Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_16-cv-00959/USCOURTS-casd-3_16-cv-00959-5/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

DUNCAN LINDSEY, PH.D,

Plaintiff,

v.

ELSEVIER INC., ELSEVIER B.V., 

ELSEVIER, LTD.,

Defendants.

Case No.: 16cv959-GPC(DHB)

ORDER GRANTING DEFENDANTS’ 

MOTION FOR LEAVE TO FILE 

FIRST AMENDED ANSWER AND 

COUNTERCLAIM

[Dkt. No. 41.]

Before the Court is Defendants’ motion for leave to file an amended answer and 

counterclaims. (Dkt. No. 41.) Plaintiff filed an opposition on July 28, 2017 and 

Defendants filed a reply on August 4, 2017. (Dkt. Nos. 45, 52.) Based on the reasoning 

below, the Court GRANTS Defendants’ motion for leave to file first amended answer and 

counterclaim. 

Background

On April 20, 2016, the case was removed from state court. (Dkt. No. 1.) Plaintiff 

Duncan Lindsey, Ph.D. (“Plaintiff” or “Dr. Lindsey”) filed a complaint alleging state law 

causes of action for breach of contract, fraud, breach of fiduciary duty, constructive fraud, 

breach of the implied covenant of good faith and fair dealing, rescission, accounting and 

declaratory relief against Defendants Elsevier Inc., Elsevier B.V, and Elsevier, Ltd.’s 

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(“Defendants” or “Elsevier”) failure to pay him royalties allegedly owed under a written 

contract for a scholarly research journal. (Dkt. No. 1-2, Compl.) On July 28, 1978, 

Plaintiff, a distinguished scholar in the field of social work, entered into a contract with 

Defendants’ predecessor, Pergamon Press, to develop and publish a journal called 

“Children and Youth Services Review” (“CYSR”) which became the premier research 

journal in the field of child welfare social work. (Id. ¶ 1.) The contract provides that Dr. 

Lindsey is responsible for the content of the journal, that the journal would be published 

and owned by Pergamon Press and it would pay Dr. Lindsey each year “15% of the net 

subscription income received in respect of institutional subscriptions to the journal over 

and above the first 750 institutional subscription.” (Id., Ex. A ¶ 6(a).) As to individual 

subscriptions, Dr. Lindsey would be paid per year “10% of the net subscription income. . .

over and above the first 500 such subscriptions and up to the first 3,000 such subscriptions; 

and 15% of net subscription income from all subscriptions over and above 3,000.” (Id. at 

¶ 6(b).) Pergamon Press also agreed to pay a $2000 “editorial subsidy” during the first 

year to cover portions of the editorial and office expenses. (Id. ¶ 7.) It also required

Plaintiff to “endeavor to obtain sponsoring subscriptions”. (Id. ¶ 6(c).) Moreover, it 

included a right of first refusal which stated that “[i]n the event that you should, at any time 

while this agreement is in force, contemplate any other publications, whether journals, 

books or otherwise, we agree that we shall give any such project our sympathetic 

consideration; you, on your part, agree that any such project will be presented to us in the 

first instance.” (Id. ¶ 10.)

In 1989, Pergamon Press agreed to increase the editorial subsidy to $2000 per issue. 

(Id. ¶ 20.) The journal is now published 12 times a years with almost 300 articles. (Id.) 

In 1991, Defendant Elsevier purchased the assets and assumed the liabilities of Pergamon 

Press and became its successor in interest. (Id. ¶ 23.) Dr. Lindsey continues to work on 

the journal under the terms of the contract. (Id.) 

Despite the success of CYSR, Plaintiff alleges Elsevier has never paid him any 

subscription royalties as Elsevier and its predecessor repeatedly informed Plaintiff that the 

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threshold of 750 subscriptions was never met. (Id. ¶¶ 3, 5, 6.) Plaintiff alleges that Elsevier 

has “obfuscated, misled, and failed to disclose the truth” about the way it was calculating 

its subscriptions and his royalties. (Id. ¶ 6.) 

