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IN THE UNITED STATES COURT OF FEDERAL CLAIMS
?LOUISE RAFTER, JOSEPHINE RATTIEN, STEPHEN RATTIEN, and PERSHING SQUARE CAPITAL MANAGEMENT, L.P.,
Plaintiffs,
v.
THE UNITED STATES OF AMERICA,
Defendant,
FEDERAL NATIONAL MORTGAGE ASSOCIATION and FEDERAL HOME LOAN MORTGAGE CORPORATION
Nominal Defendants.
Case No. 14-740C
Judge Margaret M. Sweeney
ORAL ARGUMENT REQUESTED
PLAINTIFFS’ MOTION FOR LEAVE TO FILE AN AMENDED COMPLAINT
Plaintiffs Louise Rafter, Josephine and Stephen Rattien, and Pershing Square Capital Management, L.P. (“Plaintiffs”), file this Motion for Leave to File an Amended Complaint pursuant to Rule 15 of the Rules of the United States Court of Federal Claims (“RCFC”). A copy of the Proposed Amended Complaint is attached to this Motion as Exhibit 1. Plaintiffs have conferred with counsel for the United States of America (the “United States” or the “Government”), who has indicated that they were not able to respond today. Plaintiffs will promptly update the Court if the Government’s consent is obtained.
BACKGROUND
Plaintiffs filed their Complaint against the United States on August 14, 2014, asserting two causes of action: (1) a claim under the takings clause of the Fifth Amendment; and (2) a derivative claim on behalf of the Federal National Mortgage Association (“Fannie Mae”) and
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the Federal Home Loan Mortgage Corporation (“Freddie Mac,” and collectively, the “Companies”) for implied breach of contract. Complaint, ECF No. 1. Plaintiffs’ claims arise out of an August 2012 amendment to a senior preferred stock purchase agreement between each Company and Treasury (the “Government Preferred Stock”), replacing the 10% coupon on the Government Preferred Stock with quarterly dividends which stripped the Companies of their entire net worth.
On October 10, 2014, this Court granted the Government’s motion for an extension of time to respond to Plaintiffs’ Complaint to within 60 days after the close of jurisdictional discovery in Fairholme Funds, Inc. et al. v. United States, No. 13-465C, (Fed. Cl.). See October 10, 2014 Order, ECF No. 9. Under this Court’s Order in Fairholme, jurisdictional discovery is currently scheduled to be completed on September 4, 2015. See July 9, 2015 Order, Fairholme, No. 13-465C, ECF No. 193. Accordingly, Defendant has until November 3, 2015 to respond to the Complaint. No discovery has been conducted in this case.
On August 14, 2015, Plaintiffs filed the Proposed Amended Complaint, styled as the “Amended Verified Complaint,” pursuant to Rule 15(a)(1)(B) of the Rules of the Court of Federal Claims. The Proposed Amended Complaint continues to assert a direct takings claim by all Plaintiffs, but eliminates the claim for implied breach of contract. It also adds derivative takings and illegal exaction claims on behalf of Fannie Mae, as well as direct claims for breach of contract, based on more detailed allegations concerning the same facts and circumstances alleged in the Original Complaint. See Exhibit 1.
On August 17, 2015, this Court issued an Order striking the Amended Verified Complaint stating that “ecause more than twenty-one days have passed since the filing of their original complaint, plaintiffs must provide defendant’s written consent to the amendment, or file
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a motion to amend the complaint, pursuant to Rule 15(a)(2) of the Rules of the United States Court of Federal Claims.” Aug. 17, 2015 Order, ECF No. 15. The Court further instructed Plaintiffs that they “may refile their amended complaint with defendant’s written consent, or may submit a motion to file an amended complaint.” Id. As set forth above, the Government’s response to Plaintiffs’ request for consent to file the Proposed Amended Complaint is pending.
ARGUMENT1
A. PLAINTIFFS’ MOTION FOR LEAVE TO AMEND SHOULD BE GRANTED
RCFC 15(a)(2) provides that the court should “freely give[] leave when justice so requires.” In Foman v. Davis, 371 U.S. 178 (1962), the Supreme Court addressed the relevant considerations involved in deciding motions to amend pursuant to Rule 15 of the Federal Rules of Civil Procedure2:
In the absence of any apparent or declared reason — such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc. — the leave sought should, as the rules require, be “freely given.”
Id. at 182.
