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JOHNNY D. KNADLER (SBN 220942)
1 LAW OFFICE OF JOHNNY D. KNADLER
1527-E Pershing Drive
2 San Francisco, CA 94129 ELECTRONICALLY
Telephone: (310) 564-6695
3 Facsimile: (888) 323-0611 F I L E D
Superior Court of California,
Email: jdknadler@gmail.com County of San Francisco
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03/22/2021
5 Attorneys for Plaintiff Clerk of the Court
BY: YOLANDA TABO-RAMIREZ
SYNERGY PROJECT MANAGEMENT, INC. Deputy Clerk
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SUPERIOR COURT OF THE STATE OF CALIFORNIA
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IN AND FOR THE COUNTY OF SAN FRANCISCO
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SYNERGY PROJECT MANAGEMENT, Case Nos. CGC-17-560034, CGC-19-576488
10 INC., (Consolidated)
11 Plaintiff,
PLAINTIFF SYNERGY PROJECT
12 vs. MANAGEMENT, INC.’S REPLY
MEMORANDUM OF POINTS AND
13 CITY AND COUNTY OF SAN FRANCISCO, AUTHORITIES IN SUPPORT OF
LONDON BREED, MOHAMMED NURU, MOTION FOR LEAVE TO FILE
14 FOURTH AMENDED
Defendants. COMPLAINT AND FIRST
15 ______________________________________ AMENDED CROSS-COMPLAINT
16 GHILOTTI BROS., INC., a California
Corporation,
17 Date: March 26, 2021
Plaintiff, Time: 9:30 a.m.
18 Dept: 302
19 vs, Complaint filed: July 10, 2017
20 SYNERGY PROJECT MANAGEMENT,
INC., a California Corporation, and
21 DOES 1-30,
Defendants.
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______________________________________
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24 SYNERGY PROJECT MANAGEMENT, a
California Corporation,
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Cross-Complainant,
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SYNERGY’S REPLY ISO MOTION FOR LEAVE 1 Case Nos. CGC-17-560034, CGC-19-576488,
TO FILE FOURTH AMENDED COMPLAINT (consolidated)
27 AND FIRST AMENDED CROSS-COMPLAINT
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1 vs.
2 GHILOTTI BROS, INC., a California
Corporation, and ROES 1-20,
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Cross-Defendants.
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SYNERGY’S REPLY ISO MOTION FOR LEAVE 2 Case Nos. CGC-17-560034, CGC-19-576488,
TO FILE FOURTH AMENDED COMPLAINT (consolidated)
27 AND FIRST AMENDED CROSS-COMPLAINT
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1 MEMORANDUM OF POINTS AND AUTHORITIES
2 I. INTRODUCTION
3 The fundamental facts of Synergy Project Management, Inc’s (“Synergy”) motion for
4 leave to amend, and the controlling law applicable to these facts, are straight forward. In its
5 motion for leave to amend its complaint, Synergy demonstrated that:
6 1. Over the course of 2020, Synergy discovered facts giving rise to valid claims arising
7 out of the facts that form the basis for this case;
8 2. Synergy did not have grounds to allege these claims until December 2020, and
9 Synergy moved to amend one month later,
10 3. Synergy’s proposed new claims are not presented in Synergy’s pending appeal,
11 because they are based on facts revealed after that appeal was taken, and
12 4. In contrast, this court has jurisdiction over these claims, because they arise out of the
13 same facts of this case.
14 Application of California law to these facts dictates as straightforward conclusion: Consistent
15 with the court’s policy favoring leave to amend and the resolution of disputes on the merits,
16 Synergy’s motion to amend its complaint should be granted.
17 The facts and law governing Synergy’s proposed amended cross-complaint likewise are
18 straightforward. In its opening brief, Synergy demonstrated that over the course of 2020 and
19 2021, Synergy discovered that:
20 1. The damages Ghilotti Bros., Inc. (“GBI”) seeks to recover in its complaint against
21 Synergy, are based on the same work that GBI and the City previously approved;
22 2. At the same time GBI was purporting to oppose Synergy’s removal and replacement
23 from the Haight Street Project, GBI's president and treasurer, Michael Ghilotti,
24 unbeknownst to Synergy, was surreptitiously meeting with Nuru to plot Synergy’s
25 removal (PFACC, 31-32);
26
SYNERGY’S REPLY ISO MOTION FOR LEAVE 3 Case Nos. CGC-17-560034, CGC-19-576488,
TO FILE FOURTH AMENDED COMPLAINT (consolidated)
27 AND FIRST AMENDED CROSS-COMPLAINT
28
1 3. That GBI and Mohammed Nuru facilitated GBI’s claims against Synergy in this case,
2 by manipulating and mischaracterizing the Haight Street Project plans and records
3 (PFACC, 47); and
4 4. That GBI and its principal, Mike Ghilotti, were “friends of” Nuru and the “City
5 Family”, and contributors to the “friends” organizations created by Nuru and other
6 government officials identified as vehicles for abuse and corruption by the City
7 Attorney and City Controller post-scandal reports (PFACC, ¶51);
8 In its opposition, GBI does not confront these facts. Instead, GBI employs a “Wizard of Oz”
9 defense, that encourages this Court to pay no attention to the relevant facts and law applicable to
10 motions to amend, but to focus instead on GBI’s depiction of other proceedings, and GBI’s
11 contention that Synergy’s prosecution of its appeal in federal court, and the claims and issues
12 that appeal presents, render Synergy’s presentation of valid claims over which this Court has
13 jurisdiction somehow illicit. To support these contentions and inferences, GBI relies on a stream
14 of erroneous statements, half-truths, and omissions. Although these misstatements are various,
15 and take some time to unpack, correction of these misstatements leave the fundamental facts and
16 law before this court undisturbed.
17 Synergy propounded discovery directed to the above-described facts and claims during fact
18 discovery in this case, but was thwarted, in significant part by GBI, which did not deny it
19 possessed undisclosed communications with Nuru regarding Synergy and the Haight Street
20 Project, or its donations to organizations Nuru used to launder bribes and kickbacks, but refused
21 to produce them, hoping that the impending discovery deadline would prevent Synergy from
22 enforcing this discovery.
23 That effort failed. On March 19, 2021, the Superior Court granted Synergy’s motion to
24 continue the trial, and to pursue the discovery it promulgated directed to its pending and
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SYNERGY’S REPLY ISO MOTION FOR LEAVE 4 Case Nos. CGC-17-560034, CGC-19-576488,
TO FILE FOURTH AMENDED COMPLAINT (consolidated)
27 AND FIRST AMENDED CROSS-COMPLAINT
28
1 proposed claims, including the discovery GBI has withheld. Trial is now set for August 23,
2 2021, and presents no obstacle to a resolution of Synergy’s claims on the merits.
3 Synergy’s motion to amend should be granted.
4 II. ARGUMENT
5 GBI devotes the majority of its opposition to a fusillade of contentions about the
6 procedural history of this case, and the pending federal appellate proceeding, and various other
7 issues collateral to Synergy’s motion for leave to amend its complaint and cross-complaint.
8 Synergy can and does refute each and everyone one of these statements and contentions below.
9 But, first, Synergy will address the issues actually presented by Synergy’s motion to amend, and
10 the grounds why Synergy’s motion should be granted, which GBI fails to reasonably contest.
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A. Synergy’s Motion for Leave to File its Fourth Amended Complaint Should Be
12 Granted
13 1. Synergy’s Proposed First Amended Complaint States Valid Claims over
Which This Court Has Jurisdiction
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In its proposed Fourth Amended Complaint (“PFAC”), Synergy seeks to add the
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following claims: (1) Conspiracy to violate civil rights, pursuant to 42 U.S.C. § 1983 [PFAC
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count 5]; (2) Racketeering and (3) racketeering conspiracy, pursuant to 42 U.S. C. § 1962
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(PFAC counts 9 and 10); and (4) Fraudulent Concealment. See Synergy’s Memorandum of
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Points and Authorities in Support of Motion to for Leave to File Fourth Amended Complaint
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(“Opening Brief”), and PFAC Declaration of Johnny D. Knadler in Support of Motion for Leave
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to File Fourth Amended Complaint and First Amended Cross-Complaint (“Knadler Decl.”), Ex.1
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(counts 5, 8-10).
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GBI does not dispute that these claims are well pled (i.e., not futile), arise out of the facts
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that form the basis for this action, and are not presented in Synergy’s pending appeal before the
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Ninth Circuit. GBI could not, for simple reasons. Each of the elements for these claims is met.
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And this court has jurisdiction of these claims, because they arise out of the same events that
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SYNERGY’S REPLY ISO MOTION FOR LEAVE 5 Case Nos. CGC-17-560034, CGC-19-576488,
TO FILE FOURTH AMENDED COMPLAINT (consolidated)
27 AND FIRST AMENDED CROSS-COMPLAINT
28
1 form the basis for Synergy’s original and operative complaints. See Opening Brief, at 11-16. And
2 because each of these claims is based on facts disclosed and discovered by Synergy after its
3 appeal was taken, neither these claims, nor the facts upon which they are based, is presented in
4 that appeal.1 See Opening Brief, at p. 14, lines 7-14.
