Lindsey v. Conteh , 215 Cal. Rptr. 3d 801 ( 2017 )

Filed 03/23/17.
CERTIFIED FOR PARTIAL PUBLICATION*
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
JAMES R. LINDSEY, as Trustee, etc., et
al.,
G052016
Plaintiffs and Respondents,
(Super. Ct. No. 30-2014-00739428)
v.
OPINION
ALIEU B. M. CONTEH et al.,
Defendants and Appellants.
Appeal from an order of the Superior Court of Orange County, Jacqueline
A. Connor, Temporary Judge. (Pursuant to Cal. Const., art. VI, § 21.) Affirmed.
Reed Smith, Margaret M. Grignon, Anne M. Grignon, Michael Gerst, Ilana
R. Herscovitz, James L. Sanders and Stuart A. Shanus; Genga & Associates, John M.
Genga and Khurram A. Nizami for Defendants and Appellants.
Handal & Associates, Anton N. Handal, Gabriel G. Hedrick and Lauren G.
Kane; Newmeyer & Dillion and Thomas F. Newmeyer for Plaintiffs and Respondents.
* * *
* Pursuant to California Rules of Court, rules 8.1105(b) and 8.1110, this
opinion is certified for publication with the exception of subparts B., and C. of part II.
Characterized by the trial court as litigation in which “[m]oney does not
appear to be an object to the parties and counsel[,]” this case calls on us to consider the
propriety of a discovery referee‟s order imposing $100,000 in discovery sanctions against
defendants Alieu B. M. Conteh (Conteh), Odessa Capital Inc., Dominique Financial, Ltd.,
OOA ONE, LLC, and OOA TWO, LLC (collectively, defendants), for failure to comply
with a prior discovery order. Defendants contend the referee, stipulated to by the parties
to rule on all discovery related matters, erred in imposing monetary sanctions due to both
procedural and substantive defects. Among other things, they assert that defendants‟
“substantial compliance” with the prior discovery order, combined with Conteh‟s
expressed willingness to sit for an additional deposition and produce additional
documents, precluded the levying of any sanctions. They also claim the amount of
sanctions is unjustified.
In the published portion of this opinion, we conclude that the referee‟s
order, filed with the trial court, is appealable. The language of the reference, expressly
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made under Code of Civil Procedure section 638, subdivision (a), and the actions of the
parties, the referee and the court, indicate that the reference was a general reference,
making the referee‟s order appealable once filed with the court.
In the unpublished portion, we address the merits of Defendants‟ appeal
and reject their challenges to the imposition and amount of monetary sanctions.
Defendants conceded below that they failed to comply with the prior discovery order, and
the referee did not abuse her discretion under the circumstances either in determining
monetary sanctions were appropriate despite Conteh‟s promises about his future actions,
or in calculating the amount of appropriate sanctions.
1
All further statutory references are to the Code of Civil Procedure unless
specified otherwise.
2
I
FACTS AND PROCEDURAL BACKGROUND
African Wireless, Inc. (African Wireless) is a Delaware corporation owned
by a handful of shareholders. Conteh and his closely held business entity, Dominique
Financial, Ltd., own approximately 70 percent of African Wireless shares. In addition to
being a shareholder, Conteh is African Wireless‟ CEO and Chairman of its Board of
Directors. He has the power to nominate three of the five members of the African
Wireless Board. Plaintiffs James R. Lindsey, as trustee of the Lindsey Family Trust,
William Buck Johns, Wymont Services, Ltd. and Marc van Antro (collectively, the
minority shareholders) each hold between a one and 15 percent interest in African
Wireless, and all but one acts as, or has a representative who acts as, a director of African
Wireless.
African Wireless‟ principal place of business is designated as the City of
Irvine, but the corporation has no operations, no sales and no employees. Its purpose is
to act as a holding company, with its principal asset being a 60 percent interest in
Congolese Wireless Network SPRL (Congolese Wireless). Congolese Wireless is a
business entity organized under the laws of the Democratic Republic of Congo (the
DRC). Its principal place of business is in Kinshasa, DRC, and all of its operations take
place in the DRC. Beginning in 1990, Conteh served as manager of Congolese Wireless.
With assistance from Conteh and a few politically connected and powerful citizens in the
DRC, Congolese Wireless embarked on a joint venture with another company, Vodacom
International Ltd. They created a new entity known as Vodacom Congo for the purpose
of owning and operating a wireless telephone network in the DRC.
In late 2012, a Congolese criminal tribunal allegedly convicted Conteh of
forgery, sentencing him to one year in jail. A warrant was supposedly issued for his
immediate arrest following the rejection of all appeals in the case. Conteh chose to flee
the country to avoid incarceration. Less than two years later, a Congolese commercial
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tribunal allegedly ruled against Conteh in a business lawsuit due to Conteh‟s criminal
forgery conviction. That alleged ruling prohibited Conteh from: (1) performing any acts
in the name of, and on behalf of, Congolese Wireless, and (2) representing Congolese
Wireless within any of the management and administrative bodies of Vodacom Congo.
In August 2014, the minority shareholders filed this shareholder derivative
action on behalf of African Wireless and against Conteh, as an individual, and various of
his alleged investment entities that purportedly have ties to Congolese Wireless and
African Wireless. The operative complaint alleges that over the course of nearly a
decade, Conteh took various actions and engaged in transactions that were detrimental to
African Wireless‟ interests and that usurped opportunities belonging to it. The causes of
action include breach of fiduciary duty, unjust enrichment, accounting and conversion,
and among the relief sought is monetary damages, prejudgment interest, injunctive relief,
declaratory relief and a constructive trust.
