DANIEL MEYEROV VS MARK FRIEDMAN ET AL

Tentative Rulings

Case Number: BC651099    Hearing Date: January 29, 2021    Dept: 48

[TENTATIVE] ORDER RE MOTION TO CONSOLIDATE

On January 6, 2021, Defendants Mark Friedman, Trident Group, Inc., David Friedman, and Werner Clark filed a motion to consolidate claims from Case No. BC587482 with this case, Case No. BC651099. Defendants also seek a bench trial on the declaratory relief causes of action and to bifurcate punitive damages.

Case No. BC651099

In Case No. BC651099, the parties did not post jury fees, and the Court has already determined that a bench trial will begin on February 16, 2021.

In this case, Plaintiff Daniel Meyerov asserts causes of action alleging that Defendants breached their duties by using company funds for personal use, co-mingling personal and business finances, not accurately maintaining company records and accounts, and improperly competing against Onlybusiness; made misrepresentations about personal expenses and business accounts; and breached an agreement not to compete with Onlybusiness. In addition, the complaint seeks determinations about whether funds provided by Trident to Onlybusiness were a loan or capital contribution and whether funds from Mark Friedman to Onlybusiness were loans or capital contributions. And, the complaint seeks an accounting.

Case No. BC587482

In Case No. BC587482, trial is also scheduled for February 16, 2021. Plaintiffs Daniel Meyerov and Polaris Blue Holdings, LLC posted jury fees. Defendants Mark Friedman, Onlybusiness.com, LLC, and Trident Group, Inc. did not. Meyerov states Plaintiffs agree to a bench trial for the entire case. (Opposition at p. 4.) Therefore, this trial will be a bench trial as well.

The second, fourth, fifth, sixth, seventh and eighth causes of action in the Fourth Amended Complaint remain to be tried. These causes of action concern Defendants’ alleged breach of an agreement not to solicit customers of or compete against Polaris Blue or Onlybusiness, alleged misrepresentations by Defendants about not competing with Polaris Blue and Onlybusiness, and Friedman’s and Trident’s alleged breaches of duties to Plaintiffs in misusing company funds, co-mingling personal and business finances, and not properly maintaining business records and accounts. The eighth cause of action seeks an accounting.

Because the issues in Case No. BC651099 and Case No. BC587482 overlap significantly, many of the same witnesses, exhibits and evidence will be required in both trials. While some of the causes of action are direct claims and some are derivative claims, they rely on much of the same evidence. Because the trial in both cases will be a bench trial, it makes sense to try both cases at the same time. This will be much more efficient, eliminate duplicative testimony, and conserve judicial resources.

The issue of punitive damages is bifurcated and will be tried in a second phase.

In sum, the motion is GRANTED in part. Case No. BC651099 and Case No. BC587482 will be tried together in a bench trial scheduled for February 16, 2021.

Moving party to give notice.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are STRONGLY encouraged to appear remotely.

Case Number: BC651099    Hearing Date: October 22, 2020    Dept: 48

[TENTATIVE] MOTIONS FOR SANCTIONS

On December 5, 2019, the Court denied Plaintiff Daniel Meyerov’s previous motion for terminating, evidentiary, and monetary sanctions against Defendants Mark Friedman, David Friedman, and Trident Group, Inc. and their counsel. The Court concluded that Plaintiff’s complaints “go to the weight of the evidence . . . as it pertains to the merits of Plaintiff’s claims against Defendants. Such weighing of evidence is to occur at trial.”

On August 24, 2020, Plaintiff filed a second motion for terminating, evidentiary, and monetary sanctions against Defendants and their counsel. The second motion makes the same arguments and rests on the same evidence with a bit of new evidence. For example, the tables of contents for the two motions are almost identical.

Plaintiff’s counsel states in his declaration that the judge at the December 5, 2019 hearing did not read Defendant’s late-filed opposition papers and that he too had not had time to review the opposition papers. Refiling the motion eight months after the hearing is not the remedy for the other side’s late filing of opposition papers.

Plaintiff’s motion does not identify the new evidence. Instead Plaintiff states in his long argumentative declaration, starting at paragraph 77, that in a December 2019 declaration Defendant Mark Friedman lied and contradicted documents and prior testimony. While the alleged lies and contradictions may be grounds to impeach Mark Friedman at trial, they are not grounds to reconsider the decision on the first motion.

In a reply declaration filed on October 15, 2020, to which Defendants did not have the opportunity to respond, Plaintiff states he has “uncovered literally hundreds of mis-statements and omissions.” He states that he learned in June 2020 that Defendants deleted an audit trail, he found more evidence that Defendants made a mess of their invoices, and he found more examples of phony vendors. Misstatements and omissions are not grounds for sanctions – every party thinks the other side misstates the evidence. Plaintiff previously raised the issue of messy invoices and phony vendors in his first motion. If the deleted audit trail truly is grounds for sanctions, Plaintiff should have raised it in the moving papers.

