Case Name: Jiahui Wang, et al. v. Hanping Hou

Case No.: 18-CV-328943

Currently before the Court is the motion by defendant Hanping Hou (“Defendant”) for sanctions against plaintiffs Jiahui Wang and Wei Qin (collectively, “Plaintiffs”) and their counsel.

Factual and Procedural Background

This is an action for fraud, breach of contract, and common counts. Plaintiffs allegedly loaned money to Defendant, a family friend, who thereafter failed to pay them back. (Complaint, ¶¶ 12-14.)

Specifically, in July 2016, Defendant told Yi Qin that she urgently needed money and “would repay [money loaned to her] in or around one year.” (Complaint, ¶¶ 15 & 19.) Yi Qin reached out to his relatives regarding Defendant’s request. (Id. at ¶ 15.) Wei Qin then agreed to loan Defendant money, and Yi Qin informed Defendant of the same. (Id. ¶ 16.) Defendant sent her bank account information to Yi Qin, who forwarded it to Wei Qin. (Ibid.) On July 15, 2016, Wei Qin wired Defendant approximately $650,522. (Id. at ¶¶ 17-19.) Despite several demands for payment, Defendant refused to repay the loan. (Id. at ¶¶ 20, 28, 32, 39, & 44.)

In January 2018, Defendant told Yi Qin that she wanted to “borrow money for short term in or around a month.” (Complaint, ¶ 21.) Yi Qin told his relatives that Defendant wanted to borrow approximately $317,460. (Ibid.) Jiahui Wang agreed to loan Defendant money, and Yi Qin informed Defendant of the same. (Ibid.) Defendant sent her bank account information to Yi Qin, who forwarded it to Jiahui Wang. (Ibid.) On January 3, 2018, Jiahui Wang wired Defendant approximately $317,460. (Id. at ¶¶ 22-23.) Despite several demands for payment, Defendant refused to repay the loan. (Id. at ¶¶ 28, 32, 39, & 44.)

Based on the foregoing allegations, Plaintiffs filed a complaint against Defendant, alleging causes of action for: (1) fraud; (2) breach of contract; (3) money had and received; (4) restitution; and (5) conversion.

Subsequently, Defendant demurred to the complaint on the ground of failure to allege facts sufficient to constitute a cause of action. (See Code Civ. Proc., § 430.10, subd. (e).) According to the minute order dated November 13, 2018, the court (Hon. Theodore C. Zayner) adopted its tentative ruling on Defendant’s demurrer, which overruled Defendant’s demurrer in its entirety.

Thereafter, Defendant filed an answer to the complaint on December 5, 2018, generally denying the allegations of the complaint and alleging various affirmative defenses. On December 12, 2018, Defendant filed an amended answer, in which she admitted and denied various allegations of the complaint and alleged various affirmative defenses.

It appears that this case is currently set for trial on October 15, 2019.

Discovery Dispute

In December 2018, Defendant served Plaintiffs with form interrogatories, set one (“FI”), special interrogatories, set one (“SI”), and requests for production of documents, set one (“RPD”). As is relevant here, SI Nos. 4-5 asked Plaintiffs to describe in detail “the source of income [relating] to” the money that they allegedly lent to Defendant. RPD Nos. 5-6 asked Plaintiffs to produce all documents relating to the source of income for the money they allegedly loaned to Defendant.

Plaintiffs requested an extension of time to respond to the discovery, which Defendant granted. Plaintiffs served Defendant with their responses to the FI, SI, and RPD on January 31, 3019.

Subsequently, the parties’ counsel meet and conferred over several days regarding the sufficiency of Plaintiffs’ responses to the discovery. However, the parties were unable to informally resolve the discovery dispute.

In March 2019, Defendant filed a motion to compel Plaintiffs to provide further responses to FI No. 2.6(b), SI Nos. 1-2 and 4-5, and RPD Nos. 5-6. Plaintiffs opposed the motion.

