MOTIONS TO COMPEL FURTHER RESPONSES TO SPECIAL INTERROGATORIES AND DEMAND FOR PRODUCTION OF DOCUMENTS

Moving Party: Plaintiff Creditors Adjustment Bureau, Inc.

Respondent: Defendant Prominent Systems, Inc.

POS: Moving OK; Opposing served by regular mail contrary to CCP § 1005(c); Reply OK

Plaintiff is a collection agency that has been assigned this account by State Compensation Insurance Fund. The Complaint alleges that Defendant breached the contract by failing to pay insurance premiums in the amount of $31,693.68. The Complaint, filed on 7/3/13, asserts causes of action for:

1. Breach of Contract
2. Open Book Account
3. Account Stated
4. Reasonable Value

The trial is set for 6/2/14.

Plaintiff Creditors Adjustment Bureau, Inc. moves for an order compelling Defendant Prominent Systems, Inc. to provide further responses to special interrogatories nos. 1-19, and demand for production, of documents nos. 1-13. Plaintiff seeks monetary sanctions in the amount of $2,860.00 against Defendant and its counsel.

CCP §§ 2030.300 and 2031.310 allow a party to file a motion to compel further answers to interrogatories or document requests if it finds that the response is inadequate, incomplete, or evasive, or an objection in the response is without merit or too general. The motion shall be accompanied by a meet and confer declaration. (CCP §§ 2030.300(b); 2031.310(b).) Unless notice of the motion is given within 45 days of the service of the response, or any supplemental response, or on or before any specific later date to which the propounding party and the responding party have agreed in writing, the propounding party waives any right to compel a further response. (CCP §§ 2030.300(c); 2031.310(c).)

TIMELINESS:

Defendant served its responses to the subject discovery by mail on November 14, 2013. (Motion, Freed Decl., Exh. 3.) The motions were timely filed on December 16, 2013.

MEET AND CONFER:

The Declaration of Kenneth J. Freed demonstrates that counsel for Plaintiff attempted to resolve the issues informally with opposing counsel before the motion was filed. (Motion, Freed Decl. ¶¶ 2-5, Exhs. 2-4.) Based on Defendant’s responses, which essentially consists of boilerplate objections, and its counsel’s representation that he was presently working with his client to serve the further responses discussed, it appears that Plaintiff’s meet and confer efforts were reasonable and made in good faith.

DISCOVERY RESPONSES:

If a timely motion to compel has been filed, the burden is on the responding party to justify any objection or failure fully to answer the interrogatories. (Fairmont Ins. Co. v. Sup.Ct. (Stendell) (2000) 22 Cal.4th 245, 255.)

The motion for an order compelling further responses “shall set forth specific facts showing good cause justifying the discovery sought by the inspection demand.” (CCP § 2031.310(b)(1); Kirkland v. Sup.Ct. (Guess?, Inc.) (2002) 95 Cal.App.4th 92, 98.) If “good cause” is shown by the moving party, the burden is then on the responding party to justify any objections made to document disclosure (the same as on motions to compel answers to interrogatories or deposition questions). (Ibid.)

As discussed above, the motions are timely. Further, Plaintiff has demonstrated a “good cause” for the discovery sought by the inspection demand. (See Plaintiff’s Separate Statement.)

Defendant’s responses consist entirely of boilerplate objections. Defendant, in opposition, fails to justify the objections asserted. Specifically, Defendant attempts to justify only two of the objections asserted, i.e., the objection based on the definition of “employee” (special interrogatories) and an objection based on taxpayer privilege (document requests).

OBJECTIONS BASED ON DEFINITION OF “EMPLOYEE”:

Defendant contends that given that the issue is the proper calculation of employee workers’ compensation insurance coverage premiums (versus independent contractors also employed by Defendant), the interrogatories, in the absence of definition of the term “employed” are: (1) per se argumentative, (2) appropriately objected to as calling for speculation, (3) vague and ambiguous, (4) overbroad, (5) irrelevant, and (6) calls for premature disclosure of expert opinion.

However, the distinction between “employees” and “independent contractors” has no bearing upon whether these interrogatories can be properly answered or are properly subject to objection. In answering these interrogatories, Defendant need only identify the names of those persons that Defendant agrees were employees during the year in question. Each answer in the response must be “as complete and straightforward as the information reasonably available to the responding party permits.” (CCP § 2030.220(a).) Interrogatories may require a party to state his or her contentions as to either factual or legal issues: “An interrogatory is not objectionable because an answer… relates to fact or the application of law to fact, or would be based on… legal theories…” (CCP § 2030.010(b).)

OBJECTIONS BASED ON TAXPAYER PRIVILEGE, PRIVACY AND PERSONNEL RECORDS:

Defendant contends that Plaintiff has broadly sought employee-related tax and personnel information protected by taxpayer privilege and CCP § 1985.6.

