Judge: Salvatore Sirna, Case: 22PSCV00446, Date: 2023-02-27 Tentative Ruling
The Court may change tentative rulings at any time. Therefore, counsel are advised to check this website periodically to determine whether any changes or updates have been made to the tentative ruling. Counsel may submit on the tentative rulings by calling the clerk in Department G at (909) 802-1104 prior to 8:30 a.m. the morning of the hearing.
Case Number: 22PSCV00446 Hearing Date: February 27, 2023 Dept: G
Defendant Yanlin Li’s
Motion to Quash Deposition Subpoena to Citibank and Motion for Protective Order
Respondent: Plaintiffs M Capital Global California and Sokly Chen
Defendant Yanlin Li’s Motion to Quash Deposition Subpoena to Wells Fargo Bank and Motion for Protective Order
Respondent: Plaintiffs M Capital Global California and Sokly Chen
Defendants Yanlin Li and Yokohama Imports USA, LLC’s Motion to Quash Subpoena for Wells Fargo Bank and Motion for a Protective Order
Respondent: Plaintiffs M Capital Global California and Sokly Chen
TENTATIVE RULING
Defendant Yanlin Li’s Motion to Quash Deposition Subpoena to Citibank and Motion for Protective Order are DENIED. Defendant’s Request for Sanctions is DENIED.
Plaintiffs M Capital Global California and Sokly Chen’s Request for Sanctions is DENIED.
Defendant Yanlin Li’s Motion to Quash Deposition Subpoena to Wells Fargo Bank and Motion for Protective Order are DENIED. Defendant’s Request for Sanctions is DENIED.
Plaintiffs M Capital Global California and Sokly Chen’s Request for Sanctions is DENIED.
Defendants Yanlin Li and Yokohama Imports USA, LLC’s Motion to Quash Subpoena for Wells Fargo Bank and Motion for a Protective Order are DENIED.
Plaintiffs M Capital Global California and Sokly Chen’s Request for Sanctions is DENIED.
BACKGROUND
This is an action for breach of contract and fraud. In August 2021, Plaintiff Sokly Chen (Chen), a member of Plaintiff M Capital Global California (M Capital), met with Defendant Yanlin Li (Li) who invited Chen to invest in Li’s vehicle dealership business by purchasing a 50% ownership interest in Fiorano Motorsport LLC (Fiorano Motorsport) for $1,000,000. On September 22, Li prepared on operating agreement that established Li and M Capital would be members of Fiorano Motorsport. That same month, M Capital provided an additional $1,500,000 at Li’s request so Fiorano Motorsport could allegedly open a dealership.
Subsequently, in September and October 2021, Li allegedly withdrew $1,440,000 and $1,047,286.80 from Fiorano Motorsport’s account for Li’s personal use. In October 2021, Li claimed business was going well and successfully solicited an additional $1,000,000 from M Capital for alleged vehicle purchases. Upon receiving the money, Li continued to withdraw funds for personal use and to purchase vehicles that were titled under Li’s name or that of Bianco Corsa Motorsport, Inc. (Bianco Corsa Motorsport), an entity owned by Li.
When M Capital inquired about the vehicle purchases, Li allegedly provided falsified DMV bills of sale that claimed Fiorano Motorsport had title to all the vehicles. M Capital then invested an additional $1,000,000 in December 10, 2021 and $483,000 in January 12, 2022. By February 2022, Fiorano Motorsport’s account had been drained of funds as Li had been allegedly transferring the money to Li’s personal accounts and pocketing revenue from purchases. When Li requested a $2,350,000 investment from M Capital to cover expenses, M Capital questioned why the sale revenue was insufficient. In response, Li claimed there was insufficient revenue and that Li had used personal money to purchase vehicles. Li then claimed the $2,350,000 was debt owed by M Capital and began attempting to collect this debt by allegedly threatening M Capital employees, attempting to break into M Capital’s office, falsely reporting Chen to law enforcement for vehicle theft, and stalking Chen.
