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Sacramento E.D.M., Inc. v. Hynes Aviation Industries, Inc.

United States District Court, E.D. California

October 2, 2014

SACRAMENTO E.D.M., INC., et al., Plaintiffs,
v.
HYNES AVIATION INDUSTRIES, INC., et al., Defendants.

MEMORANDUM AND ORDER

MORRISON C. ENGLAND, Jr., Chief District Judge.

On October 4, 2012, Plaintiffs Sacramento E.D.M., Inc. ("Sacramento EDM") and Dan Folk ("Folk") (collectively, "Plaintiffs") brought the instant action alleging various tort claims against Defendants Hynes Aviation Industries, Inc. ("HAI"), Hynes Children TF Limited ("HCTF"), and Michael K. Hynes ("Hynes") (collectively, "Defendants") in the Superior Court of California, County of Sacramento. ECF No. 2. On February 14, 2013, Defendants removed the case to federal court pursuant to this Court's diversity jurisdiction. Id . On July 21, 2014, Defendants filed a Motion for Leave to File Counterclaim and to Amend the Court's Pretrial Scheduling Order ("PTSO"). Mot., ECF No. 52. Plaintiffs timely opposed Defendants' Motion. ECF No. 60. For the following reasons, Defendants' Motion is DENIED.[1]

BACKGROUND[2]

Sacramento EDM is a California corporation engaged in the business of electrical discharge machining and waterjet technology. Folk is Sacramento EDM's president. Defendant Hynes is a professional consultant, among other things, in the fields of aviation safety and business and finance. On October 4, 2012, Plaintiffs filed the instant lawsuit in the Superior Court of California, County of Sacramento, against Hynes, HAI and HCTF, asserting the following causes of action: (1) Breach of Fiduciary Duty; (2) Fraud; (3) Constructive Fraud; (4) Intentional Interference with Prospective Business Advantage; (5) Negligent Interference with Prospective Business Advantage; (6) Tortious Interference with Contract; (7) Unjust Enrichment; (8) Unfair Business Practices in Violation of California Business and Professions Code § 17200; and (9) Declaratory Relief. ECF No. 2-1. On February 14, 2013, Defendants removed the action to this Court pursuant to its diversity jurisdiction. ECF No. 2. Subsequently, Defendants filed a motion to dismiss for improper venue or, in the alternative, to transfer the case to the U.S. District Court for the Western District of Missouri (ECF No. 6), which the Court denied on April 8, 2013. ECF No. 17. Plaintiffs' operative First Amended Complaint ("FAC") alleges eight causes of action arising out of the decade-long business relationship and concomitant transactions between Plaintiffs and Defendants. ECF No. 29.

Separately, on December 10, 2012, HAI brought an action in the U.S. District Court for the Western District of Missouri, Case No. 6:12-cv-03521-REL (the "Missouri action" or "Missouri case").[3] In the Missouri action, HAI sought to collect payments from Sacramento EDM and Folk for contractual obligations on two leases. The First Amended Complaint in the Missouri case alleges payments owed by Sacramento EDM and Folk (the Plaintiffs in this action), totaling $428, 082 on unpaid lease obligations, $542, 063 on unpaid loans, and $58, 087 owed for premium payments on Key Man life insurance policies. Mot., ECF No. 53 at 2.[4]

On April 29, 2013, Sacramento EDM and Folk moved to transfer the Missouri case to this District pursuant to 28 U.S.C. § 1404(a). On August 1, 2013, Judge Brian C. Wimes granted Sacramento EDM and Folk's Motion on the basis of the first-filed rule. See Order, ECF No. 30, 6:12-cv-03521-REL. The docket for the Missouri case indicates that the case was transferred to this District on August 14, 2013. ECF No. 31, 2:13-cv-01674-JAM-CKD. That same day, the Court issued Civil New Case Documents (ECF No. 32) and a Clerk's Notice directing counsel for all parties to submit Pro Hac Vice Applications (ECF No. 33). No further activity took place in the Missouri case until the issuance of a Minute Order four months later on December 19, 2014, ordering that the parties file a joint status report on or before January 10, 2014. ECF No. 34. After no party filed a status report, on January 14, 2014, the Court issued a Minute Order directing counsel to file "a statement in writing as to why this matter should/should not be dismissed for lack of prosecution" within fourteen days. ECF No. 35. On February 6, 2014, the Court dismissed the Missouri case for failure to respond to Court orders and for lack of prosecution. ECF No. 36. No party has moved to reopen the Missouri case.

Now, through the instant motion, Defendants seek to file counterclaims and to amend the pretrial scheduling order in this case to allow the action to proceed to trial on all issues disputed among the parties. Mot., ECF No. 53. The counterclaims at issue are derived from Defendants' claims in the Missouri case. Id.

STANDARD

A. Amendment under Rule 16(b)

Generally, the Court is required to enter a pretrial scheduling order within 120 days of the filing of the complaint. Fed.R.Civ.P. 16(b). The scheduling order "controls the subsequent course of the action" unless modified by the Court. Fed.R.Civ.P. 16(e). Orders entered before the final pretrial conference may be modified upon a showing of "good cause, " Fed.R.Civ.P. 16(b), but orders "following a final pretrial conference shall be modified only to prevent manifest injustice." Fed.R.Civ.P. 16(e); see also Johnson v. Mammoth Recreations , 975 F.2d 604, 608 (9th Cir. 1992)

Rule 16(b)'s "good cause" standard primarily considers the diligence of the party seeking the amendment. Johnson , 975 F.2d at 609. The district court may modify the pretrial schedule "if it cannot reasonably be met despite the diligence of the party seeking the extension." Fed.R.Civ.P. 16 Advisory Committee's Notes (1983 amendment); Johnson , 975 F.2d at 609. Moreover, carelessness is not compatible with a finding of diligence and offers no reason for a grant of relief. Johnson , 975 F.2d at 609. Although the existence or degree of prejudice to the party opposing the modification might supply additional reasons to deny a motion, the focus of the inquiry is upon the moving party's reasons for seeking modification. Id . (citing Gestetner Corp. v. Case Equip. Co. , 108 F.R.D. 138, 141 (D. Me. 1985)). If the moving party was not diligent, the Court's inquiry should end. Id.

B. Amendment under Rule 15

The court should freely give leave when justice so requires. Fed.R.Civ.P. 15(a)(2). Generally, the five factors of bad faith, undue delay, prejudice to the opposing party, futility of amendment, and whether the moving party has previously amended the pleadings are considered when assessing the propriety of a motion to ...


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