MiCamp Solutions LLC v. National Processing LLC

• Court: District Court, D. Arizona
• Decided: January 28, 2021
• Docket: 2:19-cv-05468
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 MiCamp Solutions LLC, No. CV-19-05468-PHX-MTL

10 Plaintiff, ORDER

11 v.

12 National Processing LLC,

13 Defendant. 14 15 Before the Court is Plaintiff’s Motion for Leave to File Second Amended 16 Complaint. (Doc. 86.) Plaintiff MiCamp Solutions LLC (“Plaintiff” or “MiCamp”) moves 17 to amend the First Amended Complaint to add two new defendants under an alter ego 18 theory of liability. Defendant National Processing LLC (“Defendant” or “National 19 Processing”) opposes the motion. For the following reasons, the motion is denied. 20 I. 21 Plaintiff filed its Complaint in Arizona Superior Court on July 26, 2019. (Doc. 1-3 22 at 5.) Plaintiff then filed the First Amended Complaint, also in state court, on October 23, 23 2019. (Doc. 1-3 at 10.) It asserts claims for breach of contract, breach of the covenant of 24 good faith and fair dealing, and for a declaratory judgment.1 (Id. at 12–15.) Defendant 25 removed the case to this Court on October 22, 2019. (Doc. 1.) The Scheduling Order in 26 this case set the deadline to move to amend pleadings as January 31, 2020. (Doc. 20 at 1.)

27 1 Defendant has also filed counterclaims against Plaintiff for breach of contract, breach of the covenant of good faith and fair dealing, tortious interference with prospective business 28 relations, violations of the Lanham Act, and unfair competition. (Doc. 21.) These counterclaims are not directly relevant for purposes of the present motion. 1 Plaintiff filed the present motion on January 8, 2021. (Doc. 86.) The Court heard oral 2 argument on January 26, 2021.2 (Doc. 99.) 3 II. 4 The motion states that Plaintiff seeks to amend the Complaint pursuant to Rule 15(a) 5 of the Federal Rules of Civil Procedure. (Doc. 86 at 1.) Rule 15(a)(2) provides that “[t]he 6 court should freely give leave [to amend] when justice so requires.” Fed. R. Civ. P. 15(a)(2). 7 As Defendant argues, however, because Plaintiff moves to amend after the deadline, the 8 present motion is governed by Rule 16(b), not 15(a). (Doc. 95 at 4.) 9 Rule 16(b)(3)(A) requires a district court to include a deadline for amending 10 pleadings in its scheduling order. Fed. R. Civ. P. 16(b)(3)(A) (“The scheduling order must 11 limit the time to join other parties, amend the pleadings, complete discovery, and file 12 motions.”). “Normally, attempts to amend complaints before the Federal Rule of Civil 13 Procedure 16 scheduling order’s deadline are addressed under Rule 15.” AZ Holding, 14 L.L.C. v. Frederick, No. CV-08-0276-PHX-LOA, 2009 WL 3063314, at *3 (D. Ariz. Sept. 15 22, 2009). But when “an amendment would require an extension of the scheduling order 16 deadlines, Rule 16’s good-cause standard is considered first.” Id. See also Johnson v. 17 Mammoth Recreations, Inc., 975 F.2d 604, 608 (9th Cir. 1992) (A “party seeking to amend 18 [a] pleading after [the] date specified in scheduling order must first show ‘good cause’ for 19 amendment under Rule 16(b), then, if ‘good cause’ be shown, the party must demonstrate 20 that amendment was proper under Rule 15.”) (citation omitted). Plaintiff does not dispute 21 that it filed the present motion after the amendment deadline. (Doc. 86 at 4.) 22 The Court first addresses, as a threshold matter, whether Plaintiff’s failure to bring 23 a motion to modify the Scheduling Order is fatal. Plaintiff’s motion does not cite Rule 16. 24 (Doc. 86 at 4.) Defendant’s counsel emphasized at oral argument that this “procedural” 25 shortcoming was sufficient reason to deny the motion. The Ninth Circuit Court of Appeals 26 has indicated that district courts may deny untimely motions to amend on this basis. See 27 Johnson, 975 F.2d 608–09. Nonetheless, multiple courts have construed untimely motions

