Opinion

1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 SOUTHERN DISTRICT OF CALIFORNIA 8 9 SHARP MEMORIAL Case No.: 24-cv-00511-WQH-JLB HOSPITAL; SHARP CHULA 10 VISTA MEDICAL CENTER; ORDER 11 SHARP CORONADO HOSPITAL AND 12 HEALTHCARE CENTER; and 13 GROSSMONT HOSPITAL CORPORATION dba SHARP 14 GROSSMONT HOSPITAL, 15 Plaintiffs, 16 v. 17 MEDI-EXCEL, S.A. DE C.V., 18 dba MEDIEXCEL HEALTH PLAN; and DOES 1-10, 19 inclusive, 20 Defendants. 21 HAYES, Judge: 22 The matter before the Court is the Motion to Amend/Correct Scheduling Order and 23 for Leave to Amend Answer filed by Defendant Medi-Excel, S.A. de C.V. dba MediExcel 24 Health Plan (ECF No. 74) and the Motion to Strike Document filed by Plaintiffs Sharp 25 Memorial Hospital, Sharp Chula Vista Medical Center, Sharp Coronado Hospital and 26 Healthcare Center, and Grossmont Hospital Corporation dba Sharp Grossmont Hospital. 27 (ECF No. 77.) 28 1 I. PROCEDURAL HISTORY 2 On February 13, 2024, Plaintiffs Sharp Memorial Hospital, Sharp Chula Vista 3 Medical Center, Sharp Coronado Hospital and Healthcare Center, and Grossmont Hospital 4 Corporation d.b.a. Sharp Grossmont Hospital (collectively, “Plaintiffs”) initiated this 5 action by filing a Complaint in the Superior Court of California, County of San Diego: 6 Case No. 37-2024-00006620-CU-BC-CTL. (ECF No. 1-2.) 7 On March 15, 2024, Defendant Medi-Excel, S.A. de C.V. dba MediExcel Health 8 Plan (“Defendant MediExcel”) removed the action to this Court. (ECF No. 1.) 9 On May 7, 2024, Defendant MediExcel filed its Answer. (ECF No. 11.) 10 On June 27, 2024, Magistrate Judge Jill L. Burkhardt issued a Scheduling Order 11 (ECF No. 17) requiring the parties to file any motion to amend pleadings by August 26, 12 2024. Id. at 2. 13 On January 29, 2026, Defendant MediExcel filed the pending Motion to 14 Amend/Correct Scheduling Order and for Leave to Amend Answer (the “Motion to 15 Amend”). (ECF No. 74.) Defendant MediExcel submits its proposed Amended Answer as 16 an Exhibit to the Motion to Amend. (See Exhibit B, ECF No. 74-4.) 17 On February 13, 2026, Plaintiffs filed a Response in Opposition. (ECF No. 75.) 18 On February 23, 2026, Defendant MediExcel filed a Reply. (ECF No. 76.) In 19 support, Defendant MediExcel submits a Declaration of Joseph Leventhal with two 20 Exhibits. (ECF Nos. 76-1, 76-2, 76-3.) 21 On February 25, 2026, Plaintiffs filed a Motion to Strike the Declaration of Joseph 22 Leventhal filed in Support of Defendant MediExcel’s Reply (the “Motion to Strike”). (ECF 23 No. 77.) On March 2, 2026, Defendant MediExcel filed a Motion to Strike Plaintiff’s 24 Motion to Strike (ECF No. 78) and a Response in Opposition. (ECF No. 79.) 25 II. CONTENTIONS 26 Defendant MediExcel seeks to amend its Answer to “assert two new affirmative 27 defenses—unjust enrichment and unclean hands.” (ECF No. 74 at 4.) 28 1 Defendant MediExcel contends that Plaintiffs produced “over 140,000 pages of 2 documents” on May 2, 2025. Id. at 5. After reviewing these documents, Defendant 3 MediExcel contends that it “learned that Sharp has solicited and accepted payment for 4 some of the claims at issue in this litigation from sources other than MediExcel.” Id. 5 Defendant MediExcel also contends that, for other patient claims, Plaintiffs have “engaged 6 in block billing[,] an illegal practice whereby hospitals or other healthcare providers seek 7 to hold an individual patient responsible for the difference between what the patient’s 8 insurer pays for services rendered and the full amount of billed charges.” Id. at 5–6. 9 Defendant MediExcel now seeks to amend its Answer to include its newly raised 10 affirmative defenses of unjust enrichment and unclean hands in response to these 11 allegations. Id. at 6. 