Judge Michael D. Washington, Case Number: 37-2023-00028529-CU-BC-NC, Date: 2024-04-05 Tentative Ruling

Judge: Michael D. Washington, Case: 37-2023-00028529-CU-BC-NC, Date: 2024-04-05 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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SOUTH BUILDING TENTATIVE RULINGS - April 04, 2024

04/05/2024 01:30:00 PM N-31 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Michael D Washington

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Civil - Unlimited Breach of Contract/Warranty Discovery Hearing 37-2023-00028529-CU-BC-NC PAYLEASE, LLC VS CORPHOUSING LLC [IMAGED] CAUSAL DOCUMENT/DATE FILED: Motion to Compel Discovery, 02/02/2024

Disposition The Motion to Compel Production and Further Responses to Requests for Production of Documents brought by plaintiff PayLease LLC dba Zego (Plaintiff) is GRANTED.

The Motion to Deem Admissions Admitted or, in the Alternative, Compel Further Responses brought by Plaintiff is GRANTED.

As to the Request for Monetary Sanctions brought by Plaintiff, this matter is continued to Friday, May 10, 2024 at 1:30 p.m. in Department N-31. Prior to that continued hearing date, the Court imposes the following timeline: --by April 19, 2024, Defendants are ORDERED to serve additional supplemental responses resolving all of the issues raised in Plaintiff's reply brief – arguments which the Court has reviewed and finds meritorious --by April 26, 2024, a supplemental brief by Plaintiff, limited to 5 pages, is due filed and served and is to: (1) address any deficiencies in the supplemental responses that Defendants have provided, and (2) request any additional monetary sanctions that have been incurred in the process of reviewing the supplemental responses and drafting the supplemental reply --by May 3, 2024, a supplemental brief by Defendants, limited to 3 pages, is due filed and served and is to respond to any arguments raised in Plaintiff's supplemental brief The Court's decision regarding the amount of monetary sanctions to be awarded in this case will be heavily influenced by Defendants' efforts to comply and produce robust responses devoid of many of the evasive aspects plaguing their current responses.

Merits of Motions Plaintiff originally filed three discovery motions. (ROA 22, 24, and 29.) One of those, a motion relating to form interrogatories, appears to be set for hearing on May 3, 2024. In response to the two remaining motions, defendants LuxUrban Hotels Inc. and CorpHousing LLC (dba CorpHousing Group) (collectively, Defendants) have filed an omnibus opposition brief. That opposition implicitly concedes the merits of Plaintiff's arguments because it acknowledges that supplemental responses were needed.

However, Defendants request that monetary sanctions be reduced. In reply, Plaintiffs argue that even Defendants supplemental responses are insufficient. The Court agrees. The several points made in Calendar No.: Event ID: TENTATIVE RULINGS

3090734 CASE NUMBER: CASE TITLE: PAYLEASE, LLC VS CORPHOUSING LLC [IMAGED] 37-2023-00028529-CU-BC-NC Plaintiff's reply brief are meritorious in that Defendants responses are evasive or inadequate.

Accordingly, the Court grants the motion as to the issue of production of substantive responses.

Monetary Sanctions Plaintiff's initial request for monetary sanctions was in the total amount of $20,460.00 – apparently for all three motions combined. This 'omnibus' style of parsing out the monetary sanctions makes awarding an appropriate amount of monetary sanctions difficult.

First, one of those motions has not yet been heard, such that monetary sanctions as to it should not be granted. Second, Plaintiff seeks 'approximately 28.5 hours ... [for] meeting and conferring with opposing counsel and drafting the motions to compel.' (ROA 21, ¶ 15.) Absent very unique or special circumstances, monetary sanctions are generally not awardable for meet and confer efforts. The discovery process is designed to be self-executing. As such, the meet and confer rule exists to encourage parties to meaningfully engage with one another to resolve issues that can be resolved informally. If every time a party initiated meet and confer efforts, it triggered a right to attorney fees as monetary sanctions, the rule would encourage more motion practice (to obtain attorney fees for meeting and conferring) rather than less. Third, the total amount sought did provide one breakdown - $15,772.50 'to date' (i.e. for everything leading up to the filing of the moving papers) and an estimate of $4,687.50 for replying and appearing at the hearing. However, as Defendants' opposition largely concedes the substantive issues, less was needed to draft a reply brief.

