Stone v. Olderbak Georgetown/Willows LLC

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEBRASKA

MICHELLE STONE,

Plaintiff, 8:23CV26

vs.

ORDER ON DEFENDANT’S

OLDERBAK GEORGETOWN/WILLOWS OBJECTIONS TO MAGISTRATE

LLC, JUDGE’S ORDER

Defendant.

This case originally involved allegations of discriminatory housing practices implicating

the Fair Housing Act (FHA), 42 U.S.C. § 3601 et seq., the Nebraska Fair Housing Act (NFHA),

Neb. Rev. Stat. § 20–301 et seq., and the Municipal Code for the City of Lincoln, Nebraska

(LMC). See generally Filing 1 (original complaint); Filing 8 (first amended complaint). United

States Magistrate Judge Susan M. Bazis entered an Order, Filing 40, granting Plaintiff’s Motion

for Leave to Amend First Amended Complaint (Motion to Amend), Filing 26, to assert claims of

retaliation in violation of the FHA, 42 U.S.C. § 3617, and the NFHA, Neb. Rev. Stat. § 20-344.

Filing 40 at 2; Filing 41 (Second Amended Complaint). This case is now before the Court on

Defendant’s Statement of Objections to that Order. Filing 42. For the reasons stated below,

Defendant’s Objections are overruled.

I. INTRODUCTION

In Plaintiff’s Amended Complaint, Plaintiff alleged that during her tenancy at Willows

Apartments, which is owned by Defendant, she was discriminated against on the basis of

disability. See Filing 8. The Court entered a Memorandum and Order dismissing Plaintiff’s

claims to the extent that they were premised upon conduct that allegedly occurred before May

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11, 2020, because such claims are barred by the applicable statute of limitations. Filing 19 at 14.

Defendant then filed its Answer and a Counterclaim alleging that Plaintiff breached the lease

agreement between the parties by failing to pay move-out charges and fees on which Defendant

seeks an award of $1,263.49. Filing 20 at 8. In an Answer and Affirmative Defenses to

Defendant’s Counterclaim, Plaintiff denied Defendant’s Counterclaim and alleged that

Defendant’s Counterclaim is discriminatory and in retaliation for her attempt to enforce her

rights under federal, state, and local fair housing laws. Filing 21 at 3.

Subsequently, Plaintiff filed a Motion for Leave to Amend First Amended Complaint,

Filing 26, to add claims of retaliation in violation of the FHA, 42 U.S.C. § 3617, Filing 27-4 at

10 (¶ 58.a.) (redlined version of proposed Second Amended Complaint), and the NFHA, Neb.

Rev. Stat. § 20-344. Filing 27-4 at 11 (¶ 65.a.). The retaliation claims are based on allegations

that Plaintiff was assessed baseless move-out charges and fees and that Defendant’s

Counterclaim seeking to recover those charges and fees is a “sham” brought in bad faith and with

retaliatory motive to coerce, threaten, and intimidate Plaintiff into dropping her fair housing

claims. Filing 27-4 at 8–9 (¶¶ 53–56).

Although Defendant opposed the Motion to Amend on the basis of futility under the

Noerr-Pennington doctrine, see generally Filing 32, Judge Bazis granted it, Filing 40 at 3. In her

Order granting leave to amend, before embarking on her analysis, Judge Bazis summarized

Defendant’s arguments that the proposed amendment should be denied on the basis of futility, as

follows:

Defendant argues Plaintiff’s proposed claims would not survive a motion to

dismiss because its right to assert its Counterclaim is protected by the Noerr-

Pennington doctrine, which “immunizes acts related to the constitutional right to

petition the courts for a grievance, unless the act is a mere sham.” Castro-Jaques

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v. Lang-Nelson Assocs., Inc., No. 18-CV-3376, 2020 WL 13609938, at *6 (D.

Minn. Jan. 3, 2020). Defendant further asserts Plaintiff’s proposed amendment

fails to plausibly allege an adverse action by Defendant or that there is a causal

connection between any adverse action and a protected activity.

Filing 40 at 3.

Judge Bazis’s analysis of Plaintiff’s Motion to Amend consisted of the following:

Having considered the matter, the Court will grant Plaintiff leave to

amend. Plaintiff’s proposed amended complaint contains plausible allegations

and, importantly, the issue of whether Plaintiff will or will not prevail on her

claims “should be determined on the merits rather than as part of a motion to

amend.” Doyle v. Eli Lilly & Co., No. 8:06CV412, 2008 WL 215802, at *2 (D.

