Judge Margaret L. Oldendorf, Case Number: 22AHCV01400, Date: 2023-10-16 Tentative Ruling

Judge: Margaret L. Oldendorf, Case: 22AHCV01400, Date: 2023-10-16 Tentative Ruling

Plaintiff Raymond Clark (Clark) purchased Crescenta Valley Tile Distributor, Inc. (CV Tile) from Defendants Craig and Jeanne Reiber (Reibers). Craig and Jeanne Reiber owned and operated Crescenta Valley Tile Distributor, Inc. for 30 years. In 2021, they began to look for someone to sell the business to so they could retire. Clark, after conducting due diligence, purchased the business.

The lawsuit is essentially a fraud claim. Clark alleges that the Reibers misrepresented that the financials had been prepared in accordance with Generally Accepted Accounting Principles (GAAP), that the financials were accurate, that Accounts Receivable (AR) was accurate, and that the financials supported the belief that there was a positive cash flow and the company would not require additional capital investment by Clark. These misrepresentations are alleged to have caused Clark to suffer material damages due to lost investment and opportunity, as well as expenditure of legal and accounting fees.

In their cross-complaint, the Reibers allege that from August to December 2022, Clark breached the agreement in several ways including failing to complete the F Reorganization and lease negotiations, failing to timely pay business and credit accounts held in the name of Craig Reiber and causing him to incur substantial debt and harm to his credit, and failing to request a “true-up” accounting. They further allege that in December 2022, Clark informed the Reibers that he would invest no more money in the company, he refused to pay debt of more than $500,000 that was personally guaranteed by Craig Reiber and he renounced any further obligations under the contract. Clark also announced he was closing the company and, on December 29, 2022, caused the company to file for bankruptcy. The operative first amended cross-complaint (FACC) sets forth the following causes of action: (1) breach of contract; (2) repudiation of contract; (3) breach of the implied covenant of good faith and fair dealing; (4) express indemnity; (5) intentional misrepresentation; (6) negligent misrepresentation; and (7) untrue statement or omission in connection with the sale of a security.

Before the Court is Defendants’ motion to compel third party Valcor Advisor’s deposition. The motion to compel deposition is GRANTED.

“If the deponent named is not a natural person, the deposition notice shall describe with reasonable particularity the matters on which examination is requested. In that event, the deponent shall designate and produce at the deposition those of its officers, directors, managing agents, employees, or agents who are most qualified to testify on its behalf as to those matters to the extent of any information known or reasonably available to the deponent. (CCP § 2025.230.)

(a) If, after service of a deposition notice, a party to the action or an officer, director, managing agent, or employee of a party, or a person designated by an organization that is a party under Section 2025.230, without having served a valid objection under Section 2025.410, fails to appear for examination, or to proceed with it, or to produce for inspection any document, electronically stored information, or tangible thing described in the deposition notice, the party giving the notice may move for an order compelling the deponent’s attendance and testimony, and the production for inspection of any document, electronically stored information, or tangible thing described in the deposition notice.

(1) The motion shall set forth specific facts showing good cause justifying the production for inspection of any document, electronically stored information, or tangible thing described in the deposition notice.

(2) The motion shall be accompanied by a meet and confer declaration under Section 2016.040, or, when the deponent fails to attend the deposition and produce the documents, electronically stored information, or things described in the deposition notice, by a declaration stating that the petitioner has contacted the deponent to inquire about the nonappearance.

(g)(1) If a motion under subdivision (a) is granted, the court shall impose a monetary sanction under Chapter 7 (commencing with Section 2023.010) in favor of the party who noticed the deposition and against the deponent or the party with whom the deponent is affiliated, unless the court finds that the one subject to the sanction acted with substantial justification or that other circumstances make the imposition of the sanction unjust.

Defendants offer the declaration of their attorney, D. Jason Lyon, in support of their meet and confer efforts. (Lyon Declaration.) Lyon declares that on January 18, 2024, he first sent notice that he received. (Lyon Decl. ¶ 5.) He then emailed on January 22, 2024, requesting further meet and confer. (Lyon Decl. ¶ 6.) He declares that Valcor’s attorney responded he could meet and confer on January 30, 2024. (Lyon Decl. ¶ 6.) Lyon proposed meeting and conferring with counsel’s co-counsel in order to meet the filing deadline. (Lyon Decl. ¶ 6.) Valcor’s attorneys did not respond.

On January 29, 2024, Lyon again requested to meet and confer. (Lyon Decl. ¶ 8.) On February 7, 2024, Counsel for Valcor responded with a meet and confer email. (Lyon Decl. ¶ 9.) Lyon responded to this email substantively. (Lyon Decl. ¶ 9, Exh. E.)

In opposition, Clark urges that meet and confer efforts were not sufficient. (Korenaga Decl. Exh. 6.) Kaeleen Korenaga, counsel for Clark, attaches her email correspondence with Lyon to show that parties discussed the deposition objections on March 28, 2024 and April 1, 2024, after this motion was filed. (Korenaga Decl. ¶ 3.)

