Amerisourcebergen Corporation v. Dialysist West, Inc. , 465 F.3d 946 ( 2006 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
AMERISOURCEBERGEN CORPORATION, 
a New Jersey corporation, dba
Bergen Brunswig Corporation, aka
BBC; AMERISOURCEBERGEN DRUG
CORPORATION; MEDICAL INITIATIVES,
INC., aka Oncology Supply; ASD
SPECIALTY HEALTHCARE, INC.,
Plaintiffs-Appellants, No. 04-15595
v. D.C. No.
DIALYSIST WEST, INC., an Arizona  CV-02-01472-JWS
corporation, AMENDED
Defendant-Appellee, OPINION
v.
AMERX INC., a Florida corporation;
CSG DISTRIBUTORS, a Tennessee
company; PREMIER MEDICAL
DISTRIBUTORS, INC.,
Third-party-Defendants.

Appeal from the United States District Court
for the District of Arizona
John W. Sedwick, District Judge, Presiding
Argued and Submitted
November 18, 2005—San Francisco, California
Filed March 22, 2006
Amended April 24, 2006
Second Amendment October 6, 2006
Before: Jerome Farris, A. Wallace Tashima, and
Consuelo M. Callahan, Circuit Judges.
17311
17312 AMERISOURCEBERGEN v. DIALYSIST WEST
Opinion by Judge Farris;
Dissent by Judge Tashima
17316 AMERISOURCEBERGEN v. DIALYSIST WEST
COUNSEL
Morton R. Branzburg and Andrew O. Schiff, Klehr, Harrison,
Harvey, Branzburg, & Ellers LLP, Philadelphia, Pennsylva-
nia, for the plaintiffs-appellants.
Dan L. Bagatell and Joel W. Nomkin, Perkins Coie Brown &
Bain P.A., Phoenix, Arizona, for the defendant-appellee.
OPINION
FARRIS, Circuit Judge:
I. FACTUAL AND PROCEDURAL HISTORY
On August 2, 2002, AmerisourceBergen Corporation1
brought suit against Dialysist West, Inc. alleging that Dialy-
sist West breached a sales agreement concerning the sale of
the drug Epogen S40. Following its determination that 50%
to 100% of the Epogen it purchased from Dialysist West was
counterfeit, AmerisourceBergen withheld payments due Dia-
lysist West on non-Epogen drug sales. On March 18, 2003,
Dialysist West filed a counterclaim demanding that Ameri-
sourceBergen pay the approximately $2.2 million it owed for
the non-Epogen products Dialysist West had shipped to
AmerisourceBergen. On the same day, Dialysist West also
filed an Epogen-related, third-party complaint against phar-
maceutical distributors AmeRx Inc., CSG Distributors, and
Optia Medical. On April 21, 2003, CSG Distributors filed a
third-party complaint against Premier Medical Distributors
Inc., and on July 14, 2003, AmeRx filed a third-party com-
plaint against three more Epogen distributors.
1
AmerisourceBergen Corp. succeeded Bergen Brunswig Corporation as
the plaintiff-appellant in this case.
AMERISOURCEBERGEN v. DIALYSIST WEST 17317
On May 30, 2003, AmerisourceBergen filed a reply to Dia-
lysist West’s counterclaim conceding that it had not paid for
the non-Epogen products (including Procrit) and that these
products were genuine. On July 22, 2003, Dialysist West filed
a motion for judgment on the pleadings and for entry of final
judgment pursuant to Federal Rule of Civil Procedure 54(b)
on the $2.2 million counterclaim. On August 25, 2003,
AmerisourceBergen filed a cross-motion for leave to amend
its complaint and its reply to Dialysist West’s counterclaim,
changing its tack by alleging that Dialysist West had also sold
it counterfeit Procrit. On January 6, 2004, the district court
granted Dialysist West’s motion for judgment on the plead-
ings, denied AmerisourceBergen’s motion for leave to amend,
and certified the judgment as final under Rule 54(b). On
March 3, 2004, the district court denied AmerisourceBergen’s
motion to stay execution of judgment and AmerisourceBergen
filed this appeal on March 24, 2004.
II. JURISDICTION & STANDARD OF REVIEW
We have subject matter jurisdiction over the final decision
of the district court pursuant to 28 U.S.C. § 1291. We review
the district court’s interpretation of Arizona contract law de
novo. El-Hakem v. BJY Inc., 415 F.3d 1068, 1072 (9th Cir.
2005). The denial of AmerisourceBergen’s motion for leave
to amend is reviewed for abuse of discretion. See Bowles v.
Reade, 198 F.3d 752, 757 (9th Cir. 1999). The district court’s
Rule 54(b) certification of the judgment is reviewed de novo
to determine if it will lead to “piecemeal appeals” and for
“clear unreasonableness” on the issue of equities. See Grego-
rian v. Izvestia, 871 F.2d 1515, 1519 (9th Cir. 1989). The dis-
trict court’s refusal to stay enforcement of the judgment under
Rule 62(h) is reviewed for abuse of discretion. See MacKillop
v. Lowe’s Mkt., Inc., 58 F.3d 1441, 1446 (9th Cir. 1995).
17318 AMERISOURCEBERGEN v. DIALYSIST WEST
III. DISCUSSION
A. Setoff of Epogen Claims
AmerisourceBergen claims that the district court erred in
finding that it could not set-off the approximately $2.2 million
it owes Dialysist West for non-Epogen, pharmaceutical pur-
chases against the estimated $8 million judgment it seeks
from Dialysist West for selling AmerisourceBergen counter-
feit Epogen. AmerisourceBergen bears the burden of estab-
lishing that it is entitled to either a legal or equitable setoff of
its claims. See Newbery Corp. v. Fireman’s Fund Ins. Co., 95
F.3d 1392, 1399 (9th Cir. 1996).
[1] AmerisourceBergen and Dialysist West agree that sec-
tion 47-2717 of the Arizona Commercial Code applies. The
Arizona statute, a codification of section 2-717 of the Uni-
form Commercial Code, provides:
The buyer on notifying the seller of his intention to
do so may deduct all or any part of the damages
resulting from any breach of the contract from any
part of the price still due under the same contract.
Ariz. Rev. Stat. § 47-2717 (2006). A plain reading of the stat-
ute indicates that a party may not set-off a contractual claim
against a debt on a separate contract. See ITV Direct, Inc. v.
Healthy Solutions, LLC, 379 F. Supp. 2d 130, 133 (D. Mass.
2005) (“Section 2-717 is not a general setoff provision per-
mitting a buyer of goods to adjust its continuing contract obli-
gations according to the equities perceived by the buyer.”).
[2] AmerisourceBergen concedes that the contracts for sale
of Epogen and the other drugs were separate contracts. But
because the Vendor Agreement signed by Dialysist West per-
mits AmerisourceBergen to return any goods to Dialysist
West for “full credit,” AmerisourceBergen believes it was jus-
tified in applying the credit it held for the counterfeit Epogen
AMERISOURCEBERGEN v. DIALYSIST WEST 17319
purchases against its outstanding debts. AmerisourceBergen’s
reading of the Vendor Agreement is strained.2 The Vendor
Agreement does not indicate that AmerisourceBergen can off-
set one deficient transaction against another transaction.
Rather, as the district court pointed out, “[t]he plain language
of the provision links the allowable credit to the specific
returned goods.” AmerisourceBergen Corp. v. Dialysist West,
Inc., No. CIV-02-1472 PHX JWS, slip op. at 13 (D. Ariz. Jan.
