2 UNITED STATES DISTRICT COURT 3 DISTRICT OF NEVADA 4
5 Mary Jane Beauregard and John Hugh Case No. 2:20-cv-02123-KJD-DJA Smith, 6 Plaintiffs, ORDER – Denying Motion to Reopen 7 Discovery v. 8 Clayton Sampson, an individual; Elisha 9 Sampson, an individual; EnvyTV, LLC, a Nevada limited liability company; and Envy 10 Solutions, LLC, a Nevada limited liability company, 11 Defendants. 12 13 This is a fraud action arising out of Plaintiffs’ investment into EnvyTV, LLC—a multi-level 14 marketing company. Plaintiffs Mary Jane Beauregard and John Hugh Smith sue Defendants 15 Clayton Sampson; Elisha Sampson; EnvySolutions, LLC; and EnvyTV claiming that the 16 Sampsons—a majority owners and co-managers of EnvyTV—failed to acknowledge Plaintiffs’ 17 ownership interests in the company after they invested. Instead, Plaintiffs claim that the 18 Sampsons recreated the business operations of EnvyTV through EnvySolutions to cut Plaintiffs 19 out of the business. 20 Defendants move under Federal Rules of Civil Procedure 16(b)(4) and 26(e) to admit newly 21 discovered evidence beyond the close of discovery. (#99); (#117). 1 Defendants essentially ask 22 the Court to reopen discovery. For the reasons stated below, Defendants’ motion is denied. 23 24 25 1 Defendants erroneously filed their first motion as a “proposed pretrial order” even though they titled it a “motion to admit new evidence after the close of the discovery period.” (#99). After Plaintiffs responded 26 to Defendants’ motion, Defendants filed a second motion seeking the same relief as the first. (#117). It appears that Defendants’ second motion may have been their reply in support of their first motion. The 27 Court thus construes the second motion as a reply. In addition, Plaintiffs filed a supplemental response (#121) to Defendants’ motion, attempting to clarify the erroneously filed motions on the docket, and 1 I. Factual and Procedural Background 2 Defendants move to admit new evidence after the close of discovery, explaining that they 3 “engaged in a meticulous financial review of the company” which resulted in Defendants 4 “discover[ing] significant financial discrepancies, most notably, substantial overpayments to 5 various affiliates, including those who are now Plaintiffs in this suit.” (#99, at 4). The evidence 6 can be summarized as follows: (1) a transcript of a conversation between Clayton Sampson and 7 Hannah Yoshiko; (2) a 2019 email exchange between Clayton Sampson and Amanda Davis; (3) 8 EnvyTY rank history for Plaintiffs’ EnvyTV affiliate positions; (4) Defendants’ profit and loss 9 statements for the period of January 2019 to November 2023; and (5) Multisoft invoices sent to 10 Clayton Sampson/EnvyTV for the period of February 2019 to November 2023. See id., at 13-103. 11 Defendants assert in conclusory fashion that the evidence was “previously inaccessible and only 12 recently come to light” on December 4, 2023. Id. at 1-2. Defendants add that the evidence will 13 demonstrate “the company’s dedication to transparency and ethical business operations” and 14 indicates “a possible breach of good faith,” by Plaintiffs. Id. at 4-5. Defendants add that they are 15 obligated under Federal Rule of Civil Procedure 26(e) to supplement their initial disclosures 16 given their discovery of new information. Id. at 6. 