Judge: Joseph Lipner, Case: 22STCV29610, Date: 2024-12-19 Tentative Ruling
Case Number: 22STCV29610 Hearing Date: December 19, 2024 Dept: 72
SUPERIOR COURT OF CALIFORNIA
COUNTY OF LOS ANGELES
DEPARTMENT 72
TENTATIVE
RULING
|
HEATHER ALTEPETER, Plaintiff, v. ASH PATEL, et al., Defendants. |
Case No:
22STCV29610 Hearing Date: December 19, 2024 Calendar Number: Add-On #12 1:30 PM |
This is a hearing re reconsideration of the Court’s June 20,
2024 ruling on the summary motion filed by Defendants Ash Patel, Shahzad Khan,
Houri Simon, John Friedemann, and Commercial Bank of California (“CBC”)
(collectively, “Defendants”) as to the First Amended Complaint (“FAC”) filed by
Plaintiff Heather Altepeter (“Plaintiff”). Several additional motions have also
been set for hearing this date, as follows:
Plaintiff moves for relief from the Court’s September 26,
2024 order issuing monetary and evidentiary sanctions against Plaintiff.
Defendants move for terminating sanctions and additional
monetary sanctions against Plaintiff and her attorney.
Defendants move for the Court to issue an order for
Plaintiff to show cause or be held in contempt of court for failure to pay the
monetary sanctions issued on September 26, 2024.
The Court DENIES Plaintiff’s motion for relief from
evidentiary and monetary sanctions.
The Court sua sponte reconsiders the summary judgment order.
The Court REVISES its June 20 Order and grants summary adjudication on
Plaintiff’s second, third, fourth, and sixth claims. The Court therefore GRANTS
summary judgment.
The Court DENIES Defendants’ motion for terminating
sanctions as MOOT. The Court doubts that
monetary sanctions against Attorney Douglas are appropriate under these
circumstances but is willing to hear argument on the issue.
The Court DENIES the motion for an order to show cause re
contempt.
The Court takes certain background facts from papers
relating to the recently-litigated motion for summary judgment filed by the
parties.
Plaintiff is the owner and CEO of National Merchants
Association, Inc. (“NMA”). NMA provides electronic payment processing services
to businesses. CBC served as NMA’s sponsor bank. Plaintiff alleges that CBC
misled her into a business relationship whereby CBC learned and usurped
proprietary information, industry connections, trade secrets, and business
strategies from Plaintiff.
Around March 1, 2017, CBC and NMA entered into the first of
three Merchant Marketing and Processing Agreements (“MMPA”s”). (Additional
Material Fact (“AMF”) 11.) The parties experienced some difficulties in the
process of rolling out their relationship, and although the parties continued
to move forward, NMA also sought out other banking partners to facilitated a
smoother relationship. (AMF 12.)
In March 2019, MUFG Union Bank (“Union Bank”) filed a
lawsuit against NMA, Plaintiff, and her other business entities. (Undisputed
Material Fact (“UMF”) 8.) Union Bank obtained an order appointing a receiver to
oversee NMA’s operation. That receiver, Howard Grobstein, terminated
Plaintiff’s role and employment as CEO of NMA in October 2019.
Following a settlement with Union Bank, Grobstein was
removed as the receiver and Plaintiff regained her prior position in NMA.
However, CBC provided Plaintiff with a ‘take it or leave it’ Amended Temporary
MMPA. (AMF 29.) Plaintiff contends that CBC coerced her into entering the
agreement. The new MMPA was executed on April 14, 2020. (AMF 29.) On April 27,
2020, Plaintiff received compensation from NMA for the first time since her
removal as CEO.
Plaintiff was not given access to NMA’s company data and
merchant activity records until May 5, 2020. (AMF 30.) When she obtained
access, Plaintiff contends that she discovered that, during her absence, CBC
had attempted to steer merchant accounts with NMA to other sponsored payment
processing organizations. (AMF 31.)
NMA eventually identified Evolve Bank as its new sponsor
bank. CBC ported NMA’s merchant portfolio to Evolve by the beginning of
November 2020. (UMF 17.) Neither Plaintiff nor NMA have held any business
relationship with CBC since at least January 1, 2021. (UMF 18.) Plaintiff has
not held any depository account at CBC in her own name since at least 2019.
(UMF 19.)
In December 2021, NMA filed an action (the “NMA Action”)
against CBC in the Los Angeles County Superior Court, Case No. 21STCV44674.
