Formality Needed to Secure Post-Dismissal Amendment Right

Last week, in Cita Trust Co. AG v. Fifth Third Bank, 2018 WL 416253 (11th Cir. Jan 16, 2018), the Eleventh Circuit affirmed the dismissal of a $400-million contract dispute over an unauthorized bond transfer, demonstrating that the court will strictly enforce both procedural rules and contracts negotiated by sophisticated entities.

This dispute concerned a transfer of bonds. Cita, a Swiss trust, had contracted with Fifth Third, a U.S. bank, for Fifth Third to take custody of certain bonds purportedly valued at $428 million. For reasons that neither party saw fit to inform the court, Fifth Third transferred the bonds back to their original issuer. (They were soon thereafter delisted from the London Stock Exchange.) Cita sued Fifth Third over the transfer, claiming breach of contract, breach of fiduciary duty, and negligence.

Fifth Third moved to dismiss the complaint, pointing out that it was filed outside the one-year time limit imposed by the contract. In response, Cita (which did not deny that it was notified of the transfer more than a year before it filed suit) argued that the limitation it had signed was unconscionable. In one sentence of the conclusion of its response—and nowhere else—Cita also requested that if the court dismissed the complaint, it should be without prejudice so that Cita could amend.

Although the Eleventh Circuit rarely finds itself applying Ohio law, it should come as no surprise that the court—in an opinion authored by Judge Stanley Marcus—held that the clear one-year limitations provision agreed to by sophisticated parties was valid and enforceable under the law of that state.

More significantly for Eleventh Circuit litigants, the court also demonstrated its enforcement of procedural requirements, holding that the trial court had not abused its discretion in denying leave to amend the complaint. Although the Federal Rules require trial courts to “freely give” leave to amend when justice requires, the Eleventh Circuit will not reverse a trial court if the plaintiff does not “properly move” for such leave in a separate motion laying out the substance of the proposed amendments. See Long v. Satz, 181 F.3d 1275, 1279 (11th Cir. 1999). Additionally, Cita’s various arguments for tolling the contractual limitations period were waived because the arguments had not been raised before the district court and (as usual) none of the very narrow circumstances that excuse such waiver were present.

Posted by Nick Boyd.

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