MEMORANDUM OPINION AND ORDER
Plaintiffs' motion for leave to amend is granted.
Plaintiffs' claims against State Street fall into two groups: (1) pre-contractual misrepresentation claims; and (2) contract and other tort claims. The pre-contractual claims are based on allegations that State Street misrepresented the characteristics of the Limited Duration Bond Fund ("LDBF") to induce plaintiffs to enter an "Agreement of Trust" permitting State Street to invest plaintiffs' funds in the LDBF. The contract and other tort claims, collectively referred to here as "post-contractual claims," are based on allegations that State Street mismanaged the LDBF after plaintiffs had invested in it. The proposed Third Amended Complaint would add one pre-contractual cause of action (a claim under the Texas Securities Act ("TSA")), while also deleting a pre-contractual cause of action (fraud) and two post-contractual causes of action (breach of contract and breach of trust). Although the Third Amended Complaint slightly amplifies some of the underlying misrepresentation allegations, the pleading's main innovation is to change the formal causes of action, not the underlying allegations.
State Street argues that leave to amend should be denied for undue delay because plaintiffs filed the motion on January 27, 2010, two months after the official close of fact discovery on November 10, 2010.
Leave to amend must be granted "freely . . . when justice so requires." Fed. R. Civ. Proc. 15(a)(2). In some circumstances, courts deny leave where a party delays inexcusably in seeking to amend, but only if the delay also causes prejudice to the opposing party. Touchtunes Music Corp. v. Rowe Intern. Corp., 07 Civ. 11450 (RWS), 2010 WL 1904326, at *2 (S.D.N.Y. 2010); see MacDraw, Inc. v. CIT Group Equip. Financing, Inc., 157 F.3d 956, 962(2d Cir. 1998). Here, State Street has not shown that the amendment will cause it prejudice. Plaintiffs demonstrated in their opening brief that the elements of the proposed TSA claim overlap in all relevant respects with the elements of the other pre-contractual claims (fraudulent inducement and negligent misrepresentation), such that the new claim will not require further discovery. State Street does not respond to this argument in any of its three briefs, nor does it explain any other plausible theory of prejudice.*fn1 Accordingly, plaintiffs' delay is not grounds for denying leave to amend.
State Street also argues the TSA claim is futile because the Third Amended Complaint does not allege any misrepresentations with the specificity required by Rule 9(b).
"Where a party opposes leave to amend on 'futility' grounds, the appropriate legal standard is whether the proposed [amendment] fails to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure." Ratcliffe v. Pradera Realty Co., 2007 WL 3084977, at *4 (S.D.N.Y. Oct. 19, 2007); Kassner v. 2nd Ave. Delicatessen, Inc., 496 F.3d 229, 244 (2d Cir. 2007); Segatt v. GSI Holding Corp., 2008 WL 4865033, at *3 (S.D.N.Y. Nov. 3, 2008) (If the party seeking leave to amend "'is unable to demonstrate that he would be able to amend his [pleading] in a manner which would survive dismissal, opportunity to replead is rightfully denied.'") (quoting Hayden v. County of Nassau, 180 F.3d 42, 53 (2d Cir. 1999)).
State Street's futility argument is perplexing for two procedural reasons. First, the misrepresentation allegations underlying the TSA claim also form the basis for the fraud and negligent misrepresentation claims, which plaintiffs have asserted since the outset of the case. It is unclear why State Street challenges the sufficiency of those allegations now, in the context of the TSA claim, after having proceeded through discovery on the other pre-contractual claims without raising a similar challenge to the pleadings. Second, in briefing this motion, State Street did not attack the sufficiency of the misrepresentation allegations in its opposition papers (even though it had received the proposed Third Amended Complaint), but instead waited until its proposed sur-reply to do so.
The Court is intrigued, but it need not determine the consequences of these procedural miscues because plaintiffs have submitted a "hypothetical fourth amended complaint" that cures the pleading deficiencies identified in State Street's sur-replies. Whereas the proposed Third Amended Complaint probably fails to describe any specific misrepresentation with the requisite detail (i.e., the "who, what, where, when, and why" required under Rule 9(b)), the hypothetical fourth version amply describes numerous alleged misstatements. ( E.g., Fourth Am. Compl. ¶¶ 11-14 (August 2004 presentation); ¶ 16 (holdings report); ¶¶ 18-21 (November 2004 presentation and fact sheet).) In light of these proposed amendments, the Court finds that the TSA claim is not futile.
For the foregoing reasons, plaintiffs' motion for leave to amend  is granted. Plaintiffs are directed to file their amended pleading within fourteen days of this order. Within fourteen days of that filing, the parties are directed to submit a joint letter stating their views as to what effect, if any, the amendments have upon the pending summary judgment motions.
State Street's motion for leave to file a sur-reply is denied as moot.*fn2