Case Number: SC127984 Hearing Date: March 12, 2019 Dept: K

Case Name: Tower Glass, Inc. v. 2834 Colorado Avenue LLC, et al.

Case No.: SC127984 Complaint Filed: 08/18/17

Hearing: 3/12/19 Motion C/O: 06/23/19

Calendar #: Discovery C/O: 06/08/19

Notice: OK Trial Date: 07/08/19

______________________________________________________________________________

SUBJECT: (1) MOTION TO COMPEL FURTHER RESPONSES FROM DEFENDANTS/ CROSS-COMPLAINANTS TESLA WALL SYSTEMS, LLC AND ASIS MANUFACTURE QC LTD TO SPECIAL INTERROGATORIES (SET TWO)

(2) MOTION TO COMPEL FURTHER RESPONSES FROM DEFENDANTS/ CROSS-COMPLAINANTS TESLA WALL SYSTEMS, LLC AND ASIS MANUFACTURE QC LTD TO REQUESTS FOR PRODUCTION (SET ONE)

MP: Plaintiff/Cross-defendant Tower Glass, Inc.

RP: Defendants/Cross-complainants Tesla Wall Systems, LLC and Asis Manufacture QC LTD

BACKGROUND

This action arises out a construction project to build a creative work space in Santa Monica. The General Contractor McCormick (“GC”) hired sub-contractor Plaintiff Tower Glass, Inc. to provide glazing and curtain wall work in the creative work space. Plaintiff in turn contracted with sub-sub-contractor Defendants Tesla Wall Systems, LLC and Asis Manufacture QC LTD (“Defendants”) to build a curtain wall system in the work space. Defendants planned to use materials from China. Work began in Sept. 2015, but stopped in January 2016 because the GC instructed Plaintiff to cease the all work because the owner of the project wanted domestic materials to be used. Plaintiff is suing the GC for breach of contract and this Defendant for Declaratory Relief.

Defendants have brought a cross-complaint against Plaintiff seeking $2.5 mil in lost profits resulting from the stop work order. Plaintiff seeks to compel additional rog answers and documents regarding Defendants’ subsequent work on other projects, and Defendants have objected on relevancy grounds.

FIRST AMENDED COMPLAINT (filed 8/18/17)

  1. Declaratory relief (count 1)
  2. Breach of contract
  3. Reasonable value (count 1)
  4. Reasonable value (count 2)
  5. Declaratory relief (count 2)
  6. Recovery on mechanic’s lien release bond

CROSS-COMPLAINT (filed 8/18/17 by Cross-complainants/Defendants Tesla Wall Systems, LLC and Asis Manufacture QC LTD against Cross-defendant/Plaintiff Tower Glass, Inc.)

  1. Breach of contract
  2. Reasonable value
  3. Declaratory relief

MOTIONFiled 9/7/18

SROG: 4 interrogatories to each Defendant/Cross-complainant (items are the same for both)

This Court should compel Tesla/Asis to provide further responses regarding their contracts entered and performed and employees and independent contracts as this information is highly relevant to testing the credibility of, or refuting, Tesla/Asis’s $2.5 million lost profits claims.

RFP: 1 document demand to each Defendant/Cross-complainant (demand is the same for both)

Documents are relevant to proving or disproving Defendants would have profited from the subject project.

Impose sanctions in the collective amount of over $13,000.

OPPOSITION— Filed 1/15/19

Tower’s request seeks information on contracts Tesla has entered into for a three year

period AFTER the work on the PROJECT. It is already undisputed that the Project was the first

project Tesla worked on after it was formed, so Tower clearly only seeks to discover information

relating to the period after Tower told Tesla to cease its work. Such information has no bearing

on the lost profits or costs incurred on the Project.

Document request for records over the last two years, for projects that differ from the Project in numerous ways, (including but not limited to geography, size, types of material, and scope) are simply not relevant to the profits that were expected on the Project.

Deny Plaintiff’s request for sanctions. Impose sanctions against Plaintiff.

