Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_14-cv-00930/USCOURTS-cand-3_14-cv-00930-3/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

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

TESORO REFINING & MARKETING 

COMPANY LLC,

Plaintiff,

v.

PACIFIC GAS AND ELECTRIC 

COMPANY,

Defendant.

Case No. 14-cv-00930-JCS 

ORDER DENYING MOTION FOR 

LEAVE TO AMEND COMPLAINT

Re: Dkt. No. 69

I. INTRODUCTION

This case concerns a power outage at the Golden Eagle Refinery (the “Refinery”) owned 

by Plaintiff Tesoro Refining & Marketing Company LCC (“Tesoro”). Tesoro and Defendant 

Pacific Gas and Electric Company (“PG&E”) entered a stipulation in May of 2014, agreeing that 

Tesoro would amend its complaint to remove a request for punitive damages, but that Tesoro 

could reassert that request no later than seventy-five days before the close of fact discovery. 

Although fact discovery closed in April of this year, Tesoro now moves for leave to further amend 

its complaint to seek punitive damages, based on purportedly relevant information not produced 

until after the stipulated amendment deadline. The Court held a hearing on September 25, 2015. 

For the reasons stated below Tesoro‟s motion is DENIED.1

II. BACKGROUND

A. Factual Background

The following summary is intended only as an overview, with additional purportedly 

relevant facts discussed in more detail below in the context of the parties‟ disclosures and 

 

1

The parties have consented to the jurisdiction of the undersigned magistrate judge for all 

purposes pursuant to 28 U.S.C. § 636(c).

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discovery.

Although the Refinery primarily drew power from an adjacent cogeneration plant (the 

“Cogen”) operated by non-parties Foster Wheeler Martinez, Inc. and Martinez Cogen Limited 

Partnership (collectively, “FWM” or “Foster Wheeler”),2Tesoro had an agreement for standby 

electricity service from Defendant Pacific Gas & Electric Company (“PG&E”). In November of 

2010, an unexpected disruption of PG&E‟s transmission lines to PG&E‟s Tidewater Substation 

(the “Substation”) isolated, or “islanded,” the Refinery, the Cogen, and local PG&E customers 

from PG&E‟s electrical grid, with the Cogen as the only remaining source of power for the 

Refinery and the other local customers. The Cogen tripped offline, causing an unplanned loss of 

power at the Refinery and allegedly damaging the Refinery.

B. Procedural History and Discovery Process

Tesoro‟s original Complaint in this action included a request for punitive damages on 

Tesoro‟s second cause of action for negligence or gross negligence. Compl. (dkt. 1) ¶ 49. On 

May 5, 2014, PG&E moved to dismiss only Tesoro‟s punitive damages claim. See generally Mot. 

to Dismiss (dkt. 18). Two weeks later, the parties filed the following stipulation:

Plaintiff Tesoro . . . and Defendant [PG&E] stipulate as follows:

WHEREAS, on May 5, 2014, PG&E filed a Motion to Dismiss 

Plaintiff‟s Claim for Punitive and Exemplary Damages (docket no. 

18), currently scheduled for hearing on July 11, 2014,

WHEREAS, Tesoro agrees to withdraw its claim for punitive and 

exemplary damages without prejudice to amendment and subject to 

the terms of this Stipulation,

WHEREFORE, THE PARTIES HEREBY STIPULATE:

1. Tesoro will amend its complaint by no later than May 26, 2014, 

for the sole purpose of removing its claim for punitive and 

exemplary damages; 

2. Tesoro may reassert a claim for punitive and exemplary damages 

no later than 75 days prior to the close of fact discovery, provided 

 

2

FWM was briefly a party to this litigation after PG&E filed a third-party complaint against it. 

The Court granted FWM‟s motion to dismiss that complaint with prejudice on August 29, 2014. 

See Order Granting Third-Party Defendant‟s Motion to Dismiss (dkt. 50); Tesoro Refining & 

Mktg. Co. LLC v. Pac. Gas & Elec. Co., No. 14-cv-00930-JCS, 2014 WL 4364393 (N.D. Cal. 

Aug. 29, 2014).

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such amendment is consistent with federal and local rules and, if 

necessary, subject to this Court‟s leave; 

3. In the event that Tesoro reasserts its punitive and exemplary 

damages claim, PG&E may seek dismissal of such claim on any 

relevant grounds, except that it may not assert that Tesoro has, by 

virtue of its filing of an amended complaint as set forth in this 

Stipulation, conceded any legal or factual issues or waived any 

argument in this case, including without limitation, the factual 

statements and legal arguments set forth in PG&E‟s May 5, 2014, 

Motion to Dismiss; 

4. Except as set forth in Paragraph 3, above, this Stipulation shall 

not constitute an admission of fact or waiver of legal argument by 

either party.

5. The parties shall bear their own costs and attorneys‟ fees.

Stipulation (dkt. 23). 

Tesoro‟s initial draft of the stipulation did not include a time limit for amendment, but 

PG&E‟s counsel proposed, among other changes, adding a deadline before the close of discovery 

“to ensure [that] PG&E would have sufficient time to conduct discovery in response to any 

claim.” Edelstein Decl. (dkt. 83) ¶ 8 & Ex. 1. Tesoro‟s counsel responded that he was “fine with 

those changes,” resulting in the final version of the stipulation recounted above. Id. Ex. 1.

The Court endorsed the parties‟ stipulation as “so ordered” on May 21, 2014, and Tesoro 

filed its currently operative First Amended Complaint two days later, without a claim for punitive 

damages. See generally Order Granting Stipulation (dkt. 27); 1st Am. Compl. (dkt. 28). On 

September 5, 2014, the Court entered a Case Management and Pretrial Order providing that “[a]ll 

non-expert discovery shall be completed by April 3, 2015,” thus effectively setting a deadline of 

January 18, 2015, seventy-five days before the discovery cutoff, for Tesoro to add a punitive 

damages claim pursuant to the stipulation. See Case Management & Pretrial Order (dkt. 52) 

¶ II.A.

Tesoro served its first request for production of documents on July 29, 2014. De Recat 

Decl. (dkt. 70) ¶ 2; Edelstein Decl. ¶ 12. Although PG&E‟s response was due August 28, 2014, 

de Recat Decl. ¶ 3, counsel for the parties met on August 21, 2014 and “agreed to a rolling 

production of documents,” Edelstein Decl. ¶ 13. PG&E produced documents on November 17, 

2014, January 30, 2015, February 9, 2015 and May 1, 2015, with the final set produced in 

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response to Tesoro‟s third request for production served on March 4, 2015.3 De Recat Decl. ¶¶ 3, 

8−9; Sias Decl. (dkt. 84) ¶¶ 19, 27−28. Tesoro did not make its second request for production or 

propound any other discovery requests until sometime after January 18, 2015. See Sias Decl. ¶ 26.

