Judge: Salvatore Sirna, Case: 22PSCV00446, Date: 2023-04-11 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: April 11, 2023    Dept: G

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 to Plaintiffs’ First Amended Complaint is SUSTAINED IN PART and OVERRULED IN PART with twenty (20) days leave to amend.

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¿is deemed MOOT.

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 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 (collectively, Defendants) 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 November 10, 2022, Defendants filed the present demurrer and motion to strike. Prior to filing on October 6, Defendants’ counsel sent a “meet and confer” letter to Plaintiffs’ counsel, requesting a response. (Chang Decl., ¶ 6-8.)

On February 27, 2023, the court continued Defendants’ demurrer and motion to strike. On March 10, Defendants’ counsel telephonically met and conferred with Plaintiffs’ counsel. (Chang Suppl. Decl., ¶ 3.) A hearing on the present motions and motions to quash deposition subpoenas are set for April 11, along with a case management conference.

ANALYSIS

Defendants demur to Plaintiffs’ first cause of action (­fraud), second cause of action (­breach of fiduciary duty), third cause of action (­breach of contract), fourth cause of action (­breach of quasi contract), fifth cause of action (­involuntary dissolution), sixth cause of action (­common counts), seventh cause of action (­conversion), eighth cause of action (­accounting), ninth cause of action (­offer and sale of unqualified, nonexempt securities), tenth cause of action (­misrepresentation and/or omission of material facts), eleventh cause of action (­unlawful sale of securities), twelfth cause of action (­unlawful fraudulent scheme), thirteenth cause of action (­unlawful business practices), and fourteenth cause of action (­intentional infliction of emotional distress).

For the following reasons, the court SUSTAINS Defendants’ demurrer in its entirety with respect to M Capital’s causes of action. The court also SUSTAINS Defendants’ demurrer to all of Chen’s causes of action with the exception of Chen’s fourteenth cause of action, to which the court OVERRULES Defendants’ demurrer.

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.)¿ 

Standing (1st, 2nd, 3rd, 4th, 5th, 6th, 7th, 8th, 9th, 10th, 11th, 12th, and 13th Causes of Action)

Defendants argue Plaintiffs lack standing to bring the present action. The court agrees.

M Capital

As an initial matter, the parties dispute whether Plaintiffs are bringing this action individually or derivatively on behalf of Fiorano Motorsport. “An action is deemed derivative ‘if the gravamen of the complaint is injury to the corporation, or to the whole body of its stock and property without any severance or distribution among individual holders, or it seeks to recover assets for the corporation or to prevent the dissipation of its assets.’” (Grosset v. Wenaas (2008) 42 Cal.4th 1100, 1108, quoting Jones v. H.F. Ahmanson & Co. (1969) 1 Cal.3d 93, 106 (Jones).) “The stockholder’s individual suit, on the other hand, is a suit to enforce a right against the corporation which the stockholder possesses as an individual.” (Schrage v. Schrage (2021) 69 Cal.App.5th 126, 150, quoting Jones, supra, 1 Cal.3d at p. 107.) “The individual wrong necessary to support a suit by a shareholder need not be unique to that plaintiff. The same injury may affect a substantial number of shareholders. If the injury is not incidental to an injury to the corporation, an individual cause of action exists.” (Jones, supra, 1 Cal.3d at p. 107.)

In Sutter v. General Petroleum Corp. (1946) 28 Cal.2d 525 (Sutter), defendants fraudulently induced plaintiff to form and invest in a corporation that became worthless. (Id., at p. 526-529.) While the court acknowledged defendants’ actions harmed the corporation, the court recognized that defendants’ actions also caused direct and individual injury to plaintiff as plaintiff relied on their misrepresentations in forming and investing in the corporation. (Id., at p. 530-531.) Subsequent cases acknowledge this distinction between torts directed at the plaintiff individually before the corporation was formed and torts occurring after the corporation was formed. (Sole Energy Co. v. Petrominerals Corp. (2005) 128 Cal.App.4th 212, 232 (Sole Energy); Hilliard v. Harbour (2017) 12 Cal.App.5th 1006, 1014-1015.)

