Judge: Walter P. Schwarm, Case: 30-2022-01260098, Date: 2022-12-20 Tentative Ruling
Motion No. 1:
Moving Party’s (Juan Carlos Orellana) Motion for Relief from Waiver (Motion), filed on 11-22-22 under ROA No. 182, is GRANTED.
The court DENIES Moving Party’s Request for Judicial Notice (RJN), filed on 12-13-22 under ROA No. 194 as immaterial to the court’s ruling. (Silverado Modjeska Recreation & Parks District v. County of Orange (2011) 197 Cal.App.4th 282, 307, fn. 18.)
Code of Civil Procedure section 2031.300 provides in part,: “If a party to whom a demand for inspection, copying, testing, or sampling is directly fails to serve a timely response to it, the following rules shall apply: [¶] (a) The party to whom the demand for inspection, copying, testing or sampling is directed waives any objection to the demand, including one based on privilege or on the protection for work product under Chapter 4 (commencing with Section 2018.010) The court, on motion, may relieve that party from this waiver on its determination that both of the following conditions are satisfied: [¶] (1) The party has subsequently served a response that is in substantial compliance with sections 2031.210, 2031.220, 2031.230, 2031.240, and 2031.280, [¶] (2) The party’s failure to serve a timely response was the result of mistake, inadvertence, or excusable neglect.”
City of Fresno v. Superior Court (1988) 205 Cal.App.3d 1459, 1466-1467 (City of Fresno), states, “As previously noted, the trial court may relieve a party from the consequences of its failure to serve a timely response if the court finds, in relevant part, the failure was the result of mistake, inadvertence or excusable neglect. (§ 2031, subd. (k).) Given the recent enactment of section 2031 as part of the Civil Discovery Act of 1986, there is no case law interpreting the meaning of mistake, inadvertence or excusable neglect. [¶] However, there is a reference in the legislative history to this standard for relief. The discovery act was the product of the State Bar–Judicial Council Joint Commission on Discovery. In the reporter's notes on the joint commission's efforts, the following was written with regard to the relief provision: ‘The subdivision then brings over from CCP § 473 the court's power to relieve one from that waiver under the circumstances set forth in the proposed subdivision. It is the intent of the Commission that henceforth this subdivision, and not CCP § 473, will apply to this form of discovery default.’ [Citation.] [¶] The Legislature apparently intended to employ the same standard for relief from defaults as used in section 473 for failure to serve a timely response to a discovery demand. Consistent with the cases interpreting mistake, inadvertence or excusable neglect in section 473, respondent court did not abuse its discretion. Counsel's mistake of law on a relatively simple and undebatable matter was not a valid ground for relief. [Citation.] Further, the press of an attorney's practice would not warrant relief. [Citation.]” (See also, Zellerino v. Brown (1991) 235 Cal.App.3d 1097, 1107.)
The Motion asserts, “Good cause warrants granting this Motion for Relief from Waiver. As pointed out in the opposition to the Motion to Compel the Production of Documents, counsel for Defendant claimed to have mailed the Requests for Production of Documents. However, the Requests were never received by counsel for Plaintiff. When counsel for Defendant followed up on the Requests for Production that were not received, counsel for Plaintiff pointed out that they were not received and timely responded to the Requests when they were received by email. In addition, at the time of the alleged mailing of the Requests, everything was being emailed in the case as the case was pending in Los Angeles County Superior Court and email service was being used. Nonetheless, as the Requests were never received, as testified to by R. Paul Katrinak in his declaration, Plaintiff respectfully requests relief from waiver of the objections pursuant to Code of Civil Procedure § 2031.300(a).” (Motion, 2:10-20.)
The declaration of S. Michael Kernan in Support of Motion, filed 11-22-22 under ROA No. 170 states, “As an officer of the Court, I can testify that I review the mail that comes in (we have a special place we put it on my desk) and this discovery which they claimed was mailed was never sent to our firm. We absolutely did not receive the mailed version.” (Kernan Decl., ¶ 4.) The declaration of R. Paul Katrinak in Support of Motion, filed 11-22-22 under ROA No. 168 states, “I personally check the mail every single day from our mail service. I have been personally checking the mail every single day for more than five years. I then sort the mail and put on Mr. Kernan's desk any mail, motions, discovery or case related materials that needs to be addressed. I also personally put in the calendar deadlines for discovery and motions. I never received counsel for Plaintiffs Request for Production of documents. If I had received it, I would have put the response date in the calendar. [¶] In sum, Plaintiff’s Requests for Production of Documents were never received by our office until March 11, 2022 when they were emailed.” (Katrinak Decl., ¶¶ 4 and 5.)
