Judge: Stephen P. Pfahler, Case: 22CHCV00236, Date: 2023-09-25 Tentative Ruling

Case Number: 22CHCV00236    Hearing Date: September 25, 2023    Dept: F49

Dept. F-49

Date: 9-25-23 (TBH with Motion to Compel Compliance Originally Calendared for 9-12-23)

Case #22CHCV00236 (consolidated with 22CHCV00319)

Trial Date: 6-17-24

 

COMPEL/QUASH DEPOSITION SUBPOENA

 

MOVING PARTY: Cross-Complainant, Mina Kateb

RESPONDING PARTY: Cross-Defendants, Monocent, Inc., et al.

 

RELIEF REQUESTED

Motion to Compel Compliance with the Deposition Subpoena

 

Motion to Quash Deposition Subpoena

 

SUMMARY OF ACTION

22CHCV00236

Defendant Mina Kateb was “hired … as a managing director” with Plaintiff Monocent, Inc. on an unspecified date for an unspecified period of time. Monocent alleges Kateb improperly diverted customers, vendors, and business suppliers for “personal benefit,” diverting future business, and taking trade secrets.

 

On April 7, 2022, Monocent filed its complaint for Breach of Fiduciary Duty–Duty of Loyalty, Breach of Fiduciary Duty – Duty of Care, Intentional Interference with Prospective Business Advantage, Negligent Interference with Prospective Economic Advantage, Intentional Interference with Contractual Relations, Violation of Business and Professions Code section 17200, Negligence, Fraud—Intentional Misrepresentation, Fraud—Negligent Misrepresentation, Misappropriation of Trade Secrets, and Declaratory Relief. On October 13, 2022, the court sustained the demurrer of Kateb to the complaint. On November 14, 2022, Monocent filed a first amended complaint for Breach of Fiduciary Duty–Duty of Loyalty, Breach of Fiduciary Duty – Duty of Care, Intentional Interference with Prospective Business Advantage, Negligent Interference with Prospective Economic Advantage, Intentional Interference with Contractual Relations, Violation of Business and Professions Code section 17200, Negligence, Fraud—Intentional Misrepresentation, Fraud—Negligent Misrepresentation, Misappropriation of Trade Secrets, and Declaratory Relief.

 

On February 6, 2023, the court sustained the demurrer to the Breach of Fiduciary Duty–Duty of Loyalty, Intentional Interference with Prospective Business Advantage, Negligent Interference with Prospective Economic Advantage, Intentional Interference with Contractual Relations, Violation of Business and Professions Code section 17200, without leave to amend. The demurrer to the Breach of Fiduciary Duty – Duty of Care and Fraud – Negligent Misrepresentation causes of action were sustained with leave to amend. On March 8 and 15, 2023, Kateb filed an answer and first amended answer to the remaining causes of action in the first amended complaint.

 

22CHCV00319

On May 10, 2022, Mina Kateb filed a complaint for Fraudulent Representation, Breach of Fiduciary Duty–Duty of Loyalty, Breach of Fiduciary Duty – Duty of Care (3rd and 4th), Negligence, Retaliation in Violation of Labor Code section 1102.5, Wrongful Constructive Termination, Unfair Competition, Intentional Infliction of Emotional Distress, Intentional Interference with Contractual Relations, Negligent Interference with Prospective Economic Advantage, Breach of Contract, and Declaratory Relief. On June 15, 2022, Kateb filed a first amended complaint for Fraudulent Representation, Breach of Fiduciary Duty–Duty of Loyalty, Breach of Fiduciary Duty – Duty of Care (3rd and 4th), Negligence, Retaliation in Violation of Labor Code section 1102.5, Wrongful Constructive Termination, Unfair Competition, Intentional Infliction of Emotional Distress, negligent Infliction of Emotional Distress, Defamation, Intentional Interference with Prospective Contractual Relations, Negligent Interference with Prospective Contractual Relations, Breach of Contract, and Declaratory Relief.

 

On June 27, 2022, the court entered the stipulation of the parties relating and consolidating the cases. On December 30, 2022, the court whereby the court clarified the consolidation stipulation: 22CHCV00236 remains the lead case, and 22CHCV00319 now presents as a cross-complaint.

