1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 J. ELIZABETH SANTOS and GLORIA Case No.: 24cv2069-GPC(MSB) P. SANTOS, Trustees of the GHS Living 12 Trust, ORDER GRANTING PLAINITFFS’ 13 MOTION FOR LEAVE TO FILE A Plaintiffs, SECOND AMENDED COMPLAINT 14 v. 15 [Dkt. No. 21.] FIDELITY NATIONAL TITLE 16 INSURANCE COMPANY, as successor to American Title Insurance Company, 17 Defendant. 18
19 Plaintiffs filed a motion for leave to file a second amended complaint. (Dkt. No. 20 21.) Defendant filed an opposition and Plaintiffs replied. (Dkt. Nos. 26, 27.) Based on 21 the reasoning below, the Court GRANTS Plaintiff’s motion for leave to file a second 22 amended complaint. 23 Background 24 On November 4, 2024, Plaintiff J. Elizabeth Santos and Gloria P. Santos, as 25 Trustee of the GHS Living Trust (“Plaintiffs or “Insured”) filed a complaint against 26 Defendant Fidelity National Title Insurance Company (“Defendant” or “Fidelity”) 27 seeking declaratory relief and alleges claims for breach of contract, bad faith, and in the 28 1 alternative, contract reformation. (Dkt. No. 1, Compl.) In response to the Court’s order 2 to show cause why the case should not be dismissed for lack of subject matter 3 jurisdiction, Plaintiffs responded and the Court dissolved the order to show cause. (Dkt. 4 Nos. 4, 5, 6.) On November 22, 2024, Plaintiffs filed an amended complaint to properly 5 allege subject matter jurisdiction. (Dkt. No. 7.) 6 Defendant filed an answer on January 2, 2025. (Dkt. No. 8.) On March 3, 2025, 7 Defendant filed a motion for judgment on the pleadings. (Dkt. No. 12.) Then, on April 8 9, 2025, Plaintiffs filed the instant motion for leave to file a second amended complaint. 9 (Dkt. No. 21.) In the meantime, on April 11, 2025, Plaintiffs filed a response to 10 Defendant’s motion for judgment on the pleadings and a motion for partial summary 11 judgment. (Dkt. Nos. 22, 23.) On April 28, 2025, Defendant filed an opposition to the 12 motion for leave to file a second amended complaint. (Dkt. No. 26.) A reply was filed 13 by Plaintiffs on May 6, 2025. (Dkt. No. 27.) 14 Discussion 15 Under Federal Rule of Civil Procedure (“Rule”) 15, courts “should freely give leave 16 [to amend] when justice so requires.” Fed. R. Civ. P. 15(a)(2); see also Foman v. Davis, 17 371 U.S. 178, 182 (1962) (“Rule 15(a) declares that leave to amend ‘shall be freely given 18 when justice so requires’; this mandate is to be heeded.”). Granting leave to amend rests 19 in the sound discretion of the trial court. Int’l Ass’n of Machinists & Aerospace Workers 20 v. Republic Airlines, 761 F.2d 1386, 1390 (9th Cir. 1985). 21 “Five factors are taken into account to assess the propriety of a motion for leave to 22 amend: bad faith, undue delay, prejudice to the opposing party, futility of amendment, and 23 whether the plaintiff has previously amended the complaint.” Johnson v. Buckley, 356 24 F.3d 1067, 1077 (9th Cir. 2004); see also Foman, 371 U.S. at 182 (Foman factors). These 25 factors do not carry equal weight; the possibility of delay alone, for instance, cannot justify 26 denial of leave to amend, but when combined with a showing of prejudice, bad faith, or 27 futility of amendment, leave to amend will likely be denied. DCD Programs, Ltd., 833 28 F.2d at 186; Bowles v. Reade, 198 F.3d 752, 757-58 (9th Cir. 1999). The single most 1 important factor is whether prejudice would result to the non-movant as a consequence of 2 the amendment. Eminence Cap., LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003); 3 William Inglis & Sons Baking Co. v. ITT Continental Baking Co., Inc., 668 F.2d 1014, 4 1053 n.68 (9th Cir. 1981). “Absent prejudice, or a strong showing of any of the remaining 5 . . . factors, there exists a presumption under Rule 15(a) in favor of granting leave to 6 amend.” Eminence Cap. LLC, 316 F.3d at 1052 (emphasis in original). The burden of 7 demonstrating prejudice falls on the party opposing leave to amend. DCD Programs, Ltd., 8 833 F.2d at 187. When determining whether to grant leave to amend, courts “must remain 9 guided by ‘the underlying purpose of Rule 15 . . . to facilitate decision on the merits, rather 10 than on the pleadings or technicalities.’” