The full case caption appears at the
end of this opinion. This litigation began when Ohio Cellular Products Corporation (OCP) sued respondent Adams USA, Inc. (Adams),claiming patent infringement. The District Court eventually dismissed OCP’s claim and ordered OCP to pay Adams’ costsand attorney fees. Adams feared that OCP might be unable to pay the fee award and therefore sought a means to recoverfrom petitioner Nelson, president and sole shareholder of OCP, in his individual capacity. In pursuit of that objective, Adamsmoved under Rule 15 of the Federal Rules of Civil Procedure to amend its pleading to add Nelson as a party; Adams alsoasked the court, under Rule 59(e), to amend the fee award. The District Court granted the motion in full, simultaneouslymaking Nelson a party and subjecting him to judgment. The Court of Appeals affirmed. We hold that the District Court erredin amending the judgment immediately upon permitting amendment of the pleading. Due process, as reflected in Rule 15 aswell as Rule 12, required that Nelson be given an opportunity to respond and contest his personal liability for the award afterhe was made a party and before the entry of judgment against him. I OCP and its successor corporation held two patents relating to the method of manufacturing a foamed padding used inathletic equipment. In 1994, OCP sued Adams for infringement. Adams maintained that the patents had been anticipated byprior art and were therefore invalid under 35 U.S.C. � 102(b). The District Court ruled in Adams’ favor and dismissed theinfringement complaint. Adams then moved for attorney fees and costs. The District Court granted the motion on the ground that Nelson, whowas at all relevant times president and sole shareholder of OCP, had deceitfully withheld the prior art from the United StatesPatent and Trademark Office. This behavior, the District Court concluded, constituted inequitable conduct chargeable toOCP. On January 20, 1998, the District Court awarded Adams costs and fees in the amount of $178,888.51 against OCP. Adams feared, however, that it would be unable to collect the award. This was an altogether understandable concern; itstemmed from a letter OCP’s counsel had sent Adams warning that OCP would be liquidated if exposed to a judgment forfees more than nominal in amount. Adams therefore moved to amend its pleading to add Nelson, personally, as a party fromwhom fees could be collected. In this postjudgment endeavor, Adams reasoned that Nelson was the flesh-and-blood partybehind OCP, the person whose conduct in withholding prior art precip-itated the fee award, and a person with funds sufficient to satisfy that award. The District Court granted the motion. Adams’ motion, however, sought more than permission to amend the pleading. It sought simultaneously an amendedjudgment, subjecting Nelson to liability as soon as he was made a party. See Record, Doc. No. 126, at 1 (“Defendants [i.e.,Adams] hereby move the Court … for an order granting Defendants leave to amend their third party complaint to nameDonald E. Nelson (Nelson) as a third party defendant in his individual capacity, and amending the judgment in this action toinclude Nelson as an additional party against whom judgment is entered.”). In presenting the motion, Adams offered noreason why the judgment should be altered immediately. See id., at 7-8. The motion did contend that an amendment to thejudgment was “necessary to prevent manifest injustice,” id., at 8 (internal quotation deleted), but it did not explain whyNelson, once joined as a party, should not be permitted to state his side of that argument. The District Court seems not tohave paused over this question, for it allowed the pleading amendment and altered the judgment at a single stroke. Record,Doc. No. 131. The memorandum explaining the District Court’s decision addressed only the propriety of adding Nelson as aparty. It did not address the propriety of altering the judgment at the very same time. Record, Doc. No. 130, at 3-7. The Court of Appeals for the Federal Circuit affirmed the amended judgment against Nelson. Ohio Cellular Prods., Inc.v. Adams USA, Inc., 175 F.3d 1343 (1999). It was “uncommon,” the appeals court acknowledged, to add a party after theentry of judgment. Id., at 1348. The court concluded, however, that Nelson had not been prejudiced by the postjudgmentjoinder. The Federal Circuit based that conclusion on Nelson’s failure to show that “anything different or additional wouldhave been done” to stave off the judgment had Nelson been a