Superior Court, Los Angeles County, California.
Los Angeles County
CORONA CORPORATION, et al., Plaintiffs,
v.
GLOBAL CAPITAL PARTNERS, INC., et al., Defendants.
Case No. BC 271898.
October 6, 2004.
[Motion No. 4]
Reply Brief in Support of Motion of Defendant Global Capital Partners, Inc. to
Compel Plaintiff Reid Breitman's Responses to Martin Sumichrast's Special
Interrogatories
Assigned for all purposes to the Honorable Paul Gutman, Department 34.
I. INTRODUCTION
At his deposition, Corona Corporation's ("Corona") principal Reid Breitman testified that Corona's purchase money for its GCAP shares was provided by Corporate Financial Enterprises ("CFE"), notorious scam artist Regis Possino's company, and funneled through American Equities, another of Breitman's corporations and convicted felon Sherman Mazur's erstwhile employer. (Declaration of Ellyn S. Garofalo ("Garofalo Decl.") to Opening Brief at ¶ 4, and Ex. C.) This information confirmed NASDAQ's suspicion that Breitman was investing on behalf of Messrs. Mazur and Possino, and tends to show that NASDAQ was correct in concluding that Breitman steered GCAP into investing in companies in which he invested and which were controlled by Messrs. Mazur and Possino. Because NASDAQ cited Messrs. Mazur and Possino's involvement in GCAP - as well as questionable investments urged by Mr. Breitman tending to indicate stock manipulation - as primary reasons for its delisting, [FN1] untangling the financial web connecting Corona and Breitman to American Equities, CFE, Sherman Mazur, Regis Possino, and other related companies and stocks is crucial to Martin Sumichrast's affirmative defense of unclean hands. In addition, information about American Equities and CFE bears directly on the issue of whether Corona, which appears to have essentially received its GCAP shares for free, actually suffered any damages at all, much less the $20 million it claims Mr. Sumichrast owes.
FN1. Breitman's attempts to make hay of portions of the NASDAQ report that do not lay blame directly at his feet (Opp. Br. at 10, n.4) notwithstanding, it is undeniable that NASDAQ cited Breitman's misconduct and criminal associations as one major reason for the delisting. (Garofalo Decl.¶ 2, and Ex. A.) Mr. Sumichrast's unclean hands defense is properly considered even in the event that Breitman attempts to bring forth allegations (as Mr. Sumichrast anticipates) that GCAP and its principals acted improperly. See e.g., Unilogic v. Burroughs Corp., 10 Cal.App.4th 612 (1992) (affirming denial of damages based on unclean hands defenses notwithstanding plaintiff's presentation of evidence that defendant committed wrongdoing). Consequently, Breitman's allegations of wrongdoing are not relevant to Mr. Sumichrast's right to discovery.
Because of the gravity of Mr. Sumichrast's need for this information, he sought to determine the answer to a few simple questions: (1) Where does Mr. Breitman hold bank accounts; (2) To whom did American Equities make payments during the relevant period; (3) What securities did Mr. Breitman personally hold during the applicable period and from whom did he purchase them; and (4) Did Mr. Breitman have communications regarding ECS, Omni, Digs, and/or Hartcourt? Breitman, who owns and operates both Corona and American Equities, has now stalled for eight months. Now, for the first time in his opposition to this Motion, Breitman offers to stipulate to a protective order with respect only to the Interrogatories at issue, which order would designate the responses "confidential" at Breitman's sole discretion. Given Breitman's well documented history of discovery abuse, Mr. Sumichrast is understandably reluctant to enter into such an agreement on Mr. Breitman's terms.
Breitman devotes the majority of his argument to claiming that Mr. Sumichrast's counsel spent too much time meeting and conferring and filing his motion. This argument is audacious, as the time and expense Mr. Sumichrast has incurred in dealing with these matters was entirely Breitman's doing. First, Mr. Sumichrast met and conferred over a period of six months, incurring significant time and expense responding to Breitman's frivolous objections. In executing his responsibility to meet and confer, Mr. Sumichrast's counsel was additionally required to prepare on more than one occasion for in-person meetings that Breitman's counsel unilaterally canceled at the last minute, on one occasion by voicemail. (Garofalo Decl., ¶¶ 11-14, 16, and Exs. J-M, O.) Second, the time to draft Mr. Sumichrast's Motion took significantly longer than a typical discovery motion would take because Mr. Sumichrast's counsel had been so patient with Breitman's counsel. Because counsel for Mr. Sumichrast had met and conferred for many months with Breitman's counsel, the discovery correspondence (as illustrated by Mr. Sumichrast's opening papers) was quite voluminous. Furthermore, Breitman's counsel's habit of promising to amend unspecified discovery responses required Mr. Sumichrast's counsel to expend much more time reviewing and analyzing the discovery correspondence than would typically be required for a motion of this sort. (Garofalo Decl., ¶¶ 8, 23, 24, and Exs. G, V, W.) Third, with respect to Mr. Sumichrast's counsel's appearance fees, Mr. Sumichrast requested fees related to each of the Motions in an abundance of caution. Should Mr. Sumichrast prevail on all or any of the Motions, Mr. Sumichrast of course does not expect the Court to sanction Breitman for time expended beyond the hours required for counsel's actual appearance. Mr; Sumichrast requests only that the Court order Breitman to provide substantive responses to Special Interrogatories Numbers 11, 31, 34, 35, and 69-76 within one week; and impose monetary sanctions against Breitman in a reasonable amount, as demonstrated by the time counsel has spent prosecuting this Motion.
