*1 This Report and Recommendation (“R&R”) is submitted to the Honorable Otis D. Wright, II, United States District Judge, pursuant to the provisions of 28 U.S.C. § 636 of the United States District Court for the Central District of California.

Defendants KEP Fortune, LLC (“KEP”) and its principals, Jeroen and Miray Bik (collectively, “Defendants”) moved to be excused from the legal consequences of KEP's failure to respond timely to Requests for Admission (“RFAs”) propounded by Plaintiff Full Tilt Boogie, LLC (“Plaintiff”). (Dkt. 50 [the “Motion to Withdraw”].) The Motion to Withdraw is supported by a declaration by lead defense counsel, Al Mohajerian (Dkt. 50-1), and his firm Mohajerian APLC's paralegal, Anna Contreras (Dkt. 50-2).

Plaintiff opposed the motion (Dkt. 52) and Defendants filed a reply (Dkt. 63). On May 18, 2021, the Magistrate Judge held a telephonic hearing on the motion. (Dkt. 65.) For the reasons stated below, the Magistrate Judge recommends that the Motion to Withdraw be DENIED.

Plaintiff entered into a franchise agreement with Defendants to operate a Klein Epstein & Parker store selling made-to-order suits. In October 2019, Plaintiff sued Defendants generally alleging that they failed to provide truthful disclosures about financial matters in their Franchise Disclosure Document (“FDD”). (Dkt 1.) Plaintiff asserts claims for (1) fraudulent and negligent misrepresentations or omissions that induced Plaintiff to purchase the franchise; (2) breach of the franchise agreement or, alternatively, rescission and unjust enrichment; (3) violations of California's Franchise Investment Law by providing an incomplete or untrue FDD; (4) unfair business practices (i.e. inserting a non-compete clause in the franchise agreement) in violation of California Business & Professions Code section 16600; (5) deceptive trade practices violating Nevada law where Plaintiff's shop was located; and (6) intentional interference with contractual relations. (Id.)

After the Clerk entered default against Defendants (Dkt. 22), the parties stipulated to set aside the default (Dkt. 25). Defendants answered the Complaint in February 2020 and filed counterclaims against Plaintiff. (Dkt. 27, 28.) The parties filed a Rule 26(f) report in May 2020 (Dkt. 35), and the District Court set May 3, 2021, as the fact discovery cutoff date. (Dkt. 37 at 21.[1])

On November 3, 2020, Plaintiff served its first set of RFAs on KEP by mail and email[2] along with interrogatories and requests for production. (Dkt. 50-5, 62-2, 62-4.) On November 4, Ms. Contreras emailed the RFAs to Mr. Bik for his review, cc'ing Mr. Mohajerian. (Dkt. 50-2 ¶ 4; Dkt. 50-6 [email].) By November 12, Ms. Contreras had some draft responses which she also emailed to Mr. Bik, this time cc'ing Mr. Mohajerian and associate attorney, Ann Anooshian. (Dkt. 50-2 ¶ 5; Dkt. 50-7 [email].) Ms. Contreras declares that on November 23, “we received” comments from Mr. Bik on the proposed responses to the RFAs, referring to an email sent both to her and Mr. Mohajerian. (Dkt. 50-2 ¶ 7; Dkt. 50-9 [email].)

*2 On December 4, Ms. Contreras requested and received an extension of time for Defendants to respond to the discovery, moving the RFA response deadline to December 14, 2020. (Dkt. 50-2 ¶ 8.) Her email and the response from Plaintiff's counsel were cc'd to both Mr. Mohajerian and Ms. Anooshian. (Dkt. 50-10.)

Five days later on December 9, 2021, Mr. Mohajerian emailed Ms. Contreras and Ms. Anooshian asking for a case update. (Dkt. 50-11.) Specifically, he asked, “did we respond to their discovery questions”? (Id.) Ms. Contreras responded the same day, cc'ing Ms. Anooshian, stating that the discovery responses were “ready for review” but not due until December 14. (Dkt. 50-12.)

On December 14, 2021, Ms. Contreras forwarded draft responses to the interrogatories and document requests by email to Mr. Bik for his review and verification, but the draft RFA responses were not attached to her email “for a reason of which [she] is uncertain.” (Dkt. 50-2 ¶ 11.) She suspects that the reason might be a technical glitch in the process of uploading the draft discovery responses from the firm's cloud-based server, but she had never seen that happen before. (Id. ¶¶ 13-14.) This transmittal email to Mr. Bik is not included in Defendants' exhibits. At the hearing, however, Mr. Mohajerian represented that he had found the email while on the phone with the Court, and it was cc'd to both him and Ms. Anooshian. He also represented that he found the version of the RFA responses that were ready to be sent to Mr. Bik on December 14, and that document bore Ms. Anooshian's electronic signature. Mr. Mohajerian explained that he provided information from the clients to be included in KEP's responses, but he never reviewed the draft RFA responses.

