Cunningham v. Dickeys Barbecue Rests. (In re Levenson Grp.)

In re: THE LEVENSON GROUP, INC. AND LEVENSON & HILL, LLC

JAMES W. CUNNINGHAM, Plaintiff, v. DICKEY'S BARBECUE RESTAURANTS, INC., Defendant.

No. 18-34105-mvl7

Adv. Pro. No. 20-03027

United States Bankruptcy Court, N.D. Texas, Dallas Division

April 26, 2022

Chapter 7

ORDER DENYING DEFENDANT'S MOTION FOR LEAVE TO AMEND AND GRANTING IN PART AND DENYING IN PART PLAINTIFF TRUSTEE'S MOTION FOR SUMMARY JUDGMENT

Before this Court is the Motion for Summary Judgment, together with the Brief in Support thereof (collectively, the "Motion" or "MSJ"), filed by Plaintiff James W. Cunningham, the Chapter 7 Trustee (the "Trustee" or "Plaintiff"), on December 16 2021.^[1] In the MSJ, the Trustee seeks summary judgment on its breach of contract claim against Defendant Dickey's Barbecue Restaurants, Inc. (the "Defendant" or "Dickey's"), as well as the Defendant's affirmative defenses and the counterclaim for breach of contract raised in the Answer.^[2] Subsequent to the filing of the MSJ, the Defendant filed its Motion to Amend the Answer (the "Motion to Amend"), seeking to add an additional defense it asserted in connection with the MSJ.^[3]

As stated more fully below, the Court will deny, in part, and grant, in part, the Trustee's MSJ. Additionally, the Court will contemporaneously deny the Defendant's Motion to Amend.

I. Jurisdiction and Venue.

Bankruptcy subject matter jurisdiction exists in this proceeding pursuant to 28 U.S.C. § 1334. This is a core proceeding under 28 U.S.C. § 157(b). This Court has authority to adjudicate this matter pursuant to the United States District Court for the Northern District of Texas Miscellaneous Order No. 33. The following shall constitute this Court's reasoning pursuant to Rule 56 of the Federal Rules of Civil Procedure, as made applicable in adversary proceedings pursuant to Rule 7056 of the Federal Rules of Bankruptcy Procedure.

II. Undisputed Facts and Procedural Posture.

After careful review of the parties' assertions, responses, and citations to the record, the following will constitute the Court's findings as to the material, undisputed facts for purposes of the Trustee's MSJ:

The Levenson Group, Inc. ("Levenson" or the "Debtor") was an advertisement agency that primarily took orders from advertising clients and placed those orders with various vendors (the "Vendors") in radio, television, outdoor, and online media.^[4] Sometime in late 2016, the Levenson Group and the Defendant entered into an Agreement to Provide Marketing Communications Services (the "Agreement"), to be effective October 13, 2016, in which the Debtor would provide "marketing, advertising, and public relations services" on behalf of the Defendant.^[5] The Agreement provided for a monthly public relations fee of $6, 250.00 and media placement fees billed at a rate that would yield a 6.5 percent commission on gross expenditures.^[6]The Agreement also provided that the Defendant would pay the Levenson Group a fixed sum of $109, 319.23 per week, beginning on November 16, 2016, to cover anticipated expenses.^[7]

At some point in 2017, the Trustee alleges that the Defendant informed Levenson that the pricing terms of the Agreement had changed and that the Defendant would pay a flat fee of $39, 625.00 per month to Levenson.^[8] There is no formal amendment to that effect in the record, nor any disagreement as to its effectiveness. As such, after the pricing amendment, Levenson would provide the Defendant with monthly billing packages, which had to be approved by the Defendant before being paid.^[9] Thus, Levenson essentially submitted invoices to the Defendant in arrears for advertisements that ran the previous month. These billing packages gave an extensive breakdown of each advertising expenditure, including the type of medium used and the markets in which the advertisement ran, together with a flat fee.^[10] On December 6, 2018 (the "Petition Date"), Levenson filed for Chapter 7 bankruptcy under Title 11 of the United States Code.^[11] In the months leading up to the filing-September, October, November, and December-the Defendant failed to provide payment for services provided under the Agreement. On March 12, 2020, the Trustee filed his Complaint alleging breach of contract, quantum meruit, and unjust enrichment, as well as requesting declaratory judgment.^[12] On August 18, 2020, the Defendant filed its Answer, which contained a counterclaim for breach of contract.^[13] In the counterclaim, the Defendant alleged, without specificity, that Levenson "failed to provide the services as stated in the Agreement."^[14] The Defendant also raised the affirmative defenses of accord and satisfaction, failure of consideration, laches, payment, release, and setoff.^[15]

