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April 9, 1985


The opinion of the court was delivered by: William T. Hart, District Judge.


Presently before the court is UNR's motion for leave to file a second amended complaint. This motion was filed one month after this court's opinion of November 30, 1984, 607 F. Supp. 855, (N.D.Ill. 1984) ("November 30 Opinion") which, among other things, dismissed the antitrust claims (counts 1 and 2) of UNR's first amended complaint. Other counts in UNR's complaint seek recovery for the same conduct complained of in those dismissed counts, but the November 30 Opinion had the effect of removing the only federal-law claims and the possibility of recovering treble damages.

UNR's second amended complaint would add three new counts, all based on the same set of facts and against the same defendants. Proposed count 1, a revised version of the previously dismissed count 1,*fn1 claims that section 1 of the Sherman Act, 15 U.S.C. § 1, was violated when UNR was prevented from participating as a consumer in the insurance market by a conspiracy between three of UNR's insurers and Corroon and Black ("C & B"), UNR's insurance broker at the relevant times. Proposed count 2 alleges that those same acts violated the RICO statute, 18 U.S.C. § 1961-1968, because they constituted a scheme to defraud UNR which was conducted at least in part through mail and wire communication in violation of the mail and wire fraud laws, 18 U.S.C. § 1341 and 1343. Finally, proposed count 15 alleges C & B's misconduct described in proposed count 1 violated the Illinois Consumer Fraud and Deceptive Business Practices Act, Ill.Rev.Stat. ch. 121½, par. 262.

I. Standards Governing Request to Amend

Rule 15(a) of the Federal Rules of Civil Procedure provides that when a party seeks leave to amend a pleading "leave shall be freely given when justice so requires." In Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962), the Court stated:

  [T]his mandate is to be heeded. If 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. 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.'

Here, defendants assert that three factors — undue delay, undue prejudice, and futility of amendment — each are present and any one of them sufficient to deny leave to amend. UNR claims, and defendant C & B apparently concedes, that undue delay is not a sufficient reason by itself but must be accompanied by undue prejudice. To resolve this dispute and to better articulate the discretion vested in this court, Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 330, 91 S.Ct. 795, 802, 28 L.Ed.2d 77 (1971), an examination of the interrelationship of those three factors is necessary.

The wording used in the Foman case ("In the absence of any apparent or declared reason") suggests that any one of the reasons listed by the Supreme Court, including undue delay, is sufficient to justify denying leave to amend. Until recently the Seventh Circuit seemed to agree. See Jafree v. Barber, 689 F.2d 640, 644 (7th Cir. 1982); United States Labor Party v. Oremus, 619 F.2d 683, 692 (7th Cir. 1980). In Textor v. Board of Regents, 711 F.2d 1387, 1391 (7th Cir. 1983), however, the court stated that "[d]elay in presenting the amendment will be a sufficient basis for denial of leave to amend only when the delay has caused the opposing party undue prejudice." Though relying solely on 6 Wright & Miller, Federal Practice and Procedure § 1488 (1971) for what amounts to an implicit reversal of the Oremus case, the statement in Textor does find support in several cases from this district. Issen v. GSC Enterprises, 522 F. Supp. 390, 394 (N.D.Ill. 1981); Farr v. United Airlines, Inc., 84 F.R.D. 618, 620 (N.D.Ill. 1979); A. Cherney Disposal Co. v. Chicago & Suburban Refuse Disposal Corp., 68 F.R.D. 383, 385 (N.D.Ill. 1975); Ozark Air Lines, Inc. v. Delta Air Lines, Inc., 63 F.R.D. 69, 72 (N.D.Ill. 1974). Contra, Skokie Gold Standard Liquors, Inc. v. Joseph E. Seagram & Sons, Inc., 99 F.R.D. 108, 109 (N.D.Ill. 1983).

