Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_04-cv-02728/USCOURTS-caed-2_04-cv-02728-8/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Contract Default

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

MERIDIAN PROJECT SYSTEMS,

INC.,

Plaintiff,

v. NO. CIV. S-04-2728 FCD DAD

MEMORANDUM AND ORDER

HARDIN CONSTRUCTION COMPANY,

LLC, and COMPUTER METHODS

INTERNATION CORP., 

Defendants.

___________________________/

COMPUTER METHODS INTERNATION

CORP., and HARDIN CONSTRUCTION

COMPANY, LLC, 

Counterclaimants,

v.

MERIDIAN PROJECT SYSTEMS,

INC., and JAMES OLSEN, JOHN

BODROZIC, and MIKE CARRINGTON,

Counterdefendants.

_____________________________/

Case 2:04-cv-02728-FCD-DAD Document 105 Filed 01/19/06 Page 1 of 7
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Because oral argument will not be of material 1

assistance, the court orders the matter submitted on the briefs. 

E.D. Cal. L. R. 78-230(h).

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----oo0oo----

This matter is before the court on plaintiff’s Meridian

Project Systems, Inc.’s (“Meridian”) motion for leave to file a

second amended complaint. Defendants Hardin Construction

Companis, LLC (“Hardin”) and Computer Methods International Corp.

(“CMIC”) oppose the motion. For the reasons set forth below,1

plaintiff’s motion is GRANTED.

BACKGROUND

Meridian is a software company that provides project

management software for large real estate projects and other

capital-intensive construction initiatives. (First Amended

Complaint (“FAC”) ¶ 9.) Meridian’s “flagship” product is Prolog

Manager (“Prolog”), a project management software package that

automates all aspects of the construction process, from project

design to closeout. (FAC ¶ 9.) Defendant Hardin Construction

Company, LLC (“Hardin”) is a large construction company in

Georgia and long-time customer of Meridian for its Prolog

product. (FAC ¶ 11.) Defendant CMIC is a software company based

in Canada that provides software products and software

consulting. (FAC ¶ 14.) Meridian alleges that, beginning in

late 2000 or early 2001, Hardin and CMIC initiated a scheme to

reverse engineer Prolog for the purpose of developing a competing

project management software solution that CMIC could combine with

its existing financial and operational software. (FAC ¶ 16.)

On November 29, 2004, Meridian filed a complaint against

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CMIC and Hardin in the Superior Court of Sacramento County. CMIC

and Hardin subsequently removed the action to this court. The

original complaint asserted seven causes of action for breach of

contract against CMIC, breach of contract against Hardin, breach

of the implied covenant of good faith and fair dealing, fraud,

interference with contractual relations, intentional interference

with prospective economic advantage, and unfair competition. 

(FAC ¶¶ 20-58.) On January 14, 2005, plaintiff filed the First

Amended Complaint, which added an eighth claim, for copyright

infringement, to the seven claims asserted in the original

complaint. (FAC ¶¶ 59-68.)

On October 28, 2005, a pretrial scheduling order was entered

in the court. The scheduling order provides that “[n]o further

joinder of parties or amendments to pleadings is permitted

without leave of court, good cause having been shown.” (Pretrial

Scheduling Order, Oct. 28, 2005, Docket No. 64 (citing Rule

16(b); Johnson v. Mammoth Recreations, Inc., 975 F.2d 604 (9th

Cir. 1992)). The scheduling order further provides that the

plaintiff may file a motion to amend and have it heard no later

than January 13, 2006. (Id.)

On December 16, 2005, plaintiff filed a motion for leave to

file a second amended complaint. The motion was scheduled to be

heard on January 13, 2006. Plaintiffs seek to amend their

complaint to (1) clarify certain factual allegations against

defendants based upon evidence produced in discovery; (2) attach

a Certificate of Copyright Registration for Meridian’s Prolog

Version 6.0 software; and (3) add a claim for conversion based on

evidence developed during recent discovery. (Pl.’s Mot. to

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 To rely solely on Rule 15 after a pretrial scheduling 2

order has been entered would “render scheduling orders

meaningless and effectively would read Rule 16(b) and its good

cause requirement out of the Federal Rules of Civil Procedure.” 

Sosa v. Airprint Systems, Inc., 133 F.3d 1417, 1419 (11th Cir.

1998); see also Mammoth Recreations, 975 F.2d at 610 (adopting

Rule 15's standards for amending the complaint would “undermine

the court’s ability to control its docket, disrupt the agreedupon course of the litigation, and reward the indolent and the

cavalier”); Eckert Cold Storage, 943 F. Supp. at 1232 n.3.

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Amend, filed Dec. 16, 2005, at 2). Defendants oppose plaintiff’s

motion only to the extent that it seeks to add a claim for

conversion. (Defs.’ Opp’n, filed Dec. 30, 2005, at 2). 

STANDARD

Once the court has entered a pretrial scheduling order

pursuant to Rule 16, the standards of Rule 16 rather than Rule 15

govern amendment of the pleadings. See Johnson v. Mammoth

Recreations, Inc., 975 F.2d 604, 607-08 (9th Cir. 1992); Eckert

Cold Storage, Inc. v. Behl, 943 F. Supp. 1230, 1232-33 (E.D. Cal.

