2009-00037027-CU-CO

City of Sacramento vs. Beazer Homes Holdings Corp

Nature of Proceeding: Motion to File Amended Answer

Filed By: Koltun, Gregory B.

Defendant Alleghany Properties, LLC’s (“Alleghany”) Motion for Leave to Amend
Answer is ruled upon as follows.

This an action to determine the distribution of $1,519,331 in “Drainage Fees” collected
by the City of Sacramento in connection with drainage improvements constructed in a
drainage basin known as “Shed 6” in the North Natomas area of Sacramento. Both
Alleghany and Defendant Beazer Homes Holding Corp. (“Beazer”) claim they are
entitled to reimbursement of a portion of the fees under agreements with the City. The
City interpleaded the disputed funds with the court, and the Defendants stipulated to
the City’s dismissal from the action.

Alleghany now moves for leave to amend its answer to allege that Beazer is barred
from seeking reimbursement because it failed to competitively bid in accordance with
its Drainage Agreements with the City. Alleghany argues that on August 13, 2013, it
took the deposition of the person most knowledgeable (“PMK”) from Beazer regarding
“City of Sacramento requirements for competitive bidding of drainage improvements and whether the contracts for work performed by or on behalf of, Beazer under the
Drainage Agreements were awarded based on competitive bidding procedures.”
Alleghany contends that Beazer’s representative testified that the procedure Beazer
generally utilizes to competitively bid work was not sued in the construction of its
drainage improvements in Shed 6. Alleghany argues this was the first time Alleghany
received confirmation that Beazer had failed to competitively bid its construction work.
(Koltun Decl. ¶2.) Alleghany asserts that it requested that Beazer stipulate to
Alleghany filing an amendment to its answer adding a defense based on Beazer’s
failure to competitively bid, but Beazer did not respond.

Beazer first opposes the motion on the grounds that Alleghany failed to comply with
Rule of Court 3.1324(b). That rule states that a supporting declaration must
accompany a motion for leave to amend 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. (C.R.C. 3.1324(b).) Beazer argues that
Alleghany’s counsel represents the testimony at the August 13, 2013 PMK deposition,
and thus fails “to provide an objective and accurate recitation of the facts upon which it
relies” in making the instant motion. (Opp. 7:14-15.) However, while Beazer may
dispute the validity of Alleghany’s contention that it first learned of Beazer’s alleged
failure to competitively bid at the August 13, 2013 deposition, the declaration of
counsel is sufficient to satisfy the technical requirements of Rule 3.1324.

Beazer next contends that Alleghany has unreasonably delayed bringing the instant
motion because it has been on notice of issues relating to Beazer’s competitive
bidding for at least several months. Beazer argues that in March of 2012, Alleghany
propounded requests for production of documents that included requests specifically
directed to the question of whether Beazer had complied with its purported competitive
bidding requirements. Beazer asserts that it produced responsive documents in July of
2012, and thus Alleghany could have sought leave to amend at that time if it believed
Beazer failed to comply with the competitive bidding requirements. Beazer also argues
Alleghany could have sought to amend its answer in June of 2013 after the deposition
of the City’s three PMKs, as Alleghany’s questions to the deponents included the topic
of Beazer’s compliance with competitive bidding requirements.

Beazer further argues that it will be substantially prejudiced if Alleghany is permitted to
amend its answer. Beazer contends that non-expert discovery has closed, and Beazer
will therefore have only limited opportunity to conduct discovery into Alleghany’s
defense. Beazer also notes that trial in the action is set for November 18, 2013, and
that if Alleghany’s motion is granted, the trial must be continued. Additionally, Beazer
contends that Alleghany has indicated it has retained an expert to discuss Beazer’s
alleged non-compliance with competitive bidding requirements, and that “it would be
unreasonable to require Beazer to now attempt to retain one on its own.” (Opp. 10:13-
14.)

Beazer’s remaining arguments to the merits of the proposed affirmative defense, which
are not properly decided on this motion.

On reply, Alleghany responds that it has not unduly delayed seeking leave to amend
its answer. Alleghany argues that although it propounded discovery concerning the
issue of competitive bidding in March of 2012, the parties were attempting to settle the
action “well into 2013.” (Reply 4:21-22.) Alleghany also contends that although it
deposed the City’s PMK’s regarding Beazer’s compliance with competitive bidding
requirements, the deponents did not know whether Beazer competitively bid in
connection with the Shed 6 construction, and the bidding could have been done
without the City’s knowledge. Alleghany contends that it is undisputed that the August
13, 2013 deposition of Beazer’s representative was the first time that anyone from
Beazer confirmed a lack of knowledge whether competitive bidding took place.
Alleghany also contends that Beazer will not be prejudiced if the amendment is
permitted because Beazer is in possession of the information necessary to evaluate its
own competitive bidding. Additionally, Alleghany argues that Beazer has offered no
reason why it will be unable to designate a rebuttal expert witness within the statutory
deadlines.

Section 473 of the Code of Civil Procedure authorizes the trial court, in its discretion, to
allow amendments in furtherance of justice. It is well established that California courts
have a policy of great liberality in allowing amendments at any stage of the proceeding
so as to dispose of cases upon their substantial merits where the authorization does
not prejudice the substantial rights of others. The policy of great liberality in permitting
amendments at any stage of the proceeding has been declared by our courts. (
Klopstock v. Superior Court, (1941) 17 Cal.2d 13, 19-20.) Indeed, it is a rare case in
which “a court will be justified in refusing a party leave to amend his or her pleading so
that he or she may properly present his or her case. Thus, absent a showing of
prejudice to the adverse party, the rule of great liberality in allowing amendment of
pleadings will prevail. (Board of Trustees v. Superior Court (2007) 149 Cal. App. 4th
1154, 1163.) “Moreover, it is irrelevant that new legal theories are introduced as long
as the proposed amendments relate to the same general set of facts.” (Kittredge
Sports Co. v. Superior Court (1989) 213 Cal.App.3d 1045, 1048, quotations, citations
omitted.)

Here, the Court cannot conclude that Beazer has demonstrated it will be subject to
significant prejudice if the amendment is allowed. Alleghany has indicated it will agree
to continue the trial date if Beazer requires additional time to respond to the additional
defense.

The motion for leave to amend the answer is granted. Alleghany shall file the proposed
amended answer no later than October 28, 2013.

The minute order is effective immediately. No formal order pursuant to CRC Rule
3.1312 or further notice is required.