Judge: Joseph Lipner, Case: 23STCP02227, Date: 2024-11-14 Tentative Ruling

Case Number: 23STCP02227    Hearing Date: November 14, 2024    Dept: 72

SUPERIOR COURT OF CALIFORNIA

COUNTY OF LOS ANGELES

DEPARTMENT 72

TENTATIVE RULING

Defendants Robert Spieth (“Spieth”) and S&H Real Estate, LLC (“S&H”) (collectively, “Defendants”) move for an order quashing the subpoena issued by Plaintiff Joshua David-Helderman Lawler (“Plaintiff”) to non-party Bank of America and entering a protective order barring Plaintiff from seeking the documents and information requested therein.

In the alternative, Defendants seek a protective order (1) prohibiting production of  any banking records relating to Spieth; (2) prohibiting production of any documents relating to S&H which are not authorized by Corporations Code, section 17701.13, subd. (d); and (3) limiting any production to a period from September 3, 2020 to September 3, 2024.

The Court DENIES the motion as to S&H’s bank records.

The Court GRANTS the motion IN PART as to Spieth’s bank records.

Bank of America shall respond to Plaintiff’s subpoena of Spieth’s records, with the following limitations:

Bank of America shall only produce bank statements.

Bank of America shall only produce statements from September 3, 2020 to September 3, 2024.

Bank of America shall redact Spieth’s personal information from the production, including social security numbers, addresses, and other identifying information that may exist in Spieth’s or S&H’s banking records.

If, after obtaining the discovery authorized in this order, Plaintiff has reason to believe that there is good cause for further discovery into Spieth’s bank information, Plaintiff may seek leave of Court to obtain further discovery.

Background

This case involves the dissolution of S&H and Plaintiff’s claims related to the dissolution.

            Plaintiff and Spieth founded S&H for the purpose of engaging in real estate investment. Plaintiff owned a 20 percent interest in S&H and Spieth owned an 80 percent interest.

            It is not clear whether S&H is a manager-managed or member-managed LLC.

            Plaintiff alleges that Spieth converted funds belonging to S&H.

            Plaintiff sought to obtain records of S&H which the Court has ruled that he was entitled to receive as a member. S&H did not permit Plaintiff’s inspection of the corporate records in question.

Plaintiff filed this action on June 23, 2023. The operative complaint is now the First Amended Complaint (“FAC”), which raises the following claims: (1) petition for writ of mandate to produce corporate records under Corporations Code, sections 17704.10, subd. (b)(1) and 17701.13, subd. (d); (2) breach of fiduciary duties; (3) breach of contract; (4) breach of implied covenant of good faith and fair dealing; (5) conversion; and (6) judicial dissolution of limited liability company.

On June 18, 2024, the Court granted the petition for writ of mandate. The Court awarded Plaintiff $44,728.40 in attorney’s fees against Defendants jointly and severally. An abstract of judgment was issued on October 18, 2024. Defendants have not provided Plaintiff with the records or paid the judgment.

On July 12, 2024, Plaintiff issued a deposition subpoena to Bank of America and served Spieth with a Notice to Consumer informing him that Plaintiff was seeking his bank records. Plaintiff similarly served a subpoena with respect to S&H and issued S&H a Notice to Consumer.

Defendants filed this motion on August 21, 2024. Plaintiff filed an opposition and Defendants filed a reply.

Evidentiary Objections

The Court has considered the parties’ evidentiary objections. The Court overrules the parties’ evidentiary objections.

Legal Standard

“Unless otherwise limited by order of the court in accordance with this title, any party may obtain discovery regarding any matter, not privileged, that is relevant to the subject matter involved in the pending action or to the determination of any motion made in that action, if the matter either is itself admissible in evidence or appears reasonably calculated to lead to the discovery of admissible evidence. Discovery may relate to the claim or defense of the party seeking discovery or of any other party to the action. Discovery may be obtained of the identity and location of persons having knowledge of any discoverable matter, as well as of the existence, description, nature, custody, condition, and location of any document, electronically stored information, tangible thing, or land or other property.” (Code Civ. Proc., § 2017.010.)

“ ‘Relevant evidence’ means evidence, including evidence relevant to the credibility of a witness or hearsay declarant, having any tendency in reason to prove or disprove any disputed fact that is of consequence to the determination of the action.” (Evid. Code, § 210.)

If a subpoena requires the attendance of a witness or the production of documents, the court may, upon motion reasonably made, 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. (Code Civ. Proc., § 1987.1, subd. (a).)  

In making an order pursuant to Code of Civil Procedure 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.” (Code Civ. Proc., § 1987.2, subd. (a).)  

