ESI Group et al v. Wave Six, LLC et al

Filing 54

ORDER Granting 47 Plaintiffs' Motion for Leave to Amend Complaint. Plaintiffs must file an amended complaint on or before 6/7/2019. Signed by Judge Anthony J. Battaglia on 5/24/2019. (acc)

1
2
3
4
5
6
7
8

UNITED STATES DISTRICT COURT

9

SOUTHERN DISTRICT OF CALIFORNIA

10
11
12
13

ESI GROUP, a foreign corporation, ESI
NORTH AMERICA, INC., a Michigan
corporation, and ESI US R&D, INC. a
Michigan corporation,

Case No.: 17-CV-02293-AJB-MSB
ORDER GRANTING PLAINTIFFS’
MOTION FOR LEAVE TO AMEND
COMPLAINT

Plaintiffs,

14
15

v.

16

19

WAVE SIX, LLC, a California limited
liability company, PHILIP SHORTER, an
individual, VINCENT COTONI, an
individual, SASCHA MERZ, an
individual, and TERENCE CONNELLY,
an individual,

20

Defendants.

17
18

(Doc. No. 47)

21
22

Pending before the Court is Plaintiffs ESI Group, ESI North America, Inc., and ESI

23

US R&D, Inc.’s (collectively referred to as “Plaintiffs” or “ESI”) motion for leave to

24

amend their complaint. (Doc. No. 47.) Defendants Wave Six, Philip Shorter, Vincent

25

Cotoni, Sascha Merz, and Terence Connelly (collectively referred to as “Defendants”) filed

26

an opposition to Plaintiffs’ motion. (Doc. No. 49.) For the reasons set forth more fully

27

below, the Court GRANTS Plaintiffs’ motion.

28

///
1
17-CV-02293-AJB-MSB

1

I.

BACKGROUND

2

Plaintiffs contend their copyright protected writings, property, and trade secrets were

3

copied and used by Defendants. (Doc. No. 1 at 1.) Specifically, Plaintiffs allege all four of

4

the individual Defendants worked for ESI at one point in time but left and began working

5

for Wave Six, a direct competitor. (Id. at 2.) Moreover, the Plaintiffs claim the individual

6

Defendants used and continue to use Plaintiffs’ trade secret file format with their new

7

employer. (Id.)

8

Plaintiffs filed their complaint on November 11, 2017 in the United States District

9

Court in the Southern District of California. (Id. at 1.) Plaintiffs seek to add Dassault

10

Systemes Simulia Corp. (“Dassault”) as a defendant, due to Defendant Wave Six’s merger

11

with Dassault in October 2017. (Doc. No. 47-1 at 3.)

12

II.

LEGAL STANDARD

13

Pursuant to Federal Rule of Civil Procedure 15, leave to amend should be “freely

14

give[n] [] when justice so requires.” Fed. R. Civ. P. 15(a)(2). “This policy is to be applied

15

with extreme liberality.” Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th

16

Cir. 2003) (citation and internal quotation marks omitted). In Foman v. Davis, 371 U.S.

17

178 (1962), the Supreme Court offered several factors for district courts to consider in

18

deciding whether to grant a motion to amend under Rule 15(a):

19

In the absence of any apparent or declared reason—such as
undue delay, bad faith or dilatory motive on the part of the
movant, repeated failure to cure deficiencies by amendments
previously allowed, undue prejudice to the opposing party by
virtue of allowance of the amendment, futility of amendment,
etc.—the leave sought should, as the rules require, be ‘freely
given.’

20
21
22
23
24
25
26
27

Id. at 182. Additionally, “[a]bsent prejudice, or a strong showing of any of the remaining
Foman factors, there exists a presumption under Rule 15(a) in favor of granting leave to
amend.” Eminence Capital, 316 F.3d at 1052.
///

28
2
17-CV-02293-AJB-MSB

1

III.

DISCUSSION

2

Plaintiff contends that Defendant will not suffer any prejudice and the amendment

3

is not based on bad faith or undue delay. (Doc. No. 47-1 at 7.) Further, counsel for

4

Defendant Wave Six has identified in previous documents that Wave Six was merged into

5

Dassault and stated the case caption would be corrected. (Doc. No. 24-1 at 1.) Plaintiffs

6

are not seeking to add additional operative facts. (Doc. No. 47-1 at 10.)

7

A.

8

Defendants’ primary opposition to the proposed amendments center on the factor of

9

futility. (Doc. No. 49 at 4.) Defendants allege that Plaintiffs’ amendments if granted would

10

be futile because Plaintiffs refer to both Wave Six and Dassault as “Wave Six” where

11

applicable in the proposed First Amended Complaint, creating confusion and ambiguity.

12

(Doc. No. 47-3 at 49.)

Futility of Amendment Foman Factor

13

A court may deny leave to amend if the proposed amendment is futile or would be

14

subject to dismissal. See Carrico v. City & Cty. Of San Francisco, 656 F.3d 1002, 1008

15

(9th Cir. 2001). The test of futility “is identical to the one used when considering the

16

sufficiency of a pleading challenged under Rule 12(b)(6).” Miller v. Rykoff-Sexton, Inc.,

17

845 F.2d 209, 214 (9th Cir. 1988), implied overruling on other grounds by Ashcroft v.

18

Iqbal, 556 U.S. 662 (2009). “While some courts liken the futility inquiry with that of a

19

motion to dismiss, most recognize that ‘[d]enial of leave to amend on [futility] ground [s]

20

is rare.’” Defazio v. Hollister, Inc., No. Civ. 04–1358, 2008 WL 2825045, at *2 (E.D. Cal.

