Leach v. Ingram ( 2024 )

1 2 3 UNITED STATES DISTRICT COURT 4 DISTRICT OF NEVADA 5 6 THEODORE LEACH, et al., Case No. 2:22-cv-01809-JAD-NJK 7 Plaintiff(s), ORDER 8 v. [Docket Nos. 95, 96, 100] 9 DENNETT INGRAM, et al., 10 Defendant(s). 11 Pending before the Court are the parties’ requests for rulings on the amendment-related 12 motions that the Court had previously denied without prejudice. To that end, Plaintiffs have refiled 13 their motion for leave to amend, Docket No. 100, and Defendants have refiled their motions to 14 strike and for sanctions, Docket Nos. 95, 96. The motions have been fully briefed and the Court 15 does not require a hearing. See Local Rule 78-1. For the reasons discussed more fully below, the 16 Court GRANTS the motion for leave to amend (Docket No. 100) and DENIES the motion to 17 strike (Docket No. 95) and the motion for sanctions (Docket No. 96).1 18 I. MOTION TO AMEND 19 The Court begins with the motion for leave to amend, which seeks to add Haxxr as a new 20 defendant. See Docket No. 100-1. In particular, Plaintiffs seek to add Haxxr as a defendant by 21 changing the caption of the operative pleading and adding the following allegations: 22 7. Defendant HAXXR PTE. LTD.. [hereinafter “HAXXR”] is a Singapore business entity which at all relevant times hereto an 23 entity formed in Singapore and which may have been doing business in Clark County, Nevada. 24 8. Defendant HAXXR is the sole owner of PTE. 25 26 1 The parties are familiar with the facts of the case and the procedural posture, so the Court 27 declines to provide background within this order. Moreover, any argument not addressed explicitly herein has been rejected to the extent it is inconsistent with the rulings made. E.g., 28 PlayUp, Inc. v. Mintas, 635 F. Supp. 3d 1087, 1099 (D. Nev. 2022). 9. Defendant PTE is the sole owner of HAXXR and 1 WYOMING HOLDINGS. 2 Docket No. 100-1 at 11. The proposed second amended complaint does not otherwise change the 3 factual allegations or alter the causes of action. 4 A. Standards 5 When a party moves to amend the pleadings after the expiration of the deadline established 6 in the scheduling order, courts review the motion through a multi-step process. As a threshold 7 matter, courts treat the motion as seeking to amend the scheduling order. Such a request implicates 8 the “good cause” standard outlined in Rule 16(b) of the Federal Rules of Civil Procedure. Johnson 9 v. Mammoth Recreations, Inc., 975 F.2d 604, 608 (9th Cir. 1992). “Rule 16(b)’s ‘good cause’ 10 standard primarily considers the diligence of the party seeking the amendment.” Id. at 609. In 11 particular, courts look to whether the deadline set in the scheduling order “cannot reasonably be 12 met despite the diligence of the party seeking the extension.” Id. The diligence inquiry also 13 addresses other pertinent circumstances, including whether the movant was prompt in seeking 14 relief from the Court once it became apparent that relief from the scheduling order was needed. 15 See Jackson v. Laureate, Inc., 186 F.R.D. 605, 608 (E.D. Cal. 1999) (citing Eckert Cold Storage, 16 Inc. v. Behl, 943 F. Supp. 1230, 1233 (E.D. Cal. 1996)). Although prejudice to the opposing party 17 may also be considered, the focus of the inquiry is on the movant’s reasons for seeking 18 modification. Johnson, 975 F.2d at 609. “If that party was not diligent, the inquiry should end.” 19 Id. The party seeking amendment bears the burden of establishing diligence. See Singer v. Las 20 Vegas Athletic Clubs, 376 F. Supp. 3d 1062, 1077 (D. Nev. 2019); see also Morgal v. Maricopa 21 County Bd. Of Supervisors, 284 F.R.D. 452, 460 (D. Ariz. 2012). 22 A motion for leave to amend filed after the expiration of the corresponding deadline also 23 requires a showing of excusable neglect. See Branch Banking & Trust Co. v. DMSI, LLC, 871 24 F.3d 751, 764-65 (9th Cir. 2017); see also Local Rule 26-3. The excusable neglect analysis is 25 guided by factors that include (1) the danger of prejudice to the opposing party; (2) the length of 26 the delay and its potential impact on the proceedings; (3) the reason for the delay; and (4) whether 27 the movant acted in good faith. Branch Banking, 871 F.3d at 765. The party seeking amendment 28 1 bears the burden of establishing excusable neglect. See id. (affirming finding of no excusable 2 neglect based upon the movant’s failure to provide a sufficient showing). 