NELSON v. ADAMS USA, INC., et al.

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460 OCTOBER TERM, 1999
Syllabus
NELSON v. ADAMS USA, INC., et al.
certiorari to the united states court of appeals for
the federal circuit
No. 99–502. Argued March 27, 2000—Decided April 25, 2000
Ohio Cellular Products Corporation (OCP) sued respondent Adams USA,
Inc. (Adams), for patent infringement. The District Court dismissed
OCP’s claim and ordered OCP to pay Adams’ costs and attorney fees.
In awarding costs and fees, the court determined that petitioner Nelson,
president and sole shareholder of OCP, had deceitfully withheld from
the United States Patent and Trademark Office prior art that ren-
dered OCP’s patents invalid, and that this behavior constituted inequi-
table conduct chargeable to OCP. Fearing that OCP might be unable
to pay the fee, Adams moved under Rule 15 of the Federal Rules of
Civil Procedure to amend its pleading to add Nelson, personally, as a
party from whom fees could be collected. Adams also asked the
court, under Rule 59(e), to amend the judgment to make Nelson im-
mediately liable for the fee award. The District Court granted Adams’
motion in full. In affirming the judgment entered against Nelson, the
Federal Circuit acknowledged that it was “uncommon” to add a party
after the entry of judgment. Nevertheless, Nelson had not demon-
strated prejudice, the Court of Appeals concluded, because he made no
showing that anything different or additional would have been done to
stave off the judgment had he been a party, in his individual capacity,
from the outset. That court, over a vigorous dissent, was apparently
satisfied that the District Court’s simultaneous allowance of the plead-
ing amendment and entry of judgment satisfied due process.
Held: The District Court erred in amending the judgment immediately
upon permitting amendment of the pleading. Due process, as reflected
in Rule 15 as well as Rule 12, required that Nelson be given an opportu-
nity to respond and contest his personal liability for the fee award after
he was made a party and before the entry of judgment against him.
Pp. 465–472.
(a) Nelson was never afforded a proper opportunity to respond to the
claim against him, but was adjudged liable the very first moment his
personal liability was legally at issue. The Federal Circuit observed
that as long as no undue prejudice is shown, due process is met if
Rule 15’s requirements for amended pleadings are met. But the re-
quirements of Rule 15 were not met here, and due process does not
countenance such swift passage from pleading to judgment in the

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pleader’s favor. Because the propriety of allowing a pleading altera-
tion depends not only on the state of affairs prior to amendment but
also on what happens afterwards, Rule 15 both conveys the circum-
stances under which leave to amend shall be granted and directs how
the litigation will move forward following an amendment. When a
court grants leave to amend to add an adverse party after the time for
responding to the original pleading has lapsed, Rule 15(a) gives the
party so added “10 days after service of the amended pleading” to plead
in response. This opportunity to respond, fundamental to due process,
is the echo of the opportunity to respond to original pleadings secured
under Rule 12(a)(1). Thus, Rule 15 assumes an amended pleading will
be filed and anticipates service of that pleading on the adverse party.
Nelson was never served with an amended pleading. Indeed, no such
pleading was ever actually composed and filed in court. Nor, after
the amendment joining Nelson, was he accorded time to state his de-
fenses against personal liability for costs and fees. Instead, judgment
was entered against him the moment permission to amend the plead-
ing was granted. Appeal after judgment, in the circumstances this
case presents, did not provide an adequate opportunity to defend against
the imposition of liability. Cf. American Surety Co. v. Baldwin, 287
U. S. 156. Nothing in the record indicates that Nelson affirmatively
relinquished his right to respond on the merits of the case belatedly
stated against him in his individual capacity. That Nelson knew as
soon as Adams moved to amend the pleading and alter the judgment
that he might ultimately be subjected to personal liability does not mean
that he in fact had a fair chance, before alteration of the judgment, to
respond and be heard. Rule 15 and the due process for which it pro-
vides demand a more reliable and orderly course. First, as Rule 15(a)
indicates, pleading in response to an amended complaint is a prerogative
of parties, and Nelson was not a party prior to the District Court’s
ruling on Adams’ motion to amend. Second, as Rule 15 further pre-
scribes, the clock on an added party’s time to respond does not start
running until the new pleading naming that party is served, just as the
clock on an original party’s time to respond does not start running
until the original pleading is served, see Rule 12(a)(1)(A). This is not to
say that Rule 15 is itself a constitutional requirement. Beyond doubt,
however, a prospective party cannot fairly be required to answer an
amended pleading not yet permitted, framed, and served. Pp. 465–468.
(b) Adams’ arguments that Nelson waived his objections to the swift
process of the District Court are rejected. First, the assertion that
Nelson waived personal jurisdiction and absence-of-service arguments
is beside the point because Nelson’s winning argument is based neither
on personal jurisdiction nor on service of process. Second, the sub-

