Judge: Margaret L. Oldendorf, Case: 19GDCV01347, Date: 2022-12-08 Tentative Ruling
Case Number: 19GDCV01347 Hearing Date: December 8, 2022 Dept: P
SUPERIOR COURT OF THE
STATE OF CALIFORNIA
FOR THE COUNTY OF LOS ANGELES
NORTHEAST DISTRICT
I. INTRODUCTION
Plaintiff J&J Freight Solutions, LLC is a trucking
company. It was started by Jie Mei Huang. Huang’s husband Qinyi Yu formed
Golden J Group, Inc., a sister company, that provides back up services to
J&J in the form of assisting with port entry, trucking, repairing,
warehousing, and repackaging services. Defendants Jianhua Li and Ninyan Tan are
former employees. In this action, Plaintiffs allege that Li and Tan misappropriated
their trade secrets to start a competing business, CTU Connection. In July
2020, a preliminary injunction issue preventing Defendants from using
Plaintiffs’ trade secrets. In October 2021, Plaintiffs added EMC
Transportation, Inc. as a doe, alleging that it is a shell corporation and
conduit for CTU.
At issue is Plaintiffs’ motion to compel compliance with
a records-only deposition subpoena served on a third party whose name is filed
under seal and who is referred to herein as Witness. For the reasons that
follow, the motion is denied.
II. LEGAL
STANDARD
“Discovery procedures are generally less onerous for
strangers to the litigation.” Monarch Healthcare v. Superior Court (2000)
78 Cal.App.4th 1282, 1289. A non-party from whom records are sought does not
need to file a motion to quash. Non-parties may simply object and place the
onus on the party seeking discovery to make a motion to compel. Id. at
1288-1289.
Code Civ. Proc. §2020.010:
(a) Any of the following
methods may be used to obtain discovery within the state from a person who is not
a party to the action in which the discovery is sought:
(1) An oral deposition under
Chapter 9 (commencing with Section 2025.010).
(2) A written deposition
under Chapter 11 (commencing with Section 2028.010).
(3) A deposition for
production of business records and things under Article 4 (commencing with
Section 2020.410) or Article 5 (commencing with Section 2020.510).
(b) Except as provided in
subdivision (a) of Section 2025.280, the process by which a nonparty is
required to provide discovery is a deposition subpoena.
Code Civ. Proc. §2025.280 (a) provides that service of a
deposition notice under Section 2025.240 is effective to require any deponent
to produce any document or electronically stored information.
Code Civ. Proc. §2020.030 provides that the provisions of
Section 1985 apply to a deposition subpoena. Code Civ. Proc. §1987.1 permits a
court, upon motion, to make an order directing compliance with a subpoena upon
terms or conditions as the court shall declare. Section 1987.2 provides for an
award of reasonable expenses and reasonable attorney fees incurred in making or
opposing a motion under Section 1987.1.
III. ANALYSIS
A. Pertinent Procedural History
Plaintiffs filed this lawsuit in October 2019. In July
2020, they sought and obtained a preliminary injunction prohibiting Li, Tan,
and CTU from “misusing or disclosing Plaintiffs’ trade secrets, confidential
business information and other property, intellectual or otherwise, including
Plaintiffs’ customer lists, driver lists including the earning statements, rate
sheets, price sheets, vendor information, document templates, invoices and
customer order and other business information shown on Exhibits 1 through 20
attached to the motion.” Further, the preliminary injunction enjoins Li, Tan,
and CTU from, among other things, contacting, transacting, dealing, soliciting,
or communicating in any way with any persons or entities identified on an
exhibit list attached to the Preliminary Injunction Order. Witness is on the
list. In February 2021, Plaintiffs filed doe amendments: Doe 1 – EMC
Transportation, Inc.; Doe 2 – Jinqing Ye; Doe
3 – Jianwen Huang; Doe 4 – Peng Xue; Doe 5 – Peinan Hu.
The Second Amended Complaint, filed October 14, 2021,
alleges that in violation of the preliminary injunction, Defendants created one
or more shell companies, including EMC, to serve as Defendants’ alter egos in
order to continue conducting business by illegally stealing Plaintiffs’
customers. A few days later, on October 19, 2021, Plaintiffs served the
deposition subpoena at issue on Witness.
According to Huang, Plaintiffs have had a business
relationship with Witness, a freight forwarder, since 2013. Declaration of Jie
Mei Huang, ¶2. Witness arranges transportation for its customers’ cargo and
merchandise imported to the United States. J&J obtained a lot of business
from Witness picking up cargo containers shipped by Witness’s customers in
China to the Ports of Los Angeles and Long Beach and delivering them to various
destinations as Witness designated. Id. at ¶3. J&J considers Witness
as its customer although the merchandise in the cargo containers might belong
to Witness’s own customers, who may or may not be consistent shippers. Id.
at ¶4.
