Simplot Livestock Co. v. Sutfin Land & Livestock

          MEMORANDUM DECISION AND ORDER RE: PLAINTIFFS' MOTION FOR LEAVE TO AMEND COMPLAINT (DKT. 28)

          HONORABLE RONALD E. BUSH U.S. MAGISTRATE JUDGE.

         Pending is Plaintiffs' Motion for Leave to Amend Complaint and Extend the Deadline to Amend Pleadings for Good Cause (Dkt. 28) (“Mot. to Amend”). Having carefully considered the record, heard oral argument, and otherwise being fully advised, the Court enters the following Memorandum Decision and Order:

         PROCEDURAL BACKGROUND Plaintiffs sued Defendant in Idaho state court on February 9, 2016. Compl. (Dkt. 1, pp. 9-13). Defendant removed the action to U.S. District Court on April 4, 2016. Notice of Removal of Action (Dkt. 1). On June 14, 2016, U.S. District Judge Edward J. Lodge referred all matters in the case to this Court. Order of Reference (Dkt. 7). Thereafter, Judge Lodge entered a Scheduling Order on July 11, 2016. (Dkt. 14.) That order set November 30, 2016 as the deadline for amending pleadings. Id. By stipulation, the scheduling order was modified twice with respect to deadlines other than the deadline to amend pleadings. (Dkts. 15, 19 (stipulations); Dkts. 16, 20 (modified scheduling orders).) Eleven months later, on May 10, 2017, Plaintiffs moved to amend their Complaint. Mot. for Leave to File First Am. Compl. (Dkt. 22). The Defendant filed a notice of non-opposition (Dkt. 21), this Court granted Plaintiffs' motion (Dkt. 25), and Plaintiffs' First Amended Complaint was filed (Dkt. 26).

         On August 29, 2017, Plaintiffs filed a motion to amend the already amended complaint. Mot. to Amend (Dkt. 28). Plaintiffs seek to add a claim to pierce the corporate veil of Defendant and to join three new individual defendants who Plaintiffs allege are Defendant's shareholders. Id. The amendment deadline has passed. See Scheduling Order (Dkt. 14). The case has not yet been set for trial. See Order Adopting 3/21/17 Stipulation to Modify Scheduling Order (Dkt. 20).

         Defendant previously filed a Counterclaim and Third-Party Complaint, but that filing is not relevant to the instant motion and will not be further discussed in this memorandum decision. Answer, Countercl., Third-Party Compl. and Demand for Jury Trial (Dkt. 3).

         LEGAL STANDARDS

         Rule 15(a) of the Federal Rules of Civil Procedure provides in relevant part that “[t]he court should freely give leave” to amend “when justice so requires.” However, after a scheduling order has been entered, the court may modify the schedule only for good cause. Fed.R.Civ.P. 16(b)(4). Thus, a “party seeking to amend [a] pleading after [the] date specified in [a] scheduling order must first show ‘good cause' for amendment under Rule 16(b), then, if ‘good cause' be shown, the party must demonstrate that amendment [is] proper under Rule 15.” Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 608 (9th Cir. 1992) (citation omitted). Rule 16's good cause inquiry focuses primarily on the diligence of the party requesting the amendment. Id. at 609. “Rule 16 was designed to facilitate more efficient disposition of cases by settlement or by trial. If disregarded it would ‘undermine the court's ability to control its docket, disrupt the agreed-upon course of the litigation, and reward the indolent and the cavalier.'” Walker v. City of Pocatello, 2017 WL 1650014 at *1 (D. Idaho May 1, 2017) (quoting Johnson, 975 F.2d at 610); see also Rule 16 Advisory Committee Notes (1983 Amendment). As explained in Johnson:

Unlike Rule 15(a)'s liberal amendment policy which focuses on the bad faith of the party seeking to interpose an amendment and the prejudice to the opposing party, Rule 16(b)'s “good cause” standard primarily considers the diligence of the party seeking the amendment. The district court may modify the pretrial schedule if it cannot reasonably be met despite the diligence of the party seeking the extension. . . Although the existence or degree of prejudice to the party opposing the modification might supply additional reasons to deny a motion, the focus of the inquiry is upon the moving party's reasons for seeking modification. If that party was not diligent, the inquiry should end.

