9Global Inc v. Avant Credit Corporation

Filing 61

ORDER DENYING 53 MOTION FOR LEAVE TO AMEND COMPLAINT AND GRANTING 59 STIPULATION TO RELATE SUBSEQUENTLY-FILED CASE (whalc2, COURT STAFF) (Filed on 1/26/2016)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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9GLOBAL, INC.,

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For the Northern District of California

United States District Court

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No. C 15-00898 WHA

Plaintiff,
v.

ORDER DENYING MOTION
FOR LEAVE TO AMEND
COMPLAINT AND GRANTING
STIPULATION TO RELATE
SUBSEQUENTLY-FILED CASE

AVANT CREDIT CORPORATION,
Defendant.
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INTRODUCTION
In this contract dispute, plaintiff moves for leave to amend its complaint to add a new

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claim for breach of contract. For the reasons stated herein, plaintiff’s motion is DENIED. The

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parties’ stipulation to relate a subsequently-filed case is GRANTED.

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STATEMENT
The following well-pled facts are assumed to be true for purposes of the present motion.

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Plaintiff 9Global, Inc., is a personal-loan leads generator. In December 2012, 9Global entered

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into a contract with Avant Credit Corporation, a credit facility that provided and serviced

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personal loans. 9Global provided leads to Avant, and if Avant followed the lead, the parties

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shared the profits. Avant used both its own and third-party money to fund the loans. When

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Avant used third-party funds, it deducted the interest rate paid to third parties (cost of capital)

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before dividing the profits with 9Global. Under this agreement, Avant did not subtract any cost

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of capital when it funded loans using exclusively its own money (Compl. ¶¶ 1, 2, 6, 8).

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In January 2014, the parties entered into “a more-detailed version of the [2012] Lead

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Provider Agreement” (id. ¶ 7). This contract was fully integrated and superseded all “other

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agreements, understandings, representations or warranties.” The contract defined cost of capital

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as “the cost of capital at current negotiated interest of 16% APR (subject to change based on

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future changes to credit facility).” When calculating the net lead revenue, the parties subtracted

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the cost of capital and default amounts from the interest revenue plus the collected default

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amounts (Compl., Exh. 2 at 4, 7). From January through June 2014, Avant continued to deduct

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For the Northern District of California

United States District Court

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the cost of capital only when it used third-party funds, not its own (Compl. ¶ 8).
In June 2014, however, Avant unilaterally began deducting the cost of capital when

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loaning from its own funds. This reduced the overall revenue 9Global received per loan.

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9Global did not object to this change because Avant assured that it would be temporary. Avant

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employees orally reassured 9Global of Avant’s desire for a long-term relationship, provided

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9Global with long-term projections of profitability, and promised that the future cost-of-capital

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percentage rate would decrease beginning in November 2014 (id. ¶¶ 9–11).

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In November 2014, however, the rate remained at sixteen percent. 9Global objected.

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Avant refused to lower the rate as promised, and 9Global subsequently withdrew from the

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contract (id. ¶¶ 13, 17). 9Global claims that Avant breached the contract in June 2014 by

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deducting the cost of capital from the net lead revenue when Avant used its own funds.

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9Global filed its original complaint in February 2015. It filed an amended complaint in

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August 2015, alleging a single claim for breach of contract. The case management order set

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August 31, 2015, as the last date to move for leave to amend the pleadings. In November 2015,

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an order granted in part the parties’ stipulation to push back the discovery cutoff and the trial

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date, granting a ten-week extension for each and setting the discovery cutoff for July 8, 2016,

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and trial for October 31, 2016. That order, however, stated that “[n]o more extensions will be

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granted” (Dkt. No. 51).

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Now, 9Global moves for leave to amend its complaint to add a new claim for breach of

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contract. Essentially, 9Global alleges that during a mediation, it learned that Avant planned to

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further breach the contract by “not pay[ing] 9Global its profits relating to loans and reloans of

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existing customers” (Mot. at 1). 9Global also seeks to “modify the scheduling order to

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accommodate its filing,” but does not provide any specific proposed changes to the scheduling

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order (Mot. at 1).

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Concurrent with the filing of this motion, 9Global filed a new action against Avant

Avant Credit Corporation, 15-CV-5543-JD). The day before the hearing on the instant motion,

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the parties filed a stipulation to relate the newly filed complaint to the undersigned judge. This

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For the Northern District of California

alleging the same breach of contract alleged in its proposed amended complaint (9Global Inc. v.

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United States District Court

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order follows full briefing and oral argument.

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ANALYSIS
Under Rule 16(b), a plaintiff moving to amend a pleading after the date established by a

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pretrial scheduling order must show good cause for the delay. “[L]ate amendments to assert

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new theories are not reviewed favorably when the facts and the theory have been known to the

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party seeking amendment since the inception of the cause of action.” Acri v. Int’l Ass’n of

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Machinists and Aerospace Workers, 781 F.2d 1393, 1398 (9th Cir. 1986). “Rule 16(b)’s ‘good

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cause’ standard primarily considers the diligence of the party seeking amendment.” Johnson v.

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Mammoth Recreations, Inc., 975 F.2d 604, 609 (9th Cir. 1992).

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Here, 9Global has failed to show good cause for its delay in seeking to amend the

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complaint. 9Global only offers one relevant sentence of sworn testimony in support of its

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motion, in which counsel stated: “After the First Amended Complaint was filed, on or around

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August 31, 2015, Defendant announced that it would stop paying 9Global for the loans and

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reloans of existing customers” (Ardalan Decl. at 1). This sworn record is insufficient to

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demonstrate good cause. 9Global has provided no details regarding when exactly it learned of

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this new information, how it learned of it, or why it did not learn of it sooner. Moreover,

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9Global told the Court in October that it imminently planned to amend its complaint and/or file

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a new action. Yet, it waited until December to file the instant motion. We are simply too far

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into the case to allow this type of amendment on such a thin sworn record.

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9Global’s motion relies heavily on Rule 15’s heavy presumption in favor of allowing

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amendment. That presumption, however, does not apply when the party seeking to amend does

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so after the date set by the scheduling order. As stated above, 9Global must show good cause

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and demonstrate diligence. It has failed to do so.

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CONCLUSION

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For the reasons stated herein, 9Global’s motion for leave to amend its complaint is

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Inc. v. Avant Credit Corporation, 15-CV-5543-JD) shall be RELATED to the undersigned judge.

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For the Northern District of California

United States District Court

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DENIED. Pursuant to the parties’ stipulation (Dkt. No. 59), the recently-filed case (9Global

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IT IS SO ORDERED.

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Dated: January 26, 2016.

WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

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