Judge Theresa M. Traber, Case Number: 22STCV34229, Date: 2024-04-24 Tentative Ruling

Judge: Theresa M. Traber, Case: 22STCV34229, Date: 2024-04-24 Tentative Ruling

Case Number: 22STCV34229 Hearing Date: April 24, 2024 Dept: 47

Tentative Ruling

Judge Theresa M. Traber, Department 47

HEARING DATE: April 24, 2024 TRIAL DATE: NOT SET

CASE: Elysian Health, LLC, et al. v. Justin White, et al.

CASE NO.: 22STCV34229

MOTION FOR ORDER APPOINTING DISCOVERY REFEREE

MOVING PARTY: Defendants Justin White, Applied Approach Services, Inc., Deena Manion, David Bifulco, and Priya Martindale (removed from action in 5AC)

RESPONDING PARTY(S): Plaintiffs Modern Management Solutions, Inc., and Zachary Ament.

CASE HISTORY:

· 10/24/22: Complaint filed.

· 11/03/22: First Amended Complaint filed.

· 03/20/23: Second Amended Complaint filed.

· 08/21/23: Third Amended Complaint filed.

· 11/20/23: Fourth Amended Complaint.

· 02/13/24: Fifth Amended Complaint.

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

This is an action for breach of fiduciary duty. Plaintiffs allege that Defendants engaged in extensive self-dealing and misappropriation of corporate assets and improperly excluded Plaintiffs from participating in the operation of nominal Defendant Elysian Health, LLC.

Defendants White, Applied Approach Services, Inc., Manion, Bifulco, and Martindale move for an order appointing a discovery referee.

TENTATIVE RULING:

Defendants’ Motion for Order Appointing Discovery Referee is GRANTED.

This order is conditioned on Defendants presenting the Court with a Proposed Order within five days of this order stating:

“Appointment of a discovery referee is necessary to mitigate the undue burden on the Court’s time and resources from the numerous discovery motions at issue in this case and the voluminous records which those motions entail.”

The proposed order shall also set forth the discovery matters to be included in the reference and shall state that the Court appoints the Hon. Norman Tarle (ret.) to be the discovery referee, including Judge Tarle’s business address and phone number.

The proposed order shall also include the hourly rate of $880 as the maximum hourly rate the referee may charge.

The proposed order shall further state that the Court finds that no party has demonstrated an inability to pay a pro rata share of the referee’s fees and that Plaintiffs shall bear 1/3 of the costs of the referee, jointly and severally, and the moving Defendants the remaining 2/3, jointly and severally.

DISCUSSION:

Defendants White, Applied Approach Services, Inc., Manion, Bifulco, and Martindale move for an order appointing a discovery referee.

The Court is authorized to appoint a referee pursuant to Code of Civil Procedure section 639 over the objections of any of the parties in specified circumstances, including, as relevant to this motion, “[w]hen the court in any pending action determines that it is necessary for the court to appoint a referee to hear and determine any and all discovery motions and disputes relevant to discovery in the action and to report findings and make a recommendation thereon.” (Code Civ. Proc. § 639(a)(5).) If a referee is appointed pursuant to subdivision (a)(5), the order “shall indicate whether the referee is being appointed for all discovery purposes in the action.” (Code Civ. Proc. § 639(c).) Any appointment of a referee under this section must be by written order and must state, as relevant here:

(2) [. . .] the exceptional circumstances requiring the reference, which must be specific to the circumstances of the particular case.

(3) The subject matter or matters included in the reference.

(4) The name, business address, and telephone number of the referee.

(5) The maximum hourly rate the referee may charge and, at the request of any party, the maximum number of hours for which the referee may charge. Upon the written application of any party or the referee, the court may, for good cause shown, modify the maximum number of hours subject to any findings as set forth in paragraph (6).

(6) (A) Either a finding that no party has established an economic inability to pay a pro rata share of the referee’s fee or a finding that one or more parties has established an economic inability to pay a pro rata share of the referee’s fees and that another party has agreed voluntarily to pay that additional share of the referee’s fee. A court shall not appoint a referee at a cost to the parties if neither of these findings is made.

