Pacific Vibrations, LLC v. Slow Gold Limited et al, No. 3:2022cv01118 - Document 72 (S.D. Cal. 2023)
Court Description: ORDER Granting Slow Gold's Motion For Leave To File First Amended Counterclaim [ECF No. 50 ]. Signed by Judge Linda Lopez on 5/11/2023. (ddf)
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Pacific Vibrations, LLC v. Slow Gold Limited et al Doc. 72 Case 3:22-cv-01118-LL-DDL Document 72 Filed 05/11/23 PageID.1110 Page 1 of 7 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 PACIFIC VIBRATIONS, LLC, Case No.: 22cv1118-LL-DDL Plaintiff, 12 13 v. 14 SLOW GOLD LIMITED, et al., ORDER GRANTING SLOW GOLD’S MOTION FOR LEAVE TO FILE FIRST AMENDED COUNTERCLAIM Defendants. 15 [ECF No. 50] 16 17 18 Before the Court is Defendant Slow Gold Limited’s Motion for Leave to File First 19 Amended Counterclaim against Plaintiff and Counter-Defendant Pacific Vibrations, LLC. 20 ECF No. 50 (“Motion” or “Mot.”). Plaintiff filed an Opposition [ECF No. 58 (“Opposition” 21 or “Oppo.”)], and Defendant filed a Reply [ECF No. 60]. The Court took this matter under 22 submission without oral argument pursuant to Civil Local Rule 7.1(d)(1). For the reasons 23 stated below, the Court GRANTS Defendant’s Motion. 24 I. BACKGROUND 25 On March 11, 2022, Plaintiff filed a complaint in state court against Defendants 26 Slow Gold Limited, Simon Charles Tucker, Cassie Green, and Bradley John Hockridge 27 alleging the following causes of action: (1) breach of contract; (2) unfair competition, 28 1 22cv1118-LL-DDL Dockets.Justia.com Case 3:22-cv-01118-LL-DDL Document 72 Filed 05/11/23 PageID.1111 Page 2 of 7 1 (3) federal trademark infringement, (4) California common law trademark infringement, 2 and (5) false designation of origin. ECF No. 1-2 at 5–27. 3 On July 29, 2022, Defendant filed its notice of removal and its answer. ECF Nos. 1; 4 1-2 at 29–38; 5. On October 17, 2022, the Court issued a scheduling order setting pretrial 5 deadlines, including a filing deadline of December 2, 2022 for any motion to join other 6 parties, to amend the pleadings, or to file additional pleadings. ECF No. 11 at 1. The 7 deadline to complete fact discovery was set for May 5, 2023 Id. at 2. The deadline to 8 complete fact witness depositions only was extended to June 5, 2023. ECF No. 28. 9 On February 10, 2023, the Court issued an Order Granting in Part and Denying in 10 Part Slow Gold Limited’s Motion for Leave to File Counterclaims. ECF No. 32. On 11 February 17, 2023, Defendant filed its Counterclaim. ECF No. 35. On February 17, 2023, 12 Defendant also corresponded with Plaintiff regarding its intention to file a First Amended 13 Counterclaim (“FAC”), and provided Plaintiff with a draft thereof on February 28, 2023. 14 ECF No. 50-1, Declaration of Thomas J. Speiss (“Speiss Decl.”) ¶¶ 4, 5; see also ECF No. 15 58-1, Declaration of Ryan J. Altomare (“Altomare Decl.”), ¶ 6. The parties also 16 participated in a meet and confer concerning the filing of the proposed FAC on February 17 28, 2023. Speiss Decl. ¶ 5; Altomare Decl. ¶ 7. On March 7, 2023, Defendant filed this 18 Motion seeking leave to file a FAC against Plaintiff. ECF No. 50. 19 II. LEGAL STANDARD 20 Once a party has served its pleading, there is a short period of time when the party 21 may amend it once as a matter of right. Fed. R. Civ. P. 15(a)(1). In all other cases, a party 22 may amend its pleading only with written consent from the opposing party or permission 23 from the court. Fed. R. Civ. P. 15(a)(2). “The court should freely give leave when justice 24 so requires.” Id. This policy should be applied with “extreme liberality” to reflect the 25 underlying purpose of Rule 15 “to facilitate decision on the merits, rather than on the 26 pleadings or technicalities.” United States v. Webb, 655 F.2d 977, 979 (9th Cir. 1981). 27 Leave to amend should be granted absent a showing of “undue delay, bad faith or 28 dilatory motive, futility of amendment, and prejudice to the opposing party.” Id. at 980 2 22cv1118-LL-DDL Case 3:22-cv-01118-LL-DDL Document 72 Filed 05/11/23 PageID.1112 Page 3 of 7 1 (citing Foman v. Davis, 371 U.S. 178, 182 (1962)). Prejudice to the opposing party is the 2 factor that carries the greatest weight. Eminence Cap., LLC v. Aspeon, Inc., 316 F.3d 1048, 3 1052 (9th Cir. 2003). “Absent prejudice, or a strong showing of any of the remaining 4 Foman factors, there exists a presumption under Rule 15(a) in favor of granting leave to 5 amend.” Id. “The party opposing amendment bears the burden of showing prejudice.” DCD 6 Programs, Ltd. v. Leighton, 833 F.2d 183, 187 (9th Cir. 1987). 