Today, in Cope v. Daniel, the Business Court denied the Defendant’s request to amend its Answer to add a statute of limitations defense and a defense of ERISA preemption.  Judge Tennille found that the Defendant had unduly delayed by raising the statute of limitations defense, and that the Plaintiff would be prejudiced if it were allowed.  The Court denied the ERISA amendment for another reason, finding it to be futile.

The case involves a dispute between shareholders of a medical practice.  Plaintiff alleged that the Defendant engaged in financial misdoings, including charging unauthorized expenses to the practice, improperly reporting to taxing authorities, paying himself unauthorized distributions of salary and bonus, and overcharging rent.

The amendment on the statute of limitations was requested fourteen months after the original Answer was filed.  The Court noted that the Complaint asserted claims based on events beginning as far back as 1999, and stated "[n]o questions have been raised as to whether Defendants knew at the time the complaint was filed . . . what claims were being asserted against them and during what timeframe."

The Court denied the Motion, holding that "[a] delay of over fourteen months before filing a statutes of limitation defense is an undue delay and causes undue prejudice to Plaintiff."  It also held that "[a] defense based upon statutes of limitation is, by definition, time sensitive. A delay of over fourteen months before asking for an amendment could be acceptable in certain circumstances. . . . The situation where statutes of limitations defense is raised is not one of those circumstances."

The ERISA claim came in for a different analysis.

The Court held that although the Complaint did reference the pension plan of the practice, this was insufficient to warrant ERISA preemption because the claim did not involve the existence or extent of benefits under an employee benefit plan.  It held:

Summarizing many courts’ view on this matter—simply referring to a pension plan for the calculation of damages is not sufficient to implicate federal preemption. (See Pl.’s Resp. Opp’n 10, 10 n.3.) “Generally speaking, ERISA preempts state common law claims of fraudulent or negligent misrepresentation when the false representations concern the existence or extent of benefits under an employee benefit plan.” Griggs v. E.I. DuPont De Nemours & Co., 237 F.3d 371, 378 (4th Cir. 2001). This action does include a fraud claim against Defendant Daniels that alleges misrepresentations concerning salaries and the finances of Defendant Daniel Urological Center, Inc. (Compl. ¶ 55.) That claim does not concern the existence or extent of benefits under an employee benefit plan. See Griggs, 237 F.3d at 378. The additional claims would only tangentially relate to the employee benefits plan as one aspect of alleged damages. Regardless of the undue delay that has occurred in filing this amendment as shown above, an amendment adding an ERISA defense would be a futile amendment and justice does not require the Court allow such an amendment. The Court hereby DENIES Defendants’ motion to amend the answer as to the sixteenth defense.

Brief in Support of Motion to Amend

Brief in Opposition to Motion to Amend

Reply Brief in Support of Motion to Amend