Judge: Mel Red Recana, Case: 21STCV17214, Date: 2024-09-10 Tentative Ruling

All rulings shown here are TENTATIVE ONLY, and thus oral argument WILL be heard. All Counsel are still required to attend.

Case Number: 21STCV17214    Hearing Date: September 10, 2024    Dept: 45

Superior Court of California

County of Los Angeles

Hearing date:              September 10, 2024

Moving Party:             Plaintiffs Terpen Inc., Jairo D. Arrieta, Joel Arrieta and Juan                                               Carlos Diaz

Responding Party:      Defendants Memory Buss, Arcturian Light, LLC and Pleiadian                                           Light, LLC

Motion for Monetary, Evidentiary, Issue and Terminating Sanctions  

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

            The motion is DENIED.

Background

            Plaintiff Terpen Inc. invested approximately $1,193,548.56 in cash contribution and approximately $275,269.45 in non-cash contributions in a partnership between limited liability companies formed, owned, operated and controlled by Defendant Memory Buss.  Defendant Buss formed Defendant Arcturian Light LLC and Pleiadian Light LLC (collectively, “The LLCs.”)  The purpose of the LLCs would be to own and use licenses for the legal sales and operation of recreational adult-use Cannabis in Los Angeles and California.  Plaintiff Terpen, Inc. is owned by Plaintiffs Joel Arrieta, Jairo D. Arrieta and Juan Carlos Diaz.  The parties memorialized their agreement in a Partnership Agreement dated April 22, 2019. 

            Plaintiffs allege Terpen, Inc. invested in Buss’s partnership based on various misrepresentations that Buss made to them, including a promise that Terpen, Inc. would have an ownership interest in the assets of the partnership.  Plaintiffs allege neither they nor the Partnership have received any membership or ownership interests in the LLCs, nor have they received any proceeds from sale of the Cannabis products. 

            In addition, the individual Plaintiffs performed substantial work for Defendants for which they were never paid.  Plaintiffs contend the individual Plaintiffs are also owed unpaid wages and penalties. 

            On May 6, 2021, Plaintiffs filed a complaint against Defendants Buss and the LLCs.  Plaintiffs allege (1) securities fraud under state law; (2) breach of fiduciary duty; (3) intentional misrepresentation; (4) negligent misrepresentation; (5) conversion; (6) civil conspiracy; (7) breach of written contract; (8) breach of oral contract; (9) breach of the covenant of good faith and fair dealing; (10) rescission per Civil Code §1689(b); (11) to compel an inspection of business records; (12) for an accounting; (13) for buyout or dissolution of partnership; (14) promissory estoppel: (15) failure to pay minimum wage; (16) failure to pay overtime; (17) failure to pay all wages upon termination; (18) failure to provide itemized wage statements; (19) false representations regarding the terms and conditions of employment inducing employee to relocate; (20) declaratory relief; and (21) violation of Labor Code §210. 

            On October 22, 2022, the Court granted Defendants’ motion to compel arbitration.  On March 15, 2023, ADR terminated the arbitration after Defendant Pleiadian Light, LLC failed to pay an invoice in the amount of $1,750.

Legal Standard

            Discovery sanctions are not intended to punish but to accomplish discovery.  (Newland v. Supr. Ct. (1995) 40 Cal.App.4th 608, 613.)  Discovery sanctions are not intended to punish but to accomplish discovery.  (Newland, supra, 40 Cal.App.4th at 613.)  CCP §2023.010 does not require that any heightened showing be made in connection with a request for terminating sanctions.  The Court is also not required to make any findings or detail with particularity the basis for its decision to impose sanctions.  (Ghanooni v. Super Shuttle (1993) 20 Cal.App.4th 256, 261.)  The imposition of sanctions detailed in CCP §2023.030(b) for disobedience to Court's orders lies entirely within the court's sound discretion and is only subject to reversal for manifest abuse exceeding the bounds of reason.  (Lang v. Hochman (2000) 77 Cal.App.4th 1225, 1244.) Thus, in reviewing a trial court’s imposition of terminating sanctions, the question is not whether lesser sanctions could have been imposed, but whether imposition of terminating sanctions constitutes an abuse of discretion.  (Collisson & Kaplan v. Hartunian (1994) 21 Cal.App.4th 1611, 1620 (affirming terminating sanctions where defendant repeatedly failed to provide substantive discovery responses and trial date was only two months from hearing on motion for terminating sanctions).)

