1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 WORKPLACE TECHNOLOGIES Case No.: 18cv1927 JM (MSB) RESEARCH, INC., 12
Plaintiff, 13 v. ORDER ON MOTION FOR LEAVE 14 TO FILE FOURTH AMENDED PROJECT MANAGEMENT 15 COMPLAINT INSTITUTE, INC., 16 Defendant. 17 PROJECT MANAGEMENT 18 INSTITUTE, INC., 19 Counter-Claimant, 20 v. 21 WORKPLACE TECHNOLOGIES RESEARCH, INC., 22 Counter-Defendant. 23
24 Workplace Technologies Research, Inc. (“WTRI”) moves for leave to file a Fourth 25 Amended Complaint under Federal Rules of Civil Procedure 16(b) and 15(a). (Doc. No. 26 97.) Project Management Institute, Inc. (“PMI”) opposes. (Doc. No. 99.) The motion has 27 been briefed and is suitable for submission without oral argument in accordance with Civil 28 Local Rule 7.1(d)(1). For the below reasons, the motion is DENIED. 1 I. BACKGROUND 2 As discussed in the court’s prior orders, this action arises out of an unsuccessful 3 endeavor to jointly develop software. On September 8, 2015, PMI and WTRI executed a 4 “Development Agreement” providing that WTRI would develop software in collaboration 5 with PMI for a payment to WTRI of up to $4,000,000. The Agreement envisioned five 6 initial stages of software development – “Alpha 1” through “Alpha 5.” If the final Alpha 7 5 version met all “Acceptance Criteria” and PMI accepted the Alpha 5 software, WTRI 8 agreed to develop a “Charlie” software. 9 After allegedly failing to perform its obligations under the Development Agreement, 10 PMI demanded a pilot study to assess the marketability of the software before it would 11 move forward with its development. On November 30, 2016, the parties amended the 12 Development Agreement to provide that if PMI rejected the Alpha 5 software and retained 13 ownership of the software, the parties would execute a Services Agreement in lieu of 14 monetary payment to WTRI. On December 2, 2016, PMI informed WTRI it would 15 exercise its right to reject the Alpha 5 software and retain ownership. On December 15, 16 2016, the parties executed the Services Agreement memorializing the parties’ agreement 17 to perform a pilot study of the software. WTRI alleges PMI then failed to perform its 18 obligations under the Services Agreement. 19 WTRI filed this action on August 20, 2018. On three separate occasions, this court 20 previously dismissed WTRI’s fraud claims. (Doc. Nos. 24, 32, 42.) The first time, the 21 court found WTRI’s claim for fraudulent misrepresentation failed to satisfy Rule 9(b) 22 because, under Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003), 23 WTRI failed to allege the “who, what, when, where, and how” of the alleged 24 misrepresentations that (1) “PMI promised to accelerate development of the Alpha 25 software toward completion,” and (2) PMI “intentionally misrepresent[ed] its intent to 26 perform under the Development Agreement and Service Agreement.” (Doc. No. 24 at 23.) 27 The second time, the court found that WTRI again failed to provide specificity as to the 28 alleged misrepresentations, and that WTRI’s mixed references to alleged 1 misrepresentations, concealment, and inducement left the court guessing at the precise 2 conduct WTRI alleged was fraud. (Doc. No. 32 at 14.) 3 The third and final time, the court found that WTRI provided some additional 4 specificity as to when the fraudulent statements were made, who made the statements, and 5 what was said, but failed to clarify whether the allegedly fraudulent conduct constituted 6 fraudulent misrepresentation, concealment, or inducement. (Doc. No. 42 at 5.) The court 7 also found that WTRI failed to plead that PMI had a duty to disclose the information it 8 allegedly concealed, and that PMI had intent to defraud. (Id. at 5.) The court therefore 9 dismissed, without leave to amend, WTRI’s fraud claim. (Id. at 9.) 10 II. LEGAL STANDARDS 11 The granting or denial of leave to amend is within the discretion of the district court. 12 Foman v. Davis, 371 U.S. 178, 182 (1962). Generally, courts may grant leave to amend 13 whenever “justice so requires.” Fed. R. Civ. P. 15(a)(2). Prior to the cutoff date for the 14 amendment of pleadings, requests for leave to amend should be granted with “extreme 15 liberality.” Moss v. U.S. Secret Service, 572 F.3d 962, 972 (9th Cir. 2009). Reasons for 16 denying a motion for leave to amend include undue delay, bad faith, futility of amendment, 17 and undue prejudice to the opposing party. Foman, 371 U.S. at 182. When a party seeks 18 to amend a pleading after the cutoff date, however, the liberal standard of Rule 15 no longer 19 governs. See Johnson v. Mammoth Recreations, 975 F.2d 604, 607-08 (9th Cir. 1992). 