The Court finds that meet and confer efforts were not sufficient. Notwithstanding this conclusion, the Court rules on the merits of the motion.

Defendants first served a notice of deposition on December 29, 2023 as to a January 24, 2024 deposition date. (Lyon Decl. ¶ 2, see Exh. A.) The deposition notice seeks letters of intent to purchase CV Tile, any prior deposition transcripts of Valcor Advisors, correspondence with former counsel who negotiated the purchase of CV Tile, and other similar topics. On January 17, 2024, Valcor served objections to the deposition notice. (Lyon Decl. ¶ 4, see Exh. C.) In response, Defendants’ counsel sent an email acknowledging the receipt of the objections and requesting meet and confer. (Lyon Decl. ¶ 5, Exh. B.) On January 22, 2024, Defendants’ counsel sent a second request for meet and confer. (Lyon Decl. ¶ 6.) Valcor did not appear at the January 24, 2024 deposition. (Lyon Decl. ¶ 7.)

Defendants urge that the information sought in the deposition is relevant to their affirmative defenses and their cross-complaint. (Motion p. 8: 19-22.) Defendants cite CCP Section 2017.010 for the scope of discovery. (CCP § 2017.010 [discovery is permitted of anything “relevant to the subject matter involved in the pending action’].) Defendants urge the scope of discovery is broad. (See Gonzalez v. Super. Ct. (1995) 33 Cal.App.4th 1539, 1546; Colonial Life & Acc. Ins. Co. v. Super. Ct. (1982) 31 Cal.3d 785, 790; Lopez v. Watchtower Bible and Tract Soc’y of N.Y., Inc. (2016) 246 Cal.App.4th 566, 591.) The Court agrees and overrules all relevancy objections.

Defendants urge that the privacy objections are not valid. (See Motion p. 8: 23-26.) In support, Defendants cite Roberts v. Gulf Oil Corp. (1983) 147 Cal.App.3d 770, 791 for the proposition that corporations do not have the same right to privacy as individuals.

Defendants allege that Valcor also objected on basis that “Defendants fail to show a compelling need for the discovery sought.” However, upon examining Valcor’s objections, this objection does not appear. (Lyon Decl. Exh. C.) Lastly, Defendants urge that the asserted vagueness, ambiguity, overbreadth, unduly burdensome and harassment objections are without merit.

In their joint opposition, Valcor and Clark urge that documents responsive to Requests 1-3 have already been produced. (Opposition p. 7: 1-12, Clark Decl. ¶¶ 11, 13.) In support, a declaration by Plaintiff Ray Clark is attached. Clark includes copies of his document production. (Clark Decl. Exhs. A-F.)

Clark and Valcor also renew their objections to Request No. 2: “[a]ll documents reflecting Valcor Advisors, LLC's communications with Kelly Ryan or the Ryan Law Firm since January 1, 2021, including but not limitation emails, physical correspondence, calendar entries, telephone logs and notes” on basis of non-disclosure agreements between Valcor and other entities. However, this is not a proper assertion of a privacy interest under Hill v. National Collegiate Athletic Assn. (1994) 7 Cal.4th 1. (See Reply p. 6: 1-12.) Additionally, there is a protective order in place. (11/17/23 Stipulation.) The Court overrules the privacy objections to Request 2.

In their opposition, Clark and Valcor renew the relevancy, privacy and burden objections raised to Request 5, which requests “[d]ocuments sufficient to identify any litigation in which Valcor Advisors, LLC has participated as a party or witness, including case caption, court, and number.” The Court finds that basic case information as requested in Request 5 does not implicate privacy of third parties, as the information is publicly available. Indeed, Valcor and Clark have identified that Valcor has participated in 70 cases and should have that case information readily available. The Court overrules the objections to Request 5. (See CCP § 2017.010, Hill v. National Collegiate Athletic Assn. (1994) 7 Cal.4th 1.)

The burdensome objection to Request 6 is supported by the declaration of Ray Clark. He declares that Valcor has been retained as an expert witness in over 70 cases. He declares that a search of the depositions and production of those depositions would take several hours and involve hundreds of documents. (Clark Decl. ¶ 10.) The Court sustains the objection. (Obregon v. Superior Court (1998) 67 Cal.App.4th 424, 431; West Pico Furniture Co. of L.A. (1961) 56 Cal.2d 407, 417.)

The motion to compel the PMQ deposition is granted in part.[1] The Court orders the PMQ deposition to proceed on Requests 1, 2, 3, 4 and 5.

The Court does not find it appropriate to issue sanctions to either party in connection with this motion.

The motion by Defendants for an order compelling the deposition of Valcor Advisors is granted. The Court, however, modifies the document requests as follows: PMQ deposition of Ray Clark on Request 1-5 is to proceed within 30 days’ notice of this order.

Counsel for Defendants, D. Jason Lyon, is ordered to provide notice of this ruling.

[1] The Court notes the possibility that these documents have already been produced in discovery. The Court is not ordering Valcor Advisors to produce documents that are already in discovery.