Court Opinion

ID: 3036690
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:54:46.797071+00
Date Added: 2024-06-11T11:48:42.855899
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

AMERISOURCEBERGEN CORPORATION,         
a New Jersey corporation, dba
Bergen Brunswig Corporation, aka
BBC; AMERISOURCEBERGEN DRUG
CORPORATION; MEDICAL INITIATIVES,
INC., aka Oncology Supply; ASD
SPECIALTY HEALTHCARE, INC.,
              Plaintiffs-Appellants,         No. 04-15595
                v.
DIALYSIST WEST, INC., an Arizona              D.C. No.
                                           CV-02-01472-JWS
corporation,                                  OPINION
               Defendant-Appellee,
                v.
AMERX INC., a Florida corporation;
CSG DISTRIBUTORS, a Tennessee
company; PREMIER MEDICAL
DISTRIBUTORS, INC.,
           Third-party-Defendants.
                                       
        Appeal from the United States District Court
                 for the District of Arizona
        John W. Sedwick, District Judge, Presiding

                Argued and Submitted
      November 18, 2005—San Francisco, California

                   Filed March 22, 2006

      Before: Jerome Farris, A. Wallace Tashima, and
          Consuelo M. Callahan, Circuit Judges.

                            3039
3040   AMERISOURCEBERGEN v. DIALYSIST WEST
           Opinion by Judge Farris;
           Dissent by Judge Tashima
           AMERISOURCEBERGEN v. DIALYSIST WEST       3043

                       COUNSEL

Morton R. Branzburg and Andrew O. Schiff, Klehr, Harrison,
Harvey, Branzburg, & Ellers LLP, Philadelphia, Pennsylva-
nia, for the plaintiffs-appellants.

Dan L. Bagatell and Joel W. Nomkin, Perkins Coie Brown &
Bain P.A., Phoenix, Arizona, for the defendant-appellee.
3044         AMERISOURCEBERGEN v. DIALYSIST WEST
                           OPINION

FARRIS, Circuit Judge:

      I.   FACTUAL AND PROCEDURAL HISTORY

   On August 2, 2002, AmerisourceBergen Corporation1
brought suit against Dialysist West, Inc. alleging that Dialy-
sist West breached a sales agreement concerning the sale of
the drug Epogen S40. Following its determination that 50%
to 100% of the Epogen it purchased from Dialysist West was
counterfeit, AmerisourceBergen withheld payments due Dia-
lysist West on non-Epogen drug sales. On May 18, 2003, Dia-
lysist West filed a counterclaim demanding that
AmerisourceBergen pay the approximately $2.2 million it
owed for the non-Epogen products Dialysist West had
shipped to AmerisourceBergen. On May 30, 2003, Ameri-
sourceBergen filed a reply to Dialysist West’s counterclaim
conceding that it had not paid for the non-Epogen products
and that these products were genuine. On August 25, 2003,
AmerisourceBergen filed a cross-motion for leave to amend
its complaint and its reply to Dialysist West’s counterclaim,
changing its tack by alleging that Dialysist West also sold it
counterfeit, non-Epogen products (namely Procrit). On Janu-
ary 6, 2004, the district court granted Dialysist West’s motion
for judgment on the pleadings, denied AmerisourceBergen’s
motion for leave to amend, and certified the judgment as final
under Federal Rule of Civil Procedure 54(b). On March 3,
2004, the district court denied AmerisourceBergen’s motion
to stay execution of judgment and AmerisourceBergen filed
this appeal on March 24, 2004.
  1
   AmerisourceBergen Corp. succeeded Bergen Brunswig Corporation as
the plaintiff-appellant in this case.
             AMERISOURCEBERGEN v. DIALYSIST WEST               3045
   II.   JURISDICTION & STANDARD OF REVIEW

   We have subject matter jurisdiction over the final decision
of the district court pursuant to 28 U.S.C. § 1291. We review
the district court’s interpretation of Arizona contract law de
novo. El-Hakem v. BJY Inc., 415 F.3d 1068, 1072 (9th Cir.
2005). The denial of AmerisourceBergen’s motion for leave
to amend is reviewed for abuse of discretion. See Bowles v.
Reade, 198 F.3d 752, 757 (9th Cir. 1999). The district court’s
Rule 54(b) certification of the judgment is reviewed de novo
to determine if it will lead to “piecemeal appeals” and for
“clear unreasonableness” on the issue of equities. See Grego-
rian v. Izvestia, 871 F.2d 1515, 1519 (9th Cir. 1989). The dis-
trict court’s refusal to stay enforcement of the judgment under
Rule 62(h) is reviewed for abuse of discretion. See MacKillop
v. Lowe’s Mkt., Inc., 58 F.3d 1441, 1446 (9th Cir. 1995).

                      III.   DISCUSSION

                A.    Setoff of Epogen Claims

   AmerisourceBergen claims that the district court erred in
finding that it could not set-off the approximately $2.2 million
it owes Dialysist West for non-Epogen, pharmaceutical pur-
chases against the estimated $8 million judgment it seeks
from Dialysist West for selling AmerisourceBergen counter-
feit Epogen. AmerisourceBergen bears the burden of estab-
lishing that it is entitled to either a legal or equitable setoff of
its claims. See Newbery Corp. v. Fireman’s Fund Ins. Co., 95
F.3d 1392, 1399 (9th Cir. 1996).

   [1] AmerisourceBergen and Dialysist West agree that sec-
tion 47-2717 of the Arizona Commercial Code applies. The
Arizona statute, a codification of section 2-717 of the Uni-
form Commercial Code, provides:

    The buyer on notifying the seller of his intention to
    do so may deduct all or any part of the damages
3046           AMERISOURCEBERGEN v. DIALYSIST WEST
      resulting from any breach of the contract from any
      part of the price still due under the same contract.

