Opinion ID: 6321287
Heading Depth: 2
Heading Rank: 1

Heading: Adequately pleading fraud

Text: In the operative complaint, Katz claims that Sisler and Belveron misrepresented the value of Ms. Katz's interest in the Company, the likelihood of the sale of the Property, and the partners' interest in selling the Property. Prior to the discovery deadline, Katz sought to amend the operative complaint to include both refined and additional theories of fraud. Specifically, she averred that Appellees fraudulently misrepresented: (1) Belveron's ability to block the Property's sale or refinance; and (2) AHP and Belveron's relationship. Katz also attempted to incorporate Oldenburg and the Fund as additional - 10 - defendants. She ultimately withdrew her motion to amend to avoid destroying diversity jurisdiction. Thus, the operative complaint remained untouched. In their motion for summary judgment, Belveron and Sisler objected to Katz's attempt to include new claims and categorized her efforts to do so as legally irrelevant in the absence of a formal amendment to the complaint. After this objection, Belveron and Sisler addressed Katz's refined claims on the merits. On their part, AHP and Orne contend that they relied on the fact that Katz withdrew her motion to amend the complaint and thus, there are no causes of action for fraud against them on record. The district court granted Defendants' motions for summary judgment highlighting that Katz never amended the complaint to revise her theory of fraud. On appeal, Katz contends that the district court erred in declining to consider her unpled theories of fraud as properly before it. She maintains that by supplementing her interrogatory responses to incorporate new facts learned through discovery, she constructively amended her complaint and provided defendants with adequate notice. We review the district court's refusal to consider Katz's unpled theories of fraud for abuse of discretion. See Antilles Cement Corp. v. Fortuno, 670 F.3d 310, 319 (1st Cir. 2012); United States ex rel. Donegan v. Anesthesia Assocs. of Kansas City, PC, 833 F.3d 874, 880 (8th Cir. 2016); see also Jenkins v. Hous. Ct. Dep't, 16 F.4th 8, 19 (1st Cir. 2021) (We - 11 - review a district court's denial of a motion seeking leave to amend for an abuse of discretion, 'defer[ring] to the district court's hands-on judgment so long as the record evinces an adequate reason for the denial.' (quoting Torres-Alamo v. Puerto Rico, 502 F.3d 20, 25 (1st Cir. 2007)); Rosario-Urdaz v. Rivera-Hernandez, 350 F.3d 219, 221 (1st Cir. 2003) (An error of law is, of course, an abuse of discretion.). While Fed. R. Civ. P. 15 governs when and how pleadings can be amended, it does not establish consequences for failing to amend the pleadings. Case law interpreting the federal rules of civil procedure demonstrates a belief that when a party has a valid claim, [they] should recover on it regardless of [their] counsel's failure to perceive the true basis of the claim at the pleading stage, provided always that a late shift in the thrust of the case will not prejudice the other party[.] 5 Wright and Miller, Fed. Prac. & Proc. Civ., § 1219 (4th ed. 2021); see also Conn. Gen. Life Ins. Co. v. Universal Ins. Co., 838 F.2d 612, 622 (1st Cir. 1988) (finding that plaintiff's failure to plead [a] particular legal theory, when it did plead two related theories would not bar relief, especially because defendant raised specific defenses regarding the unpled theory); but see Miranda-Rivera v. Toledo-Dávila, 813 F.3d 64, 76 (1st Cir. 2016) (Allowing a plaintiff to proceed on new, unpled theories after the close of discovery would prejudice defendants, who would have focused their - 12 - discovery efforts on the theories actually pled.). However, Fed. R. Civ. P. 9(b) requires that allegations of fraud must state with particularity the circumstances constituting fraud. Therefore, a claimant must specify what the underlying misrepresentation was, who made it, and when and where it was made. Khelfaoui v. Lowell Sch. Comm., 496 F. Supp. 3d 683, 689 (D. Mass. 2020) (quotation omitted); see also Alternative Sys. Concepts, Inc. v. Synopsys, Inc., 374 F.3d 23, 29 (1st Cir. 2004). The purpose of this rule is to place the defendants on notice and enable them to prepare meaningful responses, to preclude the use of a groundless fraud claim as pretext for discovering a wrong, and to safeguard defendants from frivolous charges [that] might damage their reputation. Dumont v. Reily Foods Co., 934 F.3d 35, 39 (1st Cir. 2019) (internal quotations omitted, modification in original). Notably, Rule 9(b)'s heightened pleading requirements apply not only to claims of fraud simpliciter but also to related claims as long as the central allegations of those claims 'effectively charge fraud.' Foisie v. Worcester Polytechnic Inst., 967 F.3d 27, 49 (1st Cir. 2020) (quoting Mulder v. Kohl's Dep't Stores, Inc., 865 F.3d 17, 21-22 (1st Cir. 2017)). Appellant was clearly aware of the need to amend her fraud allegations and easily could have done so against the named defendants, even at a belated stage of the proceedings. See, e.g., Adorno v. Crowley Towing & Transp. Co., 443 F.3d 122, 126 - 13 - (1st Cir. 2006) (reaffirming that a plaintiff can tender an amended complaint after a motion for summary judgment has been filed if they show that the proposed amendments were supported by substantial and convincing evidence (quotation omitted)); Asociación de Suscripción Conjunta del Seguro de Responsabilidad Obligatorio v. Juarbe-Jiménez, 659 F.3d 42, 53 (1st Cir. 2011) (At the summary judgment stage, the proper procedure for plaintiffs to assert a new claim is to amend the complaint in accordance with [Rule 15(a)]. (quoting Gilmour v. Gates, McDonald & Co., 382 