Preview
Cang N. Le SBN 246773
Ronald St. Marie (SBN
Joshua D. Mendelsohn (SBN 228888)
ADAMS STIRLING PLC
2566 Overland Avenue, Suite 730
Los Angeles, California 90064
(310) 945 Fax: (310) 945
Attorneys for Responden
LITTLE ORCHARD BUSINESS
PARK OWNERS ASSOCIATION
SUPERIOR COURT OF THE STATE OF CALIFORNI
FOR THE COUNTY OF SANTA CLARA GENERAL JURISDICTION
JULIET T. NGUYEN 17CV317898
Assigned to Hon. Theodore Zayner
etitioner
RESPONSE AND OPPOSITION OF
RESPONDENT LITTLE ORCHARD
LITTLE ORCHARD BUSINESS PARK BUSINESS PARK OWNERS
OWNERS ASSOCIATION ASSOCIATION TO PETITION FOR WRIT
OF MANDATE
Respondent, [Filed concurrently ith Respondent’s
Evidentiary Objections to Petitioner’s Evidence;
Declaration of Tanya Ruiz Jeffrey A.
Barnett William Forrester, and Joseph
Taorimino
Date: August 9, 2018
Time: 9:00 AM
Dept
Judge: Hon. Theodore Zayner
Action Filed: October 23, 2017
Trial Date: Not Set
RESPONDENTS RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE
1 TABLE OF CONTENTS
2 I. INTRODUCTION ................................................................................................................ 1
3
II. STATEMENT OF RELEVANT FACTS ........................................................................... 3
4 A. Little Orchard and its Relation to Ms. Nguyen ................................................................ 3
B. Little Orchard Fully Complied with the First Inspection Demand Producing all of
5 its Files for Inspection and Copying ................................................................................. 3
C. Little Orchard Fully Complied with the Second Inspection Demand Producing all of
6 its Files for Inspection and Copying on October 5, 2017 .................................................. 4
7
III. LEGAL ARGUMENT ......................................................................................................... 6
8 A. The Membership List Sought Pursuant to Corporation Code § 8330 was Produced
Both in 2015 and 2017 and is not an Issue Here ............................................................... 6
9 B. Little Orchard has Produced the Articles of Incorporation and Bylaws in Both 2015
and 2017. ........................................................................................................................... 7
10 C. All of Little Orchard’s Financial Records and Governing Documents Required Under
11 Corporations Code § 8333 were Produced in Both 2015 and 2017 .................................. 8
D. The Petition Fails to Support a Finding that there is a Proper Purpose to Support the
12 Production of any Additional Documents ......................................................................... 9
E. There is no Good Reason to Order an Inspection and Audit of the Records of Little
13 Orchard Pursuant to Corporations Code § 8336 as Requested by Ms. Nguyen .............. 11
F. Ms. Nguyen’s Request for Attorney Fees in Unsupportable and the Evidentiary
14 Showing Offered to Support the Extraordinary Amount of Fees is Inadequate .............. 12
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IV. CONCLUSION ................................................................................................................... 13
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RESPONDENTS’ RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE
1 TABLE OF AUTHORITIES
2 CASES
3 Parker v. Tract No. 7260 Assn., Inc. (2017) Cal.App.5th 24 .............................................................. 2, 9
4 STATUTES
5 California Corporations. Code § 7000..................................................................................................... 1
6
7 California Corporations Code § 7160...................................................................................................... 7
8 California Corporations Code § 8330.................................................................................................. 2, 6
9 California Corporations Code § 8333.................................................................................................. 8, 9
10 California Corporations Code § 8336............................................................................................. passim
11 California Corporations Code § 8337................................................................................................ 2, 12
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RESPONDENTS’ RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE
1 I. INTRODUCTION
2 Respondent Little Orchard Business Park Owners Association (“Little Orchard”) opposes the
3 Petition for Writ of Mandate filed by Petitioner Julie T. Nguyen (“Ms. Nguyen”). This Petition arises
4 out of two demands made by Ms. Nguyen under the Corporations Code for virtually every document in
5 Little Orchard’s possession. On two occasions, first in 2015, and then in 2017, Little Orchard fully
6 complied with Ms. Nguyen’s demands, allowing inspection of every document requested in the
7 possession of its custodian of records. Little Orchard has never refused to produce any document in its
8 possession.
9 The demands for documents were fully complied with because Little Orchard is a non-profit
10 mutual benefit corporation acting as the owners’ association for the commercial common interest. Ms.
11 Nguyen is a member with rights to inspection under various section of the California Corporations Code
12 for Nonprofit Mutual Benefit Corporations. (Corporations. Code § 7000 et seq.) and recorded covenants
13 – Enabling Declaration (the “CC&Rs”).
14 Despite the full compliance with her demands, Ms. Nguyen seeks an order compelling the
15 production of the same documents for a third time. For example, the documents produced included
16 Little Orchard’s Membership List, and its Articles of Incorporation and Bylaws. Yet Ms. Nguyen
17 admits that Little Orchard produced these documents in her moving papers.
18 The sole argument presented by Ms. Nguyen is that documents that she expected would be part
19 of the production were missing. However, that expectation does not establish a right to the remedy
20 sought by Ms. Nguyen in her Petition. Corporations Code § 8336, which empowers a party demanding
21 corporate documents to seek relief from the courts, requires a showing that there was a “refusal of a
22 lawful demand for inspection . . .” Little Orchard never refused to produce any documents.
23 Ms. Nguyen fails to understand that some document she seeks may never have come into being,
24 and others have been destroyed either in the ordinary course or inadvertently. This is particularly true
25 of documents created more than five years ago which represent the bulk of the documents she claims
26 are missing. The law does not require Little Orchard to create (or re-create) documents in
27 response to a request for inspection. It is only obligated to produce what it has. Ms. Nguyen now
28 has all of the documents requested that Little Orchard possesses. She therefore fails to meet her burden
28 1
RESPONDENTS’ RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE
1 of proof to support this Petition under § 8336.
2 The Petition is also motivated by an improper purpose, which would bar the production of
3 documents that are now sought. Ms. Nguyen has been an adversary of Little Orchard on several fronts,
4 not the least of which is her defiance of unambiguous rules about the types of signage that can be used
5 at the Business Park. Her tenant, who operates a marijuana dispensary in Ms. Nguyen’s unit, has put
6 up improper signage has resulted in monetary fines imposed against Ms. Nguyen. The Petition is an
7 attempt to retaliate against Little Orchard for enforcing its CC&Rs and to force the Association to spend
8 money and to create leverage to offset against the fines imposed against Ms. Nguyen. This is not a
9 legitimate purpose of Corporations Code § 8330, et seq., and should not be countenanced by this Court.
10 (See Parker v. Tract No. 7260 Assn., Inc. (2017) Cal.App.5th 24, 31-32.)
11 Finally, the other remedies sought in this case are manifestly inappropriate. Ms. Nguyen appears
12 to seek an order appointing inspectors or accountants to do an investigation and an audit of the records
13 of Little Orchard per Corporations Code § 8336. This is not part of the relief sought in the Petition but
14 is mentioned in supporting documents. The stated reason is Ms. Nguyen’s belief that an investigation
15 of the financial records produced might not tell the whole story. Ms. Nguyen’s belief is not evidence
16 and does not support a showing that an expensive investigation and audit is necessary. Moreover, such
17 an audit is usually paid for by the inspecting party – here, Ms. Nguyen. However, without justification,
18 Ms. Nguyen seeks an order compelling Little Orchard to pay for the entirety of this unnecessary and
19 wasteful work.
20 Ms. Nguyen’s request for an award of attorney fees of $17,412.50 is also unsupported. Under
21 Corporations Code § 8337, an award of attorney fees is only appropriate upon a showing of “the failure
22 of the corporation to comply with a proper demand thereunder was without justification.” Here, Little
23 Orchard did everything that it could to comply with the inspection demand; it made all of its records
24 available on two separate occasions. Nothing was done without justification.
