Opinion

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4 UNITED STATES DISTRICT COURT

5 SOUTHERN DISTRICT OF CALIFORNIA

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7 COSTCO WHOLESALE Case No.: 3:25-cv-01720-RBM-BJW

CORPORATION,

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ORDER:

Plaintiff,

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v. (1) GRANTING MOTION FOR

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LEAVE TO FILE FIRST AMENDED

SOUTHLAND ENVELOPE, LLC;

11 COMPLAINT [Doc. 21]; and

MARKETING.COM, LLC,

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Defendants. (2) GRANTING IN PART MOTION

13 TO SEAL [Doc. 19]

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16 Pending before the Court are Plaintiff Costco Wholesale Corporation’s (“Plaintiff”

17 or “Costco”) Motion for Leave to File First Amended Complaint (“Motion to Amend”)

18 (Doc. 21) and Motion to File Under Seal Motion to Amend Complaint and Supporting

19 Declaration (“Motion to Seal”) (Doc. 19). Defendants Southland Envelope, LLC

20 (“Southland”) and Marketing.com, LLC (“Marketing.com”) (collectively, “Defendants”)

21 filed an Opposition to Plaintiff’s Motion for Order Granting Leave to File First Amended

22 Complaint (“Opposition”) (Doc. 23) and a Response Regarding Plaintiff’s Motion to File

23 Under Seal (Doc. 30). Plaintiff filed a Reply in Support of Motion for Leave to File First

24 Amended Complaint (“Reply”). (Doc. 26.)

25 The Court finds this matter suitable for determination without oral argument

26 pursuant to Civil Local Rule 7.1(d)(1). Having reviewed the filings above, and for the

27 reasons discussed below, the Motion to Amend is GRANTED and the Motion to Seal is

28 GRANTED in part.

1 I. BACKGROUND

2 A. Procedural History

3 Plaintiff filed the Complaint on July 7, 2025. (Doc. 1.) After the Court granted a

4 joint stipulation to extend Defendants’ deadline to respond (Doc. 5), Defendants filed their

5 Answer to the Complaint on September 15, 2025. (Doc. 7.) Magistrate Judge Major set

6 an Early Neutral Evaluation (“ENE”) for October 22, 2025. (Doc. 8.) The case was then

7 transferred to Magistrate Judge White, who continued the ENE to November 5, 2025.

8 (Docs. 9, 10.) Judge White held the ENE on November 5 and set a further ENE for January

9 12, 2026 to allow the Parties to “conduct preliminary written discovery related to alter ego

10 liability” in the hopes of “facilitat[ing] future settlement discussions.” (Doc. 12.) Judge

11 White held the second ENE on January 12, 2026. (Doc. 14.) That same day, Judge White

12 issued the Scheduling Order. (Doc. 15.) In relevant part, the Scheduling Order required

13 “[a]ny motion to join other parties, to amend the pleadings, or to file additional pleadings”

14 to be filed by February 26, 2026. (Id. ¶ 1.) During the ENE, “Plaintiff informed Defendants

15 of its intention to seek leave of court to file a First Amended Complaint.” (Doc. 23 at 3

16 (citing Doc. 23 at 9 [Decl. of Christopher Cianci (“Cianci Decl.”)] ¶ 4).) On February 2,

17 2026, the Parties met and conferred but were unable to reach an agreement regarding a

18 stipulation to allow Plaintiff to file a First Amended Complaint (“FAC”). (Id. at 4.) On

19 February 19, 2026, Plaintiff filed the instant Motion to Amend and Motion to Seal. (Docs.

20 19, 21.)

