United States District Court, D. Colorado
RECOMMENDATION OF UNITED STATES MAGISTRATE
Y. Wang, United States Magistrate Judge.
matter comes before this court for recommendation on
Plaintiff FidoTV Channel, Inc.'s (“Plaintiff”
or “FidoTV”) Motion for Leave to Amend Complaint
and Join Parties (“Motion to Amend” or
“Motion”), filed January 31, 2019. See
[#58]. The undersigned considers the Motion pursuant to 28
U.S.C. § 636(b) and the Memorandum dated February 3,
2019 [#59]. This court concludes that oral argument will not
materially assist in the resolution of this matter.
Accordingly, having reviewed the Motion, associated briefing,
and applicable case law, this court respectfully
RECOMMENDS that the Motion to Amend be
GRANTED IN PART and DENIED IN PART.
is a Colorado corporation that “provides a 24x7, 365
days a year, cable television channel focused on dogs for dog
lovers.” [#5 at ¶ 1]. On or about February 12,
2015, Plaintiff entered into a Network Operations Services
Agreement (the “Agreement”) with Defendant The
Inspirational Network, Inc. (“Defendant” or
“Inspiration”)-a North transponder time to
connect FidoTV's channel to cable, satellite TV[, ] and
telecom video distributors throughout the United States,
” as well provides its own television shows for
distribution. See [id. at ¶¶ 2,
6]. The Agreement had a commencement date of October 14,
2015, the date on which Defendant would launch FidoTV
Network, and called for the award of 504, 000 shares of
preferred stock to Inspiration. See [id. at
to the Agreement, FidoTV was to pay Inspiration $21, 000 at
the end of the 33rd month (July 14, 2018) and then $77, 000
at the end of the 34th month (August 14, 2018) through the
60th month. See [#5 at ¶¶ 16, 18]. The
Agreement provided FidoTV a 30-day period to pay its
invoices. See [id. at ¶ 18]. According
to Plaintiff, on July 1, 2018, Defendant submitted two
“false and misleading invoice[s] stating that an
installment payment of [$77, 000] was due from FidoTV on July
31, 2018” despite the Agreement's provision that
Plaintiff owed only $21, 000 by July 31, 2018 and $77, 000 by
September 13, 2018. See [id. at
¶¶ 17-19]. On August 1, 2018, Inspiration issued to
Plaintiff a Notice of Payment Default and Termination,
wherein Inspiration gave Plaintiff “until August 31,
2018 to pay the entire past-due amount in full” or else
Inspiration would terminate the Agreement without further
notice. See [id. at ¶ 21].
efforts to negotiate an extension to the August 31 deadline
proved futile. See [#5 at ¶ 22]. On August 30,
2018, FidoTV initiated the instant action against Defendant
in the District Court for the City and County of Denver,
asserting claims for breach of contract (“Claim
1”) and breach of the implied covenant of good faith
and fair dealing (“Claim 2”), see [#5],
while also seeking a 14-day Temporary Restraining Order,
see [#1-4; #6]. By Order dated August 30, 2018,
Plaintiff received a 14-day Temporary Restraining Order, with
a permanence hearing set for September 7, 2018. See
[#1-5; #6]. Defendant, however, removed this action to this
District pursuant to 28 U.S.C. § 1332 on September 6,
2018. See [#1].
removal, the Parties stipulated to an extension of the
Temporary Restraining Order to after the September 28, 2018
hearing before the presiding judge, the Honorable Christine
M. Arguello. See [#19]. On September 28, 2018, Judge
Arguello granted FidoTV “a preliminary injunction
barring Defendant from terminating service under the
[Agreement] through November 30, 2018, ” subject to
Plaintiff posting a $335, 000 bond. See [#34 at
1-2]. The preliminary injunction dissolved at 11:59 p.m. on
November 30, 2018. See [id. at 2].
here, the Parties then appeared before the undersigned for a
Scheduling Conference, at which this court set January 15,
2019 as the deadline for Joinder of Parties and Amendment of
Pleadings, among other pretrial deadlines. See [#47
at 7]. The Parties requested and this court granted an
extension of the January 15 deadline to January 31.
