BIAO WANG, et al., Case No. 21-cv-06028-PCP
Plaintiffs, ORDER GRANTING LEAVE TO v. AMEND
ZYMERGEN INC., et al., Re: Dkt. No. 234 Defendants.
Lead plaintiff Biao Wang has moved for leave to file a second amended complaint. Dkt. No. 234. For the reasons that follow that motion is granted. I. Background The current operative complaint in this case, Dkt. No. 78, was filed February 24, 2022. It includes a claim under Section 11 of the Securities Act against Zymergen, a group of individual defendants, and a group of underwriter defendants; as well as a claim under Section 15 of the Securities Act against the individual defendants and a third set of defendants, the controlling stockholders, which included a group of SoftBank parties,1 a group of DCVC parties,2 and a group of True Ventures parties.3 On November 29, 2022 the Court dismissed the Section 15 claim on the basis that there were not “sufficient allegations to suggest that the ‘Controlling Stockholders’ acted in concert.” Dkt. No. 162, at 4. That dismissal was with leave to amend: The Court ordered that “[a]ny amended complaint is due within 28 days,” but also directed that “if the plaintiffs wish
1 SVF Excalibur (Cayman) Limited; SVF Endurance (Cayman) Limited; and SoftBank Vision Fund (AIV M1) L.P. 2 Data Collective II, L.P. and DCVC Opportunity Fund, L.P. to proceed on this complaint, they can always seek leave to amend at a later stage if discovery reveals additional information relevant to the dismissed claims.” Id. Plaintiffs did not file an amended complaint within 28 days of that order. Shortly thereafter, the Court entered a scheduling order setting a deadline of December 21, 2023 to amend pleadings. Dkt. No. 167. On December 21, 2023—the amendment deadline—Mr. Wang filed the present motion for leave to file a second amended class action complaint. He attached a proposed complaint to his motion. The proposed complaint would replead the previously dismissed Section 15 claims against the three sets of controlling stockholders. Mr. Wang says the proposed additions are based on discovery obtained to date. The proposed complaint would also add claims against the investment management companies for the three sets of funds. The underwriter defendants do not oppose leave to amend. Dkt. No. 240. The individual defendants filed an opposition. Dkt. No. 244. The controlling stockholders who would be re-added as defendants filed motions to intervene for the limited purpose of opposing Mr. Wang’s motion for leave to amend. Dkt. Nos. 248, 250, 255. The Court granted these motions and accepted the controlling stockholders’ opposition briefs, Dkt. Nos. 292, 296, 299, to consider arguments specific to the motion for leave to amend that those parties would not be able to raise in a subsequent motion to dismiss. Dkt. No. 283. II. Legal Standard Rule 15 provides that for amendments not allowed as a matter of course “a party may amend its pleading only with the opposing party’s written consent or the court’s leave.” It directs that a “court should freely give leave when justice so requires.” The Ninth Circuit has counseled that “leave to amend should be granted with extreme liberality.” Brown v. Stored Value Cards, Inc., 953 F.3d 567, 574 (9th Cir. 2020) (cleaned up). The Court considers several factors in determining whether to permit amendment, 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.” Id. Of these, “prejudice to the opposing party carries the most weight.” Id. III. Analysis The defendants and would-be defendants who oppose leave to amend have not demonstrated the kind of delay, bad faith, or prejudice that would warrant not letting Mr. Wang amend his complaint given the liberal standard of Rule 15 and the Court’s previous order that specifically contemplated Mr. Wang re-adding the Section 15 claims based on discovery. Although the defendants also attack the merits of Mr. Wang’s proposed new claims and contend that amendment would be futile, their arguments will be better addressed in the context of a fully briefed motion to dismiss the second amended complaint. A. Delay The delay inquiry focuses on whether the party seeking to amend a pleading has waited unreasonably long to do so. It considers “whether the moving party knew or should have known the facts and theories raised by the amendment in the original pleading,” as well as the “delay between the time of obtaining a relevant fact and seeking a leave to amend.” AmerisourceBergen Corp. v. Dialysist W., Inc., 465 F.3d 946, 953 (9th Cir. 2006). None of the opposing parties argues that Mr. Wang knew or should have known the facts he proposes in his amendment at the time he filed his initial complaint. Instead, they argue that he unreasonably delayed seeking to amend his complaint after learning of new facts in discovery. Mr. Wang has obtained more than 1.6 million pages of documents in