2018-00238671-CU-FR

Michael Sullivan vs. Golden Coast Construction & Restoration

Nature of Proceeding: Motion to File 1st Amended Complaint

Filed By: Olson, Connor W.

Plaintiff Michael Sullivan’s (“Plaintiff”) motion for leave to file First Amended Complaint is GRANTED.

This 2018-filed action arises from Plaintiff’s former employment with Golden Coast Construction & Restoration (“Defendant” or “GCCR”) from August 2014 to January

2018. Plaintiff was a member of Defendant’s sales team who induced homeowners who experienced fire damage to their homes to enter into home improvement contracts covered under their homeowners’ policies. Plaintiff received commissions on all contracts he obtained. Plaintiff generally contends his commissions were improperly calculated.

On August 13, 2018, Plaintiff filed a complaint against Golden Coast Construction & Restoration (“Defendant” or “GCCR”) alleging the following eight causes of action: (1) breach of contract; (2) breach of covenant of good faith and fair dealing; (3) fraud; (4) negligent misrepresentation; (5) failure to pay wages, commissions and reimbursements; (6) rest period violations; (7) meal period violations; and (8) violation of Business & Professions Code § 17200 et seq.

Defendant fled a general denial on October 3, 2018 and a first round of discovery was propounded by each party. Defendant produced documents on or about November 2, 2018.

Plaintiff now seeks leave to file a First Amended Complaint to add Alex Kotyakov as a defendant, add certain allegations and modify others to conform to newly discovered evidence, and add a cause of action for accounting and a cause of action for violation of PAGA. Plaintiff contends the facts giving rise to the proposed amendments and the addition of Mr. Kotyakov as a defendant were recently discovered by comparing Defendant’s recent document production with documents previously produced by Mr. Kotyakov and documents obtained in November from Plaintiff’s former customers. (Olson Decl. ¶¶ 5-8.) Plaintiff contends the comparison revealed Mr. Kotyakov defrauded him by making improper deductions to his commissions and intentionally misrepresenting the numbers. Plaintiff contends these revelations warrant adding Mr. Kotyakov as a defendant and adding a cause of action for accounting. Plaintiff also contends he gave notice to the Labor Workforce Development Agency regarding his intent to bring a PAGA claim and more than 63 days have passed since he gave notice. (Olson Decl. ¶¶ 9-10.)

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. (Board of Trustees v. Super. Court (2007) 149 Cal. App. 4th 1154, 1163.) Moreover, Section 473 of the Code of Civil Procedure authorizes the trial court, in its discretion, to allow amendments in furtherance of justice. 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.) However, courts should not permit an amendment “where it would not serve any useful purpose.” ( Maple Properties v. Harris (1984) 158 Cal. App. 3d 997, 1012.) Additionally, although it is true that amendments to pleadings are to be granted with great liberality, it is equally well established that an unwarranted delay in seeking to amend is one valid ground on which to deny a motion to amend. (See, e.g., Huff v. Wilkins (2006) 138 Cal.App.4th 732, 736.)

In opposition, Defendant contends the motion should be denied because it fails to comply with California Rules of Court, Rule 3.1324, subsections (a) and (b). The Court rejects this argument. Plaintiff has provided a red lined comparison of the proposed amended complaint, which sufficiently identifies the proposed amendments and changes. Further, the Court finds the declaration of Connor W. Olson satisfies the

requirements of rule 3.1324(b).

Defendant then contends the motion should be denied because the proposed amendments “fail to state a claim.” These arguments are rejected at this stage of the proceedings. The validity of a proposed amendment is generally not considered in deciding whether to grant leave to amend. (California Casualty General Ins. Co. v. Superior Court (1985) 173 Cal.App.3d 274, 280-281.) As noted therein, such challenges to the pleadings are more properly addressed in a demurrer or a motion to strike rather than in an opposition to a motion to amend. It is axiomatic that “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., supra, 173 Cal.App.3d at 281.) Defendant is free to challenge the amended pleading by way of appropriate motion.

Defendant further contends the motion should be denied because Plaintiff unnecessarily delayed in seeking amendment. Defendant contends Plaintiff waited more than four months after filing the complaint to conform his complaint with his prior PAGA notice. The Court is not persuaded that there has been unwarranted delay sufficient to deny a motion to amend. On reply, Plaintiff explains he reached out to opposing counsel after the PAGA exhaustion period ran and sent counsel a proposed amended complaint, which added the cause of action to conform to his PAGA notice. After counsel would not stipulate to the amendment, Plaintiff waited a few weeks to obtain Defendant’s discovery responses to learn more about the fraud and Mr. Kotyakov’s role in it. Plaintiff then redrafted the proposed First Amended Complaint and moved for leave. (Olson Reply Decl. ¶ 3.) The Court finds the foregoing persuasive. It does not appear Plaintiff unduly delayed in seeking leave.

Defendant’s argument regarding prejudice is also unavailing. It must be observed that there must be undue prejudice. Prejudice is “undue” when it directly limits a defendant’s ability to develop facts to present a defense. Defendant has not set forth any limitation in its ability to counter the proposed amendment. The Court finds that there is no undue prejudice. Defendant generally contends the amendment will unnecessarily expand Plaintiff’s claims and will require Defendant to defend against unsubstantiated claims. 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.) As noted above, the validity of a proposed amendment is generally not considered in deciding whether to grant leave to amend. Further, that the claims will be expanded is insufficient to warrant a denial. This case is still in its infancy. No trial date has been set, no depositions have been taken, and there has been no motion practice besides this instant motion.

Judicial policy favors resolution of all disputed matters between the parties in the same lawsuit. Thus, the court’s discretion will usually be exercised liberally to permit amendment of the pleadings. See Nestle v. Santa Monica (1972) 6 Cal.3d 920,939; Mabie v. Hyatt (1998) 61 Cal. App.4th 581, 596 (citing text). Howard v. County of San Diego (2010)184 Cal.App.4th 1422, 1428.” California Civil Procedure Before Trial (2012, Rutter) § 6:638 – 6:339. Courts apply the policy of great liberality in permitting amendments to the complaint “at any stage of the proceedings, up to and including trial” absent prejudice to the adverse party. Atkinson v Elk Corp. (2003) 109 Cal.App.4

th 739, 761.

Pursuant to the policy of great liberality in permitting amendments, the Court finds the amendments are in furtherance of justice and Defendant will not be prejudiced by the filing of the FAC. Plaintiff’s motion is GRANTED.

Plaintiff to file and serve the FAC no later than January 22, 2019. Although not required by Court rule or statute, Plaintiff is directed to present a copy of this order when the FAC is presented for filing.

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