In comparison, PG&E served its first request for production on Tesoro on July 9, 2014 

(although the parties agreed to deem the request served later that month to allow additional time to 

respond), and Tesoro did not produce any documents until January 9, 2015, despite the parties‟ 

agreement “to attempt to make an initial production of documents in advance of” their December 

11, 2014 mediation. Edelstein Decl. ¶¶ 11, 16, 18−20; Sias Decl. ¶¶ 10, 18, 20−21. According to 

PG&E‟s counsel, “Tesoro‟s January 9, 2015 production consisted largely of a Project Agreement 

between Tesoro and Foster Wheeler, a copy of which Foster Wheeler had already produced in 

response to a subpoena, and documents concerning Tesoro‟s damages that it had provided to 

PG&E during the claims process.” Sias Decl. ¶ 23.

Tesoro served its first deposition notice on January 30, 2015, and in total noticed seven 

depositions before the close of fact discovery. Edelstein Decl. ¶ 23. “PG&E made each witness 

available for deposition in that period,” but due to a conflict with Tesoro‟s counsel‟s family 

obligations, two PG&E employees‟ depositions were postponed from March of 2015 to May, and 

one of those two was later rescheduled again to July 20, 2015 based on Tesoro‟s counsel‟s 

availability and the employee‟s previously scheduled vacation. Id. ¶¶ 23−28. During discussions 

about the timing of that deposition, Tesoro‟s counsel told PG&E‟s counsel “that he was fine with 

taking [the] deposition at any time before trial.” Id. ¶ 27. PG&E proposed extending the fact 

discovery deadline to allow time for the delayed depositions—which would have also extended 

the stipulated amendment deadline, although there is no indication that either party considered that 

effect at the time—but Tesoro refused, and the parties ultimately agreed to leave the April 3 

discovery cutoff date in place but to allow depositions noticed before the deadline to occur after 

the deadline. Id. ¶ 24.

 

3 Although these are the only productions specifically referenced in the declarations submitted 

in connection with the present Motion, it is not clear whether PG&E may have made other 

productions. For example, the declarations do not specifically discuss Tesoro‟s second request for 

production or any response thereto.

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Tesoro‟s counsel did not express any concern about PG&E‟s document production before 

the stipulated January 18, 2015 amendment deadline, and never asked to revisit the stipulation

before filing Tesoro‟s present Motion on August 5, 2015. Id. ¶¶ 21−22; Sias Decl. ¶¶ 24−25. The 

Motion seeks to add a claim for punitive or exemplary damages to Tesoro‟s “Negligence/Gross 

Negligence” claim, as well as a number of factual allegations in support of such damages. See

Mot. Ex. 1 (proposed second amended complaint) at, e.g., ¶¶ 21−26, 34, 57. 

C. Timeline of Tesoro Learning Purportedly Relevant Information

Much of the present dispute regarding the timeliness of Tesoro‟s proposed amendment 

relates to when Tesoro learned facts that it considers relevant to a punitive damages claim. 

Accordingly, the following timeline is generally organized by when documents and information 

were disclosed to Tesoro, not when documents were generated or when underlying events 

described therein occurred.

1. Aftermath of the Outage: Direct Discussions Between PG&E and Tesoro4

In a conference call on December 16, 2010, PG&E informed FWM and Tesoro that it had 

transitioned the relevant circuit breakers to “manual mode” to avoid the circumstances that led to 

the outage. Sias Decl. Ex. 10 (letter from FWM summarizing meeting). PG&E also disclosed 

“that the synchronization switches at the tidewater substation are not to PG&E‟s current 

standards,” although PG&E still “want[ed] to further investigate the root cause of [the] outage.” 

Id.

On January 27th, 2011, PG&E presented a timeline of certain events related to the outage. 

Id. Ex. 29 (internal Tesoro email summarizing teleconference with PG&E). At that time, “Tesoro 

concluded from PG&E‟s review of the records that there was no awareness within PG&E during 

the 50 minute window from 1509,” when PG&E‟s timeline shows that a circuit breaker was 

opened but an alarm was not acknowledged, “through 1559 that Tidewater Substation was in a 

vulnerable position, and that there was no action taken regarding Tidewater until at least after the 

 

4

This section summarizes the disclosures addressed in the parties‟ arguments, but is not an 

exhaustive record of all meetings between PG&E and Tesoro during this period. See, e.g., Sias 

Decl. Ex. 12 (minutes of a January 13, 2011 meeting).

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1559 [second circuit] breaker open.” Id. (using four digit numbers to denote twenty-four hour 

time). Tesoro described PG&E‟s response as follows:

PG&E, as part of an existing program in effect prior to November 

11th, has done the following:

1. Reminded operators of the necessity to acknowledge alarms

2. Worked on clarifying alarm priority and on improving situational 

awareness, including identifying alarms that require immediate 

response, and highlighting key alarms on the control screens.

Id.

In February of 2011, the parties discussed issues related to the interconnection of the 

Refinery, the Cogen, and PG&E‟s Substation and grid, including “underfrequency” specifications 

and whether a “load shedding” scheme was in place. See Sias Decl. Exs. 13, 14, 30−32. These 

talks concerned both improving the reliability of PG&E‟s power transmission to the Substation 

and contingencies for maintaining a supply of electricity from the Cogen to the Refinery in the 

event of a future Substation outage. See id. It is not clear what, if anything, PG&E told Tesoro 

and FWM at that time about the presence or absence of a load shedding system.

2. July 2011: PG&E Root Cause Analysis

In June of 2011, approximately seven months after the outage (and more than two and a 

half years before Tesoro initiated this action), PG&E released a “Root Cause Analysis” of the 

incident.5 De Recat Decl. Ex. B; Sias Decl. Ex. 15. Among other issues, the Root Cause Analysis 

identified that synchronization switches, or “synch switches,” for three circuit breakers at the 

Substation failed to meet the “current PG&E standard” because they lacked “keyed face plates 

such that only one switch could be left in the „on‟ position.” De Recat Decl. Ex. B at PG&E0732.6 

Based on the configuration of the transmission lines at the Substation, placing more than one of 

the switches in the “on” position at the same time could result in a loss of power. Accordingly, 

PG&E standard synch switch installation currently includes both of 

the following design mechanisms intended to prevent the incorrect 

operation of the synch switches:

 

5 Although this document was produced through discovery in November of 2014, de Recat 

Decl. ¶ 4, PG&E first shared it with Tesoro and FWM on June 3, 2011, Sias Decl. Ex. 15.

6

To conserve space, this Order‟s citations to Bates numbers omit all but one leading zero.

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1. The switch is operated by a removable keyed handle. There is a 

mechanical interlock that only allows the handle to be removed in 

the “OFF” position.

2. There is one and only one keyed handle per substation control 

room.

Id. at PG&E0736. In other words, whenever one switch is in the “on” position, there is no way to 

turn any other switch to the “on” position without first turning the first switch off so that the 

handle can be moved to the second switch.

At the Tidewater Substation, there was only one handle, but the synch switches did not 

have a mechanical interlock, thus allowing the handle to be removed with a switch in the “on” 

position and more than one switch to be turned on at the same time. Id. The model of switch 

installed at the Substation required a separate faceplate to add the interlock feature, which had not 

been installed. Id. When a maintenance supervisor arrived at the Substation after the outage, he 

observed that two synch switches were in the “on” position. Id. 