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462 NELSON v. ADAMS USA, INC.
Opinion of the Court
mission that Nelson waived the due process issues presented here is
unavailing because his counsel explained in the Federal Circuit that the
core of Nelson’s argument was the fundamental unfairness of imposing
judgment without going through the litigation process the Rules pre-
scribe. Further, both the majority and the dissent below understood
that an issue before them concerned the process due after Adams’ post-
judgment motion. Also rejected is Adams’ essential position that there
was sufficient identity between Nelson and OCP to bind Nelson, with-
out further ado, to a judgment already entered against OCP. Because
Nelson, as president and sole shareholder of OCP, had withheld prior
art from the Patent Office, had actual notice that Adams was seeking
to collect a fee award from OCP, was the “effective controller” of the
litigation for OCP, and had personally participated as a witness at the
hearing on whether OCP had engaged in inequitable conduct, the Fed-
eral Circuit concluded that nothing different or additional would have
been done had Nelson been a party from the outset. Judicial predic-
tions about the outcome of hypothesized litigation cannot substitute for
the actual opportunity to defend that due process affords every party
against whom a claim is stated. The decision here does not insulate
Nelson from liability, but simply ensures him the right, afforded by due
process, to contest on the merits his personal liability for fees originally
sought and awarded solely against OCP. Pp. 469–472.
175 F. 3d 1343, reversed and remanded.
Ginsburg, J., delivered the opinion for a unanimous Court.
Debra J. Dixon argued the cause for petitioner. With her
on the briefs was James L. Deese.
Jack Allen Wheat argued the cause for respondents.
With him on the brief were Vance Armentrout Smith, Joel
Thomas Beres, and John William Scruton.
Justice Ginsburg delivered the opinion of the Court.
This litigation began when Ohio Cellular Products Cor-
poration (OCP) sued respondent Adams USA, Inc. (Adams),
claiming patent infringement. The District Court eventu-
ally dismissed OCP’s claim and ordered OCP to pay Adams’
costs and attorney fees. Adams feared that OCP might be
unable to pay the fee award and therefore sought a means
to recover from petitioner Nelson, president and sole share-

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holder of OCP, in his individual capacity. In pursuit of that
objective, Adams moved under Rule 15 of the Federal Rules
of Civil Procedure to amend its pleading to add Nelson as a
party; Adams also asked the court, under Rule 59(e), to
amend the fee award. The District Court granted the mo-
tion in full, simultaneously making Nelson a party and sub-
jecting him to judgment. The Court of Appeals affirmed.
We hold that the District Court erred in amending the
judgment immediately upon permitting amendment of the
pleading. Due process, as reflected in Rule 15 as well as
Rule 12, required that Nelson be given an opportunity to
respond and contest his personal liability for the award after
he was made a party and before the entry of judgment
against him.
I
OCP and its successor corporation held two patents re-
lating to the method of manufacturing a foamed padding
used in athletic equipment. In 1994, OCP sued Adams for
infringement. Adams maintained that the patents had been
anticipated by prior art and were therefore invalid under
35 U. S. C. § 102(b). The District Court ruled in Adams’
favor and dismissed the infringement complaint.
Adams then moved for attorney fees and costs. The Dis-
trict Court granted the motion on the ground that Nelson,
who was at all relevant times president and sole shareholder
of OCP, had deceitfully withheld the prior art from the
United States Patent and Trademark Office. This behavior,
the District Court concluded, constituted inequitable conduct
chargeable to OCP. 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;
it stemmed from a letter OCP’s counsel had sent Adams
warning that OCP would be liquidated if exposed to a judg-
ment for fees more than nominal in amount. Adams there-

