| Brite Semiconductor USA, Inc. v. Cloudvue Technologies | CASE NO. 114CV261671 | |
| DATE: 5 September 2014 | TIME: 9:00 | LINE NUMBER: 20 |
This matter will be heard by the Honorable Judge Socrates Peter Manoukian in Department 19 in the Old Courthouse, 2nd Floor, 161 North First Street, San Jose. Any party opposing the tentative ruling must call Department 19 at 408.808.6856 and the opposing party no later than 4:00 PM Thursday 4 September 2014. Please specify the issue to be contested when calling the Court and counsel.
On 5 September 2014, the motion of Plaintiff Brite Semiconductor USA, Inc. (“Plaintiff”) to compel answers to deposition questions and to compel document production and for monetary sanctions was argued and submitted. Defendant Cloudvue Technologies Corp. (“Defendant”) filed formal opposition to the motion and also requested monetary sanctions.
All parties are reminded that all papers must comply with Rule of Court 3.1110(f).[1]
Statement of Facts
This is primarily a contract dispute. The parties, Plaintiff’s Hong Kong parent (which has assigned its claims to Plaintiff) and Defendant entered into a written design and production contract with an effective date of 8 November 2012 attached to the operative Second Amended Complaint (“SAC”) as Exhibit A. The purpose of the contract was to design and produce a thin client companion chip, referred to as CT8313 or the CT8313 project in the SAC and in the statement of work (“SOW”) that is part of the contract between the parties. The contract called for several steps and makes clear the parties’ various duties to perform certain actions depend upon the fulfilling of conditions by the other party.
The SAC alleges two causes of action: 1) Breach of Contract and 2) Fraud (False Promises). Plaintiff alleges that Defendant’s inability to fulfill one of the steps assigned to it by the contract is a breach and repudiation of the contract and excuses Plaintiff from any obligation to continue to perform its duties under the contract. Plaintiff also alleges that Defendant fraudulently induced the formation of the contract by misrepresenting its ability, including its financial ability, to perform its duties under the contract.
Discovery Dispute
On 9 May 2014 Plaintiff noticed the deposition of Jackson Tung (“Tung”), Defendant’s President and CEO, to take place on 22 May 2014. The deposition notice included a request for production of nine categories of documents. Prior to the deposition Defendant served Plaintiff with written objections to the request for documents on 14 May 2014. Counsel for both sides engaged in unsuccessful meet and confer efforts to resolve these objections prior to the scheduled deposition. Mr. Tung appeared for his deposition but was instructed by Defense Counsel not to answer 14 questions. Apart from two questions that concerned the document requests and could be considered to incorporate the written objections to those requests, the sole basis for the instruction not to answer was the asserted objection by Defense Counsel that the questions sought information irrelevant to the dispute. Mr. Tung did produce documents at his deposition but subject to the previously asserted written objections and when Plaintiff’s counsel attempted to question Tung regarding what documents may have been withheld Tung was instructed not to answer by Defense Counsel.
Plaintiff’s motion to compel responses to deposition questions and to compel further responses to the requests for documents will be addressed separately.
Discussion
- Request for Judicial Notice
As an initial matter, Defendant requests that the Court take judicial notice of 1) The Court’s Order of 22 May 2014 on Defendant’s demurrer to the no longer operative original complaint, and 2) The Stipulated Protective Order in this matter entered into on 22 May 2014. Plaintiff does not oppose this request. A court may take judicial notice of court records that are relevant to a pending issue. (Evid. Code §452(d).) Both documents are court records and relevant to the instant motion. Therefore, Defendant’s request is GRANTED.
On its own motion the Court also takes judicial notice of the Court’s Order of 21 August 2014 overruling Defendant’s demurrer to Plaintiff’s First Amended Complaint (“FAC”) and denying its motion to strike except as to the request for attorney’s fees, which was granted with leave to amend.
