Anton Toutov v. Curative Labs Inc.

• Court: District Court, C.D. California
• Decided: December 6, 2022
• Docket: 2:20-cv-11284
• Status: Unknown

Opinion

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7 8 United States District Court 9 Central District of California 10

11 ANTON TOUTOV, Case No. 2:20-cv-11284-ODW (ASx)

12 Plaintiff, ORDER DENYING PLAINTIFF’S 13 MOTION FOR LEAVE TO FILE 14 v. FIRST AMENDED COMPLAINT

15 [90] CURATIVE LABS INC. et al., 16 Defendants. 17

18 19 I. INTRODUCTION 20 Plaintiff Anton Toutov moves for leave to file a First Amended Complaint 21 (“FAC”). (Mot. Leave Am. (“Mot.”), ECF No. 90.) For the reasons discussed below, 22 the Court DENIES Plaintiff’s Motion.1 23 II. BACKGROUND 24 On December 15, 2020, Toutov filed a Complaint asserting four causes of action 25 against Defendants Curative Labs Inc. and Curative Inc. (collectively, “Curative 26 Defendants”), Korva Holdings LLC and Korva Scientific, Inc. (collectively, “Korva 27

28 1 After carefully considering the papers filed in support of the Motion, the Court deemed the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; C.D. Cal. L.R. 7-15. Case 2:20-cv-11284-ODW-AS Document 130 Filed 12/06/22 Page 2 of 6 Page ID #:4769

1 Defendants”),2 and individuals Jonathan Martin and Paul Scott (collectively, 2 “Individual Defendants”). (Compl. ¶¶ 16–21, ECF No. 1.) In the Complaint, Toutov 3 asserts four causes of action against Defendants: violation of California Corporations 4 Code section 1600, breach of fiduciary duty, breach of contract, and accounting. (Id. 5 ¶¶ 78–97.) 6 On November 23, 2021, the Court issued a Scheduling and Case Management 7 Order (“Scheduling Order”) setting the case schedule. (Scheduling Order, ECF No. 58.) 8 The Court set February 14, 2022, as the deadline to hear motions to amend pleadings, 9 (id. at 24), and explained that any requests to amend pleadings after the deadline would 10 be subject to review under Johnson v. Mammoth Recreations, Inc., 975 F.2d 604 11 (9th Cir. 1992), (Scheduling Order 5). 12 On September 8, 2022, the Individual Defendants moved for summary judgment. 13 (Individual Defs. Mot. Summ. J., ECF No. 87.) On October 24, 2022, the Curative 14 Defendants also moved for summary judgment. (Curative Defs. Mot. Summ. J., ECF 15 No. 110.) After the Individual Defendants’ motion, and before the Curative 16 Defendants’ motion, on September 12, 2022, Toutov filed the present Motion for Leave 17 to File First Amended Complaint. (Mot.) Briefing is complete on all three motions. 18 III. LEGAL STANDARD 19 When a party moves to amend a pleading beyond the deadline set in the 20 scheduling order, the party must first show “good cause” for relief from the deadline. 21 Fed. R. Civ. P. 16(b)(4); Johnson, 975 F.2d at 607–08. Federal Rule of Civil Procedure 22 (“Rule”) “16(b)’s ‘good cause’ standard primarily considers the diligence of the party 23 seeking the amendment.” Johnson, 975 F.2d at 609. “[C]arelessness is not compatible 24 with a finding of diligence and . . . [i]f [the moving] party was not diligent, the inquiry 25 should end.” Id. (citations omitted). Only when a party first satisfies the Rule 16 good 26

27 2 On September 20, 2021, Toutov voluntarily dismissed the Korva Defendants from this suit. (Notice 28 Dismissal, ECF No. 52.) Therefore, as used here, “Defendants” refers to the Curative Defendants and the Individual Defendants collectively.