17 Plaintiffs respond that Defendants have not been diligent. (#113). Plaintiffs point out that 18 Defendants have been dilatory in responding to discovery in this case, to the point that the Court 19 had to enter an order to show cause why Defendants did not comply with their discovery 20 obligations. Id. at 2; (#56, at 3) (“Defendants must show cause why they have failed to comply 21 with the Court’s order compelling discovery responses…”). Plaintiffs assert that Defendants 22 provided no reason in their motion why they could not have found the evidence they now seek to 23 introduce earlier. Id. at 4-5. Plaintiffs also argue that the obligation to supplement under Rule 26 24 does not provide a back door to permit parties to reopen discovery. 25 In reply, Defendants appear to blame their former attorney for their delays in discovery, 26 although they do not connect their former attorney’s actions to their recent discovery of the new 27 evidence. (#117, at 2). 1 II. Analysis 2 On the eve of trial, Defendants are requesting this Court to reopen discovery and admit 3 roughly 100 pages of newly discovered evidence beyond the close of discovery. (See #99, at 13- 4 103). “District courts have ‘broad discretion to manage discovery and to control the course of 5 litigation under Federal Rule of Civil Procedure 16.’” Hunt v. Cnty. of Orange, 672 F.3d 606, 6 616 (9th Cir. 2012) (quoting Avila v. Willits Envtl. Remediation Trust, 633 F.3d 828, 833 (9th 7 Cir. 2011)). Good cause must be shown for modification of the scheduling order regulating 8 discovery. Fed. R. Civ. P. 16(b)(4); Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 608- 9 09 (9th Cir. 1992). The “good cause” requirement primarily considers the diligence of the party 10 seeking the extension. Johnson, 975 F.2d at 609. “If that party was not diligent, the inquiry 11 should end.” Id. 12 When the motion to extend time is made after time has expired, the court must also consider 13 excusable neglect. See Fed. R. Civ. P. 6(b)(1)(B). When a threshold showing of good cause is not 14 made, however, the Court need not reach the issue of excusable neglect. Werbicky v. Green Tree 15 Servicing, LLC, No. 2:12-CV-01567-JAD, 2014 WL 5470466, at *1 n.1 (D. Nev. Oct. 27, 2014). 16 In addition, when deciding whether to amend a pretrial scheduling order and reopen discovery, a 17 court considers the following factors: 18 (1) whether trial is imminent, (2) whether the request is opposed, (3) whether the non-moving party would be prejudiced, (4) whether the 19 moving party was diligent in obtaining discovery within the 20 guidelines established by the court, (5) the foreseeability of the need for additional discovery in light of the time allowed for discovery 21 by the district court, and (6) the likelihood that the discovery will lead to relevant evidence. 22 23 City of Pomona v. SQM N. Am. Corp., 866 F.3d 1060, 1066 (9th Cir. 2017) (quoting United 24 States ex rel. Schumer v. Hughes Aircraft Co., 63 F.3d 1512, 1526 (9th Cir. 1995)). 25 First, Defendants have failed to establish “good cause” under Rule 16(b). “The central inquiry 26 under Fed. R. Civ. P. 16(b)(4) is whether the requesting party was diligent in seeking the 27 amendment.” DRK Photo v. McGraw-Hill Glob. Educ. Holdings, LLC, 870 F.3d 978, 989 (9th 1 the close of discovery. (See #30, at 40) (setting November 9, 2021, as the fact discovery cut-off 2 date).