Later on December 14, Ms. Contreras sent “the verified PDF[s] to Full Tilt” without noticing that one of the three discovery responses, i.e., the responses to the RFAs, was missing. (Dkt. 50-2 ¶ 14.) Again, this transmittal email is not included in Defendants' exhibits. Again, Mr. Mohajerian represented during the telephonic hearing that he had found that email, and it was cc'd to both him and Ms. Anooshian. He explained that the email depicted two icons indicating two PDF attachments, and it also contained a link to an “attachment list.” He further explained that someone who viewed the email without opening the attachment list might not conclude that there were only two attachments, because the email system he uses only shows the “top two” attachments with PDF icons.

During the hearing, Mr. Mohajerian also represented that he had reviewed internal TEAM text messages between Ms. Anooshian and Ms. Contreras from December 14, 2020, as they were working together to finalize Defendants' discovery responses. They exchanged about 30 messages that day, but none mentioned the RFAs.

On February 3, 2021, Plaintiff's counsel sent Defendants a lengthy letter identifying claimed deficiencies in Defendants' responses to the interrogatories and document requests. (Dkt. 50-13.) This letter did not mention the RFAs, but that omission did not prompt anyone at Mohajerian APLC to doublecheck whether KEP had served RFA responses.

No one at Mohajerian APLC realized that KEP had failed to serve responses to the RFAs until April 14, 2021, when Plaintiff emailed notice that it intended to apply ex parte to shorten time to hear a motion to compel further document production and have the RFAs deemed admitted. (Dkt. 52-3 at 4; Dkt. 44.) On April 15, 2021, Defendants opposed that application, stating, “KEP has responded timely to all discovery.” (Dkt. 46 at 2.)

*3 That, however, was not true. On April 15, 2021, at about 5:40 p.m., KEP finally served RFA responses by email. (Dkt. 52-5 at 14; Dkt. 52-8 at 5.) To all 38 RFAs (except no. 16), KEP responded as follows:

(Dkt. 52-5.) This document is electronically signed by Ms. Anooshian. (Id. at 12.) It was transmitted to Plaintiff with a blank client verification page. (Id. at 13.)

On the next day April 16, 2021, KEP served amended RFA responses dated April 16, 2021, electronically signed by Ms. Anooshian and verified by Mr. Bik the same day. (Dkt. 50-4; Dkt. 52-3 at 3 [transmittal email].) These responses are substantively different. They include new objections, a more detailed explanation of perceived ambiguities, and two admissions. (Dkt. 50-4.)

The 38 RFAs address various topics. Some focus on the FDD. KEP was asked to authenticate the FDD (RFA 1) and then admit that certain terms have certain meanings (RFAs 2-8, 31-36). RFA 9 asked KEP to admit that the FDD did not comply with California or federal law. Other RFAs ask whether KEP encouraged and assisted Plaintiff in renting expensive retail space in the Forum Shops at Caesar's Palace (RFA 10, 13, 14). Some RFAs ask whether KEP sent Plaintiff unordered items and required payment for them (RFAs 11, 12) while delaying or failing to send other inventory (RFAs 15, 27, 29), conduct that Plaintiff alleges breached the franchise agreement. Finally, some RFAs target facts relevant to alleged misrepresentations about the costs of products and services for which KEP charged Plaintiff (RFA 16-20, 22-25, 28) or about training Defendants provided (RFA 21). (See Dkt. 50-4.)

Federal litigants may serve RFAs on opposing parties. Fed. R. Civ. P. 36(a)(1). “A matter is admitted unless, within 30 days after being served, the party to whom the request is directed serves on the requesting party a written answer or objection addressed to the matter and signed by the party or its attorney.” Fed. R. Civ. P. 36(a)(3). If a matter is admitted under this Rule, it is “conclusively established unless the court, on motion, permits the admission to be withdrawn or amended.” Fed. R. Civ. P. 36(b). The court has discretion to permit withdrawal or amendment “if it would promote the presentation of the merits of the action and if the court is not persuaded that it would prejudice the requesting party ....” Id. This discretion is exercised “[s]ubject to Rule 16(e).”[3] Id.

Thus, two requirements “must be met before an admission may be withdrawn: (1) presentation of the merits of the action must be subserved, and (2) the party who obtained the admission must not be prejudiced by the withdrawal.” Hadley v. United States, 45 F.3d 1345, 1348 (9th Cir. 1995). The first half of this test is satisfied if upholding the admissions would “practically eliminate” any presentation of the merits of the case. Id. The second half of the test requiring prejudice is not satisfied simply by showing “that the party who obtained the admission will now have to convince the factfinder of its truth. Rather, it relates to the difficulty a party may face in proving its case” at trial. Id. (citation omitted).

