Judge David J. Cowan, Case 18STPB11082 2023-03-29 Tentative Ruling

On February 24, 2023, the Court entered an order denying, without prejudice, an earlier motion of Michael Velcherean (“Respondent”) to terminate discovery reference on the basis that the limited evidence provided as to the financial ability of Respondent to pay for the discovery referee was without foundation.

On March 2, 2023, the Court entered an order continuing, for the reasons stated therein, the motion of the Huang Family Members (“Petitioners”) to replace or modify the protective order previously entered ex parte on October 22, 2019, until the Court was able to rule on an OSC then issued why the protective order should not be vacated.

On March 3, 2023, Respondent filed this motion to terminate the discovery reference. Respondent asserts the discovery referee has to date charged over $120,000 for his services and will continue to charge $950 per hour for further work pursuant to the reference, including a pending motion. Respondent filed a declaration in support of the motion, making a claim of hardship, and showing his purported present financial condition, including reference to the family allowance, as well as details of his income from various sources the last year (including from two brokerage accounts) in the net amount of $50,710, monthly expenses of $19,700 (exclusive of legal fees) and a pay stub from his alleged employer, Fanfare Trading. In sum, therefore, Respondent asserts he has approximately $45,000 available per month.

On March 16, 2023, Petitioners filed Opposition to the motion. They assert that the amount of referee’s fees is due to discovery abuse by Respondent – as to which he therefore cannot now complain – and which makes a continued reference necessary. They also contend that Respondent failed to disclose his access (as loans) to significant amounts he has received (directly or indirectly) from Fanfare Trading, his ostensible employer, which they contend is under his control and not a true third party – and that therefore he does have the ability to pay the referee’s fees. In summary, they argue that Respondent has not complied with this Court’s earlier order that he show not just his income but also his assets and that Respondent has not provided the latter. They also question he whereabouts of in excess of $2 million that is or was under the control of either Fanfare Trading or another entity they assert is also under the control of Respondent, Altrien, and from which he has received additional money.

On March 16, 2023, Respondent filed a Response to the OSC. Respondent indicates he now agrees with Petitioners in their request in the pending motion that the protective order be modified so it is consistent with the LASC form protective order but that he objects to cancellation of prior designation of five categories of documents as confidential, as suggested in the OSC. In particular, he argues it would violate his rights of privacy for the court file to contain Decedent’s correspondence about her mental state, photographs depicting personal or sexual matters, bank statements of Respondent and Fanfare Trading, calls to 911 and LAPD “body worn footage,” as well as personal income tax returns. He also requests the Court take judicial notice of an order of Judge Suzuki of July 26, 2019 compelling production of records by Respondent.1

On March 23, 20223, Petitioners filed a Reply in support of the OSC. They agree to termination of the protective order and for the Court to cancel the designations based on confidentiality. They concur with the Court that CCP sec. 2017.320 applies here related to sealing evidence that may show elder abuse.2

On September 27, 2022, to address various complaints of Respondent, Judge Small clarified the reference in certain respects, including capping the number of hours the referee could spend on this case, but found that neither side had proven an inability to pay a share of the referee’s fees, as required by CCP sec. 639(d)(6). Judge Small noted further that there was a pending petition by Respondent for a family allowance which might impact Respondent’s ability to pay for the referee.

“Implicit in the statutory requirement that appointment of discovery referee by trial court be ‘necessary’ is the Legislature’s acknowledgment of a litigant’s right of access to the court without the payment of a user’s fee…absent extenuating circumstances…a declaration concerning the party’s financial hardship should be considered sufficient, and no more can be required. To conclude otherwise in this case would be silly – in the time it takes to determine the legitimacy of the claimed inability to pay, the court could have determined the discovery disputes – and still had time left over.”

It is apparent that this case, with numerous petitions, as well as the related civil case for elder abuse, are hard fought and are requiring significant legal fees -- which shows no sign of abating. The Court has three motions for summary judgment to decide shortly. Preparation for and then conducting the several trials contemplated on the many issues in dispute will likely take very considerable time and effort of counsel. Given what the Court has seen of litigation activity in this case in the relatively short time it has been assigned this case, it is very likely Respondent will need all the referenced $45,000 or more to keep his several lawyers current on their bills.

Notwithstanding Judge Small’s earlier ruling, the Court now finds, based upon the additional evidence presented, that continuing to pay some share of the referee’s fees is likely to interfere with Respondent’s ability to pay his counsel (at the rates they are apparently charging) and address the merits of the numerous issues pending. While it is not clear why Respondent has as many law firms as he does, the Court cannot assess that decision and even if had less law firms the Court still finds continued payment of a share of referee fees will impact Respondent’s ability to address the many issues involved with the assistance of counsel. Discovery issues continue to be likely even just based on the disputes relating to the protective order that are the subject of the other motion and OSC now before the Court.

