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Beaver v. Tarsadia Hotels

United States District Court, S.D. California

August 4, 2016

DEAN BEAVER, et al., Plaintiffs,
TARSADIA HOTELS, et als., Defendants,



         Before the Court is Defendants’ motion for leave to amend their answer to the third amended complaint. (Dkt. No. 213.) An opposition was filed by Plaintiffs and Defendants[1] filed a reply. (Dkt. Nos. 222, 225.) After a review of the briefs, supporting documentation, and the applicable law, the Court DENIES Defendants’ motion for leave to file an amended answer to the third amended complaint.


         On August 17, 2011, this proposed class action was removed from state court to this Court. (Dkt. No. 1.) On April 18, 2013, Plaintiffs Dean Beaver, Laurie Beaver, Steven Adelman, Abram Aghachi, Dinesh Gauba, Kevin Kenna and Veronica Kenna (collectively “Plaintiffs”) filed a third amended putative class action complaint against the developers, sellers and agents of the Hard Rock Hotel & Condominium Project. (Dkt. No. 69, TAC.) Defendants filed their answer to the third amended complaint on June 14, 2013. (Dkt. No. 106.)

         After multiple motions by both parties, including summary judgment, the Court granted summary judgment as to Defendants on nearly all causes of action except the Court granted Plaintiffs’ motion for summary judgment on the unlawful prong of the UCL alleging that Defendants failed to disclose and intentionally concealed purchasers’ right to rescind their purchase contracts within two years of the date of signing the contracts in violation of ILSA. On October 29, 2014, the Court, inter alia, sua sponte certified certain issues in its orders of October 16, 2013, July 2, 2014, and October 29, 2014 for interlocutory appeal. (Dkt. No. 177.) On March 10, 2016, the Ninth Circuit issued its opinion affirming the Court’s orders. Beaver v. Tarsadia Hotels, 816 F.3d 1170 (9th Cir. 2016). The stay was lifted on April 4, 2016. (Dkt. No. 192.)

         On June 10, 2016, Defendants filed a motion seeking leave to amend their answer to the third amended complaint to assert one affirmative defense of res judicata/collateral estoppel. (Dtk. No. 213.) Defendants seek to assert the affirmative defense of preclusion based on three prior litigation concerning the purchase and sale of the Hard Rock units that were dismissed in favor of Defendants. See Salameh v. Tarsadia Hotels, No. 09cv2739 DMS(CAB), 2011 WL 1044129 (S.D. Cal. Mar. 22, 2011), aff’d, 726 F.3d 1124 (9th Cir. 2013); Bell v. Tarsadia Hotels, Case No. 37-2010-00096618-CU-BT-CTL (S.D. Super. Ct. 2010); 5th & K Parcel 2 Owners’ Assoc., Inc. v. Salameh, D066096, 2015 WL 5601555 (Cal.Ct.App. September 23, 2015), review denied on December 16, 2015. Plaintiffs oppose asserting that liability has already been established by the Court which was affirmed by the Ninth Circuit. They also argue that Defendants waived the affirmative defense, there was undue delay and any amendment would be futile.


         Federal Rule of Civil Procedure (“Rule”) 15(a) provides that leave to amend shall be freely given when justice so requires and the standard is applied liberally. Fed.R.Civ.P. 15(a). Once a district court has established a deadline for amended pleadings, and that deadline has passed, Rule 16 applies. Coleman v. Quaker Oats Co., 232 F.3d 1271, 1294 (9th Cir. 2000); Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 607-608 (9th Cir.1992). Subsequent amendments are not allowed without a request to first modify the scheduling order. At that point, any modification must be based on a showing of good cause. Coleman v. Quaker Oats Co., 232 F.3d 1271, 1294 (9th Cir. 2000). Rule 16's good cause standard is more stringent that the liberal amendment standard under Rule 15. AmerisourceBergen Corp. v. Dialysis West, Inc., 465 F.3d 946, 952 (9th Cir. 2006).

