Cress v. Nexo Financial LLC et al

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United States District Court
Northern District of California
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
JOHN CRESS,
Plaintiff,
v.
NEXO CAPITAL INC.,
Defendant.
Case No. 23-cv-00882-TSH
ORDER GRANTING MOTION FOR
LEAVE TO FILE AMENDED
COMPLAINT
Re: Dkt. No. 76
I. INTRODUCTION
Plaintiff John Cress filed this action against Defendants Nexo Financial LLC, Nexo
Financial Services Ltd., Nexo AG, Nexo Capital, Inc., and Antoni Trenchev, Nexo’s CEO
(collectively, “Defendants”), alleging the Nexo parties fraudulently induced him to take out loans
collateralized by millions of dollars in digital assets, which were ultimately sold by the Nexo
parties. ECF No. 1. Nexo Capital, Inc. (“Nexo”) is the only remaining defendant in the case.
ECF No. 37 at 7. Pending before the Court is Cress’s Motion For Leave to Amend First Amended
Complaint pursuant to Federal Rules of Civil Procedure 15(a) and 16. ECF No. 76 (“Mot.”). The
Court finds this matter suitable for disposition without oral argument pursuant to Civil Local Rule
7-1(b) and VACATES the November 6, 2025, hearing. For the reasons stated below, the Court
GRANTS the motion.1
II. BACKGROUND
The facts of this case are well known to the parties, and the Court has previously
summarized this case’s background in its order on Defendants’ motion to dismiss. ECF No. 37;
1 The parties consent to magistrate judge jurisdiction pursuant to 28 U.S.C. § 636(c). ECF Nos. 6,
16.
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see Cress v. Nexo Fin. LLC, No. 23-cv-00882-TSH, 2024 WL 3187152 (N.D. Cal. June 25, 2024).
The Court incorporates by reference the factual background set forth therein.
Overall, Cress argues that amendment is warranted because “newly discovered evidence
produced by Nexo only within the last month” shows that (1) “Nexo systematically engaged in a
fraudulent scheme to extract undisclosed fees from [Cress] and other customers in connection with
over-the-counter (‘OTC’) transactions and loan liquidations, while actively concealing those fees
through fabricated confirmations and misleading statements”; and (2) “that Nexo knowingly
misrepresented to [Cress] and numerous other investors that the NEXO Token was ‘registered
with the SEC as a security,’ despite being on notice from the SEC itself that this representation
was false.” Mot. at 1:14–24.
A. Procedural Background
Cress filed this case on February 27, 2023, alleging five causes of action: (1) Fraudulent
Inducement of Contract (against all Nexo Defendants); (2) California Unfair Competition Law
(Cal. Bus. & Prof. Code §§ 17200, et seq. (“UCL”)) (against all Nexo Defendants); (3)
Unregistered Offer and Sale of Securities (Cal. Corp. Code §§ 25110, 25503) (against all
Defendants); (4) Unregistered Offer and Sale of Securities (Cal. Corp. Code §§ 25110, 25504)
(against Trenchev); and (5) Fraud in the Offer and Sale of Securities (Cal. Corp. Code §§ 25401,
25504.1) (against all Defendants). ECF No. 1.
On May 15, 2023, Defendants moved to dismiss the original Complaint pursuant to Rule
12(b)(2) and Rule 12(b)(6). ECF No. 19. On October 10, 2023, the Court granted in part and
denied in part Defendants’ motion. ECF No. 26. The Court dismissed all claims against all
Defendants, except Nexo, for lack of personal jurisdiction. Id. at 7–15. The Court denied
Defendants’ motion as to Cress’s first claim for fraudulent inducement of contract, finding his
allegations plausible at the motion to dismiss stage. Id. at 15–21. As to the UCL claim, the Court
granted Defendants’ motion to the extent it was based on Nexo’s alleged deceptive conduct in the
sale of the NEXO Token and Cress’s Nexo Earn Account, and also to the extent it is based on
Nexo’s advertised interest rates being available only to customers who maintain 10% of their
portfolio balance in the NEXO Token or on Nexo’s alleged failure to provide Cress notice before
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liquidating his assets. Id. at 24–25. As to Cress’s third claim under California Corporations Code
sections 25110 and 25503, the Court granted Defendants’ motion, finding Cress had not plausibly
alleged the existence of a non-exempt, unregistered security. Id. at 31. The Court also dismissed
Cress’s state law securities fraud claim, except as to the single alleged misrepresentation that the
NEXO Token was registered with the Securities and Exchange Commission (“SEC”) as a security.
