United States District Court, S.D. New York
OPINION AND ORDER
RONALD L. ELLIS, District Judge.
Plaintiffs Hyo Jung, Kee Soo Hong, JeongMin Song, HaeYong Lee, Dal Young Cho, Kyungmo Yan, and SangYoon Shin ("Plaintiffs") commenced this action on March 5, 2013, alleging wage and hour violations under the Fair Labor Standards Act, 29 U.S.C. §§ 201, et seq. ("FLSA") and New York Labor Law ("NYLL") and its accompanying regulations. (Compl. ¶¶ 27-54.) Plaintiffs were waiters and busboys at Defendants' karaoke lounge, Chorus Karaoke. This action was referred to the undersigned on October 4, 2013, for a specific discovery dispute, (Docket No. 11). which was resolved at a telephone conference with the Parties on October 21, 2013. On October 29, 2013, the case was referred for Defendants' motion to amend their Answer to include counterclaims under the Computer Fraud and Abuse Act, 28 U.S.C. § 1030(a) et seq. ("CFAA") and under common law theories of conversion, misappropriation of trade secrets, and unjust enrichment. (Docket No. 15.) For the reasons which follow, Defendants' motion is DENIED.
Plaintiffs were employed by Defendants in various years spanning 2008 to 2012. Defendants allege that all of the Plaintiffs quit their employment on February 10, 2013, (Def. Mem. Of Law. In Supp. Of Mot. To Amend ("Def Mem.") at 4), and Plaintiffs do not dispute that fact. (Pl. Mem. Of Law In Opp. To Mot. To Amend ("Pl. Mem.") at 23.) On April 16, District Judge Colleen McMahon issued a scheduling order which set July 1 as the deadline for amending the pleadings. Plaintiff served discovery requests on April 22 and Defendants served discovery requests on May 18. Plaintiffs produced documents in response to Defendants' discovery requests on June 28, including the "customer list" at issue in Defendants' proposed counterclaims.
On July 9, and August 1, 2013, Plaintiffs took the Rule 30(b)(6) deposition of the corporate Defendants. On July 24, Defendants served a notice of deposition on Plaintiff Jung for August 22, and subsequently cancelled that date, and Jung was deposed on September 24. Plaintiff Hong was deposed on October 1. At his deposition, Hong testified that: "[T]here was an occasion when the shop had to change the computer and at that time, the manager instructed me to back up the information that had been stored in the previous computer in a file. So I forwarded the content to my own e-mail address when the computer was removed and I stored the information that had been installed in my e-mail account and that was it. I never opened them." (Pl. Decl. In Opp. To Mot. To Amend ("Pl. Decl.") Ex. 3 at 23:13-23.) Hong later testified that, although he did not know what was contained in the file, he sent it to Plaintiffs' counsel "so that they can see if the files could be of some use and help the case. ( Id. at 25:21-25.)
The deposition of Hong began on October 3, 2013, but was interrupted by a dispute over the deposition. On October 21, the Parties appeared before the Court for a telephone conference to address discovery disputes. At the conference, the Court ordered Plaintiffs' counsel to forward by email to Defendants' counsel any electronic files in her possession that were sent to her by Hong. On October 24, Plaintiffs' counsel forwarded three emails from Hong to Defendants' counsel. (Def. Decl. In Supp. Of Mot. To Amend, Ex. D.) Defendants acknowledged receipt of the emails, but disputed the completeness of the submission. (Docket No. 14.)
Defendants allege that, in April 2013, Plaintiffs initiated their own business venture, Club 88 NY. Defendants seek to rely on the deposition of Jung for this assertion. The pages Defendants provided from Jung's deposition indicate that Jung coordinated with a person named "Michael Yoo" to rent a space for parties with certain unnamed individuals, that the space was called "Club 88" on party days, and that Jung was referred to Michael Yoo by a man named "Haeyong, " whose American name was "Michael." (Def. Decl. Ex. F.) Defendants assert that Plaintiffs used Defendants' customer list and other proprietary information taken by Hong from Defendants' computer to promote their new venture, citing Exhibit G, which appears to be a printout from the website of Club 88 NY. Plaintiffs dispute both of these allegations. With respect to Club 88 NY, they do not dispute that the named Plaintiffs worked together at some point in time after leaving Defendants' employ, but dispute that all of the named Plaintiffs worked together for Club 88 NY. (Pl. Mem. at 23.) With respect to the customer list, Defendants allege that since Plaintiffs left their employment, their business has suffered a "significant downturn." (Def. Lee Decl. ¶ 9.) Defendants stated at the October 21 Telephone Conference for the first time that they intended to move to amend their Answer to add counterclaims. Defendants filed the instant motion on November 4, 2013.
