Sukanya Nunez v. West Coast Wings Fremont, Inc

Case Name: Nunez v. West Coast Wings Fremont, Inc., et al.
Case No.: 2016-1-CV-294599

This is a dispute as to the investment in a limited liability company. As alleged in the complaint, Plaintiff Sukanya Nunez (“Plaintiff”) is the surviving spouse and sole beneficiary of the estate of Benigno Nunez (“Benigno”). (See complaint, ¶ 2.) Benigno made capital investments in 2005 to West Coast Wings, LLC (“LLC”), with Tam Vu and Tony Lam and others. (See complaint, ¶ 19.) Two years later, the LLC formed and assigned its franchisee interest to WCW Union City. (Id.) The LLC later formed the other WCW entities named as defendants and distributed its assets among them. (Id.) In late 2009, Benigno Nunez stopped receiving dividend payments and in April 2010, he died. (See complaint, ¶ 21.) Plaintiff sought counsel to obtain the dividend payments since 2009, and the attorney for the West Coast Wings entities requested a probate court order in order for Plaintiff to receive the payments. In September 2013, Plaintiff obtained the court order to transfer all shares owned by Benigno to Plaintiff. Plaintiff began receiving some dividend checks, but the attorney for the West Coast entities stated that there were no other distribution checks after December 2014. In 2015, Plaintiff was elected as director of the LLC; however, in spite of her position, she has been unable to inspect the financial documents. (See complaint, ¶¶ 22-26.) Plaintiff contends that Lam, Vu and LaVigne are dominating the LLC, thereby preventing her from access to the records. (See complaint, ¶ 19.)

The Court has recently dealt with discovery matters regarding the production of documents. Specifically, in the Court’s May 19, 2017 order regarding Plaintiff’s motion to compel compliance with the agreement to produce documents, the Court specifically overruled objections on the ground that the request was compound, noting that it appeared that neither party understood what the term “compound” meant. With regards to the motion to compel further responses to RPDs, the Court also specifically overruled the defendants’ objections based on relevancy and privacy, noting that the defendants’ view on relevance was without merit as the documents sought were directly relevant.

Plaintiff now moves to compel further responses to requests for admission (“RFAs”) by defendant Tony Lam (“Lam”), special interrogatories (“SIs”) by defendant Robert LaVigne (“LaVigne”) and requests for production of documents (“RPDs”) by defendant West Coast Wings Milpitas, Inc. (“WCW Milpitas”) Plaintiff also requests monetary sanctions.

Defendants’ request for judicial notice

Defendants request judicial notice of objections filed on May 4, 2017 and declarations filed on May 4, 2017. The Court does not take judicial notice of hearsay statements in documents filed with the Court. The request for judicial notice is DENIED.

Motion to compel Tony Lam’s further responses to RFAs

RFAs 7-9 seeks the admission by defendant Lam that there was no annual shareholder meeting between 2010 and 2014 for WCW Milpitas, San Jose and Story entities. In response, Lam objected to the RFAs on the ground that “Plaintiff has no ownership interest in [the WCW entities] as demonstrated in the bond motion and thus, this request violates Defendant’s and other third parties’ constitutionally protected privacy rights and pecuniary information and trade secrets… [and m]oreover, this request is not relevant or reasonably calculated to the discovery of admissible evidence since Plaintiff enjoys no ownership interest in [the entities].”

These identical objections were raised in the prior motion and discussed in the May 19, 2017 order. The subject is directly relevant to Plaintiff’s causes of action and her allegation that the WCW entities are alter egos of each other that disregard corporate formalities or fail to segregate corporate records. (See Sonora Diamond Corp. v. Super. Ct. (Sonora Union High School Dist.) (2000) 83 Cal.App.4th 523, 538-539 (stating that “[u]nder the alter ego doctrine, then, when the corporate form is used to perpetrate a fraud, circumvent a statute, or accomplish some other wrongful or inequitable purpose, the courts will ignore the corporate entity and deem the corporation’s acts to be those of the persons or organizations actually controlling the corporation, in most instances the equitable owners… [a]mong the factors to be considered in applying the doctrine are commingling of funds and other assets of the two entities, the holding out by one entity that it is liable for the debts of the other, identical equitable ownership in the two entities, use of the same offices and employees, and use of one as a mere shell or conduit for the affairs of the other… [o]ther factors which have been described in the case law include inadequate capitalization, disregard of corporate formalities, lack of segregation of corporate records, and identical directors and officers”).)

