In the
United States Court of Appeals
For the Seventh Circuit
No. 10-1420
R EX M. JOSEPH, JR., trustee
of the bankruptcy estate of
Timothy Wardrop,
Plaintiff-Appellant,
v.
E LAN M OTORSPORTS T ECHNOLOGIES
R ACING C ORP.,
Defendant-Appellee.
Appeal from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. 1:04-CV-0104-LJM-DML—Larry J. McKinney, Judge.
A RGUED O CTOBER 18, 2010—D ECIDED M ARCH 14, 2011
Before
P OSNER and W OOD , Circuit Judges, and
A DELMAN, District Judge.
Hon. Lynn S. Adelman, of the Eastern District of Wisconsin,
sitting by designation.
2 No. 10-1420
P OSNER, Circuit Judge. Timothy Wardrop filed suit in
an Indiana state court more than seven years ago
against Elan Motorsports Technologies Racing Corp.,
which for reasons that will shortly become clear we’ll
call “Elan Corp.” The suit charged breach of a written
employment contract (plus an oral commission con-
tract that we can ignore). The defendant removed the
case to federal district court under the diversity juris-
diction. The written contract states that the parties are
Wardrop and Elan Motorsports Technologies, Inc., which
we’ll call “Elan Inc.” It is a separate corporation from
Elan Corp. though affiliated with it. Why an enterprise
would give two of its corporations so nearly identical
names (functionally identical, since “Corp.” and “Inc.” are
alternative ways of designating a corporation) is a
puzzle we needn’t try to solve.
Elan Corp., the named defendant, filed an answer, and
pretrial discovery ensued. Eventually Wardrop (who
at some point in this protracted litigation went bank-
rupt and was succeeded as plaintiff by his trustee in
bankruptcy, another detail we can ignore) discovered
that his contract was indeed with Elan Inc. and not Elan
Corp. He sought leave to amend the complaint to
change the defendant to Elan Inc. with relation back to
the date of the original complaint, the statute of limita-
tions having meanwhile expired. Relation back is per-
mitted in several circumstances, including when “the
party to be brought in by amendment: (i) received
such notice of the action that it will not be prejudiced
in defending on the merits; and (ii) knew or should
have known that the action would have been brought
No. 10-1420 3
against it, but for a mistake concerning the proper party’s
identity.” Fed. R. Civ. P. 15(c)(1)(C). A party who is on
notice long before the statute of limitations expires that
he is an intended defendant, and who suffers no harm
from the failure to have been named as a defendant at
the outset, is in the same position as a defendant
sued within the statute of limitations. The public policy
expressed in a statute of limitations is therefore not
undermined by relation back in the circumstances
specified in the federal rule. See Dixon Ticonderoga Co.
v. Estate of O’Connor, 248 F.3d 151, 168 (3d Cir. 2001).
Another situation in which relation back is permitted
is where the law of the jurisdiction that creates the ap-
plicable statute of limitations, which in this case is
Indiana, permits relation back. Fed. R. Civ. P. 15(c)(1)(A);
Committee Note to 1991 Amendment; Arendt v. Vetta
Sports, Inc., 99 F.3d 231, 236 and n. 3 (7th Cir. 1996). But
Indiana’s relation-back rule, Ind. Trial R. 15(C), is mate-
rially identical to the federal rule, so we need not con-
sider it separately.
The district judge ruled that the proposed amended
complaint did not relate back. He quoted from our
decision in Hall v. Norfolk Southern Ry., 469 F.3d 590, 596
(7th Cir. 2006), that “it is the plaintiff’s responsibility to
determine the proper party to sue and to do so before the
statute of limitations expires.” A failure to identify the
proper party is a mistake not about the defendant’s
name but about who is liable for the plaintiff’s injury.
Wardrop didn’t think that Elan Inc. was liable to him
and thus called Elan Inc. Elan Corp. by mistake because
4 No. 10-1420
of the similarity of the names; he thought Elan Corp.
was liable to him for breach of contract, not realizing—as
he should have done, because it was stated in his written
contract—that actually Elan Inc. was the other party
to the contract. The judge thought that since the
amended complaint did not (in his view) relate back to
the date of the original filing, permitting the amendment
would be futile. And since Wardrop acknowledged
that Elan Corp.—the only defendant named in the
original complaint—was not liable to him, the judge
concluded that there was no controversy between the
parties, and so he dismissed the suit, just as he would
have done had it been abandoned by the plaintiff, or
settled.