In the present case, M Capital alleges their initial investment and subsequent investments were induced through fraud. (FAC, ¶ 65-66.) “The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638, quoting 5 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, § 676, p. 778.) The facts constituting the alleged fraud must be alleged factually and specifically as to every element of fraud, as the policy of “liberal construction” of the pleadings will not ordinarily be invoked. (Id., at p. 645.)

Here, M Capital alleges Defendants misrepresented how Defendants would run the corporation and utilize M Capital’s investment. (FAC, ¶ 65.) However, “an actionable misrepresentation must be made about past or existing facts; statements regarding future events are merely deemed opinions.” (San Francisco Design Center Associates v. Portman Companies (1995) 41 Cal.App.4th 29, 44.) In Sutter, for example, the defendants induced plaintiff’s investment in their corporation by misrepresenting the structural integrity of a drilling platform that the corporation was to own. (Sutter, supra, 28 Cal.2d at p. 527.) However, the FAC does not allege the misrepresentation of any past or present fact when Defendants were soliciting M Capital’s investment. (FAC, ¶ 11-13.) While M Capital does allege the issued stock was not properly registered in violation of the Securities Act of 1933, the FAC does not allege what representations Defendants made regarding the stock.

To the extent M Capital attempts to establish Defendants made false promises, “the necessary averment is the general statement that the promise was made without any intention to perform it, or that the defendant did not intend to perform it. [Citation.] The absence of such a general allegation is ordinarily a fatal defect.” (Tyco Industries, Inc. v. Superior Court (1985) 164 Cal.App.3d 148, 156.) However, in this case, while the FAC vaguely alleges Defendants intended M Capital to rely on all the representations alleged in the FAC, M Capital fails to allege Defendants did not intend to perform the promises made in August 2021. Rather, the FAC establishes Defendants solicited M Capital’s investment in Fiorano Motorsports with a series of promises and later failed to fulfill those promises by allegedly embezzling the investment and further defrauding M Capital.

M Capital also alleges Defendants fraudulently solicited additional investments (FAC, ¶ 65), breached a fiduciary duty owed to M Capital (FAC, ¶ 82-83), committed breach of contract or quasi-contract by violating Fiorano Motorsports’ operating agreement (FAC, ¶ 90-95, 99-100), converted M Capital’s investment by refusing to return it (FAC, ¶ 114), violated securities law (FAC, ¶ 127, 137-138, 145-146, 148-151), and engaged in unlawful business practices (FAC, ¶ 152-154). Furthermore, M Capital seeks involuntary dissolution of Fiorano Motorsports (FAC, ¶ 103-104) and repayment of the investment funds (FAC, ¶ 107-111, 120-125).

Because the FAC fails to allege sufficient facts to establish M Capital’s membership in Fiorano Motorsports was procured through fraud, Sutter is inapplicable. Thus, since M Capital’s alleged damages flow from M Capital’s involvement as a member of Fiorano Motorsports, they are incidental to Li’s damages to Fiorano Motorsport and must be recovered in a derivative action on Fiorano Motorsports’ behalf.

“[T]he principles of derivative lawsuits applicable to corporations” also apply to limited liability companies. (PacLink Communications Intern., Inc. v. Superior Court (2001) 90 Cal.App.4th 958, 963.) In a derivative action, plaintiff must allege “with particularity plaintiff's efforts to secure from the board such action as plaintiff desires, or the reasons for not making such effort, and alleges further that plaintiff has either informed the corporation or the board in writing of the ultimate facts of each cause of action against each defendant or delivered to the corporation or the board a true copy of the complaint which plaintiff proposes to file.” (Corp. Code, § 800, subd. (b)(2).) Here, M Capital has not done so. In opposition, M Capital argues such a pre-lawsuit demand would be futile. However, M Capital did not allege those reasons in the FAC. Thus, M Capital has failed to adequately plead a derivative action.

Accordingly, Defendants’ demurrer to M Capital’s first, second, third, fourth, fifth, sixth, seventh, eighth, ninth, tenth, eleventh, twelfth, and fourteenth causes of action is SUSTAINED with leave to amend.

Chen

In addition to M Capital, Chen also maintains causes of action against Defendants for fraud, breach of contract, breach of quasi contract, involuntary dissolution, common counts, conversion, accounting, securities violations, unlawful business practices, and intentional infliction of emotional distress (IIED).

