QEMQ, Inc. v. Geekland USA ( 2021 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 QEMP, INC. dba KELKOM, No. 2:20-CV-02013-MCE-JDP 12 Plaintiff, 13 v. MEMORANDUM AND ORDER 14 GEEKLAND USA LLC; SIBO CORP., 15 Defendants. 16 17 Through this action, Plaintiff Qemp, Inc. (“Plaintiff”) seeks relief from Defendants 18 Geekland USA LLC (“Geekland”) and Sibo Corp. (“Sibo”) (collectively “Defendants”) 19 arising from a business agreement between the parties. Specifically, Plaintiff alleges 20 four causes of action against Defendants: breach of contract, breach of implied covenant 21 of good faith and dealing, fraud, and negligent misrepresentation. Presently before the 22 Court is Geekland’s Motion to Dismiss, or in the alternative, Motion to Change Venue.1 23 ECF No. 5. In opposition, Plaintiff argues, among other things, that it should be afforded 24 leave to amend to address any jurisdictional defects. ECF. No. 8. For the reasons set 25 forth below, Plaintiff’s request for leave to amend is GRANTED and Defendant’s Motion 26 is DENIED as moot.2 27 1 Sibo has not yet appeared in this action. 2 Because oral argument will not be of material assistance, the Court ordered this matter 28 submitted on the briefs. E.D. Cal. Local R. 230(g). Min. Order, Dec. 22, 2020, ECF. No. 6. 1 BACKGROUND3 2 3 Plaintiff is a Delaware Corporation doing business in Sacramento County, 4 California. Plaintiff alleges that Defendant Geekland is a limited liability organization 5 organized and existing in California, doing business in Sacramento County, California. 6 Defendant Sibo is a foreign corporation doing business in Sacramento County, 7 California. Defendants have a longstanding business relationship. 8 According to Plaintiff, in or about 2016, it entered an agreement with a Defendant4 9 to provide technology for a product Plaintiff was developing. Plaintiff purchased 10 products from Defendant between 2016-2019. Many of those products purportedly 11 failed, and Defendant refused to provide effective repair or replacement. Plaintiff was 12 nonetheless still liable to its clients for the products, and it lost future sales and suffered 13 damage to its reputation. It thus initiated this action that Defendants’ now move to 14 dismiss. Because the Court finds Plaintiff’s request for leave to amend persuasive, it 15 addresses only that argument below.5 16 17 ANALYSIS 18 19 Generally, a motion to amend is subject to Rule 15(a) of the Federal Rules of Civil 20 Procedure,6 which provides that “[t]he court should freely give leave [to amend] when 21 22 3 The following recitation of facts is taken, at times verbatim, from Plaintiff’s Complaint. This Court acknowledges that some of these assertions may be in dispute. 23 4 Plaintiff’s Complaint lists two defendants: Geekland and Sibo. However, the listed causes of 24 action include allegations against a non-descript “Defendant.” Plaintiff is advised to clarify in its amended pleading which Defendant is subject to which allegations and to utilize the term “Defendants” if referring to 25 both. 5 Plaintiff’s decision to not file this as a separate motion for leave to amend is acceptable. See, 26 e.g., Cook, Perkiss & Liehe, Inc. v. N. California Collection Serv. Inc., 911 F.2d 242, 246-47 (9th Cir. 1990). 27 6 All further references to “Rule” or “Rules” are to the Federal Rules of Civil Procedure unless 28 otherwise noted. 1 justice so requires.” FED. R. CIV. P. 15(a)(2). However, “[o]nce the district court ha[s] 2 filed a pretrial scheduling order pursuant to Federal Rule of Civil Procedure 16[,] which 3 establishe[s] a timetable for amending pleadings[,] that rule’s standards control[].” 4 Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 607-08 (9th Cir. 1992). 5 Rule 16(b) requires a party seeking leave to amend to demonstrate “good cause” 6 and obtain the judge’s consent. FED. R. CIV. P. 16(b)(4). “Unlike Rule 15(a)’s liberal 7 amendment policy which focuses on the bad faith of the party seeking to interpose an 8 amendment and the prejudice to the opposing party, Rule 16(b)' s ‘good cause’ standard 9 primarily considers the diligence of the party seeking the amendment.” Johnson, 975 10 F.2d at 609. “Although the existence or degree of prejudice to the party opposing the 11 modification might supply additional reasons to deny a motion, the focus of the inquiry is 12 upon the moving party’s reasons for seeking modification.” Id. 13 If good cause is shown, the party must then demonstrate that the amendment is 14 proper under Rule 15. See id. at 608 (citing Forstmann v. Culp, 114 F.R.D. 83, 85 15 (M.D.N.C.1987)); accord Adams v. City of Indianapolis, 742 F.3d 720, 733-34 (7th Cir. 16 2014); Sw. Bell Tel. Co. v. City of El Paso, 346 F.3d 541, 546 (5th Cir. 2003). Under 17 Rule 15(a), leave to amend “generally shall be denied only upon showing of bad faith, 18 undue delay, futility, or undue prejudice to the opposing party.” Chudacoff v. Univ. Med. 19 Ctr. of S. Nevada, 649 F.3d 1143, 1152 (9th Cir. 2011). 