5 Critically, GBI does not dispute that Synergy’s proposed new claims presented here are
6 not the same claims proposed in its previous proposed Fourth Amended Complaint, submitted to
7 the federal district court, the merits of which the district court did not reach. Instead, GBI asserts
8 only that Synergy’s proposed FAC here is “nearly” the same, as if this observation was probative
9 to the determination of Synergy’s motion to amend. See Op., at p.7 But the GBI’s use of word
10 “nearly” merely reflects GBI’s effort to avoid acknowledging that there are differences. And the
11 differences are not only material – they are the basis for Synergy’s new claims, and the reason
12 why this court has jurisdiction to consider them.2 See Opening Brief, at pages 11-16, specifying
13 the new facts in Synergy’s PFAC, and explaining that these facts are not present in the proposed
14 Fourth Amended Complaint on appeal, as they concern events discovered after the appeal was
15 taken.)
16 Rather than confront these facts, GBI pretends they don’t exist. Thus, GBI asserts
17 that:
Synergy does not explain why it sat on its hands and waited until the eve of trial
18 to assert its proposed amended claims against GBI”. Nor that does Synergy
19 1
In its opposition, GBI attempts to avoid this court’s jurisdiction by mischaracterizing
20 Synergy’s motion in federal court pursuant to Federal Rule of Court 62.1, to suggest that
Synergy has an equal alternate remedy (to amendment), and to imply that Synergy’s motion to
21 amend is somehow improper. This argument is erroneous, as it misconstrues 62.1 proceedings
(which address motions directed to the federal district court addressing matters for which it lacks
22 jurisdiction, and which are subject to procedural restrictions that do not apply to pending actions
in Superior Court. See infra, at sec I.A.4.
2
23 This is a tack that permeates GBI’s opposition to Synergy’s motion to amend.
Throughout its opposition, GBI asserts mundane facts that are necessarily intrinsic to every
24 motion to amend (like the fact that a proposed amended complaint is similar to a previous
complaint, but different), but implies that these facts are not anodyne, but are somehow
25 nefarious. Thus, for example, although procedural laws apply to virtually every aspect of civil
litigation, “procedure” and the effort to comply with procedural law in the presentation of claims,
26 emerges as an epithet, and somehow an example of “bad faith” in GBI’s opposition.
SYNERGY’S REPLY ISO MOTION FOR LEAVE 6 Case Nos. CGC-17-560034, CGC-19-576488,
TO FILE FOURTH AMENDED COMPLAINT (consolidated)
27 AND FIRST AMENDED CROSS-COMPLAINT
28
explain why it omitted its proposed claims from its operative October 2019 cross-
1 complaint against GBI in this action.
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Op., at p.9. But the reasons for this are simple. Synergy did not replead in its operative cross-
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complaint the same claims set forth in its proposed Fourth Amended Complaint submitted to the
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federal district court, precisely because those claims had been submitted to the federal district
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court. Synergy did not seek to re-litigate those same claims in its cross-complaint, as they had
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been presented in the federal proceedings. Those claims, and the district court’s declination to
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consider them, are pending in Synergy’s appeal.3 What is not presented in Synergy’s appeal are
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the new facts and allegations set forth in Synergy’s proposed Fourth Amended Complaint and
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Proposed First Amended Cross-Complaint, because those claims are different, because they
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present claims and allegations that occurred after the appeal was taken.
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In other words, in its opposition, in asking why “Synergy omitted its [present] proposed
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claims” in pleadings Synergy filed in 2019 (Op., at p. 9), GBI essentially complains that Synergy
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did not do what GBI elsewhere falsely accuses Synergy of doing (i.e., filing the exact claims in
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in its proposed claims that were presented in the 2019 pleadings). Instead, Synergy moves to
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amend its complaint and cross-complaint to allege facts not included in the 2019 pleadings. GBI
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cannot change this fact by ignoring it.
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18 2. Synergy Explained, in Detail, Why Its Proposed Fourth Amended Complaint
Could Not Be Brought Earlier.
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In its opening brief, Synergy explained that Synergy did not have facts sufficient to plead
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its proposed new claims (claims for racketeering, conspiracy and concealment), because these
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22 The same reasoning explains why Synergy did not replead its claims against GBI based
on “state actor” liability in its original cross claim. After Synergy moved to amend to allege
23 GBI’s liability as a “state actor” for Synergy’s federal claims during the federal court
proceedings, the court granted dismissal of Synergy’ s proposed amendment without considering
24 it. See GBI Request for Judicial Notice, Exs, and Ex. 5. Synergy appealed the court’s failure to
rule on Synergy’s motion to amend, thus preserving that issue (and Synergy’s claims as then
25 pled). Upon remand of this case to this Court, Synergy thus had no need to replead the exact
same claims appealed. Here again, Synergy’s cross-claim asserts facts and claims not present in
26 the appeal.
SYNERGY’S REPLY ISO MOTION FOR LEAVE 7 Case Nos. CGC-17-560034, CGC-19-576488,
TO FILE FOURTH AMENDED COMPLAINT (consolidated)
27 AND FIRST AMENDED CROSS-COMPLAINT
28
1 claims must be pled with particularity, and in the case of RICO, requires specific elements,
2 including interstate commerce. See Opening Brief, at pp. 8-10 (describing the disclosures
3 concerning the Nuru/Kelly/City family scheme culminating with the November 30, 2021 Kelly
4 Complaint) and pp. 11-12 (explaining the prerequisites for Synergy’s proposed claims, and why
5 the Kelly Complaint disclosed facts necessary for Synergy to meet those prerequisites.
6 In its opposition, GBI does not dispute that Synergy lacked the facts necessary to plead
7 its proposed new claims in its complaint until December 2020, or that Synergy moved to amend
8 its complaint the following month. Instead, GBI merely ignores these facts. This is neither
9 reasonable nor persuasive.
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3. GBI Will Not Be Cognizably Prejudiced By Amendment of the Synergy’s
11 Complaint
12 A party is not prejudiced by having to defend claims properly brought in an amended
13 complaint, merely because the amendment expands the issues in the litigation. See Hirsa v.
14 Superior Ct., 118 Cal. App. 3d 486, 490 (1981) (party is not prejudiced by having to confront
15 issues in an amended complaint that relates back to an original complaint). Such evidence is not
16 transmuted to “prejudicial” matter by later amendment to the pleadings. Id. This is because a
17 complaint’s allegations are presumed to be true, and a party is not “prejudiced”, within the
18 meaning of amendment jurisprudence, by having to defend against claims for which it is
19 presumed to be liable. See Rickley v. Goodfriend, 212 Cal. App. 4th 1136, 1141-1142 (2013); see
20 also Honig v. Fin. Corp. of Am., 6 Cal. App. 4th 960, 966 (1992) (finding denial of amendment
21 abuse of discretion). If it were otherwise, every amendment of a complaint would ostensibly
22 “prejudice” the opposing party.
23 Here, aside from vague (and as explained above, legally insufficient) statements about the
24 expansion of the litigation, GBI doesn’t attempt to explain how it would be cognizably
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SYNERGY’S REPLY ISO MOTION FOR LEAVE 8 Case Nos. CGC-17-560034, CGC-19-576488,
TO FILE FOURTH AMENDED COMPLAINT (consolidated)
27 AND FIRST AMENDED CROSS-COMPLAINT
28
1 prejudiced if Synergy’s motions are granted. On March 18, 2021, the Superior Court granted
2 Synergy’s motion to continue the trial in this matter, which is now re-set for August 29, 2021.
3 No depositions will have to be retaken, because no depositions, including the depositions of the
4 parties’ “designated persons most qualified”, and the parties’ employees, have yet occurred.
5 Instead, depositions of all of the witnesses for Synergy’s pending and proposed claims, including
6 Synergy and GBI’s “PMQs”, the parties’ employees, and other depositions will all go forward in
7 the future and before trial. Since these same depositions relate to Synergy’s pending and
8 proposed claims, allowing the amendment will further efficiency by allowing these depositions
9 to be taken once4.
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4. GBI’s Reference to Synergy’s Motion for an Indicative Ruling is a Red
11 Herring
12 As noted above, Synergy’s proposed amended new complaint (and proposed cross-
13 complaint) presents claims and allegations that are not presented in Synergy’s pending appeal,
14 because those claims and allegations are based on events and disclosures that occurred after the
15 case was returned to this Court. Synergy thus faced a dilemma: it had discovered new facts
16 supporting new claims and allegations arising out of the same facts of this case, but which were
17 neither a part of the pending appeal, nor presented in the operative pleading. Synergy brought its
18 motion to amend because this Court has jurisdiction over the complaint.
19 Synergy also moved the federal district court for an indicative ruling pursuant to Federal
20 Rule of Civil Procedure 62.1. Rule 62.1 are provisions that provide a means for district court to
21 provide an indicative ruling consider certain issues for which it lacks jurisdiction because of the
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23 Synergy anticipates that GBI may argue that it is somehow prejudiced, because Synergy
has already propounded discovery towards its pending and proposed claims, but GBI has not,
24 and therefore it cannot promulgate discovery unless discovery is reopened. This is a red herring.