Even if the refusal to allow relation back had been
correct (it wasn’t, as we’re about to see), the dismissal
of the suit on the ground that the parties had no contro-
versy would have been incorrect. Rule 15(c) is about
relation back of amendments; it is not about whether
to permit an amendment, which is the subject of
Rules 15(a) and (b). Rule 15(a)(2), which governs amend-
ments to pleadings before trial (and there hasn’t been a
trial in this case, despite its age), allowed Wardrop to
amend his complaint with the district court’s leave; the
rule adds that “the court should freely give leave
when justice so requires.” Amending the complaint to
substitute the alleged contract breaker for the innocent
affiliate was entirely proper; whether the amendment
would relate back to the date when the original com-
plaint was filed and thus defeat the defense of statute
of limitations was a separate question. See Arthur v.
Maersk, Inc., 434 F.3d 196, 202-04 (3d Cir. 2006); United
No. 10-1420 5
States v. Hicks, 283 F.3d 380, 386-87 (D.C. Cir. 2002); cf. Jones
v. Bernanke, 557 F.3d 670, 674-75 (D.C. Cir. 2009). The
judge should have allowed the amendment and then,
believing that the amended complaint did not relate
back, should have rendered judgment on the merits for
both defendants—for Elan Corp., the original defendant,
because it had not broken any contract with Wardrop,
and for Elan Inc., added as a defendant by the amend-
ment, because the statute of limitations for a suit against
it based on the contract had expired.
It is more common, though slightly irregular, for a
district court simply to “deny leave to amend based
wholly or partially on [the court’s] belief that any amend-
ment would not relate back.” Slayton v. American Express
Co., 460 F.3d 215, 226 n. 11 (2d Cir. 2006); see also Hall
v. Norfolk Southern Ry., 469 F.3d 590, 592 (7th Cir.
2006); Woods v. Indiana University-Purdue University, 996
F.2d 880, 882 (7th Cir. 1993). That is what the judge did
here, but he should have followed it up by entering
judgment for the original defendant on the merits, on
the ground that it wasn’t liable to the plaintiff. The
judge’s method of disposing of the case—dismissing for
want of jurisdiction—set the stage for counsel for Elan
Corp. to make the ridiculous argument that we have
no jurisdiction because Elan Inc. is not a party and
Wardrop does not claim to have any rights against
Elan Corp. The logic of the argument is that the denial
of a motion to amend a complaint to substitute a poten-
tially liable entity for the defendant named in the com-
plaint is not reviewable by an appellate court because
the plaintiff is no longer seeking a judgment against
the only defendant named in the complaint.
6 No. 10-1420
Inconsistently with his insistence that Elan Inc. is not
a party, counsel for Elan Corp. defends the judge’s
ruling denying leave to file an amended complaint
with relation back even though the only beneficiary of
the ruling is Elan Inc. He says that Elan Corp. “makes no
argument on behalf of non-party [Elan Inc.],” and then
proceeds to argue that the judge was right not to allow
Elan Inc. to be added as a defendant, an argument
relevant only to that firm.
Actually the judge was wrong about relation back,
though it was a forced error because it was after he
ruled on Wardrop’s motion to amend the original com-
plaint that the Supreme Court in Krupski v. Costa Crociere
S.p.A., 130 S. Ct. 2485 (2010), changed what we and other
courts had understood, in Hall and the other cases we
cited, to be the proper standard for deciding whether
an amended complaint relates back to the date of the
filing of the original complaint. We had thought the
focus should be on what the plaintiff knew or should
have known, and by that criterion Wardrop indeed had
failed to make the case for relation back because he
had intended to sue Elan Corp. even though the other
party to his contract was Elan Inc. From early in
the case, moreover, filings by Elan Corp.—including a
corporate disclosure statement that showed it was a
separate corporation from Elan Inc. (it was Elan Inc.’s
parent, but the liability of a subsidiary is not auto-
matically attributed to its parent even if it is wholly
owned by it)—should have alerted Wardrop’s lawyer to
his mistake. It took him almost six years to discover it.
His delay was inexcusable.
