Case Name: SAE Materials, Inc. v. Maldonado, et al.
Case No.: 17-CV-306257

Plaintiff/cross-defendant SAE Materials, Inc. (“SAE”) moves to compel production of documents and for sanctions against defendants/cross-complainants Richard J. Maldonado (“Richard”) and Guy Maldonado (“Guy”).

I. Factual Background

This is an action for breach of fiduciary duty and unfair competition. According to the allegations of the operative complaint (the “Complaint”), SAE is a closely-held business that manufacturers products for customers on a contract basis and specializes in the assembly of printed circuit boards. (Complaint, ¶ 6.) Richard served as the President of SAE from approximately 1997 through December 31, 2016. (Id., ¶ 7.) Both Richard and Guy have served, and continue to serve, as members of the company’s Board of Directors (the “Board”). (Id.)

On September 21, 2016, SAE notified Richard that (1) it would not renew his contract to serve as president and (2) his employment would terminate on December 31, 2016, unless the parties agreed on new terms of employment for him. (Complaint, ¶ 8.) After learning that SAE would not renew his employment, Richard advised Benjamin Yates (“Yates”), the current president of the company and the Chairman of the Board, that he intended to pursue opening his own business and would compete with SAE following the conclusion of his employment. (Id., ¶ 9.) Yates reminded Richard that he owed continued duties to SAE even after it had decided not to renew his contract and expected him to comply with those duties. (Id.)

In late 2016 and/or early 2017, Richard told SAE customers that the company was going out of business, would not continue in operation, and would not deliver the goods and services that it had agreed to provide. (Complaint, ¶ 11.) SAE alleges on information and belief that Richard told its customers that he had formed, or was in the process of forming, a new business that could meet their needs. (Id.)

During the remaining month of his employment, Richard denied Yates access to the building in which the company operates its business and, on his final day of employment, removed or directed the removal of a substantial portion of valuable tangible property from SAE. (Complaint, ¶ 13.) On January 1, 2017, Yates arrived at the company’s facilities and discovered that the locks had been changed. (Id., ¶ 14.) Upon gaining access to the building through an open back window, he also discovered that a substantial part of the company’s property had been removed, including the inventory of parts and the work in progress printed circuit boards. (Id.)

When SAE was scheduled to open for business on January 3, 2017, none of the company’s employees showed up for work. (Complaint, ¶ 15.) SAE alleges that Richard terminated the employment of all SAE employees on December 31, 2016, and/or solicited all of them to resign their employment and join his new business. (Id.) SAE also alleges that Richard is operating a new business and providing customers of SAE with the same goods and services that it provided in the past. (Id., ¶ 16.) SAE alleges that Guy was aware that Richard was acting adverse to the company’s interests but failed to take any action to protect SAE’s interests, and participated in the removal of property from the company’s facilities. (Id., ¶ 17.)

On February 9, 2017, SAE filed the Complaint asserting the following causes of action: (1) breach of fiduciary duty (against Richard and Guy); (2) unfair competition/violation of Business & Professions Code § 17200 (against Richard); (3) interference with economic advantage (against Richard); (4) conversion (against Richard and Guy); (5) accounting (against Richard); and (6) constructive trust (against Richard).

II. Discovery Dispute

On March 3, 2017, SAE served Request for Production of Documents (“RPD”), Set One, on Richard and Guy. (Declarations of Kathryn Diemer in Support of Motions to Compel Production of Documents, Exhibits F and G (“Diemer Decl.”).) Richard and Guy served their responses on April 7, 2017, which were not accompanied by any document production.

SAE’s counsel subsequently met and conferred with counsel for Richard and Guy (collectively, “Defendants”) via email on May 18, 22 and 25, 2017, each time noting that responsive documents had yet to be produced in accordance with the responses served wherein Richard and Guy agreed produce such materials. (Diemer Decl., ¶¶ 2-3 and Exhibits A and B.) In responses served to those emails, Defendants’ counsel indicated that they would produce the documents imminently. On May 26, 2017, responsive documents were provided, consisting of two identical sets of documents, both Bates stamped identically, with no indication as to which of the documents were produced as to which request. It was therefore impossible for SAE to determine which defendant, Richard or Guy, produced which set of documents.

On June 9, 2017, SAE’s counsel sent a meet and confer letter to opposing counsel identifying the problems with the production; specifically, the inability to identify which documents came from which defendant, the lack of electronically stored information (“ESI”) and the failure to organize the documents pursuant to Code of Civil Procedure section 2031.280. (Diemer Decl., ¶ 4 and Exhibit C.) Counsel also requested comments or a signature on the previously provided confidentiality agreement. Defendants’ counsel responded that the time to move to compel had passed, but that they would send the documents anyway. (Id.) SAE’s counsel then sent an email clarifying that pursuant to Code of Civil Procedure section 2031.230, Defendants were obligated to serve responsive documents, and there was no time limit to move to compel once a party had agreed to provide documents. (Id.) Subsequent meet and confer efforts did not result in the production of additional documents or the re-designation of documents and thus the parties’ discovery dispute was not resolved.

