Stanz v. Brown

• Court: District Court, S.D. California
• Decided: February 27, 2023
• Docket: 3:22-cv-01164
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 AARON STANZ, individually and on Case No.: 22-CV-1164-GPC(JLB) behalf of JET GENIUS HOLDINGS, 12 INC. as shareholder thereto, ORDER GRANTING PLAINTIFF’S 13 MOTION FOR LEAVE TO FILE A Plaintiff, FIRST AMENDED COMPLAINT; 14 v. VACATING HEARING; AND 15 DENYING PENDING MOTIONS TO

DISMISS AS MOOT 16 JORDAN BROWN, individually and in 17 his capacity as CEO, Director, and [ECF No. 16] Chairman of co-defendant JET GENIUS 18 HOLDINGS, INC., JET GENIUS 19 HOLDINGS, INC., JET GENIUS FLORIDA HOLDINGS, INC., C3jets 20 LLC, BOWMAN AVIATION LLC, and 21 DOES 1-20, 22 Defendants. 23 24 Before the Court is Plaintiff Aaron Stanz’s (“Plaintiff” or “Stanz”) Motion for 25 Leave to File a First Amended Complaint. ECF No. 16. Defendants Jordan Brown 26 (“Brown”); C3jets LLC (“C3jets”); and Jet Genius Florida Holdings, Inc. (“JGFH”) filed 27 Oppositions. ECF Nos. 19, 20. Plaintiff filed Replies to both Oppositions. ECF Nos. 22, 28 23. Based on the reasoning below, the Court GRANTS Plaintiff’s Motion for Leave to 1 File a First Amended Complaint. Plaintiff shall file an amended complaint within five (5) 2 days of the Court’s order. The hearing currently set for March 3, 2023 is VACATED. 3 BACKGROUND 4 On August 8, 2022, Plaintiff filed a Complaint against Defendants Jordan Brown; 5 Jet Genius Holdings, Inc.; Jet Genius Florida Holdings, Inc.; C3jets LLC; and Bowman 6 Aviation LLC (collectively “Defendants”) alleging numerous causes of action for: (1) 7 violations of the Defend Trade Secrets Act, 18 U.S.C. § 1836(b)(1); (2) violation of the 8 California Uniform Trade Secrets Act, Cal. Civ. Code § 3426; (3) breach of contract; (4) 9 breach of fiduciary duty; (5) fraud; (6) conspiracy; (7) accounting; and (8) unjust 10 enrichment. ECF No. 1 (Compl.) ¶¶ 51-141. Plaintiff’s initial Complaint presents 11 numerous factual allegations, including that Defendant Brown “misappropriated 12 Plaintiff’s (and his company’s) intellectual property and set up new companies to evade 13 the FET [Federal Excise Tax] and dilute Plaintiff’s shareholder value.” Id. ¶ 2. 14 On September 9, 2022, Defendants Brown and C3jets filed a Motion to Dismiss. 15 ECF No. 3. Plaintiff did not respond to the Motion, and instead filed an Amended 16 Complaint on October 11, 2022. ECF No. 6. Because Plaintiff’s First Amended 17 Complaint (“FAC”) was filed more than 21 days after service of Defendants’ Motion to 18 Dismiss, (Fed. R. Civ. P. 15(a)(1)(B)), the Court struck the Amended Complaint as 19 untimely under Rule 15(a)(1). ECF No. 19. 20 On December 5, 2022, Defendant Jet Genius Holdings, Inc. (“JGH”) filed a 21 Motion to Dismiss. ECF No. 11. On December 6, 2022, Defendant JGFH filed a Motion 22 to Dismiss. ECF No. 12. On December 27, 2022, Plaintiff filed a Motion for Leave to 23 Amend the Complaint. ECF No. 16. The Court set a briefing schedule and vacated the 24 hearing on the Motions to Dismiss pending the Court’s ruling on the instant Motion. ECF 25 No. 17. On January 25, 2023, Defendants Jordan Brown, C3jets, and JGFH filed 26 Oppositions to Plaintiff’s Motion. ECF Nos. 19, 20. On February 8, 2023, Plaintiff filed 27 his Replies. ECF Nos. 22, 23. 28 1 The Proposed First Amended Complaint (“PFAC”) is substantially different from 2 the initial Complaint. See ECF No. 16-5; ECF No. 21-1 (redline version). The PFAC 3 appears to add factual allegations, parties, and causes of action. Plaintiff states that 4 “[s]ince filing his original complaint, [he] has discovered new information” and now 5 seeks to add three new Defendants—C3 Limo LLC, Jet Agency Global LLC, and the 6 Brown Family Trust1—as well as additional causes of action “under RICO and for 7 Equitable Contribution.” ECF No. 16-1 at 1, 3. Defendants Brown, C3jets, and JGFH 8 oppose Plaintiff’s Motion primarily on the grounds that the PFAC does not 9 “meaningfully address the legal issues raised in Defendants’ pending Motions to Dismiss 10 and Strike” and because the new causes of action fail to state a claim for relief. ECF No. 11 19 at 6-7; see also ECF No. 20 at 8. 