Judge: Daniel M. Crowley, Case: 21SMCV01618, Date: 2023-03-20 Tentative Ruling
Case Number: 21SMCV01618 Hearing Date: March 20, 2023 Dept: 207
Background
In this action Plaintiff PacTec Holdings, LLC’s
(“Plaintiff”) alleges Defendant Shanghai Zhongyan Information Technology Co.,
Ltd. (“Defendant”) and other individual and corporate co-defendants, including
Defendants James Zhu (“Zhu”) and Gary Ge (“Ge”) and
non-party Yuanyuan Yoyo Wei (“Wei”), misappropriated Plaintiff’s work
product and breached—or assisted in breaching—Plaintiff’s contracts with
certain of its employees. On October 1, 2021, Plaintiff filed a Complaint
against these individuals and entities alleging causes of action for breach of
contract, breach of fiduciary duty; aiding and abetting breach of fiduciary
duty; intentional interference with contractual relations; fraud (concealment);
civil conspiracy; constructive trust; conversion; and violation of Cal. Penal
Code Section 496.
On September 15, 2022, Defendant filed a motion to quash
service for lack of personal jurisdiction. On September 22, 2022, the parties
filed a stipulation agreeing to continue the hearing date on Defendant’s motion
to quash and allow Plaintiff to propound limited jurisdictional discovery
consisting of requests for admission, requests for production of documents, and
interrogatories. The Court granted the stipulation on September 29, 2022.
Pursuant to the stipulation, Plaintiff propounded written discovery on
Defendant. Defendant provided responses to some of this discovery and objected
to other requests and interrogatories on the basis that they exceeded the scope
of jurisdictional discovery and instead concerned the merits of Plaintiff’s
claims.
The parties continued to meet and confer regarding this
jurisdictional discovery, including at an informal discovery conference with
the Court. As part of these efforts to resolve the parties’ dispute, Plaintiff
supplemented some of its jurisdictional discovery to Defendant, and Defendant
provided supplemental responses. Having reached an impasse, Plaintiff now
brings this motion to compel further responses to the interrogatories, requests
for admission, and request for production it has propounded on Defendant.
Objections to Evidence
The Court SUSTAINS Defendant’s objection Nos. 3, 4, 5, and 6
to the Declaration of Josh Steinberg as speculation. The Court SUSTAINS
Defendant’s objection Nos. 8, 10, 11 to the Declaration of Wenfeng Su to the
extent they purport to provide a translation which does not meet the
requirements of Evidence Code § 753. Defendant’s remaining objections are
OVERRULED.
Legal Standard
On receipt of a
response to interrogatories, the propounding party may move for an order
compelling a further response if the propounding party deems that an objection
to an interrogatory is without merit or too general. (C.C.P. § 2030.300(a)(3).)
The responding party has the burden of justifying the objections to the interrogatories.
(Coy v. Sup.Ct. (1962) 58 Cal.2d 210, 220-221.) The moving party on a motion
to compel further responses to requests for production of documents must submit
“specific facts showing good cause justifying the discovery sought by the inspection
demand.” (C.C.P. § 2031.310(b)(1).) If the moving party has shown good cause for
the requests, the burden is on the objecting party to justify the objections. (Kirkland
v. Sup. Ct (2002) 95 Cal. App.4th 92, 98.) A motion to compel further
responses may be brought based on responses to requests for admission that: (1)
provide evasive or incomplete answers; or (2) make unmeritorious or
overly-generalized objections. (C.C.P. § 2033.290(a).) However, a motion to
compel further responses cannot compel the admission of matters already denied.
(Holguin v. Superior Court (1972) 22 Cal.App.3d 812, 821.)
