Free Objection to Report and Recommendations - District Court of Colorado - Colorado

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Civil Action No. 03-cv-02435-PSF-PAC LILLIAN F. SANDLE, Plaintiff, v. ANTHONY J. PRINCIPI, Secretary, Department of Veterans Affairs, Defendant.

DEFENDANT'S OBJECTIONS TO ORDER AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

The United States Magistrate Judge initially granted on December 19, 2005, defendant's motion for leave to filed an amended answer containing a restitution counterclaim. See Docket No. 188. That decision was correct. The Magistrate Judge now recommends, in her Order and Recommendation, that her earlier decision be rejected and that defendant's restitution counter-claim be stricken. She finds that "extraordinary circumstances" exist here, specifically, that defendant unduly delayed filing its counterclaim. The Magistrate Judge's recommendation should not be followed. Equity and fairness suggest that defendant should be permitted to proceed with its restitution counter-claim. Defendant admittedly did not file its counter-claim with its -1-

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initial answer on April 25, 2005. See Docket No. 90. But plaintiff was permitted, almost exactly two years after initiating this action on November 19, 2003, to amend her complaint on November 9, 2005 and add 13 new claims that she had never raised in her initial complaint. Indeed, these brand new claims were the sole basis for the Court's ruling on December 20, 2006, resetting the jury trial in this case to November 2006, see Docket No. 194, and the sole basis for the Court's ruling on January 10, 2006 reopening discovery, setting a new discovery cut-off date and motion cut-off date for the summer of 2006, and rescheduling the pretrial conference date. See Docket No. 199. Defendant submitted its counter-claim for restitution within the statutory period allowed under 28 U.S.C. § 2415(a), and the U.S. Magistrate Judge did not find to the contrary. Plaintiff has made no showing in her moving papers that she would be prejudiced if defendant's requested restitution counter-claim were allowed, and the U.S. Magistrate Judge made no finding that plaintiff would be so prejudiced. Plaintiff has engaged in discovery on defendant's restitution counter-claim since discovery was reopened in early January 2006. The U.S. Magistrate Judge, on her own, evaluated plaintiff's objection to the Magistrate Judge's December 19, 2006 Order permitting defendant's restitution counterclaim under Fed. R. Civ. P. 60(b)(6). She found that the circumstances here are "extraordinary." Defendant submits that this is an extraordinary case in several respects,

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but particularly because the Court has permitted plaintiff to assert ­ two years after filing suit ­ more than a dozen new claims concerning alleged acts of retaliation and discrimination occurring between 16 and 19 years ago. The U.S. Magistrate Judge's Order and Recommendation recommending that defendant's restitution counter-claim be stricken should not be followed. This Court in the exercise of its discretion should permit defendant's restitution counter-claim. I. A. STATEMENT OF FACTS

Plaintiff Is Permitted to Amend Her Complaint and Greatly Expand the Scope of this Case At the U.S. Magistrate Judge's October 18, 2005 Status Conference, well after

discovery had closed and defendant's motion for summary judgment had been fully briefed, counsel for plaintiff Lillian F. Sandle appeared for the first time in the case. See Docket No. 159. The Magistrate Judge ordered at that hearing that plaintiff be allowed to file an amended complaint. Id. Plaintiff's amended complaint was due no later than November 2, 2005. Id. The Magistrate Judge also set at the October 18, 2005 hearing a very short schedule for the parties to complete discovery on the as-yet-unfiled amended complaint, noting that one of the reasons for the exceedingly short discovery schedule was that the Court expected plaintiff's new counsel in her amended complaint to narrow the scope of

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the case and focus on those claims that appeared to plaintiff's counsel to be most appropriate for judicial consideration. Plaintiff filed an Amended Complaint on November 2, 2005 but then, because the Prayer for Relief in her Amended Complaint did not contain certain clauses, and after the time to file an Amended Complaint had already expired, see Docket No. 164, plaintiff moved for leave to file a Second Amended Complaint on the grounds that those clauses were inadvertently omitted from the document. Id. at 2. Notably, defendant did not oppose plaintiff's request to amend her complaint. See id. This Court granted plaintiff's motion, and plaintiff's Second Amended Complaint was filed on November 9, 2005. See Docket Nos. 168, 169. Rather than narrow the issues and claims to be resolved in this matter, plaintiff's Second Amended Complaint, filed November 9, 2005, significantly expanded the issues by adding 13 new claims. See Docket No. 169; see also Docket No. 189 at 3-5 (Defendant's Motion for Extension of Time to Conduct Discovery). The new claims concern alleged acts of retaliation and discrimination in violation of the Rehabilitation Act that occurred between 16 and 19 years ago. Id. at Docket No. 189. B. The Court Sets a Very Tight Schedule for Resolving Pretrial Matters, Leaving Defendant a Very Short Time to File An Amended Answer At the October 18, 2005 hearing, the Magistrate Judge also issued an Order requiring the parties to submit a proposed amended scheduling order with the Court by -4-