Ariz. Rev. Stat. § 47-2717 (2006). A plain reading of the stat-
ute indicates that a party may not set-off a contractual claim
against a debt on a separate contract. See ITV Direct, Inc. v.
Healthy Solutions, LLC, 379 F. Supp. 2d 130, 133 (D. Mass.
2005) (“Section 2-717 is not a general setoff provision per-
mitting a buyer of goods to adjust its continuing contract obli-
gations according to the equities perceived by the buyer.”).

   [2] AmerisourceBergen contends, however, that the con-
tracts for sale of Epogen and other drugs were not separate
contracts. Because the Vendor Agreement signed by Dialysist
West permits AmerisourceBergen to return any goods to Dia-
lysist West for “full credit,” AmerisourceBergen believes it
was justified in applying the credit it held for the counterfeit
Epogen purchases against its outstanding debts. Amerisource-
Bergen’s reading of the Vendor Agreement is strained.2 The
Vendor Agreement does not indicate that AmerisourceBergen
can offset one deficient transaction against another transac-
tion. Rather, as the district court pointed out, “[t]he plain lan-
guage of the provision links the allowable credit to the
specific returned goods.” AmerisourceBergen Corp. v. Dialy-
sist West, Inc., No. CIV-02-1472 PHX JWS, slip op. at 13 (D.
Ariz. Jan. 6, 2004).

   [3] The contract clause is not ambiguous, as Amerisource-
Bergen argues. The intention of the parties is clear: to create
a return policy by which AmerisourceBergen can fully
recover for returned goods that do not meet its standards. See
Smith v. Melson, Inc., 659 P.2d 1264, 1266 (Ariz. 1983) (stat-
ing that a contract should be read in light of the intentions of
the parties as reflected in the language and circumstances of
  2
    The relevant contract clause reads: “BBC may, at its sole option, return
all or any part of any product received from Vendor and receive full credit
for all returned items.”
             AMERISOURCEBERGEN v. DIALYSIST WEST             3047
the contract); see also Echo, Inc. v. Whitson Corp., 52 F.3d
702, 705 (7th Cir. 1995) (holding under Illinois law that in
applying UCC section 2-717, purchase orders cannot be set-
off against damages buyer sustains as result of breach of
related distributorship agreement).

   [4] Furthermore, AmerisourceBergen has provided no evi-
dence that it was the pattern or practice of the parties or indus-
try custom to offset deficiencies in one sales contract by
giving discounts or “credit” on other sales contracts. See
Mohave Valley Irrigation & Drainage Dist. v. Norton, 244
F.3d 1164, 1166 (9th Cir. 2001) (“According to the UCC, to
determine whether a contract’s terms are ambiguous, courts
may only consider evidence of course of dealing, trade usage,
or course of performance.”). The district court did not err in
holding that AmerisourceBergen had no legal right to set-off
its Epogen claims against its other contractual claims.

   [5] AmerisourceBergen argues that even if it is not entitled
to offset its debt under section 47-2717 of the Arizona Com-
mercial Code, Dialysist West’s insolvency affords it an equi-
table right of setoff under Arizona common law. But
AmerisourceBergen’s claim to equitable setoff is preempted
by 47-2717. Arizona’s Commercial Code provides that “prin-
ciples of law and equity” apply “unless [displaced] by the par-
ticular provisions of this title.” Ariz. Rev. Stat. § 47-1103
(2006); see also John Deere Co. v. First Interstate Bank, 709
P.2d 890, 894 (Ariz. 1985). Although no Arizona court has
ruled on whether section 47-2717 preempts a common law
claim for setoff, several federal courts have indicated that the
corresponding UCC section preempts equitable setoffs. See
ITV Direct, 379 F. Supp. at 133; Carlisle Corp. v. Uresco
Const. Materials, Inc., 823 F. Supp. 271, 275 (E.D. Pa. 1993).
As the court convincingly reasoned in Carlisle, because the
UCC “specifically provides for set-offs in particular circum-
stances . . . we must conclude that the Code drafters, and the
state legislatures that have adopted the Code, meant to dis-
place common law set-off.” Carlisle, 823 F. Supp. at 275. It
3048          AMERISOURCEBERGEN v. DIALYSIST WEST
is apparent that the Arizona legislature intended section 47-
2717 to supercede the common law of setoff. The district
court did not err in denying AmerisourceBergen’s common
law claim for equitable setoff.

                B.   Denial of Leave to Amend

   [6] AmerisourceBergen appeals the district court’s decision
to deny it leave to amend its reply pursuant to Fed. R. Civ. P.
15(a).3 Rule 15(a) is very liberal and leave to amend “shall be
freely given when justice so requires.” See Bowles v. Reade,
198 F.3d 752, 757 (9th Cir. 1999). But a district court need
not grant leave to amend where the amendment: (1) preju-
dices the opposing party; (2) is sought in bad faith; (3) pro-
duces an undue delay in litigation; or (4) is futile. Id. at 758;
Jackson v. Bank of Hawaii, 902 F.2d 1385, 1387 (9th Cir.
1990).

   [7] The district court found that AmerisourceBergen’s
motion to amend its reply and allege that non-Epogen drugs
(Procrit) that it had purchased from Dialysist West were coun-
terfeit was both untimely and prejudicial to Dialysist West. In
evaluating undue delay, we ask “whether the moving party
knew or should have known the facts and theories raised by
the amendment in the original pleading.” Jackson, 902 F.2d
at 1388. We have held that an eight month delay between the
time of obtaining a relevant fact and seeking a leave to amend
is unreasonable. See Texaco, Inc. v. Ponsoldt, 939 F.2d 794,
799 (9th Cir. 1991) (citing Jackson, 902 F.2d at 1388).

