Goodman v. Praxair, Inc.Goodman v. Praxair, Inc.
Lead Opinion
Reversed and remanded by published opinion. Judge NIEMEYER wrote the opinion, in which Judges WILKINSON, MICHAEL, TRAXLER, KING, DUNCAN, and Senior Judges WIDENER and WILKINS joined. Chief Judge WILLIAMS wrote a separate opinion concurring in part, in which Judge SHEDD joined. Judge GREGORY wrote a separate opinion concurring in part.
OPINION
The district court dismissed plaintiff Marc Goodman’s amended complaint for breach of contract against Praxair, Inc., and its wholly-owned subsidiary, Praxair Services, Inc., under
Because we conclude that the district court erred both in applying the statute of limitations and in refusing to apply the relation back afforded by
I
On December 18, 2003, Goodman commenced an action in Maryland state court, naming Praxair, Inc., as defendant and alleging, in two counts, that Praxair, Inc., breached a contract with Goodman and in doing so also violated the Maryland Wage Payment and Collection Act.
Goodman alleged in his complaint that he entered into a written contract, dated April 16, 1998, with Tracer Research Corporation, a manufacturer of tracing chemicals (“tracers”) that detect fuel leaks in fuel tanks. Goodman alleged that the contract was for him to lobby on Tracer Research’s behalf for exemptions of its
Count I of the complaint for breach of contract demanded “[j]udgment as against Praxair, Inc. as successor in interest of Tracer Research Corp.” in the amount of $620,000 in damages plus pre-judgment interest. Count II alleged that the fees payable under the contract were also properly characterized as wages and therefore payable by reason of the Maryland Wage Payment and Collection Act. As Goodman alleged, “The Defendant has owed the claimed wages in an amount equal to $620,000.00, since December 19, 2000, the date the EPA excluded the Defendant’s tracers from the two-step EPA registration process.”
Subsequent to the formation of the contract and its alleged breach, Tracer Research was acquired by UCISCO, Inc., a wholly-owned subsidiary of Praxair, Inc., and UCISCO thereafter changed its name to Praxair Services, Inc.
Counsel for Goodman stated by affidavit that after hearing that “Tracer Research Corp. had been sold to Praxair, Inc.,” he visited the website of Praxair, Inc., during the course of preparing the complaint that he filed in state court. At the website, he found a press release dated November 11, 2002, in which Praxair, Inc., announced that “Praxair Acquires Tracer Research” and which provided the details that “UCISCO, Inc., a wholly-owned subsidiary of Praxair, Inc., has acquired Tracer Research corporation” and that “UCISCO had changed its name to Praxair Services, Inc.” Counsel also determined that Praxair Services, Inc., was not registered to do business in Maryland but that Praxair, Inc., had been so registered.
Purportedly based on the information learned, Goodman named Praxair, Inc., as the defendant and included the following allegations in the complaint:
Defendant Praxair, Inc. is a corporation, and successor in interest to Tracer Research Corp., which was acquired in November, 2002 by Praxair Service, Inc. a wholly-owned subsidiary of Praxair, Inc.
To date, Defendant Tracer Research Corp., and its successor in interest, Praxair Services, a wholly-owned subsidiary of Praxair, Inc., ... have failed and refused to pay the Plaintiff as agreed.
Wherefore, Plaintiff Marc B. Goodman demands the following relief:
a. Judgment as against Praxair, Inc. as successor in interest of Tracer Research Corp. in the amount of $620,000 plus pre-judgment interest at the legal rate.
Praxair removed the action to federal court based on diversity jurisdiction and then filed a motion to dismiss the complaint on the ground that Praxair Services, Inc., not Praxair, Inc., was the successor to Tracer Research’s obligations under the contract with Goodman. In response, Goodman filed an amended complaint on April 5, 2004, in which he repeated the allegations contained in the original complaint but stated that Praxair Services, Inc., rather than Praxair, Inc., was liable under the contract. He also alleged that Praxair, Inc., should be liable on an alter ego theory, and amended the caption of the case to indicate that both Praxair, Inc., and Praxair Services, Inc., were defendants.
