McDonald Apiary, LLC v. Starrh Bees, Inc., et al

Filing 180

MEMORANDUM AND ORDER - McDonald's Motion for Leave to Amend Second Amended Complaint (filing 135 ) is granted. McDonald's Third Amended Complaint (filing 137 -2), a copy of which was attached to its motion, shall be filed on or before September 21, 2016. On or before September 21, 2016, the parties shall confer and contact the Magistrate Judge's chambers to set a conference for the purpose of discussing any additional discovery or scheduling issues that may be required as a result of the Third Amended Complaint. Ordered by Judge John M. Gerrard. (GJG)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
MCDONALD APIARY, LLC, a
Nebraska Limited Liability Company,
Plaintiff,
vs.

8:14-CV-351
MEMORANDUM AND ORDER

STARRH BEES, INC., a California
Corporation, et al.,
Defendants.
This matter is before the Court on McDonald Apiary, LLC's motion for
leave to file a third amended complaint (filing 135). McDonald's motion will
be granted.
I. BACKGROUND
McDonald filed its initial complaint on November 12, 2014, and filed an
amended complaint on November 19. Filing 1; filing 6. On July 9, 2015, the
Court entered its final progression schedule consistent with the parties' Fed.
R. Civ. P. 26(f) report, setting an August 31 deadline for McDonald to move
for leave to file an amended pleading. Filing 46. On August 31, McDonald
filed an unopposed motion to file a second amended complaint. Filing 57. The
motion was granted, see filing 58, and McDonald's operative Second Amended
Complaint was filed September 1. Filing 59.
The operative Second Amended Complaint contains ten claims: (1)
Theft of Trade Secrets under Neb. Rev. Stat § 87-501 et seq.; (2) Trespass; (3)
Breach of Contract; (4) Tortious Interference with Business Relationships
and Expectancies; (5) Conversion; (6) Deceptive Trade Practices under Neb.
Rev. Stat. §§ 87-301-306; (7) Fraud; (8) Negligence; (9) Quantum Meruit; and
(10) Unjust Enrichment. See filing 59 at 9-21. Although many of McDonald's
claims center on a 2014 oral contract allegedly entered into by the parties,
other claims—such as the trade secrets and deceptive trade practices
claims—allege that the defendants purposefully stole beehive location data in
order to advance their business and harm McDonald. See filing 59.
Throughout the progression of this case, the parties moved for several
deadline extensions, but never sought to amend the deadline for amending

the pleadings or adding parties. Based on the case's current progression
schedule, trial is set for October 24, 2016, and all other progression deadlines
have passed.
McDonald filed the current motion for leave to amend its complaint on
June 30, 2016. Filing 135. In its proposed Third Amended Complaint,
McDonald seeks to add new facts and allegations to several claims. McDonald
argues that through the defendants' discovery responses in late March 2016,
depositions of the defendants' employees, and by defendant Starrh Bees'
placement of its hives for the 2016 season beginning in May 2016, it learned:
•
•
•

Starrh was placing hives in such large numbers that they
could serve no beekeeping purpose;
Starrh was continuing to expand its placement of hives
near and on the same land as McDonald's hives for the
2016 season; and
"Starrh personnel were impersonating McDonald Apiary in
order to deceive McDonald Apiary's landowners into
allowing Starrh to place its hives on their lands."

