DEMTECH SERVICES, INC. VS. DM SOLUTIONS, INC. ET AL

August 28, 2026 Dept. 9 Civil Tentative Rulings

6. 24CV2404 DEMTECH SERVICES, INC. VS. DM SOLUTIONS, INC. ET AL DISCOVERY REFEREE / MOTION FOR TERMINATING SANCTIONS AGAINST DEF'S/ REQUEST FOR MONETARY SANCTIONS FOR $4,702.50

Before the Court are two motions: 1) Defendants’ Motion for Appointment of Discovery Referee Pursuant to CCP § 639(a); and 2) Plaintiff’s Motion for Terminating Sanctions.

DISCOVERY REFEREE

Defendants, DM Solutions, Inc., David McLaury, and Owen Mackendrick (collectively “Defendants”), seek the appointment of Discovery Referee, Katherine Gallo, pursuant to Code of Civil Procedure § 639(a). Defendants contend that within one year, Plaintiff has filed eight discovery motions consisting of nearly 500 pages of moving papers, including a single 240-page motion, which overburdens judicial resources. Defendants propose that the Parties’ equally share the costs of the discovery referee, with the referee having the ability to make a recommendation of a different allocation if appropriate on a motion-by-motion basis.

Plaintiff, Demtech Services, Inc. (“Plaintiff”), opposes the appointment of a discovery referee and contends that Defendants have failed to make any showing that the appointment is necessary. Plaintiff alleges that there is only one outstanding discovery motion and the Court previously granted each discovery motion and imposed sanctions, establishing they were warranted. Moreover, the Court is more familiar with the history of this case and can recognize Defendants’ misrepresentations regarding Plaintiff’s motion practice, as Plaintiff has only filed two distinct motions to compel and two subsequent motions to compel compliance with the Court’s resulting orders. The appointment of a discovery referee would cause delay and impose financial burdens on Plaintiff.

Pursuant to Code of Civil Procedure § 639(a), the court may, upon the written motion of any party, or of its own motion, appoint a referee in the following cases pursuant to the provisions of subdivision (b) of Section 640: (1) When the trial of an issue of fact requires the examination of a long account on either side; in which case the referees may be directed to hear and decide the whole issue, or report upon any specific question of fact involved therein. (2) When the taking of an account is necessary for the information of the court before judgment, or for carrying a judgment or order into effect. (3) When a question of fact, other than upon the pleadings, arises upon motion or otherwise, in any stage of the action. (4) When it is necessary for the information of the court in a special proceeding.

August 28, 2026 Dept. 9 Civil Tentative Rulings

(5) When the court in any pending action determines that it is necessary for the court to appoint a referee to hear and determine any and all discovery motions and disputes relevant to discovery in the action and to report findings and make a recommendation thereon.

Unless both parties have agreed to a reference, the court should not make blanket orders directing all discovery motions to a discovery referee except in the unusual case where a majority of factors favoring reference are present. These include: (1) there are multiple issues to be resolved; (2) there are multiple motions to be heard simultaneously; (3) the present motion is only one in a continuum of many; (4) the number of documents to be reviewed (especially in issues based on assertions of privilege) make the inquiry inordinately time-consuming.

In making its decision, the trial courts need consider the statutory scheme is designed only to permit reference over the parties' objections where that procedure is necessary, not merely convenient. (§ 639, subd. (e).) Where one or more of the above factors unduly impact the court's time and/or limited resources, the court is clearly within its discretion to make an appropriate reference. Taggares v. Superior Court (1998) 62 Cal.App.4th 94, 105–106 [72 Cal.Rptr.2d 387, 393], as modified (Mar. 26, 1998).

Presently at issue is one discovery motion by Plaintiff, which is an accumulation of Plaintiff’s prior motions to compel due to Defendants’ failure to provide code-compliant responses. The Court does not find the appointment of a discovery referee is necessary. Defendants’ request for the appointment of a discovery referee is denied.