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2 UNITED STATES DISTRICT COURT 3 DISTRICT OF NEVADA 4
5 Mary Jane Beauregard and John Hugh Case No. 2:20-cv-02123-KJD-DJA Smith, 6 Plaintiffs, ORDER – Denying Motion to Reopen 7 Discovery v. 8 Clayton Sampson, an individual; Elisha 9 Sampson, an individual; EnvyTV, LLC, a Nevada limited liability company; and Envy 10 Solutions, LLC, a Nevada limited liability company, 11 Defendants. 12 13 This is a fraud action arising out of Plaintiffs’ investment into EnvyTV, LLC—a multi-level 14 marketing company. Plaintiffs Mary Jane Beauregard and John Hugh Smith sue Defendants 15 Clayton Sampson; Elisha Sampson; EnvySolutions, LLC; and EnvyTV claiming that the 16 Sampsons—a majority owners and co-managers of EnvyTV—failed to acknowledge Plaintiffs’ 17 ownership interests in the company after they invested. Instead, Plaintiffs claim that the 18 Sampsons recreated the business operations of EnvyTV through EnvySolutions to cut Plaintiffs 19 out of the business. 20 Defendants move under Federal Rules of Civil Procedure 16(b)(4) and 26(e) to admit newly 21 discovered evidence beyond the close of discovery. (#99); (#117). 1 Defendants essentially ask 22 the Court to reopen discovery. For the reasons stated below, Defendants’ motion is denied. 23 24 25 1 Defendants erroneously filed their first motion as a “proposed pretrial order” even though they titled it a “motion to admit new evidence after the close of the discovery period.” (#99). After Plaintiffs responded 26 to Defendants’ motion, Defendants filed a second motion seeking the same relief as the first. (#117). It appears that Defendants’ second motion may have been their reply in support of their first motion. The 27 Court thus construes the second motion as a reply. In addition, Plaintiffs filed a supplemental response (#121) to Defendants’ motion, attempting to clarify the erroneously filed motions on the docket, and 1 I. Factual and Procedural Background 2 Defendants move to admit new evidence after the close of discovery, explaining that they 3 “engaged in a meticulous financial review of the company” which resulted in Defendants 4 “discover[ing] significant financial discrepancies, most notably, substantial overpayments to 5 various affiliates, including those who are now Plaintiffs in this suit.” (#99, at 4). The evidence 6 can be summarized as follows: (1) a transcript of a conversation between Clayton Sampson and 7 Hannah Yoshiko; (2) a 2019 email exchange between Clayton Sampson and Amanda Davis; (3) 8 EnvyTY rank history for Plaintiffs’ EnvyTV affiliate positions; (4) Defendants’ profit and loss 9 statements for the period of January 2019 to November 2023; and (5) Multisoft invoices sent to 10 Clayton Sampson/EnvyTV for the period of February 2019 to November 2023. See id., at 13-103. 11 Defendants assert in conclusory fashion that the evidence was “previously inaccessible and only 12 recently come to light” on December 4, 2023. Id. at 1-2. Defendants add that the evidence will 13 demonstrate “the company’s dedication to transparency and ethical business operations” and 14 indicates “a possible breach of good faith,” by Plaintiffs. Id. at 4-5. Defendants add that they are 15 obligated under Federal Rule of Civil Procedure 26(e) to supplement their initial disclosures 16 given their discovery of new information. Id. at 6. 17 Plaintiffs respond that Defendants have not been diligent. (#113). Plaintiffs point out that 18 Defendants have been dilatory in responding to discovery in this case, to the point that the Court 19 had to enter an order to show cause why Defendants did not comply with their discovery 20 obligations. Id. at 2; (#56, at 3) (“Defendants must show cause why they have failed to comply 21 with the Court’s order compelling discovery responses…”). Plaintiffs assert that Defendants 22 provided no reason in their motion why they could not have found the evidence they now seek to 23 introduce earlier. Id. at 4-5. Plaintiffs also argue that the obligation to supplement under Rule 26 24 does not provide a back door to permit parties to reopen discovery. 25 In reply, Defendants appear to blame their former attorney for their delays in discovery, 26 although they do not connect their former attorney’s actions to their recent discovery of the new 27 evidence. (#117, at 2). 