21 B. Original Complaint

22 The Complaint alleges that Defendant Southland breached a 2022 lease agreement

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25 1 The factual summary in this section reflects Plaintiff’s allegations, not conclusions of

fact or law by this Court. See Harper Constr. Co., Inc. v. Nat’l Union Fire Ins. Co., Case

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No. 18-cv-00471-BAS-NLS, 2020 WL 1820124, at *9 (S.D. Cal. Apr. 10, 2020) (“[S]ince

27 a challenged motion for leave to amend operates like a motion to dismiss, the Court accepts

all factual allegations in the proposed amended complaint as true and construes them in the

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1 and a 2024 amendment to the lease agreement. (Doc. 1 ¶¶ 1–3, 17–40.) The Complaint

2 also named Marketing.com as a Defendant under an alter ego theory of liability because:

3 (1) Marketing.com acquired Southland in 2022 or 2023; (2) Costco’s communications

4 about the alleged breach of contract have been with employees of both Marketing.com and

5 Southland with email addresses ending in “Marketing.com;” and (3) “Marketing.com is

6 Southland’s sole owner, they have shared leadership, and Marketing.com has not

7 adequately capitalized Southland.” (Id. ¶¶ 41–48.)

8 C. Proposed First Amended Complaint

9 The proposed FAC (Doc. 21 at 14–28) seeks to add JAL Equity Corporation (“JAL”)

10 as a Defendant under an alter ego theory of liability. (Id. at 4.) Costco represents that

11 during the preliminary discovery authorized by Judge White before the second ENE,

12 Costco learned that: (1) JAL is Marketing.com’s sole member and manager, and “[w]hen

13 Marketing.com acquired Southland, JAL was the Parent Guarantor for all existing and

14 future payments with respect to amounts held back by Marketing.com” (Doc. 21 at 24 ¶

15 50); (2) the same person, Eran Salu, is the president and sole member of the board of

16 directors for Southland, Marketing.com, and JAL (id.); and (3) “Marketing.com and

17 Southland are mere shells or instrumentalities for JAL,” as JAL

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21 II. LEGAL STANDARDS

22 A. Motion to Amend

23 Under Federal Rule of Civil Procedure (“Rule”) 15(a)(2), a party can amend its

24 pleading only with the opposing party’s written consent or the Court’s leave. “[L]eave

25 shall be freely given when justice so requires,” Fed. R. Civ. P. 15(a), and this policy is “to

26 be applied with extreme liberality.” Morongo Band of Mission Indians v. Rose, 893 F.2d

27 1074, 1079 (9th Cir. 1990) (citation omitted).

28 Nevertheless, “[i]n deciding whether justice requires granting leave to amend,

1 factors to be considered include the presence or absence of undue delay, bad faith, dilatory

2 motive, . . . undue prejudice to the opposing party and futility of the proposed amendment.”

3 Moore v. Kayport Package Express, 885 F.2d 531, 538 (9th Cir. 1989) (citing Foman v.

4 Davis, 371 U.S. 178, 182 (1962)). “Futility of amendment can, by itself, justify the denial

5 of a motion for leave to amend.” Bonin v. Calderon, 59 F.3d 815, 845 (9th Cir. 1995). The

6 party opposing amendment bears the burden of showing that amendment is not warranted.

7 See DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 187 (9th Cir. 1987).

8 B. Motion to Seal

9 “[T]he courts of this country recognize a general right to inspect and copy public

10 records and documents, including judicial records and documents.” Nixon v. Warner

11 Commc’ns, Inc., 435 U.S. 589, 597 (1978). “Unless a particular court record is one

12 ‘traditionally kept secret,’ a ‘strong presumption in favor of access’ is the starting point.”

13 Kamakana v. City & Cnty. of Honolulu, 447 F.3d 1172, 1178 (9th Cir. 2006) (citing Foltz

14 v. State Farm Mut. Auto Ins. Co., 331 F.3d 1122, 1135 (9th Cir. 2003)). “The presumption

15 of access is ‘based on the need for federal courts . . . to have a measure of accountability

16 and for the public to have confidence in the administration of justice.’” Ctr. for Auto Safety

17 v. Chrysler Grp., LLC, 809 F.3d 1092, 1096 (9th Cir. 2016) (quoting United States v.

18 Amodeo, 71 F.3d 1044, 1048 (2d Cir. 1995)).

19 A party seeking to seal bears the burden of overcoming the strong presumption of

20 public access. Foltz, 331 F.3d at 1135. The showing required to meet this burden depends

21 upon whether the documents to be sealed relate to a motion that is “more than tangentially

22 related to the merits of the case.” Ctr. for Auto Safety, 809 F.3d at 1102. When the

23 underlying motion is more than tangentially related to the merits, the “compelling reasons”

24 standard applies. Id. at 1096–98. When the underlying motion does not surpass the

25 tangential relevance threshold, the “good cause” standard applies. Id.

