Court Opinion

ID: 8978650
Source: CourtListenerOpinion
Date Created: 2022-11-27 11:09:42.655646+00
Date Added: 2024-06-11T17:10:35.837376
License: Public Domain

HARRISON L. WINTER, Senior Circuit Judge,
concurring and dissenting:
I am in agreement with all of what is decided in the majority opinion except for the court’s affirmance of the order denying the defendants leave to amend their answer so as to allege a counterclaim for fraud. I think that this order should be reversed. Given that the case is to be returned to the district court for a new trial, I think that in any event we should allow the amendment now.
I respectfully dissent with respect to this one aspect of the appeal.
*423I.
Defendants sought to amend their answer to assert the defense of fraud and a counterclaim for fraud approximately one month before trial and approximately one month after they had obtained access to plaintiffs actual time sheets, which showed corrections and suspicious entries suggesting that fraud may have been practiced. The district court, without assigning any reason, denied leave to amend. It is well settled that denial of a motion to amend without advancing any justifying reason constitutes a clear abuse of discretion, unless the record reflects an obvious reason to deny the motion. Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962). Moreover, we have repeatedly held that delay, without “specifically resulting prejudice” or futility, or without any purpose to harass the opponent, is not a sufficient reason for denial of leave to amend. Island Creek Coal Co. v. Lake Shore, Inc., 832 F.2d 274, 279 (4th Cir.1987); Johnson v. Oroweat Foods Co., 785 F.2d 503, 509 (4th Cir.1986). Here, neither the district court nor the plaintiff pointed to any possible prejudice that would result if leave to amend were granted. The record reflects no such prejudice or bad faith either. Trial was still one month away, no new discovery would have been required, and the facts upon which the proposed counterclaim was based were well known to the plaintiff. See Sweetheart Plastics, Inc. v. Detroit Forming, Inc., 743 F.2d 1039, 1044 (4th Cir.1984) (motion to amend may be granted on eve of trial because defendant “has been aware since the filing of the [plaintiffs] complaint of the circumstances from which the [proposed added claim] arose”).
In an effort to avoid the applicable rule, the majority argues that the proposed allegations would not set forth a cause of action under applicable North Carolina law for fraud because detrimental reliance was not specifically alleged by defendants. However, we have stated previously that leave to amend should only be denied on the ground of futility “when the proposed amendment is clearly insufficient or frivolous on its face.” Johnson, 785 F.2d at 510. Even considering the requirements of North Carolina law, I think the proposed counterclaim was not patently frivolous, as any detrimental reliance can be inferred from the proposed pleadings. More importantly, I note that the pleading requirements with which the defendants must conform are set out not in the substantive law of North Carolina, but rather in the Federal Rules of Civil Procedure, and specifically in Rule 9(b), which governs “all averments of fraud.” See generally Bowers v. Firestone Tire & Rubber Co., 800 F.2d 474, 479 (5th Cir.1986) (“While substantive questions ... are resolved by applying the relevant state authorities, the adequacy of the pleadings must be resolved through the guidance of the Federal Rules of Civil Procedure.”). In my view, the defendants’ proposed counterclaim meets the requirements of Fed.R.Civ.P. 9(b), which provides that “[m]alice, intent, knowledge, and other conditions of mind of a person may be averred generally” (emphasis added). Consequently, I do not think that the counterclaim should be dismissed at this stage.1
The majority, however, has chosen to permit the defendant to plead the defense of fraud because (1) under Fed.R.Civ.P. 15(a), delay cannot serve as the sole basis for denial of leave to amend, and (2) the defense asserted by defendants was not facially meritless. Regarding the first basis, this circuit for decades has applied to all proposed amendments the liberal standards regarding leave to amend, regardless of whether the supplemental pleadings consisted of a counterclaim, a defense, or an amended complaint. See Safeway Trails, Inc. v. Allentown & Reading Transit Co., *424185 F.2d 918, 920 (4th Cir.1950) (applying liberal amendment principles to motion to add counterclaim); see also Spartan Grain & Mill Co. v. Ayers, 517 F.2d 214, 220 (5th Cir.1975) (argument in favor of allowing amendment is particularly strong where proposed counterclaim is compulsory); cf. 6 C. Wright, A. Miller & M. Kane, Federal Practice & Procedure: Civil § 1430, at 56 (Supp.1989) (a “convincing argument can be made that the liberal pleading and amendment policies embodied ... in Rule 15(a) ... should control [requests to amend under Rule 13(f) ]”).2 Thus, the majority’s reasoning that reverses the district court’s refusal to grant leave to amend the defense must apply with equal force to the counterclaim.
Second, I do not perceive that the substantive North Carolina law prescribes different tests for fraud depending upon whether it is to be pled affirmatively or defensively. Thus, I am unable to understand how the majority can reach the asymmetrical result that on the same identical language defendants have failed to allege a counterclaim for fraud but have successfully alleged a defense of fraud.
II.
My final comment concerns the inequitable situation that the majority opinion will create when this case is returned to the district court for a new trial. There, the defendants will be free to assert the defense of fraud and offer proof in support thereof, but will be unable to assert a counterclaim for fraud. In other words, defendants can avoid in whole or in part paying unpaid billings if they prove fraud, but they cannot recover any amounts already paid, the payment of which was fraudulently induced. To my mind this is a completely lopsided result. If fraud was committed by the plaintiff, I think that justice requires that defendants be given the opportunity to redress their rights both with respect to the portion of plaintiffs claim which has already been paid as well as that which is unpaid.

. I similarly take issue with the majority’s claim that the proposed pleading "plainly” would be dismissed under Fed.R.Civ.P. 12(b)(6). Under Rule 12(b)(6), a pleading may be dismissed "only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.” Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984). The pleading must also be construed in the light most favorable to the defendant here, and its well-pleaded facts must be accepted as true. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974).

. Technically, requests to add a counterclaim are authorized under Fed.R.Civ.P. 13(f), which provides that "[w]hen a pleader fails to set up a counterclaim through oversight, inadvertence, or excusable neglect, or when justice requires, the pleader may by leave of court set up the counterclaim by amendment." Requests to amend under Rule 13(f) are therefore judged under the standards of Rule 15(a), which governs amendments to pleadings generally. See SFM Corp. v. Sundstrand Corp., 99 F.R.D. 101, 104 (N.D.Ill.1983) ("Rules 13(f) and 15(a) have been construed as prescribing essentially the same standards for granting leave to add omitted counterclaims.").