See [#51; #54]. On January 31, 2019, Defendant filed
its Second Amended Answer and Counterclaims pursuant to
D.C.COLO.LCivR 15.1(a) with Plaintiff's consent,
see [#56; #57], while Plaintiff filed the instant
Motion to Amend, see [#58]. Plaintiff now seeks
leave to amend to (1) add new factual allegations to Claims 1
and 2 against Defendant as well as (2) add two new
Defendants, David Cerullo and Mark Kramer, and (3) assert
separate claims for breach of fiduciary duties against
Messrs. Cerullo and Kramer (“Claims 3 and 4”) and
two additional claims against Messrs. Cerullo and Kramer and
Defendant for aiding and abetting breach of fiduciary duties
(“Claim 5”) and tortious interference with
prospective business advantage (“Claim 6”).
See [#15 at 1-2]. Inspiration has since responded in
opposition to the Motion to Amend, see [#62], and
Plaintiff replied, see [#63]. Because the Motion to
Amend is ripe for recommendation, I consider the Parties'
15(a) of the Federal Rules of Civil Procedure governs motions
to amend when (as here) the moving party seeks leave to amend
its pleadings on or before the deadline for joinder of
parties and amendment of pleadings set by the Scheduling
Order. See Fernandez v. Bridgestone/Firestone, Inc.,
105 F.Supp.2d 1194, 1195 (D. Colo. 2000) (explaining that the
movant need not demonstrate good cause under Rule 16(b) under
such circumstances). Rule 15(a)(2) provides that leave to
amend “shall be freely given when justice so
requires.” Fed.R.Civ.P. 15(a)(2). “Indeed, Rule
15(a)'s purpose is to provide litigants the maximum
opportunity for each claim to be decided on its merits rather
than on procedural niceties.” Warnick v.
Cooley, 895 F.3d 746, 754-55 (10th Cir. 2018) (internal
quotation marks omitted). But the court may refuse leave to
amend 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. See Frank v. U.S. West, Inc., 3 F.3d
1357, 1365 (10th Cir. 1993). Whether to allow amendment is
within the trial court's discretion. Burks v.
Oklahoma Publ'g Co., 81 F.3d 975, 978-79 (10th Cir.
Claims 1 and 2
of its Motion Plaintiff seeks to include “extensive new
and updated factual allegations” regarding Claims 1 and
2 “based on . . . new documentary evidence.”
See [#58 at 2]. Defendant does not address this
request in its Response, and thus I presume it does not
oppose this issue. Further, upon review of the proposed
Amended Complaint, I find amendment in this regard
appropriate. The new allegations concern the Parties'
conduct since the inception of this lawsuit,  such as
Defendant's alleged improper billing practices,
Plaintiff's monthly payments to Defendant, and a
subsequent Notice of Default and Termination of the Agreement
issued by Defendant. See [#58-2 at ¶¶
34-49]. Thus, I respectfully RECOMMEND that
the Motion to Amend be GRANTED as to Claims
1 and 2.
Joinder of Messrs. Cerullo and Kramer
adding parties additionally require consideration of
Fed.R.Civ.P. 20, governing permissive joinder.”
Robinson v. Gillespie, 219 F.R.D. 179, 188 (D. Kan.
2003). Rule 20(a)(2) permits the joinder of defendants if
“any right to relief is asserted against them jointly,
severally, or in the alternative with respect to or arising
out of the same transaction, occurrence, or series of
transactions or occurrences, ” and “any question
of law or fact common to all defendants will arise in the
action.” Fed.R.Civ.P. 20(a)(2)(A), (B). It is within
the trial court's discretion to permit joinder of
defendants, and courts typically consider whether joinder
would prejudice any party, would cause needless delay, or
would offend notions of judicial economy and efficiency.
See Patrick Collins, Inc. v. John Does 1-2, No.
12-cv-01641-WYD-MEH, 2013 WL 3759942, at *3 (D. Colo. July
15, 2013) (noting that the Supreme Court of the United States
has encouraged the joinder of parties to promote judicial
argues for the joinder of Messrs. Cerullo and Kramer because
Plaintiff seeks relief from these individual defendants
jointly and severally and the claims asserted against them
arise from the same transaction or occurrence as Claims 1 and
2 asserted against Inspiration. See [#58 at
¶¶ 5-6]. Further, FidoTV argues, “It would be
costly and inefficient for the parties and for the Court if
the claims against Mr. Kramer and [Mr.] Cerullo were required
to be pursued in a separate action.” [Id. at
¶ 7]. Inspiration does not explicitly address this issue
in its Response, arguing instead that the proposed claims are
futile and thus this court should deny leave to amend.
