Judge: Cynthia A Freeland, Case: 37-2021-00046155-CU-BC-NC, Date: 2024-01-26 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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SOUTH BUILDING TENTATIVE RULINGS - January 18, 2024

01/19/2024  01:30:00 PM  N-27 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Cynthia A. Freeland

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Civil - Unlimited  Breach of Contract/Warranty Motion Hearing (Civil) 37-2021-00046155-CU-BC-NC BANUELOS VS PERKETT [IMAGED] CAUSAL DOCUMENT/DATE FILED: Motion - Other, 12/22/2023

Plaintiff/Cross-Defendant Saul Banuelos ('Plaintiff')'s motion for sanctions is granted in part and denied in part.

Factual Background and Procedural History On December 16, 2021, Plaintiff served Defendant/Cross-Complainant Eric Perkett ('Defendant') with Plaintiff's Demand for Production of Documents (Set One) (the 'Discovery Request'). See Campbell Decl., Ex. 2. On January 18, 2022, Defendant served his initial responses to the Discovery Request which interposed various objections and included documents responsive only to Defendant's crossclaims and affirmative defenses. Ibid., Exs. 3-4. The parties were unable to informally resolve their dispute(s) notwithstanding a robust meet and confer effort. Ibid., Ex. 5.

On July 5, 2022, Plaintiff filed a motion to compel: (1) further responses to RFP Nos. 11-12 and 21-39, and (2) compliance with Defendant's statement of compliance as to RFP Nos. 1-8, 13-20, and 40-44, and for sanctions (the 'First Motion to Compel'). See ROA No. 15. On November 17, 2022, Defendant filed his opposition to the First Motion to Compel under which he asserted, inter alia, that: (1) he, on occasion, would perform services outside of the Partnership while using Partnership assets and would receive income for those services, and (2) he had produced all records in his possession, custody, and/or control. See ROA No. 36; Campbell Decl., Exs. 6-7. On December 1, 2022, the court issued a tentative ruling granting the First Motion to Compel and awarding Plaintiff $7,582.50 in sanctions. See ROA No. 45. On December 2, 2022, the court entertained oral arguments, which arguments included Defendant's counsel's representation that Defendant was suffering a severe financial hardship such that the imposition of sanctions would be unjust, and subsequently took the matter under submission. See ROA No. 46. On December 6, 2022, the court issued a final order granting the First Motion to Compel but denying Plaintiff's sanctions request in light of Defendant's counsel representations in open court (the 'First Order'). See ROA No. 47; Campbell Decl., Ex. 8. In pertinent part, as to the request to compel further responses to RFP Nos. 11-12 and 21-39, the court found that Defendant's various objections were not well taken and his responses were otherwise evasive and/or not Code-compliant given his efforts to insert certain caveats/conditions into each response. As to the request for compliance as to RFP Nos. 1-8, 13-20, and 40-44, the court ordered Defendant to comply with his Code-compliant unequivocal response to the extent he had not already done so. Defendant had 30 days, or until January 5, 2023, to comply with the First Order.

On January 5, 2023, Defendant served his third supplemental responses to the Discovery Request and produced 73 additional pages of documents. See Campbell Decl., Exs. 9-10. The production included a Calendar No.: Event ID:  TENTATIVE RULINGS

3048755 CASE NUMBER: CASE TITLE:  BANUELOS VS PERKETT [IMAGED]  37-2021-00046155-CU-BC-NC notice representing that Defendant had produced all responsive documents and fully complied with the First Order. On April 25, 2023, Plaintiff took Defendant's deposition. Ibid., Ex. 11. During his deposition, Defendant testified, inter alia, that: (1) Defendant hired Jennifer Morton as his personal and business bookkeeper, including for the Partnership, but paid her personally in cash rather than via the Partnership's checking account; (2) Defendant frequently paid for Partnership expenses using personal funds, including purchases using his personal credit cards, cash, and checks; (3) Ms. Morton was in possession of the Partnership's books and records, which includes all documentation of Defendant's payments of Partnership expenses and purchases with his personal funds; (4) Defendant provided Ms.

Morton with financial materials and other documents pertaining to the Partnership; (5) Defendant asked Ms. Morton to conduct an accounting of the Partnership for purposes of the present case; (6) Defendant communicated with Ms. Morton via text messages and e-mail correspondence; (7) Defendant asked Ms.

