Judge: Virginia Keeny, Case: 21VECV00758, Date: 2023-04-27 Tentative Ruling
Case Number: 21VECV00758 Hearing Date: April 27, 2023 Dept: W
STRATTON AGENCY v. PCF INSURANCE SERVICES
OF THE WEST, LLC
Plaintiff’s MOTION TO COMPEL FURTHER RESPONSES
AND PRODUCTION OF DOCUMENTS TO REQUESTS FOR PRODUCTION OF DOCUMENTS, SET TWO,
AND FOR SANCTIONS IN THE AMOUNT OF $21,110
Date of Hearing: April
27, 2023 Trial
Date: None set.
Department: W Case No.: 21VECV00758
Moving Party: Plaintiff Stratton Agency
Responding Party: Defendant PCF Insurance Services of the
West, LLC
Meet and Confer: Yes. (White Decl. ¶9.)
BACKGROUND
In 2018, PCF purchased Plaintiff’s
business and assets and continued to operate the Stratton Agency business after
the Sale. Plaintiff alleges, however, Defendant PCF twice breached the Asset
Purchase Agreement (“APA”) when PCF failed to provide an Estimated Earn-Out
EBITDA to Plaintiff by that date as contractually required and failed to make
any Earn-Out Payment. Plaintiff further alleges doing so, PCF completed a fraudulent
scheme it initiated in the negotiations leading up to the APA in 2018, wherein
PCF made material representations it knew were not true, and it made material
promises it had no intention of keeping, all for the purpose of inducing
Plaintiff to sign the APA. Plaintiff also alleges Defendant fired all of
Plaintiff’s leadership and key revenue-producing personnel, cannibalized the
division, and prevented the logical expansion of Plaintiff’s post-Sale business-all
of which predictably (and intentionally) sabotaged Plaintiff’s path to
maximizing the earn-out payment.
On June 9, 2021, Plaintiff Stratton
Agency filed a complaint against Defendant PCF Insurance Services of the West,
LLC asserting causes of action for breach of written contract; breach of
implied covenant of good faith and fair dealing; and fraud in the inducement.
[Tentative] Ruling
Plaintiff Stratton Agency’s Motion to
Compel Further Responses and Production of Documents to Requests for Production
of Documents, Set Two, is GRANTED, IN PART. Plaintiff’s Request for Sanctions in
the Amount of $21,110 is DENIED.
REQUEST FOR JUDICIAL NOTICE
Plaintiff requests this court take
judicial notice of the complaint filed by Plaintiff in the instant matter on June
9, 2021 and Stipulation – No Order Protective Order filed by Plaintiff on
September 22, 2022.
The court grants Plaintiff’s request for
judicial notice. (Evid. Code §452(d).)
discussion
Plaintiff Stratton Agency moves the court for an order compelling
Defendant PCF Insurance Services of The West, LLC to provide further responses
to Plaintiff’s Requests for Production of Documents to Defendant, Set Two
(“RFPs”) and to produce all responsive nonprivileged documents. Plaintiff also
seeks sanctions against Defendant in the amount of $21,110 pursuant to Code of
Civil Procedure § 2031.310.
Under Code of Civil Procedure section 2031.310, the court may
order a responding to serve a further response to a request for production when
the court finds that any of the following apply: (1) a statement of compliance
with the demand is incomplete; (2) a representation of inability to comply is
inadequate, incomplete, or evasive; and (3) an objection in the response is
without merit or too general.
Plaintiff seeks to compel further responses and documents to the
RFPs on the grounds the documents sought by each category are directly relevant
to the allegations in the complaint and the facts supporting Plaintiff’s claims;
Defendant’s objections are baseless and any concern of privacy is completely
eliminated by the parties’ Stipulated Protective Order; Plaintiff seeks
documents well within the parameters of the broad discovery standard; and good
cause exists to compel further responses and documents because Defendant is the
only party with access to the documents sought, and the documents are vital to
Plaintiff’s preparation for trial and analysis of its claims. Plaintiff seeks the
following documents:
Defendant’s
Financial Documents: Defendant’s Financial Statements (RFP Nos. 34, 36, 38),
Book of Business Reports (RFP Nos. 40-44, 47), Customer List (RFP No. 64),
Production Reports (RFP Nos. 67-68, 70), Appraisals or Evaluations (RFP Nos.
109-110), and Projections or Forecasts (RFP Nos. 111-116);
Defendant’s
Employee Rosters (RFP Nos. 94-97) and Documents Showing Defendant’s Efforts to
Replace Plaintiff’s Employees (RFP No. 100);
Defendant’s
Offers to Purchase Other Agencies (RFP Nos. 119-122) and Earn Out Payments Made
by Defendant to Other Agencies (RFP No. 123);
Defendant’s Promotional Budgets
and Marketing Initiatives (RFP Nos. 124-131);
Plaintiff’s
Detail General Ledger (RFP No. 39); Projections or Forecasts of Plaintiff and Appraisals
or Evaluations of Plaintiff (RFP Nos. 103-108, 101-102);
Documents
Related to Plaintiff’s Programs: Online Training Academy (RFP Nos. 144-145)
Workers compensation program for comp shield (RFP No. 146) Nine Point
strategies partnerships (RFP Nos. 147-149);
Jesse Parenti’s Employment File
(RFP No. 134); and
Tedd Schwartz’s OHSA Cannabis
Certification (RFP No. 136).
