On 14 March 2014, the motions of Defendant/Cross-Complainant Hai Tung Nguyen (1) to compel Plaintiff/Cross-Defendant Phuc Ngo to provide further responses and produce further documents responsive to Request for Production of Documents, Sets Two and Three, and for monetary sanctions, and (2) to compel Cross-Defendant London Ngo, Inc. to provide responses to Special Interrogatories, Set One, and Request for Production of Documents, Set One, and for monetary sanctions were argued and submitted. Plaintiff/Cross-Defendant Phuc Ngo and Cross-Defendant London Ngo, Inc. filed formal oppositions to the motions.

All parties are reminded that all papers must comply with California Rules of Court, rule 3.1110(f).

Statement of Facts

Phuc Ngo (“Plaintiff”) instituted this fraud and breach of contract action against Hai Tung Nguyen (“Defendant”) on 3 December 2012. According to the allegations of the complaint, in 2010, Plaintiff and Defendant entered into an agreement whereby Plaintiff would purchase Defendant’s interest in a California corporation known as California Auto Tech 2, Inc. (“Cal. Auto Tech”) for $1 million dollars. Through the corporation, Defendant was operating a Union 76 gas station and vehicle repair shop in Milpitas. The terms of the parties’ agreement required Plaintiff to make monthly payments beginning 1 May 2011, and Plaintiff took possession of the gas station at that time. Through the agreement, Defendant retained a controlling interest in Cal. Auto Tech’s stock and Plaintiff was added as a member of the board of directors of the corporation.

According to Plaintiff, as part of the parties’ negotiations and in the agreement itself, Defendant made certain representations to Plaintiff, including that Cal. Auto Tech had the right to conduct business in California, that Cal. Auto Tech had a contract with Platinum Energy for the purchase of gasoline, that Cal Auto Tech held a valid lease with the owner of the premises, and that neither the corporation nor the business in general would be subject to any outstanding liens or obligations at the time of sale. Plaintiff alleges that these representations were untrue and that Plaintiff is now dealing with a business with significant debts. Based on these allegations, on 3 December 2012, Plaintiff filed an action against Defendant for fraud and breach of contract.

In June 2013, Defendant and Cal. Auto Tech filed a cross-complaint against Plaintiff and London Ngo, Inc. (“London Ngo”)—a corporation owned by Plaintiff—alleging that Plaintiff owed Defendant $165,000 of the purchase price and that Plaintiff was using his position as a director of Cal. Auto Tech to divert the corporation’s proceeds into a bank account in the name London Ngo. The operative First Amended Cross-Complaint raises causes of action for removal of Plaintiff as a director of Cal. Auto Tech, breach of fiduciary duty, conversion, breach of contract, and seeks an accounting and injunctive relief.

Discovery Dispute

On 24 May 2013, Defendant served Plaintiff with Request for Production of Documents (“RPD”), Set Two, which consisted of RPD Nos. 19-24.

Plaintiff informally responded to RPD Nos. 19-24 in June 2013 by producing 47 boxes of documents.

On 23 July 2013, defense counsel sent a meet and confer letter to Plaintiff’s counsel, indicating that the document production was incomplete and that Defendant had not received a written, verified response to the RPD.

On 8 August 2013, Plaintiff’s counsel sent an unsigned response to RPD Nos. 19-24 via facsimile to defense counsel.

On 22 August 2013, Defendant served Plaintiff with a third set of document requests, which consisted of RPD Nos. 25-44.

On 26 August 2013, defense counsel again wrote to Plaintiff’s counsel requesting that she provide a formal written, verified response and produce the documents identified in the letter that had not been produced.

On 5 December 2013, Defendant served London Ngo with Special Interrogatories (“SI”), Set One, and RPD, Set One.

On 20 December 2013, Plaintiff served a verified written response to Defendant’s second and third sets of RPD and produced a disc containing electronic copies of documents responsive to the third set.