REPLY— Filed 1/22/19

Tesla/Asis argue, in conclusory fashion, that their contracts entered and performed after

their work on the project at issue are irrelevant. Such contracts are relevant to whether

Tesla/Asis have any financial track record or operating history. Tesla/Asis argue the interrogatories seeking information regarding their employees and independent contractors are irrelevant because they encompass employees and independent contractors who worked with Tesla/Asis after the project at issue. The requested information is highly relevant to Tesla/Asis’s lost profits claims.

Tesla/Asis argue the requested financial statements are not relevant based on the

requested time period. This is incorrect. Tesla/Asis performed work on the project from the

fall of 2015 to the beginning of 2016. Tesla’s and Asis’s financial statements are relevant to show whether they have been profitable during the relevant time period surrounding the project at issue.

TENTATIVE RULING

Plaintiff’s motion for an order compelling (1) Defendant Tesla Wall Systems, LLC to provide further responses to Plaintiff’s Special Interrogatories, Set Two, Nos. 28-31 and (2) compelling Defendant Asis Manufacture QC LTD to provide further responses to Plaintiff’s Special Interrogatories, Set Two, Nos. 31-34 is GRANTED.

Plaintiff’s motion for an order compelling (1) Defendant Tesla Wall Systems, LLC to provide further responses to Plaintiff’s Request for Production of Document, Set One, No. 19 and (2) compelling Defendant Asis Manufacture QC LTD to provide further responses to Plaintiff’s Request for Production of Document, Set One, No. 19 is GRANTED.

Plaintiff’s request for sanctions against Defendants and their counsel is GRANTED in the reduced amount of $1,370. Defendants and their counsel are ordered to provide the discovery compelled and pay these sanctions within 20 days of notice of this order.

Defendants’ request for sanctions is DENIED.

ANALYSIS

Plaintiff/Cross-defendant Tower Glass, Inc. moves for an order compelling Defendants/Cross-complainants Tesla Wall Systems, LLC (“Tesla”) and Asis Manufacture QC LTD (“Asis”) to provide further responses to Plaintiff’s (1) Special Interrogatories, Set Two, (“SROG”) and (2) Request for Production of Documents, Set One (“RFP”).

  1. Parties’ positions

Plaintiff contends that the discovery items at issue are relevant because they tend to show whether Defendants are entitled to lost profits.

Defendants contend that interrogatories and document demands for information about Defendants’ business for the time periodafter the incident between the parties is plainly irrelevant.

  1. Procedural requirements are met

Timeliness

Plaintiff’s two motions to compel further responses are timely because the parties agreed in writing to extend Plaintiff’s deadline to September 7, 2018, which is when Plaintiff filed these motions. (Code Civ. Proc., §§ 2030.300, subd. (c), 2031.310, subd. (c); SROG Motion, Floyd Decl. ¶ 7; RFP Motion, Floyd Decl. ¶ 8.)

Meet and confer

Counsel for Plaintiff states the parties engaged in a discussion of Defendants’ objections to Plaintiff’s SROG and RFP. (SROG Motion, Floyd Decl. ¶ 5; RFP Motion, Floyd Decl. ¶¶ 5-7.) The court determines that Plaintiff has satisfied the meet and confer requirement. (Code Civ. Proc., §§ 2030.300, subd. (b), 2031.310, subd. (b)(2).)

Separate Statement

California Rules of Court, rule 3.1345 requires that any motion or response involving the content of discovery, including motions to compel further responses to interrogatories and a demand for inspection of documents (Cal. Rules of Court, rule 3.1345(a)(2), (3)), contain a separate statement with the text of each request, the response, and a statement of factual and legal reasons for compelling further. (Cal. Rules of Court, rule 3.1345(a).) Here, Plaintiff filed a separate statement that contains the demands and Defendants’ responses verbatim, and reasons for compelling a further response. The Court finds that Plaintiff sufficiently satisfies California Rules of Court, rule 3.1345.

