Judge: Monica Bachner, Case: 20STCV33078, Date: 2023-02-03 Tentative Ruling

Department 71: Attorneys who elect to submit on these published tentative rulings, without making an appearance at the hearing, may so notify the Court by communicating this to the Department's staff at (213) 830-0771 before the set hearing time.  See, e.g., CRC Rule 324(b).   All parties are otherwise encouraged to appear by Court Call for all matters.

Case Number: 20STCV33078    Hearing Date: February 3, 2023    Dept: 71

Superior Court of California

County of Los Angeles

DEPARTMENT 71

TENTATIVE RULING

Plaintiffs The Gores Group, LLC’s and AEG Holdings, LLC’s motion for leave to file a second amended complaint is granted.

Plaintiffs The Gores Group, LLC (“TGG”) and AEG Holdings, LLC (“AEG”) (collectively, “Plaintiffs”) move for leave to file a second amended complaint (“SAC”) in this action.  (Notice of Motion, pg. 2; C.C.P. §§473, 576.) Specifically, the SAC will: (1) add a fourth cause of action for breach of contract against Defendants Jon Gimbel (“Gimbel”) and Anthony Guagliano (“Guagliano”), and (2) adds Gallant Capital Partners I, LP, Gallant Capital Partners GP I, LP, and Gallant Capital Partners GP II, LP as additional defendants to the existing second cause of action for quantum meruit and third cause of action for unjust enrichment.  (Notice of Motion, pg. 2.)  Proposed additions are made to the following pages, lines and paragraphs: 2:5-6, 4:7-9, 4: 13-25, 5:14, 7:14-15, 12:5-6, 14:7-25, 15:15-16, 17:3-5, 17:13, 17:15-23, 19:8-9, 19:12, 19:17-19, 19:21-23, 20:10, 20:12, 20:14-15, 20:21 , 20:24, 20:27-28, 23:20-24, 24:4, 24:8, ¶¶11-15, ¶19, ¶26, ¶42, ¶¶49-50, ¶52, ¶58, ¶¶60-62, ¶¶71-74, ¶77, ¶¶81-89.  (Notice of Motion, pg. 2.)  Proposed deletions are made of the following pages, lines and paragraphs: 2:6, 4:7-9, 5:14, 17:13, 24:4, 24:8, ¶¶11-15, ¶19, ¶60.  (Notice of Motion, pg. 2.)

Background

On August 31, 2020, Plaintiffs filed their initial complaint against Defendants Gimbel, Guagliano, and Gallant Capital Partners, LLC (“Gallant Capital”) alleging causes of action for (1) breach of contract, (2) breach of covenant of good faith and fair dealing, (3) fraud—false promise, (4) quantum meruit, (5) unjust enrichment, and (6) declaratory relief arising from parties alleged agreement (“Letter Agreement”) for Plaintiffs to invest in Defendants Gimbel and Guagliano’s new private equity fund (“New Fund”) and Defendants’ alleged breach of the agreement.  April 20, 2021, this Court sustained Defendants’ demurrer to Plaintiffs’ first cause of action for breach of contract with leave to amend.  (4/20/21 Ruling.)  On May 18, 2021, Plaintiffs filed their first amended complaint (“FAC”), in which they did not re-allege their claim for breach of contract, and alleged three causes of action for (1) breach of covenant of good faith and fair dealing, (2) quantum meruit, and (3) unjust enrichment.  On November 15, 2022, parties filed a joint ex parte application to advance the hearing date on the instant motion, which this Court denied.  (11/17/22 Minute Order.)  Plaintiffs filed the instant motion on January 9, 2023.  Defendants filed their opposition on January 23, 2023.  Plaintiffs filed their reply on January 27, 2023.

Motion for Leave to Amend

“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.”  (C.C.P. §473(a)(1).)

“Trial courts are vested with the discretion to allow amendments to pleadings ‘in furtherance of justice.’ That trial courts are to liberally permit such amendments, at any stage of the proceeding, has been established policy in this state since 1901.”  (Hirsa v. Superior Court (1981) 118 Cal.App.3d 486, 488-489.)

