Creditor’s AP Amendment Denied Due to Delay

Posted by NCBRC - June 26, 2014

The creditor waited too long to amend his adversary complaint and, therefore, the bankruptcy court’s denial of the motion to amend was not an abuse of discretion. Zullo v. Lombardo (In re Lombardo), No. 13-9004 (1st Cir. June 13, 2014). The case involved an apprentice plumber (Debtor) who passed himself off as a master, did a poor job and cost the creditor (Zullo) additional money to fix his work. Zullo sued and won in state court. After the debtor filed a chapter 7 bankruptcy petition, Zullo sought an order of nondischargeability of the state court judgment under section 523(a)(6) which excepts from discharge debts caused by willful injury. After losing a motion for summary judgment and being informed by the court that a claim under section 523(a)(2)(A), which excepts debts based on fraud, might have fared better, Zullo moved to amend to add a claim under that section. The timing of the motion was seventeen months after filing the complaint and one week before trial.

The court found that “undue delay in moving to amend, even standing alone, may be . . . an adequate reason” for denial of the motion. Citing Acosta-Mestre v. Hilton Int’l of P.R., Inc., 156 F.3d 49, 51-52 (1st Cir. 1998). The court recognized the tension between efficient resolution of cases and liberally permitting appeals to ensure that all relevant claims are addressed, and found that the unwarranted delay in this case resolved that tension in favor of the non-movant/debtor. No extenuating circumstances justified the delay: there had been no change in law or recent discovery of facts since the state court judgment. Any foot-dragging by the debtor in discovery was irrelevant as the facts and law were plain from the outset.

The court concluded that, while the bankruptcy court might have been justified in granting the motion to amend, it was not an abuse of discretion to have denied it.

Judge Thompson filed a dissenting opinion. He opined that Fed. R. Civ. P. 15(a)(2) requires granting permission to amend in the absence of justification to deny. Because all the facts of the case were established, the claim Zullo sought to add was not so different from the original claim or from the claim litigated in state court, it would not have unduly burdened the debtor or the court to address the new claim. Mere delay was insufficient reason to deny the motion

Lombardo opinion

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