As with Plaintiff’s duplicative motions for punitive damages discovery, this second motion for sanctions does not add anything of substance to the first motion This second motion is DENIED for that reason and on the same grounds as the first motion. Defendants’ request for sanctions is DENIED.

Moving party to give notice.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are STRONGLY encouraged to appear remotely.

Case Number: BC651099    Hearing Date: October 15, 2020    Dept: 48

[TENTATIVE] MOTIONS FOR PUNITIVE DAMAGES DISCOVERY

On December 5, 2019, the Court denied Plaintiff Daniel Meyerov’s previous two motion for punitive damages, concluding Plaintiff had not demonstrated a substantial probability of prevailing on his claim for punitive damages against Defendants Mark Friedman, David Friedman and Trident Group, Inc.

On August 6, 2020, Plaintiff filed two new motions for punitive damages against those three defendants. Plaintiff argues that the Court should review the evidence again because the Court previously “did not review the voluminous evidence submitted with the original motion, at all.” (Motion at p. 2.) Plaintiff also argues Mark Friedman made key admissions in his deposition on December 3, 2019, which the Court did not review before the December 5, 2019 hearing. And Plaintiff argues there is new evidence. (Motion at p. 2.)

Plaintiff’s counsel states in his declaration that the judge at the December 5, 2019 hearing did not read Defendant’s late-filed opposition papers and that he too had not had time to review the opposition papers. Refiling the same motion eight months after the hearing is not the remedy for the other side’s late filing of opposition papers.

Plaintiff’s two motions do not identify the new evidence. Instead Plaintiff uses his three very lengthy declarations (two 24 pages and one 34 pages with much single spacing making the declaration even longer) to argue about the evidence, the vast majority of which Plaintiff presented with the first two motions. According to Plaintiff’s declarations, the new evidence consists of some QuickBook documents showing Defendants created new vendors on the vendor list and entered false payments. Plaintiff previously submitted evidence allegedly showing Defendants created new vendors and entered false payments and made the same allegations about vendors and false payments in his declaration in support of the first motions. So while there may be some additional example of allegedly new vendors and false payments, the substance of the allegation is not new.

Plaintiff also argues in his declarations that Defendant Mark Friedman lied in a declaration and a deposition. In his previous motion and declaration, Plaintiff argued Mark Friendman lied under oath. Again, the substance of this argument is not new, and additional examples of alleged lies do not add up to new evidence permitting these two motions to be re-filed and reconsidered

Because the additional evidence does not add anything of substance to the two motions, which are very similar (and in many portions identical) to the two prior motions, the motions are DENIED. On October 13, 2020, Defendants filed a request for sanctions for the fees in opposing these motions. That request, filed and served two days before the hearing is too late and therefore is DENIED.

The ex parte application to continue the hearings is DENIED for lack of good cause or emergency.

Moving party to give notice.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are STRONGLY encouraged to appear remotely.

Case Number: BC651099    Hearing Date: July 30, 2020    Dept: 48

[TENTATIVE] ORDER RE: MOTION TO DISQUALIFY COUNSEL

On February 17, 2017, Plaintiff Daniel Meyerov (“Plaintiff”) filed this derivative action. On September 27, 2017, Plaintiff filed an amended complaint against Mark Friedman, Trident Group, Inc. (“Trident”), OnlyBusiness.com, LLC (“OB”), David Friedman, and Werner Clark (collectively, “Defendants”). On June 17, 2020, Plaintiff moved to disqualify Patricia M. Bakst (“Bakst”) as counsel for OB.

“‘A trial court’s authority to disqualify an attorney derives from the power inherent in every court “[t]o control in furtherance of justice, the conduct of its ministerial officers, and of all other persons in any manner connected with a judicial proceeding before it, in every matter pertaining thereto.”’” (Ontiveros v. Constable (2016) 245 Cal.App.4th 686, 694, quoting People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1145.) “‘[D]isqualification motions involve a conflict between the clients’ right to counsel of their choice and the need to maintain ethical standards of professional responsibility.’” (Id. at 694-695.) “When deciding a motion to disqualify counsel, ‘[t]he paramount concern must be to preserve public trust in the scrupulous administration of justice and the integrity of the bar. The important right to counsel of one’s choice must yield to ethical considerations that affect the fundamental principles of our judicial process.’ [Citation.]” (O’Gara Coach Co., LLC v. Ra (2019) 30 Cal.App.5th 1115, 1124.)

OB’s Objection No. 1 to the Declaration of Daniel Meyerov is sustained. The remaining objections are overruled.

Plaintiff, Defendant Mark Friedman, and Defendant Trident are members of OB, a limited liability company. (Meyerov Decl. ¶ 3.) Bakst represents only OB and has no ties or affiliations to any member of OB. (Bakst Decl. ¶¶ 3-4.)

