Synopsys, Inc. v. Library Technologies, Inc.

Opinion

1 2 3 4 5 IN THE UNITED STATES DISTRICT COURT 6 FOR THE NORTHERN DISTRICT OF CALIFORNIA 7 8 SYNOPSYS, INC., Case No. 20-cv-07014-CRB

9 Plaintiff,

ORDER DENYING LEAVE TO 10 v. AMEND

11 LIBRARY TECHNOLOGIES, INC., 12 Defendant.

13 In 2020, Plaintiff Synopsis, Inc. sued Defendant Library Technologies, Inc. (LTI) 14 for, inter alia, violating the Digital Millennium Copyright Act (DMCA). Compl. (dkt. 1). 15 In the two years since, LTI has requested and been granted repeated extensions of time as 16 it has gone through multiple counsel (against whom its CEO has made extravagant 17 accusations in multiple letters sent to the Court). After employing its current counsel, LTI 18 filed a motion to dismiss for lack of subject-matter jurisdiction, even though Synopsis 19 pleaded a claim arising under federal law. See MTD (dkt. 105); Order Denying MTD (dkt. 20 124). LTI now moves for leave to amend its answer and add twelve counterclaims. See 21 Mot. for Leave (dkt. 130); see generally Counterclaims (CC) (dkt. 130-3). Running the 22 gamut from trespass to chattels to RICO conspiracy, the counterclaims allege that Synopsis 23 engaged in a scheme of widespread fraud.1 Id. Many of the counterclaims contradict 24 25 1 LTI’s counterclaims are as follows: 1) declaratory judgment that LTI is not bound by the 2006 End User License and 26 Maintenance Agreement (EULA) (CC ¶¶ 65-70) 2) declaratory judgment that LTI is not bound by the Terms of the Electronic Software 27 Transfer system (EST) (CC ¶¶ 71-76) 1 LTI’s prior admissions. Compare, e.g., Ans. (dkt. 44) ¶ 16 (admitting to entering into the 2 2006 EULA), with CC ¶ 69 (requesting a declaratory judgment that it is not bound by the 3 “purported” 2006 EULA because LTI’s CEO does not remember receiving a copy). 4 Eighteen months ago, LTI raised some of the same counterclaims, only to voluntarily 5 dismiss them. See Notice of Voluntary Dismissal (dkt. 52). The Court DENIES leave to 6 amend because the amendment is unduly delayed and would prejudice Synopsis. 7 I. LEGAL STANDARD 8 A court should “freely give leave” to amend “when justice so requires.” Fed. R. 9 Civ. P. 15(a)(2). However, leave to amend “is not to be granted automatically.” In re W. 10 States Wholesale Nat. Gas Antitrust Litig., 715 F.3d 716, 738 (9th Cir. 2013). A court has 11 discretion to deny leave to amend due to “[1] undue delay, [2] bad faith or dilatory motive 12 on the part of the movant, [3] repeated failure to cure deficiencies by amendment 13 previously allowed, [4] undue prejudice to the opposing party by virtue of allowance of the 14 amendment, [and] [5] futility of amendment.” Leadsinger, Inc. v. BMG Music Pub., 512 15 F.3d 522, 532 (9th Cir. 2008). While delay alone is normally insufficient to deny a motion 16 to amend, a contemporaneous finding of prejudice, bad faith, or futility justifies denying a 17 motion for leave to amend. Trans Video Elecs., Ltd. v. Sony Elecs., Inc., 278 F.R.D. 505, 18 507-08 (N.D. Cal. 2011). 19 II. DISCUSSION 20 The Court denies the motion for leave to amend because the amendment is unduly 21 22 4) violation of the Computer Fraud and Abuse Act (CFAA) (CC ¶¶ 82-88) 23 5) violation of the Computer Data Access & Fraud Act, Cal. Penal. Code § 502 (CC ¶¶ 89-98) 24 6) breach of contract of the 2006 EULA (CC ¶¶ 99-109) 25 7) violation of the Unfair Competition Law (UCL) because Synopsys’ business practices are fraudulent, unlawful, or unfair (CC ¶¶ 110-23) 26 8) trespass to chattels (CC ¶¶ 124-27) 9) conversion (CC ¶¶ 128-32) 27 10) fraud (CC ¶¶ 133-39) 1 delayed and would prejudice Synopsis. 