Karen Marie Foster v. Digital Safety Products, LLC

Opinion

1 2 3 4 5 6 7 10 11 KAREN MARIE FOSTER, Case No.: 3:25-cv-01782-H-KSC

12 Plaintiff, ORDER GRANTING DEFENDANT’S 13 v. MOTION FOR LEAVE TO FILE AMENDED ANSWER AND THIRD- PARTY COMPLAINT 15 Defendant.

16 [Doc. No. 15.] 17 On October 20, 2025, Defendant Digital Safety Products, LLC (“Defendant”) filed 18 a motion for leave to file an amended answer and third-party complaint. (Doc. No. 15.) 19 On October 27, 2025, Plaintiff Karen Foster (“Plaintiff”) filed a response in opposition. 20 (Doc. No. 17.) On October 30, 2025, Defendant filed its reply. (Doc. No. 18.) 21 A hearing on Defendant’s motion is currently scheduled for Monday, November 10, 22 2025 at 10:30 a.m. The Court, pursuant to its discretion under Civil Local Rule 7.1(d)(1), 23 determines the matter is appropriate for resolution without oral argument, submits the 24 motion on the parties’ papers, and vacates the hearing. For the reasons discussed below, 25 the Court grants Defendant’s motion for leave to file an amended answer and third-party 26 complaint. 27 /// 28 2 I. Factual Allegations in Plaintiff’s Complaint 3 On July 11, 2025, Plaintiff filed a complaint against Defendant, a San Diego-based 4 consumer reporting agency, alleging that Defendant violated the Fair Credit Reporting Act 5 (“FCRA”), 15 U.S.C. § 1681 et seq., the California Investigative Consumer Reporting 6 Agencies Act (“CICRAA”), Cal. Civ. Code § 1786 et seq., and the California Consumer 7 Credit Reporting Agencies Act (“CCCRAA”), Cal. Civ. Code § 1785.14 et seq. (Doc. No. 8 1, Compl. ¶¶ 2, 169-234, 291-311.) Plaintiff also alleges that Defendant defamed Plaintiff 9 by disseminating a false consumer report (the “Report”) that led to the termination of her 10 employment with Morningstar’s Bed, Bath and Curtain (the “Company”), irreparable 11 damage to her relationship with Kenneth Morningstar (“Morningstar”), the loss of a 12 business opportunity with Morningstar, damage to her reputation, and emotional distress. 13 (Id. ¶¶ 235-290.) 14 II. Additional Factual Allegations in Defendant’s Proposed Amended Answer and 15 Third-Party Complaint 16 On August 11, 2025, Defendant filed an answer to Plaintiff’s complaint. (Doc. No. 17 6.) On September 24, 2025, Plaintiff provided her Initial Disclosures, including an illegible 18 copy of the purported false consumer report from which her claims arise. (Doc. No. 15 at 19 3; Doc. No. 15-1, Diego Decl ¶ 3.) Plaintiff has not provided Defendant with a legible 20 copy. (Id. ¶ 7.) 21 On September 30, 2025, Defendant obtained a legible copy of the alleged consumer 22 report from a third-party, Casey Morningstar, which Defendant produced to opposing 23 counsel. (Id. ¶ 8.) On October 17, 2025, Defendant also obtained the Company’s responses 24 to a subpoena issued by Defendant. (Id. ¶ 9.) 25 Defendant’s present motion is based on the following allegations: the Company and 26 Morningstar republished the statements concerning Plaintiff that Plaintiff alleges are 27 defamatory and made employment decisions based on the Report allegedly purchased from 28 Defendant. (Doc. No. 15 at 3; Doc. No. 15-3 at 30.) While Defendant denies that it 1 provided the Report, if Plaintiff’s allegations are true and the public records report provided 2 by Defendant is found to be the Report at issue, then the Company failed to comply with 3 its obligations under the FCRA, CICRAA, and CCCRAA. (Doc. No. 15 at 4.) In 4 particular, the Company obtained the Report without Plaintiff’s written authorization, 5 failed to provide Plaintiff with an opportunity to review and correct the Report before 6 termination, and wrongfully terminated Plaintiff based on the Report. (Id.; Doc No. 15-3 7 at 30-31.) 8 By the present motion, Defendant moves the Court for an order granting it leave to: 9 (1) amend its answer to assert an additional affirmative defense of immunity pursuant to 10 47 U.S.C § 230(c)(1) and Fed. R. Civ. P. 15; (2) add Kenneth Morningstar and 11 Morningstar’s Bed, Bath and Curtain as third parties; and (3) file a third-party complaint 12 against Morningstar and the Company based on their intervening and contributory conduct. 13 (Id. at 3, 4.) The Court will address each of these requests in turn. 15 I. Defendant’s Motion to Amend its Answer to Include Additional Affirmative 16 Defense is Granted 17 Defendant seeks to add an additional affirmative defense of immunity to its answer 18 pursuant to 47 U.S.C. 230(c). (Id. at 6-7.) Plaintiff does not oppose Defendant’s request 19 in its Response. 