Judge: Bruce G. Iwasaki, Case: 22STCV11771, Date: 2022-08-02 Tentative Ruling
Case Number: 22STCV11771 Hearing Date: August 2, 2022 Dept: 58
Judge
Bruce G. Iwasaki
DEPARTMENT 58
Hearing Date: August
2, 2022
Case
Name: TruConnect
Communications, Inc. v. Ground Floor Marketing LLC, et. al.
Case
No.: 22STCV11771
Matter: Motion for Leave to File
First Amended Complaint
Moving
Party: Plaintiff TruConnect
Communications Inc.
Responding
Party: Defendant Ground Floor
Marketing LLC
Tentative Ruling: The Motion
for Leave to File the First Amended Complaint is granted. Plaintiff is ordered
to file its First Amended Complaint within 10 days.
Background
Plaintiff
TruConnect Communications, Inc. (Plaintiff or TruConnect) filed the Complaint
on April 7, 2022, alleging a breach of contract against Defendant Ground Floor
Marketing LLC (Defendant or Ground Floor).
TruConnect
manages a free wireless telephone program for qualified, low-income
households. In May 2021, TruConnect contracted
with Ground Floor. As part of the
agreement, TruConnect sent cellular devices to Ground Floor (with zero paid
upfront), and Ground Floor was to provide the devices to qualified individuals
who enrolled in the programs.
On March 22,
2022, TruConnect exercised its right to terminate the contract and demanded
that Ground Connect return the devices or remit payment of $978,899.00 for the
20,446 devices within seven days. After
Ground Floor failed to return the devices and pay the invoice, TruConnect sued
for breach of contract.
After filing
the Complaint, TruConnect alleged that it discovered an online seller with the
pseudonym “mr.hikmat642” selling its inventory online through eBay. TruConnect asserts that this seller is or is
connected to Ground Floor because: (1) the seller shipped from Meriden,
Connecticut, which is the same location in which TruConnect shipped its devices
to Ground Floor; and (2) TruConnect purchased a phone from the seller and the
phone’s IMEI code matched one of TruConnect’s prior devices. On June 21, 2022, TruConnect obtained a
preliminary injunction to enjoin Ground Floor from selling any of the devices.
Motion for leave to file amended complaint
TruConnect
asserts that after filing the initial complaint, it discovered that Ground
Floor may have committed fraud.
Specifically, TruConnect contends that it believed John C. Merrill and
Marisha Voloshin oversaw Ground Floor; however, when the process server attempted
service on Ground Floor, he served “Roger Cohen,” who then explained that Ms.
Voloshin was no longer working there.
TruConnect avers that the Connecticut Secretary of State’s Office
identifies Ms. Voloshin as its managing member, but the provided business
addresses were invalid. Thus, TruConnect
believes Ground Floor was established for the appearance of a legitimate
company so that the individual Defendants could obtain the devices and resell
them.
TruConnect
seeks leave to amend its complaint to add causes of action for intentional
interference with prospective economic relations, negligent interference with
prospective economic relations, aiding and abetting interference with
prospective economic relations, fraud, and violation of Penal Code section 496
(receiving stolen property).
Ground Floor
opposes. It argues that the amended
complaint “attempts to change the nature of the liability sought to be
enforced,” the claim for interference with prospective economic advantage is
invalid, and that the new pleading is a sham amendment.
TruConnect
replied, stating that amendments are liberally allowed, the validity of a cause
of action is properly challenged on demurrer, and that this is not a sham
amendment because there are no contradictions to the initial complaint.
TruConnect
requests judicial notice of court records and “business details” from the
Connecticut Secretary of State’s Office.
The request is granted. (Evid.
Code, § 452, subds. (c), (d).)
None of Defendant’s
arguments in opposition has merit. The
Court grants Plaintiff’s motion for leave to amend the complaint.
Legal Standard
The
court may, in furtherance of justice, allow a party to amend any pleading upon
any terms as may be proper. (Code Civ.
Proc., §§ 473, subd. (a), 576.) Courts
liberally grant leave to amend in light of a strong policy favoring resolution
of all disputes between parties in the same action. (Nestle
v. Santa Monica (1972) 6 Cal.3d 920, 939; Morgan v. Superior Court (1959) 172 Cal.App.2d 527, 530.) Accordingly, requests for leave to amend
generally will be granted unless the party seeking to amend has been dilatory
in bringing the proposed amendment, and the delay in seeking leave to amend
will cause prejudice to the opposing party if leave to amend is permitted. (Hirsa
v. Superior Court (1981) 118 Cal.App.3d 486, 490; see also Armenta ex
rel. City of Burbank (2006) 142 Cal.App.4th 636, 642 [“instances justifying
the court’s denial of leave to amend are rare.”].) Absent prejudice, delay alone is insufficient
to deny leave to amend. (Higgins v. Del Faro (1981) 123
Cal.App.3d 558, 564-565.) The decision on a motion for leave is directed to the
sound discretion of the trial court. (See
Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter
Group 2014) ¶¶ 6:637 et seq.)