On its own motion the Court further takes judicial notice of Plaintiff’s operative SAC filed on 2 September 2014 pursuant to the 21 August 2014 Order of the Court.
II. Plaintiff’s Motion to Compel Answers to Deposition Questions
Plaintiff moves to compel Tung to provide answers to 14 questions asked at his deposition which he was instructed not to answer by Defense Counsel on the basis that each question was irrelevant to the parties’ dispute.[2]
Questions 1 and 2 each refer to a request to produce documents at the deposition, request nos. 3 and 9 respectively. The remaining 12 are inquiries into Defendant’s structure and financing. (See excerpts from Tung disposition transcript attached as Ex. I to the Declaration of Plaintiff’s Counsel Andrew Watters.)
A. Legal Standard
If a deponent fails to answer a question at his or her deposition, the party seeking discovery may move for an order compelling an answer. (Code Civ. Proc., § 2025.480, subd. (a).) A deponent who has objected to a question and refused to answer bears the burden of justifying such a refusal. (See Coy v. Superior Court (1962) 58 Cal.2d 210, 220-221.) If the court determines that the answer sought is subject to discovery, it shall order that the answer be given on the resumption of the deposition. (Code Civ. Proc., § 2025.480, subd. (e).)
B. Meet and Confer
Defendant argues that Plaintiff did not adequately meet and confer before filing this motion.
A motion to compel answers at deposition shall be accompanied by a meet and confer declaration “showing a reasonable and good faith attempt at an informal resolution of each issue presented by the motion.” (Code Civ. Proc., §§ 2016.040, 2025.480, subd. (b).) A reasonable and good faith attempt at informal resolution entails something more than argument with opposing counsel. It requires that the parties present the merits of their respective positions with candor, specificity, and support. (Townsend v. Superior Court (1998) 61 Cal.App.4th 1431,1435, 1439.) The level of effort at informal resolution that satisfies the “reasonable and good faith attempt” standard depends upon the circumstances of the case. (Obregon v. Superior Court (1998) 67 Cal.App.4th 424, 431.) The court has discretion to deny discovery absent efforts to meet and confer, but must consider whether a less drastic remedy is appropriate given the circumstances presented. (See Townsend v. Superior Court, supra, 61 Cal.App.4th at p. 1439, Obregon v. Superior Court, supra, 67 Cal.App.4th at p. 434.)
After the transcript of the Tung deposition was completed on 6 June 2014, Plaintiff’s Counsel states that he took a prepaid, preplanned vacation in June 2014 before sending a meet and confer letter to Defense Counsel on 18 July 2014 (see Watters Decl. at 13 and Ex. J.) This letter adequately stated Plaintiff’s position regarding each question Tung was instructed not to answer that is a subject of the present motion, separately addressing each one and stating Plaintiff’s argument for why a response to the question should be given. It asked for an indication of whether Defendant would permit Tung to provide answers to the questions or provide further responses to the document requests by close of business on 22 July 2014. Defense Counsel responded in a letter dated 22 July 2014 which, apart from questions 1 and 2 relating to document requests, addressed the questions Tung was instructed not to answer only briefly and collectively and attempted to assert additional objections that Defense Counsel had failed to timely assert at the deposition and had therefore been waived. The letter also complained that Plaintiff had not allowed sufficient time to respond (see Watters Decl., Ex. K.)
Apparently believing that Defense Counsel’s complaint regarding time to respond was a request for additional time, Plaintiff’s Counsel in an email dated 25 July 2014 (Ex. L to the Watters Decl.) indicated that he was willing to grant an extension until 1 August 2014 for a further response to the 18 July letter.
Defense Counsel responded in a letter dated 1 August 2014 (Ex. M to the Watters Decl.) that no additional time to respond had been requested and that the letter of 22 July had “fully responded to each of the issues you raised.” It also stated that meet and confer efforts would be more productive “if you addressed the specific objections that were raised,” but Plaintiff was not required to address objections to deposition questions that were not properly raised during the deposition.