25 Little Orchard submits that the Petition should be denied, and Little Orchard should be deemed
26 the prevailing party for the purposes of an award of fees and costs. This Petition should never have
27 been filed, much less prosecuted.
28 ///
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RESPONDENTS’ RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE
1 II. STATEMENT OF RELEVANT FACTS
2 A. Little Orchard and its Relation to Ms. Nguyen
3 Little Orchard is the owners association created to manage the Business Park located on Little
4 Orchard Street in San Jose. The Business Park is a commercial common interest development of
5 twenty-seven (27) separately owned units designed exclusively for retail and commercial use.
6 (Declaration of Jeffrey Barnett (“Barnett Decl.”), ¶ 3.)
7 Little Orchard was formed in 1986. It operates pursuant to the recorded CC&Rs which
8 provides that the owners of the individual units of the Business Park are members of Little Orchard.
9 The owners have the rights as members of Little Orchard under the California Nonprofit Mutual Benefit
10 Corporations Code and the Commercial and Industrial Common Interest Development Act (Civil Code
11 § 6500, et seq.). Ms. Nguyen is an owner of a unit within the Business Park and a member of Little
12 Orchard. (Barnett Decl., ¶ 4.)
13 Ms. Nguyen has been in a number of disputes with Little Orchard, including a dispute over the
14 conduct of the tenant who rented her unit from her. That tenant had displayed signage contrary to the
15 governing documents that bound all members of Little Orchard and without permission of Little
16 Orchard’s board of directors. As a result, Ms. Nguyen was fined by Little Orchard for each day that the
17 sign was not removed. (Barnett Decl., ¶ 5; Declaration of Tanya Ruiz (“Ruiz Decl.”), ¶ 4; Declaration
18 of Bill Forrester (“Forrester Decl.”), ¶ 5.) The daily fines stopped accruing in August 2017 at or around
19 the time of the second document inspection was made by Ms. Nguyen. (Barnett Decl., ¶ 5.)
20 B. Little Orchard Fully Complied with the First Inspection Demand Producing all of its
21 Files for Inspection and Copying.
22 Ms. Nguyen demanded Little Orchard produce its records on least two occasions. The first
23 demand was made on September 10, 2015 and sought the production of documents falling within twelve
24 separate categories. Taken together, this covered virtually every document pertaining to the operation
25 of Little Orchard during the entirety of its existence – from 1986 forward. Then, on October 5, 2017,
26 the same documents were produced a second time to Ms. Nguyen.
27 Throughout this process, Little Orchard was represented by experienced association managers,
28 William Forrester (20 years of experience); Tanya Ruiz (6 years of experience). Little Orchard was
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RESPONDENTS’ RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE
1 also guided by experienced legal counsel with more than 50 years of practice and vast experience in the
2 law of common-interest developments: Jeffrey A. Barnett. (Ruiz Decl., ¶ 2; Forrester Decl., ¶ 2; Barnett
3 Decl., ¶ 2.)
4 This first production included the membership list that Ms. Nguyen requested under
5 Corporations Code § 8330. As Ms. Nguyen’s counsel testifies to in his declaration, “The Association
6 responded through counsel by providing the membership list on September 28, 2015.” (Declaration of
7 James Roberts (“Roberts Decl.”) filed in support of the Petition, ¶ 8; 5:4-5.) The production was made
8 by the manager/custodian of Little Orchard’ records, Cornerstone Community Management, Inc.
9 (“Cornerstone”). Cornerstone maintained all of the records for Little Orchard. (Declaration of Joseph
10 Taormino (“Taormino Decl.”), ¶ 2.)
11 After the 2015 production, Ms. Nguyen’s counsel noted that there were documents he
12 anticipated would exist and were missing from the production. (Barnett Decl., ¶ 7; Exhibit E.) Little
13 Orchard responded through its counsel, Jeffrey A. Barnett, explaining:
14 The Association has produced all available records responsive to your request. The fact that
the corporate records that are over ten or fifteen years old are not complete is not a surprise
15 given that the corporation is run by volunteers, that the corporation is non-profit and that the
membership consists of twenty-seven commercial owners focused on their own business
16 interests.
17 (Barnett Decl., ¶ 8; Exhibit F.)
18 While Ms. Nguyen spends a considerable time and effort in her moving documents addressing this first
19 production of records in the moving papers, it is not the production that is challenged in the Petition.
20 (See Petition at ¶¶ 4 & 5; 2:12-19; Petitioner’s Memorandum of Points and Authorities (“MPAs”) at
21 13:16 (“THE INSPECTION SUBJECT OF THE PETITION”).) Rather it is the second production
22 that is at issue here.
23 C. Little Orchard Fully Complied with the Second Inspection Demand Producing all of
24 its Files for Inspection and Copying on October 5, 2017.
25 On August 9, 2017, Ms. Nguyen’s counsel sent Little Orchard virtually the identical inspection
26 demand that was sent on two years earlier. The second demand was unlimited as to time and seemingly
27 covered every single document maintained by Little Orchard from its creation. These included:
28 • All Annual Meeting Minutes;
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RESPONDENTS’ RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE
1 • All Annual Meeting Reports;
2 • All Board Minutes;
3 • All Federal Tax returns;
4 • All State Tax Returns;
5 • All Budgets;
6 • All Financial Statements;
7 • All Meeting Agendas;
8 • All Meeting Minutes; and
9 • The Little Orchard Membership List.
10 (Ruiz Decl., ¶ 8; “Forrester Decl., ¶ 7.)
11 Little Orchard initially protested that fact stating that the identical documents were produced
12 earlier. It was argued that a second production should be unnecessary and was wasteful. (Roberts Decl.,
13 12, 14, 15; Exhibits 12, 14, 16.) Thus, Little Orchard initially offered to produce what it believed were
14 the new relevant documents for inspection on September 14, 2017. (Roberts Decl., 12, 14, 15; Exhibits
15 12, 14, 16.) Ms. Nguyen’s counsel protested and a second full production, duplicating the first
16 production, was made on October 5, 2017. (Roberts Decl., ¶¶ 17, 18; Ruiz Decl., ¶ 7.)
17 At this second production, Little Orchard produced all of the documents that it had. This
18 production included approximately six (6) boxes of Little Orchard’s documents taken from off-site
19 storage and transported to Little Orchard’s manager’s offices in San Jose, approximately two (2)
20 standard file drawers of documents maintained at the manager’s site offices, and electronically stored
21 documents, printed out from custodian’s computers. (Ruiz Decl., ¶ 9; Forrester Decl., ¶ 9.)
22 Ms. Nguyen now claims that there are gaps in the records maintained by Little Orchard. This
23 is based on the conclusions of Ms. Nguyen’s counsel (see Roberts Decl., [first] ¶ 241) and on an
24 unauthenticated hearsay spreadsheet (see Roberts Decl., Exhibit 26). However, all of that testimony is
25 subject to the following testimony of counsel qualifying his conclusion that there were missing
26 documents “Given the state of the records, it is possible a page or two was missed in this description,
27
1
28 The Roberts Declaration ends with two paragraphs, both numbered 24. Roberts Decl., pp.12-13.
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RESPONDENTS’ RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE
1 but it is believed that the following substantially set forth the records.” (Roberts Decl., footnote 1,
2 12:26-28; emphasis added.) Thus, Mr. Roberts admits that the accusation that there were missing
3 documents is based on a belief, and that the list submitted could be inaccurate.
4 Significantly, after October 5, 2017 production, Ms. Nguyen did not reach out to Little Orchard
5 (either directly or through her counsel) to identify the claimed missing documents or seek assurances
6 that they exist and were intentionally withheld. Instead, it appears that she immediately prepared the
7 Petition, (signed on October 16, 2017) and then filed the Petition one week later (October 23, 2017).
8 Moreover, the moving papers relied upon by Ms. Nguyen were not prepared until May of 2018, more
9 that seven months later. During this seven-month delay, Ms. Nguyen and her counsel remained silent.