The defendants filed a motion to dismiss the amended complaint on various grounds, including the ground that the complaint on its face was time-barred and that
Goodman filed this appeal, arguing (1) that the running of Maryland’s statute of limitations does not appear on the face of the complaint, and (2) that, in any case,
II
In concluding that the amended complaint itself alleged facts showing that its claims were barred by Maryland’s three-year statute of limitations, the district court said:
Plaintiff expressly stated in the First Amended Complaint that “the Defendant has owed the claimed wages in an amount equal to $620,000 since December 19, 2000.” Thus, Plaintiff has unambiguously set forth the date of accrual of the claim(s) that he was asserting. There is no doubt that there is a three-year period of limitations. Accordingly, limitations expired December 19, 2003 on the claim(s) that Plaintiff presented in the instant case.
(Emphasis added).
Goodman argues that “the date that $620,000 became owing is not the same as an allegation of the date a contract cause of action acames.” He adds that in Mary
The parties agree that Maryland’s statute of limitations applies, providing, “A civil action at law shall be filed within three years from the date it accrues.”
Since the district court dismissed Goodman’s amended complaint based on the affirmative defense that the complaint was barred by a statute of limitations, the question presented in this case is whether the amended complaint sets forth on its face the facts necessary to conclude that plaintiffs claims are barred by the statute of limitations.
The amended complaint alleges with respect to the timing of claims:
(1) that on December 19, 2000, the EPA “forwarded correspondence to” Tracer Research, stating that the EPA had concluded that Tracer Research’s tracer chemicals were not fuel additives subject to regulation and therefore were exempt from the testing requirements;
(2) that as of December 19, 2000, $620,000 became due to the plaintiff under the contract; and
(3) that “to date, Defendant Tracer Research Corp., and its successor in interest, Praxair Services, Inc., a wholly-owned subsidiary of Praxair, Inc., have failed and refused to pay the Plaintiff as agreed.”
The complaint also included a copy of the EPA letter dated December 19, 2000, addressed to the CEO of Tracer Research Corporation. That letter does not show that a copy was sent to Goodman.
The complaint alleges neither a date when the contract was breached nor a date when Goodman may have discovered the breach. Its allegation that money was owed does not mean that the contract on which it was owed had been breached. Indeed, the complaint does not even allege when Tracer Research received the letter or when it provided a copy to Goodman. Moreover, the complaint contains no allegations of when any demand for payment was made by Goodman nor of when Tracer Research refused to pay, if it did so explic
In Maryland, a cause of action for breach of contract generally accrues when the contract is breached. Mayor & Council of Federalsburg v. Allied Contractors, Inc.,
Although the statute of limitations for breach of contract generally commences on the date of breach, for that is when the cause of action “accrues,” that date may be extended in Maryland by the “discovery rule,” which provides that the limitations period does not begin until the plaintiff learned or should have learned of the breach. As the Maryland Court of Appeals has explained:
The statute of limitations on [the plaintiffs’] contract claim began to run when the cause of action for breach of contract accrued. Under the principles set forth in our cases, the cause of action accrued when [the defendant] breached its contract ... and when the breach was or should have been discovered.... Since the discovery rule is now generally applicable in civil actions, accrual of the cause of action was postponed until [the plaintiffs] knew or should have known of the breach.
Jones v. Hyatt Ins. Agency, Inc.,
Goodman’s complaint also does not provide facts sufficient to apply the discovery rule. This is particularly important in this case in view of the fact that the district court concluded that the breach of contract claim accrued when the EPA sent its letter to Tracer Research, not to Goodman. The district court did not address either when Tracer Research received the letter or when Goodman received it or when a commercially reasonable time for payment had elapsed.
