Judge: Curtis A. Kin, Case: 23STCP02227, Date: 2024-06-18 Tentative Ruling

Case Number: 23STCP02227    Hearing Date: June 18, 2024    Dept: 86

Petitioner Joshua David-Helderman Lawler petitions for a writ of mandate directing respondents Robert Spieth and S&H Real Estate Group LLC to provide petitioner the opportunity to inspect and copy the records specified in paragraph 1 of the Prayer for Relief in the First Amended Petition.

I.       Factual Background[1]

            This proceeding concerns respondent S&H Real Estate Group LLC (“S&H”),[2] the owner-operator of three rental properties in Long Beach. (Amend. Lawler Decl. ¶¶ 6, 8.) Petitioner Joshua David-Helderman Lawler has a 20% membership interest in S&H. (Ans. ¶ 4; Amend. Lawler Decl. ¶¶ 2, 7.) Respondent Robert Spieth has an 80% membership interest in S&H. (Amend. Lawler Decl. ¶¶ 2, 7.)

On December 11, 2022, petitioner sent a written demand requesting to copy and inspect the S&H books and records, including but not limited to the following: (i) a current list of members with current contact information, (ii) list and name of each manager with current contact information, (iii) federal, state, and local income tax information for the past six years, (iv) articles of the organization complete with amendments; (v) operating agreement and amendments thereto for S&H, (vi) financial statements deriving from S&H’s management of the rental properties, and (viii) books and records related to the internal affairs of S&H. (collectively, (Petitioner’s Appendix [“PA”] 164-66.)[3]

On January 27, 2023, Spieth sent written correspondence to petitioner regarding CPAs needing to calculate taxes involved with a buy-out of petitioner’s 20% membership interest in S&H. (PA 167.) Spieth did not provide any substantive response to petitioner’s December 11, 2022 request to inspect the books and records of S&H. (Amend. Lawler Decl. ¶ 10.)

On February 6, 2023, Spieth sent written correspondence offering $400,000 for petitioner’s 20% minority interest in S&H. (PA 173-74.) Spieth failed to provide a substantive response to petitioner’s request to inspect the books and records of S&H. (Amend. Lawler Decl. ¶ 10.)

On February 8, 2023, petitioner sent another email to Spieth, reiterating his December 11, 2022 records inspection request. (PA 170.) Petitioner indicated that he could not evaluate Spieth’s proposal without the requested information. (PA 170.) Petitioner warned that, if the Court found that Spieth refused to provide access to the books and records without justification, petitioner may recover his attorney fees and expenses. (PA 166.)

On February 19, 2023, petitioner noted to Spieth that it had been 16 months since he saw a distribution. (PA 175.) In the same communication, petitioner again requested the books and records, specifically requesting to see the “P&L for the last few years, as well as our current loan balances.” (PA 175.) On February 22, 2023, in response, Spieth replied: “Yes, I am working on this.… will follow up shortly.” (PA 175.) Spieth failed to follow up with the requested profit and loss statements or current loan balances of the rental properties. (Amend. Lawler Decl. ¶ 10.)

On February 22, 2023, Spieth clarified that petitioner had received a distribution on March 28, 2022 for the amount of $4,005 via Zelle, which petitioner admitted as an oversight. (PA 180-81.) Spieth did not address petitioner’s inspection request. (PA 180-81; Amend. Lawler Decl. ¶ 10.) Petitioner has not received a distribution since March 28, 2022. (PA 180-81; Amend. Lawler Decl. ¶ 12.)

On April 29, 2023, petitioner advised Spieth that he was unable to make an informed decision on the February 6, 2023 buy-out offer “without the underlying information,” noting that Spieth had continuously failed to provide the requested books and records. (PA 169.) Petitioner further advised that he was unsure how the “property tax bill on properties of this value could have gotten as large as you are saying,” in response to Spieth’s advisement that the rental properties were in tax arrears to governmental authorities. (PA 158, 169.)

On June 12, 2023, petitioner sent Spieth a copy of the Petition for Writ of Mandate, which had not yet been filed, specifically advising that he would prefer to settle the matter amicably without court intervention but that Spieth’s refusal to enable him to access the books and records of S&H was not “really leaving [petitioner] any choice here.” (PA 182-87.)

On or before May 20, 2024, respondents Spieth and S&H made a production that included the following documents: (i) 2017-2022 federal and state tax returns for S&H, without separate financial statements from which the 2017-2022 tax statements were prepared; (ii) outstanding tax bills owed by S&H to Los Angeles County; (iii) repair receipts concerning sewer and pipe repairs addressed to Spieth; (iv) an insurance payment; (v) a receipt from Ocean Environmental Services; and (vi) hotel receipts concerning lodging on or around February 24-28, 2020 for individuals, whose connection and role to S&H was not provided. (Idris Supp. Decl. ¶ 10 & Ex. 1.)

