Opinion ID: 767608
Heading Depth: 3
Heading Rank: 1

Heading: Rose's Motion to Amend His Original Complaint

Text: 7 Rose contends that the district court erred when it denied his motion to amend his original complaint, which prevented him from adding a claim of bad faith against Hartford in this insurance dispute. Rule 15(a) of the Federal Rules of Civil Procedure provides that leave to amend shall be freely given when justice so requires. We review a district court's order denying a Rule 15(a) motion to amend for an abuse of discretion. General Elec. Co. v. Sargent & Lundy, 916 F.2d 1119, 1130 (6th Cir. 1990). 8 Although a district court has discretion to deny a motion to amend a complaint after an answer has been filed, we have held on several occasions that a district court abuses its discretion when it fails to state a basis for its decision to deny a motion to amend. Jet, Inc. v. Sewage Aeration Sys., 165 F.3d 419, 425 (6th Cir. 1999); Moore v. City of Paducah, 790 F.2d 557, 559 (6th Cir. 1986); see also Foman v. Davis, 371 U.S. 178, 182 (1962) ([An] 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.). In the present case, the district court issued a marginal entry order denying Rose's motion for leave to amend his complaint, but it did not provide a justification or explanation for its denial. Because the district court denied Rose's motion without explanation, it has clearly abused its discretion in this case. 9 Nevertheless, the district court's abuse of its discretion could amount to a harmless error if adding Rose's proposed amendment would have been futile. See, e.g., Jet, Inc., 165 F.3d at 425 (holding that magistrate judge's denial of motion to amend without providing an explanation was harmless because [t]he futility of amending [the plaintiff's] complaint would have been appropriate grounds on which to deny the motion to amend.). A proposed amendment is futile if the amendment could not withstand a Rule 12(b)(6) motion to dismiss. Thiokol Corp. v. Department of Treasury, State of Michigan, Revenue Div., 987 F.2d 376, 382-83 (6th Cir. 1993). 10 In this case, Hartford argues that the district court's decision should be affirmed because there is evidence in the record, i.e., Rose's criminal indictment on arson charges, that shows that adding Rose's bad faith claim would have been futile. The district court, however, could not have properly considered Rose's indictment on criminal charges on a Rule 12(b)(6) motion to dismiss. Because the criminal indictment qualifies as a matter[ ] outside the pleading, the district court would have had to treat a Rule 12(b)(6) motion and accompanying indictment as a motion for summary judgment. See Fed. R. Civ. P. 12(b)(6) (stating that if matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all materialmade pertinent to such a motion by Rule 56.). Hartford claims that Rose's proposed amendment is futile because the district court would have eventually granted summary judgment in the insurance company's favor once the district court considered the criminal indictment. The test for futility, however, does not depend on whether the proposed amendment could potentially be dismissed on a motion for summary judgment; instead, a proposed amendment is futile only if it could not withstand a Rule 12(b)(6) motion to dismiss. Because the proposed bad faith claim could withstand a Rule 12(b)(6) motion to dismiss, Rose's proposed amendment was not futile. Thus, the district court's abuse of discretion in this case does not amount to a harmless error. 11 Hartford also argues that the district court's dismissal of Rose's motion to amend should be affirmed because the district court could have taken judicial notice of the criminal indictment pursuant to Federal Rule of Evidence 201. Rule 201 states in part that: 12
13 (b) Kinds of Facts. A judicially noticed fact must be one not subject to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned. 14 (c) When discretionary. A court may take judicial notice, whether requested or not. 15 (e) Opportunity to be heard. A party is entitled upon timely request to an opportunity to be heard as to the propriety of taking judicial notice and the tenor of the matter noticed. In the absence of prior notification, the request may be made after judicial notice has been taken. 16 Fed. R. Evid. 201. Although a district court has discretion to take judicial notice of adjudicative facts pursuant to Rule 201, the district court in this case did not necessarily take judicial notice of Rose's criminal indictment. Because the district court did not set forth an explanation for its decision to deny Rose's motion to amend his complaint, it is impossible to tell on appeal whether the district court properly took judicial notice of the indictment pursuant to Rule 201. Furthermore, Rule 201(e) requires the district court to give a party an opportunity to be heard if judicial notice is taken. See, e.g., Lussier v. Runyon, 50 F.3d 1103, 1114 (1st Cir.) (holding that district court erred when it took judicial notice without giving parties an opportunity to be heard), cert. denied, 516 U.S. 815 (1995). Because Rose was not given an opportunity to address the judicial notice issue either before or after the district court denied his motion to amend, and because the district court did not necessarily take judicial notice of the criminal indictment in this case, the district court's decision to deny the motion to amend without any explanation does not amount to a harmless error. 17