Challenge Printing Company, Inc. v. Electronics For Imaging Inc.

Filing 46

Order Granting 39 Motion for Leave to File Second Amended Complaint. Signed by Judge Edward J. Davila on 8/16/2021. (ejdlc3S, COURT STAFF) (Filed on 8/16/2021)

Case 5:20-cv-04659-EJD Document 46 Filed 08/16/21 Page 1 of 4

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

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CHALLENGE PRINTING COMPANY,
INC.,

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Plaintiff,
v.

United States District Court
Northern District of California

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ELECTRONICS FOR IMAGING INC.,

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Case No. 5:20-cv-04659-EJD
ORDER GRANTING MOTION FOR
LEAVE TO FILE SECOND AMENDED
COMPLAINT

Defendant.

Re: Dkt. No. 39

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This case arises out of a licensing agreement between Plaintiff, the Challenge Printing

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Company, Inc. (“Challenge Printing”), and Defendant, Electronics for Imaging, Inc. (“EFI”), for

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software to aid in Challenge Printing’s printing enterprise. Challenge Printing also entered into a

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contract for Professional Services with EFI. In the First Amended Complaint, Challenge Printing

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asserts claims for breach of contract, intentional as well as negligent misrepresentation, unfair

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competition and deceit. Pending before the Court is Challenge Printing’s motion for leave to file a

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second amended complaint. Dkt. No. 39. Challenge Printing requests leave to add a claim for

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breach of the implied covenant of good faith and fair dealing and additional factual allegations to

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support other claims.

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Rule 15(a) of the Federal Rules of Civil Procedure governs motions for leave to amend and

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provides that “[t]he court should freely give leave when justice so requires.” Fed. R. Civ. P.

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15(a)(2); Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990) (leave

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should be granted with “extreme liberality”). The decision whether to grant leave to amend under

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Rule 15(a) is committed to the sound discretion of the trial court. Waits v. Weller, 653 F.2d 1288,

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Case No.: 5:20-cv-04659-EJD
ORDER GRANTING MOTION FOR LEAVE TO FILE SECOND AMENDED COMPLAINT
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Case 5:20-cv-04659-EJD Document 46 Filed 08/16/21 Page 2 of 4

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1290 (9th Cir. 1981). Leave need not be granted, however, where the amendment would cause the

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opposing party undue prejudice, is sought in bad faith, constitutes an exercise in futility, or creates

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undue delay. Foman v. Davis, 371 U.S. 178, 182 (1962); Janicki Logging Co. v. Mateer, 42 F.3d

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561, 566 (9th Cir. 1994). “Absent prejudice, or a strong showing of any of the remaining Foman

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factors, there exists a presumption under Rule 15(a) in favor of granting leave to amend.”

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Eminence Capital LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003).

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EFI raises two objections to the motion. First, EFI contends that the proposed new claim is

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futile because it is based on the same conduct underlying the breach of contract claim, and is

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therefore superfluous. See Bionghi v. Metro. Water Dist. of So. California, 70 Cal. App. 4th 1358,
1370 (1999) (claim for breach of the implied covenant that relies on the same acts and seeks the

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United States District Court
Northern District of California

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same damages as a claim for breach of contract is duplicative and may be disregarded); In re

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Facebook PPC Adver. Litig., 709 F. Supp. 2d 762, 770 (N.D. Cal. 2010) (claim for breach of the

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implied covenant that relies on the same alleged acts and seeks the same damages already claimed

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in a companion contract claim may be disregarded as superfluous). Challenge Printing counters

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that the breach of the implied covenant and breach of contract claim are distinguishable.

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Although there is some overlap of the two claims, the Court concurs with Challenge

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Printing that the proposed new claim is distinguishable. The breach of contract claim is based on,

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among other things, an allegation that EFI failed to provide Professional Services in “good and

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workmanlike manner consistent with generally accepted industry standards.” Mot. for Leave to

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File Second Am. Compl., Ex. 12, Redline of Second Am. Compl., Dkt. No. 39-12 ¶¶ 107.

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Challenge Printing’s proposed new claim for breach of the implied covenant of good faith and fair

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dealing is based on allegations that “without justification and in bad faith EFI ceased providing the

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Professional Services” that Challenge Printing had purchased; that EFI “abandoned” its efforts to

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allow Challenge Printing to use iQuote; and that EFI “unreasonably failed to cooperate with

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Challenge Printing’s performance and unreasonably failed to communicate with Challenge

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Printing to the extent that EFI believed Challenge Printing needed to take further or additional

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actions so that Challenge Printing could receive the benefit of its bargain with EFI.” Dkt. 39-12 ¶¶

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Case No.: 5:20-cv-04659-EJD
ORDER GRANTING MOTION FOR LEAVE TO FILE SECOND AMENDED COMPLAINT
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Case 5:20-cv-04659-EJD Document 46 Filed 08/16/21 Page 3 of 4

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115-120. In short, the breach of the implied covenant claim is based on additional allegations of

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abandonment, failure to cooperate, and failure to communicate that are not found in the breach of

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contract claim. Therefore, the two claims are not duplicative. See Ronpak, Inc. v. Elecs. for

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Imaging, Inc., 2015 WL 179560, at *6 (N.D. Cal. Jan. 14, 2015) (“to the extent that the plaintiff’s

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implied covenant claim for unreasonably delayed software implementation is not premised on the

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same allegations as those supporting its breach of contract claim, specifically, that EFI did not

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provide functional software to plaintiff, it is not duplicative”). It follows that the proposed

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amendment is not futile.1
Second, EFI contends that leave to amend should be denied because of Challenge

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Printing’s purported undue delay in bringing the motion and because of prejudice to EFI. The

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United States District Court
Northern District of California

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arguments are unpersuasive. Challenge Printing’s motion is timely, having been filed within the

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deadline set by the Case Management Order2 and a month prior to the discovery cut-off. To be

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sure, Challenge Printing could have filed its motion sooner; however, its failure to do so does not

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constitute undue delay. As to prejudice, the Court recognizes that discovery is nearly complete

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and that there may be unresolved discovery issues; however, EFI does not articulate any particular

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prejudice it will suffer in the event the proposed amendments are allowed. EFI does not, for

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example, identify any additional discovery it must pursue to defend against the new claim and

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allegations. Furthermore, the Court notes that the deadline for dispositive motions is not until

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January 2022 and a trial date has not been set. Therefore, the proposed amendments are unlikely

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to interfere with the case schedule.

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“The implied covenant is breached when the [defendant] unreasonably fails to cooperate with the
other party’s performance.” D’Andrea Bros. LLC v. United States, 109 Fed. Cl. 243 (2013)
(relying on Malone v. United States, 849 F.2d 1441, 1445 (Fed. Cir. 1988)).
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See Case Management Order And Referral to Court Sponsored Mediation, Dkt. No. 30 (setting
July 1, 2021 deadline for amending the pleadings).
Case No.: 5:20-cv-04659-EJD
ORDER GRANTING MOTION FOR LEAVE TO FILE SECOND AMENDED COMPLAINT
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Case 5:20-cv-04659-EJD Document 46 Filed 08/16/21 Page 4 of 4

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On balance, the Foman factors weigh in favor of granting Challenge Printing leave to file a
Second Amended Complaint. The motion is GRANTED.

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IT IS SO ORDERED.
Dated: August 16, 2021

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EDWARD J. DAVILA
United States District Judge

United States District Court
Northern District of California

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Case No.: 5:20-cv-04659-EJD
ORDER GRANTING MOTION FOR LEAVE TO FILE SECOND AMENDED COMPLAINT
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