Id. at 33. The Court granted Cress leave to amend. Id.
On November 10, 2023, Cress filed his First Amended Complaint (“FAC”), re-pleading
the same five causes of action. ECF No. 29. Defendants again moved to dismiss pursuant to Rule
12(b)(2) and Rule 12(b)(6). ECF No. 32. On June 25, 2024, the Court granted in part and denied
in part Defendants’ motion. ECF No. 37. The Court granted Defendants’ request to dismiss all
Defendants, except Nexo, without leave to amend. Id. at 7. The Court granted Defendants’
motion as to the UCL claim to the extent and for the same reasons as articulated in the Court’s
first dismissal order. Id. at 8. As to Cress’s claims under California Corporations Code sections
25110 and 25503, the Court granted Defendants’ motion to the extent it was based on the Earn
Account and Leveraged Investment Instrument but denied Defendants’ motion to the extent the
claim was based on the NEXO Token. Id. at 8–13. The Court also dismissed Cress’s state law
securities fraud claim, except as to the single alleged misrepresentation that the NEXO Token was
registered with the SEC as a security. Id. at 13. The Court denied Cress leave to amend his
dismissed claims. Id. at 8, 10, 13.
On July 23, 2024, Nexo filed an answer to the FAC. ECF No. 45. Nexo filed an amended
answer to the FAC on August 13, 2024. ECF No. 50.
On August 13, 2024, the Court issued a Case Management Order, setting the following
deadlines relevant here:
Deadline to Seek Leave to Amend Pleadings: 12/12/2024
Close of Fact Discovery: 8/29/2025
ECF No. 51. On May 7, 2025, pursuant to the parties’ stipulation, the Court amended the
scheduling order and set the close of fact discovery as February 27, 2026. ECF No. 71.
Cress informed Nexo of his intent to amend his complaint on September 22, 2025, and at
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Nexo’s request, held off “on filing the motion to allow the parties additional time to meet and
confer.” Mot. at 8:16–22 (citing Declaration of James Taylor-Copeland (“Taylor-Copeland
Decl.”) ¶ 21 (ECF No. 76-1)). “Nexo informed [Cress] on September 29, 2025 that it would not
stipulate to amendment, and that no further meet and confer efforts were necessary.” Id.
On September 30, 2025, Cress filed the instant Motion For Leave to Amend First
Amended Complaint pursuant to Federal Rules of Civil Procedure 15(a) and 16. ECF No. 76
(“Mot.”). Cress “seeks leave to add additional misrepresentations as the basis for his fraudulent
inducement claim, and add causes of action for fraudulent omission, common law fraud, civil
theft, civil RICO, and breach of contract.” Mot. at 1:25–2:2; see generally Proposed Second
Amended Complaint (“PSAC”) (ECF No. 76-3). On October 14, 2025, Nexo filed an Opposition.
ECF No. 80 (“Opp.”). On October 21, 2025, Cress filed a Reply. ECF No. 81 (“Reply”).
B. Relevant Discovery
Cress served his first set of document requests on July 25, 2024, and moved to compel
production in December 2024. Mot. at 3:9–14 (citing Taylor-Copeland Decl. ¶ 20). “From
January 2025 to April 2025, this Court issued six discovery orders defining the metes and bounds
of permissible discovery.” Id. (citing ECF Nos. 55, 62, 63, 65, 69, 72).
On March 19, 2025, Nexo produced two documents relevant to Cress’s Motion, both Nexo
internal emails. Opp. at 12:4–21 (citing Taylor-Copeland Decl. ¶¶ 7, 10, Exs. 5, 8); Reply at 5:9–
14; see Taylor-Copeland Decl., Exs. 5 (Email from Edward Tonkov on October 25, 2021) (ECF
No. 75-7), 8 (Email from Octavian Dinca on March 8, 2021) (ECF No. 75-10).2 Significant
portions of both documents are in Bulgarian, and Cress did not obtain certified translations until
September 29, 2025. Reply at 5:9–14 (citing Taylor-Copeland Decl. ¶¶ 7, 10). The documents
relate to two of Cress’s OTC transactions with Nexo, showing the fees charged by Nexo and
profits earned by Nexo on the transactions. Opp. at 12:4–21; Reply at 5:15–23. Cress states that
the documents demonstrate that Nexo was “selling its own digital assets to its customers.” Mot. at
5:17–18.
