Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_21-cv-01470/USCOURTS-caed-1_21-cv-01470-1/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Breach of Contract

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UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

BALDEV KHELA and JASJIT KHELA,

Plaintiff,

v.

AMCO INSURANCE CO.,

Defendant.

Case No. 1:21-cv-01470-KES-HBK

FINDINGS AND RECOMMENDATIONS TO 

DENY PLAINTIFFS’ MOTION FOR LEAVE 

TO AMEND COMPLAINT

FOURTEEN DAY OBJECTION PERIOD

(Doc. No. 45)

Pending before the Court is Plaintiffs’ Motion for Leave to Amend Complaint, filed on 

June 20, 2024. (Doc. No. 45, “Motion”). Plaintiffs attach to their Motion a proposed amended 

complaint. (Id. at 8-18). For the reasons stated below, the undersigned recommends the Motion 

be denied. 

BACKGROUND

Plaintiffs initiated this action by filing a complaint against Defendant AMCO Insurance 

Company (“AMCO”) on September 30, 2021. (Doc. No. 1). The Complaint alleged a single 

count of breach of implied covenant of good faith and fair dealing against AMCO. (See 

generally, Id.). Specifically, Plaintiffs asserted that AMCO stopped paying policy benefits on a 

Premier Business Policy after a fire loss on April 17, 2018 to Plaintiffs’ business, Circle D Food 

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and Liquor located in Fresno, California. (Id.). 

On June 21, 2022, the Court issued a Case Management Scheduling Order (“CMSO”), 

which included a July 1, 2022 deadline to join a party or amend the pleadings and a June 23, 2023 

deadline to complete non-expert discovery. (Doc. No. 10 at 2). On April 24, 2023, the Parties 

requested extensions to certain new case management deadlines, including extending the nonexpert discovery cut-off to September 25, 2023, but did not request an extension of the deadline 

to join a party or amend the pleadings, which the Court granted. (Doc. Nos. 16, 17). After the 

parties’ settlement efforts reached an impasse, (See Doc. No. 24), the Court held a status 

conference at which Plaintiffs requested the case be set for trial. (See Doc. Nos. 27, 31). On 

January 16, 2024, the Court further amended the CMSO, to permit expert discovery and file 

dispositive motions as requested in the Parties’ Joint Report (Doc. No. 30), but it did not extend

the deadline to join a party or amend the pleadings. (Doc. No. 31).

On June 20, 2024, nearly two years past the deadline in the CMSO to join a party or 

amend the pleadings, Plaintiffs filed the instant motion, seeking to add two new defendants, and 

to add two new causes of action to the Complaint. (Doc. No. 45). Specifically, Plaintiffs seeks to 

add corporate defendant, CCIS Insurance Group Inc., dba CCIS Bonding and Insurance Services; 

and an individual defendant, Cala Carter. (Id. at 2).1 Plaintiffs argue that the new defendants 

“held themselves out as experts in the field of property and Casualty Insurance” and they relied 

on their representations in procuring the subject policy from AMCO. (Id. at 4). Plaintiff seeks to 

add as Count II, a claim of Negligence and as Count II ad claim of Negligent Misrepresentation

against the new defendants. (Id. at 2). 

On July 25, 2024, the Plaintiff and AMCO then filed a Rule 41 (a)(1)(A)(ii) stipulation for 

dismissal with prejudice of AMCO, the original and only named defendant since the inception of 

this action. (Doc. No. 48). On July 30, 2024, the Court noted that this action was terminated as a 

matter of law as against AMCO and vacated all deadlines as to AMCO but ordered that the matter 

remain open pending a ruling on the instant Motion. (Doc. No. 49).

1 The proposed amended complaint also continues to assert claims against Does 1-10 (see Doc. No. 45 at 

8) but does not name these individuals despite the deadline for doing so having long passed.

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APPLICABLE LAW AND ANALYSIS

A. Motion to Amend Under Rule 16

Notably, Plaintiff do not seek to further amend the CMSO but rather seeks to amend the 

Complaint to join additional parties and two new causes of action. As an initial matter, the Court 

addresses the relevant standard governing Plaintiffs’ Motion. Plaintiffs cite to the liberal 

amendment policy of Federal Rule of Civil Procedure 15(a). Under that Rule, leave to amend 

should be granted as a matter of course, at least until the defendant files a responsive pleading. 