Consequently, on July 10, 2017, SAE filed the instant motions to compel production from Richard and Guy and for monetary sanctions. On August 2, 2017, Defendants filed a single opposition to the two motions. On August 9, 2017, SAE served its reply.

III. Discussion

A. Nature of Motions

The first issue that must be addressed is what the precise nature of the motion before the Court is and what the Court has jurisdiction to do. SAE’s motions are brought pursuant to Code of Civil Procedure section 2031.320 (“Section 2031.320”), which provides that “[i]f a party filing a response to a demand for inspection, copying, testing, or sampling … thereafter fails to permit the inspection, copying, testing, or sampling in accordance with that party’s statement of compliance, the demanding party may move for an order compelling compliance.” This is commonly referred to as a “motion to compel compliance,” and there is no fixed time limit on such a motion, which also does not require attempts to informally resolve the underlying dispute. All that need been shown on such a motion is the responding party’s failure to comply as agreed. (Code Civ. Proc., § 2031.320, subd. (a); see Standon Co., Inc. v. Superior Court (1990) 225 Cal.App.3d 898, 903.)

Confusingly, SAE has provided separate statements with their motions which address the merits of the objections asserted therein despite the fact that such a document is not required for a motion filed pursuant to Section 2031.320. A separate statement is not required because with such a motion, the court is not tasked with evaluating the sufficiency of the responses, i.e., the merits of any objections asserted, but merely ensuring that the responding party comports with its agreement to comply with an inspection demand. As Defendants note in their opposition, the time to evaluate the substance of their responses to the two sets of production requests has passed. Where a response to a production request has been made, but the demanding party is not satisfied with it, the remedy is a motion to compel further responses. (Code Civ. Proc., § 2031.310.) Such a motion must be served within 45 days after service of a verified response, otherwise the demanding party waives the right to compel any further response to the production request. (Code Civ. Proc., § 2031.310, subd. (c); see Sperber v. Robinson (1994) 26 Cal.App.4th 736, 745.) That is, the 45-day time limit is jurisdictional in nature and the court therefore has no authority to grant such a motion. (Sexton v. Superior Court (1997) 58 Cal.App.4th 1403, 1410.) As the responses at issue in this action were served on April 7, 2017, the time to challenge the substance of these responses has long since passed.

Thus, the only thing the Court is permitted to do with the instant motions is evaluate whether Defendants have produced documents in accordance with their stated agreement to do so in their responses to various requests in RPD, Set One. The Court notes that SAE has also requested that the Court enter a confidentiality order that it provided to Defendants, which Defendants purportedly indicated they were willing to enter into for the responsive materials produced. However, the Court declines to make such an order without the attendant showing of good cause. (See, e.g., Code Civ. Proc., §§ 2017.020, subd. (a), 2019.030, subd. (b) and 2031.060, subd. (d).) The Court will now turn to the merits of SAE’s motions.

B. Substantive Merits

Guy

According to SAE, Guy’s responses to RPD, Sets One, can be categorized into the following three groups:

 RPD Nos. 4, 5 and 7: Guy agreed to respond to these items, but did not originally produce responsive documents. Some production was provided on May 26, 2017, but the documents were unorganized, unidentifiable as to whether Richard or Guy had produced them, and were comprised solely of paper documents with no ESI.
 RPD Nos. 1-3, 6, 9 and 11-14: Defendants asserted objections but agreed to provide documents if the parties reached a stipulation for a protective order. No such stipulation has been reached and no documents have been produced.
 RPD Nos. 8, 10 and 11: Defendants claim they have no documents.

In the first group, Guy agreed, in response to RPD Nos. 4 and 5, without qualification, to fully comply with the demand and produce all responsive documents in his possession, custody and control. In response to RPD No. 7, Guy stated that he was unable to comply with the demand because the requested items did not exist. SAE’s stated issue with the resulting production is that the materials produced were unorganized, with no indication of whether they were being produced by Richard or Guy and were comprised solely of paper with no ESI.

Per Code of Civil Procedure section 2031.280, subdivision (a), “[a]ny documents produced in response to a demand for inspection, copying, testing, or sampling shall either be produced as they are kept in the usual course of business, or be organized and labeled to correspond with the categories in the demand.” SAE asserts that it was intimated that the documents were produced as they were originally kept, but argues that if that is the case, they were kept in a single unorganized pile, which strains believability. SAE continues that the it is “almost impossible” to believe that there was zero ESI amongst the responsive materials in this day and age, especially given the nature of what has been requested, including communications between various individuals which would most like have been done via email. Thus, it asserts, Defendants should be compelled to produce these materials organized and labeled to correspond with the categories in the demand and the Defendant producing them. It further requests that the Court order Defendants to provide a list of all electronic devices searched and the search terms used to ensure that the document production does in fact include all responsive documents, including ESI.