  [8] As the district court pointed out, AmerisourceBergen
  3
   We need not decide whether the district court also erred in denying
AmerisourceBergen leave to amend its complaint. See 10 Moore’s Federal
Practice, § 54.28[3][b], at 54-109 (3d ed. 2005) (“On appeal of a judg-
ment properly entered under Rule 54(b), the court of appeals may review
any matter implicated by the judgment, but should not reach beyond the
bounds of the judgment . . . .”).
             AMERISOURCEBERGEN v. DIALYSIST WEST             3049
sought to amend its pleadings nearly fifteen months after it
first learned that counterfeit Procrit was in the market and
three months after entering a reply where it conceded that the
products for which it had not paid, including Procrit, were
genuine. It is undisputed that at the time AmerisourceBergen
filed its reply in May 2003, it had all the information neces-
sary to raise the affirmative defense it now pursues: Ameri-
sourceBergen knew about the counterfeit Procrit on the
pharmaceuticals market, acknowledged that it had purchased
Procrit from Dialysist West during that period, and had previ-
ously filed suit because it believed that it had purchased coun-
terfeit drugs from Dialysist West. Presumably, at the time it
filed its reply, AmerisourceBergen made a reasoned decision
not to assert the defense that the shipments of Procrit it
received from Dialysist West contained bogus product.

   [9] Allowing AmerisourceBergen to “advance different
legal theories and require proof of different facts” at this stage
in the litigation would have prejudiced Dialysist West by
forcing it to undertake burdensome discovery and would have
unnecessarily delayed final judgment on the counterclaim.
Jackson, 902 F.2d at 1387; see also Chodos v. West Publ’g
Co., 292 F.3d 992, 1003 (9th Cir. 2002) (upholding district
court’s denial of leave to amend fraud claim where plaintiff
had facts prior to first amendment and amendment was both
prejudicial and dilatory). The district court did not abuse its
discretion in denying AmerisourceBergen’s motion for leave
to amend.

            C.   Certification of Final Judgment

   [10] AmerisourceBergen also appeals the district court’s
certification of final judgment on Dialysist West’s counter-
claim under Federal Rule of Civil Procedure 54(b). Rule 54(b)
provides that final entry of judgment should be made on indi-
vidual claims in multiple claim suits “upon an express deter-
mination that there is no just reason for delay.” Fed. R. Civ.
P. 54(b). Review of a district court’s certification of a final
3050         AMERISOURCEBERGEN v. DIALYSIST WEST
judgment involves a two-step process. See Curtiss-Wright
Corp. v. Gen. Elec. Co., 446 U.S. 1, 12 (1980). In the first
step, we review the district court’s entry of judgment de novo
and evaluate “such factors as the interrelationship of the
claims so as to prevent piecemeal appeals.” See Gregorian v.
Izvestia, 871 F.2d 1515, 1519 (9th Cir. 1989). The second
step of review requires an assessment of the equities. We
apply the “substantial deference” standard, reversing the dis-
trict court only if we find the district court’s conclusions
clearly unreasonable. Id.

   [11] The district court found that there was no risk of dupli-
cative effort by the courts because any subsequent judgments
in this case would not vacate its judgment on Dialysist West’s
counterclaim. See Curtiss-Wright, 446 U.S. at 8 (holding that
proper factors for 54(b) review include “whether the claims
for review were separable from the others . . . and whether the
nature of the claims already determined was such that no
appellate court would have to decide the same issues more
than once”). We agree. Because Dialysist West’s counter-
claim to recover for non-Epogen sales was not legally or fac-
tually related to AmerisourceBergen’s Epogen claim, no court
need revisit this judgment. See Morrison-Knudsen Co., Inc. v.
Archer, 655 F.2d 962, 965 (9th Cir. 1981).

   [12] AmerisourceBergen contends that, as a matter of
equity, the district court’s certification of its judgment on Dia-
lysist West’s counterclaim should not be upheld because Dia-
lysist West is insolvent. We recognize that insolvency is a
factor that should weigh against the final entry of judgment on
Dialysist West’s counterclaim. See Reiter v. Cooper, 507 U.S.
258, 270 (1993) (acknowledging that “even a ‘threat of insol-
vency’ of the party seeking separate judgment is a factor
weighing against it”). But as the Supreme Court held in
Reiter: “[W]e cannot say that insolvency is an absolute bar [to
certification].” Id.; see also Shintom Am. Inc. v. Car Tels.
Inc., 45 F.3d 1107, 1110 (7th Cir. 1995) (affirming district
court’s entry of final judgment under 54(b) despite the “pre-
             AMERISOURCEBERGEN v. DIALYSIST WEST            3051
carious financial condition and potential insolvency of the
plaintiff”).

   In weighing the equities of Rule 54(b) certification, the dis-
trict court concluded that certification was warranted because
this result: (1) aligned with the set-off principles of the UCC;
(2) helped avoid unreasonable delay; and because (3) Ameri-
sourceBergen owed Dialysist West approximately $2.2 mil-
lion. See AmerisourceBergen Corp., No. CIV-02-1472 PHX
JWS, slip op. at 14-15. These factors are a sufficient basis for
certifying final judgment in favor of Dialysist West. See
Schieffelin & Co. v. Valley Liquors, Inc., 823 F.2d 1064,
1065-1067 (7th Cir. 1987) (permitting certification where
defendant filed counterclaims and plaintiff asserted defenses
that were “at least plausible”); C.R. Bard, Inc. v. Med. Elecs.
Corp., 529 F. Supp. 1382, 1388 (D. Mass. 1982) (stating that
court “saw no reason why plaintiff should be denied” use of
substantial funds “while awaiting disposition of . . . counter-
claims”). Moreover, the district court’s decision to favor Dia-
lysist West’s creditors as a matter of equity is not erroneous
where AmerisourceBergen has not shown that the debt it
seeks to set-off is related to Dialysist West’s counterclaim.
See Newbery Corp., 95 F.3d at 1399 (“[S]etoffs run contrary
to fundamental bankruptcy policies such as the equal treat-
ment of creditors and the preservation of a reorganizing debt-
or’s assets.”).