20 Instead, the moving party must satisfy the good cause requirement of Rule 16(b)(4), which 21 provides that “[a] schedule may be modified only for good cause and with the judge’s 22 consent.” “Unlike Rule 15(a)’s liberal amendment policy which focuses on the bad faith 23 of the party seeking to interpose an amendment and the prejudice to the opposing party, 24 Rule 16(b)(4)’s ‘good cause’ standard primarily considers the diligence of the party 25 seeking the amendment.” Johnson, 975 F.2d at 609. 26 III. DISCUSSION 27 WTRI has not shown good cause under Rule 16(b)(4) to amend the scheduling order 28 based on its desired amendment to its Third Amended Complaint (“TAC”). WTRI seeks 1 to amend its TAC by adding claims for fraudulent misrepresentation and fraudulent 2 inducement. (Doc. No. 97-5 at ¶¶ 208-33.) As noted above, on multiple occasions, the 3 court previously dismissed WTRI’s fraud claims under Rule 12(b)(6). (Doc. Nos. 24, 32, 4 42.) Most recently, the court dismissed WTRI’s fraud claims without leave to amend, but 5 stated “[a]fter discovery commences . . . . WTRI is free to request leave to amend its 6 Complaint, as consistent with the Federal Rules of Civil Procedure and Local Rules, based 7 on evidence obtained through discovery.” (Doc. No. 42 at 9.) 8 WTRI argues that fact discovery in this case has “confirmed” the basis for its fraud 9 claims. (Doc. No. 97-1 at 4.) In its motion, however, WTRI does not identify the evidence 10 in the record that “confirmed” the basis for its fraud claims, and WTRI does not explain 11 why the fraud claims it seeks to bring now are distinguishable from those it previously 12 brought. Rather, WTRI merely states that its allegations regarding PMI’s fraudulent 13 misrepresentation were “garnered from deposition testimony of Messrs. Carter-Bey, 14 Weiss, and Labrador, as well as PMI internal communications produced shortly before the 15 end of fact discovery.”1 (Doc. No. 97-1 at 4.) Instead of citing, or even discussing, the 16 specific deposition testimony or documents upon which it relies to support its desired 17 amendments, WTRI cites the amendments themselves. (See Doc. No. 97-1 at 8.) 18 19
20 21 1 The specific deposition testimony and the document upon which WTRI relies to support its fraud claims was identified, for the first time, in WTRI’s reply. (Doc. No. 103 at 3.) 22 New information provided in a reply is “improper” and should be struck. See Tovar v. 23 U.S. Postal Serv., 3 F.3d 1271, 1273 n.3 (9th Cir.
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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 WORKPLACE TECHNOLOGIES Case No.: 18cv1927 JM (MSB) RESEARCH, INC., 12
Plaintiff, 13 v. ORDER ON MOTION FOR LEAVE 14 TO FILE FOURTH AMENDED PROJECT MANAGEMENT 15 COMPLAINT INSTITUTE, INC., 16 Defendant. 17 PROJECT MANAGEMENT 18 INSTITUTE, INC., 19 Counter-Claimant, 20 v. 21 WORKPLACE TECHNOLOGIES RESEARCH, INC., 22 Counter-Defendant. 23
24 Workplace Technologies Research, Inc. (“WTRI”) moves for leave to file a Fourth 25 Amended Complaint under Federal Rules of Civil Procedure 16(b) and 15(a). (Doc. No. 26 97.) Project Management Institute, Inc. (“PMI”) opposes. (Doc. No. 99.) The motion has 27 been briefed and is suitable for submission without oral argument in accordance with Civil 28 Local Rule 7.1(d)(1). For the below reasons, the motion is DENIED. 1 I. BACKGROUND 2 As discussed in the court’s prior orders, this action arises out of an unsuccessful 3 endeavor to jointly develop software. On September 8, 2015, PMI and WTRI executed a 4 “Development Agreement” providing that WTRI would develop software in collaboration 5 with PMI for a payment to WTRI of up to $4,000,000. The Agreement envisioned five 6 initial stages of software development – “Alpha 1” through “Alpha 5.” If the final Alpha 7 5 version met all “Acceptance Criteria” and PMI accepted the Alpha 5 software, WTRI 8 agreed to develop a “Charlie” software. 9 After allegedly failing to perform its obligations under the Development Agreement, 10 PMI demanded a pilot study to assess the marketability of the software before it would 11 move forward with its development. On November 30, 2016, the parties amended the 12 Development Agreement to provide that if PMI rejected the Alpha 5 software and retained 13 ownership of the software, the parties would execute a Services Agreement in lieu of 14 monetary payment to WTRI. On December 2, 2016, PMI informed WTRI it would 15 exercise its right to reject the Alpha 5 software and retain ownership. On December 15, 16 2016, the parties executed the Services Agreement memorializing the parties’ agreement 17 to perform a pilot study of the software. WTRI alleges PMI then failed to perform its 18 obligations under the Services Agreement. 