Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-01726/USCOURTS-caed-2_05-cv-01726-11/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 28:1132 E.R.I.S.A.

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1 Plaintiff Kathleen Ellis is represented by separate

counsel and does not join her co-plaintiffs in the instant

motion.

2 Plaintiffs simultaneously, and incorrectly, filed their

motion for leave to file a Fifth Amended Complaint as a Rule 59

motion for reconsideration. Because the motion was filed more

1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

JAMES P. DEFAZIO, et al.,

NOS. CIV. 04-1358 WBS GGH

 05-0559 WBS GGH

Plaintiffs, 05-1726 WBS GGH

CONSOLIDATED 

v. ORDER RE: MOTION FOR LEAVE TO

FILE A FIFTH AMENDED COMPLAINT

HOLLISTER, INC., et al.,

Defendants.

 ----oo0oo----

Currently before the court is plaintiffs’1 motion for

leave to file a Fifth Amended Complaint alleging additional

claims under the Employee Retirement Income Security Act (ERISA),

29 U.S.C. §§ 1001-1461, against defendants based on recently

discovered information.2 To avoid repetition, the court will

Case 2:05-cv-01726-WBS-GGH Document 92 Filed 07/21/08 Page 1 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

than ten days after this court’s April 8, 2008 Order, it should

be treated as a Rule 60(b) motion for relief from final judgment. 

See Am. Ironworks & Erectors, Inc. v. N. Am. Const. Corp., 248

F.3d 892, 898-99 (9th Cir. 2001) (noting that “a motion for

reconsideration . . . is treated as a Rule 60(b) motion” if it is

filed more than ten days after entry of judgment). A Rule 60(b)

motion, however, is applicable only to final judgments, and a

district court’s dismissal “without prejudice” and thus

contemplating amendment--as is the case in the instant matter--is

not considered a final judgment on the merits. Bruns v. Nat’l

Credit Union Admin., 122 F.3d 1251, 1258 (9th Cir. 1997) (“The

district court’s dismissal without prejudice was not a final

judgment on the merits of [plaintiff’s] claims.”). 

3 In its April 7, 2008 Order, the court granted

defendants’ motion to strike plaintiffs’ allegations based on

defendants’ statements in previous court filings. Id. at *9. As

both parties acknowledge and this court now clarifies for their

convenience, this ruling included striking paragraph sixty-eight

of the Fourth Amended Complaint. Additionally, footnote

thirty-six of plaintiffs’ Fourth Amended Complaint (footnote

twenty-two of the proposed Fifth Amended Complaint)

inappropriately contained a citation to yet another of

defendants’ previous court filings, and thus must also be

stricken.

2

refrain from reciting the entire factual and procedural

background, which essentially remains the same as in its November

1, 2007 Order. Defazio v. Hollister, Inc., No. 04-1358, 2007 WL

3231670, at *1-2 (E.D. Cal. Nov. 1, 2007). 

On April 8, 2008, this court granted in part (without

prejudice) and denied in part defendants’ motions to dismiss

and/or strike portions of plaintiffs’ Fourth Amended Complaint. 

Defazio v. Hollister, Inc., No. 04-1358, 2008 WL 958185, at

*10-11 (E.D. Cal. Apr. 8, 2008).3 Plaintiffs subsequently

attempted to meet and confer with defendants regarding a January

23, 2008 intervening motion that defendants filed in plaintiffs

James P. Defazio and Kathleen Ellis’s state court divorce

proceeding. When defendants declined to stipulate to further

ERISA allegations stemming from the filing of their state court

Case 2:05-cv-01726-WBS-GGH Document 92 Filed 07/21/08 Page 2 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4 On February 19, 2008, this court issued a Status

(Pretrial Scheduling) Order that explicitly prohibited further

amendments to the pleadings without leave of the court pursuant

to Rule 16(b). (Feb. 19, 2008 Status (Pretrial Scheduling) Order

2:2-5.) 

