Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_02-cv-02099/USCOURTS-azd-2_02-cv-02099-5/pdf.json

Nature of Suit Code: 360
Nature of Suit: Other Personal Injury
Cause of Action: 28:1441 Petition for Removal- Property Damage

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Diane Mann, as Trustee for )

the Estate of LeapSource, )

Inc., et al. )

)

Plaintiffs, ) No. CIV 02-2099-PHX RCB

)

vs. ) O R D E R

)

GTCR Golder Rauner, L.L.C., )

a Delaware limited liability )

company, et al., )

)

Defendants. ) )

This matter arises out of an adversary proceeding filed in the

bankruptcy of Debtor LeapSource, Inc. ("LeapSource") by Trustee

Diane Mann originally against Defendants ICG Group, Inc. ("ICG

Group"), Michael Makings, and Jane Doe Makings for the avoidance of

a transaction alleged to be a fraudulent conveyance, or

alternatively, a preferential transfer pursuant to 11 U.S.C. §§

547, 548, 500. Mann v. ICG Group, Inc. (In re LeapSource), Adv.

No. 02-1202 PHX JMM (Bankr. D. Ariz. 2002) (doc. 1). The case was 

Case 2:02-cv-02099-RCB Document 455 Filed 08/28/06 Page 1 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 2 -

withdrawn to this Court under case, CIV-02-2325-PHX-RCB, and

consolidated into related case, CIV-02-2099-PHX-RCB. Orders (doc.

60, 68); Mann v. ICG Group, Inc. (In re LeapSource), Adv. No. 02-

1202 PHX JMM (Bankr. D. Ariz. 2002) (doc. 3, 5); Mann v. ICG Group,

Inc. (In re LeapSource), No. CIV 02-2325 PHX RCB (D. Ariz. 2002)

(doc. 1-5). On January 20, 2006, the Trustee filed an Amended

Complaint ("Amend. Complt."), naming ICG Group as a defendant with

respect to the claim of preferential transfer. Amend. Complt.

(doc. 310). In the Amended Complaint, Plaintiffs also named

Marcia Makings as a defendant solely for purposes of binding

Makings' marital community. Amend. Complt. (doc. 310) at ¶ 5. 

Currently pending before the Court is a Rule 12(b)(6) motion

to dismiss by Defendants ICG Group and Marcia Makings. Mot. (doc.

316). The Trustee filed a response (doc. 330) on March 1, 2006,

Defendants filed a reply (doc. 338) on March 9, 2006, and the Court

heard oral argument on July 31, 2006. (doc. 415). Having

carefully considered the arguments presented by the parties, the

Court now rules.

I. BACKGROUND

ICG Group provides consulting services to large corporations

to help them integrate their financial and accounting systems. 

PSOF (doc. 313) at ¶ 1; DSOF (doc. 351) at ¶ 1. The ICG business

("ICG") was founded in approximately 1990, and Michael Makings was

one of the two co-founders. PSOF at ¶ 2; DSOF at ¶ 2. ICG was

owned by Image Consulting Group, Inc., which was later changed to

ICG Consulting, Inc. ("ICG Consulting"). Id. At all times prior

to the year 2000, Makings was ICG Consulting's 50% shareholder, one

of its two directors, and its president. Id.

Case 2:02-cv-02099-RCB Document 455 Filed 08/28/06 Page 2 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

 The parties dispute whether, in October of 2000, LeapSource

made Makings its Chief Operating Officer; however, they agree that on

or before February 27, 2001, Makings was named CEO and made a

director. PSOF (doc. 313) at ¶ 4; DSOF (doc. 351) at ¶ 4.

- 3 -

On January 1, 2000, LeapSource purchased the ICG business from

ICG Consulting for $10 million. PSOF (doc. 313) at ¶ 3; DSOF (doc.

351) at ¶ 3. Debtor paid $5 million in cash (including $2.5

million to Makings and $2.5 million to his partner) and delivered

$5 million worth of promissory notes, including a $2.5 million

Promissory Note to ICG Consulting (the "Note"), which it assigned

to Makings. Id.

