Department 58

Hearing Date: August 13, 2024

Case Name: Playboy Enterprises International, Inc. et al., vs. Advanced Vita Supplements Corporation, et al.

Case No.: 21STCV07609

Motion: Leave to file Second Amended Complaint

Moving Party: Plaintiffs Playboy Enterprise International, Inc. and Products Licensing, LLC

Responding Party: Defendants Advanced Vita Supplements Corporation, AVS Products LLC, and Sasha Matloob, and Sunrise Brands LLC, Specially Appearing

Tentative Ruling: The Motion for Leave to File the Second Amended Complaint is denied.

Background

On February 25, 2021, Plaintiffs Playboy Enterprises International, Inc. and Products Licensing LLC (together “Plaintiffs”) filed this action against Defendants Advanced Vita Supplements, AVS Products LLC, and Sasha Matloob (“AVS Defendants”) for (1) breach of contract, (2) violation of Bus. & Prof. Code § 17200, (3) violation of Bus. & Prof. Code § 17500, and (4) declaratory relief. Plaintiffs allege that Defendants breached their licensing agreement to use Plaintiffs' trademarks and then continued to market and sell Playboy-branded products after the agreement was terminated.

On May 7, 2021, Plaintiffs filed their First Amended Complaint adding a fifth cause of action for an accounting.

On June 26, 2024, Plaintiffs filed a substitution of attorney. The following day, Plaintiffs/Cross-defendants filed an ex parte application to continue the trial date to no earlier than June 30, 2025, which the Court denied due to a lack of good cause. (7/10/24 Minute Order)

On July 31, 2024, Plaintiffs/Cross-defendants filed the instant motion for leave to file a second amended complaint, seeking to add as defendants Sunrise Brands LLC, Sunrise PB Investments LLC, Todd Kay, and Gerard Guez (Sunrise Defendants), as well as nine additional causes of action.

On August 8, 2024, AVS Defendants and Sunrise Defendants separately opposed Plaintiffs’ motion for leave to amend the complaint.

Motion for leave to amend the complaint.

The Court grants Defendants’ request for judicial notice of a portion of Playboy’s website, though not for its truth. The Court grants Sunrise Defendants’ request to take judicial notice of Playboy’s preliminary injunction motion and supporting declaration.

Plaintiffs move for an order granting leave to file a Second Amended Complaint (“SAC”) and deem the SAC filed and served on all Defendants/Cross-complainants.

In lieu of DOES 1 through 5, Plaintiffs seek leave to add the following as Defendants:

1. Sunrise Brands, LLC, a California limited liability company,

2. Sunrise PB Investment, a California limited liability company,

3. Todd Kay, an individual,

4. Gerard Guez, an individual

Plaintiffs seek to add nine new causes of action, including:

6. Fraudulent Concealment,

7. Tortious Interference,

8. Trademark Infringement, 15 U.S.C. § 1114,

9. False Designation of Origin, 15 U.S.C. § 1125(a),

10. Trademark Dilution, 15 U.S.C. § 1125(c),

11. Cybersquatting, 15 U.S.C. § 1125(d),

12. Trademark Infringement, Common Law,

13. Negligent Misrepresentation,

14. Common Law Unfair Competition

Plaintiffs assert that they seek to amend the First Amended Complaint due to evidence produced on March 21, 2024, showing Sunrise was involved with Defendant AVS in marketing strategies, sales distribution, and international shipping beyond the termination of the governing agreement.

Plaintiffs argue that there is no undue prejudice to Sunrise Defendants because the new claims refer to the conduct articulated in the original complaint and the trademark claims are timely because they are not subject to a statute of limitations.

As to the newly added causes of action for cybersquatting, fraudulent concealment, tortious interference, negligent misrepresentation, and common law unfair competition, Plaintiff argues that there is no surprise to Sunrise Defendants. Plaintiffs newly alleged, eleventh cause of action for cybersquatting is related to Defendant’s unauthorized use of unlawful domain names to market and sell Playboy-branded products. Plaintiff’s cause of action for fraudulent concealment arises from Sunrise’s complication of facts related to their involvement in marketing and strategy for Defendant AVS’s actions. Because the tortious interference, negligent misrepresentation, and common law unfair competition relate to the original complaint and show the injury to Plaintiffs, leave should be granted to amend.

Plaintiffs further contend that Sunrise Defendants are already participating in discovery through the third-party subpoenaed depositions of Todd Kay and Gerard Guez, as principals of Sunrise.

Finally, Plaintiffs argue that a denial of the motion would not be in the best interests of justice because the claims in the proposed SAC are related to the original complaint. If denied, Plaintiffs will file a separate action and seek to relate the cases, resulting in a waste of judicial resources.

The AVS Defendants contend that the motion is unreasonably delayed and prejudicial because Plaintiffs have been familiar with the proposed Sunrise Defendants’ involvement as early as 2017.

In support, Defendants cite the operative agreement, the Fourth Amendment to the Product License Agreement, dated September 20, 2017, and how it expressly refers to the proposed defendants Todd Kay, Gerard Guez, and Sunrise PB Investment, LLC. Defendants cite 2017 and 2018 correspondence between Playboy and Creative Artists Agency (“CAA”) in which Sunrise, Guez and Kay are discussed, and where Plaintiffs directed CAA to work with Sunrise agents even after Playboy delivered a March 2020 termination letter to AVS.

