Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_14-cv-02529/USCOURTS-azd-2_14-cv-02529-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition for Removal- Breach of Contract

---

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

INSIGHT PUBLIC SECTOR, INC., ) 

) 

 Plaintiff, ) 

vs. ) 

) 

PROTEAM SOLUTIONS, INC., ) 

) No. 2:14-cv-2529-HRH

Defendant. ) 

_______________________________________) 

O R D E R

Motion to Extend Deadlines and for

Leave to File Second Amended Counterclaim

Procedural History

Defendant/counterclaimant moves for leave to amend its counterclaim and to modify

the scheduling order in this case.1 This motion is opposed.2 Oral argument has not been

requested. 

Facts

Plaintiff/counterdefendant is Insight Public Sector, Inc. Defendant/counterclaimant

is Proteam Solutions. 

“Insight is a global provider of information technology hardware, software and

service solutions to private and public sector organizations.”3 “Proteam offers professional

1Docket No. 43. 

2Docket Nos. 57 & 58. 

3Complaint at 2, ¶ 5, attached to Notice of Removal, Docket No. 1. 

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information technology solutions and consulting services to private and public sector

organizations in Ohio.”4

“In March 2010, Insight and Proteam entered into an agreement ... in which Proteam

agreed to provide Insight with information about specific sales opportunities within Ohio.”5

The agreement referred to these sale opportunities as “Designated Opportunities.”6 If

Insight made any “Designated Opportunities” sales, Proteam was to receive a royalty in the

amount of 50% of the gross profit for the sale.7 The “Designated Opportunities” were to

order products directly from Insight.8 

Insight alleges that from July 2013 through October 2013, Proteam placed orders in

its own name in the amount of $726,498.07.9 Proteam paid Insight $350,000 plus Proteam

had a $23,438 credit with Insight, which left $352,950.07 unpaid.10 Insight alleges that

Proteam owes it this unpaid amount because these sales were not governed by the parties’

agreement, but rather were purchases made directly by Proteam and not by “Designated

Opportunities.”11 

Proteam alleges that after the parties entered into their agreement, Insight learned

that “the involved Ohio purchasing agencies require[d] that payments for purchases be

4

Id. at ¶ 6. 

5

Id. at ¶ 7. 

6

Id. at ¶ 8. 

7

Id. at ¶ 8. 

8

Id. at ¶ 9. 

9

Id. at 3, ¶¶ 11-14. 

10Id. at 4, ¶ 17. 

11Id. at 3-4, ¶ 15. 

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remitted to Proteam, rather than Insight” and that “Insight did not thereafter make any

effort to amend the Contract to reflect that requirement.”12 Proteam alleges that during the

time that the parties’ agreement was in effect, it “brokered the sales of $4,387,034.33 of

Insight-supplied goods and services to various Ohio governmental agencies.”13 Proteam

alleges that “[d]uring the tenure of the Contract, Insight either instructed Proteam to submit

bids to purchasing agencies in amounts equal to 101% to 103% of Insight’s pricing, or to

submit bids in amounts equal to Insight’s pricing for the goods.”14 Proteam alleges that

Insight told Proteam that this small mark-up was equal to the amount of Proteam’s

royalty,

15 which resulted in an average royalty payment for Proteam of 1.6%. Proteam

alleges that this royalty amount was inconsistent with “Insight’s annual reports to

shareholders [which] state that during each year of the term of the Contract, Insight’s gross

profits were in excess of 13%.”16 Thus, Proteam alleges that Insight breached the contract

“by ... concealing the true gross profits resulting from Proteam-brokered sales, and failing

to pay Proteam its Contractually established royalties in the amount of 50% of such gross

profits.”17 Proteam further alleges that Insight misrepresented the amount of royalty that

Proteam was due under the parties’ agreement and that Insight concealed its gross profits

12Amended Counterclaim at 3, ¶ 10, Docket No. 28. 

13Id. at ¶ 12. 

14Id. at 4, ¶ 22. 

