Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_19-cv-00390/USCOURTS-casd-3_19-cv-00390-8/pdf.json

Nature of Suit Code: 480
Nature of Suit: Consumer Credit
Cause of Action: 28:1331 Fed. Question

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

DALE SUNDBY,

Plaintiff,

v.

MARQUEE FUNDING GROUP, INC.,

et al.,

Defendants.

Case No.: 3:19-cv-00390-GPC-AHG

ORDER DENYING INVESTOR 

DEFENDANTS’ MOTION TO 

AMEND SCHEDULING ORDER 

AND PLAINTIFF’S MOTION TO 

STRIKE REPLY

[ECF Nos. 97, 115]

I. BACKGROUND

This matter comes before the Court on the Motion to Modify Scheduling Order to 

Allow Defendants to File an Amended Answer Pursuant to Rule 16(b)(4) of the Federal 

Rules of Civil Procedure, filed by the Investor Defendants1 on March 11, 2020. ECF No. 

97. Plaintiff filed a Response in opposition to the motion on March 30, 2020 (ECF No. 

1 The Investor Defendants include Salomon Benzimra, Trustee, Stanley Kesselman, 

Trustee, Jeffrey Myers, Kathleen Myers, Andres Salsido, Trustee, Benning Management 

Group 401(k) Profit Sharing Plan, Christopher Myers, Vickie McCarty, Delores 

Thompson, Kimberly Gill Rabinoff, Steven Cobin, Trustee, Susan Cobin, Trustee, Equity 

Trust Company, Custodian FBO Steven M. Cobin Traditional IRA, Todd B. Cobin, 

Trustee, Barbara A. Cobin, Trustee, and Fasack Investments, LLC.

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107), and the Investor Defendants filed a Reply on April 6, 2020 (ECF No. 112). Plaintiff 

also filed a Motion to Strike the Reply on April 6, 2020 (ECF No. 115). 

II. LEGAL STANDARD

Under Fed. R. Civ. P 16(b)(4), “[a] schedule may be modified only for good cause 

and with the judge’s consent.” “Good cause” is a non-rigorous standard that has been 

construed broadly across procedural and statutory contexts. Ahanchian v. Xenon Pictures, 

Inc., 624 F.3d 1253, 1259 (9th Cir. 2010). The good cause standard focuses on the diligence 

of the party seeking to amend the scheduling order and the reasons for seeking 

modification. Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 609 (9th Cir. 1992).

“[T]he court may modify the schedule on a showing of good cause if it cannot reasonably 

be met despite the diligence of the party seeking the extension.” Fed. R. Civ. P. 16, advisory 

committee’s notes to 1983 amendment. Therefore, “a party demonstrates good cause by 

acting diligently to meet the original deadlines set forth by the court.” Merck v. Swift 

Transportation Co., No. CV-16-01103-PHX-ROS, 2018 WL 4492362, at *2 (D. Ariz. 

Sept. 19, 2018).

III. DISCUSSION

Here, the Investor Defendants seek to amend the Scheduling Order to extend the 

deadline governing motions to amend pleadings, which the Court set as December 30, 2019 

in the Scheduling Order issued on November 26, 2019. ECF No. 70 at 2. The Investor 

Defendants request that the Court reset the deadline to April 30, 2020, so that they may file 

a motion to amend their Answer (ECF No. 49) for the District Judge’s consideration. 

Specifically, the Investor Defendants wish to amend their Answer to Plaintiff’s Amended 

Complaint to add the affirmative defenses of Equitable Subrogation and Equitable Lien. 

See ECF No. 97 at 5. Investor Defendants contend that they could not have moved to amend 

the Answer by the deadline of December 30, 2019, because they only recently determined 

in February 2020 that these affirmative defenses apply in response to Plaintiff’s claims. Id.

at 5, 6, 8.