6, 2004).
[3] The contract clause is not ambiguous, as Amerisource-
Bergen argues. The intention of the parties is clear: to create
a return policy by which AmerisourceBergen can fully
recover for returned goods that do not meet its standards. See
Smith v. Melson, Inc., 659 P.2d 1264, 1266 (Ariz. 1983) (stat-
ing that a contract should be read in light of the intentions of
the parties as reflected in the language and circumstances of
the contract); see also Echo, Inc. v. Whitson Corp., 52 F.3d
702, 705 (7th Cir. 1995) (holding under Illinois law that in
applying UCC section 2-717, purchase orders cannot be set-
off against damages buyer sustains as result of breach of
related distributorship agreement).
[4] Furthermore, AmerisourceBergen has provided no evi-
dence that it was the pattern or practice of the parties or indus-
try custom to offset deficiencies in one sales contract by
giving discounts or “credit” on other sales contracts. See
Mohave Valley Irrigation & Drainage Dist. v. Norton, 244
F.3d 1164, 1166 (9th Cir. 2001) (“According to the UCC, to
determine whether a contract’s terms are ambiguous, courts
may only consider evidence of course of dealing, trade usage,
or course of performance.”). The district court did not err in
holding that AmerisourceBergen had no legal right to set-off
its Epogen claims against its other contractual claims.
2
The relevant contract clause reads: “BBC may, at its sole option, return
all or any part of any product received from Vendor and receive full credit
for all returned items.”
17320 AMERISOURCEBERGEN v. DIALYSIST WEST
[5] AmerisourceBergen argues that even if it is not entitled
to offset its debt under section 47-2717 of the Arizona Com-
mercial Code, Dialysist West’s insolvency affords it an equi-
table right of setoff under Arizona common law. But
AmerisourceBergen’s claim to equitable setoff is preempted
by 47-2717. Arizona’s Commercial Code provides that “prin-
ciples of law and equity” apply “unless [displaced] by the par-
ticular provisions of this title.” Ariz. Rev. Stat. § 47-1103
(2006); see also John Deere Co. v. First Interstate Bank, 709
P.2d 890, 894 (Ariz. 1985). Although no Arizona court has
ruled on whether section 47-2717 preempts a common law
claim for setoff, several federal courts have indicated that the
corresponding UCC section preempts equitable setoffs. See
ITV Direct, 379 F. Supp. at 133; Carlisle Corp. v. Uresco
Const. Materials, Inc., 823 F. Supp. 271, 275 (E.D. Pa. 1993).
As the court convincingly reasoned in Carlisle, because the
UCC “specifically provides for set-offs in particular circum-
stances . . . we must conclude that the Code drafters, and the
state legislatures that have adopted the Code, meant to dis-
place common law set-off.” Carlisle, 823 F. Supp. at 275. It
is apparent that the Arizona legislature intended section 47-
2717 to supercede the common law of setoff. The district
court did not err in denying AmerisourceBergen’s common
law claim for equitable setoff.
B. Denial of Leave to Amend
[6] AmerisourceBergen appeals the district court’s decision
to deny it leave to amend its reply pursuant to Federal Rule
of Civil Procedure 15(a).3 Rule 15(a) is very liberal and leave
to amend “shall be freely given when justice so requires.” See
3
We need not decide whether the district court also erred in denying
AmerisourceBergen leave to amend its complaint. See 10 Moore’s Federal
Practice, § 54.28[3][b], at 54-109 (3d ed. 2005) (“On appeal of a judg-
ment properly entered under Rule 54(b), the court of appeals may review
any matter implicated by the judgment, but should not reach beyond the
bounds of the judgment . . . .”).
AMERISOURCEBERGEN v. DIALYSIST WEST 17321
Bowles v. Reade, 198 F.3d 752, 757 (9th Cir. 1999). But a dis-
trict court need not grant leave to amend where the amend-
ment: (1) prejudices the opposing party; (2) is sought in bad
faith; (3) produces an undue delay in litigation; or (4) is futile.
Id. at 758; Jackson v. Bank of Hawaii, 902 F.2d 1385, 1387
(9th Cir. 1990).
AmerisourceBergen filed its leave to amend on August 25,
2003, nearly fifteen months after it first learned that counter-
feit Procrit was in the marketplace and three months after
entering a reply where it conceded that the products for which
it had not paid Dialysist West, including Procrit, were genu-
ine. In the dissent, Judge Tashima emphasizes the district
court’s filing of a pretrial scheduling order on July 7, 2003,
which extended the period for filing a motion to amend from
June 2, 2003 to December 2, 2003; and the non-expert discov-
ery cutoff date from August 1, 2003 to February 2, 2004.4
Because AmerisourceBergen’s motion for leave to amend was
filed before the cutoff date set by the court, Judge Tashima
concludes that the motion was “presumptively timely” and the
district court therefore abused its discretion in denying the
motion. (Dissent at 17332; citing Halbert v. City of Sherman,
33 F.3d 526, 529 (5th Cir. 1994)).5
4
In a joint motion to extend the dates set in the pretrial schedule, coun-
sel for the parties argued that more time was necessary because of disputes
regarding what materials should be produced and the complications that
arose in the case from the entry of third parties. Joint Motion To Extend
Dates in Pretrial Schedule, Bergen Brunswig Corp. v. Dialysist West, Inc.,
No. CIV 02 1472 PHX JWS, at *3 (D. Ariz. June 19, 2003).
5
Judge Tashima’s interpretation of Halbert is flawed. Halbert does not
stand for the proposition that a district court must always accept a motion
for leave to amend simply because the court has established a period, pur-
suant to Federal Rule of Civil Procedure 16(b), in which the parties may
file a leave to amend. Rather, Halbert reiterates that granting or denying
a motion for leave to amend remains within the discretion of the district
court. Halbert, 33 F.3d at 530. In Halbert the Fifth Circuit did not reverse
the district court because the motion for leave to amend was “presump-
tively timely,” but rather because the district court provided no “justifying
reasons” for denying the motion for leave to amend. Id.; see also DCD
Programs, Ltd. v. Leighton, 833 F.2d 183, 185 (9th Cir. 1987) (reversing
district court’s leave to amend ruling where the “district court denied the
motion without explanation or findings.”).
17322 AMERISOURCEBERGEN v. DIALYSIST WEST
By the dissent’s reasoning, a district court initially has the
discretion to determine whether a motion for leave to amend
is prejudicial, made in bad faith, would cause undue delay, or
is futile under Rule 15(a); but once the district court sets a
schedule for pretrial motions pursuant to Rule 16(b), the court
must accept all “timely” motions filed before the court-
appointed deadline.6 Even if such a scheme made sense—if a
pretrial order changed parties’ expectations regarding the
prospect of litigating new facts and legal theories—there is no
authority stating that Rule 16(b) preempts Rule 15(a) in cases
like this one.