Responding Party’s (Victor Manuel Orellana) Opposition to Plaintiff’s Motion for Relief from Waiver, filed 12-7-22 under ROA No. 186, states, “In relation to the 7 Production Requests in Controversy, Plaintiff has never served any responses which comply with Section 2031.240 by identifying the documents or electronically stored information being withheld, specifying the particular grounds for objection or privilege to any such document, or providing the information necessary to evaluate the merits of any asserted privilege. Therefore, relief cannot be granted under Section 2031.300 and Plaintiff’s motion should be properly denied.” (Opposition, 6:21-26.)
Moving Party’s Reply to Defendant’s Opposition to Plaintiff’s Motion for Relief (Reply), filed 12-13-22 under ROA No. 192, states, “Defendant cites no authority for the proposition that a privilege log has to be produced when no documents are withheld based on privilege. No documents were withheld on the basis of privilege concerning the Requests at issue. The Requests at issue concern financial documents that are not directly relevant to Plaintiff’s Complaint.” (Reply, 4:16-19.)
On 1-24-22, Responding Party served Moving Party with “Demand for Production of Documents or Other Things (Set One).” (Shields Decl., ¶ 4 and Exhibit A.) The date for a response to this discovery request was 2-28-22. (Shields Decl., ¶ 4 and Exhibit A.) When responding Party did not receive a response, Responding Party advised Moving Party that Moving Party had waived objections to this discovery request by failing to timely respond. (Shields Decl., ¶ 4 and Exhibit A.) On 4-12-22, before the filing of Responding Party’s Motion to Compel Further Responses to Demand for Production of Documents, Production Compliance (filed on 7-18-22 under ROA No. 70), Moving Party served Responding Party with responses to this discovery request. (Shields Decl., ¶ 4 and Exhibit A: Kernan Decl., ¶ 3 and Exhibit B.)
First, the court finds that Moving Party has provided responses that are in substantial compliance with Code of Civil Procedure sections 2031.210, 2031.220, 2031.230, 2031.240, and 2031.280. (Kernan Decl., ¶ 3 and Exhibit B.)
Second, the court finds that the declarations in support of the Motion sufficiently demonstrate that Moving Party did not receive the discovery at issue until 3-11-22. These declarations described the practices used by The Kernan Law Firm in receiving and processing mail. Thus, the court finds that the failure to timely respond was due to mistake, inadvertence, or excusable neglect. Therefore the court relieves the moving party from the waiver of objections imposed by Code of Civil Procedure section 2031.300, subdivision (a), as to Responding Party’s “Demand for Production of Documents or Other Things (Set One).” (Shields Decl., ¶ 4 and Exhibit A.) .
Based on the above, the court GRANTS Moving Party’s (Juan Carlos Orellana) Motion for Relief from Waiver filed on 11-22-22 under ROA No. 182.
Moving Party is to give notice.
Motion No. 2:
Moving Party’s (Victor Orellana) Motion to Compel Further Responses to Demand for Production of Documents, Production Compliance, and for Sanctions (Motion), filed on 7-18-22 under ROA No. 70, is GRANTED.
Code of Civil Procedure section 2031.310 provides: “(a) On receipt of a response to a demand for inspection, copying, testing, or sampling, the demanding party may move for an order compelling further response to the demand if the demanding party deems 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. [¶] (3) An objection in the response is without merit or too general. [¶] (b) A motion under subdivision (a) shall comply with each of the following: [¶] (1)The motion shall set forth specific facts showing good cause justifying the discovery sought by the demand. [¶] (2) The motion shall be accompanied by a meet and confer declaration under Section 2016.040. . . [¶] (c) Unless notice of this motion is given within 45 days of the service of the verified response, or any supplemental verified response, or on or before any specific later date to which the demanding party and the responding party have agreed in writing, the demanding party waives any right to compel a further response to the demand.”
