Alliance Manufactured Homes, Inc. v. S. Su, et al. CASE NO. 113CV250526
DATE: 6 June 2014 TIME: 9:00 LINE NUMBER: 20
This matter will be heard by the Honorable Judge Socrates Peter Manoukian in Department 19 in the Old Courthouse, 2nd Floor, 161 North First Street, San Jose. Any party opposing the tentative ruling must call Department 19 at 408.808.6856 and the opposing party no later than 4:00 PM Thursday 5 June 2014. Please specify the issue to be contested when calling the Court and counsel.

On 6 June 2014, the motion of plaintiff Alliance Manufactured Homes, Inc. (“Alliance”) to compel discovery responses, and for monetary sanctions was argued and submitted. Defendants Samuel B. Su (“Su”), Realty World Todd Su & Company, Inc. (“Realty World”), Home Ownership Financial, Inc. (“HOF”), Inception Homes (“Inception”), and Lan Nguyen (“Nguyen”) (collectively, “Defendants”) filed a formal opposition to the motion, in which they request monetary sanctions.

Statement of Facts

This interference with contract action arises from the attempted purchase of a manufactured home located in Sunnyvale, California. In April 2013, Alliance entered into a contract with Linda Zuber pursuant to which it purchased Ms. Zuber’s mobile home trailer. Following the execution of the contract, Ms. Zuber passed away and her heir, defendant Jeff Zuber, sold the trailer to Inception.

Alliance alleges that Defendants are in the business of buying and selling manufactured homes in a number of manufactured home parks in Santa Clara County. Alliance and Defendants are longtime competitors in the mobile home market. Alliance alleges that Defendants interfered with its agreement with Ms. Zuber by approaching Jeff Zuber in an attempt to acquire title to Ms. Zuber’s trailer home.

In its operative first amended complaint, Alliance asserts twelve causes of action for (1) negligent interference with economic relations, (2) intentional interference with economic relations, (3) negligent interference with prospective economic advantage, (4) intentional interference with prospective economic advantage, (5) breach of contract, (6) breach of implied covenant of good faith and fair dealing, (7) unfair competition, (8) breach of written contract, (9) breach of implied-in-fact contract, (10) breach of covenant of good faith and fair dealing, (11) breach of fiduciary duties, and (12) negligence.

Discovery Dispute

On 17 September 2013, Alliance served an identical set of requests for production of documents (“RPD”) on each of Defendants. Defendants served initial responses to the RPD on 22 October 2013, and supplemental responses on 7 November 2013. Dissatisfied with the responses, Alliance filed a motion to compel further responses to the RPD.

On 21 February 2014, the Court granted the motion to compel as to RPD Nos. 7-9 and 11, and ordered Defendants to serve verified, code-compliant further responses, without objection, and to produce documents in conformity with those responses, within 20 calendar days of the filing of the order.

Defendants served further responses to the RPD on 13 March 2014, consisting solely of substantive responses. Of particular relevance to this motion is RPD No. 9 which seeks “All DOCUMENTS that RELATE TO all computer equipment used by YOU in the course of performing the acts alleged in the COMPLAINT.” In response to RPD No. 9, Su, Realty World, HOF and Inception each stated: “After a diligent search and a reasonabl[e] inquiry responding party is unable to comply. The inability to comply is because the particular item or category has never existed. There is no person or organization believed to have possession, custody, or control of those items.” Nguyen responded to RPD No. 9 by agreeing to comply with the request.

On 25 March 2014, counsel for Alliance sent a meet and confer letter addressing purported deficiencies with Defendants’ further responses to RPD No. 9. Counsel asserted that Su, Realty World, HOF and Inception’s responses were not credible. He reasoned that each of these defendants admits to using computer equipment in the course of their business and thus, these defendants must have some documentation concerning the specific computer equipment they use. With regard to Nguyen’s response, counsel argued that she only produced a software manual and failed to produce any documents specifically identifying any computer, server, smartphone, or other piece of computer equipment. He concluded that she must also have additional documents responsive to the request. Finally, counsel indicated that Nguyen had yet to provide an original verification to her further responses.