The Praxair defendants argue that because the discovery rule is an extension of the limitations period that Goodman must allege and prove in response to a statute of limitations defense, the risk of failing to make the showing must fall on Goodman, not on the Praxair defendants. See Shah v. HealthPlus, Inc.,
In sum, the most that can be derived from Goodman’s complaint is that the conditions precedent to Tracer Research’s obligations to pay Goodman were satisfied as of December 19, 2000. But there are no allegations sufficient to determine when the obligation to pay arose or when Tracer Research could be deemed to have refused to make payment. The most the complaint says is that at some unspecified time after December 19, 2000, Tracer Research “failed and refused” to pay, breaching the contract. Accordingly, we conclude that the face of the complaint does not allege facts sufficiently clear to conclude that the statute of limitations had run, and the district court therefore erred in dismissing the complaint on that basis under
Ill
Because the district court ruled that Goodman’s amended complaint, filed on April 5, 2004, was barred by Maryland’s three-year statute of limitations, it also decided whether the amended complaint was saved by the relation-back facility of
An amendment of a pleading relates back to the date of the original pleading when
* H* H*
(2) the claim or defense asserted in the amended pleading arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading, or
(3) the amendment changes the party or the naming of the party against whom a claim is asserted if the foregoing provision (2) is satisfied and ... the party to be brought in by amendment (A) has received such notice of the institution of the action that the party will not be prejudiced in maintaining a defense on the merits, and (B) knew or should have known that, but for a mistake concerning the identity of the proper party, the action would have been brought against the party.
These requirements of
In denying relation-back under
A
Goodman argues that by adding Praxair Services, Inc., as a defendant to the amended complaint, he “changed” the party he was suing, as required by
The Praxair defendants argue that “the language of
Although we adopt Goodman’s position as the better interpretation of
Moreover, we can discern no policy that would be served by the Praxair defendants’ restrictive reading of “changes,” which would force the amending party to drop a defendant for each defendant he adds. Praxair, Inc., was placed on notice within the limitations period of the claims relating to the transactions alleged in the original complaint, and no unfairness to it resulted from leaving it in as a defendant in the amended complaint. Any unfairness caused by the amendment could only be claimed by Praxair Services, Inc., the new party. But the protections for Praxair Services are addressed by considering the requirements of
B
The district court also concluded that Goodman’s naming of Praxair Services, Inc., in the amended complaint when Goodman had named only Praxair, Inc., in the original complaint, corrected a mistake that was not covered by
The Praxair defendants have developed this position further, arguing that when a plaintiff fully intends to name the original defendant and it turns out that the plaintiff named the wrong party, no “mistake” as anticipated by
The interpretation of
Unfortunately, the “but for a mistake” language in
Despite the good-sense results effected by some of these holdings, the text of
Thus, for example, substitutions for “Doe” defendants after limitations have run would be barred by the two separately stated requirements of
The “mistake” language is textually limited to describing the notice that the new party had, requiring that the new party have expected or should have expected, within the limitations period, that it was meant to be named a party in the first place, although it also implies that the plaintiff in fact made a mistake. No policy supports permitting relation-back for typographical mistakes, but not for oversights or mistakes of inclusion or omission. The policy considerations of
Of course an argument can be made on the other side, but when a defendant has had notice from the beginning that the plaintiff sets up and is trying to enforce a claim against it because of specified conduct, the reasons for the statute of limitations do not exist, and we are of opinion that a liberal rule should be applied.
New York Cent. & Hudson River R.R. v. Kinney,
At bottom, the inquiry, when determining whether an amendment relates back looks at whether the plaintiff made a mistake in failing to name a party, in naming the wrong party, or in misnaming the party in order to prosecute his claim as originally alleged, and it looks into whether the rights of the new party, grounded in the statute of limitations, will be harmed if that party is brought into the litigation. When that party has been given fair notice of a claim within the limitations period and will suffer no improper prejudice in defending it, the liberal amendment policies of the Federal Rules favor relation-back.
A few cases tend to suggest that if plaintiffs own inexcusable neglect was responsible for the failure to name the correct party, an amendment substituting the proper party will not be allowed, notwithstanding adequate notice to the new party. Although this factor is germane to the question of permitting an amendment, it is more closely related to the trial court’s exercise of discretion underRule 15(a) whether to allow the change than it is to the satisfaction of the notice requirements ofRule 15(c) .
6A Charles Alan Wright, et al. § 1498.