12 Defendant MediExcel contends that it brings the pending motion after the deadline 13 for motions to amend pleadings passed more than one year ago on August 26, 2024 because 14 it “had no reason to amend its Answer” prior to learning about Plaintiffs’ alleged 15 misconduct. Id. at 7. Defendant MediExcel contends that its current counsel joined this 16 case on April 14, 2025 and has since been “fully engaged in litigating this case and 17 developing its arguments for trial.” Id. 18 Plaintiffs respond that Defendant MediExcel moves for leave to amend 19 approximately “15 months after the deadline for the parties to amend pleadings and 8 20 months after discovery closed.” (ECF No. 75 at 5.) Plaintiffs contend that Defendant 21 MediExcel “failed to establish why it took eight months” from its receipt of the relevant 22 documents to move for leave to amend their Answer. Id. at 6. Plaintiffs contend that they 23 would be prejudiced by the addition of the affirmative defenses because, if the defenses 24 had been raised “in a timely manner,” then Plaintiffs “would have propounded written 25 discovery on this defense.” Id. at 6. Plaintiffs also contend that, despite the voluminous 26 number of documents exchanged in discovery, the information required for Defendant 27 MediExcel to be made aware of its newly raised affirmative defenses “would appear to be 28 solely based on billing-related documents,” which would not have required Defendant 1 MediExcel to have reviewed the extensive medical records associated with each patient. 2 Id. at 9. Plaintiffs contend that the limited set of relevant documents required to identify 3 the defenses does not justify Defendant MediExcel’s excessive delay in moving for leave 4 to amend its Answer. Id. Plaintiffs also contend that Defendant MediExcel now files the 5 pending motion “over three months after it first raised the issue of the amendments” with 6 Plaintiffs during the meet-and-confer process. Id. at 12. 7 Defendant MediExcel replies that the “timeline created by [Plaintiffs’] own belated 8 efforts” deprived it of the opportunity to identify affirmative defenses earlier in this 9 litigation. (ECF No. 76 at 4.) Defendant MediExcel contends that it could not “somehow 10 ignore all of [Plaintiffs’] production except for billing records that revealed improper 11 billing practices” to more quickly identify the basis for its newly raised affirmative 12 defenses. Id. at 5–6. Defendant MediExcel contends that its earlier efforts were focused on 13 “documents that supported MediExcel’s defenses at the time,” and that it appropriately 14 exercised diligence in pursuing its new affirmative defenses once aware of their factual 15 basis. Id. at 7. Defendant MediExcel contends that any delay during the period after it 16 discovered the basis for its affirmative defenses resulted from its good faith efforts to 17 confer with Plaintiffs’ counsel regarding amendment. Id. Defendant MediExcel also 18 contends that these new affirmative defenses “do not represent a wholesale shift in legal 19 theory” that would prejudice Plaintiffs. Id. at 9. Defendant MediExcel also contends that, 20 if the Court grants leave to amend the Answer, additional discovery would not be 21 warranted. Id. at 11–12. 22 In its Motion to Strike, Plaintiffs contend that Defendant MediExcel impermissibly 23 “raises entirely new evidence and issues” in its Reply. (ECF No. 77 at 4.) Plaintiffs contend 24 that the Declaration of Joseph Leventhal (ECF No. 76-1) “contains 11 new paragraphs of 25 purported evidence, and attaches two new exhibits—discovery responses and a letter 26 exchanged between the parties in discovery” that should have been raised in Defendant 27 MediExcel’s “original motion” to provide Plaintiffs with a “proper opportunity to 28 respond.” (ECF No. 77 at 4.) 