This case was last updated from Los Angeles County Superior Courts on 11/16/2021 at 11:16:41 (UTC).

KUKDONG CORP VS DREAM APPAREL INC ET AL

Case Summary

On 02/05/2018 KUKDONG CORP filed a Contract - Other Contract lawsuit against DREAM APPAREL INC. This case was filed in Los Angeles County Superior Courts, Stanley Mosk Courthouse located in Los Angeles, California. The case status is Disposed - Judgment Entered.

Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    ****2829

  • Filing Date:

    02/05/2018

  • Case Status:

    Disposed - Judgment Entered

  • Case Type:

    Contract - Other Contract

  • County, State:

    Los Angeles, California

 

Party Details

Cross Defendants, Petitioners and Plaintiffs

KUKDONG CORP.

ROES 1 THROUGH 10

Respondents and Defendants

DOES 1 TO 20

DREAM APPAREL INC

LEE JAMES J.

DREAM APPAREL INC.

Defendant and Cross Plaintiff

DREAM APPAREL INC.

Attorney/Law Firm Details

Petitioner and Plaintiff Attorneys

RAMJI RIZWAN R. ESQ.

VALLE JEFFREY B

VALLE JEFFREY BOYD

Defendant Attorneys

BLOOM JAY S. ESQ.

BLOOM JAY S ESQ.

BLOOM JAY STEVEN

 

Court Documents

Writ - Return

9/13/2021: Writ - Return

Status Report

7/19/2019: Status Report

Notice - NOTICE OF WITHDRAWAL OF MOTION FOR SUMMARY ADJUDICATION

7/22/2019: Notice - NOTICE OF WITHDRAWAL OF MOTION FOR SUMMARY ADJUDICATION

Notice of Posting of Jury Fees

7/22/2019: Notice of Posting of Jury Fees

Notice - NOTICE OF ERRATA RE: PLAINTIFF'S STATUS REPORT ON MEDIATION FOR AUGUST 8, 2019 CONFERENCE

7/22/2019: Notice - NOTICE OF ERRATA RE: PLAINTIFF'S STATUS REPORT ON MEDIATION FOR AUGUST 8, 2019 CONFERENCE

Minute Order - MINUTE ORDER (POST-MEDIATION STATUS CONFERENCE)

8/7/2019: Minute Order - MINUTE ORDER (POST-MEDIATION STATUS CONFERENCE)

Memorandum of Points & Authorities

8/29/2019: Memorandum of Points & Authorities

Opposition - OPPOSITION TO DEFENDANT'S EX PARTE APPLICATION FOR ISSUANCE OF A PROTECTIVE ORDER, OR, ALTERNATIVELY, ORDER SHORTENING TIME; DECLARATION OF KATHERINE BALATBAT

8/29/2019: Opposition - OPPOSITION TO DEFENDANT'S EX PARTE APPLICATION FOR ISSUANCE OF A PROTECTIVE ORDER, OR, ALTERNATIVELY, ORDER SHORTENING TIME; DECLARATION OF KATHERINE BALATBAT

Declaration in Support of Ex Parte Application

8/29/2019: Declaration in Support of Ex Parte Application

Minute Order - MINUTE ORDER (HEARING ON EX PARTE APPLICATION FOR ISSUANCE OF PROTECTIVE ORDER)

8/30/2019: Minute Order - MINUTE ORDER (HEARING ON EX PARTE APPLICATION FOR ISSUANCE OF PROTECTIVE ORDER)

Ex Parte Application - EX PARTE APPLICATION EX PARTE APPLICATION FOR ISSUANCE OF PROTECTIVE ORDER

8/30/2019: Ex Parte Application - EX PARTE APPLICATION EX PARTE APPLICATION FOR ISSUANCE OF PROTECTIVE ORDER

Minute Order - MINUTE ORDER (HEARING ON EX PARTE APPLICATION FOR ISSUANCE OF PROTECTIVE ORDER)

9/5/2019: Minute Order - MINUTE ORDER (HEARING ON EX PARTE APPLICATION FOR ISSUANCE OF PROTECTIVE ORDER)

Minute Order - MINUTE ORDER (POST-MEDIATION STATUS CONFERENCE)

9/9/2019: Minute Order - MINUTE ORDER (POST-MEDIATION STATUS CONFERENCE)

