establishes that the amended counterclaim is, among other things, not futile and not unduly
delayed. (fd. at 3.) While Illinois courts have applied the discovery rule in actions filed pursuant
to the Consumer Fraud Act, see Gredell v. Wyeth Labs., Inc., 803 N.E.2d 541, 546 (ll. App. Ct.
[st Dist. 2004), the discovery rule does not apply here.

The only case cited by Defendants to support their motion, Koch Materials Co. v. Shore
Slurry Seal, Inc., 216 F.R.D. 301 (D.N.J, 2003), demonstrates as much, although it is not actually
a discovery rule case. (The Court notes that Defendants did not cite any case law addressing the
discovery rule, despite having used the rule as the foundation for many of their arguments.) As
Plaintiff points out, the court in Koch found that the proposed amendment to a counterclaim was
not unduly delayed because the information that formed the basis of the defendant’s amendment
was uncovered after, among other things, the deposition of the plaintiff's corporate
tepresentative. See Koch, 216 F.R.D. at 305. Here, however, Defendants seek to amend their
counterclaim based on information “discovered” during the deposition of the Defendants’ own
corporate representative and a named Defendant in this action, Mr. Kamlesh Sheth. Put
differently, it was one of the Defendants who purports to have recently recalled certain alleged
facts—facts which were known or should have been known to Defendants at the time of their
original counterclaim in 2002 (and well before the close of discovery) because the “new” factual
allegations concern events and alleged conversations in which the Defendant/deponent personally
participated in 2000. Under such circumstances, it can hardly be said that this information was
recently “discovered” within the meaning of the discovery rule. See Gredell, 803 N.E.2d at 546
(noting that the discovery rule delays the statute of limitations until a party knows or reasonably

should know that an injury has occurred); see also Cont’l Bank, N.A., v. Meyer, 10 F.3d 1293,


ILCS 505/1 et seq? In sum, discovery has closed and Defendants now seek to add an additional
counterclaim more than two years after filing their original counterclaim. Notably, and as
discussed below, Defendants’ proposed amendment is premised on information available (or, at
the very least, information that should have been available) to the Defendants at the time they
filed their original counterclaim. Indeed, as Defendants admit, it was one of the Defendant’s
purported recent recollections that prompted the proposed amendment.

Given the posture of this case, the Defendants may amend their counterclaim “only by
leave of court or by written consent of the” Plaintiff. Fed. R. Civ. P. 15(a). Not surprisingly,
Plaintiff is not willing to give its consent. And although leave to amend shall be freely given
when justice so requires, “leave is inappropriate where there is undue delay, . . . undue prejudice
to the opposing party by virtue of allowance of the amendment, or futility of the amendment.”
Villa v. City of Chicago, 924 F.2d 629, 632 (7th Cir. 1991) (citing Foman v. Davis, 371 U.S. 178,
183 (1962). In its opposition to the Motion, Plaintiff argues that Defendants’ Motion should be
denied because (1) the Defendants have failed to offer a valid reason for their delay in seeking to
amend; (2) an amendment at this stage of the litigation would result in undue prejudice; and (3)
the proposed amendment is futile. (DE. 25 at 1.) The Court agrees.

The lynchpin of Defendants’ arguments in support of their Motion appears to be their
belief “that they are allowed to maintain their fraud claims against Plaintiff based on the

‘discovery rule’....” (DE. 24 at 1.) The discovery rule, according to the Defendants,

2 Defendants’ proposed amendment also mentions common law fraud, but this does not
appear to be a separate count. Indeed, Defendants titled the proposed amendment “Consumer
Fraud Act Violations, 815 ILCS 505/1 et seq.,” and the proposed amendment asks for judgment
solely on “Count II.”


oo

1298 (7th Cir. 1993) (affirming the district court’s denial of an amendment to a counterclaim
where, among other things, the facts underlying the amendment “must have been known to
defendants”).? As a consequence, Defendants contention that there was no undue delay in
bringing the proposed counterclaim is unavailing.

