Williams v. Citigroup Inc.

10-538
Williams v. Citigroup
UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

_______________

August Term, 2010

(Argued: April 13, 2011 Decided: August 11, 2011)

________________________________________________________

LINDA GRANT WILLIAMS,

Plaintiff-Appellant,

—v.—

CITIGROUP INC., CITIGROUP GLOBAL MARKETS INC.,

Defendants-Appellees.

Docket No. 10-538-cv
________________________________________________________

B e f o r e : LEVAL, KATZMANN, HALL, Circuit Judges.

_______________

Plaintiff-Appellant Linda Grant Williams appeals from a November 3, 2009 judgment of the United
States District Court for the Southern District of New York (Preska, C.J.) dismissing her complaint
and from the district court’s February 8, 2010 order denying her postjudgment motion for
reargument and reconsideration of this dismissal and for leave to replead. For the reasons stated
below and in an accompanying summary order, we AFFIRM the district court’s dismissal of
plaintiff’s federal claims, but VACATE the order denying the postjudgment motion and so much
of the judgment as retained supplemental jurisdiction over and dismissed plaintiff’s state law claims.
We REMAND for further proceedings consistent with this opinion.

_______________

Counsel for Plaintiff-Appellant: MICHAEL A. BOWSE, Browne Woods George LLP,
Los Angeles, Cal. (Lee A. Weiss, Browne Woods
George LLP, New York, N.Y., on the brief).
Counsel for Defendants-Appellees: CARMINE D. BOCCUZZI, Cleary Gottlieb Steen &
Hamilton LLP, New York, N.Y. (Leah Brannon,
Cleary Gottlieb Steen & Hamilton LLP,
Washington, D.C., on the brief).
_______________

PER CURIAM:

Plaintiff-Appellant Linda Grant Williams appeals from a November 3, 2009 judgment of

the United States District Court for the Southern District of New York (Preska, C.J.) dismissing

her complaint and from the district court’s February 8, 2010 order denying her postjudgment

motion for reargument and reconsideration of this dismissal and for leave to replead. On appeal,

Williams argues that the district court erred by, inter alia, dismissing the complaint without

granting leave to replead, denying the postjudgment motion (through which she sought leave to

replead), and exercising supplemental jurisdiction to deny the remaining state law claims. We

hold that the district court, in denying the postjudgment motion, applied a standard that

overemphasized considerations of finality at the expense of the liberal amendment policy

embodied in the Federal Rules of Civil Procedure. Accordingly, we vacate the order denying the

postjudgment motion and so much of the judgment as retained supplemental jurisdiction over

and dismissed Williams’s state law claims.1 We remand for further proceedings consistent with

this opinion.

BACKGROUND

We set forth below the relevant facts as alleged in the complaint. Williams is an attorney

licensed in the state of New York who specializes in structured finance. She has developed a

1
In an accompanying summary order filed today, we affirm the district court’s dismissal
of Williams’s federal claims.

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patent-pending structure for Airline Special Facility bonds (“ASF bonds”), which are issued by

municipalities to finance the construction and renovation of airport terminals. According to

Williams, her structure is superior to that of existing ASF bonds and would provide benefits to

airlines, municipalities, bondholders, and underwriting banks if it were adopted.

Defendant-Appellee Citigroup Inc., through its wholly owned subsidiary Citigroup

Global Markets Inc. (together, “Citigroup”), is a major underwriter of ASF bonds. Williams

began performing legal work for Citigroup while she was a partner at the law firm of Thelen

Reid & Priest. At the suggestion of a Citigroup employee, Williams joined Pillsbury Winthrop

Shaw Pittman, LLP (“Pillsbury”) — a law firm that had a strong preexisting business

relationship with Citigroup — as an equity partner. While at Pillsbury, Williams marketed her

structure to Citigroup. Although a Citigroup executive responsible for ASF bond underwriting

initially responded to her proposal with enthusiasm, Citigroup ultimately declined to adopt

Williams’s structure. Eventually, Pillsbury “forced” Williams to leave the firm. She thereafter

became “Of Counsel” to Greenberg Traurig, LLP (“Greenberg”) pursuant to an employment

contract. Greenberg later terminated that contract.

