2017-00209945-CU-PT

D.A. McCosker Construction Co. vs. DWR

Nature of Proceeding: Motion to Compel Production of Documents

Filed By: Johnson, Ian

California Department of Water Resources’ (“DWR”) moves to compel further responses to request for production of documents from D.A. McCosker Construction Co., dba Independent Construction Company (“ICC”) and subpoena of Kevin McCosker (“Kevin”). The Court previously heard argument on September 7, 2018, and continued this matter to allow for the parties to file a joint statement regarding the discovery requests at issue.

The Court incorporates by reference its September 7, 2018 order, from which this proceeding is a continuation. The instant discovery motion is in the context of competing petitions to confirm or vacate an arbitration award. As this is unique in setting, for context, the Court refers back to its the Court’s May 4, 2018 order related to DWR’s petition to vacate and ICC’s related defenses; and its June 20, 2018 order permitting DWR to conduct limited discovery, and its related July 6, 2018 order on ICC’s motion for reconsideration related to that order.

The Court has received and reviewed the joint statement and related declarations.

Preliminary Comment

The Court acknowledges that ICC continues to dispute the permissible scope of the Court’s review, including whether discovery is permitted, as well as the standard of

review. The Court also notes that ICC now argues: “The issue of substantial compliance only arises if the court’s interpretation of Bus. & Prof. C. §§ 7068 and 7068.1 is confirmed by the Court of Appeals. Therefore, the court should, in fact must, allow the issue of the scope and application of Bus. & Prof. C. §§ 7068 and 7068.1 to be determined at the appellate level. No discovery is permitted now because the alleged basis for that discovery–unlicensed activity–has not arisen, assuming discovery would be permitted in the first instance. If ICC is correct about the non-effect of out of state licenses on in-state licenses, then ICC was always properly licensed and there is no issue of substantial compliance. If the Court of Appeals vindicates the court’s interpretation, there would be remand on the substantial compliance issue because only then does that issue arise.” (Joint Statement at p. 17.)

The Court acknowledges this argument specifically to clarify that the Court is addressing the issue of substantial compliance through this process before entering a final order. The Court’s ruling on May 4, 2018 specifically provided that the Court was setting “an Evidentiary Hearing re Substantial Compliance [B&P Code 7031(d)]” and allowed the parties to brief the issue. The Court then ordered separate briefing from the parties “addressing the new argument [B&P Code 7068.1(e)] that the penalties are limited, as expressed at oral argument.” The Court did so at the request of ICC.

Therefore, ICC’s representation that an evidentiary hearing on substantial compliance would only take place following an order of remand from the Court of Appeal is not accurate. ICC argues: “What is required at this time is appellate review to determine the validity of the court’s interpretation of Bus. & Prof. C. §§ 7068 and 7068.1, and that can only happen after the court issues its final ruling on the same. If the Court of Appeals agrees with this court on the Bus. & Prof. C. §§ 7068 and 7068.1 issue, then ICC is allowed an evidentiary hearing to establish substantial compliance.” (Joint Statement at p. 19.)

Substantial compliance is not an issue that the Court will only reach following appeal, though the substantial compliance defense is an issue that may be waived by ICC. (See Judicial Council of California v. Jacobs Facilities, Inc. (2015) 239 Cal.App.4th 882, 912.)

Analysis

The parties have resolved three issues: (1) discovery related to “bona fide employee” and “direct supervision and control”; (2) the use of documents relating to the renewal of ICC’s contractors bonds; and (3) evidence that may be submitted in connection with briefing on the issue of Business & Professions Code section 7068.1(e).

The Court addresses the outstanding discovery requests, as set forth in the joint statement:

Request for Production of Documents to ICC

· Request No. 10: All DOCUMENTS RELATING to KEVIN’s becoming, applying to become, serving as, or leaving or discontinuing service as YOUR RME.

DWR alleges that this request relates to all four factors considered in determining substantial compliance under Business & Professions Code section 7031(e). The version of section 7031(e) that governed during the relevant time period reads, in

relevant part:

[T]he court may determine that there has been substantial compliance with licensure requirements under this section if it is shown at an evidentiary hearing that the person who engaged in the business or acted in the capacity of a contractor (1) had been duly licensed as a contractor in this state prior to performance of the act or contract, (2) acted reasonably and in good faith to maintain proper licensure,

(3) did not know or reasonably should not have known that he or she was not duly licensed when performance of the act or contract commenced, and (4) acted promptly and in good faith to reinstate his or her license upon learning it was invalid.