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fore moved to amend its pleading to add Nelson, personally,
as a party from whom fees could be collected. In this post-
judgment endeavor, Adams reasoned that Nelson was the
flesh-and-blood party behind OCP, the person whose conduct
in withholding prior art precipitated the fee award, and a
person with funds sufficient to satisfy that award. The Dis-
trict Court granted the motion.
Adams’ motion, however, sought more than permission to
amend the pleading. It sought simultaneously an amended
judgment, subjecting Nelson to liability as soon as he was
made a party. See Record, Doc. No. 126, p. 1 (“Defendants
[i. e., Adams] hereby move the Court . . . for an order grant-
ing Defendants leave to amend their third party complaint
to name Donald E. Nelson (Nelson) as a third party defend-
ant in his individual capacity, and amending the judgment in
this action to include Nelson as an additional party against
whom judgment is entered.”). In presenting the motion,
Adams offered no reason why the judgment should be al-
tered immediately. See id., at 7–8. The motion did contend
that an amendment to the judgment was “necessary to pre-
vent manifest injustice,” id., at 8 (internal quotation marks
omitted), but it did not explain why Nelson, once joined as a
party, should not be permitted to state his side of that argu-
ment. The District Court seems not to have paused over
this question, for it allowed the pleading amendment and al-
tered 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 a party.
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.
Corp. v. Adams USA, Inc., 175 F. 3d 1343 (1999). It was
“uncommon,” the appeals court acknowledged, to add a party
after the entry of judgment. Id., at 1348. The court con-

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cluded, however, that Nelson had not been prejudiced by the
postjudgment joinder. The Federal Circuit based that con-
clusion on Nelson’s failure to show that “anything different
or additional would have been done” to stave off the judg-
ment 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 party and simultaneously
amending the judgment to obligate him individually met due
process requirements. See id., at 1345, 1349, n. 5.
We granted certiorari, 528 U. S. 1018 (1999). In his re-
quest for this Court’s review, Nelson did not dispute the por-
tion of the District Court’s order that granted Adams leave
to amend its pleading to add Nelson as a party against whom
costs and fees were sought. Pet. for Cert. 11. What he
does challenge, and what is now before us, is the portion of
the District Court’s order that immediately adjudged Nelson
personally liable the moment he was made a party.
II
A
The Federal Rules of Civil Procedure are designed to fur-
ther 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
determination of every action.”). Rule 15 sets out the re-
quirements for amended and supplemental pleadings. On
that score, the Court of Appeals observed that as long as
no undue prejudice is shown, “due process requirements
are met if the requirements of Rule 15 are met.” 175 F. 3d,
at 1349, n. 5. But in the instant case, the requirements of
Rule 15 were not met. As Judge Newman recognized in her
dissent below, due process does not countenance such swift
passage from pleading to judgment in the pleader’s favor.
See id., at 1352.

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The propriety of allowing a pleading alteration depends
not only on the state of affairs prior to amendment but also
on what happens afterwards. Accordingly, Rule 15 both
conveys the circumstances under which leave to amend
shall be granted and directs how the litigation will move
forward following an amendment. When a court grants
leave to amend to add an adverse party after the time for
responding to the original pleading has lapsed, the party
so added is given “10 days after service of the amended
pleading” to plead in response. Fed. Rule Civ. Proc. 15(a).
This opportunity to respond, fundamental to due process,
is the echo of the opportunity to respond to original plead-
ings 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 adverse party.
Nelson was never served with an amended pleading. In-
deed, no such pleading was ever actually composed and filed
in court. Nor, after the amendment naming him as a party,
was Nelson accorded 10 days to state his defenses against
personal liability for costs and fees. Instead, judgment was
entered against him the moment permission to amend the
pleading was granted. Appeal after judgment, in the cir-
cumstances this case presents, did not provide an ade-
quate opportunity to defend against the imposition of lia-
bility. Cf. American Surety Co. v. Baldwin, 287 U. S. 156
(1932). Adams points to nothing in the record indicating
that Nelson affirmatively relinquished his right to respond
on the merits of the case belatedly stated against him in
his individual capacity. Accordingly, the proceedings did not
comply with Rule 15, and neither did they comport with due
process. See, e. g., Mullane v. Central Hanover Bank &
Trust Co., 339 U. S. 306, 314 (1950) (“ ‘The fundamental requi-
site 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
ultimately be subjected to personal liability. One could

