Judge: David A. Rosen, Case: 19GDCV00819, Date: 2023-02-24 Tentative Ruling

Case Number: 19GDCV00819    Hearing Date: February 24, 2023    Dept: E

Hearing Date: 02/24/2023 – 8:30am
Case No. 19GDCV00819
Trial Date: 03/20/2023
Case Name: ASATUR GALADJIAN, et al. v. INTERVALLEY ESCROW, INC., et al.

2 TENTATIVE RULINGS – MOTION TO ENFORCE SUBPOENAS

MOTION 1

Moving Party:  Defendant/Cross-Complainant, JCP, LP (JCP)

Responding Party: Plaintiffs Asatur Galadjian and Armenuhi Galadjian, and Third-Party objectors Hakob Galadjian (Hakob) and Millennium Towing, LLC (Millennium)  [A combined opposition was submitted to oppose both moving party’s motions.]

RELIEF REQUESTED¿ 
Defendant/Cross-Complainant, JCP, moves this Court to enforce the business records subpoena to Citibank, N.A. (Citibank) over the objections of Hakob Galadjian

The motion is made pursuant to the provisions of Code of Civil Procedure sections 1985.3, 1987.1 and upon the grounds that Citibank was duly served with a deposition subpoena for business records, but ceased efforts to comply due to an objection by Hakob Galadjian.

JCP alleges that, “Code of Civil Procedure §1985.3(g) provides that “[t]he party requesting a consumer’s personal records may bring a motion under Section 1987.1 to enforce the subpoena within 20 days of service of the written objection.” Code of Civil Procedure § 1013 provides the time is extended by 2 days when service is completed by email. JCP timely files this motion to enforce the Subpoena.”

Procedural
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): Ok

Opposition and Reply Submitted

Moving Papers: Notice of Motion/Motion; Separate Statement; Request for Judicial Notice

Opposition Papers: Opposition [The opposition was a combined opposition for both motions.

Reply Papers: Reply [The reply was a combined reply to the combined opposition.]

Timeliness and Meet and Confer
In relevant part, CCP § 1985.3(g) states, “The party requesting a consumer’s personal records may bring a motion under Section 1987.1 to enforce the subpoena within 20 days of service of the written objection. The motion shall be accompanied by a declaration showing a reasonable and good faith attempt at informal resolution of the dispute between the party requesting the personal records and the consumer or the consumer’s attorney.” (Ibid..)

JCP states that Hakob filed third-party objections to the Citibank subpoena for business records on November 9, 2022. On the notice page of this motion, JCP states how CCP §1013 provides the time is extended 2 days when service is completed by email.

Here, the Court is unclear how this motion is timely. Moving party alleges objections were served on November 9, 2022; however, this motion was filed and served on December 19, 2022. This motion was thus filed far beyond 20 days within service of written objections, even if 2 days is added.

As to the meet and confer requirement, counsel for JCP states that on November 28, 2022, counsel met and conferred with Eugene Alkana, counsel for Hakob. JCP’s counsel stated that they offered to enter into a protective order to keep the matters produced confidential, but Mr. Alkana would not agree to the production of records. (Decl. Howard ¶10.)

BACKGROUND
Plaintiffs filed a Complaint on 06/19/2019. A First Amended Complaint was filed on 06/21/2019. A Second Amended Complaint was filed on 02/13/2020.

A Cross-Complaint was filed on 07/17/2020.

Plaintiffs’ Third Amended Complaint was filed on 10/09/2020.

Moving Party, JCP’s, Arguments to Enforce Subpoena
JCP states that Defendant/Cross-Complainant JCP is a victim of an alleged real estate scam. JCP alleges that it funded a $720,000 loan to Plaintiffs, and the loan is secured by a deed of trust encumbering real property located at 2040 Chilton Drive, Glendale, CA. JCP states that the Galadjians contend their signatures were forged on the loan documents and that they did not receive any of the loan funds. JCP alleges that six months after the loan was made and the deed of trust recorded, the Galadjians initiated an action seeking to cancel the loan and deed of trust on the grounds that their identities were stolen. Against JCP, the lender, the Third Amended Complaint alleges causes of action for negligence, quiet title, cancellation of instruments, slander of title, unfair business practices, unjust enrichment, and injunction. JCP filed a cross-complaint for declaratory relief, equitable subrogation, unjust enrichment, conversion, breach of contract, and fraud.