On 30 December 2013, defense counsel wrote a third meet and confer letter to Plaintiff’s counsel. The letter indicates that Plaintiff’s production of documents related to both the second and third sets of RPD remained incomplete and specifically addressed RPD Nos. 19 and 20 from the second set, and RPD Nos. 25, 27, 28, 33, and 40 from the third set. Defense counsel requested that Plaintiff produce additional documents responsive to the identified requests

On 14 and 24 January 2014, Plaintiff served supplemental written responses to Defendant’s second and third sets of RPD and produced additional documents responsive to the requests.

On 15 January 2014, defense counsel wrote to counsel for London Ngo, who also represents Plaintiff, asking London Ngo to respond to the SI and RPD. As of the date that Defendant filed the present motions to compel, London Ngo had not served responses to Defendant’s SI and RPD.

Based upon the perceived inadequacy of Plaintiff’s responses and the complete absence of responses from London Ngo to Defendant’s discovery requests, on 10 February 2014, Defendant filed two separate motions to compel. The first motion seeks an order compelling Plaintiff to provide further responses and produce further documents responsive to Defendant’s second and third sets of RPD and seeks the imposition of monetary sanctions. The second motion seeks an order compelling London Ngo to provide initial responses to Defendant’s SI and RPD.

On 25 February 2014, London Ngo served Defendant with responses to the SI and RPD and documents in compliance with those responses.

On 28 February 2014, Plaintiff and London Ngo filed their respective oppositions to Defendant’s motions. Defendant filed separate replies to the oppositions on 7 March 2014.

Discussion

I. Defendant’s Motion to Compel Further Responses and Documents from Plaintiff

Defendant seeks further responses to RPD Nos. 19 and 20 from his second set of document requests served on Plaintiff and RPD Nos. 25, 27, 28, 33, and 40 from his third set of document requests served on Plaintiff. Plaintiff opposes Defendant’s motion, arguing that, through his supplemental responses and multiple document productions, he has fully responded to Defendant’s document requests.

As a preliminary matter, although Defendant’s motion is styled as a motion to compel further responses, it is actually a hybrid motion seeking two forms of relief. First Defendant contends that Plaintiff failed to produce documents in conformity with the statements of compliance contained in Plaintiff’s responses. Based on this contention, Defendant seeks production of documents in conformity with Plaintiff’s statements of compliance. Second, Defendant contends that Plaintiff’s responses themselves are not code-complaint. Based on this contention, Defendant seeks an order compelling further code-compliant responses to the requests.

The Code of Civil Procedure addresses these two forms of relief in separate sections. (Compare CCP, § 2031.300, subd. (b) [authorizing motions to compel further responses], with CCP, § 2031.320, subd. (a) [authorizing motions to compel compliance].) As such, the two forms of relief are addressed separately below.

A. Compelling Further Responses

1. Legal Standard

Upon receipt of a response to a demand for inspection, including requests for the production of documents, the demanding party may move for an order compelling further response to the demand if the demanding party deems that any of the following apply:

(1) A statement of compliance with the demand is incomplete.
(2)
(3) A representation of inability to comply is inadequate, incomplete, or evasive.
(4)
(5) An objection in the response is without merit or too general.
(6)
(Code Civ. Proc. [“CCP”], § 2031.310, subd. (a)(1) – (3).) The motion for order compelling further responses “shall set forth specific facts showing good cause justifying the discovery sought by the inspection demand.” (CCP, § 2031.310, subd. (b)(1); Kirkland v. Sup. Ct. (2002) 95 Cal.App.4th 92, 98.) To establish “good cause,” the burden is on the moving party to show both relevance to the subject matter (e.g., how the information in the documents would tend to prove or disprove some issue in the case) and specific facts justifying discovery (e.g., why such information is necessary for trial preparation or to prevent surprise at trial). (Glenfed Develop. Corp. v. Sup. Ct. (1997) 53 Cal.4th 1113, 1117.) Where the moving party establishes “good cause,” the burden shifts to the responding party to justify its objections. (Kirkland, supra, 95 Cal.App.4th at p. 98.)

2. Analysis

The first question the Court must address is whether Defendant has established good cause justifying the discovery sought. (CCP, § 2031.310, subd. (b)(1); Kirkland v. Sup. Ct. (2002) 95 Cal.App.4th 92, 98.) Plaintiff does not contest the existence of good cause regarding the discovery sought in Defendant’s second and third sets of RPD. The statute nonetheless requires the moving party to make the showing. (CCP, § 2031.310, subd. (b)(1) [“the motion shall set forth specific facts showing good cause justifying the discovery sought by the demand.”].) The Court finds that Defendant has carried its burden to show good cause.