2 Cress filed Exhibits 2 through 17 to the Taylor-Copeland Declaration under seal. See ECF No.
75.
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In May 2025, Nexo began reviewing documents collected from court ordered custodians;
Nexo agreed to “substantially complete document production by August 31, 2025.” Id. at 3:18–25
(citing ECF No. 71 at 2).
On August 12, 2025, Nexo produced one document relevant to Cress’s motion. Taylor-
Copeland Decl. ¶ 14. This document is a communication from Nexo to the SEC—Nexo states that
“[a] liquidation fee of 5.0% is applied in such cases and these fees represent a significant source of
revenue to Nexo.” Mot. at 7:12–17 (citing Taylor-Copeland Decl., Ex. 12 (ECF No. 75-14)).
On August 31, 2025, Nexo produced 45,990 documents to Cress—containing internal
memos, spreadsheets, and emails—which included documents collected from the court ordered
custodians. Id. at 4:2–5:4. This production included twelve documents relevant to Cress’s
Motion. See Taylor-Copeland Decl., Exs. 2 (Nexo’s Retail OTC Procedures) (ECF No. 75-4), 3
(Nexo’s OTC Services) (ECF No. 75-5), 4 (Email from Hristov) (ECF No. 75-6), 6 (Nexo’s
internal sales data for Cress’s purchases) (ECF No. 75-8), 7 (Nexo’s Portfolio Booster charge of
$102,125 to Cress) (ECF No. 75-9), 9 (Nexo’s internal policy document on liquidation taxes)
(ECF No. 75-11), 10 (Nexo’s revenues) (ECF No. 75-12), 13 (Nexo client flow procedures) (ECF
No. 75-15), 14 (Nexo Terms and Conditions of Token Sale) (ECF No. 75-16), 15 (Email from
Martin J. Cameron) (ECF No. 75-17), 16 (Nexo communication to Arkansas Securities Dep’t)
(ECF No. 75-18), 17 (Nexo communication to SEC) (ECF No. 75-19); see also Mot. at 4:16–8:15
(discussing documents). One document, relating to OTC transactions, states: “We tell customers
Nexo does not charge commission on the transaction, while in fact we do.” Taylor-Copeland
Decl., Ex. 2. Another document states that for OTC sales, “NEXO token – we price them 3–5%
over the spot price.” Id. at Ex. 3. Several documents show the markup on Cress’s transactions,
along with Nexo’s profits, that Cress asserts were undisclosed to him. Id. at Exs. 6–8. The
internal policy document on liquidation taxes states, in all capital letters, “Importanta: We should
never under any circumstances mention there is a liquidation tax.” Id. at Ex. 9. The document
goes on to explain how “to convince [the customer] there is no mistake.” Id. And one document
shows that Nexo collected millions of dollars in liquidation fees. Id. at Ex. 10. Further, Nexo’s
Terms and Conditions of Token Sale states, “the offer and sale of this security instrument has not
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been registered under the U.S. Securities Act of 1933 . . . or under the securities laws of certain
states.” Id. at Ex. 14.
Following a meet and confer letter sent by Cress, Nexo made an additional production on
September 12, 2025, “containing some of its communications with regulators regarding the NEXO
Token.” Mot. at 4:10–15. This production included one document relevant to Cress’s Motion.
Taylor-Copeland Decl. ¶ 13. In this document, a communication from Nexo to the SEC, Nexo
states that it collects 5.0% liquidation fees. Reply at 7:22 (citing Taylor-Copeland Decl., Ex. 11
(ECF No. 75-13)).