Neb. Jan. 24, 2008). “Likelihood of success on the new claim or defenses is not a

consideration for denying leave to amend unless the claim is clearly frivolous.”

Becker v. Univ. of Neb., 191 F.3d 904, 908 (8th Cir. 1999). See also Gamma-10

Plastics, Inc. v. Am. President Lines, 32 F.3d 1244, 1255 (8th Cir. 1994) (stating

that a motion to amend should be dismissed on the merits “only if it asserts

clearly frivolous claims or defenses”). At this stage in the proceedings, the Court

cannot conclude that Plaintiff’s proposed claims are clearly frivolous. Plaintiff’s

proposed claims are relatively fact-dependent, and it would be inappropriate to

evaluate their merit in a motion to amend. See, e.g. Butler v. Sundo Cap., LLC,

559 F. Supp. 3d 452 (W.D. Pa. 2021); Castro-Jaques, No. 18-CV-3376, 2020 WL

13609938, at *11. Additionally, Plaintiff filed her motion within the time

established by the Progression Order and there is no indication Defendant will be

prejudiced by allowing Plaintiff to amend at this time.

Filing 40 at 3.

Defendant now asserts the following objections to Judge Bazis’s Order:

1. The January 18, 2024 Order erroneously concluded that

“Plaintiff’s proposed amended complaint contains plausible allegations and,

importantly, the issue of whether Plaintiff will or will not prevail on her claims

‘should be determined on the merits rather than as part of a motion to amend.’”

[Doc. No. 40 at 3].

2. The January 18, 2024 Order failed to apply the applicable legal

standard and failed to determine whether the allegations in the proposed amended

complaint were sufficient to withstand a motion to dismiss pursuant to Rule

12(b)(6) of the Federal Rules of Civil Procedure.

3. The January 18, 2024 Order erroneously granted Plaintiff’s Motion

for Leave to Amend First Amended Complaint.

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Filing 42 at 1.

II. LEGAL ANALYSIS

A. Applicable Standards

1. Standard of Review

A district court may refer a nondispositive “pretrial matter” to “a magistrate judge to hear

and determine.” 28 U.S.C. § 636(b)(1)(A); Fed. R. Civ. P. 72(a). A magistrate judge’s ruling on

a motion for leave to amend is such a determination on a nondispositive pretrial matter. Daley v.

Marriott Int’l, Inc., 415 F.3d 889, 893 n.9 (8th Cir. 2005). The opposing party must object to the

magistrate judge’s ruling to maintain the ability to appeal that ruling. See Devine v. Walker, 984

F.3d 605, 608 (8th Cir. 2020) (explaining that “we lack jurisdiction when a party fails to object

to a magistrate judge’s pretrial order and tries to appeal anyway” and citing cases); see also Fed.

R. Civ. P. 72(a) (“A party may not assign as error a defect in the [nondispositive] order not

timely objected to.”).

“A district court may reconsider a magistrate judge’s ruling on nondispositive pretrial

matters where it has been shown that the ruling is clearly erroneous or contrary to law.”

Ferguson v. United States, 484 F.3d 1068, 1076 (8th Cir. 2007) (citing 28 U.S.C.

§ 636(b)(1)(A)); see also Fed. R. Civ. P. 72(a) (“The district judge in the case must consider

timely objections and modify or set aside any part of the order that is clearly erroneous or is

contrary to law.”). In other words, “[a]s long as [a party] filed objections . . . the district court

ha[s] no choice but to consider them.” Devine, 984 F.3d at 607.

This Court has previously explained the applicable standard of review as follows:

The Eighth Circuit Court of Appeals has explained that a finding of fact is

clearly erroneous “only when [the court is] left with a ‘definite and firm

conviction that a mistake has been committed.’” United States v. Gray, 59 F.4th

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329, 332 (8th Cir. 2023) (quoting United States v. U.S. Gypsum Co., 333 U.S. 364,

395, 68 S.Ct. 525, 92 L.Ed. 746 (1948)); Doe v. United States, 58 F.4th 955, 963

(8th Cir. 2023) (explaining that findings are not clearly erroneous when

“[v]iewing the record as a whole, ‘[the court is] not left with the definite and firm

conviction that a mistake has been committed.’”) (quoting United States v. Finley,

612 F.3d 998, 1003 (8th Cir. 2010)). “An order is contrary to law if it fails to

apply or misapplies relevant statutes, case law, or rules of procedure.” Haviland v.

