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RX Savings, LLC v. Besch

United States District Court, D. Kansas

December 20, 2019

RX SAVINGS, LLC, et al., Plaintiffs,
v.
DOUGLAS BESCH, et al., Defendants.

          MEMORANDUM AND ORDER

          Daniel D. Crabtree United States District Judge

         This matter comes before the court on Judge O'Hara's Report and Recommendation (Doc. 32) and defendants Douglas Besch, Besch Holdings, LLC, and Laxman Degala's Second Motion for Leave to Add Counterclaim (Doc. 41). As explained below, the court concludes that Judge O'Hara did not err when he recommended that the court deny defendants' motion for leave to assert a counterclaim for defamation. Thus, the court affirms Judge O'Hara's decision. Also, the court grants defendants' Second Motion for Leave to Add Counterclaim (Doc. 41).

         I. Factual and Procedural Background

         Plaintiff RX Savings, LLC filed this breach-of-contract action in Johnson County District Court on October 15, 2018. Plaintiff sought injunctive relief and damages against defendants Douglas Besch and Besch Holdings, LLC. Later, plaintiff RX Savings, LLC added its individual owners as plaintiffs: Dan Henry, David Shewmaker, Marcus #1, LLC, Carmel Strategies LLC, and Jeffrey Carl Brown. And, plaintiffs also joined DR/Decision Resources, LLC d/b/a DRG/Adaptive and Laxman Degala as defendants. Defendants answered the Petition on June 27, 2019, asserting counterclaims against plaintiffs and adding claims against Michael Rea.[1] Plaintiffs filed a Second Amended Petition, asserting claims for tortious interference, unjust enrichment, unfair competition, breach of fiduciary duty, conversion, violation of the Computer Fraud and Abuse Act (18 U.S.C. § 1030), civil conspiracy, and misappropriation of trade secrets. Defendants removed the case to the United States District Court asserting federal question jurisdiction on July 30, 2019. Doc. 1. On August 9, 2019, counterclaim defendants replied to the counterclaims. Doc. 3. Defendants answered plaintiffs' Second Amended Petition on August 16, 2019, asserting counterclaims, and an additional defamation claim against Michael Rea. Doc. 10.

         Plaintiffs moved to strike defendants' Counterclaims, which defendants opposed. Doc. 13. But, defendants also filed a motion for leave to join the Counterclaim defendant and add Counterclaims. Doc. 18. After conferring with the parties, Judge O'Hara denied plaintiffs' motion to strike as moot because defendants had moved for leave to join the Counterclaim. Doc. 26. Also, Judge O'Hara granted defendants' motion to join Michael Rea. Doc. 32 at 3-6. But, Judge O'Hara recommended that the district court deny defendants' motion for leave to add a defamation claim to their Counterclaim. Id. at 6-11.

         Defendants did not file an objection to Judge O'Hara's Report and Recommendation. Instead, defendants filed a Second Motion for Leave to Add Counterclaim, claiming this amendment, if allowed, would cure the defects Judge O'Hara had articulated in his Report and Recommendation (Doc. 41). Plaintiffs oppose defendants' Second Motion (Doc. 49), and defendants have replied (Doc. 53).

         II. Judge O'Hara's Report and Recommendation

         Judge O'Hara recommended that the district court deny defendants' motion for leave to add a defamation claim because the claim was futile under Kansas law. Doc. 32 at 6-7. Judge O'Hara concluded that “a party must allege and prove actual damages to have a cognizable claim for defamation” and cannot rely on the theory of presumed damages. Id. at 7. Because defendants' proposed defamation did not plead damages adequately, Judge O'Hara recommended the court deny defendants' motion because the defamation claim was “clearly futile.” Id.

         To date, no party has filed an objection to Judge O'Hara's Report and Recommendation, nor has any party asked to extend the time to object. Because no one has filed an objection to the Report and Recommendation within the time prescribed by Rule 72, and no party has sought an extension of time to object, the court can accept, adopt, and affirm the Report and Recommendation in its entirety. See Summers v. Utah, 927 F.2d 1165, 1167 (10th Cir. 1991) (“In the absence of timely objection, the district court may review a magistrate's report under any standard it deems appropriate.”).

         After de novo review, the court finds that Judge O'Hara's interpretation of Kansas law did not err. And the court thus accepts, adopts, and affirms Judge O'Hara's Report and Recommendation that the district court deny defendants' motion for leave to add a defamation counterclaim.

         With that work finished, the court now turns to defendants' Second Motion for Leave to Add Counterclaim.

         III. Standard of Review

         Federal Rule of Civil Procedure 15(a)(1) permits a party to amend its pleadings in one of two ways: (A) first, as a matter of course within 21 days after serving it, or (B) second, within 21 days of service of a responsive pleading. Fed.R.Civ.P. 15(a)(1)(A)-(B). Outside those periods, any amendment to the pleadings requires leave, and courts should “freely give leave [to amend] when justice so requires.” Fed.R.Civ.P. 15(a)(2); Foman v. Davis, 371 U.S. 178, 182 (1962). In contrast, a court should refuse to grant leave to amend on “a showing of undue delay, undue prejudice to the opposing party, bad faith or dilatory motive, failure to cure deficiencies . . ., or futility of amendment.” Bylin v. Billings, 568 F.3d 1224, 1229 (10th Cir. 2009) (quoting Frank v. U.S. West, Inc., 3 F.3d 1357, 1365 (10th Cir. 1993)).

         The decision whether to grant leave to amend is within the court's sound discretion. Minter v. Prime Equip. Co., 451 F.3d 1196, 1204 (10th Cir. 2006) (quoting Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 330 (1971)). When exercising this discretion, “the court must be mindful that the Federal Rules of Civil Procedure are designed to facilitate decisions on the merits rather than on pleading technicalities.” Bank Midwest, N.A. v. Millard, No. 10-2387-JAR-DJW, 2012 WL 4006423, at *1 (D. Kan. Sept. 12, 2012) (citing Koch v. Koch Indus., 127 F.R.D. 206, 209 (D. Kan. 1989)). Also, the court must remember that the Federal Rules of Civil Procedure “should be construed, administered and employed by the court and the parties to secure the just, speedy, and inexpensive determination of every action and proceeding.” Fed.R.Civ.P. 1. As this court and other federal courts have explained time and again, “[t]his discretionary approach of the federal rules fosters a full adjudication of the merits of the parties' disputes within a single comprehensive proceeding.” First Savings Bank, F.S.B. v. U.S. Bancorp, 184 F.R.D. 363, ...


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