Judge: Gary Y. Tanaka, Case: 20TRCV00464, Date: 2022-09-15 Tentative Ruling
Case Number: 20TRCV00464 Hearing Date: September 15, 2022 Dept: B
LOS ANGELES SUPERIOR COURT – SOUTHWEST DISTRICT
Honorable Gary Y. Tanaka Thursday, September 15, 2022
Department B Calendar No. 10
PROCEEDINGS
2221 Park Place Partners LLC v. 2221 Park Place Tenants LLC, et al.
20TRCV00464
2221 Park Place Partners LLC’s Motion to Compel Further Responses to and Compliance with Request for Production of Documents (Set One)
Marten King’s Application to Appear as Counsel Pro Hac Vice
TENTATIVE RULING
2221 Park Place Partners LLC’s Motion to Compel Further Responses to and Compliance with Request for Production of Documents (Set One) is denied.
Marten King’s Application to Appear as Counsel Pro Hac Vice is granted.
Background
Plaintiff 2221 Park Place Partners LLC (“Landlord”) filed its original Complaint on June 30, 2020. Plaintiff operative Fourth Amended Complaint was filed on November 29, 2021. Plaintiff alleges the following facts. Plaintiff was the landlord and Defendant 2221 Park Place Tenant LLC (“Tenant”) was the tenant on the subject property located at 2221 Park Place, El Segundo, California. Defendant WeWork Companies, LLC (“Defendant” or “guarantor”) was the guarantor on the lease. Plaintiff alleges that the tenant breached the lease by failing to take possession of the subject premises and repudiating the lease. Plaintiff also alleges that Defendant guarantor breached its obligations under the Springing Guaranty. In the First Amended Complaint, Plaintiff set forth causes of action for Breach of Lease against the tenant and Breach of Guaranty against the guarantor.
On February 11, 2021, Defendant guarantor’s demurrer to the sole cause of action alleged against it, the second cause of action, was sustained with 20 days leave to amend. On March 3, 2021, Plaintiff filed a Second Amended Complaint alleging the following causes of action: 1. Breach of Lease; 2. Breach of Guaranty; 3. Inducement of Breach of Contract; 4. Intentional Interference with Contractual Relations; 5. Breach of the Implied Covenant of Good Faith and Fair Dealing; 6. Breach of Lease. The third through sixth causes of action were added without first obtaining leave to amend to add these new causes of action.
On June 2, 2021, WeWork’s demurrer to the Second Amended Complaint was sustained with leave to amend as to the second cause of action and without leave to amend as to the third through sixth causes of action. On August 17, 2021, following court leave to file a Third Amended Complaint, Plaintiff filed the Third Amended Complaint restating the causes of action which were included in the Second Amended Complaint. On November 8, 2021, WeWork’s demurrer to the Third Amended Complaint was sustained with leave to amend, in part, and overruled, in part. The Fourth Amended Complaint sets forth the following causes of action: 1. Breach of Lease; 2. Inducement of Breach of Contract; 3. Intentional Interference with Contractual Relations; 4. Breach of Lease.
Request for Judicial Notice
WeWork’s request for judicial notice is granted pursuant to Evidence Code section 452(d).
2221 Park Place Partners LLC’s Motion to Compel Further Responses to Request for Production of Documents and to Compel Compliance
A party responding to an inspection demand shall respond to each demand with one of the following: a statement the party will comply with the demand, a representation the party lacks the ability to comply with the demand, or an objection. (Code Civ. Proc., § 2031.210, subd. (a).) A response to an inspection demand may be inadequate because it is evasive or incomplete; contains an incomplete statement of compliance; an inadequate, incomplete, or evasive representation of inability to comply; or meritless or overly general objections to a demand. (Code Civ. Proc., § 2031.310, subd. (a).)
If a demanding party believes the responding party responded inadequately, the demanding party may move for an order compelling further response. (Code Civ. Proc., § 2031.310, subd. (a).) “Unless notice of this motion is given within 45 days of the service of the verified response, or any supplemental verified response, or on or before any specific later date to which the demanding party and the responding party have agreed in writing, the demanding party waives any right to compel a further response to the demand.” (Code Civ. Proc., § 2031.310, subd. (c).)
