MagTarget LLC et al v. Saldana
Filing
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ORDER GRANTING MOTION TO MODIFY SCHEDULING ORDER AND LEAVE TO FILE AMENDED COMPLAINT by Judge Jon S. Tigar granting 57 Motion for Leave to File. Amended Pleadings due by 5/6/2019. (wsnS, COURT STAFF) (Filed on 4/29/2019)
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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MAGTARGET LLC, et al.,
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Plaintiffs,
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v.
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DARRELL SALDANA,
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Defendant.
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United States District Court
Northern District of California
Case No. 18-cv-03527-JST
ORDER GRANTING MOTION TO
MODIFY SCHEDULING ORDER AND
LEAVE TO FILE AMENDED
COMPLAINT
Re: ECF No. 57
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Before the Court is Plaintiffs and Counter-Defendants MagTarget LLC’s and Jean-Michel
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Thiers’ motion to modify the scheduling order and for leave to file an amended complaint. ECF
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No. 57. The Court will grant the motion.
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I.
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BACKGROUND
Plaintiffs brought this declaratory judgment action against Defendant and Counter-
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Claimant Darrell Saldana to resolve questions of Saldana’s equity ownership in MagTarget and
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Saldana’s inventorship role in MagTarget’s patents, some of which are pending applications. ECF
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No. 1. On June 13, 2018, Plaintiffs filed a complaint, requesting a declaration that (1) Thiers is
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the sole inventor of the patents; and (2) Plaintiffs did not breach 2014 and 2016 contracts with
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Saldana and, relatedly, Saldana is not entitled to an equity stake in MagTarget or additional
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compensation under the contracts. Id. at 10.
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Saldana answered the complaint on September 19, 2018, asserting counterclaims against
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Plaintiffs and a third-party complaint against May Chen. ECF No. 20 at 13. Saldana alleged
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claims for (1) breach of contract; (2) negligent misrepresentation; (3) fraud; (4) breach of fiduciary
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duty; (5) violation of California’s Unfair Competition Law; and (6) declaratory relief. Id. at 18-
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23. Saldana amended his pleading on September 28, 2018, to add a claim for failure to pay wages.
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ECF No. 25 at 24-25.
On October 16, 2018, Plaintiffs and Chen filed a motion to dismiss, arguing that Thiers
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and Chen were not individually liable. ECF No. 30. The next day, on October 17, 2018, the Court
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issued a scheduling order setting a November 7, 2018 deadline to add parties or amend pleadings.
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ECF No. 35.1 In anticipation of further amendment from Saldana, Plaintiffs withdrew their
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motion to dismiss. ECF No. 40. On November 6, 2018, Saldana filed a timely amendment to his
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answer and counterclaim. ECF No. 44.
On February 7, 2019, three months after the deadline had passed, Plaintiffs filed this
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motion seeking to file an amended complaint. ECF No. 57.
II.
LEGAL STANDARD
United States District Court
Northern District of California
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Requests to modify a scheduling order made after the Court has set a timetable for
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amending the pleadings are governed by Federal Rule of Civil Procedure 16. Coleman v. Quaker
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Oats Co., 232 F.3d 1271, 1294 (9th Cir. 2000). Rule 16(b)(4) requires “good cause” and the
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consent of the Court to amend a scheduling order. Fed. R. Civ. P. 16(b)(4). As Plaintiffs
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acknowledge, the Court considers the diligence of the parties in deciding such a motion.
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Coleman, 232 F.3d at 1294; see also Zivkovic v. S. Cal. Edison Co., 302 F.3d 1080, 1088 (9th Cir.
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2002) (“The pretrial schedule may be modified ‘if it cannot reasonably be met despite the
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diligence of the party seeking the extension.’” (quoting Johnson v. Mammoth Recreations, Inc.,
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975 F.2d 604, 609 (9th Cir. 1992)). “Although the existence or degree of prejudice to the party
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opposing the modification might supply additional reasons to deny a motion, the focus of the
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inquiry is upon the moving party’s reasons for seeking modification. If that party was not diligent,
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the inquiry should end.” Johnson, 975 F.2d at 609 (citation omitted).
If the moving party demonstrates good cause to modify the scheduling order, the Court
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must then determine whether to grant leave to amend the complaint under Federal Rule of Civil
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Procedure 15(a)(2). See Oracle Am., Inc. v. Hewlett Packard Enter. Co., No. 16-CV-01393-JST,
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2017 WL 3149297, at *3 (N.D. Cal. July 25, 2017). Rule 15(a)(2) instructs that a “court should
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The Court issued a supplementary scheduling order on November 8, 2018, with the same
deadline to add parties or amend the pleadings. ECF No. 45.