Declaration - DECLARATION OF KATHERINE BALATBAT ISO MOTION FOR LEAVE TO AMEND

9/16/2019: Declaration - DECLARATION OF KATHERINE BALATBAT ISO MOTION FOR LEAVE TO AMEND

Declaration - DECLARATION OF RIZWAN RAMJI ISO MOTION FOR LEAVE TO AMEND

9/16/2019: Declaration - DECLARATION OF RIZWAN RAMJI ISO MOTION FOR LEAVE TO AMEND

Motion for Leave to Amend - MOTION FOR LEAVE TO AMEND MOTION FOR LEAVE TO FILE FIRST AMENDED COMPLAINT

9/16/2019: Motion for Leave to Amend - MOTION FOR LEAVE TO AMEND MOTION FOR LEAVE TO FILE FIRST AMENDED COMPLAINT

Memorandum of Points & Authorities

9/23/2019: Memorandum of Points & Authorities

Notice - NOTICE OF DEFENDANTS' OPPOSITION TO PLAINTIFF'S MOTION TO FILE FIRST AMENDED COMPLAINT

9/23/2019: Notice - NOTICE OF DEFENDANTS' OPPOSITION TO PLAINTIFF'S MOTION TO FILE FIRST AMENDED COMPLAINT

140 More Documents Available

 

Docket Entries

  • 09/13/2021
  • DocketWrit - Return

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  • 02/01/2021
  • DocketWrit of Execution ((Los Angeles)); Filed by Kukdong Corp. (Plaintiff)

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  • 01/26/2021
  • DocketNotice (of Entry of Amended Judgment); Filed by Kukdong Corp. (Plaintiff)

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  • 01/26/2021
  • DocketWrit - Return; Filed by Kukdong Corp. (Plaintiff)

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  • 01/15/2021
  • DocketJudgment ([PROPOSED] AMENDED JUDGMENT BY THE COURT AFTER ENTRY OF DEFAULT); Filed by Kukdong Corp. (Plaintiff)

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  • 01/05/2021
  • DocketNotice of Rejection - Post Judgment; Filed by Clerk

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  • 11/09/2020
  • DocketWrit of Execution ((Los Angeles)); Filed by Kukdong Corp. (Plaintiff)

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  • 10/19/2020
  • DocketMemorandum of Costs After Judgment, Acknowledgment of Credit, and Declaration of Accrued Interest; Filed by Kukdong Corp. (Plaintiff)

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  • 10/13/2020
  • DocketAbstract of Judgment - Civil and Small Claims; Filed by Kukdong Corp. (Plaintiff)

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  • 10/08/2020
  • DocketNotice of Rejection - Post Judgment; Filed by Clerk

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201 More Docket Entries
  • 04/03/2018
  • DocketAnswer and Cross-Complaint; Filed by Dream Apparel, Inc. (Defendant); James J. Lee (Defendant)

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  • 04/03/2018
  • DocketSummons; Filed by Dream Apparel, Inc. (Defendant); James J. Lee (Defendant)

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  • 04/03/2018
  • DocketDEFENDANT'S CROSS-COMPLAINT 1. BREACH OF WRITTEN CONTRACT; ETC.

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  • 04/03/2018
  • DocketDEFENDANTS' ANSWER TO PLAINTIFF'S COMPLAINT

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  • 03/06/2018
  • DocketPROOF OF SERVICE RE DEFENDANTS DREAM APPAREL, INC., AND JAMES J. LEE

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  • 03/06/2018
  • DocketProof of Service (not Summons and Complaint); Filed by Plaintiff/Petitioner

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  • 02/05/2018
  • DocketComplaint; Filed by Kukdong Corp. (Plaintiff)

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  • 02/05/2018
  • DocketCOMPLAINT FOR: 1. BREACH OF WRITFEN CONTRACT; ETC

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  • 02/05/2018
  • DocketSummons; Filed by Kukdong Corp. (Plaintiff)

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  • 02/05/2018
  • DocketSUMMONS

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Tentative Rulings

Case Number: BC692829    Hearing Date: June 23, 2020    Dept: 24

Plaintiff Kukdong Corp.’s motion for terminating sanctions is GRANTED. Defendants Dream Apparel Inc. and James J. Lee’s answer is stricken. The Court awards monetary sanctions against Defendants Dream Apparel Inc. and James J. Lee and their counsel of record in the total amount of $23,000.00.

