Judge: Michael E. Whitaker, Case: 20SMCV01202, Date: 2025-01-08 Tentative Ruling

Case Number: 20SMCV01202    Hearing Date: January 8, 2025    Dept: 207

TENTATIVE RULING

BACKGROUND

On February 2, 2020, Plaintiff Ardeshir Haerizadeh (“Haerizadeh”), the founder of Yucatan Foods, brought suit against Defendants Landec Corporation and Apio Inc. (collectively, “Landec” or “Defendants”), who acquired Yucatan Foods, alleging four causes of action for (1) breach of employment contract; (2) breach of holdback agreement; (3) declaratory relief (as to whether the non-compete provisions in the Employment Agreement are enforceable in light of Plaintiff’s termination without cause); and (4) accounting. 

On November 3, 2020, Landec brought a cross-complaint against Cross-Defendants Haerizadeh, Dan Walton, Warren Schlichting, Robert Hall, Sepand Riahi, Allen Lance McInnes, John Barber, Michael F. Baxter, Doug Harmon, George H. Davis Jr., Adam Cardenas, Kevin Gay, Aaron Morris, J.F. Shea Co., Inc. as Nominee 1996-1, and Desarrollos Inmobilarios Cuga, S.A.P.I. de C.V. (“CUGA”) alleging seven causes of action for (1) fraud; (2) fraudulent inducement; (3) civil conspiracy; (4) contractual indemnity; (5) breach of contract; (6) equitable indemnity; and (7) unjust enrichment.

CUGA answered the cross-complaint on January 4, 2023.  On September 25, 2024, the Court granted CUGA’s motion for leave to amend its answer to the cross-complaint to add a fifteenth affirmative defense for in pari delicto.  CUGA filed its first amended answer on September 30, 2024.

Also, on September 25, 2024, the Court granted CUGA’s motion to sever Landec’s cross action against Haerizadeh from Landec’s cross action against CUGA. 

CUGA now moves for leave to add a sixteenth affirmative defense for collateral estoppel and seventeenth affirmative defense for res judicata.  Landec opposes the motion and CUGA replies.

LEGAL STANDARD

Amendments to Pleadings: General Provisions

            Under Code of Civil Procedure section 473, subdivision (a)(1), “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.”

            To wit, without notice to the other party the Court has wide discretion to allow either party (i) to add or strike the name of a party or (ii) to correct a mistake in the name of a party or a mistake in any other respect “in furtherance of justice” and “on any terms as may be proper.” (See Code Civ. Proc., § 473, subd. (a)(1); see also Marriage of Liss (1992) 10 Cal.App.4th 1426, 1429.) Alternatively, after notice to the other party, the Court has wide discretion to allow either party to amend pleadings “upon any terms as may be just.” (See Code Civ. Proc., § 473, subd. (a)(1). Similarly, Code of Civil Procedure section 576 states “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.”

            Judicial policy favors resolution of all disputed matters between the parties and, therefore, leave to amend is liberally granted. (Berman vs. Bromberg (1986) 56 Cal.App.4th 936, 945; Hirsa v. Superior Court (1981) 118 Cal.App.3d 486, 488-489 [this has been an established policy in California since 1901] (citing Frost v. Whitter (1901) 132 Cal. 421, 424; Thomas v. Bruza (1957) 151 Cal.App.2d 150, 155).) The Court of Appeal in Morgan v. Superior Court held “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.) Moreover, “it is an abuse of discretion for the court to deny leave to amend where the opposing party was not misled or prejudiced by the amendment.” (Kittredge Sports Co. v. Superior Court (1989) 213 Cal.App.3d 1045, 1048 [opposing party did not establish harm by the delay in moving to amend the complaint].)

            “The court may grant leave to amend the pleadings at any stage of the action.” (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2024) ¶ 6:636 (hereafter Weil & Brown).) Denial of a motion to amend is rarely justified if the motion is timely made and granting the motion will not prejudice the opposing party. (Id. at ¶ 6:639, citations omitted.) However, 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. (Id. at ¶ 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, etc. . . . But 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.” (Weil & Brown, supra, at ¶ 6:656, citations omitted.)

            “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, 42 Cal.App.2d 400, 404).)

California Rules of Court, rule 3.1324: Procedural Requirements

            Pursuant to California Rules of Court, rule 3.1324(a), a motion to amend a pleading before trial must:

“(1) Include a copy of the proposed amendment or amended pleadings, 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.”

            In addition, under Rule 3.1324(b), a motion to amend a pleading before trial must be accompanied by a separate declaration that specifies 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.”

DISCUSSION

            In support of the motion, CUGA has provided both redlined and clean copies of the proposed second amended answer, as well as the Declaration of Emil W. Herich, which indicates that upon the jury’s October 3, 2024 verdict in favor of Haerizadeh and against Landec on Landec’s fraud claims, the Court’s subsequent grant of directed verdicts in favor of Haerizadeh on Landec’s fifth cause of action for breach of contract and seventh cause of action for unjust enrichment, and the jury’s October 18 award to Landec of $1,011,361 on is fourth cause of action for contractual indemnity, CUGA now has a sufficient basis to raise the affirmative defenses of res judicata and collateral estoppel. 

            Specifically, CUGA contends that pursuant to the SPA, CUGA has no exposure on Landec’s contractual indemnity cause of action unless and until Landec sustains $19,360,924 in damages.  As such, CUGA may now rely on those rulings and judgment to eliminate or limit CUGA’s exposure to Landec.

            Landec opposes the motion on the grounds that there is no final judgment and therefore the motion is not yet ripe. 

            The Court does not find that CUGA’s collateral estoppel and res judicata defenses must be fully ripe before CUGA may assert them.  In light of the rulings made in connection with phase 1 of the trial, CUGA now has a reasonable factual and legal basis to assert collateral estoppel and res judicata defenses due to the prior findings and rulings.  

CONCLUSION AND ORDER

            Therefore, the Court grants CUGA’s motion for leave to file a second amended answer.  CUGA shall file and serve the proposed amended answer on or before January 24, 2025. 

            The Court orders CUGA to provide notice of the Court’s ruling and file the notice with a proof of service forthwith.

DATED:  January 8, 2025                              ___________________________

                                                                  Michael E. Whitaker

                                                                  Judge of the Superior Court