SFM LLC v. Best Roast Coffee LLC

          ORDER

          James A. Teilborg, Senior United States District Judge.

         Pending before the Court is Defendants Best Roast Coffee LLC and Jason Roe's (“Defendants”)^[1] Motion to Dismiss for Lack of Jurisdiction. (Doc. 65). Plaintiff SFM, LLC d/b/a Sprouts Farmers Market (“Plaintiff”) has responded, (Doc. 69), and Defendants have replied, (Doc. 74). Also pending before the Court is defense counsel's motion to withdraw. (Doc. 58). The clients have been notified and have not opposed withdrawal. Plaintiff has opposed withdrawal on the grounds that Best Roast Coffee LLC cannot proceed pro se. (Doc. 66). The Court now rules on the motions.

         I. BACKGROUND

         As the Court explained in its prior order, (Doc. 29), this case concerns Plaintiff's allegations that Defendants have infringed its trademarks and disseminated a false narrative about the parties' business relationship. Plaintiff has since filed a First Amended Complaint (“FAC”) changing a Jane Doe defendant to Julia Yim-Jason Roe's wife. (Doc. 52). Defendants now move to dismiss this case, alleging that the FAC fails to comply with Federal Rule of Civil Procedure (“Rule”) 15, that the Court lacks personal jurisdiction over Defendants, and that the Court lacks subject-matter jurisdiction over this action based on an arbitration provision in the Terms of Use (“Terms”) on Plaintiff's website.

         II. DISCUSSION

         A. Compliance with Rule 15

         As an initial matter, the Court must address Defendants' request to dismiss the FAC because Plaintiff filed it outside the time period in which amendments are permitted as a matter of course and did not otherwise obtain this Court's approval. Plaintiff acknowledges its failure to timely file this amendment but asks the Court to excuse its error because the FAC “was filed solely to change the case caption from Jane Doe to Julia Yim (Mr. Roe's wife's name).” (Doc. 69 at 4).

         Unless leave to amend is permitted as a matter of course, “a party may amend its pleading only with the opposing party's written consent or the court's leave. The court should freely give leave when justice so requires.” Fed.R.Civ.P. 15(a)(2). Although the policy favoring amendments “should be applied with ‘extreme liberality, '” courts may deny a motion to amend if it would result in undue delay, is motivated by bad faith or dilatory motive, would be futile, or would prejudice the opposing party. United States v. Webb, 655 F.2d 977, 979-80 (9th Cir. 1981) (citation omitted). “Prejudice to the opposing party is the most important factor.” Jackson v. Bank of Hawaii, 902 F.2d 1385, 1387 (9th Cir. 1990).

         Here, although Plaintiff technically failed to comply with the letter of Rule 15(a), such a minor amendment at this early stage of the litigation will not prejudice Defendants. Thus, had Plaintiff filed a proper motion to amend, it would have been granted. Accordingly, in consideration of the factors outlined in Webb, the Court accepts the FAC as the operative pleading in this case. See Narramore v. HSBC Bank USA, N.A., No. 09-cv-635-TUC-CKJ, 2010 WL 2732815, at *2 (D. Ariz. July 7, 2010).

         B. Personal Jurisdiction

         Defendants first seek dismissal on the grounds that the Court lacks personal jurisdiction over them. (Doc. 65 at 2-8). As Plaintiff points out, however, Defendants previously filed a Rule 12(b) motion, (Doc. 20), that did not raise lack of personal jurisdiction as a defense. (Doc. 69 at 2-3). Thus, Plaintiff argues, Defendants have waived this defense. (Id. at 2-3).

         “[I]t is well-recognized that personal jurisdiction-unlike subject-matter jurisdiction-may be waived.” Smith v. Idaho, 392 F.3d 350, 355 (9th Cir. 2004). A defendant waives a personal jurisdiction defense by not raising it in a responsive pleading or in a motion to dismiss that precedes a responsive pleading. Fed.R.Civ.P. 12(h)(1). Because Defendants filed a prior motion to dismiss under Rule 12(b)(6), (Doc. 20 at 1, 8), and did not raise lack of personal jurisdiction as a defense, they have waived their ability to do so now.^[2]

         C. Claims Subject to Arbitration

         Defendants next argue that this Court lacks subject-matter jurisdiction because this case is subject to the arbitration provision found in the Terms. (Doc. 65 at 8). In response, Plaintiff asserts that the Terms do not apply because “Defendants have done much more than use a Sprouts' trademark[, ] Defendants have purposefully disseminated false statements.” (Doc. 69 at 12). Plaintiff argues in the alternative that if the Terms do apply “the only effect ...