Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_11-cv-01363/USCOURTS-cand-3_11-cv-01363-11/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 29:1001 E.R.I.S.A.: Employee Retirement

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

For the Northern District of California 

IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF CALIFORNIA 

THOMAS A.GONDA, JR., M.D.,

 Plaintiff, 

 v. 

THE PERMANENTE MEDICAL GROUP, 

INC.; and THE PERMANENTE MEDICAL 

GROUP, INC. LONG TERM DISABILITY 

PLAN FOR PHYSICIANS,

 Defendants. 

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

Case No. 11-cv-01363-SC

ORDER GRANTING LEAVE TO AMEND 

I. INTRODUCTION 

Now before the Court is Defendants The Permanente Medical 

Group, Inc. ("TPMG") and The Permanent Medical Group, Inc. Long 

Term Disability Plan for Physicians' ("TMPG Plan") motion for 

summary judgment. ECF No. 67. That motion is premised on the 

argument that a settlement agreement (the "Settlement Agreement") 

between Plaintiff Dr. Thomas A. Gonda, Jr., M.D. and TPMG releases 

all of Dr. Gonda's claims in this action. The Court has previously 

held that Defendants must amend their answer if they wish to raise 

release as an affirmative defense, and the Court ordered 

Case 3:11-cv-01363-SC Document 94 Filed 02/09/15 Page 1 of 9
2 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

For the Northern District of California 

supplemental briefing as to whether Defendants should be permitted 

to amend their answer. See ECF No. 84 ("Supp. Br. Order"). Both 

Defendants and Dr. Gonda timely filed briefs on the issue. See ECF 

Nos. 85, 91. For the reasons set forth below, the Court finds that 

Defendants should be permitted to amend their answer to add the 

relevant affirmative defense. 

II. LEGAL STANDARD 

Federal Rule of Procedure 15(a) permits a party to amend its 

pleading once as a matter of course within 21 days of serving it. 

Rule 15 allows amendments beyond the 21-day period only with the 

opposing party's consent or the court's leave, and the rule 

instructs courts to "freely give leave when justice so requires." 

Fed. R. Civ. P. 15(a)(2). "The purpose of pleadings is 'to 

facilitate a proper decision on the merits,' and not to erect 

formal and burdensome impediments in the litigation process. 

Unless undue prejudice to the opposing party will result, a trial 

judge should ordinarily permit a party to amend its complaint." 

Howey v. United States, 481 F.2d 1187, 1190 (9th Cir. 1973) 

(internal quotations and citations omitted). The Ninth Circuit has 

identified "several factors" used to determine whether leave to 

amend should be granted. "These criteria include undue delay, bad 

faith, futility of amendment, and prejudice to the opposing party. 

While all these factors are relevant, the crucial factor is the 

resulting prejudice to the opposing party." Id. 

/// 

/// 

/// 

Case 3:11-cv-01363-SC Document 94 Filed 02/09/15 Page 2 of 9
3 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

For the Northern District of California 

III. DISCUSSION 

A. Undue Delay 

This action was filed in March of 2011. Defendants answered 

Dr. Gonda's complaint on June 16. They could not have raised the 

Settlement Agreement as a defense at that time, because the 

Settlement Agreement had not yet been executed. When the 

Settlement Agreement was executed in November of 2011, this case 

was stayed pending the outcome of Dr. Gonda's arbitration 

proceedings against Defendants, and then the stay was continued 

during his administrative appeals. See ECF Nos. 19 ("Stay Order"); 

21. Defendants argue that "it would have been improper" to move 

for leave to amend at that time. That is correct, but the parties 

could have moved to lift the stay and dismiss the case, given that 

they had apparently agreed to release this lawsuit. 

Regardless, on May 20, 2013, Dr. Gonda reported that his 

administrative appeals had been exhausted and requested a case 

management conference. See ECF No. 24. On May 30, the Clerk set a 

case management conference on the Court's calendar. See ECF No. 

25. Once the case was restored to the Court's calendar, Defendants 

still did not seek leave to amend their answer. On November 11, 

2013, Defendants filed a motion for summary judgment. ECF No. 35. 

That summary judgment motion did not mention the Settlement 

Agreement, nor did Defendants seek leave to amend their answer at 

that time. It was not until November 6, 2014 -- almost three years 

after the Settlement Agreement was executed -- that Defendants 

finally raised the issue in their motion for summary judgment. See 

ECF No. 67 ("SJ Mot."). Even accepting that it would have been 

improper to move for leave to amend during the stay, Defendants 

Case 3:11-cv-01363-SC Document 94 Filed 02/09/15 Page 3 of 9
4 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

For the Northern District of California 

waited almost a year and a half after the exhaustion of Dr. Gonda's 

administrative appeals to raise this issue. 

TPMG argues that its attorneys did not obtain a copy of the 

release until August 2014. Because Defendants filed their motion 

for summary judgment about two months thereafter, Defendants argue 

that any delay was not undue. See Defs. Supp. Br. at 5-6. 

