Court Opinion

ID: 2678397
Source: CourtListenerOpinion
Date Created: 2014-06-13 20:00:06.656316+00
Date Added: 2024-06-11T13:09:44.845393
License: Public Domain

United States Court of Appeals
                        For the First Circuit

No. 13-9004

                     IN RE: DAVID ALLEN LOMBARDO,

                                Debtor.
                              __________

                            JOHN F. ZULLO,

                              Appellant,

                                  v.

                        DAVID ALLEN LOMBARDO,

                              Appellee.

              APPEAL FROM THE BANKRUPTCY APPELLATE PANEL
                         FOR THE FIRST CIRCUIT

                                Before
                       Thompson, Circuit Judge,
                     Souter,* Associate Justice,
                      and Stahl, Circuit Judge.

     Dean C. Brunel, with whom Erica C. Mirabella and Law Offices
of Dean C. Brunel were on brief, for appellant.
     Richard S. Ravosa for appellee.

                            June 13, 2014

     *
       Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
             SOUTER,   Associate   Justice.     This   appeal      is     from    the

bankruptcy court's dismissal on summary judgment of John Zullo's

adversary proceeding against debtor David Lombardo, after denying

Zullo leave to amend his complaint. We affirm.

             In   September   2010,     Lombardo     filed     for      Chapter      7

bankruptcy. In December, Zullo began an adversary proceeding in the

bankruptcy    court,    alleging      that   Lombardo's    debt      to   him     was

nondischargeable under 11 U.S.C. § 523(a)(6).1 That provision

excepts from bankruptcy discharge "any debt . . . for willful and

malicious injury by the debtor to another entity or to the property

of another entity."

             Lombardo's   debt   to    Zullo   was   for     the   amount       of   a

Massachusetts state court judgment antedating Lombardo's bankruptcy

and resting on the following facts. In 2006, Zullo paid Lombardo

for services under a contract to perform plumbing and other work on

Zullo's house. Lombardo had represented that he was the president

of a plumbing company and was licensed to perform the necessary

procedures. In fact, Lombardo was an apprentice, lacking the master

plumber's license required by Massachusetts law to make any such

agreement as the one with Zullo. Unsurprisingly, Lombardo's work

turned out to be inadequate, and Zullo incurred additional expense

to have it fixed.

     1
       The complaint had other counts as well, but they have since
dropped out of the litigation.

                                       -2-
               After filing the adversary proceeding, Zullo's counsel

withdrew in June 2011. In January 2012, Zullo retained a successor

who,    in    March,    moved    for   summary     judgment    on    the   11    U.S.C.

§ 523(a)(6) claim, alleging nondischargeability because the debt on

the    state    court    judgment      arose   from     Lombardo's     willful     and

malicious injury to Zullo's property.

               The bankruptcy court held a hearing on the motion in May

2012.    At    that    point,    seventeen     months    had   passed      since   the

complaint had been filed, the period for discovery had closed, and

trial    was    scheduled       to   start   the   following     week.     The    court

indicated that there was no evidence before it to support the

theory that Lombardo had injured Zullo's property willfully, as

required by subsection (6) of § 523(a). The court explained that

Zullo's adversary proceeding might properly have been brought not

under that provision, but rather under subsection (2)(A), which

excepts from discharge "any debt for money . . . obtained by false

pretenses,      a   false   representation,        or   actual      fraud."     Zullo's

counsel argued to the contrary, but also made an oral request for

leave to amend the complaint by adding a count under subsection

(2)(A). The court denied it and ultimately granted summary judgment

not for the movant, Zullo, but for Lombardo. See Fed. R. Bankr. P.

7056; Fed. R. Civ. P. 56(f)(1). Zullo appealed to the Bankruptcy

Appellate Panel (BAP), which affirmed.

                                         -3-
           The sole issue is whether the bankruptcy court erred in

denying   Zullo   leave   to   amend   his   complaint.2   We   review   the

bankruptcy court's decision directly, according no deference to the

BAP's affirmance. See Brandt v. Repco Printers & Lithographics,

Inc. (In re Healthco Int'l, Inc.), 132 F.3d 104, 107 (1st Cir.

1997). The standard of review is "only for abuse of discretion."

Noonan v. Rauh (In re Rauh), 119 F.3d 46, 52 n.10 (1st Cir. 1997).

Such an abuse may consist of, among other things, mistakes of law,

see Todisco v. Verizon Commc'ns, Inc., 497 F.3d 95, 98 (1st Cir.

2007), or clearly erroneous findings of fact, see Young v. City of

Providence ex rel. Napolitano, 404 F.3d 33, 38 (1st Cir. 2005).

