Judge Deirdre Hill, Case 19TRCV00125 2023-01-24 Tentative Ruling

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The court considered the moving, opposition, and reply papers. The court declines to consider the additional evidence submitted in plaintiffs’ reply brief and supplemental declaration, as improperly submitted.

On February 5, 2019, Kurt Baker, individual dba as Riviera Fitness, LLC and Dustin Holcomb, ind. dba as Riviera Fitness, LLC filed a complaint against Redondo Riviera Associates, LLC for (1) fraud, (2) breach of contract, (3) breach of covenant of good faith and fair dealing, and (4) rescission.

On April 8, 2019, plaintiffs filed a FAC for (1) fraud-concealment, (2) fraud-false representation, (3) breach of contract, (4) breach of covenant of good faith and fair dealing, (5) gross negligence, and (6) rescission.

On June 17, 2019, the parties stipulated, and the court ordered, that plaintiffs were to file a second amended complaint.

On September 5, 2019, the court overruled defendant’s demurrer to SAC as to the 4^th and 5^th causes of action and sustained with leave to amend as to the 6^th cause of action.

On September 25, 2019, Redondo Riviera Associates, LLC filed a cross-complaint for breach of contract.

On June 29, 2020, the court sustained with leave to amend Derek McLay’s demurrer to FACC.

On April 20, 2022, as to Redondo Riviera’s motion for adjudication, the court denied it as to the 3^rd, 4^th, and 5^th causes of action and grants it as to the 6^th cause of action.

On June 21, 2022, the court denied without prejudice plaintiffs’ motion for leave to file a TAC.

CCP § 473(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.”

“This discretion should be exercised liberally in favor of amendments, for judicial policy favors resolution of all disputed matters in the same lawsuit.” Kittredge Sports Co. v. Superior Court (1989) 213 Cal. App. 3d 1045, 1047.

Under CRC Rule 3.1324(a), a motion to amend a pleading shall (1) include a copy of the proposed amendment or amended pleading, which must be serially numbered to differentiate it from previous pleadings or amendments; (2) state what allegations in the previous pleading are proposed to be deleted, if any, and where, by page, paragraph and line number, the deleted allegations are located; and (3) state what allegations are proposed to be added to the previous pleading, if any, and where, by page, paragraph, and line number, the additional allegations are located.

Under CRC Rule 3.1324(b), a separate declaration must accompany the motion and must specify (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) the reasons why the request for amendment was not made earlier.

Even if a good amendment is proposed in proper form, a long, unwarranted and unexcused delay in presenting it may be a good reason for denial. In most cases, the factors for timeliness are: (1) lack of diligence in discovering the facts or in offering the amendment after knowledge of them; and (2) the effect of the delay on the adverse party. If the party seeking the amendment has been dilatory, and the delay has prejudiced the opposing party, the judge has discretion to deny leave to amend. Hirsa v. Superior Court (1981) 118 Cal. App. 3d 486, 490. Prejudice exists where the amendment would require delaying the trial, resulting in loss of critical evidence, or added costs of preparation such as an increased burden of discovery. Magpali v. Farmers Group, Inc. (1996) 48 Cal. App. 4th 471, 486-488.

Plaintiffs request leave to file a Third Amended Complaint to add a plaintiff, the actual operator of the business, which was named as a dba in the complaint, by changing Riviera Fitness, LLC from a dba of plaintiffs into a separate plaintiff and to add the allegation that Riviera Fitness, LLC has assigned its claims against defendant to plaintiffs.

Plaintiffs note that defendant Riviera Associates, LLC raised for the first time in its motion for summary adjudication the issue that the naming of the LLC as a “dba” was not the procedurally proper way to name it. Further, since the hearing on the motion, plaintiffs assert the LLC has assigned all of its rights and claims to allow plaintiffs to prosecute the case in the name of the LLC. Plaintiffs explain that the LLC was entered into so that plaintiffs, who took out business and personal loans to capitalize the LLC would have the opportunity to be made whole. Plaintiffs also contend that the amendments are justified because the LLC has been a party to this case from the outset, notwithstanding the error in naming it and defendant has obtained LLC’s tax returns and other financial information during the normal course of discovery. Moreover, plaintiffs assert the LLC seeks the same remedy based upon the same facts as already alleged in the SAC.

In opposition, defendant argues that plaintiffs’ counsel’s declaration does not comply with Cal. Rules of Court, Rule 3.1324(b) because it does not state when the facts giving rise to the amended allegations were discovered and why the reasons why the request for amendment was not made earlier. Defendant also contends that “[i]t is textbook law that an LLC is an entity separate and distinct from its members” and that the LLC is a legal entity which is separate from its owners and has its own separate rights and liabilities. Defendant further asserts that the LLC has no standing to sue because the subject lease was only entered into by plaintiffs Baker and Holcomb and thus “there are absolutely no allegations that anything was falsely represented to the LLC or concealed from it.” Defendant also argues that the LLC’s purported assignment of tort claims under the 1^st, 2^nd, 3^rd, and 7^th causes of action or its purported assignment of contractual rights under the 4^th and 5^th causes of action is a nullity. Moreover, defendant argues, the LLC’s claims are independent of those alleged by plaintiffs and are time-barred and denies treating the LLC as a party. Finally, defendant also argues that it will be prejudiced because it will have to “undergo expensive and time-consuming additional costs of trial preparation” if the motion to amend is granted.

In reply, plaintiffs reiterate that the LLC has been a party named as a dba of the individual plaintiffs in the complaint and that plaintiffs had alleged that the LLC was formed to run the gym at the leased premises. Plaintiffs argue that it is solely seeking to correct a technical misnomer and that the claims are not “independent” and thus not subject to the statute of limitations. Further, plaintiffs contend that there has been no delay in seeking amendment and reiterate that neither plaintiffs nor counsel were aware the manner the LLC was named was procedurally incorrect until the court indicated its view during the April 20, 2022 oral argument. Plaintiffs also argue that the procedural requirements have been met.

The court rules as follows: Counsel’s declaration states that he was “not aware it was improper to name the LLC as a dba rather than a separate party.” Counsel further explains he did not become aware until after defendant raised the standing issue in the motion for summary adjudication. The court finds that these statements, taken together, suffice to show compliance with CRC Rule 3.1324. Further, while the parties are now on the eve of trial, the delay in resolving this issue was not within plaintiffs’ control. Finally, the court is satisfied that the proposed amendment is more technical than substantive, in that it serves to align the legal entities involved in the lawsuit with the already stated parties’ interests. In light of the liberal policy in allowing amendment, the motion is GRANTED.