Judge Carolyn M. Caietti, Case Number: 37-2023-00005994-CU-FR-CTL, Date: 2024-05-17 Tentative Ruling

Judge: Carolyn M. Caietti, Case: 37-2023-00005994-CU-FR-CTL, Date: 2024-05-17 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - May 16, 2024

05/17/2024 10:30:00 AM C-70 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Carolyn Caietti

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Civil - Unlimited Fraud Discovery Hearing 37-2023-00005994-CU-FR-CTL WILLIAM ROBERT AYRES SUCCESSOR RECEIVER TO RICHARD KIPPERMAN IN HIS CAPACITY AS COURT APPOINTED SUCCESSOR RECEIVER VS KORDUSA INC CAUSAL DOCUMENT/DATE FILED:

Plaintiff's Motion to Compel Specially Appearing Defendant KordDefence Pty. Ltd. to Provide Further Responses to Plaintiff's Jurisdictional Requests for Production of Documents, Set One; and Request for: (i) Monetary Sanctions in the Amount of $3,540.50; and (ii) Issue Sanctions as to Jurisdiction is GRANTED IN PART AND DENIED IN PART.

Plaintiff's Motion to Compel Specially Appearing Defendant KordTech Pty. Ltd to Provide Further Responses to Plaintiff's Jurisdictional Requests for Production of Documents, Set One; and Request for: (i) Monetary Sanctions in the Amount of $3,540.50; and (ii) Issue Sanctions as to Jurisdiction is GRANTED IN PART AND DENIED IN PART.

Plaintiff's Motion to Compel Specially Appearing Defendant KordUSA, Inc. to Provide Further Responses to Plaintiff's Jurisdictional Requests for Production of Documents, Set One; and Request for: (i) Monetary Sanctions in the Amount of $9,934.00; and (ii) Issue Sanctions as to Jurisdiction is GRANTED IN PART AND DENIED IN PART.

Plaintiff's Motion to Compel Specially Appearing Defendant KordDefence Pty. Ltd. to Provide Further Responses to Plaintiff's Jurisdictional Special Interrogatories, Set One; and Request for: (i) Monetary Sanctions in the Amount of $2,901.50; and (ii) Issue Sanctions as to Jurisdiction is GRANTED IN PART AND DENIED IN PART.

Plaintiff's Motion to Compel Specially Appearing Defendant KordTech Pty. Ltd. to Provide Further Responses to Plaintiff's Jurisdictional Special Interrogatories, Set One; and Request for: (i) Monetary Sanctions in the Amount of $2,853.00; and (ii) Issue Sanctions as to Jurisdiction is GRANTED IN PART AND DENIED IN PART.

Plaintiff's Motion to Compel Specially Appearing Defendant KordUSA, Inc. to Provide Further Responses to Plaintiff's Jurisdictional Special Interrogatories, Set One; and Request for: (i) Monetary Sanctions in the Amount of $8,915.50; and (ii) Issue Sanctions as to Jurisdiction is GRANTED IN PART AND DENIED IN PART.

Background Plaintiff William Robert Ayres is the Successor Receiver in the San Diego Superior Court case, People v. McManus, et al, Case No. SCD266439. As alleged in this case's Complaint, the People's case stems from an alleged scheme to defraud the State of California through fraudulent billing practices in Calendar No.: Event ID: TENTATIVE RULINGS