Concerning the second set of document requests, RPD Nos. 19-24 seek monthly auto repair sales reports, daily sales reports, deposit slips, bank statements and copies of workers compensation and general liability insurance policies. Defendant asserts that these documents are relevant “since they will show whether Plaintiff has performed his obligations under the [parties’] contract and disprove his allegations that he has somehow been prevented from operating the business.” (Pl.’s Mot. to Compel Further Responses, p. 3.) Defendant further states that these documents should be maintained by Plaintiff in the ordinary course of business and that they “will also show the amount of cash received each day, establish the earnings of the business, and tend to establish the value of the business, which Plaintiff has alleged is only about one-half of what he agreed to pay for it.” (Id.) Based on these statements, the Court finds that Defendant has established both the relevance of the information in the documents to the subject matter of the case and set forth specific facts justifying discovery. In other words, Defendant has demonstrated good cause regarding RPD Nos. 19-24.

Concerning the third set of document requests, RPD Nos. 25-44 seek financial, operational and tax records that, according to Defendant, Plaintiff should be maintaining in his position as the officer and board member of Cal. Auto Tech charged with day-to-day operation of the corporation’s business. Defendant states that the documents sought—corporate profit and loss statements, tax returns, tax invoices and statements and Board of Equalization statements, licenses, invoices and proofs of payments of various corporate business obligations—are relevant to show Plaintiff’s alleged breach of fiduciary duty, the value of the business, and relevant to Defendant’s claim that Plaintiff diverted corporate funds. The Court agrees. For instance, as part of his first cause of action, which seeks to remove Plaintiff as a director of Cal. Auto Tech, Defendant alleges that Plaintiff failed to file and pay federal taxes on behalf of the corporation. The tax records sought by the third set of document requests are facially relevant to this claim, as they would tend to prove or disprove whether Plaintiff was in fact fulfilling his fiduciary duties owed to Cal. Auto Tech. Because Defendant has established both the relevance of the documents to the subject matter of the case and set forth specific facts justifying discovery, the Court finds that Defendant has demonstrated good cause regarding RPD Nos. 25-44.

All of Plaintiff’s initial responses to Defendant’s requests represent that Plaintiff has or will comply with the requests. In all but one of those initial responses, after Plaintiff’s statement of compliance, Plaintiff made the following statement:

Plaintiff made a reasonable and diligent search for additional documents related to this request but was unable to locate any additional documents as they may be either lost, stolen, misplace, [sic] or simply do not exist. Discovery is pending and Plaintiff reserves the right to augment and supplement this response. (Def.’s Separate Statement, p. 2.)

In each of his supplemental responses, Plaintiff indicates that he will produce certain documents that are not specifically sought by the requests but which Plaintiff believes contain the same information sought by the requests, or that the requested documents can be obtained from another entity.

Defendant argues that these statements are not code-compliant. The Court agrees.

Code of Civil Procedure section 2031.230 requires a responding party to affirm “that a diligent search and a reasonable inquiry has been made in an effort to comply with [the] demand” to “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.” (CCP, § 2031.230, emphasis added.)

Plaintiff did not specify the reason why certain documents were not produced or why certain documents were being produced in lieu of the specific documents requested. Instead, Plaintiff has used the language contained in section 2031.230 as a boilerplate response. The Code does not permit such a response. If Plaintiff is no longer in possession of a certain document or category of documents, the Code requires him to affirmatively specify whether the document ever existed and, if it did, why Plaintiff is no longer in possession of the document. (CCP, § 2031.230.) By failing to specify the reasons certain documents were not produced, Plaintiff did not comply with the requirements of section 2031.230. Because Plaintiff failed to provide Defendant with code-compliant responses, Defendant’s motion to compel further responses to RPD Nos. 19, 20, 25, 27, 28, 33, and 40, is GRANTED.