*4 Even “when a district court finds that the merits of the action will be subserved and the nonmoving party will not be prejudiced, it ‘may’ allow withdrawal, but is not required to do so under the text of Rule 36(b).” Conlon v. United States, 474 F.3d 616, 625 (9th Cir. 2007). District courts can consider other factors, including “whether the moving party can show good cause for the delay and ... appears to have a strong case on the merits.” Id.

A. The Court Excuses Compliance with Meet and Confer Requirements.

Plaintiff argues that the Motion to Withdraw should be denied because Defendant failed to meet and confer before filing it as required by the Local Rules and failed to proceed via joint stipulation, a requirement for “any motion relating to discovery under F.Rs.Civ.P. 26-37.” (Dkt. 52 at 9, citing L.R. 37-1.) The Motion to Withdraw is not in the form of a joint stipulation, and the notice of motion does not describe any pre-filing conference of counsel about the RFAs. (Dkt. 50 at 2.)

Per the scheduling order, discovery motions “must be heard sufficiently in advance of the discovery cut-off date to permit the responses to be obtained before that date if the motion is granted.” (Dkt. 37 at 2-3.) For parties proceeding under Local Rule 37-1 to have a hearing before May 3, 2021 (i.e., on April 27, 2021, the last Tuesday for law and motion before the May 3 discovery cutoff on the Magistrate Judge's calendar), the motion would need to be filed no later than April 6, which means that the Rule 37-1 “meet and confer” letter requesting the conference that must precede preparation of the joint stipulation would have needed to be sent on about March 19, 2021. See L.R. 37.

In March 2021, defense counsel was still unaware that KEP had failed to serve responses to the RFAs, precluding them from filing a motion to withdraw the admissions that complied with Rule 37-1. While counsel could still have conferred per Local Rule 7-3 (requiring a meeting of counsel seven days prior to filing any motion), the Court doubts that the conference would have resolved any issues. This R&R, therefore, recommends that the District Court exercise its discretion to consider the merits of Defendants' Motion to Withdraw.

B. Upholding the Admissions Would Not Practically Eliminate Any Presentation of the Merits.

As a threshold issue, the RFAs were propounded only to KEP. Thus, upholding the admissions would not prevent the two individual Defendants from presenting the merits of their defenses and counterclaims.

In their motion, Defendants present an unusual (and contradictory) “alternative” argument addressing the first prong of Rule 36(b)'s test. (Dkt. 50 at 15.) First, Defendants cursorily argue that upholding the admissions would “lead to a conclusion ... that KEP breached its own franchise agreement” or “violated the law” by not providing required information in the FDD. (Id. at 9.) Next, Defendants argue expansively that “the admissions do not create liability of KEP.” (Id. at 11-15). KEP provides examples of facts that it could admit about the FDD's content without admitting that the FDD was illegal. (Id. at 11-12.) Similarly, KEP explains how it could admit certain actions without admitting that it violated franchise law or breached the franchise agreement. (Id. at 12-14.) KEP further points out that even if it is deemed to have admitted acts of breach, it has not admitted liability, because “Full Tilt was already in material breach” which excused KEP's performance, a claim asserted via KEP's counterclaim. (Id. at 15.)

*5 At the hearing, when the Magistrate Judge asked for clarification of Defendants' position, counsel stated that whether upholding the admissions would subserve the merits was a “mixed” question, meaning that it would for some admissions but not for others. When the Magistrate Judge asked which admissions met the first prong of the Rule 36(b) test, counsel identified RFA 9. When pressed to identify others, he represented that there were more, but he could not list them because he had not anticipated the question. He offered to review each of the 38 RFAs with the Court during the telephonic hearing, but stopped after the Magistrate Judge pointed out that the next two or three RFAs he chose to discuss did not actually satisfy the first prong of the Rule 36(b) test. Counsel then offered to submit a supplemental brief identifying which RFAs met this prong, but the Magistrate Judge declined to authorize one, having already received Defendants' motion, reply, and oral argument.