II.
ARGUMENT
A. Information Regarding the Money Trail, Put Into Issue by Mr. Breitman, is Narrowly Tailored and Indubitably Relevant.
As noted in Mr. Sumichrast's opening brief and acknowledged by Breitman in his opposition, California law favors broad discovery. Even if that was not the case, however, the Interrogatories at issue are narrowly tailored. They seek only basic information related to the money trail connecting Breitman and Corona to Messrs. Mazur and Possino and their entities and controlled companies, as well as basic information that would permit Mr. Sumichrast to subpoena confirming documentation related to Mr. Breitman's financial accounts. The Interrogatories do not seek any information regarding the manner in which payments were made. Nor do they seek any information about the reason for which any particular payments were made. The Interrogatories on their face only request basic information such as dates, amounts, account numbers, and the identities of buyers and sellers of the enumerated stocks. Even if, as Breitman claims, the list would have numerous entries, this would hardly be "overbroad."
Nor do the Interrogatories seek irrelevant information. Mr. Breitman put the money trail directly at issue, first when his manipulations caused GCAP to be delisted, and then when he testified that American Equities had laundered CFE's payments to Corona. Breitman's protestations to the contrary, such information shows, at a miinimum: (1) Corona was paying for its GCAP shares with somebody else's money, and therefore suffered no damages; (2) The money Corona was using came from Sherman Mazur and/or Regis Possino, felons barred from the securities industry and a major cause of NASDAQ's decision to delist GCAP; and (3) Investments that he recommended GCAP make inured only to the benefit of Breitman and his criminal associates.
Breitman attempts to argue that he offered to provide information sought if all Defendants would enter into a protective order. (Opp. Br. at 1.) The impropriety of denying discovery to one defendant based on the refusal of other defendants to make discovery concessions notwithstanding, this characterization of Breitman's conduct is, to be charitable, misleading. In fact, what Breitman did was to demand a protective order covering any material that Mr. Breitman might unilaterally deem confidential. (Garofalo Decl., ¶ 20, and Ex. S.) After Mr. Sumichrast turned down Breitman's "offer," Breitman proceeded to "amend" his responses to add the condition of a protective order on his previously rejected, onerous terms. (Garofalo Decl., ¶ 21, and Ex. T).
B. The Interrogatories Do Not Violate Privacy.
Breitman attempts to argue that he "did not put American Equities' financial information as a central issue in this case" (Oppo. Br. at 11) notwithstanding Mr. Sumichrast's citations to Mr. Breitman's deposition where he does just that. (Garofalo Decl. ¶ 4, and Ex. C.) More importantly, Breitman's argument betrays a fundamental misunderstanding of the applicability of California Code of Civil Procedure section 1985. First, that section only applies when a party seeks records. Cal. Code. Civ. Proc. § 1985. By its terms, moreover, the rule only applies to writings. Id. Here, simple reference to the Interrogatories reveals that Mr. Sumichrast does not seek any records or other documents. He seeks only a straightforward answer to the questions of the identity of accounts and persons (many if not most of whom he anticipates will not be one of American Equities' "dozen" employees) who received payments, as well as the existence of transactions. Consequently, Breitman's cynical privacy argument must fail.
Even if Breitman had never raised the issue, the importance of this information cannot be overstated. Defendants believe that American Equities was used as a vehicle to pass cash to Sherman Mazur, Mazur's family, and his related companies. For example, Defendants believe Sherman Mazur took no less than $30,000 per month from American Equities for his personal expenses, and that several companies related to Mr. Mazur received funds from American Equities. (Supplemental Declaration of Gary J. Gorham ("Gorham Supp. Decl."), ¶ 2.) Understanding these financial ties is imperative to the development of Defendants' unclean hands defense.
C. Breitman's Bad Faith is Manifest.
Breitman's opposition papers attempt to convert the six months of hoops he made Mr. Sunichrast jump through into a demonstration of his own good faith. (Opp. Br. at 11-12.) Breitman's counsel then attempts to blame their client for the delay. (Id. at 12.) Breitman even resorted to outright misrepresentations, such as his claim that "Plaintiffs never unilaterally canceled 'meet and confers,' " notwithstanding the fact that Mr. Sumichrast provided evidence in its opening brief that Breitman in fact did cancel such meetings on more than one occasion. (Garofalo Decl., ¶¶ 11-14, 16, and Exs. J-M, O.)
