Case Name: Silicon Valley University v. Dr. Feng-Min Shiao, et al.

Case No.: 17CV306346

I. Background and Discovery Dispute

This action arises out of the purported embezzlement of a university’s funds by its former president. The Complaint is filed by plaintiff Silicon Valley University (the “University”) against defendants Feng-Min Shiao (“Shiao”) and Yu-Hao Fan (“Fan”).

As alleged in the Complaint, Shiao and his wife formed the University in 1997 as an institute of higher learning for individuals wishing to join the technology industry in the Silicon Valley. (Complaint, ¶ 11.) Shiao and his wife provided the initial capitalization and the University has since relied solely on that funding and tuition from its students. (Id. at ¶ 12.) In 1999, Shiao was appointed president of the University. (Id. at ¶ 13.) In that role, he maintained sole control and oversight over all administrative operations. (Id. at ¶ 14.) By 2015, student enrollment had risen to around 3,600 students, which resulted in a substantial uptick in tuition revenue to around $30-40 million. (Id. at ¶¶ 15-16.) Approximately 45 percent of the tuition was received in cash, which Shiao maintained exclusive control over and insisted on counting himself or with the assistance of Fan. (Id. at ¶¶ 17-18, 20.) At some point, Shiao eliminated all oversight regarding the accounting and reconciliation of cash payments. (Id. at ¶ 18.) Despite the increase in enrollment, he instituted extreme cost reductions at the University. (Id. at ¶ 20.)

Around 2016, concerned with Shiao’s behavior and operation of the University, the board of directors voted to remove him as president and later moved to enforce this resolution when Shiao refused to step down. (Id. at ¶¶ 23, 25-26.) Shiao later attempted to forcibly enter the campus at which point the University was forced to call the police. (Id. at ¶ 27.) The police allowed Shiao to gather his possessions under their supervision; during this time, the University discovered Shiao kept a secret second floor office that included a safe, a vacuum sealer machine with plastic bags, and a second cash counting machine. (Id. at ¶ 28.) Inside the safe was $365,000 in cash that was never reported to the University accounting department or deposited in the University bank account. (Id. at ¶ 29.) The University also later discovered Shiao had withdrawn approximately $12.45 million dollars from its bank account and there was a $22.4 million discrepancy between the amount of cash tuition paid and the amount actually deposited. (Id. at ¶¶ 30-32.)

The University asserts causes of action against the defendants for breach of fiduciary duty, conversion, civil conspiracy, aiding and abetting, and constructive trust. Shiao filed a cross-complaint alleging intentional interference with prospective economic advantage and seeking indemnity from various individuals based on averments he was wrongfully removed as president.

The present matter involves a discovery dispute.

Around November 9, 2017, Shiao served Google, Inc. (“Google”) with a deposition subpoena for the production of business records, seeking all e-mails and attachments thereto that were transmitted and/or received from his University e-mail account. (Lee Decl., ¶ 6.) Shiao had previously requested but was unable to procure these e-mails through requests for production of documents he propounded on the University. (Id. at ¶ 2.) As such, he utilized the deposition subpoena as an alternate means of obtaining them. (See Id. at ¶ 6.)

Google served Shiao with objections to the subpoena based on the Stored Communications Act (18 U.S.C. § 2701 et seq.) and indicated it would only produce the e-mails if both Shiao and the administrator of his University e-mail account consented. (Id. at ¶¶ 7-8.) The University filed a motion to quash the subpoena. (Id. at ¶ 9.) Both parties represent that, prior to the March 15, 2018 hearing on this motion, the parties entered into an agreement regarding the production of Shiao’s e-mails and agreed to take the motion off calendar. (Ibid.; see also Sun Decl., ¶ 6.)

This agreement to produce, however, fell through; thus, on May 31, 2018, Shiao issued another deposition subpoena for business records to Google. (Ibid.) Shortly thereafter, Google served Shiao with objections to the subpoena and the University filed the present motion to quash. (Id. at ¶ 3.) The University also seeks an award of sanctions.

II. Motion to Quash

The University moves to quash the subpoena to Google pursuant to Code of Civil Procedure section 1987.1, which authorizes a court to quash entirely or modify a subpoena and “make any other order as may be appropriate to protect the person from unreasonable or oppressive demands, including unreasonable violations of the right to privacy of the person.” (Code Civ. Proc., § 1987.1, subd. (a).)