Federal Rule of Civil Procedure 16 has no effect on the
operation of Federal Rule of Civil Procedure 15(a) principles
in this case. In Johnson v. Mammoth Recreations, Inc., 975
F.2d 604 (9th Cir. 1992), we held that Rule 15(a) did not
apply, not because Rule 15 is trumped by Rule 16 once the
district court filed a pretrial scheduling order, but rather
because the party in Johnson had failed to file his motion to
join additional parties within the period of time set in the dis-
trict court’s scheduling order. Id. at 607-08. Put simply, the
party could not appeal to the liberal amendment procedures
afforded by Rule 15; his tardy motion had to satisfy the more
stringent “good cause” showing required under Rule 16. In
this case, AmerisourceBergen filed its motion for leave to
amend within the deadline set by the district court. Accord-
ingly, as the district court correctly recognized, Amerisource-
Bergen’s motion is subject to the limited constraints placed on
motions for leave to amend under Rule 15(a).7
6
Judge Tashima argues that it would be pointless to create a schedule
for filing pretrial motions pursuant to Federal Rule of Civil Procedure
16(b), “if the schedule can be disregarded by the court and counsel.” Dis-
sent at 17332 n.1.
7
AmerisourceBergen Corp., et al. v. Dialysist West, Inc., No. CIV-02-
1472-PHXJWS, slip op. at 6 (D. Ariz. Jan. 6, 2004) (“The effect of filing
a motion to amend prior to court ordered deadlines is that Rule 15(a) pro-
vides the standard of review, not the “good cause” standard articulated in
Rule 16.”)
AMERISOURCEBERGEN v. DIALYSIST WEST 17323
Unlike the district courts in Halbert and DCD Programs,8
the district court in this case provided sufficient “justifying
reasons” for denying AmerisourceBergen’s leave to amend. In
a detailed order on January 6, 2004, the district court held that
AmerisourceBergen’s motion to amend its reply and allege
that non-Epogen drugs (Procrit) that it had purchased from
Dialysist West were counterfeit was both untimely and preju-
dicial to Dialysist West.9
[7] In assessing timeliness, we do not merely ask whether
a motion was filed within the period of time allotted by the
district court in a Rule 16 scheduling order. Rather, in evalu-
ating undue delay, we also inquire “whether the moving party
knew or should have known the facts and theories raised by
the amendment in the original pleading.” Jackson, 902 F.2d
at 1388; see also Sierra Club v. Union Oil Co. of California,
813 F.2d 1480, 1492-93 (9th Cir. 1987), vacated on other
grounds by Union Oil Co. of California v. Sierra Club, 485
U.S. 931 (1988). We have held that an eight month delay
between the time of obtaining a relevant fact and seeking a
leave to amend is unreasonable. See Texaco, Inc. v. Ponsoldt,
939 F.2d 794, 799 (9th Cir. 1991) (citing Jackson, 902 F.2d
at 1388).
[8] In this case, fifteen months passed between the time
AmerisourceBergen first discovered the possibility that the
Procrit was tainted and its assertion of this theory in the
motion for leave to amend. Even more detrimental to Ameri-
sourceBergen’s motion for leave to amend, however, is the
8
Halbert, 33 F.3d at 530; DCD Programs, 833 F.2d at 185.
9
AmerisourceBergen, No. CIV-02-1472-PHXJWS, slip op. at 4-7. The
district court’s key holdings on the motion for leave to amend were: 1)
AmerisourceBergen did not allege any “newly discovered facts” in the
motion nor did the company explain why it waited over a year after filing
its complaint before bringing these facts to the attention of the court; and
2) the amendments were prejudicial because they contradicted the compa-
ny’s “own previous admissions mid-stream,” without any proffered rea-
son.
17324 AMERISOURCEBERGEN v. DIALYSIST WEST
fact that AmerisourceBergen had admitted only three months
before that the products for which it had not paid Dialysist
West, including Procrit, were genuine. At the time Ameri-
sourceBergen filed its reply in May 2003, it had all the infor-
mation necessary to raise the affirmative defense it now
pursues: AmerisourceBergen knew about the counterfeit
Procrit on the pharmaceuticals market, acknowledged that it
had purchased Procrit from Dialysist West during that period,
and had previously filed suit because it believed that it had
purchased counterfeit drugs from Dialysist West. Although
AmerisourceBergen vigorously protests the denial of its
motion for leave to amend, it has never provided a satisfac-
tory explanation of why, twelve months into the litigation, it
so drastically changed its litigation theory.
[9] Even though eight months of discovery remained,
requiring the parties to scramble and attempt to ascertain
whether the Procrit purchased by AmerisourceBergen was
tainted, would have unfairly imposed potentially high, addi-
tional litigation costs on Dialysist West that could have easily
been avoided had AmerisourceBergen pursued its “tainted
product” theory in its original complaint or reply.10 Allowing
AmerisourceBergen to “advance different legal theories and
require proof of different facts” at this stage in the litigation
would have prejudiced Dialysist West and unfairly delayed
Dialysist West’s collection of a judgment worth approxi-
mately $2.2 million. Jackson, 902 F.2d at 1387; see also Cho-
dos v. West Publ’g Co., 292 F.3d 992, 1003 (9th Cir. 2002)
(upholding district court’s denial of leave to amend fraud
claim where plaintiff had facts prior to first amendment and
amendment was both prejudicial and dilatory); Morongo
10
See 6 Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Fed-
eral Practice and Procedure § 1487 (2d ed. 1990) (stating that “if [an] . . .
amendment substantially changes the theory on which the case has been
proceeding and is proposed late enough so that the opponent would be
required to engage in significant new preparation, the court may deem it
prejudicial.”).
AMERISOURCEBERGEN v. DIALYSIST WEST 17325
Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th
Cir. 1990) (upholding denial of leave to amend on the basis
of dilatoriness and prejudice where Morongo Indians intro-
duced new legal theory well into the litigation). Amerisource-
Bergen’s motion to amend its reply closely followed Dialysist
West’s challenge to AmerisourceBergen’s claim for equitable
setoff and motion for final judgment under Rule 54(b) as well
as the addition of seven new parties to the Epogen litigation.
We will not speculate whether AmerisourceBergen’s sudden
change in tactics was gamesmanship or the result of an over-
sight by counsel, but we do conclude that the district court did
not abuse its discretion in denying AmerisourceBergen’s
motion for leave to amend.
C. Certification of Final Judgment
[10] AmerisourceBergen also appeals the district court’s
certification of final judgment on Dialysist West’s counter-
claim under Federal Rule of Civil Procedure 54(b). Rule 54(b)
provides that final entry of judgment should be made on indi-
vidual claims in multiple claim suits “upon an express deter-
mination that there is no just reason for delay.” Fed. R. Civ.
P. 54(b). Review of a district court’s certification of a final
judgment involves a two-step process. See Curtiss-Wright
Corp. v. Gen. Elec. Co., 446 U.S. 1, 12 (1980). In the first
step, we review the district court’s entry of judgment de novo
and evaluate “such factors as the interrelationship of the
claims so as to prevent piecemeal appeals.” See Gregorian v.
Izvestia, 871 F.2d 1515, 1519 (9th Cir. 1989). The second
step of review requires an assessment of the equities. We
apply the “substantial deference” standard, reversing the dis-
trict court only if we find the district court’s conclusions
clearly unreasonable. Id.
[11] The district court found that there was no risk of dupli-
cative effort by the courts because any subsequent judgments
in this case would not vacate its judgment on Dialysist West’s
counterclaim. See Curtiss-Wright, 446 U.S. at 8 (holding that
17326 AMERISOURCEBERGEN v. DIALYSIST WEST
proper factors for 54(b) review include “whether the claims
for review were separable from the others . . . and whether the
nature of the claims already determined was such that no
appellate court would have to decide the same issues more
than once”). We agree. Because Dialysist West’s counter-
claim to recover for non-Epogen sales was not legally or fac-
tually related to AmerisourceBergen’s Epogen claim, no court
need revisit this judgment. See Morrison-Knudsen Co., Inc. v.
