Stowe Aviation, LLC v. Agency of Commerce, 2024 VT 11 [
CARROLL, J. Plaintiffs appeal from an order denying their motion to reopen this breach-of-contract case and for leave to file a second amended complaint. Plaintiffs assert that Rule 59(e) is a viable means to reopen the pleadings, and the trial court abused its discretion in denying relief under that rule. We agree that plaintiffs can potentially obtain Rule 59(e) relief, and therefore reverse the order denying plaintiffs' Rule 59(e) motion and remand for further proceedings to evaluate plaintiffs' request to replead consistent with this opinion.
Plaintiffs complained in count one that they executed an MOU with defendant based on its representations that it provided "gold standard" oversight of EB-5 projects, when in fact a significant fraud had been perpetrated on its watch. In count two, plaintiffs alleged that defendant’s misrepresentations about its oversight of other EB-5 projects breached the implied covenant of good faith and fair dealing.
The trial court granted defendant's motion to dismiss for failure to state a claim on both counts. It concluded that the MOU did not contain any provision promising oversight of the Jay Peak projects for the benefit of plaintiffs. The court found the claim of breach of the implied covenant of good faith and fair dealing arising from the same allegations suffered from the same deficiency. The court did find that plaintiffs had alleged a separate basis for a breach-of-contract claim but did not, however, adequately plead damages related to this alleged breach, and therefore failed to state a claim. The court dismissed the complaint pursuant to Vermont Rule of Procedure 41(b) and closed the case the same day.
Plaintiffs moved under Vermont Rule of Civil Procedure 15 to amend the complaint in response to the court's identification of a potential basis for plaintiffs' two claims. The defendant opposed the motion, arguing ,because the court had closed the case, plaintiffs had to first move the court to reopen or vacate judgment under Vermont Rules of Civil Procedure 59 or 60. Plaintiffs then timely filed a restyled motion seeking relief under either Rule 59 or 60, and submitted a proposed second amended complaint attempting to cure the deficiencies the court identified in its final order.
The court concluded that for plaintiffs to prevail under Rule 59(e), the court had to have made a mistake, not plaintiffs. It found that plaintiffs' failure to request leave to amend was not a fault or mistake of the court, but of plaintiffs. It found that the proposed second amended complaint contained new arguments that plaintiffs could have pleaded before it closed the case. It concluded that it had not made a clerical mistake in failing to sua sponte grant leave to amend. The court accordingly denied the motion. Plaintiffs appealed this order.
The first question presented is whether plaintiffs can prevail on a Rule 59(e) motion to replead where plaintiffs did not seek leave to amend their complaint prior to the court's merits decision and where the court dismissed with prejudice and closed the case. We have never addressed whether the court's power includes granting Rule 59(e) relief to cure a pleading deficiency.
In Mitec, we held that the right to amend provided by Rule 15 no longer attached after entry of judgment. N. Sec. Ins. Co. v. Mitec Electronics, Ltd., 2008 VT 96, ¶ 39. And while we ultimately reversed the post-judgment grant of leave to amend in Mitec, our decision was based on the specific facts of that case, and we did not express or imply that the rules never allow repleading after the court closes the case or enters judgment.
We are persuaded that curing a pleading deficiency is a possible basis for relief under Rule 59(e). Relief to amend pleadings under Rule 59(e) is available in most if not all the federal circuits. As we noted in Equinox, "[f]reedom of amendment is a fundamental principle of our rules." State v. Equinox House, Inc., 134 Vt. 59 , 62 (1975); see also Foman v. Davis, 371 U.S. 178, 181-82 (1962) (stating that Rule 59 motion to amend should have been granted because purpose of civil rules, including Rule 15, is that "[i]f the underlying factors or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claims on the merits").
In Williams v. Citigroup Inc. , 659 F.3d 208 (2d Cir. 2011) (per curiam), the Second Circuit encountered facts similar to the present dispute. There, the district court dismissed the plaintiff's complaint and entered final judgment the following day. The plaintiff timely moved to reopen the judgment and sought leave to cure defects in the original complaint that the court identified in its dismissal order. The Second Circuit reversed, concluding that the court abused its discretion in denying the motion for reconsideration. The court held that the U.S. Supreme Court in Foman makes unmistakably clear there is no such rule requiring litigants to request leave to amend with their opposition papers or to do so before the court enters judgment.
We similarly hold that the trial court's denial of plaintiffs' motion in this case was an abuse of discretion. The court's conclusion that relief was unavailable because plaintiffs should have requested leave to amend in their opposition papers cannot be squared with Equinox, Mitec, or the federal cases addressing the topic including Foman. The rules do not require it.
On remand, plaintiffs must first convince the court to reopen the case under Rule 59(e) before they can file their second amended complaint. The standard to prevail on a Rule 59(e) motion in this context is more exacting, because the presumption to grant leave to amend under Rule 15 "disappears after judgment has been entered." Plaintiffs must demonstrate one of the "four basic grounds" for granting a Rule 59 motion. Mitec, 2008 VT 96, ¶ 42.*
If plaintiffs sufficiently demonstrate a basis for relief under Rule 59(e), the inquiry proceeds to whether plaintiffs' second amended complaint meets the ordinary Rule 15 standard. Colby v. Umbrella, Inc., 2008 VT 20, ¶ 4 (identifying factors to evaluate whether to allow party to amend pleadings under Rule 15 including undue delay, bad faith, futility, and prejudice); Bevins v. King, 143 Vt. 252, 254-56(1983). Plaintiffs can only file their second amended complaint if they prevail on both Rule 59(e) and Rule 15 standards.
The order denying plaintiffs' post-judgment motion for reconsideration is reversed, and the matter is remanded for further proceedings consistent with this opinion.
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SCOVT Note: In Foman v. Davis, 371 U.S. 178 (1962) the U.S. Supreme Court held the Court of Appeals erred in affirming a District Court's denial, without any apparent reason, of petitioner's motion to vacate the judgment in order to allow amendment of the complaint to plead a new legal theory based on the same transaction:
As appears from the record, the amendment would have done no more than state an alternative theory for recovery.
Rule 15 (a) declares that leave to amend "shall be freely given when justice so requires"; this mandate is to be heeded . . . If the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits. In the absence of any 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, futility of amendment, etc.—the leave sought should, as the rules require, be "freely given."
Of course, the grant or denial of an opportunity to amend is within the discretion of the District Court, but outright refusal to grant the leave without any justifying reason appearing for the denial is not an exercise of discretion; it is merely abuse of that discretion and inconsistent with the spirit of the Federal Rules.
*The ""four basic grounds" for granting a Rule 59 motion" referred to in Mitec, are:from Wright & Miller:
First, the movant may demonstrate that the motion is necessary to correct manifest errors of law or fact upon which the judgment is based.
Second, the motion may be granted so that the moving party may present newly discovered or previously unavailable evidence.
Third, the motion will be granted if necessary to prevent manifest injustice.
Fourth, a Rule 59(e) motion may be justified by an intervening change in controlling law.11 Fed. Prac. & Proc. Civ. § 2810.1 (3d ed.)
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