Judge: David Sotelo, Case: 20STCV40121, Date: 2022-09-27 Tentative Ruling
Case Number: 20STCV40121 Hearing Date: September 27, 2022 Dept: 40
MOVING PARTY: Defendants/Cross-Complainants
Sneakertopia, Inc.,
Stephen Brown, and
Steve Harris.
This action involves disputes between the Plaintiffs and
Defendants regarding Defendants’ failure to pay Plaintiff Big Time Affairs, LLC
under a services contract, and the Cross-Complainants claims of indemnity
against Cross-Defendants under the same facts.
Defendants/Cross-Complainants Sneakertopia, Inc., Stephen Brown, and Steve Harris (“Defendants”) request
Leave to File First Amended Cross-Complaint to add two new causes of action: Disgorgement
under Business and Professions Code §7031(b) and an Action for Declaratory
Relief.
The Court GRANTS the Motion.
Legal Standard: California Code of Civil Procedure
section 473, subdivision (a)(1) provides, in relevant part: “The court may, in
furtherance of justice, and on any terms as may be proper, allow a party to
amend any pleading or proceeding by adding or striking out the name of any
party, or by correcting a mistake in the name of a party, or a mistake in any
other respect; and may, upon like terms, enlarge the time for answer or
demurrer. The court may likewise, in its
discretion, after notice to the adverse party, allow, upon any terms as may be
just, an amendment to any pleading or proceeding in other particulars; and may
upon like terms allow an answer to be made after the time limited by this
code.”
Leave to amend may also be properly denied when “the
insufficiency of the proposed amendment is established by controlling precedent
and . . . [can]not be cured by further appropriate amendment.” (California Casualty General Ins. Co.,
supra, 173 Cal.App.3d at pp. 280-81; see, e.g., Foxborough v. Van
Atta (1994) 26 Cal.App.4th 217, 231 [not an abuse of discretion to deny
leave to amend when “proposed amendment would have been futile because it was
barred by the statute of limitations” with no indication of relating back to
the original complaint].) However, “even
if the proposed legal theory is a novel one, ‘the preferable practice would be
to permit the amendment and allow the parties to test its legal sufficiency by
demurrer, motion for judgment on the pleadings or other appropriate
proceedings.’” (Kittredge Sports Co.,
supra, 213 Cal.App.3d at p. 1048, quoting California Casualty General
Ins. Co., supra, 173 Cal.App.3d at p. 280.)
Analysis: Leave to Amend is GRANTED for the following
reasons.
Cross-Complainants have complied with the procedural requirements
of CRC 3.1324: the facts giving rise to the amended allegations regarding
violations of the Business & Professions Code were discovered after
mediation in April 2022 in case number 19SMCV02216 and the facts giving rise to
the declaratory relief cause of action surfaced during the hearing on May 2,
2022 in connection with Cross-Complainants’ efforts to amend their Answer.
(Rosen Decl., ¶¶14-15.) Further, Cross-Complainants represent that the amended
pleading is necessary because the requirements of the Business and Professions
Code regarding licensing of contractors needs to be adjudicated and the
requirements of the Corporations Code regarding formalities of limited
liability companies also needs to be adjudicated. The potential violation of
the Business & Professions Code provides for a remedy to Cross-complainants
Sneakertopia, Inc., Stephen Brown and Stephen Harris of disgorgement. The
potential violation of the Corporations Code and Revenue & Tax Code affects
Plaintiff’s ability to prosecute this action and to defend the Cross-complaint,
an issue that must be adjudicated. The amended pleading is thus necessary and
proper. (Id., at ¶¶12-13.)
Plaintiff, a suspended corporation, (and the Court notes
that “[a] suspended corporation may not prosecute or defend an action in a
California court” Timberline, Inc. v. Jaisinghani (1997) 54 Cal.App.4th
1361, 1365.) opposes the motion arguing that the claims are time barred and
Cross-Complainants delayed in seeking amendment.
The Court declines to consider the merits of these claims at
this time (they are more properly considered on demurrer). Further,
Cross-Complainants represent that Sneakertopia and its counsel were reluctant
to bring the disgorgement claim until, in a mediation, Artxco agreed that Sneakertopia
could bring this claim and subsequently agreed in writing to assign its claim
against Plaintiff if such an assignment was necessary and would be valid. (See
Rosen Decl., ¶¶5, 7.) Accordingly, Sneakertopia’s counsel’s declaration about
when he knew that Sneakertopia had a claim for disgorgement is correct.
Accordingly, the Court finds no delay and considering the
liberal policy allowing amendments to pleadings, the Court grants the motion.
Defendants/Cross-Complainants
Sneakertopia, Inc., Stephen Brown, and Stephen Harris’s Motion for Leave to
File First Amended Cross-Complaint is GRANTED.