Judge: Daniel S. Murphy, Case: 22STCV14915, Date: 2023-01-13 Tentative Ruling

Case Number: 22STCV14915    Hearing Date: January 13, 2023    Dept: 32

BACKGROUND

            On May 4, 2022, Plaintiff WG Holdings SPV, LLC (WGH) initiated this action for breach of fiduciary duties, breach of contract, interference, and fraud stemming from Defendants’ purported mismanagement of Plaintiff.

The complaint alleges that Defendant E&B Natural Resources Management Corporation (E&B) sought to purchase a 25% stake in WGH. Due to financial issues with its lenders, E&B could not directly deal with WGH. Instead, E&B allegedly formed Defendant Triton LA, LLC (Triton) to hold E&B’s 25% interest in WGH. The complaint alleges that the arrangement was induced by fraud and that Defendants merely sought to take over WGH’s assets for themselves. Triton allegedly demanded a higher ownership stake in WGH, which WGH’s board denied. Thereafter, Defendants allegedly mismanaged WGH’s finances and operations, leading to the damages sought in this action.

Triton has cross-complained against Scott Wood (Wood), William Nicholson (Nicholson), and CW Children Holdings, LLC (CWH). Triton asserts causes of action for harm done to Triton and asserts claims derivatively on behalf of WGH. Triton and CWH are allegedly the sole members of WGH. Wood and Nicholson are two of three board members on WGH, both appointed by CWH. Triton alleges that Wood, Nicholson, and CWH colluded to deprive Triton of its rights and also mismanaged WGH assets. The operative Second Amended Cross-Complaint (SACC) was filed on October 27, 2022.

Wood and CWH have filed their own cross-complaint against Triton, E&B, and various others. Wood wanted to invest in oil and gas properties and came into contact with Galesi Group (Galesi), a consortium of companies with experience in operating oil and gas assets. Wood was allegedly led to believe that Galesi was financially solvent and had the expertise needed to operate the oil and gas properties he sought to purchase. Wood paid the money to purchase the oil and gas assets and formed CWH and WGH to hold his 75% interest. Wood agreed to give Galesi 25% in return for Galesi’s promise to operate the assets and pay government bond premiums. Cross-Defendants allegedly lied about their financial stability, capability to operate the assets, and intent to pay the government bond premiums. Wood and CWH then replaced Cross-Defendants and rescinded the LLC Agreement (ARLLCA) that the parties had signed.

On December 16, 2022, Plaintiff WGH filed the instant motion to compel E&B to produce documents in response to Plaintiff’s Requests for Production Nos. 3-7. Specifically, Plaintiff seeks “documents and communications regarding E&B’s financial condition in the spring and summer of 2021 and its communications with lenders and restructuring consultants concerning the same.” (Mtn. 4:16-18.) E&B stated in its responses to RFP Nos. 3-7 that it would provide responsive documents and began a rolling production that Plaintiff contends is incomplete. After this motion was filed, E&B made two additional productions on December 23 and 30, 2022, which Plaintiff contends is still incomplete.  

LEGAL STANDARD

            “If a party filing a response to a demand for inspection, copying, testing, or sampling . . . thereafter fails to permit the inspection, copying, testing, or sampling in accordance with that party’s statement of compliance, the demanding party may move for an order compelling compliance.” (Code Civ. Proc., § 2031.320(a).)

DISCUSSION

            E&B does not dispute the relevance of the documents requested in RFP Nos. 3-7, nor has it articulated any valid justification for withholding any documents. Instead, E&B claims that it has produced documents responsive to RFP Nos. 3-7. (Opp. 8:25-9:16.) However, Plaintiff avers that certain communications are still missing. (See Morgan Decl. ¶ 16.) E&B must produce all nonprivileged documents in its possession responsive to RFP Nos. 3-7.

            Plaintiff’s skepticism regarding the production does not impose upon E&B additional obligations not found in the Code.

CONCLUSION

            Plaintiff’s motion to compel production is GRANTED. Within 10 days, E&B is to produce all nonprivileged documents responsive to RFP Nos. 3-7. If E&B withholds any documents, E&B shall provide a privilege log.

E&B’s request for sanctions is denied as Plaintiff prevailed and also acted with substantial justification in filing the motion.