2012-00124071-CU-MC

Sharon Scofield vs. Jugjit S Johal

Nature of Proceeding: Motion to File Amended Complaint

Filed By: Walker, M. Henry

Plaintiff Sharon Scofield individually and as Trustee of The Sharon Scofield Family
Trust, Trustee of the Alice Scofield Family Trust, and Executor for the Estate of Alice
Scofield (“Plaintiff”) moves for leave to file a “Third Amended and Supplemental
Complaint.”

Defendants Richard Samra (“Samra”), Bernard C. Kooyman (“Kooyman”) Hammer
Lane R.V. & Mini-Storage LP (“Hammer Lane”), Hammer Lane Management LLC
(“Hammer Lane Management”) Richard Samra as Co-Trustee of the Richard and
Ravinder Samra Family Trust (“Samra Family Trust”) filed an opposition to the motion
(“Hammer Lane Oppo.”). Defendants Hansen Bridgett LLP (“Hansen Bridgett”), Jack
Johal (“Johal”), and Mark Zimmerman (“Zimmerman”) and Zimmerman Land
Corporation (“Zimmerman Land”) each filed separate oppositions to the motion.
Defendants RMJ Enterprises, LLC (“RMJ”) and Twin Cities Investment, LP (“Twin
Cities”) filed a joinder in Hammer Lane’s Opposition. Defendants CVM Law Group LLP
(“CVM”), Robert D. Collins (“Collins”), Peter Von Elten (“Von Elten”), and Joseph D.
O’Neil (“O’Neil”) filed a non-opposition to the motion given their stipulation with
Plaintiffs regarding the content and extent of the proposed amended pleading.

Plaintiff’s motion is GRANTED.

In the operative Second Amended Complaint (“SAC”), Scofield summarizes the instant
action as follows:

This complaint arises out of the wrongful taking of more than $1,700,000 from
an elderly woman and her daughter by their attorney, his friends and others in
the fraudulent promotion and sale of investments in two speculative business
ventures created and controlled by them. The ventures failed and defendant
attorney, his law firm and colleagues compounded the malfeasance by colluding
to conceal the claims Plaintiffs had against them and others, among other acts
of fraud and malpractice as more fully alleged below.

(SAC ¶ 1.) The referenced attorney is Defendant Johal. Other defendants include
Johal’s former law firm, Hanson Bridgett; HLMS, LLC (“Hanson Bridgett”); Real Estate
Broker Zimmerman; and Zimmerman Land. Scofield identifies several others as
defendants in the SAC as well.

In the SAC, Scofield alleges, among other things, that:

Between 2002 and 2009, Johal represented Scofield and her then-frail, now deceased
mother. Scofield and her mother sought to obtain secure investments for their
retirement years, and Johal was aware of their financial goals.

In 2003, Johal, Zimmerman and others persuaded Scofield to use trust assets to invest
in Defendant Hammer Lane, an entity in which both men held interests. Johal,
Zimmerman and others misrepresented the many risks associated with the investment,
and they profited from unconscionable terms associated with it. They also concealed
the conflicts of interest inherent in the joint venture between them, on the one hand,
and their client Scofield, on the other. The defendants induced Scofield to gift and
assign her interest (as trustee) in the investment to them.

In addition, in exercising a put/option agreement included as part of the investment,
defendants induced Scofield to release part of her interest in the investment – acquired
with cash – in exchange for an interest in another entity in which Johal and others held
interests. Defendants embellished the other entity’s value as a means to induce the
exchange. Then Johal, Zimmerman and others induced Scofield to provide additional
cash to invest in the second entity. Again, the inducement was accompanied by
concealment of associated risks and conflicts of interest.

The investments encompassed the purported execution of various agreements
containing attorney fee-shifting provisions in case of resulting litigation. Both
investments have resulted in Scofield suffering serious monetary losses.

Relevant to the instant motion are Scofield’s allegations that, leading up to and during
the course of litigation in a related case in which Scofield was a defendant, Hammer
Lane R.V. & Mini-Storage, LP et al. v. HLMS, LLC, Sac. County Case No. 2008-23098
(“Related Case”), Johal advised her on litigation tactics and strategies. (He also
advised her to make two loans to Hammer Lane.) The Related Case, which Scofield
lost at trial and has taken up on appeal, involved allegations that she, Johal and other
limited partners in Hammer Lane wrongfully attempted to removed Hammer Lane’s
general partner and replace it with HMLS LLC, an entity controlled by Johal. (See
Stmt. of Decision dated 05/13/13.) As a result of her loss (along with Johal and others)
in the Related Case, there is a judgment against Scofield, jointly and severally, for
almost $700,000 in fees and costs.