ICC argues “discovery is closed, the arbitration is concluded, and the Decision is rendered. Discovery is intended to develop facts for use at trial or arbitration, not as a way to re-open an already presented case. This request is irrelevant to the issues before the court, which are identified as pure issues of law (see ICC Prelim Objection).

[¶] Notwithstanding these objections and without waiving any objection, the documents requested are already provided and were already presented to this court as part of the Department’s various motions and/or are included in the briefings ICC also presented.”

The Court previously addressed the argument that DWR is not entitled to any discovery in its June 20, 2018 order permitting DWR to conduct only limited discovery.

It appears that ICC is arguing that additional responsive documents outside the scope of the record do not exist. If ICC’s position is that there are no additional responsive documents beyond what already exists in the record for this case, ICC should issue a response confirming that all responsive documents are already in the record. If ICC believes additional responsive documents exist, it should request oral argument to clarify its position to the Court.

· Request No. 11: All DOCUMENTS RELATING TO KEVIN’s becoming, applying to become, serving as, or leaving or discontinuing service as an RME or RMO for any PERSON in California other than YOU between 2005 and the present.

DWR argues that this request also relates to the factors considering in determining substantial compliance under section 7031(e). Business & Professions Code section 7068.1(a) provides that, subject to exceptions not applicable here, an RME may not qualify any other entity.

ICC raises many of the same objections, arguing the “request is irrelevant and the time for any discovery is long past.” ICC also argues, “Moreover, there is no portion of any statute which considers what Kevin McCosker did with his time in excess of the 32-hours per week he was to have worked for ICC. What Kevin McCosker may have done in that time, if anything, is irrelevant and has no bearing on the outcome of this case.” ICC also claims, notwithstanding these objections, the documents requested are already provided and were presented to the Court as part of DWR’s various motions and/or are included in the briefings ICC also presented.

ICC’s representation that “there is no portion of any statute which considers” what

Kevin McCosker may have done outside of the time he worked for ICC is incorrect under section 7068.1(a). (See Bus. & Prof. Code § 7068.1(a) (“This person shall not act in the capacity of the qualifying person for an additional individual or firm unless one of the following conditions exists: [exceptions ICC has not argued are applicable]”).)

Notwithstanding this clarification, if ICC’s position is that there are no additional responsive documents beyond what already exists in the record in this case, ICC should issue a response confirming that all responsive documents are already in the record. If ICC believes additional responsive documents exist, it should request oral argument to clarify its position to the Court.

· Request No. 12: All DOCUMENTS RELATING to KEVIN’s becoming, applying to become, serving as, or leaving or discontinuing services as a PERSON qualifying and PERSON other than YOU for a contractor’s license in any State other than California.

The parties raise the same arguments as in request for production no. 11.

If ICC’s position is that there are no additional responsive documents beyond what already exists in the record for this case, ICC should issue a response confirming that all responsive documents are already in the record. If ICC believes additional responsive documents exist, it should request oral argument to clarify its position to the Court.

· Request No. 13: All DOCUMENTS RELATING to any contractor’s license that KEVIN holds or has held in any State.

DWR argues that this requests is relevant to the first three prongs of section 7068(e). DWR alleges this request seeks documents related to any other potential contractor’s licenses Kevin McCosker may have held besides his Nevada license.

ICC responds with objections about the state of the proceedings, etc., but states “[i]n keeping with the court’s Order, ICC is not intending to present further information other than what is already in the record or part of the ICC briefing. ICC confirms there are no other licenses in any other state that Kevin McCosker holds.”

The Court construes ICC’s briefing as stating that Kevin McCosker does not hold any other license beyond his since-surrendered Nevada license. The Court will narrow the request accordingly to any contractor’s license other than Kevin McCosker’s Nevada’s contractor’s license, as DWR concedes the request “seeks documents related to the question of whether Kevin McCosker held still additional contractor’s licenses [beyond Nevada] in further violation of BPC 7068(e).”

If ICC’s position is that no responsive documents exist related to other contractor’s licenses other than the known Nevada license, ICC should issue a response confirming that there are no responsive documents. If ICC believes additional responsive documents exist, it should request oral argument to clarify its position to the Court.

· Request No. 14: All DOCUMENTS RELATING to COMMUNICATIONS between YOU or any PERSON, on the one hand, and the California State License

Board, on the other.

