Judge: Mark H. Epstein, Case: 21SMCV01978, Date: 2024-01-18 Tentative Ruling
Case Number: 21SMCV01978 Hearing Date: January 23, 2024 Dept: I
The court turns first to plaintiffs’ motion.
In large measure, defendants simply refuse to disclose information, generally contending that only an expert can answer the questions posed. The court finds that response to be not credible.
The line here tends to be historical versus future. Plaintiff is entitled to know, and know now, whether defendant contends plaintiff was underpaid, overpaid, or properly paid, and why. If the answer is that only an expert can tell, then so be it, maybe. But at a minimum, the contention is not work product or privileged.
If the problem is that defendant just does not know, then defendant can say so. Something like, “At present defendant does not know whether plaintiff was overpaid, underpaid, or properly paid.” Of course, defendant will look odd at trial, but that is because it is an odd answer.
For historical stuff, defendant just has to answer. How something was in fact calculated is historical, not an invasion of privilege. Defendant needs to say how the calculation was made. If the problem is that the person who did the analysis is dead and the current trustee does not know, then there must be an inquiry. If after an inquiry one still does not know, then so state. “The calculation was done by Mr. DOE, who has since passed away. The responding party, having looked at the documents and made diligent inquiry, cannot discern how the calculation was made and does not know.”
What the court is saying is that the responding party has the obligation to try and find out what was done. It is not proper to wait until expert testimony to disclose how something was done in the past. But if defendant is going to stand on the Sergeant Shultz position, at least defendant must be clear: “The trustee, having reviewed all of the documents, does not know even after diligent inquiry, how the calculation was done and can provide no insight on that point. The trustee has given the following documents to an expert, who will attempt to ascertain how it was done and provide an opinion thereon if possible but cannot opine as of now.” The court believes that such a response would be insufficient, and the court might well be inclined not to let the expert testify, but at least it would be an honest answer.
Note that if this were a PMK deposition, then there would be no way to answer this without retaining an accountant to get the answer. That accountant need not testify, but the accountant would have to inform the PMK, who would have a duty to answer the question. The court does not see an interrogatory as being all that different.
As to legal theories, the court does not understand defendants’ objection. If the position is that the contract requires a certain calculation, that is not a “legal position” requiring “legal research.” It is a question of contract interpretation and it must be disclosed.
The problem here is that it appears to the court that the defense either cannot or will not justify its actions but hopes that maybe it can get an expert to get there somehow. That is not appropriate. If defendant does not know, then defendant has to so state. If defendant made payouts that it contended at the time were proper, defendant must either stand by that payment or disclaim it. Defendant cannot simply refuse to answer. Defendant might have to hire a non-consulting expert at least historically to ascertain what in fact was done but that is not too heavy a burden here.
As to interrogatories, the propounding party has no burden to justify the interrogatories; the objecting party has a burden to substantiate the objections. The objecting party has not done so.
The court also notes that general objections are improper and that even if there is an objection, the response must state whether the responding party is standing on a particular objection and, if so, where the line is being drawn.
Therefore, as to FI, the court rules as follows. 2.8—GRANTED. The argument of capacity is just not correct. 2.11—GRANTED. It is apparent who “YOU” means. And the court does not find the interrogatory to be unduly broad or vague. 4.1—GRANTED. To the extent they were provided (and not recently), the court would agree the request is moot, though. 15.1—GRANTED. This is a standard interrogatory. It is not infirm and the objections are meritless on its face. Obviously, defendant need not provide witnesses about whom it does not yet know, but that is no ground for objection. 50 series—GRANTED. There is nothing wrong with this series of interrogatories.
As to SI, the court rules as follows. 1—GRANTED. This must be stated; it is historical fact. The response as written is just plain silly. Further, producing documents is not sufficient unless the document itself obviously and plainly discloses the calculation. 2—GRANTED. Same thing. 3—GRANTED. Same thing. 4—GRANTED. Same thing. 5—GRANTED. This is a question of what the contract requires and the manner in which it should be computed. It is not asking for a dollar figure. If defendant truly believes that the contract is so opaque that no one but an expert can tell how to calculate an IRR, then it can so state, but it has to do so very clearly. 6—GRANTED. There is nothing privileged about this historical question. 7—GRANTED. Same. 8—GRANTED. At this point in the litigation, defendant needs to say if it overpaid plaintiff and why. That is not privileged; it is based on the reading of the contract. If the answer is that truly no one knows but an expert and defendant is therefore not so contending at this time, then such must be stated. 9—GRANTED. Again, this is historical. If truly only an expert can tell and there was no expert at the time, then defendant can so state, but it is akin to admitting bad faith. 10—GRANTED. While the conclusion is legal, the contention interrogatory is permitted. If the contention is being made, the facts supporting the contention are properly discoverable. 11—GRANTED. This goes to whether any information is being withheld on the basis of the objection. It would seem that none should be, but defendant needs to say so. 12—GRANT. Contention interrogatory. The facts can be sought.