Moreover, and independently, Plaintiff would be prejudiced by the undue delay,
especially because discovery has closed, if the court were to allow the proposed amendment.
Indeed, the Court finds it likely that additional discovery would be required—an issue raised by
Plaintiff's counsel in open court that Defendants do not attempt to address in their motion. See
Cont’ Bank, 10 F.3d at1298 (7th Cir. 1993) (holding that an amendment was properly denied
where facts underlying the amendment where known for two years prior to the amendment and
the amendment would result in additional discovery). Defendants simply argue that the proposed
amendment would “not cause undue prejudice to Ramada because if Defendants prove their
fraud claims, Ramada is the evil-doer....” (D.E. 24 at 3.) This conclusory argument is
unavailing and ignores the types of obvious prejudice that Plaintiff would be subjected to in
terms of additional litigation costs and delays prompted by the Defendants’ failure to think about
the case and investigate whether they had purported counterclaims.

Furthermore, the Court finds that the proposed amendment would be futile. “The statute
of limitations . . . under the [Consumer Fraud] Act is three years and begins to run when the

cause of action accrues.” Gredell, 803 N.E.2d at 546 (citing 815 ILCS 505/10a(e)). Defendants’

> In this regard, the Court notes that Defendants have not alleged (and do not appear to be
able to allege) that Plaintiff played any part in preventing Defendants from having discovered the
“new” facts concerning events and conversations in which the Defendant/deponent pevponally
participated some four years ago.


‘Minute Order Form (06/97)

United States District Court, Northern District of Illinois

Name of Assigned Jud; ‘li Sitting Judge if Oth
or Magistrate Judge Mark Filip than Atsigned Judge
CASE NUMBER 02 C 1941 DATE 5/25/2004
CASE RAMADA FRANCHISE SYSTEMS vs. ROYAL VALE HOSPITALITY
TITLE
[In the following box (a) indicate the party filing the motion, ¢.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.]
DOCKET ENTRY:
(1) Oo Filed motion of [ use listing in “Motion” box above.]
(2) im) Brief in support of motion due
(3) oO Answer brief to motion due. . Reply to answer brief due.
(4) Oo Ruling/Hearing on set for at
(5) oO Status hearing[held/continued to] [set for/re-set for] on set for at
(6) oO Pretrial conference[held/continued to] [set for/re-set for] on set for at
(7) Oo Trial[set for/re-set for] on at
(8) oO [Bench/Jury trial] [Hearing] held/continued to at
(9) oO This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OFRCP4(m) OLocal Rule 41.1 OO FRCP4I(a)\(1) OO FRCP41(a)(2).
(10) ME [Other docketentry]) ENTER OPINION AND ORDER DENYING DEFENDANTS’ MOTION TO
AMEND PLEADINGS.
(ll) [For further detail see order attached to the original minute order.]

No notices required, advised in open court,

‘No notices required.

Notices mailed by judge’s staff.

a | Notified counsel by telephone.

Docketing to mail notices.

Mail AO 450 form. docketing deputy initials

Copy to judge/magistrate judge.

courtroom
TBK deputy’s
initials

go, “4 =< Date/time received in
pS dcentral Clerk's Office



proposed amendment repeatedly identifies May 25, 2000, the date Defendants signed the
licensing agreement, as the date the alleged consumer fraud was committed. Defendants’ rely on
the discovery rule for the proposition that the consumer fraud action did not accrue unti] April
14, 2004 (at the deposition of Mr. Sheth), which reliance is misplaced, as discussed above.
Accordingly, at least for purposes of analysis of the present motion,‘ the Court finds that the
proposed amendment would be futile because the statute of limitations on the proposed consumer
fraud count ran sometime in May 2003.

