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Lindsey v. Conteh

California Court of Appeals, Fourth District, Third Division

March 23, 2017

JAMES R. LINDSEY, as Trustee, etc., et al., Plaintiffs and Respondents,
ALIEU B. M. CONTEH et al., Defendants and Appellants.


         Appeal from an order of the Superior Court of Orange County No. 30-2014-00739428, Jacqueline A. Connor, Temporary Judge. (Pursuant to Cal. Const., art. VI, § 21.) Affirmed.

          Reed Smith, Margaret M. Grignon, Anne M. Grignon, Michael Gerst, Ilana R. Herscovitz, James L. Sanders and Stuart A. Shanus; Genga & Associates, John M. Genga and Khurram A. Nizami for Defendants and Appellants.

          Handal & Associates, Anton N. Handal, Gabriel G. Hedrick and Lauren G. Kane; Newmeyer & Dillion and Thomas F. Newmeyer for Plaintiffs and Respondents.


          MOORE, ACTING P. J.

         Characterized by the trial court as litigation in which “[m]oney does not appear to be an object to the parties and counsel[, ]” this case calls on us to consider the propriety of a discovery referee's order imposing $100, 000 in discovery sanctions against defendants Alieu B. M. Conteh (Conteh), Odessa Capital Inc., Dominique Financial, Ltd., OOA ONE, LLC, and OOA TWO, LLC (collectively, defendants), for failure to comply with a prior discovery order. Defendants contend the referee, stipulated to by the parties to rule on all discovery related matters, erred in imposing monetary sanctions due to both procedural and substantive defects. Among other things, they assert that defendants' “substantial compliance” with the prior discovery order, combined with Conteh's expressed willingness to sit for an additional deposition and produce additional documents, precluded the levying of any sanctions. They also claim the amount of sanctions is unjustified.

         In the published portion of this opinion, we conclude that the referee's order, filed with the trial court, is appealable. The language of the reference, expressly made under Code of Civil Procedure section 638, subdivision (a), [1] and the actions of the parties, the referee and the court, indicate that the reference was a general reference, making the referee's order appealable once filed with the court.

         In the unpublished portion, we address the merits of Defendants' appeal and reject their challenges to the imposition and amount of monetary sanctions. Defendants conceded below that they failed to comply with the prior discovery order, and the referee did not abuse her discretion under the circumstances either in determining monetary sanctions were appropriate despite Conteh's promises about his future actions, or in calculating the amount of appropriate sanctions.



         African Wireless, Inc. (African Wireless) is a Delaware corporation owned by a handful of shareholders. Conteh and his closely held business entity, Dominique Financial, Ltd., own approximately 70 percent of African Wireless shares. In addition to being a shareholder, Conteh is African Wireless' CEO and Chairman of its Board of Directors. He has the power to nominate three of the five members of the African Wireless Board. Plaintiffs James R. Lindsey, as trustee of the Lindsey Family Trust, William Buck Johns, Wymont Services, Ltd. and Marc van Antro (collectively, the minority shareholders) each hold between a one and 15 percent interest in African Wireless, and all but one acts as, or has a representative who acts as, a director of African Wireless.

         African Wireless' principal place of business is designated as the City of Irvine, but the corporation has no operations, no sales and no employees. Its purpose is to act as a holding company, with its principal asset being a 60 percent interest in Congolese Wireless Network SPRL (Congolese Wireless). Congolese Wireless is a business entity organized under the laws of the Democratic Republic of Congo (the DRC). Its principal place of business is in Kinshasa, DRC, and all of its operations take place in the DRC. Beginning in 1990, Conteh served as manager of Congolese Wireless. With assistance from Conteh and a few politically connected and powerful citizens in the DRC, Congolese Wireless embarked on a joint venture with another company, Vodacom International Ltd. They created a new entity known as Vodacom Congo for the purpose of owning and operating a wireless telephone network in the DRC.

         In late 2012, a Congolese criminal tribunal allegedly convicted Conteh of forgery, sentencing him to one year in jail. A warrant was supposedly issued for his immediate arrest following the rejection of all appeals in the case. Conteh chose to flee the country to avoid incarceration. Less than two years later, a Congolese commercial tribunal allegedly ruled against Conteh in a business lawsuit due to Conteh's criminal forgery conviction. That alleged ruling prohibited Conteh from: (1) performing any acts in the name of, and on behalf of, Congolese Wireless, and (2) representing Congolese Wireless within any of the management and administrative bodies of Vodacom Congo.

         In August 2014, the minority shareholders filed this shareholder derivative action on behalf of African Wireless and against Conteh, as an individual, and various of his alleged investment entities that purportedly have ties to Congolese Wireless and African Wireless. The operative complaint alleges that over the course of nearly a decade, Conteh took various actions and engaged in transactions that were detrimental to African Wireless' interests and that usurped opportunities belonging to it. The causes of action include breach of fiduciary duty, unjust enrichment, accounting and conversion, and among the relief sought is monetary damages, prejudgment interest, injunctive relief, declaratory relief and a constructive trust.

