Judge: Teresa A. Beaudet, Case: BC667151, Date: 2022-08-02 Tentative Ruling

Case Number: BC667151    Hearing Date: August 2, 2022    Dept: 50

Superior Court of California

County of Los Angeles

Department 50

Background

Plaintiffs Mehdi Saidane and Mimi Saidane (jointly, “Plaintiffs”) brought this action on June 30, 2017 against Defendants Patrick Khalafian (“Khalafian”), Dertad Teddy Bedjakian (“Bedjakian”), and 168 Entertainment, LLC (“168 Entertainment”). Plaintiffs filed the operative Second Amended Complaint (“SAC”) on July 3, 2018, asserting causes of action for (1) fraud, (2) breach of contract and (3) breach of the covenant of good faith and fair dealing.

On October 22, 2018, Bedjakian filed an Answer to the SAC, in which he asserts a number of affirmative defenses. On March 22, 2019, 168 Entertainment filed an Answer to the SAC, in which it also asserts a number of affirmative defenses. 

The SAC alleges that Plaintiffs entered into a contract (the “Contract”) with Khalafian and 168 Entertainment in November 2009, wherein Plaintiffs agreed to invest $205,000 into a new internet project. (SAC, ¶ 7, Ex. 1.) Plaintiffs allege that 168 Entertainment was operated and owned by Khalafian and Bedjakian. (SAC, ¶ 8.) Plaintiffs thereafter “patiently waited for a return on their initial investment.” (SAC, ¶ 9.) Plaintiffs inquired as to the status of their investment on a yearly basis from 2009 to 2015. (SAC, ¶ 10.) Plaintiffs were told by Khalafian and Bedjakian that their investment “was being put to good use” and “profit distributions were ‘right around the corner.’” (SAC, ¶ 9.) Finally, in 2016, Mehdi Saidane discovered that the investment was being used to fund the personal lifestyles of Khalafian and Bedjakian. (SAC,      ¶ 12.) When Plaintiffs demanded a return of their investment, they were rebuffed. (SAC, ¶ 13.) Plaintiffs thereafter learned that in March 2017, Bedjakian filed documents with the California Secretary of State to cancel the corporate status of 168 Entertainment, in violation of the Contract. (SAC, ¶ 13.)

Bedjakian and 168 Entertainment (jointly, “Defendants”) now move for leave to file amended answers to the SAC. Plaintiffs oppose.

Evidentiary Objections

The Court rules on Plaintiffs’ objection to the Declaration of Thomas Kostos as follows:

Objection 1: sustained

Discussion

Pursuant to Code of Civil Procedure section 473(a)(1), “[t]he court may, in furtherance of justice, and on any terms as may be proper, allow a party to amend any pleading.” Amendment may be allowed at any time before or after commencement of trial.  ((Id., § 576.)  “[T]he court’s discretion will usually be exercised liberally to permit amendment of the pleadings. The policy favoring amendment is so strong that it is a rare case in which denial of leave to amend can be justified.” (Howard v. County of San Diego (2010) 184 Cal.App.4th 1422, 1428 (internal citations omitted).) “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….”   (Morgan v. Sup. Ct. (1959) 172 Cal.App.2d 527, 530.) Prejudice includes “delay in trial, loss of critical evidence, or added costs of preparation.”  (Solit v. Tokai Bank, Ltd. New York Branch (1999) 68 Cal.App.4th 1435, 1448.)

A motion to amend a pleading before trial must include a copy of the proposed amendment or amended pleading, which must be serially numbered to differentiate it from previous pleadings or amendments. ((Cal. Rules of Court, rule 3.1324(a).) The motion must also state what allegations are proposed to be deleted or added, by page, paragraph, and line number.  ((Ibid. .) Finally, a separate supporting declaration specifying the effect of the amendment, why the amendment is necessary and proper, when the facts giving rise to the amended allegations were discovered, and the reason why the request for amendment was not made earlier must also accompany the motion.  ((Id. R., rule 3.1324(b).)

Defendants seek to amend their answers to add a tenth affirmative defense – novation. The affirmative defense provides, “As a separate and distinct affirmative defense to the second amended complaint, defendant alleges that the second amended complaint, and each cause of action therein, are completely barred, waived or otherwise unenforceable because of a novation between PATRICK KHALAFIAN and plaintiffs, wherein plaintiffs agreed to substitute an investment in an unrelated business with the intent of extinguishing any obligations any of the defendants allegedly had to plaintiffs under the November 30, 2009, agreement, or any claim arising out of or related to said agreement.” (Kostos Decl., ¶ 4, Exs. A-B.)

In support of this proposed amendment, Defendants submit the declaration of their counsel, Thomas J. Kostos, who asserts that he is “informed and believe that to the extent plaintiffs invested money in [168 Entertainment], or the project, [Khalafian] repaid or extinguished any obligation of any of the defendants under the November 30, 2009, agreement by giving them stock in a companion business unrelated to [168 Entertainment], [168 Entertainment’s] project alleged in the November 30, 2009, agreement, or [Bedjakian]. These businesses were Croesus, and/or Empire Entertainment Group. I learned this information from former members and officers of Croesus, and Empire Entertainment Group. I believe plaintiffs have first-hand knowledge of these facts and that they were aware of these facts from the beginning of this litigation, and they should have disclosed these facts to defendants and this Court.” (Kostos Decl., ¶ 2.) Mr. Kostos asserts that he learned these facts in recent months. (Kostos Decl., ¶ 3.)

As set forth above, the Court sustains Plaintiffs’ objection to paragraph 2 of Mr. Kostos’s declaration. As noted by Plaintiffs, Mr. Kostos lacks foundation to make the claims asserted in the first, second, and fourth sentences of paragraph 2 of his declaration. Plaintiffs also note that Mr. Kostos’s statement in the third sentence that he learned the information from former members and officers of Croesus and Empire Entertainment Group shows that the entirety of paragraph 2 is hearsay.

Plaintiffs note that “courts are much more critical of proposed amendments to answers when offered after long unexplained delay or on the eve of trial [citations], or where there is a lack of diligence, or there is prejudice to the other party.” ((Hulsey v. Koehler (1990) 218 Cal.App.3d 1150, 1159.) Plaintiffs assert that all of these factors are present here. Bedjakian filed his answer to the SAC on October 22, 2018, almost four years ago. 168 Entertainment filed its answer to the SAC on March 22, 2019 over three years ago. In addition, trial in this action is currently set for August 24, 2022. Plaintiffs note that the action is thus on the eve of trial, and discovery is closed. Plaintiffs assert that the proposed amendments will thus cause great prejudice to them, and indicate that they would not have any ability “to delve into this new affirmative defense, and this novel theory that the Plaintiffs accepted something other than money for their investment.” (Opp’n at p. 2:25-26.) Defendants did not file a reply in support of the motion, and thus do not offer any response to the foregoing points.

            Conclusion

Based on the foregoing, Defendants’ motion for leave to amend their answers is denied.

Plaintiffs are ordered to provide notice of this ruling.

DATED:  August 2, 2022                               ________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court