26 III. DISCUSSION

27 A. Motion to Amend (Doc. 21)

28 Defendants argue that the Court should deny leave to amend because: (1) Plaintiff

1 unduly delayed seeking amendment because the factual allegations underlying the

2 proposed amendment were known to Plaintiff long ago; (2) amendment, and the subsequent

3 expansion of discovery, would substantially prejudice Defendants; and (3) amendment is

4 futile because the FAC fails to plead facts sufficient to support alter ego liability for JAL.

5 (Doc. 23 at 2–8.) The Court disagrees and will grant Plaintiff leave to amend.

6 1. Plaintiff did not unduly delay in moving to amend the Complaint.

7 Judge White authorized preliminary discovery “related to alter ego liability” on

8 November 5, 2025. (Doc. 12.) “Defendants provided written objections and responses to

9 Costco’s First Interrogatories and Requests for Production on December 19, 2025,” and

10 produced documents to Costco on December 29, 2025. (Doc. 26-1 [Decl. of Amanda

11 Beane (“Beane Decl.”)] ¶ 2.) At the ENE on January 12, 2026, Plaintiff informed

12 Defendants of its intent to amend the Complaint. (Cianci Decl. ¶ 4.) On January 12, 2026,

13 Judge White also issued the Scheduling Order and set a February 26, 2026 deadline for the

14 Parties to file any motion to join other parties or amend the pleadings. (Doc. 15 ¶ 1.) The

15 Parties filed a Joint Motion for Protective Order on January 20, 2026 (Doc. 16), and

16 Defendants produced their discovery documents pursuant to the Protective Order on

17 February 9, 2026. (Beane Decl. ¶ 4.) On February 2, 2026, the Parties met and conferred

18 but were unable to stipulate to an FAC. (Cianci Decl. ¶ 4.) Not even three weeks after

19 this, and a week before its deadline to do so under the Scheduling Order, Plaintiff filed the

20 instant Motion to Amend. (Doc. 21.)

21 The record does not support a finding of undue delay. Plaintiff represents that it

22 would not have been able to name JAL as a Defendant until receiving the preliminary

23 written discovery, which was, at earliest, December 29, 2025. (Beane Decl. ¶ 2.) Two

24 weeks later, the Parties attempted to reach a settlement at the second ENE. (Doc. 14.)

25 Two weeks after that, Plaintiff attempted to reach an agreement with Defendants to file an

26 FAC without motion practice. (Beane Decl. ¶¶ 2–5; Cianci Decl. ¶¶ 4–5.) It was only

27 shortly after the Parties realized they could not agree that Plaintiff filed the Motion to

28 Amend. (Doc. 21.) The Court “does not see anything . . . that establishes that either side

1 engaged in undue delay, as opposed to a good-faith effort to meet and confer and try to

2 work out a compromise before involving the [C]ourt.” Updateme Inc. v. Axel Springer SE,

3 Case No. 17-cv-05054-SI (LB), 2018 WL 5734670, at *4 (N.D. Cal. Oct. 31, 2018). “To

4 the contrary, the [C]ourt appreciates the parties’ attempts to resolve the issue amongst

5 themselves before involving the [C]ourt.” Id.; see also Dumke v. Southside Realty Invs.,

6 LLC, Case No.: 20-cv-0935-GPC-LL, 2021 WL 230036, at *2 (S.D. Cal. Jan. 22, 2021)

7 (“Because the motion was filed before the deadline imposed by the scheduling order, the

8 Court finds that there is no showing of undue delay.”).

9 Defendants argue that the FAC relies “primarily on publicly available corporate

10 filings, publicly announced corporate relationships, and alleged internal organizational

11 structures” that Plaintiff could have discovered earlier had they performed their due

12 diligence. (Doc. 23 at 5.) Even crediting this argument,2 Plaintiff’s FAC also relies on

13 information gleaned from Defendants’ responses to written discovery requests. (See Doc.