After its acquisition of the ICG business, LeapSource hired

Makings as an employee.1 PSOF (doc. 313) at ¶ 4; DSOF (doc. 351)

at ¶ 4. Makings also became a shareholder of LeapSource, but

continued to operate the ICG business, integrating it into

LeapSource as a division of LeapSource, and conducting sales and

marketing activities for LeapSource on other accounts related to

ICG. Id.

In January of 2001, Makings accelerated the entire balance

owed on the Note, $2.5 million plus interest, due to Debtor's

default. PSOF (doc. 313) at ¶ 5; DSOF (doc. 351) at ¶ 5. 

Thereafter, in early March 2001, Makings began planning a

reacquisition of ICG. PSOF (doc. 313) at ¶ 6. On March 16, 2001,

Makings incorporated a new entity, ICG Group, and has been at all

times ICG Group's sole shareholder and sole director. Id.; DSOF

(doc. 351) at ¶ 6.

On March 20, 2001, Makings formally resigned as the CEO and as

a director of Debtor. PSOF (doc. 313) at ¶ 7; DSOF (doc. 351) at ¶

Case 2:02-cv-02099-RCB Document 455 Filed 08/28/06 Page 3 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 4 -

7. On March 29, 2001, Debtor's board of directors accepted

Making's resignation as a director, which was characterized as

effective on March 22, 2001. Id. Defendants assert, however, that

Makings' resignation was effective on March 20, 2001. DSOF (doc.

351) at ¶ 7. 

By Asset Purchase Agreement (the "Agreement") dated March 23,

2001, but allegedly signed on March 30, 2001, Debtor sold its ICG

division (the "ICG Asset") to ICG Group. PSOF (doc. 313) at ¶ 8;

DSOF (doc. 351) at ¶ 8. According to the Agreement, the "purchase

price" for the transfer consisted of ICG Group's forgiveness of the

Note that Debtor owed to Makings, which he had assigned to ICG

Group. Id. Additionally, ICG Group also agreed to assume several

third party liabilities owned by LeapSource, including telephone

lease payments, building lease payments, copier lease payments,

various accounts payable, and past and future payroll expenses. 

DSOF (doc. 351) at ¶ 8.

Pursuant to the Agreement, the ICG Asset was transferred to

ICG Group on March 30, 2001. PSOF (doc. 313) at ¶ 10; DSOF (doc.

351) at ¶ 11. ICG Group still owns and operates the ICG Asset

under the name ICG Consulting. PSOF (doc. 313) at ¶ 11; DSOF

(doc. 351) at ¶ 12.

On July 11, 2001, LeapSource filed a voluntary chapter 7

petition in the bankruptcy court, and Diane Mann was appointed as

Trustee. In re LeapSource, Inc., No. B 01-9020 PHX JMM (Bankr. D.

Ariz. 2001) (doc. 1). On October 10, 2002, the Trustee initiated

this adversary proceeding against Defendants ICG Group and Michael

Makings, seeking the avoidance of LeapSource's conveyance of the

ICG Asset to ICG Group as an alleged fraudulent or preferential

Case 2:02-cv-02099-RCB Document 455 Filed 08/28/06 Page 4 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

 Rule 15 of the Federal Rules of Civil Procedure applies in

bankruptcy adversary proceedings. Fed. R. Bankr. P. 7015. Under

Rule 15(a), the Trustee's Amended Complaint (doc. 310) is permitted

as a matter of course, because Defendants had not yet filed a

pleading responsive to the original complaint. See Fed. R. Civ. P.

15(a) ("A party may amend a party's pleading once as a matter of

course at any time before a responsive pleading is served . . . .").

Defendants would apparently have the Court nullify this provision,

arguing for the first time in their reply that the entire Amended

Complaint (doc. 310) should be barred for reasons of delay and unfair

prejudice. Reply (doc. 338) at 3.

Ordinarily, the Court would allow the Trustee an opportunity to

file a sur-reply to address this new argument. See Provenz v.

