Case Name: Anupam Sahai v. Aegify, Inc.
Case No.: 2018-CV-327834

Demurrer to the First Amended Complaint by Defendant Aegify, Inc. and Motion for Leave to File a Second Amended Complaint by Plaintiff Anupam Sahai

Factual and Procedural Background

This is an action for unpaid wages. In August 2009, plaintiff Anupam Sahai (“Plaintiff”), Chandra Bilugu, and Sayi Tigadi co-founded eGestalt Technologies (“eGestalt”), a California corporation. (First Amended Complaint [“FAC”] at ¶ 6.) In March 2015, eGestalt merged with a shell Delaware entity and it was renamed Aegify, Inc. (“Aegify”). (Ibid.) Plaintiff served in a number of executive roles at Aegify, including periods as its President and CEO. (Id. at ¶ 9.) Plaintiff also maintained a 40% ownership interest in the corporation. (Id. at ¶ 10.)

Per Aegify’s February 1, 2010 offer letter, Plaintiff was entitled to $16,666.70 per month in salary. (FAC at ¶¶ 7, 15.) However, in November 2011, Aegify allegedly stopped paying Plaintiff’s monthly salary in full. (Id. at ¶ 11.) Instead, Aegify began deferring Plaintiff’s salary and held these unpaid amounts on its books as owed but unpaid salary (collectively, “Deferred Salary”). (Ibid.) Aegify terminated Plaintiff’s employment on July 11, 2016. (Id. at ¶¶ 12, 17.) At the time of Plaintiff’s termination, Aegify owed Sahai $912,438.74 in Deferred Salary. (Id. at ¶ 18.) Aegify did not pay the Deferred Salary at the time of Plaintiff’s termination or at any time thereafter. (Ibid.)

On May 10, 2018, Plaintiff filed the operative FAC against Aegify alleging causes of action for: (1) breach of written contract; (2) failure to pay wages at termination, Cal. Labor Code, § 203; and (3) unfair competition, Cal. Bus. & Prof. Code, § 17200.

The following motions are currently before the Court: (1) Aegify’s demurrer to the FAC; and (2) Plaintiff’s motion for leave to file a Second Amended Complaint (“SAC”). Aegify submitted requests for judicial notice in conjunction with the motions. Both sides filed written oppositions and reply papers.

Motion for Leave to File SAC

Plaintiff moves to file a SAC in order to: (1) add eGestalt as a defendant; (2) clarify the relationship between the defendant entities; (3) clarify the facts supporting his allegation of equitable estoppel; and (4) add a cause of action for account stated.

Aegify’s Request for Judicial Notice

In opposition, defendant Aegify filed a request for judicial notice of the following: (1) a true and complete copy of the Statement of Information for 2017 filed with the Secretary of State of California on April 10, 2017 as document number FK98631 (Exhibit A); and (2) a true and complete copy of the Statement of Information for 2018 filed with the Secretary of State of California on May 14, 2018 as document number FW74894 (Exhibit B). Here, the Court may take judicial notice of Exhibits A and B as records from the Office of the Secretary of State under Evidence Code section 452, subdivision (c). (See Pedus Building Services, Inc. v. Allen (2002) 96 Cal.App.4th 152, 156 [granting request for “judicial notice of the official records of the California Secretary of State confirming that Pedus is a California Corporation with its principal place of business in Monterey Park, California” on the basis of Evidence Code § 452, subdivision (c)]; see also Gamet v. Blanchard (2001) 91 Cal.App.4th 1276, 1286-1287 [granting request for judicial notice of Secretary of State’s domestic corporation certificate of filing and suspension pertaining to corporate status of ASI].)

Accordingly, the request for judicial notice is GRANTED.

Legal Standard

“[A] motion to permit an amendment to a pleading to be filed is one addressed to the discretion of the court.” (Morgan v. Super. Ct. (1959) 172 Cal.App.2d 527, 530 (Morgan).) “[C]ourts are bound to apply a policy of great liberality in permitting amendments to [a pleading] at any stage of the proceedings, up to and including trial.” (Atkinson v. Elk Corp. (2003) 109 Cal.App.4th 739, 761.) “[I]t is a rare case” in which a court will be justified in denying a party leave to amend his or her pleadings. (Morgan, supra, 172 Cal.App.2d at p. 530.) “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 and where the refusal also results in a party being deprived of the right to assert a meritorious cause of action or a meritorious defense, it is not only error but an abuse of discretion.” (Ibid.)

A motion to amend a pleading before the trial court must include a copy of the proposed amendment or amended pleading. (Cal. Rules of Court, rule 3.1324(a)(1).) A separate declaration must also accompany the motion and must specify: (1) the effect of the amendment; (2) why the amendment is necessary and proper; (3) when the facts giving rise to the amended allegations were discovered; and (4) the reasons why the request for amendment was not made earlier. (Cal. Rules of Court, rule 3.1324(b)(1) – (4).)

Analysis

In support of the motion, Plaintiff submitted a declaration from counsel attaching a proposed SAC. (See Declaration of Dhaivat H. Shah at Exhibit G.) According to counsel’s declaration, Plaintiff seeks to amend to add allegations regarding Aegify’s actions with respect to the Deferred Salary over time. (Id. at ¶ 10, subd. (a).) Such allegations are necessary to show that Aegify is equitably estopped from asserting the statute of limitations defense. (Ibid.) The proposed amendment also adds eGestalt as a defendant and explains the relationships between the different entities. (Id. at ¶ 10, subd. (b).) These changes are to ensure that the action is directed against the proper parties. (Ibid.) Finally, the proposed amended pleading seeks to add a cause of action for account stated as the underlying facts of this case support such a claim. (Id. at ¶ 10, subd. (c).) Plaintiff realized the need for this cause of action following the filing of the current FAC. (Ibid.)

In opposition, defendant Aegify does not argue that any such amendments will result in prejudice. Rather, Aegify asserts the proposed SAC was brought in bad faith, still fails to state any valid cause of action, and remains subject to the defense of statute of limitations. Defendant Aegify however can raise these arguments in a pleading challenge by way of demurrer or motion for judgment for pleadings to the SAC. (See Kittredge Sports Co. v. Super. Ct. (1989) 213 Cal.App.3d 1045, 1048 [“even if the proposed legal theory is a novel one, the preferable practice would be to permit the amendment and allow the parties to test its legal sufficiency by demurrer, motion for judgment on the pleadings or other appropriate proceedings”]; California Casualty Gen. Ins. Co. v. Super. Ct. (1985) 173 Cal.App.3d 274, 281 [disapproved on other grounds in Kransco v. American Empire Surplus Lines Ins. Co. (2000) 23 Cal.4th 390] [same].) At such time, the Court can determine whether Plaintiff has stated a valid cause of action in the SAC.

Therefore, the motion for leave to file a SAC is GRANTED. Plaintiff’s SAC shall be filed and served within 15 days of notice of entry of the order. Answer to the SAC shall be filed according to the Code after service of the SAC. Given the Court’s ruling on the motion, the demurrer to the FAC is MOOT.

The Court will prepare the Order.