DN Reynoldsburg, LLC v. Shoe Show Inc

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF OHIO

EASTERN DIVISION

DN REYNOLDSBURG, :

: Case No. 2:18-cv-1190

Plaintiff, :

: JUDGE ALGENON L. MARBLEY

v. :

: Magistrate Judge Jolson

SHOE SHOW, INC., :

:

Defendant. :

OPINION & ORDER

This matter comes before the Court on Defendant Shoe Show, Inc.’s June 19, 2019

appeal (ECF No. 30) of the Magistrate Judge’s June 7, 2019 Opinion and Order granting Plaintiff

DN Reynoldsburg’s Motion for Leave to File First Amended Complaint (ECF No. 26). This

Court hereby REVERSES the Opinion and Order and DENIES Plaintiff’s Motion for Leave to

File First Amended Complaint based on an independent consideration of the analysis therein.

Defendant’s Motion to Extend the Deadline for Defendant’s Responsive Pleading to Plaintiff’s

Amended Complaint (ECF No. 32) is MOOT.

I. BACKGROUND

Plaintiff rented retail space to Defendant pursuant to a lease contract (“the lease”) in

October 2015. (ECF No. 3 at ¶ 5). The lease required Defendant to make regular monthly rent

payments of $10,833.33. Id. at ¶ 6. However, under Section 15.2 of the lease, paying this rent

was only required if the “opening condition” was met. (ECF No. 30-5 at 2). The opening

condition was for Sports Authority, TJ Maxx, and Maurices to be open in the mall within one

year of Defendant’s store opening. Id. Within this one-year window, Defendant would pay

Plaintiff five percent of gross sales instead of rent until Sports Authority, TJ Maxx, and Maurices

opened. Id. If any one of those stores did not open in the shopping center within the one-year

window, then Defendant could terminate the lease and leave. Id. Sports Authority did not open

within the one-year window so Defendant did not pay the full rent during that time. (ECF No. 3

at ¶ 7).

Plaintiff filed suit in the Franklin County Court of Common Pleas on September 9, 2018,

alleging that Defendant had breached the lease by not paying the full rent. (ECF No. 3).

Defendant removed the matter to this Court on October 5, 2018. (ECF No. 1). This Court issued

a scheduling order on November 9, 2018 setting the deadline for amendments to the Complaint

on November 30, 2018. (ECF No. 11). The parties jointly moved to extend scheduling

deadlines on March 1, 2019 (ECF No. 15) and the Court issued an order granting the motion on

March 4, 2019 (ECF No. 16). The new deadlines generated in that order did not include a new

deadline for leave to amend the complaint. (ECF No. 15). Plaintiff moved to amend its

complaint on April 29, 2019, arguing that it was not aware that Defendant would be raising the

opening condition defense until Defendants filed responses to interrogatories in March 2019 and

that it wanted to assert a claim for declaratory judgment on the “unenforceable penalty” (as it

called the opening condition). (ECF No. 18). In its response, Defendant argued that the defense

came from the plain language of the contract and that Plaintiff should already have been aware of

it and thus had not shown good cause for amending after the deadline to do so passed. (ECF No.

19). The Magistrate Judge granted Plaintiff’s motion to file an amended complaint on June 7,

2019, agreeing with Plaintiff that it was unaware of the opening condition defense before it was

mentioned in Defendant’s responses to interrogatories. (ECF No. 26). Defendant appealed the

Magistrate Judge’s Order, arguing that counsel for Defendant had mentioned the opening

condition defense to Plaintiff’s counsel in a letter dated November 29, 2017. (ECF No. 30).

Plaintiff filed a Response on July 3, 2019, arguing that Defendant had not clearly established the

opening condition as a defense prior to the start of the litigation. (ECF No. 35). The matter is

ripe for review.

