Opinion ID: 421676
Heading Depth: 2
Heading Rank: 3

Heading: Sufficiency of the Proposed Amendment.

Text: 15 Contrary to defendants' assertion, the district court was empowered to grant plaintiff's motion for leave to amend even after judgment had been entered. United States Labor Party v. Oremus, 619 F.2d 683, 692 (7th Cir.1980). The district court's decision not to allow amendment of the complaint at this stage of the litigation is reviewable only for an abuse of discretion. Id.; Verhein v. South Bend Lathe, Inc., 598 F.2d 1061, 1063 (7th Cir.1979). In reviewing the district court's decision, however, it must be remembered that the hallmark of sound judicial discretion is the lawfulness of the action taken. Cohen v. Illinois Institute of Technology, 581 F.2d 658, 661 (7th Cir.1978), cert. denied, 439 U.S. 1135, 99 S.Ct. 1058, 59 L.Ed.2d 97 (1979). 16 Leave to amend shall be freely given when justice so requires. Fed.R.Civ.P. 15(a). 1 A district court may refuse to allow amendment of a complaint when the proposed amendment fails to cure the deficiencies of the original complaint. Verhein v. South Bend Lathe, Inc., supra; Cohen v. Illinois Institute of Technology, supra. Leave to amend may also be denied when the amending party is guilty of bad faith in delaying presentation of the amendment. United States Labor Party v. Oremus, supra; 6 C. Wright & A. Miller, Federal Practice and Procedure § 1488 (1971). Delay in presenting the amendment will be a sufficient basis for denial of leave to amend only when the delay has caused the opposing party undue prejudice. Id. As the district court did not rely upon delay in denying plaintiff leave to amend, and as we do not think that plaintiff's decision to wait until the court ruled upon the original complaint before offering the amendment caused defendants undue prejudice, we will focus our attention upon the district court's determination that the amendment did not remedy the jurisdictional defects in the original complaint. 17 Judge Shadur dismissed the original complaint after finding that it failed to allege facts that would support an assertion of personal jurisdiction over the out-of-state defendants. Textor v. Board of Regents, 87 F.R.D. 751 (N.D.Ill.1980). Judge Shadur held that plaintiff had not alleged sufficient contacts between defendants and the State of Illinois. Although due process does not require minimum contacts with a federal judicial district before subjecting a defendant to jurisdiction when the suit involves a federal question, the absence of a federal long-arm service of process statute requires that a federal plaintiff resort to the state long-arm statute, which in turn requires minimum contacts between the state and the defendant. See Gemini Enterprises, Inc. v. WFMY Television Corp., 470 F.Supp. 559 (M.D.N.C.1979). Judge Shadur ruled that the few alleged contacts that the out-of-state defendants had with Illinois, none of which related to plaintiff's cause of action, were insufficient to render defendants subject to service under the Illinois long-arm statute. Ill.Rev.Stat. ch. 110, § 17. 18 Plaintiff attempted to remedy the defects relied upon by the district court in dismissing the out-of-state defendants by amending the complaint to include an allegation that defendants had conspired to discriminate against women's athletics in violation of the Constitution and several federal statutes. Among these allegations were the following: 19 [Defendants] have engaged in annual and other conference meetings and discussions within Illinois, including DeKalb, Illinois, and have held meetings with the Council of Presidents and the Conference of Deans for such Conference in DeKalb, Illinois, and at such meetings and conferences, issued directives and requests regarding women's athletics. 20 Said defendants have, in concert with each other, agreed to and followed a pattern in disregard to deprive female athletic directors and coaches of due process of law, equal protection of the laws and of other rights guaranteed in whole or in part by various statutory and constitutional provisions heretofore enumerated; and in furtherance thereof, said defendants acted as described hereinafter described [sic] in Paragraph 22, and that the effect of their actions in conspiracy has been felt by plaintiffs in Illinois and by other females similarly situated. 21 The alleged effects of the conspiracy included lower pay for women coaches, differences between the length of contracts entered into with men and women coaches, and scheduling inequities. Plaintiff alleged that defendants obtained their objectives because they acted in concert by joining together by a conspiracy to keep such salaries of plaintiff and others low with a disparate differential. 