(Code Civ. Proc. § 639(d) (2)-(6).) “Unless both parties have agreed to a reference, the court should not make blanket orders directing all discovery motions to a discovery referee except in the unusual case where a majority of factors favoring reference are present.” (Taggares v. Superior Court (1998) 62 Cal.App.4th 94, 105.) These factors include “(1) there are multiple issues to be resolved; (2) there are multiple motions to be heard simultaneously; (3) the present motion is only one in a continuum of many; (4) the number of documents to be reviewed (especially in issues based on assertions of privilege) make the inquiry inordinately time-consuming.” (Id.) In reaching its decision, the Court must consider that “the statutory scheme is designed only to permit reference over the parties’ objections where that procedure is necessary, not merely convenient.” (Id. at 135-36.) However, “[w]here one or more of the above factors unduly impact the court’s time and/or limited resources, the court is clearly within its discretion to make an appropriate reference.” (Id. at 136.)

Exceptional Circumstances

The parties agree that discovery in this matter has been intensely litigated and that a discovery referee is appropriate. Before transferring the matter to this Department, the Court had heard five discovery motions (see March 7, 2023 Minute Order; December 5, 2023 Minute Order; February 27, 2024 Minute Order) and had conducted six informal discovery conferences (March 9, 2023, May 11, 2023, June 27, 2023, June 28, 2023, September 29, 2023, January 22, 2024 Minute Orders.) A seventh informal discovery conference is scheduled for May 30, 2024, and several additional discovery motions have been filed with the Court. Defendants contend that a further fifteen discovery motions may be necessary. (Declaration of George Burns. ISO Mot. ¶¶ 6-7.)

The Court finds that, because of the numerous discovery motions already at issue in this case and the complexity of the facts in this action, the Court’s limited time and resources threaten to become unduly impacted such that it is necessary to appoint a discovery referee to hear and determine any and all discovery motions and disputes relevant to discovery in the action and to report findings and make a recommendation thereon.

Apportionment of Fees

Plaintiffs agree that a discovery referee is necessary, but assert that they lack the ability to pay and that the costs of the referee should be borne by Elysian. Plaintiff Ament states that he has been a single father since 2019 after the passing of Justin Wells and that his “sole source of income has been from Elysian, until the Defendants removed my salary in October 2022.” (Declaration of Justin Ament ISO Opp. ¶ 2.) “Absent [his] salary [Ament] ha[s] been relying solely on distributions from Elysian for the years 2022 and 2023. However, Defendants have completely cut of [sic] distributions since January 2024.” (Ament Decl. ¶ 3.) Ament claims that “[t]he distributions were [his] only source to pay for legal fees in this case.” (Ament Decl. ¶ 5.) Ament further states that in September 2023, “[he] was required to move from [his] home to [his] parents' home given the amount financial pressure [Ament] ha[s] had to deal with, including the mortgage on [his] home which [Ament] could no longer afford.” (Ament Decl. ¶ 4.)

In reply, Defendants contend that this claim of poverty is unsupported. As noted in Defendant White’s January 26, 2024 declaration, Ament has received distributions totaling $961,425 since the action started. (Reply Exh. 1 [Declaration of Justin White filed January 26, 2024] ¶ 6.) Plaintiff “was about to receive another $128,000 dividend” which was previously announced and funded just before the reply was filed. (Reply, Exh. 2 [Emails Regarding Dividends between the Parties].) Defendants also present news articles and social media posts which indicate that Plaintiff Ament owns a gym in West Hollywood and is opening a treatment facility in Bend, Oregon. (Reply, Exhs. 3-5 [Ament Social Media Posting and News Articles].) Finally, Defendants have produced Plaintiff Ament’s own social media posts which show that he has been traveling extensively throughout 2023 to Maui, Mammoth, Palm Springs, Florida, North Carolina, New York, and Las Vegas. (Reply, Exh. 6 [Social Media Posts].)