10 The first time Little Orchard learned of any of Ms. Nguyen’s concerns about the second production was
11 when it was served with the Petition and supporting papers. (Ruiz Decl., ¶ 11; Forrester Decl., ¶ 11;
12 Barnett Decl., ¶ 10.)
13 Since the initial production in 2015, no legal action has been commenced by Ms. Nguyen
14 against Little Orchard based on the voluminous documents and information produced by Little Orchard.
15 Further, Little Orchard is unaware of any proper use made of the Membership List. Moreover, while
16 Ms. Nguyen claims there is a need for a full audit of all of the financial records of Little Orchard, she
17 offers no evidence to support that claim. (Ruiz Decl., ¶ 12; Forrester Decl., ¶ 12; Barnett Decl., ¶ 11.)
18 The documents claimed to be missing are not shown to be important to any issue or controversy,
19 momentous or otherwise for proper purpose. The documents claimed to be missing from the production
20 all predate 2013, and in many cases go back eight (8) years to 2010 and earlier. (See Roberts Decl.,
21 [first] ¶ 24; Exhibit 26.) None of these documents would bear on any legitimate purpose for demanding
22 another inspection.
23 III. LEGAL ARGUMENT
24 A. The Membership List Sought Pursuant to Corporations Code § 8330 was Produced
25 Both in 2015 and 2017 and is not at Issue Here.
26 In her Petition, Ms. Nguyen asks this Court to order Little Orchard to produce the Membership
27 List. A member is entitled to inspect and copy membership contact information under California
28 Corporations Code § 8330. This includes “the record of all the members' names, addresses and voting
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RESPONDENTS’ RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE
1 rights . . ..” Corporations Code § 8330(1). This same right to the membership list is set forth in the
2 Little Orchard Bylaws at section 10.1 (referencing the “member register”). (Bylaws, attached as Exhibit
3 3 to the Roberts Decl. at page 9.)
4 Ms. Nguyen made a demand for the Membership List in both 2015 and 2017. Ms. Nguyen has
5 made no showing that the Membership List was withheld from production. Indeed, her attorney
6 admits in his declaration that this was produced in 2015. (Roberts Decl., ¶ 8; 5:4-5.) This is
7 confirmed by Little Orchard’s counsel (Barnett Decl., ¶ 6; Exhibit D.) Also, the Membership List is
8 not one of the documents identified as missing in the 2017 inspection. (Roberts Decl., ¶ 24, 12:2-15;
9 Exhibit 26.) Nguyen’s claim to the contrary in her Petition, is therefore unsupported and unsupportable.
10 It should not be countenanced by this Court.
11 B. Little Orchard has Produced the Articles of Incorporation and Bylaws in Both 2015
12 and 2017.
13 In her Petition, Ms. Nguyen seeks an order to compel the production of the “Articles of
14 Incorporation and Bylaws (original and as amended to date).” (Petition, 3:6-7.) These documents are
15 subject to an inspection demand made under Corporations Code § 7160. (“Every corporation shall keep
16 at its principal office in this state the original or a copy of its articles and bylaws as amended to date,
17 which shall be open to inspection by the members at all reasonable times during office hours.”) The
18 right to inspect the Articles and Bylaws is mirrored in Section 8.5 of the CC&Rs. (CC&Rs at p. 20.)
19 These documents were produced both in 2015 and 2017. (Ruiz Decl., ¶¶ 6. 9.) Indeed, in the
20 purported spreadsheet of documents produced by Ms. Nguyen’s counsel, both the Articles and the
21 Bylaws are listed as produced. (Roberts Decl., Exhibit 26.) Further, these documents are not included
22 in the conclusory list of missing documents in Mr. Roberts’ declaration. (Roberts Decl., [first] ¶ 24,
23 12:2-15.) In fact, both documents are attached to Ms. Nguyen’s counsel’s declaration as Exhibits.
24 (Roberts Decl., Exhibits 1 & 3.) Ms. Nguyen’s claim to the contrary in her Petition is therefore
25 unsupported and unsupportable.
26 ///
27 ///
28 ///
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RESPONDENTS’ RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE
1 C. All of Little Orchard’s Financial Records and Governing Documents Required Under
2 Corporations Code § 8333 were Produced in Both 2015 and 2017.
3 Ms. Nguyen is entitled to inspect certain financial and governance documents under
4 Corporations Code § 8333, which provides:
5 The accounting books and records and minutes of proceedings of the members and the board
and committees of the board shall be open to inspection upon the written demand on the
6 corporation of any member at any reasonable time, for a purpose reasonably related to such
person's interests as a member.
7
8 This right is mirrored in the Little Orchard Bylaws at Section 10.1., which calls for the production of
9 “books of account and minutes of meetings of the members, of the Board, and of committees.” (Bylaws
10 at page 9.) As set out in the declarations supporting this Opposition, Little Orchard produced all of its
11 financial and governance documents that it maintains. (Ruiz Decl., ¶ 9; Forrester Decl., ¶¶ 8, 9.) No
12 documents were withheld by Little Orchard. (Taormino Decl., ¶ 2.) Little Orchard can only produce
13 what it has.
14 Ms. Nguyen claims that there are documents which she believes should have been produced and
15 were not. However, she presents no evidence that the documents were ever created or, alternatively
16 were created and actually maintained by Little Orchard in its corporate records. There also is no
17 evidence that any documents were refused to Ms. Nguyen. Ms. Nguyen had more than sufficient time
18 from the date of the filing of the Petition to the date of this hearing in which to conduct discovery on
19 this issue but has not seen fit to do that.
20 Instead, Plaintiff apparently relies on the ludicrous argument that: “Nor may a corporation
21 simply deny the existence of the records.” (MPAs, 3:5.) This argument is unsupported by any authority
22 because none exists. Yes, a corporation has obligations to maintain certain records under Corporations
23 Code § 8320. However, it has no obligation to create (or recreate) such documents in response to a
24 request for inspection made under Corporations Code § 8333 if the documents do not already exist.
25 This conclusion can be seen in § 8336(a) governing the enforcement of the right to inspect
26 financial and governance documents. It requires a showing of a refusal of a lawful demand. (“Upon
27 refusal of a lawful demand for inspection under this chapter, or a lawful demand pursuant to Section
28 8330 or Section 8333 . . .”).
28 8
RESPONDENTS’ RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE
1 Thus, merely failing to produce a document because it does not exist does not give rise to a right
2 to seek the remedies under § 8336. There has to be a refusal to produce a document. There is no
3 evidence adduced that, beyond the initial wrangling over the scope of the second inspection demands,
4 Little Orchard refused to produce any document requested that it had. Little Orchard produced
5 everything it had in 2015 and 2017. (Ruiz Decl., ¶¶ 6, 9.)
6 Given the nature and number of the documents actually produced, there would be no reason to
7 conclude that Little Orchard refused to produce all of its documents. For example, Ms. Nguyen would
8 have this Court believe that Little Orchard produced all annual meeting minutes and annual meeting
9 reports after 2011, but for some reason intentionally withheld the production minutes prior to 2011.
10 Similarly, Ms. Nguyen suggests that the Board produced all board minutes, but for some reason
11 intentionally withheld the board minutes for the single year -- 2013. (See Roberts Decl., [first] ¶ 24,
12 12:4-15.)
13 The evidence and common sense show that that the Petition is unsupportable. There is no
14 ground on which this Court might order the production of documents that Little Orchard does not have.
