Judge: Shirley K. Watkins, Case: LC107846, Date: 2022-10-12 Tentative Ruling

Case Number: LC107846    Hearing Date: October 12, 2022    Dept: T

            [TENTATIVE] ORDER:  Defendant Bruce Gray’s Motion for Leave to File an Amended Answer is GRANTED WITH ADDITIONAL ORDERS.  The Court continues the trial date to March 23, 2023, at 9:30 a.m., continues the Final Status Conference to March 2, 2023, at 8:30 a.m., reopens discovery for both parties (including re-taking of parties' depositions) but limits the scope of the discovery to the new defenses, and orders Defendant Bruce Gray to pay Plaintiff $25,000 by check or money order payable to the Client Trust Account of Schreiber & Schreiber, 16633 Ventura Blvd., Suite 711, Encino, CA 91436 by 11/10/2022.  The First Amended Answer attached to the motion must be separately served and filed with the court within 20 days.

INTRODUCTION

Defendant Bruce Gray (Defendant) moved for leave to file a First Amended Answer (FAA) against Plaintiff Strategic Emerging Economics, Inc.’s (Plaintiff) Complaint. 

            DISCUSSION 

            In general, Defendant requested to amend the answer filed on May 5, 2020, to plead new Affirmative Defenses grounded on claims that Plaintiff’s fraud, economic duress, and undue influence made the Continuing Guaranty unenforceable and full satisfaction of the debt due to a July 2021 payment by NSHE CA Bulls, LLC (NSHE) to Plaintiff resulting from NSHE’s Chapter 11 Bankruptcy Petition’s reorganization plan.  The Court notes that this motion comes after a mistrial was declared in the bifurcated trial on estoppel.

            The courts apply liberality in allowing amendment of answers.  (Code Civ. Proc. sec 473(a)(1).)  However, a court can deny leave to amend after long, inexcusable delay, where there is cognizable prejudice, such as discovery needed, trial delay, critical evidence lost, or added preparation expense.  (Hong Sang Market, Inc. v. Peng (2018) 20 Cal.App.5th 474, 488; Atkinson v. Elk Corp. (2003) 109 Cal.App.4th 739, 761.)  The chronology of events shows some delay in the filing of the instant motion on September 16, 2022.  As to NSHE’s July 2021 payment, it is presumed that Defendant had knowledge of this payment since Defendant is the president of NSHE, which is an ongoing business.  Defendant delayed 14 months in bringing the new defense.  Defendant fails to present facts showing any excuse for not bringing this defense sooner.  As for Defendant’s "ne defenses for fraud/economic duress/undue influence, Defendant asserted that he discovered the defenses were not properly alleged in the Answer at the September 8, 2022, trial.  It is presumed that Defendant had prior knowledge of the fraud/economic duress/undue influence defense early in the litigation because Defendant asserted that these claims were encompassed within his estoppel defenses, albeit mistakenly.  Defendant was aware of this, however, from numerous discussions a pre-trial proceedings.  Although some delay is seen in bringing these defenses now, the Court finds that the delay was excusable due to Defendant’s misconception regarding the estoppel defense.  Because Defendant’s delay is both excusable and inexcusable, the Court reviews the issue of prejudice upon Plaintiff.

            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. (P & D Consultants, Inc. v. City of Carlsbad (2010) 190 Cal.App.4th 1332, 1345.)  Plaintiff argues prejudice in additional legal fees due to new discovery needing to be conducted.  The Court notes that trial delay is not at issue because a new trial date is set due to mistrial.  However, the defenses of fraud (and agency issues related to non-party Olympia Financial) would necessarily require additional discovery because they are fact-based defenses.  The additional costs in preparing to rebut the fraud defense show prejudice to Plaintiff.  There will also be additional preparation expenses since the trial of this case was set to begin in less than a month, but because trial will be delayed, perhaps for several months, then there will be need for plaintiff to prepare again for trial. Because Plaintiff has and will incur additional costs, Plaintiff has sufficiently shown prejudice.

            To allay Plaintiff’s prejudice, the Court is authorized to grant leave “on such terms as may be proper.”  (Code Civ. Proc. secs. 473(a)(1), 576.) The Court may continue the trial date (if requested by the opposing party); limit discovery; and/or order the party seeking the amendment to pay the costs and fees incurred by the opposing party in preparing for trial.  (Fuller v. Vista Del Arroyo Hotel (1941) 42 Cal.App.2d 400, 404.)  Plaintiff requests $25,000.00 for attorney fees because or prejudice in having to conduct additional discovery and re-preparing the case for trial.  The request for trial continuance is reasonable as are the request for fees as described below.

The request to reopen discovery on the new issues and trial continuance is reasonable because the new defenses, specifically fraud, is factually based.  However, if discovery is reopened on these limited issues, then it would apply to both sides. The request to prohibit Defendant from conducting discovery is unreasonable and denied. 

As to Plaintiff’s request for $25,000, Plaintiff provides that the amount includes “at least” 63 hours in anticipated legal and reporter fees “to be” incurred due to the new discovery to be conducted and because there is prejudice to Plaintiff in having to prepare for a trial that is no longer at issue, and re-prepare for a trial in the future. The Court finds that the rate of $400/hour charged by Attorney Edwin Schreiber is found to be reasonable based upon his education and experience, and the level of work to be provided.   Defendant Bruce Gray is ordered to pay Plaintiff $25,000 by check or money order payable to the Client Trust Account of Schreiber & Schreiber, 16633 Ventura Blvd., Suite 711, Encino, CA 91436 by 11/10/2022.  The order for attorney fees will be separately signed and is enforceable as a judgment.

            The motion for leave to amend is GRANTED WITH ADDITIONAL ORDERS.

            IT IS SO ORDERED, CLERK TO GIVE NOTICE.