Further, while the granting or denial of a motion to amend is within the sound discretion
of the Court, a “a court ought to exercise liberally its discretion to grant leave to amend,” Cebe Farms, Ind. v. United States, No. 05-965C, 2012 WL 294666, at *1 (Fed. Cl. Jan. 31, 2012) (Sweeney, J.) (granting leave to amend). See also Joint Venture of Comint Sys. Corp. and Eyeit.com, Inc. v. United States, 100 Fed. Cl. 170, 171 (2011) (Sweeney, J.) (Foman declares
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quoted material in this brief, except as indicated.
Emphasis has been added to, and internal quotations, brackets and citations omitted from,
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15(a), and consequently application of FED. R. CIV. P. 15(a) is highly persuasive in this court.”
“The text of RCFC 15(a) mirrors, in all pertinent respects, that found in FED. R. CIV. P. Katzin v. United States, 115 Fed. Cl. 618, 620 (2014).
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that leave to amend “shall be freely given when justice so requires: this mandate is to be heeded;” granting leave to amend). Thus, “f the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits.” Foman, 371 U.S. at 182. See also Joint Venture, 100 Fed. Cl. at 172 (“there is no reason why NetServices should not be freely given leave to file a second amended complaint”). Here, the Proposed Amended Complaint fully satisfies this standard.
1. The Proposed Amended Complaint Will Not Cause Any Prejudice
The Government will suffer no prejudice as a result of the Proposed Amended Complaint. A non-moving party claiming prejudice must demonstrate “that it will be severely disadvantaged or incapable of presenting facts or evidence with regard to the issues at hand.” Veridyne Corp. v. United States, 86 Fed. Cl. 668, 680 (2009). See also Anaheim Gardens v. United States, No. 93-655C, 2011 WL 4090899, at *6 (Fed. Cl. Sept. 14, 2011) (finding no prejudice, and granting leave, where amendment will not cause any “unfair surprise to the opposing party, unreasonably broaden the issues, or require additional discovery”). No evidence of any disadvantage to the Government is remotely present here.
The Proposed Amended Complaint is based on the same facts and circumstances as Plaintiffs’ original Complaint — challenging the August 2012 amendment to the Government Preferred Stock — and thus does not broaden the scope of fact discovery. See Veridyne, 86 Fed. Cl. 681 (allowing the Government to amend to plead new claims based on previously asserted allegations). Indeed, courts routinely permit amended pleadings to assert new claims based on new allegations where discovery is not complete and the cost of any additional discovery did not “substantiate the level of prejudice needed to overcome the liberal standard of RCFC 15(a)(2).” Id. See also Grand Acadian Inc. v. United States, No. 07-849 C, 2008 WL 4597131, at *1 (Fed.
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Cl. Oct. 9, 2008) (granting leave to amend answer where “plaintiff does not dispute that defendant’s Motion is timely and that it will not cause plaintiff undue prejudice”). Here, issue has yet to be joined and discovery has not even commenced. See October 10, 2014 Order, ECF No. 9.
Nor will the Proposed Amended Complaint prevent the Government from responding adequately to the new claims because this Court’s October 10, 2014 Order, which gives the Government’s until “sixty days after the completion of [still ongoing] jurisdictional discovery in Fairholme” to respond to Plaintiff’s complaint. Id. Accordingly, there remains more than ample time for the Government to respond adequately to the amended pleading and to conduct appropriate discovery. See Meyer Grp., Ltd. v. United States, 115 Fed. Cl. 645, 650 (2014) (finding no “ndue prejudice,” and granting leave to amend complaint after denial of summary judgment motion where plaintiff gave notice of potential counterclaims in cross motion for summary judgment).
Accordingly, allowing Plaintiffs to amend their complaint will not prejudice the Government.