(UMF 26.) NMA raised claims for breach of written agreement, breach of
contract, breach of the covenant of good faith and fair dealing, unjust
enrichment, unfair business practices, promissory fraud, and rescission of the
April 14, 2020 MMPA. (UMF 26.) The court ordered the NMA Action to a judicial
reference on March 8, 2022. (UMF 27.) Shortly before trial in the NMA Action,
NMA filed a request for dismissal, and the NMA Action was dismissed on February
8, 2023. (UMF 28.)
Plaintiff filed this action on April 29, 2022. The operative
complaint is now the First Amended Complaint, which raises claims for (1)
unfair business practices; (2) intentional interference with prospective
economic relations; (3) negligent interference with prospective economic
relations; (4) intentional interference with prospective contractual relations;
(5) inducing breach of contract; and (6) negligence.
Plaintiff names as Defendants CBC; Patel, as CBC’s President
and Chairman (FAC ¶ 80); Khan, as its Executive Vice President, Chief Growth
and Strategy Officer (FAC ¶ 81); Simon, as Executive Vice President, Payment
Solutions (FAC ¶ 82); Friedemann, as CBC’s General Counsel (FAC ¶ 83); Pinge,
as Executive Vice President, Chief Risk Officer of CB Cal (FAC ¶ 84); Mr.
Meruelo, as the founder of CBC and a member of its Board of Directors (FAC ¶
85); and McCullough, as CBC’s Executive Vice President, Executive Administration
(CBC ¶ 86).
Plaintiff moved for leave to file a Second Amended Complaint
joining NMA as a party, but the Court denied the motion on September 12, 2023.
(UMF 29.)
Defendants moved for summary judgment on April 4, 2024.
Plaintiff filed an opposition and Defendants filed a reply.
On June 20, 2024, the Court granted the summary judgment motion
as to Plaintiff’s first and fifth claims and as to three other defendants (the
“June 20 Order”). The Court denied the motion as to Plaintiff’s remaining
claims. In denying the motion as to the second, third, and fourth claims, the
Court relied on declarations submitted by Plaintiff indicating that, as a
result of CBC’s actions, a number of agents had directed their business away
from NMA and to competitors. Although the Court concluded that Plaintiff could not raise claims on
behalf of NMA, the Court found that Plaintiff could assert personal claims for
damage to her own reputation – of which the lost business was evidence. In
denying the motion as to the sixth claim, the Court relied on Plaintiff’s
counsel’s representations that Plaintiff had personally deposited money with
CBC in the past, and that CBC therefore had a duty of care to Plaintiff when
moving money involving Plaintiff’s personal deposits.
On June 25, 2024, CBC served its second sets of Requests for
Production and Special Interrogatories on Plaintiff. This set of discovery was
targeted at the theories that the Court relied on to partially deny the summary
judgment motion. The interrogatories sought to identify the personal agent
relationships that Defendants had allegedly interfered with, the alleged damages
to Plaintiff’s net worth, and the basis for her claim that her reputation was
damaged. The document requests sought agreements between Plaintiff and agents
with which Plaintiff claimed Defendants interfered, as well as financial
statements supporting Plaintiff’s damages and proof of a personal depositor
account with CBC. Despite repeated meet and confer efforts by CBC, Plaintiff
served responses to the requests for production only on August 19, 2024, and
had not served any other responses by September 26, 2024, when the Court
granted sanctions against Plaintiff for such failure.
On July 12, 2024, CBC noticed Plaintiff’s deposition for
July 24, 2024. Plaintiff did not appear for her deposition. The Court issued ex
parte orders on July 30, 2024 and August 6, 2024 for Plaintiff to appear for
her deposition.
On August 23, 2024, Plaintiff appeared for her deposition.
At her deposition, Plaintiff testified that she could not name a single agent
who left NMA because of CBC’s actions. (Rome Del., Ex. 6 at pp. 49:11-14, 18;
34:5-8, 10.) Plaintiff testified that NMA’s revenue increased in 2020 and 2021,
the two years after Plaintiff alleges that Defendants interfered with her
contractual relationships. (September 3, 2024 Rome Del., Ex. 6 at p. 87:2-3,
6-7, 17-20.) Plaintiff testified that she could not recall whether she had ever
had a personal bank account at CBC. (September 3, 2024 Rome Del., Ex. 6 at p. 92:19-22.)
