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1 Rushing McCarl LLP
Ryan McCarl (SBN # 302206)
2 John Mayfield Rushing (SBN # 331273)
Davit Avagyan (SBN # 336350)
3 2219 Main St. No. 144
4 Santa Monica, CA 90405
T: (310) 896-5082
5 E: info@rushingmccarl.com
6
Attorneys for Plaintiff and Cross-Defendant Mario Delis
7 and Cross-Defendant Nature & Life Farms, LLC
8 SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF KERN
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10 MARIO DELIS, an individual,
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Plaintiff,
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v. Case No. BCV-21-102152
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14 JEFFREY D. THORN, an individual; JCM Civil – Unlimited
AG MANAGEMENT, LLC, a corporation;
15 CANA ROSE REALTY HOLDINGS, LLC, a Plaintiff Mario Delis’ Reply in Support
corporation; ROSEDALE OFFICE of Motion for Sanctions
16 COMPLEX, LLC, a corporation; JCM
17 CAPITAL INVESTORS #1, LLC, a Date: April 27, 2022
corporation; and DOES 1 through 50, Time: 8:30 a.m.
18 inclusive, Judge: Hon. Thomas S. Clark
Dept: 17
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Defendants Trial Date: TBD
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21 JCM AG MANAGEMENT, LLC; CANA
22 ROSE REALTY HOLDINGS, LLC; and
JEFFREY D. THORN,
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Cross-Complainants
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25 v.
MARIO DELIS; NATURE & LIFE FARMS,
LLC; and ROES 51-100,
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Cross-Defendants
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1 PLAINTIFF MARIO DELIS’ REPLY IN SUPPORT OF MOTION FOR SANCTIONS
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I. Introduction ...........................................................................................................1
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II. Thorn admits or fails to contest all the misconduct described in Delis’
4 Motion for Sanctions and concurrent filings.....................................................2
5 A. Thorn admits that Delis owned N&L until March 22, when
6 Thorn unilaterally decided that Thorn owns N&L. ...................................2
B. Thorn does not dispute any of Delis’ allegations that Thorn
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has committed fraud on the court. ...............................................................6
8 III. The Court should use its inherent and statutory sanctions authority to
9 impose consequences for Thorn’s unprecedented wrongdoing. ...................8
10 A. The Court has inherent power to issue terminating sanctions
without need for a prior court order, and it should do so in
11
this case. ............................................................................................................9
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B. Tailored remedies and “directives of a nonmonetary nature”
13 are needed to prevent Thorn from profiting from his wrong. ...............11
14 C. The Court should order Thorn to reimburse Delis for
expenses incurred because of Thorn’s litigation misconduct. ................12
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IV. Conclusion ...........................................................................................................15
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Plaintiff Mario Delis’ Reply in Support of Motion for Sanctions
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1 I. Introduction
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Defendant Jeffrey D. Thorn admits that on March 22, 2022, he declared himself
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owner of an opposing party (Cross-Defendant Nature & Life Farms, LLC, a
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company wholly owned by Mario Delis) without waiting for judicial resolution of
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Delis’ lawsuit or Thorn’s cross-claims and appeal.
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As Thorn himself explains, Delis attempted to assign N&L to Thorn in September
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2021, and Thorn rejected (“could not accept”) that attempted assignment.1 Thorn
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went on to sue N&L and force Delis to defend it.2 But last month, circumstances had
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changed, as Thorn had managed to secretly procure his own cannabis license for
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N&L’s premises. Thorn, therefore, changed his mind and purported to “accept” the
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September 2021 offer his earlier rejection had long-ago extinguished:
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13 On March 22, 2022, as soon as Thorn obtained his own cannabis license,
he accepted the assignment of 100% of the membership interest in N&L.
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Prior to the acceptance of the assignment, Delis was the owner of N&L.3
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16 Thorn ousted Delis and embezzled all N&L’s assets and income.
17 Thorn also fails to controvert any of the evidence Delis introduced showing that
18 Thorn and his companies JCM Ag Management, LLC (“JCM AM”) and Cana Rose
19 Realty Holdings, LLC (“Cana Rose”) have, in the first seven months of this litigation,
20 sought to recover upon false claims, fabricated and spoliated evidence, misled
21 government agencies at Delis’ expense, impersonated Delis in an act of attempted
22
23
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1 Thorn Opp. Sanc. 6.
25 2 See RJN Exh. K (Cross-Complaint).
3 Thorn Opp. Sanc. 8.
Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions
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1 bank fraud, and bribed a material witness.
2 The only open question is what this Court should do to address Thorn’s decision
3 to take the law into his own hands and undermine this judicial proceeding through
4 a stunning pattern of misconduct that we are only beginning to uncover.
5
II. Thorn admits or fails to contest all the misconduct described in
6 Delis’ Motion for Sanctions and concurrent filings.
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Thorn admits or fails to contest virtually all the allegations raised in Delis’
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Motion for Sanctions.
9
10 A. Thorn admits that Delis owned N&L until March 22, when Thorn
11 unilaterally decided that Thorn owns N&L.
12
On March 22, Thorn unilaterally decided that the MOU his Cross-Complaint
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sought to enforce is valid, declared himself owner of Delis’ wholly owned company
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N&L (an opposing party), and then, without waiting for the outcome of this lawsuit
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or his appeal, ousted Delis, embezzled all N&L’s assets, diverted all N&L’s income
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to himself, and began holding himself out to third parties (including government
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agencies) as N&L’s owner.
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Thorn does not dispute or offer evidence against any of these allegations. On the
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contrary, he largely admits them, but argues — much like the burglar in People v.
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Williams4 — that he believed his resort to self-help was legal. Indeed, Thorn saw it as
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a “necessary measure” to address his perception that Delis was failing to operate the
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4 118 Ill. App. 2d 341 (1969). In Williams, a burglar admitted that he took a television
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but argued that he believed he had a legal right to do so. The court rejected that
argument, noting that “[t]he law does not permit such self-help.” Id. at 345.
Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions
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1 company properly.5
2 Thorn admits that on October 1, 2021, he rejected Delis’ attempted assignment:
3
On October 1, 2021, Defendants’ counsel, Craig Lynch, wrote an email
4 to John Rushing, one of Plaintiffs attorneys, that Thorn could not at that
5 time accept the assignment of Plaintiff’s membership . . . .
6 Lynch further stated at that time that Thorn could not take over N&L . . . .
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Thorn could not accept the option . . . .6
8
9 Thorn’s rejection of the assignment offer extinguished it.7 But on March 22 —
10 almost six months after rejecting the offer, and at a time that Thorn had an active
11 lawsuit and appeal against N&L that he initiated — Thorn changed his mind and
12 purported to “accept” the rejected offer after all, then ousted Delis.8
13 Thorn does not attempt to rebut any of Delis’ legal arguments or authority
14
15
16
5 Thorn Opp. Sanc. 6.
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6 Accord McCarl Decl. ¶¶ 35–53 and Exhs. E, G, J, K, L (illustrating Lynch’s repeated
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rejection of Delis’ offer, insistence that no assignment had occurred, and insistence
19 that Delis’ attorneys must represent N&L so Thorn could sue it); Reply Mot. PI
20 App’x A (visual timeline of litigation events); RJN Exhs. I (N&L Statement of
Information filed by JCM AM on October 10, 2021 listing Delis as N&L’s owner),
21
K (Cross-Complaint in which Thorn sued N&L).
22 7 See Mot. PI 9–12; Richardson v. Abernathy, 23 Cal. App. 2d 629, 631 (1937) (“[I]n
23 addition to delivery by the grantor, there must also be an acceptance on the part of
24 the grantee.”); Civ. Code § 1066 (“Grants are to be interpreted in like manner with
contracts in general.”).
25
8 See Lynch Decl. ¶ 6 and Exh. 3 (announcing that Thorn “accepts” the extinguished
offer and “hereby discharge[s] [Delis] as Manager of Nature & Life Farms, LLC.”).
Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions
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1 establishing that Thorn’s ownership claim is frivolous.9 Unable to find any
2 supporting legal authority, Thorn continues to rely entirely on an argument made
3 by opposing counsel that Thorn rejected at the time it was made.10
4 If it were not obvious that Thorn’s mid-litigation seizure of an opposing party
5 and embezzlement of its assets was an act of extrajudicial self-help that undermined
6 this Court’s jurisdiction and disrupted its proceedings, Thorn’s opposition brief
7 should remove all doubt, as it implicitly admits that Thorn decided for himself a
8 matter that is solely within this Court’s jurisdiction and central to the case.
9 The basis for Thorn’s March 22 declaration that he owns N&L is the purported
10 MOU attached to the Cross-Complaint, a partially fabricated document in which
11 Thorn gave himself an option to purchase “100%” of N&L for $1,000.11 Delis
12 challenged that document’s validity in the First Amended Complaint, and Thorn
13 sought to enforce it in his Cross-Complaint’s stricken Second Cause of Action.
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16 9 See Mot. PI 5–12 (establishing, in arguments that Thorn fails to address or rebut, that
17 Thorn’s belated “acceptance” of an attempted assignment he rejected six months
earlier is legally ineffective for a host of reasons).
18
10 See Mot. PI 8; McCarl Decl. ¶¶ 35–52.
19 11 Thorn wrote in an option for himself to purchase “100%” of N&L for $1,000 after the
20 MOU was executed. See McCarl Decl. ¶ 26, Exh. D. In his April 15 Declaration,
21 Thorn admits this for the first time: “Although it is true that the hand-written text
‘$1,000’ and ‘l00%’ was written in by me after the document was signed, that
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modification was done in front of both of us with Mr. Delis’ full knowledge and
23 ascent.” (Thorn Decl. ¶ 8). But see Delis Decl. ¶ 41 (describing circumstances in
24 which the MOU was signed); Delis Decl. in Opposition to Thorn’s Motion to Quash
Altshuler Subpoena (filed Apr. 13, 2022) ¶¶ 28–31, Exh. G (Feb. 1, 2021 email from
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Thorn to Delis attaching scanned copy of MOU upon which Thorn has not yet
written in the term allowing him to purchase “100%” of N&L for $1,000).
Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions
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1 The first sentence of Thorn’s opposition brief admits that the MOU’s
2 enforceability is not only at issue in this litigation, but central to the parties’ claims:
3
When all is said and done . . . this Lawsuit . . . boil[s] down to the validity
4 of the Memorandum of Understanding (“MOU”) . . .into which the
5 parties entered, and the efficacy of the exercise of the option in the MOU
authorizing Defendant Jeffrey Thorn to purchase the member interest of
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Plaintiff as the sole member of Nature and Life Farms, LLC.12
7
8 Thorn’s opposition brief makes waiver and estoppel arguments that he should
9 have made in court while playing by the rules of civil litigation.13 Because Thorn
10 seized for himself the relief he had sought in his stricken Second Cause of Action,
11 the matter of the MOU’s enforceability is moot. But Thorn now, having decided the
12 matter himself instead of waiting for the Court to decide it, tries to belatedly
13 persuade the Court that the MOU Thorn just enforced is enforceable. The Court
14 should not entertain such arguments, which are meritless in any event.14
15 Thorn’s contentions about waiver and estoppel implicitly acknowledge that the
16 matter of the MOU’s enforceability was within this Court’s jurisdiction, not least
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19 12 Thorn Opp. Sanc. 2.
20 13 Thorn Opp. Sanc. 7–9.
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14 Thorn’s arguments are meritless because Thorn rejected rather than relied on Delis’
former argument that Delis’ attempted assignment in September 2022 was effective
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upon tender (see supra n.6). Thorn also never accepted Delis’ September 2021
23 attempt to purchase additional shares in JCM AM (see Suppl. RJN Exh. Y, p.11
24 [interrogatory response in which Thorn admits that he has never delivered shares in
JCM AM to Delis]). But that is beside the point. Thorn decided to enforce the MOU
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without waiting to find out from the Court whether he had a right to do so, so these
matters are moot. Thorn achieved his litigation aims through self-help.
Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions
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1 because Thorn put it at issue in his Cross-Complaint. Rather than try to persuade the
2 Court, Thorn took the law into his own hands.
3
B. Thorn does not dispute any of Delis’ allegations that Thorn has
4 committed fraud on the court.
5
In case Thorn’s mid-litigation theft of an opposing party were not enough to
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justify the strongest sanctions civil litigation can muster, Delis has also introduced
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uncontroverted evidence that Thorn and his companies JCM AM and Cana Rose
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have, during the first seven months of this lawsuit, undermined this proceeding by
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committing fraud on the court.
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Thorn’s opposition filings left virtually all these allegations unanswered and
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produced no contrary evidence. Thorn and his companies appear to have:
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1. Bribed a material witness;15
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2. Presented false claims based on fabricated evidence, including:
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- A “made-up” damages figure;16
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20 15 See Pen. Code §§ 7, 137; McCarl Decl. ¶ 122 and Exh. JJ (email from Jeffrey D. Thorn
to Chuck Shakta sent less than two weeks after Delis sued Thorn, in which Thorn
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confirms an “understanding” in which Thorn agrees to raise Shakta’s salary and
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provide reassurances about his investment position in connection with Shakta’s
23 “acknowledg[ment]” about circumstances surrounding the Thorn-Shakta-Delis
24 purchase of the Arvin Property in 2018).
16 See McCarl Decl. ¶ 119 (showing that Thorn admitted in a text message to a
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colleague that he “made up” the $21 million in damages sought in the Cross-
Complaint, then deleted the text message).
Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions
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1 - A materially altered real property lease17 and MOU18;
2 - A forged and backdated Management Services Agreement;19 and
3 - A fabricated “oral Equipment Lease” whose monthly rent was
4 apparently derived from a spreadsheet prepared in the weeks before
5 Thorn filed the Cross-Complaint;20
6 3. Falsely representing to a third-party payment processor that Cana Rose is
7 entitled to receive N&L’s income going forward;21
8 4. Filed a false Statement of Information with the California Secretary of
9 State claiming that Thorn owns N&L;22
10 5. Secretly communicated with the California Department of Cannabis
11
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13 17 McCarl Decl. ¶ 109 and Exh. DD (showing that Thorn materially altered a real
14 property lease before attaching it to his Cross-Complaint).
15 18 See supra n.11
16 19 McCarl Decl. ¶¶ 110–18 and Exhs. EE and GG, and Delis Decl. ¶¶ 47–51 (showing
that Thorn backdated the Management Services Agreement attached to the Cross-
17
Complaint and stamped Delis’ signature on that document using a stamp Thorn
18 secretly procured without Delis’ knowledge or consent).
19 20 McCarl Decl. ¶¶ 106–08 and Delis Decl. ¶ 103 (showing that Thorn fabricated the
20 preposterous “oral Equipment Lease” alleged in his Cross-Complaint, and that he
derived the alleged monthly rent amount of $52,455.77 from a spreadsheet prepared
21
by his accountant two weeks before Thorn filed the Cross-Complaint). Thorn swore
22 to the truth of facts underlying these claims in his February 15, 2022 Declaration
23 opposing Delis’ Motion to Strike. See Suppl. RJN Exh. X.
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21 See Delis Decl. ¶ 72 and Exh. Q.
22 See RJN Exhs. P (false N&L statement of information filed by JCM AM employee
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Sandra Henson on March 28, 2022 declaring that Thorn owns N&L), R (California
Secretary of State webpage describing Thorn as N&L’s owner).
Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions
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1 Control about Delis’ cannabis license while purporting to act on Delis’
2 behalf despite a knowing lack of authorization to do so;23
3 6. Made false, misleading, and contradictory statements in interrogatory
4 responses and declarations;24
5 7. On April 1, 2022, fraudulently accepted service of process on Delis’ behalf
6 in the matter of Meeks v. N&L,25 in which Thorn has sent attorneys to
7 represent himself and his companies, but not N&L.26
8 Excerpts from some of the criminal statutes these acts violated are attached as an
9 Appendix to this brief. Any of these acts provide standalone justification for
10 terminating sanctions as well as Delis’ other requested relief.
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III. The Court should use its inherent and statutory sanctions authority
12 to impose consequences for Thorn’s unprecedented wrongdoing.
13
Delis’ Motion for Sanctions invoked the Court’s inherent power as well as Civ.
14
15
16
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18 23 See McCarl Decl. ¶ 134 and Exhs. Q, OO.
19 24 See Suppl. RJN 4–6, Exhs. X, (excerpts from Thorn’s Feb. 15, 2022, Declaration)
20 Y (excerpts from Thorn’s responses to Delis’ First Set of Special Interrogatories and
Requests for Admission); McCarl Decl. ¶¶ 89–97 and Delis Decl. ¶ 98 (describing
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evidence that Thorn and JCM AM, despite numerous interrogatory responses to the
22 contrary [see Suppl. RJN Exh. Y, pp. 4–5], have failed to deposit all N&L’s cash
23 receipts into N&L’s accounts).
24
25 See Suppl. RJN Exh. T (Proof of Service showing that Thorn’s controller Sandra
Henson accepted substituted service on Mario Delis’ behalf at 901 Potato Road on
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April 1 — ten days after Thorn ousted Delis from the property.).
26 See Delis Decl. ¶ 87, and RJN Exh. O.
Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions
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1 Proc. Code § 128.5(a).27 Delis seeks terminating sanctions against Thorn, JCM AM,
2 and Cana Rose. He also seeks directives of a monetary and nonmonetary nature
3 aimed at protecting Delis’ interests following Thorn’s March 22 takeover of N&L,28
4 protecting Delis’ right to a fair trial,29 and reimbursing Delis for expenses imposed
5 by Thorn’s bad-faith actions and tactics.30
6
A. The Court has inherent power to issue terminating sanctions without
7 need for a prior court order, and it should do so in this case.
8
Thorn claims that terminating sanctions can only be imposed pursuant to a
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discovery motion made under Civ. Proc. Code § 2023.030(d)(1).31 The sole case
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Thorn cites for this proposition says nothing of the sort,32 and the proposition is
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12
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14 27 Thorn’s argument that Civ. Proc. Code § 128.5(a) applies only to “the making or
15 opposing for motions or the filing and service of [pleadings]” (Thorn Opp. Sanc. 11)
is contradicted by the plain language of the statute as well as binding precedent. See,
16
e.g., On v. Cow Hollow Properties, 222 Cal. App. 3d 1568, 1575 (1990).
17 28 Civ. Proc. Code § 128.5(f)(2). These directives are set forth in ¶¶ 34–55 of the
18 Proposed Order and summarized in Appendix B of Delis’ Reply Mot. PI. Each
19 proposed remedy can be characterized either as an injunction or as a directive made
under § 128.5 or the Court’s inherent sanctions authority.
20
29 See Mot. Sanc. 15 (requesting remedies for Thorn’s evidence spoliation).
21 30 See Mot. Sanc. 15–17.
22 31 Thorn Opp. Sanc. 9–10.
23 32 See Van Sickle v. Gilbert, 196 Cal. App. 4th 1495 (2011) (affirming terminating
24 sanctions pursuant to Civ. Proc. Code § 2023.030(d)(1), but nowhere suggesting that
this is the only source of a court’s power to grant terminating sanctions).
25
Cases ”are not authority for propositions not considered.” People v. Ault, 33 Cal. 4th
1250, 1268 n.10 (2004).
Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions
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1 contrary to law. The Court has inherent authority to issue terminating sanctions.
2 “California courts have inherent power to terminate litigation for deliberate and
3 egregious misconduct when no other remedy can restore fairness,”33 and an exercise
4 of this power need not be preceded by violation of a court order.34
5 Thorn’s resort to extrajudicial self-help to enforce the MOU more than justifies
6 terminating sanctions. Additionally, Delis has provided extensive, uncontroverted
7 evidence that Thorn and his companies have engaged in widespread evidence
8
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17 33 Stephen Slesinger, Inc. v. Walt Disney Co., 155 Cal. App. 4th 736, 761 (2007). “When a
[party]’s deliberate and egregious misconduct in the course of the litigation renders
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any sanction short of dismissal inadequate to protect the fairness of the trial,
19 California courts necessarily have the power to preserve their integrity by
20 dismissing the action.” Id.
21
34 See id. at 763 (affirming terminating sanctions sought under the inherent power
doctrine and explaining that no violation of a court order is required for a court to
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issue such sanctions). The same rule applies to requests for terminating sanctions
23 made under the Discovery Code, so it makes no difference which of the two sources
24 of authority a moving party invokes in a motion for terminating sanctions. See, e.g.,
Williams v. Russ, 167 Cal. App. 4th 1215, 1227 (2008) (noting that terminating
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sanctions are “appropriate in the first instance without a violation of prior court
orders in egregious cases of intentional spoliation of evidence”).
Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions
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1 spoliation and concealment.35 Terminating sanctions are commonly imposed for far
2 less severe instances of such conduct.36
3
B. Tailored remedies and “directives of a nonmonetary nature” are
4 needed to prevent Thorn from profiting from his wrong.
5
Each proposed remedy set forth in Delis’ Proposed Order can be characterized
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either as an injunction or as a directive made under § 128.5 or the Court’s inherent
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sanctions authority. All the requested remedies are necessary to “deter repetition of
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the action or tactic or comparable action or tactic by others similarly situated.”37
9
After all, if parties routinely sought to recover for claims based on fabricated
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evidence, destroyed evidence to keep it out of an opponent’s hands, defrauded
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government agencies and third parties to help themselves at an opponent’s expense,
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or seized opposing parties’ and parties’ assets and income through acts of self-help
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in the middle of civil litigation, that would spell the end of the rule of law.
14
15
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35 See, e.g., McCarl ¶ 127 and Exh. MM (Sept. 22, 2021 message from Jeffrey Thorn to
Kelly Steinback instructing her to alter evidence before Delis asks for it); Delis Decl.
18
¶ 66–67, 88 and McCarl Decl. Exh. II (showing that Thorn deleted Delis’ 420
19 Kingdom Dropbox Business Account the day after Delis filed this lawsuit and has
20 restricted Delis’ access to N&L’s records); McCarl Decl. ¶ 86 and Exhs. W, X
(showing that in the weeks after Delis sued, Thorn and JCM AM paid an accountant
21
$13,500 for an operation called “Catchup and Clean Up Accounting”); McCarl Decl.
22 Exh. PP, pp. 6–7 (text messages between Thorn and his bookkeeper Sandra Henson
23 in which a month of messages exchanged in the month preceding Delis’ lawsuit is
missing, and in which Henson tells Thorn on December 18, 2021 that “Evan your IT
24
person is going to call me on Monday so we can move files.”).
25 36 See Mot. Sanc. 13–14.
37 Civ. Proc. Code § 128.5(f)(2).
Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions
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1 C. The Court should order Thorn to reimburse Delis for expenses
incurred because of Thorn’s litigation misconduct.
2
3 The Court should order Thorn, JCM AM, and Cana Rose to reimburse Delis for
4 his “reasonable expenses, including attorney’s fees, incurred by [Delis] as a result
5 of” their sanctionable conduct.38 Sanctions awards under Civ. Proc. Code § 128.5
6 “can be based either on a finding of a bad faith action or tactics that are frivolous or
7 solely intended to cause unnecessary delay.”39 Tactics are “frivolous” when they are
8 “totally and completely without merit or for the sole purpose of harassing an
9 opposing party.”40 An action is frivolous or in bad faith if it “is prosecuted for an
10 improper motive, including harassment or delay” or “indisputably has no merit.”41
11 However, the moving party need not demonstrate an “evil motive.”42
12 The amounts Delis seeks to recover include the following:
13 • Thorn should pay Delis’ legal expenses incurred in investigating and
14 responding to Thorn’s March 22 takeover of N&L and embezzlement of its
15 assets and income streams. But for Thorn’s resort to self-help to enforce a
16
17
18 38 Civ. Proc. Code § 128.5(a).