As articulated in the prior order, there is no possibility of any serious invasion of a privacy right with regards to the existence or non-existence of an annual shareholder meeting. (See Pioneer Electronics (USA), Inc. v. Super. Ct. (Olmstead) (2007) 40 Cal.4th 360, 370 (stating that the right of privacy established by the California Constitution “protects the individual’s reasonable expectation of privacy against a serious invasion”).) Moreover, even if the existence of a shareholder meeting had any privacy implications, as previously stated, the existence of any right of privacy regarding such a meeting belongs to the corporate entity, and [a] corporation has a lesser expectation of privacy relative to that of an individual. (See SCC Acquisitions, Inc. v. Super. Ct. (Western Albuquerque Land Holdings, LLC) (2015) 243 Cal.App.4th 741, 754 (stating that “[w]e conclude corporations do not have a right of privacy protected by the California Constitution… [t]he corporate right to privacy is a lesser right than that held by human beings and is not considered a fundamental right”).) As the Court has already stated with regards to identical objections raised by defendants, these objections on the ground of privacy and relevance are wholly without merit. Finally, there are no trade secrets or pecuniary interests involved with a failure to conduct an annual shareholder meeting. Lam’s objections are OVERRULED. Plaintiff’s motion to compel further responses to RFAs 7-9 is GRANTED. Defendant Lam shall provide verified code-compliant further responses without objections within 15 days of service of written notice of the Court’s order.

Motion to compel LaVigne’s further responses to SIs 25-29, 32-40, 43-51, 54-58 and 60

SIs 25-29, 32-40, 43-51, 54-58 and 60 seek information regarding the officer and director positions LaVigne held in the WCW entities, assets and funds received from the WCW entities by LaVigne, the people responsible for the accounting, bookkeeping, and filing of tax returns of the WCW entities, persons in possession of the WCW entities’ corporate documents, the shareholders and interests of the WCW entities, documents supporting the shareholders and percentage interests of the WCW entities, and agreements to which LaVigne was a party in connection with the WCW entities. Each of LaVigne’s responses consist of identical objections that the interrogatory is compound, violates his and third parties’ privacy rights, “Plaintiff enjoys no ownership interest in [the WCW entities] as already proven to Plaintiff through the Motion for a Bond and thus, such information is not relevant and/or reasonably-calculated to the discovery of any admissible evidence”, and that this information represents pecuniary information and/or trade secrets that are protected and thus disclosure would damage the WCW entities.

As already stated in the Court’s prior order, defendants’ counsel fails to understand what the term “compound” means. Regardless, the objection is not justified and is without merit. The objection based on the ground that the SIs are compound is OVERRULED.

As also stated above and in the Court’s prior order, defendants’ counsel also misunderstands the scope of relevance. Discovery is allowed for any matters that are not privileged, relevant to the subject matter involved in the action, and reasonably calculated to lead to the discovery of admissible evidence. (Code Civ. Proc. § 2017.010.) The “relevance to the subject matter” and “reasonably calculated to lead to discovery of admissible evidence” standards are applied liberally with any doubt generally resolved in favor of discovery. (See Colonial Life & Acc. Ins. Co. v. Super. Ct. (Perry) (1982) 31 Cal.3d 785, 790.) Moreover, for discovery purposes, information is “relevant to the subject matter” if it might reasonably assist a party in evaluating the case, preparing for trial, or facilitating settlement thereof. (See Gonzalez v. Super. Ct. (City of San Fernando) (1995) 33 Cal.App.4th 1539, 1546.) Here, the information sought is clearly relevant as they clearly relate to Plaintiff’s causes of action and allegations that the WCW entities are alter egos of each other, or are otherwise improperly transferring assets to and from each other. The objection on the ground of relevance is without merit and is OVERRULED.

