“Good Cause” Supports Modification of the Scheduling Order, Allows Trustee to Amend a Complaint After Mandated Deadline
January 22, 2021, Southern District of Texas - The Liquidating Trustee of the Alliance Health Liquidating Trust, Mark Shapiro, brought a complaint to avoid and recover certain fraudulent and preferential transfers made by the Debtor, Uplift RX, LLC, and certain of its affiliates (collectively, "the Debtors"). The complaint alleged that Defendant Wall Street was the sole transferee of these transfers.
Subsequently, the Trustee sought leave to amend the complaint to add new claims and new defendants to the adversary proceeding. The deadline to amend the complaint was over. The Trustee reasoned that the delay in moving to amend resulted from the need for an additional investigation based on Wall Street's discovery responses. The Trustee argued that "good cause" supported modification of the scheduling order because, at the time the scheduling order was entered, the Trustee was unaware of the need to amend the original complaint. Wall Street opposed the Trustee's requests as barred by applicable statutes of limitations. The parties' dispute centered on three issues:
(1) Whether "good cause" existed to allow the Trustee to amend the complaint after the expiration of the pleading amendment deadline;
(2) Whether the claims the Trustee sought to add arose out of the same "conduct, transaction, or occurrence" pleaded in the original complaint"
3) Whether the new defendants received the "notice" required by Federal Rule of Civil Procedure 15(c).
The Court stated that - the focus of the "good cause" analysis is the movant's diligence in attempting to comply with the scheduling order. In the case at bar, the Court found that the Trustee diligently pursued additional information needed to amend the complaint before the close of discovery. Despite this diligence, the Trustee could not reasonably have met the amendment deadline, given that it was just two weeks after the Trustee received Wall Street's discovery response. Thus, the Court held that there was "good cause" to allow the Trustee to amend the complaint, in part, after the deadline set by the Court's scheduling order.
The Court also granted Trustee a leave to amend to add the two defendants – Peterson RX LLC and Dow Jones to the adversary proceeding because the claims asserted against these new defendants related-back to the original complaint. Further, they received notice of the original complaint, but the remaining prospective defendants did not. Thus, the Court allowed to add Peterson RX and Dow Jones as defendants but denied leave to add the remaining additional defendants.
The Court also ruled that the additional transfer claims did not arise from the same "conduct, transaction, or occurrence." Instead, each additional transfer claim was considered to have arisen from a distinct "transaction, or occurrence and are were thereby time-barred by§ 546(a)".
In re Uplift Rx, Nos. 17-32186, 19-3431, 2021 Bankr. LEXIS 136 (Bankr. S.D. Tex. Jan. 21, 2021)