On February 5, 2018, Plaintiff Kukdong Corp. (“Plaintiff”) filed this breach of contract action against Defendant Dream Apparel Inc. (“Dream Apparel”) and James J. Lee (“James”) (collectively “Defendants”). Plaintiff is an apparel-manufacturing company that agreed to provide clothing to Defendants. Defendants import and sell women’s clothing and other items to retailers. Defendants agreed to pay $13,191,457 for the clothing. Defendants failed to pay Plaintiff. The operative Second Amended Complaint (“SAC”) alleges six causes of action for: 1) breach of written contract, 2) fraud; 3) civil RICO; 4) unfair business acts and practices; 5) conversion; and 6) common count – goods sold and delivered.

On March 3, 2020, Plaintiff filed the instant motion for Terminating or Monetary Sanctions against Defendants and their attorney of record Jay S. Bloom (“Bloom”) for mis-use of the discovery process. On March 27, 2020, Defendants filed an opposition. On April 13, 2020, Plaintiff filed a reply.

Legal Standard

If a party fails to obey a court order compelling it to provide a discovery response, “the court may make those orders that are just, including the imposition of an issue sanction, an evidence sanction, or a terminating sanction . . . In lieu of or in addition to this sanction, the court may impose a monetary sanction . . . .” (CCP §§ 2030.290(c), 2030.300(e), 2031.300(c), 2031.320(c).) Misuse of the discovery process, which includes disobeying a court order to provide discovery, is conduct subject to sanctions. (CCP § 2023.010(g).) Possible sanctions are:

(a) [A] monetary sanction ordering that one engaging in the misuse of the discovery process, or any attorney advising that conduct, or both pay the reasonable expenses, including attorney's fees, incurred by anyone as a result of that conduct….

(b) [A]n issue sanction ordering that designated facts shall be taken as established in the action in accordance with the claim of the party adversely affected by the misuse of the discovery process. The court may also impose an issue sanction by an order prohibiting any party engaging in the misuse of the discovery process from supporting or opposing designated claims or defenses.

(c) [A]n evidence sanction by an order prohibiting any party engaging in the misuse of the discovery process from introducing designated matters in evidence.

(d) [A] terminating sanction by one of the following orders:

(1) An order striking out the pleadings or parts of the pleadings of any party engaging in the misuse of the discovery process.

(2) An order staying further proceedings by that party until an order for discovery is obeyed.

(3) An order dismissing the action, or any part of the action, of that party.

(4) An order rendering a judgment by default against that party.

(e) [A] contempt sanction by an order treating the misuse of the discovery process as a contempt of court.

(CCP § 2023.030 [emphasis added].)

The party seeking to impose sanctions need only show the failure to obey earlier discovery orders. (Puritan Ins. Co. v. Superior Court (1985) 171 Cal.App.3d 877, 884 [interpreting former statute dealing with “refusal” to comply].) However, numerous cases hold that severe sanctions (i.e., terminating or evidentiary sanctions) for failure to comply with a court order are allowed only where the failure was willful. (See R.S. Creative, Inc. v. Creative Cotton, Ltd. (1999) 75 Cal.App.4th 486, 495; Vallbona v. Springer (1996) 43 Cal.App.4th 1525, 1545; Biles v. Exxon Mobil Corp. (2004) 124 Cal.App.4th 1315, 1327.) The burden of proof then shifts to the party seeking to avoid sanctions to establish a satisfactory excuse for his or her conduct. (Corns v. Miller (1986) 181 Cal.App.3d 195, 201; Williams v. Russ (2008) 167 Cal.App.4th 1215, 1227.)

Evidentiary Objections

Plaintiff’s objections to the Bloom Declaration nos. 2-11 are SUSTAINED. Objection no. 1 is OVERRULED. While the Court agrees that the Korean complaint is irrelevant and unauthenticated, and that the declaration is rife with hearsay, legal conclusions and arguments, the Court will not strike the entirety of the declaration.

Request for Judicial Notice

Plaintiff’s request for judicial notice is GRANTED. (RJN Exs. A-E.) The documents are properly noticed under Evid. Code section 452(d).

Defendant’s Merit-Based Arguments

Defendants, in part, argue that their discovery abuses are excusable because they believe they can win the suit on the merits. Particularly, they cite to purported contradictions between the SAC and a Korean criminal complaint. Defendants’ argument to this end is not well-taken. Such arguments are a transparent attempt to distract the Court from the discovery violations. Defendants supply no authority that this would justify the willful spoliation of evidence. The Court does not find Defendants’ citations to the substantive issues on the suit persuasive. No authority justifies this position, as substantive issues are irrelevant as to whether discovery abuses occurred. Therefore, the Court will not consider Defendants’ arguments on this point unless they have some bearing on the matter at hand.

