Judge Lee W. Tsao, Case Number: VC067069, Date: 2024-11-06 Tentative Ruling

Judge: Lee W. Tsao, Case: VC067069, Date: 2024-11-06 Tentative Ruling

Case Number: VC067069 Hearing Date: November 6, 2024 Dept: C

HUANG v. JAN, et al.

CASE NO.: VC067069

HEARING: 11/06/2024

TENATIVE ORDER

Defendants’ motion for terminating, or issue and/or evidentiary sanctions is DENIED.

Opposing Party to give Notice.

This action arises out of a business dispute concerning Global Best Produce Inc. (“GBP”), a large Los Angeles-based produce wholesaler owned by Defendants and Cross-Complainants Chyan-Wen Jan and Ching Wen Chen (35%), Plaintiffs and Cross-Defendants Eric Hsing Shou Huang and Jenny Huei Ju Lee (20%), and Cross-Defendants Ingram Liu and Sophie Chang (45%). GBP is managed by Liu and Chang, who also serve as the company’s directors and CEO and CFO, respectively. In 2022, GBP’s gross revenues exceeded 54 million dollars.

Defendants’ Second Amended Cross-Complaint asserts causes of action for: (1) Breach of Fiduciary Duty; (2) Breach of Contract; (3) Gross Mismanagement; (4) Unjust Enrichment; (5) Intentional Interference with Prospective Economic Advantage; (6) Trespass to Chattels; (7) Conversion; (8) Accounting; and (9) Intentional Inference with Contractual Relationship and Economic Advantage.

Defendants Jan, Chen, Jan Fruits, Inc., and Global Logistics, LLC move for terminating sanctions, or in the alternative, issue and evidentiary sanctions against Plaintiffs Huang, Lee, Global Best Produce Inc., Formosa Fresh Connections Inc, Liu, and Chang. Plaintiffs oppose.

“The discovery statutes evince an incremental approach to discovery sanctions, starting with monetary sanctions and ending with the ultimate sanction of termination.” (Doppes v. Bentley Motors, Inc. (2009) 174 Cal.App.4th 967, 992.) “Discovery sanctions should be appropriate to the dereliction, and should not exceed that which is required to protect the interests of the party entitled to but denied discovery.” (Ibid.) “[C]ontinuing misuses of the discovery process warrant incrementally harsher sanctions until the sanction is reached that will curb the abuse.” (Ibid.) Where discovery violations are “willful, preceded by a history of abuse, and the evidence shows that less severe sanctions would not produce compliance with discovery rules, the trial court is justified in imposing the ultimate sanction.” (Ibid.) A trial court has broad discretion to impose discovery sanctions, but two facts are generally a prerequisite to the imposition of nonmonetary sanctions. (Biles v. Exxon Mobil Corp. (2004) 124 Cal.App.4th 1315, 1327.) Where discovery sanctions are requested against a party, there must be a failure to comply with a court order and the failure must be willful. (Ibid.)

“A decision to order terminating sanctions should not be made lightly.” (Creed-21 v. City of Wildomar (2017) 18 Cal.App.5th 690, 702.) A trial court’s order to impose terminating sanctions will be reversed only if it “was arbitrary, capricious, or whimsical.” (Id. at 702.) “[W]here a violation is willful, preceded by a history of abuse, and the evidence shows that less severe sanctions would not produce compliance with the discovery rules, the trial court is justified in imposing the ultimate sanction.” (Id. at p. 702.) Trial courts have properly imposed terminating sanctions when parties have willfully disobeyed one or more discovery orders. (Los Defensores, Inc. v. Gomez (2014) 223 Cal.App.4th 377, 390.) Terminating sanctions are warranted when a party’s lack of compliance with the discovery process has caused the opposing party prejudice. (Doppes v. Bentley Motors, Inc., supra, 174 Cal.App.4th 967, 989.)

Here, as noted above, Defendants move for terminating, or in the alternative, issue and/or evidentiary sanctions, and monetary sanctions against Plaintiffs on the grounds that Plaintiffs failed to comply with the court’s July 18, 2019 order to provide further responses, and the court’s January 4, 2024 and August 2024 orders imposing $3,000 in sanctions.