The Court did not reopen discovery (beyond the discovery the parties had already issued),
25 because GBI did not ask it to be reopened, and because the motions to amend had not been
decided. GBI will certainly have the opportunity to conduct whatever discovery it needs if
26 amendment is granted.
SYNERGY’S REPLY ISO MOTION FOR LEAVE 9 Case Nos. CGC-17-560034, CGC-19-576488,
TO FILE FOURTH AMENDED COMPLAINT (consolidated)
27 AND FIRST AMENDED CROSS-COMPLAINT
28
1 pending appeal. See Fed. R. Civ. Proc. 62.1. The rules governing the court’s ability to hear
2 motions brought under rule 62.1 (in this case, a motion to alter the judgment pursuant to Federal
3 Rule of Civil Procedure 60(b)(b)), are heavily restricted, and can be precluded for procedural
4 reasons having nothing to do with the merits of the motion.5 When presented with a Rule 62.1
5 motion, the Court may in response deny the motion, indicate to the Court of Appeal that it would
6 grant the motion, or indicate that the motion raises significant issues that it would consider upon
7 remand.
8 Synergy moved the Court for relief pursuant to Rule 62.1 because this is the reasonable
9 and prudent course of action for any party in Synergy’s position to take, especially, where, as
10 here, a party’s failure to exhaust all avenues available to it can later be deemed an abandonment
11 or failure to diligently pursue its claims. Cf. Aikens v. Ingram, 2022 WL 2725822 (4th Cir. 2011)
12 (finding that moving party’s pursuit of relief through alternative proceedings demonstrated
13 requisite diligence). But Synergy’s pursuit of relief pursuant to Rule 62.1 does not constitute an
14 “equal alternative remedy”, for several reasons. The federal court could deny Synergy’s motion
15 to amend on procedural grounds, on the grounds that it lacks jurisdiction, or on the grounds that
16 Synergy’s proposed amended claims can, and must, be presented to this Court.
17 Neither does Synergy’s Rule 62.1 motion divest this court of jurisdiction over Synergy’s
18 motion to amend, or change the governing California law under which Synergy’s motion to
19 amend must be determined. These motions argue governed by statute (see Code Civ. Proc., §
20 473) and California courts’ strong preference for resolution of cases on the merits. See Honig v.
21 Fin. Corp. of Am., 6 Cal. App. 4th 960, 965, 7 Cal. Rptr. 2d 922, 925 (1992) (courts discretion
22 should be exercised to further California’s strong policy in favor of liberal allowance of
23 amendments.)
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25 See, e.g. Latshaw v. Trainer Wortham & Co., 452 F.3d 1097, 1103 (9th Cir. 2006)
(describing limited issues reviewable on motions brought pursuant to Federal Rule of Civil
26 Procedure 60(b)(6).
SYNERGY’S REPLY ISO MOTION FOR LEAVE 10 Case Nos. CGC-17-560034, CGC-19-576488,
TO FILE FOURTH AMENDED COMPLAINT (consolidated)
27 AND FIRST AMENDED CROSS-COMPLAINT
28
1 Needless to say, Synergy’s proposed cross-claims, which state claims based on GBI’s
2 complaint, are not at issue in Synergy’s appeal or Synergy’s motion pursuant to Rule 62.1.
3 Thus, this Court should not be distracted by GBI’s facile, but nevertheless erroneous,
4 characterization of the federal proceedings, or GBI’s collateral speculation as to how the federal
5 district court or Ninth Circuit Court of Appeals may rule, or arguments properly raised (and fully
6 briefed) in motions to dismiss. The issue before this Court is Synergy’s motions to amend the
7 complaint and cross-complaint pending before this Court.
8 B. Synergy’s Motion for Leave to File it First Amended Cross-Complaint
Should Be Granted
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1. Synergy’s Cross-Claims Are Compulsory.
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Synergy’s proposed cross-claims are compulsory, because they arise out of the same
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events that GBI alleges in its complaint. Cal Code. Civ. Proc. §§ 426.10, subd. (c), 426.30. In
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its complaint, GBI alleges, inter alia, that Synergy caused gas line ruptures on the Haight Street
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Project, failed to perform its work diligently and in compliance with the GBI-Synergy
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subcontract, and caused delays. See GBI Complaint, (Case No. CGC-19-576488) passim. GBI
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claims damages in the amount of $2,000,000. In its proposed cross-claim, Synergy alleges: (1)
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that GBI’s claims and damages are based on work GBI, and the Department of Public Works of
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the City and County of San Francisco previously approved (see FACC, ¶47; Knadler Reply
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Decl., Ex. B); (2) that GBI, working with DBI head Mohammed Nuru, subsequently manipulated
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the Haight Street Project records to enable GBI (and the City) to allow GBI to seek and receive
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payment for work GBI (and the City) had already approved, (see PFACC, ¶47, and Knadler
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Reply Decl., Ex. B) and that (3) GBI concealed from Synergy the fact that at the time of
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Synergy’s termination in October 13, 2015, GBI had already reached GBI reached an agreement
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to replace Synergy on the project.
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SYNERGY’S REPLY ISO MOTION FOR LEAVE 11 Case Nos. CGC-17-560034, CGC-19-576488,
TO FILE FOURTH AMENDED COMPLAINT (consolidated)
27 AND FIRST AMENDED CROSS-COMPLAINT
28
1 These cross-claims unquestionably arise out of the same events that form the basis for
2 GBI’s complaint, and are therefore compulsory. As a result, these claims must be brought in this
3 lawsuit, or be barred in a later lawsuit. Cal Code. Civ. Proc. § 426.30.
4 2. GBI Has Not, and Cannot Meet Its Burden to Demonstrate Substantial Bad Faith
5 Unable to credibly dispute the fact that Synergy’s proposed cross-claims are compulsory,
6 GBI argues that the claims are brought in “bad faith”. But to establish bad faith, GBI relies on a
7 series of groundless assertions, unfounded innuendos and self-serving speculations that, even if
8 true, would not constitute bad faith. And none are true.
9 Code of Civil Procedure section 426.50 provides: “A party who fails to plead a cause of
10 action subject to the requirements of this article [Article 2 of Chapter 2 of Title 6 of Part 2 of the
11 Code of Civil Procedure; captioned “Compulsory Cross-complaints”], whether through
12 oversight, inadvertence, mistake, neglect, or other cause, may apply to the court for leave to
13 amend his pleading, or to file a cross-complaint, to assert such cause at any time during the
14 course of the action. The court, after notice to the adverse party, shall grant, upon such terms as
15 may be just to the parties, leave to amend the pleading, or to file the cross-complaint, to assert
16 such cause if the party who failed to plead the cause acted in good faith. This subdivision shall
17 be liberally construed to avoid forfeiture of causes of action.” Code Civ. Proc. §425.50.
18 “The legislative mandate is clear. A policy of liberal construction of section 426.50 to
19 avoid forfeiture of causes of action is imposed on the trial court. A motion to file a cross-
20 complaint at any time during the course of the action must be granted unless bad faith of the
21 moving party is demonstrated where forfeiture would otherwise result. Factors such as oversight,
22 inadvertence, neglect, mistake or other cause, are insufficient grounds to deny the motion unless
23 accompanied by bad faith.” Silver Organizations Ltd. v. Frank 217 Cal.App.3d 94, 98–99
24 (1990). “Notwithstanding the holding in Gherman v. Colburn (1977) 72 Cal.App.3d 544, 559,
25 140 Cal.Rptr. 330 ..., that ‘the statutory terminology [of section 426.50] allows the court some
26
SYNERGY’S REPLY ISO MOTION FOR LEAVE 12 Case Nos. CGC-17-560034, CGC-19-576488,
TO FILE FOURTH AMENDED COMPLAINT (consolidated)
27 AND FIRST AMENDED CROSS-COMPLAINT
28
1 modicum of discretion in determining whether or not a defendant has acted in good faith’ ..., it is
2 our view that substantial evidence must support the trial court's decision.” Id., 217 Cal.App.3d at
3 p. 99. Accordingly, the substantial evidence standard governs our review of the trial court's
4 determination, express or implied, that City had not acted in good faith. (Id; see also Foot's
5 Transfer & Storage Co. v. Superior Court (1980) 114 Cal.App.3d 897, 902.
6 What constitutes “good faith” or lack of it under section 426.50 must be determined in
7 light of and in conformity with the liberality conferred upon the trial courts by the section and
8 prior law; this principle of liberality requires a strong showing of bad faith be made in order to
9 support a denial of the right to file a compulsory cross-complaint. Foot's Transfer & Storage Co.