Archer, 655 F.2d 962, 965 (9th Cir. 1981).
[12] AmerisourceBergen contends that, as a matter of
equity, the district court’s certification of its judgment on Dia-
lysist West’s counterclaim should not be upheld because Dia-
lysist West is insolvent. We recognize that insolvency is a
factor that should weigh against the final entry of judgment on
Dialysist West’s counterclaim. See Reiter v. Cooper, 507 U.S.
258, 270 (1993) (acknowledging that “even a ‘threat of insol-
vency’ of the party seeking separate judgment is a factor
weighing against it”). But as the Supreme Court held in
Reiter: “[W]e cannot say that insolvency is an absolute bar [to
certification].” Id.; see also Shintom Am. Inc. v. Car Tels.
Inc., 45 F.3d 1107, 1110 (7th Cir. 1995) (affirming district
court’s entry of final judgment under 54(b) despite the “pre-
carious financial condition and potential insolvency of the
plaintiff”).
In weighing the equities of Rule 54(b) certification, the dis-
trict court concluded that certification was warranted because
this result: (1) aligned with the set-off principles of the UCC;
(2) helped avoid unreasonable delay; and because (3) Ameri-
sourceBergen owed Dialysist West approximately $2.2 mil-
lion. See AmerisourceBergen Corp., No. CIV-02-1472 PHX
JWS, slip op. at 14-15. These factors are a sufficient basis for
certifying final judgment in favor of Dialysist West. See
Schieffelin & Co. v. Valley Liquors, Inc., 823 F.2d 1064,
1065-1067 (7th Cir. 1987) (permitting certification where
defendant filed counterclaims and plaintiff asserted defenses
that were “at least plausible”); C.R. Bard, Inc. v. Med. Elecs.
AMERISOURCEBERGEN v. DIALYSIST WEST 17327
Corp., 529 F. Supp. 1382, 1388 (D. Mass. 1982) (stating that
court “saw no reason why plaintiff should be denied” use of
substantial funds “while awaiting disposition of . . . counter-
claims”). Moreover, the district court’s decision to favor Dia-
lysist West’s creditors as a matter of equity is not erroneous
where AmerisourceBergen has not shown that the debt it
seeks to set-off is related to Dialysist West’s counterclaim.
See Newbery Corp., 95 F.3d at 1399 (“[S]etoffs run contrary
to fundamental bankruptcy policies such as the equal treat-
ment of creditors and the preservation of a reorganizing debt-
or’s assets.”).
[13] “The task of weighing and balancing the contending”
equities of a case is “peculiarly one for the trial judge.”
Curtiss-Wright, 446 U.S. at 12. It is not the appellate court’s
role to “reweigh the equities.” Id. at 10. The district court’s
conclusions for certifying the judgment were not “clearly
unreasonable.” We decline to vacate the certification of judg-
ment.
D. Denial of Stay of Enforcement
[14] Federal Rule of Civil Procedure 62(h) provides that
when a court has entered final judgment, it may upon its dis-
cretion, “stay enforcement of that judgment until the entering
of a subsequent judgment or judgments.” Fed. R. Civ. P.
62(h). AmerisourceBergen argues that the district court erred
in rejecting its 62(h) motion by conflating Rule 54(b) and
Rule 62(h). While it is true that the district court has discre-
tion to grant a stay when it has already certified final judgment,11
11
See Curtiss-Wright, 446 U.S. at 13 (“Under this Rule [62(h)], we
assume it would be within the power of the district court to protect all par-
ties by having the losing party deposit the amount of the judgment with
the court . . . . In this way, valid considerations of economic duress and
solvency . . . can be provided without preventing Rule 54(b) consider-
ation.”); see also Reiter, 507 U.S. at 270-271 (similarly endorsing the con-
cept of a Rule 62(h) stay when a court certifies final judgment in favor of
17328 AMERISOURCEBERGEN v. DIALYSIST WEST
we disagree with AmerisourceBergen’s contention that “spe-
cial circumstances” warrant a stay in this case.
[15] AmerisourceBergen cannot show that failure to pro-
vide the stay will cause it to suffer greater harm than Dialysist
West will face should it be denied this judgment pending res-
olution of AmerisourceBergen’s outstanding claims. See Soo
Line R.R. Co. v. Escanaba & Lake Superior R.R. Co., 840
F.2d 546, 552 (7th Cir. 1988) (“Courts regularly require the
payment of undisputed debts while the parties litigate their
genuine disputes.”). Moreover, allowing AmerisourceBergen
to obtain a stay of the judgment would effectively sanction its
self-help tactics. If it does ultimately succeed on its Epogen
claim, AmerisourceBergen will have avoided paying funds it
owes Dialysist West and would unjustifiably leap-frog other
creditors. See Pereira v. Cogan, 275 B.R. 472, 475 (S.D.N.Y.
2002) (“In fashioning a stay of enforcement, a court looks to
general equitable principles.”). The district court did not
abuse its discretion in denying AmerisourceBergen’s Rule
62(h) motion.12
an insolvent party). Judge Tashima extensively cites Curtiss-Wright and
Reiter for the proposition that the district court abused its discretion by
denying AmerisourceBergen’s Rule 62(h) motion. Dissent at 17339-40.
But while Curtiss-Wright and Reiter both approved (in dicta) the option
of a Rule 62(h) stay when a court certifies judgment for an insolvent party,
neither case suggested that a district court would abuse its discretion if it
declined to issue a stay under these circumstances.
12
Judge Tashima would stay enforcement of the judgment and “pro-
tect[ ] AmerisourceBergen’s claims against Dialysist West’s insolvency.”
Dissent at 17343. Section 553 of the Bankruptcy Code governs the equita-
ble right of setoff in bankruptcy law. 11 U.S.C. § 553 (2006). Section 553,
however, does not create a right of setoff: “Rather, the section merely rec-
ognizes and preserves setoff rights that exist under other applicable law.
. . . Thus, the threshold determination in every case involving section 553
is the source of the alleged setoff right.” 5 Myron M. Sheinfeld et al., Col-
lier on Bankruptcy ¶ 553.01[2] (Lawrence P. King, ed., 15th ed. rev.
2005). AmerisourceBergen has no right to legal or equitable setoff under
Arizona law for the judgment against it on the counterclaim; it therefore
does not have a right to setoff under bankruptcy law. See In re Hal, Inc.,
196 B.R. 159, 161 (B.A.P. 9th Cir. 1996).
AMERISOURCEBERGEN v. DIALYSIST WEST 17329
E. Attorney’s Fees & Costs of Appeal
[16] Dialysist West seeks attorney’s fees and the costs of
appeal under Arizona Revised Statute section 12-341.01(A).
The statute permits an award of attorney’s fees to the “suc-
cessful party” in “any contested action arising out of a con-
tract.” Ariz. Rev. Stat. § 12-341.01(A) (2006). An award of
attorney’s fees under Arizona law is permissive, rather than
mandatory. See Wagenseller v. Scottsdale Mem’l. Hosp., 710
P.2d 1025, 1049 (Ariz. 1985). The Arizona Supreme Court
has held that there are six grounds that must be considered in
awarding attorney’s fees to a successful litigant including:
(1) whether the unsuccessful party’s claim or
defense was meritorious; (2) whether the litigation
could have been avoided or settled and the success-
ful party’s efforts were completely superfluous in
achieving the result; (3) whether assessing fees
against the unsuccessful party would cause an
extreme hardship; (4) whether the successful party
prevailed with respect to all of the relief sought; (5)
whether the legal question presented was novel and
whether such claim or defense have previously been
adjudicated in this jurisdiction; and (6) whether the
award would discourage other parties with tenable
claims or defenses from litigating or defending legit-
imate contract issues for fear of incurring liability for
substantial amounts of attorney’s fees.
