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United States v. Talmage

United States District Court, D. Utah, Northern Division

December 28, 2018

UNITED STATES OF AMERICA, Plaintiff,
v.
RONALD B. TALMAGE, et al., Defendants.

          MEMORANDUM DECISION AND ORDER DENYING MOTION TO AMEND COMPLAINT

          DAVID NUFFER UNITED STATES DISTRICT JUDGE.

         Plaintiff United States of America filed a motion (the “Motion”)[1] to amend its complaint[2] to add a new cause of action against two new parties. For the reasons stated below, the Motion1 is DENIED.

         BACKGROUND

         On February 18, 2016, the United States commenced this lawsuit asserting two causes of action.2 The United States' first cause of action seeks to reduce to judgment federal tax assessments against Defendants Ronald B. Talmage and Annette C. Talmage.[3] The United States' second cause of action seeks to foreclose federal tax liens against certain real property (the “Liberty Property”) in which Defendants Western Land & Livestock LLC and Western Reserve Mortgage LLC (collectively, the “Western Entities”) assert an interest.[4]

         The Talmages failed to appear or defend themselves in this case, and a default judgment was entered against them on August 26, 2016, in the principal amount of $10, 813, 740.19.[5] As a result, “the only remaining claim in the Complaint is whether the United States may foreclose the Liberty Property under 26 U.S.C. § 7403 to satisfy the Talmages' tax debts.”[6] Also remaining is the first cause of action of the Western Entities' counterclaim, which seeks to quiet title to the Liberty Property as against the United States.[7] The Western Entities' second cause of action, which sought civil damages from the United States for not releasing liens affecting the Liberty Property, was recently dismissed.[8]

         On July 18, 2018, after approximately two years of extended and expansive discovery, [9]the United States filed the instant Motion seeking leave to add a cause of action to foreclose on various promissory notes held by two newly proposed parties, Heng Cheong Pacific Limited (“HCPL”) and New Century Properties Limited (“NCPL”). If amendment is not allowed, the United States acknowledges that it can simply file a separate “lawsuit against HCPL and NCPL to obtain the . . . same relief.”[10]

         The cutoff date for filing a motion to amend the pleadings or to join additional parties was March 8, 2017.[11]

         DISCUSSION

         Leave to amend pleadings should be given freely “when justice so requires.”[12] In making this determination, courts enjoy broad discretion.[13] Reasons for denying amendment include, but are not limited to, “undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc.”[14] Because the United States' proposed amendment is both unduly prejudicial and untimely, justice does not require that it be allowed.

         The United States' proposed amendment is unduly prejudicial.

         The United States' proposed amendment is prejudicial because it concerns “a subject matter different from what was set forth in the complaint and raise[s] significant new factual issues.”[15] While the subject of the complaint is the Western Entities' interest in the Liberty Property, the proposed amendment concerns-and raises significant new factual issues regarding-HCPL's and NCPL's interests in various promissory notes. The amendment does not seek to add new claims against the Western Entities. Instead, it seeks to bring an entirely separate claim against two new parties-which, if allowed, would substantially complicate this proceeding, thwart the discovery schedule, add a year or more to the duration of this case, require the parties to backtrack and redo work already completed, and thereby unduly prejudice the Western Entities.[16]

         The United States' proposed amendment is untimely.

         Although “[l]ateness does not of itself justify the denial of [an] amendment, ”[17] “denial of leave to amend is appropriate when the party filing the motion has no adequate explanation for the delay.”[18]

         The United States' sole explanation for its delay is that its “proposed amended complaint is the result of information . . . gathered in discovery and expert analysis.”[19] While that may true, it is also true that the United States possessed this information for more than a year before it filed the Motion.[20] Indeed, the United States was aware of the Talmages' involvement with NCPL before ...


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