Cress sent another meet and confer letter to Nexo on September 15, 2025. Mot. at 4:10–
15. Cress asserts that Nexo’s document production remains deficient.3 Id.
III. LEGAL STANDARD
A party seeking to amend a pleading after the date specified in a scheduling order must
first show “good cause” for the amendment under Federal Rule of Civil Procedure 16(b) and,
second, if good cause is shown, the party must demonstrate that the amendment is proper under
Rule 15. Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 608 (9th Cir. 1992). The good
cause standard “primarily considers the diligence of the party seeking the amendment.” Id. at 609.
If the moving party fails to show diligence, “the inquiry should end.” Coleman v. Quaker Oats
Co., 232 F.3d 1271, 1295 (9th Cir. 2000) (cleaned up). If, however, “the moving party establishes
good cause to modify the scheduling order, it must then demonstrate that its motion is also proper
under Rule 15.” Calvary Chapel San Jose v. Cody, No. 20-cv-03794-BLF, 2021 WL 4427384, at
*1 (N.D. Cal. Sept. 27, 2021) (cleaned up).
“Generally, Rule 15 advises the court that leave shall be freely given when justice so
requires. This policy is to be applied with extreme liberality.” Eminence Cap., LLC v. Aspeon,
Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (cleaned up). The Court considers five factors in
deciding a motion for leave to amend: (1) bad faith on the part of the movant; (2) undue delay; (3)
prejudice to the opposing party; (4) futility of amendment; and (5) whether the plaintiff has
3 The parties filed two discovery letters after Cress filed his Motion, one on October 2, 2025, and
one on October 23, 2025. See ECF Nos. 77, 82.
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previously amended his complaint. In re W. States Wholesale Nat. Gas Antitrust Litig., 715 F.3d
716, 738 (9th Cir. 2013). Generally, a court should determine whether to grant leave indulging
“all inferences in favor of granting the motion.” Griggs v. Pace Am. Grp., Inc., 170 F.3d 877, 880
(9th Cir. 1999). “Courts may decline to grant leave to amend only if there is strong evidence of
‘undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure
deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue
of allowance of the amendment, [or] futility of amendment, etc.’” Sonoma Cnty. Ass’n of Retired
Emps. v. Sonoma Cnty., 708 F.3d 1109, 1117 (9th Cir. 2013) (quoting Foman v. Davis, 371 U.S.
178, 182 (1962)).
IV. DISCUSSION
Cress seeks leave to add fraudulent inducement, civil theft, civil RICO, fraudulent
omission, and breach of contract claims, “based upon Nexo’s misrepresentations and active
concealment of its OTC and liquidation fees,” and leave to add a common law fraud claim “based
upon Nexo’s false representation that the Nexo Token was registered with the SEC as a security.”
Mot. at 8:23–9:5. Cress argues that the Court should grant leave to amend because “[g]ood cause
exists under Rule 16 to permit amendment of the scheduling order,” and “Rule 15’s liberal
standard is likewise satisfied, as there has been no undue delay, bad faith, or prejudice to Nexo.”
Id. at 2:8–14. Cress further argues that the additional claims asserted in his PSAC “are timely
because (1) they relate back to the filing of [his] original Complaint on February 27, 2023 and (2)
are subject to the discovery rule.” Id. at 23:12–14.
Nexo contends that the Court should deny Cress leave to amend because “Cress fails to
meet the Rule 16 ‘good cause’ standard for amendment,” and “all four elements of the Rule 15
standard for amendment, including the futility of the new proposed claims, likewise support denial
of the motion.” Opp. at 10:22–27. Nexo does not dispute that Cress’s newly proposed claims
“relate back to the filing of his initial complaint in this matter.” Reply at 7 n.2; see generally Opp.
In sum, the Court concludes that Cress has established good cause to amend the Court’s
scheduling order under Rule 16 and that the Rule 15 factors weigh in favor of amendment—
therefore, leave to amend is warranted.
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A. Good Cause Under Rule 16
Cress argues that “good cause exists to relieve him from any deadline to amend the
pleadings” because he “exercised diligence in seeking relief,” and because “Nexo will not be
prejudiced by the amendment.” Mot. at 10:11–13:19. Nexo contends that “Cress has not been
diligent in pursuing amendment,” and that “Nexo will be prejudiced if amendment is allowed near
the close of discovery.” Opp. at 14:10–18:18.