According to the minute order dated June 6, 2019, the Court adopted its tentative ruling on Defendant’s motion to compel, which deemed the motion moot as to FI No. 2.6(b) and SI Nos. 1-2 and granted the motion as to SI Nos. 4-5 and RPD Nos. 5-6. As is relevant here, the minute order provided, “Within 30 days of the date of filing of the Order, Plaintiffs shall serve Defendant with verified, code-compliant further responses SI Nos. 4-5 and RPD Nos. 5-6, without objections, and produce documents in accordance with their responses. Production of any responsive documents shall be subject to a protective order, and the parties shall meet and confer on the language of an appropriate protective order.”

On July 5, 2019, Plaintiffs served Defendant with verified, amended responses to the SI and RPD. (Ryan Dec., ¶¶ 5-7, Exs. 1-2.) Plaintiffs’ amended responses to SI Nos. 4-5 provided substantive responses to the requests, without objections. Plaintiffs’ amended responses to RPD Nos. 5-6 stated:

Upon diligent search and reasonable inquiry made in an effort to comply with that demand, Responding Party is unable to comply with this request because the documents requested have never existed, have been destroyed, lost, misplaced, or stolen, or have never been, or are no longer, in their possession, custody, or control or can be located at present time. Furthermore, Plaintiffs are unaware of any natural person or organization known or believed by them to have possession, custody, or control of the documents requested. Responding Party will continue their search and will prompt amend this response should any of the documents requested become available.

(Id. at ¶ 6, Ex. 1.) Given the substance of these responses, Plaintiffs did not produce any documents responsive to RPD Nos. 5-6.

A few days later, Defendant’s counsel sent an email to Plaintiffs’ counsel, asserting that Plaintiffs violated the June 6, 2019 court order by including objections in their amended responses and refusing to produce any documents in response to the requests. (Ryan Dec., ¶¶ 8 & 12, Ex. 3.) Defendant’s counsel stated that Defendant would file a motion if Plaintiffs did not produce any documents. (Ibid.)

Thereafter, Plaintiffs’ counsel sent a reply email to Defendant’s counsel, explaining that Plaintiffs did not include any objections in their responses to SI Nos. 4-5 and RPD Nos. 5-6 and Plaintiffs were unable to produce any documents responsive to the requests. (Ryan Dec., ¶ 9, Ex. 4.)

Defendant’s counsel responded the same day, asserting that the Court ordered Plaintiffs to produce documents and Plaintiffs should have produced, at minimum, monthly bank account statements for the accounts from which Plaintiffs allegedly transferred money to Defendant. (Ryan Dec., ¶ 10, Ex. 4.) Plaintiffs’ counsel replied, explaining why Plaintiffs were unable to produce bank statements and asserting that the court order did not require them to produce bank records. (Id. at ¶ 11, Ex. 4.) Defendant’s counsel disagreed, arguing that “Plaintiffs [were] ordered by the Court to produce documents proving the source of income relating to the loan amounts by July 7, 2019.” (Ibid.) Defendant’s counsel stated that in light of the apparent impasse, Defendant would file a motion for sanctions. (Ibid.)

Thereafter, Wei Qin was able to obtain a one-page bank statement, which was produced to Defendant on July 26, 2019. (Ryan Dec., ¶ 14, Ex. 5; Wang Dec., Exs. G-H.)

On August 5, 2019, Defendant filed the instant motion for sanctions against Plaintiffs and their counsel. Plaintiffs filed papers in opposition to the motion on September 3, 2019.

Discussion

Defendant moves for: (1) monetary sanctions against Plaintiffs and their counsel in the amount of $9,500; (2) an “order … stay[ing] the case until Plaintiffs produce the relevant documents in dispute or, alternatively, postpon[ing] the trial until Defendant has an opportunity to review the relevant documents and to depose Plaintiffs”; and (3) “[s]hould Plaintiffs continuously refuse to produce the relevant documents, … an issue sanction ordering that Plaintiffs are not the legal owners of the loans in dispute, or alternatively … an evidence sanction prohibiting Plaintiffs from introducing evidence in support of their claims that they are the legal owners of the loans in future legal proceedings.” (Ntc. Mtn., p. 1:5-13; Mem. Ps. & As., p. 2:11-22.) Defendant asserts that she is entitled to the requested relief because Plaintiffs refused to produce documents relating to the source of income for the money allegedly loaned to her in violation of a June 6, 2019 court order. (Mem. Ps. & As., pp. 2:4-13, 4:14-17, 5:5-14, 6:4-18, 7:18-21, & 8:4-18.)

