Judge: Malcolm Mackey, Case: 22STCV14800, Date: 2023-05-23 Tentative Ruling

Case Number: 22STCV14800    Hearing Date: August 8, 2023    Dept: 55

WEI LI v. US XINLI, INC.                                                  22STCV14800

Hearing Date:  8/8/23,  Dept. 55

#10:   

MOTION TO COMPEL FURTHER RESPONSES OF WENG’S RESPONSES TO REQUEST FOR PRODUCTION OF DOCUMENTS;  SET NO. 1.

MOTION TO COMPEL FURTHER RESPONSES OF US XINLI, INC.’S RESPONSES TO REQUEST FOR PRODUCTION OF DOCUMENTS;  REQUEST FOR MONETARY SANCTIONS.

 

Notice:  Okay

Opposition

 

MP:  

Plaintiff/Cross-Defendant

RP:  

Defendant Liping Weng.

Defendant/Cross-Complainant US XINLI, INC.

 

 

Summary

 

On 5/4/22, Plaintiff WEI LI filed a Complaint.

On 7/13/22, Plaintiff filed a First Amended Complaint, alleging: To help his son with college entry and attendance, Plaintiff signed a Service Contract with Defendant Weng, who signed her name as the “representative for New Force International Education, and Plaintiff paid a total of $39,950.00.  Defendant Weng deliberately used different business entities in the Service Contract, and on her business card, to confuse Plaintiff, and to create the false impression that she was a successful businesswoman with great resources and capabilities.

The causes of action are:

1. INTENTIONAL MISREPRESENTATION

2. NEGLIGENT MISREPRESENTATION

3. RESCISSION OF CONTRACT

4. BREACH OF CONTRACT

5. CONVERSION

6. UNJUST ENRICHMENT

7. UNFAIR BUSINESS PRACTICE

8. FALSE ADVERTISEMENT.

 

On 1/31/23, Defendant US XINLI, INC. filed a Cross-Complaint against Plaintiff, alleging his breach by unilaterally terminating a written service contract, based on a dispute over the interpretation of Section V(2) of the subject contract providing that Plaintiff would pay installments for tutoring and other college-preparation services for his son.

 

 

MP Positions

 

Moving party requests an order granting motions to compel further document responses from each defendant, and imposing monetary sanctions against the clients and counsel ($4,147.77 against Defendant Weng and counsel, and  $3,929.42 against Defendant US Xinli, Inc. and counsel), on grounds including the following:

 

·         The requested documents are relevant to prove that Defendants engaged in reckless business practices over the years and grossly exaggerated and misrepresented their capability and qualification to the public. The requests are directly related to Plaintiff’s claims that Defendant US Xinli does not have the required resources, business capacities, capabilities and skills to provide the type of services as stated in the service contract and as advertised to the public. They are also relevant to prove Defendant Weng’s alter ego liability.

·         Defendant Liping Weng admitted at her deposition that she made up the name of “Xinli International Education,” the entity that signed the service contract with Plaintiff, and that she never registered such an entity with the Secretary of the State of California.  Defendant Weng could not remember how many business entities she formed over the years.  She also testified that all money she deposited in her personal bank account was for business purposes. 

·         Defendants made the same boilerplate and generalized objections to each of the requests.

·         Opposing counsel failed to meet and confer in good faith.

·         Request categories as to Defendant WENG are:

1.      All documents showing the names of Defendant Weng’s partners from 2014 to 2021; (requests no. 1-9)

2.      A copy of Weng’s business card from 2014-2021; (requests no. 10-18)

3.      All business entities Weng registered with the State of California from 2014 to 2021 (requests no. 19-27), and

4.      The record of Weng’s personal bank account from 2014 to 2021 that was designated as the recipient for payment of fees in the service contract signed by Plaintiff. (requests no. 28-36).

 

·         Request categories as to Defendant US Xinli are:

1. All documents showing the names of Defendant US Xinli’s partners since 2014;

2. Defendant US Xinli’s payroll records since 2014;

3. All W-2s issued by Defendant US Xinli since 2014;

4. All 1099s issued by Defendant US Xinli since 2014;

5. All contracts for consultation service signed by US Xinli since 2014;

6. All contracts for tutoring service signed by US Xinli since 2014;

7. All contracts for Straight Through Train project signed by US Xinli since 2014;

8. All advertising materials by US Xinli since 2014;

9. All refunds issued by US Xinli to its clients since 2014;

10. All complaints made by clients against US Xinli since 2014;

11. All documents showing US Xinli’s “cooperative relationship” with any of the colleges since 2014, and

12. The bank records of US Xinli’s account that is identified in the service contract since 2014.

 

 

RP Positions

 

Opposing parties advocate denying, and imposing monetary sanctions against moving parties and counsel ($1400 to Defendant WENDY WENG and $1400 as to Defendant US XINLI INC), for reasons including the following:

 

·         Plaintiff failed to demonstrate good cause to seek over nine years’ worth of Defendant’s contracts, text messages and emails with her business partners, business records, business cards and personal bank records, which private information of Defendant and other third parties (i.e., individuals and business entities that are not involved in this case) and commercially sensitive materials. In this, the burden is on the moving party to “set forth specific facts showing good cause justifying the discovery sought by the demand.” Code Civ. Proc., 2031.310(b)(1).

