Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca7-14-01729/USCOURTS-ca7-14-01729-0/pdf.json

Nature of Suit Code: 440
Nature of Suit: Other Civil Rights
Cause of Action: 

---

In the

United States Court of Appeals

For the Seventh Circuit ____________________

No. 14-1729

MEGAN RUNNION, a minor, through

her mother and next friend, EDIE RUNNION,

Plaintiff-Appellant,

v.

GIRL SCOUTS OF GREATER CHICAGO

AND NORTHWEST INDIANA,

Defendant-Appellee.

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 12 C 6066—Harry D. Leinenweber, Judge.

____________________

ARGUED DECEMBER 10, 2014 — DECIDED MAY 8, 2015

____________________

Before EASTERBROOK, SYKES, and HAMILTON, Circuit Judges.

HAMILTON, Circuit Judge. This appeal presents substantive 

issues concerning the scope of the federal Rehabilitation 

Act’s coverage of private organizations (like the Girl Scouts) 

that receive federal funding. Before addressing the merits, 

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though, we must address some recurring procedural issues 

involving Federal Rule of Civil Procedure 12(b)(6) dismissals 

and plaintiffs’ opportunities to amend complaints before entry of a final judgment of dismissal. In particular, we focus 

on how the 2009 amendment to Federal Rule of Civil Procedure 15(a)(1) affects amendment practice in district courts.

Plaintiff Megan Runnion was active in a Girl Scout troop 

run by defendant Girl Scouts of Greater Chicago and 

Northwest Indiana, which is the largest regional Girl Scout 

organization in the United States. Megan is deaf. For several 

years she benefitted from sign language interpreters provided by the Girl Scouts that enabled her to participate fully in 

the troop’s activities. The Girl Scouts then stopped providing 

interpreters. When her mother complained, Megan’s entire 

troop was disbanded. 

Megan alleges that the Girl Scouts violated the Rehabilitation Act by refusing to provide her with sign language services and then by disbanding her troop because her mother 

complained. The district court ultimately dismissed the case 

under Rule 12(b)(6), finding that Megan had failed to allege 

sufficiently that the Girl Scouts are subject to the Rehabilitation Act. Thinking amendment would be futile under its interpretation of the Rehabilitation Act, the district court dismissed the case without leave to amend. 

We reverse. We first set out the facts and procedural history of the case, including the substantive issue about the 

scope of the Rehabilitation Act’s coverage. We then turn to 

the procedural issues and seek to clarify the proper approach to motions for leave to amend complaints. We then 

resolve the substantive issues under the Rehabilitation Act 

and conclude that the district court erred by dismissing the 

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No. 14-1729 3

entire case without giving plaintiff an opportunity to amend 

her complaint. The district court corrected that error in part 

by vacating its judgment but then erred again by refusing to 

allow a proposed amended complaint that is more than sufficient to state a viable claim for relief.

I. Statutory and Procedural Background

Megan filed her original complaint under the Rehabilitation Act in August 2012 when she was twelve years old. The 

Rehabilitation Act of 1973 uses the Congressional spending 

power to protect the rights of individuals with disabilities. 

Section 504 of the Act provides: “No otherwise qualified individual with a disability in the United States ... shall, solely 

by reason of her or his disability, be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal 

financial assistance ... .” 29 U.S.C. § 794(a). A person who 

has been excluded, denied, or discriminated against may sue 

the recipient of federal funds to enforce her rights. 29 U.S.C. 

§ 794a(a)(2) (incorporating “remedies, procedures, and 

rights” from Title VI of the Civil Rights Act of 1964, 42 U.S.C. 

§ 2000d et seq.).

Megan alleged that she has a hearing impairment, that 

she was otherwise qualified to participate in and to benefit 

from programs and activities offered by the Girl Scouts, and 

that the defendant violated the anti-discrimination provisions of the Rehabilitation Act when it stopped providing 

her with sign language interpreters that she needs to participate in group activities. The decision excluded her from participating in and denied her the benefits of Girl Scout programs and services solely by reason of her disability. Megan 

also alleged that the Girl Scouts retaliated against her for reCase: 14-1729 Document: 39 Filed: 05/08/2015 Pages: 29
4 No. 14-1729

questing these services when they disbanded the troop in 

response to her mother’s complaints. 

This appeal does not present any question about whether, if the Rehabilitation Act applies to the Girl Scouts, the organization must supply sign-language interpretation. The 

disputed issue on the merits of this appeal is whether Megan 

alleged sufficiently that the activities from which she was 

excluded are covered under the Rehabilitation Act by virtue 

of the Girl Scouts receiving Federal funding. The act forbids 

discrimination on the basis of disability in any “program or 

activity” receiving “Federal financial assistance.” 29 U.S.C. § 

794(a). As relevant here, the Act defines “program or activity” as “all of the operations” of a private organization, 29 

U.S.C. § 794(b), if either (i) the private organization “as a 

whole” receives federal financial assistance, § 794(b)(3)(A)(i), 

or (ii) the private organization receives some federal funding 

and “is principally engaged in the business of providing education, health care, housing, social services, or parks and 

recreation,” § 794(b)(3)(A)(ii).1

In her initial complaint, Megan alleged without more that 

the Girl Scouts are “a recipient of federal financial assistance 

within the meaning of 29 U.S.C. § 794.” The Girl Scouts 

promptly moved to dismiss that complaint under Federal 

Rules of Civil Procedure 12(b)(1) (lack of subject-matter jurisdiction) and 12(b)(6) (failure to state a claim), arguing that 

Megan had not alleged sufficiently that they received federal 

financial assistance and were covered by the Rehabilitation 

1 The Act also contains provisions covering schools systems and a 

wide range of other federal, state, and local government activities that 

receive federal financial assistance but those provisions are not relevant 

in this appeal. See 29 U.S.C. § 794(b)(1) & (b)(2).