19 39 On v. Cow Hollow Properties, 222 Cal. App. 3d 1568, 1575 (1990). Thorn’s argument
that Civ. Proc. Code § 128.5(a) applies only to “the making or opposing for motions
20
or the filing and service of [pleadings]” (Thorn Opp. Sanc. 11) is contradicted by the
21 plain language of the statute; Thorn omits the key language “include, but are not
22 limited to” from his excerpt from Civ. Proc. Code § 128.5(b)(1); see also In re Marriage
23 of Sahafzadeh-Taeb &Taeb, 39 Cal. App. 5th 124 (2019) (terminating sanctions imposed
for counsel’s failure to appear at trial).
24
40 Civ. Proc. Code § 128.5(b)(2).
25 41 Winick Corp. v. County Sanitation Dist. No. 2, 185 Cal. App. 3d 1170, 1177 (1986).
42 West Coast Dev. v. Reed, 2 Cal. App. 4th 693, 702 (1992).
Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions
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1 frivolous legal position, these expenses would not have been incurred.43
2 • Thorn should pay for all Delis’ expenses incurred in responding to the
3 Cross-Complaint, which was brought in bad faith and sought to recover
4 “made up”44 damages for fraudulent claims based on bogus agreements.45
5 • Thorn should pay for Delis’ expenses incurred in investigating Thorn’s
6 spoliation, fabrication, and concealment of evidence.46
7 • Thorn should reimburse Delis for amounts Delis was forced to invest in
8 N&L in reliance on Thorn’s now-abandoned litigation position that Delis’
9 attempt to assign N&L to Thorn in September was ineffective. Thorn’s
10 theft of N&L’s assets and income is a bad-faith tactic, based on a frivolous
11 claim of ownership, that ensures Delis will never recover his investments
12 unless the Court forces Thorn to disgorge their value.
13 Thorn’s contention that the amount of sanctions sought had to be presented
14 “with exactitude” in Delis’ Notice of Motion seeks to introduce a new requirement
15 that the California Legislature omitted from Civ. Proc. Code § 128.5. If this Court
16 grants Delis’ request for sanctions pursuant to § 128.5, Delis can submit a statement
17
18
19
20
21 43 See Delis Decl. ¶¶ 52–60.
22 44 See McCarl Decl. ¶ 119, Exh. HH (deleted December 2021 text message in which
23 Thorn admits that he “made up” the damages sought in the Cross-Complaint).
24
45 On v. Cow Hollow Props., 222 Cal. App. 3d 1568, 1575 (1990) (allowing a litigant to
recover all their legal expenses incurred in responding to a frivolous action).
25
46 See, e.g., Modern Remodeling, Inc. v. Tripod Holdings, LLC, 2021 U.S. Dist. LEXIS
163228, *42, 46–48 (D. Md.) (awarding expenses for a party’s evidence spoliation).
Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions
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1 of expenses that Thorn may challenge.47 Thorn relies on Lesser v. Huntington Harbor
2 Corp.,48 but that case held only that “more than one or two days’ notice” before the
3 hearing was required in the circumstances of that six-year, $7.5M litigation.49 The
4 case said nothing about whether the Court could first make findings of fact showing
5 an entitlement to sanctions, and then later approve a fee application seeking those
6 sanctions — as Delis requested here.50
7 Here, Delis’ moving papers thoroughly documented the grounds for Delis’
8 requested sanctions and gave Thorn an opportunity to dispute those grounds. Thorn
9 has done his best to do so. The amount of Delis’ expenses attributable to Thorn’s
10 bad-faith tactics had yet to be determined at the time of Delis’ Motion and continues
11 to accumulate today, so Delis requested a directive ordering Delis’ attorneys to
12 submit supplemental declarations describing and seeking the amounts sought.51
13
14
15 47 Brewster v. S. Pac. Transp. Co., 235 Cal. App. 3d 701, 716 (1991) (notice was adequate
when, after the judge at the hearing for sanctions stated his intention to award costs,
16
the moving party submitted a statement of costs twenty days later that could be
17
challanged separately).
18 48 173 Cal. App. 3d 922, 931–33 (1985).
19 49 The court rejected an argument that adequate notice invariably required at least five
20 days before the hearing. See id.
50 See Prop. Ord. ¶¶ 40, 77.
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51 This Court has the authority to manage its proceedings in the interest of justice,
22
including by issuing one order establishing the moving party’s right to sanctions
23 and a later order granting that party’s fee application based in part on the earlier
24 order’s findings. That was the process apparently followed in On, 222 Cal. App. 3d
at 1576. In that case, the trial court granted a fee application that invoked Civ. Proc.
25
Code § 128.5; the court’s order incorporated by reference the findings of fact made in
an earlier statement of decision.
Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions
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1 IV. Conclusion
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Thorn’s seizure of an opposing party in the middle of ongoing litigation is an
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affront to the rule of law, and Delis asks the Court to impose all sanctions needed to
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prevent Thorn from profiting from his wrong at Delis’ expense.
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Dated: April 20, 2022
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8 Respectfully submitted,
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John Mayfield Rushing Ryan McCarl
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SBN # 331273 SBN # 302206
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14 Rushing McCarl LLP
2219 Main St. No. 144 |Santa Monica, CA 90405
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T: (310) 896-5082 | E: info@rushingmccarl.com
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Appendix: Excerpts from California Penal Code
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Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions
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Appendix to Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions
1 APPENDIX: EXCERPTS FROM CALIFORNIA PENAL CODE
2
Thorn claims that Delis’ Motion for Sanctions must be denied because it fails to
3
allege any specific rule or law that Thorn violated.52 While that argument is
4
baseless,53 we are happy to oblige. Thorn’s litigation misconduct to date, as
5
documented in the Motion for Sanctions and its accompanying declarations, has
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arguably violated the following laws, among others (and setting aside federal crimes
7
to conserve space):
8
• Pen. Code § 503 (“Embezzlement”): “Embezzlement is the fraudulent
9
appropriation of property by a person to whom it has been intrusted.”54
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• Pen. Code § 532(a) (“Fraudulently obtaining money, property or labor”):
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“Every person who knowingly and designedly, by any false or fraudulent
12
representation or pretense, defrauds any other person of money, labor, or
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property . . . and by thus imposing upon any person . . . fraudulently gets
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possession of money or property . . . is punishable in the same manner
15
and to the same extent as for larceny of the money or property so
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obtained.”
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• Pen. Code § 470(a) (“Forgery”): “(a) Every person who, with the intent to
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21 52 See Thorn Opp. Sanc. 10 n.9.
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53 Delis is not seeking sanctions under Cal. Rules of Court, Rule 2.3, so that rule’s
requirements are inapplicable.
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54 This amount includes amounts related to the Anti-SLAPP Motion that were the
24 subject of Delis’ earlier fee motion. The Supplemental Declaration of Ryan McCarl
25 and Supplemental Proposed Order break out this amount so the Court can elect
whether to include it or consider it separately at a later hearing.
