Chang v. Cashman

Background

Stacy Chang brought an employment-related lawsuit against Carlos Cashman and several entities. Her first amended complaint asserted claims including fraudulent inducement, negligent misrepresentation, alleged violations of California Labor Code sections 970 and 2802, breach of contract, promissory estoppel, unjust enrichment, failure to pay wages upon separation, and violation of California Business and Professions Code section 17200.

Chang moved to amend the complaint after the scheduling-order deadline. She sought to add Perseverus LLC, Cashman Family Investment LLC, Arrowside Fund LP, and the Cashman Opportunity Fund, LLC as defendants. She also sought to add allegations concerning alter-ego liability and veil piercing, civil conspiracy, and successor-in-interest liability.

Legal standards

Federal Rule of Civil Procedure 16(b)(4) requires a party seeking to modify a scheduling order to show good cause and obtain the judge’s consent. The court explained that the main consideration is the moving party’s diligence. If good cause is shown, Rule 15 applies. Rule 15 generally calls for permission to amend a pleading when justice requires, unless the amendment would cause undue prejudice, result from bad faith or undue delay, or be futile.

Court’s analysis

The court found no good cause to add the Cashman Opportunity Fund. Chang did not dispute that she received an October 28, 2021 email in which the entity appeared on an alternative-asset list, and she acknowledged that the entity’s role before Arrowside Ventures was formed made sense. The court concluded that waiting until December 29, 2023 to seek leave to add the entity weighed against good cause.

The court also found no good cause to add Cashman Family Investment LLC or Arrowside Fund LP. Chang conceded at the March 14, 2024 hearing that defendants had produced documents reflecting their funding plan by February 15, 2023. The court therefore found that her delay in seeking to add those entities precluded good cause.

The court found good cause to add Perseverus as a defendant and to add related successor-in-interest allegations. Chang first learned about Perseverus during Copeman’s November 9, 2023 deposition. The court rejected defendants’ argument that Cashman would have disclosed the entity if Chang had asked particular follow-up questions, describing that argument as self-serving speculation. The court therefore granted relief from the scheduling order for Perseverus and the related successor allegations, while otherwise denying relief from the scheduling order.

The court did not reach whether civil-conspiracy, alter-ego, or veil-piercing allegations could be added as to the entities that Chang was not allowed to add. The court also found that Chang had not shown good cause to add such allegations against the already named defendants at that late stage.

Applying Rule 15 to the proposed Perseverus amendments, the court found no undue prejudice. It limited discovery to the narrow amendments and required that discovery to proceed on an accelerated schedule. The court also found no undue delay because Chang acted promptly after learning about Perseverus, and found no bad faith.

The court declined to decide on the amendment motion whether Perseverus was actually a continuation of Arrowside Ventures or was created to shield assets from liability. Those factual disputes concerned the merits of the proposed allegations and were not properly resolved in a motion for leave to amend. The court therefore found that the proposed amendments were not futile at this stage.

Disposition

The court granted in part and denied in part Chang’s motion for leave to amend. It permitted Chang to add Perseverus LLC as a defendant and to add successor-in-interest liability allegations concerning that entity. The motion was otherwise denied. Chang was ordered to file her second amended complaint within two days.

The order also authorized, unless Chief Magistrate Judge Ryu ordered otherwise, five additional requests for production, required defendants to respond within 30 days after service, made Cashman available for a further deposition of no more than four hours within two weeks after those responses, and extended the electronic-discovery date range to March 15, 2023. A revised case-management scheduling order was to issue separately.