Youngevity International, Corp. v. Smith

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 Youngevity International, et al., Case No.: 3:16-cv-704-BTM-JLB 11 Plaintiffs, 12 ORDER GRANTING MOTION FOR v. LEAVE TO FILE FIFTH AMENDED 13 COMPLAINT Todd Smith, et al., 14 Defendants. [ECF NO. 628] 15 16 Before the Court is the plaintiffs’ motion for leave to file a fifth amended 17 complaint to allow Plaintiff Youngevity International Corp. (“Youngevity”) to add 18 claims for breach of contract against Defendants Dave Pitcock, Barb Pitcock, Todd 19 Smith, Blake Graham, Andre Vaughn, and Total Nutrition, Inc. (collectively, the 20 “Distributor Defendants”). (See ECF No. 628; see also 628-3, at 81-83.) 21 “After a party has amended a pleading once as a matter of course, it may 22 only amend further after obtaining leave of the court, or by consent of the adverse 23 party.” Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) 24 (citing Fed. R. Civ. P. 15(a)). Rule 15 provides that “[t]he court should freely give 25 leave when justice so requires.” Fed. R. Civ. P. 15(a)(2). “This policy is to be 26 applied with extreme liberality.” Eminence Capital, 316 F.3d at 1051. Indeed, “[i]n 27 exercising its discretion a court must be guided by the underlying purpose of Rule 28 15—to facilitate decision on the merits rather than on the pleadings or 1 technicalities.” DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987) 2 (internal quotations and citations omitted). Nevertheless, “[f]ive factors are 3 frequently used to assess the propriety of a motion for leave to amend: (1) bad 4 faith, (2) undue delay, (3) prejudice to the opposing party, (4) futility of amendment; 5 and (5) whether plaintiff has previously amended his complaint.” Allen v. City of 6 Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990). Moreover, where a motion to 7 amend is filed after the deadline set by the Court for filing such a motion, the 8 movant must demonstrate “good cause” as to why the schedule should be 9 amended. Fed. R. Civ. P. 16(b)(4). 10 Here, the defendants have failed to demonstrate they will suffer prejudice 11 from the grant of the requested leave to amend. See DCD Programs, 833 F.2d at 12 187 (“The party opposing amendment bears the burden of showing prejudice.”) 13 (citations omitted). The facts underlying the proposed claims are already at issue 14 in this action given that they form one of Youngevity’s defenses to the Distributor 15 Defendants’ breach of contract counterclaims. (See ECF No. 670-1, at 8-17 16 (seeking summary judgment based upon the Distributor Defendants “cross- 17 recruiting” activities).) The defendants’ vague assertion that they “would have 18 conducted discovery differently” had Youngevity added its proposed claims earlier 19 in this litigation is insufficient to support a finding of prejudice given their failure to 20 delineate any additional discovery required to defend against Youngevity’s “new” 21 allegations. (See ECF No. 639, at 8-9.) Additionally, that the defendants have 22 incurred significant expenses in defending against Youngevity’s attempts to 23 compel arbitration – and will incur significant expenses in defending against the 24 proposed claims if amendment is allowed – are not sufficient to establish prejudice 25 where, as here, there is an absence of a showing of bad faith or that such expenses 26 were ultimately avoidable. See United States v. United Healthcare Ins. Co., 848 27 F.3d 1161, 1184-85 (9th Cir. 2016). 28 Further, the Court concludes that the plaintiffs have demonstrated good 1 cause under Rule 16(b)(4) – and the absence of undue delay under Rule 15(a) – 2 in the filing of their instant motion given that the Distributor Defendants’ breach of 3 contract counterclaims were stayed pending interlocutory appeal (ECF No. 560, at 4 2) and prior attempts to amend the plaintiffs’ complaint to include the proposed 5 claims may have mooted the appeal or needlessly increased litigation. While the 6 Ninth Circuit ultimately upheld this Court’s conclusion that Youngevity had waived 7 its right to compel arbitration, the plaintiffs moved for leave to amend less than ten 8 days after the issuance of the relevant mandate. (See ECF No. 650.) Additionally, 9 while the defendants argue that Youngevity “engag[ed] in tactical gamesmanship” 10 in the manner by which it sought to compel arbitration or otherwise seek 11 adjudication of the breach of contract claims and counterclaims (ECF No. 639, at 12 7), the defendants nonetheless fail to demonstrate such efforts were wholly without 13 merit, motivated by an improper motive, or otherwise made in bad faith. 14 Finally, the defendants have failed to demonstrate the futility of the proposed 15 amendment, as their arguments concerning the lack of evidence to support 16 Youngevity’s allegations of damages proximately caused by the Distributor 17 Defendants’ purported breaches are inapposite to a motion seeking leave to 18 amend.1 See Missouri ex rel. Koster v. Harris, 847 F.3d 646, 656 (9th Cir. 2017) 19 (“An amendment is futile when no set of facts can be proved under the amendment 20 to the pleadings that would constitute a valid and sufficient claim or defense.” 21 (internal quotations and citations omitted)). Moreover, given the unusual 22 procedural history of this case and guided by Rule 15(a)’s purpose of resolving 23 disputes on their merits, the Court is reluctant to conclude that Youngevity has 24 waived its breach of contract claims against the Distributor Defendants by its 25 26 27 1 The Distributor Defendants may raise such arguments in a timely-filed motion for summary judgment. The Court reminds the parties of the limitations on further 28 1 efforts in seeking to compel arbitration. 2 Based upon the foregoing, the plaintiffs’ motion for leave to file a fifth 3 ||}amended complaint (ECF No. 628) is GRANTED and the plaintiffs may file an 4 ||amended complaint in the form of the proposed fifth amended complaint attached 5 || to their motion as Exhibit A (ECF No. 628-3). The plaintiffs shall file their amended 6 || complaint on or before April 10, 2020. 7 IT IS SO ORDERED. 3 , 8 || Dated: March 23, 2020 Tid. jideh 9 Honor ble Barry Ted. Moskowitz United States District Judge 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28