1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 REDWOOD VILLA INTERFAITH Case No.: 24-cv-00233-AJB-JLB HOUSING CORPORATION, a 12 California non-profit public benefit ORDER GRANTING DEFENDANTS’ 13 corporation, MOTION FOR LEAVE TO FILE

FIRST AMENDED COUNTERCLAIM

14 Plaintiff and Counter-Defendant, 15 (Doc. No. 30) v. 16

17 NATIONWIDE AFFORDABLE HOUSING FUND 33, LLC, an Ohio 18 limited liability company, and SCDC, 19 LLC, an Ohio limited liability company,

20 Defendants and Counterclaimants, 21 and 22

23

REDWOOD VILLA SENIOR HOUSING

24 PARTNERS, L.P., a California limited 25 partnership,

26 Nominal Defendant. 27

28 1 Before the Court is Defendants Nationwide Affordable Housing Fund 33, LLC, 2 (“Nationwide”) and SCDC, LLC’s (“SCDC”) (collectively, “Defendants” or “Limited 3 Partners”) motion for leave to file first amended counterclaim pursuant to Federal Rules of 4 Civil Procedure 15(a)(2) and Civil Local Rule 7.2. (Doc. No. 30.) Plaintiff Redwood Villa 5 Interfaith Housing Corporation (“Plaintiff” or “Redwood”) filed an opposition, (Doc. No. 6 32), to which Defendants replied, (Doc. No. 33). For the reasons set forth below, the Court 7 GRANTS Defendants’ motion. 8 I. BACKGROUND 9 This action concerns a dispute regarding an affordable housing partnership 10 agreement between Redwood and the Limited Partners, Nationwide and SCDC. (Doc. No. 11 1-2 ¶¶ 1–137.) The Amended and Restated Agreement of Limited Partnership (“LPA”), 12 dated September 1, 2007, as amended, governs the parties’ agreement. (Doc. No. 1-2 ¶ 6; 13 id. at 45–147.) On December 29, 2023, Plaintiff filed a complaint in San Diego County 14 Superior Court, seeking a declaratory judgment, damages from Defendants’ alleged breach 15 of the LPA’s implied covenant of good faith and fair dealing, and specific performance 16 requiring the conveyance of property to Plaintiff in accordance with Plaintiff’s right of first 17 refusal in the LPA. (Doc. No. 1-2 at 42.) Defendants timely removed the complaint to 18 federal court, (Doc. No. 1), and submitted an answer, affirmative defenses, and 19 counterclaims to the Complaint, (Doc. No. 14). Defendants initially brought four 20 counterclaims for (1) declaratory relief, (2) breach of contract, (3) breach of fiduciary duty, 21 and (4) breach of the implied covenant of good faith and fair dealing. (Id. ¶¶ 39–59.) 22 Plaintiff responded to Defendants’ answer and counterclaims. (Doc. No. 18.) On May 2, 23 2024, Defendants filed the instant motion for leave to file a first amended counterclaim. 24 (Doc. No. 30.) 25 II. LEGAL STANDARD 26 Pursuant to Rule 15 of the Federal Rules of Civil Procedure,1 “a party may amend 27