In opposition, Defendant PCF first argues the court should not
compel the production of financial information and reports of any non-Stratton
companies (RFP Nos. 34, 36, 38, 40-42, 44, 64, 67, 109-110, 111-116). The court
agrees. Plaintiff has not demonstrated looking into PCF’s other divisions is
relevant to their case. For discovery purposes, information is regarded as
relevant “if it might reasonably assist a party in evaluating the case,
preparing for trial, or facilitating settlement thereof.” (City of Los
Angeles v. Superior Court (2017) 9 Cal.App.5th 272, 288.) PCF’s other
divisions are not related to Defendant’s alleged fraudulent conduct. Because
PCF didn’t purchase Plaintiff’s assets until 2018 and Defendant purportedly
breached the agreement in 2021, the court further limits the discovery requests
from 2018 to 2021. Similarly, Defendant PCF argues the details of PCF’s
acquisitions of other agencies (RFP Nos. 119–122) and PCF’s earn-out payments
made to other agencies (RFP No. 123) have little to no bearing on Stratton’s
claim. The court agrees. PCF’s other agencies do not have an impact on
Stratton’s allegations and the information sought is overly invasive and
burdensome.
Next, Defendant PCF opposes the motion to compel further discovery
on the grounds Requests No. 43, 47, 68, and 70 seek to expand the scope of
responses in response to which Stratton has already agreed to produce documents.
PCF contends Stratton apparently takes issue with PCF’s agreement to produce
documents up through the April 9, 2021 earn-out period rather than “to
present.” The court agrees. Plaintiff has not demonstrated the need for the seven
year period. The court limits the discovery requests from 2018 to 2021.
Defendant PCF also opposes the motion on the grounds there is no
substantial justification to provide discovery into each of PCF’s employees or PCF’s
efforts to replace each and every Stratton employee. Again, the court agrees
the Request Nos. 94-97 should be limited to Plaintiff’s employees and not any
and all employees of PCF. Moreover, the court agrees that Request No. 100
should define “efforts” to replace any employee of Plaintiff after April 9,
2018.
Again, Defendant PCF opposes the motion to several of Plaintiff’s
requests for further production on the grounds PCF’s other agencies are
irrelevant, including documents relating to PCF’ promotional budgets or
marketing initiatives for its 140 other agencies (RFP Nos. 124-126, 127-131). The
court agrees. As noted by PCF, it is unclear how the promotional budgets or
marketing initiatives for PCF’s 140 unrelated subsidiaries would help
demonstrate Stratton had adequate marketing support.
PCF opposes Stratton’s request to compel further responses to Nos.
101 and 102 regarding “appraisals or evaluations” of Stratton either before
April 9, 2018 or after April 9, 2018 on the grounds there has never been an
independent formal appraisal or evaluation performed during these periods. Stratton
contends there could have been “informal” appraisals. The court finds the
requests regarding “appraisals or evaluations”, formal or informal should be
compelled. Defendant has not demonstrated justification for the objection.
Although PCF contends “[t]he terms ‘appraisal’ and ‘evaluation’ in the business
context are terms of art which specifically denote an independent, formal
process[]”, Plaintiff is entitled to discovery of the process. As for Nos.
103-108, the court agrees with PCF that the documents being compelled relating
to projections or forecasts should be limited to 2017 through the end of the
earnout period.
As for RFP Nos. 144-145, 146, 147-149, the court finds the
requests do not need further narrowing. However, the parties are to work
together to help PCF identify particular documents relating to the purchase and
development of Stratton’s On-Line Training Academy, purchase of Plaintiff’s
development of a worker’s compensation program for Comp Shield, and various
partnerships of Nine Point Strategies with certain industry partners.
Lastly, PCF objects to Plaintiff’s request for Jessee Parenti’s
employment file and Tedd Schwartz California OSHA cannabis certification (RFP
No. 134-136). The court grants Plaintiff’s request. The court finds Plaintiff
has demonstrated good cause for the requests as each relate to Defendant’s
alleged fraudulent scheme to sabotage Plaintiff’s path to realize the earn-out.
The court notes the parties are working out the issues regarding the
general ledgers.
Sanctions
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.
Plaintiff seeks $21,110.00 in monetary sanctions against PCF on
the grounds Defendant’s document production contains improper redactions on
documents that are directly related to the subject matter of the dispute despite
the parties’ Stipulated Protective Order and
Defendant insists standing on their baseless objections impeding on
Plaintiff’s right to conduct meaningful discovery.
The court finds Defendant has acted with substantial justification
in opposing the discovery and denies Plaintiff’s request.