 

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No. 14-1729 5

Act. All parties now agree (correctly) that whether the Girl 

Scouts receive federal financial assistance has no effect on 

subject-matter jurisdiction and that federal-question jurisdiction under 28 U.S.C. § 1331 is proper. See generally Arbaugh 

v. Y&H Corp., 546 U.S. 500 (2006) (whether employer falls 

within the limited definition of an employer covered by Title 

VII of Civil Rights Act of 1964 is a merits-related determination and does not concern subject-matter jurisdiction). We 

need not worry further about subject-matter jurisdiction.

In its first decision, issued October 26, 2012, the district 

court sided with the Girl Scouts in an opinion granting the 

motion to dismiss under Rule 12(b)(6). The district court 

found that Megan’s original complaint had not alleged with 

sufficient factual detail that the Girl Scouts received federal 

financial assistance within the meaning of 29 U.S.C. § 794(b). 

Though Megan tried to argue that the defendant organization received financial assistance as a whole or was principally engaged in providing education or social services, the 

district court concluded that she had failed to allege facts 

supporting either theory. 

The conclusion that Megan needed to allege in her complaint facts supporting specific legal theories was problematic, to say the least. Even after Bell Atlantic Corp. v. Twombly, 

550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), 

the Federal Rules of Civil Procedure do not require code 

pleading. Under the old pre-Rules regime of code pleading, 

plaintiffs were required to plead the elements of a cause of 

action along with facts supporting each element. 5 Charles 

Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1216 (3d ed.) (describing code pleading as requiring 

“the pleader [to] set forth the ‘facts’ constituting a ‘cause of 

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action’”). Under the modern regime of the Federal Rules, the 

complaint need contain only factual allegations that give the 

defendant fair notice of the claim for relief and show the 

claim has “substantive plausibility.” Johnson v. City of Shelby, 

135 S. Ct. 346 (2014) (per curiam). As explained in Johnson: 

Petitioners stated simply, concisely, and directly events that, they alleged, entitled them to 

damages from the city. Having informed the 

city of the factual basis for their complaint, 

they were required to do no more to stave off 

threshold dismissal for want of an adequate 

statement of their claim.

135 S. Ct. at 347; accord, Bausch v. Stryker Corp., 630 F.3d 546, 

559–62 (7th Cir. 2010) (reversing dismissal where complaints 

gave fair notice of claims); Bartholet v Reishauer A.G. (Zurich), 

953 F.2d 1073, 1078 (7th Cir. 1992) (Federal Rules of Civil 

Procedure do not require complaint to specify legal theory 

or statute that supports claim for relief). Plaintiff has not argued on appeal that her original complaint was sufficient, 

though, so we need not reach a conclusion on that question.

Normally, the plaintiff would have an opportunity to 

avoid any harm caused by a problematic dismissal by 

amending her complaint to try to add what the district court 

found was lacking. Here, however, the district court took an 

unusual step after finding that the original complaint failed 

to state a claim. Without affording plaintiff any opportunity 

to try to correct the deficiencies the court had identified, the 

district court entered final judgment in favor of defendant.2

2 We must note the confusion about whether the district court entered a final judgment on October 26, 2012. The court’s opinion conclud-

 

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No. 14-1729 7

In light of the presumption in favor of giving plaintiffs at 

least one opportunity to amend, see, e.g., Luevano v. WalMart Stores, Inc., 722 F.3d 1014, 1024 (7th Cir. 2013), denying 

a plaintiff that opportunity carries a high risk of being 

deemed an abuse of discretion. The district court supported 

its decision with a finding that amendment would be futile, 

but that conclusion was based on a novel interpretation of 

the Rehabilitation Act and a preliminary view of the facts 

that could prove mistaken following amendment.

ed by saying only that “the Court grants Defendant’s Motion to Dismiss.” Though the court considered whether amendment might be futile, 

it said nothing about dismissing the case, let alone dismissing it with 

prejudice or denying leave to amend the complaint. The same day the 

court docketed a separate piece of paper called “Judgment in a Civil 

Case,” but that document also failed to acknowledge the difference. It 

said: “It is hereby ordered and adjudged that the motion by defendant to 

dismiss is granted,” but said nothing about dismissal of the action or 

whether plaintiffs were denied all relief.

If that were all we had before us, those documents would not have 

amounted to a final judgment. See Paganis v. Blonstein, 3 F.3d 1067, 1070 

(7th Cir. 1993) (noting that a judgment entry that simply grants a motion 

is too ambiguous to determine the disposition of the case). However, the 

court’s electronic docket entry for the “Judgment” includes a notation 

that is not on the judgment itself: “Case Terminated.” The discrepancy 

between the electronic docket and the docketed judgment is unfortunate, 

but the “Case Terminated” notation is a sufficiently clear indication that 

the district court believed it was finished with the case, at least where no 

party was prejudiced by the inconsistency. The parties reasonably concluded that final judgment of dismissal had been entered. See Luevano v. 

Wal-Mart Stores, Inc., 722 F.3d 1014, 1020–21 (7th Cir. 2013); Furnace v. 

Board of Trustees of Southern Illinois Univ., 218 F.3d 666, 669–70 (7th Cir. 

2000); Principal Mutual Life Ins. Co. v. Cincinnati TV 64 Ltd. Partnership, 845 

F.2d 674, 676 (7th Cir. 1988).