I. Legal Standard

As a preliminary matter, Defendant does not identify any statute authorizing her motion. “A basic principle of motion practice is that the moving party must specify for the court and the opposing party the grounds upon which that party seeks relief.” (Luri v. Greenwald (2003) 107 Cal.App.4th 1119, 1125 (Luri).) “It is elemental that a notice of motion must state in writing the ‘grounds upon which it will be made.’ ” (Gonzales v. Super. Ct. (1987) 189 Cal.App.3d 1542, 1545; see Cal. Rules of Ct., rule 3.1112(d)(3).) However, “[a]n omission in the notice may be overlooked if the supporting papers make clear the grounds for the relief sought.” (Luri, supra, 107 Cal.App.4th at p. 1125; Carrasco v. Craft (1985) 164 Cal.App.3d 796, 808.)

In her notice of motion, Defendant does not cite any statutory authority permitting the instant motion. In her memorandum of points and authorities, Defendant cites Code of Civil Procedure section 2023.030 as the basis for her motion. That statute provides that sanctions may be imposed for misuses of the discovery process “[t]o the extent authorized by the chapter governing any particular discovery method or any other provision of this title.” (Code Civ. Proc., § 2023.030.) Consequently, Code of Civil Procedure section 2023.030, itself, does not provide an independent basis for an award of sanctions. Thus, Defendant has not provided a legal basis for her motion.

That being said, it is readily apparent given the nature of Defendant’s arguments that her motion for sanctions is brought pursuant to Code of Civil Procedure sections 2030.300, subdivision (e), and 2031.310, subdivision (i).

Those statutes provide that if a party fails to obey an order compelling further responses to form interrogatories or requests for production of documents, the Court may make “those orders that are just, including the imposition of an issue sanction, an evidence sanction, or a terminating sanction under Chapter 7 (commencing with Section 2023.010).” (Code Civ. Proc., §§ 2030.300, subd. (e) & 2031.310, subd. (i).) Furthermore, “[i]n lieu of, or in addition to, that sanction, the court may impose a monetary sanction under Chapter 7 (commencing with Section 2023.010).” (Code Civ. Proc., §§ 2030.300, subd. (e) & 2031.310, subd. (i).)

Two facts are generally prerequisite to the imposition of nonmonetary sanctions: (1) there must be a failure to comply with a court order; and (2) that failure must be willful. (Miranda v. 21st Century Ins Co. (2004) 117 Cal.App.4th 913, 929.) It is the moving party’s burden to establish the responding party’s failure to obey the prior discovery order. (Corns v. Miller (1986) 181 Cal.App.3d 195, 200-201.) If noncompliance is shown, then the burdens shifts to the opposing party to show that his or her noncompliance was not willful. (Id. at p. 201.)

Even where these prerequisite facts are present, the trial court has broad discretion in imposing discovery sanctions and the “decision to order terminating sanctions should not be made lightly.” (Doppes v. Bentley Motors, Inc. (2009) 174 Cal.App.4th 967, 992 (Doppes); see Reedy v. Bussell (2007) 148 Cal.App.4th 1272, 1293.) In exercising this discretion, the trial court should consider both the conduct being sanctioned and its effect on the party seeking discovery. (See Doppes, supra, 174 Cal.App.4th at p. 992; see also Deyo v. Kilbourne (1978) 84 Cal.App.3d 771, 796-797.) Additionally, the trial court should “attempt to tailor the sanction to the harm caused by the withheld discovery” (Doppes, supra, 174 Cal.App.4th at p. 992) and the court’s discretionary authority in determining the appropriate sanction is limited by the principle that discovery sanctions are meant to be remedial rather than punitive (see Kahn v. Kahn (1977) 68 Cal.App.3d 372, 381). Put another way, the discretionary imposition of a sanction is proper when it is suitable and necessary to enable the party seeking discovery to obtain the objects of the discovery sought, but not when it places the prevailing party in a better position than if discovery had been obtained. (See Wilson v. Jefferson (1985) 163 Cal.App.3d 952, 958.)