On 31 March 2014, Defendants’ counsel sent a detailed letter in reply, as well as Nguyen’s original verification. In his letter, counsel asserted that Defendants’ responses are code-compliant, and Nguyen had produced all documents in her possession responsive to the request. While acknowledging that Defendants utilized computer equipment in the course of their business, he stated that Su, Realty World, HOF and Inception simply do not have any documents relating to their computer equipment. With regard to Nguyen, counsel reiterated that she had produced all documents in her possession responsive to the request. Finally, in the spirit of compromise, counsel offered to create a list detailing the make and model number of Defendants’ computers in order to enable Alliance to subpoena documents from the manufacturer.

Counsel for the parties met and conferred via telephone on 2 April 2014, and again on 25 April 2014. Defendants’ counsel offered once again to provide a list detailing the make and model number of the computers, or allow counsel for Alliance to physically inspect the computers. Counsel for Alliance declined the offer, indicating that a list or an inspection is no substitute for discovery responses.

On 6 May 2014, based upon counsels’ inability to resolve the dispute informally, Alliance filed the present motion to compel.

On 22 May 2014, Defendants served further responses to RPD No. 9. The amended responses reiterated Su, Realty World, HOF and Inception’s inability to comply. In addition, Su, Nguyen and Inception provided the model number, operating system and the serial number of the computer used by each of these defendants. The following day, on 23 May 2014, Defendants filed their opposition. On 30 May 2014, Alliance filed its reply.

Discussion

I. Motion to Compel with Regard to RPD No. 9

Alliance moves to compel “responses” to RPD No. 9 on the grounds that Defendants’ previous responses are not code-compliant, and Defendants have not produced all responsive documents in their possession.

A. Nature of Motion

As a threshold matter, it is unclear whether Alliance’s motion is one to compel further responses to RPD No. 9 and/or a motion to compel compliance with Nguyen’s response to RPD No. 9.

Pursuant to Code of Civil Procedure section 2031.310, a party may move to compel a further response to a demand for inspection, copying, testing, or sampling, if: (1) a statement of compliance with the demand is incomplete; (2) a representation of inability to comply is inadequate, incomplete or evasive; or (3) an objection in the response is without merit or too general. The aim of this type of motion is to obtain a court order requiring a further response which completely identifies the available, non-privileged documents and a corresponding agreement to produce them. (See Standon Co. v. Superior Court (1990) 225 Cal.App.3d 898, 903.)

Once an adequate response has been obtained, there is no longer a dispute over the right to inspect the documents. (See Standon Co., supra, 225 Cal.App.3d at p. 903.) A party may then move to compel compliance under Code of Civil Procedure 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.” (Code Civ. Proc., § 2031.320.)

Here, Alliance’s arguments indicate that the motion is both a motion to compel further responses to RPD No. 9 and a motion to compel compliance with Nguyen’s response to the RPD.

With regard to Su, Realty World, HOF and Inception’s responses to RPD No. 9, Alliance questions the veracity of their representations of an inability to comply with the request. In essence, Alliance asserts that the representations of an inability to comply are inadequate, incomplete or evasive. Thus, as to these defendants, Alliance appears to be moving to compel further responses to RPD No. 9.

With regard to Nguyen’s response to RPD No. 9, Alliance contends that she has not fully complied with her representation of compliance because she has only provided documentation concerning a software manual, and other documents responsive to the request are within her possession, custody or control. Thus, Alliance does not challenge the adequacy of Nguyen’s statement of compliance, but only her compliance with that statement. Accordingly, as to Nguyen, Alliance appears to be moving to compel compliance with her representation that she would provide all documents responsive to the request.

Accordingly, the Court will construe the instant motion as both a motion to compel further responses to RPD No. 9 as to Su, Realty World, HOF and Inception, and a motion to compel compliance with Nguyen’s response to RPD No. 9.

B. Legal Standards

A party may move to compel a further response to a demand for inspection, copying, testing, or sampling, if a representation of inability to comply is inadequate, incomplete or evasive. (See Code Civ. Proc., § 2031.310, subd. (a)(2).) The motion must set forth “specific facts showing good cause justifying the discovery sought by the demand.” (Code Civ. Proc., § 2031.310, subd. (b)(1); Kirkland v. Superior Court (2002) 95 Cal.App.4th 92, 98.) Good cause is established simply by a fact-specific showing of relevance. (Kirkland v. Superior Court, supra, 95 Cal.App.4th at p. 98.)

