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1 ROBERT H. PLATT (SBN 108533)
MANATT, PHELPS & PHILLIPS, LLP
2 2049 Century Park East, Suite 1700
Los Angeles, CA 90067 ELECTRONICALLY
3 Telephone: (310) 312-4000
Facsimile: (310) 312-4224 F I L E D
Superior Court of California,
4 rplatt@manatt.com County of San Francisco
5 KEVIN P. DWIGHT (SBN 239476) 06/29/2020
Clerk of the Court
STEPHANIE A. ROESER (SBN 306343) BY: RONNIE OTERO
6 1 Embarcadero Center, 30th Floor Deputy Clerk
San Francisco, CA 94111
7 Telephone: (415) 291-7400
Facsimile: (415) 291-7474
8 kdwight@manatt.com
sroeser@manatt.com
9
MICHAEL D. BRUNO (SBN 166805)
10 MICHAEL A. DUBIN (SBN 212581)
SCOTT M. MCLEOD (SBN 242035)
11 GORDON REES SCULLY MANSUKHANI, LLP
275 Battery Street, Suite 2000
Gordon Rees Scully Mansukhani, LLP
12 San Francisco, CA 94111
275 Battery Street, Suite 2000
Telephone: (415) 986-5900
San Francisco, CA 94111
13 Facsimile: (415) 986-8054
mbruno@grsm.com
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Attorneys for Plaintiffs
15 POLYMATHIC PROPERTIES, INC., a California corporation
and MEYER CORPORATION, U.S., a Delaware corporation
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17 SUPERIOR COURT FOR THE STATE OF CALIFORNIA
18 IN AND FOR THE COUNTY OF SAN FRANCISCO
19 POLYMATHIC PROPERTIES, INC., a ) CASE NO. CGC-17-557774
California corporation, MEYER )
20 CORPORATION, U.S., a Delaware corporation, )
) PLAINTIFFS’ OPPOSITION TO
21 Plaintiffs, DEFENDANT DEAN LUCA
)
vs. KRAUSE’S MOTION FOR LEAVE
)
22 TO AMEND CROSS-COMPLAINT
DEAN LUCA KRAUSE, an individual; CHEUK )
23 LIN CHIU, an individual and DOES 1 through 25, ) Date: August 12, 2020
) Time: 9:00 a.m.
24 Defendants. ) Dept.: 613
)
25 ) Complaint Filed: March 27, 2017
AND RELATED CROSS-ACTION. Cross-Complaint Filed: June 9, 2017
)
26 )
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Opposition to Motion for Leave to Amend Cross-Complaint
1 I. INTRODUCTION
2 Defendant Dean Krause’s Motion for Leave to Amend Cross-Complaint should be
3 denied. Defendant seeks to significantly expand the scope of this litigation and discovery by
4 adding a new cross-defendant, Meyer Manufacturing Company Limited (“MHK”), a Hong
5 Kong corporation, and a new contract claim against MHK and Plaintiffs Meyer Corporation,
6 U.S. “MUS”) and Polymathic Properties (“PMP”). The “new fact” supporting this significant
7 expansion is a contract, which Defendant refers to as the September 1, 2013 Amendment, that
8 Krause himself signed over seven years ago. Krause’s prior counsel in this matter was well
9 aware of the contract: it was attached to Krause’s initial Cross-Complaint filed three years ago.
10 In the supporting declaration filed with the Motion for Leave to Amend, Krause’s current
11 counsel asserts that he became of the allegedly new fact some unspecified time after his firm
Gordon Rees Scully Mansukhani, LLP
12 was retained in November 2018 – over one and a half years ago. The delay is undue and
275 Battery Street, Suite 2000
San Francisco, CA 94111
13 unexplained.