22 In paragraph 22 of the amended complaint plaintiff further alleged that: 23 22. In furtherance of said conspiracy, Defendant Universities in or about August, 1979, did donate and give $1,000.00 dollars each to the Defendant Conference and Commissioner for payment to a lobby in Washington, D.C., for the purpose of urging on behalf of said Defendants that certain athletic endeavors of Defendants be exempted from application and regulations of Title IX, and that said conduct was done without consultation with any of the Plaintiffs and contrary to the philosophy and terms of Title IX and of other statutes and regulations heretofore described herein. 24 There does not seem to be any question that if plaintiff's complaint alleges an actionable conspiracy then the minimum contacts test has been met. The conspiracy theory of personal jurisdiction is based on the time honored notion that the acts of [a] conspirator in furtherance of a conspiracy may be attributed to the other members of the conspiracy. Gemini Enterprises, Inc. v. WFMY Television Corp., supra, 470 F.Supp. at 564; see also National Van Lines, Inc. v. Atlas Van Lines, Inc., 406 F.Supp. 1087 (N.D.Ill.1975); Socialist Workers Party v. Attorney General, 375 F.Supp. 318, 321 (S.D.N.Y.1974), vacated on other grounds, 510 F.2d 253, 257 (2nd Cir.1974); Mandelkorn v. Patrick, 359 F.Supp. 692 (D.D.C.1973); Green v. Advance Ross Electronics Corp., 86 Ill.2d 431, 440-441, 56 Ill.Dec. 657, 662, 427 N.E.2d 1203, 1208 (1981). To plead successfully facts supporting application of the conspiracy theory of jurisdiction a plaintiff must allege both an actionable conspiracy and a substantial act in furtherance of the conspiracy performed in the forum state. Gemini Enterprises, Inc. v. WFMY Television Corp., supra, at 564. If plaintiff's allegations are sufficient to establish both of these elements then it was an abuse of the district court's discretion to refuse plaintiff leave to amend. See Lone Star Motor Import, Inc. v. Citroen Cars Corp., 288 F.2d 69 (5th Cir.1961) (abuse of discretion to deny leave to file valid amended complaint). 25 In denying leave to amend the court analyzed paragraph 22 of the amended complaint and concluded that it failed to allege an actionable conspiracy. We agree. Plaintiff alleges in paragraph 22 that defendants gave financial support to a lobbying effort directed toward legislative change of Title IX. Plaintiff has not explained to us why defendants' support of legislative change is illegal, and we can see no possible basis for holding that this action supports a charge of illegal conspiracy. Cf. Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961) (not illegal under antitrust laws to petition Government for favorable legislation). 26 The inadequacies of paragraph 22 do not necessarily spell defeat for plaintiff. Plaintiff need only present a prima facie showing of personal jurisdiction, Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2nd Cir.1981), and in appraising her allegations we must read the complaint liberally, in its entirety, and with every inference drawn in favor of plaintiff. Warth v. Seldin, 422 U.S. 490, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975); Conley v. Gibson, 355 U.S. 41, 45, 78 S.Ct. 99, 101, 2 L.Ed.2d 80 (1957); Burns v. Paddock, 503 F.2d 18, 25 (7th Cir.1974). 27 Read liberally plaintiff's amended complaint alleges that defendants agreed to follow a systematic campaign of discrimination against women's athletics. As defendants were in competition with each other in recruiting women's coaches the success of their plan to keep women's salaries low depended on the cooperation of all MAC members. In furtherance of, and in accordance with, this conspiracy defendant NIU discriminated against female members of the athletic department. The illegal actions of NIU in Illinois are enough to provide the requisite minimum contacts between the remaining members of the conspiracy and the State of Illinois. In addition, it is a fair inference that the treatment of women's athletics was discussed by the conspirators during the alleged meeting in DeKalb, Illinois. Such action is sufficient basis for the exercise of personal jurisdiction and service of process may be effected under the Illinois long-arm statute. See United States Dental Institute v. American Association of Orthodontists, 396 F.Supp. 565 (N.D.Ill.1975). 28 Venue in this action lies only in the judicial district in which the claim arose. 28 U.S.C. § 1391(a). Judge Shadur held that the lack of alleged contacts between defendants and the Northern District of Illinois defeated plaintiff's attempt to establish venue. As we have stated in the context of personal jurisdiction, the original complaint's lack of allegations concerning contacts with Illinois have been cured by the amendment. These contacts are also sufficient to support plaintiff's allegation that her claim arose in Illinois. Plaintiff's amended complaint alleges that defendants met in the Northern District of Illinois, conspired to discriminate against women's athletics, and that NIU, which is located in the Northern District of Illinois, did in fact discriminate against plaintiff in furtherance of the conspiracy. Those contacts are sufficient to establish that plaintiff's claim arose in the forum district. 