2. No Undue Delay, Dilatory Motive or Bad Faith by Plaintiffs
The Proposed Amended Complaint will not cause any delay, much less undue delay. See State of Alaska v. United States, 15 Cl. Ct. 276, 280 (1988) (“mere delay, without some showing of prejudice, bad faith, or futility is insufficient to deny a motion to amend a complaint”); Block v. First Blood Assocs., 988 F.2d 344, 350 (2d Cir. 1993) (“Mere delay, . . . absent a showing of bad faith or undue prejudice, does not provide a basis for a district court to deny the right to amend.”). There has been no delay whatsoever in seeking leave to file the Proposed Amended Complaint, let alone any evidence of bad faith or ill motive. To the contrary, the proposed
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amendment comes at a very early stage in the case — only a year after the original Complaint was filed, well before the Government must file any responsive pleading or motion, and before the parties have even begun to conduct discovery. See e.g., Joint Venture, 100 Fed. Cl. at 172 (granting leave to file second amended complaint when Defendant and defendant-intervenors had not yet responded to first amended complaint). Courts have historically allowed leave to amend at much later points in litigation. See, e.g., Katzin v. United States, 115 Fed Cl. 618, 621 (2014) (no undue delay where “case itself is less than two years old, and basic discovery is still underway, although fact discovery has closed within the past few days); Meyer Grp., 115 Fed. Cl. at 649 (holding delay in amending until 12 months after defendant’s original answer and six months after plaintiff’s amended complaint “insufficient by itself to warrant denial of leave to amend” and granting leave to amend); Tommaseo v. United States, 80 Fed. Cl. 366, 373 (2008) (“the timing of the Second Amended Complaint, approximately two years after filing the October 17, 2005 Complaint, is not excessive”).
3. The Proposed Amended Complaint Is Not Futile
Nor can Plaintiffs’ Proposed Amended Complaint be denied on the basis of futility. “[A] plaintiff seeking to overcome an argument that the filing of an amended complaint would be futile need only establish that its proposed amendment states a claim on which relief could be granted and offer sufficient facts supporting the amended pleading that the claim could survive a dispositive pretrial motion.” Savantage Fin. Servs., Inc. v. United States, 119 Fed. Cl. 246, 252 (2014) (granting leave to file amended complaint). See also Centech Grp., Inc. v. United States, 78 Fed. Cl. 658, 661 (2007) (granting leave to amend and holding that “futility ... requires the Court to determine that the proposed amendment is ... so wholly and patently lacking in merit that it cannot possibly succeed”). The Government bears “the burden to show futility.” Mead v.
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City First Bank of DC, N.A., 256 F.R.D. 6, 7-8 (D.D.C. 2009) (granting leave to amend where defendant “has not carried its burden of establishing ... futil[ity.]”). See also Dave v. District of Columbia, 811 F.Supp. 2d 111, 118 (D.D.C. 2011) (“defendant bears the burden of proving the futility of the proposed claims”).
Here, in the Fairholme action involving certain related claims, this Court specifically held that the complaint could not be dismissed at the early stages of the litigation pursuant to a RCFC 12(b)(6) motion before plaintiffs had an opportunity to conduct certain discovery “relevant to the disputed factual issues about Fannie and Freddie’s solvency and the reasonableness of expectations about their future profitability, as well as . . . why the government allowed the preexisting capital structure and stockholders to remain in place, and whether this decision was based on the partial expectation that Fannie and Freddie would be profitable again in the future.” Feb. 26, 2015 Order, at 4, Fairholme, No. 13-465C (Fed. Cl.) (ECF. No. 32). Because similar discovery issues preclude dismissal of Plaintiffs’ Proposed Amended Complaint, amendment is not futile.3
B. DEFENDANTSHAVENOTFILEDARESPONSIVEPLEADING,ANDPLAINTIFFSMAY AMEND “AS A MATTER OF COURSE” WITHOUT LEAVE OF THE COURT
In any event, Plaintiffs respectfully submit that, under Rule 15(a)(1)(B), Plaintiffs have the right to file their amended pleading “as a matter of course,” without Defendant’s consent or leave of this Court. Under RCFC 15(a)(1)(B), a “party may amend its pleadings once as a matter of course within . . . [,] if the pleading is one to which a responsive pleading is required, 21 days after service of a responsive pleading or 21 days after service of a motion [to dismiss.]” Because
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high burden, Plaintiffs respectfully reserve the right to respond further in a reply brief.
Should the Government oppose this motion on futility grounds and attempt to meet this 7
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the Government has not filed any responsive pleading or motion in this case, the Proposed Amended Complaint falls within the time frame authorized by Rule 15(a)(1)(B).