 

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Faced with a judgment entered without an opportunity 

to amend, Megan filed a motion to alter the judgment under 

Federal Rule of Civil Procedure 59(e) and for leave to file an 

amended complaint under Rule 15(a)(2). Megan attached a 

proposed amended complaint that set forth more specific 

allegations about the Girl Scouts’ funding and why she believed the defendant both had received funding as a whole 

and is an organization primarily engaged in education and 

social services. The proposed amended complaint cited publicly available information, including public statements by 

the Girl Scouts, about the organization’s funding and programming. 

On March 12, 2013, the district court granted the motion 

and vacated the judgment of October 26, 2012. There was a 

catch, though. The court said Megan could try to establish 

that defendant was a private organization receiving financial 

assistance “as a whole,” but the court refused to allow her to 

pursue the theory that the defendant was principally engaged in education or social services. The district court gave 

Megan thirty days to file a new amended complaint elaborating on only the “as a whole” theory for finding federal 

financial assistance. 

Megan filed such an amended complaint on April 11, 

2013. The Girl Scouts then filed a new motion to dismiss, 

which the district court granted on March 7, 2014. This time, 

the court’s judgment was clear: it said the court was indeed 

entering a final judgment in favor of defendant and against 

plaintiff. Megan then filed this appeal. She no longer pursues the theory that the Girl Scouts receive federal financial 

assistance “as a whole.” She stakes her appeal instead on the 

argument that the district court erred by refusing to allow 

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No. 14-1729 9

her to pursue the theory that the Girl Scouts are “principally 

engaged in the business of providing education, health care, 

... social services, or parks and recreation” as alleged in the 

proposed amended complaint submitted with her Rule 59(e) 

motion.

II. Procedural Issues

Before turning to the merits, we must sort out some procedural issues posed by the district court dismissing the 

original complaint and entering judgment without granting 

leave to amend the complaint. First, we consider the general 

approach district courts must take in reviewing motions for 

leave to amend. Second, we address how review of such motions is affected by the district court’s entry of judgment. Finally, we examine the impact of the 2009 amendment to Rule 

15(a)(1) on both pre- and post-judgment motions for leave to 

amend. 

A. General Rule—Liberal Approach to Amending Pleadings

When the district court granted the motion to dismiss the 

original complaint, Megan no longer had a right to amend 

her complaint as a matter of course. See Fed. R. Civ. P. 

15(a)(1) (right to amend expires 21 days after service of defendant’s motion to dismiss under Rule 12(b)). Ordinarily, 

however, a plaintiff whose original complaint has been dismissed under Rule 12(b)(6) should be given at least one opportunity to try to amend her complaint before the entire action is dismissed. We have said this repeatedly. E.g., Luevano 

v. Wal-Mart Stores, Inc., 722 F.3d at 1024; Bausch v. Stryker 

Corp., 630 F.3d at 562; Foster v DeLuca, 545 F.3d 582, 584 (7th 

Cir. 2008); Barry Aviation Inc. v. Land O’Lakes Municipal Airport Comm’n, 377 F.3d 682, 687 & n.3 (7th Cir. 2004) (collectCase: 14-1729 Document: 39 Filed: 05/08/2015 Pages: 29
10 No. 14-1729

ing cases). Rule 15(a)(2) governs when court approval is 

needed to amend a pleading: “The court should freely give 

leave [to amend] when justice so requires.” See generally 

Foman v. Davis, 371 U.S. 178, 182 (1962) (reversing denial of 

leave to amend by citing to Rule 15(a)(2)’s mandate to freely 

give leave to amend and stating “this mandate is to be heeded”).

When a district court denies a plaintiff such an opportunity, its decision will be reviewed rigorously on appeal. In 

Barry Aviation, we said that giving leave to amend freely is 

“especially advisable when such permission is sought after 

the dismissal of the first complaint. Unless it is certain from 

the face of the complaint that any amendment would be futile or otherwise unwarranted, the district court should grant 

leave to amend after granting a motion to dismiss.” 377 F.3d 

at 687 (emphasis added). We also endorsed the reasons for 

this practice given by Professors Wright and Miller:

The federal rule policy of deciding cases on the 

basis of the substantive rights involved rather 

than on technicalities requires that plaintiff be 

given every opportunity to cure a formal defect 

in his pleading. This is true even though the 

court doubts that plaintiff will be able to overcome the defects in his initial pleading. 

Amendment should be refused only if it appears to a certainty that plaintiff cannot state a 

claim. The better practice is to allow at least 

one amendment regardless of how unpromising the initial pleading appears because except 

in unusual circumstances it is unlikely that the 

court will be able to determine conclusively on 

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No. 14-1729 11

the face of a defective pleading whether plaintiff actually can state a claim.

Id. at 687, quoting 5A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1357 (2d ed. 1990).

Where it is clear that the defect cannot be corrected so 

that amendment is futile, it might do no harm to deny leave 

to amend and to enter an immediate final judgment, just as 

when an amendment has been unduly delayed or would 

cause undue prejudice to other parties. See, e.g., Airborne 

Beepers & Video, Inc. v. AT & T Mobility LLC, 499 F.3d 663, 666 

(7th Cir. 2007); James Cape & Sons Co. v. PCC Construction Co., 

453 F.3d 396, 400–01 (7th Cir. 2006); see also Foman, 371 U.S. 

at 182 (leave to amend may be denied based on futility, undue delay, undue prejudice, or bad faith). Such cases of clear 

futility at the outset of a case are rare, though, and this is not 

one of them.

