Judge: Gary I. Micon, Case: 21STCV28908, Date: 2024-12-03 Tentative Ruling
Case Number: 21STCV28908 Hearing Date: December 3, 2024 Dept: F43
Dept.
F43
Date:
12-03-24
Case
# 21STCV28908, Moroso, et al. v. Newegg Business Inc., et al.
Trial
Date: 05-27-25
MOTION FOR LEAVE TO FILE A FOURTH AMENDED COMPLAINT
MOVING
PARTIES: Plaintiffs Rose Moroso, Rose Moroso, and Tyler Lawrence
RESPONDING PARTIES: Defendants
Jacob Joey Sanchez, Now Express Cartage, Inc., PDQ Fulfillment, LLC, and
Rideshare Car Rentals, LLC
RELIEF
REQUESTED
Order
granting leave to file a Fourth Amended Complaint.
RULING: Motion is
granted in part, to add an alter ego theory pertaining to Newegg Logistics and
PDQ Pickup, and denied in part regarding allegations that Jacob Joey Sanchez is
an alter ego of the Newegg Defendants.
SUMMARY
OF ACTION
This
wrongful death action arises out of a vehicle collision. On June 24, 2021, Jacob Joey Sanchez, while
texting and operating a van within the scope of his employment, drove into a
motorcycle driven by Lawrence Samuel Moroso.
Lawrence died from his injuries.
On
August 5, 2021, Plaintiffs Rose Moroso (successor in interest to Lawrence
Samuel Moroso), Rose Moroso, and Tyler Lawrence Moroso filed this action
against Newegg Business Inc., Newegg Facility Solutions, Inc., Newegg Inc.,
Newegg Logistic Services Inc., Newegg North America Inc., Newegg Staffing Inc.,
Newegg Tech, Inc., Newegg Enterprises LLC, Newegg Commerce, Inc., Distinct Cars
LLC, Jacob Joey Sanchez, Jacob A. Sanchez, and Does 1 through 50. The complaint alleged causes of action for
motor vehicle negligence, negligent hiring, negligent entrustment, negligent
supervision, and survival action.
On
January 3, 2022, Plaintiffs filed a first amended complaint.
On
February 16, 2022, Plaintiffs filed a second amended complaint. Defendant Distinct Cars LLC demurred to the
motor vehicle negligence and survival causes of action on March 10, 2022. Defendants Newegg Logistics Services, Inc.
and Newegg Inc. filed a motion to strike punitive damages from the second
amended complaint on March 15, 2022. Distinct
Cars LLC demurred to the motor vehicle negligence and survival causes of action
on September 19, 2022. On September 30,
2022, the Court sustained Distinct Cars LLC’s demurrer, with leave to
amend. (09/30/2022 – Minute Order.)
On
April 11, 2022, Plaintiffs amended the SAC to add fictitious defendants Now
Express Cartage, Inc. and PDQ Fulfillment, LLC.
On
October 28, 2022, Plaintiffs filed a third amended complaint (3AC). On December 6, 2022, Newegg Logistics
Services, Inc. and Newegg Inc. filed a motion to strike punitive damages from
the 3AC. The Court denied the
motion. (07/13/2023 – Minute
Order.) Distinct Cars LLC demurred to
the motor vehicle negligence, negligent entrustment, and survival causes of
action. On January 25, 2023, the Court
sustained Distinct Cars LLC’s demurrer to the 3AC without leave to amend. Rideshare Car Rentals, LLC demurred to the 3AC
on March 3, 2023. On May 11, 2023, the
overruled Rideshare Car’s demurrer.
On
December 14, 2023, New Egg Logistics Services Inc., Newegg Inc., Newegg
Business Inc., Newegg North America Inc., Newegg Tech, Inc., and Newegg
Enterprises LLC filed a motion for summary judgment.
After
mediating on May 24, 2024, the Newegg Defendants stipulated to allowing
Plaintiffs to file a 4AC in exchange for the Newegg Defendants removing a
motion for summary judgment from the calendar.
Sanchez and PDQ did not stipulate to this and were nonresponsive to
Plaintiffs’ meet and confer efforts.
On
September 24, 2024, Plaintiffs filed this motion for leave to file a fourth
amended complaint (4AC). Defendants Now
Express, PDQ, and Jacob Joey Sanchez filed and served an opposition on
September 30, 2024. Rideshare filed an
opposition on November 14, 2024. Plaintiffs
filed a reply on November 22, 2024.
Summary
of Arguments
Plaintiffs
move for leave to file a 4AC under Code of Civil Procedure section 473,
subdivision (a)(1) and section 576.