         A pretrial scheduling order can only be modified “upon a showing of good cause.” Fed.R.Civ.P. 16(b). “Good cause” focuses on the diligence of the party seeking an amendment. Johnson, 975 F.2d at 609. The pretrial schedule may be modified “if it cannot reasonably be met despite the diligence of the party seeking the extension.” Id. In general, the focus of the diligence inquiry is on the time between the moving party’s discovery of new facts and its asking leave of the court to file an amended pleading. See Zivkovic v. S. Cal. Edison Corp., 302 F.3d 1080, 1087-88 (9th Cir. 2002). Prejudice to the non-moving party, though not required under FRCP 16(b), can supply additional reasons to deny a motion. Coleman, 232 F.3d at 1295. The Ninth Circuit noted that “[c]arelessness is not compatible with a finding of diligence and offers no reason for a grant of relief.” Id.; see Sugita v. Parker, 13cv118-AWI-MJS(PC), 2015 WL 5522078, at *2 (E.D. Cal. Sept. 16, 2015) (counsel’s carelessness or inadvertence fails to establish “good cause”).

         Here, Defendants seek leave to amend their answer to assert the affirmative defenses of res judicata and collateral estoppel. (Dkt. No. 213.) Defendants explain that after the case was remanded back to this Court following the interlocutory appeal, they re-evaluated the case and discovered that their answer inadvertently did not plead the affirmative defense of res judicata/collateral estoppel as to the Salameh and Bell actions. (Dkt. No. 213-1, Galuppo Decl.¶¶ 2, 3.) They argue that given the disposition of the case at this time, they believe that amending the answer is necessary and appropriate and that the delay was in part due to the appeal. (Id. ¶ 3.) They further argue that Plaintiff will not be prejudiced because they were aware of the potential defense in April 2013 when the parties filed a joint motion for approval of stipulation regarding members of putative class and reserved their right to various defenses as outlined in the table attached as Exhibit A to the Joint Motion. (Dkt. Nos. 72, 73.) The table provides a list of purchasers with numerous columns concerning their purchase of the Hard Rock unit and includes a column entitled “subject to Bell or Salameh Defense.” Therefore, Defendants assert Plaintiff had notice of these defenses and cannot claim prejudice. As to the 5th & K action, Defendants argue they could not assert the affirmative defense until now since it did not ripen until review was denied on December 16, 2015.

         A scheduling order was first filed on September 5, 2012 which set the deadline to amend the pleadings by September 27, 2012. (Dkt. No. 42.) A first amended scheduling order which did not extend the deadlines for amended pleadings was then filed on October 10, 2012. (Dkt. No. 50.) Because the pleading amendment deadline has long passed, Defendants bear the burden of showing "good cause” to amend the answer under Rule 16(b). See Zivkovic v. Southern California Edison Co., 302 F.3d 1080, 1087 (9th Cir. 2002). In their motion, Defendants do not address or satisfy the “good cause” standard. Instead, they assert that leave to amend should be freely granted under Rule 15(a). Therefore, the Court DENIES Defendants’ motion to modify the scheduling order to seek leave to file an amended answer for failing to demonstrate “good cause.”

         If the Court declines to exercise its discretion to modify its Rule 16 Scheduling Order, an analysis under Rule 15(a) is not necessary. See Sosa v. Airprint Sys., Inc., 133 F.3d 1417, 1419 (11th Cir. 1998) (holding that the Court need not evaluate Rule 15(a) unless the movant first meets the “good cause” requirement of Rule 16); MMMT Holdings Corp. v NSGI Holdings, Inc., No. C12-1570 RSL, 2014 WL 2573290, at *4 (W.D. Wash June 9, 2014) (because plaintiff cannot satisfy Rule 16(b), it is not necessary to evaluate the plaintiff’s motion to amend under Rule 15).

         B. Rule 15(a)

         However, even if Defendants satisfied the “good cause” standard, the Court finds that leave to amend ...

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