On May 10, 2022, M Capital filed a complaint against Li, Fiorano Motorsport, Bianco Corsa Motorsport, and Does 1-50, alleging the following causes of action: (1) fraud, (2) breach of fiduciary duty, (3) breach of oral contract, (4) common counts, (5) conversion, and (6) accounting.
On August 29, 2022, Li filed the present motions to quash deposition subpoenas to Citibank and Wells Fargo Bank.
On September 12, 2022, M Capital and Chen (collectively, Plaintiffs) filed a First Amended Complaint (FAC) against Li, Fiorano Motorsport, Bianco Corsa Motorsport, and Yokohama Imports USA, LLC (Yokohama Imports USA) as well as Does 1-50, alleging the following causes of action: (1) fraud, (2) breach of fiduciary duty, (3) breach of contract, (4) breach of quasi contract, (5) involuntary dissolution under Corporations Code section 17707.03, (6) common counts, (7) conversion, (8) accounting, (9) offer and sale of unqualified, non-exempt securities in violation of Corporations Code section 25110, (10) misrepresentation and/ or omissions of material facts in violation of Corporations Code section 25401, (11) unlawful sale of securities under the Securities Act of 1933, section 5, (12) unlawful fraudulent scheme under the Securities Act of 1933, section 17, (13) unlawful business practices under Business & Professions Code section 17200, and (14) intentional infliction of emotional distress.
On October 14, 2022, Li and Yokohama Imports USA (collectively, Defendants) filed the present motion to quash deposition subpoena to Wells Fargo Bank. A hearing is set for February 27, 2023, along with OSC Re: Sanctions, a case management conference, and hearing on a demurrer with a motion to strike.
ANALYSIS
Defendants move to quash Plaintiffs’ subpoenas for production of business records from Citibank and Wells Fargo Bank. Defendants also move for protective orders and seek sanctions. For the following reasons, the court DENIES Defendants’ motions and GRANTS Plaintiffs’ request for sanctions.
Motions to Quash
Li moves to quash M Capital’s subpoenas to Citibank and Wells Fargo Bank while Defendants move to quash Plaintiffs’ subpoena to Wells Fargo Bank, arguing the subpoenas violate Li’s right to privacy. The court disagrees.
Legal Standard
If a subpoena requires the attendance of a witness or the production of books, documents, electronically stored information, or other things before a court, or at the trial of an issue therein, or at the taking of a deposition, the court, upon motion reasonably made by any person described in subdivision (b), or upon the court's own motion after giving counsel notice and an opportunity to be heard, may make an order quashing the subpoena entirely, modifying it, or directing compliance with it upon those terms or conditions as the court shall declare, including protective orders. In addition, the court may make any other order as may be appropriate to protect the person from unreasonable or oppressive demands such as unreasonable violations of the right of privacy.¿ (Code Civ. Proc., § 1987.1.)
An individual’s right of privacy is protected by the California Constitution. (Cal. Const., Art. I, § 1.) In ruling on discovery motions, the Court must balance the privacy claims of the responding party with the requesting party’s need for the information. (Schnabel v. Superior Court (1993) 5 Cal.4th 704, 718-722.)¿¿The responding party, as the party asserting the right of privacy, bears the initial burden of demonstrating (1) a “legally protected privacy interest”; (2) an “objectively reasonable expectation of privacy in the given circumstances”; and (3) a “threatened intrusion that is serious.” (Williams v. Superior Court (2017) 3 Cal.5th 531, 552 (Williams).) If this standard is met, requesting party must then show that the requested documents are “directly relevant” to the litigation. (Tylo v. Superior Court (1997) 55 Cal.App.4th 1379, 1387, citing Britt v. Superior Court (1978) 20 Cal.3d 844, 858-859.)¿¿
“Legally recognized privacy interests [include] . . . interests in precluding the dissemination or misuse of sensitive and confidential information (‘informational privacy’) .¿ .¿ .¿ .”¿ (Hill v. National Collegiate Athletic Assn. (1994) 7 Cal.4th 1, 35 (Hill).)¿ “A particular class of information is private when well-established social norms recognize the need to maximize individual control over its dissemination and use to prevent unjustified embarrassment or indignity.”¿ (Ibid.)
