Setty v. Shrinivas Sugandhalaya LLP

Opinion

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5 UNITED STATES DISTRICT COURT 6 WESTERN DISTRICT OF WASHINGTON AT SEATTLE 7 8 BALKRISHNA SETTY, et al., 9 Plaintiffs, Case No. C17-1146-MLP 10 v. ORDER 11 SHRINIVAS SUGANDHALAYA LLP, et al., 12 Defendants. 13

14 I. INTRODUCTION 15 This matter is before the Court on Defendant Shrinivas Sugandhalaya LLP’s (“SS LLP”) 16 Motion to Supplement Answer (“SS LLP’s Motion” (dkt. # 141)), Plaintiffs Balkrishna Setty and 17 Shrinivas Sugandhalaya (BNG) LLP’s (“SS BNG,” and together with Mr. Setty, “Plaintiffs”) 18 Motion for Leave to File Amended Complaint (“Plaintiffs’ Motion” (dkt. # 143)), and Defendant 19 and Counter-Plaintiff R. Expo (USA), Ltd., Inc.’s (“R Expo”) Motion to Enforce the U.S. 20 Settlement Agreement (“R Expo’s Motion” (dkt. # 145)). 21 SS LLP’s Motion seeks to amend its answer and counterclaims to include an additional 22 affirmative defense based on the parties’ purported settlement. (Dkt. # 141 at 2.) Defendant R 23 Expo stipulated to the entry of SS LLP’s Motion (id. at 3) and no parties filed oppositions. 1 Plaintiffs’ Motion requests leave to file an amended complaint alleging five new causes 2 of action stemming from the same facts as Plaintiffs’ original complaint. (Pls.’ Mot. at 4.) 3 Defendants R Expo and SS LLP filed responses to Plaintiffs’ Motion (dkt. ## 148, 150), to 4 which Plaintiffs filed separate replies (dkt. ## 152-53.) R Expo filed a surreply (dkt. # 155)

5 wherein it moved to strike extraneous words from Plaintiffs’ overlength reply and citations to 6 out-of-circuit authority. 7 R Expo’s Motion seeks enforcement of a purported settlement between it and Plaintiffs, 8 and requests that the Court dismiss R Expo from this action. (R Expo’s Mot. at 1-2.) Plaintiffs 9 filed a response (dkt. # 156) and R Expo filed a reply (dkt. # 158). 10 Having considered the parties’ submissions, the balance of the record, and the governing 11 law, the Court GRANTS SS LLP’s Motion (dkt. # 141), GRANTS Plaintiffs’ Motion (dkt. 12 # 143), DENIES R Expo’s Motion (dkt. # 145), and DENIES R Expo’s request to strike (dkt. 13 # 155) as further explained below. 14 II. BACKGROUND

15 Though this litigation is over seven years old, the background relevant to the parties’ 16 motions began in January 2023 when the parties filed a notice of settlement in principle and 17 stipulated motion to stay proceedings pending negotiations. (Dkt. # 122.) Over the next several 18 months, the Court granted additional extensions to the stay as the parties continued settlement 19 negotiations. (See dkt. ## 123-26.) The parties disagree as to whether their negotiations reached 20 an enforceable settlement agreement as to the instant action, but by September 2023, the parties 21 had reached an impasse over Defendant SS LLP’s purported failure to transfer certain 22 intellectual property to Plaintiffs as a condition precedent to settlement. (Dkt. # 127.) As a result, 23 1 Plaintiffs moved to reopen the case (id.), which SS LLP and R Expo opposed (dkt. ## 129-30) on 2 the grounds that the settlement agreement was enforceable. 3 The Court granted Plaintiffs’ motion to reopen the case on November 28, 2023, finding 4 insufficient evidence of an enforceable settlement agreement, and ordered the parties to submit a

