Case Number: BC583437 Hearing Date: April 06, 2018 Dept: 32

moshe barkat, et al.,

Plaintiffs,

v.

medley capital corporation, et al.,

Defendant.

Case No.: BC583437

Hearing Date: April 6, 2018

[TENTATIVE] order RE:

plaintiff’s motion to compel attendance at depositions and further discovery responses

Defendant’s motion for protective order

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[1] 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.

Plaintiffs requests an order pursuant to CCP 2023.010 and 2025.450 compelling the depositions of Defendant Medley Capital Corporation’s General Counsel John Fredericks (“Fredericks”) and co-CEO Seth Taube (“Taube”) on the grounds that Medley has no valid objection to the deposition notices.

Plaintiffs further request an order compelling Medley, Congruent Investment Partners LLC/Congruent Credit Opportunities Fund II, LP (“Congruent”) and Main Street Capital Corporation (“Main Street”)(collectively, “Defendants”) to amend their privilege log to remove the non-privileged entries and produce those documents and provide responses to the seven sets of interrogatories they were served with in November. The seven sets of interrogatories at issue are: (i) Form Interrogatories (“FIs”)- Employment from Barkat; (ii) FIs from Hugh Miller; (iii) Special Interrogatories (“SIs”) from Hugh Miller to Medley; (iv) Sis from holdings to Medley; (v) SIs from Holdings to Congruent Credit Opportunities Fund II LP; (vi) SIs from Holdings to Congruent Investment Partners LLC; (vii) SIs from Holdings to Main Street. (Beatty Decl., Exh. P.)

DISCUSSION

A. Meet and Confer

A motion to compel further responses “shall be accompanied by a meet and confer declaration under Section 2016.040.” (CCP § 2030.300(b).)

Written Discovery:

Plaintiffs propounded two sets of FIs on November 17, 2017 and five sets of SIs on November 28, 29, and 30, 2017. (Beatty Decl., Exh. P.) On February 21, 2018 Defendants agreed to respond to the interrogatories that were previously the subject of a withdrawn motion for protective order. (Beatty Decl., Exh. O.) On March 12, 2018 Plaintiffs wrote Medley to ask about the status of the discovery responses. (Id.) Medley did not respond to this email. (Beatty Decl. ¶18.)

The Court finds Plaintiffs’ meet and confer efforts were sufficient to comply with CCP §2016.040.

Depositions:

On February 23, 2018, Plaintiffs noticed the depositions of Fredericks and Taube. (Beatty, Exh. A & B.) On February 27, 2018, Medley and Plaintiff’s counsel commenced email communications regarding the necessity of the Fredericks and Taube depositions. (Beatty, Exh. C, D, E.) Medley’s counsel objected to the depositions on March 9, 2018. (Beatty Decl., Exh. F and G.) Plaintiffs’ counsel did not meet and confer subsequent to the receipt of these objections though their substance was discussed during the prior meet and confers emails.

The Court finds the parties’ meet and confer efforts were sufficient to comply with CCP §2016.040.

Privilege Log:

Plaintiffs wrote Medley a meet and confer letter expressing concerns about numerous entries on the privilege log. (Beatty Decl., Exh. H.) Medley wrote to Plaintiff’s counsel on June 20, 2017 saying that Medley is in the process of compiling a revised privilege log that should be provided to Plaintiff by the second week of July. (Beatty Decl., Exh. I.) Defendant’s provided new privilege logs on January 10, 2018 and Plaintiffs wrote another meet and confer about the amended log. (Beatty Decl. Ex. K).

The Court finds Plaintiff’s meet and confer efforts were sufficient to comply with CCP §2016.040.

B. Written Discovery

Defendants have agreed to provide their responses to the seven sets of interrogatories after withdrawing their motion for protective order. (Beatty Decl., Exh. O.) Defendants state that they responded to this discovery by March 23, 2018 and so this motion is moot in part. (Opp 5:26-28.) When a party serves supplemental responses after a motion to compel further responses has been filed, a court has substantial discretion in deciding how to rule in light of the particular circumstances present, such as denying the motion as moot. (Sinaiko Healthcare Consulting, Inc. v. Pacific Healthcare Consultants (2007) 148 Cal.App.4th 390, 408-409.) Plaintiffs have withdrawn their request upon receipt of the supplemental responses. (Reply 4:fn1.)