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 11 2000) (en banc) (quoting Noll v. Carlson, 809 F.2d 1446 (9th Cir. 1987)). 12 Plaintiffs contend that the Foman factors support their motion. They argue there has 13 been no undue delay as they filed the motion within days of discovering the factual error 14 while preparing their opposition to the motion for judgment on the pleadings. (Dkt. No. 15 21-2 at 4.) They also assert that the amendment is not due to bad faith or dilatory motive 16 but to provide factual accuracy of the pleadings and even reached out to defense counsel 17 to avoid any delay in the case. (Id. at 5.) They claim this is their first request to cure the 18 pleading deficiency noting that the prior amendment was filed in response to the Court’s 19 order to show cause. (Id.) They further maintain that the proposed amendment will not 20 prejudice Defendant because the case is in its infancy, and finally, the proposed amendment 21 is not futile because any claims as to the merits of the proposed pleading can be raised after 22 the pleadings have been finalized. In opposition, Defendant contends that the proposed 23 amendments (1) are futile; and (2) will unfairly prejudice it. (Dkt. No. 26.) 24 A. Futility 25 “[A proposed] amendment is futile when no set of facts can be proved under the 26 amendment to the pleadings that would constitute a valid and sufficient claim or defense.” 27 Missouri ex rel. Koster v. Harris, 847 F.3d 646, 656 (9th Cir. 2017) (citation and quotation 28 marks omitted). “Denial of leave to amend on this ground is rare. Ordinarily, courts will 1 defer consideration of [futility] challenges . . . until after leave to amend is granted and the 2 amended pleading is filed.” Netbula, LLC v. Distinct Corp., 212 F.R.D. 534, 539 (N.D. 3 Cal. 2003); Green Valley Corp. v. Caldo Oil Co., No. 09cv4028-LHK, 2011 WL 1465883, 4 at *6 (N.D. Cal. Apr. 18, 2011) (noting “the general preference against denying a motion 5 for leave to amend based on futility”); see also Clarke v. Upton, 703 F. Supp. 2d 1037, 6 1043 (E.D. Cal. 2010) (“However, denial [of a motion to amend] on this ground is rare and 7 courts generally defer considerations of challenges to the merits of a proposed amended 8 pleading until after leave to amend is granted and the amended pleading is filed.”). As the 9 Ninth Circuit explained, “[i]t would be undesirable to resolve important legal questions on 10 the basis of allegations which are incomplete” and “[i]t has been said that the sufficiency 11 of an amended pleading ordinarily will not be considered on motion for leave to amend.” 12 Breier v. N. Cal.
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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 J. ELIZABETH SANTOS and GLORIA Case No.: 24cv2069-GPC(MSB) P. SANTOS, Trustees of the GHS Living 12 Trust, ORDER GRANTING PLAINITFFS’ 13 MOTION FOR LEAVE TO FILE A Plaintiffs, SECOND AMENDED COMPLAINT 14 v. 15 [Dkt. No. 21.] FIDELITY NATIONAL TITLE 16 INSURANCE COMPANY, as successor to American Title Insurance Company, 17 Defendant. 18