Id. at 1049. Neither party directly addresses the Wagenseller
factors in its briefing, but there is sufficient evidence in the
record to conclude that these factors weigh against granting
Dialysist West attorney’s fees and costs. First, no evidence
has been presented indicating that this case could have been
successfully avoided or settled. Second, the issues in this
appeal raise novel questions of contract law. Finally, we do
not wish to discourage parties like AmerisourceBergen from
17330 AMERISOURCEBERGEN v. DIALYSIST WEST
litigating opaque issues of contract law for fear of being sad-
dled with opposing counsel’s fees and costs.
AFFIRMED.
TASHIMA, Circuit Judge, dissenting:
While I agree with most of the majority’s disposition of the
issues raised by this appeal, I part company on two issues. I
believe that the district court abused its discretion in denying
AmerisourceBergen’s motion for leave to amend because the
motion was made well before the deadline set by the court for
the making of such motions and because Dialysist West has
shown absolutely no prejudice. I further believe that the dis-
trict court abused its discretion in refusing to stay the judg-
ment pursuant to Federal Rule of Civil Procedure 62(h)
because it failed to perform an analysis separate from its Rule
54(b) analysis and failed to give adequate consideration to
Dialysist West’s insolvency. For these reasons, I respectfully
dissent from Parts III.B. and III.D. of the majority opinion,
and from the judgment of affirmance.
1. Leave to Amend.
Federal Rule of Civil Procedure 15 provides that “leave to
amend shall be freely given when justice so requires.” Fed. R.
Civ. P. 15(a). Absent prejudice, or a “strong showing” of the
other factors, such as undue delay, bad faith, or dilatory
motive, “there exists a presumption under Rule 15(a) in favor
of granting leave to amend.” Eminence Capital, LLC v.
Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (per
curiam); see also Allwaste, Inc. v. Hecht, 65 F.3d 1523, 1530
(9th Cir. 1995) (stating that, although the denial of leave to
amend after a responsive pleading has been filed is reviewed
for an abuse of discretion, “we strictly review such denial in
light of the strong policy permitting amendment”). Amend-
AMERISOURCEBERGEN v. DIALYSIST WEST 17331
ments are to be permitted liberally because, as the Supreme
Court observed many years ago, “[i]f the underlying facts or
circumstances relied upon by a plaintiff may be a proper sub-
ject of relief, he ought to be afforded an opportunity to test his
claim on the merits.” Foman v. Davis, 371 U.S. 178, 182
(1962).
On January 16, 2003, the district court held the scheduling
conference, pursuant to Federal Rule of Civil Procedure 16,
and set the trial date and the deadlines for discovery and dis-
positive motions. On June 19, 2003, the parties filed a joint
motion to extend the dates in the pretrial schedule. The dis-
trict court granted the motion on July 7, 2003, and accord-
ingly filed an order adjusting the pretrial schedule, based on
the joint motion of the parties and on a showing of good
cause. This order provided that the last date to file motions to
amend was extended from June 2, 2003, to December 2, 2003.
The order also extended the non-expert discovery cutoff date
from August 1, 2003, to February 2, 2004, and for expert dis-
covery from October 17, 2003, to April 19, 2004. The court
deleted the reference to the pretrial conference, stating that it
would address the final pretrial arrangements at a later date.
AmerisourceBergen’s motion for leave to amend was filed on
August 25, 2003 — more than three months before the cutoff
date for such motions and almost eight months before discov-
ery was to be completed.
“A pretrial order controls the subsequent course of the
action unless modified ‘upon a showing of good cause.’ ” El-
Hakem v. BJY Inc., 415 F.3d 1068, 1077 (9th Cir. 2005)
(quoting Zivkovic v. S. Cal. Edison Co., 302 F.3d 1080, 1087
(9th Cir. 2002)), cert. denied, 126 S. Ct. 1470 (2006); see also
Arsement v. Spinnaker Exploration Co., 400 F.3d 238, 245
(5th Cir. 2005) (“It goes without saying that a pre-trial order
controls the scope and course of trial . . . .” ); Johnson v.
Mammoth Recreations, Inc., 975 F.2d 604, 608 (9th Cir.
1992) (“The scheduling order ‘control[s] the subsequent
17332 AMERISOURCEBERGEN v. DIALYSIST WEST
course of the action’ unless modified by the court.”) (quoting
Fed. R. Civ. P. 16(e)) (alteration in original).
We have often affirmed the denial of leave to amend when
the motion was made after the cutoff date for such motions,
or when discovery had closed or was about to close. For
example, in Zivkovic, the motion to amend was filed three
months after the deadline established by the court and only
five days before discovery was to be completed. We con-
cluded that, under those circumstances, the district court did
not abuse its discretion in denying the motion to amend. Ziv-
kovic, 302 F.3d at 1087; see also, e.g., Lockheed Martin Corp.
v. Network Solutions, Inc., 194 F.3d 980, 983, 986 (9th Cir.
1999) (where the motion to amend was made more than four
months after the cutoff date for motions to amend, stating that
“[a] need to reopen discovery and therefore delay the pro-
ceedings supports a district court’s finding of prejudice from
a delayed motion to amend the complaint”); Solomon v. N.
Am. Life & Cas. Ins. Co., 151 F.3d 1132, 1139 (9th Cir. 1998)
(affirming the denial of leave to amend where the motion was
made “on the eve of the discovery deadline”).
Our jurisprudence thus establishes that where a motion to
amend the pleadings is made within the time established by
the pretrial scheduling order for the making of such motions,
the motion is presumptively timely. Otherwise, it would be a
pointless exercise to establish cutoff dates in a Rule 16 sched-
uling order.1 Here, the motion to amend was made more than
three months before the motion cutoff date; thus, “on its face,
the motion was timely.” Halbert v. City of Sherman, Tex., 33
F.3d 526, 529 (5th Cir. 1994). Moreover, eight months
remained before the completion of discovery.
1
What would be the point, for example, of the rule’s requirement that
“[a] schedule shall not be modified except upon a showing of good cause
and by leave of the district court,” Fed. R. Civ. P. 16(b), if the schedule
can be disregarded by the court and counsel.
AMERISOURCEBERGEN v. DIALYSIST WEST 17333
The majority has cited no case in which a motion to amend
was made within the deadline set by the district court and yet
denied as untimely. Indeed, such a case would be difficult to
find because common sense and Rule 16 dictate that a motion
filed “well within the . . . scheduling order deadline for the
amendment of pleadings” is timely “on its face.” Id.
Contrary to the majority’s assertion, taking into account the
fact that the motion was presumptively timely does not force
the district court to “accept all ‘timely’ motions filed before
the court-appointed deadline.”2 Maj. Op. at 17322. In fact, the
remaining factors, including prejudice and bad faith, remain
to be assessed. Given the undeniable conclusion that the
motion was presumptively timely, it remains for Dialysist
West to establish prejudice sufficient to overcome the pre-
sumption under Rule 15(a) in favor of granting leave to
amend. Eminence Capital, 316 F.3d at 1052.