“The pretrial schedule may be modified if it cannot reasonably be met despite the
diligence of the party seeking the extension. If the party seeking the modification was not
diligent, the inquiry should end and the motion to modify should not be granted.” Zivkovic v. S.
Cal. Edison Co., 302 F.3d 1080, 1087 (9th Cir. 2002) (cleaned up). “The diligence inquiry is not
confined to the question of whether the moving party could have met a deadline in the first
instance; it also asks whether the moving party acted diligently in seeking to modify the
scheduling order once it became apparent that it could not do so.” Hayward Prop., LLC v.
Commonwealth Land Title Ins. Co., No. 17-cv-06177 SBA, 2021 WL 4927012, at *5 (N.D. Cal.
Sept. 28, 2021). “Although the existence or degree of prejudice to the party opposing the
modification might supply additional reasons to deny a motion, the focus of the inquiry is upon the
moving party’s reasons for seeking modification.” Johnson, 975 F.2d at 609.
Here, the Court finds that Cress establishes good cause to modify the Court’s scheduling
order. Because Cress seeks to amend his complaint after the scheduling order’s deadline to amend
the pleadings, Cress must show good cause for his amendment. Id. at 608; see ECF No. 51
(setting date to amend pleadings as December 12, 2024). It is undisputed that Cress could not
have amended his complaint prior to the deadline to amend pleadings set in the scheduling order.
See Opp. at 16 n.2 (“Nexo does not argue that Cress could have met the scheduling order’s
deadline to amend the complaint”)4; Reply at 5:9–12 (“Recognizing that [Cress] could not have
4 Nexo repeatedly argues that Cress could have asserted his newly proposed claims in his original
Complaint in 2023. See, e.g., Opp. at 12:5–6 (“This laundry list of admissions from Cress in 2021
show that he could have asserted his ‘fee’ claims when he filed this lawsuit in 2023.”). But Nexo
concedes—in a footnote—that Cress could not have asserted his new claims prior to the deadline
to amend pleadings on December 12, 2024. See id. at 16 n.2.
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met the initial deadline to amend, Nexo pivots[.]”). Instead, the good cause dispute turns on
whether Cress was diligent in pursuing his OTC-related claims after Nexo’s document production
in March 2025. Reply at 2:5–24. Nexo argues that Cress was not diligent because he was aware
of the facts supporting his “fee claims . . . no later than March 2025 when Nexo produced the two
centerpiece documents of the Proposed SAC, yet failed to [seek leave to amend] until mere
months before the end of fact discovery.” Opp. at 14:18–21. In March 2025, Nexo produced two
of the sixteen documents relied upon by Cress in his Motion—these documents, written in
Bulgarian, relate to two of Cress’s transactions through Nexo’s OTC desk. Id. at 12:4–21; Reply
at 2:6–7. Thus, these documents do not relate to whether Cress was “diligent in bringing his
claims based on liquidation fees and its fraudulent statement regarding the NEXO Token.” Reply
at 2:5–12.
Cress asserts that he was diligent in pursuing his claims because after receiving the two
documents in March 2025, he “acted reasonably in obtaining translations [and] seeking
clarifications through interrogatories,” and sought leave to amend shortly after receiving
documents from Nexo in August and September 2025 that demonstrated “a deliberate, systematic
fraud by Nexo.” Id. at 2:13–6:20 (citing Taylor-Copeland Decl., Exs. 5–9). The Court agrees that
Cress acted diligently in seeking leave to amend. Importantly, Cress states that he did not have “a
good-faith basis to allege fraud, civil theft, or RICO,” until he compiled the multiple document
productions from March, August, and September 2025. Id. at 6:15–19. Cress was also unaware of
the “true nature and extent of Nexo’s OTC fees” until he received the documents in August 2025.
Id. at 3:4–5:2. And once Cress received these documents, he filed his Motion within one month.
Mot. at 10:20–23. “Indeed, waiting to amend a complaint or answer until a strong evidentiary
basis for the amended claims has been developed is preferable to prematurely asserting those
claims on the basis of a limited record that may or may not support them.” Entangled Media, LLC
v. Dropbox Inc., 348 F.R.D. 649, 655 (N.D. Cal. 2025). Therefore, because Cress did not have the
facts needed to plead his claims until at least August 2025, and he acted diligently in seeking
amendment after discovering those facts, he acted with diligence and good cause exists to permit
amendment of the scheduling order under Rule 16. Cf. id.
