Judge: Alison Mackenzie, Case: 23STCV25796, Date: 2024-08-15 Tentative Ruling

Case Number: 23STCV25796    Hearing Date: August 15, 2024    Dept: 55

NATURE OF PROCEEDINGS:  Motion for Protective Order

The Motion for a Protective Order is DENIED.

On October 20, 2023, Plaintiff Bondit LLC filed a complaint against Defendants Logan Wood and Vertex Funding, LLC.

On April 30, 2024, Plaintiff filed the first amended complaint (“FAC”), against Defendants, alleging causes of action for: (1) fraud-intentional misrepresentation; (2) fraud-concealment; (3) negligent misrepresentation; (4) Violation of Business and Professions Code section 17200; and Violation of Penal Code section 496. Plaintiff alleges that Defendants acted as authorized representatives of Jil Pro Group, LLC (“Jil Pro”), HMG Studios, Inc., Heritage Music Group, Inc., Full Range Backline LLC, and Jovan Dawkins (“Judgment Debtors”) in negotiations with Plaintiff over loans that Plaintiff ultimately made to Judgment Debtors. Plaintiff alleges that it made these loans after receiving false information from Defendants about Judgment Debtors’ assets and ability to pay the loans. After Judgment Debtors failed to pay the loans, Plaintiff filed a lawsuit against them and ultimately obtained a judgment against them pursuant to settlement.

Defendants filed a motion for protective order.

Plaintiff opposes.

Evidentiary Objections

Plaintiff’s Objections to Defendants’ Evidence:

·       The following objections are SUSTAINED: 1, 3, 4

·       The following objections are OVERRULED: 2

Defendants move for a protective order as to Plaintiff BondIt LLC’s Requests for Production, Set One, precluding the production of: (1) all discovery pertaining to the financial information of Judgment Debtor Jovan Dawkins; (2) documents that are protected by the constitutional right to privacy or the right to privacy for Judgment Debtors; and, (3) documents that are not subject to the same privileges, including ones that are publicly available. In the alternative, Defendants seek the Court’s guidance.

When an inspection, copying, testing, or sampling of documents, tangible things, places, or electronically stored information has been demanded, the party to whom the demand has been directed, and any other party or affected person, may promptly move for a protective order. This motion shall be accompanied by a meet and confer declaration under Section 2016.040.” (C.C.P. §2031.060(a).)

“The court, for good cause shown, may make any order that justice requires to protect any party, deponent, or other natural person or organization from unwarranted annoyance, embarrassment, or oppression, or undue burden and expense. This protective order may include, but is not limited to, one or more of the following directions:

(1) That all or some of the items or categories of items in the demand need not be produced or made available at all.

(C.C.P. §2031.060(b).)

“In accordance with the liberal policies underlying the discovery procedures, California courts have been broad-minded in determining whether discovery is reasonably calculated to lead to admissible evidence. (Pacific Tel. & Tel. Co. v. Superior Court¿(1970) 2 Cal.3d 161,¿172;¿Pettie v. Superior Court¿(1960) 178 Cal.App.2d 680,¿687.) As a practical matter, it is difficult to define at the discovery stage what evidence will be relevant at trial. Therefore, the party seeking discovery is entitled to substantial leeway. (Pacific Tel. & Tel. Co.,¿supra, 2 Cal.3d at p. 172.) Furthermore, California’s liberal approach to permissible discovery generally has led the courts to resolve any doubt in favor of permitting discovery. (Id.¿at p. 173.) In doing so, the courts have taken the view if an error is made in ruling on a discovery motion, it is better that it be made in favor of granting discovery of the¿nondiscoverable¿rather than denying discovery of information vital to preparation or presentation of the party's case or to efficacious settlement of the dispute.”¿(Norton v. Superior Court¿(1994) 24 Cal.App.4th 1750, 1761.)¿ 

Courts have considerable discretion in granting and crafting protective orders. (Raymond Handling Concepts Corp. v. Superior Court¿(1995) 39 Cal.App.4th 584, 588.) The burden of proof is on the party seeking the protective order to show "good cause" for the Order he or she seeks.  (Fairmont Insurance Co. v. Superior Court¿(2000) 22 Cal.4th¿245, 255.)¿

Here, Defendants argue that the information sought by Plaintiff seeks financial information of Defendants and invades their rights to privacy; and that Defendants are under a confidentiality provision with Judgment Debtors.

