United States District Court, W.D. Pennsylvania
R. ALEXANDER ACOSTA, SECRETARY OF LABOR, UNITED STATES DEPARTMENT OF LABOR, Plaintiff,
HOLLAND ACQUISITIONS, INC., d/b/a HOLLAND SERVICES, a Corporation; and BRYAN GAUDIN, Individually, and as a Corporate Officer of HOLLAND ACQUISITIONS, INC., d/b/a HOLLAND SERVICES, Defendants.
R. Hornak United States District Judge.
before the Court is the Secretary of Labor's (the
"Secretary's") Motion for Leave to File Third
Amended Complaint. (ECF No. 141 ("Motion for
Leave").) The Secretary seeks to join a new Defendant to
the case: former Chief Executive Officer of Holland
Acquisitions, Inc. ("Holland"), Robert Gaudin
("RG"). For the reasons that follow, the Motion for
Leave is denied.
lawsuit arises out of alleged violations of the Fair Labor
Standards Act (FLSA). Put simply, the claims center around
Holland's alleged improper classification of abstractors,
title examiners, and landmen as independent contractors and
Holland's resulting failure to properly compensate such
individuals for overtime worked. Prior to the commencement of
this lawsuit, the Department of Labor (DOL) conducted its
extensive pre-suit investigation, which included a review of
Holland's records. (Investigator's Coverage Memo, ECF
No. 148-1, at 23-30 ("Memo").) The Memo was written
by DOL Investigator Nicholas Barron and summarizes the nearly
two-year FLSA investigation into Holland that took place from
April 2012 through March 2014. (Id.) The Memo
identities only one "Section 3(d) employer for purposes of
the investigation, " and that individual was RG.
According to the Memo, RG, as President of Holland,
"ha[d] an active role in the management [sic] the daily
operations of the firm including hiring, firing, setting the
rates of pay, and directing the work of the employees."
(Memo, at 1.) This same language, "Section 3(d) employer
for purposes of the investigation is Robert L. Gaudin, "
appears in another nearly identical report signed by Wage
& Hour Investigator Steven Bethurem and dated January 1,
2015. (ECF No. 149-2.) At oral argument en February 13, 2018,
the Secretary characterized this language as essentially the
investigators' recommendation to bring a federal lawsuit
August 20, 2015, the Secretary initiated this FLSA
enforcement litigation, alleging violations of the FLSA
against two Defendants: Holland and Chief Officer
Bryan Gaudin.(Compl., ECF No. 1 ("Initial
Complaint").) RG was not a named Defendant. The Initial
Complaint (as have all of the subsequent pleadings by the
Secretary) alleges individual liability against Bryan Gaudin
pursuant to 29 U.S.C. § 203(d) on the basis that he
acted as an employer in relation to specific employees,
he too may be liable for the very same unpaid wages for which
Holland may be liable. (Initial Compl., ¶ III.) The
Secretary included in his Initial Complaint a list of 89
specific individuals, intended to represent, albeit not
exclusively, a list of Holland's current and former
employees to whom the Defendants allegedly owe unpaid wages
on account of the pled FLSA violations. (Initial Compl.,
¶ X ("As a result of the violations alleged in
paragraphs VI and VIII above, amounts are owing for
Defendants' current and former employees including the
persons specifically listed in the attached Schedule A to the
Secretary's Complaint.").) That list is referred to
as Schedule A. (ECF No. 1-1.)
this dispute entered federal court, it began to snowball.