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November 14, 2005. See Docket No. 159. Given that the Magistrate Judge ordered at the October 18 hearing that discovery would close only two months after plaintiff had filed her amended complaint, id., the parties were required to suggest in their proposed amended scheduling order extremely short deadlines for the completion of pretrial matters. On November 14, 2005, the parties submitted their proposed scheduling order to the Court, proposing December 1, 2005, as the deadline for amendment of pleadings. See Docket No. 170 at 4. This Court filed the scheduling order on November 15, 2005. See Docket No. 172. Defendant filed its answer to the Second Amended Complaint on November 25, 2005. See Docket No. 179. Pursuant to Fed. R. Civ. P. 15(a), defendant would ordinarily have 20 days after the filing of its answer to file an amended answer, and as a consequence defendant's proposed amended answer, if filed on December 9, 2005 ­ only 14 days after filing its answer ­ would be timely. However, due to the Scheduling Order, which as a consequence of the Magistrate Judge's October 18, 2005 Order necessarily included exceedingly short deadlines, defendant was left with only six days to amend its answer. In defendant's answer to the Second Amended Complaint, defendant identified a number of defenses related to the fact that plaintiff entered into and signed a written administrative settlement agreement on April 2, 1997, resolving all issues in plaintiff's

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Second Amended Complaint. Pursuant to the written administrative settlement agreement, plaintiff received the amount of $66,000 ($50,000 plus $16,600 as attorneys fees). See Docket No. 179 (defendant's Answer) at 24-25. As a result of plaintiff's contention that the settlement agreement was entered into under coercion, the EEOC ultimately determined that the settlement agreement was invalid. Nevertheless, plaintiff has retained the $66,600 which she obtained as consideration for the "invalid" agreement. Defendant inadvertently neglected to include in its November 25, 2005 answer a counter-claim against plaintiff for recovery of the $66,600 paid to plaintiff to administratively settle her case. C. Defendant's Counterclaim On December 9, 2006, defendant moved for leave to amend its answer to assert a counterclaim against plaintiff for restitution in the amount of $66,600, plus interest. See Docket No. 185. D. The Court Recognizes that Plaintiff's Second Amended Complaint Contains a Significant Number of Brand-New Claims Defendant submitted written discovery to plaintiff very quickly after receiving plaintiff's Second Amended Complaint. Those responses revealed to defendant that plaintiff had greatly expanded the scope of this case, adding 13 new claims that she had never raised in her initial complaint. See Docket No. 189. These new claims primarily

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concerned positions which plaintiff alleges she was denied, for discriminatory and retaliatory reasons, between 1986 and 1990, more than sixteen years ago. Id. Consequently, defendant moved for leave to extend the discovery cut-off so that defendant could conduct discovery on all of these new claims. Id. Plaintiff opposed the motion, see Docket No. 190, but the Court rejected plaintiff's argument, see Docket No. 195, ordering that the discovery period be greatly extended, into July 2006. Id. These brand new claims were the sole basis for the Court's ruling on December 20, 2006, resetting the jury trial in this case to November 2006, see Docket No. 194, and the sole basis for the Court's ruling on January 10, 2006 reopening discovery, setting a new discovery cut-off date and motion cut-off date for the summer of 2006, and rescheduling the pretrial conference date. See Docket No. 199. II. DISCUSSION

Rule 15(a) of the Federal Rules of Civil Procedure concerns amendment of pleadings and provides, in relevant part: A party may amend the party's pleading once as a matter of course at any time before a responsive pleading is served or, if the pleading is one which no responsive pleading is permitted and the action has not placed on the trial calendar, the party may so amend it at any time within 20 days after it has been served. Otherwise a party may amend the party's pleading only by leave of court or by written consent of the adverse party . . . .

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This rule also provides that a party's request to amend his pleading "shall be freely given when justice so requires." Fed. R. Civ. P. 15(a).1 The matter is committed to the Court's sound discretion. Federal Ins. Co. v. Gates Learjet Corp., 823 F.2d 383, 387 (10 th Cir. 1987). "Refusing leave to amend is generally only justified upon a showing of undue delay, undue prejudice to the opposing party, bad faith or dilatory motive, failure to cure deficiencies by amendments previously allowed, or futility of amendment." Frank v. U.S. West, Inc., 3 F.3d 1357, 1365 (10 th Cir.1993) (citing Castleglen, Inc. v. Resolution Trust Corp., 984 F.2d 1571, 1585 (10 th Cir.1993)). As defendant shows below, the Magistrate Judge ruled correctly on December 19, 2005 when she granted defendant's motion to amend its answer. Justice requires that defendant's request to amend its pleadings be granted. This Court in its sound discretion should reject the Magistrate Judge's Order and Recommendation. A. Defendant's Delay Here Was Only Eight Days Defendant missed the deadline to amend its answer and assert a restitution counterclaim by only eight days. That eight-day period did not constitute undue delay in seeking to amend defendant's answer. Indeed, but for the Court's November 15, 2005 Scheduling

