Chang v. Cashman ( 2024 )

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 STACY CHANG, Case No. 22-cv-02010-AMO 8 Plaintiff, ORDER GRANTING IN PART AND 9 v. DENYING IN PART MOTION FOR LEAVE TO AMEND 10 CARLOS CASHMAN, et al., Re: Dkt. No. 80 Defendants. 11 12 13 Before the Court is Plaintiff Stacy Chang’s motion for leave to amend her first amended 14 complaint. Having considered the parties’ papers, the relevant legal authority, and the arguments 15 advanced by counsel during the March 14, 2024 hearing on the matter, the motion is GRANTED 16 IN PART and DENIED IN PART for the reasons set forth below. 17 I. BACKGROUND 18 A. Factual Background1 19 This case stems from an employment dispute between Stacy Chang and Carlos Cashman. 20 Stacy Chang is “a successful founder and designer in the fashion industry.” ECF 32 ¶ 24. In 21 March 2017, Chang “joined Founders Fund to work in the tech ecosystem.” Id. In her role as 22 Chief of Staff, “Chang sourced and led consumer investments, crafted the firm’s consumer retail 23 investment thesis, and worked closely with [the] General Partner and Chief Operating Officer.” 24 Id. ¶ 25. Over time, “Chang’s reputation within Founders Fund grew, as did her profile within the 25 broader venture capital community.” Id. 26 In November 2019, Chang met Thomas Copeman through her work at Founders Fund. Id. 27 1 ¶ 26. In January 2020, Copeman introduced Chang to Carlos Cashman. Id. ¶¶ 2, 26. Cashman 2 “was a well-known operator [and] investor and the Co-founder of Thrasio.” Id. ¶ 26. Thrasio is 3 “an aggregator of Amazon third-party sellers that has been valued at approximately $10 billion.” 4 Id. ¶ 2. 5 In May 2021, Copeman told Chang that Cashman “wanted to create a new investment 6 platform and raise a fund to work more closely with early-stage founders.” Id. ¶¶ 2, 28. 7 “Cashman would provide $10 million of capital as the anchor limited partner, with additional 8 capital to be raised from other parties.” Id. ¶ 28. 9 During a Zoom call on June 25, 2021, Chang made a presentation to Cashman and 10 Copeman about the state of the venture capital industry. Id. ¶ 4. Cashman and Copeman 11 “explained their vision for the new venture and the key role Chang could play.” Id. ¶ 31. Chang 12 “was interested in the new opportunity this collaboration presented, assuming that her new role 13 would come with a partner title and partner carried interest upside.” Id. ¶ 32. Copeman and 14 Cashman “assured her [the position] would include both and asked her to continue to work on 15 various aspects of getting the fund off the ground.” Id. 16 Cashman, however, did not send Chang a formal offer letter. Id. ¶ 33. “[T]his was not 17 surprising,” because no entity “had . . . been created through execution of the corporate 18 documents, [so] there was not yet an entity to send a letter on behalf of.” Id. Chang also “trusted 19 Cashman’s word given his stellar reputation within the early stage investing community.” Id. 20 On September 17, 2021, Chang met with Cashman, Copeman, and the rest of the 21 Arrowside team in-person. Id. ¶ 38. “[I]t was understood and agreed that Chang was part of 22 Arrowside going forward.” Id. ¶ 39. Arrowside Capital, LLC “would employ Chang and all of 23 the other partners, and provide services and benefits to all employees, including infrastructure, 24 offices, and IT systems.” Id. ¶ 8. Ownership of Arrowside Capital “would be split among the 25 partners and there was to be a managing general partner on the early-stage private side [Arrowside 26 Ventures, LLC] and a managing general partner on the public and late-stage private side 27 [Arrowside Fund GP, LLC].” Id. Arrowside Ventures and Arrowside Fund GP “would each have 1 Id. 2 Based on statements from Cashman, Copeman, and another anticipated partner in 3 Arrowside named Tucker Walsh, Chang “believed that she would receive carried interest from any 4 investments she introduced to [Arrowside] Fund [GP].” Id. ¶¶ 35, 36. She also “anticipated her 5 carried interest would be weighted more heavily in Ventures” and “understood that there would be 6 a shared economic relationship between the entities all under one Arrowside management 7 company such that she would receive some split of the carry value from” Arrowside Fund GP, 8 even though she would be working mostly in, and sourcing investments for, Arrowside Ventures. 