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The Arden Group, Inc., et al v. Camille O. Hoffman

December 12, 2012

THE ARDEN GROUP, INC., ET AL., PLAINTIFFS,
v.
CAMILLE O. HOFFMAN, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Goldberg, J.

MEMORANDUM OPINION

This case involves a claim by Cross-PlaintiffRobert Schulz for indemnification of legal fees and expenses pursuant to the Illinois Business Corporation Act ("IBCA").*fn1 Schulz allegesthat these fees were "reasonably incurred" in successfully defending himself in the underlying litigation.

Currently at issue is Cross-Defendant Oliver Hoffman Corporation's ("OHC") request to amend its answer to include a waiver defense, and the parties' disagreement over whether OHC is entitled to a jury trial. For reasons set forth below, we conclude that OHC'sproposed amendment would be futile. We also conclude that OHCisentitled to have a jury resolve the dispute between the parties, and will permit it to file a late jury demand.

I. Factual and Procedural Background

On June 19, 2009, Plaintiffs in the underlying litigation, The Arden Group, Inc. and Craig Spencer, filed suit against OHC, Schulz and several other business entities and individuals. While the specifics of this lawsuit are not germane to the dispute before us, the case generallyinvolved contract and tort claims arising from a failed joint business venture. Schulz served as vice president of OHC at the time of the events at issue and was sued in his individual capacity.

On June 2, 2010, Schulz filed a cross-claim against OHC pursuant to the IBCA seeking indemnification for the legal fees and expenses he incurred in connection with the Arden Group lawsuit. On February 25, 2011, following a stipulation of settlement of the underlying litigation, Schulz filed a motion for summary judgment on his cross-claim. OHC opposed the motion, arguing that there was a genuine issue of material fact as to whether Schulz's fees were reasonably incurred, as required by the IBCA. Specifically, OHC contended that it provided Schulz with free legal representation along with the other named defendants, and that Schulz's decision to decline that offer was unreasonable. Schulz countered that his fees were reasonably incurred because he determined that it was in his best interest to retain independent counsel after OHC refused his request for indemnification in the event he was found personally liable.*fn2 We denied Schulz's motion, finding that a genuine issue of material fact existed with respect to whether his attorneys' fees were "reasonably incurred." (Nov. 30, 2011 Summ J. Mem. Op. 6-7.)

Presently before us is OHC's "Motion for Leave to File an Amended Answer and Affirmative Defense." In this motion,OHC requests that the Court grant it leave to file an amended answer to include the affirmative defense of waiver. OHC also requests that we clarify that the jury demand requested by plaintiffs in the original Arden Group litigation applies to the current dispute between Schulz and OHC. In the alternative, OHC requests that it be permitted to file an untimely jury demand. We address each issue below.

II. Discussion

A. The Proposed Amended Answer and the Waiver Defense

OHC first moves to amend its answer to assert a waiver defense. This new defense rests solely on correspondence dated July 20, 2009 from the law firm of Ackerman, Link & Satory, P.A. ("Ackerman Link") to Schulz and the other defendants. The correspondence contained the terms and conditions regarding the joint representation of Schulz and the other defendants in the underlying Arden Group litigation. OHC argues that certain language in this letter supports its proposed waiver defense. (OHC's Mot. Ex. A.)

Read as a whole, it is clear that the correspondence from Ackerman Link addresses the issue of that firm representing multiple defendants and states that it was the firm's belief that there was no existing conflict of interest presented by the representation of all defendants. The correspondence also advises that if any conflicts of interest, potential conflicts of interest or strategic disagreements should arise, each client would agree that Ackerman Link would need to determine whether it could properly continue to represent that client and, in the event of a strategic disagreement, Ackerman Link would continue to represent all other clients. (OHC's Mot. Ex. B.)

In support of its waiver argument, OHC relies entirely on one portion of the correspondence, which states: "[i]f there arises a fundamental disagreement between clients on a strategic decision in the case, then each of you agree that we may continue to represent all other clients listed above and that the individual client that has a disagreement will seek independent counsel at his/her own expense." OHC also points to language in which Ackerman Link informed the recipients that if they "desire to consult independent counsel concerning this representation, feel free to do so," and language indicating that the firm required each client to "confirm, in writing, both [his] understanding of the implications of [the] multiple representation in these matters, and [his] consent to that representation." OHC notes that Schulz agreed to the joint representation, but then sought independent counsel shortly thereafter. (OHC's Mot. 2, Exs. A, B.)

With the above language in mind, OHC alleges that Schulz left the joint representation because he felt "uncomfortable" with Ackerman Link's decision to enter a stipulation dismissing certain individual defendants and not him. OHC contends that the stipulation was a "strategic decision in the case." As such, OHC asserts that Schulz's disagreement with that decision and retention of independent counsel constitutes a waiver of Schulz's indemnification rights under the IBCA, and the Court should thus allow its proposed amended answer. (OHC's Mot. 2-3, Ex. A.)

Under Federal Rule of Civil Procedure 15(a), leave to amend a pleading, including an answer to the complaint, should be freely given "when justice so requires." FED. R. CIV. P. 15(a); Long v. Wilson, 393 F.3d 390, 400 (3d Cir. 2004) ("The plain terms of Rule 15(a) do not discriminate on the basis of type of pleading. The liberal right to amend extends to an answer to the complaint."). The grounds upon which a court may deny leave to amend include "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, [or] futility of the amendment." Foman v. Davis, 371 U.S. 178, 182 (1962). "An amendment is considered futile if it advances a claim or defense that is legally insufficient on its face"-that is, it would not survive a motion to dismiss. Eisai Co., Ltd. v. Teva Pharm. USA, Inc., 247 F.R.D. 445, 449 (D.N.J. ...


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