Judge: John J. Kralik, Case: 23BBCV00852, Date: 2024-04-26 Tentative Ruling

Case Number: 23BBCV00852    Hearing Date: April 26, 2024    Dept: NCB

Superior Court of California

County of Los Angeles

North Central District

Department B

BACKGROUND

A.    Allegations

Plaintiff Modern HR, Inc. (“Plaintiff”) alleges that it is an outsourced human resources provider that works with many industries all over the country.  It alleges that in December 2021, it entered into a contract with SA Hospital Acquisition, LLC (“SAH”), which was owned by Defendants Lawrence Feigen and Jeffrey Ahlholm.  Plaintiff alleges that under its agreement with SAH, SAH agreed to use Plaintiff’s HR services and Feigen and Ahlholm each personally guaranteed SAH’s payment and performance obligations under the agreement.  Plaintiff alleges that SAH began having difficulty submitting timely and complete payments to Plaintiff and, after discussing the issues with Defendants, Plaintiff continued to provide services and even advanced its own funds to meet SAH’s payroll demands.  Plaintiff alleges that in April 2022, Feigen and Ahlholm convinced some of their associates to make payments to Plaintiff on SAH’s behalf, including Defendant Kris Smolinski who paid $300,000 to Plaintiff by credit card.  Plaintiff alleges that SAH continued to fail meeting its financial obligations.  On May 2, 2022, the parties executed a Memorandum of Understanding (“MOU”) with the parties’ payment and reimbursement schedule, but SAH failed to make the first $500,000 payment on May 3, 2022.  On May 10, 2022, SAH signed a letter of intent (“LOI”) to sell South City Hospital to American Healthcare Systems.  In late March 2023, Smolinski initiated a chargeback on his $300,000 payment, claiming it was not an authorized payment. 

 The complaint, filed April 19, 2023, alleges causes of action for: (1) breach of contract; (2) money lent; (3) breach of contract; and (4) breach of contract (third party beneficiary).   

B.     Motion on Calendar

On March 28, 2024, Plaintiff filed a single motion to compel Defendants Feigen and Ahlholm’s further responses to the Requests for Production of Documents (“RPD”) Nos. 1, 11-13, 15-19, 22-23, and 25-27, and Special Interrogatory (“SROG”) Nos. 4-7.  (In the future, Plaintiff should file these motions separately for each Defendant and for each set of discovery at issue and pay separate filing fees.)

On April 15, 2024, Feigen and Ahlholm filed an opposition brief.

April 19, 2024, Plaintiff filed a reply brief. 

DISCUSSION

A.    RPD

Plaintiff moves to compel each of Defendants Feigen and Ahlholm’s further responses to RPD Nos. 1, 11-13, 15-19, 22-23, and 25-27.  The Court will consider the requests directed at Feigen and Ahlholm together as the RPDs and responses are essentially identical. 

RPD No. 1 seeks all documents and communications that mention/reference Plaintiff.  RPD No. 11 seeks documents sufficient to identify all third parties who made payments to Plaintiff on SAH’s behalf.  RPD Nos. 12-13 seek all documents/communications (12) where Defendants asked or instructed a third party to make payments to Plaintiff on SAH’s behalf; and (13) reflecting the payments all third parties made to Plaintiff on SAH’s behalf.  RPD No. 15 seeks documents sufficient to show the nature of the relationship between Defendants and Smolinski.  RPD Nos. 16-17 seek all communications between Defendants and Smolinski referencing or concerning (16) Plaintiff and (17) South City Hospital. RPD Nos. 18-19 seek all communication (18) where Defendants asked/instructed Smolinski to pay Plaintiff on SAH’s behalf and (19) between Defendants and Smolinski referencing/concerning the payment.  RPD No. 22 seeks all documents and communications reflecting any oral agreements Defendants entered into with Smolinski.  RPD No. 23 seeks all documents evidencing any and all monetary payments Smolinski made to Defendants.  RPD Nos. 25-27 seek all communications between Defendants and Smolinski concerning (25) South City Hospital and (26)/(27) the payment. 

Defendants objected to each of the RPDs, on the grounds that they were vague, overly broad and burdensome, an invasion of their right of privacy and of non-party third persons, and not reasonably calculated to lead to the discovery of admissible evidence; and violated the attorney-client privilege and work product privileges.  Without waiving objections, Defendants stated they would produce bates stamped documents MODERNHR000001-000004.  Plaintiff argues that it is unlikely that only 4 pages of documents are responsive to each of the RPDs at issue and that, given the parties’ relationship, there must be more than 4 pages of documents total.  In opposition, Defendants argue the merits of the case and that the guaranty agreements have been terminated.  Defendants also argue that Plaintiff’s meet and confer attempts were lacking. 