Plaintiff argues that the pending proposed Third Amended Complaint (“TAC”) “adds
specifics to prayers for damage (to the 2nd and 3rd causes of action) based on the recent $690,000 judgment and $150,000 settlement, adds a new cause of action for
accounting against one of the Limited Partnerships and its managing general partner,
and makes corrections and other clarifications regarding the parties, their respective
roles in these transaction (and the wrongdoing), their relationships with one another,
and the damages claimed.” (Pl.’s Ps & As at 1.) Plaintiff clarifies that “no additional
parties” are added to the proposed TAC. (Id.) Plaintiff argues that no depositions
have yet been taken and that trial is “almost a year away,” such that no prejudice
would result from the requested amendments. (Id. at 2.)

Background
By way of background, this Court previously denied Plaintiff’s prior motion to file a
Third supplemental and amended pleading. This Court found that Plaintiff’s proposed
new fourteenth cause of action for equitable indemnity had not accrued because
Plaintiff had not alleged that she has actually paid anything toward the Related Case
judgment. The Court also found that Plaintiff’s proposed amended and supplemental
pleading improperly introduced entirely new causes of action rather than incorporating
new allegations into existing causes of action.

Legal Standard
“Any judge, at any time before or after commencement of trial, in the furtherance of
justice, and upon such terms as may be proper, may allow the amendment of any
pleading or pretrial conference order.” (Code Civ. Proc. § 576.) Further, a plaintiff
may be allowed to move for a supplemental complaint “alleging facts material to the
case occurring after the former complaint.” (Code Civ. Proc. § 464.) Finally, “in
furtherance of justice,” a court may “allow a party to amend any pleading . . . by
adding . . . the name of any party, or by correcting . . . a mistake in any other respect,”
and the court may allow “an amendment to any pleading . . . in other
particulars.” (Code Civ. Proc. § 473(a)(1).) “[T]here is a strong policy in favor of liberal
allowance of amendments.” (Mesler v. Bragg Mgmt. Co. (1985) 39 Cal.3d 290, 296;
Dye v. Caterpillar, Inc. (2011) 195 Cal.App.4th 1366, 1380.) “Although courts are
bound to apply a policy of great liberality in permitting amendments to the complaint at
any stage of the proceedings, up to and including trial, this policy should be applied
only where no prejudice is shown to the adverse party . . . .” (Magpali v. Farmers
Group (1996) 48 Cal.App.4th 471, 486-87 (citations and quotation marks omitted).)

Discussion
Here, Plaintiff represents (Pl.’s Ps & As at 3) that her proposed TAC makes “four basic
categories” of changes:

(1) adds “new allegations and prayers for relief for indemnity and declaratory relief
in the 3rd cause of action against CVM and the individual CVM attorneys
stemming from the $150,000 settlement of the Samra Malicious Prosecution
Case”
(2) adds “new allegations and prayers for relief for indemnity and declaratory relief
in the 2nd cause of action against Hanson Bridgett” and Johal “stemming from
the $150,000 settlement of the Samra Malicious Prosecution Case”
(3) adds “a new cause of action against Hammer Lane” and its managing general
partner Hammer Lane Management for an accounting (14th), “based largely on
the failure to provide certain books, records, and financial information to Plaintiff
as a limited partner” and
(4) clarifies and augments “several previously alleged matters such as the more
comprehensive allegation of the defendants’ aiding and abetting, alter ego
liability and conflicts of interest.”

While Plaintiff’s moving papers did not technically comply with Rule of Court 3.1324(a)
in that the papers did not state “by page, paragraph, and line number” where the
proposed additional allegations would be located, Plaintiff’s counsel’s declaration
attached a “redlined” draft TAC that substantially complies with this requirement.
Plaintiff’s briefing also substantially complied with California Rule of Court 3.1324(b)(3)
-(4), which requires the motion to be filed with a “supporting declaration” that “must
specify” “[w]hen the facts giving rise to the amended allegations were discovered;” and
“[t]he reasons why the request for amendment was not made earlier.” (Cal. Rule of
Court 3.1324(b)(3)-(4).) Plaintiff’s counsel’s declaration explains that voluminous
documents produced in discovery and the conclusion of the Hammer Lane and
Malicious Prosecution Cases prompted the pending motion. (Walker Decl. ¶¶ 13, 15,
16.) Defendants argue that Plaintiff’s counsel did not adequately explain the delay in
seeking the proposed amendments to and supplementation of the pleading, but the
Court finds these explanations sufficient. (See Mesler, supra, 39 Cal.3d at 296; Dye,
supra, 195 Cal.App.4th at 1380.)

