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T. Dorfman, Inc. v. Melaleuca, Inc.

United States District Court, Ninth Circuit

October 18, 2013

T. DORFMAN, INC., a Canadian corporation, and TERRY DORFMAN, an individual, Plaintiffs,
v.
MELALEUCA, INC., an Idaho, corporation, and FRANK, VANDERSLOOT, individually, and, in his official management capacity, Defendants.

MEMORANDUM DECISION AND ORDER

CANDY W. DALE, District Judge.

Before the Court is Plaintiffs' Motion to Modify Scheduling Order and For Leave to File First Amended Complaint (Dkt. 92). In the motion, Plaintiffs, T. Dorfman, Inc. ("TDI") and Terry Dorfman, make two related arguments. First, Plaintiffs argue the Court should determine, pursuant to Fed.R.Civ.P. 16(b)(4), that good cause exists to amend the October 5, 2012 deadline for amendment of pleadings set forth in the Court's original Scheduling Order (Dkt. 48).[1] Second, Plaintiffs contend the Court should grant leave to amend the Complaint in accordance with the liberal standard for amendment of pleadings contained in Fed.R.Civ.P. 15(a)(2).

Having fully reviewed the record, the Court finds that the facts and legal arguments are adequately presented in the briefs and record. Accordingly, in the interest of avoiding delay, and because the Court conclusively finds that the decisional process would not be significantly aided by oral argument, this matter shall be decided on the record without oral argument. Dist. Idaho Loc. Civ. R. 7.1. Considering the procedural history and posture of this matter, and as elaborated below, the Court finds good cause to amend the Scheduling Order and grants Plaintiffs leave to amend the Complaint.

BACKGROUND

Between 2002 and 2010, TDI operated as an independent marketing executive for Melaleuca, Inc. Melaleuca manufactures skin care and other health products and markets these products through independent contractors such as TDI. In August of 2010, Melaleuca terminated its contract with TDI based upon TDI's alleged violation of Melaleuca's non-solicitation and conflicts of interest policy (known as "Policy 20").

Following the termination of the contract, TDI and Terry Dorfman (the sole shareholder, officer, and director of TDI) filed this action against Melaleuca and Frank Vandersloot (Melaleuca's CEO) alleging causes of action for breach of contract, defamation, and various other business torts. The defamation claim is of particular note for purposes of the instant motion. That claim relates to statements regarding Plaintiffs made by Defendant Vandersloot during the Melaleuca's 2010 Annual Convention. ( Compl. at ΒΆΒΆ 108-117, Dkt. 2.) Mr. Vandersloot's remarks were audiotaped. Although Plaintiffs received excerpted transcripts of the recording from Defendants early in the case, they did not receive the recording itself until April 2013. ( Defs.' Mem. Opp. at 6, Dkt. 104.)

The timing of these disclosures is significant, as is the current procedural posture of the case. Plaintiffs moved to amend the Complaint with the false light claim and other unopposed changes in May 2013, (Dkt. 92), seven months after the Court's October 5, 2012 deadline for amended pleadings. (Dkt. 48.) Notably, the parties have twice jointly moved for discovery extensions, (Dkt. 102, 132), and the Court has granted both extensions (Dkt. 103, 133). The deadline for completion of discovery in this matter is now January 24, 2014.

The need to extend the discovery deadline arose, in part, from disputes over venue, (Dkt. 32), and disqualification of Plaintiffs' former counsel, (Dkt. 70), which delayed substantive discovery until December 2012-two years after Plaintiffs filed their Complaint and two months after the deadline for pleading amendments. Discovery was delayed further until the parties agreed to, and the Court granted, a Stipulated Motion for Entry of Protective Order in late March 2013. (Dkt. 89.)

In April 2013, the parties began exchanging discovery on a rolling basis. Shortly thereafter, Plaintiffs filed the instant Motion to Modify Scheduling Order and For Leave to File First Amended Complaint. (Dkt. 92.) The motion implicates three proposed substantive changes to the Complaint. The first two- adding a cause of action for attorney fees under Idaho law and adding Melaleuca Canada, Inc., as a party defendant with corresponding allegations and claims-are not opposed. ( Defs.' Mem. Opp. at 2 n.1, Dkt. 104 ("Defendants oppose only the addition of a false light claim.").)

Plaintiffs also move to add a false light claim under Idaho law. Like the existing defamation claim, the false light claim arises out of Mr. Vandersloot's statements concerning Plaintiff Dorfman's termination, which he made to Melaleuca business leaders during the August 12, 2010 Leadership Session at Melaleuca Annual Convention. ( Pls.' Reply at 4-5, Dkt. 113.) Defendants oppose this amendment, arguing Plaintiffs had ample opportunity to add the claim before the Court's deadline and that the claim itself is "duplicative of [Plaintiffs'] defamation claim and futile as a matter of law." ( Defs.' Mem. Opp. at 4.) Thus, the parties' dispute over the proposed false light claim is the primary issue before the Court.

In addition, Plaintiffs note for the first time in their Reply the need for a fourth amendment-removing the punitive damages allegations in the Complaint. ( Pls.' Reply at 8.) Although this amendment appears to be unopposed, it is not properly before the Court. However, the Court provides instructions on how to accomplish this amendment below.

DISCUSSION

1. Good Cause to Amend the Scheduling Order

Once a court enters a scheduling order pursuant to Rule 16, the "schedule may be modified only for good cause and with the judge's consent." Fed.R.Civ.P. 16(b)(4). The "good cause" inquiry under Rule 16 "is not coextensive with an inquiry into the propriety of the amendment under... Rule 15." Johnson v. Mammoth Recreations, Inc.975 F.2d 604, 609 (9th Cir. 1992) (citation omitted). While prejudice to the non-moving party is a secondary consideration, the focus of the Rule 16 analysis is on "the diligence of the party seeking the extension." Id. ...


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