The only short-term corrective action recommended in the Root Cause Analysis was to 

replace the synch switches with new models that have the mechanical interlock function, and to 

determine whether other PG&E facilities had the same problem (subsequent investigations found 

that they did not). Id. at PG&E0739. Long term recommendations included replacing other 

equipment that may have contributed to the outage, as well as upgrading electromechanical relays 

to microprocessor-based relays to allow for better “event capturing capabilities” for diagnosis of 

any future issues. Id. at PG&E0740.

According to later deposition testimony by Jonathan Sykes, PG&E‟s person-mostknowledgeable under Rule 30(b)(6), the Root Cause analysis was limited to understanding why 

PG&E‟s two circuit breakers tripped—isolating the Substation and its clients from PG&E‟s power 

grid and generators—and did not address why FWM‟s Cogen tripped offline after the outage. Sias 

Decl. Ex. 26 (Sykes Dep.) 70:12−71:11. According to Sykes, that issue “would be a part of a 

different root cause analysis. It would be part of Foster Wheeler‟s root cause analysis.” Id.

73:15−17. A PG&E engineer testified similarly, attributing PG&E‟s focus on the substation 

outage to the parties‟ agreement that each was in the best position to evaluate its own systems. 

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See Sias Decl. Ex. 18 (Nie Dep.) 77:10−78:25.

3. November 17, 2014: Load at Risk Notification

PG&E‟s first document production on November 17, 2014 included a Load at Risk 

Notification prepared by PG&E engineer Sebastian Fiala several months before the power outage. 

See de Recat Decl. ¶ 5 & Exs. C1, C2. That document includes the following assessment of the 

likely outcome of a failure on the remaining transmission line to the Substation during 

maintenance of the other transmission line:

Tidewater Banks #1 and #2 and Foster Wheeler are out of service or 

islanded. Under/over voltage and under/over frequency can result. 

The majority of the time, load at Tidewater will exceed generation at 

Foster Wheeler, and will likely cause Foster Wheeler units to trip 

offline. If an islanding condition occurs and voltages/frequency can 

be brought to tolerable levels, bring back Pittsburg CB 612 and 

synchronize with island.

Id. Ex. C1 at PG&E0873 (emphasis added).

* * *

All of the information discussed above was disclosed to PG&E before the stipulated 

amendment deadline. The following information was disclosed after the deadline.

4. January 30, 2015: Documents from 1986

PG&E‟s document production on January 30, 2015 included a number of documents 

related to discussions between PG&E and FWM7in 1986. Memoranda exchanged between the 

two companies indicate that PG&E required FWM to disclose the interconnection equipment and 

settings used to connect the Cogen to the PG&E grid, and that FWM did so. De Recat Decl. Ex. 

D. FWM‟s notes from a meeting on September 23, 1986 state that PG&E‟s interconnection 

requirements exceeded the limits of FWM‟s steam turbine generator. Id Ex. E. However, 

historical data from PG&E‟s system “show[ed] that the limits for continuous operation for the 

steam turbine have never been exceeded” in the past ten years, and the system only approached the 

lower frequency limit once. Id. Further, “PG&E‟s „Load Shedding and Tie Tripping Schedule‟ 

indicate[d] that all interruptible customers and 50% of the remaining load will be shed 

 

7

These documents actually relate to FWM‟s predecessor, Foster Wheeler USA Corporation, 

a/k/a FWUSA. For simplicity, however, this Order refers to FWUSA as FWM.

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automatically and also the tie lines will be tripped before the turbine reaches the lower limit for 

continuous operation.” Id. PG&E stated that it would advise its “legal department to adjust the 

capacity credit clause of the „Power Purchase Agreement‟ to reflect the lower available capacity” 

if FWM operated the Cogen “with relay settings other than those specified” by PG&E. Id.

There is some question as to when Tesoro first had access to these documents. PG&E 

notes that Tesoro entered a “common interest agreement” with FWM on July 21, 2014, and asserts 

that Tesoro therefore had access to the 1986 documents at that time. Opp‟n (dkt. 82) at 8 n.8 

(citing Sias Decl. Ex. 33 ¶ 1). Tesoro‟s Reply does not address this assertion, but the Court is not 

aware of any evidence that FWM actually retained these documents, which were created by its 

predecessor nearly thirty years before FWM and Tesoro entered their common interest agreement.

5. February 25, 2015: Deposition of Ben Nie

Ben Nie, a PG&E engineer, testified on February 25, 2015 that the erroneous operation of 

the synch switches was, in his view, the most likely cause of Substation outage, and that it was the 

only concrete possible cause that PG&E identified. De Recat Decl. Ex. G (Nie Dep.) 63:7−64:6, 

68:9−25. However, according to Nie, PG&E could not determine with certainty whether the 

switches caused the outage. Sias Decl. Ex. 18 (Nie Dep.) 58:25−59:8 (“[T]here was a lot of kind 

of chicken and egg sequence that we couldn‟t determine because we had the failed potential 

devices. . . . I don‟t think we were able to come to a conclusion.”). Even at the time of his 

deposition, Nie testified that “nothing has really changed in three or fear years” since the outage 

with respect to his assessment of the cause, and he “still wouldn‟t today . . . say for sure, yeah, that 

resulted and, you know, A led to B.” Id. 60:20−61:2. He noted that although he personally 

believed that there was a greater than fifty percent chance that the synch switches caused the 

outage, there was a significant gap between the outage and the time when PG&E believed the 

switches could have been last adjusted, and that programmable logic controllers that failed during 

the outage—likely as a result of the synch switches—had also been known to fail spontaneously. 

Id. 59:22−60:3, 62:22−63:4, 63:14−21. 

6. March 16, 2015: Deposition of Richard White

Richard White, who participated in an inspection of the Substation sometime in 2010 

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before the outage, testified on March 16, 2015 that at the time of the inspection, he informed “the 

team that was involved” that the synch switches did not have a mechanical interlock feature. De 

Recat Reply Decl. (dkt. 92) Ex. O (White Dep.) 41:9−25. He also testified that the lack of that 

feature was a “fairly” serious design defect, and that he did not recall discussing the urgency of 

remedying the defect. Id. 54:1−8, 56:22−57:1.

7. March 17, 2015: Deposition of Sebastian Fiala

On March 17, 2015, Sebastian Fiala testified that he laid out the scenario of the Cogen 

tripping offline in his Load at Risk Notification “so the system operators and system dispatchers 

would know that this condition could exist and it could occur, just so they would be privy to the 

scenario and they would be able to prepare themselves and know what to do next.” De Recat 

Decl. Ex. I (Fiala Dep.) 92:4−8.