With respect to the meet and confer attempts, it appears that Plaintiff’s counsel attempted to seek dates via email from defense counsel to engage in communications, but no dates were provided.  (Frid Decl., ¶7, Ex. 4.)  It does not appear that further meet and confer attempts were made—by telephone or by letter to inform Defendants of how their responses were deficient.  The Court will still consider the merits of the motion to compel further responses, but will consider the lack of meet and confer when discussing sanctions. 

In ascertaining whether discovery of documents is proper, the Court will not prematurely make a determination on the merits of the action.  In addition, it is Defendants’ burden to substantiate their objections, but they have not done so here.  The RPDs are not vague as asked and Defendants have not shown how the RPDs are overly broad or burdensome such that Defendants are unable to answer.  The claims of privileges too have not been substantiated but if Defendants claim there is a privilege that applies, then they may produce a privilege log.  The RPDs directly address the allegations of the complaint regarding the relationship between Plaintiff, SAH, Feigen, Alholm, and Smolinski, as well as the parties’ communications during their contractual relationship, and whether payments were made in conformance with contract obligations. 

As such, the motion to compel further responses to the RPDs is granted. 

B.     SROG

Plaintiff moves to compel each of Defendants Feigen and Ahlholm’s further responses to SROG Nos. 4-7.  The Court will consider the requests directed at Feigen and Ahlholm together as the SROGs and responses are essentially identical. 

SROG No. 4 asks Defendants to detail each instance when a third party made a payment to Plaintiff on SAH’s behalf, and to include the name of the third party, the amount, and the date.  SROG No. 5 asks Defendants to explain the process by which SAH secured the payment from Smolinski including, but not limited to, what SAH informed Smolinski the payment was for.  SROG No. 6 asks Defendants to explain whether SAH agreed to reimburse Smolinski for the payment and whether that was agreed to in writing.  SROG No. 7 asks Defendants to explain their understanding of their financial obligation under the MOU. 

Defendants objected to the SROGs on the grounds that they were vague, overly broad and burdensome, an invasion of their right of privacy and of non-party third persons, and not reasonably calculated to lead to the discovery of admissible evidence; and violated the attorney-client privilege and work product privileges.  Without waiving responses, Defendants responded: “SA Hospital Acquisition Group, LLC entered into an oral agreement with Kris Smolinski wherein Mr. Smolinski agreed to loan SA Hospital Acquisition Group, LLC $300,000. Additionally, SA Hospital Acquisition Group, LLC entered into an agreement with American Healthcare services in which American Healthcare Services assumed the debts of SA Hospital Acquisition Group, LLC including any debts owed with Modern HR. Moreover, Modern HR agreed to allow American Healthcare Services to assume this debts [sic], thereby discharging SA Hospital Acquisition Group, LLC, Mr. Ahlholm, and Mr. Feigen from any liability associated with any debts they may owe to Modern HR.”

While Defendants have responded in some form, the response does not necessarily address the SROGs at issue.  For example, No. 4 asks Defendants to detail each instance a third party made a payment to Plaintiff on SAH’s behalf, including name, amount, and date.  Defendants’ blanket response identified Smolinski and the $300,000 payment but fails to provide a date.  Further, if AHS has assumed SAH’s debts, then Defendants should also provide any payments, amounts, and dates made by AHS.  Defendants should respond to each of the SROGs at issue directly.  For the same reasons discussed above, the objections are overruled.

The motion is granted as to SROG Nos. 4-7. 

C.     Sanctions

Plaintiff seeks $1,900 in sanctions against Defendants for bringing this motion.  Counsel A. Sasha Frid states that she spent 1 hour on the motion at $1,250/hour and Danielle Novelly spent 3 hours on the motion at $775/hour, but they will only be seeking $1,900 total.  (Frid Decl., ¶8.)  As discussed above, the Court will consider Plaintiff’s lack of meet and confer attempts when issuing sanctions.  Total, the Court will award $1,000 in sanctions for this motion. 

CONCLUSION AND ORDER

Plaintiff’s motion to compel Defendants Lawrence Feigen and Jeffrey Ahlholm’s further responses to the Requests for Production of Documents Nos. 1, 11-13, 15-19, 22-23, and 25-27 and Special Interrogatory Nos. 4-7 is granted.  Defendants are ordered to provide further responses within 20 days of notice of this order.

Defendants and their counsel of record, jointly and severally, are ordered to pay monetary sanctions in the amount of $1,000 to Plaintiff, by and through counsel, within 20 days of notice of this order.

            Plaintiff shall provide notice of this order.

DATED:  April 26, 2024                                                        ___________________________

                                                                                          John J. Kralik

                                                                                          Judge of the Superior Court