Judge: Ashfaq G. Chowdhury, Case: 21GDCV00949, Date: 2024-11-20 Tentative Ruling
Case Number: 21GDCV00949 Hearing Date: November 20, 2024 Dept: E
Hearing Date: 11/20/2024 – 8:30am
Case No. 21GDCV00949
Trial Date: UNSET
Case Name: PASADENA POST NO. 13, DEPARTMENT OF CALIFORNIA, THE AMERICAN LEGION,
a California non-profit corporation, v. THE LEGION CORPORATION OF PASADENA, a
California non-profit corporation; MICHAEL SEATON, an individual; LYNNE GARCIA,
an individual; JOHN McGUIRE, an individual; TONY MARTINEZ, an individual;
GEORGE CURTIS, an individual; EUGENE SACCO, an individual; THE SACCO GROUP,
LLC, a California limited liability corporation; THE SACCO GROUP, LLC, dba
SURETY SOLUTIONS, TOO TIRED TO COOK, LEGION CLUB OF PASADENA, and MICRO PROJECT
MANAGEMENT COMPANY; and DOES 1 to 100, Inclusive,
TENTATIVE
RULING – MOTION TO QUASH
RELIEF REQUESTED¿
“Defendants
THE LEGION CORPORATION OF PASADENA, MICHAEL SEATON, LYNNE GARCIA, JOHN McGUIRE,
TONY MARTINEZ, GEORGE CURTIS, and EUGENE SACCO (collectively “Defendants”),
pursuant to California Code of Civil Procedure § 1987.1, will move this
Court for an order quashing the deposition subpoena (“Ng Subpoena”) served on
Raymond Ng, CPA, by Plaintiff PASADENA POST NO. 13, DEPARTMENT OF CALIFORNIA,
THE AMERICAN LEGION’S (“Plaintiff”). The Ng Subpoena requests the production of
the following documents: (1) Any and all 990 forms (whether or not prepared by
witness); (2) Any and all general ledgers; (3) Any and all financial
statements; (4) Any and all financial statements; (5) Any and all expense
records; (6) Any and all balance sheets; (7) Any and all income statements; (8)
Any and all paperwork and notes used to produce 990 forms; (9) Any and all tax
returns; (10) Any and all work papers to prepare the 990 forms; (11) Any and
all bank statements; (12) Any and all accounting software to prepare taxes and
990 forms; and (13) Any and all supporting documents, notes, emails, and
correspondence to prepare 990 forms. Such financial records are neither
necessary nor relevant to the issues raised or relief sought by Plaintiff.
This
Motion is made on the grounds that the Ng Subpoena is defective because it is
overly broad and seeks irrelevant documents not reasonably calculated to lead
to the discovery of admissible evidence (seeking Defendants financial records
with no timeframe limitation.) Additionally, Defendant has a protected privacy
interest in its financial records that is was outweighed by the records’
relevancy in determining causation and damages in an action for declaratory
relief, breach of fiduciary duty, constructive fraud, unjust enrichment and
conversion. Hecht, Solberg, Robinson, Goldberg & Bagley LLP v. Superior
Court (2006) 137 Cal.App.4th 579, 595 [40 Cal. Rptr. 3d 446].
This
motion will be based on this Notice, the provisions of California Code of
Civil Procedure §1987.1, the Points and Authorities set forth below, the
attached Declaration of Erika Brenner, the concurrently filed Separate
Statement of Disputed Matters, and the complete files and records of this
action.”
(Def.
Mot. p. 2-3.)
Procedural
Moving
Party: Defendants, The Legion Corporation of Pasadena; Michael Seaton; Lynne
Garcia; John McGuire; Tony Martinez; George Curtis; and Eugene Sacco
(Defendants or Movants)
Responding Party: Plaintiff, Pasadena Post No. 13, Department of California,
The American Legion
16/21 Day Lapse (CCP § 12c and § 1005(b)): Ok
Proof of Service Timely Filed (CRC, Rule 3.1300): Ok
Correct Address (CCP § 1013, § 1013a, § 1013b): Yes/No – Plaintiff’s counsel
lists Plaintiff’s counsel’s email address on eCourt as johnharrold68@gmail.com.
