Court in its favor." Simply put, Trendi could not have it both ways.
Trendi argues that in the January 18, 2002 Opinion and Order, this Court held that the Bankruptcy Court judgment in Trendi's favor against Indu Craft was null and void. However, in that Opinion, the Court never questioned the validity of the Bankruptcy Court's judgment. It merely held that Indu Craft's indemnification claim against Baroda failed to state a cause of action as a matter of New York law, and that therefore Trendi's agreement to limit its recovery on its judgment against Indu Craft to the proceeds, if any, of the prosecution of that claim by Indu Craft, would preclude Trendi from collecting on its judgment. While Trendi may well have made an ill-advised agreement, which did not take adequate account of New York law regarding indemnification, that agreement was, nevertheless, the basis upon which the judgment of the Bankruptcy Court was entered. It also was incorporated into the Plan of Reorganization, and consequently, into that court's Discharge Order. That judgment was entered, and has not been set aside. Therefore, there is no complaint to amend. Pena v. Mattox, 84 F.3d 894, 903 (7th Cir. 1996)
Finally, even if the Court were to be presented by Trendi with a motion under Rule 60(b), Fed.R.Civ.P., to vacate the judgment entered in its favor against Indu Craft, so that it could then move to amend its third party complaint, it would not be granted at this juncture. Trendi has been fully advised of Indu Craft's claims against Baroda for many years, and, assuming for this purpose that a pleading stating its own direct claims against Baroda would have constituted an amendment of its Third Party Complaint, it could have filed such a pleading, without leave of court, at any time between the filing of Indu Craft's Fourth Party Complaint on June 21, 1990, and the entry of Final Judgment by the Bankruptcy Court on January 18, 2000. Why it failed to do so remains unexplained. As the Court stated in Figgie Int'l, Inc. v. Miller, 966 F.2d 1178, 1181 (7th Cir. 1992), "in a post-judgment situation, delay without explanation is sufficient reason to deny a motion to amend." Although the leave provisions of Rule 15(a) are not directly relevant here, it is instructive that under Rule 15(a), even prior to judgment, "if a lengthy delay exists before a motion to amend is made, it is incumbent upon the movant to offer a valid explanation for the delay." Evans v. Syracuse City School Dist., 704 F.2d 44, 47 (2d Cir. 1983). Cf. Deere v. Goodyear Tire and Rubber Co., 175 F.R.D. 157, 166 (N.D.N.Y. 1997) ("[Dienial of a motion to amend is appropriate when the sole reason for the undue delay is ignorance of the law.); Wells v. HBO Co., 813 F. Supp. 1561 (N.D. Ga. 1992) (stating with respect to Rule 15(c)(3), that "even the most liberal interpretation of `mistake' cannot include a deliberate decision not to sue a party whose identity plaintiff knew from the outset."); Boyle v. Texasgulf Aviation, Inc., 696 F. Supp. 951, 956 (S.D.N.Y. 1988), aff'd, 875 F.2d 307 (2d Cir. 1989) (The longer the period of unexplained delay, the less the opposing party must show by way of prejudice.); Reborn Enterprises, Inc. v. Fine Child, Inc., 590 F. Supp. 1423, 1449 (S.D.N.Y. 1984), aff'd, 754 F.2d 1072 (2d Cir. 1985) (stating, in a pretrial situation, that "[l]ack of dingence is reason enough [to refuse to permit amendment] . . . [Plaintiff] has had the facts necessary to make the two new allegations proposed throughout this litigation, but has unduly delayed in asserting them.")
Accordingly, the claims asserted in Trendi's Second Third Party Complaint do not relate back to the date of filing Trendi's original Third Party Complaint, and the Second Third Party Complaint is dismissed as time-barred.
Conclusion
For the foregoing reasons, Trendi's Second Third Party Complaint against Baroda is dismissed, and Trendi's motion to vacate the Final Judgment of this Court entered on April 11, 2002, is denied.
SO ORDERED.