Ultimately, as the moving party, it was Defendants' burden to demonstrate that upholding all or some of the admissions would subserve the merits. Defendants have not met that burden. As to the FDD-related RFAs (i.e., RFAs 1-8), Defendants expressly argued that upholding these admissions would not establish liability. (Dkt. 50 at 11-12.) As to the RFAs about Caesar's Palace (i.e., RFAs 10, 13, 14), defense counsel agreed at the hearing that even if deemed admitted, these admissions would not establish a breach of contract or of any other legal duty. (See also Dkt. 50 at 12.) As to the RFAs aimed at establishing conduct that Plaintiff contends breached the franchise agreement (i.e., RFAs 11-12, 15, 27, 29), Defendants argue persuasively that upholding such admissions would not establish liability, because Defendants have defenses to Plaintiff's breach of contract claims. (Dkt. 50 at 12-13.) Similarly, upholding an admission of RFA 21 about training would not establish a breach, because Defendants' position is that the Biks did conduct some training, and they were not required to conduct all training. Finally, some RFAs target facts relevant to alleged misrepresentations in the FDD about the costs of products and services for which Defendants charged Plaintiff. During the hearing, counsel argued that upholding these admissions would not create liability, because Defendants contend any charges were part of permissible royalties, not undisclosed profits. (See also Dkt. 50 at 13-14 [listing RFAs 16-38, saying they “may be addressed as a group,” and concluding, “[t]he ‘admissions’ to the above RFA's do not create liability to KEP even if considered ‘admissions’ ”].)

That leaves only Defendants' argument that RFA 9 meets the first prong of the Rule 36(b) test, because an admission that the FDD failed to comply with state and federal law would establish KEP's liability on Plaintiff's fourth cause of action for violating California's Franchise Investment Law. (Dkt. 1 at 25.) Defendants' briefing fails to address whether it is sufficient under Rule 36(b) to show that the merits of only one of several claims would be subsumed.[4] Defendants have therefore failed to carry their burden of demonstrating that the Motion to Withdraw meets the first prong of the Rule 36(b) test as to any of the RFAs.[5]

C. Withdrawing the Admissions Would Prejudice Plaintiff.

*6 The Court may only grant the Motion to Withdraw if it is “not persuaded” that doing so would prejudice Plaintiff. Fed. R. Civ. P. 36(b). As the party relying on the admissions, Plaintiff bears the burden of showing prejudice. Conlon, 474 F.3d at 622.

Plaintiff argues that it will be prejudiced, because it relied on the deemed admissions for about four months, a significant portion of the discovery period. Once the RFAs were deemed admitted in December 2020, Plaintiff's counsel, who must litigate efficiently (Fed. R. Civ. P. 1), chose not to pursue depositions and other discovery before the cutoff date and instead relied on the admission. Plaintiff did not depose KEP or the Biks. (Dkt. 52 at 17-18.) By April 23, 2021, the Motion to Withdraw's filing date, it was too late for Plaintiff to serve additional written discovery, notice depositions, or initiate the Local Rule 37-1 procedure for discovery motions.

In response, Defendants first argue that Plaintiff will not be prejudiced because the parties are engaged in settlement negotiations. (Dkt. 50 at 9.) While this may be true, it is irrelevant to the issue of prejudice under Rule 36(b).

Second, Defendants argue that “there is no motion for summary judgment deadline pending.” (Dkt. 50 at 9.) This is untrue. Per the Scheduling Order, the motion deadline is June 28, 2021. (Dkt. 37 at 5, 6, 21.) It is true, however, that this date has not yet passed and neither party has filed a motion for summary judgment.

Third, Defendants argue that Plaintiff would not be prejudiced by withdrawal because the admissions, even if upheld, would not create liability for KEP. (Dkt. 50 at 12-13.) This argument collapses the two prongs of the Rule 36(b) test. If prejudice can only exist where upholding the admissions would establish liability, then the first prong of the test would be superfluous. Rather, prejudice for purposes of Rule 36(b) considers the difficulty the party who obtained the admissions will have proving relevant—but not necessarily dispositive—facts at trial if it cannot rely on the admissions.

Fourth, Defendants argue that Plaintiff will not be prejudiced because there was only a “short” delay between when the RFA responses were due and when KEP served them. (Id. at 10.) In fact, there was a delay from December 14, 2020, until April 15, 2021.[6] The effect of KEP's four-month delay (approximately 1/3 of the time permitted for fact discovery and related motions) was to cause Plaintiff to believe that it could rely on the admissions until it was too late to pursue other discovery.

Defendants counter that Plaintiff is to blame for any delay-based prejudice, because Plaintiff's counsel should have noticed that the RFA responses were missing and alerted defense counsel earlier. (Id. at 5, 8.) Defendants go so far as to call Plaintiff's counsel “unethical” for failing to do so. (Id. at 10-11.) Defendants cite no case law for the premise that counsel must promptly advise adverse parties of missed deadlines so that opposing counsel can move for relief. It was defense counsel's duty to notice that the RFA responses were missing from the transmittal email (as discussed more below).