The liberal standard for amending under Rule 15(a)(2) is 

especially important where the law is uncertain. In the wake 

of Twombly and Iqbal, there remain considerable uncertainty 

and variation among the lower courts as to just how demanding pleading standards have become. For a good recent 

illustration, see the majority and dissenting opinions in 

McCleary-Evans v. Maryland Dep’t of Transportation, 780 F.3d 

582 (4th Cir. 2015), which disagree about how to reconcile 

Swierkiewicz v. Sorema N.A., 534 U.S. 506 (2002), with Twombly 

and Iqbal. In the face of that uncertainty, applying the liberal 

standard for amending pleadings, especially in the early 

stages of a lawsuit, is the best way to ensure that cases will 

be decided justly and on their merits. See Foman, 371 U.S. at 

181–82, citing Fed. R. Civ. P. 1 (Federal Rules of Civil Procedure “should be construed and administered to secure the 

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just, speedy, and inexpensive determination of every action 

and proceeding.”). 

B. Amendment Following Entry of Judgment

Despite the liberal standard for amending pleadings, the 

Girl Scouts argue that our review of the district court’s decision to bar Megan from pursuing the “principally engaged” 

theory of Rehabilitation Act coverage should be more deferential because it was made as part of a decision on a Rule 

59(e) motion to modify a final judgment. We reject this argument, which contends in essence that one error by the district court (prematurely entering a final judgment on the basis of futility) should insulate another error (erroneously 

denying leave to amend on the basis of futility) from proper 

appellate review. 

It is true that when a district court has entered a final 

judgment of dismissal, the plaintiff cannot amend under 

Rule 15(a) unless the judgment is modified, either by the district court under Rule 59(e) or 60(b), or on appeal. Camp v. 

Gregory, 67 F.3d 1286, 1289 (7th Cir. 1995), citing Car Carriers, 

Inc. v. Ford Motor Co., 745 F.2d 1101, 1111 (7th Cir. 1984); see 

also Fed. R. Civ. P. 59(e) (motion to alter or amend judgment); Fed. R. Civ. P. 60(b) (motion for relief from final 

judgment). It is also true that Rules 59(e) and 60(b) provide 

“extraordinary remedies reserved for the exceptional case.” 

Foster, 545 F.3d at 584, citing Dickerson v. Board of Educ. of Ford 

Heights, 32 F.3d 1114, 1116 (7th Cir. 1994); see also 6 Charles 

Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1489 (3d ed.) (noting importance of finality of judgments and collecting cases noting same).

Because Rules 59(e) and 60(b) are reserved for extraordinary cases, the Girl Scouts urge us to apply a more demandCase: 14-1729 Document: 39 Filed: 05/08/2015 Pages: 29
No. 14-1729 13

ing standard to post-judgment motions to amend than we do 

to motions to amend filed prior to the entry of judgment. But 

the extraordinary nature of these remedies does not mean 

that a different standard applies—at least when judgment 

was entered at the same time the case was first dismissed. 

When the district court has taken the unusual step of entering judgment at the same time it dismisses the complaint, 

the court need not find other extraordinary circumstances 

and must still apply the liberal standard for amending 

pleadings under Rule 15(a)(2). See Foster, 545 F.3d at 584–85 

(noting that district courts “routinely do not terminate a case 

at the same time that they grant a defendant’s motion to 

dismiss”); Bausch v. Stryker Corp., 630 F.3d 546, 562 (7th Cir. 

2010).

Lest there be any doubt about the soundness of applying 

the liberal amendment policy of Rule 15(a)(2) to post-motion 

judgment motions for relief, the Supreme Court’s decision in 

Foman v. Davis, 371 U.S. 178 (1962), itself illustrates the point. 

The district court had granted a motion to dismiss a contract 

claim based on the statute of frauds and immediately entered judgment dismissing the case. Id. at 179. Plaintiff 

sought post-judgment relief that was treated as a Rule 59(e) 

motion, and because of some confusion about the timing of a 

notice of appeal, the appeal was dismissed. Foman v. Davis, 

292 F.2d 85, 87 (1st Cir. 1961). The Supreme Court reversed, 

and it applied the liberal amendment policy of Rule 15(a)(2) 

to the post-judgment motion for relief. Foman, 371 U.S. at 

182. 

Consistent with that approach, we have repeatedly applied that same liberal policy of amendment when reviewing 

district court decisions on post-judgment motions for leave 

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to amend. Bausch, 630 F.3d at 562; Foster, 545 F.3d at 584–85; 

Camp, 67 F.3d at 1290. We have reversed district court decisions that provide no explanation for why they denied 

amendment. See Foster, 545 F.3d at 584–85 (vacating denial of 

post-judgment relief made without explanation); accord, 

Foman, 371 U.S. at 182 (“[T]he grant or denial of an opportunity to amend is within the discretion of the District Court, 

but outright refusal to grant the leave without any justifying 

reason appearing for the denial is not an exercise of discretion; it is merely abuse of that discretion and inconsistent 

with the spirit of the Federal Rules.”). Similarly, we have affirmed a decision to grant post-judgment leave to amend 

when there was no reason the amendment should otherwise 

have been denied. See Camp, 67 F.3d at 1289–90. Finally, we 

have reversed a decision denying post-judgment amendment when the reason given by the district court for denying 

the amendment—futility of amendment—was not supported 

by the record. See Bausch, 630 F.3d at 562. 

In other words, a district court cannot nullify the liberal 

right to amend under Rule 15(a)(2) by entering judgment 

prematurely at the same time it dismisses the complaint that 

would be amended. As with pre-judgment motions for leave 

to amend, the district court must still provide some reason—

futility, undue delay, undue prejudice, or bad faith—for 

denying leave to amend, and we will review that decision 

under the same standard we would otherwise review decisions on Rule 15(a)(2) motions for leave to amend.