In DCD Programs, Ltd. v. Leighton, 833 F.2d 183 (9th Cir.
1987), we reversed the district court’s denial of the plaintiffs’
motion to file a fourth amended complaint. Id. at 190. We
rejected the defendant’s argument that it would be prejudiced
by the delay in naming it to the suit, stating that, “[g]iven that
this case is still at the discovery stage with no trial date pend-
ing, nor has a pretrial conference been scheduled, there is no
evidence that [the defendant] would be prejudiced by the tim-
ing of the proposed amendment.” Id. at 187-88.
The Eighth Circuit similarly has relied on the fact that trial
was nearly three months away in concluding that the district
court abused its discretion in denying leave to amend an
answer. Dennis v. Dillard Dep’t Stores, Inc., 207 F.3d 523,
526 (8th Cir. 2000); see also Halbert, 33 F.3d at 530 (con-
cluding that the district court erred in denying “the facially
valid motion to amend,” where the motion to amend was
2
The majority’s use of quotation marks around “timely” is disingenu-
ous; there is absolutely no question that the motion to amend was timely.
17334 AMERISOURCEBERGEN v. DIALYSIST WEST
made four months before the scheduling order deadline). The
court reasoned that, although discovery had closed, the district
court had discretion to reopen it for the limited purpose of
exploring the additional defense raised by the amendment,
noting that “an ‘adverse party’s burden of undertaking discov-
ery, standing alone, does not suffice to warrant denial of a
motion to amend a pleading.’ ” Dennis, 207 F.3d at 526 (quot-
ing United States ex rel. Maritime Admin. v. Cont’l Ill. Nat’l
Bank & Trust Co., 889 F.2d 1248, 1255 (2d Cir. 1989)). The
court further reasoned that the three months remaining until
trial was ample time to conduct any further discovery that
may have been required. Id.
Similar to DCD, the trial date in the instant case had not
even been set at the time AmerisourceBergen filed its motion
to amend. The district court already had found that there was
good cause to modify the pretrial schedule, giving the parties
six additional months to file motions to amend, to complete
discovery, and to file dispositive motions. AmerisourceBer-
gen’s motion was filed less than two months after the court
had modified the schedule, and well before the deadline estab-
lished by the modified schedule. Thus, this case falls squarely
within the reasoning of DCD, Dennis, and Halbert.
The majority asserts that this case is distinguishable from
DCD and Halbert because the district court provided suffi-
cient reasons to justify the denial of the leave to amend. Maj.
op. at 17323. The district court relied primarily on a finding
of prejudice to Dialysist West in denying the motion to
amend, but the court did not explain how Dialysist West
would be prejudiced. We have noted that “[b]ald assertions of
prejudice cannot overcome the strong policy reflected in Rule
15(a) to ‘facilitate a proper disposition on the merits.’ ” Hurn
v. Ret. Fund Trust of the Plumbing, Heating & Piping Indus.,
648 F.2d 1252, 1254 (9th Cir. 1981) (quoting Conley v. Gib-
son, 355 U.S. 41, 48 (1957)); see also Eminence Capital, 316
F.3d at 1052 (“A simple denial of leave to amend without any
explanation by the district court is subject to reversal. Such a
AMERISOURCEBERGEN v. DIALYSIST WEST 17335
judgment is ‘not an exercise of discretion; it is merely abuse
of that discretion and inconsistent with the spirit of the Fed-
eral Rules.’ ” (quoting Foman, 371 U.S. at 182)).
The majority asserts that the proposed amendment would
have imposed “potentially high, additional litigation costs on
Dialysist West.”3 Maj. op. at 17324. AmerisourceBergen dis-
putes the district court’s statement that the parties agreed that
the proposed amendment would require further discovery.4
Even if further discovery were required, however, nearly eight
months remained before the discovery cutoff date — a dead-
line based on the parties’ own stipulation. Given that the par-
ties had agreed on this schedule, it is difficult to understand
how Dialysist West could have been prejudiced, even if fur-
ther discovery were required.
The reason the majority gives for the potential additional
litigation costs is that AmerisourceBergen “drastically
changed its litigation theory.” Maj. op. at 17324. Yet Ameri-
sourceBergen alleged in its proposed amendment that it pur-
chased both Epogen and Procrit from Dialysist West, the two
are identical drugs, they are manufactured by the same com-
pany, although Procrit is marketed by a different company,
and both drugs were the subject of announcements regarding
counterfeit products. The assertion that the addition of the
Procrit claim constitutes a drastic change in AmerisourceBer-
gen’s litigation theory is thus not supported by the record.
Dialysist West bore the burden of showing that it would be
prejudiced by the proposed amendment. See Eminence Capi-
3
There is no denying that litigation costs today are high. But if the “high
cost” of additional litigation were a sufficient showing of prejudice, then
virtually all but the most innocuous amendments could be denied as “prej-
udicial.” This surely cannot be the standard for denying leave to amend.
4
In its memorandum in support of its motion to amend, Amerisource-
Bergen disputed Dialysist West’s assertions regarding the need for further
discovery that would arise from the proposed amendment.
17336 AMERISOURCEBERGEN v. DIALYSIST WEST
tal, 316 F.3d at 1052. Dialysist West did not contend, and the
district court did not find, that any additional discovery that
might have been required could not have been completed
within the time remaining before the discovery cutoff date.
The need to undertake additional discovery cannot be classi-
fied as prejudice so long as ample time remains, as it did in
this case, to complete that discovery before the discovery cut-
off date. See, e.g., Arthur v. Maersk, Inc., 434 F.3d 196, 206
(3d Cir. 2006) (finding no prejudice where the plaintiff’s pro-
posed amendment was filed eleven months after the original
complaint, reasoning that the defendant “had not argued that
the delay impaired its ability to defend against the suit or that
it ‘was unfairly disadvantaged or deprived of the opportunity
to present facts or evidence which it would have offered had
the . . . amendment [ ] been timely’ ”) (quoting Bechtel v.
Robinson, 886 F.2d 644, 652 (3d Cir. 1989)) (alterations in
original); Dennis, 207 F.3d at 526 (stating that the mere fact
that an adverse party must undertake discovery does not suf-
fice to warrant denying a motion to amend); DCD, 833 F.2d
at 188 (reasoning that, because the case was at the discovery
stage, there was no evidence of prejudice). After all, discov-
ery is an ordinary incident and burden of litigation sanctioned
by the Federal Rules of Civil Procedure. I thus disagree with
the majority’s characterization of the need to conduct discov-
ery as prejudicial. The majority simply misunderstands the
meaning of “prejudice” in this context — or willfully misap-
plies it.
As in DCD and Dennis, I would therefore hold that Dialy-
sist West has failed to demonstrate any prejudice from the
proposed amendment, let alone prejudice sufficient to over-
come the presumption in favor of granting leave to amend.
See, e.g., Adam v. Hawaii, 235 F.3d 1160, 1164 (9th Cir.
2001) (concluding that the district court erred by denying the
motion to amend where the defendants failed to identify any
prejudice they would suffer from the amendment and “at this
point in the proceedings, there has been no discovery, nor has
a trial date been set”), overruled on other grounds by Green
AMERISOURCEBERGEN v. DIALYSIST WEST 17337
v. City of Tucson, 255 F.3d 1086 (9th Cir. 2001) (en banc);
S.S. Silberblatt, Inc. v. E. Harlem Pilot Bock Bldg. 1 Hous.