Some language in our cases is eoncededly less than clear on this point of law. See
In Western Contracting, the plaintiff corporation brought suit for breach of contract. The defendant counterclaimed on the basis that the contract had been procured by fraud. Later, the defendant sought to amend the counterclaim to add new claims against individual employees of the plaintiff corporation, asserting that they were responsible for the fraud. We held that the new claims did not relate back under
Similarly, in Locklear, the original complaint in a products liability action named the town where the offending machine was constructed, rather than the manufacturer. We held that the manufacturer was not chargeable within the limitations period with knowledge that it should have originally been named a defendant. It was readily apparent in that case that the naming of the town rather than the manufacturer was a “mistake,” but the later-added manufacturer was not put on notice of the claim within the limitations period in that it should have known it would have been named but for the mistake. See Locklear,
These holdings, as so read, comport well with the policies underlying
The mandate remains that a plaintiff has the burden of locating and suing the proper defendant within the applicable limitations period. The Federal Rules do not demand a perfect effort at the outset, but they do demand that when an amendment seeks to correct an imperfect effort by changing parties, the new party must have received adequate notice within the limitations period and suffer no prejudice in its defense.
C
Praxair Services, Inc., asserts, as the district court concluded, that it was not provided fair notice by the original complaint as required by
The original complaint described the contract between Goodman and Tracer Research Corporation and alleged that Tracer Research breached it. Seeking to redress the breach, the complaint sought to trace liability from Tracer Research to the appropriate successor. The complaint stated that “[t]o date, Defendant Tracer Research Corp., and its successor in interest, Praxair Services, a wholly owned subsidiary of Praxair, Inc., ... have failed and refused to pay the Plaintiff as agreed.” For relief, the complaint demanded “Judgment as against Praxair, Inc. as successor in interest of Tracer Research Corp.”
Explaining the circumstances of these assertions, the complaint described the events leading up to the breach of contract, the parties, the transactions between Praxair, Inc., and Tracer Research Corporation, and the facts attendant to the litigation. Praxair Services’ current assertion of ignorance is simply implausible for several reasons. First, the complaint made conceptually clear that it was suing the corporate entity that was the successor of Tracer Research Corporation. Praxair, Inc., and Praxair Services, Inc., knew, better than anyone, which corporate entity that was, having acquired Tracer Research and participated in the structuring of the transaction in the first place.
Second, the complaint described the nature of the contract and the original parties to it. Any corporation maintaining reasonable business records would be able rapidly to route the complaint to the appropriate subsidiary responsible for that contract.
Third, Praxair, Inc., and Praxair Services, Inc., are parent and subsidiary, respectively, and have employed the same attorneys. Their identity of interest elimi
Thus, what is clear is (1) that Goodman intended to sue the successor of Tracer Research for breach of his contract with Tracer Research; (2) that Praxair Services, Inc., became the successor of Tracer Research; (3) that Goodman named Prax-air, Inc., in its original complaint for breach of his contract with Tracer Research; and (4) that Praxair Services, Inc., knew that but for Goodman’s mistake in pleading, Praxair Services, Inc., would have been sued for breach of his contract with Tracer Research. Goodman’s mistake therefore represents the difference between his manifested intent to sue the successor to Tracer Research and the defendant whom he actually named in the complaint.
The reason for Goodman’s mistake, while irrelevant to whether Praxair Services, Inc., had adequate notice, is nonetheless puzzling in view of the complaint’s allegations. In one place, the complaint states, ambiguously, “Defendant Praxair, Inc. is a corporation, and successor in interest to Tracer Research Corp., which was acquired in November 2002 by Praxair Service[s], Inc. a wholly owned subsidiary of Praxair, Inc.” Yet in another place in the same complaint, Goodman alleges, “To date, Defendant Tracer Research Corp., and its successor in interest, Praxair Services, a wholly owned subsidiary of Prax-air, Inc., ... have failed and refused to pay the Plaintiff as agreed.” Finally, in his prayer for relief, Goodman demands judgment against “Praxair, Inc. as successor in interest of Tracer Research Corp.” These apparent inconsistencies need not be reconciled except to conclude that Prax-air Services, Inc., was put on notice that Goodman had made a mistake in pleading because, incontrovertibly, he intended to name as defendant the successor in interest to Tracer Research, and Praxair Services, Inc., knew who that was.
In addition to the complaint’s facial expression of intent to sue the successor in interest, we may also impute that knowledge to Praxair Services, Inc., because both Praxair Services, Inc., and Praxair, Inc., were closely related business entities represented by the same lawyers. The history of
We conclude that Praxair Services, Inc., knew that it was the successor to Tracer Research Corporation’s contractual liability and therefore it knew or should have known within the limitations period that it was the proper party to Goodman’s suit. Since Praxair Services, Inc., has conceded that it has suffered no prejudice to its defense of Goodman’s claim, we conclude that the requirements for relation-back under
The judgment of the district court is reversed, and the case is remanded for further proceedings.