On September 26, 2024, the Court granted in part Defendants’
motion for sanctions against Plaintiff (the “September 26 Order”). The Court denied
the request for terminating sanctions but granted evidentiary sanctions
prohibiting Plaintiff from introducing evidence that she had a depositor
account with CBC or evidence of agents that Plaintiff claims to have lost due
to CBC’s alleged actions. The Court awarded Defendants $17,975.00 in monetary
sanctions against Plaintiff. The Court additionally set a hearing for
reconsideration of the summary judgment motion and ordered briefing by the
parties.
On October 7, 2024, Defendants filed the motion for further
sanctions. Plaintiff filed an opposition and Defendants filed a reply.
On October 14, 2024, Defendants filed an opening brief in
support of reconsideration. Plaintiff filed an opposition and Defendants filed
a reply.
On November 5, 2024, Defendants moved for an order for
Plaintiff to show cause for failure to pay the monetary sanctions or be held in
contempt. Plaintiff filed an opposition and Defendants filed a reply.
On November 13, 2024, Plaintiff filed a notice of
substitution of attorney indicating that her prior attorney, Michael David
Douglas, was substituted out for her new attorney, Casey C. Daggett.
On November 27, 2024, Plaintiff filed a motion for relief
from the evidentiary and monetary sanctions.
On November 27, 2024, the Court consolidated the hearings on
Defendants’ motions and the reconsideration to December 17, 2024.
On December 9, 2024, the Court, pursuant to Plaintiff’s
request, consolidated the December 17, 2024 hearings and the hearing on
Plaintiff’s motion for relief from sanctions, originally calendared for January
16, 2025, to December 19, 2024.
Defendants filed an opposition to the motion for relief on
December 13, 2024. Plaintiff has not filed a reply.
Where a party misuses the discovery process, courts have
discretion to impose terminating, issue, evidence, or monetary sanctions. (Code
Civ. Proc. §§ 2023.010(g), 2030.290(c); R.S. Creative, Inc. v. Creative
Cotton, Ltd. (1999) 75 Cal.App.4th 486, 495.) Misuse of the discovery
process includes failure to respond to an authorized method of discovery or
disobeying a court order to provide discovery. (Code Civ. Proc., §§
2023.010(d), (g).)
Monetary sanctions may be imposed “ordering that one engaging in
the misuse of the discovery process, or any attorney advising that conduct, or
both pay the reasonable expenses, including attorney's fees, incurred by anyone
as a result of that conduct…unless [the Court] finds that the one subject to
the sanction acted with substantial justification or that other circumstances
make the imposition of the sanction unjust.” (Code of Civ. Proc.,
§ 2030.030, subd. (a).)
Evidence sanctions may be imposed “by an order prohibiting any
party engaging in the misuse of the discovery process from introducing
designated matters in evidence.” (Code of Civ. Proc.,
§ 2030.030, subd. (c).)
In more extreme cases, the Court may also impose terminating
sanctions by “striking out the pleadings or parts of the pleadings,” “staying
further proceedings,” “dismissing the action, or any part of the action,” or
“rending a judgment by default” against the party misusing the discovery
process. (Code of Civ. Proc. § 2030.030(d).) The court should look to
the totality of the circumstances in determining whether terminating sanctions
are appropriate. (Lang v. Hochman (2000) 77¿Cal.App.4th 1225,
1246.) Ultimate discovery sanctions are justified where there is a
willful discovery order violation, a history of abuse, and evidence showing
that less severe sanctions would not produce compliance with discovery rules. (Van
Sickle v. Gilbert (2011) 196 Cal.App.4th 1495, 1516.) “[A] penalty as
severe as dismissal or default is not authorized where noncompliance with
discovery is caused by an inability to comply rather than willfulness or bad
faith.” (Brown v. Sup. Ct. (1986) 180 Cal.App.3d 701, 707.) Further,
preventing parties from presenting their cases on the merits is a drastic
measure; terminating sanctions should only be ordered when there has been
previous noncompliance with a rule or order and it appears a less severe
sanction would not be effective. (Link v. Cater (1998) 60 Cal.App.4th
1315, 1326.)
Before any sanctions may be imposed the court must make an
express finding that there has been a willful failure of the party to serve the
required answers. (Fairfield v. Superior Court for Los Angeles County
(1966) 246 Cal.App.2d 113, 118.) Lack of diligence may be deemed willful where
the party understood its obligation, had the ability to comply, and failed to
comply. (Deyo v. Killbourne (1978) 84 Cal.App.3d 771, 787.) The party
who failed to comply with discovery obligations has the burden of showing that
the failure was not willful. (Id. at 788.)