However, Defendant TPMG was a party to the Settlement Agreement and 

was therefore aware of it from the date it was executed. Failure 

to turn over the agreement to counsel does not excuse the delay. 

The Court finds that the sheer length of the delay in this case -- 

either three years or one and a half years, depending on when you 

start counting -- counsels against granting leave to amend. Cf. 

Toth v. Glazer, 163 F.R.D. 549, 550 (E.D. Wis. 1995) (two month 

delay in moving to amend answer supported denial of motion). 

B. Bad Faith 

The Life Insurance Company of North America ("LINA") provides 

long-term disability benefit insurance coverage for the TPMG Plan. 

As the TPMG Plan's insurer, LINA agreed to provide TPMG and the 

TPMG Plan with counsel in this case, and so TPMG was represented by 

different attorneys in Dr. Gonda's wrongful termination action. 

Defs. Supp. Br. at 2-3. LINA requested a copy of the Settlement 

Agreement from TPMG for use in this action in December of 2013 

(still two years after the agreement's execution). Id. at 3. TPMG 

did not respond. After LINA followed up with TPMG, TPMG referred 

LINA to the counsel who represented TPMG in the wrongful 

termination arbitration. However, TPMG's attorneys refused to turn 

over a copy of the Settlement Agreement. Defendants' attorneys 

also sought a copy of the agreement from Kaiser Foundation 

Case 3:11-cv-01363-SC Document 94 Filed 02/09/15 Page 4 of 9
5 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

For the Northern District of California 

Hospitals ("KFH"), but KFH's attorneys also refused to turn it 

over. Id. 

In April of 2014, Defendants served a request for production 

on Dr. Gonda that sought, among other things, a copy of the 

Settlement Agreement. That is rather remarkable. Defendant TPMG 

was a party to the Settlement Agreement and alleges in its motion 

for summary judgment that the Settlement Agreement applies to this 

action. But TPMG could not obtain a copy of a contract to which it 

was a party for use in its own defense and was put in the position 

of requesting that contract from the adverse party.1 While that 

does not necessarily indicate that bad faith caused the delay in 

raising this defense, it certainly gives the Court pause. TPMG's 

inability to obtain its own contract for its own defense casts some 

doubt on the forthrightness of the release argument. If the 

Settlement Agreement was truly intended to cover this litigation, 

then is difficult to understand why TPMG's attorneys had such 

difficulty getting a copy. 

Dr. Gonda suggests that Defendants are using the Settlement 

Agreement in a last-ditch effort to avoid adjudication on the 

merits because a court in this District issued a decision that 

adversely affected Defendants' chances in this litigation. See

Pl.'s Supp. Br. at 3-4. However, other than the timing (the 

decision, Polnicky v. Liberty Life Assurance Co. of Boston, 999 F. 

Supp. 2d 1144 (N.D. Cal. 2013) was issued November 26, 2013, and 

Defendants' first attempts to locate a copy of the Settlement 

 

1 TPMG ultimately did not need Dr. Gonda's copy of the Settlement 

Agreement. It was finally able to track down one of its own in 

house attorneys who had a copy on August 19, 2014. Still, it took 

TPMG more than nine months to obtain a copy of its own document. 

Case 3:11-cv-01363-SC Document 94 Filed 02/09/15 Page 5 of 9
6 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

For the Northern District of California 

Agreement came on December 11), there is no evidence that that was 

Defendants' motive. 

The Court finds that this factor weighs in favor of granting 

leave to amend. While the Court has some concerns about 

Defendants' inability to obtain a copy of the release, there is no 

evidence that Defendants acted in bad faith. 

C. Futility of Amendment 

This factor weighs in favor of granting Defendants leave to 

amend. The Court cannot say that amendment would be futile, as the 

Settlement Agreement does specifically refer to ERISA claims. This 

factor, too, weighs in favor of granting leave to amend. 

D. Prejudice to Dr. Gonda 

"[T]he consideration of prejudice to the opposing party 

carries the greatest weight." Sonoma Cnty. Ass'n of Retired Emps. 

v. Sonoma Cnty., 708 F.3d 1109, 1117 (9th Cir. 2013) (quoting 

Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th 

Cir.2003)). The discovery cutoff in this case was December 1, 2014 

(three weeks after Defendants filed the instant motion), and crossmotions for judgment under Rule 52 (in lieu of a trial) are set to 

be heard on March 6, 2015. Dr. Gonda argues that he would be 

unduly prejudiced were the Court to permit amendment, because 

amendment would either leave Dr. Gonda insufficient time to 

investigate Defendants' claims regarding the Settlement Agreement 

or require the Court to postpone the hearing date. 

