State of Washington v. Landmark Technology A LLC ( 2022 )

1 2 3 4 5 6 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON 7 AT SEATTLE 8 9 STATE OF WASHINGTON, Case No. C21-728RSM 10 Plaintiff, 11 ORDER GRANTING MOTION TO v. AMEND COMPLAINT 12 LANDMARK TECHNOLOGY A, LLC, 13 14 Defendant. 15 I. INTRODUCTION 16 17 This matter comes before the Court on Plaintiff State of Washington’s Motion to 18 Amend Complaint, Dkt. #36. Defendant Landmark Technology A, LLC (“LTA”) opposes. 19 Dkt. #26. Neither party has requested oral argument. For the reasons stated below, the Court 20 GRANTS this Motion. 21 II. BACKGROUND 22 23 The Attorney General of the State of Washington brought this action on June 2, 2021, in 24 the name of the State, or as parens patriae on behalf of persons residing in the State, to enforce 25 the provisions of the Washington Consumer Protection Act, RCW 19.86 (“CPA”) and the 26 Patent Troll Prevention Act, RCW 19.350 (“PTPA”). 27 28 Defendant Landmark is a North Carolina patent-assertion entity (“PAE”). The sole 1 2 member of LTA is Raymond Mercado, a North Carolina resident. 3 On November 14, 2022, the State of Washington moved for leave to amend its 4 Complaint to add Mr. Mercado as a defendant. Dkt. #36. A proposed amended complaint is 5 attached. Dkt. #36-1. There has been no prior amendment. 6 Proceedings were stayed in this matter at the request of the parties, Dkt. #7, and it 7 8 appears that discovery has not proceeded. Defendant recently obtained new counsel. A trial 9 date has not yet been set. 10 III. DISCUSSION 11 A. Legal Standard 12 13 Pursuant to Fed. R. Civ. P. 15(a)(2), a “court should freely give leave [to amend] when 14 justice so requires,” Fed. R. Civ. P. 15(a)(2). Courts apply this policy with “extreme 15 liberality.” Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003). Five 16 factors are commonly used to assess the propriety of granting leave to amend: (1) bad faith, (2) 17 undue delay, (3) prejudice to the opposing party, (4) futility of amendment, and (5) whether 18 19 plaintiff has previously amended the complaint. Allen v. City of Beverly Hills, 911 F.2d 367, 20 373 (9th Cir. 1990); Foman v. Davis, 371 U.S. 178, 182 (1962). In conducting this five-factor 21 analysis, the court must grant all inferences in favor of allowing amendment. Griggs v. Pace 22 Am. Group, Inc., 170 F.3d 877, 880 (9th Cir. 1999). In addition, the court must be mindful of 23 the fact that, for each of these factors, the party opposing amendment has the burden of 24 25 showing that amendment is not warranted. DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 26 187 (9th Cir. 1987); see also Richardson v. United States, 841 F.2d 993, 999 (9th Cir. 1988). 27 Pursuant to Fed. R. Civ. P. 15(a)(2), a “court should freely give leave [to amend] when justice 28 so requires,” Fed. R. Civ. P. 15(a)(2). Courts apply this policy with “extreme liberality.” 1 2 Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003). Five factors are 3 commonly used to assess the propriety of granting leave to amend: (1) bad faith, (2) undue 4 delay, (3) prejudice to the opposing party, (4) futility of amendment, and (5) whether plaintiff 5 has previously amended the complaint. Allen v. City of Beverly Hills, 911 F.2d 367, 373 (9th 6 Cir. 1990); Foman v. Davis, 371 U.S. 178, 182 (1962). In conducting this five-factor analysis, 7 8 the court must grant all inferences in favor of allowing amendment. Griggs v. Pace Am. 9 Group, Inc., 170 F.3d 877, 880 (9th Cir. 1999). In addition, the court must be mindful of the 10 fact that, for each of these factors, the party opposing amendment has the burden of showing 11 that amendment is not warranted. DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 187 (9th 12 13 Cir. 1987); see also Richardson v. United States, 841 F.2d 993, 999 (9th Cir. 1988). 14 Rule 20(a)(2) permits the joinder of a defendant where (1) any right to relief is asserted 15 against the defendants jointly, severally, or in the alternative with respect to or arising out of 16 the same transaction, occurrence, or series of transactions or occurrences, and (2) any question 17 of law or fact common to all defendants will arise in the action. 18 19 B. Analysis 20 The State of Washington presents evidence that Mr. Mercado is the “self-employed 21 owner” of LTA and the only individual associated with the company and that he personally 22 executed licensing agreements on behalf of LTA. Dkt. #36 at 3. Mr. Mercado is being added 23 based on case law establishing personal liability for a CPA violation if the corporate officer 24 25 authorized or participated in the wrongful conduct. Id. at 6 (citing State v. Ralph Williams’ 26 N.W. Chrysler Plymouth, Inc., 87 Wn.2d 298, 322 (1976); Coastal Abstract Serv., Inc. v. First 27 Am. Title Ins. Co., 173 F.3d 725, 734 (9th Cir. 1999)). 28 LTA has not addressed either of these cases in its Response, which appear to establish 1 2 liability even without relying on alter ego liability. The Court is convinced that this 3 amendment is not made in bad faith, that there has been no undue delay caused by the State of 4 Washington, that the opposing party will not be unduly prejudiced by the amendment, and that 5 there has been no prior amendment. With regard to futility, the State of Washington has 6 adequately pointed to case law establishing CPA liability for Mr. Mercado’s actions, backed up 7 8 by plausible factual allegations. Even if the State were required to establish alter ego liability, 9 the pleading and record before the Court indicate that such an effort would not be futile. Given 10 all of the above, the Court finds that the liberal Rule 15 standard has been met. 11 The Court is also convinced that the State’s claims against Mr. Mercado arise out of the 12 13 same transactions or occurrences as those alleged against LTA. Mercado is the founder, sole 14 owner, and managing member of LTA. There is a clear and obvious overlap of facts and law. 15 The proposed amended complaint seeks, in a non-futile way, liability against both LTA and 16 Mr. Mercado for the actions of LTA giving rise to liability under the PTPA and CPA. 17 Accordingly, joinder is appropriate under Rule 20. 18 19 IV. CONCLUSION 20 Having reviewed the relevant pleadings and the remainder of the record, the Court 21 hereby finds and ORDERS that the State of Washington’s Motion to Amend, Dkt. #36, is 22 GRANTED. A scheduling order setting a trial date and related deadlines will follow. 23 24 DATED this 5th day of December, 2022. 25 26 A 27 RICARDO S. MARTINEZ 28 UNITED STATES DISTRICT JUDGE