FI LED U. S . COURT OF AP PE ALS E L E V E N T H C IR C U IT D e c e m be r 11, 2006 T HOM AS K. KAHN CL E RK [ DO NO T P UB L I S H] I N THE UN I TE D STATE S C OU RT OF APPE ALS F O R T H E E L E V E N T H C IR C U IT

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_________________________ ( D e c e m b e r 11, 2006)Honora ble Lyle E. Strom, United States District Judg e for the District of Nebraska , * sitti ngby designation. Th e sere late d entitie s w e rea ff ili ate d entitie s o f Koh lbergKravisRob e rt s, c e rt ain 1 individuals who werepartners in KohlbergKravis Roberts and offic ers a nd/or direc tors of Br uno’s, Inc., and two c ompanies that rendere d opinions for Br uno’s. In the seven year s since the c ase w as orig inally filed, it has come be forefive fe deral 2 judge s and a va

riety of state judg es. In its wanderingtrave ls, the casehas enc ountere d two bankruptc y

courts and theAlabama

Supreme Court, and numerous motions for dismissal and rec onsideration. 2 B ef ore A N D E R S O N and B A R K E T T C i rc ui tJudg es , and S T R O M , D i stri ctJudg e. * P E R C U R I A M: W . R . H uff A ss etM anagem entC o. , L L C (“ H uff” ) app ea l s f rom the di sm i ss al of H uff’ s T hi rd A m ended C om pl ai ntand d eni al of l ea ve t o fi l e aF ou rth A m ended C om pl ai ntagai nstK oh l berg K ra vi s R ob ert s & C o. and v ar i ou s r el at ed ent i t i es (c ol l ec t i vel y, “ K K R ”) . 1 B AC KG RO UN D T h is c a s e o r ig in a te d in th e C ir c u it C o u r t o f J e f f e r s o n C o u n ty , A lab a m a , in A u g u s t 1 9 9 9 , w h e n H u f f f ile d a n a c tio n a g a in s t K K R o n b e h a lf o f c e r ta in benefi ci al ow ners of 10 1⁄2 % se ni or subo rdi nat ed no t es i ss ued b y B runo ’ s ( “ N ot es ”) , a su p erm ark etch ai n o w n er. In th e o ri g i n al co m p l ai n tan d i t s am en d ed su ccesso rs, H uff r epea t edl y a ss ert ed A l abam a s t at e l aw cl ai m s f or fr audu l enttra nsfe r, brea ch of fi du ci ary duty, ai di ng and abett i ng , and con spi ra cy . T here af t er , the ca se had lo n g a n d to r tu r o u s p r o c e d u r a l h is to ry , w h ic h g iv e s r is e to th e p r e s e n t ap p e a l. 2Th at peri od wa s amend e d in

20 02 to e xten d th estatut eof repo seperi od

to f iveye ars , 3 see 28 U.S.C. § 1658(b)(i)(2) , but Huff c oncede s that this amendment does not apply here . 3 D ur i ng thi s e xt e nde d ody s s e y , H uf f ha s f i l e d thr e e a m e nde d c om pl a i nt s a nd s ought l ea ve t o fi l e afourth. T he m ai n i ss ue i n the ca se pert ai ned t o w hether the S ec uri t i es L i t i gat i on U ni form S t andards A ctof 19 98 , 15 U . S . C . §§ 77 p and 78 bb (f ) ( “ S L U S A ” ) , pr e e m pt s H uf f’ s s t a t e l a w c l a i m s . A ny f e de r a l c l a i m s H uf

f m i ghtha ve h a d a g a in s t K K R e x p ir e d b e f o r e H u f f f ile d its f ir s t a c tio n in A u g u s t 1 9 9 9 , d u e to th e th r e e - y e a rs ta tu te o f r e p o s e th e n s e t f

