Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_04-cv-04082/USCOURTS-cand-3_04-cv-04082-22/pdf.json

Parties Involved:
Atmel Corporation
Counter-defendant
Royal Indemnity Company
Miscellaneous
St. Paul Fire & Marine Insurance Company
Counter-claimant

Document Text:

United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

ATMEL CORPORATION,

Plaintiff,

 v.

ST. PAUL FIRE & MARINE INSURANCE

COMPANY,

Defendant.

 /

No. C 04-04082 SI

ORDER GRANTING ATMEL’S MOTION

TO AMEND COMPLAINT

On January 6, 2006, the Court heard oralargument on plaintiff AtmelCorporation’s (“Atmel”) motion

to amend the complaint. Having carefully considered the parties’ papers and the arguments of counsel, the

Court hereby GRANTS Atmel’s motion.

BACKGROUND

Plaintiff Atmel is a company that manufactures computer chips. Atmel obtained general liability and

errors and omissions insurance from defendant St. Paul Fire & Marine Insurance Company (“St. Paul”)

beginning January 1, 2002. This lawsuit primarily arises out of St. Paul’s refusal to defend Atmel in a

now-settled lawsuit brought by one of Atmel’s customers, Seagate Corporation. In that lawsuit, which the

parties refer to as the “Seagate Action,” Seagate alleged thatAtmelsold it defective computer chips and that

Seagate had notified Atmel of the problems in the fall of 2001. 

After it was sued in July of 2002, Atmel tendered the Seagate Action to St. Paul and to its previous

insurer, Royal Indemnity Company (“Royal”), which had provided Atmel with insurance through December

31, 2001. Royal defended Atmel subject to a reservation of rights, and paid approximately half of Atmel’s

defense costs. St. Paul denied a defense, and after Atmel filed the instant lawsuit, St. Paul rescinded the

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policies on the ground that Atmel omitted material information from its application for insurance.

LEGAL STANDARD

FederalRule ofCivil Procedure 15 governs the amendment of complaints. It states that if a responsive

pleading has already been filed, the party seeking amendment “may amend the party's pleading only by leave

of court or by written consent of the adverse party; and leave shall be freely given when justice so requires.”

Fed. R. Civ. P. 15(a). This rule reflects an underlying policy that disputes should be determined on their merits,

and not on the technicalities of pleading rules. See Foman v. Davis, 371 U.S. 178, 181-82 (1962).

Accordingly, the Court must be very liberal in granting leave to amend a complaint. See Morongo Band of

Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990) (leave to amend granted with “extreme

liberality”); Ascon Properties, Inc. v. Mobil OilCo., 866 F.2d 1149, 1160 (9th Cir. 1989); Genentech, Inc.

v. Abbott Laboratories, 127 F.R.D. 529, 530 (N.D. Cal. 1989) (citing DCD Programs, Ltd. v.Leighton,

833 F.2d 183, 186 (9th Cir. 1987)). 

Once a plaintiff has given a legitimate reason for amending the complaint, the burden shifts to the

defendant to demonstrate why leave to amend should not be granted. See Genentech, 127 F.R.D. at 530-31

(citing Senze-Gel Corp. v. Sieffhart, 803 F.2d 661, 666 (Fed.Cir. 1986)); William W. Schwarzer et al.,

Federal Civil Procedure Before Trial, § 8:415, at 8-75. There are several accepted reasons why leave to

amend should not be granted, including the presence of bad faith on the part of the plaintiff, undue delay,

prejudice to the defendant, futility of amendment, and that the plaintiff has previously amended the complaint.

See Ascon Properties, 866 F.2d at 1160; McGlinchy v. Shell Chemical Co., 845 F.2d 802, 809 (9th Cir.

1988). The Court has the discretion to determine whether the presence of any of these elements justifies refusal

of a request to amend the complaint; this discretion is particularly broad where plaintiff has previously amended

the complaint. See Ascon Properties, 866 F.2d at 1160.

DISCUSSION

Atmel seeks leave to amend its complaint to allege an assigned claim for equitable contribution against

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St. Paul. In the underlying Seagate action, Royal paid approximately one-half of Atmel’s defense costs. On

October 12, 2005, Atmel and Royal finalized a settlement under which, inter alia, Royal assigned to Atmel

itsrights of equitable contribution against St. Paul. Atmel’s proposed amendmentseeks equitable contribution

for defense costs associated with the Seagate litigation, and does not seek equitable contribution for any

monies that Royal paid towards the Seagate settlement.

 St. Paul opposes the amendment, contending that (1) Atmel purposefully delayed entering into the

settlement with Royal and seeking leave to amend, (2) the proposed amendment will require reopening

discovery, and (3) if Atmelis allowed to amend its complaint, St. Paul will need to file a third-party complaint

against Royal to pursue St. Paul's own equitable contribution claims.

St. Paul allegesthatAtmelpurposefully delayed in finalizing the settlementwith Royalin order to ensure

that its motion forleave to amend the complaint would be filed only days before the discovery cut-off. Atmel

contends that it did not delay in seeking leave to amend because the Atmel-Royal settlement was finalized on

October 12, 2005, and Atmel filed its motion forleave to amend on October 20, 2005. (Atmel's motion was

originally noticed for December 2, 2005, but was moved due to a heavy calendar.) Atmel also argues that it

provided St. Paulwith notice in September 2005 of both the Atmel-Royal agreement and its intention to seek

leave to amend the complaint. 

The parties’ dispute is a factual one that the Court need not resolve. Even if St. Paul is correct that

Atmeldelayed in seeking leave to amend, the Court concludes that St. Paul will not be prejudiced because St.

Paulwill be allowed to conduct limited discovery on the issuesraised by the amendment ifit is determined such

discovery is necessary. In addition, the Court recognizes that the question of whether any discovery is needed

may be obviated by the Court’s decisions on the parties’ motions forsummary judgmentscheduled for hearing

on February 17, 2006. Accordingly, when the Court issues decisions on the upcoming motions for summary

judgment, the Court will also inform the parties regarding how to proceed with respect to discovery related to

Atmel’s equitable contribution claim.

Finally, St. Paul contends that if Atmel is allowed to amend its complaint, it must be allowed to file a

third-party complaint againstRoyalto pursue itsown equitable contribution claims regarding the Seagate action

as well as the Venstar and Pacific Digital matters. However, as Atmel correctly objects, St. Paul has not

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 Moreover, the Court notes that the disposition of the upcoming motions for summary judgment may

moot St. Paul’s desire to file a third-party complaint. If, however, it should come to pass thatAtmelis entitled

to indemnity from St. Paul, then it may be appropriate for St. Paul to seek leave to file a third-party complaint

against Royal.

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properly sought leave to file a third-party complaint because St. Paul did not file a noticed motion.

Accordingly, the Court does notmake any ruling at this time regarding whether St. Paul should be allowed to

file such a third-party complaint.1

CONCLUSION

For the foregoing reasons and for good cause shown, the Court hereby GRANTS Atmel’s motion to

amend the complaint. [Docket No. 266]. Atmel shall file the amended complaint by January 12, 2006.

IT IS SO ORDERED.

Dated: January 6, 2006

 

SUSAN ILLSTON

United States District Judge

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