The Motion seeks further responses to RFP Nos. 2-7, 11, 13, 14-20, and 22-25. (Notice of Motion (Notice) filed on 7-18-22 under ROA No. 78; 1:22-28)
On 1-24-22, Moving Party served Responding Party with “Defendant’s Demand for Production of Documents and Other Things (Set One).” (Shields Decl., ¶ 15 and Exhibit E.) On 4-12-22, Responding Party served Moving Party with objections to this discovery request. (Shields Decl., ¶ 18 and Exhibit G.) The parties met and conferred with respect to the objections served on 4-12-22. (Shields Decl., ¶¶ 19, 20, and Exhibits H, I, and J.) On 4-26-22, Responding Party served Moving Party with Supplemental Objections and Responses to this discovery request. (Shields Decl., ¶ 21 and Exhibit K.) The parties met and conferred again as to the responses served on 4-26-22. (Shields Decl., ¶¶ 22, 23, 24, and Exhibits L, M, and N.) On 6-16-22, Responding Party served Moving Party with Second Supplemental Objections and Responses. (Shields Decl., ¶ 25 and Exhibit O.) The declaration in support of the Motion states, “. . . As to the 19 document requests addressed in this motion, there are no substantial differences from the prior supplemental responses or the original responses. The second supplemental responses to the 19 Document Demands addressed in this motion are still the same objections, entirely objections, and no documents have been identified or produced in relation to the 19 Document Demands.” (Shields Decl., ¶ 25.)
As to the sufficiency of the meet and confer efforts, Obregon v. Superior Court (1998) 67 Cal.App.4th 424, 431 (Obregon), states, “A determination of whether an attempt at informal resolution is adequate also involves the exercise of discretion. The level of effort at informal resolution which satisfies the ‘reasonable and good faith attempt’ standard depends upon the circumstances. In a larger, more complex discovery context, a greater effort at informal resolution may be warranted. In a simpler, or more narrowly focused case, a more modest effort may suffice. The history of the litigation, the nature of the interaction between counsel, the nature of the issues, the type and scope of discovery requested, the prospects for success and other similar factors can be relevant. Judges have broad powers and responsibilities to determine what measures and procedures are appropriate in varying circumstances. [Citations.]”
Based on Obregon, the court finds that the parties sufficiently met and conferred because the responses served on 6-16-22 are substantially similar to the responses served on 4-26-22 to the discovery requests at issue in this Motion. Since the parties met and conferred after the service of the 4-26-22 responses (Shields Decl., ¶¶ 21, 22, 23, and 24), the parties sufficiently met and conferred as to the responses served on 6-16-22 based on their similarity to the 4-26-22 responses.
The court’s 10-4-22 Minute Order states in part, “Therefore, the court CONTINUES the hearing on RFP Nos. 2 through 7, and requests supplemental briefing on whether the agreement at issue is a “Redemption of Shares” agreement by Paramount, or a voluntary purchase of shares of stock from Defendant by Plaintiff. Plaintiff may file a supplemental opposition, not to exceed three pages, no later than 9 court days before the next hearing. Defendant may file a supplemental reply, not to exceed three pages, no later than 5 court days before the next hearing.” (10-4-22 Minute Order; Emphasis on 10-4-22 Minute Order.)
On 12-13-22 under ROA No. 196, Moving Party filed the “Declaration of Victor Orellana Concerning Redemption of Shares Agreement.” (Redemption Agreement.) Responding Party (Juan Carlos Orellana) filed an Objection to the Declaration of Defendant Victor Orellana Concerning Redemption of Shares (Objection) on 12-14-22 under ROA No. 198. (The court OVERRULES the objections contained in the Objection.) The court also DENIES Responding Party’s Request for Judicial Notice, filed on 8-30-22 under ROA No. 100, as immaterial to the court’s decision as set forth below. (Silverado Modjeska Recreation & Parks District v. County of Orange (2011) 197 Cal.App.4th 282, 307, fn. 18.)