19 WTRI filed this action on August 20, 2018. On three separate occasions, this court 20 previously dismissed WTRI’s fraud claims. (Doc. Nos. 24, 32, 42.) The first time, the 21 court found WTRI’s claim for fraudulent misrepresentation failed to satisfy Rule 9(b) 22 because, under Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003), 23 WTRI failed to allege the “who, what, when, where, and how” of the alleged 24 misrepresentations that (1) “PMI promised to accelerate development of the Alpha 25 software toward completion,” and (2) PMI “intentionally misrepresent[ed] its intent to 26 perform under the Development Agreement and Service Agreement.” (Doc. No. 24 at 23.) 27 The second time, the court found that WTRI again failed to provide specificity as to the 28 alleged misrepresentations, and that WTRI’s mixed references to alleged 1 misrepresentations, concealment, and inducement left the court guessing at the precise 2 conduct WTRI alleged was fraud. (Doc. No. 32 at 14.) 3 The third and final time, the court found that WTRI provided some additional 4 specificity as to when the fraudulent statements were made, who made the statements, and 5 what was said, but failed to clarify whether the allegedly fraudulent conduct constituted 6 fraudulent misrepresentation, concealment, or inducement. (Doc. No. 42 at 5.) The court 7 also found that WTRI failed to plead that PMI had a duty to disclose the information it 8 allegedly concealed, and that PMI had intent to defraud. (Id. at 5.) The court therefore 9 dismissed, without leave to amend, WTRI’s fraud claim. (Id. at 9.) 10 II. LEGAL STANDARDS 11 The granting or denial of leave to amend is within the discretion of the district court. 12 Foman v. Davis, 371 U.S. 178, 182 (1962). Generally, courts may grant leave to amend 13 whenever “justice so requires.” Fed. R. Civ. P. 15(a)(2). Prior to the cutoff date for the 14 amendment of pleadings, requests for leave to amend should be granted with “extreme 15 liberality.” Moss v. U.S. Secret Service, 572 F.3d 962, 972 (9th Cir. 2009). Reasons for 16 denying a motion for leave to amend include undue delay, bad faith, futility of amendment, 17 and undue prejudice to the opposing party. Foman, 371 U.S. at 182. When a party seeks 18 to amend a pleading after the cutoff date, however, the liberal standard of Rule 15 no longer 19 governs. See Johnson v. Mammoth Recreations, 975 F.2d 604, 607-08 (9th Cir. 1992). 20 Instead, the moving party must satisfy the good cause requirement of Rule 16(b)(4), which 21 provides that “[a] schedule may be modified only for good cause and with the judge’s 22 consent.” “Unlike Rule 15(a)’s liberal amendment policy which focuses on the bad faith 23 of the party seeking to interpose an amendment and the prejudice to the opposing party, 24 Rule 16(b)(4)’s ‘good cause’ standard primarily considers the diligence of the party 25 seeking the amendment.” Johnson, 975 F.2d at 609. 26 III. DISCUSSION 27 WTRI has not shown good cause under Rule 16(b)(4) to amend the scheduling order 28 based on its desired amendment to its Third Amended Complaint (“TAC”). WTRI seeks 1 to amend its TAC by adding claims for fraudulent misrepresentation and fraudulent 2 inducement. (Doc. No. 97-5 at ¶¶ 208-33.) As noted above, on multiple occasions, the 3 court previously dismissed WTRI’s fraud claims under Rule 12(b)(6). (Doc. Nos. 24, 32, 4 42.) Most recently, the court dismissed WTRI’s fraud claims without leave to amend, but 5 stated “[a]fter discovery commences . . . . WTRI is free to request leave to amend its 6 Complaint, as consistent with the Federal Rules of Civil Procedure and Local Rules, based 7 on evidence obtained through discovery.” (Doc. No. 42 at 9.) 8 WTRI argues that fact discovery in this case has “confirmed” the basis for its fraud 9 claims. (Doc. No. 97-1 at 4.) In its motion, however, WTRI does not identify the evidence 10 in the record that “confirmed” the basis for its fraud claims, and WTRI does not explain 11 why the fraud claims it seeks to bring now are distinguishable from those it previously 12 brought. Rather, WTRI merely states that its allegations regarding PMI’s fraudulent 13 misrepresentation were “garnered from deposition testimony of Messrs. Carter-Bey, 14 Weiss, and Labrador, as well as PMI internal communications produced shortly before the 15 end of fact discovery.”1 (Doc. No. 97-1 at 4.) Instead of citing, or even discussing, the 16 specific deposition testimony or documents upon which it relies to support its desired 17 amendments, WTRI cites the amendments themselves. (See Doc. No. 97-1 at 8.) 18 19
