The opinion of the court was delivered by: Sweet, District Judge.
Defendants First Blood Associates, A. Frederick Greenberg
and Richard M. Greenberg (collectively, "First Blood") have
moved for summary judgment dismissing the complaint of
plaintiff Stanley B. Block and others ("the Investors") on the
grounds that their claims are barred by the statute of
limitations. For the following reasons, the motion is granted.
The parties, the underlying facts and the tortuous history
of this dispute are described in detail in the prior opinions
in this matter, familiarity with which is assumed. Block v.
First Blood Associates, 663 F. Supp. 50 (S.D.N.Y. 1987) ("Block
I"); Block v. First Blood Associates, 691 F. Supp. 685 (S.D.N.Y.
1988) ("Block II"); Block v. First Blood Associates, 125
F.R.D. 39 (S.D.N.Y. 1989) ("Block III"); Block v. First Blood
Associates, 743 F. Supp. 194 (S.D.N.Y. 1990) ("Block IV").
Following the Second Circuit's decision in Ceres Partners v.
GEL Associates, 918 F.2d 349 (2d Cir. 1990) to adopt a uniform
statute of limitations in securities actions brought under §
10(b) of the Securities Exchange Act of 1934, First Blood moved
on November 19, 1990 for summary judgment, seeking to apply the
new rule announced in Ceres, under which claims must be filed
within "one year of their discovery, but in no event more than
three years after their accrual." Id. at 351.
Once the Ceres issue had drawn First Blood's attention to the
limitations question, it recognized that even under pre-Ceres
law there was a question of the timeliness of the Investors'
claims. First Blood's reply papers therefore broadened the
argument to include this issue as well. Oral argument was heard
on January 14, 1991, and following further submission by the
parties, the matter was taken on submission on February 21,
1. The Investors Have Not Established Prejudice Which Would
Warrant Denying Amendment of the Answer.
Reasons for a proper denial of leave to amend
include undue delay, bad faith, futility of the
amendment, and perhaps most important, the
resulting prejudice to the opposing party. Mere
delay, however, absent a showing of bad faith or
undue prejudice, does not provide a basis for a
district court to deny the right to amend.
State Teachers Retirement Board v. Fluor Corp., 654 F.2d 843,
856 (2d Cir. 1981) (citing Foman v. Davis, 371 U.S. 178, 182,
83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962)); see also Richardson
Greenshields Securities, Inc. v. Lau, 825 F.2d 647, 653 n. 6
(2d Cir. 1987); Howey v. United States, 481 F.2d 1187, 1190
(9th Cir. 1973) (Lumbard, J.).
The Investors assert that permitting First Blood to assert
the statute of limitations at this late date, nearly four
years after its original answer, constitutes "undue delay"
which should prevent First Blood from amending that answer.
Therefore, they contend, under Fed.R.Civ.P. 8(c), First Block
must be held to have waived the limitations defense, and its
motion must be denied.
However, as Fluor indicates, a party opposing a proposed
amendment on the basis of delay must also demonstrate either
the amending party's bad faith or the undue prejudice which
would result from the amendment. The Investors do not seriously
contend that First Blood's failure to avail itself of the
limitations argument prior to this time was the result of
anything but inadvertence, nor has any evidence been adduced
which would support a finding of bad faith.
The Investors do, however, assert that permitting the
amendment at this late stage of the litigation would cause
them substantial prejudice, primarily based on the extensive
discovery and motion practice which have taken place and the
substantial attorneys' fees and expenses which have
accumulated over the course of the lawsuit. They also allege
that First Blood's failure to raise the limitations issue
earlier denied them the opportunity to file their claims in a
jurisdiction in which they might not have been time-barred.
In order to resolve the issue, it is necessary to consider
the nature of the Fluor requirement of "prejudice." It seems
clear that a party opposing amendment cannot prove prejudice
merely by the fact that the amendment may make it more
difficult, or even impossible, for that party to prevail in the
litigation. This conclusion applies no matter how heavily the
party opposing amendment has invested in the litigation: a
claim or defense which is not itself meritorious cannot be
preserved simply by its proponent's expenditure of funds.
As the Investors correctly note, a plaintiff's assertion of
a time-barred claim is valid so long as the defendant does not
assert the defense. Nevertheless, a plaintiff may reasonably
be charged with knowledge of the limitations period applicable
to his complaint, and thus a plaintiff who incurs significant
expenses in ...