Judge Holly J. Fujie, Case Number: 23STCV14403, Date: 2023-08-10 Tentative Ruling

On June 20, 2023, Plaintiffs Glass House Brands Inc., Kyle D. Kazan, and Graham Farrar (collectively, “Plaintiffs”) filed a Complaint against Defendants South Cord Holdings LLC, South Cord Management LLC, Elliot Lewis, Damian Martin (collectively, “Defendants”), and DOES 1 through 100, inclusive for: (1) Defamation Per Se; (2) Defamation Per Quod; and (3) Violation of California Business & Professions Code § 17200.

On February 22, 2024, the Court ruled on various discovery motions (the “Discovery Motions”) as follows: (1) Motion to Quash Deposition Subpoena – granted; (2) Motion to Compel Deposition of Custodian of Records – denied; (3) Motion to Compel Party Deposition – granted in part; (4) Motion to Compel Requests for Admissions – granted in part; (5) GHB Motion to Compel Form Interrogatories – granted in part; (6) GHB Motion to Compel Special Interrogatories – granted; (7) Martin, Lewis, and SC Request for Production Motions – denied; and (8) Martin and Lewis Special Interrogatories Motion – denied.

On March 8, 2024, Plaintiff GHB filed the instant Motion for Reconsideration (the “Motion”) of the Court’s ruling on the Discovery Motions. On March 27, 2024, Defendant SCH filed an opposition to the Motion. On April 5, 2024, Plaintiff GHB filed a reply to the opposition.

In support of its motion, Plaintiff GHB submits the declarations of Michael Garfinkel (the “Garfinkle Declaration”) and Mark Vendetti (the “Vendetti Declaration”). Defendant SCH objects to portions of these declarations. The Court rules as follows:

OVERRULED: 1-11 as to the Vendetti Declaration and 106 as to the Garfinkel Declaration

Pursuant to Code of Civil Procedure Section 1008, subdivision (a), “[w]hen an application for an order has been made to a judge, or to a court, and refused in whole or in part, or granted, or granted conditionally, or on terms, any party affected by the order may, within 10 days after service upon the party of written notice of entry of the order and based upon new or different facts, circumstances, or law, make application to the same judge or court that made the order, to reconsider the matter and modify, amend, or revoke the prior order. The party making the application shall state by affidavit what application was made before, when and to what judge, what order or decisions were made, and what new or different facts, circumstances, or law are claimed to be shown.” (Code Civ. Proc., § 1008, subd. (a).)

As it relates to new or different facts, circumstances, or law under Code of Civil Procedure Section 1008, subdivision (a), “the moving party must provide a satisfactory explanation for the failure to produce that evidence at an earlier time.” (Shiffer v. CBS Corp. (2015) 240 Cal.App.4th 246, 255.) Furthermore, “facts of which the party seeking reconsideration was aware at the time of the original ruling are not “new or different.” (In re Marriage of Herr (2009) 174 Cal.App.4th 1463, 1468.)

A formal notice of ruling is required to set the time limit running to file a motion for reconsideration. The 10-day time limit runs from service of notice of entry of the order. (Code Civ. Proc., § 1008, subd. (a).)

The Court’s ruling on Motions to Compel Further Discovery was served on the parties on February 26, 2024. Plaintiff GHB filed this instant motion 10 (10) days later. Thus, Plaintiff GHB’s Motion for Reconsideration is timely because it was filed within ten (10) days of formal notice of the ruling on the Motions to Compel Further Discovery.

Plaintiff GHB moves for reconsideration of the Court’s February 22, 2024 Minute Order (“Discovery Order”) and to modify, amend, or revoke such Discovery Order. Specifically, Plaintiff GHB requests that the Court amend or modify the Discovery Order as it relates to: Defendant SCH’s Special Interrogatories (“SPROGs”), Set One, Nos. 7-18 (Plaintiff GHB’s customer list for its bulk sale of cannabis biomass), and Nos. 21 and 24 (requests seeking information about “white labeling” to the extent that it implicates the same information); and the Request for Production of Documents (“RFPs”) attached to Defendant SCH’s Notice of Deposition to Plaintiff GHB’s Custodian of Records (“COR”) that seek the same confidential and proprietary information, such as FRPs Nos. 1-11, 18, 23, 28, 29, 30, 31, 33, 43, 53, 55, 56, and 62.