Sanctions are appropriate. In most cases, the opposition seemed designed to obfuscate the facts and to try and hide the fact that either defendant had no basis for what it did or that it does not want to tell. In either case it is not appropriate. The sanctions requested appear to be reasonable. They are payable by defendants, but not counsel, within 30 days. Further responses, without objection other than privilege, shall be made within 30 days. If there is a privilege, the basis for it must be set forth with enough specificity to allow plaintiff to challenge the privilege; defendants will not be able to provide more evidence to make out a prima facie case in opposition. And, given what the court has stated, it is unlikely that there will be a lot of privilege anyway.
The court now turns to defendants’ motion. Defendants have asked plaintiffs about their damages and why they believe they were not properly paid. Plaintiffs largely responded as defendants responded above: by saying that defendants owed them millions of dollars and plaintiffs would figure out why using an expert and let defendants know a few weeks before trial when experts were deposed. That answer is no better coming from plaintiffs than it was coming from defendants.
It is pretty basic stuff to ask a plaintiff how much money it thinks it is owed and how it came up with that number. Plaintiffs here are pretty good with the first part. They say they are owed over $7 million. When asked why, though, their answer tends to be that they are owed this because defendant did not pay it. When asked for supporting facts showing they are owed $7 million, the facts are that defendants did not pay the money. When asked how they got to $7 million, they refuse to say. Conspicuously absent from their answers is anything that comes close to explaining how the $7 million number was derived. If plaintiffs want to state “We are owed $7 million but we do not know why we are owed that money because only an expert can tell” that is one thing. But it is hard to believe that plaintiffs can sue defendants for money without being able to say what defendants did wrong.
Turning to the specifics, then, the court rules as follows. 1—DENIED. $7 million is a description of damages—it is cash in the amount of $7 million. 2—GRANT. Saying that the calculation is GAAP without more is not responsive. 5—GRANT. Plaintiffs must identify the supporting documents; saying it is the contract and all communications is not sufficient. 6—GRANT. Not paying the money is not sufficiently responsive. 7—GRANT. Same as 6. 8—GRANT. When asked for supporting facts, it is not sufficient to say that defendant still owes money. 10—GRANT. The instances of breach is not just that plaintiffs are owed money. 13—DENY. When describing damage, it is sufficient to say $7 million. 15—GRANT. The point is not just whether plaintiffs got paid, but rather why the amount paid was wrong. 18—GRANT. 23—DENY. But plaintiffs will not be able to elaborate at trial. Unless the Operating Agreement is intuitively obvious in meaning and requires no explanation, this answer is no good. But if plaintiffs are prepared to stand or fall on the OA and whatever the jury can make of it, then this will be ok. 25—DENY. Same as 23. 29—DENY. But the only evidence of alter ego plaintiffs will be allowed to produce is that there is a bank account that does not have the word “trustee” in it. 30—DENY. The interrogatory is not well worded. 32—GRANT. The interrogatory asks what is meant in the complaint. The answer cannot be that plaintiffs get to keep it a secret. 33—GRANT. 34—GRANT. 35—GRANT.
Having reviewed the requests for sanctions, the court finds that the opposing party for both sets of motions acted without substantial justification. Discovery sanctions in the amount of $2500 are imposed against plaintiffs and plaintiffs’ counsel, and also against defendants and defendants’ counsel. Checks will be written; the sanctions will not just “cancel out.” The sanctions are payable within 30 days. Substantive verified responses without objection will be served within 10 court days of today.
Given the way the case is being litigated, the court has no confidence that the matter will be ready for trial on the current schedule. The FSC and trial dates are VACATED on the court’s own motion. A TSC will be held at 8:30 am on February 20, 2024. Five court days before that date, the parties will submit a joint brief not exceeding four pages explaining how they are going to be able to change their behavior to comport with the proper discovery. In the alternative, the parties can stipulate to a discovery referee, whose cost will be shared equally but subject to re-allocation by the referee. The parties should also consider stipulating that all decisions by the referee other than non-monetary sanctions will be final and binding. The court will not participate in further IDC’s, as they do not appear to be of value.
Although the trial date is being vacated, the discovery cut-offs, including expert discovery, will be keyed to the original trial date unless the court otherwise orders. The court notes that this ought to eliminate most of the problems anyway as the “only an expert can tell us what happened, what ought to happen, and why we are (or are not) owed money) can be visited during expert discovery.
