In Schmees v. HC1.com, Inc., No. 22-1214 (7th Cir. Aug. 8, 2023), the Seventh Circuit addresses the “muddled” law of whether district courts may treat new claims raised by a plaintiff for the first time in summary judgment briefing as a constructive amendment to the complaint. The court holds they may, although it does not aid the plaintiff in this particular case.
“One week after [plaintiff] started working for HC1.COM, the company eliminated her position and terminated her employment. Schmees sued HC1, alleging that it fraudulently induced her to join the company by making false assurances about its financial outlook and her prospects for career advancement . . . . In response to HC1’s motion for summary judgment, Schmees attempted to supplement her complaint with a new fraud claim via her briefing. The district court granted summary judgment for HC1, finding the new fraud claim was beyond the scope of the complaint and declining to treat her response brief as a de facto amendment to the complaint.”
The Seventh Circuit affirms, though the panel uses the opportunity to clarify the circuit law on when a district court may treat a new claim at the Fed. R. Civ. R. 56 stage as a constructive amendment to a complaint.
“Our case law is muddled as to whether district courts have discretion to allow amendment of a complaint through summary judgment briefing . . . . [S]ometimes our cases say that a district court has discretion to treat a new factual allegation presented in briefing as a constructive motion to amend; other times they say that presenting new factual allegations in briefing is absolutely prohibited—that district courts lack discretion to consider them. Circuits appear similarly split on this issue.” (The panel notes that the Tenth Circuit recognizes such constructive amendments while the Fifth, Sixth, and Eleventh Circuits are more restrictive view.)
“We take this opportunity to clean up our case law and provide guidance to district courts.” The panel holds that “district courts retain discretion to interpret new factual allegations or claims presented in a plaintiff’s briefs as a constructive motion to amend.”
The panel notes that the Federal Rules of Civil Procedure contain no restrictions on the practice. “The proposed blanket prohibition finds a ready home in none of Rule 8 (pleading requirements), Rule 15 (amendment), or Rule 56 (summary judgment). However well-intentioned the blanket rule is, we decline to locate it in the Rules’ interstices. Doing so would be all the more odd given that Rule 15(b) permits amendments during trial. If amendments during trial are entrusted to a district court’s discretion, amendments before trial should be, too.”
“Finally, whether a plaintiff’s argument amounts to a new claim (generally impermissible) or a new legal theory (permissible) is unknowable until the district court considers and resolves the issue. This raises both a prudential and a practical point. On the prudential point: District courts are far better positioned to discern whether a plaintiff’s new claims are fair game. We are reluctant to foreclose the possibility that an improbable confluence of events might justify constructive amendment. Such a confluence will be all but impossible for a counseled plaintiff to establish. Even so, only when the general principles governing amendment of a complaint are satisfied should constructive amendment be permitted. We expect justice will rarely require leave to amend in the context of new claims presented for the first time in opposition to a motion for summary judgment. On the practical side: Since she cannot know how the district court will construe her opposition until after summary judgment is resolved, a plaintiff may lose the opportunity to seek leave to amend if her arguments are treated as a new claim. Given Rule 1’s instruction that we interpret the Rules to promote the ‘just, speedy, and inexpensive’ resolution of cases, we decline to adopt a rule that could burden courts with a slew of perhaps-unnecessary motions to amend.”
The panel then affirms the district court’s holding that the new fraud claim in this case was not a de facto amendment. “Schmees first offered the facts to support her new claim in her proposed second amended complaint [that] the district court denied as unnecessary. When it did so, the district court granted Schmees thirty days to explain why the second amendment was necessary. She declined the invitation. Having rejected the opportunity to properly add the factual underpinnings for the new claim, justice did not require that Schmees be allowed to smuggle it into the case through her summary judgment briefing.”
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