However, Defendants served the moving papers via electronic mail to
Johnharrold68@icloud.com and Laurieharrold68@icould.com. Although Defendants’
counsel did not serve the email address that Plaintiff’s counsel lists on
eCourt, it appears that Plaintiff’s counsel received this motion because
Plaintiff filed an Opposition. The Court notes that if Plaintiff’s e-service
address listed on eCourt is incorrect, Plaintiff’s counsel is encouraged to put
its proper e-service address on eCourt.
Moving Papers: Notice/Motion; Separate Statement;
Proposed Order
Opposition Papers: Opposition; Opposition Separate
Statement; Exhibits to Opposition; Proof of Service
Reply Papers: Reply
BACKGROUND
Plaintiff filed the instant Second
Amended Complaint (SAC) on 9/11/2023 alleging five causes of action for: (1)
Declaratory Relief, (2) Breach of Fiduciary Duty, (3) Constructive Fraud, (4)
Unjust Enrichment, and (5) Conversion.
ANALYSIS
Moving Arguments by Defendants
Movants/Defendants argue that this dispute arises out of Defendant The
Legion Corporation of Pasadena’s ownership and Defendant Eugene Sacco’s
maintenance of the building located at 131 N. Marengo Ave., Pasadena, CA 91101
(“subject premises”).
Defendants state, “According to
Plaintiff, even though Plaintiff is a separate and distinct legal entity,
neither a member nor shareholder of Defendant The Legion Corporation of
Pasadena (“Defendant”) and has no contract or other legal mechanism to provide
it with any sort of rights as it relates to the Defendant and the conduct
alleged, the subject premises should be taken from Defendant and given to
Plaintiff. In addition, Plaintiff alleges that
all monies Defendant earned from rent and/or parking at the subject premises
should also be taken from the Defendant and given to Plaintiff. ” (Def. Mot. p.
4.)
Defendants further state, “The Ng
Subpoena seeks the personal appearance of Defendant’s accountant and production
of Defendant’s tax returns and supporting documentation, without any limitation
as to time. [A true and accurate copy of the Ng Subpoena is attached to the
Declaration of Erika N. Brenner as Exhibit “A”.] The failure to quash the Ng
Subpoena is in direct contradiction of the right to privacy that Defendant has
in its financial records and would effectively enable Plaintiff to go on an
unwarranted and irrelevant fishing expedition that is harassing to Defendant.”
(Def. Mot. p. 4.)
Defendants argue that the Ng
Subpoena must be quashed because there is no good cause for production of the
subpoenaed financial records.
Opposition Arguments by Plaintiff
Not only does Plaintiff oppose Defendants’ motion, but Plaintiff also seeks
monetary sanctions be imposed against Defendant, The Legion Corporation, and
its attorney of record, Resnick & Louis P.C. in the amount of $2,020.00.
Plaintiff argues that the Defendants
have been resisting the production of the requested documents in the current
deposition subpoena served on Mr. Ng, the accountant for Defendants, since
March 2023.
Plaintiff then discusses several
other motions filed by Defendants that were previously denied by the Court.
Plaintiff argues that the deposition
subpoena to Mr. Ng seeks documents relevant to the subject matter of this
action.
Reply Arguments by Defendants
In Reply, Defendants argue:
Plaintiff’s Opposition intentionally sets forth a false
recitation of the procedural history to date as well as a number of falsehoods.