See [#62 at 2, 4-13]. For the following reasons, I
conclude that joinder of Messrs. Cerullo and Kramer is
begin, Plaintiff mentions Messrs. Cerullo and Kramer in its
Complaint, though it does not assert claims against these
individuals. For instance, FidoTV alleges that Messrs.
Cerullo and Kramer, both employees of Inspiration, became
members of FidoTV's Board of Directors, which increased
Inspiration's “voting power and influence”
over the Board of Directors, and that during their tenure on
the Board of Directors a member disclosed confidential Board
information to one of Plaintiff's vendors and
“urged that vendor(s) not to settle a programming and
production dispute with FidoTV.” See [#5 at
¶¶ 11-12, 15]. And In her Order denying
Defendant's Motion to Strike these allegations from the
Complaint, Judge Arguello held that such allegations
“may bear on Plaintiff's claims; on both
parties' affirmative defenses of estoppel, waiver, and
unclean hands; and on damages[, ]” and may affect the
“equitable relations between the parties.” [#48
addition, because Plaintiff alleges that Messrs. Cerullo and
Kramer are agents and/or representatives of Defendant whose
conduct bears relevance to the soured relationship between
the Parties, I find joinder of Messrs. Cerullo and Kramer to
be appropriate at this early juncture. Indeed, Plaintiff
seeks to include two additional claims against Messrs.
Cerullo and Kramer and Inspiration based on their collective
conduct. Cf. Wayman v. Accor N. Am., Inc., 486
F.Supp.2d 1280, 1285 (D. Kan. 2007) (permitting the joinder
of employee as additional defendant in negligence suit
against employer for injuries sustained by the plaintiff when
employee was acting within employment-capacity and struck the
plaintiff with a vehicle); accord Council on
American-Islamic Relations Action Network, Inc. v.
Gaubatz, 891 F.Supp.2d 13, 31 (D.D.C. 2012) (“In
sum, Plaintiffs claim that SANE and Yerushalmi are liable on
essentially the same legal theories and the same set of
facts. As a result, granting Plaintiffs leave to name SANE
and Yerushalmi as defendants in this action will promote
judicial economy, expedite the resolution of Plaintiffs'
claims, and eliminate unnecessary litigation.”). In so
recommending, this court does not pass on the merits of the
allegations against Messrs. Cerullo or Kramer.
The Proposed New Claims
not directly challenging the joinder of Messrs. Cerullo and
Kramer under Rule 20(a)(2), Defendant opposes the four new
claims asserted in the proposed Amended Complaint, arguing
that the court should deny the Motion to Amend on three
grounds: (1) futility, (2) undue delay, and (3) undue
prejudice. I consider each in turn.
in their discretion, may deny leave to amend upon a
determination that such amendment would be futile. See
Castleglen, Inc. v. Resolution Trust Corp., 984 F.2d
1571, 1585 (10th Cir. 1993). “A proposed amendment is
futile if the complaint, as amended, would be subject to
dismissal.” Full Life Hospice, LLC v.
Sebelius, 709 F.3d 1012, 1018 (10th Cir. 2013) (internal
quotation marks omitted). While courts sometimes decline to
consider futility in favor of a subsequent motion to dismiss,
Gen. Steel Domestic Sales, LLC v. Steelwise, LLC,
No. 07-CV-01145-DME-KMT, 2008 WL 2520423, at *4 (D. Colo.
Jun. 20, 2008) (suggesting that a “futility argument
seems to place the cart before the horse, ” and is
better suited for a Rule 12(b)(6) motion), this court finds
that it is more efficient in this case to consider the
Parties' arguments in the context of this instant motion
instead of awaiting another round of motions practice.
“If a party opposes a motion to amend [...] on the
grounds of futility, the court applies the same standard to
its determination of the motion that governs a motion to
dismiss under Fed.R.Civ.P. 12(b)(6).” JDK LLC v.
Hodge, No. 15-CV-00494-NYW, 2015 WL 5766466, at *2 (D.
Colo. Oct. 2, 2015) (citation and internal quotation marks
omitted) (ellipsis added).
of Fiduciary ...