Combining Motions

Plaintiff combined separate motions to compel further responses against each defendant into one motion. Plaintiff should have separately filed a motion to compel each against Tesla and Asis. But, as Defendants did not object on this basis and the discovery items request the same information from each defendant, the court exercises its discretion to overlook this procedural irregularity.

III. Defendants’ objections to Special Interrogatories, Set Two, are not justified

Plaintiff propounded SROG Nos. 28-31 to Tesla and SROG Nos. 31-34 to Asis. The items request the same information from each defendant. The items request Defendants to give descriptions of (1) contracts they’ve entered into and (2) employees and independent contractors they’ve hired during the time after the parties engaged in the contract at issue in this case. For the two items related to Defendants’ contracts, Defendants objected based on relevance. For the two items related to Defendants’ employees or independent contractors, Defendants objected based on overbreadth and relevance.

Background Law

If a timely motion to compel has been filed, the burden is on the responding party to justify any objection or failure to fully answer the discovery request. (Coy v. Superior Court (1962) 58 Cal.2d 210, 220–221; Fairmont Ins. Co. v. Superior Court (2000) 22 Cal.4th 245, 255.) A court may compel further responses to a discovery request when “[a]n objection to an interrogatory is without merit or too general.” (Code Civ. Proc. §§ 2030.300, subd. (a)(3), 2031.310, subd. (a)(3).)

[A]ny party may obtain discovery regarding any matter, not privileged, that is relevant to the subject matter involved in the pending action…, if the matter either is itself admissible in evidence or appears reasonably calculated to lead to the discovery of admissible evidence.” (Code Civ. Proc., § 2017.010.)

The Legislature established a broad right to discovery and was aware this broad right to discovery might permit parties lacking any valid cause of action to engage in “fishing expeditions”. (Williams v. Superior Court (2017) 3 Cal.5th 531, 551.) The Legislature granted a broad right to discovery anyway, comfortable in the conclusion that “[m]utual knowledge of all the relevant facts gathered by both parties is essential to proper litigation.” (Ibid.) As a result, California law does not require a party to supply proof of any claims or defenses as a condition to obtaining discovery in support of those claims or defenses. (Ibid.)

Further, for discovery purposes, information is relevant if it might reasonably assist a party in evaluating the case, preparing for trial, or facilitating settlement. (Gonzalez v. Superior Court (1995) 33 Cal.App.4th 1539, 1546.) Admissibility is not the test and information, unless privileged, is discoverable if it might reasonably lead to admissible evidence. (Ibid.) These rules are applied liberally in favor of discovery and, contrary to popular belief, fishing expeditions are permissible in some cases. (Ibid.)

Discussion – relevance objection to discovery items about Defendants’ contracts

Defendants fail to show the interrogatories relating to the number and description of contracts (SROG Nos. 28, 29 to Tesla and SROG Nos. 31, 32 to Asis) are irrelevant to the subject matter involved in the pending action and do not appear reasonably calculated to lead to the discovery of admissible evidence.

In Defendants’ cross-complaint, they seek $2.5 mil compensatory relief for lost profits. The existence and description of Defendants’ contracts (even after the contractual relationship with Plaintiff) are relevant to evaluating Defendants’ ability to generate the amount of anticipated profits they seek. The existence and description of Defendants’ contracts made after the incident with Plaintiff would lend credibility to the amount of lost profits claimed by Defendants. As pointed out by Plaintiffs, this is particularly relevant where there has been no past history of profit making ventures with which to compare the work on the project at issue.

In opposition, Defendants’ attempt to justify the relevance is a conclusory assertion that the contracts are not relevant.

Accordingly, the relevance objections to SROG Nos. 28, 29 to Tesla and SROG Nos. 31, 32 to Asis are not justified.