F.3d 1312, 1315 (11th Cir. 2004)). Instead, she opted to amend her complaint through her opposition to defendants' motion for summary judgment, a practice this Court has routinely rejected. See, e.g., Montany v. Univ. of New England, 858 F.3d 34, 42 (1st Cir. 2017); Asociación de Suscripción Conjunta del Seguro de Responsabilidad Obligatorio, 659 F.3d at 53; see also Brooks v. AIG SunAmerica Life Assur. Co., 480 F.3d 579, 590 (1st Cir. 2007). While the Federal Rules of Civil Procedure allow for the constructive amendment of a complaint in limited circumstances, the requisite conditions are not present here. Fed. R. Civ. P. 15(b)(2) provides [w]hen an issue not raised by the pleadings is tried by the parties' express or implied consent, it must be treated in all respects as if raised in the pleadings. We have previously held that: For purposes of Rule 15(b), implied consent to - 14 - the litigation of an unpleaded claim may arise from one of two generic sets of circumstances. First, the claim may actually be introduced outside the complaint—say, by means of a sufficiently pointed interrogatory answer or in a pretrial memorandum—and then treated by the opposing party as having been pleaded, either through his effective engagement of the claim or through his silent acquiescence. . . Second, and more conventionally, [c]onsent to the trial of an issue may be implied if, during the trial, a party acquiesces in the introduction of evidence which is relevant only to that issue. Rodriguez v. Doral Mortg. Corp., 57 F.3d 1168, 1172 (1st Cir. 1995) (emphases added) (quoting DCPB, Inc. v. City of Lebanon, 957 F.2d 913, 917 (1st Cir. 1992)); see also Scholz v. Goudreau, 901 F.3d 37, 45 (1st Cir. 2018); Antilles Cement Corp., 670 F.3d at 319 (quoting and applying Rodriguez); Lynch v. Dukakis, 719 F.2d 504, 508 (1st Cir. 1983) (The test of consent by implication to the trial of claims not set forth in the complaint is whether a party did not object to the introduction of evidence or introduced evidence himself that was relevant only to that issue. (citation omitted)). While this Court has not expressly done so, the Seventh Circuit has held that, in the spirit of Rule 15(b), constructive amendments to the complaint can be effected at the summary judgment stage, rather than at trial, when the parties have provided express or implied consent. Walton v. Jennings Comm. Hosp., Inc., 875 F.2d 1317, 1320 n.3 (7th Cir. 1989). The test for implied consent - 15 - at summary judgment becomes whether the opposing party had a fair opportunity to defend and whether he could have presented additional evidence had he known sooner the substance of the amendment. Hutchins v. Clarke, 661 F.3d 947, 957 (7th Cir. 2011) (quotation omitted). Even if we were to follow the Seventh Circuit's lead and recognize a district court's discretionary authority to allow constructive amendments to pleadings at the summary judgment stage, as extrapolated from Rule 15(b), see, e.g., Torry v. Northrop Grumman Corp., 399 F.3d 876, 877-78 (7th Cir. 2005), here, the district court acted within its discretion in determining that unpled claims were not properly before it. Even though defendants acknowledged Katz's unpled claims in their motions for summary judgment, they only did so after explicitly objecting to their inclusion. Cf. Action Mfg., Inc. v. Fairhaven Textile Corp., 790 F.2d 164, 167 (1st Cir. 1986) (As a general principle the presentation of claims beyond the complaint without objection is considered an informal amendment of the complaint. (emphasis added)). By arguing that Katz's decision to withdraw her proposed amended complaint rendered her new theories legally irrelevant and ineffective, defendants precluded a finding that they engaged or embraced, and thus implicitly consented to, said claims becoming part of the proceedings. Rodriguez, 57 F.3d at 1173; see also Kenda Corp., Inc. v. Pot O'Gold Money Leagues, Inc., 329 F.3d 216, 232 (1st Cir. 2003) (It - 16 - is not enough that an issue may be 'inferentially suggested by incidental evidence in the record;' the record must indicate that the parties understood that the evidence was aimed at an unpleaded issue.' (quoting Galindo v. Stoody Co., 793 F.2d 1502, 1513 (9th Cir. 1986)). As noted earlier, although she withdrew her motion to amend, Katz contends that defendants were on notice of her new theories by way of her supplemental responses to their interrogatories, which she served a few weeks before the close of discovery and in advance of her second day of deposition testimony. Specifically, this five-page document attached Katz's proposed amended complaint -- withdrawn with her motion to amend, two months prior -- and broadly purported to incorporate [its] allegations . . . insofar as they pertain to the conduct, misrepresentation and omissions of the individuals with whom she communicated during the relevant time period. She then vaguely refer[red] the defendants to the withdrawn amended complaint as a supplemental response to one interrogatory, without any further explanation or citation. Whatever the potential legal significance of this attempted end-around Rule 15, the supplemental response is not sufficiently informative to satisfy Rule 9(b)'s particularity requirement. See Rodriguez, 57 F.3d at 1171-72. Moreover, the defendants' failure to immediately move to strike the response can hardly be viewed as acquiescence sufficient to amount to implied - 17 - consent that the new issues would be litigated. Given the absence of defendants' consent, implied or otherwise, coupled with Katz's failure to plead fraud pursuant to the heightened standard imposed by Rule 9(b), the district court did not abuse its discretion in determining that Katz's unpled theories were not properly before it.