Judge Alison Mackenzie, Case Number: 21STCV45457, Date: 2024-03-06 Tentative Ruling

Judge: Alison Mackenzie, Case: 21STCV45457, Date: 2024-03-06 Tentative Ruling

Case Number: 21STCV45457 Hearing Date: March 6, 2024 Dept: 55

NATURE OF PROCEEDINGS: Motion of Defendant and Cross-Complainant Onni Contracting (California), Inc. for Leave to File Amended Cross-Complaint.

BACKGROUND

In this case, PRECISION CONSTRUCTION GROUP, INC. (“Precision”) seeks damages against ONNI CONTRACTING (CALIFORNIA), INC. (“Onni”) based on Onni’s alleged breach of a written subcontract between the parties and Onni’s alleged failure to pay Precision for products it provided to Onni. Onni filed a Cross-Complaint against Precision and Cross-Defendant SURETEC INSURANCE COMPANY, alleging that Precision negligently, defectively, and incompletely performed the subcontract, and ultimately abandoned it. Onni’s causes of action are: 1. Breach of Written Contract; 2. Breach of Oral Contract; 3. Breach of Fiduciary Duty; 4. Negligence; 5. Contractual Indemnity; 6. Unfair Business Practices; 7. Disgorgement; and 8. Recovery of Contractor’s License Bond.

Onni now seeks leave to file a proposed First Amended Cross-Complaint (“FACC”) to add Jerry Sorrentino, Precision’s sole owner and designated PMQ, as a cross-defendant under an alter ego theory. Precision opposes motion.

LEGAL STANDARD

A trial court has discretion to 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. “It is a rare case in which denial of leave to amend can be justified.” Howard v. County of San Diego (2010) 184 Cal. App. 4th 1422, 1428.

It is an abuse of discretion for a court to deny leave to amend a pleading where the opposing party is not prejudiced by the proposed amendment. Kittredge Sports Co. v Superior Court (1989) 213 Cal. App. 3d 1045, 1048.

ANALYSIS

Onni seeks to allege alter ego allegations against Precision’s owner Jerry Sorrentino after Sorrentino testified at his PMQ deposition that (1) Precision cannot account for the $860,001.28 payment received by Onni, including whether Precision paid any of its subcontractors from those funds, and (2) Precision has ceased operations and sold off most of its assets. Onni only learned the bases for adding Sorrentino under an alter ego theory after completing Sorrentino’s second PMQ deposition in December 2023 and Precision’s failure to produce documents related to the disposition of the funds. Onni then promptly sought leave to amend its pleading. Under these circumstances, the Court exercises its discretion to permit the filing of the FACC.

Precision’s suggestion that Onni could have learned the bases for its FACC earlier fails to take into consideration that a party could risk liability for malicious prosecution for filing a claim before obtaining facts justifying support. See Mabie, 61 Cal.App.4th at 596. Precision’s contention that the pleading changes legal strategies (Opp., 7:6), supports granting leave to amend. “[I]t is irrelevant that new legal theories are introduced as long as the proposed amendments relate to the same general set of facts….” Atkinson v. Elk Corp. (2003) 109 Cal. App. 4th 739, 761 (internal quotation and citation omitted). That evidence of an added theory of liability would become admissible against opposing parties, after leave to amend a complaint, does not constitute the kind of prejudice supporting denial. Hirsa v. Sup. Ct. (1981) 118 Cal. App 3d486, 490. Here, the proposed changes seek to make Sorrentino liable for the same overall wrongdoing as alleged in the earlier cross-complaint.

Precision’s argument about whether Onni could have conducted the discovery sooner is immaterial. In considering whether there was unjustified delay as to a motion for leave to file an amended pleading, 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. Here, Onni did not learn of the facts giving rise to its alter ego allegations until it completed the Sorrentino deposition in December 2023 and Precision confirmed in January 2024 that it will not produce relevant documents that it has in its possession. Onni then timely filed its motion in February 2024.

Precision’s argument regarding its statute of limitations defense to certain claims in the FACC is also immaterial to the determination of whether to allow the amended pleading. Courts do not consider the merits of the allegations in a proposed amended pleading when deciding leave to amend. See, e.g., Atkinson v. Elk Corp. (2006) 109 Cal. App. 4th 739, 760 (“the better course of action would have been to allow … [plaintiff] to amend the complaint and then let the parties test its legal sufficiency in other appropriate proceedings.”).

Precision is correct that permitting the filing of the FACC will require additional discovery. The Court therefore will move the trial to ensure the parties can complete discovery on the new pleading.

CONCLUSION

For the above reasons, the motion is granted, with a condition of a trial continuance. The proposed FACC may be served and filed, as a separate document, within 10 days.

Trial set for 6/3/24 will be continued to allow the parties additional time to complete discovery related to the FACC. The discovery cutoff date shall run from the continued trial date. The Court will set a new trial date in consultation with counsel at the hearing.