To be clear, Defendants have never resisted the production of documents in this
matter. All that Defendants have done, is sought to protect both the
corporation’s and individual defendants’ confidential financial information via
a protective order and stop Plaintiff’s counsel’s disclosure of such documents
and information from the prosecutor in the criminal action and to individuals
outside of this litigation, which Plaintiff’ counsel has previously done
and continues to do. Without any guardrails, the Defendants have
suffered substantial prejudice and harm.
(Def. Reply. p. 2.)
Defendants also state in Reply:
On or about September 18, 2023, Defendants filed a Motion
for a Protective Order. The Protective Order was necessary to prevent the
disclosure and dissemination of documents containing trade secrets,
confidential financial information/documents of the individual defendants and
third persons which are entitled to privacy, confidential financial
information/documents of the corporate defendant, and information/documents
which have been used against the individual defendants in the State of
California, Department of Justice, criminal action (especially since
Plaintiff’s counsel had previously provided deposition transcripts, and
documents obtained to date during this civil litigation, to the State of
California, Department of Justice Prosecutor for use in the criminal action –
which is still pending). The Court denied Defendants’ Motion. The court never
addressed the individual Defendants constitutionally protected right to privacy
and never engaged in any balancing test regarding the right to privacy of the
corporation.
(Def. Reply. p.2.)
Defendants also continue to talk
about other motions not before this Court just like Plaintiff did.
Defendants also argue:
It is Defendants’ position that the current deposition
subpoena served on Mr. Ng seeks information and documents that are not
relevant, is overbroad, and serves to harass and annoy the Defendants. The
deposition subpoena is really a fishing expedition since Plaintiffs to date
have over 29,000 pages of financial records from the corporate Defendants, the
individual Defendants, and nonparties financial institutions. The Plaintiff and
Defendant The Legion Corporation are separate and distinct nonprofit
corporations with no cognizable relationship. There are no contracts by and
between them. None of the individuals on Plaintiff’s litigation committee are
legal directors or officers of The Legion Corporation. The Legion Corporation
does not have any shareholders or members. Clearly, the underlying financial
records that Plaintiff is already in possession of, are more than sufficient,
and the least intrusive way to search for any alleged relevant transactions. (Declaration
of Erika N. Brenner, ¶7.)
Defendant The Legion Corporation of Pasadena does have a
right to privacy, even though it is not constitutionally protected. In
Plaintiff’s Opposition, even Plaintiff recognizes the need for the balancing
test to be applied.
(Def. Reply. p. 5.)
Discussion
As a preliminary matter, both
parties’ papers are poorly written and unhelpful to the Court. Neither party ties
their arguments to a specific legal standard and instead the parties go back
and forth between various legal standards, and it remains unclear as to why the
parties constantly refer to varying standards. Further, both parties extensively
refer to prior motions and rulings that are not before this Court.
Defendants move under CCP § 1987.1
which states:
(a) If a subpoena requires the attendance of a witness
or the production of books, documents, electronically stored information, or
other things before a court, or at the trial of an issue therein, or at the
taking of a deposition, the court, upon motion reasonably made by any person
described in subdivision (b), or upon the court’s own motion after giving
counsel notice and an opportunity to be heard, may make an order quashing the
subpoena entirely, modifying it, or directing compliance with it upon those
terms or conditions as the court shall declare, including protective orders. In
addition, the court may 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.
(b) The following persons may make a motion pursuant to
subdivision (a):
(1) A party.
(2) A witness.
(3) A consumer described in Section 1985.3.
(4) An employee described in Section 1985.6.
(5) A person whose personally identifying information,
as defined in subdivision (b) of Section 1798.79.8 of the Civil Code, is sought
in connection with an underlying action involving that person’s exercise of
free speech rights.
(c) Nothing in this section shall require any person to
move to quash, modify, or condition any subpoena duces tecum of personal
records of any consumer served under paragraph (1) of subdivision (b) of
Section 1985.3 or employment records of any employee served under paragraph (1)
of subdivision (b) of Section 1985.6.
(CCP § 1987.1(a)-(c).)