Additionally, as to the objection on the ground of privacy, as already stated in the prior order and above, the right of privacy established by the California Constitution “protects the individual’s reasonable expectation of privacy against a serious invasion.” (Pioneer Electronics (USA), Inc. v. Super. Ct. (Olmstead) (2007) 40 Cal.4th 360, 370.) “Assuming that a claimant has met the foregoing Hill criteria for invasion of a privacy interest, that interest must be measured against other competing or countervailing interests in a ‘balancing test.’” (Id.) “Conduct alleged to be an invasion of privacy is to be evaluated based on the extent to which it furthers legitimate and important competing interests.” (Id.) “Protective measures, safeguards and other alternatives may minimize the privacy intrusion.” (Id.) “For example, if intrusion is limited and confidential information is carefully shielded from disclosure except to those who have a legitimate need to know, privacy concerns are assuaged.” (Id.) Regardless, the party seeking discovery of private information must demonstrate direct relevance of a particular cause of action or defense. (See Britt v. Super. Ct. (San Diego Unified Port Dist.) (1978) 20 Cal.3d 844, 859-862.) A corporation has a lesser expectation of privacy relative to that of an individual. (See SCC Acquisitions, Inc. v. Super. Ct. (Western Albuquerque Land Holdings, LLC) (2015) 243 Cal.App.4th 741, 754 (stating that “[w]e conclude corporations do not have a right of privacy protected by the California Constitution… [t]he corporate right to privacy is a lesser right than that held by human beings and is not considered a fundamental right”).) The information sought is directly relevant to Plaintiff’s causes of action and allegations. Accordingly, the objection on the ground of privacy is OVERRULED.

Moreover, the fact that the SIs seek pecuniary information is not a basis for withholding discovery. This objection, to the extent that it is separate and apart from the already overruled privacy objection, is likewise OVERRULED.

Finally, LaVigne utterly fails to justify his objection on the ground that a response might contain any trade secret and it is difficult to see how any such response might contain such a trade secret. This objection is without merit and OVERRULED.

Plaintiff’s motion to compel further responses to SIs 25-29, 32-40, 43-51, 54-58 and 60 is GRANTED. Defendant Lam shall provide verified code-compliant further responses to SIs 25-29, 32-40, 43-51, 54-58 and 60 within 15 days of service of written notice of the Court’s order.

Motion to compel WCW Milpitas’ further responses to RPDs 2, 5-8, 11, 16-19, 27-36

RPDs 2, 5-8, 11, 16-19, and 27-36 seek: WCW Milpitas’ by-laws and amendments; documents relating to the election of its board of directors and officers; documents relating to the financial relationship between it and its shareholders; WCW Milpitas’ annual and quarterly financial reports; WCW Milpitas’ bank account statements; documents relating profit sharing and distribution of dividends of WCW Milpitas; contracts and agreements in which WCW Milpitas is a party; documents concerning assets loaned or transferred from the LLC to WCW Milpitas; documents concerning assets loaned or transferred between WCW entities; and, all documents identified in its responses to the SIs. WCW Milpitas provides identical responses to these RPDs, stating:

Objection, this requests [sic] are not only relevant and/or reasonably-calculated to the discovery of admissible evidence, but these requests violate Defendant’s constitutionally protected privacy rights as well as trade secrets and pecuniary information and those of its shareholders since Plaintiff enjoys no ownership interest as demonstrated by the bond motion and thus, Plaintiff is not entitled to know anything related to the election of the Board or officers. Thus, Defendant will not comply with request. [sic]

As stated in multiple prior orders, these documents “might help or disprove Plaintiff’s claims relating to mismanagement or improper distributions.” Thus, Plaintiff has demonstrated good cause for these documents. (See Digital Music News LLC v. Super. Ct. (Escape Media Group, LLC) (2014) 226 Cal.App.4th 216, 224 (stating that “[t]o establish good cause, a discovery proponent must identify a disputed fact that is of consequence in the action and explain how the discovery sought will tend in reason to prove or disprove that fact or lead to other evidence that will tend to prove or disprove the fact”).) Moreover, these documents are directly relevant to the causes of action that are asserted by Plaintiff and her allegation that the WCW entities are alter egos of each other, or are otherwise improperly transferring assets to and from each other.

