ARTS DISTRICT PATIENTS COLLECTIVE INC VS SERGIO TELLEZ ET AL

Tentative Rulings

Case Number: BC644345    Hearing Date: November 17, 2020    Dept: 36

Superior Court of California

County of Los Angeles

Department 36

Plaintiffs’ unopposed motion for leave to file a Second Amended Complaint is granted.

Discussion

Notice of Motion

“Unless otherwise ordered or specifically provided by law, all moving and supporting papers shall be served and filed at least 16 court days before the hearing.” (CCP § 1005(b).)

Plaintiffs have filed proof of service of Plaintiffs’ renewed motion showing all parties in the action, as well as parties to be added to the action by the proposed amended complaint, were served with the motion by overnight delivery, in some cases as well by email, on October 21, 2020. The motion is thus timely. (CCP § 1005(b).)

California Rules of Court, Rule 3.1324

Plaintiff moves to amend a pleading before trial. The moving papers must meet the following:

(1) Include a copy of the proposed amendment or amended pleading, which must be serially numbered to differentiate it from previous pleadings or amendments;

(2) State what allegations in the previous pleading are proposed to be deleted, if any, and where, by page, paragraph, and line number, the deleted allegations are located; and

(3) State what allegations are proposed to be added to the previous pleading, if any, and where, by page, paragraph, and line number, the additional allegations are located.

Additionally, a separate declaration 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.

Plaintiffs have satisfied the procedural requirements. Plaintiffs have included a copy of the proposed Second Amended Complaint (“SAC”). (Ehrlich Decl., Exh. A.) Plaintiffs have provided a redline comparison of the First Amended Complaint (“FAC”) with the proposed SAC. (Id. Exh. B.) Plaintiffs have summarized the major changes between the FAC and SAC. (Id. ¶ 3.) Plaintiffs’ counsel attests that the proposed amendments are necessary and proper because:

if they are not allowed, Plaintiffs will be prejudiced by a potential inability to adjudicate them in this action, especially to the extent that some of the cause of action may relate back to the original filing of this action. The amendments are necessary to afford Plaintiffs all the full and fair relief to which they are entitled. Deciding the proposed claims separately would also be inefficient. Moreover, would be no prejudice to any party from allowing the amendment because an initial trial has not yet been set in this action, and the Court can set that initial trial date sufficiently into the future that all parties will be able to conduct ample discovery and otherwise prepare their claims, defenses and appropriate dispositive motions. Moreover, this action has not been aggressively litigated during the time that the related Tellez v. Shaw action was pending, given the overlap between the causes of action at issue in that case, and those pled in the First Amended Complaint in this case.

(Ehrlich Decl. ¶ 4.) The court notes, however, that since Plaintiff’s prior motion seeking leave to file an amended complaint, dates have been set for a Final Status Conference and Jury Trial for April 6 and April 13, 2021.

Counsel attests that the facts giving rise to the proposed amendment were discovered after the June 2019 judgment in the related Tellez v. Shaw case, at which point Counsel asserts Mr. Tellez “flouted the Judgment by attempting to install Tellez as the sole shareholder, sole Director, and the Chief Executive Officer of Arts District Patients’ Collective, and to exclude Shaw from playing any role in the business . . . .” (Id. ¶ 5.) Counsel attests the request for amendment was not made earlier because the facts giving rise to almost all of the new allegations did not arise until that point. (Id. ¶ 6.)

Proposed Amendments

Plaintiffs summarize the proposed changes in the Second Amended Complaint as the following:

a. Entirely revised background facts to avoid repetition of, or pleading facts already adjudicated in the Tellez v. Shaw case, and to state the new facts supporting the revised and newly alleged causes of action.

b. The addition of Derivative Action and conspiracy allegations.

c. New causes of action for: (i) Derivative Cause of Action for Preliminary & Permanent Injunction / Removal of Officer / Director; (ii) Derivative Cause of Action for Appointment of Provisional Director; (iii) Derivative Cause of Action for Breach of Fiduciary Duty; (iv) Revised Direct Cause of Action for Breach of Fiduciary Duty based on post-Judgment status of parties; (v) Derivative Cause of Action for Aiding and Abetting Breach of Fiduciary Duty based on post-judgment aiding and abetting facts; (vi) Derivative Cause of Action for Unfair Competition based on post-judgment conduct; (vii) New direct cause of action for breach of Oral Contract found to exist in the Jury Verdict in the Tellez v. Shaw case; (viii) revised and Derivative cause of action for Identity Theft based on new and ongoing violations; (ix) Derivative Cause of Action for Accounting based on ongoing misappropriation of assets that must be traced and accounted for; (x) Derivative cause of action for Conversion based on ongoing and post-judgment conversion of assets belonging to ADPC and /or Shaw; (xi) new Derivative cause of action for Unjust Enrichment; (xii) new Direct Cause of Action for Tortious Interference With Prospective Economic Advantage, based on Tellez costing Shaw other business opportunities by is illegal conduct.