   [13] “The task of weighing and balancing the contending”
equities of a case is “peculiarly one for the trial judge.”
Curtiss-Wright, 446 U.S. at 12. It is not the appellate court’s
role to “reweigh the equities.” Id. at 10. The district court’s
conclusions for certifying the judgment were not “clearly
unreasonable.” We decline to vacate the certification of judg-
ment.
3052           AMERISOURCEBERGEN v. DIALYSIST WEST
               D.    Denial of Stay of Enforcement

   [14] Federal Rule of Civil Procedure 62(h) provides that
when a court has entered final judgment, it may upon its dis-
cretion, “stay enforcement of that judgment until the entering
of a subsequent judgment or judgments.” Fed. R. Civ. P.
62(h). AmerisourceBergen argues that the district court erred
in rejecting its 62(h) motion by conflating Rule 54(b) and
Rule 62(h). While it is true that the district court has discre-
tion to grant a stay when it has already certified final judgment,4
we disagree with AmerisourceBergen’s contention that “spe-
cial circumstances” warrant a stay in this case.

   [15] AmerisourceBergen cannot show that failure to pro-
vide the stay will cause it to suffer greater harm than Dialysist
West will face should it be denied this judgment pending res-
olution of AmerisourceBergen’s outstanding claims. See Soo
Line R.R. Co. v. Escanaba & Lake Superior R.R. Co., 840
F.2d 546, 552 (7th Cir. 1988) (“Courts regularly require the
payment of undisputed debts while the parties litigate their
genuine disputes.”). Moreover, allowing AmerisourceBergen
to obtain a stay of the judgment would effectively sanction its
self-help tactics. If it does ultimately succeed on its Epogen
claim, AmerisourceBergen will have avoided paying funds it
owes Dialysist West and would unjustifiably leap-frog other
creditors. See Pereira v. Cogan, 275 B.R. 472, 475 (S.D.N.Y.
2002) (“In fashioning a stay of enforcement, a court looks to
general equitable principles.”). The district court did not
  4
    See Curtiss-Wright, 446 U.S. at 13. (“Under this Rule [62(h)], we
assume it would be within the power of the district court to protect all par-
ties by having the losing party deposit the amount of the judgment with
the court . . . . In this way, valid considerations of economic duress and
solvency . . . can be provided without preventing Rule 54(b) consider-
ation.”); see also Hartford Accident & Indem. Co. v. Boise Cascade Corp.,
489 F. Supp. 855, 860 (N.D. Ill. 1980) (granting 62(h) motion to stay after
certifying judgment against party).
                 AMERISOURCEBERGEN v. DIALYSIST WEST                   3053
abuse its discretion in denying AmerisourceBergen’s Rule
62(h) motion.5

            E.    Attorney’s Fees & Costs of Appeal

   [16] Dialysist West seeks attorney’s fees and the costs of
appeal under Arizona Revised Statute section 12-341.01(A).
The statute permits an award of attorney’s fees to the “suc-
cessful party” in “any contested action arising out of a con-
tract.” Ariz. Rev. Stat. § 12-341.01(A) (2006). An award of
attorney’s fees under Arizona law is permissive, rather than
mandatory. See Wagenseller v. Scottsdale Mem’l. Hosp., 710
P.2d 1025, 1049 (Ariz. 1985). The Arizona Supreme Court
has held that there are six grounds that must be considered in
awarding attorney’s fees to a successful litigant including:

      (1) whether the unsuccessful party’s claim or
      defense was meritorious; (2) whether the litigation
      could have been avoided or settled and the success-
      ful party’s efforts were completely superfluous in
      achieving the result; (3) whether assessing fees
      against the unsuccessful party would cause an
      extreme hardship; (4) whether the successful party
      prevailed with respect to all of the relief sought; (5)
      whether the legal question presented was novel and
      whether such claim or defense have previously been
  5
     Judge Tashima would stay enforcement of the judgment and “protect[ ]
AmerisourceBergen’s claims against Dialysist West’s insolvency.” (Dis-
sent, 3065). Section 553 of the Bankruptcy Code governs the equitable
right of setoff in bankruptcy law. 11 U.S.C. § 553 (2006). Section 553,
however, does not create a right of setoff: “Rather, the section merely rec-
ognizes and preserves setoff rights that exist under other applicable law
. . . . Thus, the threshold determination in every case involving section 553
is the source of the alleged setoff right.” 5 Myron M. Sheinfeld et al., Col-
lier on Bankruptcy ¶ 553.01[2] (Lawrence P. King, ed., 15th ed. rev.
2005). AmerisourceBergen has no right to legal or equitable setoff under
Arizona law for the judgment against it on the counterclaim; it therefore
does not have a right to setoff under bankruptcy law. See In re Hal, Inc.,
196 B.R. 159, 161 (B.A.P. 9th Cir. 1996).
3054        AMERISOURCEBERGEN v. DIALYSIST WEST
    adjudicated in this jurisdiction; and (6) whether the
    award would discourage other parties with tenable
    claims or defenses from litigating or defending legit-
    imate contract issues for fear of incurring liability for
    substantial amounts of attorney’s fees.

Id. at 1049. Neither party directly addresses the Wagenseller
factors in its briefing, but there is sufficient evidence in the
record to conclude that these factors weigh against granting
Dialysist West attorney’s fees and costs. First, no evidence
has been presented indicating that this case could have been
successfully avoided or settled. Second, the issues in this
appeal raise novel questions of contract law. Finally, we do
not wish to discourage parties like AmerisourceBergen from
litigating opaque issues of contract law for fear of being sad-
dled with opposing counsel’s fees and costs.

  AFFIRMED.

TASHIMA, Circuit Judge, dissenting:

   While I agree with most of the majority’s disposition of the
issues raised by this appeal, I part company on two issues. I
believe that the district court abused its discretion in denying
AmerisourceBergen’s motion for leave to amend because the
motion was made well before the deadline set by the court for
the making of such motions and because Dialysist West has
shown absolutely no prejudice. I further believe that the dis-
trict court abused its discretion in refusing to stay the judg-
ment pursuant to Federal Rule of Civil Procedure 62(h)
because it failed to perform an analysis separate from its Rule
54(b) analysis and failed to give adequate consideration to
Dialysist West’s insolvency. For these reasons, I respectfully
dissent from Parts III.B. and III.D. of the majority opinion,
and from the judgment of affirmance.
             AMERISOURCEBERGEN v. DIALYSIST WEST             3055
  1.   Leave to Amend.

