Case Number: VC064688 Hearing Date: May 05, 2016 Dept: SEC

YOUSSEF v. 5D BUILDING SYSTEMS, INC.
CASE NO.: VC064688
HEARING: 05/05/16

#7
TENTATIVE ORDER

Defendants RON HUDSON, JOHN HANSEN, SUPERIOR WALL SYSTEMS, INC. and SWS PANEL & TRUSS, INC.’s motions to quash third party records subpoenas are GRANTED. C.C.P. §1987.1.

Plaintiff ALEX YOUSSEF and his counsel of record are ORDRED to pay to defendants and their counsel of record sanctions in the total amount of $1,720 no later than June 6, 2016.

This action concerns a dispute among members of a joint venture, defendant 5D BUILDING SYSTEMS, INC.

In January 2016, plaintiff ALEX YOUSSEF served a deposition subpoena on Opus Bank to produce the bank records for defendants/account holders 5D Building Systems, Inc., Superior Wall Systems, Inc. and SWS Panel & Truss, Inc.
As to defendant 5D, the subpoena seeks records from January 1, 2010 to present, and as to the other defendants, production from January 1, 2013 to present is requested.

In February 2016, plaintiff served a deposition subpoena on MUFG Union Bank to produce bank records for defendant/account holder John Hansen from January 1, 2009 to present.

Defendants object to the subpoena on the ground of privacy. Valley Bank of Nevada v. Superior Court (1975) 15 Cal.3d 652. Business entities’ right to privacy in financial affairs must be weighed against the right to discover relevant facts. Hecht, Solberg, Robinson, Goldberg & Bagley v. Superior Court (2006) 137 Cal.App.4th 579. Defendant Hansen’s constitutional right to privacy must also be balanced with the public interest in truth in litigation. See, e.g. Babcock v. Superior Court (1994) 29 Cal.App.4th 721.

Defendants argue that the temporal scope of the subpoenas is overbroad, and essentially request plaintiff explain the relevancy and establish a compelling need for the information sought. It does not appear defendants’ counsel made any effort to meet and confer with opposing counsel prior to filing the subject motions (in February 2016).

Plaintiff’s counsel submitted declarations in opposition. Preliminarily, the Court notes that counsel John Goffin declares, under penalty of perjury, that he possesses personal knowledge of the underlying facts upon which this action is based. Defendants’ objections to the scope of counsel’s testimony are SUSTAINED.

As to the Hansen subpoena, plaintiff explains that defendants deny that he paid monies to become a shareholder or director of defendant 5D. He seeks to establish he made monthly payments to John Hansen from 2009 to mid-2012.
Plaintiff seeks financial records beginning in April 2013 to examine the deposits made by Hansen in order to assist in the evaluation of whether the entity defendants were profitable, which is relevant to plaintiff’s damages (lost profits).
From that explanation, the Court concludes that the bank records after mid-2012 through March 2013 are not sought. The subpoena seemingly should be modified to exclude that time period (July 2012 through March 2013).

That discovery is not precluded under Civil Code section 3295 (punitive damages discovery) because plaintiff is not seeking to establish or conduct discovery into Hansen’s “net worth.” The Court is unpersuaded by defendants’ argument to the contrary. Nonetheless, it finds the subpoena is overbroad and improperly infringes on Hansen’s privacy rights. While there may be portions of his personal bank records that are discoverable, it is not this Court’s task to modify the subpoena. (Neither party offered any meaningful suggestion as to how to limit the scope). The motion to quash is granted.

As to the other subpoena, plaintiff explains that the 2010 through 2013 time frame set for 5D’s banking records is the life of the company. It was sold in August 2013 to defendant Superior Wall. Plaintiff seeks records for it and SWS from 6 months prior to the sale to the present to establish the present valuation of the companies, in which plaintiff claims an interest. The Court finds this subpoena also unnecessarily invasive of defendants’ privacy rights, and also overbroad. Plaintiff may be able to obtain portions of the records sought, but not the totality of the entities’ banking records. The motion to quash the subpoena is granted.

Plaintiff should consider other, less intrusive means of discovery which would perhaps assist in narrowing the requests for bank records and other financial documents protected by privacy rights. Counsel are encouraged to make continued efforts to informally resolve their discovery disputes.