No. 10-1420 7
But the Supreme Court’s decision in Krupski, hewing
closely to the language of Rule 15(c)(1)(C), has cut the
ground out from under the district court’s decision. See
also United States ex rel. Miller v. Bill Harbert Int’l Con-
struction, Inc., 608 F.3d 871, 885 (D.C. Cir. 2010) (per
curiam); Abdell v. City of New York, 2010 WL 5422375, at *4-
7 (S.D.N.Y. Dec. 22, 2010). The only two inquiries that
the district court is now permitted to make in deciding
whether an amended complaint relates back to the date
of the original one are, first, whether the defendant
who is sought to be added by the amendment knew or
should have known that the plaintiff, had it not been for
a mistake, would have sued him instead or in addition
to suing the named defendant; and second, whether,
even if so, the delay in the plaintiff’s discovering
his mistake impaired the new defendant’s ability to
defend himself. “A potential defendant who has not
been named in a lawsuit by the time the statute of limita-
tions has run is entitled to repose—unless it is or should
be apparent to that person that he is the beneficiary of
a mere slip of the pen, as it were.” Rendall-Speranza v.
Nassim, 107 F.3d 913, 918 (D.C. Cir. 1997); see Wood v.
Worachek, 618 F.2d 1225, 1230 (7th Cir. 1980); Locklear v.
Bergman & Beving AB, 457 F.3d 363, 366-67 (4th Cir. 2006).
The fact that the plaintiff was careless in failing to
discover his mistake is relevant to a defendant’s claim
of prejudice; the longer the delay in amending the com-
plaint was, the likelier the new defendant is to have
been placed at a disadvantage in the litigation. But care-
lessness is no longer a ground independent of prejudice
for refusing to allow relation back.
8 No. 10-1420
Elan Inc. knew that Wardrop meant to sue it rather
than Elan Corp. He meant to sue the party to the em-
ployment contract with him and Elan Inc. was that
party. The two corporations are pieces of a dizzying
array of corporate entities all of which, it seems—or at
least Elan Corp. and Elan Inc.—are managed out of the
same office. Elan Inc. is registered in Delaware and has
an address and a registered agent in Delaware, as re-
quired of a Delaware corporation. But its operations are
conducted from the same office in Georgia that houses
Elan Corp. Wardrop traveled to that office many times
during and in relation to the performance of his con-
tract. His complaint was served on the employee of still
another affiliate—but, as it happened, that was the
person who “supervised, directed, and monitored”
Wardrop’s services under his contract with Elan Inc.
The person was a de facto employee of Elan Inc. when
supervising Wardrop’s performance of his contract with
that firm. But however we characterize his legal relation
to Elan Inc., he had to know, as soon as he received
the complaint, that Wardrop meant to sue Elan Inc.
rather than Elan Corp.—knew that had it not been for
the plaintiff’s error, to which the confusing similarity of
the corporate names doubtless contributed, Elan Inc.
would have been named as the defendant. See United
States ex rel. Miller v. Bill Harbert Int’l Construction, Inc.,
supra, 608 F.3d at 883-84; Singletary v. Pennsylvania Dep’t
of Corrections, 266 F.3d 186, 195-98 (3d Cir. 2001); Datskow
v. Teledyne, Inc., 899 F.2d 1298, 1301-02 (2d Cir. 1990);
16 Charles Alan Wright, Arthur R. Miller & Mary Kay
Kane, Federal Practice and Procedure § 1499, pp. 146-51 (2d
No. 10-1420 9
ed. 1996). His knowledge was Elan Inc.’s knowledge
because he was, as we said, supervising that firm’s
contract with Wardrop.
Thus one of the two requirements for relation back
was satisfied (knowledge by the “real” defendant); but
so we think was the other requirement (prejudice), even
though the district judge made no finding on whether
Elan Inc. was harmed by the delay in Wardrop’s moving
to substitute it as a defendant. Prejudice manufactured
by a defendant is not a ground for refusing relation
back. Cf. Hafferman v. Westinghouse Electric Corp., 653
F. Supp. 423, 429 (D.D.C. 1986); Hart v. Bechtel Corp.,
90 F.R.D. 104, 106 (D. Ariz. 1981); Wasson v. McClintock,
703 A.2d 726, 730 (Pa. Commonwealth Ct. 1997). It’s
like failing to mitigate damages. As soon as the em-
ployee we mentioned read Wardrop’s complaint, he
knew, and therefore Elan Inc. knew, that Wardrop had
sued the wrong entity. Elan Inc. sat on its haunches for
almost six years while the litigation ground forward,
and it would still be squatting on its haunches had
Wardrop not finally woken up in 2009 and moved to
substitute it as defendant. No prejudice accrued to
Elan Inc. in the brief interval between the filing of
Wardrop’s original complaint and the receipt of the
complaint by the employee who had administered
Wardrop’s contract. Elan Inc., if it had promptly
disabused Wardrop of his mistake and he had
amended his complaint forthwith, would have suffered
no harm from delay in the amending of the complaint
because there wouldn’t have been any delay. It brought
10 No. 10-1420
on itself any harm it has suffered from delay, and can’t
be allowed to gain an advantage from doing that.