According to Huang, business from Witness suddenly came
to a complete stop after Li and Tan formed CTU to compete with J&J. Id.
at ¶6. Huang says she has had communication with her contact person at Witness,
who confirmed that Witness is using CTU’s services and that this continued even
after Huang made Witness aware of the Preliminary Injunction. Id. at
¶¶7, 8. This contact person provides a declaration in opposition denying that
this is so. Witness Declaration, ¶13. The Witness Declarant states that Witness
was unaware of the injunction until September 2021, when it issued a delivery
order to CTU pertaining to a particular container number. Witness Declaration,
¶16. When the container was at customs inspection, CTU informed Witness that it
could not transport the container because of a preliminary injunction order.
Witness indicates this was a surprise but in order to get the container out of
inspections and avoid excess storage and delay fees, Witness reached out to
several trucking companies, including EMC, requesting help. EMC handled the
request. Witness Declaration, ¶¶17-20.
Plaintiffs have been attempting to obtain information to
establish their claim that Defendants are violating the injunction by contacting
and transacting business with persons and entities on the exhibit list attached
to the order. Plaintiffs have sought information directly from Defendants. The
current motion involves their attempts to obtain information from Witness, a
third party who is on the exhibit list.
On March 4, 2022, Witness responded to the subpoena by
serving objections. Extensive meet and confer efforts followed. As a result of
those efforts, and in reliance on a meet and confer letter from Plaintiffs’
counsel stating that the subpoena does not request electronically stored
information, on July 29, 2022, Witness provided supplemental responses and
produced two physical documents.
B. Discovery At Issue
A copy of the Deposition Subpoena for Production of
Business Records at issue is attached as Exhibit 1 to Plaintiffs’ motion. It
seeks production of the following documents:
1. All documents that relate
to all business that you have transacted with CTU, including without limitation
all delivery orders, invoices, proofs of delivery, documents evidencing your
payments to CTU, and all communications regarding the foregoing, including
messages sent and received via WeChat, WhatsApp or any other social media
platform, from January 1, 2019 to the present, including the first or initial
communications between you and CTU.
2. All documents that relate
to all business that you have transacted with EMC, including without limitation
all delivery orders, invoices, proofs of delivery, documents evidencing your
payments to CTU, and all communications regarding the foregoing, including
messages sent and received via WeChat, WhatsApp or any other social media
platform, from January 1, 2019 to the present, including the first or initial
communications between you and EMC.
3. Documents sufficient to
identify all persons who have used CTU’s trucking services by and through your
services, whether the business is provided based upon your recommendation, by
your referral, by your direct order, or by the request of such person(s), from
January 1, 2019 to the present.
4. Documents sufficient to identify
all persons who have used EMC’s trucking services by and through your services,
whether the business is provided based upon your recommendation, by your
referral, by your direct order, or by the request of such person(s), from
January 1, 2019 to the present.
5. All communications between
you and any customs broker or freight forwarder regarding CTU or EMC, including
without limitation all delivery orders, emails, facsimiles, text messages, and
any messages sent or received via WeChat or any other social messaging
platform.
6. Documents sufficient to
identify your customers who use CTU, EMC and/or their affiliates for their
trucking needs.
The subpoena specifies in the Attachment 3, ¶5 of the
Definitions that “‘DOCUMENT(S)’ shall have the meaning ascribed to WRITING(S)
in California Evidence Code §250, and include originals, copies and
electronically stored versions of the WRITING(S), and include text messages
and/or messages sent through WeChat, WhatsApp, or any other social medial
platform.”
Code Civ. Proc. §2020.410(a) provides that a deposition
subpoena demanding only the production of business records “shall designate the
business records to be produced either by specifically describing each
individual item or by reasonably particularizing each category of item, and
shall specify the form in which any electronically stored information is to be
produced, if a particular form is desired.” Here, no particular form for
producing ESI is stated.
Code Civ. Proc. §2020.220(d)(1) provides that if a
subpoena does not specify the form or forms for producing a type of ESI, the
person subpoenaed shall produce the information in the form or forms in which
it is ordinarily maintained or in a form that is reasonably usable.