As this evidence was initially presented in Defendants’ reply papers, the Court permitted Plaintiffs to file a supplemental opposition to address the new evidence. In their supplemental opposition, Plaintiffs argue that distributions from Elysian cannot be relied upon because they are announced and paid at the discretion of Defendant White. (Supplemental Declaration of Justin Ament ISO Opp. ¶ 2.) Plaintiff Ament also states that the dividends have been used to pay his personal expenses, support his family, and cover legal fees in this case. (Id. ¶ 12.) As to the business ventures in which he is involved, Plaintiff Ament contends that he has not received any money from operating the West Hollywood gym nor invested any money in it. (Id. ¶ 4.) Plaintiff Ament also claims that the treatment facility in Bend, Oregon was paid for by his mother, not himself, and that he has not received any money from the facility. (Id. ¶ 3; Declaration of Judith Brill ISO Supp. Opp. ¶ 5.) As to the numerous trips taken in 2023, Plaintiff contends that they were all trips to locations where his family had a residence, day trips, or paid for by his mother or his mother-in-law, save for the trip to Hawaii to attend a wedding. (Ament Supp. Decl. ¶¶ 5-11, Brill Decl. ¶ 2-4, Declaration of Gina Wells ISO Supp Opp. ¶ 2.)

While this supplemental production demonstrates that Plaintiff Ament’s financial situation is not as extravagant as Defendants suggest, it also undercuts Plaintiff’s claim that he is entirely unable to pay the costs of a referee. At minimum, Plaintiff admits that he expects to receive revenue from his new business venture in West Hollywood. (Ament Supp. Decl. ¶ 4.) Plaintiff’s silence as to whether he expects to receive money from the treatment facility in Oregon is also telling. The Court therefore finds that Plaintiffs have not demonstrated a complete inability to pay for the costs of a discovery referee. However, neither is the Court persuaded by Defendants’ argument that the costs should be borne 50/50. The plain language of section 639 requires a pro rata apportionment of the discovery referee fees. Of the nine parties to this action, two are Plaintiffs and seven are Defendants, including nominal Defendant Elysian Health, LLC. Of the seven Defendants remaining, Defendants Manion, Bifulco, White, and Applied Approach Services, Inc. have appeared, as well as the nominal Defendant. Since Elysian is not a party to these disputes, the Court finds that imposing those costs onto Elysian, as Plaintiffs suggest, would be inappropriate. Instead, the Court finds that Plaintiffs Zachary Ament and Modern Management Solutions, Inc. should bear 2/6 of the costs, or 1/3, and Defendants should bear the other 2/3 share.

Choice of Referee

Defendants nominate the Hon. Benny Osorio, (Ret.) as the discovery referee without explanation or discussion. In response, Plaintiffs recommend Judge Jacqueline Connor (Ret.) from ADR Services or Judge Norman Tarle (Ret) from Judicate West as referee. Judge Connor has an hourly rate of $1,200 for service as a discovery referee. (Declaration of Niki Kalantari ISO Opp. Exh. 2.) Judge Tarle charges $880 for the same services. (Id. Exh. 3.) Plaintiffs’ counsel contends that Judge Osorio has 10 years’ experience as a judicial officer and previously was an assistant district attorney handling criminal matters, and charges the same rate for discovery referee services as Judge Connor. (Declaration of Faryan Afifi ISO Supp. Opp. ¶ 3.) Plaintiffs contend that Judge Tarle and Judge Connor have considerably more experience than Judge Osorio and therefore are better suited to serve as discovery referees. (Id. ¶¶ 2-3.) As Defendants have offered no explanation for their choice of referee, the Court will appoint the Hon. Norman Tarle (Ret.) as referee, in light of the sworn statement by Plaintiff’s counsel as to his experience, temperament, and skill.

CONCLUSION:

Accordingly, Defendants’ Motion for Order Appointing Discovery Referee is GRANTED.

This order is conditioned on Defendants presenting the Court with a Proposed Order within five days of this order stating:

The proposed order shall also include the hourly rate of $880 as the maximum hourly rate the referee may charge.

Moving Parties to give notice.

IT IS SO ORDERED.

Dated: April 24, 2024 ___________________________________

Theresa M. Traber

Judge of the Superior Court

Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept47@lacourt.org by no later than 4:00 p.m. the day before the hearing. All interested parties must be copied on the email. It should be noted that if you submit on a tentative ruling the court will still conduct a hearing if any party appears. By submitting on the tentative you have, in essence, waived your right to be present at the hearing, and you should be aware that the court may not adopt the tentative, and may issue an order which modifies the tentative ruling in whole or in part.