Judge Randolph M. Hammock, Case 18STCV04752 2022-08-11 Tentative Ruling

Judge: Randolph M. Hammock, Case: 18STCV04752, Date: 2022-08-11 Tentative Ruling

Plaintiffs Kurt Knuttson and Woojivas, Inc. bring this suit against the law corporation of their deceased former lawyer, Judith Salkow Shapiro, APC, for legal malpractice and fraud in the handling of an underlying employment and right of publicity action against KTLA, Local TV, and other television stations. The operative Second Amended Complaint asserts causes of action for (1) Breach of Contract, (2) Professional Negligence/Legal Malpractice, (3) Fraud and Deceit, (4) Negligent Misrepresentation, and (5) Breach of Fiduciary Duty.

Defendant Judith Salkow Shapiro, APC now moves for a protective order to prevent the deposition of its person most knowledgeable. This motion first came for hearing on June 16, 2022, along with a motion for a protective order to prevent the deposition of Monica Potter. This court granted in part and denied in part Defendant’s motion for a protective order to prevent the deposition of Monica Potter. Defendant’s motion for a protective order to prevent the deposition of its person most knowledgeable was continued to this date. Since the last hearing, Plaintiffs have deposed Monica Potter.

Defendant Judith Salkow Shapiro, APC originally moved for a protective order to prevent the deposition of both its person most knowledgeable and of Monica Potter. These motions first came for hearing on June 16, 2022. This court granted in part and denied in part Defendant’s motion for a protective order to prevent the deposition of Monica Potter. In permitting the deposition of Potter, this court ruled:

[T]he court will enter a protective order preventing Plaintiffs from inquiring into Defendant’s financial information (debts, assets, or liabilities) at or after the time of Shapiro’s death, or as to any other matter unless expressly allowed below. [¶] Plaintiffs can still seek evidence from Potter of Shapiro APC’s compliance or noncompliance with laws governing law corporations after a lawyer owner passes away, prohibited transfers of shares in professional corporations, and shareholder votes required for dissolutions. These are the only subject areas about which Potter need to testify.

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.

There, the plaintiffs alleged discrimination by their former employer, and sought to depose the employer’s persons most knowledgeable of the terminations and to produce documents concerning the same. However, the employer was in bankruptcy and many of its former employees had left the company. Ultimately, the persons the employer designated as its PMKs “had very little actual knowledge about the specific events that led to the terminations (or resignations) involved in the litigation…or about more general matters such as employment policies and the contents of personnel files.” (Id. at 1393.) Following the depositions, the plaintiffs brought motions to compel further responses.

The court addressed who may be compelled to appear as a PMK and noted that “the code applies by its language only to current officers, directors, managing agents, or employees.” (Id. at 1398.) Therefore, a party is “not required to produce former employees in response to the notice just because the former employees are far more knowledgeable about the litigation than anyone currently employed by the company.” “[A party’s] duty is limited, as we have said, to producing the most knowledgeable person currently in its employ and making sure that that person has access to information and documents reasonably available within the corporation.” (Id. at 1398.) Thus, Defendant here argues that under Maldonado, it may legitimately take the position that it has no PMK.

Defendant further argues that even if the court permits the deposition of its PMK, the court should preclude Plaintiff from inquiring into Shapiro’s assets and finances. Defendant contends such information is outside the scope of discovery because it is unrelated to the claims and defenses raised in this matter. In Defendant’s words, “[i]t is inconceivable how information concerning the formal dissolution of the law firm, including the value of assets, debts and liabilities, ‘might reasonably assist’ Plaintiffs ‘in evaluating its case, preparing for trial, or facilitating a settlement’ when all the issues in this case center around Judith Shapiro’s activities while alive and representing Plaintiffs in their underlying lawsuit.” (Mtn. 10: 15-19.)

Finally, Defendant argues that requiring it to produce a person most knowledgeable under these circumstances “would also cause an extreme undue burden that significantly outweighs any benefit of discovery that the deposition will provide Plaintiffs [because] [1] The time and expense associated with finding a person and preparing them to testify as to these 89 topics would be substantial; [2] It would require a person who has zero personal knowledge of the underlying litigation and the law firm’s procedures following Shapiro’s death to spend likely hundreds of hours reviewing the 50,000+ pages of documents that were generated in the underlying case; [3] This person would have to do this work without compensation because Shapiro, APC is dissolved with no assets and the sole shareholder (the trust) having received no distribution at the time of dissolution; [and] [4] Further, all the information would necessarily have to be provided by counsel for Shapiro, APC thereby implicating attorney-client privileged communications and attorney work product.” Rather than go through this process, Defendants assert that Plaintiffs have the ability to seek depositions of Shapiro’s former co-counsel Karen Moskowitz, Nathan Goldberg, and John West, and that most, if not all, of the information on the permissible topics could be provided by these persons.

Plaintiff disagrees that Maldonado stands for such a sweeping proposition as applied to this case. Plaintiff contends that Loren Naiman appointed himself as president, CEO, and sole director of Shapiro APC after Shapiro’ death. It also argues that Monica Potter is “an officer of co-defendant San Pasqual, which…became the owner of Shapiro APC until its shares were transferred to Potter.” Thus, Defendant contends one (or both) of Shapiro and Potter should have some knowledge of the information and documents at issue.

