Judge Lee W. Tsao, Case Number: 22NWCV01401, Date: 2023-08-29 Tentative Ruling

Judge: Lee W. Tsao, Case: 22NWCV01401, Date: 2023-08-29 Tentative Ruling

Case Number: 22NWCV01401 Hearing Date: November 2, 2023 Dept: C

SCHUBERT INVESTMENTS, INC. v. TAY

CASE NO.: 22NWCV01401

HEARING: 11/02/23

Defendant/Cross-Complainant ALLAN ROBERTO TAY’s Motion to Quash ¶Plaintiff/Cross-Defendant SCHUBERT INVESTMENTS, INC.’s Deposition Subpoenas for Production of Business Records from JP Morgan Chase Bank N.A. is DENIED. On the Court’s own Motion, the Subpoena is MODIFIED, and a Protective Order is issued, as indicated below.

Moving Party to give notice.

This breach of contract action was filed by Plaintiff SCHUBERT INVESTMENTS INC. (“Plaintiff”) against Defendants ALLAN ROBERTO TAY (“Tay”) and BELLATOR ROOFING INC. (“Bellator Roofing”) (collectively “Defendants”) on November 22, 2022. The operative Complaint alleges that in January 2022, the parties entered into an oral agreement whereby Schubert Investments Inc. would receive a 10% ownership interest in Bellator Roofing, Inc., in return for a direct investment of one hundred thousand dollars. (Complaint, ¶ 19). The parties agreed that Schubert Investments, Inc. would receive 10% of the profits from all jobs contracted by Bellator Roofing Inc. (Ibid.) Plaintiff made payments totaling one hundred thousand dollars in or around March 2022. (Complaint, ¶¶ 13-14.) However, despite Plaintiffs payment, Defendants have failed to issue Plaintiff a 10% ownership interest in Bellator Roofing, Inc., nor have they made any payments pursuant to the agreement that Plaintiff would receive 10% of all profits on jobs contracted by Bellator. (Complaint, ¶ 22.) Additionally, the Complaint alleges Defendant Allan Roberto Tay diverted corporate assets, commingled corporate funds and assets with his personal funds, and paid for personal expenses out of Bellator's company funds. (Complaint, ¶ 34, 39.)

The Complaint asserts the following causes of action: (1) Breach of Oral Agreement; (2) Breach of Implied Covenant of Good Faith and Fair Dealing; (3) Breach of Fiduciary Duty; (4) Fraud; (5) Negligent Misrepresentation; (6) Conversion of Stock; (7) Constructive Trust; (8) Accounting; (9) Inspection Rights; and (10) Injunctive Relief.

On September 6, 2023, Defendants/Cross-Complainants Tay and Bellator Roofing filed the operative First Amended Cross-Complaint (“FAXC”) asserting claims for: (1) Breach of Oral Contract; (2) Fraud; and (3) Declaratory Relief.

Tay now moves for an order to quash the deposition subpoena for production of business records served by Plaintiff to JP Morgan Chase Bank N.A. Tay alternatively moves for the issuance of a protective order to prevent disclosure of Tay’s financial condition and profits until and unless the trier of fact returns a verdict for Plaintiff finding Tay guilty of malice, oppression, or fraud. Tay argues that the subpoena at issue constitutes a violation of his right to privacy, is overly broad, and seeks irrelevant non-discoverable information.

Tay’s Separate Statements indicates that the following Requests are at issue:

(1) All documents pertaining to all open or closed checking accounts in the name of or associated with Allan Roberto Tay, including but not limited to: (a) Bank statements; (b) Deposit tickets; and (c) Items deposited;

(2) All documents pertaining to all open or closed saving accounts in the name of or associated with Allan Roberto Tay, including but not limited to: (a) Bank statements; (b) Deposit tickets; and (c) Items deposited; and

(3) Customer correspondence files related to any account associated with Allan Roberto Tay.

In Opposition, Plaintiff argues that the documents at issue are relevant because they are directly related to the amount of damages that Plaintiff has suffered due to Defendants’ purported failure to issue Plaintiff the agreed upon 10% ownership interest in Bellator Roofing, Inc., as well as payments pursuant to the agreement that Plaintiff would receive 10% of all profits on jobs contracted by Bellator. Plaintiff maintains that the subpoena at issue is necessary to show that cash or other payments that should have been deposited into the corporate bank accounts for Bellator Roofing, Inc., were instead deposited into Tay’s personal bank account.

“If a subpoena requires the attendance of a witness or the production of books, documents, electronically stored information, or other things before a court, or at the trial of an issue therein, or at the taking of a deposition, the court, upon motion reasonably made by [a party], or upon the court’s own motion after giving counsel notice and an opportunity to be heard, 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 order as may be appropriate to protect the person from unreasonable or oppressive demands, including unreasonable violation of the right of privacy of the person.” (CCP §1987.1.)

The documents sought by Plaintiff contain Tay’s financial information. Financial records are subject to a right of privacy. The right to privacy set forth in the California Constitution extends to one’s financial records. (Valley Bank of Nevada v. Superior Court of San Joaquin County (1975) 15 Cal.3d 652, 656.) Even highly relevant, non-privileged information may be shielded from discovery if its disclosure would impair a person’s “inalienable right of privacy” provided by Calif. Const. Art., 1 §1. The right to privacy may be abridged only when there is a compelling and opposing state interest. (Garstang v. Superior Court (1995) 39 Cal.App.4th 526, 532.) One such compelling public need lies in facilitating the ascertainment of truth in connection with legal claims. (Id.) The party seeking the constitutionally protected information has the burden of establishing that the information sought is directly relevant to the claims. (Tylo v. Superior Court (1997) 55 Cal.App.4th 1379, 1387.)

When privacy objections are asserted, the party seeking discovery must show a “particularized need” for the confidential information sought. “The broad “relevancy to the subject matter” standard is not enough. The Court must be convinced that the information is directly relevant to a cause of action or defense… i.e. that it is essential to determining the truth of the matters in dispute.” (TRG, Civil Procedure Before Trial, Chapter 8C-5, Section 8:320, citing Britt v. Superior Court (1978) 20 Cal.3d 844, 859-562.)

The Court finds that Plaintiff has not established a “particularized need” warranting entitlement to the breadth financial information sought by the subpoena at issue. However, the court determines there is a “particularized need” for some access to Tay’s relevant financial records, limited in time and scope. It is undisputed that an issue to be adjudicated in this case is whether Tay commingled or misappropriated the funds of Bellator Roofing, Inc. (See Complaint ¶34.) Rather than quash the subpoena in its entirety, the Court elects to modify the subpoena in accordance with its powers to do so under CCP 1987.1.

The Subpoena is MODIFIED to limit the documents sought to: funds deposited into Tay’s personal and checking accounts from January 2022 to present.

Moreover, on its own motion, the Court ORDERS that a protective order should be entered to govern the disclosure of implicated documents produced or that are to be produced throughout the course of discovery. (CCP §2031.060(b).) Therefore, it is ORDERED that documents to be produced by JP Morgan Chase Bank which contain confidential information are “Protected Documents.” The Protected Documents and the information contained therein shall be treated by all parties as confidential. Except upon the prior written consent of Defendant Tay or upon further order of this Court, the Protected Documents or information contained therein may be shown, disseminated, or disclosed only to: the parties of this litigation and/or their counsel of record in this case; or employees of counsel or of associated counsel who assist in the preparation of this case; or experts and consultants retained by the parties to this litigation.