           Under the rules governing adversary proceedings, the

bankruptcy court should freely give a party leave to amend his

complaint when justice so requires. See Fed. R. Bankr. P. 7015;

Fed. R. Civ. P. 15(a)(2). While the rules thus reflect a liberal

amendment policy, we defer to the bankruptcy court's denial of

leave to amend if supported by an apparent, adequate reason, see

Grant v. News Grp. Bos., Inc., 55 F.3d 1, 5 (1st Cir. 1995), and

under this court's precedent, undue delay in moving to amend, even

standing alone, may be such an adequate reason. See Acosta-Mestre

v. Hilton Int'l of P.R., Inc., 156 F.3d 49, 51-52 (1st Cir. 1998);

     2
       Zullo's brief frames the issue as whether the bankruptcy
court was required to "find for" him under subsection (2)(A), but
his argument properly focuses on the amendment issue.

                                   -4-
see also Foman v. Davis, 371 U.S. 178, 182 (1962) (listing "undue

delay" as a reason for denying leave to amend).3

          In   any    event,    we       have   repeatedly     said    that   when

"considerable time has elapsed between the filing of the complaint

and the motion to amend, the movant has [at the very least] the

burden of showing some 'valid reason for his neglect and delay.'"

Stepanischen v. Merchs. Despatch Transp. Corp., 722 F.2d 922, 933

(1st Cir. 1983) (quoting Hayes v. New Eng. Millwork Distribs.,

Inc., 602 F.2d 15, 20 (1st Cir. 1979)). And we have previously

labeled as "considerable time," warranting explanation, periods of

fourteen months, see Grant, 55 F.3d at 6, fifteen months, see

Acosta-Mestre,    156    F.3d      at     52,   and     seventeen   months,    see

Stepanischen, 722 F.2d at 933. We have also held that in assessing

whether delay is undue, a court will take account of what the

movant "knew or should have known and what he did or should have

done." Invest Almaz v. Temple-Inland Forest Prods. Corp., 243 F.3d

57, 72 (1st Cir. 2001) (quoting Leonard v. Parry, 219 F.3d 25, 30

(1st Cir. 2000)).

          Here,      Zullo   has        provided   no    explanation    for   the

seventeen-month delay between filing the complaint and seeking

     3
        In support of the proposition that delay alone is
insufficient, Zullo cites two cases from other circuits: Cornell &
Co. v. Occupational Safety & Health Review Comm'n, 573 F.2d 820,
823 (3d Cir. 1978), and Mercantile Trust Co. Nat'l. Ass'n v. Inland
Marine Prods. Corp., 542 F.2d 1010, 1012 (8th Cir. 1976). Even
assuming these cases reflect the law in those circuits, they do not
bear on our analysis.

                                         -5-
leave     to    amend.   His    change    of   counsel      is   obviously   no

justification, as his second lawyer did not try to amend until four

months after taking the case and over one month after moving for

summary judgment on the apparently ill-pleaded claim. And even then

Zullo's counsel ultimately requested leave only because the court

informed him that a claim under a different statutory subsection

might have fared better than the claim actually made. That reason

carries no implication favorable to Zullo under the Invest Almaz

standard of giving consideration to what a lawyer should have known

and done: this is not a case where the movant sought to amend upon

learning previously undiscoverable information, nor one in which

the law took some surprising turn. On the contrary, all of the

relevant facts had been settled since the time of the Massachusetts

state court proceedings (concluded before the adversary proceeding

had begun in the bankruptcy court), and the law had not changed

since this case's inception.

               Zullo consequently misses the point when he contends that

the delay between the filing of his complaint and the hearing on

his summary judgment motion was largely attributable to Lombardo's

dilatory tactics during discovery. Whatever the reason for the

proceedings' protraction, the point is that Zullo had ample time to

seek leave to amend and had no reasonable basis in fact or law for

waiting    until    seventeen    months    after   filing    the   adversarial

complaint.

                                     -6-
            This case brings into relief the tension that lurks

between different policies of judicial practice. The system favors

liberal amendment of pleadings to ensure that litigants' claims are

resolved on their merits. But by the time discovery has ended and

trial is imminent, that same concern for a fair and reliable trial

process recognizes value in finality and certainty about the case

that may be tried. Counsel facing an adversary given to sudden

second thoughts should not be put on the spot to prepare to meet a

new legal theory on the verge of trial, and courts straining to

accommodate    their   case    loads    need    to    minimize    the    risk   of

continuances   in   order     to   provide     dependable      dockets   serving

efficient   management      and    fairness    to    waiting   litigants.       See

Acosta-Mestre, 156 F.3d at 53 ("Rule 15(a)'s liberal amendment

policy seeks to serve justice, but does not excuse a lack of

diligence that imposes additional and unwarranted burdens on an

opponent and the courts.").

            We are not implying that it would have been error for the

bankruptcy court to grant Zullo leave to amend. But we cannot say

that the court abused its discretion in denying his request, filed

as an act of desperation when the case as prepared for imminent

trial began to look ill-pleaded after the passage of seventeen

months to ponder it. It is enough to say that the judge's action

fell within the zone of reasonable judgment.

                                       -7-
         The bankruptcy court's denial of Zullo's request for

leave to amend is AFFIRMED.

