To seek leave or not to seek leave? That is a complicated question

April 23, 2015

Hunter Keeton, Marie A. McKiernan
(as published in Inside Counsel)

When a plaintiff amends its complaint with leave of court, must a defendant also seek leave before asserting new or amended counterclaims in its answer? Neither the Federal Rules of Civil Procedure nor the case law offer a simple answer to this seemingly straightforward question. Judge Saylor in the District of Massachusetts provided a new take on the issue in a case that was recently concluded, Bern Unlimited, Inc. v. The Burton Corp. His new framework has some procedural implications of which defendants should be aware.

The rule

After a case has gotten underway, Federal Rule of Civil Procedure 15(a)(2) requires either the court’s leave or the opposing party’s written consent for a party to amend its pleadings. Rule 15(a)(3) says that “any required response to an amended pleading must be made within the time remaining to respond to the original pleading or within 14 days after service of the amended pleading, whichever is later.” Consequently, while the rule dictates that a plaintiff must normally obtain leave of court to amend its complaint and outlines the time in which the defendant’s response must be filed, it does not say whether the defendant must obtain leave of court when asserting new or amended counterclaims to the plaintiff’s amended complaint.

Judge Saylor is not the first to recognize that Rule 15 lacks guidance on this issue, and no federal appellate court appears to have addressed it. So the district courts have fashioned several different methods, known as the “narrow,” “permissive,” and “moderate” approaches, to assess whether leave is required.

First, before 2009, some courts limited defendants’ abilities to amend without leave, applying the “narrow” approach. Under this framework, a defendant was permitted to amend its answer, adding counterclaims only if the new counterclaims directly related to the changes made in the amended complaint.

Second, the “permissive” method allows a defendant served with an amended complaint to amend its answer and add any new or amended counterclaims freely, without leave of court, regardless of the context or scope of the changes in the amended complaint.

Third, the “moderate” approach falls between the permissive and narrow approaches. Here, a defendant can insert new or additional counterclaims in its response to an amended complaint only if the amended complaint changes the theory or scope of the case, as the new counterclaims “respond” to a substantively new complaint.

Judge Saylor noted the narrow approach was removed from the Rules in 2009 and found deficiencies in both the permissive and moderate approaches. In his assessment, the permissive approach runs contrary to the purpose and spirit of Rule 15. Allowing the addition of any and all new counterclaims without leave of court could result in undue delay or prejudice, assertion of futile claims and abuse of the legal process. Judge Saylor also pointed out that applying the permissive approach allows for inconsistent treatment of the parties: requiring the plaintiff to seek leave but permitting the defendant to amend freely. Further, he found the moderate approach insufficient, as it asks a difficult question with no clear answer: whether a counterclaim “responds” to an amended complaint. This question could result in inconsistent applications across district courts.

A new approach

Finding the existing approaches lacking, Judge Saylor decided that the better solution would be to apply the Rule 15 standard to both parties and pleadings—the plaintiff’s amended complaint and the defendant’s amended answer—equally. Thus, both the plaintiff and defendant, seeking to add new or different claims or counterclaims respectively, are required to seek leave of the court prior to amending. Judge Saylor noted that such a framework requires the least “contortion” of Rule 15(a)’s language, since Rule 15(a)(2) requires the court’s leave before amending a pleading. In his estimation, this is the most practical way to permit defendants to amend or add new counterclaims when justice requires, while simultaneously allowing the court to protect against undue delay, prejudice, bad faith and futility.

This new framework would not affect answers that do not raise new or amended counterclaims in response to an amended complaint. Rather, Judge Saylor’s new approach sets forth a simple ground rule for defendants seeking to add new, different or amended counterclaims in response to the plaintiff amending its complaint.

Implications

If appearing before Judge Saylor or before a district court judge that may follow his approach, a defendant should seek leave of the court (or obtain its opponent’s written consent) prior to seeking to amend or add new counterclaims in response to an amended complaint. A defendant should seek leave of court or file a motion to amend its pleading within the 14 days it has to respond to an amended complaint.

But in practice, a defendant may instead oppose a plaintiff’s motion to amend the complaint. This allows the defendant to employ a preemptive strategy to alert the court of its intentions. In its opposition to the plaintiff’s motion to amend, the defendant could substantively argue why the plaintiff’s motion should be denied, but also provisionally notify the court of its own intention to seek leave to amend or add new counterclaims if the plaintiff is permitted to amend.

Alternatively, the defendant could oppose the plaintiff’s motion to amend and make a provisional motion to amend its answer by substantively outlining arguments why the defendant should be permitted to add new or different counterclaims. This would not only put the court and plaintiff on notice of the defendant’s intentions to amend, but it would also allow the judge to resolve both the plaintiff’s and defendant’s motions at once.

Among the many considerations that go into the strategic decision of whether to add or amend counterclaims in response to an amended complaint, this new Rule 15 approach and its procedural implications should not be overlooked.