Faizi v. Temori

Background

Ahmad Mukhtar Faizi brought a shareholder derivative case for himself and on behalf of Falafel Flame, Inc. The defendants included Falafel Flame directors Baktash Temori and Masoud Rustakhis, along with entities that Faizi alleged operated unauthorized Falafel Flame restaurants.

At an August 18, 2023 hearing about Faizi’s document requests, the court ordered the parties to confer about priority documents. The court ordered defendants to complete production of all responsive, non-privileged documents by September 15, 2023. It also set an October 6, 2023 deadline for depositions of Temori or Rustakhis if Faizi chose to proceed with them.

Faizi then filed his third motion asking the court to hold defendants in civil contempt. He asserted that defendants had responded to approximately 986 document requests with 46 documents, most concerning the Blaze defendants, and that the production did not include documents about the Falafel Flame San Jose location, Temori, or Rustakhis. He requested attorney fees and costs, fines of $100 per day until meaningful compliance, and sworn affidavits describing defendants’ efforts to comply. Defendants did not file a written response, but their counsel appeared at the hearing.

Legal standard

The court explained that civil contempt is a court’s method of enforcing compliance with its orders. The moving party must prove by clear and convincing evidence that the other party violated a specific and definite order. Contempt sanctions are not warranted when the challenged conduct reflects a good-faith and reasonable interpretation of the order, and substantial compliance can defeat a contempt request when the party made every reasonable effort to comply.

The court stated that Faizi therefore had to show that defendants violated the August 18 discovery order, that the violation was more than technical or minor, and that defendants’ conduct was not based on a good-faith and reasonable interpretation of the order.

Ruling

The court denied Faizi’s third motion for an order holding defendants in contempt. It concluded that Faizi had not identified the specific document requests at issue, the categories of information defendants had produced, or the additional categories of responsive documents he believed existed but had not been produced. Although defendants’ counsel acknowledged that additional responsive documents might exist, the court said the record did not allow it to determine whether defendants’ production fell short of the discovery order.

The court also stated that Faizi had had ample opportunity during discovery to seek documents he believed he needed but had not been diligent in seeking that relief. Because he did not meet his burden to establish a discovery-order violation or the magnitude of the requested sanctions, the contempt motion was denied. The court noted that it separately addressed defendants’ litigation conduct in another order striking certain defendants’ answer and entering their default, but that separate ruling was not the subject of this order.