Judge: Monica Bachner, Case: 22STCV10768, Date: 2023-02-10 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: 22STCV10768    Hearing Date: February 10, 2023    Dept: 71

Superior Court of California

County of Los Angeles

DEPARTMENT 71

TENTATIVE RULING

Defendants/Cross-Complainants Ari Resnick’s and R.O.A.R. Management Company, Inc.’s motion for leave to file a first amended cross-complaint is granted.

Defendants/Cross-Complainants Ari Resnick (“Resnick”) and R.O.A.R. Management Company, Inc. (“ROAR”) (collectively, “Cross-Complainants”) move for leave to file a first amended cross-complaint (“FACC”) in this action. (Second Notice of Revised Motion, pgs. 1-2; C.C.P. §§473, 576; C.R.C., Rule 3.1324.)

Background

On March 29, 2022, Plaintiff Healthcare Management Associates, Inc., individually and derivatively on behalf of Healthcare Financial Solutions, LLC, (“HMA”) (“Plaintiff”) filed its initial complaint against Defendants ROAR, Resnik, and 11 Funding, LLC dba 11 Med Funding (“11 Funding”) (collectively, “Defendants”) alleging causes of action for (1) breach of fiduciary duty, (2) breach of written contract, (3) breach of implied covenant of good faith and fair dealing, (4) fraud, (5) unjust enrichment, (6) aiding and abetting, (7) conversion, (8) misappropriation of trade secrets, (9) intentional interference with prospective economic relations, and (10) violation of Business & Professions Code §§17200, et seq., arising from alleged breaches of Defendant Resnik’s obligations to Plaintiff.  (See Complaint.)  On May 16, 2022, Defendants Resnik and ROAR filed their initial cross-complaint (“CC”) against Cross-Defendants HMA and Mary Aviles (“Aviles”) (collectively, “Cross-Defendants”) alleging four causes of action: (1) declaratory relief [Cross-Complainant Resnik in his individual capacity against Cross-Defendants], (2) declaratory relief [Cross-Complainants in their individual capacities against Cross-Defendants], (3) breach of fiduciary duty [Cross-Complainants in their individual and representative capacities against Cross-Defendant Aviles], and (4) breach of fiduciary duty [Cross-Complainants in their individual and representative capacities against Cross-Defendant HMA].  (See CC.)  Cross-Complainants filed their original version of the instant motion on November 30, 2022 in Department 69, and was taken off calendar due to Cross-Complainants’ failure to provide the Court with mandatory courtesy copies of the motion.  (1/5/23 Minute Order.)  Parties filed peremptory challenges to the presiding judicial officers and on January 17, 2023, this case was reassigned to Department 71.  (1/17/23 Minute Order.)  On January 13, 2023, Cross-Complainants filed the instant motion.  On January 30, 2023, Cross-Defendants HMA, acting individually and derivatively on behalf of Healthcare Financial Solutions, LLC, and Aviles filed their opposition.  On February 3, 2023, Cross-Complainants filed their reply.

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.)

C.R.C. Rule 3.1321(a) requires that a motion to amend must: “[i]nclude a copy of the proposed . . . amended pleading . . . [and] 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, the [deleted and/or additional] allegations are located.”

C.R.C. Rule 3.1324(b) provides, as follows: “[a] separate declaration must accompany the motion and must specify: (1) [t]he effect of the amendment; (2) [w]hy the amendment is necessary and proper; (3) [w]hen the facts giving rise to the amended allegations were discovered; and (4) [t]he reasons why the request for amendment was not made earlier.”

