Judge Bruce G. Iwasaki, Case 22STCV23880 2022-09-30 Tentative Ruling

Tentative Ruling: Plaintiffs’ Motion for Limited Discovery is granted. Plaintiffs’ previous subpoenas are ordered quashed. New deposition notices must be properly issued, and any out-of-state subpoenas must comply with Code of Civil Procedure section 2026.010, subdivision (c).

This is an action involved alleged wire fraud in the purchase of real property in New Hampshire. Preston Smith and Elizabeth Meyer (Plaintiffs) sued “Does 1 through 20” for violation of the Electronic Funds Transfer Act, wire fraud, unauthorized computer access under Penal Code section 502, negligence, fraud, breach of contract, conversion, unjust enrichment, invasion of privacy, and declaratory/injunctive relief.

Plaintiffs alleged that as part of the real estate transaction, they communicated with Northeast Title and Escrow, LLC (Escrow Company). On May 27, 2022, Plaintiffs received an e-mail with instructions from “desk.title@gmail.com” and “mortgagebroker@comcast.net” requesting the money. Plaintiffs wired $163,487.20 from their account at the Peace Officers Professional Associations Federal Credit Union (Credit Union) to Truist Bank (Bank) in Florida.

Plaintiffs further alleged that the wired funds were fraudulently diverted to another account. They reported this to police. They allege that the Escrow Company communicated with unencrypted electronic messages, thus allowing unknown defendants to intercept and create fake e-mail addresses to divert the money. Plaintiffs served multiple subpoenas on Berkshire Hathaway HomeServices Verani Realty (Escrow Agent), the Escrow Company, Credit Union, and the Bank for records to help identify the unknown Doe Defendants. The Escrow Company, Credit Union, and the Bank objected to the subpoenas.

Plaintiffs now move for leave from the Court to engage in pre-service discovery. The Escrow Company opposes, arguing that the subpoenas are invalid, this Court has no jurisdiction to compel a non-party to comply with an invalid subpoena, and no good cause exists for pre-service discovery. The Credit Union also responded, expressing concern over the scope of the subpoena and requesting a Protective Order to safeguard confidential information. Plaintiffs replied, arguing the liberality of discovery.

The Court quashes Plaintiffs’ subpoenas because they were issued without prior Court permission. But the Court finds good cause to allow Plaintiffs to conduct early discovery to obtain the identities of the Doe Defendants.

Discovery against non-parties is generally governed by Code of Civil Procedure sections 2020.010 et seq. “[D]iscovery may be obtained from a nonparty only through a ‘deposition subpoena.’” (Unzipped Apparel, LLC v. Bader¿(2007) 156 Cal.App.4th 123, 127.)¿“The Civil Discovery Act . . . authorizes a nonparty’s ‘oral deposition,’ ‘written deposition,’ and ‘deposition for [the] production of business records.’ (Ibid.)¿¿

There is a general discovery hold under Code of Civil Procedure section 2025.210, which applies to all discovery by deposition, including business records subpoenas to nonparties. (Cal. Shellfish v. United Shellfish Co.¿(1997) 56 Cal.App.4th 16, 25 [“We conclude that the deposition hold in section 2025, subdivision (b)(2) does apply to a deposition subpoena seeking business records”]; see also O'Grady v. Superior Court (2006) 139 Cal.App.4th 1423, 1454 [“Not having yet named any defendant, and a fortiori having served none, Apple needed leave of court before it could propound discovery from petitioners or anyone else”].)

A plaintiff generally may serve deposition notices without leave of court 20 days after the “service of the summons on, or appearance by, any defendant.” (Code Civ. Proc., § 2025.210, subd. (b).)¿ However, as applicable here: “On motion with or without notice, the court, for good cause shown, may grant to a plaintiff leave to serve a deposition notice on an earlier date.” (Ibid.)

There is a lack of case law in California as to what constitutes “good cause” for pre-service discovery to identify Doe Defendants. The only published case deals with defamation and free speech interests under the First Amendment. (See generally Yelp Inc. v. Superior Court (2017) 17 Cal.App.5th 1, 13-20.)

