IEI Inc. v. ETG Capital LLC

Background

Magistrate Judge Cott issued a Report and Recommendation on April 22, 2022, recommending that the court grant IEI’s motion for leave to file an amended complaint. The proposed amendment would add a claim that ETG breached the parties’ 2018 Settlement Agreement. ETG filed timely objections.

Standard of Review

The district court reviewed the objections under Federal Rule of Civil Procedure 72(a). Under that rule, a district court may modify a magistrate judge’s ruling on a non-dispositive, pretrial matter only if the ruling is clearly erroneous or contrary to law. The court explained that magistrate judges have broad discretion over such matters and that reversal is appropriate only when that discretion is abused.

ETG’s Objections

ETG first argued that allowing the amendment was unfair because IEI could seek additional attorney’s fees and would gain a tactical advantage by amending later rather than earlier. The court agreed with Judge Cott that IEI had no greater chance of success merely because of the amendment, had not taken inconsistent positions, and had not shown that the timing would unfairly increase ETG’s potential liability for attorney’s fees. The court concluded that Judge Cott properly exercised his discretion on this issue.

ETG next argued that the amendment would cause undue delay because discovery had already taken place and ETG had not been able to conduct discovery related to the proposed claim. The court noted that it had previously ordered supplemental discovery concerning a condition-precedent issue raised in ETG’s summary-judgment briefing. Judge Cott found that discovery related to the proposed amendment was covered by that supplemental discovery. The court concluded that ETG had not identified any discovery it had been unable to conduct or explained why it had not conducted that discovery during the supplemental period.

Finally, ETG argued that allegations in the amended complaint and related documents required denial of the motion to amend or, alternatively, dismissal of the proposed claim. The court agreed with Judge Cott that ETG’s disagreements with IEI’s legal and factual positions were generally arguments about the merits, not whether the proposed claim was legally cognizable at the amendment stage. Because the Settlement Agreement’s provisions were ambiguous, the court could not conclude that the agreement clearly barred the proposed breach-of-contract claim.

Ruling

Judge Carter found ETG’s objections without merit and adopted Judge Cott’s Report and Recommendation in its entirety. The court therefore allowed IEI to amend its complaint to add the breach-of-contract claim. The parties were ordered to file a joint status report by November 22, 2022.