9 Id. ¶¶ 8, 35. 10 Following the September meeting, Cashman treated Chang as a full-time employee and 11 partner in Arrowside. Id. ¶ 40. On October 13, 2021, Chang told Cashman and Copeman that she 12 would be winding down her responsibilities at Founders Fund and resigning in the coming weeks. 13 Id. ¶ 48. Chang gave notice at Founder’s Fund in mid-November, and her last day was November 14 30, 2021. Id. ¶ 15. 15 On December 10, 2021, Copeman told Chang that she would no longer be part of 16 Arrowside and offered her one-month’s pay and carry interest for three of her funding deals. Id. 17 ¶ 63. She declined. Id. Subsequent exchanges between Chang, Cashman, and Copeman did not 18 result in any resolution. Id. ¶¶ 65-67. 19 B. Procedural Background 20 On March 29, 2022, Chang commenced this action against Cashman, Arrowside Capital, 21 Arrowside Fund GP, Arrowside Ventures, and Cashman Family Investments II LLC (collectively, 22 “Defendants”).2 ECF 1. In the operative first amended complaint, filed on July 25, 2022,3 Chang 23 asserts claims for (1) fraudulent inducement, (2) negligent misrepresentation, 24 25 2 Chang alleges that Cashman used Cashman Family Investments II to store “[t]he deals that Chang sourced and worked on for Cashman and Arrowside . . . because the other entities had not 26 yet been formally created.” ECF 32 ¶ 20. 27 3 After they filed Rule 12 motions to the original complaint, Defendants stipulated to the filing of 1 (3) misrepresentations in violation of California Labor Code § 970, (4) breach of contract, 2 (5) promissory estoppel, (6) unjust enrichment, (7) failure to pay wages upon separation of 3 employment, (8) violation of California Business and Professions Code § 17200, and (9) failure to 4 reimburse expenses and losses in violation of California Labor Code § 2802. ECF 32 ¶¶ 69-76, 5 ¶¶ 77-84, ¶¶ 85-93, ¶¶ 94-97, ¶¶ 98-101, ¶¶ 102-106, ¶¶ 107-113, ¶¶ 114-117, ¶¶ 118-122. 6 On August 8, 2022, Arrowside Capital and Arrowside Fund GP filed an answer to the first 7 amended complaint. ECF 35. Cashman, Arrowside Ventures, and Cashman Family Investments 8 II moved for a more definite statement. ECF 33. The Court denied the motion on September 12, 9 2022. ECF 38. Cashman, Arrowside Ventures, and Cashman Family Investments II then filed 10 their answer on September 26, 2022. ECF 43. On September 29, 2022, the Court issued a case 11 management scheduling order, setting, among other deadlines, May 19, 2023 as the last day to 12 amend the pleadings, and January 22, 2024 as the first date for trial.4 ECF 45 at 1, 3. 13 On December 29, 2023, Chang moved for leave to amend her first amended complaint. 14 ECF 80.5 She seeks to add Perseverus LLC, Cashman Family Investment LLC (“Cashman Family 15 Investment I”), Arrowside Fund LP, and the Cashman Opportunity Fund, LLC as defendants, add 16 allegations of alter-ego liability and veil piercing, and in the alterative, civil conspiracy, as to 17 Arrowside Ventures, Arrowside Fund GP, Arrowside Capital, Cashman Family Investments II, the 18 Cashman Opportunity Fund, Arrowside Fund LP, and Cashman Family Investment I, and plead 19 successor-in-interest liability allegations as to Perseverus.6 Id. at 5-6; ECF 100 at 4. 20 4 On request of the parties, the trial date in this matter has been continued twice; related deadlines 21 have been continued three times. ECF 54, 55, 61, 62, 71, 72. 22 5 The scheduling order in effect at the time of Chang’s motion set January 31, 2024 as the close of fact discovery, May 1, 2024 as the close of expert discovery, April 15, 2024 as the due date for 23 dispositive motions, August 22, 2024 as the date for the pretrial conference, and September 17, 2024 as the first day for trial. ECF 72 at 3. 