12 REQUEST FOR JUDICIAL NOTICE 13 As a preliminary matter, the Court grants Defendants’ request for judicial notice of 14 Plaintiff’s initial Complaint, (ECF No. 1), Defendants Jordan Brown and C3jets’s Motion 15 to Dismiss and supporting documents, (ECF No. 3), and Defendant JGFH’s Motion to 16 Dismiss, (ECF No. 12). See Harris v. Cnty. of Orange, 682 F.3d 1126, 1132 (9th Cir. 17 2012) (“We may take judicial notice of undisputed matters of public record, including 18 documents on file in federal or state courts.”). Because Defendants request notice of 19 documents filed in this Court, and Plaintiff has not opposed this request, the Court 20 GRANTS Defendants’ requests for judicial notice. See ECF No. 19-1, 20-2. 21 LEGAL STANDARD 22 Under Federal Rule of Civil Procedure (“Rule”) 15(a), “[a] party may amend its 23 pleading once as a matter of course within (A) 21 days after serving it; or (B) 21 days 24 after service of a motion under Rule 12(b) . . . .” Fed. R. Civ. P. 15(a)(1). “In all other 25

26 27 1 Defendants’ Opposition argues that a family trust cannot be sued. See ECF No. 19 at 17. Plaintiff concedes this and states that he “will remove the Family trust as a defendant.” 28 1 cases, a party may amend its pleading only with the opposing party’s written consent or 2 the court’s leave,” and courts “should freely give leave when justice so requires.” Fed. R. 3 Civ. P. 15(a)(2); see also Foman v. Davis, 371 U.S. 178, 182 (1962) (“Rule 15(a) 4 declares that leave to amend ‘shall be freely given when justice so requires’; this mandate 5 is to be heeded.”); DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987) 6 (stating “[R]ule 15’s policy of favoring amendments to pleadings should be applied with 7 ‘extreme liberality’”). 8 In assessing the propriety of an amendment, courts consider several factors: (1) 9 undue delay; (2) bad faith or dilatory motive; (3) repeated failure to cure deficiencies by 10 amendments previously permitted;2 (4) prejudice to the opposing party; and (5) futility of 11 amendment. Foman, 371 U.S. at 182; United States v. Corinthian Colleges, 655 F.3d 12 984, 995 (9th Cir. 2011). These factors do not carry equal weight; the possibility of delay 13 alone, for instance, cannot justify denial of leave to amend. DCD Programs, 833 F.2d at 14 186. The single most important factor is whether prejudice would result to the non- 15 movant as a consequence of the amendment. Eminence Cap., LLC v. Aspeon, Inc., 316 16 F.3d 1048, 1052 (9th Cir. 2003) (“As this circuit and others have held, it is the 17 consideration of prejudice to the opposing party that carries the greatest weight.”). The 18 burden of demonstrating prejudice falls on the party opposing leave to amend. DCD 19 Programs, 833 F.2d at 187. 20 When determining whether to grant leave to amend, courts must bear in mind that 21 “the underlying purpose of Rule 15 [is] to facilitate decisions on the merits, rather than on 22 the pleadings or technicalities.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en 23 banc); see also In re Zoom Video Commc’ns Inc. Priv. Litig., 525 F. Supp. 32 1017, 1027 24 (N.D. Cal. 2021). 25 26

27 2 Because this is Plaintiff’s first amended complaint, the Court does not discuss this 28 1 DISCUSSION 2 A. Undue Delay 3 First, the Court must determine if Plaintiff unduly delayed in filing this Motion. 4 “Relevant to evaluating the delay issue is whether the moving party knew or should have 5 known the facts and theories raised by the amendment in the original pleading.” Jackson 6 v. Bank of Hawaii, 902 F.2d 1385, 1389 (9th Cir. 1990). A court should also determine if 7 “permitting amendment would . . . produce an undue delay in the litigation.” Waryck v. 8 Thor Motor Coach Inc., 2023 WL 300138, at *2 (S.D. Cal. Jan. 18, 2023) (quoting 9 Jackson, 902 F.2d at 1387). 