Holden vs. Royale Management Group, LLC

Petitioner has not served Lindsey despite having more than six months to do so. Petitioner contends Lindsey has been avoiding service, but Petitioner was unable to make an adequate showing to justify service by alternative means. Given this case is now at its hearing on the merits of the petition and Lindsey still has not been properly served so as to confer jurisdiction over him, the court hereby DISMISSES Lindsey from these proceedings. Any order on the petition will be directed solely to RMG and Ponce.

Petitioner brings this petition to enforce his rights as a member of RMG under Corporations Code section 17704.10. As relevant to this case, that statute provides an LLC member with two rights to certain books and records of the LLC.

Section 17704.10, subdivision (a) provides, upon request and for purposes reasonably related to the interest of the requesting party as a member, a manager or member in possession shall promptly deliver in writing and at the expense of the LLC, copies of the information identified in section 17701.13(d)(1), (2), and (4) and any written operating agreement. The records identified in those paragraphs are (a) a current list of the full name and last known business or residence address of each member and of each transferee set forth in alphabetical order, together with the contribution and the share in profits and losses of each member and transferee, (b) if the limited liability company is a manager-managed limited liability company, a current list of the full name and business or residence address of each manager, and (c) copies of the limited liability company's federal, state, and local income tax or information returns and reports, if any, for the six most recent fiscal years.

Section 17704.10, subdivision (b) provides a member, upon reasonable request and for purposes reasonably related to the person’s interest as a member, has the right to inspect and copy during normal business hours any of the records identified in section 17701.13. In addition to the records identified in the previous paragraph, those records include (a) a copy of the articles of organization and all amendments thereto, together with any powers of attorney pursuant to which the articles of organization or any amendments thereto were executed; (b) a copy of the limited liability company's operating agreement, if in writing, and any amendments thereto, together with any powers of attorney pursuant to which any written operating agreement or any amendments thereto were executed; (c) copies of the financial statement of the limited liability company, if any, for the six most recent fiscal years; and (d) the books and records of the limited liability company as they relate to the internal affairs of the limited liability company for at least the current and past four fiscal years.

RMG and Ponce (collectively, Respondents) oppose the petition on a number of grounds. Frist, they argue Petitioner resigned and therefore holds no more than a bare economic interest in RMG. They point to an email Petitioner sent in December 2023 in which he states he formally resigns as a “Managing Member” effective December 31, 2023. Respondents contend this amounted to a dissociation event within the meaning of section 17706.02, subdivision (a), and thereby terminated his status as a member with inspection rights.

Not so for a number of reasons. The resignation states Petitioner resigns as a managing member, not that he resigned as a member. More importantly, RMG has continued to issue K-1’s and other tax documents that identify Petitioner as holding a onethird membership interest in RMG. Respondents also have acknowledged in these proceedings and other litigation involving the parties that Petitioner is still technically a member of RMG. Section 17704.10, subdivision (h), also states any waiver of the rights that code section provides is unenforceable. Accordingly, Petitioner has presented sufficient evidence showing he is a member of RMG with rights under section 17704.10 and Respondents have not overcome that showing or otherwise established the contrary.

Next, Respondents emphasize the requirement that any request for records under section 17704.10 must be reasonably related to Petitioner’s interests as a member of RMG. Respondents contend Petitioner’s requests do not meet this standard. Instead, Respondents assert Petitioner’s request is an overbroad discovery request unrelated to any interest as a member and seeks documents for use in various lawsuits pending between the parties. To support this, Respondent’s point to communications in the San Diego lawsuit relating to various discovery requests and disputes relating to some of the same documents. Specifically, they point to statements by Petitioner’s counsel in that lawsuit stating Petitioner would stipulate to a protective order as long as there is a carve out allowing the use of the documents in litigation among the parties.

Petitioner states he seeks the requested documents to enable him to properly complete his taxes for the last couple years because Respondents have provided him with incomplete K-1s and refused him access to other financial records he needs to confirm the limited information they have provided and otherwise properly file his taxes. Petitioner, however, does not directly deny he also may seek the documents for use in other litigation. Petitioner’s proffered reason relating to taxes is a valid and legitimate reason for seeking the requested documents.

The court also notes Petitioner is only seeking financial and membership records. He is not seeking any sort of documents that potentially would amount to proprietary information or trade secrets. For example, he does not seek customer lists, business plans, marketing materials, or anything else of that nature. Moreover, the litigation among the parties relates, at least in part, Petitioner’s interest as a member of RMG.

In support of their argument, Respondents cite Parker v. Tract No. 7260 Association, Inc. (2017) 10 Cal.App.5 th 24. That case involved an inspection request by a member of a nonprofit mutual benefit corporation under an entirely separate statutory scheme, but the governing statute in that case nonetheless has a similar limitation—i.e., the member's right of inspection was limited to purposes reasonably related to the member's interests as a member. (Parker, at p. 31.) The Parker court explained, “‘This limitation is always subject to judicial review to determine whether a lawful purpose exists.’ [Citation.]

A corporation has the burden of proving that the member ‘will allow use of the information for purposes unrelated to the person's interest as a member.’ [Citation.] On appeal, we review the trial court’s order for substantial evidence. [Citation.] Mere speculation that the member will use the information for an improper purpose is not sufficient to nullify inspection rights; any suspicion must be based on adequate facts in order to justify denial of inspection. [Citation.]” (Parker, supra, 10 Cal.App.5 th at pp. 31-32.)

Although Parker provides valuable insight into the governing standard it is readily distinguishable on its facts. There, the trial court agreed with the corporation’s conclusion the member sought the record for an improper purpose because the member wanted the records to provide to a third-party nonmember for the third party to use in ongoing litigation with the corporation. The member was not a party to that litigation. (Parker, supra, 10 Cal.App.5 th at pp. 28-33.) Here, Petitioner is seeking the records for his own use, not that of a nonparty.

