Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_07-cv-02361/USCOURTS-cand-3_07-cv-02361-67/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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United States District Court

For the Northern District of California

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NOT FOR CITATION

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

CLARKE AND REBECCA WIXON, et al.,

Plaintiffs,

 v.

WYNDHAM RESORT DEVELOPMENT

CORP., et al.,

Defendants. /

No. C07-02361 JSW

ORDER GRANTING

PLAINTIFFS’ MOTION FOR

LEAVE TO FILE FIFTH

AMENDED COMPLAINT

Now before the Court for consideration is Plaintiffs’ Motion for Leave to File Fifth

Amended Complaint. The Court finds this matter suitable for disposition without oral argument

and HEREBY VACATES the hearing set for February 5, 2010. See Civ. L.R. 7-1(b). Having

carefully considered the parties’ papers, the record in this case, and relevant legal authority, the

Court GRANTS Plaintiffs’ motion to amend for leave to file the proposed Fifth Amended

Complaint. 

BACKGROUND

On April 2, 2007, Plaintiffs filed the original complaint in this action in San Mateo

County Superior Court, naming Defendant Wyndham Resort Development Corp. (“WRDC”) 

and Does 1-50 as Defendants. WRDC answered the complaint and removed the case to this

Court on May 1, 2007. 

On September 14, 2007, Plaintiffs moved to file an amended complaint to add additional

allegations against WRDC and to name certain WorldMark directors as defendants (the

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“Director Defendants”). The claims against the Director Defendants were premised on alleged

breaches of fiduciary duties. On October 22, 2007, the Court granted that motion. Thereafter

the parties engaged in extensive motion practice regarding the sufficiency of Plaintiffs’

allegations, including a dispute over whether Plaintiffs’ claims against the Director Defendants

were derivative. The Court concluded that they were, and Plaintiffs filed a Third Amended

Complaint. Thereafter, the Court denied the Director Defendants’ motion to dismiss the Third

Amended Complaint and found that Plaintiffs had alleged demand futility. The matter was then

at issue, and the parties engaged in a discovery practice that they litigated as vigorously as they

had litigated the sufficiency of the pleadings.

On April 24, 2009, Plaintiffs moved for class certification and simultaneously filed a

motion for leave to file a Fourth Amended Complaint, for the purpose of conforming the class

definition to the class definition proposed in the motion. The Court granted that motion on

October 19, 2009. However, in that Order, the Court also determined that Plaintiffs were not

adequate representatives to pursue the derivative claims. Accordingly, the Court also granted,

in part, the Director Defendants’ motion to dismiss. Plaintiffs now seek to leave to amend to

include an additional plaintiff, Kandice Scattlon. Plaintiffs contend Ms. Scattlon is an adequate

representative to pursue the derivative claims. Plaintiffs also represent that, if the Court grants

this motion, Ms. Scattlon will respond to all outstanding discovery within two weeks and will

make herself available for a deposition shortly thereafter. Defendants oppose Plaintiffs’

motion.

ANALYSIS

A. Legal Standard Applicable to Motions to Amend.

Federal Rule of Civil Procedure 15(a) allows a plaintiff to amend their complaint, after a

responsive pleading has been served, by leave of court or by consent of the adverse party. Rule

15(a) provides that leave to amend “shall be freely given.” See Fed. R. Civ. Proc. 15(a). The

Ninth Circuit has stated that “[r]ule 15’s policy of favoring amendments to pleadings should be

applied with ‘extreme liberality.’” United States v. Webb, 655 F.2d 977, 979 (9th Cir. 1981). 

Four factors are considered to determine whether a motion for leave to file an amended

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1 Defendants do not assert that Plaintiffs have acted in bad faith, and the Court

concludes that the record does not support a finding that the Plaintiffs have acted with a

wrongful motive in seeking leave to amend. See DCD Programs, 833 F.2d at 187. 

Accordingly, this factor weighs in favor of granting the motion. 

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complaint should be granted: bad faith; undue delay; prejudice to the opposing party; and

futility of amendment.1

 DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987). 

While these “factors are usually used as criteria to determine the propriety of a motion for leave

to amend ... the crucial factor is the resulting prejudice to the opposing party.” Howey v. United

States, 481 F.2d 1187, 1190 (9th Cir. 1973). 