As such, Plaintiff’s motion to compel responses to the seven sets of interrogatories listed above is DENIED as moot.

C. Depositions

A. Seth Taube

When a plaintiff seeks to depose an official at the highest level of corporate management, and that official moves for a protective order to prohibit the deposition, the trial court should first determine whether the plaintiff has shown good cause that the official has unique or superior personal knowledge of discoverable information. (Liberty Mutual Ins. Co. v. Superior Court (1992) 10 Cal.App.4th 1282, 1289.) If not, the trail court should issue the protective order and first require the plaintiff to obtain the necessary discovery through less intrusive methods. (Ibid.) This would include interrogatories directed to the official to explore the state of his or her knowledge or involvement in plaintiff’s case; the deposition of lower level employees with appropriate knowledge and involvement in the subject matter of the litigation; and the organizational deposition of the corporation itself, which will require the corporation to produce for deposition the most qualified employee to testify on its behalf as to the specified matters. (Ibid.) Should these avenues be exhausted, and the plaintiff make a colorable showing of good cause that the high-level official possesses necessary information to the case, the trial court may then lift the protective order and allow the deposition to proceed. (Ibid.)

Taube is an official at the highest level of corporate management as he is on the Board of Directors for Medley Capital Corporation and is co-Chief Executive Officer and co-Chairman of the Board of Directors of Medley Management Inc. (Taube Decl. ¶2.) Plaintiffs bear the burden of providing good cause that the official has unique or superior personal knowledge or discoverable information. Plaintiffs state they need to depose Taube because “he was on the Investment Committee and thus was a part of numerous meeting and communications about the MVF loan.” (Beatty Decl. Exh. C.) Though these are relevant topics for this case, Defendants contend that Taube was not personally involved in any negotiations and his knowledge with respect to the Medley Loan to MVF is limited to reports from three other witnesses. (Taube Decl. ¶¶3-4.) Defendants contend anything Taube knows has been learned second-hand from three witnesses that have been deposed already (i.e. Richard Craybas, Jim Feeley and Brian Dohmen), or can be learned from Medley’s CEO, Brook Taube, who is set to be deposed on April 10, 2018. (Taube Decl. ¶¶3-5). As such, Plaintiffs have not met their burden, and Plaintiff must obtain the necessary discovery through less intrusive methods.

B. Federicks

Medley objected to the Fredericks Deposition notice on the grounds that it violates the attorney client privilege and work product doctrine, (2) seeks an apex deposition; and (3) seeks information that is irrelevant.

The practice of taking the deposition of opposing counsel should be severely restricted, and permitted only upon a showing of extremely good cause. (Fireman’s Fund Ins. Co. v. Superior Court (1977) 72 Cal.App.3d 786, 790.) Taking the deposition of opposing counsel not only disrupts the adversarial system and lowers the standard of the profession, but it also adds to the already burdensome time and costs of litigation and detracts from the quality of client representation. (Spectra-Physics, Inc. v. Superior Court, (1988) 198 Cal.App.3d 1487, 1494.) Circumstances may arise in which the court should order the taking of opposing counsel’s deposition but those circumstances should be limited to where the party seeking to take the deposition has shown that (1) no other means exist to obtain the information than to depose opposing counsel, (2) the information sought is relevant and nonprivileged; and (3) the information is crucial to the preparation of the case. (Ibid.)