The minority shareholders sought a temporary restraining order (TRO) and
a preliminary injunction to remove Conteh from his African Wireless director position
and prohibit him from voting his shares in the corporation. The trial court denied the
TRO request, but scheduled a preliminary injunction hearing. In preparation for the
hearing, the parties initiated expedited discovery by way of interrogatories, deposition
notices, and requests for admissions and production of documents. At this point,
whatever was not already sour between the parties quickly turned such. The minority
shareholders accused Conteh, as an individual and as the representative of the business
entity defendants, of failing to produce a single document, refusing to confirm a
deposition date and appear for a deposition, and unreasonably objecting to all discovery.
In turn, defendants accused all or some of the minority shareholders of refusing to
produce for deposition a party-affiliated witness, Jonathan Sandler (Sandler), producing a
“shell” person most knowledgeable (PMK) for deposition, and failing to respond to
interrogatories and document production requests.
4
After a variety of back and forth between the parties‟ counsel, the parties
remained unable to agree on deposition schedules and locations, and each believed the
other was continuing to fail to provide meaningful discovery responses. At the
preliminary injunction hearing, the trial court briefly addressed discovery matters raised
in the parties‟ preliminary injunction papers, expressing “disappointment in the utter
inability of counsel to effectively meet and confer.” Believing a discovery referee to be
necessary, the court directed counsel to meet and confer to select one, but left the parties
to work out the details.
Thereafter, the parties agreed upon a discovery referee and related details.
They stipulated that the referee would have broad powers, including “the authority to set
the date, time, and place for any hearings determined by the discovery referee to be
necessary, to preside over hearings, to take evidence if the referee so determines, rule on
discovery objections, discovery motions, and other requests made during the course of
the hearing.” The reference order drafted by the parties, and issued by the trial court,
indicated it was made pursuant to section 638, subdivision (a), and ordered that the
parties‟ then pending discovery motions were to be heard and decided by the referee.
In January 2015, following a telephonic hearing and a review of the more
than 1,000 pages submitted in conjunction with the then pending motions to compel, the
discovery referee issued a 38-page detailed ruling and order. The referee ordered Conteh
to attend a three-day deposition in South Africa on specified dates, and Sandler to attend
a deposition in the same location on the two days prior to the start of Conteh‟s deposition.
The parties stipulated that Conteh was the PMK for each of the business entity
defendants, so his appearance would be both in his individual capacity and as PMK. As
for documents, defendants were ordered to produce the documents listed in the deposition
notices for Conteh and the business entity defendants on or before February 23, 2015 – a
date 10 days prior to Conteh‟s scheduled deposition – “at a time, place and manner
5
agreed upon by counsel.” Defendants were also ordered to provide certain verifications
and privilege logs.
Defendants served their first document production and related responses on
the agreed upon date. Two days later, defendants‟ counsel produced an additional batch
of documents without a proof of service.
Both Sandler‟s and Conteh‟s depositions took place in South Africa as
ordered by the discovery referee, with Conteh‟s lasting the full three days for which it
was scheduled. During the first day of Conteh‟s deposition, Conteh admitted that he did
not produce certain requested documents even though he acknowledged their existence,
and that he had not done a diligent search for all responsive documents “in [his]
possession and control.” He stated that additional documents were likely in his office in
South Africa or in the DRC, and that the latter could be sent by his staff in the DRC.
Two days after Conteh‟s deposition concluded, the minority shareholders
sent a motion to the discovery referee requesting that discovery sanctions be levied
against Conteh and each of the business entity defendants for their alleged failure to
comply with the portion of the referee‟s January 2015 order concerning document
production. They requested terminating, evidentiary, contempt and monetary sanctions.
Defendants opposed the sanctions motion.
Following a hearing, and taking into consideration all of the parties‟
arguments and evidence, the referee issued a detailed ruling, finding that Conteh had
violated the January 2015 order in multiple ways. Based on her factual findings, the
referee concluded that monetary sanctions were warranted, but other sanctions were not.
She found the more than $130,000 requested by the minority shareholders to be
excessive, and instead imposed $100,000 in sanctions.
The referee‟s sanctions order was filed with the trial court on May 20,
2015. Defendants timely appealed, limiting their appeal to the monetary sanctions aspect
of the order.
6
II
DISCUSSION
A. Determining the Nature of the Reference
An appeal of an order to pay monetary sanctions in an amount over $5,000
is an appealable order over which we have jurisdiction. (§ 904.1, subd. (a)(12); Rail–
Transport Employees Assn. v. Union Pacific Motor Freight (1996) 46 Cal. App. 4th 469,
471 (Rail-Transport).) Our review of the record raised a concern about whether the
discovery referee‟s ruling from which defendants appeal is a qualifying “order” given
that the trial court filed the ruling, but took no further action with respect to it. At our
request, the parties provided additional briefing concerning the nature of the reference
2
and the resulting implications on appealability. We conclude, based on the language of
the reference and the actions of the parties, the referee and the court, that the reference
was a general reference, making the referee‟s order directly appealable without further
action from the court.
