Case Name: Software Hardware & Consulting, LLC v. Smart Energy Instruments
Case No.: 16-CV-291317

(1) Plaintiff Software Hardware & Consulting, LLC’s Motion for Relief from Waiver of Discovery Objections; and (2) Plaintiff Software Hardware & Consulting, LLC’s Demurrer to the Answer of Defendant Smart Energy Instruments

Factual and Procedural Background

This is an action for breach of contract. Plaintiff Software Hardware & Consulting, LLC (“Plaintiff”) entered into a written Consulting Service Agreement and Statement of Work (collectively, the “Agreement”) with defendant Smart Energy Instruments (“Defendant”), providing that it would provide Defendant with consulting and software development services. (Complaint, ¶¶ 2, 14, Ex. 1.) Under the terms of the Agreement, Defendant agreed to pay Plaintiff for its services and Plaintiff agreed to generate periodic invoices. (Id., at ¶ 14.) From August 2014 to November 2015, Plaintiff provided services to Defendant in accordance with the Agreement and invoiced Defendant for the same. (Id., at ¶¶ 2, 15.) On October 23, 2015, Defendant terminated the Agreement with an effective termination date of November 22, 2015. (Id., at ¶ 16.) Several invoices remain outstanding and Defendant allegedly owes Plaintiff “18,451.089 Japanese Yen and $45,915.54 United States Dollars for services performed pursuant to the Agreement, and for which [Plaintiff] has invoiced [Defendant] pursuant to the Agreement.” (Id., at ¶¶ 3, 17-18.) Defendant allegedly acknowledged and admitted that the outstanding invoices are due and payable, but nonetheless refuses to pay the amounts due and owing. (Id., at ¶¶ 19-21.) Instead, Defendant improperly conditioned payment of the invoices “upon certain additional representations and agreements by [Plaintiff],” such as a release from any and all future claims of damages. (Id., at ¶¶ 19-20.)

Based on the foregoing, Plaintiff filed a complaint against Defendant, alleging a single cause of action for breach of contract. Thereafter, Defendant filed an answer to the complaint, generally denying each and every allegation of the complaint and asserting several affirmative defenses.

Currently before the Court are the following matters: (1) the motion by Plaintiff for relief from waiver of discovery objections; and (2) the demurrer by Plaintiff to the answer of Defendant. Defendant filed papers in opposition to the matters on May 24, 2016. Plaintiff filed reply papers on May 31, 2016.

Discussion

I. Motion for Relief from Waiver of Discovery Objections

Plaintiff moves for relief from waiver of its objections to form interrogatories, set one (“FI”), special interrogatories, set one (“SI”), and requests for production of documents, set one (“RPD”).

A. Discovery Dispute

On March 16, 2016, Defendant served Plaintiff with the FI, SI, and RPD. (Gaudette Dec., ¶ 3, Exs. A-D.) The cover letter accompanying the discovery requests indicated that the requests were served by mail on Plaintiff’s counsel at Kennedy, Archer & Giffen (“KAR”), and by personal delivery on KAR’s co-counsel at Wilson Sonsini Goodrich & Rosati (“WSGR”). (Kelly Dec., Ex. 1 [“Attached are courtesy copies of Smart Energy’s answer, initial discovery, and a deposition notice for Mr. Kawasaki. The service copies are being hand-delivered to [counsel at WSGR] and mailed to [counsel at KAR].”].) The proofs of service accompanying the requests also reflected the same. (Gaudette Dec., Ex. D.)

KAR was responsible for working with Plaintiff on discovery. (Gaudette Dec.,
¶ 6.) Upon receiving the FI, SI, and RPD, KAR’s staff calculated the deadline to respond to the discovery requests as April 20, 2016, given that the requests were served on KAR by mail and the subject date was 30 days plus five additional days for mailing from the date of service of the discovery. (Ibid.)

