Judge: Mark A. Young, Case: 21SMC01472, Date: 2023-10-18 Tentative Ruling

Case Number: 21SMC01472    Hearing Date: October 18, 2023    Dept: M

CASE NAME:           Strategic Legal Practices v. Consumer Law Experts, et al.

CASE NO.:                21SMC01472

MOTION:                  Motion for Leave to Amend

HEARING DATE:   10/17/2023

Legal Standard

If a party wishes to amend a pleading after an answer has been filed, or after a demurrer has been filed and after the hearing on the demurrer, or if he or she has already amended the pleading as a matter of course, the party must obtain permission from the court before amendment. (CCP §§ 473(a)(1), 576.)

Motions for leave to amend the pleadings are directed to the sound discretion of the court. “The court may, in furtherance of justice, and on any terms as may be proper, allow a party to amend any pleading . . ..” (CCP § 473(a)(1); see CCP § 576.) Policy favors liberally granting leave to amend so that all disputed matters between the parties may be resolved. (See Howard v. County of San Diego (2010) 184 Cal.App.4th 1422, 1428.) Absent prejudice to the adverse party, the court may permit amendments to the complaint “at any stage of the proceedings, up to and including trial.” (Atkinson v. Elk Corp. (2003) 109 Cal.App.4th 739, 761 [internal quotes omitted].) Where leave is sought to add entirely new claims, the court may grant leave to amend if the new claims are based on the same general set of facts, and the amendment will not prejudice the opposing party. (Austin v. Massachusetts Bonding & Ins. Co. (1961) 56 Cal.2d 596, 600-602; Glaser v. Meyers (1982) 137 Cal.App.3d 770, 777 [holding trial court did not abuse its discretion in permitting amendment of complaint, which originally alleged constructive eviction, to allege retaliatory eviction where the new claim was based on the same general set of facts].)

Although denial is rarely justified, a judge has discretion to deny leave to amend if the party seeking the amendment has been dilatory, and the delay has prejudiced the opposing party. (Morgan v. Superior Court (1959) 172 Cal.App.2d 527, 530; Hirsa v. Superior Court (1981) 118 Cal.App.3d 486, 490). An opposing party is prejudiced where the amendment would necessitate a trial delay along with a loss of critical evidence, added preparation expense, increased burden of discovery, etc. (Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 486-488 [leave properly denied where plaintiff sought leave on the eve of trial, nearly two years after the complaint was originally filed and gave no explanation for the delay which prejudiced defendant who did not discover or depose many of the witnesses who would support the new allegations and had not marshaled evidence in opposition of the new allegations].)

Procedurally, a motion for leave to amend must state with particularity what allegations are to be amended. Namely, it must state what allegations in the previous pleading are proposed to be deleted and/or added, if any, and where, by page, paragraph, and line number. (CRC, Rule 3.1324(a)(2)-(3).) The motion must be accompanied by a declaration specifying: (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. (CRC, Rule 3.1324(b).) The motion must also be accompanied by the proposed amended pleading, numbered to differentiate it from the prior pleadings or amendments. (CRC, Rule 3.1324(a)(1).) It is within the court’s discretion to require compliance with Rule 3.1324 before granting leave to amend. (Hataishi v. First American Home Buyers Protection Corp. (2014) 223 Cal.App.4th 1454, 1469.)

Analysis

Plaintiff Strategic Legal Practices, APC, move for leave to file a proposed Third Amended Complaint (“TAC”). (Singer Decl., Exs. A, B.) The proposed TAC includes a redline version of the SAC with allegations in the previous pleading that are proposed to be deleted and/or added, by page, paragraph, and line number. Plaintiff provides the declaration of counsel which asserts the effect and necessity of the amendments. The TAC will (1) update the SAC following the rulings on the motions for summary judgment and subsequent entry of judgment in the action against some of the defendants, (2) correct a purported deficiency in the SAC by identifying by name an SLP employee who was solicited by Beck; and (3) add an additional cause of action for a violation of Penal Code § 502 (Computer Data and Access Fraud Act) to conform to recently discovery evidence. Plaintiff argues that there has been no delay in seeking leave to file the proposed TAC and that the TAC will not prejudice any of the Defendants since there is no scheduled trial date in this action.