In addition, a representation of inability to comply must 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. (See Code Civ. Proc., § 2031.230.) The statement must also set forth the name and address of any person known or believed to have possession of a particular item or category. (See Code Civ. Proc., § 2031.230.)

Moreover, as indicated above, pursuant to Code of Civil Procedure section 2031.320, “[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.” (Code Civ. Proc., § 2031.320.)

C. Separate Statement

As an initial matter, Defendants contend that Alliance’s separate statement is defective because it does not address the responses of Realty World, and the motion as to Realty World should therefore be denied. Alliance acknowledges that the separate statement does not address Realty World’s responses, but argues that the defect is not prejudicial to Defendants.

The court has discretion, but is not required to deny a discovery motion for failure to provide a code-compliant separate statement. (See Mills v. U.S. Bank (2008) 166 Cal.App.4th 871, 893.) Here, while Alliance concedes that it failed to explicitly address the responses of Realty World in its separate statement, Realty World’s responses are identical to those of Su, HOF and Inception. Accordingly, the deficiency does not prevent the Court from addressing the motion on its merits, and the denial of the motion on this ground is unwarranted.

D. Motion to Compel Further Responses to RPD No. 9

Alliance moves to compel further responses to RPD No. 9 by Su, Realty World, HOF and Inception on the ground that their representations of an inability to comply are not credible.

1. Good Cause

The first question the Court must address is whether Alliance has established good cause justifying the discovery. (See Code Civ. Proc., § 2031.310, subd. (b)(1); Kirkland v. Superior Court (2002) 95 Cal.App.4th 92, 98.) As indicated above, to establish good cause, the burden is on Alliance to set forth specific facts showing good cause justifying the discovery sought by the demand. (Kirkland v. Superior Court, supra, 95 Cal.App.4th at p. 98.)

It is undisputed that RPD No. 9 requests relevant information. RPD No. 9 seeks, “ALL DOCUMENTS that RELATE TO all computer equipment used by YOU in the course of performing the acts alleged in the COMPLAINT.” As this Court indicated in its 21 February 2014 order, the requests for information concerning Defendants’ computers may contain extensive documentation related to Alliance’s allegations, and seeking this information is an efficient first step in the discovery process. Accordingly, the Court finds that Alliance has demonstrated good cause justifying the discovery sought by RPD No. 9.

2. Substantive Responses

As indicated above, RPD No. 9 seeks, “ALL DOCUMENTS that RELATE TO all computer equipment used by YOU in the course of performing the acts alleged in the COMPLAINT.” “DOCUMENT” is broadly defined in RPD No. 9 to include “all written, recorded or graphic material, whether produced or reproduced by handwriting, magnetic recording, photograph, printing, tape, transcription…, typewriting, writing or any other means as defined in Evidence Code § 250…” Thus, a “DOCUMENT” for the purposes of RPD No. 9 includes any information encoded upon a computer hard drive (i.e., a magnetic recording).

In their further responses to RPD No. 9, Su and Inception each state: “After a diligent search and a reasonabl[e] inquiry responding party is unable to comply. The inability to comply is because the particular item or category has never existed. There is no person or organization believed to have possession, custody, or control of these items.” In addition, they provide the model, operating system, serial number, and location of their computers.

Alliance persuasively asserts that these responses are evasive because Su and Inception do not provide unambiguous statements of inability to comply. In particular, it reasons that Su and Inception acknowledge that the identity of their computers, operating system and serial numbers must be stored somewhere on their computers, and the storage of this information, in whatever format, constitutes a “DOCUMENT” which must be produced. The Court agrees that Su and Inception’s statements of compliance are evasive because they suggest that they do have “DOCUMENTS” responsive to the request encoded on their computer hard drives. Accordingly, further responses to RPD No. 9 by Su and Inception are warranted.

As to Realty World and HOF, Alliance makes the same argument. However, in contrast to Su and Inception’s responses, Realty World and HOF’s supplemental responses are unambiguous. Their responses state: “After a diligent search and a reasonabl[e] inquiry responding party is unable to comply. The inability to comply is because the particular item or category has never existed. There is no person or organization believed to have possession, custody, or control of these items. Additionally, no computer equipment was used by responding party with regard to allegations in the COMPLAINT.” As these responses are complete and straightforward, further responses to RPD No. 9 by Realty World and HOF are unwarranted.

