Judge: Elaine Lu, Case: 22STCV14368, Date: 2024-02-02 Tentative Ruling

Case Number: 22STCV14368    Hearing Date: February 2, 2024    Dept: 26

Superior Court of California

County of Los Angeles

Department 26

Procedural Background

            On April 29, 2022, Plaintiff Paul Falzon (“Plaintiff”) filed the instant wrongful termination action.  On October 24, 2022, Plaintiff filed a First Amended Complaint against Defendants SMG Holdings, Inc. (“SMG Inc.”), SMG Holdings, LLC, (“SMG LLC”), ASM Global (“ASM”), and Steve Goodling (“Goodling”).  On February 1, 2023, Plaintiff filed the operative Second Amended Complaint (“SAC”).  The SAC asserts four causes of action for (1) Retaliation (Labor Code § 1102.5), (2) Wrongful Termination in Violation of Public Policy, (3) Intentional Interference with Prospective Economic Advantage, and (4) Negligent Interference with Prospective Economic Advantage.  On June 26, 2023, Plaintiff named SMG, a general partnership as Doe 3.

            On August 29, 2023, Plaintiff filed the instant motion for leave to file a third amended complaint.  On January 22, 2024, Defendants SMG Inc., SMG LLC, ASM Global, and SMG (collectively “Defendants”) filed an opposition.  On January 26, 2024, Plaintiff filed a reply.

Allegations of the Operative Complaint

            The SAC alleges that:

            ASM is a venue and event management company that manages “over 300 stadiums, arenas and convention centers around the world.”  (SAC ¶ 11.)  AMS’s subsidiary SMG, Inc. and its successor SMG LLC “manage[] and operate[] the venue known as the Long Beach Convention & Entertainment Center (LBCEC) pursuant to a contract between SMG and the City of Long Beach.”  (SAC ¶¶ 2-3, 11.)  Defendant Goodling is the President and Chief Executive Officer of the Long Beach Convention & Visitors Bureau.  (SAC ¶ 12.)

            ASM, SMG, Inc., and SMG, LLC hired Plaintiff to serve as the Director of Finance, and Senior Accounting and Finance Executive at LBCEC, and Plaintiff reported to the LBCEC’s General Manager Charlie Beirne.  (SAC ¶ 13.)  Plaintiff had no performance issues and in fact received a substantial salary increase in August 2021.  (SAC ¶ 15.)

            While serving as Director of Finance, and Senior Accounting and Finance Executive, Plaintiff uncovered that “Goodling was spending public money to buy furniture that he converted to his personal use. Ultimately, Plaintiff calculated that Goodling spent over $1.3 million in public funds on furniture and unapproved purchases.”  (SAC ¶ 17.)  “Plaintiff determined that there were no purchase orders, no competitive bidding, no vendor selection process, and the City of Long Beach, which owns the LBCEC, was unaware of the full extent of Goodling’s unapproved furniture shopping activities.”  (SAC ¶ 18.)  “Plaintiff reasonably believed that Goodling, in his role as President and CEO of the LBCVB was a public officer. As a certified public accountant charged with accounting for Goodling' s purchases, Plaintiff believed that he and Goodling shared duties and responsibilities for the proper handling and disposition of the monies in the Parking Fund and Facility Fund described above.”  (SAC ¶ 19.)

            “Goodling committed financial waste in other areas. For example, at one event, the client wanted music played off an iPhone music playlist. Goodling felt this was below standard so he ordered a DJ with a light package that was paid for by the City of Long Beach.”  (SAC ¶ 22.)  “Goodling spent City of Long Beach money on extravagant holiday lighting displays and expensive landscaping projects. Goodling spent approximately $102,345 for flowers on a rainbow bridge.”  (SAC ¶ 23.)  “Goodling’s fraudulent purchases, [] were extravagant and wasteful and violated state and local laws and regulations because they had not been preapproved as per the SMG/LBCEC purchasing guidelines.”  (SAC ¶ 25.) 

            “Plaintiff complained internally to Beirne about Goodling operating outside company and city policy. Beirne threatened Plaintiff, saying that if SMG lost the contract to manage the LBCEC a new management company would take over and Beirne and Plaintiff would be terminated. Beirne explained that Goodling’s political influence, i.e., ‘clout,’ with the Mayor and City Council would help ASM / SMG renew the contract without going to a request for proposal (RFP). Beirne made clear that SMG/ASM Management would not care about Goodling’s financial abuse because Steve Goodling was wasting City of Long Beach funds and not SMG/ASM funds. Plaintiff was essentially told to shut up and remain silent about Goodling’s fraud, or else lose his job.”  (SAC ¶ 26.)

            “In July 2021, after Plaintiff complained again, Beirne said that Plaintiff’s complaints of inappropriate spending and misuse of city funds would be investigated. The City of Long Beach sent a warning letter to ASM about abiding by the City’s purchasing requirements. However, there was no investigation by SMG or ASM at that time. Instead, Goodling and Beirne cornered Plaintiff and threatened him.”  (SAC ¶ 27.)