Plaintiff disagrees with the positions that Bakst took on behalf of OB in multiple motions and filings, contending that she acted in favor of the individual defendants and abandoned her role as an advocate for OB. (Motion at pp. 10-11.) Plaintiff contends that Bakst disregarded legal arguments that she should have made on behalf of OB. (Id. at p. 12.) Bakst argues that she has reviewed the pleadings in documents in this case to form her own opinions on the case and exercise her best judgment, and she has acted 100% in the interests of OB. (Bakst Decl. ¶¶ 6-7, 12; Opposition at pp. 6-9.) In effect, Plaintiff contends that he, not Bakst, Friedman or Trident, has OB’s interests at heart. But that conclusion assumes that Plaintiff ultimately prevails on his claim that the loans were actually investments, which is a dispute that cannot be decided on this motion.

Plaintiff also contends that Bakst has not filed an answer on behalf of OB or defended OB in Trident v. Onlybusiness.com, LLC, Case No., SC126936. (Motion at pp. 3, 12.) That case is beyond the scope of this case.

Plaintiff contends that Bakst argued for sanctions against Plaintiff on Thomas FitzGibbon’s behalf. OB and Bakst argue that Plaintiff’s refusal to comply with his discovery obligations warranted sanctions. (Opposition at pp. 8-9.) Plaintiff also contends that Bakst insisted that FitzGibbon participate in meet-and-confer calls for discovery propounded solely on OB. (Motion at p. 11.) OB explains that during an early meet-and-confer discussion, Bakst thought it would be helpful to have FitzGibbon on the call because Bakst does not have direct access to any records, and FitzGibbon could ensure an appropriate response if Plaintiff demanded to know the location or substance of the books and records. (Opposition at p. 9; Bakst Decl. ¶ 11.) Plaintiff further contends that Bakst issued discovery that FitzGibbon “should have issued instead.” (Motion at p. 12.) Plaintiff does not explain why it was improper for Bakst to seek that discovery. These kinds of litigation tactics are not grounds for disqualification.

Finally, the Court does not find merit in Plaintiff’s contention that Bakst and FitzGibbon “appear to have a close personal relationship.” (Motion at p. 6.) Plaintiff contends that they are friends, avid cyclists in the same cycling group, and appear in social media photos together. (Ibid.) But Bakst explains that they are members of a cycling club that has approximately 500 members, met a few years ago, and have ridden together with a group on a few occasions. (Opposition at p. 10; Bakst Decl. ¶ 15.) Bakst also once attended a barbecue at FitzGibbon’s home, which was attended by about 50 cycling club members, but she does not recall speaking with FitzGibbon about more than food. (Bakst Decl. ¶ 15.) Bakst describes FitzGibbons as “a business and social acquaintance, but nothing more.” (Id. at ¶ 16.) This falls far below California Rules of Professional Conduct, Rule 1.7(c)’s prohibition of representation when a lawyer “has an intimate personal relationship with” another party’s lawyer.

Accordingly, the motion to disqualify counsel is DENIED.

[TENTATIVE] ORDER RE: MOTION TO COMPEL FURTHER RESPONSES TO REQUEST FOR PRODUCTION OF DOCUMENTS, SET ONE; SPECIAL INTERROGATORIES, SET ONE

On February 17, 2017, Plaintiff Daniel Meyerov (“Plaintiff”) filed this derivative action. On September 27, 2017, Plaintiff filed an amended complaint against Mark Friedman, Trident Group, Inc. (“Trident”), OnlyBusiness.com, LLC (“OB”), David Friedman, and Werner Clark (collectively, “Defendants”). Plaintiff alleges Friedman as OB’s managing member breached his fiduciary duty by allegedly using company funds for non-business purposes and mismanaged OB’s book and records.

On April 1, 2020, OB moved to compel Plaintiff’s further responses to Request for Production of Documents, Set One, and Special Interrogatories, Set One. Plaintiff also requests monetary sanctions in the amount of $5,273.65.

As an initial matter, OB should have filed two motions to compel, one for each of the type of discovery (requests production of documents and special interrogatories) and paid two filing fees.

Evidentiary Objections

OB’s Objections to the Declaration of Brent Kramer are overruled.

Request for Judicial Notice

OB requests the Court to take judicial notice of (1) Meet and Confer Declaration of Thomas N. Fitzgibbon, Esq. in support of Demurrer to 4th Amended Complaint in Related Case No. BC587482, and (2) Supplemental Declaration of Thomas N. Fitzgibbon, Esq. in support of Motion for Security. Plaintiff opposes the request. The request is denied because the documents are not material to deciding the motion.