20 A. Rule 16 21 Because the Court already issued an Initial Pretrial Scheduling Order pursuant to 22 Rule 16, that rule’s “good cause” standard applies. Plaintiff was diligent in seeking 23 amendment, making its request once it was on notice of Geekland’s pending arguments 24 and when this case was in its infancy. Moreover, Plaintiff acknowledges that the original 25 Complaint may have included “inartful pleading” and assures this Court that it will 26 provide an adequate factual basis to demonstrate subject matter jurisdiction under 28 27 U.S.C. § 1332(a). The alleged existence of a business agreement spanning several 28 years would tend to suggest that Plaintiff can plausibly reach the required amount in 1 controversy. Plaintiff additionally provides sufficient facts indicating it may be able to 2 establish personal jurisdiction. Opp’n at 2-3. Finally, Plaintiff avers that it may be able to 3 “more clearly plead its claims.”. Opp’n at 3-4; see FED. R. CIV. P. 8(a)(2). 4 While the focus of this analysis is on Plaintiff, the risk of prejudice to Defendant 5 Geekland also supports a finding of good cause. See Johnson, 975 F.2d at 609. Here, 6 the risk of prejudice is low. Granting Plaintiff leave to amend does not remove 7 Defendant Geekland’s ability to renew its current arguments regarding possible defects – 8 e.g., lack of subject matter and personal jurisdiction – at a later time. This Court is also 9 influenced by the fact that this case, as indicated, was only filed in October 2020, and 10 remains in the early stages of litigation. Accordingly, Plaintiff has adequately 11 demonstrated good cause under Rule 16(b). 12 B. Rule 15 13 Because good cause has been shown, the Court must evaluate Plaintiff’s request 14 to amend the Complaint in light of Rule 15. See Johnson, 975 F.2d at 608. The 15 decision to grant leave to amend is within the discretion of the district court. Leadsinger, 16 Inc. v. BMG Music Publ’g., 512 F.3d 522, 532 (9th Cir.2008). 17 Defendant Geekland avers that Plaintiff has failed to demonstrate in good faith 18 that the amount in controversy exceeds $75,000 and accurately notes that Plaintiff has 19 not provided an amount in controversy to date. Reply at 2. It further contends that 20 Plaintiff has not established personal jurisdiction. Reply at 2. However, while perhaps 21 an error in pleading, there is no demonstration of bad faith, undue delay, futility, or 22 undue prejudice. For example, this Court does not have sufficient facts to determine that 23 allowing leave to amend would be futile in reaching the required amount in controversy. 24 Regardless, as noted above, Defendant Geekland retains the ability to make this 25 argument, if applicable, following the filing of an amended complaint. 26 Defendant Geekland further contends that Plaintiff failed to demonstrate that this 27 Court has personal jurisdiction over Defendant and that it has chosen and improper 28 forum. The Court applies the same standard of bad faith, undue delay, futility, or undue 1 | prejudice, and concludes none of these preclude amendment. On this record the Court 2 || cannot find that Plaintiff is wholly unable to establish the propriety of pursuing this action 3 | in this forum. Because it appears Plaintiff may be able to plead a set of facts sufficient to 4 | establish subject matter jurisdiction, personal jurisdiction, proper forum, and the alleged 5 || causes of action, Plaintiff will be afforded the opportunity to amend its complaint. This is 6 || in Keeping with Rule 15(a)(2)’s mandate to “freely give leave when justice so requires.” 7 | Plaintiff's request is therefore GRANTED. 8 9 CONCLUSION 10 11 For the reasons set forth above, Plaintiff's request to amend the complaint is 12 | GRANTED. Opp’n, ECF No. 8. Defendant Geekland’s Motion to Dismiss is DENIED as 13 || moot. Mot. to Dismiss, ECF No. 5. Plaintiff shall file a First Amended Complaint within 14 | twenty (20) days from the date of this memorandum and order is electronically filed. If 15 || no amended complaint is timely filed, this action will be dismissed with prejudice 16 || pursuant to Federal Rule of Civil Procedure 41(b) upon no further notice to the parties. 17 IT IS SO ORDERED. 18 19 | Dated: March 3, 2021 = Mater LEK Whig { AX Xo - " SENIOR UNITED STATES DISTRICT JUDGE 22 23 24 25 26 27 28