Judge: Daniel S. Murphy, Case: 22STCV14915, Date: 2023-06-23 Tentative Ruling

Case Number: 22STCV14915    Hearing Date: April 8, 2024    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 Wood and CWH then replaced Cross-Defendants and rescinded the LLC Agreement (ARLLCA) that the parties had signed.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 April 17, 2023, David Buicko, a WGH board member appointed by Triton, filed a cross-complaint against WGH, asserting a claim for indemnity and advancement of legal fees. Buicko alleges that under the ARLLCA, WGH must indemnify Buicko for claims arising out of his duties as a manager of WGH. On June 5, 2023, Steve Layton, president of Triton and co-president of WGH, filed a cross-complaint against WGH, asserting a nearly identical claim for indemnity and advancement of legal fees.    

According to a notice of settlement filed October 12, 2023, the parties have settled the entire case. However, the parties are currently engaged in similar litigation in Texas. On March 11, 2024, WGH, Wood, and CWH filed the instant motion to amend the existing protective order in this case to allow for covered documents to be used in the Texas litigation. There is no opposition to the motion.

LEGAL STANDARD

“The court shall limit the scope of discovery if it determines that the burden, expense, or intrusiveness of that discovery clearly outweighs the likelihood that the information sought will lead to the discovery of admissible evidence. The court may make this determination pursuant to a motion for protective order by a party or other affected person.” (Code Civ. Proc., § 2017.020(a).) “The issuance and formulation of protective orders are to a large extent discretionary.” (Nativi v. Deutsche Bank National Trust Co. (2014) 223 Cal.App.4th 261, 316.) “[T]he burden is on the party seeking the protective order to show good cause for whatever order is sought.” (Id. at p. 318.)

DISCUSSION

            The Court finds good cause to amend the protective order to allow for use of the covered information in the Texas litigation. This would prevent the parties in the Texas litigation from having to re-conduct discovery on similar claims and would therefore mitigate unnecessary burden and expense. The lack of opposition to the motion indicates that the parties are in agreement that the protective order should be amended accordingly.

CONCLUSION

            The motion to amend protective order is GRANTED.