Judge: Anne Richardson, Case: 20STCV25326, Date: 2023-12-08 Tentative Ruling

DEPARTMENT 40 - JUDGE ANNE RICHARDSON - LAW AND MOTION RULINGS
The Court issues tentative rulings on certain motions.The tentative ruling will not become the final ruling until the hearing [see CRC 3.1308(a)(2)]. If the parties wish to submit on the tentative ruling and avoid a court appearance, all counsel must agree and choose which counsel will give notice. That counsel must 1) email Dept 40 by 8:30 a.m. on the day of the hearing (smcdept40@lacourt.org) with a copy to the other party(ies) and state that all parties will submit on the tentative ruling, and 2) serve notice of the ruling on all parties. If any party declines to submit on the tentative ruling, then no email is necessary and all parties should appear at the hearing in person or by Court Call. 

Case Number: 20STCV25326    Hearing Date: December 8, 2023    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

Background

Pleadings

Plaintiff Santa Playa Vista Panini Investments, Inc. (Santa Playa) sues Defendants Invesco Advisers, Inc. (Invesco), Runway Owner, LLC (Runway), Playa Owner, LP (Playa), DJM Capital Partners, Inc. (DJM), Universal Protection Service, LP (Universal), and Does 1-100 pursuant to a June 17, 2021 Third Amended Complaint (TAC), alleging claims of: (1) Fraud; (2) Fraudulent Concealment; (3) Negligent Misrepresentation; (4) Intentional Interference with Prospective Economic Advantage (challenged successfully on demurrer, without leave to amend, by Universal); (5) Negligent Interference with Prospective Economic Advantage; (6) Breach of Contract; (7) Breach of Good Faith and Fair Dealing; (8) Trespass; (9) Nuisance; (10) Negligence; (11) Declaratory Relief; (12) Discrimination and Retaliation (Civil Code § 51); and (13) Breach of the Covenant of Quiet Enjoyment.

(Playa was dismissed without prejudice by the Court on September 13, 2021, based on Santa Playa’s failure to serve the operative summons and complaint on Playa. Universal was dismissed with prejudice by Santa Playa on August 9, 2022, after the Court granted an April 9, 2022/May 11, 2022 good faith settlement application made by these parties.)

The TAC’s claims arise from allegations that, among other things, Santa Playa—a company operating Mediterranean-style restaurants—leased from Invesco, Runway, and DJM (Landlord Defendants) commercial restaurant space located at 12751 Millennium Dr #110, Los Angeles, CA 90094 (Premises). Landlord Defendants and Universal were alleged as alter egos of one another. Despite Landlord Defendants’ representations during contractual negotiations, however, after Santa Playa completed construction of its business on the Premises, Santa Playa failed to receive the benefit of promised foot traffic and signage for the business, with the business further negatively affected by Landlord Defendants’ six-month shutdown of the road on which the Premises were located. These difficulties, compounded by COVID-19 restrictions on dining, caused Santa Playa to lose customers and led Santa Playa to vacate the Premises on June 26, 2020. After this vacatur, Landlord Defendants removed “closed” banners hung by Playa outside the Premises and harassed Santa Playa by placing Universal security guards on or near the Premises and by refusing to permit Santa Playa access to the Premises to remove their belongings, such as by locking out the Premises and refusing roof access.

Defendant Runway, in a Cross-Complaint filed October 22, 2022, sues Santa Playa, Cross-Defendant Mike Rafipoor (Rafipoor), and Roes 1 through 10, asserting causes of action of: (1) Breach of Contract; (2) Breach of the Implied Covenant of Good Faith and Fair Dealing; (3) Negligence; (4) Negligent Interference with Prospective Economic Advantage; (5) Intentional Interference with Prospective Economic Advantage; (6) Public Nuisance; (7) Private Nuisance; (8) Declaratory Relief; and (9) Rent on Abandonment and Termination of Lease [Civ. Code § 1951.2].

            The Cross-Complaint alleges, among other things, that Santa Playa broke the lease between the parties by hanging contractually unauthorized banners with inflammatory language outside the Premises, demolishing the Premises in their entirety and failing to return them to broom-clean condition (waste), and trespassing on the Premises after a change of locks on the Premises, causing damage thereto in the process (e.g., breaking a water sprinkler which triggered a fire alarm for the building).