After that point, leave to amend should be granted unless amendment would cause prejudice to 

the opposing party, is sought in bad faith, is futile, or creates undue delay. Ascon Properties, Inc. 

v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989); DCD Programs, Ltd. v. Leighton, 833 

F.2d 183, 185–87 (9th Cir. 1987).

However, Rule 15 does not provide the applicable standard for evaluating Plaintiffs’

motion at this stage of the litigation. After this court issued a case management scheduling order 

pursuant to Federal Rule of Civil Procedure 16, which established a timetable for amending 

pleadings, that rule’s standards control. See Johnson v. Mammoth Recreations, Inc., 975 F.2d 

604, 607-08 (9th Cir. 1992) (evaluating under Rule 16 motion for leave to amend filed after 

issuance of pretrial scheduling order). Rule 16 provides in relevant part:

(b) [The district court] . . . shall, after consulting with the attorneys 

for the parties and any unrepresented parties, by a scheduling 

conference, . . . enter a scheduling order that limits the time

(1) to join other parties and to amend the pleadings;

(2) to file and hear motions; and

(3) to complete discovery.

....

The order shall issue as soon as practicable but in no event more 

than 120 days after filing of the complaint. A schedule shall not be 

modified except by leave of . . . [the district court] upon a showing 

of good cause.

Fed. R. Civ. P. 16(b). Thus, Plaintiffs’ ability to amend their Complaint is governed by 

Rule 16(b), not Rule 15(a). See Forstmann v. Culp, 114 F.R.D. 83, 85 (M.D.N.C.1987) (party 

seeking to amend pleading after date specified in scheduling order must first show “good cause” 

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for amendment under Rule 16(b), then, if “good cause” be shown, the party must demonstrate that 

amendment was proper under Rule 15); see also Financial Holding Corp. v. Garnac Grain Co., 

127 F.R.D. 165, 166 (W.D. Mo. 1989) (same).

Except in certain classes of cases not applicable here,2the district court is required to enter 

a pretrial scheduling order within 120 days of the filing of the complaint. The scheduling order 

“control[s] the subsequent course of the action” unless modified by the court. Fed. R. Civ. P. 

16(e). Orders entered before the final pretrial conference may be modified upon a showing of 

“good cause,” Fed. R. Civ. P. 16(b), but orders “following a final pretrial conference shall be 

modified only to prevent manifest injustice.” Fed. R. Civ. P. 16(e). Here, because Plaintiffs filed 

their Motion to Amend after the Court issued its CMSO, Rule 16’s “good cause” standard applies.

B. Good Cause Under Rule 16

“A court’s evaluation of good cause is not coextensive with an inquiry into the propriety 

of the amendment under . . . Rule 15.” Forstmann, 114 F.R.D. at 85. Unlike Rule 15(a)'s liberal 

amendment policy which focuses on the bad faith of the party seeking to interpose an amendment 

and the prejudice to the opposing party, Rule 16(b)’s “good cause” standard primarily considers 

the diligence of the party seeking the amendment. The district court may modify the pretrial 

schedule “if it cannot reasonably be met despite the diligence of the party seeking the extension.” 

Fed. R. Civ. P. 16 advisory committee'’ notes (1983 amendment); Harrison Beverage Co. v. 

Dribeck Importers, Inc., 133 F.R.D. 463, 469 (D.N.J. 1990); Amcast Indus. Corp. v. Detrex 

Corp., 132 F.R.D. 213, 217 (N.D. Ind. 1990); Forstmann, 114 F.R.D. at 85; 6A Wright, Miller & 

Kane, Federal Practice and Procedure § 1522.1 at 231 (2d ed. 1990) (“good cause” means 

scheduling deadlines cannot be met despite party’s diligence). Moreover, carelessness is not 

compatible with a finding of diligence and offers no reason for a grant of relief. Cf. Engleson v. 