Miller, 102 F.3d 1478, 1483 (9th Cir. 1996) (holding that where a

party introduces new evidence in its reply brief, the district court

should not consider the new evidence without giving the non-movant an

opportunity to respond); cf. Corson & Gruman Co. v. NLRB, 899 F.2d

47, 50 (D.C. Cir. 1990) (requiring moving party to raise all

arguments in its opening brief to prevent "sandbagging" of opposing

party). Here, that is not necessary, because Defendants' argument is

- 5 -

transfer pursuant to 11 U.S.C. §§ 547, 548, 550. Mann v. ICG

Group, Inc. (In re LeapSource), Adv. No. 02-1202 PHX JMM (Bankr. D.

Ariz. 2002) (doc. 1); Exbt. A (doc. 330). The original complaint

alleged fraudulent transfer against ICG Group and Michael Makings

(Count 1), aiding and abetting a fraudulent transfer against

Michael Makings (Count 2), and preferential transfer against

Michael Makings (Count 3). Id. The original complaint also named

Jane Doe Makings, believed to be Michael Makings' wife, "solely for

the purposes of binding Makings' marital community." Id. at ¶ 5.

The Trustee's adversary proceeding was subsequently withdrawn

to this Court under case, CIV-02-2325-PHX-RCB, and consolidated

into related case, CIV-02-2099-PHX-RCB. Orders (doc. 60, 68); Mann

v. ICG Group, Inc. (In re LeapSource), Adv. No. 02-1202 PHX JMM

(Bankr. D. Ariz. 2002) (doc. 3, 5); Mann v. ICG Group, Inc. (In re

LeapSource), No. CIV 02-2325 PHX RCB (D. Ariz. 2002) (doc. 1-5). 

No response was ever filed to that action.2

Case 2:02-cv-02099-RCB Document 455 Filed 08/28/06 Page 5 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

wholly unmeritorious and without any basis in law. Defendants admit

that they have not filed a responsive pleading. See Reply (doc. 338)

at 3. This entitles the Trustee to an amendment as a matter of

course. See Fed. R. Civ. P. 15(a); Fed. R. Bankr. P. 7015. Because

a motion to amend is not before the Court-- indeed, is not even

necessary under the circumstances-- Defendants' Rule 15(a) arguments

serve no purpose.

- 6 -

On January 20, 2006, the Trustee filed an Amended Complaint,

naming ICG Group as an additional defendant with respect to the

preferential transfer claim (Count 3), and also naming Marcia

Makings, in place of Jane Doe Makings, as a defendant solely for

purposes of binding Michael Makings' marital community. Amend.

Complt. (doc. 310) at ¶¶ 5, 31-40.

On February 9, 2006, Defendants ICG Group and Marcia Makings

filed a Rule 12(b)(6) motion to dismiss, arguing that the Trustee's

amended claims do not relate back to the date of the original

complaint as provided under Rule 15(c), and, therefore, are timebarred. Mot. (doc. 316) at 3-6.

II. STANDARD OF REVIEW

Paragraphs (b) though (h) of Rule 12 of the Federal Rules of

Civil Procedure apply in bankruptcy adversary proceedings. Fed. R.

Bankr. P. 7012. Rule 12(b)(6) of the Federal Rules of Civil

Procedure allows a party to seek dismissal of a claim if the

claimant failed to state a claim upon which relief can be granted. 

Fed. R. Civ. P. 12(b)(6). Under Rule 12(b)(6), "dismissal for

failure to state a claim is improper unless 'it appears beyond

doubt that the plaintiff can prove no set of facts in support of

his claim which would entitle him to relief.'" Schowengerdt v.

Gen. Dynamics Corp., 823 F.2d 1328, 1332 (9th Cir. 1987) (quoting

Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). Factual argument is

Case 2:02-cv-02099-RCB Document 455 Filed 08/28/06 Page 6 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 7 -

inappropriate in a Rule 12(b)(6) motion, which tests only the legal

sufficiency of the complaint. Thus, in undertaking its analysis, a

court must limit its "review to the contents of the complaint,

accepting the material factual allegations as true and construing

them in the light most favorable to the [non-movant]." Id.