Request for Production of Documents

A court may order a party to serve a further response to a demand for inspection when the court finds that (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. (Code Civ. Proc., § 2031.310, subd. (a).) The burden is on the moving party to “set forth specific facts showing good cause justifying the discovery sought by the demand.” (Code Civ. Proc., § 2031.310, subd. (b)(1).) This burden “is met simply by a fact-specific showing of relevance.” (TBG Ins. Servs. Corp. v. Superior Court (2002) 96 Cal.App.4th 443, 448.)

OB’s requests seek the production of documents concerning Plaintiff’s contentions that:

Nos. 1, 3: OB and Defendant Mark Friedman made improper financial transactions.

No. 5: The lawsuit will benefit OB.

Nos. 6-14: OB paid personal expenses on behalf of Mark Friedman that were not reimbursed.

Nos. 15-20: OB paid money on behalf of others (Moisoft, SEORankingreports.com, Internetmarketingwebsites.com, Stagasoft, iGPS, and any business owned by Mark Friedman) that were not reimbursed.

No. 21: Mark Friedman formed a civil conspiracy with Trident, David Friedman, and Werner Clark.

No. 22: Mark Friedman took money from OB’s accounts that was not reimbursed.

In addition, Nos. 2 and 4 seek documents reflecting Plaintiff’s attempt to notify OB about the improper financial transactions.

Plaintiff objected to these requests, arguing (1) that Defendant is a nominal defendant and therefore cannot challenge the merits of a derivative claim filed on its behalf, (2) that the request misstates legal requirements concerning the requirement to notify Defendant of improper transactions before filing the lawsuit and “the Court denied the demurrer on the basis that such requirements must be plead prior to the filing of the derivative lawsuit,” and (3) that the request is overbroad, unduly burdensome, harassing, calls for expert opinion, calls for documents already in OB’s possession, calls for information protected by attorney-client and/or work product privileges, and calls for information that is confidential or proprietary.

Regarding the first category of objections, Plaintiff cites Patrick v. Alacer Corp. (2008) 167 Cal.App.4th 995 (Patrick). In Patrick, the Court of Appeal held that because in a derivative action the corporation is the real party in interest even though joined as a nominal defendant, the corporation cannot generally oppose a derivative action on the merits because it would allow the wrongdoer defendants to shift the cost of their defense to the corporation. (Patrick, supra,167 Cal.App.4th at pp. 1004-1010.) However, “[t]he corporation may assert defenses contesting the plaintiff's right or decision to bring suit, such as asserting the shareholder plaintiff’s lack of standing or the [special litigation committee] defense.” (Id. at p. 1005.)

Before bringing a derivative action, a member of the limited liability company must have made an effort to secure from the managers the action that the member-plaintiff desires or have reasons for not making that effort. (Corp. Code, § 17709.02, subd. (a).) Before initiating litigation, the plaintiff must inform the limited liability company or the managers in writing of the ultimate facts of each cause of action against each defendant or deliver to the limited liability company or the managers a true copy of the complaint that the plaintiff proposes to file. (Corp. Code, § 17709.02, subd. (a)(2).)

In its answer, OB entered a general denial and reserved “the right to assert that Plaintiff lacks standing to sue on ONLYBUSINESS.COM, LLC’s behalf.” Although OB was unsuccessful challenging Plaintiff’s standing at the demurrer stage, OB can still pursue that argument at later stages of litigation and pursuing discovery on the issue. Therefore, while Plaintiff is correct that OB cannot challenge the merits of Plaintiff’s claims as a nominal defendant, Request Nos. 2 and 4 do not seek discovery directly challenging the merits of Plaintiff’s claims. Request Nos. 2 and 4 are relevant to a standing defense because they ask for documents reflecting Plaintiff’s informing OB about the facts of each cause of action. However, the other requests go beyond that and directly challenge the merits of Plaintiff’s contentions.

OB also argues that it is requesting information to help it determine whether a special litigation committee would be fruitful. To assert the special litigation committee defense, a corporation in a derivative action may appoint a special litigation committee of independent directors to investigate the challenged transaction. (Patrick, supra,167 Cal.App.4th at pp. 1005.) If the committee reasonably determines that it is not in the corporation’s best interest to pursue the claims in the derivative action, that decision is protected by the business judgment rule. (Ibid.) After that, if the court determines that the committee members were as a matter of fact disinterested and they conducted an adequate investigation, then the court must dismiss the derivative action. (Ibid.) “Thus, for a shareholder plaintiff to take a derivative action to trial and prevail, it must be able to withstand the corporation's objection that it legitimately does not want to pursue the litigation.” (Ibid.) But OB does not cite legal authority allowing a corporation to take discovery in a derivative action into the merits of the plaintiff’s case in order to decide whether to appoint a special litigation committee.