Morton on multiple occasions since February 2023 to produce all of the Partnership's financial records in her possession; (8) Defendant was waiting for Ms. Morton to complete her bookkeeping and/or accounting services before requesting that various financial documents be returned; (9) Defendant communicated via text messages with customers that paid for Partnership services via Defendant's personal Venmo and PayPal accounts, including text messages with David Paradise, Don Aumann, and Eric Everly, all of whom were in Defendant's possession; (10) Defendant had in his possession records reflecting additional payments from Mr. Paradise to Defendant; (11) Defendant had produced all text messages by taking screenshots of the messages, some of which he claimed to have taken over the previous year; and (12) Defendant continued to communicate with the Partnership's primary customer, Accu-Seal, concerning services rendered using the Partnership's CNC machine.

On August 16, 2023, Plaintiff filed a motion to compel Defendant's compliance with the First Order and for attorney's fees and costs incurred in pursuing compliance. Plaintiff also renewed his previously denied sanctions request under California Code of Civil Procedure ('CCP') § 1008(b) (collectively, the 'Second Motion to Compel'). See ROA No. 63. On August 25, 2023, Defendant filed his opposition to the Second Motion to Compel under which he maintained, inter alia, that: (1) he had produced all Venmo and PayPal records; (2) he did not have any other responsive documents to produce (including text messages); (3) he was not in possession of any text messages with Mr. Paradise, Ms. Morton, Mr.

Aumann, and Mr. Everly as his phone automatically deletes text messages after 30 days, and (4) there was a $35,000.00 outstanding balance owed by Mr. Paradise. See ROA No. 71; Campbell Decl., Exs.

12-13. On September 15, 2023, the court granted the Second Motion to Compel in part, finding that the evidence did not support Defendant's assertion that he had fully complied with the First Order. More specifically, the court noted that the evidence showed that Defendant, at a minimum, had not provided all documents: (1) reflecting the status of the CNC machine and/or transfer of the CNC machine to EPRD, the LS3 corvette engine, and other Partnership assets; (2) showing the income and expenses related to his ongoing use of the CNC machine through EPRD; (3) concerning communications with Ms.

Morton on these matters; and (4) evidencing communications with Partnership clients who paid Defendant though his personal account(s). The court further indicated that, to the extent Defendant was now arguing that he could not produce certain text messages between himself and Partnership clients and/or Ms. Morton because those messages self-delete after 30 days, such contention was unavailing because Defendant had testified at his April 25, 2023 deposition that he took screenshots of those communications for production. The court denied Plaintiff's renewed sanctions request but did award Plaintiff $5,925.00 in sanctions in connection with the Second Motion to Compel (collectively, the 'Second Order'). The court directed Defendant to comply with the Second Order, including payment of the sanctions, within 30 days, or by October 15, 2023. See ROA No. 101; Campbell Decl., Ex. 14.

On November 2, 2023, Defendant produced a single e-mail chain between himself and Mr. Paradise.

See Campbell Decl., Ex. 18. Defendant paid the sanctions associated with the Second Order on November 28, 2023. Ibid., ¶ 32. He has not fully complied with the Second Order to date because he has failed to produce his text messages with Partnership customers and Ms. Morton. Ibid., ¶ 34. Ms.

Morton, for her part, has since indicated by way of her response to Plaintiff's document subpoena, that she had returned all documents to Defendant. Ibid., Ex. 16.

Plaintiff now seeks monetary and nonmonetary sanctions, inclusive of terminating sanctions, for Calendar No.: Event ID:  TENTATIVE RULINGS

3048755 CASE NUMBER: CASE TITLE:  BANUELOS VS PERKETT [IMAGED]  37-2021-00046155-CU-BC-NC Defendant's failure to comply with the First and Second Orders.

Legal Analysis The court maintains broad discretion in determining an appropriate sanction for misuse of the discovery process. See Lopez v. Watchtower Bible & Tract Society of New York (2016) 246 Cal. App. 4th 566, 604.

