Source: https://casetext.com/case/youngevity-intl-corp-v-smith-4
Timestamp: 2019-04-19 04:47:36+00:00

Document:
YOUNGEVITY INTERNATIONAL CORP., et al., Plaintiffs, v. TODD SMITH, et al., Defendant.
Pending before the Court is Defendants' and Counterclaimants' motion for leave to file a Second Amended Counterclaim ("SAC"). (Defs.' Mtn to Amend, ECF No. 111.) For the reasons discussed below, Plaintiffs' motion is GRANTED.
Counterclaimants seek to amend the Counterclaim to add four additional former Youngevity distributors and Counterclaimants: (1) Maxandra Desrosiers; (2) Kurt Venekamp; (3) Teresa Venekamp; and (4) Five Point Consulting, Inc.
Pursuant to Federal Rule of Civil Procedure 15(a)(2), "a party may amend its pleading only with the opposing party's written consent or the court's leave." Fed. R. Civ. P. 15(a)(2). "The court should freely give leave when justice so requires." Id. "Liberality in granting a plaintiff leave to amend is subject to the qualification that the amendment not cause undue prejudice to the defendant, is not sought in bad faith, and is not futile." Bowles v. Reade, 198 F.3d 752, 757 (9th Cir. 1999). Additionally, a court may consider the factor of undue delay. Id. at 757-58.
These factors are not given equal weight. Bonin v. Calderon, 59 F.3d 815, 845 (9th Cir. 1995). "Futility of amendment can, by itself, justify the denial of a motion for leave to amend." Id. The test for futility is the same one used when considering the sufficiency of a pleading under Rule 12(b)(6). Miller v. Rykoff-Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988).
First, Counterclaim Defendants argue that the motion to amend should be denied because the SAC is futile, renewing the arguments they made in their motion to strike and/or dismiss. The Court has already ruled on the sufficiency of the First Amended Counterclaim in its order denying in part and granting in part Counterclaim Defendants' motion to strike and/or dismiss. Therefore, to the extent the Court permits amending the Counterclaim, Counterclaimants must do so in accordance with the findings of that order.
Second, Counterclaim Defendants argue that regardless of whether this Court dismisses or stays counterclaims one through five, the Court should deny the motion to amend because the claims asserted by the proposed Counterclaimants are subject to arbitration. However, it is unclear whether Youngevity is moving to compel arbitration or instead seeks to merely keep the proposed Counterclaimants out of this Court. While at a first glance it appears that Youngevity has not waived its right to arbitrate claims involving the proposed Counterclaimants, it has not requested that the Court "direct such arbitration in the manner provided for in such agreement." 9 U.S.C. § 4. Youngevity instead argues that "this Court should prohibit the proposed Counterclaimants from asserting those claims against Youngevity through the SAC." (Pls.' Opp'n to Defs.' Mtn. to Amend, ECF No, 119, 3.) Thus, the Court declines to construe Counterclaim Defendants' opposition as a motion to compel arbitration. See Wabtec Corp. v. Faiveley Transp. Malmo AB, 525 F.3d 135, 140 (2d. Cir. 2008) (declining to construe plaintiff's motion to dismiss as a motion to compel arbitration where it did not "frame its argument in terms of mandatory arbitration but in terms of judicial preclusion."); see also Bombardier Corp. v. Amtrack, 333 F.3d 250, 254 (D.C. Cir. 2003) (declining to treat defendant's 12(b)(6) motion to dismiss as a motion to compel arbitration because the defendant did not invoke the FAA's policy favoring enforceability of arbitration agreements and ask the Court to order arbitration). In absence of a sincere desire to compel arbitration, the amendments are not futile. Accordingly, the Court GRANTS Counterclaimants' motion to amend and add the proposed Counterclaimants.
For the reasons discussed above, the Court GRANTS Counterclaimants' motion to file an SAC (ECF No. 111). Counterclaimants are ordered to file their SAC within 14 days of entry of this order. Defendants shall have 30 days to respond to the SAC.

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