1 II. Analysis 2 On the eve of trial, Defendants are requesting this Court to reopen discovery and admit 3 roughly 100 pages of newly discovered evidence beyond the close of discovery. (See #99, at 13- 4 103). “District courts have ‘broad discretion to manage discovery and to control the course of 5 litigation under Federal Rule of Civil Procedure 16.’” Hunt v. Cnty. of Orange, 672 F.3d 606, 6 616 (9th Cir. 2012) (quoting Avila v. Willits Envtl. Remediation Trust, 633 F.3d 828, 833 (9th 7 Cir. 2011)). Good cause must be shown for modification of the scheduling order regulating 8 discovery. Fed. R. Civ. P. 16(b)(4); Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 608- 9 09 (9th Cir. 1992). The “good cause” requirement primarily considers the diligence of the party 10 seeking the extension. Johnson, 975 F.2d at 609. “If that party was not diligent, the inquiry 11 should end.” Id. 12 When the motion to extend time is made after time has expired, the court must also consider 13 excusable neglect. See Fed. R. Civ. P. 6(b)(1)(B). When a threshold showing of good cause is not 14 made, however, the Court need not reach the issue of excusable neglect. Werbicky v. Green Tree 15 Servicing, LLC, No. 2:12-CV-01567-JAD, 2014 WL 5470466, at *1 n.1 (D. Nev. Oct. 27, 2014). 16 In addition, when deciding whether to amend a pretrial scheduling order and reopen discovery, a 17 court considers the following factors: 18 (1) whether trial is imminent, (2) whether the request is opposed, (3) whether the non-moving party would be prejudiced, (4) whether the 19 moving party was diligent in obtaining discovery within the 20 guidelines established by the court, (5) the foreseeability of the need for additional discovery in light of the time allowed for discovery 21 by the district court, and (6) the likelihood that the discovery will lead to relevant evidence. 22 23 City of Pomona v. SQM N. Am. Corp., 866 F.3d 1060, 1066 (9th Cir. 2017) (quoting United 24 States ex rel. Schumer v. Hughes Aircraft Co., 63 F.3d 1512, 1526 (9th Cir. 1995)). 25 First, Defendants have failed to establish “good cause” under Rule 16(b). “The central inquiry 26 under Fed. R. Civ. P. 16(b)(4) is whether the requesting party was diligent in seeking the 27 amendment.” DRK Photo v. McGraw-Hill Glob. Educ. Holdings, LLC, 870 F.3d 978, 989 (9th 1 the close of discovery. (See #30, at 40) (setting November 9, 2021, as the fact discovery cut-off 2 date). Defendants’ decision to raise this issue over two years past the close of discovery equates 3 to clear carelessness on their part, and “carelessness is not compatible with a finding of diligence 4 and offers no reason for a grant of relief.” See Johnson, 975 F.2d at 609. 5 Second, after evaluating all applicable factors, the Court finds that reopening discovery is not 6 appropriate. See City of Pomona, 866 F.3d at 1066. As trial is scheduled to begin on January 2, 7 2024, reopening discovery at this point would ultimately result in prejudice to Plaintiffs and cause 8 a delay in judicial proceedings. Plaintiffs would need additional time to analyze the newly 9 disclosed evidence, formulate a new litigation strategy, and possibly conduct additional discovery 10 of their own. 11 Moreover, Defendants were clearly not diligent in obtaining discovery within the guidelines 12 established by the Court. Defendants’ motion asserts that the new evidence “was not accessible 13 during the discovery phase despite [their] diligent efforts”, but they offer no reason as to why it 14 was not accessible. (See #99, at 7-8). Yet, in the preceding paragraphs, Defendants claim the 15 evidence was discovered “[i]n the course of a detailed and thorough examination of the 16 company’s financial statements and commission structures[.]” Id. at 4. Based on the nature of the 17 case—a fraud action arising out of Plaintiffs’ investment into Defendants’ company—the Court 18 feels that a review of Defendants’ financial statements should have been conducted during the 19 discovery phase, not a month before trial. Lastly, in their Reply, Defendants assert that some 20 “evidence was discovered my [sic] accident on December 4th[.]” (#117, at 3). Here, the Court has 21 a hard time reconciling Defendants’ argument that they conducted discovery diligently with the 22 fact that they discovered “vital” and “indispensable” evidence by “accident” two years after the 23 close of discovery. See id.; (#99, at 4). Thus, the Court finds that Defendants were not diligent in 24 their discovery efforts, and reopening discovery is not appropriate in this case. 25 // 26 // 27 // 1) Uf. Conclusion 2 Accordingly, IT IS THEREFORE ORDERED that Defendants’ motions to reopen 3 || discovery (#99/117) are DENIED. 4 . o™ 5 DATED: December 22, 2023 | / Ko ‘ + KENT J. DAWSON 7 UNITED STATES DISTRICT JUDGE 8 9 10 1] 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28