14 20 at 24 ¶ 49 (citing Doc. 20-1 at 10–13).) In sum, the Court does not find that Plaintiff

15 unduly delayed in seeking leave to amend.

16 2. Amendment will not unduly prejudice Defendants.

17 Defendants argue that amendment “would significantly alter the scope of this case

18 by adding a new corporate defendant and asserting alter ego liability against it.” (Doc. 23

19 at 5.) Specifically, “allowing amendment would require additional written discovery and

20 document production, necessitate depositions concerning corporate governance and

21 ownership, expand the scope of discovery far beyond the original contract dispute, and may

22 ultimately delay resolution of the case.” (Id. at 6.) Plaintiff responds that discovery is still

23 in its early stages and will not close for another month, and that “the claims and theories

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2 From Defendants’ response to Plaintiff’s motion to file under seal (Doc. 30), it appears

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that many of these filings are not publicly available. (See Doc. 30 at 7–8 (arguing that the

27 exhibits relied upon by Plaintiff should be sealed because they “contain[ ] confidential and

proprietary information regarding Defendants’ strategic financial agenda, specifically

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1 of the case are not changing, but simply reaching the ultimate parent—JAL—of Southland

2 and Marketing.com.” (Doc. 21 at 9.)

3 The Court finds that although Defendants may be prejudiced by amendment, such

4 prejudice is not substantial enough to warrant denying leave to amend. First, the FAC does

5 not add any new claims, and notably already features an alter ego claim against

6 Marketing.com. (See Doc. 21 at 30–44 (redlined FAC).) Second, although the addition of

7 a new Defendant will require additional discovery, such additional discovery “is nothing

8 more than the inconvenience always present when a party is required to defend against a

9 [lawsuit].” Davis v. Soc. Serv. Coordinators, Inc., No. 1:10-cv-02372-OWW-SKO, 2011

10 WL 3207818, at *2 (E.D. Cal. July 28, 2011). It certainly does not constitute prejudice

11 substantial enough to overcome the “extreme liberality” with which the Court must apply

12 Rule 15. Rose, 893 F.2d at 1079. Third, discovery opened on January 12, 2026, is still

13 open, and this Action is just over nine months old. Defendants argue that they “would be

14 hard-pressed to complete, let alone adequately conduct, discovery into additional issues

15 raised by Plaintiff’s amended complaint.” (Doc. 23 at 6.) Plaintiff’s counsel attests that

16 they have discussed with Defendants’ counsel the unlikelihood of experts in this case, “and

17 that with the Court’s permission, fact discovery could extend into the expert discovery

18 period without disrupting the remaining case schedule if needed.” (Beane Decl. ¶ 6.) The

19 Court is confident that the Parties will be able to continue to meet and confer and, if

20 necessary, move to continue the discovery deadlines as necessary and as warranted by good

21 cause. See Morgan v. Laborers Pension Trust Fund for N. Cal., 81 F.R.D. 669, 675 (N.D.

22 Cal. 1979) (finding “that the proper response is to extend defendants’ discovery time rather

23 than to deny plaintiffs’ motion to amend the complaint”). The Court thus finds that

24 Defendants will not be unduly prejudiced by amendment.

25 3. The Court declines to reach futility at this stage.

26 Defendants argue that the FAC’s allegations fail to state a claim that JAL may be

27 liable under an alter ego theory. (Doc. 23 at 6–7.) Plaintiff responds substantively to this

28 argument (Doc. 21 at 10–12), but also argues that Defendants’ “futility argument attempts

1 to prematurely litigate the merits of the amendment.” (Doc. 26 at 2.) Although “[f]utility

2 of amendment can, by itself, justify the denial of a motion for leave to amend,” Bonin, 59

3 F.3d at 845, “[d]enial of leave to amend on this ground is rare.” Netbula, LLC v. Distinct

4 Corp., 212 F.R.D. 534, 539 (N.D. Cal. 2003). “Ordinarily, courts will defer consideration

5 of challenges to the merits of a proposed amended pleading until after leave to amend is

6 granted and the amended pleading is filed.” Netbula, LLC, 212 F.R.D. at 539; see also

7 SAES Getters S.p.A. v. Aeronex, Inc., 219 F. Supp. 2d 1081, 1086 (S.D. Cal. 2002) (“While

8 courts will determine the legal sufficiency of a proposed amendment using the same

9 standard as applied on a Rule 12(b)(6) motion, . . . such issues are often more appropriately

10 raised in a motion to dismiss rather than in an opposition to a motion for leave to amend.”).

