Bass, Berry & Sims attorney Chris Lazarini examined a Madoff Trustee’s case in which defendants sought to modify their Scheduling Order to allow them to take discovery of supplemental matters identified in the Trustee’s amended disclosures in other cases. The court denied the motion, stating that a Scheduling Order may only be modified for “good cause,” which the defendants failed to establish.

Chris provided the analysis for Securities Online Litigation Alert (SOLA). The full text of the analysis is below and used with permission from the publication.

SIPC vs. BLMIS: Picard vs. Nelson, Adv. Pro. Nos. 10-04377; -04658 & -04898 (S.D. N.Y., Bankr., 1/2/19)

*Federal Rule of Civil Procedure 16(b)(4) states that a deadline in a Scheduling Order “may be modified only for good cause and with the judge’s consent.”

**A party’s lack of diligence in complying with the Order is not “good cause” for modification, and lack of prejudice to a non-moving party is irrelevant.

In late 2010, the Trustee in the Bernie Madoff matter filed adversary proceedings against approximately 1,000 “net winners” (i.e., persons who had withdrawn more from their Madoff accounts than they had deposited into them) to recover their “fictitious profits.” The cases were subject to a single case management order, but with distinct discovery schedules. In the three cases at issue here, the Trustee timely made his Rule 26(a) initial disclosures, and Defendants allowed their March 2016 discovery deadlines to pass without seeking additional discovery. They did, however, serve discovery after the deadline passed. The Trustee objected to their discovery as untimely, and Defendants did not move to compel.

During a May 2017 scheduling conference, Defendants’ counsel acknowledged all three cases were ready for trial and one case was set for hearing in February 2019. A Defendant’s medical issues prevented the other two cases from being set. In November 2018, the Court held another conference to set those cases for trial, but Defendants’ counsel informed the Court that the Trustee had recently submitted amended initial disclosures in other adversary proceedings (but not these three) and was granted leave to move to adjourn. In their Motion, Defendants sought adjournment of their trials and permission to modify their case management order to allow them to take discovery of the supplemental matters identified in the Trustee’s amended disclosures in other cases. They also argued that discovery in their cases was still open or had been re-opened by the Trustee or the Magistrate handling discovery matters.

The Court denies the Motion. First, the Court finds Defendants failed to demonstrate “good cause” to modify the case management order. The Court cites Defendants’ failure to timely serve discovery and notes the Trustee was not obligated to amend his initial disclosures in Defendants’ cases to identify witnesses he did not intend to call. Second, the Court rejects Defendants’ contention that discovery was still open or had been re-opened. The Court finds the Trustee, in proposing an omnibus trial on issues relating to the existence and duration of the alleged Ponzi scheme, did not concede that defendants in cases where discovery was closed could seek additional discovery and did not offer to re-open discovery.

Similarly, the Court finds the Magistrate’s determination to issue a single ruling on a discovery issue raised by Defendants’ counsel in other cases she was handling did not translate to a finding that discovery was open, or had been re-opened, in all of her cases. The ruling, the Court determines, applies only to cases where discovery was still open or a timely dispute had been raised. It did not, however, amend scheduling orders in cases, like these, where discovery had never been requested and was closed, and which counsel acknowledged were trial-ready.