II.      Procedural History

            On June 23, 2023, petitioner filed a Verified Petition for Writ of Mandate to Produce Corporate Records. On August 25, 2023, petitioner filed a First Amended Complaint and Verified Petition for Writ of Mandate to Produce Corporate Records. No answer has been filed.

            On April 19, 2024, petitioner served and filed an opening brief. On June 3, 2024, petitioner served and filed a notice indicating that respondents had not served or filed any opposition. On June 5, 2024, respondents untimely served and filed an opposition.[4] On June 7, 2024, petitioner served and filed a reply.

III.     Standard of Review

CCP § 1085(a) provides: “A writ of mandate may be issued by any court to any inferior tribunal, corporation, board, or person, to compel the performance of an act which the law specially enjoins, as a duty resulting from an office, trust, or station, or to compel the admission of a party to the use and enjoyment of a right or office to which the party is entitled, and from which the party is unlawfully precluded by that inferior tribunal, corporation, board, or person.”

“There are two essential requirements to the issuance of a traditional writ of mandate: (1) a clear, present and usually ministerial duty on the part of the respondent, and (2) a clear, present and beneficial right on the part of the petitioner to the performance of that duty.” (California Assn. for Health Services at Home v. State Dept. of Health Services (2007) 148 Cal.App.4th 696, 704.) “An action in ordinary mandamus is proper where…the claim is that an agency has failed to act as required by law.” (Id. at 705.)

Corporate inspections are governed under CCP § 1085. (Wolf v. CDS Devco (2010) 185 Cal.App.4th 903, 912.) The rights of a member of an LLC to inspect and copy records of the LLC are set forth in Corporations Code §§ 17704.10 and 17701.13.[5]

Section 17704.10 provides in relevant part:

(a) Upon the request of a member or transferee, for purposes reasonably related to the interest of that person as a member or a transferee, a manager or, if the limited liability company is member-managed, a member in possession of the requested information, shall promptly deliver, in writing, to the member or transferee, at the expense of the limited liability company, a copy of the information required to be maintained by paragraphs (1), (2), and (4) of subdivision (d) of Section 17701.13, and any written operating agreement of the limited liability company.

(b) Each member, manager, and transferee has the right, upon reasonable request, for purposes reasonably related to the interest of that person as a member, manager, or transferee, to each of the following:

(1) To inspect and copy during normal business hours any of the records required to be maintained pursuant to Section 17701.13.

(2) To obtain in writing from the limited liability company, promptly after becoming available, a copy of the limited liability company's federal, state, and local income tax returns for each year….

(g) In any action under this section or under Section 17713.07, if the court finds the failure of the limited liability company to comply with the requirements of this section is without justification, the court may award an amount sufficient to reimburse the person bringing the action for the reasonable expenses incurred by that person, including attorney's fees, in connection with the action or proceeding.

Section 17701.13 provides in relevant part:

(d) Each limited liability company shall maintain in writing or in any other form capable of being converted into clearly legible tangible form at the office referred to in subdivision (a)^[[6]] all of the following:

(1) A current list of the full name and last known business or residence address of each member and of each transferee set forth in alphabetical order, together with the contribution and the share in profits and losses of each member and transferee.

(2) If the limited liability company is a manager-managed limited liability company, a current list of the full name and business or residence address of each manager.

(3) A copy of the articles of organization and all amendments thereto, together with any powers of attorney pursuant to which the articles of organization or any amendments thereto were executed.

(4) Copies of the limited liability company’s federal, state, and local income tax or information returns and reports, if any, for the six most recent fiscal years.

(5) A copy of the limited liability company’s operating agreement, if in writing, and any amendments thereto, together with any powers of attorney pursuant to which any written operating agreement or any amendments thereto were executed.

(6) Copies of the financial statement of the limited liability company, if any, for the six most recent fiscal years.

(7) The books and records of the limited liability company as they relate to the internal affairs of the limited liability company for at least the current and past four fiscal years.

IV.     Analysis

A.           Evidentiary Matters

1.            Objections to Declarations

            Respondents’ and petitioner’s evidentiary objections are OVERRULED, except as otherwise stated below.