19 Plaintiffs filed a motion for leave to file a second amended complaint. (Dkt. No. 20 21.) Defendant filed an opposition and Plaintiffs replied. (Dkt. Nos. 26, 27.) Based on 21 the reasoning below, the Court GRANTS Plaintiff’s motion for leave to file a second 22 amended complaint. 23 Background 24 On November 4, 2024, Plaintiff J. Elizabeth Santos and Gloria P. Santos, as 25 Trustee of the GHS Living Trust (“Plaintiffs or “Insured”) filed a complaint against 26 Defendant Fidelity National Title Insurance Company (“Defendant” or “Fidelity”) 27 seeking declaratory relief and alleges claims for breach of contract, bad faith, and in the 28 1 alternative, contract reformation. (Dkt. No. 1, Compl.) In response to the Court’s order 2 to show cause why the case should not be dismissed for lack of subject matter 3 jurisdiction, Plaintiffs responded and the Court dissolved the order to show cause. (Dkt. 4 Nos. 4, 5, 6.) On November 22, 2024, Plaintiffs filed an amended complaint to properly 5 allege subject matter jurisdiction. (Dkt. No. 7.) 6 Defendant filed an answer on January 2, 2025. (Dkt. No. 8.) On March 3, 2025, 7 Defendant filed a motion for judgment on the pleadings. (Dkt. No. 12.) Then, on April 8 9, 2025, Plaintiffs filed the instant motion for leave to file a second amended complaint. 9 (Dkt. No. 21.) In the meantime, on April 11, 2025, Plaintiffs filed a response to 10 Defendant’s motion for judgment on the pleadings and a motion for partial summary 11 judgment. (Dkt. Nos. 22, 23.) On April 28, 2025, Defendant filed an opposition to the 12 motion for leave to file a second amended complaint. (Dkt. No. 26.) A reply was filed 13 by Plaintiffs on May 6, 2025. (Dkt. No. 27.) 14 Discussion 15 Under Federal Rule of Civil Procedure (“Rule”) 15, courts “should freely give leave 16 [to amend] when justice so requires.” Fed. R. Civ. P. 15(a)(2); see also Foman v. Davis, 17 371 U.S. 178, 182 (1962) (“Rule 15(a) declares that leave to amend ‘shall be freely given 18 when justice so requires’; this mandate is to be heeded.”). Granting leave to amend rests 19 in the sound discretion of the trial court. Int’l Ass’n of Machinists & Aerospace Workers 20 v. Republic Airlines, 761 F.2d 1386, 1390 (9th Cir. 1985). 21 “Five factors are taken into account to assess the propriety of a motion for leave to 22 amend: bad faith, undue delay, prejudice to the opposing party, futility of amendment, and 23 whether the plaintiff has previously amended the complaint.” Johnson v. Buckley, 356 24 F.3d 1067, 1077 (9th Cir. 2004); see also Foman, 371 U.S. at 182 (Foman factors). These 25 factors do not carry equal weight; the possibility of delay alone, for instance, cannot justify 26 denial of leave to amend, but when combined with a showing of prejudice, bad faith, or 27 futility of amendment, leave to amend will likely be denied. DCD Programs, Ltd., 833 28 F.2d at 186; Bowles v. Reade, 198 F.3d 752, 757-58 (9th Cir. 1999). The single most 1 important factor is whether prejudice would result to the non-movant as a consequence of 2 the amendment. Eminence Cap., LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003); 3 William Inglis & Sons Baking Co. v. ITT Continental Baking Co., Inc., 668 F.2d 1014, 4 1053 n.68 (9th Cir. 1981). “Absent prejudice, or a strong showing of any of the remaining 5 . . . factors, there exists a presumption under Rule 15(a) in favor of granting leave to 6 amend.” Eminence Cap. LLC, 316 F.3d at 1052 (emphasis in original). The burden of 7 demonstrating prejudice falls on the party opposing leave to amend. DCD Programs, Ltd., 8 833 F.2d at 187. When determining whether to grant leave to amend, courts “must remain 9 guided by ‘the underlying purpose of Rule 15 . . . to facilitate decision on the merits, rather 10 than on the pleadings or technicalities.’” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 11 2000) (en banc) (quoting Noll v. Carlson, 809 F.2d 1446 (9th Cir. 1987)). 