As to whether Moving Party has shown good cause for RFP Nos. 2-7, these RFPs seek the following documents relating to: (1) “. . . any bank or bank account where any funds or income of PARAMOUNT were held, deposited or paid from at any time during the RELEVANT PERIOD . . . .” (Defendant’s Separate Statement (DSS) filed on 7-18-22 under ROA No. 72; RFP No. 2.); (2) “. . . any bank statement for any account where any funds or income of PARAMOUNT were held, deposited or paid from at any time during the RELEVANT PERIOD.” (DSS; RFP No. 3.); (3) “All federal and state tax returns prepared or filed by or on behalf of PARAMOUNT at any time during the RELEVANT PERIOD.” (DSS, RFP No. 4.); (4) “. . . any financial statements, (including income statements, profit and loss statements, balance sheets, general ledgers, shareholder equity statements, etc.) prepared by or on behalf of PARAMOUNT at any time during the RELEVANT PERIOD. (DSS, RFP No. 5.); (5) “All ESI . . . which comprise or contain any data or file files used or created by PARAMOUNT in or by its accounting software or systems to maintain and manage the company’s financial records, financial statements, accounts or accounting, along with any necessary passwords or access codes.” (DSS; RFP No. 6.); (6) “. . . any payments, distributions, or reimbursements by PARAMOUNT to or for the benefit of YOU at any time during the RELEVANT PERIOD. (DSS; RFP No. 7.) (Uppercase and emphasis in DSS.)
The Motion states, “Furthermore, the finances of Paramount are entirely discoverable because the first cause of action seeks specific performance of the agreement for redemption of shares. Under Civil Code § 3391, specific performance cannot be enforced against a party to a contract unless that party has received adequate consideration. Inadequacy of consideration is in itself sufficient to deny the granting of specific performance.” (Motion; 8:5-9.) The Opposition states, “Defendant must limit his discovery responses to only those relevant to the only pending action here, which concerns the buy/sale agreement between Plaintiff and Defendant.” (Opposition; 1:12-14.) The Motion characterizes the agreement at issue as a redemption agreement and the Opposition characterizes the agreement as a buy/sale agreement. The Complaint, filed on 5-17-22 under ROA No. 2, attaches a handwritten agreement labeled “Redemption of Shares” as Exhibit A. It is unclear whether this agreement was a redemption agreement or a purchase of stock between two individuals.
Moving Party’s (Reply), filed on 9-6-22 under ROA No. 106, states, “Furthermore, a redemption of shares by a corporation constitutes a ‘distribution to shareholders’ under Corporations Code § 166. Such distributions to shareholders are subject to restrictions based on the corporation's financial condition. (Corporations Code§ 500). Therefore, the proposed redemption of shares described in the handwritten ‘Redemption of Shares’ agreement attached to Plaintiffs operative pleading cannot be enforced unless Paramount Intermodal Systems Inc. (‘Paramount) met certain financial tests.” (Reply; 3:1-7.)
Corporations Code section 402, subdivision (a), states in part, “(a) A corporation may provide in its articles for one or more classes or series of shares which are redeemable, in whole or in part, (1) at the option of the corporation or (2) to the extent and upon the happening of one or more specified events, and not otherwise except as herein provided. A corporation may provide in its articles for one or more classes or series of preferred shares which are redeemable, in whole or in part, (1) as specified above, (2) at the option of the holder, or (3) upon the vote of at least a majority of the outstanding shares of the class or series to be redeemed. . . .”
The 12-9-22 declaration of Victor Orellana is relevant under Code of Civil Procedure section 2031.310, subdivision (b)(1), to establish good cause for the production of the items requested by RFP No. 2-7. (See also, Code Civ. Proc., 2017.010.) The Second Amended Complaint (SAC), filed on 11-1-22 under ROA No. 151, attaches the Redemption of Shares Agreement as Exhibit A. (SAC, ¶ 8 and Exhibit A.) For the purpose of discovery under Code of Civil Procedure section 2017.010, an interpretation of the Redemption Agreement is that it is an agreement between Moving Party and Paramount Intermodal Systems, Inc. as a redemption of shares agreement. Since the SAC seeks to enforce the Redemption Agreement, Moving Party has provided a legal theory that the Redemption Agreement may be unenforceable. This supports discovery of the requested information within the meaning of Code of Civil Procedure section 2017.010.
Therefore, the court GRANTS the Motion as to RFP Nos. 2-7.
RFP No. 11 seeks, “Each and every WRITING which shows, reflects, reveals, mentions, or identifies any officers or directors insurance issued, maintained, or in force for the benefit of PARAMOUNT or any of its officers or directors at any time during the RELEVANT PERIOD.” (Emphasis in RFP No. 11.)