24 6 In her supplemental brief, Chang modifies the proposed amendment as it concerns civil 25 conspiracy allegations, stating that she “seeks to add all entity Defendants to her present causes of action as they are all Defendant’s alter ago, or in the alternative, all entered into a civil conspiracy 26 with him to wrong [Chang].” Id. at 4. In the original motion, however, Chang sought to plead civil conspiracy in the alternative only as to her first and second causes of action. Id. at 19-20. 27 The Court will not permit Chang to expand the proposed amendment beyond what she presented 1 On January 12, 2024, Defendants filed their opposition to the motion. ECF 85. Chang’s 2 reply followed on January 19, 2024. ECF 87. Because neither party addressed the threshold 3 question of whether the Court should grant relief from the scheduling order, the Court ordered the 4 parties to submit short supplemental briefs on the issue.7 ECF 97. Chang filed a supplemental 5 brief on March 5, 2024, and Defendants filed their supplemental brief on March 7, 2024. ECF 6 100, 103. The Court held a hearing on the motion on March 14, 2024. ECF 105. 7 II. LEGAL STANDARDS 8 A. Federal Rule of Civil Procedure 16 9 Federal Rule of Civil Procedure 16(b)(4) requires “good cause” and “the judge’s consent” 10 to modify a scheduling order. Fed. R. Civ. P. 16(b)(4). “Rule 16(b)’s ‘good cause’ standard 11 primarily considers the diligence of the party seeking the amendment.” Johnson v. Mammoth 12 Recreations, Inc., 975 F.2d 604, 609 (9th Cir. 1992). “The pretrial schedule may be modified ‘if it 13 cannot reasonably be met despite the diligence of the party seeking the extension.’” Zivkovic v. S. 14 Cal. Edison Co., 302 F.3d 1080, 1087 (9th Cir. 2002) (quoting Mammoth Recreations, 975 F.2d at 15 609). “Although the existence or degree of prejudice to the party opposing the modification might 16 supply additional reasons to deny a motion, the focus of the inquiry is upon the moving party’s 17 reasons for seeking modification.” Mammoth Recreations, 975 F.2d at 609 (citation omitted). If 18 the moving party fails to show diligence, “‘the inquiry should end.’” Coleman v. Quaker Oats 19 Co., 232 F.3d 1271, 1295 (9th Cir. 2000) (quoting Mammoth Recreations, 975 F.2d at 609). If, 20 however, “the moving party establishes good cause to modify the scheduling order, it must then 21 demonstrate that its motion is also proper under Rule 15.” Calvary Chapel San Jose v. Cody, No. 22 20-CV-03794-BLF, 2021 WL 4427384, at *1 (N.D. Cal. Sept. 27, 2021) (internal quotations and 23 citation omitted). 24 B. Federal Rule of Civil Procedure 15 25 “Generally, Rule 15 advises the court that leave shall be freely given when justice so 26 requires. This policy is to be applied with extreme liberality.” Eminence Cap., LLC v. Aspeon, 27 1 Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (internal quotations and citations omitted). “[L]eave to 2 amend should be granted unless amendment would cause prejudice to the opposing party, is 3 sought in bad faith, is futile, or creates undue delay.” Mammoth Recreations, 975 F.2d at 607 4 (citation omitted). 5 “Not all of the factors merit equal weight. . . . [I]t is the consideration of prejudice to the 6 opposing party that carries the greatest weight.” Eminence Cap., 316 F.3d at 1052 (citation 7 omitted). “Absent prejudice, or a strong showing of any of the remaining . . . factors, there exists 8 a presumption under Rule 15(a) in favor of granting leave to amend.” Id. (emphasis in original). 9 Courts may deny leave to amend “only if there is strong evidence of undue delay, bad faith 10 or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments 11 previously allowed, undue prejudice to the opposing party by virtue of allowance of the 12 amendment, [or] futility of amendment, etc.” Sonoma Cnty. Ass’n of Retired Emps. v. Sonoma 13 Cnty., 708 F.3d 1109, 1117 (9th Cir. 2013) (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)) 14 (modification in original). 