Judge: Theodore R. Howard, Case: 21-1205446, Date: 2022-08-25 Tentative Ruling
Defendant Douglas Foose, a.k.a. Chip Foose’s (“Foose”) Motion for Leave to File a Cross-Complaint (“Motion”) is DENIED.
Foose brings his Motion pursuant to Civ. Proc. Code § 426.50, which requires a party seeking to file a cross-complaint to plead oversight, inadvertence, mistake, neglect, or other cause for failure to not file a timely cross-complaint and to show he acted in good faith in bringing the Motion.
The “good faith” requirement allows the trial court a “modicum of discretion” in allowing amendments to pleadings. (Foot's Transfer & Storage Co. v. Superior Ct. (1980) 114 Cal. App. 3d 897, 901.) “[W]hat constitutes “good faith”-or lack of it-under Code of Civil Procedure section 426.50 must be determined in light of and in conformity with the liberality conferred upon the trial courts by the section and by prior law. We conclude that this principle of liberality requires that a strong showing of bad faith be made in order to support a denial of the right to file a cross-complaint under this section.” (Id., at 902.) ““'Bad faith' is defined as '[t]he opposite of ”good faith,“ generally implying or involving actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake ..., but by some interested or sinister motive[,] ... not simply bad judgment or negligence, but rather ... the conscious doing of a wrong because of dishonest purpose or moral obliquity; ... it contemplates a state of mind affirmatively operating with furtive design or ill will.” (Silver Organizations Ltd. v. Frank (1990) 217 Cal. App. 3d 94, 100.)
Here, plaintiffs Redphin Productions, LLC (“Redphin” individually), and Carson Lev (“Lev” individually; “Plaintiffs” with Redphin) have provided evidence that most if not all of the causes of action (“COA”) in Foose’s proposed cross-complaint (“CC”) have no basis in fact. The CC has COA for 1) Conversion; 2) Breach of Fiduciary Duty; 3) Accounting; 4) Violation of Labor Code § 2855, et seq.; 5) Fraudulent Representation; and 6) Declaratory Relief.
As to the COA for conversion, the CC alleges Plaintiffs wrongfully distributed Foose’s portion of the gross net licensing revenue. (CC ¶ 22.) However, Foose testified that under the terms of the contract, Plaintiffs were required to pay fees to Hemisfear, LP (“Hemisfear”) and not directly to Foose. (Miller Decl., Ex. C at 43:15-19.) Plaintiffs never refused to remit payments to Hemisfear, Foose never instructed Plaintiffs to stop making payments to Hemisfear, Hemisfear always received money it was owed, Plaintiffs are still paying Hemisfear, and Plaintiffs were, “doing exactly what the contract said. They were sending money to whatever the Hemisfear account was. . .” (Millier Decl., Ex. C at 43:15-25, 44:3-45:16, 50:8-19; 51:17-25; 129:24-130:12; 130:9-12.) Foose has in essence admitted there is no basis for this COA.
As to the COA for Breach of Fiduciary Duty, Foose testified that the only reason he believed Plaintiffs breached their fiduciary duty was that Plaintiffs failed to figure out a way for Foose to get money from Hemisfear by “interplead[ing] the money.” (Millier Decl., Ex. C at 131:14-132:5; 171:8-15.) This is despite Foose never contacting his ex-wife (and partner in Hemisfear) to agree to a contractual amendment regarding payments and despite Foose not being aware of any clause in the existing contracts requiring Plaintiffs to interplead anything on behalf of Foose. (Id., at 45:20-46:10 and 187:8-15.) Foose has in essence admitted there is no basis for this COA.
As to the COA for Accounting, again, Foose admitted that Plaintiffs complied with what was required of them under the contract and paid all of the required fees, Foose was simply unhappy that he was subsequently unable to obtain payment from Hemisfear, which Foose has not alleged Plaintiffs had any control over. (Millier Decl., Ex. C at 43:15-19, 44:3-45:16, 50:8-19; 51:17-25; 129:24-130:12, 130:9-12.) Foose has in essence admitted there is no basis for this COA.
As to the COA for Violation of Labor Code § 2855, et seq., that code section involves actions between employers and their employees and/or contractors. Foose testified he was never an employee or contractor working for Plaintiffs. (Millier Decl., Ex. C at 53:5-10; 184:16-21.) If Foose did not believe he was an employee/contractor of Plaintiffs, then it is unclear how Labor Code § 2855 applies.
As to the COA for Declaratory Relief, it is unclear what or how Foose is seeking a declaration of right from. To the extent that Foose seeks a declaration under the contract with Plaintiffs and Foose, again, Foose has already admitted Plaintiffs complied with what was required of them under the contract. (Millier Decl., Ex. C at 50:8-19; 51:17-25; 129:24-130:12.) It is unclear what relief the court could declare on that contract. If Foose is seeking a declaration under other contract(s), he has not pled such contract(s). To the extent that Foose is seeking a declaration of the rights to the fees within Hemisfear’s possession and how much Foose or his ex-wife are entitled to, it appears that issue was, or should have been, part of the marriage dissolution lawsuit identified in the CC as In re Marriage of Foose, OCSC Case No. 190009387. This court would likely not have jurisdiction to consider such family law disputes, especially those already ruled upon by another court.
Finally, as to the COA for Fraudulent Misrepresentation, Foose alleged Lev touted successful employment history with Mattel as a licensing executive, which would enable him to secure extensive additional licensing agreements. (CC ¶ 20.) Instead, Foose alleges Lev, “had in fact ben [sic] terminated for cause by Mattel for theft and engaging in unauthorized transactions violative of Mattel Employment policies.” (Id.) Had Foose known about the termination, he would not have entered into the contract. (CC ¶¶ 20, 38.) Foose did not allegedly discovery the termination until December 2021. (CC ¶ 39.) Foose seeks the same $1,000,000 in damages that he sought in the other COA. While this COA and the “new found facts” might support this COA, Foose has again already stated that Plaintiffs have done everything that was required of them under the contract. It is therefore unclear how any allegedly fraudulent misrepresentations on the part of Plaintiffs actually harmed Foose.
Even if in theory the Fraudulent Misrepresentation COA is proper, Foose seems to have testified there is no basis for the other five COA in the CC. Pleading numerous COA that have no foundation is an act of bad faith. Requiring Plaintiffs to spend money, time, and resources defending against groundless COA is an act of bad faith. Requiring Plaintiffs to perform additional discovery, filing motions to dismiss those COA (either through demurrers, motions to strike, or summary judgment), and/or possibly defending against those groundless COA at trial is an act of bad faith. Requiring the court to expend resources on making rulings related to unfounded COA would also be an act of bad faith. Aside from the alleged discovery of Lev’s employment history in December 2021, Foose has made no statements supporting oversight, inadvertence, mistake, neglect, or other reasons why the CC (and other five COA) was not filed at the time Foose filed his answer. Indeed, Foose appears not to even be aware as to why the Motion was filed and the contents of his declaration. (Millier Decl., Ex. C at 103:4-12; 130:25-131:13.) All of the above shows a lack of the requisite good faith on the part of Foose in bringing the Motion.
Finally, Foose failed to file a timely reply brief and as such appears to have conceded Plaintiffs’ arguments regarding the merit of the Motion.
As Foose has failed to show he acted in good faith in bringing this Motion, it must be denied at this time.
Plaintiffs to give notice.