Kyle B. Hardy, et al. v. Cresco Labs, Inc., et al.

In February 2024, Plaintiffs filed a first amended complaint (FAC) which newly alleged that defendant Charles Bachtell “made these promises on behalf of himself, [Canadian] Cresco, and Cresco’s other owned and controlled subsidiaries ....” (FAC, ¶¶ 14.) Paragraph 30 of the FAC then alleges, “These fictitiously named Defendants are other [Canadian] Cresco entities, as well as [Canadian] Cresco’s directors, officers, and other members of management, employees, and/or

consultants who were involved in the wrongdoing detailed herein. These Does 1-25 Defendants aided and abetted and/or conspired with the named Defendants in the wrongful acts and course of conduct ... claimed herein ....”1

On March 8, 2024, Canadian Cresco and Illinois Cresco produced four documents in response to Plaintiffs’ requests for production. (03/13/24 Baskin Decl., ¶ 27.) Sometime between that date and April 11, 2024, Illinois Cresco provided (a) a list of all trademarks registered to any Cresco entity by the State of California and (b) the same two federal patents which Plaintiffs had submitted in June 2023. (04/11/24 Seaman-Grant Decl., ¶ 13, Exs. C-E.) Both patents produced showed Illinois Cresco ownership and all but two of the California trademarks were owned by Illinois Cresco.

Discovery disputes arose which led to motions to compel further responses heard by the Court on May 1, 2024, and October 2, 2024. The first discovery motion sought further responses from Canadian Cresco, SLO Cresco, and Bachtell. In addition, Plaintiffs served a document subpoena on Illinois Cresco “because it appears to own some of the intellectual property at issue and potentially owns, controls, and manages [Canadian] Cresco’s subsidiaries in California.” (03/13/24 Mtn., p. 7, fn. 2.) The Court denied the requests to compel further responses from Illinois-Cresco on the ground “[t]hat entity has not been named as a party, and Plaintiffs have not provided authority on which the Court can compel that out-of-state entity to comply with the propounded discovery.” (05/01/24 Ruling, p. 2.)

The Court directed further responses to Plaintiffs’ requests for production seeking “DOCUMENTS sufficient to show the organizational, ownership, and operational relationships between [Canadian-] CRESCO, Cresco US Corp., Cresco Labs LLC, Cresco Labs Notes Issuer, LLC, CRESCO SLO, and SLO.” (05/01/24 Order, pp, 2 [SLO Cresco], 3 [Canadian Cresco]; see also 05/09/24 Stip. & Order [parties’ agreement that Plaintiffs would serve additional discovery “narrowly tailored to ascertain the identification and ownership of the Intellectual Property licensed in the [SPA and License Agreement].”].)

SLO Cresco provided supplemental responses on May 10, 2024, which included an Operating Agreement for SLO Cresco with Illinois Cresco (effective April 17, 2018), an Amended and Restated Operating Agreement for SLO Cresco with Cresco Labs Notes Issuer, LLC (effective June 14, 2019, and a First Amendment to the Amended and Restated Operating Agreement (effective September 10, 2021). (07/26/24 Baskin Decl., ¶¶ 14, 28-29, Exs. 16-18.)2

After a successful demurrer filed by SLO Cresco and the individual defendants, Plaintiffs filed a second amended complaint (SAC) on October 23, 2024. (10/02/24 Ruling on Demurrer to FAC.)

1 The Doe allegations in the initial complaint were limited to “[Canadian] Cresco’s directors, officers, and other members of management, employees and/or consultants who were involved in the wrongdoing detailed herein.” (Cmpl., ¶ 23.) 2 Illinois Cresco argues Plaintiffs signed the amended bylaws of SLO Cultivation, Inc. in 2018, which identifies “Cresco Labs, LLC, an Illinois limited liability company,” as the “parent” of Cresco Labs SLO, LLC, responsible for providing certain defined “Corporate Services” under the parties’ transaction documents. (Mtn., p. 6, ll. 14- 19.) In support, Illinois Cresco cites exhibit 1 of the SAC which is the SPA. Exhibit A of the SPA is the amended bylaws. However, exhibit A of the SPA was not filed with the SAC.