Finally, non-monetary sanctions are imposed upon an incremental basis depending upon the severity of the violation. (See Doppes, supra, 174 Cal.App.4th at 992.) “If a lesser sanction fails to curb misuse, a greater sanction is warranted: continuing misuses of the discovery process warrant incrementally harsher sanctions until the sanction is reached that will curb the abuse.” (Ibid., internal quotation marks and citations omitted.)

II. Merits of the Motion

In her moving papers, Defendant argues that Plaintiffs failed to comply with the June 6, 2019 court order because they refused to produce documents relating to the source of income for the money allegedly loaned to her. Defendant asserts that Plaintiffs were directed to produce such documents in the prior court order.

Defendant’s argument is not well-taken. The Court’s June 6, 2019 minute order did not order Plaintiffs to produce a particular category of documents. Instead, the minute order provided, “[w]ithin 30 days of the date of filing of the Order, Plaintiffs shall serve Defendant with verified, code-compliant further responses SI Nos. 4-5 and RPD Nos. 5-6, without objections, and produce documents in accordance with their responses.” (June 6, 2019 Minute Order, p. 9, italics added.) Thus, Plaintiffs were only obligated to produce documents to the extent their further responses provided that documents would be produced.

On July 5, 2019, Plaintiffs timely served Defendant with verified, further responses to SI Nos. 4-5 and RPD Nos. 5-6, without objections.

In their further responses to SI Nos. 4-5, Plaintiffs provided information regarding the source of income for the money they allegedly lent to Defendant. Plaintiffs neither agreed to produce any documents in response to the requests nor were they required to as SI Nos. 4-5 only asked Plaintiffs to describe in detail the source of income for the money they allegedly lent to Defendant.

In their further responses to RPD No. 5-6, Plaintiffs provided statements of inability to comply with the requests. Such a response is authorized by the Discovery Act. (Code Civ. Proc., §§ 2031.210, subd. (a)(2) [the party to whom a request for production of documents has been directed may respond with a representation that the party lacks the ability to comply with the demand for inspection, copying, testing, or sampling of a particular item or category of item] & 2031.230 [“[a] representation of inability to comply with the particular demand … shall affirm that a diligent search and a reasonable inquiry has been made in an effort to comply with that demand,” “specify whether the inability to comply is because the particular item or category has never existed, has been destroyed, has been lost, misplaced, or stolen, or has never been, or is no longer, in the possession, custody, or control of the responding party,” and “set forth the name and address of any natural person or organization known or believed by that party to have possession, custody, or control of that item or category of item”].) Moreover, the fact that Plaintiffs did not produce any documents responsive to the requests is in accordance with the statements of inability to comply in their further responses.

For these reasons, Defendant has not established that Plaintiffs failed to comply with the June 6, 2019 minute order.

To the extent Defendant believes Plaintiffs’ statements of inability to comply in their further responses to RPD Nos. 5-6 are deficient, her recourse is to file a motion to compel further responses to those requests. (See Code Civ. Proc., 2031.310, subd. (a) [on receipt of a response to a request for production of documents, the demanding party may move for an order compelling further response to the demand if the demanding party deems that a representation of inability to comply is inadequate, incomplete, or evasive].)

To the extent Defendant believes Plaintiffs’ representations of inability to comply with RPD Nos. 5-6 are false, there are various remedies that Defendant can pursue if, at some later time, it comes to light that Plaintiffs’ representations are untrue. (See e.g., Vallbona v. Springer (1996) 43 Cal.App.4th 1525, 1544-1545 [discovery sanctions at trial upheld where the sanctioned party falsely claimed that the requested documents were nonexistent or missing or that all relevant documents had already been produced]; see also Pate v. Channel Lumber Co. (1997) 51 Cal.App.4th 1447, 1452-1455 [same].) At this time, Defendant has not made such a showing.

Accordingly, Defendant’s motion for sanctions is DENIED.