Plaintiff seeks permissive relief under Code of Civil
Procedure, section 473, subd. (b) on the grounds that the sanctions order was
taken against her as a result of the mistake, inadvertence, or excusable
neglect of her previous counsel, Michael D. Douglas.
The trial court has discretion to “relieve a party or his or
her legal representative from a judgment, dismissal, order, or other proceeding
taken against him or her through his or her mistake, inadvertence, surprise, or
excusable neglect.” (Code Civ. Proc., § 473 (b).) Such an application shall be
accompanied by a copy of the answer or other pleading proposed to be filed in
replacement of the pleading being set aside and shall be made within six months
after the judgment, dismissal, order, or other pleading for which dismissal is
being sought. (Ibid.)
Where a defendant in default moves for relief from default,
judgment, or other dismissal against them entered as the result of her
attorney’s mistake and “no more than six months” have passed since the entry of
judgment, the court shall grant such relief as is requested, provided
the motion satisfies all procedural requirements and the court does not find
that the entry of default was caused by something other than the attorney's
mistake, inadvertence, surprise, or neglect. (Code Civ. Proc., § 473 (b).)
Plaintiff
argues that where the basis for relief is attorney fault, granting relief is
appropriate to “relieve the innocent client of the burden of the attorney's
fault, to impose the burden on the erring attorney, and to avoid precipitating
more litigation in the form of malpractice suits.” (Motion for Relief at p.
4:15-23, quoting Metropolitan Service Corp. v. Casa de Palms, Ltd.
(1995) 31 Cal.App.4th 1481, 1487; see.) Plaintiff further argues that “any
doubts in applying section 473 must be resolved in favor of the party seeking
relief from default”. (Motion for Relief at p. 4:15-23, quoting Elston v.
City of Turlock (1985) 38 Cal.3d 227, 233.) Plaintiff cites the wrong legal
standard. The portions of Elston and Metropolitan Service Corp.
cited by Plaintiff each discussed mandatory relief from default. As a
close reading of section 473(b) will show, mandatory relief based on attorney
affidavit of fault is only available for a party seeking relief from default,
default judgment, or dismissal. None of those apply here. The proper standard here is that for
permissive relief, discussed above.
Turning
to the factual content of Plaintiff’s argument, Plaintiff contends that her
failure to respond to the discovery resulted from medical conditions suffered
by her prior counsel, Michael D. Douglas. Douglas declares that he has been
suffering from cardiac and kidney conditions that resulted in his
hospitalization on numerous occasions from July 16, 2024 through November 11,
2024. (Douglas Decl. re Motion for Relief ¶ 3.) Douglas declares that these
conditions and hospitalizations resulted in his failure to serve the discovery
responses. (Douglas Decl. re Motion for Relief ¶ 3.)
The
Court has difficulty accepting this argument for multiple reasons.
First,
Plaintiff now contends that she provided responsive written responses and
documents to the discovery on or around July 10, 2024, approximately two weeks
before the original due date (Motion at p. 2:3-5). This contention is
contradicted by Plaintiff’s declaration in opposition to the previous sanctions
motion, where she stated that her efforts to retrieve the responsive documents
from NMA’s system interfered with her ability to sit for her deposition on
August 21, 2024. (September 20, 2024 Altepeter Decl. at ¶¶ 21-23.) Plaintiff’s contention
that she timely submitted the responsive documents to Douglas therefore does
not appear credible.
Second,
the medical incapacity explanation for Plaintiff’s inability to serve discovery
responses is a new explanation that was never raised in opposition to the
original motion for sanctions. In Plaintiff’s opposition to the original motion
for sanctions, which was written by Douglas, Plaintiff argued:
“Plaintiff
acknowledges it has missed deadlines, has requested extensions on the same
basis as stated above which have not been granted in this, as well as other
matters in other jurisdictions, and has attempted on multiple occasions to meet
and confer with Defendants’ counsel to no avail. Without pointing fingers in a
manner that is unprofessional, Plaintiff simply cannot compromise herself, nor
her personal well-being by addressing all these issues at this time. Given the
pending Motion was not filed under seal, it raises serious concerns pertaining
to Plaintiff’s ability to navigate the numerous existing matters.
As a
result of the Rome LLP’s recent involvement in this matter, and that same
firm’s involvement with the agents referenced in the Court’s Minute Order
regarding Defendants’ denied Motion for Summary Judgment on June 20, 2024,
Plaintiff is unable to adequately oppose this.