After the parties conducted their Rule 26(f) planning
meeting, the Secretary amended the Initial Complaint to add
additional allegations, filing his First Amended Complaint on
November 13, 2015. (First Am. Compl., ECF No. 21.)
nearly five months after filing the First Amended Complaint,
the Secretary sought to amend again. The Secretary sought
leave to file a Second Amended Complaint to broaden the
prayer for relief to include back wages through the date of
judgment (instead of through the date the Complaint was
filed), to add a claim for relief under § 17 of the
FLSA, 29 U.S.C. § 217, to specify which regional offices
of Holland were at issue in the suit, and to clarify various
terminology used in the First Amended
Complaint. (Mot. for Leave to File Second Am. Compl.,
ECF No. 44.) The Secretary asserted that such amendment
"would facilitate the 'just, speedy, and
inexpensive' resolution of this case by narrowing the
issues before the court and clarifying ambiguities in the
pleadings about which employees are included in the
lawsuit." (Suggestions in Supp. of Mot. for Leave to
File Second Am. Compl., ECF No. 44-1, at 3.) The Defendants
opposed this motion. (ECF No. 46.) After a full briefing and
oral argument by the parties, the Court granted the
Secretary's motion for leave to amend on July 15, 2016.
(See ECF Nos. 44, 46, 51, 54, 55.)
discovery progressed, more names of possibly relevant
"employees" came to light. Pending possible
resolution by mediation before a United States Magistrate
Judge, the case was stayed from January 27, 2017, to June 5,
2017,  during which time the parties were not
required to engage in further discovery. (ECF Nos. 93, 103.)
After the stay was lifted, the parties once again re-visited
an evolving list of potentially impacted individuals. On July
7, 2017, the Secretary filed another motion for leave to
amend, in which he sought to amend Schedule A to include an
additional 800 named individuals to the original Schedule A,
which contained 89 named individuals. (Pl.'s Mot. to
Amend the Schedule A, ECF No. 105.) Defendants once again
objected to the Secretary expanding the case (this time by
expanding the names on Schedule A nearly tenfold). (ECF No.
114.) Following another round of briefs and oral argument,
the Court granted the Motion to Amend/Correct Schedule A on
October 18, 2017. (Order, ECF No. 132.) But, as the Court
noted in the Opinion accompanying that Order, the Court had
"repeatedly observed that there was a sound basis to
conclude that the Secretary has been periodically and
repeatedly reinventing the wheel." (Op., ECF No. 131, at
8.) Despite this observation, the Court pointed to record
evidence from which it was apparent to the Court and should
have been to the named Defendants that Schedule A was likely
destined to grow (even substantially), and any delay in
bringing the Motion to Amend/Correct Schedule A was not
sufficiently undue or prejudicial to warrant denial of
further amendment under Federal Rule of Civil Procedure 15.
(Id. at ll.)
this case had spilled over onto a whole new lawsuit. The
Secretary filed a new civil action in this Court on March 22,
2017, this time only against RG, former Chief Executive
Officer of Holland. (Compl., Acosta v. Gaudin, No.
2:17-cv-366 (W.D. Pa), at ECF No. 1.) RG, represented by his
own distinct counsel, filed a motion to dismiss the
Secretary's complaint in that case under the doctrine of
claim-splitting and that complaint's failure to meet the
applicable Twombly and Iqbal pleadings
standards. (Mot. to Dismiss, id. at ECF No.
7.) The Court concluded that the claim-splitting doctrine
precluded the Secretary from maintaining both that action and
this action simultaneously, and the Court also concluded that
the complaint failed to reach the requisite level of
particularity to state a plausible claim for relief. (Op.,
id. at ECF No. 17.) The Court noted that "it is
[RG's] relationship with Holland, the lead party in the
first case, that makes him a target of the Secretary's
litigation arrows in the second case. The Secretary's
piecemeal litigation strategy appears to put the Court in the
exact predicament that the claim-splitting doctrine aims to
avoid." (Op., id. at ECF No. 17, at 6-7.) The
Court opined that the Secretary likely chose to bring its
claims against RG in a separate action to avoid another fight
about amendment in this case and the expansion of
this lawsuit, but "[t]he law requires the
Secretary to roll those dice at the table where he is already
seated." (Op., id. at ECF No. 17, at 7-8.)
November 8, 2017, the Secretary did just that and filed his
Motion for Leave at issue here. (ECF No. 141.) The Court
granted RG's motion to intervene for the limited purpose
of responding to the Secretary's Motion, and the parties
engaged in another round of written briefs and oral argument.