3. Conclusion

Based on the foregoing, Alliance’s motion to compel further responses to RPD No. 9 as to Realty World and HOF is DENIED. Alliance’s motion to compel further responses to RPD No. 9 as to Su and Inception is GRANTED.

E. Motion to Compel Compliance

Alliance asserts that Nguyen has failed to produce all documents responsive to RPD No. 9, despite representing that she would comply with the request. In opposition, Nguyen contends that she has produced all documents in her possession, custody and control.

In her supplemental response, Nguyen states as follows: “Responding party will comply with this request. Responding party has produced the documents regarding her computer equipment that [are] in her possession. In an effort to cooperate with counsel for Plaintiff’s request for additional information, responding party identifies that her computer is an Acer Aspire 4830T, running the Windows 7 operating system, and the serial number is 00196-157-710-944. It is a laptop and the location changes; however, it is in responding party’s possession.” As indicated above, for the purposes of RPD No. 9, a “DOCUMENT” includes any information encoded upon a computer hard drive.

Alliance contends that Nguyen has withheld documents responsive to the request. It reasons that the identity of Nguyen’s computer, operating system and serial number can be located on her computer, and the storage of this information, in whatever format, constitutes a “DOCUMENT” that must be produced.

Here, Nguyen’s response indicates that she is in possession of information concerning the model of her computer, its operating system and serial number. She further acknowledges that this information is responsive to RPD No. 9. Thus, her response suggests that she might have this information in “DOCUMENT” form. In response, Alliance states in a conclusory fashion that Nguyen must have this information.

While the Court suspects that a “DOCUMENT” containing the model, operating system and serial number of a computer running a Windows operating system may be stored on Nguyen’s hard drive, Alliance has provided no evidence substantiating that such a “DOCUMENT” is likely to exist. Accordingly, the Court cannot reach a definitive conclusion as to whether all responsive documents have been produced. Therefore, to the extent it is Nguyen’s position that she has produced all responsive documents in her possession, custody and control, including any information encoded on the hard drive of her computer, she is ordered to serve on Alliance a verified statement to that effect. Alternatively, if Nguyen maintains that all responsive documents have not been produced, she is ordered to produce the documents.

II. Requests for Monetary Sanctions

Both parties request monetary sanctions in connection with the motion to compel as to RPD No. 9 pursuant to Code of Civil Procedure section 2031.310.

A. Legal Standard

Code of Civil Procedure section 2031.310, subdivision (h) provides that the court shall impose a monetary sanction against any party or attorney who unsuccessfully makes or opposes a motion to compel further responses to requests for production of documents unless the party or attorney acted with substantial justification or other circumstances make the imposition of a sanction unjust.

B. Alliance’s Request for Monetary Sanctions

Alliance seeks monetary sanctions in the amount of “at least” $3,780 against Defendants and their counsel for unsuccessfully opposing its motion to compel. Here, Defendants prevailed in part on the motion. Therefore, Defendants and their counsel acted with substantial justification. Accordingly, Alliance’s request for monetary sanctions is DENIED.

C. Defendants’ Request for Monetary Sanctions

Defendants make a request for monetary sanctions in the amount of $2,200 against Alliance and its counsel. Alliance prevailed in part on the motion. Therefore, Alliance and its counsel acted with substantial justification. Accordingly, Defendants’ request for monetary sanctions is DENIED.

Conclusion and Order

Alliance’s motion to compel further responses to RPD No. 9 as to Realty World and HOF is DENIED.

Alliance’s motion to compel further responses to RPD No. 9 as to Su and Inception is GRANTED. Accordingly, within 20 calendar days of the filing of this Order, Su and Inception shall provide verified code-compliant further responses to RPD No. 9, without objections, and produce documents in accordance with those responses.

Alliance’s motion to compel compliance with Nguyen’s representation of compliance in regards to RPD No. 9 is GRANTED as follows: Within 20 calendar days of the filing of this Order, Nguyen shall either (1) serve on Alliance a verified statement that all documents responsive to RPD No. 9 in her possession, custody or control, including any information encoded on the hard drive of her computer, have been produced, or (2) produce all responsive documents in her possession, custody or control that have not yet been produced.

Alliance’s request for monetary sanctions against Defendants and their counsel is DENIED.

Defendants’ request for monetary sanctions against Alliance and its counsel is DENIED.