United States District Court, D. New Jersey
Michael A. Hammer United States Magistrate Judge
matter comes before the Court on Nasa Machine Tools
Inc.'s (“Nasa”) Motion for Leave to File a
Second Amended Complaint. D.E. 102. Pursuant to Federal Rule
of Civil Procedure 78 and Local Civil Rule 78.1, the Court
decides this motion without oral argument. For the reasons
set forth below, the Court will grant Nasa's motion.
manufactures computer numerical control machines (CNCs).
First Am. Compl., D.E. 50, Oct. 31, 2018, ¶ 7. From
approximately 2011 to 2017, Nasa had an agreement with FAMA
Technology Inc. (“FAMA”) and Farzad Ahmadpour
(“Ahmadpour”), the owner of FAMA, to service the
CNCs that Nasa sold to customers. Id. at ¶ 9.
This relationship, Nasa alleges, afforded FAMA access to
Nasa's proprietary information and trade secrets.
Id. at ¶ 10. Sometime in mid-2016, Nasa engaged
FAMA to help design and install a probing system, called the
“Vision System, ” for Nasa's CNCs for
delivery to Customer 1. Id. at ¶¶ 13-15.
Nasa contends that the parties orally agreed that FAMA would
assign the software rights to Nasa, and that Nasa would pay
FAMA $22, 100 for the installment of the Vision System on
each CNC. Id. Nasa claims that for the period of
approximately July 2016 to September 2017, the Vision System
was installed on eight CNCs that Nasa sold to Customer 1, for
which Nasa paid FAMA $184, 300. Id. at ¶ 15.
to Nasa, in late 2017, Ahmadpour notified NASA that FAMA
would no longer conduct business with Nasa, and that
Ahmadpour and FAMA would market and sell their own CNCs with
the Vision System. Id. at ¶ 18. Nasa alleges
that in or around January 2017, Defendants formed ProCut
Technologies, LLC (“ProCut”) to manufacture and
sell CNCs and began selling CNCs to at least one of
Nasa's customers. Id. at ¶ 17. Nasa also
alleges that Defendants attempted to advertise or market
ProCut's CNCs to Customer 1, made derogatory statements
about Nasa's quality, and caused Nasa to lose potential
sales to existing customers, including Customer 1.
Id. at ¶¶ 20-22. Further, Nasa complains
that Defendants have refused to provide the Vision System
software to Nasa, thereby preventing Nasa from marketing or
selling the Vision System. Id. at ¶ 19.
Instead, Nasa alleges, ProCut now markets the Vision System
software as its own. Id. at ¶ 22.
January 23, 2018, Nasa filed the Complaint in the instant
action against Defendants, claiming breach of an oral
contract, tortious interference with existing and prospective
contractual or economic relationships, unfair trade
practices, misappropriation of confidential information,
misappropriation of trade secrets, fraudulent
misrepresentation, unjust enrichment, and punitive damages.
Compl., Jan. 23, 2018, D.E. 1. Defendants removed the action
to this Court on February 28, 2018. D.E. 1. Defendants moved
to dismiss Nasa's Complaint, which District Judge
Madeline Cox Arleo denied on October 22, 2018. D.E. 49. Judge
Arleo, however, directed Nasa to re-plead its counts for
breach of contract and fraudulent misrepresentation with the
requisite specificity, and on October 31, 2018, Nasa filed
its First Amended Complaint. First Am. Compl, D.E. 50, Oct.
now moves for leave to file a Second Amended Complaint to:
(1) re-define the “Vision System, ” changing the
definition from a software-only system to a combined software
and hardware system; (2) add additional allegations in
support of Nasa's claims; (3) add a claim for trade
libel; and (4) add a claim for defamation. Defendants argue
that the Court should deny Nasa's motion to amend because
the amendment is the result of undue delay and bad faith, and
permitting the amendment would cause Defendants to suffer
undue prejudice. With respect to the defamation claim,
Defendants maintain that the amendment would be futile as it
is brought beyond the one-year statute of limitations.
first issue for the Court is whether Federal Rule of Civil
Procedure 15 or 16 governs Plaintiff's motion to amend.