Motion Before the Court

On October 13, 2023, Santa Playa and Rafipoor (collectively, “Cross-Defendants”) moved for an order quashing or limiting the deposition subpoenas for production of business records that Cross-Complainant Runway served on nonparties Baker Tilly, US (Baker) and Nano Banc (Nano).

On November 27, 2023, Runway filed its opposition to the motion.

As of December 7, 2023, no reply has been filed.

Motion to Quash: GRANTED IN PART.

Legal Standard

“To pursue the deposition of a nonparty, a party must generally serve a deposition subpoena.” (Board of Registered Nursing v. Superior Court of Orange County (2021) 59 Cal.App.5th 1011, 1030, citing Code Civ. Proc., § 2020.010, subd. (a).)

“A business records subpoena directs the nonparty’s custodian of records (or other qualified person) to deliver the requested documents (in person, by messenger, or by mail) to the ‘deposition officer’ specified in the subpoena. ([Code Civ. Proc.] § 2020.430, subd. (a).)” (Unzipped Apparel, LLC v. Bader (2007) 156 Cal.App.4th 123, 131.) The subpoena must “designate the business records to be produced either by specifically describing each individual item or by reasonably particularizing each category of item, and shall specify the form in which any electronically stored information is to be produced, if a particular form is desired.” (Code Civ. Proc., § 2020.410, subd. (a).)

“[T]he court, upon motion reasonably made by any person [including a party] … may make an order quashing [a] subpoena entirely, modifying it, or directing compliance with it upon those terms or conditions as the court shall declare, including protective orders.” (Code Civ. Proc., § 1987.1, subd. (a).) The court may also “make any other order as may be appropriate to protect the person from unreasonable or oppressive demands, including unreasonable violations of the right of privacy of the person.” (Code Civ. Proc., § 1987.1, subd. (a).)

Discussion

As an initial matter, the Court discusses the procedural issues raised in Cross-Complainant Runway’s opposition.

First, Runway argues that the motion should be denied because the motion was brought against Invesco instead of Runway, the party that issued the subpoenas. (Opposition, pp. 9:24-10:2.)

Indeed, the Court notes that Cross-Defendants state it was Invesco that issued the subpoena at issue even though according to the copies of the subpoenas the Cross-Defendants have submitted, the “requesting party” is Runway. (See Motion, Declaration of Jores Kharatian), ¶ 2; Exhibit A – a copy of the subpoenas.)

Nevertheless, the Court will consider the motion on the merits, as Runway has responded and failed to show prejudice.

Second, Runway argues that the motion should be denied because the movants failed to submit a separate statement for each subpoena and instead submitted one separate statement. Runway also contends that the separate statement is confusing.

“Any motion involving the content of a discovery request or the responses to such a request must be accompanied by a separate statement. The motions that require a separate statement include a motion: … [¶¶] (5) To compel or to quash the production of documents or tangible things at a deposition ….” (Cal. Rules of Court, rule 3.1345(a).)

 “A separate statement is a separate document filed and served with the discovery motion that provides all the information necessary to understand each discovery request and all the responses to it that are at issue. The separate statement must be full and complete so that no person is required to review any other document in order to determine the full request and the full response.” (Cal. Rules of Court, rule 3.1345(c).)

Here, even if the Court were to agree that Cross-Defendants should have filed separate statements for each subpoena, the current separate statement is sufficient because it identifies each request for production at issue in the subpoenas and explains the Cross-Defendants’ reasons for objecting to each of those requests.

Lastly, Runway argues the Cross-Defendants did not meet and confer in good faith.

However, the governing statute (Code of Civil Procedure section 1987.1) did not require the moving parties to meet and confer before filing the instant motion. (See Notice of Motion, p. ii:21-23 [stating that Cross-Defendants are bringing the motion under Section 1987.1].) The Code of Civil Procedure sections that Runway cites, 2017.020(a) and 2019.030(b), concern motions for protective orders.

Accordingly, even if the parties’ meet and confer process was insufficient, the Court will still consider the motion on its merits.

            Cross-Defendants move for an order quashing the subpoenas, arguing that the subpoenas (1) seek irrelevant information, (2) are overly broad as they go beyond the landlord-tenant, breach of commercial lease dispute at issue in the case, (3) seek third party information (e.g., information regarding Santa Playa’s former employees), and (4) seek private and privileged financial information, including bank account statements and tax returns.