The Court notes as a preliminary
matter that CCP § 1987.1, the statute that Defendants moved under, does not
state who has the burden on this type of motion, and what the standard is for
that burden.
The requests at issue in the
deposition subpoena are:
1. Any and all 990 forms (whether or
not prepared by witness).
2. Any and all general ledgers
3. Any and all financial statements.
4. Any and all financial statements.
5. Any and all expense records.
6. Any and all balance sheets.
7. Any and all income statements.
8. Any and all paperwork and notes
used to produce 990 forms.
9. Any and all tax returns.
10. Any and all work papers to prepare the 990 forms.
11. Any and all bank statements.
12. Any and all accounting software
to prepare taxes and 990 forms.
13. Any and all supporting
documents, notes, emails, and correspondence to prepare 990 forms.
In Defendants’ moving separate
statement, Defendants provide the same exact reason as to the grounds for the
motion to quash for all 13 requests.
Defendants provide the same exact
reason for all 13 requests as follows in their separate statement:
There is no “good cause” for production since Defendant’s
financial records cannot affirmatively be shown as relevant and necessary to
the issues of ownership of the subject premises or revenue generated therefrom.
California Evidence Code defines relevant evidence as evidence “having
any tendency in reason to prove or disprove a disputed fact that is of
consequence to the determination of the action.” Evidence Code § 210. See,
also, Lee v. Superior Court (2009) 177 Cal. App. 4th 1108. Delving into
the financial records of Defendant by subpoenaing its non-party accountant is
nothing more than an act of harassment which Plaintiff has employed since the
inception of this litigation. Under California Code of Civil Procedure §
2019.030(a)(2), courts “shall restrict the frequency or extent of use of a
discovery method” when such a method is “unduly burdensome or expensive.” This
is especially true of non-parties, who “should be somewhat protected from the
burdensome demands of litigation.” Monarch Healthcare v. Sup. Crt.
(2000) 78 Cal. App.4th 1282, 1289-1290. Indeed, “the court should attempt to
structure discovery in a manner which is least burdensome to” a non-party
deponent. Calcor Space Facility, Inc., supra, 53 Cal. App.4™ at 223.
Furthermore, under California Code of Civil Procedure
§2017.010, discovery sought must pertain to a matter “not privileged, that is
relevant to the subject matter involved in the pending action.” Yet, even
highly relevant non-privileged information may be shielded from discovery if
its disclosure would impair the inalienable right of privacy. 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.) Because the corporate privacy
right is not constitutionally protected, the issue presented in determining
whether Plaintiff’s requests for production infringe on 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 [40 Cal. Rptr. 3d
446].)
Defendant has a protected privacy interest in its financial
records that is outweighed by the records’ relevancy in determining causation
and damages in an action involving a dispute of ownership of the subject
property. Hecht, Solberg, Robinson, Goldberg & Bagley v. Sup.Ct.
(Panther) (2006) 137 CA4th 579, 595-596; and SCC Acquisitions, Inc. v.
Sup.Ct. (Western Albuquerque Land Holdings, LLC) (2015) 243 CA4th 741,
755-756.
“Courts must insist discovery devices be used as tools to
facilitate litigation rather than as weapons to wage litigation. These tools
should be well calibrated; the lancet is to be preferred over the sledge
hammer.” Calcor Space Facility, Inc. v.
Superior Court (1997) 53 Cal. App.4th 216, 221. The Ng Subpoena is clearly
designed to use a “sledge hammer” when a “lancet” would suffice. Id. at 221.
For these reasons, this Court must quash the Ng Subpoena for attempting to
improperly violate Defendant’s right too financial privacy.
