Ever.Ag, LLC v. Milk Moovement, Inc. ( 2023 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- 11 12 DAIRY, LLC, a Delaware Limited No. 2:21-cv-02233 WBS AC Liability Company, 13 Plaintiff, 14 ORDER RE: MOTION FOR LEAVE TO v. AMEND COUNTERCLAIMS 15 MILK MOOVEMENT, INC., a foreign 16 Corporation, and MILK MOOVEMENT, LLC, a Delaware Limited 17 Liability Company, 18 Defendants. 19 20 ----oo0oo---- 21 Defendant Milk Moovement, LLC seeks leave to amend its 22 counterclaims to add counterclaims for: (1) conspiracy to 23 monopolize in violation of § 2 of the Sherman Act, 15 U.S.C. § 2; 24 (2) monopolization and attempted monopolization in violation of § 25 2 of the Sherman Act, 15 U.S.C. § 2; (3) unlawful restraint of 26 trade in violation of § 1 of the Sherman Act, 15 U.S.C. § 1; (4) 27 unlawful restraint of trade in violation of the Cartwright Act, 28 Cal. Bus. Prof. Code §§ 16700 et seq.; (5) violation of § 7 of 1 the Clayton Act, 15 U.S.C. § 18; and (6) unfair competition, Cal. 2 Bus. & Prof. Code §§ 17200 et seq. (See Mot. to Am. Countercls. 3 (Docket No. 204).) 4 Because the court has issued a pretrial scheduling 5 order in this matter, it must look first to Rule 16(b)’s “good 6 cause” standard and then to Rule 15(a)(2) in ruling on the 7 motion. See Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 8 607-08 (9th Cir. 1992). Accordingly, the relevant inquiry 9 includes whether the proposed amendment (1) would cause prejudice 10 to the opposing party, (2) is sought in bad faith, (3) creates 11 undue delay, or (4) is futile. Chudacoff v. Univ. Med. Ctr. of 12 S. Nev., 649 F.3d 1143, 1153 (9th Cir. 2011) (citing Foman v. 13 Davis, 371 U.S. 178, 182 (1962)).1 14 Here, plaintiff argues that allowing the amendment 15 would “radically prejudice” Dairy by exploding what is 16 essentially a trade secrets case into a full-blown antitrust 17 action. (Opp’n at 3 (Docket No. 224).) Specifically, Dairy 18 contends that the new counterclaims would result in the need for 19 additional discovery and necessitate extension of existing 20 discovery deadlines, would “balloon” the scope of litigation, and 21 could not be accommodated by the current case schedule, which has 22 trial currently scheduled for November 7, 2023. (Id. at 27.) 23 However, “[t]he fact that the amended counterclaim may cause more 24 work does not constitute prejudice.”). Fru-Con Constr. Corp. v. 25 1 “Because Rule 16(b)’s ‘good cause’ inquiry essentially incorporates the first three factors, if a court finds that good 26 cause exists, it should then deny a motion for leave to amend 27 only if such amendment would be futile.” J & J Sports Prods., Inc. v. Maravilla, 2:12-cv-02899 WBS EFB, 2013 WL 4780764, at *1 28 (E.D. Cal. Sept. 5, 2013). 1 Sacramento Mun. Util. Dist., No. CIV. S-05-583 LKK GGH, 2006 WL 2 3733815, at *5 (E.D. Cal. Dec. 15, 2006) (citation omitted). 3 This is a case that is going to be hotly litigated, 4 whether the court allows the amended counterclaims or not. The 5 parties have already filed five dispositive motions, including a 6 motion for a temporary restraining order (Docket No. 8), a motion 7 for a preliminary injunction (Docket No. 31), a motion to dismiss 8 the complaint (Docket No. 55), and two motions to dismiss 9 counterclaims (Docket Nos. 83, 113). The magistrate judge has 10 handled a constant stream of discovery disputes including 11 numerous requests to seal, motions to compel, motions for 12 sanctions, motions to expedite discovery, and multiple requests 13 for reconsideration. While the new counterclaims may expand the 14 scope of the litigation, the parties have already made it clear 15 that this case is major complex litigation. 