Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_04-cv-00135/USCOURTS-cand-4_04-cv-00135-3/pdf.json

Nature of Suit Code: 440
Nature of Suit: Other Civil Rights
Cause of Action: 28:1441 Petition for Removal- Civil Rights Act

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United States District Court

For the Northern District of California

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 The current defendants are Dale Gwilliam, Nathan Gwilliam, and two Arizona limited

liability companies – Adoption Media LLC and Adoption Profiles LLC.

United States District Court

For the Northern District of California

NOT FOR CITATION

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

MICHAEL BUTLER, et al.,

Plaintiffs, No. C 04-0135 PJH

v. ORDER RE MOTION FOR LEAVE TO

AMEND THE COMPLAINT

ADOPTION MEDIA, LLC, et al.,

Defendants.

_______________________________/

Before the court is plaintiffs’ motion for leave to file an amended complaint. Having

read the parties’ papers and carefully considered their arguments and the relevant legal

authority, and good cause appearing, the court hereby GRANTS the motion in part and

DENIES it in part as follows.

Plaintiffs seek to amend the complaint to add four defendants – Adoption.com (a

general partnership), Adoption Internet Holdings (“AIH” – a general partnership), True North,

Inc. (“True North”), and Aracaju, Inc. (“Aracaju”).1 The proposed first amended complaint

(“FAC”) alleges the same causes of action as the original complaint – violations of California

Civil Code § 51 and § 51.5, and violation of California Business & Professions Code § 17200

and § 17500. 

Case 4:04-cv-00135-PJH Document 167 Filed 11/02/05 Page 1 of 5
United States District Court

For the Northern District of California

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DISCUSSION

A. Legal Standard

Federal Rule of Civil Procedure 15 requires that a plaintiff obtain consent of the

defendant or leave of court to amend its complaint once the defendant has answered, but

"leave shall be freely given when justice so requires." Fed. R. Civ. P. 15(a); see also, e.g.,

Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990) (leave to

amend granted with "extreme liberality"). Leave to amend is thus ordinarily granted unless the

amendment is futile, would cause undue prejudice to the defendants, or is sought by plaintiffs

in bad faith or with a dilatory motive. Foman v. Davis, 371 U.S. 178, 182 (1962); DCD

Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir.1987). Amendments seeking to add

claims are to be granted more freely than amendments adding parties. Union Pacific R. Co.

v. Nevada Power Co., 950 F.2d 1429, 1432 (9th Cir. 1991). 

B. Plaintiffs’ Motion

In their moving papers, plaintiffs argue that each of the proposed new defendants is

either a successor in interest or an alter ego of the current defendants, and that the proposed

FAC will therefore not prejudice the defendants. Plaintiffs also contend that defendants

previously agreed to such an amendment in two stipulations agreeing to extend the deadline

to amend pleadings, including the addition of new parties. Plaintiffs claim that they were not

prepared to seek leave to amend earlier, asserting that defendants’ actions in discovery

made it difficult for plaintiffs to ascertain which new parties, if any, should be added as

defendants.

Defendants respond that while they may have agreed to extend the time for filing a

motion to amend the complaint, they did not agree in advance that plaintiffs could file an

amended complaint that defendants had not seen and reviewed. They contend that plaintiffs

still have to meet their burden under Rule 15, and argue that they have not. Defendants assert

that the motion should be denied because the proposed amendment is futile, because

allowing plaintiffs to file the proposed FAC would prejudice defendants, and because the

motion is brought in bad faith. 

Case 4:04-cv-00135-PJH Document 167 Filed 11/02/05 Page 2 of 5
United States District Court

For the Northern District of California

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1. Futility of amendment

Defendants claim that the proposed amendment is futile. They argue, first, that the

standing requirements under Business & Professions Code § 17200 and § 17500 have

changed as a result of the recent enactment of Proposition 64, which precludes a plaintiff from

bringing claims on behalf of the general public under California’s unfair competition laws

(“UCL”). Defendants contend that Proposition 64 is retroactive, and that because plaintiffs do

not have standing under the UCL claims, their attempt to add new parties is futile.

Second, defendants claim that because the UCL limits remedies to injunctive relief and

restitution, plaintiffs cannot obtain relief. They argue that plaintiffs have no basis for seeking

restitution against any of the defendants, because none of the defendants received anything of

value from the plaintiffs. They also claim that the pursuit of injunctive relief would be futile,

because neither Adoption.com nor AIH owns or controls ParentProfiles.com, as

Adoption.com ceased its involvement with ParentProfiles.com long ago, and AIH has not

existed as an entity for more than two and a half years. 

Third, defendants contend that plaintiffs have no basis for a class action (referring to

the allegations in proposed FAC, ¶ 10). 