·         Plaintiff’s purported offer of proof is predicated upon counsel’s misrepresentation of piecemeal deposition testimony.

·         Plaintiff includes requested documents that would come from defense counsel in the definitions of the discovery requests.

·         Given the sweeping scope of the requests, privacy rights of Defendant and its third parties customers are clearly implicated.

·         Plaintiff has not obtained an order as required by Cal. Civ. Code Section 3295 before inquiring into the financial condition of Defendant.

·         By filing an incomplete and deficient separate statement, Plaintiff is improperly asking for a court order to compel responses without advising the Court the true nature and full text of the requests.

 

 

Tentative Ruling

 

Both motions are denied.

Both sides’ requests for sanctions are denied, the Court finding substantial justification for positions of each side.

 

            Overbreadth

Primarily, the Court sustains the overbreadth objection.  Moving parties’ document requests cover 9 years, which far exceeds the subject one contract date, “[o]n or about September 6, 2019.”  (First Amended Complaint, ¶ 15.).  Moreover, the span of time is more than seen in every other case before this court.  Attorneys generally propound discovery seeking 3 and maybe 4 years of discovery surrounding the time of an alleged incident.  Further increasing the overbreadth here, are requests including many other customers’ contracts, and client and attorney documents held by opposing counsel.  That is unusually aggressive discovery for a one-contract case.

As to overbreadth objections involving no claim of privilege, courts determine whether the discovery is “ ‘reasonably calculated to lead to the discovery of admissible evidence’ ”, generally  resolving doubt in favor of permitting discovery.  Williams v. Sup. Ct. (2017) 3 Cal.5th 531, 542.  “When discovery requests are grossly overbroad on their face, and hence do not appear reasonably related to a legitimate discovery need, a reasonable inference can be drawn of an intent to harass and improperly burden.”  Obregon v. Sup. Ct. (1998) 67 Cal.App.4th 424, 431.  [Emphasis added.]

As to motions to compel document responses, moving parties must file evidence, such as a declaration, showing good cause, based on specific facts, that the requested matter is admissible evidence, or appears reasonably calculated to lead to the discovery of such evidence. Calcor Space Facility, Inc. v. Sup. Ct. (1997) 53 Cal.App.4th 216, 223-24.

 

            Privacy

The requests on their face sometimes appear to request information of third parties included in defendants’ documents, such as employees’ W-2 forms, which requires that all third parties receive notice of an opportunity to object.  Further, the deposition transcript excerpt attached to the motion is not clear as to the scope of all deposits and withdrawals.  Additionally, the Court lacks information to perform the balancing of relevance verses privacy intrusion, because the third parties involved and their information is not specified by opposing party.

Third parties must be notified and given an opportunity to either consent or object, before discovery responses revealing their private information, and parties cannot waive such rights of third parties. Belaire-West Landscape, Inc. v. Sup. Ct.  (2007) 149 Cal.App.4th 554, 561-62;  Pioneer Electronics (USA), Inc. v. Sup. Ct. (2007) 40 Cal.4th 360, 374-75;  DOE 2 v. Sup. Ct. (2005) 132 Cal.App.4th 1504, 1521. 

There is a privacy interest as to one's personnel files.  BRV, Inc. v. Sup. Ct. (2006) 143 Cal. App. 4th 742, 756;  Teamsters Local 856 v. Priceless, LLC (2003) 112 Cal. App. 4th 1500, 1515, disapproved on other grounds by  Int’l Fed. of Prof. and Technical Engineers, Local 21, AFL-CIO v. Sup. Ct. (2007) 42 Cal.4th 319, 336.

“Mere speculation as to the possibility that some portion of the records might be relevant to some substantive issue does not suffice” for showing direct relevance as to private information sought in discovery.  Davis v. Sup. Ct. (1992) 7 Cal. App. 4th 1008, 1017-20 (directing trial court to grant motion to quash as to discovery request that was not narrowly drawn to enable the court to evaluate the appropriate extent of disclosure).

“[I]ndividuals have a legally recognized privacy interest in their personal financial information.”  International Federation of Professional & Technical Engineers, Local 21, AFL-CIO v. Sup. Ct. (2007) 42 Cal. 4th 319, 330.