The subpoena contains two requests for production of documents (“RPD”). (See Sun Decl., Exh. A.) RPD No. 1 requests all e-mails transmitted from and/or received at Shiao’s University e-mail account, jshiao@svuca.edu, from January 1, 2012 through December 1, 2016, which is hosted and maintained by Google through its G Suite for Education Services. RPD No. 2 requests all documents attached to any of these emails.

The University raises procedural concerns regarding the production date set by Shiao and his use of the subpoena as another means to obtain documents it is currently producing. It also objects to the subpoena on substantive grounds.

A. Procedural Concerns

The University argues the deposition subpoena is not code-compliant because it sets a production date earlier than that permitted by statute. It states that, under Code of Civil Procedure section 2020.410, subdivision (c) (“Section 2020.410”), a production date must be “no earlier than 20 days after the [subpoena’s] issuance, or 15 days after the service…whichever date is later.” The University asserts Shiao issued and served the subpoena by overnight delivery on May 31, 2018. Taking into account Code of Civil Procedure section 1013 (“Section 1013”), which extends any period to respond by two court days when service occurs by overnight delivery, the University concludes the earliest date of production was June 22, 2018. But the production date here was designated as June 21, 2018.

In opposition, Shiao argues the subpoena was served personally, not by express mail, and attaches a proof of service demonstrating that fact. (See Poole Decl., ¶ 2; Exh. A.) As such, he asserts Section 1013 is not implicated and the production date set was code-compliant. This argument is well-taken.

The proof of service of the subpoena indicates it was issued and personally served on May 31, 2018. As such, under Section 2020.410, the earliest production date was June 20, 2018, 20 days after the subpoena’s issuance. Therefore, the production date of June 21, 2018 was code-compliant.

Next, the University asserts Shiao improperly served the subpoena in the first instance because the parties have already agreed upon a production process for the subject e-mails and it is complying with its obligations pursuant to this agreement. It therefore seeks that Shiao be “directed to comply with the rolling production that was previously agreed upon by both parties’ counsel.” (Mtn. at p. 10:3-4.) This is improper as the Court can only rule on the matter presented before it, namely the University’s motion to quash the subpoena directed to Google. As such, the University’s request that Shiao be compelled to comply with the terms of the parties’ prior production agreement is disregarded.

B. Substantive Objections

The University asserts the RPD seek information protected from disclosure by the Stored Communications Act (18 U.S.C. § 2701 et seq.) (“SCA”) and/or by the right to privacy of third parties.

Generally, the party resisting discovery bears the burden of substantiating his or her objections to a discovery request. (See, e.g., Fairmont Insurance Co. v. Super. Ct. (2000) 22 Cal.4th 245, 255.)

1. Stored Communications Act

The SCA was enacted in 1986 to protect communications held in electronic storage. (Facebook, Inc. v. Superior Court (2017) 15 Cal.App.5th 729, 736.) It provides in relevant part that no electronic communication services provider shall knowingly divulge the contents of a communication in its electronic storage unless an enumerated exception applies. (18 U.S.C., § 2702(a)(1), (b).) These exceptions include disclosure of the communications to an “addressee or intended recipient of such communication” or “with the lawful consent of the originator or an addressee or intended recipient of such communication.” (18 U.S.C., § 2702(b)(1), (3).)

The University asserts the SCA prohibits Google’s production of Shiao’s e-mails because Google is an electronic communication services provider that stores these communications and no exception to the SCA applies. In opposition, Shiao argues that, as the subpoena seeks only e-mails that were transmitted from and/or received at his own University e-mail address, he is either the originator providing lawful consent for disclosure or the intended recipient of all the communications being sought. Thus, he concludes exceptions to the SCA apply and the e-mails may be disclosed. This contention is persuasive.

The plain language of the SCA indicates disclosure of communications ordinarily protected by the SCA may be made upon lawful consent by the originator or to an intended recipient of the communications.