Karlo v. Pittsburgh Glass Works, LLC, Civ. No.
10-1283, 2011 WL 5170445, at *2 (W.D. Pa. Oct. 31, 2011).
Rule 15 states, in pertinent part, “a party may amend
its pleading only with the opposing party's written
consent or the court's leave. The court should freely
give leave when justice so requires.” Fed.R.Civ.P.
15(a)(2). “Rule 16, on the other hand, requires a party
to demonstrate ‘good cause' prior to the Court
amending its scheduling order.” Karlo, 2011 WL
5170445, at *2 (citing Fed.R.Civ.P. 16(b)(4)).
is a recognized tension between Rule 15 and Rule 16 that has
not been directly resolved by the United States Court of
Appeals for the Third Circuit. See Race Tires America,
Inc. v. Hoosier Racing Tire Corp., 614 F.3d 57, 84 (3d.
Cir. 2010); Graham v. Progressive Direct Ins.
Co., 271 F.R.D. 112, 118 (W.D. Pa. 2010). However,
courts “within the Third Circuit have consistently
reached the same conclusion: a party seeking to amend the
pleadings after the deadline set by the Court must
satisfy the requirements of Rule 16(b)(4)-i.e., they must
show ‘good cause.'” Karlo, 2011 WL
5170445, at *2 (citing Fed.R.Civ.P. 16(b)(4)) (emphasis
Nasa filed its pleading after the deadline set by this Court,
and, therefore, the Court must consider Rule 16. The
operative Order instructed that any motion to amend the
pleadings be filed by February 25, 2019. Pretrial Scheduling
Order, Nov. 20, 2018, D.E. 59. Nasa filed the instant motion
on September 13, 2019. Motion for Leave to File
Plaintiff's Second Am. Compl., Sept. 13, 2019, D.E. 102.
Because Nasa filed the present motion nearly seven months
after the February 25, 2019 filing deadline, the Court must
first determine whether, under Rule 16, good cause exists to
adjust the deadline to permit Nasa to file its motion. If
there is good cause to amend, the Court will then turn to
Rule 15 to determine whether to permit Nasa to file its
amended pleading as justice so requires. Home
Semiconductor Corp. v. Samsung Electronics Co., Ltd.,
Civ. No. 13-2033, 2019 WL 2135858, at *2 (D. Del. 2019)
(stating, “only after having found the requisite
showing of good cause will the court consider whether the
proposed amendment pleading meets the 15(a)
of the Federal Rules of Civil Procedure authorizes courts to
enter schedules of proceedings. The pretrial scheduling order
allows a court to take “judicial control over a case
and to schedule dates for completion by the parties of the
principal pretrial steps.” Harrison Beverage Co. v.
Dribeck Imps., Inc., 133 F.R.D. 463, 469 (D.N.J. 1990)
(quoting Fed.R.Civ.P. 16 advisory committee's note (1983
Amendment)); see also Newton v. A.C. & S., Inc.,
918 F.2d 1121, 1126 (3d Cir. 1990) (stating the purpose of
Rule 16 is to provide for judicial control over cases,
streamline proceedings, maximize efficiency of the court
system, and actively manage the timetable of case preparation
to expedite speedy and efficient disposition of cases).
scheduling order must, among other things, “limit the
time to join other parties, amend the pleadings, complete
discovery, and file motions.” Fed.R.Civ.P. 16(b)(3)(A).
The requirement of a deadline for amending pleadings in the
pretrial scheduling order “assures that at some point .
. . the pleadings will be fixed.” Fed.R.Civ.P. 16(b)
advisory committee's note (1983 Amendment); see also
Harrison, 133 F.R.D. at 469 (“The careful scheme
of reasonable framing and enforcement of scheduling orders
for case management would thus be nullified if a party could
inject amended pleadings upon a showing of less than good
cause after scheduling deadlines have expired.”). Under
Rule 16, “[a] schedule may be modified only for good
cause and with the judge's consent.” E.
Minerals & Chems. Co. v. Mahan, 225 F.3d 330, 340
(3d Cir. 2000).
burden is on the moving party to show “good
cause” for its failure to comply with the applicable
scheduling order, and, accordingly, for the Court to allow
its proposed amended pleading. Prince v. Aiellos,
Civ. No. 09-5429, 2012 WL 1883812, at *6 (D.N.J. May 22,
2012) (quoting Graham v. Progressive Direct Ins.
