United States District Court, E.D. California
ROBERT TERRY, CREST CORPORATION, and CREST IRREVOCABLE BUSINESS TRUST, doing business as “Freedom Media, ” Plaintiffs,
REGISTER TAPES UNLIMITED, INC.; EDWARD ENDSLEY; ASHLEY MATE; and DOES 1 through 50, inclusive; Defendants.
ORDER RE: MOTION TO AMEND COMPLAINT
WILLIAM B. SHUBB UNITED STATES DISTRICT JUDGE
Robert Terry brought this action against defendants
Register Tapes Unlimited, Inc. (“RTU Inc.”),
Edward Endsley, and Ashley Mate, alleging breach of contract
and disability discrimination under California law. (Notice
of Removal, Compl. (Docket No. 1).) Plaintiff now seeks leave
to amend his Complaint to add Register Tapes Unlimited, LP
(“RTU LP”), the entity defendants claim is
successor-in-interest to RTU Inc., as a defendant to this
action. (Pl.'s Mot. (Docket No. 23).)
is a California resident. (First Am. Compl.
(“FAC”) ¶ 1 (Docket No. 6).) RTU Inc. is
allegedly a Texas corporation engaged in the business of
selling advertising space on grocery store receipts to
businesses in Texas and California. (See id.
¶¶ 4, 16.) Endsley is president of RTU Inc., and
Mate is RTU Inc.'s chief operating officer. (See
id. ¶¶ 5-6.)
1998 to 2004, plaintiff allegedly entered into contracts with
RTU Inc. to sell advertising space on RTU Inc.'s behalf,
negotiate grocery store servicing contracts on RTU Inc.'s
behalf, assign grocery store servicing contracts he had
previously obtained to RTU Inc., and provide sales training
to RTU Inc. staff. (See id. ¶ 17.) The
contracts between plaintiff and RTU Inc. allegedly provide
that RTU Inc. would pay plaintiff various percentages of its
revenues as compensation for his services and assignment of
contracts. (See id.) Plaintiff has allegedly
provided services pursuant to his contracts with RTU Inc.
from 1998 to the present time. (See id. ¶ 17;
Pl.'s Mot., Mem. (“Pl.'s Mem.”) at 2
(Docket No. 23-1).)
January 26, 2016, plaintiff brought this action against
defendants, alleging that RTU Inc. failed to pay him the
percentages of revenues they had agreed to. (See
Compl. ¶¶ 19-25.) Plaintiff also alleges that RTU
Inc. unlawfully discriminated against him after he suffered a
“traumatic brain injury” from a car accident in
2010 that left him with reduced memory and intellectual
capacity. (See FAC ¶¶ 29-34.) Citing the
above allegations, plaintiff brings causes of action against
defendants for, inter alia, breach of contract,
failure to pay wages, disability discrimination, and failure
to provide reasonable accommodation under California law.
(See id. at 12-20.)
April 27, 2016, defendants filed a motion to dismiss one of
plaintiff's causes of action,  the notice of which stated
that plaintiff had incorrectly named RTU Inc. as a defendant
in this action, and the correct entity to name in this action
is RTU LP. (See Docket No. 4 at 1.) The notice did
not offer any explanation for why RTU LP should be named in
May through December 2016, plaintiff engaged in multiple
follow-up attempts to ascertain the reasons for naming RTU LP
in this action. (See Decl. of Robert Boucher
(“Boucher Decl.”) ¶¶ 3-7 (Docket No.
23-2).) According to plaintiff, defendants did not respond to
such inquiries, and he “did not press the issue”
with defendants, because defendants' counsel was
experiencing illness during that time. (See id.
¶¶ 3, 6-7.) Plaintiff represents that he did not
seek to add RTU LP during that time because he did not want
to risk “burdening the Court with unnecessary
parties.” (Pl.'s. Mem. at 2.)
January 4, 2017, defendants informed plaintiff that RTU LP
should be added to this action because it is the successor
entity to RTU Inc. and true party-in-interest with respect to
this action. (Boucher Decl. ¶ 9.) According to
defendants, the entity known as “Registered Tapes
Unlimited” which plaintiff had conducted business with
was restructured from a corporation, RTU Inc., to a limited
partnership, RTU LP, in 2007, and “all the assets and
liabilities of [RTU Inc.] were transferred to [RTU LP]”
at that time. (Defs.' Opp'n at 2 (Docket No. 27).)
