Judge Ronald F. Frank, Case Number: 20TRCV00302, Date: 2023-05-11 Tentative Ruling

Judge: Ronald F. Frank, Case: 20TRCV00302, Date: 2023-05-11 Tentative Ruling

Case Number: 20TRCV00302¿ Hearing Date: May 11, 2023 Dept: 8

Tentative Ruling¿

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HEARING DATE: May 11, 2023¿

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CASE NUMBER: 20TRCV00302¿¿

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CASE NAME: Zouki for America Corporation v. Prime Healthcare Centinela, LLC, et al¿¿¿

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MOVING PARTY: Defendants, Prime Healthcare Centinela, LLC and Prime Healthcare Centinela, LLC dba Centinela Hospital Medical Center, a Delaware Limited Liability Company; Mohammad Abdelnaser, R.N., an individual; and DOES 1 through 20

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RESPONDING PARTY: Plaintiff, Zouki for America Corporation, a Delaware Corporation.

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TRIAL DATE: August 7, 2023 ¿

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MOTION:¿ (1) Motion to Compel Plaintiff to Produce Native Accounting Documents

Tentative Rulings: (1) Motion to Compel Plaintiff to Produce Native Accounting Documents is GRANTED. A verified written response per CCP § 2031.230 is required attesting to the Plaintiff’s inability to comply and why. If such a verification is given, Plaintiff should produce the derivative files from which the missing or lost report was created so experts on both sides can evaluate the damages claim

I. BACKGROUND¿¿

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A. Factual¿¿

Prime requests the production of Zouki’s accounting records, noting it used QuickBooks accounting software, and seeking access to such. Defendants served Requests for Production, Set Two to Zouki. Defendants note that on November 17, 2022, in a single follow-up discovery request to Zouki, they asked Zouki to produce “[t]he accounting records that were used to produce the profit and loss statement produced as PRIME012589 . . . . The records should be produced in their native format as QuickBooks files (e.g., “.QBB” or “.QBW” files).” Prime asserts that Zouki failed to timely respond by December 19, 2022, so defense counsel reached out to counsel for Zouki. After initially receiving no response, Prime states that Zouki’s counsel promised the file would be provided soon. Prime later followed up and indicated that if the file was not produced by February 23, 2023, they would file a motion to compel. This motion was then filed. On March 22, 2023, Prime notes that Zouki’s counsel claimed that Zouki was unable to gain access to Zouki’s QuickBooks records and that they are still attempting to access the files. (Schrader Decl. ¶ 9; Exhibit F).

B. Procedural¿¿

On April 10, 2023, Defendants filed this Motion to Compel Plaintiff to Produce Native Accounting Documents. On April 28, 2023, Plaintiff filed an opposition. On May 4, 2023, Defendants filed a reply brief.

¿II. ANALYSIS¿

A. Legal Standard

A motion to compel further responses to a demand for inspection or production of documents (“RFP”) may be brought based on: (1) incomplete statements of compliance; (2) inadequate, evasive, or incomplete claims of inability to comply; or (3) unmerited or overly generalized objections. (Code Civ. Proc., § 2031.310(c).) A motion to compel further production must set forth specific facts showing good cause justifying the discovery sought by the inspection demand. (See Code Civ. Proc., § 2031.310(b)(1).) In Digital Music News LLC v Superior Court (2014) 226 Cal.App.4th 216 at 224, the Court defined “good cause” as a showing that there “a disputed fact that is of consequence in the action and the discovery sought will tend in reason to prove or disprove that fact or lead to other evidence that will tend to prove or disprove the fact.” If the moving party has shown good cause for the requests for production, the burden is on the objecting party to justify the objections. (Kirkland v. Sup.Ct (2002) 95 Cal. App.4th 92, 98.)

B. Discussion

Defendants argue that the QuickBooks files are relevant to the lost profits case, that Zouki’s failure to timely respond waived any objections to the production of the QuickBooks files, and that alternatively, Zouki should be compelled with its informal response promising production of the QuickBooks files.

The Court agrees, as does Plaintiff in its opposition, that such files would be relevant and should be produced. However, Plaintiff notes that it is unable to retrieve the QuickBooks records. Nevertheless, Plaintiff notes that during the search for the QuickBooks records, Plaintiff was able to locate the data and information extracted from Quickbooks that provides the same level of information and insight into Plaintiff’s finances. Plaintiff contends that the loss of QuickBooks native information was done so inadvertently and without the intent to deprive Defendants of the information which was included. Instead, Plaintiff argues that the inadvertent deletion of QuickBooks’ records was caused by the routine operations of Plaintiff following the period of eviction and the shuttering of Zouki for America Corporation.

Nowhere in Plaintiff’s Opposition does counsel explain why Plaintiff cannot give a verified response compliant with CCP § 2031.230, i.e., a statement of inability to respond. A defendant is entitled to be suspicious of claims by counsel that a requested document cannot be located if the party is unwilling to verify under oath that those claims are correct. Plaintiff should produce the derivative files from which the missing or lost report was created so experts on both sides can evaluate the damages claim.

The Court cannot compel the production of documents that no longer exist, but a verified written response attesting to the loss or inadvertent destruction of the report mentioned by Plaintiff itself in earlier discovery responses and deposition testimony must be provided. Thus, the Motion to compel is GRANTED to the extent it seeks the required verified written response of inability to comply with the demand and why not. The Court will invite argument at the hearing as to whether the parties contemplate further deposition from Faddy Zoucky or others bearing on how the Quickbook report may have gone missing, overwritten, or been inadvertently destroyed, and bearing on why Intuit has been unable to resurrect the report from the Cloud or other database. The Court will invite argument at the hearing as to whether there is any evidence or indication of intentional spoliation of the Quickbooks report.

C. Sanctions

Defendants assert that Plaintiff should be sanctioned for failing to produce the QuickBooks files in the amount of $2,000 because it argues that it is undisputed that the documents are in Zouki’s possession, custody, and control. In opposition, Plaintiff notes that the bases for this belief is from Mr. Schrader’s quote from Faddy Zouky’s deposition where he states that Plaintiff maintained its accounting records using Quickbooks accounting software. Plaintiff notes that while records may have been maintained there, there is nothing in Defendants’ motion to suggest that Plaintiff has admitted the files still exist. Instead, Plaintiff’s counsel notes that a diligent effort has been made to locate the Quickbooks files, however, that the QuickBooks account was allowed to expire after Plaintiff’s operations ceased.

The Court is not inclined to award sanctions here, absent some further showing. The lack of a verified written statement of inability to comply is troubling, but apparently defense counsel inquired on this issue in Mr. Zoucki’s deposition and Plaintiff has offered the source documents from which the report was generated. Further, counsel has argued (although without a verified response from his client) that sanctions should not be awarded when ESI has been lost, damaged, or overwritten in the routine operation of an electronic information system, citing to CCP §2031.300 and 2031.320.