On April 18, 2016, Defendant’s counsel emailed Plaintiff’s counsel at KAR, indicating that Defendant had not received Plaintiff’s responses to the FI, SI, and RPD. (Kelly Dec., Ex. 3.) Defendant’s counsel asserted that the discovery responses were due on April 15, 2016, in light of the personal service of the requests on KAR’s co-counsel at WSGR. (Ibid.)

Plaintiff’s counsel at KAR responded via email the same day, advising that KAR “had a calendaring mishap, and did not notice the personal service upon [co-counsel at WSGR].” (Kelly Dec., Ex. 3.) Plaintiff’s counsel requested an extension of time to respond to the discovery, but Defendant’s counsel refused to grant Plaintiff an extension of time and asserted that Plaintiff’s objections to the requests were waived. (Ibid.)

Later that day, Plaintiff served Defendant with its responses to the FI, SI, and RPD. (Gaudette Dec., ¶ 9, Exs. F-H.) The responses consisted of various objections and/or substantive responses. (Ibid.) Plaintiff served Defendant with verifications for its responses two days later on April 20, 2016. (Ibid.)

As a result of the foregoing, Plaintiff filed the instant motion seeking relief from waiver of its objections to the FI, SI, and RPD.

B. Discussion

Plaintiff argues that it is entitled to relief from waiver of objections because it promptly served responses to the FI, SI, and RPD that are substantially code-compliant and its failure to serve timely responses was the result of a calendaring mistake by its counsel’s staff. In opposition, Defendant asserts that the responses are not substantially code-compliant and the purported calendaring error does not constitute mistake, inadvertence, or excusable neglect.

1. Legal Standard

Responses to interrogatories and requests for production of documents are due within 30 days from the date the requests were served. (Code Civ. Proc., §§ 2030.260, subd. (a), 2031.260, subd. (a).) Failing to respond within the time limit waives objections to the discovery requests, including claims of privilege and work product protection. (Code Civ. Proc., §§ 2030.290, subd. (a), 2031.300, subd. (a).) The court may relieve a party of a waiver of objections for failure to serve a timely response to discovery if, on noticed motion, the affected party demonstrates that (1) they have subsequently served responses to the subject discovery requests that substantially comply with the relevant sections of the Code of Civil Procedure, and (2) the failure to serve timely responses was the result of mistake, inadvertence, or excusable neglect. (Ibid.)

2. Waiver of Objections

As an initial matter, the parties do not dispute that Plaintiff’s responses to the FI, SI, and RPD were untimely and Plaintiff’s objections to the requests have been waived. Consequently, the Court finds that Plaintiff’s objections are waived and turns to the issue of whether Plaintiff is entitled to relief from waiver.

3. Substantial Compliance

To be eligible for relief, Plaintiff must first show that it served discovery responses in substantial compliance with the pertinent sections of the Code of Civil Procedure. With respect to interrogatories, a party may respond by any of the following: (1) an answer containing the information sought to be discovered; (2) an exercise of the party’s option to produce writings; and (3) an objection to a particular interrogatory. (Code Civ. Proc., § 2030.210.) Similarly, with respect to requests for production of documents, a party may respond by any of the following: (1) a statement that the party will comply with the particular demand for inspection, copying, testing, or sampling by the date set for the inspection, copying, testing, or sampling; (2) a representation that the party lacks the ability to comply with the inspection demand; and (3) an objection to the particular demand for inspection, copying, testing, or sampling. (Code Civ. Proc., § 2031.210.)

To demonstrate substantial compliance, Plaintiff attaches its responses to the FI, SI, and RPD to the motion. Plaintiff’s evidence demonstrates that it served Defendant with verified responses to the FI, SI, and RPD shortly after the responses were due. (Gaudette Dec., ¶ 9, Exs. F-H.) The responses to the FI consist primarily of detailed substantive responses, though Plaintiff also asserts some objections to a limited number of requests. (See Gaudette Dec., Ex. F.) With respect to the SI, Plaintiff asserts specific objections in response to the majority of the requests, but also provides substantive responses to a few interrogatories. (See Gaudette Dec., Ex. G.) Finally, in response to the RPD, Plaintiff provided objection-only responses. (See Gaudette Dec., Ex. H.) Since all of Plaintiff’s responses are verified and permitted by statute, the Court finds that they are in substantial compliance with the Code of Civil Procedure.