5 joint status report (“JSR”) by January 12, 2024.1 (Dkt. # 133.) In the JSR, the parties proposed 6 deadlines for case management, including an April 26, 2024 “[d]eadline for amended pleadings” 7 proposed by Defendant SS LLP. (Dkt. # 138 at 2.) The Court adopted SS LLP’s proposal in the 8 scheduling order, setting April 26, 2024, as the deadline for amended pleadings. (Dkt. # 140.) 9 Accordingly, Defendant SS LLP filed a motion to amend its answer on April 25, 2024. 10 (SS LLP’s Mot.) The next day, Plaintiffs likewise moved for leave to file an amended complaint. 11 (Pls.’ Mot.) SS LLP opposed Plaintiffs’ attempt to amend its pleadings, despite: (1) having 12 proposed the Court’s April 26 deadline for amended pleadings; and (2) having filed its own 13 motion for amended pleadings the day before Plaintiffs. (SS LLP’s Mot.; Pls.’ Mot.; dkt. # 150.) 14 R Expo also opposed Plaintiffs’ Motion. (Dkt. # 148.)

15 On May 8, 2024, R Expo filed a motion to enforce the settlement agreement and to 16 dismiss R Expo from this action. (R Expo’s Mot.) Plaintiffs opposed R Expo’s Motion. (Dkt. 17 # 156.) 18 III. DISCUSSION 19 A. Plaintiffs’ Motion to File Amended Complaint 20 Plaintiffs’ Motion seeks leave to file an amended complaint that, inter alia, adds five new 21 causes of action. (Pls.’ Mot. at 2.) After passage of the initial period to amend as a matter of 22 course, Federal Rule of Civil Procedure 15 requires leave of Court to file an amended complaint. 23

1 The Court also denied SS LLP’s motion for reconsideration of the order to reopen the case. (Dkt. # 139.) 1 Fed. R. Civ. P. 15(a). “The court should freely give leave when justice so requires.” Id.; see 2 Eminence Cap., LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (Leave to amend 3 under Rule 15 “is to be applied with extreme liberality.”) (quotation omitted). Factors weighing 4 against leave to amend include undue delay, bad faith, failure to cure deficiencies in previous

5 amendments, undue prejudice to opposing parties, and futility of amendment. Foman v. Davis, 6 371 U.S. 178, 182 (1962). 7 Specifically, Plaintiffs’ proposed amended complaint adds causes of action for 8 defamation, trade libel, violation of Washington Consumer Protection Act, civil conspiracy, and 9 unjust enrichment. (Pls.’ Mot. at 4.) Plaintiffs further assert that these new causes of action “are 10 based on the same underlying facts and circumstances pleaded in the original Complaint.” (Id.) 11 Indeed, neither R Expo nor SS LLP argue that Plaintiffs’ proposed complaint adds claims based 12 on facts outside the scope of this litigation. (See generally dkt. ## 148, 150.) Despite its delayed 13 filing, Plaintiffs argue that no parties are prejudiced by amendments to the pleadings because the 14 case is still in relatively early stages of litigation—discovery closes on December 2, 2024, and

15 trial begins May 12, 2025. (Dkt. # 140; Pls.’ Mot. at 5-6.) Though this matter was initially filed 16 almost eight years ago, Plaintiffs’ Motion was filed less than five months after the Court ordered 17 this case to be reopened, and with plenty of time for the parties to finish discovery. (See dkt. 18 ## 133, 140.) Furthermore, Plaintiffs’ Motion to amend was filed within the Court’s April 26, 19 2024, deadline to amend pleadings, meaning Plaintiffs are entitled to the more deferential Rule 20 15 amendment standards and need not show “good faith” under Rule 16. (Id.) 21 R Expo asserts that Plaintiffs’ Motion is untimely because it was filed after the Court’s 22 prior deadline for amended pleadings set in the initial scheduling order dated November 11, 23 2021. (Dkt. # 148 at 2; see dkt. # 109.) Furthermore, R Expo argues that Plaintiffs’ reliance on 1 Rule 15 is procedurally improper, and that Plaintiffs must instead show good faith under Rule 16 2 to amend the prior scheduling order. (Dkt. # 148 at 6-7.) This argument has no merit. The Court 3 adopted a new scheduling order on January 23, 2024, with a new April 26, 2024, deadline for 4 amended pleadings that necessarily superseded all prior deadlines. (Dkt. # 140.) Rule 15 governs