discovery, according to his counsel, including 500,000 pages produced after June 6, 2023 and 250,000 after November 23, 2023. Dkt. No. 310, at 2. Even assuming the revelations relevant to Mr. Wang’s proposed amendment were all produced on or before June 6, 2023, as at least the individual defendants argue, Dkt. No. 244, at 9, there is no indication that Mr. Wang unreasonably delayed in bringing his motion for leave to amend by December 2023, especially given the quantity of documents at issue. It is not necessarily unreasonable for a plaintiff to wait to see what further documents will be produced while discovery is ongoing, even after receiving some new information that may be relevant. Especially given the Court’s previous dismissal of the Section 15 claims, Mr. Wang cannot be faulted for waiting to gather as much additional information as possible before order specifically contemplated he could. Some of the opposing parties also argue that Mr. Wang’s proposed amendment will cause undue delay by requiring another round of briefing on another motion to dismiss. But this is not the kind of delay courts consider when determining whether to grant leave to amend under Rule 15. Amending pleadings will almost always result in some degree of prospective delay. This is part of the reason why Rule 16 requires the Court to set a deadline for amending pleadings. Here, though, Mr. Wang has specifically complied with that deadline and has not unreasonably delayed bringing his motion for leave to amend. B. Motive The Court can also consider a movant’s “bad faith or dilatory motive” in determining whether to grant leave to amend. Here, none of the opposing parties explicitly argues that Mr. Wang is acting in bad faith or out of motivation to delay this case. But some of the opposing parties assert that Mr. Wang’s motion may be motivated by additional strategic considerations. For example, SoftBank suggests that Mr. Wang’s motion “looks to be an effort to bring additional parties into the case to increase leverage or improve chances of financial recovery.” Dkt. No. 299, at 20. True Ventures put it more bluntly: “Plaintiff’s true motivation” is “to get at the ostensible deep pockets of Zymergen investors following the Company’s bankruptcy announcement.” Dkt. No. 296, at 21. That plaintiffs in a putative securities class action for damages may consider potential defendants’ ability to pay is permissible and unsurprising, and Rule 15 does not prohibit plaintiffs from thinking strategically when deciding whether to seek to amend a pleading. Moreover, SoftBank’s insinuation of bad faith from that the fact that Mr. Wang moved for leave to amend after Zymergen filed for bankruptcy falls particularly flat considering that the
Free access — add to your briefcase to read the full text and ask questions with AI
BIAO WANG, et al., Case No. 21-cv-06028-PCP
Plaintiffs, ORDER GRANTING LEAVE TO v. AMEND
ZYMERGEN INC., et al., Re: Dkt. No. 234 Defendants.
Lead plaintiff Biao Wang has moved for leave to file a second amended complaint. Dkt. No. 234. For the reasons that follow that motion is granted. I. Background The current operative complaint in this case, Dkt. No. 78, was filed February 24, 2022. It includes a claim under Section 11 of the Securities Act against Zymergen, a group of individual defendants, and a group of underwriter defendants; as well as a claim under Section 15 of the Securities Act against the individual defendants and a third set of defendants, the controlling stockholders, which included a group of SoftBank parties,1 a group of DCVC parties,2 and a group of True Ventures parties.3 On November 29, 2022 the Court dismissed the Section 15 claim on the basis that there were not “sufficient allegations to suggest that the ‘Controlling Stockholders’ acted in concert.” Dkt. No. 162, at 4. That dismissal was with leave to amend: The Court ordered that “[a]ny amended complaint is due within 28 days,” but also directed that “if the plaintiffs wish
1 SVF Excalibur (Cayman) Limited; SVF Endurance (Cayman) Limited; and SoftBank Vision Fund (AIV M1) L.P. 2 Data Collective II, L.P. and DCVC Opportunity Fund, L.P. to proceed on this complaint, they can always seek leave to amend at a later stage if discovery reveals additional information relevant to the dismissed claims.” Id. Plaintiffs did not file an amended complaint within 28 days of that order. Shortly thereafter, the Court entered a scheduling order setting a deadline of December 21, 2023 to amend pleadings. Dkt. No. 167. On December 21, 2023—the amendment deadline—Mr. Wang filed the present motion for leave to file a second amended class action complaint. He attached a proposed complaint to his motion. The proposed complaint would replead the previously dismissed Section 15 claims against the three sets of controlling stockholders. Mr. Wang says the proposed additions are