1 III. LEGAL STANDARD 2 If a party moves for leave to amend a pleading after a district court has issued a 3 Scheduling Order pursuant to Federal Rule of Civil Procedure 16, “the motion ‘is governed 4 first by Rule 16(b), and only secondarily by Rule 15(a).’” Cervantes v. Zimmerman, No. 5 17-CV-1230-BAS-NLS, 2019 WL 1129154, at *2 (S.D. Cal. Mar. 12, 2019) (quoting 6 Jackson v. Laureate, Inc., 186 F.R.D. 605, 607 (E.D. Cal. 1999)). “[T]he party seeking 7 leave to amend cannot simply ‘appeal to the liberal amendment procedures afforded by 8 Rule 15,’ but rather must show good cause in the first instance.” Id. (quoting 9 AmerisourceBergen Corp. v. Dialysist West, Inc., 465 F.3d 946, 952 (9th Cir. 2006)). 10 Federal Rule of Civil Procedure 16 provides that a “schedule may be modified only 11 for good cause and with the judge’s consent.” Fed. R. Civ. P. 16(b)(4). The “good cause” 12 standard “primarily considers the diligence of the party seeking the amendment.” Johnson 13 v. Mammoth Recreations, Inc., 975 F.2d 604, 609 (9th Cir. 1992). “The pretrial schedule 14 may be modified if it cannot reasonably be met despite the diligence of the party seeking 15 the extension.” Zivkovic v. S. California Edison Co., 302 F.3d 1080, 1087 (9th Cir. 2002) 16 (quotation omitted). “[T]he focus of the inquiry is upon the moving party’s reasons for 17 seeking modification. If that party was not diligent, the inquiry should end.” Johnson, 975 18 F.2d at 604 (citation omitted). 19 Federal Rule of Civil Procedure 15(a) provides that a district court should “freely 20 give leave [to amend a pleading] when justice so requires.” Fed. R. Civ. P. 15(a)(2). This 21 policy is “to be applied with extreme liberality.” Owens v. Kaiser Found. Health Plan, Inc., 22 244 F.3d 708, 712 (9th Cir. 2001) (quotation omitted). A district court’s decision whether 23 to grant a motion to amend a pleading requires consideration of five factors: “(1) bad faith; 24 (2) undue delay; (3) prejudice to the opposing party; (4) futility of amendment; and (5) 25 whether plaintiff has previously amended its [pleading].” Western Shoshone Nat’l Council 26 v. Molini, 951 F.2d 200, 204 (9th Cir. 1991). “[T]he consideration of prejudice to the 27 opposing party [] carries the greatest weight.” Eminence Cap., LLC v. Aspeon, Inc., 316 28 F.3d 1048, 1052 (9th Cir. 2003). In conducting its analysis pursuant to Rule 15(a), the 1 district court should draw “all inferences in favor of granting the motion.” Griggs v. Pace 2 Am. Grp., Inc., 170 F.3d 877, 880 (9th Cir. 1999). 3 IV. DISCUSSION 4 a. Amendment of Scheduling Order under Rule 16(b) 5 Defendant MediExcel contends that it “has been diligent in this litigation” and “only 6 recently appreciated the propriety of asserting additional affirmative defenses” based on 7 the “improper billing practices” made evident by Plaintiffs’ May 2, 2025 document 8 production. (ECF No. 74 at 9–10.) Defendant MediExcel contends that, “[a]lthough Sharp 9 produced the client files on May 2, 2025, it took several months to review the production 10 due to the volume of Sharp’s production.” Id. at 10 n.2. Plaintiffs respond that Defendant 11 MediExcel has demonstrated a lack of diligence because of the eight-month delay after 12 receipt of the “production of documents allegedly supporting its new affirmative defenses” 13 and the three-month delay after Defendant MediExcel “first raised the issue of the 14 amendments” to Plaintiffs. (ECF No. 75 at 12.) 15 The Court holds that good cause exists to modify its Scheduling Order. The relevant 16 Scheduling Order, issued on June 26, 2024 by Magistrate Judge Jill L. Burkhardt, required 17 that “[a]ny motion to join other parties, to amend the pleadings, or to file additional 18 pleadings shall be filed August 26, 2024.” (ECF No. 17 at 2.) The parties repeatedly 19 exchanged documents during the discovery process, including the May 2, 2025 production 20 which purportedly put Defendant MediExcel on notice as to the basis for its newly raised 21 affirmative defenses. (ECF No. 64 at 4; ECF No. 75 at 13.) Defendant MediExcel could 22 not have moved to amend the Scheduling Order prior to the August 26, 2024 deadline 23 because it lacked the information that would later prompt it to do so. See, e.g., Zoe Mktg., 24 Inc. v. Impressons, LLC, No. 14CV1881 AJB (WVG), 2015 WL 12216341, at *2 (S.D. 25 Cal. June 1, 2015) (describing the impossibility of timely moving for amendment in a case 26 where “the depositions occurred after the deadline set forth in the scheduling order”). 