TERMINATING AND MONETARY SANCTIONS

Plaintiff moves for an order for terminating sanctions against Defendants for continuously violating the Court’s discovery orders and spoliating evidence, striking Defendants’ Answers to the Operative Complaint and entering default against Defendants. Plaintiff further seeks monetary sanctions in the amount of $4,702.50 against Defendants and their counsel, Pamela M. Schuur and Timothy T. Huber, for their misuse of the discovery process and willful violations of court orders.

On June 6, 2025, the Court granted the following: 1) Plaintiff’s Motion to Compel Defendant DM Solution Inc.’s Responses to Plaintiff’s First Set of Form Interrogatories, Special Interrogatories, Requests for Production of Documents, and Request for Sanctions; 2) Plaintiff’s Motion to Compel Defendant Owen Mackendrick’s Responses to Plaintiff’s First Set of Form Interrogatories, Requests for Production of Documents, and Request for Sanctions; 3) Plaintiff’s Motion to Compel Defendant David McLaury’s Responses to Plaintiff’s First Set of Form Interrogatories, Special Interrogatories, Requests for Production of Documents, Second Set of Requests for Production of Documents, and Request for Sanctions; 4) Plaintiff’s Motion to Deem Matters Admitted in Plaintiff’s First Set of Requests for Admission to Defendant David McLaury and Request for Sanctions.

August 28, 2026 Dept. 9 Civil Tentative Rulings

On October 23, 2025, the Court denied Defendants’ Motion for Reconsideration of the June 6, 2025, Order. Defendants’ were ordered to provide code-compliant responses, without objections of the following discovery by November 21, 2025: 1) Plaintiff’s First Set of Form Interrogatories, Special Interrogatories, and Requests for Production of Documents served on Defendant DM Solutions; 2) Plaintiff’s First Set of Form Interrogatories and Requests for Production of Documents served on Defendant Owen Mackendrick; and 3) Plaintiff’s First Set of Form Interrogatories, Special Interrogatories, Requests for Production of Documents, and Second Set of Requests for Production of Documents served on David McLaury.

In addition, the Court awarded sanctions to Plaintiff from Defendants for failing to timely serve responses to Plaintiff’s Form Interrogatories (Set Two), Requests for Admissions (Set Two), and Requests for Production of Documents (Set Three), necessitating the filing of a motion to compel which was thereafter rendered moot.

On March 13, 2026, the Court found Defendant McLaury willfully and purposefully disobeyed the Court’s October 23, 2025, Order and ordered issue sanctions after finding monetary sanctions have not resulted in the production of the requested discovery. In addition, the Court granted Plaintiff’s Motion to Compel Further Discovery Responses in compliance with the Court’s October 23, 2025, Order as to all Defendants. Sanctions were awarded to Plaintiff by Defendants. Code-compliant discovery responses were ordered to be submitted without objection by April 10, 2026.

Plaintiff now alleges that Defendants have yet again failed to comply with the Court’s March 13, 2026, Order. Plaintiff contends that although responses were served on April 13, 2026, the responses remain deficient for the following reasons: 1) Defendant McLaury’s responses to Requests for Production of Documents, Set Two, confirm that he “may have destroyed” one of the subject USB devices containing critical evidence, yet he refuses to provide any explanation for this admitted spoilation; 2) Defendants have still not produced any documents in response to Plaintiff’s Requests for Production of Documents, and failed to respond to meet and confer efforts; 3) Defendants’ responses to Plaintiff’s Special Interrogatories are tantamount to no response at all, as Defendants represented that they could not respond as they have not completed their review of relevant documents; and 4) Defendants written responses to Form Interrogatories remain evasive and incomplete.

Defendants argue that they complied with the Court’s March 13, 2026, Order, as they provided five USB devices to Plaintiff, as the sixth no longer exists. Defendants contend that Defendants served verified responses without objections on April 10, 2026, and the Order did not require them to produce any documents. As for the spoilation issue regarding the sixth USB, Defendants contend the device was inadvertently lost and there is no evidence that Defendant McLaury intentionally destroyed the device and the issue of intentionality should be deferred to the jury at trial.