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Moreover, because the Court finds that Cress was diligent in seeking leave to amend, the
Court does not address prejudice to Nexo under its Rule 16 analysis; instead, the Court addresses
prejudice below in its Rule 15 analysis. See Johnson, 975 F.2d at 609 (explaining that prejudice to
the nonmoving party is an additional reason to deny leave to amend).
Accordingly, the Court concludes that good cause exists to amend the Court’s scheduling
order under Rule 16.
B. Rule 15 Factors
Nexo argues that the Court should deny Cress leave to amend because (1) “Cress has
unduly delayed seeking amendment”; (2) “Nexo will be prejudiced by amendment near the close
of discovery”; (3) “Cress acted in bad faith”; and (4) “Cress’s proposed claims are futile.” Opp. at
19:1–33:25. Cress contends that all Foman factors weigh heavily in favor of amendment because
there “has been no (a) undue delay, (b) bad faith, or (c) repeated failure to cure, and there will be
no (d) undue prejudice to Nexo because of [Cress] adding (e) meritorious claims.” Reply at 6:21–
24.
As discussed below, the Court finds that each Foman factor weighs in favor of
amendment. Accordingly, the Court concludes that amendment is warranted under Rule 15.
1. Bad Faith And Undue Delay
Nexo argues that Cress (1) unduly delayed seeking leave to amend because he asserts
theories based on facts known to him since the inception of the case; and (2) acted in bad faith by
“waiting until near the end of fact discovery to pivot from his original claims to new ones based
on new facts[.]” Opp. at 19:2–20:11. Cress responds that (1) he “moved with due diligence upon
discovering the facts underpinning the new claims in the SAC”; and (2) “Nexo’s accusation of bad
faith is baseless and contradicted by the record.” Reply at 6:25–7:1, 9:4–7.
Bad faith may be shown when a party seeks to amend late in the litigation process with
claims which were, or should have been, apparent early. Bonin v. Calderon, 59 F.3d 815, 846 (9th
Cir. 1995). A moving party’s inability to sufficiently explain its delay may indicate that the delay
was undue. Jackson v. Bank of Hawaii, 902 F.2d 1385, 1388 (9th Cir. 1990). Whether the
moving party knew or should have known the facts and theories raised in the proposed amendment
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at the time it filed its original pleadings is a relevant consideration in assessing untimeliness. Id.;
see Acri v. Int’l Ass’n of Machinists & Aerospace Workers, 781 F.2d 1393, 1398 (9th Cir. 1986)
(“[L]ate amendments to assert new theories are not reviewed favorably when the facts and the
theory have been known to the party seeking amendment since the inception of the cause of
action.”). However, “delay alone no matter how lengthy is an insufficient ground for denial of
leave to amend.” United States v. Webb, 655 F.2d 977, 980 (9th Cir. 1981). Rather, undue delay
combined with other factors may warrant denial of leave to amend. See, e.g., Jackson, 902 F.2d at
1387–89 (holding that prejudice and undue delay are sufficient to deny leave to amend); Morongo
Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990) (“[A] delay of nearly two
years, while not alone enough to support denial, is nevertheless relevant”).
Here, the Court finds the proposed amendment is not sought in bad faith or with undue
delay. First, as discussed, Cress was diligent in pursuing amendment. After receiving the March
2025 production, Cress sought translations and pursued additional discovery. Reply at 2:13–6:20.
And after receiving the August 31, 2025, production, Cress provided “Nexo of his intent to amend
within three weeks,” and filed “the present motion less than a month after discovery of the
information[.]” Mot. at 10:20–23. Nexo does not dispute these contentions, other than arguing
that the delay in seeking translations “is attributable to Cress.” Opp. at 12:4–21. But as discussed,
even had Cress translated the documents earlier, Cress did not have enough information to amend
his complaint until he received documents in August 2025. Reply at 2:13–6:20. As such, Nexo
fails to show that Cress unduly delayed seeking leave to amend.