The parties agree that if the reference to the referee was a “general”
reference, the referee‟s sanctions ruling stands as one of the trial court and, thus, would
be directly appealable. (§§ 644, subd. (a), 645 [“The decision of the referee appointed
pursuant to Section 638 . . . may be excepted to and reviewed in like manner as if made
by the court”]; Ellsworth v. Ellsworth (1954) 42 Cal. 2d 719, 722 (Ellsworth).) There is
also agreement on the converse – if it was a “special” reference, the ruling is not
appealable because the court did not take action to independently review and adopt it, in
2
In their supplemental briefing, the minority shareholders request that we
take judicial notice of briefs submitted by the parties concerning a motion by the minority
shareholders to strike defendants‟ answers based on a February 2016 ruling of the
discovery referee. They also request that we take judicial notice of an April 22, 2016,
trial court minute order ruling on that motion. We grant their request, but only as to the
existence of the documents, not the truth of their contents. (Kilroy v. State of California
(2004) 119 Cal. App. 4th 140, 145-147 (Kilroy); Columbia Casualty Co. v. Northwestern
Nat. Ins. Co. (1991) 231 Cal. App. 3d 457, 473 (Columbia Casualty Co.).)
7
whole or in part. (§ 644, subd. (b); Aetna Life Ins. Co. v. Superior Court (1986) 182
Cal. App. 3d 431, 436 (Aetna).) The critical question is whether the reference is properly
characterized as “general” or “special.”
The Code of Civil Procedure provides for both general and special
references. A general reference is an appointment to a referee made pursuant to section
638, subdivision (a), giving the referee authority “[t]o hear and determine any or all of
the issues in an action or proceeding, whether of fact or of law, and to report a statement
of decision.” (Italics added; see Fredendall v. Shrader (1920) 45 Cal. App. 719, 723;
Kajima Engineering & Construction, Inc. v. Pacific Bell (2002) 103 Cal. App. 4th 1397,
1400-1401; Jovine v. FHP, Inc. (1998) 64 Cal. App. 4th 1506, 1521-1522; Ruisi v.
Thieriot (1997) 53 Cal. App. 4th 1197, 1208 (Ruisi).) A special reference is an
appointment to a referee made pursuant to section 638, subdivision (b), or section 639,
giving the referee authority to perform certain specified tasks and report a
recommendation back to the trial court for independent consideration and further action
by the court. (§ 644, subd. (b); Ellsworth, supra, 42 Cal.2d at p. 722; Ruisi, supra, 53
Cal.App.4th at p. 1208; Dynair Electronics, Inc. v. Video Cable, Inc. (1976) 55
Cal. App. 3d 11, 20.) Although a special reference may be made with or without the
consent of the parties, a general reference requires the parties‟ prior consent so as to
avoid an unlawful delegation of judicial power. (§§ 638, 639; Holt v. Kelly (1978) 20
Cal. 3d 560, 562; Aetna, supra, 182 Cal.App.3d at pp. 435-436.)
To determine the nature of the reference, we look not only to the language
of the order of reference, but also to any recitals in the referee‟s ruling, the conduct of the
parties and the subsequent actions of the trial court. (See In re Estate of Hart (1938) 11
Cal. 2d 89; Lewis v. Grunberg (1928) 205 Cal. 158; Estate of Bassi (1965) 234
Cal. App. 2d 529, 539 (Estate of Bassi).)
Here, the reference order derived from a “stipulation and request” of the
parties and was submitted by them to the trial court in proposed form. It expressly states
8
that the referee‟s appointment is made “pursuant to California Code of Civil Procedure
Section 638(a)” and further specifies that the appointment is “as to all discovery matters
for purposes of this action.” The reference authorizes the referee to, among other things,
set any hearings determined by the referee to be necessary, preside over the hearings, and
“rule on discovery objections, discovery motions, and other requests made during the
course of the hearing.” And, within 20 days after the completion of any hearing, the
referee is required to “submit a written decision to the parties and to the Court . . . , with
findings and decisions thereon, including a decision for allocation of payment and any
decision for the imposition of sanctions.”
This language, and the explicit mention of section 638, subdivision (a), is
indicative of a consensual general reference. The referee was not merely empowered to
determine and report facts, and/or make a recommendation, and there is no provision for
the trial court‟s subsequent involvement in rulings made by the referee. (See § 643, subd.
(c); compare Dallman Co. v. Southern Heater Co. (1968) 262 Cal. App. 2d 582, 589-590
[reference order authorizing referee to ascertain facts concerning existence and amount of
damages for report back to court was special reference]; Weavering v. Schneider (1921)
52 Cal. App. 181, 183 [reference authorizing referee to examine and report information to
court so that court could consider the issue was special reference].) Rather, the parties –
with the court‟s approval – gave the referee the power to make “findings and decisions”
and “rule on” all discovery matters, including requests for sanctions. (See also Hihn v.
Peck (1866) 30 Cal. 280, 285 [reference order requiring referee to try the issues and
report “„his findings thereon‟” was general, not special, reference].)
The general nature of the reference is underscored by the subsequent
actions of the parties, the referee and the trial court. After the reference order was issued,
the referee accepted further briefing and heard the parties‟ motions to compel that had
originally been filed with the court. In the resulting ruling, which ordered the South
Africa depositions of both Conteh and Sandler and the related document production, the
9
referee stated at the outset that she was ordered to serve “pursuant to CCP section 638(a)”
and that the parties had “stipulated that [she] was vested with the authority to rule on
discovery motions and depositions at the request of a party.” Thereafter, the parties acted
as if the referee‟s ruling had binding effect without any further action by the court. And,
when the ruling was sent to the court, the court filed it and took no other action. A
similar sequence of events occurred with respect to the sanctions motion and ruling from
which this appeal stems.
Because we conclude the reference was a general reference, the referee‟s
sanctions ruling, filed with the trial court, “stand[s] as the decision of the court” and we
have jurisdiction over the appeal. (§ 644, subd. (a); see §§ 645, 904.1, subd. (a)(12);
Rail–Transport, supra, 46 Cal.App.4th at p. 471.)