III. DISCUSSION

Defendants argue that all of the claims against Marcia

Makings, as well as the preferential transfer claim against ICG

Group, in the Trustee's Amended Complaint should be dismissed as

untimely under the relevant statute of limitations, 11 U.S.C. §

546(a). Mot. (doc. 316) at 3-6. Although conceding the timeliness

of the original complaint, Defendants contend that the amended

claims do not relate back to the date of the original complaint as

provided under Rule 15(c), thereby rendering them time-barred. Id.

Under Rule 15(c), "[a]n amendment of a pleading relates back

to the date of the original pleading" in three circumstances. 

First, for all amendments, relation back is permitted if

specifically contemplated "by the law that provides the statute of

limitations applicable to the action." Fed. R. Civ. P. 15(c)(1). 

Second, for amendments to claims or defenses, relation back is

permitted if "the claim or defense asserted in the amended pleading

arose out of the conduct, transaction, or occurrence set forth or

attempted to be set forth in the original pleading." Fed. R. Civ.

P. 15(c)(2). Third, for amendments "chang[ing] the party or the

naming of the party against whom a claim is asserted," relation

back is permitted if the amended claim is transactionally related

to the original pleading, and the party to be brought in by

amendment "knew or should have known that, but for a mistake

Case 2:02-cv-02099-RCB Document 455 Filed 08/28/06 Page 7 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 8 -

concerning the identity of the proper party, the action would have

been brought against the party." Fed. R. Civ. P. 15(c)(3). This

requires the plaintiff "to establish that (1) it made a mistake of

identity in failing to sue [the party to be brought in by

amendment] . . . , and (2) [the party to be brought in by

amendment] knew or should have known, by the time the limitation

period expired . . . , that [the plaintiff] had made the mistake." 

Louisiana-Pacific Corp. v. ASARCO, Inc., 5 F.3d 431, 434 (9th Cir.

1993) (citation omitted). In addition, the party to be brought in

by amendment must receive timely notice so as "not [to] be

prejudiced in maintaining a defense on the merits." Id.

In the present action, the law providing the statute of

limitations applicable to the Trustee's claims of fraudulent and

preferential transfers does not specifically provide for relation

back. See 11 U.S.C. § 546(a). Therefore, only the second and

third subparts of Rule 15(c) can apply in determining whether the

amended claims relate back to the date of the original complaint as

to each of the defendants.

A. Relation Back of Amended Complaint as to ICG Group

Defendants argue that there can be no relation back for the

preferential transfer claims against ICG Group under the more

stringent provisions of Rule 15(c)(3), because the Trustee cannot

show that there was ever a mistake as to the identity of ICG Group

as a proper defendant. Mot. (doc. 316) at 5 (citing ASARCO, Inc.,

5 F.3d at 434). Alternatively, Defendants argue that even if Rule

15(c)(2) were to apply, relation back should not be allowed as it

would unfairly prejudice ICG Group in its ability to maintain its

defense. Reply (doc. 338) at 4. Both arguments fail.

Case 2:02-cv-02099-RCB Document 455 Filed 08/28/06 Page 8 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

 Ordinarily, when matters outside the pleadings are introduced

on a Rule 12(b)(6) motion, and these matters are not excluded by the

court, the motion is to be treated as one for summary judgment and

disposed of as provided in Rule 56. See Fed. R. Civ. P. 12(b).

However, under Rule 201 of the Federal Rules of Evidence, a district

court may take judicial notice of "matters of public record" outside

the pleadings without converting a motion to dismiss into a motion

for summary judgment. MGIC Indem. Corp. v. Weisman, 803 F.2d 500,

504 (9th Cir. 1986). The Federal Rules of Evidence apply in

bankruptcy adversary proceedings. Fed. R. Bankr. P. 9017.

