Case Number: GC046810    Hearing Date: July 25, 2014    Dept: NCD

TENTATIVE RULING (7-25-14) (No Opposition)
#2
GC 046810
ELIE v. FEDORIS

Plaintiff Mehrdad Elie’s Ninth Motion for Terminating and Monetary Sanctions as to Rita Josephine Garcia Mangiapane, Michael A. Fedoris and Bear Resources, LLC

Cross-Defendants Phase 2 Holdings and Kevin Doherty’s Joinder in Plaintiff’s Motion for Terminating Sanctions

Plaintiff Mehrdad Elie’s Motion to Compel Rita Josephine Garcia Mangiapane and Bear Resources LLC’s Further Responses to Form Interrogatories Set Three, Requests for Admissions, Set Three and Requests for Production of Documents, Set Three

Plaintiff Merhdad Elie’s Motion to Compel Defendant Michael A. Fedoris’ Further Responses to Form Interrogatories, Set Three, and Requests for Production of Documents, Set Two

TENTATIVE:
Plaintiff Mehrdad Elie’s Ninth Motion for Terminating and Monetary Sanctions as to Rita Josephine Garcia Mangiapane, Michael A. Fedoris and Bear Resources, LLC is MOOT as to Michael A. Fedoris in light of the striking of the answer and entry of default of this party on June 17, 2014. Motion is GRANTED as to defendants Rita Josephine Garcia Mangiapane and Bear Resources, LLC.

The court finds that defendants have failed to comply with this court’s June 14, 2013 order requiring defendant Mangiapane to appear for deposition, and for Mangianpane to appear for deposition as the PMK for Bear Resources. This follows defendants’ previous failure to comply with court orders concerning discovery dated February 21, 2012, July 13, 2012, August 10, 2012, and a Stipulated Order dated January 29, 2013.
The court also finds that defendants have failed to fully comply with this court’s order of June 14, 2013 concerning providing computers, in light of the wiping of said computers of potentially discoverable material before they were produced. The court further notes that plaintiff has submitted expert evidence and deposition testimony of Mangianpane suggesting that defendants have engaged in destruction of evidence. In addition, defendants have failed to file written opposition to this motion.

The court construes this persistent refusal to appear for deposition and produce evidence to permit plaintiff to prosecute this action as an admission that defendants have no meritorious defense. See Kahn v. Kahn (1977) 68 Cal.App.3d 372, 382. In addition, the imposition of lesser sanctions (monetary sanctions) has been ineffective in directing defendants’ attention to this matter. Finally, the delay and destruction of evidence has prejudiced plaintiff. The Court therefore orders the answers of defendants Rita Josephine Garcia Mangiapane and Bear Resources, LLC stricken.

Monetary sanctions in the amount of __________[$6,863.33requested] are awarded in favor of moving parties (not joining parties) as against defendants Rita Josephine Garcia Mangiapane and Bear Resources, LLC, jointly and severally, payable within 30 days. CCP sections 2025.450(d), 2023.010(g) and 2023.030(a).

Cross-Defendants Phase 2 Holdings and Kevin Doherty’s Joinder in Plaintiff’s Motion for Terminating Sanctions is GRANTED as well.

Plaintiff Merhdad Elie’s remaining motions are MOOT.

BACKGROUND:

Moving Party: Plaintiff Mehrdad Elie
“Joinder” filed by cross defendants Phase 2 Holdings and Kevin Doherty
Responding Party: Defendants Rita Josephine Garcia Mangiapane, Michael Fedoris and Bear Resources, LLC (No Opposition)

RELIEF REQUESTED:
Terminating sanctions—striking Answer
Further Responses to Discovery

FACTUAL AND PROCEDURAL BACKGROUND:
Plaintiff Mehrdad Elie alleges that he is the assignee of claims from third party Phase 2 Holdings, LLC dba Phase 2 International. Plaintiff alleges that in July of 2009, Phase 2 initiated discussions with defendant Byron G. Best, doing business as B.G. Best Company, an investment banker, concerning obtaining financing for expanding Phase 2’s business and obtaining operating capital. On July 20, 2009, Best entered a Conventional Mortgage Funding and/or Guaranteed Takeout Agreement to provide funding to Phase 2, which Best has not in fact provided.