“The corporate right to privacy is a lesser right than that held by human beings and is not considered a fundamental right.”   SCC Acquisitions, Inc. v. Sup. Ct. (2015) 243 Cal.App.4th 741, 756  (evaluating whether the corporate information appears reasonably calculated to lead to the discovery of admissible evidence, balanced against the corporate right, with doubts about relevance generally resolved in favor of allowing the discovery).

Bank customers have a privacy interest in matters they reveal to banks. E.g.,  Casey v. U.S. Bank National Ass'n (2005)127 Cal.App.4th 1138, 1150-51.

A privacy objection is not ripe for adjudication before a court where there is no factual basis for ruling, such as respondents’ identifying the documents withheld in a privilege log or elsewhere. Connecticut Indem. Co. v. Sup. Ct. (2000) 23 Cal. 4th 807, 818.

 

            Punitive Damages Discovery

 

The law regarding financial condition to prove punitive damages is inapposite, because the moving papers state other reasons for financial discovery such as alter ego, and a financial inability to perform a fraudulently induced contract.

Financial discovery has been found relevant as to alter ego allegations.  E.g., Flora Crane Service, Inc. v. Sup. Ct. (1965) 234 Cal. App. 2d 767, 778-79;  Rawnsley v. Sup. Ct. (1986) 183 Cal. App. 3d 86, 91 (party alleging alter ego theories was entitled to access defendants' financial records due to lack of alternatives).

Civil Code Section 3295 does not apply when the financial information is relevant to an issue other than punitive damages, such as liability.  Notrica v. State Compensation Ins. Fund  (1999) 70 Cal.App.4th 911, 939. 

 

            Privilege

Opposing parties failed to provide a privilege log or evidence to support privilege or work-product objections.

“[I]f documents responsive to a document request are withheld on privilege grounds, a privilege log or some equivalent specification of any asserted privilege objection ‘shall’ be supplied.”  Roche v. Hyde (2020) 51 Cal.App.5th 757, 813.  “[L]egislation amended subdivision (c)(1) of Code of Civil Procedure section 2031.240 to require the preparation of a privilege log ‘if necessary’ to ‘provide sufficient factual information for other parties to evaluate the merits’ of a claim of privilege or protected work product.”  Bank of Amer., N.A. v. Sup. Ct. (2013) 212 Cal.App.4th 1076, 1098.

 

            Trade Secret and Confidential Information

Opposing parties failed to evidence trade secrets and confidential information.

After the objecting party meets the initial burden to show the existence of a trade secret, it shifts to the party requesting the discovery to “‘make a prima facie, particularized showing that the information sought is relevant and necessary to the proof of, or defense against, a material element of one or more causes of action presented in the case, and that it is reasonable to conclude that the information sought is essential to a fair resolution of the lawsuit.’”  Citizens of Humanity, LLC v. Costco Wholesale Corp. (2009) 171 Cal. App. 4th 1, 13,  disapproved on other grounds by  Kwikset Corp. v. Sup. Ct. (2011) 51 Cal. 4th 310, 337;  Bridgestone/Firestone, Inc. v. Sup. Ct. (1992) 7 Cal.App.4th 1384, 1390 

The party claiming a qualified privilege, such as confidential commercial information, has the burden to show that the information falls within the privilege.   Lipton v. Sup. Ct.  (1996) 48 Cal. App. 4th 1599, 1618-19 (addressing reinsurance discovery that may involve confidential commercial information about insurer financial condition).

 

            Separate Statement Content

Courts have discretion as to whether to deny discovery motions where a filed separate statement lacks the content and format required by the California Rules of Court.  Mills v. U.S. Bank (2008) 166 Cal.App.4th 871, 893.  Accord  St. Mary v. Sup. Ct.  (2014) 223 Cal. App. 4th 762, 778.

            Sanctions

 

Because each side has substantial justification for some issues but not others, and the briefing of both sides was incomplete, the Court imposes no sanctions.

Generally, monetary sanctions are mandatory as to parties losing discovery motions, unless courts find substantial justification or other injustice.  E.g.,  Foothill Properties v. Lyon/Copley Corona Assocs., L.P. (1996) 46 Cal.App.4th 1542, 1557-58.  “ ‘[S]ubstantial justification” has been understood to mean that a justification is clearly reasonable because it is well-grounded in both law and fact.”  Doe v. U.S. Swimming, Inc. (2011) 200 Cal.App.4th 1424, 1434.

 

*IF BOTH PARTIES SUBMIT ON THE COURT’S TENTATIVE RULING, PLEASE CALL THE COURTROOM AT 213-633-0655*