Michael Dennis vs Ralph T Iannelli et al

Case Number

18CV03317

Case Type

Hearing Date / Time

Fri, 11/01/2024 - 10:00

Nature of Proceedings

(2) Motions to Compel

Tentative Ruling

(1) For all reasons discussed herein, the motion of defendants Montecito Bank & Trust and Janet Garufis to compel production of documents and further responses to requests for production nos. 1-3, 5, 7, 10-13 and special interrogatory nos. 1-4 is denied in part and continued in part. As to special interrogatory nos. 1-4 directed to plaintiff Michael Dennis, the motion is denied. As to requests for production nos. 1-3, 5, 7, and 10-13 directed to plaintiff Michael Dennis, the motion is continued to December 6, 2024.

(2) For all reasons discussed herein, the motion of Montecito Bank & Trust to compel production of documents and further responses to requests for production and special interrogatories with respect to plaintiffs Marcia Bischoff, Lee Heller, and Geoff Winkler, is continued to December 6, 2024.

(3) On or before November 15, 2024, defendants Montecito Bank & Trust and Janet Garufis shall pay filing and other fees in accordance with the Court’s ruling herein. On or before November 22, 2024, defendants shall serve a notice of payment of fees identifying the motion(s) for which filing fees have been paid and for which adjudication is sought.

Background:

On July 3, 2018, plaintiff Michael Dennis (Dennis) filed an original class action complaint, on behalf of himself and all those similarly situated, against defendants Ralph T. Iannelli (Iannelli) and Essex Capital Corporation (Essex), alleging five causes of action: (1) negligence; (2) violation of Corporations Code sections 25401, 25504.1, and 25501; (3) negligence per se; (4) fraud; and (5) financial elder abuse.

Iannelli and Essex answered the original complaint of Dennis on August 9, 2018, generally denying its allegations and asserting affirmative defenses.

On February 1, 2019, a notice of pending receivership (the receivership notice) was filed in this action by Geoff Winkler (Winkler), in which Winkler is identified as the permanent receiver for Essex in United States District Court for the Central District of California case no. 2:18-cv-05008-FMO-AFM entitled SEC v. Ralph T. Iannelli, et al. (the receivership action). The receivership notice reflected that the court in the receivership action entered an order on December 6, 2018, effectively stayed all pending litigation brought by investors or other persons seeking relief against Essex or Iannelli.

On October 11, 2023, Dennis separately filed two amendments to the complaint substituting defendants Janet A. Garufis (Garufis) and Montecito Bank & Trust (MBT) for defendants fictitiously named as, respectively, Does 1 and 2.

On March 18, 2024, with leave of court pursuant to a stipulation of the parties, Dennis and Winkler, as the receiver for Essex, filed a first amended class action complaint (the FAC) against Iannelli, Garufis, and MBT, alleging five causes of action: (1) negligence; (2) negligence; (3) violation of Corporations Code sections 25401, 25505.1, and 25501; (4) fraud and aiding and abetting fraud; and (5) financial elder abuse.

On May 7, 2024, the Court entered its order granting the motion of Dennis and Winkler to dismiss Essex from the action with prejudice.

On May 9, 2024, with leave of court pursuant to the parties’ stipulation, Dennis and Winkler filed an amendment to the FAC to add Marcia Bischoff (Bischoff) and Lee Heller (Heller) as plaintiffs and class representatives.

On June 21, 2024, the Court sustained in part and overruled in part the demurrer of MBT and Garufis to the FAC, with leave to amend as to the first, third, fourth, and fifth causes of action.

On July 29, 2024, Dennis, Winkler, Bischoff, Heller, and Barbara Boyle (Boyle) (collectively, plaintiffs) filed a second amended class action complaint (the SAC), alleging six causes of action: (1) negligence (by Bischoff and Heller against Garufis and MBT); (2) negligence (by Winkler against Garufis and MBT); (3) breach of fiduciary duty and aiding and abetting breach of fiduciary duty (by Winkler against Iannelli, MBT, and Garufis); (4) violation of Corporations Code section 25401, 25504.1, and 25501 (by Boyle against Iannelli, MBT, and Garufis); (5) fraud and aiding and abetting fraud (by Dennis, Bischoff, Heller, and Boyle against Iannelli, MBT, and Garufis); and (6) financial elder abuse (by Dennis against Iannelli, MBT, and Garufis).

