Steward v. CMRE Financial Services, Inc.

Filing 31

ORDER that 22 Motion for Leave to Amend Complaint is GRANTED. Plaintiff shall file and serve the amended complaint within 7 days of this order. In addition, the parties shall confer and, within 7 days of this order, submit a proposed joint discovery plan. Signed by Magistrate Judge Nancy J. Koppe on 10/16/15. (Copies have been distributed pursuant to the NEF - MMM)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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HILLARY STEWARD,
Plaintiff(s),

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vs.

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CMRE FINANCIAL SERVICES, INC.,

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Defendant(s).
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Case No. 2:15-cv-00408-JAD-NJK
ORDER GRANTING MOTION FOR
LEAVE TO AMEND
(Docket No. 22)

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Pending before the Court is Plaintiff’s motion for leave to file an amended complaint. Docket

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No. 22. Defendant filed a response, and Plaintiff replied. Docket Nos. 28, 30. Having considered the

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documents submitted and the arguments presented, the Court hereby GRANTS the motion.

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I.

BACKGROUND

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This matter arises from a series of phone calls made to Plaintiff’s cell phone. Docket No. 1 at

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4-6. Plaintiff argues she received automated debt collection messages in her voice mail, in which the

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caller misrepresented its identify. Docket No. 22 at 2. Plaintiff argues Defendant is responsible for the

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debt-collection calls, but Defendant responds the responsibility lies with Healthcare Medical Revenue

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Group (“HMRG”). Id; Docket No 28 at 2. Plaintiff replies that HMRG is a wholly owned subsidiary

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and division of Defendant, but Defendant counters HMRG is a separate entity. Docket Nos. 22 at 2;

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28 at 5. Plaintiff has therefore filed a motion for leave to amend her complaint to allege that HMRG

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is Defendant’s alter-ego. Docket No. 22 at 3. It is that motion that is presently before the Court.

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II.

STANDARDS

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When a party moves to amend the pleadings after the expiration of the deadline to do so

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established in the scheduling order, courts review the motion through a two-step process. First, courts

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treat the motion as seeking to amend the scheduling order, which is governed by the “good cause”

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standard outlined in Rule 16(b). See, e.g., Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 608

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(9th Cir. 1992).1 “Rule 16(b)’s ‘good cause’ standard primarily considers the diligence of the party

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seeking the amendment.” Id. at 609. In particular, courts look to whether the deadline set in the

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scheduling order “cannot reasonably be met despite the diligence of the party seeking the amendment.”

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Id. Although prejudice to the opposing party may also be considered, the focus of the inquiry is on the

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movant’s reasons for seeking modification. Id. “If that party was not diligent, the inquiry should end.”

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Id. The party seeking amendment bears the burden of establishing diligence. See, e.g., Morgal v.

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Maricopa County Bd. Of Supervisors, 284 F.R.D. 452, 460 (D. Ariz. 2012).

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Where “good cause” exists under Rule 16(b), courts will then examine whether amendment is

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proper under the standards outlined in Rule 15(a). Rule 15(a) provides that “[t]he court should freely

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give leave [to amend] when justice so requires,” and there is a strong public policy in favor of permitting

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amendment. Bowles v. Reade, 198 F.3d 752, 757 (9th Cir. 1999). The Ninth Circuit has made clear that

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Rule 15(a) is to be applied with “extreme liberality.” Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d

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1048, 1051 (9th Cir. 2003) (per curiam). Under Rule 15(a), courts consider various factors, including:

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

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(5) whether the plaintiff has previously amended the complaint. See id. at 1052. These factors do not

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carry equal weight, however, and prejudice is the touchstone of the analysis. See id. The party opposing

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the amendment bears the burden of showing why leave to amend should be denied. See, e.g., Desert

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Protective Council v. U.S. Dept. Of the Interior, 927 F. Supp. 2d 949, 962 (S.D. Cal. 2013) (citing

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Genentech, Inc. v. Abbott Labs., 127 F.R.D. 529, 530-31 (N.D. Cal. 1989)).

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Unless otherwise stated, references to “Rules” refer to the Federal Rules of Civil Procedure.
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III.

ANALYSIS

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The Court begins its analysis with Rule 16(b)’s good cause standard and its focus on Plaintiff’s

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diligence. Good cause exists here because Plaintiff only recently acquired Defendant’s untimely

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discovery responses, in which Defendant first asserted HMRG is a distinct entity. Therefore, although

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Plaintiff knew that HMRG made the call at issue, there is no indication that Plaintiff was aware that

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Defendant would assert that HMRG was a distinct entity until recently. Given that Plaintiff filed her

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motion to amend shortly thereafter, the Court finds that Plaintiff was diligent and that good cause exists

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to allow the amendment.2

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Having found good cause exists as required by Rule 16, the Court turns to whether the

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amendment should be permitted under Rule 15. Defendant’s primary argument regarding Rule 15 is

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that the amendments are futile because Plaintiff failed to allege sufficient facts to support her new claim.

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See Docket No. 28 at 4. “Denial of leave to amend on this ground is rare. Ordinarily, courts will defer

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consideration of challenges to the merits of a proposed amendment until after leave to amend is granted

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and the amended pleading is filed.” See Branch Banking & Trust Co. v. Pebble Creek Plaza, LLC, 2013

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U.S. Dist. Lexis 73723, *3 (D. Nev. May 22, 2013) (quoting Netbula, LLC v. Distinct Corp., 212 F.R.D.

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534, 539 (N.D. Cal. 2003)). Deferring ruling on the sufficiency of the allegations is preferred in light

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of the more liberal standards applicable to motions to amend and the fact that the parties’ arguments are

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better developed through a motion to dismiss. See, e.g., In re Dynamic Random Access Memory

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(DRAM) Antitrust Litig., 536 F. Supp. 2d 1129, 1135-36 (N.D. Cal. 2008). The Court finds that

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Defendant’s futility arguments, as well as its argument regarding dismissal of CMRE, are better

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addressed through a motion to dismiss rather than the pending motion.3 The Court therefore finds that

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the requirements for amendment under Rule 15 are also satisfied in this case.

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In determining whether “good cause” exists, the Court may also consider prejudice to the opposing
party. See, e.g., Johnson, 975 F.2d 609. Here, Defendant makes no prejudice argument. See Docket No.
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The Court expresses no opinion as to the viability of the newly added claims or the merits of a
motion to dimiss, and nothing in this order shall be construed as precluding Defendant from bringing a
motion to dismiss.
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IV.

CONCLUSION

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For the reasons stated more fully above, the Court hereby GRANTS the motion for leave to

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amend. Plaintiff shall file and serve the amended complaint within 7 days of this order. In addition,

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the parties shall confer and, within 7 days of this order, submit a proposed joint discovery plan.

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IT IS SO ORDERED.

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DATED: October 16, 2015

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______________________________________
NANCY J. KOPPE
United States Magistrate Judge

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