Judge: Gregory Keosian, Case: BC689331, Date: 2023-01-25 Tentative Ruling

Case Number: BC689331    Hearing Date: January 25, 2023    Dept: 61

Plaintiff and Cross-Defendant Mark Guirguis’s Motions to Compel Further Responses to Requests for Production and Form Interrogatories from Defendants and Cross-Complainants Rachel Carlsen and Carlsen Financial, Inc. are:

·       GRANTED as to Interrogatories No. 7.1 and 8.4, and otherwise DENIED as to other interrogatories;

·       As to Carlsen, GRANTED as to Requests No. 4–8, 10–12, 14, 16–22, 27, 30–37, 40–48, 50, 51, 53–62, 64–70, 72, and 75–83, and DENIED as to Requests No. 1–3, 9, 28, and 29;

·       As to Carlsen Financial Inc., GRANTED as to Requests for Production to Company, No. 1–6, 8–13, 15, 17, 18, 22–24, 33, 36–39, 41, and 43–48, and DENIED as to Requests No. 19, 20, 25–29, 34, and 35.

Sanctions are DENIED.

I.      MOTIONS TO COMPEL FURTHER

“Any party may obtain discovery . . . by propounding to any other party to the action written interrogatories to be answered under oath.”  (Code Civ. Proc., § 2030.010(a).) If a propounding party is not satisfied with the response served by a responding party, the former may move the court to compel further interrogatory responses.  (Code Civ. Proc., § 2030.300; Sinaiko Healthcare Consulting, Inc. v. Pacific Healthcare Consultants (2007) 148 Cal.App.4th 390, 403.)  The propounding party must demonstrate that the responses were incomplete, inadequate or evasive, or that the responding party asserted objections that are either without merit or too general.  (Code Civ. Proc., § 2030.300(a)(1)–(3); Sinaiko Healthcare Consulting, Inc., supra, 148 Cal.App.4th at 403.)

“A propounding party may demand a responding party to produce documents that are in their possession, custody or control. (Code Civ. Proc., § 2031.010.) A party may likewise conduct discovery by propounding interrogatories to another party to be answered under oath. (Code Civ. Proc. § 2030.010, subd. (a).) The responding party must respond to the production demand either by complying, by representing that the party lacks the ability to comply, or by objecting to the demand. (Code Civ. Proc., § 2031.210.) The responding party must respond to the interrogatories by answering or objecting. (Code Civ. Proc. § 2030.210, subd. (a).) If the responding party fails to serve timely responses, the propounding party may move for an order compelling responses to the production demand and interrogatories. (Code Civ. Proc., §§ 2030.290, 2031.300.)

Plaintiff Mark Guirguis (Plaintiff) moves to compel further responses from Defendants Rachel Carlsen (Carlsen) to Requests for Production No. 1–12, 14, 16–22, 27–37, 40–48, 50, 51, 53–62, 64–70, 72, and 75–83, and to compel responses from Carlsen Financial, Inc. (Company) to Requests for Production No. 1–6, 8–13, 15, 17–29, 33–39, 41, and 43–48. Plaintiff moves to compel further responses to Form Interrogatories No. 2.5, 2.6, 2.8, 2.11, 2.12, 7.1(c), and 8.4 from both Defendants.

1.     Carlsen Financial, Inc. Requests

The requests sent to Company asked for various items of financial information, such as credit account statements, employee payroll reports, 1099s and 1096s, documents related to Company’s suspension by the California Franchise Tax Board in 2015, client agreements and communications, partner agreements,  balance sheets, fee-sharing agreements, Quickbooks audit logs, and other documents, generally dating from 2015 onward.

Company’s responses varied. Each stated some objections, and some — Requests No. 1, 10, 20, 21, 25, 26, 37, and 48 — stated only objections. Others, such as the responses to Requests No. 2, 3, 5, 6, 8, 9, 11–13, 27, 28, 33, 34, 36, 38, 39, and 43–47, stated that Company had no responsive documents. Company responded to Requests No. 4, 15, 17, 18, and 22–24 with statements of partial production, and to Requests No. 19, 35, and 41 with statements that it would produce all responsive documents in its possession.