   Federal Rule of Civil Procedure 15 provides that “leave to
amend shall be freely given when justice so requires.” Fed. R.
Civ. P. 15(a). Absent prejudice, or a “strong showing” of the
other factors, such as undue delay, bad faith, or dilatory
motive, “there exists a presumption under Rule 15(a) in favor
of granting leave to amend.” Eminence Capital, LLC v.
Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (per
curiam); see also Allwaste, Inc. v. Hecht, 65 F.3d 1523, 1530
(9th Cir. 1995) (stating that, although the denial of leave to
amend after a responsive pleading has been filed is reviewed
for an abuse of discretion, “we strictly review such denial in
light of the strong policy permitting amendment”). Amend-
ments are to be permitted liberally because, as the Supreme
Court observed many years ago, “[i]f the underlying facts or
circumstances relied upon by a plaintiff may be a proper sub-
ject of relief, he ought to be afforded an opportunity to test his
claim on the merits.” Foman v. Davis, 371 U.S. 178, 182
(1962).

   “A pretrial order controls the subsequent course of the
action unless modified ‘upon a showing of good cause.’ ” El-
Hakem v. BJY Inc., 415 F.3d 1068, 1077 (9th Cir. 2005)
(quoting Zivkovic v. S. Cal. Edison Co., 302 F.3d 1080, 1087
(9th Cir. 2002)), petition for cert. filed, 74 U.S.L.W. 3407
(U.S. Oct. 19, 2005) (No. 05-84); see also Arsement v. Spin-
naker Exploration Co., 400 F.3d 238, 245 (5th Cir. 2005) (“It
goes without saying that a pre-trial order controls the scope
and course of trial . . . .”).

   On July 7, 2003, the district court filed an order adjusting
the pretrial schedule, based on a joint motion of the parties
and on a showing of good cause. The order provided that the
last date to file motions to amend was extended from June 2,
2003, to December 2, 2003. The order also extended the non-
expert discovery cutoff date from August 1, 2003, to February
2, 2004, and for expert discovery from October 17, 2003, to
3056           AMERISOURCEBERGEN v. DIALYSIST WEST
April 19, 2004. The court deleted the reference to the pretrial
conference, stating that it would address the final pretrial
arrangements at a later date. AmerisourceBergen’s motion for
leave to amend was filed on August 25, 2003 — more than
three months before the cutoff date for such motions and
almost eight months before discovery was to be completed.

   We have often affirmed the denial of leave to amend when
the motion was made after the cutoff date for such motions,
or when discovery had closed or was about to close. For
example, in Zivkovic, the motion to amend was filed three
months after the deadline established by the court and only
five days before discovery was to be completed. We con-
cluded that, under those circumstances, the district court did
not abuse its discretion in denying the motion to amend. Ziv-
kovic, 302 F.3d at 1087; see also, e.g., Lockheed Martin Corp.
v. Network Solutions, Inc., 194 F.3d 980, 983, 986 (9th Cir.
1999) (stating that where the motion to amend was made
more than four months after the cutoff date for motions to
amend,“[a] need to reopen discovery and therefore delay the
proceedings supports a district court’s finding of prejudice
from a delayed motion to amend the complaint”); Solomon v.
N. Am. Life & Cas. Ins. Co., 151 F.3d 1132, 1139 (9th Cir.
1998) (affirming the denial of leave to amend where the
motion was made “on the eve of the discovery deadline”).

   Our jurisprudence thus establishes that where a motion to
amend the pleadings is made within the time established by
the pretrial scheduling order for the making of such motions,
the motion is presumptively timely. Otherwise, it would be a
pointless exercise to establish cutoff dates in a Rule 16 sched-
uling order.1 Here, the motion to amend was made more than
three months before the motion cutoff date; thus, “on its face,
  1
   What would be the point, for example, of the rule’s requirement that
“[a] schedule shall not be modified except upon a showing of good cause
and by leave of the district court,” Fed. R. Civ. P. 16(b), if the schedule
can be disregarded by the court and counsel.
             AMERISOURCEBERGEN v. DIALYSIST WEST             3057
the motion was timely.” Halbert v. City of Sherman, Tex., 33
F.3d 526, 529 (5th Cir. 1994). Moreover, eight months
remained before the completion of discovery.

   In DCD Programs, Ltd. v. Leighton, 833 F.2d 183 (9th Cir.
1987), we reversed the district court’s denial of the plaintiffs’
motion to file a fourth amended complaint. Id. at 190. We
rejected the defendant’s argument that it would be prejudiced
by the delay in naming it to the suit, stating that, “[g]iven that
this case is still at the discovery stage with no trial date pend-
ing, nor has a pretrial conference been scheduled, there is no
evidence that [the defendant] would be prejudiced by the tim-
ing of the proposed amendment.” Id. at 187-88.

   The Eight Circuit similarly has relied on the fact that trial
was nearly three months away in concluding that the district
court abused its discretion in denying leave to amend an
answer. Dennis v. Dillard Dep’t Stores, Inc., 207 F.3d 523,
526 (8th Cir. 2000). The court reasoned that, although discov-
ery had closed, the district court had discretion to reopen it for
the limited purpose of exploring the additional defense raised
by the amendment, noting that “an ‘adverse party’s burden of
undertaking discovery, standing alone, does not suffice to
warrant denial of a motion to amend a pleading.’ ” Id. (quot-
ing United States ex rel. Maritime Admin. v. Cont’l Ill. Nat’l
Bank & Trust Co., 889 F.2d 1248, 1255 (2d Cir. 1989)). The
court further reasoned that the three months remaining until
trial was ample time to conduct any further discovery that
may have been required. Id.

