United States District Court, D. Maryland
L. Russell, III United States District Judge
MATTER is before the Court on Plaintiff George Wilson's
Motion for Leave to File First Amended Complaint (ECF No. 32)
and Defendant Adam Cole's Motion to Dismiss (ECF No. 24).
The Motions are ripe for disposition, and no hearing is
necessary. See Local Rule 105.6 (D.Md. 2018). For
the reasons outlined below, the Court will grant Wilson's
Motion and grant Cole's Motion.
and 2015, Defendant TelAgility Corp.
(“TelAgility”) was seeking $500, 000.00 in
capital funds to start operations. (Compl. ¶¶ 5-6,
ECF No. 1). In exchange for the capital funds, investors
would receive common stock in the company. (Id.).
Wilson learned of the opportunity to invest with TelAgility
after speaking with Cole, who was on the company's Board
of Directors and was also a 78% shareholder. (Id.
¶ 7; Compl. Ex. 5 at 13, ECF No. 1-5). After a
conversation with Cole, Wilson “transmitted $200, 000
to TelAgility, ” in four equal monthly installments
from December 2015 to March 2016, in exchange for a 2% equity
ownership interest in the company. (Compl. ¶ 7). In
return for his investment, Cole promised Wilson investment
paperwork, but Wilson only received an incomplete
“Second Subscription Agreement and Second Private
Placement Memorandum.” (Id. ¶ 8).
12, 2016, after failing to receive any documentation
memorializing his investment, Wilson contacted board members
Cole and Rob Dawson, as well as TelAgility's Operations
Manager, Tiffaney Adams. (Id. ¶ 9). On July 19,
2016, Dawson responded to Wilson stating that he had
instructed Cole to “prepare a document [outlining] the
financial/business arrangement between TelAgility” and
Wilson, and to have the documents reflect that Wilson
“currently owns 2% of the company.” (Id.
¶ 10; Compl. Ex. 7 at 1-2, ECF No. 1-7). On October 26,
2016, after Cole failed to provide Wilson with any
recognition of his investment, Wilson sent a demand letter to
Cole for the return of his $200, 000.00. (Compl. ¶ 12;
Compl. Ex. 8, ECF No. 1-8). TelAgility responded that the
funds were to be “treated as a loan, ” but
neither the documentation Wilson received, nor the
conversations Wilson had with Cole, indicated that the
transaction was a loan. (Compl. ¶ 13).
5, 2017, Wilson sued TelAgility and Cole. (ECF No. 1). The
four-count Complaint alleges: Breach of Oral Contract (Count
I); Detrimental Reliance (Count II); Fraudulent
Misrepresentation (Count III); and Unjust Enrichment (Count
IV). (Id. ¶¶ 15- 32). Wilson seeks the
repayment of his full investment, plus interest, costs, and
reasonable attorneys' fees. (Id. at 6).
14, 2017, Defendants filed an Answer. (ECF No. 11). On June
15, 2017, the Court issued a Scheduling Order. (ECF No.
13-1). Under the Scheduling Order, Wilson had until July 31,
2017 to amend his pleadings or add new parties. (Scheduling
Order at 2, ECF No. 13-1).
November 28, 2017, the parties participated in a mediation.
One day before the mediation, Cole filed his Motion to
Dismiss. (ECF No. 24). On January 5, 2018, the
Court issued an Order staying this case. (Jan. 5, 2018 Mem.,
ECF No. 26). On July 2, 2018, the parties filed a Joint
Status Report requesting that the stay be lifted and that
Wilson be given sixty days to respond to Cole's Motion.
(July 2, 2018 Ltr., ECF No. 28). On July 3, 2018, the Court
lifted the stay and granted Wilson's request. (July 3,
2018 Order, ECF No. 29). Wilson filed an Opposition on August
31, 2018. (ECF No. 31). To date, the Court has no record that
Cole filed a Reply.
August 31, 2018, Wilson filed a Motion for Leave to File
First Amended Complaint. (ECF No. 32). Defendants filed an
Opposition on September 14, 2018. (ECF No. 33). On September
21, 2018, Wilson filed a Reply. (ECF No. 34).
