SBK HOLDINGS USA INC VS EDGAR SARGSYAN ET AL

Tentative Rulings

Case Number: BC649108 Hearing Date: November 8, 2021 Dept: 51

Background

Plaintiff’s Allegations

On September 27, 2016, Plaintiff Stuart Kaplan filed this action against defendants over a transaction related to an expensive watch gone awry. In the operative fourth amended complaint (4AC), filed September 7, 2018, Plaintiff alleges causes of action against Defendants Erik Grochowiak, LCGG Enterprises, LLC (“LCGG”), Danies Wong, Mario Alessandro Ciani, Alex Ciani, LLC, and Luxury Vintage Concept, Inc., related to multiple watch transactions, alleging two counts of conversion, two counts of replevin, two counts of fraud, two counts of negligent misrepresentation, three counts of breach of contract, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unfair competition, and violation of Penal Code section 496.

Plaintiff is a collector of expensive and rare watches. Grochowiak is a broker/dealer of expensive and rare watches and wholly owns LCGG. Plaintiff owns a particularly rare watch, which he purchased in 2013 for an auction bid-price of $521,960 (the “Subject Watch”). In addition to that watch, Plaintiff was the owner of over 20 other rare and expensive watches. For years, Plaintiff has purchased, sold, and repaired watches through Grochowiak. In 2016, Grochowiak agreed to attempt to sell the Subject Watch for Plaintiff on certain terms. Grochowiak represented that he had sold the Subject Watch to an overseas buyer through a Hong Kong broker of his, but did not identify the broker or buyer. Plaintiff demanded that Grochowiak produce proof he had sold the watch, but Grochowiak refused. Grochowiak did not close the sale by the deadline to do so and refused to return the Subject Watch.

Plaintiff rescinded all rights for Grochowiak to sell the Subject Watch in September 2016. Plaintiff reported the watch as stolen on September 30, 2016. Plaintiff alleges that Grochowiak conspired with Defendants Wong and Ciani to falsely represent that Wong was buyer and fabricated records to do so. Plaintiff alleges that they needed more time to market the watch to sell the watch at a much higher price (Plaintiff believes that the value of the Subject Watch is $1.2 million) and abscond with undisclosed profits while pressuring Plaintiff to part with the Subject Watch for a much lower price.

Grochowiak was also in possession of 20 other watches that Plaintiff owned. Plaintiff demanded the return of all of his watches. Grochowiak initially refused to do so, but eventually returned them. However, Grochowiak did not return three, which were sold without Plaintiff’s knowledge or permission. As to the remaining watches that Grochowiak did return, he did not return the boxes, the original certificates, or the original dust case with the boxes.

On June 8, 2021, Plaintiff filed two Doe amendments, substituting Doe 5 for Defendant Eric Ku and Doe 6 for Defendant Eric Ku, Inc. (“Ku Inc.”) (collectively, the “Ku Defendants.”)

On July 8, 2021, Plaintiff filed two notices of acknowledgment of receipt of the summons and complaint for the Ku Defendants. The notices were signed by Rebecca Wester on June 21, 2021.

Instant Motion to Quash by the Ku Defendants

On July 21, 2021, the Ku Defendants file a motion to strike and quash the Doe amendments. They argue that Plaintiff unreasonably delayed in filing the Doe amendments as Plaintiff had knowledge of the Ku Defendants two years ago. The allegations related to the Ku Defendants relate to a sale of a Cartier Crash white gold watch (the “White Crash”) that belonged to Plaintiff. Grochowiak brokered the sale of the White Crash to the Ku Defendants.

On October 22, 2021, Plaintiff filed an opposition. Plaintiff argues the following:

· The original complaint, filed on September 27, 2016, only concerned the Subject Watch.

· The first amended complaint, filed on February 14, 2017, was when a cause of action concerning the White Crash was first alleged, but Plaintiff did not know the identity of the buyer of the White Crash at the time.

· In January 2018, Plaintiff confirmed that the Ku Defendants were the buyers of the White Crash. In 2018, the Ku Defendants only produced documents suggesting that they were innocent purchasers.