14 Furthermore, the new entity that Krause seeks to add as a defendant, MHK, was not
15 even Krause’s employer at the time of his termination. Krause’s services contract with MHK
16 expired and was superseded more than three years before Krause was fired. (See September 1,
17 2013 agreement [Exhibit B to Krause’s Notice of Motion] (“MHK and Employee mutually
18 agree to terminate the Third Amended and Restated Services Agreement dated as of June 1,
19 2012”.) Thus, the only connection between Krause and MHK at the time of Krause’s
20 termination was that MHK purportedly agreed to “guaranty the timely payment of any sums
21 and benefits owed by PMP.” In light of MHK’s tenuous connection to this dispute, and
22 consistent with the terms of the purported contract, Plaintiffs offered to enter into a stipulation
23 by which MHK would guaranty the payment of any judgment ultimately obtained by Krause,
24 to the extent PMP and/or MUS failed to satisfy it. Krause refused without explanation,
25 suggesting that his true motive in adding MHK is to expand discovery to a foreign entity
26 unrelated to this dispute, rather than enforcing the terms of his purported contract with MHK.
27 The parties have already engaged in significant written discovery, and the Court has
28 already decided numerous discovery motions. Allowing amendment to include a brand new
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Opposition to Motion for Leave to Amend Cross-Complaint
1 party – located in Hong Kong, no less – will likely lead to a new round of discovery disputes.
2 Greatly expanding the scope of issues and discovery, with witnesses and documents overseas,
3 likely requiring extensive translation, does not further justice given Defendant’s lengthy and
4 unexplained delay. The motion for leave should be denied.
5 II. PROCEDURAL HISTORY
6 Plaintiffs terminated Krause’s at-will employment effective March 10, 2017, and filed
7 their complaint against their faithless fiduciary over three years ago on March 27, 2017. (Ex. A
8 to Declaration of Kevin P. Dwight filed herewith [“Dwight Decl.”].) Plaintiffs asserted causes
9 of action against Krause for breach of contract, breach of fiduciary duty, and declaratory and
10 injunctive relief. (Id.) As set forth in the Complaint, Plaintiffs allege that Krause improperly
11 took hundreds of confidential and privileged communications and documents from Plaintiff,
Gordon Rees Scully Mansukhani, LLP
12 and secretly and illegally recorded conversations between himself and his clients (Plaintiffs).
275 Battery Street, Suite 2000
San Francisco, CA 94111
13 (Id., ¶¶ 30 – 38.)
14 In addition, the Meyer executives whom Krause secretly and unlawfully recorded filed
15 a separate lawsuit against Krause for his violations of Penal Code section 632. (See Johnston,
16 et al. v. Krause, Superior Court of California, County of Solano, Case No. FCS048702.)
17 (Ex. B to Dwight Decl.) The Meyer executives recently obtained judgments in their favor and
18 against Krause in that action. (Id.)
19 On June 9, 2017, over two months after Plaintiffs initiated this action, Krause filed a
20 Cross-Complaint, asserting numerous causes of action against MUS and PMP relating to the
21 termination of his employment.
22 In August 2018, Plaintiffs amended their Complaint to dismiss, without prejudice, their
23 causes action for breach of contract and breach of fiduciary duty. (Dwight Decl. ¶ 4.)
24 Plaintiffs’ operative Third Amended Complaint challenges the validity of the presumptively
25 invalid employment agreements that Krause drafted and caused Plaintiffs to enter into while
26 serving as their attorney and director.
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Opposition to Motion for Leave to Amend Cross-Complaint
1 Almost three years after filing his cross-complaint, Krause now seeks leave to amend
2 his complaint to add (i) an entirely new party and (ii) an entirely new contract claim, without
3 justification or any credible explanation for the delay.
4 III. ANALYSIS
5 A. Defendant’s Request Should Be Denied Because the Supporting Declaration
Does Not Meet the Requirements of the Rules of Court
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7 Defendant’s request for leave to amend should be denied because the motion does not
8 comply with California Rules of Court, Rule 3.1324(b), which requires a supporting
9 declaration that must specify:
10 (1) The effect of the amendment;
(2) Why the amendment is necessary and proper;
11 (3) When the facts giving rise to the amended allegations were
discovered; and
Gordon Rees Scully Mansukhani, LLP
12 (4) The reasons why the request for amendment was not made
275 Battery Street, Suite 2000
earlier.