Defendant contends that Plaintiff’s responses are not substantially code-complaint because Plaintiff’s objections lack merit, the substantive responses are not sufficiently detailed, and Plaintiff refused to produce documents based on its objections to the RPD. Each of Defendant’s arguments lack merit. First, in the instant motion, the Court’s consideration of Plaintiff’s objections to the discovery requests is limited to determining whether the objections are in substantial compliance with the Code of Civil Procedure, not whether the objections have merit. Here, Plaintiff properly asserts objections to specific requests and identifies the particular ground(s) for objection. (See Code Civ. Proc., §§ 2030.210, 2030.240, 2031.210, 2031.240.) Thus, the objections are substantially code-compliant.

Second, the fact that Plaintiff has not produced documents in response to the RPD does not demonstrate that Plaintiff’s responses fail to substantial comply with the Code of Civil Procedure. The Code of Civil Procedure permits responses to requests for production to include objections (see Code Civ. Proc., §§ 2031.210, subd. (a)(3), 2031.240) and while Plaintiff’s objections to the RPD are presently waived, it properly seeks relief from waiver by this motion. It would frustrate the purpose of the statute to hold that a party seeking relief from waiver must produce documents in response to requests for production of documents despite its objections—thereby waiving its objections anew—to substantially comply with the Code of Civil Procedure.

Third, Defendant’s arguments regarding the specificity, or lack thereof, of Plaintiff’s substantive responses are more properly raised in connection with a motion to compel further responses and fail to show that Plaintiff’s responses do not substantially comply with the Code of Civil Procedure.

Since Plaintiff’s responses are substantially code-complaint, the Court considers whether Plaintiff has established that its failure to timely respond was the result of mistake, inadvertence, or excusable neglect.

4. Mistake, Inadvertence, Excusable Neglect

Generally, the standard of what constitutes “mistake, inadvertence, or excusable neglect,” depends on the facts of the case. (See City of Fresno v. Super. Ct. (1988) 205 Cal.App.3d 1459, 1466-1467 (“City of Fresno”).) In determining what constitutes “mistake, inadvertence, or excusable neglect” under the Discovery Act, courts apply the same standards as for relief from default under Code of Civil Procedure section 473, subdivision (b). (City of Fresno, supra, 205 Cal.App.3d at p. 1467.) “A mistake of fact is when a person understands the facts to be other than they are; a mistake of law is when a person knows the facts as they really are but has a mistaken belief as to the legal consequences of those facts. [Citation.]” (Baratti v. Baratti (1952) 109 Cal.App.2d 917, 921.) “Inadvertence is defined as lack of heedfulness or attentiveness, inattention, fault from negligence. [Citations.]” (Ibid.) “The ‘excusable neglect’ referred to in the section is that neglect which might have been the act of a reasonably prudent person under the same circumstances. [Citation.]” (Ibid.) In deciding whether counsel’s error is excusable, courts look to “(1) the nature of the mistake or neglect[] and (2) whether counsel was otherwise diligent in investigating and pursuing the claim.” (Tackett v. City of Huntington Beach (1994) 22 Cal.App.4th 60, 65, citing Bettencourt v. Los Rios Community College Dist. (1986) 42 Cal.3d 270, 276.)

Plaintiff contends that its failure to timely respond to the discovery requests was the result of mistake, inadvertence, and excusable neglect because its counsel at KAR relied on staff to calendar the deadline to respond to the discovery and the staff failed to recognize or otherwise notice that Defendant personally served KAR’s co-counsel, WSGR, with the requests in addition to serving the requests on KAR by mail. In support of its position, Plaintiff offers the declaration of its counsel at KAR, Crystal Gaudette (“Gaudette”). Gaudette declares that her firm, KAR, was responsible for working with Plaintiff to respond to discovery; upon receipt of the discovery, her staff “calculated the deadline to respond as April 20, 2016 (i.e., 30 days, plus five additional days for service via mail), inputted that date on the firm calendar, and informed [her] regarding the same”; and “[t]his was a mistake, as it was calculated to include additional time for service by mail, without recognition of the fact that [Defendant] had simultaneously personally served the discovery upon WSGR.” (Gaudette Dec., ¶ 6.)