         The minority shareholders sought a temporary restraining order (TRO) and a preliminary injunction to remove Conteh from his African Wireless director position and prohibit him from voting his shares in the corporation. The trial court denied the TRO request, but scheduled a preliminary injunction hearing. In preparation for the hearing, the parties initiated expedited discovery by way of interrogatories, deposition notices, and requests for admissions and production of documents. At this point, whatever was not already sour between the parties quickly turned such. The minority shareholders accused Conteh, as an individual and as the representative of the business entity defendants, of failing to produce a single document, refusing to confirm a deposition date and appear for a deposition, and unreasonably objecting to all discovery. In turn, defendants accused all or some of the minority shareholders of refusing to produce for deposition a party-affiliated witness, Jonathan Sandler (Sandler), producing a “shell” person most knowledgeable (PMK) for deposition, and failing to respond to interrogatories and document production requests.

         After a variety of back and forth between the parties' counsel, the parties remained unable to agree on deposition schedules and locations, and each believed the other was continuing to fail to provide meaningful discovery responses. At the preliminary injunction hearing, the trial court briefly addressed discovery matters raised in the parties' preliminary injunction papers, expressing “disappointment in the utter inability of counsel to effectively meet and confer.” Believing a discovery referee to be necessary, the court directed counsel to meet and confer to select one, but left the parties to work out the details.

         Thereafter, the parties agreed upon a discovery referee and related details. They stipulated that the referee would have broad powers, including “the authority to set the date, time, and place for any hearings determined by the discovery referee to be necessary, to preside over hearings, to take evidence if the referee so determines, rule on discovery objections, discovery motions, and other requests made during the course of the hearing.” The reference order drafted by the parties, and issued by the trial court, indicated it was made pursuant to section 638, subdivision (a), and ordered that the parties' then pending discovery motions were to be heard and decided by the referee.

         In January 2015, following a telephonic hearing and a review of the more than 1, 000 pages submitted in conjunction with the then pending motions to compel, the discovery referee issued a 38-page detailed ruling and order. The referee ordered Conteh to attend a three-day deposition in South Africa on specified dates, and Sandler to attend a deposition in the same location on the two days prior to the start of Conteh's deposition. The parties stipulated that Conteh was the PMK for each of the business entity defendants, so his appearance would be both in his individual capacity and as PMK. As for documents, defendants were ordered to produce the documents listed in the deposition notices for Conteh and the business entity defendants on or before February 23, 2015 - a date 10 days prior to Conteh's scheduled deposition - “at a time, place and manner agreed upon by counsel.” Defendants were also ordered to provide certain verifications and privilege logs.

         Defendants served their first document production and related responses on the agreed upon date. Two days later, defendants' counsel produced an additional batch of documents without a proof of service.

         Both Sandler's and Conteh's depositions took place in South Africa as ordered by the discovery referee, with Conteh's lasting the full three days for which it was scheduled. During the first day of Conteh's deposition, Conteh admitted that he did not produce certain requested documents even though he acknowledged their existence, and that he had not done a diligent search for all responsive documents “in [his] possession and control.” He stated that additional documents were likely in his office in South Africa or in the DRC, and that the latter could be sent by his staff in the DRC.

         Two days after Conteh's deposition concluded, the minority shareholders sent a motion to the discovery referee requesting that discovery sanctions be levied against Conteh and each of the business entity defendants for their alleged failure to comply with the portion of the referee's January 2015 order concerning document production. They requested terminating, evidentiary, contempt and monetary sanctions. Defendants opposed the sanctions motion.

         Following a hearing, and taking into consideration all of the parties' arguments and evidence, the referee issued a detailed ruling, finding that Conteh had violated the January 2015 order in multiple ways. Based on her factual findings, the referee concluded that monetary sanctions were warranted, but other sanctions were not. She found the more than $130, 000 requested by the minority shareholders to be excessive, and instead imposed $100, 000 in sanctions.

         The referee's sanctions order was filed with the trial court on May 20, 2015. Defendants timely appealed, limiting their appeal to the monetary sanctions aspect of the order.



         A. Determining the Nature of the Reference

         An appeal of an order to pay monetary sanctions in an amount over $5, 000 is an appealable order over which we have jurisdiction. (§ 904.1, subd. (a)(12); Rail-Transport Employees Assn. v. Union Pacific Motor Freight (1996) 46 Cal.App.4th 469, 471 (Rail-Transport).) Our review of the record raised a concern about whether the discovery referee's ruling from which defendants appeal is a qualifying “order” given that the trial court filed the ruling, but took no further action with respect to it. At our request, the parties provided additional briefing concerning the nature of the reference and the resulting implications on appealability.[2] We conclude, based on the language of the ...

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