Co., 271 F.R.D. 112, 118 (W.D. Pa. 2010)); see also
Race Tires, 614 F.3d at 84 (affirming the trial
court's holding that “Rule 16(b)(4) focuses on the
moving party's burden to show due diligence”).
Whether “good cause” exists under Rule 16 hinges
to a large extent on the diligence of the moving party.
GlobespanVirata, Inc. v. Texas Instruments, Inc.,
Civ. No. 03-2854, 2005 WL 1638136, at *3 (D.N.J. July 12,
2005) (quoting Rent-A-Ctr. v. Mamaroneck Ave. Corp.,
215 F.R.D. 100, 104 (S.D.N.Y. 2003)). Put succinctly,
“[a]bsent diligence, there is no ‘good
cause.'” Chancellor v. Pottsgrove Sch.
Dist., 501 F.Supp.2d 695, 702 (E.D. Pa. 2007); see
also Fed. R. Civ. P. 16(b), advisory committee's
note (1983 Amendment) (“[T]he court may modify the
schedule on a showing of good cause if it cannot reasonably
be met despite the diligence of the party seeking the
examining a party's diligence, courts typically ascertain
whether the movant possessed, or through the exercise of
reasonable diligence should have possessed, the knowledge
necessary to file the motion to amend before the deadline
expired. See Stallings ex rel. Estate of Stallings v. IBM
Corp., Civ. No. 08-3121, 2009 WL 2905471, at *16 (D.N.J.
Sept. 8, 2009) (denying plaintiffs' motion to amend
because they “had sufficient information to state the
proposed claims well in advance of the Scheduling Order
deadline”); Kennedy v. City of Newark, Civ.
No. 10-1405, 2011 WL 2669601, at *2 (D.N.J. July 7, 2011)
(“The most common basis for finding a lack of good
cause is the party's knowledge of the potential claim
before the deadline to amend has passed.”). If a movant
had the knowledge necessary to file a motion to amend prior
to the expiration of the Court's deadline set forth in
the scheduling order, and if the movant can provide no
satisfactory explanation for the delay, the Court may, in its
discretion, deny the motion. See Dimensional Communs.,
Inc. v. OZ Optics, Ltd., 148 Fed. App'x. 82, 85 (3d
Cir. 2005) (upholding trial court's finding that the
movant could not show “good cause” because they
were in possession of the facts underlying the proposed
counterclaim well before the deadline for amendment).
argues that it has good cause for seeking to amend after the
expiration of the deadline. Nasa maintains that it did not
learn about the January 23, 2018 and January 19, 2018
e-mails, which form the basis of the instant amendments,
until April 11, 2019. Specifically, Nasa contends that on
April 11, 2019, Defendants produced third-party discovery in
response to Defendants' subpoena, including: (1) a
January 23, 2018 e-mail, in which Nasa claims Defendants make
defamatory statements about Nasa to Customer 1; and (2) an e-mail
exchange between Defendants' counsel, Neil A. Benchell,
Esq., and Customer 1 dated January 16 and January 19,
2018. Nasa contends that had these emails been
produced in any of Defendants' prior productions on
January 4, 2019, January 30, 2019, and February 20, 2019,
Nasa would have been able to move to amend by the Court's
deadline for doing so. Nasa argues that it further delayed in
moving to amend because discovery was stayed from April 15,
2019 to July 11, 2019, shortly after Nasa obtained these
emails, so that the parties could focus on settlement.
However, Nasa raised its intention to amend in both its June
21, 2019 settlement letter to the Court and in the
parties' July 10, 2019 status report to the Court. Given
that Nasa did not know of the existence of the pertinent
emails until April 11, 2019, only four days before the Court
stayed discovery, and that Nasa raised its intention to amend
to the Court in June and again in July, as soon as the stay
was lifted, the Court finds that Nasa has demonstrated good
cause pursuant to Rule 16 to modify the February 25, 2019
deadline for filing any motion to amend the