10 v. Superior Court (1980) 114 Cal.App.3d 897. “Substantial evidence of bad faith will obviously
11 negate good faith, the latter being the sine qua non to the granting of a section 426.50 motion. It
12 is therefore necessary to examine the amorphous concept of bad faith. ‘Bad faith’ is defined as
13 [t]he opposite of ‘good faith,’ generally implying or involving actual or constructive fraud, or a
14 design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some
15 contractual obligation, not prompted by an honest mistake ..., but by some interested or sinister
16 motive[,] ... not simply bad judgment or negligence, but rather ... the conscious doing of a wrong
17 because of dishonest purpose or moral obliquity; ... it contemplates a state of mind affirmatively
18 operating with furtive design or ill will. [Citations.]” Silver Organizations Ltd, supra, 217
19 Cal.App.3d at100.
20 GBI doesn’t dispute that the proposed cross-claims are compulsory, but instead argues
21 that they are brought in bad faith. But GBI’s contentions of bad faith are based on a collection of
22 demonstrably erroneous facts, unjustified innuendoes, and self-serving, unfounded speculation.
23 None of these contentions comes close to demonstrating that Synergy’s proposed cross-claims
24 are brought in bad faith. To the contrary, Synergy’s proposed cross-claims are based on
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SYNERGY’S REPLY ISO MOTION FOR LEAVE 13 Case Nos. CGC-17-560034, CGC-19-576488,
TO FILE FOURTH AMENDED COMPLAINT (consolidated)
27 AND FIRST AMENDED CROSS-COMPLAINT
28
1 information Synergy obtained through discovery and investigation conducted in preparation for
2 trial. See section I.B.2.c, at p.17
3
a. Synergy’s State Action-Based Cross-Claims Assert Claims Not Presented In
4 Synergy’s Appeal
5 GBI’s first contention, in support of its claims of bad faith, is that Synergy pled its “state
6 actor” claims when it sought leave to amend to allege a fourth amended complaint in District
7 Court, and Synergy’s proposed cross-claims here are “nearly” the same. Op. at 13. GBI asserts
8 that Synergy has “no explanation” for why it did not plead its claims against GBI that were
9 included in its proposed amended complaint submitted to the district court in August 2019 when
10 this case was remanded to this court, in one of various assertions GBI makes to imply that GBI’s
11 pursuit of its proposed cross-claims here are somehow illicit. Op., at p.10. But GBI’s own
12 statement contains the reasons why (1) Synergy did not replead its “state actor” claims in its
13 original cross-compliant, and (2) why it seeks to file them now.
14 Synergy did move to amend to allege GBI’s liability as a “state actor” for Synergy’s federal
15 claims during the federal court proceedings; the court granted dismissal of Synergy’ s proposed
16 amendment without considering it.6 Synergy appealed the court’s failure to rule on Synergy’s
17 motion to amend, thus preserving that issue (and Synergy’s claims as then pled). Upon remand
18 of this case to this Court, Synergy thus had no need to replead the exact same claims appealed.
19 But as GBI grudgingly admits, Synergy’s proposed cross-claims and its state actor
20 allegations here are not the same as those presented to the District Court. And the differences are
21 material. In its 2019 proposed fourth amended complaint, Synergy alleged that in October 2015,
22 GBI opposed Synergy’s removal from the Haight Street Project, both directly to Synergy and
23 formally, but was compelled by the City to remove Synergy. See GBI Request for Judicial
24 6
The Court did not reach the merits of the motion to amend, but, in an minute order,
25 expressly declined to consider the motion, and on that basis denied it without prejudice. Because
the Court subsequently entered judgment, neither that court, (nor any court) has ever addressed
26 the merits of Synergy’s state actor allegations.
SYNERGY’S REPLY ISO MOTION FOR LEAVE 14 Case Nos. CGC-17-560034, CGC-19-576488,
TO FILE FOURTH AMENDED COMPLAINT (consolidated)
27 AND FIRST AMENDED CROSS-COMPLAINT
28
1 Notice, Ex. 5, ¶¶ GBI notes that in its complaint, it “confirmed that on October 9, 2019, the City
2 demanded that GBI identify ‘one of more alternative subcontractors to replace Synergy’ and that
3 GBI ultimately did engage replacement subcontractors.” Op., at p.15 (emphasis added)(citing
4 GBI complaint, at ¶¶16-17, 24). But in its proposed FACC herein (and unlike its 2019 proposed
5 FACC), Synergy alleges that GBI was not compelled to replace Synergy, but did so willingly,
6 pursuant to an agreement GBI’s principal, Michael Ghilotti, reached with Mohammed Nuru and
7 concealed from Synergy. See Knadler Decl., Ex.4 (FACC), ¶¶31-35, Knadler Reply Decl., Ex. B
8 (letter explaining basis for Synergy’s proposed cross-claims); Mirsaidi Decl., ¶2 (explaining
9 GBI’s representations to Synergy of GBI’s opposition to Synergy’s removal). While GBI alleges
10 in its complaint that it “ultimately” replaced Synergy, Synergy alleges, in its proposed that GBI
11 agreed to replace Synergy from the start, even though it was at the time telling Synergy the
12 opposite. See Knadler Reply Decl., Ex. B, and ¶¶1-4 (describing Synergy’s discovery that at the
13 same time GBI was representing, in its communications to Synergy and its statements under
14 oath, GBI’s opposition to Synergy’s removal from the Haight Street Project, GBI’s principal,
15 Mike Ghilotti, reached a private agreement with Mohammed Nuru to remove and replace
16 Synergy from the project). These allegations are not included in Synergy’s proposed 2019
17 FACC, which also did not allege a conspiracy claim (between GBI and Nuru), as Synergy’s
18 proposed FACC herein does.
19 And GBI’s opposition itself states the law regarding state action that gives the new
20 allegations import. See Op., at p. 19 (describing tests for “state action”). GBI notes that the
21 courts have established multiple tests for state action, and asserts that “willful participation” by
22 the private party is a prerequisite to a finding of state action. Id. In its previously-filed 2019
23 proposed FACC, Synergy alleged that GBI was compelled to remove Synergy by the City (and
24
25
26
SYNERGY’S REPLY ISO MOTION FOR LEAVE 15 Case Nos. CGC-17-560034, CGC-19-576488,
TO FILE FOURTH AMENDED COMPLAINT (consolidated)
27 AND FIRST AMENDED CROSS-COMPLAINT
28
1 thus was a state actor pursuant to the “compulsion or coercion” test.7 As GBI’s opposition makes
2 clear, GBI contends that (based on the 2019 proposed FAC allegations) it nevertheless lacked the
3 sufficient willfulness for state action purposes. But in its proposed FACC herein, Synergy alleges
4 that GBI was a willing participant in Synergy’s removal from the start, pursuant to an agreement
5 GBI hid from Synergy. Thus, under Synergy’s proposed FACC, GBI is a state actor not just
6 under the compulsion test, but also under the joint action test.8 In other words, one reason
7 Synergy’s proposed FACC herein is materially different is because it states factual allegations
8 that supply the willfulness that GBI itself contends Synergy’s previous pleadings lacked.
9
b. GBI does not dispute the allegations that form the basis for Synergy’s Proposed First
10 Amended Cross-Complaint
11 In its opposition, GBI does not dispute that it concealed from Synergy Mike Ghilotti’s
12 October 13, 2019 agreement with Nuru to replace Synergy on the Haight Street Project, that GBI
13 or Synergy’s allegation (in its proposed FACC herein) that GBI subsequently worked with Nuru
14 to manipulate the Haight Street Project records to enable GBI to receive payment for work done
15 by Synergy that GBI and the City approved. In fact, GBI does not acknowledge the latter
16 allegations, even though they form the basis for Synergy’s proposed claim in its FACC for unjust
17 enrichment.9
18 7
Under the state compulsion (or “coercion”) test, state action is found “when the
19 State 'has exercised coercive power or has provided such significant encouragement,
either overt or covert, that the choice must in law be deemed to be that of the State."See George
20 v. Pac.-CSC Work Furlough, 91 F.3d 1227, 1232 (9th Cir. 1996) (citing Gorenc v. Salt
River Project Agric. Improvement & Power Dist., 869 F.2d 503, 508 (9th Cir. 1989).
8
21 Under the joint action test, private actors can be state actors if they are 'willful
participant[s] in joint action with the state .... ". George v. Pac.-CSC Work Furlough, 91 F.3d at
22 1231.