The complaint alleges that Citigroup, along with various rating agencies, airlines, and

municipalities, conspired to block the use of Williams’s structure to issue ASF bonds. Williams

asserts that the acts in furtherance of this alleged conspiracy included, inter alia, terminating or

transferring Citigroup employees who supported implementing Williams’s structure; objecting to

Williams’s efforts to patent her structure; demanding that Williams’s employers sever their

relationships with her; pressuring another investment bank to terminate its two-year license of

Williams’s structure; and issuing new ASF bonds with terms that impeded the possibility of

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refinancing those bonds using Williams’s structure. Williams avers that Citigroup and its co-

conspirators took these actions to protect the profits that they derived from the existing

secondary trading market for ASF bonds, which she claims would disappear if her structure were

adopted.

Based on these allegations, Williams’s complaint asserts eight causes of action. The first

through fifth causes of action (the “federal claims”) allege that Citigroup violated Sections 1 and

2 of the Sherman Act, 15 U.S.C. §§ 1-2, by engaging in various conspiracies to boycott her

structure and by monopolizing, attempting to monopolize, and conspiring to monopolize the

ASF bond market. The sixth through eighth causes of action (the “state law claims”)

respectively allege that Citigroup violated New York’s Donnelly Act, N.Y. Gen. Bus. L. § 340;2

that Citigroup tortiously interfered with Williams’s employment contracts with Pillsbury and

Greenberg; and that Citigroup tortiously interfered with Williams’s business relationships with

those firms.

On January 9, 2009, Citigroup moved pursuant to Federal Rule of Civil Procedure

12(b)(6) to dismiss the complaint with prejudice. It urged the court to dismiss the federal claims

for failure to state a claim and then to decline to exercise supplemental jurisdiction over the state

law claims or, if it elected to retain jurisdiction over those claims, to dismiss them.

By memorandum and order dated November 2, 2009, the district court granted the

motion to dismiss. It dismissed the federal claims on the ground that Williams failed to satisfy

the pleading standard set forth in Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009), and Bell Atlantic

2
The Donnelly Act, New York’s antitrust statute, was modeled on the Sherman Act and
has generally been construed in accordance with federal precedents. X.L.O. Concrete Corp. v.
Rivergate Corp., 634 N.E.2d 158, 161 (N.Y. 1994).

4
Corp. v. Twombly, 550 U.S. 554 (2007), due to the absence of factual allegations plausibly

suggesting that Citigroup violated the Sherman Act. See Williams v. Citigroup, Inc., No. 08 CV

9208(LAP), 2009 WL 3682536, at *2-8 (S.D.N.Y. Nov. 2, 2009). Notwithstanding Citigroup’s

request that the state law claims be dismissed without prejudice so as to allow reassertion in state

court, the district court went on to consider whether the exercise of supplemental jurisdiction

over the remaining claims was warranted. Acknowledging that the relevant factors “usually

point toward dismissal” of state law claims without prejudice when the federal claims are

dismissed before trial, the court nonetheless concluded that retention of jurisdiction was proper

because the state law claims could “‘be determined without further trial proceedings and without

entanglement with any difficult issues of state law.’” Id. at *8 (quoting Brazinski v. Amoco

Petroleum Additives Co., 6 F.3d 1176, 1182 (7th Cir. 1993)). The court then dismissed the

Donnelly Act claim based on the same deficiencies it detected in the federal claims, and

dismissed the tortious interference claims for failure to allege certain elements required by New

York law. Id. at *8-10. On the day following the district court’s ruling, the clerk entered final

judgment.

On November 17, 2009, Williams timely moved for reargument and reconsideration

pursuant to Federal Rules of Civil Procedure 59(e) and 60(b) and Rule 6.3 of the Local Rules of

the United States District Courts for the Southern and Eastern Districts of New York (the “Local

Rules”). Through this motion (the “postjudgment motion”), Williams sought to reopen the

judgment and obtain leave to amend her original complaint so as to attempt to remedy the

pleading defects identified in the dismissal order. Williams’s counsel previewed the proposed

amendments in a fifteen-page declaration accompanying the motion.