JCP alleges there is a suspicion the Galadjians and their son, Hakob Galadjian, orchestrated a fraud wherein they allowed third parties to pose as the Galadjians for purposes of obtaining a loan against the Chilton Property. JCP alleges that the Galadjians have a history of associating with known criminals charged with bank fraud and white-collar crimes similar to the fraud orchestrated against JCP.

JCP further alleges that the documents provided in support of the loan, are documents the Galadjians admit would only be accessible and in the possession of the Galadjians and their son. Additionally, JCP alleges that Denis Rediger, the principal of JCP, was given access to the Chilton Property by the Galadjians to inspect the property prior to funding and that the only persons residing at the Chilton Property are the Galadjians and their son.

JCP alleges that the Galadjians’ claim that the loan is fraudulent is highly suspicious because they benefitted from the loan when approximately $204,380.20 of the loan proceeds were used to pay off the Galadjians’ existing debt.

Therefore, JCP seeks to investigate and confirm that the Galadjians and their son, did not receive any portion of the loan funds through the alleged fraudulent scheme. JCP issued a subpoena to Citibank for financial records relating to the Galadjians’ son, Hakob Galadjian. JCP alleges it learned through employees of Fidelity Funding that they believed an individual by the name of Hakob arranged for the inspection of the Chilton Property prior to the funding of the loan.

JCP alleges the purpose of the subpoena is to determine whether the Galadjians did any business with the alleged fraudsters in this matter and whether the Galadjians received any benefit from the loan funds by way funneling of money through the fraudsters through their son.  JCP argues such records are directly relevant to the investigation of the alleged fraud claimed by the Galadjians. Therefore, JCP seeks an order enforcing the subpoena to Citibank over the objections of Hakob.

Interestingly enough, on page 5 of the motion, JCP, apparently providing background and context, appears to impliedly admit that a person named Artak Babakhanyan and Fidelity Funding submitted a loan application on behalf of individuals who represented themselves to be the Galadjians.

Plaintiffs and Third-Party Objector Hakob’s arguments opposing enforcement of subpoena
Opposition argues that Plaintiffs were victims of identity theft. Opposition alleges that Plaintiffs had a conventional first mortgage of $188,00.00 with Cenlar, the loan was current at all times, and JCP replaced the long term, low interest Cenlar loan with a one-year term loan from JCP for $720,00.00.

Opposition argues that the co-brokers, Rediger Investment Corporation and Fidelity Funding, admit they never met the Galadjians, and or anyone pretending to be the Galadjians. Opposition argues the co-broker only met with Arak Banakhanyan, a felon convicted of defrauding Commonwealth Land Title Insurance Company in 2016, in Criminal Case No. BA422178-01 (Los Angeles).

Opposition argues that the funds from the fraudulent loan have already been traced in detail, that Defendants have not taken the depositions of any of these entities referenced above nor seen fit to sue any of these entities, and Hakob is a third party and not a Defendant. Opposition also argues Hakob’s deposition was taken and he never met or knew of the defendants. Opposition argues that the subpoenas and these motions are based solely on groundless conjecture.

MOTION TO QUASH – LEGAL STANDARD
“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.” (CCP §1987.1(a).)

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.) When the information sought to be discovered impacts a person’s constitutional right to privacy, limited protections come into play for that person. (Shaffer v. Superior Court (1995) 33 Cal.App.4th 993, 999.) The protections cover both a person’s personal and financial matters. (Id.) The court must balance competing rights — the right of a litigant to discover relevant facts and the right of an individual to maintain reasonable privacy — in determining whether the information is discoverable. (Id.) 

For discovery purposes, information is relevant if it might reasonably assist a party in evaluating the case, preparing for trial, or facilitating settlement. (Gonzalez v. Superior Court (1995) 33 Cal.App.4th 1539, 1546.) 