*7 Defendants also argue that any delay is Plaintiff's fault because “Plaintiff acknowledges that it received Defendants' Answer to the complaint on or about January 20, 2020, yet Plaintiff did not propound discovery until November 2020. In other words, Plaintiff sat on the case for over 10 months doing nothing.” (Dkt. 63 at 2.) In fact, Defendants did not answer until February 2020. (Dkt. 27.) The parties did not exchange initial disclosures until May 2020. (Dkt. 35 at 3.) When Plaintiff served the RFAs in November 2020, plenty of time remained for Defendants to respond and for Plaintiff to conduct follow-up discovery before the discovery cutoff date. Cf. Duarte Nursery, Inc. v. United States Army Corps of Eng'rs, No. 2:13-CV-02095, 2015 U.S. Dist. LEXIS 154762 at *11-12, 2015 WL 7188227, at *4 (E.D. Cal. Nov. 13, 2015) (finding no prejudice where RFA responses were served 1-day late due to a calendaring error and only 2 days before the discovery cutoff, such that the requesting party “could not have relied on the responses to admissions to conduct further discovery”).

Defendants' last argument is that discovery-related prejudice is insufficient, because there is time to conduct additional discovery before trial, even though the discovery cutoff date has passed. (Dkt. 63 at 6.) Defendants point out that trial is not scheduled to start until October 2021, and they are willing to be deposed. (Id. at 9.) In support of this argument, Defendants cite the unpublished case Vecron Exim Ltd v. Stokes, No. CV 17-02944-CAS (RAOx), 2018 U.S. Dist. LEXIS 226384, 2018 WL 6168022 (C.D. Cal. June 20, 2018). In Vecron, the court found that no prejudice would result from permitting Defendant Stokes to withdraw his admissions, because the case was still four months from trial and the district judge had recently granted a motion to modify the scheduling order. Id. at *10-12, 2018 WL 6168022, at *4. Under these circumstances, the court concluded that “Vecron has sufficient time to conduct discovery to probe responses to the RFAs.” Id. at *11, 2018 WL 6168022, at *4.

The Vecron case involved unique facts that drove the court's scheduling decisions. Stokes's first attorney abandoned him by failing to notify him when the RFAs were served, failing to respond, and failing to oppose the summary judgment motion. Id. at *13-14, 2018 WL 6168022, at *5. This provided good cause to modify the scheduling order and re-open discovery, and the discovery cutoff date was ultimately extended about a year and a half after Stokes was permitted to withdraw his admissions. Thus, Vecron is factually distinguishable.

The relevant procedural history in Vecron is summarized below based on the docket, which is subject to judicial notice:

*8 Defendants cite language from the Vecron decision suggesting that it might be an abuse of discretion to find prejudice would result from allowing a litigant to withdraw admissions rather than curing the prejudice by re-opening discovery. (Dkt. 63 at 6.) This language comes from Conlon, in which the Ninth Circuit noted its “reluctan[ce] to conclude that a lack of discovery, without more, constitutes prejudice” because “[t]he district court could have reopened the discovery period[.]” 474 F.3d at 624. In Conlon, however, the Ninth Circuit ultimately held that the district court did not abuse its discretion by finding prejudice and refusing to permit the withdrawal of the pro se plaintiff's admissions, where the defendant had “relied on the admissions for a total of two and a half months,” discovery was closed, and the case was only eight days from trial when the motion to withdraw was denied. Id.

After the 2007 Conlon decision, many district courts have continued to find that withdrawing admissions after the discovery cutoff would cause prejudice. See, e.g., Doty v. City of Santa Clara, No. 14-CV-03739, 2015 U.S. Dist. LEXIS 169094 at *14-15, 2015 WL 9027727, at *5 (N.D. Cal. Dec. 16, 2015) (finding prejudice where the motion to withdraw was filed 5 months after the RFAs were deemed admitted and a month after the close of discovery, and defendant relied on the admissions to structure its discovery plan and forgo certain discovery); Am. Gen. Life & Accident Ins. Co. v. Findley, No. CV 12-01753 MMM (PSWx), 2013 U.S. Dist. LEXIS 41644 at *9-10, 2013 WL 1120662, at *4 (C.D. Cal. Mar. 15, 2013) (“AGLA would be prejudiced if Hazzard-Findley were permitted to withdraw the admissions at this late date,” after the discovery and motion cutoff but before trial); Buchanan v. Neighbors Van Lines, No. CV 10-6206 PSG, 2011 U.S. Dist. LEXIS 121423 at *34-35, 2011 WL 5005769, *12 (C.D. Cal. Oct. 20, 2011) (“Plaintiff has relied on the deemed admissions for 11 weeks, including through the close of fact discovery. ... Accordingly, the Court finds Plaintiff will be prejudiced by Golden Hand's belated attempt to amend its admissions and denies Golden Hand's motion”); Haile v. Santa Rosa Mem. Hosp., No. C-08-04149, 2009 U.S. Dist. LEXIS 122589 at *8-9, 2009 WL 5088736, *3 (N.D. Cal. Dec. 17, 2009) (“Defendant suffered prejudice not only based on a lack of discovery, but because of its reliance for several months through the discovery cutoff date on the deemed admissions, with no indication that Plaintiff would seek relief under Rule 36(b).”).