B. Motion to Dismiss Appeal
Next, we address the minority shareholders‟ motion to dismiss the appeal,
which was filed after briefing was complete. They assert dismissal is warranted for
multiple reasons, each of which lacks merit.
The minority shareholders contend dismissal is proper under the
disentitlement doctrine due to what they describe as defendants‟ “pattern and practice of
engaging in willful defiance of trial court orders and improper obstructive tactics.” The
disentitlement doctrine is an equitable doctrine which recognizes an appellate court‟s
inherent power to dismiss the appeal of a party who has refused to obey legal court
orders. (Blumberg v. Minthorne (2015) 233 Cal. App. 4th 1384, 1391 (Blumberg);
MacPherson v. MacPherson (1939) 13 Cal. 2d 271, 277.) It prevents a party from
seeking assistance from the court while that party is in “„an attitude of contempt to legal
orders and processes of the courts.‟” (In re Marriage of Hofer (2012) 208 Cal. App. 4th
454, 459.) A formal finding of contempt is not required; “„the same principle applies to
wilful [sic] disobedience or obstructive tactics without such an adjudication.‟” (Alioto
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Fish Co. v. Alioto (1994) 27 Cal. App. 4th 1669, 1683.) The doctrine has been applied in a
wide range of situations, including where the appellant repeatedly refused to comply with
discovery orders. (Blumberg, supra, 233 Cal.App.4th at p. 1391; see, e.g., In re
Marriage of Hofer, supra, 208 Cal. App. 4th 454.)
To support their disentitlement doctrine argument, the minority
shareholders cite a February 2016 statement of decision issued by the same discovery
referee that granted the sanctions motion at issue in this appeal. The 29-page decision
states that the defendants willfully failed to comply with multiple court orders concerning
discovery and concludes with a determination that terminating sanctions were
appropriate.
Although we grant the minority shareholders‟ unopposed motion for us to
3
take judicial notice of the February 2016 decision, we do nothing more than note its
existence and the existence of the statements therein. (Kilroy, supra, 119 Cal.App.4th at
pp. 145-147.) Judicial notice of the truth of the content of trial court records generally “is
not appropriate either because the truth of the content is reasonably subject to dispute
[citation], or because the content is hearsay [citations].” (Columbia Casualty Co., supra,
231 Cal.App.3d at p. 473.) Such is the case here, where, among other things, the
defendants assert that facts relied on by the discovery referee were “materially
misrepresented” by the minority shareholders, and an appeal concerning the grant of
4
terminating sanctions and entry of default judgment is currently pending in this court.
3
In conjunction with their motion to dismiss the appeal, the minority
shareholders filed a motion for judicial notice, or in the alternative, motion to augment
the record, concerning the referee‟s February 2016 decision, which was filed with the
trial court on February 16, 2016. We grant the unopposed request for judicial notice.
(Evid. Code, §§ 452, subd. (d), 459.)
4
We take judicial notice of the existence of the other appeal on our own
motion. (Evid. Code, §§ 452, subd. (d), 459.)
11
Because the February 2016 ruling is the sole evidence on which the
minority shareholders rely to support their argument, there is a lack of evidence
demonstrating the acute recalcitrance necessary to justify dismissal pursuant to the
disentitlement doctrine.
We likewise reject the minority shareholders‟ next contention – that
dismissal is warranted due to what they characterize as “an irreconcilable conflict of
interest” had by the defendants‟ former counsel. They claim that at the time this appeal
was filed, defendants‟ then counsel concurrently represented African Wireless, a
corporation that is a nominal defendant in this case, and Conteh, an individual who is a
corporate director of African Wireless and who is accused of, inter alia, fraudulent
mismanagement of the corporation. Even if such was the case and such concurrent
representation amounted to some type of conflict of interest, matters on which we express
no opinion, the minority shareholders provide no legal authority for the proposition that
dismissal would be appropriate. (See Cal. Rules of Court, rule 8.54(a)(1) [“[A] party
wanting to make a motion in a reviewing court must serve and file a written motion
stating the grounds and the relief requested and identifying any documents on which the
motion is based”]; Potrero Neuvo Land Co. v. All Persons Claiming etc. (1909) 155 Cal.
371, 372 [burden is on party moving to dismiss appeal to show that grounds for dismissal
of the appeal exist].)
Lastly, contrary to the minority shareholders‟ assertions, discovery sanction
orders in excess of $5,000 are directly appealable pursuant to section 904.1, subdivision
(a)(12). (§ 904.1, subd. (a)(12) [“From an order directing payment of monetary sanctions
by a party or an attorney for a party if the amount exceeds five thousand dollars
($5,000)”]; Tucker v. Pacific Bell Mobile Services (2010) 186 Cal. App. 4th 1548, 1559;
Sinaiko Healthcare Consulting, Inc. v. Pacific Healthcare Consultants (2007) 148
12
5
Cal. App. 4th 390, 401 (Sinaiko).) The cases they cite in support of the contrary were
superseded on this point by a 1993 legislative amendment to section 904.1. (Rail–
Transport, supra, 46 Cal.App.4th at pp. 473-475.)
C. Monetary Sanctions
Turning to the merits of the appeal, defendants argue that the referee
unwarrantedly imposed monetary sanctions due to both procedural defects and
substantive errors. We generally review the imposition of a discovery sanction, and the
amount imposed, for abuse of discretion. (Reedy v. Bussell (2007) 148 Cal. App. 4th
1272, 1293 (Reedy) [“„The court‟s discretion to impose discovery sanctions is broad,
subject to reversal only for manifest abuse exceeding the bounds of reason‟”]; Parker v.
