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  • POLYMATHIC PROPERTIES, INC. ET AL VS. DEAN LUCA KRAUSE ET AL CONTRACT/WARRANTY document preview
  • POLYMATHIC PROPERTIES, INC. ET AL VS. DEAN LUCA KRAUSE ET AL CONTRACT/WARRANTY document preview
  • POLYMATHIC PROPERTIES, INC. ET AL VS. DEAN LUCA KRAUSE ET AL CONTRACT/WARRANTY document preview
  • POLYMATHIC PROPERTIES, INC. ET AL VS. DEAN LUCA KRAUSE ET AL CONTRACT/WARRANTY document preview
  • POLYMATHIC PROPERTIES, INC. ET AL VS. DEAN LUCA KRAUSE ET AL CONTRACT/WARRANTY document preview
  • POLYMATHIC PROPERTIES, INC. ET AL VS. DEAN LUCA KRAUSE ET AL CONTRACT/WARRANTY document preview
  • POLYMATHIC PROPERTIES, INC. ET AL VS. DEAN LUCA KRAUSE ET AL CONTRACT/WARRANTY document preview
  • POLYMATHIC PROPERTIES, INC. ET AL VS. DEAN LUCA KRAUSE ET AL CONTRACT/WARRANTY document preview
						
                                

Preview

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 14 Attorneys for Plaintiffs 15 POLYMATHIC PROPERTIES, INC., a California corporation and MEYER CORPORATION, U.S., a Delaware corporation 16 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 ) 27 28 -1- 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 -2- 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. 27 28 -3- 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 6 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 13 (emphasis added.) 14 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”].) -4- 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”) 275 Battery Street, Suite 2000 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 -5- 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 275 Battery Street, Suite 2000 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 -6- 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 275 Battery Street, Suite 2000 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. 18 /// 19 /// 20 /// 21 /// 22 /// 23 /// 24 /// 25 /// 26 /// 27 /// 28 /// -7- 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 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -8- 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. 9 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: 11 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 24 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. 28 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. 2 3 4 Cindy Wallin 5 6 7 8 9 10 11 Gordon Rees Scully Mansukhani, LLP 12 275 Battery Street, Suite 2000 San Francisco, CA 94111 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -10- Opposition to Motion for Leave to Amend Cross-Complaint