United States District Court, N.D. California
ORDER GRANTING DEFENDANT HENRY LO'S MOTION FOR LEAVE TO FILE 1) AMENDED ANSWER, AND 2) THIRD-PARTY COMPLAINT Re: Dkt. No. 64
JACQUELINE SCOTT CORLEY, Magistrate Judge.
Now pending before the Court is Defendant Henry Lo's ("Lo") motion for leave to file 1) an amended answer, and 2) a third-party complaint. (Dkt. No. 64.) After carefully considering the parties' submissions, and having had the benefit of oral argument on March 20, 2014, the Court GRANTS the motion.
Plaintiff Square 1 Bank ("Square 1") brought this action against Lo and AbsolutelyNew, Inc. ("ANI"), seeking to recover over $4, 000, 000 due on a defaulted promissory note. Square 1 alleges that Lo, ANI's former Chief Financial Officer, used the funds from the note for his own personal use. Lo has denied that he misdirected any funds, and contends that any withdrawals from ANI were for the benefit of ANI.
At the end of 2013, the Court granted ANI's motion for good faith settlement pursuant to California Code of Civil Procedure Section 877.6. (Dkt. No. 61.) Square 1 subsequently dismissed ANI from this case. (Dkt. No. 63.) Shortly thereafter, Lo filed the present motion, seeking to allege claims against ANI, AbsolutelyNew Holdings, Inc. ("Holdings"), Artiman Ventures, L.P. ("Artiman"), and Amit Shah ("Shah"). (Dkt. No. 65-2.) Specifically, the proposed third-party complaint contains six claims: 1) equitable indemnity (against Holdings and Artiman); 2) express written indemnity (against Holdings and Artiman); 3) declaratory relief (against Holdings and Artiman); 4) defamation (against ANI, Holdings, Artiman, and Shah); 5) tortious interference with contract (against Holdings, Artiman, and Shah); 6) Fraud (against ANI, Holdings, Artiman, and Shah).
Although the case was filed in 2012, little-if any-discovery has been initiated, and no scheduling order has been issued.
A. Motion to Amend the Answer
Federal Rule of Civil Procedure 15(a)(2) states that a party may amend a pleading before trial "with the opposing party's written consent or the court's leave" and that the "court should freely give leave when justice so requires." Though Rule 15(a) is "very liberal... a district court need not grant leave to amend where the amendment: (1) prejudices the opposing party; (2) is sought in bad faith; (3) produces an undue delay in litigation; or (4) is futile." AmerisourceBergen Corp. v. Dialysist West, Inc., 465 F.3d 946, 951 (9th Cir. 2006). Undue delay cannot alone justify the denial of a motion to amend. Owens v. Kaiser Foundation Health Plan, Inc., 244 F.3d 708, 712-13 (9th Cir. 2001). The most important factor is prejudice to the opposing party. Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 330-31 (1971).
Square 1's opposition to Lo's motion does not clearly distinguish between Lo's request to amend his answer and his request to file a third-party complaint. Nevertheless, the Court discerns that Square 1's only objection to the motion to amend the answer is that Lo unduly delayed in bringing the motion. Because "[u]ndue delay cannot alone justify the denial of a motion to amend, " Owens, 244 F.3d at 712-13, and Square 1 identifies no other reason to deny the motion, the motion to amend is GRANTED.
B. Motion to File Third-Party Complaint
Federal Rule of Civil Procedure 14(a)(1) provides,
[a] defending party may, as third-party plaintiff, serve a summons and complaint on a nonparty who is or may be liable to it for all or part of the claim against it. But the third-party plaintiff must, by motion, obtain the court's leave if it files the third-party complaint more than 14 days after serving its original answer.
"The decision to allow a third-party defendant to be impleaded under rule 14 is entrusted to the sound discretion of the trial court." United States v. One 1977 Mercedes Benz, 708 F.2d 444, 452 (9th Cir. 1983). The purpose of this rule is "to promote judicial efficiency by eliminating the necessity for the defendant to bring a separate action against a third individual who may be secondarily or derivatively liable to the defendant for all or part of the plaintiff's original claim." Sw. Adm'rs, Inc. v. Rozay's Transfer, 791 F.2d 769, 777 (9th Cir. 1986). "Therefore, courts have construed the rule ...