Judge: Kevin C. Brazile, Case: 23STCP02239, Date: 2023-09-07 Tentative Ruling

Hearing Date: April 16, 2024

Case Name: Chen, et al. v. Yalla Acquisition, LLC, et al.

Case No.: 22STCV22292

Matter: Motions to Compel Further Responses (3x)

Moving Party: Defendants Yalla Acquisition, LLC, Yalla Mediterranean Franchising 

Company, LLC, and FAT Brands Management, LLC

Responding Party: Plaintiffs Wei Chen and Weifeng International, Inc.

Notice: OK

Ruling: The Motion as to Requests for Admission is granted.

The Motions as to Requests for Production are denied.

Moving parties to give notice.

If counsel do not submit on the tentative, they are strongly 

encouraged to appear by LACourtConnect rather than in person due to the COVID-19 pandemic. 

On September 20, 2022, Plaintiffs Wei Chen, Weifeng International, Inc., and AIIC 17 YM Culver City, LLC filed the operative First Amended FAC (“FAC”) against Defendants Yalla Acquisition, LLC, Yalla Mediterranean Franchising Company, LLC, and FAT Brands Management, LLC for (1) rescission and restitution, (2) violations of California Franchise Investment Law, (3) violations of California Corporate Securities Law, (4) breach of contract (count I), (5) breach of contract (count II), and (6) violation of the UCL.  

Plaintiffs allege as follows.  “The agreements that Mr. Chen was induced to enter into concerned (1) acquisition by Weifeng from Yalla Acquisition, of an entity (AIIC) that, Mr. Chen was told by them, owned a Yalla Mediterranean restaurant in Culver City, California; (2) sale by Yalla Franchising to the restaurant owner (AIIC), of a Yalla Mediterranean restaurant franchise; (3) arrangements for Fat Brands to manage and operate the restaurant; (4) Mr. Chen providing $770,000 to Defendant Yalla Acquisition to fund the above; and (5) this qualified Mr. Chen to own a restaurant through AIIC and to live and work in the United States (the ‘Transaction.’)”  (FAC ¶ 23.)  “At the time of purportedly entering into the Franchise Agreement, Yalla Franchising and the other Defendants were not registered in California to offer and sell franchises. The franchise agreement that was purportedly entered into was not registered when executed.”  (FAC ¶ 25.)  “The representation that AIIC owned the Restaurant was incorrect. Neither Yalla Acquisition nor AIIC had ownership of the Restaurant. The Restaurant was owned by Yalla Med or Med Cuisine.”  (FAC ¶ 28.)  “Ownership of the Restaurant was never transferred to Plaintiffs.”  (FAC ¶ 29.)  “When Defendants sold the membership interest to Plaintiffs, Defendants knew they were selling an unregistered security. Defendants, with this knowledge, and seeking to unlawfully evade liability, induced Plaintiff Weifeng to acknowledge incorrectly that what it acquired was not a security. This was an unlawful effort by Defendants to obtain a waiver of compliance with the securities law and regulations.”  (FAC ¶ 36.)  “The grounds for rescission include but are not limited to: (i) violations by Defendants of the Franchise Investment Law, (ii) violations by Defendants of the Corporate Securities Law; (iii) material misrepresentation by Defendants, reasonably relied on by Plaintiffs, in that ownership of the Restaurant was not held by Defendants nor AIIC at the time of selling AIIC to Plaintiff, (iv) ownership of the Restaurant was never transferred to AIIC or Plaintiff, (iv) unilateral and/or mutual mistake; (v) and failure of consideration.”  (FAC ¶ 46.)

Defendants Yalla Acquisition, LLC, Yalla Mediterranean Franchising Company, LLC, and FAT Brands Management, LLC seek to compel Plaintiffs Wei Chen and Weifeng International, Inc. to provide further responses to their requests for production, set one.  Defendants also seek to compel Plaintiff Chen to provide further responses to their requests for admission, set one, nos. 32-33.

With respect to requests for admission, the requests at issue seek for Plaintiff Chen to admit that he represented in his visa application that he would be actively involved in the management of AIIC and the restaurant.  Plaintiff contends the information is subject to privacy rights and that it is irrelevant because Plaintiff is not pursuing a claim based on a denial of the visa.

Here, the narrowly tailored admission that Defendants seek might be relevant to credibility in this specific case in that the issue of Plaintiff’s active management is key in determining whether a security interest exists for Plaintiff’s third cause of action.  Thus, the Court will require further responses within 20 days.  

The one request for production directed at Chen seeks his visa application and all related documents.  The Court will not require that these documents, which contain private information, be produced.  The narrowly tailored request for admission discussed above is sufficient for Defendants’ purposes.  

The one request for production directed at Weifeng seeks all contracts signed on its behalf by Chen.  Weifeng responded as follows: “Responding Party will produce the agreements subject to this dispute without conceding to any legal conclusions regarding whether Mr. Chen properly executed the agreements on behalf of the Plaintiff entities.”  

Defendants argue that this request is relevant to the allegation that “The agreements were not executed by parties with requisite formalities or by requisite individuals in requisite capacities to bind the parties.”  (FAC ¶  61.)

Despite the FAC’s boilerplate allegations, it is not apparent that Plaintiffs are denying that Chen had authority to sign documents on behalf of Weifeng.  In any case, the Court believes the subject request is overbroad and that the information sought can be better addressed through a request for admission or deposition inquiry.  The Motion is denied.

Moving parties to give notice.

If counsel do not submit on the tentative, they are strongly encouraged to appear by LACourtConnect rather than in person due to the COVID-19 pandemic.