Regarding Plaintiff’s second category of objections, Plaintiff cannot rest on the fact that the Court agreed with Plaintiff on this argument in rulings on demurrer. At the pleading stage, the Court accepted Plaintiff’s factual allegations as true, which supported no need for an identification of the improper transactions prior to filing suit. But the demurrer rulings do not preclude Defendant pursuing the argument in the litigation.

Finally, Plaintiff fails to justify why his boilerplate objections should preclude production of the documents in Request Nos. 2 and 4.

The motion to compel is GRANTED as to Request Nos. 2 and 4 and otherwise DENIED. Plaintiff is to produce responsive documents and substantive responses to Request Nos. 2 and 4 within 20 days of the date of this order.

Special Interrogatories

A court may order a party to serve a further response to an interrogatory when the court finds that (1) an answer to a particular interrogatory is evasive or incomplete; (2) an exercise of the option to produce documents under section 2030.230 is unwarranted or the required specification of those documents is inadequate; or (3) an objection to an interrogatory is without merit or too general. (Code Civ. Proc., § 2030.300, subd. (a).) If a timely motion to compel a further response to an interrogatory has been filed, the burden is on the responding party to justify any objection or failure fully to answer the interrogatories. (Fairmont Ins. Co. v. Superior Court (2000) 22 Cal.4th 245, 255.)

OB special interrogatories track the document requests described above. For the reasons stated above, the motion is GRANTED as to Interrogatory Nos. 2 and 4, and DENIED as to the rest. Plaintiff is to serve substantive responses to Interrogatory Nos. 2 and 4 within 20 days of the date of this order.

Sanctions

Where the court grants a motion to compel, sanctions shall be imposed against the party who unsuccessfully makes or opposes a motion to compel, unless the party acted with substantial justification or the sanction would otherwise be unjust. (Code Civ. Proc., § 2030.290, subd. (c), 2031.300, subd. (c).) The Court declines to award sanctions against either Plaintiff or OB, finding substantial justification for making and opposing the motion.

Conclusion

Subject to OB paying an additional filing fee and filing proof of that payment, the motion to compel is GRANTED in part. Plaintiff is ordered to produce documents and further substantive responses to Request Nos. 2 and 4 and Interrogatory Nos. 2 and 4 within twenty (20) days of the date of this order.

Moving party to give notice.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are STRONGLY encouraged to appear remotely.

Case Number: BC651099    Hearing Date: December 27, 2019    Dept: 48

(1) MOTION TO PERMIT FILING OF PORTIONS OF NEURAL ACCOUNTANT REPORT UNDER SEAL;

(2) MOTION COMPEL COMPLIANCE WITH DEPOSITION SUBPOENA; REQUEST FOR SANCTIONS;

(3) & (4) DEMURRERS TO FIRST AMENDED DERIVATIVE COMPLAINT (x2)

MOVING PARTY: (1) Defendants Mark Friedman and Trident Group, Inc.;

(2) Plaintiff Daniel Meyerov;

(3) Defendant OnlyBusiness.com, LLC;

(4) Defendants Mark Friedman, Trident Group, David Friedman and Werner Clark

RESPONDING PARTY(S): (1) No opposition filed;

(2) No opposition filed;

(3) Plaintiff Daniel Meyerov;

(4) Plaintiff Daniel Meyerov

PROOF OF SERVICE:

• Correct Address: (1) Yes; (2) No proof of service; (3) Yes; (4) Yes.
• 16/21 (CCP § 1005(b)): (1) Served by electronic service on June 25, 2019; no agreement to accept electronic service is on file; continued to this date per August 21, 2019, September 26, 2019 and December 5, 2019 minute order; (2) No proof of service; (3) Served by electronic service on November 11, 2019; no agreement to accept electronic service is on file; (4) Served by electronic service on November 12, 2019; no agreement to accept electronic service is on file.

• PLACE entire neutral accountant report in the public record;

• CONTINUE hearing on motion to compel compliance;

• CONTINUE hearing on both demurrers.

  ANALYSIS

  Motion to Seal

Defendants Mark Friedman and Trident Group, Inc. move for an order permitting filing of portions of neutral accountant report under seal. In particular, the Motion seeks an order (1) sealing/redacting the Report at pages 7-12, 19-22, 25-29, 32-33, 39-88, and (2) sealing/redacting Exhibits F-M, P-BB, and DD-KK (the “Sealing Order”).

By way of the December 5, 2019 minute order, the Court granted the motion to seal in part and otherwise denied the motion. The court ordered moving party to submit a supplemental brief and proposed order by December 20, 2019 specifically identifying the portions of the report containing tax return information to be sealed. The Court has not yet received these documents. Accordingly, the Court is inclined to place the entire neutral accountant report in the public record, unless moving party can demonstrate that compliance with the Court’s December 5, 2019 order is imminent.

Motions to Compel Compliance with Subpoena

Plaintiff Daniel Meyerov moves to compel compliance with the subpoena issued to non-party Vu Pham, and requests sanctions.