The framework for evaluating invasions of privacy in discovery has been clarified in Williams v. Superior Court (2017) 3 Cal.5th 531. There, the California Supreme Court held that, generally, “[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. 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. A court must then balance these competing considerations. (Williams, 3 Cal.5th at p. 533, citing Hill v. Collegiate Athletic Assn. (1994) 7 Cal.4th 1, 35.) The court rejected cases which held that the party seeking protected information must always show a compelling need or interest. (Id. at p. 557.) Instead, the court held, “[o]nly obvious invasions of interest fundamental to personal autonomy must be supported by a compelling interest.” (Id.) When lesser interests are at stake, “the strength of the countervailing interest sufficient to warrant disclosure of private information var[ies] according to the strength of the privacy interest itself, the seriousness of the invasion, and the availability of alternatives and protective measures.” (Id.) 

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.)  Once good cause is shown, courts must carefully balance a right of privacy against the interest in having just litigation.  (Pioneer Electronics (USA), Inc. v. Superior Court (2007) 40 Cal.4th 360, 371.) 

A court may abuse its discretion in denying requests for discovery, or in granting a motion to quash, where it fails to consider interests favoring disclosure, or an order partially limiting rather than outright denying discovery. (Johnson v. Superior Court (2000) 80 Cal.App.4th 1050, 1073 (reversing trial court order quashing entirely deposition notice, and instead ordering discovery of private medical history, but only to the extent relevant.)

Subpoena to Citibank
Please produce the following documents relating to any and all accounts held by Hakob Galadjian including Account No. 38762924; SSN: XXX-XX-1255; DOB: 07-05-1996:

a. Monthly bank account statements showing deposits from January 1, 2019 to the present;

b. All cancelled checks drawn on the account(s) between January 1, 2019 to the present;

c. All checks issued (including cashier’s checks or money orders) from the account(s) from January 15, 2019 to the present;

d. All checks deposited into the account(s) from January 1, 2019 to the present;

e. All incoming wire or electronic transfers into the account(s) between January 1, 2019 to the present;

f. All outgoing wire or electronic transfers out of the account(s) between January 1, 2019 to the present;

g. All documents relating to or reflecting wiring instructions, both online and in branch, including the receiving payee's identity, the receiving account number, and receiving bank name and address of the payee, for funds sent out of the account(s) between January 1, 2019 to the present

h. All withdrawals from any account made between January 1, 2019 to the present.

Objections by Hakob to Citibank Subpoena
In relevant part, “Third Party is a consumer whose financial records are protected under Article 1, Section 1 of the California constitution. The records of Hakob Galadjian are irrelevant to the issues presented in this lawsuit. Furthermore, the subpoena itself is overly broad and encompasses a time frame well beyond any relevant period of time involved in this lawsuit.” (Ex. 3 moving papers.)

DISCUSSION
Relevancy

As moving party correctly pointed out, the objections were not tailored to the specific requests, the objections were asserted generally.

Moving party argues the objection as to relevancy should be overruled because the objection is boilerplate and because the documents requested are clearly relevant in ascertaining the persons who are in control of the accounts and money and whether such persons are related to any of the individuals who participated in the allegedly fraudulent loan transaction.

Moving party argues that the information relating to the deposits and expenditures after January of 2019 are relevant in determining (1) whether any portion of the loan proceeds was ever transferred from a participant in the loan transaction; (2) whether Hakob or any other person or entity has been used to “wash” illegal monies obtained through the fraudulent transaction. JCP alleges the production of documents will lead to information as to whether these parties, including the Galadjians and their son, participated in the purportedly fraudulent transaction.

Opposition doesn’t appear to assert in any clear fashion how the instant requests are irrelevant, or not reasonably calculated to lead to the discovery of admissible evidence.

Thus, the Court doesn’t find the objection as to relevancy convincing, and it is overruled.

Overbroad
JCP alleges that the objection as to overbroad in time and scope is not valid because the subpoena requests banking documents from January 1, 2019 to the present  and the loan the Galadjians seek to invalidate closed on January 15, 2019. JCP argues with a difference in time period of two weeks, the subpoena is narrowly tailored.

Opposition argues that the instant requests are overbroad because:

1.      The overbroad language of the Subpoenas, Defendant would obtain a whole host of documents that have nothing to do with that time frame nor of the tracing of funds that it claims to be investigating.

2.      For example, Defendant could use the Subpoena to obtain a vast array of documents pertaining to virtually every aspect of this third-party individual and LLC. Defendant could subject Plaintiffs and their affiliates to yet further needless scrutiny, and continue to harass Plaintiffs by impugning their honesty (as they have readily done in drafting these two motions).