In opposition, Defendant asserts that Plaintiff fails to demonstrate mistake, inadvertence, or excusable neglect, as a matter of law, because it did not provide a declaration from its co-counsel at WSGR explaining why WSGR did not calculate the correct date for service of Plaintiff’s responses based on personal service of the requests. Defendant also suggests that the mistake at issue is more properly characterized as one of law on a relatively simple and undebatable matter.

Here, the mistake at issue is not one of law as there is no evidence showing that KAR’s staff was aware that WSGR was personally served with the discovery and KAR’s staff was merely mistaken as to the legal consequences of that fact. Rather, the mistake is one of fact as KAR’s staff failed to notice and/or recognize that co-counsel WSGR had been personally served with the discovery requests. Thus, the cases cited by Defendant, in which courts refused to grant relief from waiver based on mistakes of law, do not apply.

Moreover, given the unusual circumstances presented by Plaintiff’s retention of two law firms in this action, the Court finds that a reasonably prudent person might well have made the same mistake as KAR’s staff and failed to notice the personal service of the discovery on WSGR. Furthermore, Plaintiff’s counsel was diligent in seeking to remedy the mistake, immediately communicating what had transpired to Defendant’s counsel and promptly serving responses and filing the present motion for relief from waiver.

Furthermore, courts have found excusable neglect where the attorney relied on a member of his or her staff “to perform certain tasks, including calendaring deadlines, and the staff member errs.” (Renteria v. Juvenile Justice, Dept. of Corrections and Rehabilitation (2006) 135 Cal.App.4th 903, 911; see also Bergloff v. Reynolds (1960) 181 Cal.App.2d 349, 358-359; see also Alderman v. Jacobs (1954) 128 Cal.App.2d 273, 275–276.) Here, Plaintiff’s counsel at KAR relied on her staff to calendar the appropriate deadline and the staff errored by failing to notice that WSGR had been personally served with the requests. Therefore, Plaintiff’s counsel’s reliance on her staff and the staff’s error in calendaring the deadline to respond to the FI, SI, and RPD, constitutes excusable neglect.

Finally, Defendant’s remaining argument—that Plaintiff fails to establish mistake, inadvertence, or excusable neglect, as a matter of law, because Plaintiff did not provide a declaration from co-counsel at WSGR—lacks merit. Defendant does not cite any legal authority whatsoever, and the Court is aware of none, providing that a declaration from WSGR is necessary for Plaintiff to meet its burden. In any case, the declaration from Gaudette adequately explains why WSGR did not calculate the correct date for service of Plaintiff’s responses based on personal service—because KAR was handling all discovery matters for Plaintiff.

Consequently, the Court finds that Plaintiff’s failure to timely respond to the FI, SI, and RPD was the result of mistake, inadvertence, and excusable neglect.

5. Conclusion

For the foregoing reasons, the motion for relief from waiver of objections to the FI, SI, and RPD is GRANTED.

II. Demurrer to the Answer

Plaintiff demurs to each and every affirmative defense asserted in the answer on the grounds of uncertainty and failure to state sufficient facts to constitute a defense. (See Code Civ. Proc., § 430.20, subds. (a), (b).)

A. Uncertainty

Plaintiff argues in a conclusory manner that the answer is uncertain because Defendant fails to set forth facts supporting its affirmative defenses.
Uncertainty is a disfavored ground for demurrer and is typically sustained only where the pleading is so unintelligible that the responding party cannot reasonably respond. (See Khoury v. Maly’s of Cal., Inc. (1993) 14 Cal.App.4th 612, 616 [“A demurrer for uncertainty is strictly construed, even where a [pleading] is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.”].)