            “While there is no question but that a trial court, under appropriate circumstances, has the power to sanction a party who refuses to provide discovery to which his adversary is entitled, the sanction chosen must not be the result of an arbitrary selection. It should not deprive a party of all right to defend an action if the discriminating imposition of a lesser sanction will serve to protect the legitimate interests of the party harmed by the failure to provide discovery.”  (Thomas v. Luong (1986) 187 Cal.App.3d 76, 81–82; Morgan v. Ransom (1979) 95 Cal.App.3d 664, 669 (incarcerated, indigent, pro per plaintiff's delay in serving responses insufficient to justify imposition of terminating sanctions where no prejudice demonstrated).)

            “A decision to order terminating sanctions should not be made lightly. But where 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.”  (Mileikowsky v. Tenet Healthsystem (2005) 128 Cal.App.4th 262, 279-280 (terminating sanctions proper despite service of verified responses after their imposition where defendant repeatedly failed to respond to discovery or comply with court discovery orders).)  Where there is a pattern of discovery abuse, the trial court is “not required to allow this pattern of abuse to continue ad infinitum.”  (Id. at 280.)  Imposition of terminating sanctions is appropriate where imposition of a lesser sanction would permit the non-compliant party to benefit from their stalling tactics.  (Collisson & Kaplan, supra, 21 Cal.App.4th at 1620.)

            Traditionally, a court’s inherent power to dismiss or terminate an action has been recognized in cases of delay in prosecution or instances of sham, fraudulent or vexatious lawsuits.  (Stephen Slesinger, Inc. v. Walt Disney Co. (2007) 155 Cal.App.4th 736, 758.)  However, case law has expanded such power to cases of extreme litigation abuse.  (CCP §§581(m) and 583.150; Del Junco v. Hufnagel (2007) 150 Cal.App.4th 789, 799 (acknowledging inherent power to impose terminating sanctions as referenced in CCP §§581 and 583.150).)  “[W]e conclude that California trial courts have inherent power to issue a terminating sanction when a plaintiff's misconduct is deliberate, is egregious, and makes lesser sanctions inadequate to ensure a fair trial.”  (Stephen Slesinger, Inc., supra, 155 Cal.App.4th at 758.)  Exercise of this power need not be preceded by violation of a court order and is reviewed for abuse of discretion.  (Id. at 763 and 765.) 

Discussion

            Parties’ Positions

            Plaintiffs’ Position

            Plaintiffs ask that the Court impose monetary, evidentiary, issue and terminating sanctions against Defendants based on their failure to preserve critical security footage despite repeated written preservation notices prior to the time of destruction.  Plaintiffs argue Defendants concealed destruction of the evidence for two years, prevented Plaintiffs from accessing the premises to confirm Defendants’ explanation for the destruction and failed to comply with the Arbitrator’s March 9, 2024 order.  Plaintiffs argue the security footage is a condition of Defendants’ Cannabis licenses and would directly prove Plaintiffs’ claims and disprove Defendants’ contentions of Plaintiffs’ wrongdoing at the cannabis facilities.  Plaintiffs argue the Court should impose terminating sanctions against Defendants for their failure to preserve the security footage, despite Plaintiffs’ request in February 2020 that it do so.  Plaintiffs ask that the Court impose evidentiary or issue sanctions if it chooses not to impose terminating sanctions. Plaintiffs ask that the Court impose monetary sanctions regardless of whether it chooses to impose terminating, evidentiary and/or issue sanctions. 

            Defendants’ Opposition

            Defendants argue none of the request sanctions should be imposed against them, because the security footage was not willfully destroyed.  Defendants responded to Plaintiffs’ discovery request for the footage with a statement that the footage was unavailable, because the electronic information system automatically destroyed the footage 90 days after recordation.  Defendants argue they did not know until years later that the system automatically destroyed footage 90 days after recordation.  Defendants argue counsel should not be sanctioned, because he was not able to reach Buss and has moved to be relieved as counsel.  Defendants also argue sanctions are unwarranted, because they met and conferred in good faith to informally resolve the issue.   

