Judge Kerry Bensinger, Case Number: 23STCV12713, Date: 2023-12-12 Tentative Ruling

This is a breach of contract action concerning unpaid work and reimbursement for the renovation of two properties on 49th Street and Roy Street in Highland Park, California. The parties are in the business of flipping houses. On June 5, 2022, Plaintiff, Kendall Key dba A Paper Street, filed a Complaint against Defendants, Robert Pereira and Vista Park Properties, LLC. On September 13, 2023, Plaintiff filed the First Amended Complaint (“FAC”) against Defendants alleging causes of action for (1) Breach of Contract, (2) Intentional Misrepresentation, (3) Negligent Misrepresentation, (4) Violation of Business and Professions Code § 17200, (5) Defamation, (6) Unjust Enrichment, and (7) Quantum Meruit.

The Complaint alleges as follows: In 2019, Defendants and Plaintiff entered into a working relationship for Plaintiff to provide services as a landscape designer and construction professional to prepare Defendants’ properties at Valleybrink Rd. (“Valleybrink Property”), Verdugo Rd. (“Verdugo Property”), and two properties on Aldama Street in Highland Park (the “Aldama Properties”) for market. After the Valleybrink Property, Verdugo Property, and Aldama Properties were finished and sold, Plaintiff, on behalf of Defendants, located additional properties in Highland Park at 49th Street (“49th Street Property”) and Roy Street (“Roy Street Property”). Plaintiff negotiated their purchase and provided Defendants with estimates of the work to be done. Defendants approved the estimates and construction ensued. The 49th Street Property was eventually completed and sold. At the completion of the work and the beginning of escrow, Plaintiff provided Defendants and escrow a final invoice of $60,670 to be paid out of the proceeds from the 49th Street Property sale. However, Defendants instructed escrow not to pay the invoice by informing escrow that the parties had reached an agreement to settle the invoice. This was false. Escrow then closed and Plaintiff was not paid. Plaintiff demanded payment, but Defendants refused. When it became clear that Defendants would not pay Plaintiff the amounts due on the 49th Street Property, Plaintiff stopped all work on the Roy Street Property. At that point, Plaintiff had personally expended approximately $35,000 on materials for the Roy Street Property.

Later, problems arose with the 49th Street Property and Aldama Street Properties. The buyers of the 49th Street Property raised issued regarding the roof and HVAC. The water proofing failed at the Aldama Properties. Defendants blamed Plaintiff for the foregoing issues even though she had no part in the installation of those aspects of the renovation projects. Plaintiff believes that Defendants disparaged Plaintiff to other members of the community which negatively impacted her ability to market her business and gain new clients. Plaintiff now seeks to recover $60,670 for her work on the 49th Street Property and $35,000 in personal expenditures on the Roy Street Property. Plaintiff also seeks punitive damages.

On October 17, 2023, Plaintiff served a subpoena for production of business records (the “Subpoena”) from third party Glen Oaks Escrow, Inc. (“Escrow”).

On November 14, 2023, Defendants filed this motion to quash the Subpoena, or alternatively, a protective order limiting its scope. Defendants request sanctions against Plaintiff and her counsel of record.

On November 29, 2023, Plaintiff filed an opposition. Plaintiff requests sanctions against Defendants and their counsel.

A deposition subpoena may request (1) only the attendance and testimony of a deponent, (2) only the production of business records for copying, or (3) the attendance and testimony, as well as the production of business records. (Code Civ. Proc., § 2020.020.) The court, upon motion or the court’s own motion, “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 orders as may be appropriate to protect the person from unreasonable or oppressive demands, including unreasonable violations of the right of privacy of the person.” (Code Civ. Proc., § 1987.1, subd. (a).) “A deposition subpoena that commands only the production of business records for copying shall designate the business records to be produced either by specifically describing each individual item or by reasonably particularizing each category of item . . . .” (Code Civ. Proc., § 2020.410, subd. (a).)

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.” (Code of Civ. Proc. §1987.2.)

If sanctions are sought, Code of Civil Procedure section 2023.040 requires that the notice specify the identity of the person against whom sanctions are sought and the type of sanction requested, that the motion be supported in the points and authorities, and the facts be set forth in a declaration supporting the amount of any monetary sanction.¿¿

Sanctions against counsel:¿ The court in Kwan Software Engineering, Inc. v. Hennings (2020) 58 Cal.App.5th 57, 81 (Hennings) noted that discovery sanctions against an attorney are governed by a different standard than sanctions against a party:¿

By the terms of the statute, a trial court under section 2023.030(a) may not impose monetary sanctions against a party’s attorney unless the court finds that the attorney “advised” the party to engage in the conduct resulting in sanctions. (§ 2023.030(a); Ghanooni v. Super Shuttle (1993) 20 Cal.App.4th 256, 261, 24 Cal.Rptr.2d 501.)¿ “Unlike monetary sanctions against a party, which are based on the party’s misuse of the discovery process, monetary sanctions against the party’s attorney require a finding the ‘attorney advis[ed] that conduct.’ ” (Ibid.) “It is not enough that the attorney’s actions were in some way improper.” (Corns v. Miller (1986) 181 Cal.App.3d 195, 200, 226 Cal.Rptr. 247 (Corns).) Because an attorney’s advice to a client is “peculiarly within [his or her] knowledge,” the attorney has the burden of showing that he or she did not counsel discovery abuse. (Ibid.) Accordingly, when a party seeking sanctions against an attorney offers sufficient evidence of a misuse of the discovery process, the burden shifts to the attorney to demonstrate that he or she did not recommend that conduct. (Id. at pp. 200–201, 226 Cal.Rptr. 247; Ghanooni, at p. 262, 24 Cal.Rptr.2d 501.)¿¿¿

Plaintiff submits objections to paragraphs 2 and 3 of the Declaration of Grant K. Peto and two Exhibits 1 and 2 attached to the declaration. As the objections are not material to the Court’s disposition of the motion, the Court does not rule on them.