Catholic Health Initiatives-Iowa, Corp., 692 F. Supp. 2d 1040, 1043 (S.D. Iowa

2010) (internal quotation marks omitted).

Benson v. City of Lincoln, 343 F.R.D. 595, 607 (D. Neb. 2023).

Where the Court’s review is prompted by objections to a magistrate judge’s order

granting leave to amend a pleading, the Court turns to the standards applicable to amendment of

pleadings.

2. Standards for Leave to Amend

If a party seeks leave to amend more than twenty-one days after the opposing party has

filed an answer—as is the situation here—that party “may amend its pleading only with the

opposing party’s written consent or the court’s leave,” but “[t]he court should freely give leave

when justice so requires.” Fed. R. Civ. P. 15(a)(2). As the Eighth Circuit Court of Appeals has

explained, even though Rule 15(a)(2) states a liberal standard for leave to amend, “denial of

leave to amend may be justified by undue delay, bad faith on the part of the moving party,

futility of the amendment or unfair prejudice to the opposing party.” Nuevos Destinos, LLC v.

Peck, 999 F.3d 641, 646 n.4 (8th Cir. 2021) (quoting United States ex rel. Joshi v. St. Luke’s

Hosp., Inc., 441 F.3d 552, 557–58 (8th Cir. 2006)); Hillesheim v. Myron’s Cards & Gifts, Inc.,

897 F.3d 953, 955 (8th Cir. 2018). Thus, even if a motion to amend is filed before the deadline in

a scheduling order, that does not require the court to grant the motion. Rather, “the scheduling

order merely prescribes the date by which all such motions ‘shall be filed’; the date on the

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scheduling order does not confine the district court’s consideration of the merits of such motions

and does not preclude it from finding that an amendment would result in prejudice.” Moses.com

Sec., Inc. v. Comprehensive Software Sys., Inc., 406 F.3d 1052, 1066 (8th Cir. 2005).

In response to Plaintiff’s Motion to Amend, Defendant asserted that the proffered

amendment was futile. See generally Filing 32. “[W]hen the court denies leave on the basis of

futility, it means the district court has reached the legal conclusion that the amended complaint

could not withstand a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil

Procedure.” Munro v. Lucy Activewear, Inc., 899 F.3d 585, 589 (8th Cir. 2018) (quoting

Cornelia I. Crowell GST Tr. v. Possis Med., Inc., 519 F.3d 778, 782 (8th Cir. 2008)). To decide

whether the proposed amendment would withstand such a motion to dismiss, the court must take

the factual allegations in the amended complaint as true and afford the non-moving party all

reasonable inferences from those allegations. Id. The court must then decide if the amended

pleading states “sufficient factual matter, accepted as true, to state a claim to relief that is

plausible on its face.” Hillesheim, 897 F.3d at 955 (quoting In re Pre-Filled Propane Tank

Antitrust Litig., 860 F.3d 1059, 1063 (8th Cir. 2017) (en banc), in turn quoting Ashcroft v. Iqbal,

556 U.S. 662, 678 (2009)).

B. Defendant’s Objections

On a party’s objections to a magistrate judge’s ruling on a nondispositive matter, the

district court must decide whether the ruling was “clearly erroneous or contrary to law.” Fed. R.

Civ. P. 72(a); Ferguson, 484 F.3d at 1076 (citing 28 U.S.C. § 636(b)(1)(A)). As explained

below, Defendant asserts both kinds of errors in Judge Bazis’s Order on Plaintiff’s Motion to

Amend, but the Court is not persuaded that there was any error.

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1. The Order Is Not Contrary to Law

Although framed as an “erroneous[ ] conclusion,” part of Defendant’s first objection

asserts an error of law. Specifically, Defendant’s first objection is in part that Judge Bazis’s

Order stated that “whether Plaintiff will or will not prevail on her claims ‘should be determined

on the merits rather than as part of a motion to amend.’” Filing 42 at 1. Defendant’s second

objection is more explicitly based on legal error because it asserts that Judge Bazis’s Order

“failed to apply the applicable legal standard and failed to determine whether the allegations in

the proposed amended complaint were sufficient to withstand a motion to dismiss pursuant to

Rule 12(b)(6) of the Federal Rules of Civil Procedure.” Filing 42 at 2. These objections are

overruled.

