United States District Court, S.D. New York
June 6, 2005.
OFFICIAL COMMITTEE OF ASBESTOS CLAIMANTS OF G-I HOLDING, INC., Plaintiff,
SAMUEL J. HEYMAN, Defendant.
The opinion of the court was delivered by: ROBERT SWEET, Senior District Judge
Plaintiffs the Official Committee of Asbestos Claimants of G-I
Holdings, Inc. (the "Committee") and the Legal Representative of
Present and Future Holders of Asbestos-Related Demands (the
"Legal Representative") have moved to amend their complaint to
add as defendants the Heyman Holdings Associates Limited
Partnership ("HHA"), Heybldg Associates LLC ("Heybldg") and the
Annette Heyman Foundation (the "Foundation") to their claims for
avoidance of a fraudulent transfer, for recovery of the proceeds
of the transfer pursuant to 11 U.S.C. § 550(a), and for breach of
fiduciary duty, restitution, and unjust enrichment. The defendant
Samuel J. Heyman ("Heyman") has opposed the motion on the grounds
that it violates the scheduling orders of the court, is without
good cause, and would prejudice him. For the reasons set forth
below, the motion is granted, and a pretrial conference will be
held to determine the schedule for further proceedings.
The Committee filed this action in September 2001 as the
authorized representative of the bankruptcy estate of G-I
Holdings, Inc., formerly known as GAF Corporation ("G-I" or the
On July 24, 2002, this Court entered a scheduling order,
setting forth a schedule that had been negotiated and agreed to
by the parties. On September 16, 2002, the last date established by
that order for adding parties or amending pleadings, the
Committee filed a motion for leave to amend its original
complaint for the purpose, inter alia, of adding HHA,
Heybldg, and Heyman Joint Ventures ("HJV") as defendants. Shortly
after this motion to amend was filed, the Third Circuit issued a
decision holding that a creditors committee was not authorized to
pursue a fraudulent conveyance action on behalf of a debtor
estate. See Official Comm. of Unsecured Creditors of
Cybergenics Corp. v. Chinery, 304 F.3d 316 (3d Cir. 2002)
In light of Cybergenics I, the Committee withdrew its motion
to amend and entered into a tolling agreement on November 7, 2002
with Heyman, HJV, HHA, Heybldg and certain other Heyman
On November 19, 2002, two months after issuance of the
Cybergenics I decision, the Third Circuit vacated the decision
pending en banc review. See Official Comm. of Unsecured
Creditors of Cybergenics Corp. v. Chinery, 310 F.3d 785 (3d Cir.
2002). The Third Circuit subsequently issued an en banc
opinion on May 29, 2003, reversing Cybergenics I. See
Official Comm. of Unsecured Creditors of Cybergenics Corp. v.
Chinery, 330 F.3d 548 (3d Cir.), cert. denied sub nom.,
Chinery v. Official Comm. of Unsecured Creditors of Cybergenics
Corp., 540 U.S. 1002 (2003). On April 18, 2003, counsel for the Committee advised Heyman
that it had come to the Committee's attention that the Foundation
had received shares of a GAF subsidiary, International Specialty
Products ("ISP"), that had initially been distributed in the 1997
transactions. On May 14, 2003, the Committee and the Foundation
entered into a tolling agreement. This tolling agreement was
terminable at will by either party.
On June 17, 2003, the Legal Representative moved to intervene
in this action. This motion was granted on November 25, 2003.
On September 19, 2003, Heyman filed a motion to transfer this
action to the District of New Jersey. This motion was denied on
March 23, 2004.
On May 17, 2004, the Court entered an amended scheduling order
that was negotiated and agreed to by the parties.
The instant motion by the plaintiffs to amend the complaint was
filed on November 15, 2004, and it was heard and marked fully
submitted on February 16, 2005. The Proposed First Amended Complaint
The Proposed First Amended Complaint ("PFAC") includes: four
new fraudulent conveyance claims against HHA under section 544(b)
of New York's Debtors and Creditors Law based on HHA's initial
receipt of ISP shares in the 1997 transactions; claims under
11 U.S.C. § 550(a)(2) alleging that Heyman and the Heyman entities
were subsequent transferees of ISP stock distributed in the 1997
transactions; and new causes of action based on theories of
unjust enrichment and restitution against each of the Connecticut
Counts I-IV of the PFAC set forth the same intentional and
constructive transfer theories as are pleaded in the original
complaint. Counts VI and VII replead two claims for common law
restitution based on unjust enrichment and breach of fiduciary
duty without making any substantive changes to the nature or
specific allegations of those claims. Plaintiffs seek to add HHA
as a defendant to Counts I-IV and HHA, Heybldg and the Foundation
to Counts VI and VII.
The original pleading included, in the prayer for relief, a
demand for recovery of the ISP shares pursuant to
11 U.S.C. § 550(a). The proposed amendment asserts this demand as a distinct
count (Count V). Additional sources of derivative standing added in the PFAC,
the IRS, the New Jersey Department of Environmental Protection,
and the environmental authorities of other states, and the Port
Authority of New York and New Jersey, were previously identified
in the May 2002 initial disclosures by the Committee.
The Standard For Amendment
Motions to file amended pleadings are governed by Fed.R. Civ.