Plaintiff also contends that Defendant has no valid objections to Plaintiff seeking information about the transfer of Shapiro APC’s ownership or the identity of its legal officers. Plaintiff first argues that the cessation of the law practice and any representations the firm made in filings with the secretary of state are not privileged. Plaintiff further argues that the firm waived any privilege by submitting the Declaration of its counsel, who attested to “(i) the purported ownership of shares in Shapiro APC, (ii) Naiman’s purported compliance with the Corporations Code in Shapiro APC’s filings, (iii) steps Shapiro APC took to wind up the professional corporation, (iv) the value of the assets of the corporation, (v) the extent of Ms. Potter’s personal knowledge, and (vi) the disposition of the law corporation’s files.” (Opp. 11) (See Ainslie Decl. ¶¶ 3-7.)

Plaintiffs are entitled to know from Potter if a shareholder vote to dissolve actually occurred, what basis Potter had for claiming Shapiro APC’s “known debts and liabilities have been actually paid or paid as far as its assets permitted,” and what Potter meant by “[t]he known assets have been distributed to the persons entitled thereto.” (See id.) Besides being matters that are relevant to voidable transfer and alter ego theories, at the very least Potter’s willingness to attest to things under oath that may be untrue is relevant to her credibility.

Other categories of information sought concern the steps Naiman did or did not take in maintaining Shapiro APC after Shapiro’s passing and the transfer of ownership to Potter, who appears to be a non-lawyer. As discussed previously, initially it looked as though the practice was transferred to Naiman, which might be permissible, but the transfer to Potter – when Shapiro APC continued to represent that the corporation was engaged in professional service (see RJN Ex. 2) – would appear to be void. See Corp. Code § 13407. Ultimately, Plaintiffs need to know who should be speaking for Shapiro APC.

Finally, Plaintiffs disagree that they seek any privileged financial information. “Plaintiffs are not asking for information on Shapiro APC’s financial condition or any dollar amounts. Plaintiffs are seeking evidence of Shapiro APC’s compliance or noncompliance with laws governing law corporations after a lawyer owner passes away, prohibited transfers of shares in professional corporations, and shareholder votes required for dissolutions. Given that Shapiro APC has made representations to the Secretary of State and was supposed to make representations to the State Bar regarding these subjects, it is impossible to fathom how Shapiro APC could have an expectation of privacy about them.” (Opp. 14: 10-16.)

The parties report that on August 1, 2022, Plaintiffs deposed Monica Potter, the successor trustee of the Shapiro Family Trust. The deposition lasted for approximately five hours, and the parties have agreed for a maximum of two additional hours to complete the deposition.

It is Defendant’s position that Potter’s deposition “provided all the information that Plaintiffs were seeking within the confines of the Court’s protective order.” (D’s Supp. Brief 3: 8-9.) Accordingly, Defendant contends “there is no reason to permit the deposition of Mr. Naiman,” as any remaining questions would be “inconsequential” and “irrelevant to the issues in the case.” (Id. 3: 21, 27.) Defendant also says it is willing to stipulate that Potter’s testimony is that of its PMK. (Id. 4: 12-13.)

It is Plaintiffs’ position that Naiman’s deposition should go forward. They contend that “Potter claimed ignorance” of some issues in the winding-up of Shapiro APC, and “that Naiman…is the only witness who can provide information about what occurred after Shapiro’s passing.” (P’s Supp. Brief 2: 1-3.) They seek to determine “[t]he steps Naiman did or did not take in maintaining Shapiro APC after Shapiro’s passing.” (Id. 3: 7-8.)

In light of the above, it appears Defendant can produce a PMK—likely Naiman—who can at least testify to the affairs of Defendant after the death of Shapiro, and fill the gaps in which Potter did not have knowledge. Moreover, the deposition could be reasonably calculated to lead to the discovery of admissible evidence—although it is still less clear if they can provide information relevant to the claims here, which are based on or related to professional negligence.

Thus, the court will adopt its June 6, 2022, Tentative Ruling and enter a protective order preventing Plaintiffs from inquiring into Defendant’s financial information (debts, assets, or liabilities) at or after the time of Shapiro’s death, or as to any other matter unless expressly allowed below.

Plaintiffs can still seek evidence of Shapiro APC’s compliance or noncompliance with laws governing law corporations after a lawyer owner passes away, prohibited transfers of shares in professional corporations, and shareholder votes required for dissolutions. These are the only subject areas about which the PMK need to testify.

Under CCP 2025.420(h), “the court shall impose a monetary sanction…against any party, person, or attorney who unsuccessfully makes or opposes a motion for a protective order, 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.”

Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept49@lacourt.org by no later than 4:00 p.m. the day before the hearing. All interested parties must be copied on the email. It should be noted that if you submit on a tentative ruling the court will still conduct a hearing if any party appears. By submitting on the tentative you have, in essence, waived your right to be present at the hearing, and you should be aware that the court may not adopt the tentative, and may issue an order which modifies the tentative ruling in whole or in part.