3

motion and adherence to the state court’s resulting domestic

relations order (DRO), plaintiffs brought the instant motion for

leave to amend. Plaintiffs also seek amendment to re-allege

their fraud allegations against defendants Alan F. Herbert, James

A. Karlovsky, and James J. McCormack based upon a February 17,

1999 letter recently obtained through the discovery process.

Generally, a motion to amend is subject to Rule

15(a)(2) of the Federal Rules of Civil Procedure, which provides

that “[t]he court should freely give leave [to amend] when

justice so requires.” Fed. R. Civ. P. 15(a)(2). However,

“[o]nce the district court ha[s] filed a pretrial scheduling

order pursuant to Federal Rule of Civil Procedure 16[,] which

establishe[s] a timetable for amending pleadings[,] that rule’s

standards control[].”4 Johnson v. Mammoth Recreations, Inc., 975

F.2d 604, 607-08 (9th Cir. 1992). 

Under Rule 16(b), a party seeking leave to amend must

demonstrate “good cause.” Fed. R. Civ. P. 16(b). “Rule 16(b)’s

‘good cause’ standard primarily considers the diligence of the

party seeking the amendment.” Johnson, 975 F.2d at 609; see also

id. (“If [the moving] party is not diligent, the inquiry should

end.”). Although “the focus of the inquiry is upon the moving

party’s reasons for seeking modification[,]” a court may

supplement its determination by considering the prejudice to the

other party. Id. at 609 (finding that “the existence or degree

Case 2:05-cv-01726-WBS-GGH Document 92 Filed 07/21/08 Page 3 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

of prejudice to the party opposing the modification might supply

additional reasons to deny a motion” under Rule 16(b)). Finally,

if good cause is found, the court then turns to Rule 15 to

determine whether the amendment sought should be granted. Id. at

608.

Here, plaintiffs have demonstrated the requisite

diligence in satisfaction of Rule 16(b). First, with respect to

allegations related to defendants’ state court intervention and

subsequent qualification of the DRO, it was not unreasonable for

plaintiffs to wait to contact defendants until after the state

court issued its Order on April 1, 2008. After an exchange of

emails between the parties regarding a possible stipulation as to

the potential allegations proved unsuccessful, plaintiffs

promptly filed the instant motion. See Jackson v. Laureate,

Inc., 186 F.R.D. 605, 608 (E.D. Cal. 1999) (noting that “good

cause” exists where the moving party shows that he or she was

diligent in seeking an amendment once the need became apparent). 

Second, plaintiffs’ request to re-allege their fraud allegations

against Herbert, Karlovsky, and McCormack are likewise timely, as

such allegations stem from materials (notably, the February 17,

1999 letter) disclosed through the discovery process as recently

as April 23, 2008. Id.

There is also no apparent prejudice to defendants in

permitting the instant amendment. Though this case’s origins

date back over three years, this matter regrettably is still in

its early litigious stages. Due in large part to three judicial

reassignments, the parties waited four years to be apprised of

the Scheduling Order and discovery is not set to conclude until

Case 2:05-cv-01726-WBS-GGH Document 92 Filed 07/21/08 Page 4 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5

January 30, 2009. (Feb. 19, 2008 Status (Pretrial Scheduling)

Order 2:20-22); see also Arizona v. San Carlos Apache Tribe of

Ariz., 463 U.S. 545, 580 (1983) (finding that because the

proceedings “remain at an early stage,” “[t]he district court

should therefore grant the plaintiffs leave to amend”); Wixon v.

Wyndham Resort Dev. Corp., No. 07-2361, 2007 WL 3101331, at *2

(N.D. Cal. Oct. 22, 2007) (allowing amendment because

“[p]laintiffs’ motion for leave to amend was filed at a very

early stage in the litigation in which little discovery has been

taken by both parties”). 

Turning to Rule 15(a), “[t]he Supreme Court and the

Court of Appeals for the Ninth Circuit interpret . . . Rule 15(a)

very liberally in order to permit meritorious actions to go

forward, despite inadequacies in the pleadings.” Bellanger v.