15 On this basis, the Petition should be denied.
16 D. The Petition Fails to Support a Finding that there is a Proper Purpose to Support the
17 Production of any Additional Documents.
18 Little Orchard also challenges the Petition on the ground that the documents sought in the
19 Petition appear not to be for a “purpose reasonably related to [Ms. Nguyen’s] interests as a member.”
20 Corporations Code § 8333. Instead, the principal purpose for unnecessarily burdening Little Orchard
21 with a third production appears to be to retaliatory – to punish Little Orchard for imposing fines against
22 Ms. Nguyen for her violations of Little Orchard’s governing documents. (See Barnett Decl., ¶ 5; Ruiz
23 Decl., ¶ 4; Forrester Decl., ¶ 5.) Again, this purpose was not made apparent until the filing of the
24 Petition and the utter lack of competent evidence to show any violation of duty to allow inspection under
25 the Corporations Code.
26 The proper purpose element of an inspection demand was recently examined in Parker v. Tract
27 No. 7260 Assn., Inc. (2017) 10 Cal. App. 5th 24, reh'g denied (Apr. 13, 2017), review denied (July 12,
28 2017). The Court explained.
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RESPONDENTS’ RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE
1 A member's right of inspection is limited to purposes reasonably related to the member's
interests as a member. (§§ 8330, subd. (b)(1) [membership lists], 8333 [corporate financial
2 records].) “This limitation is always subject to judicial review to determine whether a lawful
purpose exists.” (Dandini v. Superior Court (1940) 38 Cal.App.2d 32, 35, 100 P.2d 535.) A
3 corporation has the burden of proving that the member “will allow use of the information for
purposes unrelated to the person's interest as a member.” (WorldMark, the Club v. Wyndham
4 Resort Development Corp. (2010) 187 Cal.App.4th 1017, 1029, 114 Cal.Rptr.3d 546.)
5 10 Cal. App. 5th at 31–32
6 Ms. Nguyen’s stated purpose for requesting the financial and governing documents was set out for the
7 first time in the Petition:
8 Petitioner's purpose in demanding inspection of records is to investigate the financial condition
of the association and propriety of association board activities and of the board members
9 (including duties as a member of any board committee on which the director may serve), and to
determine the rights and obligations of Petitioner as it pertains to the Association.
10
(Petition, ¶ 6, 2:20-24.)
11
12 Yet nothing appears to have come of the production of such documents. Ms. Nguyen has taken no
13 action regarding the financial documents produced. (Ruiz Decl., ¶ 12; Forrester Decl. ¶ 12; Barnett
14 Decl., ¶ 11.)
15 As explained above, Ms. Nguyen has been provided with all of he financial documents needed
16 to determine whether there is any impropriety in the financial condition or board activities of Little
17 Orchard during any relevant time. Any claim that might be shown by the documents sought – dating
18 back to 2013 and earlier – would be barred by any applicable statute of limitations. This conclusion is
19 underscored by the lack of any articulated claim asserted by Ms. Nguyen that would arise from the
20 mountain of documents already produced in 2015 and 2017.
21 The inescapable conclusion is that Ms. Nguyen’s purpose here is nefarious – to burden the
22 Association unnecessarily by requiring it to provide a third massive production of documents, to pay
23 exorbitant and unnecessary auditing and inspection costs, and to enrich Ms. Nguyen in the process by
24 paying unsubstantiated attorney fees and costs. This is an improper purpose that supports the denial of
25 the Petition and the award of fees and costs against her and in favor of Little Orchard.
26 ///
27 ///
28 ///
28 10
RESPONDENTS’ RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE
1 E. There is no Good Reason to Order an Inspection and Audit of the Records of Little
2 Orchard Pursuant to Corporations Code § 8336 as Requested by Ms. Nguyen.
3 In her Petition, Ms. Nguyen only seeks an order compelling Little Orchard to produce
4 documents for a third time. However, in her moving documents, she seeks to expand her remedies to
5 seek the appointment of inspectors or accountants to conduct an audit of the financial records of Little
6 Orchard. This remedy is stated in § 8336(a) as an alternative remedy to an order compelling production
7 of records:
8 (a) [T]he superior court … may enforce the demand or right of inspection with just and proper
conditions or may, for good cause shown, appoint one or more competent inspectors or
9 independent accountants to audit the financial statements kept in this state and investigate
the property, funds and affairs of any corporation and of any subsidiary corporation
10 thereof, domestic or foreign, keeping records in this state and to report thereon in such
manner as the court may direct.
11
(Emphasis added.)
12
13 Thus, the remedy requires a showing of good cause. Here, the only attempt to justify this request is set
14 out in the Declaration of Ms. Nguyen where she states:
15 An audit of the books and records and an investigation of the property, funds, and affairs of
Respondent Association are necessary because Petitioner is informed and believes that
16 misappropriations may not be disclosed by a simple review of Respondent Association's books
and records.
17
(Declaration of Julie T. Nguyen, ¶ 7, 3:5-8; emphasis added.)
18
This rank speculation based on “information and belief” rather than first-hand knowledge does not rise
19
to the level of good cause as required under law.
20
21 If there were any suspicions, they should have been triggered by something in the financial
22 documents already produced. Ms. Nguyen has all but two (2) years of the financial statements of Little
23 Orchard. The only ones purportedly missing are 2009 and 2011. She also has years of tax returns, both
24 state and federal, and other financial documents, including at least one audit report, multiple balance
25 statements, tax statements, budgets, and an independent account review report. (See Roberts Decl.,
26 Exhibit 26.) Despite having months to delve into these financial statements, Ms. Nguyen has failed to
27 identify a single suspicious financial entry, suspicious expenditure, or suspicious transaction that would
28 support a finding of good cause to conduct an audit.
28 11
RESPONDENTS’ RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE
1 Ms. Nguyen then doubles down on her request by asking this Court to compel Little Orchard to
2 pay for this unjustified inspection and audit. Under § 8336(c), it is presumed that the petitioning party
3 will pay for this extraordinary expense unless ordered otherwise. (“(c) All expenses of the investigation
4 or audit shall be defrayed by the applicant unless the court orders them to be paid or shared by the
5 corporation.”) Absent any reason to conduct an audit in the first place, it would be unfair to force Little
6 Orchard to pay even a portion of it. On these grounds, Little Orchard submits that the request for an
7 inspection and audit should be denied.
8 F. Ms. Nguyen’s Request for Attorney Fees is Unsupportable and the Evidentiary
9 Showing Offered to Support the Extraordinary Amount of Fees is Inadequate.
10 Ms. Nguyen seeks an award of attorney’s fees under Corporations Code § 8337 in the amount
11 of $17,412.50. To recover fees, Ms. Nguyen must demonstrate that Little Orchard acted without
12 justification:
13 In any action or proceeding under this article, and except as required by Section 8331, if the
court finds the failure of the corporation to comply with a proper demand thereunder was
14 without justification, the court may award the member reasonable costs and expenses,
including reasonable attorneys' fees, in connection with such action or proceeding.
15
(Emphasis added.)
16
17 There is no showing that Little Orchard acted without justification in response to Ms. Nguyen’s
18 document demands. Little Orchard timely produced all of the documents in its possession on two
19 occasions in two years. No harm or prejudice has been demonstrated by Ms. Nguyen resulting from
20 any imagined deficiencies in the production. Little Orchard therefore submits that the request for fees
21 should be denied.
22 Even if Ms. Nguyen is deemed to have established that Little Orchard acted without justification,
23 the evidence offered to support the claim of fees is inadequate. Ms. Nguyen’s counsel offer of proof
24 fails as follows:
25 • Counsel offers only conclusory evidence of the general nature of the fees he has billed, without
26 reference to the details, including dates, tasks and specific hours billed to this matter.
27 • Counsel testifies not only as to his own time billed out at $495 an hour, but that of an associate
28 attorney, Sharmi Shah, billing at $450 an hour.