The causes of action alleged in the SAC arise from what plaintiffs contend constitute wrongful or fraudulent conduct by Iannelli, Garufis, and MBT, with respect to plaintiffs’ and other class member’s investments in promissory notes issued by Essex, an equipment leasing company wholly owned by Iannelli, which plaintiffs allege include “Ponzi-like” payments made to investors, the monitoring of or participation by MBT and Garufis in the purportedly fraudulent loan scheme of Iannelli and Essex, purported advice offered by Garufis who is the President and Chief Executive Officer of MBT with respect to investments in Essex, and other acts which plaintiffs contend constitute atypical banking practices and the aiding and abetting of Iannelli by Garufis and MBT in keeping Essex in operation after it had become insolvent, among other things.

Also on July 29, 2024, MBT and Garufis (collectively, the MBT defendants) filed a motion (the First Motion) for an order compelling Dennis to provide full and complete verified responses to a set one request for production of documents (the Dennis RFP) nos. 1 through 3, 5, 7, and 10 through 13, to produce documents responsive to the Dennis RFP, and to provide full and complete verified responses to a set one specially prepared interrogatories (the Dennis SI) nos. 1 through 4.

In support of the First Motion, the MBT defendants submit the declaration of their counsel, Naeun Rim (Rim), who states that on February 9, 2024, MBT propounded the Dennis SI and the Dennis RFP (collectively, the Dennis Requests) on Dennis. (Rim Decl., ¶¶ 6-7 & Exhs. B & C.) Dennis served written responses to the Dennis Requests which were not verified by Dennis, and produced a single four page document without a privilege log. (Id. at ¶¶ 9-10 & Exhs. D & E.)

Between May 15 and June 24, and on July 2, 9, and 16, 2024, the parties exchanged communications regarding the written responses of Dennis to the Dennis Requests, and the production of documents by Dennis. (Rim Decl., ¶¶ 14-20 & 22-32; Exh. F.) On July 16, 2024, Dennis served supplemental responses to the Dennis SI which did not include a verification by Dennis. (Id. at ¶ 33 & Exh. G.) On the same date, counsel for the MBT defendants sent an email to counsel for Dennis regarding whether and when Dennis would provide supplemental responses to the Dennis RFP, to which counsel for Dennis did not respond. (Id. at ¶ 35-35 & Exh. F at PDF p. 96.)

On September 6, 2024, the Court denied the motion of the MBT defendants to dismiss the SAC.

On September 26, 2024, MBT filed a motion (the Second Motion) for an order compelling Bischoff, Heller, and Winkler to serve full and complete verified responses to MBT’s set one specially prepared interrogatories separately served on Bischoff, Heller, and Winkler (respectively, the Bischoff SI, the Heller SI, and the Winkler SI), and to MBT’s set one requests for production of documents served on Bischoff, Heller, and Winkler (respectively, the Bischoff RFP, the Heller RFP, and the Winkler RFP).

In support of the Second Motion, MBT submits the declaration of its counsel, Sareen K. Armani (Armani), who states that on May 22, 2024, MBT separately propounded the Bischoff SI, the Bischoff RFP (collectively, the Bischoff Requests), the Heller SI, the Heller RFP (collectively, the Heller Requests), the Winkler SI, and the Winkler RFP (collectively, the Winkler Requests). (Armani Decl., ¶¶ 9-14 & Exhs. B-G.) On July 12, 2024, Bischoff, Heller, and Winkler separately served responses to, respectively, the Bischoff Requests, the Heller Requests, and the Winkler Requests, each of which MBT contends were incomplete. (Id. at ¶¶ 15-17 & Exhs. H-M.)

Armani and counsel for Bischoff, Heller, and Winkler communicated regarding the purported deficiencies in the responses of Bischoff, Heller, and Winkler to, respectively, the Bischoff Requests, the Heller Requests, and the Winkler Requests. (Armani Decl., ¶¶ 22-25 & Exhs. N-Q.) Armani contends that Bischoff, Heller, and Winkler have produced only a “handful” of documents, have not served supplemental responses to the Bischoff Requests, the Heller Requests, or the Winkler Requests, and have not produced a privilege log. (Id. at ¶ 26.)

The MBT defendants answered the SAC on October 7, 2024, generally denying its allegations and asserting thirty-one affirmative defenses. Iannelli filed an answer to the SAC on October 8, 2024, generally denying its allegations and asserting nineteen affirmative defenses.

On October 21, 2024, Dennis, Bischoff, Heller, and Winkler filed a joint opposition to the First Motion and the Second Motion.