7 III. DISCUSSION 8 Defendant argues that it should be allowed leave to file its FAC for two reasons: 9 (1) the allegations of the claim for breach of contract set forth in the pending Counterclaim, as the Court noted in the Order granting leave to file that pleading, are not entirely clear and unambiguous, shortcomings which the court stated would be best addressed by motion, and which Slow Gold has undertaken to correct in the FAC; and, 10 11 12 13 14 15 16 17 18 (2) Slow Gold’s claim for relief arising from Plaintiff’s persistent delivery of defective products for marketing and sale by Slow Gold pursuant to the parties’ distribution agreement – as alleged in the pending Counterclaim, and as further revealed in discovery obtained since the pending Counterclaim was drafted – can only be fully addressed and remedied by a claim for breach of the covenant of good faith and fair dealing that is implied in that distribution agreement, and the FAC adds that claim for relief. 19 Mot. at 2; see also Mot. at 10-11. Plaintiff claims that both of Defendant’s arguments fail 20 and leave to amend should be denied. 21 The Court will consider the Foman factors of undue delay, bad faith or dilatory 22 motive, futility of amendment, and prejudice to the opposing party. Foman v. Davis, 371 23 U.S. at 182. 24 A. 25 Defendant claims that it did not unduly delay in filing this Motion, and was diligent 26 in bringing its proposed FAC before the Court. Mot. at 11-12. Defendant also argues that 27 Plaintiff will not be prejudiced by the FAC because “Plaintiff has propounded discovery 28 requests that encompass the issues that are raised by the claim for breach of the implied Undue Delay and Prejudice 3 22cv1118-LL-DDL Case 3:22-cv-01118-LL-DDL Document 72 Filed 05/11/23 PageID.1113 Page 4 of 7 1 covenant of good faith.” Id. at 12-13. Plaintiff opposes on the grounds that “the allegations 2 of the new proposed counterclaim are in fact based on facts and theories Slow Gold knew 3 or should have known at the time it filed the original pleading.” Oppo. at 12. Plaintiff 4 argues that “Slow Gold has offered nothing explaining why it was not known and why it 5 could not file its counterclaims on these issues in a timely manner.” Id. at 13. Plaintiff also 6 argues that the proposed amendment is prejudicial to Plaintiff because the “addition of 7 these counterclaims will only increase the discovery required to be conducted by the parties 8 and may require supplemental responses to address the counterclaims, driving up litigation 9 costs.” Id. at 14-15. 10 “Undue delay is delay that prejudices the nonmoving party or imposes unwarranted 11 burdens on the court.” Davis v. Powell, 901 F. Supp. 2d 1196, 1212 (S.D. Cal. 2012) 12 (quoting BNSF Ry. Co. v. San Joaquin Valley R. Co., No. 1:08-CV-01086-AWI, 2011 WL 13 3328398, at *2 (E.D. Cal. Aug. 2, 2011)). “The fact that [an] amended counterclaim may 14 cause more work does not constitute prejudice.” Fru-Con Constr. Corp. v. Sacramento 15 Mun. Until. Dist., 2006 WL 3733815, at *5 (E.D. Cal. 2006). 16 The Court finds Defendant has not unduly delayed in filing this Motion. Defendant 17 informed Plaintiff of its intention to file the FAC the same day it filed the original 18 counterclaim. Less than ten days later, Defendant provided Plaintiff with the proposed FAC 19 and “met and conferred” regarding it. The instant Motion was filed within one week of the 20 meet and confer. Although discovery has begun and the deadline for fact discovery is 21 closed, there is still time for fact depositions until June 5, 2023. Additionally, Defendant 22 states that it has “commit[ted] to full, reasonable cooperation with Plaintiff as needed to 23 accommodate Plaintiff’s legitimate additional discovery needs, if any.” Reply at 12. The 24 Court does not find that allowing a FAC at this stage of the litigation will prejudice Plaintiff 25 or burden the Court. The Court’s finding of no undue delay and no prejudice weighs toward 26 granting the Motion. 27 /// 28 /// 4 22cv1118-LL-DDL Case 3:22-cv-01118-LL-DDL Document 72 Filed 05/11/23 PageID.1114 Page 5 of 7 1 B. 2 Defendant contends that it brings this Motion in good faith because the factual 3 allegations to support its breach of contract claim and the additional claim for breach of 4 the implied covenant of good faith and fair dealing are fully supported by the law. Mot. at 5 12. Defendant argues that it seeks to bring the additional counterclaim for “breach of 6 implied covenant of good faith and fair dealing only because its further analysis of the 7 correct legal basis for relief for Plaintiff’s prolonged and excessive delivery of defective 8 products, the scope of which is better understood based on Plaintiff’s discovery responses 9 since the original Counterclaim was drafted, indicates that the correct legal theory is breach 10 of the implied covenant of good faith.” Id. at 12. Defendant also argues that it “has a more 11 complete understanding of the scope of [the