Accordingly, the Court takes judicial notice of the original

complaint in Mann v. ICG Group, Inc. (In re LeapSource), Adv. No. 02-

- 9 -

1. Rule 15(c)(2) Is the Appropriate Standard

The Trustee correctly notes that Rule 15(c)(2), and not Rule

15(c)(3), controls here, as ICG was already a defendant in the

original action. Resp. (doc. 330) at 6-9. The Court agrees. 

Because ICG Group was named in the original action, and not

introduced for the first time by amendment, Rule 15(c)(2) is the

appropriate standard. See Martell v. Trilogy, Ltd., 872 F.2d 322,

324-25 (9th Cir. 1989) (discussing the different standards under

Rule 15(c) applicable to amendments "that amend[] the claims

against a party already named in the pleading and [those] . . .

that amend[] the party to the original pleading"). In their reply,

Defendants do not challenge the Trustee's position in this regard. 

See Reply (doc. 338) at 4.

The decisive inquiry therefore is not whether there was a

mistake as to ICG Group's identity, but whether the preferential

transfer claim in the amended complaint "arose out of the conduct,

transaction, or occurrence set forth . . . in the original

pleading." See Fed. R. Civ. P. 15(c)(2). It is without question

that the Trustee's preferential transfer allegations concern the

same conduct and transaction at issue in the fraudulent transfer

claim in the original complaint3

-- namely, LeapSource's transfer of

Case 2:02-cv-02099-RCB Document 455 Filed 08/28/06 Page 9 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1202 PHX JMM (Bankr. D. Ariz. 2002) (doc. 1), as a matter of public

record having a direct relation to the matters at issue in this case.

Fed. R. Evid. 201; Borneo, Inc., 971 F.2d at 248.

4

 Among the prerequisites of relation back under Rule 15(c)(3)

is the requirement that, "within the period provided by Rule 4(m) for

service of the summons and complaint, the party to be brought in by

amendment . . . has received such notice of the institution of the

action that the party will not be prejudiced in maintaining a defense

on the merits." Fed. R. Civ. P. 15(c)(3). There is no such

reference to "prejudice" in Rule 15(c)(2). See Fed. R. Civ. P.

15(c)(2).

- 10 -

the ICG Asset to ICG Group– making relation back appropriate under

Rule 15(c)(2). See Amend. Complt. (doc. 310) at ¶¶ 14-18, 31-40;

Exbt. A (doc. 330) at ¶¶ 14-26; see also Mendelsohn v. Mack Fin.

Corp. (In re Frank Santora Equip. Corp.), 202 B.R. 543, 545-46

(Bankr. E.D.N.Y. 1996) (allowing Trustee's amended claim of

fraudulent conveyance to relate back under Rule 15(c)(2) where the

original "preference action and the fraudulent conveyance action

ar[o]se from the same underlying transaction"); see also Birdsell

v. U.S. W. Newvector Group, Inc. (In re Cellular Express of Ariz.),

275 B.R. 357, 364 (Bankr. D. Ariz. 2002) ("It's only where there

are absolutely no adequately identified transactions in the

original complaint that relation back should be denied . . . .").

2. Avoidance of Prejudice

Defendants argue in the alternative that, even under Rule

15(c)(2), the Trustee's preferential transfer claim against ICG

Group should not relate back to the date of the original complaint

because it would be unfairly prejudiced in its ability to maintain

its defense. See Reply (doc. 338) at 4. The Court rejects this

argument also, because the prejudice factor relied upon by

Defendants is only relevant to Rule 15(c)(3), which does not apply

here.4

 See Fed. R. Civ. P. 15(c).

Case 2:02-cv-02099-RCB Document 455 Filed 08/28/06 Page 10 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5

 In ASARCO, the amended pleading at issue was filed in 1989.