Discussion

Plaintiff seeks terminating and monetary sanctions for Defendants’ willful destruction of evidence.

Spoliation of evidence means the destruction or significant alteration of evidence or the failure to preserve evidence for another's use in pending or future litigation. (Willard v. Caterpillar, Inc. (1995) 40 Cal.App.4th 892, 907, overruled on other grounds in Cedars–Sinai Medical Center v. Superior Court (1998) 18 Cal.4th 1, 18, fn. 4 (Cedars.).) Such conduct is condemned because it “can destroy fairness and justice, for it increases the risk of an erroneous decision on the merits of the underlying cause of action. Destroying evidence can also increase the costs of litigation as parties attempt to reconstruct the destroyed evidence or to develop other evidence, which may be less accessible, less persuasive, or both.” (Cedars, supra, 18 Cal.4th at 8.)

While there is no tort cause of action for the intentional destruction of evidence after litigation has commenced, it is a misuse of the discovery process that is subject to a broad range of punishment, including monetary, issue, evidentiary, and terminating sanctions. (Williams v. Russ (2008) 167 Cal.App.4th 1215, 1223; see CCP §§ 2023.010(d), 2023.030(a)-(d).) Generally, severe sanctions should generally not be imposed until the court has attempted less severe alternatives and found them to be unsuccessful and/or the record clearly shows lesser sanctions would be ineffective. (Lopez v. Watchtower Bible and Tract Society of New York, Inc. (2016) 246 Cal.App.4th 566, 604 [terminating sanctions order reversed where there was no showing the court could not have obtained compliance by using lesser sanction e.g., issue or evidentiary].) In extreme cases, terminating sanctions as a first measure are authorized. (New Albertsons, Inc. v. Superior Court (2008) 168 Cal.App.4th 1403, 1434 [“sufficiently egregious, misconduct committed in connection with the failure to produce evidence in discovery may justify the imposition of nonmonetary sanctions even absent a prior order compelling discovery, or its equivalent. Furthermore, a prior order may not be necessary where it is reasonably clear that obtaining such an order would be futile.”]; accord Williams, supra, 167 Cal.App.4th at 1223.) However, numerous cases hold that severe sanctions (i.e., terminating or evidentiary sanctions) are allowed only where the violation was willful. (See R.S. Creative, Inc. v. Creative Cotton, Ltd. (1999) 75 Cal.App.4th 486, 495; Vallbona v. Springer (1996) 43 Cal.App.4th 1525, 1545; Biles v. Exxon Mobil Corp. (2004) 124 Cal.App.4th 1315, 1327.)

Plaintiff presents uncontroverted evidence that Defendants extensively destroyed evidence. Defendants admit as much in their depositions and their opposing papers. (Opp. at 5:11-12, 7:9-10, 18-20.) In fact, Defendants begin their opposition by admitting “the evidence shows that defendants may have committed discovery violations involving responses to written discovery.” (Opp. at 5.) An argument that the Court can hardly ignore. Consequently, the only issue is whether terminating sanctions are justified, or lesser monetary sanctions would suffice.

Here, Plaintiff presents evidence that Defendants willfully destroyed responsive emails before and during the pendency of this suit. Hak Lee (“Hak”) and James admitted to systematically destroying all email communications, including during the pendency of this litigation. James, Hak and Dream Apparel staff deleted all the company’s email communications as a matter of “company policy.” (Balatbat Decl., Ex. KK at 45:24-47:3) James testified that he deleted documents regularly whenever transactions were “completed.” (Id., Ex. KK [11/14/19 Tr. at 24:3-26:25]; see also Ex. FF [Resp. to SROG No. 61].) James destroyed every email responsive to Kukdong’s document requests. (Id., Ex. KK at 25:8-22; 262:21-263:10.) James deleted the emails from his brother that supposedly transmitted the annual balance sheet purporting to reconcile Dream Apparel’s payments to SJ Mode with invoices for Kukdong’s goods. (Id., Ex. KK at 307:23-309:7.) James deleted his communications with Dream Apparel’s customer E.S. Sutton that referred to Kukdong and all the purchase orders from E.S. Sutton related to this case. (Id., Ex. KK at 28:7-16; 244:2-3.) James and Hak deleted their texts with each other. (Id. at 291:25-292:4; Ex. JJ at 47:5-49:22.) James deleted all the invoices sent by SJ Mode to Dream Apparel relating to the goods manufactured by Kukdong. (Id., Ex. KK at 81:9-15.) James deleted communications with Prime relating to Kukdong during the pendency of this litigation. (Id. at 269-270.) Hak and James continued their practice of deleting emails even after Kukdong’s complaint was filed. (Id., Ex. KK at 26:12-18; Ex. JJ at 121:11-17.)