From Textor this court concludes that delay and prejudice are tied together in a way similar to the sliding scale approach to preliminary injunctions adopted in Roland Machinery Co. v. Dresser Industries, Inc., 749 F.2d 380, 387-88 (7th Cir. 1984). That is, while delay itself is never sufficient, the longer a party has delayed in bringing the amendment, the less prejudice the other party must show to justify denying leave to amend.*fn2 That interpretation appears to reconcile Foman and Textor, is hinted at in Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 91 S.Ct. 795, 28 L.Ed.2d 77 (1971); Murphy v. White Hen Pantry Co., 691 F.2d 350, 353-54 (7th Cir. 1981); and Kirby v. P.R. Mallory & Co., 489 F.2d 904, 912 (7th Cir. 1973), and is supported by the following considerations. First, a party who inexcusably delays in seeking leave to amend is in effect holding back and only playing his cards when necessary to avoid defeat. That approach is contrary to the policy of the federal rules in favor of "the just, speedy and inexpensive determination of every action." Fed.R.Civ.P. 1. If the other party can point to no prejudice that would be suffered by allowing the amendment, then Textor can be taken as saying that denying leave would be too harsh a punishment to visit on a party whose only "victim" is the system of justice generally. See also Carson v. Polley, 689 F.2d 562, 584 (5th Cir. 1982) ("Merely because a claim was not presented as promptly as possible, however, does not vest the district court with authority to punish the litigant"). However, if the inexcusable delay has caused the other party some prejudice, then depending on the degree of delay and prejudice, denying leave to amend may be what justice requires.

That leaves "futility of amendment" to consider. Where it is clear that an amendment would be futile (as, e.g., where it would not survive a motion to dismiss) then quite apart from any considerations of delay or prejudice leave should be denied to avoid doing a "futile thing," Textor, 711 F.2d at 1391 n. 1. (Denying leave in those circumstances would not contravene the policy, see Green v. J.C. Penney Auto Insurance Co., 722 F.2d 330, 333 n. 3 (7th Cir. 1983), in favor of deciding cases on their merits, since a futile amendment has no merit). Even an amendment that would survive a motion to dismiss is properly barred "in those instances where the prejudice outweighs the right to have the case tried on the merits." Hess v. Gray, 85 F.R.D. 15, 20 (N.D.Ill. 1979). See also Wakeen v. Hoffman House, Inc., 724 F.2d 1238, 1244 (7th Cir. 1983) (movant must show that a proposed amendment has "substantial" merit). Thus, the more merit a proposed amendment has, the stronger the countervailing factors (such as prejudice and delay) must be to justify denying leave.

A. Degree of Prejudice

The first sort of prejudice defendants claim will result from granting leave to amend is that they would have to file and brief a second round of "laborious and costly" motions to dismiss. (Defendants also seem to argue this court would be prejudiced by having to deal with the new claims and new motions to dismiss them, but of course that is not a consideration here.) Accepting that as "undue" prejudice, however, would effectively nullify Rule 15(a) since nearly every amendment requires the parties to analyze and in some manner respond to new claims or allegations.

C & B argues that it will be particularly prejudiced by the recent and unexpected death of David Leavitt, UNR's chief executive officer, because that person had discussions with Morton Gainer, the broker at C & B who handled the UNR account, concerning the availability and cost of insurance during the relevant time period. Relying on Boris v. Moore, 253 F.2d 523 (7th Cir. 1958), C & B argues that the unavailability of Leavitt precludes it from questioning Leavitt on the proposed amended counts. That of course is true, but the prejudice is not so extreme as C & B claims. As UNR points out, Leavitt had previously testified that he left insurance matters to Robert Penn, UNR's president, and that he himself rarely met with C & B's agents. This situation is therefore different from Boris, in which the person who died after the action was commenced but before amendment was sought was the only person from whom the party claiming prejudice could have obtained any evidence regarding the amended claim. Therefore, that prejudice must be taken into account but is small.

Defendant next argues that the proposed amendments would require much new discovery, some of it duplicative, and would delay final disposition of the case. As defendants point out, adding C & B as a new and crucial partner in the alleged conspiracy will require discovery into the kind and degree of contact between C & B and the other alleged conspirators, facts which previously were of secondary importance at best. Defendants do not attempt to quantify this new discovery, but the number of potential witnesses, the length of time involved, and the number of meetings among witnesses strongly suggest it would be substantial. On the other hand, the proposed general discovery plan indicates discovery is only about half finished, and how long if at all the trial would be delayed by allowing the amendments is difficult to determine.

A possible solution in these circumstances is to try to cure any prejudice to defendants by charging UNR for the diseconomies created by its tardiness. See Ovitz v. Jefferies & Co., Inc., 102 F.R.D. 242 (N.D. Ill. 1984). That approach would not work here, however. Obviously, that solution would do nothing to cure C & B's inability to examine David Leavitt on the new allegations. More important, the nature of this case makes it unlikely that the amount representing expenses attributable to UNR's tardiness could be determined without in turn incurring substantial (and perhaps greater) expense. Finally, this court is unwilling to impose any such costs on this estate unless they ...

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