Plaintiffs’ motion complies with CRC Rule 3.1324(a).  The motion includes a copy of the proposed SAC.  (Decl. of Harris ¶5, Exh. 1 [SAC].)  Plaintiffs’ motion also complies with CRC Rule 3.1324(b).  Plaintiffs submitted a separate declaration of their counsel that specifies the effect of the amendment and explains why the amendment is necessary and proper.  (Decl. of Harris ¶¶4, 10-19.)  Plaintiffs assert the amendments are necessary because the breach of contract claim relates to the same general set of facts and arises from the same Letter Agreement, and through discovery Plaintiffs developed a new theory for breach of contract based on evidence to conclusively demonstrate that Plaintiffs committed their Commitment with Fund documents when they executed the Subscription Agreement.  (Motion, pgs. 11, 14-15; Decl. of Harris ¶10.)  Plaintiff further asserts the proposed SAC does not alter the scope of the case with the addition of the new Gallant entity defendants because they comprise different aspects of the same private equity fund and its successor fund, Plaintiffs were entitled to become members or partners of each of these entities under the terms of the Letter Agreement, each of the additional defendant entities benefitted from the use of Plaintiff TGG’s reputation and resources and knew or should have known Defendant TGG expected to be compensated in turn, and the equitable claims against proposed additional Defendants are the same as the equitable claims against existing Defendant Gallant Capital.  (Motion, pg. 12.) 

Plaintiffs assert they acted as quickly as practicable once they learned of the facts related to GFO’s execution of the Subscription Agreement and its legal implications during deposition preparation in or about August 2022.  (Motion, pgs. 13-14; Decl. of Harris ¶18.)  Plaintiffs assert the identification of facts relating to GFO’s execution of the Subscription Agreement also suggested to Plaintiffs the need to amend to add the general partner along with the limited partnership to which GFO Investors was subscribing.  (Motion, pg. 14; Decl. of Harris ¶18.)  Plaintiffs argue they reached out to Defendants’ counsel on October 31, 2022, to request Defendants stipulate to the proposed amendments and Plaintiffs sent a copy of the proposed SAC to Defendants, and as such, Defendants have been on notice of Plaintiffs’ proposed additional cause of action and any relevant facts since October 31, 2022.  (Decl. of Harris ¶5.)

Defendants argue in opposition that permitting the requested amendments would cause Defendants severe prejudice because trial is currently set for April 17, 2023, and Plaintiffs seek to add three new defendants, re-plead a previously dismissed claim, and allege facts that would have been known to Plaintiffs more than three years ago.  (Opposition, pg. 9.)  Defendants argue Plaintiffs’ proposed amendments would require multiple new rounds of dispositive briefing, necessitate months of additional fact and expert discovery, significantly delay trial, and substantially increase costs.  (Opposition, pg. 9.)  Defendants argue Plaintiffs’ motion does not offer a plausible justification for its multi-year delay to include the proposed amendments to their pleading.  (Opposition, pg. 11.)  Defendants argue that in the original Complaint, Plaintiffs failed to acknowledge anything about an assignment to GFO Investors or a completed capital commitment, and to the contrary, claims Defendants breached the Letter Agreement by “not include[ing] AEGH as an investor in the fund,” and sought “specific performance . . . to have AEGH included as an investor, which did not permit an inference of any assignment.  (Opposition, pgs. 10-11, citing Complaint ¶¶42, 54, 59, 61, 78-79, 86.)  Defendants further argue that after Plaintiffs dismissed their breach of contract claim from the Complaint, Plaintiffs did not amend their pleading to allege the AEGH assigned any right to GFO Investors, or that GFO Investors had committed capital to Gallant, but rather dropped the cause of action.  (Opposition, pg. 11.)  Defendants argue it is implausible for Plaintiffs to claim that they only discovered the facts related to the assignment of rights and signing of subscription documents in or about August 2022, years after performing those very acts.  Opposition, pg. 11.)  Defendants argue Plaintiffs’ argument that they only discovered these facts in August is also baseless because Plaintiffs never produced any direct written evidence of an assignment, nor have witnesses been able to describe any, nor do they provide any factual support for their position of discovering such evidence.  (Opposition, pg. 11 n.6, 7.)