Discussion – relevance objection to discovery items about Defendants’ employees and independent contractors

For the same reasons as above, Defendants fail to show the interrogatories relating to identities of employees and independent contractors (SROG Nos. 30, 31 to Tesla and SROG Nos. 33, 34 to Asis) are irrelevant to the subject matter involved in the pending action and do not appear reasonably calculated to lead to the discovery of admissible evidence. The information requested in these items could lead to admissible evidence to support or refute the amount of lost profits currently sought by Defendants.

Accordingly, the relevance objections to SROG Nos. 30, 31 to Tesla and SROG Nos. 33, 34 to Asis are not justified.

Discussion – overbreadth objection to discovery items about Defendants’ employees and independent contractors

In the opposition papers, Defendants argue that the identities of employees and independent contractors who worked with Defendants after the incident between the parties have no bearing on this case. This argument amounts to an objection based on relevance, not overbreadth. Therefore, Defendants do not carry their burden to justify their objections based on overbreadth.

Accordingly, the overbreadth objections to SROG Nos. 30, 31 to Tesla and SROG Nos. 33, 34 to Asis are not justified.

  1. Defendants’ objections to Requests for Production of Documents, Set One, are not justified

Plaintiff propounded RFP No. 19 to Tesla and RFP No. 19 to Asis. Each item requests documents related to:

Defendant’s “financial statements for the last two years, including balance sheets, statement of profits and losses, and statement of cash flows.” Because Plaintiff served the RFP on Defendants in March 2017, the “last two years” reasonably refers to documents from 2015-2016.

Defendants object based on relevance.

Good Cause

For the same reasons set forth above, Plaintiff shows good cause for the production of the 2015-2016 financial as they may relate to Defendants’ ability to generate the lost profits they seek. For example, if subsequent records indicate that Defendants have never generated a profit or never completed a job in the past, that evidence would be relevant to their ability to have completed the project at issue. By the same token, if subsequent jobs show that Defendant has consistently generated large profits after this Project, that also would be evidence to substantiate their claim of lost profits here.

Defendants’ objection based on relevance

Defendants’ argument appears to assume the phrase “the last two years” from the requests refers to documents in the last two years from the date of this hearing. Defendants argues that documents from 2017-2018 are not relevant to prove Defendants would have been profitable on the subject project because the subsequent projects have substantial differences and therefore are not useful for financial comparison. However, the requests reasonably refer to documents from 2015-2016 because the requests were served in March 2017. Defendants do not justify a relevance objection for documents that are from this earlier period. Therefore, Defendants’ objection is not justified.

Accordingly, the relevance objections to RFP No. 19 to Tesla and RFP No. 19 to Asis are not justified.

  1. Sanctions

Plaintiff requests monetary sanctions against Defendants and their counsel in the amount of $6,730 (for the SROG motion) and $6,730 (for the RFP motion) for a total amount of $13,460.

The court shall impose a monetary sanction against a party who unsuccessfully opposes a motion to compel further responses to interrogatories or a demand, unless it finds that the one subject to the sanction acted with substantial justification or that other circumstances make the imposition of the sanction unjust. (Code Civ. Proc., §§ 2030.300, subd. (d), 2031.310, subd. (h).)

Here, Plaintiff prevailed on both motions. The court finds that the imposition of sanctions would not be unjust under the circumstances. Defendants do not show that they acted with substantial justification.

The court determines that a reasonable hourly rate for these discovery motions is $250. The court determines that a reasonable amount of time billed on each motion is 1.5 based on the limited number of requests at issue. A reasonable amount of time preparing the reply to each motion is 0.5 hour. One hour attending the hearing is reasonable for both motions. Therefore, the court determines that a reasonable amount of sanctions for these motions is $1,370 ($250/hour * 1.5 hours/motion * 0.5 hour/reply * 1 hour for hearing + $120 for 2 filing fees).

Accordingly, the court GRANTS the Plaintiff’s request for sanctions against Defendants and their counsel in the reduced amount of $1,370. Defendants and their counsel are ordered to pay these sanctions within 20 days of notice of this order.

Defendants’ request for sanctions in their opposition is DENIED.