B. Plaintiffs Shall Be Given Leave to Amend.

Defendants’ primary argument in opposition to the motion is that Plaintiffs unduly

delayed in seeking to amend the complaint to include Ms. Scattlon. Defendants also assert that

in light of the impending discovery deadlines they will be prejudiced. A moving party may be

precluded from asserting an amendment on the basis of undue delay where the matters asserted

in the amendment were known to them from the beginning of the suit. See Komie v. Buehler

Corp., 449 F.2d 644, 648 (9th Cir. 1971) (finding that where the moving party filed a motion to

amend the pleadings 31 months after the answer was filed, the trial court did not abuse its

discretion in denying leave to amend). 

Defendants argue that Plaintiffs have known since at least October 24, 2008 that the

Director Defendants intended to challenge their adequacy to pursue the derivative claims and,

thus, should have sought leave to amend to correct the alleged deficiencies before this late date. 

The Court agrees that the proposed amendment is coming at a late stage in this litigation. 

However, the Court cannot say that the Plaintiffs’ arguments in opposition to the Director

Defendants’ motion to dismiss were frivolous. Thus, although it might have been prudent for

Plaintiffs to have sought out additional representatives on the derivative claims before now, the

Court shall not fault Plaintiffs for not doing so. Nor can the Court find that Plaintiffs’ unduly

delayed in bringing the motion. 

Even if the Court concluded that Plaintiffs unduly delayed, “[u]ndue delay by itself is

insufficient to justify denying a motion to amend.” Bowles v. Reade, 198 F.3d 752, 757-58 (9th

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Cir. 1999). Accordingly, the Court must examine whether Defendants have shown they will be

prejudiced by the amendment or whether amendment would be futile. The Court concludes

Defendants have not made such a showing. 

With respect to futility, Plaintiffs do not seek to challenge the validity of any past

election. Rather, they contend that the Director Defendants have engaged in manipulation of

election practices, and Plaintiffs seek to enjoin those practices in the future. Thus, the Court

does not find the Director Defendants’ arguments regarding the statute of limitations to be

persuasive.

The Court also concludes that Defendants have not demonstrated they will be prejudiced

by the amendment. Plaintiffs do not seek to add new claims. Rather, they seek only to pursue

claims that have been at issue from an early stage in this litigation. Thus, this is not a situation

where Plaintiffs are injecting a new theory of liability late in the game. See Morongo Band of

Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990) (undue delay was prejudicial

where new claims set forth in the amended complaint would have greatly altered the nature of

the litigation and would have required defendants to have undertaken, at a late hour, an entirely

new course of defense). 

The Ninth Circuit has held that undue delay may result in prejudice when a motion for

leave to amend is made on the eve of the discovery deadline, which would have required

reopening discovery, or when an amendment is asserted at a late stage of the action and would

inevitably lead to a delay in the trial and further expense to the opposing party. See Solomon v.

North Am. Life & Cas. Ins. Co., 151 F.3d 1132, 1139 (9th Cir. 1998) (citations omitted); see

also McGlinchy v. Shell Chemical Co., 845 F.2d 802 (9th Cir. 1998) (where plaintiffs waited

more than 6 months after the original complaint was filed and until after the original trial date

had been vacated to attempt to amend the complaint, delay was undue, and leave to amend was

properly denied).

Defendants do not suggest that granting leave to amend would require them to reopen

discovery on the election related claims. Rather, the parties have been producing discovery on

those claims. In addition, Plaintiffs represent that Ms. Scattlon will respond to all outstanding

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discovery within two weeks and will make herself available for a deposition. The Court shall

hold Plaintiffs to these representations. The Director Defendants also contend that they cannot

respond to all outstanding discovery and file a responsive pleading within fourteen days,

pursuant to Federal Rule of Civil Procedure 15(a)(3). However, Rule 15(a)(3) permits the

Court to alter the deadline by which a responsive pleading is required, and the Court shall do so. 

Finally, the Court notes that there is ample time prior to trial for Defendants to raise any

challenges to Ms. Scattlon’ s adequacy as a representative Plaintiff on the derivative claims.

CONCLUSION

For the foregoing reasons, the Court GRANTS Plaintiffs’ motion for leave to file the

Fifth Amended Complaint. The Court ORDERS Plaintiffs to file and serve the Fifth Amended

Complaint by no later than February 1, 2010. Ms. Scattlon shall respond to all outstanding

written discovery requests by no later than February 10, 2010, and shall make herself available

for a deposition by no later than March 1, 2010. If the parties are unable to schedule Ms.

Scattlon’s deposition by that date, due to their current deposition schedule, they may seek leave

to extend that deadline. Defendants shall file their responsive pleadings to the Fifth Amended

Complaint by no later than March 5, 2010.

IT IS SO ORDERED.

Dated: January 27, 2010 

JEFFREY S. WHITE

UNITED STATES DISTRICT JUDGE

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