Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_05-cv-03097/USCOURTS-cand-5_05-cv-03097-2/pdf.json

Nature of Suit Code: 480
Nature of Suit: Consumer Credit
Cause of Action: 15:1692 Fair Debt Collection Act

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

FRANCIS YEE, IRENE YEE

Plaintiffs, 

 v.

VENTUS CAPITAL SERVICES,

Defendant. 

______________________________________________

NO. C 05-03097 (RS)

ORDER GRANTING

PLAINTIFFS’ MOTION FOR

LEAVE TO AMEND 

Before the Court is plaintiffs Francis and Irene Yee’s Motion for Leave to file a third

amended complaint, filed May 17, 2006. Defendant Ventus Capital Services, LP has filed written

opposition. Pursuant to Local Rule 7-1 (b), the Court finds this matter suitable for disposition

without oral argument.

BACKGROUND

The Yees seek leave to add an allegation that Ventus violated the Rosenthal Act, California

Civil Code § 1812.700, by failing to include certain required language in its debt collection letter to

the Yees. In opposition, Ventus makes five basic arguments: (1) the Yees’ proposed amendment is

barred by the statute of limitations as the claim does not relate back to the original pleading; (2) the

Yees’ motion has been made in bad faith under Federal Rule of Civil Procedure 11(b)(3); (3) the

*E-FILED 6/27/06*

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United States District Court

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Yees unduly delayed in bringing this claim; (4) allowing the amendment would prejudice Ventus;

and (5) the proposed amendment is futile. These arguments are addressed separately below.

RELEVANT LEGAL STANDARDS

Rule 15(a) of the Federal Rules of Civil Procedure provides that leave to amend “shall be

freely given when justice so requires.” Fed. R. Civ. P. 15(a). Generally, leave to amend is “to be

applied with extreme liberality.” Eminence Capital, LLC v. Aspeon, 316 F.3d 1048, 1051 (9th Cir

2003) (reversing and remanding to the district court the plaintiff’s motion to amend where the

plaintiff had amended his complaint three times already, but sought leave of court in good faith to

meet the district court’s heightened pleading requirements). In deciding whether to grant leave to

amend the court generally considers five non-exclusive factors: (1) undue delay by the movant; (2)

bad faith or dilatory motive by the movant; (3) repeated failure by the movant to cure deficiencies by

amendments previously allowed; (4) undue prejudice to the opposing party if the amendment were

allowed; and (5) the futility of the amendment. Id. at 1051-1052. The court looks primarily to

whether the proposed amendment will prejudice the opposing party. Id. at 1052. Without a showing

of prejudice, or an otherwise strong showing of any of the other aforementioned factors, the court

favors granting leave to amend. Id. 

DISCUSSION

A. Statute of Limitations

Under Federal Rule of Civil Procedure 15(c), an amendment relates back to the original

pleading if “the claim or defense asserted in the amended pleading arose out of the conduct,

transaction, or occurrence set forth or attempted to be set forth in the original pleading.” Fed. R.

Civ. P. 15(c)(2). Ventus argues that the new claim, which it characterizes as involving the “alleged

lack of certain text in the first written notice in connection with the collection of a debt” is

insufficiently related to the original claims, limited it argues, to telephone communications between

the parties. The distinction Ventus is drawing between the precise nature of the claims fails to

recognize they need only arise out of the same general “transaction.” As it appears on the present

record that the claims can fairly be characterized as all arising out of Ventus’s collection efforts with

respect to a single debt, the Court cannot conclude that the proposed amendment fails to relate back

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to the original complaint. Therefore, it does not appear as a matter of law that the Rosenthal Act’s

three-year statute of limitations necessarily bars the claim, in that the original complaint was filed on

July 29, 2005.

B. Bad Faith

Next, Ventus suggests the Yees’ new claim is made in bad faith under Federal Rule of Civil

Procedure 11(b)(3). This rule, as applied here, requires that the Yees certify to the best of their

knowledge, on information and belief formed after a reasonable inquiry, that they have evidentiary

support, or are likely to have evidentiary support after a reasonable opportunity for further

investigation and discovery, for their proposed amendment. Fed. R. Civ. P. 11 (b)(3). 

Ventus contends the Yees lack such evidence to support their claim and that Yees know or

should know the proposed amendment is frivolous. It appears that the Yees first became aware of

this particular claim when Ventus provided a “template” of its form collection letter as part of a

motion for summary judgment it recently brought. That template lacked certain language mandated

by the Rosenthal Act. Ventus now argues that despite its prior presentation of that template as a fair

representation of the actual letter sent to the Yees, the Yees and the Court should conclude with

certainty that the letter Ventus actually sent to the Yees was based on a different template, which

was specifically tailored to comply with California law. Further discovery may eventually answer

the question of what was contained in the actual letter sent to the Yees. At this point, however,

Ventus’s own submissions to the Court have created a sufficient basis for the Yees to make the claim

that the letter lacked the requisite disclosures.

