GPMM, Inc. v. Tharp

• Decision Date: 04 February 2021
• Docket Number: 8:19-CV-128
• Parties: GPMM, INC., a Nebraska Corporation; Plaintiff, v. BRENDA THARP, an individual; and NATALIE KOTRC, an individual; Defendants.
• Court: U.S. District Court — District of Nebraska

GPMM, INC., a Nebraska Corporation; Plaintiff, v. BRENDA THARP, an individual; andNATALIE KOTRC, an individual; Defendants.

8:19-CV-128

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEBRASKA

February 4, 2021

MEMORANDUM AND ORDER

This case comes before the Court on Plaintiff's Motion for Partial Judgment on the Pleadings, Filing 38, and Defendants' Motion to Amend Answer, Filing 40. For the reasons set forth herein, the Court denies both motions.

I. BACKGROUND¹

Plaintiff, GPMM, Inc., (GPMM) operates a wedding and catering business called Save the Date. Filing 16 at 2. Defendants, Brenda Tharp and Natalie Kotrc, are former employees of Save the Date who left to form their own company, Elegant Edge Events. Filing 16 at 6-7. GPMM alleges Tharp and Kotrc used Save the Date's contacts and resources in order to grow their new business. Filing 16 at 4-5. In particular, Tharp used Save the Date's Wedding Wire and The Knot accounts to divert potential client inquiries to the new company by forwarding them from Save the Date's email to her private email account. Filing 16 at 4. Tharp then deleted records of the potential client inquiries from the Save the Date email account. Filing 16 at 5. GPMM also alleges Tharp and Kotrc represented Save the Date at a bridal fair in October 2018 and used the opportunity to solicit business for their new company. Filing 16 at 5-6.

GPMM filed suit against Tharp and Kotrc, alleging breach of the duty of loyalty, tortious interference with business relationships, breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, violation of the Nebraska Junkin Act relating to unlawful restraint of trade, and violation of the federal Computer Fraud and Abuse Act (CFAA). See generally Filing 1; Filing 16. On May 1, 2019, Defendants filed a Motion to Dismiss, alleging GPMM had failed to state a claim under the CFAA, 18 U.S.C. § 1030. Filing 7 at 1-6. On October 3, the Court granted Defendants' Motion to Dismiss but granted GPMM leave to file an amended complaint in order to remedy the pleading deficiencies. Filing 15 at 13.

On October 14, 2019, GPMM filed its Amended Complaint. Filing 16. Following an unsuccessful second motion to dismiss, Defendants filed their Answer to the Amended Complaint on March 10, 2020. Filing 22. The scheduling order provided that the last date to amend the pleadings was April 30, 2020, and neither party sought an extension of that deadline. Filing 26 at 1. As is relevant here, in their Answer, Defendants admitted paragraphs 34, 35, and 36 of the Amended Complaint. See Filing 22 at 3 ("Defendants admit the allegations of Paragraph[s] 34 through 37."). Those paragraphs state:

34. Specifically, on October 9, 2018, while employees of GPMM, Tharp and Kotrc represented Save the Date at a large bridal fair hosted by Wedding Essentials at the Mid-America Center in Council Bluffs, Iowa. GPMM paid the registration fee for the bridal fair in order to promote Save the Date Catering.

35. While at the bridal fair, Tharp and Kotrc collected the names of 219 potential clients. Normally, Save the Date could expect to book 10% of such client contacts. None of these potential clients booked events or tastings with Save the Date.

36. On information and belief, instead of booking tastings and events for Save the Date while at the bridal fair, Tharp and Kotrc solicited business for Elegant Edge Events.

Filing 16 at 5-6.

II. DISCUSSION

GPMM moves for partial judgment on the pleadings as to Count 1 (breach of the duty of loyalty), Count 2 (tortious interference with business relationships), and Count 4 (unjust enrichment) of its Amended Complaint. Filing 38. In response, Tharp and Kotrc have filed a Motion to Amend their Answer, which GPMM opposes. Filing 40. Tharp and Kotrc also separately oppose the Motion for Partial Judgment on the Pleadings. Filing 43. The Court will address the motion to amend and the motion for judgment in turn.

A. Motion to Amend Answer

1. Standard of Review

There are two procedural rules at play, and the parties disagree about their applicability to Defendants' motion seeking to amend its answer. First, Federal Rule of Civil Procedure Rule 15(a) provides that "a party may amend its pleading only with the opposing party's written consent or the court's leave." Fed. R. Civ. P. 15(a)(2). Rule 15(a) further states that "[t]he court should freely grant [such] leave when justice so requires." Id. This standard is construed liberally but "plaintiffs do not have an absolute or automatic right to amend." United States ex rel. Lee v. Fairview Health Sys., 413 F.3d 748, 749 (8th Cir. 2005) (citing Meehan v. United Consumers Club Franchising Corp., 312 F.3d 909, 913 (8th Cir. 2002)). A district court may appropriately deny the movant leave to amend if "there are compelling reasons such as undue delay, bad faith, or dilatory motive, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the non-moving party, or futility of the amendment." Moses.com Sec., Inc. v. Comprehensive Software Sys., Inc., 406 F.3d 1052, 1065 (8th Cir. 2005) (internal quotation marks and citations omitted).