II. STANDARD OF REVIEW

A district judge will reverse a magistrate judge’s non-dispositive order if it is “clearly

erroneous or is contrary to the law.” FED. R. CIV. P. 72(a). In evaluating magistrate judges’

decisions, district judges often exhibit substantial deference. See Siegler v. City of Columbus,

No. 2:12-cv-472 2014 WL 1096159, *1 (S.D. Ohio Mar. 19, 2014) (quoting In re Search

Warrants Issued Aug. 29, 1994, 889 F.Supp. 296, 298 (S.D. Ohio 1995)). The district judge may

reverse the magistrate judge’s decision as being clearly erroneous “only when the reviewing

court is left with a definite and firm conviction that a mistake has been committed.” Id. (citing

Heights Cmty. Cong. v. Hilltop Realty Inc., 774 F.2d 135, 140 (6th Cir. 1985)). On review, a

district judge may consider evidence first presented after the magistrate judge has filed his or her

decision. Banner v. City of Flint, 99 F. App'x 29, 35 (6th Cir. 2004).

III. LAW AND ANALYSIS

Although Federal Rule of Civil Procedure 15(a) governs amendments to the pleadings,

when, as here, a motion to amend is brought after the deadline set within the court’s scheduling

order, a party must satisfy the standards of both Rule 15(a) and 16(b)(4). Carrizo (Utica) LLC v.

City of Girard, Ohio, 661 F. App’x 364, 367 (6th Cir. 2016) (citing Leary v. Daeschner, 349

F.3d 888, 909 (6th Cir. 2003)). “Once the scheduling order’s deadline to amend the complaint

passes, . . . a plaintiff first must show good cause under Rule 16(b) for failure earlier to seek

leave to amend and the district court must evaluate prejudice to the nonmoving party before a

court will [even] consider whether amendment is proper under Rule 15(a).” Commerce Benefits

Grp. Inc. v. McKesson Corp, 326 F. App’x 369, 376 (6th Cir. 2009) (internal quotation marks

and citation omitted) (emphasis added); cf. Johnson v. Metro. Gov’t of Nashville & Davidson

Cnty., Nos. 10-6102 & 11-5174, 2012 WL 4945607, at *17 (6th Cir. Oct. 18, 2012) (“Rule 15 is

augmented by Rule 16, which states that the generally wide latitude to amend may be restricted

by the court’s other scheduling orders.”).

Under Rule 16(b)(4), the Court will modify a case scheduling “only for good cause . . . .”

Fed. R. Civ. P. 16(b)(4). The party seeking modification of the case schedule has the “obligation

to demonstrate ‘good cause’ for failing to comply with the district court’s scheduling order . . . .”

Pittman ex rel. Sykes v. Franklin, 282 F. App’x 418, 425 n.5 (6th Cir. 2008). In determining

whether good cause exists, the primary consideration “is the moving party’s diligence in

attempting to meet the case management order’s requirements.” Commerce, 326 F. App’x at 377

(internal quotation marks and citation omitted); see also Leary, 349 F.3d at 906 (quoting 1983

advisory committee notes to Fed. R. Civ. P. 16) (“But a court choosing to modify the schedule

upon a showing of good cause, may do so only ‘if it cannot reasonably be met despite the

diligence of the party seeking the extension.’”). Finally, the Court must also consider “potential

prejudice to the nonmovant . . . .” Leary, 349 F.3d at 909. Even if an amendment would not

prejudice the nonmoving party, a plaintiff must still provide good cause for failing to move to

amend by the Court’s deadline. Korn v. Paul Revere Life Ins. Co., 382 F. App’x 443, 450 (6th

Cir. 2010); see also Wagner v. Mastiffs, Nos. 2:08-cv-431, 2:09-cv-0172, 2011 WL 124226, at

*4 (S.D. Ohio Jan. 14, 2011) (“[T]he absence of prejudice to the opposing party is not equivalent

to a showing of good cause.”).

