Judge Ralph C. Hofer, Case Number: 22GDCV00983, Date: 2024-03-01 Tentative Ruling

Plaintiffs Mildred DeCastro, Estrella Choy, Avigdor Kessler, Izuchukwa Okpara, Else Grospe and Christian Escobar allege that in May of 2022, they were interested in purchasing a hospice care business in California which was authorized to participate in the Medicare and Medicaid Services, possessed a valid Centers for Medicare and Medicaid Services (CMS) Certification Number, and was enrolled in the Medicare program.

Plaintiffs allege that they entered into a contract with defendant Armine Petrosian to purchase all stock in ANG Hospice, Inc. (ANG) for $650,000, based on representations and warranties by defendant Petrosian that ANG was fully licensed and certified by Medicare and Medicaid.

Plaintiffs allege that to induce plaintiffs to forebear from suing defendant Petrosian for rescission and damages, defendants Petrosian and Norayr Gasparian stated that they would sell or give plaintiffs another hospice care company which had the proper licenses to conduct business, R and A Hospice, Inc. (R and A), which was owned by Gasparyan. The parties agreed that if plaintiffs agreed to buy R and A, and not sue defendant Petrosian, defendant Gasparyan would sell R and A to plaintiffs, and plaintiffs would reconvey ANG to Petrosian.

The FAC alleges that to induce plaintiffs to enter into the transaction, defendants sent plaintiff a letter dated January 13, 2022 from the CMS which purported to provide R and A provisional certification and enrollment in Medicare, in reliance upon which in June of 2022, plaintiffs entered into a Stock Purchase Agreement with defendant Gasparyan, pursuant to which Gasparyan sold 100% of the stock of R and A to plaintiffs for $650,000. In the Agreement, Gasparyan represented and warranted, as had been represented in connection with the ANG Stock Purchase Agreement, that R and A had all authority to carry out its business, and had not received any notice of non-compliance or potential non-compliance with any applicable laws, statutes, regulations or ordinances, and that none of the information relating to the corporation or its operations contained any untrue statement of material fact, or omitted to state any material fact necessary to make the statements misleading.

The FAC alleges that after the sale of R and A to plaintiffs, in July of 2022, plaintiffs received a letter from CMS indicating that CMS denied the Company’s enrollment in the Medicare program, and that the denial had been communicated to defendant Gasparyan in a letter dated February 22, 2022, months before defendant Gasparyan provided the January 13, 2022 letter to plaintiffs. Plaintiffs allege that at no time did Gasparyan disclose to plaintiffs prior to close of escrow that CMS had denied the company’s enrollment or license, and also allege that Gasparyan knew of the February 22, 2022 letter and its contents and implications because defendant Gasparyan sent a letter to CMS requesting reconsideration, to which CMS responded by confirming its denial of enrollment in the Medicare program. Plaintiffs allege that this information was wrongfully concealed from plaintiffs, and that defendants were aware plaintiffs would not have proceeded with the purchase of ANG or R and A had plaintiffs known of the facts which defendants failed to disclose and would have sued Petrosian.

Defendant Petrosian has filed opposition to the motion, indicating that the motion is moot, as on February 21, 2024, before the hearing on the motion, defendant served plaintiffs with verified further responses to the Requests for Production of Documents. [Sogoyan Decl., para. 7, Ex. D].

CCP § 2031.310 (h) provides that the court “shall impose a monetary sanction...against any party, person, or attorney who unsuccessfully makes or opposes a motion to compel further response to a demand, unless it finds that the one subject to the sanction acted with substantial justification or that other circumstances make the imposition of the sanction unjust.”

Under CCP § 2023.010, misuse of the discovery process includes “(e) Making, without substantial justification, an unmeritorious objection to discovery”; and “(f) Making an evasive response to discovery.” Where there has been a misuse of the discovery process, under CCP § 2023.030(a), the court “may impose a monetary sanction ordering that one engaging in the misuse of the discovery process, or any attorney advising that conduct, or both pay the reasonable expenses, including attorney’s fees, incurred by anyone as a result of that conduct.” “If a monetary sanction is authorized” by the statute, “the court shall impose that sanction unless it finds that the one subject to the sanction acted with substantial justification or that the other circumstances make the imposition of the sanction unjust.” CCP §2023.030(a).

