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Richardson Greenshields Securities Inc. v. Lau

decided: July 30, 1987.

RICHARDSON GREENSHIELDS SECURITIES, INC., PLAINTIFF-APPELLEE,
v.
MUI-HIN LAU, HO SIH FONG, KAU-YING LAU, YING LUP LAU, AND WAI YAU CHI, DEFENDANTS-APPELLANTS



Defendants appeal from an interlocutory order of the United States District Court for the Southern District of New York (Shirley Wohl Kram, Judge) denying their motion for leave to file an amended answer after preventing the filing of that motion for nearly five months by not arranging a pre-motion conference as required by her rules of practice. We treat this premature appeal as a motion for leave to file a petition for a writ of mandamus. We grant the motion contingent upon the district court's refusal on remand to permit the filing of the amended answer.

Oakes and Winter, Circuit Judges, and Metzner,*fn* Senior District Judge.

Author: Winter

WINTER, Circuit Judge:

Defendants appeal from Judge Kram's denial of their motion for leave to file an amended answer asserting counterclaims against plaintiff and third-party claims against four of plaintiff's former employees. The denial of that motion to amend a pleading is not appealable in the circumstances of this case. We treat the attempted appeal as a motion for leave to file a petition for a writ of mandamus, however, and grant the motion if Judge Kram refuses on remand to permit the amendment of the answer.

The issue before us concerns the practice of some district judges to require parties to attend a conference with the court before filing a motion. We do not disapprove of this practice where the required conference is timely arranged by the district judge. In the present case, however, the failure to afford a timely conference had the effect of preventing a party from filing a motion, a power district courts do not have.

BACKGROUND

This is a diversity action brought by Richardson Greenshields Securities, Inc. ("Richardson") against five members of the Lau family ("the Laus").*fn1 Richardson is a commodity futures commission merchant that traded commodities accounts opened in the names of each of the Laus in December 1982.*fn2 Richardson liquidated the accounts in July 1984 following the Laus' failure to pay $167,212.48 in deficit balances that had become due.

This collection was brought on August 27, 1984. The Laus filed an answer on April 15, 1985, denying, inter alia, that any of them except defendant Ying Lup Lau had ever opened an account with Richardson. The answer contained no counterclaims or third-party claims. The parties thereafter engaged in discovery.

Judge Kram conducted a pre-trial conference on June 13, 1986, at which she set a trial date of January 26, 1987. At the conference, counsel for the Laus indicated his desire to file a motion for leave to file an amended answer asserting counterclaims. Judge Kram responded that she would consider such a motion only after a pre-motion conference. This response was pursuant to her rule of practice that "any party wishing to make a motion should arrange for a pre-motion conference prior to the preparation and submission of any papers."

On June 25, 1986, counsel for the Laus wrote to Judge Kram requesting an immediate conference "to discuss whether the Court will permit Defendants to file a counterclaim in the pending matter." The hand-delivered letter urged that the conference be scheduled for June 27 "or as soon thereafter as is convenient for the Court" because "the statute of limitations for filing certain counterclaims may expire before July 4, 1986." Judge Kram's chambers subsequently informed counsel that no conference could be scheduled prior to July 4 but did not give permission to file the motion for leave to file an amended answer.

In an attempt to prevent the statute of limitations from running on their claims against Richardson and simultaneously to avoid flaunting Judge Kram's request of a pre-motion conference, the Laus filed a separate action in the Southern District of New York on July 2, 1986 asserting common law and statutory claims of fraud and conversion against Richardson and four of its former employees. The Laus indicated at the time that the new action was related to the action pending before Judge Kram and that they intended to move to consolidate the cases.

Notwithstanding the Southern District's rule governing the assignment of related cases, and the obvious fact that the July 2 action was related to the present proceeding, Judge Kram appears to have explicitly rejected assignment of the case to her.*fn3 The case was then assigned to Judge Goettel, who dismissed the complaint on September 19, 1986 "without prejudice to application to Judge Kram to amend answer and assert counterclaims in [the case pending before her] and upon representation of counsel for defendants that they will not assert a statute of limitations defense to any counterclaims that were timely when [the Laus] instituted this suit."

The Laus' counsel sent a letter to Judge Kram later that day again requesting a conference to discuss the motion for leave to amend the answer. Nearly three weeks later, on October 7, Judge Kram's chambers scheduled the requested conference for November 14. When the conference was finally held, Judge Kram indicated that she would not be inclined to grant the motion to amend "after this case has been pending all this time." However, recognizing that a judge "can't deny an attorney the right to make a motion," she permitted the Laus' counsel to file the motion to amend. The motion was filed on November 24.

Judge Kram denied the motion in a memorandum opinion and order entered December 30, 1986 on the ground that the Laus had "offered no justifiable excuse for [the] delay" between the filing of their original answer and the filing of their motion to amend. She rejected the Laus' contention that they lacked sufficient knowledge to plead the counterclaims until the discovery process had been completed, reasoning that "the elements of the claims were within the Laus' sphere of knowledge at the time the Richardson complaint was filed." Judge Kram ...


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