Appendix to Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions
i
1 defraud, knowing that he or she has no authority to do so, signs the name
2 of another person or of a fictitious person to any of the items listed in
3 subdivision (d) [including any “contract” or “power to receive money” or
4 “power . . . to dispose of goods”] is guilty of forgery. (b) Every person
5 who, with the intent to defraud, counterfeits or forges the seal or
Preview
1 Rushing McCarl LLP Ryan McCarl (SBN # 302206) 2 John Mayfield Rushing (SBN # 331273) Davit Avagyan (SBN # 336350) 3 2219 Main St. No. 144 4 Santa Monica, CA 90405 T: (310) 896-5082 5 E: info@rushingmccarl.com 6 Attorneys for Plaintiff and Cross-Defendant Mario Delis 7 and Cross-Defendant Nature & Life Farms, LLC 8 SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF KERN 9 10 MARIO DELIS, an individual, 11 Plaintiff, 12 v. Case No. BCV-21-102152 13 14 JEFFREY D. THORN, an individual; JCM Civil – Unlimited AG MANAGEMENT, LLC, a corporation; 15 CANA ROSE REALTY HOLDINGS, LLC, a Plaintiff Mario Delis’ Reply in Support corporation; ROSEDALE OFFICE of Motion for Sanctions 16 COMPLEX, LLC, a corporation; JCM 17 CAPITAL INVESTORS #1, LLC, a Date: April 27, 2022 corporation; and DOES 1 through 50, Time: 8:30 a.m. 18 inclusive, Judge: Hon. Thomas S. Clark Dept: 17 19 Defendants Trial Date: TBD 20 21 JCM AG MANAGEMENT, LLC; CANA 22 ROSE REALTY HOLDINGS, LLC; and JEFFREY D. THORN, 23 Cross-Complainants 24 25 v. MARIO DELIS; NATURE & LIFE FARMS, LLC; and ROES 51-100, 1 Cross-Defendants 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 1 PLAINTIFF MARIO DELIS’ REPLY IN SUPPORT OF MOTION FOR SANCTIONS 2 I. Introduction ...........................................................................................................1 3 II. Thorn admits or fails to contest all the misconduct described in Delis’ 4 Motion for Sanctions and concurrent filings.....................................................2 5 A. Thorn admits that Delis owned N&L until March 22, when 6 Thorn unilaterally decided that Thorn owns N&L. ...................................2 B. Thorn does not dispute any of Delis’ allegations that Thorn 7 has committed fraud on the court. ...............................................................6 8 III. The Court should use its inherent and statutory sanctions authority to 9 impose consequences for Thorn’s unprecedented wrongdoing. ...................8 10 A. The Court has inherent power to issue terminating sanctions without need for a prior court order, and it should do so in 11 this case. ............................................................................................................9 12 B. Tailored remedies and “directives of a nonmonetary nature” 13 are needed to prevent Thorn from profiting from his wrong. ...............11 14 C. The Court should order Thorn to reimburse Delis for expenses incurred because of Thorn’s litigation misconduct. ................12 15 IV. Conclusion ...........................................................................................................15 16 17 18 19 20 21 22 23 24 25 Plaintiff Mario Delis’ Reply in Support of Motion for Sanctions i 1 I. Introduction 2 Defendant Jeffrey D. Thorn admits that on March 22, 2022, he declared himself 3 owner of an opposing party (Cross-Defendant Nature & Life Farms, LLC, a 4 company wholly owned by Mario Delis) without waiting for judicial resolution of 5 Delis’ lawsuit or Thorn’s cross-claims and appeal. 6 As Thorn himself explains, Delis attempted to assign N&L to Thorn in September 7 2021, and Thorn rejected (“could not accept”) that attempted assignment.1 Thorn 8 went on to sue N&L and force Delis to defend it.2 But last month, circumstances had 9 changed, as Thorn had managed to secretly procure his own cannabis license for 10 N&L’s premises. Thorn, therefore, changed his mind and purported to “accept” the 11 September 2021 offer his earlier rejection had long-ago extinguished: 12 13 On March 22, 2022, as soon as Thorn obtained his own cannabis license, he accepted the assignment of 100% of the membership interest in N&L. 14 Prior to the acceptance of the assignment, Delis was the owner of N&L.3 15 16 Thorn ousted Delis and embezzled all N&L’s assets and income. 17 Thorn also fails to controvert any of the evidence Delis introduced showing that 18 Thorn and his companies JCM Ag Management, LLC (“JCM AM”) and Cana Rose 19 Realty Holdings, LLC (“Cana Rose”) have, in the first seven months of this litigation, 20 sought to recover upon false claims, fabricated and spoliated evidence, misled 21 government agencies at Delis’ expense, impersonated Delis in an act of attempted 22 23 24 1 Thorn Opp. Sanc. 6. 25 2 See RJN Exh. K (Cross-Complaint). 3 Thorn Opp. Sanc. 8. Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions 1 1 bank fraud, and bribed a material witness. 2 The only open question is what this Court should do to address Thorn’s decision 3 to take the law into his own hands and undermine this judicial proceeding through 4 a stunning pattern of misconduct that we are only beginning to uncover. 5 II. Thorn admits or fails to contest all the misconduct described in 6 Delis’ Motion for Sanctions and concurrent filings. 7 Thorn admits or fails to contest virtually all the allegations raised in Delis’ 8 Motion for Sanctions. 9 10 A. Thorn admits that Delis owned N&L until March 22, when Thorn 11 unilaterally decided that Thorn owns N&L. 12 On March 22, Thorn unilaterally decided that the MOU his Cross-Complaint 13 sought to enforce is valid, declared himself owner of Delis’ wholly owned company 14 N&L (an opposing party), and then, without waiting for the outcome of this lawsuit 15 or his appeal, ousted Delis, embezzled all N&L’s assets, diverted all N&L’s income 16 to himself, and began holding himself out to third parties (including government 17 agencies) as N&L’s owner. 18 Thorn does not dispute or offer evidence against any of these allegations. On the 19 contrary, he largely admits them, but argues — much like the burglar in People v. 20 Williams4 — that he believed his resort to self-help was legal. Indeed, Thorn saw it as 21 a “necessary measure” to address his perception that Delis was failing to operate the 22 23 24 4 118 Ill. App. 2d 341 (1969). In Williams, a burglar admitted that he took a television 25 but argued that he believed he had a legal right to do so. The court rejected that argument, noting that “[t]he law does not permit such self-help.” Id. at 345. Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions 2 1 company properly.5 2 Thorn admits that on October 1, 2021, he rejected Delis’ attempted assignment: 3 On October 1, 2021, Defendants’ counsel, Craig Lynch, wrote an email 4 to John Rushing, one of Plaintiffs attorneys, that Thorn could not at that 5 time accept the assignment of Plaintiff’s membership . . . . 6 Lynch further stated at that time that Thorn could not take over N&L . . . . 7 Thorn could not accept the option . . . .6 8 9 Thorn’s rejection of the assignment offer extinguished it.7 But on March 22 — 10 almost six months after rejecting the offer, and at a time that Thorn had an active 11 lawsuit and appeal against N&L that he initiated — Thorn changed his mind and 12 purported to “accept” the rejected offer after all, then ousted Delis.8 13 Thorn does not attempt to rebut any of Delis’ legal arguments or authority 14 15 16 5 Thorn Opp. Sanc. 6. 17 6 Accord McCarl Decl. ¶¶ 35–53 and Exhs. E, G, J, K, L (illustrating Lynch’s repeated 18 rejection of Delis’ offer, insistence that no assignment had occurred, and insistence 19 that Delis’ attorneys must represent N&L so Thorn could sue it); Reply Mot. PI 20 App’x A (visual timeline of litigation events); RJN Exhs. I (N&L Statement of Information filed by JCM AM on October 10, 2021 listing Delis as N&L’s owner), 21 K (Cross-Complaint in which Thorn sued N&L). 22 7 See Mot. PI 9–12; Richardson v. Abernathy, 23 Cal. App. 2d 629, 631 (1937) (“[I]n 23 addition to delivery by the grantor, there must also be an acceptance on the part of 24 the grantee.”); Civ. Code § 1066 (“Grants are to be interpreted in like manner with contracts in general.”). 