A. The Motion to Amend Should Be Denied Under Rule 16(b)
Generally, leave of court to amend pleadings should be freely given when justice so requires. Fed.R.Civ.P. 15(a); Rachman Bag Co. v. Liberty Mut. Ins. Co., 46 F.3d 230 (2d Cir. 1995), aff'd, 101 F.3d 1393 (2d Cir. 1996). However, a party moving to amend the pleadings made after the deadline to do so in the court's scheduling order must first satisfy the good cause requirement of Federal Rule of Civil Procedure 16(b). Fed.R.Civ.P. 16(b). See Parker v. Columbia Pictures Industries, 204 F.3d 326, 339-40 (2d Cir. 2000). "A finding of good cause' depends on the diligence of the moving party." Id. at 340. Although diligence is "the primary consideration, " the court may consider other relevant factors, including whether amendment of the pleadings will prejudice the opposing party. Kassner v. 2nd Avenue Delicatessen, Inc., 496 F.3d 229, 244 (2d Cir. 2007); Grant v. Citibank, 10-CV-2955 (KNF), 2010 WI., 5187754 (S.D.N.Y. Dec. 6, 2010). If a proposed amendment is based on "information that the party knew or should have known prior to the deadline, leave to amend is properly denied." Soroof Trading Dev. Co., Ltd. V. GE Microgen, Inc., 283 F.R.D. 142, 147 (S.D.N.Y. 2012). See Fuller v. Interview, Inc., 07-CV-5728 (RJS) (DE).
Defendants did not act with diligence in pursuing their motion to amend. Defendants filed the motion to amend on November 4, 2013, over four months after the deadline for amendment of pleadings, July 1, 2013. Defendants assert that they were unaware of the facts underlying their counterclaims until Hong's deposition on October 1, 2013. (Def. Lee. Decl. ¶ 4.) However, Plaintiffs assert, and Defendants do not dispute, that on May 18, 2013, Defendants sent Plaintiffs their document requests, including a request that Plaintiffs [p]roduce all documents in the form when they were taken, including invoices, receipts, customer information. or other employee's information which are the property of the Employer that each Plaintiff without permission, may have removed from Chorus's place of business at any time during their employment with Chorus." (Pl. Schulman Decl. Ex. 2 at 5.) On June 28, Plaintiffs responded to Defendants' document requests, and, among other documents, produced the customer list now at issue. (Pl. Schulman Decl. ¶ 8.) The production of the list at issue before the deadline for amendments to the pleadings, if not the original request for the list, demonstrates that Defendants knew or should have known the facts underlying their counterclaims prior to the deadline. Soroof Trading Dev. Co., Ltd., 283 F.R.D. at 147.
Defendants assert that Plaintiffs merely produced print-outs or hard copy documents in response to their May 18, 2013 discovery request, and that they were not on notice that documents had been taken from Defendant Chorus's business computer until they received documents in electronic form from Plaintiffs' counsel pursuant to the Court's order. This argument is without merit. Whether or not Defendants knew of the facts supporting the counterclaims is not the standard. The record shows that even if Defendants did not know the facts underlying their proposed claims before July 1, 2013, they should have known.
Defendants also failed to act with diligence by not requesting an extension of the deadline as soon as they received the customer list from Plaintiffs. Even crediting Defendants' claim that they were unaware of the alleged unauthorized taking of electronic information before October 1, 2013, Defendants did not act with diligence when they failed to notify the Court about their intended motion to amend before the October 21, 2013 Telephone Conference. Defendants correctly assert that they notified the Court of Hongss alleged unauthorized taking of the files on October 4, 2013, but failed to notify the Court of their intent to amend the pleadings. Defendants also delayed in serving their discovery requests for over a month after the scheduling order was issued. (Pl. Schulman Decl. ¶¶ 3, 6), and despite appearing to suspect that some of their former employees could have taken documents from Chorus without permission failed to serve any requests seeking the ...