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Conservation Easement Promoters Seek to Block Amended Complaint

MAY 22, 2020

United States v. Nancy Zak et al.

DATED MAY 22, 2020
DOCUMENT ATTRIBUTES

United States v. Nancy Zak et al.

UNITED STATES,
Plaintiff,
v.
NANCY ZAK, CLAUD CLARK III, ECOVEST CAPITAL, INC., ALAN N. SOLON, ROBERT M. MCCULLOUGH, RALPH R. TEAL JR.,
Defendants.

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION

DEFENDANTS' JOINT RESPONSE IN OPPOSITION TO PLAINTIFF'S MOTION FOR LEAVE TO AMEND COMPLAINT

Plaintiff's Motion for Leave to Amend Complaint (Doc. 174) typifies its indifference towards litigating this case to an efficient trial in any reasonable timeframe or manner. The Proposed Amended Complaint (Doc. 174-1) adds 26 new pages of surplusage, the substance of which is already fairly encompassed in Plaintiff's original 80-page-long Complaint filed a year-and-a-half ago (Doc. 1). No new parties are named. No new causes of action are pled. No new relief is sought. Yet, the amendment would require that Defendants answer 106 pages of allegations, imposing a considerable cost burden on each of the Defendants, notwithstanding Plaintiff's arguments otherwise.

To prevent needless expense and delay, Defendants respectfully request that the Court deny Plaintiff's motion. Plaintiff's motion also should be denied because the proposed amended complaint adds no new claim, party, or demand for relief, is untimely, and seeks to further broaden an already sprawling case, rather than efficiently and economically get it to trial.

APPLICABLE LEGAL STANDARD

Except in limited circumstances not applicable here, a party may not amend its complaint before trial without leave of the court. Fed. R. Civ. P. 15(a)(2). While Rule 15(a)(2) provides that “[t]he court should freely give leave when justice so requires,” justice certainly does not require the Court to grant leave for amendment in every case. Id. (emphasis added). “[T]he granting of such a motion [for leave to amend] is by no means automatic” and is “within the sound discretion of the trial court.” O'Brien v. Union Oil Co. of California, 699 F. Supp. 1562, 1571 (N.D. Ga. 1988) (denying a motion for leave to amend complaint filed 15 months after case was filed). The Court may consider factors such as undue delay, bad faith, undue prejudice, dilatory motive, as well as “whether allowance of the proposed amendment would complicate trial preparation by requiring additional discovery” and “whether the movant has attempted to justify any delay.” Id. (citing multiple authorities).

ARGUMENT

It appears Plaintiff desires to bring new factual allegations to the Court's attention primarily to challenge the discovery limitations the Court has imposed — and thereby further expand the scope of this dispute. See Doc. 174, at 2; Doc. 175. It would be unduly prejudicial, though, to impose on Defendants the cost of answering again simply because Plaintiff chose to press for more discovery in such roundabout way — seeking leave to amend a 17-month-old complaint, which the Court has already held to be sufficient (Doc. 119).

Many of the factors that weigh in favor of denying a motion for leave to amend are present here — particularly the extraordinary inefficiency this will present to trying a case that already involves more transactions than could ever be tried and the prejudice of bearing the significant cost of responding to a lengthy amended complaint.

Defendants' concern in this instance is heightened for several reasons. First, equally effective tools (e.g., Fed. R. Civ. P. 36) were available to Plaintiff to bolster its motion seeking relief from the discovery limitations imposed by the Court, without senselessly driving up defense costs ― including imposing on enormous amended complaint containing several hundred paragraphs.

Second, Plaintiff made no effort to meet and confer on this issue,1 request a conference with the Court (Doc. 8, at 20), or seek permission from the Court (LR 7.1(A)(2)) prior to filing its two simultaneous motions and the proposed amended complaint. Defendants have never opposed Plaintiff's entitlement to discovery, but instead have consistently requested that reasonable limitations proportionate to the needs of the case be put in place.

Third, there is no end in sight. Plaintiff consistently cites the purported complexity of its case in demanding more from the Court and more from Defendants ― including more discovery, more of the Court's limited judicial resources, and more expense incurred by Defendants. See e.g., Doc. 19, at 2. Plaintiff's recent filings are just another example. Doc. 175, at 4. Furthermore, Plaintiff has already announced plans to seek even more time for discovery.2 Doc. 174, at 6, n. 4. However, Plaintiff still has not addressed the concerns of Defendants, as well as of the Court (Tr. of Telephone Conf. Proceedings (Jan. 10, 2020) at 19, 43, 53–54; Doc. 135), about how to “make [this] a manageable case that is proportionate and that the Court itself is going to be able to effectively assess.” Tr. of Telephone Conf. Proceedings (Jan. 10, 2020) at 53. Instead, Plaintiff seeks to amend its complaint to add numerous superfluous transactions (many of which it has been aware of for years) and further complicate discovery and trial. At some point, Plaintiff cannot be given more without offering a proposal for limiting the incredible expense and burden it is imposing on Defendants and moving this case closer to resolution.

