1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 UNITED STATES OF AMERICA, for the No. 2:20-cv-01401-TLN-KJN use and benefit of BCP MECHANICAL 12 LLC, a California limited liability company, 13 ORDER Plaintiff, 14 v. 15

ANDERSON BURTON

16 CONSTRUCTION, INC., a California Corporation; WESTERN SURETY 17 COMPANY, a South Dakota corporation, 18 Defendants. 19 20 This matter is before the Court on Plaintiff BCP Mechanical LLC’s (“Plaintiff”) Motion to 21 Amend. (ECF No. 23.) Defendant Anderson Burton Construction, Inc. (“Defendant”) filed an 22 opposition (ECF No. 24), and Plaintiff filed a reply (ECF No. 26).1 For the reasons set forth 23 below, the Court GRANTS Plaintiff’s motion. 24 /// 25 /// 26 /// 27

28 1 Defendant Western Surety Company did not join the opposition or file its own opposition. 1 I. FACTUAL AND PROCEDURAL BACKGROUND 2 This case arises from a contractual agreement between the parties. (ECF No. 3 at 22.) 3 Plaintiff filed the initial complaint on July 10, 2020, alleging claims for violation of the Miller 4 Act, breach of contract, quantum meruit, and open book account. (ECF No. 1.) Plaintiff filed the 5 instant motion to amend on December 10, 2021, seeking to add a fraud claim and an additional 6 breach of contract claim. (ECF No. 23.) 7 II. STANDARD OF LAW 8 Granting or denying leave to amend a complaint rests in the sound discretion of the trial 9 court. Swanson v. United States Forest Serv., 87 F.3d 339, 343 (9th Cir. 1996). When the Court 10 issues a pretrial scheduling order that establishes a timetable to amend the complaint, Federal 11 Rule of Civil Procedure (“Rule”) 16 governs any amendments to the complaint. Coleman v. 12 Quaker Oats Co., 232 F.3d 1271, 1294 (9th Cir. 2000). To allow for amendment under Rule 16, 13 a plaintiff must show good cause for not having amended the complaint before the time specified 14 in the pretrial scheduling order. Id. The good cause standard primarily considers the diligence of 15 the party seeking the amendment. Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 609 (9th 16 Cir. 1992). “Moreover, carelessness is not compatible with a finding of diligence and offers no 17 reason for a grant of relief.” Id. The focus of the inquiry is on the reasons why the moving party 18 seeks to modify the complaint. Id. If the moving party was not diligent, then good cause cannot 19 be shown and the inquiry should end. Id. 20 Even if the good cause standard is met under Rule 16(b), the Court has the discretion to 21 refuse amendment if it finds reasons to deny leave to amend under Rule 15(a). Johnson, 975 F.2d 22 at 610. Under Rule 15(a)(2), “a party may amend its pleading only with the opposing party’s 23 written consent or the court’s leave,” and the “court should freely give leave when justice so 24 requires.” The Ninth Circuit has considered five factors in determining whether leave to amend 25 should be given: “(1) bad faith, (2) undue delay, (3) prejudice to the opposing party, (4) futility of 26 amendment; and (5) whether plaintiff has previously amended his complaint.” In re W. States 27 Wholesale Nat. Gas Antitrust Litig., 715 F.3d 716, 738 (9th Cir. 2013) (citing Allen v. City of 28 Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990)). 1 III. ANALYSIS 2 A. Rule 16 3 Since the pretrial scheduling order requires Plaintiff to show good cause to amend at this 4 stage, Plaintiff must first meet Rule 16’s good cause standard. (ECF No. 3 at 2.) 5 Plaintiff asserts there is good cause to modify the scheduling order because it discovered 6 the information supporting the new claims around September 22, 2021, after reviewing over 7 60,000 pages of documents Defendant produced during discovery. (ECF No. 23 at 5, 7.) Plaintiff 8 filed the instant motion approximately two months later. (Id.) In opposition, Defendant does not 9 address Plaintiff’s diligence in any meaningful way, other than to argue that Plaintiff was aware 10 of the back charges at issue as early as November 4, 2020. (ECF No. 24 at 4.) In reply, Plaintiff 11 asserts that although it knew of the back charges earlier, it did not learn the back charges were 12 fraudulent until reviewing voluminous amounts of discovery. (ECF No. 26 at 3.) 13 Based on the aforementioned arguments, albeit limited, before the Court, the Court finds 14 Plaintiff was sufficiently diligent to satisfy Rule 16’s good cause standard. See Johnson, 975 15 F.2d at 609. 16 B. Rule 15 17 Turning to Rule 15, Defendant opposes Plaintiff’s motion based on three factors: (1) 18 prejudice; (2) undue delay; (3) and futility. (ECF No. 24 at 4–7.) Defendant does not make any 19 arguments about bad faith or whether Plaintiff previously amended the Complaint. The Court 20 will address each of Defendant’s arguments in turn. 21 i. Prejudice 22 Prejudice is the factor that weighs most heavily in the Court’s analysis of whether to grant 23 leave to amend. Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003). 