Judge Elaine W. Mandel, Case Number: 22SMCV01642, Date: 2023-11-17 Tentative Ruling

Judge: Elaine W. Mandel, Case: 22SMCV01642, Date: 2023-11-17 Tentative Ruling

Case Number: 22SMCV01642 Hearing Date: November 17, 2023 Dept: P

Tentative Ruling

Smith, et al. v. GNG Development LLC, Case No. 22SMCV01642

Hearing date November 17, 2023

Plaintiffs’ Motion for Summary Adjudication

Defendant Faryar Ghaemi’s Motion to Quash Deposition Subpoenas (Employment Records)

The Smith plaintiffs hired defendants Farhad Ghaemi and his company GNG Development to perform remodeling work on their home. The contract warrants that GNG possessed a contractor’s license. Plaintiffs allege GNG was unlicensed and defendants breached the contract by failing to obtain work permits.

On July 21, 2023 the granted plaintiffs’ motion for summary adjudication in part, ruling defendant GNG was liable for disgorgement as a matter of law under Business and Professions Code §7031. The court denied summary adjudication as to individual defendants Farhad and Faryar Ghaemi. Plaintiffs renew their motion against Farhad and Faryar Ghaemi based on evidence from discovery responses and declarations after the first motion was made. This is proper under Code of Civ. Proc. §437c (f)(2), which allows a renewed motion for summary adjudication based on issues asserted in a prior motion upon a showing of “newly discovered facts or circumstances[.]”

A plaintiff fulfills an initial burden on summary adjudication or judgment by proving each element of the cause of action. Code of Civ. Proc. §437c(p)(1). The burden then shifts to defendant to show a genuine issue of fact as to one or more elements or an affirmative defense. Celotex Corp. v. Catrett (1986) 477 U.S 317, 323.

Bus. & Profs. Code §7031 Claim – Farhad Ghaemi

A person who utilizes the services of an unlicensed contractor may bring an action to recover all compensation paid to the contractor “for performance of any act or contractor.” The burden is on the contractor to prove proper licensure. Bus. & Profs. Code §7031(b), (d). When the contracting party is unlicensed, it is subject to §7031 liability even if the entity’s president or other principal has a license. Opp v. St. Paul Fire & Marine Ins. Co. (2007) 154 Cal.App.4th 71, 74-76. The statute applies to all persons and entities who act as contractors, regardless of whether they “operate . . . by formal contract.” MW Erectors, Inc. v. Neiderhauser Ornamental & Metal Works Co. (2005) 36 Cal.4th 412, 427. When the elements of §7031 are met, an unlicensed contractor must disgorge all profits, regardless of the equities involved. Courts have held the statute represents a legislative determination that deterring unlicensed contractors outweighs any harshness between the parties. Id. at 665-666.

Plaintiffs argue that though they did not directly contract with Farhad Ghaemi, he “acted as a contractor” on the project. Therefore, they argue, his lack of a license means he is liable for disgorgement under §7031(b).

Bus. & Profs. Code §7026.1(2)(A) defines a contractor as a person who “purports to have the capacity to undertake or submits a bid to construct any building or home improvement project, or part thereof.” It states a “consultant to an owner-builder” who meets the above criteria qualifies as a contractor, defining a “consultant” as one who “provides or oversees a bid for a construction project,” or “arranges for and sets up work schedules for contractors and subcontractors and maintains oversight of a construction project.” Id.

Plaintiffs cite Farhad Ghaemi’s declaration, wherein he admits he prepared construction contract on behalf of his sister Faryar Ghaemi, he was the “point of contact” with plaintiffs regarding the proposal and bid, determined the scope of work and acted as construction manager. Plaintiffs’ separate statement nos. 1, 3, 6, 7. Farhad Ghaemi does not dispute that he is unlicensed. His admission that he prepared the construction contract and was the “point of contact” regarding the bid indicates he acted as a contractor and is subject to the statutory licensing requirement. This is sufficient to shift the burden to show a triable issue of material fact under §7031.

Farhad Ghaemi presents evidence he never received money from plaintiffs other than the initial deposit of $1,000, which he immediately transferred to GNG Development. Defendants’ separate statement no. 13. Plaintiffs claim this is “irrelevant,” but Bus. & Profs. Code §7031 states “a person who utilizes the services of an unlicensed contractor may bring an action in any court of competent jurisdiction to recover all compensation paid to the unlicensed contractor for performance of any act or contract.” (emphasis added). The statute requires an unlicensed contractor to disgorge funds plaintiffs paid to them. Though Farhad Ghaemi was as an unlicensed contractor, plaintiffs can only obtain disgorgement under §7031 to the extent they paid money to him. Defendant’s evidence that plaintiffs paid GNG, not him, is sufficient to create a triable issue of fact as to the availability of disgorgement. He can only be required to disgorge what was paid to him. DENIED.

Faryar Ghaemi

Plaintiffs provide evidence Faryar Ghaemi acted as a contractor by bidding on and managing the project, did not have workers’ compensation coverage while the project was ongoing and employed 18 individuals as subcontractors. Plaintiffs’ separate statement Nos. 12, 16. Therefore, plaintiffs argue, her license was automatically suspended as soon as the work began, subjecting her to liability for disgorgement. Wright v. Issak (2007) 149 Cal.App.4th 1116, 1121. This is sufficient to shift the summary judgment burden.

Faryar Ghaemi does not dispute she had employees and lacked workers’ compensation, but she presents evidence plaintiffs did not pay her. Defendants’ separate statement 10, 12-14. Faryar Ghaemi can only disgorge funds paid to her. Therefore, as with the claim against her brother, this evidence is sufficient to create a triable issue of fact. DENIED.

Faryar Ghaemi’s Motion to Quash Subpoenas re: Employment Records

Faryar Ghaemi moves to quash plaintiffs’ subpoenas for her employment/payroll records from The RealReal and V One, her prior employers.

A court may quash a subpoena to protect a person from “unreasonable or oppressive demands, including unreasonable violations of the right to privacy. Code of Civ. Proc. §1987. Personnel records are protected by the right to privacy, so their compelled disclosure within litigation must be justified by a compelling interest. Board of Trustees v. Superior Court (1981) 119 Cal.App.3d 516, 526.

Faryar Ghaemi’s prior employment and payroll records are protected by the right to privacy, so to compel production, plaintiffs must show the records are relevant and necessary to the litigation. Plaintiffs argue the records are relevant to show Faryar Ghaemi lied on her contractor’s license application, in which stated she worked full time at a journeyman level in construction from 2015 through 2019. Plaintiffs argue Ghaemi worked for The RealReal and V One during this period, and payroll records will show she worked for them full-time, casting doubt on her declaration regarding her construction experience.

Plaintiffs have not shown this information is relevant, other than as possible impeachment. They provide no authority for the proposition that a contractor’s license is automatically invalid if the applicant provided false information on the application or that work provided under a license based on a false application gives rise to a private cause of action.

Faryar Ghaemi’s work for these employers was years before the events giving rise to this litigation. The records’ limited potential probative value does not justify production of private financial records. GRANTED.