DWR argues this request is relevant to substantial compliance. DWR also argues that “ICC has submitted certain of its communications with the CSLB in a bid to clarify or establish that it was properly licensed. DWR is thus entitled to see all of ICC’s communications with the CSLB.”

ICC raises many of the same objections that the request is improper because it should have been sought earlier. ICC also states that it is “not intending to present further information other than what is already in the record of part of the ICC briefing.” ICC alleges “the Department should read and review the ICC briefing on licensing and on the Bus. & Prof. C. section 7068 and 7068.1 issues.”

The Court previously addressed the argument that discovery is improper in its June 20, 2018 order permitting DWR to conduct limited discovery. ICC itself has expanded the record by including communications with CSLB. DWR is entitled to discovery about those communications.

ICC is ordered to provide any additional responsive documents or provide a response confirming that all responsive documents are already in the record.

· Request No. 15: All DOCUMENTS RELATING to COMMUNICATIONS between YOU or any PERSON, on the one hand, and, on the other, any governmental agency responsible for administering or overseeing contractor licensing, including without limitation, the Nevada State Contractors Board.

DWR argues this request is relevant to the second and third prongs of section 7031(e), in that it would provide information regarding ICC’s understanding of the effect that out -of-state licenses or qualifications might have on ICC’s California license.

ICC responds that it is not intending to present further information other than what is already in the record or part of its briefing. ICC also states that DWR “should read and review the ICC briefing on licensing and on the Bus. & Prof. C. section 7068 and 7068.1 issues.”

As above, DWR is entitled to know whether responsive documents exist. ICC is ordered to provide responsive documents or provide a response confirming that all responsive documents are already in the record.

Request for Production of Documents from Kevin McCosker

ICC objects that Kevin McCosker may not be deposed at this time because discovery closed with the arbitration. ICC then argues, somewhat paradoxically, that Kevin McCosker is an employee of ICC and therefore a subpoena is not necessary or proper. ICC argues “[t]he Department’s use of the subpoena suggests the Department recognizes there is no jurisdiction remaining under the statutorily required arbitration proceeding used to resolve all disputes involving the Dyer project, and it attempts to circumvent and avoid its failure to investigate by hiding behind a subpoena issued as part of the court’s de novo review of the Decision.” ICC also states that it “objects that the subpoena attempts a far-ranging deposition apparently in large part unrelated to anything this court is considering as part of its de novo review of ICC’s license vis-à-vis the 7068 and 7068.1 issues and the role Kevin had at ICC generally or specifically at

Dyer, both of which the court characterizes as pure issues of law. The court’s review and interpretation is of the evidence in the arbitration hearing and in the record of the arbitration whether raised at the hearing or not. ICC objects to any further discovery to provide new evidence never before presented or uncovered, that would be considered by the court as part of its de novo review. (see ICC’s Preliminary Objections)”

The Court acknowledges this objection but has addressed this argument previously. First, the Court may not characterize the Department’s use of the subpoena as some sort of judicial admission regarding jurisdiction or lack thereof. As the Court has stated in numerous prior orders, the issue of licensing requires a de novo review by this court. The Court does not defer to the determination of the arbitrator whether section 7031 applies. (See Ahdout v. Hekmatjah (2013) 2213 Cal.App.4th 21, 24 (determining the trial court erred in deferring to the arbitrator’s finding that section 7031 does not apply and remanding to the trial court for a de novo review).) Further, as the Court has explained in numerous orders, “[o]n remand, the court must independently consider” the licensing argument “taking into account ‘all of the admissible evidence submitted to it regardless of whether that evidence was before the arbitrator.’” (Id. at 39-40, quoting Lindenstadt v. Staff Builders, Inc. (1997) 55 Cal.App.4th 882, 893, fn. 8.) The Court does not believe that its de novo review is limited to what was included in the arbitration hearing or in the record of the arbitration. The Court may consider any and all admissible evidence, “regardless of whether that evidence was before the arbitrator.”

Further, ICC never served written objections, moved to quash, or moved for a protective order. (See Code Civ. Proc. §§ 2025.410(a)-(c), 2026.420(a).)

Having clarified these points, the Court turns to the specific requests at issue.

· Request No. 11: All DOCUMENTS RELATING to YOUR becoming, applying to become or serving as ICC’s RME, including, without limitation, all DOCUMENTS relating to whether you could serve as ICC’s RME under California laws and regulations.

DWR alleges that this request relates to all four factors considered in determining substantial compliance under Business & Professions Code section 7031(e).