Plaintiff
is left without a choice but to seek to either (1) seek the disqualification of
Defendants’ counsel, (2) seek to consolidate matters from various jurisdictions
and/or (3) move to reopen discovery to further investigate the impact of Rome
LLP’s involvement in this matter on the other matters stated in Ms. Altepeter’s
concurrently filed declaration.”
(September 20, 2024 Opposition to
Motion for Sanctions at p. 2:3-17.)
The opposition to the sanctions motion said nothing about
medical conditions. This would have been
a simple matter to put in an opposition if it were accurate. Instead, Plaintiff
raised a different argument, one that showed that her failure to comply was
willful.
Finally,
in the time when Plaintiff contends that her counsel was medically
incapacitated, Plaintiff’s counsel filed and litigated a motion to disqualify
Defendants’ counsel (Rome Decl., Exs. C, D), prepared an opposition to
Defendants’ motion for sanctions (Rome Decl., Exs. E, F), defended the
depositions of Plaintiff and Plaintiff’s expert (Rome Decl. ¶ 11; Kananen Decl.
¶ 10), and appeared for multiple hearings (Minute Orders dated August 7, 2024
and September 23, 2024). These facts further support that Plaintiff’s failure
to serve discovery responses was the result of her own decision, and not the
mistake, inadvertence, or excusable neglect of her counsel.
The
Court therefore declines to use its discretion to grant relief under section
473(b).
Plaintiff additionally argues that the order granting
evidentiary sanctions was procedurally improper because there were no unusual
circumstances that would permit the issuance of evidentiary sanctions. The
Court treats this contention as a motion for reconsideration.
Within ten days of service of an order, a party may move for
reconsideration based on new facts, circumstances, or law.¿ (Code Civ. Proc., §
1008, subd. (a); see also Mink v. Superior Court (1992) 2 Cal.App.4th
1338, 1342.)¿The moving party shall state by affidavit what application was
made before, what order or decisions were made, and what new or different facts
or circumstances are claimed to be shown.¿ (Code Civ. Proc., § 1008, subd .(a).)¿
“[T]he party seeking reconsideration must provide not only new evidence but
also a satisfactory explanation for the failure to produce that evidence at an
earlier time.”¿ (Glade v. Glade (1995) 38 Cal.App.4th 1441, 1457.)¿ The
legislative intent was to restrict motions for reconsideration to circumstances
where a party offers the court some fact or circumstance not previously
considered and some valid reason for not offering it earlier.¿ (Gilberd v.
AC Transit (1995) 32 Cal.App.4th 1494, 1500.)¿
“If those requirements have been met to the satisfaction of
the court but the court is not persuaded the earlier ruling was erroneous, the
proper course to grant reconsideration and to reaffirm the earlier ruling.” (Corns
v. Miller (1986) 181 Cal.App.3d 195, 202.)
For several reasons, the Court will not disturb the
September 26 Order.
First, Plaintiff has waited well beyond the 10-day window
for a motion for reconsideration.
Second, even if the Court were to reconsider the September
26 Order, it would still find that the order was not erroneous.
“[V]iolation of a discovery order is not a prerequisite to
issue and evidentiary sanctions when the offending party has engaged in a
pattern of willful discovery abuse that causes the unavailability of evidence.”
(Karlsson v. Ford Motor Co. (2006) 140 Cal.App.4th 1202, 1215.) Here, Plaintiff engaged in a pattern of
willful discovery abuse for the reasons set forth in the Court’s September 26,
2024 minute order. Trial was, and is, imminent in this matter, and the
discovery at issue was critical to the success or failure of Plaintiff’s
remaining claims. The Court found that a lesser sanction would not suffice to
prevent the prejudice caused to Defendant.
The sanction order was proportional to the discovery
dereliction. Plaintiff failed and refused to produce evidence concerning her having
a depositor account with CBC or evidence of agents that Plaintiff claims to
have lost. Plaintiff did so up until a point that trial was imminent. The
sanctions were simply a ruling that Plaintiff could not use evidence at trial
that Plaintiff willfully refused to produce.
Plaintiff argues that the motion for sanctions was not
timely brought. On August 7, 2024, the Court issued a minute order indicating
that all litigation deadlines shall remain based on the original trial date of
August 26, 2024. Plaintiff argues that the sanctions motion, filed on September
3, 2024, was therefore not timely. However, this lateness resulted directly
from the conduct of Plaintiff and her counsel. Plaintiff’s counsel repeatedly
sought extensions for the time to serve Plaintiff’s discovery responses,
eventually serving only responses to the requests for production on August 19,
2024, well past the July 29, 2024 discovery cutoff. (Rome Decl. ¶¶ 7, 9.) It would
be inequitable to prevent Defendants from seeking necessary sanctions for
failure to respond to discovery when the delay resulted from Defendants’ good
faith provision of extensions to Plaintiff, which Plaintiff abused.
