Judge: Michael E. Whitaker, Case: 24SMCV00948, Date: 2025-04-03 Tentative Ruling

Case Number: 24SMCV00948    Hearing Date: April 3, 2025    Dept: 207

TENTATIVE RULING

MOTION

This case arises from a dispute over medical billing services Defendants allegedly provided to Plaintiffs.  On February 29, 2024, Plaintiffs Innovative Medical Solutions, Inc. (“Innovative”); Emerald Greens Hospice, Inc. d/b/a Butterfly Hospice; Century City Endoscopy, LLC; and Vital Solutions Medical Group (“Plaintiffs”) filed suit against Defendants Nexus Healthcare Solutions, Inc. (“Nexus”); ALN Medical Management, LLC (“ALN”); and Health Prime International, LLC (“Health Prime”) (together, “Defendants”) alleging seven causes of action for (1) breach of contract; (2) breach of implied contract; (3) violation of Business & Professions Code sections 17200 and 17500; (4) Unjust Enrichment; (5) Declaratory Relief; (6) Fraud; and (7) Negligent Misrepresentation.

            Nexus now moves for leave to file a cross complaint against ALN for indemnification, breach of contract, and declaratory relief regarding Plaintiff’s allegations.  ALN opposes the motion and Nexus replies.

            Foremost, the Court granted Chapman Gluksman’s motion to be relieved as counsel for Nexus and entered an Order granting the motion on November 1, 2024.  (See MC-053 (Order) filed November 1, 2024.)  However, the Order relieving Chapman Gluksman takes effect upon service of the Order upon Nexus and filing of the proof of service regarding the same.  (See id. at § 5.a.)  Yet, Chapman Gluksman has not filed the requisite proof of service, and thus, it remains the attorney of record for Nexus.  Moreover, Nexus’ apparently new counsel has not filed a substitution of attorney which would obviate the need for Chapman Gluksman to serve the Order and file the attendant proof of service. 

            The Court notes however that Nexus’ “new” counsel (Leech Tishman Nelson Hardiman, Inc.) filed a Notice of Appearance of Counsel which is insufficient to substitute into the action as counsel for Nexus as the notice lacks Nexus’ consent of Nexus.  In short, until the issue of Nexus’ legal representation is resolved, the Court will not move forward with the hearing on the instant motion, and it will be continued for Nexus to rectify the issue. 

LEGAL STANDARD

A party against whom a cause of action has been asserted in a complaint or cross-complaint may file a cross-complaint setting forth either or both of the following:

(a)   Any cause of action he has against any of the parties who filed the complaint or cross-complaint against him. Nothing in this subdivision authorizes the filing of a cross-complaint against the plaintiff in an action commenced under Title 7 (commencing with Section 1230.010) of Part 3.

(b)   Any cause of action he has against a person alleged to be liable thereon, whether or not such person is already a party to the action, if the cause of action asserted in his cross-complaint (1) arises out of the same transaction, occurrence, or series of transactions or occurrences as the cause brought against him or (2) asserts a claim, right, or interest in the property or controversy which is the subject of the cause brought against him.

(Code Civ. Proc., § 428.10, subds. (a)-(b).) 

(a)   A party shall file a cross-complaint against any of the parties who filed the complaint or cross-complaint against him or her before or at the same time as the answer to the complaint or cross-complaint.

(b)   Any other cross-complaint may be filed at any time before the court has set a date for trial.

(c)   A party shall obtain leave of court to file any cross-complaint except one filed within the time specified in subdivision (a) or (b). Leave may be granted in the interest of justice at any time during the course of the action.

(Code Civ. Proc., § 428.50, subds. (a)-(c).) 

Indeed, where a cause of action would otherwise be lost, leave to amend is appropriate even if the party was negligent in not moving for leave to amend earlier.  “The legislative mandate is clear.  A policy of liberal construction of section 426.50 to avoid forfeiture of causes of action is imposed on the trial court.  A motion to file a cross-complaint at any time during the course of the action must be granted unless bad faith of the moving party is demonstrated where forfeiture would otherwise result.”  (Silver Organizations, Ltd. v. Frank (1990) 217 Cal.App.3d 94, 98-99.)   Further, “Cross-complaints for comparative equitable indemnity would appear virtually always¿transactionally¿related to the main action.”¿¿(Time for Living, Inc. v. Guy Hatfield Homes¿(1991) 230 Cal.App.3d 30, 38; see also Countrywide Home Loans, Inc. v. Superior Court (1999) 69 Cal.App.4th 785, 799 [“Undoubtedly, a claim for contribution or indemnity ‘arises out of’ the same transaction or occurrence as the plaintiff's claim”].)¿

DISCUSSION

            ALN, Nexus, and Health Prime were previously represented by the same counsel.  On December 16, 2024, Nexus retained new counsel.  Upon new counsel’s review of the complaint, counsel determined that ALN was contractually required to indemnify Nexus, pursuant to Section 6.3 of the Asset Purchase Agreement.  On December 27, 2024, Nexus’ new counsel sent ALN an indemnification request.  (Estrin Decl. ¶ 2.)  On February 11, 2025, ALN refused to indemnify Nexus.  (Estrin Decl. ¶ 3.)  On March 7, 2025, Nexus filed the instant motion.

            ALN opposes the motion, on the grounds that pursuant to Section 6.2(d) of the Asset Purchase Agreement, Nexus is liable for indemnifying ALN for acts or omissions that occurred prior to or on the closing date, which includes the billing services Plaintiff alleges in the Complaint that originated in 2018.  ALN also takes the position that it did not refuse to indemnify Nexus, but rather takes the position that the request is premature because discovery had only recently commenced.  (Tafarella Decl. ¶ 2.)  ALN also argues the proposed cross-complaint is faulty because the allegations do not support a claim for punitive damages.

            Ultimately, Nexus has demonstrated that the proposed cross-claims are related to the main action, and Nexus diligently moved for leave to file a cross-complaint after retaining new counsel unrelated to ALN. 

            With respect to ALN’s arguments about the merits of the cross-claims, the Court will generally not consider the merits of the proposed amendment in determining whether to grant leave to amend.  (See Kittredge Sports Co. v. Superior Court (1989) 213 Cal.App.3d 1045, 1048 [“the preferable practice would be to permit the amendment and allow the parties to test its legal sufficiency by demurrer, motion for judgment on the pleadings or other appropriate proceedings”].) 

CONCLUSION AND ORDER

            As stated above, the Court continues the hearing on the instant motion to permit Nexus to resolve the issue of its legal representation to May 13, 2025 at 8:30 A.M. in Department 207. 

            Unless the parties waive notice, the Clerk of the Court shall provide notice of the Court’s order. 

DATED:  April 3, 2025                                  ___________________________

                                                                  Michael E. Whitaker

                                                                  Judge of the Superior Court