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David Ossentjuk prevails in appellate case

08.26.2009

Litigation partner David Ossentjuk prevailed on behalf of client Signum Systems in Dabrowski, et al. v Signum Systems Corporation, et al., 2d Civil No. B210268. The Court of Appeal affirmed the trial court’s grant of summary adjudication of issues in favor of Signum.

Plaintiffs, who were former employees and current shareholders of defendant Signum, claimed that they had been promised additional stock in the company in return for their long term loyalty and service to the company. They sued the company and its president/majority shareholder for breach of oral contract, breach of fiduciary duty, and fraud. They alleged that they were entitled to the stock or monetary damages equal to the value of the stock. Signum elected to tender the stock to the plaintiffs pursuant to Civil Code Section 1485 and Code of Civil Procedure Section 2074. Signum filed at the same time a motion for summary adjudication of issues based on the contention that our client’s tender of the stock extinguished all of plaintiffs’ damages. After continuing the hearing to permit plaintiffs an opportunity to identify additional discovery they might conduct, the court granted the motion in its entirety. The court then denied plaintiffs’ motion for leave to file an amended complaint. Those two rulings were affirmed on appeal in an unpublished decision.

The case is significant in two respects. First, the tender provisions in the Civil Code and Code of Civil Procedure are relatively unknown and little used, but potentially powerful tools for a defendant facing a claim for specific performance. If the plaintiff’s damages are alleged to be equal to the value of the disputed property, a defendant should think seriously about simply tendering the property. In this case, even after tendering the disputed stock, the plaintiffs nonetheless own less than one-third of the outstanding shares, which makes it difficult for them to involuntarily dissolve the corporation. Second, the case is a reminder of the fact that a plaintiff that wants to amend its complaint to avoid a motion for summary judgment or summary adjudication must file a motion for leave to amend as soon as possible after the potentially dispositive motion is filed, and should seek to have the motion for leave to amend heard on shortened notice if necessary to make sure that it is ruled upon before the summary judgment motion is heard. In this case, despite the policy of liberality in granting leave to amend, the court found that the plaintiffs had simply waited too long to seek leave to amend.

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