3059414 29 CASE NUMBER: CASE TITLE: WILLIAM ROBERT AYRES SUCCESSOR RECEIVER TO 37-2023-00005994-CU-FR-CTL connection with the operation of 19 charter schools throughout California alleged to have been managed by Academic Arts and Action Charter Academy, doing business as A3 Education. As further alleged here, in 2018 and after the criminal investigation into A3 Education and various individuals begun, Sean McManus and Jason Schrock, two individuals involved with A3 Education, found ways to fraudulently transfer, hide, delay the discovery and abscond with funds wrongfully obtained from the State of California. (Complaint, at ¶¶ 1-2.) The Complaint further alleges Schrock fraudulently transferred A3 Education funds into a purported investment in KordUSA, Inc. (KordUSA), KordTech Pty. Ltd. (KordTech) and/or KordDefence Pty. Ltd. (KordDefence) (collectively, the Kord Defendants). (Complaint, at ¶ 3.) More specifically, '[g]iven the challenges of the Kord Defendants faced in obtaining needed capital and with actual and/or constructive knowledge of the wrongful conduct by McManus and Schrock who presented the Kord Defendants with a $2,999, 997.00 capital infusion, the Kord Defendants chose to accept' this transmission of stolen funds – the Receiver Property. (Id., at ¶ 19.) The Receiver was appointed in the criminal case to take possession and control of the Receiver Property and filed this suit. (Id., at ¶ 4.) Jurisdictional Discovery On June 28, 2024, the Court will hear the Kord Defendants' Motions to Quash. When a defendant moves to quash service of process on jurisdictional grounds, the plaintiff has the initial burden of demonstrating facts justifying the exercise of jurisdiction. (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 449.) The plaintiff must come forward with affidavits and other competent evidence to carry this burden and cannot simply rely on allegations in an unverified complaint. (Buchanan v. Soto (2015) 241 Cal.App.4th 1353, 1362.) Here, to oppose the motions to quash, the Receiver, issued jurisdictional discovery. (See, In re Automobile Antitrust Cases I & II (2005) 135 Cal.App.4th 100, 127 ['A plaintiff attempting to assert jurisdiction over a nonresident defendant is entitled to an opportunity to conduct discovery of the jurisdictional facts necessary to sustain its burden of proof.'].) These motions concern the Receiver's jurisdictional discovery.

Special Interrogatories Motions Based on the Court's review, it appears all requests and responses in each of the special interrogatories motions are the same.

The Kord Defendants provided substantive responses to Nos. 15-20, verifying it does not ship or store product in California and those responses are complete.

However, a further response is warranted as to Nos. 1-2, 5-13, 34 and 36 as the Kord Defendants' objections lack merit. (C.C.P., § 2030.300(a)(3).) Generally, these interrogatories focused on the products the Kord Defendants marketed to California, to whom, who they contracted with in California and who it delivered product to, which is all reasonably calculated to lead to the discovery of admissible information related to general and specific personal jurisdiction. (See discussion, Preciado v. Freightliner Custom Chassis Corp. (2023) 87 Cal.App.5th 964.) The Receiver's request for monetary sanctions and undefined issue sanctions is denied in light of the mixed result.

Thus, the motions are GRANTED IN PART AND DENIED IN PART.

Document Motions Based on the Court's review, it appears all requests and responses are the same. Primarily, the Kord Defendants objections are that the requests are not reasonably calculated to lead to the discovery of Calendar No.: Event ID: TENTATIVE RULINGS

3059414 29 CASE NUMBER: CASE TITLE: WILLIAM ROBERT AYRES SUCCESSOR RECEIVER TO 37-2023-00005994-CU-FR-CTL admissible evidence.

Further Responses Required Responses to No. 34 (marketing of product in California), No. 37 (promotion of product to persons in California), No. 38 (market strategy of product in California), No. 67 (communications with persons in California related to product) require a further code compliant response for failing to state whether production is in whole or in part, which documents are being produced by which defendant, which documents pertain to which request and whether all documents in the party's possession, custody or control to which no objection is being made will be included in the production. (C.C.P., § 2031.220.). It is unclear if production is complete. (C.C.P., § 2031.310(a)(1).) The Kord Defendants' oppositions indicate all documents were produced, but this is not verified.

The next set of requests are Nos. 19-20 (corporate meeting minutes evidencing transfers of funds between Kord Defendants' accounts) and Nos. 47-48 (transfers of funds between Kord Defendants' accounts); No. 56 (KordUSA's cash on hand in March 2018-August 2018); No. 57 (KordUSA's operating expenses from March 2018-August 2018); Nos. 58-63 (transfer of funds wired from A3 Education to a Kord Defendant account).

The Receiver frames these requests as related to its alter ego allegations (Complaint, at ¶ 33) and maintains KordUSA was an underfunded shell company that KordTech and KordDefence funded when needed. However, courts have ruled reliance on state substantive law of agency and alter ego to determine the constitutional limits of specific personal jurisdiction is unnecessary and an imprecise substitute for the appropriate jurisdictional question. (See, HealthMarkets, Inc. v. Sup. Ct. (2009) 171 Cal.App.4th 1160, 1170.) Notwithstanding, these requests are relevant to whether the Kord Defendants purposefully directed its activities at the forum state by causing a separate person or entity to engage in forum contacts.' (SK Trading International Co. Ltd. v. Sup. Ct. (2022) 77 Cal.App.5th 378, 388.) Thus, the Kord Defendants' objections lack merit, warranting a further response.