25 8 See Lynch Decl. ¶ 6 and Exh. 3 (announcing that Thorn “accepts” the extinguished offer and “hereby discharge[s] [Delis] as Manager of Nature & Life Farms, LLC.”). Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions 3 1 establishing that Thorn’s ownership claim is frivolous.9 Unable to find any 2 supporting legal authority, Thorn continues to rely entirely on an argument made 3 by opposing counsel that Thorn rejected at the time it was made.10 4 If it were not obvious that Thorn’s mid-litigation seizure of an opposing party 5 and embezzlement of its assets was an act of extrajudicial self-help that undermined 6 this Court’s jurisdiction and disrupted its proceedings, Thorn’s opposition brief 7 should remove all doubt, as it implicitly admits that Thorn decided for himself a 8 matter that is solely within this Court’s jurisdiction and central to the case. 9 The basis for Thorn’s March 22 declaration that he owns N&L is the purported 10 MOU attached to the Cross-Complaint, a partially fabricated document in which 11 Thorn gave himself an option to purchase “100%” of N&L for $1,000.11 Delis 12 challenged that document’s validity in the First Amended Complaint, and Thorn 13 sought to enforce it in his Cross-Complaint’s stricken Second Cause of Action. 14 15 16 9 See Mot. PI 5–12 (establishing, in arguments that Thorn fails to address or rebut, that 17 Thorn’s belated “acceptance” of an attempted assignment he rejected six months earlier is legally ineffective for a host of reasons). 18 10 See Mot. PI 8; McCarl Decl. ¶¶ 35–52. 19 11 Thorn wrote in an option for himself to purchase “100%” of N&L for $1,000 after the 20 MOU was executed. See McCarl Decl. ¶ 26, Exh. D. In his April 15 Declaration, 21 Thorn admits this for the first time: “Although it is true that the hand-written text ‘$1,000’ and ‘l00%’ was written in by me after the document was signed, that 22 modification was done in front of both of us with Mr. Delis’ full knowledge and 23 ascent.” (Thorn Decl. ¶ 8). But see Delis Decl. ¶ 41 (describing circumstances in 24 which the MOU was signed); Delis Decl. in Opposition to Thorn’s Motion to Quash Altshuler Subpoena (filed Apr. 13, 2022) ¶¶ 28–31, Exh. G (Feb. 1, 2021 email from 25 Thorn to Delis attaching scanned copy of MOU upon which Thorn has not yet written in the term allowing him to purchase “100%” of N&L for $1,000). Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions 4 1 The first sentence of Thorn’s opposition brief admits that the MOU’s 2 enforceability is not only at issue in this litigation, but central to the parties’ claims: 3 When all is said and done . . . this Lawsuit . . . boil[s] down to the validity 4 of the Memorandum of Understanding (“MOU”) . . .into which the 5 parties entered, and the efficacy of the exercise of the option in the MOU authorizing Defendant Jeffrey Thorn to purchase the member interest of 6 Plaintiff as the sole member of Nature and Life Farms, LLC.12 7 8 Thorn’s opposition brief makes waiver and estoppel arguments that he should 9 have made in court while playing by the rules of civil litigation.13 Because Thorn 10 seized for himself the relief he had sought in his stricken Second Cause of Action, 11 the matter of the MOU’s enforceability is moot. But Thorn now, having decided the 12 matter himself instead of waiting for the Court to decide it, tries to belatedly 13 persuade the Court that the MOU Thorn just enforced is enforceable. The Court 14 should not entertain such arguments, which are meritless in any event.14 15 Thorn’s contentions about waiver and estoppel implicitly acknowledge that the 16 matter of the MOU’s enforceability was within this Court’s jurisdiction, not least 17 18 19 12 Thorn Opp. Sanc. 2. 20 13 Thorn Opp. Sanc. 7–9. 21 14 Thorn’s arguments are meritless because Thorn rejected rather than relied on Delis’ former argument that Delis’ attempted assignment in September 2022 was effective 22 upon tender (see supra n.6). Thorn also never accepted Delis’ September 2021 23 attempt to purchase additional shares in JCM AM (see Suppl. RJN Exh. Y, p.11 24 [interrogatory response in which Thorn admits that he has never delivered shares in JCM AM to Delis]). But that is beside the point. Thorn decided to enforce the MOU 25 without waiting to find out from the Court whether he had a right to do so, so these matters are moot. Thorn achieved his litigation aims through self-help. Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions 5 1 because Thorn put it at issue in his Cross-Complaint. Rather than try to persuade the 2 Court, Thorn took the law into his own hands. 3 B. Thorn does not dispute any of Delis’ allegations that Thorn has 4 committed fraud on the court. 5 In case Thorn’s mid-litigation theft of an opposing party were not enough to 6 justify the strongest sanctions civil litigation can muster, Delis has also introduced 7 uncontroverted evidence that Thorn and his companies JCM AM and Cana Rose 8 have, during the first seven months of this lawsuit, undermined this proceeding by 9 committing fraud on the court. 10 Thorn’s opposition filings left virtually all these allegations unanswered and 11 produced no contrary evidence. Thorn and his companies appear to have: 12 1. Bribed a material witness;15 13 2. Presented false claims based on fabricated evidence, including: 14 - A “made-up” damages figure;16 15 16 17 18 19 20 15 See Pen. Code §§ 7, 137; McCarl Decl. ¶ 122 and Exh. JJ (email from Jeffrey D. Thorn to Chuck Shakta sent less than two weeks after Delis sued Thorn, in which Thorn 21 confirms an “understanding” in which Thorn agrees to raise Shakta’s salary and 22 provide reassurances about his investment position in connection with Shakta’s 23 “acknowledg[ment]” about circumstances surrounding the Thorn-Shakta-Delis 24 purchase of the Arvin Property in 2018). 16 See McCarl Decl. ¶ 119 (showing that Thorn admitted in a text message to a 25 colleague that he “made up” the $21 million in damages sought in the Cross- Complaint, then deleted the text message). Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions 6 1 - A materially altered real property lease17 and MOU18; 2 - A forged and backdated Management Services Agreement;19 and 3 - A fabricated “oral Equipment Lease” whose monthly rent was 4 apparently derived from a spreadsheet prepared in the weeks before 5 Thorn filed the Cross-Complaint;20 6 3. Falsely representing to a third-party payment processor that Cana Rose is 7 entitled to receive N&L’s income going forward;21 8 4. Filed a false Statement of Information with the California Secretary of 9 State claiming that Thorn owns N&L;22 10 5. Secretly communicated with the California Department of Cannabis 11 12 13 17 McCarl Decl. ¶ 109 and Exh. DD (showing that Thorn materially altered a real 14 property lease before attaching it to his Cross-Complaint). 15 18 See supra n.11 16 19 McCarl Decl. ¶¶ 110–18 and Exhs. EE and GG, and Delis Decl. ¶¶ 47–51 (showing that Thorn backdated the Management Services Agreement attached to the Cross- 17 Complaint and stamped Delis’ signature on that document using a stamp Thorn 18 secretly procured without Delis’ knowledge or consent). 19 20 McCarl Decl. ¶¶ 106–08 and Delis Decl. ¶ 103 (showing that Thorn fabricated the 20 preposterous “oral Equipment Lease” alleged in his Cross-Complaint, and that he derived the alleged monthly rent amount of $52,455.77 from a spreadsheet prepared 21 by his accountant two weeks before Thorn filed the Cross-Complaint). Thorn swore 22 to the truth of facts underlying these claims in his February 15, 2022 Declaration 23 opposing Delis’ Motion to Strike. See Suppl. RJN Exh. X. 24 21 See Delis Decl. ¶ 72 and Exh. Q. 22 See RJN Exhs. P (false N&L statement of information filed by JCM AM employee 25 Sandra Henson on March 28, 2022 declaring that Thorn owns N&L), R (California Secretary of State webpage describing Thorn as N&L’s owner). Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions 7 1 Control about Delis’ cannabis license while purporting to act on Delis’ 2 behalf despite a knowing lack of authorization to do so;23 3 6. Made false, misleading, and contradictory statements in interrogatory 4 responses and declarations;24 5 7. On April 1, 2022, fraudulently accepted service of process on Delis’ behalf 6 in the matter of Meeks v. N&L,25 in which Thorn has sent attorneys to 7 represent himself and his companies, but not N&L.26 8 Excerpts from some of the criminal statutes these acts violated are attached as an 9 Appendix to this brief. Any of these acts provide standalone justification for 10 terminating sanctions as well as Delis’ other requested relief. 11 III. The Court should use its inherent and statutory sanctions authority 12 to impose consequences for Thorn’s unprecedented wrongdoing. 13 Delis’ Motion for Sanctions invoked the Court’s inherent power as well as Civ. 14 15 16 17 18 23 See McCarl Decl. ¶ 134 and Exhs. Q, OO. 19 24 See Suppl. RJN 4–6, Exhs. X, (excerpts from Thorn’s Feb. 15, 2022, Declaration) 20 Y (excerpts from Thorn’s responses to Delis’ First Set of Special Interrogatories and Requests for Admission); McCarl Decl. ¶¶ 89–97 and Delis Decl. ¶ 98 (describing 21 evidence that Thorn and JCM AM, despite numerous interrogatory responses to the 22 contrary [see Suppl. RJN Exh. Y, pp. 4–5], have failed to deposit all N&L’s cash 23 receipts into N&L’s accounts). 24 25 See Suppl. RJN Exh. T (Proof of Service showing that Thorn’s controller Sandra Henson accepted substituted service on Mario Delis’ behalf at 901 Potato Road on 25 April 1 — ten days after Thorn ousted Delis from the property.). 26 See Delis Decl. ¶ 87, and RJN Exh. O. Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions 8 1 Proc. Code § 128.5(a).27 Delis seeks terminating sanctions against Thorn, JCM AM, 2 and Cana Rose. He also seeks directives of a monetary and nonmonetary nature 3 aimed at protecting Delis’ interests following Thorn’s March 22 takeover of N&L,28 4 protecting Delis’ right to a fair trial,29 and reimbursing Delis for expenses imposed 5 by Thorn’s bad-faith actions and tactics.30 6 A. The Court has inherent power to issue terminating sanctions without 7 need for a prior court order, and it should do so in this case. 8 Thorn claims that terminating sanctions can only be imposed pursuant to a 9 discovery motion made under Civ. Proc. Code § 2023.030(d)(1).31 The sole case 10 Thorn cites for this proposition says nothing of the sort,32 and the proposition is 11 12 13 14 27 Thorn’s argument that Civ. Proc. Code § 128.5(a) applies only to “the making or 15 opposing for motions or the filing and service of [pleadings]” (Thorn Opp. Sanc. 11) is contradicted by the plain language of the statute as well as binding precedent. See, 16 e.g., On v. Cow Hollow Properties, 222 Cal. App. 3d 1568, 1575 (1990). 17 28 Civ. Proc. Code § 128.5(f)(2). These directives are set forth in ¶¶ 34–55 of the 18 Proposed Order and summarized in Appendix B of Delis’ Reply Mot. PI. Each 19 proposed remedy can be characterized either as an injunction or as a directive made under § 128.5 or the Court’s inherent sanctions authority. 20 29 See Mot. Sanc. 15 (requesting remedies for Thorn’s evidence spoliation). 21 30 See Mot. Sanc. 15–17. 22 31 Thorn Opp. Sanc. 9–10. 23 32 See Van Sickle v. Gilbert, 196 Cal. App. 4th 1495 (2011) (affirming terminating 24 sanctions pursuant to Civ. Proc. Code § 2023.030(d)(1), but nowhere suggesting that this is the only source of a court’s power to grant terminating sanctions). 25 Cases ”are not authority for propositions not considered.” People v. Ault, 33 Cal. 4th 1250, 1268 n.10 (2004). Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions 9 1 contrary to law. The Court has inherent authority to issue terminating sanctions. 2 “California courts have inherent power to terminate litigation for deliberate and 3 egregious misconduct when no other remedy can restore fairness,”33 and an exercise 4 of this power need not be preceded by violation of a court order.34 5 Thorn’s resort to extrajudicial self-help to enforce the MOU more than justifies 6 terminating sanctions. Additionally, Delis has provided extensive, uncontroverted 7 evidence that Thorn and his companies have engaged in widespread evidence 8 9 10 11 12 13 14 15 16 17 33 Stephen Slesinger, Inc. v. Walt Disney Co., 155 Cal. App. 4th 736, 761 (2007). “When a [party]’s deliberate and egregious misconduct in the course of the litigation renders 18 any sanction short of dismissal inadequate to protect the fairness of the trial, 19 California courts necessarily have the power to preserve their integrity by 20 dismissing the action.” Id. 21 34 See id. at 763 (affirming terminating sanctions sought under the inherent power doctrine and explaining that no violation of a court order is required for a court to 22 issue such sanctions). The same rule applies to requests for terminating sanctions 23 made under the Discovery Code, so it makes no difference which of the two sources 24 of authority a moving party invokes in a motion for terminating sanctions. See, e.g., Williams v. Russ, 167 Cal. App. 4th 1215, 1227 (2008) (noting that terminating 25 sanctions are “appropriate in the first instance without a violation of prior court orders in egregious cases of intentional spoliation of evidence”). Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions 10 1 spoliation and concealment.35 Terminating sanctions are commonly imposed for far 2 less severe instances of such conduct.36 3 B. Tailored remedies and “directives of a nonmonetary nature” are 4 needed to prevent Thorn from profiting from his wrong. 5 Each proposed remedy set forth in Delis’ Proposed Order can be characterized 6 either as an injunction or as a directive made under § 128.5 or the Court’s inherent 7 sanctions authority. All the requested remedies are necessary to “deter repetition of 8 the action or tactic or comparable action or tactic by others similarly situated.”37 9 After all, if parties routinely sought to recover for claims based on fabricated 10 evidence, destroyed evidence to keep it out of an opponent’s hands, defrauded 11 government agencies and third parties to help themselves at an opponent’s expense, 12 or seized opposing parties’ and parties’ assets and income through acts of self-help 13 in the middle of civil litigation, that would spell the end of the rule of law. 14 15 16 17 35 See, e.g., McCarl ¶ 127 and Exh. MM (Sept. 22, 2021 message from Jeffrey Thorn to Kelly Steinback instructing her to alter evidence before Delis asks for it); Delis Decl. 18 ¶ 66–67, 88 and McCarl Decl. Exh. II (showing that Thorn deleted Delis’ 420 19 Kingdom Dropbox Business Account the day after Delis filed this lawsuit and has 20 restricted Delis’ access to N&L’s records); McCarl Decl. ¶ 86 and Exhs. W, X (showing that in the weeks after Delis sued, Thorn and JCM AM paid an accountant 21 $13,500 for an operation called “Catchup and Clean Up Accounting”); McCarl Decl. 22 Exh. PP, pp. 6–7 (text messages between Thorn and his bookkeeper Sandra Henson 23 in which a month of messages exchanged in the month preceding Delis’ lawsuit is missing, and in which Henson tells Thorn on December 18, 2021 that “Evan your IT 24 person is going to call me on Monday so we can move files.”). 25 36 See Mot. Sanc. 13–14. 37 Civ. Proc. Code § 128.5(f)(2). Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions 11 1 C. The Court should order Thorn to reimburse Delis for expenses incurred because of Thorn’s litigation misconduct. 