   Similar to DCD, the trial date in the instant case had not
even been set at the time AmerisourceBergen filed its motion
to amend. The district court already had found that there was
good cause to modify the pretrial schedule, giving the parties
six additional months to file motions to amend, to complete
discovery, and to file dispositive motions. AmerisourceBer-
gen’s motion was filed less than two months after the court
had modified the schedule, and well before the deadline estab-
3058           AMERISOURCEBERGEN v. DIALYSIST WEST
lished by the modified schedule. Thus, given the procedural
posture of the case at the time the motion to amend was filed,
the majority’s assertions of untimeliness, maj. op. at 3048-49,
are unconvincing.

   The district court relied primarily on a finding of prejudice
to Dialysist West in denying the motion to amend, but it did
not explain how Dialysist West would be prejudiced. We have
noted that “[b]ald assertions of prejudice cannot overcome the
strong policy reflected in Rule 15(a) to ‘facilitate a proper dis-
position on the merits.’ ” Hurn v. Ret. Fund Trust of the
Plumbing, Heating & Piping Indus., 648 F.2d 1252, 1254 (9th
Cir. 1981) (quoting Conley v. Gibson, 355 U.S. 41, 48
(1957)); see also Eminence Capital, 316 F.3d at 1052 (“A
simple denial of leave to amend without any explanation by
the district court is subject to reversal. Such a judgment is ‘not
an exercise of discretion; it is merely abuse of that discretion
and inconsistent with the spirit of the Federal Rules.’ ” (quot-
ing Foman, 371 U.S. at 182)).

   AmerisourceBergen disputes the district court’s statement
that the parties agreed that the proposed amendment would
require further discovery.2 Even if further discovery were
required, however, nearly eight months remained before the
discovery cutoff date — a deadline based on the parties own
stipulation. Given that the parties had agreed on this schedule,
it is difficult to understand how Dialysist West could have
been prejudiced, even if further discovery were required.

   Dialysist West bore the burden of showing that it would be
prejudiced by the proposed amendment. See Eminence Capi-
tal, 316 F.3d at 1052. Dialysist West did not contend, and the
district court did not find, that any additional discovery that
might have been required could not have been completed
  2
   In its memorandum in support of its motion to amend, Amerisource-
Bergen disputed Dialysist West’s assertions regarding the need for further
discovery that would arise from the proposed amendment.
            AMERISOURCEBERGEN v. DIALYSIST WEST           3059
within the time remaining before the discovery cutoff date. As
in DCD and Dennis, I would therefore hold that Dialysist
West has failed to demonstrate any prejudice from the pro-
posed amendment, let alone prejudice sufficient to overcome
the presumption in favor of granting leave to amend. See, e.g.,
Adam v. Hawaii, 235 F.3d 1160, 1164 (9th Cir. 2001) (con-
cluding that the district court erred by denying the motion to
amend where the defendants failed to identify any prejudice
they would suffer from the amendment and “at this point in
the proceedings, there has been no discovery, nor has a trial
date been set”), overruled on other grounds by Green v. City
of Tucson, 255 F.3d 1086 (9th Cir. 2001) (en banc); S.S. Sil-
berblatt, Inc. v. E. Harlem Pilot Bock Bldg. 1 Hous. Dev.
Fund Co., 608 F.2d 28, 42-43 (2d Cir. 1979) (reversing the
denial of the appellant’s motion for leave to amend, rejecting
the appellee’s argument that it would suffer undue prejudice
because of the extensive discovery that would be required,
stating that this was insufficient to overcome the policy in
favor of permitting amendment, “particularly when trial has
not yet commenced and is not likely to do so for some time”).

   The district court also stated that AmerisourceBergen’s
proposed amendment sought to contradict established facts of
the case. But this is the very nature and purpose of an amend-
ment. “ ‘[A]n amended pleading supersedes the original.’ ”
Armstrong v. Davis, 275 F.3d 849, 878 n.40 (9th Cir. 2001)
(quoting Hal Roach Studios, Inc. v. Richard Feiner & Co.,
896 F.2d 1542, 1546 (9th Cir. 1989)) (alteration in the origi-
nal). Thus, although “a statement in a complaint may serve as
a judicial admission,” the admission is no longer binding if
the party subsequently amends the pleading. Sicor Ltd. v.
Cetus Corp., 51 F.3d 848, 859 (9th Cir. 1995); see also, e.g.,
188 LLC v. Trinity Indus., 300 F.3d 730, 736 (7th Cir. 2002)
(“When a party has amended a pleading, allegations and state-
ments in earlier pleadings are not considered judicial admis-
sions.”); 3 James Wm. Moore et al., Moore’s Federal Practice
§ 15.17[3] (3d ed. 2005) (stating that, “in the more usual sce-
3060         AMERISOURCEBERGEN v. DIALYSIST WEST
nario, a court may permit a party amending a pleading to
withdraw an admission contained in the original pleading”).

  Finally, the majority asserts that:

       Allowing AmerisourceBergen to “advance differ-
    ent legal theories and require proof of different
    facts” at this stage in the litigation would have preju-
    diced Dialysist West by forcing it to undertake bur-
    densome discovery and would have unnecessarily
    delayed final judgment on the counterclaim.

Maj. op. at 3060. This assertion, however, simply does not
withstand close scrutiny. First, this litigation was still in its
early stages. The parties had just stipulated and the court had
ordered that the cutoff dates for motions to amend and for dis-
covery, both expert and non-expert, be extended for six
months. Moreover, the pretrial conference had been taken off
calendar, and no trial date had been set.

   Second, the need to undertake additional discovery, even
“burdensome” discovery, cannot be classified as prejudice so
long as ample time remains, as it did in this case, to complete
that discovery before the discovery cutoff date. After all, dis-
covery is an ordinary incident and burden of litigation sanc-
tioned by the Federal Rules of Civil Procedure. I thus disagree
with the majority’s characterization of the need to conduct
discovery as prejudicial.

  Third, the majority asserts that permitting the amendment
“would have unnecessarily delayed final judgment on the
counterclaim.” There is nothing in the record, however, to
support the assertion that final judgment would have been
unnecessarily delayed. The pretrial conference date had previ-
ously been vacated and no trial date had been set, and there
was ample time left before the discovery cutoff date to con-
duct any necessary discovery. Thus, nothing in this record
supports the majority’s assertion of unnecessary delay.
             AMERISOURCEBERGEN v. DIALYSIST WEST             3061
  The district court abused its discretion in denying Ameri-
sourceBergen’s timely motion to amend in the absence of any
showing of prejudice by Dyalisist West.