On September 11, 2009, Best introduced Phase 2 to Best’s associate, defendant Josephine Mangiapane, who held herself out as a mortgage broker and real estate broker. Best represented that Mangiapane was an officer working on behalf of third party Bear Resources, LLC (allegedly since discovered to have been a shell company), and that she would be able to assist in procuring the funding required by Phase 2, as Best had been previously involved in multiple, similar successful business transactions with Mangiapane. Mangiapane informed Phase 2 that it had been approved for funding, that Mangiapane had access to $5.5 million required, and that the funds would be provided if Phase 2 would sign documentation and advance to Bear an “issuance fee” of $300,000. Based on these representations, on September 16, 2009, Elie advanced Phase 2 the principal sum of $300,000, which Phase 2 agreed to repay within 60 days with interest pursuant to a Note and Loan Agreement.

On September 20, 2009, Phase 2 and Bear, through Bear’s purported representative, defendant Michael Fedoris, entered into a Financial Services and Escrow Agreement with defendant All Pro Escrow Services, an escrow company located in Pasadena. The Escrow Agreement purported to memorialize the fact that Bear would provide Phase 2 with the financing in exchange for the $300,000 fee and that if Bear were unable to obtain the financing, the fee would be returned to Phase 2 with prejudice. The complaint alleges that defendants have failed to perform under the agreement, have failed to obtain the financing and have failed to return the fee.

Plaintiff further alleges that Mangiapane was representing both plaintiff and Bear in the transaction, did not have previous successful transactions, is not a licensed broker, and that Bear was not an appropriate legal entity, but that much information concerning Bear in the Escrow Agreement was false. It is also alleged that defendants attempted to implement a modified plan to obtain funding to which Phase 2 never assented. The complaint alleges various causes of action for fraud, breach of fiduciary duty, negligence, breach of contract, interference with prospective economic advantage, conversion and RICO violations.

Defendants Mangiapane, Fedoris and Bear have filed a cross-complaint against Phase 2 and its owner, Kevin Doherty, alleging that under the proposed terms of the transaction to obtain financing for Phase 2, Bear agreed to issue a Standby Letter of Credit which would be used as collateral to obtain a loan on behalf of Phase 2 in an amount of $5.5 million. In order to engage the Standby Letter of Credit, Phase 2 was required to provide a $300,000 origination fee, which Doherty represented to Mangiapane he would be able to provide. In September, 2009, Phase 2 Bear and All Pro Escrow entered into the Financial Services and Escrow Agreement, but, unknown to cross-defendants, Phase 2 had entered into a Loan Agreement and Promissory Note with Elie for a loan of the origination fee, which was required to be repaid within 60 days in addition to 10% in interest fees.

Cross-Complainants allege that Phase 2 represented that the $300,000 origination fee was from their own funds, not third party funds, and that had cross-complainants known the true facts, they would not have entered into the Agreement, as they do not become involved in third party transactions wherein third parties are not directly subject to the terms and conditions of the originating agreement, nor do they become involved in transactions in which third party funds are involved. Cross-complainants allege that they only became aware of Elie’s involvement when Elie’s attorney began contacting All Pro Escrow demanding information concerning the transaction and escrow account and demanding that the escrow agent transfer the $300,000 originating fee to Elie.

Cross-complainants allege that they paid $150,000 for due diligence in connection with the financing, which they would not have paid had they known of Elie or the transaction concerning the originating fee. It is also alleged that cross-complainants, to satisfy their obligation to return the $300,000 originating fee has made more than four attempts to return the fee to Phase 2, which efforts have been rejected by Phase 2. It is also alleged that as the result of the conduct of cross-defendants, cross-complainants have been required to defend against the allegations asserted by Elie.

ANALYSIS:
Terminating Sanctions
As an initial matter, the motion, which seeks to have the answer of the defendants stricken, is moot as to defendant Michael A. Fedoris, as the file shows that his answer has already been stricken by the court and his default entered on June 17, 2014.

One court order which has been violated is an order entered on June 14, 2013, Judge Milton presiding, to the extent that order, for the second time, orders defendant Mangiapane, individually and as PMK for Bear Resources, to sit for depositions on March 6 and 7th 2013, and orders “The Court orders that the stipulation between parties stands and that delivery of content of defendant’s computers may be done by a 3rd party accredited forensic company.” [See Ex. A].

Evidently, the discovery otherwise ordered was provided, and the sanctions paid, as the moving papers do not represent otherwise.