The scope of what is “relevant” during discovery is broad as
information sought need not itself necessarily be admissible, but only need be
reasonably calculated to lead to the discovery of admissible evidence. (Gonzalez
v. Superior Court (1995) 33 Cal.App.4th 1539, 1546.) “[D]iscovery may be had
as to any matter which is relevant to the subject matter involved
in the pending action, with added proviso that inadmissibility at trial is not ground
for objection if the information sought appears to be reasonably calculated to lead
to the discovery of admissible evidence.” (Pettie v. Superior Court (1960)
178 Cal.App.2d 680, 688 [emphasis in original].)
The Code
of Civil Procedure requires the Court to sanction a party who makes or opposes
a motion to compel further responses to requests for production or
interrogatories unless the Court finds the party acted with substantial
justification or that other circumstances make the imposition of sanctions
unjust. (C.C.P. §§ 2030.030(a), 2031.310(h).) “[S]ubstantial justification” is
understood to mean a justification that is “clearly reasonable because it is
well-grounded in both law and fact.” (Doe v. U.S. Swimming, Inc.¿(2011) 200
Cal.App.4th 1424, 1434.)
Analysis
“A court may exercise specific jurisdiction over a
nonresident defendant only if: (1) the defendant has purposefully availed
himself or herself of forum benefits; (2) the controversy is related to or
arises out of the defendant’s contacts with the forum; and (3) the assertion of
personal jurisdiction would comport with fair play and substantial justice.” (Elkman
v. National States Ins. Co. (2009) 173 Cal.App.4th 1305, 1314.) Plaintiff
argues two potential bases for establishing specific jurisdiction over
Defendant: (1) by showing Defendant misappropriated intellectual property from
Plaintiff, a California company, or (2) by showing Defendant inherited the
jurisdictional contacts of Ge and Wei.
Defendant argues more is required
than simply showing the misappropriation of Plaintiff’s intellectual property
and Plaintiff must still show some purposeful availment or targeting directed
at California. The Court agrees. Plaintiff’s reliance on Integral
Development. Corp. v. Weissenbach (2002) 99 Cal.App.4th 576 and Zehia v.
Superior Court (2020) 45 Cal.App.5th 543 to the contrary is misplaced
as neither case suggests a California plaintiff may establish specific
jurisdiction over any entities or individuals simply by alleging they
misappropriated the plaintiff’s intellectual property. The Court in Integral
Development offered an extended discussion of the defendant’s contacts with
California separate from the alleged act of misappropriation:
Integral-Germany was a wholly owned subsidiary of
Integral-U.K., which in turn was owned entirely by Integral-California.
Integral-U.K. was the sole shareholder of Integral-Germany. Officers of
Integral-Germany were also officers of Integral-U.K. and Integral-California.
Thus Integral-Germany was a separate entity from Integral-California in name
only. As Integral's controller explained, Integral-Germany was formed as a
subsidiary of Integral-California in order to permit the hiring of German
nationals in compliance with German tax laws. At all times during his
employment Weissenbach reported to the vice president of sales at
Integral-California. The products offered through Integral-Germany were
designed and developed by Integral-California. Personnel decisions for employees
at Integral-Germany were approved by Integral-California. Marketing and sales
were likewise overseen by Integral-California. Integral-California controlled
contracting decisions relating to Integral-Germany. Weissenbach communicated
regularly with Integral employees in California by e-mail and telephone
regarding sales and personnel matters. His compensation was set and authorized
in California, and the funds for his paychecks originated from
Integral-California. He submitted expense reimbursement claims to
Integral-California for approval in California. He was given the opportunity to
participate in Integral's employee stock option plan, which was administered in
California. During the short time he was employed by Integral, he traveled to
the California headquarters twice, in order to finalize his employment
relationship and later to attend business meetings and report on progress of
the German subsidiary. Based on these facts, Integral contends that
Weissenbach's employment relationship with the parent corporation in California
to market and sell products designed and developed in California constituted
the requisite minimal contacts to support the exercise of jurisdiction.
(Integral Development, 99
Cal.App.4th at 586.) The Court found these contacts were sufficiently related
to the alleged act of misappropriation to establish specific jurisdiction over
the defendant.
Similarly, the Court’s finding of
specific jurisdiction over the defendant in Zehia was based not on the
alleged act of misappropriation but on the specific acts of the defendant
directed at California:
First, Zehia transmitted the allegedly harassing statements
directly to a California resident (Nadhir) and the allegedly fabricated
conversations directly to another California resident (S.M.), with knowledge
the recipients were California residents. Engaging in such targeted
communications with forum residents has been recognized as one type of conduct
that can establish a purposeful availment of the forum's benefits.