o r th in S L U S A . See 15 U . S . C . § 7 8r(c ). 3 A f t e rm uc h l i t i ga t i on pe r t a i ni ng t o a m e nde d c om pl a i nt s , ba nkrupt c y , a nd the p r e e m p tiv e e f

f e c t o f S L U S A , H u f

f f ile d a T h ir d A m e n d e d C o m p la in t, a g a in a s s e r t i ng onl y s t a t e l a w c l a i m s , w hi c h H uf f a r gue d w e r e out s i de the a m bi tof S L U S A . K K R m ov ed t o stri ke the T hi rd A m ended C om pl ai nton the grou nd s that i tfa i l ed t o adh er e t o a previ ou s orderent er ed by Judg e K ar on B ow dre on O ct ob er 22 , 20 02 , w hi ch di sm i ss ed H uff’ s S ec on d A m ended C om pl ai ntand g ra nt ed H uff l e a ve t o “ a s s e r ta ny appl i c abl e f e de r a l c l a i m s i tm a y ha ve unde rS L U S A . ” H uf f v. K ohl be r g K r a vi s & R obe r t s , 234 F . S upp. 2d 1218, 1227 ( M . D . A l a 2002) . J udge B ow dr e the n on D e c e m be r12, 2002 i s s ue d a n or de rs e tt i ng a br i e f i ng s c he dul e on th e T h ir d A m e n d e d C o m p la in t, n o tin g th e e x is te n c e o f a n “is s u e o f

la w , n a m e ly w he the rthe N ot e s i n Q ue s t i on a r e ‘ c ove r e d s e c ur i t i e s ’ s o tha tthe c l a i m s i nvol vi ng th o s e N o te s a r e p r e e m p te d b y th e S e c u r itie s L itig a tio n U n if o r m S ta n d a r d s A c t.”Th edis tric t c ourt alsofoun d th at “ Hu ff

’sa ssertion

that it is n ot t here al pa rt y in intere st 4 to this action” represente d simply a “de sire to cha

ng e its tactics” a

nd “not a suff

icient justification for a substitution of parties”under F ederal Rule of Civil P roce dure 17. It is unclear whether the district court intende d this as a sepa rateground for

denying le ave to amend. 4 B r ie f in g o n th e T h ir d A m e n d e d C o m p la in t w a s c o m p le te d o n A p r il 7 , 2 0 0 3 . B u t in A pri l 20 05 , before the courthad rul ed on the T hi rd A m ended C om pl ai nt , H uff s oughtl e a ve t o f

i l e a F our th A m e nde d C om pl a i ntde c r e a s i ng the num be rof pl ai nt i ff s t o 4 6 n ot ehol der c l i ent s. T hi s a m endm entw ou l d arguabl y have r em ov ed H uff’ s c l ai m s f

rom the re ac h o f S L U S A , si nce S L U S A on l y gov erns ac t i on s f i l ed b y 5 0 o rm o r e p la in tif

f s . 1 5 U .S .C . § § 7 7 p ( f

) ( 2 ) ( A ) ( i) ( I ) ,( I I ) . J udge V i r gi ni a E m e r s on H opki ns , t o w hom the c a s e ha d the n be e n a s s i gne d, d e n ie d H u f

f’s p r o p o s e d a m e n d m e n t o n F e b ru a ry 7 , 2 0 0 6 , a n d s im u lta n e o u s ly struck H uff’ s T hi rd A m ended C om pl ai nt . Judg e H op ki ns hel d thatthe st at e l aw c l a i m s i n H uf

f’ s F our th A m e nde d C om pl a i ntvi ol a t e d J udge B ow dr e ’ s O c t obe r22 or de r , w e r e unt i m e l y , a nd tha ti tw oul d be “ undul y bur de ns om e on K K R a nd a w a s te o f ju d ic ia l r e s o u r c e s f

o rth e c o u r t to c o n tin u e to e n te r ta in H u f f’s a tte m p ts to a voi d the r e a c h of