For the foregoing reasons, Defendants’ Motion for Leave to File Amended Counterclaims

is denied.
So Ordered. U2.
Mark Filip U.
United States District Judge
Northern District of Illinois
Dated: MAY 25 2004

‘ In the Defendants’ motion, they hint that if the proposed amendment is not allowed,
they may file the Illinois Consumer Fraud Act claim as a separate federal lawsuit and seek to
have it consolidated with the instant case. If Plaintiffs so file, the Court will likely be called
upon to address whether that claim is time-barred under the three-year statute of limitations for
Iinois Consumer Fraud Act claims. Because the motion to amend is improper for multiple,
independent reasons, the Court need not today conclusively decide whether any hypothetical
future suit is time-barred. For present purposes, the treatment of the issue in the parties’ briefs
leads to the conclusion that the proposed amendment is futile.

6



UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

RAMADA FRANCHISE SYSTEMS, INC.,

DOCKETED

Plaintiff, MAY 2 6 2004

v. No. 02 C 1941
ROYAL VALE HOSPITALITY OF
CINCINNATI, INC., an Illinois corporation, and
KAMLESH SHETH, an individual, and
YOGESH SHAH, an individual,

Judge Mark Filip

wee erway

Defendants,
OPINION AND ORDER DENYING DEFENDANTS’ MOTION TO AMEND PLEADINGS

Plaintiff Ramada Franchise Systems, Inc. (“Ramada”) filed this action in this Court over
two years ago. (D.E. 1.) Plaintiff alleges that Defendant Royal Vale Hospitality of Cincinnati,
Inc. (a former Ramada franchisee) violated multiple sections of the Lanham Act, 15 U.S.C. §
1051 et seq., (Counts I-III) by infringing Ramada’s trade and service marks. Ramada also claims
breach of contract (Counts V-VII), breach of guaranty against Defendants Kamlesh Sheth and
Yogesh Shah (Count IX), unjust enrichment (Count VIII), and seeks an accounting (Count
TV)—all in connection with a licensing agreement between Ramada and Royal Vale. (/d.) This
case is before the Court on Defendants’ Motion for Leave to File Amended Counterclaim
(“Motion”). (D.E. 24.) For the following reasons, Defendants’ Motion is denied.

The Court begins by recounting the procedural and factual history of this case, which
history underscores the impropriety of granting Defendants’ Motion. On March 15, 2002,
Plaintiff filed its complaint in this Court. (D.E. 1.) On April 18, 2002, Defendants filed a

counterclaim against Ramada, claiming that Ramada breached the licensing agreement by failing

el


to include Defendants’ facility in Ramada’s national reservation system. (See D.E. 8. at 2.)
Although Defendants’ April 2002 filing purported to assert “counterclaims” against Ramada, it is
clear, after reviewing the Defendants’ pleading and the parties’ subsequent filings, that the
Defendants actually asserted one counterclaim (for breach of the licensing agreement) at that
time. (See D.E. 22 3 (“Defendants have asserted a counterclaim that [Ramada] breached the
Licensing Agreement regarding the inclusion of Defendants’ facility in a national reservation
system.”).)

On September 26, 2002, Judge Milton Shadur ordered discovery closed on December 11,
2002.' On February 4, 2003, Defendants filed a Motion to Enlarge Time for Discovery, citing
certain health issues regarding Defendant Yogesh Shah. (See D.E. 12 at 1.) The Court granted
that motion (see D.E. 13) and extended the close of discovery to February 20, 2004, with
Defendants’ designation of experts and expert report due December 20, 2003. (See D.E. 17.) On
February 11, 2003, Plaintiff moved for the extension of the February 2004 discovery deadline for
the limited purpose of deposing certain of Defendants’ witnesses who were unavailable for
depositions noticed prior to the close of discovery. (See D.E. 19.) The Court extended the
discovery deadline to April 20, 2004, in order for “[P]laintiff to take further depositions.” (D.E.
20.)

On May 10, 2004, Defendants filed a Motion for Leave to File Amended Counterclaim.
(See DE. 24.) By their Motion, Defendants seek to add a counterclaim alleging violations of the

Illinois Consumer Fraud and Deceptive Business Practices Act (“Consumer Fraud Act”), 815

| This case was reassigned under order of the Executive Committee from the Calendar of
Judge Milton Shadur to the Calendar of Judge Mark Filip on March 3, 2004.

2