Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_04-cv-02690/USCOURTS-caed-2_04-cv-02690-4/pdf.json

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

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

DANIEL W. FAERFERS and KATJA

FAERFERS,

NO. CIV. S 04-2690 MCE PAN

Plaintiffs,

v. MEMORANDUM AND ORDER

CAVIAR CREATOR, INC., a Nevada

corporation, individually and

as successor to CAVIAR

CREATOR, INC., an Oregon

corporation,

Defendants.

_____________________________

CAVIAR CREATOR, INC., a 

Nevada corporation,

Counterclaimant/

Cross-Complainant,

v.

DANIEL W. FAERFERS, an 

individual; KATJA FAERFERS,

an individual; SINCLAIR WILSON,

an unknown business entity;

Counter-defendants/

Cross-defendants.

Case 2:04-cv-02690-TLN-EFB Document 70 Filed 10/28/05 Page 1 of 7
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Through the present action Caviar Creator, Inc. (“Caviar”)

has moved for leave to add a third party, Sinclair Wilson

(“Sinclair”), to this action. Sinclair has concurrently filed a

motion to strike all Caviar’s claims against it. For the reasons

set forth below, Caviar’s motion for leave to add a third party

is granted and Sinclair’s motion to strike is denied.

BACKGROUND

This action arises out of a settlement agreement

(“Agreement”) entered into by the Parties that was intended to

settle a previously filed lawsuit. All Parties vigorously

maintain that the opposing Parties have breached that Agreement

giving rise to this action. 

The Faerfers initially filed this action against Caviar

alleging breach of contract, fraud and seeking declaratory

relief. Caviar counter-claimed against the Faerfers likewise

alleging breach of contract and seeking declaratory relief. In

that same responsive pleading, Caviar cross-claimed against

Sinclair but failed to seek leave to add a third party in

violation of this Court’s pretrial scheduling order (“Order”)

giving rise to these concurrent motions.

STANDARD

The Court is normally required to enter a pretrial

scheduling order within 120 days of the filing of the complaint. 

Fed. R. Civ. P. 16(b). The scheduling order "controls the

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subsequent course of the action" unless modified by the Court. 

Fed. R. Civ. P. 16(e). Orders entered before the final pretrial

conference may be modified upon a showing of "good cause," Fed.

R. Civ. P. 16(b), but orders "following a final pretrial

conference shall be modified only to prevent manifest injustice." 

Fed. R. Civ. P. 16(e).

Rule 16(b)'s "good cause" standard primarily considers the

diligence of the party seeking the amendment. Johnson v. Mammoth

Recreations, 975 F.2d 604, 609 (9th Cir. 1992). The district

court may modify the pretrial schedule "if it cannot reasonably

be met despite the diligence of the party seeking the extension."

Fed. R. Civ. P. 16 advisory committee's notes (1983 amendment);

Id. Moreover, carelessness is not compatible with a finding of

diligence and offers no reason for a grant of relief. Id.

Although the existence or degree of prejudice to the party

opposing the modification might supply additional reasons to deny

a motion, the focus of the inquiry is upon the moving party's

reasons for seeking modification. If that party was not

diligent, the inquiry should end. Id.

ANALYSIS

1. Joinder

As noted above, Caviar Creator has filed a motion for leave

to add Sinclair to this action. Sinclair opposes Caviar’s motion

on the ground that it is not a party to the Agreement and,

therefore, is not a proper party to this action. 

Under Federal Rule of Civil Procedure 20, joinder is proper

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The Parties dispute whether Sinclair was, in fact, bound to 1

perform any duties under the Agreement. Specifically, Sinclair

urges that Vaughan entered into the Agreement in his individual

capacity. Caviar contends that Vaughan was acting as Sinclair’s

agent obligating it under the Agreement. 

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if (1) the plaintiffs asserted a right to relief arising out of

the same transaction and occurrence and (2) some question of law

or fact common to all the plaintiffs will arise in the action.

See Fed. R. Civ. P. 20(a); Desert Empire Bank v. Ins. Co. of N.

Am., 623 F.2d 1371, 1375 (9th Cir. 1980). Even once these

requirements are met, a district court must examine whether

permissive joinder would comport with the principles of

fundamental fairness or would result in prejudice to either side. 