Tax Payer’s Privilege: The taxpayer’s privilege protects all tax returns, whether personal or corporate, including income, employment, estate, payroll and sales tax returns. (Schnabel v. Sup.Ct. (Schnabel) (1993) 5 Cal.4th 704, 720–721.) It also covers business (corporate and partnership) tax returns. (Rifkind v. Sup.Ct. (Rifkind) (1981) 123 Cal.App.3d 1045, 1048–1049, disapproved on other grounds in Schnabel v. Sup.Ct. (Schnabel), supra, 5 Cal.4th at 723.) However, the privilege is not absolute; it may be lost if intentionally relinquished, or where the gravamen of the underlying action is inconsistent with assertion of the privilege or “a public policy greater than that of confidentiality of tax returns is involved.” (Schnabel v. Sup.Ct. (Schnabel) (1993) 5 Cal.4th 704, 721; Weingarten v. Sup.Ct. (Pointe San Diego Residential Community) (2002) 102 Cal.App.4th 268, 274.)

A trial court has “broad discretion” in determining whether the statutory tax return privilege applies. (Weingarten v. Sup.Ct. (Pointe San Diego Residential Community), supra, 102 Cal.App.4th at 274.) However, the trial court should use its discretion to compel disclosure of personal tax returns only in those “rare instances” where the public policy underlying the tax privilege is outweighed by other compelling public policies or where waiver principles apply. (Id. at 276-277.)

Privacy: The right of privacy contained in the California Constitution (Art. 1, § 1) is limited to “people,” meaning natural persons: “[T]he constitutional provision simply does not apply to corporations.” (Roberts v. Gulf Oil Corp. (1983) 147 Cal.App.3d 770, 791, 796–797.) Even so, some privacy protection exists for artificial business entities, apart from its members or shareholders: “[T]he nature and purposes of the corporate entity and the nature of the interest sought to be protected will determine the question whether under given facts the corporation per se has a protectible privacy interest… Two critical factors are the strength of the nexus between the artificial entity and human beings and the context in which the controversy arises.” (Id. at 796–797, 195 CR at 411412 (emphasis added) — although a corporation enjoys a right to privacy “in some circumstances,” it cannot prevent the County Tax Assessor from obtaining corporate financial records for tax assessment purposes; see also Ameri-Medical Corp. v. WCAB (1996) 42 Cal.App.4th 1260, 1286–1289 — professional medical corporation retained a privacy interest in financial and employment information unrelated to preparation of medical reports sought by workers’ compensation insurers.)

Assuming a business entity has a right of privacy, courts must determine whether it is outweighed by the relevance of the information sought to the subject matter in the pending action. “[D]oubts as to relevance should generally be resolved in favor of permitting discovery.” (Hecht, Solberg, Robinson, Goldberg & Bagley v. Sup.Ct. (Panther) (2006) 137 Cal.App,4th 579, 595.)

Personnel Files: Confidential personnel files at a person’s place of employment are within a zone of privacy. (Board of Trustees of Leland Stanford Jr. Univ. v. Sup.Ct. (Dong) (1981) 119 Cal.App.3d 516, 528-530.) Third party personnel records are protected from discovery “unless the litigant can show a compelling need for the particular documents and that the information cannot reasonably be obtained through depositions or from nonconfidential sources.” (Harding Lawson Associates v. Sup.Ct. (Bailey) (1992) 10 Cal.App.4th 7, 10.) Moreover, even if the balance weighs in favor of disclosure, the scope of disclosure must be narrowly tailored. (Life Technologies Corp. v. Sup.Ct. (Joyce) (2011) 197 Cal.App.4th 640, 652–653.)

Under the circumstances of this case, it appears that the documents sought must be produced. This is a collection case for unpaid workers’ compensation insurance premiums. Plaintiff represents that: (1) the calculation of insurance premiums is based almost entirely upon payroll and the job duties and responsibilities of the employees; (2) premiums are originally based on an estimate at the inception of the policy with actual premiums being ascertained at the conclusion of the policy pursuant to a physical audit of the insured’s operation and relevant payroll records; (3) the payroll figures are obtained specifically from federal and state payroll tax returns and other payroll related documentation; and (4) that the terms of Defendant’s policy expressly requires Defendant to produce detailed records such as “ledgers, journals, registers, contracts, TAX RETURNS, payroll and disbursement records and programs for storing and retrieving data” for purposes of determining the premium (Policy at Part Five – Premium). Further, Tammy Vancourt, a Senior Collections Representative from State Fund, further attests to the need for these records, attaches the relevant policy terms and conditions supporting the production of the records, and demonstrates that the subject documents were produced during a previous audit. (Reply, Vancourt Decl.) Moreover, to the extent that the documents sought involve private information of third parties, it appears that any such information can be redacted from the documents produced.

Thus, further responses are ordered within 20 days.

SANCTIONS:

Monetary sanctions are authorized against the “party, person or attorney” who unsuccessfully makes or opposes a motion to compel. (CCP § 2030.300(d).)

Sanctions are warranted. It appears that Plaintiff’s request of $2,860.00 in monetary sanctions made in the moving papers is reasonable. Thus, Defendant and its counsel are jointly ordered to pay Plaintiff monetary sanctions of $2,860.00 within 20 days.