28 12
Preview
Cang N. Le SBN 246773 Ronald St. Marie (SBN Joshua D. Mendelsohn (SBN 228888) ADAMS STIRLING PLC 2566 Overland Avenue, Suite 730 Los Angeles, California 90064 (310) 945 Fax: (310) 945 Attorneys for Responden LITTLE ORCHARD BUSINESS PARK OWNERS ASSOCIATION SUPERIOR COURT OF THE STATE OF CALIFORNI FOR THE COUNTY OF SANTA CLARA GENERAL JURISDICTION JULIET T. NGUYEN 17CV317898 Assigned to Hon. Theodore Zayner etitioner RESPONSE AND OPPOSITION OF RESPONDENT LITTLE ORCHARD LITTLE ORCHARD BUSINESS PARK BUSINESS PARK OWNERS OWNERS ASSOCIATION ASSOCIATION TO PETITION FOR WRIT OF MANDATE Respondent, [Filed concurrently ith Respondent’s Evidentiary Objections to Petitioner’s Evidence; Declaration of Tanya Ruiz Jeffrey A. Barnett William Forrester, and Joseph Taorimino Date: August 9, 2018 Time: 9:00 AM Dept Judge: Hon. Theodore Zayner Action Filed: October 23, 2017 Trial Date: Not Set RESPONDENTS RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE 1 TABLE OF CONTENTS 2 I. INTRODUCTION ................................................................................................................ 1 3 II. STATEMENT OF RELEVANT FACTS ........................................................................... 3 4 A. Little Orchard and its Relation to Ms. Nguyen ................................................................ 3 B. Little Orchard Fully Complied with the First Inspection Demand Producing all of 5 its Files for Inspection and Copying ................................................................................. 3 C. Little Orchard Fully Complied with the Second Inspection Demand Producing all of 6 its Files for Inspection and Copying on October 5, 2017 .................................................. 4 7 III. LEGAL ARGUMENT ......................................................................................................... 6 8 A. The Membership List Sought Pursuant to Corporation Code § 8330 was Produced Both in 2015 and 2017 and is not an Issue Here ............................................................... 6 9 B. Little Orchard has Produced the Articles of Incorporation and Bylaws in Both 2015 and 2017. ........................................................................................................................... 7 10 C. All of Little Orchard’s Financial Records and Governing Documents Required Under 11 Corporations Code § 8333 were Produced in Both 2015 and 2017 .................................. 8 D. The Petition Fails to Support a Finding that there is a Proper Purpose to Support the 12 Production of any Additional Documents ......................................................................... 9 E. There is no Good Reason to Order an Inspection and Audit of the Records of Little 13 Orchard Pursuant to Corporations Code § 8336 as Requested by Ms. Nguyen .............. 11 F. Ms. Nguyen’s Request for Attorney Fees in Unsupportable and the Evidentiary 14 Showing Offered to Support the Extraordinary Amount of Fees is Inadequate .............. 12 15 IV. CONCLUSION ................................................................................................................... 13 16 17 18 19 20 21 22 23 24 25 26 27 28 28 ii RESPONDENTS’ RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE 1 TABLE OF AUTHORITIES 2 CASES 3 Parker v. Tract No. 7260 Assn., Inc. (2017) Cal.App.5th 24 .............................................................. 2, 9 4 STATUTES 5 California Corporations. Code § 7000..................................................................................................... 1 6 7 California Corporations Code § 7160...................................................................................................... 7 8 California Corporations Code § 8330.................................................................................................. 2, 6 9 California Corporations Code § 8333.................................................................................................. 8, 9 10 California Corporations Code § 8336............................................................................................. passim 11 California Corporations Code § 8337................................................................................................ 2, 12 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 28 iii RESPONDENTS’ RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE 1 I. INTRODUCTION 2 Respondent Little Orchard Business Park Owners Association (“Little Orchard”) opposes the 3 Petition for Writ of Mandate filed by Petitioner Julie T. Nguyen (“Ms. Nguyen”). This Petition arises 4 out of two demands made by Ms. Nguyen under the Corporations Code for virtually every document in 5 Little Orchard’s possession. On two occasions, first in 2015, and then in 2017, Little Orchard fully 6 complied with Ms. Nguyen’s demands, allowing inspection of every document requested in the 7 possession of its custodian of records. Little Orchard has never refused to produce any document in its 8 possession. 9 The demands for documents were fully complied with because Little Orchard is a non-profit 10 mutual benefit corporation acting as the owners’ association for the commercial common interest. Ms. 11 Nguyen is a member with rights to inspection under various section of the California Corporations Code 12 for Nonprofit Mutual Benefit Corporations. (Corporations. Code § 7000 et seq.) and recorded covenants 13 – Enabling Declaration (the “CC&Rs”). 14 Despite the full compliance with her demands, Ms. Nguyen seeks an order compelling the 15 production of the same documents for a third time. For example, the documents produced included 16 Little Orchard’s Membership List, and its Articles of Incorporation and Bylaws. Yet Ms. Nguyen 17 admits that Little Orchard produced these documents in her moving papers. 18 The sole argument presented by Ms. Nguyen is that documents that she expected would be part 19 of the production were missing. However, that expectation does not establish a right to the remedy 20 sought by Ms. Nguyen in her Petition. Corporations Code § 8336, which empowers a party demanding 21 corporate documents to seek relief from the courts, requires a showing that there was a “refusal of a 22 lawful demand for inspection . . .” Little Orchard never refused to produce any documents. 23 Ms. Nguyen fails to understand that some document she seeks may never have come into being, 24 and others have been destroyed either in the ordinary course or inadvertently. This is particularly true 25 of documents created more than five years ago which represent the bulk of the documents she claims 26 are missing. The law does not require Little Orchard to create (or re-create) documents in 27 response to a request for inspection. It is only obligated to produce what it has. Ms. Nguyen now 28 has all of the documents requested that Little Orchard possesses. She therefore fails to meet her burden 28 1 RESPONDENTS’ RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE 1 of proof to support this Petition under § 8336. 2 The Petition is also motivated by an improper purpose, which would bar the production of 3 documents that are now sought. Ms. Nguyen has been an adversary of Little Orchard on several fronts, 4 not the least of which is her defiance of unambiguous rules about the types of signage that can be used 5 at the Business Park. Her tenant, who operates a marijuana dispensary in Ms. Nguyen’s unit, has put 6 up improper signage has resulted in monetary fines imposed against Ms. Nguyen. The Petition is an 7 attempt to retaliate against Little Orchard for enforcing its CC&Rs and to force the Association to spend 8 money and to create leverage to offset against the fines imposed against Ms. Nguyen. This is not a 9 legitimate purpose of Corporations Code § 8330, et seq., and should not be countenanced by this Court. 10 (See Parker v. Tract No. 7260 Assn., Inc. (2017) Cal.App.5th 24, 31-32.) 