Motekaitis v. USI Insurance Services National, Inc.

Background

Paul Motekaitis and Carri Mangelli Kneass brought claims involving alleged defamation, interference with business, blacklisting, and intentional infliction of emotional distress. They sued USI Insurance Services, LLC, several individuals associated with the company, Marsh & McLennan Agency LLC, and one of its employees. The plaintiffs alleged that, after their termination, an email explaining the terminations portrayed them negatively and that the email was republished to divert potential business.

The plaintiffs sought permission to file a third amended complaint. They had already amended once under the Federal Rules of Civil Procedure and once by stipulation. The proposed amendment corrected or addressed misspelled party names, added a defendant identified during discovery, and revised allegations to better conform to information learned in discovery.

Discovery and Proposed Amendment

During discovery, the plaintiffs initially requested emails sent by USI staff to third parties about their terminations, including copies or forwards of a January 20, 2024 email. The parties agreed that USI would provide a master list of recipients instead of the requested copies and related documents. USI provided the list. Later, another defendant produced an email that matched the description of the requested forward. The opinion states that the plaintiffs had sought leave to amend before discovering that email.

USI opposed the third amendment, arguing that the request was untimely and would create additional discovery burdens. Defendant McLennan did not oppose the request. USI also argued that the plaintiffs’ counsel had not satisfied a meet-and-confer requirement, while plaintiffs’ counsel declared that the parties had conferred.

Legal Standard

The court applied Federal Rule of Civil Procedure 16, which requires good cause to modify a scheduling order after the deadline for amending pleadings has passed. If good cause exists, Rule 15 generally requires that permission to amend be given freely when justice requires it. The court considered bad faith, undue delay, prejudice to the opposing party, and whether the proposed amendment would be futile. It also considered that the plaintiffs had amended previously. Prejudice to the opposing party was the most important factor.

Court’s Analysis

The court found good cause to correct the party names and include the newly discovered defendant. Although the request was late, the court held that the Ninth Circuit’s strong preference for allowing amendments favored granting it.

The court found that the plaintiffs’ conduct was not clearly in bad faith, even though they had delayed correcting several misspellings after the court had identified them. The court also found that the plaintiffs barely overcame the undue-delay concern because they had first tried to obtain a stipulation and sought court permission only after USI refused. The proposed amendment was not futile: correcting spellings was useful, and the record did not show that the claims against the additional defendants were obviously futile.

USI argued that the amendment would require more discovery. The court acknowledged that additional discovery can support a finding of prejudice, but held that the showing here was insufficient because discovery was still ongoing. The amendment might require additional discovery, but it would not require reopening discovery.

Disposition

The court granted the motion to file a third amended complaint. The court directed the plaintiffs either to file a complaint identifying USI as “USI Insurance Services, LLC” and Newborn as “Ernest J. Newborn II,” or, within seven days of the order, file a letter explaining why they refused to do so.