First, the Court finds that, Judge Bazis’s statement of the general Rule 15(a)(2) standards

is consistent with the Court’s own statement of those standards set out above. Compare § II.A.2.

(stating that leave to amend must be freely given but may be justified by undue delay, bad faith

on the part of the moving party, futility of the amendment or unfair prejudice to the opposing

party (citing Fed. R. Civ. P. 15(a)(2); Nuevos Destinos, LLC, 999 F.3d at 646 n.4; Hillesheim,

897 F.3d at 955)), with Filing 40 at 2 (same (citing Fed. R. Civ. P. 15 and Amrine v. Brooks, 522

F.3d at 833)). Thus, these challenged statements in the Order did not fail to apply applicable

standards by instead stating inapplicable standards. See Benson, 343 F.R.D. at 607 (explaining

“contrary to law” as failing to apply or misapplying applicable standards).

Even to the extent that Judge Bazis stated that whether Plaintiff will or will not prevail on

her claims “should be determined on the merits rather than as part of a motion to amend,” Filing

40 at 3, the Court cannot find that was a statement of inapplicable standards. Benson, 343 F.R.D.

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at 607. That standard was drawn from Doyle v. Eli Lilly & Co., No. 8:06CV412, 2008 WL

215802 (D. Neb. Jan. 24, 2008), which recognized that “the underlying purpose of Rule 15 [is] to

facilitate decision on the merits rather than on the pleadings or technicalities.” 2008 WL215802,

at *2 (quoting Sharper Image Corp. v. Target Corp., 425 F. Supp. 2d 1056 (N.D. Cal. 2006)).

That statement is also a correct formulation of the law. See Foman v. Davis, 371 U.S. 178, 182

(1962) (stating that Rule 15(a)(2) reflects the “principle that the purpose of pleading is to

facilitate a proper decision on the merits” (quoting Conley v. Gibson, 355 us 41, 48 (1957)).

Interestingly, in its brief, Defendant does not base any objection on use of a standard

concerned with facilitating a decision on the merits. See generally Filing 43. Instead, Defendant

relies on the somewhat different ground that Judge Bazis “appeared to ultimately apply a stricter

standard” than futility of a claim that could not withstand a motion to dismiss. Filing 43 at 2.

Defendant identified Judge Bazis’s “stricter standard” as stating that “‘[l]ikelihood of success on

the new claim or defenses is not a consideration for denying leave to amend unless the claim is

clearly frivolous,’ and holding that ‘[a]t this stage in the proceedings, the Court cannot conclude

that Plaintiff’s proposed claims are clearly frivolous.’” Filing 43 at 2 (quoting Filing 40 at 3).

The Court notes that the Eighth Circuit Court of Appeals does not appear to have reiterated this

standard in the quarter century since the later decision that Judge Bazis cited. See Filing 40 at 3

(citing Becker v. Univ. of Neb., 191 F.3d 904, 908 (8th Cir. 1999), and Gamma-10 Plastics, Inc.

v. Am. President Lines, 32 F.3d 1244, 1255 (8th Cir. 1994)). On the other hand, neither has the

Eighth Circuit repudiated or reversed that standard. The Court cannot hold that the Order used an

inapplicable standard, i.e., failed to apply the correct standard. Benson, 343 F.R.D. at 607.

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It appears to the Court that Defendant’s first objection based on legal error bleeds into its

second one, where both assert that the Order failed to apply the applicable legal standard,

meaning the standard for denying leave to amend based on futility. Defendant expressly asserts

in its second objection that Judge Bazis “failed to determine whether the allegations in the

proposed amended complaint were sufficient to withstand a motion to dismiss pursuant to Rule

12(b)(6) of the Federal Rules of Civil Procedure.” Filing 42 at 2; Filing 43 at 2–3. Defendant

points out that this Rule 12(b)(6) standard requires assessment of whether the claim is plausible

on its face based on the facts alleged. Filing 43 at 3–4. However, Judge Bazis explicitly

recognized the applicability of this standard. See Filing 40 at 2. She stated, “When the court

denies leave on the basis of futility, it means the district court has reached the legal conclusion

that the amended complaint could not withstand a motion to dismiss under Rule 12(b)(6) of the

Federal Rules of Civil Procedure.” Filing 40 at 2 (quoting Hintz v. JPMorgan Chase Bank, N.A.,

686 F.3d 505, 511 (8th Cir. 2012)). Judge Bazis then applied the “plausible pleading” standard

asserted by Defendant by holding, “Having considered the matter, the Court will grant Plaintiff

leave to amend. Plaintiff’s proposed amended complaint contains plausible allegations.” Filing

40 at 3.

