Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.

LYONDELL-CITGO REFINING v. PETROLEOS DE VENEZUELA

United States District Court, S.D. New York


April 12, 2005.

LYONDELL-CITGO REFINING, LP, Plaintiff,
v.
PETROLEOS DE VENEZUELA, S.A. AND PDVSA-PETROLEO, S.A., Defendants.

The opinion of the court was delivered by: CONSTANCE MOTLEY, Senior District Judge

MEMORANDUM OPINION AND ORDER

Defendant requests that this court set aside Magistrate Judge Peck's November 22, 2004 opinion and order denying defendant's motion for leave to amend its answer and file a counterclaim. For the reasons set forth below, defendant's request is DENIED.

I. The Parties

  Plaintiff, Lyondell-Citgo Refining, LP ("LCR"), is a limited partnership with its principal place of business in Houston, Texas, where it owns a crude oil refinery. Defendant Petroleos de Venezuela, S.A. ("PDVSA"), is the national oil company of Venezuela, and defendant PDVSA-Petroleo, S.A. ("Petroleo"), is a wholly owned subsidiary of PDVSA.

  II. Background

  This action was initiated by the filing of a civil suit on February 1, 2002. The complaint alleges that defendants breached contracts to supply heavy crude oil to plaintiff, and that their declaration of force majeure was invalid. Plaintiff seeks damages, specific performance of the contracts, and declaratory judgment. The case was transferred to this court from Judge Deborah Batts on May 22, 2003. On October 30, 2003, this court set a discovery deadline of October 1, 2004. On August 30, 2004, this case was referred to Magistrate Judge Peck for supervision of the remainder of discovery. On October 29, 2004, after the close of discovery, defendant filed a motion for leave to amend its answer and file a counterclaim. Specifically, defendant asserted that a deposition of one of plaintiff's witnesses on October 4-5, 2004 revealed that plaintiff breached the parties' Crude Oil Supply Agreement by time-trading crude oil in violation of the Agreement, and that these newly discovered facts form the basis of a compulsory breach of contract counterclaim On November 22, Judge Peck issued an opinion denying defendant's motion on the grounds that the motion, which came after the close of discovery and after the filing of extensive cross-motions for summary judgment, would require substantial additional discovery and would prejudice plaintiff by delaying decision of the case. In response to defendant's argument that its proposed counterclaim is compulsory, Judge Peck held that the court need not reach that issue because plaintiff stipulated that defendant can bring its proposed counterclaim in a separate action.

  On December 7, 2004, defendant filed an objection to Judge Peck's denial of defendant's motion for leave to amend its answer and file a counterclaim. Defendant requests that this court review Judge Peck's opinion and order under a de novo standard of review on the grounds that Judge Peck's order is a dispositive order, and grant defendant's motion to amend its answer and file a counterclaim. Alternatively, defendant argues that Judge Peck clearly erred in denying defendant's motion, and that this court should grant defendant's motion. Defendant further urges the court to find that its proposed counterclaim is compulsory, and therefore that defendant should be permitted to file it.

  Plaintiff opposes defendant's motion and argues that Judge Peck's opinion and order should be reviewed under the clearly erroneous standard that is applicable to a magistrate's non-dispositive rulings. Plaintiff further submits that it would be prejudiced if defendant's motion is granted, as additional discovery would be required and the discovery would likely extend to third parties. Plaintiff argues that defendant's proposed counterclaim is not compulsory and that because plaintiff has stipulated that defendant can bring the proposed counterclaim in a separate action, defendant will suffer no prejudice if its motion is denied.

  III. Standard of Review

  As a preliminary matter, the court must determine the appropriate standard of review for considering Judge Peck's opinion and order. Pursuant to Rule 72 of the Federal Rules of Civil Procedure and its enabling statute, the Federal Magistrates Act, 28 U.S.C. § 636(b)(1) (2002), determination of the standard of review turns on whether the magistrate's decision is dispositive of a claim or defense of a party. Both the rule and the statute state that, as to non-dispositive matters, a district court shall reverse a magistrate's order only where it has been shown that the order is "clearly erroneous or contrary to law." 28 U.S.C. § 636(b)(1)(A) (2002); Fed.R.Civ.P. 72(a). When reviewing a magistrate's order regarding a dispositive pretrial motion, however, a district court "shall make a de novo determination . . . of any portion of the magistrate judge's disposition to which specific written objection has been made." 28 U.S.C. § 636(b)(1)(C) (2002); Fed.R.Civ.P. 72(b).