The court finds Petitioner has a proper purpose for the request, and the potential that Petitioner may also use the records in ongoing litigation among the parties is not sufficient to defeat his inspection rights because that other litigation relates, at least in part, to Petitioner’s interest as a member. Respondents have failed to meet their burden to establish an improper or impermissible purpose.

Respondents next contend Petitioner’s request goes beyond what he is entitled to under section 17704.10. On this point, the court agrees with Respondents to a limited degree. With the exception of the category of documents identified in section 17701.13, subdivision (d)(7), the documents to which a member is entitled to access under section 17704.10 are fairly specific. That one broad category entitles a member to inspect the books and records of the limited liability company as they relate to the internal affairs of the limited liability company for at least the current and past four fiscal years.

Neither side offers any argument to interpret what this category covers. Moreover, as stated above, an LLC is only required to provide a member with copies of the records identified in section 17701.13(d)(1), (2), and (4). As for the records identified in section 17701.13(d)(3), (5), (6), and (7), the member is only entitled to inspect and copy the records during normal business hours as maintained in the LLCs records.

By the petition, Petitioner seeks the following: (1) tax returns, (2) K-1’s, (3) basis schedules, (4) CPA work papers, (5) QuickBooks files, (6) general ledger, (7) bank statements, (8) payroll records, (9) capital accounts, (10) contribution/distribution records, (11) governance materials, (12) Secretary of State filings, and (13) communications concerning allocations and membership. Most of these categories fall within the categories identified in section 17701.13. The ones that do not are the CPA work papers and the communications concerning allocations and membership. The court finds these two categories are not covered by section 17701.13 and the final one also is much too vague.

The court also notes section 17701.13 puts specific time limits on some of the categories. Accordingly, consistent with those time limits, the court finds Petitioner is entitled to either copies or to inspect and copy on his own the documents identified in Petitioner’s category nos. (1)-(3) and (5)-(12) depending on whether they are covered by section 17704.10(a) or 17704.10(b). In terms of any copies that are produced or records that are made available for inspection, they are to be provided in the manner they are kept in the ordinary course of business. Respondents are not required to do any more than that. The petition therefore is GRANTED as to the categories and in the manner described in this paragraph, but DENIED as to any documents or requests that go beyond what is described in this paragraph.

Petitioner also seeks an order requiring Respondents to preserve various records. Petitioner, however, cites no authority to support that request. This is a petition for copies of or access to records of an LLC under section 17704.10. That code section does not authorize any sort of preservation or spoilation order by this court. The parties all have their preservation obligations as parties to other ongoing litigation and to the extent there is any issue regarding the preservation of documents that is beyond the scope of this case and should be raised in the other cases. Accordingly, Petitioner’s request for a preservation order is DENIED.

Respondents request that, to the extent the court grants the petition as to any documents, the court also issue an appropriate protective order limiting the use of the documents. Neither section 17704.10 nor any of the other authorities Respondents cite, however, support or authorize issuance of such an order. In Perry v. Stuart (2025) 111 Cal.App.5 th 472, the court authorized redaction of certain records that were produced pursuant to section 17704.10. The Perry court, however, authorized the redactions under the California Trade Secrets Act, finding it was a more recent and specific statute and its provisions authorized or required the redactions. The Perry court did not hold section 17704.10 authorized redactions or protective orders to protect any specific type of information. Here, Respondents have not shown any of the requested documents include trade secrets.

Respondents also cite Havlicek v. Coast-To-Coast Analytical Services, Inc. (1995) 39 Cal.App.4 th 1844, 1855-1856. Havlicek, however, involved a different statutory scheme with different provisions. Specifically, Havlicek held a trial court may impose limitations on an order compelling a corporation to comply with a director’s absolute inspection rights under Corporations Code sections 1602 and 1603. Significantly, in authorizing a director to bring a court case to enforce their inspection rights, section 1603 specifically states in granting the director’s request the superior court may impose “just and proper conditions” on its order. The Havlicek court relied on this language as the basis for the authority to impose conditions, such as a protective order. Here, section 17704.10 does not include any language supporting the imposition of a protective order.

Section 17704.10, subdivision (f), is the statutory provision that allows a member to bring a court case to enforce their inspection rights. That subdivision provides, “In addition to the remedies provided in Sections 17713.06 and 17713.07 and any other remedies, a court of competent jurisdiction may enforce the duty of making and mailing or delivering the information and financial statements required by this section and, for good cause shown, extend the time therefor.” Nothing in this language authorizes the court to impose conditions. Moreover, Respondents have not convinced the court of the need for a protective order. Accordingly, Respondents’ request for a protective order is DENIED, but Petitioner is cautioned that the misuse of the documents and information he obtains may subject him to liability for any damages or injuries he might cause.

Finally, Petitioner’s request for fees and costs is DENIED. Section 17704.10, subdivision (g), authorizes a court to award reasonable expenses and attorney fees if the court finds the failure of the limited liability company to comply with the requirements of Section 17704.10 is without justification. Here, Petitioner is self-represented and therefore has not incurred any attorney fees. Petitioner also has not presented any evidence or specific request for any expenses or costs. Moreover, the court finds there was a legitimate dispute about the access to the records given there was no specific authority on point regarding this specific statute.

Based on the foregoing, Respondent is ordered to produce copies of the records governed by section 17704.10, subdivision (a), and provide Petitioner access during normal business hours to the records governed by section 17704.10, subdivision (b), within 15 days of this ruling. Petitioner is ordered to give notice of this ruling.

8. City of Orange v. Leon 2008-00114884 CONTINUED TO JUNE 25, 2026, as stated in the June 15, 2026 minute order