Wolters Kluwer United States, Inc. (2007) 149 Cal. App. 4th 285, 294.) We review the
referee‟s factual findings under a substantial evidence standard of review (In re Marriage
of Feldman (2007) 153 Cal. App. 4th 1470, 1479), and we review de novo certain
procedural aspects, such as whether adequate notice of the sanctions motion was
provided (see Central Valley General Hospital v. Smith (2008) 162 Cal. App. 4th 501, 513
[questions of law are reviewed de novo]).
1. Additional Facts Relevant to Sanctions Award
To aid in our discussion of defendants‟ assertions, we provide some
additional detail concerning the parties‟ discovery disputes and the referee‟s orders.
Prior to a referee being appointed, the minority shareholders noticed
Conteh‟s deposition for a date in early September 2014, with the deposition to take place
where Conteh claimed to reside – South Africa. Conteh, through his counsel, objected to
both the date and location of the deposition. He indicated that Paris, France, where his
counsel had an office, would be a more suitable place for the deposition as it would save
5
The minority shareholders cite Hanna v. BankAmerica Business Credit, Inc.
(1993) 16 Cal. App. 4th 913, and Ghanooni v. Super Shuttle (1992) 2 Cal. App. 4th 380.
13
considerable travel time and expense for both parties. The minority shareholders‟
counsel rejected such a location, stating that they had “already undertaken great expense
to accommodate the taking of [Conteh‟s] deposition near his home [in South Africa].”
Following contentious e-mail exchanges between the parties‟ respective counsels,
Conteh‟s counsel indicated agreement to South Africa as the location, but proposed a date
that fell not long before the date scheduled for the preliminary injunction hearing. The
minority shareholders‟ counsel insisted on the originally noticed deposition date, a date
on which Conteh had previously indicated he was not available. Additional back and
forth between the parties‟ counsel ensued, with South Africa, Paris and London each
mentioned as a potential location for Conteh‟s deposition, but no agreement was reached.
After the trial court appointed the referee pursuant to the parties‟
stipulation, the referee considered the then pending motions to compel, which were
primarily focused on mandating the appearance of Conteh and Sandler at depositions and
requiring the production of documents requested in prior deposition notices. In the
resulting 38-page January 2015 order, the referee detailed at length and with great
specificity what each party was being ordered to do. Because the parties had both
expressed concern that the other would not ultimately produce its respective deponent,
the referee cautioned that if either Sandler or Conteh did not appear for his deposition,
there would be “serious and appropriate sanctions[,]” which the parties agreed “would at
a minimum include the striking of their pleadings.”
Defendants‟ first production of documents, consisting of just under 4,500
pages, was served via e-mail and overnight mail and accompanied by verifications and a
proof of service. Their second production of documents, consisting of approximately
4,000 pages, lacked a proof of service and was delivered via an e-mail which contained
an electronic link to a File Transfer Protocol (FTP) site from which copies could be
downloaded.
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In the minority shareholders‟ motion for sanctions that followed Conteh‟s
South Africa deposition, they alleged that Conteh made “little to no effort” to collect
responsive documents and that defendants failed to produce the requested “bank
statements, source financial documentation, emails, and minutes of corporate meetings
and correspondence.” Although they requested that defendants be ordered “to pay the
expenses incurred by the Plaintiffs in connection with their travel to Johannesburg, South
Africa to take the depositions in the amount to be determined per the declaration of
Counsel[,]” they did not specify an amount.
Defendants opposed the sanctions motion on multiple grounds. First, they
argued that Conteh, as an individual and on behalf of the entities, had obeyed the
referee‟s order in good faith by producing two batches of responsive documents, which
they claimed “included financial documents, emails, corporate meeting minutes, and
correspondence.” Second, they argued that Conteh could not produce the Congolese
Wireless documents desired by the minority shareholders because they were “not within
his „possession, custody, or control.‟” Third, they asserted sanctions were unnecessary
because Conteh had already offered to appear in Los Angeles for a second deposition and
produce additional documents at that time. Fourth, defendants argued they should not
have to pay the minority shareholders‟ travel expenses for Conteh‟s South Africa
deposition because the minority shareholders‟ counsel would have travelled there anyway
for Sandler‟s deposition, and the minority shareholders had unreasonably rejected
defendants‟ offers to have Conteh‟s deposition take place in a location that would have
reduced costs (e.g., California, Paris, London).
In reply, the minority shareholders admitted to receiving both sets of
documents from defendants, but emphasized that (1) the second set was provided two
days after the deadline specified by the referee‟s order; (2) the second set failed to
include a proof of service, which they argued meant it was not a valid production; (3) all
responsive documents had not been produced, including certain financial records;
15
(4) Conteh was not truthful about having diligently searched for responsive documents;
and (5) Conteh‟s offer to sit for an additional deposition and produce additional
documents was insufficient to avoid the imposition of sanctions for his past conduct.
The minority shareholders reiterated their request to be reimbursed for certain fees and
costs, this time including not only the full cost of the South Africa deposition (i.e.,
airfare, hotel, court reporter costs and attorney time), but also attorney fees related to the
sanctions motion. No specific dollar amounts were listed; they indicated that proper
sworn declarations and proof of expenditures would be submitted if the referee were to
grant their request.
Less than 24 hours before the telephonic hearing concerning the sanctions,
and in response to a tentative ruling provided by the referee, the minority shareholders‟
counsel submitted a supplemental declaration. An attachment to the declaration listed the
costs and fees allegedly incurred by the minority shareholders in connection with
Conteh‟s South Africa deposition and attorney fees related to the sanctions motion –
$83,649 for the former and $46,155 for the latter, for a total of $129,804.