· For two years, Plaintiff was in extensive discovery disputes with Grochowiak. In April 2021, two years after the court ordered a forensic examination, the forensic expert produced records regarding texts between Ku and Grochowiak that neither Grochowiak nor Ku had produced in discovery. Plaintiff argues that it did not have a reasonable basis for believing that Ku was involved in any fraud until those text messages.

Accordingly, Plaintiff argues that he did not unreasonably delay filing the Doe amendments and, even if he did, the Ku Defendants will not suffer prejudice from allowing the amendments.

On November 1, 2021, the Ku Defendants filed a reply.

Legal Standard

Quashing Doe Amendments for Unreasonable Delay

Code of Civil Procedure, section 474 provides in relevant part: “When the plaintiff is ignorant of the name of a defendant, he must state that fact in the complaint, or the affidavit if the action is commenced by affidavit, and such defendant may be designated in any pleading or proceeding by any name, and when his true name is discovered, the pleading or proceeding must be amended accordingly….” Cal. Civ. Proc. Code ; 474. A plaintiff must substitute in the name of the Doe defendant when the plaintiff learns the individual’s name and the facts giving rise to liability. E.g., Optical Surplus v. Superior Court (1991) 228 Cal.App.3d 776, 783-784 [recognizing that a plaintiff’s earlier knowledge of the facts giving rise to his or her claims bars a plaintiff from naming an individual as a Doe defendant]. A plaintiff need not be aware of “each and every detail” concerning a person’s involvement to be “aware of the facts implicating the defendant.” Dover v. Sadowinski (1983) 147 Cal.App.3d 113, 117-118 [recognizing that a plaintiff need not be aware of “each and every detail” concerning a person’s involvement to be aware of the facts implicating the defendant.]

A plaintiff cannot avail himself or herself of the Doe amendment procedure if he or she unreasonably delays in filing Doe amendments naming Doe defendants as parties. A.N. v. County of Los Angeles (2009) 171 Cal.App.4th 1058, 1064-1066.) In order to prevail on a motion to bar amendment under section 474 on grounds of unreasonable delay, a defendant “must show not only that the plaintiff was dilatory but also ‘that defendant suffered prejudice from any such delay.” Id. at p. 1066.

Dismissal for Delay in Serving Doe Amendments

Also relevant and related to this inquiry, but which the parties do not raise or address is California Code of Civil Procedure sec 583.210. That section requires that the summons and complaint be served upon a defendant within three years after the complaint is filed. Cal. Civ. Proc. Code ; 583.210(a). If service of the summons and complaint has not been served upon a defendant within the three-year statutory time period, the court shall dismiss the action—i.e., dismissal is mandatory. Cal. Civ. Proc. Code ; 583.250. “The three-year rule applies where the defendant seeking dismissal was served as a Doe defendant named in the original complaint, later amended to show his or her true name.” Inversiones Papaluchi S.A.S. v. Superior Court (2018) 20 Cal.App.5th 1055, 1061. Thus, “a plaintiff has three years from the date of filing the complaint to identify and serve a Doe defendant.” Ibid.

The Legislature has articulated four conditions that toll the time for service set forth in California Code of Civil Procedure ; 583.240, which states:

In computing the time within which service must be made pursuant to this article, there shall be excluded the time during which any of the following conditions existed:

(a) The defendant was not amenable to the process of the court.

(b) The prosecution of the action or proceedings in the action was stayed and the stay affected service.

(c) The validity of service was the subject of litigation by the parties.

(d) Service, for any other reason, was impossible, impracticable, or futile due to causes beyond the plaintiff's control. Failure to discover relevant facts or evidence is not a cause beyond the plaintiff's control for the purpose of this subdivision.

These conditions “must be construed strictly against the plaintiff.” Inversiones, supra, at p. 1061. For example, in Higgins v. Superior Court, the court held that the automatic stay triggered by co-defendant's filing of chapter seven bankruptcy petition applied only to that defendant, not to the nondebtor defendant at issue, and thus stay did not toll the three-year period for plaintiff to serve summons and complaint on the defendant. Higgins v. Superior Court (2017) 15 Cal.App.5th 973, 982.