Although the undersigned expresses no opinion on the merits of the proposed 

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affirmative defenses of Equitable Subrogation and Equitable Lien, a brief merits discussion 

is necessary to give context to Investor Defendants’ argument that they did not have 

sufficient information until February 2020 to know that these defenses may apply. 

Plaintiff’s claims in this action arise from two separate refinance loans obtained in 2016 

and 2017, which Plaintiff used to pay off a prior loan encumbering Plaintiff’s real property. 

Plaintiff obtained the 2017 loan in the amount of $3,160,000 from the Investor Defendants. 

Among other relief sought in the Amended Complaint, Plaintiff seeks a judgment setting 

aside the Investor Defendants’ Deed of Trust for the 2017 loan as a lien against the 

property. 

Pertinent to the Investor Defendants’ newly proposed affirmative defenses, Plaintiff 

also entered into a third refinance loan in 2015 in the amount of $2,000,000, which was 

used to pay off Bank of America’s $1,500,000 deed of trust encumbering Plaintiff’s 

property. Some of the Investor Defendants were also lenders involved in paying the 2015 

refinance loan. 

The Investor Defendants argue that the fact that some of their funds were used to 

pay the 2015 refinance loan supports the affirmative defenses of equitable subrogation and 

equitable lien. Specifically, in the motion at hand, Investor Defendants first cite to 

California law regarding the doctrine of equitable subrogation, which grants a lender the 

same first and senior priority lien position held by a paid-off lender in a loan refinance 

transaction. See ECF No. 97 at 7 (citing to Caito v. United California Bank, 20 Cal. 3d 694, 

704 (Cal. 1978)) (“One who claims to be equitably subrogated to the rights of a secured 

creditor must satisfy certain prerequisites. These are: (1) Payment must have been made by 

the subrogee to protect his own interest. (2) The subrogee must not have acted as a 

volunteer. (3) The debt paid must be one for which the subrogee was not primarily liable. 

(4) The entire debt must have been paid. (5) Subrogation must not work any injustice to 

the rights of others.”) (quotations and citation omitted). Investor Defendants further argue 

that the doctrine of equitable lien applies, because “[a]n equitable lien is a right to subject 

property not in the possession of the lienor to the payment of a debt as a charge against that 

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property” and “courts will construe the existence of equitable liens where the parties have 

erroneously created a defective mortgage.” ECF No. 97 at 8 (quoting, respectively, 

Farmers Ins. Exch. v. Zerin, 53 Cal. App. 4th 445, 453 (Cal. Ct. App. 1997) and Grappo 

v. Coventry Fin. Corp., 235 Cal. App. 3d 496, 509 (Cal. Ct. App. 1991)). 

Based on these doctrines, the Investor Defendants aver they are “entitled at a 

minimum to the same priority lien position held by the Bank of America” because some of 

their funds were used to pay off the Bank of America loan in 2015, and that their additional 

payment of the 2016 refinance loan, used to pay off the 2015 refinance loan, also forms the 

basis for a further equitable lien. ECF No. 97 at 8. The Investor Defendants rely on this 

argument to support the contention that they have shown good cause to modify the 

Scheduling Order. Id. at 9. However, the Investor Defendants’ legal arguments have no 

bearing on whether they have shown good cause to modify the Scheduling Order. As 

explained above, the key inquiry under Rule 16(b)(4) is whether the party seeking to amend 

the Scheduling Order has shown the requisite diligence. See Johnson, 975 F.2d at 609

(“[T]he focus of the inquiry is upon the moving party’s reasons for seeking modification. 

If that party was not diligent, the inquiry should end.”) (citation omitted).

To be clear, the Investor Defendants do also touch on the diligence inquiry in their 

motion in addition to arguing the merits of their proposed defenses. In particular, the

Investor Defendants contend that “[b]ased on further investigation of the law and facts in 

this matter, including reviewing the Plaintiff’s discovery responses served on 

February 24, 2020, Investor Defendants have recently determined that the affirmative 

defenses of Equitable Subrogation and Equitable Lien apply[.]” ECF No. 97 at 2 (emphasis 

added). See also id. at 6 (reiterating the same assertion that the Investor Defendants 

determined in February 2020 that the affirmative defenses may apply). 