11 Finally, the other remedies sought in this case are manifestly inappropriate. Ms. Nguyen appears 12 to seek an order appointing inspectors or accountants to do an investigation and an audit of the records 13 of Little Orchard per Corporations Code § 8336. This is not part of the relief sought in the Petition but 14 is mentioned in supporting documents. The stated reason is Ms. Nguyen’s belief that an investigation 15 of the financial records produced might not tell the whole story. Ms. Nguyen’s belief is not evidence 16 and does not support a showing that an expensive investigation and audit is necessary. Moreover, such 17 an audit is usually paid for by the inspecting party – here, Ms. Nguyen. However, without justification, 18 Ms. Nguyen seeks an order compelling Little Orchard to pay for the entirety of this unnecessary and 19 wasteful work. 20 Ms. Nguyen’s request for an award of attorney fees of $17,412.50 is also unsupported. Under 21 Corporations Code § 8337, an award of attorney fees is only appropriate upon a showing of “the failure 22 of the corporation to comply with a proper demand thereunder was without justification.” Here, Little 23 Orchard did everything that it could to comply with the inspection demand; it made all of its records 24 available on two separate occasions. Nothing was done without justification. 25 Little Orchard submits that the Petition should be denied, and Little Orchard should be deemed 26 the prevailing party for the purposes of an award of fees and costs. This Petition should never have 27 been filed, much less prosecuted. 28 /// 28 2 RESPONDENTS’ RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE 1 II. STATEMENT OF RELEVANT FACTS 2 A. Little Orchard and its Relation to Ms. Nguyen 3 Little Orchard is the owners association created to manage the Business Park located on Little 4 Orchard Street in San Jose. The Business Park is a commercial common interest development of 5 twenty-seven (27) separately owned units designed exclusively for retail and commercial use. 6 (Declaration of Jeffrey Barnett (“Barnett Decl.”), ¶ 3.) 7 Little Orchard was formed in 1986. It operates pursuant to the recorded CC&Rs which 8 provides that the owners of the individual units of the Business Park are members of Little Orchard. 9 The owners have the rights as members of Little Orchard under the California Nonprofit Mutual Benefit 10 Corporations Code and the Commercial and Industrial Common Interest Development Act (Civil Code 11 § 6500, et seq.). Ms. Nguyen is an owner of a unit within the Business Park and a member of Little 12 Orchard. (Barnett Decl., ¶ 4.) 13 Ms. Nguyen has been in a number of disputes with Little Orchard, including a dispute over the 14 conduct of the tenant who rented her unit from her. That tenant had displayed signage contrary to the 15 governing documents that bound all members of Little Orchard and without permission of Little 16 Orchard’s board of directors. As a result, Ms. Nguyen was fined by Little Orchard for each day that the 17 sign was not removed. (Barnett Decl., ¶ 5; Declaration of Tanya Ruiz (“Ruiz Decl.”), ¶ 4; Declaration 18 of Bill Forrester (“Forrester Decl.”), ¶ 5.) The daily fines stopped accruing in August 2017 at or around 19 the time of the second document inspection was made by Ms. Nguyen. (Barnett Decl., ¶ 5.) 20 B. Little Orchard Fully Complied with the First Inspection Demand Producing all of its 21 Files for Inspection and Copying. 22 Ms. Nguyen demanded Little Orchard produce its records on least two occasions. The first 23 demand was made on September 10, 2015 and sought the production of documents falling within twelve 24 separate categories. Taken together, this covered virtually every document pertaining to the operation 25 of Little Orchard during the entirety of its existence – from 1986 forward. Then, on October 5, 2017, 26 the same documents were produced a second time to Ms. Nguyen. 27 Throughout this process, Little Orchard was represented by experienced association managers, 28 William Forrester (20 years of experience); Tanya Ruiz (6 years of experience). Little Orchard was 28 3 RESPONDENTS’ RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE 1 also guided by experienced legal counsel with more than 50 years of practice and vast experience in the 2 law of common-interest developments: Jeffrey A. Barnett. (Ruiz Decl., ¶ 2; Forrester Decl., ¶ 2; Barnett 3 Decl., ¶ 2.) 4 This first production included the membership list that Ms. Nguyen requested under 5 Corporations Code § 8330. As Ms. Nguyen’s counsel testifies to in his declaration, “The Association 6 responded through counsel by providing the membership list on September 28, 2015.” (Declaration of 7 James Roberts (“Roberts Decl.”) filed in support of the Petition, ¶ 8; 5:4-5.) The production was made 8 by the manager/custodian of Little Orchard’ records, Cornerstone Community Management, Inc. 9 (“Cornerstone”). Cornerstone maintained all of the records for Little Orchard. (Declaration of Joseph 10 Taormino (“Taormino Decl.”), ¶ 2.) 11 After the 2015 production, Ms. Nguyen’s counsel noted that there were documents he 12 anticipated would exist and were missing from the production. (Barnett Decl., ¶ 7; Exhibit E.) Little 13 Orchard responded through its counsel, Jeffrey A. Barnett, explaining: 14 The Association has produced all available records responsive to your request. The fact that the corporate records that are over ten or fifteen years old are not complete is not a surprise 15 given that the corporation is run by volunteers, that the corporation is non-profit and that the membership consists of twenty-seven commercial owners focused on their own business 16 interests. 17 (Barnett Decl., ¶ 8; Exhibit F.) 18 While Ms. Nguyen spends a considerable time and effort in her moving documents addressing this first 19 production of records in the moving papers, it is not the production that is challenged in the Petition. 20 (See Petition at ¶¶ 4 & 5; 2:12-19; Petitioner’s Memorandum of Points and Authorities (“MPAs”) at 21 13:16 (“THE INSPECTION SUBJECT OF THE PETITION”).) Rather it is the second production 22 that is at issue here. 23 C. Little Orchard Fully Complied with the Second Inspection Demand Producing all of 24 its Files for Inspection and Copying on October 5, 2017. 25 On August 9, 2017, Ms. Nguyen’s counsel sent Little Orchard virtually the identical inspection 26 demand that was sent on two years earlier. The second demand was unlimited as to time and seemingly 27 covered every single document maintained by Little Orchard from its creation. These included: 28 • All Annual Meeting Minutes; 28 4 RESPONDENTS’ RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE 1 • All Annual Meeting Reports; 2 • All Board Minutes; 3 • All Federal Tax returns; 4 • All State Tax Returns; 5 • All Budgets; 6 • All Financial Statements; 7 • All Meeting Agendas; 8 • All Meeting Minutes; and 9 • The Little Orchard Membership List. 10 (Ruiz Decl., ¶ 8; “Forrester Decl., ¶ 7.) 11 Little Orchard initially protested that fact stating that the identical documents were produced 12 earlier. It was argued that a second production should be unnecessary and was wasteful. (Roberts Decl., 13 12, 14, 15; Exhibits 12, 14, 16.) Thus, Little Orchard initially offered to produce what it believed were 14 the new relevant documents for inspection on September 14, 2017. (Roberts Decl., 12, 14, 15; Exhibits 15 12, 14, 16.) Ms. Nguyen’s counsel protested and a second full production, duplicating the first 16 production, was made on October 5, 2017. (Roberts Decl., ¶¶ 17, 18; Ruiz Decl., ¶ 7.) 17 At this second production, Little Orchard produced all of the documents that it had. This 18 production included approximately six (6) boxes of Little Orchard’s documents taken from off-site 19 storage and transported to Little Orchard’s manager’s offices in San Jose, approximately two (2) 20 standard file drawers of documents maintained at the manager’s site offices, and electronically stored 21 documents, printed out from custodian’s computers. (Ruiz Decl., ¶ 9; Forrester Decl., ¶ 9.) 22 Ms. Nguyen now claims that there are gaps in the records maintained by Little Orchard. This 23 is based on the conclusions of Ms. Nguyen’s counsel (see Roberts Decl., [first] ¶ 241) and on an 24 unauthenticated hearsay spreadsheet (see Roberts Decl., Exhibit 26). However, all of that testimony is 25 subject to the following testimony of counsel qualifying his conclusion that there were missing 26 documents “Given the state of the records, it is possible a page or two was missed in this description, 27 1 28 The Roberts Declaration ends with two paragraphs, both numbered 24. Roberts Decl., pp.12-13. 28 5 RESPONDENTS’ RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE 1 but it is believed that the following substantially set forth the records.” (Roberts Decl., footnote 1, 2 12:26-28; emphasis added.) Thus, Mr. Roberts admits that the accusation that there were missing 3 documents is based on a belief, and that the list submitted could be inaccurate. 