Plaintiff also presents evidence that Defendants made a number of misrepresentations in their discovery responses, specifically regarding their efforts to find these (deleted) documents and their existence. For example, in contradiction to Dream Apparel’s affirmation that they had made a diligent and reasonable inquiry in an effort to comply with Kukdong’s document demands, Hak testified that he was unaware of Kukdong’s document demands and did not search for documents or emails. (Balatbat Decl., Ex. JJ [9/27/19 Tr. at 43:4-44:14; 11/13/19 Tr. at 177:20-178:11].) Further contradicting this testimony, James testified that it was Hak who searched for and collected the documents produced to Kukdong. (Id., Ex. KK [2/14/20 Tr. at 81:2-11].) James admitted that he had access to these email accounts, but he did not search his SJ Mode email and a Dream Apparel gmail accounts for documents related to Kukdong. (Id., Ex. KK [2/14/20 Tr. at 20:13-16; 31:2-10].) He further contradicted his discovery responses by admitting that he did not search for emails to and from Sam Lee’s email account. (Id., Ex. KK [Tr. at 112:16-20; 116:10-15].) His brother shut off his access to his emails last fall and his SJ Mode emails are now lost. (Id., Ex. KK [2/14/20 Tr. at 19:16-20:16].) James admitted to deleting the emails his brother sent transmitting documents for production to Kukdong during this litigation and then represented to Kukdong that such emails had ever existed. (Id., Ex. KK [Tr. at 111:3-11; 113:5- 115:3; 119:1-5; 123:4-20; 125:2-23; 303:20-304:5.].) Later, James could not recall how any of the documents Dream Apparel produced had been located and what documents he obtained from his brother. (Id., Ex. KK [2/14/20 Tr. at 51:20-53:23; 63:12-65:8; 82:2-12; 122:7-123:2].)

Plaintiff also contends that Defendants fabricated evidence. To demonstrate that it has fully paid SJ Mode for Kukdong’s goods, Defendants produced a series of balance sheets purporting to show each SJ Mode invoice for Kukdong’s goods that Dream Apparel paid. Plaintiff asserts that they cannot show that it paid SJ Mode fully for Kukdong’s clothing because the purported balance sheet Defendants produced is based on a second set of false invoices that do not accurately reflect the price of Kukdong’s goods. (Balatbat Decl., Ex. KK [2/14/20 Tr. at 96:21-103:25].) Again, James deleted the emails that transmitted the annual balance sheet purporting to reconcile Dream Apparel’s payments to SJ Mode with invoices for Kukdong’s goods. (Id., Ex. KK at 307:23-309:7.)

To say the least, this evidence paints a troubling pattern of spoliation of evidence critical to this case. The destruction is significant since the deleted communications go to the core of the dispute in this case—whether Defendants were a party to the contracts at issue. Defendants’ defense, while shifting, essentially is that they were not parties. Dream Apparel claims for that it never entered into contracts with Kukdong, and SJ Mode, not Dream Apparel, owes Kukdong for the ordered goods. For example, in response to special interrogatories, Dream Apparel claimed that Kukdong never sent it invoices, and that the stamps on the contracts were false. (Ex. I at 2:23-3:5.) James admits he told Kukdong he would pay for the apparel ordered on Dream Apparel’s behalf, but explained he made the promises at his brother’s request and not because Dream Apparel owed any money to Kukdong. (Balatbat Decl., Ex. KK at 184:1-19; 186:20-23; 194:25-198:24; 210:15-20; 213:10-17, 215:6-9.) Notably, he admits to deleting these emails as well. (Id., Ex. KK at 243:2-6; 262:10-20.)