party, in his individual capacity, from the outset of the litigation.Id., at 1351. The panel, over a vigorous dissent by Judge Newman, was apparently satisfied that adding Nelson as a partyand simultaneously amending the judgment to obligate him individually met due process requirements. See id., at 1345, 1349,n. 5. Seeking review in this Court, Nelson did not dispute the portion of the District Court’s order that granted Adams leave toamend its pleading to add Nelson as a party against whom costs and fees were sought. Pet. for Cert. 11. What he doeschallenge, and what is now before us, is the portion of the District Court’s order that immediately adjudged Nelson personallyliable the moment he was made a party. II A The Federal Rules of Civil Procedure are designed to further the due process of law that the Constitution guarantees. Cf.Fed. Rule Civ. Proc. 1 (Rules “shall be construed and administered to secure the just, speedy, and inexpensive determinationof every action.”). Rule 15 sets out the requirements for amended and supplemental pleadings. On that score, the Court ofAppeals observed that as long as no undue prejudice is shown, “due process requirements are met if the requirements ofRule 15 are met.” 175 F.3d, at 1349, n. 5. But in the instant case, the requirements of Rule 15 were not met. As JudgeNewman recognized in her dissent below, due process does not countenance such swift passage from pleading to judgmentin the pleader’s favor. See id., at 1352. The propriety of allowing a pleading alteration depends not only on the state of affairs prior to amendment but also onwhat happens afterwards. Accordingly, Rule 15 both conveys the circumstances under which leave to amend shall begranted and directs how the litigation will move forward following an amendment. When a court grants leave to amend to addan adverse party after the time for responding to the original pleading has lapsed, the party so added is given “10 days afterservice of the amended pleading” to plead in response. Fed. Rule Civ. Proc. 15(a). This opportunity to respond, fundamentalto due process, is the echo of the opportunity to respond to original pleadings secured by Rule 12. See Fed. Rule Civ. Proc.12(a)(1). Thus, Rule 15 assumes an amended pleading will be filed and anticipates service of that pleading on the adverseparty. Nelson was never served with an amended pleading. Indeed, no such pleading was ever actually composed and filed incourt. Nor, after the amendment naming him as a party, was Nelson accorded 10 days to state his defenses against personalliability for costs and fees. Instead, judgment was entered against him the moment permission to amend the pleading wasgranted. Appeal after judgment, in the circumstances this case presents, did not provide an adequate opportunity to defendagainst the imposition of liability. Cf. American Surety Co. v. Baldwin, 287 U.S. 156 (1932). Adams points to nothing inthe record indicating that Nelson affirmatively relinquished his right to respond on the merits of the case belatedly statedagainst him in his individual capacity. Accordingly, the proceedings did not comply with Rule 15, and neither did theycomport with due process. See, e.g., Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950) (” ‘Thefundamental requisite of due process of law is the opportunity to be heard.’ “ ) (quoting Grannis v. Ordean, 234 U.S. 385,394 (1914)). It is true that Nelson knew as soon as Adams moved to amend the pleading and alter the judgment that he might ultimatelybe subjected to personal liability. One could ask, therefore, whether Nelson in fact had a fair chance, before alteration of thejudgment, to respond and be heard. Rule 15 and the due process for which it provides, however, demand a more reliableand orderly course. First, as the Rule indicates, pleading in response to an amended complaint is a prerogative of parties, seeFed. Rule Civ. Proc. 15(a), and Nelson was not a party prior to the District Court’s ruling on Adams’ motion to amend.Second, as Rule 15 further prescribes, the clock on an added party’s time to respond does not start running until the newpleading naming that party is served, see ibid., just as the clock on an original party’s time to respond does not start runninguntil the original pleading is served, see Fed. Rule Civ. Proc. 12(a)(1)(A). This is not to say that Rule 15 is itself aconstitutional requirement. Beyond doubt, however, a prospective party cannot fairly be required to answer an amendedpleading not yet permitted, framed, and served.