Based on this correspondence the Court finds that Plaintiff’s meet and confer efforts were adequate. If anything Plaintiff presented its position regarding the refusal to answer questions with more candor, specificity and support than Defendant.
C. Questions Tung Was Instructed By Counsel Not to Answer at Deposition
As noted above questions 1 and 2 relate to requests for production of documents in the deposition notice. Question 1 asked Tung what documents responsive to request no. 3 were being withheld. Question 2 asked a yes or no question; whether there were any documents responsive to request no. 9 that Tung was not producing. Question 3 asked Tung how many employees Defendant has; Question 4 asked him whether anyone was recruited by Defendant specifically to work on the “CT8313 Project” that was/is the subject of the contract between the parties; Question 5 asked whether a specific person, a Mr. Li, was a full-time employee of Defendant; Question 6 asked if Tung was a full-time employee of Defendant; Question 7 is a repeat of Question 5, it again asked if Mr. Li was a full-time employee; Question 8 asked if Defendant had pursued any funding to allow it to pursue the project that was the subject of the parties’ contract; Question 9 asked how much funding was required by Defendant “to use in the process,” presumably the chip design and production process; Question 10 asked a yes or no question, whether any other companies invested in Defendant “for the purpose of pursuing the CT83813 project,”; Question 11 asked what funding sources Defendant pursued; Question 12 asked how much funding was secured for the CT8313 project; Question 13 asked what was Defendant’s “burn rate” at the time the contract was signed, and finally; Question 14 asked how many units of the CT8313 did Defendant expect to have manufactured when Defendant entered the contract.
It is clear from the excerpted deposition transcript that the only objection to each of the above questions that was properly asserted by Defense Counsel at the deposition as the basis for her instruction to Tung not to answer each of them was that the questions did not seek relevant information.
Defendant has failed to meet its burden to justify this objection. Discovery is allowed for any matters that are not privileged and relevant to the subject matter, and a matter is relevant if it appears reasonably calculated to lead to the discovery of admissible evidence. (CCP §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. (Colonial Life & Acc. Ins. Co. v. Super. Ct. (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. (Gonzalez v. Super. Ct. (1995) 33 Cal.App.4th 1539, 1546.) By this standard it is self-evident that each of the above questions seeks information relevant to Plaintiff’s case as alleged in both the original complaint, the FAC and now the SAC; that Defendant’s alleged inability to perform the portion of the contract it was responsible for (including alleged financial inability) is a breach of the contract that excused Plaintiff’s nonperformance from that point on and that Defendant may have fraudulently misrepresented its ability to perform in order to induce the formation of the contract in the first place.
Even if it could be reasonably argued that any of these questions did not seek relevant information, irrelevance alone is an insufficient ground to justify instructing a witness not to answer a deposition question. (See Stewart v. Colonial Western Agency, Inc. (2001) 87 Cal App 4th 1006, 1015 [“Relevance objections should be held in abeyance until an attempt is made to use the testimony at trial.”]) Any other objections (including on the basis of privilege) that were not timely asserted to these questions at the deposition have been waived. (See CCP §2025.460.) The only possible exception to this waiver is any objection on the basis of the privacy rights of Defendant, Mr. Tung or third parties. (See Boler v. Superior Court (1987) 201 Cal App 3d 467, 472, fn. 1.) Defendant’s attempts to assert additional objections and/or privileges in response to these questions after the deposition in both its meet and confer correspondence and its opposition to this motion are ineffective and disingenuous.
Plaintiff’s Motion to Compel answer to deposition questions is GRANTED. Mr. Tung shall be produced for further deposition at which time he shall provide answers to each of the 13 questions without any objection other than privacy if applicable. As to financial privacy, the Court notes that corporations such as Defendant have only a limited right to privacy regarding financial information, and Defendant’s financial status, both now and at the time the contract was negotiated and entered into, is directly relevant to Plaintiff’s causes of action. (See Britt v. Superior Court (1978) 20 Cal. 3d 844, 859-862.) In addition a negotiated protective order is already in place.