Filing 155 at 8-9. McDonald argues it could not have possibly known by the
August 2015 amendment deadline the extent of damage caused by Starrh's
actions because the honey production season was not complete, it did not
know its business partner would refuse to come back (allegedly due to
Starrh's actions), it did not know the placement of all Starrh's hives during
the 2015 season and at that time, and it did not know Starrh would continue
its actions into the 2016 honey season.
II. DISCUSSION
1. GOOD CAUSE
In general, courts are encouraged to allow amendments liberally. Shen
v. Leo A. Daly Co., 222 F.3d 472, 478 (8th Cir. 2000). However, the initial
question is whether McDonald should be permitted to amend its complaint
outside the deadline provided by the scheduling order. "If a party files for
leave to amend outside of the court's scheduling order, the party must show
cause to modify the schedule." Sherman v. Winco Fireworks, Inc., 532 F.3d
709, 716 (8th Cir. 2008). The good cause requirement found in Fed. R. Civ. P.
16(b) for amending pleadings after the scheduling deadline for doing so has
passed "is not optional." Id.
The movant's level of diligence and the degree of prejudice to the
parties are both factors to consider when assessing if good cause warrants
extending a case management deadline, with the movant's diligence being
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the first consideration and the extent of prejudice to either party considered
only following a requisite threshold finding of due diligence. Id. at 716-17;
Marmo v. Tyson Fresh Meats, Inc., 457 F.3d 748, 759 (8th Cir. 2006). "Where
there has been 'no change in the law, no newly discovered facts, or any other
changed circumstance . . . after the scheduling deadline for amending
pleadings,' [the Court] may conclude that the moving party has failed to show
good cause." Hartis v. Chicago Title Ins. Co., 694 F.3d 935 (8th Cir. 2012)
(quoting Sherman, 532 F.3d at 718).
The defendants argue that McDonald's newly alleged facts arise out of
the 2015 honey season—i.e., May to September 2015—and that McDonald
was aware of at least some of the defendants' alleged activity in September
2015 at the latest. See filing 151 at 19-24. However, McDonald contends that
the scope of Starrh's alleged activities was not clear until after production
and depositions in March and April 2016. Filing 155 at 3-5. And McDonald
contends that, once that information was available, it was able to determine
during the 2016 honey season that Starrh's alleged activity was continuing.
Filing 155 at 5-6.
This is, to be candid, not a dispute that the Court is well-positioned to
resolve—at least, not without reviewing the parties' discovery materials in
their entirety, which would create more delay than it could prevent. The
defendants argue that McDonald "points to no specific discovery from
Starrh . . . supporting its claim that it just learned of this 'new' information
from the discovery Starrh has produced in the case." Filing 151 at 22. But the
Court finds that McDonald has credibly explained why the scope of Starrh's
alleged activity was not clear to it before April 2016, even if certain instances
of the alleged conduct were known.
Based on that showing, the Court finds that McDonald acted diligently
in moving to amend its complaint. The Court is persuaded that McDonald's
additional allegations were unavailable—or, at least, not clearly available—
until shortly before McDonald moved for leave to amend. And for reasons
that will be explained more fully below, the Court finds that any prejudice to
the defendants is not sufficient to warrant precluding McDonald from
alleging its newly discovered facts in support of its claims, or precluding
McDonald from having newly discovered claims addressed on the merits. The
Court finds that good cause has been shown to allow amendment beyond the
progression deadline.
2. LEAVE TO AMEND
Once the moving party is able to show good cause, under Fed. R. Civ. P.
15(a)(2), a pleading may only be amended if the opposing party provides
written consent or with leave of court. "[A]bsent a good reason for denial—
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such as undue delay, bad faith or dilatory motive, repeated failure to cure
deficiencies by amendments previously allowed, undue prejudice to the nonmoving party, or futility of amendment—leave to amend should be granted."
Kozohorsky v. Harmon, 332 F.3d 1141, 1144 (8th Cir. 2003). But there is no
absolute right to amend a pleading. Hammer v. City of Osage Beach, 318 F.3d
832, 844 (8th Cir. 2003). In this case, the defendants argue that they would
be unduly prejudiced by the amendment and that the proposed amendments
are futile.1
(a) Prejudice from Amendment
Starrh argues that if McDonald is allowed to amend, it will be
prejudiced. Specifically, Starrh argues that the case would be delayed
because the Court would have to allow additional discovery so that Starrh
can defend against McDonald's new allegations. Additionally, because this
trial is scheduled for North Platte, Starrh argues the trial cannot be
scheduled until February or May, both of which are busy months for the beekeeping industry. And finally, Starrh argues that its counsel is busy with
other litigation in the upcoming months and cannot "drop everything" to
reinitiate discovery.
Regarding prejudice, the Court should consider whether the
amendment "requires re-opening discovery, additional costs, and substantial
changes to the course of the case[.]" White Cap. Constr. Supply, Inc. v.
Tighton Fastener & Supply Corp., 8:08-cv-264, 2010 WL 3636263 (D. Neb.
Sept. 9, 2010). Because of the liberal amendment policy of Rule 15, any
existing prejudice must outweigh McDonald's right to have the new facts and
claims heard on the merits. See, Naylor v. Rotech Healthcare, Inc., 679 F.
Supp. 2d 505, 509 (D. Vt. 2009) (citing 6 Charles Alan Wright et al., Federal
Practice and Procedure § 1487 (2d ed. 1990 & Supp. 2009)); Jeter v.
Montgomery Cnty., 480 F Supp. 2d 1293 (M.D. Ala. 2007); Assam v. Deer Park
Spring Water, 163 F.R.D. 400 (E.D.N.Y. 1995); UNR Indus., Inc. v. Cont'l Ins.
Co., 623 F. Supp. 1319 (N.D. Ill. 1985). As a practical matter, any substantive
amendment to the pleadings will "prejudice" the party at whom the pleading
is directed—the question is whether that prejudice is undue. See Doe v.
Cassel, 403 F.3d 986, 990-91 (8th Cir. 2005).
This litigation is late in its progression: only a summary judgment
motion and motions in limine remain and trial is set to begin in late October.
The parties disagree about whether discovery would have to be reopened to
In addition, the Court finds that for the reasons substantially explained above, McDonald
has not unduly delayed seeking leave to amend. Nor does the Court find bad faith or a
dilatory motive. The only "deficiency" that McDonald is arguably attempting to correct—its
dismissed Junkin Act claim—will be discussed in greater detail below.
1