4 Significantly, after October 5, 2017 production, Ms. Nguyen did not reach out to Little Orchard 5 (either directly or through her counsel) to identify the claimed missing documents or seek assurances 6 that they exist and were intentionally withheld. Instead, it appears that she immediately prepared the 7 Petition, (signed on October 16, 2017) and then filed the Petition one week later (October 23, 2017). 8 Moreover, the moving papers relied upon by Ms. Nguyen were not prepared until May of 2018, more 9 that seven months later. During this seven-month delay, Ms. Nguyen and her counsel remained silent. 10 The first time Little Orchard learned of any of Ms. Nguyen’s concerns about the second production was 11 when it was served with the Petition and supporting papers. (Ruiz Decl., ¶ 11; Forrester Decl., ¶ 11; 12 Barnett Decl., ¶ 10.) 13 Since the initial production in 2015, no legal action has been commenced by Ms. Nguyen 14 against Little Orchard based on the voluminous documents and information produced by Little Orchard. 15 Further, Little Orchard is unaware of any proper use made of the Membership List. Moreover, while 16 Ms. Nguyen claims there is a need for a full audit of all of the financial records of Little Orchard, she 17 offers no evidence to support that claim. (Ruiz Decl., ¶ 12; Forrester Decl., ¶ 12; Barnett Decl., ¶ 11.) 18 The documents claimed to be missing are not shown to be important to any issue or controversy, 19 momentous or otherwise for proper purpose. The documents claimed to be missing from the production 20 all predate 2013, and in many cases go back eight (8) years to 2010 and earlier. (See Roberts Decl., 21 [first] ¶ 24; Exhibit 26.) None of these documents would bear on any legitimate purpose for demanding 22 another inspection. 23 III. LEGAL ARGUMENT 24 A. The Membership List Sought Pursuant to Corporations Code § 8330 was Produced 25 Both in 2015 and 2017 and is not at Issue Here. 26 In her Petition, Ms. Nguyen asks this Court to order Little Orchard to produce the Membership 27 List. A member is entitled to inspect and copy membership contact information under California 28 Corporations Code § 8330. This includes “the record of all the members' names, addresses and voting 28 6 RESPONDENTS’ RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE 1 rights . . ..” Corporations Code § 8330(1). This same right to the membership list is set forth in the 2 Little Orchard Bylaws at section 10.1 (referencing the “member register”). (Bylaws, attached as Exhibit 3 3 to the Roberts Decl. at page 9.) 4 Ms. Nguyen made a demand for the Membership List in both 2015 and 2017. Ms. Nguyen has 5 made no showing that the Membership List was withheld from production. Indeed, her attorney 6 admits in his declaration that this was produced in 2015. (Roberts Decl., ¶ 8; 5:4-5.) This is 7 confirmed by Little Orchard’s counsel (Barnett Decl., ¶ 6; Exhibit D.) Also, the Membership List is 8 not one of the documents identified as missing in the 2017 inspection. (Roberts Decl., ¶ 24, 12:2-15; 9 Exhibit 26.) Nguyen’s claim to the contrary in her Petition, is therefore unsupported and unsupportable. 10 It should not be countenanced by this Court. 11 B. Little Orchard has Produced the Articles of Incorporation and Bylaws in Both 2015 12 and 2017. 13 In her Petition, Ms. Nguyen seeks an order to compel the production of the “Articles of 14 Incorporation and Bylaws (original and as amended to date).” (Petition, 3:6-7.) These documents are 15 subject to an inspection demand made under Corporations Code § 7160. (“Every corporation shall keep 16 at its principal office in this state the original or a copy of its articles and bylaws as amended to date, 17 which shall be open to inspection by the members at all reasonable times during office hours.”) The 18 right to inspect the Articles and Bylaws is mirrored in Section 8.5 of the CC&Rs. (CC&Rs at p. 20.) 19 These documents were produced both in 2015 and 2017. (Ruiz Decl., ¶¶ 6. 9.) Indeed, in the 20 purported spreadsheet of documents produced by Ms. Nguyen’s counsel, both the Articles and the 21 Bylaws are listed as produced. (Roberts Decl., Exhibit 26.) Further, these documents are not included 22 in the conclusory list of missing documents in Mr. Roberts’ declaration. (Roberts Decl., [first] ¶ 24, 23 12:2-15.) In fact, both documents are attached to Ms. Nguyen’s counsel’s declaration as Exhibits. 24 (Roberts Decl., Exhibits 1 & 3.) Ms. Nguyen’s claim to the contrary in her Petition is therefore 25 unsupported and unsupportable. 26 /// 27 /// 28 /// 28 7 RESPONDENTS’ RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE 1 C. All of Little Orchard’s Financial Records and Governing Documents Required Under 2 Corporations Code § 8333 were Produced in Both 2015 and 2017. 3 Ms. Nguyen is entitled to inspect certain financial and governance documents under 4 Corporations Code § 8333, which provides: 5 The accounting books and records and minutes of proceedings of the members and the board and committees of the board shall be open to inspection upon the written demand on the 6 corporation of any member at any reasonable time, for a purpose reasonably related to such person's interests as a member. 7 8 This right is mirrored in the Little Orchard Bylaws at Section 10.1., which calls for the production of 9 “books of account and minutes of meetings of the members, of the Board, and of committees.” (Bylaws 10 at page 9.) As set out in the declarations supporting this Opposition, Little Orchard produced all of its 11 financial and governance documents that it maintains. (Ruiz Decl., ¶ 9; Forrester Decl., ¶¶ 8, 9.) No 12 documents were withheld by Little Orchard. (Taormino Decl., ¶ 2.) Little Orchard can only produce 13 what it has. 14 Ms. Nguyen claims that there are documents which she believes should have been produced and 15 were not. However, she presents no evidence that the documents were ever created or, alternatively 16 were created and actually maintained by Little Orchard in its corporate records. There also is no 17 evidence that any documents were refused to Ms. Nguyen. Ms. Nguyen had more than sufficient time 18 from the date of the filing of the Petition to the date of this hearing in which to conduct discovery on 19 this issue but has not seen fit to do that. 20 Instead, Plaintiff apparently relies on the ludicrous argument that: “Nor may a corporation 21 simply deny the existence of the records.” (MPAs, 3:5.) This argument is unsupported by any authority 22 because none exists. Yes, a corporation has obligations to maintain certain records under Corporations 23 Code § 8320. However, it has no obligation to create (or recreate) such documents in response to a 24 request for inspection made under Corporations Code § 8333 if the documents do not already exist. 25 This conclusion can be seen in § 8336(a) governing the enforcement of the right to inspect 26 financial and governance documents. It requires a showing of a refusal of a lawful demand. (“Upon 27 refusal of a lawful demand for inspection under this chapter, or a lawful demand pursuant to Section 28 8330 or Section 8333 . . .”). 28 8 RESPONDENTS’ RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE 1 Thus, merely failing to produce a document because it does not exist does not give rise to a right 2 to seek the remedies under § 8336. There has to be a refusal to produce a document. There is no 3 evidence adduced that, beyond the initial wrangling over the scope of the second inspection demands, 4 Little Orchard refused to produce any document requested that it had. Little Orchard produced 5 everything it had in 2015 and 2017. (Ruiz Decl., ¶¶ 6, 9.) 6 Given the nature and number of the documents actually produced, there would be no reason to 7 conclude that Little Orchard refused to produce all of its documents. For example, Ms. Nguyen would 8 have this Court believe that Little Orchard produced all annual meeting minutes and annual meeting 9 reports after 2011, but for some reason intentionally withheld the production minutes prior to 2011. 10 Similarly, Ms. Nguyen suggests that the Board produced all board minutes, but for some reason 11 intentionally withheld the board minutes for the single year -- 2013. (See Roberts Decl., [first] ¶ 24, 12 12:4-15.) 13 The evidence and common sense show that that the Petition is unsupportable. There is no 14 ground on which this Court might order the production of documents that Little Orchard does not have. 15 On this basis, the Petition should be denied. 16 D. The Petition Fails to Support a Finding that there is a Proper Purpose to Support the 17 Production of any Additional Documents. 