6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 JEREMY L. KEATING ET AL., CASE NO. 3:15-cv-00057-L-AGS
12 Plaintiffs, ORDER GRANTING THE 13 v. RETIREMENT GROUP, LLC’S MOTION TO AMEND 14 JOHN A. JASTREMSKI ET AL., COUNTERCLAIM 15 (Doc. no. 439) Defendants. 16
17 AND RELATED CROSS-ACTIONS.
19 In this action alleging misappropriation of trade secrets, pending before the 20 Court is a motion to amend counterclaim filed by Counterclaimant The Retirement 21 Group, LLC ("TRG"). (Doc. no. 439.) Counter-Defendants Lloyd Silvers, Steven 22 Dalton and Ardent Retirement Planning, LLC (“Ardent,” collectively the “Ardent 23 Group”) filed an opposition and TRG replied. For the reasons that follow, TRG’s 24 motion is granted. 25 The parties had previously filed cross-motions for evidentiary and terminating 26 sanctions based on claims of discovery misconduct and spoliation of evidence. (See 27 docs. no. 157, 275.) The Court appointed Hon. Ronald S. Prager (Ret.) as the Special 28 1 and recommendation. (Docs. no. 316, 323.) After the Special Master had issued a 2 report recommending terminating sanctions against the Ardent Group (see doc. no. 3 440), but before the Court ruled on the Ardent Group’s objections, TRG filed the 4 pending motion, requesting leave to amend its counterclaims to prepare its case for a 5 motion for default judgment against the Ardent Group, should this Court adopt the 6 Special Master’s recommendation. 7 The proposed second amended counterclaim removes the claims against the 8 parties who have settled out of the case, including Plaintiffs/Counter-Defendants 9 Jeremy Keating, Richard P. Gigliotti and Alexander J. Mele (collectively, “the Keating 10 Group”), as well as Counter-Defendant Securities America, Inc. ("SAI"), and leaves 11 intact the claims against the Ardent Group members. 12 The substantive amendments pertain to the requested relief. With respect to the 13 claim for misappropriation of trade secrets, the first amended counterclaim sought 14 “proximately caused damages and unjust enrichment obtained by counter-defendants.” 15 (See doc. no. 439-1 Ex. B (redline comparison of the first and proposed second 16 amended counterclaims (“Redline”)) at 103.)1 The proposed amendment replaces this 17 language with a reference to disgorgement and specifies the amounts sought against 18 each member of the Ardent Group, including prejudgment interest. (Id.) It also adds 19 an estimated amount of attorneys’ fees TRG intends to request. (Id.) 20 A similar request is made with respect to the claim for unfair trade practices. 21 The first amended counterclaim sought restitution of Counter-Defendants’ unjust 22 enrichment and attorneys’ fees. (Redline at 108.) TRG seeks leave to add the specific 23 sums it intends to seek against each member of the Ardent Group and estimates the 24 attorneys’ fees. (Id.) 25 With respect to the breach of contract claim against Silvers, the first amended 26 counterclaim sought “damages in an amount to be proven at trial.” (Redline at 106.) 27 28 1 This remains unchanged, but TRG seeks leave to add a request for an “injunction 2 pursuant to the terms of Silvers’ Marketing and Licensing Agreement.” (Id. at 106- 3 07.) 4 Finally, the prayer for relief reflects the above requested changes. In the first 5 amended counterclaim, TRG requested “compensatory damages (including restitution 6 and unjust enrichment) according to proof” and attorneys’ fees. (Redline at 110.) This 7 remains unchanged, but TRG requests to add the amounts sought against each member 8 of the Ardent Group, an estimate of attorneys’ fees, and a request for injunctive relief. 9 (Id.) 10 Rule 15 advises leave to amend shall be freely given when justice so requires. 11 Fed. R. Civ. P. 15(a)(2). “This policy is to be applied with extreme liberality.” 12 Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (internal 13 quotation marks and citation omitted). 14 In the absence of any apparent or declared reason – such as undue delay, 15 bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to 16 the opposing party by virtue of allowance of the amendment, futility of the 17 amendment, etc. – the leave sought should, as the rules require, be freely given. 18