Discovery in this case was conducted in two phases. Phase 1 was to consist only of 

discovery served by Plaintiff so that he could evaluate the amount of Elsevier’s 

subscription income that is attributable to CYSR and then the parties could engage in 

settlement discussions. (Dkt. No. 41-1, Jonak Decl. ¶ 4.) Phase 1 ended on December 16, 

2016. (Id.) However, the deadline for any amendment to pleadings passed on November 

14, 2016. (Id.) In Phase 2, Defendants served document requests seeking information 

relating to Plaintiff’s allegations that the substantial annual subsidies that he received from 

Defendants were merely reimbursement for his out of pocket expenses. (Id. ¶ 5.) 

Documents by Dr. Lindsey were not produced until March 31, 2017 and consisted 

of over 78,000 pages and did not include any metadata. (Id. ¶ 6.) On April 27, 2017, 

Defendant received a second production duplicating a part of the first production with 

native files to permit limited searching of documents. (Id.) Plaintiff’s most recent 

production of documents was on June 23, 2017. (Id.) Another production of documents 

was made after the filing of the instant motion on July 29, 2017 to include an additional 

80,000 pages from Dr. Lindsey. (Dkt. No. 52-1, Jonak Decl. ¶ 9.) 

From 2008 until 2015, Plaintiff had asked Elsevier to pay part of the editorial subsidy 

to Renji Mathew (“Renji”) in India who Dr. Lindsey claimed was assisting with work on 

CYSR. (Dkt. No. 41-1, Jonak Decl. ¶ 7.) However, in the initial production of documents, 

no documents or emails were produced concerning Renji. (Id. ¶¶ 8, 9.) It was only after 

repeated requests and after preparing a motion to compel, that Plaintiff agreed to provide 

additional documents. (Id. ¶¶ 11, 16.) It appears this production occurred on July 29, 

2017. (Dkt. No. 52-1, Jonak Decl. ¶ 9.)

When Defendants conducted their own independent research of Renji, it was 

discovered his background is in software development and not editorial or child welfare 

work. (Dkt. No. 41-1, Jonak Decl. ¶ 12.) During the time when Dr. Lindsey was using 

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Mathew’s services, Plaintiff “was involved in software ventures utilizing personnel from 

India that were developing applications matching the identical services provided by Renji 

and his company, Sykronit. Our investigation has also revealed that Synkronit provided 

application development services to Webport, one of Lindsey’s companies, and helped 

produce some of its apps, including Airport Pro. Renji and/or Synkronit may also have 

provided services to other of Lindsey’s business ventures.” (Id. ¶ 13.) Elsevier believes 

that the monies sent to Mathew had nothing to do with CYSR and Dr. Lindsey was 

defrauding Elsevier by having it pay for software development for his own private 

companies. (Id. ¶ 15.) 

Defendants also discovered evidence in Plaintiff’s document production that he 

claimed $1.3 million in expenses for CYSR but the expenses appear to be related to his 

other business ventures. (Id. ¶ 17.) When asked to produce receipts to support these 

expenses, none that were related to CYSR were produced. (Id.) Moreover, other evidence 

revealed that Dr. Lindsey never made any attempts to obtain sponsoring subscriptions, 

made no attempts to appoint Associate Editors as contemplated by the contract, and that he 

breached the right of first refusal. (Id. ¶ 19.) 

Based on the newly discovered evidence, Defendants seek leave of Court to file a 

counterclaim against Plaintiff for breach of contract, fraud, and conversion. (Dkt. No. 41-

4, Proposed Am. Ans. and Counterclaim.) Plaintiff opposes. 

Discussion

A. Federal Rule of Civil Procedure 16

Once a district court has established a deadline for amended pleadings, and that 

deadline has passed, Federal Rule of Civil Procedure (“Rule”) 16 applies to modify a 

scheduling order. Coleman v. Quaker Oats Co., 232 F.3d 1271, 1294 (9th Cir. 2000); 

Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 607-608 (9th Cir. 1992). A pretrial 

scheduling order can only be modified “upon a showing of good cause.” Fed. R. Civ. P. 