The requests at issue are expansive in scope, but broadly supported by good cause. Plaintiff’s complaint against Carlsen and Company alleges that Carlsen misrepresented to Plaintiff the assets and value of Company in order to induce Plaintiff to enter a partnership with Carlsen, in which the assets of Company would form Carlsen’s capital contribution to the partnership. (FAC ¶ 15.) The FAC also seeks a dissolution of the partnership and an accounting, which likewise concerns the value of Company, as well as allegations that Carlsen embezzled funds from the partnership.(FAC ¶¶ 75–82.)

Defendants object to particular requests, however. They note that Requests No. 1 and 36 seek all credit accounts and statements maintained by Company from 2015 to the present, which they claim seeks private financial information without cause. (Opposition at pp. 5–7.)

“In determining whether disclosure is required [against a privacy objection], the court must indulge in a ‘careful balancing’ of the right of a civil litigant to discover relevant facts, on the one hand, and the right of the third parties to maintain reasonable privacy regarding their sensitive personal affairs, on the other. The court must consider the purpose of the information sought, the effect that disclosure will have on the affected persons and parties, the nature of the objections urged by the party resisting disclosure and availability of alternative, less intrusive means for obtaining the requested information. Based on an application of these factors, the more sensitive the nature of the personal information that is sought to be discovered, the more substantial the showing of the need for the discovery that will be required before disclosure will be permitted.” (Hooser v. Superior Court (2000) 84 Cal.App.4th 997, 1004, internal citations omitted.)

Here, the privacy objections raised as to the Company’s credit card statements are not substantial. The right to privacy in a corporation’s financial affairs is of lesser magnitude than the right of privacy held by natural persons. (See SCC Acquisitions, Inc. v. Superior Court (2015) 243 Cal.App.4th 741, 755.) Likewise, the request for Company’s credit accounts serve a twofold interest in this litigation: offering evidence of the Company’s actual value prior to the partnership agreement in 2017, and offering evidence of potential embezzlement of partnership and Company funds, which forms the basis for Plaintiff’s fiduciary duty and conversion claims. Thus further response is appropriate as to these requests.

Company also argues that further responses are unnecessary for Requests No. 8, 11, and 39 (which sought client agreements and bad debt records) because it provided statements of inability to comply, using the language: “Defendant states that Defendant has no responsive documents in its possession. Defendant believes that Plaintiff stole these documents.” (Separate Statement at p. 57.) This is not a statement of inability to comply under Code of Civil Procedure § 2031.230, which requires that such a statement “shall affirm that a diligent search and a reasonable inquiry has been made in an effort to comply with that demand.” (Code Civ. Proc. § 2031.230.) Without such assurance, a statement of inability to comply is incomplete. Thus Company’s responses to these requests — as well as other requests to which it responded with similarly infirm statements of inability to comply, such as Requests No. 2, 3, 5, 6, 8, 9, 11–13, 33, 36, 38, 39, and 43–47 —lack such a statement, and are incomplete.

Company also argues that Request No. 10, which seeks documents and correspondence related to Company’s 2015 Franchise Tax Board suspension, is unsupported by good cause. (Opposition at pp. 8–9.) But this request is related to Plaintiff’s claims concerning the value of the company when he negotiated the partnership agreement, which is reasonably related to that Company’s suspension two years prior. Company’s privacy objections, meanwhile, are unsupported.

The same is true of Company’s arguments as to Requests No. 21 and 22, which seek documents related to discounts given to customers and clients from 2015 onward. Company argues that these requests are overbroad in time, and that it has agreed to produce documents from 2016 to 2018. (Opposition at p. 9.) But the time-frame of 2015 is reasonable in relation to the subject matter of this litigation, which concerns the valuation of the company in 2017. For this same reason, Company’s responses to Requests No. 4, 15, 17, 18, and 22–24 are also defective, as they promise partial production of responsive documents, but similarly limit the production to documents created in 2016 or later, when the requests seek documents from 2015. Further responses are proper as to these requests.