If the Court is somehow inclined to nonetheless permit the
Ng Subpoena to be enforced during this action, Defendant requests the Court
review the documents in camera before production to assess their value and the
harm disclosure might cause the parties whose privacy is threatened. Schnabel
v. Superior Court (Schnabel) (1993) 5 Cal.4™ 704, 714. Alternatively,
Defendant requests that if the documents are to be produced, such documents be
produced under a confidentiality order and for “attorneys eyes only” to limit
the use Defendant’s financial information, for use solely limited to this
litigation, and for all copies to be returned to Defendant following the
conclusion of this litigation pursuant to Code of Civil Procedure
§1987.1(a). There are no alternative means that could adequately protect
Defendant from disclosure of its financial records which Defendant maintains
have no relevance to this action.
(Def. Sep. Stmt. 2-4.)
“Good Cause”
In Defendants’ Separate Statement, under their grounds for motion to quash,
Defendants’ first sentence for each request states, “There is no “good cause”
for production since Defendant’s financial records cannot affirmatively be
shown as relevant and necessary to the issues of ownership of the subject
premises or revenue generated therefrom.” (See Def. Sep. Stmt. p. 2.)
The Court does not find Defendants’
“good cause” argument availing. Defendants cite no legal authority for their
argument that in order for Plaintiff to obtain discovery, Plaintiff’s must
first demonstrate good cause.
Balancing
In the second and third paragraphs
of Defendants’ grounds for motion to quash in their separate statement,
Defendants concede that corporations do not have a constitutional right to
privacy. Defendants then state that although there is no constitutional right
to privacy for a corporation, there is still a right to privacy for
corporations, but it is just a lesser right than that held by natural persons.
Defendants argue that since the
privacy right is lesser than that held by natural persons, the court must
balance the privacy right with the discovery’s relevance.
Defendants argue that their privacy
interest in financial records outweighs Plaintiff’s records’ relevancy in
determining causation and damages in an action involving a dispute of ownership
of the subject property.
Here, the Court does not find
Defendants’ arguments availing.
Defendants stated in their separate
statement:
Defendant has a protected privacy interest in its financial
records that is outweighed by the records’ relevancy in determining causation
and damages in an action involving a dispute of ownership of the subject
property. Hecht, Solberg, Robinson, Goldberg & Bagley v. Sup.Ct.
(Panther) (2006) 137 CA4th 579, 595-596; and SCC Acquisitions, Inc. v.
Sup.Ct. (Western Albuquerque Land Holdings, LLC) (2015) 243 CA4th 741,
755-756.
(Def. Sep. Stmt. p. 3.)
Based on Defendants’ statement
above, it appears that Defendants are conceding that Plaintiff’s requests are
relevant in determining causation and damages in this action.
The Court does not find that
Defendants’ privacy interest outweighs Plaintiff’s ability to discovery
pertaining to causation and damages.
Parties may overcome objections on
the basis of a right to privacy by demonstrating that the information sought is
“directly relevant to a cause of action or defense … i.e., that it is essential
to determining the truth of the matters in dispute.” (Britt v.
Superior Court (1978) 20 Cal.3d 844, 859-862.)
Here, Defendants appear to be
conceding that the requests are directly relevant by stating that the records
are relevant to determining causation and damages in the action. Therefore, the
Court finds that on balance, Plaintiff’s right to discover information
pertaining to causation and damages outweighs Defendants’ right to privacy.
Confusion
What is confusing about Defendants’
motion is that although Defendants appear to be conceding that the records
requested here are relevant to determining causation and damages (see ¶ 3 of
Defendants’ Sep. Stmt.), Defendants simultaneously argue that the records
requested are irrelevant (see ¶ 1 of Defendants’ Sep. Stmt.).
To the extent that Defendants are
arguing that the requested records are irrelevant, Defendants provided no
explanation as to how the records sought are irrelevant.
Not only is Defendants’ motion
confusing in the sense that Defendants argue that the records are
simultaneously irrelevant and relevant, but Plaintiff’s Opposition is
equally unhelpful with respect to relevancy.