  The proper classification of a denial of leave to amend a pleading is not clearly settled in this Circuit. See Credit Suisse First Boston LLC v. Coeur D'Alene Mines Corp., 2005 WL 323714, at *3 (S.D.N.Y. Feb. 10, 2005); Am. Stock Exch., LLC v. Mopex, Inc., 215 F.R.D. 87, 90-91 (S.D.N.Y. 2002); HCC, Inc. v. R H & M Machine Co., 39 F.Supp 2d 317, 321 (S.D.N.Y. 1999); Rao v. Envirodyne Eng'rs of N.Y., 1996 WL 594054, at *2 (E.D.N.Y. Oct. 11, 1996). Some courts have reviewed a denial of a motion to amend a pleading under a de novo standard. See Covington v. Kid, et al., 1999 WL 9835, at *2 (S.D.N.Y. Jan. 7, 1999) (finding that because magistrate judge's denial of leave to amend complaint foreclosed potential claims against defendants, it was dispositive); Moss v. Stinnes Corp., 1995 WL 625698, at *1 (S.D.N.Y. Oct. 25, 1995) (holding that magistrate's denial of motion to further amend complaint was dispositive of certain of plaintiff's claims so district court should apply de novo standard of review); Champion Titanium Horseshoe, Inc. v. Wyman-Gordon Inv. Castings, Inc., 925 F.Supp 188, 189-90 (S.D.N.Y. 1996) (holding that magistrate's denial of leave to file an amended pleading should be subject to reconsideration de novo since it is dispositive of proposed new claims).

  Many other courts, however, have reviewed a denial of a motion to amend a pleading under a "clearly erroneous" standard of review. See Benedict v. Amaducci, 1995 WL 413206, at *11 (S.D.N.Y. July 12, 1995) (holding that a magistrate's denial of leave to amend a complaint will not be overturned by the district court unless it is shown to be clearly erroneous or contrary to law); St. Paul Fire and Marine Ins. Co. v. Heath Fielding Ins. Broking Ltd. et al., 1996 WL 19028, at *4 (S.D.N.Y. Jan. 17, 1996) (holding that because a motion to amend a complaint is not dispositive, the court reviews the magistrate's disposition of plaintiff's motion only to determine whether it was clearly erroneous or contrary to law); Wahad v. F.B.I., et al., 132 F.R.D. 17, 20 (S.D.N.Y. 1990) (holding that a motion for leave to amend is considered nondispositive and, accordingly, clearly erroneous standard of review should be applied); Dais v. Lane Bryant, Inc., 2000 WL 145755, at *1 (S.D.N.Y. Feb. 8, 2000) (holding that although de novo review is appropriate where magistrate's denial of plaintiff's leave to amend is based on futility, a denial based on other grounds would subject the magistrate's decision to a clearly erroneous standard of review); Smith v. Montefiore Med. Ctr.-Health Servs. Div., et al., 1997 WL 711053, at *2 (S.D.N.Y. Nov. 13, 1997) (holding that review of a magistrate's denial of plaintiff's motion to amend complaint was subject to review under clearly erroneous standard, as plaintiff's request was "unambiguously" not dispositive of a claim or defense of a party).

  Most recently, in Credit Suisse First Boston, a case in which, as here, the defendant objected to the magistrate's denial of defendant's motion to amend its answer and file counterclaims, the court held, "Although the proper classification of a denial of leave to amend a pleading is not settled in this Circuit, where magistrate judges prohibit a party from asserting a potential claim, courts tend to review the preclusion of such a claim under a clearly erroneous standard." Credit Suisse First Boston, 2005 WL 323714, at *3 (internal quotations omitted). See also Corcoran v. Sinclair, et al., 1999 WL 177444, at *13 (S.D.N.Y. Mar. 30, 1999) (holding that "most courts considering the question have concluded that a ruling regarding amendment of a complaint is non-dispositive"). This court agrees. Based on the weight of authority in this Circuit applying a clearly erroneous standard of review to a magistrate's ruling on a party's motion to amend a pleading, this court will apply a clearly erroneous standard of review to Judge Peck's order denying defendant's motion to amend and file a counterclaim.