C. Effect of the 2009 Amendment

The Girl Scouts also argue that the district court was 

right to reject Megan’s “principally engaged” theory because 

the 2009 amendment to Rule 15(a)(1) requires district courts 

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No. 14-1729 15

reviewing motions for leave to amend under Rule 15(a)(2) to 

apply a more demanding standard than we have previously 

applied. The 2009 amendment imposed a new and shorter 

deadline for a plaintiff to exercise her right to amend her 

complaint as a matter of course, so the Girl Scouts suggest 

that we should similarly restrict plaintiff’s ability to amend 

with leave of the court. 

Before 2009, a plaintiff who lost a Rule 12(b)(6) motion 

challenging an original complaint had an absolute right to 

file an amended complaint. The rule then provided: “A party 

may amend its pleading once as a matter of course: ... before 

being served with a responsive pleading ... .” A motion under Rule 12(b)(6) is not a “pleading,” so the plaintiff had a 

right to amend “as a matter of course” after the motion was 

granted. E.g., Camp, 67 F.3d at 1289.

In 2009, Rule 15(a)(1) was amended to limit this right to 

amend as a matter of course:

A party may amend its pleading once as a matter of course within:

(A) 21 days after serving it, or

(B) if the pleading is one to which a responsive 

pleading is required, 21 days after service of a 

responsive pleading or 21 days after service of 

a motion under Rule 12(b), (e), or (f), whichever is earlier.

The advisory committee notes explain that the 2009 amendment

will force the pleader to consider carefully and 

promptly the wisdom of amending to meet the 

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arguments in the motion. A responsive 

amendment may avoid the need to decide the 

motion or reduce the number of issues to be 

decided, and will expedite determination of issues that otherwise might be raised seriatim.

Based on the 2009 amendment, the Girl Scouts argue that 

if Megan thought she might need to amend her complaint in 

light of the motion to dismiss, she should have done so within 21 days after she received that motion to dismiss pointing 

out deficiencies in her complaint. Her decision not to amend, 

according to the Girl Scouts, exposed her to the risk that the 

district court would grant the motion to dismiss and enter 

judgment dismissing the entire case, which the Girl Scouts 

argue is reason enough to find that the district court did not 

abuse its discretion in denying leave to amend. 

We disagree. The 2009 amendment did not impose on

plaintiff’s choice a pleading regime of “one-and-done.” 

Adopting that regime would attribute to the 2009 amendment of Rule 15(a)(1) a far greater coercive power than is evident in the text of the amended rule or the advisory committee’s explanation. The only coercive effect evident in the 

text is that 21 days after service of a Rule 12 motion, a plaintiff’s right to amend changes from one guaranteed under 

Rule 15(a)(1) to one governed by the liberal standard under 

Rule 15(a)(2). The loss of a guaranteed right to amend as a 

matter of course can be important, and the prospect of that 

loss may help persuade some plaintiffs confronted with a 

Rule 12 motion to respond by amending rather than spending time and money arguing about easily corrected deficiencies, whether real or imagined. The advisory committee 

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No. 14-1729 17

hoped that such a response might resolve a motion to dismiss without court action.

But a plaintiff who receives a Rule 12(b)(6) motion and 

who has good reason to think the complaint is sufficient may 

also choose to stand on the complaint and insist on a decision without losing the benefit of the well-established liberal 

standard for amendment with leave of court under Rule 

15(a)(2). That subsection was not amended and still applies 

after the right to amend as a matter of course has lapsed. The 

need for a liberal amendment standard remains in the face of 

uncertain pleading standards after Twombly and Iqbal.3

III. Merits of the Proposed Amendment

This excursion through the procedural history brings us 

to the question whether the district court erred by refusing 

to consider the “principally engaged” theory of Rehabilitation Act coverage alleged in Megan’s proposed amended 

complaint. Under that theory, all of the Girl Scouts’ operations would be subject to the Act if the organization “is principally engaged in the business of providing education, 

health care, housing, social services, or parks and recreation.” 29 U.S.C. § 794(b)(3)(A)(ii). The sole reason the district 

court gave for denying amendment was that under its interpretation of the statute, any amendment asserting the “principally engaged” theory would be futile. In the district 

court’s view, the complaint could never be amended to state 

a valid claim because the Rehabilitation Act excludes private 

3 A district court does not have the discretion to remove the liberal 

amendment standard by standing order or other mechanisms requiring 

plaintiffs to propose amendments before the court rules on a Rule 

12(b)(6) motion on pain of forfeiture of the right to amend.

 

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membership organizations like the Girl Scouts from its reach 

even if they might otherwise be principally engaged in 

providing one of the services designated in the statute. 

Despite the Girl Scouts’ argument to the contrary, none of 

the other grounds for denying leave to amend apply here. 

Plaintiffs did not fail to take advantage of several opportunities to amend. See, e.g., Agnew v. Nat’l Collegiate Athletic 

Ass’n, 683 F.3d 328, 347 (7th Cir. 2012) (affirming denial of 

fourth opportunity to amend). Nor is there any evidence that 

Megan unduly delayed amending the complaint or acted in 

bad faith. Once the district court told Megan that her complaint was deficient and entered judgment, she filed her Rule 

59(e) motion and proposed amended complaint within 28

days. Upon consideration of that motion, the district court 

made no finding of delay or bad faith and was willing to allow Megan to amend her complaint on the other theory in 

her motion seeking leave to amend—that the Girl Scouts received federal funding “as a whole.” The district court treated the two theories differently only because it thought one 

was futile while the other was not. 

