Raymat Materials, Inc. v. A&C Catalysts, Inc.

Filing 92

ORDER DENYING MOTION FOR LEAVE TO FILE SECOND AMENDED COMPLAINT, DENYING REQUEST TO AMEND SCHEDULING ORDER, AND VACATING HEARING by Judge Alsup denying 61 Motion for Leave to File (whalc1, COURT STAFF) (Filed on 4/22/2014)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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For the Northern District of California

United States District Court

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v.
A&C CATALYSTS, INC., a New Jersey
corporation,

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Defendant and Third-Party
Plaintiff,

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ORDER DENYING
MOTION FOR LEAVE TO FILE
SECOND AMENDED COMPLAINT,
DENYING REQUEST TO AMEND
SCHEDULING ORDER, AND
VACATING HEARING

Plaintiff,

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No. C 13-00567 WHA

RAYMAT MATERIALS, INC., a
California corporation,

v.

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PROTAMEEN CHEMICALS, INC., a
New Jersey corporation,

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Third-Party Defendant.

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/

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INTRODUCTION

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In this breach-of-contract action, plaintiff moves — nine months late and two months

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before trial — to file a second amended complaint adding three fraud claims. For the reasons

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stated herein, the motion is DENIED. The hearing on May 1 is VACATED.

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STATEMENT
In February 2013, plaintiff Raymat Materials, Inc. filed a five-page complaint alleging

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breach-of-contract and sought declaratory relief. Raymat filed a first amended complaint in May

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2013 to append the exclusive supply agreement, the underlying contract for the breach by which

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it had agreed to supply lauroyl lysine to A&C Catalysts, Inc. (Dkt. No. 15).

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A May 2013 case management order set a number of deadlines including: initial

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disclosures by May 17, 2013, and leave to add any new parties or pleading amendments by June

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28, 2013 (Dkt. No. 16).

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Nine months after the deadline for pleading amendments and just two weeks before the
close of fact discovery, Raymat moved for leave to file a second amended complaint to add three

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For the Northern District of California

United States District Court

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fraud-related claims — intentional misrepresentation, false promise, and declaratory judgment

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that the agreement was null and void (Dkt. No. 56). Raymat amended its motion to request a

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modification of the scheduling order to allow the amendment shortly after (Dkt. No. 61).

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Ten days later, Raymat moved for summary judgment (Dkt. No. 64). Trial is scheduled for

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June 2014.

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Central to the parties’ dispute is the exclusive supply agreement and the alleged failure
by A&C Catalysts to purchase 24 metric tons of lauroyl lysine per year from Raymat.
In emails, dated October 26–27, 2010, Jim Turner from Raymat stated to John Wolfe
from A&C Catalysts:
John, hope all is well, I know that you haven’t heard from either
Jibing or I in a while, but I wanted to let you know that we have
begun bringing in higher volumes of LL with our new
manufacturing capabilities . . . I would like to quote you and see if
we could support your efforts again.
(Li Decl. Exh. A) (emphasis added). “LL” is lauroyl lysine.
John Wolfe responded: “Please quote me on a usage number of 6,000 lbs a month &

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growing. This business for Raymat could start 12/1/10” (ibid.) (emphasis added). Six-thousand

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pounds is 2.7 metric tons.

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Jim Turner responded: “John, we can offer $46.20Kg, 30 day terms. Let me know and
we can review your volumes and timing” (ibid.).
In November 2010, Jim Turner (Raymat) stated in an email:
John, hope all is well, I left you a message on your mobile . . . We
need to talk. As I’ve mentioned I have the volume now that we
originally talked about . . . Raymat has 2 new ventures that are
taking up much of our time. We originally fell down on the volume
commitment to you and now we would prefer to try and move the
volume to a single person that can take 2–3 tons monthly . . . If we
can move this volume through you I would be willing to roll back
your price to $42.60/kilo for the next 10 tons purchased . . . 30 day
terms . . . I would prefer doing it this way as opposed to marketing
the product directly . . . we can talk further commitment as needed.

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(Li Decl. Exh. B) (ellipses in original, emphasis added).
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Exhibit A to the agreement stated:
For the Northern District of California

United States District Court

In 2011, Raymat and A&C Catalysts entered into an exclusive supply agreement.
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Products

4/7/2011

Lysine

$42.40/kg

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Purchase Quantities minimums;

1 MT

Annual Volume Commitment

24 MT

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(Li Reply Decl. Exh. D). MT stands for metric ton. John Wolfe signed for A&C Catalysts and
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Jim Turner signed for Raymat.
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When John Wolfe was deposed in March 2014, he testified as follows:
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Q. So on October 27, 2010, which is the date of this email, you
asked Raymat to give you a quote for the volume of 2.7 metric ton
per month and growing, correct?

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A. Yes, I did.
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Q. Where did you get that volume figure?
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A.

I pulled it out of the air.

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Q. So you had no basis to make that statement about the volume
of 2.7 metric ton per month?

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MR. CHANG: Objection. That’s not what his -mischaracterization of his answer.

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Q.

You may answer, sir.
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A. For me it’s standard business practice to go out and throw
numbers out and try to get the best pricing I can.

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Q. You say as best as you can. Is there any basis for that
monthly volume of 2.7 metric ton?

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A. Not that I remember.

