Judge: Michelle Williams Court, Case: 19STCV17032, Date: 2022-09-14 Tentative Ruling

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Case Number: 19STCV17032    Hearing Date: September 14, 2022    Dept: 74

19STCV17032           801 S. GRAND AVENUE (LA) vs DOHERTY & CATLOW

Plaintiff’s Motion for Issue Sanctions, or Alternatively, for an Order of Terminating Sanctions

TENTATIVE RULING:  The motion is DENIED as to the requests for issue and terminating sanctions.  Defendants are ordered to fully comply with the Court’s March 3, 2022 order within 10 days.

Background

On May 16, 2019, Plaintiff 801 S. Grand Avenue (LA), LLC filed this action against Defendants Doherty & Catlow, a Law Corporation, John Doherty, Paul F. Sullivan, and James T. Catlow. The First Amended Complaint asserts causes of action for: (1) breach of lease, (2) breach of fiduciary duty, (3) approval of illegal distributions, (4) receipt of illegal distributions, (5) fraudulent transfer in violation of Civil Code § 3439.04(a)(1), (6) fraudulent transfer in violation of Civil Code § 3439.04(a)(2), (7) transfer in violation of Civil Code § 3439.04(a)(B), (8) transfer in violation of Civil Code § 3439.05, and (9) money had and received. The FAC alleges Defendants failed to pay rent as required by the lease agreements between the parties.

Motion for Issue or Terminating Sanctions

On August 22, 2022, Plaintiff filed the instant motion seeking issue sanctions, or alternatively, terminating sanctions, based upon Defendants’ failure to comply with the Court’s March 3, 2022 discovery order.

Opposition

On August 26, 2022, Defendants filed a document entitled “Defendants’ (1) Request to Take Plaintiff's Motion for an Order for Issue or Terminating Sanctions Off Calendar and (2) Objection to Plaintiff’s Inadequate and Defective Notice for Plaintiff's Motion for an Order for Issue Sanctions, or Alternatively, for an Order for Terminating Sanctions” arguing Plaintiff’s motion was not timely served because it failed to account for the two court-day extension required when serving a motion by electronic means.

On August 31, 2022, Defendants filed an opposition to the motion, noting the service defect and responding on the merits. Defendants’ opposition argues non-monetary sanctions are not warranted, they are in substantial compliance with the Court’s order, and the Court’s order was overly broad.

While Defendants are correct that the motion was served with less than 18-court days’ notice as required due to the manner of service, they responded on the merits and were not prejudiced thereby. (Tate v. Superior Court (1975) 45 Cal.App.3d 925, 930 (“It is well settled that the appearance of a party at the hearing of a motion and his or her opposition to the motion on its merits is a waiver of any defects or irregularities in the notice of the motion.”); Carlton v. Quint (2000) 77 Cal.App.4th 690, 697.) The opinion cited by Defendants to argue sanctions require sufficient notice, (Opp. at 4:26-5:2), supports hearing Plaintiff’s motion on the merits. (Alliance Bank v. Murray (1984) 161 Cal.App.3d 1, 7 (“We find that appellant's appearance at the June 14, 1983 hearing and his opposition to the motion on its merits constitutes a waiver of the defective notice of motion.”).)

Reply

The Court did not receive a timely reply. (Code Civ. Proc. § 1005(c).)

Terminating, Issue, and Evidentiary Sanctions

Standard

Where a party willfully disobeys a discovery order, courts have discretion to impose terminating, issue, evidence, or monetary sanctions. (Code Civ. Proc. §§ 2023.010(g); Code Civ. Proc. § 2025.450(h) (“If that party or party-affiliated deponent then fails to obey an order compelling attendance, testimony, and production, the court may make those orders that are just, including the imposition of an issue sanction, an evidence sanction, or a terminating sanction under Chapter 7 (commencing with Section 2023.010) against that party deponent or against the party with whom the deponent is affiliated. In lieu of, or in addition to, this sanction, the court may impose a monetary sanction under Chapter 7 (commencing with Section 2023.010) against that deponent or against the party with whom that party deponent is affiliated, and in favor of any party who, in person or by attorney, attended in the expectation that the deponent's testimony would be taken pursuant to that order.”).)

Pursuant to Code of Civil Procedure section 2023.030(d), the court may impose a terminating sanction by one of the following orders:

(1) An order striking out the pleadings or parts of the pleadings of any party engaging in the misuse of the discovery process.

(2) An order staying further proceedings by that party until an order for discovery is obeyed.

(3) An order dismissing the action, or any part of the action, of that party.

(4) An order rendering a judgment by default against that party.