In this case there is a further reason for concluding that 

Megan did not unduly delay by waiting to amend her complaint until after it was dismissed by the district court: there 

is uncertainty as to whether the Rehabilitation Act covers 

private organizations like the Girl Scouts. The relevant statutory language has been the subject of relatively few decisions, so this is not a case where a plaintiff obtusely failed to 

comply with well-established legal standards. Accordingly, 

Megan could reasonably have expected that the allegations 

in her original complaint would survive a motion to dismiss. 

Moreover, given how difficult it might be to discover all of 

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the Girl Scouts’ activities, the disputed issue is one that may 

require considerable time, effort, and money to litigate. It 

was reasonable for her to avoid that expense until she was 

sure that she failed to survive the motion to dismiss. Cf. 

Bausch v. Stryker Corp., 630 F.3d at 560–61 (recognizing that 

plaintiffs’ pleading burden is “commensurate with the 

amount of information available to them”) (citation and internal quotation marks omitted).

That leaves us with a denial based on futility. Generally, 

denials of leave to amend are reviewed for abuse of discretion. Gandhi v. Sitara Capital Management, LLC, 721 F.3d 865, 

868 (7th Cir. 2013). But when the basis for denial is futility, 

we apply the legal sufficiency standard of Rule 12(b)(6) to 

determine whether the proposed amended complaint fails to 

state a claim. See, e.g., General Electric Capital Corp. v. Lease 

Resolution Corp., 128 F.3d 1074, 1085 (7th Cir. 1997). Accordingly, our review for abuse of discretion of futility-based denials includes de novo review of the legal basis for the futility. 

See Gandhi, 721 F.3d at 868–69; accord, Ervin v. OS Restaurant 

Servs., Inc., 632 F.3d 971, 976 (7th Cir. 2011) (“If ... the district 

court applies an incorrect legal rule as part of its decision, 

then the framework within which it has applied its discretion is flawed, and the decision must be set aside as an 

abuse.”).

We conclude that the district court erred by finding that 

amendment would be futile. The proposed amended complaint here did not fail to state a claim upon which relief 

could be granted. Neither the text nor the legislative history 

of the Rehabilitation Act suggests that Megan’s claim is 

barred as a matter of law because organizations like the Girl 

Scouts are categorically exempt from the Rehabilitation Act. 

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Absent that categorical bar, Megan’s proposed amended 

complaint is more than sufficient to state a claim upon which 

relief can be granted. 

A. The Rehabilitation Act and Private Membership Organizations

We turn first to whether the district court correctly interpreted § 794(b)(3)(A) as not applying to organizations like 

the Girl Scouts. In finding that private membership organizations like the Girl Scouts could never be subject to the Rehabilitation Act, the district court found in the statute a requirement that the private organization provide a public 

service and be open to the public. This interpretation cannot 

be squared with the text of § 794(b)(3)(A). As written, the 

provision applies broadly to all sorts of private organizations 

so long as they receive federal funding and are “principally 

engaged” in providing one of the services enumerated in the 

statute. Since § 794(b)(3)(A)’s very purpose is to set out when 

private organizations are subject to the Rehabilitation Act, it 

is reasonable to assume that Congress would have been 

more explicit if it had wanted to exempt private membership 

organizations. 

For example, Congress might have expressly exempted 

private membership organizations or private organizations 

not open to the public, as it has done in other similar statutes. See, e.g., 42 U.S.C. § 2000a(e) (exempting from Title II

of Civil Rights Act of 1964 “a private club or other establishment not in fact open to the public”); 42 U.S.C. § 2000e(b) 

(excluding “bona fide private membership club” from definition of employer subject to Title VII); 42 U.S.C. § 

12111(5)(B)(ii) (excluding “bona fide private membership 

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club” from definition of employer subject to Americans with 

Disabilities Act). 

No such express exemptions are found in the text of the 

Rehabilitation Act. To find a broad exemption for private 

membership organizations, we would have to read into the 

statute an implied requirement that the private organization 

be open to the public. The district court did exactly that, 

supporting its categorical exemption with reference to case 

law interpreting similar anti-discrimination statutes and 

with legislative history of the Civil Rights Restoration Act of 

1987, which amended the Rehabilitation Act. The fact that 

other anti-discrimination statutes exempt private membership organizations expressly, see Welsh v. Boy Scouts of America, 993 F.2d 1267, 1276–77 (7th Cir. 1993), does not support 

but instead undermines the argument for an implied exemption here. We conclude that the Rehabilitation Act covers 

private organizations not open to the public if they receive 

federal financial assistance within the scope of § 794.

Because the text of the statute can apply so clearly to all 

private organizations that receive federal financial assistance, there is no need to resort to legislative history. See 

EEOC v. Chicago Club, 86 F.3d 1423, 1434 (7th Cir. 1996). In 

any event, the nuggets of legislative history cited by the district court do not support a categorical exemption for private 

membership organizations or organizations not open to the 

public. In the district court’s reading of the legislative history, the Rehabilitation Act should apply only to private entities that “provide[] a public service,” S. Rep. No. 100-64, at 4, 

20 (1988), or “perform governmental functions,” id. at 20. In 

the court’s view, a private membership organization cannot 

be deemed to provide a “public service” because it provides 

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services only to its members and is not generally open to the 

public. 