2. The Order Is Not Clearly Erroneous

Part of Defendant’s first objection and Defendant’s third objection assert that the Order is

clearly erroneous. Specifically, the first part of the first objection is that “[t]he January 18, 2024

Order erroneously concluded that ‘Plaintiff’s proposed amended complaint contains plausible

allegations. . . .’” Filing 42 at 1 (quoting Filing 40 at 3). Defendant’s third objection is that “[t]he

January 18, 2024 Order erroneously granted Plaintiff’s Motion for Leave to Amend First

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Amended Complaint.” Filing 42 at 1. The crux of Defendant’s argument in support of both

Objections—as in its Opposition to Plaintiff’s Motion to Amend, Filing 32 at 6–9—is that

Plaintiff has not plausibly pleaded that Defendant’s Counterclaim was a “sham” excepting it

from the protection of the Noerr-Pennington doctrine. See Filing 43 at 5–8. These objections are

overruled.

While the Court might believe that the factual allegations supporting the Second

Amended Complaint’s new retaliation claims are weaker than Judge Bazis thinks they are, the

Court cannot find that her conclusion that the supporting allegations make the claims plausible

was clearly erroneous. See Kingman v. Dillard’s, Inc., 643 F.3d 607, 613 (8th Cir. 2011)

(explaining that the possibility of a different result does not establish that the result is clearly

erroneous). By asserting that Plaintiff plausibly pleaded retaliation claims, Filing 40 at 3, Judge

Bazis necessarily concluded that the retaliation claims are based on plausible allegations that

except Defendant’s counterclaim from the protection of the Noerr-Pennington doctrine despite

Defendant’s contrary argument, Filing 43 at 4–7. In other words, Judge Basis necessarily

concluded that Plaintiff plausibly pleaded that she was assessed baseless move-out charges and

fees and that Defendant’s Counterclaim seeking to recover those charges and fees is a “sham”

brought in bad faith and with retaliatory motive to coerce, threaten, and intimidate Plaintiff into

dropping her fair housing claims. This Court agrees with Judge Bazis that allegations in the

Second Amended Complaint, Filing 41 at 5 (¶¶ 29–32), 8–9 (¶¶ 53–56), provide plausible factual

grounds for the inference that Defendant’s Counterclaim was a “sham” excepting it from the

protection of the Noerr-Pennington doctrine. See Munro, 899 F.3d at 589 (explaining that an

amended complaint is futile if it could not withstand a motion to dismiss under Rule 12(b)(6));

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Hillesheim, 897 F.3d at 955 (explaining that to state a claim, the amended pleading must state

sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face);

see also Inline Packaging, LLC v. Graphic Packaging Int'l, LLC, 962 F.3d 1015, 1028 (8th Cir.

2020) (explaining the requirements of the “sham” exception to the protection of the Noerr-

Pennington doctrine providing immunity from claims that are based on the filing of lawsuits). In

other words, the Court is not “left with a ‘definite and firm conviction that a mistake has been

committed.’” Benson, 343 F.R.D. at 607 (quoting Gray, 59 F.4th at 332).

il. CONCLUSION

Upon the foregoing,

IT IS ORDERED that

1. Defendant’s objections to United States Magistrate Judge Susan M. Bazis’s Order

granting Plaintiffs Motion for Leave to Amend First Amended Complaint, as set out in

Defendant’s Statement of Objections to the Magistrate Judge’s Order, Filing 42, are overruled;

and

2. United States Magistrate Judge Susan M. Bazis’s Order granting Plaintiffs

Motion for Leave to Amend First Amended Complaint, Filing 40, is affirmed.

Dated this 1st day of March, 2024.

BY THE COURT:

BC fs

BrianC. Buescher

United States District Judge

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