Discussion
In this case, Defendant Li seeks to quash subpoenas from M Capital to Citibank and Wells Fargo requesting Li’s personal financial records. In particular, the subpoenas request the following documents from January 1, 2021 to present: membership applications; digitally stored records; monthly statements; signature cards; front and back sides of checks; deposit slips; documents evidencing electronic debits and credits; all documents relating to cashier's checks, bank checks, money orders; all documents pertaining to wire transfers; all Currency Transactions Reports and Currency and Monetary Instrument Reports; and image data regarding canceled checks and deposited items. (Motion, Ex. 1, Attachment 3.) Defendants also seek to quash subpoenas from Plaintiffs seeking similar records from Wells Fargo Bank with regards to Li and Yokohama Imports USA.
Defendants first argue personal financial information is protected within the “zone of privacy.” (See Valley Bank of Nevada v. Superior (1975) 15 Cal.3d 652, 656 (Valley Bank).) The court agrees and notes courts have recognized bank customers have a reasonable expectation of privacy with respect to their financial information. (Athearn v. State Bar (1977) 20 Cal.3d 232, 235, citing Valley Bank, supra, 15 Cal.3d 652, and Burrows v. Superior Court (1974) 13 Cal.3d 238.)
However, even if Plaintiffs’ subpoenas were a serious intrusion of Defendants’ privacy, the court finds Plaintiffs have established the subpoenaed financial records are directly relevant to the present litigation. Plaintiffs’ operative FAC alleges Li withdrew company funds for personal use (FAC, ¶ 18, 22-27, 30-31, 37-38, 40-41, 43-44) and transferred company funds to Li’s personal bank account with Citibank (FAC, ¶ 19). Plaintiffs’ operative FAC also alleges Li transferred company funds to Yokohama Imports USA (FAC, ¶ 39, 45, 65), an entity that Plaintiffs allege is owned by Li and serves as the alter ego of Li (FAC, ¶ 6, 8-9.) Thus, the personal financial records of Defendants is directly relevant to this action as Plaintiffs are alleging Defendants misappropriated M Capital’s investment in Fiorano Motorsport for their personal use.
Next, Defendants contend the subpoenas should be quashed because they invade a third-party’s right to privacy as they claim the personal bank records “will surely reveal numerous transactions with third parties.” Nonetheless, this argument is unavailing for the same reason demonstrated above, given the discovery sought here is directly relevant to the case at issue. The same goes for Defendants’ “business entity privacy” argument.
Last, Defendants maintain Civil Code section 3295, subdivision (c) prevents pretrial discovery of financial condition when punitive damages are sought. However, this limitation only applies when “plaintiff seeks to discover defendant’s financial status solely for the purpose of assessing a punitive damages claim,” not when the financial information is “fundamental” to the case. (Rawnsley v. Superior Court (1986) 183 Cal.App.3d 86, 91.) Thus, where the financial information requested here goes to the heart of Plaintiffs’ claims involving Defendants’ alleged misappropriation of M Capital’s investment, Civil Code section 3295 does not apply.
Accordingly, Defendants’ motions to quash are DENIED.
Motions for Protective Orders
In all of three of Defendants’ motions to quash, Defendants requested the court impose protective orders. However, because Defendants’ request fails to establish any good cause for such an order, Defendants’ requests are DENIED.
Sanctions
Both parties seek sanctions. Li requests sanctions pursuant to Code of Civil Procedure sections 1987.2, 2025.420, and 2023.030, subdivision (a). Because Li did not prevail or establish these subpoenas are oppressive, Li’s requests are DENIED.