B. Compelling Compliance

1. Legal Standard

If a responding party agrees to comply with a document demand pursuant to Code of Civil Procedure section 2031.010 and then fails to do so, the propounding party may bring a motion to compel compliance under section 2031.320, subdivision (a). There is no time limit for bringing a motion to compel compliance. (CCP, § 2031.320, subd. (a).) Additionally, there is no requirement to “meet and confer” in an attempt to resolve the matter informally. (Id.) All that has to be shown is the responding party’s failure to comply as agreed. (See Id.; see also Standon Co., Inc. v. Sup. Ct. (1990) 225 Cal.App.3d 898, 903.)

2. Analysis

In his initial and supplemental responses, Plaintiff indicated that he has or would comply with each request. Defendant asserts that Plaintiff has not produced all documents responsive to the requests. In the conclusion section of Defendant’s memorandum of points and authorities in support of his motion to compel, Defendant lists the documents responsive to the requests that have not been produced. According to Defendant, the documents that remain to be produced are as follows:

RPD No. 19 – monthly reports of the auto repair sales from July through December 2011 and October 2013 to present.

RPD No. 20 – copies of all daily sales reports (a one page document generated two times each day) with the detail of the total cash and credit sales from 1 April 2013 to present.

RPD No. 25 – copies of all profit and loss statements for Cal. Auto Tech for 2012.

RPD No. 27 – copies of all State Board of Equalization statements or invoices for Cal. Auto Tech for the Second, Third and Fourth Quarter of 2012, and the Fourth Quarter of 2013.

RPD No. 28 – copies of all State Board of Equalization proof of payments for Cal. Auto Tech for the First, Third and Fourth Quarters of 2011, the Fourth Quarter of 2012, and the First, Second, Third, and Fourth Quarter of 2013.

RPD No. 33 – copies of all federal P/R Tax (Form DE 88) proof of payments for Cal. Auto Tech for 2011, the First, Third, and Fourth Quarters of 2012, and the Fourth Quarter of 2013.

RPD No. 40 – copies of all checks related to the monthly profit and loss statements for Cal. Auto Tech from 1 January 2012 to 30 June 2013.

Plaintiff does not argue that he has produced these documents or that they are not responsive to the requests at issue. He simply states that “this is the first time Plaintiff has seen this list after the final supplemental responses were submitted.” (Pl.’s Opp., p. 7.) That assertion is not well-taken. The Court has reviewed the requests at issue, and the above listed documents are either expressly named in the requests or clearly fall within the category of documents sought by the requests.

Because Plaintiff has failed to produce all of the documents responsive to Defendant’s requests in accordance with Plaintiff’s statements of compliance, Defendant’s motion to compel compliance as to RPD Nos. 19, 20, 25, 27, 28, 33, and 40 is GRANTED.

C. Request for Sanctions

Defendant requests that the Court impose monetary sanctions against Plaintiff in the amount of $5,010 pursuant to Code of Civil Procedure section 2031.300, subdivision (c). That section provides that “the court shall impose a monetary sanction . . . against any party, person, or attorney who unsuccessfully makes or opposes a motion to compel a response to a demand for inspection . . . 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.”

Defendant prevailed on his motion to compel, Plaintiff did not act with substantial justification, and no other circumstances render the imposition of a sanction unjust. Therefore, a monetary sanction shall be imposed to compensate for the reasonable expenses, including attorney’s fees, incurred as a result of Defendant’s conduct. (CCP, § 2023.030, subd. (a).)

Counsel for Defendant declares that he spent 1.8 hours at an hourly rate of $450 per hour meeting and conferring with Plaintiff’s counsel. He further declares that his paralegal spent 2.2 hours at $150 per hour drafting the motion to compel, that his associate spent 6.8 hours at $350 per hour reviewing and revising the motion, and that he paid a $90 filing fee to file the motion. Defense counsel further anticipates incurring $1,400 for drafting the reply and appearing for a hearing on the motion. The Court does not award sanctions for time spent during the meet and confer process. Further, because the Code only authorizes sanctions for expenses “incurred” as a result of the sanctionable conduct, the Court does not award sanctions for anticipated expenses. The hourly rates and hours spent are otherwise reasonable (2.2 hours x $150/hr + 6.8 hours x $350/hr + 90 filing fee).