This shows the high degree of prejudice to Plaintiff’s ability to prosecute their suit. The communications between James and SJ Mode’s Sam Lee are central to each of Kukdong’s claims and Dream Apparel’s defenses. These communications would tend to show whether Defendants were aware that Sam had entered into sales contracts on their behalf, whether SJ Mode transmitted Kukdong’s invoices and shipping documents to Dream Apparel, whether SJ Mode’s wire transfer requests were created for the purpose of this litigation, and whether Dream Apparel and SJ Mode conspired to defraud Kukdong (and potentially other Korean manufacturers) by purposely confusing SJ Mode and Dream Apparel.

Defendants’ opposition may be summed in two points: 1) Defendants did not delete all the evidence in the case, as they have produced other documents in response to discovery requests; and 2) there is no prejudice to Plaintiff. Both miss the mark and fail to justify their admitted destruction of relevant responsive documents. Defendants misrepresent the breadth of their misconduct by claiming that they simply mistakenly failed to disclose “marginally relevant documents” that Kukdong found anyway, and that Kukdong was aware of its own communications with Dream Apparel. (Opp. at 13.) Of course, this simply ignores the fact that the admitted to deleting an unknown number of emails between SJ Mode and Dream Apparel.

Defendants’ claim that the only prejudice Kukdong suffered is the $70,000 in attorneys’ fees and costs related to obtaining third party discovery. This, of course, misrepresents the nature of discovery abuses and the prejudice that Plaintiff suffered. Whatever communications existed, whether harmful or supportive of Plaintiff’s case, are hidden as a result of Defendants’ misconduct. Defendants attempt to attack Plaintiff’s claims by stating that the contracts are “phony” and that Dream Apparel was never a party to the contracts at issue. (Bloom Decl., ¶ 15.) But the emails may have confirmed or denied this.

Defendants also downplay their spoliation of evidence, suggesting that it was just a longstanding business practice of deleting all of their business emails (and texts). This assertion is incredible. Simply put, the Court does not believe that a sophisticated business man in the international textile trade, dealing in multimillion dollar contracts, regularly deletes business records as a matter of course. Even if Dream Apparel and SJ Mode had such a company policy, the only reasonable conclusion is that policy is designed to frustrate anticipated and current litigation. This purported “business practice” simply demonstrates that they willfully destroyed evidence, since they did not suspend their deletion of emails and documents after this lawsuit was filed. In any event, Defendants admit blatant discovery abuse.

Considering the extensive evidence of discovery abuses, and the nature of those abuses, the Court finds that terminating sanctions would be proper as a first measure. Due to the suppression of evidence, any motion to compel brought here would have been futile. The record clearly shows lesser sanctions would be ineffective.

Additional Monetary Sanctions

Plaintiff requests an additional $70,000.00 monetary sanction against Defendants as well as their counsel of record Jay S. Bloom, Esq. This sanction is based on work performed in connection with Defendants’ discovery abuses. (Balatbat Decl., ¶¶ 28-32.) This includes time charged by Balatbat at the rate of $575 per hour and Ilan Wisnia at the rate of $475 per hour.

Wisnia spent in excess of 40 hours drafting subpoenas to third parties, meeting and conferring with third parties about the subpoenas, communicating with the deposition officer about the subpoenas, reviewing Prime's document production for missing attachments and emails, meeting and conferring with Prime's in-house counsel to locate the missing attachments and emails, coordinating with our New York counsel and drafting meet and confer letters to Bloom about Defendants' deficient discovery responses and document production. This comes to $19,000.00 in fees.

Balatbat claims an excess of 80 hours revising and drafting subpoenas to third parties engaging New York counsel for preparing and serving a subpoena on E.S. Sutton, discussing New York law regarding third party discovery with our New York counsel, preparing an order to show cause to be filed in New York, meeting and conferring with E.S. Sutton and its counsel about the subpoena, preparing a protective order, negotiating the protective order with E.S. Sutton, meeting and conferring with Jay Bloom regarding Defendants' deficient and incomplete discovery responses and document production and the draft protective order requested by E.S. Sutton, drafting and revising meet and confer letters and emails to Jay Bloom, and meeting and conferring with Master Customs Service regarding the subpoena for its documents. Balatbat claims an additional 40 hours preparing the instant motion for Monetary Sanctions and supporting papers. Balabat claims $47,300.00 in fees.

In light of granting terminating sanctions, the Court is inclined to grant reasonable monetary sanctions to compensate for the preparation of the instant motion. The Court finds that a reasonable sanction in this instance would be $23,000.00.

The Court finds that Bloom should be jointly and severally liable for the sanctions.

Bloom has represented Defendants for many years and through several litigations, he does not deny in his declaration that he failed to put a litigation hold in place and instead allowed Defendants to continue their destruction of relevant evidence.