(ECF Nos. 142, 148-1, 149, 154, 156.)
seeking leave to amend pleadings after a deadline set in the
Court's case management order must satisfy Rule 16(b)(4).
See Race Tires Am., Inc. v. Hoosier Racing Tire
Corp., 614 F.3d 57, 84 (3d Cir. 2010). Under Rule
16(b)(4), a case management order "may be modified only
for good cause and with the judge's consent."
Fed.R.Civ.P. 16(b)(4). "Only after the moving party
demonstrates good cause under Rule 16(b)(4) may the Court
consider its Motion to Amend under Rule 15's
standard." Greygor v. Wexford Health Sources,
Inc., No. 14-cv-1254, 2016 WL 772740, at *2 (W.D. Pa.
Feb. 27, 2016) (citing Walker v. Centocor Ortho Biotech,
Inc., 558 Fed.Appx. 216, 221-22 (3d Cir. 2014)).
"Thus, in such instances, the lenient Fed.R.Civ.P.
15(a)(2) standard ... yields to the good cause
requirement." Lee v. Park, No. 17-1421, __F.
App'x __, 2017 WL 6508840, at *4 (3d Cir. Dec. 20, 2017).
"The purpose of limiting the period for amending the
pleadings is to assure that at some point both the parties
and the pleadings will be fixed." O'Connell v.
Hyatt Hotels of P.R., 357 F.3d 152, 154 (1st Cir. 2004).
Because good cause under Rule 16(b)(4) looks to the diligence
of the party seeking the modification of the scheduling
order, the party seeking modification bears the burden to
demonstrate "good cause" before the Court will
amend a case management order. Id.; Graham v.
Progressive Direct Ins. Co., 271 F.R.D. 112, 119 (W.D.
Pa. Sept. 15, 2010). Denials of motions for leave to amend
pleadings under Rule 16(b)(4) are reviewed for abuse of
discretion. Lee v. Park, 2017 WL 6508840, at
to amend shall be "freely given when justice so
requires, " Fed.R.Civ.P. 15(a)(2), in order to promote
the general policy of the Federal Rules of Civil Procedure
that cases are better resolved on their merits. Mullin v.
Balicki, 875 F.3d 140, 149 (3d Cir. 2017). The standard
for granting leave to amend was recently outlined by our
Court of Appeals in Mullin:
In determining whether leave to amend might reasonably be
denied, courts are guided by the Foman factors,
named for the Supreme Court's decision in Foman v.
Davis, 371 U.S. 178 (1962). Denial of leave to amend can
be based on undue delay, bad faith or dilatory motive on the
part of the movant; repeated failure to cure deficiencies by
amendments previously allowed; prejudice to the opposing
party; and futility. The Foman factors are not
exhaustive, allowing a court to ground its decision, within
reason, on consideration of additional equities, such as
judicial economy/burden on the court and the prejudice
denying leave to amend would cause to the plaintiff. All
factors are not created equal, however, as "prejudice to
the non-moving party is the touchstone for the denial of an
amendment." Arthur v. Maersk, Inc., 434 F.3d
196, 204 (3d Cir. 2006).
Mullin, 875 F.3d at 149-50. A court should only deny
leave "when these factors suggest that amendment would
be 'unjust.'" Arthur, 434 F.3d at 203.
a party seeks leave to amend the pleadings after the deadline
set by a court's scheduling order, that party must first
satisfy Rule l6(b)(4)'s requirements for modifying a
scheduling order." Abed-Rabuh v. Hoobrajh, No.
17-cv-15, 2018 WL 300453, at *2 (W.D. Pa. Jan. 4, 2018)
(quoting Hadeed v. Advanced Vascular Res. of Johnstown,
LLC, No. 15-cv-22, 2017 WL 4286343, at *2 (W.D. Pa.
