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Seifert v. Werner

October 13, 2010


The opinion of the court was delivered by: Garland E. Burrell, Jr. United States District Judge


Plaintiff moves for leave to amend her Complaint under Federal Rule of Civil Procedure ("Rule") 15(a)(2). Defendant opposes the motion. For the reasons stated below, the motion is DENIED.

I. Legal Standard

Rule 15(a)(2) prescribes that "[t]he court should freely give leave when justice so requires." "This [leave] policy is 'to be applied with extreme liberality.'" Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (citations omitted). "Four factors are commonly used to determine the propriety of a motion for leave to amend. These are: bad faith, undue delay, prejudice to the opposing party, and futility of amendment." DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987). "Delay alone is insufficient to justify denial of leave to amend; the party opposing amendment must also show that the amendment sought is futile, in bad faith or will cause undue prejudice to the opposing party." Jones v. Bates, 127 F.3d 839, 847 n.8 (9th Cir. 1997). "The party opposing amendment bears the burden of showing prejudice." DCD Programs, 833 F.2d at 187.

II. Factual and Procedural Background

Plaintiff sues Defendant for legal malpractice. Defendant previously represented Plaintiff in an action filed under the Federal Tort Claims Act ("FTCA action"), from October 2, 2002 to March 10, 2006. (Compl. 2:4-5.) Plaintiff and Defendant entered into a Contingency Fee Contract (the "Contract") concerning the FTCA action which allowed Defendant to charge Plaintiff up to forty percent of any recovery. (Mot. to Amend Compl. ("Mot") Ex. 1.) The Contract required the parties to arbitrate any dispute. Id. Ex. 3. The District Court entered an order in the FTCA action on March 10, 2006, which allowed Defendant to withdraw as Plaintiff's attorney due to counsel's disabling medical condition. (Opp'n to Mot. to Amend Compl. ("Opp'n") 1:27-2:2.)

Plaintiff filed the instant legal malpractice action against Defendant on May 7, 2008, following which the Magistrate Judge ordered the parties to arbitration in an order filed September 21, 2009. (Order, September 21, 2009, ECF No. 98.) Plaintiff alleges in her Complaint that the parties contracted "to arbitrate any malpractice dispute." (Compl. 2:14-18.) "[O]n April 13, 2010, an arbitration hearing was held before arbitrator [John] Ball on the statute of limitations issue." (Order, June 4, 2010, ECF No. 112 at 2:20-21.) Following the hearing, Plaintiff sought to have the Magistrate Judge "return [the] case from arbitration." Id. 1:16-22. Plaintiff argued "the contingency fee agreement is illegal under 28 U.S.C. § 2678 because it allows for more than twenty-five percent of the award or settlement be paid to her attorney as a contingency fee. Plaintiff contends that because the contract is illegal, the arbitration clause is unenforceable." Id. 2:24-3:1. The Magistrate Judge denied Plaintiff's motion to return the case from arbitration stating:

Plaintiff has known since the very outset of this case about the provisions of the fee contract. At every turn, plaintiff has invoked arbitration and has already had a hearing before the arbitrator on a potentially dispositive issue. Under these circumstances, plaintiff has forfeited any right to now contend the arbitration clause is unenforceable. (Order, June 4, 2010, ECF No. 112 at 3:22-25.) Plaintiff now seeks to amend her Complaint to remove all references to arbitration and to add a fraud claim, based on the illegal contingency fee. (Mot. Ex. 7; Reply to Def.'s Opp'n ("Reply") 3:1-3.)

III. Discussion

Plaintiff argues that without leave to amend she will be consigned to futile arbitration where any award will be void by law. (Mot. 4:8-9.) Defendant responds Plaintiff should not be allowed to amend her Complaint because of Plaintiff's bad faith, undue delay, the futility of the amendment, and the prejudice Defendant will suffer if amendment is allowed. (Opp'n 5:15-16.)

Bad Faith and Undue Delay

Defendant argues Plaintiff has given no reason for her delay in seeking to amend her Complaint, which was filed over two and a half years ago. (Opp'n 6:9-10.) Defendant also argues Plaintiff previously agreed to the legality of the Contract and sought arbitration. Id. 6:10-7:7. Defendant argues Plaintiff manifests bad faith by requesting amendment now, after she acquiesced to the legality of the Contract. Id. 7:5-7. Defendant also argues Plaintiff unduly delayed by waiting over two and a half years, and after the case was heard by the arbitrator, to seek to amend her Complaint. Id. 7:11-15.

Plaintiff responds she can raise the illegality of the Contract at any time because "[a] provision in a contract void as against public policy can be raised at any time." (Reply 4:18-26, quoting Klein v. Asgrow Seed Co., 246 Cal. App. 2d 87, 101 (1966).) Plaintiff also argues the matter has not been heard on the merits by the arbitrator. (Reply 5:1-2.)

"[L]ate amendments to assert new theories are not reviewed favorably when the facts and the theory have been known to the party seeking amendment since the inception of the cause of action." Acri v. International Assoc. of Machinists & Aerospace Workers, 781 F.2d 1393, 1398 (9th Cir. 1986). Plaintiff waited until after an arbitrator heard and took under submission a statute of limitations matter, which the parties agreed to arbitrate, before she attempted to amend her Complaint. The terms of the Contract were known to Plaintiff since she filed this legal malpractice action, which is evidenced by her Complaint and the portions of the Contract attached thereto. ...

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