            “On August 9, 2021, Plaintiff attended a work-related event in Bogarts Café. After the event, Beirne asked Plaintiff to meet with him and Goodling. In this impromptu meeting, Goodling wanted Plaintiff to apologize for complaining. Goodling said he did not think Plaintiff was ‘on board’ with Goodling’s vision for the LBCEC. Goodling pressured and bullied Plaintiff, saying to Plaintiff, in an aggressive tone, that if Plaintiff was unwilling to get on board with his vision, then ‘this was not the right job’ for him. Goodling stated, in essence, that Plaintiff needed to get on board with Goodling's vision or else he needed ‘to go.’ Thus, Goodling had the power, authority, and influence to determine whether Plaintiffs job was ‘right’ for Plaintiff.”  (SAC ¶ 28.)  “Goodling exerted his ‘clout’ with the City and the corporate defendants, SMG and ASM by telling Plaintiff that SMG (and its affiliate/parent, ASM) were making a lot of money on the City contract (as if the profit on the management contract should justify or excuse his shopping sprees). Goodling informed Plaintiff that the contract was up for renewal in an effort to pressure Plaintiff into remaining silent. Goodling further pressured Plaintiff by telling Plaintiff that Plaintiff’s complaints were making ‘things difficult’ for Goodling.”  (SAC ¶ 29.)

            “There was a power imbalance in the special relationship between Goodling, as the Chief Executive Officer of the facility where Plaintiff worked and officed, and Plaintiff, the Finance Director responsible for accounting for Goodling's financial transactions. Goodling expressed his displeasure with Plaintiff because of Plaintiffs complaints. Goodling acted as a manager and supervisor of LBCEC staff by making it clear to Plaintiff and SMG/ASM, through his actions and conduct, that Goodling had the power and authority to silence Plaintiff, by retaliating and having Plaintiff terminated from his job. Plaintiffs direct supervisor, Beirne did nothing while Goodling attacked, intimidated and threatened Plaintiff for making complaints about Goodling's expenditures. Beirne did not defend Plaintiff at all during or after the meeting. It appeared to Plaintiff that Beirne sided with Goodling during Goodling's unlawful, verbal assault and vicious attacks on Plaintiff.”  (SAC ¶ 32.) 

            On “August 17, 2021, Plaintiff met with an auditor and supervisor with the firm of Lance, Soll & Lunghard, the LBCEC External Auditors.”  (SAC ¶ 34.)  During this audit meeting, “Plaintiff disclosed Goodling’s inappropriate and unlawful purchasing activities.”  (SAC ¶ 34.) 

            “On September 28, 2021, Beirne called Plaintiff into a termination meeting. Beirne, and McClintock informed Plaintiff that Plaintiff was being terminated due to ‘position elimination.’”  (SAC ¶ 36.)  “SMG purported to offer Plaintiff a corporate job at SMG’s corporate office in Los Angeles.”  (SAC ¶ 38.)  However, this was not a legitimate job offer as “[t]he offer was vague[,] [t]he position was temporary[,] [and] [t]he Defendant’s Human Resources Manager has confirmed in a sworn statement that the corporate job offer was pretextual and the termination was retaliatory.”  (SAC ¶ 38.)  “Plaintiff immediately complained to McClintock that his termination was based on Goodling retaliating against Plaintiff.”  (SAC ¶ 39.)  Immediately after, on October 22, 2021, Plaintiff was placed on administrative leave.  (SAC ¶¶ 39-40.)  On October 25, 2021, ASM’s Executive Vice-President, Bob McClintock sent an email announcing to SMG Inc. and SMG LLC employees that Plaintiff had resigned.  (SAC ¶ 41.)  This was untrue as Plaintiff did not resign.  (SAC ¶ 41.)  “On October 28, 2021, SMG’s investigator, Ms. Gilkin, finally interviewed Plaintiff in response to Plaintiff’s complaints.”  (SAC ¶ 42.)

            “Plaintiff was told that he would be terminated, effective November 12, 2021 or the following Monday, November 15, 2021.  The termination was finalized, effective November 12, 2021.”  (SAC ¶ 43.)

Legal Standard

            Code of Civil Procedure § 473, subdivision (a)(1) states: “[t]he 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.” 

            Code of Civil Procedure § 576 states that: “[a]ny judge, at any time before or after commencement of trial, in the furtherance of justice, and upon such terms as may be proper, may allow the amendment of any pleading or pretrial conference order.”

            Judicial policy favors resolution of all disputed matters between the parties, and therefore, courts have held that “there is a strong policy in favor of liberal allowance of amendments.” (Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 296-97; see also Ventura v. ABM Industries, Inc. (2013) 212 Cal.App.4th 258, 268) [“Trial courts are bound to apply a policy of great liberality in permitting amendments to the complaint at any stage of the proceedings, up to and including trial where the adverse party will not be prejudiced.”].)