As for the specific facts that the Investor Defendants did not learn until 

February 2020, the motion states that “counsel for Investor Defendants [Troy Slome] was 

not fully aware of the facts in regard to this third [2015] refinance loan with the Plaintiff 

until February 2020, including the fact that the sum of $1,500,000 was paid to Bank of 

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America in connection with the 2015 refinance loan.” Id. at 8. Mr. Slome’s declaration 

similarly states that Plaintiff’s February 24, 2020 responses to the Investor Defendants’ 

Interrogatories (Set 1) and Demand for Production and Inspection of Documents (Set 1) 

“shed additional light on the Plaintiff’s claims in the First Amended Complaint.” ECF No. 

97-1, Slome Decl. ¶ 2. Mr. Slome does not expound on what “additional light” these 

documents shed, however. Indeed, the specific information most pertinent to the proposed

defenses appears to have been gleaned from conversations with counsel for Marquee, as 

described in the following paragraph of the declaration:

In February 2020, I was also able to confer with counsel for defendant 

Marquee [] in regard to the issue of a 2015 loan provided by some of the 

Investor Defendants to the Plaintiff in 2015. Specifically, I was also able to 

confirm that the refinance loan provided to the Plaintiff in 2015 included the 

pay-off of [a] $1,500,000 loan and deed of trust in favor of Bank of America. 

This 2015 refinance loan from some of the Investor Defendants was then paidoff by the Investor Defendants’ 2016 refinance loan at issue in the Plaintiff’s 

First Amended Complaint.

Id. ¶ 3. 

Plaintiff opposes the Investor Defendants’ request on the basis that they have failed 

to show diligence. See ECF No. 107 at 2-4. In particular, Plaintiff asserts that counsel for 

the Investor Defendants has known of the underlying facts that purportedly support the 

proposed new defenses since long before February 2020, because Jeffrey Myers, one of the 

Investor Defendants, was the lead investor in the 2016 and 2017 loans and was also the 

controlling investor in the 2015 loan. Id. at 4. Plaintiff further asserts that counsel for the 

Investor Defendants should have known about the relevant facts underlying the defenses 

because the other Defendant, Marquee Funding Group, Inc. (“Marquee”), originated the 

2015 loan, and Marquee’s counsel and the Investor Defendants’ counsel have had a joint 

defense relationship since the outset of the litigation. Id. The Investor Defendants do not 

dispute either of these facts in the Reply, which does not address the diligence question at 

all. Instead, the arguments in the Reply include: (1) that the proposed defenses of equitable 

lien and equitable subrogation are meritorious; (2) that the proposed defenses are 

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affirmative defenses, and not compulsory counterclaims as Plaintiff argues in his 

opposition; and (3) that Plaintiff will not be prejudiced by the extension of the scheduling

order, because the Investor Defendants have agreed to allow Plaintiff to propound 

discovery as to the two new affirmative defenses, and the pretrial motions deadline is not 

until June 30, 2020. See generally ECF No. 112. 

Upon consideration, the Court finds that the Investor Defendants have not met the 

diligence standard to amend the Scheduling Order. The Investor Defendants and their 

counsel do not sufficiently explain in their motion—or address at all in their Reply—what 

information in particular was learned for the first time in February 2020 upon review of 

Plaintiff’s discovery responses that was previously unknown to the Investor Defendants, 

or, more importantly, why the information that was already known to Investor Defendants 

was insufficient to determine the applicability of the proposed equitable defenses prior to

the pleading amendment deadline of December 30, 2019. The very basis of the proposed 

affirmative defenses is that the Investor Defendants’ funds were used to pay off the 2015 

Bank of America loan. Surely, then, the Investor Defendants who contributed to the 2015 

loan would have known these facts from the beginning of this litigation, and their counsel 

would have also known about these facts in the exercise of due diligence. See Quezada v. 