Any suit brought against RTU Inc., defendants informed
plaintiff, should instead be brought against RTU LP.
(See Boucher Decl. ¶ 9.) Defendants stated in
their January 4 correspondence to plaintiff that they
“believe [the parties] can prepare a stipulation for
the court to correctly name [RTU LP]” as a defendant in
this action. (Id..)
January 4, plaintiff again experienced difficulties
communicating with defendants due to “Defendant[s']
counsel's medical issues and other schedule
conflicts.” (Id. ¶ 11.) The parties were
unable to confer regarding the stipulation discussed on
January 4 until late March. (See id. ¶¶
11-12.) On March 31, defendants informed plaintiff that they
“would only stipulate to add [RTU LP] to this action if
[RTU Inc.] was withdrawn.” (Id. ¶ 16.)
Plaintiff declined to withdraw RTU Inc. on grounds that his
contracts with defendants name RTU Inc. as the contracting
party, RTU Inc. continues to exist as an entity, and RTU Inc.
is, according to defendants, the general partner of RTU LP.
(See id. ¶ 12; Defs.' Opp'n at 2.)
After declining defendants' proposed stipulation,
plaintiff filed the present Motion. (Pl.'s Mot.).
Motion, now before the court, seeks leave of the court to
file a second amended Complaint adding RTU LP as a defendant to
this action. (Id.) While defendants have filed an
Opposition to plaintiff's Motion, they do not oppose
plaintiff naming RTU LP as a defendant in this action.
(See Defs.' Opp'n at 1.) The sole reason for
defendants' Opposition is their position that RTU LP
should be substituted as a defendant in place of RTU Inc.,
not added as a defendant alongside RTU Inc. (Id.)
Because RTU Inc. has “ceased to be an operating
entity” and has shifted “all . . . assets and
liabilities” to RTU LP, defendants contend, RTU Inc.
should be dismissed from this action. (Id. at 1, 3.)
aside the question of whether RTU Inc. should be dismissed
from this action, which is not presently before the court, it
appears that adding RTU LP as a defendant to this action is
issued a scheduling order in August 2016 stating that
“no further joinder of parties or amendments to
pleadings will be permitted [in this action] except with
leave of court, good cause having been shown under Federal
Rule of Civil Procedure 16(b), ” (Aug. 12, 2016 Order
at 2 (Docket No. 22)), the court must be shown good cause
under Rule 16(b) to allow plaintiff to add RTU LP to this
action. See Johnson v. Mammoth Recreations, Inc.,
975 F.2d 604, 607-08 (9th Cir. 1992).
16(b)'s ‘good cause' standard primarily
considers the diligence of the party seeking
amendment.” Id. at 609. “If that party
was not diligent, the inquiry should end.” Id.
Although “the focus of the inquiry is upon the moving
party's reasons for seeking modification[, ]” a
court may make its determination by assessing any prejudice
that would result to the other parties from allowing
amendment. Id. If good cause is shown under Rule
16(b), the court then evaluates the request to amend in light
of Federal Rule of Civil Procedure 15(a)'s more liberal
standard, id. at 608, which considers, in addition
to the factors considered under Rule 16(b), whether the
proposed amendment would be futile, see Baisa v. Indymac
Fed. Reserve, No. Civ. 2:09-1464 WBS JFM, 2010 WL
2348736, at *1 (E.D. Cal. June 7, 2010).
has demonstrated good cause to add RTU LP to this action.
Affidavit evidence offered by plaintiff indicates that
plaintiff began investigating whether sufficient facts
existed to add RTU LP to this action one week after
defendants filed their April 27, 2016 notice of motion to
dismiss, notifying plaintiff that they believed RTU LP to be
the proper entity to sue in this action. (See
Boucher Decl. ¶¶ 2-3.) Such evidence further
indicates that plaintiff engaged in multiple follow-up
attempts to ascertain the reasons for adding RTU LP to this
action from May through December 2016, and defendants'
counsel's illness likely played a role in plaintiff's
inability to ascertain such reasons prior to January 2017.
(See id. at ¶¶ 3-8.) Upon learning of RTU
LP's putative status ...