See ASARCO, 5 F.3d at 433. At that time, the rule regarding relation

back of amendments provided in pertinent part as follows:

Whenever the claim or defense asserted in the

amended pleading arose out of the conduct,

transaction, or occurrence set forth or attempted

to be set forth in the original pleading, the

amendment relates back to the date of the

original pleading. An amendment changing the

party against whom a claim is asserted relates

back if the foregoing provision is satisfied and,

within the period provided by law for commencing

the action against the party to be brought in by

amendment, that party (1) has received such

notice of the institution of the action that the

party will not be prejudiced in maintaining a

defense on the merits, and (2) knew or should

have known that, but for a mistake concerning the

identity of the proper party, the action would

- 11 -

Contrary to the plain meaning of Rule 15(c), Defendants claim

that the Ninth Circuit, in ASARCO, somehow broadened the

applicability of the prejudice factor so that it would apply under

Rule 15(c)(2). See Reply (doc. 338) at 4 ("This 'prejudice' factor

is not unique to Rule 15(c)(2) or 15(c)(3) but rather applies to

any amended pleading."). This confusion concerning the

applicability of ASARCO probably arises from the court's lack of

reference to Rule 15(c)(3) in its decision. See ASARCO, 5 F.3d

431. Of course, the reason for that omission is that the version

of Rule 15(c) in effect at that time did not contain subparts as

the current version does. See Fed. R. Civ. P. 15(c) (1990)

(amended 1991). Nevertheless, it is apparent that the ASARCO

court's discussion of the prejudice factor was limited to that

portion of former Rule 15(c) concerning amendments that introduce

new parties, which has since been codified in current Rule

15(c)(3).5

Case 2:02-cv-02099-RCB Document 455 Filed 08/28/06 Page 11 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

have been brought against the party.

Fed. R. Civ. P. 15(c) (1990) (amended 1991) (emphasis added); see

also Percy, 841 F.2d at 978 (quoting former Rule 15(c)). Although

the ASARCO court did not explicitly say so, it is apparent from the

substance of the opinion that it was interpreting and applying the

second sentence of former Rule 15(c), because the plaintiff in that

case was attempting to sue a new party that had not been named in the

original complaint. See ASARCO, 5 F.3d at 434-35; cf. Percy, 841

F.2d at 978 ("The second sentence of Rule 15(c) controls relation

back of an amendment that seeks to add a new party.").

- 12 -

Thus, while the avoidance of prejudice is an express

prerequisite for the relation back of amendments introducing new

parties, it is not required for amendments introducing new claims

against parties named in the original pleading. See Percy v. S.F.

Gen. Hosp., 841 F.2d 975, 978 (9th Cir. 1988). Where a new claim

is asserted against an existing party, as in the present situation,

the district court is not called upon to exercise its discretion to

consider prejudice to the defendant. See id. Rather, the court's

obligation is to "compare[] the original complaint with the amended

complaint and decide[] whether the claim to be added will likely be

prove[n] by the same kind of evidence offered in support of the

original pleading." Id. (internal quotations omitted). The

requirement of transactional relatedness built into Rule 15(c)(2)

thus protects the interests of the defendant against whom a new

claim is introduced by ensuring that the original complaint put the

defendant on sufficient notice of the "particular transaction or

set of facts that the plaintiff believes to have caused the

complained of injury." See id. at 979.

As noted above, the Trustee's claims of preferential and

fraudulent transfer are transactionally related. Both concern

LeapSource's transfer of the ICG Asset to ICG Group, and both will

Case 2:02-cv-02099-RCB Document 455 Filed 08/28/06 Page 12 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 13 -

be proven largely by the same set of facts. See Amend. Complt.

(doc. 310) at ¶¶ 14-18, 31-40; Exbt. A (doc. 330) at ¶¶ 14-26. In

view of the overlapping issues of LeapSource's insolvency and the

relative values realized by the parties to the transaction, ICG

Group will hardly be "robbed . . . of its rightful discovery" in

defending against the preferential transfer claim. See Reply (doc.

338) at 4; Amend. Complt. (doc. 310) at ¶¶ 14-18, 31-40; Exbt. A

(doc. 330) at ¶¶ 14-26; see also Mendelsohn, 202 B.R. at 545-46

(finding "no actual prejudice to the Defendant," because "[t]he

Trustee has the same burden of proof to prove its case under

Section 547 and 548."). Because the original complaint

specifically identified the ICG Asset transfer as the transaction

to be avoided, ICG Group was at that time fairly apprised of the

"claims that might follow from the facts alleged by [the Trustee]." 