16 It does not appear that the pending motion was filed in 17 bad faith. Defendant has shown good cause to bring the motion at 18 this time. It appears that Milk Moovement was not aware of the 19 potential counterclaims until it obtained additional information 20 through discovery. Milk Moovement states that discovery produced 21 after the amendment deadline, including a letter sent by Dairy’s 22 Chief Financial Officer to United Dairymen of Arizona’s Chief 23 Executive Officer (the “UDA Letter”), produced through third- 24 party discovery on December 6, 2022, forms the basis for their 25 proposed amended counterclaims. (See Mot. at 11-14 (Docket No. 26 204-1).) 27 While permitting the amended counterclaims may require 28 additional discovery, it should not result in undue delay. The 1 court notes that discovery is still ongoing, and that no 2 depositions have yet been taken. As recently as January 26, 3 2023, the court amended the scheduling order at the request of 4 the parties to extend the time for discovery. (See Docket No. 5 220.) If either side needs more time for discovery as a result 6 of the amended counterclaims, they are free to request amendment 7 of the scheduling order to extend the discovery period or to 8 continue the final pretrial conference or trial dates if 9 necessary. 10 Dairy’s primary argument against allowing the proposed 11 amendments appears to be that it would be futile because the 12 proposed counterclaims have no viable theory of recovery. Dairy 13 argues that the pending motion amounts to no more than an 14 improper request for reconsideration of the court’s prior order 15 dismissing Milk Moovement’s sham litigation counterclaim without 16 leave to amend. (Opp’n at 6-7.) Although both the dismissed 17 sham litigation counterclaim and the proposed amended 18 counterclaims arise out of antitrust laws, the proposed amended 19 counterclaims are based on alleged monopolistic behavior which 20 extends beyond the initiation of this lawsuit.2 Milk Moovement’s 21 proposed counterclaims do not appear to be an attempt to present 22 the previously dismissed antitrust counterclaim “under new 23 2 The sham litigation counterclaim alleged that “[t]he 24 whole purpose of Dairy’s sham lawsuit was to misuse the courts as a vehicle for carrying out its anticompetitive scheme.” (First 25 Am. Countercls. at 52 (Docket No. 111).) By contrast, the new counterclaims allege a variety of actions taken by Dairy 26 including “improperly lock[ing] up customers,” “market-power- 27 consolidating acquisitions,” and its relationship with Dairy Farmers of America (“DFA”). (Mot. for Leave at 6-7; Hagey Decl., 28 Ex. 1, ¶¶ 33-43 (“Proposed Countercls.”) (Docket No. 204-3).) nnn enn nn en nn en en nn nO OD EO 1 theories.” See McCurdy v. Kernan, No. 1:17-cv-01356 SAB PC, 2021 2 WL 5822868, at *1 (E.D. Cal. Dec. 8, 2021) (citation omitted). 3 Because Milk Moovement has demonstrated good cause 4 under Rule 16(b) and the court cannot conclude at this stage that 5 amendment would clearly be futile under Rule 15(a), Milk 6 Moovement’s motion for leave to file the Second Amended 7 Counterclaims will be granted. This is not the appropriate time 8 to consider the legal sufficiency of those counterclaims. As 9 this court has held many times, courts generally defer 10 consideration of challenges to the merits of a proposed amended 11 pleading until after leave to amend is granted and the amended 12 pleading is filed. Harris v. Chipotle Mexican Grill, Inc., No. 13 2:13-cv-2472 WBS EFB, 2014 WL 2993796, at *4 (E.D. Cal. July 2, 14 2014); see also Duhn Oil Tool, Inc. v. Cooper Cameron Corp., No. 15 1:05-CV-1411 OWW GSA, 2010 WL 596312, at *14 (E.D. Cal. Feb. 16, 16 2010) .3 17 IT IS THEREFORE ORDERED that Milk Moovement’s motion 18 for leave to amend counterclaims (Docket No. 204) be, and the 19 same hereby is, GRANTED. Milk Moovement has seven days from the 20 date of this Order to file the Second Amended Counterclaims. 21 | Dated: February 23, 2023 bette 2d. □□ 22 WILLIAM B. SHUBB UNITED STATES DISTRICT JUDGE 23 24 29 3 See also Netbula v. Distinct Corp., 212 F.R.D. 534, 539 26 (N.D. Cal. 2003) (“Ordinarily, courts will defer consideration of challenges to the merits of a proposed amended pleading until 27 after leave to amend is granted and the amended pleading is filed.”). 28