  The Supreme Court has held that a finding is "clearly erroneous" if the reviewing court is "left with the definite and firm conviction that a mistake has been committed." Easley v. Cromartie, 532 U.S. 234, 242 (2001) (quoting United States v. United Gypsum Co., 333 U.S. 364, 395 (1948)). Indeed, "[w]here there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous." Anderson v. City of Bessemer City, 470 U.S. 564, 574 (1985) (citing United States v. Yellow Cab Co., 338 U.S. 338, 342 (1949)). Pursuant to this highly deferential standard of review, a magistrate judge is "afforded broad discretion in resolving non-dispositive disputes and reversal is appropriate only if their discretion is abused." Am. Stock Exch., LLC v. Mopex, Inc., 215 F.R.D. 87, 90 (S.D.N.Y. 2002). Thus, a party seeking to overturn or modify a discovery order bears a heavy burden.

  IV. Discussion

  A. Amendment of Pleadings

  Defendant argues that it should be granted leave to amend its answer and file a counterclaim pursuant to Rule 13(f) of the Federal Rules of Civil Procedure, which states, "When a pleader fails to set up a counterclaim through oversight, inadvertence, or excusable neglect, or when justice requires, the pleader may by leave of court set up the counterclaim by amendment." Fed.R.Civ.P. 13(f). Defendant argues that because it only learned of the basis for its proposed counterclaim late in the discovery process, it should be allowed to interpose a counterclaim at this time. (Def.'s Objection to Magistrate Judge's Den. of Mot. for Leave to Am. Answer and File Countercl. at 3-4).

  Courts must read Rule 13(f) together with Rule 15(a), which provides that leave to amend a pleading "shall be freely given when justice so requires." Fed.R.Civ.P. 15(a). See Resorts and Motel Advancement Dev. Agency, Ltd. v. Sloan, et al., 160 F.R.D. 449, 450 (S.D.N.Y. 1995); Bank of New York v. Sasson, 786 F.Supp. 349, 352 (S.D.N.Y. 1992). However, leave to amend is by no means automatic. In Foman v. Davis, 371 U.S. 178 (1962), the Supreme Court held that, "In the absence of any apparent or declared reason — such as undue delay, bad faith or dilatory motive on the part of the movant . . . undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc. — the leave sought should, as the rules require, be `freely given.'" Foman, 371 U.S. at 182. See also Cartier, Inc., et al. v. Four Star Jewelry Creations, Inc., et al., 2004 WL 169746, at *1 (S.D.N.Y. Jan. 28, 2004) (holding that "district courts may deny leave to amend in the face of undue delay, bad faith, dilatory motive, undue prejudice, repeated failure to cure deficiencies by amendments previously allowed, or futility of the amendment.")

  In Credit Suisse First Boston, the district court affirmed the magistrate's denial of defendant's motion to amend its answer and file counterclaims where the magistrate's ruling was based on the proposed motion's interference with the court's scheduling order, prejudice to the plaintiff, and unjustified delay. Credit Suisse First Boston, 2005 WL 323714, at *2. The same grounds are present in the instant case. Judge Peck found that plaintiff would be unduly prejudiced if defendant were to file its proposed counterclaim. In measuring prejudice to the non-moving party, courts consider "whether the assertion of the new claim would (i) require the opponent to expend significant additional resources to conduct discovery and prepare for trial; (ii) significantly delay the resolution of the dispute; or (iii) prevent the plaintiff from bringing a timely action in another jurisdiction." Block v. First Blood Assoc., 988 F.2d 344, 350 (2d Cir. 1993). See also A.V. By Versace, Inc. v. Gianni Versace S.p.A., 160 F.Supp.2d 657, 669-70 (S.D.N.Y. 2001). Here, Judge Peck noted that both plaintiff and defendant would require additional discovery, and held that, "The delay of additional months of discovery, followed perhaps by further summary judgment motions, would significantly delay resolution of this case, to the prejudice of [plaintiff] and the judicial process." Lyondell-Citgo Refining, LP v. Petroleos de Venezuela, S.A., 2004 WL 2650884, at *3 (S.D.N.Y. Nov. 22, 2004).