The Subpoena is composed of 34 categories. It generally seeks production of documents of any and all documents related to the purchase/sale of the six properties (Valleybrink, Verdugo, Aldama Properties, 49th Street, and Roy Street) from January 1, 2018 to present. (See Declaration of Grant K. Peto, Ex. 6.)

Defendants move for an order quashing the Subpoena or, alternatively, modifying the Subpoena for the following reasons: (1) Plaintiff failed to serve Notice to Consumer on any of the buyers or sellers whose records are the subject of the Subpoena, (2) the Subpoena seeks irrelevant information, and (3) the Subpoena seeks information that is protected by privacy rights.[1] The Court addressees each argument in turn.

Defendants argue the Subpoena should be quashed because Plaintiff did not serve a Notice of Consumer to the buyers and sellers of the six properties. In support, Defendants cite Valley Bank of Nevada v. Superior Court (1975) 15 Cal.3d 652 for the proposition that nonparties are entitled to notice and an opportunity to object to a subpoena which seeks disclosure of their financial files. Valley Bank of Nevada is not on point. That case concerned the service of a deposition notice on a party plaintiff with an accompanying request to bring documents to the deposition.

Here, Plaintiff is required to serve a Notice of Consumer to nonparties to afford them an opportunity to object to the subpoena. Code of Civil Procedure section 1985.3 provides that service of a deposition subpoena for the “personal records” of a “consumer’ must be accompanied by the consumer’s written release of the records, or proof of service of a special notice to the consumer that the records are being subpoenaed. “The purpose is to give the consumer a chance to seek appropriate orders protecting the privacy of such records. (Code Civ. Proc. §§ 2020.510(c), 1985.3(e).)” (Weil & Brown, Cal. Prac. Guide Before Trial (The Rutter Group 2023), ¶ 8:566.)

Here, Plaintiff does not dispute that Notices to Consumer were not served in connection with the Subpoena. Instead, Plaintiff argues the motion should be denied because Defendants did not meet and confer on this issue. A review of the email correspondence supports Plaintiff’s position. Defendants do not raise this issue in the months leading to the filing of this motion. Nonetheless, the motion is procedurally defective.

Additionally, in the hopes of obviating the need for the filing of a future motion to quash regarding this Subpoena, the Court offers the following observations.

Defendants argue the Subpoena does not seek relevant information from Escrow because the anticipated responsive documents are not relevant to the causes of action in the FAC. In support, Defendants point to the sole allegation concerning Escrow in the FAC, which states that “Defendants instructed escrow not to pay the Invoice by informing escrow that the parties had reached an agreement to settle the Invoice.” (FAC, ¶ 21.)

Plaintiff contends the Subpoena seeks information and documents regarding each cause of action. Specifically, the Subpoena will elicit information to show Defendants’ pattern and practice to pay invoices through escrow proceeds, the scope of Plaintiff’s work, Defendants’ intention not to pay the invoice, and other communications between Escrow and Defendants showing that Defendants took advantage of others. (See Opposition, pp. 8:24-10:8.)

The Subpoena undoubtedly seeks relevant information. (See Peto Decl., Ex. 6.) However, the Court is concerned with the breadth of the Subpoena, the categories and privacy interests. The parties will be ordered to meet and confer on this issue.

A right of privacy exists as to a party’s financial affairs, even if the information sought is relevant to litigation. (City of Carmel by the Sea v. Young (1970) 2 Cal.3d 259, 268.) Additionally, the owner of a trade secret has a privilege to refuse to disclose and prevent others from disclosing the secret. (Evid. Code §1060.)

Defendants argue that the Subpoena must be quashed because it seeks privileged information such as Defendants’ banking information, tax information, social security numbers, and specifics on Defendants’ profits, losses, and expenditures. Defendants further contend that the Subpoena also improperly seeks Defendants’ trade secrets. Some of these points are true; others aren’t. Plaintiff’s offer to enter into protective order and/or redact information may ameliorate these concerns. (See Declaration of Jonathan Gerber, ¶ 7.) But Defendant’s point that such redacts might not be manageable given the scope of the request has some merit.

The parties each request sanctions against the other and their counsel. Notwithstanding the Court’s disposition of the motion, the Court finds sanctions are not warranted against any party. This was a close matter involving sensitive, financial information of nonparties. Accordingly, the Court declines to impose sanctions.

The motion is Granted for failure to provide consumer notice. Prior to issuing any further subpoena, the Parties are to meet and confer over the scope and categories of information and the appropriate use of a protective order and/or redactions.

Kerry Bensinger

Judge of the Superior Court

[1] Defendants also argue that the Subpoena improperly seeks information on Defendants’ financial condition in violation of Civil Code section 3295, subdivision (c). However, Defendants appear to abandon this argument in its Reply. The Court does not address it further.