Court Opinion

ID: 75334
Source: CourtListenerOpinion
Date Created: 2010-04-26 09:10:17+00
Date Added: 2024-06-11T13:27:12.134908
License: Public Domain

[PUBLISH]

                IN THE UNITED STATES COURT OF APPEALS
                                                                         FILED
                         FOR THE ELEVENTH CIRCUIT              U.S. COURT OF APPEALS
                                                                 ELEVENTH CIRCUIT
                                -----------------------              MAY 18, 2001
                                   No. 00-13834                   THOMAS K. KAHN
                                -----------------------                CLERK
                           D.C. No. 97-00083 CV-DV-3

JOHN BRYANT, On behalf of Himself and
all others similarly situated,
ROBERT C. EAST, et al.,

                                                Plaintiffs-Appellants,

                                       versus

THOMAS E. DUPREE, JR.,
DAVID P. FRAZIER, et al.,

                                                Defendants-Appellees,

                                -----------------------
                    Appeal from the United States District Court
                        for the Middle District of Georgia
                                -----------------------
                                  (May 18, 2001)

Before BARKETT, HILL and KRAVITCH, Circuit Judges.

PER CURIAM:

      This is the second appeal of this case and the facts are set out fully in Bryant

v. Avado Brands, Inc., 187 F.3d 1271 (11th Cir. 1999). Accordingly, we address

only the facts necessary to our decision in the current appeal, in which the
plaintiffs challenge the district court’s dismissal of their complaint without leave to

amend. Because we find that the district court should have allowed the plaintiffs

an opportunity to amend their complaint, we reverse and remand.

                                   I. BACKGROUND

       Plaintiffs, who are shareholders of Apple South, Inc. (now known as “Avado

Brands, Inc.”), allege that the defendant officers of the corporation made false and

misleading statements in violation of the Securities and Exchange Act of 1934.

The district court denied the defendants’ motion to dismiss, but certified its order

for interlocutory review so that this court could address whether the Private

Securities Litigation Reform Act of 1995, 15 U.S.C. § 78u-4 et seq. (“PSLRA”)

altered the scienter requirement for securities fraud cases. We held it did not. See

Bryant, 187 F.3d at 1283. Specifically, we stated that in order to meet the

PSLRA’s heightened pleading requirement, a plaintiff must plead with particularity

facts which give rise to a strong inference that the defendant acted in a severely

reckless fashion, but that allegations of motivation and opportunity, without more,

do not meet this burden.1 Id. at 1285-87. Following remand, the defendants

renewed their motion to dismiss. The plaintiffs filed a response which included a

       1
        We also held that the district court was authorized to take judicial notice of public
documents filed according to SEC regulations for the purpose of determining what statements
the documents contain. Bryant, 187 F.3d at 1276.

                                               2
request for leave to amend. The district court dismissed the complaint with

prejudice and denied plaintiffs leave to amend.

                                 II. DISCUSSION

      We review for abuse of discretion a district court’s denial of a motion to

amend. Henson v. Columbus Bank & Trust Co., 770 F.2d 1566, 1574 (11th Cir.

1985). A district court’s discretion to dismiss a complaint without leave to amend

“is ‘severely restrict[ed]’ by Fed. R. Civ. P. 15(a), which directs that leave to

amend ‘shall be freely given when justice so requires.’” Thomas v. Town of

Davie, 847 F.2d 771, 773 (11th Cir.1988) (citation omitted). Generally, “[w]here a

more carefully drafted complaint might state a claim, a plaintiff must be given at

least one chance to amend the complaint before the district court dismisses the

action with prejudice.” Bank v. Pitt, 928 F.2d 1108, 1112 (11th Cir. 1991). A

district court need not, however, allow an amendment (1) where there has been

undue delay, bad faith, dilatory motive, or repeated failure to cure deficiencies by

amendments previously allowed; (2) where allowing amendment would cause

undue prejudice to the opposing party; or (3) where amendment would be futile.

See Forman v. Davis, 371 U.S. 178, 182 (1962).

      The district court gave several reasons for its refusal to grant the plaintiffs

leave to amend. First, the district court stated that the plaintiffs already had been

                                           3
“given one opportunity to amend their complaint.” This assertion apparently refers

to the plaintiffs’ Amended Complaint, filed in response to the defendants’ original

motion to dismiss. Under Rule 15(a), an amendment may be made either as “a

matter of course” or “by leave of court.” See Fed. R. Civ. P. 15(a).2 The

Amended Complaint was filed as a matter of course, and until the renewed motion

to dismiss came before the court, the plaintiffs had not asked for leave to amend.