Company further argues that Request No. 37 — which seeks Company’s agreements with the partners of Carlsen Financial Partners, another business entity — is overbroad and intrudes upon private information. (Opposition at p. 10.) But this request seeks relevant information about agreements between the Company and other entities and persons, not agreements among private persons. As Plaintiff argues, such agreements with Company could assist in evaluating the revenues and value of Company. (Reply at p. 8.) Company’s privacy objections are again conclusory and unsupported.

A further response is also appropriate as to Request No. 48, which sought Company’s payroll reports from 2016 through 2020. This request is relevant to Plaintiff’s claims of conversion and breach of fiduciary duty, as Plaintiff contends that Carlsen diverted funds from the partnership to Company on the pretense that Company was handling payroll. (Reply at p. 9.)

Thus most of the requests at issue in the motion directed to Company are supported by good cause, and unanswered by any substantive objections. However, certain requests do not require a further response.

For one, Plaintiff has withdrawn the motion as to Request No. 34 in reply. (Reply at p. 8.) Additionally, no further responses are necessary as to Requests No. 20, 25–29, which seek broad swaths of communications with Company’s clients, employees, and contractors, on the justification that Plaintiff is seeking evidence that customers of Company terminated their relationship with Company based on Plaintiff’s campaign of disparagement. (Reply at pp. 7–8.) However, the allegations at issue (contained in Carlsen’s consolidated Complaint from Case No. 20STCV26639) concern conduct in relation to clients that occurred in 2017 and after. (Carlsen Complaint ¶¶ 13–15.) This is out of step with the broad scope of the matters requested, which lack any similar time limitation. Finally, the responses to Requests No. 19 and 35, although offering a limited slate of documents to be produced, contained verified assurances that the documents to be produced were “all that Defendant has in its possession.” (Separate Statement at pp. 30, 51–52.) No further responses are warranted.

Accordingly, the motion is GRANTED as to Requests for Production to Company, No. 1–6, 8–13, 15, 17, 18, 22–24, 33, 36–39, 41, and 43–48, and DENIED as to Requests No. 19, 20, 25–29, 34, and 35.

2.     Carlsen Requests

Many of the requests directed to Carlsen and which are at issue in this motion are similar or identical to requests propounded upon Company. Carlsen responded to most of these — Requests No. 4–8, 10, 12, 14, 16–20, 22, 27, 31–37, 40, 41, 42–48, 50, 51, and 53–56 — by stating that these requests were properly directed to Company, rather than herself. (Opposition at p. 4.) Yet this is no objectionable matter, even if similar requests were served upon Company as well. f such documents “relate to the claim or defense of the party seeking discovery or of any other party to the action,” they may be discoverable. (Code Civ. Proc. § 2017.010.) Unless “the possession, custody, or control” of Company and Carlsen are construed to have identical reach, Plaintiff may seek identical categories of relevant documents from either party.

Carlsen also acknowledges that, of the above Requests, Nos. 42–48, 51, 51, and 53–56 relate to Carlsen Financial, LLP, rather than Company, meaning that deflections to the Company are not useful responses. (Opposition at p. 5.) Accordingly, a further response should be provided to these requests.

Requests no. 69, 70, 72, 75, and 78–82, require a further response from Carlsen. These requests asked Carlsen to supply documents substantiating assertions made by Carlsen or affiliated entities in other documents, such as Carlsen Garelick LLP’s tax documents. (Separate Statement at pp. 84–93.) Carlsen objects that each request, in referring to other documents, is not full and complete in itself. (Ibid.) But this objection is one properly made to special interrogatories under Code of Civil Procedure § 2030.060, subd. (d), not to requests for production, which lack such a limitation in the comparable statute. (See Code Civ. Proc. § 2031.030.)