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ask, therefore, whether Nelson in fact had a fair chance, be-
fore alteration of the judgment, to respond and be heard.
Rule 15 and the due process for which it provides, how-
ever, demand a more reliable and orderly course. First,
as the Rule indicates, pleading in response to an amended
complaint is a prerogative of parties, see Fed. Rule Civ.
Proc. 15(a), and Nelson was not a party prior to the Dis-
trict 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 new plead-
ing naming that party is served, see ibid., just as the clock
on an original party’s time to respond does not start running
until the original pleading is served, see Fed. Rule Civ.
Proc. 12(a)(1)(A). This is not to say that Rule 15 is itself
a constitutional requirement. Beyond doubt, however, a
prospective party cannot fairly be required to answer an
amended pleading not yet permitted, framed, and served.1
In support of its holding that Nelson was not prejudiced
when added as a party and subjected to judgment, the
Federal Circuit relied on its prior decision in Fromson v.
Citiplate, Inc., 886 F. 2d 1300 (1989). See 175 F. 3d, at 1349–
1350, and n. 7. The reliance is puzzling, for the circum-
stances in Fromson were crucially different from those
presented here. The plaintiff in Fromson prevailed on an
infringement claim and subsequently moved to hold the
owners of the judgment-proof defendant corporation indi-
vidually liable. To that extent only, Fromson resembles the
1 Even when an amendment relates back to the original date of plead-
ing under Rule 15(c), as Adams contends its amendment does, the rela-
tion back cannot, consistently with due process, deny a party all opportu-
nity to be heard in response to the amendment. We also note in this
regard that the instant case does not fall under Rule 15(c)(3), which deals
with amendments that change the party or the name of the party against
whom claims are asserted. That subsection applies only in cases in-
volving “a mistake concerning the identity of the proper party.” Fed.
Rule Civ. Proc. 15(c)(3)(B). Respondent Adams made no such mistake.
It knew of Nelson’s role and existence and, until it moved to amend its
pleading, chose to assert its claim for costs and fees only against OCP.

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instant case. Notably unlike Adams, however, the plaintiff
in Fromson had moved before trial to add the individual
owners as parties, because it suspected from the start that
the defendant corporation might not be able to pay. The
District Court denied that motion in reliance on the de-
fendant corporation’s false assurances that it was solvent.
See 886 F. 2d, at 1301, 1304. Having been informed be-
fore trial that the plaintiffs sought to sue them in their
individual capacities, and having acted deliberately to de-
rail such a suit, the owners of the defendant corporation
in Fromson could hardly assert that another’s mistake or
choice of whom to sue had compromised their ability to
defend. Their problem, the Federal Circuit aptly observed
in its Fromson opinion, was “a bed of their own making.”
Id., at 1304. Here, in contrast, Adams never sought to
sue Nelson individually until after judgment was entered
against OCP. Nor is there any indication that Adams ini-
tially sought relief solely against OCP because of some false
assurance regarding OCP’s solvency.
To summarize, Nelson was never afforded a proper op-
portunity to respond to the claim against him. Instead, he
was adjudged liable the very first moment his personal lia-
bility was legally at issue. Procedure of this style has been
questioned even in systems, real and imaginary, less con-
cerned than ours with the right to due process.2
2 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).