12 Plaintiffs contend that the Foman factors support their motion. They argue there has 13 been no undue delay as they filed the motion within days of discovering the factual error 14 while preparing their opposition to the motion for judgment on the pleadings. (Dkt. No. 15 21-2 at 4.) They also assert that the amendment is not due to bad faith or dilatory motive 16 but to provide factual accuracy of the pleadings and even reached out to defense counsel 17 to avoid any delay in the case. (Id. at 5.) They claim this is their first request to cure the 18 pleading deficiency noting that the prior amendment was filed in response to the Court’s 19 order to show cause. (Id.) They further maintain that the proposed amendment will not 20 prejudice Defendant because the case is in its infancy, and finally, the proposed amendment 21 is not futile because any claims as to the merits of the proposed pleading can be raised after 22 the pleadings have been finalized. In opposition, Defendant contends that the proposed 23 amendments (1) are futile; and (2) will unfairly prejudice it. (Dkt. No. 26.) 24 A. Futility 25 “[A proposed] amendment is futile when no set of facts can be proved under the 26 amendment to the pleadings that would constitute a valid and sufficient claim or defense.” 27 Missouri ex rel. Koster v. Harris, 847 F.3d 646, 656 (9th Cir. 2017) (citation and quotation 28 marks omitted). “Denial of leave to amend on this ground is rare. Ordinarily, courts will 1 defer consideration of [futility] challenges . . . until after leave to amend is granted and the 2 amended pleading is filed.” Netbula, LLC v. Distinct Corp., 212 F.R.D. 534, 539 (N.D. 3 Cal. 2003); Green Valley Corp. v. Caldo Oil Co., No. 09cv4028-LHK, 2011 WL 1465883, 4 at *6 (N.D. Cal. Apr. 18, 2011) (noting “the general preference against denying a motion 5 for leave to amend based on futility”); see also Clarke v. Upton, 703 F. Supp. 2d 1037, 6 1043 (E.D. Cal. 2010) (“However, denial [of a motion to amend] on this ground is rare and 7 courts generally defer considerations of challenges to the merits of a proposed amended 8 pleading until after leave to amend is granted and the amended pleading is filed.”). As the 9 Ninth Circuit explained, “[i]t would be undesirable to resolve important legal questions on 10 the basis of allegations which are incomplete” and “[i]t has been said that the sufficiency 11 of an amended pleading ordinarily will not be considered on motion for leave to amend.” 12 Breier v. N. Cal. Bowling Proprietors’ Ass’n, 316 F.2d 787, 790 (9th Cir. 1963). 13 Here, the parties dispute whether Plaintiffs are “insured” as defined in the Title 14 Policy and whether they are entitled to coverage under the Title Policy issued by Fidelity 15 to Plaintiff J. Elizabeth Sanchez and her then husband, Jose P. Santos, in 1981. (Dkt. No. 16 7, Am. Compl. ¶ 2; see Dkt. Nos. 12, 23.) Plaintiffs seek to correct how the property was 17 subsequently transferred. The FAC alleges the property is being held as J. Elizabeth 18 Santos and Gloria P. Santos, as co-Trustees, but in fact, it should be corrected and the 19 property is being held as Gloria P. Santos, as Trustee and J. Elizabeth Santos, in her 20 individual capacity, as joint tenants. (See Dkt. No. 21-1 at 2; Dkt. No. 21-4, Proposed 21 SAC ¶ 5.) In its opposition, Defendant includes arguments raised in its motion for 22 judgment on the pleadings arguing the amendments are futile. However, the Court is not 23 prepared to address the merits of Defendant’s motion for judgment on the pleadings on a 24 motion for leave to amend. At this stage of the litigation, the Court is not ruling on the 25 sufficiency of the proposed pleadings, but only on whether “no set of facts” can be 26 proven that would constitute a valid and sufficient claim. See Missouri ex rel. Koster, 27 847 F.3d at 656 (citing Miller v. Rykoff-Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988)). 