(Zehia, 45 Cal.App.5th at
556.) The Court also found the defendant’s conduct was also directed at “a
California audience” and “had a distinct California focus.” (Id. at
557.) In other words, Zehia did not find jurisdiction over defendant
simply because defendant was alleged to have committed a tort against a
California resident.
Plaintiff also relies on CollegeSource, Inc. v. AcademyOne, Inc. (9th Cir. 2011) 653 F.3d 1066, a federal case which
is not binding on this Court. The Court in CollegeSource found the
defendant “expressly aimed its actions” at California, relying on other federal
authority which found jurisdiction where “a plaintiff alleges that the defendant individually targeted him
by misusing his intellectual property on the defendant's website for the
purpose of competing with the plaintiff in the forum.” (Id. at 1077
[internal quotation omitted].) CollegeSource thus comports with the
purposeful availment criteria set forth above based on the defendant’s
competition with the plaintiff in California.
Thus, to
establish jurisdiction over Defendant on its first theory, Plaintiff must still
show some connection between Defendant and California beyond the allegation
that Defendant harmed Plaintiff, which is a California entity. (David
L. v. Superior Court (2018) 29 Cal. App. 5th 359, 362
[“Specific jurisdiction must rest on [defendant’s] own suit-related contacts with
California,
not merely a plaintiff who lives here”].)
As for
Plaintiff’s second theory of jurisdiction, Defendant acknowledges
jurisdictional contacts can be inherited by successors-in-interest in certain
situations, though Defendant argues Plaintiff cannot meet the requirements for
such jurisdiction here. Such disputes are the subject of Defendant’s motion to
quash for lack of jurisdiction which is currently pending before the Court, and
it would be premature for the Court to address the merits of the parties’
arguments as to whether personal jurisdiction over Defendant can be established
at this time. The Court notes that both sides have presented the Court with
legal authority in support of their respective positions which will be relevant
when it comes time to rule on Defendant’s motion to quash. However, for
purposes of the instant motion to compel, the Court notes that the scope of
discovery is not limited to information that itself is directly admissible
evidence of a particular issue but need only be reasonably calculated to lead
to such evidence. Accordingly, the Court will consider whether the subject
interrogatories and requests for production are reasonably likely to lead to
admissible evidence under either of the two theories of personal jurisdiction
asserted by Plaintiff. Whether the information sought by Plaintiff is
ultimately able to establish jurisdiction over Defendant is a question for the
motion to quash.
1. Requests
for Admission Nos. 5 and 6
Request for Admission No. 5 calls
for Defendant to admit 51fanli.com is a cashback website. Request for Admission
No. 6 calls for Defendant to admit 51fanli.com and fanli.com are the same
cashback website. Defendant argues this requested information goes to the
merits of Plaintiff’s allegations of misappropriation and not the question of
jurisdiction. The Court agrees that the function of 51fanli.com and fanli.com
is itself not admissible evidence which would establish jurisdiction over
Defendant, however it is potentially relevant to the question of jurisdiction
to the extent Plaintiff can show either site targeted or directed at consumers
in California. The Court GRANTS Plaintiff’s motion as to these two requests.
2. Requests for Admission Nos. 4 and 20
Request for Admission No. 4 calls
for Defendant to admit that Ge and Wei created, designed, developed, or worked
on the cashback system used by 51fanli.com in 2006. Request for Admission No.
20 calls for Defendant to admit 51fanli.com was operating as a cashback website
by the time Ge was employed by PacTec Software (Shanghai) Co. Ltd. Taken
together, these requests appear to be directed at establishing the merits of
Plaintiff’s allegations concerning Ge and Wei’s alleged misappropriation from
Plaintiff without any clear relevance to either jurisdictional theory set forth
above. The Court DENIES Plaintiff’s motion as to these two requests.