20 A. Legal Standard 21 Federal Rule of Civil Procedure 15(a) provides that once a responsive pleading is 22 served, “a party may amend its pleading only with the opposing party’s written consent 23 or the court’s leave.” Fed. R. Civ. P. 15(a)(2). “The court should freely give leave when 24 justice so requires.” Id. The Ninth Circuit has instructed that this policy is “‘to be 25 applied with extreme liberality.’” Hoang v. Bank of Am., N.A., 910 F.3d 1096, 1102 26 (9th Cir. 2018) (quoting Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 27 (9th Cir. 2003)). The decision whether to grant leave to amend “is entrusted to the sound 28 discretion of the trial court.” Pisciotta v. Teledyne Indus., 91 F.3d 1326, 1331 (9th Cir. 1 1996). 2 When determining whether to grant leave to amend, courts generally consider five 3 factors, known as the Foman factors as stated by the Supreme Court in Foman v. Davis, 4 371 U.S. 178, 182 (1962). These factors include: (1) undue delay; (2) bad faith on the 5 part of the party seeking leave to amend; (3) undue prejudice to the non-moving party; 6 (4) futility of amendment; and (5) whether the party has previously amended the 7 pleading. Foman, 371 U.S. at 182; see Desertrain v. City of Los Angeles, 754 F.3d 1147, 8 1154 (9th Cir. 2014); Johnson v. Buckley, 356 F.3d 1067, 1077 (9th Cir. 2004). “Absent 9 prejudice, or a strong showing of any of the remaining Foman factors, there exists a 10 presumption under Rule 15(a) in favor of granting leave to amend.” Eminence Cap., 316 11 F.3d at 1052. 12 The party opposing amendment bears the burden of showing prejudice, unfair 13 delay, bad faith, or futility of amendment. Id.; see also DCD Programs, Ltd. v. Leighton, 14 833 F.2d 183, 186–87 (9th Cir. 1987). 15 B. Analysis 16 The Foman factors weigh in favor of granting the Defendant’s motion to amend its 17 answer to assert an additional affirmative defense. There is no evidence of bad faith or 18 undue delay by the Defendant. The proposed amendment does not appear to be futile. 19 The Defendant has not previously amended its answer in this action, and there is no 20 apparent prejudice to the Plaintiff at issue. Indeed, Defendant’s motion to amend its 21 answer to assert an additional affirmative defense is unopposed. As such, after weighing 22 the Foman factors, the Court grants the Defendant’s leave to file its proposed amended 23 answer. (See Doc. No. 15-3.) 24 II. Defendant’s Motion to Add Third Parties and File a Third-Party Complaint 25 Against Kenneth Morningstar and Morningstar’s Bed, Bath and Curtain is 26 Granted 27 Defendant requests leave to add Kenneth Morningstar and Morningstar’s Bed, Bath 28 and Curtain as third-parties and file a third-party complaint against them for: (1) 1 defamation by republication against all third-party Defendants for further disseminating 2 allegedly false statements contained in the Report; (2) negligence, by all third-party 3 Defendants, for failing to verify, investigate, or accurately communicate the contents of the 4 Report prior to taking acts which allegedly resulted in harm to the Plaintiff; and (3-5) 5 against Morningstar’s Bed, Bath and Curtain for violation of the FCRA, the CICRAA, the 6 CCCRAA, and wrongful termination. (Doc. No. 15 at 6.) Plaintiff opposes Defendant’s 7 request to add Morningstar and the Company as third parties and file a third-party 8 complaint on the grounds that the Court lacks personal jurisdiction over Morningstar and 9 the Company. (Doc. No. 17.) 10 A. Legal Standard 11 As an initial matter, Defendant submitted its Motion for Leave to File Third-Party 12 Complaint under Federal Rule of Civil Procedure Rules 13(g), 19, and 20(a). (Doc. No. 13 15 at 6.) As neither Kenneth Morningstar nor Morningstar’s Bed, Bath and Curtain are 14 existing parties to this matter and Defendant is seeking to assert its own claims against 15 these parties, Defendant should have submitted a motion for leave to file third-party 16 complaint under Federal Rule of Civil Procedure Rule 14. 