Case Name: Chou v. Wang & Chou Accountancy Corp., et al.
Case No.: 17CV318790

On November 7, 2017, plaintiff Jennifer Chin-Shih Chou (“Chou”) filed a complaint against defendants Wang & Chou Accountancy Corporation (“WCAC”) and Jung-Mei Wang (“Wang”) for involuntary dissolution of a corporation. On March 5, 2018, WCAC and Wang filed a cross-complaint against Chou. According to the allegations of the cross-complaint, in 2007, Chou has been in charge of the finances of WCAC and also was made a minority shareholder. (See cross-complaint (“XC”), ¶¶ 11-13.) Chou is not a licensed accountant and thus could not conduct audits for clients on her own. (See XC, ¶ 14.) Wang had informed Chou on numerous occasions that if an audit was requested, Chou was required to contact Wang so she could manage the audit. (See XC, ¶ 14.) Despite these instructions, in 2012, Chou secretly conducted an audit for a client on her own. (See XC, ¶ 15.) The client thereafter notified the California Board of Accountancy, which then launched an investigation against WCAC, and eventually administered discipline to WCAC, including the suspension of WCAC’s license. (See XC, ¶¶ 15-16.) Subsequently, Chou then started to refuse to provide access to WCAC’s financial information to Wang. (See XC, ¶¶ 20-21.) Wang then removed Chou from WCAC’s bank account and then discovered that Chou inexplicably had attempted to wire WCAC funds to a third party. (See XC, ¶ 22.) Wang now believes that Chou had been doing this for years, as Wang checked the QuickBooks to discover that Chou had erased all financial files of WCAC, including files from prior years such that WCAC currently has no current or historical data of its finances, likely to conceal Chou’s prior embezzlement of WCAC funds. (See XC, ¶ 24.) On November 9, 2017, Chou was terminated from WCAC and, Wang then discovered that Chou had changed the password of the WCAC email so that Chou could remotely access her company email and forward those emails to her personal email. (See XC, ¶ 26.) Chou also misappropriated WCAC’s client list to compete with WCAC, and refused to return the company laptop despite Wang’s demand to do so. (See XC, ¶ 27.)

Wang and WCAC assert causes of action against Chou for:

1) Breach of fiduciary duty;
2) Accounting;
3) Request for injunctive relief;
4) Conversion;
5) Declaratory relief—rescission of stock grant;
6) Unjust enrichment—assumpsit;
7) Fraud;
8) Constructive fraud;
9) Negligence;
10) Interference with contractual relations;
11) Misappropriation of trade secrets—statutory; and,
12) Misappropriation of trade secrets—common law.
On June 18, 2018, Wang served a notice of deposition on Chou, including 20 document requests. Chou provided objections, and on June 26, 2018, counsel for Wang sent an email to meet and confer on the objections to the deposition notice. On July 13, 2018, Wang sent a letter to meet and confer as to Chou’s objections to the deposition notice and her failure to provide responses to the document requests. Chou responded by letter addressing each of the points raised by the meet and confer letter, including objections based on privacy, and, on July 23, 2018, Chou served objections to each of the document requests. Chou’s counsel then indicated that he could proceed as to Chou’s deposition and served a second set of objections. However, at the deposition, Chou refused to answer certain questions regarding her contact with former WCAC employees and the monies generated from those persons, and refused to produce any documents. Apparently, despite having an agreement in principle in place, Chou additionally asserts that she cannot produce documents unless Wang stipulate to the Los Angeles County Superior Court protective order. Chou’s attorney stated that he could not find any records of the protective order that Wang’s counsel had stated was a standard for the Santa Clara County Superior Court. Chou’s counsel also refused to provide a privilege log, asserting that he was unaware of any authority requiring a privilege log. Wang and WCAC move to compel the production of documents at deposition, requests numbers 1-3. Both parties seek monetary sanctions.