First, Plaintiff GHB argues on February 21, 2024, California’s Department of Cannabis Control (“DCC”) launched 4 new data dashboards that display publicly, for the very first time, aggregated data from 2020, 2021 and 2022, and partial year data for 2023 reflecting sales, pricing, harvest, and licensing information. Plaintiff GHB contends this data proves with absolute certainty that the underlying “math” employed by Defendant Lewis as the sole justification for his false and defamatory statements and, saliently, the discovery challenged hereunder, is demonstrably false because it shows that Plaintiff GHB’s market share ranged between approximately 1.7% and 8.2% of cannabis plants, 0.6% and 6.2% of pounds of wet weight cannabis, and 0.24% and 2.14% of pounds of dry weight cannabis during 2020, 2021, 2022, and partially 2023.

In fact, Plaintiff GHB contends that the DCC dashboards disprove Defendants’ hypothesis to such a degree that they should not be able to “test it” through an invasive and improper fishing expedition where the entire basis for it rests on faulty assumption. Second, Plaintiff GHB argues on February 22, 2024, Defendant Elliot Lewis utilized a platform at a premier cannabis investor conference, sponsored by and featuring Plaintiff GHB, to repeat his defamatory statements about Plaintiff GHB and to intimidate investors in attendance so that they would reconsider or decide not to invest in Plaintiff GHB. Furthermore, Plaintiff GHB argues Defendant Lewis's reprehensible behavior confirms Plaintiff GHB’s prediction outlined in the opposition to the COR motion and Interrogatory motion that Defendants are pursuing Plaintiff GHB’s confidential, proprietary, sensitive, and trade secret information for the express purpose of harassing Plaintiff GHB’s customers and investors, thereby destroying Plaintiff GHB’s business. Specifically, Plaintiff GHB contends Defendant Lewis accused Plaintiff GHB of massive diversion and its investors of being complicit in criminal activity at the both the conference, in multiple videos posted on the @atalyst_ceo Instagram account, and in a rant posted on his personal LinkedIn account.

Plaintiff GHB further contends that while not directly identifying Plaintiff GHB or Kazan and Farrar by name, Defendant Lewis made clear that he was talking about Plaintiff GHB by referencing being in deep litigation was the company. As such, Plaintiff GHB asserts to provide its trade secrets to Defendants would substantially and unnecessarily prejudice Plaintiff GHB insofar as its most confidential information would be disclosed to a competitor who had repeatedly telegraphed its intent to wreak havoc and cause Plaintiff GHB financial harm. Moreover, Plaintiff GHB asserts the potential harm outweighs any probative value in its customer list because Plaintiff GHB only needs to establish that its cultivated cannabis was transferred through METRC, which can be produced by Plaintiff GHB and confirmed by the DCC without the need of disclosing the identities of its customers. Lastly, Plaintiff GHB contends the existence of the Stipulated Protective Order does not solve this present dilemma because Defendants have made it clear that they would have defy or circumvent the Stipulated Protective Order by issuing subpoenas to all of Plaintiff’ GHB’s customers.

In opposition, Defendant SCH argues that while the DCC dashboard data, which is expressly disclaimed by the DCC as to its reliability, factually supports Defendant Lewis’ alleged statements, it does not prove or confirm them. In fact, Defendant SCH asserts that the DCC discloses: “Data Sources – The information contained in the accompanying tabs was derived from data entered into the California Cannabis Track-and-Trace system by licensed cannabis businesses. The Department does not make any warranties or guarantees regarding the accuracy of the source data.” (Augustini Decl. ¶, Ex. C.)

Furthermore, Defendant SCH asserts that the dashboard data shows that since 2020, between 80 and 93% of all cultivated cannabis that entered the METRC system was diverted to the illicit market prior to final retail sale. (Lewis Decl. ¶¶ 4-11, Exs. A-I.) Thus, Defendant SCH contends the discovery Plaintiff GHB has been ordered to provide is aimed at demonstrating the diversion of Plaintiff GHB’s cannabis and will assist in Defendant SCH is determining whether Plaintiff GHB’s specific diversion rate is equal to if not greater than that of the industry as a whole. Similarly, Defendant SCH argues most of the dashboard data heralded by Plaintiff GHB is irrelevant or inapposite, and the package weight data factually supports Defendant Lewis’ challenged statements because (1) the category of “plant count” provides no information whatsoever about the amount of cannabis Plaintiff GHB cultivates, produces, transfers or is diverted; Defendant Lewis comments did not refer to “wet weight” in the challenged videos only “dry” cannabis; and the “package weight” data supports a much higher diversion rate for Plaintiff GHB than the 70-80% referenced in Defendant Lewis’ alleged defamatory statements.