17 Under Federal Rule of Civil Procedure 14(a)(1), “[a] defending party may, as 18 third-party plaintiff, serve a summons and complaint on a nonparty who is or may be 19 liable to it for all or part of the claim against it.” Fed. R. Civ. P. 14(a)(1). The decision 20 about whether to grant leave to implead a third-party defendant rests in the sound 21 discretion of the district court. Sw. Adm’rs., Inc. v. Rozay's Transfer, 791 F.2d 769, 777 22 (9th Cir. 1986). The purpose of Rule 14 is “to promote judicial efficiency by eliminating 23 the necessity for the defendant to bring a separate action against a third individual who 24 may be secondarily or derivatively liable to the defendant for all or part of the plaintiff's 25 original claim.” Id. “Since the rule is designed to reduce multiplicity of litigation, it is 26 construed liberally in favor of allowing impleader.” KKMB, LLC v. Khader, 2020 WL 27 7978993, at *4 (C.D. Cal. June 17, 2020) (quoting Fed. Deposit Ins. Corp. v. Loube, 134 28 F.R.D. 270, 272 (N.D. Cal. 1991)). 1 A third-party claim may be asserted under Rule 14 “only when the third party's 2 liability is in some way dependent on the outcome of the main claim and is secondary or 3 derivative thereto.” Stewart v. Am. Int'l Oil & Gas Co., 845 F.2d 196, 199 (9th Cir. 4 1988). “The crucial characteristic of a Rule 14 claim is that defendant is attempting to 5 transfer to the third-party defendant the liability asserted against him by the original 6 plaintiff. The mere fact that the alleged third-party claim arises from the same transaction 7 or set of facts as the original claim is not enough.” Id. at 200 (quoting Wright & Miller, 6 8 Fed. Prac. & Proc. § 1446 at 257 (1971 ed.)); see also United States v. One 1977 9 Mercedes Benz, 708 F.2d 444, 452 (9th Cir. 1983) (“It is not sufficient that the third- 10 party claim is a related claim; the claim must be derivatively based on the original 11 plaintiff's claim.”). 12 B. Analysis 13 Defendant argues that Morningstar and the Company should be added as third-party 14 Defendants based on their intervening and contributory conduct of republishing the 15 statements concerning Plaintiff that Plaintiff alleges are defamatory and making 16 employment decisions based on the Report. (Doc. No. 15 at 3-4; Doc. No. 15-3 at 31.) 17 Plaintiff objects to Defendant’s request on the grounds that Defendant has failed to allege 18 that the Court has personal jurisdiction over Morningstar and the Company. (Doc. No. 17 19 at 2.) 20 i. Jurisdiction 21 The Court finds Plaintiff’s objection unavailing. As Defendant notes, Plaintiff lacks 22 standing to contest personal jurisdiction on behalf of the proposed third-party Defendants. 23 This is because “[t]he personal jurisdiction requirement recognizes and protects an 24 individual liberty interest.” Dow Chemical Co. v. Calderon, 422 F.3d 827, 831 (9th Cir. 25 2005) (quoting Ins. Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 26 702-03 (1982)). Further, as an individual liberty interest, “it can, like other such rights, be 27 waived.” Id. “[B]ecause the personal jurisdiction requirement is a waivable right, there 28 are a ‘variety of legal arrangements' by which a litigant may give ‘express or implied 1 consent to the personal jurisdiction of the court.’” Burger King Corp. v. Rudzewicz, 471 2 U.S. 462, 472 n. 14 (1985) (quoting Ins. Corp., 456 U.S. at 703). 3 Here, Morningstar and the Company have yet to be added as third-party Defendants, 4 so it is unclear whether they will waive or object to the personal jurisdiction requirement. 5 It is possible that Morningstar and the Company could provide express or implied consent 6 to the Court or waive personal jurisdiction thereby granting the Court proper personal 7 jurisdiction. As such, Plaintiff may not object on Morningstar or the Company’s behalf. 8 Without more, the Court does not find Plaintiff’s objection to a lack of personal jurisdiction 9 sufficient to deny leave to add Morningstar and the Company as third parties or to deny 10 Defendant from filing a third-party complaint. 11 With respect to subject matter jurisdiction, Defendant asserts that the Court has 12 federal question jurisdiction over the claims against Morningstar and the Company 13 pursuant to 28 U.S.C. § 1331 based on the FCRA claims. (Doc. No. 15-3 at 29.) The federal 14 supplemental jurisdiction statute also provides that if a court has original jurisdiction over 15 a case, it may exercise supplemental jurisdiction over “all other claims that are so related 16 to claims in the action ... that they form part of the same case or controversy under Article 17 III of the United States Constitution.” 