Plaintiff did not submit a proof of service reflecting service of this motion upon Vu Pham, against whom sanctions are being sought. Accordingly, the hearing on the motion to compel compliance is CONTINUED to January 22, 2020. Proof of service re: notice of this motion and continuance is due January 13, 2020.

Defendant OnlyBusiness.com, LLC’s Demurrer

Defendant OnlyBusiness.com, LLC demurs to the First Amended Derivative Complaint.

However, no meet and confer declaration was submitted, as required by CCP § 430.41. Accordingly, the hearing on the demurrer is CONTINUED to January 22, 2020. Meet and confer declaration is due January 13, 2020.

Defendants Mark Friedman, Trident Group, David Friedman and Werner Clark’s Demurrer

Defendants Mark Friedman, Trident Group, David Friedman and Werner Clark demur to the First Amended Derivative Complaint.

The Court’s electronic records do not show that a meet and confer declaration, or supporting memorandum of points and authorities were filed. Accordingly, the hearing on the demurrer is CONTINUED to January 22, 2020. Conformed copies of the meet and confer declaration and supporting memorandum of points and authorities are due January 13, 2020.

Case Number: BC651099    Hearing Date: December 17, 2019    Dept: 48

MOTION TO COMPEL RESPONSES TO REQUESTS FOR PRODUCTION OF DOCUMENTS; REQUEST FOR SANCTIONS

MOVING PARTY: Plaintiff Daniel Meyerov

RESPONDING PARTY(S): No opposition filed;

PROOF OF SERVICE:

• Correct Address: No proof of service.
• 16/21 (CCP § 1005(b)): No proof of service.

• CONTINUE hearing on motion to compel responses to requests for production of documents for proof of service.

  ANALYSIS

  Motion to Compel Responses to Requests for Production of Documents

  Moving party did not submit a proof of service reflecting that notice of this motion was properly served upon Defendant.

  Accordingly, the hearing on the motion to compel responses to requests for production of documents is CONTINUED to January 16, 2020. Proof of service re: moving papers and notice of continuance to be filed by January 9, 2020.

Case Number: BC651099    Hearing Date: December 05, 2019    Dept: 48

(1) MOTION TO PERMIT FILING OF PORTIONS OF NEURAL ACCOUNTANT REPORT UNDER SEAL;

(2) & (3) MOTION FOR PUNITIVE DAMAGES DISCOVERY (x2)

(4) MOTION FOR TERMINATING, EVIDENTIARY AND MONETARY SANCTIONS

MOVING PARTY: (1) Defendants Mark Friedman and Trident Group, Inc.;

(2) Plaintiff Daniel Meyerov;

(3) Plaintiff Daniel Meyerov;

(4) Plaintiff Daniel Meyerov

RESPONDING PARTY(S): (1) No opposition filed;

(2) Defendant Mark Friedman;

(3) No opposition filed.

(4) Defendants Mark Friedman, David Friedman, Werner Clark and Trident Group, Inc.

PROOF OF SERVICE:

• Correct Address: (1) Yes; (2) Yes; (3) Yes; (4) Yes.
• 16/21 (CCP § 1005(b)): (1) Served by electronic service on June 25, 2019; no agreement to accept electronic service is on file; continued to this date per August 21, 2019 minute order and September 26, 2019 minute order; (2) Served by electronic service on June 25, 2019; no agreement to accept electronic service is on file; advanced and continued to this date per stip. & order; (3) Served by electronic service on June 25, 2019; no agreement to accept electronic service is on file; advanced and continued to this date per stip. & order (4) OK. Served by mail on July 31, 2019.

• PLACE entire neutral accountant report in the public record;

• DENY both motions to conduct punitive damages discovery as against Defendants Mark Friedman, David Friedman and Trident Group, Inc.;

• DENY Plaintiff’s motion for terminating, evidentiary and $47,000 in monetary sanctions and Defendant’s request for $33,600 in monetary sanctions.

  ANALYSIS

  Motion To Seal

Defendants Mark Friedman and Trident Group, Inc. move for an order permitting filing of portions of neutral accountant report under seal. In particular, the Motion seeks an order (1) sealing/redacting the Report at pages 7-12, 19-22, 25-29, 32-33, 39-88, and (2) sealing/redacting Exhibits F-M, P-BB, and DD-KK (the “Sealing Order”).

By way of the October 3, 2019 minute order, the Court granted the motion to seal in part and otherwise denied the motion. The court ordered moving party to submit a supplemental brief and proposed order by October 18, 2019 specifically identifying the portions of the report containing tax return information to be sealed. The Court has not yet received these documents. Accordingly, the Court is inclined to place the entire neutral accountant report in the public record, unless moving party can demonstrate that compliance with the Court’s October 3, 2019 order is imminent.