As a simple gauge on appropriate monetary sanctions, the Court notes that in relatively recent years, normal discovery motions warranted monetary sanctions in the realm of $1,500.00-$2,500.00. With recent inflationary pressures, this reasonable range appears to have moved up into the $3,000.00-$4,000.00 range. Here, the reply estimate alone is beyond what is reasonable for an entire discovery motion. Ultimately, these numbers appear to be inflated. Moreover, because the declaration in support of the monetary sanctions does not parse out time spent on tasks (such as time spent on the motion that was ultimately taken off-calendar or time spent solely on the meet and confer effort) the Court has few tools with which to make a reasonable calculation of an appropriate monetary sanction.

Further, even if it were readily-possible with the information available to reach a conclusion as to the reasonable amount of attorney fees incurred to bring the motions, the Court is mindful of the following principle: If... the Court were required to award a reasonable fee when an ... unreasonable one has been asked for, claimants would be encouraged to make unreasonable demands, knowing that the only unfavorable consequences of such misconduct would be reduction of their fee to what they should have asked in the first place. To discourage such greed, a severer reaction is needful... Serrano v. Unruh (1982) 32 Cal.3d 621, 635.

As such, in assessing a reasonable monetary sanction (if any is appropriate under these circumstances) the Court's initial inclination is to err on the side of under awarding monetary sanctions in light of what appears to have been a significant overcalculation that has inflated the requested monetary sanctions.

Balanced against this principle, however, is the fact that Plaintiff's arguments are persuasive as to the underlying substantive issues – i.e. it does appear that Defendants' responses are either half-hearted or evasive. Defendants have failed to use appropriate language to make unconditional statements of compliance, have referred Plaintiff to the SEC website to essentially do their own investigation, and have restated responses narrowly to evade the entirety of the request. In light of these poor tactics, the fact that Plaintiff's counsel was required to spend more time in the meet and confer process essentially 'spinning their wheels' and getting nowhere tempers some of the otherwise inflatedness of the request for $20,460.00 in monetary sanctions.

Weighing these several factors and circumstances, the Court concludes that some amount of sanctions will need to be granted (likely in the range of about $4,000.00-$8,000.00 for the 'omnibus' style motions). As to the remaining approximately $12,000.00-$16,000.00 currently being sought by Plaintiff, Calendar No.: Event ID: TENTATIVE RULINGS

3090734 CASE NUMBER: CASE TITLE: PAYLEASE, LLC VS CORPHOUSING LLC [IMAGED] 37-2023-00028529-CU-BC-NC the reasonableness of this request will be reflected in Defendants' subsequent efforts to comply as ordered above. In other words, Defendants admit that they 'did not do a good job meeting their obligations to meet and confer...,' but Plaintiff is now contending that Defendants also did not do a good job producing subsequent responses that were adequate. To the extent that attorney fees are only warranted for meet and confer efforts in rare or unique circumstances, a complete lack of effort or diligence on the part of the responding party or, worse, an evasive approach, might be the kind of circumstance in which monetary sanctions for meet and confer efforts is appropriate – precisely because the efforts were not genuine, substantive, or in good faith.

The Court's view is this: if this is an issue the can and should be resolved by Defendants' diligent efforts, then Defendants should diligently seek to remedy all problems being raised by Plaintiff and, by doing so, temper the rather high monetary sanctions being sought by Plaintiff. However, if Defendants are unwilling to do so, then Plaintiff's rather high monetary sanctions request begins to look much more reasonable and could be appropriately granted – not only in the original amount, but also in the additional amount incurred to review supplemental production and file supplemental briefing. The message should be clear: if Defendants wish to avoid the high monetary sanctions (as they are requesting in their opposition), then they should work diligently and aggressively to give Plaintiff everything it is requesting so that this production issue resolves. Failing to do so will negate the earnestness and credibility of Defendants' request for a reduction of monetary sanctions.

Unless the ruling(s) above indicate that an appearance is necessary, parties who wish to submit, who are satisfied with the above tentative ruling(s), and/or who do not otherwise wish to argue the motion(s) are encouraged to give notice to the Court and each other of their intention not to appear.

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