San Francisco, CA 94111
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(emphasis added.)
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15 Defendant has not met these requirements. First, the declaration of Johnathan
16 Rauchway is fatally vague when attempting to state when the “facts” giving rise to the
17 amendment were discovered. Mr. Rauchway states that his firm was retained in or “about
18 November 2018” and that “[f]ollowing Cross-Complainant’s retention of new counsel, the
19 facts that give rise to the proposed First Amended Cross-Complaint were discovered through
20 investigation by Krause’s legal counsel.” (Declaration of Jonathan Rauchway, filed March 20,
21 2020, ¶ 5.) That is, the declaration states only that the facts were discovered sometime
22 between November 2018 and March 2020 – a period of over one and a half years. Moreover,
23 as discussed further below, the declaration only purports to demonstrate when Defendant’s
24 current counsel “discovered” the new “facts.” It is silent as to the knowledge of Krause
25 himself and Krause’s prior counsel.
26 Second, Defendant’s declaration at most gives lip service as to the fourth requirement,
27 why the amendment was not sought earlier. (Rauchway Decl., ¶ 6 [merely reciting that leave
28 was sought at the “earliest practical time after the discovery of those facts”].)
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Opposition to Motion for Leave to Amend Cross-Complaint
1 B. The Request Should Be Denied Because Defendant’s Delay Is Unwarranted
2 Defendant’s lengthy and unexplained delay by itself warrants denial of his request for
3 leave. “The law is also clear that even if a good amendment is proposed in proper form,
4 unwarranted delay in presenting it may – of itself – be a valid reason for denial.” (Emerald
5 Bay Community Assn. v. Golden Eagle Ins. Corp. (2005)130 Cal.App.4th 1078, 1097, citing
6 Leader v. Health Industries of America, Inc. (2001) 89 Cal.App.4th 603, 613; see also Green
7 v. Rancho Santa Margarita Mortgage Co. (1994) 28 Cal.App.4th 686, 692.)
8 The substance and content of the papers filed by Plaintiff fail to justify the delay. As
9 shown by Defendant’s moving papers, the alleged “new facts” supporting the amendment to
10 name MHK are that, by contract, MHK could be obligated to pay to Defendant an amount
11 found owing to him by Plaintiffs. Specifically, Defendant argues that the September 1, 2013
Gordon Rees Scully Mansukhani, LLP
12 agreement between himself, PMP, MUS, and MHK (the “September 1, 2013 Amendment”)
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San Francisco, CA 94111
13 creates the obligation that serves as the basis for naming MHK in this lawsuit. (See
14 Memorandum of Points and Authorities in Support of Motion for Leave to Amend Cross-
15 Complaint, at 3:3-15 and 4:26-27 [“the September 1, 2013 Amendment on which Krause’s
16 new claim is based…”].) Defendant alleges that paragraph 4 of that agreement provides that
17 “MHK guarant[ees] the timely payment of any sums and benefits owed by PMP.” (Id. at 3:10-
18 12.) As described above, the Rauchway Declaration shows only that Defendant’s current
19 counsel discovered the “facts” supporting amendment, i.e. the September 1, 2013 Amendment,
20 at some unmentioned time after November 2018. Defendant’s motion says nothing about when
21 Defendant himself or his prior counsel learned of the supposedly new facts. For good reason.
22 Defendant executed that the September 1, 2013 Amendment in 2013. (See Proposed
23 First Amended Complaint at ¶ 15, and exhibit B thereto.) Dean Krause – Plaintiffs’ in-house
24 counsel – has known about MHK’s potential obligation for over seven years. (See e.g. Melican
25 v. Regents of University of California (2007) 151 Cal. App. 4th 168, 176 [denying leave to
26 amend where, among other things, the parties seeking leave “were aware of the facts
27 underlying the purported contract [at issue in the amendment] from the time the agreement
28 allegedly was formed”].) There is nothing “new” about MHK’s alleged contractual
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Opposition to Motion for Leave to Amend Cross-Complaint
1 obligations – Defendant knew about them from the day the September 1, 2013 Amendment
2 was signed.
