Judge Jill Feeney, Case Number: 23STCV02371, Date: 2023-08-18 Tentative Ruling

This is a dispute over the purchase of a rehabilitation treatment and sober living services provider. The Complaint alleges that Plaintiffs Montana Oasis, Inc. (“Montana”) and Villa Adventures, LP (“Villa”), sole partners of Sea Change Santa Monica, LP (“Operator”), sold Operator to Defendant Sea Recovery 2, LLC (“Recovery”) in June 2022 for cash payments to be made over 450 days under a Unit Purchase Agreement (“UPA”). Defendants Littleton and Fennelly personally guaranteed Recovery’s obligations. Better Soul, Inc. (“Better Soul”), Resurgence of Tennessee, LLC (“Resurgence Tennessee”), Resurgence of TX, LLC (“Resurgence TX”), and Sea Change Recovery 2, LLC (“SCR2”) pledged substantially all of their assets to Plaintiffs as collateral. These Defendants insisted that Plaintiffs wait until after a default to perfect their security interests. Plaintiffs retained ownership of Operator until the purchase price was paid in full. Recovery was given limited management powers and duties. Recovery was forbidden from incurring, assuming, or guaranteeing any indebtedness without Plaintiff’s consent.

Six weeks after the parties entered their agreement, Recovery caused Operator to take a $279,000 loan and pledged substantially all of Operator’s and certain Defendants’ personal property as collateral for that loan, used Operator’s revenue to repay the loan, and stole all the proceeds. Recovery also failed to make installment payments toward its purchase of Operator. The parties executed a Forbearance agreement in October 2022. Defendants admitted to their defaults and committed to paying $1,499,111.92 in installments. By December 2022, Defendants defaulted again after paying only $119,000. Better Soul made out a check for $45,000 and transferred $45,000 out of its account to ensure the check would bounce.

Plaintiffs Montana and Villa (collectively, “Sellers”) filed the Complaint against Defendants Fennelly, Littleton, Better Soul, Recovery, SCR2, Resurgence Tennessee, and Resurgence TX (collectively “Managers”) on February 2, 2023.

Plaintiffs move for orders compelling Defendants Sea Recovery 2, LLC, Sea Change Recovery 2, LLC, Jamie Littleton, Steve Fennelly, Resurgence TX, LLC, and Resurgence Tennessee, LLC to respond to their Form Interrogatories (“FROGs”), set one.

Within 30 days after service of interrogatories, the party to whom the interrogatories are propounded shall serve the original of the response to them on the propounding party, unless on motion of the propounding party the court has shortened the time for response, or unless on motion of the responding party the court has extended the time for response. (Code Civ. Proc. section 2030.260, subd. (a).)

If a party to whom interrogatories are directed fails to serve a timely response, the propounding party may move for an order compelling responses and for a monetary sanction. (Code Civ. Proc section 2030.290, subd. (b).) The statute contains no time limit for a motion to compel where no responses have been served. All that needs be shown in the moving papers is that a set of interrogatories was properly served on the opposing party, that the time to respond has expired, and that no response of any kind has been served. (Leach v. Superior Court (1980) 111 Cal.App.3d 902, 905-906.)

Answers to interrogatories must be as complete and straightforward as the information reasonably available to the responding party permits. (Code Civ. Proc., section 2030.220(a).) If an interrogatory cannot be answered completely, it shall be answered to the extent possible. (Code Civ. Proc., section 2030.220(b).) If the responding party does not have personal knowledge sufficient to respond fully to an interrogatory, that party shall so state, but shall make a reasonable and good faith effort to obtain the information by inquiry to other natural persons or organizations, except where the information is equally available to the propounding party. (Code Civ. Proc., section 2030.220(c).)

Failure to timely move to compel further responses within the specified period constitutes a waiver of any right to compel a further response. The 45–day rule to bring a motion to compel is mandatory and jurisdictional “in the sense that it renders court without authority to rule on motions to compel other than to deny them.” (Sexton v. Superior Ct. (1997) 58 Cal.App.4th 1403, 1410.)