Undoubtedly, district courts can re-open discovery and extend pre-trial deadlines to ameliorate prejudice. See, e.g., Fox v. De Long, No. 2:14-cv-02947, 2016 U.S. Dist. LEXIS 2540 at *26, 2016 WL 6088371, at *9 (E.D. Cal. Jan. 7, 2016) (“After he granted the motion to withdraw the admissions, the trial judge extended discovery to minimize any prejudice.”) They are not, however, required to do so. It is not an abuse of discretion for a district court to decline to modify its scheduling order without a showing of good cause. Fed. R. Civ. P. 16(b)(4).

In sum, Plaintiff has demonstrated it will be prejudiced if the Court allows KEP to withdraw its admissions at this late date. Plaintiff relied on the deemed admissions for approximately four months during the discovery period rather than pursuing other discovery to prove the admitted facts. The discovery cutoff date has now passed, which precludes Plaintiff from pursuing such discovery. This prejudice is real unless and until the District Court extends the discovery cutoff date, which requires a showing of good cause. As discussed below, Defendants have not shown good cause.

D. Other Factors Support Denying the Motion to Withdraw.

In their briefing, the parties urge the Court to consider other factors including the lack of good case for KEP's failure to serve the RFA responses on time and failure to move to withdraw the admissions earlier; Defendants' lack of candor in arguing for withdrawal; Defendants' pattern of delays in conducting discovery; and which party is likely to prevail on the merits. The Court lacks sufficient information to consider the merits, but considers the other three factors.

1. Lack of Good Cause.

*9 Defendants argue that KEP's RFA responses were served late “due to administrative oversight and error.” (Dkt. 50 at 2.) They blame paralegal Ms. Contreras and an unrepeatable computer error, claiming that the oversight was not “due to inattention by counsel or KEP.” (Id. at 9.)

In November 2020, however, both attorneys Mohajerian and Anooshian knew that RFAs had been served and responses were due in 30 days. On December 9, both attorneys knew that draft RFA responses existed that needed to be reviewed and signed by an attorney and then verified by the client, and that this needed to occur on or before December 14. (Dkt. 50-12.) Mr. Mohajerian submitted a declaration (Dkt. 50-1), but it says nothing about his role (if any) in finalizing the RFA responses. He was apparently relying on Ms. Anooshian to review and sign the final draft, but she did not submit a declaration.

On December 14, Ms. Contreras sent two emails (one to Mr. Bik and one to opposing counsel) that attached only two sets of discovery responses. Both emails were cc'd to Mr. Mohajerian and Ms. Anooshian, but neither noticed the missing RFAs. This seems peculiar if one of them had truly been involved in drafting, reviewing, and e-signing RFA responses just days earlier. Counsel's explanation attempts to focus on the reliability of Ms. Contreras and the firm's computer system, essentially arguing that counsel had no reason to doublecheck them. “The duty of competent representation includes the duty of adequately supervising non-attorney employees ....” In re Hessinger & Assocs., 192 B.R. 211, 223 (N.D. Cal. 1996) (citing Waysman v. State Bar, 41 Cal. 3d 452, 224 Cal.Rptr. 101, 714 P.2d 1239 (1986)). Here, either Attorneys Mohajerian or Anooshian should have confirmed that verified responses were served to all the discovery, especially given the importance of RFAs and their knowledge (as Mr. Mohajerian represented) that seeing two PDF attachments in an email might—but might not—mean that the email had only two attachments. Counsel's inattention continued for months, even after receiving Plaintiff's February 2021 meet and confer letter that should have raised questions as to why Plaintiff would challenge Defendants' objections to the interrogatories and document requests but not the RFAs.

Ultimately, this is not a case where Defendants were self-represented, someone miscounted the 30-day deadline, or the RFAs were lost during a mailing mishap.[7] Had defense counsel been more involved in finalizing KEP's RFA responses, as they were required to be, then KEP would have served timely responses to the RFAs.

2. Lack of Candor.

According to Defendants, draft RFA responses were ready to serve in December 2020 but for client verification. (Dkt. 50-1 ¶ 9.) Plaintiff queries if this is so, then why did KEP need to serve boilerplate responses on April 15, followed by more robust responses on April 16? (Dkt. 52 at 12-13.) Why not find the December 2020 draft, obtain a verification, and serve that? (Id.) Defendants failed to explain this in their reply or attach the December 2020 draft.[8] (Dkt. 62.) Indeed, Defendants failed to submit both critical transmittal emails as exhibits, despite Mr. Mohajerian's representations during the telephonic hearing that he had them available on his computer.