Second, Federal Rule of Civil Procedure Rule 16(b) guides the district court on how to issue and modify pretrial scheduling orders and provides that "[e]xcept in categories of actionsexempted by local rule, the . . . judge . . . must issue a scheduling order." Fed. R. Civ. P. 16(b)(1). The order "must limit the time to join other parties, amend the pleadings, complete discovery, and file motions." Fed. R. Civ. P. 16(b)(3)(A). The scheduling order "may be modified only for good cause and with the judge's consent." Fed. R. Civ. P. 16(b)(4) (emphasis added). Additionally, Rule 16(d) states that a pretrial scheduling order "controls the course of the action unless the court modifies it." Fed. R. Civ. P. 16(d).

2. Analysis

Tharp and Kotrc argue the Court need only apply the lenient standard found in Rule 15(a) instructing courts to give leave to amend freely "when justice so requires." Filing 40 at 3 (quoting Fed. R. Civ. P. 15(a)). GPMM argues that the Court must apply Rule 16(b)'s "good cause" standard in ruling on Defendants' motion to amend because it was filed after the deadline for amendments set forth in the scheduling order. Filing 44 at 3-4. The Court agrees it must apply Rule 16's good-cause standard to Defendants' untimely request to amend and finds they have failed to demonstrate good cause to modify the scheduling order's deadlines.

"The interplay between Rule 15(a) and 16(b) is settled in this circuit." Sherman v. Winco Fireworks, Inc., 532 F.3d 709, 716 (8th Cir. 2008). When a motion for leave to amend is filed outside the district court's scheduling order, the moving "party must show cause to modify the schedule." Popoalii v. Corr. Med. Servs., 512 F.3d 488, 497 (8th Cir. 2008) (emphasis added). Showing "good cause" is more demanding than the standard in Rule 15. See Bradford v. DANA Corp., 249 F.3d 807, 809 (8th Cir. 2001) (stating that "[a]s regards case management orders, . . . the Federal Rules set a less forgiving standard" than the liberal construction given to requests to amend as a matter of course). As another court within the circuit aptly put it, "Rule 16 opens the door to Rule 15" with respect to motions to amend brought outside the scheduling order deadline.Shank v. Carleton Coll., 329 F.R.D. 610, 614 (D. Min. 2019). That is, Rule 16(b)'s "good cause" analysis is meant to determine whether the scheduling order should be modified; the Rule 15(a) analysis then "resolves whether the complaint can be amended." Id. (emphasis in original). Only after the movant has shown good cause to modify the scheduling order under Rule 16(b) may the court consider whether the amendment is permitted under Rule 15(a). See Sherman, 532 F.3d at 716 (citing with approval cases which first required a good-cause showing before proceeding to consider whether an amendment is proper under Rule 15(a)). "The primary measure of good cause is the movant's diligence in attempting to meet the [scheduling] order's requirements." Id. at 716-17 (quoting Rahn v. Hawkins, 464 F.3d 813, 822 (8th Cir. 2006)).

In this case, Tharp and Kotrc have failed to demonstrate good cause to extend the deadlines set forth in the scheduling order in order to allow them to amend their Answer. The scheduling order provided that the last date to amend the pleadings was April 30, 2020.² Filing 26 at 1. Tharp and Kotrc did not seek to amend their answer until December 15, 2020, nearly eight months later, and then only in response to GPMM's motion seeking partial judgment based on their answer responses. See Filing 40. This lengthy delay and the fact that Defendants did not discover the supposed error independently but only sought to amend once GPMM moved for partial judgment do not demonstrate diligence in seeking to modify the scheduling order. See Sherman, 532 F.3d at 716-17 ("The primary measure of good cause is the movant's diligence in attempting to meet the [scheduling] order's requirements.").

Furthermore, Defendants' purported reason for needing to amend does not demonstrate diligence or establish good cause. Tharp and Kotrc blame an alleged error in drafting their Answer.They claim they "never had any intent to admit the allegations" in paragraphs 34 through 36 and state "[i]t is unknown how the mix up occurred and the responses changed from 'deny' as originally drafted, to 'admit.'" Filing 40 at 2. This explanation strains plausibility. First, the Answer as filed groups together Paragraphs 34 through 37, not just paragraphs 34 through 36. See Filing 22 at 3 ("Defendants admit the allegations of Paragraph [sic] 34 through 37." (emphasis added)). Thus, it is unclear how only the responses to paragraphs 34 to 36 would be incorrect due to an inadvertent drafting mistake. Furthermore, Defendants seem to concede that portions of these paragraphs are, in fact,...