Judge: Theodore R. Howard, Case: 20-1133569, Date: 2023-01-05 Tentative Ruling

The Motion to Quash Deposition Subpoena for the Production of Business Records, filed by moving parties Defendants 520 Capital, LLC, David Kent Riemann and Lisa Riemann (here “MPs”), as to the subpoena issued by counsel for Plaintiff Nancy Corzine (“Plaintiff”) to Nano Banc (“Bank”) is GRANTED IN PART.

Under C.C.P. § 1987.1(a), in response to a motion to quash subpoena, the court 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. Here, the Court finds that the subpoena should not be quashed but should be modified as to any tax records that may be within the scope of the subpoena, and that a protective order should issue, limiting the use of the materials to be produced in response.

As a preliminary matter, the Motion correctly observes that for the subpoena at issue, a Notice to Consumer should have been served in accordance with C.C.P. § 1985.3 on both David Riemann and Lisa Riemann, as the subpoena seeks financial records concerning each of them, yet Plaintiff did not give notice to Lisa Riemann. (ROA 417, Neri Decl., ¶ 2, Ex. A; ROA 453, Opp, p. 9.) However, the Notice that was provided for Mr. Riemann was served on the Riemann’s mutual counsel of record. (ROA 417, Neri Decl., ¶ 2, Ex. A.) Their counsel then sent a meet and confer letter which failed to even mention the omission, and instead objected as to the subpoena on the merits. (Id. at ¶ 3, Ex. B.) This Motion was then filed on behalf of all three MPs.  Minor defects in documents served on the “consumer” may be waived upon good cause shown where the rights of witnesses and consumers are preserved. (C.C.P. § 1985.3(h).) As Ms. Riemann’s counsel had actual notice of the subpoena but did not object to the notice defect in the meet and confer process, and this Motion also addresses her objections on the merits, the Court finds that her rights have been adequately preserved, and that good cause exists to find that the defect should be deemed waived here.

On the merits, MPs argue that the materials at issue improperly seek to invade their financial privacy rights.  Where privacy rights are at issue in discovery, the party asserting the privacy right must establish a legally protected privacy interest, an objectively reasonable expectation of privacy in the given circumstances, and a threatened intrusion that is serious. The party seeking the information may raise in response whatever legitimate and important countervailing interest disclosure serves, while the party seeking protection may identify feasible alternatives that serve the same interests or protective measures that would diminish the loss of privacy. The court must then balance these competing considerations.  (Williams v. Superior Court (2017) 3 Cal.5th 531, 552, citing Hill v. National Collegiate Athletic Assn. (1994) 7 Cal.4th 1, 35.) Here, MPs have shown that the material at issue includes confidential financial information in which the parties at issue have a legally protected privacy interest, an objectively reasonable expectation of privacy, and that the threatened intrusion is serious.

But Plaintiff has identified legitimate and important countervailing interests that disclosure would serve. She alleges that MPs defrauded her and misappropriated or embezzled $4,393,800 from her. (SAC, ROA 145.)   MPs dispute Plaintiff’s characterizations and claim, but Mr. Riemann asserted as of 8/30/21 that Plaintiff’s funds, at least in substantial part, were transferred into various accounts, and are now gone. (See ROA 316, Supp. Riemann Decl., ¶ 8.)  Mr. Riemann also attested, as of 4/2/21, that the Riemanns lacked substantial other assets, so that the issuance of the TRO had required them to borrow funds for basic living expenses for their family. (ROA 181, ¶¶ 52, 53.) Yet in the Business Loan Agreement at issue here, they agreed as of 8/17/20 not only to pledge real property to secure the loan from Bank, but also represented that they had at least a $3,000,000 “Tangible Net Worth,” they agreed to maintain at least $2.5M in “unencumbered Net Liquid Assets” at all times, and they represented that they had provided truthful financial statements. (ROA 453, Droste Decl., ¶ 3, Ex. 1, at pp. 1-3.) Under these circumstances, Plaintiff has identified a compelling need for access to the records at issue and has shown that they are directly relevant to her claims. MPs have failed to identify feasible alternatives or limitations on scope that would serve the same interests. The Court thus finds that MPs’ privacy interests here are outweighed by Plaintiff’s need for the discovery at issue.

This is so even though tax returns for MPs are included in the materials that have been subpoenaed here.  The statutory privilege for tax returns is not absolute. (Weingarten v. Superior Court (2002) 102 Cal.App.4th 268, 274.) The privilege will not be upheld when, among other things, a public policy greater than that of the confidentiality of tax returns is involved. (Id.)  Here, as what has been represented by the Riemanns in this action appears to be inconsistent with what they represented in obtaining the Business Loan Agreement at issue, and they have failed to date to otherwise adequately explain the disposition of Plaintiff’s funds, the purpose of the discovery process and the judicial system's ability to ensure an ordered process designed to uncover the truth is thus at issue. (See Weingarten, supra, 102 Cal.App.4th at 276.)  A public policy greater than that of the confidentiality of the tax returns at issue is thus involved here.  However, with regard to any tax returns and tax records of MPs that were provided to Bank, the subpoena at issue is modified to require disclosure of tax returns and tax records only for tax years from 2016 on, as that is the period at issue here. (See ROA 181, at ¶¶ 35-50; SAC ¶ 24.) 

In addition, a Protective Order shall issue to: (a) limit the use of the material at issue to this litigation alone; (b) require that (absent a prior written agreement with defense counsel which states otherwise) any material obtained through the subject subpoena which Plaintiff wishes to file in this action is to be filed conditionally under seal, in accordance with C.R.C. 2.551(b)(3), along with a redacted version, with the defense to then have an opportunity to file a motion to seal some or all of those records as if they were the producing party, in accordance with C.R.C. 2.551(b)(3)(B); and (c) in addition to those limitations, for any tax returns or tax records which may be produced pursuant to this subpoena, only counsel for the parties (and their retained experts, if any) may view those materials.

Both sides’ requests for sanctions are DENIED.  In light of the issues presented and the nature of the material sought, both sides appear to have acted, at least in part, with substantial justification.

Counsel for MPs is to prepare a proposed order which comports with the foregoing, in accordance with C.R.C. 3.1312, and is to give notice of this ruling.