  Further, as set forth in this court's original scheduling order, the deadline for amendments to pleadings was January 16, 2004, over one year ago. Though defendant asserts that it made this motion at such a late date because it only learned of the facts that form the basis of its proposed counterclaim through a deposition that took place in early October, plaintiff argues, and Judge Peck agreed, that defendant "knew or should have known" of these facts and could have amended in a timely manner. Id.

  Judge Peck did not clearly err by denying defendant's motion after weighing the impact of the proposed motion on the court's scheduling order and the extent to which plaintiff would be prejudiced. Judge Peck properly struck a balance between defendant's concerns and plaintiff's assertion of prejudice, and he was well within his discretion to conclude as he did.

  B. Defendant's Assertion that Its Proposed Counterclaim is Compulsory

  In response to defendant's claim that it would be prejudiced if its motion is denied because its counterclaim is compulsory, Judge Peck held that the court need not decide that issue because plaintiff has stipulated that defendant can bring its proposed counterclaim in a separate action. Lyondell-Citgo Refining, LP v. Petroleos de Venezuela, S.A., 2004 WL 2650884, at *3. Defendant now argues, again, that addition of its proposed counterclaim by amendment is warranted if the court deems that the counterclaim is compulsory. The court disagrees.

  As stated above, a motion for leave to amend a pleading and assert a counterclaim is governed by Rule 13(f), which must be read in conjunction with Rule 15(a). The decision of whether to grant leave to amend is entirely within the discretion of the court. Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 330 (1971); Cartier, Inc., 2004 WL 169746, at *1. Although a liberal standard governs motions for leave to amend under Rule 15(a) and applications to interpose counterclaims by amendment under Rule 13(f), Pfeffer v. Mark, 2000 WL 516891, at *1 (S.D.N.Y. Mar. 16, 2000), courts may deny a motion for leave to amend in the face of undue delay, bad faith, dilatory motive, or undue prejudice. Cartier, Inc., 2004 WL 169746, at *1.

  The court need not reach the issue of whether defendant's proposed counterclaim is permissive or compulsory because, despite the liberal standards that govern Rule 13(f) and Rule 15(a), there are ample grounds on which to deny defendant's motion. As the court stated in Gabourel v. Bouchard Transportation Co. Inc., et al., 901 F.Supp 142 (S.D.N.Y. 1995), whether a proposed counterclaim is compulsory is just one of four factors for the court to consider in assessing a motion to add a counterclaim, the others being whether the pleader has acted in good faith and has not unduly delayed filing the counterclaim, whether undue prejudice would result to plaintiff, and whether the counterclaim raises meritorious claims. Gabourel, 901 F.Supp. at 144. See also Nordco, A.S. v. Ledes, et al., 1999 WL 1243883, at *5 (S.D.N.Y. Dec. 21, 1999); Gucci America, Inc. v. Exclusive Imports Int'l, et al., 2001 WL 21253, at *6 (S.D.N.Y. Jan. 9, 2001).

  In the instant case, defendant filed its motion for leave to amend over a year after the deadline to amend pleadings had passed, and after the close of extensive discovery. As stated above, Judge Peck found, and this court agrees, that additional months of discovery and the possibility of additional summary judgment motions would significantly delay resolution of the case and prejudice the plaintiff. Further, as plaintiff asserted and Judge Peck agreed, defendant knew or should have known of the facts that led to defendant's motion for leave to amend prior to this late date. Finally, defendant's repeated objections to Judge Peck's discovery rulings, on which this court has spoken in five previous opinions, could, taken together, be construed as evidence of defendant's stalling or otherwise delaying this litigation. Judge Peck did not clearly err in denying defendant's motion for leave to amend its answer and file a counterclaim, and this court therefore affirms Judge Peck's decision.

  V. Conclusion:

  Based on the broad discretion afforded magistrate judges when resolving non-dispositive disputes, this court finds that Magistrate Judge Peck was well within his discretion by resolving defendant's motion for leave to amend its answer and file a counterclaim as he did. Magistrate Judge Peck's opinion and order of November 22, 2004 is therefore hereby affirmed over defendant's objections.

  SO ORDERED.

20050412

© 1992-2005 VersusLaw Inc.



Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.