Judge: Upinder S. Kalra, Case: 21STCV04178, Date: 2022-09-22 Tentative Ruling

Case Number: 21STCV04178    Hearing Date: September 22, 2022    Dept: 51

Tentative Ruling

 

Judge Upinder S. Kalra, Department 51

 

HEARING DATE:   September 22, 2022                                       

 

CASE NAME:            Paraga Import & Co., Ltd., successor to Paraga Co., Ltd., et al. v. Samtex Fabrics, Inc., et al.

 

CASE NO.:                21STCV04178

 

DEFENDANT’S MOTION FOR PROTECTIVE ORDER

 

MOVING PARTY: Defendant Samtex Fabrics, Inc.

 

RESPONDING PARTY(S): Plaintiff Paraga Import & Co., LTD

 

REQUESTED RELIEF:

 

1.      An order granting a protective order

TENTATIVE RULING:

 

1.      Motion for Protective Order is DENIED.

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

On February 2, 2021, Plaintiffs Paraga Import & Co., LTd, successor to Paraga Co, Ltd, and Shoaxing Paraga Import & Export Co., Ltd (“Plaintiffs”) filed a complaint against Defendant Samtex Fabrics, Inc., Shimson Kachan, Justin Kachan, Mojgan Rahimian (“Defendants.”) The complaint alleged five causes of action based on a breach of contract. The parties entered into a Subordination Agreement where Defendant was to make monthly payments to Plaintiff. However, Defendant Samtex failed to pay six months of requirement payments.

 

On June 11, 2021, Defendants filed an Answer.

 

On June 30, 2022, Defendant filed a Motion for Protective Order. On September 9, 2022, Plaintiff filed an Opposition. Defendant’s reply was filed on September 15, 2022.

 

LEGAL STANDARD

 

When a party demands the production of documents, the responding party may move for a protective order, which shall be accompanied with a meet and confer declaration. (C.C.P. § 2031.060(a).) For “good cause” shown, the court may make whatever order justice requires to protect a party against “unwarranted annoyance, embarrassment, or oppression, or undue burden and expense.” This protective order may include, but is not limited to, one or more of the following directions: 

  1. “That all or some of the items or categories of items in the¿demand need not be produced or made available at all. 
  1. That the time specified in¿Section 2030.260¿to respond to the set of¿demands, or to a particular item or category in the set, be extended. 
  1. That the place of production be other than that specified in the¿demand. 
  1. That the inspection, copying, testing, or sampling¿be made only on specified terms and conditions. 
  1. That a trade secret or other confidential research, development, or commercial information not be disclosed, or be disclosed only to specified persons or only in a specified way. 
  1. ¿That the items produced be sealed and thereafter opened only on order of the court.” 

Code Civ. Proc., § 2031.060.¿ 

 

“The state has two substantial interests in regulating pretrial discovery. The first is to facilitate the search for truth and promote justice. The second is to protect the legitimate privacy interests of the litigants and third parties…The trial court is in the best position to weigh fairly the competing needs and interests of parties affected by discovery. [Citation.]’ (Stadish v. Superior Court, supra,¿71 Cal.App.4th at p. 1145). A trial court must balance the various interests in deciding ‘whether dissemination of the documents should be restricted.’ (Id.¿at p. 1146) Further, even where a motion for a¿protective¿order¿is denied in whole or in part, the trial court may still impose “terms and conditions that are just.” (Nativi v. Deutsche Bank Nat'l Tr. Co., (2014) 223 Cal. App. 4th 261, 317).

 

A party seeking the protective order bears the burden of proof to establish good cause and cannot use mere conclusions to establish good cause without a factual showing. (Id. at 318.)  

 

Code Civ. Proc., § 2025.420 provides in pertinent part the following:  

 

“(a) Before, during, or after a deposition, any party, any deponent, or any other affected natural person or organization may promptly move for a protective order. The motion shall be accompanied by a meet and confer declaration under Section 2016.040. 

(b) The court, for good cause shown, may make any order that justice requires to protect any party, deponent, or other natural person or organization from unwarranted annoyance, embarrassment, or oppression, or undue burden and expense….” 

 

 

ANALYSIS:

 

Defendant Samtex Fabrics, Inc., moves for a protective order as to the documents sought by the subpoena Plaintiff’s served on Golden Bank, N.A. The subpoena seeks documents regarding loans and other financial information.