Additionally, there is currently a hearing for an order to show cause as to why a temporary restraining order should not issue, scheduled for April 15, 2019. Wang and WCAC request a continuance of that hearing, asserting that they need sufficient time to obtain the requested information from Chou for the hearing.

Parties have adequately met and conferred

Here, the parties have adequately met and conferred regarding the subjects of the instant motion. Contrary to Chou’s assertion, the parties discussed the privacy objection at length; unfortunately, they could not come to an agreement. However, as discussed below, the parties are ordered to present a stipulated protective order that will assuage Chou’s concerns regarding her right to privacy.

Protective order

Wang’s counsel is correct that this department uses the Model Confidentiality Order approved by the Complex Division of this Court. The parties are ordered to present to the Court a stipulated protective order consistent with the aforementioned Model Confidentiality Order endorsed by the Complex Division of this Court within 10 days. The Court will provide the form of this order to the parties by email if requested. The Court is unwilling to sign a protective order based on the Los Angeles County form.

Document request number 1

Request number one seeks documents showing or referring to correspondence between current or former clients of WCAC, between November 1, 2017 and the present. In opposition, Chou objects on the grounds of privacy and overbreadth.

Wang and WCAC clearly establish good cause for the sought after documents as they are essential for the resolution of the causes of action of the cross-complaint.

As to the objection based on overbreadth, this argument is without merit. The request is narrowed to a specific period of time where Chou is alleged to have misappropriated trade secrets, interfered in contracts and embezzled funds. It is limited to only certain clients—those who are currently or are formerly WCAC’s clients. The objection based on overbreadth is OVERRULED.

“[T]he right of privacy protects the individual’s reasonable expectation of privacy against a serious invasion.” (Pioneer Electronics (USA), Inc. v. Super. Ct. (Olmstead) (2007) 40 Cal.4th 360, 370 (emphasis original), citing Hill v. National Collegiate Athletic Assn. (1994) 7 Cal.4th 1, 36-37.) To demonstrate a serious invasion of privacy, “the claimant must possess a ‘legally protected privacy interest’… must possess a reasonable expectation of privacy under the particular circumstances, including “customs, practices, and physical settings surrounding particular activities… [and] the invasion of privacy complained of must be ‘serious’ in nature, scope, and actual or potential impact to constitute an ‘egregious’ breach of social norms, for trivial invasions afford no cause of action.” (Id. at pp.370-371.) “Assuming that a claimant has met the foregoing Hill criteria for invasion of a privacy interest, that interest must be measured against other competing or countervailing interests in a ‘balancing test.’” (Id. at p.371, citing Hill, supra, 7 Cal.4th at p.37; also citing Valley Bank of Nevada v. Super. Ct. (Barkett) (1975) 15 Cal.3d 652, 657; also citing Britt v. Super. Ct. (San Diego Unified Port Dist.) (1978) 20 Cal.3d 844, 855-856.) “Protective measures, safeguards and other alternatives may minimize the privacy intrusion.” (Id.) “For example, if intrusion is limited and confidential information is carefully shielded from disclosure except to those who have a legitimate need to know, privacy concerns are assuaged.” (Id.)

Here, Chou asserts that the requested documents seek private financial information of herself and third parties. Clearly, this information is directly relevant to Wang and WCAC’s allegations. Here, the third parties are either former or current clients of WCAC. The parties have been ordered to enter into a protective order consistent with the Model Confidentiality Order endorsed by the Complex Division of this Court, which may include an “Attorney’s Eyes Only” provision that will assuage third party privacy concerns. Moreover, as the information relates to former or current clients of WCAC, the client(s) presumptively consented to WCAC’s access to this information. The scope of the sought after communications are limited in time. Weighing the countervailing interests, and considering the circumstances, Wang and WCAC’s interest in obtaining the sought after documents outweighs the rights of both Chou and her clients. Chou must provide the documents requested by request number 1.

