Youngevity International, Corp. v. Smith et al

Filing 738

ORDER Granting 628 Motion for Leave to File Fifth Amended Complaint. The Plaintiffs Shall File Their Amended Complaint on or before 4/10/2020. Signed by Judge Barry Ted Moskowitz on 3/24/2020. (sxa)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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Youngevity International, et al.,
Plaintiffs,

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v.
Todd Smith, et al.,
Defendants.

Case No.: 3:16-cv-704-BTM-JLB
ORDER GRANTING MOTION FOR
LEAVE TO FILE FIFTH AMENDED
COMPLAINT
[ECF NO. 628]

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Before the Court is the plaintiffs’ motion for leave to file a fifth amended

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complaint to allow Plaintiff Youngevity International Corp. (“Youngevity”) to add

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claims for breach of contract against Defendants Dave Pitcock, Barb Pitcock, Todd

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Smith, Blake Graham, Andre Vaughn, and Total Nutrition, Inc. (collectively, the

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“Distributor Defendants”). (See ECF No. 628; see also 628-3, at 81-83.)

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“After a party has amended a pleading once as a matter of course, it may

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only amend further after obtaining leave of the court, or by consent of the adverse

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party.” Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003)

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(citing Fed. R. Civ. P. 15(a)). Rule 15 provides that “[t]he court should freely give

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leave when justice so requires.” Fed. R. Civ. P. 15(a)(2). “This policy is to be

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applied with extreme liberality.” Eminence Capital, 316 F.3d at 1051. Indeed, “[i]n

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exercising its discretion a court must be guided by the underlying purpose of Rule

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15—to facilitate decision on the merits rather than on the pleadings or
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technicalities.” DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987)

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(internal quotations and citations omitted).

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frequently used to assess the propriety of a motion for leave to amend: (1) bad

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faith, (2) undue delay, (3) prejudice to the opposing party, (4) futility of amendment;

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and (5) whether plaintiff has previously amended his complaint.” Allen v. City of

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Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990). Moreover, where a motion to

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amend is filed after the deadline set by the Court for filing such a motion, the

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movant must demonstrate “good cause” as to why the schedule should be

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amended. Fed. R. Civ. P. 16(b)(4).

Nevertheless, “[f]ive factors are

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Here, the defendants have failed to demonstrate they will suffer prejudice

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from the grant of the requested leave to amend. See DCD Programs, 833 F.2d at

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187 (“The party opposing amendment bears the burden of showing prejudice.”)

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(citations omitted). The facts underlying the proposed claims are already at issue

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in this action given that they form one of Youngevity’s defenses to the Distributor

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Defendants’ breach of contract counterclaims. (See ECF No. 670-1, at 8-17

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(seeking summary judgment based upon the Distributor Defendants “cross-

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recruiting” activities).) The defendants’ vague assertion that they “would have

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conducted discovery differently” had Youngevity added its proposed claims earlier

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in this litigation is insufficient to support a finding of prejudice given their failure to

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delineate any additional discovery required to defend against Youngevity’s “new”

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allegations. (See ECF No. 639, at 8-9.) Additionally, that the defendants have

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incurred significant expenses in defending against Youngevity’s attempts to

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compel arbitration – and will incur significant expenses in defending against the

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proposed claims if amendment is allowed – are not sufficient to establish prejudice

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where, as here, there is an absence of a showing of bad faith or that such expenses

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were ultimately avoidable. See United States v. United Healthcare Ins. Co., 848

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F.3d 1161, 1184-85 (9th Cir. 2016).

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Further, the Court concludes that the plaintiffs have demonstrated good
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cause under Rule 16(b)(4) – and the absence of undue delay under Rule 15(a) –

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in the filing of their instant motion given that the Distributor Defendants’ breach of

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contract counterclaims were stayed pending interlocutory appeal (ECF No. 560, at

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2) and prior attempts to amend the plaintiffs’ complaint to include the proposed

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claims may have mooted the appeal or needlessly increased litigation. While the

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Ninth Circuit ultimately upheld this Court’s conclusion that Youngevity had waived

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its right to compel arbitration, the plaintiffs moved for leave to amend less than ten

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days after the issuance of the relevant mandate. (See ECF No. 650.) Additionally,

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while the defendants argue that Youngevity “engag[ed] in tactical gamesmanship”

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in the manner by which it sought to compel arbitration or otherwise seek

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adjudication of the breach of contract claims and counterclaims (ECF No. 639, at

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7), the defendants nonetheless fail to demonstrate such efforts were wholly without

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merit, motivated by an improper motive, or otherwise made in bad faith.

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Finally, the defendants have failed to demonstrate the futility of the proposed

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amendment, as their arguments concerning the lack of evidence to support

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Youngevity’s allegations of damages proximately caused by the Distributor

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Defendants’ purported breaches are inapposite to a motion seeking leave to

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amend. 1 See Missouri ex rel. Koster v. Harris, 847 F.3d 646, 656 (9th Cir. 2017)

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(“An amendment is futile when no set of facts can be proved under the amendment

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to the pleadings that would constitute a valid and sufficient claim or defense.”

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(internal quotations and citations omitted)).

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procedural history of this case and guided by Rule 15(a)’s purpose of resolving

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disputes on their merits, the Court is reluctant to conclude that Youngevity has

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waived its breach of contract claims against the Distributor Defendants by its

Moreover, given the unusual

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The Distributor Defendants may raise such arguments in a timely-filed motion for
summary judgment. The Court reminds the parties of the limitations on further
motion practice in this matter. (See ECF No. 675, at 3-4.)
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efforts in seeking to compel arbitration.

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Based upon the foregoing, the plaintiffs’ motion for leave to file a fifth

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amended complaint (ECF No. 628) is GRANTED and the plaintiffs may file an

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amended complaint in the form of the proposed fifth amended complaint attached

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to their motion as Exhibit A (ECF No. 628-3). The plaintiffs shall file their amended

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complaint on or before April 10, 2020.

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IT IS SO ORDERED.
Dated: March 23, 2020

______________________________
Honorable Barry Ted. Moskowitz
United States District Judge

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