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B
Adams strongly urges, however, that Nelson waived
his objections to the swift process of the District Court.
Adams first maintains that Nelson waived arguments based
on personal jurisdiction and the absence of service of process
by failing to raise them promptly after being added as a
party. Brief for Respondents 32–41. Nelson’s winning ar-
gument, however, is based neither on personal jurisdiction
nor on service of process. It rests on his right to have time
and opportunity to respond to the claim once Adams gained
leave to sue Nelson in his individual capacity, and thereby
to reach beyond OCP’s corporate till into Nelson’s personal
pocket. Waiver of arguments based on personal jurisdiction
and service of process is therefore beside the point.3
In a similar vein, and this time coming closer to the dis-
positive issue, Adams submits that the Federal Circuit
“did not address the ‘due process’ issues now sought to be
presented, . . . because these issues were never raised by
Petitioner” before that court. Id., at 47 (emphasis deleted).
It is indeed the general rule that issues must be raised in
lower courts in order to be preserved as potential grounds
of decision in higher courts. But this principle does not
demand the incantation of particular words; rather, it re-
quires that the lower court be fairly put on notice as to the
substance of the issue. See, e. g., Beech Aircraft Corp. v.
Rainey, 488 U. S. 153, 174–175 (1988). And the general rule
3 We note that a waiver of service of process does not waive a party’s
right to time in which to respond to the substance of charges that, absent
the waiver, would have been included in a served document. It would
make little sense to penalize a party’s waiver of process, which can help
streamline litigation, by barring such a party from stating its side of
the case. Indeed, such waiver can sometimes extend a party’s time to
respond. See Fed. Rule Civ. Proc. 12(a)(1)(B) (rather than having to re-
spond within 20 days of service, a party waiving service may respond at
any time within 60 days of the request for waiver).

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does not prevent us from declaring what due process re-
quires 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 argu-
ment was the fundamental unfairness of imposing judgment
without going through the process of litigation our rules of
civil procedure prescribe.4 Both the majority and the dis-
sent in the Federal Circuit understood that an issue before
them concerned the process 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 con-
sidered and passed upon by the court below.
Beneath Adams’ technical and ultimately unavailing argu-
ments about waiver, its essential position in the litigation is
reflected in the Federal Circuit’s decision: There was suffi-
cient identity between Nelson and OCP to bind Nelson, with-
out further ado, to a judgment already entered against OCP.
Nelson was president and sole shareholder of OCP. See
id., at 1346. It was Nelson who withheld prior art from the
Patent Office. See id., at 1349. He had actual notice that
Adams was seeking to collect a fee award from OCP, because
he was the “effective controller” of the litigation for OCP
and personally participated as 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
4 Nelson’s counsel stated his position as follows: “[I]t’s legally wrong
to subject the individual, nonserved, nonsued, nonlitigated-against per-
son to liability for that judgment. Because there are rules. The rules
say if you want a judgment against somebody, you sue them, you litigate
against them, you get a judgment against them.” Tape of Oral Arg. in
No. 98–1448 (CA Fed. Feb. 3, 1999).

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OCP’s corporate 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
corporate form’ ”); Tape of Oral Arg. in No. 98–1448 (CA Fed.
Feb. 3, 1999) (expressly stating that this case does not con-
cern piercing 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 en-
tirely by one person, but because it had “no business or
corporate purpose”); Kirno Hill Corp. v. Holt, 618 F. 2d
982, 985 (CA2 1980) (a corporation’s veil may not be pierced
merely because it has only one owner). Indeed, where pat-
ents are concerned, the one-person corporation may be an
altogether appropriate means to permit innovation without
exposing inventors to possibly 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 and fees was OCP or Nelson. “[N]o basis has been
advanced,” the panel majority concluded, “to believe any-
thing different or additional would have been done to de-
fend against the allegation of inequitable conduct had Nelson
individually already been added as a party or had he been a
party from the outset.” 175 F. 3d, at 1351. We neither dis-
pute nor endorse the substance of this speculation. We say
instead that judicial predictions about the outcome of hy-
pothesized litigation cannot substitute for the actual oppor-
tunity to defend that due process affords every party against
whom a claim is stated. As Judge Newman wrote in dis-
sent: “The law, at its most fundamental, does not render
judgment simply because a person might have been found
liable had he been charged.” Id., at 1354.

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Our decision surely does not insulate Nelson from liability.
As counsel twice represented at oral argument, see Tr. of
Oral Arg. 9, 19–20, Nelson seeks only the right to contest
on the merits his personal liability for fees originally sought
and awarded solely against OCP. That right, we hold, is just
what due process affords him.5
* * *
For the reasons stated, the judgment of the Court of
Appeals is reversed, and the case is remanded for further
proceedings consistent with this opinion.
It is so ordered.
5 Once the amended pleading is served and Nelson’s response is sub-
mitted, it will be open to Adams to urge, as Adams prematurely does here,
Brief for Respondents 22–28, that issue preclusion (collateral estoppel)
bars Nelson from contesting 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 argu-
ment, made at the proper time.