Wash. Tr. Advisors, Inc. v. Arnold

678 F.Supp.3d 192

WASHINGTON TRUST ADVISORS, INC., Plaintiff, v. Susan K. ARNOLD, Ronald D. Halterman, Brett C. Lonergan, Nicholas T. Rossie,Private Advisor Group, LLC, and Northward Financial Group, Defendants.

No. 22-cv-11847-PBS

United States District Court, D. Massachusetts

Signed June 12, 2023

Jeffrey E. Francis, Melanie A. Conroy, Pierce Atwood LLP, Boston, MA, for Plaintiff.

Ashley Camille Krezmien, Erik W. Weibust, Epstein Becker & Green, P.C., Boston, MA, for Defendants Susan K. Arnold, Ronald D. Halterman, Brett C. Lonergan, Nicholas R. Rossi.

David J. Freniere, Freniere Law Group PLLC, Wellesley, MA, for Defendant Private Advisor Group LLC.

MEMORANDUM AND ORDER ON PLAINTIFF'S MOTION TO AMEND

CABELL, United States Magistrate Judge

In this trade secrets case, plaintiff Washington Trust Advisors, Inc. ("the plaintiff"), which provides wealth management and financial advisory services, filed suit against four former employees, defendants Susan K. Arnold, Ronald D. Halterman ("Halterman"), Brett C. Lonergan ("Lonergan"), and Nicholas T. Rossi (collectively "the Individual Defendants") as well as Private Advisor Group, LLC ("PAG"). The plaintiff alleges, inter alia, that the Individual Defendants misappropriated the plaintiff's trade secrets, solicited its clients, and violated non-competition covenants by working for a competing business after their September 2022 resignations. The original complaint ("the complaint") also names Northward Financial Group ("NFG") as a defendant.

On April 14, 2023, the court allowed the Individual Defendants' motion to strike a summons served on Northward Financial Group, LLC ("NFG LLC") because it was not in existence at the time the plaintiff filed suit on October 28, 2022. The court also rejected the references in the complaint to NFG as a misnomer for the purportedly intended defendant, NFG LLC. (D. 78). Relatedly, the plaintiff's opposition to the motion to strike contained a brief request to grant leave to amend the complaint. (D. 54). In lieu of allowing the request, the court instructed the plaintiff to "file a motion for leave to amend with an attached proposed amended complaint naming NFG LLC." (D. 78, p. 10).

Pending before the court is a motion for leave to amend the complaint to add NFG LLC as a defendant, albeit without an attached proposed amended complaint.¹ (D. 80). The Individual Defendants and PAG ("the defendants") argue in opposition that the motion does not comply with the court's April 14, 2023 Memorandum and Order ("the Memorandum and Order") (D. 78) and L.R. 15.1. They also oppose the motion based on futility. (D. 83). For the reasons that follow, the motion to amend is allowed.

I. BACKGROUND

Prior to their resignations, the Individual Defendants served as wealth advisors for the plaintiff. As wealth advisors, they worked with the plaintiff's "clients to implement their financial goals." (D. 42, p. 2). On Friday, September 23, 2022, all four Individual Defendants submitted resignation letters stating they were "joining Northward Financial Group of Private Advisor Group." (D. 1, ¶ 16). At the time the plaintiff filed the October 28, 2022 complaint, PAG and NFG maintained separate websites. (D. 1-3, 1-4). NFG's website described PAG and NFG as "separate entities." (D. 1-4).

On November 14, 2022, a certificate of organization was filed for NFG LLC with the Secretary of the Commonwealth of Massachusetts. (D. 54-3, p. 2). In a November 28, 2022 email, PAG's counsel advised the plaintiff's counsel about the certificate of organization.² (D. 54-3). The certificate identifies the Individual Defendants as the four managers of NFG LLC. See https://corp.sec.state.ma.us/CorpWeb/CorpSearch.³ On December 19, 2022, the plaintiff served a summons on NFG LLC along with the complaint.⁴ (D. 43).

In a January 9, 2023 email, counsel for the Individual Defendants suggested that the plaintiff amend the complaint to name the proper party, i.e., NFG LLC as opposed to NFG. (D. 48-2). Later that day, the Individual Defendants filed the motion to strike the summons served on NFG LLC. Therein, they noted that the plaintiff "refused to amend its complaint to substitute NFG LLC for NFG." (D. 48). The plaintiff's January 23, 2023 opposition included a brief request to amend the complaint "if the Court grants any portion of the [m]otion" to strike. (D. 54). The plaintiff primarily argued that naming NFG rather than NFG LLC was a misnomer. (D. 54).

As indicated, the court allowed the motion to strike on April 14, 2023. On April 20, 2023, the deadline for filing motions to amend (D. 75, ¶ II.B) (D. 88), the plaintiff filed the motion to amend.