Coleman v. Quaker Oats Co., 232 F.3d 1271, 1296 (9th Cir.

2000)(citations and quotations omitted).

Caviar’s asserted right to relief in this action arises out

of the Agreement executed primarily between the Faerfers and

Caviar. Sinclair’s involvement arises through one of its former

employees, Cris Vaughan. At the time the Agreement was executed,

Vaughan was employed by Sinclair and was attorney of record for

Daniel Faerfer. Significantly, Paragraph two of the Agreement

names Sinclair as well as Vaughan. In addition, the signatory 1

page contains the following legend:

APPROVED AS TO FORM AND TERMS OF PARAGRAPH 2:

Sinclair Wilson

By /s/ Cris Vaughan 

Attorneys for Daniel Faerfers

Decl. of M. MacDonald, Exh. A., P. 18.

In light of the foregoing, it is clear that Caviar’s

asserted right to relief arises out of a transaction common to

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all Parties, namely, the performance of the Agreement. 

Similarly, the issue of whether Sinclair was bound under the

Agreement and, if so, whether it properly performed its duties

thereunder are factual questions common to all Parties. 

Accordingly, the Court is satisfied that Sinclair is a proper

party to this action.

A finding that Sinclair is a proper party does not end the

inquiry. Courts must also ascertain whether joining a party

comports with fundamental fairness or would result in prejudice

to either side. Considering the scope of Caviar’s claim as a

whole, the Court finds that fairness will be best served by

permitting Caviar to bring its case concurrently against the

Faerfers and Sinclair rather than forcing it to seek redress from

each independently. In addition, the Court sees no injustice or

prejudice that would result from permitting Caviar to join

Sinclair at this early stage of the litigation. As noted above,

discovery is in its initial stages and Sinclair will have ample

opportunity to prepare its case. Accordingly, the Court finds

that the elements of joinder are satisfactorily met.

2. Amendment of Pretrial Scheduling Order

 

Sinclair avers that Caviar’s motion for leave should be

denied because Caviar violated this Court’s Order by adding

Sinclair without first seeking leave as required. Caviar replies

that good cause exists for its failure to properly seek leave

before adding Sinclair. Specifically, Caviar contends that the

following facts establish good cause: 1) the cross complaint

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naming Sinclair was Caviar’s first responsive pleading and first

opportunity to name a cross defendant; 2) Caviar disclosed that

it intended to name a third party in the Parties’ Joint Status

Report; and 3) discovery is in its initial stages so that adding

Sinclair will not prejudice any party.

As discussed above, the focus in determining whether to

permit a modification of a pretrial scheduling order is the

diligence of the party seeking the amendment. It is important to

note at the outset that this case has had an unusual procedural

progression. The case was filed and, prior to any responsive

pleadings, three motions to dismiss were filed and adjudicated. 

It was only then that this Court issued its pretrial scheduling

order. Thereafter, Caviar filed its first responsive pleading

improperly naming Sinclair as a party. Caviar became aware of

its error on Friday, August 26, 2005, when Sinclair filed its

motion to strike. By Monday, August 29, 2005, Caviar had filed

the appropriate motion for leave to add a third party. The

foregoing facts clearly demonstrate Caviar’s diligence in

pursuing this action. While Caviar failed to seek leave as

required, permitting Caviar to correct its mistake will not

result in any prejudice to Sinclair and will, instead, serve to

effect judicial economy. 

The Court finds that Caviar was sufficiently diligent in

pursuing its claims and Sinclair will suffer no prejudice by

being added at this early stage of litigation. Accordingly,

Caviar’s motion for leave to add a third party is granted.

//

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3. Sinclair’s Motion to Strike

Sinclair’s motion to strike is based entirely on its

argument that it is not a proper party to this action. As set

forth in detail above, the Court has concluded that Sinclair is

properly a party and will suffer no injustice by being joined in

the present action. Accordingly, Sinclair’s motion to strike is

denied.

CONCLUSION

Because Caviar has satisfied its burden of showing good

cause and judicial economy warrants, Caviar’s motion for leave to

add a third party is hereby GRANTED and Sinclair’s motion to

strike is hereby DENIED.

IT IS SO ORDERED.

DATED: October 27, 2005

_____________________________

MORRISON C. ENGLAND, JR

UNITED STATES DISTRICT JUDGE

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