The Court concurs with Petitioners that Respondent has not provided the complete financial picture the undersigned stated previously it expected. Hold, supra, suggests however taking issue with a statement of hardship may itself be beyond the court’s purview without some good cause to do so. The Court is skeptical that Respondent’s status with Fanfare Trading and Altrien is strictly one of employee on his part given the personal expenses they appear to have made on his behalf. Even if this is good cause not to accept Respondent’s claim at face value, making a complete determination of the separateness of these entities, and to what extent Respondent has access to moneys under the control of these entities, would likely require a trial in and of itself. Further, these entities have not made a general appearance before the Court. Their motions to quash service of summons are pending. Hence, even if the Court were permitted to address these issues in this context, the Court is also guided by the holding in Hold, supra, that conducting such inquiry is likely to take the Court down a further side path and that case management is better achieved by simply ruling expeditiously on the discovery motions themselves.

Petitioners may also be correct that at least some of these fees are Respondent’s own doing that he could have avoided had he met his obligations to provide discovery responses given the findings of the referee that the Court adopted.3 Judge Small also found that the significant work involved in addressing these discovery issues was difficult given the volume of other cases during the height of the pandemic. This courtroom is also busy with many other difficult cases. Regardless, the CCP provides a full arsenal of remedies to a trial court to address any continuing misuse or abuse of the discovery process, including also evidentiary and terminating sanctions. Assessing monetary sanctions is not the Court’s only option depending on the circumstances. Further, where the reference is a “special reference” requiring this court’s independent review of recommendations of the referee, it is not clear what savings there are in having a discovery reference. Tagarres v. Superior Court (1998) 62 Cal.App.4th 94, 106 still requires this Court not to permit a discovery reference where “one party is not reasonably able to finance private dispute resolution.” Given the referee’s fees to date, the Court is unable to assess whether or to what degree Respondent can afford those fees. Respondent also asserts Petitioners have an unlimited budget to litigate every issue and thereby prevent Respondent being able to afford to ultimately go to trial.

There is no motion for a new protective order; only an agreement to modify the current one. It is not clear Petitioners are now still pursuing their motion to modify where they support the reasons for the OSC and agree no order is needed. Even if Respondent’s argument is treated as a motion for a new protective order, the Court does not find good cause to issue one, for the reasons noted in its earlier order, except potentially for specific documents, as set forth below.

Respondent contends he produced documents believing there would be a protective order. Petitioners contend Respondent has over-designated documents confidential - causing issues and extra expense with filing of documents and securing information from non-parties. If Respondent wants specific documents to continue to be sealed, he may bring such a motion in the next thirty days; subject to the Court’s order as to all discovery disputes set forth below. Absent an order allowing continued sealing, all documents previously designated confidential will no longer be so designated.

1. Decedent’s correspondence. Any privacy right of Decedent would belong to the Special Administrator, not Respondent. To the extent they were written to or by Respondent, the Court acknowledges their subject is likely personal and sensitive. However, where personal relations between spouses in marital dissolution cases or issues between persons involved in domestic violence situations are required to be public records, this situation does not seem materially different: Parties do not have an automatic right to make their affairs private where the adjudication of disputes is presumptively public and open to review. Further, where these and other document types referenced below may evidence elder abuse, the Court is required to make findings consistent with CCP sec. 2017.320 prior to any sealing. Respondent did not address this issue. No such findings have been sought to date.

2. Photographs of sexual or personal matters. Petitioners assert there are not any such documents where Respondent did not create a log of any such documents, as ordered by Judge Suzuki. If there any, Respondent can move to seal. That said, it is not clear what privacy may attach to non-sexual “personal” photographs of Respondent or what pictures that includes exactly.

3. Bank records of Respondent and Fanfare Trading. Respondent has no standing to assert any privacy interest of Fanfare Trading – particularly where the company is contesting this Court’s jurisdiction to make orders about it – and Judge Suzuki’s order denying his motion to quash production of those records. The Court will have to address in any future motion whether any account of Respondent was solely his separate property where Decedent is presumed to have a community property interest in assets acquired while they were married. If she has some interest in that account, it is not clear he can assert a privacy interest at least as to the Special Administrator (and as a result from other interested persons). It appears however Petitioners may agree to continued confidentiality of at least certain personal accounts.

5. Calls to 911 or LAPD body worn videos. Again, while these may be sensitive, it is not clear there is a continuing privacy right where according to Petitioners this may have been waived in filing other documents revealing this information. Moreover, the Legislature has made a policy determination that elder abuse may be deterred where the public can see situations where abuse may have occurred. The Court will need to review each document for which confidentiality and sealing are sought.

Footnotes:

1) The Court takes judicial notice of that order. As discussed below, nothing ordered herein is inconsistent with that order.

2) The Court also takes judicial notice of the documents requested.

3) It is not appropriate for this Court to consider Respondent permissibly seeking review of the adverse orders against him as a basis to keep the reference order in place. Relatedly, the pendency of an appeal from those orders does not divest this court of jurisdiction over collateral matters that do not make moot any ruling by the Court of Appeal – for purposes of CCP sec. 916. The orders allowing a reference are not themselves under appeal as the Court understands it. This motion concerns what procedure should be followed going forward; not the propriety of compelling production or responses or as to sanctions already decided. Any other decision now would effectively stay holding a trial on the merits.

4) The Court orders an informal discovery conference (“IDC”) prior to the filing of all future discovery motions, including the one now pending before the discovery referee. Scheduling an IDC with this courtroom will toll the 45 days filing requirement for filing of a motion to compel. The parties are ordered to orally meet and confer in person or in a visual remote format prior to the IDC. A joint IDC statement is required to be filed five days before the IDC.