If the proponent of a belated amendment demonstrates good cause under Rule 16(b)(4), a

court will then evaluate the proposed amendment under Rule 15(a). Commerce, 326 F. App’x at

376. Pursuant to Rule 15(a), the Court should freely grant a party leave to amend his or her

pleadings “when justice so requires.” Fed. R. Civ. P. 15(a). Rule 15(a) sets forth “a liberal

policy of permitting amendments to ensure the determination of claims on their merits.” Oleson

v. United States, 27 F. App’x 566, 569 (6th Cir. 2001) (internal quotations omitted). As the

Sixth Circuit has noted, “[f]actors that may affect [a Rule 15(a)] determination include undue

delay in filing, lack of notice to the opposing party, bad faith by the moving party, repeated

failure to cure deficiencies by previous amendment, undue prejudice to the opposing party, and

futility of the amendment.” Seals v. Gen. Motors Corp., 546 F.3d 766, 770 (6th Cir. 2008). In

determining prejudice, the Court examines “whether the assertion of the new claim would:

require the opponent to expend significant additional resources to conduct discovery and prepare

for trial; significantly delay the resolution of the dispute; or prevent the plaintiff from bringing a

timely action in another jurisdiction.” Phelps v. McLellan, 30 F.3d 658, 662–63 (6th Cir. 1994).

The Magistrate Judge erred by concluding that Plaintiff could not have reasonably

anticipated Defendant’s invoking the opening condition as a defense because Plaintiffs had been

informed of Defendant’s intent to use the opening condition as a defense as early as November

2017. Before the magistrate, Plaintiff argued that there was good cause to amend the complaint

even though the deadline to amend had long passed because it had only learned of Defendant’s

intent to use the opening condition defense for the first time in the March 22, 2019

interrogatories. (ECF No. 21 at 1-2). The Magistrate Judge accepted this argument, finding that

the defense was sufficiently sophisticated that Plaintiff could not have anticipated it based on a

reading of the lease alone. (ECF No. 26 at 5).

On appeal, however, Defendant presents a copy of a letter from Defendant’s general

counsel to Plaintiff’s counsel dated November 29, 2017 that states Defendant will not be paying

full rent because Plaintiff failed to open Sports Authority as called for in in Section 15.2 of the

contract. (ECF No. 30-5). Defendant did not include this letter in any of its pleadings prior to

the appeal and, thus, the Magistrate Judge did not have access to it when making her decision.

This letter disproves Plaintiff’s assertion that it was unaware of the opening condition defense

until it was brought forward for the first time in Defendant’s responses to interrogatories.

This Court is entitled to exercise its discretion to consider the newly submitted letter

where there is good cause for revisiting a matter. Banner v. City of Flint, 99 F. App'x 29, 35 (6th

Cir. 2004) (finding that a district court is not forbidden from taking new evidence in non-

dispositive matters after a decision has been given by a magistrate judge and that this power

arises from the inherent power of the court); Brown v. Tellermate Holdings Ltd., No. 2:11-CV-

1122, 2015 WL 12991208, at *2 (S.D. Ohio July 8, 2015) (determining that when reviewing both

dispositive and non-dispositive matters, courts have the discretion to consider new evidence

when reviewing objections to a magistrate judge’s decision, but declining to exercise this

discretion). Good cause exists to revisit this matter because Plaintiff has misrepresented its

knowledge of the time when it first learned of Defendant’s intent to bring this defense. It is clear

from the November 2017 letter that Plaintiff was given notice of Defendant’s intent to assert this

defense as early as November 29, 2017. (ECF No 30-5).

Plaintiff made no other arguments to show good cause for not filing within the deadline

and therefore must be denied leave to file an amended complaint. Because the Court has found

that good cause has not been established as a threshold matter, it need not discuss the issue of

prejudice.

IV. CONCLUSION

For the reasons discussed above, the Court REVERSES the Magistrate Judge’s decision

and DENIES Plaintiff’s Motion to File a First Amended Complaint.

IT IS SO ORDERED.

s/Algenon L. Marbley

ALGENON L. MARBLEY

UNITED STATES DISTRICT JUDGE

DATED: September 6, 2019