City of Los Angeles, No. 21507382ODWPJWX, 2018 WL 4378661, at *3 (C.D. Cal. Sept. 

13, 2018) (finding the Rule 16(b)(4) diligence standard was not met to justify permitting 

amendment of the complaint to include a new fact known to the plaintiffs, because 

“[p]resumably, counsel conducted due diligence, including communicating with their 

clients and ascertaining the circumstances of the [underlying incident], when they appeared 

in the action more than a year ago, which means they would have learned what Plaintiffs 

knew at least by July 2017.”). See also Merck, 2018 WL 4492362, at *3 (finding the 

plaintiff had not shown the requisite diligence to amend the complaint because at the time 

the suit was filed, “Plaintiff knew the relevant facts underlying her claim,” and “Plaintiff’s 

counsel presumptively knew the relevant facts underlying her client’s claim when drafting 

the complaint and submitting it to the court.”). Similarly, here, the Investor Defendants 

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whose funds were used in the 2015 refinance loan transaction presumably knew about that 

transaction when the Answer was filed, and their counsel presumptively knew those facts 

as well. This conclusion is further bolstered by the fact that Mr. Slome’s declaration only 

specifies information that he “confirm[ed]” by conferring with counsel for Marquee, with 

whom Mr. Slome has had a joint defense relationship since long before the pleading 

amendment deadline passed at the end of December. The information that was newly 

learned from Plaintiff’s discovery responses is not identified.

Therefore, the Investor Defendants have failed to show that they acted diligently to 

comply with the existing deadline to add the proposed affirmative defenses to their Answer. 

Whether those defenses would ultimately win the day if allowed to proceed is not a 

question before the Court. If the moving party fails to show diligence, the inquiry must 

end. Johnson, 975 F.2d at 609; Zivkovic v. Southern California Edison Co., 302 F.3d 1080, 

1097 (9th Cir. 2002). Nor does lack of prejudice to Plaintiff matter except as only a 

secondary consideration to the diligence inquiry. See Cruz v. City of Anaheim, No. 

CV1003997MMMJEMX, 2011 WL 13214312, at *2 (C.D. Cal. Dec. 19, 2011) (quoting 

Johnson, 975 F.2d at 609) (“Because diligence is the focus of the inquiry, prejudice to the 

party opposing the modification is not a prerequisite; it does, however, ‘supply additional 

reasons to deny [the] motion.’”). Consequently, the Court must DENY the Investor 

Defendants’ Motion.

Finally, although Plaintiff’s opposition brief also addresses the legal merits of the 

proposed affirmative defenses, Plaintiff moved to strike the Investor Defendants’ Reply 

precisely because it did not address the diligence question and instead presented substantial 

legal arguments on the merits. See ECF No. 115. In the alternative, Plaintiff sought leave 

to file a surreply to address the merits issues argued in the Reply, since the Court’s Order 

Setting Briefing Schedule instructed Plaintiff that “any opposition should be limited to the 

Investor Defendants’ request to extend the pleadings amendment deadline, since the merits 

issue of whether to grant leave to amend the answer as proposed is not yet before the 

Court.” ECF No. 99. Because the Court denies the motion to amend based on failure to 

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show diligence, Plaintiff’s Motion to Strike (ECF No. 115) based on the Investor 

Defendants’ failure to argue the relevant standard is also DENIED as moot.

IV. CONCLUSION

For the reasons set forth above, the Investor Defendants’ Motion to Modify 

Scheduling Order to Allow Defendants to File an Amended Answer Pursuant to Rule 

16(b)(4) of the Federal Rules of Civil Procedure (ECF No. 97) is DENIED.

Additionally, Plaintiff’s Motion to Strike (ECF No. 115) is DENIED as moot. 

IT IS SO ORDERED.

Dated: April 24, 2020

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