Plaintiffs seek to amend their complaint to allege alter ego,
partnership, and joint venture, etc. between the Defendants. Between March 2024 and July 2024, Plaintiffs
deposed managers of the Defendant entities and discovered substantial evidence
that several of the Defendant entities are “sham” organizations operating in
violation of the law.
In
opposition, Defendants Now Express, PDQ Fulfillment, and Jacob Joey Sanchez
argue that granting another amendment will cause great expense for all parties. Each party will have to re-depose several
individuals, the amendment will further delay for a case that is now three
years old, and the evidence does not support Plaintiffs’ new civil and criminal
conspiracy claims. Additionally,
Rideshare argues it will suffer prejudice because it ceased operations in 2023
and no longer has company representatives who can assist in defending these
additional allegations.
In
reply, Plaintiffs note discovery has been an ongoing issue, regardless of the
amendment, because Defendants refuse to respond to Plaintiffs’ discovery
requests. Defendants’ opposition admits
the very facts learned during the discovery process that support filing an
amended complaint. The interests of
justice support an amended complaint because no risk of prejudice exists, and
Court can address all related issues at once.
ANALYSIS
Legal
Standard
“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.” (Code Civ. Proc., § 473, subd.
(a)(1); see also In re Marriage of Liss (1992) 10 Cal.App.4th 1426,
1429.) “Any 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.” (Code Civ. Proc., §
576.)
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, 296-297; 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.”].)
“If the motion to amend is timely made and the granting of the motion
will not prejudice the opposing party, it is error to refuse permission to
amend and where the refusal also results in a party being deprived of the right
to assert a meritorious cause of action or a meritorious defense, it is not
only error but an abuse of discretion.”
(Morgan v. Superior Court (1959) 172 Cal.App.2d 527, 530,
citations omitted.)
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. (Weil & Brown, Cal. Practice
Guide: Civil Procedure Before Trial (The Rutter Group 2020) [Weil & Brown],
¶ 6:655, citations omitted.) Absent
prejudice, any claimed delay alone is not grounds for denial. “If the delay in seeking the amendment has
not misled or prejudiced the other side, the liberal policy of allowing
amendments prevails. Indeed, it is an
abuse of discretion to deny leave in such a case even if sought as late as the
time of trial. (Id. at ¶ 6:653
[citing Higgins v. Del Faro (1981) 123 Cal.App.3d 558, 564-565].) “Prejudice exists where the amendment would
result in a delay of trial, along with loss of critical evidence, added costs
of preparation, increased burden of discovery.”
(Weil & Brown, supra, at ¶ 6:656, citations omitted.) However, “the fact that the amendment
involves a change in legal theory which would make admissible evidence damaging
to the opposing party is not the kind of prejudice the court will consider.” (Ibid.)
“Even
if some prejudice is shown, the judge may still permit the amendment but impose
conditions, as the Court is authorized to grant leave ‘on such terms as may be
proper.’” (Weil & Brown, supra,
at ¶ 6:663, citation omitted.) For
example, the court may cause the party seeking the amendment to pay the costs
and fees incurred in preparing for
trial. (Id. at ¶ 6:664, citing Fuller
v. Vista Del Arroyo Hotel (1941) 42 Cal.App.2d 400, 404.)
Motions for leave to amend must also meet
certain procedural requirements. For instance, Cal. Rules of Court Rule
3.1324(a) requires that the motion “(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.”
Additionally, Rule 3.1324(b) requires that
the declaration in support of a motion for leave to file an amended complaint
must state: “(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.”
Here,
as set forth in the Declaration of Armine Khatchaturian, Plaintiffs’ counsel,
Plaintiffs seek to add a new legal theory for alter ego liability and factual
allegations laying out the relationship between the Newegg Defendants, PDQ
Pickup, and Jacob J. Sanchez.
(Declaration of Armine Khatchaturian Dec., ¶¶ 5-34.)
Between February 2024 and July 2024, Plaintiffs
conducted depositions. During these
depositions, Plaintiffs discovered the full nature of Sanchez, Newegg Express,
Newegg Logistics, and PDQ’s relationship.
Newegg is an online retailer of consumer goods that sells Newegg
products directly to consumers through its online platform. Newegg uses third party services to deliver
these products. To expand into the same day and overnight delivery market,
Newegg partnered with PDQ Pickup to create “Newegg Express.” (Khatchaturian Dec., ¶ 10; Exh. H, Harold
Fischer Depo, 25:25-26:15; 27:3-28:5; 28:16-31:12; 46:20- 47:19; ¶ 11; Exh. I,
Dana Kendall Depo, 32:19-33:3, 5-8.)