Code Civ. Proc., § 2031.320 states, in relevant part:
“(a) If a party filing a response to a demand for inspection, copying, testing, or sampling under Sections 2031.210, 2031.220, 2031.230, 2031.240, and 2031.280 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.
(b) Except as provided in subdivision (d), the court shall impose a monetary sanction under Chapter 7 (commencing with Section 2023.010) against any party, person, or attorney who unsuccessfully makes or opposes a motion to compel compliance with a demand, unless it finds that the one subject to the sanction acted with substantial justification or that other circumstances make the imposition of the sanction unjust.
(c) Except as provided in subdivision (d), if a party then fails to obey an order compelling inspection, copying, testing, or sampling, 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).
(d)(1) Notwithstanding subdivisions (b) and (c), absent exceptional circumstances, the court shall not impose sanctions on a party or any attorney of a party for failure to provide electronically stored information that has been lost, damaged, altered, or overwritten as the result of the routine, good faith operation of an electronic information system.”
Meet and Confer
Plaintiff filed a meet and confer declaration setting forth a reasonable good faith attempt at an informal resolution of each issue presented by the motion in compliance with CCP § 2031.310(b), and CCP § 2016.040. (Decl., Philip B. Adams, ¶¶ 6-8.)
Motion to Compel
Plaintiff moves to compel Defendant WeWork Companies, LLC to provide further responses and to produce documents in response to Plaintiff’s Request for Production (Set One), requests 6 to 12. The motion is made on the grounds that the objections are without merit and Defendant failed to produce documents in accord with its statement of compliance.
Request 6 states as follows: “All DOCUMENTS from September 1, 2019 to the present RELATING TO any instances where YOU or other WEWORK ENTITIES failed to accept delivery of premises under OTHER LEASES.”
Requests 7 to 11 essentially seeks every document in the possession of Defendant WeWork regarding “Project X.” Project X is defined by moving party as follows: “The term "PROJECT X" shall refer to the internal working group known as "Project X" formed by The We Company and/or WEWORK in or around November 2019 in response to the decision by The We Company and/or WEWORK to not proceed with the planned Initial Public Offering for The We Company.” In its opposition, WeWork refers to the term “Project X-Ray.” WeWork described Project X-Ray in the following manner: “WeWork assembled a team of in-house lawyers and outside counsel who could advise the company and its affiliates about their legal rights and obligations under various agreements. ... The team reviewed hundreds of leases, including the Lease between Landlord and Tenant. ... The review was called ‘Project X-Ray.’” (Opposition, page 7, lines 1-5.) The Court presumes “Project X” and “Project X-Ray” refers to the same “project.” The Court will use the term “Project X-Ray” as presumably WeWork would utilize the correct name of the project in its pleadings.
Request 12 states as follows: “All DOCUMENTS from September 1, 2019, including COMMUNICATIONS, RELATING TO Adam Neumann's instruction to WEWORK, as alleged in Paragraph 17 of the COMPLAINT, "to take the steps necessary to reduce all cash expenditures on new and existing leases and exposure on lease guaranties[.]" For full context, the Court restates paragraph 17 of the SAC in full: “ On information and belief, following the failure of the attempted WeWork IPO, WeWork adopted significant changes in its real estate business strategy in order to reduce its financial liabilities. The Chief Executive Officer of The We Company at that time, Adam Neumann, directed the executive team of WeWork to take the steps necessary to reduce all cash expenditures on new and existing leases and exposure on lease guaranties, such as the Guaranty. On information and belief, in or around November of 2019, Arik Benzino (the President and Chief Operating Officer of WeWork) and other senior executives of WeWork formed an internal working group called "Project X." Project X was formed to carry out the cost-cutting measures directed by Mr. Neumann as described above.” (SAC, ¶ 17.) Thus, request 12 again seeks documents relating to Project X-Ray.