August 28, 2026 Dept. 9 Civil Tentative Rulings

Plaintiff argues that even if the Court were to accept Defendants’ assertion that the sixth USB was inadvertently destroyed the subject drive, this still constitutes spoilation as Defendants had a duty to preserve the evidence. Plaintiff asserts that it was reasonably foreseeable that Defendants’ theft of trade secrets would lead to litigation and discovery of the devices Defendants used to carry out their theft. On June 28, 2024, Plaintiff sent a letter to Defendants regarding the misappropriation of confidential trade secrets and demands the preservation of evidence and ESI. The Complaint was thereafter filed on October 25, 2024.

Absent exceptional circumstances, the court shall not impose sanctions on a party or any attorney of a party for failure to provide electronically stored information that has been lost, damaged, altered, or overwritten as the result of the routine, good faith operation of an electronic information system. Code of Civil Procedure § 2023.030(f)(1). The safe-harbor provision of section 2023.030(f)(1) does not insulate a party from discovery sanctions for the material alteration or destruction of electronically stored information if the evidence was lost when the party was under a duty to preserve it.

The duty to preserve evidence arises when the party in possession and/or control of the electronically stored information was objectively aware the evidence was relevant to reasonably foreseeable future litigation, meaning the future litigation was probable or likely to arise from an event, and not merely when litigation was a remote possibility. Victor Valley Union High School Dist. v. Superior Court (2023) 91 Cal.App.5th 1121, 1138 [309 Cal.Rptr.3d 258, 269]

The Court finds that Defendants were under a duty to preserve all six USBs. As early as June 2024, Defendants had actual notice that future litigation was probable. Defendants’ failure to preserve the evidence accordingly constitutes spoilation. Moreover, there is a substantial history of Defendants engaging in the misuse of the discovery process. It is beyond all reasonable comprehension that Defendants assert that the Court did not require them to produce any documents. The Court expressly ordered Defendants to provide code-compliant responses to Plaintiff’s Request for Production of Documents, Set One as to all Defendants, and Request for Production of Documents, Set Two as to Defendant McLaury. The Court finds that Defendants have yet again failed to comply with its prior Orders and have failed to provide code-compliant discovery responses.

Code of Civil Procedure section 2023.030, subdivision (d) provides: “The court may impose a terminating sanction by one of the following orders: [¶] (1) An order striking out the pleadings or parts of the pleadings of any party engaging in the misuse of the discovery process. [¶] (2) An order staying further proceedings by that party until an order for discovery is obeyed. [¶] (3) An order dismissing the action, or any part of the action, of that party. [¶] (4) An order rendering a judgment by default against that party.” Doppes v. Bentley Motors, Inc. (2009) 174 Cal.App.4th 967, 992 [94 Cal.Rptr.3d 802, 823]

August 28, 2026 Dept. 9 Civil Tentative Rulings

The discovery statutes evince an incremental approach to discovery sanctions, starting with monetary sanctions and ending with the ultimate sanction of termination. “Discovery sanctions ‘should be appropriate to the dereliction, and should not exceed that which is required to protect the interests of the party entitled to but denied discovery.’ ” (Laguna Auto Body v. Farmers Ins. Exchange, supra, 231 Cal.App.3d at p. 487, 282 Cal.Rptr. 530.) If a lesser sanction fails to curb misuse, a greater sanction is warranted: continuing misuses of the discovery process warrant incrementally harsher sanctions until the sanction is reached that will curb the abuse.