3.      By this subject subpoena, Defendant JCP has sought virtually every single banking document in the possession of Citibank or B of A pertaining to Millennium over the three-plus years since January of 2019. Attachment 3 to the subpoena seeks all bank account statements over the three-year period; all checks, wires, and transfers over the period; and the hugely overbroad request at 1.g for “all document relating to or reflecting wiring instructions.” As a result, Objectors stated that these requests were overbroad and an invasion of privacy, because compliance with such requests would place virtually every single detail of Millennium’s operations and Hakob’s financial life before the scrutiny of this hostile party.

Here, the Court does not find Opposition’s arguments as to the subpoenas being overbroad as convincing. This objection is overruled.

Privacy
JCP argues the burden is on Hakob to identify how disclosure of the relevant documents will invade his privacy, and that the burden of establishing the information sought is protected by his financial privacy rights. Further, JCP argues that the right to privacy is not inalienable, and it must be balanced against the interest in the right of civil litigants to obtain discovery.

Opposition’s argument as to privacy is less than clear, as Opposition appears to predominantly argue about overbreadth.

Opposition states, “In balancing the limited and questionable relevancy of all the documents requested, the rights of privacy of third parties, and the burden and expense of production, it seems that there are far less intrusive ways for Defendant to investigate this matter. For example, the Court could set a lower limit for any transfers to be reported under these subpoenas, such as $100,000. The result would be that JCP could then investigate Millennium’s and Hakob’s finances (and disprove its involvement in any transfers related to this property) without opening up every single detail of its operations and financial life to the scrutiny of this hostile party.”

The Court finds that whatever privacy interests Hakob may have, JCP’s right to obtain relevant facts outweighs Hakob’s right to privacy. This objection is overruled.

Funds Already Traced
Opposition argues as follows:

Plaintiffs’ bank records have been subpoenaed, all of which clearly demonstrate that Plaintiffs never received any portion of the funds from the fraudulent loan. The loan proceeds themselves have been traced. Plaintiffs’ subpoenas to the entities that received the funds show as follows:

• At the close of escrow on January 14, 2019, just over $200,000 was paid out – $188,000 to Cenlar, holder of the Galadjian’s first mortgage, and $15,000 on a bail bond for Hracha Manukyan.

 • Approximately $30,000 was withheld by the lender for fees and prepaid interest to JCP, $11,350

• Approximately $15,000 went to Fidelity Funding; and • The remaining net balance of $482,490, was wired to the fraudulent account at Bank of the West (the account that was opened with a mere $100.00 only about 2 days before escrow closed). (Alkana Decl. at ¶ 6.)

     In summary, Defendants deducted their own fees, costs and prepaid interest; the balance of $482,490 was wired to the fraudulent account at Bank of the West. Plaintiffs never had knowledge of or access to this account. (Id.)

On January 17, 2019, the fraudsters wired the net proceeds out of the account at Bank of the West to Commonwealth Business Bank (“CBB”), into the account of A&J Financial Services (“A&J”), an entity completely unknown and unrelated to the Plaintiffs. A&J retained $36,000. On January 22, 2019, A&J wired the remaining $426,000 into the account of Regael Raz, aka Rafi Raz also an individual completely unknown to Plaintiffs. Rafi Rab’s declaration is attached hereto as Exhibit “B” and incorporated herein by reference. Rafi Rab kept $12,551 and sent the remaining funds of $413,449, in 2 installments of $207,000 on January 23rd, and $206,449 on January 24, 2019, to KFI, a gold dealer in Los Angeles, owned by Simon Simonian, also completely unknown to Plaintiffs. All of the funds have been traced through bank record subpoenas. The path of the traced funds has been known to Defendants for almost two years. (Id. at ¶ 7.)

In Reply, JCP does not address whether or not it has already traced the loan amounts. However, assuming the defense has done so, the subpoena addressing Hakob’s data, in this narrow fashion, is still appropriate.

Groundless Conjecture

Opposition argues that:

There is no evidence whatsoever that Millennium has ever had any connection to the issues in this lawsuit. The sum total of JCP’s entire motion is revealed in the Howard declaration, para. 6, first sentence: “There is suspicion the Galadjians and their son … orchestrated a fraud….” (Howard Decl. at ¶ 6, emph. added.) In paragraph 7, they say that money might have been funneled through this business entity, but again without any evidentiary support. Movant JCP can’t even bother to articulate who supposedly has this imagined suspicion, much less the reasons for it. An anonymous “hunch” without explanation cannot reasonably form the basis for this significant intrusion into the privacy rights of these third parties.