28 Here, Plaintiffs seek to correct a factual error on how they have held title to the property, 1 which is relevant to determining whether they are “insureds” covered by the Title Policy. 2 Accordingly, the Court finds that the proposed amendment is not futile. 3 B. Prejudice 4 Defendant argues it will be prejudiced because the motion to amend is an attempt to 5 derail and disrupt its motion for judgment on the pleadings because Plaintiffs should have 6 known or had constructive knowledge of the proposed amendment when they filed their 7 complaint yet waited six months to seek leave to amend. (Dkt. No. 26 at 3-4.) Plaintiffs 8 respond that they have no interest in delaying the case and reached out to defense counsel 9 in an attempt to address the factual error without filing the instant motion but defense 10 counsel did not respond. (Dkt. No. 27 at 3.) 11 “Prejudice is the touchstone of inquiry under Rule 15(a),” and “[a]bsent prejudice, 12 or a strong showing of any of the remaining Foman factors, there exists a presumption 13 under Rule 15(a) in favor of granting leave to amend.” Eminence Cap. LLC, 316 F.3d at 14 1052 (internal quotation marks omitted). Prejudice may exist where new allegations 15 “greatly alter[] the nature of the litigation” and would require defendants to undertake, “at 16 a late hour, an entirely new course of defense.” Morongo Band of Mission Indians v. Rose, 17 893 F.2d 1074, 1079 (9th Cir. 1990); Peterson v. California, No. 1:10-cv-01132-SMS, 18 2011 WL 3875622, at *3 (E.D. Cal. Sept. 1, 2011) (“[W]hen, after a period of extensive 19 discovery, a party proposes a late-tendered amendment that would fundamentally change 20 the case to incorporate new causes of action and that would require additional discovery, 21 the amendment may be appropriately denied as prejudicial to the opposing party.”). 22 Despite its frustration, Defendant fails to articulate any prejudice it will suffer from 23 allowing the complaint to be amended to allege the correct holding of property by 24 Plaintiffs. First, the litigation is in its early stages, see Fremantlemedia N. Am., Inc. v. AXA 25 Ins. Co., 2010 WL 11601204, at *3 (C.D. Cal. Nov. 5, 2010) (granting motion for leave to 26 amend because, inter alia, the case was in “its early stages and neither party ha[d] 27 conducted discovery, except for initial disclosures.”), and Plaintiffs’ proposed 28 amendments do not add new legal claims or theories, but simply corrects the property 1 || transfer at issue. Further, litigation expenses incurred before a motion to amend is filed 2 || does not constitute prejudice. United States v. United States Healthcare Ins. Co., 848 F.3d 3 1161, 1184 (9th Cir. 2016). Accordingly, Defendant has failed to demonstrate any 4 || prejudice if Plaintiff is granted leave to file a second amended complaint. 5 In sum, the Court concludes that the Foman factors support Plaintiff's motion for 6 || leave to file an amended complaint. 7 Conclusion 8 For the reasons set forth above, the Court GRANTS Plaintiffs’ motion for leave to 9 || file a second amended complaint. Plaintiffs shall file a second amended complaint within 10 || three (3) days of the Court’s order. In light of the Court’s ruling, the Court DENIES 11 || Defendant’s motion for judgment on the pleadings, (Dkt. No. 12) and Plaintiff's motion 12 || for partial summary judgment, (Dkt. No. 23), as MOOT. The parties may re-file their 13 motions once the second amended complaint has been filed. The hearing currently set for 14 || May 23, 2025 is hereby vacated. 15 IT IS SO ORDERED. 16 || Dated: May 9, 2025 V7 Hon. athe Cae 18 United States District Judge 19 20 21 22 23 24 25 26 27 28