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Chao v. Magnuson

June 12, 2008


The opinion of the court was delivered by: David E. Peebles U.S. Magistrate Judge


On October 11, 2006 plaintiff Elaine L. Chao, the Secretary of the United States Department of Labor, commenced this action against various individuals involved to varying degrees in the administration of an employee pension benefit plan, alleging their violation of obligations imposed under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), 29 U.S.C. §1001 et seq. The action results from an investigation into practices surrounding administration of the plan upon which the claims are focused, initiated by the Secretary several years ago.

In November of 2007, the plaintiff moved for leave to amend her complaint in this action. Plaintiff's motion, which was filed well after the deadline for amendment of pleadings under the court's case management scheduling order had passed, and on the eve of the close of fact discovery, sought, inter alia, leave to interpose a course of action alleging that by their actions, the defendants had engaged in prohibited transactions in violation of sections 406(a) and 407(a) of ERISA -- a claim which has been asserted by the plaintiffs in a separate but related action, Fiduciary Counselors, Inc. v. Magnusen, et al.,Civil Action No. 5:03-CV-1060 (NAM/DEP) (the "FCI litigation") as early as December 29, 2003.

While the Secretary's motion for leave to amend was granted, in part, based chiefly upon the lack of opposition by the defendants, the portion seeking permission to add a fourth cause of action, alleging violations of sections 406(a) and 407(a) of ERISA, was denied in light of the lateness of the motion and the fact that to avoid prejudice to the defendants, in the event of amendment, the court would have been required to extend the governing schedule in the case in the event of amendment.

Plaintiff now seeks reconsideration of that denial, arguing that it represents both a clear error of law and results in manifest injustice. For the reasons set forth below, plaintiff's motion is denied.


Preceded by a multi-year investigation dating back to October of 2001, and the filing on August 26, 2003 of the FCI litigation, the Secretary commenced this suit on October 11, 2006 asserting various violations growing out of defendants' management and administration of the Agway Inc. Employees' 401(k) Thrift Investment Plan. While plaintiff's initial complaint did not include a claim under sections 406(a) and 407(a) of ERISA, addressing the defendants' acquisition and holding of Agway Money Market Certificates ("MMCs") in the plan, it paralleled the claims asserted in the FCI complaint in most other respects.

Since inception of this action, the court has held several conferences with the parties concerning its progress, including an in-person conference conducted pursuant to Rule 16 of the Federal Rules of Civil Procedure on February 23, 2007, as well as telephone conferences held on April 5, 2007, June 21, 2007, September 20, 2007, and November 14, 2007. Following the initial Rule 16 conference a Uniform Pretrial Scheduling Order was issued by the court on February 23, 2007 establishing certain deadlines pertaining to the action, including the requirement that amended pleadings or motions for leave to amend be filed by July 31, 2007, and that fact discovery be completed on or before September 28, 2007. Dkt. No. 31.

In light of a request made during the status conference held on June 21, 2007, the controlling deadlines in the case were adjusted and an amended text scheduling order was issued resulting in an extension of the deadline for amendment of pleadings until October 1, 2007, together with a corresponding extension of fact discovery to November 30, 2007.*fn1 See Dkt. Minute Entry dated 6/28/07. At the time, the parties were advised by the court, both orally and in writing, that this would be a final extension of the deadlines and that "no further extensions will be granted absent extenuating circumstances." Id.

During the November 14, 2007 telephone conference the Secretary requested permission to file a motion for leave to amend her complaint in this action to interpose additional ERISA claims. That motion was subsequently filed on November 27, 2007. Dkt. No. 43. Following the submission of opposition papers by the defendants, in which they did not oppose certain facets of the plaintiff's motion for leave to amend, oral argument was conducted on January 16, 2008 regarding the application as well as a pending discovery-related motion. At the close of argument I rendered a bench decision granting the motion to amend, in part, but denying plaintiff's application for leave to include the proposed fourth claim for relief asserting violation of sections 406(a) and 407 of ERISA in her amended complaint. That determination was memorialized by short form order issued by the court on January 18, 2008. Dkt. No. 52.


On January 28, 2008, plaintiff filed a motion for reconsideration of the court's denial of her motion for leave to amend. Dkt. No. 53. In her motion, plaintiff asserts that the prior order represents clear error, and results in a manifest injustice. Plaintiff's reconsideration motion focuses heavily upon the question of whether defendants would be prejudiced by the amendment, asserting, inter alia, that the claims sought to be added are not barred by the applicable statute of limitations. Plaintiff also maintains she should have been permitted to add at least a portion of the proposed fourth claim for relief since defendants' objection was voiced to only the part of the claim related to violation of section 407(a). Defendants have since submitted papers in opposition to the motion, arguing both that the requisite standard for reconsideration has not been met, and that in any event the court's initial determination was correct. Dkt. Nos. 59, 60.


A. Reconsideration ...

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