Prior to its amendment in 2009, Federal Rule of Civil Procedure 15(a) stated that a “party may amend the party’s pleading once as a matter of course at any time before a responsive pleading is served.” Rather than change this rule, the 2009 amendment clarified that a party may file an amended pleading “to which a responsive pleading is required” (e.g., a complaint) up to 21 days after a responsive pleading. The Advisory Committee made this clear: the “right to amend once as a matter of course is no longer terminated by service of a responsive pleading.” FED. R. CIV. P. 15(a), Advisory Committee’s Notes to 2009 Amendment. See also Charles Alan Wright et al., 6 Fed. Prac. & Proc. Civ. § 1483 (“The right to amend [as a matter of course] no longer is terminated by the service of a responsive pleading. Instead, Rule 15(a) ... extends the right to amend as a matter of course.”); 61A Am. Jur. 2d Pleading § 704 (Rule 15(a)(1)(B) “has been changed in two ways: first, the right to amend once as a matter of course terminates 21 days after service of a motion under the specified provisions; and second, the right to amend once as a matter of course is no longer terminated by service of a responsive pleading”).4 Accordingly, Courts have consistently held that under Rule 15, as amended in 2009, a party has the right to amend once without leave of court before a responsive pleading is filed. See, e.g., Villery v. Dist. of Colum., 277 F.R.D. 218, 219 (D.D.C. 2011) (“A complaint is a pleading to which a responsive pleading is required. Therefore, under Rule 15(a)(1)(B), a party has an absolute right to amend
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?RCFC 15(a)(1)(A), which permits a party to file an amended pleading once as a matter of course “21 days after service of the pleading,” refers to pleadings to which a responsive pleading is not allowed (e.g., an answer or answer to counter-claim). See Fed. R. Civ. P. 15(a), Advisory Committee’s Notes to 2009 Amendment (“Finally, amended Rule 15(a)(1) extends from 20 to 21 days the period to amend a pleading to which no responsive pleading is allowed and omits the provision that cuts off the right if the action is on the trial calendar.”).
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its complaint at any time from the moment the complaint is filed until 21 days after the earlier of the filing of a responsive pleading or a motion under Rule 12(b), (e), or (f).”).5
Moreover, even if the Government’s consent, or leave of the Court, is now required to file the Proposed Amended Complaint before the Government files a responsive proceeding, given Plaintiffs’ undisputed right to amend its pleading up to “21 days after service of a responsive pleading . . . or motion [to dismiss],” there can be no conceivable prejudice to the Government if leave to amend is permitted before responsive papers are filed.
CONCLUSION
For the foregoing reasons, Plaintiffs respectfully request that this Court grant its motion for leave to file the Proposed Amended Complaint attached hereto.
?See also Souffrance v. Warden, Lebanon Corr. Inst., No. 1:09-CV-217, 2011 WL 463096, at *4 (S.D. Ohio Feb. 4, 2011); (“[U]nder Rule 15, a party has a right to amend once before a responsive pleading is filed.”); In re Legal Xtranet, Inc., No. 11-51042-LMC, 2011 WL 3652756, at *2 (Bankr. W.D. Tex. Aug. 19, 2011) (“In short, Rule 15(a) allows a party to amend its pleading once as a matter of course until 21 days after a responsive pleading or Rule 12(b), (e), or (f) motion is served, or within 21 days if the party's earlier pleading required no response.”); Nunn v. Hunt, No. 5:11-CT-3227-BO, 2013 WL 2468349, at *1 (E.D.N.C. June 7, 2013) (“a party may amend his complaint once as a matter of right at any time before a responsive pleading is served”); Rosin v. Thaler, 417 F. App'x 432, 434 (5th Cir. 2011) (Plaintiff “was entitled to amend his pleading once as a matter of right because the respondent had not yet filed a responsive pleading.”); Haddix v. Burris, No. C-12-1674 EMC PR, 2013 WL 2950655, at *2 (N.D. Cal. June 14, 2013) (“Haddix had a right to amend his complaint once without leave of court because no responsive pleading or motion had yet been filed.”).
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Case 1:14-cv-00740-MMS
Document 16 Filed 08/17/15 Page 10 of 10
Dated: August 17, 2015
Respectfully submitted,
/s/ Gregory P. Joseph Gregory P. Joseph Counsel of Record
Of Counsel
Mara Leventhal Sandra M. Lipsman Christopher J. Stanley Gregory O. Tuttle
JOSEPH HAGE AARONSON LLC 485 Lexington Avenue, 30th Floor New York, New York 10017
Tel. (212) 407-1200
Fax (212) 407-1280 Email: gjoseph@jha.com
Counsel for Plaintiffs
?767497
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