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freely give leave [to amend] when justice so requires.” Fed. R. Civ. P. 15(a)(2). The Court
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considers five factors in deciding a motion for leave to amend: bad faith, undue delay, prejudice to
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the opposing party, futility of amendment, and whether the plaintiff has previously amended his
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complaint. In re W. States Wholesale Natural Gas Antitrust Litig., 715 F.3d 716, 738 (9th Cir.
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2013); see also Foman v. Davis, 371 U.S. 178, 182 (1962). The rule is “to be applied with
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extreme liberality.” Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003)
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(quoting Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 712 (9th Cir. 2001)).
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Generally, a court should determine whether to grant leave indulging “all inferences in favor of
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granting the motion.” Griggs v. Pace Am. Grp., Inc., 170 F.3d 877, 880 (9th Cir. 1999).
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United States District Court
Northern District of California
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III.
DISCUSSION
Plaintiffs seek to amend their complaint to assert three new claims: (1) breach of contract,
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(2) breach of the implied covenant of good faith and fair dealing, and (3) intentional
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misrepresentation. ECF No. 57 at 2.
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A.
Rule 16
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Plaintiffs argue that they satisfy Rule 16’s good cause standard because they “did not
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become aware of facts giving rise to new claims against Mr. Saldana until after the scheduling
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order had been issued.” ECF No. 57 at 5. In particular, Plaintiffs contend that documents
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produced to them in discovery in December 2018 demonstrate that Saldana did not work full time
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for MagTarget, as evidenced by Saldana’s alleged failure to send any work-related emails to
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potential clients for a 249-day period in 2015 and 2016. Id. Plaintiffs reason that they could not
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otherwise have known about this gap because Saldana worked remotely. Id. Plaintiffs also argue
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that they did not discover Saldana’s misrepresentations regarding his prior sales experience until
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after the scheduling order’s deadline passed. Id.
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Though the parties dispute whether Plaintiffs had access to Saldana’s emails prior to
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discovery, ECF No. 62 at 6-7, the Court agrees with Plaintiffs that the mere fact that the emails
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were sent to or from Saldana’s MagTarget corporate account does not, by itself, demonstrate that
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Plaintiffs had access, ECF No. 63 at 4. Furthermore, having reviewed the parties’ submissions,
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the Court is satisfied that Plaintiffs acted diligently in requesting those documents and promptly
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reviewing them once they were received. Once Plaintiffs determined that their review supported
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additional claims, they acted diligently in seeking a stipulation from Saldana’s counsel on January
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29, 2018, and filing this motion ten days later when they received no response. ECF No. 58 ¶ 5.
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As for the allegations that Saldana misrepresented his sales background, Saldana does not
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contend that these new allegations are based on previously available documents, or otherwise
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argue that Plaintiffs knew or should have known the basis for this claim before the deadline to
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amend. Cf. ECF No. 62 at 6-7.
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United States District Court
Northern District of California
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Nor has Saldana identified sufficient prejudice to negate a finding of good cause, as
explained further below. Cf. Johnson, 975 F.2d at 609 (explaining that prejudice may “supply
additional reasons to deny a motion” to modify the scheduling order).
Accordingly, the Court finds that Plaintiffs have shown good cause to modify the
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scheduling order.
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B.
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The Foman factors likewise weigh in favor of granting Plaintiffs leave to file their
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proposed amended complaint. In arguing to the contrary, Saldana primarily relies on futility and
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prejudice.
Rule 15
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First, Saldana argues that amendment would be futile because Plaintiffs’ answer to his
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counter-claims contains a binding judicial admission that Saldana did not breach his contracts.
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ECF No. 62 at 7 (citing ECF No. 44 ¶¶ 45-47; ECF No. 46 ¶¶ 45-47). This argument lacks merit.
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“Factual assertions in pleadings and pretrial orders, unless amended, are considered judicial
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admissions conclusively binding on the party who made them.” In re Bakersfield Westar
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Ambulance, Inc., 123 F.3d 1243, 1248 (9th Cir. 1997) (emphasis in original) (quoting Am. Title
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Ins. Co. v. Lacelaw Corp., 861 F.2d 224, 226 (9th Cir. 1988)). Saldana cites no authority
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suggesting that a party cannot seek leave to amend a prior “admission” in its initial pleading where
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newly discovered facts contradict the basis for its statement.
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Alternatively, Saldana argues, Plaintiffs’ new claims are deficiently pleaded in the
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proposed amended complaint. ECF No. 62 at 8-9. But “[u]nder Rule 15(a), ‘[i]f the underlying
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facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be
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afforded an opportunity to test his claim on the merits.’” Allen v. Bayshore Mall, No. 12-cv-
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02368-JST, 2013 WL 6441504, at *5 (N.D. Cal. Dec. 9, 2013) (quoting Foman, 371 U.S. at 182).