27 The elapsed time between the May 2, 2025 exchange of documents and the filing of 28 the pending motion on January 29, 2026 does not indicate that Defendant MediExcel failed 1 to act with diligence. The voluminous number of documents exchanged during discovery 2 supports Defendant MediExcel’s contention that a time-intensive review process was 3 necessary for it to identify its newly raised affirmative defenses. Moreover, the August 18, 4 2025 filing of its Motion for Partial Summary Judgment (ECF No. 47) indicates that 5 Defendant MediExcel acted diligently in dedicating its attention to those documents that 6 supported its asserted defenses at that time. In total, the five-month lapse between 7 Plaintiffs’ document production in May 2025 and Defendant MediExcel’s outreach to 8 Plaintiffs’ counsel regarding amendment in October 2025 and the additional three-month 9 lapse between that outreach and the January 29, 2026 filing of the pending motion does not 10 indicate a lack of diligence on behalf of Defendant MediExcel. See Melingonis v. Rapid 11 Cap. Funding, L.L.C., No. 16CV490-WQH-KSC, 2017 WL 1550045, at *3 (S.D. Cal. May 12 1, 2017) (holding the same based on a four-month lapse between discovering relevant 13 information and moving for leave to amend a complaint to add an additional defendant). 14 Plaintiffs’ cited authority does not persuade the Court to hold otherwise. In Kamal 15 v. Eden Creamery, LLC, the Ninth Circuit held that a district court did not abuse its 16 discretion in denying the plaintiffs leave to amend their complaint under Rule 16(b). 88 17 F.4th 1268, 1277–78 (9th Cir. 2023). In that case, the district court denied the plaintiffs’ 18 motion to add an additional defendant because the plaintiffs had been put on notice that the 19 third party was involved in the chain of sale for the product at issue eight months prior to 20 filing their motion. Id. at 1277. The district court also denied the plaintiffs’ motion to add 21 another theory of liability because the “key documents” informing their theory had been 22 shared by the defendants five months earlier. Id. at 1278. The district court concluded that 23 the plaintiffs “failed to account” for their delay in filing for leave to amend and denied their 24 motion under the “good cause” standard. Id. Plaintiffs also cite to Sharp v. Covenant Care 25 LLC, in which a magistrate judge denied the defendants’ motion for leave to amend a 26 scheduling order, which would have permitted them to file a motion for summary 27 judgment, because of a three-month delay between the defendants discovering the relevant 28 information and filing their motion. 288 F.R.D. 465, 468 (S.D. Cal. 2012). Defendant 1 MediExcel, unlike the movants in these cases, provides sufficient justification for its delay 2 as a result of the large number of documents exchanged during discovery and the 3 intervening Motion for Partial Summary Judgment.1 The record does not suggest that 4 Defendant MediExcel identified the basis for its newly raised affirmative defenses earlier 5 than suggested by its outreach to Plaintiffs’ counsel. Although district courts may hold that 6 briefer lapses fail to satisfy the “good cause” standard of Rule 16(b), the complexities of 7 this case favor a finding that Defendant MediExcel acted with diligence in pursing 8 amendment of its Answer. 