THE RECKSTIN FAMILY TRUST, et al., Case No. 22-cv-01413-HSG
Plaintiffs, ORDER GRANTING PLAINTIFFS’ MOTION FOR LEAVE TO AMEND, v. TERMINATING AS MOOT DEFENDANTS’ MOTIONS FOR C3.AI, INC., et al., JOINDER, AND TERMINATING AS MOOT DEFENDANTS’ PENDING Defendants. MOTIONS TO DISMISS
Re: Dkt. Nos. 167, 170, 171, 181, 187, 188
Pending before the Court is Plaintiffs’ motion for leave to file a Third Amended Class Action Complaint, Dkt. No. 181 (“Mot.”), Dkt. No. 186 (“Opp.”), Dkt. No. 189 (“Reply”).1 Also pending before the Court are Defendants’ motions to dismiss Plaintiffs’ Second Amended Class Action Complaint, Dkt. Nos. 167, 170, 171. The Court finds this matter appropriate for disposition without oral argument and deems it submitted. See Civil L.R. 7-1(b). For the reasons discussed below, the Court GRANTS Plaintiffs’ motion for leave to amend, Dkt. No. 181, and TERMINATES AS MOOT the pending motions to dismiss, Dkt. Nos. 167, 170, 171. I. BACKGROUND The parties are familiar with the facts alleged in this securities class action, which the Court recited in its order on the first set of motions to dismiss. See Dkt. No. 154. As relevant here, Plaintiffs filed an Amended Class Action Complaint against numerous defendants in February 2023, alleging that Defendant C3.ai, Inc. (“C3”) and several of its individual officers 1 Defendant Lorenzo Simonelli and Defendant Baker Hughes filed motions to join Defendant C3.ai, Inc.’s opposition to Plaintiffs’ motion for leave to amend. See Dkt. Nos. 187, 188. Because made false or misleading statements concerning the nature of C3’s joint venture with Defendant Baker Hughes. Dkt. No. 71. Defendants moved to dismiss, Dkt. Nos. 105, 109, and the Court granted in part and denied in part the C3 Defendants’ motion to dismiss and granted Baker Hughes’ motion to dismiss. See Dkt. No. 154. Plaintiffs then filed their Second Amended Class Action Complaint, Dkt. No. 167, and Defendants again moved to dismiss, Dkt. Nos. 167, 170, 171. Before the Court resolved the pending motions to dismiss, Plaintiffs sought leave to file a Third Amended Class Action Complaint, Dkt. No. 181. Rule 15(a) of the Federal Rules of Civil Procedure allows a plaintiff to amend the complaint once, as a matter of right, prior to the filing of a responsive pleading. See Fed. R. Civ. P. 15(a). Once the complaint has been amended, a plaintiff must then seek leave of court or written consent of the adverse party before further amendment may be made. See id. The Court shall grant leave to amend “when justice so requires.” Id. The Court must be guided by Rule 15’s underlying purpose: to facilitate decision on the merits, rather than on the pleadings or technicalities. See Roth v. Garcia Marquez, 942 F.2d 617, 628 (9th Cir. 1991). Thus, requests for leave to amend should be granted with “extreme liberality.” Brown v. Stored Value Cards, Inc., 953 F.3d 567, 574 (9th Cir. 2020). When considering whether to grant leave to amend, district courts consider several factors including undue delay, the movant’s bad faith or dilatory motive, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party, and futility. Foman v. Davis, 371 U.S. 178, 182 (1962). “[P]rejudice to the opposing party carries the most weight” in the Court’s analysis. Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003). Plaintiffs state that they seek leave to amend based on information contained in a recently unsealed C3 derivative case from the Delaware Chancery Court, Pankow v. Siebel et al., C.A. No. 2024-0520-NAC (Del. Ch.). These proposed amendments include factual allegations regarding Defendant Siebel’s knowledge of C3’s access to Baker Hughes’ full 12,000-person salesforce, chart containing information required under 15 U.S.C. § 78u-4(b)(1). Mot. at 6. Defendants argue that Plaintiffs should not be given leave to amend because the proposed amendments are (1) futile and (2) unduly delayed and thus prejudicial. Opp at 10–18. The Court finds that the most important factor weighs in favor of granting leave to amend: there is no evidence that amendment would substantially prejudice Defendants.2 Defendants cite “delay and inefficiency” stemming from the need to “start over with new motions to dismiss” as the primary basis for prejudice, but Plaintiffs’ proposed amendments are narrow.3 Plaintiffs seek to materially modify two paragraphs and add one chart to a 60-page complaint. Defendants’ assertions that they will need to “start over” are simply unpersuasive. The proposed amendments would not “greatly alter[] the nature of the litigation,” nor would they “requir[e] defendants to . . . undertake[], at a late hour, an entirely new course of defense.” Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990). Although Defendants may need to modify their motions to dismiss, Plaintiffs’ amendments will not substantially reshape the parameters of the defense. See Carranza v. City of San Pablo, No. 4:20-CV-08443-SBA, 2022 WL 110647, at *6 (N.D. Cal. Jan. 12, 2022) (finding that no undue prejudice existed where the proposed complaint was “based largely on the same underlying facts as the prior pleadings”). Moreover, the parties have not begun discovery, which weighs against a finding of prejudice. See Lockheed Martin Corp. v. Network Sols., Inc., 194 F.3d 980, 986 (9th Cir. 1999) (“A need to reopen discovery and therefore delay the proceedings supports a district court’s finding of prejudice from a delayed motion to amend the complaint.”). “Prejudice is the touchstone of the inquiry under rule 15(a),” and in this case Defendants have not demonstrated substantial prejudice. Eminence, 316 F.3d at 2 Defendants’ arguments regarding undue delay and prejudice bleed together. Undue delay may occur when a party attempts to add a claim known to the party before it initiated an action or when a party unjustifiably waits to seek leave to amend after learning new information. See Jackson v. Bank of Haw., 902 F.2d 1385, 1388 (9th Cir. 1990); AmerisourceBergen Corp. v. Dialysist W., Inc., 465 F.3d 946, 953 (9th Cir. 2006). Neither circumstance is present here. Plaintiffs informed the Court that they would seek to amend their complaint less than one month after the Pankow complaint was unsealed. See Dkt. No. 178. This gap does not establish undue delay. Defendants also appear to argue that Plaintiffs should have included allegations regarding Baker Hughes’ alleged control of C3 in an earlier complaint. Opp. at 6–7. Adding less than a paragraph of additional factual material to a complaint is not equivalent to adding an entire claim, nor does it 1052; see DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 187 (9th Cir. 1987) (“The party opposing amendment bears the burden of showing prejudice.”). Defendants also argue th
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THE RECKSTIN FAMILY TRUST, et al., Case No. 22-cv-01413-HSG
Plaintiffs, ORDER GRANTING PLAINTIFFS’ MOTION FOR LEAVE TO AMEND, v. TERMINATING AS MOOT DEFENDANTS’ MOTIONS FOR C3.AI, INC., et al., JOINDER, AND TERMINATING AS MOOT DEFENDANTS’ PENDING Defendants. MOTIONS TO DISMISS
Re: Dkt. Nos. 167, 170, 171, 181, 187, 188
Pending before the Court is Plaintiffs’ motion for leave to file a Third Amended Class Action Complaint, Dkt. No. 181 (“Mot.”), Dkt. No. 186 (“Opp.”), Dkt. No. 189 (“Reply”).1 Also pending before the Court are Defendants’ motions to dismiss Plaintiffs’ Second Amended Class Action Complaint, Dkt. Nos. 167, 170, 171. The Court finds this matter appropriate for disposition without oral argument and deems it submitted. See Civil L.R. 7-1(b). For the reasons discussed below, the Court GRANTS Plaintiffs’ motion for leave to amend, Dkt. No. 181, and TERMINATES AS MOOT the pending motions to dismiss, Dkt. Nos. 167, 170, 171. I. BACKGROUND The parties are familiar with the facts alleged in this securities class action, which the Court recited in its order on the first set of motions to dismiss. See Dkt. No. 154. As relevant here, Plaintiffs filed an Amended Class Action Complaint against numerous defendants in February 2023, alleging that Defendant C3.ai, Inc. (“C3”) and several of its individual officers 1 Defendant Lorenzo Simonelli and Defendant Baker Hughes filed motions to join Defendant C3.ai, Inc.’s opposition to Plaintiffs’ motion for leave to amend. See Dkt. Nos. 187, 188. Because made false or misleading statements concerning the nature of C3’s joint venture with Defendant Baker Hughes. Dkt. No. 71. Defendants moved to dismiss, Dkt. Nos. 105, 109, and the Court granted in