Id. (quotation marks and citations omitted). In addition, district courts are “given broad discretion in supervising the pretrial phase of litigation, ” including with respect to “decisions regarding the preclusive effect of a pretrial order.” Johnson, 972 F.2d at 607. If good cause exists under Rule 16(b), “leave to amend should be granted unless amendment would cause prejudice to the opposing party, is sought in bad faith, is futile, or creates undue delay.” Id.; see also Branch Banking and Trust Co. v. D.M.S.I., LLC, 871 F.3d 751, 764 (9th Cir. 2017) (applying Johnson and demonstrating it is still controlling law).

         Plaintiffs' motion seeks to add a claim to pierce Defendant's corporate veil. Mot. to Amend 1 (Dkt. 28). Because this is a diversity action over which the Court exercises original jurisdiction pursuant to 28 U.S.C. § 1332, Idaho law applies to the claim. Piercing the corporate veil under Idaho law requires “(1) a unity of interest and ownership to a degree that the separate personalities of the [company] and individual no longer exist and (2) if the acts are treated as acts of the [company] an inequitable result would follow.” Wandering Trails, LLC v. Big Bite Excavation, Inc., 329 P.3d 368, 376 (Idaho 2014) (alterations in original) (citation omitted).

         DISCUSSION

         The instant motion turns on whether Plaintiffs were diligent in seeking an otherwise untimely amendment to bring a claim to pierce Defendant's corporate veil.

         The dealings between Plaintiffs and Defendant began with the execution of a Cattle Feeding, Finance, and Security Agreement (the “Agreement”) in June of 2014, under which Plaintiff Simplot Livestock Co. (“Feedlot”) was obligated to feed and care for Defendant Sutfin Land & Livestock's (“SLL”) feeder cattle^[1] and SLL was obligated to pay Feedlot for the goods and services supplied. Compl. ¶¶ 5-6 (Dkt. 1 p. 10); Agreement ¶¶ 2, 5 (Dkt. 3-2). Feedlot's related company, Plaintiff J.R. Simplot Company (“Simplot”), was also a party to the Agreement. Agreement 1 (Dkt. 3-2). Simplot's role was to finance advances to SLL upon request, conditioned upon Simplot satisfying itself that Defendant was sufficiently creditworthy and met other requirements. Id. at ¶ 9. Feedlot claimed a lien upon Defendant's cattle and Defendant granted Simplot a security interest in the cattle and related property. Id. at ¶¶ 8, 11. The Agreement specified how proceeds from the sale of Defendant's cattle would be distributed - broadly, Feedlot and Simplot were to be paid in full before Defendant received any proceeds. Id. at ¶ 10. Plaintiffs allege in the First Amended Complaint that a substantial deficit remains owing after all of Defendant's cattle were sold and the proceeds applied to pay debts owed under the Agreement to Plaintiffs. First Am. Compl. ¶ 11 (Dkt. 26). More specifically, Plaintiffs allege that Defendant owes them over one million dollars under the Agreement. Id. ¶¶ 12-14.

         The First Amended Complaint, like the original Complaint, names only SLL as a Defendant. Id. at p. 1; Compl. 1 (Dkt. 1 p. 9). SLL is a California corporation. First Am. Compl. ¶ 3 (Dkt. 26); Answer ¶ 2 (Dkt. 27). Notably, Defendant's owners (allegedly Dan, Arthur, and Joan Sutfin) are not named as Defendants in the original Complaint or the First Amended Complaint. See Compl. (Dkt. 1 p. 9); ...