Analysis:

First, the court finds that the Ku Defendants have a colorable argument that Plaintiff knew or should have known about the facts giving rise to his claim between 2017 and 2019. In the first amended complaint, Plaintiff alleges that “another of the watches Plaintiff entrusted to Grochowiak was a Cartier Crash White Gold dial marked London. Plaintiff believes this was a unique piece. Grochowiak represented to Plaintiff that he had a buyer for the Cartier Crash White Gold at $125,000 which, by Grochowiak’s representation and assessment, was a fair price. Based upon Grochowiak’s representation, Plaintiff consented to the sale despite having previously instructed Grochowiak to only sell … for $300,000.” (First Amended Complaint, ¶ 58.) Plaintiff, therefore, had the facts that gave rise to his claim since 2017, but had not yet identified the buyer then. Plaintiff admits that he discovered the buyer—the Ku Defendants—in early 2018. Further, Plaintiff deposed Ku in January 2019. The record, therefore, establishes that Plaintiff had notice of the facts on which Plaintiff based his claims in 2017, knew of the identity of the buyer in January 2018, and was able to depose Ku in January 2019 to discover further facts. These circumstances give some weight to the Ku Defendants’ argument that Plaintiff unreasonably delayed filing the Doe amendments on June 8, 2021, despite having knowledge of them between January 2018 and January 2019.

However, even if the court were to interpret the facts in a light that most favors Plaintiff—i.e., that Plaintiff did not have any suspicion that Plaintiff had any claims against the Ku Defendants related to the White Crash until April 2021—such that there was no unreasonable delay and no prejudice, Plaintiff would still not be able to overcome sections 583.210 and 583.250. Under those sections, Plaintiff had three years from filing the complaint to discover the identities of the Doe defendants and serve them. Plaintiff filed the complaint on September 27, 2016, which means that Plaintiff had until September 27, 2019, to serve the Doe defendants. Even if the court were to toll the accrual of this deadline until the date that Plaintiff filed the first amended complaint (February 14, 2017), when allegations relating to the White Crash first arose, Plaintiff’s deadline to serve the Doe defendants would be February 14, 2020.

Further, on the record before the court, none of the conditions under section 583.240 exist to toll this deadline. There is no evidence that:

· The Ku Defendants were not amenable to the process of the court. Cal. Civ. Proc. Code ; 583.240(a).

· The validity of service is the subject of litigation—there is no service contest here. Cal. Civ. Proc. Code ; 583.240(c).

· Service, for any other reason, was impossible, impracticable, or futile due to causes beyond the plaintiff's control. Civ. Proc. Code ; 583.240(d). As the statute expressly states, “[f]ailure to discover relevant facts or evidence is not a cause beyond the plaintiff's control for the purpose of this subdivision.” The entire basis of plaintiff’s opposition is that he could not discover facts or evidence sooner, which does not constitute impossibility, impracticability or futility under the statute.

The only other condition that may apply to toll the deadline is “[t]he prosecution of the action or proceedings in the action was stayed and the stay affected service.” Civ. Proc. Code ; 583.240(b). While the court finds that, under Higgins, the stay caused by the bankruptcy filings of the other co-defendants do not apply to toll Plaintiff’s deadline to serve, the stay of the action pending the resolution of the anti-SLAPP motion may apply. Otherwise, under ; 583.250, the court must dismiss this action as against the Ku Defendants for failure to serve them with the doe amendments within three years.

Conclusion

The court is inclined to GRANT the motion. However, the court will allow the parties to file a supplemental brief that does not exceed five pages on the discrete issues of (1) whether or not any stay related to the anti-SLAPP motion tolls the deadline to serve Doe defendants under section 583.240, and if yes, (2) by how many days (i.e., calculate the three-year deadline to serve Doe defendants after tolling).

The Ku Defendants to give notice.