1996).2

A scheduling order is not “a frivolous piece of paper, idly

entered, which can be cavalierly disregarded by counsel without

peril.” Gestetner Corp. v. Case Equip. Co., 108 F.R.D. 138, 141

(D. Me. 1985). The pretrial scheduling order is designed to

allow the district court to better manage its calendar and to

facilitate more efficient disposition of cases by settlement or

by trial. See Mammoth Recreations, 975 F.2d at 610-11; Fed. R.

Civ. P. 16 advisory committee notes (1983 amendment).

When evaluating whether a party was diligent, the Ninth

Circuit has determined that “the focus of the inquiry is upon the

moving party’s reasons for modification. If that party was not

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diligent, the inquiry should end.” Id. at 610; see also

Gestetner, 108 F.R.D. at 141. 

Only after the moving party has demonstrated diligence under

Rule 16 does the court apply the standard under Rule 15 to

determine whether the amendment was proper. See Mammoth

Recreations, 975 F.2d at 608; Eckert Cold Storage, 943 F. Supp.

at 1232 n.3. Pursuant to Rule 15(a), “leave [to amend] is to be

freely given when justice so requires.” “[L]eave to amend should

be granted unless amendment would cause prejudice to the opposing

party, is sought in bad faith, is futile, or creates undue

delay.” Martinez v. Newport Beach, 125 F.3d 777, 785 (9th Cir.

1997). 

ANALYSIS

I. Rule 16(b)

Plaintiff has brought this motion to amend in compliance

with the deadline set forth in the scheduling order. Therefore,

in order to demonstrate good cause, plaintiff need only show

diligence in uncovering facts supporting the amendments. See

Johnson, 975 F.2d at 609. Plaintiff argues that it has shown

good cause to amend its complaint because it only recently

learned of the basis for the proposed claim of conversion through

discovery and depositions.

Plaintiff asserts that it first received documents from

defendant Hardin on May 27, 2005, and from defendant CMIC on June

15, 2005. (Declaration of Scott W. Pink (“Pink Decl.”), filed

Dec. 16, 2005, ¶ 3). However, nearly all of the documents were

designated “Highly Confidential-Attorney Eyes Only” which

prevented plaintiff’s counsel from showing key documents to the

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plaintiff. (Id.) The parties reached an agreement regarding the

confidentiality designations on September 13, 2005. (Id. ¶ 6). 

Plaintiff deposed Hardin employees on October 12-14, 2005. (Id.

¶ 7). As a result of this discovery, plaintiff discovered

evidence regarding the use of plaintiff’s Prolog software that it

believes supports a claims for conversion. (Id. ¶ 9). Plaintiff

asserts that the deposition testimony revealed facts supporting

its conversion claim that were not previously known to it. 

(Pl.’s Mot. at 3-4).

Plaintiff has produced evidence that it was diligent in

conducting discovery in this matter, and specifically, that it

was diligent in uncovering the facts supporting the amendments. 

The facts set forth by plaintiff demonstrate that there were

disputes regarding the confidentiality of documents which

prevented plaintiff from seeing key documents. The facts

demonstrate that once this dispute was settled and depositions

were taken, plaintiff discovered evidence that supported a claim

for conversion. Plaintiff then filed this motion to amend in a

timely manner. Therefore, plaintiff has demonstrated diligence

in uncovering the facts supporting the amendment, and thus, good

cause has been shown pursuant to Rule 16. 

II. Rule 15(a)

Plaintiffs also argue that leave to amend should be granted

pursuant to Rule 15. “[L]eave to amend should be granted unless

amendment would cause prejudice to the opposing party, is sought

in bad faith, is futile, or creates undue delay.” Martinez v.

Newport Beach, 125 F.3d 777, 785 (9th Cir. 1997). Defendants

argue that leave to amend should not be granted because the new

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Defendants do not assert that plaintiff’s amendment is 3

sought in bad faith or would cause undue delay. 

For the reasons set forth herein, it is not necessary 4

for the court to determine whether the conversion claim in this

case is pre-empted by the Copyright Act on plaintiff’s motion to

amend.

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claim for conversion is futile as pre-empted by the Copyright

Act. (Def.’s Opp’n at 5). 

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Assuming for the purposes of this motion that plaintiff’s 4

conversion claim is pre-empted by the Copyright Act, plaintiff

may assert this claim in the alternative. Defendants assert in

their Third Amended Answer to plaintiff’s First Amended Complaint

and Counterclaim that plaintiff’s Prolog software is

copyrightable subject matter within the scope of the Copyright

Act. To the extent that plaintiff’s claim for copyright

infringement may fail on this ground, plaintiff may have an

actionable claim for conversion. Therefore, plaintiff’s proposed

addition of the claim for conversion is not futile. 

CONCLUSION

For the reasons stated herein, plaintiff’s motion for leave

to file a second amended complaint is GRANTED.

IT IS SO ORDERED.

DATED: January 18, 2006.

/s/Frank C. Damrell, Jr. 

 FRANK C. DAMRELL, Jr.

UNITED STATES DISTRICT JUDGE

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