9 Having found good cause to amend the relevant deadline in the Scheduling Order 10 under Federal Rule of Civil Procedure 16(b), the Court considers whether to grant 11 Defendant MediExcel leave to amend its Answer pursuant to Rule 15(a). 12 b. Amendment of Answer under Rule 15(a) 13 Defendant MediExcel contends that the Court should permit amendment of its 14 answer because Plaintiffs will not suffer prejudice. (ECF No. 74 at 11.) Defendant 15 MediExcel contends that amendment will not require the Court to re-open discovery 16 because the documents produced to date “demonstrate the impropriety of Sharp’s billing 17 practices” and Plaintiffs are “already in full possession of all the relevant facts” related to 18 the proposed affirmative defenses. Id. at 11–12. Defendant MediExcel also contends that 19 the proposed affirmative defenses will not “broaden the claims at issue” because they do 20 not “add new patient claims” or “implicate facts that were not already at issue.” Id. at 12. 21 Plaintiffs contend, in response, that amendment of the Answer would prejudice them 22 because they “would have propounded written discovery” regarding the newly raised 23 affirmative defenses, “including asking MediExcel to identify which of the 1,000 medical 24 25 26 1 The Ninth Circuit described the relevant documents in Kamal as being produced within a batch of “12,224 pages.” 88 F.4th at 1278. Plaintiffs compare this number to the “10,000 pages” of “billing and 27 account related documents” shared in this action, (ECF No. 75 at 13), but the more appropriate comparison is to the total “140,000 pages” of billing and medical documents exchanged in the May 2, 2025 production. 28 1 claims at issue these defenses apply to, the factual bases for the defenses as to these specific 2 claims, and the documents MediExcel contends support its contentions as to these specific 3 defenses.” (ECF No. 75 at 15.) Plaintiffs contend that they “would be severely prejudiced 4 by the addition of these affirmative defenses in the absence of discovery” and, alternatively, 5 that “reopening discovery would cause a prejudicial further delay in the trial.” Id. at 16. 6 Plaintiffs also contend that amendment would be futile because Defendant MediExcel 7 “provides no legal or evidentiary authority” for its newly raised affirmative defenses. Id. 8 at 16–17. 9 The Court considers the Western Shoshone factors to determine whether it should 10 permit Defendant MediExcel to amend its Answer. 951 F.2d at 204. 11 First, there is no indication of bad faith. See Dzhatdoev v. Warden of Golden State 12 Annex Det. Facility, No. 1:25-CV-01457-JLT-CDB, 2026 WL 84300 (E.D. Cal. Jan. 12, 13 2026) (“A motion to amend is made in bad faith where there is evidence in the record which 14 would indicate a wrongful motive on the part of the litigant requesting leave to amend.”) 15 (quotation omitted). Plaintiffs do not contend that Defendant MediExcel attempts to 16 deceive the Court or delay the resolution of this action, and the record does not indicate 17 any such improper motive. 18 Second, as discussed above, Defendant MediExcel’s lapse in moving for leave to 19 amend does not rise to the level of an “undue delay” because of the volume of discovery 20 exchanged, the intervening motion practice during the period of delay, and communication 21 between counsel for the parties provide sufficient justification for the delay. 22 Third, and most importantly, there is insufficient risk of prejudice to Plaintiffs to 23 justify denying Defendant MediExcel leave to amend its Answer. Plaintiffs contend that 24 permitting amendment would cause prejudice because (1) Defendant MediExcel has failed 25 to “disclose[] the factual or legal basis” for its newly raised affirmative defenses and (2) 26 amendment would either require “reopening discovery, [which] would cause a prejudicial 27 further delay in trial” or force Plaintiffs to respond to these affirmative defenses without 28 the opportunity to propound discovery on their underlying issues. (ECF No. 75 at 14–16.) 