28 U.S.C. § 1367(a). Supplemental jurisdiction 18 extends to claims that involve the joinder or additional parties. Id. 19 Here, the claims in Defendant's third-party complaint arise from the same factual 20 circumstances and controversy as Plaintiff's action against Defendant. Plaintiff's claims 21 against Defendant allege that Defendant defamed Plaintiff by disseminating a false 22 consumer report that led to the termination of her employment with the Company, 23 irreparable damage to her relationship with Morningstar, the loss of a business opportunity 24 with Morningstar, damage to her reputation, and emotional distress. (Doc. No. 1, Compl. 25 ¶¶ 235-290.) Defendant's proposed third-party claims generally allege that Morningstar 26 and the Company obtained the Report without Plaintiff’s pre-authorization in violation of 27 the FCRA, failed to allow Plaintiff an opportunity to dispute the contents of the Report 28 prior to terminating her employment in violation of the FCRA, and negligently misused 1 and republished the Report without verifying its accuracy thereby causing harm to the 2 Plaintiff. (Doc. No. 15-3 at 31-34.) Accordingly, the Court has supplemental jurisdiction 3 over Defendant's third-party claims against Morningstar and the Company. 4 ii. Rule 14 5 In its third-party complaint, Defendant seeks equitable indemnification and complete 6 contribution from Morningstar and the Company for any judgment, settlement, or damages 7 awarded to Plaintiff. (Id. at 34.) Under the doctrine of equitable indemnity, “defendants 8 are entitled to seek apportionment of loss between the wrongdoers in proportion to their 9 relative culpability so there will be equitable sharing of loss between multiple 10 tortfeasors.” Greystone Homes, Inc. v. Midtec, Inc., 168 Cal. App. 4th 1194, 1208 11 (2008) (quoting Gem Developers v. Hallcraft Homes of San Diego, Inc., 213 Cal. App. 3d 12 419, 431 (1989)); see also Stop Loss Ins. Brokers, Inc. v. Brown & Toland Med. Grp., 143 13 Cal. App. 4th 1036, 1040 (2006) (equitable indemnity is “available among tortfeasors who 14 are jointly and severally liable for the plaintiff's injury”). A claim for equitable indemnity 15 is “wholly derivative” of the injured party's claims. Prince v. Pac. Gas & Elec. Co., 45 Cal. 16 4th 1151, 1158 (2009). 17 Here, Defendant seeks to transfer liability for Plaintiff's claims against Defendant to 18 Morningstar and the Company. In its third-party complaint, Defendant alleges that 19 Morningstar and the Company’s republication, negligent use of public-record information, 20 and statutory violations directly caused or substantially contributed to the damages claimed 21 by Plaintiff. (Doc. No. 15-3 at 29.) In particular, Defendant alleges that Morningstar and 22 the Company obtained the Report without Plaintiff’s pre-authorization in violation of the 23 FCRA, failed to allow Plaintiff an opportunity to dispute the contents of the Report prior 24 to terminating her employment in violation of the FCRA, and negligently misused and 25 republished the Report without verifying its accuracy. (Id. at 31.) The allegations set forth 26 in Defendant’s proposed third-party complaint could impose liability on Morningstar and 27 the Company and is thus derivative of Plaintiff's claims against Defendant. Accordingly, 28 without addressing the merits or ultimate viability of the third-party complaint, Defendant's 1 ||claims for indemnity against Morningstar and the Company may properly be brought 2 || pursuant to Rule 14. See Stewart, 845 F.2d at 199 (“[A] third-party claim may be asserted 3 || only when the third party's liability is in some way dependent on the outcome of the main 4 ||claim and is secondary or derivative thereto.”’). 5 For the reasons above, the Court grants Defendant’s leave to file a third-party 6 || complaint against Morningstar and the Company. 8 For the reasons above, the Court grants Defendant’s motion for leave to file an 9 |lamended answer and Defendant’s motion for leave to file a third-party complaint. 10 Defendant must file its proposed first amended answer (Doc. No. 15-3) within seven (7) 11 ||days from the date this order is filed and its third-party complaint within fourteen (14) 12 || days from the date this order is filed. | DATED: November 3, 2025 | | ul 0 JI 15 MARILYN W. HUFF, DistribU/Judge 16 UNITED STATES DISTRICT COURT 17 18 19 20 21 22 23 24 25 26 27 28