15Id. at 5, ¶ 23. 

16Id. at ¶ 25. 

17Id. at ¶ 29. 

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on the goods that it sold to Proteam.

18 Proteam alleges that Insight owes it in excess of

$500,000.19 

On October 16, 2014, Insight commenced this action, in which it asserts a breach of

contract claim and an unjust enrichment claim against Proteam. Proteam has asserted three

counterclaims against Insight: (1) breach of contract, (2) breach of the implied covenant of

good faith and fair dealing, and (3) intentional misrepresentation. 

Following the filing of the instant motion to amend counterclaim and modify

scheduling order, an informal discovery conference was convened on March 25, 2016. As

a consequence of that conference, the court ordered that the parties re-brief the pending

motion.20 The supplemental briefing has been received21 and reviewed by the court. The

focus of the supplemental briefing is Proteam’s contention that its motion to extend

discovery deadlines should be granted. 

Discussion

Proteam seeks leave to amend in order to add new factual allegations to its

counterclaims.22 Although Proteam moves to amend its counterclaims to add this new

factual information, Proteam also takes the position that its counterclaims as currently pled

are broad enough to encompass this new information. The court agrees with the latter

contention. 

18Id. at 6-7, ¶ 40. 

19Id. at 5, ¶ 30. 

20Docket No. 70. 

21Docket Nos. 72, 73 & 74. 

22Although Proteam moves to amend its counterclaims to add this new factual

information, Proteam also takes the position that its counterclaims as currently pled are

broad enough to encompass this new information. 

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In support of its motion to amend counterclaims, Proteam contends that it only

recently discovered that Insight deliberately increased the cost of goods it sold to Proteam

by purchasing the goods at a marked-up cost from Insight Direct USA, a sister company

and co-subsidiary of Insight’s parent company, Insight Enterprises, Inc. Proteam contends

that this practice by Insight significantly lowered the gross profit on Proteam-brokered

sales, thereby reducing the royalty to which Proteam was due on each sale. Proteam argues

that amending its counterclaims to add these additional factual allegations will ensure that

its fraud counterclaim is pled with sufficient particularity. To support its contention that it

only recently discovered the information about Insight Direct USA, Proteam offers

Insight’s supplemental responses to Proteam’s first set of interrogatories, dated

November 11, 2015.23 Proteam asked Insight: 

With respect to each business entity from which you purchased

Goods, identify (1) the total dollar amount of your annual

purchases, and (2) the total annual dollar amount(s) of

incentives, rebates, discounts and other things of value which

you received as the result of such purchases during each of the

calendar years 2010 through 2013.[24] 

Insight responded that “the vast majority of [its] annual sales are supplied by Insight Direct

USA, Inc., as were all the sales at issue in this lawsuit. [Insight] does not receive any break

on pricing that would not have been disclosed to Proteam to utilize in determining its sale

price to the end user.”25

 

Insight argues that Proteam did not recently learn that the goods that Insight sold to

Proteam were purchased from Insight Direct USA. Rather, Insight contends that Proteam

23Defendant/Counterclaimant’s Motion to Extend Deadlines and for Leave to File

Second Amended Counterclaim, Exhibit C, Docket No. 43-1. 

24Id. at 7-8. 

25Id. at 8. 

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has known about Insight Direct USA’s involvement since August 2015. To support this

contention, Insight offers its initial responses to Proteam’s first set of interrogatories, dated

August 15, 2015, in which Insight provided the same answer as it did in its supplemental

responses,26 quoted above. Proteam filed the instant motion for leave to amend on

February 16, 2016, six months after Insight’s August 15, 2015, discovery response. Insight

contends that Proteam could have filed the instant motion long before now instead of

waiting until approximately one month before discovery was to close.27 Insight also argues

that any amendment would be futile because Proteam has no evidence to support these new

factual allegations. Insight contends that further discovery will not lead to evidence that it

marked up the cost of goods sold to Proteam.