Respondents’ objections based on failure to comply with CCP § 2015.5 were cured with the declarations filed in support of the reply, both of which were executed under penalty of perjury under the laws of the State of California. Except for an email chain concerning the production of documents after the filing of the opening brief (Idris Supp. Decl. ¶ 10 & Ex. 1), the amended declarations contain the same evidence attached to the respective initially filed declarations, Bates stamped 1-187.  In objecting on this basis, respondents rely on Kulshrestha v. First Union Commercial Corp. (2004) 33 Cal.4th 601, but it is inapposite.  The plaintiff in Kulshrestha did not attempt to amend the declaration before or during the summary judgment hearing. (Kulshrestha, 33 Cal.4th at 607-08.) Moreover, although maintaining that the declarations were inadmissible, respondents had the opportunity to address and did address the substance of the declarations. (Opp. at 4:3-13, 5:12-6:8.) Under the circumstances presented here, the defective initially filed declarations are harmless. (See Hearn v. Howard (2009) 177 Cal.App.4th 1193, 1204.)

            With respect to respondents’ objections based on lack of personal knowledge, it is true that a declaration in support of a petition for writ of mandate must be based on personal knowledge. (See Star Motor Imports, Inc. v. Superior Court (1979) 88 Cal.App.3d 201, 204-05 [“An affidavit based on ‘information and belief’ is hearsay and must be disregarded… and it is ‘unavailing for any purpose’ whatsoever….”]) Thus, petitioner’s citation to CCP § 446 for the assertion that he may allege matters that are not within his personal knowledge on information and belief is unavailing. (See Reply at 4:1-3.) CCP § 446 refers “to pleadings that Join issues, such as the common complaint and answer of a lawsuit.” (Star Motor, 88 Cal.App.3d at 204.) Petitions for writ of mandate must be supported by facts, not the belief of the declarant. (Ibid., quoting Pelegrinelli v. McCloud River etc. Co. (1905) 1 Cal.App. 593, 597.) Accordingly, Objection No. 10 to the declaration of petitioner is SUSTAINED, but only with respect to the portion of paragraph 8 (identically phrased in the initially filed and amended declarations) stating “on information and belief, he caused Respondent S&H to pay him fees ranging from 10-15% of the gross income generated by the Rental Properties.” In addition, Objection No. 11 to the entirety of paragraph 9 of petitioner’s declaration is SUSTAINED for lack of personal knowledge.  Respondents’ other objections based on personal knowledge are OVERRULED, as the averments were not expressly based on information and belief, and petitioner may testify based on his 20% interest in S&H and his communications and interactions with Spieth. (Amend. Lawler Decl. ¶¶ 7, 10-54.)

2.            Requests for Judicial Notice

Petitioners’ request for the Court to take judicial notice that S&H is a manager-managed California limited liability company with Spieth serving as its Managing Member and Manager is DENIED. “Manager” is defined in the California Revised Uniform Limited Liability Company Act as “a person that under the operating agreement of a manager-managed limited liability company is responsible, alone or in concert with others, for performing the management functions stated in subdivision (c) of Section 17704.07.” (§ 17701.02(n).) Despite what Spieth represented in documents filed with the Secretary of State, no party has produced the operating agreement. Consequently, the Court declines to determine whether S&H is a manager-managed limited liability company.

B.           Merits

Through the instant First Amended Petition, petitioner seeks the opportunity to inspect and copy the following records for the present and last four fiscal years:

·         A current list of members with current contact information

·         List and name of each manager with current contact information

·         Federal, state, and local income tax information

·         Articles of the organization complete with all amendments

·         Operating agreements and amendments

·         Financial statements

·         Books and records related to the internal affairs of the company

(FAP ¶ 6; Prayer for Relief ¶ 1.) As stated above, section 17704.10 provides in relevant part:

(b) Each member, manager, and transferee has the right, upon reasonable request, for purposes reasonably related to the interest of that person as a member, manager, or transferee, to each of the following:

(1) To inspect and copy during normal business hours any of the records required to be maintained pursuant to Section 17701.13.

(2) To obtain in writing from the limited liability company, promptly after becoming available, a copy of the limited liability company's federal, state, and local income tax returns for each year….

            Petitioner is a member of S&H. Schedule K-1 forms issued to petitioner indicate that he is a member of S&H. (PA 12, 21, 34, 55, 73, 83.) Further, on February 6, 2023, Spieth offered to buy out petitioner’s 20% ownership interest in S&H. (PA 173.) This is a clear admission from Spieth that petitioner is a member of S&H. 