based on discovery obtained to date. The proposed complaint would also add claims against the investment management companies for the three sets of funds. The underwriter defendants do not oppose leave to amend. Dkt. No. 240. The individual defendants filed an opposition. Dkt. No. 244. The controlling stockholders who would be re-added as defendants filed motions to intervene for the limited purpose of opposing Mr. Wang’s motion for leave to amend. Dkt. Nos. 248, 250, 255. The Court granted these motions and accepted the controlling stockholders’ opposition briefs, Dkt. Nos. 292, 296, 299, to consider arguments specific to the motion for leave to amend that those parties would not be able to raise in a subsequent motion to dismiss. Dkt. No. 283. II. Legal Standard Rule 15 provides that for amendments not allowed as a matter of course “a party may amend its pleading only with the opposing party’s written consent or the court’s leave.” It directs that a “court should freely give leave when justice so requires.” The Ninth Circuit has counseled that “leave to amend should be granted with extreme liberality.” Brown v. Stored Value Cards, Inc., 953 F.3d 567, 574 (9th Cir. 2020) (cleaned up). The Court considers several factors in determining whether to permit amendment, 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.” Id. Of these, “prejudice to the opposing party carries the most weight.” Id. III. Analysis The defendants and would-be defendants who oppose leave to amend have not demonstrated the kind of delay, bad faith, or prejudice that would warrant not letting Mr. Wang amend his complaint given the liberal standard of Rule 15 and the Court’s previous order that specifically contemplated Mr. Wang re-adding the Section 15 claims based on discovery. Although the defendants also attack the merits of Mr. Wang’s proposed new claims and contend that amendment would be futile, their arguments will be better addressed in the context of a fully briefed motion to dismiss the second amended complaint. A. Delay The delay inquiry focuses on whether the party seeking to amend a pleading has waited unreasonably long to do so. It considers “whether the moving party knew or should have known the facts and theories raised by the amendment in the original pleading,” as well as the “delay between the time of obtaining a relevant fact and seeking a leave to amend.” AmerisourceBergen Corp. v. Dialysist W., Inc., 465 F.3d 946, 953 (9th Cir. 2006). None of the opposing parties argues that Mr. Wang knew or should have known the facts he proposes in his amendment at the time he filed his initial complaint. Instead, they argue that he unreasonably delayed seeking to amend his complaint after learning of new facts in discovery. Mr. Wang has obtained more than 1.6 million pages of documents in discovery, according to his counsel, including 500,000 pages produced after June 6, 2023 and 250,000 after November 23, 2023. Dkt. No. 310, at 2. Even assuming the revelations relevant to Mr. Wang’s proposed amendment were all produced on or before June 6, 2023, as at least the individual defendants argue, Dkt. No. 244, at 9, there is no indication that Mr. Wang unreasonably delayed in bringing his motion for leave to amend by December 2023, especially given the quantity of documents at issue. It is not necessarily unreasonable for a plaintiff to wait to see what further documents will be produced while discovery is ongoing, even after receiving some new information that may be relevant. Especially given the Court’s previous dismissal of the Section 15 claims, Mr. Wang cannot be faulted for waiting to gather as much additional information as possible before order specifically contemplated he could. Some of the opposing parties also argue that Mr. Wang’s proposed amendment will cause undue delay by requiring another round of briefing on another motion to dismiss. But this is not the kind of delay courts consider when determining whether to grant leave to amend under Rule 15. Amending pleadings will almost always result in some degree of prospective delay. This is part of the reason why Rule 16 requires the Court to set a deadline for amending pleadings. Here, though, Mr. Wang has specifically complied with that deadline and has not unreasonably delayed bringing his motion for leave to amend. B. Motive The Court can also consider a movant’s “bad faith or dilatory motive” in determining whether to grant leave to amend. Here, none of the opposing parties explicitly argues that Mr. Wang is acting in bad faith or out of motivation to delay this case. But some of the opposing parties assert that Mr. Wang’s motion may be motivated by additional strategic considerations. For example, SoftBank suggests that Mr. Wang’s motion “looks to be an effort to bring additional parties into the case to increase leverage or improve chances of financial