28 2 The Court also addressed Defendant’s Motion for Extension of Discovery (Doc. 99) and a joint discovery dispute (Docs. 91, 92), both of which were resolved at the hearing. 1 to amend as motions to modify the scheduling order. See, e.g., Jacobs Silver K Farm, Inc. 2 v. Taylor Produce, LLC, No. 4:13-CV-00535-EJL-CWD, 2015 WL 12839162, at *4 (D. 3 Idaho Sept. 3, 2015) (“The Court therefore construes [plaintiff’s] motion to amend its 4 complaint as including also a motion to amend the deadline within which to file an 5 amended complaint.”); Williams v. Perdue, No. C19-0444-JCC, 2020 WL 5893408, at *1 6 (W.D. Wash. Oct. 5, 2020) (“[T]he Court concludes that it may construe a party’s untimely 7 motion for leave to amend as a motion to modify the scheduling order, and it does so 8 here.”). The Court will construe the present motion as containing a motion to amend the 9 Scheduling Order, and will not deny it on this basis. 10 III. 11 The Court next addresses the merits of the motion. As noted, Plaintiff must 12 demonstrate “good cause” to modify the Scheduling Order. Fed. R. Civ. P. 16(b)(4). This 13 District “consistently upholds the good-cause standard regarding amending pleadings after 14 the scheduling order’s amendment deadline has expired.” Reg’l Care Servs. v. Companion 15 Life Ins. Co., No. CV-10-2597-PHX-LOA, 2012 WL 1018937, at *4 (D. Ariz. Mar. 26, 16 2012). Under this standard, “the focus of the inquiry is upon the moving party’s reasons 17 for seeking modification.” Johnson, 975 F.2d at 609. Courts specifically focus on the 18 “diligence of the party seeking the amendment.” Id. 19 Plaintiff seeks to add Wayne Hamilton and his wife, Kenzi Hamilton, as new 20 defendants and the alter egos of National Processing.3 (Doc. 86 at 1.) Plaintiff asserts that 21 it learned of the need to amend the Complaint at the December 11, 2020 deposition of 22 Defendant’s former Director of Finance, Jill Putnam. (Id. at 2; Doc. 86-1 at 10.) Ms. 23 Putnam stated that in her role, she was responsible for “any and all accounting and financial 24 responsibilities,” including Mr. Hamilton’s personal finances. (Doc. 86-1 at 11.) She also 25 stated that Mr. Hamilton received distributions from Defendant “whenever he wanted one,” 26 and that he deposited money from his own personal account into Defendant’s “as needed.” 27 (Id. at 13, 14.) Plaintiff relies on this and other testimony to assert that the Hamiltons are