Burlington Northern R.R. Co., 972 F.2d 1038, 1043 (9th Cir. 1992) (carelessness not a ground for 

relief under Rule 60(b)); Martella v. Marine Cooks & Stewards Union, 448 F.2d 729, 730 (9th 

Cir.1971) (same), cert. denied, 405 U.S. 974 (1972); Smith v. Stone, 308 F.2d 15, 18 (9th 

2 See Local Rule 240(c) for exceptions to Rule 16(b)’s mandatory scheduling requirement.

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Cir.1962) (same). Although the existence or degree of prejudice to the party opposing the 

modification might supply additional reasons to deny a motion, the focus of the inquiry is upon 

the moving party’s reasons for seeking modification. See Gestetner Corp. v. Case Equip. Co., 

108 F.R.D. 138, 141 (D. Me. 1985). If that party was not diligent, the inquiry should end. See 

Kamal v. Eden Creamery, LLC, 88 F.4th 1268, 1279 (9th Cir. 2023) (finding no abuse of 

discretion by district court in denying plaintiff motion to amend finding plaintiff no diligent). 

Here, Plaintiffs provide no explanation or reason in their Motion as to why they failed to

join the two proposed additional defendants or raise the two new causes of action at an earlier 

stage of this litigation. The case was commenced nearly three years ago, (see Doc. No. 1), and 

contrary to Plaintiffs’ representation, the deadline to join a party or amend passed more than two 

years ago. (See Doc. No. 10). Plaintiffs refer twice to a non-existent “Doc. 85” pursuant to 

which the claim their Motion is timely submitted. (Doc. No. 45 at 2, 6). However, the docket in 

this case reflects that the deadline to join a party or amend expired on July 1, 2022. (Doc. No. 10 

at 2). Plaintiffs also erroneously assert that because “discovery will continue for a few more 

months, the time is ripe for parties to develop these facts and narrow the issues for litigation.” 

(Id. at 7). In fact, the operative CMSO reflects that fact discovery closed on September 25, 2023, 

nearly a year ago, expert discovery closed on May 28, 2024, and the deadline to file dispositive 

motions has also passed. (Doc. Nos. 16; 31 at 2). Thus, to pursue new claims against the two 

additional proposed defendants, this case would essentially begin anew. Both new defendants 

would need to be served, the Court would need to reopen discovery from inception, and all new 

case management deadlines would need to be set in this already three-year-old case.

Plaintiffs’ Motion does not address the critical question in evaluating a motion to amend 

under Rule 16: why Plaintiff were unable to file their motion within the deadlines prescribed by 

the Court’s June 21, 2022 Case Management Scheduling Order. Plaintiffs provide no information 

as to when they learned of the alleged wrongdoing by the new defendants. The basic premise of 

Plaintiffs’ Motion—that their proposed amendment is timely and therefore should be granted—is 

factually false. The Motion is well beyond the deadline set to join and parties or amend the 

pleadings. Plaintiffs’ barebone Motion states only that they learned of the additional defendants 

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and new causes of action “from Defendants3themselves,” presumably through the discovery 

process, but do not state when they learned the relevant information. (Doc. No. 45 at 6:8-9). 

Given that fact discovery closed on September 25, 2023, the Court infers, absent evidence to the 

contrary, that Plaintiffs were aware of the pertinent information giving rise to the new claims at 

least nine months before they filed their Motion on June 20, 2024. Plaintiffs have failed to 

explain the lengthy delay and therefore failed to demonstrate diligence and good cause to amend 

their complaint. 

A scheduling order “is not a frivolous piece of paper, idly entered, which can be cavalierly 

disregarded by counsel without peril.” Johnson, 975 F.2d at 610 (quoting Gestetner Corp., 108 

F.R.D. at 141). Plaintiffs’ disregard of the Court’s scheduling orders “undermine[s] the court’s 

ability to control its docket, disrupt[s] the agreed-upon course of the litigation, and reward[s] the 

indolent and the cavalier.” Johnson, Id. The undersigned finds no reason to set aside the 

important principles underpinning Rule 16 and permit Plaintiffs’ proposed amendment at this late 

date. Forstmann, 114 F.R.D. at 85; Financial Holding Corp., 127 F.R.D. at 166; see also Riofrio 

Anda v. Ralston Purina Co., 959 F.2d 1149, 1155 (1st Cir.1992) (permitting amendment under 

Rule 15(a) in violation of district court scheduling order “would have nullified the purpose of rule 

16(b)(1)”).

C. Subject Matter Jurisdiction

Because Plaintiff’s proposed amendment appears to add a non-diverse defendant, CCIS 

Insurance Group Inc., as a precaution the Court also considers whether doing so would destroy 

diversity and divest this court of jurisdiction.

4

 “Federal courts are courts of limited jurisdiction.” 