Cross-Defendants further argue that to the extent Runway is seeking pretrial discovery of the Cross-Defendants’ financial condition, Runway should have complied with Civil Code section 3295. That statute “allows the trial court, ‘at any time,’ to enter an order permitting the discovery of a defendant’s profits and/or financial condition, if the plaintiff has established that there is a substantial probability that he or she can prevail on a claim upon which an award of punitive damages can be based.” (Mike Davidov Co. v. Issod (2000) 78 Cal.App.4th 597, 609 [italics removed].) Given those reasons, Runway asks the Court to quash the subpoenas or, in the alternative, issue a protective order “[l]imiting the subpoenas to the production of ‘financial documents of [Santa Playa] relating to the property located at 12751 Millennium Dr #110, Los Angeles, CA 90094, prepared by the non-party entities within the five years preceding the Subpoena.” (Motion, p. 9:23-10:4.)

            In opposition, Runway argues the Court should deny the motion for the following reasons.

First, the subpoenas seek relevant information for the following reasons. The Cross-Defendants’ financial records, including history of transactions and/or transfers between them and any related entities, are directly relevant to (1) substantiate Runway’s allegations that Rafipoor is the alter ego of Santa Playa and (2) support the cross-complainant’s punitive damages claim; 3) documents and communications relating to Santa Playa’s payroll and application for a loan pursuant to the Paycheck Protection Program are directly relevant to Santa Playa’s claim for damages resulting from financial losses allegedly caused by Runway; and 4) documents and communications relating to the action, lease, or premises are critical to determine, among other things, whether the movants have engaged in communications with their financial advisors to evade their rent obligations to Runway and whether the Cross-Defendants are alter egos.

Second, the subpoenas do not seek any privileged documents or communications. Although federal and state tax returns are generally privileged from disclosure, two recognized exceptions are applicable here, and the Cross-Defendants have not addressed those exceptions. Therefore, the Cross-Defendants have failed to meet their burden of showing that the documents are privileged.

Third, Runway does not need to show a “compelling need” for information at issue in the subpoenas. In Hill v. National Collegiate Athletic Assn. (1994) 7 Cal.4th 1 (“Hill”), the California Court of Appeal held that a “compelling interest” is only required “[w]here the case involves an obvious invasion of an interest fundamental to personal autonomy, e.g., freedom from involuntary sterilization or the freedom to pursue consensual familial relationships.” (Id. p. 34, fn. 11.) In contrast, invasions of “informational privacy,” such as the financial records here, do not infringe a fundamental right and thus do not require such a showing. (Ibid.)

Fourth, Cross-Defendants have failed to meet their burden of establishing that their privacy interests outweigh the need for discovery. However, even if they have met that burden, the importance of the information outweighs any privacy interest.

The Court notes that although there are four (4) subpoenas at issue, two of those subpoenas were served on nonparty Baker (the “Baker Subpoenas”) and the other two on nonparty Nano (the “Nano Subpoenas”). The Court has reviewed the Baker Subpoenas and notes that they are identical (i.e., they contain the same 23 requests for production of documents), and the same is true for the Nano Subpoenas (they contain the same 15 requests for production). Therefore, it is the Court’s understanding that there are only two types of subpoenas at issue: one propounded on Baker and the other on Nano.

Runway’s argument that the subpoenas seek information relevant to its punitive damages claim is not a persuasive reason for the Court to deny the motion to quash. As the Cross-Defendants argue, “‘[p]retrial discovery of a defendant’s financial condition in connection with a claim for punitive damages is prohibited absent a court order permitting such discovery.’” (I-CA Enterprises, Inc. v. Palram Americas, Inc. (2015) 235 Cal.App.4th 257, 282.) “[A] plaintiff who believes that there is a substantial probability that the plaintiff will prevail on its punitive damages claim must seek such a court order in order to obtain the supporting information.” (Id. at p. 283.) Civil Code section 3295, subdivision (c), requires a party desiring discovery of a defendant’s financial information to bring a motion in order to obtain such information. (Ibid.) “Then, the trial court must determine whether the plaintiff has established a ‘substantial probability’ of prevailing on the claim for punitive damages” before granting such an order. (Ibid.) “‘In this context, a “substantial probability” of prevailing on a claim for punitive damages means that it is “very likely” that the plaintiff will prevail on such a claim or there is a “‘strong likelihood’” that the plaintiff will prevail on such a claim.’ [Citation.]” (Ibid.) Here, Runway has not brought a motion under Civil Code section 3925, subdivision (c), let alone shown a substantial probability of prevailing on its punitive damages claim.