Defendants acknowledge that this Court has broad discretion to grant leave to amend, but disagree that justice requires leave be granted at this stage of the litigation. Because the original Complaint challenges some 96 transactions and the proposed amendment — if allowed — will only add more, Plaintiff's request that the Court permit amendment exacerbates the challenges discussed in the January 10, 2020 conference with the Court concerning how this case can be tried, how to manage discovery, and how to determine representative sampling. Regardless of how the Court rules on the request for leave to amend, Defendants respectfully request that it hold a telephonic or video hearing to address the proportionality and manageability of this case and enter a case management order.

Furthermore, if the Court does permit the amendment, Defendants respectfully request that the Court (1) permit Plaintiff no more amendments given the concrete harm and material prejudice to Defendants that would result from an endless cycle of amendment and answer, likely pushing some Defendants to the brink of bankruptcy and endangering any hope of a trial on the merits of Plaintiff's widely-publicized ― and untrue ― claims of fraud and (2) defer Defendants' obligations to file amended answers until the case management issues noted above have been addressed.

CONCLUSION

For the foregoing reasons, and to prevent needless delay and expense, Defendants respectfully request that the Court deny Plaintiff's motion for leave to amend the Complaint.

Alternatively, if the Court permits the amendment, Defendants respectfully request that the Court (1) prohibit additional amended complaints, and (2) defer the start of the time period for Defendants to file amended answers until the Court has addressed the proportionality and manageability of this case, and has entered a case management order.

Dated: May 22, 2020

Respectfully submitted,

ANDERSEN, TATE & CARR, P.C.

THOMAS T. TATE
Georgia Bar No. 698879
ELIZABETH L. CLACK-FREEMAN
Georgia Bar No. 126888

One Sugarloaf Centre
1960 Satellite Blvd., Suite 4000
Duluth, Georgia 30097
Telephone: (770) 822-0900
Facsimile: (770) 822-9680
Email: ttate@atclawfirm.com
Email: lcfreeman@atclawfirm.com

COVINGTON & BURLING LLP

BENJAMIN J. RAZI
DC Bar No. 475946
850 Tenth St. NW
Washington, DC 20001
Telephone: (202) 662-6000
Facsimile: (202) 662-6291
Email: brazi@cov.com

Admitted Pro Hac Vice

Counsel for Defendants EcoVest Capital, Inc., Alan N. Solon, Robert M. McCullough, and Ralph J. Teal, Jr.

KHAYAT LAW FIRM

ROBERT C. KHAYAT, JR
Georgia Bar No. 416981
75 Fourteenth Street, N.E.,
Suite 2750
Atlanta, Georgia 30309
Telephone: (404) 978-2750
Facsimile: (404) 978-2901
Email: rkhayat@khayatlawfirm.com

CAPLIN & DRYSDALE, CHARTERED

NILES A. ELBER
DC Bar No. 488099
One Thomas Circle NW, Suite 1100
Washington, DC 20005
Telephone: (202) 862-7827
Facsimile: (202) 429-3301
Email: nelber@capdale.com
Admitted Pro Hac Vice

Counsel for Defendant Claud Clark III

S. FENN LITTLE, JR., PC

S. FENN LITTLE, JR.
Georgia Bar No. 454360
1490 Mecaslin St., NW
Atlanta, GA 30309
Telephone: (404) 815-3100
Email: fennlaw@fennlittle.com

SIDLEY AUSTIN LLP

NATHAN E. CLUKEY
DC Bar No. 461535
1501 K St. NW
Washington, DC 20005
Telephone: (202) 736-8949
Email: nclukey@sidley.com
Admitted Pro Hac Vice

Counsel for Defendant Nancy Zak

FOOTNOTES

1While the parties met and conferred about dates for filing amended complaints in the past, the parties have not discussed the issue since filing the last joint response with the Court in January 2020 (Doc. 146). Notably, in that joint response to the Court's Order, Defendants proposed March 16, 2020 as the last day to file an amended complaint, while Plaintiff proposed April 16, 2020 as the last possible day. Plaintiff thus has already missed both Defendants' and Plaintiff's proposed deadlines for filing an amended complaint — a fact Plaintiff admits in its own motion. 

2Defendants recognize that the COVID-19 public health crisis has had an unavoidable and unprecedented impact on the parties' ability to conduct in-person depositions and site visits. Despite the situation, however, the parties have been working diligently as evidenced by the continued exchange of discovery requests (Doc. 170; Doc. 178) and responses (e.g., Doc. 176), meeting and conferring via email and teleconference, and the recent motions and responses.

END FOOTNOTES

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