3 Further, Defendant attached a copy of the September 1, 2013 Amendment as Exhibit B
4 to his initial Cross-Complaint filed in June 2017. (Memorandum of Points and Authorities in
5 Support of Motion for Leave to Amend Cross-Complaint, at 4:26-27 [“the September 1, 2013
6 Amendment on which Krause’s new claim is based was attached to the original Cross-
7 Complaint as Exhibit B…”].) Defendant knew about the contract since at 2013, and
8 Defendant’s prior counsel not only knew about the agreement in 2017 but also attached and
9 incorporated it into Defendant’s Cross-Complaint over three years ago.
10 Courts have upheld the denial of a motion for leave to file an amended pleading where,
11 as here, the party delays bringing the motion. (Duchrow v. Forrest (2013) 215 Cal.App.4th
Gordon Rees Scully Mansukhani, LLP
12 1359, 1377.) Defendant’s supporting Declaration avoids fully disclosing when the facts
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San Francisco, CA 94111
13 allegedly supporting the amendment were discovered and why amendment was not sought
14 earlier because it is evident that Defendant and prior counsel were well aware of the
15 September 1, 2017 Amendment, and understood its import enough to attach it to his original
16 Cross-Complaint, yet made the decision to not name MHK as a defendant until three years
17 later. Defendant’s intentional delay must be rejected.
18 C. Plaintiffs Face Prejudice if Amendment Is Allowed
19 Defendant’s late attempt to significantly expand the scope of this lawsuit and discovery
20 will cause substantial prejudice to Plaintiff and may re-open discovery disputes that the Court
21 has already resolved. The policy in favor of liberal amendment applies “only ‘[w]here no
22 prejudice is shown to the adverse party.’” (Melican supra, 151 Cal.App.4th at 175.) In this
23 case, while the delay alone warrants denial of leave, the Court should deny leave for the
24 further reason that the amendment unjustly prejudices Plaintiffs by substantially expanding
25 scope of discovery.
26 Indeed, the facts suggest that the expanded scope of discovery, and the burdens it will
27 impose on Plaintiffs, is the driving force behind the proposed amendment. When Defendant
28 proposed an amendment to name MHK, Plaintiffs’ counsel responded by offering to stipulate
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Opposition to Motion for Leave to Amend Cross-Complaint
1 that MHK would satisfy any judgment that Defendant might obtain against Plaintiffs that
2 Plaintiffs did not satisfy, without the necessity of adding MHK as a party. (Dwight Decl., ¶ 6.)
3 Defendant’s counsel refused, arguing only that Defendant had the right to name parties as he
4 so desired (Dwight Decl., ¶ 7.) Because Defendant has not fully explained the reason for the
5 delay and rejected Plaintiff’s reasonable proposal without convincing reason, it can be inferred
6 that Defendant’s reasons are tactical and an attempt to gain leverage.
7 Proposed cross-defendant MHK is a Hong Kong corporation. (Proposed First
8 Amended Complaint at ¶ 4.) If MHK is added to this lawsuit, the parties will be required to
9 engage in extensive and complicated extra-territorial discovery. Plaintiffs have already
10 responded to four sets of Requests for Production of Documents propounded by Defendant
11 and produced thousands of pages of documents. (Declaration of Scott McLeod filed herewith,
Gordon Rees Scully Mansukhani, LLP
12 ¶ 2.) The Court has already decided numerous discovery motions, including Defendant’s
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San Francisco, CA 94111
13 motion to compel further responses to requests for production (sets one and two) and
14 Plaintiff’s motion to compel further responses to form and special interrogatories and requests
15 for production. (Ex. A to McLeod Decl.) Greatly expanding the scope of discovery threatens
16 to upset the discovery work that the parties and Court have already conducted. The motion for
17 leave should be denied.