21

July 21, 2008) (quotation omitted).

22

Defendants contend that Plaintiffs’ use of “Wave Six” as a reference to both Wave

23

Six and Dassault creates confusing and ambiguous allegations. (Doc. No. 49 at 4.)

24

Therefore, Defendants assert, the Plaintiffs’ proposed First Amended Complaint fails to

25

give each defendant fair notice of their claim against each party. (Id. at 6.) Plaintiffs assert

26

the complaint is sufficient to inform each Defendant of Plaintiffs’ claims against them and

27

the Court agrees. Under California Corporations Code § 1107(a), “the separate existence

28

of the disappearing corporations ceases [upon merger] and the surviving corporation . . .
3
17-CV-02293-AJB-MSB

1

shall be subject to all the debts and liabilities of each in the same manner as if the surviving

2

corporation had itself incurred them.” Because Dassault and Wave Six merged in October

3

2017, Dassault is now subject to the liabilities that Wave Six incurred. Thus, Plaintiffs’

4

proposed amendments reasonably group Dassault together with Wave Six. Accordingly,

5

the Court finds the Plaintiff has sufficiently given notice without confusion to the

6

Defendants of their claim against each party for the purpose of leave to file an amended

7

complaint.

8

B.

9

Defendant also contends that ESI unreasonably delayed in filing its motion. (Doc.

10

No. 49 at 6.) “Relevant to evaluating the delay issue is whether the moving party knew or

11

should have known the facts and theories raised by the amendment in the original

12

pleading.” Jackson v. Bank of Hawaii, 902 F.2d 1385, 1388 (9th Cir. 1990). Although

13

Wave Six merged with Dassault in October 2017, Plaintiffs filed their Complaint in

14

November 2017 without mention of Dassault. (See generally Doc. No. 1.) However,

15

Plaintiffs claim that Defendants informed them of the merger after the original Complaint

16

was filed. (Doc. No. 47-1 at 2.) Additionally, Defendants addressed the merger in their

17

motion to dismiss in January 2018, stating the entities named would be corrected. (Doc.

18

No. 24-1 at 1.) Because Defendants have not yet taken actions to correct the entities named,

19

Plaintiffs reasonably move to amend. Plaintiffs also first attempted to seek Defendants’

20

concurrence to the proposed amendments in November 2018. (Doc. No. 47-3, Ex. 4 at

21

104.)

Undue Delay Foman Factor

22

Moreover, this is the first time Plaintiff has sought leave to amend his complaint.

23

Discovery has not yet commenced, and the amendments do not change the parties’ position.

24

Thus, finding that there is no evidence that Plaintiffs delayed in bringing this motion, this

25

factor weighs in favor of granting leave to amend. See Davis v. Powell, 901 F. Supp. 2d

26

1196, 1212 (S.D. Cal. 2012) (holding that undue delay is delay that “prejudices the

27

nonmoving party or imposes unwarranted burdens on the court.”).

28

///
4
17-CV-02293-AJB-MSB

1

C.

2

Defendants do not raise the remaining Foman factors. However, the Court finds the

3

majority of the remaining factors support granting leave to amend.

4
5

The Remaining Foman Factors

First, there is no indication that Plaintiff seeks amendment in bad faith. See Cf. Leon
v. IDX Sys. Corp., 464 F.3d 951, 961 (9th Cir. 2006).

6

As to prejudice, the factor that carries the “greatest weight” among the five Foman

7

factors, Eminence Capital, LLC, 316 F.3d at1052, the Court finds that Plaintiffs have not

8

altered or transformed the causes of action pled in their complaint in comparison with their

9

proposed amended complaint. (See generally Doc. No. 47-3 at 47–94.) As the allegations

10

that led up to their claims remain the same, Defendants would not be substantially

11

prejudiced by amendment; nor does the opposition brief argue that it will suffer prejudice

12

if amendment is granted. Thus, this factor weighs in favor of granting leave to amend. See

13

DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 187 (9th Cir. 1987) (noting that the party

14

opposing amendment “bears the burden of showing prejudice.”); see also United States v.

15

Webb, 655 F.2d 977, 980 (9th Cir. 1981) (finding that mere addition of new claims in a

16

proposed amended complaint is insufficient to support denial under Rule 15); Mayeaux v.

17

Louisiana Health Serv. and Indem. Co., 376 F.3d 420, 427 (5th Cir. 2004) (finding that

18

when an amendment merely incorporates alternative theories using existing facts, it falls

19

safely within Rule 15(a)’s policy of promoting litigation on the merits over procedural

20

technicalities). In sum, the Foman factors weigh in favor of granting leave to amend.

21

V.

CONCLUSION

22

For the foregoing reasons, and in the interests of judicial economy, Plaintiffs’ motion

23

for leave to amend is GRANTED. Plaintiffs must file an amended complaint on or before

24

June 7, 2019.

25

IT IS SO ORDERED.

26

Dated: May 24, 2019

27
28
5
17-CV-02293-AJB-MSB

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
6
17-CV-02293-AJB-MSB