19 Foman v. Davis, 371 U.S. 178, 182 (1962) (internal quotation marks and citation 20 omitted). 21 The Ardent Group does not oppose adding requests for injunctive relief and 22 prejudgment interest. However, it argues that in other respects, the amendments are 23 requested in bad faith and that they are untimely and prejudicial. They claim to be 24 prejudiced because they did not know TRG’s damage theory and the actual amounts in 25 advance, for example, through TRG’s disclosures under Federal Rule of Civil 26 Procedure 26(a)(1)(A), responses to interrogatories or timely updates to each. This 27 argument is without merit. 28 / / / 1 The Ardent Group, together with other Counter-Defendants, raised the same 2 issues of timeliness, prejudice and bad faith in their motion for evidentiary sanctions 3 (doc. 275). Magistrate Judge Andrew G. Schopler entertained voluminous briefing 4 and extensive oral argument. He concluded that TRG should have provided an 5 estimate of its damages earlier in the case. He found, however, that the delay in 6 disclosure was harmless to Counter-Defendants. Accordingly, evidentiary sanctions 7 were denied, but Counter-Defendants were awarded attorneys’ fees for having to file 8 the motion. (See doc. no. 298 and related audio recording of the hearing.) They 9 requested a total of approximately $31,000 in fees. (Docs. no. 299, 300.) The Special 10 Master ultimately recommended, and this Court agreed, to award a total of $10,000, 11 with $5,000 of that attributable to the Ardent Group. (Docs. no. 409, 418.) The 12 Ardent Group did not object to this resolution of their motion for evidentiary sanctions. 13 See Fed. R. Civ. Proc. 53(f), 72. 14 If not before, in February 2018, in its opposition to the motion for evidentiary 15 sanctions, TRG spelled out its theory of damages and how it intends to calculate them. 16 (See doc. no. 293 at 8.) Its theory was that members of the Keating Group “stole” 17 TRG’s clients when they transferred from TRG to Ardent and SAI. SAI was a broker- 18 dealer who employed them. Ardent was associated with SAI in that it provided 19 marketing services to find clients. As referenced in the order adopting the Special 20 Master’s recommendation, filed concurrently herewith, the Ardent Group members 21 considered their assistance with the Keating Group’s transition, including alleged theft 22 of client information, a “marketing service,” resulting in commission override 23 payments to Dalton and kickbacks to Silvers. 24 The implications of this theory on TRG’s calculation of damages were explained 25 in TRG’s brief in opposition to the motion for evidentiary sanctions. TRG explained 26 that it needed SAI’s commissions report to see how much the Keating Group members 27 earned based on the clients they “stole” from TRG. (Doc. no. 293 at 8.) This 28 1 calculate damages against Dalton and Ardent, TRG planned to apply 30% to the 2 commissions, representing Dalton’s override on the Keating Group’s commissions 3 earned from TRG’s clients. (Id.) With respect to Silvers, the disgorgement amount 4 was disclosed in a deposition, where the witness testified that Silvers received 5 $97,573.74 in kickbacks in connection with transitioning the Keating Group to SAI.
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6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 JEREMY L. KEATING ET AL., CASE NO. 3:15-cv-00057-L-AGS
12 Plaintiffs, ORDER GRANTING THE 13 v. RETIREMENT GROUP, LLC’S MOTION TO AMEND 14 JOHN A. JASTREMSKI ET AL., COUNTERCLAIM 15 (Doc. no. 439) Defendants. 16
