Judge: Cherol J. Nellon, Case: 20STCV05874, Date: 2024-03-11 Tentative Ruling

Case Number: 20STCV05874    Hearing Date: March 11, 2024    Dept: 14

Gould vs. Bolour

Case Background

            Plaintiff alleges that the principal Defendants tricked him into putting $400,000 into a trading account and giving them management privileges. Defendants then used his money to engage in a series of highly-leveraged margin trades. Even though Plaintiff figured out the scheme in a matter of days and closed the account, Defendants had still managed to lose over $250,000 of his money. Plaintiff is now suing everyone involved, including the trading platform which hosted his account.

            On June 8, 2023, Plaintiff filed his Second Amended Complaint (“SAC”) for (1) Breach of Contract, (2) Breach of Fiduciary Duty, (3) Violation of Corp. Code §§ 25000, 27000 and Code Civ. Proc. § 1029.8, (4) Trading Without Authorization, (5) Negligent Misrepresentation, (6) Fraud, (7) Material Misrepresentation in Securities Transaction, (8) Aiding and Abetting Fraud, (9) Financial Elder Abuse, (10) Unfair Competition, (11) Conspiracy, (12) RICO, (13) Accounting, (14) Negligence, (15) Negligent Supervision, and (16) Failure to Supervise/Control against Defendants Ashkan Bolour (“Bolour”), USITM Trading, Inc. (“USITM”), Anita Rodal (“Rodal”), South Bay Property Investors, Inc. dba SBPI Services, Inc. and Practical Opinions (“SBPI”), Eric Colon (“Colon”), Alternative Wealth Solutions, Inc. (“AWS”), Hulick Capital Management LLC (“Hulick”), Oanda Corporation (“Oanda”), and DOES 1-50.

            On July 11, 2023, Defendants Colon and AWS filed their joint Answer.

            On August 24, 2023, the default of Defendant Hulick was entered.

            On July 28, 2020, Defendants Rodal and SBPI filed their joint Answer to a prior version of the complaint.

On September 28, 2020, this court dismissed Defendant Oanda, without prejudice, based on contractual selection of another forum. The subsequent amendment does not revive Oanda’s status in this case.

No responsive pleading has been filed by Defendants Bolour and USITM, nor has their default been entered.

            Jury Trial is currently set for March 11, 2024.

(1)        OSC re: Failure to Serve

            Plaintiff’s original complaint was filed on February 14, 2020. Only Defendant Oanda was served with the original complaint.

Plaintiff’s First Amended Complaint (“FAC”) was filed on May 6, 2020. The FAC was served on Defendants Hulick, Colon, USITM, Rodal, SBPI, and AWS. Defendant Bolour was served by publication. Defendants Hulick, Colon, Rodal, and SBPI filed responses. Defendants AWS and Bolour were defaulted. Defendant USITM never responded, and its default was never sought.

On June 8, 2023, this court granted Plaintiff’s motion for leave to file the SAC. In that motion, Plaintiff stipulated that the answers already filed by Defendants Rodal and Colon in response to the FAC could serve as their responses to the SAC. (Motion filed April 6, 2023, p 4:18-20). Counsel for Defendants Colon and AWS were present at the hearing; no other defense counsel appeared. Counsel for Defendants Colon and AWS stipulated that the service date for the SAC would be the day of the hearing. Since no other counsel appeared at the hearing and no written stipulation was ever filed, the court can only conclude that no other counsel were party to this stipulation.

            On February 26, 2024, this court issued the instant OSC, asking Plaintiff to explain why (1) the filing of the SAC did not “re-open” the default of Defendant Bolour and (2) why no proof of service was ever filed as to Defendant USITM. (Minute Order of February 26, 2024).

            Plaintiff has filed a response to the OSC on March 6, 2023. In that response, he correctly notes that a default is only “re-opened” after amendment if there has been a substantive change in the allegations against or remedies sought from the defaulted party. See Paterra v. Hansen (2021) 64 Cal.App.5^th 507, 529-530. The court has compared the First Amended Complaint to the Second Amended Complaint, and determined that, as relates to Defendant Bolour, the pleadings are materially identical. Therefore, the default remains in place and has not been “re-opened.”

            Plaintiff’s response also indicates that there is no such entity as Defendant USITM, and Plaintiff will not be pursuing them.

            Therefore, the complaint against Defendant USITM is DISMISSED, without prejudice. This OSC is DISCHARGED.

(2)        OSC re: Set Aside Default

            As noted above, Defendant Hulick answered the FAC. (Answer filed August 18, 2020). Because the SAC did materially alter the claims asserted against Defendant Hulick, they were entitled to new service. However, no proof of service has been filed which shows that anyone has ever been served with the SAC.

            There is a proof of electronic service attached to the SAC which shows that counsel for Colon, AWS, Rodal, SBPI, and Hulick were all served with a “Proposed” Second Amended Complaint. But that is not the same as being served with an actual SAC, bearing a file stamp.

            Likewise, Plaintiff served a Notice of Ruling indicating that the motion to file the SAC had been granted. But this also is not the same as being served with the actual pleading.

            Despite the defect in service, Plaintiff was able to obtain the entry of Defendant Hulick’s default from the clerk on August 24, 2023.

            Counsel for Hulick attempted to file a motion to set the default aside, but was unable to complete and serve the filing in time for the reserved hearing date. In the absence of timely filing, the court removed the hearing from its calendar. Counsel for Hulick then reserved a new hearing date of March 13, 2024, which is two days from the instant hearing, but filed no new papers.

            On February 26, 2024, the court issued the instant OSC. Plaintiff filed a response on March 6, 2024.

            Plaintiff argues that the Second Amended Complaint was “deemed served” by this court on June 8, 2023. But as explained above, the minute order from that date makes clear that this is not what happened. Counsel for two parties stipulated that there was no need for additional service on their clients. Neither of those parties was Defendant Hulick.

The Declaration of Nicole Uhlmann, filed January 26, 2024, indicates that Plaintiff’s counsel did not warn her before seeking the default of her client. The Response to the OSC confirms that account – Plaintiff’s counsel simply served Ms. Uhlmann with copies of his requests for entry of default as he submitted them to the clerk. (Declaration of Marc I. Zussman ¶¶ 8-9).

            It has long been acknowledged that where a plaintiff’s attorney is aware that a defendant has counsel, that plaintiff’s attorney has an ethical obligation to warn defense counsel before they attempt to enter default. See Lasalle v. Vogel (2019) 36 Cal.App.5^th 127, 135. That ethical obligation has since been turned into a legal obligation which would require this court to set aside any default that was sought without advance warning. Id. at 135-141. The mere fact that counsel failed to obtain entry of default on his first attempt does not excuse the breach of this rule.

Furthermore, as just described, it is not at all clear that counsel for Hulick was ever properly served with the SAC, in which case this court would lack jurisdiction to enter any default judgment against it.

For these two independent reasons, the default of Defendant Hulick is VACATED. Defendant Hulick is to file an Answer within 24 hours.