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 The district court denied the postjudgment motion in a brief order dated February

8, 2010, which reads in pertinent part:

Plaintiff has not . . . demonstrated any basis for the extraordinary remedy of
reconsideration. Although she submits a declaration of counsel in support of the
motion — an affidavit expressly prohibited by Local Civil Rule 6.3 — she does
not point to any matter which the Court overlooked in dismissing the action.
Also, she fails to indicate any reason why she was justifiably ignorant of the facts
set forth in counsel’s declaration — facts which by and large reiterate matters
which apparently occurred years ago.

Plaintiff also does not explain why she should be granted leave to replead
at this stage when she failed to request an opportunity to replead in the first
instance.

Accordingly, the motion for reconsideration and reargument is denied.

App. 44 (citation omitted). This appeal followed.

DISCUSSION

On appeal, Williams argues that the district court erred by, inter alia, dismissing the

complaint without granting leave to replead, denying the postjudgment motion, and exercising

supplemental jurisdiction so as to dismiss the state law claims with prejudice.

A. Failure To Grant Leave To Replead Sua Sponte

First, we address Williams’s assertion that the district court erred by dismissing the

complaint and closing the case without granting leave to replead sua sponte. “We review a

district court’s denial of leave to amend for abuse of discretion.” ATSI Commc’ns, Inc. v. Shaar

Fund, Ltd., 493 F.3d 87, 108 (2d Cir. 2007). We have described the contention that “the District

Court abused its discretion in not permitting an amendment that was never requested” as

“frivolous.” Horoshko v. Citibank, N.A., 373 F.3d 248, 249-50 (2d Cir. 2004) (per curiam);

accord Gallop v. Cheney, 642 F.3d 364, 369 (2d Cir. 2011). Accordingly, we see no abuse of

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discretion in the district court’s failure to grant leave to replead sua sponte.

B. Denial of the Postjudgment Motion

Williams also argues that the district court erred by denying the postjudgment motion.

We review the district court’s denial of a postjudgment motion for leave to replead for abuse of

discretion. See In re Assicurazioni Generali, S.P.A., 592 F.3d 113, 120 (2d Cir. 2010);

Ruotolo v. City of New York, 514 F.3d 184, 191 (2d Cir. 2008). A district court abuses its

discretion when its ruling “rests on an error of law” or “cannot be located within the range of

permissible decisions.” Zervos v. Verizon N.Y., Inc., 252 F.3d 163, 169 (2d Cir. 2001).

In reviewing the district court’s denial of this motion, we are mindful of the nature of the

relief that Williams sought: namely, leave to amend her complaint. In the ordinary course, the

Federal Rules of Civil Procedure provide that courts “should freely give leave” to amend a

complaint “when justice so requires.” Fed. R. Civ. P. 15(a)(2). This permissive standard is

consistent with our “strong preference for resolving disputes on the merits.” New York v. Green,

420 F.3d 99, 104 (2d Cir. 2005) (internal quotation marks omitted). Where, however, a party

does not seek leave to file an amended complaint until after judgment is entered, Rule 15’s

liberality must be tempered by considerations of finality. As a procedural matter, “[a] party

seeking to file an amended complaint postjudgment must first have the judgment vacated or set

aside pursuant to [Rules] 59(e) or 60(b).” Ruotolo, 514 F.3d at 191; see also Nat’l Petrochem.

Co. of Iran v. M/T Stolt Sheaf, 930 F.2d 240, 245 (2d Cir. 1991) (“Unless there is a valid basis to

vacate the previously entered judgment, it would be contradictory to entertain a motion to amend

the complaint.”). “[T]o hold otherwise would enable the liberal amendment policy of Rule 15(a)

to be employed in a way that is contrary to the philosophy favoring finality of judgments and the

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expeditious termination of litigation.” Nat’l Petrochem., 930 F.2d at 245 (quoting 6 Charles

Alan Wright et al., Federal Practice and Procedure § 1489 (2d ed. 1990)).

