The opinion of the court was delivered by: MILTON I. SHADUR
Aircraft Gear Corporation ("Aircraft") has sued Kaman Aerospace Corporation ("Kaman"), seeking damages for the alleged breach of a subcontract under which Aircraft supplied steel gears for helicopters that Kaman manufactured for the United States Navy. Kaman has in turn filed a Counterclaim to recover amounts that it incurred as a result of Aircraft's claimed deviations from the original Manufacturing Orders and Purchase Orders under the subcontract.
Following dismissal of its original Complaint on summary judgment, Aircraft has now moved for leave to file an Amended Complaint ("AC") under Fed. R. Civ. P. ("Rule") 15(a), asserting that its original Complaint had inadequately set forth its claims against Kaman. In addition, Aircraft has moved under Rule 56 for summary judgment on Kaman's Counterclaim. For the reasons stated in this memorandum opinion and order, Aircraft's motion for leave to file the AC is granted in part but denied in principal part, while its motion for summary judgment on the Counterclaim is denied.
Aircraft's Amended Complaint
Aircraft filed its single-count breach of contract Complaint on February 26, 1993. Aircraft asserted there that Kaman had breached its contractual duty to provide specifications instructing Aircraft on how to heat treat helicopter gearbox components. As a result, Aircraft claimed $ 1.8 million in extra expenses by way of additional work and outlays to finish the job.
After the case was at issue and substantial discovery had taken place, Kaman moved for summary judgment on Aircraft's Complaint (but not on Kaman's own Counterclaim). That motion was briefed extensively, and on June 13, 1994 this Court granted Kaman's motion for summary judgment and dismissed the Complaint in the "Opinion," 856 F. Supp. 446.
Holding that the key determination as to the scope of Kaman's contractual undertaking posed a question of law, the Opinion determined that the parties' contract was manifestly of the "performance" variety and that Aircraft alone was responsible for the cost overruns.
On June 20 Aircraft filed a "motion for reconsideration," requesting this Court to revisit its Opinion. Aircraft's position was that this Court had erred in reading the Complaint to reach only Pyrowear gears instead of all gears for which Kaman had contracted. Kaman was given the opportunity to oppose both the filing of the motion and Aircraft's substantive arguments. Before Kaman could respond, however, Aircraft filed yet another motion--this one purporting to seek the alteration or amendment of a judgment under Rule 59(e). On June 27 this Court denied the latter motion (1994 U.S. Dist. LEXIS 9018), pointing out that such motions were wholly inapropos where as here no final order had been entered.
After Aircraft and Kaman then adhered to the original briefing schedule on the motion for reconsideration, this Court denied that motion orally. Although Aircraft ascribed its loss on summary judgment to "poor presentation," this Court concluded (Aug. 8, 1994 Tr. 5):
Both Kaman and the Court were entitled, I find, to rely on the plain meaning of the Complaint as defining the scope of the claim. And the evidence that was tendered on the summary judgment motion was insufficient to create a material factual issue, which is of course why the Complaint was properly dismissed and remains dismissed.
Under Rule 15(a) parties may amend their pleadings, after a responsive pleading has been served, only with leave of court. Leave to amend "shall be freely given when justice so requires" (Rule 15(a)), but such grants are not automatic ( Johnson v. Methodist Medical Ctr. of Ill., 10 F.3d 1300, 1303 (7th Cir. 1993)). Instead the decision on whether "justice so requires" is committed to the discretion of the district judge ( Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 330, 28 L. Ed. 2d 77, 91 S. Ct. 795 (1971)), to be determined on the basis of the factors set forth in Foman v. Davis, 371 U.S. 178, 182, 9 L. Ed. 2d 222, 83 S. Ct. 227 (1962):
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."