*10 Equally troubling, upon receiving Plaintiff's ex parte application, Defendants represented that they had timely responded to all discovery, either misrepresenting the truth or failing to investigate the truth before filing their brief. (Dkt. 46 at 2.) This representation appears to have been intentionally omitted from Mr. Mohajerian's declaration. (Dkt. 50-1.)

3. Pattern of Discovery Delays.

In a separate motion, Plaintiff has moved to compel Defendants to produce additional documents. (Dkt. 62.) This R&R will not recite the full history of the parties' dispute over documents, but notes that the Magistrate Judge conducted a teleconference with the parties on April 28 to explore possibilities for an agreed-upon resolution. (Dkt. 53, 57 [transcript].) At that hearing, Mr. Mohajerian acknowledged that Defendants had objected to many document requests on the ground that they sought trade secrets. The parties had known since May 2020 that discovery would involve financial records. (Dkt. 35 at 3 [Rule 26(f) report stating, “the parties agree to prepare and submit a proposed order governing the discovery, disclosure, and use of confidential information in this case.”].) Yet Defendants chose to object on this basis and withhold relevant documents rather than seek a protective order. See Travelers Indem. Co. v. Trumpet, Inc., No. 8:19-cv-01036-PSG (JDEx), 2020 U.S. Dist. LEXIS 166187 at *26, 2020 WL 5372108, at *8 (C.D. Cal. May 8, 2020) (“If Defendant truly thought the information was so business-sensitive that it could not be produced without a confidentiality protective order, Defendant could have sought such a protective order under Rule 26(c)(1)(G) at any time. It did not do so. ... Defendant, as the party asserting the objection, bears the burden to support the objection and could have moved for a protective order at any time.”). Defendants did not promptly negotiate a protective order when Plaintiff sought one in February 2021. (Dkt. 57 at 17.)

Regarding Plaintiff's claim of undisclosed or illegal mark-ups, Mr. Mohajerian first represented, “if they signed a stip for confidentiality, I can release records to give them comfort that there's nothing here.” (Id. at 15.) He proposed that the documents be marked “attorneys' eyes only,” but withdrew that proposal after a discussion with the Magistrate Judge. (Id. at 19-22.) When the Magistrate Judge asked how long it would take to produce relevant documents, he professed uncertainty as to the nature of Plaintiff's claims. (Id. at 24-27.) After some discussion, he said, “if she's trying to find out what [Defendants] paid for [products Plaintiff purchased from Defendants], well, that's easy to produce.” (Id. at 27.) He then immediately backtracked and stated that responsive documents might not exist. (Id.) This prompted Plaintiff's counsel to retort, “So, basically what he's just said is he has no idea of the documents that are responsive to the request[,] ... has done no diligence ... in terms of trying to determine the records ... the franchisor has or doesn't have—doesn't understand the supply chain process and doesn't have any information—even though these [requests for production] have been pending for five months.” (Id. at 30.) Mr. Mohajerian protested, “[m]y associate knows this case inside and out.” (Id. at 33.)

That conference ended with a direction that the parties submit a stipulated, proposed protective order and that Defendants produce documents by May 7, with a follow-up hearing on May 10. (Id. at 34-35.) The parties also discussed stipulating to extend the discovery cutoff date. (Id. at 37.)

*11 On Saturday, May 8, Defendants produced documents via a shared electronic folder. (Dkt. 59.) At the hearing on May 10, Plaintiff's counsel told the Magistrate Judge that the production did not contain the records previously discussed and were largely duplicative of the 24 or so documents that Defendants had previously produced. (Dkt. 60; see Dkt. 62 at 8-9 [describing KEP's December 2020 production as containing 24 files and January 2021 production as containing the same files].) The parties were unable to agree on the wording of a stipulation to continue pre-trial deadlines while they pursued mediation. Accordingly, the Magistrate Judge set dates for briefing and hearing the pending discovery motions. (Dkt. 60.)

Defendants argue that any delays they may have caused during discovery are offset by delays caused by Plaintiff. Defendants attached many of Plaintiff's discovery responses to their reply and argue that the responses are deficient. (Dkt. 63 at 2, 4.) If so, then it was incumbent on Defendants to initiate the meet and confer process and, if unable to resolve the dispute, move to compel further responses. In a financial dispute like the instant case, it is hard to imagine how Defendants, if they were taking their discovery obligations seriously, would not have produced far more relevant records many months ago.

E. KEP May Not Stand On Its April 16 RFA Responses.

Defendants also moved to allow KEP's April 16 RFA responses “to stand as KEP's answers.” (Dkt. 50 at 2.) KEP argues that it “properly responded to the RFA[s],” and any deficiencies should be challenged “in a motion to compel.” (Dkt. 63 at 7.) While this request is moot if the District Court does not permit KEP to withdraw its admissions, the District Court might not adopt that recommendation, so this R&R addresses whether KEP's April 16 responses are “procedurally and substantively deficient,” as Plaintiff argues. (Dkt. 52 at 23.)