Accordingly, Plaintiff’s motion for terminating sanctions is GRANTED. Defendants’ answer is stricken and default is entered. The Court awards monetary sanctions against Defendants and their counsel of record in the total amount of $23,000.00. Moving party is ordered to give notice.

Case Number: BC692829    Hearing Date: January 31, 2020    Dept: 24

Plaintiff Kukdong Corp.’s motion for leave to file a Second Amended Complaint is GRANTED.

On February 5, 2018, Plaintiff Kukdong Corp. (“Plaintiff”) filed this breach of contract action against Defendant Dream Apparel Inc. and James J. Lee (collectively “Defendants”). Plaintiff is an apparel-manufacturing company that agreed to provide clothing to Defendants. Defendants import and sell women’s clothing and other items to retailers. Defendants agreed to pay $13,191,457 for the clothing. Defendants filed to pay Plaintiff. The operative First Amended Complaint (“FAC”) alleges eight causes of action for: 1) breach of contract, 2) breach of the implied covenant of good faith and fair dealing; 3) conversion; 4) unfair business practices; 5) intentional interference with prospective economic advantage; 6) negligence interference with prospective economic advantage; 7) intentional interference with contract; and 8) unjust enrichment. Trial is set for May 11, 2020.

On December 13, 2019, Plaintiff moved for leave to amend to file the proposed Second Amended Complaint (“SAC”), which will remove several causes of action and add new causes for fraud, a violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), and common count. On January 17, 2020, Defendants filed an opposition. On January 24, 2020, Plaintiff filed a reply.

Legal Standard

If a plaintiff wishes to amend a complaint after the answer has been filed or after the demurrer has been filed and after the hearing on the demurrer, or if he or she has already amended the complaint “of course,” permission of the court must be obtained before the amendment will be allowed. (CCP §§ 473(a)(1), 576.)

Motions for leave to amend the pleadings are directed to the sound discretion of the court. “The court may, in furtherance of justice, and on any terms as may be proper, allow a party to amend any pleading . . . .” (CCP § 473(a)(1); see CCP § 576.) Policy favors liberally granting leave to amend so that all disputed matters between the parties may be resolved. (See Howard v. County of San Diego (2010) 184 Cal.App.4th 1422, 1428.) Absent prejudice to the adverse party, the court may permit amendments to the complaint “at any stage of the proceedings, up to and including trial.” (Atkinson v. Elk Corp. (2003) 109 Cal.App.4th 739, 761 [internal quotes omitted].) Where leave is sought to add entirely new claims, the court may grant leave to amend if the new claims are based on the same general set of facts, and the amendment will not prejudice the opposing party. (Austin v. Massachusetts Bonding & Ins. Co. (1961) 56 Cal.2d 596, 600-602; Glaser v. Meyers (1982) 137 Cal.App.3d 770, 777 [holding trial court did not abuse its discretion in permitting amendment of complaint, which originally alleged constructive eviction, to allege retaliatory eviction where the new claim was based on the same general set of facts].)

Although denial is rarely justified, a judge has discretion to deny leave to amend if the party seeking the amendment has been dilatory, and the delay has prejudiced the opposing party. (Morgan v. Sup.Ct. (1959) 172 Cal.App.2d 527, 530; see also Hirsa v. Superior Court (1981) 118 Cal.App.3d 486, 490). An opposing party is prejudiced where the amendment would necessitate a trial delay along with a loss of critical evidence, added preparation expense, increased burden of discovery, etc. (Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 486-488 [leave properly denied where plaintiff sought leave on the eve of trial, nearly two years after the complaint was originally filed and gave no explanation for the delay which prejudiced defendant who did not discover or depose many of the witnesses who would support the new allegations and had not marshaled evidence in opposition of the new allegations].)

Discussion

Procedure

A motion for leave to amend must state with particularity what allegations are to be amended. Namely, it must state what allegations in the previous pleading are proposed to be deleted and/or added, if any, and where, by page, paragraph, and line number. (CRC, Rule 3.1324(a)(2)-(3).) The motion must be accompanied by a declaration specifying: (1) the effect of the amendment; (2) why the amendment is necessary and proper; (3) when the facts giving rise to the amended allegations were discovered; and (4) the reasons why the request for amendment was not made earlier. (CRC, Rule 3.1324(b).) The motion must also be accompanied by the proposed amended pleading, numbered to differentiate it from the prior pleadings or amendments. (CRC, Rule 3.1324(a)(1).) It is within the court’s discretion to require compliance with Rule 3.1324 before granting leave to amend. (Hataishi v. First American Home Buyers Protection Corp. (2014) 223 Cal.App.4th 1454, 1469.)