So the decision of the district court must be reversed
with directions to allow the amended complaint, sub-
stituting Elan Inc. as defendant with relation back to
the date of the original complaint.
The amended complaint differs from the original com-
plaint in other respects as well as the defendant’s
name, however, and on remand the district judge will
have to consider whether those differences warrant
rejection of the amended complaint, as Elan Inc. argues.
Granted, the fact that the amended complaint adds new
legal theories (as distinct from new claims, Doe v. Howe
Military School, 227 F.3d 981, 989-90 (7th Cir. 2000); R.P.
ex rel. C.P. v. Prescott Unified School District, 2011 WL
343966, at *3-4 (9th Cir. Feb. 4, 2011) (the R.P. opinion
refers to “a new theory of relief” but it is apparent that
the intended meaning is a new claim)) would not
warrant rejection. Santamarina v. Sears, Roebuck & Co., 466
F.3d 570, 573-74 (7th Cir. 2006); McBeth v. Himes,
598 F.3d 708, 716 (10th Cir. 2010); Hall v. Spencer County,
583 F.3d 930, 934-35 (6th Cir. 2009). A complaint need not
plead legal theories. Hatmaker v. Memorial Medical Center,
619 F.3d 741, 743 (7th Cir. 2010); O’Grady v. Village of
Libertyville, 304 F.3d 719, 723 (7th Cir. 2002); Sagana v.
Tenorio, 384 F.3d 731, 736-37 (9th Cir. 2004). The
defendant can elicit them by contention interrogatories.
Fed. R. Civ. P. 33(a)(1); In re Ocwen Loan Servicing, LLC
Mortgage Servicing Litigation, 491 F.3d 638, 641 (7th Cir.
2007); American Nurses’ Ass’n v. Illinois, 783 F.2d 716, 723
No. 10-1420 11
(7th Cir. 1986); Starcher v. Correctional Medical Systems,
Inc., 144 F.3d 418, 421 and n. 2 (6th Cir. 1998).
But there is a new claim in the amended complaint:
a claim of quantum meruit, which might allow an award
of damages based on the market value of the services
that Wardrop rendered to Elan Inc. even if he failed
to prove a breach of contract, if he rendered those
services with a reasonable expectation of being compen-
sated for them. Wallace v. Long, 5 N.E. 666, 668-69 (Ind.
1886); Mueller v. Karns, 873 N.E.2d 652, 659 (Ind. App.
2007); Lindquist Ford, Inc. v. Middleton Motors, Inc., 557
F.3d 469, 477-78 (7th Cir. 2009); ConFold Pacific, Inc. v.
Polaris Industries, Inc., 433 F.3d 952, 958 (7th Cir. 2006);
Jason Scott Johnston, “Communication and Courtship:
Cheap Talk Economics and the Law of Contract Forma-
tion,” 85 Va. L. Rev. 385, 486 (1999). Proof of such damages
is likely to require expert evidence of market value,
Overseas Development Disc Corp. v. Sangamo Construction
Co., 686 F.2d 498, 508-09 (7th Cir. 1982); see, e.g., Dresser
Industries, Inc. v. Gradall Co., 965 F.2d 1442, 1448 (7th Cir.
1992) (per curiam); Ensley v. Cody Resources, Inc., 171
F.3d 315, 318, 322 (5th Cir. 1999), and it’s pretty late in
this litigation to be trotting out new experts. But this
and any other issues relating to the proposed amended
complaint, other than the unexceptionable substitution
of the right Elan for the wrong Elan, are for the district
judge to consider in the first instance.
R EVERSED AND R EMANDED.
3-14-11