16(b). “Good cause” focuses on the diligence of the party seeking an amendment. Johnson, 

975 F.2d at 609. The pretrial schedule may be modified “if it cannot reasonably be met 

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despite the diligence of the party seeking the extension.” Id. In general, the focus of the 

diligence inquiry is on the time between the moving party’s discovery of new facts and its 

asking leave of the court to file an amended pleading. See Zivkovic v. S. Cal. Edison 

Corp., 302 F.3d 1080, 1087-88 (9th Cir. 2002). Prejudice to the non-moving party, though 

not required under FRCP 16(b), can supply additional reasons to deny a motion. Coleman, 

232 F.3d at 1295. The Ninth Circuit noted that “[c]arelessness is not compatible with a 

finding of diligence and offers no reason for a grant of relief.” Id.; see Sugita v. Parker, 

13cv118-AWI-MJS(PC), 2015 WL 5522078, at *2 (E.D. Cal. Sept. 16, 2015) (counsel’s 

carelessness or inadvertence fails to establish “good cause”). Rule 16’s good cause 

standard is more stringent that the liberal amendment standard under Rule 15. 

AmerisourceBergen Corp. v. Dialysis West, Inc., 465 F.3d 946, 952 (9th Cir. 2006). 

A scheduling order was filed on September 14, 2016 which set the deadline to amend 

the pleadings by November 14, 2016. (Dkt. No. 20.) An amended scheduling order, which 

did not extend the deadlines for amending pleadings, was then filed on January 27, 2017. 

(Dkt. No. 38.) Because the pleading amendment deadline has long passed, Defendants 

bear the burden of showing “good cause” to amend the answer and add counterclaims under 

Rule 16(b). See Zivkovic, 302 F.3d at 1087. Defendants argue that “good cause” exists to 

extend the deadlines because Defendants were extremely diligent and brought their motion 

as soon as practicable. In fact, under the parties agreed upon phased discovery, Defendants 

were not allowed to serve discovery until after the scheduling order deadline had passed 

on November 14, 2016. Plaintiff does not dispute whether “good cause” exists to extend 

the deadline to file a motion for leave to amend the answer. The Court finds that good 

cause has been shown as Defendants have been diligent in seeking discovery and filed the 

instant motion timely after discovering the facts to support their counterclaims. Therefore, 

the Court GRANTS Defendants’ request to modify the scheduling order to seek leave to 

file an amended answer and add counterclaims.

/ / / / 

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B. Federal Rule of Civil Procedure 15(a) 

Under Rule 15(a), leave to amend a complaint after a responsive pleading has been 

filed may be allowed by leave of the court and “shall freely be given when justice so 

requires.” Foman v. Davis, 371 U.S. 178, 182 (1962); Fed. R. Civ. P. 15(a). Granting leave 

to amend rests in the sound discretion of the trial court. Int’l Ass’n of Machinists & 

Aerospace Workers v. Republic Airlines, 761 F.2d 1386, 1390 (9th Cir. 1985). This 

discretion must be guided by the strong federal policy favoring the disposition of cases on 

the merits and permitting amendments with “extreme liberality.” DCD Programs Ltd. v. 

Leighton, 833 F.2d 183, 186 (9th Cir. 1987). “This liberality in granting leave to amend is 

not dependent on whether the amendment will add causes of action or parties.” Id.; but see

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

practice, however, courts more freely grant plaintiffs leave to amend pleadings in order to 

add claims than new parties). 

Because Rule 15(a) favors a liberal policy, the nonmoving party bears the burden of 

demonstrating why leave to amend should not be granted. Genentech, Inc. v. Abbott Labs., 

127 F.R.D. 529, 530-31 (N.D. Cal. 1989). In assessing the propriety of an amendment, 

courts consider several factors: (1) undue delay, (2) bad faith or dilatory motive; (3) 

repeated failure to cure deficiencies by amendments previously permitted; (4) prejudice to 

the opposing party; and (5) futility of amendment. Foman, 371 U.S. at 182; United States 

v. Corinthian Colleges, 655 F.3d 984, 995 (9th Cir. 2011). These factors are not equally 

weighted; the possibility of delay alone, for instance, cannot justify denial of leave to 

amend, DCD Programs, 833 F.2d at 186, but when combined with a showing of prejudice, 

bad faith, or futility of amendment, leave to amend will likely be denied. Bowles v. 