The Court determines that requests 6 to 12 are overly broad and burdensome. Plaintiff states that the documents related to all other leases in which WeWork repudiated and/or which were involved in Project X-Ray are discoverable to develop relevant evidence as to Plaintiff’s alter ego theory of liability.
“In California, two conditions must be met before the alter ego doctrine will be invoked. First, there must be such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist. Second, there must be an inequitable result if the acts in question are treated as those of the corporation alone.” Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App 4th 523, 538.
Among the factors to be considered in applying the alter ego doctrine are commingling of funds and other assets of the two entities, the holding out by one entity that it is liable for the debts of the other, identical equitable ownership in the two entities, use of the same offices and employees, and use of one as a mere shell or conduit for the affairs of the other. See Id. at 538-539. Other factors include inadequate capitalization, disregard of corporate formalities, lack of segregation of corporate records, and identical directors and officers. See Id. at 539. No one characteristic governs. The courts must look at the totality of the circumstances to determine whether the doctrine should be applied. See Id.
Plaintiff argues as follows: “Landlord is entitled to discover such records relating to WeWork’s repudiation of other leases as such records are directly relevant to show whether WeWork had a pattern or practice of improperly using shell entities to shield itself from liability. Put simply, to the extent such records show that WeWork likewise dominated and/or controlled such other “special-purpose entities” to repudiate other leases in an effort to escape its financial obligations, that would tend to prove Landlord’s alter ego claim that WeWork used Tenant as its mere alter ego to repudiate this Lease.” (Motion, page 6, lines 15-21.) However, Plaintiff fails to show that the discovery of other leases involving other entities would lead to the discovery of admissible evidence, in this action, related to alter ego liability. Further, even assuming arguendo, that perhaps a threshold showing under the broad discovery standard is met, the overly broad and burdensome nature of the discovery requests support denying the motion to compel. “In evaluating the two requirements of the alter ego doctrine, courts look to the totality of the circumstances bearing on the relationship between the parent and its subsidiary.” Santa Clarita Organization for Planning & Environment v. Castaic Lake Water Agency (2016) 1 Cal.App.5th 1084, 1105. Here, however, Plaintiff appears to seek discovery as to numerous other subsidiaries not involved in the lease dispute at issue in this action. It is difficult to conceive how these documents related to other entities could lead to discovery to meet the factors for alter ego liability as noted above. In fact, the documents sought do not fall within any of the factors set forth above in Sonora Diamond with respect to the alleged unity of interest and ownership and inequitable result with respect to the two specific entities involved – WeWork and 2221 Park Place Tenant LLC.
Further, the overbreadth and burdensome nature of the discovery requests must be considered. Again, as noted above, Plaintiff seeks what appears to be every document generated related to every WeWork “affiliate” in which a lease property was not accepted. To comply with the requests would be burdensome, with, again, as noted above, most likely no relevant value.
Therefore, Plaintiff’s motion is denied. Plaintiff’s request for monetary sanctions is also denied. Defendant WeWork did not request monetary sanctions in its opposition.
Applications to Appear Pro Hac Vice
Cal. Rules of Court, Rule 9.40 states, in relevant part:
“(d) The application must state:
(1) The applicant's residence and office address;
(2) The courts to which the applicant has been admitted to practice and the dates of admission;
(3) That the applicant is a licensee in good standing in those courts;
(4) That the applicant is not currently suspended or disbarred in any court;
(5) The title of each court and cause in which the applicant has filed an application to appear as counsel pro hac vice in this state in the preceding two years, the date of each application, and whether or not it was granted; and
(6) The name, address, and telephone number of the active licensee of the State Bar of California who is attorney of record.
(e) An applicant for permission to appear as counsel pro hac vice under this rule must pay a reasonable fee not exceeding $50 to the State Bar of California with the copy of the application and the notice of hearing that is served on the State Bar.”
The applicant has met all the requirements mandated in Rule 9.40.
Therefore, the Application to be admitted as counsel pro hac vice is granted.
Marten King is admitted as counsel pro hac vice in the pending matter.
WeWork is ordered to give notice of this ruling.