Pipeline Prods., Inc. v. Madison Cos.

PIPELINE PRODUCTIONS, INC., et al., Plaintiffs and Counterclaim Defendants, v. THE MADISON COMPANIES, LLC, et al., Defendants and Counterclaimants.

Case No. 15-4890-KHV-ADM

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS

August 28, 2019

MEMORANDUM AND ORDER

This matter comes before the court on Plaintiff Pipeline Productions, Inc., Backwood Enterprises, LLC, OK Productions, Inc., and Brett Mosiman's (collectively "Pipeline") Motion for Leave to Amend Complaint (ECF No. 552). Pipeline asserts claims in this lawsuit against The Madison Companies, LLC and Horsepower Entertainment, LLC (collectively "Madison"). Pipeline now seeks leave to file a Second Amended Complaint that adds KaabooWorks, LLC, KaabooWorks Services, LLC, Kaaboo Del Mar, LLC, and Wardawgs (collectively, the "Kaaboo entities") as defendants. The Kaaboo entities are related to Madison as part of the same corporate family. Pipeline seeks to assert a tortious interference claim against the Kaaboo entities and also seeks to hold them liable for Pipeline's claims against Madison under successor liability theories. Madison argues the court should deny the motion because Pipeline unduly delayed in seeking to amend, Madison would be unduly prejudiced by the late amendments, and the amendments are futile. As explained below, the court finds no valid grounds to deny the motion given the liberal standards governing leave to amend, the procedural posture of this case, and the gist of Madison's futility arguments. Pipeline's motion is therefore granted.

I. BACKGROUND

Pipeline asserts claims against Madison for breach of contract, breach of fiduciary duty, fraud, and tortious interference arising from the parties' business dealings relating to the Thunder on the Mountain country music festival ("Thunder") in 2015. (Pretrial Order, ECF No. 477 ¶ 4(a)(1)-(4), at 18-20.) Pipeline alleges that it formed a joint venture with Madison to put on Thunder but shortly before the festival was scheduled to occur, Madison pulled out. Pipeline contends this "left [Pipeline] holding the bag for all artist payments and festival expenses" and, furthermore, that Madison tried to further destroy Pipeline's business, reputation, and financial condition by hiring away Pipeline's partners and employees. (Id. at 14-15.) Because of this, Pipeline claims that it was unable to provide ticket refunds, had to divert funds to other businesses, and effectively destroyed Pipeline's festival-related businesses. (Id.) Meanwhile, Pipeline contends that Madison tried to make its entities "judgment proof by scheming and 'transitioning' their interests, assets, and businesses to other entities in the hopes of preventing Plaintiffs from obtaining fair and just remuneration." (Id.)

This case has an unusually protracted procedural history. Pipeline filed suit on May 21, 2015. (ECF No. 1.) Madison promptly moved to dismiss for failure to state a claim or, alternatively, to transfer to the District of Delaware, where a related case was pending. (ECF No. 6.) The case was then tied up with motion practice relating to issues in the Delaware litigation, and Madison's related motion to stay the proceedings. (ECF Nos. 16, 20.) On February 22, 2017, U.S. District Judge Kathryn H. Vratil denied Madison's motion to dismiss or transfer. (ECF No. 37.) Madison then moved for reconsideration of the order, which the district judge denied on April 27, 2017. (ECF Nos. 46, 50.)

Meanwhile, the previously assigned Magistrate Judge K. Gary Sebelius set this case for a scheduling conference on February 15, 2017. (ECF No. 33.) But the court postponed the scheduling conference at Pipeline's request because it was in the process of securing new counsel. (ECF Nos. 34.) After Pipeline's new counsel entered his appearance, Pipeline was granted leave to file an amended complaint that included new allegations and added fraud and tortious interference claims. (ECF No. 56.) On June 21, 2017, Pipeline moved to compel Madison to participate in a Rule 26(f) conference and begin discovery. (ECF No. 57.) Madison promptly filed another motion to dismiss (this time, directed at the amended complaint) and opposed Pipeline's discovery motion because its second motion to dismiss was pending. (ECF No. 58, 59.) At Madison's request, Magistrate Judge Sebelius stayed discovery pending the district court's determination of Madison's motion to dismiss. (ECF No. 61.) On October 11, 2017, the district judge largely denied Madison's motion to dismiss. (ECF Nos. 59, 64.) In doing so, the court ordered Magistrate Judge Sebelius to expedite pretrial proceedings. (ECF No. 64.)