P. 15(a), which provides in pertinent part that "a party may
amend the party's pleading . . . by leave of court . . . and
leave shall be freely given when justice so requires."
Fed.R.Civ.P. 15(a). The Supreme Court has articulated the following
criteria concerning Rule 15(a) motions:
If the underlying facts or circumstances relied upon
by a plaintiff may be a proper subject of relief, he
ought to be afforded an opportunity to test his claim
on the merits. In the absence of any apparent or
declared reason such as undue delay, bad faith or
dilatory motive on the part of the movant, repeated
failure to cure deficiencies by amendments previously
allowed, 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 v. Davis, 371 U.S. 178
, 182 (1962). The Second Circuit,
citing Foman, has stated that "it is rare that such leave
should be denied, . . . especially when there has been no prior
amendment." Ricciuti v. N.Y.C. Transit Auth., 941 F.2d 119
(2d Cir. 1991) (internal citation omitted). The Proposed Amendment Does Not Violate The Scheduling Order
Rule 16(b), Fed.R.Civ.P., provides in pertinent part that
"the district judge . . . shall . . . enter a scheduling order
that limits the time . . . to join other parties and to amend the
pleadings. . . . A schedule shall not be modified except upon a
showing of good cause and by leave of the district judge. . . ."
Heyman has argued that pursuant to Rule 16(b), all amendments
were required to be filed by the September 16, 2002 deadline
established by the July 24, 2002 scheduling order and allegedly
reaffirmed in the May 17, 2004 amended scheduling order.
However, Paragraph 2(a) of November 7, 2002 tolling agreement
permitted the Committee to withdraw its first motion to amend
without prejudice to the filing of a later motion to amend or to
the filing of another motion to add additional Heyman entities as
defendants. The May 22, 2003 tolling agreement entered into by
the Foundation and the Committee did not limit or otherwise
address Plaintiffs' ability to file motions to amend the
complaint. Rather, it merely tolled the statute of limitations.
Both tolling agreements were terminable at will and remain in
effect. The May 17, 2004 amended scheduling order did not modify
Paragraph 2(a) of the November 7, 2002 tolling agreement or
contain any provision with respect to amendment. Under the November 7, 2002 tolling agreement, the instant
motion to amend is not precluded by the scheduling order of July
24, 2002. The instant motion is, in effect, the renewed motion
contemplated by those agreements.
Finally, it should be noted that the PFAC states that the
transfer of the ISP shares to the Foundation did not take place
until December 5, 2002 nearly three months after the September
16, 2002 deadline had allegedly expired. (See PFAC ¶ 41.)
The Delay Does Not Bar The Amendment
Heyman has argued that the pendency of this action has had a
deleterious effect on the value of ISP. The Plaintiffs concede
the delay but seek to charge it in part to the tactics of Heyman
with respect to discovery.
In this Circuit "delay alone would be insufficient to defeat a
motion to amend" to add defendants. See U.S. For And On Behalf
of Maritime Admin. v. Continental Illinois Nat. Bank and Trust
Co. of Chicago, 889 F.2d 1248, 1254 (2d Cir. 1989) (stating that
"delay, standing alone, is an insufficient basis to deny leave to
amend [pursuant to Rule 15(a)]"); see also Middle Atlantic
Utilities Co. v. S.M.W. Dev'p. Corp., 392 F.2d 380, 384 (2d Cir.
1968). Heyman has cited Republic Nat'l Bank v. Hales,
75 F. Supp. 2d 300, 308 (S.D.N.Y. 1999), where this Court noted that "`[t]he
longer the period of an unexplained delay, the less will be
required of the nonmoving party in terms of a showing of
prejudice.'" Id. (quoting Block v. First Blood Assocs.,
988 F.2d 344, 350 (2d Cir. 1993)). However, the motion to amend was
granted in part in Republic, noting that delay alone was not a
sufficient reason to deny the defendant's motion to amend his
answer. Id. at 318.
In fact, under the present scheduling order, dispositive
motions are to be completed by the fall of 2005 and under the
circumstances of this action, that schedule should not be
affected by this amendment. The delay does not warrant denial of
the Plaintiffs' motion.
The Prejudice To Heyman Does Not Defeat The Amendment
To demonstrate prejudice under Rule 15(a), Heyman must
establish that the amendment 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
Associates, 988 F.2d 344, 350 (2d Cir. 1993). Even accepting Heyman's contention that the Committee has
brought this action for a strategic purpose (i.e., to create
leverage in negotiations relating to the G-I bankruptcy), the
Legal Representative, which is separately represented, is a
co-plaintiff and co-representative of G-I's estate. Moreover, as
bankruptcy fiduciaries, both the Committee and the Legal
Representative have a duty to pursue claims brought on behalf of
the estate. Furthermore, although Heyman claims that the PFAC
will fundamentally change and expand this litigation, a review of
the PFAC establishes that the action remains fundamentally
Based on the foregoing, although this action and the amendment
continue to cloud this issue of ownership of ISP, it is
determined that Heyman has failed to demonstrate prejudice that
would bar the amendment. The defense of the PFAC will not require
substantial additional resources, nor will it delay the
resolution of the action. Conclusion
Plaintiffs' motion for leave to file an amended complaint is
granted. The First Amended Complaint shall be served within
twenty (20) days of entry of this opinion.
It is so ordered.
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