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1 cause standard need a court consider whether amendment is proper under Rule 15. See 2 id. at 608. 3 Under Rule 15, courts analyze the following “Foman factors” to determine 4 whether leave to amend should be granted: (1) undue delay; (2) bad faith; (3) dilatory 5 motive; (4) repeated failure to cure deficiencies by amendments previously allowed; 6 (5) undue prejudice to the opposing party; and (6) futility of the amendment. Foman v. 7 Davis, 371 U.S. 178, 182 (1962). Courts apply these factors with “extreme liberality” 8 favoring amendment under Rule 15. United States v. Webb, 655 F.2d 977, 979 (9th Cir. 9 1981). However, the moving party cannot “appeal to the liberal amendment procedures 10 afforded by Rule 15” unless it first “satisf[ies] the more stringent ‘good cause’ showing 11 required under Rule 16.” AmerisourceBergen Corp. v. Dialysist W., Inc., 465 F.3d 946, 12 952 (9th Cir. 2006) (emphasis omitted). 13 IV. DISCUSSION 14 Toutov brings this Motion solely under Rule 15. (See Mot. 4–5.) However, the 15 deadline to amend has passed and Rule 16’s good cause standard under Johnson 16 governs here. (See Scheduling Order 5, 24.) As Toutov fails to address the correct legal 17 standard, the Court could deny the Motion on this basis alone. See AmerisourceBergen, 18 465 F.3d at 952. Nevertheless, the Court considers the Motion under Rule 16 and 19 Rule 15 and finds leave to amend inappropriate under either standard. 20 A. Rule 16 21 Rule 16 requires the moving party to demonstrate good cause to modify the case 22 schedule to permit an otherwise late motion for leave to amend. See Fed. R. Civ. 23 P. 16(b)(4); Johnson, 975 F.2d at 607–08. The moving party can show good cause 24 through “changes in law or newly discovered evidence.” Del Rio v. Virgin Am., Inc., 25 No. 2:18-cv-1063-GW (SKx), 2019 WL 210957, at *3 (C.D. Cal. Jan. 3, 2019). 26 However, “that justification erodes . . . when a Plaintiff delays amending his complaint 27 beyond the time he could have discovered the grounds for amendment through the 28 exercise of reasonable diligence.” Id. (emphasis omitted). “The good cause standard

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1 typically will not be met where the party seeking to modify the scheduling order has 2 been aware of the facts and theories supporting amendment since the inception of the 3 action.” In re W. States Wholesale Nat. Gas Antitrust Litig., 715 F.3d 716, 737–38 4 (9th Cir. 2013) (affirming district court denial of motion to amend where the plaintiff 5 was not diligent). 6 Here, Toutov seeks to add a cause of action under California Penal Code 7 section 496 (“Section 496”), for treble damages and attorneys’ fees based on 8 Defendants’ alleged theft of Toutov’s property. (Mot. 1, 7–9.) He proposes no new 9 factual allegations and instead seeks only to assert a new legal theory based on the 10 existing allegations. (See id. at 5–6.) Toutov contends that, at the time he initiated this 11 litigation, he could not assert a Section 496 cause of action because the “California 12 Courts of Appeal were split as to whether [S]ection 496 could be applied to business 13 disputes” such as this one. (Id. at 8 (comparing Switzer v. Wood, 35 Cal. App. 5th 116, 14 131–32 (2019) (finding Section 496 applies in a civil action), with Siry Inv., L.P. v. 15 Farkhondehpour, 45 Cal. App. 5th 1098, 1134 (2020) (“Siry I”) (finding Section 496 16 does not apply in a civil action)).) He argues that, in July 2022—after he filed his 17 Complaint and the time to seek leave to amend had elapsed—the California Supreme 18 Court confirmed that Section 496 does apply to civil matters involving business 19 disputes, reversing Siry I and agreeing with Switzer. (Id. (citing Siry Inv., L.P. v. 20 Farkhondehpour, 13 Cal. 5th 333, 361–62 (2022) (“Siry II”)).) Toutov contends that 21 only now can he assert a Section 496 cause of action here, because the recent California 22 Supreme Court decision in Siry II “just recently . . . established” his right to do so. (Id. 23 at 8.) 24 Toutov ignores that California Courts of Appeal decisions such as Switzer 25 supported Section 496’s applicability to civil business disputes well before the 26 California Supreme Court affirmed it in Siry II. For instance, in Bell v. Feibush, the 27 California Court of Appeal for the Fourth District found a Section 496 civil claim 28 permissible in a case in which the plaintiff alleged the defendant fraudulently induced

