318 F.R.D. 28
S.D.N.Y.2016Background
- Plaintiffs (the Union and several multiemployer trust funds) sued SL Construction and Phase Construction (and seek to add Phase NY and Salvatore LaBarca) for unpaid fringe contributions and related ERISA/Taft-Hartley/CBA claims, alleging the entities are alter egos / a single employer and that LaBarca misappropriated corporate funds.
- Extensive, contested discovery: Plaintiffs inspected a Deer Park warehouse of records (latest labeled records dated 2013), deposed LaBarca (Oct. 1, 2015) who testified some records were elsewhere, and later deposed the accountant (Dima) and LaBarca’s sister in March 2016.
- Plaintiffs moved (May 2016) to amend/supplement the complaint to add LaBarca and Phase NY based on deposition testimony and tax returns showing post-2013 profits; they also moved to compel production of documents post-December 2013, which defendants largely declined to produce, asserting none exist.
- The court reviewed motions under Rule 16(b) (good cause for late amendment), Rule 15/21 standards for joinder/amendment, and Rule 26/37 discovery rules; held multiple conferences and extended discovery deadlines repeatedly due to disputes and counsel events.
- The court granted leave to amend/supplement: plaintiffs pleaded sufficient factual allegations to pierce the corporate veil (LaBarca) and to allege single-employer/alter-ego liability for Phase NY; it also granted the motion to compel production of post-December 2013 documents and awarded plaintiffs reasonable attorneys’ fees for the motion to compel.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs showed good cause under Rule 16 to amend after scheduling deadline | Plaintiffs acted diligently: new facts surfaced only after depositions and tax returns in early 2016 | Defendants: plaintiffs delayed (knew facts earlier) and missed multiple deadlines | Court: Good cause shown—plaintiffs timely moved after uncovering material facts in March 2016 depositions |
| Whether adding LaBarca and Phase NY is prejudicial to defendants | Addition arises from same transactions; discovery already covered relevant topics | Defendants: new theories (veil piercing) and new parties create undue discovery burden and unfair notice | Court: No undue prejudice—defendants had notice of theories and limited additional discovery expected |
| Whether allegations against LaBarca and Phase NY are futile (12(b)(6) standard) | Plaintiffs pled domination, improper transfers/loans, use of corporate funds, and Phase NY formed to avoid obligations—sufficient facts for veil-piercing and single-employer theories | Defendants: allegations conclusory, contrary evidence, and insufficient to state claims | Court: Not futile—allegations suffice at pleading stage to state veil-piercing and single-employer claims |
| Whether defendants must produce post-12/31/2013 documents and pay discovery expenses | Plaintiffs identified specific evidence (LaBarca deposition, tax returns, later documents) undermining defendants’ claim that no such documents exist | Defendants: swore (LaBarca affidavit) that no additional responsive documents exist; production to date complies with orders | Court: Plaintiffs met burden to challenge nonexistence; defendants must either produce post-2013 documents or provide detailed account of searches and why none exist; plaintiffs awarded fees for motion to compel |
Key Cases Cited
- Holmes v. Grubman, 568 F.3d 329 (2d Cir. 2009) (discusses standards for denying leave to amend: futility, bad faith, undue delay, prejudice)
- McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184 (2d Cir. 2007) (standards on amendment and prejudice)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (Sup. Ct.) (pleading must allege sufficient facts to state a claim)
- Slayton v. Am. Express Co., 460 F.3d 215 (2d Cir. 2006) (relation-back and statute-of-limitations considerations for amendments)
- Am. Fuel Corp. v. Utah Energy Dev. Co., 122 F.3d 130 (2d Cir. 1997) (veil-piercing elements: domination and misuse causing injury)
- Lihli Fashions Corp. v. N.L.R.B., 80 F.3d 743 (2d Cir. 1996) (single-employer factors: interrelationship, common management, centralized labor control)
- Grand Cent. P’ship v. Cuomo, 166 F.3d 473 (2d Cir. 1999) (district courts have broad discretion on discovery motions)
- Krupski v. Costa Crociere S.p.A., 560 U.S. 538 (Sup. Ct.) (relation-back doctrine: failure to name must be a mistake, not a deliberate choice)