(Oppo. p. 6.)

In reply, JCP argues the subpoenas are not based on conjecture because:

Prior to the loan funding, a representative of JCP was given access to the interior of the Property for an inspection. The Galadjians and their son testified at their deposition that the only persons that could have let anyone into the house for an inspection were them. They adamantly denied the possibility that any other person could have provided access to the Property. This begs the question as to why the Galadjians or their son would give JCP access to the interior of the Property if they were not involved in the loan transaction.

Further, in connection with the loan, JCP received several documents which would only be in the possession of the Galadjians or their son. These documents included mortgage statements that the Galadjians stores inside their home.

Additionally, the Galadjians are associated with convicted felons charged financial crimes. The Galadjians secured several bail bonds for their criminal friends and relatives. This raises a further suspicion that they may have been associated with the fraudsters in the current loan transaction.

(Reply p. 3.)

The Court is persuaded by JCP’s argument and stated underlying facts.

TENTATIVE RULING MOTION 1

JCP’s motion to enforce the subpoena served on Citibank is GRANTED. Hakob’s objections to the subpoena are overruled. Hakob’s right to financial privacy is outweighed by JCP’s right to obtain discovery.

MOTION 2

RELIEF REQUESTED
JCP moves this Court to enforce the business records subpoena to Bank of America, N.A. (“BofA”) over the objections of Millennium Towing, LLC.

BACKGROUND
The instant motion is identical to Motion 1, except it differs as follows:

JCP learned that the Galadjians own a towing business called Millennium Towing. To investigate whether the Galadjians benefitted from the loan or were involved in the fraudulent scheme, JCP served a business records subpoena to Bofa for bank statements and records relating to any transactions that occurred on or after the loan date. On November 9, 2022, Millennium served objections by email to the production of records.

(Def. Mot. p. 6.)

TENTATIVE RULING MOTION 2
Motion 2 is identical to motion 1 except motion 2 obtains to a subpoena served on Bank of America, N.A and Millennium Towing was the objecting third party. Opposition submitted a joint Opposition to both motions; therefore, Opposition’s arguments were brought up in Motion 1.

The Court overrules the objections to the subpoena. The only difference between the motions was that in the moving papers, JCP cited a case stating that corporations do not have a right of privacy. Whether this citation is accurate or not, it is not of importance to this motion because whatever privacy right Millennium towing may or may not have, it is outweighed by JCP’s right to obtain discovery. JCP’s motion to enforce the subpoena served on Bank of America, N.A. is GRANTED.

Sanctions Ruling for motions 1 and 2
“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).)

Here, neither party requested sanctions. Therefore, in the Court’s discretion, no sanctions are awarded.

Request for judicial notice by moving party

Moving party requests judicial notice of 18 Exhibits under Evidence Codes 451, 452, and 453.

Judicial notice may be taken of the following matters to the extent that they are not embraced within Section 451:

(a) The decisional, constitutional, and statutory law of any state of the United States and the resolutions and private acts of the Congress of the United States and of the Legislature of this state.

(b) Regulations and legislative enactments issued by or under the authority of the United States or any public entity in the United States.

(c) Official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States.

(d) Records of (1) any court of this state or (2) any court of record of the United States or of any state of the United States.

(e) Rules of court of (1) any court of this state or (2) any court of record of the United States or of any state of the United States.

(f) The law of an organization of nations and of foreign nations and public entities in foreign nations.

(g) Facts and propositions that are of such common knowledge within the territorial jurisdiction of the court that they cannot reasonably be the subject of dispute.

(h) Facts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.

(Evidence Code §452.)

The trial court shall take judicial notice of any matter specified in Section 452 if a party requests it and:

(a) Gives each adverse party sufficient notice of the request, through the pleadings or otherwise, to enable such adverse party to prepare to meet the request; and

(b) Furnishes the court with sufficient information to enable it to take judicial notice of the matter.

(Evidence Code §453.)

Judicial notice is GRANTED only as to exhibits 17 and 18.