Kamal v. G E R Industries, Inc.

Background

Defendants moved for reconsideration of the court’s bench ruling issued during a September 8, 2023 conference. The earlier ruling treated defendants’ pre-motion conference letter as motions to reopen discovery and to obtain permission to amend their answer, and denied both requests. The reconsideration motion asked the court to revisit those decisions.

Motion to Reopen Discovery

Defendants argued that they had acted diligently but remained unaware of alleged accounting issues involving GER Vietnam until employees raised them. They also argued that COVID-19 travel restrictions prevented them from traveling to Vietnam before June 2023.

The court applied Federal Rule of Civil Procedure 16(b)(4), which allows a court-ordered schedule to be changed only for good cause and with the judge’s consent. The court explained that diligence, the opportunity already available for discovery, the foreseeability of the need for additional discovery, possible prejudice, the timing of trial, and the likelihood that the discovery would produce relevant evidence are among the relevant considerations.

The court found that defendants identified no overlooked fact or controlling law that would justify reconsideration. Vietnam had eased international travel restrictions in March 2022, three months before discovery closed, so defendants had not shown that they were unable to travel earlier. The court also found that defendants should have anticipated the relevance of GER Vietnam’s accounting records because Kamal had claimed since the beginning of the case that he had a supervisory role over GER Vietnam’s accounting function, while defendants argued that his employment was terminated for poor performance. The court therefore denied reconsideration of its ruling denying the request to reopen discovery.

Motion for Leave to Amend

Defendants also sought reconsideration of the denial of permission to amend their answer. They wanted to add an after-acquired-evidence defense, a faithless-servant defense, and a counterclaim based on the faithless-servant doctrine.

The court held that Federal Rule of Civil Procedure 16(b), rather than the more permissive amendment standard in Rule 15(a)(2), governed because the deadline to seek permission to amend was November 19, 2020. Under Rule 16(b), the moving party must show good cause, which principally depends on diligence. The court found that defendants had not shown diligence and that the proposed amendment appeared to have been brought in bad faith.

The court noted that defendants had repeatedly argued, including on summary judgment, that Kamal was not employed by GER Vietnam and had no supervisory authority over its operations. After the court denied defendants’ summary judgment motion, defendants sought to rely on the opposite position—that Kamal either was or should have been aware of alleged financial improprieties because of a supervisory role. The court viewed this late change in position as evidence of bad faith. It also found that defendants had not diligently sought the underlying evidence during discovery, even though they could have done so. The court denied reconsideration of its ruling denying leave to amend.

Pre-Motion Letter

Defendants argued that the court should not have treated their pre-motion conference letter as the motions themselves because the letter and response were brief and the court’s individual practices did not expressly state that pre-motion letters could be treated that way.

The court disagreed. It explained that Second Circuit law allows district courts, in appropriate circumstances, to treat a pre-motion letter as the motion when the parties’ letters provide sufficiently detailed arguments and show that the proposed motion lacks merit. The court found that the parties’ letters addressed the relevant standards, facts, and legal authorities. Defendants also identified no argument, fact, or controlling precedent that the court had overlooked.

Disposition

The court denied the motion for reconsideration and directed the clerk to terminate it. The opinion states that nothing in the order prevents defendants from attempting to introduce the alleged after-acquired evidence at trial, and nothing prevents Kamal from seeking to exclude that evidence before trial.