            Plaintiff’s Reply

            On reply, Plaintiffs argue Defendants’ explanation for loss of the security camera footage does not apply to short clips and video footage identified by Buss as existing and available as of July 6, 2022.  Plaintiffs argue the opposition fails to explain how these short clips and photos could have survived the automatic deletion of such items every 90 days by the electronic system.  Plaintiffs argue it is also incredible that Defendants did not produce copies of the relevant footage to their attorney when they initiated the First Arbitration in 2020, when the footage still existed.  Plaintiffs argue Defendants have also previously indicated that they would fully comply with all discovery obligations but have failed to do so.  Plaintiffs argue Defendants have also failed to provide supplemental responses promised on December 22, 2022, provide access to the premises, answer questions ordered by the Arbitrator and remedy outstanding discovery as promised to the Court on November 11, 2023.  If the Court chooses not to impose any of the sanctions, Plaintiffs ask that this motion be continued to be heard with the other motions to compel set for October 24, 2024, January 27, 2025, May 2, 2025 and May 16, 2025. 

            Plaintiffs’ Request for Terminating, Evidentiary, Issue and Monetary Sanctions is DENIED.

            In Cedars-Sinai Medical Center v. Superior Court (1998) 18 Cal.4th 1, the Supreme Court declined to recognize a separate tort cause of action for intentional spoliation of evidence.  Acknowledging that “[t]he intentional destruction of evidence is a grave affront to the cause of justice and deserves our unqualified condemnation,” the Court held it was “preferable to rely on existing nontort remedies rather than creating a tort remedy.” (Cedars-Sinai Medical Center v. Superior Court (1998) 18 Cal.4th 1, 4.)  In particular, the Court explained that Evidence Code section 413 and standard civil jury instructions authorized the finder of fact to consider willful suppression of evidence when evaluating the inferences to be drawn from the evidence presented (Id. at 12) and “potent” sanctions, including issue sanctions, evidence sanctions and terminating sanctions, are available under the discovery statutes for misuse of the discovery process. (Id.) The Court observed, “Destroying evidence in response to a discovery request after litigation has commenced would surely be a misuse of discovery within the meaning of [Code of Civil Procedure former] section 2023, as would such destruction in anticipation of a discovery request.” (Id.)

            On reply, Plaintiffs attempt to expand the grounds for imposition of the requested sanctions.  Plaintiffs may not do so.  Based on the Notice of Motion and opening brief, Plaintiffs seek terminating, evidentiary, issue and/or monetary sanctions based on the destruction of security footage relevant to allegations that Plaintiffs did not know how to keep the cannabis plants, resulting in the destruction of much of the crop.  Plaintiffs rely on multiple requests for preservation of evidence, discovery requests and meet and confers to establish willful destruction and spoliation of evidence.  Based on the notice of motion and opening brief, Plaintiffs’ motion is not based on violation of any outstanding discovery orders.

            According to Plaintiffs, they issued a preservation of evidence letter on February 11, 2020 demanding that Defendants preserve all evidence related to the litigation.  (Kim Dec., ¶6.)  On March 6, 2020, Plaintiffs’ counsel sent a letter to Defendants identifying specific evidence that they had to preserve, including all video evidence from the Premises where cannabis was grown.  (Id. at ¶7.)  In response to Plaintiffs’ July 26, 2021 document requests, Defendants filed a verified statement on July 6, 2022 that they did not preserve the security video recordings and photos due to the limitations of the digital video recorder, which could only store recordings for 90 days.  (Id. at ¶11.)  Plaintiffs have also been unable to access the premises.  (Id. at ¶¶13-16.)  On January 9, 2023, Defendants again acknowledged in an email that the requested security footage had been automatically destroyed due to the limitations of the DVR system to hold recordings for 90 days.  (Id. at ¶15.)  On March 9, 2023, the Arbitrator ordered Defendants to answer 15 questions regarding the unavailability of the security footage but Defendants have not yet done so.  (Id. at ¶23.)

