In re Marriage of Foulk

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In re the Marriage of GINA C. and BENJAMIN L. FOULK.

GINA C. FOULK, Respondent, v. BENJAMIN L. FOULK, Appellant.

C094350

California Court of Appeals, Third District, El Dorado

May 30, 2023

NOT TO BE PUBLISHED

(Super. Ct. No. PFL20130180)

ROBIE Acting P. J.

Appellant Benjamin L. Foulk appeals the trial court's order awarding monetary sanctions to his former wife respondent Gina C. Foulk^[1] in the amount of $68,358. Benjamin argues the trial court abused its discretion by imposing such sanctions under Code of Civil Procedure section 2023.030. We disagree and affirm.

FACTUAL AND PROCEDURAL BACKGROUND

In October 2013, Benjamin and Gina were granted a dissolution of their marital status, but issues related to the division of their property remained and were subject to further proceedings. In April 2017, the trial court ordered formal discovery closed, except for requests for documents pertaining to certain unsettled subjects. Gina later moved to reopen discovery to obtain more current information necessary to appraise the parties' business, El Dorado Senior Care LLC (Senior Care). Specifically, Gina sought production of Senior Care's business records and depositions of Senior Care's administrator and Benjamin. Benjamin opposed Gina's motion to reopen discovery.

On March 18, 2019, the trial court granted Gina's motion to reopen discovery with regards to the finances and operations of Senior Care since January 1, 2017. The trial court permitted Gina to request documents pertaining to the finances and operations of Senior Care and take the depositions of Benjamin and Senior Care's administrator about Senior Care's finances.

On April 17, 2019, Gina filed a motion to compel further responses and production of documents related to Senior Care's accounting records. Gina asserted that Benjamin had failed to produce QuickBooks files for Senior Care despite those files being in his possession.

On June 10, 2019, Gina filed another motion to compel production of checks and check registers/ledgers for Senior Care from 2017 through 2019. Gina's counsel declared that Gina requested checks and check ledgers to recreate the QuickBooks files already requested but not produced by Benjamin. Benjamin responded that he did not have checks, general accounting ledgers, or QuickBooks files for the requested years.

At a hearing on Gina's motions to compel, Benjamin argued that the QuickBooks files were created by his accountant when preparing Senior Care's tax returns. He asserted the QuickBooks files had just recently been prepared and were not in his possession when Gina initially requested them. Benjamin argued that, while the accountant generated the QuickBooks files with information supplied by Benjamin, Gina's April 17, 2020 request for documents encompassed only the QuickBooks files and the ledgers produced from those files, and not the information on which the QuickBooks files and ledgers were based. Gina disputed Benjamin's characterization of Senior Care's records, pointing to a letter produced by a court appointed accountant stating that Senior Care contemporaneously prepared QuickBooks files during the course of business.

Benjamin also asserted his accountant would give QuickBooks files to the court appointed accountant to inspect, and Gina would get redacted Excel files removing confidential information pertaining to Senior Care's clients. Benjamin argued this method of production was ordered earlier in the litigation. Gina disputed Benjamin's claim the QuickBooks files were previously ordered to be produced in such a manner or that the files contained confidential information. She asserted that the parties had previously agreed to use a court appointed accountant to inspect the QuickBooks files for tampering before the files were provided to her.

The trial court granted Gina's motion to compel production of the QuickBooks files and found her other motion moot in light of that ruling. Specifically, the trial court ordered Benjamin to produce two copies of Senior Care's QuickBooks files to the court appointed accountant on or before August 12, 2019. One copy would be the unredacted version of the QuickBooks files and the other copy a version with the names of the business's clients redacted. The trial court ordered the court appointed accountant to compare the versions of the QuickBooks files to ensure only the names of clients were redacted, and then to also analyze the QuickBooks files with the audit trail function available on QuickBooks software to determine whether the files were reliably prepared.