In their opposition, Defendants do not address any of the foregoing issues. The Court, therefore, is left only with SAE’s version of events with respect to production. First, with respect to the issue of ESI, there is nothing currently before the Court which indicates that Defendants’ production is incomplete due to a lack of ESI, or that they are deliberately refusing to produce or search such for search materials. The Court will not assume that Defendants are withholding ESI simply because SAE finds it unbelievable that Defendants do not have such materials in “this day and age.” SAE also cites no authority which provides that Defendants can be compelled to provide a list of all electronic devices searched and the search terms used. If SAE desires to obtain this information, it can propound discovery to that effect. The Court agrees, however, that Defendants must provide clarification as to which documents are being produced by which defendant, Richard or Guy. However, as there is nothing which indicates that the materials produced were not produced as they are kept in the usual course of business, the Court will not order Defendants to organize and label them to correspond with the categories in the subject demands as requested by SAE.

As for RPD No. 7 in particular, because there is no stated agreement to comply on the part of Guy, there is nothing for the Court to compel compliance with. Consequently, the motion will not be granted with respect to this request.

Turning to the second grouping of requests, in response to RPD Nos. 9 and 11-14,
Guy stated that he would be unable to comply with the demands because the requested items did not exist. As with RPD No. 7, because there is no stated agreement to comply on the part of Guy, there is nothing for the Court to compel compliance with. Consequently, the motion will not be granted with respect to these requests.

Guy responded identically to the remaining requests in this grouping, i.e., RPD Nos. 1-3 and 6, which seek various communications between him and different parties since July 1, 2016 and prior to January 1, 2017. Guy stated an agreement to comply, but with a qualification: he would only produce responsive materials between July 1, 2016 and December 31, 2016. Further, he indicated a reluctance to produce the materials unless the parties entered into a protective order. As the time to challenge the substance of this response, i.e., the qualification, has passed, the only thing the Court can do is compel Guy to comply with his agreement to produce communications between July 1, 2016 and December 31, 2016. Accordingly, to the extent that these items have not been produced by Guy, they must be provided to SAE.

In the final grouping of requests, Guy responded identically to RPD Nos. 8, 10 and 11, stating that he was unable to comply with the demand because the requested items did not exist. Because there is no stated agreement to comply on the part of Guy, there is nothing for the Court to compel compliance with. Consequently, the motion will not be granted with respect to these requests.

Richard

For the purposes of this motion, SAE organizes the subject RPD, i.e., Nos. 1-3, 6, 8 and 9-14, into the same three groupings as it did in connection with its motion relative to Guy’s responses.

In the first group, RPD No. 4, 5 and 7, Richard responded identically, agreeing, without qualification, to fully comply with the demand and produce all responsive documents in his possession, custody and control. The Court treats these requests in the same way as Guy’s responses to RPD Nos. 4 and 5, discussed above.

In the second grouping, Richard responded identically to RPD Nos. 1-3 and 6, stating his agreement to comply, but with a qualification: he would only produce responsive materials between July 1, 2016 and December 31, 2016. Further, he indicated a reluctance to produce the materials unless the parties entered into a protective order. As the time to challenge the substance of this response, i.e., the qualification, has passed, the only thing the Court can do is compel Richard to comply with his agreement to produce communications between July 1, 2016 and December 31, 2016. Accordingly, to the extent that these items have not been produced by Richard, they must be provided to SAE.

Richard also responded identically to the remaining requests in this grouping, RPD Nos. 11-14, agreeing to fully comply with the demands, but then qualified his responses by refusing to produce items relating to Meritronics Materials, among other things. As the time to challenge these sufficiency of this response, i.e., the qualifications placed on the agreement to comply by Richard, the only thing the Court is permitted to do is compel Richard to comply with his agreement to comply as stated in his responses. Accordingly, to the extent that these items have not been produced by Richard, they must be provided to SAE.

In the final grouping of requests, Richard responded identically to RPD Nos. 8, 10 and 11, stating that he was unable to comply with the demand because the requested items did not exist. Because there is no stated agreement to comply on the part of Richard, there is nothing for the Court to compel compliance with. Consequently, the motion will not be granted with respect to these requests.

C. SAE’s Request for Sanctions

In connection with its motion to compel compliance, SAE requests that the Court impose sanctions against Defendants and their counsel in the amount of $3,187.50 per motion. Under Code of Civil Procedure section 2031.320, the court “shall” impose monetary sanctions against whichever party losses unless it finds that the party made or opposed the motion “with substantial justification” or other circumstances make the imposition of sanctions unjust. (Code Civ. Proc., § 2031.320, subd. (b).)

Here, because Defendants’ opposition to SAE’s motions is partly successful, the Court finds that they opposed the motions with substantial justification. Consequently, there is no basis upon which to impose sanctions against Defendants and SAE’s request is therefore DENIED.

IV. Conclusion and Order

SAE’s motions to compel compliance are GRANTED IN PART and DENIED IN PART. The motions are granted to the extent that Richard must provide items which comport with his agreement to comply as stated in response to RPD, Set One, Nos. 1-3, 6, 11-14, and Guy with his agreement comply as stated in response to RPD, Set One, Nos. 1-3 and 6. As for the responsive materials already produced, Defendants must identify which are being produced by which particular defendant. The motion is otherwise denied. These materials shall be provided to SAE within 20 calendars days of this order.

SAE’s related requests for sanctions are DENIED.