Judge: John J. Kralik, Case: 22BBCV00690, Date: 2024-01-19 Tentative Ruling
Case Number: 22BBCV00690 Hearing Date: January 19, 2024 Dept: NCB
North Central District
|
alpha medical resources,
inc., Plaintiff, v. frank uchalik, et al., Defendants. |
Case
No.: 22BBCV00690 Hearing Date: January 19, 2024 [TENTATIVE] order RE: motion for leave to file first amended cross-complaint |
BACKGROUND
A.
Allegations
Plaintiff Alpha Medical Resources, Inc. (“Alpha”) alleges that it was
formed on May 19, 1992 by Frank A. Uchalik, Sr. (“Uchalik Sr.”), who is the
father of Defendant Frank Uchalik (“Uchalik Jr.”), along with some other
owners. Uchalik Jr. became an employee
of Spellman Desk Company, which is a wholly-owned subsidiary of Alpha. On February 21, 2008, Defendant Frenemy, LLC
(“Frenemy”) was formed by Uchalik Jr. On
December 14, 2009, Uchalik Jr. signed a Confidentiality Agreement to maintain
Alpha’s trade secrets concerning Alpha, Alpha II Furniture Resources, Inc.,
and/or Spellman. When hired, Defendant
Gerardo Hernandez (“Hernandez”) and Arnaldo Villalobos (“Villalobos”) also
signed the same agreement.
In July 2019, Uchalik Jr. succeeded Uchalik Sr. as president of Alpha
and served on the board of directors.
During this time, Villalobos (a sales representative of Alpha) formed
Defendant MPG, LLC (“MPG”) to provide Alpha consulting services. From July 2019 until Uchalik Jr.’s resignation
in April 2022, he approved payments of over $100,000 to MPG, which Alpha
alleges were at the discretion of Uchalik Jr. but were not in the best interest
of Alpha. Alpha alleges that until his
resignation, Uchalik Jr. issued bonuses to himself, to Frenemy, and to other
individuals he favored, such that the shareholders determined he had mismanaged
the company’s finances.
Alpha alleges that on July 5, 2022, Uchalik Jr. formed Defendant
Heritage Props, Inc. (“Heritage”) in order to compete with Alpha. Thereafter, Hernandez and Villalobos
resigned from Alpha and started working for Heritage. Alpha alleges that Uchalik Jr., Villalobos,
and Hernandez took some of Alpha’s other employees, have been contacting
Alpha’s clients, and have been diverting business away from Alpha to Heritage.
The complaint, filed on September 27, 2022, alleges causes of action
for: (1) fraud and deceit; (2) misappropriation of funds; (3) conversion; (4) breach
of contract; (5) misappropriation of trade secrets; (6) unfair competition and
unfair business practices; (7) intentional interference with prospective
economic advantage; (8) unjust enrichment; and (9) conspiracy to commit unfair
trade practices.
B.
Cross-Complaints
On November 14, 2022, Frank Uchalik, Jr. filed a cross-complaint
against Alpha and Frank Uchalik, Sr. for: (1) wrongful constructive termination
in violation of public policy; (2) associational race discrimination in
violation of Government Code, § 12940 et seq.; (3) false imprisonment;
(4) assault; (5) battery; and (6) breach of fiduciary duty.
On January 9, 2023, Frank A. Uchalik (Sr.) filed a cross-complaint
against Cross-Defendant Frank Uchalik (Jr.) for: (1) assault; and (2) battery.
C.
Motion on Calendar
On December 8, 2023, Cross-Complainant Uchalik
Jr. filed a motion for leave to file a First Amended Cross-Complaint
(“FAXC”).
On January 5, 2024, Cross-Defendants Alpha and Uchalik Sr. filed an opposition
brief.
On January 11, 2024, Uchalik Jr. filed reply papers.
LEGAL
STANDARD
CCP § 473(a)(1) states: “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.”
CRC rule 3.1324
requires a motion seeking leave to amend to include a copy of the proposed
pleadings, to identify the amendments, and to be accompanied by a declaration
including the following facts:
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.
The Court’s discretion regarding granting leave to amend is usually
exercised liberally to permit amendment of pleadings. (Nestle
v. Santa Monica (1972) 6 Cal.3d 920, 939.)
If a 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. (Morgan v. Superior Court of Los Angeles County (1959) 172
Cal.App.2d 527, 530.)
