1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 6 GERALD D.W. NORTH, Case No. 24-cv-03410-SVK

7 Plaintiff, ORDER ON MOTIONS FOR LEAVE 8 v. TO AMEND THE PLEADINGS

9 WENDI THOMAS, et al., Re: Dkt. Nos. 37, 38 10 Defendants.

11 Before the Court are two motions for leave to amend the pleadings. Plaintiff Gerald D.W. 12 North seeks leave to amend the complaint to add a claim for civil theft. Dkt. 37; Dkt. 37-1 13 (proposed amended complaint). Defendants Anthony Thomas and Wendi Thomas have not filed 14 an opposition to Plaintiff’s motion. Defendants’ motion originally sought leave to amend both 15 their counterclaim (to add a claim for breach of fiduciary duty) and their answer (to add an 16 affirmative defense of offset). Dkt. 38. In their reply brief, Defendants withdrew their request for 17 leave to amend their counterclaim, but their request to amend their answer remains. Dkt. 43. 18 These motions are suitable for determination without a hearing. Dkt. 7-1(b). For the reasons 19 discussed below, the Court GRANTS Plaintiff’s motion for leave to amend the complaint to add a 20 claim for civil theft and GRANTS Defendants’ motion for leave to amend the answer to add an 21 affirmative defense of offset. 22 I. LEGAL STANDARD 23 Under Federal Rule of Civil Procedure 15, “a party may amend its pleading only with the 24 opposing party’s written consent or the court’s leave.” Fed. R. Civ. P. 15(a)(2). “The court 25 should freely give leave when justice so requires.” Id. A district court ordinarily must grant leave 26 to amend unless one or more of the following “Foman factors” is present: (1) undue delay, 27 (2) bad faith or dilatory motive, (3) repeated failure to cure deficiencies by amendment, (4) undue 1 Aspeon, Inc.,

(9th Cir. 2003) (citing Foman v. Davis,

, 182 2 (1962)). “[I]t is the consideration of prejudice to the opposing party that carries the greatest 3 weight.”

However, a strong showing with respect to one of the other factors may warrant 4 denial of leave to amend.

5 II. DISCUSSION 6 A. Plaintiff’s motion for leave to amend the complaint 7 Plaintiff’s motion seeks leave to add a new fourth cause of action and related allegations to 8 the complaint. See Dkt. 37; Dkt. 37-1. The new cause of action is for “Civil Theft” and is 9 premised on California Penal Code § 496. Dkt. 37-1 ¶ 44-50. That statute establishes criminal 10 penalties for “[e]very person who buys or receives any property that has been stolen or that has 11 been obtained in any manner constituting theft or extortion, knowing the property to be so stolen 12 or obtained, or who conceals, sells, withholds, or aids in concealing, selling, or withholding any 13 property from the owner, knowing the property to be so stolen or obtained.” Cal. Pen. C. § 496(a). 14 The statute “provides a private right for ‘[a]ny person who has been injured’ by the sale of stolen 15 property.” Citizens of Humanity, LLC v. Costco Wholesale Corp.,

(2009) 16 (citing Cal. Pen. C. § 496(c)); see also id. at 470. Such a person may seek “three times the 17 amount of actual damages, if any” that he or she sustained. Cal. Pen. C. § 496(c). 18 Defendants have not opposed Plaintiff’s motion for leave to amend the complaint. In light 19 of the requirement that the Court “freely give” leave to amend, and the absence of any showing by 20 Defendants that the Foman factors weigh against amendment, the Court GRANTS Plaintiff’s 21 motion for leave to amend the complaint. 22 B. Defendants’ motion for leave to amend the answer 23 As discussed above, Defendants have abandoned their effort to add a new counterclaim but 24 continue to seek leave to amend their answer to add an affirmative defense of offset. See Dkt. 38, 25 43. Defendants’ proposed new affirmative defense states: “Plaintiff’s damages, if any, are offset 26 by the damages he legally caused to Defendants by his actions, that include, but are not limited to, 27 those that constitute a breach of his fiduciary duty to Defendants.” Dkt. 31-1 at PDF p. 12. 1 Amended Counterclaim], amendment of the Answer to allege an affirmative defense of ‘offset’ 2 would be futile.” Dkt. 40 at 1. 3 “An amendment is futile when no set of facts can be proved under the amendment to the 4 pleadings that would constitute a valid and sufficient claim or defense.” Jones v. PGA Tour, Inc., 5 No. 22-cv-04486-BLF,

, at *4 (N.D. Cal. Feb. 21, 2023 (citations omitted). 6 “While courts will determine the legal sufficiency of a proposed amendment using the same 7 standard as applied on a Rule 12(b)(6) motion . . . such issues are often more appropriately raised 8 in a motion to dismiss rather than in an opposition to a motion for leave to amend.”

(citations 9 omitted). 10 The Court cannot say at this stage that there is no set of facts that can be proved under the 11 amendment that would constitute a valid affirmative defense of offset. See generally

Plaintiff 12 does not elaborate on his argument that a viable offset defense requires a viable underlying claim 13 for breach of fiduciary duty. In their reply, Defendants present a colorable argument that under 14 California Code of Civil Procedure § 431.70 and Safine v. Sinnott,

, 619 15 (1993), a time-barred claim (such as Defendants’ breach of fiduciary duty claim here) can be used 16 to offset a lawyer’s claim for fees. Dkt. 43 at 2. Plaintiff has not argued that any other Forman 17 factor weigh against granting Defendants leave to amend, and under the circumstances of this 18 case, the prejudice (if any) to Plaintiff of allowing Defendants to add an affirmative defense on 19 which Defendants will bear the burden to prove is minimal. 20 III. CONCLUSION 21 For the foregoing reasons, Plaintiff’s motion to amend the complaint and Defendants’ 22 motion to amend the answer are GRANTED. Plaintiff must file the amended complaint by 23 May 5, 2025. Defendants’ response to the amended complaint is due 14 days after the amended 24 complaint is filed. When Defendants file an answer to the amended complaint, they have leave to 25 include an affirmative defense for offset. In granting the Parties leave to amend these pleadings, 26 the Court takes no position on the viability of the newly-added claim or affirmative defense. 27 Defendants may file a counterclaim to the FAC only with leave of court. Defendants may 1 their motion for leave to file such a counterclaim. See Dkt. 43. Defendants also may not seek 2 || leave to file a counterclaim for promissory fraud, which the Court previously dismissed without 3 leave to amend. see Dkt. 29. 4 SO ORDERED. 5 || Dated: April 29, 2025 6 7 Seam yeYul SUSAN VAN KEULEN 8 United States Magistrate Judge 9 10 11 12

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