Rule 15(a) has as its purpose "to enable a party to assert matters that were overlooked or were unknown at the time he interposed the original complaint or answer" (6 Charles Wright et al., Federal Practice & Procedure: Civil 2d § 1473, at 520 (2d ed. 1990)). Once summary judgment has been entered and a plaintiff's complaint has been dismissed, the plaintiff seeking leave to amend before entry of an adverse final judgment must therefore either explain why the "new" theory was not advanced at an earlier time or risk denial of the motion as untimely ( Humphreys v. Roche Biomedical Lab., Inc., 990 F.2d 1078, 1081-82 (8th Cir. 1993); Shipner v. Eastern Air Lines, Inc., 868 F.2d 401, 407 (11th Cir. 1989); Union Planters Nat'l Leasing, Inc. v. Woods, 687 F.2d 117, 121 (5th Cir. 1982); Scottish Air Int'l v. British Caledonian Group, PLC, 152 F.R.D. 18, 30 (S.D.N.Y. 1993)). Freeman v. Continental Gin Co., 381 F.2d 459, 469-70 (5th Cir. 1967) explains the conceptual basis for that approach:
Much of the value of summary judgment . . . would be dissipated if a party were free to rely on one theory in an attempt to defeat a summary judgment and then, should that theory prove unsound, come back long thereafter and fight on the basis of some other theory.
We hold that a district court does not abuse its discretion in refusing to allow amendment of pleadings to change the theory of a case if the amendment is offered after summary judgment has been granted against the party, and no valid reason is shown for the failure to present the new theory at an earlier time.
As Thompson v. Boggs, 33 F.3d 847, 853 (7th Cir. 1994) has more recently said, quoting Johnson:
There must be a point at which a plaintiff makes a commitment to the theory of its case.
AC Count I goes far beyond the assertions of the original Complaint to which Kaman responded in its motion for summary judgment and on which this Court ruled in the Opinion. Aircraft's breach of contract claim alleges that Kaman ordered over 300 engineering changes that forced Aircraft to incur added costs and experience delays. Whereas the original Complaint had spoken in terms of modifications relating to the manufacture of Pyrowear gears (Complaint P13), this time the proposed language says that the "directed changes were almost entirely concerned with aspects of the manufacturing processes unrelated to the heat treatment of Pyrowear gears" (AC P15).
Aircraft's delay in filing its motion to amend by way of AC Count I must be characterized as "undue." Aircraft was clearly aware of the scope of its claim from the very beginning. In fact, Aircraft relies even now on the same submissions that it tendered to this Court to oppose summary judgment. In addition, Aircraft can point only to what its Reply Memorandum in support of its earlier motion seeking "reconsideration " of the Opinion termed the "errors of the lawyer" (R. Mem. 3) to explain its failure to bring the claim earlier. It is well settled, however, that a client may not avoid dismissal merely because of the negligence of its freely selected agent ( Daniels v. Brennan, 887 F.2d 783, 788 (7th Cir. 1989)).
In terms of prejudice to Kaman, our Court of Appeals' decision in Johnson offers a valuable basis for comparison. There the plaintiff was denied the opportunity to amend her complaint after defendant had filed a motion for summary judgment--and even before the district court had decided that motion. In affirming that denial Johnson, 10 F.3d at 1304 said:
First, the preceding complaints made very specific allegations, thus focusing the issues narrowly; it was not unreasonable for Methodist to be taken by surprise by the proposed complaint's new allegations. Second, Methodist moved for summary judgment based on the allegations contained in the second amended complaint, which if granted (as here), removes Methodist from this action. Third, it seems likely that Methodist, as it contends, would have to engage in substantial additional discovery and thus be prejudiced if plaintiff's proposed complaint were accepted. If amendment were permitted, Methodist's success in defeating all the claims in the second amended complaint would not end the lawsuit, and it would have to engage in a new contest on different issues--four years after the action was started.