The SAC did not name any new defendants and maintained the DOE allegations asserted in the FAC. (SAC, ¶¶ 14, 32.)

On November 1, 2024, SLO Cresco served a supplemental discovery response which identified Illinois Cresco as the owner of the brands and other intellectual property enumerated in the SPA. (04/02/26 Baskin Decl., Ex. 14.) The supplemental response confirmed that Illinois Cresco owned those brands at all times between June 7, 2018, and the date of the supplemental discovery response. (Ibid.)

On August 27, 2025, the Court granted Canadian Cresco’s motion to quash 3 and overruled the demurrer to the SAC filed by the other defendants. SLO Cresco and the individual defendants filed an answer to the SAC on September 4, 2025.

In their opposition to the motion to quash, Plaintiffs had requested leave to amend the complaint to name Illinois Cresco as a defendant. The Court stated, “Any request to add an additional defendant should be made by the appropriate motion.” (08/27/25 Ruling, p. 6.)4 On January 28, 2026, Plaintiffs filed a Doe amendment adding Cresco Labs, LLC, a limited liability company existing under the laws of the state of Illinois (Illinois Cresco). 5

On calendar is Illinois Cresco’s motion to quash service of the summons and complaint. Illinois Cresco argues (1) adding it via a Doe amendment was improper and (2) the allegations of the SAC do not support this Court’s exercise of jurisdiction over Illinois Cresco.

For the reasons set forth below, the motion is granted.

II. DISCUSSION

A. Plaintiffs Failed to Comply with Code of Civil Procedure Section 474

“Improper service of a defendant under section 474 may be attacked by a motion to quash. [Citation.]” (McClatchy v. Coblentz, Patch, Duffy & Bass, LLP (2016) 247 Cal.App.4th 368, 371- 372, 375 (McClatchy); see also Maier Brewing Co. v. Flora Crane Service, Inc. (1969) 270 Cal.App.2d 873, 875 [“If the terms of Code of Civil Procedure section 474 have not been complied with, the purported defendant has not been named as such in the complaint. A service upon one not named in a complaint does not confer jurisdiction to proceed upon the complaint against him, and a motion to quash is proper.”].)

3 Canadian Cresco had filed a new motion to quash in July 2024. 4 This was not an order or directive but merely a denial of the request to add a defendant by way of Plaintiffs’ opposition to the motion to quash. 5 During the first three years of litigation, the parties stipulated to two stays. The first in February 2025 which stayed the case pending the outcome of the Parties’ mediation. (02/06/25 Stip. & Order.) It does not appear the parties ever complied with this stay as they continued to submit filings to the Court. The second was issued after the Court ruled on Canadian Cresco’s motion to quash and stayed discovery pending mediation. (08/27/25 Ntc. of Ruling, ¶ 5.)

1.

Legal Standard

Section 474 allows a plaintiff who is ignorant of a defendant’s identity to designate the defendant in a complaint by a fictitious name (typically, as a “Doe”), and to amend the pleading to state the defendant’s true name when the plaintiff subsequently discovers it. ... this procedure is available only when the plaintiff is actually ignorant of the facts establishing a cause of action against the party to be substituted for a Doe defendant. [Citation.] “The question is whether [the plaintiff] knew or reasonably should have known that he had a cause of action against [the defendant].” [Citation.]

(McClatchy, supra, 247 Cal.App.4th at pp. 371-372, footnote omitted.)

The test is whether, at the time the complaint was filed, the plaintiff “ ‘was ignorant of the facts giving [her] a cause of action against the person.’ ” [Citation.] The focus is on the facts that the plaintiff knew, not on whether the plaintiff subjectively knew she had a cause of action based on those facts. [Citation]. While the plaintiff’s ignorance must be genuine, and the plaintiff cannot claim ignorance simply because she did not know all the details of the person’s involvement, the plaintiff is not barred from invoking section 474 merely because she suspected the person of wrongdoing based on an incomplete set of facts.

