Judge: Maurice A. Leiter, Case: 23STCV09536, Date: 2024-07-10 Tentative Ruling

Case Number: 23STCV09536    Hearing Date: July 10, 2024    Dept: 54

Hearing Date: July 10, 2024

Department 54, Judge Maurice Leiter

Motion To Compel Further Responses to Requests for Production of Documents

Moving Party: Plaintiff California Credits Group, LLC

Responding Party: Defendant Foster Poultry Farms, LLC

T/R:     THE MOTION IS GRANTED IN PART.

PLAINTIFF TO GIVE NOTICE.

If the parties wish to submit on the tentative, please email the courtroom at SMCdept54@lacourt.org with notice to opposing counsel (or self-represented party) before 8:30 am on the day of the hearing.

            The Court considers the moving papers, opposition, and reply.

BACKGROUND

Plaintiff California Credits Group, LLC sued defendants Foster Poultry Farms, LLC and Foster Farms, LLC on April 28, 2023 for breach of contract and breach of the covenant of good faith and fair dealing.

As alleged in its complaint, Plaintiff provides “tax credit services with a primary focus on California ‘Enterprise Zone’ credits.” (Compl., ¶ 9.) Defendant Foster Poultry was one of Plaintiff’s clients; Defendant Foster Farms acquired Foster Poultry in June 2022. (Id., ¶¶ 11-13.) Under the contract, Plaintiff would locate employees for Foster Poultry who, once employed, would generate tax credits for Foster Poultry based on Enterprise Zone economic incentives. (Ibid.) Foster Poultry agreed to pay Plaintiff a portion of the credits generated when the credits were “utilized”, that is, when they were actually applied to reduce Foster Poultry’s tax obligations. (Id., ¶ 14-15, Exhs. A-B [initial 2005 and amended 2007 contracts].)

The Contract anticipated the possibility that Foster Poultry might be acquired, and there may be tax credits that had been generated by Plaintiff’s recommended hires, but not yet utilized. (Id., ¶ 20.) Those credits’ utility might be cut off by an acquisition. (Id., ¶¶ 21-22.) In that case, the contract required that all pending credits be deemed “utilized”, and Plaintiff paid for their use, upon Foster Poultry’s acquisition. (Id., ¶ 22.)

The private equity firm Atlas Holdings, Inc. acquired Foster Poultry in June 2022. (Id., ¶¶ 4-5.) The transaction was structured so that Foster Poultry’s co-defendant, Foster Farms, acquired Foster Poultry, and Atlas in turn acquired Foster Farms. (Id., ¶ 5.) Plaintiff alleges that when Atlas acquired Foster Poultry, it cut off $70 million in outstanding, unutilized tax credits generated by Plaintiff. (Id., ¶ 30.)

On May 17, 2024, Plaintiff filed the instant motion to compel further responses to its Requests for Production (Set One) propounded on Foster Poultry.

ANALYSIS

            Plaintiff moves for further responses to its Requests for Production (“RPDs”) Nos. 9-11 and 40. Plaintiff frames these as requests for “communications relating to the June 2022 reorganizing transactions that suspended the tax credits allocated by [Plaintiff].” (MPA, 4:22-23.) Plaintiff contends these documents must be produced “because they are critical to understanding the scope and significance of the June 2022 transactions and determining whether they constitute a ‘Reorganization’ under the parties’ Agreements.” (Id., 26-28.)

            Defendant argues that communications involving the June 2022 transactions are irrelevant to whether the transaction was a “Reorganization” for purposes of the parties’ contract. Defendant contends that all Plaintiff needs are the documents governing the transactions – namely, the June 2022 Purchase Agreement (“2022 Agreement”). Defendant already has produced the 2022 Agreement. Defendant also objects that the requests are unduly burdensome, Plaintiff has not properly met and conferred about them, and, to the extent some portion of the materials might be relevant, Plaintiff’s Requests should be narrowed after Plaintiff obtains its still-outstanding, more reasonable discovery.

            Defendant has produced to Plaintiff excerpts of the 2022 Agreement that Plaintiff contends triggered the “reorganization” provisions of the Contract. Defendant contends this satisfies Plaintiff’s asserted need to evaluate whether Defendants’ reorganization triggered the Contract.

Defendant cannot unilaterally identify what evidence Plaintiff needs. “For discovery purposes, information is relevant if it ‘might reasonably assist a party in evaluating the case, preparing for trial, or facilitating settlement.’ [Citation.] ... [T]he scope of discovery extends to any information that reasonably might lead to other evidence that would be admissible at trial. ‘Thus, the scope of permissible discovery is one of reason, logic and common sense.’ ” (Lipton v. Superior Court (1996) 48 Cal.App.4th 1599, 1611–1612, 56 Cal.Rptr.2d 341.)

Communications surrounding the execution of the 2022 Agreement may lead to admissible evidence about how its execution was expected to impact the terms of the Contract. Plaintiff may explore evidence of how the 2022 Agreement was executed, and whether those facts are relevant to the alleged breach.

Defendants have not shown undue burden.

Some of the phrasing of Plaintiff’s requests is overbroad; the Court will sustain Defendant’s objections in part:

The Court grants Plaintiff’s motion and orders Defendant to provide Code-compliant responses to all the disputed requests within thirty (30) days of this ruling, except:

1. Defendant need only produce documents created between June 1, 2021 and the filing of the complaint, and

2. The terms “in connection with” and “in connection with or following” are narrowed to “as a result of” for purposes of this order.

            The Court finds Defendant was substantially justified in opposing Plaintiff’s motion. The Court awards no sanctions.