11 Therefore, the Court declines to deny Plaintiff leave to amend due to futility, undue delay,

12 or undue prejudice. The Motion to Amend (Doc. 21) is thus GRANTED.

13 B. Motion to Seal (Doc. 19)

14 Defendants seek to seal portions of: Plaintiff’s Motion to Amend, exhibits filed in

15 support, and Plaintiff’s proposed FAC. (Doc. 19 at 2.) Because the Motion to Amend is a

16 non-dispositive motion, the Parties need only demonstrate “good cause” in order to support

17 their requests to seal it and the exhibits filed in support. See Pintos v. Pac. Creditors Ass’n,

18 605 F.3d 665, 677–78 (9th Cir. 2010); Lyft, Inc. v. AGIS Software Dev., LLC, Case No. 21-

19 cv-04653, 2022 WL 2135757, at *2 (N.D. Cal. May 2, 2022) (“Because the parties’ sealing

20 motions pertain to a motion for leave to file an amended complaint, the Court finds that the

21 ‘good cause’ standard applies.”) (citation omitted). However, the Parties must demonstrate

22 “compelling reasons” to seal portions of the FAC. See McCrary v. Elations Co, LLC, No.

23 EDCV 13-00242 JGB (OPx), 2014 WL 1779243, at *6 (C.D. Cal. Jan. 13, 2014) (“While

24 a complaint is not, per se, dispositive, it is the root, the foundation, the basis by which a

25 suit arises and must be disposed of.”) (internal quotation marks and citation omitted).

26 1. Sealing the Motion to Amend

27 Defendants seek to seal fewer than 20 lines of Plaintiff’s Motion to Amend, a single

28 interrogatory and response, and several operating and purchasing agreements, arguing that

1 these materials include: “(1) proprietary pricing structures and financial terms,

2 (2) confidential contractual provisions and business agreements with third parties,

3 (3) internal business practices, processes, and operational strategies, and (4) non-public

4 information regarding Defendants’ commercial relationships.” (Doc. 30 at 4.) Having

5 reviewed the sealed information and Defendants’ representations, the Court finds that

6 Defendants have provided good cause for sealing the portions of the documents related to

7 Plaintiff’s Motion to Amend. The documents that the Court finds appropriate to seal are

8 those already identified by Plaintiff’s helpful highlighting:

9 1. Doc. 21 at page 4, lines 15–16;

10 2. Doc. 21 at page 6, lines 8–9 and 12–20;

11 3. Doc. 21 at page 11, lines 22–25;

12 4. Doc. 21-1 at page 11, line 17;

13 5. Doc. 21-1 at page 12, lines 8–9;

14 6. Doc. 21-1, Exhibits B, C, and D.

15 2. Sealing the FAC

16 Defendants also seek to seal about five sentences in the 15-page FAC. Defendants

17 argue that these portions of the FAC “contain[ ] confidential and proprietary information”

18 regarding Defendants’ “allocation of labor . . . , distribution of assets and liabilities between

19 themselves and third-party entities . . . , [and] internal business strategy.” (Doc. 30 at 4–

20 7.) Defendants argue that disclosure of this information would result in significant harm

21 to Defendants, as it “would expose Defendants to serious competitive disadvantages by

22 revealing non-public insights into their financial strategies, cost management processes,

23 and internal operational methodologies.” (Id. at 8.) Furthermore, Defendants argue,

24 disclosure would allow competitors to “(1) undercut Defendants’ pricing and contractual

25 terms; (2) gain leverage in negotiations with shared counterparties; (3) replicate or exploit

26 Defendants’ internal business strategies; and (4) interfere with existing or prospective

27 business relationships.” (Id. at 8–10.)