Cross-Complainants’ motion complies with C.R.C. Rule 3.1324(a).  The motion includes a copy of the proposed FACC.  (Decl. of Ram ¶2, Exh. 1 [FACC].)  Cross-Complainants’ motion sets forth the proposed deletions from the CC and allegations proposed to be added against Cross-Defendants and where, by page, paragraph, and line number, the changes are located.  (C.R.C. Rule 3.1324(a)(3); Motion, pgs. 7-8; see Decl. of Ram ¶¶4, 6, 7, Exh. 1.)  Specifically, Cross-Complainants propose the following deletions: “all of the original Cross-Complaint, except for the Cross-Complaint’s original third and fourth causes of action for breach of fiduciary duty by ROAR in its representative capacity against Aviles and HMA, which are now the fourth and fifth causes of action, respectively. (Motion, pg. 7; Decl. of Ram ¶¶4, 6, 7, Exh. 1 ¶¶141-56.)  Cross-Complainants propose the addition of the following parties as Cross-Defendants to the FACC: Ismael Silva, Jr., M.D. (“Silva”), Ismael Geli Silva (“Geli”), James Aviles (“James”), Starbase, Inc. (“Starbase”), American Financial Investment Services, Inc. (“AFIS”), National Intra-Operative Monitoring, Inc. (“NIOM”), and Orangewood Surgical Center, LLC (“Orangewood”), and the parties are named in the new first, second, and third causes of action.  (Motion, pgs. 7-8; Decl. of Ram ¶¶4, 7, Exh. 1 ¶¶2, 8, 10, 12-26, 69-71, 107-40.)  Cross-Complainants propose the addition of the following causes of action: claims for violations of the Racketeer Influenced and Corrupt Organizations Act (first and second causes of action) and fraud (third cause of action) against all Cross-Defendants.  (Motion, pg. 8; Decl. of Ram ¶¶4, 7, Exh. 1 ¶¶1, 107-140.)  Cross-Complainants propose the addition of the following factual allegations: allegations relating to Silva, Geli, Aviles, and James’ ownership, control, or involvement with Starbase, AFIS, NIOM, and Orangewood, as well as their fraudulent conduct in connection with each entity, including but not limited to, written and verbal misrepresentations, signatures on corporate documents and checks, and misrepresentations on loan applications to banks.  (Motion, pg. 8; Decl. of Ram ¶¶4, 7, Exh. 1 ¶¶28-106.)

Cross-Complainants’ motion substantially complies with C.R.C. Rule 3.1324(b).  Cross-Complainants submitted a separate declaration of their counsel that specifies the effect of the amendments and explains why the amendments are necessary and proper.  (Decl. of Ram ¶¶7-8.)  Cross-Complainants’ counsel declares the amendments are necessary so that Cross-Complainants can assert their meritorious claims against newly added Cross-Defendants, whose conduct they allege is intertwined with Cross-Defendants HMA and Aviles’ conduct, and thus resolve all disputed matters between the parties in the same lawsuit.  (Decl. of Ram ¶8.)  Cross-Complainants’ counsel declares the amendments are proper because the conduct and claims alleged identify the real parties-in-interest who have harmed Cross-Complainants and stem from Healthcare Financial Solutions, LLC’s operations and dissolution, which they allege is the crux of the dispute between the parties to this action.  (Decl. of Ram ¶8.)  Cross-Complainants argue the facts supporting the proposed FACC were not discovered sooner because Cross-Defendants HMA, Aviles, and the proposed cross-defendants had been fraudulently concealing their conduct and fraudulently misrepresenting their ownership and control of various related entities for more than a decade.  (Motion, pg. 9; see Decl. of Ram ¶4, Exh. 1 ¶¶33, 38, 40, 42, 44-47, 50-58, 63-64.)  Cross-Complainants argue they could not have sought amendment any sooner because it was not until the dissolution of Healthcare Financial Solutions, LLC, and the commencement of this action that Cross-Complainants discovered and pieced together additional facts, with the benefit of new counsel retained on November 8, 2022, from filings in various civil and criminal proceedings involving the proposed cross-defendants, which helped Cross-Complainants connect the dots that they were victims of an elaborate criminal enterprise.  (Motion, pg. 9; see Decl. of Ram ¶¶3,4, Exh. 1 ¶¶6-7, 56-58, 63-68, 103-106.).

          Cross-Defendants argue in opposition that Cross-Complainants’ motion should be denied because Cross-Complainants “fail[] to offer any explanation for [their] delay in seeking leave to amend,” especially given the fact that they “were aware of the facts” years before this litigation began.  (Huff v. Wilkins (2006) 138 Cal.App.4th 732, 746; Melican v. Regents of the University of California (2007) 151 Cal.App.4th 168, 176.)  Cross-Defendants argue “[t]he only declaration supporting its request was that of an attorney authenticating the proposed amended cross-complaint,” which is insufficient to support a motion for leave to amend.  (Green v. Rancho Santa Margarita Mortgage Co. (1994) 28 Cal.App.4th 686, 692.)  Cross-Defendants argue Cross-Complainants admit and expressly allege within their proposed FACC that they have known of the facts underlying their proposed FACC for over seven years.  (Opposition, pgs. 6-7.)  The cases Cross-Defendants cite are inapposite: unlike the party in Green that failed to offer any excuse for its delay in seeking to amend after the matter had been tried, appealed, and remanded; the defendant in Hulsey v. Koehler, who moved to amend during trial and over three years after her initial answer; the plaintiff in P&D Consultants, Inc. v. City of Carlsbad, who moved to amend complaint after the trial readiness conference and amendment would require additional discovery; and the plaintiff in Melican, who moved to amend complaint after five years during a summary judgment hearing, Cross-Complainants have not demonstrated dilatory tactics.  (Green v. Rancho Santa Margarita Mortg. Co., 28 Cal.App.4th at pg. 692; Hulsey v. Koehler (1990) 218 Cal.App.3d 1150, 1159; P&D Consultants, Inc. v. City of Carlsbad (2010) 190 Cal.App.4th 1332, 1345; Melican, 151 Cal.App.4th at pg. 176.)  After the original CC was answered on November 10, 2022, Cross-Complainants took an additional 13 days to request Cross-Defendants’ consent to file the proposed FACC, and then waited another week for Cross-Defendant’s counsel to respond to the consent request.  (Decl. of Ram ¶5.)  Here, like the plaintiff in Hirsa v. Superior Court, who engaged private counsel, discovered additional facts, and moved to amend the operative pleading four months later, Cross-Complainants have timely brought the instant motion without delay.  (Hirsa, 118 Cal.App.3d at pg. 488.)