Particularly, Defendants allege that Plaintiffs claim are unreasonably delayed because Plaintiffs knew of the sales of Playboy-branded products abroad since as early as 2021, have been aware of the Sunrise Defendants since 2017, and knew about the use of Plaintiffs’ domain names since 2018.

Defendants also allege that the addition of four new defendants and nine new causes of action two months prior to trial would cause delay and add to preparation costs in the instant case.

The specially appearing Sunrise Defendants urge the Court to deny the motion to amend because service of process against them is late. The complaint was filed on February 25, 2021, and Plaintiffs filed this Motion on July 31, 2024, over three years after the original complaint was filed. Under Code of Civil Procedure section 583.210, subdivision (a) and section 583.250, the action against them “cannot be prosecuted.”

Apart from that, Sunrise Defendants maintain that nearly all of the claims alleged against them are barred by the statute of limitations.

Legal Standard

Pursuant to Code of Civil Procedure section 473, subdivision (a)(1), “[t]he court may, in furtherance of justice, and on any terms as may be proper, allow a party to amend any pleading.” Amendment may be allowed at any time before or after commencement of trial. (Code Civ. Proc., § 576.) “[T]he court’s discretion will usually be exercised liberally to permit amendment of the pleadings. The policy favoring amendment is so strong that 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 (internal citations omitted).) “If the motion to amend is timely made and the granting of the motion will not prejudice the opposing party, it is error to refuse permission to amend….” (Morgan v. Sup. Ct. (1959) 172 Cal.App.2d 527, 530.) Prejudice includes “delay in trial, loss of critical evidence, or added costs of preparation.” (Solit v. Tokai Bank, Ltd. New York Branch (1999) 68 Cal.App.4th 1435, 1448.)

A motion to amend a pleading before trial must include a copy of the proposed amendment or amended pleading, which must be serially numbered to differentiate it from previous pleadings or amendments. (Cal. Rules of Court, rule 3.1324(a).) The motion must also state what allegations are proposed to be deleted or added, by page, paragraph, and line number. (Cal. Rules of Court, rule 3.1324(a).) Finally, a separate supporting 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 the reason the request for amendment was not made earlier must also accompany the motion. (Cal. Rules of Court, rule 3.134(b).)

Discussion

Plaintiffs seek leave to amend their First Amended Complaint to add nine new causes of action against four new defendants.

The motion was filed on July 31, 2024, and trial was 61 days away, as it is scheduled to begin on September 30, 2024. According to Plaintiffs, the new evidence leading to the filing of this motion was discovered on or about March 21, 2024, in response to a request for Defendants’ production of documents, and communication related to Todd Kay, Gerard Guez, and Hubert Guez and contain communications among and between these individuals, and an additional document production after Gerard Guez’s deposition. (Decl. of Frost, ¶ 5.) Plaintiffs argue that the documents were deliberately produced late in the case and Defendants buried the voluminous documents by labeling them “AVS” productions. (Decl., of Frost ¶ 6.) A long-deferred presentation of the proposed amendment without a showing of excuse for the delay is itself a significant factor to uphold the trial court's denial of the amendment.'"]; Estate of Murphy (1978) 82 Cal.App.3d 304, 311, ["Where inexcusable delay and probable prejudice to the opposing party is indicated, the trial court's exercise of discretion in denying a proposed amendment should not be disturbed."] Leader v. Health Industries of America, Inc. (2001) 89 Cal.App.4th 603, 613.) “Prejudice exists where the proposed amendment would require delaying the trial, resulting in added costs of preparation and increased discovery burdens.” (Miles v. City of LA. (2020) 56 Cal.App.5th 728, 739.)

Plaintiffs’ claim that they were ignorant of Sunrise’s role in AVS’s operations is disingenuous. The roles of Guez, Kay, and the Sunrise entities in AVS’s ownership and operations were disclosed to Plaintiffs in 2021. As early as 2017, Playboy’s internal communications recognized the role the Sunrise Defendant played in execution of the parties’ agreements. These communications expressly linked AVS and Sunrise. Playboy was fully aware of that Guez and Kay, principals of the Sunrise entities, were more than equal partners with AVS. Plaintiffs’ claim that Sunrise’s role was hidden from them is unsupported by the evidence. (Downes’ decl. Exhs. 2, 5, 9, 10, 18, 19.)

Accordingly, the Court finds no justification for Plaintiffs’ delay in naming the Sunrise entities, Guez, and Kay. Moreover, by adding them as formerly Doe defendants, Plaintiff is unable to serve them within the three years of initiating the action. These Defendants would be dismissed under Code of Civil Procedure section 583.210, subdivision (a). (Higgins v. Superior Court (2017) 15 Cal.App.5^th 973, 982 [“even where the filing of an amended complaint on a Doe defendant relates back to the filing of an original complaint, the plaintiff must nonetheless identify and serve a Doe defendant with a summons and complaint within three years of the commencement of the action”].)

Plaintiffs’ motion for leave to amend is denied.