First, it is “well established that failure to object to discovery requests within the time required constitutes a waiver of any objection.” Richmark Corp. v. Timber Falling Consultants, 959 F.2d 1468, 1473 (9th Cir. 1992); see also Fid. Nat'l Title Ins. Co. v. Tahoe Reg'l Planning Agency, No. 3:11-cv-00444, 2014 WL 12918366, at *3, 2014 U.S. Dist. LEXIS 38384 at *13 (D. Nev. Mar. 21, 2014) (applying this rule to RFA responses and collecting similar cases). Thus, even if KEP were permitted to withdraw its admissions, it would need to respond to the RFAs without objections. KEP's April 16 responses assert objections to every RFA. (Dkt 50-4.)

Additionally, KEP's April 16 responses contain numerous objections that are demonstrably inapplicable. For example, RFA 1 asks KEP to admit the authenticity of the FDD. (Dkt. 50-4 at 5.) “A request to admit the genuineness of a document must be accompanied by a copy of the document unless it is, or has been, otherwise furnished or made available for inspection and copying.” Fed. R. Civ. P. 36(a)(2). Here, the RFAs defined the FDD by referring to the copy of the FDD attached to the Complaint, so it was “otherwise furnished or made available.” (Dkt. 50-5 at 4 #8.) Yet KEP objected, “To the extent this request asks KEP to ‘verify’ a document, no document was attached hereto, and thus this request must be denied.” (Dkt. 50-4 at 5.) As more examples of inapplicable objections, KEP objected to RFA 6 on several grounds, including that it “assumes facts not in evidence.” (Id. at 6.) During discovery (as opposed to during trial), no facts have been admitted into evidence. KEP objected to RFA 16 based on the ambiguity of terms not used in RFA 16. (Id. at 8.) KEP objected to RFAs about its own costs and revenues as calling for speculation. (Id. at 6, 8 [RFAs 6, 7, and 17].) KEP objected to RFA 8 as calling for hearsay. (Id. at 6.)

*12 Third, if a party denies an RFA, then the denial “must fairly respond to the substance of the matter.” Fed. R. Civ. P. 36(a)(4). A party cannot re-write the RFA and deny a different matter. Some of KEP's April 16 RFA responses do just that. For example, RFA 5 asked KEP to admit “that You charged Full Tilt more for the Inventory Full Tilt was required to purchase from You than the cost You paid for said Inventory.” (Dkt. 50-4 at 6.) After objections, KEP responded, “All KEP stores had the same Cost of Goods.” (Id.) KEP provided the same non-responsive response to RFA 7. (Id.) When asked to admit facts about the FDD's content, KEP responded, “The FDD speaks for itself” and denied the RFA “as phrased.” (Id. at 6, RFA 8.) When RFA 21 asked if the Biks had conducted “the initial training program,” KEP responded by describing other training. (Id. at 9.)

Finally, a party responding to RFAs must either admit the RFA, deny the RFA, or “state in detail why the answering party cannot truthfully admit or deny it.” Fed. R. Civ. P. 36(a)(4). “[W]hen good faith requires that a party qualify an answer or deny only a part of a matter, the answer must specify the part admitted and qualify or deny the rest.” Id. In other words, a party cannot artfully both admit and deny a matter. RFA 31 asked KEP to “Admit that the financial performance representation contained in Item 19 of the FDD is based upon the performance of stores You own.” (Dkt. 50-4 at 11.) KEP responded “Denied” but then admitted the substance of the RFA in the next sentence by saying, “Article 19 is based on the only stores the responding party had; company owned stores.” (Id.)

This is not a comprehensive list of the defects in KEP's April 16 responses to the RFAs. This list illustrates, however, why it would be improper to allow KEP to stand on its April 16 responses, which Plaintiff cannot challenge at this late date because the deadline to file discovery motions has already passed. Thus, if the District Court grants the Motion to Withdraw, then the District Court should order KEP to serve amended responses to the RFAs without objections.

In conclusion, the Motion to Withdraw fails because Defendants did not satisfy the first prong of Rule 36(b)'s test; they argued the opposite. The Motion to Withdraw also fails because Plaintiff demonstrated it will be prejudiced by withdrawal, and Defendants failed to show good cause to re-open discovery and push back other pre-trial deadlines to ameliorate that prejudice.

IT IS THEREFORE RECOMMENDED that the District Court issue an Order: (1) approving and accepting this R&R and (2) denying Defendants' Motion to Withdraw (Dkt. 50). If the District Court grants Defendants' Motion to Withdraw, then it is RECOMMENDED that the District Court order KEP to serve amended responses to the RFAs, without objections, within seven (7) days of the District Court's order.