III. Plaintiff’s Motion to Compel Production of Documents Responsive to Deposition Notice
While it is undisputed that Defendant produced documents at Tung’s deposition, Plaintiff moves to compel production of documents responsive to request nos. 2, 3, 5, 6, 8, 9 and 10 in the Tung deposition notice. Plaintiff contends that the documents produced were not responsive to these requests. It is undisputed that Defendant’s written objections to the notice of Tung’s deposition stated that no documents would be produced in response to request nos. 9 and 10 without a protective order.
With some slight variations Defendant’s responses to each of these requests in its written objections to the Tung deposition notice consisted of the same boilerplate objections.
A. Legal Standard
In order to compel the production of documents requested in a deposition notice, Plaintiff is required to “set forth specific facts showing good cause justifying the production.” (See CCP §§ 2025.450, subd. (b)(1) and 2025.480, subd. (a).) To establish “good cause,” the burden is on the moving party to show both relevance to the subject matter (e.g., how the information in the documents would tend to prove or disprove some issue in the case) and the specific facts justifying discovery (e.g., why such information is necessary for trial preparation or to prevent surprise at trial). (Glenfed Develop. Corp. v. Sup. Ct. (1997) 53 Cal 4th 1113, 1117.) Where the moving party establishes a “good cause,” the burden shifts to the responding party to justify its objections.
B. Meet and Confer
Defendant also argues that this portion of Plaintiff’s motion was brought without an adequate effort to meet and confer, primarily based on the argument that Plaintiff failed to adequately identify the purported deficiencies as to each of its responses to the disputed requests. The argument is unpersuasive. Right or wrong, Plaintiff adequately and consistently stated with candor its belief that the objections to each of the targeted requests were “specious boilerplate,” (See Ex. D to Watters Decl.,); “frivolous,” (Ex. F to Watters Decl.); “nuisance, copy-and-paste objections that are themselves sanctionable,” (Ex. H to Watters Decl.), and; “specious, boilerplate copy-and-paste objections,” (Ex. J to Watters Decl.)
C. Analysis
Document request no. 2 seeks “[a]ll internal communications” of Defendant “concerning any contact with officers, directors, managing agents, or employees” of Plaintiff.
Request No. 3 seeks “[a]ll internal communications” of Defendant “concerning its performance or nonperformance of any portion or all of the CT8313 contract” with Plaintiff.
Request No. 5 seeks “[a]ll ‘netlists’ developed, generated, produced, prepared, assembled, or otherwise created or involved in the CT8313 project.”
Request No. 6 seeks “[a]ll documents showing whether there are any conditions precedent to performance of the underlying contract.”
Request No. 8 seeks Defendant’s “complete file, electronically or otherwise, on the CT8313 project.”
Request No. 9 seeks “[a]ll financial statements” of Defendant, “since 2011, including balance sheets, profit and loss statements, and any other financials.”
Request No. 10 seeks “[a]ll electronically stored information reflecting any of the preceding categories of requests, on a disk, memory card, or DVD-ROM/CD-ROM.”
With slight variations, Defendant’s response to each of these requests was to object that they were overbroad; unduly burdensome; vague and ambiguous; assumed (unidentified) facts not in evidence; sought documents neither relevant nor admissible; were vague as to time; failed to describe documents sought with adequate particularity and thereby required Defendant to speculate regarding such basic terms as “employees” and “managing agents,” (no. 2), “CT8313 contract,” which plainly refers to the contract attached to each version of the complaint (no. 3), “netlists,” “developed,” “generated,” “otherwise created,” “involved in,” “assembled,” and “CT8313 project,” (no. 5), “conditions precedent” and “underlying contract,” (no. 6), “CT8313 contract,” (no. 8), and “financial statements” and “other financials,” (no. 9); called for legal conclusions and/or expert opinions; sought documents which are business confidential, proprietary or contain trade secret and/or design or production information, and, last but not least: purportedly sought information protected by the attorney-client privilege and the work product doctrine.