The standards we have developed for evaluating postjudgment motions generally place

significant emphasis on the “value of finality and repose.” In re Frigitemp Corp., 781 F.2d 324,

327 (2d Cir. 1986). Our precedents make clear, however, that considerations of finality do not

always foreclose the possibility of amendment, even when leave to replead is not sought until

after the entry of judgment. Thus, we have stated that “in view of the provision in rule 15(a) that

‘leave [to amend] shall be freely given when justice so requires,’ it might be appropriate in a

proper case to take into account the nature of the proposed amendment in deciding whether to

vacate the previously entered judgment.” Ruotolo, 514 F.3d at 191 (alteration in original)

(quoting earlier version of Rule 15) (other internal quotation marks omitted); see also State

Trading Corp. of India, Ltd. v. Assuranceforeningen Skuld, 921 F.2d 409, 418 (2d Cir. 1990)

(“When the moving party has had an opportunity to assert the amendment earlier, but has waited

until after judgment before requesting leave, a court may exercise its discretion [to grant leave to

amend] more exactingly.”). Under these formulations, postjudgment motions for leave to

replead must be evaluated with due regard to both the value of finality and the policies embodied

in Rule 15.

Particularly instructive in this respect is the Supreme Court’s decision in Foman v. Davis,

371 U.S. 178 (1962). Foman involved an action to enforce an alleged oral agreement regarding

the amount that the plaintiff stood to inherit from her father’s estate. The district court dismissed

the complaint for failure to state a claim on the ground that the alleged oral agreement was

unenforceable under the statute of frauds. The day after judgment was entered, the plaintiff

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moved to vacate the judgment and to amend her complaint to seek recovery in quantum meruit.

The district court denied that motion. Id. at 179. The Supreme Court reversed, construing the

motion to vacate as filed pursuant to Rule 59(e) and holding that the district court abused its

discretion in denying leave:

Rule 15(a) declares that leave to amend “shall be freely given when justice
so requires”; this mandate is to be heeded. If the underlying facts or
circumstances relied upon by a plaintiff may be a proper subject of relief, he
ought to be afforded an opportunity to test his claim on the merits. In the absence
of any apparent or declared reason — such as undue delay, bad faith or dilatory
motive on the part of the movant, repeated failure to cure deficiencies by
amendments previously allowed, undue prejudice to the opposing party by virtue
of allowance of the amendment, futility of amendment, etc. — the leave sought
should, as the rules require, be “freely given.” Of course, the grant or denial of an
opportunity to amend is within the discretion of the District Court, but outright
refusal to grant the leave without any justifying reason appearing for the denial is
not an exercise of discretion; it is merely abuse of that discretion and inconsistent
with the spirit of the Federal Rules.

Id. at 182 (citation omitted).

Against this background, we turn to the district court’s stated reason for denying the

postjudgment motion for leave to replead. The district court wrote in explanation, “Plaintiff . . .

does not explain why she should be granted leave to replead at this stage when she failed to

request an opportunity to replead in the first instance.” App. 44.

We conclude that the denial of the motion for this reason was not a proper exercise of the

district court’s discretion, as the district court applied a standard that cannot be reconciled with

the Supreme Court’s holding in Foman. The district court apparently believed that a motion for

leave to replead is not timely unless made “in the first instance.” The court did not explain

precisely what it meant by “in the first instance.” In the circumstances of this case, however, it

can only have meant one of two things: that the plaintiff was under obligation to seek leave to

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replead either immediately upon answering the motion to dismiss the complaint (without yet

knowing whether the court will grant the motion, or, if so, on what ground), or immediately upon

receipt of the court’s ruling granting the motion and prior to the entry of judgment thereupon.

