not contained in the pleadings. "The court's inquiry on a motion to amend a complaint is comparable to that required by Fed. R. Civ. P. 12(b)(6) as to whether the proposed amendments state a cognizable claim. . . It would therefore be improper for the Court to consider facts beyond the scope of the pleading." Polycast, 728 F. Supp. at 943 n.2. Furthermore, even assuming that defendants are correct, they attack only the evidence regarding their alleged statements regarding a $ 12.4 million equity investment in the facility, and do not address the many other alleged misrepresentations. Therefore, the claims are colorable and amendment will not be denied on this ground.
C. Prejudice and Bad Faith
Defendants argue that the proposed fraud amendments would require them to perform burdensome duplicative discovery. First, they assert that all of their discovery to date has focussed on the alleged misrepresentations contained in the purchase agreement, and that they have conducted no discovery regarding misrepresentations allegedly contained in the investment memoranda. The plaintiff's allegations regarding the investment memoranda pertain only to the § 12(2) claim, which the court has already dismissed, so the court need not reach this argument. The defendants' emphasis on the extensive discovery that has already been conducted regarding the purchase agreement undercuts their second complaint, however, which is that the addition of the fraud claims will require extensive new discovery. Since the fraud claims rest on the same alleged misrepresentations contained in the same purchase agreement that was the focus of the § 12(2) claim, it is unlikely that the fraud claims will require much new discovery.
Defendants assert, however, that the elements of § 10(b) and common law fraud claims are so different from the elements of a § 12(2) claim that even though all the claims rest on the same transaction, the addition of the fraud claims will necessitate further discovery. The elements of fraud
and § 12(2) causes of action are similar. Goodridge v. Harvey Group, Inc., 778 F. Supp. 115, 129 (S.D.N.Y. 1991) (Lasker, J.). In particular, the materiality standard is the same in both § 10(b) and § 12(2). Id.
The primary difference between a § 12(2) action and a fraud action is that in the former plaintiffs need not show scienter, reliance or loss causation. Klein v. Computer Devices, Inc., 591 F. Supp. 270, 277 (1984) (need not show reliance), reh'g granted & modified on other grounds, 602 F. Supp. 837 (S.D.N.Y. 1985) (Goettel, J.); Finkel v. Stratton Corp., 754 F. Supp. 318, 326 (S.D.N.Y. 1991) (Haight, J.) (need not show scienter or loss causation), aff'd in part, rev'd in part on other grounds, 962 F.2d 169 (2d Cir. 1992). Since the scienter at issue here is the defendants', they should not need to conduct extensive discovery regarding scienter. See Phoenix Technologies, Inc. v. TRW, Inc., 834 F. Supp. 148, 150-51 (E.D. Pa. 1993) ("it is unlikely that plaintiff would need to conduct discovery in order to ascertain its own beliefs and intentions"). Nor is it likely that defendants will need to conduct significant additional discovery regarding plaintiff's reliance on the alleged misrepresentations and the loss that plaintiff allegedly suffered as a result these are elements of the breach of contract and negligent misrepresentation claims that plaintiff brought in its first amended complaint. Defendants cannot claim prejudice merely because they must now defend against fraud claims -- they would have had to defend against these claims if plaintiff had included them in its original complaint. See Journal publishing Co. v. American Home Assurance Co., 771 F. Supp. 632, 637 (S.D.N.Y. 1991) (Leisure, J.) (had new claims been included in original complaint, defendant would have had to defend against them, so defendant could show no additional burden imposed by the delay). Since the discovery deadline has not passed
and no depositions have been closed, the defendants are not precluded from conducting discovery regarding these elements. The court does not believe that defendants will have to undertake a significant amount of duplicative discovery, and therefore the prejudice resulting from the amendment will not be undue.
Defendants also assert that plaintiff has had access to the facts underlying its fraud claims since before it filed its original complaint and that plaintiff has possessed the documents underlying its fraud claims since before it filed its first amended complaint, thus raising an inference of bad faith. "Mere delay in presenting an amendment absent a showing of bad faith or undue prejudice, does not provide a basis for the district court to deny the right to amend." Polycast, 728 F. Supp. at 943; see also Poloron Prods., Inc. v. Lybrand Ross Bros. & Montgomery, 72 F.R.D. 556, 561 (S.D.N.Y. 1976) (Conner, J.); United States v. International Business Machs. Corp., 66 F.R.D. 223, 228-29 (S.D.N.Y. 1975) (Edelstein, J.). Nor is bad faith evinced by the fact that plaintiff admittedly sought to add the fraud claims in an attempt to find a new theory of recovery after its original § 12(2) claim was precluded by the Supreme Court's ruling in Gustafson. "Many amendments will be afterthoughts; often they will be engendered because counsel anticipate defeat on the initial complaint. Such realities alone do not support denial of a motion to amend." Polycast, 728 F. Supp. at 943 (quoting Middle Atlantic Utils. Co. v. S.M.W. Dev't Corp., 392 F.2d 380, 385 (2d Cir. 1968)); see also Poloron Prods., Inc., 72 F.R.D. at 561 ("neither long delay nor the fact that a proposed amendment is motivated by an afterthought of counsel as to the best theory upon which to proceed, by themselves, suffice as reasons for denying leave to amend") (quoting Green v. Wolf Corp., 50 F.R.D. 220, 223 (S.D.N.Y. 1970)). Therefore, plaintiff may amend its complaint to add causes of action based on allegations of fraud.
IV. Protective Order
In light of this opinion, defendants' motion to stay discovery has become moot.
Plaintiff's motion to amend the complaint is denied insofar as it seeks to amend the § 12(2) cause of action but granted insofar as it seeks to add causes of action sounding in fraud, pursuant to § 10(b) and New York common law. Summary judgment is granted in favor of defendants on plaintiff's § 12(2) cause of action, but defendants' motion to dismiss the state law claims is denied. Defendants' motion to stay discovery is denied as moot.
IT IS SO ORDERED.
Dated: New York, New York
June 14, 1995
Robert L. Carter