Lawzilla Additional Information:
Per the Los Angeles court records we believe the tentative ruling below is on hold and not a final ruling because one of the parties declared bankruptcy. As a result the case is on hold and no final order has been made by the court. Lawzilla is not following the case for updates. You will want to review the court file to see if a final ruling was made.

Update: We received this update about the case order from attorney Chris Beatty: “My client was never sanctioned; in fact, the Court denied the request for sanctions related to this Motion at a hearing held on 12/11/19. The reason for the delay between the tentative and final ruling was an interested party filed for bankruptcy and stayed the case for over a year, so the hearing was not held until after relief from stay was obtained from the bankruptcy court.”

moshe barkat, et. al.

Plaintiffs,

v.

medley capital corporation, et. al.

Defendants.

Case No.: BC 583437

Hearing Date: May 21, 2018

[TENTATIVE] order RE:

plaintiff’s motion for terminating sanctions

BACKGROUND

As set forth in the second amended complaint (“SAC”), Plaintiff Moshe Barkat (“Barkat”) is the founder and former CEO of Defendant Modern VideoFilm, Inc. (“MVF”). Barkat alleges that he is the president and sole member of Plaintiff Modern VideoFilm Holdings, LLC (“Holdings”), which holds all of MVF’s shares. Barkat alleges that Defendants Medley and Charles Sweet caused Barkat’s termination from MVF, and that Medley exercised excessive control and dominations over the operations of MVF that ultimately led to MVF’s demise. Plaintiffs SAC assert causes of action for (1) breach of employment contract; (2) intentional (3) interference with employment contract; (4) breach of fiduciary duty [against Medley]; (5) aiding and abetting breach of fiduciary duty [against Medley]; (6) breach of fiduciary duty [against Sweet]; (7) unfair competition; and (8) defamation.

DISCUSSION

It is a misuse of the discovery process to fail “to respond or to submit to an authorized method of discovery,” (CCP § 2023.010(d)) or to disobey “a court order to provide discovery.” (CCP § 2023.010(g).) Under CCP § 2023.030, courts have the authority to issue monetary sanctions, evidentiary sanctions, or terminating sanctions after giving parties proper notice and the opportunity to be heard.

In determining whether sanctions should be imposed, courts consider the totality of the circumstances, including the “conduct of the party to determine if the actions were willful; the detriment to the propounding party; and the number of formal and informal attempts to obtain the discovery.” (Lang v. Hochman (2000) 77 Cal. App. 4th 1225, 1246.) “The penalty should be appropriate to the dereliction, and should not exceed that which is required to protect the interests of the party entitled to but denied discovery.” (Wilson v. Jefferson (1985) 163 Cal. App. 3d 952, 959.)

Plaintiffs move for terminating sanctions, or in the alternative evidentiary sanctions, on the grounds that Defendants allegedly improperly obtained attorney-client privileged documents of Plaintiffs, hid this from Plaintiffs for two years and then used the documents to prepare their litigation strategy. Plaintiffs contend the communications with their attorney, Cary Epstein, are privileged and the documents consisted of communications regarding legal advice on the creation of Holdings; whether Holdings should pledge the MVF shares as collateral; whether Holdings should sign loan documents; and how Barkat should personally handle loans he took from MVF twenty years ago.

Plaintiffs contend that under the State Fund rule, Defendants were required to notify Plaintiffs they received privileged communications with Plaintiff’s attorney and they did not. (See McDermott Will & Emery LLP v. Superior Court, 10 Cal.App.5th 1083, 1117.)

Plaintiffs contend that Barkat founded and spent over thirty years at MVF and Epstein served as the in-house attorney for MVF. (Barkat Decl. ¶2-3.) Plaintiff alleges when Holdings was created, Epstein became counsel for Holdings as well. (Id. ¶5.) On June 14, 2017 Plaintiffs sent MVF a deposition subpoena for production of business records. (Beatty Decl. Exh. O.) On June 20, 2017, Plaintiff’s received MVF’s responses, which included objections based on attorney-client privilege. (Beatty Decl. Exh. P.) Defendants provided Plaintiffs with a flash drive containing MVF 0000001 through MVF064780 on or around December 12, 2017. (Beatty Decl. Exh. X.)

In opposition, Defendants claim that Plaintiffs failed to meet and confer per CCP §2016.040, and further that Plaintiffs failed to assert any objections to the document production requests served on October 7, 2016 or raise this issue with the Court prior to this filing. (Betz Decl. ¶3, 9 .) Further, Defendants contend Plaintiffs do not hold the privilege they claim as the attorney-client privilege belongs to MVF. Defendants contend that Plaintiff does not identify a single document that constitutes a privileged communication with Mr. Epstein as Barkat’s personal counsel, but relies on the fact that he occasionally used Epsteins’ advice, paid for by MVF, for his personal purposes.

The client holds the privilege to prevent disclosure of the confidential communication between the client and the attorney, and only the holder may waive the privilege. (Cal. Evid. Code §§953, 954.) Consent to disclosure is manifested by any statement or other conduct of the holder of the privilege indicating consent to the disclosure, including failure to claim the privilege in any proceedings in which the holder has the legal standing and opportunity to claim the privilege. (People v. Hayes (1991) 21 Cal.4th 1211, 1265; Cal. Evid. Code §912.) Plaintiff’s concede that Cary Epstien is the in house attorney for MVF (Barkat Decl. ¶3) and Defendants evidence that Epstein continued to serve as in house counsel for MVF after Barkat was terminated. (Betz Decl. ¶4; Exh. B.) Defendants contend that the documents were produced by MVF. (See Regents of Univ. of Cal. V. Super. Ct. (2008) 165 Cal.App.4th 672, 675.) Plaintiffs have not provided evidence that Barkat retained Epstein for individual legal services apart from MVF, and Plaintiffs did not object to the discovery requests to MVF on the grounds of attorney-client privilege setting forth the attorney client relationship they now claim. Further, Plaintiffs did not make a “claw-back request pursuant to CCP §2031.285(a) for all of the documents they now seek to exclude. (Betz Decl. ¶8; Exh. F.)

Based on the foregoing, the Court finds that Plaintiffs have failed to demonstrate which documents are allegedly privileged and that Plaintiffs hold the privilege. Further, Plaintiffs have failed to demonstrate that, if they did hold the privilege, they took reasonable steps to protect privileged communications. As such, the motion for terminating sanctions is DENIED.

Defendants request sanctions in the amount of $19,680 pursuant to CCP §2023.010(a)(9). The Court grants reduced sanctions in the amount of $5,250.00 (7 hours for drafting and appearing at $750/hour) payable to Defendant’s counsel within 30 days of receiving notice of this ruling.

Lawzilla Additional Information:
Per the Los Angeles court records we believe the tentative ruling above is on hold and not a final ruling because one of the parties declared bankruptcy. As a result the case is on hold and no final order has been made by the court. Lawzilla is not following the case for updates. You will want to review the court file to see if a final ruling was made.

Note: this page and tentative ruling are locked and claimed by Lawzilla and are not subject to the “Own the Page” policy. The reason is because it is the first statement we have seen where failure to make a clawback request is mentioned as a basis for denying sanctions due to the potential misuse of privileged documents.

Go here for more information about the “clawback” statute referred to in the judge’s tentative ruling.