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investigate the new claim and additional allegations. Regardless, even if new
discovery is required, the new allegations and claims are closely related to
already-pending issues, and do not materially alter the nature of this case.
See Bell v. Allstate Life Ins. Co., 160 F.3d 452, 454 (8th Cir. 1998). And more
fundamentally, the burden of undertaking discovery, standing alone, does not
suffice to warrant denial of a motion to amend a pleading. Dennis v. Dillard
Dep't Stores, Inc., 207 F.3d 523, 526 (8th Cir. 2000). Nor is there anything to
suggest that the defendants are ultimately less able now than they previously
would have been to mount an effective defense. Compare Doe, 403 F.3d at
991. On balance, the Court finds that the defendants will not be so unduly
prejudiced as to outweigh McDonald's right to assert its claims.
(b) Futility of Amendment
The Court will also deny a motion for leave to amend as futile if
McDonald's proposed complaint fails to state a claim under the pleading
standard described in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007),
thereby rendering the complaint subject to dismissal under Fed. R. Civ. P.
12(b)(6). Zutz v. Nelson, 601 F.3d 842, 850-51 (8th Cir. 2010).
A complaint must contain sufficient facts which, if accepted as true,
state a claim for relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (quoting Twombly, 550 U.S. at 570). When assessing whether
a plausible claim was alleged, the Court considers only the materials that are
"necessarily embraced by the pleadings and exhibits attached to the
complaint." Whitney v. Guys, Inc., 700 F.3d 1118, 1128 (8th Cir. 2012).
McDonald need not submit documentary evidence to withstand a Rule
12(b)(6) analysis. The Court should not "incorporate some general and formal
level of evidentiary proof into the 'plausibility' requirement of Iqbal and
Twombly." Whitney, 700 F.3d at 1128-29. The question at this preliminary
stage is not whether McDonald might be able to prove its claim, but whether
it has "adequately asserted facts (as contrasted with naked legal conclusions)
to support" those claims. Id. at 1128-29.
Starrh argues that numerous components of McDonald's proposed
amended complaint are futile. Of those, only one—the Junkin Act claim—
requires significant discussion. As for the others, McDonald is for the most
part seeking to allege additional facts, arising out of events occurring after
this suit was filed, in support of its existing claims for relief.
The Court already found that McDonald had sufficiently pled its
tortious interference claim and its Uniform Deceptive Trade Practices Act
(UDTPA) claim. Filing 40 at 5-8. The defendants did not even move to
dismiss McDonald's fraud claim or negligence claim. See filing 18. And it is
almost axiomatic that a sufficiently pled claim for relief does not cease to
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state a claim when additional facts are added. Whether the new allegations
are material additions is not a question the Court has to answer. The Court
has considered McDonald's proposed amendments and concludes that, when
McDonald's allegations are read as a whole, the proposed Third Amended
Complaint states claims for relief based on tortious interference, the UDTPA,
fraud, and negligence.
McDonald's proposed Third Amended Complaint also seeks to reassert
a claim for Unlawful Restraint of Trade under the Junkin Act, Neb. Rev.
Stat. § 59-801 et seq. McDonald pleaded a Junkin Act claim in its First
Amended Complaint (filing 6), but the Court dismissed it for failure to state a
claim in May 2015. Filing 40. The defendants argue that the new Junkin Act
