Billy Zachary Earley v. LAX Surgery Center, LLC

court-supervised auction. The Receiver discovered gaps in PGP's diligence, including that PGP had not obtained definitive proof of funds from two leading bidders at the stalking-horse selection point. PGP cannot establish that it is entitled to compensation because it was terminated due to confidentiality breaches that were material obligations under both agreements and indispensable to the competitive process. Specifically, PGP breached the Non-Disclosure Agreement executed around April 13, 2025 and the Engagement Agreement, which provided that PGP would not disclose any information regarding transactions related to the engagement which were not in the public domain. (Ormond Decl., Exs. 2-3.)

Thus, there are substantial disputes regarding breach, causation, benefit, damages, and offset. The Receiver argues that the Court should deny the Motion, or conduct an evidentiary hearing concerning PGP's disclosures, their impact on bidders and the Receivership Estate, and offsets the Receivership is entitled to. Furthermore, 1625 S. 7th St., LLC ("Landlord") filed a limited opposition to the Motion solely regarding PGP's request for attorneys' fees and costs. Landlord takes no position on PGP's claim for transaction-related fees under the Engagement Letter.

The Receiver joins the limited opposition. PGP has not filed a reply addressing the Receiver's opposition or the limited opposition to its request for attorney fees and costs. "The receiver is the agent of the court and not of any party, and as such: (1) [i]s neutral; (2) [a]cts for the benefit of all who may have an interest in the receivership property; and (3) [h]olds assets for the court and not for the plaintiff or the defendant." (Cal. Rules of Court, rule 3.1179(a).) "The receiver has, under the control of the Court, power to bring and defend actions in his own name, as receiver; to take and keep possession of the property, to receive rents, collect debts, to compound for and compromise the same, to make transfers, and generally to do such acts respecting the property as the Court may authorize." (Code Civ.

Proc., Sec.568.) "It is well settled that a trial court has broad discretion in its directions and approvals given to a receiver in respect to management of the property." (Hillman v. Stults (1968) 263 Cal.App.2d 848, 876.) "'The "main function" of the court is to manage or dispose of the property 'in the best manner possible and for the best interest of the parties concerned. To effectually perform that duty necessarily requires some flexibility and continuity of jurisdiction in giving instructions to the receiver as to the manner in which the property should be sold to meet exigencies as they may arise.' [Citations.]" (People v.

Stark (2005) 131 Cal.App.4th 184, 205.) "[C]ompensation to be allowed receivers and their attorneys is primarily within the sound discretion of the trial court." (Venza v. Venza (1951) 101 Cal.App.2d 678, 681.) "Generally, the costs of a receivership are paid from the property in the receivership estate...Courts are vested with broad discretion in determining who is to pay the expenses of a receivership, and the court's determination must be upheld in the absence of a clear showing of an abuse of discretion." (City of Chula Vista v.

Gutierrez (2012) 207 Cal.App.4th 681, 685.) Having considered the moving papers and oppositions, the Court finds that substantial disputes exist regarding whether PGP breached its confidentiality obligations under the Engagement Letter and the Non-Disclosure Agreement, whether such breaches were material, whether and to what extent the breaches caused harm to the Receivership Estate, whether the Receiver's termination of PGP was justified, and what benefit, if any, the Receivership Estate retained from PGP's pre termination efforts.

The determination of whether PGP is entitled to compensation under the Engagement Letter requires resolution of contested factual issues. The record as presented--particularly in the absence of a reply from PGP--does not permit resolution of these disputes on the papers. Thus, the Court finds that Plaintiff has not demonstrated that it is entitled to the transaction-related fees and denies the Motion. Given that the Motion is denied, the Court also denies PGP's request for attorney fees and costs.

PGP Capital Advisors, LLC's Motion for Allowance and Payment of Administrative Claim is DENIED without prejudice. Case Number: 25SMCV04186 Hearing Date: September 1, 2026 Dept: N TENTATIVE RULING Defendant-in-Interpleader Billy Zachary Earley's Motion for Sanctions for Misuse of the Discovery Process is DENIED. Earley to give notice. REASONING

Request for Judicial Notice Earley requests judicial notice of the following exhibits: 1) Exhibit A: 12-20-2022 MRI document produced by LAX Surgery Center, LLC in response to subpoena. 2) Exhibit B: Billing for December 22, 2022, produced by LAX Surgery Center, LLC. 3) Exhibit C: 12-22-2022 Procedure Site Verification produced by LAX Surgery Center, LLC. 4) Exhibit D: 12-22-2022 Operative Report produced by LAX Surgery Center, LLC. 5) Exhibit E: 05-03-2026 Grok Al Forensic Audit Report analyzing the records and declaration. 6) Exhibit F: 05-04-2026 Expert Handwriting Witness Report of Beth Chrisman, CFDE, CQDE, analyzing the 28 forged signatures on the produced documents. 7) Exhibit G: Police Report of the 28 Forged Signatures and Supportive Evidence Submitted to the Police Online Portal. Earley's request is DENIED, as there is no basis to take judicial notice of such documents.