Cross-Defendants argue that the Court should deny the motion because Cross-Complainants lack standing and fail to allege causation.  These arguments are not persuasive.

The federal Racketeer Influenced and Corrupt Organizations Act (“RICO Act”) “authorizes a private suit by ‘any person injured in his business or property by reason of a violation of § 1962.’”  (Sedima, S.P.R.L. v. Imrex Co. (1985) 473 U.S. 479, 495.)  Section 1962(c) makes it unlawful for any person “to conduct an enterprise through a pattern of racketeering activity.”  (Id.)  To properly allege a violation of section 1962(c) requires alleging the conduct of an enterprise and a pattern of racketeering activity.  (Id. at 496.) The plaintiff must plead that the conduct constituting the violation was “the proximate cause of harm to the victim,” and that conduct includes the operation of the enterprise and the pattern of racketeering activity.  (De L.A. Gomez v. Bank of America (9th Cir. 2016) 642 F.App’x 670, 676.) 

Cross-Complainants’ allegations of Cross-Defendants’ predicate acts of bank fraud, healthcare fraud, insurance fraud, and tax fraud support Cross-Complainants’ allegation that Cross-Defendants and proposed cross-defendants conducted or participated in the conduct of the Silva/Aviles Family RICO Enterprise, and that their violation of §1962(c) both directly and proximately caused harm to Cross-Complainants.  Cross-Complainants allege proposed cross-defendants Starbase and AFIS’ funds are proceeds of illegal racketeering activity, and subsequently invested into the legitimate HFS business, in which Cross-Complainants have a property interest.  (Decl. of Ram, Exh. 1 ¶¶83, 90-91, 98, 100.)  Cross-Complainants sufficiently allege under §1962 they suffered injury to their property caused by Cross-Defendants, including that cross-Defendants (1) fraudulently induced Cross-Complainants to agree to pay $5.1 million in interest on a loan of racketeering income that Cross-Complainants unknowingly agreed for Healthcare Financial Solutions, LLC, to accept, (2) caused Healthcare Financial Solutions, LLC, to engage in transactional money laundering with Cross-Complainants’ unknowing acceptance of financing from entities funded with proceeds of unlawful activity, thereby exposing Cross-Complainants to potential criminal investigation and penalties, and (3) harming their reputation among medical-legal practitioners and personal injury attorneys.  (Decl. of Ram, Exh. 1 ¶¶100, 118-120, 126-128.)  As such, Cross-Complainants’ motion should not be denied on the basis that the proposed amendment fails to state a valid cause of action.

Finally, the Court finds Cross-Defendants will not be substantially prejudiced by the amendments and Cross-Complainants are entitled to an order granting leave to amend. There is no evidence of significant delay considering Cross-Complainants’ counsel provided Cross-Defendants with notice of the proposed FACC on November 23, 2022, nearly four months before the prior trial date which will be reset in this courtroom.  (Decl. of Ram ¶5.)  Moreover, no party has provided substantive written responses to discovery, no party has produced documents, and no deposition has been taken in this matter.  (Decl. of Ram ¶10.)  Cross-Defendants’ arguments in opposition do not establish they will be so prejudiced by the amendment such that leave to amend should be denied.

Based on the foregoing, Cross-Complainants’ motion for leave to file an FACC is granted.

Dated:  February _____, 2023

Hon. Monica Bachner

Judge of the Superior Court