Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_06-cv-00398/USCOURTS-caed-1_06-cv-00398-2/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 15:1681 Fair Credit Reporting Act

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APR 1 2 2007 

CLERK. U.S. DISTRICT COURT 

EASTERN DISTRICT OF CALIPBAflIA 

BY 

DEPUTYCLERK 

UNITED STATES DISTRICT COURT 

EASTERN DISTRICT OF CALIFORNIA 

ROBERT A. WOODS and LORI A. 1:06-CV-00398-SMS 

WOODS, husband and wife as 

individuals, MEMORANDUM AND ORDER DENYING 

MOTION TO FILE SECOND AMENDED 

Plaintiff, COMPLAINT 

PROTECTION ONE ALARM 

MONITORING, INC., a Delaware 

Corporation admitted to do 

business in California, Does 1 

to 100, and ASSET RESOURCES, 

1 Defendants. 

~ The above-captioned case was removed to this court from the 

Superior Court for the State of California, County of Merced, on 

April 6, 2006. The consented to the jurisdiction of the 

Honorable Sandra M. Snyder, United States Magistrate Judge, 

pursuant to 28 U.S.C. § 636(c) (1) and Local Rule 73-305. 

Hearing on Robert A. Woods and Lori A. Woods (hereafter 

referred to as Plaintiffs) motion to file a second amended 

complaint came on for hearing on Friday, March 31, 2007, at 9:30 

a.m. in the above-entitled court in Fresno, California, before 

Case 1:06-cv-00398-SMS Document 47 Filed 04/13/07 Page 1 of 12
The Honorable Sandra M. Snyder, United States Magistrate Judge. 

Attorney P. Michael Pekin appeared telephonically for the 

Plaintiffs, and Attorney Alexander J. Harwin appeared 

telephonically for Defendant Protection One Alarm Monitoring, 

Inc.(hereafter referred to as Protection One). 

The court has reviewed all the pleadings submitted in 

connection with the motion, the opposition, and the reply. After 

argument, the matter was submitted to the Court. 

I. Backsround 

On February 12, 2007, Plaintiffs filed a notice of motion 

and motion to file a second amended complaint together with a 

memorandum of points and authorities, a declaration of P. Michael 

Pekin, with attached exhibits, and a separate statement of 

changes made to second amended complaint. Defendant Protection 

One filed its opposition on March 16, 2007. Plaintiffs filed a 

reply to the opposition on March 21, 2007. Finally, Protection 

One filed an objection to evidence and request to strike in 

connection with the instant motion. 

This diversity case was removed to U. S. District Court on 

April 6, 2006 by Defendant Asset Resources. It was originally 

filed in state court on August 19, 2003 naming Defendant 

Protection One as the only defendant. Plaintiffs conducted no 

depositions and very little written discovery during the next two 

years. Defendants conducted depositions, one in Fargo, N.D., and 

two in Atlanta, GA. Plaintiffs did not appear personally at any 

of the depositions but did appear telephonically for the Atlanta, 

GA depositions. 

On November 28, 2005, Protection One filed a motion for 

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summary judgment, and trial was set before the Merced County 

Superior Court on March 14, 2006. On December 20, 2005, 

Plaintiffs filed a motion to request order to file a first 

amended complaint. In his declaration in support of the motion, 

Attorney Pekin indicated that the proposed changes in the 

complaint 'do not change the theory of the lawsuit which remains 

one founded in libel. ... all necessary discovery will have been 

completed prior to trial; the amendments sought do not require 

that discovery be extended nor a continuance of the trial be 

granted." Declaration of P. Michael Pekin in support of motion 

to file first amended complaint, p.1:21-22, p.6:25 - 7:l-2, 

attached as Exhibit 1 to Protection One's opposition to this 

motion. Plaintiffs were allowed to file a first amended 

complaint by the Merced Superior Court in late 2005 or early 

2006 .' 

The first amended complaint alleges libel, breach of contract 

by the tort of libel, breach of contract for violation of the 

California Consumer Credit Reporting Act, and violation of the 

California Consumer Credit Reporting Agencies Act. Asset 

Resources, Inc., was added as a named defendant. 

In December 1999, Plaintiffs and Protection One entered into 

a two-year contract for Protection One to install and maintain a 

home alarm system in their home in Los Banos, CA. In 2000 

Plaintiffs moved to Atwater, CA. They allege they were compelled 

' The Court is uncertain as to the date of filing of the First Amended 

Complaint. The unsigned copy filed with the Court upon removal in April 2006 

bears a date of February 4, 2006. The unsigned copy provided to the Court by 

Plaintiffs' attorney as Attachment lto his Motion to file a Second Amended 

Complaint bears a date of February 28, 2006. Neither document bears a filing 

date by the Merced County Superior Court. 