Analysis

Earley moves for a Court order imposing monetary and evidentiary sanctions against Defendant LAX Surgery Center, LLC ("Defendant") and its counsel of record for misuse of the discovery process pursuant to Code of Civil Procedure sections 2023.010 and 2023.030. Specifically, Earley requests monetary sanctions in the amount of $2,500 and issue/evidentiary sanctions ordering "the forged records are inadmissible" and "adverse inference that authentic records would be unfavorable to LAX." (5-14-26 Memorandum, p. 4.)

The Motion is based on Defendant's alleged production of medical records containing 28 forged signatures and failure to produce authentic records. Where a party engages in conduct that constitutes misuse of the discovery process, courts have discretion to impose terminating, issue, evidence, or monetary sanctions. (Code Civ. Proc., Sec.Sec.2023.010, subds. (d), (g), 2023.030; R.S. Creative, Inc. v. Creative Cotton, Ltd. (1999) 75 Cal.App.4th 486, 495.) Code of Civil Procedure section 2023.040 requires that "[a] request for a sanction shall, in the notice of motion, identify every person, party, and attorney against whom the sanction is sought, and specify the type of sanction sought."

Furthermore, the notice of motion shall be supported by a memorandum of points and authorities and accompanied by a declaration setting forth facts supporting the amount of any monetary sanction sought. (Code Civ. Proc., Sec. 2023.040.) Monetary sanctions may be imposed "ordering that one engaging in the misuse of the discovery process, or any attorney advising that conduct, or both pay the reasonable expenses, including attorney's fees, incurred by anyone as a result of that conduct...unless [the Court] finds that the one subject to the sanction acted with substantial justification or that other circumstances make the imposition of the sanction unjust." (Code Civ.

Proc., Sec.2023.030, subd. (a).) Issue sanctions may be imposed "ordering that designated facts shall be taken as established in the action in accordance with the claim of the party adversely affected by the misuse of the discovery process" or "prohibiting any party engaging in the misuse of the discovery process from supporting or opposing designated claims or defenses." (Id. at Sec.2023.030, subd. (b).) Evidentiary sanctions may be imposed "prohibiting any party engaging in the misuse of the discovery process from introducing designated matters in evidence." (Id. at Sec.2023.030, subd. (c).)

On May 14, 2026, the Court denied Earley's Motion to Compel Amended Deposition Subpoena for Production of Business Records and Request for Monetary Sanctions. The motion was based on Earley's claim that Defendants failed to produce the complete set of Earley's medical records and related documents responsive to the deposition subpoena served on it on February 13, 2026. Based on Defendant's assertion, the Court found that Defendant had substantially complied with the subpoena and produced additional records, such that there was no basis to conclude the existence of any other documents that could be produced.

The Court also denied Earley's request for sanctions. On the same day the Court issued its order on Earley's motion for compel, Earley filed the instant Motion for Sanctions ("Motion"). In addition to the moving papers, Earley filed supplemental declarations and memoranda on July 2, 13, 20, August 3, 11, and 21. The Court cannot consider any papers that were filed after Defendant's Reply or that were not timely served and filed in compliance with Code of Civil Procedure section 1005,

subdivision (b). The central issue raised in the papers filed by Earley is that a motion for sanctions is appropriate because the records produced by Defendant contain forged signatures. In support of his claim that the documents contain forged signatures, Earley has filed a report from a certified forensic document examiner (Exhibit F) and proof that he submitted evidence to the Los Angeles Police Department on its Evidence Submission Portal. Earley argues that producing forged medical records constitutes misuse of discovery pursuant to Code of Civil Procedure section 2023.010 because it "is evasive and misleading on its face." (5-14-26 Memorandum, p. 3.)

There is no justification for Defendant's conduct "because forgery and billing fraud are criminal violations of the law." (Ibid.) In subsequent, supplemental papers, Earley claims that Defendant has been using the unregistered and non-existent name "LAX Surgery Center" without the "LLC" designation, in its records, which constitutes further evidence of evasive responses and bad faith conduct. In opposition, Defendant argues that the Court already determined that Defendant complied with the subpoena for production of records in its ruling on May 14, 2026, and denies that it has produced any forged documents.

Thus, Earley, through the instant Motion, is attempting to improperly litigate substantive issues that are in dispute. The Court agrees. Earley has filed multiple declarations and memoranda raising various challenges to the validity of the records produced, the alleged forged signatures, and the legal standing of LAX Surgery Center. The Court previously issued orders regarding the status of the entities in this action and found that Defendant had complied with the subpoena for production of records.

A motion for sanctions is not the proper vehicle for obtaining rulings on the issues Earley presents. Moreover, the cases cited by Earley address the destruction of evidence, not disputes over the content of evidence produced, and therefore, do not support a finding of discovery abuse. To impose sanctions, the Court would first need to determine that Defendant committed forgery, an issue that cannot be adjudicated through this Motion. Accordingly, Defendant-in-Interpleader Billy Zachary Earley's Motion for Sanctions for Misuse of the Discovery Process is DENIED. | Home -->)" -->