Dev. Fund Co., 608 F.2d 28, 42-43 (2d Cir. 1979) (reversing
the denial of the appellant’s motion for leave to amend, reject-
ing the appellee’s argument that it would suffer undue preju-
dice because of the extensive discovery that would be
required, stating that this was insufficient to overcome the
policy in favor of permitting amendment, “particularly when
trial has not yet commenced and is not likely to do so for
some time”).
The district court also stated that AmerisourceBergen’s
proposed amendment sought to contradict established facts of
the case. The majority similarly relies on this reasoning. See
Maj. Op. at 17323-24. But this is the very nature and purpose
of an amendment. “ ‘[A]n amended pleading supersedes the
original.’ ” Armstrong v. Davis, 275 F.3d 849, 878 n.40 (9th
Cir. 2001) (quoting Hal Roach Studios, Inc. v. Richard Feiner
& Co., 896 F.2d 1542, 1546 (9th Cir. 1989)) (alteration in the
original). Thus, although “a statement in a complaint may
serve as a judicial admission,” the admission is no longer
binding if the party subsequently amends the pleading. Sicor
Ltd. v. Cetus Corp., 51 F.3d 848, 859 (9th Cir. 1995); see
also, e.g., 188 LLC v. Trinity Indus., 300 F.3d 730, 736 (7th
Cir. 2002) (“When a party has amended a pleading, allega-
tions and statements in earlier pleadings are not considered
judicial admissions.”); 3 James Wm. Moore et al., Moore’s
Federal Practice § 15.17[3] (3d ed. 2005) (stating that, “in the
more usual scenario, a court may permit a party amending a
pleading to withdraw an admission contained in the original
pleading”). I therefore disagree with the majority that “the
district court . . . provided sufficient ‘justifying reasons’ for
denying AmerisourceBergen’s leave to amend.” Maj. op. at
17323.
Finally, the majority asserts that permitting the amendment
“would have unfairly delayed Dialysist West’s collection of
a judgment worth over $2.2 million.” Maj. op. at 17324-25.
17338 AMERISOURCEBERGEN v. DIALYSIST WEST
There is nothing in the record, however, to support the asser-
tion that final judgment would have been unnecessarily
delayed. The pretrial conference date had previously been
vacated and no trial date had been set, and there was ample
time left before the discovery cutoff date to conduct any nec-
essary discovery. Thus, nothing in this record supports the
majority’s assertion of unnecessary delay.
The district court abused its discretion in denying Ameri-
sourceBergen’s timely motion to amend in the absence of any
showing of prejudice by Dialysist West.
2. Stay of the Judgment.
I also believe that the district court abused its discretion in
denying AmerisourceBergen’s motion to stay the judgment
pursuant to Rule 62(h). After directing entry of final judgment
pursuant to Rule 54(b) against AmerisourceBergen on Dialy-
sist West’s second claim for relief in its counterclaim, the dis-
trict court denied AmerisourceBergen’s motion to stay the
judgment pursuant to Rule 62(h). To support its order, the dis-
trict court stated only that AmerisourceBergen’s motion was
based on Dialysist West’s insolvency, and that it had consid-
ered the issue in its prior order and found the argument unper-
suasive. But the insolvency analysis under Rule 62(h) is
different from the insolvency analysis under Rule 54(b), and
the district court did not make that analysis.
This case involved several claims and counterclaims. The
district court directed entry of judgment on the pleadings with
respect to Dialysist West’s second claim for relief in its coun-
terclaim, related to non-Epogen products. Still at issue are
AmerisourceBergen’s claims regarding Epogen and Dialysist
West’s first claim for relief. Although the district court ruled
against AmerisourceBergen on the set-off issue, Amerisource-
Bergen’s claim regarding the counterfeit Epogen remains.
AmerisourceBergen argued below that enforcement of the
judgment should be stayed because of Dialysist West’s insol-
AMERISOURCEBERGEN v. DIALYSIST WEST 17339
vency. The district court docket indicates that Dialysist West
had, in fact, filed for bankruptcy as of May 2004.
In Curtiss-Wright Corp. v. General Electric Co., 446 U.S.
1 (1980), the Supreme Court examined the district court’s
entry of final judgment under Rule 54(b), in favor of Curtiss-
Wright, on some of the claims in a multi-claim suit. The dis-
trict court’s entry of judgment was based, in part, on the fact
that the litigation on the remaining claims would continue for
months, if not years, and on the determination that both liti-
gants were financially sound. The Supreme Court agreed that,
although General Electric’s pending counterclaims created the
possibility of a set-off against the amount it owed Curtiss-
Wright, Curtiss-Wright was financially sound and would be
able to satisfy any judgment on the counterclaims. Id. at 11-
12. The Court further stated that, “if Curtiss-Wright were
under a threat of insolvency, that factor alone would weigh
against qualifying” because the threat alone would cast doubt
on Curtiss-Wright’s ability to satisfy any counterclaims, if
General Electric were to prevail. Id. at 12. The Court noted
that Rule 62(h) would allow the district court to protect the
parties by having the losing party deposit the amount of the
judgment with the court, such that “valid considerations of
economic duress and solvency, which do not affect the juridi-
cal considerations involved in a Rule 54(b) determination, can
be provided for without preventing Rule 54(b) certification.”
Id. at 13 n.3.
The Supreme Court again cited the threat of insolvency in
Reiter v. Cooper, 507 U.S. 258 (1993), in which the issue was
whether, “when a shipper defends against a motor common
carrier’s suit to collect tariff rates with the claim that the tariff
rates were unreasonable, the court should proceed immedi-
ately to judgment on the carrier’s complaint without waiting
for the Interstate Commerce Commission . . . to rule on the
reasonableness issue.” Id. at 260. The Court concluded that
the “ordinary rules governing counterclaims” applied and
stated that, “[i]n the ordinary case, where a carrier is solvent
17340 AMERISOURCEBERGEN v. DIALYSIST WEST
and has promptly initiated suit, the equities favor separate
judgment on the principal claim.” Id. at 270. The equities to
be balanced in a Rule 54(b) consideration “change, however,
when the suing carrier is in bankruptcy.” Id. Although insol-
vency is not an “absolute bar” to Rule 54(b) certification, the
Court reasoned that a district court could protect against the
threat of insolvency by entering separate judgment but staying
enforcement of the judgment under Rule 62(h). Id. at 270-71.
Curtiss-Wright and Reiter thus indicate that, although entry of
a final judgment under Rule 54(b) may be proper, the district
court should rely on Rule 62(h) to protect the parties when
there are “valid considerations of economic duress and sol-
vency.” Curtiss-Wright, 446 U.S. at 13 n.3; see Pereira v.
Cogan, 275 B.R. 472, 475 (S.D.N.Y. 2002) (“ ‘[t]he Supreme
Court has suggested that where Rule 54(b) certification is
appropriate, courts can protect all parties against the
uncertainties posed by the possibility of a large setoff and by
the possibility of the insolvency of a judgment debtor’ ” by
staying enforcement pursuant to Rule 62(h) and having the
losing party deposit the amount of the judgment with the
court) (quoting Bowne of New York City, Inc. v. AmBase
Corp., 161 F.R.D. 270, 274 (S.D.N.Y. 1995)).