8. March 18, 2015: Deposition of Frank Eich

On March 18, 2015, Tesoro‟s counsel asked Frank Eich, a PG&E customer account 

representative responsible for the FWM and Tesoro accounts, about the scope of PG&E‟s 

responsibility to its customers and the effects of an “islanding” scenario. De Recat Decl. Ex. J 

(Eich Dep.) 52:12−54:20, 86:10−87:8. Eich testified that PG&E “service[s] each customer at a 

service point. You can put your finger on it. That‟s where PG&E‟s responsibility terminates, and 

beyond that, how it‟s wired, how it‟s connected, what it‟s used for and stuff, is the customer‟s 

responsibility.” Id. 53:9−13. Except in special circumstances not applicable to the Cogen and the 

Refinery, “PG&E has no ability to serve beyond the point of termination.” Id. 87:5−8. Eich stated 

that he did not know “exactly what happens when either a gen[erator] goes off or PG&E goes off 

at that service point,” because he “didn‟t design the load shedding or failsafe or contingencies at 

the service.” Id. 52:24−53:2. 

Discussing his own job responsibilities and understanding, Eich testified that he “ha[d] no 

idea” whether other customers‟ load could be shed if a loss of power to the Substation resulted in 

an “islanding scenario,” and that he “ha[d] no need to even care about that.” Id. 54:8−17.

9. May 1, 2015: PG&E Interconnection Handbook

Tesoro cites PG&E‟s May 1, 2015 production of its “interconnection handbook which sets 

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forth PG&E policy and procedures regarding protective equipment for its electrical systems” as 

among the purportedly delinquent productions justifying Tesoro‟s delayed motion for leave to 

amend, but does not provide that document or explain whether or how it would support a claim for 

punitive damages. Mot. (dkt. 69) at 17 (citing de Recat Decl. ¶ 9).

10. May 28, 2015: Deposition of Brian Cawaring

Brian Cawaring, who supervised PG&E‟s Grid Control Center, testified on May 28, 2015 

that a transmission line to the Substation tripping offline would cause a visual and auditory alarm 

to go off in the control room. De Recat Decl. Ex. K (Cawaring Dep.) 47:21−48:2. He also 

testified that control center operators received load risk analysis notifications—like Sebastian 

Fiala‟s notification that, as discussed above, warned that an outage would create an “island” and 

likely cause the Cogen to trip offline. Id. 159:19−162:17. Further, Cawaring testified that no one 

interviewed him during PG&E‟s investigation of the outage. Id. 54:4−15. He stated that he was 

not part of the investigation team. Id. 53:21−24.

11. June 3, 2015: Deposition of Michael Van Remoortere

On June 3, 2015, Michael Van Remoortere, a PG&E engineer and Rule 30(b)(6) corporate 

witness, testified that he also received Sebastian Fiala‟s Load at Risk Notification—which, as 

discussed above, warned that an outage would create an “island” and likely cause the Cogen to trip 

offline—and that it was “sent to a fairly wide audience.” De Recat Reply Decl. ¶ 6 & Ex. R (Van 

Remoortere Dep.) 20:2−15. He further testified that he saw no evidence that PG&E took any 

action in response to Fiala‟s identification of that contingency. De Recat Decl. Ex. L (Van 

Remoortere Dep.) 89:24−90:4.

12. July 20, 2015: Deposition of Feliks Karchemskiy

On July 20, 2015, Tesoro‟s counsel asked Feliks Karchemskiy, a PG&E senior protection 

engineer who participated in the investigation of the 2010 outage, whether “having those synch 

switches without the . . . keyed or locked faceplate is a serious violation of PG&E‟s standard 

design.” De Recat Reply Decl. Ex. S (Karchemskiy Dep.) 18:11−14. Karchemskiy responded as 

follows:

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I would say this: It‟s definitely a conceptual violation of the good 

engineering practice that I would define as -- and it‟s ABC of 

engineering that potential devices should not be paralleled on the 

low side.

And that could be achieved by a number of approaches. It could be 

done by interlock keys, but it could be done by procedure. You 

know, if personnel knows that those switches should not be left in 

the on position simultaneously, and that they should not parallel the 

potential devices on the low side, that would be acceptable.

Id. 18:19−19:5. Karchemskiy also wrote in an email, which Tesoro apparently obtained at some 

point before the deposition, that the lack of an interlock feature for the faceplates was a serious 

violation of PG&E‟s design standards. De Recat Decl. Ex. M (Karchemskiy Dep.) 26:14−21.

In response to a question about whether PG&E‟s root cause investigation covered the Grid 

Control Center‟s failure to respond to an alarm, Karchemskiy testified that his role was “related to 

the scheme and equipment,” that he did not “believe in my part of the job we investigated any 

human performance,” and that “Grid control does their own thing” and would likely conduct their 

own investigation. Id. 63:14−64:6. Karchemskiy testified that he had no knowledge of why the 

control operator failed to respond to the alarm for fifty minutes. Id. 64:11−65:5.

D. Parties’ Arguments

1. Tesoro’s Motion

Tesoro argues that the stipulated January 18, 2015 deadline should be set aside because 

enforcing it, and thus rejecting Tesoro‟s request to amend the complaint after that deadline, would 

constitute “manifest injustice.” Mot. at 16 (quoting United States v. Barrueta, No. CR-94-20050-

JW, 1996 WL 101197, at *1 (N.D. Cal. Feb. 29, 1996)). According to Tesoro, “PG&E repeatedly 

delayed producing key documents that were relevant to Tesoro‟s evaluation of whether to reassert 

its claim for punitive damages,” producing relevant documents “close to and mostly after the 

amendment cut-off date to which the parties stipulated.” Id. at 16−17. In a footnote, Tesoro 

acknowledges that it too completed its document production “well beyond the original response 

date,” and that PG&E‟s delay may have been “unavoidable.” Id. at 17 n.3. 

Tesoro also contends that “PG&E attempted to conceal their conscious disregard for the 

rights and safety of Tesoro” by omitting certain conduct from PG&E‟s Root Cause Analysis. Id.

at 17. According to Tesoro, the 2011 Root Cause Analysis omits the following “key facts”: 

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(1) negligent design and operation of the synch switches was “the most likely identified cause of 

the power outage”; (2) PG&E personnel failed to adequately respond to failure alarms twice 

during the period leading up to the outage, when PG&E could have warned FWM of the risk; and 

(3) PG&E had previously prepared a Load at Risk Notification recognizing the likelihood that a 

power failure at the Substation would overload the Cogen. Mot. at 9. Tesoro argues that as a 

result, it did not learn these facts “until [the completion of] extensive discovery which PG&E 

routinely delayed.” Id. at 17−18.

Tesoro asserts that “punitive damages are warranted here due to [PG&E‟s] malicious 

conduct.” Id. at 18. Tesoro claims that PG&E displayed “conscious disregard of the rights or 

safety of others,” which can support a claim for punitive damages under California law. Id. at 13 

(quoting Cal. Civ. Code § 3294; SKF Farms v. Superior Court, 153 Cal. App. 3d 902, 907 

(1984)). Specifically, Tesoro cites the documents from 1986 as evidence that PG&E assured 

FWM that PG&E‟s safeguards would protect the Cogen from excess load, and Sebastian Fiala‟s 

2010 Load at Risk Notification as evidence that PG&E knew that a failure of its own transmission 

lines would likely overload the Cogen. Id. at 14−15. According to Tesoro, PG&E‟s failure to 

either take steps to prevent that outcome or warn Tesoro and FWM of the risk “constitutes a 

knowing disregard of the rights and safety of Tesoro.” Id. at 15−16. 