Reade, 198 F.2d 752, 758 (9th Cir. 1999). “Futility of amendment can, by itself, justify the 

denial of a motion for leave to amend.” Bonin v. Calderon, 59 F.3d 815, 845 (9th Cir. 

1995). 

1. Futility of Amendment

Plaintiff primarily disputes the motion arguing that the proposed counterclaims are 

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defective by failing to meet the Rule 8 pleading standard, and are consequently futile. 

Defendants argue they have sufficiently alleged causes of action in their counterclaim. 

“A motion for leave to amend may be denied if it appears to be futile or legally 

insufficient.” 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.” Id. “If the 

underlying facts or circumstances relied upon by a [party] may be a proper subject of relief, 

he ought to be afforded an opportunity to test his claim on the merits.” Breier v. N. Cal. 

Bowling Proprietors’ Ass’n, 316 F.2d 787, 789-90 (1963) (quoting Foman, 371 U.S. at 

182). An amendment “should not be barred as futile if the underlying facts ‘may be a 

proper subject of relief.’” Id. at 790. The “sufficiency of an amended pleading ordinarily 

will not be considered on the motion for leave to amend.” Id. at 790. 

Rule 8 requires “a short and plain statement of the claim showing that the pleader is 

entitled to relief. Fed. R. Civ. P. 8(a)(2). Under Rule 8, detailed factual allegations are not 

required, but “[t]hreadbare recitals of the elements of a cause of action, supported by mere 

conclusory statements, do not suffice.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing 

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). “When there are well-pleaded 

factual allegations, a court should assume their veracity, and then determine whether they 

plausibly give rise to an entitlement to relief.” Iqbal, 556 U.S. at 679; see also Resnick v. 

Hayes, 213 F.3d 443, 447 (9th Cir. 2000) (“[W]hen determining whether a complaint states 

a claim, a court must accept as true all allegations of material fact and must construe those 

facts in the light most favorable to the plaintiff.”). 

Moreover, Rule 8's pleading standard does not prevent a plaintiff from “pleading 

facts alleged ‘upon information and belief’ where the facts are peculiarly within the 

possession and control of the defendant or where the belief is based on factual information 

that makes the inference of culpability plausible.” Arista Records, LLC v. Doe 3, 604 F.3d 

110, 120 (2d Cir. 2010) (quoting Runnion ex rel. Runnion v. Girl Scouts of Greater Chicago 

and Northwest Indiana, 786 F.3d 510, 517 (7th Cir. 2015)). Arguments concerning the 

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sufficiency of the proposed pleadings, even if meritorious, is better left for briefing on a 

motion to dismiss. Lillis v. Apria Healthcare, No. 12cv52-IEG(KSC), 2012 WL 4760908, 

at * 1 (S.D. Cal. Oct. 5, 2012). 

District courts in the Ninth Circuit have also concluded that allegations in a 

complaint based on “information and belief” are sufficient to survive a motion to dismiss 

as long as there is some plausible basis to support a cause of action. See Bernstein v. Health 

Net Life Ins. Co., Case No. 12cv717-AJB(JMA), 2013 WL 12095240, at *4 (S.D. Cal. Apr. 

4, 2013) (citing Hightower v. Tilton, No. C08-1129-MJP, 2012 WL 1194720, at *3 (E.D. 

Cal. Apr. 10, 2012) (“facts pled ‘on information and belief’ can survive a motion to dismiss 

so long as the plaintiff pleads sufficient facts to make the claims plausible under IqbalTwombly”)).

Here, Plaintiff argues that all the claims fail to meet the pleading standard of Rule 8 

as they are conclusory and are devoid of any factual support. He also argues that the 

allegations are misleading and intended to imply allegations that are not truthful. 