Thus, the Court declines to reconsider the September 26
Order. If the Court were to reconsider the September 26 Order, it would
reaffirm it.
The Court therefore denies the motion for relief from
sanctions.
The purpose of a motion for
summary judgment or summary adjudication “is to provide courts with a mechanism
to cut through the parties’ pleadings in order to determine whether, despite
their allegations, trial is in fact necessary to resolve their dispute.” (Aguilar
v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 843.) “Code of
Civil Procedure section 437c, subdivision (c), requires the trial judge to
grant summary judgment if all the evidence submitted, and ‘all inferences
reasonably deducible from the evidence’ and uncontradicted by other inferences
or evidence, show that there is no triable issue as to any material fact and
that the moving party is entitled to judgment as a matter of law.” (Adler v.
Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.)
“In ruling on the motion,
the court must consider all of the evidence and all of the inferences
reasonably drawn therefrom [citation] and must view such evidence [citations]
and such inferences [citations] in the light most favorable to the opposing
party.” (Aguilar, supra, at pp. 844-845 [quotation marks
omitted].)
“On a motion for summary
judgment, the initial burden is always on the moving party to make a prima
facie
showing that there are no triable issues of material fact.” (Scalf v. D. B.
Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1519.) A defendant moving
for summary judgment or summary adjudication “has met his or her burden of
showing that a cause of action has no merit if the party has shown that one or
more elements of the cause of action . . . cannot be established, or that there
is a complete defense to the cause of action.” (Code Civ. Proc., § 437c, subd.
(p)(2).)
“Once the defendant . . .
has met that burden, the burden shifts to the plaintiff . . . to show that a
triable issue of one or more material facts exists as to the cause of action or
a defense thereto.” (Ibid.) To establish a triable issue of material
fact, the party opposing the motion must produce substantial responsive
evidence. (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.) “If the plaintiff cannot do
so, summary judgment should be granted.” (Avivi v. Centro Medico Urgente
Medical Center (2008) 159 Cal.App.4th 463, 467.)
In the June 20 Order, the Court denied summary adjudication
as to Plaintiff’s second claim for intentional interference with prospective
economic relations; third claim for negligent interference with prospective
economic relations; fourth claim for intentional interference with prospective
contractual relations; (collectively, the “Interference Claims”) and sixth
claim for negligence. The Court granted summary adjudication as to Plaintiff’s
first claim for unfair business practices and fifth claim for inducing breach
of contract.
Defendant argued on the Interference Claims that Plaintiff
had not established interference with any business relationships. In denying
the motion as to the second, third, and fourth claims, the Court relied on
declarations submitted by Plaintiff indicating that, as a result of CBC’s
actions, a number of agents had directed their business away from NMA and to
competitors. Although the Court concluded that Plaintiff could not raise claims
on behalf of NMA, the Court found that Plaintiff could assert personal claims
for damage to her own reputation – of which the lost business was evidence.
In denying the motion as to the sixth claim, the Court
relied on Plaintiff’s counsel’s representations at the hearing that Plaintiff
had personally deposited money with CBC in the past, and that CBC therefore had
a duty of care to Plaintiff when moving money involving Plaintiff’s personal
deposits.
Defendants served additional discovery requests on Plaintiff
seeking to determine, among other things, what relationships had been damaged
and what account Plaintiff had held. Plaintiff’s failure to respond to that
discovery is the subject of the sanctions motion discussed above. In
particular, Defendants asked Plaintiff to identify the agents who had had
agreements with Plaintiff who subsequently began to board business with CBC, to
produce such agreements, and to identify the revenue that those agents had
generated for Plaintiff or NMA. Defendants asked Plaintiff to state all other
facts supporting her assertion that Defendants had impacted her goodwill within
the marketplace. Defendants asked Plaintiff to identify all accounts or
agreements that she had ever had with CBC and to produce all such agreements.
Plaintiff never responded to these interrogatories or produced responsive
documents to these document production requests. (Kananen Decl. ¶¶ 6-7, Exs.
2-4.)