15 III. DISCUSSION 16 The case management order issued on September 29, 2022 set May 19, 2023 as the 17 deadline to amend the pleadings. ECF 45. Chang must therefore first demonstrate that good 18 cause exists under Rule 16(b) to permit the proposed amendment seven months after the 19 May 19, 2023 deadline before showing that the amendment is proper under Rule 15. See 20 Mammoth Recreations, 975 F.2d at 607-08. Accordingly, the Court first analyzes whether Chang 21 has shown good cause under Rule 16(b) before turning to whether the amendment is proper under 22 Rule 15. 23 A. Good Cause under Rule 16 24 The Court first analyzes whether good cause exists to permit the addition of the proposed 25 defendants, i.e., Cashman Opportunity Fund, Arrowside Fund LP, Cashman Family Investment I, 26 and Perseverus. 27 Good cause does not exist to allow the addition of the Cashman Opportunity Fund. Chang 1 operating agreement for a different entity, Arrowside Ventures, on October 17, 2023. ECF 80 at 2 10. According to Chang, the agreement revealed the existence of the Cashman Opportunity Fund, 3 “which was the funding investor for a Ventures investment completed in early December 2021, 4 just prior to [Chang] being ousted from Arrowside.”8 Id. Chang also asserts that the agreement 5 revealed that Arrowside Ventures still holds the investment. ECF 100 at 3. Chang seeks to add 6 the Cashman Opportunity Fund as a defendant for that reason. Id. 7 Defendants counter with an email from Copeman to Chang dated October 28, 2021, in 8 which the Cashman Opportunity Fund appears on an alternative asset list for Cashman Family 9 Enterprises. ECF 85-2. Chang does not dispute that she received the October 2021 email from 10 Copeman. Moreover, Chang herself acknowledges that “[i]t made sense that [the Cashman] 11 Opportunity Fund held an investment for [Arrowside] Ventures prior to [Arrowside] Venture’s 12 formation because [Arrowside] Ventures did not yet exist.” ECF 87 at 5. 13 With knowledge of the Cashman Opportunity Fund since October 28, 2021, and with 14 knowledge of how the entity operated prior to Arrowside Venture’s formation, Chang’s decision 15 to wait until December 29, 2023 to seek leave to add the Cashman Opportunity Fund as a 16 defendant cuts against a finding of good cause. 17 The Court likewise finds no good cause to allow the addition of Cashman Family 18 Investment I and Arrowside Fund LP as defendants. As to these entities, Chang asserts: 19 Cashman Family Investment[] I funded approximately $22 million into Arrowside Fund LP, and has a 5% interest in Arrowside Fund 20 GP, LLC which is owned by Carlos Cashman directly. Arrowside Fund, LP is funded in whole or in significant part by Defendant 21 Cashman Family Investment I. [Arrowside] Fund LP, in turn, funded Defendant [Arrowside] Fund GP’s investments and Cashman 22 23 8 The operating agreement for Arrowside Ventures is dated January 1, 2022 and reflects an incorporation date of December 17, 2021. ECF 81-2 at 1. Chang speculates the agreement was 24 likely backdated because it provides for Copeman’s back pay for the period of July 1, 2021 through March 2022. ECF 80 at 9. Chang also contends that “[p]resumably, Cashman thought 25 that backdating the agreement to closer in time to when his controversy with Chang commenced he would better protect his other assets from the instant litigation.” Id. At deposition, when asked 26 whether Arrowside Ventures was created in reaction to Chang’s request for compensation, Cashman responded, “[y]es, mostly.” ECF 86-4 at 3. He also testified: “[W]e felt it would be 27 better, on legal advice, to form the entity and put the investments into it, that she had been around completely dominates and controls Fund LP. It was not until after 1 the parties completed significant discovery that [Chang] was able to unravel the knotted architecture of Defendant Cashman’s many 2 entities and their involvement in the instant litigation. 