3. Requests
for Admission Nos. 18 and 19
Requests for Admission Nos. 18 and
19 call for Defendant to admit Ge and Wei entered into an agreement with PacTec
Software (Shanghai) Co. Ltd. As with the previous set of requests for
admission, these two requests go to the merits of Plaintiff’s misappropriation claim
and seek to establish they breached contractual duties to one of Plaintiff’s
affiliated entities without showing any clear relevance to establishing
jurisdiction over Defendant under the theories discussed above. The Court thus DENIES
Plaintiff’s motion as to these two requests.
4. Special Interrogatories
Nos. 8, 9, 17, 18, and Request for Production No. 12
Special Interrogatories Nos. 8, 9,
17, and 18 call for Defendant to identify all facts and legal theories which
would support its denial of Plaintiff’s claim of misappropriation. Defendant
provided a response stating it has conducted a diligent search and reasonable
inquiry and based on that believes no proprietary information from California
entities was used in creating 51fanli.com and has not discovered any documents
or information indicating otherwise. Plaintiff argues these responses are vague
and evasive and fails to answer the call of the interrogatory. The Court
disagrees. Defendant cannot prove a negative (e.g., that it did not misappropriate
Plaintiff’s intellectual property), Defendant states it is basing its denial of
Plaintiff’s allegation on the lack of any evidence showing such
misappropriation occurred. Plaintiff has failed to show how this response is
improper or insufficient and has not identified any specific additional
information it believes should have been included.
Request for Production No. 12
calls for the production of documents and communications containing information
relating to the origin or development of the cashback system utilized by
Defendant including materials provided to investors, internal communications,
and legal due diligence documents. The Court finds this request is overbroad in
that it appears to be aimed solely at the merits of Plaintiff’s misappropriation
claim without a clear nexus to either jurisdictional theory set forth above.
The request is not limited to documents or materials which could potentially
establish some connection between the alleged misappropriation and Defendant’s
contact with California, and instead seeks the entire universe of documents
concerning the development of the cashback system. As such, the request goes
beyond jurisdictional discovery and into the realm of pure merits discovery.
The Court thus DENIES Plaintiff’s
motion to compel as to these interrogatories and request for production.
5. Requests
for Admission Nos. 10, 12, 14, and 21
Request for Admission No. 10 calls
for Defendant to admit it was incorporated to operate 51fanli.com. Request for
Admission No. 12 calls for Defendant to admit it owns “the rights to
information, technology, data, or other intellectual property” related to the
cashback system used by 51fanli.com. Request for Admission Nos. 14 and 21 call
for Defendant to admit it owns the rights to the cashback system used by
fanli.com and 51fanli.com. The Court finds these requests are potentially
relevant to Plaintiff’s successor theory of jurisdiction. While Defendant
argues Plaintiff will not be able to establish jurisdiction through this
successor, that is a question for Defendant’s pending motion to quash. The
purpose of jurisdictional discovery is to afford a plaintiff the opportunity to
investigate potential bases for jurisdiction. As such, the Court cannot require
Plaintiff to conclusively establish it will be successful in establishing
jurisdiction over Defendant through the successor theory as a prerequisite to
conducting discovery into that theory of jurisdiction.
Plaintiff’s motion to compel
further responses to these requests is GRANTED.
6. Special Interrogatory
No. 24
Special Interrogatory No. 24 is
similar to Special Interrogatories Nos. 8, 9, 17, and 18, discussed above, in
that is calls for Defendant to identify all facts and theories upon which
Defendant bases its contention that Ge and Wei did not form a partnership to
create and run 51fanli.com before Defendant was incorporated. Defendant
responded that it conducted a diligent search and reasonable inquiry and states
it has not uncovered any documents or information which indicate Ge and Wei
formed a partnership to create or run 51fanli.com before Defendant was
incorporated. Defendant adds that based on its investigation it believes Ge,
alone, owned the 51fanli.com website and domain registration. Plaintiff argues
this response is incomplete and evasive.
The Court finds Defendant’s
response is incomplete as it does not disclose the facts upon which it bases
the conclusion that Ge alone owned 51fanli.com during the relevant time period.