17 AND RELATED CROSS-ACTIONS.
19 In this action alleging misappropriation of trade secrets, pending before the 20 Court is a motion to amend counterclaim filed by Counterclaimant The Retirement 21 Group, LLC ("TRG"). (Doc. no. 439.) Counter-Defendants Lloyd Silvers, Steven 22 Dalton and Ardent Retirement Planning, LLC (“Ardent,” collectively the “Ardent 23 Group”) filed an opposition and TRG replied. For the reasons that follow, TRG’s 24 motion is granted. 25 The parties had previously filed cross-motions for evidentiary and terminating 26 sanctions based on claims of discovery misconduct and spoliation of evidence. (See 27 docs. no. 157, 275.) The Court appointed Hon. Ronald S. Prager (Ret.) as the Special 28 1 and recommendation. (Docs. no. 316, 323.) After the Special Master had issued a 2 report recommending terminating sanctions against the Ardent Group (see doc. no. 3 440), but before the Court ruled on the Ardent Group’s objections, TRG filed the 4 pending motion, requesting leave to amend its counterclaims to prepare its case for a 5 motion for default judgment against the Ardent Group, should this Court adopt the 6 Special Master’s recommendation. 7 The proposed second amended counterclaim removes the claims against the 8 parties who have settled out of the case, including Plaintiffs/Counter-Defendants 9 Jeremy Keating, Richard P. Gigliotti and Alexander J. Mele (collectively, “the Keating 10 Group”), as well as Counter-Defendant Securities America, Inc. ("SAI"), and leaves 11 intact the claims against the Ardent Group members. 12 The substantive amendments pertain to the requested relief. With respect to the 13 claim for misappropriation of trade secrets, the first amended counterclaim sought 14 “proximately caused damages and unjust enrichment obtained by counter-defendants.” 15 (See doc. no. 439-1 Ex. B (redline comparison of the first and proposed second 16 amended counterclaims (“Redline”)) at 103.)1 The proposed amendment replaces this 17 language with a reference to disgorgement and specifies the amounts sought against 18 each member of the Ardent Group, including prejudgment interest. (Id.) It also adds 19 an estimated amount of attorneys’ fees TRG intends to request. (Id.) 20 A similar request is made with respect to the claim for unfair trade practices. 21 The first amended counterclaim sought restitution of Counter-Defendants’ unjust 22 enrichment and attorneys’ fees. (Redline at 108.) TRG seeks leave to add the specific 23 sums it intends to seek against each member of the Ardent Group and estimates the 24 attorneys’ fees. (Id.) 25 With respect to the breach of contract claim against Silvers, the first amended 26 counterclaim sought “damages in an amount to be proven at trial.” (Redline at 106.) 27 28 1 This remains unchanged, but TRG seeks leave to add a request for an “injunction 2 pursuant to the terms of Silvers’ Marketing and Licensing Agreement.” (Id. at 106- 3 07.) 4 Finally, the prayer for relief reflects the above requested changes. In the first 5 amended counterclaim, TRG requested “compensatory damages (including restitution 6 and unjust enrichment) according to proof” and attorneys’ fees. (Redline at 110.) This 7 remains unchanged, but TRG requests to add the amounts sought against each member 8 of the Ardent Group, an estimate of attorneys’ fees, and a request for injunctive relief. 9 (Id.) 10 Rule 15 advises leave to amend shall be freely given when justice so requires. 11 Fed. R. Civ. P. 15(a)(2). “This policy is to be applied with extreme liberality.” 12 Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (internal 13 quotation marks and citation omitted). 14 In the absence of any apparent or declared reason – such as undue delay, 15 bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to 16 the opposing party by virtue of allowance of the amendment, futility of the 17 amendment, etc. – the leave sought should, as the rules require, be freely given. 18
19 Foman v. Davis, 371 U.S. 178, 182 (1962) (internal quotation marks and citation 20 omitted). 21 The Ardent Group does not oppose adding requests for injunctive relief and 22 prejudgment interest. However, it argues that in other respects, the amendments are 23 requested in bad faith and that they are untimely and prejudicial. They claim to be 24 prejudiced because they did not know TRG’s damage theory and the actual amounts in 25 advance, for example, through TRG’s disclosures under Federal Rule of Civil 26 Procedure 26(a)(1)(A), responses to interrogatories or timely updates to each. This 27 argument is without merit. 