Because the discovery referee‟s tentative ruling was to deny the requests for
nonmonetary sanctions and the minority shareholders‟ counsel submitted on that
tentative, defendants‟ counsel focused his arguments during the hearing on the issue of
monetary sanctions. In addition to opposing any award on a variety of both procedural
and substantive grounds, defendants‟ counsel objected to the 11th hour costs and fees
declaration. The referee took the matter under submission.
The ensuing 15-page detailed ruling by the referee found that Conteh
appeared for the ordered deposition in South Africa, produced responsive documents on
February 23, 2015, and on February 25,2015, “made a belated supplemental production
of documents, together with a privilege log, but failed to attach the requisite proof of
service for the documents and never produced hard copies.” The referee also found that
“Conteh signed an Affidavit under oath attesting to a diligent search for the documents
16
responsive to the Deposition Notice, but conceded during his deposition that he neither
performed a diligent search nor produced all responsive documents under his control.”
It was based on these factual findings that the referee concluded monetary
sanctions were warranted. The $100,000 amount she deemed reasonable included:
(1) half the costs of Conteh‟s South Africa deposition (airfare, hotel and court reporter),
(2) attorney‟s fees for “a portion of the attorney time spent on [the] deposition[,]” and (3)
“a portion of [the] attorneys‟ fees and costs” related to the sanctions motion. Although
defense counsel did not request an opportunity to respond to the minority shareholders‟
costs and fees declaration, the referee authorized defendants to file a written opposition
within seven days to address the amount of monetary sanctions. If they did so, the
referee would “reconsider the entire amount of the sanction.”
In addition to imposing monetary sanctions, the referee ordered Conteh to
take certain actions. First, he was reordered to produce the documents he was supposed
to produce under the January 2015 order, and to execute a sworn affidavit that he
diligently searched for and produced all responsive documents, except for attorney-client
privileged documents which were to be included in a privilege log. To resolve a dispute
over certain categories of documents, the order mandated that three specified categories
of documents be part of the forthcoming production. Second, the referee ordered Conteh
to provide the minority shareholders‟ counsel with a thumb drive of electronic copies of
the documents produced on February 25, 2015, along with a properly executed proof of
serviced. Third, consistent with his voluntary offer, Conteh was ordered to appear for an
additional deposition in Los Angeles. The defendants filed a timely written opposition,
along with declarations and exhibits. However, instead of limiting their arguments to the
amounts specified in opposing counsel‟s declaration, their opposition largely rehashed
their belief as to why monetary sanctions were not warranted in the first instance –
arguments already considered and rejected by the referee.
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2. Imposition of Sanctions
Defendants contend that the imposition of monetary sanctions in any
amount was error because (1) statutory procedural requirements were not followed; (2)
sanctions were unnecessary given that Conteh agreed to an additional deposition in Los
Angeles and to produce additional documents; (3) Conteh could not be legally obligated
to produce some of the documents at issue because they were not under his “control”; and
(4) Conteh substantially complied with the January 2015 order. We reject each of these
contentions.
Defendants first argue that the minority shareholders failed to meet and
confer prior to requesting sanctions. But, there is no “meet and confer” requirement for a
sanctions request based on misuse of discovery or based on a party‟s violation of an order
concerning production of documents. (§§ 2023.040, 2025.480, subd. (k); Sinaiko, supra,
148 Cal.App4th at p. 411.) Defendants improperly conflate the requirements for a
motion to compel attendance at a deposition and/or a related production of documents
(§§ 2025.450, subd. (b), 2025.480, subd. (b)) with those applicable to a sanctions motion
for noncompliance with a trial court‟s discovery order. It was the latter, not the former
that was the basis of the minority shareholders‟ sanctions request.
Their next argument, that the referee lacked authority to award sanctions
pursuant to sections 2025.450 and 2025.480 because the minority shareholders only
requested relief under section 2023.030, is likewise without merit. To begin, defendants
provide no authority for the proposition that citation to a particular statutory section in the
notice of motion or motion is a mandatory prerequisite to a discovery sanction award.
Further, even if such a requirement existed, and even if we assumed defendants preserved
the issue by raising it below, which they did not, their assertion ignores the interplay of
the discovery statutes.
18
Section 2023.030 authorizes a trial court to impose sanctions for conduct
6
that amounts to a “misuse of the discovery process[,]” but it is not self-executing.
The types of sanctions available for a particular misuse are a function of authorizations
set forth in the statute(s) applicable to each discovery method or any another discovery
statute. (§ 2023.030 [“To the extent authorized by the chapter governing any particular
discovery method or any other provision of this title . . . .”].) For example, section
2025.450, subdivision (h), provides, “if [a] party or party-affiliated deponent . . . fails to
obey an order compelling attendance, testimony, and production, the court may make
those orders that are just, including the imposition of an issue sanction, an evidence
sanction, or a terminating sanction . . . .” It further authorizes the court to impose a
monetary sanction either in lieu of, or in addition to, the other sanctions mentioned.
(Ibid.) Section 2025.480, subdivision (k), makes a nearly identical authorization for
situations in which a deponent fails to obey an order requiring him or her to produce
documents and/or answer certain questions. Here, the minority shareholders‟ request
clearly indicated they were seeking sanctions for the defendants‟ “failure to comply with
[the] [o]rder for [d]iscovery of January 23, 2015” by not producing the documents they
were ordered to produce, and the referee awarded sanctions under the statutes relevant to
such a failure.
Defendants‟ final procedural challenge is that sanctions were not warranted
because the minority shareholders failed “to provide notice of any monetary sanctions
amount in the notice of motion and support such a request with an attorney declaration.”
