Case Number: KC061475 Hearing Date: February 09, 2015 Dept: O
Raphael v. Rizk, et al. (KC061475)

Plaintiff Raphael’s MOTION FOR: 1) TERMINATING SANCTIONS, ISSUE SANCTIONS, OR EVIDENCE SANCTIONS; OR IN THE ALTERNATIVE, CONTEMPT SANCTIONS; 2) REQUEST FOR DISMISSING CROSS-COMPLAINT; AND 3) REQUEST FOR MONETARY SANCTIONS IN THE AMOUNT OF $6,360.00 AGAINST Defendant RIZK AND HIS ATTORNEY OF RECORD SA’ID VAKILI

Respondent: Defendant Rizk

TENTATIVE RULING

Plaintiff Raphael’s motion for: 1) terminating sanctions, issue sanctions, or evidence sanctions; or in the alternative, contempt sanctions; 2) request for dismissing cross-complaint; and 3) request for monetary sanctions in the amount of $6,360.00 against defendant Rizk and his attorney of record Sa’id Vakili will be continued to obtain the recommendation of the discovery referee, Judge O’Brien (ret.), as the referee is in the best position to inform the court regarding compliance with the previous orders, the status of the deposition of McGarrell, and whether there is willful complicity of defendant Rizk and/or his counsel.

If anyone engages in conduct that is a misuse of the discovery process, the court may impose monetary sanction, issue sanction, evidence sanction, terminating sanction, and contempt sanction. (CCP § 2023.030.) The sanctions the court may impose are such as are suitable and necessary to enable the party seeking discovery to obtain the objects of the discovery he seeks, but the court may not impose sanctions which are designed not to accomplish the objects of discovery but to impose punishment. (Laguna Auto Body v. Farmers Ins. Exchange (1991) 231 Cal.App.3d 481, 487.)

A prerequisite to the imposition of the dismissal sanction is that the party has willfully failed to comply with a court order. (Ibid.) Terminating sanctions should only be ordered when there has been previous noncompliance with a rule or order and it appears a less severe sanction would not be effective. (Link v. Cater (1998) 60 Cal.App.4th 1315, 1326.) A terminating sanction issued solely because of a failure to pay a monetary sanction is never justified. (Newland v. Sup.Ct. (1995) 40 Cal.App.4th 608, 615.)

On 9/3/14, this court adopted the Discovery Referee’s Report No. 3, which compelled production of George Rizk’s tax returns. Defendant thereafter appealed the ruling. It is now alleged that on 9/23/14, Rizk’s attorney willfully instructed Rizk’s accountant, Roy McGarrell, not to produce the records “while our stay request is pending.” (Motion, Ex. 3.) When Plaintiff’s counsel requested authority as to how his request for stay meant a stay was in effect, no response was provided. Regardless, on 9/30/14, the Court of Appeal denied Defendant’s petition. The documents were then made available for inspection on 10/1/14, but because of the delay, McGarrell’s deposition had to be postponed so counsel could inspect and review the documents prior to the deposition. Since then, McGarrell sent a letter to Judge O’Brien (discovery referee) claiming that there is no reason for him to be deposed, thereby refusing to appear for his court ordered deposition. Now, according to Plaintiff, it appears from a review of the documents that some documents are missing, and McGarrell is in the best position to answer questions as to where such documents may be. (Sultanyan Decl., Par. 10.)

Compelling McGarrell’s deposition is an issue that should be addressed with the discovery referee. Likewise, as to the instant motion, the court determines the referee is in the best position to determine if Rizk, himself, or through counsel, willfully failed to comply with this court’s order by advising the 3rd party deponent to not cooperate nor comply with the deposition subpoena and further frustrate the ability of plaintiff to proceed with the needed deposition. Accordingly, motion is continued to receive a recommendation of the referree.

This court critically notes, however, that Rizk’s Opposition is replete with inaccurate statements about the continuing discovery disputes, referee findings, and court findings in this matter. The court has grown weary of his continued obfuscation of his complicity in denying plaintiff his rightful access to these discovery matters.

For example, Rizk asserts that litigation of his personal tax returns only occurred from June to September 2014. However, the discoverability of George Risk’s tax returns were ruled on back in October 2013, when the court ordered Defendant’s accountant, Roy McGarrell to produce tax returns at the time of trial and denied Defendant’s motion to quash a subpoena that specifically asked for George Rizk’s tax returns. (Foster Decl., Par. 9.) In December 2013, the discovery referee granted Plaintiff’s renewed Motion to Reopen Discovery for the limited purpose of taking the deposition of McGarrell and ordered the production of documents. (Foster Decl., Par. 10.) On 1/31/14, counsel for Rizk sent a letter to Plaintiff’s counsel attempting to prevent the disclosure of J.R. Shell’s tax returns because it is included in the personal tax return of George Rizk. (Foster Decl., Par. 13.)

On 2/24/14, Rizk filed a Motion to Contest Report No. 2, which compelled production of “all existing business records pertaining to J.R. Shell dating from 1995, including tax returns, whether such records are in the name of Caderex, Inc., Jean Rizk, GEORGE RIZK and/or his spouse.” (Opposition, Ex. A, 4:10-13.) On 4/8/14, Defendant objected to Report No. 2 relating to Jean Rizk’s tax returns, but failed to raise any objection to the discoverability of George Rizk’s tax returns. Anticipating this very issue, this court found “BOTH Jean Rizk and George Rizk waived the [taxpayer] privilege by filing the business returns under their tax returns, an intentional act on their part. Further, the gravamen of this lawsuit is the wrongful conversion by Defendant George Rizk and his brother Jean Rizk of the assets of Caderex, which include J.R. Shell. Therefore, the gravamen of this lawsuit is inconsistent with the continued assertion of the taxpayer privilege. Finally, the purpose of the privilege is to encourage a taxpayer to make full and truthful declarations in his return. It is not to facilitate the tax payer in perpetrating a fraud, and would be inconsistent with public policy.”

Although the court had found as above, in June 2014, George Rizk again claimed to the discovery referee that his tax returns were not discoverable asserting that by failing to address the issue of his own tax returns in the previous hearing he somehow preserved it for further litigation and hearing and the court’s findings were in some manner akin to dicta. This precipitated further briefing, motions and hearings both before the referee and this court. On 9/3/14, this court adopted the Discovery Referee’s Report No. 3, which compelled production of George Rizk’s tax returns. Defendant thereafter appealed the ruling. On 9/30/14, the Court of Appeal denied Defendant’s petition.

Thus, contrary to Defendant’s assertion, the subject of his personal tax returns has been ongoing for well over a year. It is past time that the documents are produced and the accountant has his deposition taken.

The referee is ordered to submit a recommendation regarding the instant request and the status of the deposition of McGarrell prior to the next hearing.