Defendant SCH argues that the Court should disregard Plaintiff GHB’s new trade secret objection because it did not assert that objection in its original discovery responses, and thus it has been waived. Likewise, Defendant SCH contends Plaintiff GHB’s counsel undoubtedly knew before filing this motion that this objection was waived and could not form a new fact supporting reconsideration but improperly asserted it anyway. Defendant SCH also argues all of the so-called new facts supporting its purported trade secret objection were, by definition, in Plaintiff GHB’s possession or readily available to it long before it opposed Defendant SCH’s motions and Plaintiff GHB provided no declaration testimony, as legally required, showing it could not have asserted before, nor any new information that with reasonable diligence it could not have obtained earlier.

Defendant SCH further asserts that Plaintiff GHB does not attempt to establish the legal requirements for trade secret protection. Finally, Defendant SCH argues Defendant Lewis’ comments at the Benzinga Conference are not new facts or circumstances that support reconsideration because Plaintiff GHB provides no evidence showing Defendant Lewis has ever improperly disclosed or misused information that Plaintiff GHB designated as confidential or highly confidential under the Stipulated Protective Order; presents no evidence Defendant Lewis or his counsel intends to violate the Stipulated Protective Order; and only provides evidence that Lewis referenced Plaintiff GHB’s publicly disclosed, non-confidential Quarter 3 2023 financial information when making comments.

In reply, Plaintiff GHB argues Defendant SCH does not dispute that the new DCC dashboard establishes that Plaintiff GHB may represent only a small percentage of cultivated cannabis. Plaintiff GHB further argues Defendant SCH does not dispute Defendant Lewis’ Benzinga tirade is new evidence and confirms it will violate the Stipulated Protective Order by using the highly confidential customer list. Moreover, Plaintiff GHB contends Defendant SCH’s opposition makes clear that this discovery is all aimed at improperly seeking information about downstream transactions. In addition, Plaintiff GHB asserts Defendant SCH falsely claims that it is seeking to block all discovery because since the court order Plaintiff GHB has produced thousands of pages of documents that substantiate that it sells cannabis through METRC, while also producing documents relating to its procedures and protocols to ensure compliance with the applicable rules and regulations. Plaintiff GHB also asserts Defendant SCH falsely claims that Plaintiff GHB waived its trade secrets objections when it was asserted in response to each interrogatory and request at issue. Last, Plaintiff GHB argues Defendant Lewis’ latest mathematical calculations are irrelevant because it beyond the permissible scope of discovery.

The Court finds that Plaintiff GHB has not shown that the new facts or circumstances warrant modification, amendment or revocation of the present Discovery Order. First, the dashboard data was available on February 21, 2024, a day prior to the hearing giving rise to the present Discovery Order and Plaintiff GHB has not explained why this information was not produced at an earlier time. Also, information known to Plaintiff GHB at the time of the original ruling are not “new” facts or circumstances. Further, Plaintiff GHB’s evidence appears to show that the February 22, 2024 statements allegedly made by Defendant Lewis were made prior to the original hearing. As such, these statements are not “new” facts or circumstances and Plaintiff GHB does not provide any explanation why this information was not produced at an earlier time. Nevertheless, Plaintiff GHB’s evidence does not support that the dashboard data is reliable and/or accurate and Plaintiff GHB’s CFO Mark Vendetti admits as much in his declaration. Lastly, Plaintiff GHB’s evidence does not support that Defendant Lewis has in the past or will in the future disclose highly confidential, proprietary information provided through discovery.

Parties who intend to submit on this tentative must send an email to the Court at SMC_DEPT56@lacourt.org as directed by the instructions provided on the court website at www.lacourt.org. If the department does not receive an email and there are no appearances at the hearing, the motion will be placed off calendar.

Hon. Holly J. Fujie

Judge of the Superior Court