Here, the purported ambiguities do not render the answer so unintelligible that Plaintiff cannot reasonably respond. Moreover, it is apparent from Plaintiff’s more specific arguments that it understands what each affirmative defense at least attempts to allege and there is no true uncertainty.

Accordingly, the demurrer to each affirmative defense on the ground of uncertainty is OVERRULED.

B. Failure to Allege Facts Sufficient to Constitute a Defense

1. First Affirmative Defense

The first affirmative defense provides that Plaintiff’s complaint fails to state facts sufficient to constitute a cause of action. Plaintiff argues that the first affirmative defense is insufficiently pled and constitutes a mere legal conclusion. Plaintiff’s argument is not well-taken. As an initial matter, asserting that the complaint fails to state a cause of action on which relief can be granted is not new matter and does not require the pleading of additional facts. Since there are no factual allegations which are necessary to raise the objection, the first affirmative defense is properly pled. Moreover, the objection asserted in the first affirmative defense goes to the court’s power to grant relief and such an objection is never waived. (See Code Civ. Proc., § 430.80, subd. (a).) Consequently, there does not appear to be any prejudice to Plaintiff in allowing such an objection to be made as an affirmative defense.

Thus, the demurrer to the first affirmative defense on the ground of failure to allege facts sufficient to constitute a defense is OVERRULED.

2. Second, Third, Fourth, Fifth, Seventh, and Eighth Affirmative Defenses

The second affirmative defense of waiver, the third affirmative defense of estoppel, the fourth affirmative defense of failure to mitigate damages, the fifth affirmative defense of unclean hands, seventh affirmative defense of failure to provide adequate assurances of performance, and the eighth affirmative defense of excuse are pled in a conclusory manner. Allegations in an affirmative defense which are proffered “in the form of terse legal conclusions, rather than as facts ‘averred as carefully and with as much detail as the fact[s] which constitute the cause of action and are alleged in the complaint’ ” are insufficient to survive a demurrer. (FPI Development, Inc. v. Nakashima (1991) 231 Cal.App.3d 367, 384; see also Metropolis Trust & Sav. Bank v. Monnier (1915) 169 Cal. 592, 596-597 [defenses must contain averments of fact and cannot rest upon “naked, unsupported, legal conclusion of the pleader”]; Logan v. Southern Cal. Rapid Transit Dist. (1982) 136 Cal.App.3d 116, 126 [an answer must allege ultimate facts and not mere conclusions of law].) For example, Defendant alleges in the third affirmative defense that Plaintiff is estopped from pursuing this action, without providing any fact-based details supporting the legal conclusion that Plaintiff is estopped from bringing its claims. The other affirmative defenses listed above suffer from similar defects. Consequently, these affirmative defenses do not satisfy the pleading requirement.

Therefore, the demurrer to the second, third, fourth fifth, seventh, and eighth affirmative defenses on the ground of failure to allege facts sufficient to constitute a defense is SUSTAINED, with 10 days’ leave to amend.

3. Sixth and Ninth Affirmative Defenses

The sixth and ninth affirmative defenses provide that conditions precedent to Defendant’s performance have not occurred and Plaintiff failed to perform its obligations under the Agreement. Plaintiff argues these affirmative defenses are inadequately pled because they lack factual details. Plaintiff’s argument is not well-taken. The objections set forth in the sixth and ninth affirmative defenses—that there was a failure of conditions precedent and Plaintiff failed to perform its duties under the contract—address elements of Plaintiff’s claims and, consequently, cannot be waived. (See Acoustics, Inc. v. Trepte Constr. Co. (1971) 14 Cal.App.3d 887, 913 [defendant entitled to establish failure to perform conditions precedent “without pleading such failure as a separate defense”]; see also Eucalyptus Growers Ass’n. v. Orange County Nursery & Land Co. (1917) 174 Cal. 330, 334 [failure of condition or performance is not new matter].) Thus, there does not appear to be any prejudice to Plaintiff in allowing such objections to be made as affirmative defenses.

Accordingly, the demurrer to the sixth and ninth affirmative defenses on the ground of failure to allege facts sufficient to constitute a defense is OVERRULED.