Judge: Robert S. Draper, Case: 21STCV40546, Date: 2023-03-17 Tentative Ruling

Case Number: 21STCV40546    Hearing Date: March 17, 2023    Dept: 78

Superior Court of California 

County of Los Angeles 

Department 78 

Defendant Sound (ABC), LLC’s Motion for Protective Order is GRANTED.

Plaintiff Creative Resonance, Inc.’s Request for Monetary Sanctions is DENIED.

FACTUAL BACKGROUND   

This is an action for breach of contract and fraud. The operative Third Amended Complaint (“TAC”) alleges as follows.

Plaintiff Creative Resonance, Inc. (“CRI”) is a food science company owned and founded by Roberto Capodieci (“Capodieci”), an accomplished food scientist. (TAC ¶¶ 2-3.) In 2018, Defendant Don Dillon (“Dillon”) approached Capodieci about creating a snack company, Defendant Sound Nutrition, Inc (“SNI”.) (TAC ¶ 4.) Dillon promised Capodieci $1.5 million if he transferred certain patents and manufacturing equipment to SNI. (Ibid.)

Dillon hired Defendant law firm Wilson Sonsini Goodrich & Rosati (“WSGR”) to draft legal documents establishing the sale of the patents and manufacturing equipment to SNI. (TAC ¶ 7.) Capodieci was under the impression that WSGR would represent his best interests in the transaction. (TAC ¶ 8.) Instead, he alleges that WSGR colluded with SNI to defraud Capodieci out of his agreed upon payment. (Ibid.)

In 2021, SNI informed CRI that SNI had been placed into an insolvency process. (TAC ¶ 48.) In November of 2021, non-party accounting firm Armanino LLP informed Capodieci that SNI had made a general assignment for the benefit of creditors by transferring all the company’s assets to Defendant Sounds (ABC), LLC (“Sound ABC”). (Ibid.) Included in Sound ABC’s assets for sale were the Patents and Physical Assets that CRI transferred to SNI. (Ibid.) Plaintiff alleges that SNI transferred, and Sound ABC received, the assets intending to prevent CRI from recovering the Patents and Physical Assets. (TAC ¶ 138.)

PROCEDURAL HISTORY 

On November 3, 2021, Plaintiff filed the Complaint.

On November 29, 2021, Plaintiff filed the First Amended Complaint asserting twelve Causes of Action:

1.    Breach of Contract;

2.    Breach of Implied Covenant of Good Faith and Fair Dealing;

3.    Fraudulent Misrepresentation – Contracts;

4.    Fraudulent Misrepresentation – Legal Representation;

5.    Fraudulent Concealment – Legal Representation;

6.    Professional Negligence;

7.    Breach of Fiduciary Duty;

8.    Civil Conspiracy – Fraudulent Misrepresentation;

9.    Fraudulent Transfer;

10.                   Conversion:

11.                   Civil Conspiracy – Fraudulent Transfer; and,

12.                   Declaratory Relief.

On February 1, 2022, Sound ABC filed a Demurrer to the First Amended Complaint.

On April 29, 2022, the Court sustained Sound ABC’s Demurrer without leave to amend as to the Tenth and Twelfth Causes of Action and sustained Sound ABC’s Demurrer with thirty days leave to amend as to the Ninth and Eleventh Causes of Action.

On May 27, 2022, Plaintiff filed the Second Amended Complaint.

On January 13, 2023, Plaintiff filed the operative Third Amended Complaint asserting the same twelve causes of action.

On December 22, 2022, Sound ABC filed the instant Motion for Protective Order.

On March 6, 2023, CRI filed a Limited Opposition.

On March 10, 2023, Sound ABC filed a Reply.

DISCUSSION

I.                MOTION FOR PROTECTIVE ORDER

Sound ABC moves for a protective order pursuant to Code of Civil Procedure section 2031.060(b).)