Here, Plaintiffs’ counsel testifies that they propounded FROGSs on Responding Defendants on April 13, 2023. (Rothstein Decl., ¶3.) Responding Defendants filed responses on May 18, 2023 and, after participating in IDC, served supplemental responses. (Id., ¶¶4-5.) Plaintiffs obtained relief from the automatic stay which applied to Defendant Sea Recovery 2, LLC, meaning they may proceed with discovery as to the Defendants in bankruptcy. (Id., ¶5.)

Plaintiffs first argue that Fennelly and Littleton’s responses to FROG 2.8 are incomplete. FROG 2.8 seeks information about whether Fennelly and Littleton have ever been convicted of a felony. Fennelly and Littleton responded to this FROG with objections that the question was argumentative, harassing, requested information already in Plaintiffs’ possession or control, and sought to violate third party rights. These objections are overruled.

The supplemental responses state that discovery is ongoing and continuing, and that Fennelly and Littleton reserve the right to amend or supplement their responses. Fennelly and Littleton failed to respond to this FROG. Their supplemental responses are not persuasive because Fennelly and Littleton would know whether they had been convicted of felonies and discovering this information would not require further discovery. The Court finds the responses are incomplete.

Plaintiffs argue that Responding Defendants’ responses to FROG 15.1 were incomplete because they failed to answer the subparts of the question, responded with objections, and stated discovery was still ongoing. FROG 15.1 seeks information about each denial of a material allegation and each special or affirmative defense in the pleadings. Responding Defendants responded with objections that the interrogatory is premature, the responding party does not have adequate information to provide a full and complete response, the information is privileged, the interrogatory calls for a premature expert opinion, and the interrogatory is oppressive. The supplemental responses state the information is unknown at this time.

The objections that the interrogatory is premature or oppressive are overruled. The interrogatory is not premature because Responding Defendants filed an Answer containing denials and affirmative defenses. Additionally, the interrogatory does not appear to be oppressive.

Finally, even if the evidence is insufficient to supply a complete answer at this time, Responding Defendants are required to answer to the extent possible. Because they filed an Answer containing denials and affirmative defenses, it logically follows that they must have based the contents of the Answer on some facts. Thus, Responding Defendants reasonably know of the information requested in FROG 15.1.

FROGs 50.1-50.5 seek information about any agreement between Plaintiffs and Defendants. Specifically, they ask Responding Defendants to identify all documents that are part of the agreement, state whether there was a breach, state whether any performance under the agreement was excused, whether the agreement was terminated by mutual agreement, and whether any agreement was unenforceable.

Responding Defendants objected on the grounds that the FROGs call for irrelevant information, seek privileged information, and because they seek confidential information. However, the information is relevant because this is an action for breach of contract, among other things. Additionally, the information requested does not appear to be privileged or confidential. Responding Defendants also failed to explain the alleged privilege or oppose this motion. The objections are overruled.

Responding Defendants were each parties to the agreement at issue in this action. Thus, it is reasonable that Responding Defendants would have personal knowledge of the information about this agreement sufficient to provide responses. Even if the information available is incomplete, Responding Defendants are required to respond to the extent possible with the information available.

Code Civ. Proc., section 2030.300, subdivision (d) authorizes a mandatory issuance of sanctions against “any party, person, or attorney who unsuccessfully makes or opposes a motion to compel a further response to interrogatories, 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.” (Code Civ. Proc., section 2030.300, subd. (d).)

Sanctions may be imposed for misuse of the discovery process. (Code Civ. Proc., § 2023.030, subd. (a).) Failing to respond or to submit to an authorized method of discovery constitutes a misuse of the discovery process. (Code Civ. Proc., § 2023.010, subd. (d).) Cal. Rules of Court, Rule 3.1348 provides that a court may award sanctions under the Discovery Act in favor of a party who files a motion to compel discovery even if no opposition was filed.

Here, the Court finds that Responding Defendants misused the discovery process by failing to provide complete responses despite multiple opportunities, meet and confer discussions, and an IDC. However, because this motion was unopposed, the Court will reduce Plaintiffs’ requested sanctions to $2,310 for five hours of attorney time at a rate of $450 per hour plus the $60 filing fee.