Therefore, it cannot be said that the plaintiffs already had been given an

opportunity to amend or that the plaintiffs repeatedly had failed to cure deficiencies

through previously allowed amendments.

      Second, the district court stated that dismissal with prejudice was

appropriate because the plaintiffs already had been given notice of the possible

deficiencies in their complaint. See Friedlander v. Nims, 755 F.2d 810, 811-12

(11th Cir.1985) (stating that dismissal with prejudice was appropriate where

district court gave “specific and repeated warnings” that amendment was

      2
       Rule 15(a) provides:

      A party may amend the party’s pleading once as a matter of course at any time
      before a responsive pleading is served or, if the pleading is one to which no
      responsive pleading is permitted and the action has not been placed upon the trial
      calendar, the party may so amend it at any time within 20 days after it is served.
      Otherwise a party may amend the party’s pleading only by leave of court or by
      written consent of the adverse party; and leave shall be freely given when justice
      so requires.

      Fed. R. Civ. P. 15(a).

                                              4
necessary). On the contrary, in denying the original motion to dismiss, the district

court stated that the plaintiffs’ allegations of internal reports showing that the

defendants were aware of the falsity of their statements, coupled with evidence of

motive and opportunity in the form of insider stock trades, satisfied the heightened

pleading requirement. Bryant v. Apple South, Inc., 25 F. Supp. 2d 1372, 1381

(M.D. Ga. 1998). Rather than indicating infirmities in the complaint, the district

court’s prior opinion created the exact opposite impression. Nor did our opinion in

the previous appeal suggest that the plaintiffs’ complaint did not satisfy the

PSLRA’s heightened pleading requirement. See Bryant, 187 F.3d at 1287

(“Having thus set out the law, . . . we remand the case to the district court for

proceedings consistent with this opinion.”). Furthermore, once the defendants

renewed their motion to dismiss, the plaintiffs responded with their first request for

leave to amend, which the district court denied. Accordingly, it cannot be said that

the plaintiffs failed to correct defects of which they had notice.

      The district court also denied leave to amend because it determined that

allowing further amendment would be futile in light of the fact that the Amended

Complaint “contain[ed] few if any new allegations.” This reasoning ignores the

fact that the district court earlier had found the complaint sufficient, thus justifying,

until this court’s opinion, the plaintiffs’ belief that they did not need to include any

                                           5
further allegations in the Amended Complaint. As mentioned above, once the

defendants renewed their motion to dismiss, the plaintiffs requested leave to

amend. The plaintiffs have indicated, moreover, that if given the chance to amend,

they will meet the PSLRA’s pleading requirement. Thus, allowing the plaintiffs to

amend their complaint would not be futile. See Thomas, 847 F.2d at 773 (stating

that district court should have allowed amendment where “it does not appear

beyond doubt that [plaintiff] cannot prove a set of facts which would entitle him to

relief”).

       Finally, the district court declined to grant the plaintiffs leave to amend

because it concluded that doing so would unfairly prejudice the defendants. The

court found prejudice because the litigation had been ongoing for over three years

and the plaintiffs had not yet adequately pleaded their complaint. The lengthy

nature of litigation, without any other evidence of prejudice to the defendants or

bad faith on the part of the plaintiffs, does not justify denying the plaintiffs the

opportunity to amend their complaint. See Floyd v. Eastern Airlines, Inc., 872
F.2d 1462, 1490 (11th Cir. 1989) (“The mere passage of time, without anything

more, is an insufficient reason to deny leave to amend.”) rev’d on other grounds,

499 U.S. 530 (1990).

                                            6
       Here, there is no evidence that the plaintiffs have employed delaying tactics.

The litigation was protracted in part by the district court’s decision to certify for

interlocutory appeal its initial denial of the motion to dismiss. Moreover, the

district court did not give any reason, other than the mere passage of time, to

support its conclusion that allowing the plaintiffs to amend their complaint would

prejudice the defendants. Because there is no evidence that allowing an

amendment at this stage would prejudice the defendants, the district court should

have allowed the plaintiffs to amend their complaint.

                                    III. CONCLUSION

       Accordingly, we REVERSE the district court’s dismissal of the action and

REMAND with instructions to grant the plaintiffs leave to amend.3

       3
        Because we conclude that the district court should have allowed the plaintiffs to amend
their complaint, we do not address whether the plaintiffs have met the PSLRA’s pleading
requirement.

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