S L U S A . ” J udge H opki ns e xpl i c i t l y r e s e r ve d de c i s i on on

4 w he the rthe pr opos e d F our th A m e nde d C om pl a i ntw oul d f a l l w i thi n the r e a c h of S L U S A a n d , ju s t a s J u d g e B o w d r e h a d , g r a n te d H u f f le a v e to a m e n d in o r d e rto “a s s e r t a n y ap p lic ab le f

e d e r a l c la im s it m a y h a v e u n d e rS L U S A .” R e ite r a tin g th a t it r e c ogni z e d tha ti tha d no s uc h c l a i m s , H uf f i ns t e a d m ove d f

orr e c ons i de r a t i on ofAt oral a rgument before this Court, KKR argued that the F ourth Amende d Complaint 5 sh ould b edis mis se d o n o ther groun ds , s uc h a s f uti lity and pre e mption . B e c a

us ethe searguments wereno t deve lop e d a

nd dis tric t c ourt

did no t re ly on them, w ee xpre ss n o opinion a s tothe ir a b i l i ty. 5 Ju d g e H o p k i n s’ an d Ju d g e B o w d re’ s o rd ers. T h e m o t i o n w as d en i ed , th e case di s m i s s e d w i th pr e

j udi c e , a nd thi s appe a l f ol l ow e d. F rom thi s l on g p roce du ra l hi st ory, four i ss ues a ri se on appeal . H uff a rgues that : (1) the di stri ctcourtabused i t s di sc re t i on i n d enyi ng H uff’ s M ot i on t o F i l e a F o u r th A m e n d e d C o m p la in t; ( 2 ) th e d is tr ic t c o u r t e rr e d a s a m a tte ro f la w in s tr ik in g H u f

f’s T h ir d A m e n d e d C o m p la in t; ( 3 ) th e d is tr ic t c o u r t ab u s e d its di sc re t i on i n d enyi ng H uff’ s m ot i on t o rec on si der the di stri ctcourt ’ s 200 2 O rder fi nd i ng thatH uff’ s c as e w as a “ covered cl as s a ct i on ”; and (4) the di stri ctcourt e rr e d a s a m a tt e rof

l a w i n di s m i s s i ng the c a s e “ w i th pr e j udi c e . ” W e hol d tha tthe di stri ctcourt ’ s r ea sons for denyi ng the m ot i on t o fi l e the F ou rth A m ended C om pl a i ntc ons t i tut e a n abus e of di s c r e t i on. B e c a us e tha tc om pl a i nt , i f a l l ow e d, w oul d s upe r s e de a l l pr i orc om pl a i nt s , w e ne e d notr e a c h the f i na l thr e e que s t i ons here . T h e d is tr ic t c o u r t d e n ie d H u f f’s m o tio n f

o rle a v e to a m e n d o n e s s e n tia lly thr e e gr ounds : ( 1) the pr opos e d F our th A m e nde d C om pl a i ntc ontr a ve ne d J udge

5 B ow dre’ s O ct ob er22 order grant i ng l ea ve t o am end i n o rdert o p l ea d federa l c a us e s of a c t i on; ( 2) i tw oul d be “ undul y bur de ns om e on K K R ” a nd a w a s t e ofWe reviewa denial of a motion to amend for abuse of discretion. B ryant v. Dupre e, 252 6 F.3d 1161, 1163 ( 11th Cir. 2001). However, “a district court by