(Hahn v. New York Air Brake LLC (2022) 77 Cal.App.5th 895, 899-900 (Hahn);6 McClatchy, supra, 247 Cal.App.4th at p. 372 [same].)

“Section 474 allows a plaintiff in good faith to delay suing particular persons as named defendants until he has knowledge of sufficient facts to cause a reasonable person to believe liability is probable. The distinction between a suspicion that some cause could exist and a factual basis to believe a cause exists is critical in the operation of section 474.” (General Motors Corp. v. Superior Court (1996) 48 Cal.App.4th 580, 595, quoting Dieckmann v. Superior Court (1985) 175 Cal.App.3d 345, 363.)

2. Plaintiffs Had Sufficient Facts at the Time the SAC Was Filed to Believe Illinois Cresco Was Liable For Some of The Claimed Damages

Plaintiffs state that they “substituted Illinois Cresco for one of the Doe Defendants because they had learned that it owns the Cresco brands and associated intellectual property, and thus that it is liable for falsely promising an exclusive license in California to that intellectual property ....” (Opp., p. 9, ll. 18-19.) Plaintiffs were on notice as far back as June 2023, that Illinois Cresco owned the brands at issue. (06/12/23 Flynn Decl., Exs. D [trademark information for the brands identified in the SPA], E [patent information].) Plaintiffs likewise knew in June 2023, that Bachtell, who

6 In Hahn, the court reversed summary judgment finding the trial court had applied the wrong “they knew or should have known” facts establishing a cause of action standard. “Compliance with section 474 is determined by the facts that a plaintiff actually knew at the time she filed the complaint, not the facts she should have known.” (Hahn, supra, 77 Cal.App.5th at p. 897.)

negotiated the SPA and accompanying license agreement was the CEO of Illinois Cresco. (06/12/23 Flynn Decl., Ex. D [01/22/20 Grant of Security Interest in Trademarks, p. 12].)

Supplemental discovery responses served in April and May 2024, confirmed Illinois Cresco owned several of the brands at issue and was the sole member of SLO Cresco at the time SLO Cultivation, Inc. and SLO Cresco entered into their agreements. (04/11/24 Seaman-Grant Decl., Ex. C; 07/26/24 Baskin Decl., ¶¶ 28-29, Exs. 16-18.)

These are sufficient facts to cause a reasonable person to believe liability is probable at the time the SAC was filed in October 2024. Accordingly, Illinois Cresco’s motion to quash based on Plaintiffs’ failure to comply with Code of Civil Procedure section 474 is granted.

3. Illinois Cresco Failed to Show Prejudice from Any Unreasonable Delay in Filing the Doe Amendment After the SAC Was Filed

Plaintiffs argue at the time they filed the SAC, there remained questions about which Cresco entity was the current owner of the brands, and which entity owned the brands at issue at the time of contracting. That issue was resolved on November 1, 2024 (nine days after the SAC was filed). (04/02/26 Baskin Decl., Ex. 14 [SLO Cresco’s supplemental discovery response].)

Despite confirmation that Illinois Cresco owned the brands at the time of contracting, Plaintiffs waited almost fifteen months to file the Doe amendment. Unreasonable delay in filing an amendment after actually acquiring knowledge of the identity of Doe defendants can bar a plaintiff’s use of Code of Civil Procedure section 474. (Barrows v. Am. Motors Corp. (1983) 144 Cal.App.3d 1, 8; see also A.N. v. County of Los Angeles (2009) 171 Cal.App.4th 1058, 1067-1068 [affirming trial court’s order granting motion to quash due to almost two-year delay between filing of amended complaint and Doe amendments].) Plaintiffs’ arguments regarding the cause for the delay are unpersuasive. (Opp., p. 9, ll. 8-16.)

Plaintiffs argue even if there was unreasonable delay, Illinois Cresco has failed to show prejudice. (A.N., supra, 171 Cal.App.4th at p. 1067 [Doe substitution filed within a month of trial quashed because of prejudice to defendants to prepare for trial in such short order].)