9
Neither does GBI acknowledge, much less dispute, Synergy’s allegations in its
23 proposed FACC herein (1) that GBI and its president, Mike Ghilotti, enjoyed close relationships
with Nuru, Harlan Kelly and former Mayor Ed Lee, and were perceived by them to be “friends”
24 of the “City Family”, within the meaning of the City Attorney and City Controller’s post-sandal
reports (see Knadler Decl.(PFACC, ¶51)); or that GBI bolstered its status as a “friend” of the
25 “City Family” through contributions to “friends” organizations created by Nuru and other
government officials identifiedas vehicles for abuse and corruption by the City Attorney and City
26 Controller postscandal reports (see id. PFACC, ¶52).
SYNERGY’S REPLY ISO MOTION FOR LEAVE 16 Case Nos. CGC-17-560034, CGC-19-576488,
TO FILE FOURTH AMENDED COMPLAINT (consolidated)
27 AND FIRST AMENDED CROSS-COMPLAINT
28
1
c. Synergy’s Proposed First Amended Cross-claim is based on Synergy’s discovery and
2 investigatio
Preview
JOHNNY D. KNADLER (SBN 220942) 1 LAW OFFICE OF JOHNNY D. KNADLER 1527-E Pershing Drive 2 San Francisco, CA 94129 ELECTRONICALLY Telephone: (310) 564-6695 3 Facsimile: (888) 323-0611 F I L E D Superior Court of California, Email: jdknadler@gmail.com County of San Francisco 4 03/22/2021 5 Attorneys for Plaintiff Clerk of the Court BY: YOLANDA TABO-RAMIREZ SYNERGY PROJECT MANAGEMENT, INC. Deputy Clerk 6 7 SUPERIOR COURT OF THE STATE OF CALIFORNIA 8 IN AND FOR THE COUNTY OF SAN FRANCISCO 9 SYNERGY PROJECT MANAGEMENT, Case Nos. CGC-17-560034, CGC-19-576488 10 INC., (Consolidated) 11 Plaintiff, PLAINTIFF SYNERGY PROJECT 12 vs. MANAGEMENT, INC.’S REPLY MEMORANDUM OF POINTS AND 13 CITY AND COUNTY OF SAN FRANCISCO, AUTHORITIES IN SUPPORT OF LONDON BREED, MOHAMMED NURU, MOTION FOR LEAVE TO FILE 14 FOURTH AMENDED Defendants. COMPLAINT AND FIRST 15 ______________________________________ AMENDED CROSS-COMPLAINT 16 GHILOTTI BROS., INC., a California Corporation, 17 Date: March 26, 2021 Plaintiff, Time: 9:30 a.m. 18 Dept: 302 19 vs, Complaint filed: July 10, 2017 20 SYNERGY PROJECT MANAGEMENT, INC., a California Corporation, and 21 DOES 1-30, Defendants. 22 ______________________________________ 23 24 SYNERGY PROJECT MANAGEMENT, a California Corporation, 25 Cross-Complainant, 26 SYNERGY’S REPLY ISO MOTION FOR LEAVE 1 Case Nos. CGC-17-560034, CGC-19-576488, TO FILE FOURTH AMENDED COMPLAINT (consolidated) 27 AND FIRST AMENDED CROSS-COMPLAINT 28 1 vs. 2 GHILOTTI BROS, INC., a California Corporation, and ROES 1-20, 3 Cross-Defendants. 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 SYNERGY’S REPLY ISO MOTION FOR LEAVE 2 Case Nos. CGC-17-560034, CGC-19-576488, TO FILE FOURTH AMENDED COMPLAINT (consolidated) 27 AND FIRST AMENDED CROSS-COMPLAINT 28 1 MEMORANDUM OF POINTS AND AUTHORITIES 2 I. INTRODUCTION 3 The fundamental facts of Synergy Project Management, Inc’s (“Synergy”) motion for 4 leave to amend, and the controlling law applicable to these facts, are straight forward. In its 5 motion for leave to amend its complaint, Synergy demonstrated that: 6 1. Over the course of 2020, Synergy discovered facts giving rise to valid claims arising 7 out of the facts that form the basis for this case; 8 2. Synergy did not have grounds to allege these claims until December 2020, and 9 Synergy moved to amend one month later, 10 3. Synergy’s proposed new claims are not presented in Synergy’s pending appeal, 11 because they are based on facts revealed after that appeal was taken, and 12 4. In contrast, this court has jurisdiction over these claims, because they arise out of the 13 same facts of this case. 14 Application of California law to these facts dictates as straightforward conclusion: Consistent 15 with the court’s policy favoring leave to amend and the resolution of disputes on the merits, 16 Synergy’s motion to amend its complaint should be granted. 17 The facts and law governing Synergy’s proposed amended cross-complaint likewise are 18 straightforward. In its opening brief, Synergy demonstrated that over the course of 2020 and 19 2021, Synergy discovered that: 20 1. The damages Ghilotti Bros., Inc. (“GBI”) seeks to recover in its complaint against 21 Synergy, are based on the same work that GBI and the City previously approved; 22 2. At the same time GBI was purporting to oppose Synergy’s removal and replacement 23 from the Haight Street Project, GBI's president and treasurer, Michael Ghilotti, 24 unbeknownst to Synergy, was surreptitiously meeting with Nuru to plot Synergy’s 25 removal (PFACC, 31-32); 26 SYNERGY’S REPLY ISO MOTION FOR LEAVE 3 Case Nos. CGC-17-560034, CGC-19-576488, TO FILE FOURTH AMENDED COMPLAINT (consolidated) 27 AND FIRST AMENDED CROSS-COMPLAINT 28 1 3. That GBI and Mohammed Nuru facilitated GBI’s claims against Synergy in this case, 2 by manipulating and mischaracterizing the Haight Street Project plans and records 3 (PFACC, 47); and 4 4. That GBI and its principal, Mike Ghilotti, were “friends of” Nuru and the “City 5 Family”, and contributors to the “friends” organizations created by Nuru and other 6 government officials identified as vehicles for abuse and corruption by the City 7 Attorney and City Controller post-scandal reports (PFACC, ¶51); 8 In its opposition, GBI does not confront these facts. Instead, GBI employs a “Wizard of Oz” 9 defense, that encourages this Court to pay no attention to the relevant facts and law applicable to 10 motions to amend, but to focus instead on GBI’s depiction of other proceedings, and GBI’s 11 contention that Synergy’s prosecution of its appeal in federal court, and the claims and issues 12 that appeal presents, render Synergy’s presentation of valid claims over which this Court has 13 jurisdiction somehow illicit. To support these contentions and inferences, GBI relies on a stream 14 of erroneous statements, half-truths, and omissions. Although these misstatements are various, 15 and take some time to unpack, correction of these misstatements leave the fundamental facts and 16 law before this court undisturbed. 17 Synergy propounded discovery directed to the above-described facts and claims during fact 18 discovery in this case, but was thwarted, in significant part by GBI, which did not deny it 19 possessed undisclosed communications with Nuru regarding Synergy and the Haight Street 20 Project, or its donations to organizations Nuru used to launder bribes and kickbacks, but refused 21 to produce them, hoping that the impending discovery deadline would prevent Synergy from 22 enforcing this discovery. 23 That effort failed. On March 19, 2021, the Superior Court granted Synergy’s motion to 24 continue the trial, and to pursue the discovery it promulgated directed to its pending and 25 26 SYNERGY’S REPLY ISO MOTION FOR LEAVE 4 Case Nos. CGC-17-560034, CGC-19-576488, TO FILE FOURTH AMENDED COMPLAINT (consolidated) 27 AND FIRST AMENDED CROSS-COMPLAINT 28 1 proposed claims, including the discovery GBI has withheld. Trial is now set for August 23, 2 2021, and presents no obstacle to a resolution of Synergy’s claims on the merits. 3 Synergy’s motion to amend should be granted. 4 II. ARGUMENT 5 GBI devotes the majority of its opposition to a fusillade of contentions about the 6 procedural history of this case, and the pending federal appellate proceeding, and various other 7 issues collateral to Synergy’s motion for leave to amend its complaint and cross-complaint. 8 Synergy can and does refute each and everyone one of these statements and contentions below. 9 But, first, Synergy will address the issues actually presented by Synergy’s motion to amend, and 10 the grounds why Synergy’s motion should be granted, which GBI fails to reasonably contest. 11 A. Synergy’s Motion for Leave to File its Fourth Amended Complaint Should Be 12 Granted 13 1. Synergy’s Proposed First Amended Complaint States Valid Claims over Which This Court Has Jurisdiction 14 In its proposed Fourth Amended Complaint (“PFAC”), Synergy seeks to add the 15 following claims: (1) Conspiracy to violate civil rights, pursuant to 42 U.S.C. § 1983 [PFAC 16 count 5]; (2) Racketeering and (3) racketeering conspiracy, pursuant to 42 U.S. C. § 1962 17 (PFAC counts 9 and 10); and (4) Fraudulent Concealment. See Synergy’s Memorandum of 18 Points and Authorities in Support of Motion to for Leave to File Fourth Amended Complaint 19 (“Opening Brief”), and PFAC Declaration of Johnny D. Knadler in Support of Motion for Leave 20 to File Fourth Amended Complaint and First Amended Cross-Complaint (“Knadler Decl.”), Ex.1 21 (counts 5, 8-10). 22 GBI does not dispute that these claims are well pled (i.e., not futile), arise out of the facts 23 that form the basis for this action, and are not presented in Synergy’s pending appeal before the 24 Ninth Circuit. GBI could not, for simple reasons. Each of the elements for these claims is met. 25 And this court has jurisdiction of these claims, because they arise out of the same events that 26 SYNERGY’S REPLY ISO MOTION FOR LEAVE 5 Case Nos. CGC-17-560034, CGC-19-576488, TO FILE FOURTH AMENDED COMPLAINT (consolidated) 27 AND FIRST AMENDED CROSS-COMPLAINT 28 1 form the basis for Synergy’s original and operative complaints. See Opening Brief, at 11-16. And 2 because each of these claims is based on facts disclosed and discovered by Synergy after its 3 appeal was taken, neither these claims, nor the facts upon which they are based, is presented in 4 that appeal.1 See Opening Brief, at p. 14, lines 7-14. 