When read in context, however, the passages from the 

legislative history merely explain why the provision was 

limited to covering organizations providing the enumerated 

services. See S. Rep. No. 100-64, at 4 (“if the corporation provides a public service, such as social services, education, or 

housing, the entire corporation is covered”); id. at 18 (explaining that the bill under consideration would cover “private entities ... that provide services that are traditionally 

regarded as within the public sector, i.e., those enumerated 

in part (3)(A)(ii) of the definition of ‘program or activity’”); 

id. at 20 (“Even private corporations are covered in their entirety ... if they perform governmental functions, i.e., are 

‘principally engaged in the business of providing education, 

housing, social services, or parks and recreation.’”). To be 

sure, the services enumerated in the statute are often provided by governmental or public service entities. But private 

corporations choosing to provide these services—whether to 

their own members (or tuition-paying students) or to the 

public at large—are providing a “public service” in the way 

Congress envisioned.4

4 Under the Girl Scouts’ narrower reading, it is difficult to explain 

the presence of 29 U.S.C. § 794(b)(2), which provides that traditional private and public school systems are subject to the Rehabilitation Act. See 

34 C.F.R. § 104.39; 65 Fed. Reg. 68050, 68051 (Nov. 13, 2000) (explaining 

application of Act to private schools). Thus, for § 794(b)(3)(A)(ii) to have 

any substance for education services, it must apply to private organizations providing education services outside of the traditional school context.

 

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Even so, private membership organizations could still be 

exempt from the statute if they were thought to be, as a categorical matter, principally engaged in businesses other than 

providing the services enumerated in the statute. Cf. S. Rep. 

No. 100-64, at 18 (“Because they are principally religious organizations, institutions such as churches, dioceses and synagogues would not be considered to be ‘principally engaged 

in the business of providing education, health care, housing, 

social services or parks or recreation,’ even though they may 

conduct a number of programs in these areas.”). But nothing 

about the nature of private membership organizations 

makes it impossible for them to be engaged principally in 

providing the services found in the statute.

The primary activity of at least some private membership 

organizations that receive federal financial assistance is to 

engage in programs that fall within the statute. Others may 

not engage in any such programs, and some might engage in 

providing those sorts of services on the side. Whatever the 

case may be, the statute provides the standard—“principally 

engaged in the business of providing education, health care, 

housing, social services, or parks and recreation”—that can 

be applied on a case-by-case basis to private membership 

organizations to determine if they are covered by the Rehabilitation Act. Cf. Doe v. Salvation Army in U.S., 685 F.3d 564, 

571 (6th Cir. 2012) (declining to adopt a categorical rule for 

religious organizations because the legislative history “says 

nothing about a religious organization whose participation 

in such programs is its primary activity, or that churches 

may never be subject to liability under 29 U.S.C. § 794(a) if 

the vast majority of their activities are the provision of social 

services”). 

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B. “Principally Engaged” Coverage Under 29 U.S.C. 

§ 794(b)(3)(A)(ii)

Since no categorical exemption applies, we next evaluate 

whether plaintiff’s proposed amendment was otherwise futile. We apply the Rule 12(b)(6) standard for evaluating the 

legal sufficiency of a complaint. General Electric Capital, 128 

F.3d at 1085 (“The opportunity to amend a complaint is futile 

if ‘the complaint, as amended, would fail to state a claim upon which relief could be granted.’”) (citation omitted). That 

means we must accept as true all factual allegations in the 

complaint. Carlson v. CSX Transportation, Inc., 758 F.3d 819, 

826 (7th Cir. 2014). A claim for relief must be plausible rather 

than merely conceivable or speculative. See Ashcroft v. Iqbal, 

556 U.S. 662, 678 (2009); Bell Atlantic Corp. v. Twombly, 550 

U.S. 544, 556 (2007); Carlson, 758 F.3d at 826–27. But all this 

means is that the plaintiff must “include ‘enough details 

about the subject-matter of the case to present a story that 

holds together.’” Carlson, 758 F.3d at 827, quoting Swanson v. 

Citibank, N.A., 614 F.3d 400, 404–05 (7th Cir. 2010). At this 

pleading stage, we do not ask whether these things actually 

happened; instead, “the proper question to ask is still ‘could

these things have happened.’” Id., quoting Swanson, 614 F.3d 

at 404–05.

Turning to the requirements for establishing that the Rehabilitation Act covers a private organization under 

§ 794(b)(3)(A)(ii), we know that a plaintiff must eventually 

prove that the private organization is “principally engaged 

in the business of providing education, health care, housing, 

social services, or parks and recreation.” The statute does not 

define what these individual businesses entail or explain 

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what it means to be “principally engaged” in them. See Salvation Army, 685 F.3d at 568. 

Because the list of activities in § 794(b)(3)(A)(ii) is written 

in the disjunctive, Megan must eventually show that defendant engages in any one of these businesses. Megan focuses on the education and social services provided by the 

Girl Scouts.5 In terms of what businesses might qualify as 

providing education, the statute envisions that education is 

not limited to the sort of instruction received in a traditional 

school system. As noted above, formal educational systems 

are covered by a separate provision, § 794(b)(2). Section 

794(b)(3)(A)(ii), then, covers the sort of education offered by 

stand-alone schools or by other private organizations seeking to train and develop individuals. As to what constitutes 

a social service, it is “an activity designed to promote social 

well-being” such as “organized philanthropic assistance of 

the sick, destitute, or unfortunate.” Salvation Army, 685 F.3d 

at 570, quoting Merriam Webster’s Collegiate Dictionary 

1115 (10th Ed. 1995).6

5 Though she focuses on education and social services, plaintiff also 

points to some Girl Scout projects that involve providing health care and 

parks and recreation. 