Illinois Cresco responds, “If the ignorance ‘requirements of section 474 are not met, lack of prejudice alone does not allow the addition of a new defendant by amendment[.]’ ” (Reply, p. 5, ll. 16-20, quoting Hazel v. Hewlett (1988) 201 Cal.App.3d 1458, 1466 (Hazel).) Illinois Cresco did not include the last part of the quoted sentence which ends with “after the statute of limitations has run. [Citation.]” (Hazel, supra, 201 Cal.App.3d at p. 1466.) Defendants do not address the statute of limitations issue. (Mtn., p. 7, fn. 1 [“Defendants reserve all rights on statute of limitations issues].)

The motion to quash based on unreasonable delay between the filing of the SAC and the Doe Amendment is denied based on Illinois Cresco’s failure to show prejudice.

B. Plaintiffs Have Failed to Show that Illinois Cresco Has the Minimum Contacts Necessary for This State to Exercise Jurisdiction

1.

Legal Standard

California courts may exercise personal jurisdiction on any basis consistent with the Constitutions of California and the United States. (Code of Civ. Proc., § 410.10.) The exercise of jurisdiction over a nonresident defendant comports with these Constitutions, “if the defendant has such minimum contacts with the state that the assertion of jurisdiction does not violate” “traditional notions of fair play and substantial justice.”

(Pavlovich v. Superior Court (2002) 29 Cal.4th 262, 268 (Pavlovich), citations omitted.)

“When a defendant challenges jurisdiction through a motion to quash, the plaintiff bears the burden to demonstrate facts, as to each nonresident defendant, justifying the exercise of jurisdiction by a preponderance of the evidence. [Citation.]” (Strasner v. Touchstone Wireless Repair & Logistics, LP (2016) 5 Cal.App.5th 215, 221-222.) To carry this burden, the plaintiff must produce admissible evidence. (Id. at p. 222.) If the plaintiff meets this initial burden, then the burden shifts to the defendant to show the court’s exercise of jurisdiction would be unreasonable. (Buchanan v. Soto (2015) 241 Cal.App.4th 1353, 1362.)

2. Plaintiffs Have Not Submitted Sufficient Evidence to Support California’s Jurisdiction Over Illinois Cresco

Illinois Cresco argues the SAC does not include any “jurisdictional allegations” directed at Illinois Cresco. It argues without any such allegations, “the Court cannot assess whether jurisdiction exists.” (Mtn., p. 13, ll. 10-18.) In support, Illinois Cresco cites Goehring v. Superior Court (1998) 62 Cal.App.4th 894, 909 [allegations in unverified complaint are not evidence of minimum contacts]; Rivelli v. Hemm (2021) 67 Cal.App.5th 380, 393 [“A plaintiff must support its allegations with ‘competent evidence of jurisdictional facts.

Allegations in an unverified complaint are insufficient to satisfy this burden’ ”]; and LG Chem, Ltd. v. Superior Court (2022) 80 Cal.App.5th 348, 363, 369 [similar evidentiary gap as that presented in Bristol-Myers Squibb Co. v. Superior Court (2017) 582 U.S. 255, 268].) Each of these cases focus on the failure to produce evidence of the Court’s jurisdiction, not the sufficiency of the complaint’s allegations.

To oppose a motion to quash for lack of jurisdiction, the plaintiff must “do more than rely on allegations. It [must] produce admissible evidence that supported its jurisdictional facts.” (ViaView, Inc. v. Retzlaff (2016) 1 Cal.App.5th 198, 218 [corporation’s verified complaint cannot serve as an affidavit or declaration establishing facts alleged therein, citing Code Civ. Proc., § 446].) Regardless of whether the SAC includes sufficient jurisdictional allegations, the pleading is not verified and thus, cannot serve as evidence.

The Court has reviewed the evidence cited by Plaintiffs in support jurisdiction and find they have failed to produce sufficient evidence justifying the exercise of jurisdiction over Illinois Cresco. The motion to quash for lack of jurisdiction is therefore granted.

ORDER

The motion to quash is granted.

The Court grants Plaintiffs’ unopposed requests for judicial notice.

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