28

Even as to a second motion to amend, 

“In the absence of any apparent or declared reason – such as

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, futility of amendment,

etc., the leave [to amend] ‘should ... be freely given.’” 

Nat’l Council of La Raza v. Cegavske, 800 F.3d 1032, 1041-42 (9th Cir. 2015) (quoting

Foman v. Davis, 371 U.S. 178, 182 (1962)). 

26Insight Public Sector’s Responses to Proteam’s 1st Set of Interrogatories at 8,

Exhibit B, Opposition to Defendant/Counterclaimant’s Motion to Extend Deadlines and

for Leave to File Second Amended Counterclaim, which is attached to Notice of Errata,

Docket No. 58. 

27All discovery in this case was set to close on March 25, 2016. Scheduling and

Planning Order at 4, Docket No. 18. 

28Insight also argues that Proteam cannot prove that the transactions alleged in the

complaint were governed by the parties’ agreement or that it is entitled to a 13% royalty,

but these are arguments that go to the merits of Proteam’s current counterclaims, not to

whether amending those counterclaims would be futile. 

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Proteam’s motion to amend is denied because of undue delay. Proteam was not

diligent in seeking leave to amend. Proteam knew about Insight Direct USA in August

2015. If Proteam believed that it needed to amend its counterclaims based on this

information, it should have done so before February 2016, particularly since discovery in

this case was set to close in March 2016. 

 If the motion for leave to amend is granted (which it is not), then Proteam moves to

extend the deadlines in this case so that it can take discovery regarding Insight Direct

USA’s involvement in Insight’s sales to Proteam. More specifically, Proteam requests that

the current scheduling order be vacated and a new Rule 16 conference ordered, to allow the

scheduling of amended litigation deadlines. 

“In general, the pretrial scheduling order can only be modified ‘upon a showing of

good cause.’” Zivkovic v. S. Cal. Edison Co., 302 F.3d 1080, 1087 (9th Cir. 2002)

(quoting Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 608 (9th Cir. 1992)). “The

pretrial schedule may be modified ‘if it cannot reasonably be met despite the diligence of

the party seeking the extension.’” Id. (quoting Johnson, 975 F.2d at 609). “If the party

seeking the modification ‘was not diligent, the inquiry should end’ and the motion to

modify should not be granted.” Id. (quoting Johnson, 975 F.2d at 609). 

Proteam argues that it has shown good cause to modify the scheduling order because

it has discovered new factual information that is pertinent to its counterclaims. Proteam

also argues that it has been diligent in moving to modify the scheduling order. 

Insight argues that Proteam’s motion to modify the scheduling order should be

denied because Proteam was not diligent in seeking amendment. Insight again points out

that Proteam knew in August 2015 that Insight had purchased the goods it sold to Proteam

from Insight Direct USA, but then Proteam waited six months before bringing the instant

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motion. Insight also argues that there is no need to modify the scheduling order because

Proteam has already taken discovery related to its allegations about Insight Direct USA’s

involvement in this case by propounding discovery upon Insight and serving a subpoena

upon Insight Direct, USA. 

In consideration of the foregoing and after having reviewed the parties’ extensive

supplemental briefing in which the parties debate the history of discovery in this case, the

court concludes that Proteam has failed to demonstrate good cause to depart from the

March 25, 2016, date for the completion of all discovery which the parties proposed29 and

the court approved.30 The court is satisfied from the parties’ supplemental briefing that

adequate discovery has been undertaken with respect to the issues presented by Insight’s

complaint and defendant’s answer and amended counterclaims. 

Conclusion

Proteam’s motion for leave to amend and to modify the scheduling order is denied. 

While the instant motion was under consideration, the time for filing dispositive

motions in this case (April 22, 2016) expired. The time for serving and filing dispositive

motions is extended to June 10, 2016. 

DATED at Anchorage, Alaska, this 11th day of May, 2016. 

/s/ H. Russel Holland 

United States District Judge 

29Scheduling and Planning Conference Report at 4, Docket No. 17. 

30Scheduling and Planning Order at 4, Docket No. 18. 

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