Magistrate Judge Sebelius conducted the initial scheduling conference on January 5, 2018 (ECF No. 88)—over two and a half years into the case. The court set a discovery deadline of August 31, 2018, and a pretrial conference in September of 2018. (Id.) Discovery disputes ensued almost immediately. Without belaboring the minutiae, suffice it to say for purposes of the present motion that many of these discovery disputes centered around Pipeline's attempts to obtain discovery from and regarding Madison's related business entities, including the Kaaboo entities. These included Pipeline's motions to compel Madison to respond to certain requests for production ("RFPs"), Madison's motions for protective order(s) limiting Pipeline's Rule 30(b)(6) topics, and multiple telephone calls to the court during depositions. According to Pipeline, Madison was "never more obstinate than when it came to Kaaboo-related discovery." (ECF No. 552, at 2.)Magistrate Judge Sebelius largely ruled in favor of Madison on these issues in June, July, and October of 2018. (ECF Nos. 195, 203, 314.) So, Madison was successful in preventing Pipeline from obtaining discovery regarding the Kaaboo entities during the original discovery period. After a series of extensions, discovery closed on December 31, 2018, with several motions outstanding.

Pipeline moved to amend on December 4, 2018. (ECF No. 335.) According to Pipeline, it did the best it could with discovery stalled regarding the relationship between Madison and the Kaaboo entities, which Pipeline contends remained "shrouded" at that time. (ECF No. 552, at 3.) Pipeline sought to add as defendants Kaaboo LLC; KaabooWorks Services, LLC; Wardawgs, LLC; Bryan Gordon (who had been previously dismissed from this suit); Rob Walker; and 25 Doe defendants. The proposed pleading sought to assert claims of fraudulent transfer, alter ego/piercing the corporate veil, and it sought to add the Kaaboo entities to its tortious interference claim. On March 6, 2018, Judge Sebelius denied the motion to amend, largely based on Pipeline's failure to establish good cause to extend the scheduling order deadline for motions to amend, which was April 15, 2018. (ECF No. 421, at 4-7.) Judge Sebelius found that "the key factual allegations giving rise to plaintiffs' proposed amendments were known to plaintiffs by the summer of 2018, at the latest." (Id. at 5.) Because the good cause analysis is similar to the Rule 15(a) undue delay analysis, Judge Sebelius also found that Pipeline had unduly delayed. (Id. at 8.) And he found that Madison would be unduly prejudiced because of the procedural posture of the case. (Id. at 8-9.) By that time, discovery was closed. The court reasoned that plaintiff's suggestion that all discovery on the new issues could be completed in two months was unrealistic, and that Pipeline's proposed amendment to include Doe defendants foreshadowed yet another amended pleading formally naming them, causing "significant additional delays." (Id. at 9.) With discoveryostensibly closed, the undersigned convened a pretrial conference and entered a pretrial order on April 30, 2019. (ECF No. 477.)

Meanwhile, Pipeline had filed objections to Magistrate Judge Sebelius's orders denying discovery into the Kaaboo entities and denying Pipeline's motion to amend. (ECF Nos. 325, 427, 429.) On May 1, 2019, Judge Vratil sustained Pipeline's objections to Judge Sebelius' ruling striking "related entities" from Pipeline's Rule 30(b)(6) deposition notice. (ECF No. 479.) Among other things, Judge Vratil found that discovery related to the Kaaboo entities was relevant to multiple issues in the case. Judge Vratil recognized that this ruling "significantly altered the landscape of pretrial proceedings in this case" and that other pending motions for review were premised on changed circumstances. (ECF No. 493, at 2.) She therefore vacated those related rulings—including Magistrate Judge Sebelius's order denying Pipeline leave to amend—and referred the case to the undersigned to conduct further pretrial proceedings "given the new parameters of discovery." (Id.)

Separately, and within days of Judge Vratil's discovery rulings, the undersigned granted in part Pipeline's motion for sanctions stemming from Madison's belated production of a draft consulting agreement. (ECF No. 486.) Among other things, the court found that Pipeline should have the opportunity to take limited additional discovery to put it in the same position it would have been in had Madison complied with its discovery obligations. (Id. at 9.)

Given the new discovery parameters, the undersigned reopened discovery in order to make sure that Pipeline had a full and fair opportunity to conduct discovery into the related-entities issue, beginning with a status conference on May 9, 2019. (ECF Nos. 482, 487.) The court ultimately allowed the written discovery at issue in Pipeline's objections to Judge Sebelius' prior discovery order, as well as other discovery relating to the Kaaboo entities. During this additional period ofdiscovery, Pipeline produced additional documents and served subpoenas on the Kaaboo entities. Pipeline also took the FED. R. CIV. P. 30(b)(6) deposition of Madison and the Kaaboo entities, and reopened depositions of certain key witnesses. The court oversaw this process in May, June, and July via numerous...