At her deposition, Plaintiff testified that she could not
name a single agent who left NMA because of CBC’s actions. (Rome Del., Ex. 6 at
pp. 49:11-14, 18; 34:5-8, 10.) Plaintiff testified that NMA’s revenue increased
in 2020 and 2021, the two years after Plaintiff alleges that Defendants
interfered with her contractual relationships. (September 3, 2024 Rome Del.,
Ex. 6 at p. 87:2-3, 6-7, 17-20.)
Plaintiff now names in a new declaration over ninety agents
who she asserts left NMA because they were not paid their residuals. (November
26, 2024 Altepeter Decl. ¶ 10.) The Court does not consider this statement, for
several reasons.
First, it violates the Court’s evidentiary sanction, which
remains in place.
Second, Plaintiff’s statement in her declaration that the
agents left because they were not paid is not admissible evidence. It is either hearsay, if it relies on
statements made by the agents out of court as to the truth of their motivations
for leaving, or speculation, if it does not.
Tellingly, there are no declarations from even a single agent or from
anyone other than Plaintiff.
Third, Plaintiff’s new declaration is not consistent with Plaintiff’s
statements in her deposition that she could not name a single agent who was not
paid. This is especially true as Plaintiff has not provided a basis for her new
testimony. “After-the-fact attempts to reverse prior admissions are
impermissible because a party cannot rely on contradictions in his own
testimony to create a triable issue of fact.” (Thompson v. Williams
(1989) 211 Cal.App.3d 566, 573.)
For each of these reasons, Plaintiff’s assertion in her new
declaration does not create or evidence a triable issue of fact. The record remains devoid of any proper
evidence that agents left NMA because of CBC’s actions. The Court relied on the
existence of such evidence and the
representations by Plaintiff’s counsel to deny summary adjudication as to
Plaintiff’s surviving claims. Without the loss of any business relationships,
Plaintiff cannot show causation or damages on the Interference Claims.
The Court stated in its order that Defendants had not raised
the issue of whether Plaintiff had adequately identified the damaged
relationships in their moving papers. Defendants,
however, did raise the issue of whether Plaintiff had shown damaged
relationships in general. Defendants argued that Plaintiff could not show that
Defendants had caused damage to her relationship with NMA because it had been
the receiver who terminated Plaintiff. In her opposition, Plaintiff argued that
her personal relationships with agents had been disrupted. In their reply,
Defendants argued that Plaintiff had not adequately made such allegations in
the FAC, and therefore could not rely on them to resist summary adjudication.
The Court found that Plaintiff had adequately made such allegations. However,
at bottom, the Court’s denial of the summary adjudication motion did also rely
on Plaintiff’s showing that Defendants’ argument that they had not disrupted
any of Plaintiff’s relationships was wrong – by providing her declaration that
she had lost relationships with agents. That declaration now appears to have
been, at best, mistaken. In light of this revelation, the Court now believes
that its ruling on the Interference Claims in the June 20 Order was wrong.
Defendants have therefore carried their initial burden to
show the absence of a triable issue of fact as to the claims at issue.
Plaintiff has failed to carry her burden of creating a triable issue of fact in
response.
The Court therefore reconsiders the summary judgment order.
The Court revises its June 20 Order and grants summary adjudication on
Plaintiff’s Interference Claims.
Plaintiff testified that she could not recall whether she
had ever had a personal bank account at CBC. (September 3, 2024 Rome Del., Ex.
6 at p. 92:19-22.) Without a personal account with CBC, Plaintiff cannot show
that CBC had a duty to her under the negligence claim.
Of note, Plaintiff now takes the position that Attorney Douglas
only contended that Plaintiff had had a CBC account prior to 2019 because he
believed that Defendants had represented as such in their separate statement.
But Defendants had not done so. Defendants’ separate statement reads that
“[Plaintiff] has not held any depository account at [CBC] in her own name since
at least 2019.” (UMF 19 [emphasis added].) It was Attorney Douglas, and
not Defendants, who represented to the Court that Plaintiff had had an account.
Plaintiff now advances an entirely different argument. She argues that she had multiple accounts
with CBC in her capacity as CEO of NMA under the Amended and Restated Marketing
and Processing Agreement (“ARMPA”), to which Plaintiff contends that she was a
party. (Plaintiff’s Responsive Brief at pp. 5:25-6:6.) This appears to refer to
the “Amended and Restated Temporary Merchant Marketing and Processing
Agreement” alleged in the FAC. (FAC ¶ 75.) Plaintiff declares that Defendants
denied her access to deposit accounts held with CBC under the ARMPA. (November
26, 2024 Altepeter Decl. ¶¶ 7-8.) But Plaintiff never alleges breach of either
the ARMPA or the Amended and Restated Temporary Merchant Marketing and
Processing Agreement in the FAC.