Tesoro also argues that granting its Motion would not prejudice PG&E, id. at 18, because 

“Tesoro is merely re-asserting a previously pleaded claim for punitive and exemplary damages,” 

and PG&E has therefore “been on notice from the onset of this litigation that Tesoro may renew 

its claim for punitive damages.” Id. at 21 (emphasis omitted). Further, according to Tesoro, 

evidence related to punitive damages “falls within PG&E‟s purview” and the proposed 

amendment thus would not require further discovery by PG&E. Id. at 21−22.

In addition to claiming manifest injustice, Tesoro argues that leave to amend should be 

granted under the liberal standard applicable to Rule 15 of the Federal Rules of Civil Procedure. 

See id. at 19−22. Because as discussed below the Court holds that Tesoro failed to show manifest 

injustice sufficient to set aside its stipulation, or good cause sufficient to alter a scheduling order 

under Rule 16, the Court does not reach Tesoro‟s Rule 15 arguments.

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2. PG&E’s Opposition

PG&E argues that Tesoro has not shown manifest injustice and thus should not be relieved 

of its commitment under the parties‟ stipulation. See Opp‟n at 10. PG&E asserts that it shared 

relevant information with Tesoro in the aftermath of the outage and prepared a comprehensive 

Root Cause Analysis, although the Root Cause Analysis focused on the reasons the Substation 

became disconnected from the grid, not the reasons FWM‟s Cogen went offline after the 

Substation outage. Id. at 11−12 & n.11. Even if Tesoro did not have all the information on which 

it now relies before the amendment deadline, PG&E contends that Tesoro had “all of the „key‟ 

evidence on which its motion is based by March 2015 at the latest,” several months before Tesoro 

filed its present Motion. Id. at 16. According to PG&E, its own document production was 

diligent and in line with the parties‟ agreements, while “Tesoro failed to pursue discovery in a 

diligent way” and did not produce any of its own documents until months after PG&E‟s first 

production. Id. at 12−13. PG&E contends that Tesoro bears responsibility for postponing the 

depositions that occurred after the close of discovery, and that the information Tesoro claims to 

have obtained during those depositions is largely redundant to information PG&E provided before

litigation began. Id. at 13−14. 

According to PG&E, “[t]hat Tesoro may have belatedly realized it erred in not pursuing 

punitive damages is not grounds for relief.” Id. at 14 (citing, e.g., Morrison v. Zangpo, No. 

C-08-1945 EMC, 2008 WL 4449585, at *4 (N.D. Cal. 2008)). PG&E claims that it would be 

prejudiced by allowing Tesoro to amend after the close of both fact and expert discovery, because 

“Tesoro has presumably conducted discovery with punitive damages in mind,” while “PG&E had 

the right to—and did—rely on Tesoro‟s election not to reassert a punitive damages claim” by the 

agreed deadline. Id. at 18−20. Finally, PG&E argues that the Motion should be denied because, 

according to PG&E, Tesoro‟s evidence and proposed pleading are insufficient to support such 

damages. Id. at 21−24. 

3. Tesoro’s Reply

Tesoro begins its Reply by reviewing facts that, according to Tesoro, demonstrate that 

PG&E “acted with willful and knowing disregard of the rights and safety of Tesoro, FWM, and 

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the [local] residents,” and that—according to Tesoro—“PG&E does not dispute.” Reply (dkt. 91) 

at 2−5 (emphasis omitted). Tesoro also argues that PG&E overstates the extent of its disclosures 

to Tesoro after the outage. Id. at 5−9. Addressing the “manifest injustice” standard, Tesoro 

argues that it “did not learn the full extent of PG&E‟s omissions until the production of key 

documents and the depositions of PG&E‟s witnesses,” and goes on to recount depositions that it 

took from March 16 through July 20, 2015. Id. at 9−10 (capitalization altered). Tesoro contends 

that enforcing the stipulation would “reward[] PG&E for its delay tactics” and would not cause 

prejudice because the facts at issue are either “directly related to Tesoro‟s original cause of action” 

or within PG&E‟s own knowledge. Id. at 11−12, 15. Tesoro also asserts that its Motion was 

promptly filed because it came within weeks of the final deposition of a fact witness (Feliks 

Karchemskiy) and before, albeit only days before, PG&E moved for partial summary judgment. 

Id. at 13−14. Tesoro disputes PG&E‟s contention that the proposed amendment would be futile. 

Id. at 14−15.

III. ANALYSIS

A. Legal Standard

In general, when a party seeks to amend a pleading more than 21 days after serving it, or 

more than 21 days after service of a responsive pleading or motion, the party must obtain either 

the opposing party‟s consent or leave of the court. Fed. R. Civ. P. 15(a). The Federal Rules of 

Civil Procedure provide that “courts should freely give leave when justice so requires.” Id. 

“Courts may decline to grant leave to amend only if there is strong evidence of „undue delay, bad 

faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by 

amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of 

the amendment, [or] futility of amendment, etc.‟” Sonoma Cty. Ass’n of Retired Emps. v. Sonoma 

County, 708 F.3d 1109, 1117 (9th Cir. 2013) (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)) 

(alteration in original). 

The stipulation in this case, however, changes the calculus. “[U]nder Ninth Circuit law, a 

stipulation may . . . be withdrawn to prevent a manifest injustice.” Morrison v. Zangpo, No. 

C-08-1945 EMC, 2008 WL 4449585, at *3 (N.D. Cal. 2008) (citing Waggoner v. Dallaire, 767 

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F.2d 589, 593 (9th Cir. 1985)).8 “In determining what constitutes manifest injustice, courts may 

consider (1) the effect of the stipulation on the party seeking to withdraw the stipulation; (2) the 

effect on the other parties to the litigation; (3) the occurrence of intervening events since the 

parties agreed to the stipulation; and (4) whether the evidence contrary to the [stipulation] is 

substantial.” Id. at *4 (quoting State Farm Fire & Cas. v. McDevitt, No. C-00-2240 EDL, 2001 

WL 637419, at *8 (N.D. Cal. 2001)) (alteration in original). Here, where the parties‟ stipulation 

was procedural rather than factual, the Court finds the fourth factor inapplicable.

B. Effect on Tesoro

If the stipulation is enforced, Tesoro would be barred from seeking punitive damages, 

because it failed to amend its complaint by the stipulated deadline. Tesoro could continue to 

prosecute its case and, if successful, recover damages equivalent to any compensable harm that it 

actually suffered.

C. Effect on PG&E

If the stipulation is enforced, PG&E will not be liable for punitive damages, because 

Tesoro did not amend its complaint to seek such damages by the stipulated deadline. PG&E may 

still be liable for any compensable harm that Tesoro actually suffered.

