Case Name: James Li v. Weiping Xia, et al.

Case No.: 18CV334462

[Plaintiff’s] Motion to Compel Further Responses to Form Interrogatory Nos. 2.5 and 2.6 and for Monetary Sanctions

Factual and Procedural Background

Defendant Weiping Xia (“Xia”) founded Han’s Technologies, Inc. (“HTI”) in 1997. (Complaint, ¶11.) HTI was in the business of exporting environmental technology related to water and waste treatment in California. (Complaint, ¶12.) In 2000, plaintiff James Li (“Li”) began working for HTI as Chief Financial Officer and Secretary and served on HTI’s board of directors. (Complaint, ¶13.) Plaintiff Li owns 22,000 shares of defendant HTI. (Complaint, ¶14.)

From 2000 to 2018, plaintiff Li worked for defendant HTI and frequently traveled to China on behalf of defendant HTI. (Complaint, ¶15.) Other than the first two years, plaintiff Li was never paid a salary for his work for defendant HTI. (Id.) During the time plaintiff Li worked for defendant HTI, defendant Xia served continuously as Chairman, controlling shareholder and director, and controlling officer of defendant HTI. (Complaint, ¶16.) Defendant Xia regularly abused and exceeded his authority as an officer of defendant HTI, acted without authorization by the board of directors, and intentionally disregarded demands made on him by the board of directors. (Complaint, ¶17.)

In 2002, defendant Xia created Western Water Company (“WWC”), a Samoan corporation, to hold and administer contracts on water treatment plants in China. (Complaint, ¶18.) Defendant HTI owned 100% of WWC. (Id.) In 2003, WWC formed Western Water Group (“WWG”) to engage in the business of constructing and operating water and waste water facilities in China. (Complaint, ¶19.) Since their inception until February 2018, defendant Xia served as Chairman, general manager, controlling shareholder and director, and controlling officer of WWC and WWG. (Complaint, ¶20.) From their inception until 2018, plaintiff Li also worked for WWC and WWG but was never paid a salary for his work for WWC and WWG. (Complaint, ¶21.)

On July 20, 2011, defendant Xia transferred all of HTI’s interest in WWC to Alpheus Management Limited (“Alpheus”), a British Virgin Islands corporation owned by defendant Xia. (Complaint, ¶22.) Alpheus did not pay HTI for the WWC shares. (Id.) Defendant Xia appointed his sister, Xian Nan Xia, as the sole shareholder and director of Alpheus. (Id.) On the same date, defendant Xia resigned as director of WWC. (Id.) Defendant Xia represented to HTI shareholders that the transfer of WWC shares from HTI to Alpheus was for tax purposes and that WWC was a wholly-owned subsidiary of HTI. (Complaint, ¶¶24 – 27.)

WWC, through WWG, became very successful, entering into long term contracts with municipalities to build and operate water and waste water facilities. (Complaint, ¶29.) In 2017, WWG’s annual revenue was approximately seventy million RMB (more than $10 million US dollars). (Complaint, ¶30.)

In the fall of 2017, defendant Xia informed plaintiff Li that he was in negotiations for the sale of WWC to Goldwind, a Chinese company. (Complaint, ¶31.) To facilitate the sale, plaintiff Li met with Goldwind at WWG facilities in China over several days in December 2017 to provide Goldwind with details about the operations of WWC. (Complaint, ¶32.) In December 2017, defendant Xia informed plaintiff Li that Goldwind agreed to purchase WWC for $660,000,000 RMB (approximately $100,000,000 US dollars). (Complaint, ¶33.) Defendant Xia informed plaintiff Li that HTI shareholders would receive proceeds from the sale of WWC. (Complaint, ¶34.) Defendant Xia told plaintiff Li to open a bank account in Hong Kong so he could wire plaintiff Li his respective share of the distribution from the proceeds of the WWC sale. (Id.)

Sale of WWC to Goldwind was finalized in January 2018 with the funds for purchase wired to Alpheus’s account. (Complaint, ¶35.) Alpheus did not distribute the proceeds from the WWC sale to any HTI shareholders. (Id.) When plaintiff Li expressed concern that he did not receive any proceeds from the WWC sale, defendant Xia wired $170,000 to plaintiff Li for the 18 years of service without salary in helping to develop WWC into a $100,000,000 company. (Complaint, ¶36.)

On September 6, 2018, plaintiff Li filed a complaint against defendants Xia and HTI asserting causes of action for:

(1) Actual Fraud
(2) Concealment Fraud
(3) Promissory Fraud
(4) Negligent Misrepresentation
(5) Breach of Fiduciary Duty
(6) Conversion
(7) Negligence
(8) Constructive Trust
(9) Unjust Enrichment
(10) Common Count
(11) Failure to Timely Pay Wages
(12) Waiting Time Penalties
(13) Violations of the Unfair Competition Law

On December 4, 2018, defendants Xia and HTI filed an answer to plaintiff Li’s complaint. HTI also filed a cross-complaint against Li asserting causes of action for:

(1) Conversion
(2) Money Had and Received
(3) False Promise
(4) Unjust Enrichment
(5) Trade Libel
(6) Intentional Interference with Prospective Economic Relations
(7) Violation of Business & Professions Code §17200 et seq.
(8) Declaratory Relief

On May 14, 2019, Li filed an answer to HTI’s cross-complaint.