3 ECF 80 at 14.9 Chang does not indicate when she learned about Cashman Family Investment I 4 and Arrowside Fund LP. Instead, Chang generally contends that she “uncovered that both entities 5 are completely controlled and dominated by Defendant Cashman as a means to fund Arrowside 6 Capital.” ECF 100 at 4. She claims she could not have uncovered “Cashman’s complete 7 disregard of the corporate form” before last fall. Id. 8 Defendants counter that Chang new about the funding plan concerning Arrowside Fund LP 9 and Cashman Investment I since at least February 15, 2023, when they produced documents 10 reflecting that. ECF 85 at 9. Chang conceded this at the March 14 hearing on the motion. For 11 this reason, the Court finds that Chang’s delay in seeking to add Arrowside Fund LP and Cashman 12 Investment I precludes a finding of good cause. 13 There is, however, good cause to permit Chang to add Perseverus as a defendant and allow 14 the related successor-in-interest liability allegations as to the entity. While Chang could have 15 deposed Copeman and Cashman sooner, Defendants’ argument that Cashman would have 16 disclosed the existence of Perseverus if Chang had asked certain follow-up questions is self- 17 serving speculation. It does not rebut the undisputed fact that Chang first learned about the entity 18 on November 9, 2023, when she deposed Copeman. ECF 80 at 10. Copeman testified that 19 Perseverus was created because “[t]he lawyers wanted to switch to a different entity” to “separate 20 out the previously warehoused funds that ended up in Arrowside Ventures from future 21 investments.” ECF 81-4 at 2, 21. Based on this testimony and privilege log entries suggesting the 22 use of a codename for the company,10 Chang contends that Cashman created Perseverus “to 23 9 To further illustrate this “knotted architecture,” Chang points to Copeman’s separation 24 agreement, which provides that “Copeman cannot receive any distributions from Ventures or Perseverus until after Cashman Family Investments II is paid 1.5 times compensation for any legal 25 fees or expenses relating to litigation or settlement of ‘the Chang Issue.’” ECF 80 at 11. 26 10 An amended privilege log served on October 21, 2023 references an entity called Arrowside Ventures II. ECF 81 ¶ 7, 81-7. Based on entries indicating discussions about the formation of the 27 entity in early 2022, Chang contends that the entity became Perseverus and that Cashman departed 1 proceed with new investments under the same investment thesis [Chang] had mapped out . . . 2 presumably, hoping to shield this new entity and its assets from being detected during the instant 3 litigation.” ECF 80 at 11. Chang asserts that Perseverus is a proper defendant because 4 “Perseverus was based on the same investment strategy that [Chang] had laid out for Cashman in 5 September 2021, with the same structure, and the same players minus [Chang].” ECF 80 at 12. 6 For these reasons, the Court finds good cause to allow the addition of Perseverus as a 7 defendant and the related allegations of successor-in-interest liability as to the entity.11 The Court 8 does not find good cause to allow the addition of the Cashman Opportunity Fund, Arrowside Fund 9 LP, or Cashman Family Investment I and therefore does not reach the question of whether to allow 10 the addition of civil conspiracy, alter ego, or veil piercing allegations as to those entities. To the 11 extent Chang seeks to add such allegations as to the currently named Defendants, Chang has not 12 convinced the Court that there is good cause to permit them at this late stage. Therefore, the Court 13 grants relief from the scheduling order to permit the addition of Perseverus as a defendant and 14 successor-in-interest allegations as to that entity. Relief from the scheduling order is otherwise 15 denied. 16 B. Leave to Amend under Rule 15 17 Because the Court finds good cause to allow the addition of Perseverus as a defendant and 18 to permit the addition of allegations of successor-in-interest liability as to that entity, the Court 19 now analyzes whether those limited amendments are proper under Rule 15. 