3 When the movant establishes a sufficient basis for obtaining relief from the governing case 4 management deadline, courts then examine whether amendment is proper under the standards 5 outlined in Rule 15(a). Rule 15(a) provides that “[t]he court should freely give leave [to amend] 6 when justice so requires,” and there is a strong public policy in favor of permitting amendment. 7 Bowles v. Reade, 198 F.3d 752, 757 (9th Cir. 1999). Rule 15(a) is to be applied with “extreme 8 liberality.” Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (per 9 curiam). Under Rule 15(a), courts consider various factors, including: (1) bad faith; (2) undue 10 delay; (3) prejudice to the opposing party; (4) futility of the amendment; and (5) whether the 11 plaintiff has previously amended the complaint. See id. at 1052. Not all of these factors carry 12 equal weight and prejudice is the “touchstone.” Id. Absent a showing of prejudice or a strong 13 showing of any of the remaining factors, there is a presumption that leave to amend should be 14 granted. Id. The party opposing the amendment bears the burden of showing why leave should 15 not be permitted under Rule 15(a). Underwood v. O’Reilly Auto Enters., LLC, 342 F.R.D. 338, 16 343 (D. Nev. 2022). 17 B. Analysis 18 The Court begins with whether sufficient justification has been advanced to reopen and 19 extend the deadline to amend or add parties, which expired on April 11, 2023. Docket No. 17. 20 There is no dispute that Plaintiffs first became aware of Haxxr at a deposition on November 30, 21 2023. Docket No. 97 at 3. Nonetheless, Defendants argue that Plaintiffs were not diligent 22 thereafter in bringing their motion for leave to amend. See, e.g., id. at 4.2 While it does appear 23 that Plaintiffs stretched the diligence standard with respect to the timing of the motion to amend, 24 the Court is not persuaded that the circumstances evidence a lack of diligence given the amount of 25 2 Defendants argue that they will be prejudiced by modifying the scheduling order to allow 26 for the addition of Haxxr. See, e.g., Docket No. 97 at 4, 5. Such an argument is puzzling given that Defendants agree that adding Haxxr as a party is warranted under Rule 15(a), which means 27 by implication that there is not a significant risk of prejudice in doing so. See Eminence Capital, 316 F.3d at 1052. At any rate, the Court is not persuaded that Defendants made a sufficient 28 showing of prejudice to avoid modification of the case management schedule. 1 time at issue and the existence of conferral efforts aimed at obtaining this relief by stipulation, 2 which seem to have been sidetracked by disputes concerning preexisting allegations from the 3 earlier pleadings.3 See Docket No. 72 at 4; see also Docket No. 100 at 308-10 (letter from defense 4 counsel indicating that “we are amenable to stipulating to the same and waiving service as to Haxxr 5 as a courtesy to you, provided you are willing to correct those allegations which have been 6 disproven through discovery in this case such that Plaintiffs are not re-pleading factually 7 unsupported claims”). In short, good cause and excusable neglect exist to modify the case 8 management schedule with respect to adding Haxxr as a defendant. 9 Having decided that relief from the case management schedule is warranted, the Court 10 turns to the Rule 15 analysis. As a threshold matter, Defendants consent to adding Haxxr as a 11 defendant, e.g., Docket No. 94 at 2, so that aspect of the motion can be granted as unopposed, see, 12 e.g., Local Rule 7-2(d). On the other hand, Defendants argue that leave to amend should be denied 13 as to certain preexisting factual allegations that the second amended complaint carries over from 14 earlier pleadings. See, e.g., Docket No. 94 at 2-3, 12-15. This argument is unconvincing for a 15 number of reasons. At the most basic level, Plaintiffs are not seeking leave to amend to add these 16 particular allegations because they are already part of the earlier pleadings,4 and Defendants fail 17 to sufficiently explain why the Rule 15(a) standards would be applied to preexisting allegations. 