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1 the plaintiff to loan the defendant money. 212 Cal. App. 4th 1041, 1043, 1048 (2013). 2 And in Switzer, the California Court of Appeal for the Fifth District found that 3 Section 496 applies to claims of fraud and breach of contract “in the context of . . . joint 4 venture[s] or preexisting business relationship[s].” 35 Cal. App. 5th at 119, 131–32. 5 Notably, in Siry I, the Court of Appeal for the Second District disagreed with both Bell 6 and Switzer and held that a plaintiff was precluded from bringing a Section 496 claim 7 for stolen property in a civil business dispute. See 45 Cal. App. 5th at 1137–38. Toutov 8 emphasizes that appellate decisions were split regarding Section 496’s applicability to 9 business disputes when he brought this suit, but he fails to acknowledge that he could 10 have brought such a claim at the time he filed his Complaint. (See Mot. 7–9.) 11 When Toutov he filed suit in 2020, both Bell and Switzer were published and 12 supported applying Section 496 in civil business disputes. Thus, Toutov’s Section 496 13 claim could have been brought under either Bell or Switzer, well before Siry II. See 14 Fagerquist v. W. Sun Aviation, Inc., 191 Cal. App. 3d 709, 716 (1987) (“[F]ederal courts 15 are not bound by a particular state court holding when there is a split among the 16 intermediate state courts which has not been resolved by the state Supreme Court.”). 17 Therefore, by waiting to seek leave to amend until the pleadings were settled and 18 dispositive motions filed, only to add a cause of action available to him from the outset 19 of the litigation, Toutov has failed to act diligently. As Toutov was not diligent, the 20 Court’s inquiry under Rule 16 ends. Johnson, 975 F.2d at 609. 21 Toutov fails to establish good cause under Rule 16, and the Motion is DENIED 22 on this basis. 23 B. Rule 15 24 Nevertheless, even if Toutov satisfied Rule 16, the Motion also fails under 25 Rule 15 because the balance of the Foman factors—including the weightiest Foman 26 factor—weigh against granting leave to amend. First, Defendants will suffer prejudice 27 if Toutov is permitted to amend at this late date because the new cause of action would 28 require the Court to reopen discovery, which would delay proceedings. See Eminence

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1 || Cap., LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (finding that “prejudice 2|| to the opposing party... carries the greatest weight” among the Foman factors); 3 || Zivkovic v. S. Cal. Edison Co., 302 F.3d 1080, 1087 (9th Cir. 2002) (finding no abuse □ □□ of discretion to deny motion to amend where “[t]he requirement of additional discovery 5 || would have prejudiced [defendant] and delayed the proceedings’). Additionally, 6 || Toutov waited to seek leave to amend for nearly two months after the California 7 || Supreme Court issued its decision in Siry JJ, filing his Motion just days after the 8 | Individual Defendants moved for summary judgment. This suggests a dilatory motive 9 || and possibly gamesmanship. See Matsumoto v. Republic Ins. Co., 792 F.2d 869, 872— 10 | 73 (9th Cir. 1986) (affirming denial of leave to amend where motion was made after 11 || discovery commenced and defendant’s motion for summary judgment was pending). 12 || Accordingly, the Court finds that these Foman factors weigh against granting leave to 13 | amend, and the Motion is DENIED under Rule 15 as well. 14 Vv. CONCLUSION 15 For the reasons discussed above, the Court DENIES Toutov’s Motion for Leave 16 || to File a First Amended Complaint. (ECF No. 90.) 17 18 IT IS SO ORDERED.

20 December 6, 2022 NO. Yo a 21 Celtis Yall — 0 OTIS DSWRIGHT, II 33 UNITED STATES DISTRICT JUDGE

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