Judge: Bruce G. Iwasaki, Case: 23STCV16295, Date: 2024-11-19 Tentative Ruling

Case Number: 23STCV16295    Hearing Date: November 19, 2024    Dept: 58

Judge Bruce G. Iwasaki

Hearing Date:             November 19, 2024

Case Name:                Pacific Building Contractors v. European Parquet Inc.

Case No.:                    23STCV16295

Matter:                        Motion for Leave to File a Cross-Complaint

Moving Party:             Defendant European Parquet, Inc.

Opposing Party:          Plaintiff Pacific Building Contracts, Inc.

Background

            The action arises from a dispute between a general contractor and its subcontractor. On July 12, 2023, Plaintiff Pacific Building Contracts, Inc. (Plaintiff), the general contractor, filed a Complaint against its flooring subcontractor, Defendant European Parquet, Inc. (Defendant), for (1.) breach of contract, (2.) breach of implied contract, (3.) negligence, (4.) implied contractual indemnity, (5.) implied equitable indemnity, and (6.) unjust enrichment.

On October 18, 2023, Defendant European Parquet, Inc. filed an Answer.

            On October 18, 2024, Defendant filed the instant motion seeking leave to file a Cross-Complaint against Plaintiff. Plaintiff opposes the motion.

            The motion for leave to file a Cross-Complaint is granted.

Legal Standard

            Code of Civil Procedure section 428.50 provides as follows:

“(a) A party shall file a cross-complaint against any of the parties who filed the complaint or cross-complaint against him or her before or at the same time as the answer to the complaint or cross-complaint.

(b) Any other cross-complaint may be filed at any time before the court has set a date for trial.

(c) A party shall obtain leave of court to file any cross-complaint except one filed within the time specified in subdivision (a) or (b). Leave may be granted in the interest of justice at any time during the course of the action.”

Discussion

            Defendant moves for leave to file a cross-complaint on the grounds that the proposed Cross-Complaint is compulsory under Code of Civil Procedure section 426.30 and the delay in seeking leave was in good faith.

            The Court must first determine the appropriate standard by which to assess the motion for leave to file a cross-complaint. This turns on whether the proposed cross-complaint is deemed to be either a compulsory cross-complaint or a permissive cross-complaint.

            Code of Civil Procedure section 426.30, subdivision (a), which defines compulsory cross-complaints, states: “Except as otherwise provided by statute, if a party against whom a complaint has been filed and served fails to allege in a cross-complaint any related cause of action which (at the time of serving his answer to the complaint) he has against the plaintiff, such party may not thereafter in any other action assert against the plaintiff the related cause of action not pleaded.”

Under this statutory scheme, “[s]ubdivision (a) addresses compulsory cross-complaints, those related to the subject matter of the underlying complaint which exist at the time of service of the answer to the complaint on the particular plaintiff.” (City of Hanford v. Superior Court (1989) 208 Cal.App.3d 580, 586–587; see also Code Civ. Proc. § 426.30, subd. (a).) “Related cause of action” is defined in Code of Civil Procedure section 426.10(c) as “a cause of action which arises out of the same transaction, occurrence or series of transactions or occurrences as the cause of action which the plaintiff alleges in his complaint.” “[T]he relatedness standard ‘requires “not an absolute identity of factual backgrounds for the two claims, but only a logical relationship between them.” ’ ” (ZF Micro Devices, Inc. v. TAT Capital Partners, Ltd. (2016) 5 Cal.App.5th 69, 82.)

            Here, the proposed cross-complaint arises from the same underlying construction project and the parties’ respective obligations and services provided therein. (Compare Wiener Decl., Ex. D, ¶¶ 12-17 [Proposed Cross-Complaint] with Compl., ¶¶ 5-14.) Moreover, Plaintiff does not dispute that the proposed Cross-Complaint is compulsory. Based on the pleading “arises out of the same transaction, occurrence, or series of transactions or occurrences as the cause of action which the plaintiff alleges in his complaint” (Code Civ. Proc., § 426.10, subd. (c)), the proposed Cross-Complaint is a compulsory cross-complaint.

            Next, Defendant argues the delay in seeking leave to file this Cross-Complaint was made in good faith.

Under Section 426.50, a party who fails to plead a compulsory cross-complaint, “whether through oversight, inadvertence, mistake, neglect, or other cause,” may apply for leave to file the cross-complaint “at any time during the course of the action.” The statute further provides that the court shall grant leave to file a cross-complaint to assert a cause of action “if the party who failed to plead the cause acted in good faith,” and that “[t]his subdivision shall be liberally construed to avoid forfeiture of causes of action.”

The pertinent inquiry is whether there is “substantial evidence that bad faith existed in the circumstances surrounding [the] motion to file the cross-complaint.” (Silver Organizations Ltd. v. Frank (1990) 217 Cal.App.3d 94, 99.)

Here, Defendant submits evidence that it was only after reviewing Plaintiff’s responses to discovery that Defendant’s counsel realized it had a factual basis for the cross-claims in the proposed Cross-Complaint. Specifically, Defendant served various written discovery on Plaintiff, including Requests for Admission on December 7, 2023. (Wiener Decl., ¶ 2, Ex. A.) On January 5, 2024, Plaintiff served responses to Defendant’s Requests for Admission, which contained various facts supporting Defendant’s Cross-Complaint. (Wiener Decl., ¶ 3, Ex. B.) These responses demonstrated to Defendant the disparity between the parties’ understanding of events and convinced Defendant that cross-claims were necessary. (Weiner Decl., ¶¶ 2-5.)

            Defendant further represents that the delay was also the result of Defendant’s belief that the parties’ then ongoing settlement negotiations would be successful. That is, for months, the parties were engaged in settlement negotiations, which Defendant believed would result in its dismissal form this case; however, negotiations were ultimately unsuccessful. (Weiner Decl., ¶¶ 5-8.)

            In opposition, Plaintiff argues that Defendant acted in bad faith because it would have been aware of the crossclaims as early as January 5, 2024 and Defendant’s purported insolvency was responsible the delays related to the settlement negotiations. (Fax Decl., ¶ 3.)

While the evidence before the Court does not show that Defendant acted as expediently as possible in seeking leave to file the cross-complaint, there is no evidence that Defendant acted in bad faith in its delay in seeking to file a cross-complaint.

            Plaintiff also makes arguments challenging the legal viability of the cross-claims in the Cross-Complaint; however, a motion for leave is generally not the appropriate vehicle to substantively challenge a pleading. (See e.g., California Casualty General Ins. Co. v. Superior Court (1985) 173 Cal.App.3d 274, 280-81 [disapproved on other grounds].)

            Finally, Plaintiff argues that it will be prejudiced by the filing of this Cross-Complaint. Plaintiff argues the Cross-Complaint  will increase Plaintiff’s litigation costs and prolong the case, as Plaintiff would need to investigate and defend against claims that could have been raised at the outset of the litigation. Plaintiff submits no evidence of prejudice. For example, there is no evidence that material evidence has been lost with the passage of time or that Plaintiff will incur substantial costs that would not have been incurred had the cross-complaint been timely filed. Rather, Plaintiff’s claims of increased litigation costs are merely the normal costs of the litigation process and not prejudice from any delay. 

Conclusion

            Accordingly, the Court grants leave to Defendant to file the proposed Cross-Complaint. Defendant is ordered to file and serve the Cross-Complaint within seven days.