28 1 its pleading only with the opposing party’s written consent or the court’s leave” after the 2 time for amendment as a matter of course has expired. Fed. R. Civ. P. 15(a)(2). “The court 3 should freely give leave when justice so requires.” Id.; see also Eminence Cap., LLC v. 4 Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003). “This policy is ‘to be applied with 5 extreme liberality.’” Eminence Cap., LLC, 316 F.3d at 1051 (citing Owens v. Kaiser 6 Found. Health Plan, Inc., 244 F.3d 708, 712 (9th Cir. 2001) (quoting Morongo Band of 7 Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir.1990))). 8 “Five factors are taken into account to assess the propriety of a motion for leave to 9 amend: bad faith, undue delay, prejudice to the opposing party, futility of amendment, and 10 whether the plaintiff has previously amended the complaint.” Johnson v. Buckley, 356 F.3d 11 1067, 1077 (9th Cir. 2004). “Not all of the factors merit equal weight[; rather,] it is the 12 consideration of prejudice to the opposing party that carries the greatest weight.” Eminence 13 Cap., LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003). “Absent prejudice, or a 14 strong showing” of the remaining factors, there exists a “presumption under Rule 15(a) in 15 favor of granting leave to amend.” Id. The party opposing the amendment bears the burden 16 of showing why leave should be denied, including the burden of establishing prejudice. 17 DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 187 (9th Cir. 1987). The decision whether 18 to grant leave to amend “is entrusted to the sound discretion of the trial court.” Pisciotta v. 19 Teledyne Indus., Inc., 91 F.3d 1326, 1331 (9th Cir. 1996). 20 III. DISCUSSION 21 Defendants Nationwide and SCDC seek to amend their counterclaim by adding (1) 22 a further request for declaratory relief, (2) a second breach of contract claim alleging that 23 Plaintiff breached an option contract between the parties, (3) and a claim that Plaintiff 24 breached the implied covenant of good faith and fear dealing of the alleged option contract. 25 (Doc. No. 30-3 ¶¶ 49, 50, 55, 62–66, 75–78.) Defendants argue leave should be granted 26 because the motion was timely filed largely before the start of discovery, the amendments 27 are requested in good faith, no prior amendment has been requested, the proposed 28 1 amendments will not unduly prejudice Plaintiff, and the proposed amendments are not 2 futile. (Doc. No. 30-1.) 3 In opposition, Plaintiff does not assert any arguments regarding bad faith, undue 4 delay, undue prejudice, or the number of prior amendments. (See generally Doc. No. 32.) 5 Rather, Plaintiff solely opposes the instant motion on the grounds that it is futile. (Id.) 6 Specifically, Plaintiff argues that the amended counterclaim is futile because Defendants 7 fail to sufficiently allege (1) the existence of an option contract, (2) Defendants’ 8 performance of conditions precedent, (3) Plaintiff’s breach or repudiation of its obligations 9 under the LPA or any other contract, and (4) damages. The Court addresses the parties’ 10 arguments and each factor in turn. 11 First, there is no dispute that Defendants have not previously sought to amend their 12 counterclaims. Second, the Court accepts Defendants’ assertions that the instant motion 13 was not brought in bad faith. Third, Defendants filed their motion by the deadline provided 14 by the Court. (See Doc. No. 29.) Fourth, and most importantly, there are no allegations that 15 granting leave to amend would unduly prejudice Plaintiff, and Plaintiff failed to argue 16 prejudice. (See generally Doc. No. 32.) Having reviewed the proposed amendments, 17 Defendants’ amended counterclaims distinguish between two alleged separate contractual 18 agreements, both arising from the same common set of facts that Defendants assert, and 19 Plaintiff does not dispute, are generally known to Plaintiff. (See Doc. Nos. 30-1 at 3; 30-2 20 ¶ 4.) The Court does not find that granting leave to amend would unduly prejudice Plaintiff. 21 Regarding futility, “amendment is futile when ‘no set of facts can be proved under 22 the amendment to the pleadings that would constitute a valid and sufficient claim or 23 defense.’” Missouri ex rel. Koster v. Harris, 847 F.3d 646, 656 (9th Cir. 2017) (quoting 24 Miller v. Rykoff–Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988)). Plaintiff asks the Court 25 to delve into the merits of the proposed amended counterclaim, in essence holding a motion 26 for leave to amend under Rule 15 up to the standard for a Rule 12(b)(6) motion to dismiss. 27 The Court declines to do so as it contradicts the letter and spirit of Rule 15. See Netbula, 28 LLC v. Distinct Corp., 212 F.R.D. 534, 539 (N.D. Cal. 2003) (“Denial of leave to amend 1 || on thle] ground [of futility] is rare. Ordinarily, courts will defer consideration of challenges 2 || to the merits of a proposed amended pleading until after leave to amend is granted and the 3 |}amended pleading is filed.”); Steward v. CMRE Fin’ Servs., Inc., 2015 WL 6123202, at 4 (D. Nev. Oct. 16, 2015) (“Deferring ruling on the sufficiency of the allegations is 5 || preferred in light of the more liberal standards applicable to motions to amend and the fact 6 || that the parties’ arguments are better developed through a motion to dismiss or motion for 7 ||summary judgment.”). The Court notes that Defendants have alleged additional facts, such 8 the October 9, 2023, “Notice of Option Exercise” letter sent by Plaintiffs President, 9 Matthew Jumper, to the Limited Partners, (see Doc. No. 30-3 4] 24; id. at 149-50, Ex. 3), 10 || prior to the Plaintiff's December 20, 2023, “Notice of Exercise of Right of First Refusal 11 Disposition Notice” letter, that make it not clear that amendment is futile. 12 As such, Plaintiff has failed to meet its burden to demonstrate why leave should be 13 || denied. 14 CONCLUSION 15 Considering leave should be freely given and for the reasons stated herein, the Court 16 ||GRANTS Defendant’s motion for leave to file a First Amended Counterclaim 17 Defendants must file the First Amended Counterclaim no later than December 12, 2024 18 (Doc. No. 30-3.) Any pleadings responsive to the First Amended Counterclaim must bi 19 || filed no later than thirty (30) days following the filing of the First Amende 20 || Counterclaim. 21 IT IS SO ORDERED. 22 3 Dated: December 4, 2024 © ¢ 24 Hon. Anthony J. attaglia United States District Judge 26 27 28