[FOOTNOTE 1] In support of its holding that Nelson was not prejudiced when added as a party and subjected to judgment, the FederalCircuit relied on its prior decision in Fromson v. Citiplate, Inc., 886 F.2d 1300 (1989). See 175 F.3d, at 1349-50 andn. 7. The reliance is puzzling, for the circumstances in Fromson were crucially different from those presented here. Theplaintiff in Fromson prevailed on an infringement claim and subsequently moved to hold the owners of the judgment-proofdefendant corporation individually liable. To that extent only, Fromson resembles the instant case. Notably unlike Adams,however, the plaintiff in Fromson had moved before trial to add the individual owners as parties, because it suspected fromthe start that the defendant corporation might not be able to pay. The District Court denied that motion in reliance on thedefendant corporation’s false assurances that it was solvent. See 886 F.2d, at 1301, 1304. Having been informed before trialthat the plaintiffs sought to sue them in their individual capacities, and having acted deliberately to derail such a suit, theowners of the defendant corporation in Fromson could hardly assert that another’s mistake or choice of whom to sue hadcompromised their ability to defend. Their problem, the Federal Circuit aptly observed in its Fromson opinion, was “a bed oftheir own making.” Id., at 1304. Here, in contrast, Adams never sought to sue Nelson individually until after judgment wasentered against OCP. Nor is there any indication that Adams initially sought relief solely against OCP because of some falseassurance regarding OCP’s solvency. To summarize, Nelson was never afforded a proper opportunity to respond to the claim against him. Instead, he wasadjudged liable the very first moment his personal liability was legally at issue. Procedure of this style has been questionedeven in systems, real and imaginary, less concerned than ours with the right to due process.
[FOOTNOTE 2] B Adams strongly urges, however, that Nelson waived his objections to the swift process of the District Court. Adams firstmaintains that Nelson waived arguments based on personal jurisdiction and the absence of service of process by failing toraise them promptly after being added as a party. Brief for Respondents 32-41. Nelson’s winning argument, however, isbased neither on personal jurisdiction nor on service of process. It rests on his right to have time and opportunity to respondto the claim once Adams gained leave to sue Nelson in his individual capacity, and thereby to reach beyond OCP’scorporate till into Nelson’s personal pocket. Waiver of arguments based on personal jurisdiction and service of process istherefore beside the point.
[FOOTNOTE 3] In a similar vein, and this time coming closer to the dispositive issue, Adams submits that the Federal Circuit “did notaddress the ‘due process’ issues now sought to be presented, … because these issues were never raised by Petitioner” beforethat court. Id., at 47 (emphasis deleted). It is indeed the general rule that issues must be raised in lower courts in order to bepreserved as potential grounds of decision in higher courts. But this principle does not demand the incantation of particularwords; rather, it requires that the lower court be fairly put on notice as to the substance of the issue. See, e.g., BeechAircraft Corp. v. Rainey 488 U.S. 153, 174-175 (1988). And the general rule does not prevent us from declaring what dueprocess requires in this case, for that matter was fairly before the Court of Appeals. In response to questioning from the appellate bench, Nelson’s counsel explained that the core of his client’s argument wasthe fundamental unfairness of imposing judgment without going through the process of litigation our rules of civil procedureprescribe.
[FOOTNOTE 4] Both the majority and the dissent in the Federal Circuit understood that an issue before them concerned theprocess due after Adams’ postjudgment motion. See 175 F.3d, at 1349, n. 5 (majority opinion); id., at 1352 (Newman, J.,dissenting). Our resolution of the case as a matter of due process therefore rests on a ground considered and passed upon bythe court below. Beneath Adams’ technical and ultimately unavailing arguments about waiver, its essential position in the litigation is reflectedin the Federal Circuit’s decision: There was sufficient identity between Nelson and OCP to bind Nelson, without further ado,to a judgment already entered against OCP. Nelson was president and sole shareholder of OCP. See id., at 1346. It wasNelson who withheld prior art from the Patent Office. See id., at 1349. He had actual notice that Adams was seeking tocollect a fee award from OCP, because he was the “effective controller” of the litigation for OCP and personally participatedas a witness at the hearing on whether OCP had engaged in inequitable conduct. See ibid. The Federal Circuit did not conclude that these factors would have justified imposing liability on Nelson by piercing OCP’scorporate veil, see id., at 1349, n. 6, and Adams, for its part, has disavowed reliance on a veil-piercing theory, see Record,Doc. No. 129, at 3 (stating, before the District Court, that “Adams does not request that the Court ‘disregard the corporateform’ “); Tape of Oral Arg. in No. 98-1448 (CA Fed. Feb. 3, 1999) (expressly stating that this case does not concernpiercing the corporate veil). One-person corporations are authorized by law and should not lightly be labeled sham. See,e.g., Gregory v. Helvering, 293 U.S. 465, 469 (1935) (finding corporation a sham not because it was owned entirely byone person, but because it had “no business or corporate purpose”); Kirno Hill Corp. v. Holt, 618 F.2d 982, 985 (CA21980) (a corporation’s veil may not be pierced merely because it has only one owner). Indeed, where patents are concerned,the one-person corporation may be an altogether appropriate means to permit innovation without exposing inventors topossibly ruinous consequences. The legitimacy of OCP as a corporation, in short, is not at issue in this case. Instead, the Federal Circuit reasoned that nothing much turned on whether the party opposing Adams’ claim for costs andfees was OCP or Nelson. “[N]o basis has been advanced,” the panel majority concluded, “to believe anything different oradditional would have been done to defend against the allegation of inequitable conduct had Nelson individually already beenadded as a party or had he been a party from the outset.” 175 F.3d, at 1351. We neither dispute nor endorse the substanceof this speculation. We say instead that judicial predictions about the outcome of hypothesized litigation cannot substitute forthe actual opportunity to defend that due process affords every party against whom a claim is stated. As Judge Newmanwrote in dissent: “The law, at its most fundamental, does not render judgment simply because a person might have beenfound liable had he been charged.” Id., at 1354. Our decision surely does not insulate Nelson from liability. As counsel twice represented at oral argument, see Tr. of OralArg. 9, 19-20, Nelson seeks only the right to contest on the merits his personal liability for fees originally sought andawarded solely against OCP. That right, we hold, is just what due process affords him.
