Deejayzoo, LLC v. Kaz Konsulting, LLC

Background

Deejayzoo, LLC, doing business as Shhhowercap, and Kaz Konsulting, LLC entered into an Amended and Restated Independent Contractor Agreement on November 14, 2018. The agreement concerned Kaz’s work helping sell Deejayzoo’s products. Deejayzoo’s original complaint asserted eight causes of action, including claims under the Lanham Act, state trademark law, breach of contract, and tortious interference.

The court’s scheduling order required any motion to amend the pleadings to be filed by January 3, 2020. Deejayzoo sought permission to amend in July 2020, more than six months after that deadline and after fact discovery had closed. It proposed adding a claim against Kaz for rescission of the agreement based on fraud.

Reasons for the ruling

Under Rule 16(b) of the Federal Rules of Civil Procedure, a party seeking to amend after a scheduling deadline must show good cause, with diligence as the primary consideration. Deejayzoo argued that two emails supported the proposed claim and that counsel did not recognize their significance until June 2020. But Deejayzoo acknowledged that it had possessed the emails before filing the original complaint and that they were not obtained through discovery. The court therefore concluded that Deejayzoo had not shown good cause for its delay.

The court also rejected the argument that Kaz would not be prejudiced. Even without prejudice, the lack of diligence was sufficient to deny the request. The court additionally stated that allowing the amendment would require a motion to dismiss and, if the claim survived, reopening discovery, which would prejudice the defendants.

Separately, the court found the proposed amendment futile. An amendment is futile when the proposed claim would fail under the standard for dismissing a claim for failure to state a claim. Under New York law, a fraud claim requires, among other things, justifiable reliance on a misrepresentation or material omission. The court determined that Deejayzoo could not reasonably rely on alleged statements that Kaz would not work for Silke London because Deejayzoo knew Kaz had previously worked with Silke London, knew Kaz had refused to agree to a non-compete provision, and knew Kaz had not ruled out working for other retailers with conflicts of interest.

The court further found that the proposed fraud claim did not satisfy Rule 9(b), which requires fraud to be pleaded with particularity. Deejayzoo alleged in general terms that Kaz made an oral promise not to work for Silke London but did not identify who made the statement, to whom it was made, or where it was made. The court also concluded that Kaz’s written statements about doing what was right and taking a reasonable approach did not amount to fraud in light of Kaz’s stated desire to work with other retailers.

Disposition

Judge Castel denied Deejayzoo’s motion for leave to amend its complaint and directed the Clerk to terminate the motion. The order did not state that the motion was denied with or without prejudice.