2 3 The Court should order Thorn, JCM AM, and Cana Rose to reimburse Delis for 4 his “reasonable expenses, including attorney’s fees, incurred by [Delis] as a result 5 of” their sanctionable conduct.38 Sanctions awards under Civ. Proc. Code § 128.5 6 “can be based either on a finding of a bad faith action or tactics that are frivolous or 7 solely intended to cause unnecessary delay.”39 Tactics are “frivolous” when they are 8 “totally and completely without merit or for the sole purpose of harassing an 9 opposing party.”40 An action is frivolous or in bad faith if it “is prosecuted for an 10 improper motive, including harassment or delay” or “indisputably has no merit.”41 11 However, the moving party need not demonstrate an “evil motive.”42 12 The amounts Delis seeks to recover include the following: 13 • Thorn should pay Delis’ legal expenses incurred in investigating and 14 responding to Thorn’s March 22 takeover of N&L and embezzlement of its 15 assets and income streams. But for Thorn’s resort to self-help to enforce a 16 17 18 38 Civ. Proc. Code § 128.5(a). 19 39 On v. Cow Hollow Properties, 222 Cal. App. 3d 1568, 1575 (1990). Thorn’s argument that Civ. Proc. Code § 128.5(a) applies only to “the making or opposing for motions 20 or the filing and service of [pleadings]” (Thorn Opp. Sanc. 11) is contradicted by the 21 plain language of the statute; Thorn omits the key language “include, but are not 22 limited to” from his excerpt from Civ. Proc. Code § 128.5(b)(1); see also In re Marriage 23 of Sahafzadeh-Taeb &Taeb, 39 Cal. App. 5th 124 (2019) (terminating sanctions imposed for counsel’s failure to appear at trial). 24 40 Civ. Proc. Code § 128.5(b)(2). 25 41 Winick Corp. v. County Sanitation Dist. No. 2, 185 Cal. App. 3d 1170, 1177 (1986). 42 West Coast Dev. v. Reed, 2 Cal. App. 4th 693, 702 (1992). Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions 12 1 frivolous legal position, these expenses would not have been incurred.43 2 • Thorn should pay for all Delis’ expenses incurred in responding to the 3 Cross-Complaint, which was brought in bad faith and sought to recover 4 “made up”44 damages for fraudulent claims based on bogus agreements.45 5 • Thorn should pay for Delis’ expenses incurred in investigating Thorn’s 6 spoliation, fabrication, and concealment of evidence.46 7 • Thorn should reimburse Delis for amounts Delis was forced to invest in 8 N&L in reliance on Thorn’s now-abandoned litigation position that Delis’ 9 attempt to assign N&L to Thorn in September was ineffective. Thorn’s 10 theft of N&L’s assets and income is a bad-faith tactic, based on a frivolous 11 claim of ownership, that ensures Delis will never recover his investments 12 unless the Court forces Thorn to disgorge their value. 13 Thorn’s contention that the amount of sanctions sought had to be presented 14 “with exactitude” in Delis’ Notice of Motion seeks to introduce a new requirement 15 that the California Legislature omitted from Civ. Proc. Code § 128.5. If this Court 16 grants Delis’ request for sanctions pursuant to § 128.5, Delis can submit a statement 17 18 19 20 21 43 See Delis Decl. ¶¶ 52–60. 22 44 See McCarl Decl. ¶ 119, Exh. HH (deleted December 2021 text message in which 23 Thorn admits that he “made up” the damages sought in the Cross-Complaint). 24 45 On v. Cow Hollow Props., 222 Cal. App. 3d 1568, 1575 (1990) (allowing a litigant to recover all their legal expenses incurred in responding to a frivolous action). 25 46 See, e.g., Modern Remodeling, Inc. v. Tripod Holdings, LLC, 2021 U.S. Dist. LEXIS 163228, *42, 46–48 (D. Md.) (awarding expenses for a party’s evidence spoliation). Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions 13 1 of expenses that Thorn may challenge.47 Thorn relies on Lesser v. Huntington Harbor 2 Corp.,48 but that case held only that “more than one or two days’ notice” before the 3 hearing was required in the circumstances of that six-year, $7.5M litigation.49 The 4 case said nothing about whether the Court could first make findings of fact showing 5 an entitlement to sanctions, and then later approve a fee application seeking those 6 sanctions — as Delis requested here.50 7 Here, Delis’ moving papers thoroughly documented the grounds for Delis’ 8 requested sanctions and gave Thorn an opportunity to dispute those grounds. Thorn 9 has done his best to do so. The amount of Delis’ expenses attributable to Thorn’s 10 bad-faith tactics had yet to be determined at the time of Delis’ Motion and continues 11 to accumulate today, so Delis requested a directive ordering Delis’ attorneys to 12 submit supplemental declarations describing and seeking the amounts sought.51 13 14 15 47 Brewster v. S. Pac. Transp. Co., 235 Cal. App. 3d 701, 716 (1991) (notice was adequate when, after the judge at the hearing for sanctions stated his intention to award costs, 16 the moving party submitted a statement of costs twenty days later that could be 17 challanged separately). 18 48 173 Cal. App. 3d 922, 931–33 (1985). 19 49 The court rejected an argument that adequate notice invariably required at least five 20 days before the hearing. See id. 50 See Prop. Ord. ¶¶ 40, 77. 21 51 This Court has the authority to manage its proceedings in the interest of justice, 22 including by issuing one order establishing the moving party’s right to sanctions 23 and a later order granting that party’s fee application based in part on the earlier 24 order’s findings. That was the process apparently followed in On, 222 Cal. App. 3d at 1576. In that case, the trial court granted a fee application that invoked Civ. Proc. 25 Code § 128.5; the court’s order incorporated by reference the findings of fact made in an earlier statement of decision. Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions 14 1 IV. Conclusion 2 Thorn’s seizure of an opposing party in the middle of ongoing litigation is an 3 affront to the rule of law, and Delis asks the Court to impose all sanctions needed to 4 prevent Thorn from profiting from his wrong at Delis’ expense. 5 6 Dated: April 20, 2022 7 8 Respectfully submitted, 9 10 11 John Mayfield Rushing Ryan McCarl 12 SBN # 331273 SBN # 302206 13 14 Rushing McCarl LLP 2219 Main St. No. 144 |Santa Monica, CA 90405 15 T: (310) 896-5082 | E: info@rushingmccarl.com 16 17 Appendix: Excerpts from California Penal Code 18 19 20 21 22 23 24 25 Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Appendix to Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions 1 APPENDIX: EXCERPTS FROM CALIFORNIA PENAL CODE 2 Thorn claims that Delis’ Motion for Sanctions must be denied because it fails to 3 allege any specific rule or law that Thorn violated.52 While that argument is 4 baseless,53 we are happy to oblige. Thorn’s litigation misconduct to date, as 5 documented in the Motion for Sanctions and its accompanying declarations, has 6 arguably violated the following laws, among others (and setting aside federal crimes 7 to conserve space): 8 • Pen. Code § 503 (“Embezzlement”): “Embezzlement is the fraudulent 9 appropriation of property by a person to whom it has been intrusted.”54 10 • Pen. Code § 532(a) (“Fraudulently obtaining money, property or labor”): 11 “Every person who knowingly and designedly, by any false or fraudulent 12 representation or pretense, defrauds any other person of money, labor, or 13 property . . . and by thus imposing upon any person . . . fraudulently gets 14 possession of money or property . . . is punishable in the same manner 15 and to the same extent as for larceny of the money or property so 16 obtained.” 17 • Pen. Code § 470(a) (“Forgery”): “(a) Every person who, with the intent to 18 19 20 21 52 See Thorn Opp. Sanc. 10 n.9. 22 53 Delis is not seeking sanctions under Cal. Rules of Court, Rule 2.3, so that rule’s requirements are inapplicable. 23 54 This amount includes amounts related to the Anti-SLAPP Motion that were the 24 subject of Delis’ earlier fee motion. The Supplemental Declaration of Ryan McCarl 25 and Supplemental Proposed Order break out this amount so the Court can elect whether to include it or consider it separately at a later hearing. Appendix to Plaintiff Mario Delis’ Reply in Support of Delis’ Motion for Sanctions i 1 defraud, knowing that he or she has no authority to do so, signs the name 2 of another person or of a fictitious person to any of the items listed in 3 subdivision (d) [including any “contract” or “power to receive money” or 4 “power . . . to dispose of goods”] is guilty of forgery. (b) Every person 5 who, with the intent to defraud, counterfeits or forges the seal or