The Court declines to deny the motion on grounds that various proposed amendments
could have been requested earlier. Discovery has not yet closed, this case is set for
trial commencing March 10, 2015, and no depositions have been completed. (Walker
Decl. ¶ 4; Pl.’s Ps & As at 2.) Plaintiff’s deposition has begun, but no other depositions
have yet been noticed. (Id. ¶ 4.) Accordingly, even accepting Defendants’ arguments
that Plaintiff could have made the requested amendments much earlier in these
proceedings, Defendants have not persuaded the Court that the requested
amendments will cause them actual prejudice or delay this case. (Hammer Lane’s
Oppo. at 7-8.)

For instance, Johal argues that the proposed TAC adds Panakosta LP as a defendant
(Johal Oppo. at 2-3 (citing proposed TAC at ¶¶ 42, 49)), but Plaintiff has clarified that
the proposed TAC does not add any new named defendants. Johal has not
persuaded the Court that mentioning Panakosta LP in the proposed TAC – but not
naming it as a defendant – will cause prejudice. Similarly, Zimmerman has not
persuaded the Court that mentioning Diversified Foundation LP in the proposed TAC –
but not naming it as a defendant – will cause prejudice. (Zimmerman Oppo. at 2-4.)
That the proposed TAC may envision potential alter ego theories of liability does not
mean that those theories will be proven at trial or on summary judgment; nor does it
mean that the proposed amendments are prejudicial.

Concerns that the additions to the pleading will necessitate additional discovery (Johal
Oppo. at 3-4) do not reveal significant prejudice in this particular case: again,
discovery is not closed and only Plaintiff’s deposition has commenced. Moreover,
various Defendants argue that the proposed TAC contains duplicative allegations (e.g.,
Johal Oppo. at 4); if so, discovery on the “duplicative” issues will not need to be
repeated. Similarly, while some of the proposed amendments may be repetitive and
others may not be absolutely necessary, Defendants have not shown that proposed
additional allegations can be allowed only if they are not repetitive and absolutely
necessary. While the proposed TAC renumbers paragraphs in the prior pleading,
which may cause some confusion with respect to discovery responses that specifically
reference paragraphs of the prior pleading, Defendants have not persuaded the Court
that this potential for confusion gives causes the sort of prejudice that outweighs the
“strong policy in favor of liberal allowance of amendments.” (See Mesler, supra, 39 Cal.3d at 296; Dye, supra, 195 Cal.App.4th at 1380.)

Hanson Bridgett argues that the proposed “declaratory relief” allegations to be inserted
at Paragraph 80 of the proposed TAC are an end-run around the Court’s Order of
March 18, 2014, which prohibited proposed “new” causes of action. However, the new
allegations in the current proposed TAC do not state a new cause of action for
“declaratory relief;” they seek a remedy for an already-alleged cause of action for
malpractice by Hanson Bridgett. (Proposed TAC ¶ 80 (seeking, as a prayer for relief
on the Second Cause of Action (Malpractice), a “declaration of the parties’ respective
rights and obligations concerning the parties’ liability for the $689,871.60 Judgment
entered against Plaintiff . . . in the Hammer Lane Lawsuit . . .”).) While the malpractice
cause of action in the SAC seeks to recover from Hanson Bridgett those fees and
costs Plaintiff incurred in connection with the Hammer Lane Lawsuit, the proposed
TAC now seeks to recover fees, costs, and a declaration that Hanson Bridgett must
reimburse Plaintiff for the amount of the judgment rendered against Plaintiff in that
lawsuit as an alleged result of Hanson Bridgett’s malpractice. (Proposed TAC ¶ 80.)
Neither Hanson Bridgett nor Zimmerman have shown that such amended requested
remedies are prohibited as a matter of law upon a successful malpractice claim. (E.g.,
Hanson Bridgett Oppo. at 8-9; Zimmerman Oppo. at 4-5.) In any event, Hanson
Bridgett and Zimmerman (and the other Defendants) may challenge the availability of
such relief by way of a demurrer or motion to strike, as appropriate.