 

On February 6, 2023, the court sustained the demurrer to the Breach of Fiduciary Duty–Duty of Loyalty, Breach of Fiduciary Duty – Duty of Care, Breach of Fiduciary Duty – Duty of Care, Retaliation in Violation of Labor Code section 1102.5, Wrongful Constructive Termination, and Negligent Infliction of Emotional Distress causes of action, and overruled the demurrer to the Intentional Infliction of Emotional Distress cause of action, in the first amended cross-complaint. On March 9, 2023, Kateb filed the second amended cross-complaint for Fraudulent Representation, Breach of Fiduciary Duty–Duty of Loyalty (Taheri), Breach of Fiduciary Duty – Duty of Care (3rd (Taheri) and 4th (Sahrapeyma)), Negligence, Retaliation in Violation of Labor Code section 1102.5, Wrongful Constructive Termination, Unfair Competition, Intentional Infliction of Emotional Distress, Defamation, Intentional Interference with Prospective Contractual Relations, Negligent Interference with Prospective Contractual Relations, Breach of Contract, and Declaratory Relief. The second amended cross-complaint specifically skips from the ninth to the eleventh cause of action, thereby omitting the previously alleged claim for Negligent Infliction of Emotional Distress.On June 27, 2023, the court overruled the demurrer to the second amended cross-complaint of Kateb. Monocent answered the second amended cross-complaint on July 5, 2023.

 

On August 21, 2023, Nadia Taheri, in pro per, filed an answer.

 

RULING: Granted, Compel/Denied, Protective Order

Mina Kateb moves to compel compliance with the deposition subpoena seeking the Daneshrad Tax & Audit Consultants report prepared on behalf of Monocent, Inc. (Monocent) Monocent filed a separate motion to quash and alternatively stay any subpoena for said records. The court consolidates the motions into a single ruling.

 

Kateb brings the motion to compel based on a claim of a shareholder interest in Monocent, and the refusal to provide copies of records. Monocent declines to produce the records on grounds of denial of any shareholder interest in Monocent, and therefore a right to examination of the documents. Kateb relies on an argument of waiver of any objections by the subpoenaed third party. Monocent’s opposition to the motion to compel contends the motion lacks a sufficient meet and confer effort, and the motion to compel only comes after a “third” unilateral cancellation of a prior scheduled deposition of Kateb. Mononcent also maintains the sought after discovery exceeds the scope of discovery on the basis of burdensome and relevance, and seeks privacy protected information. Kateb in reply maintains the subpoena only seeks relevant evidence. Kateb denies any protection from discovery, and even if privacy privileges exist, a compelling interest exists.

 

“If a subpoena requires the attendance of a witness … the court, upon motion reasonably made by any person described in subdivision (b), … 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, including unreasonable violations of the right of privacy.”  directing compliance with it upon those terms or conditions as the court shall declare...” (Code Civ. Proc., § 1987.1, subd. (a).) A party to the action may bring the motion to enforce or protective order. (Code Civ. Proc., § 1987.1, subd. (b)(1).)

 

Kateb moves entirely on the basis of a waiver based on the deponent’s failure to serve formal objections, and instead a promise to produce prior to intervention by Monocent. The motion depends on authority based in Code of Civil Procedure sections 2025.210 and 2025.410. (Unzipped Apparel, LLC v. Bader (2007) 156 Cal.App.4th 123, 127.)

 

(a) Any party served with a deposition notice that does not comply with Article 2 (commencing with Section 2025.210) waives any error or irregularity unless that party promptly serves a written objection specifying that error or irregularity at least three calendar days prior to the date for which the deposition is scheduled, on the party seeking to take the deposition and any other attorney or party on whom the deposition notice was served.

(b) If an objection is made three calendar days before the deposition date, the objecting party shall make personal service of that objection pursuant to Section 1011 on the party who gave notice of the deposition. Any deposition taken after the service of a written objection shall not be used against the objecting party under Section 2025.620 if the party did not attend the deposition and if the court determines that the objection was a valid one.

(c) In addition to serving this written objection, a party may also move for an order staying the taking of the deposition and quashing the deposition notice. This motion shall be accompanied by a meet and confer declaration under Section 2016.040. The taking of the deposition is stayed pending the determination of this motion.

 

Code Civ. Proc., § 2025.410

 

The subpoena was served on March 21, 2023, with a production compliance date on or before April 27, 2023. On March 31, 2023, Deponent represented an unwillingness to comply based on the instruction of counsel for Monocent. [Declaration of Alexander Gura.] Kateb maintains the position that the communication from the deponent insufficiently constitutes an objection in that the response was not presented as a “formal objection.” Monocent offers no specific response to this omission of objections, and instead seeks to challenge the validity of the motion, with now interspersed objections and within the motion for protective order.