Second, Nexo’s argument on bad faith repeats its assertion that Cress sat on facts known to
him “before filing the initial complaint.” Opp. at 19:20–27. Nexo’s argument fails—it cannot
successfully argue that Cress “withheld such facts or claims from the complaint” while
simultaneously conceding that Cress could not have met the scheduling order’s deadline to amend
the complaint. Id. at 16 n.2, 19:20–27. Given the fragmented and recent discovery productions by
Nexo, the Court finds Cress has established good faith reasons for seeking to amend at this stage
in the proceedings. Contra Jackson, 902 F.2d at 1388 (explaining that a moving party’s inability
to sufficiently explain its delay may indicate that the delay was undue).
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Accordingly, these factors weigh in favor of granting leave to amend.
2. Prejudice To The Opposing Party
Nexo argues that it “will be prejudiced if amendment is granted at this late date” because
(1) the new claims greatly alter the nature of the litigation; and (2) “Nexo will need significant
additional discovery into the factual basis for Cress’s proposed new causes of action.” Opp. at
16:12–19:19. Cress responds that (1) “the timing of the amendment—over a year before trial—
does not severely prejudice Nexo, especially since the new claims are based on the same general
nucleus of facts and transactions already at issue”; (2) “any additional discovery required is
manageable”; and (3) “the stage of the case is such that prejudice is minimized.” Reply at 7:2–
9:3.
“[I]t is the consideration of prejudice to the opposing party that carries the greatest
weight.” Eminence Capital, 316 F.3d at 1052 (citing DCD Programs, Ltd. v. Leighton, 833 F.2d
183, 185 (9th Cir. 1987)). “To overcome Rule 15(a)’s liberal policy with respect to the
amendment of pleadings a showing of prejudice must be substantial.” Stearns v. Select Comfort
Retail Corp., 763 F. Supp. 2d 1128, 1158 (N.D. Cal. 2010). “Neither delay resulting from the
proposed amendment nor the prospect of additional discovery needed by the non-moving party in
itself constitutes a sufficient showing of prejudice.” Id. “The party opposing amendment bears
the burden of showing prejudice.” DCD Programs, 833 F.2d at 187.
Here, the Court finds that Nexo will not suffer substantial prejudice if the Court permits
Cress leave to amend. Nexo’s first argument—that “Cress has entirely changed his theory of the
case”—is unpersuasive. Opp. at 17:3–13. Nexo does not dispute that Cress’s newly proposed
claims “relate back to the filing of his initial complaint in this matter.” Reply at 7 n.2; see
generally Opp. The Court agrees with Cress that “having to defend new legal theories is a normal
consequence of amendment.” Reply at 8:15–23. Further, Nexo’s argument that it will be
prejudiced by the need for additional discovery does not carry the day. Opp. at 17:14–18:7.
While an increase in the scope and time required for discovery are important considerations, they
are not sufficient to establish substantial prejudice. See Yates v. W. Contra Costa Unified Sch.
Dist., No. 16-cv-01077-MEJ, 2017 WL 57308, at *3 (N.D. Cal. Jan. 5, 2017) (finding defendant’s
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argument that it would need to conduct additional discovery “insufficient to show Defendant will
suffer ‘substantial’ prejudice as a result of the proposed amendment”); Tyco Thermal Controls
LLC v. Redwood Indus., No. C-06-07164 JF(RS), 2009 WL 4907512, at *3 (N.D. Cal. Dec. 14,
2009) (“Neither delay resulting from the proposed amendment nor the prospect of additional
discovery needed by the non-moving party in itself constitutes a sufficient showing of
prejudice.”); O’Shea v. Epson Am., Inc., No. CV-09-8063 PSG(CWx), 2010 WL 4025627, at *5
(C.D. Cal. Oct. 12, 2010) (“[G]iven that granting a plaintiff leave to amend usually leads to
additional discovery, courts typically require ‘something more’ to justify denying the motion on
grounds of prejudice.”); Nissou-Rabban v. Cap. One Bank (USA), N.A., 285 F. Supp. 3d 1136,
1145 (S.D. Cal. 2018) (finding that the “expenditure of additional monies or time do not constitute
undue prejudice”). Thus, the possibility of additional discovery is not by itself sufficient to
demonstrate prejudice. Finally, as Nexo acknowledges, where there is no undue delay, as is the
case here, courts are less likely to find prejudice to the nonmoving party. See Opp. at 18 n.3
(citing DCD Programs, 833 F.2d at 187–88). Therefore, Nexo fails to show that it will be
substantially prejudiced by Cress’s amendment.