Fourth, defendants argue that the Unruh Act claims are time-barred, and do not relate

back to the time of filing the original complaint because plaintiffs had actual notice of

Adoption.com’s status as an independent entity, but chose not to name it as a defendant at

the outset. Defendants reiterate that AIH has no connection to the events alleged in the

complaint, as AIH had been out of existence for eleven months at the time the original

complaint was filed. 

Fifth, defendants assert that the allegations of alter ego and successor liability are bare

conclusory allegations that are insufficient to survive a motion to dismiss. They contend that

the FAC alleges no facts which, if true, would support a finding of alter ego liability as to any of

the current or proposed defendants. Defendants also claim that there are no allegations that

meet the elements of successor liability, and no allegations regarding how Adoption Media or

Adoption Profiles fits those elements. 

Case 4:04-cv-00135-PJH Document 167 Filed 11/02/05 Page 3 of 5
United States District Court

For the Northern District of California

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The court finds that defendants have not established that the proposed amendment

would be futile, except with regard to AIH. First, the court declines to reach the issue of the

retroactivity of Proposition 64, which is currently pending before the California Supreme Court. 

Second, any question of remedies under the UCL is premature. Third, plaintiffs have

represented that they do not plan on seeking class certification, and are bound by that

representation. Fourth, for purposes of this motion, plaintiffs have articulated a basis to

support a finding that the Unruh Act claims against the proposed new defendants relate back

to the time of the filing of the original complaint. Fifth, while it is true that plaintiffs have alleged

only limited facts supporting their assertions of alter ego and successor liability, addressing

the sufficiency of those claims would be premature at this stage of the litigation; moreover, it

may be that defendants have impeded plaintiffs’ ability to obtain information regarding the

financial interrelationships of the various entities. 

2. Prejudice to defendants

Defendants argue that allowing plaintiffs to proceed with the FAC will prejudice both

the proposed defendants and the existing defendants. Defendants contend that adding the

general partnerships (Adoption.com and AIH) to the case will prejudice those defendants

because they will be forced to appear and defend against time-barred and moot claims. 

Defendants also assert that the interests of True North and Aracaju are not necessarily

aligned with the interests of the current defendants, such that the same counsel can represent

them all. In addition, they claim that any extension of the discovery period to allow True North

and Aracaju to conduct discovery will prejudice the existing defendants, against whom this

case has been pending for close to two years. 

The court finds that defendants have failed to show any undue prejudice that will result if

the motion is granted. The facts giving rise to the claims against the original defendants

appear to be identical to the facts giving rise to the claims against the proposed defendants. 

Thus, granting leave to file the proposed FAC will likely not necessitate significant additional

discovery and will not delay the trial. 

/ / /

Case 4:04-cv-00135-PJH Document 167 Filed 11/02/05 Page 4 of 5
United States District Court

For the Northern District of California

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3. Plaintiffs’ bad faith

Defendants argue that seeking to amend the complaint so late in the litigation

constitutes bad faith. Defendants claim that plaintiffs had both notice and knowledge of

Adoption.com’s status as a separate entity at the time they filed the original complaint, but

nonetheless chose not to name Adoption.com as a defendant at that time. Defendants also

contend that they advised plaintiffs prior to the filing of the present motion that AIH had been

dissolved before the lawsuit was filed. Defendants assert in addition that plaintiffs are aware

from discovery and from discussions with defendants’ counsel that there is no good faith basis

in law or fact for seeking to “pierce the corporate veil” so as to hold True North and Aracaju

liable as alter egos of any of the other defendants.

The court finds that defendants have not established that plaintiffs acted in bad faith in

seeking to amend the complaint. For the most part, defendants’ argument amounts to a claim

that plaintiffs cannot state a claim against the new defendants. With regard to Adoption.com,

True North, and Aracaju, the court is unwilling to resolve that question without benefit of

briefing on a motion to dismiss. With regard to AIH, however, plaintiffs did not respond to

defendants’ claim that the partnership was defunct before the events occurred that gave rise

to this lawsuit. 

Accordingly, the court finds that the motion should be GRANTED with regard to adding

Adoption.com, True North, and Aracaju as defendants, and DENIED with regard to adding

AIH as a defendant. In addition, the FAC shall not include any class allegations. Plaintiffs

shall file the FAC no later than November 9, 2005. 

The date for the hearing on the motion, previously set for Wednesday, November 9,

2005, is hereby VACATED.

IT IS SO ORDERED.

Dated: November 2, 2005 

______________________________

PHYLLIS J. HAMILTON

United States District Judge

Case 4:04-cv-00135-PJH Document 167 Filed 11/02/05 Page 5 of 5