RFP No. 13 requests, “For each and every account from which any check, payment or disbursement was made or tendered by YOU or on YOUR behalf to Victor Orellana at any time (whether or not they were ever deposited or negotiated) for any stock, securities or interests in PARAMOUNT, each and every WRITING which comprises, constitutes, or contains any bank statement for each such account at any time during the RELEVANT PERIOD.” (DSS; RFP No. 13.) The DSS states, “Plaintiff has alleged that he tendered various cashier’s checks to Victor Orellana pursuant to the alleged agreement for redemption of shares. These documents will show the exact dates such funds were withdrawn from the accounts in question, whose accounts the funds were withdrawn from, and whether and when those funds were returned or re-deposited. Thus, the relevance objection is baseless.” (DSS; 16:18-22.)
The court GRANTS the Motion as to RFP Nos. 11 and 13 for the same reasons as stated for RFP Nos. 2-7.
RFP Nos. 14-20 and 22-25 seek documents relating to relating to Seacool, Inc. (DSS; RFP Nos. 14-20 and 22-25.) The Motion states, “Along with that demand for corporate action, Victor presented his proposed shareholder derivative complaint against Juan Carlos for the benefit of Paramount. In order to determine whether the claims alleged in the proposed shareholder derivative action are well founded, documents and records concerning Seacool, Inc. are properly discoverable.” (Motion; 4:8-12.)
On 10-7-22 under ROA No. 140, Moving Party filed a Cross-Complaint against Responding Party. The Cross Complaint pleads, “Cross-complainant is informed and believes and thereon alleges that cross-defendant Juan Carlos never gave Paramount notice of the business opportunity that Seacool is pursuing, nor disclosed the conflict of interest that he has as an officer and/or director of both Seacool and Paramount, and never sought or obtained any vote or authorization from independent and disinterested directors or shareholders of Paramount in relation to the Seacool business opportunity. Cross-complainant is informed and believes and thereupon alleges that Paramount had the necessary resources to undertake the Seacool business opportunity. . . . [¶] Cross-complainant is informed and believes and thereon alleges that cross-defendant Juan Carlos has breached and violated his fiduciary duty to Paramount by misappropriating and usurping the Seacool business opportunities, by directing or allowing opportunities which could have and should have been pursued by Paramount to go to Seacool, by receiving money and payment of personal expenses from Paramount without proper disinterested and independent corporate authority or approval, by causing false statements or entries in the records and accounts of Paramount, by disguising or not disclosing his conflicts of interest vis-a-vis Paramount, and by failing and refusing to proper disclose and account for money, opportunities, and other valuable property or interests received by Juan Carlos at the expense of Paramount.” (Cross-Complaint, ¶¶ 17 and 18.)
RFP Nos. 14-20 and 22-25 are relevant (Code Civ. Proc., § 2017.010) to Moving Party’s shareholder derivative action alleged in the Cross-Complaint. RFP Nos. 14-20 and 22-25 may tend to show the individuals responsible for managing Seacool, Inc. and whether Seacool, Inc. pursued business opportunities in conflict with Paramount Intermodal Systems, Inc. Therefore, the court GRANTS the Motion as to RFP Nos. 14-20 and 22-25.
Based on the above, the court GRANTS Moving Party’s (Victor Orellana) Motion to Compel Further Responses to Demand for Production of Documents, Production Compliance, and for Sanctions, filed on 7-18-22 under ROA No. 70, as to RFP Nos. 2-7, 11, 13, 14-20, and 22-25. The court ORDERS Responding Party to provide verified, Code of Civil Procedure compliant responses to RFP Nos. 2-7, 11, 13, 14-20, and 22-25 within 30-days from the date of service of the notice of the court’s decision. The court does not award a monetary sanction. Responding Party was substantially justified in opposing the Motion based on the dispute regarding the meaning of the Redemption Agreement. Further, Responding Party was substantially justified in opposing the Motion because the relevance of the discovery (Code Civ. Proc., § 2017.010) as to RFP Nos. 14-20 and 22-25 did not fully develop until Moving Party filed the Cross-Complaint. (Code Civ. Proc., § 2031.310, subd. (h).
Moving Party is to give notice.