10 Plaintiff argues that there is no undue delay and amendment will not alter the 11 proceeding’s scheduling. ECF No. 16-1 at 8. Plaintiff states the case has only been active 12 for 4.5 months and there is “sufficient time remaining for the parties to conduct relevant 13 discovery.” Id. Neither Opposition argues undue delay is present. 14 The Court finds Plaintiff has not unduly delayed. A Declaration submitted by 15 Plaintiff’s counsel Wade Miller states that, following filing the initial Complaint, “new 16 and important facts continue[] to come to light.” ECF No. 16-2 ¶ 9. Plaintiff alleges he 17 “has discovered new information regarding Defendants, and these new details support 18 Plaintiff’s previously asserted claims.” ECF No. 16-1 at 7. Specifically, following filing 19 of the initial Complaint, Plaintiff and counsel were “made aware of actions by Defendant 20 Jordan Brown against his business competitor, Jason Johnson.” Id. at 5. Plaintiff states he 21 learned Defendant Brown made threats to kill Johnson and argues that this discovery 22 supports the addition of a RICO cause of action, because RICO “includes ‘any act or 23 threat involving murder.’” Id. at 7 (citing 18 U.S.C. § 1961(1)(A)). In addition, because 24 this Motion to Amend was filed only 4.5 months after the initial Complaint, the Court 25 finds amendment at this stage will not substantially delay litigation. See also Waryck, 26 2023 WL 300138 at *2 (finding no undue delay when motion for amendment was filed 27 three months after commencement of the action because it was an “early stage of 28 proceedings”). No scheduling order has been issued, and discovery has not yet begun. See 1 also SAES Getters S.p.A. v. Aeronex, Inc., 219 F. Supp. 2d 1081 (S.D. Cal. 2002) (“To 2 show undue delay, the opposing party must at least show delay past the point of initiation 3 of discovery . . . .”). Thus, this factor weighs in favor of granting leave to amend. 4 B. Bad Faith 5 Bad faith exists when the proposed amendment “will not save the complaint or the 6 plaintiff merely is seeking to prolong the litigation by adding new but baseless legal 7 theories.” Griggs v. Pace Am. Grp., Inc., 170 F.3d 877, 881 (9th Cir. 1999). Bad faith 8 may also be present when the moving party has a “‘history of dilatory tactics.’” Naranjo 9 v. Bank of Am. Nat’l Ass’n, 2015 WL 913031, at *5 (N.D. Cal. Feb. 27, 2015) (quoting 10 Thornton v. McClatchy Newspapers, Inc., 261 F.3d 789, 799 (9th Cir. 2001)). A court 11 should look to the record to determine if bad faith exists. Id. (citing DCD Programs, 833 12 F.2d at 187). 13 Plaintiff argues there is no evidence of bad faith. Defendants do not make any 14 argument Plaintiff is acting in bad faith. The Court agrees. Plaintiff does not appear to be 15 attempting to prolong the litigation. As stated above, the initial Complaint was filed only 16 four and a half months prior to the present Motion, and discovery has not yet started. 17 Thus, this factor weighs in favor of granting leave. 18 C. Prejudice 19 “Prejudice is the touchstone of the inquiry under Rule 15(a),” and “[a]bsent 20 prejudice, or a strong showing of any of the remaining Foman factors, there exists a 21 presumption under Rule 15(a) in favor of granting a leave to amend.” Eminence Cap., 22 316 F.3d at1052 (internal quotations omitted). Prejudice may exist where new allegations 23 “greatly alter[] the nature of the litigation” and would require defendants to undertake, “at 24 a late hour, an entirely new course of defense.” Morongo Band of Mission Indians v. 25 Rose, 893 F.2d 1074, 1079 (9th Cir. 1990); Peterson v. California, No. 1:10-cv-01132- 26 SMS, 2011 WL 3875622, at *3 (E.D. Cal. Sept. 1, 2011) (“[W]hen, after a period of 27 extensive discovery, a party proposes a late-tendered amendment that would 28 fundamentally change the case to incorporate new causes of action and that would require 1 additional discovery, the amendment may be appropriately denied as prejudicial to the 2 opposing party.”). 