A party requesting leave to amend must state what allegations in the
previous pleading are proposed to be deleted and added, as well as specify
where, by page, paragraph, and line number, the changes are located. (Cal. Rules of Court, rule 3.1324(a)(1)-(3).)
The moving party must also attach the proposed amended pleading with a
declaration by counsel, describing (1) the effect of the amendment; (2) why the
amendment is necessary and proper; (3) when the facts giving rise to the
amended allegations were discovered; and (4) why the request was not made
earlier. (Cal. Rules of Court, rule 3.1324(b)(1)-(4).)
Discussion
Plaintiff
TruConnect complied with the Rules of Court. Counsel’s declaration attache a copy of the
proposed First Amended Complaint. (Cole
Decl., ¶ 6, Ex. A.) Counsel describes the newly added paragraphs and
allegations. (Id. at ¶¶ 6(a)-(f).)
He also provides the reason for the amendment (new evidence) and the new
facts supporting the allegations. (Id.
at ¶¶ 4, 5, 7, 8, 13-17.) These facts
suggest that Defendants’ subsequent actions of listing the phones online and
separately selling them may give rise to other theories of liability such as fraud.
Defendant
does not address the issue of prejudice.
Instead, it asserts that the amendment changes the theory of liability, contains
invalid causes of action, and is a sham.
None of these contentions have merit.
To the
extent that Defendant is arguing that the damages and theories of liability may
be different, this is irrelevant if the amendment is based on the same set of
operative facts. (Amaral v. Cintas
Corp. No. 2 (2008) 163 Cal.App.4th 1157, 1199-1200.) Defendant’s only cited case, Klopstock v.
Superior Court of San Francisco (1941) 17 Cal.2d 13, 20 (Klopstock)
is factually distinguishable and does not stand for the blanket proposition
that new causes of action are not permitted in amendments.
In Klopstock,
the decedent was a stockholder and the plaintiff, acting as executor of the
estate, sued on behalf of the corporation to compel the other shareholders to
repay wrongfully withdrawn sums. (Klopstock,
supra, 17 Cal.2d at p. 15.) Judgment
was entered in favor of the estate, but the Court of Appeal reversed because
the estate was not a party to the action.
(Id. at pp. 15-16.) The plaintiff
then sought to amend the complaint to substitute in the newly appointed
executor. The California Supreme Court stated
the amendment was consistent with “modern theories of code pleading, which
would permit amendment in the discretion of the court unless an attempt is made
to present an entirely different set of facts by way of the amendment.” (Klopstock v. Superior Court of San
Francisco, supra, 17 Cal.2d at pp. 19-20.) While amendments with the effect of stating a
distinct cause of action were not permitted, “the test is not whether under
technical rules of pleading a new cause of action is introduced, but rather,
the test is whether an attempt is made to state facts which give rise to a
wholly distinct and different legal obligation against the defendant.” (Id. at p. 20.)
Klopstock
was in response to defendant’s prior demurrer and involved an amendment as
to the plaintiff and the capacity in which she sued. This is not the case here. TruConnect is not substituting itself out as
a plaintiff. It is alleging new causes
of action under the same set of operative facts, i.e., the contract that
provided the cellular devices to Defendant.
The factual allegations are consistent between both pleadings.
As to Defendant’s argument that the
claim for interference with prospective economic advantage is insufficient,
this is properly addressed at demurrer.
(Kittredge v. Sports Co. (1989) 213 Cal.App.3d 1045, 1048.)
Defendant also contends the proposed
amendment is a “sham” pleading. This
argument fails. The sham pleading
doctrine provides that allegations in the original pleading that were vulnerable
to demurrer cannot simply be omitted without explanation in the amended
pleading. (Owens v. Kings Supermarket
(1988) 198 Cal.App.3d 379, 384.) The
policy requires the pleading party to explain the inconsistency. If he fails to do so, “the court may
disregard the inconsistent allegations and read into the amended complaint the
allegations of the superseded complaint.”
(Ibid.)
Defendant does not indicate what
allegations are inconsistent, merely arguing that the proposed amendments
“take[] this case in an entirely different direction.” The Court has reviewed both pleadings and
does not find any inconsistencies.
Finally,
Defendant has failed to address any issues of prejudice that it may
suffer. This case was only filed on
April 7, 2022, and a trial date has not been set. Even if discovery has begun, it is still in
the early stages and Defendant has not shown that it would suffer any
prejudice. “Where no prejudice is shown
to the adverse party, the liberal rule of allowance prevails.” (Higgins v. Del Faro (1981) 123
Cal.App.3d 558, 564-565 [finding that it may be an abuse of discretion to deny
leave to amend if no prejudice is shown]; see also Atkinson v. Elk Corp.
(2003) 109 Cal.App.4th 739, 761.)
Given the “ ‘great liberality in
permitting amendments to the complaint at any stage of the proceedings,’ ” the Court
grants the motion. (Atkinson v. Elk Corp., supra, 109 Cal.App.4th
at p. 761; see Howard v. County of San Diego (2010) 184 Cal.App.4th 1422,
1428.) Plaintiff is ordered to file its
First Amended Complaint within 10 days.