CCP section 2031.060 provides that a party can move for a protective order “[w]hen an inspection, copying, testing, or sampling of documents, tangible things, places, or electronically stored information has been demanded.” (Code Civ. Proc., § 2031.060(a).) The court may make any order that justice requires to protect any party from unwarranted annoyance, embarrassment, or oppression, or undue burden and expense upon a showing of good cause. (Id., § 2031.060(b).)  

The burden of proof is on the party seeking the protective order to show “good cause” for the order he or she seeks. (Fairmont Insurance Co. v. Superior Court (2000) 22 Cal.4th 245, 255.) A motion for a protective order “shall be accompanied by a meet and confer declaration under Section 2016.040.”  (Code Civ. Proc., § 2030.090.) “A meet and confer declaration in support of a motion shall state facts showing a reasonable and good faith attempt at an informal resolution of each issue presented by the motion.” (Code Civ. Proc., § 2016.040.)   

Here, Sound ABC seeks a Court order allowing Sound ABC to propound an Asset Purchase Agreement (“APA”) to Plaintiff; the APA contains a confidentiality provision that prohibits Sound ABC from producing the document to a non-party to the agreement absent a court order or the prior written consent of the other contracting party, non-party Treadstone Capital Trust (“Treadstone”).

Sound ABC notes that the APA is directly responsive to three of Plaintiff’s discovery requests. Treadstone has, thus far, not permitted release of the APA. By seeking a court order allowing Sound ABC to release the APA to Plaintiff, Plaintiff hopes to fulfill its discovery requirements while avoiding costly litigation for breaching the confidentiality terms of the APA.

The Court finds that Sound ABC has shown good cause for such order. And, as no party opposes the release of the APA, the Court finds that its release will not substantially interfere with any party’s right to privacy.

Accordingly, Sound ABC’s motion for a protective order allowing Sound ABC to provide the Asset Purchase Agreement to Plaintiff is GRANTED.

II.              SANCTIONS

While Plaintiff does not oppose an order allowing Sound ABC to provide the APA to Plaintiff, Plaintiff argues that the Court should impose sanctions on Sound ABC pursuant to Code of Civil Procedure section 2023.030(a).

Under CCP § 2023.030, the court has discretion to issue (1) monetary sanctions (CCP § 2023.030(a)), (2) issue sanctions (CCP § 2023.030(b)), (3) evidence sanctions (CCP § 2023.030(c)), and (4) terminating sanctions (CCP § 2023.030(d)) against anyone engaging in conduct that is a misuse of the discovery process. Such sanctions are meant to remove the tactical advantage a loss of evidence might create and place the parties on a more equal footing; so, a court imposing sanctions may not exceed that which is required to protect the interests of the party entitled to but denied discovery. (See Puritan Ins. Co. v. Superior Court (1985) 171 Cal. App. 3d 877, 886.)

Here, Plaintiff seeks monetary sanctions against Sound ABC and Sound ABC’s Counsel due to Sound ABC’s delay in filing the instant motion. Plaintiff notes that it sent the requests for discovery in question to Sound ABC on April 7, 2022. Plaintiff contends that Sound ABC’s failure to file the instant motion until December 2022, after Plaintiff had filed motions to compel related to the missing discovery, constitutes a bad faith abuse of the discovery process.

However, as Sound ABC notes on Reply, Sound ABC did not spend this time idly sitting by. Instead, in the intervening months, the parties engaged in multiple meet and confer meetings, informal discovery conferences, discussions of discovery referees, and a mediation.

The Court will not punish Sound ABC for attempting to resolve this legitimate discovery issue without court intervention. Accordingly, the Court finds that the delay in filing the instant motion was not a misuse of the discovery process, and sanctions are not warranted.

Plaintiff’s request for monetary sanctions is DENIED. At hearing, the Court will consider whether there remain outstanding discovery matters in Plaintiff’s Motion to Compel as to Sound ABC, currently scheduled to be heard on March 30, 2023, or if those motions can be taken off calendar.  

DATED: March 17, 2023                    

____________________________ 

Hon. Robert S. Draper

Judge of the Superior Court