18 Moreover, futility is generally not grounds to deny leave to amend because such arguments are 19 often better addressed through dispositive motion practice. Underwood, 342 F.R.D. at 346-47.5 20 21 22 3 Plaintiffs explain that it appears Defendants improperly failed to disclose Haxxr much earlier in the case, see, e.g., Docket No. 100-2 at 3 (citing Docket No. 13), and it would seem 23 inequitable to hold Plaintiffs to an overly stringent application of the diligence standard when Defendants themselves appear to have dropped the ball in identifying Haxxr. 24 4 By way of example, Defendants challenge the factual allegations that Plaintiffs were able 25 to procure a ready, willing, and able buyer to purchase the subject IP block. See, e.g., Docket No. 94 at 9. Such factual allegations also appear in the first amended complaint that was filed almost 26 two years ago. See, e.g., Docket No. 101 at 279. 27 5 The Court is not persuaded that Defendants are prejudiced by addressing these allegations in summary judgment motion practice, which is the ordinary course for challenging the evidentiary 28 support for factual allegations. 1 In short, Defendants have not met their burden of showing leave to amend should be denied under 2 Rule 15(a).6 3 Accordingly, Plaintiffs’ motion for leave to amend is GRANTED.7 Plaintiffs must 4 promptly file their second amended complaint on the docket. See Local Rule 15-1(b). Formal 5 service of the second amended complaint on Haxxr appears unnecessary because defense counsel 6 previously agreed to accept service on Haxxr’s behalf. See Docket No. 100 at 308. 7 II. MOTION TO STRIKE 8 Defendants seek to strike insurance-related allegations within in the second amended 9 complaint that were also included in the earlier pleadings. Docket No. 95 at 3, 10, 15; see also 10 Docket No. 98 at 2-3. 11 A complaint is meant to provide a defendant with “fair notice” of the claims brought and 12 the grounds on which they are premised. Erickson v. Pardus, 551 U.S. 89, 93 (2007). “Modern 13 litigation is too protracted and expensive for the litigants and the court to expend time and effort 14 pruning or polishing the pleadings.” 5C Charles Alan Wright & Arthur R. Miller, FEDERAL 15 PRACTICE AND PROCEDURE § 1382, at p. 458 (2020 Supp.). The federal case reporters abound with 16 pronouncements that motions to strike are highly disfavored, e.g., Petrie v. Elec. Game Card, Inc., 17 6 There is some uncertainty as to whether discovery should be reopened in response to the 18 addition of Haxxr as a defendant. For their part, Plaintiffs indicate that adding Haxxr will not “require any substantial discovery,” Docket No. 100-1 at 5, and the Court is mindful that Haxxr 19 will have the benefit of any discovery completed to date, see Local Rule 26-5. Defendants are not entirely consistent on this issue. At some points, Defendants minimize the change to litigation 20 being made in exclaiming that “[t]he proposed amended complaint did not significantly modify the allegations; in fact, the only changes are to paragraphs 7-9 of the complaint which introduce 21 Haxxr as a defendant,” Docket No. 97 at 4, which would seem to suggest that significant discovery would be unnecessary. Nonetheless, Defendants elsewhere argue that “Defendants will not have 22 time to mount any defense of such allegations,” id., and that the defense has been prevented sufficient time during the discovery period to address the allegations, id. at 5. For purposes of this 23 order, the Court finds that adding Haxxr is warranted even if doing so would require allowing a short period for additional discovery. Given the muddled record and the fact that Haxxr has not 24 yet responded to the second amended complaint, the Court declines to weigh in conclusively on whether reopening discovery is necessary or the length of such additional discovery period. If any 25 party believes discovery should be reopened to account for the ruling made herein, they must file a proper request seeking such relief. 26 7 In reply, Plaintiffs seek the imposition of sanctions against Defendants. Docket No. 100- 27 2 at 8-9. The Court declines to address this request as it was improperly filed, see, e.g., Local Rule IC 2-2(b), and is not supported by points and authorities, see, e.g., Local Rule 7-2(d); Kor Media 28 Grp., LLC v. Green, 294 F.R.D. 579, 582 n.3 (D. Nev. 2013). 