Case 1:06-cv-00398-SMS Document 47 Filed 04/13/07 Page 3 of 12
by Protection One to enter into a new two-year contract for their 

new home in Atwater to avoid penalties for early cancellation of 

the contract for the Los Banos home. At the time that Plaintiffs 

entered into a new two-year contract, they allege Protection One 

informed them that the prior Los Banos contract was cancelled and 

void, and that no further money was owed on the Los Banos 

contract. The Atwater contract was completed at the expiration 

of the two-year period in October, 2002. 

Plaintiffs allege that prior to the acts complained of 

herein, they enjoyed an excellent credit rating. They allege 

that in June, 2003, they learned for the first time that the 

defendants were allegedly publishing false information to credit 

reporting services indicating that plaintiffs failed to make 

their contractual payments to Protection One for the services to 

their former home in Los Banos in the amount of $650.2 This 

information was republished by credit reporting agencies. 

Plaintiffs further allege that Protection One sent the 

account to defendant Asset Resources Collection Agency for 

collection. They further allege that in June, 2003, Protection 

One informed Plaintiffs that their account had been sent to an 

outside collection agency in error, and that they were in the 

process of correcting the error. Despite this, Plaintiffs allege 

that the defendants continued to publish the erroneous and 

Plaintiffs apparently discovered the existence of this collection 

action when they submitted two allegedly false home mortgage refinance 

applications in June, 2003. Plaintiffs lived in a manufactured home on 

acreage, but on their applications stated they lived in a single family home. 

Even with excellent credit ratings, the mortgage brokers involved stated that 

very few investors would give advantageous rates for financing of manufactured 

homes. See Protection One's Opposition to Motion to Amend, p. 4:s-14, and 

Exhibits 2. 3 and 4. 

Case 1:06-cv-00398-SMS Document 47 Filed 04/13/07 Page 4 of 12
jerogatory consumer credit information about them to March, 2005. 

Plaintiffs allege that they were powerless to prevent 

further injury because only Protection One through its express 

3gent could effect the removal of the erroneous information from 

the credit reporting agencies. 

They contend that as a result of the erroneous and 

jerogatory information, they were unable to obtain a refinancing 

loan at the favorable interest rates that were available in June 

2003 to consumers who enjoyed excellent credit ratings. As a 

result of the alleged libel they have suffered loss of 

reputation, shame, mortification, hurt feelings and emotional and 

financial distress causing pain and suffering and physical and 

emotional injury. 

11. Motion for Order to File Second Amended Complaint 

A. Lesal Standard 

Fed. R. Civ. P. 15(a) provides in pertinent part: 

A party may amend the party's pleading once as a 

matter of course at any time before a responsive 

pleading is served or, if the pleading is one to which 

no responsive pleading is permitted and the action has 

not been placed upon the trial calendar, the party 

may so amend it at any time within 20 days after it 

is served. Otherwise a party may amend the party's 

pleading only by leave of court or by written consent 

of the adverse party; and leave shall be freely given 

when justice so requires. , . . 

A motion for leave to amend is subject to the Court's 

discretion, Swanson v. United States Forest Service, 87 F.3d 

339, 343 (gCh Cir. 1996). Although the rule is to be construed 

liberally, leave to amend is not automatically granted. Jackson 

v. Bank of Hawaii, 902 F.2d 1385, 1387 (9th Cir.1990). In 

determining whether the Court should exercise its discretion to 

Case 1:06-cv-00398-SMS Document 47 Filed 04/13/07 Page 5 of 12
allow amendments, the following factors should be considered: 

(1) whether the movant unduly delayed seeking leave to amend, or 

acted in bad faith or with dilatory motive; (2) whether the 

party opposing amendment would be unduly prejudiced by the 

amendment; 3) whether there have been repeated failures to cure, 

and (4) whether amendment would be futile. Foman v. Davis, 371 

U.S. 178, 182, 83 S.Ct. 227, 230 (1962). 

B. Analysis 

Defendants argue that Plaintiffs' motion should be denied 

as untimely because this case was set for trial in Merced County 

Superior Court on March 14, 2006, after the state court had 

allowed Plaintiffs to file their first amended complaint. At 

that time Plaintiffs stated their readiness for trial and 

assured the court that all discovery would be completed in 

accordance with the schedule previously set by the court. 

Defendants further argue that Plaintiffs should have filed 

a motion to modify the federal court scheduling order and be 

required to show good cause for the seeking to amend the 

complaint. See Fed.R.Civ.P. 16(b), and Coleman v. Quaker Oats, 

232 F.3d 1271, 1294 (9th Cir. 2000). This standard "primarily 

considers the diligence of the party seeking the amendment." 

Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 609 (9=" Cir. 

1992) 

After removal to federal court, a scheduling conference was 

reset from September 1, 2006 to September 13, 2006 by The 

Honorable Oliver W. Wanger after all parties consented to 

magistrate judge jurisdiction. At that 9/13/06 conference the 

court determined that the case was not ready for scheduling. A 

Case 1:06-cv-00398-SMS Document 47 Filed 04/13/07 Page 6 of 12
briefing schedule was set for the parties to submit their 

motions to dismiss by October 27, 2006, with response dates set 

out, and a hearing date for said motions was set for December 1, 

2006. 

The defendants each filed timely motions to dismiss. The 

Court granted in part and denied in part the Defendants' motions 

to dismiss which reduced the causes of action to one alleging 

libel. Defendants then filed their answers to the first amended 

complaint, and another scheduling conference was set for 

February 12, 2007. The court ordered the parties to file a 

joint scheduling conference report one week prior to the 

hearing. The joint report was filed on February 2, 2007. 

Plaintiff made no indication in this document that he intended 

to file a second amended complaint. 

On February 4, 2007, without filing a proper motion to 

amend the complaint, Plaintiffs filed a second amended 

complaint. This was subsequently withdrawn by Plaintiffs. 

On February 12, 2007, the second scheduling conference was 

held, and again it was found that the case remained unready for 

scheduling. Again, Plaintiffs' counsel discussed amending the 

complaint. If they still intended to do so, Plaintiffs were 

ordered to file a motion to amend by March 1, 2007. 

Anticipating that Plaintiffs would file such a motion, a hearing 

date was set for March 30, 2007. 

Plaintiffs argue that they should not be held to any 

schedule set by the Merced Superior Court and contends that no 

scheduling order has been entered after removal. It is true that 

no scheduling order pursuant to FRCP 16 has been issued by this 

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Court despite the fact that on two occasions the Court held 

scheduling conferences to attempt to issue a scheduling order, 

and each time determined that the case was not yet ready for 

scheduling. 

Under Rule 15(a), while the court is allowed to grant 

amendment freely when justice so requires, the court need not 

grant the motion automatically. After reviewing the standards 

set out for Rule 15, the court, in the exercise of its 

discretion, can determine that justice does not require the 

granting of leave to amend. See Foman v. Davis, 371 U.S. 178, 

182, 83 S.Ct. 227, 230 (1962). 

Plaintiffs here have unduly delayed seeking leave to amend 

the complaint. The same allegations set out in the proposed 

second amended complaint could have been alleged in the first 

amended complaint in state court in late 2005 or early 2006 as 

the relationships and events Plaintiffs seek to include were 

known or should have been known no later than March 2005. 

Plaintiffs argue that Protection One's failure to provide 

satisfactory responses to his request for admissions propounded 

on December 20, 2005 and responded to on December 31, 2005, 

caused this delay. See Plaintiffs' reply to opposition, pgs. 4- 

5, lines 15-24; 1-16. (Doc. 40)' However, in the period from 

December 30, 2005, to date, Plaintiffs have not filed a motion 

to compel answers or sought to depose the parties involved. The 

Court finds that Plaintiffs have shown no valid cause for 

' protection One filed an objection to evidence and request to strike, 

arguing use of the requests for admissions as an exhibit is inadmissible 

hearsay, irrelevant, argumentative and conclusionary. Objections denied. 

Evidence considered as foundational only. 

Case 1:06-cv-00398-SMS Document 47 Filed 04/13/07 Page 8 of 12
failing to include the allegations in the first amended 

complaint and that Plaintiffs unduly delayed seeking to again 

amend the complaint. 

The Court also finds that defendants have been prejudiced 

by the undue delay. The case was originally filed on August 19, 

2003 in Merced Superior Court. During the next nearly three 

years, there was little or no activity by Plaintiff in 

prosecuting the case. Protection One, the only defendant in the 

matter, conducted discovery and took depositions between October 

2004, and July of 2005. On November 28, 2005, Protection One 

filed a motion for summary judgment in state court. The matter 

was never heard as Plaintiffs moved to file their first amended 

complaint. As stated before, at that time Plaintiffs declared 

readiness in state court for trial scheduled for March 14, 2006. 