recovery.” Dkt. No. 299, at 20. True Ventures put it more bluntly: “Plaintiff’s true motivation” is “to get at the ostensible deep pockets of Zymergen investors following the Company’s bankruptcy announcement.” Dkt. No. 296, at 21. That plaintiffs in a putative securities class action for damages may consider potential defendants’ ability to pay is permissible and unsurprising, and Rule 15 does not prohibit plaintiffs from thinking strategically when deciding whether to seek to amend a pleading. Moreover, SoftBank’s insinuation of bad faith from that the fact that Mr. Wang moved for leave to amend after Zymergen filed for bankruptcy falls particularly flat considering that the original complaint included the same Section 15 claim against the controlling stockholder defendants. In short, there is no indication that Mr. Wang has brought this motion in bad faith. C. Prejudice The final consideration is prejudice to the opposing parties. Prejudice is more than the mere burden of having to defend against new claims. Rather, the “undue prejudice which a court lawsuit as a result of a change of tactics or theories on the part of the other part.” Jones v. PGA Tour, Inc., No. 22-CV-04486-BLF, 2023 WL 2173417, at *3 (N.D. Cal. Feb. 21, 2023). The opposing parties point to several forms of potential prejudice they argue warrants denying leave to amend. First, they point to the time and expense of litigating a motion to dismiss the new claim. But the fact that adding new claims to a complaint will require the defendants to defend against those claims on the merits does not constitute undue prejudice. The “liberality” required under Rule 15 “in granting leave to amend is not dependent on whether the amendment will add causes of action or parties.” DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987). Thus the fact that the controlling stockholders may choose to move to dismiss the Section 15 claims in the amended complaint cannot constitute prejudice. Next, the opposing parties point to both the need to catch up on discovery that has occurred to date and the fact that fact discovery is currently set to close on June 6, 2024. But the fact that the controlling stockholders, if added as defendants, would have to review the “voluminous” discovery produced to date is not prejudicial—like the burden of responding, this is simply part of the litigation process. As for prospective discovery, the opposing parties have not met their burden of demonstrating prejudice. There are still several months before the discovery cutoff—a deadline which the parties already agreed to extend once. See Dkt. No. 242. While some of the opposing parties say that completing the discovery they would want within the remaining discovery period would be “impracticable,” see Dkt. No. 292, at 7, they have not pointed to any information they would want to seek and explained why it would be difficult to obtain on the current schedule. Hypothetical prejudice cannot justify denying leave to amend. And if specific discovery challenges do arise later on, the parties may of course again move to modify the case schedule for good cause. Finally, the opposing parties point to the fact that a class has already been certified in this action without the controlling stockholders having had a chance to weigh in. Here, too, though, the objections are hypothetical and the opposing parties do not identify any particular problems they have with the currently certified class. Indeed, the original motion to certify that class was 1 In sum, the opposing parties have not demonstrated the sort of undue prejudice that would 2 warrant not granting Mr. Wang leave to amend the complaint. Leave must therefore be granted. 3 IV. Conclusion 4 Mr. Wang’s motion for leave to amend is granted for the reasons set forth above. The 5 February 29, 2024 hearing on that motion is vacated. Mr. Wang’s proposed second amended class 6 action complaint is deemed filed as of the date of this order. Mr. Wang shall refile the amended 7 complaint as a separate entry on the public docket within seven days of this order. 8 The February 29, 2024 Case Management Conference is also vacated. The parties are 9 ordered to meet and confer and file, by March 29, 2024, an updated Joint Case Management 10 Statement that proposes a full case schedule through trial. The parties shall also discuss briefing 11 schedules for any potential motions to dismiss the amended complaint, as well as the current 12 discovery cutoffs. The parties should either indicate their agreement on these topics and include 13 their proposals in the updated joint statement, or indicate their respective positions in the joint 14 statement and request that the Court hold a Case Management Conference.
a 16 IT IS SO ORDERED. 17 Dated: February 26, 2024 Zs. 19 Wt ly P. Casey Pitts 20 United States District Judge 21 22 23 24 25 26 27 28