Accordingly, Defendant’s request for monetary sanctions against Plaintiff is GRANTED IN PART in the amount of $2,800.

II. Defendant’s Motion to Compel London Ngo to Provide Responses to SI and RPD

Defendant seeks an order compelling Cross-Defendant London Ngo to provide initial responses to the SI and RPD. Defendant served London Ngo with these discovery requests on 5 December 2013. As of the date that Defendant filed his motion to compel, London Ngo had not served Defendant with responses to the discovery requests.

On 25 February 2014, after Defendant filed his motion to compel, London Ngo served Defendant with responses to the SI and RPD and produced documents responsive to the RPD.

A. Service of Responses after Motion to Compel is Filed

When discovery responses are served after a motion to compel is filed, the court has substantial discretion in deciding how to rule in light of the particular circumstances presented. (See Sinaiko Healthcare Consulting, Inc. v. Pacific Healthcare Consultants (2007) 148 Cal.App.4th 390, 408-409 (“Sinaiko”).) Through this discretion, the court might deny the motion to compel as moot and just impose sanctions, or examine the responses to determine if they are code-compliant. (Id., at p. 409.)

In his reply, Defendant asserts that the documents served after the filing of the motion do not fully respond to Defendant’s requests and that Plaintiff’s responses are otherwise not code-compliant. Based on these assertions, Defendant asks the Court to exercise its discretion in evaluating London Ngo’s responses and granting the motion to compel. The Court, however, is not privy to London Ngo’s responses. Defendant has not submitted the responses for the Court’s review. In the absence of this information, the Court finds that the appropriate action is to deny the motion as moot and award sanctions. Accordingly, Defendant’s motion to compel London Ngo to provide initial responses to Defendant’s SI and RPD is DENIED AS MOOT.

B. Request for Sanctions

Defendant requests monetary sanctions against London Ngo and its attorney in the amount of $3,278.

The California Rules of Court provide that “[t]he court may award sanctions under the Discovery Act in favor of a party who files a motion to compel discovery . . . [if] the requested discovery was provided to the moving party after the motion was filed.” (Cal. Rules of Court, rule 3.1348(a); see also Sinaiko, supra, 148 Cal.App.4th at pp. 408-409.)

Monetary sanctions may be imposed to compensate for reasonable expenses, including attorney’s fees, incurred as a result of party’s sanctionable conduct. (See CCP, § 2023.030, subd. (a).)

Defense counsel declares that his paralegal spent 1.42 hours at $150 per hour drafting the motion, that his associate spent 4.5 hours at $350 per hour reviewing and revising the motion, and that he paid a $90 filing fee to file the motion. Defense counsel also anticipates that he will spend additional time associated with preparing a reply and appearing for a hearing on the motion resulting in additional fees in the amount of $1,400.

As indicated above, the Court does not award sanctions for anticipated expenses. The hourly rates and hours spent are otherwise reasonable (1.42 hours x $150/hr + 4.5 hours x $350/hr + 90 filing fee). Accordingly, Defendant’s request for monetary sanctions against London Ngo and its counsel is GRANTED IN PART in the amount of $1,878.

Conclusion and Order

Defendant’s motion to compel Plaintiff to provide further responses to Defendant’s second and third sets of RPD is GRANTED. Accordingly, Plaintiff shall serve verified, code-compliant further responses, without objection to RPD Nos. 19, 20, 25, 27, 28, 33, and 40, and documents in conformity with those responses, within 20 calendar days of the filing of this Order.

Defendant’s request for monetary sanctions against Plaintiff is GRANTED IN PART in the amount of $2,800. Plaintiff shall pay $2,800 to counsel for Defendant within 20 calendar days of the filing of this Order.

Defendant’s motion to compel Cross-Defendant London Ngo to provide initial responses to Defendant’s SI and RPD is DENIED AS MOOT.

Defendant’s request for monetary sanctions against London Ngo and its counsel is GRANTED IN PART in the amount of $1,878. London Ngo and its counsel shall pay $1,878 to counsel for Defendant within 20 calendar days of the filing of this Order.