20 When analyzing the Rule 15 factors, prejudice is the factor that carries the most weight, 21 and the burden of showing undue prejudice falls on the party opposing the proposed amendment. 22 See Eminence Cap., 316 F.3d at 1052. Here, Defendants assert that such prejudice exists because 23 this case has been pending for two years, and discovery has been underway for one. ECF 85 at 8. 24 11 The Court finds good cause to permit the addition of Perseverus as a defendant without regard 25 to the parties’ arguments about any related gamesmanship. The Court does not, therefore, reach the questions of whether Defendants had a duty to disclose Perseverus in their initial disclosures, 26 whether discovery about the entity was outside the parameters the parties agreed to in their stipulation regarding electronically stored information, whether the documents that would have 27 revealed the existence of the entity were responsive to Chang’s document requests, or whether 1 Defendants claim that document productions total more than 14,000 pages,12 argue that Chang has 2 all the information she needs to pursue her claims, and contend that re-opening discovery will 3 result in additional requests and costs that are not proportional to the needs of the case. Id. 4 While the Court appreciates that the demands of litigation impose burdens on each party, 5 the attendant prejudice to Defendants in this case is not undue. See Stearns v. Select Comfort 6 Retail Corp., 763 F. Supp. 2d 1128, 1158 (N.D. Cal. 2010) (“Neither delay resulting from the 7 proposed amendment nor the prospect of additional discovery needed by the non-moving party in 8 itself constitutes a sufficient showing of prejudice.”) (citations omitted); Genentech, Inc. v. Abbott 9 Labs., 127 F.R.D. 529, 531 (N.D. Cal. 1989) (rejecting the argument that the proposed 10 amendments were unduly prejudicial because they would require numerous depositions of 11 witnesses who had already been questioned, additional document searches, more written 12 discovery, and postponing the trial date). Moreover, the Court will allow only targeted discovery 13 on the narrow amendments allowed, which will proceed on an accelerated timeline to minimize 14 delay and guard against the risk of protracted litigation. The undue prejudice factor thus weighs in 15 favor of granting leave to amend. 16 As to the undue delay factor, the “inquiry focuses on whether the plaintiff knew of the 17 facts or legal bases for the amendments at the time the operative pleading was filed and 18 nevertheless failed to act promptly to add them to the pleadings.” McFall v. Stacy & Witbeck, 19 Inc., No. 14-CV-04150-JSC, 2016 WL 2851589, at *3 (N.D. Cal. May 16, 2016). Here, it is 20 undisputed that Chang first learned about Perseverus on November 9, 2023. Chang then acted 21 with reasonable diligence upon discovering that Perseverus existed and upon obtaining the 22 testimony that provides the basis for the proposed successor-in-interest allegations. She promptly 23 sought to meet and confer about the proposed amendment with Defendants, then filed her motion 24 25 12 Defendants point to nothing in the record that substantiates the volume of documents produced in this litigation. The Court notes that both sides have generally done a poor job of complying 26 with Civil Local Rule 7-5, which provides, in part: “Factual contentions made in support of or in opposition to any motion must be supported by an affidavit or declaration and by appropriate 27 references to the record. Extracts from depositions, interrogatory answers, requests for admission 1 December 29, 2023, after Defendants declined to stipulate. This is not undue delay. See McFall, 2 2016 WL 2851589, at *3 (“Because Plaintiff moved expeditiously to amend upon receipt of the 3 emails . . . , there was no undue delay.”). This factor thus weighs in favor of granting leave to 4 amend. 