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For this reason, denial of a motion for leave to amend on the ground of futility “is rare and courts
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generally defer consideration of challenges to the merits of a proposed amended pleading until
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after leave to amend is granted and the amended pleading is filed.” Clarke v. Upton, 703 F. Supp.
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2d 1037, 1043 (E.D. Cal. 2010) (citing Netbula, LLC v. Distinct Corp., 212 F.R.D. 534, 539 (N.D.
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Cal. 2003)). Here, without formal briefing on the adequacy of these new claims, the Court is not
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in a position to determine that they fail as a matter of law. The Court therefore declines to deny
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leave to amend on that basis.
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Second, Saldana asserts that he will be prejudiced by the amendments because the issue
United States District Court
Northern District of California
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whether Saldana breached the contracts would “dramatically expand the scope of the case.” ECF
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No. 62 at 10. As Saldana notes, expert reports are due on April 26, 2019, and both fact and expert
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discovery close on May 31, 2019. See ECF No. 45 at 1. Also, subsequent to the filing of this
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motion, the parties stipulated to extend those deadlines, ECF No. 71, which request the Court will
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grant by separate order. Thus, the discovery schedule is already in flux, further weakening
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Saldana’s claim of prejudice.
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The “need to reopen discovery and therefore delay the proceedings supports a district
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court’s finding of prejudice from a delayed motion to amend the complaint.” Lockheed Martin
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Corp. v. Network Sols., Inc., 194 F.3d 980, 986 (9th Cir. 1999). Yet “[t]o overcome Rule 15(a)’s
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liberal policy with respect to the amendment of pleadings a showing of prejudice must be
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substantial. Neither delay resulting from the proposed amendment nor the prospect of additional
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discovery needed by the non-moving party in itself constitutes a sufficient showing of prejudice.”
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Stearns v. Select Comfort Retail Corp., 763 F. Supp. 2d 1128, 1158 (N.D. Cal. 2010) (citing
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Genentech, Inc. v. Abbott Labs., 127 F.R.D. 529, 530-32 (N.D. Cal. 1989)).
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As an initial matter, the Court is not persuaded that the issue whether Saldana worked full-
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time, as required by the contracts, significantly expands the contract issues in this case. Nor has
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Saldana explained what additional discovery he will require or why it cannot be accomplished
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under the current schedule, let alone shown that “any delays in the case schedule will be
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substantial or explained how they would be prejudicial.” Wroth v. City of Rohnert Park, No. 17-
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cv-05339-JST, 2018 WL 6439120, at *3 (N.D. Cal. Dec. 7, 2018). For instance, although Saldana
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emphasizes upcoming expert discovery deadlines, he does not say – nor is it obvious to the Court
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– why expert testimony will be necessary to litigate the issues whether Saldana sent work emails
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during the disputed time period or misrepresented his sales experience. See Allen, 2013 WL
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6441504, at *3 (“Defendants do not explain what experts they would retain, explain what
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discovery Defendants would seek, or identify the testimony they would elicit to respond to a
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prayer for punitive damages.”).
The remaining Foman factors further support Plaintiffs’ motion. There are no allegations
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of bad faith on Plaintiffs’ part. The most that can be gleaned from Saldana’s opposition is a
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United States District Court
Northern District of California
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suggestion that Plaintiffs were careless or not diligent in failing to assert these claims earlier. As
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explained above, the Court disagrees. Similarly, Saldana’s argument that the amendments are
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“untimely” simply recycles his diligence arguments that Plaintiffs previously had access to the
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basis for the proposed amendments. ECF No. 62 at 9-10. For the same reasons, the Court
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concludes that Plaintiffs did not unduly delay in seeking leave to amend. Finally, Plaintiffs have
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not previously amended their complaint. Cf. In re W. States Wholesale Nat. Gas Antitrust Litig.,
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715 F.3d at 739.
The Court therefore concludes that Plaintiffs have satisfied Rule 15(a)(2).
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CONCLUSION
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For the foregoing reasons, the Court GRANTS the motion to modify the scheduling order
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and for leave to file an amended complaint. Plaintiffs shall file their proposed amended
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complaint, which is attached as Exhibit A to ECF No. 54, within seven days of the date of this
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order.
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By separate order related to the parties’ recent request for an extension of the discovery
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deadlines, ECF No. 71, the Court will be inviting the parties to propose further amendments to the
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scheduling order, given the effect an extension of the discovery schedule will have on other
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deadlines.2 In responding to that order, the parties should consider what effect, if any, the present
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order has on the overall case schedule.
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IT IS SO ORDERED.
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Dated: April 29, 2019
______________________________________
JON S. TIGAR
United States District Judge
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United States District Court
Northern District of California
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For example, the parties’ proposed new discovery cut-off occurs after the deadline for the filing
of dispositive motions.
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