5 Critically, GBI does not dispute that Synergy’s proposed new claims presented here are 6 not the same claims proposed in its previous proposed Fourth Amended Complaint, submitted to 7 the federal district court, the merits of which the district court did not reach. Instead, GBI asserts 8 only that Synergy’s proposed FAC here is “nearly” the same, as if this observation was probative 9 to the determination of Synergy’s motion to amend. See Op., at p.7 But the GBI’s use of word 10 “nearly” merely reflects GBI’s effort to avoid acknowledging that there are differences. And the 11 differences are not only material – they are the basis for Synergy’s new claims, and the reason 12 why this court has jurisdiction to consider them.2 See Opening Brief, at pages 11-16, specifying 13 the new facts in Synergy’s PFAC, and explaining that these facts are not present in the proposed 14 Fourth Amended Complaint on appeal, as they concern events discovered after the appeal was 15 taken.) 16 Rather than confront these facts, GBI pretends they don’t exist. Thus, GBI asserts 17 that: Synergy does not explain why it sat on its hands and waited until the eve of trial 18 to assert its proposed amended claims against GBI”. Nor that does Synergy 19 1 In its opposition, GBI attempts to avoid this court’s jurisdiction by mischaracterizing 20 Synergy’s motion in federal court pursuant to Federal Rule of Court 62.1, to suggest that Synergy has an equal alternate remedy (to amendment), and to imply that Synergy’s motion to 21 amend is somehow improper. This argument is erroneous, as it misconstrues 62.1 proceedings (which address motions directed to the federal district court addressing matters for which it lacks 22 jurisdiction, and which are subject to procedural restrictions that do not apply to pending actions in Superior Court. See infra, at sec I.A.4. 2 23 This is a tack that permeates GBI’s opposition to Synergy’s motion to amend. Throughout its opposition, GBI asserts mundane facts that are necessarily intrinsic to every 24 motion to amend (like the fact that a proposed amended complaint is similar to a previous complaint, but different), but implies that these facts are not anodyne, but are somehow 25 nefarious. Thus, for example, although procedural laws apply to virtually every aspect of civil litigation, “procedure” and the effort to comply with procedural law in the presentation of claims, 26 emerges as an epithet, and somehow an example of “bad faith” in GBI’s opposition. SYNERGY’S REPLY ISO MOTION FOR LEAVE 6 Case Nos. CGC-17-560034, CGC-19-576488, TO FILE FOURTH AMENDED COMPLAINT (consolidated) 27 AND FIRST AMENDED CROSS-COMPLAINT 28 explain why it omitted its proposed claims from its operative October 2019 cross- 1 complaint against GBI in this action. 2 Op., at p.9. But the reasons for this are simple. Synergy did not replead in its operative cross- 3 complaint the same claims set forth in its proposed Fourth Amended Complaint submitted to the 4 federal district court, precisely because those claims had been submitted to the federal district 5 court. Synergy did not seek to re-litigate those same claims in its cross-complaint, as they had 6 been presented in the federal proceedings. Those claims, and the district court’s declination to 7 consider them, are pending in Synergy’s appeal.3 What is not presented in Synergy’s appeal are 8 the new facts and allegations set forth in Synergy’s proposed Fourth Amended Complaint and 9 Proposed First Amended Cross-Complaint, because those claims are different, because they 10 present claims and allegations that occurred after the appeal was taken. 11 In other words, in its opposition, in asking why “Synergy omitted its [present] proposed 12 claims” in pleadings Synergy filed in 2019 (Op., at p. 9), GBI essentially complains that Synergy 13 did not do what GBI elsewhere falsely accuses Synergy of doing (i.e., filing the exact claims in 14 in its proposed claims that were presented in the 2019 pleadings). Instead, Synergy moves to 15 amend its complaint and cross-complaint to allege facts not included in the 2019 pleadings. GBI 16 cannot change this fact by ignoring it. 17 18 2. Synergy Explained, in Detail, Why Its Proposed Fourth Amended Complaint Could Not Be Brought Earlier. 19 In its opening brief, Synergy explained that Synergy did not have facts sufficient to plead 20 its proposed new claims (claims for racketeering, conspiracy and concealment), because these 21 3 22 The same reasoning explains why Synergy did not replead its claims against GBI based on “state actor” liability in its original cross claim. After Synergy moved to amend to allege 23 GBI’s liability as a “state actor” for Synergy’s federal claims during the federal court proceedings, the court granted dismissal of Synergy’ s proposed amendment without considering 24 it. See GBI Request for Judicial Notice, Exs, and Ex. 5. Synergy appealed the court’s failure to rule on Synergy’s motion to amend, thus preserving that issue (and Synergy’s claims as then 25 pled). Upon remand of this case to this Court, Synergy thus had no need to replead the exact same claims appealed. Here again, Synergy’s cross-claim asserts facts and claims not present in 26 the appeal. SYNERGY’S REPLY ISO MOTION FOR LEAVE 7 Case Nos. CGC-17-560034, CGC-19-576488, TO FILE FOURTH AMENDED COMPLAINT (consolidated) 27 AND FIRST AMENDED CROSS-COMPLAINT 28 1 claims must be pled with particularity, and in the case of RICO, requires specific elements, 2 including interstate commerce. See Opening Brief, at pp. 8-10 (describing the disclosures 3 concerning the Nuru/Kelly/City family scheme culminating with the November 30, 2021 Kelly 4 Complaint) and pp. 11-12 (explaining the prerequisites for Synergy’s proposed claims, and why 5 the Kelly Complaint disclosed facts necessary for Synergy to meet those prerequisites. 6 In its opposition, GBI does not dispute that Synergy lacked the facts necessary to plead 7 its proposed new claims in its complaint until December 2020, or that Synergy moved to amend 8 its complaint the following month. Instead, GBI merely ignores these facts. This is neither 9 reasonable nor persuasive. 10 3. GBI Will Not Be Cognizably Prejudiced By Amendment of the Synergy’s 11 Complaint 12 A party is not prejudiced by having to defend claims properly brought in an amended 13 complaint, merely because the amendment expands the issues in the litigation. See Hirsa v. 14 Superior Ct., 118 Cal. App. 3d 486, 490 (1981) (party is not prejudiced by having to confront 15 issues in an amended complaint that relates back to an original complaint). Such evidence is not 16 transmuted to “prejudicial” matter by later amendment to the pleadings. Id. This is because a 17 complaint’s allegations are presumed to be true, and a party is not “prejudiced”, within the 18 meaning of amendment jurisprudence, by having to defend against claims for which it is 19 presumed to be liable. See Rickley v. Goodfriend, 212 Cal. App. 4th 1136, 1141-1142 (2013); see 20 also Honig v. Fin. Corp. of Am., 6 Cal. App. 4th 960, 966 (1992) (finding denial of amendment 21 abuse of discretion). If it were otherwise, every amendment of a complaint would ostensibly 22 “prejudice” the opposing party. 23 Here, aside from vague (and as explained above, legally insufficient) statements about the 24 expansion of the litigation, GBI doesn’t attempt to explain how it would be cognizably 25 26 SYNERGY’S REPLY ISO MOTION FOR LEAVE 8 Case Nos. CGC-17-560034, CGC-19-576488, TO FILE FOURTH AMENDED COMPLAINT (consolidated) 27 AND FIRST AMENDED CROSS-COMPLAINT 28 1 prejudiced if Synergy’s motions are granted. On March 18, 2021, the Superior Court granted 2 Synergy’s motion to continue the trial in this matter, which is now re-set for August 29, 2021. 3 No depositions will have to be retaken, because no depositions, including the depositions of the 4 parties’ “designated persons most qualified”, and the parties’ employees, have yet occurred. 5 Instead, depositions of all of the witnesses for Synergy’s pending and proposed claims, including 6 Synergy and GBI’s “PMQs”, the parties’ employees, and other depositions will all go forward in 7 the future and before trial. Since these same depositions relate to Synergy’s pending and 8 proposed claims, allowing the amendment will further efficiency by allowing these depositions 9 to be taken once4. 10 4. GBI’s Reference to Synergy’s Motion for an Indicative Ruling is a Red 11 Herring 12 As noted above, Synergy’s proposed amended new complaint (and proposed cross- 13 complaint) presents claims and allegations that are not presented in Synergy’s pending appeal, 14 because those claims and allegations are based on events and disclosures that occurred after the 15 case was returned to this Court. Synergy thus faced a dilemma: it had discovered new facts 16 supporting new claims and allegations arising out of the same facts of this case, but which were 17 neither a part of the pending appeal, nor presented in the operative pleading. Synergy brought its 18 motion to amend because this Court has jurisdiction over the complaint. 