TENTATIVE RULING

Plaintiff Robert Gordon’s Motion for Leave to File First Amended Complaint is GRANTED.

Plaintiff Robert Gordon’s First Amended Complaint is deemed filed as of the date of entry of this order.

Plaintiff Robert Gordon’s Renewed Motion for the Appointment of a Provisional Director [Corp. Code, § 308] is DENIED.

Plaintiff Robert Gordon to give notice. 

REASONING

Plaintiff Robert Gordon’s Motion for Leave to File First Amended Complaint

The court may grant leave to amend the pleadings at any stage of the action. (Code Civ. Proc., § 473, subd. (a).) A party may discover the need to amend after all pleadings are completed (the case is “at issue”) and new information requires a change in the nature of the claims or defenses previously pleaded. (See Dye v. Caterpillar, Inc. (2011) 195 Cal.App.4th 1366, 1380.)

“The policy favoring amendment is so strong that it is a rare case in which denial of leave to amend can be justified. Leave to amend should be denied only where the facts are not in dispute, and the nature of the plaintiff’s claim is clear, but under substantive law, no liability exists and no amendment would change the result.” (Howard v. County of San Diego (2010) 184 Cal.App.4th 1422, 1428, internal quotation marks and citations omitted.) Courts apply a policy of great liberality in permitting amendments to the complaint “at any stage of the proceedings, up to and including trial,” absent prejudice to the adverse party. (Atkinson v. Elk Corp. (2003) 109 Cal.App.4th 739, 761.) Prejudice exists where the amendment would require delaying the trial, resulting in loss of critical evidence, added costs of preparation, or an increased burden of discovery. (See Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 486-488 [trial court’s denial of leave to amend was proper where those factors were present].) If the delay in seeking the amendment has not misled or prejudiced the other side, the liberal policy of allowing amendments prevails. (See Higgins v. Del Faro (1981) 123 Cal.App.3d 558, 564-565 [describing same].)

A motion for leave to amend must: 

(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.

(Cal. Rules of Court, rule 3.1324(a).) 

Further, a separate declaration must accompany the motion and must specify the following:

(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.(Cal. Rules of Court, rule 3.1324(b).)

Plaintiff Robert Gordon (“Robert”) moves the Court for leave to file a First Amended Complaint to seek the appointment of a provisional director. Defendant American Voice Mail, Inc. (“AVM”) has filed a notice of non-opposition to the motion. The Court notes that Robert has failed to provide the required declaration describing when the facts giving rise to the proposed amendment were discovered and why the request for amendment was not made earlier, nor does the provided declaration state the allegations proposed to deleted and added, but given that Robert has provided a copy of the proposed pleading, as well as a redlined copy, and because AVM does not oppose the amendment, Plaintiff Robert Gordon’s Motion for Leave to File First Amended Complaint is GRANTED. Plaintiff Robert Gordon shall file a "clean copy" of his First Amended Complaint and is deemed filed as of the date of entry of this order.

Factual Background

The Court repeats the factual background it stated in the prior order, with revised citations to the First Amended Complaint (“FAC”), as very little of the pleading has changed:

In 1979, Plaintiff Robert Gordon (“Robert”) partnered with his brother Mark Gordon (“Mark”) and their father Sam Gordon (“Sam”) to purchase two telephone answering services, with Mark managing day-to-day operations of Bel-Air Brentwood Answering Service, Robert managing day-to-day operations of Westside Answering Service, and Sam being a non-working silent partner. (FAC ¶ 7.) In March 1983, Robert and Mark formed a new voicemail company, American Voice Retrieval, which was renamed American Voice Mail, Inc. dba AVM (“AVM”) in 1990. (FAC ¶¶ 8-9.) AVM currently provides cloud based voice mail, virtual office, and hosted telecommunication services, local Direct Inward Dialing phone numbers, find-me/follow me, toll free numbers, inbound and outbound fax services, and virtual office/pbx type services to individuals and companies in 70 countries. (FAC ¶ 10.) Throughout AVM’s existence, Robert, Mark, and Sam were shareholders and board members with each owning 33.3% of the company. (FAC ¶ 11.) Sam died on April 6, 2015, and his one-third interest in AVM was divided equally between Mark and Robert, such that each own 50% of AVM. (FAC ¶ 12.) Robert alleges that, since 1991, Mark has engaged in self-enriching and obstructionist behavior, including misappropriating AVM funds for his own benefit and encouraging a hostile work environment, in a manner that has resulted in shareholder and director deadlock between Robert and Mark that is preventing AVM from carrying on with its business. (FAC ¶ 14.) In this action, Robert seeks corporate dissolution and appointment of a provisional director. (FAC, p. 2, ll. 1-3.)