1 761 F.3d 959, 965 (9th Cir. 2014), rarely granted, e.g., Stanbury Law Firm v. I.R.S., 221 F.3d 1059, 2 1063 (8th Cir. 2000), and viewed as “time-wasters,” e.g., Gaines v. AT&T Mobility Servs., LLC, 3 424 F. Supp. 3d 1004, 1014 (S.D. Cal. 2019). Courts will not grant a motion to strike “unless it is 4 clear that the matter to be stricken could not have any possible bearing on the subject matter of the 5 litigation.” In re Facebook PPC Advertising Litig., 709 F. Supp. 2d 762, 773 (N.D. Cal. 2010). 6 “[I]f there is any doubt as to whether under any contingency the matter may raise an issue, the 7 motion may be denied.” G.K. Las Vegas Ltd. P’ship v. Simon Prop. Grp., Inc., 460 F. Supp. 2d 8 1222, 1234 (D. Nev. 2006). Given the disfavored nature of motions to strike, courts routinely 9 require a showing of actual prejudice before striking material from a pleading. See, e.g., 10 Roadhouse v. Las Vegas Metro. Police Dept., 290 F.R.D. 535, 543 (D. Nev. 2013). 11 Here, Defendants ask the Court to strike references to “insurance” as being immaterial. 12 Docket No. 95 at 15.8 While Defendants contend that these allegations have not been supported 13 by disclosures or discovery, Defendants have failed to satisfy the threshold requirement of showing 14 that they are prejudiced by allowing the allegations to remain within the pleadings. 15 Accordingly, Defendants’ motion to strike is DENIED. 16 III. MOTION FOR SANCTIONS 17 Defendants seek an award of sanctions, arguing that the second amended complaint 18 continues to include factual allegations that Defendants contend are not supported by the evidence. 19 See, e.g., Docket No. 96 at 4, 15-18; Docket No. 99 at 3-5.9 Requests for sanctions as to the 20 supportability of the pleadings are not substitutes for motions for summary judgment and are 21 generally deferred until after the conclusion of the case. See PlayUp, Inc. v. Mintas, 2023 WL 22 1771128, at *1 (D. Nev. Jan. 20, 2023) (collecting cases in the Rule 11 context); see also, e.g., 23 Quaker Alloy Casting Co. v. Gulfco Indus., Inc., 686 F. Supp. 1319, 1350-51 (N.D. Ill. 1988) (same 24 for request for § 1927 sanctions regarding the allegations in original and amended pleadings). 25 8 The motion also indicates that these allegations are “irrelevant,” Docket No. 95 at 15, but 26 Rule 12(f) does not enumerate irrelevance as a basis for striking. 27 9 Defendants seek sanctions under 28 U.S.C. § 1927 and the Court’s inherent authority. See Docket No. 94 at 15-18. Defendants also argue that the scenario constitutes a Rule 11 28 violation, but they did not move on that ground given the safe harbor provision. See id. at 4 n.4. 1} Indeed, the cases from this District on which Defendants rely arose in the post-judgment context. See Lall v. Corner Invs. Co., 2023 WL 6197334, at *1 (D. Nev. Sept. 21, 2023) (noting that the 3] sanction requests were “post-judgment motions”); Salley v. Truckee Meadows Water Auth., 2015 4] WL 1414038 (D. Nev. Mar. 27, 2015); see also id., Case No. 3:12-cv-00306-RCJ-WGC, Docket 5] No. 48 at 6 (D. Nev. Oct. 30, 2013) (entering judgment and closing the case).!” The Court has 6|| been provided insufficient justification to wade into these types of factual issues before motions 7| for summary judgment have been filed. Accordingly, Defendants’ motion for sanctions is DENIED without prejudice. CONCLUSION 10 Tn light of the above, the Court hereby ORDERS as follows: 11 e Plaintiffs’ motion for leave to amend (Docket No. 100) is GRANTED. Plaintiffs must 12 promptly file their second amended complaint on the docket. See Local Rule 15-1(b). 13 e Defendants’ motion to strike (Docket No. 95) is DENIED. 14 e Defendants’ motion for sanctions (Docket No. 96) is DENIED without prejudice. 15 e In light of the above, the Court EXTENDS the deadline to file dispositive motions to 16 November 4, 2024, and the deadline to file the joint proposed pretrial order to 17 December 4, 2024 (or 30 days after resolution of dispositive motions). 18 IT IS SO ORDERED. 19 Dated: September 4, 2024 20 Z = Nancy J. Koppe.< 21 United States Magistrate Judge 22 23 24 25 26 27), ——__________ ‘0 Pappas v. Experian Information Solutions also arose in the post-judgment context. 2017 28] WL 3052978, at *1 (N.D. Ill. July 13, 2017).