However, the FAC establishes that M Capital, not Chen, purchased shares in and became a member of Fiorano Motorsports. (FAC, ¶ 12-13.) Furthermore, M Capital was the one who made the additional investments. (FAC, ¶ 17, 29, 45.) Lastly, the Operating Agreement attached as Exhibit A lists M Capital, not Chen, as a member. (FAC, Ex. A.) Because Chen was not a shareholder or party to the operating agreement and operated through M Capital as its member, Chen does not have standing to bring causes of action one and three through thirteen. (FAC, ¶ 2.)

Accordingly, Defendants’ demurrer to Chen’s first, third, fourth, fifth, sixth, seventh, eighth, ninth, tenth, eleventh, twelfth, and thirteenth causes of action is SUSTAINED with leave to amend.

Intentional Infliction of Emotional Distress (Fourteenth Cause of Action)

Defendants contend Chen’s fourteenth cause of action for IIED fails to plead sufficient facts to state a claim. The court disagrees.

To establish a claim of IIED, one must show “(1) extreme and outrageous conduct by the defendant with the intention of causing, or reckless disregard of the probability of causing, emotional distress; (2) the plaintiff’s suffering severe or extreme emotional distress; and (3) actual and proximate causation of the emotional distress by the defendant’s outrageous conduct.” (Wilson v. Hynek (2012) 207 Cal.App.4th 999, 1009, quoting Cervantez v. J.C. Penney Co. (1979) 24 Cal.3d 579, 593.) Extreme and outrageous conduct is defined as exceeding “all bounds of decency usually tolerated by a decent society” and intending to cause mental distress. (Fisher v. San Pedro Peninsula Hospital (1989) 214 Cal.App.3d 590, 618.)

In this case, Chen alleges Li engaged in outrageous conduct by embezzling Chen’s money, falsely claiming Chen owed Li money, making false police reports, harassing and stalking Chen, and making false immigration reports. (FAC, ¶ 157.) Li contends this conduct was not directed at Chen but was privileged and in the course of business. More specifically, Chen alleges that Li threatened to “report him to the police” if Chen did not drop the present lawsuit and repay Li. (FAC, ¶ 56.) Li then filed false police reports accusing Chen of stealing Li’s vehicle and caused Chen to be investigated by the Orange County Sheriff’s Department. (FAC, ¶ 56.) Chen also alleges Li frequently drove by Chen’s house and caused Chen to hire private security for Chen’s protection. (FAC, ¶ 57-59.) Chen points to one incident where one of Chen’s associates borrowed Chen’s car and was followed by Li to a store parking lot where Li confronted the associate by blocking the car from driving away and banging on its windows. (FAC, ¶ 59-61.)

The attempt to extort money by threat of arrest can constitute extreme and outrageous conduct. (Restatement (Second) of Torts, § 46, comment (e).) Similarly, making false police reports and engaging in surveillance or stalking can constitute outrageous conduct. (See Taiwo v. Vu (Kan. 1991) 822 P.2d 1024, 1029-1030 [filing false police reports to subject an individual to law enforcement investigation could constitute outrageous conduct]; Gianoli v. Pfleiderer (Wis. App. 1997) 563 N.W.2d 562, 567 [surveilling, following, and stalking of plaintiff support findings of extreme and outrageous conduct].)

Thus, the court finds Chen sufficiently alleged Li engaged in extreme and outrageous conduct that supports a cause of action for IIED. Accordingly, Defendants’ demurrer to Chen’s fourteenth cause of action is OVERRULED.

CONCLUSION

Based on the foregoing, Defendants’ demurrer to Plaintiffs’ FAC is SUSTAINED with twenty (20) days leave to amend as to the first, second, third, fourth, fifth, sixth, seventh, eighth, ninth, tenth, eleventh, twelfth, and thirteenth causes of action.

Defendants’ demurrer to the fourteenth cause of action is OVERRULED.

Based on the court’s ruling on Defendants’ demurrer, Defendants’ motion to strike portions of Plaintiffs’ FAC is deemed MOOT.

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.

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.  Plaintiff requests sanctions
as well.

Defendant
Li filed a supplemental declaration on March 28, 2023 to the motions to quash
deposition subpoenas.  

For
the following reasons, the court DENIES Defendants’ motions and DENIES
Plaintiffs’ request for sanctions.

Motions
to Quash

Defendant 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 the 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.