Plaintiff argues that the facts giving rise to this proposed amendment were discovered during the summary judgment process, and during discovery efforts in this action. Plaintiff claims that they discovered facts justifying the addition of the Penal Code section 502 claim in March 2023, when Beck produced documents from case files which Beck confirmed at his deposition in April 2023 were files he downloaded and removed from SLP’s computer system without authorization. At the time of the filing of the SAC, Plaintiff was not in possession of the Beck document production or Beck’s admission at his deposition.

Reviewing the record, Plaintiff delayed in bringing this cause of action. Penal Code section 502 provides that “the owner or lessee of the computer, computer system, computer network, computer program, or data who suffers damage or loss by reason of a violation of any provisions of subdivision (c) may bring a civil action against the violator for compensatory damages and injunctive relief or other equitable relief.” (Pen. Code, § 502(e)(1).) Subsection (c) provides, in relevant part, as follows: 

Except as provided in subdivision (h), any person who commits any of the following acts is guilty of a public offense: 

(1) Knowingly access and without permission alters, damages, deletes, destroys, or otherwise uses any data, computer, computer system, or computer network in order to either (A) devise or execute any scheme or artifice to defraud, deceive, or extort, or (B) wrongfully control or obtain money, property, or data. 

(2) Knowingly accesses and without permission takes, copies, or makes use of any data from a computer, computer system, or computer network, or takes or copies any supporting documentation, whether existing or residing internal or external to a computer, computer system, or computer network.

(3) Knowingly and without permission uses or causes to be used computer services.

            ***

(6) Knowingly and without permission provides or assists in providing a means of accessing a computer, computer system, or computer network in violation of this section. 

(7) Knowingly and without permission accesses or causes to be accessed any computer, computer system, or computer network.

(§ 502(c)(1)-(7).)

Plaintiff was aware of the facts underlying a potential section 502 theory of recovery since the inception of this action. Plaintiff’s allegations in the initial complaint state that Beck accessed and divulged the alleged confidential information to third parties, in violation of his agreement with Plaintiff. (Compl., ¶¶22-27.) Plaintiff’s responses to interrogatories state that Beck participated, assisted, breached, and/or induced the breach of various agreements between SLP and its employees by way of accessing, using, copying, removing, downloading, and/or exporting the firm’s property and/or work product information, information from confidential settlement agreements, records, files, confidential intake materials, including but not limited to lists of hot cases and/or vehicle defect lists, information related to Salesforce and the firm’s intake process, as well the related targeted marketing and intake strategy that is derived from the compilation, analysis, and/or evaluation of such data and materials. (Beck Decl., ¶¶ 3-4, Ex. A, B.) In opposing the summary judgment motions, SLP’s Chief Operating Officer Pauli declared that he reviewed SLP’s software platform during this course of this litigation which showed that Beck downloaded or exported all or portions of approximately 27 SLP case files from around the time he accepted an offer of employment from CLE up to and through his last day at SLP after he had left the office. (Pauli Decl. ISO opposition to MSJs ¶¶ 24-25, Ex. 46.) Based on these undisputed facts, Plaintiff had reason to bring the section 502 against Beck at least a year and ten months prior to seeking leave.

Beck argues that he will suffer substantial prejudice from this delay if leave to amend is granted to add the section 502 claim. Beck litigated this case for two years under a strategy based on the causes of action pled in the original complaint. Beck argues that this change will harm him because he is a new sole practitioner, and representing himself against Plaintiff’s ongoing litigation practices would substantially interfere with Beck’s livelihood. Further, if Beck is required to hire counsel, Beck would incur substantial attorney fees and costs in his defense that would have been otherwise paid for by his employer to dispense of Plaintiff’s new and futile claim.

Beck does not explain how the delay in bringing this new cause of action would cause him substantial prejudice. Beck does not explain what new or substantially different issues are brought by this amendment. The Court notes that the new theory is based on the same facts underlying the breach of contract cause of action. Beck does not direct the Court to any discovery he would need to conduct to defend himself against this new claim. From the record, it appears that any new discovery would be de minimis. Further, Beck does not show that his former employer would pay for his legal fees if not for this new theory of liability. While Beck claims delay in trial, there is currently no trial date set. Beck also does not adequately explain why this new cause of action is a sham pleading. As such, the Court observes no prejudice to Beck.  

Without a showing of prejudice stemming from the inclusion of the Penal Code section 502 claim, the Court must grant leave to allege this new legal theory. As to the other amendments, there is no delay or prejudice apparent to the Court.

Accordingly, Plaintiff’s motion is GRANTED.  Plaintiff shall file the TAC within two court days.