Property Solutions International v. Yardi Systems

Filing 54

MEMORANDUM DECISION AND Order-granting 36 Motion for Leave to File. Plaintiff shall file its amended complaint within ten (10) days of the date of this order. Signed by Magistrate Judge Paul M. Warner on 4/7/16. (jmr)

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION

PROPERTY SOLUTIONS
INTERNATIONAL, INC., a Delaware
corporation,

MEMORANDUM DECISION
AND ORDER

Plaintiff,
Case No. 2:15cv102
v.
YARDI SYSTEMS, INC., a California
corporation,

District Judge Clark Waddoups

Defendant.

Magistrate Judge Paul M. Warner

District Judge Clark Waddoups referred this case to Magistrate Judge Paul M. Warner
pursuant to 28 U.S.C. § 636(b)(1)(A).1 Before the court is Property Solutions International,
Inc.’s (“Plaintiff”) Motion for Leave to File First Amended Complaint.2 The court has reviewed
the written memoranda submitted by the parties. Pursuant to civil rule 7-1(f) of the Rules of
Practice for the United States District Court for the District of Utah, the court has concluded that
oral argument is not necessary and will determine the motion on the basis of the written
memoranda. See DUCivR 7-1(f).
Plaintiff seeks to amend its complaint to assert a claim for breach of a 2006 nondisclosure agreement between Plaintiff and Yardi Systems, Inc. (“Defendant”). In addition,
Plaintiff seeks to add and modify a number of allegations to refine its other causes of action and
to reflect new information learned from ongoing factual investigations. Plaintiff sought consent
1

See docket no. 30.

2

See docket no. 36.

from Defendant to file an amended complaint. Defendant reviewed the proposed amended
complaint and determined that it would not consent to either the amendments proposed to the
antitrust claims or the addition of a new claim for breach of contract. Defendant previously filed
a motion for judgment on the pleadings. Briefing on that motion has been stayed pending the
outcome of the instant motion.
Defendant asks this court to deny Plaintiff’s motion for leave to amend its Fifth, Sixth
and Seventh Claims and related allegations of antitrust violations because Plaintiff’s proposed
amendments are futile. Defendant also requests that this court deny Plaintiff leave to add its
Ninth Claim for breach of contract because that amendment would also be futile as Plaintiff was
aware of the facts underlying that claim before bringing this case.
Plaintiff’s motion for leave to amend is governed by rule 15(a)(2) of the Federal Rules of
Civil Procedure. See Fed. R. Civ. P. 15(a)(2). Under that rule, “[t]he court should freely give
leave” to amend pleadings “when justice so requires.” Id.; see also Foman v. Davis, 371 U.S.
178, 182 (1962). The decision about whether to provide a party leave to amend pleadings “is
within the discretion of the trial court.” Minter v. Prime Equip. Co., 451 F.3d 1196, 1204 (10th
Cir. 2006) (quotations and citation omitted). In the absence of any apparent or declared
reason—such as undue delay, bad faith or dilatory motive on the part of the movant, . . . undue
prejudice to the opposing party by virtue of allowance, futility of amendment . . . the leave
sought should, as the rules require, be ‘freely given.’” Foman, 371 U.S. at 182 (quoting Fed. R.
Civ. P. 15(a)). “The purpose of the Rule is to provide litigants ‘the maximum opportunity for
each claim to be decided on its merits rather than on procedural niceties.’” Minter, 451 F.3d at
1204 (quoting Hardin v. Manitowoc-Forsythe Corp., 691 F.2d 449, 456 (10th Cir. 1982)).

2

Defendant contends that Plaintiff’s proposed amended complaint is futile. Even under
the liberal standard for amending pleadings, “the district court may deny leave to amend where
amendment would be futile. A proposed amendment is futile if the complaint, as amended,
would be subject to dismissal.” Bradley v. Val-Mejias, 379 F.3d 892, 901 (10th Cir. 2004)
(quotations and citation omitted). A proposed amendment is futile only where “it is patently
obvious that the plaintiff could not prevail on the facts alleged, and allowing him an opportunity
to amend his complaint would be futile.” Cohen v. Longshore, 621 F.3d 1311, 1314-15 (10th Cir.
2010) (quotation marks and internal citation omitted) (emphasis added).
Plaintiff’s “[f]actual allegations must be enough to raise a right to relief above the
speculative level . . . on the assumption that all the allegations in the complaint are true (even if
doubtful in fact).” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). However, a
motion for leave to amend “should not be transformed by [the opposing party] into a mini-trial or
summary judgment proceeding, without the safeguards normally present for maturation and
merits-based resolution of claims.” ClearOne Commc'n, Inc. v. Chiang, No. 2:07cv00037TC,
2007 WL 2572380, at *1 (D. Utah Sept.5, 2007).
In its opposition memorandum, Defendant’s futility argument reads more like a motion to
dismiss or motion for summary judgment, “[b]ut the doctrine [of futility] is meant to apply in
cases where a party clearly cannot state a claim.” ClearOne, 2007 WL 2572380, at *1.
Defendant makes various arguments that the challenged portions of Plaintiff’s proposed
Amended Complaint fails to state a claim but it neglects the liberal standard applied to both
motions to amend and to pleadings themselves. Defendant’s objections to the proposed
Amended Complaint are “more properly raised in a motion to dismiss where full briefing is
allowed rather than in the motion to amend.” ClearOne, 2007 WL 2572380, at *1.

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The court notes that this case is in its infancy. The parties have not yet conducted the
Rule 26(f) attorneys’ planning meeting, proposed any pretrial and trial deadlines to the court,
participated in a scheduling or initial pretrial conference before the court (indeed, none has yet
even been scheduled), made any initial disclosures, or propounded any discovery of any type.
Furthermore, as noted by the Tenth Circuit, the “most important” factor in determining
whether to grant a motion to amend the pleadings “is whether the amendment would prejudice
the nonmoving party.” Minter, 451 F.3d at 1207. “Courts typically find prejudice only when the
amendment unfairly affects the defendants in terms of preparing their defense to the
amendment.” Id. at 1208 (quotations and citation omitted). “Most often, this occurs when the
amended claims arise out of a subject matter different from what was set forth in the complaint
and raise significant new factual issues.” Id. Defendant does not even assert or explain how it
would suffer any prejudice if Plaintiff is allowed to file an amended complaint.
While Plaintiff’s challenged causes of action may eventually fail as a matter of law, given
the very liberal pleading standard under rule 15(a) and the procedural posture of this case, as
well as the fact that Defendant has not alleged prejudice in allowing the amendment, this court is
persuaded that Plaintiff ought to be allowed to amend its complaint. Accordingly, Plaintiff’s
motion for leave to file an amended complaint is GRANTED. Plaintiff shall file its amended
complaint within ten (10) days of the date of this order.
IT IS SO ORDERED.
DATED this 7th day of April, 2016.
BY THE COURT:

PAUL M. WARNER
United States Magistrate Judge
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