The opinion of the court was delivered by: M. James Lorenz United States District Court Judge
ORDER (1) GRANTING PLAINTIFF'S MOTION FOR LEAVE TO AMEND; (2) DENYING WITHOUT PREJUDICE DEFENDANT'S MOTION FOR SUMMARY JUDGMENT; AND (3) EXTENDING TIME FOR DEFENDANT TO FILE A SUMMARY JUDGMENT MOTION
In this breach of contract and fraud action, Plaintiff field a motion for leave to amend and Defendant filed a motion for summary judgment. Both motions are opposed. For the reasons which follow, Plaintiff's motion for leave amend is GRANTED, Defendant's motion for summary judgment is DENIED WITHOUT PREJUDICE, and the time for Defendant to file a summary judgment motion is EXTENDED.
Plaintiff James R. Huck holds a Ph.D. in organizational psychology and provides consulting services to various corporate entities in the area of human resources and leadership assessment and development. Plaintiff alleges he entered into a contract with Defendant and provided consulting services from 2001 through 2005 to senior management personnel in Defendant's Asia Region. The arrangements were for Defendant to pay Plaintiff a quarterly retainer, a fixed fee for specific assessments and surveys, as well as Plaintiff's costs and expenses, including travel and living expenses.
During the course of the consulting relationship, Defendant's demand for Plaintiff's services increased. Plaintiff alleges that Defendant induced him to hire additional personnel to meet the demand, provide consulting services on an exclusive basis, terminate consulting relationships with other clients, and forego seeking new ones. In 2005 Defendant ceased paying Plaintiff.
Plaintiff filed a complaint in State court alleging state law claims for breach of contract; fraud and deceit -- intentional misrepresentation; fraud and deceit -- concealment; fraud and deceit -- negligent misrepresentation; breach of implied covenant of good faith and fair dealing; unjust enrichment; quantum meruit; work, labor, and services provided; and unfair business practices. He seeks damages exceeding $800,000. Defendant answered and removed the action to this court based on diversity jurisdiction.
During discovery, Curtis L. Andrews, one of Defendant's former employees, was deposed and testified that he was terminated because he reported what he believed was Defendant's violations of the Foreign Corrupt Practices Act ("FCPA"). (Decl. of Thomas F. Landers ("Landers Decl.") at 2.) A few days later, Plaintiff was deposed and testified that Defendant stopped paying him because he also reported what he believed to be FCPA violations and violations of Defendant's own corporate compliance policies. (Id.)
Approximately three months later, Defendant filed a motion for a protective order, seeking, among other things, to designate Mr. Andrews' testimony regarding his termination as "attorneys eyes only" and bar the use of the evidence absent a court order. (See docket no. 30 & 32.) Plaintiff argued that the evidence was relevant to his theory of the case that Defendant stopped paying him because he had previously complained about the same general type of perceived misconduct as Mr. Andrews, which tends to support his allegation that Defendant's representatives intentionally misrepresented their intent to continue using Plaintiff's services.
(See docket no. 32.) In support of the protective order, Defendant argued, in part, that the evidence was not relevant because the complaint does not allege any reasons why Defendant ceased making payments to Plaintiff. (See docket no. 33.) At the hearing on Defendant's motion, the Magistrate Judge indicated that he did not consider the evidence relevant until Plaintiff amended the complaint. (Landers Decl. at 2-3.) Approximately two months later, on the last day to file pretrial motions, Plaintiff filed a motion for leave to amend, and Defendant filed a motion for summary judgment. The filing of the motions was preceded by counsel's discussion of Plaintiff's intended amendment. (Supplemental Declaration of Thomas F. Landers ("Landers Supp. Decl.") at 1-2.)
Plaintiff seeks to amend the complaint by adding a factual allegation that Plaintiff discovered what he believed to be Defendant's violations of the FCPA and its own corporate compliance policies, which he reported to Defendant. (Landers Decl. Ex. 2 at 5-6.) Plaintiff further proposes to allege that because of this report, Defendant decided to terminate the consulting relationship with Plaintiff, but concealed its intent to do so and let Plaintiff continue performing services for which Defendant did not intend to pay. (Id. at 5-6, 12 & 16.)
Rule 15 of the Federal Rules of Civil Procedure advises the court that leave to amend shall be freely given when justice so requires. Fed. R. Civ. P. 15(a). "This policy is to be applied with extreme liberality." Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (internal quotation marks 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, 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."
Foman v. Davis, 371 U.S. 178, 182 (1962). Of the foregoing factors, the "prejudice to the opposing party . . . carries the greatest weight." Eminence Capital, 316 F.3d at 1052.
It is undisputed that Plaintiff has not previously sought to amend the complaint and that the motion was timely under the operative case management orders. Defendant does not suggest that Plaintiff's motion was filed in bad faith.
Defendant argues that Plaintiff unduly delayed filing this motion because he had been aware of the pertinent facts since 2005. Plaintiff, on the other hand, claims that he is seeking amendment at this time because he anticipates difficulties with admissibility of evidence, unless the amends the complaint, as argued by Defendant in support of its motion for protective order and as ...