5 because Plaintiffs’ Motion was indisputably filed within the Court’s new April 26 deadline—a 6 Rule 16 motion to amend the scheduling order was not necessary. Counsel are advised to rely on 7 deadlines from the Court’s most current scheduling order, and not to represent prior scheduling 8 order deadlines as if they are operative. 9 R Expo also filed a surreply wherein it moved to strike: (1) portions of Plaintiffs’ 10 collective replies that allegedly exceed Local Civil Rule (“LCR”) 7(e)(4)’s word limit; and 11 (2) Plaintiffs’ citation to a Fifth Circuit case, Halbert v. City of Sherman, Tex., 33 F.3d 526 (5th 12 Cir. 1994). (Dkt. # 155.) Defendants R Expo and SS LLP filed two separate responses (dkt. 13 ## 148, 150) to Plaintiffs’ Motion, to which Plaintiffs filed two separate replies (dkt. ## 152-53). 14 Both of Plaintiffs’ replies were, individually, within the word limit provided by LCR 7(e)(4), but

15 when added together, exceeded the word limit. (Dkt. # 155.) As a result, R Expo argues that the 16 replies should be stricken to the extent they collectively exceed LCR 7(e)(4)’s word limit. (Id.) 17 The Court declines to apply R Expo’s interpretation of LCR 7(e)(4) and likewise declines to 18 strike Plaintiffs’ reply. Additionally, merely citing out-of-circuit authority is not a basis for a 19 motion to strike—parties may cite, and courts may consider, out-of-circuit authority.2 In any 20 event, striking 636 words and a citation to out-of-circuit authority from one of Plaintiffs’ replies 21 22

23 2 Arguably, R Expo’s surreply contains an improper attempt to offer extraneous argument regarding Halbert and Rule 16. (See dkt. # 155 at 2-3.) A surreply is “strictly limited” to a request to strike material in the reply. LCR 7(g)(2). 1 would not negate the merits of Plaintiffs’ timely and nonprejudicial request to amend pleadings. 2 R Expo’s request to strike is denied. 3 Finally, SS LLP argues that Plaintiffs’ delay in amending its complaint is inexcusable 4 because the case has been pending for almost eight years. (Dkt. # 150.) While there has certainly

5 been a delay to Plaintiffs’ amendment, the delay does not reflect bad faith or dilatory motives 6 attributable to Plaintiffs. Instead, this matter was left pending largely because SS LLP 7 unsuccessfully appealed an order to the Ninth Circuit and Supreme Court, a process that took at 8 least three years. See Setty v. Shrinivas Sugandhalaya LLP, 2018 WL 3064778, at *3 (W.D. 9 Wash. June 21, 2018), aff’d, 771 F. App’x 456 (9th Cir. 2019), cert. granted, judgment vacated, 10 141 S. Ct. 83 (2020), and aff’d, 3 F.4th 1166 (9th Cir. 2021). Subsequently, the parties again 11 stayed the action for almost another year while they engaged in settlement discussions, which 12 ultimately fell through after SS LLP purportedly failed to meet a condition precedent. (Dkt. 13 # 133.) Then, as noted in the JSR, SS LLP itself proposed the current deadline for amended 14 pleadings. (Dkt. # 138 at 2.) When SS LLP proposed this deadline, it should have anticipated that