29 Because the district court abused its discretion in denying leave to amend we vacate the order dismissing the out-of-state defendants and order the district court to allow plaintiff to file her amended complaint. We intimate no view on the merits of defendants' remaining arguments concerning standing and certification of the class. Plaintiff, of course, must be prepared to prove the alleged conspiracy at the appropriate time.II. Award of Attorney's Fees. 30 Our determination that the district court erred in refusing leave to amend does not require that we find similar error in the court's finding that plaintiff's attorneys were guilty of willful abuse of the judicial process in filing and litigating the original complaint. That Deidrich and Mix should be given the opportunity to amend the complaint does not mean that they are relieved of all blame for filing a defective complaint to begin with. We will therefore turn our attention to the factual background of the award entered against Deidrich and Mix. 31 A. Facts. 32 Attorney Deidrich filed the original complaint on January 23, 1980. Attorney Fitzgerald filed an appearance as additional counsel on February 20, and Attorney Mix filed his appearance during May. Mix prepared and filed the seven-page response to defendants' motions, which response failed to address jurisdiction or venue. 33 In his order of October 2, 1980, in which defendants' motions to dismiss were granted, Judge Shadur also addressed the request by several defendants for an award of attorney's fees for litigating what they thought was a frivolous lawsuit. Judge Shadur found that the complaint lacked any colorable basis for jurisdiction or venue, that plaintiff's attorney failed to respond to defendants' motions adequately, and that counsel's failure to sign the complaint after the omission had been brought to his attention amounted to a willful abuse of the judicial process and justified an award of fees against counsel under Roadway Express, Inc. v. Piper, 447 U.S. 752, 100 S.Ct. 2455, 65 L.Ed.2d 488 (1980). The court directed defendants to file motions setting forth the amount of their legal fees incurred in defending the suit. 34 On October 10, 1980, Deidrich and Mix filed a motion requesting a hearing on the propriety of the award of fees. The same day Judge Shadur gave a speech, at the annual meeting of the Chicago Council of Lawyers, which speech was later published, in which he cited and discussed plaintiff's case as an example of frivolous litigation. On October 17, Judge Shadur granted Deidrich and Mix a hearing, although noting that they were not entitled to one as a matter of right under Hayden Stone v. Brode, 508 F.2d 895 (7th Cir.1974). The judge further informed counsel that the burden is on you to prove that they were not guilty of willful abuse of the judicial process, apparently analogizing the proceeding to one conducted under Rule 37, Fed.R.Civ.P., allowing an award of fees incurred in presenting a successful motion to compel discovery. 35 A hearing was held on October 30 and 31 during which Deidrich testified about his conduct in filing and litigating the suit. Mix did not testify, although he did appear on behalf of Deidrich. On November 5, 1980, the court affirmed the award of fees against plaintiff's attorneys, observing that counsel had a very cavalier attitude toward the duty to file an adequate complaint. In prior orders the court used the term plaintiff's attorney, which led Mix to believe that only Deidrich was subject to the fee award. The November 5 order referred to attorneys, prompting both Mix and Fitzgerald to request a clarification of who was liable. On the basis of an affidavit filed by Fitzgerald detailing his minimal involvement in the case Judge Shadur held that only Deidrich and Mix were included in the November 5 order. Due to unexplained delay the court did not set the amount of the award until August 6, 1982, when it ruled that defendants employing salaried counsel could not recover any fees and that Deidrich and Mix personally were to pay the attorney's fees of the other defendants. These had been placed at $56,000, but the order cut the amount to be paid to one-half. 36 B. Procedural Due Process. 37 In assessing attorney's fees against Deidrich and Mix the district court was exercising its power to punish counsel who willfully abuse judicial processes, which the Supreme Court recently recognized as inherent in a court's power to protect the orderly administration of justice. Roadway Express, Inc. v. Piper, 447 U.S. 752, 766, 100 S.Ct. 2455, 2464, 65 L.Ed.2d 488 (1980). The Court cautioned, however, that [l]ike other sanctions, attorney's fees certainly should not be assessed lightly or without fair notice and an opportunity for a hearing on the record. The principal complaint of Deidrich and Mix is that they were denied a fair notice and a meaningful hearing by the court's imposition of fees without a hearing, the court's placing the burden of proof on them rather than the moving defendants during the subsequent hearing, and