Plaintiff’s Opposition is equally
unhelpful because after Plaintiff conclusorily asserts that the documents
sought are relevant, Plaintiff argues:
Defendants acknowledge in their Motion to Quash that
Plaintiff’s SAC alleges causes of action for declaratory relief, breach of
fiduciary duty, constructive fraud, unjust enrichment and conversion. (Motion
to Quash, 2: 24-25.) The SAC states facts alleging Defendants’ misconduct and
violations of the Corporations Code as a corporation, the alleged conversion of
Plaintiff’s funds, the unlawful disenfranchisement of Plaintiff’s membership in
the Legion Corporation, and the use of Pasadena Post 13’s property for
Defendants’ profit and unjust enrichment. The documents requested by the
deposition subpoena – and by prior discovery requests – are corporate documents
such as 990 forms (whether or not prepared by the witness); general ledgers;
financial statements; expense records; balance sheets; income statements;
paperwork, supporting documents, notes, emails and correspondence used to
produce 990 forms; tax returns; bank statements; and accounting software to
prepare taxes and 990 forms. (Exhibit L.)
Depositions of Defendants’ directors and officers have
revealed Defendants’ unethical and provable illegalities concerning their
financial and corporate activities in relation to Plaintiff. Certain Defendants
have acknowledged under oath their taking of Plaintiff’s funds for their own
personal use and of their lack of compliance with corporate laws.
The Ng deposition subpoena requests documents relevant to
the subject matter of this case as alleged in Plaintiff’s SAC. Significantly,
this court has already confirmed in its ruling on Defendants’ prior Motion to
Quash deposition subpoenas seeking Defendants’ corporate financial records and
documents that such documents are relevant and are not prevented from being
produced by Defendants based on any privacy or confidentiality objections.
(Pl. Oppo. p. 5.)
Plaintiff’s arguments on page 5 of the Opposition are
entirely unhelpful as to showing relevancy of the requested documents.
Presumably, in explaining relevancy, Plaintiff would explain
what the causes of action are in the SAC, what the elements are to those causes
of action, and how the documents requested prove an element, or elements, in
one of those causes of action in the SAC. However, Plaintiff does nothing along
those lines. Plaintiff simply alleges what it believes to be misconduct without
tying the alleged misconduct to any sort of legal standard and how the
misconduct is legally relevant to proving an element in a cause of action in
Plaintiff’s SAC.
Plaintiff’s arguments on page 5 are also unhelpful because
Plaintiff refers to prior rulings that are not before this Court today.
Overall
Overall, both parties’ motions are
poorly written, and both parties’ arguments on relevancy are indecipherable.
Therefore, for the most part, the Court is left to rely on
the standard for discoverability, which is a liberal standard.
As a general rule, all unprivileged information that is
relevant to the subject matter of the action is discoverable if it would itself
be admissible evidence at trial or if it appears reasonably calculated to lead
to the discovery of admissible evidence. (Code Civ. Proc. § 2017.010; Schnabel
v. Superior Court (1993) 5 Cal.4th 704, 711.)
Since Defendants appear to concede that the requested
information is relevant to causation and damages, the Court does not find
Defendants’ argument that their privacy right outweighs Plaintiff’s right to
discovery to be availing.
TENTATIVE RULING
Defendants’ motion to quash is
DENIED.
Sanctions
“Except as specified in subdivision
(c), in making an order pursuant to motion made under subdivision (c) of
Section 1987 or under Section 1987.1, the court may in its discretion award the
amount of the reasonable expenses incurred in making or opposing the motion,
including reasonable attorney’s fees, if the court finds the motion was made or
opposed in bad faith or without substantial justification or that one or more
of the requirements of the subpoena was oppressive.” (CCP § 1987.2(a).)
Plaintiff requests sanctions in the
amount of $2,020.00.
Here, the Court utilizes its
discretion and DENIES the sanctions that were sought in Plaintiff’s Opposition.