While Defendant cannot prove a denial of the existence of a partnership, to the
extent it is affirmatively claiming an alternate fact—Ge’s sole ownership—it
must disclose the basis for that determination. Plaintiff’s motion to compel a
further response to this interrogatory is GRANTED.
Plaintiff also takes issue with
Defendant’s objections based on privilege and the right to privacy. It is
unclear from Defendant’s response whether any information was withheld on the
basis of these objections. If Defendant has withheld information based on these
objections, it must specifically state so in its further response, and must
identify facts sufficient to allow Plaintiff and the Court to determine the
propriety of the asserted privilege.
7. Request
for Admission No. 23, Special Interrogatory Nos. 5, 23, and Request for
Production No. 16
Request for Admission No. 23 calls
for Defendant to admit it did not provide consideration in exchange for the
rights to the cashback system used by 51fanli.com. Special Interrogatory No. 5
calls for Defendant to describe how it acquired the ownership or rights to the
intellectual property of 51fanli.com. Special Interrogatory No. 23 calls for
Defendant to describe the consideration it provided in exchange for the
cashback system used by 51fanli.com. Request for Production No. 16 calls for
the production of all documents and communications related to Defendant’s
obtaining the rights to the cashback system used by 51fanli.com.
The Court finds these requests and
interrogatories are potentially relevant to Plaintiff’s theory of successor-in-interest
jurisdiction as they seek information and documents relating to the transfer of
assets and intellectual property which forms the basis for the claim that
Defendant is the successor-in-interest to Ge and Wei. Plaintiff’s motion to
compel further responses to these requests and interrogatories is GRANTED.
8. Special Interrogatories Nos. 19 and 25
Special Interrogatory No. 19 calls
for Defendant to identify “email addresses, phone numbers, social
media profiles, and accounts for messaging services (including Tencent QQ),
platforms, or applications that GE used for communications in connection with
the creation, research, designing, or development of the CASHBACK system,
program, or mechanism of 51fanli.com before January 4, 2011.”
Special Interrogatory No. 25 calls
for Defendant to describe the actions it took to respond to Plaintiff’s written
discovery, including how it searched for documents or who it consulted with.
Plaintiff characterizes both
interrogatories as “discovery about discovery.” This characterization is
accurate as to Special Interrogatory No. 25, however it does not appear Special
Interrogatory No. 19 is concerned with Defendant’s actions taken to respond to
this discovery, rather it calls for information concerning Ge’s email
addresses, phone numbers, social media accounts, and other information from
2011. There does not appear to be any connection between the information sought
by this interrogatory and Defendant’s responses to discovery, nor is there a
nexus to either of Plaintiff’s jurisdictional theories.
As for Special Interrogatory No.
25, Defendant correctly points out that discovery about discovery is typically
disfavored and requires a showing of some deficiency in a party’s production
before it will be allowed. Plaintiff attempts to make this showing, arguing
Defendant has previously provided a declaration which initially contradicted
one of Defendant’s discovery responses, although Plaintiff acknowledges
Defendant cured this deficiency by submitting an errata to the declaration,
which is now consistent with Defendant’s discovery responses. The Court finds
this temporary conflict between Defendant’s declaration and discovery responses
is insufficient to merit discovery into Defendant’s actions taken to respond to
discovery. Plaintiff argues without this discovery, it has no way of ensuring
Defendant carried out its discovery obligations in good faith. However, this is
true of all written discovery, and as the parties appear to recognize, such
discovery into discovery is not permitted as a matter of right.
For these reasons, the Court
DENIES Plaintiff’s motion to compel further responses to these interrogatories.
9. Sanctions
Both parties have asked the Court
to impose monetary sanctions against the other in connection with this motion
to compel. After reviewing the parties’ filings, the Court has granted
Plaintiff’s motion in part and denied it in part based on the arguments raised
by the parties. The Court notes Plaintiff’s motion raises complex issues of
jurisdiction for which there is little clear authority directly on point to
guide the parties. On such facts, the Court finds the parties’ filings were
made with substantial justification and declines to impose sanctions against
any party.
Conclusion
Plaintiff’s Motion to Compel Further Responses to
Jurisdictional Discovery is GRANTED in part and DENIED in part as set forth
above.