Although there is some merit to the defendants‟ assertions, they fail to show prejudice,
6
A separate statute sets forth a nonexhaustive list of actions and inactions
that constitute misuse of the discovery process, including “[m]aking an evasive response
to discovery” and “[d]isobeying a court order to provide discovery.” (§ 2023.010, subds.
(f) & (g).)
19
which is a prerequisite for reversal. (Cal. Const., art. VI, § 13; Cassim v. Allstate Ins. Co.
(2004) 33 Cal. 4th 780, 801-802.)
Section 2023.040 states that the notice of motion for a sanctions request
“shall . . . identify every person, party, and attorney against whom the sanction is sought,
and specify the type of sanction sought.” It further states that the request “shall be
supported by a memorandum of points and authorities, and accompanied by a declaration
setting forth facts supporting the amount of any monetary sanction sought.” (Ibid.)
It is undisputed that no dollar value was included in the minority
shareholders‟ initial sanctions request and that the minority shareholders‟ attorney did not
submit a declaration detailing fees and costs sought to be recovered through a sanctions
award until the afternoon before the hearing. However, the minority shareholders‟ letter
to the referee requesting sanctions made clear what was being sought and why: the
subject line specified that it was a “[m]otion for [s]anctions and other appropriate relief
for failure to comply with [o]rder for [d]iscovery of January 23, 2015[;]” the first
sentence of the letter expressly stated that defendants‟ failure to comply concerned the
production of documents; the particular aspects of the order allegedly violated were
identified; excerpts from Conteh‟s South Africa deposition that allegedly evidenced the
noncompliance were provided; the law concerning various types of sanctions was
explained; and the sanctions being sought were listed, which included expenses related to
Conteh‟s South Africa deposition.
Additionally, the referee recognized that defendants did not have the chance
to respond to the belated declaration of the minority shareholders‟ counsel‟s prior to the
hearing, and remedied the issue. Although the referee‟s initial ruling found that $100,000
was an appropriate amount, the referee expressly gave defendants the opportunity to
contest that amount, in toto, with a supplemental written opposition. Defendants seized
the opportunity, filing with the referee a supplemental opposition, two supplemental
declarations and a variety of exhibits. Following a reply by the minority shareholders,
20
and taking into account all arguments made by the parties concerning the amount of
monetary sanctions, the discovery referee confirmed the $100,000 sanctions order.
Having had a full opportunity to be heard, defendants may not complain
about the specific amount of monetary sanctions not being initially provided; there was
no prejudice. (Reedy, supra, 148 Cal.App.4th at p. 1288 [“„[I]t is well settled that the
appearance of a party at the hearing of a motion and his or her opposition to the motion
on its merits is a waiver of any defects or irregularities in the notice of the motion‟”];
London v. Dri-Honing Corp. (2004) 117 Cal. App. 4th 999, 1008 [“[A] party is obligated
to comply with the discovery statutes cooperatively and in good faith, regardless of what
sanctions it may or may not be subject to. The suggestion that a party‟s cooperation
during discovery depends on how heavy the hammer is that hangs above its head is
troublesome”]; Lever v. Garoogian (1974) 41 Cal. App. 3d 37, 40 [“Procedural defects
which do not affect the substantial rights of the parties do not constitute reversible
error”].)
Turning to defendants‟ substantive attacks on the grant of sanctions, they
contend Conteh‟s offer to sit for an additional deposition session in Los Angeles, at
which time he would produce additional responsive documents, precluded the imposition
of sanctions. Referring to this as a “voluntary self-sanction,” defendants state that it
“would more than compensate Plaintiffs for any alleged harm they incurred from
Conteh‟s failure to produce documents.” The minority shareholders disagree, arguing
that Conteh‟s after-the-fact offer to comply with the January 2015 order does not absolve
him, as an individual and as a representative of the entity defendants, of his past
noncompliance and the resulting “tens of thousands of dollars” that the minority
shareholders‟ claim “were wasted pursuing a meaningless exercise” – the South Africa
deposition.
Discovery sanctions must be “suitable and necessary to enable the party
seeking discovery to obtain the objects of the discovery he seeks,” and not punishment.
21
(Caryl Richards, Inc. v. Superior Court of Los Angeles County (1961) 188 Cal. App. 2d
300, 304 (Caryl Richards, Inc.).) That said, the trial court has broad discretion to
determine, based on its factual findings, whether sanctions are warranted in a given
instance, as well as the suitable type. (Reedy, supra, 148 Cal.App.4th at p. 1293.)
Although a different referee or trial court may have been more sympathetic to defendants
and, for example, given them another warning before imposing sanctions, the discovery
referee‟s decision to impose monetary sanctions under the circumstances did not exceed
the bounds of reason. (Ibid.; Evilsizor v. Sweeney (2014) 230 Cal. App. 4th 1304, 1313
[affirming sanctions order because trial court ruling was reasonable exercise of
discretion].)
The referee‟s finding that defendants failed to produce the responsive
documents they were previously ordered to produce was based on Conteh‟s own
deposition statements indicating “that he neither performed a diligent search nor
produced all responsive documents under his control.” Defendants do not contest, and in
fact have admitted to, the inadequate production and failure to diligently search for
responsive documents. What they characterize as “substantial[] compli[ance]” with the
January 2015 order does not absolve the noncompliance.