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(Wolfe Dep. at 68–69) (emphasis added). Six-thousand pounds is 2.7 metric tons.
This order pauses to note that the excerpts from John Wolfe’s deposition can be found

motion. Raymat argues that “[i]t is sufficient for Counsel to summarize the relevant testimony to

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inform the court of the essence of the testimony that triggered the need for the proposed

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amendment” (Reply 5). This is wrong. Please append the relevant transcripts or source

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For the Northern District of California

appended to A&C Catalysts’ opposition. Raymat failed to even append the transcript to its

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United States District Court

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documents in the future.

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In Raymat’s four-page motion for leave to file a second amended complaint, Raymat

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argues that these lines of Wolfe’s testimony provide the basis for the new proposed fraud claims.

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In its reply, Raymat states: “Right after the deposition, Raymat filed the instant Motion based on

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Mr. Wolfe’s deposition testimony that he pulled the 2.7 MT per month volume out of thin air”

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(Reply 1). Raymat’s theory is that A&C Catalysts lied to get a good price when it had no

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intention of honoring a 24 metric ton per year commitment.

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ANALYSIS
The case management order listed June 28, 2013, as the deadline for filing amendments.

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After an amendment deadline passes, a scheduling order may be modified only for good cause.

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See FRCP 16. Our court of appeals has held:

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The pretrial schedule may be modified if it cannot reasonably be
met despite the diligence of the party seeking the extension. If the
party seeking the modification was not diligent, the inquiry should
end and the motion to modify should not be granted.

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Zivkovic v. S. Cal. Edison Co., 302 F.3d 1080, 1087 (9th Cir. 2002) (internal citations omitted).
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If the movant is not diligent, the inquiry ends. Johnson v. Mammoth Recreations, Inc.,
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975 F.2d 604, 607–08 (9th Cir. 1992).
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No diligence has been shown by Raymat. This order finds no good cause for amending

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the scheduling order to allow Raymat to add in three new claims. Raymat’s motion is more than

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nine months late and fact discovery is currently closed.

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Raymat mistakenly focuses on how quickly it moved to amend following the deposition.

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This does not demonstrate diligence for the real dragging of the feet is Raymat’s utter failure to

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propound any requests for production from May 2013 (after initial disclosures were exchanged)

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to September 2013 (when Raymat served its first set of requests for production) and to wait until

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December 2013 to serve its deposition notice on John Wolfe, a key figure in this action.

the ADR session concluded to begin propounding discovery requests. Court-ordered mediation

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For the Northern District of California

No decent explanation is provided for this delay. It seems that Raymat waited until after

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United States District Court

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does not suspend the discovery schedule. The case management order stated:

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While the Court encourages the parties to engage in settlement
discussions, please do not ask for any extensions on the ground of
settlement discussions or on the ground that the parties
experienced delays in scheduling settlement conferences,
mediation, or ENE. The parties should proceed to prepare their
cases for trial. No continuance (even if stipulated) shall be granted
on the ground of incomplete preparation without competent and
detailed declarations setting forth good cause.

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(Dkt. No. 16). Raymat should have proceeded expeditiously. Perhaps, had it done so, it would
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have “discovered” these three new fraud claims at a much earlier date.
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Moreover, Raymat blows smoke, contending that the only reason the deposition took
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place in March 3 was a result of A&C Catalysts inability to hold the deposition on January 22,
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when it was initially noticed for by Raymat (Reply 1). The record does not reflect stalling by
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A&C Catalysts and absent continuous efforts to delay, Raymat can hardly claim that an opposing
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party’s inability to comply with an initial notice date set by an adverse party preserves diligence
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in discovery. In any event, Raymat’s failure to be diligent dooms its tardy motion.
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The foregoing is sufficient but there is more. These three new fraud claims arise from the
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same contract signed by John Wolfe and Jim Turner. To bring on three new claims two months
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before trial based on seven words in a deposition — “I pulled it out of the air” — is nonsensical.
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In negotiations such as this where a minimum buy quantity is being negotiated, each side
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is entitled to negotiate for whatever amount they can get away with. It is, after all, a contract
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negotiation and neither side wants to leave “money on the table.” There is nothing inherently

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wrong with one side or the other bargaining for a higher/lower amount than what they would be

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willing to accept. It is okay in a negotiation, therefore, for one side or the other to “pull a

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number out of the air” as their starting point, or intermediate point, or even end point. Neither

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side is required to lay bare its negotiating strategy. This is America and the other side is free to

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walk away if they do not like it.

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Perhaps a false promise is actionable as a species of fraud but the deposition snippet falls

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short of suggesting fraud and is consistent with innocent negotiations. At this very late hour in

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the case, the snippet is simply not enough to scrap the schedule and to dive back into discovery.

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For the Northern District of California

United States District Court

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Since the foregoing reasons are sufficient to deny Raymat’s motion, this order need not
reach the merits of the bad faith, prejudice, FRCP 12(b), and FRCP 9(b) arguments.

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CONCLUSION
For the foregoing reasons, Raymat’s motion for leave to file a second amended complaint

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is DENIED. The request to amend the scheduling order is DENIED AS MOOT. The hearing on

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May 1 is VACATED.

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IT IS SO ORDERED.

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Dated: April 22, 2014.

WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

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