18 Little Orchard also challenges the Petition on the ground that the documents sought in the 19 Petition appear not to be for a “purpose reasonably related to [Ms. Nguyen’s] interests as a member.” 20 Corporations Code § 8333. Instead, the principal purpose for unnecessarily burdening Little Orchard 21 with a third production appears to be to retaliatory – to punish Little Orchard for imposing fines against 22 Ms. Nguyen for her violations of Little Orchard’s governing documents. (See Barnett Decl., ¶ 5; Ruiz 23 Decl., ¶ 4; Forrester Decl., ¶ 5.) Again, this purpose was not made apparent until the filing of the 24 Petition and the utter lack of competent evidence to show any violation of duty to allow inspection under 25 the Corporations Code. 26 The proper purpose element of an inspection demand was recently examined in Parker v. Tract 27 No. 7260 Assn., Inc. (2017) 10 Cal. App. 5th 24, reh'g denied (Apr. 13, 2017), review denied (July 12, 28 2017). The Court explained. 28 9 RESPONDENTS’ RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE 1 A member's right of inspection is limited to purposes reasonably related to the member's interests as a member. (§§ 8330, subd. (b)(1) [membership lists], 8333 [corporate financial 2 records].) “This limitation is always subject to judicial review to determine whether a lawful purpose exists.” (Dandini v. Superior Court (1940) 38 Cal.App.2d 32, 35, 100 P.2d 535.) A 3 corporation has the burden of proving that the member “will allow use of the information for purposes unrelated to the person's interest as a member.” (WorldMark, the Club v. Wyndham 4 Resort Development Corp. (2010) 187 Cal.App.4th 1017, 1029, 114 Cal.Rptr.3d 546.) 5 10 Cal. App. 5th at 31–32 6 Ms. Nguyen’s stated purpose for requesting the financial and governing documents was set out for the 7 first time in the Petition: 8 Petitioner's purpose in demanding inspection of records is to investigate the financial condition of the association and propriety of association board activities and of the board members 9 (including duties as a member of any board committee on which the director may serve), and to determine the rights and obligations of Petitioner as it pertains to the Association. 10 (Petition, ¶ 6, 2:20-24.) 11 12 Yet nothing appears to have come of the production of such documents. Ms. Nguyen has taken no 13 action regarding the financial documents produced. (Ruiz Decl., ¶ 12; Forrester Decl. ¶ 12; Barnett 14 Decl., ¶ 11.) 15 As explained above, Ms. Nguyen has been provided with all of he financial documents needed 16 to determine whether there is any impropriety in the financial condition or board activities of Little 17 Orchard during any relevant time. Any claim that might be shown by the documents sought – dating 18 back to 2013 and earlier – would be barred by any applicable statute of limitations. This conclusion is 19 underscored by the lack of any articulated claim asserted by Ms. Nguyen that would arise from the 20 mountain of documents already produced in 2015 and 2017. 21 The inescapable conclusion is that Ms. Nguyen’s purpose here is nefarious – to burden the 22 Association unnecessarily by requiring it to provide a third massive production of documents, to pay 23 exorbitant and unnecessary auditing and inspection costs, and to enrich Ms. Nguyen in the process by 24 paying unsubstantiated attorney fees and costs. This is an improper purpose that supports the denial of 25 the Petition and the award of fees and costs against her and in favor of Little Orchard. 26 /// 27 /// 28 /// 28 10 RESPONDENTS’ RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE 1 E. There is no Good Reason to Order an Inspection and Audit of the Records of Little 2 Orchard Pursuant to Corporations Code § 8336 as Requested by Ms. Nguyen. 3 In her Petition, Ms. Nguyen only seeks an order compelling Little Orchard to produce 4 documents for a third time. However, in her moving documents, she seeks to expand her remedies to 5 seek the appointment of inspectors or accountants to conduct an audit of the financial records of Little 6 Orchard. This remedy is stated in § 8336(a) as an alternative remedy to an order compelling production 7 of records: 8 (a) [T]he superior court … may enforce the demand or right of inspection with just and proper conditions or may, for good cause shown, appoint one or more competent inspectors or 9 independent accountants to audit the financial statements kept in this state and investigate the property, funds and affairs of any corporation and of any subsidiary corporation 10 thereof, domestic or foreign, keeping records in this state and to report thereon in such manner as the court may direct. 11 (Emphasis added.) 12 13 Thus, the remedy requires a showing of good cause. Here, the only attempt to justify this request is set 14 out in the Declaration of Ms. Nguyen where she states: 15 An audit of the books and records and an investigation of the property, funds, and affairs of Respondent Association are necessary because Petitioner is informed and believes that 16 misappropriations may not be disclosed by a simple review of Respondent Association's books and records. 17 (Declaration of Julie T. Nguyen, ¶ 7, 3:5-8; emphasis added.) 18 This rank speculation based on “information and belief” rather than first-hand knowledge does not rise 19 to the level of good cause as required under law. 20 21 If there were any suspicions, they should have been triggered by something in the financial 22 documents already produced. Ms. Nguyen has all but two (2) years of the financial statements of Little 23 Orchard. The only ones purportedly missing are 2009 and 2011. She also has years of tax returns, both 24 state and federal, and other financial documents, including at least one audit report, multiple balance 25 statements, tax statements, budgets, and an independent account review report. (See Roberts Decl., 26 Exhibit 26.) Despite having months to delve into these financial statements, Ms. Nguyen has failed to 27 identify a single suspicious financial entry, suspicious expenditure, or suspicious transaction that would 28 support a finding of good cause to conduct an audit. 28 11 RESPONDENTS’ RESPONSE AND OPPOSITION TO PETITION FOR WRIT OF MANDATE 1 Ms. Nguyen then doubles down on her request by asking this Court to compel Little Orchard to 2 pay for this unjustified inspection and audit. Under § 8336(c), it is presumed that the petitioning party 3 will pay for this extraordinary expense unless ordered otherwise. (“(c) All expenses of the investigation 4 or audit shall be defrayed by the applicant unless the court orders them to be paid or shared by the 5 corporation.”) Absent any reason to conduct an audit in the first place, it would be unfair to force Little 6 Orchard to pay even a portion of it. On these grounds, Little Orchard submits that the request for an 7 inspection and audit should be denied. 8 F. Ms. Nguyen’s Request for Attorney Fees is Unsupportable and the Evidentiary 9 Showing Offered to Support the Extraordinary Amount of Fees is Inadequate. 10 Ms. Nguyen seeks an award of attorney’s fees under Corporations Code § 8337 in the amount 11 of $17,412.50. To recover fees, Ms. Nguyen must demonstrate that Little Orchard acted without 12 justification: 13 In any action or proceeding under this article, and except as required by Section 8331, if the court finds the failure of the corporation to comply with a proper demand thereunder was 14 without justification, the court may award the member reasonable costs and expenses, including reasonable attorneys' fees, in connection with such action or proceeding. 15 (Emphasis added.) 16 17 There is no showing that Little Orchard acted without justification in response to Ms. Nguyen’s 18 document demands. Little Orchard timely produced all of the documents in its possession on two 19 occasions in two years. No harm or prejudice has been demonstrated by Ms. Nguyen resulting from 20 any imagined deficiencies in the production. Little Orchard therefore submits that the request for fees 21 should be denied. 22 Even if Ms. Nguyen is deemed to have established that Little Orchard acted without justification, 23 the evidence offered to support the claim of fees is inadequate. Ms. Nguyen’s counsel offer of proof 24 fails as follows: 25 • Counsel offers only conclusory evidence of the general nature of the fees he has billed, without 26 reference to the details, including dates, tasks and specific hours billed to this matter. 27 • Counsel testifies not only as to his own time billed out at $495 an hour, but that of an associate 28 attorney, Sharmi Shah, billing at $450 an hour. 28 12