See Percy, 841 F.2d at 979; Mendelsohn, 202 B.R. at 546 (noting

that an amended "fraudulent conveyance claim stem[ming] from the

same basic facts as alleged in the initial complaint[] . . . put

the Defendant on sufficient notice so as to permit relation back to

the initial date of the complaint."); Birdsell, 275 B.R. at 364. 

There being no prejudice to Defendants, the Court therefore finds

that the preferential transfer claim asserted against ICG Group in

the Amended Complaint (doc. 310) relates back to the date of the

original complaint under Rule 15(c)(2).

B. Relation Back of Amended Complaint as to Marcia Makings

The original complaint named Jane Doe Makings as a party

"solely for purposes of binding [Michael] Makings' marital

community." Exbt. A (doc. 330) at ¶ 5. Similarly, the Amended

Complaint names Marcia Makings in her marital capacity for the same

Case 2:02-cv-02099-RCB Document 455 Filed 08/28/06 Page 13 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6

 Defendants also argue that, even if Rule 15(c)(2) applied, the

amendment should not relate back as it would unfairly prejudice

Marcia Makings' ability to maintain her defense on the merits. Reply

(doc. 338) at 4. As Rule 15(c)(3) controls, the Court will not

address this second argument. Even if Rule 15(c)(2) were applicable,

this argument would be rejected for the same reasons discussed above

with regard to ICG Group.

- 14 -

purpose. Amend. Complt. (doc. 310) at ¶ 5. Defendants argue that

this amendment should not relate back to the date of the original

complaint, because the Trustee cannot show that there was ever a

mistake as to Marcia Makings' identity as a proper defendant.6

Mot. (doc. 316) at 5 (citing ASARCO, Inc., 5 F.3d at 434). 

Because the amendment at issue "changes . . . the naming of the

party against whom a claim is asserted," the Trustee must show (1)

that the claims against Marcia Makings in the Amended Complaint

(doc. 310) are transactionally related to the matters set forth in

the original complaint, (2) that Marcia Makings has received notice

of the action such that she will not be prejudiced in maintaining

her defense on the merits, and (3) that Marcia Makings "knew or

should have known that, but for a mistake concerning the identity

of the proper party, the action would have been brought against

[her]." See Fed. R. Civ. P. 15(c)(3).

Upon review of the original and amended complaints, and the

for the reasons explained above, the Court is satisfied that the

matters set forth in both are transactionally related. See Amend.

Complt. (doc. 310); Exbt. A (doc. 330). Defendants do not contend

otherwise.

Similarly, Defendants do not complain of any prejudice arising

Case 2:02-cv-02099-RCB Document 455 Filed 08/28/06 Page 14 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

7

 Indeed, based on Marcia Makings' filing of the present motion

(doc. 316) within one month of the Amended Complaint (doc. 310), it

is apparent that she has had such timely notice of the institution of

this action such that she would not be prejudiced in her ability to

maintain her defense.

8

 Unusually, this argument would imply that at one point Marcia

Makings was actually named as a defendant in the action, and was

subsequently dropped as a party. The Court surmises that Defendants

mean that after the withdrawal and consolidation of this adversary

proceeding, Jane Doe Makings was somehow omitted as a party, and

subsequently failed to appear or participate in this adversary

proceeding or the related civil case. As it happens, the docket

sheets for the lead case as well as the present case, Mann v. ICG

Group, Inc. (In re LeapSource, Inc.), CIV 02-2325 PHX RCB (D. Ariz.

2002), both reflect the status of Jane Doe Makings as a defendant.

