United States District Court, D. Colorado
KRISTEN L. MIX, UNITED STATES MAGISTRATE JUDGE
matter is before the Court on Plaintiff's Motion
for Leave to File Second Amended Complaint
[#72] (the “Motion”). Defendants
filed a Response [#75] in opposition to the Motion, and
Plaintiff filed a Reply [#76]. The Motion is thus fully
briefed and ripe for resolution. For the reasons set forth
below, the Motion [#72] is GRANTED.
filed suit on July 14, 2017, alleging that Defendants Adam
Hirschfeld (“Hirschfeld”) and Joseph Galban
(“Galban”) misappropriated confidential
information and trade secrets to benefit Plaintiff's
competitor, Defendant Ally Consulting, LLC
(“Ally”). In the present Motion [#72], Plaintiff
moves for leave to file its Second Amended Complaint [#72-1],
which seeks to add: (1) Craig Hirschfeld, Joseph Johnson,
Katie Stromstad, Ross Rhinehart, and Ally Energy Services,
Inc. as new Defendants; (2) new claims consisting of
conversion and violations of the Racketeer Influenced and
Corrupt Organizations Act (“RICO”), 18 U.S.C.
§§ 1961-1968, and Computer Fraud and Abuse Act
(“CFAA”), 18 U.S.C. § 1030; and (3) new
factual allegations. The three current Defendants oppose the
Motion [#72], arguing that Plaintiff's amendments are
made in bad faith, are unduly delayed, and are futile.
See Response [#75]. The Court has not yet entered a
scheduling order, nor has it set a deadline to join parties
and amend pleadings, and therefore, Plaintiff's motion is
timely. See Minute Order [#74]. Thus, the Court
considers any arguments raised by the parties related to
whether justice would be served by amendment. See
Fed. R. Civ. P. 15(a)(2).
Court has discretion to grant a party leave to amend its
pleadings. Foman v. Davis, 371 U.S. 178, 182 (1962);
see Fed. R. Civ. P. 15(a)(2) (“The court
should freely give leave when justice so requires.”).
The purpose of the rule is to provide litigants “the
maximum opportunity for each claim to be decided on its
merits rather than on procedural niceties.” Minter
v. Prime Equip. Co., 451 F.3d 1196, 1204 (10th Cir.
2006). “Refusing leave to amend is generally only
justified upon a showing of undue delay, undue prejudice to
the opposing party, bad faith or dilatory motive, failure to
cure deficiencies by amendments previously allowed, or
futility of amendment.” Frank v. U.S. West,
Inc., 3 F.3d 1357, 1365 (10th Cir. 1993) (citation
omitted). “[Defendants] bear the burden of showing that
the proposed amendment is sought in bad faith [or is]
futile.” Corp. Stock Transfer, Inc. v. AE Biofuels,
Inc., 663 F.Supp.2d 1056, 1061 (D. Colo. 2009) (citing
Fluker v. Fed. Bureau of Prisons, No.
07-cv-02426-CMA-CBS, 2009 WL 1065986, at *4 (D. Colo. Apr.
amendment is futile only if it would not survive a motion to
dismiss. See Bradley v. Val-Mejias, 379 F.3d 892,
901 (10th Cir. 2004) (citing Jefferson Cty. Sch. Dist. v.
Moody's Inv'rs Servs., 175 F.3d 848, 859 (10th
Cir. 1999)). “In ascertaining whether plaintiff['s]
proposed amended complaint is likely to survive a motion to
dismiss, the court must construe the complaint in the light
most favorable to plaintiff[ ], and the allegations in the
complaint must be accepted as true.” Bennett v.
Wells Fargo Home Mortg., No. 16-cv-03185-CMA-KLM, 2017
WL 4675524, at *1 (D. Colo. Oct. 18, 2017) (citing Murray
v. Sevier, 156 F.R.D. 235, 238 (D. Kan. 1994)).
Moreover, “[a]ny ambiguities must be resolved in favor
of plaintiff[ ], giving [plaintiff] ‘the benefit of
every reasonable inference' drawn from the
‘well-pleaded' facts and allegations in [the]
complaint.” Id. Defendants challenge the
proposed additions of RICO and CFAA claims, arguing that they
are futile, but make no such argument regarding the proposed
conversion claim. See Response [#75].
noted above, Plaintiff seeks leave to add a new statutory
claim against Defendants under RICO. See Second Am.
Compl. [#72-1]. Plaintiff alleges that Defendants
engaged in a coordinated scheme to form Defendant Ally and
transform it into a direct competitor of Plaintiff's.
Reply [#76] at 6. Plaintiff alleges that Defendants
“hijacked” its resources, confidential
information, and employees, all while still employed by
Plaintiff. Id. Further, Plaintiff alleges that
Defendants utilized Plaintiff's resources and information
in order to carry out their alleged fraudulent scheme.
argue that the alleged RICO claim in the Second Amended
Complaint is legally and factually insufficient to survive a
motion to dismiss. Response [#75] at 10.
Specifically, Defendants state that (1) Plaintiff does not
have any trade secrets; (2) Plaintiff has provided little or
no information as to why the alleged predicate acts would
survive an inquiry into a valid RICO claim; and (3)
Plaintiff's claim is subject to dismissal because there
is no requisite enterprise. Id. at 10-13.
Essentially, Defendants argue that Defendant Ally and its
employees were operating within the permissible bounds of
regularly conducted business practices.
state a claim under RICO, Plaintiff must plead
“sufficient facts to make plausible (1) conduct; (2) of
an enterprise; (3) through a pattern[;] (4) of racketeering
activity.” Christou v. Beatport, LLC, 849
F.Supp. 2d. 1055, 1077 (D. Colo. 2012) (citing Sedima,
S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985)).
Racketeering activity is defined “to mean any of
numerous acts ‘chargeable' or
‘indictable' under enumerated state and federal
laws, including . . . federal mail and wire fraud
statutes.” Christou, 849 F.Supp. 2d. at
1077-78; see also 18 U.S.C. §§ 1341 and
1343. Plaintiff must also meet the requirements of
Fed.R.Civ.P. 9(b), which states: “In alleging fraud or
mistake, a party must state with particularity the
circumstances constituting fraud or mistake.” See
Pine Tel. Co., Inc. v. Alcatel Lucent USA Inc., 617
Fed.Appx. 846, 860 (10th Cir. 2015) (citation omitted). The
Second Amended Complaint must “set forth the time,
place and contents of the false representations, the identity
of the party making the false statements, and the
consequences thereof.” Lawrence Nat'l Bank v.
Edmonds, 924 F.2d 176, 180 (10th Cir. 1991).
Defendants argue that the RICO claim is subject to dismissal
because Plaintiff does not have any actual trade secrets.
Response [#75] at 11. Defendants, however, do not
cite to any case law supporting this proposition.
Additionally, Plaintiff argues that its trade secret claims
have nothing to do with its independent RICO claim.
Reply [#76] at 4. To support a RICO claim, Plaintiff
is merely required to plead sufficient facts to make
plausible conduct of an enterprise through a pattern of
racketeering activity. Christou, 849 F.Supp. 2d. at
1077. Defendants fail to explain how these elements
necessarily require allegations regarding ...