ICC argues that it is not intending to present further information other than what is already in the record of part of the ICC briefing. ICC then argues that the request “seeks attorney work product and/or communications relating to the hypothetical it includes.” ICC also raises the same objections as above, e.g., that discovery is closed. ICC concludes that “the documents requested are already provided and were already presented to this court as part of the Department’s various motions and/or are included in the briefings ICC also presented and that were not otherwise withdrawn. The Department already has these documents.”

If ICC’s position is that there are no additional responsive documents beyond what already exists in the record for this case, ICC should issue a response confirming that all responsive documents are already in the record. If ICC believes additional responsive documents exist, it should request oral argument to clarify its position to the Court.

· Request No. 12: All DOCUMENTS RELATING to YOUR becoming, applying to

become or serving as an RME, RMO or employee for any PERSON in the State of California other than ICC between 2009 and the present.

DWR alleges this request is relevant to the first three prongs of the substantial compliance analysis.

ICC argues this request should be denied for the same reasons as request no. 11.

As with request no. 11, if ICC’s position is that there are no additional responsive documents beyond what already exists in the record for this case, ICC should issue a response confirming that all responsive documents are already in the record. If ICC believes additional responsive documents exist, it should request oral argument to clarify its position to the Court.

· Request No. 13: All DOCUMENTS RELATING to YOUR becoming, applying to become or serving as a PERSON qualifying any PERSON other than ICC for a contractor’s license in any State other than California between 2009 and the present.

DWR incorporated its argument from request no. 12

ICC pointed to its arguments regarding requests nos. 11 and 12.

As with request nos. 11 and 12, if ICC’s position is that there are no additional responsive documents beyond what already exists in the record for this case, ICC should issue a response confirming that all responsive documents are already in the record. If ICC believes additional responsive documents exist, it should request oral argument to clarify its position to the Court.

· Request No. 14: All DOCUMENTS RELATING to any contractor’s license that YOU hold or have held in any State between 2009 and the present.

DWR argues this request is relevant to the first 3 prongs of the substantial compliance analysis.

ICC “confirms Kevin McCosker holds no licenses in any other state now.” After raising its repeated objections, ICC alleges “the ICC brief submitted August 10, 2018 contains the surrendered NV license. The Department has undertaken an investigation of other state’s licensing authorities and Kevin McCosker’s holding of any out of state license, so it can confirm the status of the NV license, and any others, for itself. There are no other licenses however.”

The Court construes ICC’s briefing as stating that Kevin McCosker does not hold any other license beyond his since-surrendered Nevada license. The Court will narrow the request accordingly to any contractor’s license other than Kevin McCosker’s Nevada’s contractor’s license, as DWR concedes the request “seeks documents related to the question of whether Kevin McCosker held still additional contractor’s licenses [beyond Nevada] in further violation of BPC 7068(e).”

If ICC’s position is that no responsive documents exist related to other contractor’s licenses other than the known Nevada license, ICC should issue a response confirming that there are no responsive documents. If ICC believes additional

responsive documents exist, it should request oral argument to clarify its position to the Court.

· Request No. 15: All DOCUMENTS RELATING to COMMUNICATIONS between the California State License Board, on the one hand, and, on the other, YOU or any PERSON acting on your behalf.

DWR raises the same arguments as it did with regard to its request no. 14 to ICC, addressed in the previous section.

ICC raises the same arguments as request no. 14 to ICC, but includes “[t]o the extent there may be communications from and/or to attorneys, attorney client privilege precludes disclosure.”

As discussed above, the Court previously addressed the argument that DWR is not entitled to discovery in its June 20, 2018 order permitting DWR to conduct limited discovery. ICC has expanded the record by including communications with CSLB. DWR is entitled to discovery about those communications.

ICC is ordered to provide any additional responsive documents or provide a response confirming that all responsive documents are already in the record. To the extent ICC argues the attorney-client privilege may apply to any specific document(s), it is ordered to provide a privilege log to DWR. The Court gives no indication at this time whether ICC has waived any objections by failing to challenge or respond to the deposition subpoena.

· Request No. 16: All DOCUMENTS RELATING to any request by YOU or any PERSON to any PERSON that any PERSON contact or communicate with the California State License Board.

DWR argues that this request is relevant to the second and third prongs of the substantial compliance analysis. ICC has submitted with its briefing correspondence between third persons and the CSLB in support of its substantial compliance brief. DWR contends this request might provide information concerning ICC and the third persons’ understanding of the effect of Kevin McCosker’s Nevada licensing on ICC’s California license.