The Court also agrees that the subpoenas are overly broad and seek information interfering with Rafipoor’s right to privacy in his financial records.

When evaluating potential privacy violations concerning discovery, the Court is guided by the framework articulated in Hill, which “sets forth in detail the analytical framework for assessing claims of invasion of privacy under the state Constitution.” (Pioneer Electronics (USA), Inc. v. Superior Court (2007) 40 Cal.4th 360, 370.)

According to Hill, “[t]he party asserting a privacy right must establish a legally protected privacy interest, an objectively reasonable expectation of privacy in the given circumstances, and a threatened intrusion that is serious. [Citation.]” (Williams v. Superior Court (2017) 3 Cal.5th 531, 552 (“Williams”), citing Hill, supra, 7 Cal.4th at pp. 35-40.)

“The party seeking information may raise in response whatever legitimate and important countervailing interests’ disclosure serves, while the party seeking protection may identify feasible alternatives that serve the same interests or protective measures that would diminish the loss of privacy.” (Williams, supra, 3 Cal.5th at p. 552.)

“A court must then balance these competing considerations.” (Williams, supra, 3 Cal.5th at p. 552.)

Here, Rafipoor has a right to privacy in his financial matters. (Shaffer v. Superior Court (1995) 33 Cal.App.4th 993, 999.)

Runway argues that the subpoenas seek information relevant to its allegations that the Cross-Defendants are alter egos of one other.

“Whether a party is liable under an alter-ego theory is normally a question of fact” that depends on the facts of each case. (Zoran Corp. v. Chen (2010) 185 Cal.App.4th 799, 811 (“Zoran”).)

“[I]t is generally stated that in order to prevail on an alter-ego theory, the plaintiff must show that ‘(1) there is such a unity of interest that the separate personalities of the corporations no longer exist; and (2) inequitable results will follow if the corporate separateness is respected.’ [Citation.]” (Zoran, supra, 185 Cal.App.4th at p. 811.)

The alter ego test encompasses a host of factors, including (1) the commingling of funds and other assets, (2) the treatment by an individual of the assets of the corporation as his own, (3) the holding out by an individual that he is personally liable for the debts of the corporation, (4) sole ownership of all of the stock in a corporation by one individual, (5) the failure to adequately capitalize a corporation, (6) the total absence of corporate assets, and undercapitalization, (7) the use of a corporation as a mere shell, instrumentality or conduit for a single venture or the business of an individual or another corporation, and (8) the diversion of assets from a corporation by or to a stockholder or other person or entity, to the detriment of creditors. (Zoran, supra, 185 Cal.App.4th at pp. 811-812.)

In all, after considering the parties’ papers and reviewing the pleadings, the Court finds it proper to enter an order quashing the subpoenas except as to the following document requests:

3, 6, 7, 8, 9, 10, 11, 13, 16, 20, 21, 22, and 23.

The Court finds these requests are appropriately limited in scope, reasonably calculated to lead to admissible evidence as they relate to alter ego and compensatory damages, and tailored to protect Rafipoor’s right to privacy in his financial records. The Court does not order any documents relating solely to punitive damages. The documents may be produced pursuant to a protective order, and if none has yet been signed, the Court will sign an order based on the model protective order posted on the court’s website at lacourt.org, civil division section, Tools for Litigators.

Conclusion

The Motion to Quash is GRANTED IN PART as follows.

Nonparties Baker Tilly US, LLP and Nano Banc are ordered to produce documents only to the following document requests:

3, 6, 7, 8, 9, 10, 11, 13, 16, 20, 21, 22, and 23.

At Cross-Defendants’ election, the documents may be produced pursuant to a protective order, and if none has yet been signed, the Court will sign an order based on the model protective order posted on the court’s website at lacourt.org, civil division section, Tools for Litigators page.

All other requests for production in Defendant and Cross-Complainant Runway Owner, LLC’s subpoenas are quashed.