19 Synergy also moved the federal district court for an indicative ruling pursuant to Federal 20 Rule of Civil Procedure 62.1. Rule 62.1 are provisions that provide a means for district court to 21 provide an indicative ruling consider certain issues for which it lacks jurisdiction because of the 22 4 23 Synergy anticipates that GBI may argue that it is somehow prejudiced, because Synergy has already propounded discovery towards its pending and proposed claims, but GBI has not, 24 and therefore it cannot promulgate discovery unless discovery is reopened. This is a red herring. The Court did not reopen discovery (beyond the discovery the parties had already issued), 25 because GBI did not ask it to be reopened, and because the motions to amend had not been decided. GBI will certainly have the opportunity to conduct whatever discovery it needs if 26 amendment is granted. SYNERGY’S REPLY ISO MOTION FOR LEAVE 9 Case Nos. CGC-17-560034, CGC-19-576488, TO FILE FOURTH AMENDED COMPLAINT (consolidated) 27 AND FIRST AMENDED CROSS-COMPLAINT 28 1 pending appeal. See Fed. R. Civ. Proc. 62.1. The rules governing the court’s ability to hear 2 motions brought under rule 62.1 (in this case, a motion to alter the judgment pursuant to Federal 3 Rule of Civil Procedure 60(b)(b)), are heavily restricted, and can be precluded for procedural 4 reasons having nothing to do with the merits of the motion.5 When presented with a Rule 62.1 5 motion, the Court may in response deny the motion, indicate to the Court of Appeal that it would 6 grant the motion, or indicate that the motion raises significant issues that it would consider upon 7 remand. 8 Synergy moved the Court for relief pursuant to Rule 62.1 because this is the reasonable 9 and prudent course of action for any party in Synergy’s position to take, especially, where, as 10 here, a party’s failure to exhaust all avenues available to it can later be deemed an abandonment 11 or failure to diligently pursue its claims. Cf. Aikens v. Ingram, 2022 WL 2725822 (4th Cir. 2011) 12 (finding that moving party’s pursuit of relief through alternative proceedings demonstrated 13 requisite diligence). But Synergy’s pursuit of relief pursuant to Rule 62.1 does not constitute an 14 “equal alternative remedy”, for several reasons. The federal court could deny Synergy’s motion 15 to amend on procedural grounds, on the grounds that it lacks jurisdiction, or on the grounds that 16 Synergy’s proposed amended claims can, and must, be presented to this Court. 17 Neither does Synergy’s Rule 62.1 motion divest this court of jurisdiction over Synergy’s 18 motion to amend, or change the governing California law under which Synergy’s motion to 19 amend must be determined. These motions argue governed by statute (see Code Civ. Proc., § 20 473) and California courts’ strong preference for resolution of cases on the merits. See Honig v. 21 Fin. Corp. of Am., 6 Cal. App. 4th 960, 965, 7 Cal. Rptr. 2d 922, 925 (1992) (courts discretion 22 should be exercised to further California’s strong policy in favor of liberal allowance of 23 amendments.) 24 5 25 See, e.g. Latshaw v. Trainer Wortham & Co., 452 F.3d 1097, 1103 (9th Cir. 2006) (describing limited issues reviewable on motions brought pursuant to Federal Rule of Civil 26 Procedure 60(b)(6). SYNERGY’S REPLY ISO MOTION FOR LEAVE 10 Case Nos. CGC-17-560034, CGC-19-576488, TO FILE FOURTH AMENDED COMPLAINT (consolidated) 27 AND FIRST AMENDED CROSS-COMPLAINT 28 1 Needless to say, Synergy’s proposed cross-claims, which state claims based on GBI’s 2 complaint, are not at issue in Synergy’s appeal or Synergy’s motion pursuant to Rule 62.1. 3 Thus, this Court should not be distracted by GBI’s facile, but nevertheless erroneous, 4 characterization of the federal proceedings, or GBI’s collateral speculation as to how the federal 5 district court or Ninth Circuit Court of Appeals may rule, or arguments properly raised (and fully 6 briefed) in motions to dismiss. The issue before this Court is Synergy’s motions to amend the 7 complaint and cross-complaint pending before this Court. 8 B. Synergy’s Motion for Leave to File it First Amended Cross-Complaint Should Be Granted 9 1. Synergy’s Cross-Claims Are Compulsory. 10 Synergy’s proposed cross-claims are compulsory, because they arise out of the same 11 events that GBI alleges in its complaint. Cal Code. Civ. Proc. §§ 426.10, subd. (c), 426.30. In 12 its complaint, GBI alleges, inter alia, that Synergy caused gas line ruptures on the Haight Street 13 Project, failed to perform its work diligently and in compliance with the GBI-Synergy 14 subcontract, and caused delays. See GBI Complaint, (Case No. CGC-19-576488) passim. GBI 15 claims damages in the amount of $2,000,000. In its proposed cross-claim, Synergy alleges: (1) 16 that GBI’s claims and damages are based on work GBI, and the Department of Public Works of 17 the City and County of San Francisco previously approved (see FACC, ¶47; Knadler Reply 18 Decl., Ex. B); (2) that GBI, working with DBI head Mohammed Nuru, subsequently manipulated 19 the Haight Street Project records to enable GBI (and the City) to allow GBI to seek and receive 20 payment for work GBI (and the City) had already approved, (see PFACC, ¶47, and Knadler 21 Reply Decl., Ex. B) and that (3) GBI concealed from Synergy the fact that at the time of 22 Synergy’s termination in October 13, 2015, GBI had already reached GBI reached an agreement 23 to replace Synergy on the project. 24 25 26 SYNERGY’S REPLY ISO MOTION FOR LEAVE 11 Case Nos. CGC-17-560034, CGC-19-576488, TO FILE FOURTH AMENDED COMPLAINT (consolidated) 27 AND FIRST AMENDED CROSS-COMPLAINT 28 1 These cross-claims unquestionably arise out of the same events that form the basis for 2 GBI’s complaint, and are therefore compulsory. As a result, these claims must be brought in this 3 lawsuit, or be barred in a later lawsuit. Cal Code. Civ. Proc. § 426.30. 4 2. GBI Has Not, and Cannot Meet Its Burden to Demonstrate Substantial Bad Faith 5 Unable to credibly dispute the fact that Synergy’s proposed cross-claims are compulsory, 6 GBI argues that the claims are brought in “bad faith”. But to establish bad faith, GBI relies on a 7 series of groundless assertions, unfounded innuendos and self-serving speculations that, even if 8 true, would not constitute bad faith. And none are true. 9 Code of Civil Procedure section 426.50 provides: “A party who fails to plead a cause of 10 action subject to the requirements of this article [Article 2 of Chapter 2 of Title 6 of Part 2 of the 11 Code of Civil Procedure; captioned “Compulsory Cross-complaints”], whether through 12 oversight, inadvertence, mistake, neglect, or other cause, may apply to the court for leave to 13 amend his pleading, or to file a cross-complaint, to assert such cause at any time during the 14 course of the action. The court, after notice to the adverse party, shall grant, upon such terms as 15 may be just to the parties, leave to amend the pleading, or to file the cross-complaint, to assert 16 such cause if the party who failed to plead the cause acted in good faith. This subdivision shall 17 be liberally construed to avoid forfeiture of causes of action.” Code Civ. Proc. §425.50. 18 “The legislative mandate is clear. A policy of liberal construction of section 426.50 to 19 avoid forfeiture of causes of action is imposed on the trial court. A motion to file a cross- 20 complaint at any time during the course of the action must be granted unless bad faith of the 21 moving party is demonstrated where forfeiture would otherwise result. Factors such as oversight, 22 inadvertence, neglect, mistake or other cause, are insufficient grounds to deny the motion unless 23 accompanied by bad faith.” Silver Organizations Ltd. v. Frank 217 Cal.App.3d 94, 98–99 24 (1990). “Notwithstanding the holding in Gherman v. Colburn (1977) 72 Cal.App.3d 544, 559, 25 140 Cal.Rptr. 330 ..., that ‘the statutory terminology [of section 426.50] allows the court some 26 SYNERGY’S REPLY ISO MOTION FOR LEAVE 12 Case Nos. CGC-17-560034, CGC-19-576488, TO FILE FOURTH AMENDED COMPLAINT (consolidated) 27 AND FIRST AMENDED CROSS-COMPLAINT 28 1 modicum of discretion in determining whether or not a defendant has acted in good faith’ ..., it is 2 our view that substantial evidence must support the trial court's decision.” Id., 217 Cal.App.3d at 3 p. 99. Accordingly, the substantial evidence standard governs our review of the trial court's 4 determination, express or implied, that City had not acted in good faith. (Id; see also Foot's 5 Transfer & Storage Co. v. Superior Court (1980) 114 Cal.App.3d 897, 902. 