“A decision to order terminating sanctions should not be made lightly. But where a violation is willful, preceded by a history of abuse, and the evidence shows that less severe sanctions would not produce compliance with the discovery rules, the trial court is justified in imposing the ultimate sanction.”5 (Mileikowsky v. Tenet Healthsystem (2005) 128 Cal.App.4th 262, 279–280, 26 Cal.Rptr.3d 831) Id. The trial court should tailor the sanction for such conduct to “fit the crime.” (Reedy v. Bussell (2007) 148 Cal.App.4th 1272, 1293.) The court cannot impose sanctions as punishment; the choice of sanctions should not give the moving party more than it would have gotten had the discovery been responded to. (Doppes v. Bentley Motors, Inc. (2009) 174 Cal.App.4th 967, 992; Caryl Richards, Inc. v. Superior Court, 188 Cal.App.2d 300, 303.)

Before issuing terminating sanctions, the court should usually grant lesser sanctions....”(Doppes, supra, 174 Cal.App.4th at 99.) It is only when a party persists in disobeying the court’s orders that the ultimate sanctions of dismissing the action or entering default judgment, etc. are justified. Deyo v. Kilbourne (1978) 84 Cal.App.3d 771.

The Court has previously issued monetary sanctions against Defendants for failing to comply with discovery demands on three occasions and ordered issue sanctions. Defendants have had nearly a year to comply with the Court’s Orders and have failed to do so. The Court has utilized lesser sanctions without any effect. The Court has no lesser options left to utilize at this point other than grant the motion for terminating sanctions, strike Defendants’ Answers to the operative Complaint, enter default against Defendants, and order sanctions in the amount of $4,702.50 against Defendants.

TENTATIVE RULING #6: DEFENDANTS’ MOTION FOR APPOINTMENT OF DISCOVERY REFEREE IS DENIED. PLAINTIFF’S MOTION FOR TERMINATING SANCTIONS IS GRANTED. DEFENDANTS’ ANSWERS TO THE OPERATIVE COMPLAINT ARE STRICKEN AND DEFAULT SHALL BE ENTERED AGAINST DEFENDANTS. DEFENDANTS ARE ORDERED TO PAY PLAINTIFF $4,702.50 WITHIN 10 DAYS OF THE COURT’S ORDER.

NO HEARING ON THIS MATTER WILL BE HELD UNLESS A REQUEST FOR ORAL ARGUMENT IS TRANSMITTED ELECTRONICALLY THROUGH THE COURT’S WEBSITE OR BY TELEPHONE TO THE COURT AT (530) 621-6551 BY 4:00 P.M. ON THE DAY THE TENTATIVE RULING IS ISSUED. CAL.

August 28, 2026 Dept. 9 Civil Tentative Rulings

RULE CT. 3.1308; LOCAL RULE 8.05.07; SEE ALSO LEWIS V. SUPERIOR COURT, 19 CAL.4TH 1232, 1247 (1999).

NOTICE TO ALL PARTIES OF A REQUEST FOR ORAL ARGUMENT AND THE GROUNDS UPON WHICH ARGUMENT IS BEING REQUESTED MUST BE MADE BY TELEPHONE OR IN PERSON BY 4:00 P.M. ON THE DAY THE TENTATIVE RULING IS ISSUED. CAL. RULE CT. 3.1308; EL DORADO COUNTY LOCAL RULE 8.05.07. PROOF OF SERVICE OF SAID NOTICE MUST BE FILED PRIOR TO OR AT THE HEARING.

LONG CAUSE HEARINGS MUST BE REQUESTED BY 4:00 P.M. ON THE DAY THE TENTATIVE RULING IS ISSUED AND THE PARTIES ARE TO PROVIDE THE COURT WITH THREE MUTUALLY AGREEABLE DATES ON FRIDAY AFTERNOONS AT 2:30 P.M. LONG CAUSE ORAL ARGUMENT REQUESTS WILL BE SET FOR HEARING ON ONE OF THE THREE MUTUALLY AGREEABLE DATES ON FRIDAY AFTERNOONS AT 2:30 P.M. THE COURT WILL ADVISE THE PARTIES OF THE LONG CAUSE HEARING DATE AND TIME BY 5:00 P.M. ON THE DAY THE TENTATIVE RULING IS ISSUED. PARTIES MAY PERSONALLY APPEAR AT THE HEARING.

13