Plaintiffs also request sanctions in the amount of $3,616.70 for each of the three oppositions to Defendants’ motions. The court likewise declines to award sanctions to Plaintiff as it finds that Defendants’ motions to quash were brought in good faith and not to harass or delay. The court chooses to exercise its discretion and declines to award sanctions to Plaintiff.
CONCLUSION
Based on the foregoing, Defendants’ three motions to quash Plaintiffs’ subpoenas are DENIED. Defendants’ motions for protective orders are DENIED.
The court exercises its discretion and declines to award sanctions to Plaintiff.
Defendants Yanlin Li,
Fiorano Motorsport LLC, Bianco Corsa Motorsport, Inc., and Yokohama Imports
USA, LLC’s Demurrer to Plaintiffs’ First Amended Complaint
Respondent: Plaintiffs M Capital Global California and Sokly Chen
Defendants Yanlin Li, Fiorano Motorsport LLC, Bianco Corsa Motorsport, Inc., and Yokohama Imports USA, LLC’s Motion to Strike Portions of Plaintiffs’ First Amended Complaint
Respondent: Plaintiff M Capital Global California and Sokly Chen
TENTATIVE RULING
Defendants Yanlin Li, Fiorano Motorsport LLC, Bianco Corsa Motorsport, Inc., and Yokohama Imports USA, LLC’s Demurrer and Motion to Strike Portions of Plaintiffs’ First Amended Complaint are CONTINUED TO March 17, 202, 8:30 a.m., Department G (Pomona). Defendants are also ordered meet and confer with Plaintiff’s counsel regarding the Demurrer and Motion to Strike and file a supplemental declaration describing such meet and confer efforts at least (9) court days before the next scheduled hearing.
LEGAL STANDARD
A party may demur to a complaint on the grounds that it “does not state facts sufficient to constitute a cause of action.” (Code Civ. Proc., § 430.10, subd. (e).) A demurrer tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747 (Hahn).) When considering demurrers, courts accept all well pleaded facts as true. (Fox v. JAMDAT Mobile, Inc. (2010) 185 Cal.App.4th 1068, 1078.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.” (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.) “The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.” (Hahn, supra, at p. 747.)
ANALYSIS
Defendants demur to all fourteen of Plaintiffs’ causes of action. For the following reasons, the court finds parties did not adequately meet and confer.
Pursuant to Code of Civil Procedure section 430.41, subdivision (a), prior to filing a demurrer, “the demurring party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” This section further provides that “the demurring party shall identify all of the specific causes of action that it believes are subject to demurrer and identify with legal support the basis of the deficiencies.” (Code Civ. Proc., § 430.41, subd. (a)(1).)
While Code of Civil Procedure section 430.41, subdivision (a)(4) makes clear failing to meet and confer is not grounds to overrule a demurrer, courts “are not required to ignore defects in the meet and confer process” and if the court determines “no meet and confer has taken place, or concludes further conferences between counsel would likely be productive, it retains discretion to order counsel to meaningfully discuss the pleadings with an eye toward reducing the number of issues or eliminating the need for a demurrer, and to continue the hearing date to facilitate that effort.” (Dumas v. Los Angeles County Bd. of Supervisors (2020) 45 Cal.App.5th 348, 355 & fn. 3.)
Here, Defendants’ counsel sent a single letter to Plaintiffs’ counsel that highlighted Defendants’ issues and requested a response within one-week. (Chang Decl., ¶ 5-6.) The court finds this sole attempt insufficient, especially given Defendants’ counsel did not state counsel ever attempted to contact Plaintiffs’ counsel telephonically or in-person. Accordingly, the court finds a continuance of the hearing on Defendants’ demurrer and motion to strike is appropriate.
CONCLUSION
Based on the foregoing, Defendants’ demurrer to Plaintiffs’ complaint is CONTINUED TO March 17, 2023, 8:30 a.m., Department G (Pomona). Defendants are also ordered meet and confer with Plaintiffs’ counsel regarding the Demurrer and Motion to Strike and file a supplemental declaration describing such meet and confer efforts at least (9) court days before the next scheduled hearing.¿