Gaby's Bags, LLC v. Mercari, Inc.

Background

Gaby’s Bags, LLC sold handbags through Mercari’s online platform and alleged that Mercari falsely advertised that “anyone” could sell on it. Mercari terminated Gaby’s Bags’ account for violating terms of service that barred business accounts. Gaby’s Bags originally asserted Florida consumer-protection claims and a claim under the federal Lanham Act, which addresses certain false advertising.

The court previously dismissed the Florida claims based on the terms’ California choice-of-law provision. It later granted Mercari summary judgment on the remaining Lanham Act claim, ruling that Gaby’s Bags lacked statutory standing because its alleged injury arose from using Mercari as a consumer rather than competing with Mercari. The court invited Gaby’s Bags to seek permission to amend its complaint.

Mercari also amended its counterclaim to add Kody Yates and other members of his household as individual counterdefendants. Mercari then sought approximately $30,832 in service costs and attorney’s fees, arguing that the individuals had refused to waive formal service. The individual counterdefendants separately sought extensions of the case-management deadlines.

Mercari’s request for service costs and attorney’s fees

The court denied Mercari’s motion under Federal Rule of Civil Procedure 4(d)(2). That rule can require a defendant who refuses to waive formal service without good cause to pay the later service expenses and the reasonable expenses of a motion seeking those costs. But Mercari first had to comply strictly with Rule 4(d)(1)’s requirements for requesting a waiver.

The court identified several defects. Mercari sent its waiver request by email rather than first-class mail or another qualifying reliable means. An earlier agreement to accept email service applied only to Gaby’s Bags, not to the individual counterdefendants, who were not then parties and were not represented by the attorney who received the email. The request also did not include a prepaid way to return the waiver form. Finally, Mercari sent the request on the forty-fourth day of a sixty-three-day period for identifying and serving the Doe defendants, leaving less than the required thirty days to respond.

Because Mercari did not satisfy the required conditions, the court denied the request for service costs and attorney’s fees, including the requested expenses for the motion.

Motion to amend the case-management order

The individual counterdefendants moved under Rule 16(b)(4), which allows a schedule to be changed only for good cause and with the judge’s consent. They argued that their recent addition to the case justified extending all deadlines and that refusing to do so would be unfair.

Judge Alsup denied the motion. Although the counterdefendants filed their motion promptly after being added, they did not identify a concrete reason or specific difficulty requiring months-long extensions of every deadline. The court found that the existing discovery deadline provided sufficient time for them to obtain discovery needed for their defense.

Gaby’s Bags’ motion for leave to amend

The court applied Federal Rule of Civil Procedure 15(a), under which permission to amend should generally be freely given when justice requires. Gaby’s Bags timely filed its motion within the fourteen-day period provided by the court’s earlier summary-judgment order, even though the original scheduling deadline for amendments had passed.

The court rejected Mercari’s arguments that amendment would be unfairly prejudicial, brought in bad faith, or futile. It found that this was Gaby’s Bags’ first request to amend, discovery had not closed, and the proposed claims arose from the same basic allegations about Mercari’s representations. The court also held that the proposed allegations sufficiently connected the alleged conduct to California, alleged injury supporting standing under California’s consumer-protection statutes, and did not show on the existing record that the claims were time-barred.

The court permitted Gaby’s Bags to assert claims under California’s Unfair Competition Law, California’s False Advertising Law, concealment, and intentional misrepresentation. It denied leave for negligent misrepresentation because the proposed complaint did not identify facts or legal authority showing that Mercari owed Gaby’s Bags the required legal duty or standard of care. It also denied leave for intentional and negligent interference with prospective economic advantage because those claims did not fit the claims originally pleaded or the theory discussed when the court invited amendment.

Disposition

Gaby’s Bags’ motion for leave to amend was granted in part and denied in part. Mercari’s Rule 4(d)(2) motion for service costs and attorney’s fees was denied. The individual counterdefendants’ motion to amend the scheduling order was denied. The amended complaint was allowed and deemed filed subject to the stated limitations, and Mercari’s answer was due in 14 calendar days.