15 other parties might also seek to amend their own pleadings. Instead, SS LLP asks to benefit from 16 the Court’s deadline by filing an amended pleading while denying its party opponent the same 17 opportunity. Additionally, neither R Expo nor SS LLP has identified how they would suffer 18 undue prejudice if Plaintiffs’ Motion was granted. The crux of SS LLP’s argument—that it “is 19 prejudiced by any continuation of this action” (dkt. # 150 at 7)—is an improper attempt to 20 relitigate the Court’s order to reopen this case, an argument that the Court now rejects for a third 21 time. (See dkt. ## 133, 139.) Having found no undue prejudice, bad faith, dilatory motives, prior 22 amendments, futility, or other grounds to deny Plaintiffs’ request to amend its pleading, the 23 Court grants Plaintiffs’ Motion. 1 B. SS LLP’s Motion to Amend Answer 2 Defendant SS LLP also seeks leave of court to file amended pleadings, this time to 3 supplement its answer and counterclaims to include an additional affirmative defense based on 4 the parties’ purported settlement. (SS LLP’s Mot.) No parties filed oppositions to SS LLP’s

5 Motion. As discussed above, SS LLP’s motion to supplement its answer was timely filed before 6 the Court’s April 26 deadline to amend pleadings, and no party would be unduly prejudiced if SS 7 LLP were to file an amended answer at this point in the litigation. Furthermore, given the Court’s 8 decision to grant Plaintiffs’ Motion to file an amended complaint, SS LLP would have the 9 opportunity to respond to the amended complaint as a matter of course. See Fed. R. Civ. P. 10 15(a)(3). Accordingly, SS LLP’s Motion is granted. 11 C. R Expo’s Motion to Enforce Settlement 12 R Expo’s Motion argues that R Expo should be dismissed from the action pursuant to the 13 parties’ purported settlement. (R Expo’s Mot. at 8-9.) Under the settlement’s terms, R Expo 14 allegedly has no obligations to perform, and is therefore entitled to the settlement’s benefit. (Id.)

15 R Expo further argues that equitable and judicial estoppel mandate R Expo’s dismissal because R 16 Expo’s reliance on the settlement agreement’s performance imposed an unfair tactical 17 disadvantage for not pursuing discovery while the case was stayed. (Id. at 9-10.) 18 As this Court has already ruled (see dkt. ## 133, 139), there is insufficient evidence in the 19 record to find an enforceable settlement agreement between the parties. While parties may assert 20 this defense at a later stage, the evidence currently before the Court shows that the settlement 21 agreement was never perfected as to this litigation because certain conditions precedent were 22 unmet. (See dkt. ## 125 at ¶¶ 2-8, 129 at 2, 130 at 2, 133 at 3, 139 at 3-4.) While R Expo may be 23 1 understandably frustrated with the parties’ failure to perfect settlement, the Court cannot find an 2 enforceable contract on these facts. 3 Nor are R Expo’s circumstances the basis for estoppel. Contrary to R Expo’s arguments, 4 no party has asserted inconsistent positions to gain an unfair advantage. Instead, the parties

5 engaged in good faith settlement negotiations, during which the parties agreed to stay litigation. 6 (Dkt. # 122.) When the Court ordered the case to be reopened, it issued a new scheduling order 7 with extended deadlines so that all parties had sufficient opportunities to develop their cases. 8 (Dkt. # 140.) The end of discovery is December 2, 2024 (see id.), meaning all parties have ample 9 time to propound and respond to discovery, and seek the Court’s intervention if necessary. 10 However, R Expo’s declination to pursue discovery does not justify estoppel. R Expo’s Motion 11 is DENIED. 12 IV. CONCLUSION 13 (1) Plaintiffs’ Motion (dkt. # 143) is GRANTED. Plaintiffs shall file their amended 14 complaint in the form provided (dkt. # 144, Ex. A) by June 28, 2024. Parties shall file any

15 required responses to Plaintiffs’ amended complaint pursuant to Rule 15(a)(3) by July 12, 2024. 16 (2) SS LLP’s Motion (dkt. # 141) is GRANTED. SS LLP shall file an amended 17 answer by July 12, 2024. 18 (3) R Expo’s Motion (dkt. # 145) is DENIED. 19 (4) R Expo’s request to strike (dkt. # 155) is DENIED. 20 Dated this 28th day of June, 2024. 21 22 A 23 MICHELLE L. PETERSON United States Magistrate Judge