definition abuses its discretion when it makes a

n error of law .” Koon v. United States, 518 U .S. 81, 100 (1996). 6 j ud i ci al re source s; and (3) H uff’ s propo se d am endm entw as “ un t i m el y. ” W e addres s e ac h i n turn, no t i ng that“ l ea ve t o am end sho ul d b e l i bera l l y gra nt ed w hen n e c e s s a ry in th e in te r e s t o f ju s tic e ,” F e d . R . C iv . P . 1 5 ( a ) , a n d th a t “u n le s s th e r e is a s u b s ta n tia l r e a s o n to d e n y le a v e to a m e n d , th e d is c r e tio n o f th e d is tr ic t c o u r t is notbr oa d e nough t o pe r m i tde ni a l . ” B ur ge rK i ng C orp. v. W e a ve r , 169 F . 3d 1310, 13 19 (11th C i r. 19 99 ). 6 T he fi rs tgrou nd on w hi ch the di stri ctcourtre l i ed w as that“ H uff’ s propo se d F ou rth A m ended C om pl ai nti s i m prop eri n l i gh tof the C ou rt ’ s hol di ng that S L U S A pr e e m pt s the s t a t e l a w c l a i m s H uf f i s a tt e m pt i ng t o a s s e r ti n the co m p lain t. ” T h e “h o ld in g ” to w h ich th e c o u rt re fe rr ed w as Ju d g e B o w d re ’s O c t obe r2002 O r de r , w hi c h gr a nt e d H uf f l e a ve t o pl e a d a ny f

e de r a l c a us e s of a c tio n a r is in g u n d e rS L U S A . J u d g e B o w d r e ’s o r d e r , h o w e v e r , lim ite d H u f f to fe dera l cl ai m s onl y i f H uff e l ec t ed t o p ursue i t s c as e bas ed on S L U S A -def i ned

“ covered se curi t i es . ” T hi s orderca nn otbe i nt erpret ed t o p re cl ud e a l l st at e l aw cl ai m s. Indeed, Judg e B ow dre r ec og ni ze d the po ss i bi l i ty of e xi st i ng st at e l aw c l a i m s w he n on D e c e m be r12, 2002, s he di r e c t e d the f i l i ng of br i e f s a ddr e s s i ng the

“ i s s ue of l a w , . . . w he the rthe N ot e s i n que s t i on a r e ‘ c ove r e d s e c ur i t i e s ’ s o tha tthe7

cl ai m s i nv ol vi ng tho se N ot es ar e pre em pt ed by the S ec uri t i es L i t i gat i on U ni form S t a nda r ds A c t . ” T he F our th A m e nde d C om pl a i ntw oul d r e duc e the num be rof p l ai n t i ffs b el o w fi fty, th u s ap p aren t l y el i m i n at i n g an y q u est i o n o f w h eth er th e case i nvol ve d “ c ove r e d s e c ur i t i e s . ” T hi s w oul d thus r e m ove i tf r om the r e a c h of

the fe dera l se curi t i es l aw s a nd fr om the am bi tof Judg e B ow dre’ s order . T he di stri ct c o u r t c o m m itte d a n e rr o ro f la w in m is in te rp r e tin g th a t o r d e r . I ts d e n ia l o f le a v e to a m e nd ba s e d on tha te rr orw a s a n abus e of di s c r e t i on. K oon, 518 U . S . a t100. T he s e c ond r e a s on on w hi c h the di s tr i c tc our tr e l i e d w a s tha ti tw oul d be “u n d u ly b u r d e n s o m e o n K K R a n d a w a s te o f ju d ic ia l r e s o u r c e s f

o rth e c o u r t to c ont i nue t o e nt e r t a i n H uf f’ s a tt e m pt s t o a voi d the r e a c h of S L U S A . ” T hi s hol di ng w a s appa r e nt l y ba s e d on the c our t ’ s f l a w e d r e a di ng of

J udge B ow dr e ’ s or de r , a nd i t s c orr e s pondi ngl y e rr one ous c onc l us i on tha tthe F our th A m e nde d C om pl a i nt w oul d be “ e xc l us i ve l y c om pr i s e d of ba rr e d c l a i m s . ” A s e xpl a i ne d above , the F our th A m e nde d C om pl a i ntc ont a i ne d c l a i m s tha tw e r e not“ ba rr e d” by J udge B ow dr e ’ s or de r . M or e ove r , w e pe r c e i ve no undue bur de n on K K R w he n the l i t i gat i on – tho ug h l on g-l i ved – had n otye tprog re ss ed beyond the pl ea di ng st age. T he r e ha s be e n no di s c ove ry , nora tr i a l da t e s e t , a nd the c l a i m s pr e s e nt e d i n the n e w c o m p l a i n td o n o td i f f e ri n s u b s t a n c e f