REQUEST FOR JUDICIAL NOTICE
With the motion
papers, Uchalik Jr. requests judicial notice of Exhibits: (A) Frank Uchalik’s
answer filed on November 14, 2022 in the New York Supreme Court, County of
Queens in FRF-NY LLC v. Frank Uchalik (No. 719849/2022, the “New York
Action”) (the “New York Counterclaim”); and (B) Frank Uchalik’s answer to
Plaintiff’s Complaint and Counterclaim filed on November 14, 2022 in the Fulton
County Superior Court action Alpha ATL Properties, LLC v. Frank Uchalik (No.
2022CV370656, the “Georgia Action”) (the “Georgia Counterclaim”). The request is granted. (Evid. Code, § 452(d).)
With the opposition papers, Alpha
and Uchalik Sr. request judicial notice of Exhibits: (A) the complaint in the
New York Action; (B) the cross-complaint in the New York Action; (C) the
proposed scheduling order in the New York Action; (D) the complaint in the Georgia
Action; and (E) the cross-complaint in the Georgia Action. The request is granted. (Evid. Code, § 452(d).)
EVIDENTIARY
OBJECTIONS
With the reply brief,
Uchalik Jr. submitted evidentiary objections to papers submitted with Alpha and
Uchalik Sr.’s opposition. The Court
rules as follows:
·
Declaration of Peter T. Shapiro:
Objections to paragraphs 5-11 are overruled.
·
Declaration of Sean P. Robinson:
Objections to paragraphs 3 and 5-9 are overruled.
DISCUSSION
Uchalik Jr. moves for leave to file the
proposed First Amended Cross-Complaint (“FAXC”). In support of the motion, he provides the
declaration of counsel Matthew E. Lewitz.
Mr. Lewitz’s declaration includes a clean copy of the FAXC attached as
Exhibit 1 and a red-lined copy of the FAXC attached as Exhibit 2. (Lewitz Decl., ¶¶14-15, Exs. 1-2.)
The Court notes that it does not
appear that Alpha and Uchalik Sr. are opposing the addition of Spellman in the
FAXC. Rather, they only argue that
additional allegations should not be allowed for the 6th cause of
action.
In his declaration, Mr. Lewitz
states that he and his firm serve as counsel in this action, as well as the New
York Action and the Georgia Action. (Lewitz
Decl., ¶¶2, 5.) He states that the
parties in this action have engaged in extensive written discovery. (Id., ¶9.) He states that on October 24, 2023, his
colleague Matthew S. Steinberg took session one of the deposition of Uchalik
Sr. in both his individual capacity and as the PMK for Alpha, and the second
session was held on November 17, 2023. (Id.,
¶10.) Mr. Lewitz states that in November
2022, his office sought access to books and records of Alpha’s entities and it
was not until September 2023 that Cross-Defendants made certain books and
records available for Uchalik Jr.’s review.
(Id., ¶¶11-12.) He states
that after reviewing copies of the Alpha entities’ books and records,
Cross-Complainant discovered additional misconduct undertaken by Uchalik Sr.
following the termination of Uchalik Jr.’s employment on April 11, 2022,
including withholding Cross-Complainant’s duly owed distributions from certain
Alpha entities, failing to provide him with notice of the Alpha entities’
failure to pay rental, loan, and other business obligations, and causing
nonparties FRF Properties, LLC and JDU Properties, LLC (two of the six Alpha
entities) to make payments to Cross-Defendants’ counsel in this action. (Id., ¶13.) Mr. Lewitz states that the FAXC would: (1)
add Spellman Desk Company, Alpha’s wholly owned subsidiary, as a
cross-defendant and add necessary allegations to assert Uchalik Jr.’s 1st
and 2nd causes of action against both Alpha and Spellman; and (2) include
additional allegations regarding Uchalik Sr.’s misconduct pertaining to his and
Uchalik Jr.’s respective membership interests in the Alpha entities in support
of the 6th cause of action against Uchalik Sr. (Id., ¶14.) He states that the proposed addition of
Spellman is necessary and proper because Uchalik Sr. admitted under oath during
his October 24, 2023 deposition that both Alpha and Spellman provided
compensation to certain of Alpha’s executives, including Uchalik Jr., during
the timer period alleged in the cross-complaint. (Id., ¶16, Ex. 3.) He states that Uchalik Jr. did not seek to
add Spellman earlier because he did not have the benefit of Uchalik Sr.’s
deposition testimony in the first session until October 24, 2023. (Id., ¶17.) Mr. Lewitz also states that the proposed
amendment to the 6th cause of action is also necessary and proper
because Uchalik Sr.’s newly discovered misconduct includes withholding Uchalik
Jr.’s duly owed distributions, refusing to provide him with full and complete
records, and failing to provide him with truthful disclosures regarding the
Alpha entities’ affairs. (Id.,
¶18.) He states they did not seek leave
to amend the 6th cause of action earlier because they did not become
aware of the facts until they received access to certain Alpha entities’ books
and records in September 2023. (Id.,
¶19.)