28 / / / 1 The Ardent Group, together with other Counter-Defendants, raised the same 2 issues of timeliness, prejudice and bad faith in their motion for evidentiary sanctions 3 (doc. 275). Magistrate Judge Andrew G. Schopler entertained voluminous briefing 4 and extensive oral argument. He concluded that TRG should have provided an 5 estimate of its damages earlier in the case. He found, however, that the delay in 6 disclosure was harmless to Counter-Defendants. Accordingly, evidentiary sanctions 7 were denied, but Counter-Defendants were awarded attorneys’ fees for having to file 8 the motion. (See doc. no. 298 and related audio recording of the hearing.) They 9 requested a total of approximately $31,000 in fees. (Docs. no. 299, 300.) The Special 10 Master ultimately recommended, and this Court agreed, to award a total of $10,000, 11 with $5,000 of that attributable to the Ardent Group. (Docs. no. 409, 418.) The 12 Ardent Group did not object to this resolution of their motion for evidentiary sanctions. 13 See Fed. R. Civ. Proc. 53(f), 72. 14 If not before, in February 2018, in its opposition to the motion for evidentiary 15 sanctions, TRG spelled out its theory of damages and how it intends to calculate them. 16 (See doc. no. 293 at 8.) Its theory was that members of the Keating Group “stole” 17 TRG’s clients when they transferred from TRG to Ardent and SAI. SAI was a broker- 18 dealer who employed them. Ardent was associated with SAI in that it provided 19 marketing services to find clients. As referenced in the order adopting the Special 20 Master’s recommendation, filed concurrently herewith, the Ardent Group members 21 considered their assistance with the Keating Group’s transition, including alleged theft 22 of client information, a “marketing service,” resulting in commission override 23 payments to Dalton and kickbacks to Silvers. 24 The implications of this theory on TRG’s calculation of damages were explained 25 in TRG’s brief in opposition to the motion for evidentiary sanctions. TRG explained 26 that it needed SAI’s commissions report to see how much the Keating Group members 27 earned based on the clients they “stole” from TRG. (Doc. no. 293 at 8.) This 28 1 calculate damages against Dalton and Ardent, TRG planned to apply 30% to the 2 commissions, representing Dalton’s override on the Keating Group’s commissions 3 earned from TRG’s clients. (Id.) With respect to Silvers, the disgorgement amount 4 was disclosed in a deposition, where the witness testified that Silvers received 5 $97,573.74 in kickbacks in connection with transitioning the Keating Group to SAI. 6 (Id.) The foregoing information resulted in the sums included in the proposed second 7 amended counterclaim. As to Silvers, precisely the same sum is included in the 8 proposed second amended counterclaim. (Cf. Redline at 108, 110.) 9 Based on the foregoing, no later than February 2018, the Ardent Group had the 10 exact sum of damages against Silvers and the means to calculate damages against 11 Dalton and Ardent. Their claims of undue delay, prejudice and bad faith and their 12 motion to preclude TRG from relying on these calculations at trial were rejected by 13 Judge Schopler in March 2018. The Ardent Group did not object. See Fed. R. Civ. 14 Proc. 53(f), 72. Their reliance on the same arguments in opposition to TRG’s pending 15 motion for leave to amend is unavailing. 16 The Ardent Group’s remaining opposition arguments are premised on the 17 contention that TRG seeks to change the nature of its claims against the Ardent Group 18 members and that the claims are without merit as unsupported by law or evidence. 19 However, review of the proposed amendments shows that all causes of action against 20 the Ardent Group members remain the same, with the exception of specifying damage 21 amounts, as addressed above. Accordingly, the Ardent Group’s arguments as to the 22 merits cannot properly be considered in opposition to TRG’s motion for leave to 23 amend. 24 For the foregoing reasons, TRG’s motion for leave to amend is granted. No 25 later than April 16, 2020, TRG shall file the second amended counterclaim attached as 26 Exhibit A to its motion (doc. no. 439-1 at 7-73 ("Exhibit A")) with the following 27 changes: 28 1 1. Consistent with the representations made in its motion (doc. no. 439-1 at 2 || 1-5), TRG shall remove from the caption the Counter-Defendants who have been 3 || dismissed to date (J eremy Keating, Richard Gigliotti, Alexander Mele, Securities 4 America, Inc., Sean Sullivan, and Capital Income Advisors, LLC (collectively, 5 || "Dismissed Parties")), leaving only Lloyd Silvers, Steven Dalton and Ardent 6 |) Retirement Planning, LLC as named Counter-Defendants. 7 2. Also consistent with the representations made in its motion, TRG shall 8 || review Exhibit A and remove all references to Dismissed Parties as Counter- 9 || Defendants. (See, e.g., Ex. A at 25 ("counter-defendant Securities America”").) 10 IT IS SO ORDERED. 11 12 || Dated: April 9, 2020 patey 14 H . James Lorenz, 15 United States District Judge 16 17 18 19 20 21 22 23 24 25 26 27 28