 

Defendant argues that the motion should be granted for five main reasons. One, the bank records are within a “zone of privacy.” Two, the documents sought have no demonstrable link to the issue of alter ego. Three, the documents are not probative of the issue concerning distributions made by Defendant before paying creditors. Four, the overbreadth of the requests have the potential to include tax documents and payment information, which should be protected and have no connection to alter ego allegations. Fifth, Plaintiff did not and cannot demonstrate that these discovery requests cannot be achieved through other, less intrusive ways.

 

Plaintiff argues that this information about PPP loans is relevant, and Plaintiff is entitled to such information due to the liberal policy surrounding discovery. Additionally, Plaintiff asserts that there is a compelling need for this discovery, which outweighs the Defendant’s privacy rights. Lastly, Plaintiff did not waive the alter ego claims. (Opp. 6: 10-16.)

 

The subpoena sought the following documents:

 

1. All Documents and Communications relating to any Paycheck Protection Plan (PPP) loan(s) made to Samtex, including but not limited to (i) a loan made on or about April 28, 2020 in the amount of $61.555, and (ii) a loan made on or about February 8, 2021 in the amount of $61,555.

2. All financial statements submitted by Samtex.

3. All loan applications submitted by Samtex.

4. All Documents submitted by Samtex in connection with any loan,

5. All Documents relating to the funding of any loan to Samtex, including wire receipts and other Documents relating to the transfer of such funds to Samtex.”

 

The decision as to whether to enter a protective order lies within the sound discretion of the court. (Raymond Handling Concepts Corp. v. Sup. Ct. (1995) 39 Cal.App.4th 584, 588, 591; Meritplan Ins. Co. v. Sup. Ct. (1981) 124 Cal.App.3d 237, 242.) The moving party has the burden of showing good cause for protective order. (Emerson Elec. Co. v Sup. Ct. (1997) 16 Cal.4th 1101, 1110.)  

 

“The court, for good cause shown, may make any order that justice requires to protect any party, deponent, or other natural person or organization from unwarranted annoyance, embarrassment, or oppression, or undue burden and expense. This protective order may include, but is not limited to, one or more of the following directions: (5) That the deposition be taken only on certain specified terms and conditions… (10) that the scope of the examination be limited to certain matters.” 

 

(CCP. § 2025.420(b).)  

 

“The interest in privacy is promoted by restricting the procurement or dissemination of information from the opposing party upon a showing of “good cause.” The trial court is in the best position to weigh fairly the competing needs and interests of parties affected by discovery. [citations omitted.] A trial court must balance the various interests in deciding “whether dissemination of the documents should be restricted.” (Nativi v. Deutsche Bank National Trust Co. (2014) 223 Cal.App.4th 261, 317.) To obtain a protective order, the moving party must demonstrate good cause.

 Defendant has failed to demonstrate good cause for the scope of the protective order sought here. The underlying complaint alleges that Defendant Samtex breached the January 13, 2017 Settlement agreement. The complaint further alleges that the individual defendants are the alter ego of Samtex and that they removed company assets for their personal benefit.  That is, Plaintiff has alleged a cause of action for alter ego. Plaintiff is seeking private financial records that are ordinarily subject to a conditional right of privacy.  That right is balanced against Plaintiff’s right to seek and obtain highly relevant admissible evidence. In this context, on balance, Defendant’s right to privacy must cede to Plaintiff’s right to know, subject to other more limited constraints. Plaintiff has further shown that they attempted to obtain the records from Defendant through discovery, but were rebuffed.  (Sobkowiak Dect. ¶¶ 6-8.)  Defendant’s argument that Plaintiff waived prospective alter ego claims is belied by review of the Settlement Agreement attached as Exhibit B of the Complaint and to the Tabibi Declaration as Exhibits 2 and 3. Paragraph 6 waived past personal guarantees including the July 25, 2015 Subordination Agreement, that was attached as Exhibit A to the Complaint. Nothing is said about shielding the individual defendants for aiding Defendant with breaching the January 13, 2017 Settlement agreement. Lastly, whether or not Defendant Samtex is actually still in business or not is besides the point and remains to be determined. 

 

Nonetheless, the Court will consider a more limited protective order, particularly regarding disclosure. 

 

Conclusion:

 

            For the foregoing reasons, the Court decides the pending motion as follows:

 

            Motion for Protective Order as urged by Defendant is DENIED, without prejudice.

 

Moving party is to give notice.

 

IT IS SO ORDERED.

 

Dated:             September 22, 2022.               _________________________________                                                                                                                  Upinder S. Kalra

                                                                                    Judge of the Superior Court