In so doing, the court 'should consider both the conduct being sanctioned and its effect on the party seeking discovery and, in choosing a sanction, should attempt to tailor the sanction to the harm caused by the withheld discovery.' Van Sickle v. Gilbert (2011) 196 Cal. App. 4th 1495, 1516 (internal quotation omitted). The discovery statutes prescribe an incremental approach to sanctions. Sanctions 'should be appropriate to the dereliction, and should not exceed that which is required to protect the interests of the party entitled to but denied discovery. If a lesser sanction fails to curb misuse, a greater sanction is warranted: continuing misuses of the discovery process warrant incrementally harsher sanctions until the sanction is reached that will curb the abuse.' Doppes v. Bentley Motors, Inc. (2009) 174 Cal. App. 4th 967, 992. In addition, if a party fails to obey an order compelling further responses to requests for production of documents or an order compelling compliance, 'the court may make those orders that are just, including the imposition of an issue sanction, an evidence sanction, or a terminating sanction under Chapter 7 (commencing with Section 2023.010). In lieu of[,] or in addition to[,] that sanction, the court may impose a monetary sanction under Chapter 7 (commencing with Section 2023.010).' Cal. Code Civ.

P. §§ 2031.310(i), 2031.320(c).

Terminating sanctions are generally regarded as a last resort to be applied sparingly. See Siry Investment, L.P. v. Farkhondehpour (2020) 45 Cal. App. 5th 1098, 1118. Before issuing terminating sanctions, the court should consider the totality of the circumstances, including: (1) whether the respondent's conduct was willful; (2) the detriment to the propounding party; (3) the number of formal and informal attempts to obtain the discovery; (4) whether the respondent has a history of discovery abuses; and (5) whether the respondent's noncompliance persisted despite previous court orders or warnings that greater sanctions might follow. Ibid. at 1117-1118; Lang v. Hochman (2000) 77 Cal. App. 4th 1225, 1246. See also Milekowsky v. Tenet Healthsystem (2005) 128 Cal. App. 4th 262, 279-280 ('[W]here a violation is willful, preceded by a history of abuse, and the evidence shows that less severe sanctions would not produce compliance with the discovery rules, the trial court is justified in imposing the ultimate sanction.').

The court finds that terminating sanctions are not yet appropriate under the totality of the facts and circumstances. As set forth above, Defendant has a history of discovery abuses dating back to his initial responses to the Discovery Request which he served on January 18, 2022. The evidence shows that Defendant's initial responses solely consisted of identical boilerplate objections with Defendant refusing to provide documents responsive to Plaintiff's claims. The court found Defendant's objections to the Discovery Request unavailing and his attempts to insert caveats into his responses improper. As part of his opposition to the First Motion to Compel, Defendant claimed that he could not pay the requested sanctions owing to ongoing financial issues; however, later evidence confirmed that on September 27, 2022 – over two months before the December 2, 2022 hearing on the First Motion to Compel – Defendant purchased a Can-AM X3 for $40,000.00, which belied his earlier assertion of a financial hardship. Additionally, Defendant's position on the existence and/or possession of certain documents in this matter has fluctuated. In his opposition to the First Motion to Compel, Defendant represented that he had produced all documents in his possession, custody, and/or control. However, at his April 25, 2023 deposition, Defendant testified that he had taken screenshots of text messages between himself and Ms.

Morton and/or Partnership clients going back more than a year and, in fact, had produced them all.

However, in his opposition to the Second Motion to Compel, Defendant represented that he, in fact, did not have any text messages in his possession, custody, and/or control because his phone automatically deletes them after 30 days. Additionally, in his opposition to the Second Motion to Compel, Defendant represented that Mr. Paradise's entire balance remained outstanding. This is contradicted by Defendant's deposition testimony and the present record which confirm that Mr. Paradise paid at least $17,000.00 and agreed to make further installment payments to Defendant via Venmo. In sum, the court finds that Defendant has a history of willfully abusing the discovery process, i.e., he consciously or Calendar No.: Event ID:  TENTATIVE RULINGS