Motions To Conduct Punitive Damages Discovery

Defendants’ request that the Court take judicial notice of court documents filed in this action is GRANTED per Evid. Code § 452(d)(court records).

Plaintiff Daniel Meyerov moves for an order permitting punitive damages discovery against Defendants Mark Friedman, David Friedman and Trident Group, Inc.

Civil Code § 3295(c) provides in pertinent part:

(c)  No pretrial discovery by the plaintiff shall be permitted with respect to the evidence referred to in paragraphs (1) and (2) of subdivision (a) unless the court enters an order permitting such discovery pursuant to this subdivision. . . . Upon motion by the plaintiff supported by appropriate affidavits and after a hearing, if the court deems a hearing to be necessary, the court may at any time enter an order permitting the discovery otherwise prohibited by this subdivision if the court finds, on the basis of the supporting and opposing affidavits presented, that the plaintiff has established that there is a substantial probability that the plaintiff will prevail on the claim pursuant to Section 3294. Such order shall not be considered to be a determination on the merits of the claim or any defense thereto and shall not be given in evidence or referred to at the trial.

“We hold here that before a trial court may enter an order allowing discovery of financial condition information under Civil Code section 3295, subdivision (c) . . ., it must (1) weigh the evidence presented by both sides, and (2) make a finding that it is very likely the plaintiff will prevail on his claim for punitive damages.” Jabro v. Superior Court (2002) 95 Cal.App.4th 754, 755 (bold emphasis added).

Against this backdrop of legislative intent, in which protecting the financial privacy of defendants is paramount, we interpret the language of section 3295(c), requiring the trial court to find based on supporting and opposing affidavits that the plaintiff has established there is a substantial probability he will prevail on his claim for punitive damages, to mean that before a court may enter an order permitting discovery of a defendant's financial condition, it must (1) weigh the evidence submitted in favor of and in opposition to motion for discovery, and (2) make a finding that it is very likely the plaintiff will prevail on his claim for punitive damages. In this context, we interpret the words "substantial probability" to mean "very likely" or "a strong likelihood" just as their plain meaning suggests. We note that the Legislature did not use the term "reasonable probability" or simply "probability," which would imply a lower threshold of "more likely than not."

Id. at 758 (bold emphasis added).

In contrast, section 3295(c) concerns a defendant's right to privacy and protection from being forced to settle unmeritorious lawsuits in order to protect this right. It is a discovery statute and does not implicate the traditional factfinding process or the right to a jury trial in any way. Indeed, section 3295(c) expressly states that an order thereunder "shall not be considered to be a determination on the merits of the claim or any defense thereto and shall not be given in evidence or referred to at the trial." (§ 3295(c).) Finally, although no court has specifically addressed section 3295(c) and interpreted the statute as allowing financial condition discovery based on a prima facie showing sufficient to avoid

The Court agrees with Defendants that it is premature to permit punitive damages discovery when the case is not even at issue as to the operative complaint. It is unknown whether any causes of action which may support punitive damages will remain.

More importantly, the Court has reviewed the portions of the neutral accountant report cited by Defendants, and agrees with Defendants that Plaintiff has failed to demonstrate a substantial probably of prevailing on his claim for punitive damages against Defendants Mark Friedman, David Friedman and Trident Group, Inc.

Accordingly, both motions to conduct punitive damages discovery as against Defendants Mark Friedman, David Friedman and Trident Group, Inc. is DENIED.

Motion For Terminating, Evidentiary and Monetary Sanctions

Plaintiff’s Evidentiary Objections

Declaration of Thomas N. Fitzgibbon

No. 1: SUSTAINED. Lack of foundation.

No. 2: SUSTAINED. Lack of personal knowledge.

No. 3: OVERRULED. Relevant.

No. 4: SUSTAINED. Lack of personal knowledge.

No. 5: SUSTAINED. Hearsay.

No. 6: SUSTAINED. Lack of personal knowledge.

No. 7: OVERRULED. Permissible legal opinion by counsel.

No. 8: SUSTAINED. Lack of personal knowledge.

No. 9: SUSTAINED. Lack of personal knowledge.

No. 10: SUSTAINED. Hearsay.

No. 11. OVERRULED. Relevant.

No. 12: SUSTAINED. Lack of personal knowledge.

No. 13: SUSTAINED. Hearsay.

No. 14: SUSTAINED. Hearsay.

Declaration of Tara Jackson

No. 1: SUSTAINED. Inadmissible lay opinion.

Declaration of Vu Pham

No. 1: SUSTAINED. Hearsay.

No. 2: SUSTAINED. Hearsay.

Discussion

Plaintiff moves for terminating, evidentiary and monetary sanctions against Defendants for spoliation of evidence.