If the stipulation is set aside, and assuming that the Court finds the proposed amendment 

permissible under Rules 15 and 16, PG&E could be liable for punitive damages. PG&E would 

almost certainly file a motion for summary judgment as to Tesoro‟s punitive damage claim (or 

seek leave to submit supplemental briefing regarding that issue to be addressed with its currently 

pending summary judgment motion), and the Court would either continue the October 16, 2015 

hearing date or hold a second summary judgment hearing to address punitive damages.9 See

Opp‟n at 21−25 (arguing that the proposed punitive damages claim would not survive a motion for 

 

8

The Morrison decision also discusses the possibility that “relief from a stipulation may be 

given where a party enters a stipulation due to mistake, inadvertence, or excusable neglect.” 

Morrison, 2008 WL 4449585, at *3. No party argues that the stipulation in this case was the result 

of mistake, inadvertence, or excusable neglect.

9

Tesoro filed its present Motion nine days before the deadline to file dispositive motions. 

PG&E filed a Motion for Partial Summary Judgment (dkt. 78) on that deadline, which is now fully 

briefed and set for an October 16, 2015 hearing.

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summary judgment). At a case management conference on August 10, 2015, PG&E stated its 

intent to seek summary judgment on the issue of punitive damages if Tesoro prevailed on the 

present Motion, and the Court determined that it would allow PG&E to do so. See dkt. 72 (textonly minute entry). 

PG&E also argues that it would require additional discovery if Tesoro is permitted to 

pursue a claim for punitive damages. Opp‟n at 20. Although Tesoro now contends that no such 

discovery is needed, it initially agreed to the amendment deadline specifically to allow PG&E time 

to conduct discovery if Tesoro reasserted a claim for punitive damages. See Edelstein Decl. Ex. 1 

(email exchange between counsel for Tesoro and PG&E).

D. Intervening Events

The third and, in this case, final factor is “the occurrence of intervening events since the 

parties agreed to the stipulation.” Morrison, 2008 WL 4449585, at *4 (citation omitted). If there 

have been no significant intervening events, an attorney‟s mere “realization that he may have 

made a tactical error . . . does not render enforcement of the stipulation a manifest injustice.” Id.

Although by its terms this factor encompasses all discovery in this case, the possibility that Tesoro 

would discover grounds to seek punitive damages before the stipulated amendment deadline was 

plainly anticipated by the stipulation. In the Court‟s view, relevant intervening events include any 

information discovered after the deadline for amendment, as well as both parties‟ conduct, before 

and after the deadline, that either facilitated or inhibited Tesoro‟s ability to seek a timely 

amendment.

1. Discovery of Relevant Facts

Tesoro argues that:

it was not until extensive discovery which PG&E routinely delayed 

that Tesoro learned that the only identified cause of the power 

outage was PG&E‟s negligent design and operation of its synch 

switches, that GCC operators failed to timely respond to multiple 

alarms warning of an electrical system failure, and that PG&E 

configured its electrical system so that its North Concord customers 

would draw electrical power from FWM‟s Cogen in the event of a 

power outage at Tidewater, even though PG&E was aware that 

(1) the Cogen could not bear the additional load of North Concord, 

(2) such a configuration would force a power outage at the Cogen, 

and subsequently the Refinery, and (3) the PG&E load shedding 

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system that would prevent a power outage at the Cogen was not 

operational or connected.

Mot. at 17−18. In fact, Tesoro learned all of the above before the stipulated deadline to amend its 

complaint. 

The PG&E Root Cause Analysis—which Tesoro received well before this litigation 

commenced—identified “[t]he synch switches for CB212 & 213 both being in the ON position” as 

“an abnormal switching condition,” the impact of which “may range from minimal impact to 

damaged secondary potential circuits and equipment.” De Recat Decl. Ex. B at PG&E0737. 

Consistent with Ben Nie‟s later testimony, the Root Cause Analysis reports that “it is . . . 

impossible to determine what damage, if any . . . was caused by the incorrect operation of the 

synch switch.” Id. However, the Root Cause Analysis did identify the synch switches as a 

possible cause of damage, and did not identify any other possible root cause. Tesoro therefore had 

reason to believe that “that the only identified [possible10] cause of the power outage was PG&E‟s 

negligent design and operation of its synch switches,” see Mot. at 17−18, long before the 

amendment deadline.11

Tesoro also learned before the start of this litigation that “that GCC operators failed to 

timely respond to multiple alarms warning of an electrical system failure.” See Mot. at 18. In 

January of 2011, “Tesoro concluded from PG&E‟s review of the records that there was no 

awareness within PG&E during the 50 minute window from 1509,” when a circuit breaker was 

opened but an alarm was not acknowledged, “through 1559 that Tidewater Substation was in a 

vulnerable position, and that there was no action taken regarding Tidewater until at least after the 

1559 [second circuit] breaker open.” Sias Decl. Ex. 29 (Tesoro internal email). Subsequent 

deposition testimony that the alarm was both auditory and visual and that a supervisor was not 

 

10 The record before the Court indicates that to date, PG&E has not identified the synch 

switches as the definitive cause of the outage. See Sias Decl. Ex. 18 (Nie Dep.) 58:25−59:8, 

60:20−61:2. 

11 Tesoro‟s own Root Cause Analysis, dated August 11, 2011, lists four root causes. Sias 

Decl. Ex. 17 at 5. Tesoro‟s “Root Cause #1” is the faulty operation and design of the synch 

switches. The second and third identified causes discuss damaged equipment, which based on 

PG&E‟s Root Cause Analysis may or may not have been caused by the synch switch error. 

Tesoro‟s fourth root cause discusses the lack of a system to separate the Cogen from the 

Substation in the event the Substation loses power, which is likely a contributing cause of the 

Cogen outage but is not a cause of the Substation outage.

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sure why there was no response, see de Recat Decl. Ex. K (Cawaring Dep.) 47:21−48:2, does not 

significantly add to the core facts that Tesoro learned several years before the deadline for 

amendment.

Finally, Tesoro learned no later than November of 2014—approximately three months 

before the amendment deadline—that PG&E was aware of the risk of tripping the Cogen offline if 

the Substation became isolated from PG&E‟s grid, because Sebastian Fiala‟s Load at Risk 

Notification predicting exactly that result was included in PG&E‟s first production of documents. 

See de Recat Decl. ¶ 5 & Exs. C1, C2. Fiala‟s prediction implicitly but necessarily acknowledged 

that: (1) “the Cogen could not bear the additional load of North Concord,” (2) an “islanding” 

scenario “would force a power outage at the Cogen, and subsequently the Refinery,” and (3) there 

was no “load shedding system that would prevent a power outage at the Cogen,” see Mot. at 18, 

because if any of those things were not true, “load at Tidewater” would not “cause Foster Wheeler 

units to trip offline” as Fiala predicted. See de Recat Decl. Ex. C1 at PG&E0873.

Although subsequent discovery revealed the extent of that notification‟s distribution within 

PG&E, the notification itself is the key document to any theory of recovery based on PG&E‟s 

knowledge of risk, because it put Tesoro on notice that at least some PG&E employees were 

aware that an outage at the Substation would cause the Cogen to trip offline. Even if the Load at 

Risk Notification did not in itself provide a sufficient basis for Tesoro to reassert a claim for 

punitive damages—an issue that the Court need not decide—at the very least, it should have 

prompted Tesoro to pursue that lead in the months remaining before the deadline, or to seek an 

extension of the deadline to allow more time to do so.