Furthermore, he maintains that there are no specific facts to toll the statute of limitations. 

In reply, Defendants argue that Plaintiff seeks to impose a heightened pleading standard to 

the breach of contract claim and also improperly disputes the facts alleged in the proposed 

counterclaim which is not proper on a motion to amend. 

a. Breach of Contract

Plaintiff argues that no facts are alleged and the allegations are only based on 

“information and belief” and are conclusory. Defendants dispute Plaintiff’s argument 

asserting that they have sufficiently alleged a breach of contract claim.

Neither party definitively argues whether California or New York law applies. 

However, at this time, such a determination is not necessary because the elements for a 

breach of contract claim in California and New York are the same. A breach of contract 

cause of action in California and New York requires a 1) contract, 2) plaintiff’s 

performance or excuse for performance, 3) defendant’s breach and 4) damages. Wall St. 

Network, Ltd. v. New York Tiems Co., 164 Cal. App. 4th 1171, 1178 (2008); Harsco Corp. 

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v. Segui, 91 F.3d 337, 348 (2d Cir. 1996). 

Of the elements of a breach of contract claim, it appears that Plaintiff is challenging 

the allegations to support a breach by Plaintiff. The breach of contract claim alleges that 

Dr. Lindsey breached Defendants’ right of first refusal to consider Dr. Lindsey’s

publication ideas or projects by failing to present other publication ideas and projects to 

Elsevier and instead pursued them with another publisher, (Dkt. No. 41-1, Proposed 

Counterclaim ¶ 104), breached his obligation to “endeavor” to obtain sponsorship 

agreements by not obtaining any sponsorships, (id. ¶ 107), and breached a general duty of 

care by using expenses for CYSR for his own personal benefit and for the benefit of his 

other business ventures, and refusing to appoint other editors and an editorial advisory 

board for CYSR. (Id. ¶¶ 105, 106.) These allegations are alleged “upon information and 

belief.” (Dkt. No. 41-1, Proposed Counterclaim ¶¶ 104, 106, 107.) However, an allegation 

based on information and belief is appropriate when the facts are within the possession and 

control of the opposing party. Defendants assert they did not learn about these issues until 

about May 2017 when Dr. Lindsey produced documents in response to Defendants’ 

request. They also claim that all evidence to support their counterclaims are in Plaintiff’s 

possession and control. (Dkt. No. 41-1, Jonak Decl. ¶ 20 (“most of the evidence regarding 

the bases for the counterclaims is in Lindsey’s possession or control (or that of his 

immediate relatives).”). Plaintiff does not dispute this argument instead disputing the

specific facts alleged by Defendants. Here, most of the evidence concerning whether Dr. 

Lindsey breached the contract and whether there was fraud and conversion are within his 

possession as they concern his conduct during the contract. Therefore, the counterclaim 

may be alleged “on information and belief” and satisfy Rule 8’s pleading standard. 

Next, much of Plaintiff’s arguments challenge Defendants’ interpretation of the 

contract and dispute the facts alleged; however, such arguments are not proper on a motion 

for leave to amend. For example, as to Dr. Lindsey’s agreement to endeavor to seek 

sponsorships, he claims he was not contractually obligated to obtain sponsoring 

subscriptions, that Elsevier and its predecessor knew that he was not able to obtain 

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sponsorship subscriptions for the past 39 years and yet 39 years later they claim that he 

breached the contract. These arguments on the merits of the claim are not proper on a 

motion to amend and the Court is not in a position to resolve any factual disputes. The 

Court is only obligated to determine whether the alleged facts, taken as true, “may be a 

proper subject of relief.” See Breier, 316 F.2d at 790. As to the alleged breach of the 

general duty of care as to editorial standards and expense reimbursement issue, Plaintiff 

again argues that he did not fail to comply with the standard of care in his editorial duties 

and expense reimbursements based on his interpretation of the contract. Again, such 

arguments cannot be resolved at this stage of the proceedings. 

Based on the allegations presented in the proposed counterclaim, Defendants have 

sufficiently placed Plaintiff on notice as to the nature of the claims and present facts that 

plausibly state a breach of contract claim. See Iqbal, 556 U.S. at 678. 