3 Here, Defendants make no argument they will suffer from undue prejudice should 4 Plaintiff’s Motion to Amend be granted, and as stated above, it is the non-movant’s 5 burden to demonstrate prejudice. Plaintiff argues that he does “not add these parties or 6 new claims late to litigation as the case was only filed in August of 2022.” ECF No. 16-1 7 at 9. 8 The Court finds amendment at this stage and under these circumstances would not 9 unduly prejudice Defendants. The new claims and allegations do not alter the nature of 10 the litigation to a significant extent as they all concern Defendant Brown’s allegedly 11 improper and illegal actions. Further, the litigation is in early stages. Plaintiff filed his 12 Motion for Leave to Amend only four and a half months after filing of the initial 13 Complaint. Defendants have filed Motions to Dismiss, but no significant briefing has 14 occurred on the arguments presented therein. See Fremantlemedia N. Am., Inc. v. AXA 15 Ins. Co., 2010 WL 11601204, at *3 (C.D. Cal. Nov. 5, 2010) (granting motion for leave 16 to amend because the case was in “its early stages and neither party has conducted 17 discovery, except for initial disclosures”). Accordingly, Defendant has not demonstrated 18 it would be prejudiced by the filing of an amended complaint, and thus, this factor weighs 19 in favor of granting leave to amend. 20 D. Futility 21 An amendment is futile “only if it would clearly be subject to dismissal.” SAES 22 Getters, 219 F. Supp. 2d at 1086 (citing DCD Programs, 83 F.2d at 188). Amendment is 23 futile when a court could not “conceive of additional facts that could, if formally alleged, 24 support the claim[s].” Corinthian Colls., 655 F.3d at 995. “While courts will determine 25 the legal sufficiency of a proposed amendment using the same standard as applied on a 26 Rule 12(b)(6) motion . . . such issues are often more appropriately raised in a motion to 27 dismiss rather than in an opposition to a motion for leave to amend.” SAES Getters, 219 28 F. Supp. 2d at 1086. Courts generally do not consider the validity of a proposed amended 1 || pleading in deciding whether to grant leave to amend, instead deferring consideration of 2 challenges to the merits after leave to amend is granted and the amended pleadings are 3 || filed. See id.; Clarke v. Upton, 703 F. Supp. 2d 1037, 1043 (E.D. Cal. 2010) (“[D]enial 4 a motion to amend] on this ground is rare and courts generally defer considerations of 5 || challenges to the merits of a proposed amended pleading until after leave to amend is 6 || granted and the amended pleading 1s filed.’’). 7 Due to the complexity of the legal issues and sheer volume of factual allegations, 8 || arguments, and Defendants, the Court finds Defendants’ arguments are more 9 || appropriately resolved at the Motion to Dismiss stage after substantive briefing by all 10 || Parties. Plaintiff has yet to respond to the Motions to Dismiss and was limited to the 11 length of a Reply brief to respond to Defendants’ substantive arguments presented in 12 || their Oppositions to the present Motion. Due to the complicated nature of the factual 13 || allegations and causes of action, the Court is not prepared to say that there exists no 14 || factual scenario in which all or some of Plaintiff's causes of action can survive a Motion 15 Dismiss against all or some of the Defendants. 16 Overall, the Foman factors weigh in favor of permitting Plaintiff to amend his 17 ||Complaint. The Court GRANTS Plaintiff's Motion for Leave to File an Amended 18 ||Complaint given the strong federal policy favoring amendments due to a preference for 19 || resolving cases on the merits. See DCD Programs, Ltd., 833 F.2d at 186. 20 CONCLUSION 21 For the reasons set forth above, the Court GRANTS Plaintiff's Motion for Leave 22 File an Amended Complaint. Plaintiff shall file an Amended Complaint within five (5) 23 || days of the Court’s order. The hearing currently set for March 3, 2023 is VACATED. 24 || The pending Motions to Dismiss are DENIED as MOOT. 25 IT IS SO ORDERED. 26 Dated: February 27, 2023 2 27 Hon. athe Cae 28 United States District Judge