24 “Prejudice results when an amendment would unnecessarily increase costs or would diminish the 25 opposing party’s ability to respond to the amended pleading.” NSF Ry. Co. v. San Joaquin Valley 26 R.R. Co., No. 1:08-cv-01086-AWI, 2011 WL 3328398, at *2 (E.D. Cal. Aug. 2, 2011) (citations 27 omitted). Courts have found proposed amendments to be prejudicial when leave to amend is 28 requested as a relevant discovery deadline nears or has already passed. See, e.g., Zivkovic v. S. 1 Cal. Edison Co., 302 F.3d 1080, 1087 (9th Cir. 2002). 2 Defendant argues “[t]he impending percipient and expert-discovery cut-off dates would 3 cause great prejudice to [Defendant] should this [m]otion be granted.” (ECF No. 24 at 5.) Since 4 Defendant filed its opposition, however, the deadlines for discovery and dispositive motions have 5 been continued. (ECF No. 28.) Because Defendant did not provide further arguments relating to 6 prejudice, the continuance of these deadlines eliminates Defendant’s concerns. 7 Accordingly, this factor weighs in favor of granting leave to amend. 8 ii. Undue Delay 9 In evaluating undue delay, the Court inquires “whether the moving party knew or should 10 have known the facts and theories raised by the amendment in the original pleading.” Jackson v. 11 Bank of Haw., 902 F.2d 1385, 1388 (9th Cir. 1990). However, “undue delay by itself . . . is 12 insufficient to justify denying a motion to amend.” Bowles v. Reade, 198 F.3d 752, 758 (9th Cir. 13 1999). 14 The Court has already addressed the parties’ arguments about undue delay in the context 15 of Plaintiff’s diligence under Rule 16. For the same reasons articulated above, the Court 16 concludes Plaintiff has not unduly delayed seeking leave to amend. 17 Therefore, this factor weighs in favor of granting leave to amend. 18 iii. Futility 19 A proposed amendment is futile “only if no set of facts can be proved under the 20 amendment to the pleadings that would constitute a valid and sufficient claim or defense.” Miller 21 v. Rykoff-Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988). Denial of leave to amend on this 22 ground is rare. Netbula, LLC v. Distinct Corp., 212 F.R.D. 534, 539 (N.D. Cal. 2003). 23 “Ordinarily, courts will defer consideration of challenges to the merits of a proposed amended 24 pleading until after leave to amend is granted and the amended pleading is filed.” Id. 25 Defendant argues the proposed fraud claim is futile because it is indistinct from the original 26 breach of contract claim. (ECF No. 24 at 6.) A cause of action for breach of contract under 27 California law has the following elements: (1) a contract, (2) plaintiff’s performance or excuse for 28 nonperformance, (3) defendant’s breach, and (4) the resulting damages to plaintiff. Dougherty v. 1 Bank of Am., N.A., 177 F. Supp. 3d 1230, 1248 (E.D. Cal. 2016). In comparison, the elements of 2 fraud include: 1) misrepresentation, 2) knowledge of falsity, 3) intent to defraud (induce reliance) 3 and 4) justifiable reliance which 5) results in damage. Robinson Helicopter Co. Inc. v. Dana 4 Corp., 34 Cal. 4th 984, 990 (2004). 5 Plaintiff seeks to add the following allegations: (1) Defendant misrepresented that it 6 would pay Plaintiff in full for its work and also misrepresented that Plaintiff owes Defendant over 7 $2,000,000 for improper or defective work as well as work it allegedly failed to perform; (2) 8 Defendant knew these representations were false because it was its pattern and practice to falsely 9 claim inflated back charges, alleged schedule delays, and other disputed items to coerce 10 subcontractors into settling; (3) Defendant intended to defraud Plaintiff to force Plaintiff to accept 11 less than what is due and owing to it; (4) Plaintiff justifiably relied on Defendant’s 12 misrepresentations because Plaintiff had no reason to believe that Defendant would claim moneys 13 were owed when they were not owed or are unrelated to any work Plaintiff performed for 14 Defendant; and (5) Plaintiff was damaged because it, among other things, continued to perform 15 work on other projects and agreed to allow another case to settle and be contingent upon the 16 parties settling the instant case. (ECF No. 23 at 18–22.) These fraud allegations are sufficiently 17 distinct from a breach of contract claim. Moreover, the Court cannot say that “no set of facts can 18 be proved under the amendment to the pleadings that would constitute a valid and sufficient claim 19 or defense.” Miller, 845 F.2d at 214. 20 In sum, the Court finds Plaintiff has met Rule 16’s good cause standard. The Court also 21 finds the Rule 15 factors weigh in favor of granting Plaintiff’s motion because (1) such an 22 amendment will not unduly prejudice Defendant, (2) there is no evidence Plaintiff acted in bad 23 faith, (3) there is no undue delay, (4) the proposed amendments are not futile, and (5) this is 24 Plaintiff’s first amendment to the Complaint. 25 IV. CONCLUSION 26 For the reasons stated above, the Court GRANTS Plaintiff’s Motion to Amend. (ECF No. 27 23.) Plaintiff shall file its amended complaint not later than thirty (30) days after the electronic 28 filing date of this Order. Defendants’ responsive pleading is due not later than twenty-one (21) 1 | days after Plaintiff files the amended complaint. 2 IT IS SO ORDERED. 3 | DATED: June 21, 2022 4 () jf | }

6 Troy L. Nuhlep ] 5 United States District Judge 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28