part and denied in part the C3 Defendants’ motion to dismiss and granted Baker Hughes’ motion to dismiss. See Dkt. No. 154. Plaintiffs then filed their Second Amended Class Action Complaint, Dkt. No. 167, and Defendants again moved to dismiss, Dkt. Nos. 167, 170, 171. Before the Court resolved the pending motions to dismiss, Plaintiffs sought leave to file a Third Amended Class Action Complaint, Dkt. No. 181. Rule 15(a) of the Federal Rules of Civil Procedure allows a plaintiff to amend the complaint once, as a matter of right, prior to the filing of a responsive pleading. See Fed. R. Civ. P. 15(a). Once the complaint has been amended, a plaintiff must then seek leave of court or written consent of the adverse party before further amendment may be made. See id. The Court shall grant leave to amend “when justice so requires.” Id. The Court must be guided by Rule 15’s underlying purpose: to facilitate decision on the merits, rather than on the pleadings or technicalities. See Roth v. Garcia Marquez, 942 F.2d 617, 628 (9th Cir. 1991). Thus, requests for leave to amend should be granted with “extreme liberality.” Brown v. Stored Value Cards, Inc., 953 F.3d 567, 574 (9th Cir. 2020). When considering whether to grant leave to amend, district courts consider several factors including undue delay, the movant’s bad faith or dilatory motive, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party, and futility. Foman v. Davis, 371 U.S. 178, 182 (1962). “[P]rejudice to the opposing party carries the most weight” in the Court’s analysis. Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003). Plaintiffs state that they seek leave to amend based on information contained in a recently unsealed C3 derivative case from the Delaware Chancery Court, Pankow v. Siebel et al., C.A. No. 2024-0520-NAC (Del. Ch.). These proposed amendments include factual allegations regarding Defendant Siebel’s knowledge of C3’s access to Baker Hughes’ full 12,000-person salesforce, chart containing information required under 15 U.S.C. § 78u-4(b)(1). Mot. at 6. Defendants argue that Plaintiffs should not be given leave to amend because the proposed amendments are (1) futile and (2) unduly delayed and thus prejudicial. Opp at 10–18. The Court finds that the most important factor weighs in favor of granting leave to amend: there is no evidence that amendment would substantially prejudice Defendants.2 Defendants cite “delay and inefficiency” stemming from the need to “start over with new motions to dismiss” as the primary basis for prejudice, but Plaintiffs’ proposed amendments are narrow.3 Plaintiffs seek to materially modify two paragraphs and add one chart to a 60-page complaint. Defendants’ assertions that they will need to “start over” are simply unpersuasive. The proposed amendments would not “greatly alter[] the nature of the litigation,” nor would they “requir[e] defendants to . . . undertake[], at a late hour, an entirely new course of defense.” Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990). Although Defendants may need to modify their motions to dismiss, Plaintiffs’ amendments will not substantially reshape the parameters of the defense. See Carranza v. City of San Pablo, No. 4:20-CV-08443-SBA, 2022 WL 110647, at *6 (N.D. Cal. Jan. 12, 2022) (finding that no undue prejudice existed where the proposed complaint was “based largely on the same underlying facts as the prior pleadings”). Moreover, the parties have not begun discovery, which weighs against a finding of prejudice. See Lockheed Martin Corp. v. Network Sols., Inc., 194 F.3d 980, 986 (9th Cir. 1999) (“A need to reopen discovery and therefore delay the proceedings supports a district court’s finding of prejudice from a delayed motion to amend the complaint.”). “Prejudice is the touchstone of the inquiry under rule 15(a),” and in this case Defendants have not demonstrated substantial prejudice. Eminence, 316 F.3d at 2 Defendants’ arguments regarding undue delay and prejudice bleed together. Undue delay may occur when a party attempts to add a claim known to the party before it initiated an action or when a party unjustifiably waits to seek leave to amend after learning new information. See Jackson v. Bank of Haw., 902 F.2d 1385, 1388 (9th Cir. 1990); AmerisourceBergen