DWR argues it is not intending to present further information other than what is in the record or part of ICC’s briefing. ICC also argues: “Objection is also taken to the extent the RPD is vague, ambiguous and makes no sense. To the extent the RPD asks for documents that request another to contact the CSLB, the request involves hearsay and inadmissible evidence. To the extent there may be communications from and/or to attorneys, attorney client privilege precludes disclosure.”

As discussed above, the Court previously addressed the argument that DWR is not entitled to discovery in its June 20, 2018 order permitting DWR to conduct limited discovery. ICC has expanded the record by including communications with CSLB. DWR is entitled to discovery about those communications.

Further, it is a hallmark of discovery that the requested documents need not be themselves admissible to be discoverable. Code of Civil Procedure section 2017.010 provides: “Unless otherwise limited by order of the court in accordance with this title,

any party may obtain discovery regarding any matter, not privileged, that is relevant to the subject matter involved in the pending action or to the determination of any motion made in that action, if the matter either is itself admissible in evidence or appears reasonably calculated to lead to the discovery of admissible evidence. Discovery may relate to the claim or defense of the party seeking discovery or of any other party to the action. Discovery may be obtained of the identity and location of persons having knowledge of any discoverable matter, as well as of the existence, description, nature, custody, condition, and location of any document, electronically stored information, tangible thing, or lard or other property.” In ruling on a discovery motion, the Court’s role is not to determine whether the information sought will be admissible. (See Maldonado v. Superior Court (2002) 94 Cal.App.4th 1390, 1397; see also Smith v. Superior Court (1961) 189 Cal.App.2d 6, 11-12 (the question is whether the hearsay evidence may lead to other evidence that would be admissible).)

ICC is ordered to provide responsive documents. To the extent ICC argues the attorney-client privilege may apply to any specific document(s), it is ordered to provide a privilege log to DWR. The Court gives no indication at this time whether ICC has waived any objections by failing to challenge or respond to the deposition subpoena.

Sanctions

The Court’s prior tentative indicated it would order sanctions in the amount of $2,040, but the Court stated at the hearing that it would hold that amount pending determination of the final order.

The Court confirms the sanctions award. As stated in the Court’s September 7, 2018 order, ICC has continued to flagrantly disregard the Court’s prior order allowing DWR to conduct limited discovery. Sanctions are warranted for disregarding the judicial process. ICC did not seek a writ following the Court’s order allowing DWR to conduct limited discovery. Saliently, ICC’s belief that the Court’s order was erroneous does not excuse its failure to comply with the order. (See Marriage of Niklas (1989) 211 Cal.App.3d 28, 34-36 (“Even if the trial court had erred in issuing the discovery orders, sanctions would be imposed for the willful violation of the court’s orders.”); see also Weil & Brown, Civil Procedure Before Trial (TRG) 8:2150-8:2152.)

The Court, in allowing ICC to argue it had substantially complied with the statutory requirements, permitted discovery to DWR related to the evidence presented by ICC. As set forth in the Court’s June 20, 2018 order, the Court determined that, while not specifically provided for in the Code of Civil Procedure, the Court had inherent authority to manage the proceedings before it and to adopt suitable methods of practice.

Conclusion

As provided in the Court’s specific responses to the requests at issue, ICC is ordered to issue further responses and, when provided for above, responsive documents and/or a privilege log.

Absent a request for a stay from ICC to seek a writ on this discovery order, the Court orders that ICC provide responses and documents and/or privilege log by November 2, 2018. Should ICC seek a writ, the Court hereby acknowledges that this case presents novel questions of law, and therefore “involves a controlling question of law

as to which there are substantial grounds for difference of opinion, appellate resolution of which may materially advance the conclusion of the litigation.” (See Code Civ. Proc. § 166.1)

While the instant motion does not seek to compel the deposition of Kevin McCosker, the Court’s June 20, 2018 order allowed DWR to take up to five depositions. ICC had previously indicated it would provide possible dates to DWR. ICC is encouraged to continue such efforts.

The parties should meet and confer regarding a briefing schedule and scheduling of the continued hearing on the petition to vacate and petition to confirm the arbitration award. If the parties cannot reach agreement to submit a stipulation and proposed order, the parties should request ex parte relief or seek oral argument to set a schedule with Court guidance.

The parties are again reminded of Local Rule 1.06 and the Court’s tentative ruling procedure.

The minute order is effective immediately. No formal order pursuant to CRC Rule 3.1312 or further notice is required.