As to the now repetitious objections on the ground of relevance and privacy rights, these objections are plainly without merit. The documents sought are directly relevant to Plaintiff’s causes of action and allegations. The right of privacy established by the California Constitution “protects the individual’s reasonable expectation of privacy against a serious invasion.” (Pioneer Electronics (USA), Inc. v. Super. Ct. (Olmstead) (2007) 40 Cal.4th 360, 370.) Defendants’ counsel plainly misunderstands not only the broad scope of what is considered relevant, but also what constitutes a serious invasion. Moreover, a corporation has a lesser expectation of privacy relative to that of an individual. (See SCC Acquisitions, Inc. v. Super. Ct. (Western Albuquerque Land Holdings, LLC) (2015) 243 Cal.App.4th 741, 754 (stating that “[w]e conclude corporations do not have a right of privacy protected by the California Constitution… [t]he corporate right to privacy is a lesser right than that held by human beings and is not considered a fundamental right”).) As these documents are directly relevant to Plaintiff’s causes of action, the objections on the ground of privacy and relevance are OVERRULED.

Moreover, the fact that the RPDs seek pecuniary information is not a basis for withholding discovery. This objection, to the extent that it is separate and apart from the already overruled privacy objection, is likewise OVERRULED.

Finally, WCW Milpitas utterly fails to justify its objection on the ground that a response might contain any trade secret and it is difficult to see how financial documents regarding transfer of assets, financial reports or corporate documents such as by-laws might contain such a trade secret. This objection is without merit and OVERRULED.

Plaintiff’s motion to compel a further response to RPDs 2, 5-8, 11, 16-19, and 27-36 is GRANTED. Defendant WCW Milpitas shall provide a further code-compliant response without objections and shall produce all responsive documents within 15 days of service of written notice of the Court’s signed order as to RPDs 2, 5-8, 11, 16-19, and 27-36.

Requests for monetary sanctions

In connection with his opposition to the motion to compel Lam’s further responses to RFAs, Lam requests monetary sanctions in the amount of $812 against Plaintiff. Lam did not substantially prevail in opposing the motion. Lam’s request for monetary sanctions is DENIED.

In connection with his opposition to the motion to compel LaVigne’s further responses to SIs, LaVigne requests monetary sanctions in the amount of $1,950 against Plaintiff. LaVigne did not substantially prevail in opposing the motion. LaVigne’s request for monetary sanctions is DENIED.

In connection with its opposition to the motion to compel WCW Milpitas’ further responses to RPDs, WCW Milpitas requests monetary sanctions in the amount of $1,950 against Plaintiff. WCW Milpitas did not substantially prevail in opposing the motion. WCW Milpitas’ request for monetary sanctions is DENIED.

Plaintiff requests monetary sanctions in the amount of $625 against Lam, Vu and LaVigne and their counsel each in connection with the motion to compel further responses to RFAs. Plaintiff also requests monetary sanctions in the amount of $3,670 against Lam, Vu and LaVigne and their counsel each in connection with the motion to compel further responses to SIs. Plaintiff also requests monetary sanctions in the amount of $2,060 against WCW Milpitas and its counsel each in connection with the motion to compel further responses to RPDs. The requests are code compliant. Plaintiff has substantially prevailed on each of its motions. The defendants and their counsel did not act with substantial justification in opposing the motion and there are no other circumstances that make the imposition of the sanction unjust—particularly since the Court has addressed the same objections multiple times previously. However, the Court will not award the monetary sanctions for the defendants that are not named as a responding party on the motion. Further, considering that the Court has already ruled on the propriety of similar or identical objections, and has urged the parties to work things out regarding its meritless objections, it is clear that Defendants’ counsel has engaged in tactics that needlessly delay discovery from proceeding. As the issues are not new, however, the Court will award less than the amount of monetary sanctions sought. Accordingly, Plaintiff’s request for monetary sanctions is GRANTED in the amount of $5,000 against counsel for defendants Lam, LaVigne and WCW Milpitas, Bao-Quan P. Pham. Defendants Lam, LaVigne and WCW Milpitas’ counsel, Bao-Quan P. Pham, shall pay counsel for Plaintiff $5,000 within 10 days of this Order.

The Court shall prepare the Order.