Defendant is reminded that it is not appropriate to assert boilerplate objections in each response; objections must be tailored to each request.
Plaintiff has established good cause as to each of the document requests at issue. Each plainly seeks documents relevant to Plaintiff’s theory of the case (breach of contract and fraud based on false promises) as alleged in the original complaint, the FAC and the SAC. Accordingly, the burden shifts to Defendant to justify each of its objections. Defendant’s opposing separate statement and opposition brief only present arguments attempting to justify its objections on the basis that the requests seek irrelevant information, are overbroad, are vague and ambiguous/fail to describe documents with reasonable particularity, seek trade secrets, “business confidential” information and information subject to the attorney-client privilege or attorney work product.
1. Relevance
This objection is OVERRULED as to all requests. It is well-settled that, in the discovery context, relevance is to be construed liberally in favor or disclosure (see Emerson Electric Co. v. Sup. Ct. (1997) 16 Cal 4th 1101, 1107), and the standard is “relevancy to the subject matter” of the action, which case law makes clear is “a broader concept than ‘relevancy to the issues.’” (Pac. Tel. and Tel. Co. v. Sup. Ct. (1970) 2 Cal.3d 161, 172, quoting Chronicle Publishing Co. v. Sup. Ct. (1960) 54 Cal.2d 548, 560.) As stated above in concluding that Plaintiff has established good cause for these requests, each of the requests seeks information relevant to whether Defendant is capable of performing the contract, including financially, whether it was incapable of performing when the contract was negotiated and entered into, and whether it concealed or made false statements about its capability to perform, financially or otherwise, to get Plaintiff to enter into the contract. To the extent the Defendant is concerned about disclosure of its financial information, Plaintiff has established that such information is directly relevant to its causes of action and a protective order negotiated by the parties is in place.
2. Overbroad
The only argument provided in support of this objection in Defendant’s opposing separate statement and opposition brief is that request nos. 2, 3, 8 and 10 are overbroad because they are not restricted as to time, with no additional explanation for the objection. This argument is unpersuasive and does not justify the objection. Defendant was allegedly founded in 2010, so none of the requests can possibly cover more than four and a half years, and the effective date of the contract between the parties is 8 November 2012, making the period of time during which the contract was being negotiated through the present indisputably relevant. Having failed to meet its burden, Defendant’s objection to each of the requests on the basis that they are overbroad is OVERRULED.
3. Vague and Ambiguous, Calls for Speculation
A vagueness and ambiguity objection will only be sustained if the request is unintelligible. (Deyo v. Kilbourne (1978) 84 Cal.App.3d 771, 783.) “A party may not deliberately misconstrue a question for the purpose of supplying an evasive answer.” (Id.) Defendant does not argue that any of the requests are unintelligible. The only “calls for speculation” objection that is supported with any argument in the opposition is that request No. 8’s reference to the “CT8313 Project” is somehow confusing or ambiguous because the phrase is not defined. This argument is unpersuasive. The Court notes that the SOW attached to the parties’ contract states that it concerns “Project: CT8313.” It is thus implausible that Defendant does not comprehend what the term references. The same rationale would apply to the term “netlists” also used in the SOW. The objection on this basis is OVERRULED.
4. Trade Secrets
Defendant has the burden of establishing the existence of a protected trade secret that might be divulged. (See Bridgestone/Firestone, Inc. v. Superior Court (1992) 7 Cal App 4th 1384, 1393.) It has not met this burden. First, it merely asserts that the requests seek information that qualifies as trade secrets, but it provides no supporting declaration or evidence to support this assertion. Second, Defendant does not even attempt to establish the elements of a trade secret. (See Civ. Code §3426.1, subd. (d); Cadence Design Systems, Inc. v. Avant! Corp. (2002) 29 Cal 4th 215, 221-222.) Accordingly, Defendant’s objection on this basis is OVERRULED.
