United States District Court, D. Oregon, Medford Division
OPINION & ORDER
D.CLARKE, UNITED STATES MAGISTRATE JUDGE
case comes before the Court on Plaintiff Rust-Oleum's
Motion for Leave to File an Amended Complaint (#54). For the
reasons discussed below, Rust-Oleum's motion is GRANTED.
and Defendant NIC entered into a Sales Agreement concerning
the product "Wipe New" prior to this litigation.
Under the Sales Agreement, Rust-Oleum assumed the obligation
to purchase certain minimum quantities of product from NIC or
alternatively pay a specified sum in exchange for the right
to be the exclusive purchaser of the Wipe New product
supplied by NIC for "Covered Applications." Compl.
Exhibit A, at 1 (#1-1). The parties mutually agreed to
terminate the Agreement approximately two years later and
entered into a Settlement Agreement. After receiving a cease
and desist letter from NIC, Rust-Oleum filed this action
seeking a determination that it has not breached its
obligations under both the Sales Agreement and Settlement
Agreement. Additionally, Rust-Oleum is seeking damages for
NIC's alleged breach of duty of good faith and fair
dealing resulting from its interference with Rust-Oleum's
business operations. In response, NIC filed counterclaims for
breach of contract, misappropriation of trade secrets, and is
also seeking damages. NIC counterclaims that Rust-Oleum used
its trade secrets to reverse engineer Wipe New and sell it
themselves. Rust-Oleum now seeks leave to amend its complaint
to add claims for fraud in the inducements and breach of
Rule of Civil Procedure 15(a) provides that leave to amend a
pleading "shall be freely given when justice so
requires." This rule represents a "strong policy
permitting amendment." Texaco, Inc. v.
Ponsoldt, 939 F.2d 794, 798 (9th Cir. 1991). The
liberality of the rule is qualified by the requirement that
the amendment not cause undue prejudice to the opposing
party, is not sought in bad faith, and is not futile.
Green v. City of Tucson, 255 F.3d 1086, 1093 (9th
Cir. 2001). Thus, whether leave to amend should be granted is
generally determined by considering the following: 1) undue
delay; 2) bad faith; 3) futility of amendment; and 4)
prejudice to the opposing party. Lockheed Martin v.
Network Solutions Inc., 194 F.3d 980, 986 (9th Cir.
of the factors merit equal weight. Eminence Capital, LLC
v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003)
(per curiam). The consideration of prejudice to the opposing
party carries the greatest weight and is the "touchstone
of the inquiry under Rule 15(a)." Id. at 1052.
Absent prejudice, or a strong showing of any of the remaining
factors, there exists a presumption under rule 15(a) in favor
of granting leave to amend. Id.
seeks to add claims for breach of contract and fraud in the
inducement, Rust-Oleum's proposed amendments are based on
alleged information uncovered during discovery. Rust-Oleum
allegedly discovered that NIC breached its exclusivity
obligations under the Sales Agreement by selling products to
third parties that were substantially similar or the same as
the "Products" defined by the Sales Agreement, and
by selling these products to third parties for "Covered
Applications." Rust-Oleum further claims that NIC
intentionally misrepresented that it had maintained
exclusivity to induce Rust-Oleum into entering the Settlement
argues that Rust-Oleum's additional claims are futile
because 1) Rust-Oleum released any and all known or unknown
claims against NIC when it signed the Settlement Agreement
and 2) Rust-Oleum's new claims fail to state a claim in
that they are inconsistent with the terms of the Sales
Agreement. NIC has not satisfied its burden of showing the
futility of Rust-Oleum's proposed amendments or that
undue prejudice will result from the amendments.
under Oregon law, fraud with respect to a transaction that is
the subject of a release does not bar enforcement of a
release, so long as the release was not itself the product of
fraud in the inducement. Ristau v. Wescold, Inc.,
868 P.2d 1331 (Or. 1994); see also Whitehead v.
Montgomery Ward & Co., Inc., 239 P.2d 226, 237 (Or.
1952) (if a plaintiff was induced to enter into a release
"by means of [the] defendant's fraud or material
misrepresentation, the transaction is voidable"). Here,
Rust-Oleum claims that the release itself was the product of
fraud in the inducement because it entered into the
Settlement Agreement in reliance on NIC's alleged
material misrepresentation that NIC had sold the
"Product" exclusively to Rust-Oleum. Therefore, the
existence of the Settlement Agreement does not bar
Rust-Oleum's claim of fraud in the inducement.
Rust-Oleum has alleged sufficient facts to support its breach
of contract claim at the pleading stage. "An amendment
is futile when 'no set of facts can be proved under the
amendment to the pleadings that would constitute a valid and
sufficient claim or defense.'" Robillard,
337 F.Supp.3d at 969 (D. Or. 2018) (quoting Miller,
845 F.2d at 214 (9th Cir. 1988)). When deciding a motion for
leave to amend under Rule 15(a), the Court may only consider
allegations in the proposed amended complaint and documents
incorporated by reference, such as the Sales Agreement.
See Robillard, 337 F.Supp.3d at 969. NIC argued that
it did not breach the Sales Agreement because the products
are not substantially similar or are applied in different
ways and introduced evidence about the products through a
declaration. Not only is this evidence outside the proposed
amended complaint, and therefore not appropriate for the
Court to consider, but whether the products are substantially
similar is an issue of fact that cannot be decided by the
Court at this time. Therefore, the presumption of Rule 15(a)
weighs in favor of granting leave to amend.
Motion for Leave to File an Amended ...