2012-00128969-CU-BT

Altergy Systems vs. Terry Carlone

Nature of Proceeding:  Motion to Modify/Limit Subpoenas (Jerrold Franklin)

Filed By:  Sturmer, Debra Steel

Defendant Jerrold Franklin’s Motion to Modify Limit Subpoenas or for Protective Order
is granted as to Topics 20 and 21 in Paychex subpoena and Topic 11 in the
employees subpoena, to the extent that the topics are limited to information about
Carlone’s compensation.  The motion is otherwise denied.

The Court declines to rule on the evidentiary objections on this discovery motion.

Carlone was retained by Altergy as outside corporate counsel shortly after the
company was founded and later was hired as in-house counsel and Chief
Administrative Officer. A dispute arose between Carlone and Mettler regarding the
terms of Carlone’s employment agreement. Carlone contends that Mettler took the
originals of the  employment agreements signed in July of 2010 and later modified
them on terms unfavorable to Carlone.  Carlone served deposition subpoenas on
Paychex and two of its employees, Misty Elmore and Chesney Strange.  (Declaration
of Deschler, Exs. D, E and F.)   Paychex provided services to Altergy and Carlone
believes it will have evidence relevant to his claims that all three “C level
executives” (Mettler, Franklin and Carlone) were given employment benefits that
included the ability to cash out all unused sick leave and vacation.    The subpoenas
seek information about how the vacation and sick leave benefits were calculated for
the three C-level Executives along with other information about benefits paid to Altergy
employees.

Franklin seeks to limit the subpoenas as follows: (1) Paychex shall produce responsive
documents relating to Terry D. Carlone only, and shall not produce documents
pertaining to Jerrold Franklin, cross-defendant Eric Mettler
(“Mettler”), or any other Altergy employee; and, (2) the scope of deposition questions
shall be limited to (a) employee specific information about Terry D. Carlone only, and
(b) Altergy System’s policies, practices and procedures relating to payroll, vacation
accrual, and benefits. Deposition questions should not be permitted as to the private
information of Franklin, Mettler or any other
Altergy employee.

Franklin contends that the subpoenas violate his right to privacy and that Carlone is
only entitled to obtain information about his own benefits.

Carlone contends that all three of the “C level Executives were supposed to have the
same benefits, including ability to cash out unused vacation and sick time.  Carlone
contends that the original of the agreement cannot be found and was last in Mettler’s
possession.

Except as to Topics 20 and 21 in the Paychex subpoena and Topic 11 in the employee
subpoenas, Franklin’s privacy objections lack merit.  Carlone was privy to information
about payout of accrued benefits as the primary draftsman of his own employment
agreement, as well as Mettler’s and Franklin’s employment agreements.   Mettler and
Franklin participated with Carlone in the drafting, revision and approval of changes
made to the employment agreements of the C-Level executives. (Declaration of
Carlone)  Mettler conceded at his deposition that the three C level executives each
had their medical insurance paid for by the company.  The information sought about
Mettler’s vacation and sick leave accrual is directly relevant to Carlone’s claim that
Mettler and Carlone’s benefits were to have been the same as his.   It would appear
that the information about the sick leave and vacation accrual and is not available by
any less intrusive means since Carlone’s original employment agreement has been
lost.

Carlone’s subpoenas do not request any private information about any Altergy
employee other than Mettler, Franklin, and Carlone.   The other items sought in the
deposition subpoenas include information about any adverse action taken against
Carlone by plaintiffs, which does not invade any opposing party’s privacy interest.

However, as to the Paychex subpoena Topics 20, 21, and employee subpoenas Topic
11, the request is overbroad and seeks any communication by Mettler concerning
compensation to be paid to Carlone, Mettler and Franklin.  This category is overbroad
and not directly relevant to the issue of whether Carlone is entitled to pay out of
accrued sick leave and/or vacation.

Generally, the court must balance competing rights–the right of a litigant to discover
relevant facts and the right of an individual to maintain reasonable privacy. Shaffer v.
Superior Court (1995) 33 Cal.App.4th 993, 999; Britt v. Superior Court (1978) 20 C.3d
844, 855. It is also observed that while the right to discovery is very broad, it is not
absolute, particularly where issues of privacy are involved. The right of privacy in the
California Constitution (art. I, § 1), protects the individual’s reasonable expectation of
privacy against a serious invasion.

A party seeking Constitutionally-protected information in discovery may obtain such
information only where he or she can demonstrate a “compelling need” that outweighs
the right to privacy. Harding Lawson Assoc. v. Sup. Ct (Bailey) (1992) 10 Cal.App.4th
7, 10 (denying production of records); Bd of Trustees v. Sup Ct (Dong) (1981) 119
Cal.App.3d 516, 525 (the Constitutional right to privacy “may be abridged when, but
only when, there is a “compelling” need for the information. The “compelling need”
standard requires “direct relevance” rather than the
typical relevance standard applied in typical discovery disputes: Mere relevance is not
sufficient; indeed, such private information is presumptively
protected. The need for discovery is balanced against the magnitude of the privacy
invasion, and the party seeking discovery must make a higher showing of relevance
and materiality than otherwise would be required for less sensitive material. [Citations.]
Rancho Publications v. Superior Court (1999) 68 Cal.App.4th 1538, 1549-1550)

When discovery of information which is private and protected under the California
Constitution is sought, the information must be directly relevant to the instant
litigation. Prior to obtaining constitutionally protected information, a showing of direct
relevance must be established. Harris v. Superior Court (1992) 3 Cal. App. 4th 661.
Mere speculation as to the possibility that some portion of the records might be
relevant to some substantive issue does not suffice. Davis v. Superior Court (1992) 7
Cal.App. 4th 1008, 1017 (citing In Re Lifschutz 2 Cal.3d 415, 435).   Plaintiff has the
burden to establish direct relevance of the information sought.

Franklin’s payroll information about his accrued sick leave and vacation leave is
encompassed by his right to privacy.  However, Carlone has established that the
information is directly relevant to Carlone’s claims in this action, except as limited in
the first paragraph of this ruling. When discovery is found directly relevant to the
issues, there must be a careful balancing of the compelling public need for discovery
against the fundamental right of privacy. Experian Info. Solutions, Inc. v. Superior
Court (2006) 138 Cal. App. 4th 122, 132-135.  Any compelled disclosure should be
narrowly drawn so as to ensure maximum protection of the constitutional interests at
stake. Schnabel v. Superior Court (1993) 5 Cal. 4th 704, 712 ; Britt v. Superior Court
(1978) 20 Cal. 3d 844, 859; see, e.g., Johnson v. Superior Court (2000) 80 Cal. App.
4th 1050, 1070-1072, 1073.

Carlone contends he was privy to the information during his employment with Altergy
and therefore there is less expectation of privacy in this limited information.    Carlone
drafted all of the employment agreements in question. Carlone Decl. para.12. Mettler
and Franklin participated with Carlone in the drafting, revision, and approval of their
agreements. Id.   Mettler and Franklin have previously made all information about their
salaries and  wage accruals available to Carlone. At the Board’s direction (Mettler,
Franklin and Carlone were the board for most of the period in question) Carlone was
the Paychex payroll coordinator for the  five senior executives at Altergy, including
Mettier and Franklin. Id

The Court has balanced Carlone’s need for the information against the privacy interest
of Franklin in his vacation and sick leave accrual information and finds that the balance
tips in favor of discovery of the information.

The minute order is effective immediately.  No formal order pursuant to CRC Rule
3.1312 or further notice is required.