On December 16, 2021, the Trustee filed its MSJ^[16] and Brief in Support^[17] in which it requests this Court find there is no genuine issue of material fact as to the Trustee's recovery against the Defendant on the Trustee's breach of contract claim. The Trustee also seeks summary judgment as to the Defendant's affirmative defenses and counterclaim for breach of contract. On January 13, 2022, the Defendant filed its Response in Opposition to Plaintiff's Motion for Summary Judgment^[18] and Brief in Opposition to Plaintiff's Motion for Summary Judgment (collectively, the "Opposition").^[19] In the Opposition, the Defendant waived the affirmative defenses of accord and satisfaction, laches, and release.^[21]

On February 22, 2022, the Court held a hearing on the Trustee's MSJ. Counsel for the Trustee and the Defendant appeared. The Court took the MSJ under advisement. On March 3, 2022, the Defendant filed its Motion to Amend requesting the Court allow the Defendant to amend its Answer to include the affirmative defense of anticipatory repudiation.^[22] Pending further briefing on the Motion to Amend, the Court held the MSJ under abeyance. On March 24, 2022, the Trustee filed his Response to Motion to Amend Answer (the "Response") wherein the Trustee requested that the Court deny leave.^[23] Because the relief sought in the Motion to Amend was raised in connection with the MSJ, the Court will rule on the Motion to Amend as a preliminary matter.

III. Leave to Amend.

At the hearing on the MSJ, the parties disputed whether anticipatory repudiation had been properly plead. The Trustee argued it had not and pointed out that there was no reference of the affirmative defense until the Defendant filed the Opposition.^[24] The Defendant argued generally that the Trustee had been on notice of the defense during discovery and that it did not need to replead to add the defense. Soon after, however, the Defendant changed course and filed the Motion to Amend requesting this Court allow the Defendant to plead anticipatory repudiation.^[25]In the Motion to Amend, the Defendant requested that the Court grant the amendment and asserted that the request was made in good faith.^[26] The Defendant also emphasized that the request was narrow, since it was only to add a singular affirmative defense, and that the Trustee had already conducted discovery on the issue or had the opportunity to do so.^[27] In the Response, the Trustee claimed that the proposed amendment: (1) was untimely and would cause undue delay and prejudice; (2) demonstrated bad faith or dilatory motive; and (3) was futile.^[28] After considering the arguments of the parties, the Court finds that the Motion to Amend must be DENIED.

Rule 15 of the Federal Rules of Civil Procedure, as incorporated by Rule 7015 of the Federal Rules of Bankruptcy Procedure, affords courts the discretion to "freely give leave when justice so requires."^[29] "Whether leave to amend should be granted is entrusted to the sound discretion of the district court[.]"^[30] While Rule 15 evinces a bias in favor of granting leave to amend, ^[31] amendments should not be considered "automatic."^[32] Courts consider such factors as: "(1) undue delay, (2) bad faith or dilatory motive, (3) repeated failure to cure deficiencies by previous amendments, (4) undue prejudice to the opposing party, and (5) futility of the amendment."^[33] In consideration of those factors as applied to the facts of this case, the Court takes special interest in the inexplicable delay in the request and the clear prejudice to the Trustee if granted.

First, the Court notes the unexplained delay in the filing of the Motion to Amend. The Court may properly consider (1) an unexplained delay following an original complaint and (2) whether the facts underlying the amended complaint were known to the party when the original complaint was filed.^[34] Here, it appears, at least from the Defendant's filings related to the MSJ, that the Defendant has been planning to argue anticipatory repudiation for some time.^[35] Yet, the Defendant filed its request well after the dispositive motion and final discovery deadlines and after five amended scheduling orders. Any facts associated with the defense of anticipatory repudiation were known or should have been known at the time of the Answer, let alone before the Trustee filed the instant MSJ.

The Trustee accuses the Defendant of a dilatory, and even bad faith, motive.^[36] The Court will not go so far as to infer such a motive from the pleadings. However, the Court must note that, at best, the Defendant has procrastinated severely in filing an amendment it clearly believed was of high importance to its case. The Court will not reward the Defendant for dragging its feet and attempting to present an additional defense in the "eleventh hour."^[37] The Defendant has not presented any evidence that this undue delay "was due to oversight inadvertence, or excusable neglect."^[38] Rather, the Defendant rests its argument on the narrowness of the request and the claim that...