While Defendants argue that the proposed TAC is an effort by Plaintiff to avoid current
outstanding discovery obligations and would “moot” the discovery disputes currently
pending before the discovery referee (Hanson Bridgett Oppo. at 3), Defendants have
not persuaded the Court that the proposed amendments would eviscerate all prior
discovery efforts, moot pending discovery disagreements, or result in the sort of
prejudice that warrants denying Plaintiff’s motion. As to the need for additional
discovery arising from the amended pleading, the Court anticipates that Plaintiff will
fully and promptly comply with discovery requests arising there from. If, however,
Plaintiff “cries foul” as Defendants anticipate (Hanson Bridgett Oppo. at 8), Defendants
are encouraged to remind the Court and the discovery referee about the timing and
content of Plaintiff’s proposed amended pleading. In light of the liberality with which
amendments to pleadings are to be granted, Defendants have not shown that
discovery concerns warrant denying the motion in its entirety.

Plaintiff’s proposed TAC seeks to supplement the pleading to insert a “new” fourteenth
cause of action for accounting as against Hammer Lane and Hammer Lane
Management. (Walker Decl. ¶ 12; Exh. A to Walker Decl (“Proposed TAC”) at 59-60.)
Plaintiff’s papers note that some events underlying this “new” cause of action occurred
after this action was initiated: in “February 2014,” when Defendant Hammer Lane
allegedly failed to produce books and records for Plaintiff’s inspection, but Plaintiff
explains that the “new” accounting “cause of action” actually seeks a new remedy for
already-alleged wrongs, i.e., those in the fourth, fifth, seventh, and twelfth causes of
action, which generally allege that as a result of fraud, Plaintiff invested significant
funds in Hammer Lane and now has nothing to show for it. (Pl.’s Ps & As at 4.) While
“a supplemental complaint may not introduce entirely new causes of action,” (Order of
March 18, 2014 (citing Flood v. Simpson (1975) 45 Cal.App.3d 644, 647; Gonzales v.
Arbelbide (1957) 155 Cal.App.2d 721, 727)), the proposed accounting “cause of
action” is not “entirely new;” it seeks a remedy for misconduct already alleged in the
SAC and is therefore “in furtherance and consistent with” the causes of action in the
current pleading. (Cf. Gonzales, supra, 155 Cal.App.2d at 726-27; see Kritzer v.
Lancaster (1950) 96 Cal.App.2d 1, 6-7 (holding that, where the allegations “show that
the defendant was the trusted agent of the plaintiff, acting in a fiduciary capacity, and
having for a long period of time the entire charge and control of plaintiff’s business, and
that by various kinds of misconduct which are specially described, defendant caused
losses and became liable in various sums of money, the true amounts of which cannot
be ascertained and determined without an accounting, there is sufficient ground for an
accounting in equity.”).)

Accordingly, Plaintiff’s motion is GRANTED.

Plaintiff shall file the proposed TAC in accordance with the foregoing on or before May
16, 2014.

Requests For Judicial Notice
Plaintiff’s Request for Judicial Notice (“RJN”), which attaches a prior court order in this
case, is GRANTED.

Defendants Samra, Kooyman, Hammer Lane, Hammer Lane Management, and
Samra Family Trust filed an RJN, which attaches various pleadings and court filings, is
GRANTED.

Defendants Zimmerman and Zimmerman Land’s RJN, which attaches court filings, is
GRANTED.

In taking judicial notice of these documents, the Court accepts the fact of their
existence, not the truth of their contents. (See Professional Engineers v. Dep’t of
Transp. (1997) 15 Cal.4th 543, 590 (judicial notice of findings of fact does not mean
that those findings of fact are true); Steed v. Department of Consumer Affairs (2012)
204 Cal.App.4th 112, 120-121.)

Objections to Evidence
Defendants Samra, Kooyman, Hammer Lane, Hammer Lane Management, and
Samra Family Trust filed objections to various portions of the Declaration of Plaintiff’s
counsel, M. Henry Walker. The objections are OVERRULED.

This minute order is effective immediately. No formal order or other notice is required.
(Code Civ. Proc. § 1019.5; California Rule of Court 3.1312.)