Next, Plaintiff argues that the claims are futile because they are barred by the statute 

of limitations. Arguing that New York law presumably governs the contract, without legal 

authority explaining why, Plaintiff asserts that the statute of limitation is six years for a 

breach of contract claim. In response, Defendants argue that California’s statute of 

limitations apply based on California’s “governmental interest” analysis. 

This Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332(a)(2). (Dkt. No. 

1, Notice of Removal ¶ 5.) Under diversity jurisdiction, the court applies the choice-oflaw rules of the state in which it sits, and in this case, it is California. See Mortensen v. 

Bresnan Comm'ns, LLC, 722 F.3d 1151, 1161 (9th Cir. 2013). 

California Civil Code section 1646 provides that “[a] contract is to be interpreted 

according to the law and usage of the place where it is to be performed; or, if it does not 

indicate a place of performance, according to the law and usage of the place where it is 

made.” Cal. Civ. Code § 1646. Section 1646’s purpose “is to determine the choice of law 

with respect to the interpretation of a contract in accordance with the parties’ presumed 

intention at the time they entered the contract.” Frontier Oil Corp. v. RLI Ins. Co., 153 

Cal. App. 4th 1436, 1449 (2007). The California Court of Appeals concluded that 

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“notwithstanding the application of the governmental interest analysis to other choice-oflaw issues, Civil Code section 1646 is the choice-of-law rule that determines the law 

governing the interpretation of a contract.” Id. at 1442-43. The court of appeal found that 

although section 1646 applies when interpreting the contract, the “governmental interest” 

test apply to other “choice-of-law issues” which include the statute of limitations. Id. at 

1453, 1459. 

While a choice of law analysis on the interpretation of the contract is governed by 

section 1646, the choice of law analysis on which state’s statute of limitations should apply 

is governed by the governmental interest test. See id.

To determine “whether the relevant California statute of limitations . . . or, instead, 

another jurisdiction’s statute of limitations . . . should be applied in a particular case must 

be determined through application of the governmental interest analysis that governs 

choice-of-law issues generally.” McCann v. Foster Wheeler LLC, 48 Cal. 4th 68, 87 

(2010) (citing Ashland Chemical Co. v. Provence, 129 Cal. App. 3d 790, 793-94 (1982) 

(holding that under California law, governmental interest analysis is applicable to resolve 

a choice-of-law issue relating to the statute of limitations); Nelson v. Int’l Paint Co., 716 

F.2d 640, 644 (9th Cir. 1983) (same).) The governmental interest approach is described as 

follows.

In brief outline, the governmental interest approach generally involves three 

steps. First, the court determines whether the relevant law of each of the 

potentially affected jurisdictions with regard to the particular issue in 

question is the same or different. Second, if there is a difference, the court 

examines each jurisdiction’s interest in the application of its own law under 

the circumstances of the particular case to determine whether a true conflict 

exists. Third, if the court finds that there is a true conflict, it carefully 

evaluates and compares the nature and strength of the interest of each 

jurisdiction in the application of its own law “to determine which state’s 

interest would be more impaired if its policy were subordinated to the policy 

of the other state” [citation] and then ultimately applies “the law of the state 

whose interest would be more impaired if its law were not applied.” 

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Mc Cann, 48 Cal. 4th at 87-88 (quoting Kearny v. Salomon Smith Barney Inc., 39 Cal. 4th 

95, 107-08 (2006)). 

The parties disagree on whether New York or California law applies to the statute 

of limitations. A motion for leave to amend is not the proper motion for addressing the 

applicable statute of limitations that requires full briefing and thoughtful consideration of 

each state’s interest in the case. Plaintiff initially raises the statute of limitations issue in 

his opposition presuming that New York law applies without any legal analysis on the 

governmental interest test. Defendants then respond to the argument in its reply applying 

the governmental interest test. Plaintiff has not had an opportunity to address the 

governmental interest standard. While the Court has concerns as to whether Defendants’ 

counterclaims may be barred by the statute of limitations, the issue has not been properly 

briefed and cannot be resolved on this motion. See Gen. Fire & Casualty Co. v. Guy 

Carpenter & Co., Inc., No. CV05-251S-LMB, 2007 WL 683793 (D. Idaho. Mar. 2, 2007) 

(merits of statute of limitations defense will not be resolved on motion for leave to amend

as motion for summary judgment, rather than motion to amend, is the proper means to 

address the merits of the defense.) 