Protection One had already expended considerable effort and 

expense in defending the original complaint and expected the 

matter to go to trial in March, 2005. The first amended 

complaint added Asset Resources which defendant subsequently 

removed the matter to this court. Since the April 5, 2006, 

removal of the parties have been proceeding on the first amended 

complaint. While it is true Plaintiffs' counsel has been 

discussing informally with the Court and defense counsel his 

desire to file another amended complaint, those discussions have 

focused on a desire and/or perceived need to have Equifax as a 

party in this case. In fact, Plaintiffs' counsel has challenged 

and at times seemingly begged defense counsel to cross-claim 

against or implead Equifax if they think Equifax is necessary in 

this lawsuit. At no time was there a discussion, informal or 

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otherwise, about adding explanatory language to the complaint 

regarding Attorney Shapiro's agency status with Protection One 

or that Protection One is vicariously liable for actions of its 

legal counsel, etc., as set forth in the proposed second amended 

complaint. In fact, what is perplexing to the point of alarming 

to the Court is Attorney Pekin's own statement in his 

declaration filed in December, 2005 in conjunction with 

Plaintiffs' motion to file their first amended complaint in 

state court: "19. Declarant does not complain of any 

impropriety on the part of opposing counsel nor ASSET RESOURCES 

or its counsel. Each is acting within their rights in defending 

their clientsf interests." See Exhibit 1 attached to Protection 

One's opposition to Plaintiffs' motion for order to file second 

amended complaint, page 10-11, lines 23-24; 1-2. 

The Court finds that the delay of Plaintiffs and their 

failure to diligently prosecute the case has unduly and 

repeatedly prejudiced the defendants. In addition, Plaintiffs 

now attempt to assert that defense counsel for Protection One, 

attorney David Shapiro, has wronged them from July 2004 through 

March 2005 through publication of the derogatory credit 

information. They allege that Mr. Shapiro is an agent of 

Protection One and as such knew of the libel when he was 

retained to represent Protection One and had a duty to stop the 

continuous libel of Protection One, and that this continued 

until March 2005. 

Plaintiffs cite no legal authority for this position. They 

merely allege that Shapiro became an agent of Protection One by 

virtue of representing Protection One in this action, and that 

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he was aware of the libelous credit information upon service of 

the original complaint and took no action to stop the continuous 

libel of Plaintiffs by Defendants. Plaintiffs state that they 

will not make a motion to disqualify Attorney Shapiro nor his 

firm, but because Mr. Shapiro is an agent of Protection One, 

they cannot be prevented "from fully exploring Shapiro's 

knowledge the Libel was continuing, his contacts with other 

[Protection One] personnel to try to stop it, and all 

[Protection One] conduct he has knowledge by any means regarding 

the continuing Libel' of Plaintiffs." Plaintiffs motion, 

p.6:16-23. Plaintiffs further contend that "Attorney Shapiro's 

conduct is fully discoverable . . . without restriction of 

attorney/client or work product privileges." Id., p.7:15-17. 

Plaintiffs rely upon Chicaso Title Ins. Co. v. Superior 

Court, 174 Cal.App.3d 1142 (1985) and Well~oint Health Networks, 

Inc. v. Su~erior Court, 59 Cal.App.4th 110 (1997) to support his 

argument. Reliance on those cases is incorrect. In Chicaso 

Title Ins. Co. v. Superior Court, id. at 1154, the attorney 

there acted as business agent as well as an attorney, and his 

activities were so intertwined as to become indistinguishable 

and the court held that the attorney-client privilege was deemed 

impliedly waived. In Wellpoint Health Networks, Inc. v. 

Superior Court,& the court discusses both the attorney client 

privilege and discoverability of attorney work product. The 

court carefully explained that only when an attorney acts in a 

non-attorney capacity can the privilege be waived. Nothing in 

either case supports Plaintiffs' contention that when Mr. 

Shapiro began representing Protection One in this action he 

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necessarily became an agent of Protection One. There is no 

evidence that Mr. Shapiro was an in-house lawyer, was a hired 

business agent or ever performed in any non-attorney capacity. 

To conclude, Plaintiffs failed to timely seek to amend the 

complaint when they were fully aware over two years ago of the 

allegations they now seek to add. Further, the Court finds that 

the amendment of the complaint to include the allegations with 

regard to Mr. Shapiro as discussed above are without legal basis 

and are meritless. Thus, allowing Plaintiffs to amend the 

complaint to include these allegations would be futile. 

111. Di~~o~ition 

For all of the foregoing reasons, the Court, in the 

exercise of its discretion, DENIES Plaintiffs' motion for leave 

to file a second amended complaint. 

Protection One requests that "in the event that the Court 

elects to grant leave, this Court should only grant the Motion 

if and only if Plaintiffs reimburse the Protection One no less 

than three thousand, two hundred and fifty dollars ($3,250.00) ." 

This Defendant goes on to opine that this is the amount they 

will most likely incur in preparing for and attending another 

motion to dismiss. Since the Court did not grant Plaintiffs' 

motion, no order of attorneys' fees and costs is made with 

regard to this motion. 

IT IS SO ORDERED this /~.kCay of April, 2007. 

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