3048755 CASE NUMBER: CASE TITLE:  BANUELOS VS PERKETT [IMAGED]  37-2021-00046155-CU-BC-NC intentionally failed to comply with his discovery obligations, including compliance with the First and Second Orders. See Sauer v. Sup. Ct. (1987) 195 Cal. App. 3d 213, 227-228. Defendant's conduct has injected delay into the case and impeded Plaintiff's ability to obtain highly relevant discovery and prepare for trial. That being said, however, the above authorities make clear that terminating sanctions are generally regarded as a last resort to be applied sparingly. While Plaintiff has demonstrated that Defendant has a history of willfully disobeying the court's discovery order and otherwise engaging in evasive behavior in the discovery process, the court must take an incremental approach to sanctions. As a result, the court simply is not yet at the point where terminating sanctions are appropriate. Moreover, the court has not, before this ruling, put Defendant on notice that terminating sanctions might follow should he persist in violating court orders. Plaintiff, seeming to acknowledge the foregoing, indicates in his reply brief that his request for terminating sanctions was presented as more of an alternative to issue and/or evidentiary sanctions.

The court finds that issue and/or evidentiary sanctions are appropriate under the circumstances. The evidence shows that monetary sanctions were plainly insufficient to compel Defendant's compliance with the First and Second Orders as well as his discovery obligations. Indeed, the court, in issuing the Second Order, sanctioned Defendant in the amount of $5,925.00. Defendant paid the sanction (44 days late) yet continues to maintain his position that he is not in possession of text messages between himself and Ms. Morton and/or Partnership clients notwithstanding his earlier deposition testimony to the contrary. The court thus imposes issue and evidentiary sanctions establishing the following: (1) as of mid-2019 and early 2020, Defendant willfully misappropriated Partnership funds by having Partnership customers pay him directly via his personal Venmo, PayPal, and bank accounts; (2) Defendant secretly retained those funds for his own financial gain at the exclusion of Plaintiff; (3) the payments were made by Partnership customers for Partnership services and did not constitute 'outside' transactions or 'rent' payments; (4) Mr. Paradise made the Venmo payments to pay his outstanding balance for Partnership work performed on his 1999 Tacoma truck; (5) Defendant has attempted to conceal the foregoing by making false representations in this action; (6) Defendant's conduct constitutes a willful breach of the Partnership agreement and his fiduciary duties; (7) Plaintiff has suffered damages as a result; and (8) Defendant is precluded from offering contrary positions at trial. To the extent Plaintiff seeks an issue and/or evidentiary sanction establishing that Defendant's conduct warrants the imposition of exemplary/punitive damages, that request is denied. Defendant's willful conduct with regard to his discovery abuses and/or other aspects of Plaintiff's case-in-chief is different from the conduct that Plaintiff must prove in order to obtain punitive damages, i.e., that Defendant's conduct was oppressive, malicious, and/or fraudulent under California Civil Code § 3294.

Defendant's opposition is unavailing. Defendant spends a vast majority of his opposition arguing issues that are immaterial to the issue that is dispositive of the pending motion, namely Defendant's failure to comply with the First and Second Orders as well as his discovery obligations. Toward that end, Defendant's contentions regarding Plaintiff's deposition testimony, alleged bad acts on Plaintiff's part, or the merits of this action are of no moment. Notably, Defendant makes no effort to explain his inconsistent statements throughout discovery. Moreover, Defendant's argument that Plaintiff failed to adequately pursue the subject discovery is not persuasive and contradicted by both the evidence Plaintiff submitted with his moving papers and the record in this case dating back to December 2021.

In light of the foregoing, the court: (1) denies Plaintiff's request for terminating sanctions; (2) imposes issue and evidentiary sanctions against Defendant as set forth herein; and (3) awards Plaintiff $6,520.00 in sanctions against Defendant, due within thirty (30) days of this hearing. The court places Defendant on notice that further misuses of the discovery process and/or his continued failure to participate in discovery in good faith will result in more severe sanctions in the future, inclusive of terminating sanctions.

This is the tentative ruling for the hearing at 1:30 p.m. on Friday, January 19, 2024. If no party appears at the hearing, this tentative ruling will become the order of the court as of January 19, 2024. If the parties are satisfied with the court's tentative ruling or do not otherwise wish to argue the motion, they are encouraged to give notice to the court and each other of their intention not to appear, though this Calendar No.: Event ID:  TENTATIVE RULINGS

3048755 CASE NUMBER: CASE TITLE:  BANUELOS VS PERKETT [IMAGED]  37-2021-00046155-CU-BC-NC notice is not required.

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