5 The futility of amendment factor weighs in favor of denying leave to amend where “no set 6 of facts can be proved under the amendment to the pleadings that would constitute a valid and 7 sufficient claim[.]” See Ross v. AT&T Mobility, LLC, No. 19-CV-06669-JST, 2020 WL 9848733, 8 at *4 (N.D. Cal. Dec. 18, 2020) (citations omitted). However, “[d]enial of leave to amend on this 9 ground is rare. Ordinarily, courts will defer consideration of challenges to the merits of a 10 proposed amended pleading until after leave to amend is granted and the amended pleading is 11 filed.” Carranza v. City of San Pablo, No. 4:20-CV-08443-SBA, 2022 WL 110647, at *4 (N.D. 12 Cal. Jan. 12, 2022) (internal quotations and citation omitted). This is because “[t]he merits or 13 facts of a controversy are not properly decided in a motion for leave to amend and should instead 14 be attacked by a motion to dismiss for failure to state a claim or for summary judgment.” 15 LiveCareer Ltd v. Su Jia Techs. Ltd., No. 14-CV-03336-JST, 2015 WL 4089800, at *3 (N.D. Cal. 16 July 2, 2015) (internal quotations and citations omitted). 17 That is the case here. Each party offers its reasons why Perseverus was created, i.e., 18 whether it was intended to shield assets from any liability for Cashman’s conduct towards Chang 19 or whether it was properly created as a separate entity for Cashman to conduct wholly separate 20 business dealings rather than a mere continuation of Arrowside Ventures.13 That dispute, 21 however, is not ripe for resolution on a motion for leave to amend and is thus not a basis on which 22 this Court may deny leave to amend. See L.B. v. W. Contra Costa Unified Sch. Dist., No. 16-CV- 23 24 13 Successor liability attaches if: [T]he successor expressly or impliedly agrees to assume the subject 25 liabilities . . . , (2) the transaction amounts to a consolidation or 26 merger of the successor and the predecessor, (3) the successor is a mere continuation of the predecessor, or (4) the transfer of assets to 27 the successor is for the fraudulent purpose of escaping liability for the predecessor’s debts. 1 04382-DMR, 2017 WL 3232484, at *6 (N.D. Cal. July 31, 2017) (declining to deny leave to 2 amend on futility grounds where factual disputes existed that could not be resolved on a Rule 15 3 || motion); Allen v. Bayshore Mall, No. 12-CV-02368-JST, 2013 WL 6441504, at *5 (N.D. Cal. 4 || Dec. 9, 2013) (rejecting futility arguments because they went “to the weight of the evidence, not 5 || the futility of [the] proposed amendment’). Accordingly, the futility of amendment factor does 6 || not preclude granting leave to amend. 7 Finally, given the factual disputes surrounding the creation of Perseverus, and Chang’s 8 || prompt actions following the discovery of the entity, the Court does not find that the proposed 9 || amendments about Perseverus are brought in bad faith. Accordingly, this factor weighs in favor of 10 || granting leave to amend. 11 On the record presently before the Court, the Rule 15 factors weigh in favor of permitting 12 || Chang to add Perseverus as a defendant and amend her complaint to add allegations of successor- 13 in-interest liability as to the entity. To that extent, the motion for leave to amend is granted. The 14 || motion is otherwise denied. 3 15 || IV. CONCLUSION a 16 For the reasons set forth above, the Court grants the motion for leave to amend in part and 3 17 denies the motion in part. Chang must file her second amended complaint within 2 days of this 18 || order. A revised case management scheduling order will issue by separate order. 19 Unless otherwise ordered by Chief Magistrate Judge Ryu: Chang may serve 5 additional 20 || requests for production within 2 days of this order. Defendants’ responses shall be due within 30 21 days of service of the requests for production. Cashman shall be made available for a further 22 || deposition, of no more than 4 hours, within 2 weeks of service of Defendants’ responses to 23 Chang’s additional requests for production. The ESI date range is extended to March 15, 2023. 24 IT IS SO ORDERED. 25 || Dated: March 18, 2024 Mod rf / □ 26 coh ARACELI MARTINEZ-OLGUIN 27 United States District Judge 28