United States District Court, S.D. New York
OPINION AND ORDER
KATHERINE POLK FAILLA, District Judge.
Defendant Nestle Waters Management & Technology objects to Magistrate Judge Henry Pitman's Order dated January 21, 2014, denying Nestle's motion to amend its Answer and Counterclaims. Judge Pitman did not clearly err in denying Nestle's motion and so his Order is affirmed.
A. Factual Background
The lengthy history of the relationship and dispute between the parties is only partially relevant to this motion and so the Court will not set it out in full here. In short, Nestle contracted with Plaintiff Eastman Chemical Company from 2007 through 2009, and again from 2010 through 2013, to supply certain resin products to Nestle and its affiliated entities for manufacturing purposes. (Am. Compl. ¶ 6). Eastman maintains in this litigation that Nestle breached its contract with Eastman through certain alleged deceptive and abusive negotiating practices. ( Id. at ¶¶ 28-41). Nestle disclaims any such liability (Def. Answer ¶¶ 28-41), and counterclaims fraud and fraudulent inducement against Eastman regarding its representations during negotiation of the contracts and fulfillment of its contractual obligations (Def. Counterclaims ¶¶ 20-40).
The Court entered an Order of Reference to a Magistrate Judge on September 9, 2011, referring this case to Magistrate Judge Henry Pitman for general pretrial purposes (including non-dispositive pretrial motions), as well as for a report and recommendation on any dispositive motion. (Dkt. #19).
B. The Instant Dispute
On December 23, 2013, Nestle moved to amend its Answer and Counterclaims by adding a third counterclaim against Eastman for breach of contract. (Dkt. #90-92). As Judge Pitman put it in his oral order denying Nestle's motion, "[t]he claim here is basically the claim of an aggrieved buyer for cover damages, that is[, ] the difference between the contract price and the... price the aggrieved buyer paid or the allegedly aggrieved buyer paid for conforming goods to substitute for the nonconforming goods that the seller offered." (1/17/14 Tr. 51:25-52:5).
Eastman opposed (Dkt. #95-96, 98) and Nestle filed a reply in further support of its motion (Dkt. #93-94). The parties appeared for oral argument before Judge Pitman on January 17, 2014, where Judge Pitman denied Nestle's motion to amend, based on both Rule 15 and Rule 16 of the Federal Rules of Civil Procedure, from the bench in an oral Order. (Dkt. #101). He memorialized this decision in a written Order four days later. (Dkt. #100). Nestle filed objections to that Order on February 4, 2014 (Dkt. #106), and Eastman responded to those objections on February 14, 2014 (Dkt. #108).
A. Applicable Law
1. The Standard of Review
The Second Circuit has suggested, though it has not explicitly held, that a motion to amend is a nondispositive motion and thus district courts must subject the orders of magistrate judges respecting such motions to clear error review. Fielding v. Tollaksen, 510 F.3d 175, 178 (2d Cir. 2007); see Bridgeport Music, Inc. v. Universal Music Grp., Inc., 248 F.R.D. 408, 410 (S.D.N.Y. 2008) ("[T]he weight of opinion appears to favor treating... rulings [denying motions to amend the pleadings] as nondispositive."); see also Sokol Holdings, Inc. v. BMB Munai, Inc., No. 05 Civ. 3749 (KMW) (DCF), 2009 WL 3467756, at *4 (S.D.N.Y. Oct. 28, 2009) (collecting cases); but cf. Wilson v. City of New York, No. 06 Civ. 229 (ARR) (VVP), 2008 WL 1909212, at *3 (E.D.N.Y. Apr. 30, 2008) ("Courts in this Circuit are divided on the issue of whether, and under what circumstances, motions to amend a pleading are dispositive or nondispositive."). Some courts in this Circuit have concluded that it is appropriate to treat a motion to amend as dispositive when the magistrate judge decided it based on "a substantive evaluation of the proposed claims, " Sokol Holdings, 2009 WL 3467756, at *4 n.2 (collecting cases), such as on the basis of the futility of the proposed amendment, Dais v. Lane Bryant, Inc., No. 97 Civ. 2011 (PKL) (RLE), 2000 WL 145755, at *1 (S.D.N.Y. Feb. 8, 2000), while other grounds for denying a motion to dismiss should receive "clearly erroneous" review, Wilson, 2008 WL 1909212, at *4.
In light of the Second Circuit's strong indications and the weight of authority from courts within the Circuit, the Court concludes that motions to amend should generally be reviewed as nondispositive. This standard of review is especially justified where, as here, denial of leave to amend was based on procedural issues like failure to comply with a scheduling order and prejudicial delay. See Sokol Holdings, 2009 WL 3467756, at *4 ("Here, the Magistrate Judge's denial of leave to amend is based on a procedural violation - to wit, non-compliance with a scheduling order without a showing of good cause' - rather than a substantive determination on the merit of Plaintiffs' claims. The specific circumstances of the instant motion and the weight of opinion in this Circuit suggest that application of the clearly erroneous' standard of review is appropriate."). Accordingly, the Court will review Judge Pitman's ruling here for clear error.
2. Motions to Amend
Rule 16(b) of the Federal Rules of Civil Procedure requires a court to issue a scheduling order to "limit the time to join other parties, amend the pleadings, complete discovery, and file motions." Fed.R.Civ.P. 16(b)(1), (b)(3)(A). Once a schedule is imposed under Rule 16, it "may be modified only for good cause and with the judge's consent." Fed.R.Civ.P. 16(b)(4). "A finding of good cause depends on the diligence of the moving party." Grochowski v. Phoenix Const., 318 F.3d 80, 86 (2d Cir. 2003). Courts considering motions to amend "also may consider other relevant factors including, in particular, whether allowing the amendment of the pleading at this stage of the litigation will prejudice [the non-moving party]." Kassner v. 2nd Ave. Delicatessen Inc., 496 F.3d 229, 244 (2d Cir. 2007). Rule 16(b) is designed, at least in part, "to offer a measure of certainty in pretrial proceedings, ensuring that at some point both the parties and the pleadings will be fixed." Parker v. Columbia Pictures Indus., 204 F.3d 326, 339-40 (2d Cir. 2000) (internal quotation marks omitted).
In the absence of a valid scheduling order, the parties are subject to the more "lenient standard of Rule 15(a), " Grochowski, 318 F.3d at 86, which provides that a court "should freely give leave [to amend] when justice so requires." Fed.R.Civ.P. 15(a)(2). "When determining whether to grant leave to amend, district courts consider: (i) whether the party seeking the amendment has unduly delayed; (ii) whether that party is acting in good faith; (iii) whether the opposing party will be prejudiced; and (iv) whether the amendment will be futile." Baez v. Delta ...