Further, although Conteh “promised” to appear in Los Angeles for
additional deposition sessions and to produce additional documents responsive to the
minority shareholders‟ original requests, the discovery referee was not required to take
him at his word. We are reminded of the common adage that “actions speak louder than
words.” Conteh‟s track record showed that (1) he failed to produce documents from the
outset, which led to the minority shareholders filing a motion to compel; (2) he failed to
comply with the document production aspect of the order that resulted from the referee‟s
grant of that motion to compel; (3) he did not engage in the diligent search for documents
that he swore under oath he had performed; (4) he failed to produce responsive
documents that he admitted existed and to which he had access; and (5) he continued to
22
fail to produce those additional documents even after stating at his South Africa
deposition that he would do so in the next day or so. Given this pattern, it was within
reason for the discovery referee to believe monetary sanctions were necessary to get
defendants to produce the documents, to curb further delays and to make it clear that
further discovery gamesmanship preventing another party from obtaining discovery to
which they are entitled would not be tolerated. (Sauer v. Superior Court (1987) 195
Cal. App. 3d 213, 230 (Sauer) [“„Belated compliance with discovery orders does not
preclude the imposition of sanctions‟”]; Caryl Richards, Inc., supra, 188 Cal.App.2d at p.
303 [“One of the principal purposes of the Discovery Act . . . is to enable a party to
obtain evidence in the control of his adversary in order to further the efficient,
economical disposition of cases according to right and justice on the merits”].)
The two cases cited by defendants are inapposite. At issue in both were
nonmonetary sanctions, which are viewed as more harsh than monetary ones. (McGinty
v. Superior Court (1994) 26 Cal. App. 4th 204, 210 (McGinty); Motown Record Corp. v.
Superior Court (1984) 155 Cal. App. 3d 482, 488 (Motown).) Further, unlike in McGinty,
supra, 26 Cal.App.4th at pages 213-214, the referee in this case was not dealing with an
inadvertent violation of a court order that resulted in minimal, if any, prejudice to the
other side. And, unlike in Motown, supra, 155 Cal.App.3d at pages 487-488, the referee
in this case was not dealing with a situation where documents were produced only a few
days late, and the referee did not order documents to be produced irrespective of any
claimed privilege.
We also find no validity in defendants‟ last argument concerning the
imposition of sanctions – that a dispute concerning their obligation to provide documents
belonging to Congolese Wireless barred any monetary sanctions. Defendants overlook
that the unproduced documents at issue were not limited to Congolese Wireless
documents, but rather extended, for example, to bank and financial records of the
multiple business entity defendants. Moreover, Conteh indisputably did not diligently
23
search for responsive documents. This, alone, was a violation of the January 2015 order,
irrespective of whether such a search would have resulted in the production of additional
documents.
3. Amount of Sanctions
Defendants also challenge the amount of sanctions imposed, asserting that
(1) the minority shareholders failed to show a causal nexus between the alleged order
violations and the monetary sanctions requested, (2) there was no evidence that the
attorney fees claimed were actually incurred by the minority shareholders, and (3) the
amount – including items, hours and rates claimed – is excessive. We find no merit in
their contentions.
Monetary sanctions imposed due to a misuse of the discovery process may
be in an amount equal to “the reasonable expenses, including attorney‟s fees, incurred by
anyone as a result of [the misuse].” (§ 2023.030, subd. (a).) As with discovery sanctions
in general, monetary sanctions should not serve as punishment. (Do v. Superior Court
(2003) 109 Cal. App. 4th 1210, 1213.) Additionally, they should not put the requesting
party in a better position than it would have been had the discovery abuse had not
occurred; the aim is to make the requesting party whole again. (Sauer, supra, 195
Cal.App.3d at p. 228.)
Here, the minority shareholders‟ counsel declared that the amount being
requested consisted of “costs and fees incurred by the Plaintiffs in connection with the
deposition of Defendant Alieu B. M. Conteh[,]” and expressly excluded any amounts
attributable to Sandler‟s deposition. (Italics added.) The declaration separately itemized
airfare, hotel and court reporter expenses for Conteh‟s South Africa deposition, specified
the hourly rates of each attorney and a paralegal “for this matter[,]” detailed the work
performed by the attorneys and the paralegal, and broke down by day the number of
hours spent by each. Although defendants argued that the claimed hourly rates were
unjustified and that the attorney hours spent were unreasonable, they produced no counter
24
declaration supporting their argument. (See Ghanooni v. Super Shuttle (1993) 20
Cal. App. 4th 256, 262.)
Relying on the uncontradicted statements of the minority shareholders‟
counsel made under penalty of perjury, and her intimate knowledge of the parties and the
history of their discovery disputes, the referee calculated an amount of sanctions that she
believed was a reasonable under the circumstances. She did not merely “rubber stamp”
the amount requested. Rather, included in the $100,000 amount were: (1) a portion of
the attorney time spent on Conteh‟s South Africa deposition; (2) one-half the costs of the
airfare, hotel and court reporter related to the deposition; and (3) a portion of the attorney
fees and costs related to the sanctions motion. Contrary to defendants‟ assertions, this
amount does not provide a windfall to the minority shareholders. It reasonably
compensates them for expenses incurred as a result of defendants‟ admitted failure to
comply with the January 2015 discovery order.
“„A court‟s decision to impose a particular sanction is “subject to reversal
only for manifest abuse exceeding the bounds of reason.”‟” (Ellis v. Toshiba America
Information Systems, Inc. (2013) 218 Cal. App. 4th 853, 880.) The referee‟s decision to
sanction defendants in the amount of $100,000 did not exceed those bounds. (Ibid.
[upholding imposition of $165,000 in monetary sanctions for failure to comply with
discovery order].)
25
III
DISPOSITION
We affirm the order. Respondents are entitled to their costs on appeal.
MOORE, ACTING P. J.
WE CONCUR:
IKOLA, J.
THOMPSON, J.
26