 

The plain language of the statute supports the finding of a waiver in that no objections were served. Kateb was in no way obliged to meet and confer, and nothing in the opposition cites any basis of authority for this requirement.

 

Monocent otherwise provides no support for the argument against the waiver of any and all privilege objections by the third party. Nevertheless, while any and all privilege objections were not presented, a party may wait until the time of the deposition itself to invoke any privilege objections. (Monarch Healthcare v. Superior Court (2000) 78 Cal.App.4th 1282, 1290.) The court therefore finds no waiver of the privacy and also unstated tax return objections.

 

While the parties extensively address personal privacy objections, the court begins at the threshold consideration: a corporate defendant is not an individual entitled to invoke the constitutional right to privacy. (SCC Acquisitions, Inc. v. Superior Court (2015) 243 Cal.App.4th 741, 755.) Lesser privacy rights apply to corporate entities, which depends “on the circumstances.” (Ameri-Medical Corp. v. Workers' Comp. Appeals Bd. (1996) 42 Cal.App.4th 1260, 1288.) A corporation exercises no reasonable expectation of privacy, but “the nature of the interest sought to be protected will determine the question whether under given facts the corporation per se has a protectible privacy interest.” (Ibid.)

 

Tax returns are privileged, but the privilege is not absolute. (Schnabel v. Superior Court (1993) 5 Cal.4th 704, 720; Deary v. Superior Court (2001) 87 Cal.App.4th 1072, 1080.) The privilege protects all entries made on tax returns such as amounts of income reported, deductions claimed, etc. In other words, the content of the return, as well as production of the returns themselves, is privileged.  (Sav-On Drugs, Inc. v. Superior Court (1975) 15 Cal.3d 1, 7 [“Assuming Revenue and Taxation Code section 7056 protects the returns themselves, it is reasonable to conclude that it must also protect the information contained in the returns”].) A compelling reason for discovery must be presented. (Fortunato v. Superior Court (2003) 114 Cal.App.4th 475, 483.)

 

Of the 75 listed items in the subpoena numbers 54-55 specifically seek tax records, while numbers 28-30 seek documents “related” to the tax returns. The declaration and motion itself fails to actually parse the items in dispute, if applicable. The court declines to speculate as to which of the 75 items the motion may or not apply, other than the four explicitly identified items.

 

Given the limited factual argument and legal authority on tax records and corporate privacy standards, the court finds the vaguely described “tax” records are privileged for the privately held corporate entity. The court therefore considers a compelling interest for production. Kateb relies on an assumption of a shareholder relationship, thereby entitling production.

 

The court declines to consider any ruling on the prior demurrers as a statement of fact, but notes paragraphs 47 and 48 of the second amended complaint specifically seek production of records as a shareholder. The court overruled the demurrer on the derivative liability based claims of Kateb. The court therefore finds no basis preventing discovery as an alleged, not factually determined shareholder for purposes of conducting discovery. It’s a shareholder’s right to conduct discovery into corporate records against an entity without any other established constitutionally protected privacy interest.

 

In the case of a protective order, the burden of proof is on the party seeking the protective order to show “good cause” for the order he or she seeks. (Fairmont Insurance Co. v. Superior Court (2000) 22 Cal.4th 245, 255.) “A meet and confer declaration in support of a motion shall state facts showing a reasonable and good faith attempt at an informal resolution of each issue presented by the motion.” (Code Civ. Proc., § 2016.040.) The court record electronic filing system shows no separately filed opposition or reply to the motion for protective order, and assumes the arguments were subsumed within the motion to compel. The motion contains the requisite meet and confer, but as addressed above, fails to demonstrate any privilege barring production of the sought after tax documents. Again, any and all other objections were waived. Kateb establishes a right to production of tax records.

 

The motion to compel is granted, and the motion for protective order is denied. As stated above, the court cannot determine the scope of the 75 items, but given the guidelines presented regarding the production, the court assumes all items fall under a waiver of objections, a right to discovery as a shareholder, and/or a compelling interest.

 

The subject action continues to present an inordinate burden on court resources. Further extensive discovery disputes with minimally factually and legally supported arguments may lead to referral to a discovery referee, including a supervised deposition, if necessary. Any disputes subsequently raised requiring item-by-item consideration may also justify referee referral.

 

Motion to Compel the Deposition of Kateb set for December 22, 2023.

 

Kateb to give notice on both orders.