For the parties' assistance, the court adds its guidelines on discovery responses and meet and confer.
DISCOVERY RELATED GUIDELINES FOR DEPARTMENT I
The guidelines below are not “rules” and they are not
universally applicable in all cases.
Rather, they are guidelines as to the court’s general views. Each case, of course, will be decided on its
own facts and circumstances, and some of the guidelines below may not apply to
particular circumstances. That said, the
court does take these views seriously.
Discovery Responses
The Court provides the following guidance concerning its
general views on some common issues regarding responses to written
objections. The Court has noticed that
many attorneys view objections and the manner of making them in a way different
than does the Court. To avoid these
common pitfalls, the Court offers the following in addition to the provisions
of the Litigation Guidelines appended to the Los Angeles County Superior Court
Local Rules.
First, “General Objections” are not permitted. The Code of Civil Procedure does not provide
for them, and therefore they are disregarded by the Court. Any response that “incorporates” the “General
Objections” is improper by definition.
Second, the Court often views boilerplate objections
as being in bad faith. A bad faith
response is no response at all in the Court’s view. Therefore, making boilerplate objections does
not preserve those objections nor does it constitute a good faith response to
written discovery. A bad faith response
is viewed by the Court for what it is: bad faith. The objections will be stricken and deemed
waived. In the context of a Request for
Admission, such objections may lead to a finding that the request is deemed
admitted, although that will depend on the facts of the particular case and the
specific discovery at hand.
Objections should be tailored to each specific request. If a request truly is overbroad, then an
objection to that effect is proper. But
such an objection is best accompanied by some reasonable limitation by the
responding party that will narrow the request appropriately and (as narrowed)
provide a substantive response rather than a mere statement that the request is
overbroad. The same is true as to an
objection that a request is unduly burdensome.
The Court also notes that the party asserting that a request is unduly
burdensome has the obligation at some point to provide an evidentiary basis for
the objection, including evidence as to what the burden of compliance would
be. (West Pico Furniture Co. v.
Superior Court (1961) 56 Cal.2d 407.)
Often such an objection will include a statement by the responding party
as to a narrower request that would not be unduly burdensome and provide
substantive responses as so limited.
Objections that a request is “vague and ambiguous” must set forth the
vague and ambiguous term as well as the responding party’s reasonable
interpretation of that term as well as a statement that, so interpreted, the
response will provide the discovery requested.
If there is no reasonable interpretation possible (which is a rare
situation), then the responding party must so state. Objections as to privilege must set forth the
basis explaining why the information sought is in fact privileged. Where a privilege is asserted in the context
of a document request, a privilege log must accompany the answer or be provided
within a short and reasonable time after the answer. Where the objection is made in the context of
an interrogatory, it must be clear from the objection the scope of the
information being withheld. If there is
no log, there should be no privilege objection to a document request (meaning
that a prophylactic privilege objection is the equivalent of no objection; it
preserves nothing). There are some rare
exceptions, such as where the entire point of the discovery is to get allegedly
privileged information or where compliance would require a log that is in
essence an index of counsel’s file. In
that situation, the log is unnecessary, but the assertion should be made that
the request is in that rare context.
Third, if an objection is made to the discovery but a
response is being given, it must be clear whether information or documents are
in fact being withheld on the basis of the objections. If the objections are clear and done in the
manner set forth above, with statements in the objection as to a narrowing that
will make the request proper, this is usually a simple task. The objections themselves state the limit and
the response will be full and complete as limited. But where the objections are not so clear,
the response must clearly state whether any information or document is being
withheld on the basis of the objection and, if so, the extent of the
withholding. Accordingly, in those
situations, phrases like “Notwithstanding and subject to the foregoing
objections, responding party states as follows” are improper. Those sorts of phrases make the verification
useless, as the verifier can always fall back on the ”objections” as the reason
why a document was not produced or information was not disclosed. On the other hand, where the line of
demarcation is clear, the verification will still serve its purpose.
Fourth, for document requests, the substantive
response must conform to the Code. There
are relatively tight rules as to what the response must say, and the response
must say it. For example, where a
responding party is not producing documents because they are not in the party’s
possession, custody, or control, the responding party must verify that a
diligent search has been made and must further provide the information set
forth in the Code of Civil Procedure in such cases. In the case of interrogatories, the responses
must also conform to the Code of Civil Procedure and must be made after
diligent inquiry. It is not proper to
refuse to respond because the responding party has no personal knowledge. If the knowledge is hearsay, it must still be
disclosed, although it can be qualified to make it clear that it is not based
on the verifier’s personal knowledge.