“[C]ontract and tort obligations are different. [Citation]
The ‘independent tort principle,’ and its specific application in our economic
loss rule cases, honors those differences. The law of contracts protects the
interests of parties who enter into an agreement that secures rights and
obligations of their choosing. The parties make clear those rights and
obligations by the terms they put in the contract. Contract law functions to
facilitate commerce by enforcing the agreement the parties adopt. Tort law
operates on a different principle. A tort remedy arises, not based on an
agreement between the parties, but because the defendant has violated a
societal duty that the law itself imposes on everyone. A tortfeasor is held
liable not for violating a contract, but for violating an independent legal
duty.” (Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1, 37.)
“But to be held liable in tort, a defendant must commit a tort. If all the
defendant has allegedly done is violate the terms of the parties’ contract,
depriving the plaintiff of the benefits the contract ensures, the defendant's
liability is limited by the contract. Broader tort liability only arises if a
defendant violates an independent legal duty and the type of harm that ensues
was not reasonably contemplated or accounted for by the contractual parties.” (Ibid.)
Thus,
insofar as Plaintiff now asserts that Defendants breached the ARMPA, she is
asserting a claim that is not cognizable as negligence.
Defendants have therefore carried their initial burden to
show the absence of a triable issue of fact as to the claims at issue.
Plaintiff has failed to carry her burden of creating a triable issue of fact in
response.
The Court therefore reconsiders the summary judgment order.
The Court revises its June 20 Order and grants summary adjudication on
Plaintiff’s negligence claim. Because this disposes of Plaintiff’s last claim,
the Court grants summary judgment.
Defendants request terminating sanctions and monetary
sanctions in the amount of $57,690.00 against Plaintiff, Michael D. Douglas,
and the Douglas Firm on the grounds that the FAC is without factual or legal
merit and was filed for an improper purpose to harass Defendants.
The Court denies terminating sanctions as moot.
“By
presenting to the court, whether by signing, filing, submitting, or later
advocating, a pleading, petition, written notice of motion, or other similar
paper, an attorney or unrepresented party is certifying that to the best of the
person’s knowledge, information, and belief, formed after an inquiry reasonable
under the circumstances, all of the following conditions are met:
(1)
It is not being presented primarily for an improper purpose, such as to harass
or to cause unnecessary delay or needless increase in the cost of litigation.
(2)
The claims, defenses, and other legal contentions therein are warranted by
existing law or by a nonfrivolous argument for the extension, modification, or
reversal of existing law or the establishment of new law.
(3)
The allegations and other factual contentions have evidentiary support or, if specifically
so identified, are likely to have evidentiary support after a reasonable
opportunity for further investigation or discovery.
(4)
The denials of factual contentions are warranted on the evidence or, if
specifically so identified, are reasonably based on a lack of information or
belief.”
(Code Civ. Proc., § 128.7, subd.
(b).)
“If, after notice and a reasonable opportunity to respond,
the court determines that subdivision (b) has been violated, the court may,
subject to the conditions stated below, impose an appropriate sanction upon the
attorneys, law firms, or parties that have violated subdivision (b) or are
responsible for the violation. In determining what sanctions, if any, should be
ordered, the court shall consider whether a party seeking sanctions has
exercised due diligence.” (Code Civ. Proc., § 128.7, subd. (c).)
Section 128.7 provides for a “safe harbor” procedure,
requiring that the motion be served 21 days before it is filed. (Code Civ. Proc., § 128.7, subd. (c)(1).)
Defendants complied with that provision by serving the motion on September 11
and not filing it until October 7.
During that time, Plaintiff and her counsel did not withdraw the
complaint.
As
noted, the Court will hear argument on the issue of monetary sanctions.
Defendants move for an order to show cause why Plaintiff has
not paid the monetary sanctions issued in the September 26 Order.
A judicial officer may punish for contempt. (Code Civ.
Proc., § 178.) “he power of the court to punish for contempt is indeed broad,
but it is not unlimited. It is a drastic remedy, to be employed only when
necessary to the proper and orderly conduct of judicial proceedings.” (Application
of Burns (1958) 161 Cal.App.2d 137, 144.)
The Court does not
deem it necessary to punish Plaintiff for contempt in this instance. This case
is reaching a close, and the prior sanction awards will be collectible by
Defendants as a judgment against Plaintiff through normal judgment enforcement
proceedings.