“Spoliation” is “ ‘the destruction or significant alteration of evidence, or the failure to preserve property for another's use as evidence in pending or reasonably foreseeable litigation.’ ” (Byrnie, supra, 243 F.3d at p. 107.) “[D]estruction of evidence relevant to proof of an issue at trial can support an inference that the evidence would have been unfavorable to the party responsible for its destruction.” (Kronisch v. U.S. (2d Cir. 1998) 150 F.3d 112, 126 (Kronisch); see also Cedars-Sinai Medical Center v. Superior Court (1998) 18 Cal.4th 1, 11 [74 Cal. Rptr. 2d 248, 954 P.2d 511] (Cedars-Sinai).) “In order for an adverse inference to arise from the destruction of evidence, the party having control over the evidence must have had an obligation to preserve it at the time it was destroyed.” (Kronisch, supra, 150 F.3d at p. 126.) In addition, the party seeking the benefit of an inference from spoliation “must demonstrate first that the records were destroyed with a  [*682]  culpable state of mind (i.e. where, for example, the records were destroyed knowingly, even if without intent to violate [a] regulation [requiring their retention], or negligently). Second, a party must show that the destroyed records were relevant to the party's claim or defense.” (Byrnie, supra, 243 F.3d at p. 109; but see Cedars-Sinai, supra, 18 Cal.4th at p. 14 [“there will typically be no way of telling what precisely the evidence would have shown and how much it would have weighed in the spoliation victim's favor”].)

Reeves v. MV Transportation, Inc. (2010) 186 Cal.App.4th 666, 681-82.

The Court finds that the modifications of which Plaintiff complains go to weight of the evidence, to be aided by the Neutral Accountant Report, as it pertains to the merits of Plaintiff’s claims against Defendants. Such weighing of evidence is to occur at trial. As Defendants state in their opposition at Page 10:9-10: “Meyerov challenges whether the changes or actions were proper, a matter to be resolved at trial, not on a Motion for Spoliation.” The Court does not find sufficient evidence that Defendants engaged in spoliation which would warrant sanctions at this stage of the litigation.

The motion for terminating, evidentiary and $47,000 in monetary sanctions is DENIED.

Defendants’ request for $33,600 in monetary sanctions is likewise DENIED.

Case Number: BC651099    Hearing Date: November 04, 2019    Dept: 48

MOTION TO COMPEL COMPLIANCE WITH SUBPOENA; REQUEST FOR SANCTIONS

MOVING PARTY: Plaintiff Daniel Meyerov

RESPONDING PARTY(S): No opposition filed.

PROOF OF SERVICE:

• Correct Address: No as to Brian D. Boydston, Esq (served at 10786 Le Conte Avenues, Los Angeles, CA 90024; address is listed as 2288 Westwood Blvd., Ste 212, Los Angeles, CA 90064-2000 on Bar website)
• 16/21 (CCP § 1005(b)): OK. Served by mail on July 25, 2019.

• DENY motion to compel compliance with subpoena and request for sanctions without prejudice.

ANALYSIS

Motion to Compel Compliance with Subpoena

It is unclear whether non-party Andrew Friedman received notice of such a motion, for instance, by service upon an attorney representing Friedman.

Plaintiff Daniel Meyerov moves to compel compliance with the subpoena served upon non-party Andrew Friedman and requests sanctions. The basis for this motion is CCP §§ 2020.220(c) and 2025.450. See Notice of Motion, Page 2:9-10. However, neither of these code sections authorize a motion to compel compliance and imposition of sanctions against a non-party witness:

CCP § 2020.220(c) provides:

(c) Personal service of any deposition subpoena is effective to require all of the following of any deponent who is a resident of California at the time of service:

(1) Personal attendance and testimony, if the subpoena so specifies.

(2) Any specified production, inspection, testing, and sampling.

(3) The deponent’s attendance at a court session to consider any issue arising out of the deponent’s refusal to be sworn, or to answer any question, or to produce specified items, or to permit inspection or photocopying, if the subpoena so specifies, or specified testing and sampling of the items produced.

CCP § 2025.450(a) provides:

(a) If, after service of a deposition notice, a party to the action or an officer, director, managing agent, or employee of a party, or a person designated by an organization that is a party under Section 2025.230, without having served a valid objection under Section 2025.410, fails to appear for examination, or to proceed with it, or to produce for inspection any document, electronically stored information, or tangible thing described in the deposition notice, the party giving the notice may move for an order compelling the deponent’s attendance and testimony, and the production for inspection of any document, electronically stored information, or tangible thing described in the deposition notice.

(Bold emphasis added.)

Accordingly, Plaintiff has failed to cite statutory authority to compel non-party Andrew Friedman to comply with the subpoena and for the imposition of sanctions against him.

The motion to compel compliance and request for sanctions is DENIED without prejudice to bringing a newly-noticed motion to compel based upon the applicable statute.