Judge: Mark H. Epstein, Case: 23SMCV04623, Date: 2025-05-23 Tentative Ruling

Case Number: 23SMCV04623    Hearing Date: May 23, 2025    Dept: I

The motion to compel production of documents pursuant to two document subpoenae are GRANTED.   

At issue is a request by the defense aimed at two providers.  The documents sought are documents relating to factoring agreements.  (Plaintiff and the witnesses state that all documents pertaining to liens have been provided.  Assuming that is true, it is only the factoring documents at issue.)  The question goes to damages.  To set the table, in most personal injury cases an injured plaintiff will seek treatment.  The provider will provide treatment for a fee, but rather than take money at the time of treatment sometimes the provider will accept a lien on any recovery that plaintiff might obtain.  That said, though, the lien is not in lieu of the fee.  Rather, the provider agrees to defer collection until the case is over in return for an agreement that the provider will be paid from the proceeds recovered.  But if that is not sufficient—either because there is no recovery or because the recovery is not enough—the plaintiff remains liable for the full amount of the bill (although it is not uncommon for the provider ultimately to agree to a discount).  So far, so good.  However, many providers have agreements with third parties, or factors.  These are entities that agree to buy the debt (and the lien) for a discounted amount.  At that point, the provider is no longer entitled to collect any money from the plaintiff, but the factor succeeds to all of the provider’s rights.  That means that the factor has the rights under the lien and has the right to collect—from the lien or the plaintiff or both—the full amount of the bill irrespective of the discount and irrespective of plaintiff’s recovery.  Defendant is seeking any agreements between the providers and any factor that pertains or might pertain to this case.

This presents a different question than was resolved in Howell.  That case involved the situation where there is an agreement between the provider and an insurer to accept less than the full rate of the bill in full satisfaction of the debt.  Under those circumstances, the plaintiff is entitled to recover only what the carrier paid, not the full amount of the bill.  But this is a bit different.  Here, the provider did not agree with an insurer before the services were provided to accept less than full value for the bill.  Which means that there is a very important difference in kind.  In Howell the plaintiff is not liable for anything other than what the carrier paid even though the undiscounted bill is higher.  But here, the plaintiff remains liable for 100% of the amount of the bill.  While the provider has given up the right to recover that much, the plaintiff could still be forced to pay it, albeit to the factor.

This question was addressed in two appellate cases; Katiuzhinsky v. Perry (2007) 152 Cal.App.4th and Moore v. Mercer (2016) 4 Cal.App.5th 424.  Those cases provide the answer here, for both permitted discovery of this information, although the discovery issue was expressly addressed only in Moore.  Critically, neither case held that plaintiff is limited to the amount paid by the factor—unlike the holding in Howell.  The issue was one of relevance and, in Moore, discovery.  Indeed, the Moore court held that the likely probative value of the evidence is slight.  Even so, in the course of affirming a judgment that excluded that evidence at trial, the court affirmed the trial court’s trial order and found that the trial court’s order that it need not be produced in discovery was harmless error.  Critically, though, the court held that it was error to bar discovery of that information.  (The discovery issue came up because the court sanctioned the party demanding the information.  The sanction was reversed because the motion to compel should have been granted.  The court agrees with the reasoning and logic of those cases. 

The court is unsure what the agreements here at issue state.  This information might still have some probative value.  That is the direct holding of the cases cited above.  While the probative value might be slight, that is a case specific inquiry and will be better addressed at trial.  The standard for discovery is not whether the evidence is admissible at trial, it is whether the request is reasonably calculated to lead to the discovery of admissible evidence.  Here, it is.

Resistance to the motion is made on the basis that neither case considered the responding party’s claims of privacy or trade secret.  In other words, here the responding party claims that it has a privacy interest in these agreements and further that the agreements are trade secrets.  The court agrees that neither case discussed those issues, but the court does not find the argument to justify shielding the information from discovery.  And the court is aware that the burden of making a privacy or trade secret objection lies with the party asserting it, not the party opposing it.    First, the privacy argument carries little weight given the showing made.  While the providers have some privacy interests in certain financial matters, the court does not see those interests as it pertains to these contracts as being particularly weighty.  Nor do the declarations explain why they might be weighty.  Other than simply asserting that there is a privacy interest—something that the above courts surely knew—there is no explanation as to how this is a major infringement on that interest.  After all, defendant does not seek bank records or the like.  Therefore, while it might be that the value of this evidence in discovery is not great, the court sees virtually no heft to the privacy interest either.  The trade secret argument is weaker still.  The court sees no explanation as to how this constitutes a trade secret or why disclosure will harm the responding parties.  The court well understands that if the information becomes public there could be a problem.  Factors likely compete as to providers.  It could well be that if the provider had to publish the rate it takes from a factor, it would have trouble with regard to future negotiations and the same might be true of a provider.  The sorts of concerns raised can be addressed by way of a protective order.  The court is aware, of course, of the Calcor decision, and the court’s balance has taken that into consideration.  The court has also reviewed the requests at issue and believes that the requests are broad enough to capture this information.

Therefore, the motions to compel are GRANTED.  The requests for sanctions are DENIED.  Given that the privacy and trade secret issues were not decided in the earlier cases, the court finds that there was substantial justification for the opposition.  If the parties have a confidentiality order in place, these documents may be designated as confidential.  If not, the parties will meet and confer, but the court strongly recommends using the Superior Court’s template.  The documents will be produced in 30 days.  If there is information in those documents that is otherwise protected, it may be redacted but a log will be provided at the same time.