Discovery Dispute

On January 16, 2019, plaintiff Li served defendant Xia, by e-mail, with Form Interrogatories—General (“FI”), Set One.

On May 23, 2019, defendant Xia served plaintiff Li with a response to plaintiff Li’s FI, Set One.

Plaintiff Li considered defendant Xia’s responses deficient and between August 14 and 27, 2019, plaintiff Li’s counsel and defendant Xia’s counsel met and conferred but defendant Xia’s counsel made clear that defendant would not supplement his response to FI, numbers 2.5 and 2.6.

On September 5, 2019, plaintiff Li filed the instant motion to compel defendant Xia’s further response to FI, Set One, numbers 2.5 and 2.6.

VI. Plaintiff Li’s Motion to Compel Further Responses to Form Interrogatory Nos. 2.5 and 2.6 is DENIED.

“On receipt of a response to interrogatories, the propounding party may move for an order compelling a further response if the propounding party deems that any of the following apply: (1) An answer to a particular interrogatory is evasive or incomplete. (2) An exercise of the option to produce documents under Section 2030.230 is unwarranted or the required specification of those documents is inadequate. (3) An objection to an interrogatory is without merit or too general.” (Code Civ. Proc., §2030.300.) The objecting party bears the burden of justifying any objections raised. (Kirkland v. Superior Court (2002) 95 Cal.App.4th 92, 98.) As for substantive answers, a response to an interrogatory must be “as complete and straightforward as the information reasonably available to the responding party permits.” (Code Civ. Proc., § 2030.200, subd. (a).)

The only two FI at issue are numbers 2.5 and 2.6. FI, number 2.5, asks defendant Xia to, “State: (a) your present residence ADDRESS; (b) your residence ADDRESSES for the past five years; and (c) the dates you lived at each ADDRESS.” FI, number 2.6, asks defendant Xia to, “State: (a) the name, ADDRESS, and telephone number of your present employer or place of self-employment; and (b) the name, ADDRESS, dates of employment, job title, and nature of work for each employer or self-employment you have had from five years before the INCIDENT until today.” Defendant Xia’s response to plaintiff Li’s FI, numbers 2.5 and 2.6, consisted of objections.

Plaintiff Li relies principally upon Code of Civil Procedure section 2017.010 which states:

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 land or other property.

(Emphasis added.)

In opposition, defendant Xia argues initially that plaintiff Li’s motion to compel further response is defective because plaintiff Li did not provide a separate statement as required by California Rules of Court, rule 3.1345, subdivision (a) which states, in relevant part, “Any motion involving the content of a discovery request or the responses to such a request must be accompanied by a separate statement. The motions that require a separate statement include a motion: … (2) To compel further responses to interrogatories.” Where the party moving to compel a further response to discovery fails to comply with California Rules of Court, rule 3.1345, “the trial court [is] well within its discretion to deny the motion to compel discovery on that basis.” (Mills v. U.S. Bank (2008) 166 Cal.App.4th 871, 893.) However, in furtherance of judicial economy, the court exercises its discretion in this instance to consider the motion on its substantive merits.

Substantively, defendant Xia maintains his objection that the information sought by FI, numbers 2.5 and 2.6 are irrelevant to the subject matter in the pending action and not reasonably calculated to lead to the discovery of any admissible evidence. Defendant Xia is a percipient witness but contends his residence address and employment information are not relevant to any issue in this litigation. The court agrees with defendant Xia that the information sought by FI, numbers 2.5 and 2.6, are not relevant. Defendant Xia is a party to the litigation and can be contacted through his counsel. To the extent plaintiff Li seeks such information to collect a future judgment, the court agrees with defendant Xia that such information is premature.

Accordingly, plaintiff Li’s motion to compel defendant Xia’s further responses to FI, numbers 2.5 and 2.6, is DENIED.

The court shall impose a monetary sanction under Chapter 7 (commencing with Section 2023.010) against any party, person, or attorney who unsuccessfully makes or opposes a motion to compel a further response to interrogatories, 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.

(Code Civ. Proc., §2030.300, subd. (d).)

Since plaintiff did not prevail, plaintiff Li’s request for monetary sanctions is DENIED. In opposition, defendant Xia requests an award of monetary sanctions against plaintiff Li and/or his counsel pursuant to Code of Civil Procedure section 2023.020 which states, “Notwithstanding the outcome of the particular discovery motion, the court shall impose a monetary sanction ordering that any party or attorney who fails to confer as required pay the reasonable expenses, including attorney’s fees, incurred by anyone as a result of that conduct.” Defendant Xia contends plaintiff Li did not adequately meet and confer because plaintiff Li did not provide legal authority to support his position in seeking a further response to FI, numbers 2.5 and 2.6. In reviewing the meet and confer correspondence, the court finds plaintiff Li and/or his counsel’s efforts to be adequate. Accordingly, defendant Xia’s request for monetary sanctions is DENIED.