6 What constitutes “good faith” or lack of it under section 426.50 must be determined in 7 light of and in conformity with the liberality conferred upon the trial courts by the section and 8 prior law; this principle of liberality requires a strong showing of bad faith be made in order to 9 support a denial of the right to file a compulsory cross-complaint. Foot's Transfer & Storage Co. 10 v. Superior Court (1980) 114 Cal.App.3d 897. “Substantial evidence of bad faith will obviously 11 negate good faith, the latter being the sine qua non to the granting of a section 426.50 motion. It 12 is therefore necessary to examine the amorphous concept of bad faith. ‘Bad faith’ is defined as 13 [t]he opposite of ‘good faith,’ generally implying or involving actual or constructive fraud, or a 14 design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some 15 contractual obligation, not prompted by an honest mistake ..., but by some interested or sinister 16 motive[,] ... not simply bad judgment or negligence, but rather ... the conscious doing of a wrong 17 because of dishonest purpose or moral obliquity; ... it contemplates a state of mind affirmatively 18 operating with furtive design or ill will. [Citations.]” Silver Organizations Ltd, supra, 217 19 Cal.App.3d at100. 20 GBI doesn’t dispute that the proposed cross-claims are compulsory, but instead argues 21 that they are brought in bad faith. But GBI’s contentions of bad faith are based on a collection of 22 demonstrably erroneous facts, unjustified innuendoes, and self-serving, unfounded speculation. 23 None of these contentions comes close to demonstrating that Synergy’s proposed cross-claims 24 are brought in bad faith. To the contrary, Synergy’s proposed cross-claims are based on 25 26 SYNERGY’S REPLY ISO MOTION FOR LEAVE 13 Case Nos. CGC-17-560034, CGC-19-576488, TO FILE FOURTH AMENDED COMPLAINT (consolidated) 27 AND FIRST AMENDED CROSS-COMPLAINT 28 1 information Synergy obtained through discovery and investigation conducted in preparation for 2 trial. See section I.B.2.c, at p.17 3 a. Synergy’s State Action-Based Cross-Claims Assert Claims Not Presented In 4 Synergy’s Appeal 5 GBI’s first contention, in support of its claims of bad faith, is that Synergy pled its “state 6 actor” claims when it sought leave to amend to allege a fourth amended complaint in District 7 Court, and Synergy’s proposed cross-claims here are “nearly” the same. Op. at 13. GBI asserts 8 that Synergy has “no explanation” for why it did not plead its claims against GBI that were 9 included in its proposed amended complaint submitted to the district court in August 2019 when 10 this case was remanded to this court, in one of various assertions GBI makes to imply that GBI’s 11 pursuit of its proposed cross-claims here are somehow illicit. Op., at p.10. But GBI’s own 12 statement contains the reasons why (1) Synergy did not replead its “state actor” claims in its 13 original cross-compliant, and (2) why it seeks to file them now. 14 Synergy did move to amend to allege GBI’s liability as a “state actor” for Synergy’s federal 15 claims during the federal court proceedings; the court granted dismissal of Synergy’ s proposed 16 amendment without considering it.6 Synergy appealed the court’s failure to rule on Synergy’s 17 motion to amend, thus preserving that issue (and Synergy’s claims as then pled). Upon remand 18 of this case to this Court, Synergy thus had no need to replead the exact same claims appealed. 19 But as GBI grudgingly admits, Synergy’s proposed cross-claims and its state actor 20 allegations here are not the same as those presented to the District Court. And the differences are 21 material. In its 2019 proposed fourth amended complaint, Synergy alleged that in October 2015, 22 GBI opposed Synergy’s removal from the Haight Street Project, both directly to Synergy and 23 formally, but was compelled by the City to remove Synergy. See GBI Request for Judicial 24 6 The Court did not reach the merits of the motion to amend, but, in an minute order, 25 expressly declined to consider the motion, and on that basis denied it without prejudice. Because the Court subsequently entered judgment, neither that court, (nor any court) has ever addressed 26 the merits of Synergy’s state actor allegations. SYNERGY’S REPLY ISO MOTION FOR LEAVE 14 Case Nos. CGC-17-560034, CGC-19-576488, TO FILE FOURTH AMENDED COMPLAINT (consolidated) 27 AND FIRST AMENDED CROSS-COMPLAINT 28 1 Notice, Ex. 5, ¶¶ GBI notes that in its complaint, it “confirmed that on October 9, 2019, the City 2 demanded that GBI identify ‘one of more alternative subcontractors to replace Synergy’ and that 3 GBI ultimately did engage replacement subcontractors.” Op., at p.15 (emphasis added)(citing 4 GBI complaint, at ¶¶16-17, 24). But in its proposed FACC herein (and unlike its 2019 proposed 5 FACC), Synergy alleges that GBI was not compelled to replace Synergy, but did so willingly, 6 pursuant to an agreement GBI’s principal, Michael Ghilotti, reached with Mohammed Nuru and 7 concealed from Synergy. See Knadler Decl., Ex.4 (FACC), ¶¶31-35, Knadler Reply Decl., Ex. B 8 (letter explaining basis for Synergy’s proposed cross-claims); Mirsaidi Decl., ¶2 (explaining 9 GBI’s representations to Synergy of GBI’s opposition to Synergy’s removal). While GBI alleges 10 in its complaint that it “ultimately” replaced Synergy, Synergy alleges, in its proposed that GBI 11 agreed to replace Synergy from the start, even though it was at the time telling Synergy the 12 opposite. See Knadler Reply Decl., Ex. B, and ¶¶1-4 (describing Synergy’s discovery that at the 13 same time GBI was representing, in its communications to Synergy and its statements under 14 oath, GBI’s opposition to Synergy’s removal from the Haight Street Project, GBI’s principal, 15 Mike Ghilotti, reached a private agreement with Mohammed Nuru to remove and replace 16 Synergy from the project). These allegations are not included in Synergy’s proposed 2019 17 FACC, which also did not allege a conspiracy claim (between GBI and Nuru), as Synergy’s 18 proposed FACC herein does. 19 And GBI’s opposition itself states the law regarding state action that gives the new 20 allegations import. See Op., at p. 19 (describing tests for “state action”). GBI notes that the 21 courts have established multiple tests for state action, and asserts that “willful participation” by 22 the private party is a prerequisite to a finding of state action. Id. In its previously-filed 2019 23 proposed FACC, Synergy alleged that GBI was compelled to remove Synergy by the City (and 24 25 26 SYNERGY’S REPLY ISO MOTION FOR LEAVE 15 Case Nos. CGC-17-560034, CGC-19-576488, TO FILE FOURTH AMENDED COMPLAINT (consolidated) 27 AND FIRST AMENDED CROSS-COMPLAINT 28 1 thus was a state actor pursuant to the “compulsion or coercion” test.7 As GBI’s opposition makes 2 clear, GBI contends that (based on the 2019 proposed FAC allegations) it nevertheless lacked the 3 sufficient willfulness for state action purposes. But in its proposed FACC herein, Synergy alleges 4 that GBI was a willing participant in Synergy’s removal from the start, pursuant to an agreement 5 GBI hid from Synergy. Thus, under Synergy’s proposed FACC, GBI is a state actor not just 6 under the compulsion test, but also under the joint action test.8 In other words, one reason 7 Synergy’s proposed FACC herein is materially different is because it states factual allegations 8 that supply the willfulness that GBI itself contends Synergy’s previous pleadings lacked. 9 b. GBI does not dispute the allegations that form the basis for Synergy’s Proposed First 10 Amended Cross-Complaint 11 In its opposition, GBI does not dispute that it concealed from Synergy Mike Ghilotti’s 12 October 13, 2019 agreement with Nuru to replace Synergy on the Haight Street Project, that GBI 13 or Synergy’s allegation (in its proposed FACC herein) that GBI subsequently worked with Nuru 14 to manipulate the Haight Street Project records to enable GBI to receive payment for work done 15 by Synergy that GBI and the City approved. In fact, GBI does not acknowledge the latter 16 allegations, even though they form the basis for Synergy’s proposed claim in its FACC for unjust 17 enrichment.9 18 7 Under the state compulsion (or “coercion”) test, state action is found “when the 19 State 'has exercised coercive power or has provided such significant encouragement, either overt or covert, that the choice must in law be deemed to be that of the State."See George 20 v. Pac.-CSC Work Furlough, 91 F.3d 1227, 1232 (9th Cir. 1996) (citing Gorenc v. Salt River Project Agric. Improvement & Power Dist., 869 F.2d 503, 508 (9th Cir. 1989). 8 21 Under the joint action test, private actors can be state actors if they are 'willful participant[s] in joint action with the state .... ". George v. Pac.-CSC Work Furlough, 91 F.3d at 22 1231. 9 Neither does GBI acknowledge, much less dispute, Synergy’s allegations in its 23 proposed FACC herein (1) that GBI and its president, Mike Ghilotti, enjoyed close relationships with Nuru, Harlan Kelly and former Mayor Ed Lee, and were perceived by them to be “friends” 24 of the “City Family”, within the meaning of the City Attorney and City Controller’s post-sandal reports (see Knadler Decl.(PFACC, ¶51)); or that GBI bolstered its status as a “friend” of the 25 “City Family” through contributions to “friends” organizations created by Nuru and other government officials identifiedas vehicles for abuse and corruption by the City Attorney and City 26 Controller postscandal reports (see id. PFACC, ¶52). SYNERGY’S REPLY ISO MOTION FOR LEAVE 16 Case Nos. CGC-17-560034, CGC-19-576488, TO FILE FOURTH AMENDED COMPLAINT (consolidated) 27 AND FIRST AMENDED CROSS-COMPLAINT 28 1 c. Synergy’s Proposed First Amended Cross-claim is based on Synergy’s discovery and 2 investigatio