Home Depot U.S.A., Inc. v. Jackson, 587 U.S. 435, 437 (2019) (citations omitted). Article II, § 2 

of the Constitution delineates “the character of the controversies over which federal judicial 

authority may extend.” Id. (citations omitted). “And lower federal-court jurisdiction ‘is further 

limited to those subjects encompassed within a statutory grant of jurisdiction.’” Id. A federal 

3

It is unclear whether Plaintiffs’ use of “Defendants” includes only AMCO, or also includes the two new 

defendants sought to be joined.

4 The Court does not need to analyze the motion under 28 U.S.C. 1447(e), as this action was initially filed 

in federal court rather than removed from state court. 

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court has subject matter jurisdiction of a case when it raises a federal question, or when diversity 

jurisdiction exists. See 28 U.S.C. §§ 1331, 1332(a); see also Home Depot USA, 587 U.S. at 437-

38. 

Plaintiffs in this case initially asserted diversity jurisdiction based on Plaintiffs being 

citizens of California and Defendant AMCO being a citizen of Iowa. (Doc. No. 1 at 1). In their 

proposed first amended complaint, Plaintiffs again assert diversity as the basis for the Court’s 

jurisdiction but note that proposed Defendant CCIS Bonding and Insurance Group Inc. is “a 

corporation organized and existing under the laws of the State of California . . .” (Doc. No. 45 at 

9 ¶ 4).

Although the Parties would no longer be completely diverse under the proposed amended 

complaint, the Supreme Court has “consistently held that if jurisdiction exists at the time an 

action is commenced,” as was the case here, “such jurisdiction may not be divested by subsequent 

events.” Freeport-McMoRan, Inc. v. KN Energy, Inc., 498 U.S. 426, 428 (1991). In Freeport, 

the plaintiffs sued the defendants for breach of contract in the district court in Colorado, alleging 

federal jurisdiction based on diversity of citizenship given that plaintiffs were Delaware 

corporations, and the defendant was a Kansas corporation with its principal place of business in 

Colorado. 498 U.S. at 427. After filing suit, however, the plaintiff transferred its interest in the 

contract at issue to another entity, and the entity, like the defendant, had limited partners that were 

citizens of Kansas and Colorado. Id. The plaintiffs sought leave to amend their complaint to 

substitute in the assignee of the contract as the plaintiff under Rule 25(c) of the Federal rules of 

Civil Procedure, and the district court permitted the substitution but did not remove the original 

plaintiff as a party, and ultimately, held in the plaintiff’s favor. Id. The Tenth Circuit Court of 

Appeals, however, reversed the decision and dismissed the case for lack of jurisdiction due to the 

substituted plaintiff destroying jurisdiction. Id. The Supreme Court reversed the appellate court, 

holding that the record “establish[ed] that the plaintiffs and defendant were diverse at the time the 

breach-of-contract action arose and at the time that federal proceedings commenced.” Id. at 428. 

Because “[d]iversity jurisdiction, once established, is not defeated by the addition of a nondiverse 

party to the action,” the Supreme Court reversed the Tenth Circuit’s dismissal for lack of 

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jurisdiction. Id. at 428-29.

Likewise, the Court finds that the proposed addition of CCIS Insurance Co. would not 

divest the Court of diversity jurisdiction, which was present at the time the action commenced. 

See Freeport, 498 U.S. at 428. Although the proposed amendment would have no effect on the 

Court’s jurisdiction, it nonetheless does not alter the analysis above, which concludes that the 

Motion to Amend should be denied.

Accordingly, it is hereby RECOMMENDED:

The district court deny Plaintiff’s Motion to Amend. (Doc. No. 45).

NOTICE TO PARTIES

These findings and recommendations will be submitted to the United States district judge 

assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(1). Within fourteen (14) 

days after being served with these findings and recommendations, a party may file written 

objections with the court. The document should be captioned “Objections to Magistrate Judge’s 

Findings and Recommendations.” Parties are advised that failure to file objections within the 

specified time may result in the waiver of rights on appeal. Wilkerson v. Wheeler, 772 F.3d 834, 

838-39 (9th Cir. 2014) (citing Baxter v. Sullivan, 923 F.2d 1391, 1394 (9th Cir. 1991)).

Dated: September 19, 2024 

HELENA M. BARCH-KUCHTA

UNITED STATES MAGISTRATE JUDGE

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