Fed. R. Civ. P. 13(f) also specifically allows for omitted counterclaims. Rule 13(f) provides that, "[w]hen a pleader fails to set up a counterclaim through oversight, inadvertence, or excusable neglect, or when justice requires, the pleader may by leave of court set up the counterclaim by amendment." -8-

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Order, requiring amendment by December 1, 2005, see Docket No. 172 at 4, only six days after defendant filed its answer, defendant's proposed amendment would clearly be timely under Fed. R. Civ. P. 15(a). The Magistrate Judge's finding that defendant has engaged in undue delay is the same as asserting that defendant is guilty of laches. See, e.g., Mahn v. Harwood, 112 U.S. 354, 366 (1884) (the question of laches is one of undue delay); In re Bogese, 303 F.3d 1362, 1364 (Fed. Cir. 2002) ("The doctrine of laches [means] undue delay in claiming one's rights"). But the United States is not "subject to the defense of laches in enforcing its rights." United States v. Summerlin, 310 U.S. 414, 416 (1940). See F.D.I.C. v. Hulsey, 22 F.3d 1472, 1490 (10 th Cir. 1994) (citing Summerlin). Laches is inapplicable here. Laches is an affirmative defense requiring a showing of (1) lack of diligence by the opponent and (2) prejudice to the movant. See Costello v. United States, 365 U.S. 265, 282 (1961); Roberts v. Morton, 549 F.2d 158, 163 (10 th Cir. 1977). Plaintiff should not be able to defeat defendant's motion to amend on the grounds that defendant has failed to act with diligence given that Congress by statute has authorized a six-year period to assert claims for unjust enrichment. See infra. And plaintiff never argued that she will be prejudiced if defendant's Amended Answer containing defendant's counterclaim is allowed.

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B.

Plaintiff Was Permitted to Amend Its Complaint Plaintiff moved to amend its Amended Complaint, filed November 2, 2005. See

Docket No. 164. Defendant did not oppose that motion, id., and plaintiff's motion to amend was granted by this Court. See Docket No. 168. C. The U.S. Magistrate Judge's Sua Sponte Ruling that Plaintiff's Motion Should Be Granted Pursuant to Fed. R. Civ. P. 60(b)(6) Will Not Further the Interests of Justice As the U.S. Magistrate Judge noted in her Order and Recommendation, plaintiff did not argue in her "Objection to Decision by Magistrate Judge," filed January 3, 2006, that she should be granted relief under Rule 60(b)(6). Indeed, the U.S. Magistrate Judge recognized that "[p]laintiff has not stated any grounds for relief under Rule 60(b)." Docket No. 224 at 4. Nevertheless, the Magistrate Judge addressed plaintiff's January 3, 2006 objection pursuant to Rule 60(b)(6). As the Magistrate Judge recognized, a district court may grant a Rule 60(b)(6) motion only in extraordinary circumstances and only when necessary to accomplish justice. Docket No. 224 at 4 (quoting Lyons v. Jefferson Bank & Trust, 994 F.2d 716, 729 (10 th Cir. 1993). The only basis for the Magistrate Judge's recommendation is that defendant engaged in undue delay. See Docket No. 224 at 5-8. But plaintiff was permitted, almost exactly two years after initiating this action, to amend her complaint and add 13 new

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claims that she had never raised in her initial complaint. Plaintiff never demonstrated to the Court that, at the time she filed her original complaint in November 2003, she did not know of, nor should she have known of, the facts upon which she based her Second Amended Complaint in November 2005. Nevertheless, she was permitted to amend and add these 13 new claims in her Second Amended Complaint even though she failed to include them in her original complaint. See Woolsy v. Marion Laboratories, Inc., 934 F.2d 1452, 1462 (10 th Cir. 1991) (Where the party seeking amendment knows of or should have known of the facts upon which the proposed amendment is based but fails to include them in the original complaint, the motion to amend is subject to denial) (citations omitted). If plaintiff is permitted to amend her complaint and add 13 new claims two years after initiating suit, without even being required to file a motion seeking leave to amend, and without being required to show that she did not know of, nor should have known of, the facts upon which she based the 13 new claims in her Second Amended Complaint, defendant's request to amend only eight days after the amendment cut-off date had passed should be granted as a matter of equity and justice.

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D.