1 Defendant MediExcel contends, in response, that Plaintiffs are “fully aware of the facts 2 and evidence that forms the basis of MediExcel’s new affirmative defenses” and contends 3 that there is “no new discovery required.” (ECF No. 76 at 10.) The Court makes no finding 4 regarding whether additional discovery is warranted based upon the newly raised 5 affirmative defenses, leaving that determination for Magistrate Judge Burkhardt to make 6 in the first instance. Even if additional discovery is warranted, the Court holds that this 7 would be insufficiently prejudicial to Plaintiffs to justify denial of the Motion to Amend 8 pursuant to the standard of Rule 15(a). 9 Fourth, it is not clear that Defendant MediExcel’s proposed amendment would be 10 futile. Plaintiffs contend that Defendant MediExcel provides no basis for its newly raised 11 affirmative defenses and, moreover, that “it would not be unusual or unlawful for Sharp to 12 receive reimbursement from multiple sources for a single claim.” (ECF No. 75 at 17.) 13 Defendant MediExcel contends that Plaintiffs may “seek payment from multiple sources” 14 but may not “accept full payment from another source and then seek a double recovery in 15 litigation.” (ECF No. 76 at 13.) District courts rarely deny leave to amend on the basis of 16 futility. Pac. Vibrations, LLC v. Slow Gold Ltd., No. 22CV1118-LL-DDL, 2023 WL 17 1934436 (S.D. Cal. Feb. 10, 2023); Zoe Mktg., Inc, 2015 WL 12216341 at *5. The Court 18 expresses no opinion on the sufficiency of Defendant MediExcel’s affirmative defenses, 19 apart from finding that it is not clearly evident that the newly raised affirmative defenses 20 are futile. 21 Fifth, Defendant MediExcel has not previously amended its Answer. This factor 22 does not weigh heavily in the Court’s analysis. 23 Based on these factors—in particular, the limited risk of prejudice to Plaintiffs—the 24 Court holds that Defendant MediExcel may amend its Answer (ECF No. 11) in accordance 25 with the proposed amendments submitted in support of its pending motion. (Exhibit B, 26 ECF No. 74-4.) This ruling is without prejudice to Plaintiffs moving to amend the 27 Scheduling Order with Magistrate Judge Burkhardt to permit additional discovery. 28 / / / 1 c. Motion to Strike 2 In the preceding analysis, the Court does not rely on the Declaration of Joseph 3 || Leventhal in Support of the Reply to Motion to Amend Scheduling Order and for Leave to 4 ||Amend Answer (ECF No. 76-2) nor its supporting Exhibits. The Motion to Strike (ECF 5 77) is therefore denied as moot. See, e.g., Delarosa v. Boiron, Inc., 275 F.R.D. 582, 6 (C.D. Cal. 2011) (denying as moot the parties’ motions to strike declarations because 7 district court did not rely on the declaration in its analysis). The Motion to Strike 8 || Plaintiff's Motion to Strike (ECF No. 78) is also denied as moot. 9 Vv. CONCLUSION 10 IT IS HEREBY ORDERED that Defendant MediExcel’s Motion to Amend/Correct 11 ||Scheduling Order and for Leave to Amend Answer (ECF No. 74) is granted. Defendant 12 ||MediExcel may file an Amended Answer no later than three (3) business days after the 13 || filing of this Order. 14 IT IS FURTHER ORDERED that Motions to Strike (ECF Nos. 77, 78) are denied. 15 IT IS FURTHER ORDERED that Plaintiffs may file any motion to re-open 16 || discovery within ten (10) days of the filing of this Order. Any motion regarding discovery 17 be directed to Magistrate Judge Jill L. Burkhardt. To the extent that either party also 18 || wishes to amend the remaining deadlines described in the Court’s January 9, 2026 Order 19 || (ECF No. 66), a motion may be filed before this Court seeking amendment to the January 20 ||9, 2026 Order. 21 22 Dated: March 10, 2026 BME: Me Z. A 23 Hon. William Q. Hayes 24 United States District Court 25 26 27 28