6 The district court adopted a definition of social service that required the service to be performed by trained personnel. Though some 

definitions of social services may hint at the need for trained personnel, 

we see no textual basis for this limit, nor can we see why Congress 

would have imposed such a requirement here. Even if it had, nothing in 

the proposed amended complaint suggests that the Girl Scouts’ volunteer efforts are carried out without supervision by trained personnel. 

While the district court speculated that troop leaders are generally parent volunteers, it would be just as easy to infer that those volunteers 

 

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What it means to be “principally engaged” in providing 

these services poses a distinct question. “Principally engaged” has been interpreted in other contexts to mean “the 

primary activities of a business, excluding only incidental 

activities.” See Doe, 685 F.3d at 571. If any one of the designated activities is principal, that would be sufficient. Contrary to the Girl Scouts’ suggestion, however, a private organization would also fall within the statute if it engages in a mix 

of the statutorily enumerated services, e.g., if it provides social services and education services and those services in the 

aggregate make up the primary activities of the private organization. There is no reason to think Congress was laying 

out mutually exclusive conditions. Reading the statute this 

way also ensures that organizations that focus on providing 

more than one of the enumerated public services without 

committing to just one are still covered.7 This reading also 

renders unnecessary the difficult task of classifying hybrid 

activities that provide, for example, both education and social services. At bottom, then, the relevant inquiry is whether 

have received at least some training from the organization. Either way, 

this is the sort of dispute that cannot be resolved on the pleadings.

7 A simple example inspired by the federal government’s amicus 

brief illustrates why this is the correct reading. Suppose a private organization devotes 35% of its resources to education, 25% to social services 

and 40% to selling food. If each enumerated activity were considered in 

isolation, the organization might be deemed principally engaged in selling food even though 60% of its resources were spent providing the services enumerated in the statute. Now suppose a second organization 

devotes 51% of its resources to education, 9% to social services, and 40% 

to selling food. The second organization would certainly be covered. We

find it hard to believe that Congress intended the statute to cover the 

second organization but not the first. Both are principally engaged in 

providing the enumerated services.

 

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providing the statutorily enumerated services—the public 

services Congress specified—make up the primary activities 

of the organization.

Megan’s proposed amended complaint alleges plausibly 

that the Girl Scouts are a private organization principally 

engaged in the business of providing the services found in 

§ 794(b)(3)(A)(ii). Beyond merely alleging that the Girl 

Scouts received federal funds and were engaged in some of 

those activities as their principal business activities, which 

would have been sufficient for pleading purposes, the proposed amended complaint went much further. Megan’s 

complaint cites numerous instances in which the defendant 

has characterized itself and its programs as educational. The 

constitution of the national organization—which plaintiff 

alleges the Chicago-area defendant must follow—provides 

that “Girl Scouting is a nonformal, experiential, and cooperative education program that promotes girls’ personal growth 

and leadership development.” Plaintiff also cites a 2011 financial statement saying that defendant’s organization is “an 

out-of-school educational program designed to help girls put 

into practice the fundamental principles of the Girl Scout 

movement.”8

8 It does not pose a problem for plaintiff that she attached these exhibits to her complaint. In evaluating the sufficiency of a complaint, “the 

court may also consider documents attached to the pleading without 

converting the motion into one for summary judgment.” Wigod v. Wells 

Fargo Bank, N.A., 673 F.3d 547, 556 (7th Cir. 2012), citing Fed. R. Civ. P. 

10(c). Further, and contrary to the district court’s suggestion in its opinion dismissing the first complaint, plaintiff also would have been permitted to use these exhibits for the first time in opposition to a Rule 12(b)(6) 

motion in the district court. Geinosky v. City of Chicago, 675 F.3d 743, 745 

n.1 (7th Cir. 2012) (“a party opposing a Rule 12(b)(6) motion may submit 

 

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Going even further, the proposed amended complaint 

identifies many examples of programs the organization offers that indicate the organization is principally engaged in 

providing the services enumerated in the statute. Many of 

these programs are plausibly classified as providing education, health care, social services, or parks and recreation. The 

defendant even classifies the sale of cookies—perhaps the 

Girl Scouts’ most publicly visible program—as an integral 

part of achieving its overall educational goals. Taken all together, the allegations in the complaint exceed what is needed to allege plausibly that defendant is principally engaged 

in the business of providing the services enumerated in the 

statute. It would not have been futile to permit Megan to 

amend, and the district court’s contrary conclusion was a legal error that caused it to abuse its discretion in denying 

leave to amend.

Lest we be misunderstood, a plaintiff need not provide 

all the level of detail provided by Megan’s proposed amended complaint to survive a motion to dismiss. As detailed as 

the proposed amended complaint is, we recognize that 

plaintiff has focused on the portion of defendant’s activities 

and statements that are publicly available. Discovery may 

reveal additional activities and other evidence that will inform how best to classify defendant under the statute. That 

is why we have explained that plaintiffs’ “pleading burden 

should be commensurate with the amount of information 

available to them.” See Bausch, 630 F.3d at 561 (internal quomaterials outside the pleadings to illustrate the facts the party expects to 

be able to prove”). 

 

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tation marks omitted), quoting In re Medtronic, Inc. Sprint Fidelis Leads Products Liability Litig., 623 F.3d 1200, 1212 (8th Cir. 

2010) (Melloy, J., dissenting). We cannot expect, nor does 

Federal Rule of Civil Procedure 8 require, a plaintiff to plead 

information she could not access without discovery.

The district court thus erred first when it entered judgment on the original complaint and again when it rejected as 

futile the “principally engaged” theory of Rehabilitation Act 

coverage in plaintiff’s proposed amended complaint. The 

final judgment of the district court is REVERSED and the 

case is REMANDED for further proceedings consistent with 

this opinion.

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