Judge Lee W. Tsao, Case Number: 19NWCV00633, Date: 2023-12-20 Tentative Ruling

Judge: Lee W. Tsao, Case: 19NWCV00633, Date: 2023-12-20 Tentative Ruling

Case Number: 19NWCV00633 Hearing Date: March 19, 2024 Dept: C

Myung Sik Kim vs S&H Business Management, Inc., et al.

Case No.: 19NWCV00633

Hearing Date: March 19, 2024 @ 9:30 AM

Tentative Ruling

On its own motion, the Court appoints a Discovery Referee for all discovery purposes in this action. Until further order of the Court, all costs shall be borne by Defendant S&H Business Management, Inc.

Clerk to give notice.

Background

This is a shareholder derivative action filed on August 8, 2019. On May 16, 2022, Plaintiff Myung Sik Kim (“Plaintiff”) filed a second amended complaint against Defendant S&H Business Management, Inc. (“Defendant”) alleging: (1) Involuntary Dissolution of a Corporation; (2) Accounting; (3) Breach of Fiduciary Duty; (4) Aiding and Abetting Breach of Fiduciary Duty; (5) Breach of Fiduciary Duty- Duty of Care, Loyalty, and Good Faith; (6) Constructive Trust; and (7) Declaratory Relief

On February 13, 2024, the Court on its own motion, and without opposition, appointed a discovery referee for all discovery purposes in the action. (CCP 639(a)(5).) The Court found that Plaintiff was unable to pay a pro rata share of the referee’s fee based upon her declaration. The Court ordered that all costs be paid by Defendant S&H Business Management, Inc. (“S&H”). On February 22, 2024, pursuant to the Court’s order, Plaintiff Myung Sik Kim (“Plaintiff”) filed a list of nominees for appointment. On February 27, 2024, Defendants filed an objection to the Court’s February 13, 2024 order to the extent that it required S&H to bear all costs. Defendants argued that Plaintiff’s declaration was insufficient to establish an inability to pay because it merely stated that dividend payments from S&H “were my means to support myself” (Kim Decl., ¶ 23) and not her “sole income” as Plaintiff argued in her brief. (See Plaintiff’s Response to OSC re Appointment of Discovery Referee, p. 2:6-7.) Defendants also pointed out that Plaintiff admits to financing this litigation and another related litigation without dividend payments from S&H. (Kim Decl., ¶ 24.) On February 29, 2024, the Court, on its own motion, scheduled a hearing for today’s date to reconsider the issue of Plaintiff’s inability to pay and the apportionment of costs. Plaintiff was permitted to file supplemental evidence relating to her inability to pay.

Revised Finding re Ability to Pay to Costs

On March 11, 2024, Plaintiff submitted a supplemental declaration regarding her income. In her declaration, Plaintiff declared that in 2019 she received $14,250.00 from S&H. She and her husband received $16,173.00 from the Social Security Administration. (Kim Decl., ¶¶4-6.) Since 2019, Plaintiff has not received any income from S&H. She and her husband continue to receive Social Security benefits in the following amounts: $16,687.00 (2020) $16,932.00 (2021) $17,930.00 (2022) and $19,483.20 (2023). (Kim Decl., ¶¶7-17.)

A court shall not appoint a referee at a cost to the parties if one party is unable to pay and no other party is willing to pay that additional share of the referee’s fee. The Code provides as follows: “All appointments of referees pursuant to this section shall be by written order and shall include the following … (6)(A) Either a finding that no party has established an economic inability to pay a pro rata share of the referee’s fee or a finding that one or more parties has established an economic inability to pay a pro rata share of the referee’s fees and that another party has agreed voluntarily to pay that additional share of the referee’s fee. A court shall not appoint a referee at a cost to the parties if neither of these findings is made.” (CCP §639(d)(6)(A).)

The Court’s February 13, 2024 order appointing a discovery referee was issued without objection. In light of Defendant’s objections filed on February 27, 2024, the Court will reconsider its February 13, 2024 order.

The Court determines that Plaintiff’s supplemental declaration is insufficient to establish her inability to pay. Plaintiff fails to account for any other assets she may own (e.g., cash, savings, real property, etc.), any interest she may have in community property, and her monthly expenses. Therefore, the Court cannot determine that Plaintiff is unable to pay a pro rata share of the referee’s fee. Pursuant to CCP §639(d)(6)(A), the Court determines that no party has established an economic inability to pay a pro rata share of the referee’s fee.

Exceptional Circumstances for Appointment of Discovery Referee

The Court continues to find that exceptional circumstances exist for the appointment of a Discovery Referee pursuant to Code Civ. Pro. § 639, subd. (a)(5) and Cal. Rules of Court, rule 3.920(c). Among other discovery requests, Plaintiff has propounded 323 Special Interrogatories upon Defendant S&H. Plaintiff argues that as a 50% owner of S&H, she has a right to review S&H’s records, but Defendants are denying her all access to them. Defendants argue that Plaintiff is abusing the discovery process by propounding a “massive” amount of discovery. Defendants contend Plaintiff has twice been given access to tens of thousands of documents under the authority of Corporations Code Section 1600. Plaintiff seeks $17,600.00 in monetary sanctions against Defendants and Defendants seek $4,200.00 in monetary sanctions against Plaintiff for misuse of the discovery process. Six motions to compel further responses are scheduled for April 30, 2024, three additional motions to compel further responses are reserved for July 16, 2024, a Motion to Compel In Person Deposition of Person Most Qualified is reserved for August 15, 2024, and three additional Motions to Compel Further Discovery Responses are reserved for September 5, 2024. The court has already addressed two prior motions for further responses and a motion to vacate the order to compel further responses. Prior meet and confer efforts have failed.

Scope of Reference and Authority of Discovery Referee

Accordingly, a Discovery Referee is appointed for all discovery purposes in the action. (Code Civ. Proc., § 639, subd. (c); Cal. Rules of Court, rule 3.922(c)(2).) The referee is authorized to set the date, time, and place for all hearings determined by the referee to be necessary; direct the issuance of subpoenas; preside over hearings; take evidence; and rule on objections, motions, and other requests made during the course of the hearing. (Cal. Rules of Court, rule 3.922(e).) No court facilities or court personnel may be used in connection with the reference. (Cal. Rules of Court, rule 3.922(g).)

Referee Information and Hourly Rate

Having considered Plaintiff’s proposed list of referees filed on February 22, 2024, and without objection by Defendant, the Court appoints Michael S. Fields, State Bar# 43347, 6171 Laguna Court, Long Beach, CA 90803, (562) 597-5399 at a maximum hourly rate of $500.00.

Apportionment of costs

“When a referee is appointed pursuant to Section 639, at any time after a determination of ability to pay is made as specified in paragraph (6) of subdivision (d) of Section 639, the court may order the parties to pay the fees of referees … in any manner determined by the court to be fair and reasonable, including an apportionment of the fees among the parties. For purposes of this section, the term “parties” does not include parties’ counsel.” (Code Civ. Proc., § 645.1.)

The Court continues to believe that requiring Defendant S&H to bear all costs is fair and reasonable because Plaintiff Kim and Defendant Chang are equal owners of S&H. Accordingly, Defendant S&H is ordered to bear all costs associated with the Discovery Referee. This order is without prejudice to any party seeking a modification of the apportionment of costs. In that event, the Court will consider the recommendation of the referee as a factor in determining any modification. (Cal. Rules of Court, rule 3.922(f)(3).