The Court finds that the motion complies with the court rules stated above. The declaration states the affect of the amendment, its necessity, and the facts regarding discovery. The proposed amendment is provided, along with a redlined version.

Delay

Here, no delay is apparent. Plaintiff provides an adequate showing that it discovered the instant claims during the deposition of Lee, which took place in November 2019. The instant motion was made less than a month later. Particularly, Plaintiff points to Lee’s testimony that Lee admitted that the contracts between Dream Apparel and the Korean manufacturers are in virtually the same format with the stamp of his signature as President of Dream Apparel. (Balatbat Decl., ¶ 12, Ex. P (“Lee Depo.”), at 233:24-234:14.) Lee claimed that the sales contracts are invalid because his brother had no authority to enter into the sales contracts on Dream Apparel’s behalf. (Id. at 314:7-315:12.) Both Dream Apparel and SJ Mode have denied any liability to Kukdong, pointing the finger at the other brother and other company. However, Lee admitted promising Kukdong that he would pay for the goods shipped to Dream Apparel. (Id. at 165:21-166:8; 169:18-170:18; 171:7-9; 179:14-20; 187:11-188:2; 203:12-17; 207:7-208:25; 221:6-222:18.) Lee knew that Kukdong was continuing to ship product to Dream Apparel because he had promised Kukdong that he would pay. (Id. at 245:1-21.) Lee testified that he only sent those emails to Kukdong and made those promises because his brother said it was necessary. (Id. at 184:1-19; 186:20-23; 194:25-198:24; 210:15-20; 213:10-17, 215:6-9.)

Plaintiff states that this newly discovered evidence suggests a racketeering scheme between Lee, controlling Dream Apparel, and his brother, controlling SJ Mode. Plaintiff asserts that Dream Apparel contracts with the manufacturer for goods by having SJ Mode email sales contracts stamped with Dream Apparel’s signature as the purported buyer. Then, Dream Apparel accepts the goods provided by the manufacturers pursuant to those sales contracts. Dream Apparel receives payment for the goods it provides to its customers, but fails to fully pay the manufacturer for the goods, and wires millions from its U.S. bank account to various SJ Mode bank accounts in Korea, leaving Dream Apparel with insufficient funds to pay the manufacturer. After the fact, Dream Apparel and SJ Mode deny any liability for payment to the manufacturers on the basis that the other brother or other company was the one responsible for payment under the sales contracts. Plaintiff notes that the deposition testimony and the email correspondences during 2015 show this pattern.

Plaintiff also notes that this was not discovered earlier because Defendants concealed their fraudulent intent prior to Lee’s deposition. Defendants providing incomplete and misleading discovery responses and destroying documents. In their discovery responses, Defendants had claimed that (a) Lee did not recall any discussion “concerning the party who actually owed the claimed debt,” and (b) Lee told Kukdong that he would attempt to get SJ Mode to pay what was owed. (Batlatbat Decl., Ex. J at 7:17-21.) However, Defendants failed to provide any communications between themselves and SJ Mode, leaving Plaintiff to resort to third party discovery and the deposition.

Further, it was not until Fall 2019 that Plaintiff discovered that two other Korean manufacturers had filed lawsuits based on similar facts, further suggesting fraudulent intent/RICO violation. The first lawsuit was filed on September 12, 2019 and the second on November 22, 2019. (Balatbat Decl. ¶¶ 11, 13, Exs. O, Q.)

Therefore, no undue delay is apparent.

Prejudice

Even if the Court were to assume delay, Defendants have not established any prejudice caused by such delay in amendment. Defendants essentially only identify substantive liability issues as prejudice, i.e., that the instant parties never had a contract in the first place. Of course, this does not explain how Defendants would be prejudiced by amendment. Any substantive issues may be addressed through appropriate means, such as demurrers, summary judgment, or trial. Defendant also references discovery in the other cases filed against it but does not explain how that discovery affects this case.

Defendants’ opposition fails to identify any prejudice they would suffer as a result of granting leave to amend. The Court finds none. Accordingly, Plaintiff’s motion is GRANTED.

Moving party is ordered to give notice.

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