  2.   Stay of the Judgment.

   I also believe that the district court abused its discretion in
denying AmerisourceBergen’s motion to stay the judgment
pursuant to Rule 62(h). After directing entry of final judgment
pursuant to Rule 54(b) against AmerisourceBergen on Dialy-
sist West’s second claim for relief in its counterclaim, the dis-
trict court denied AmerisourceBergen’s motion to stay the
judgment pursuant to Rule 62(h). To support its order, the dis-
trict court stated only that AmerisourceBergen’s motion was
based on Dialysist West’s insolvency, and that it had consid-
ered the issue in its prior order and found the argument unper-
suasive. But the insolvency analysis under Rule 62(h) is
different from the insolvency analysis under Rule 54(b) and
the district court did not make that analysis.

   This case involved several claims and counterclaims. The
district court directed entry of judgment on the pleadings with
respect to Dialysist West’s second claim for relief in its coun-
terclaim, related to non-Epogen products. Still at issue are
AmerisourceBergen’s claims regarding Epogen and Dialysist
West’s first claim for relief. Although the district court ruled
against AmerisourceBergen on the set-off issue, Amerisource-
Bergen’s claim regarding the counterfeit Epogen remains.
AmerisourceBergen argued below that enforcement of the
judgment should be stayed because of Dialysist West’s insol-
vency. The district court docket indicates that Dialysist West
had, in fact, filed for bankruptcy as of May 2004.

   In Curtiss-Wright Corp. v. General Electric Co., 446 U.S.
1 (1980), the Supreme Court examined the district court’s
entry of final judgment under Rule 54(b), in favor of Curtiss-
Wright, on some of the claims in a multi-claim suit. The dis-
trict court’s entry of judgment was based, in part, on the fact
3062          AMERISOURCEBERGEN v. DIALYSIST WEST
that the litigation on the remaining claims would continue for
months, if not years, and on the determination that both liti-
gants were financially sound. The Supreme Court agreed that,
although General Electric’s pending counterclaims created the
possibility of a set-off against the amount it owed Curtiss-
Wright, Curtiss-Wright was financially sound and would be
able to satisfy any judgment on the counterclaims. Id. at 11-
12. The Court further stated that, “if Curtiss-Wright were
under a threat of insolvency, that factor alone would weigh
against qualifying” because the threat alone would cast doubt
on Curtiss-Wright’s ability to satisfy any counterclaims, if
General Electric were to prevail. Id. at 12. The Court noted
that Rule 62(h) would allow the district court to protect the
parties by having the losing party deposit the amount of the
judgment with the court, such that “valid considerations of
economic duress and solvency, which do not affect the juridi-
cal considerations involved in a Rule 54(b) determination, can
be provided for without preventing Rule 54(b) certification.”
Id. at 13 n.3.

   The Supreme Court again cited the threat of insolvency in
Reiter v. Cooper, 507 U.S. 258 (1993), in which the issue was
whether, “when a shipper defends against a motor common
carrier’s suit to collect tariff rates with the claim that the tariff
rates were unreasonable, the court should proceed immedi-
ately to judgment on the carrier’s complaint without waiting
for the Interstate Commerce Commission . . . to rule on the
reasonableness issue.” Id. at 260. The Court concluded that
the “ordinary rules governing counterclaims” applied and
stated that, “[i]n the ordinary case, where a carrier is solvent
and has promptly initiated suit, the equities favor separate
judgment on the principal claim.” Id. at 270. The equities to
be balanced in a Rule 54(b) consideration “change, however,
when the suing carrier is in bankruptcy.” Id. Although insol-
vency is not an “absolute bar” to Rule 54(b) certification, the
Court reasoned that a district court could protect against the
threat of insolvency by entering separate judgment but staying
enforcement of the judgment under Rule 62(h). Id. at 270-71.
             AMERISOURCEBERGEN v. DIALYSIST WEST             3063
Curtiss-Wright and Reiter thus indicate that, although entry of
a final judgment under Rule 54(b) may be proper, the district
court should rely on Rule 62(h) to protect the parties when
there are “valid considerations of economic duress and sol-
vency.” Curtiss-Wright, 446 U.S. at 13 n.3; see Pereira v.
Cogan, 275 B.R. 472, 475 (S.D.N.Y. 2002) (“ ‘[t]he Supreme
Court has suggested that where Rule 54(b) certification is
appropriate, courts can protect all parties against the
uncertainties posed by the possibility of a large setoff and by
the possibility of the insolvency of a judgment debtor’ ” by
staying enforcement pursuant to Rule 62(h) and having the
losing party deposit the amount of the judgment with the
court) (quoting Bowne of New York City, Inc. v. AmBase
Corp., 161 F.R.D. 270, 274 (S.D.N.Y. 1995)).

   The district court here denied AmerisourceBergen’s motion
to stay enforcement of the judgment without any discussion,
stating only that it had considered AmerisourceBergen’s argu-
ment regarding Dialysist West’s insolvency when it granted
Dialysist West’s motion for judgment on the pleadings, and
citing its prior order. But the discussion cited by the district
court regarding Dialysist West’s “alleged threat of insolven-
cy” was made in the context of AmerisourceBergen’s argu-
ment that it was entitled to equitable set-off because of
Dialysist West’s insolvency, which is a completely different
question from that raised by the motion under Rule 62(h).