REVERSED AND REMANDED
Notes
. In view of the representations by Praxair, Inc.’s counsel that UCISCO acquired the stock of Tracer Research pursuant to a "stock purchase agreement entered into in October 2002,” the court questioned counsel for Prax-air, Inc., during oral argument about whether Tracer Research Corporation remained a subsidiary of UCISCO (Praxair Services, Inc.) or whether it was dissolved as a corporation. Counsel represented that after the acquisition, Tracer Research Corporation merged into UCISCO (Praxair Services, Inc.). We proceed on the agreement of the parties that Praxair Services, Inc., was thus the proper defendant.
. In her concurring opinion, Judge Williams has stated that she would not reach the relation-back issue because it is unnecessary to the resolution of the appeal and is issued solely to provide guidance.
First, our court regularly issues opinions to provide guidance on remand in the interest of judicial efficiency. See United States v. Barile,
But in this case the relation-back issue is a viable dispute that has been presented to us and is much more than something to be decided as a matter of guidance. We resolve the limitations issue only as a pleading matter, holding that a
In addition, counsel for the parties assured the court of the viability of both issues, representing to the court at oral argument that counsel for the Praxair defendants in fact had transmitted a letter to Goodman, refusing his demand more than three years before the amended complaint was filed. Once that letter is filed with the district court, we would have to address the relation-back issue in a second appeal back-to-back with this appeal.
Concurrence Opinion
concurring in part:
I join only in Parts I and II of Judge Niemeyer’s opinion. Because it does not “clearly appear[ ] on the face of the complaint” that the statute of limitations period had expired, the district court erred in dismissing the complaint under
Having determined that the district court erred in ruling, based on the complaint alone, that the statute of limitations had expired, I, with respect to my colleagues, believe that we should remand this case for discovery so that the district court may determine when, in fact, the statute of limitations period expired. Instead, the majority of my good colleagues have decided that we should address relation-back under
The parties want us to address the
Finally, apart from the hypothetical factual underpinning for the majority’s opinion on
Judge Shedd has authorized me to indicate that he joins in this opinion.
. Contrary to the majority opinion's attempt to suggest otherwise, this opinion is not inconsistent with the opinions I wrote for the court in United States v. Barile,
. The majority opinion claims that "the relation-back issue ... is much more than something to be decided as a matter of guidance” because "[n]ot deciding the relation-back issue now would leave in place an erroneous decision.” Ante at 466-67 n. 2. I beg to differ. Because the district court’s dismissal of this case was in error, we must vacate that order, leaving no decision that could operate as law of the case.
Furthermore, although the majority opinion asserts that the parties have agreed that relation-back issue will necessarily be in play on remand, the opinion points to nothing in the record or briefs to back up this assertion. And if it could, then Part II of the majority opinion is unnecessary.
Concurrence Opinion
concurring in part:
I, too, join only Parts I and II of Judge Niemeyer’s opinion. I agree that the district court could not, from the face of Goodman’s complaint, determine when the statute-of-limitations period expired. It could not, therefore, dismiss the complaint for being fded outside the limitations period. See Richmond, Fredericksburg & Potomac R.R. Co. v. Forst,
In Locklear v. Bergman & Beving AB,
I see no reason to abandon our precedent of almost twenty years in favor of a policy that will decrease the incentives for plaintiffs to investigate their cases fully before filing a lawsuit. I think it good that our former interpretation of the Rule limited the mistakes courts would forgive to the clerical and inconsequential.
The majority’s interpretation will result in more lawsuits filed against incorrect defendants as the costs associated with improperly identifying the proper defendant drop. Plaintiffs, knowing that courts will allow them to swap defendants if they select the wrong one by mistake, will have fewer incentives to name the correct defendant the first time. The incentives to name the proper defendant will remain very strong of course, but on the margin we should expect an increase in the number of incorrect defendants sued now that the majority has given
Under the interpretation of
The majority acknowledges the “good-sense results” obtained by courts that interpret
For other courts that limit relation back based upon the nature of the plaintiff's mistake, see, e.g., Rendall-Speranza v. Nassim,