DK Holdings v. Miva, Inc., 3:16-cv-00580

Background

dotCOM Host (plaintiff) is an internet hosting company that had a licensing/distribution relationship with Miva (defendant), including a most-favored-nations (MFN) clause in an addendum.
In 2009 Miva shifted to a SaaS model, entered the web-hosting business (via Hostasaurus/Miva Merchant), and raised dotCOM’s SaaS prices; dotCOM lost a substantial share of customers.
dotCOM sued (operative pleading: Third Amended Complaint, TAC) asserting seven claims including breach of contract; the TAC’s breach theory alleged only that Miva breached the MFN clause by moving dotCOM’s customers to Miva’s own hosting (Hostasaurus), not by offering lower prices to other third-party hosts.
The court granted partial summary judgment for defendants on the breach claim, holding that selling licenses directly to clients hosted by Miva did not violate the MFN clause as pled; the court did not consider a third-party price-discrimination theory because it was not alleged in the TAC.
dotCOM moved for reconsideration, arguing defendants had notice of the third-party pricing theory (based on discovery and deposition questions) and, alternatively, sought leave to amend the TAC to add that theory.
The court denied reconsideration (no newly discovered evidence, clear error, or intervening law; plaintiff may not raise a new theory at summary judgment) and denied without prejudice leave to amend because plaintiff failed to show Rule 16(b) good cause (lack of diligence in seeking to modify the scheduling order).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether court should reconsider partial summary judgment on breach because defendants had notice of an unpleaded third-party pricing theory	dotCOM: discovery and deposition questioning put defendants on notice of the third-party pricing theory, so court should consider it	Defendants: TAC did not plead that theory; summary judgment stage is not a chance to raise an unpled theory	Denied — plaintiff cannot use summary judgment to present a theory not pleaded; pleadings must give fair notice under Rule 8
Whether the TAC plausibly alleged a breach by differential pricing to third-party hosts	dotCOM: TAC’s breach allegations and language of MFN claim encompass discrimination against any other host, not limited to Hostasaurus	Defendants: TAC alleges a specific theory (migration to Miva’s host) and contains no factual allegations about discounted sales to other hosts	Denied — court finds the TAC did not plead the third-party pricing theory with sufficient factual detail to give fair notice
Whether evidence of third-party pricing raised in discovery cures pleading deficiency	dotCOM: discovery showing third-party discounts demonstrates defendants were on notice and supports reconsideration/amendment	Defendants: discovery does not substitute for properly pleaded claims; summary judgment cannot be defeated by belated factual theories	Denied — prior discovery does not excuse failure to allege the claim in the TAC filed after that discovery
Whether leave to amend should be granted to add the third-party pricing theory post-deadline	dotCOM: requests leave to file a fourth amended complaint to add the theory	Defendants: prejudiced by late amendment; scheduling order controls; plaintiff lacked diligence	Denied without prejudice — plaintiff failed to show Rule 16(b) good cause (diligence) to modify the scheduling order

Key Cases Cited

Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 877 (9th Cir. 2000) (standards for reconsideration; extraordinary remedy)
Wasco Prods., Inc. v. Southwall Techs., Inc., 435 F.3d 989 (9th Cir. 2006) (summary judgment is not a procedural second chance to flesh out inadequate pleadings)
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must contain factual allegations sufficient to state a plausible claim)
Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard: plausibility and factual content)
Johnson v. Mammoth Recreations, Inc., 975 F.2d 604 (9th Cir. 1992) (Rule 16(b) good-cause inquiry focuses on diligence to modify scheduling order)
Foman v. Davis, 371 U.S. 178 (1962) (policy favoring liberal amendment under Rule 15, but balanced against prejudice and futility)