Motion for Leave to File First Amended
requests leave of the Court to amend his Complaint to add two
counts: (1) Securities Fraud in Violation of 15 U.S.C. §
78j(b) and 17 C.F.R. § 240.10b-5; and (2) Maryland
Securities Fraud. (1st Am. Compl. ¶¶ 27-41, ECF No.
35-2). Wilson also adds factual allegations to support his
new claims and adds Cole to his prayer for relief.
(Id. ¶¶ 9-10, 19-26, at 13). Defendants
make three arguments in favor of denying Wilson's Motion:
(1) Wilson fails to demonstrate good cause under Federal Rule
of Civil Procedure 16(b) for amending his Complaint; (2)
Defendants would be prejudiced by the filing of the First
Amended Complaint; and (3) the proposed amendments are futile
as to Cole. The Court disagrees with Defendants.
plaintiff moves to amend his complaint after the scheduling
order deadline for amendments has passed, “a tension
exists” between Federal Rules of Civil Procedure 15(a)
and 16(b). Fid. & Guar. Life Ins. Co. v. United
Advisory Grp., Inc., No. WDQ-13-0040, 2016 WL 158512, at
*2 (D.Md. Jan. 12, 2016). Rule 15(a) provides that leave to
amend “shall be freely given when justice so
requires” absent bad faith, futility, or prejudice,
see Edell & Assocs., P.C. v. Law Offices of
Peter G. Angelos, 264 F.3d 424, 446 (4th Cir. 2001)
(citing Edwards v. City of Goldsboro, 178 F.3d 231,
242 (4th Cir. 1999)), while Rule 16(b) dictates that the
Court will not modify a scheduling order without “a
showing of good cause, ” Fed.R.Civ.P. 16(b). The United
States Court of Appeals for the Fourth Circuit resolved this
tension, holding that if the scheduling order deadline for
amending pleadings has passed, the good cause standard
governs. Nourison Rug Corp. v. Parvizian, 535 F.3d
295, 298 (4th Cir. 2008) (collecting cases). As a result, a
party moving for leave to amend his pleading must first
establish good cause under Rule 16(b) before the Court will
consider the Rule 15(a)(2) factors. Fid. & Guar. Life
Ins. Co., 2016 WL 158512, at *2; Prowess, Inc. v.
RaySearch Labs., AB, 953 F.Supp.2d 638, 648 (D.Md. 2013)
(citing Nourison, 535 F.3d at 298).
good cause analysis under Rule 16(b)(4) is “less
concerned with the substance of the proposed amendment”
and focuses instead on “the timeliness of the amendment
and the reasons for its tardy submission.” Rassoull
v. Maximus, Inc., 209 F.R.D. 372, 373-74 (D.Md. 2002).
Indeed, “[t]he primary consideration of the Rule 16(b)
‘good cause' standard is the diligence of the
movant.” Id. at 374. “Lack of diligence
and carelessness are ‘hallmarks of failure to meet the
good cause standard.'” Id. (quoting
W.Va. Hous. Dev. Fund v. Ocwen Tech. Xchange, Inc.,
200 F.R.D. 564, 567 (S.D.W.Va. 2001)). If a party was not
diligent in seeking to modify the scheduling order,
“the inquiry should end.” Id. (quoting
Marcum v. Zimmer, 163 F.R.D. 250, 254 (S.D.W.Va.
cause exists for amending a complaint after the scheduling
order deadline when “at least some of the evidence
needed for a plaintiff to prove his or her claim did not come
to light until after the amendment deadline.”
Tawwaab v. Va. Linen Serv., Inc., 729 F.Supp.2d 757,
768 (D.Md. 2010); see also Prowess, 953 F.Supp.2d at
648 (“Rule 16(b) good cause exists when, inter
alia, a party ‘uncover[s] previously unknown facts
during discovery that would support an additional cause of
action.'” (alteration in original) (quoting
Forstmann v. Culp, 114 F.R.D. 83, 86 n.1 (M.D. N.C.
1987)). The Court may consider the following factors when
determining whether a party has established good cause:
“danger of prejudice to the non-moving party, the
length of delay and its potential impact on judicial