McDANIEL v. NORTH AMERICAN INDEMNITY

LARRY J. McKINNEY, Chief Judge

This matter is before the Court on defendant's, Managed Healthcare, Inc. ("MHI"), motion to reconsider this Court's order granting Plaintiffs leave to amend their complaint to add a claim for damages against MHI. For the reasons set forth herein, MHI's motion is DENIED and MHI shall have twenty (20) days from the date of this Order to answer or otherwise respond to Plaintiffs' new claim.

Plaintiffs' original complaint alleged a breach of fiduciary duty against MHI and requested relief from MHI in the form of an accounting. Complaint ¶¶ 23, 35. MHI chose not to appear in the action or to respond to Plaintiffs' claim against it, for "prudent financial and legal reasons." Motion to Reconsider Addition of Damages After Entry of Default Against Defendant at 2. The clerk entered a default judgment against MHI and Edwin E. Horn ("Horn") on May 9, 2002.

Plaintiffs filed a motion to amend their complaint by adding a claim for damages against MHI and Horn on October 25, 2002. MHI still did not appear or oppose the motion to amend, and the Magistrate Judge granted Plaintiffs' motion. MHI filed the present motion on November 25, 2002, requesting the Court reconsider the order allowing Plaintiffs to add the damages claim on the basis that the default judgment on the original complaint operates to severely prejudice MHI now that Plaintiffs have asserted a claim for damages.

Motions to reconsider serve a limited function, to be used "where `the Court has patently misunderstood a party, or has made a decision outside the adversarial issues presented to the Court by the parties, or has made an error not of reasoning but of apprehension.'" Bank of Waunakee v. Rochester Cheese Sales, Inc., 906 F.2d 1185, 1191 (7th Cir. 1990) (quoting Above the Belt, Inc. v. Mel Bohannan Roofing, Inc., 99 F.R.D. 99, 101 (E.D.Va. 1983)). The parties may not introduce evidence previously available but unused in the prior proceeding or tender new legal theories. See In re Prince, 85 F.3d 314, 324 (7th Cir. 1996); Bally Export Corp. v. Balicar Ltd., 804 F.2d 398, 404 (7th Cir. 1986). A court may grant a motion to reconsider where a movant demonstrates a manifest error of law or fact. In re Prince, 85 F.3d at 324. A motion to reconsider is not an occasion to make new arguments. Granite State Ins. Co. v. Degerlia, 925 F.2d 189, 192 n. 7 (7th Cir. 1991).

This is not a case where MHI has discovered new evidence, or the Court misunderstood the issues or law on Plaintiffs' motion for leave to amend. MHI simply failed to oppose or otherwise respond to Plaintiffs' motion, just as it has failed to respond to Plaintiffs' discovery requests in this case. See Plaintiffs' Response to Motion to Reconsider at 3-4. The Court's order on the motion for leave to amend stands.

MHI argues that Rule 54 of the Federal Rules of Civil Procedure prevents Plaintiffs from amending their complaint after a default. MHI misapplies Rule 54. That rule states only that a default judgment may not be different in kind from the judgment demanded. Fed.R.Civ.P. 54(c). The purpose of Rule 54 is to prevent a default judgment from operating as to claims of which the defendant does not have notice. See 10 Wright, Miller Kane, Federal Practice and Procedure § 2663 (3d ed. 1998). Here, however, Plaintiffs filed a motion to amend their complaint to add the damages claim, and MHI did not object. MHI does not argue that it did not have notice of the new claim. "[T]here is no reason to permit [Rule 54(c)] to be used as a shield when a defaulting party has full knowledge of the relief sought against it but nevertheless ignores the proceedings." Gucci Am., Inc. v. Gold Ctr. Jewelry, 997 F. Supp. 399, 404 (S.D.N.Y.), rev'd in part, 158 F.3d 631 (2d Cir. 1998) (upholding default judgment and damages award).

Plaintiffs did not intend, by amending their complaint, to request that the default judgment against MHI on the original complaint be extended to the new claim for damages. The order granting leave to amend limits MHI's inability to plead solely to the allegations and claims in the original complaint. MHI could have and should have answered the Amended Complaint within the time provided by the rules of procedure. Nevertheless, the Court will allow MHI another opportunity to answer and defend the new claim, if it so chooses. If MHI continues to ignore these proceedings and fails to answer the Amended Complaint within twenty (20) days of this Order, a default judgment will be entered against it on the Amended Complaint.

For the reasons discussed herein, MHI's motion to reconsider is DENIED. MHI is given twenty (20) days from the date of this Order to answer or otherwise respond to the claim for damages in Plaintiffs' Amended Complaint. If MHI fails to answer or otherwise respond in the given time, a default will be entered against MHI in favor of Plaintiffs on their Amended Complaint.