At the onset, the court notes that Defendants’ motion for a Protective Order fails to establish good cause, as they seek a sweeping order denying Plaintiff of all discovery without providing an adequate factual basis or sufficient identification of the precise information they seek to protect. Defendants do not even cite to any specific requests in the request for production that they argue would violate their privacy rights. Defendants fail to cite any authority permitting the court to issue the broad protective order sought. In any event, the court addresses each of Defendants’ arguments.

A.    Privacy Right of Hawkins

The framework for evaluating invasion of privacy claims in the context of discovery is as follows: (1) a claimant must possess a legally protected privacy interest, (2) must have a reasonable expectation of privacy under the particular circumstances, and (3) the invasion of privacy must be serious in nature, scope, and actual or potential impact. (Hill v. National Collegiate Athletic Assn. (1994) 7 Cal.4th 1, 40.) 

“If there is reasonable expectation of privacy and the invasion of privacy is serious, then the court must balance the privacy interest at stake against other competing or countervailing interests, which include the interest of the requesting party, fairness to the litigants in conducting the litigation, and the consequences of granting or restricting access to the information.” (Puerto v. Superior Court (2008) 158 Cal.App4th 1242, 1251.)

There is no egregious invasion of privacy every time there is a request for private information and courts must “place the burden on the party asserting a privacy interest to establish its extent and seriousness of the prospective invasion.”  (Williams v. Superior Court (2017) 3 Cal.5th 531, 557.) 

Here, the Court agrees Hawkins has a privacy interest in his financial records. (See Valley Bank of Nevada v. Superior Court (1975) 15 Cal.3d 652, 656 [finding “the right of privacy extends to one's confidential financial affairs as well as to the details of one's personal life.”].)

Nevertheless, “[t]he tax return privilege ‘is not absolute’ and ‘will not be upheld when (1) the circumstances indicate an intentional waiver of the privilege; (2) the gravamen of the lawsuit is inconsistent with the privilege; or (3) a public policy greater than that of the confidentiality of tax returns is involved.’ ” (Strawn v. Morris, Polich & Purdy, LLP (2019) 30 Cal.App.5th 1087, 1098.)

Defendant contends that Plaintiff already has this information. “Specifically, the tax returns and other financial information requested are in the possession of BondIt.” (Motion, pg. 8, lns. 12-13.) Thus, the circumstances indicate that there was an intentional waiver of this privilege. Moreover, Hawkins does not possess an objectively reasonable expectation of privacy in these financial records based on the allegations in the FAC.

Even if Hawkins did have a reasonable expectation of privacy and there was a serious invasion of privacy, the balance of opposing interests would tilt in favor of Plaintiff. At stake is the "general public interest in ‘facilitating the ascertainment of truth in connection with legal proceedings' [citation] and in obtaining just results in litigation [citation].” (Puerto, supra, 158 Cal.App.4th at 1256.)

In sum, the court finds the balancing of interests tilts in favor of Plaintiff.

b. Privacy Right of the Businesses

“ ‘The extent of any privacy rights of a business entity is unsettled.’ ” (S.B.C.C., Inc. v. St. Paul Fire & Marine Ins. Co.¿(2010) 186 Cal.App.4th 383, 396, fn. 6.) Some opinions hold that the California Constitution protects only the privacy rights of human beings, other opinions hold that business entities have zones of privacy rights, and others assume without deciding that corporations enjoy a constitutional right of privacy. (See¿Nativi v. Deutsche Bank National Trust Co.¿(2014) 223 Cal.App.4th 261, 314, fn. 16 [comparing cases without deciding issue].) 