[FOOTNOTE 5] * * * For the reasons stated, the judgment of the Court of Appeals is reversed, and the case is remanded for furtherproceedings consistent with this opinion. It is so ordered. :::FOOTNOTES:::
FN1 Even when an amendment relates back to the original date of pleading under Rule 15(c), as Adams contends itsamendment does, the relation back cannot, consistently with due process, deny a party all opportunity to be heard inresponse to the amendment. We also note in this regard that the instant case does not fall under Rule 15(c)(3), which dealswith amendments that change the party or the name of the party against whom claims are asserted. That subsection appliesonly in cases involving “a mistake concerning the identity of the proper party.” Fed. Rule Civ. Proc. 15(c)(3)(B). RespondentAdams made no such mistake. It knew of Nelson’s role and existence and, until it moved to amend its pleading, chose toassert its claim for costs and fees only against OCP.
FN2 A well-known work offers this example: ” ‘Herald, read the accusation!’ said the King. On this the White Rabbit blew three blasts on the trumpet, and then unrolled the parchment scroll, and read as follows: ‘The Queen of Hearts, she made some tarts, All on a summer day: The Knave of Hearts, he stole those tarts, And took them quite away!’ ‘Consider your verdict,’ the King said to the jury. ‘Not yet, not yet!’ the Rabbit interrupted. ‘There’s a great deal to come before that!’ “ L. Carroll, Alice in Wonderland and Through the Looking Glass 108 (Messner, 1982) (emphasis in original).
FN3 We note that a waiver of service of process does not waive a party’s right to time in which to respond to thesubstance of charges that, absent the waiver, would have been included in a served document. It would make little sense topenalize a party’s waiver of process, which can help streamline litigation, by barring such a party from stating its side of thecase. Indeed, such waiver can sometimes extend a party’s time to respond. See Fed. Rule Civ. Proc. 12(a)(1)(B) (ratherthan having to respond within 20 days of service, a party waiving service may respond at any time within 60 days of therequest for waiver).
FN4 Nelson’s counsel stated his position as follows: “[I]t’s legally wrong to subject the individual, nonserved,nonsued, nonlitigated-against person to liability for that judgment. Because there are rules. The rules say if you want ajudgment against somebody, you sue them, you litigate against them, you get a judgment against them.” Tape of Oral Arg. inNo. 98-1448 (CA Fed. Feb. 3, 1999).
FN5 Once the amended pleading is served and Nelson’s response is submitted, it will be open to Adams to urge, asAdams prematurely does here, Brief for Respondents 22-28, that issue preclusion (collateral estoppel) bars Nelson fromcontesting findings made during the litigation between OCP and Adams. See Restatement (Second) of Judgments �39(1980). We venture no opinion here about the possible success of such an argument, made at the proper time.
Nelson vs. Adams USA SUPREME COURT OF THE UNITED STATES No. 99-502 DONALD E. NELSON, Petitioner v. ADAMS USA, INC., et al. On Writ Of Certiorari To The United States Court Of Appeals For The Federal Circuit [April 25, 2000] Justice Ginsburg delivered the opinion of the Court.