C. Motion is Denied as to Categories 1 -4 and 6
1. Witness’s Objection That Information Is Available
From Another Source
In Witness’s original response to the subpoena it objected
to Categories 1-4 and 6 in part on the ground that the subpoena improperly
sought documents from a non-party while the documents “can be readily obtained
from the defendant [], a party to the case.” Exhibit 4 at pages 6, 7, 8, 9, and
11 in response to Categories 1-4 and 6. Plaintiffs’ argument that Witness has
failed to cite any legal authority supporting its position (Separate Statement
at 5:16-22) lacks merit. While Witness’s initial set of objections does not
cite §2020.220(i), the very first meet and confer letter does so. Exhibit 6 at
page 2. Thus, Witness has provided authority for its objection. It is
the following.
Code Civ. Proc. §2020.220(i) provides the following rule as
to ESI:
(i) The court shall limit the
frequency or extent of discovery of electronically stored information, even
from a source that is reasonably accessible, if the court determines that any
of the following conditions exists:
(1) It is possible to obtain
the information from some other source that is more convenient, less
burdensome, or less expensive.
(2) The discovery sought is
unreasonably cumulative or duplicative.
(3) The party seeking
discovery has had ample opportunity by discovery in the action to obtain the
information sought.
(4) The likely burden or
expense of the proposed discovery outweighs the likely benefit, taking into account
the amount in controversy, the resources of the parties, the importance of the
issues in the litigation, and the importance of the requested discovery in
resolving the issues.
Plaintiffs are aware of this objection because they
responded to it in meet and confer letters. Plaintiffs responded to this
objection by stating that “the Subpoena does not seek ESI but physical
documents such as delivery orders, invoices, payment records, etc.” Plaintiffs’
Exhibit 7, April 15, 2022 meet and confer letter at page 2. Thereafter, Witness
provided a supplemental response, additional meet and confer letters were
exchanged, and on July 29, 2022, produced two physical documents. Exhibits 11
and 12. Further meet and confer letters followed, with Witness confirming that
these were the only two physical documents responsive to the subpoena that it
could find through reasonable efforts. Exhibit 17.
To the extent this motion argues that Witness should be
compelled to produce any electronically store information the motion is denied.
Having instructed Witness that the only documents sought by the subpoena are
physical documents, Plaintiffs cannot now accuse Witness of violating the
subpoena by failing to produce ESI.
2. Witness’s “Burdensome” Objection
Witness’s objection that the documents may more easily be
obtained from Defendants is also based on Code Civ. Proc. §2019.030(a)(1) [“The
court shall restrict the frequency or extent of use of a discovery method
provided in Section 2019.010 if it determines [] The discovery sought is
unreasonably cumulative or duplicative, or is obtainable from some other source
that is more convenient, less burdensome, or less expensive.”].
The opposition brief is supported by a Witness
Declaration who states at ¶24 that Witness uses an electronic commercial
freight management system that organizes documents by customer identity and
container number. Witness also states that in terms of physical documents it
has about 6,000 folders with about 30,000 pages of documents but that these
documents are “archived and piled over time.” Id. at ¶22. The Reply
argument at 3:8-13 that Witness has identified some 6,000 responsive,
easily-searchable documents is inaccurate for two reasons: (1) Plaintiffs
already told Witness the subpoena does not seek ESI; (2) the 6,000 documents
are physical and, according to Witness, are not organized or easily searchable.
Plaintiffs argue vigorously that Witness’s business
records are evidence of Plaintiffs’ misappropriation claim against Defendants. While
that is possibly true it does not negate Witness’s objection that the documents
may more easily be obtained from Defendants. This may be especially true since
the physical documents exist are in a “pile” and not organized in such a way
that responsive documents can easily be retrieved. The declaration of Witness’s
principle, offered in opposition to this motion, avers that Witness does not
index physical documents and that Witness has around 6,000 folders with about
30,000 pages of physical documents, which the principle spent 5-6 hours looking
through, resulting in production of the two documents. The declarant further
avers that Witness is a small business and this search required declarant to
work overtime to make up the lost time and that further searches would be a
heavy toll burden and would not result in a meaningful number of responsive
documents being located. Witness Declaration, ¶29.
Plaintiffs argue that Witness has the burden of
establishing that the information is readily available from another source,
citing Williams v. Superior Court (2017) 3 Cal.5th 531, 550. Reply at 4:5-8.
This is not a persuasive argument because Williams does not concern
third party discovery and contains no discussion about an objection that the
information is readily available from another source. Also, in their moving
papers Plaintiffs fail to explain why a third party should be ordered to
provide information that is available from the Defendants. In their reply brief
Plaintiffs assert that at a recent deposition of CTU’s person most
knowledgeable, CTU claimed that its laptops, iphones, and physical documents
subject to production had all been stolen. Exhibit 22 to Reply. As this
evidence is from a July 8, 2022, deposition and this motion was not filed until
August 16, 2022, it is evidence and argument that could and should have been
included in the moving papers. As it was not, it is not considered by the Court.