r o m th o s e r a i s e d p r e v i o u s l y . No rc a n we perc ei ve a “ w as t e of j ud i ci al re source s” w here no fe dera l j ud ges have y etWhil etheTh ird Amend e d Co mpl aint wa s p e nding , p aralle l li tig atio n in theAl a bama 7 statec ourt s ( “ Hu ff

II ” ) eventu ally

re a c he d th eAl a

bama Sup remeCourt , which r

ule d in Ap ri l 2004 that Huff’ s state law c laims ag ainst cer tain underwriters a

nd acc ountants involved in the Notes’ issuanc e were preempted by SLUSA. BT Sec s. Corp. v. W.R . Huff A sset Mgmt Co., 891 So. 2d 310, 315-17 (Ala. 2004) . After the United States Supreme Court denied certiorari in Huff II , Huff move d for lea

ve to file a

Four th Amended Complaint, before the district cour t had ruled on Hu ff ’sTh ird Amend e d Co mpl aint . 8 c ons i de r e d the s ubs t a nc e of H uf f’ s c om pl a i nt s a ga i ns tK K R , norha s a ny j udge f o u n d th e T h i r d o rF o u r th Am e n d e d C o m p l a i n t s t o b e p r e e m p t e d b y S L US A. T he thi r d r e a s on of

f e r e d by the di s tr i c tc our tw a s the “ unt i m e l y ” na tur e of the m ot i on t o a m e nd. T hi s , t oo, i s a n i ns uf f i c i e ntr e a s on t o de ny the m ot i on. A lth o u g h th is c a s e h a s h a d a n u n d e n iab ly lo n g p r o c e d u r a l h is to ry , th e d e la y s to w h ic h it h a s b e e n s u b

je c t h a v e g e n e r a lly b e e n n o f a u lt o f H u f f’s . T h e r e m o v a ls to b an k ru p tcy c o u rt, fo r e x am p le, an d co rr es p o n d in g stay s w er e b ey o n d H u ff’s c o n tr o l. T h e “p a s s a g e o f tim e , w ith o u t a n y th in g m o r e , is a n in s u f f ic ie n t r e a s o n to d e n y le a v e to a m e n d .” F lo y d v . E a s te rn A ir lin e s , I n c ., 8 7 2 F .2 d 1 4 6 2 , 1 4 9 0 ( 1 1 th C i r. 1 9 8 9 ) (ci t at i o n o m i tt ed ), rev ’ d o n o th er g ro u n d s, 4 9 9 U . S . 5 3 0 (1 9 9 1 ); see al so B ry a nt , 252 F . 3d a t1164- 65 ( w he r e “ the di s tr i c tc our tdi d notgi ve a ny r e a s on, othe rtha n the m e r e pa s s a ge of t i m e , t o s uppor ti t s c onc l us i on tha ta l l ow i ng the pl ai nt i ff s t o am end thei r c om pl ai ntw ou l d p re j ud i ce the defendant ” the court

“ s houl d ha ve a l l ow e d the pl a i nt i f f s t o a m e nd the i rc om pl a i nt . ” ) . M or e ove r , the di stri ctcourtst i l l had n otrul ed on thatC om pl ai nttw o yea rs l at erw hen H uff m o v e d f o rle a v e to f

ile a F o u r th A m e n d e d C o m p la in t. 79 CONCL US I ON F o r th e f o re g o in g re as o n s, w e V A C A T E th e d istrict co u rt’s d en ial o f H u ff’s m ot i on for l ea ve t o fi l e afourth am ended com pl ai nt , and R E M A N D for f urther pr oc e e di ngs c ons i s t e ntw i th thi s opi ni on.