Legal Standard

Corporations Code section 308, subdivision (a), states:

If a corporation has an even number of directors who are equally divided and cannot agree as to the management of its affairs, so that its business can no longer be conducted to advantage or so that there is danger that its property and business will be impaired or lost, the superior court of the proper county may, notwithstanding any provisions of the articles or bylaws and whether or not an action is pending for an involuntary winding up or dissolution of the corporation, appoint a provisional director pursuant to this section. Action for such appointment may be brought by any director or by the holders of not less than 33 ? percent of the voting power.

A provisional director must “be an impartial person, who is neither a shareholder nor a creditor of the corporation.” (Corp. Code, § 308, subd. (c).) Once appointed, “[a] provisional director shall have all the rights and powers of a director until the deadlock in the board or among shareholders is broken or until such provisional director is removed by order of the court or by approval of the outstanding shares.” (Ibid.) “A clear reading of section 308 indicates that the superior court ‘may . . . appoint a provisional director.’ This gives the superior court the discretion to grant or deny the petition.” (In re ANNRHON, Inc. (1993) 17 Cal.App.4th 742, 751.)

Analysis

First, Defendant AVM contends that Mark Gordon is an indispensable party because Robert seeks relief that would affect Mark’s interests, but Robert has chosen not to join Mark in this action, so none of the relief sought by Robert can be granted. Code of Civil Procedure section 389 provides that “[a] person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in

the action if (1) in his absence complete relief cannot be accorded among those already parties or

(2) he claims an interest relating to the subject of the action and is so situated that the disposition

of the action in his absence may (i) as a practical matter impair or impede his ability to protect

that interest,” and “[i]f he has not been so joined, the court shall order that he be made a party.”

The Court is not convinced that Mark is an indispensable party to this action for the same reasons the Court rejected this argument in its prior order. Again, a party is indispensable if complete relief cannot be accorded in his absence. While Mark will be affected by the Court’s ruling therein, he provides no basis to conclude that relief cannot be ordered without his presence. The appointment of a provisional director is “merely a method of resolving disagreements between directors” and is a statutory remedy “available to protect the rights of the parties and does not reflect upon the financial standing or good name of the corporation nor does it take the property out of the hands of the owners or the persons actually administering its business.” (In re Jamison Steel Corp. (1958) 158 Cal.App.2d 27, 35, 36.) Here, no direct relief or damages have been sought against Mark, “shareholders are not parties to a dissolution unless they are named as defendants or they intervene, . . . [a]nd shareholders cannot be named as defendants unless the petition seeks relief against them.” (In re FairWageLaw (2009) 176 Cal.App.4th 279, 286.) Thus, again, there is no basis to conclude that Mark is an indispensable party to this action, and the Court notes that Mark has still filed no motion to intervene.

Nonetheless, this petition fails, in part, for the same reason Robert’s prior petition failed, that is, AVM and Mark have stipulated to the dissolution of AVM. (Opp’n, Smith Decl. ¶ 2.) It follows that there must be a basis for appointing a provisional director for some other reason, but Robert has not provided evidence that the director cannot agree as to the management of AVM’s affairs. Robert provides only evidence of a June 23, 2023, board meeting that did not move forward because the directors disagreed on several issues. (Mot., Robert Gordon Decl. ¶ 23.) However, this teleconference occurred after the initial pleading was filed, while the initial complaint and the FAC focus on conduct from many years ago, and Mark provides evidence that the June 23, 2023, meeting went forward without creating any deadlock. (Opp’n, Mark Gordon Decl. ¶¶ 11-28.) Providing only evidence of a list of subjective disagreements on issues from one teleconference does not establish that “business can no longer be conducted to advantage or so that there is danger that its property and business will be impaired or lost” so as to justify appointment of a provisional director. Accordingly, Plaintiff Robert Gordon’s Renewed Motion for the Appointment of a Provisional Director [Corp. Code, § 308] is DENIED.