Defendants’ argument that delay is sufficient to deny leave is unavailing because they do not claim to have been misled, and Plaintiffs’ delay in amending their pleading is less than the amount considered unreasonable; and even so, denying leave to amend would be an abuse of discretion.  (Kittredge Sports Co. v. Superior Court (1989) 213 Cal.App.3d 1045, 1047 [finding no harm as a result of amendment made three years after filing complaint].)  Defendants’ cited cases further do not support their argument that an amendment to a pleading should be denied where an opposing party had notice six months ahead of trial.  Unlike Melican v. Regents of University of California, here, Plaintiffs informed Defendants they were requesting leave to amend in October 2022, nearly four months before the summary judgment hearing and more than one month before Defendants even filed their motion.  (Melican v. Regents of University of California (2007) 151 Cal.App.4th 168, 175-176 [upholding denial of leave to amend because plaintiffs engaged in unreasonable delay and requested leave to amend orally during summary judgment hearing].)  Similarly, in Huff v. Wilkins, the plaintiff sought to move to amend three days before the summary judgment hearing and offered no explanation whatsoever for the delay. (Huff v. Wilkins (2006) 138 Cal.App.4th 732, 746.)  Indeed, unlike Huff, Plaintiffs informed Defendants of the proposed amendment nearly four months before the summary judgment hearing and more than one month before Defendants even filed their motion, and Plaintiffs have provided an explanation for the delay.  (Supp-Decl. of Harris ¶¶3, 6.)

Ordinarily, a Court will not consider the validity of the proposed amended pleading in deciding whether to grant leave to amend. After leave to amend is granted, the opposing party will have the opportunity to attack the validity of the amended pleading.  (See Kittredge Sports Co., 213 Cal.App.3d at pg. 048.)  Defendant’s arguments in Section C, citing its MSJ and its exhibits are premature.

The cases cited by Defendants to support their argument that the SAC somehow contradicts the FAC are inapposite.  Green v. Rancho Santa Margarita Mortgage Co. and Roemer v. Retail Credit Co. involve admissions and motions to amend after trial.  (Green v. Rancho Santa Margarita Mortgage Co. (1994) 28 Cal.App.4th 686, 692 [attempted amendment contradicted a verified pleading]; Roemer v. Retail Credit Co. (1975) 44 Cal. App. 3d 926, 939 [attempted amendment contradicted stipulations before two different trials].)  In Symth v. Berman, the sham pleading doctrine prevented the plaintiffs from alleging that they had not extended their lease in one complaint and then subsequently alleging they had extended their lease in another.  (Symth v. Berman (2019) 31 Cal.App.5th 183.)  Unlike in Defendants’ cited cases, here, it is not contradictory to allege “AEGH” rather than “AEGH, or its assignee” has claims, and even so, “as a matter of law, allegations in a complaint must yield to contrary allegations contained in exhibits to a complaint.”  (Foxen v. Carpenter (2016) 6 Cal.App.5th 284, 295, citing Vallejo Development Co. v. Beck Development Co. (1994) 24 Cal.App.4th 929, 946.)  The Letter Agreement stating “AEGH, or its assignee” was attached to and incorporated by reference in the initial Complaint and FAC and therefore controls.  (Complaint ¶16; FAC ¶16.)  Accordingly, Plaintiffs’ allegations in the SAC are not inconsistent with the FAC.

Finally, the Court finds Defendants will not be substantially prejudiced by the amendment and Plaintiffs are entitled to an order granting leave to amend. There is no evidence of significant delay considering Plaintiffs’ counsel provided Defendants with notice of the proposed SAC on October 31, 2022, nearly six months before trial.  (Supp.-Decl. of Harris ¶¶3-4, Exh. 1.)  Moreover, discovery has not yet closed. Defendants’ assertion the delay in bringing the motion will prejudice them is based entirely on the availability of hearing dates for demurrers and/or motions to strike and the statutory deadline for filing a motion for summary judgment/adjudication prior to the April 17, 2023 trial date.  The Court acknowledges the trial date may need to be continued.  There is no evidence suggesting a delay of trial will result in prejudice to Defendants. Defendants’ arguments in opposition do not establish Defendants will be so prejudiced by the amendment such that leave to amend should be denied.

Based on the foregoing, Plaintiff’s motion for leave to file an SAC is granted.

Dated:  February _____, 2023

Hon. Monica Bachner

Judge of the Superior Court