Fredericks has been involved in the litigation strategy of Defendants, as he provided legal advice with respect to Medley Capital Corporation and Medley Opportunity Fund II LP loans to Modern VideoFilm, Inc. and regarding litigation that ensued after MVF defaulted on its loans. (Fredericks Decl ¶2.) Fredericks does not possess any unique nonprivileged information that cannot be obtained from other witnesses. (Fredericks Decl ¶9.) Plaintiffs stated they intend to question Fredericks about “his work on the Restructuring Committee, the loan negotiations, his communications with MVF’s directors (Sweet and Grobstein) and officers (Avila, etc.) and his work on the Point.350 transaction. (Beatty Decl., Exh. C.) These are all relevant topics for deposition. However, Defendants demonstrate that Fredericks was not at the Company at the time of the loan (Frederick’s Decl. ¶9a) and that the negotiations were led by Richard Craybas and Brian Dohmen who have both already been deposed. Further Grobstein was deposed on February 28, 2018; Sweet is set to be deposed on April 12, 2018; and Avila’s deposition has been noticed. (Federicks Decl. ¶9b). Two other members on the restructuring committee have the same knowledge and have or will be deposed: Jim Feeley was deposed on February 7, 2018 and Brook Taube is set to be deposed on April 10, 2018. (Fredericks Decl ¶9c.) Jim Feeley was also principal primarily involved with the Point.360 transaction. (Federicks Decl. ¶9d.) Plaintiffs have not shown that no other means exist to obtain the information than to depose opposing counsel.

Further, Fredericks is an apex official as he is the General Counsel of Medley management Inc. and Medley LLC, is the chair of Medley’s Restructuring Committee and the Chief Compliance officer for Medley Capital Corporation and MCC Advisors LLC (Fredericks Decl. ¶2-5.) Plaintiff bears the burden of providing good cause that the official has unique or superior personal knowledge or discoverable information. (Liberty Mutual Ins. Co. v. Superior Court (1992) 10 Cal.App.4th 1282, 1289.) As set forth in the reasoning above, Plaintiffs have not met that burden and a protective order is proper.

For the foregoing reasons, the Plaintiffs’ motion to compel deposition of Fredericks and Taube is DENIED and the Defendants’ motion for protective order is GRANTED pursuant to CCP §2025.420.

D. Privilege Log

Confidential communication between a client and lawyer is information transmitted between a client and his lawyer in the course of that relationship and in confidence by a means which discloses the information to no third persons other than those who are present to further the interest of the client or those to whom disclosure is reasonably necessary for the transmission of the information or the accomplishment of the purpose for which the lawyer is consulted, and includes a legal opinion formed and advice given by the lawyer in the course of that relationship. (Cal. Evidence Code §952.) California courts have held that the privilege extends to communications which are intended to be confidential if they are made to attorneys, to family members, business associates, or agents of the party or his attorneys on matters of joint concern, when disclosure of the communication is reasonably necessary to further the interest of the litigant. (Zurich American Ins. Co. v. Superior Court (2007) 155 Cal.App.4th 1485, 1496.)

Plaintiffs argue that communications between Medley and MVF’s officers and directors cannot be privileged despite their status as business associates. Additionally there is a May 29, 2015 Joint Defense Agreement entered into between Medley, MVF and its officers and directors as a result of this lawsuit and the objections to production are based on an underlying attorney-client privilege or work-product privilege. (Betz. Decl. ¶7; Separate Statement ISO Motion to Compel.) Defendant has agreed to produce any documents prior to the May 29, 2015 date that are between Medley and MVF’s officers and directors. (Opp 10:fn3). In opposition, Defendants contend that Plaintiffs do not identify which other documents are improperly logged. In the reply, Plaintiff’s specifically ask for an amended privilege log and any unprivileged documents for Nos. 2; 23; 25; 55; and 63 on the basis that these have been incorrectly labeled attorney-client privileged but no attorneys are on these emails.

The Court GRANTS this motion in respect to the specifically identified items Nos. 2; 23; 25; 55; and 63 and any unprivileged documents prior to the May 29, 2015 date that are between Medley and MVF’s officers and directors. Defendants to provide an amended privilege log and any unprivileged documents to these requests in 15 days.

D. Conclusion

Plaintiff’s motion to compel responses to seven sets of interrogatories is DENIED.

Plaintiff’s motion to compel depositions for Fredericks and Taube is DENIED. A protective order for Fredericks and Taube is GRANTED.

Plaintiff’s motion to compel further responses is GRANTED as to an amended privilege log for Nos. 2; 23; 25; 55; and 63 and any unprivileged documents prior to the May 29, 2015 date that are between Medley and MVF’s officers and directors. Defendants to provide an amended privilege log and any unprivileged documents to these requests in 15 days.

[1] For the purposes of this ruling, Defendants Medley Capital Corporation, Medley Opportunity Fund II LP, and MCC Advisors LLC will collectively be referred to as “Medley.”