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Opposition to Motion for Leave to Amend Cross-Complaint
1 IV. CONCLUSION
2 Plaintiffs request that Defendant’s motion for leave to amend be denied. Defendant –
3 practicing lawyer – knew about the contract upon which he relies since its execution in 2013.
4 Defendant relied upon the contract in his initial pleading. There is nothing new about it. What
5 is new is the significant expansion of discovery that amendment will unleash at this late stage,
6 after significant document and written discovery has already been conducted. Defendant has
7 not adequately justified his significant delay, and the motion should be denied.
8 Dated: June 29, 2020 GORDON REES SCULLY MANSUKHANI, LLP
9
By:
10 Michael D. Bruno
Michael A. Dubin
11 Scott M. McLeod
Attorneys for Plaintiffs
Gordon Rees Scully Mansukhani, LLP
12 POLYMATHIC PROPERTIES, INC., a
275 Battery Street, Suite 2000
California corporation and MEYER
San Francisco, CA 94111
13 CORPORATION, U.S., a Delaware
corporation
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Opposition to Motion for Leave to Amend Cross-Complaint
1 PROOF OF SERVICE
Polymathic Properties, Inc., et al. v. Krause, et al.
2 San Francisco Superior Court, Case No CGC-17-557774
I am a resident of the State of California, over the age of eighteen years, and not a party
3 to the within action. My business address is: Gordon Rees Scully Mansukhani, LLP 3
Parkcenter Drive, Suite 200, Sacramento, CA 95825. On the date below, I served the within
4 documents:
5 PLAINTIFFS’ OPPOSITION TO DEFENDANT DEAN LUCA KRAUSE’S MOTION
FOR LEAVE TO AMEND CROSS-COMPLAINT
6
Via Electronic Filing/Service: By instructing Nationwide to serve all parties listed on the
7 E-Service list on the court’s website.
Via Electronic Transmission: By transmitting via electronic mail the document(s) listed
8 above to the e-mail address(es) set forth below.
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Via FedEx: By placing a true copy thereof enclosed in a sealed envelope, at a station
designated for collection and processing of envelopes and packages for overnight
10 delivery by FedEx as part of the ordinary business practices of Gordon & Rees LLP
described below, addressed as follows:
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Via U.S. Mail: By placing the document(s) listed above in a sealed envelope with
postage thereon fully prepaid, in United States mail in the State of California at San
12
Francisco, addressed as set forth below.
13
Counsel for Dean Luca Krause Co-Counsel for Polymathic Properties,
14 Inc., and Meyer Corporation, U.S.
Chad D. Williams
15 Jonathan W. Rauchway Robert H. Platt
Kevin Chen MANATT, PHELPS & PHILLIPS, LLP
16 DAVIS GRAHAM & STUBBS LLP 2049 Century Park East, Suite 1700
1550 17th Street, Suite 500 Los Angeles, CA 90067
17 Denver, CO 80202 Telephone: 310.312.4000
Telephone: 303.892.9400 Facsimile: 310.312.4224
18 Facsimile: 303.893.1379 rplatt@manatt.com
chad.williams@dgslaw.com
19 jon.rauchway@dgslaw.com Kevin P. Dwight
kevin.chen@dgslaw.com Stephanie A. Roeser
20 MANATT, PHELPS & PHILLIPS, LLP
1 Embarcadero Center, 30th Floor
21 San Francisco, CA 94111
Telephone: 415.291.7400
22 Facsimile: 415.291.7474
sroeser@manatt.com
23 kdwight@manatt.com
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I am readily familiar with the firm’s practice of collection and processing
25 correspondence for mailing. Under that practice it would be deposited with the U.S. Postal
Service on that same day with postage thereon fully prepaid in the ordinary course of business.
26 I am aware that on motion of the party served, service is presumed invalid if postal
cancellation date or postage meter date is more than one day after the date of deposit for
27 mailing in affidavit.
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PROOF OF SERVICE
1 I declare under penalty of perjury under the laws of the State of California that the
above is true and correct. Executed on June 29, 2020, at Sacramento, California.
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Opposition to Motion for Leave to Amend Cross-Complaint