alleged] injury based on facts disclosed by 12 Plaintiff in discovery since the initial Counterclaim was filed.” Id. at 11. Plaintiff argues 13 that Defendant has shown bad faith by “attempting to use the Court’s concern regarding 14 the deficiencies of the counterclaim as a second bite at the apple to insert new theories of 15 liability against the Plaintiff/counter defendants.” Oppo. at 11. Plaintiff also argues that 16 “Slow Gold offers no evidence why it was not able to assert [the breach of the implied 17 covenant of good faith and fair dealing] counterclaim when it first sought leave to file its 18 first counterclaim back in December 2022.” Id. Bad Faith 19 The Court does not find that Defendant acted in bad faith. The Court finds it 20 reasonable that Defendant sought leave to file the FAC in order to address and correct the 21 shortcomings set forth in the Court’s February 10, 2023 Order Granting in Part and 22 Denying in Part Slow Gold Limited’s Motion for Leave to File Counterclaims [ECF No. 23 32]. The Court also finds reasonable Defendant’s explanation for the need to amend its 24 counterclaims based on facts learned in Plaintiff’s discovery responses since the original 25 Counterclaim was drafted. Finally, the Court has already found that Defendant acted 26 diligently in informing Plaintiff about its intention to seek to amend the Counterclaim, and 27 that the delay in filing the instant motion was not unreasonable. The Court’s failure to find 28 bad faith weighs toward granting the Motion. 5 22cv1118-LL-DDL Case 3:22-cv-01118-LL-DDL Document 72 Filed 05/11/23 PageID.1115 Page 6 of 7 1 C. 2 Defendant contends that its proposed counterclaims are not futile because they plead 3 recognized causes of action that it supports with substantial allegations of fact. Mot. at 13. 4 Plaintiff argues that (1) “Defendant’s proposed breach of contract [claim] serves no useful 5 purpose, other than to harass and increase the cost of litigation, because there is already a 6 breach of contract claim on file which appears to allege the same breaches and seeks the 7 same relief as the proposed amended counterclaim”, and (2) “the allegations of the breach 8 of implied covenant of good faith and fair dealing match those of the breach of contract 9 claim” and are “duplicative, futile, and should not be allowed.” Oppo. at 13-14. Futility 10 A motion to amend may be denied if the amendment would be futile or subject to 11 dismissal. Saul v. United States, 928 F.2d 829, 843 (9th Cir. 1991) (citations omitted). 12 “[A] proposed amendment is futile only if no set of facts can be proved under the 13 amendment to the pleadings that would constitute a valid and sufficient claim or defense.” 14 Miller v. Rykoff-Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988), implied overruling on 15 other grounds by Ashcroft v. Iqbal, 556 U.S. 662 (2009). However, denying leave to amend 16 for futility is “rare and courts generally defer consideration of challenges to the merits of a 17 proposed amended pleading until after leave to amend is granted and the amended pleading 18 is filed.” Duhn Oil Tool, Inc. v. Cooper Cameron Corp., No. CV-F-05-1411 OWW/GSA, 19 2010 WL 596312, at *14 (E.D. Cal. Feb. 16, 2010) (citing Netbula, LLC v. Distinct Corp., 20 212 F.R.D. 534, 539 (N.D. Cal. 2003)). 21 Here, the Court finds that the proposed amended counterclaim is not futile. First, on 22 the breach of contract claim, Defendant states that the proposed amendment seeks to allege 23 the breach of contract claim more “clearly, cogently, and completely.” Mot. at 10-11. This 24 proposed amendment is for a recognized cause of action (breach of contract), which 25 Defendant seeks to support with additional allegations of fact, and may entitle it to relief if 26 proven. Second, on the claim for breach of implied covenant of good faith and fair dealing, 27 the Court finds that it is also not futile because it has distinct elements and remedies from 28 that of a breach of contract claim. Plaintiff has failed to provide sufficient justification to 6 22cv1118-LL-DDL Case 3:22-cv-01118-LL-DDL Document 72 Filed 05/11/23 PageID.1116 Page 7 of 7 1 depart from the strong presumption in favor of amendment. The Court’s failure to find 2 futility weighs toward granting the Motion. 3 D. 4 Considering all the Foman factors, the Court finds they weigh in favor of granting 5 Defendant’s Motion. Accordingly, the Court GRANTS Defendant Slow Gold Limited’s 6 Motion for Leave to File the proposed First Amended Counterclaim as set forth at ECF 7 No. 50-1 at 9-18. Defendant shall file the FAC on or before May 15, 2023. 8 9 Conclusion IT IS SO ORDERED. Dated: May 11, 2023 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 7 22cv1118-LL-DDL
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