Regardless which of the two the court had in mind, Foman makes unmistakably clear there is no

such rule. The plaintiff in Foman did not seek leave to replead either together with her response

to the motion to dismiss, or indeed prior to the district court’s entry of judgment. The motion

was made postjudgment. Nonetheless, the Supreme Court, identifying “undue delay” as an

appropriate reason that might be given for denial of such a motion, ruled that the district court

abused its discretion and violated the liberal spirit of Rule 15 by denying the motion. The

Foman holding cannot be reconciled with the proposition that the liberal spirit of Rule 15

necessarily dissolves as soon as final judgment is entered.

Citigroup also argues that the denial of the postjudgment motion was justified on the

ground that the proposed amendments would not remedy the deficiencies in Williams’s claims.

It is well established that “[l]eave to amend need not be granted . . . where the proposed

amendment would be ‘futil[e].’” Advanced Magnetics, Inc. v. Bayfront Partners, Inc., 106 F.3d

11, 18 (2d Cir. 1997) (second alteration in original) (quoting Foman, 371 U.S. at 182).

Therefore, on remand, the district court should address whether the proposed amendments would

be futile. See, e.g., Ronzani v. Sanofi S.A., 899 F.2d 195, 198-99 (2d Cir. 1990).3

3
The district court’s order denying the postjudgment motion noted that the declaration of
Williams’s counsel accompanying the motion, which presented the factual allegations underlying
the proposed amendments, was submitted in violation of Local Rule 6.3. This Local Rule
prohibits the filing of affidavits in support of motions for reconsideration or reargument absent
court order. We leave it to the district court to decide on remand whether to exercise its
discretion under Local Rule 6.3 to permit the filing of the declaration or instead require the
submission of a proposed amended pleading in some other form. See, e.g., Kassner v. 2nd

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C. Exercise of Supplemental Jurisdiction To Dismiss the State Law Claims with Prejudice

For the same reasons as apply to the federal claims, we affirm the court’s initial dismissal

of the state law claims, but vacate the court’s denial of the postjudgment motion. We construe

the postjudgment motion as seeking leave to amend the complaint in ways that relate not only to

Williams’s federal claims, but also to her state law claims. On remand, the court should consider

whether Williams’s proposed amendments would cure the deficiency in the pleading of the state

law claims or otherwise alter its decision to exercise supplemental jurisdiction to dismiss the

state law claims with prejudice.4 Accordingly, we vacate so much of the court’s judgment as

dismissed the state law claims with prejudice.

CONCLUSION

For the reasons stated above and in our accompanying summary order, we AFFIRM the

district court’s dismissal of the federal claims, but VACATE the order denying the postjudgment

Avenue Delicatessen Inc., 496 F.3d 229, 244-45 (2d Cir. 2007).
4
If, on remand, the district court is again presented with the discretionary decision
whether to decline supplemental jurisdiction over the state law claims, see 28 U.S.C. § 1367(c),
it must “balance[] the traditional ‘values of judicial economy, convenience, fairness, and
comity’” in exercising its discretion. Kolari v. N.Y. Presbyterian Hosp., 455 F.3d 118, 122 (2d
Cir. 2006) (quoting Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 (1988)). The district
court’s assessment of these factors should, in our view, involve consideration of the pleading
standard that a New York court would apply in evaluating the sufficiency of Williams’s
complaint. It appears to us that this standard is more lenient than the “plausibility” standard
applicable in federal courts, compare Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949-53 (2009), with
ABN Amro Bank, N.V. v. MBIA Inc., — N.E.2d —, 2011 N.Y. Lexis 1752, at *25-26 (N.Y. June
28, 2011), and at the very least that New York’s state courts have not yet adopted the
Iqbal/Twombly pleading standard with respect to claims under the Donnelly Act, see 4B Robert
L. Haig, Commercial Litigation in New York State Courts § 89:37 (3d ed. 2010). To the extent
that Williams would have a better chance of pleading viable state law claims under the standard
that New York’s courts have chosen, we question whether the values of fairness and comity
would be served by preventing her from pursuing those claims in that forum.

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motion for leave to replead and so much of the judgment as retained supplemental jurisdiction

over and dismissed the state law claims. We REMAND for further proceedings consistent with

this opinion. Any further appeal will be referred to this panel, and the party taking appeal shall

advise the Clerk of Court of this direction.

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