Judge: Alison Mackenzie, Case: 21STCV05239, Date: 2024-01-08 Tentative Ruling


Case Number: 21STCV05239    Hearing Date: January 8, 2024    Dept: 55

 

NATURE OF PROCEEDINGS:  Plaintiff’s Motion for Leave to File First Amended Complaint.

 

The motion is denied.

 

 

On 2/9/21, Plaintiff BEEMAK PLASTICS, LLC (“Plaintiff”) filed a Complaint for Breach of Contract, alleging that Defendant SOUTH BAY SAFETY, INC. (“Defendant”) failed to properly verify temporary employees, including for compliance with State and Federal laws for employment eligibility, before such employees were placed at Plaintiff BEEMAK PLASTICS, LLC.

On 6/24/21, the Court entered default Judgment in the total sum of $1,426,093.43 against Defendant.  Defendant filed a motion to set aside/vacate the judgment in June 2023, which the Court granted on 8/3/23.

 Plaintiff brings this motion for leave to file a First Amended Complaint to add Sandra Romero as an alter ego defendant and to add alter ego allegations. Defendant opposes the motion.

The Court may allow a party to amend a pleading in the furtherance of justice. CCP § 473(a). “If discovery and investigation develop factual grounds justifying a timely amendment to a pleading, leave to amend must be liberally granted.”  Mabie v. Hyatt (1998) 61 Cal.App.4th 581, 596. 

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The Court, however, has the discretion to deny leave to amend if it finds the party’s delay in presenting the amendment was unwarranted. Miles v. City of Los Angeles (2020) 56 Cal.App.5th 728, 739. The court should consider whether the party, “was not diligent in offering the amendment after knowledge of the facts….”  Solit v. Tokai Bank (1999) 68 Cal. App. 4th 1435, 1448 (citing Roemer v. Retail Credit Co. (1975) 44 Cal. App. 3d 926, 940). A party filing a motion for leave to amend a pleading must comply with California Rule of Court 3.1324, including submitting a declaration specifying the effect of the amendment, why the amendment is necessary and proper, when the facts giving rise to the amended allegations were discovered, and why the request for amendment was not made earlier. CRC 3.1324(b). 

Recovering on an alter ego theory requires Plaintiff to sufficiently allege (1) a unity of interest between Defendant and Ms. Romero by alleging the corporation was inadequately capitalized, failed to abide by corporate formalities, and was used by Ms. Romero only as a shell and conduit, and (2) an adherence to a separate corporation existence that would promote injustice or lead to inequitable results, by alleging Ms. Romero’s use of the corporation to avoid payment obligations.   A.J. Fistes Corp. v. GDL Best Contractors, Inc. (2019) 38 Cal.App.5th 677, 696-97.  Cf.  Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 235  (sufficiently alleged defendant dominated and controlled, a unity of interest and ownership existed, a mere shell and conduit, inadequately capitalized,  failed to abide by formalities of corporate existence, used assets as own, and recognizing separate existence would promote injustice).

Here, Plaintiff purportedly “discovered facts to support an alter-ego claim against Ms. Romero after it received South Bay’s motion to set aside the default on June 23, 2023,” which included a declaration from Ms. Romero. (Serj Daniel Decl., filed 12/7/23, ¶¶ 3, 6.)  Ms. Romero’s declaration addresses an invalid service of a summons and Secretary of State filings regarding Defendant.  Plaintiff also states that it discovered facts about Ms. Romero’s alter ego status after it received discovery from Chase Bank regarding accounts owned and maintained by Defendant in or around 2022. (Mot at 9:19-20.) The Joshua Friedman declaration, filed 12/7/23, states that Chase produced documents for 20 different accounts owned and maintained by Defendant, and addresses Defendant’s questionable financial condition and purported plans to go defunct or bankrupt.  (Joshua A. Friedman Decl., filed 12/7/23, ¶¶ 3-6.) 

None of Plaintiff’s facts in evidence relates to alter ego factors.  A corporation’s lacking finances, an invalid service of a summons, and a Secretary of State filing, would not newly show alter ego factors. The reasoning is a non sequitur.  Because Plaintiff bases the proposed amendment on such factors, the Court finds that there was inexcusable delay in not moving for leave to amend earlier when any such facts were already known.

Therefore, the motion is denied.