Judge Shadur's public statements condemning their lawsuit as frivolous. We will examine each of these contentions in turn. 38 The district court relied upon the holding in Hayden Stone v. Brode, 508 F.2d 895 (7th Cir.1974), in assessing fees without a hearing to determine whether counsel's failings amounted to a willful abuse of the judicial process. Hayden Stone involved imposition of sanctions for failure to cooperate in discovery under Rule 37(a)(4), Fed.R.Civ.P., which provides that when a party unsuccessfully opposes a motion to compel discovery: 39 [T]he court shall, after opportunity for hearing, require the party or deponent whose conduct necessitated the motion or the attorney advising such conduct or both of them to pay the moving party the reasonable expenses incurred in obtaining the order, including fees, unless the court finds that the opposition to the motion was substantially justified or that other circumstances make an award unjust. 40 In Hayden Stone we held that defendant had been provided an opportunity for a hearing within the meaning of Rule 37(a)(4) when sanctions were imposed on the basis of transcripts of the depositions involved and memoranda from [defendant] setting out the alleged justifications for his activities. Moreover, had [defendant] desired further hearing after the imposition of sanctions, he could have moved for such hearings. 508 F.2d at 897 (emphasis in original). 41 The district court here concluded that, as in Hayden Stone, the bad faith of Deidrich and Mix was apparent from the record they compiled in the course of the litigation and that no further hearing was necessary. We cannot agree. Roadway Express does not provide for an award of attorney's fees against losing counsel, but rather only against counsel who willfully abuse the judicial process. An award under Roadway Express is the exception, not the rule, and there is no basis for assuming that counsel acted in bad faith from the fact that the suit was unsuccessful. Rule 37(a)(4), on the other hand, authorizes an award whenever a party unsuccessfully opposes a discovery motion, the exception being those cases in which the court finds the opposition substantially justified. 42 In Hayden Stone defendant unsuccessfully opposed discovery, and under Rule 37(a)(4) it was incumbent on him to convince the court that his opposition was substantially justified, which he attempted but failed to do in various memoranda. In contrast, that Deidrich and Mix filed a deficient complaint and violated Rule 11 did not, without more, place upon them the onus of proving their good faith. Furthermore, that they could have responded to defendants' jurisdictional arguments but did not does not mean that they were not entitled to present arguments on the distinct issue of why they had filed a deficient complaint. In this situation the court erred in imposing fees without the prior hearing required by Roadway Express. 43 The error in assessing fees without a prior hearing was not cured by granting Deidrich and Mix a subsequent hearing during which they bore the burden of proving that the award was not justified. In placing the burden on counsel the court analogized the proceedings to those under Rule 37(a)(4), but as we have already stated, this analogy is not apt. Although truly egregious conduct by counsel may support a finding of willful abuse without any inquiry about counsel's intent, in a case such as this in which counsel's conduct is as indicative of incompetence as it is of bad faith the court was not justified in placing the burden of justification on counsel. This error was exacerbated by Judge Shadur's public speech labeling counsel as deserving judicial reprobation for their actions in litigating this suit. Although an opinion formed from contact with a case is not the type of personal prejudice that disqualifies a judge, United States v. Grinnell Corp., 384 U.S. 563, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966), and although Judge Shadur probably thought that the propriety of the award had been settled at that point, the speech placed the judge in a position in which it would be difficult for him to reverse his prior ruling. This, coupled with the erroneous placement of the burden of proof, deprived Deidrich and Mix of a meaningful hearing. 44 Because we have determined that both Deidrich and Mix are entitled to a new hearing on the assessment of attorney's fees we need not consider Mix's separate argument that the court's ambiguity in referring to plaintiff's attorney deprived him of fair notice that he would be held liable for defendants' fees. On remand the case should be reassigned to a judge who has not already expressed his displeasure with plaintiff's counsel. We express no opinion as to whether Deidrich and Mix were guilty of willful abuse of the judicial process other than to note that incompetence should not be equated with bad faith. We also note that the complaint in question was an initial pleading in a period of our jurisprudence favoring notice pleading. 45