Plaintiffs also discovered that Newegg logistics
managers, including Donald Gwizdak, failed to adequately verify PDQ Pickup’s
qualifications and permits for operating as a motor express carrier before
entering into the “Newegg Express” joint venture. (Khatchaturian Dec., ¶ 12; Exh. J, Donald
Gwizdak Depo, 276:15-277:20; 278:3-25; 280:8-18; Exh. H, Fischer Depo,
41:3-7.) PDQ Pickup’s lack of proper
permits violated California Vehicle code section 34620, subdivision
(b)(1). (Ibid.)
Newegg controlled its drivers’ operations including
requiring them to use the PDQ Logistics application and requesting that PDQ
personnel remain anonymous to customers to give the impression they are Newegg
employees. Additionally, PDQ Pickup and
Newegg Defendants authored the training manual for Newegg Express. (Khachaturian Dec., Exh. K, Stephen Sanchez
Depo., 138 :12-17; 139:16-21; 140:1-4; Ex. H, Fischer Depo, 135:2-17; 137:1-16;
138:7-16.)
Finally, Plaintiffs learned that Newegg hired
Defendant Sanchez, son of PDQ Pickup CEO Stephen Sanchez, as a driver. (Khatchaturian Dec., Exh. E, JJS Depo,
21:21-22:25; 31:15-32:18, 222:16-18.)
Defendant Sanchez was on his phone immediately before the incident using
the PDQ Logistics application to determine his next assignment. (Khatchaturian Dec., Exh. E, 48:24-49:14.)
Based upon these
new facts, Plaintiffs intend to add the following legal theory to their
complaint:
Defendants Newegg
Logistics Services and PDQ operated as alter egos and shame entities of the
Newegg Defendants, Sanchez operated as an alter ego of the Newegg Defendants,
and Now Express was the alter ego of the Defendants (Khatchaturian Dec., ¶
4(a).)
A party may sue under the alter ego doctrine, “where
a corporation is used by an individual or individuals, or by another
corporation, to perpetrate fraud, circumvent a statute, or accomplish some
other wrongful or inequitable purpose, a court may disregard the corporate
entity and treat the corporation’s acts as if they were done by the persons
actually controlling the corporation.”
(See Capon v. Monopoly Game LLC (2011) 193 Cal.App.4th 344, 357.)
A defendant cannot claim surprise of a plaintiff’s
reliance on the alter ego theory where much discovery on the issue has occurred
and plaintiff bases its claims on the relationship between several
defendants. (Mesler v. Bragg
Management (2010) 39 Cal.3d 290, 297.)
Plaintiffs were diligent in discovering these new
facts and moving to file a 4AC, the evidence supports Plaintiffs’ request regarding
the alter ego theory for PDQ and Newegg. Plaintiffs present sufficient evidence to show
PDQ Pickup and Newegg Logistics formed a partnership to create the “Newegg
Express” platform to deliver consumer products through same-day or overnight
delivery. Both Newegg and PDQ created
the training manual, Newegg directly controlled the delivery drivers, and
Newegg’s drivers were required to use the PDQ Application to determine their
next deliveries. PDQ Pickup is not a
licensed motor express carrier and Newegg did not check PDQ Pickup’s carrier qualifications
before entering the joint venture.
Plaintiffs allege “Newegg Express” is a “sham operation” used by Newegg
and PDQ to avoid the permitting and qualification issues.
However, the evidence does not support amending the
complaint to list Defendant Jacob Joey Sanchez as an alter ego of the Newegg
Defendants. Plaintiffs present evidence
that Newegg hired Sanchez as a driver and that Sanchez is the son of the PDQ
CEO. Plaintiffs do not present evidence
supporting a finding that Sanchez acted with authority other than that of an
employee.
Additionally, several of Defendants’ arguments fail. First, Defendants will not need to expend
more funds for discovery and depositions because discovery is still ongoing
with Plaintiffs and Defendants communicating about discovery as recently as October
2024. Second, Defendants admit that the
depositions revealed the new information supporting Plaintiffs’ amendments and
do not argue Plaintiffs were not “genuinely ignorant” of this information. Finally, Defendants fail to show how this
amendment will prejudice them.
Defendants had the opportunity to engage in discovery and depositions of
their own over the last year.
Plaintiffs’ amendments do not cause unnecessary delay because trial is
set for May 2025. The parties have six
months to complete discovery and prepare for trial.
The Court grants, in part, Plaintiffs’ motion to file
a Fourth Amended Complaint.
CONCLUSION
The motion is granted in part to add factual
allegations supporting a new legal theory for alter ego liability pertaining to
the Newegg Defendants and PDQ Pickup LLC.
ORDER
The Court orders
Plaintiffs to file and serve their Fourth Amended Complaint within 5 days of
the date of this order. Defendants have
20 days from service to respond.
Moving
parties to give notice.