There are a small number of potentially relevant facts that Tesoro may have actually 

learned after the amendment deadline. Tesoro emphasizes the 1986 documents, which it asserts 

demonstrate that PG&E required FWM to use dangerous interconnection settings based on 

promised PG&E protective measures that were not in place at the time of the 2010 outage. See

Mot. at 5−6. PG&E disputes the meaning of those documents, arguing that the protective 

measures at issue pertained to disruptions to the grid a whole, and that the documents do not 

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“address or even mention an islanded condition at Tidewater [Substation].” Opp‟n at 24.12 Even 

accepting Tesoro‟s view of the documents, however, and even assuming that Tesoro did not have 

prior access to them through its common interest agreement with FWM, PG&E produced these 

documents on January 30, 2015. A motion to amend the complaint in the weeks following that 

disclosure, within a month or two of the stipulated deadline and while discovery was still ongoing, 

would have presented a very different scenario than Tesoro‟s present Motion—filed more than six 

months after both the stipulated deadline and the production of the 1986 documents. Further, 

Tesoro relies on these documents in large part to show that “PG&E was fully aware of FWM‟s 

protective relay settings,” Reply at 2 n.1, which is redundant to PG&E‟s knowledge, as 

demonstrated in Fiala‟s previously-disclosed Load at Risk Notification, that a “island” situation 

would likely cause the Cogen to go offline.

The second potentially relevant fact that may have been revealed after the amendment 

deadline is that PG&E discovered the synch switches‟ defective lack of an interlock feature before 

the outage, during an inspection. See Reply at 9 (citing de Recat Reply Decl. Ex. O (White Dep.) 

41:20−25). Although Tesoro cites Richard White‟s March 16, 2015 deposition as the source of 

this information, Tesoro‟s counsel appears to have already known about it at that time, and the 

record before the Court does not indicate when it was actually disclosed. See White Dep. 

41:20−23 (“Q. BY MR. BEGLAND: Am I correct that at that walk-down, you told the team that 

was involved that some of the synch switches at the substation lacked the mechanical interlock 

feature?”). Even if this fact was first revealed at the deposition, which appears unlikely, that was 

still nearly five months before Tesoro filed its present Motion and first indicated that it would 

pursue a claim for punitive damages. Finally, Tesoro did not address this issue in its Motion, 

instead raising it for the first time in its Reply, and courts “ordinarily decline to consider 

 

12 The nature of PG&E‟s pressure on FWM is also not clear from the face of the documents, 

which indicate that PG&E would “adjust the capacity credit clause of the „Power Purchase 

Agreement‟ to reflect the lower capacity” if FWM did not use PG&E‟s preferred relay settings. 

De Recat Decl. Ex. D. If FWM‟s proposed alternative settings would in fact have reduced 

capacity, that may have been a perfectly reasonable response, rather than the “threat” that Tesoro 

now characterizes it as. See Mot. at 6.

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arguments raised for the first time in a reply brief.” United States v. Bohn, 956 F.2d 208, 209 (9th 

Cir. 1992).

As outlined above in the “Background” section of this Order, the remaining information 

revealed after the stipulated amendment deadline largely consisted of mere context to the key facts 

discussed above. For example, the excerpts that Tesoro provides of Feliks Karchemskiy‟s July 20 

deposition—on which Tesoro relies heavily for the purported timeliness of its Motion, as he was 

the last fact witness deposed—reveal only that allowing multiple synch switches to be on at the 

same time is a “violation of the good engineering practice” and a serious violation of PG&E‟s 

standards, and that Karchemskiy was not aware of what occurred at the Grid Control Center or any 

investigation thereof, despite his being part of the team that prepared the Root Cause Analysis. De 

Recat Decl. Ex. M (Karchemskiy Dep.) 26:14−21, 62:17−65:50; de Recat Reply Decl. Ex. S 

(Karchemskiy Dep.) 18:11−23. The information about the synch switches echoes the 2011 Root 

Cause Analysis, which plainly identified the switches‟ inconsistency with PG&E standards and the 

need to bring them into compliance.13 See de Recat Decl. Ex. B at PG&E0732, 0736, 0740. 

Karchemskiy‟s lack of knowledge about the Grid Control Center response similarly proves very 

little beyond what Tesoro knew years before—that Grid Control Center operators failed to respond 

to an alarm, and that the Root Cause Analysis omitted that issue. See generally id.; Sias Decl. Ex. 

29. Based on the record available, it is difficult to understand how Karchemskiy‟s deposition 

contributed in any way to Tesoro‟s analysis of whether it could reassert a claim for punitive 

damages. 

2. Parties’ Conduct During Discovery

After asserting that “PG&E repeatedly delayed producing key documents that were 

relevant to Tesoro‟s evaluation of whether to reassert its claim for punitive damages,” Tesoro‟s 

Motion includes the following footnote, printed in text too small to comply with this Court‟s Local 

 

13 Further, Karchemskiy originally characterized the defect as serious in an email that Tesoro‟s 

counsel already had at the time of the deposition. See de Recat Decl. Ex. M (Karchemskiy Dep.) 

26:14−21. At the deposition, the attorney recounted the email and asked Karchemskiy to confirm 

that he had written it, and Karchemskiy agreed that he had. Id. It is not clear from the record 

when Tesoro obtained that email.

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Rules:14 “In fairness, Tesoro also needed additional time producing documents well beyond the 

original response date and both sides engaged in rolling productions; but whether PG&E‟s delay 

was strategic or unavoidable, it shouldn‟t be used as an excuse to prejudice Tesoro in bringing this 

motion.” Mot. at 16−17 & n.3.

Tesoro fails to acknowledge its own role in the discovery process. Tesoro entered a 

stipulation that explicitly required it to reassert its punitive damages claim well before the close of 

discovery. That arrangement presents an inherent risk that relevant information could arise after 

the amendment deadline. Accordingly, Tesoro was on notice of the urgency of procuring relevant 

discovery.

If Tesoro believed that PG&E was not acting diligently, Tesoro had numerous options 

available: it could have moved to compel production, prospectively asked the Court to extend the 

stipulated amendment deadline, or, in an extreme case, sought discovery sanctions. Before taking 

any of those steps, however, Tesoro could and should have conferred with PG&E to express its 

concern about the production schedule and request that PG&E either complete relevant discovery 

before the amendment deadline or stipulate to continue that deadline until relevant documents 

were disclosed and Tesoro had an opportunity to depose witnesses on the subject. Undisputed 

evidence in the record indicates that Tesoro did none of those things, and in fact never raised 

concerns about PG&E‟s document production schedule before the deadline for amendment, nor

suggested revisiting the stipulation until it filed the present Motion. Edelstein Decl. ¶¶ 21−22; 

Sias Decl. ¶¶ 24−25. Instead, Tesoro (1) agreed to a rolling production of documents; (2) agreed 

that the parties would “attempt to make an initial production of documents in advance of the 

mediation” occurring about a month before the amendment deadline; (3) failed to meet that 

deadline; and (4) made a minimal first production on January 9, 2015, six months after PG&E 

served its first requests for production. See Sias Decl. ¶¶ 10, 12, 18, 21, 23. 

