Relation Back Now Depends On Defendant's Knowledge, Not Plaintiff's
JOSEPH v. ELAN MOTORSPORTS TECHNOLOGIES RACING CORP. (March 14, 2011)
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Timothy Wardrop had a written employment agreement with Elan Motorsports Technologies, Inc. ("Inc."). Several years ago, he filed a complaint alleging a breach of the agreement. Unfortunately, he named as the only defendant Elan Motorsports Technologies Racing Corp. ("Corp."), Inc.'s parent. Eventually, Wardrop discovered his mistake and asked for leave to file an amended complaint naming Corp. He also asked that the amendment relate back to the filing of the complaint since the statute of limitations had long run. Judge McKinney (S.D. Ind.) concluded that the amendment could not relate back and dismissed the case. Wardrop appeals.
In their opinion, Circuit Judges Posner and Wood and District Judge Adelman reversed and remanded. The Court first pointed out the district court's procedural error after it concluded that the amendment would not relate back. Instead of dismissing the case, the court should have allowed the amendment under Rule 15(a)(2) and then entered judgment both for the original defendant (since it was not a party to the contract) and the added defendant (because the statute of limitations had run). But the Court identified a more fundamental error. The district court erred when it concluded that the amendment did not relate back. Its error, however, was understandable since the Supreme Court decided Krupski after the district court’s decision. Before Krupski, the Court's jurisprudence focused on what the plaintiff knew or should have known. Here, Wardrop's almost six-year delay in discovering his mistake was inexcusable. But the Supreme Court has now held that a district court makes only two inquiries: whether the defendant sought to be added to the complaint knew or should have known that it was the intended target of the litigation, and whether the plaintiff's delay has prejudiced the new defendant. A plaintiff's carelessness may still be relevant, but only to the prejudice prong of the test. That test is satisfied here. Inc. knew from the moment of service that Wardrop intended to sue the firm with whom he had employment contract -- and that was Inc. And any harm that Inc. has suffered is the direct result of its own failure to advise Wardrop of his mistake. The Court did comment that the amended complaint contained both additional legal theories and legal claims. A complaint need not allege legal theories so the inclusion of additional ones does not affect its relation back. That may not be true with respect to the new claim (quantum meruit). But the Court left it up to the district court to consider that issue in the first instance.
Michael Rigney practices in the law offices of GVC Ltd. in Chicago. In this blog, he reports on select