Breitman's professed "good faith" is even more unbelievable given his conduct during the meet and confer process. As demonstrated in Mr. Sumichrast's opening brief, Breitman ignored counsel's letters, rescheduled meeting after meeting, ultimately failed to meet at all, attempted to blackmail all Defendants into accepting the terms of an onerous and one-sided protective order, and in the end provided "amended" responses even more restrictive than his original responses. Such blatant misconduct cannot be blamed on the vagaries of Mr. Breitman's travel schedule, particularly in light of the fact that Mr. Breitman is the lead plaintiff and instigator of this lawsuit, and should reasonably be expected to make this litigation a priority.
Finally, Breitman attempts to cover his bad faith with the fig leaf of a new version of the "offered" protective order. The Court should note that Breitman has attempted on several occasions to condition his responses on a protective order that would cloak his discovery responses - at his sole discretion - in secrecy. Previously, Breitman had attempted to impose even more onerous protective orders onto all Defendants as a condition of providing discovery, the terms of which were rejected by all Defendants. (Gorham Supp. Decl., ¶¶ 3- 7, and Exs. A-G.) Breitman attempted to shove the orders down Defendants' throats on the eve of discovery deadlines. (id., ¶ 3.) If the Court does conclude that a protective order is warranted, Mr. Sumichrast requests that the order be made contingent on Breitman's compliance with a firm, short deadline by which he must provide meaningful, substantive, and complete responses to the Interrogatories at issue. Given Breitman's well documented history of discovery abuse, Mr. Sumichrast's reluctance to enter into such a protective agreement with Breitman voluntarily is because it is virtually certain that the proposed order would provide Breitman yet more excuses to delay, obfuscate, and deny reasonable discovery.
D. The Sanction Request is Reasonable in Light of Breitman's Misconduct.
Breitman has not controverted and cannot controvert that, whatever the amount, sanctions are more than warranted. As detailed in Mr. Sumichrast's opening brief, counsel for Mr. Sumichrast provided Breitman more than six months to provide responses to straightforward Interrogatories. No possible justification exists for Breitman's continuing opposition to this Motion or to the undeniable fact that he must provide responses before Mr. Sumichrast's time to file dispositive motions runs out.
Breitman's claim that this discovery dispute represents merely an "honest disagreement" (Opp. Br. at 10) is wholly unmeritorious. Honest litigants and their counsel respond to their opponents' attempts to meet and confer. Honest litigants and their counsel do not attempt to blackmail their opponents. Honest litigants and their counsel do not deliberately mislead their opponents by promising "amended" responses knowing that they will not provide additional information.
Finally, Breitman's argument that Mr. Sumichrast's counsel spent too much time dealing with Breitman's discovery antics not only neatly defines "chutzpah," it ignores the facts and relies on inapposite law. As an initial matter, Breitman cites C.R.P.C. Rule 4-200(b) in opposition to sanctions, first ignoring the fact that the rule relates to fees charged a client and not the appropriate measure of sanctions, and then ignoring the rule entirely by failing to provide any analysis of its factors to this Motion. Breitman further cites a case, Argaman v. Ratan, 73 Cal.App.4th 1173, 1179 (1999), which specifically holds that reasonable expenses include any cost directly related to the discovery misuse at issue. [FN2] In light of the indisputable fact that Mr. Sumichrast could have sought sanctions in the amount of all of the costs incurred attempting to secure responses, his request is quite reasonable.
FN2. Mr. Sumichrast is not, of course, asking at this stage of the proceedings to recoup the expenses he incurred in the months of fruitless meeting and conferring on these Interrogatories.
The amount of hours counsel expended on this Motion cannot be evaluated without due consideration of the nature and extent of Breitman's misconduct. Mr. Sumichrast met and conferred for many months with Breitman's counsel. The discovery correspondence amply demonstrates that while Mr. Sumichrast's communications were substantive and well-researched, Breitman's responses were not. (Garofalo Decl. ¶¶ 5-9, 11, 12, 19, and Exs. D-H, J, K, R.) Furthermore, the discovery correspondence reveals that Breitman's counsel on more than one occasion represented that he would amend unspecified discovery responses, only to add further objections in the end. (Garofalo Decl. ¶¶ 16, 20, 22-24, and Exs. O, S, U-W.) As a consequence, accurately reviewing and analyzing the discovery responses, the correspondence, and the law took significantly longer than would typically required for this sort of motion. Finally, with respect to appearance fees, Mr. Sumichrast requested fees for each Motion in an abundance of caution, in the event that some Motions might be granted but others not. Mr. Sumichrast of course would not expect that the Court would sanction Breitman multiple times for the costs of a single morning's appearance. Rather, Mr. Sumichrast asks only that the Court sanction Breitman in an amount that will compensate for the expenses incurred in prosecuting this Motion in light of the difficulty that Breitman's misconduct has created for Mr. Sumichrast.
III.
CONCLUSION
Based on the foregoing, Mr. Sumichrast respectfully requests that Breitman be ordered to provide substantive responses to Special Interrogatories Numbers 11, 31, 34, 35, and 69-76 within one week. Mr. Sumichrast also respectfully requests that the Court impose monetary sanctions against Breitman for his failure to produce discovery responses and its opposing this motion without substantial justification in the amount of $6,877.00.
Appendix not available.
END OF DOCUMENT
AI
