Avaya Inc. v. Pearce

Background

Avaya Inc. sued Atlas Systems Inc. and other defendants, alleging participation in the theft and resale of Avaya internal-use software licenses and the sale of counterfeit Avaya phones. Avaya later amended its complaint twice, adding several defendants.

On December 4, 2020, the Court set December 31, 2020, as the deadline for amending the pleadings. Avaya filed its motion by that deadline, seeking permission to file a third amended complaint adding Metroline, Inc. and Telcom International Trading PTE LTD as defendants.

Avaya stated that discovery produced the factual basis for the proposed additions. Metroline produced 19,369 documents in response to a subpoena after litigation over the subpoena and a protective order in the Eastern District of Michigan. Avaya stated that it determined Metroline’s alleged role in the scheme in October 2020. Avaya also stated that Atlas identified Telcom as its vendor in July 2020 and formally identified Telcom in updated discovery responses on November 2, 2020.

Arguments and legal standard

Atlas argued that Avaya had not been diligent, that the original December 16, 2019 amendment deadline had passed, and that Avaya had known about Metroline and Telcom since at least the summer of 2020. Atlas also argued that adding two parties would prolong the case and increase its defense costs.

The Court applied Federal Rule of Civil Procedure 15(a)(2), which generally favors allowing amendments when justice requires. Under that rule, leave to amend ordinarily should be granted unless the request is made in bad faith, would prejudice the opposing party, or is a dilatory tactic. The Court rejected Atlas’s argument that the stricter standard for changing a scheduling order applied because the Court had later set a new amendment deadline on December 4, 2020.

Ruling

The Court found that Avaya had been diligent. It held that December 31, 2020, was the operative deadline and that Avaya filed its motion on time. The Court also found that Avaya had pursued discovery about Metroline and Telcom since 2019 and did not have a factual basis to add them until fall 2020.

The Court further held that Atlas had not shown prejudice. The proposed complaint did not make substantive changes to the existing claims, discovery was still ongoing, and the trial date was more than a year away. The Court ruled that the possibility of additional discovery and increased costs was not enough to establish undue prejudice.

The Court GRANTED Avaya’s motion for leave to amend its complaint and ordered Avaya to file the third amended complaint no later than February 5, 2021. The hearing was vacated because the Court decided the matter without oral argument.