The moving papers indicate that Mangiapane did not appear on March 6, but did appear on March 7, and has since appeared for four sessions of deposition as an individual (walking out on one), the last session concluding with an agreement that she would appear again on August 14, 2013. [See Exs. 1-4]. Mangiapane has not appeared for this continued deposition, and has not given her deposition as PMK of Bear Resources. [Levy Decl., paras. 17-20].

Under CCP § 2025.450(d), if a party “fails to obey” a court order compelling attendance at a deposition, “the court may make those orders that are just, including the imposition of an issue sanction, an evidence sanction, or a terminating sanction under Chapter 7 (commencing with Section 2023.010 against that party deponents…” Under section 2023.010, “misuse of the discovery process” includes “(g) Disobeying a court order to provide discovery.” Where there has been such conduct, under CCP section 2023.030 (d), the court may impose a terminating sanction by issuing an order “(1)…striking out the pleadings… of any party engaging in the misuse of the discovery process.”

In general, courts should grant lesser sanctions first before granting terminating sanctions. Deyo v. Kilbourne (1978) 84 Cal.App.3d 771. However, where there is a pattern of failing to provide discovery, the court may imply a continuing intent to abuse the discovery process, permitting a party one more chance to comply is inappropriate. Manzetti v. Superior Court (1993) 21 Cal.App.4th 373, 379. Dismissal of a complaint is an appropriate sanction where the conduct of plaintiff “interferes with the court’s mission of seeking truth and justice.” Morgan v. Ransom (1979) 95 Cal.App.3d 664, 670. Failure to comply with discovery may be construed as an admission that the case has no merit: “A persistent refusal to comply with an order for production of evidence is tantamount to an admission that the disobedient party really has no meritorious claim…” Kahn v. Kahn (1977) 68 Cal.App.3d 372, 382. Where a court order has been disobeyed, the choice of sanction is within the court’s discretion and will only be set aside for abuse of discretion. Sauer v. Superior Court (1987) 195 Cal.App.3d 213, 228.

There is no opposition to the motion, and a pattern of discovery abuse has become apparent here. In addition, plaintiff now argues that terminating sanctions are warranted due to the violation of this court’s order to turn over computers, when the computers turned over were evidently wiped of some of their contents, it appearing that defendants engaged in spoliation of evidence.

It appears that computers ordered to be turned over had had the hard drives replaced, and information and documents removed in March of 2012, after this matter was filed on February 7, 2011. Plaintiff submits a declaration of a computer expert who inspected the laptops and found files had been deleted again on July 6, 2013, including some which appear to directly relate to this lawsuit, including e-mails “re Elie,” plaintiff here. [See Schroeder Decl., para. 15]. This suggests that there has been a deliberate destruction of evidence on those computers, which in March 2012 did not necessarily violate an outstanding court order, but certainly violated plaintiff’s duty to preserve evidence. See Cedars-Sinai Medical Center v. Superior Court (1998) 18 Cal.4th 1, 12.

In addition, even in the absence of a court order violation, the court has inherent equity power to dismiss an action, derived from the state constitution, including supervisory, and administrative powers, and the court’s inherent power to control litigation. See Rutherford v. Owens-Illinois, Inc. (1997) 16 Cal.4th 953, 967.

Here, the circumstances suggest the purposeful destruction of evidence to keep it from being discovered during the course of this lawsuit. There is no opposition here, so no explanation by defendants for why this conduct was not improper and does not warrant serious consequences.

Plaintiff argues that the destruction of the 38,000 files has destroyed information concerning witnesses and how this transaction occurred, particularly in connection with a key bank which has been purchased by another bank, with employees who are witnesses scattered, such that business documents are necessary.

The history of failing to comply with discovery obligations combined with what appears to be not a failure to preserve but a deliberate destruction of evidence, warrants a terminating sanction. While the Court cannot find the abuses as to the parties joining in this motion to be as severe as those abuses visited upon the moving parties, the outcome is properly the same, as the unrebutted destruction of evidence and the repeated failures to abide by discovery rules have impaired “the joinder parties” and prejudiced them herein in much the same ways.

Monetary Sanctions
CCP § 2025.450(d) provides that for failure to obey a court order compelling attendance and testimony at deposition, “In lieu of or in addition to” an issue, evidence or terminating sanction, “the court may impose a monetary sanctions under Chapter 7 (commencing with Section 2023.010.”

In this case, defendants have failed to obey a court order. Plaintiff has provided evidence that it has been forced to incur expense due to this conduct. The sanctions are hereby awarded.