Health Plan of Nev., Inc., 814 F. Supp. 914, 916 (D. Nev. 1992)

(citing Foman v. Davis, 371 U.S. 178, 182 (1962); DCD Programs,

Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987)); see also

United States v. Webb, 655 F.2d 977, 979 (9th Cir. 1981) (“Rule

15’s policy of favoring amendments to pleadings should be applied

with ‘extreme liberality.’”).

Courts commonly consider four factors when deciding

whether to grant a motion for leave to amend a complaint: (1) bad

faith or dilatory motive on the part of the movant; (2) undue

delay in filing the motion; (3) prejudice to the opposing party;

and (4) the futility of the proposed amendment. Roth v. Marquez,

942 F.2d 617, 628 (9th Cir. 1991). Because the aforementioned

“good cause” inquiry essentially incorporates the first three

factors, the court should deny plaintiffs’ motion for leave to

Case 2:05-cv-01726-WBS-GGH Document 92 Filed 07/21/08 Page 5 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5 In fact, defendants submitted lengthy opposition papers

arguing the merits of plaintiffs’ proffered amendments that may

or may not, on a properly noticed motion pursuant to Rule

12(b)(6), substantiate dismissal of certain allegations. Because

such arguments are presently premature in that they require the

court to assume that there are no facts that could support

plaintiffs’ proposed claims and would necessitate taking judicial

notice of several submissions, defendants are better off

ascertaining the form and substance of the actual Fifth Amended

6

amend only if such amendment would be futile. 

While some courts liken the futility inquiry with that

of a motion to dismiss, see Ritzer v. Gerovicap Pharm. Corp., 162

F.R.D. 642, 645 (D. Nev. 1995) (“[L]eave to amend need not be

granted if the proposed amended complaint would be subject to

dismissal.”), most recognize that “[d]enial of leave to amend on

[futility] ground[s] is rare.” Netbula v. Distinct Corp., 212

F.R.D. 534, 539 (N.D. Cal. 2003); see also Big Bear Lodging Ass’n

v. Snow Summit, Inc., 182 F.3d 1096, 1105 (9th Cir. 1999)

(“Because this litigation is still in its early stages, leave

should be liberally granted unless amendment would be futile.”). 

“Ordinarily, courts will defer consideration of challenges to the

merits of a proposed amended pleading until after leave to amend

is granted and the amended pleading is filed.” Netbula, 212

F.R.D. at 645. 

Absent a clear indication that plaintiffs have no

viable theory of recovery, the court is not prepared to deem

plaintiffs’ proposed Fifth Amended Complaint futile. In so

finding, the court does not mean to suggest that plaintiffs’ new

allegations are, as stated in their proposed Fifth Amended

Complaint, necessarily pled in a manner sufficient to withstand a

motion to dismiss.5 Rather, the court acknowledges that it

Case 2:05-cv-01726-WBS-GGH Document 92 Filed 07/21/08 Page 6 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Complaint--a proposed version of which was submitted well after

defendants’ opposition was filed--thereby allowing them the

procedurally proper opportunity to fashion both the initial

memorandum and reply brief. 

7

simply appears feasible that plaintiffs could prove some set of

facts concerning the aforementioned events constituting valid and

sufficient claims. See Miller v. Rykoff-Sexton, Inc., 845 F.2d

209, 214 (9th Cir. 1988) (“[A] proposed amendment is futile only

if no set of facts can be proved under the amendment to the

pleadings that would constitute a valid and sufficient claim or

defense.”). 

Accordingly, because plaintiffs demonstrate good cause

under Rule 16(b) and the court cannot conclude at this stage that

an amendment would clearly be futile under Rule 15(a), the court

will grant plaintiffs’ motion for leave to file a Fifth Amended

Complaint.

IT IS THEREFORE ORDERED that plaintiffs’ motion for

leave to file a Fifth Amended Complaint be, and the same hereby

is, GRANTED.

DATED: July 18, 2008

Case 2:05-cv-01726-WBS-GGH Document 92 Filed 07/21/08 Page 7 of 7