Discussion

S&H’s Bank Information

“Because the corporate privacy right is not constitutionally protected, the issue presented in determining whether [discovery requests for corporate information] infringe that right is resolved by a balancing test. The discovery's relevance to the subject matter of the pending dispute and whether the discovery ‘ “appears reasonably calculated to lead to the discovery of admissible evidence’ ” is balanced against the corporate right of privacy. [Citation.] Doubts about relevance generally are resolved in favor of permitting discovery.” (SCC Acquisitions, Inc. v. Superior Court (2015) 243 Cal.App.4th 741, 756.)

S&H’s bank records are relevant to Plaintiff’s claims. Plaintiff alleges that Spieth improperly converted S&H’s funds to himself. Plaintiff further alleges that Spieth and S&H improperly denied him access to LLC records that he was owed access to as a member. S&H’s financial records are directly relevant to both of these factual theories, which underly a number of Plaintiff’s causes of action.

The requests are not overbroad. Plaintiff and Spieth allegedly founded S&H together. Although the alleged denial of access to records occurred more recently, Plaintiff contends that Spieth exclusively managed S&H’s rental properties in secrecy and caused S&H to pay him a management fee of 10 to 15 percent of the gross income generated by those properties. The bank records speak directly to this issue, and obtaining complete records will be important for establishing any damages. Furthermore, because Defendants have not complied with the writ of mandate, Plaintiff cannot rely on S&H’s own records to provide accurate financial information.

The Court therefore denies the motion as to S&H’s records.

Spieth’s Bank Information

The party claiming invasion of a constitutional right of privacy established in article 1, section 1 of the California Constitution must show: (1) a legally protected privacy interest, (2) a reasonable expectation of privacy under the circumstances, and (3) a serious invasion of the privacy interest. (Hill v. National Collegiate Athletic
Association (1994) 7 Cal.4th 1, 39-490.)

“Courts must […] place the burden on the party asserting a privacy interest to establish its extent and the seriousness of the prospective invasion, and against that showing must weigh the countervailing interests the opposing party identifies [….] Only obvious invasions of interests fundamental to personal autonomy must be supported by a compelling interest.” (Williams v. Superior Court (2017) 3 Cal.5th 531, 557.)

“It must be remembered that [Code of Civil Procedure, section 1985.3] does not create a special privilege as to such records, but merely creates a procedure under which the consumer will be apprised that a litigant is seeking discovery of his personal records, and will be given an opportunity to make a motion to quash the proposed subpoena.” (Sasson v. Katash (1983) 146 Cal.App.3d 119, 124.)

“[T]he right of privacy extends to one’s confidential financial affairs[.]” (Valley Bank of Nevada v. Superior Court (1975) 15 Cal.3d 652, 656.) And Spieth certainly has a reasonable expectation of privacy in his bank account information, which is not ordinarily disclosed. The invasion of privacy in question is significant – Plaintiff requests 22 years of records, apparently covering the full lifespan of S&H.

The Court therefore believes that some limitations are warranted. However, due to the high relevance of this information, the Court will permit some discovery into Spieth’s bank records.

As discussed above, the records in question are relevant. Plaintiff alleges that Spieth converted LLC funds to himself. Thus, discovery into Spieth’s financial information is necessary in order to determine both liability and damages.

Furthermore, Plaintiff is a judgment creditor against Defendants in the amount of $44,728.40 in attorney’s fees. This judgment has not been satisfied. “In preparation for the examination [of a judgment debtor], discovery may be necessary as the actual examination is not so much a device to gather information as it is a tool to confirm the existence of certain assets. [Citation.] Thus, the use of a subpoena duces tecum to discover and inspect relevant documents is an accepted practice. [Citation.]” (People v. Pereira (1989) 207 Cal.App.3d 1057, 1066.)

It appears that there is also no alternate way for Plaintiff to obtain this information. If money belong to S&H passed through Spieth’s bank accounts, there will be no way to locate it aside from looking at Spieth’s bank information.

Defendants contend that Spieth’s privacy interest is particularly strong since Spieth contests Plaintiff’s claims and the business judgment rule shields Spieth form liability. However, a party may not avoid its discovery obligations simply because it contests the opposing party’s claims. Similarly, the issue of whether Spieth is shielded by the business judgment rule has not been resolved.

Having considered the balance of Spieth’s privacy interest against the need for discovery into the financial records, the Court rules as follows.

Bank of America shall respond to Plaintiff’s subpoena of Spieth’s records, with the following limitations:

Bank of America shall only produce bank statements.

Bank of America shall only produce statements from September 3, 2020 to September 3, 2024.

Bank of America shall redact Spieth’s personal information from the production, including social security numbers, addresses, and other identifying information that may exist in Spieth’s or S&H’s banking records.

If, after obtaining the discovery authorized in this order, Plaintiff has reason to believe that there is good cause for further discovery into Spieth’s bank information, Plaintiff may seek leave of Court to obtain further discovery.