            Pursuant to California Rules of Court, rule 3.1324(a), a motion to amend must: (1) include a copy of the proposed amendment or amended pleading, which must be serially numbered; and (2) state what allegations are proposed to be deleted from or added to the previous pleading and where such allegations are located.  Rule 3.1324(b) requires a separate declaration that accompanies the motion, stating: “(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 reason why the request for amendment was not made earlier.” 

Discussion

            Plaintiff seeks to file a Third Amended Complaint that adds a fifth cause of action for Failure to Provide Personnel Files in violation of Labor Code section 1198.5.  Plaintiff has attached a proposed third amended complaint and a “redline” copy indicating all proposed modifications between the proposed third amended complaint and the SAC.  (Barrera Decl. ¶¶ 3-4, Exhs. A-B.)  The only new factual allegation added is that Plaintiff requested his personnel file in November 2021, and Defendants failed to produce a copy to Plaintiff.  (Barrera Decl. ¶ 4, Exh. B, [Redline Copy at ¶ 43].)  Plaintiff’s Counsel states that he requested that the parties stipulate to the filing of the proposed third amended complaint, but Defendants refused.  (Barrera Decl. ¶ 5, Exh. C.)

            In opposition, Defendants contend that the Court should deny the instant motion because (1) the proposed fifth cause of action for Failure to Provide Personnel Files in violation of Labor Code section 1198.5 is barred by the statute of limitations and (2) Defendants are prejudiced by the delay in bringing this amendment.

            Whether the proposed third amended complaint is deficient is beyond the scope of a motion for leave to amend.  In general, there is no requirement that a critical inquiry be made into the merits of the amendment on a request for leave to amend.  (See Ruiz v. Santa Barbara Gas & Elec. Co. (1912) 164 Cal. 188, 196 [ “The usual and orderly way to test the sufficiency of an amended complaint is, in the first instance, by demurrer, after the same has been filed, when the questions presented in regard thereto may be considered and determined, and leave given to the pleader to amend if the pleading be held insufficient and the court deem it proper that the party should have such leave.”].)  Rather, Defendants can challenge such deficiency in a motion challenging the claim, such as a demurrer or motion for summary adjudication.  

            Moreover, while Plaintiff does appear to have delayed in bringing the instant motion to amend the complaint, “trial courts are to liberally permit such amendments, at any stage of the proceeding[.]”  (Hirsa v. Superior Court (1981) 118 Cal.App.3d 486, 488–489.)  Rather, to justify a denial of a motion for leave to amend, the delay must have caused prejudice to the adverse parties.  (See Fair v. Bakhtiari (2011) 195 Cal.App.4th 1135, 1147, [“[W]here there is no prejudice to the adverse party, it may be an abuse of discretion to deny leave to amend.”].) 

            Here, Defendants claim that Plaintiff’s delay in bringing the instant motion is prejudicial because trial is less than four months away, and the amendment could result “in delay of the May 13, 2024 trial, along with added costs of preparation, addition law and motion expenses given the statute of limitations issue, and increased discovery efforts.”  (Kroll Decl. ¶ 5.)  Defendants’ explanation is insufficient to show prejudice by the amendment.  The new factual allegations are minimal and merely that Plaintiff requested his personnel file in November 2021, and Defendants failed to produce said file within 30 days.  (Barrera Decl. ¶ 4, Exh. B, [Redline Copy at ¶ 43].)  Defendants do not identify what significant discovery costs would need to be incurred – if any due – as a result of the simple addition of this new cause of action.  Further, Defendants have been aware of the proposed amendment since June 2023.  The mere fact that Defendants may need to file a motion to challenge the pleadings is similarly insufficient to show prejudice as all amendments to pleadings may give rise to further motions.  Moreover, if Defendants are correct that the statute of limitations bars the proposed new claim, any prejudice to Defendants would be minimal as Defendants would defeat such claim with a straightforward demurrer.

            As Defendants fail to identify prejudice from allowing Plaintiff to file the proposed third amended complaint, it would be an abuse of discretion to deny the instant motion.  Accordingly, Plaintiff’s motion for leave to amend is GRANTED.

Conclusion and ORDER

            Based on the foregoing, Plaintiff Paul Falzon’s motion for leave to file a third amended complaint is GRANTED.

            Plaintiff is to file and serve the proposed Third Amended Complaint no later than February 7, 2024.

            A non-appearance re filing of Defendants’ responsive pleading is set for March 13, 2024 at 8:30 am.

            Moving Party is to provide notice of this order and file proof of service of such.

DATED: February ___, 2024                                                 ___________________________

                                                                                          Elaine Lu

                                                                                          Judge of the Superior Court