However, federal law provides some guidance. Under Federal Rule of Civil Procedure 26(d), a court “may authorize early discovery before the Rule 26(f) conference for the parties’ and witnesses’ convenience and in the interests of justice.” (Strike 3 Holdings, LLC v. Doe (N.D.Cal. Sep. 26, 2022, No. 22-cv-05088-LB) 2022 U.S. Dist. Lexis 173545, *3.) Similar to Code of Civil Procedure section 2025.210, subdivision (b), federal courts “generally consider whether a plaintiff has shown ‘good cause’ for early discovery. [Citations.]” (Ibid.)

In the context of early discovery for identifying Doe defendants, federal “courts examine whether the plaintiff: (1) identifies the Doe defendant with sufficient specificity that the court can determine that the defendant is a real person who can be sued in federal court, (2) recounts the steps taken to locate and identify the defendant, (3) demonstrates that the action can withstand a motion to dismiss, and (4) shows that the discovery is reasonably likely to lead to identifying information that will permit service of process. [Citation.] ‘[W]here the identity of alleged defendants [is not] known prior to the filing of a complaint[,] the plaintiff should be given an opportunity through discovery to identify the unknown defendants, unless it is clear that discovery would not uncover the identities, or that the complaint would be dismissed on other grounds.’ [Citation].” (Strike 3 Holdings, LLC, supra, 2022 U.S. Dist. Lexis 173545 at *3-4.) This standard has been used to request leave for early discovery to identify Doe defendants in cases involving copyright infringement, cryptocurrency theft, and commercial interference. (Id. at *2; (Malibu Media, LLC v. Doe (E.D.Cal. 2016) 319 F.R.D. 299, 306; (Bellwether Coffee Co. v. Doe (N.D.Cal. June 8, 2021, No. 21-cv-03612-JSC) 2021 U.S. Dist. Lexis 107507, *1.)

The Court generally finds that good cause exists for Plaintiffs to conduct pre-service discovery under Code of Civil Procedure section 2025.210, subdivision (b). Without the discovery, Plaintiffs would be unable to determine the identity of the Doe Defendants. Further, such discovery is a prerequisite to effectuate service that would otherwise be necessary to start the clock on the 20-day period required under subdivision (b).

Even under the federal standard, Plaintiffs have made a sufficient showing. They indicate that the wiring instructions came from an individual purporting to be “Lena Neruk,” who is Plaintiffs’ contact at the Escrow Company. They provide the fake e-mail address that claimed to be Ms. Neruk: desk.title@gmail.com. Plaintiffs hired a computer forensic expert to investigate the situation and identify the unknown defendants. (See generally Anderson Decl.) Under the third prong, Plaintiffs have sufficiently pled their causes of action. For example, for conversion, they allege rightful possession of the funds, defendant’s interference with that right through wire fraud, and subsequent loss of those funds. (Complaint, ¶¶ 92-96.) As to the fourth prong, Mr. Anderson averred that the requested information in the subpoenas “should provide the necessary information” to help him locate and identify the unknown defendants. (Anderson Decl., ¶ 15.) In addition, Plaintiffs’ subpoena to the Bank specifies the account numbers from which they are seeking information, which narrowly tailors the request.

The Escrow Company’s arguments are well-taken, but the objections are directed towards the substance of the subpoena. The Court does not pass on these objections. The validity of the subpoenas is a different matter than the issue before the Court, which is solely as to leave to propound pre-service discovery.

Regarding the Credit Union’s concerns of releasing confidential information for which it is obligated to protect, the Court expects the parties to agree to a protective order. The Superior Court’s website has a standard form of such a protective order.

Finally, given that Plaintiffs improperly sent deposition notices without requesting leave from the Court in violation of the discovery hold under Code of Civil Procedure section 2025.210, subdivision (b), the subpoenas are quashed. (Cal. Shellfish v. United Shellfish Co.¿(1997) 56 Cal.App.4th 16, 25; Code Civ. Proc., § 1987.1, subd. (a).)

Plaintiffs are ordered to comply with the proper statutes, especially section 2026.010, subdivision (c), for which Plaintiffs “shall use any process and procedures required and available under the laws of the state . . . where the deposition is to be taken to compel the deponent to attend and to testify, as well as to produce any document.” (Italics added.)

The Court grants Plaintiffs’ motion for limited, pre-service discovery. The prior subpoenas are ordered quashed, and Plaintiffs are ordered to re-notice the requests for records and ensure statutory compliance.

Department 58