Later, when PG&E suggested extending the fact discovery period—which would have 

retroactively extended the amendment deadline—Tesoro refused. Edelstein Decl. ¶ 24. Also after 

 

14 See Civ. L.R. 3-4(c)(2).

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the deadline passed, scheduling conflicts by both Tesoro‟s counsel and PG&E‟s witnesses led to

delays in completing their depositions, but Tesoro‟s counsel stated that he did not object to taking 

a witness‟s deposition any time before trial. Id. ¶¶ 25−28. In short, Tesoro made no significant 

effort to ensure that either PG&E‟s or its own document productions, much less depositions, were 

completed before the stipulated deadline for amendment, and there is no indication that PG&E 

deviated in any way from the parties‟ various agreements regarding the timeline for discovery or 

intentionally delayed the production of relevant information.

E. Enforcing the Stipulation Does Not Result in Manifest Injustice

The question of when a denial of punitive damages rises to the level of manifest injustice is 

somewhat complex. “Punitive damages by definition are not intended to compensate the injured 

party, but rather to punish the tortfeasor whose wrongful action was intentional or malicious, and 

to deter him and others from similar extreme conduct.” City of Newport v. Fact Concerts, Inc., 

453 U.S. 247, 266−67 (1981) (considering the propriety of punitive damages against a 

municipality). “Indeed, punitive damages . . . are in effect a windfall to a fully compensated 

plaintiff . . . .” Id. at 267; see also Hawkins v. United States, 30 F.3d 1077, 1084 (9th Cir. 1994) 

(noting in the context of tax exemption that punitive damages “bear no relationship to actual 

injuries, do not even purport to compensate the victim for actual losses, and cannot rationally be 

characterized as anything but a windfall”). As such, it is difficult to imagine any manifest 

injustice to a plaintiff resulting from a denial of punitive damages; the inquiry here turns primarily

on whether it would be manifestly unjust for PG&E to escape punitive damages.

At least two hypothetical scenarios, one procedural and one substantive, would likely

constitute manifest injustice sufficient to set aside the stipulated deadline for amendment: (1) if 

PG&E withheld relevant information in bad faith for the purpose of avoiding punitive damages by 

preventing Tesoro from meeting the amendment deadline; or (2) if the evidentiary basis for 

amendment demonstrated conduct so wantonly malicious that allowing PG&E to escape punitive 

damages would be manifestly unjust regardless of why Tesoro failed to meet the deadline, based 

on society‟s interest in punishment and deterrence of “extreme conduct.” See City of Newport, 

453 U.S. at 266−67. Perhaps there would also be manifest injustice in enforcing the stipulation if 

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Tesoro had worked diligently to expedite discovery and ensure that it received all relevant 

information before the amendment deadline, but nevertheless obtained relevant information later 

through circumstances beyond its control, and sought to amend promptly thereafter—although this 

last scenario turns more on Tesoro‟s conduct than PG&E‟s, which runs counter to the tortfeasorfocused purpose of punitive damages.

15

The record here does not demonstrate any such injustice—even if Tesoro had not already 

obtained most of the key facts it now relies on before the deadline for amendment. As discussed 

above, Tesoro made no significant effort to complete relevant discovery before the amendment 

deadline, and waited until virtually the last possible opportunity to file its present Motion. Tesoro 

has also presented no evidence of bad faith by PG&E. Finally, even assuming for the sake of 

argument that the record as a whole would support an award of punitive damages, it is based at 

most on a reckless failure to take adequate precautions to prevent a power outage. There is no 

evidence that PG&E actually sought to harm Tesoro or anyone else, or that PG&E knew of and 

disregarded a risk of anything more than economic harm.16 The Court finds that if there is any 

injustice in PG&E avoiding punitive damages, it is outweighed by the disruption of this case that 

would result from allowing amendment at this late stage.

F. Tesoro Has Not Demonstrated Good Cause to Modify a Scheduling Order

Both parties fail to meaningfully address the fact that because the Court adopted the 

stipulated deadline as “so ordered,” see dkt. 27, it was not only a stipulation, but also a scheduling 

order. Rule 16 of the Federal Rules of Civil Procedure provides that scheduling orders “may be 

modified only for good cause and with the judge‟s consent.” Fed. R. Civ. P. 16(b)(4). The Ninth 

Circuit has established a standard for such modification that focuses on the diligence of the party 

 

15 A fairly extreme alternative, which Tesoro does not appear to endorse in its briefs, is that 

declining to allow a plaintiff to seek punitive damages any time the record could support such an 

award is inherently unjust, regardless of the length of or reason for delay in seeking amendment. 

The Court declines to adopt an approach that would essentially render the parties‟ stipulation 

meaningless.

16 Tesoro asserts that a loss of power at the Refinery could cause bodily harm to Refinery 

personnel and environmental harm to the surrounding community and that PG&E was aware of 

such risk, but has not presented evidence that PG&E was aware of any risk beyond a loss of 

power. See Reply at 3.

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seeking relief from a deadline:

Unlike Rule 15(a)‟s liberal amendment policy . . . , Rule 16(b)‟s 

“good cause” standard primarily considers the diligence of the party 

seeking the amendment. 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). Moreover, carelessness is not 

compatible with a finding of diligence and offers no reason for a 

grant of relief. 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.

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

This standard also requires that Tesoro‟s Motion be denied, independently of the manifest 

injustice standard discussed above. Tesoro was not diligent in obtaining discovery from PG&E 

before the deadline, because it agreed to a rolling production process apparently lacking any fixed 

deadline for production, made no objection to the pace of PG&E‟s document production before 

the amendment deadline, failed to notice any depositions before the amendment deadline, delayed 

depositions due to its counsel‟s scheduling conflicts, and expressed willingness to take Feliks 

Karchemskiy‟s deposition (which it now dubiously argues is crucial to a claim for punitive 

damages) any time before trial. See Edelstein Decl. ¶¶ 13, 21, 25, 27. It was not diligent in its 

own document production because it did not make its first production—which largely consisted of 

documents PG&E already had—until January of 2015. Sias Decl. ¶¶ 21, 23. Finally, it was not 

diligent in moving to amend because it did not do so, or even indicate to PG&E that it might do 

so, until more than seven months after the stipulated deadline and at least several months after 

learning the key facts on which it now relies. Because Tesoro “was not diligent, the inquiry 

should end.” See Johnson, 975 F.2d at 609.

IV. CONCLUSION

For the reasons stated above, Tesoro‟s Motion for Leave to Amend is DENIED. This 

Order need not and does not address whether Tesoro‟s proposed amendment would be permissible 

under Rule 15 if the parties had not stipulated to a deadline and the Court had not adopted that 

stipulation as an order. The Court also does not reach PG&E‟s arguments that the evidence 

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presented and the proposed second amended complaint are inadequate to support punitive 

damages under California law.

IT IS SO ORDERED.

Dated: September 28, 2015

______________________________________

JOSEPH C. SPERO

Chief Magistrate Judge

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