Corp. v. Dialysist W., Inc., 465 F.3d 946, 953 (9th Cir. 2006). Neither circumstance is present here. Plaintiffs informed the Court that they would seek to amend their complaint less than one month after the Pankow complaint was unsealed. See Dkt. No. 178. This gap does not establish undue delay. Defendants also appear to argue that Plaintiffs should have included allegations regarding Baker Hughes’ alleged control of C3 in an earlier complaint. Opp. at 6–7. Adding less than a paragraph of additional factual material to a complaint is not equivalent to adding an entire claim, nor does it 1052; see DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 187 (9th Cir. 1987) (“The party opposing amendment bears the burden of showing prejudice.”). Defendants also argue that Plaintiffs’ proposed amendments are futile because they “lack necessary foundation,” are “speculative” and do not remedy the Second Amended Class Action Complaint’s defects. Leave to amend should be denied as futile when “no set of facts can be proved under the amendment to the pleadings that would constitute a valid and sufficient claim or defense.” Missouri ex rel. Koster v. Harris, 847 F.3d 646, 656 (9th Cir. 2017). Denial of leave to amend based on futility is rare. See Netbula, LLC v. Distinct Corp., 212 F.R.D. 534, 539 (N.D. Cal. 2003). In general, “courts will defer consideration of challenges to the merits of a proposed amended pleading until after leave to amend is granted and the amended pleading is filed.” Id. The parties dispute whether Plaintiffs’ proposed amendments remedy the pleading deficiencies that the Court previously identified. See Dkt. No. 154. For example, the parties disagree as to whether allegations that Defendant Siebel participated in a Board of Directors meeting and viewed a particular PowerPoint presentation would remedy Plaintiffs’ scienter pleading deficiencies. Mot. at 13; Opp. at 12. Defendants argue, in part, that Plaintiffs’ proposed amendment would be futile because Plaintiffs “plead no supporting facts that the slide, or even the PowerPoint containing it, were actually presented, much less that the board discussed the fragment they highlight.” Opp. at 12. This argument goes to the strength of the parties’ eventual evidence, not the futility of amendment. See Allen v. Bayshore Mall, No. 12CV02368JSTJST, 2013 WL 6441504, at *5 (N.D. Cal. Dec. 9, 2013) (holding that “[w]hether Defendants had knowledge of the letters or had a reasonable belief that the Mall’s ceiling did not present a falling hazard” were “issues for the trier of fact.”). Since “[t]he merits or facts of a controversy are not properly decided in a motion for leave to amend and should instead be attacked by a motion to dismiss for failure to state a claim or for summary judgment,” the Court will not deny leave to amend here on futility grounds. LiveCareer Ltd. v. Su Jia Techs. Ltd., No. 14-CV-03336-JST, 2015 WL 4089800, at *3 (N.D. Cal. July 2, 2015). “[T]here exists a presumption under Rule 15(a) in favor of granting leave to amend,” 1 liberality,” Brown, 953 F.3d at 574. Defendants will have the opportunity to challenge the 2 veracity and strength of the amended allegations, but the Court finds that Rule 15’s liberal 3 standard and the Rule 15 factors counsel in favor of allowing amendment under these 4 circumstances. 5 IV. CONCLUSION 6 The Court GRANTS Plaintiffs’ motion for leave to file a Third Amended Class Action 7 Complaint, Dkt. No. 181. Defendants’ motions to dismiss Plaintiffs’ Second Amended Class 8 Action Complaint, Dkt. Nos. 167, 170, 171, are TERMINATED as MOOT in light of Plaintiffs’ 9 Third Amended Class Action Complaint. Defendants’ motions for joinder, Dkt. Nos. 187, 188, 10 are also TERMINATED AS MOOT. Plaintiffs are DIRECTED to file their Third Amended 11 Class Action Complaint as a separate docket entry by February 14, 2025. The parties are directed 12 to meet and confer regarding a briefing schedule for any renewed motion to dismiss, and to file a 13 stipulation and proposed order setting out the agreed-upon briefing schedule and proposed hearing 14 date by February 20, 2025.
a 16 IT IS SO ORDERED. 17 |) Dated: — 2/13/2025
HAYWOOD S. GILLIAM, JR. 19 United States District Judge 20 21 22 23 24 25 26 27 28