Here, a review of the separate statements shows that the discovery consists of Requests for Production of Documents which request documents such as those reflecting communications between defendant and plaintiffs, licenses and permits issued to ANG, and evidencing licensure or certification by Medicare and Medicaid, insurance documents, and documents supporting defendant’s various contentions and affirmative defenses in this matter.

The responses consist of a series of general objections, which are not appropriate, a series of boilerplate objections, responses that discovery is “Pending further investigation,” and that “Discovery and investigation are ongoing.” These are inappropriate responses to the subject requests, and such evasive and inadequate responses clearly necessitated bringing a motion to compel further responses.

Defendant in opposition argues that discovery sanctions may not be imposed as a punishment, and that defendant has diligently responded to plaintiff’s discovery requests and subsequent requests for further responses. Defendant seems to argue that plaintiffs unreasonably denied defendant’s request for a second extension of time to further respond to discovery, when defendant needed extra time to diligently investigate and discover the substantive responses being sought.

The meet and confer correspondence attached shows that an extension to respond was requested for an additional two weeks, that counsel for plaintiffs responded by asking what was the reason for the extension, to which defendant’s counsel responded that the client had been unavailable and incapable of locating requested documents, and is diligently searching. [Ex. C].

Counsel for plaintiffs responded that there had been a pattern in the case of defendant’s counsel asking for extensions without explanation and argues that the statement that the client is both unavailable and incapable of locating documents, and yet is busy searching for documents is inconsistent. Counsel for plaintiffs also points out that despite numerous previous extensions to respond to the subject discovery, the responses which were provided included only 15 pages of documents and were not made in good faith despite extra time being permitted. The letter makes clear that if supplemental responses are not served by December 1, 2023 (beyond the extended deadline of November 27), motions would be filed. [Ex. C]. This motion was filed on December 7, 2023, a week later than the stated deadline, and practically speaking, defendant was afforded nearly the entire two-week extension requested. The further responses were still not served until long after the motion had been filed, for an additional two-and-a-half-month period of delay. The motion was reasonably filed to motivate defendant to finally prepare further responses, and the motion had its intended effect.

The opposition does not explain what had been happening with the client or mention any additional facts supporting an argument that the failure to permit an additional extension was unreasonable under the circumstances, or that defendant’s delay has been substantially justified. [See Sogoyan Decl., para. 5]. Defendant accordingly has failed to meet the burden to justify not awarding sanctions here, and sanctions are awarded.

The sanctions sought are $2,060. The motion seeks 3 hours at $400 per hour to prepare a reply to any opposition and appear at the hearing. Since the opposition does not address the merits of the motion, the reply should not require substantial time, as it will likely only defend the sanctions requests. The amount of sanctions awarded modestly are adjusted accordingly as follows: a one hour reduction in attorney time for a total of 4 hours at $400.00 per hour with total attorneys’ fees at $1,600.00.

Motion to Compel Further Responses to First Set of Requests for Documents Propounded to Defendant Armine Petrosian is MOOT in light of the service on February 21, 2024 of Defendant Armine Petrosian’s Further Responses to Plaintiff Mildred DeCastro’s Requests for Production, Set One.

Monetary sanctions requested by moving parties: Utilizing a lodestar approach, and in view of the totality of the circumstances, the Court finds that the total and reasonable amount of attorney’s fees and costs incurred for the work performed in connection with the pending motion is $1,600.00 (4.0 hours @ $400/hour [5 hours requested]) plus $60 filing fee [Amount Requested $2,060], which sum is to be awarded in favor of plaintiffs Mildred DeCastro, Estrella Choy, Avigdor Kessler, Izuchukwa Okpara, Else Grospe and Christian Escobar and against defendant Armine Petrosian, payable within 30 days. CCP §§ 2031.310 (h), 2023.010(e) and (f), and 2023.030(a), and CRC Rule 3.1030(a).

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