                -- Dissenting Opinion Follows --

                              -8-
          THOMPSON,     Circuit   Judge,   dissenting.   While   I   am

cognizant of the deferential nature of our review, I nonetheless

cannot agree with the result reached by the majority.

          Federal Rule of Civil Procedure 15(a) reflects a liberal

standard, see Torres-Alamo v. Puerto Rico, 502 F.3d 20, 25 (1st

Cir. 2007), one that requires the court to "freely give leave when

justice so requires."    Fed. R. Civ. P. 15(a)(2); see also Fed. R.

Bankr. P. 7015.   Here, we know little about the court's rationale

for denying Zullo's oral motion to amend as the court did not

explain its reasons (or articulate that it was denying the motion).

Whatever the rationale was, I think the bankruptcy court got it

wrong.

          A plaintiff's delay4 in filing the motion to amend is

undoubtedly part of the equation, and indeed a good deal of time

passed between Zullo's filing the complaint and his spur of the

     4
       Though the bankruptcy judge's reason for denial is unknown,
I (like the majority) will focus on the delay factor. Given the
chronology of events here, and the substance of Lombardo's oral
objection to the motion to amend, it is the most logical focal
point. Besides undue delay, other common grounds for a court's
denial of a motion to amend are futility, bad faith, and dilatory
motive on the movant's part.     See Hatch v. Dep't for Children,
Youth & Their Families, 274 F.3d 12, 19 (1st Cir. 2001). None of
the other grounds are a good fit here. There is no allegation that
Zullo acted in bad faith or had a dilatory motivation. A claim of
futility would be a tough one to make given that Lombardo, who
admits that he hooked up improper plumbing in Zullo's home, entered
into a consent agreement with the applicable state board conceding
unlicensed practice and agreeing to a fine and probation. On top
of that, a jury found him liable for double damages based on an
illegal contract performance, which was a willful and knowing
violation of Massachusetts law.

                                   -9-
moment attempt to amend it at the summary judgment hearing.

However, it seems clear that a primary reason we are concerned with

protracted delay in filing a motion to amend is the "attendant

burdens on the opponent and the court" that it can create.

Somascam, Inc. v. Philips Med. Sys. Nederland, B.V., 714 F.3d 62,

64 (1st Cir. 2013) (per curiam); see, e.g., Frappier v. Countrywide

Home Loans, Inc., No. 13-1774, 2014 WL 1688917, at *3 (1st Cir.

Apr. 30, 2014) (noting concern that additional discovery would

likely be required based on the proposed amendment); ACA Fin. Guar.

Corp. v. Advest, Inc., 512 F.3d 46, 57 (1st Cir. 2008) (explaining

that the plaintiffs' wait and see approach to filing complaints

"would impose unnecessary costs and inefficiencies on both the

courts and party opponents").

           In this case, I fail to see what burden would have been

placed on Lombardo or the bankruptcy court should Zullo's motion to

amend have been granted.   Everyone (the majority, the parties, the

bankruptcy judge) agree that the relevant facts were already

settled.   The factual underpinnings were fully litigated, and

adjudicated by a jury, in the state court proceeding that Zullo

filed against Lombardo, and ultimately emerged victorious from.

Discovery had been completed in the adversary proceeding and the

relevant witnesses had been identified.

           Further, the legal theory Zullo initially sought to

proceed under, 11 U.S.C. § 523(a)(6) (precludes discharge in the

                                -10-
event of willful and malicious injury by the debtor), is not

strikingly different from the one which he hoped to include in an

amended complaint, id. § 523(a)(2)(A) (prevents discharge when the

debtor     has   engaged   in   fraud    or   false   pretenses   and

representations).5   See, e.g, Old Republic Nat'l Title Ins. Co. v.

Levasseur (In re Levasseur), 737 F.3d 814, 817-19 (1st Cir. 2013)

(finding that the debtor's actions prohibited discharge under both

11 U.S.C. § 523(a)(2)(A) and § 523(a)(6)).     And neither subsection

embodies a cause of action so different from the claims already

alleged by Zullo in state court, e.g., fraud, breach of contract.

            In other words, it seems highly unlikely that Lombardo

would have had to engage in additional discovery, explore new legal

theories, or mount a previously unthought of defense should Zullo's

proposed amendment have gone forward.      For those very reasons, it

is questionable whether the court would have felt it necessary to

continue the upcoming trial.    The potential prejudice to Lombardo,

or burden on the court, should the motion to amend have been

granted, seems very lacking to me.      It is for these reasons that I

think the bankruptcy court abused its discretion and failed to do

justice.    I respectfully dissent.

     5
       It seems the difference relates to where the debtor's intent
lay. See Sharfarz v. Goguen (In re Goguen), 691 F.3d 62, 66 n.1
(1st Cir. 2012) (discussing the debtor's reliance on sections
(a)(2)(A) and (a)(6) and explaining that 11 U.S.C. § 523(a)(6)
requires a deliberate or intentional injury, not just a deliberate
or intentional act that led to injury (citing Kawaauhau v. Geiger,
523 U.S. 57, 61 (1998))).

                                 -11-