Defendants argue that the Settlement "is an integrated 

contract subject to legal interpretation by the Court based on its 

four corners," and, therefore, that Dr. Gonda will not need to 

conduct any discovery. Defs. Supp. Br. at 9. The Court is not so 

Case 3:11-cv-01363-SC Document 94 Filed 02/09/15 Page 6 of 9
7 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

For the Northern District of California 

sure; California's rules on explanatory evidence for contracts are 

rather permissive. See Cal. Civ. Code § 1647 ("A contract may be 

explained by reference to the circumstances under which it was 

made, and the matter to which it relates."); see also NavCom Tech., 

Inc. v. Oki Elec. Indus. Co., No. 5:12-CV-04175-EJD, 2014 WL 

991102, at *8 (N.D. Cal. Mar. 11, 2014) ("[T]he court can consider 

the circumstances under which a contract was negotiated, including 

its object, nature, and subject matter."). Additionally, the TPMG 

Plan was not a party to the Settlement Agreement, nor was it named 

as one of the parties thereby released. Thus discovery would 

potentially be warranted into the Settlement Agreement's 

application to the TPMG Plan. 

However, despite Defendants' undue delay, any need to conduct 

additional discovery at this point is a result of Dr. Gonda's 

decision not to conduct that discovery before the discovery 

deadline. The parties filed a joint case management statement on 

September 12, 2014, that mentioned Defendants' intention to file a 

motion for summary judgment on the grounds that the Settlement 

Agreement bars Dr. Gonda's claims. ECF No. 57 at 6. At a case 

management conference on September 19, the Court set the discovery 

cutoff date for December 1. Thus Dr. Gonda had two and a half 

months to conduct any discovery regarding the Settlement Agreement. 

He apparently chose not to do so. If Dr. Gonda needed more time 

for discovery into this issue, he could have requested it at the 

conference, but he did not. Consequently, any prejudice to Dr. 

Gonda that would be caused by permitting this amendment is a result 

of his own failure to timely conduct the necessary discovery. 

Dr. Gonda also argues that he "spent a lot of money and 

Case 3:11-cv-01363-SC Document 94 Filed 02/09/15 Page 7 of 9
8 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

For the Northern District of California 

devoted a lot of effort to pursuing the internal appeals which, he 

had been led to believe were for a viable LTD claim. If this 

defense is . . . inserted into the case now, then all that was 

wasted." See Pl.'s Supp. Br. at 8. It is not entirely clear what 

Dr. Gonda means. Apparently, Dr. Gonda is saying that, had TPMG 

and the TPMG Plan made clear that they intended to rely on the 

Settlement Agreement as an affirmative defense in this action, Dr. 

Gonda would not have pursued his internal appeals with LINA. That 

makes little sense for two reasons. First, the parties agreed that 

Dr. Gonda's LINA appeals should be concluded before this lawsuit 

was adjudicated. See ECF No. 21 at 2-3 (parties stipulated to stay 

this matter for Dr. Gonda's administrative appeal). Presumably 

this case would have been rendered moot had LINA upheld Dr. Gonda's 

LINA appeal. It is difficult to understand why Dr. Gonda would not 

have pursued that appeal had Defendants informed him earlier of 

their intention to rely upon the Settlement Agreement as an 

affirmative defense in this case. Second, LINA is not a party to 

this lawsuit. So TPMG and the TPMG Plan's intention to rely on the 

Settlement Agreement (to which LINA was not a party) in this case 

(to which LINA is not a party) has no bearing on Dr. Gonda's 

appeals with LINA.2

 

 

2 Dr. Gonda inexplicably argues that "[n]either Kaiser nor TPMG is 

a party to this action. TPMG was (and is) named solely as a 

nominal defendant to plaintiff's benefits claim; there appears to 

be no dispute that LINA is the defendant real party in interest in 

the case at bench." ECF No. 71 ("MSJ Opp'n") at 1. In fact, 

Defendants do dispute LINA's status as the "real party in 

interest." See Defs.' Supp. Br. at 5-6. Defendants are correct; 

TPMG is a named defendant in this action and is therefore a party, 

regardless of Dr. Gonda's intentions. LINA, by contrast has never 

been named as a defendant in this case and is therefore not a 

party. 

Case 3:11-cv-01363-SC Document 94 Filed 02/09/15 Page 8 of 9
9 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

For the Northern District of California 

Thus the Court finds that Dr. Gonda will suffer no prejudice 

as a result of Defendants' proposed amendment that is not of his 

own making. Because the prejudice factor carries the most weight, 

the lack of prejudice to Dr. Gonda convinces the Court that 

granting leave to amend is appropriate. 

IV. CONCLUSION 

The Court finds that Defendants unduly delayed in raising the 

affirmative defense of the Settlement Agreement. However, there is 

no evidence of bad faith or futility. Most importantly, the Court 

finds that there will be no undue prejudice to Dr. Gonda. For 

those reasons, the Court GRANTS Defendants leave to amend their 

answer to add the affirmative defense that the Settlement Agreement 

releases Dr. Gonda's claims. Defendants shall file an amended 

answer within four (4) days of the signature date of this Order. 

The Court will defer resolution of Defendants' motion for summary 

judgment until Defendants have filed the amended pleading (or the 

four-day deadline passes with no amended pleading filed). 

 IT IS SO ORDERED. 

 Dated: February 9, 2015 

UNITED STATES DISTRICT JUDGE 

Case 3:11-cv-01363-SC Document 94 Filed 02/09/15 Page 9 of 9