In opposition, Alpha and
Uchalik Sr. argue that the
motion should be denied because the proposed amendments to the breach of
fiduciary duty claim are already being litigated and were previously raised by
Uchalik Jr. in the New York and Georgia Actions. They argue that exclusive concurrent
jurisdiction bars Uchalik Jr.’s attempt to litigate issues, claims, and/or causes
of action that are being litigated in previously filed and pending actions, and
that allowing leave to amend would result in piecemeal litigation in 3 separate
courtrooms. Although not all the parties
are the same in the 3 actions, Alpha and Uchalik Sr. argue that the courts
presiding over the cases in New York and Georgia have priority over the
proposed amendments and the claims in New York and Georgia are still pending.
By way of background, Alpha and
Uchalik Sr. argue that this action was filed on September 27, 2022 and Alpha
alleges that Uchalik Jr. committed fraud and deceit against the corporation by
creating a competing business and misappropriated funds. Uchalik Jr. filed a cross-complaint against
Alpha and Uchalik Sr. on November 14, 2022 for breach of fiduciary duty and
other claims. The New York Action was
filed on September 26, 2022, which alleges that Uchalik Jr. engaged in improper
acts and exercised control over FRF-NY for his personal financial
advantage. On November 14, 2022, Uchalik
Jr. filed a cross-complaint in the New York Action to challenge management
decisions by FRF-NY, including its failure to make distributions. The Georgia Action was filed on September 23,
2022 against Uchalik Jr. for allegedly improper exercise of control over the
affairs of Alpha ATL Properties, LLC.
Uchalik Jr. filed a cross-complaint in the Georgia Action that he was
being denied periodic distributions.
“The established rule of
exclusive concurrent jurisdiction provides that where two or more courts
possess concurrent subject matter jurisdiction over a cause, the court that
first asserts jurisdiction assumes it to the exclusion of all other courts. In
essence, the rule renders concurrent jurisdiction exclusive with the first
court.” (County of Siskiyou v.
Superior Court (2013) 217 Cal.App.4th 83, 89.) “[E]xactitude is not required. That the
parties in the two actions are not entirely identical, and that the remedies
sought by the two actions are not precisely the same, is not controlling.
Instead, it is sufficient for the exercise of equitable jurisdiction that the
issue in both actions is the same and arises out of the same transaction or
events.” (Id.) “Exclusive
concurrent jurisdiction is not a permanent, immutable grant of jurisdiction in
the first court over everything even remotely connected to the subject matter.
The first court retains exclusive jurisdiction only until all necessarily
related matters are resolved.” (Id.
at 91.)
Both parties cite to People ex rel.
Garamendi v. American Autoplan, Inc. (1993) 20 Cal.App.4th 760 in their discussion
of exclusive concurrent jurisdiction.
The Court of Appeal stated:
“Under the rule of
exclusive concurrent jurisdiction, 'when two [California] superior courts have
concurrent jurisdiction over the subject matter and all parties involved in
litigation, the first to assume jurisdiction has exclusive and continuing
jurisdiction over the subject matter and all parties involved until such time
as all necessarily related matters have been resolved.' [Citations.] The rule
is based upon the public policies of avoiding conflicts that might arise
between courts if they were free to make contradictory decisions or awards
relating to the same controversy, and preventing vexatious litigation and
multiplicity of suits.” (Plant Insulation Co. v. Fibreboard Corp. (1990)
224 Cal.App.3d 781, 786-787 [274 Cal.Rptr. 147].) Ordinarily, “[p]riority of
jurisdiction resides in the tribunal where process is first served.” (California
Union Ins. Co. v. Trinity River Land Co. (1980) 105 Cal.App.3d 104, 109
[163 Cal.Rptr. 802].) However, the rule of exclusive concurrent jurisdiction is
a rule of policy and countervailing policies may make the rule inapplicable. (Childs
v. Eltinge (1973) 29 Cal.App.3d 843, 854 [105 Cal.Rptr. 864].)