The University asserts it, and not Shiao, is the owner of the “jshiao@svuca.edu” account and, thus, its consent is required before disclosure can occur. It also contends any right by Shiao to provide consent expired upon his termination as a University employee. The University does not, however, cite any authority supporting either of these propositions. As such, its position is unsubstantiated. The University also references O’Grady v. Superior Court (2006) 139 Cal.App.4th 1423 for the proposition the “SCA rendered California state court subpoenas unenforceable.” (Mtn. at p. 5:12.) This is a misstatement of O’Grady which did not, in fact, hold that state court subpoenas are never enforceable. Instead, the court in O’Grady held that disclosure of the communications sought was not permitted under the particular SCA exception invoked by the party. (O’Grady, supra, 139 Cal.App.4th at 1441-42.)

As such, the objection on the basis of the SCA is not sustainable.

2. Third-Party Privacy

A party may assert the privacy interests of third parties to the litigation. (See, e.g., Valley Bank of Nevada v. Superior Court (1975) 15 Cal. d 652, 657.) In doing so, it must demonstrate disclosure of the information sought would invade a legally protected privacy interest. (See Alch v. Super. Ct. (2008) 165 Cal.App.4th 1412, 1423.) If the discovery sought invades a cognizable privacy interest, the proponent of the discovery must demonstrate the information sought is directly relevant to a claim or defense. (Id. at 1426-27, 1433.) If direct relevance is established, a court must then balance the right to privacy against the countervailing right to discover relevant information to litigate the case in determining if disclosure is appropriate. (Id. at 1426-27.)

Here, the University asserts the e-mails sought would implicate their students’ and employees’ rights to privacy given Shiao’s role as the former president. In particular, it points out Shiao’s e-mail account would include sensitive, personal financial information of past and current students; confidential employee payroll and personnel information; previous student applications including personal identifying information such as names, addresses, social security numbers and banking information; and previous student immigration applications. It is well-established that personnel information and the financial information of third parties is protected by the right of privacy. (See Valley Bank of Nevada v. Superior Court (1975) 15 Cal.3d 652, 658), El Dorado Sav. & Loan Assn. v. Superior Court (1987) 190 Cal.App.3d 342, 344, disapproved on other grounds by Williams v. Superior Court (2017) 3 Cal.5th 531.)

Thus, the University sufficiently establishes a privacy interest and it is incumbent upon Shiao to demonstrate the information sought is directly relevant to a claim or defense. (See Harris v. Superior Court (1992) 3 Cal.App.4th 661, 665, disapproved on other grounds by Williams v. Superior Court (2017) 3 Cal.5th 531.)

Shiao does not present any argument on that issue. Instead, he merely asserts the protective order in this matter should address the privacy concerns raised by the University. He cites no authority supporting the proposition the existence of a protective order absolves a party of its obligation to demonstrate the direct relevance of the information sought in the face of a privacy objection. The Court observes that, relative to his discussion of the SCA objection, Shiao conclusorily asserts the e-mails are relevant and critical to the University’s claims and his own counter-claims. But he does not explain why this is the case or shed any light on how his e-mail communications would have any bearing on the issues of whether he embezzled money from the University or, relative to his counter-claim, was improperly removed as president. It is also not apparent to the Court how the entirety of Shiao’s e-mails from the four-year period specified in the subpoena would be directly relevant to the issues in this action.

As such, Shiao does not demonstrate the direct relevance of the information sought through the subpoena.

Therefore, the University’s objection on the basis of privacy is sustainable.

C. Conclusion

In sum, the University’s objection to the subpoena on the ground of privacy has merit. Thus, its motion to quash is GRANTED.

III. Sanctions

The University requests monetary sanctions against Shiao in the amount of $3,750. Its request is made pursuant to Code of Civil Procedure section 1987.2, which provides that a court may award the amount of the reasonable expenses incurred if it finds the “motion [to quash] was made or opposed in bad faith or without substantial justification or that one or more of the requirements of the subpoena was oppressive.” (Code Civ. Proc., § 1987.1, subd. (a).)

Here, the Court finds the University’s motion was not opposed in bad faith or without substantial justification. Though the University ultimately prevailed, many of the arguments advanced in its motion were not well-taken. Accordingly, an award of sanctions is not warranted.

Therefore, the University’s request for sanctions is DENIED.