Judge: Kevin C. Brazile, Case: 23STCV05614, Date: 2023-08-16 Tentative Ruling

Hearing Date: September 6, 2023

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

Case No.: 22STCV22292

Matter: Motion to Compel Further Responses 

Moving Party: Plaintiffs Wei Chen, Weifeng International, Inc., and AIIC 17 YM Culver 

City, LLC

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

Company, LLC, and FAT Brands Management, LLC

Notice: OK

Ruling: The Motion is granted.

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.)

Plaintiffs now seek to compel Defendants to provide further responses to their requests for production, set one, nos. 44-45.  

Request no. 44 seeks, “All advertisement Yalla Franchising, LLC disseminated referring or RELATING TO the opportunity to own a Yalla Mediterranean franchise.”

Request no. 45 seeks, “All information Yalla Franchising, LLC disseminated for the purpose of attracting investors to the Yalla Mediterranean franchise.”

Defendants asserted objections based on vagueness, relevance, lack of particularity, and overbreadth with respect to time and geography.  

Defendants’ arguments as to scope do not have merit without reference to a privacy right or the like.  Further, the requests at issue may seek information that is ultimately relevant to Plaintiffs’ rescission claim.  Notably, the scope of discovery is quite broad.   Finally, the requests are not sufficiently vague and ambiguous so as to preclude an appropriate response.

The Motion is granted.  Further responses, without objections, are to be provided within twenty days, along with documents.  

Given that the Motion is directed at three Defendants, but only one fee was tendered, Plaintiffs are ordered to tender $120 in filing fees to the Court within five days.  

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.