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1 Defendants’ burden is to “articulate compelling reasons supported by specific factual

2 findings that outweigh the general history of access and the public policies favoring

3 disclosure, such as the public interest in understanding the judicial process.” Kamakana,

4 447 F.3d at 1178–79 (cleaned up). Having considered Defendants’ arguments and weighed

5 them against the public interest in understanding the judicial process, the Court finds that,

6 with one exception discussed below, the requested portions of the FAC should be sealed.

7 These portions concern Defendants’ internal business structures, strategic staffing

8 decisions, and agreements regarding debts, obligations, liabilities, and assets. See Velasco

9 v. Chrysler Grp. LLC, Case No. CV 13-08080 DDp (VBK), 2017 WL 445241, at *2 (C.D.

10 Cal. Jan. 26, 2017) (finding compelling reasons to seal records containing “information

11 about proprietary business operations, a company’s business model or agreements with

12 clients, [and] internal policies and strategies”); Riddick v. Sony Elecs., Inc., Case No. 24-

13 cv-00319-BAS-JLB, 2024 WL 3928899, at *2 (S.D. Cal. Aug. 23, 2024) (finding

14 compelling reasons to seal and noting that “[c]ourts throughout the Ninth Circuit have

15 found future business planning and competitive strategy are quintessential business

16 information that may harm a firm’s competitive standing if disclosed”). Furthermore,

17 Defendants’ request to seal is tailored to only those lines of the FAC that reference the

18 internal business information at issue.

19 However, there is one line of the FAC that Defendants move to file under seal that

20 cannot be filed under seal: “Mr. Salu signed the Amended Operating Agreement as the

21 President of Marketing.com and the President of Southland.” (Doc. 20 at 40:22–41:1.)

22 The Court finds that disclosure of this sentence—indicating only that Mr. Salu is the

23 president of two companies and signed an agreement in that capacity—does not bring with

24 it the same risks to Defendants’ competitive standing. Additionally, given that Plaintiff

25 asserts an alter ego theory of liability, this information goes to the heart of this litigation,

26 which significantly strengthens the public’s interest in disclosure. See Associated Vendors,

27 Inc. v. Oakland Meat Co., 210 Cal. App. 2d 825, 838–40 (1962) (instructing courts to

28 consider, when determining whether alter ego liability exists, “identification of the

| directors and officers of the two entities in the responsible supervision and management”

2 || and “the use of a corporation as a mere shell, instrumentality or conduit for a single venture

3 || or the business of an individual or another corporation”).

4 Accordingly, the documents that the Court finds appropriate to seal are:

5 1. Doc. 21 at page 15, lines 24—25;

6 2. Doc. 21 at page 16, line 1;

7 3. Doc. 21 at page 24, lines 17—23, but not the sentence starting with “Mr. Salu;”

8 4. Doc. 21 at page 25, lines 4-5 and 8-9;

9 5. Doc. 21 at page 31, lines 24-25;

10 6. Doc. 21 at page 32, line 1;

11 7. Doc. 21 at page 40, lines 17—23, but not the sentence starting with “Mr. Salu;”

12 8. Doc. 21 at page 41, lines 4—5 and 10-12.

13 IV. CONCLUSION

14 Based on the foregoing reasons, the Court GRANTS in part and DENIES in part

15 || Plaintiff's Motion to Seal (Doc. 19). The Clerk of Court SHALL FILE Doc. 20 to the

16 || docket under seal.

17 The Court also GRANTS Plaintiff's Motion to Amend (Doc. 21). Plaintiff SHALL

18 || FILE the FAC, consistent with the approved redactions discussed above, on or before

19 || April 23, 2026. Defendants shall answer or otherwise respond to the FAC on or before

20 || May 14, 2026.

21 IT IS SO ORDERED.

22 ||Dated: April 16, 2026 Fe Le ; ? L □

23 HON. RUTH BERMUDEZ MONTENEGRO

24 UNITED STATES DISTRICT JUDGE

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