Thus, corporations do not have a right of privacy protected by the California Constitution.  Article I, section 1 of the California Constitution¿protects the privacy rights of “people” only.¿“ ‘[T]he constitutional¿provision simply does not apply to corporations.’ ” (Ameri-Medical Corp. v. Workers' Comp. Appeals Bd.¿(1996) 42 Cal.App.4th 1260, 1287 quoting¿Roberts v. Gulf Oil Corp.¿(1983) 147 Cal.App.3d 770, 791; see¿Zurich American Ins. Co. v. Superior Court¿(2007) 155 Cal.App.4th 1485, 1504 [corporation acknowledged that it had no right of privacy under the California Constitution].) While corporations do have a right to privacy, it is not a constitutional right. The corporate right to privacy is a lesser right than that held by human beings and is not considered a fundamental right. (Ameri-Medical Corp. v. Workers' Comp. Appeals Bd., supra,¿at pp. 1287-1288, 50 Cal.Rptr.2d 366.) 

Because the corporate privacy right is not constitutionally protected, the issue presented in determining whether the requests for production infringe that right is resolved by a balancing test. The discovery's relevance to the subject matter of the pending dispute and whether the discovery “ ‘appears reasonably calculated to lead to the discovery of admissible evidence " is balanced against the corporate right of privacy. (Hecht, Solberg, Robinson, Goldberg & Bagley LLP v. Superior Court¿(2006) 137 Cal.App.4th 579, 595. Doubts about relevance generally are resolved in favor of permitting discovery. (Ibid.) 

Again, the information sought is at the heart of this lawsuit and at stake is the general public interest in facilitating the ascertainment of truth in connection with legal proceedings and in obtaining just results in litigation. The balancing of interests weighs in favor of Plaintiff.

c. Confidentiality Provision with Judgment Debtors?

Defendants argue that there is a confidentiality provision in this case wherein it states:

“Confidentiality. Except as otherwise provided by the law, all information given to Vertex [Funding, LLC] by the Company, unless publicly available, will be held in confidence by Vertex and will not be disclosed to anyone other than Vertex’s agents and advisors without [the Company’s] prior approval or used for any other purpose other than in connection with the performance of Vertex’s services hereunder or the enforcement of this agreement.”

(Wood Decl., Ex. A.) Defendants argue this confidentiality provision applies to Full Range Backline LLC, the shareholders, subsidiaries, and related entities. (Wood Decl.) Defendants thus argue the Judgment Debtors would be protected by the provision, and that they can be sued for breach of a confidentiality agreement.

However, the agreement states “except as otherwise provided by law.” As such, the confidentiality agreement would not apply in this circumstance. Moreover, Defendants have not shown that the confidentiality provision applies to all Judgment Debtors. The agreement is between Full Range Backline LLC and Defendant Vertex. The court has sustained Plaintiff’s objections to Defendant Wood’s statement that it applies to the shareholders, subsidiaries, and related entities (Jil Pro Group, LLC, HMG Studios, Inc., Heritage Music Group, Inc. and Jovan Dawkins) as lacking foundation. The agreement does not state it applies to them.

In addition, Defendants argue that Plaintiff has the information already. As such, it is unclear why they claim they would be subject to liability if it was already provided to Plaintiff.

Defendants are strongly encouraged to enter into the model protective order proposed by Plaintiff to avoid any potential confidentiality concerns.

Lastly, the court notes that Defendants make a new argument in reply that Plaintiff has not had an opportunity to respond to. They argue that as Plaintiff has a case against Dawkins, it can directly go to Dawkins and the other judgment debtors for this discovery. As Plaintiff has not had an opportunity to respond to this argument, the court cannot consider it.

Conclusion

The Motion for a Protective Order is DENIED.