   AmerisourceBergen sought a stay of the enforcement of the
judgment because of Dialysist West’s undisputed insolvency
and the claims that remained to be resolved. The Supreme
Court’s references to Rule 62(h) in Curtiss-Wright and Reiter
indicate that the instant case presents exactly the type of situa-
tion in which a stay of the enforcement of the judgment is
appropriate. See, e.g., Schieffelin & Co. v. Valley Liquors,
Inc., 823 F.2d 1064, 1066 (7th Cir. 1987) (affirming the entry
of final judgment under Rule 54(b) despite a remaining coun-
terclaim, but noting that “enforcement might have been stayed
under appropriate conditions under Rule 62(h),” although the
3064         AMERISOURCEBERGEN v. DIALYSIST WEST
party did not make such a claim); Navajo Tribe of Indians v.
United States, 364 F.2d 320, 347 (Ct. Cl. 1966) (holding that,
although the plaintiff was entitled to entry of a separate final
judgment, payment of the judgment should be stayed pursuant
to Rule 62(h) because the validity of the defendant’s counter-
claim had not yet been determined); EMI Music Mktg. v. Ava-
tar Records, Inc., 317 F. Supp. 2d 412, 424-25 (S.D.N.Y.
2004) (directing the entry of final judgment pursuant to Rule
54(b) but staying enforcement of the judgment because of the
claims and counterclaims that remained to be resolved and the
possibility that the judgment might be reduced if the defen-
dant prevailed on its counterclaims).

   The majority reasons that staying the judgment would “ef-
fectively sanction” AmerisourceBergen’s “self-help tactics”
because, if it succeeds on its Epogen claim, it “will have
avoided paying funds it owes Dialysist West and would
unjustifiably leap-frog other creditors.” Maj. op. at 3052-53.
AmerisourceBergen cannot continue to litigate its Epogen
claim, however, because Dialysist West has filed for bank-
ruptcy and, pursuant to 11 U.S.C. § 362(a)(1), the case has
been stayed by the district court. See 11 U.S.C. § 362(a) (stat-
ing that a bankruptcy petition operates as a stay of, inter alia,
the continuation of a judicial proceeding against the debtor
that was commenced prior to the bankruptcy filing); McCar-
thy, Johnson & Miller v. North Bay Plumbing, Inc. (In re Pet-
tit), 217 F.3d 1072, 1077 (9th Cir. 2000) (explaining that the
automatic stay under § 362 enjoins the continuation of any
judicial proceedings against the debtor and the enforcement of
prior judgments). Furthermore, even if AmerisourceBergen
were permitted by the bankruptcy court to proceed with its
action and then succeed on its Epogen claim, it still would be
prohibited from enforcing its judgment by the automatic stay.
See 11 U.S.C. § 362(a) (further stating that the bankruptcy
petition stays a proceeding to recover a claim against the
debtor that arose before the commencement of the bankruptcy
case); Delpit v. Comm’r, 18 F.3d 768, 772 (9th Cir. 1994)
(stating that “a creditor’s attempt to enforce a pre-bankruptcy
               AMERISOURCEBERGEN v. DIALYSIST WEST                  3065
judgment outside of Bankruptcy Court would violate four pro-
visions of Section 362 simultaneously”). AmerisourceBergen
would simply become an unsecured creditor, in line with Dia-
lysist West’s other unsecured creditors. Cf. Shoen v. Shoen (In
re Shoen), 176 F.3d 1150, 1153 n.1 (9th Cir. 1999) (McK-
eown, J., dissenting) (stating that there was no dispute that the
appellees, “as judgment creditors, but not lien creditors, hold
unsecured claims”). Thus, contrary to the majority’s assertion,
maj. op. at 3052-53, AmerisourceBergen is prevented by the
Bankruptcy Code from “leap-frogging” Dialysist West’s other
creditors.

   As discussed supra, Curtiss-Wright and Reiter indicate
that, when multiple claims and counterclaims are involved,
and the district court grants certification under Rule 54(b),
“valid considerations of economic duress and solvency” can
be addressed by the use of Rule 62(h) to “protect all parties.”
Curtiss-Wright, 446 U.S. at 13 n.3. When Dialysist West filed
for bankruptcy, the judgment awarded on its second counter-
claim became the property of the bankruptcy estate. See 11
U.S.C. § 541(a)(1) (describing property of the estate as “all
legal or equitable interests of the debtor in property as of the
commencement of the [bankruptcy] case”); Myron M. Shein-
feld et al., 3 Collier on Bankruptcy ¶ 541.08[5] (Lawrence P.
King, ed., 15th ed. rev. 2005) (“Where a cause of action
belonging to the debtor has been merged into judgment prior
to bankruptcy, the estate succeeds to all rights under such
judgment.”). Staying enforcement of the judgment would not
have allowed AmerisourceBergen to avoid payment of the
judgment and step in line ahead of other creditors; the Bank-
ruptcy Code provides numerous protections of the property of
the estate, such as the automatic stay and the avoidance of
fraudulent or preferential transfers. Rather, a stay would have
served the purpose contemplated by the Supreme Court in
Curtiss-Wright of protecting AmerisourceBergen’s claims
against Dialysist West’s insolvency.3
  3
   The majority apparently believes that the only right of Amerisource-
Bergen protectable by a stay is its equitable right of setoff. Maj. op. at
3066           AMERISOURCEBERGEN v. DIALYSIST WEST
   Because the district court failed to conduct any analysis of
AmerisourceBergen’s Rule 62(h) motion and did not consider
the effect of Dialysist West’s insolvency on its ability to sat-
isfy any claims of AmerisourceBergen, I believe that the court
abused its discretion in denying the Rule 62(h) motion.

   For the foregoing reasons, I would reverse the judgment of
the district court. I respectfully dissent.

3053 n.5. This narrow focus, however, ignores that if the district court had
allowed AmerisourceBergen to amend its reply, as I believe it should
have, Dialysist West would not have been entitled to judgment on the
pleadings on its second counterclaim because AmerisourceBergen would
have been able to dispute the genuineness of the non-Epogen products on
which that claim was based. Thus, the majority’s assumption that Ameri-
sourceBergen’s only right to payment from Dialysist West was based on
setoff is incorrect. AmerisourceBergen’s own claims against Dialysist
West remained and still remain undetermined, and its ability to collect on
those claims, should it ultimately prevail, is jeopardized by Dialysist
West’s bankruptcy.