claim has the same deficiencies because, as relevant, it does not allege
sufficient facts to support a finding that the defendants acted with the
purpose to drive McDonald out of business. See Credit Bureau Servs., Inc. v.
Experian Info. Sols., Inc., 828 N.W.2d 147, 152 (Neb. 2013).
The Court disagrees. The proposed Third Amended Complaint alleges
that Starrh placed its hives in proximity to McDonald's hives, even though
"[t]here was no legitimate business purpose for Defendants’ placement of
thousands of bees without a place for the bees to forage." Filing 137-2 at 23.
Thus, McDonald concludes, Starrh's purpose was solely to kill McDonald's
bees and drive it out of business. Filing 137-2 at 23.
The defendants argue that the proposed amended pleading still
recognizes Starrh as a competitor of McDonald, implying that Starrh has a
legitimate competitive purpose. Filing 151 at 30-31. But even if a defendant
expects to profit from a plaintiff being driven out of business, § 59-805
"means that the prohibited act must be done with the purpose to drive the
plaintiff out of business." Credit Bureau Servs. 828 N.W.2d at 152 (emphasis
supplied). McDonald has sufficiently alleged that the defendants undertook
particular acts that had no legitimate business purpose—i.e., had no purpose
other than to drive it out of business. McDonald may or may not be able to
prove that theory, but it is enough to state a claim for relief under § 59-805.
The defendants also argue that the effect of the Court's previous
dismissal was to dismiss McDonald's Junkin Act claim "with prejudice."
Filing 151 at 28. That argument has no merit, for two reasons. First, as a
practical matter, McDonald is not reasserting the claim that was dismissed.
The allegations supporting the new Junkin Act claim arise out of completely
different facts than the previous claim—events which, in fact, are alleged to
have occurred after the previous dismissal. Compare filing 6 at 18-19 with
filing 137-2 at 22-25. Even the dismissal of a previous Junkin Act claim "with
prejudice" would not bar the allegation of a subsequent claim, based on
different facts, just because it arose under the same statutory scheme.
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But more simply, even if this was the same Junkin Act claim, the Court
could permit its reassertion. In the absence of a final judgment,
any order or other decision, however designated, that adjudicates
fewer than all the claims or the rights and liabilities of fewer
than all the parties does not end the action as to any of the claims
or parties and may be revised at any time before the entry of a
judgment adjudicating all the claims and all the parties' rights
and liabilities.
Fed. R. Civ. P. 54(b). The concept of dismissal "with prejudice" is simply not
pertinent to dismissal in an ongoing case before entry of final judgment.
In sum, the Court finds that McDonald's proposed amendments are not
futile, and should be permitted.
IT IS ORDERED:
1.

McDonald's Motion for Leave to Amend Second Amended
Complaint (filing 135) is granted.

2.

McDonald's Third Amended Complaint (filing 137-2), a
copy of which was attached to its motion, shall be filed on
or before September 21, 2016.

3.

On or before September 21, 2016, the parties shall confer
and contact the Magistrate Judge's chambers to set a
conference for the purpose of discussing any additional
discovery or scheduling issues that may be required as a
result of the Third Amended Complaint.

Dated this 14th day of September, 2016.
BY THE COURT:

John M. Gerrard
United States District Judge

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