            Buss submitted a declaration in opposition. Buss maintains she had no idea that the footage would be automatically deleted after 90 days.  (Buss Dec., ¶3.)          

            Plaintiffs’ evidence fails to demonstrate willful destruction of evidence, nor does it establish discovery abuse that would justify imposition of terminating, evidentiary, issue or monetary sanctions.  Defendants have not violated a court discovery order.  To the extent they violate the arbitrator’s order that they respond to the 15 questions, Plaintiffs should seek a lesser remedy for that offense prior to seeking terminating, evidentiary, issue or monetary sanctions.  Plaintiffs should first attempt to compel responses formally and obtain a court order.  Plaintiffs are already in the process of doing so and have several discovery motions on calendar for hearing in the future. 

            In addition, Plaintiffs argue that the requested sanctions are justified because the evidence is crucial to Plaintiffs’ defenses to Defendants’ allegations of failing to properly care for the cannabis plants.  Plaintiffs go so far as to say that they cannot otherwise prove their claim that they improperly cared for the cannabis plants or did not bring in trim to the facilities.  Plaintiffs have other sources of proof that could establish that they did neglected the plants, including eyewitness testimony and business records.

            Plaintiffs fail to cite to any portion of the Discovery Act that provides a mechanism for preservation of evidence, much less prelitigation preservation of evidence, nor does it appear that the discovery sanctions were intended to aid in the preservation of evidence.  (Dodge, Warren & Peters Ins. Services, Inc. v. Riley (2003) 105 Cal.App.4th 1414, 1419-1420 (injunction requiring employees to preserve electronic evidence properly issued; Discovery Act did not provide plaintiff with adequate remedy at law for protecting electronic evidence from destruction).)  In fact, pursuant to CCP §2023.030(f)(1), “Notwithstanding subdivision (a), or any other section of this title, absent exceptional circumstances, the court shall not impose sanctions on a party or any attorney of a party for failure to provide electronically stored information that has been lost, damaged, altered, or overwritten as the result of the routine, good faith operation of an electronic information system.”  

            At this time, there is no evidence of intentional destruction of the video footage or anything other than destruction via the routine operation of the DVR.  Certainly, the evidence is not as clear as that presented in Williams v. Russ (2008) 167 Cal.App.4^th 1215, 1224.  In Williams, the plaintiff attorney who allegedly destroyed evidence was warned by the storage facility where he was keeping the evidence that the contents of his storage space would be sold and/or destroyed if he did not remove them.  (Williams, supra, 167 Cal.App.4^th at 1224.)  Despite these warnings and knowledge that his failure to act would result in sale and/or destruction of the evidence, plaintiff did not remove the files and left them in his storage space.  (Id.)  “We agree with the trial court that this is tantamount to intentionally destroying those files.”  (Id.)  Here, there is no similar evidence that Defendants knew the security footage would be destroyed if not preserved within 90 days of recordation. 

            Plaintiffs, however, have a remedy if in fact it comes to light that the footage was intentionally destroyed.  Plaintiffs can ask for a spoliation instruction under CACI 2024 at trial.  CACI 204 provides, “You may consider whether one party intentionally concealed or destroyed evidence. If you decide that a party did so, you may decide that the evidence would have been unfavorable to that party.”  Evidence Code § 413 provides, “In determining what inferences to draw from the evidence or facts in the case against a party, the trier of fact may consider, among other things, the party's failure to explain or to deny by his testimony such evidence or facts in the case against him, or his willful suppression of evidence relating thereto, if such be the case.”  In light of the destruction of the relevant video footage, Plaintiffs are entitled to conduct discovery into whether the recording was intentionally destroyed for purposes of Evidentiary Code § 413 and CACI 204. 

            For these reasons, Defendants’ Motion for Terminating, Evidentiary, Issue and Monetary Sanction is DENIED.       

            It is so ordered.

Dated:  September 10, 2024

_______________________

MEL RED RECANA

Judge of the Superior Court