- 15 -

from lack of notice.7 Instead, Defendants claim that Marcia

Makings "was effectively dismissed when the Adversary Proceeding

was consolidated into the GTCR lawsuit," and was thereby prejudiced

by her lack of participation in discovery in the related case, Mann

v. GTCR Golder Rauner, LLC, CIV 02-2099 PHX RCB (D. Ariz. 2002).8

Once again, Defendants conflate issues of Rule 15(a) prejudice with

Rule 15(c)(3) prejudice. Although the two are different, and the

Rule 15(a) arguments misplaced, Defendants' arguments fail on their

merits. To the extent that Marcia Makings is named solely for the

purpose of binding the marital community, Defendants greatly

exaggerate the prejudice from her lack of involvement in discovery. 

See Reply (doc. 338) at 5. A defendant of such limited capacity is

unlikely to hold such pivotal importance that greater participation

by her would contribute significantly to the robust discovery that

has already taken place in these cases. Moreover, "the adverse

party's burden of undertaking discovery, standing alone, does not

suffice to warrant denial of a motion to amend a pleading." United

States v. Cont'l Ill. Bank & Trust Co. of Chi., 889 F.2d 1248, 1255

Case 2:02-cv-02099-RCB Document 455 Filed 08/28/06 Page 15 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 16 -

(2d Cir. 1989).

The remaining issue is whether the Trustee made a mistake

concerning Marcia Makings' identity when she failed to name her in

the original complaint. This requirement has two elements. First,

the Trustee must show that she made a mistake of identity in

failing to sue Marcia Makings when she sued Jane Doe Makings. 

Second, the Trustee must show that Marcia Makings knew or should

have known that the Trustee had made a mistake in naming Jane Doe

Makings instead of her. See ASARCO, 5 F.3d at 434.

As to the first element, in determining whether the Trustee

made a mistake of identity, the relevant information is what the

Trustee knew or thought she knew when she filed the original

complaint. Centuori v. Experian Info. Solutions, Inc., 329 F.

Supp. 2d 1133, 1138 (D. Ariz. 2004). Defendants do not make any

arguments concerning the Trustee's state of mind at the time of

filing the original complaint. Instead, they claim that the

Trustee, by conducting discovery prior to filing the adversary

proceeding, should have obtained information ostensibly known to

LeapSource regarding Marcia Makings' identity as Michael Makings'

wife. Mot. (doc. 316) at 5. In addition, Defendants point to

events subsequent to the initiation of the adversary proceeding

that presumably should have prompted the Trustee to amend sooner. 

See id. None of this shows that the Trustee, at the time of filing

the original complaint, knew or thought she knew the true name or

identity of Michael Makings' wife. See Centuori, 329 F. Supp. 2d

at 1138. Therefore, the Court accepts the Trustee's assertion that

Jane Doe Makings was named due to a mistake of identity as to the

proper defendant.

Case 2:02-cv-02099-RCB Document 455 Filed 08/28/06 Page 16 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 17 -

As to the second element, Defendants do not claim that Marcia

Makings did not understand that the Trustee's naming of "Jane Doe

Makings" in the original complaint referred to her. The original

complaint states, "[u]pon information and belief, Jane Doe Makings

is Michael Makings' wife and is named as a defendant herein solely

for purposes of binding Makings' marital community." Exbt. A (doc.

330) at ¶ 5. Prior to the expiration of the statute of

limitations, Marcia Makings knew that she was Michael Makings'

wife, and that she would have been named instead of Jane Doe

Makings had the Trustee known her true name at that time. All the

requirements of Rule 15(c)(3) being met, the Trustee's amendment

naming Marcia Makings as a defendant relates back to the date of

the original complaint.

IV. CONCLUSION

For the foregoing reasons, the Court finds that the Trustee's

Amended Complaint (doc. 310) in its entirety relates back to the

date of the original complaint under Rule 15(c) of the Federal

Rules of Civil Procedure, rendering all claims timely under 11

U.S.C. § 546(a). Therefore,

IT IS ORDERED that Defendants' Motion to Dismiss (doc. 316) is

DENIED.

DATED this 28th day of August, 2006.

Copies to counsel of record.

Case 2:02-cv-02099-RCB Document 455 Filed 08/28/06 Page 17 of 17