Judge Elaine W. Mandel, Case Number: 22SMCV01367, Date: 2024-12-03 Tentative Ruling

Judge: Elaine W. Mandel, Case: 22SMCV01367, Date: 2024-12-03 Tentative Ruling

Case Number: 22SMCV01367 Hearing Date: December 3, 2024 Dept: P

Tentative Ruling

Yu v. Rari Capital Infrastructure, Case no. 22SMCV01367

Hearing date December 3, 2024

Defendants’ Motion to Extend Discovery Cutoffs

Plaintiff Yu sues defendants Rari Capital Infrastructure, LLC, Fei Labs, Inc. and Longarzo for breach of contract arising from the alleged conversion of cryptocurrency assets. Defendants seek limited discovery: (1) a recent SEC complaint and consent against Rari Capital, Inc.; (2) plaintiff and plaintiff’s counsel’s association with Emily Yu, plaintiff’s mother and an attorney with a conflicted law firm; and (3) the deposition of plaintiff’s expert witness. Plaintiff opposes and requests sanctions. Defendants offer declarations of counsel Gates and general counsel for Fei Labs, Inc. Grieco.

Courts have “inherent authority” to control proceedings before them, including discretion to extend discovery deadlines. See, e.g., Briggs v. Brown (2017) 3 Cal.5th 808, 852, as modified on denial of reh’g Oct. 25, 2017; Hernandez v. Superior Ct. (2004) 115 Cal.App.4th 1242, 1246, as modified Feb. 24, 2004. In assessing whether to grant a motion to reopen discovery following the setting of a new trial date, §2024.050 requires the Court to consider “any matter relevant to the leave requested, including, but not limited to, the following: (1) The necessity and the reasons for the discovery. (2) The diligence or lack of diligence of the party seeking the discovery or the hearing of a discovery motion, and the reasons that the discovery was not completed or that the discovery motion was not heard earlier. (3) Any likelihood that permitting the discovery or hearing the discovery motion will prevent the case from going to trial on the date set, or otherwise interfere with the trial calendar, or result in prejudice to any other party. (4) The length of time that has elapsed between any date previously set, and the date presently set, for the trial of the action.” Code Civ. Proc. § 2024.050(b).

Defendants argue additional discovery is necessary regarding; (1) SEC findings as to defendant Rari Capital Infrastructure, Inc.’s relation to Rari Capital, Inc.; and (2) whether a conflict of interest exists as a result of plaintiff’s mother’s involvement in plaintiff’s case, despite the fact that her firm, Latham and Watkins, previously represented defendant Fei Labs, Inc. Defendants request permission to depose plaintiff’s expert witness, as said witness was designated while defendants’ MSJ was pending, and defendants were unable to discover an alleged discoverable report. Decl. Gates, exh. 1.

Plaintiff argues defendants have no good cause and have been dilatory in discovery. Plaintiff argues defendants had two years to discover whether a conflict of interest existed regarding plaintiff’s mother and her firm’s representation of defendant Fei Labs, Inc. Plaintiff argues dismissal of defendant Fei Labs, Inc. eliminates the need for discovery regarding plaintiff’s mother’s role. Plaintiff argues defendants have known since the outset of the case that the relationship between Rari Capital Infrastructure, Inc. and Rari Capital, Inc. as alleged successor in interest was the premise of plaintiff’s claim. Plaintiff argues his expert witness designation and declaration were served 5/20/24, giving defendants sufficient time to depose the expert.

Defendants assert they did not learn of the potential conflict of interest regarding plaintiff’s mother until defendants retained new counsel which was in contact with plaintiff’s mother’s firm. Decl. Grieco exh. 1. Further, defendants assert plaintiff previously refused to produce communications with plaintiff’s mother, asserting attorney-client privilege. Defendants argue plaintiff now asserts plaintiff’s mother never functioned as counsel, so all communications with are discoverable, despite previously being improperly denied to defendants. Defendants are correct that communications regarding plaintiff's mother’s involvement are discoverable, and the risk of prejudice to defendants from any conflict weighs in favor of allowing defendants to discover those communications.

Defendants argue they are seeking discovery related to the SEC’s 9/18/24-9/19/24 complaint and consent judgment against Rari Capital, Inc. and related findings regarding defendants’ relationship to Rari Capital, Inc. as alleged successor in interest. Such discovery could not have occurred prior to the consent judgment’s filing. Plaintiff’s claims against defendant Rari Capital Infrastructure, Inc. are based on a theory of successor-in-interest, so such limited non-party discovery goes directly to defendants’ raised defenses.

Defendants argue in light of the trial date of 2/3/25, the deadline to exchange expert witness information has not passed, as it would be 12/15/24. Defendants argue they were not dilatory in seeking to depose plaintiff’s expert, and allowing the deposition would not delay trial or prejudice plaintiff.

Trial is set for 2/3/25. Trial was initially set for 3/11/24 but was continued three times due to plaintiff’s motions to compel, the court’s request for additional briefing and defendants’ previous counsel’s withdrawal. Defendants seek limited non-party discovery regarding the SEC complaint and consent judgment, plaintiff’s mother’s conflicts of interest and role in plaintiff’s litigation and to depose plaintiff's expert witness. Defendants established the necessity and reasons for this discovery. Defendants demonstrated they were not dilatory with regards to the SEC’s filings and plaintiff’s mother’s involvement. While defendants likely could have deposed plaintiff’s expert witness during the MSJ briefing, allowing defendants to depose plaintiff's expert witness now neither delays trial nor prejudices plaintiff.

Plaintiff seeks sanctions for opposing the instant motion. As the instant motion is meritorious, such fees are not appropriate under Cal. Code Civ. Proc. §2023.050.

Defendants’ motion to extend the discovery cutoff and conduct additional limited discovery is GRANTED. Plaintiff’s request for sanctions DENIED.