Accordingly, this factor weighs in favor of granting leave to amend.
3. Futility of Amendment
Nexo argues that Cress’s proposed amendments are futile as to all his claims for relief and
allegations regarding his fraudulent inducement claim. Opp. at 20:12–33:25. Cress responds that
“Nexo’s futility arguments are predicated solely on factual disputes that are improper at this
juncture.” Reply at 9:8–16.
“A motion for leave to amend may be denied if it appears to be futile or legally
insufficient. However, a proposed amendment is futile only if no set of facts can be proved under
the amendment to the pleadings that would constitute a valid and sufficient claim[.]” Miller v.
Rykoff-Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988) (citations omitted). As the Supreme Court
has held, “[i]f the underlying facts or circumstances relied upon by a plaintiff may be a proper
subject of relief, he ought to be afforded an opportunity to test his claim on the merits.” Foman,
371 U.S. at 182.
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Here, Cress seeks leave to add additional misrepresentations as the basis for his fraudulent
inducement claim and five new causes of action. Mot. at 1:25–2:2. Nexo argues that “each of
Cress’s proposed new claims are futile” because it is clear that the PSAC cannot be saved by any
amendment. Opp. at 20:12–16. However, “[t]he merits or facts of a controversy are not properly
decided in a motion for leave to amend and should instead be attacked by a motion to dismiss for
failure to state a claim or for summary judgment.” Allen v. Bayshore Mall, No. 12-cv-02368–JST,
2013 WL 6441504, at *5 (N.D. Cal. Dec. 9, 2013) (citation omitted). Thus, “denial of a motion
for leave to amend on this ground is rare and courts generally defer consideration of challenges to
the merits of a proposed amended pleading until after leave to amend is granted and the amended
pleading is filed.” dpiX LLC v. Yieldboost Tech, Inc., No. 14-cv–05382–JST, 2015 WL 5158534,
at *3 (N.D. Cal. Sept. 2, 2015) (cleaned up). Although Nexo quibbles with the sufficiency of
Cress’s allegations, it fails to show that “no set of facts can be proved under the amendment to the
pleadings that would constitute a valid and sufficient claim.” Miller, 845 F.2d at 214.
Accordingly, as Nexo’s arguments are more appropriately decided in a motion to dismiss,
this factor weighs in favor of granting leave to amend.
4. Previous Amendments
Courts have broader discretion in denying motions for leave to amend after leave to amend
has already been granted. See Rich v. Shrader, 823 F.3d 1205, 1209 (9th Cir. 2016) (“[W]hen the
district court has already afforded a plaintiff an opportunity to amend the complaint, it has wide
discretion in granting or refusing leave to amend after the first amendment, and only upon gross
abuse will [its] rulings be disturbed.”) (alteration in original) (cleaned up); Chodos v. W. Publ’g
Co., 292 F.3d 992, 1003 (9th Cir. 2002) (noting district court’s discretion is “particularly broad”
when it has already granted a plaintiff leave to amend).
Here, Nexo does not raise this factor in arguing against granting leave to amend. See
generally Opp. Regardless, the Court agrees with Cress that this factor does not weigh against
amendment because Cress has only amended the complaint once before. Mot. at 14:12–20; see
ECF No. 26 (granting Cress leave to amend). Therefore, this is not a case where Cress has
unsuccessfully amended his claims several times. Contra Stearns, 763 F. Supp. 2d at 1159
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(recognizing Defendants’ “frustration with litigating Plaintiffs’ four failed attempts to state a claim
upon which relief may be granted”).
Accordingly, this factor weighs in favor of granting leave to amend.
V. CONCLUSION
Based on the analysis above, the Court GRANTS Cress’s motion to amend. Cress shall
file the SAC as a separate docket entry by November 10, 2025. Nexo shall file its responsive
pleading in compliance with Federal Rule of Civil Procedure 15(a)(3). After the pleadings are
resolved, the Court will schedule a further case management conference.
IT IS SO ORDERED.
Dated: October 30, 2025
THOMAS S. HIXSON
United States Magistrate Judge
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