Judge: Mark A. Young, Case: 21SMCV01343, Date: 2024-07-10 Tentative Ruling
Case Number: 21SMCV01343 Hearing Date: July 10, 2024 Dept: M
CASE NAME: Khorsandi v. Mitchell, et al.
CASE NO.: 21SMCV01343
MOTION: Motion
for Leave to Amend to File Fourth Amended Cross Complaint
HEARING DATE: 7/10/2024
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
Defendants/Cross-Complainants Floyd
Mitchell and Keith Turkowski move for leave to amend to file a proposed Fourth Amended
Cross-Complaint (“4ACC”). (Chapman Decl., Ex. 1.) The 4ACC states causes of
action for: 1. Breach Of Oral Contract, 2. False Promise, 3. Breach Of
Fiduciary Duty, 4. Conversion, 5. Violation Of California’s Uniform Trade
Secrets Act (Cal. Civ. Code § 3426 Et Seq.), 6. Unfair Competition, 7.
Negligent Misrepresentation, 8. Intentional Interference with Prospective
Economic Advantage, 9. Unjust Enrichment, 10. Request For Declaratory Relief
(Intellectual Property Ownership), 11. Request For Involuntary Dissolution, and
12. Accounting.
The Court notes that
Cross-Complainants do not provide with particularity what
allegations are to be amended, i.e., the proposed deletions and/or additions, by
page, paragraph, and line number. Despite this failure, the Court still has
discretion to grant leave to amend.
Cross-Complainants
provide the facts and circumstances that led to this amendment. The current,
operative pleading is the Second Amended Cross-Complaint filed on June 9, 2023,
which was filed following the sustained demurrer to the FACC on May 30, 2023. On
October 27, 2023, Chapman Law Group, A.P.C. substituted in as
Cross-Complainants’ counsel. To informally resolve the dispute, on November 22,
2023, the parties jointly stipulated to stay this action pending mediation for
April 2024. Following the unsuccessful mediation on April 1, 2024, the parties
subsequently met and conferred regarding Cross-Defendants’ intention to file a
demurrer to the SACC. (Chapman Decl., ¶ 4.) The parties stipulated on April 26,
2024, to Cross-Complainants filing a Third Amended Cross-Complaint (“TACC”) to
correct factual omissions and legal deficiencies in the SACC. Cross-Complainants
filed the TACC on May 22, 2024, pursuant to stipulation. Cross-Complainants
withdrew the TACC on June 6, 2024. Apparently, the parties had a
misunderstanding as to the scope of stipulation and contemplated amendments, as
the TACC provided new facts and causes of action.
The proposed 4ACC arises from the
same general set of facts as the prior cross-complaints but presents new
allegations and claims. The proposed 4ACC seeks to allege the fraud claims with
increased specificity and add claims regarding Turkowski’s creation and
ownership of the intellectual property at issue. This expands the claims stated
in the SACC, which only stated five causes of action for breaches of fiduciary
duty (direct and derivative), conversion, fraud and negligence. Cross-Complainants
explain that they did not bring any new facts or claims earlier because former
counsel failed to advise Cross-Complainants to plead the causes of action. The
4ACC seeks to correct these omissions. Cross-Complainants do not explain when
any of the specific new allegations were discovered or whether any such facts
could have been brought earlier. Moreover, the record demonstrates some
unexplained delay in bringing the newly asserted claims and allegations.
Cross-Complainants admit that they did not bring the claims because their prior
counsel neglected to do so in the initial or amended pleadings. They do not
explain whether the new facts or claims are based on newly discovered
information. As such, they concede that they delayed bringing this motion since
the filing of their initial cross-complaint. That said, any delay is partly
mitigated by the stipulated stay of proceedings and the subsequent meet and
confer efforts. Further, the parties met and conferred on these amendments in
April 2024, leading to the filing of the TACC. Therefore, Cross-Complainants
delayed bringing this motion for approximately 15 months (August 11, 2022,
through November 22, 2023).
Cross-Defendants oppose, claiming
that the proposed amendments will cause further delays, increase the scope and
complexity of the action, and increase the cost of litigation to Plaintiff. The
Court observes no substantial prejudice to Cross-Defendants resulting from this
delay. Notably, the trial date has not been set. Thus, it is unlikely
that amendment will cause significant delays in trial. There will be sufficient
time for discovery regarding any new claims or facts before trial, if any is even
necessary. The Court disagrees that these amendments significantly expand the
scope of the litigation, since the amendments pertain to the same basic facts
and legal issues contemplated by the Complaint and SACC. Moreover, allowing an
amendment will avoid forfeiture of Cross-Complainants’ claims.
Cross-Defendants argue that the
4ACC substantively fails for various reasons, including that any new claims
will be barred by the statute of limitations, and that the 4ACC includes contradictory
“sham” allegations. The Court will address these arguments when presented in a procedurally
proper challenge to the substance of the 4ACC, such as a demurrer or motion to
strike. However, the Court concurs that the request for attorneys’ fees in the
4ACC would violate this Court’s prior order striking the fee request. Cross-Complainants
do not explain what basis there is for attorneys’ fees. As such,
Cross-Complainant must omit the request in the 4ACC.
Accordingly, the motion is GRANTED, except as to the
request for attorneys’ fees which remains stricken pursuant to the court’s
May 30, 2023, order.
The 4ACC shall be filed within 10
days.