Plaintiff has not demonstrated that the breach of contract counterclaim is futile. 

b. Fraud and Conversion Claims 

Plaintiff argues that the fraud and conversion claims are also futile based on the same 

reasons as the breach of contract claim. He again argues the merits of the two claims 

arguing it is not possible to allege fraud and conversion claims based on the terms of the 

contract. Defendants assert that Plaintiff improperly disputes the facts alleged in the 

counterclaim. 

“To establish fraud, a plaintiff must prove a misrepresentation or a material omission 

of fact which was false and known to be false by the defendant, made for the purpose of 

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inducing the other party to rely upon it, justifiable reliance, and injury.” Nerey v. 

Greenpoint Mortg. Funding, Inc., 144 A.D. 3d 646, 647 (N.Y. App. Div. 2106).1 

The counterclaim for fraud alleges that Lindsey defrauded Elsevier because he 

induced it to make, and to continue to make, payments to him as a partial reimbursement 

of what he claimed to be his editorial costs. (Dkt. No. 41-1, Proposed Counterclaim ¶¶ 

112, 117-120, 127-128.) Dr. Lindsey misrepresented and omitted disclosure to Elsevier

the “credentials, work, amount, and/or scope of what Renji was doing in India, inducing 

Elsevier to pay significant editorial subsidies for CYSR, and inducing Elsevier to send 

monies to Renji, part or all of which was unrelated to CYSR and instead benefitted Lindsey 

personally and/or his software companies.” (Id. ¶ 127.) Dr. Lindsey knew the 

representations and material omissions of facts were false. (Id. ¶ 128.) Elsevier relied on 

Lindsey’s representations in effectuating his request that a substantial portion of the 

payments be made directly to Renji Mathew in India. (Id. ¶ 128.) Elsevier was damaged 

by the amount of payments it sent to Renji for expenses allegedly related to CYSR. (Id. ¶ 

130.) 

These allegations, taken as true, state a claim for relief for fraud under Rule 8. See 

Iqbal, 556 U.S. at 679. As to the conversion cause of action, again, Plaintiff merely opposes 

arguing that the editorial subsidy was lawfully his so there can be no claim for conversion. 

He does not dispute whether the elements of conversion have been sufficiently alleged but 

improperly disputes the facts alleged. Accordingly, Plaintiff has not shown that the fraud 

and conversion claims are futile. 

2. Undue Delay

Plaintiff contends that Defendants’ failure to raise these claims during the past 39 

years that the contract has been in effect constitutes undue delay. In their motion, 

Defendants claim they sought leave to amend after discovery of the relevant facts. 

 

1Plaintiff cites to New York law for the fraud and conversion claims which Defendants do not dispute. 

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To determine undue delay, the court considers whether the movant “knew or should 

have known the facts and theories raised by the amendment in the original pleading.” 

AmerisourceBergen Corp. v. Dialysist West, Inc., 465 F.3d 946, 953 (9th Cir. 2006) 

(quoting Jackson v. Bank of Hawaii, 902 F.2d 1385, 1388 (9th Cir. 1990)). 

Here, Defendants assert that they did not learn the editorial subsidy sent to Mathew’s 

in India did not relate to work on CYSR and that he was defrauding Elsevier by having it 

pay for software development for Lindsey’s own private companies until the production of 

documents recently on March 27, 2017, April 27, 2017, June 23, 2017 and July 29, 2017. 

Defendants also claim that the facts to support the other causes of action were also recently 

discovered. Accordingly, the Court concludes that there was no undue delay in filing the 

motion. 

3. Bad Faith

Plaintiff argues that the motion is brought in bad faith and is in response to Dr. 