28 3 The Hamiltons are the two members of Defendant, a limited liability company. (Docs. 86-1 at 5; 95 at 8.) 1 liable as Defendant’s alter egos. 2 Plaintiff filed the present motion on January 8, 2021—nearly one year after the 3 amendment deadline, and, at the time, the same day as the discovery deadline.4 Plaintiff 4 states that its proposed amendments “could not have reasonably been pled” prior to Ms. 5 Putnam’s deposition. (Doc. 86 at 4.) Plaintiff previously “had no reason” to believe that 6 the Hamiltons used Defendant’s “assets for their own benefit and that they regularly 7 intermingled their personal funds with the company’s funds.” (Doc. 86 at 4.) Plaintiff also 8 states that it “simply could not have complied with its Rule 11 obligations” any time prior 9 to Ms. Putman’s deposition. (Id.) 10 As noted, the primary consideration in the Rule 16 good cause analysis is the 11 “diligence of the party seeking the amendment.” Johnson, 975 F.2d at 609. The Court finds 12 that Plaintiff has not demonstrated diligence in seeking amendment. Plaintiff’s motion, for 13 example, does not reference the fact that it deposed Mr. Hamilton on July 15, 2020—five 14 months before Ms. Putnam’s deposition. (Doc. 62.) Plaintiff does not indicate whether 15 similar questions were asked of Mr. Hamilton. Defendant, in fact, states in its response that 16 Plaintiff did not “ask him any questions about these topics.”5 (Doc. 95 at 5) (emphasis in 17 original). Plaintiff also does not state whether it attempted to uncover these alleged facts 18 through written discovery. 19 Further, as compared with the nearly one-year delay in this case, courts have found 20 a lack of good cause for motions filed on the amendment deadline or shortly thereafter. 21 See, e.g, Barker v. Hertz Corp., No. CV07-554PHX-MHM, 2007 WL 4410253, at *4 (D. 22 Ariz. Dec. 13, 2007) (denying motion to amend complaint filed on the Rule 16 amendment 23 deadline where “Plaintiff has not shown good cause and offers no valid basis on which to 24 extend the Rule 16 scheduling deadlines”); Brooks v. Eclipse Recreational Vehicles, Inc., 25 No. CV-08-1731-PHX-LOA, 2009 WL 1616017, at *3 (D. Ariz. June 9, 2009) (denying 26 4 At the January 26, 2021 hearing, the Court extended the discovery deadline to March 26, 27 2021. (Doc 99.) 5 Plaintiff’s reply indicates that it “would not have learned about alter ego liability even if 28 it had asked [Mr. Hamilton] about it at his deposition.” (Doc. 96 at 2.) This assumed futility is not sufficient to demonstrate diligence, however. 1 motion to amend complaint filed 11 days after amendment deadline for failure to show 2 good cause); Villa v. Brass Eagle, LLC, No. CV-06-0870-PHX-FJM, 2007 WL 446349, at 3 *1 (D. Ariz. Feb. 7, 2007) (denying unopposed motion to amend filed three months after 4 amendment deadline). 5 That Plaintiff filed the motion nearly one month after Ms. Putnam’s deposition also 6 does not indicate diligence. See Schwerdt v. Int’l Fidelity Ins. Co., 28 F. App’x 715, 719 7 (9th Cir. 2002) (a one-month delay in filing after learning facts from a witness’s deposition 8 did not constitute diligence under Rule 16). Plaintiff asserts that after Ms. Putnam’s 9 deposition, it “immediately” raised the prospect of alter ego liability with Defendant’s 10 counsel, and “offered” Defendant “the opportunity” to produce documentation 11 demonstrating that Ms. Putnam’s testimony was inaccurate. (Doc. 96 at 3.) Plaintiff states 12 that Defendant “initially indicated it would consider MiCamp’s proposal” but ultimately 13 “withdrew from good faith compromise discussions.” (Id.) Plaintiff then filed the present 14 motion within 48 hours. (Id.) The Court finds that “neither good cause nor reliance that 15 was justified exists” to permit late amendment in these circumstances. Brooks, 2009 WL 16 1616017, at *3 (emphasis in original). 17 Pleadings “cannot be a continuously moving target for obvious reasons.” Reg’l Care 18 Servs., 2012 WL 1018937, at *5 (citation omitted). The amendment deadline “serves to 19 frame the issues at a fixed point in time so that the parties have an adequate opportunity to 20 prepare their respective positions moving forward.” Id. Plaintiff had many months to move 21 to amend its Complaint, at a time in which all parties would have been amply able to 22 prepare their respective positions and actively litigate this case. But by waiting until the 23 close of discovery, and nearly one year after the amendment deadline, Plaintiff has not 24 demonstrated the diligence required under Rule 16’s good cause standard. 25 IV. 26 Further, although it is a secondary concern under Rule 16, “the existence or degree 27 of prejudice” to the party opposing amendment may supply additional reasons to deny the 28 motion. Johnson, 975 F.2d at 609. Plaintiff states that the Hamiltons’ addition to this case 1|| “would not require any additional discovery, would not require them to hire separate counsel, and would not require any delays in the resolution of this case.” (Doc. 86 at 6.) 3|| These are not Plaintiff's decision to make, however, and the Court would almost certainly 4|| permit new defendants to hire counsel of their choosing, to conduct discovery, and to 5 || prepare dispositive motions. Even with such accommodations, this case has been pending 6|| for over a year and a half, and the dispositive motion deadline is quickly approaching.® See Lockheed Martin Corp. v. Network Solutions, Inc., 194 F.3d 980, 986 (9th Cir. 1999) (“A 8 || need to reopen discovery and therefore delay the proceedings supports a district court’s 9|| finding of prejudice from a delayed motion to amend the complaint.’’) (citation omitted). || This prejudice, “although not required under Rule 16(b), supplies an additional reason for 11 || denying the motion.” Coleman v. Quaker Oats Co., 232 F.3d 1271, 1294 (9th Cir. 2000). 12 Because the Court concludes that Plaintiff was not diligent in seeking leave to 13 || amend, and because amendment would be prejudicial, Plaintiff has not met Rule 16’s good cause requirement to amend the Scheduling Order. The Court therefore does not assess 15 || whether leave is appropriate under Rule 15. See Zivkovic v. Southern California Edison, Co., 302 F.3d 1080, 1087 (9th Cir. 2002) (“If the party seeking the modification was not || diligent, the inquiry should end and the motion to modify should not be granted.”) (internal 18 |} quotations omitted). 19 V. 20 Accordingly, 21 IT IS ORDERED denying Plaintiff's Motion for Leave to File Second Amended 22 || Complaint. (Doc. 86.) 23 Dated this 28th day of January, 2021. 24 . . 95 Mi Chak T. Hbhurdle Michael T. Liburdi 26 United States District Judge 27 © At the J anuary 26, 2021 hearing, the Court extended the dispositive motion deadline to April 23, 2021. (Doc. 99.) -6-