On July 18, 2019, Defendants’ motion to compel further responses to Request for Production, set two, was granted. Plaintiffs were ordered to provide further responses to RPD Nos. 27, 36, 37, 39, 40-43, 45, 47, 48, and 58-75 within 30 days of the court’s order. Plaintiffs were also ordered to pay Defendants sanctions in the amount of $2,811.65 within 30 days of the order.

Defendants contend that on January 22, 2021, more than eighteen months following the Court’s order, Plaintiffs finally issued a payment for the sanctions. Defendants argue they continued in the litigation with the documents Plaintiffs produced at that time, and relied upon the verified responses that Plaintiffs had produced all responsive documents in its custody, possession, or control. Furthermore, when taking the depositions of Plaintiffs, they all testified that they had produced all responsive documents in their custody, possession, or control.

Defendants also contend that on March 5, 2024, during an in-person meet and confer, counsel for Plaintiffs, Robert Hsu, admitted that further responsive documents were in Plaintiffs’ possession and agreed to allow Defendants access to these documents. On March 8, 2024, counsel for Plaintiffs sent a video of the responsive documents, evidencing approximately 70 banker’s boxes of responsive, relevant documentation. None of these documents had been previously produced, despite the 2018 filing date of this litigation, and the request for this specific documentation, and Court Order to produce years prior.

Defendants continue that they thereafter took on the cost and expense of scanning these documents and hired two separate teams to do so. The scanning project took multiple weeks and Defendants were invoiced $53,432.00 to complete the scanning project.

First, the court notes that Defendants state that Plaintiffs produced these documents, albeit late. As such, there is no outstanding discovery compelled by this court, and the motion for terminating sanctions was rendered moot by Plaintiffs’ compliance with the court order compelling further responses. Further, Plaintiffs also argue in opposition that they had produced these documents numerous times upon Defendants’ request, and that they notified Defendants in 2019 of the documents. (Hsu Decl., ¶ 3; Exh. A.) While Defendants argue in reply that they never agreed to receive the documents in the submitted format, Defendants fail to explain how this would be a violation of the discovery order.

Even if the motion was not moot, the court must take an incremental approach to discovery sanctions. Assuming arguendo that Plaintiffs failed to produce the further documents as ordered by this court, this would have been Plaintiffs’ first and only violation of a court order; thus, terminating sanctions, or issue or evidentiary sanctions (effectively terminating Plaintiff’s case), would not be appropriate at this time.

Further, were the court to interpret Plaintiffs’ late compliance with the court order a violation of that order, there is no evidence or argument presented which would show that the violation (the later production of documents) was willful.

In addition, the motion for evidentiary and issue sanctions is procedurally deficient. A motion for issue or evidentiary sanctions requires a separate statement. (Cal. Rules of Court, Rule 3.1345, subd. (a)(7).) A separate statement is not required when: (1) no response has been provided to the request for discovery; or (2) a court has allowed the moving party to submit—in place of a separate statement—a concise outline of the discovery request and each response in dispute. (Cal. Rules of Court, Rule 3.1345(b)(1)-(2).) Defendants have failed to accompany its motion for issue and evidentiary sanctions with a separate statement, in violation of California Rules of Court, rule 3.1345(a)(7).

As for the failure to pay sanctions, a court may not issue a terminating sanction for failure to pay a monetary discovery sanction. ¿(Newland v. Superior Court (1995) 40 Cal.App.4th 608, 610, 615.)¿ A monetary sanction order is enforceable as a money judgment under the Enforcement of Judgments Law, CCP §§680.010, et seq. (Id. at 615.) These orders have the force and effect of a money judgment, and are immediately enforceable through execution. (Id.)

While Defendants also seek issue/evidentiary sanctions, the Court in Newland made clear that Defendant’s remedy is to the enforce the sanction order as a money judgment, and that issue/evidentiary sanctions would also be excessive. “‘While under the statute the court undoubtedly has the power to impose a sanction which will accomplish the purpose of discovery, when its order goes beyond that and denies a party any right to defend the action or to present evidence upon issues of fact which are entirely unaffected by the discovery procedure before it, it not only abuses its discretion but deprives the recalcitrant party of due process of law.’” (Id. at 614 (quoting Caryl Richards, Inc. v. Superior Court (1961) 188 Cal.App.2d 300, 305).)

For the same reasons, the request for monetary sanctions is denied.

Accordingly, Defendants’ motion for terminating, or issue and/or evidentiary sanctions is DENIED.