Security Bank & Trust Company v. Cook Group, Inc.

Background

Security Bank & Trust Company moved to amend its complaint under Federal Rule of Civil Procedure 15(a)(2) to add Cook Group, Inc., Cook Medical Technologies LLC, and Cook Medical Holdings LLC back into the case. These three entities had originally been named as defendants but were dismissed without prejudice by stipulation on April 5, 2022. The parties’ agreement also extended the deadline for adding parties, paused any applicable limitations period for the dismissed entities, and provided for discovery concerning their relationships with the remaining defendants.

Security Bank said it learned more about Cook’s corporate structure during a March 22, 2023 deposition of the defendants’ corporate representative. Its proposed allegations described Cook Medical Technologies LLC as involved in the royalty contracts and in the manufacture, marketing, distribution, and sale of the relevant products; Cook Medical Holdings LLC as controlling or operating Cook entities and responsible for those products; and Cook Group, Inc. as the parent organization controlling the relevant Cook subsidiaries and business units.

Parties’ Positions

The defendants maintained that personal jurisdiction over the dismissed entities was still lacking, but they opposed the amendment on the stated grounds of undue delay and prejudice. They argued that the dismissed entities would not have an adequate opportunity to conduct discovery and that the defendants would be unable to determine the factual basis for separate liability theories.

Security Bank argued that it moved promptly after the deposition, that the dismissed entities had originally been parties, that they had been represented by the same counsel as the remaining defendants, and that they would receive discovery already produced by the existing parties.

Court’s Analysis

Rule 15(a)(2) provides that a court should freely allow amendment when justice requires, although leave may be denied for reasons such as undue delay, bad faith, repeated failure to cure deficiencies, undue prejudice, or futility. The court explained that delay alone is not enough; the nonmoving party must also show prejudice, and any prejudice must be weighed against the prejudice to the moving party if amendment is denied.

The court found that Security Bank did not unduly delay. It sought leave within days of the deposition that supplied the basis for its proposed allegations. The court rejected the defendants’ argument that identifying a person with knowledge of Cook’s corporate structure in an initial disclosure was equivalent to offering an early deposition.

The court also found that the defendants had not identified particular additional discovery the dismissed entities would need or be entitled to conduct. Because the dismissed entities had been original parties, shared counsel with the remaining defendants, and would receive existing discovery, the court concluded that adding them would not create sufficient prejudice to justify denying amendment. The court did not resolve the defendants’ personal-jurisdiction position in this order.

Disposition

The court GRANTED Security Bank’s Motion to Amend Complaint as to its request to add Cook Group, Inc., Cook Medical Technologies LLC, and Cook Medical Holdings LLC as parties. Security Bank was ordered to file its amended complaint within seven days. At the April 24, 2023 hearing, the court had separately denied the request to add a claim under Indiana Code § 32-36-1-8 and granted requests to seek injunctive relief and punitive damages under Minnesota Statute § 549.20; this written order addressed only the request to add the dismissed entities. Judge John F. Docherty signed the order as a United States Magistrate Judge.