Analysis:

With respect to the First Motion, available evidence and information submitted by the MBT defendants and further detailed above demonstrates that on July 16, 2024, Dennis served supplemental responses to the Dennis SI. If a responding party provides discovery requested in a motion to compel and the moving party proceeds with the motion, the court has substantial discretion to determine how to rule on the motion based on the circumstances of the case. (See Sinaiko Healthcare Consulting, Inc. v. Pacific Healthcare Consultants (2007) 148 Cal.App.4th 390, 408-409.) In exercising that discretion, the court may take the motion off-calendar, deny the motion as moot, or narrow the scope of the motion to the issue of sanctions. (Id. at p. 409; see also Cal. Rules of Court, rule 3.1348(a).)

Under the circumstances present here, and considering that the MBT defendants do not request an award of sanctions against Dennis, the Court will deny the First Motion as moot with respect to the Dennis SI. The Court’s ruling is without prejudice to any future procedurally appropriate motion to compel that may be filed by the MBT defendants with respect to any purported deficiencies in the supplemental responses of Dennis to the Dennis SI.

Regarding the Dennis RFP which are also a subject of the First Motion, and the Bischoff Requests, the Heller Requests, and the Winkler Request which are the subject of the Second Motion, both the First Motion and the Second Motion are authorized under subdivisions (a) of Code of Civil Procedure sections 2030.300 and 2031.310. In each case, the orders requested by MBT and Garufis are keyed to the responses of Dennis, Bischoff, Heller, and Winkler to a particular set of discovery. (See, e.g., Code Civ. Proc., § 2030.210, subds. (a) & (b) [a party must respond “separately” to each interrogatory and must identify the set number of the interrogatories to which the response is made]; Code Civ. Proc., § 2031.210, subds. (a) & (b) [same re inspection demands].) Because Code of Civil Procedure section 2016.010 et seq. (the Civil Discovery Act) separately authorizes motions to compel further responses to specific sets of discovery, the First Motion effectively combines two motions brought under the Civil Discovery Act with respect to two separate sets of discovery directed to Dennis, and the Second Motion effectively combines six separately authorized motions as to two sets of discovery separately directed to Bischoff, Heller, and Winkler. (Code Civ. Proc., § 1003 [“[e]very direction of a court or judge, made or entered in writing, and not included in a judgment, is denominated an order. An application for an order is a motion”].)

Though generally a party is not prohibited from combining papers supporting some types of motions, such as MBT and Garufis have done here, there exists a procedural problem regarding the payment of filing fees for each motion. The fee to file a motion applies to “[d]iscovery motions under Title 4 (commencing with Section 2016.010) of Part 4 of the Code of Civil Procedure.” (Gov. Code, § 70617, subd. (a)(4).) “Regardless of whether each motion or matter is heard at a single hearing or at separate hearings, the filing fees required by subdivisions (a), (c), (d), and (e) apply separately to each motion or other paper filed.” (Gov. Code, § 70617, subd. (f).) For all reasons discussed above, because each request for an order compelling a party to provide further responses to a specific set of discovery is a separately authorized motion, a separate filing fee is required for each motion whether or not they are presented in a single notice with combined supporting papers or presented with separate notices and separate supporting papers.

Here, Court records reflect that the MBT defendants paid one filing fee for the First Motion, and that MBT paid one filing fee for the Second Motion, for a total of two filing fees for all eight separately authorized motions. While the Court has determined the First Motion as to the Dennis SI, and could address one additional motion (for example, the Second Motion, for which one filing fee was paid, as to the Bischoff RFP which are identified first in the notice of that motion), the Court notes that the issues presented in each of the motions appear to be substantially similar if not identical, and appear to involve identical or similar discovery requests. Further, in their joint opposition to the First Motion and Second Motion, Dennis, Bischoff, Heller, and Winkler address each of the SI and RFP at issue in an omnibus fashion ostensibly due to the duplicative nature of these requests. Therefore, to preserve judicial efficiency and avoid piecemeal rulings, the Court declines to consider the Second Motion.

“Officers of the state, or of a county or judicial district, shall not perform any official services unless upon the payment of the fees prescribed by law for the performance of the services, except as provided in this chapter.” (Gov. Code, § 6100.) “An unbroken line of decisions by our Supreme Court holds that it is mandatory for court clerks to demand and receive the fee required by statute before documents or pleadings are filed.” (Duran v. St. Luke’s Hospital (2003) 114 Cal.App.4th 457, 459.) For all reasons discussed above, MBT and Garufis must pay additional filing fees if they want the Court to adjudicate the First Motion as to the Dennis RFP, or the Second Motion. Therefore, the Court will continue the hearing on the First Motion and the Second Motion to December 6, 2024, to permit MBT and Garufis sufficient time to pay required filing fees. The Court will further order the MBT defendants to file and serve, on or before November 22, 2024, a notice of payment of fees identifying each motion or motions for which filing fees have been paid and for which adjudication is sought by these defendants.