5. “Business Confidential” Information
Defendant has failed to meet its burden to set forth the specific basis for this objection as to any of the requests. Accordingly, the objection on this basis is OVERRULED.
6. Attorney-Client Privilege and Attorney Work Product
Defendant has failed to support or justify either of these objections with any specific information in the opposing separate statement or opposition brief. However this does not dispose of these objections. (See Best Products, Inc. v. Superior Court (2004) 119 Cal App 4th 1181, 1188-1189 [holding that where a defendant asserted the attorney-client privileges in a timely manner, albeit in a boilerplate fashion, the trial court erred in finding a waiver of the privileges].) Accordingly, while Defendant’s unsupported objections based on the attorney-client privilege and work product doctrine do not warrant the denial of Plaintiff’s motion to compel further responses, the objections are nonetheless preserved. (Id.)
IV. Requests for Sanctions
A. Plaintiff’s Request
Plaintiff makes a code-complaint request for monetary sanctions pursuant to Code of Civil Procedure sections 2025.420(g) (authorizing monetary sanctions in connection with a motion to compel compliance with a deposition notice), 2025.480(j) (authorizing monetary sanctions in connection with a motion to compel an answer to a deposition question or to compel production of documents specified in a deposition notice) and 2023.030(a) (authorizing monetary sanctions in connection with misuses of the discovery process). Counsel for Plaintiff declares that, at an hourly rate of $300, he spent five hours on this motion. Plaintiff further seeks compensation for the $90 filing fee for the motion.
Plaintiff’s request for monetary sanctions against Defendant and its counsel is GRANTED in the amount of $1,590 (5 hours x $300/hr + $90 filing fee).
B. Defendant’s Request
Defendant requests monetary sanctions in the amount of $11,055 for time spent opposing the motion. As Defendant did not successfully oppose either of Plaintiff’s motions to compel its request for sanctions is DENIED.
V. Conclusion and Order
Defendant’s request for judicial notice is GRANTED.
On its own motion the Court takes judicial notice of the Court’s Order of 21 August 2014 on the demurrer to and motion to strike portions of the FAC and also takes judicial notice of the existence and filing of the operative SAC.
Plaintiff’s motion to compel Tung to answer deposition questions is GRANTED as to all 14 questions addressed by this Order. Accordingly, Tung is ordered to appear and answer these 14 questions at a mutually agreed upon date and time, within 20 calendar days of the filling of this order. All objections to these 14 questions, with the possible exception of an objection on the basis of the privacy rights of Tung or third parties, have been waived by the failure to timely assert them. Plaintiff may also pose reasonably related follow-up questions, subject to Defendant’s right to assert any applicable, justifiable and legally valid objections to any such follow up questions.
Plaintiff’s motion to compel further production of documents responsive to the requests in the Tung Deposition Notice is GRANTED. Defendant shall serve code-compliant further responses, without objection (except for objections based on attorney-client privilege and attorney work product doctrine, which have been preserved) to request nos. 2, 3, 5, 6, 8, 9 and 10 in the Tung deposition notice.
Plaintiff’s request for monetary sanctions is GRANTED. Defendant and its counsel shall pay $1,590 to counsel for Plaintiff with 20 calendar days of the filing of this order.
Defendant’s request for monetary sanctions is DENIED.
| ____________________________
DATED: |
_________________________________________________
HON. SOCRATES PETER MANOUKIAN Judge of the Superior Court County of Santa Clara |
[1] “Each exhibit must be separated by a hard 81/2 x 11 sheet with hard paper or plastic tabs extending below the bottom of the page, bearing the exhibit designation. An index to exhibits must be provided. Pages from a single deposition and associated exhibits must be designated as a single exhibit.”
[2] For ease of reference, the Court will refer to the questions as numbered in the table of contents of Plaintiff’s separate statement. (See Plaintiff’s Sep. Stmt., pg. 2.)
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