However, certain of the requests directed to Carlsen are legitimately objectionable, and do not warrant a further response. Specifically, Requests No. 1–3 sought all documents relating to any credit accounts, TD Ameritrade accounts, and Charles Schwab accounts owned or controlled by Carlsen from 2015 onward. (Separate Statement at pp. 2–6.) These requests effect a broad inquiry into the personal financial affairs of an individual, and accordingly implicate a reasonable expectation of privacy. (San Diego County Employees Retirement Assn. v. Superior Court (2011) 196 Cal.App.4th 1228, 1242 [“Generally, ‘individuals have a legally recognized privacy interest in their personal financial information.’”].) Neither the requests themselves, nor Plaintiff’s explanations of cause, are of sufficient specificity to justify the intrusion that Plaintiff seeks.

Additionally, Request No. 9 seeks documents relating to any U-4 FINRA application submitted by Carlsen, to which Carlsen objected. (Separate Statement at p. 16.) Plaintiff does not offer a persuasive showing of good cause for this request, save a statement that he wishes to compare the representations made in the FINRA application to the representations that Carlsen made to him in 2017. (Separate Statement at p. 18.) Plaintiff offers no showing, however, that any such representations would be comparable or useful.

Finally, Requests No. 28 and 29 ask for all documents relating to two of Company’s customers, without any limitation as to time or subject matter. (Separate Statement at pp. 38–40.) These requests are similar to other such requests propounded to Company, discussed above, and for which no further responses are warranted.

Accordingly, the motion is GRANTED as to Requests No. 4–8, 10–12, 14, 16–22, 27, 30–37, 40–48, 50, 51, 53–62, 64–70, 72, and 75–83, and DENIED as to Requests No. 1–3, 9, 28, and 29.

3.     Interrogatories

Defendants argue that, of the Form Interrogatories at issue, all but two — No. 7.1 and 8.4. — were already answered through responses served by Defendants’ prior counsel. (Opposition at pp. 2–3.) Plaintiff concedes that this is correct, and accordingly withdraws the motion as to all interrogatories, save No. 7.1 and 8.4. (Reply at p. 2.)

Interrogatory No. 7.1 asked if Defendants were claiming damages to property, and if so, to state each item lost, the value of each item identified, and how that value was calculated. (Separate Statement at pp. 7–8.) Defendants described the items at issue, but offered one ballpark figure ($20,000.00) for loss calculations, with the assurance that a “list” would later be provided. (Separate Statement at pp. 7–8.) The response thus did not provide a valuation for each item and how each was calculated.

Defendants in opposition contend that they have included such a list with their opposition. (Opposition at p. 3.) But the document that they attach was (1) not prepared by Carlsen, but by a third party, (2) incudes no calculation of value for the items listed, and (3) does not match the ultimate total value that Defendants offer in their interrogatory response. (Opposition Exh. 3.) Moreover, this list is not provided in the form of a verified interrogatory response. Accordingly, a further response is warranted.

Interrogatory No. 8.4 asked for Defendants’ monthly incomes and how they were calculated, to which both Defendants provided the same figure, absent any calculation. (Separate Statement at p. 8.) Defendants contend that this amount was calculated by taking the average monthly income for the two years preceding the incident that is the subject of this action, and advised Plaintiff of same in informal correspondence. (Opposition at p. 3.) This informal assurance is not a verified interrogatory response, and a further response is warranted.

The motions are therefore GRANTED as to Interrogatories No. 7.1 and 8.4, and otherwise DENIED.

II.   SANCTIONS

Statute provides that the court shall impose sanctions upon a party who unsuccessfully makes or opposes a motion to compel further response to interrogatories, requests for production of documents, or requests for admission, absent substantial justification otherwise. (Code Civ. Proc. §§ 2030.300, subd. (d); 2031.310, subd. (h); 2033.290, subd. (d).)

Plaintiff seeks $4,061.65 for each of the motions to compel further, representing about 9.75 hours of work at $400 per hour for each motion, plus four $61.65 filing fees. (Bryner Decl. ¶¶ 16–17.) Sanctions are DENIED as defendants prevailed on a portion of the motion.