The Court may issue “an evidence sanction by an order prohibiting any party engaging in the misuse of the discovery process from introducing designated matters in evidence.” (Code Civ. Proc. § 2023.030(c).) The Court may impose “an issue sanction ordering that designated facts shall be taken as established in the action in accordance with the claim of the party adversely affected by the misuse of the discovery process. The court may also impose an issue sanction by an order prohibiting any party engaging in the misuse of the discovery process from supporting or opposing designated claims or defenses.” (Code Civ. Proc. § 2023.030(b).)

“Dismissal is a proper sanction to punish the failure to comply with a rule or an order only if the court's authority cannot be vindicated through the imposition of a less severe alternative.” (Rail Services of America v. State Comp. Ins. Fund (2003) 110 Cal.App.4th 323, 331. See also Mileikowsky v. Tenet Healthsystem (2005) 128 Cal.App.4th 262, 279-80 (“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.”); R.S. Creative, Inc. v. Creative Cotton, Ltd. (1999) 75 Cal.App.4th 486, 496 (“The power to impose discovery sanctions is a broad discretion subject to reversal only for arbitrary, capricious, or whimsical action.  Only two facts are absolutely prerequisite to imposition of the sanction: (1) there must be a failure to comply ... and (2) the failure must be willful.”).) “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.” (Vallbona v. Springer (1996) 43 Cal.App.4th 1525, 1545) “A discovery sanction may not place the party seeking discovery in a better position than it would have been in if the desired discovery had been provided and had been favorable.” (Rail Services, supra, 110 Cal.App.4th at 332.)

Plaintiff’s Sanction Request is Overbroad

As stated in its notice of motion, Plaintiff moves the Court for “issue sanctions establishing that Paul F. Sullivan & Associates, Paul F. Sullivan, and John Doherty are the alter egos of Doherty & Catlow, a Law Corporation, or alternatively, for an order imposing terminating sanctions against all defendants.”

Plaintiff’s sanction request is impermissibly overbroad. There is no basis for imposing terminating sanctions against the individual Defendants or issue sanctions establishing the individual Defendants are alter egos of Defendant Doherty & Catlow. Only Defendant Paul F. Sullivan & Associates is properly sanctioned based upon its conduct. Plaintiff’s motion suggests Defendant Doherty & Catlow also served objections to the deposition requests, (Opp. at 10:9-18), but Plaintiff did not provide any evidence of such conduct. (Shakouri Decl. ¶¶ 1-21.) However, Defendants provided Defendant Doherty & Catlow’s responses in opposition, which confirm Doherty & Catlow also asserted objections to the document requests. (Sullivan Decl. Ex. B.)

Issue and Terminating Sanctions Are Not Warranted

On March 3, 2022, the Court issued an order granting Plaintiff’s motion to compel Defendants Doherty & Catlow, A Law Corporation’s person most knowledgeable, and Paul F. Sullivan & Associates, APC’s person most knowledgeable and production of documents. The Court ordered Defendants’ persons most knowledgeable “to appear at deposition and to produce at the time of deposition all documents requested, without objection, in the amended Notices within 20 days.”

The parties agreed to continue the depositions, with the deposition of  Paul F. Sullivan & Associates’ PMK to take place on August 11, 2022. (Shakouri Decl. ¶ 19.) On August 8, 2022, Paul F. Sullivan & Associates served objections to the deposition notice indicating it would not produce responsive documents to several of the requests for production that were at issue in Plaintiff’s motion to compel the Court granted on March 3, 2022. (Id. ¶ 20, Ex. L.) Defendant’s objections were based upon relevance, compound requests, oppression, vagueness, ambiguity, overbreadth, and privacy. (Ibid.) At the deposition, Defendant’s PMK admitted that Defendant had documents relevant to Request No. 2, but did not produce them pursuant to the objections. (Id. ¶ 21.)  

While Plaintiff’s motion states Defendant Paul F. Sullivan & Associates objected to “nine (9) of the twenty-seven requests that the Court ordered to be produced without objection,” (Opp. at 4:22-23), Plaintiff’s separate statement identifies eight requests: Nos. 2, 8-11, 22, 23, and 27. Defendant’s response to Request No. 23 did not state any objections. (Sep. Stmt. at 9:24-26; Shakouri Decl. Ex. L at 10:20-22.) Requests Nos. 2, 8-11, 22, and 27 seek documents related to bank accounts, assets, income, equity, tax returns, “means and source of payment” to counsel and for rent, distributions to officers or executives, and accounts receivable. (Shakouri Decl. Ex. L.) Plaintiff sought these documents related to its alter ego claims.