The district court here denied AmerisourceBergen’s motion
to stay enforcement of the judgment without any discussion,
stating only that it had considered AmerisourceBergen’s argu-
ment regarding Dialysist West’s insolvency when it granted
Dialysist West’s motion for judgment on the pleadings, and
citing its prior order. But the discussion cited by the district
court regarding Dialysist West’s “alleged threat of insolven-
cy” was made in the context of AmerisourceBergen’s argu-
ment that it was entitled to equitable set-off because of
Dialysist West’s insolvency, which is a completely different
question from that raised by the motion under Rule 62(h).
AmerisourceBergen sought a stay of the enforcement of the
judgment because of Dialysist West’s undisputed insolvency
and the claims that remained to be resolved. The Supreme
AMERISOURCEBERGEN v. DIALYSIST WEST 17341
Court’s references to Rule 62(h) in Curtiss-Wright and Reiter
indicate that the instant case presents exactly the type of situa-
tion in which a stay of the enforcement of the judgment is
appropriate. For example, in a case similar to the instant case
that involved multiple claims and counterclaims, the First Cir-
cuit reasoned that, unlike Curtiss-Wright, the plaintiff “would
likely be left with no way to collect” if it established its
claims, because the defendant was insolvent. ITV Direct, Inc.
v. Healthy Solutions, LLC, 445 F.3d 66, 73 (1st Cir. 2006).
Nonetheless, the court affirmed the district court’s entry of
judgment under Rule 54(b) because the plaintiff had dis-
missed its claims, but noted that the plaintiff “was not com-
pelled to dismiss its claims against [the defendant] simply
because the district court ruled against it on the 54(b) certifi-
cation,” citing Rule 62(h). Id.; see also, e.g., Schieffelin & Co.
v. Valley Liquors, Inc., 823 F.2d 1064, 1066 (7th Cir. 1987)
(affirming the entry of final judgment under Rule 54(b)
despite a remaining counterclaim, but noting that “enforce-
ment might have been stayed under appropriate conditions
under Rule 62(h),” although the party did not make such a
claim); Navajo Tribe of Indians v. United States, 364 F.2d
320, 347 (Ct. Cl. 1966) (holding that, although the plaintiff
was entitled to entry of a separate final judgment, payment of
the judgment should be stayed pursuant to Rule 62(h) because
the validity of the defendant’s counterclaim had not yet been
determined); EMI Music Mktg. v. Avatar Records, Inc., 317
F. Supp. 2d 412, 424-25 (S.D.N.Y. 2004) (directing the entry
of final judgment pursuant to Rule 54(b) but staying enforce-
ment of the judgment because of the claims and counterclaims
that remained to be resolved and the possibility that the judg-
ment might be reduced if the defendant prevailed on its coun-
terclaims).
The majority reasons that staying the judgment would “ef-
fectively sanction” AmerisourceBergen’s “self-help tactics”
because, if it succeeds on its Epogen claim, it “will have
avoided paying funds it owes Dialysist West and would
unjustifiably leap-frog other creditors.” Maj. op. at 17328.
17342 AMERISOURCEBERGEN v. DIALYSIST WEST
AmerisourceBergen cannot continue to litigate its Epogen
claim, however, because Dialysist West has filed for bank-
ruptcy and, pursuant to 11 U.S.C. § 362(a)(1), the case has
been stayed by the district court. See 11 U.S.C. § 362(a) (stat-
ing that a bankruptcy petition operates as a stay of, inter alia,
the continuation of a judicial proceeding against the debtor
that was commenced prior to the bankruptcy filing); McCar-
thy, Johnson & Miller v. North Bay Plumbing, Inc. (In re Pet-
tit), 217 F.3d 1072, 1077 (9th Cir. 2000) (explaining that the
automatic stay under § 362 enjoins the continuation of any
judicial proceedings against the debtor and the enforcement of
prior judgments). Furthermore, even if AmerisourceBergen
were permitted by the bankruptcy court to proceed with its
action and then succeed on its Epogen claim, it still would be
prohibited from enforcing its judgment by the automatic stay.
See 11 U.S.C. § 362(a) (further stating that the bankruptcy
petition stays a proceeding to recover a claim against the
debtor that arose before the commencement of the bankruptcy
case); Delpit v. Comm’r, 18 F.3d 768, 772 (9th Cir. 1994)
(stating that “a creditor’s attempt to enforce a pre-bankruptcy
judgment outside of Bankruptcy Court would violate four pro-
visions of Section 362 simultaneously”). AmerisourceBergen
would simply become an unsecured creditor, in line with Dia-
lysist West’s other unsecured creditors. Cf. Shoen v. Shoen (In
re Shoen), 176 F.3d 1150, 1153 n.1 (9th Cir. 1999) (Mc-
Keown, J., dissenting) (stating that there was no dispute that
the appellees, “as judgment creditors, but not lien creditors,
hold unsecured claims”). Thus, contrary to the majority’s
assertion, maj. op. at 17328, AmerisourceBergen is prevented
by the Bankruptcy Code from “leap-frogging” Dialysist
West’s other creditors.
As discussed supra, Curtiss-Wright and Reiter indicate
that, when multiple claims and counterclaims are involved,
and the district court grants certification under Rule 54(b),
“valid considerations of economic duress and solvency” can
be addressed by the use of Rule 62(h) to “protect all parties.”
Curtiss-Wright, 446 U.S. at 13 n.3. When Dialysist West filed
AMERISOURCEBERGEN v. DIALYSIST WEST 17343
for bankruptcy, the judgment awarded on its second counter-
claim became the property of the bankruptcy estate. See 11
U.S.C. § 541(a)(1) (describing property of the estate as “all
legal or equitable interests of the debtor in property as of the
commencement of the [bankruptcy] case”); Myron M. Shein-
feld et al., 3 Collier on Bankruptcy ¶ 541.08[5] (Lawrence P.
King, ed., 15th ed. rev. 2005) (“Where a cause of action
belonging to the debtor has been merged into judgment prior
to bankruptcy, the estate succeeds to all rights under such
judgment.”). Staying enforcement of the judgment would not
have allowed AmerisourceBergen to avoid payment of the
judgment and step in line ahead of other creditors; the Bank-
ruptcy Code provides numerous protections of the property of
the estate, such as the automatic stay and the avoidance of
fraudulent or preferential transfers. Rather, a stay would have
served the purpose contemplated by the Supreme Court in
Curtiss-Wright of protecting AmerisourceBergen’s claims
against Dialysist West’s insolvency.5
Because the district court failed to conduct any analysis of
AmerisourceBergen’s Rule 62(h) motion and did not consider
the effect of Dialysist West’s insolvency on its ability to sat-
isfy any claims of AmerisourceBergen, I believe that the court
abused its discretion in denying the Rule 62(h) motion.
5
The majority apparently believes that the only right of Amerisource-
Bergen protectable by a stay is its equitable right of setoff. Maj. op. at
17328 n.12. This narrow focus, however, ignores that if the district court
had allowed AmerisourceBergen to amend its reply, as I believe it should
have, Dialysist West would not have been entitled to judgment on the
pleadings on its second counterclaim because AmerisourceBergen would
have been able to dispute the genuineness of the non-Epogen products on
which that claim was based. Thus, the majority’s assumption that Ameri-
sourceBergen’s only right to payment from Dialysist West was based on
setoff is incorrect. AmerisourceBergen’s own claims against Dialysist
West remained and still remain undetermined, and its ability to collect on
those claims, should it ultimately prevail, is jeopardized by Dialysist
West’s bankruptcy.
17344 AMERISOURCEBERGEN v. DIALYSIST WEST
For the foregoing reasons, I would reverse the judgment of
the district court. I respectfully dissent.