Because of subsequent disagreements between the parties regarding the scope of the trial court's order, production of the QuickBooks files was delayed until November 27, 2019. Benjamin attempted delivery of the QuickBooks files on November 27, 2019, but was prevented from delivering the files because Gina's attorney's law office was closed. Instead, he mailed the files on that date. According to Benjamin, the QuickBooks files delivered to Gina consisted of "QuickBooks journal entry files" and "Excel journal entry files."

On January 9, 2020, Gina filed a request for sanctions. As part of the request, her attorney declared that the flash drive produced by Benjamin included only Excel files and not QuickBooks files Gina could analyze for tampering. In his responsive filing, Benjamin asserted that he strictly complied with the trial court's discovery order. At a March 9, 2020 hearing on the sanctions request, Gina's accounting expert testified that the flash drive he received from Gina's attorney contained only Excel files with accounting information from Senior Care. The Excel files did not include beginning balances for any classification of expenses and deposits, and thus it was impossible to import the information from the Excel files into a workable QuickBooks report. Gina's accounting expert could not determine whether QuickBooks files had existed on the flash drive at an earlier time. The accounting expert could also not determine whether the information in the Excel files was reliable because he could not use QuickBooks's audit trail function on the Excel files.

Benjamin argued that it was too time consuming to redact all the client names from the QuickBooks reports. Thus, despite having agreed to produce redacted QuickBooks files, it was not practicable. Instead, he produced Excel files, which he believed allowed Gina to run all the QuickBooks reports she wanted, including profit/loss statements and "journal entry detail reports." The Excel files, however prevented Gina from auditing the entries to determine whether they were reliable. Benjamin denied agreeing to produce files allowing for Gina to audit the information entered.

After reading from the transcript of the hearing held on November 15, 2019, at which Benjamin agreed to produce QuickBooks files in native format with client names redacted so that Gina could inspect and audit the files, the trial court gave Benjamin two weeks to accomplish the task he agreed to at the November 15, 2019 hearing. The trial court was clear that Benjamin needed to produce QuickBooks files on which the audit trail function could be utilized. The court then put off the subject of sanctions and warned Benjamin sanctions were strongly being considered.

On March 18, 2020, the parties were back before the trial court. Benjamin asserted that it was impossible for him to comply with the trial court's order because he could not redact any portion of the QuickBooks files while still leaving the audit trail function intact. After hearing argument of the parties and considering a declaration from an attorney, the trial court determined that the names of Senior Care's clients contained in the QuickBooks files were not confidential information. The trial court vacated its prior order and ultimately ordered Benjamin on June 12, 2020, to produce unredacted and native QuickBooks files by June 26, 2020. The court then set the issue of sanctions for a July 10, 2020 hearing.

On July 10, 2020, the trial court continued the sanctions hearing because Gina's accounting expert submitted a declaration that morning asserting Benjamin had not produced the QuickBooks files in the format ordered. Benjamin agreed he had not produced the QuickBooks files on a flash drive as ordered because it was impossible for him to do so. Instead, Benjamin asserted he made Gina's accounting expert a user on Senior Care's online QuickBooks account, so he could look through the QuickBooks files unimpeded. According to Gina's accounting expert, however, his access to the online QuickBooks files was restricted and he could not download the files.

The reporter's transcript of the hearing after which sanctions were imposed on Benjamin does not appear in the record. From what can be gleaned from the clerk's transcript, the sanctions hearing occurred on September 29 2020. In a supplemental responsive declaration to Gina's request for sanctions, the person Benjamin hired to extract the QuickBooks files in November 2019 declared that it was impossible to download QuickBooks files directly to a flash drive. Benjamin and Senior Care's administrator declared they did not know how to download QuickBooks files directly to a flash drive and relied on others to maintain Senior Care's QuickBooks accounts. The accountants for Senior Care declared they had never successfully downloaded QuickBooks files to a flash drive and had always provided accounting data in an Excel file format. Senior Care's accountants believed providing Gina's accounting expert with online access to the QuickBooks files was a superior option to downloading the QuickBooks files, and thus they provided Gina's accounting expert with the ability to access...