Pursuant to 28 U.S.C. § 2415(a), Defendant's Restitution Counter-Claim Was Timely and Would Have Supported an Independent Lawsuit Against Plaintiff for Unjust Enrichment Defendant's counter-claim for restitution was timely under 28 U.S.C. § 2415(a), as

it was brought within the six-year statute of limitations. Moreover, for that reason, defendant could have filed an independent action against plaintiff for unjust enrichment. Title 28 of the U.S. Code, Section 2415 is entitled "Time for Commencing Actions Brought by the United States." In particular, 28 U.S.C. § 2415(a) provides, in pertinent part: (a) Subject to the provisions of section 2416 of this title, and except as otherwise provided by Congress, every action for money damages brought by the United States or an officer or agency thereof which is founded upon any contract express or implied in law or fact, shall be barred unless the complaint is filed within six years after the right of action accrues. . . . 28 U.S.C. § 2415(a). Defendant's counterclaim here falls under Section 2415(a). It constitutes an "action" for purposes of 28 U.S.C. § 2415(a). As the Tenth Circuit noted in Oxy USA, Inc. v. Babbitt, 268 F.3d 1001, 1005 (10 th Cir. 2001), the phrase "every action" in Section 2415(a) is "patently broad, and is expressly limited in scope only by reference to the possibility of a specific exception `otherwise provided by Congress.'" Id. (citing 28 U.S.C. § 2415(a)). The counterclaim "is founded upon [a] contract express or implied in law or fact." See 28 U.S.C. § 2415(a). In particular, an action for unjust enrichment is

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based on a quasi-contract, which is synonymous with a "contract implied in law." United States v. State of Michigan, 851 F.2d 803, 810 (6 th Cir. 1988) (citing United States v. Limbs, 524 F.2d 799, 801-02 (9 th Cir. 1975)). Consequently, section 2415(a) is applicable to defendant's counterclaim for unjust enrichment. State of Michigan, 851 F.2d at 810. Defendant's counterclaim is timely under 28 U.S.C. § 2415(a). At most, defendant's claim for unjust enrichment arose on August 2, 2000, when the EEOC invalidated the settlement agreement. See Docket 196 at 4. Accordingly, defendant's counterclaim is timely under 28 U.S.C. § 2415(a). The counterclaim was filed within the six-year period permitted by that statute. The period of time between August 2, 2000 ­ when the claim allegedly arose ­ and December 9, 2005 ­ when defendant submitted its proposed Amended Answer to Second Amended Complaint ­ is five years and four months. Therefore, defendant could have filed a separate action against plaintiff for unjust enrichment, instead of seeking to bring a counter-claim against defendant for unjust enrichment. No purpose would have been served in bringing a separate claim, however, given plaintiff's current lawsuit and the utility of simply bringing a counter-claim against plaintiff.2 .

If defendant's counter-claim is stricken, pursuant to the Magistrate Judge's recommendation, defendant may seek to file an independent action against plaintiff for (continued...) -13-

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III.

CONCLUSION

As the caselaw provides, amendment is generally freely allowed when justice so requires. Justice would be served here if defendant is permitted to amend to add its restitution counter-claim. Plaintiff has been allowed to amend. Defendant is only asking for the same benefit that plaintiff has already been accorded by the Court. WHEREFORE, defendant respectfully requests that the Court reject the U.S. Magistrate Judge's Order and Recommendation, and instead permit defendant's restitution counter-claim to remain in this case. Dated this 10 th day of August, 2006. Respectfully submitted, WILLIAM J. LEONE United States Attorney s/ Michael C. Johnson MICHAEL C. JOHNSON Assistant United States Attorney 1225 Seventeenth Street, Suite 700 Denver, Colorado 80202 Telephone: (303) 454-0134 FAX: (303) 454-0408 E-mail: [email protected] Counsel for Defendant

(...continued) unjust enrichment. -14-

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CERTIFICATE OF SERVICE I hereby certify that on this 10 th day of August, 2006, I electronically filed the foregoing document with the Clerk of the Court using the CM/ECF system, which will send notification of such filing to the following e-mail addresses: Counsel for Plaintiff: Elizabeth Kapukihilani Pietsch Email: [email protected] Dugan William Edward Bliss Email: [email protected] Sean Robert Gallagher Email: [email protected]

I hereby certify that on this 10 th day of August, 2006, I served the foregoing document via electronic mail on the following non-CM/ECF participant: Agency Counsel: Thomas Kennedy [email protected]

s/ Michael C. Johnson MICHAEL C. JOHNSON Attorney for Defendant United States Attorney's Office 1225 Seventeenth Street, Suite 700 Denver, Colorado 80202 Telephone: (303) 454-0134 FAX: (303) 454-0408 E-mail: [email protected]

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