Fifth, the Court frowns on responses that do not
conform to the foregoing rules being served with the view that the responses
will moot themselves out in the meet and confer process. That is not how the process works. A good faith response is required before the
meet and confer process begins. The meet
and confer process will (hopefully) bridge the gaps between the parties’
respective positions. Further, where a
response to a request for documents is made and documents are to be produced
subject to certain objections (with the documents withheld properly
delineated), the documents should be turned over irrespective of the meet and
confer. The documents are to be produced
with alacrity to the extent that there is no objection to them.
What this means is that the response to a discovery request
is not a trivial undertaking. Nabbing
the response from the form file is a generally bad idea and can lead to all
objections being waived. The point is
that the boilerplate often renders the remainder of the response useless. The only exception is where it is clear that
the substantive response is not in any way limited by the objections. In that case, the objections do no harm,
although they also do no good.
The Code of Civil
Procedure requires that before a motion to compel further responses or a motion
for a protective order is filed, the parties engage in a good faith attempt to
resolve their differences. They are to
“meet and confer” for that purpose. Only
if that effort fails can a motion be brought.
Sadly, many
litigants view the meet and confer process as just another procedural hoop
through which they must jump in order to bring the motion, similar to the need
to include an actual demurrer with the demurrer papers. The Code requires it, so they do it, but no
one’s heart is really in it. That is not
sufficient.
Given that, the
Court believes it appropriate to set forth how the Court views the meet and
confer requirement. Failure to abide by
the guidelines below may well justify denial of the motion or a continuance of
it to allow the process to take place.
If one party but not the other refuses to participate as set forth, more
likely than not the party refusing to participate will find itself on the
losing end of the motion. The following
quotation fairly sums up the Court’s own view.
“[W]e feel compelled
to observe that resort to the courts easily could have been avoided here
had both parties actually taken to heart Justice Stone's
admonitions in Townsend that ‘the statute requires that there
be a serious effort at negotiation and informal resolution.’ (Townsend,
supra, 61 Cal.App.4th at p. 1438.) Perhaps after 11 years it is
necessary to remind trial counsel and the bar once again that ‘[a]rgument is not the
same as informal negotiation’ (id at p. 1437); that attempting
informal resolution means more than the mere attempt by the discovery proponent
‘to persuade the objector of the error of his ways’ (id. at p.
1435); and that ‘a reasonable and good faith attempt at informal resolution
entails something more than bickering with [opposing] counsel.... Rather, the law requires that counsel attempt
to talk the matter over, compare their views, consult, and deliberate.’ (Id. at
p. 1439.)” (Clement v. Alegre (2009) 177 Cal.App.4th
1277, 1294, emphasis in original, parallel citations omitted.)
In practical terms, it means as
follows. It is entirely appropriate to
begin the process with a letter or other correspondence. The letter should not include a demand in the
form of an ultimatum, but it can certainly include the relief that is being
sought with an invitation to meet and confer.
It is also entirely appropriate for the other party to respond with a
letter or other correspondence to set forth its position on the issues. Such an initial exchange can often be helpful
to narrow the dispute. Whether further
exchanges make sense will depend on each case and each dispute.
However, at some point, before impasse is
reached the process must include an actual “meet.” The letters might well suffice to “confer,”
but an exchange of correspondence is not a meeting. In the COVID-19 era, the “meeting” can be
virtual or telephonic, but a meeting there must be. The meeting must be attended by a person from
each side with the authority to agree to the other side’s position without
getting further permission from anyone, including the client. If only the client can give the needed authority,
then the client must be available instantaneously at all times during the
meeting. This does not mean that one
side or the other must concede, but it does mean that the people meeting have
the ability in real and practical terms to strike a deal then and there.
The parties should approach the meet and
confer process as a problem-solving exercise.
The purpose of the meet and confer is not to convince the other side of
the bankruptcy of its position; rather the purpose is to reach an agreement by
which the party seeking discovery is able to obtain the information that it
reasonably needs and the party providing discovery is not put to an undue
burden or forced to provide unnecessary information that might infringe on a
privacy interest or disclose a competitive trade secret or the like.
At the conclusion of the meet and confer,
the parties should have an agreed statement as to the outcome. If the outcome is a total impasse, then they
should agree on that. If they have
resolved some or all of their differences, then they should state—in
writing—what that agreement is so that there will be no confusion later. Often, an agreement will be without prejudice
to a further request by the propounding party for more information after that
party receives the responses.
If a motion is still required, the
declaration in support should describe with some detail the meet and confer
process. While the Court is not
interested in the back and forth, the Court is interested in when the meeting
took place, who was there, and how long it lasted.
All communications—in writing or oral—must
be civil, polite, and professional.
Name-calling and accusations are devices that undermine the process;
they do not further it. A party engaging
in such activity generally is not acting in a good faith effort to reach an
agreement.