C. Prejudice

In considering a proposed amendment, the Court primarily looks to the prejudice the

opposing party will suffer from granting the motion. McGlinchy v. Shell Chemical Co., 845 F.2d

802, 809 (9th Cir 1988) (holding that where discovery had not already covered all the new claims the

plaintiff sought to add, the defendant would suffer prejudice from the delay and expense of taking

new depositions, conducting new research, and rewriting trial briefs). Prejudice may occur if an

opposing party will incur significant additional expenses, will suffer great delays in the resolution of

the conflict, or will significantly increase the complexity of the case. In re Fritz Cos. Sec. Litig., 282

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F. Supp. 2d 1105, 1109 (N.D. Cal. 2003) (granting the plaintiff’s motion to amend where the

defendant only faced the expense of briefing another round of the plaintiff's motions, and defendant

failed to show how delay in bringing the claim would prejudice them in any way). Courts have

found prejudice when adding new claims well into the proceedings alters the nature of the case. 

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

plaintiff’s motion to amend where granting the motion would have caused the defendant to

undertake “at a late hour,” an entirely new line of defense). The party opposing the motion faces the

burden of demonstrating prejudice. Dcd Programs Ltd. V. Leighton, 833 F.2d 183, 187 (9th Cir

1987).

Under these standards, Ventus fails to establish that it would be unfairly prejudiced if the

Yees’ motion is granted. Discovery is scheduled to continue until October 16, 2006. The Yees’

proposed amended claim will not result in any need for an extended discovery period in that, as

noted above, the new claim relates to the issues already contemplated in the original complaint. 

While Ventus contends its officers will be forced to spend time in the discovery process rather than

engaging in their normal duties, that is merely the unfortunate impact of litigation typically. In

short, Ventus has not advanced a sufficient showing of undue prejudice to offset the settled principle

in favor of liberal pleading amendments.

D. Futility

 A proposed amendment is futile and leave to amend may be denied if “no set of facts can be

proved under the amendment that would constitute a valid claim or defense.” Miller v. RykoffSexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988) (holding that the trial court abused its discretion in

denying the plaintiff’s motion to amend to include an affirmative defense of settlement when the

plaintiff and defendant had documented evidence of proposed settlement from prior interactions). 

Futility alone is grounds for denial of leave to amend. Nunes v. Ashcroft, 375 F.3d 805, 808-810

(9th Cir 2004). 

As noted above, Ventus now takes the position that it never sent a collection letter based on

the first template that lacked the California-specific language. Ventus argues, however, that even if

it initially did send such a letter, the Yees new claim is futile because Ventus cured the violation

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under Cal Civ. Code 1788.30(d). This provision provides that, “a debt collector shall have no civil

liability under this title if, within 15 days either after discovering a violation which is able to be

cured, or after the receipt of a written notice of such violation, the debt collector notifies the debtor

of the violation, and makes whatever adjustments or corrections are necessary to cure the violation

with respect to the debtor.” Cal Civ. Code 1788.30(d).

Absent a clear factual record as to what letter or letters were sent and when, however, there is

no way to determine whether Ventus timely cured any violation. Ventus, therefore, has not

established futility with sufficient certainty to preclude the proposed amendment. 

F. Undue Delay

Finally, Ventus contends that the Yees unduly delayed in filing their proposed amendment. 

While undue delay is one factor supporting denial of leave to amend, by itself it is insufficient. 

Bowles v. Reade. 198 F.3d 752, 758 (9th Cir 1999) (holding the district court abused its discretion in

denying plaintiff’s motion to amend for the sole reason that the plaintiff had waited for over two

years to amend). Undue delay, coupled for example with undue prejudice or a showing of bad faith,

may warrant the denial of a motion to amend. Id. Delay becomes prejudicial or indicative of bad

faith in situations such as when the timing of the request to amend compared to the need to amend

reflects gamesmanship by the moving party. SAES Getters S.p.A. v. Aeronex, Inc., 219 F. Supp 2d.

1081, 1086 (S.D. Cal. 2002) (holding that undue delay had not occurred where defendant filed an

answer to plaintiff’s complaint, and sought to amend the answer four months later, but where the

parties had not yet participated in discovery).

Here, the Yees sought leave to amend promptly after becoming aware of this claim during

the prior summary judgment proceedings. Ventus’s contention that there was undue delay is based

on its argument that the Yees could or should have made this claim from the outset, since they

presumably received a copy of the actual collection letter. At this point, the record is unclear as to

whether and when the Yees received the original letter, whether they retained a copy, and whether

they ever provided a copy of it to their counsel. At best, an inference could be drawn that perhaps

the Yees should have been aware of this claim from the outset, but there is no indication that they

actually were aware of the claim but then delayed in bringing it. Under all the circumstances here,

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leave to amend is warranted.

CONCLUSION

For the reasons stated above, the Yees’ motion to amend is granted. Ventus shall have up to

and including 10 days to respond to the new claims in the third amended complaint. 

IT IS SO ORDERED.

Dated: June 27, 2006 

RICHARD SEEBORG

United States Magistrate Judge

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THIS IS TO CERTIFY THAT NOTICE OF THIS ORDER HAS BEEN DELIVERED TO:

Steve W. Dollar nritz@eakdl.com

Eric F. Fagan efagan@efaganlaw.com, dorian@efaganlaw.com

Daniel Paul McKinnon dmckinnon@eakdl.com, mcisneros@eakdl.com

John Karl Rossman rossmanj@moss-barnett.com, cred-rem@moss-barnett.com

Natalie P. Vance nvance@klinedinstlaw.com, jbrelsford@klinedinstlaw.com;

lwelch@klinedinstlaw.com

Dated: 6/27/06 Chambers of Judge Richard Seeborg

By: /s/ BAK 

Case 5:05-cv-03097-RS Document 80 Filed 06/27/06 Page 7 of 7