(People
ex rel. Garamendi, supra, 20 Cal.App.4th at 769–770.)
Uchalik Jr. argues that
exclusive concurrent jurisdiction does not apply because there is only one
pending California action. Further, this
action (with its proposed amendments) would be regarding Alpha, FRF Properties,
LLC, and JDU Properties, LLC—entities and parties that are not at issue in the
New York Action or the Georgia Action. Alternatively, Uchalik Jr.
argues that policy considerations support granting this motion for judicial
economy purposes. He argues that it
would be prudent to allow him to plead his claims fully in this action, which
has a trial date of June 17, 2024 and extensive discovery has already been
conducted; in contrast, he argues that the New York Action and Georgia Actions
do not have trial dates and the parties have only engaged in limited discovery. (County of Siskiyou v. Superior Court (2013) 217
Cal.App.4th 83, 92 [“Moreover, the rule of exclusive concurrent jurisdiction is a
rule of policy, and countervailing policies may make the rule inapplicable. (Citation.) Such flexibility further militates against a
rigid application of the doctrine. Siskiyou does not have exclusive
jurisdiction.”].)
Indeed, the New York
Action is regarding FRF-NY and the Georgie Action is regarding Alpha ATL
Properties, LLC. While there may be 3
separate actions involving some similar parties, the allegations, entities at
issue, and the specific allegations of breach of fiduciary duty (or otherwise)
are different from those in the out-of-state action as they pertain to
different Alpha entities. As stated
above in Mr. Lewitz’s
declaration, Uchalik Jr. discovered additional facts and claims against Uchalik
Sr., including withholding Uchalik Jr.’s duly owed distributions from certain
Alpha entities, failing to provide him with notice of the Alpha entities’
failure to pay rental, loan, and other business obligations, and causing
nonparties FRF Properties, LLC and JDU Properties, LLC to make payments to
Cross-Defendants’ counsel in this action.
The parties have chosen to litigate in multiple forums, so it cannot be
said that inconsistent results are beyond the realm of possibility, but, for
pleading purposes, it appears prudent and in line with judicial economy and in
the policy favoring amendments to allow Uchalik Jr. leave to amend the
cross-complaint to fully allege his claims against Alpha and Uchalik Sr.
Uchalik Sr. and Alpha argue that
they would be prejudiced if the Court were to grant this motion because the New
York and Georgia Actions were filed prior to the California action. However, the 3 actions were filed within one
week of each other. Based on Uchalik
Jr.’s reply brief representations, it appears that this action in California
has made the most progress with respect to discovery and is the only action
with a trial date. Other than Uchalik
Sr. and Alpha’s arguments that the other actions were filed first, it is
unclear how they would be prejudiced by allowing amendment in this action.
Finally, Uchalik Sr. and Alpha argue
that Uchalik Jr. is attempting to forum shop by filing this proposed FAXC. While forum shopping is not an ideal
procedure, it occurs in most cases and this in itself is not a ground to deny
this motion for leave to amend.
Given the multiple forums, it
appears to this court prudent to get the claims pleaded. Then, assuming the
parties wish to proceed with some economy regarding this situation, one or both
parties should make a motion to stay litigation in this or other forums pending
the outcome of the case that is most likely to advance an ultimate resolution
between the parties, and which jurisdiction is likely to have a courthouse
where the most witnesses can conveniently testify. A motion to amend a pleading
does not seem the proper occasion to make that choice.
Based on the declaration of Mr. Lewitz, which
adequately addresses the factors in CRC Rule 3.1324, the liberal policy in
favor of allowing amendments to the pleading, and for the reasons stated above,
the Court grants the motion for leave to file the proposed FAXC.
CONCLUSION AND ORDER
Defendant/Cross-Complainant Frank Uchalik Jr.’s motion for leave to
file a First Amended Cross-Complaint is granted. Defendant is ordered to electronically file a
separate, clean version of the First Amended Cross-Complaint with the Court by
this date following the hearing on the matter.
Defendant shall provide notice of this order.
DATED:
January 19, 2024 ___________________________
John
Kralik
Judge
of the Superior Court