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Shao v. Beta Pharma, Inc.

United States District Court, D. Connecticut

April 19, 2018




         Before the Court is Plaintiffs' unopposed Motion to Join Parties Defendant and Add Supplemental Allegations to Complaint [Doc. 193], accompanied by a Proposed Third Amended Complaint ("Proposed TAC") [Doc. 193-1] and a supporting Memorandum of Law [Doc. 194].

         Plaintiffs' request to supplement the pleadings will be considered under Rule 15(d), which governs supplemental pleadings. Plaintiffs' request to join, as defendants, Beta Pharma (USA) Inc. ("BPUSA"), and Beta Pharma (Hong Kong) Holding Company Limited ("BPHK") will be considered under Federal Rule of Civil Procedure 20(a), which governs permissive joinders.

         I. BACKGROUND

         This matter is a contract dispute, heard by this Court under the federal diversity jurisdiction of 28 U.S.C. § 1332. The five individual Plaintiffs are investors in a "privately owned organization" (Plaintiffs' phrase) under the laws of the People's Republic of China called Zhejiang Beta Pharma Co., Ltd. ("Zhejiang" or "ZBP"). ZBP is affiliated with the corporate Defendant in this case, Beta Pharma, Inc. ("Beta Pharma" or "BP, Inc."). The individual Defendant, Don Zhang, is alleged to be the majority stockholder and president of BP, and the vice-president and a director of ZBP. Plaintiffs assert claims for breach of contract and tort against both Defendants. The original Complaint [Doc. 1-1] was filed in Connecticut state court in July 2014, and removed in August to this Court by Defendants Zhang and BP, Inc., on the basis of diversity. The currently operative complaint is the Second Amended Complaint ("SAC") [Doc. 132], filed by leave of the Court on July 22, 2016.

         Plaintiffs' latest filing makes certain new factual allegations, which, they argue, justify the joinder of two additional parties defendant and the addition of supplemental pleadings to the SAC. Inter alia, Plaintiffs allege that "[o]n December 24, 2014 defendants caused the formation of a Delaware corporation, Beta Pharma USA, Inc. [], having a principal place of business in Wilmington, Delaware." Proposed TAC at 28 ¶ 40. Plaintiffs further allege that "[o]n or about April 12, 2015, defendants Don Zhang and Beta Pharma, acting through BPUSA, caused the formation of Beta Pharma (Hong Kong) Holding Company Limited, [] a limited company formed pursuant to the laws of Hong Kong, having a principal place of business in Hong Kong." Id. at 35 ¶ 66. Plaintiffs' supplemental pleadings are principally related to those two new entities, who Plaintiffs allege are controlled entirely by Zhang and BP, Inc., the existing Defendants in this matter.


         Rule 15(d) provides that, "[o]n motion and reasonable notice, the court may, on just terms, permit a party to serve a supplemental pleading setting out any transaction, occurrence, or event that happened after the date of the pleading to be supplemented." Fed.R.Civ.P. 15(d). "An amended pleading is designed to include matters occurring before the filing of the bill, but either overlooked or not known at the time. A supplemental pleading is designed to cover matters subsequently occurring but pertaining to the original claim." Slavenburg Corp. v. Boston Ins. Co., 30 F.R.D. 123, 126 (S.D.N.Y. 1962) (internal quotation marks and alterations omitted). "A supplemental pleading 'is designed to obtain relief along the same lines, pertaining to the same cause, and based on the same subject matter or claim for relief, as set out in the original [pleading].'" Id. at 126, quoting United States v. Russell, 241 F.2d 879, 882 (1st Cir. 1957).

         "Rule 15(d) reflects a liberal policy favoring a merit-based resolution of the entire controversy between the parties." Witkowich v. Gonzales, 541 F.Supp.2d 572, 590 (S.D.N.Y. 2008) (internal quotation marks omitted). Therefore, motions to supplement will be granted "[a]bsent undue delay, bad faith, dilatory tactics, undue prejudice to the party to be served with the proposed pleading, or futility." Quarantino v. Tiffany & Co., 71 F.3d 58, 66 (2d Cir. 1995); see also Green v. Martin, 224 F.Supp.3d 154, 172 (D. Conn. 2016); Kalimantano GmbH v. Motion in Time, Inc., 939 F.Supp.2d 392, 403-04 (S.D.N.Y. 2013).

         Reviewing the Proposed TAC, given the absence of objection, and the lack of any indication of undue prejudice, undue delay, bad faith, or dilatory motive on the part of the Plaintiffs, I find no reason that leave should not be "freely given" to this motion by Plaintiffs to supplement their complaint for the purpose of adding two new parties defendant. Consequently, Plaintiffs' motion to supplement the SAC will be GRANTED IN PRINCIPLE.

         The Court's granting of that aspect of the present motion is stated conditionally because the addition of one of the new defendants may destroy this Court's subject matter jurisdiction, which as noted is based on diversity of citizenship. That jurisdictional question is not addressed by the briefs of counsel, but the Court is obligated to raise it sua sponte. The jurisdictional complications, viewed in the context of the joinder of new parties under Fed. R. Civ. P., 20(a), are considered in Point III.


         "Persons . . . may be joined in one action as defendants if: any right to relief is asserted against them jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences; and any question of law or fact common to all defendants will arise in the action." Fed.R.Civ.P. 20(a)(1)(A-B). "The requirements of Fed.R.Civ.P. 20(a) are to be interpreted liberally to enable the court to promote judicial economy by permitting all reasonably related claims for relief by or against different parties to be tried in a single proceeding." Viada v. Osaka Health Spa, Inc., 235 F.R.D. 55, 61 (S.D.N.Y. 2006) (internal quotation marks omitted). "The 'same transaction' requirement means that there must be some allegation that the joined defendants 'conspired or acted jointly.'" Arista Records LLC v. Does 1-4, 589 F.Supp.2d 151, 154 (D. Conn. 2008) (Arterton, J.) (quoting Tele-Media Co. v. Antidormi, 179 F.R.D. 75, 76 (D.Conn.1998)).

         Plaintiffs seek to join two new parties defendant: Beta Pharma (USA) Inc. ("BPUSA"), and Beta Pharma (Hong Kong) Holding Co. ("BPHK"). The Proposed TAC asserts claims against these two additional defendants, jointly and severally with existing Defendants, Don Zhang and Beta Pharma, Inc. These joint and several claims satisfy the first possible basis for permissive joinder, under Rule 20(a)(1)(A), which provides that parties defendant ...

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