Discovery sanctions must be tailored to the alleged discovery abuse and cannot  be used to punish the offending party. (Karlsson v. Ford Motor Co. (2006) 140 Cal.App.4th 1202, 1217 (“Discovery sanctions must be tailored in order to remedy the offending party's discovery abuse, should not give the aggrieved party more than what it is entitled to, and should not be used to punish the offending party”); Rail Services, supra, 110 Cal.App.4th at 332 (“A discovery sanction may not place the party seeking discovery in a better position than it would have been in if the desired discovery had been provided and had been favorable.”); Rutledge v. Hewlett-Packard Co. (2015) 238 Cal.App.4th 1164, 1193 (“sanctions may not be imposed solely to punish the offending party. [Citation.] Furthermore, the sanction chosen should not provide a windfall to the other party, by putting the prevailing party in a better position than if he or she had obtained the discovery sought and it had been favorable.”); Lopez v. Watchtower Bible and Tract Society of New York, Inc. (2016) 246 Cal.App.4th 566, 604 (“The trial court should select a sanction that is tailored to the harm caused by the withheld discovery.”).) Issuing terminating sanctions based upon Defendants’ failure to provide the limited documents at issue here would clearly violate these principals.

As to issue sanctions, the Court has not imposed monetary sanctions against Defendants and Plaintiff has not sought monetary sanctions against Defendants via the instant motion. “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.) It is undisputed Defendants appeared for their depositions and produced some documents responsive to Plaintiff’s requests.

While the Plaintiff did not seek monetary sanctions in this motion, the Court shall deem a subsequent failure to comply with the Court’s order as sufficient evidence that a lesser sanction will be sufficient. (Lopez v. Watchtower Bible & Tract Society of New York, Inc. (2016) 246 Cal.App.4th 566, 605 (“the court could have imposed evidentiary or issue sanctions to replace the information that would or could be included within those documents. When a party does not produce ordered documents, the court is entitled to infer the documents would contain evidence damaging to that party's case and instruct the jury accordingly.”); J.W. v. Watchtower Bible and Tract Society of New York, Inc. (2018) 29 Cal.App.5th 1142, 1171.)

Defendants appear to be under a misapprehension as to their duty to comply with the Court’s order. Defendants’ reliance upon Union Trust Co. of San Diego v. Superior Court in and for San Diego County (1938) 11 Cal.2d 449 and Adams v. Superior Court In and For San Bernardino County (1957) 49 Cal.2d 427 are misplaced as neither involve the requirement that a party comply with a court’s orders. The Court in Adams addressed a writ of mandate of a superior court order, which is not at issue here. Defendants’ or their counsel’s disagreement with the Court’s order, that documents be produced without objection, is not a basis for their failure to comply. (See generally Hawk v. Superior Court (1974) 42 Cal.App.3d 108, 126 (“It is the imperative duty of an attorney to respectfully yield to the rulings of the court, whether right or wrong.”); Union Trust, supra, 11 Cal.2d at 459 (“it was the [Defendants’] duty in the premises to comply with the order of the court as far as it was able in reason and good faith to ascertain the intent and meaning of the order here made. With regard thereto, it may be said at this point that the arbitrary refusal on the part of the [Defendants] to comply with the order in question, based as it was upon technical objections, does violence to the spirit and intent of the statute under which the right of an inspection is conferred.”).)

Defendants’ contention that the Court’s order is overbroad is belied by the authority cited. In Union Trust, the Court found an order stating “it is hereby ordered that the plaintiff give to the defendants forthwith an inspection and copy or permission to take a copy of the entries of account and of the documents and papers mentioned in the affidavit of C. J. Novotny sworn to on May 19th, 1937, excepting those certain documents and records mentioned in said affidavit” was sufficient. (Union Trust, supra, 11 Cal.2d at 456-457.) The affidavit at issue referred to categories of documents such as “All entries in all of plaintiff's cash books, day books, journals, trust records and other books and records relating to trust No. 5771” and “Documents, papers, instruments and instructions signed by said Prudential Bond & Mortgage Co. or said C. J. Novotny relating to the affairs, assets and securities of said trust and said Prudential Bond & Mortgage Co. and the management thereof.” (Id. at 457.) The Court’s reference to Plaintiff’s deposition notices provided Defendants with a sufficient description of the documents to be produced. (Id. at 458–459 (“Nor, under the circumstances of this case, may the technical objection be available that the order was too broad.”).)

The Court notes trial in this matter is set for October 10, 2022. “When a party does not produce ordered documents, the court is entitled to infer the documents would contain evidence damaging to that party's case and instruct the jury accordingly.” (Lopez, supra, 246 Cal.App.4th at 605.)

Defendants are ordered to fully comply with the Court’s March 3, 2022 order within 10 days.