Nos. 68-70 seek communications between Dominic Kelly and board members regarding the criminal investigation into McManus and are discoverable under the broad scope of discovery. Thus, the Kord Defendants' objections lack merit and a further response is warranted.

No. 71 asks for documents regarding Dominic Kelly's role as a director for KordUSA. The Kord Defendants acknowledged a declaration stating he was not a board director is inaccurate. (Opp., at p. 13:16-17.) Thus, the objections lack merit and a further response is warranted.

The Kord Defendants' responses include other objections such as unduly burdensome and oppressive.

But they did not provide any admissible evidence or address these objections in opposition and thus have not met their burden justifying these objections. (Williams v. Sup. Ct. (2017) 3 Cal.5th 531, 549-50.) (explaining the burden of justifying any objection and failure to respond remains at all times with the party resisting the discovery and the objecting party did not supply supporting evidence to assess whether any responsive burden would be undue or excessive relative to the likelihood of admissible evidence being discovered).) Similarly, to the extent the Kord Defendants' objections rest on a privilege, the objections cannot be adequately assessed. (See, C.C.P., § 2031.240(c)(1).) They do not provide any evidence supporting the application of the privileges cited nor a privilege log.

Further Responses Not Required These responses are complete as the Kord Defendants verified responsive documents have never existed (C.C.P., § 2031.230): No. 44 (shipments of product to California), No. 55 (communications regarding wire from A3 Education).

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3059414 29 CASE NUMBER: CASE TITLE: WILLIAM ROBERT AYRES SUCCESSOR RECEIVER TO 37-2023-00005994-CU-FR-CTL The following requests are overbroad and thus not calculated to lead to the discoverability of admissible evidence as they are not focused on activity in California, but more broadly (and irrelevantly) to the United States: Nos. 11-14 (corporate meeting minutes regarding trade shows, government agency trade shows, sales of product to government agencies and marketing); No. 39 (target markets for product within the USA); No. 40 (trade shows attended in the USA); No. 41 (government agency trade shows attended in the USA); No. 42 (sales of product to any government agency); No. 43 (marketing of product to any government agency); No. 64 (contracts with government agencies); No. 76 (USA's procurement of product).

Nos. 72-75 seek an 'Executive Summary,' 'Scoping Papers,' 'Strategic Marketing Plan,' and 'National Defense Authorization Act Fiscal Report of the Committee on Armed Services of House of Representatives,' 'as previously produced to Sean McManus dated November 12, 2018.' From the Court's perspective this is ambiguous and confusing. The Receiver maintains they somehow show an intent by the United States military and government agencies, who have locations and service members in the State of California, to procure and/or purchase product, which is also confusing. The connection to California is not established and the request is not limited to California. Thus, the objections hold merit and a further response is not required.

Sanctions In light of the mixed result, all sanctions requests are denied.

Thus, the Receiver's motions are GRANTED IN PART AND DENIED IN PART.

Concluding Orders By May 31, 2024, KordDefence is ordered to serve a further, verified and code-compliant (see, C.C.P., §§ 2030.210, et seq. & 2031.210, et seq.) response without objections to the Receiver's: (i) Special Interrogatories Nos. 1-2, 5-13, 34 and 36; and (ii) Requests for Production of Documents, Nos. 19-20, 34, 37-38, 47-48, 56-63 and 67-71.

By May 31, 2024, KordUSA is ordered to serve a further, verified and code-compliant (see, C.C.P., § 2030.210, et seq. & 2031.210, et seq.) response without objections to the Receiver's: (i) Special Interrogatories Nos. 1-2, 5-13, 34 and 36; and (ii) Requests for Production of Documents, Nos. 19-20, 34, 37-38, 47-48, 56-63 and 67-71.

By May 31, 2024, KordTech is ordered to serve a further, verified and code-compliant (see, C.C.P., § 2030.210, et seq. & 2031.210, et seq.) response without objections to the Receiver's: (i) Special Interrogatories Nos. 1-2, 5-13, 34 and 36; and (ii) Requests for Production of Documents, Nos. 19-20, 34, 37-38, 47-48, 56-63 and 67-71.

For document production, the Kord Defendants must make clear which defendant is producing the documents and identify the specific request number to which the documents respond.

If the tentative ruling is confirmed without modification, the Court's minute order will be the final ruling on all six motions. The Receiver is ordered to serve written notice of the ruling on all appearing parties by May 21, 2024.

The parties are reminded to comply with Department 70's Policies and Procedures and to provide courtesy copies of all motion paperwork.

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