Pursuant to Code Civ. Proc. §2020.430(c)(2), if the
custodian provides copies the custodian is entitled to be paid reasonable
costs. Evid. Code §1563(b)(1) sets the amount of such reasonable costs, which
is $0.10 per page and $24 per hour for the custodian to search. Thus far, and
not knowing how many of the 30,000 physical documents Witness looked through so
far, the cost to Plaintiffs would seem to be $144 (6 hours at $24) for labor
and $0.20 for the two copies. If a six-hour search turns up only two documents
and is taxing to the company in other ways in that the person doing the search
cannot attend to his or her work tasks and is forced to make up that work
later, the “burdensome” objection appears to be well taken.
D. Motion Is Denied As To Categories 5 And 6
In these two categories, Plaintiffs seek communications
between Witness and custom brokers of freight forwarders about CTU or
EMC (No. 5) and documents identifying Witnesses customers who use CTU or EMC
(No. 6).
Witness’s objection that these two are overly broad as
they contain no time restrictions is sustained.
Witness’s objection that the information sought is beyond
the scope of the underlying dispute is also sustained. Discovery is broad but
it is broader as to parties than non-parties like Witness. While a non-party
may be required to comply with a business records subpoena, the records
Plaintiffs apparently seek to obtain by way of this subpoena go beyond what may
normally be considered business records. Category 6, which essentially asks
Witness to identify every document that references every customer it may have
who uses Defendants’ services (“Documents sufficient to identify your customers
who use CTU, EMC and/or their affiliates for their trucking needs”) is
impermissibly broad.
A short discussion about the scope of the preliminary
injunction may be useful. To the extent Plaintiffs are seeking information sufficient
to demonstrate that Defendants have violated the preliminary injunction, the
scope of the subpoena is appropriately tailored to the pleading. But Plaintiffs
seem to imply that what they seek is more than that. Plaintiffs indicate that
they are trying to determine “co-conspirators” so that they may add new
defendants to the pleading. Motion at 10:11-13. Plaintiffs argue that the
information sought here is “necessary for Plaintiffs to identify the persons
who are assisting CTU and EMC to circumvent the preliminary injunction and
continue to cause harm to Plaintiffs. Plaintiffs need the information to
evaluate whether new defendants should be added to this case and to the
complaint for contempt of court.” Separate Statement at 27:16-19.
Witness is correct that the preliminary injunction does
not prohibit it from doing business with CTU or EMC, or from referring
customers to CTU or EMC. Interpreting the preliminary injunction otherwise would
give it an improper reach. The only parties over whom the Court has
jurisdiction and who are therefore subject to the preliminary injunction are
Defendants. The accusation that Witness may have “jumped on board” in doing
business with EMC or that it “may have involved itself in the dispute between
Plaintiffs and Defendants” improperly applies otherwise. Separate Statement at
28:18-25. Given that Plaintiffs have essentially argued in this motion that
they need information from Witness in order to add new defendants, Witness is understandably
and with good reason wary about providing such information.
E. Sanctions
Code Civ. Proc. §1987.2 provides that, “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 Civ. Proc. §2025.480(j) provides, “The court shall
impose a monetary sanction [] against any party, person, or attorney who
unsuccessfully makes or opposes a motion to compel an answer or production,
unless it finds that the one subject to the sanction acted with substantial
justification or that other circumstances make the imposition of the sanction
unjust.”
Plaintiffs ask for $10,861.25 in monetary sanctions
against Witness. The request is supported by the Declaration of Mary Sun, who
indicates that she bills at $450/hour and that she spent 22 hours on this
motion, anticipates another two hours to draft a reply and appear at the
hearing, and who paid $61.25 for a filing fee. That request is denied.
Witness asks for $11,700 in monetary sanctions against
Plaintiffs pursuant to Code Civ. Proc. §2023.010 on the grounds that Plaintiffs
filed this motion without substantial justification and have abused the
discovery process. This request is supported by the Declaration of Hsiwen Lo,
who bills at $450/hour and spent 23 hours on opposing this motion and
anticipates spending an additional three hours reviewing the reply brief and
attending the hearing. This request is granted in part.
The Court finds that this motion was neither made nor
opposed in bad faith. Both sides had reasonable arguments to make regarding the
scope of the subpoena. Accordingly, the Court declines to award sanctions to
either side.
IV. CONCLUSION
Plaintiffs’ motion to compel compliance with third party
deposition subpoena for business records is denied. Witness is ordered to give notice of this
ruling.
Dated: _______________________________
MARGARET OLDENDORF
JUDGE
OF THE SUPERIOR COURT