II. LEGAL STANDARD

Leave to amend a complaint under Federal Rule of Civil Procedure 15(a) ("Rule 15(a)") is ordinarily allowed "unless there is an 'apparent or declared reason—such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of amendment.' " Moon v. Instant Brands LLC, Civil Action No. 1:22-CV-11814-AK, 2023 WL 3126078, at *6 (D. Mass. Apr. 27, 2023) (citation omitted); accord Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962). In assessing futility, the "liberal criteria of Federal Rule of Civil Procedure 12(b)(6)" apply. Amyndas Pharms., S.A. v. Zealand Pharma A/S, 48 F.4th 18, 40 (1st Cir. 2022) (citations omitted). A proposed amended complaint must therefore "contain[ ] sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' " Id. (citation omitted).

The defendants argue in favor of applying a stricter, good cause standard under the language of the scheduling order. (D. 83). The scheduling order's language states that, "[e]xcept for good cause shown, no motions seeking leave to add new parties or to amend the pleadings to assert new claims or defenses may be filed after April 20, 2023." (D. 75, ¶ II.B) (emphasis added). By like token, a good cause standard applies under Federal Rule of Civil Procedure 16(b)(4) when a scheduling order includes a deadline to amend the pleadings. See Somascan, Inc. v. Philips Med. Sys. Nederland, B.V., 714 F.3d 62, 64 (1st Cir. 2013).

In seeking to apply the good cause standard in the scheduling order, the defendants point out that the plaintiff did not comply with L.R. 15.1 by serving NFG LLC with the motion to amend 14 days in advance of filing the motion. From here, they extrapolate that if the plaintiff had complied with this 14-day advance notice requirement, the plaintiff would have filed the motion for leave to amend 14 days after April 20, 2023. (D. 83, p. 4). Hence, under the defendants' reasoning, a showing of good cause under the scheduling order's language is required.

The argument overlooks the plain meaning of the language in the scheduling order. The language applies the good cause standard when the motion is "filed after April 20, 2023." (D. 75, ¶ II.B) (emphasis added). The language does not read "properly filed" or "filed in accordance with L.R. 15.1." Rather, the language applies to "filed" motions. The clear and unambiguous meaning of "file" is "[t]o deliver a legal document to the court clerk or record custodian for placement into the official record." File, Black's Law Dictionary (11th ed. 2019). Where, as here, the language of "a court's order is clear and unambiguous, neither a party nor a reviewing court can disregard its plain language." Negrón-Almeda v. Santiago, 528 F.3d 15, 23 (1st Cir. 2008) (citations omitted). The motion was electronically transmitted to the court and entered on the docket on April 20, 2023. Hence, it was "filed" on April 20, 2023, as opposed to "after" April 20, 2023. Accordingly, the scheduling order's good cause standard does not apply.

III. DISCUSSION

As previously stated, the defendants argue that the plaintiff did not comply with L.R. 15.1 and the court's Memorandum and Order. They also maintain that the proposed amended complaint is futile. Taking into account the plaintiff's arguments to the contrary, the court addresses the defendants' arguments seriatim.

A. Local Rule 15.1

Local Rule 15.1 reads as follows:

(a) Amendments Adding Parties. Amendments adding parties shall be sought as soon as an attorney reasonably can be expected to have become aware of the identity of the proposed new party.

(b) Service on New Party. A party moving to amend a pleading to add a new party shall serve, in the manner contemplated by Fed. R. Civ. P. 5(b), the motion to amend upon the proposed new party at least 14 days in advance of filing the motion, together with a separate document stating the date on which the motion will be filed. A motion to amend a pleading to add a new party shall be accompanied by a certificate stating that it has been served in advance on the new party as required by this rule.

L.R. 15.1 (emphasis added). The defendants assert that the plaintiff violated L.R. 15.1(a) because it did not file the motion as soon as "reasonably can be expected." L.R. 15.1(a). They contend that the plaintiff violated L.R. 15.1(b)'s procedural requirements to serve the motion on NFG LLC at least 14 days before filing the motion and to file the certificate stating such prior service.

The plaintiff counters that it acted as soon as reasonably possible because it was not apparent until the court's April 14, 2023 Memorandum and Order that it needed to amend the complaint to name NFG LLC. Regarding L.R. 15.1(b), the plaintiff maintains that the purpose of the advance notice requirement is to give the new party (NFG LLC) sufficient notice of its possible inclusion in the lawsuit. Because of the service of the summons and the complaint on NFG LLC, however, it "has been on notice since December 19, 2022," according to the plaintiff. (D. 86, p. 6). The plaintiff also argues that the defendants do not identify any prejudice based...