Lindsey’s lawsuit against Defendants for unpaid royalties in order to pressure him to drop 

his lawsuit. Specifically, he claims that Defendants concealed their plan to assert 

counterclaims until after the parties designated their experts on June 26, 2017. Plaintiff 

was confused as to why Defendants’ designation of experts included topics that was outside 

the scope of the complaint. It was not until a few days later, on June 30, 2017, that 

Defendants delivered the proposed counterclaim to him. (Dkt. No. 45-1, Valle Decl. ¶ 9.) 

He further claims the meritless claims alleged are examples of bad faith tactics. Lastly, he 

contends that Defendants never complained about his efforts to obtain sponsoring 

subscriptions, and his editorial work or practices concerning CYSR. Therefore, based on 

these assertions, Defendants’ counterclaims are designed to harass and scare Plaintiff into 

abandoning his claims or having him settle at a lower amount. 

In response, Defendants assert that their experts were already going to be designated 

as they were relevant to Plaintiff’s claim for “reasonable compensation” sought in the 

complaint and to their affirmative defenses. Moreover, Plaintiff knew two weeks before 

rebuttal expert designation about the proposed counterclaims and while defense counsel 

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offered Plaintiff an additional two weeks to designate any other expert witnesses, he did 

not. (Dkt. No. 52-1, Jonak Decl. ¶¶ 3, 4, 5, 6, 7.) 

The Court concluded above that the counterclaims are not baseless. Defendants 

assert they timely filed this motion shortly after learning of newly discovered facts from 

Plaintiff’s recent document production. There is no evidence, other than Plaintiff’s

conclusory allegations, that Defendants brought the instant motion in order to scare 

Plaintiff to drop the lawsuit. The Court concludes that Plaintiff has not demonstrated that 

Defendants brought the motion in bad faith. 

4. Prejudice

Plaintiff argues he will be prejudiced as the counterclaim will expand the nature of 

the case and he will need to take discovery from Elsevier and Pergamon Press and retake 

the deposition of Robert Miranda, who signed the contract in 1978 and is 83 years old. 

Prejudice is the critical factor in considering motions for leave to amend. Eminence 

Capital LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (“Not all of the factors 

merit equal weight. As this circuit and others have held, it is the consideration of prejudice 

to the opposing party that carries the greatest weight. Prejudice is the ‘touchstone of the 

inquiry under rule 15(a).’”). The burden of having to defend a new claim alone is not 

undue prejudice under Rule 15. See DCD Programs, Ltd. v. Leighton, 833 F.2d at 186 

(“[L]iberality in granting leave to amend is not dependent on whether the amendment will 

add causes of action or parties. It is, however, subject to the qualification that amendment 

of the complaint does not cause the opposing party undue prejudice”).

Here, discovery is still ongoing with a deadline of October 23, 2017. (Dkt. No. 40 

at 2.) Although Plaintiff may have to retake the deposition of Mr. Miranda and some 

additional discovery from Elsevier, the counter claim will not alter the litigation to take an 

entirely new course so as to prejudice Dr. Lindsey. See Morongo Band of Mission Indians 

v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990) (affirming district court’s denial of leave to 

amend because amendment would have made a radical shift in the nature of the litigation). 

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There is still sufficient time for Plaintiff to pursue discovery on the proposed 

counterclaims. Accordingly, Plaintiff has not demonstrated prejudice. 

In light of “the strong federal policy favoring the disposition of cases on the merits 

and permitting amendments with ‘extreme liberality,’” DCD Programs, 833 F.2d at 184, 

and because the factors weigh in favor of granting leave to amend, the Court GRANTS 

Defendant’s motion for leave to file an amended answer and counterclaim.

Conclusion

Based on the above, the Court GRANTS Defendants’ motion for leave to file an 

amended answer and counterclaim. The amended answer and counterclaim shall be filed 

within three (3) days of the filed date of the Court’s order. The hearing set for August 18, 

2017 shall be vacated.

IT IS SO ORDERED. 

Dated: August 15, 2017

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