Sept. 26, 2017)). Thus, the Court will first analyze the
Secretary's Motion under Rule 16(b)(4) to determine
whether the Secretary has demonstrated good cause to modify
the operative scheduling order, and then, to the extent
necessary, the Court will analyze the Secretary's Motion
under Rule 15(a)(2) to determine whether amendment to add RG
to this case would be unjust.
operative scheduling order is the Second Amended Case
Management Order dated June 5, 2017. (ECF No. 103
("SACMO").) The SACMO states that "[additional
parties were required to be joined on or before February 4,
2016. All Motions to Amend a pleading, add parties and the
like will be considered on their own merits."
(Id. ¶ 3(b).) After reviewing this Motion
for Leave on its own merits under the Rule 16(b)(4) analysis,
the Court concludes that the Secretary has not carried his
burden to show good cause for modification of the deadline to
add this party to this case. The Secretary had actual
knowledge from his own Departmental investigators well before
this case ever arrived in federal court that RG was not just
one possible Section 3(d) employer but
"[t]he Section 3(d) employer." (Memo, at 1
(emphasis added).) The Secretary has failed to show due
diligence with respect to adding RG as a named Defendant
given his staggering delay in heeding the advice of his own
case bears some resemblance to Race Tires, in which
the district court denied the plaintiffs' motion to amend
its complaint for the fourth time. 614 F.3d at 84. In that
case, the deadline to amend pleadings in the Court's
scheduling order was set for May 30, 2008, but the motion to
amend the complaint was filed about six months later on
November 19, 2008. Id. at 72, 84. The district court
also noted that the motion to amend arrived fifteen (15)
months after the lawsuit was initiated. 660 F.Supp.2d 590,
594-95 (W.D. Pa. 2009). The district court denied the motion
to amend under a Rule 16(b)(4) analysis due to the delay and
the fact that the proposed new claim was "based on an
additional legal theory, which would require additional
written discovery and depositions." Id. at 595.
The plaintiffs appealed on the grounds that they could not
have discovered the key facts that supported the new claim
until they had time to review late-produced documents, which
were not provided until after the deadline has passed. 614
F.3d at 84. The Court of Appeals rejected that argument,
pointing to several of the district court's conclusions
that the plaintiffs were on notice of several key facts
supporting their proposed claim. Id. at 85.
Race Tires, the Secretary is also seeking leave to
amend a fourth time. But the facts in this case are actually
worse (in terms of the propriety of amendment) than those in
Race Tires. First, all prior amendments sought in
Race Tires were timely under the scheduling order
except the last one. 660 F.Supp.2d at 594
(plaintiffs moved for leave to file their [prior] amended
complaint on the day of the actual deadline for seeking leave
to amend the pleadings). That is not the case here. The
Motion for Leave to File the Second Amended Complaint missed
the amendment deadline by four months. (Mot. for Leave to
File Second Am. Compl., ECF No. 44 (filed Apr. 29, 2016); Am.
Case Management Order, ECF No. 40 (setting Dec. 15, 2015,
amendment deadline).) This is to say nothing of the
Secretary's filing of an entire other (improper)
the Secretary brought this Motion for Leave more than
twenty-one (21) months after the deadline to add
parties (compared to six (6) months in Race
Tires) and more than twenty-six (26) months into the
lawsuit (compared to fifteen (15) months in Race
Tires). While the Court may have grown "judicially
tired" of the Secretary attempting to expand
his case before, it is now judicially justified in
"want[ing] this complicated case to move forward to its
ultimate resolution." Race Tires, 614 F.3d at
good cause can still be established despite the passage of
time if the moving party can show due diligence. In order to
demonstrate good cause under Rule 16, the Secretary has the
burden to show that he acted diligently in presenting his
claims against RG to the Court.Lee v. Park,
2017 WL 6508840, at *4 (district court did not err in denying
motion to amend because it was "self-evident" that
plaintiff was not diligent in seeking amendment because he
simply wanted to add a new cause of action based on the same
facts found within the initial complaint filed sixteen months
prior); Graham, 271 F.R.D. at 119 (plaintiff failed
to demonstrate good cause to add parties and ...