Here (as in Johnson) Aircraft originally focused the issues much more narrowly than its AC would seek to do. And here (unlike Johnson) this Court had already fully resolved those issues against Aircraft when the proposed amendment was tendered--a factor that surely entitles Aircraft to less favorable treatment (and a fortiori to no more favorable treatment) than the plaintiff in Johnson.4 If it had not been for Kaman's Counterclaim, this action would have been fully concluded before Aircraft presented its new version of its own claim. It would work a rank injustice on Kaman to punish it because it has a substantial claim against Aircraft--to treat it less favorably than a defendant that has no potential claim of its own, but is seeking only to avoid the imposition of liability.
That conclusion is buttressed by the added factor that allowing such an amendment would drastically increase the scope of the events at issue and, in so doing, would force upon Kaman the burden of additional discovery. Despite Aircraft's claims to the contrary (its AC Mem. 3), Kaman has represented to this Court that it has completed discovery and has been ready to go to trial on its Counterclaim since June 1994 (June 22, 1994 Tr. Even so, were such additional discovery capable of easy completion, this Court might be content to accept what may be Aircraft's offer to cover Kaman's expenses related to such discovery (A. AC Mem. 12), as this Court has done on occasion in the past (see, e.g., National Union Fire Ins. Co. v. Continental Ill. Corp., 658 F. Supp. 781, 791 (N.D. Ill. 1987)).
But Kaman has provided evidence that a significant number of the employees with knowledge of Aircraft's gear development phase have left the company (K. AC Mem. 11-12). To be sure, that situation might simply create greater difficulty and expense (rather than actual impossibility) in completing discovery (depending on whether the whereabouts of the departed personnel are still known), but that cannot be said of the irreparable prejudice caused by the fact that at least one Aircraft officer has died (K. AC Mem. Ex. CC, Ken Spurgeon Dep. 277).
Aircraft knew the scope of its potential claims from day one. Having chosen to pursue one line of attack in its Complaint, and having lost on summary judgment, Aircraft now seeks a second bite of the apple. That bite is denied.
Where Kaman was originally charged with ordering several hundred changes, Kaman would now be subjected to suit under AC Count II for demanding that certain changes suggested by Aircraft not be made.
But unlike the already-discussed situation involving AC Count I, Aircraft cannot claim that it always intended to assert this "constructive changes" theory and that it was only through the inadvertence of its lawyers that it failed to do so. Rather Aircraft has simply thought up a new theory to replace the one that failed on its first attempt. Under the standards already discussed, leave to file AC Count II must be denied.
AC Count III claims that Kaman breached its contract in July and August 1993 when it wrongfully terminated four Purchase Orders based on Aircraft's asserted default in performance. Aircraft alleges that Kaman waived its right to terminate those Purchase Orders when it encouraged Aircraft to continue performing under the Purchase Orders after Kaman had knowledge that Aircraft had already missed certain deadlines (AC P42). Furthermore, Aircraft argues, the delays cited by Kaman were all excusable under the terms of the Purchase Orders and therefore failed to justify Kaman's termination of those four Orders (id. P43).
But this Court's order granting Kaman summary judgment was not a final order. And that fact alone presents this Court with the option of allowing Aircraft to file the unbarred claim at this late stage. As between such filing in this case and requiring Aircraft to bring a separate action, judicial economy favors Aircraft's request--AC Count III asserts the wrongful termination of four Purchase Orders for delay, while Kaman's Counterclaim sues for damages claimed to be due from some of those same delays. In fact, given the current rejection of Aircraft's other proposed claims as well as the earlier summary judgment decision dismissing its original claims, the posture of this action is no different from one in which Kaman had sued Aircraft in the first instance (rather than via Counterclaim) and Aircraft had responded with a counterclaim of the nature presented in AC Count III. In that situation there is no question that Aircraft's "counterclaim" would have been allowed.
In sum, AC Count III stands in a wholly different light from AC Counts I and II. Neither justice nor economy would be served by denying Aircraft's motion to amend its Complaint in that respect. Aircraft is therefore granted leave to file AC Count III.