            Petitioner also made a reasonable request for the records listed in paragraph 1 of the Prayer for Relief. On December 11, 2022, petitioner emailed Spieth the following: “I pulled the relevant statute and citation from a lawyer’s website for your convenience. Consider this written request for all of the information specified below.” (PA 164.) Below petitioner’s email to Spieth was a paragraph titled “Information the LLC is Required to Maintain.” (PA 165.) Under this paragraph, several categories of records were listed: (i) a current list of members with current contact information, (ii) list and name of each manager with current contact information, (iii) federal, state, and local income tax information for the past six years, (iv) articles of the organization complete with amendments; (v) operating agreement and amendments, (vi) financial statements, and (viii) books and records related to the internal affairs of the company. (PA 165.) These categories correspond to the records petitioner seeks by way of the instant petitioner for writ of mandate to inspect and copy. Although respondents contend that Spieth is not an attorney and was therefore not required to decipher legal statutes provided by petitioner, section 17704.10 does not require the request to take any particular form. Petitioner’s request for inspection, including the incorporation of a document listing the items sought, was reasonably clear.

            Petitioner’s request was also reasonably related to his interest as a member of S&H. As petitioner explained to Spieth, petitioner cannot evaluate whether Spieth buyout offer reasonably compensates him for his membership interest without the requested records. (PA 169-70.) Indeed, respondents do not dispute that the records are reasonably related to petitioner’s interest in S&H.

With respect to who from S&H is “a manager or, if the limited liability company is member-managed, a member in possession of the requested information,” as set forth in section 17704.10(a), petitioner is not seeking to require a manager or a member in possession of the requested information to deliver copies of information required to be maintained in section 17701.13(d)(1), (d)(2), and (d)(4), pursuant to subdivision (a) of section 17704.10. Rather, petitioner seeks the opportunity to inspect and copy the records pursuant to subdivision (b)(1) of section 17704.10. (FAP ¶ 6; FAP at 3:8-9; Prayer for Relief ¶ 1.) Accordingly, it is not necessary to determine whether S&H is manager-managed or member-managed.

            Under section 17704.10(b)(1), petitioner has the right to inspect and copy the records required to be maintained pursuant to section 17701.13, not just the records specifically referenced in section 17704.10(a). (§ 17704.10(b)(1).) The records that petitioner seeks to inspect and copy are required to be maintained under section 17701.13(d).[7] (Compare Prayer for Relief ¶ 1 with § 17701.13(d).)

            For the foregoing reasons, petitioner satisfies the statutory requirements of section 17704.10(b)(1).

            Lastly, respondents contend that the petition is moot due to their May 20, 2024 production of certain documents. (Smith Decl. ¶ 2.) Petitioner disagrees. (Idris Supp. Decl. ¶¶ 12, 13.) Pursuant to section 17704.10(b)(1), the Court will issue a writ of mandate ordering respondents to allow petitioner to inspect and copy during normal business hours the records specified in paragraph 1 of the Prayer for Relief, insofar as such records have not already been produced to petitioner.

C.           Attorney Fees

Petitioner seeks attorney fees pursuant to section 17704.10(g), which states: “In any action under this section…if the court finds the failure of the limited liability company to comply with the requirements of this section is without justification, the court may award an amount sufficient to reimburse the person bringing the action for the reasonable expenses incurred by that person, including attorney’s fees, in connection with the action or proceeding.”

The Court finds that respondents’ failure to comply with the requirements of section 17704.10(b)(1) was without justification. As stated above, petitioner’s December 11, 2022 request for records was clear. Petitioner reiterated his request to Spieth on February 8 and April 29, 2023. (PA 169-70.) Petitioner also provided to Spieth a copy of the Petition for Writ of Mandate prior to filing, thereby providing respondents ample opportunity to provide the requested records without petitioner having to resort to litigation. Despite having had multiple opportunities to produce the requested records, respondents did not comply with petitioner’s request before the commencement of the instant case. (Amend. Lawler Decl. ¶ 10.) Consequently, petitioner is entitled to recover reasonable attorney fees pursuant to section 17704.10(g).

            Petitioner requests a total award of $44,728.40, including $17,479.40 for work by attorney Amroh F. Idris up to and including preparation of the opening brief, $15,476.00 for work by attorney Idris in connection with the reply and review of the May 20, 2024 production, $10,915.00 for work that attorney Michael Carlin did to prepare the instant petition, and $858.00 for paralegal work. (Idris Supp. Decl. ¶¶ 3-7.) Despite having had the opportunity to address the reasonableness of the amount of petitioner’s fee request in the opposition, with respect to work on the opening brief and before, respondents did not do so. The fee request appears to be reasonable on its face. The Court awards petitioner $44,728.40, to be paid by respondents Robert Spieth and S&H Real Estate Group LLC.

V.      Conclusion

The First Amended Petition with respect to the first cause of action is GRANTED. Pursuant to Local Rule 3.231(n), petitioner shall prepare, serve, and ultimately file a proposed judgment and proposed writ of mandate. With respect to the remaining causes of action, the Court will refer the case to Department 1 for reassignment to a direct calendar courtroom.  (See LASC Local Rule 2.8.)