2 A. Undue Delay and Prejudice 3 LTI brings these delayed counterclaims nearly two years after the complaint was 4 filed, even though little (if any) new evidence has come to light. In analyzing delay, courts 5 consider whether a moving party “knew or should have known the facts and theories raised 6 by the amendment in the original pleading.’” AmerisourceBergen Corp. v. Dialysist W., 7 Inc., 465 F.3d 946, 953 (9th Cir. 2006). Here, there is little doubt that LTI knew these 8 facts and theories: it raised some of them in December 2020, only to voluntarily retract 9 them one month later. See Notice of Voluntary Dismissal. Eighteen months passed with 10 no progress in this litigation as three sets of LTI’s counsel withdrew, LTI had to request 11 extensions and delay the settlement conference each time, and (most recently) LTI moved 12 to dismiss a federal-law claim for lack of federal jurisdiction. See Order Denying MTD. 13 To be sure, it is more than appropriate for a party to request a delay after a change in 14 counsel. Yet after three changes in counsel and at least as many delays, rescheduled 15 settlement conferences, and letters to the Court by LTI’s CEO alleging implausible and 16 wide-ranging conspiracies involving his prior counsel, see dkts. 71, 75, 80,2 LTI’s conduct 17 shows a concerning pattern. LTI argues that there can be no undue delay because the case 18 is at its earliest stages. Mot. at 7. Yet the fact that the case is still at its earliest stages is 19 demonstrative of the undue delay that has plagued this case because of LTI’s conduct. 20 Because of the unique history of this case, as well as the fact that these counterclaims took 21 so long to be raised, the Court finds that LTI has unduly delayed its amendment. 22 The Court also finds that Synopsis would be substantially prejudiced by this 23 amendment, in light of the delay and the many motions and hearings that have resulted 24 from LTI’s conduct. Prejudice can occur even when discovery has not yet begun. See 25 Ascon Properties, Inc. v. Mobil Oil Co., 866 F.2d 1149, 1161 (9th Cir. 1989); see, e.g., 26 Foster Poultry Farms v. Alkar-Rapidpak-MP Equip., Inc., 2013 WL 398664, at *6 (E.D. 27 1 || Cal. Jan. 31, 2013) (finding prejudice because two years had elapsed since plaintiff knew 2 || but chose not to allege the facts, so “requiring Defendant to respond to Plaintiffs untimely 3 |} allegations would generate unnecessary expenditures by the parties and the Court”). As 4 |] noted, the fact that discovery has not yet begun is illustrative of the prejudice Synopsis has 5 || already suffered. Synopsis, which has caused no delays, would be prejudiced by the 6 |} sudden need to defend itself from twelve counterclaims of fraud and conspiracy. See 7 || Foster Poultry Farms, 2013 WL 398664. LTI’s undue delay, combined with the prejudice 8 || to Synopsis, justifies denying leave. See Trans Video Elecs., 278 F.R.D. at 507-08. 9 B. Other Factors 10 In addition, some of the other Rule 15 factors also support denying leave to amend. 11 || See Leadsinger, 512 F.3d at 532. It’s true that LTI has not failed to cure deficiencies in 12 || previous pleadings. But the “bad faith” factor might weigh against amendment, as LTI’s € 13 || disavowal of its admissions of eighteen months ago and its sudden allegations of fraud and 14 |} RICO conspiracy arguably at least approach bad faith. Further, because the counterclaims 15 |} contradict LTI’s prior admissions and are of a piece with the implausible allegations in a 16 |} LTI’s CEO’s earlier letters to this Court, the proposed counterclaims would almost 5 17 || certainly fail the requirements of Federal Rule of Civil Procedure 8 and 9 such that 5 18 || amendment would be futile.* See Opp. (dkt. 135) at 5-15. 19 || 111. CONCLUSION 20 Because of LTI’s undue delay and the prejudice to Synopsis, the Court exercises its 21 || discretion to DENY LTI leave to amend its answer and counterclaims. 22 IT ISSO ORDERED. 23 Dated: June 30, 2022 CHARLES R. BREYER 24 United States District Judge 25 26 * To take just one example, LTI’s allegation that Synopsis tampered with the 2006 EULA 27 || 1s unplausible because it is founded in significant part on the fact that the document’s metadata was scrubbed something that (pursuant to the California State Bar’s guidance) 28 Be whenever a law firm attaches a document to an email. Uriarte Decl. Ex A (dkt.