Addressing a procedural matter of first impression, the United States District Court for South Carolina adopted the moderate approach in response to the question of whether a party requires leave of court to amend counterclaims in response to an amended complaint. Poly-Med, Inc. v. Novus Scientific PTE LTD., 2017 WL 2874715 (D.S.C. July 6, 2017).
Reminiscent of a childhood story with which we are all familiar, there are three distinct approaches to determining this issue, including two extremes and one in the middle, permissive, narrow and moderate. Pursuant to the permissive approach, true to its name, there are no restrictions and the defendant has the right to bring new counterclaims in response to an amended complaint, regardless of the scope of the amendment. The narrow approach limits amended counterclaims to those that are directly related to changes in the amended complaint. Under the moderate approach, now adopted by the court, an amended response may be made without leave of court only when the amended complaint changes the theory or scope of the case, and in those instances, the breadth of the modified response must be commensurate with the breadth of the changes in the complaint. Activevideo Networks, Inc. v. Verizon Comms., Inc. 2011 WL 13113382 (E.D. Va. Mar. 1, 2011).
If the court determines that the amended complaint changes the scope or theory of the case, the next step is to determine whether the breadth of the proposed counterclaims parallel the breadth of the modifications to the complaint. This test is one of proportionality; it does not require the changes to be directly related to the changes in the complaint. The courts in the Fourth Circuit generally follow the moderate approach, which is also favored by respected commentators. Unfortunately, however, the Novus opinion provides no guidance as to factors employed by the court to determine the breadth of the amendments or how to compare them to the breadth of proposed new counterclaims.
The court in Novus also took the opportunity to address supplemental claims sought after the expiration of a scheduling order deadline. A motion to supplement is governed by Rule 15(d), which is designed to allow a party to allege a transaction, occurrence or event that happened after the date of the pleading to be supplemented. Because it is not an amendment after a scheduling order deadline, Rule 16(b) does not govern. While liberally granted, motions to supplement are not automatically allowed, but rather analyzed by the same standards used to determine whether a motion to amend should be granted. Quirk V. Stephens, 2017 WL 2416915 (E.D.N.C. June 2, 2017) Nazarova v. Duke Univ. 2017 WL 823578 (M.D.N.C. Mar. 2, 2017). The Fourth Circuit has interpreted Rule 15(a) to provide that an amendment should be denied only when it would be prejudicial to the opposing party, there has been bad faith on the party seeking the amendment, or the amendment would be futile. Prejudice to the opposing party is the most important factor. Davis v. Piper Aircraft Corp. 615 F. 2d 606 (4th Cir. 1980).
Defendants in Novus did not argue prejudice or bad faith, and the court found none. The court provided further insight into prejudice, however, the absence of which will not alone warrant granting a motion to amend. The addition of claims and new legal theories adding to discovery and other evidentiary burdens may be sufficient prejudice to deny a motion to amend if the amendments are sought at or just before trial. Otherwise, perhaps not.
The court also addressed futility, reminding that a claim is futile if it would not survive a Rule 12(b)(6) motion. See Rush v. Am. Home Mortg. Inc., 2010 WL 1418000 (D. Md. Apr. 6, 2010) Where, as in Novus, a futility argument is based upon the statute of limitations, a 12(b)(6) motion and therefore a motion to amend, may be granted only if the time bar is apparent on the face of the complaint. Evidence outside of the pleadings may be presented later, at the summary judgment stage, but a claim is not deemed time-barred and consequently futile unless apparent on the face of the complaint.