20 21 1 The specific deposition testimony and the document upon which WTRI relies to support its fraud claims was identified, for the first time, in WTRI’s reply. (Doc. No. 103 at 3.) 22 New information provided in a reply is “improper” and should be struck. See Tovar v. 23 U.S. Postal Serv., 3 F.3d 1271, 1273 n.3 (9th Cir. 1993); see also Provenz v. Miller, 102 F.3d 1478, 1483 (9th Cir. 1996) (new evidence raised in a reply should not be considered 24 without giving the non-moving party an opportunity to respond). Moreover, WTRI does 25 not explain, nor is it obvious from the evidence itself, why the testimony or document suggests a “new” basis for WTRI’s previously dismissed fraud claims. Accordingly, PMI 26 moves the court to strike and disregard the evidence as untimely and irrelevant. (Doc. No. 27 108.) Because the court has reviewed and considered the testimony and document upon which WTRI replies, and the evidence not determinative of the instant order, PMI’s Motion 28 1 As pointed out by PMI, however, these “new” allegations are materially the same as 2 WTRI’s previous allegations that, prior to signing the Services Agreement, PMI decided 3 that WTRI would not be involved in future development of the software. (See Doc. No. 4 99 at 14-15.) Although WTRI argues in its reply that its new fraud allegations are not 5 materially “identical” to its previously dismissed fraud allegations because it now alleges 6 that “PMI lied to WTRI while negotiating the Services Agreement, telling WTRI that 7 WTRI would be involved in future development of the PAL product and that work on the 8 Proteum portion of the PAL project would continue,” WTRI does not explain why this 9 allegation differs from its previously dismissed allegations. (See Doc. No. 103 at 4.) For 10 example, in its TAC, WTRI alleged that “[p]rior to signing the Services Agreement, PMI 11 had already decided that it would not allow WTRI to participate in the development of the 12 Agile product despite telling WTRI that it would be involved.” (Doc. No. 37 ¶ 197.) Now, 13 WTRI alleges that “[p]rior to signing the Services Agreement, PMI had already decided 14 that it would not allow WTRI to participate in the source code development of the PAL 15 product despite telling WTRI that it would be involved.” (Doc. No. 97-5 ¶¶ 211, 222.) 16 Based on the argument made by WTRI in its motion, as well as the court’s previous 17 dismissals of WTRI’s fraud claims, WTRI has not shown good cause under Rule 16(b)(4) 18 to amend the scheduling order. Although the good cause standard “primarily” considers 19 the diligence of the party seeking the amendment, “the focus of the inquiry is upon the 20 moving party’s reasons for seeking modification.” Johnson, 975 F.2d at 609. To the extent 21 WTRI was diligent in bringing the instant motion after the close of discovery, its reason 22 for seeking amendment is essentially that discovery has occurred, not that newly uncovered 23 evidence or a new admission by PMI confirms facts that were not previously alleged to 24 support claims that were not previously rejected. For the same reason, PMI has made a 25 strong showing that leave to amend under Rule 15(a) would be futile. See Bonin v. 26 Calderon, 59 F.3d 815, 845 (9th Cir. 1995) (“Futility of amendment can, by itself, justify 27 the denial of a motion for leave to amend.”); DCD Programs, Ltd. v. Leighton, 833 F.2d 28 183, 187 (9th Cir. 1987) (holding that a “strong showing” of any of the Foman factors, 1 including futility of amendment, may overcome the presumption in favor of granting leave 2 ||under Rule 15(a)); Klamath-Lake Pharm. Ass’n v. Klamath Med. Serv. Bureau, 701 F.2d 3 1276, 1293 (9th Cir. 1983) (“[F]utile amendments should not be permitted.”); see also 4 ||Foman, 371 U.S. at 182 (noting that the “repeated failure to cure deficiencies by 5 || amendments previously allowed” is appropriate grounds for denial of leave to amend under 6 15(a)). 7 IV. CONCLUSION 8 For the forgoing reasons, WTRI’s Motion for Leave to File Fourth Amended 9 || Complaint (Doc. No. 97) is DENIED. 10 IT IS SO ORDERED. 11 |} DATED: January 25, 2021 7. JEFF T. MILLER 7 States fie Judge 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28