D. Removal of former causes of action for Breach of Written Contract (moot); Declaratory Relief regarding interpretation of the Management Transfer Agreement (“MTA”) (moot); Negligence; Breach of Implied Covenant of Good Faith and Fair Dealing regarding the MTA (moot); and separate cause of action for Conspiracy.

(Ehrlich Decl. ¶ 3; see id. Exh. B (redlined proposed amended complaint).)

Prejudice

“The court may, in furtherance of justice, and on any terms as may be proper, allow a party to amend any pleading . . . .” (CCP § 473(a).) “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.” (CCP § 576.)

Courts should “exercise liberality” in permitting amendments at any stage of the proceeding. (See, e.g., Klopstock v. Superior Court (1941) 17 Cal.2d 13, 19; Permalab–Metalab Equipment Corp. v. Maryland Cas. Co. (1972) 25 Cal.App.3d 465, 472.) Leave to amend is liberally granted, because judicial policy favors resolution of all disputed matters between the parties. (Kolani v. Gluska (1998) 64 Cal.App.4th 402, 412.)

“The trial court has discretion to permit or deny the amendment of the complaint, but instances justifying the court’s denial of leave to amend are rare.” (Armenta ex rel. City of Burbank v. Mueller Co. (2006) 142 Cal.App.4^th 636, 642.) The court may deny leave to amend if there is prejudice to the opposing party, such as delay of trial, an increased burden of discovery, loss of critical evidence, or added costs of preparation. (Solit v. Tokai Bank (1999) 68 Cal.App.4^th 1435, 1448.)

There is no opposition by any of the parties in this action nor by those proposed to be added as parties to this action. As such, there is no argument or evidence in support of prejudice suffered by any opposing party. The Final Status Conference and Jury Trial are presently set for April 6 and April 13, 2021.

Based on the foregoing, Plaintiffs’ motion is granted.

Dated:

____________________________

Gregory Alarcon

Superior Court Judge

Case Number: BC644345    Hearing Date: October 05, 2020    Dept: 36

Superior Court of California

County of Los Angeles

Department 36

Hearing on Plaintiffs’ motion for leave to file a Second Amended Complaint is continued for 45 days for Plaintiff to perfect service of process on named and proposed defendants in this action.

Notice of Motion

“Unless otherwise ordered or specifically provided by law, all moving and supporting papers shall be served and filed at least 16 court days before the hearing.” (CCP § 1005(b).)

Plaintiffs’ notice of motion shows that Plaintiffs served copies of the motion on Mr. Andrejich by service on Mr. Carroll, counsel of record; Polo Capital and Consulting, LP, by service on Mr. Tellez; Mr. Tellez, dba Specialized Development, by service on Mr. Tellez; and Spliffin Hardware Incorporated. There is no showing that Defendant California Institute of Cannabis, Inc. has been served with the motion; nor The Spliffin Group, a California Non-Profit Mutual Benefit Corporation. The proposed amended motion names Polo Capital and Consulting, LLC, as a defendant, and there is no showing that the amended complaint has been served on this proposed defendant. Furthermore, Specialized Development, Inc. is not named as a dba in this action.

The court granted a motion to be relieved as counsel on October 18, 2019, relieving Michael O. Azat and Issa Azat, Jr., The Azat Law Group, as counsel of record for Defendants Sergio Tellez, Nick Andrejich, Specialized Development, Inc., California Institute of Cannabis, Inc, Spliffin Group, Inc. and Spliffin Hardware, Inc. The most recent filing from Defendants, a proof of service dated October 23, 2019, lists Michael O. Azat and Issa Azat, Jr., The Azat Law Group, as attorney for Defendants Sergio Tellez, Nick Andrejich, Specialized Development, Inc., California Institute of Cannabis, Inc, Spliffin Group, Inc. and Spliffin Hardware, Inc.

Based on the foregoing, notice of the motion was improper. Hearing on the motion is continued for 45 days for Plaintiffs perfect service of the motion on the named and proposed defendants in this action.

Dated:

____________________________

Gregory Alarcon

Superior Court Judge