Chou does not support her other objections; therefore, those objections not premised on the attorney-client privilege or the work product doctrine are thus OVERRULED. (See Kirkland v. Super. Ct. (Guess?, Inc.) (2002) 95 Cal.App.4th 92, 98 (stating that the objecting party has the burden to justify his or her objections).)

Wang and WCAC’s motion to compel Chou to produce documents to request number 1 is GRANTED. Chou shall produce any non-privileged documents to Wang and WCAC’s counsel within 10 days of service of this signed order. To the extent that Chou withholds any documents on the ground of attorney-client privilege or work product doctrine, Chou must provide a privilege log that “adequately identifies each document the responding party claims is privileged and the factual basis for the privilege claim” so that the Court may evaluate the merits of the asserted objection. (Catalina Island Yacht Club v. Superior Court (2015) 242 Cal.App.4th 1116, 1127.)

Document request number 2

Document request number 2 seeks all documents, from November 1, 2017 to the present, that show or refer to any agreements between Chou and any former or current clients of WCAC. Chou asserts that “[t]his request is objectionable for many of the same reasons as Document Request No. 1.” However, as indicated above, Chou failed to support many of those objections, and thus, the unsupported objections are overruled. Moreover, weighing the countervailing interests, and considering the circumstances, Wang and WCAC’s interest in obtaining the sought after documents likewise outweighs the rights of both Chou and her clients. The parties have again been ordered to enter into a protective order consistent with the Model Confidentiality Order endorsed by the Complex Division of this Court, which includes an “Attorney’s Eyes Only” provision that will assuage third party privacy concerns. As the documents here only show or refer to agreements between Chou and former and currently WCAC clients, to the extent that these documents are not covered by request number 1, these documents do not involve financial privacy rights, or, at minimum, a serious invasion of privacy.

Lastly, Chou objects to the document request on the ground that it seeks trade secret information. Here, whether Chou’s client list is duplicative of WCAC and Wang’s client list is not a trade secret. WCAC’s original client list is a trade secret of WCAC; to the extent that request number 2 is seeking documents showing WCAC’s own client list overlapping with Chou’s client list, it does not independently derive economic value as such a list is dependent on WCAC’s original client list. Moreover, Chou has not substantiated that her client list is in fact a trade secret. (See Civ. Code § 3426.1, subd. (d).) Chou’s objections, except those based on attorney-client privilege and the work product doctrine, are OVERRULED.

Wang and WCAC’s motion to compel Chou to produce documents to request number 2 is GRANTED. Chou shall produce any non-privileged documents within 10 days of the order to Wang and WCAC’s counsel. To the extent that Chou withholds any documents on the ground of attorney-client privilege or work product doctrine, Chou must provide a privilege log that “adequately identifies each document the responding party claims is privileged and the factual basis for the privilege claim” so that the Court may evaluate the merits of the asserted objection. (Catalina Island Yacht Club v. Superior Court (2015) 242 Cal.App.4th 1116, 1127.)

Document request number 3

Document request number 3 seeks documents, from November 1, 2017 to the present, that show or refer to monies received by Chou from a former or current client of WCAC. Chou asserts that “[t]he information requested here again compromises the privacy rights of Chou’s clients.” Once again, however, weighing the countervailing interests, and considering the circumstances, Wang and WCAC’s interest in obtaining the sought after documents likewise outweighs the rights of both Chou and her clients. The parties have again been ordered to enter into a protective order consistent with the Model Confidentiality Order endorsed by the Complex Division of this Court, which includes an “Attorney’s Eyes Only” provision and a provision that the documents may only be used for purposes of the instant litigation. This protective order will assuage third party privacy concerns, particularly those regarding Chou’s concerns that “she will be providing Wang with a roadmap of which of Chou’s clients to target in marketing efforts.” As with the other two requests, Chou’s objections, except those based on attorney-client privilege and the work product doctrine, are OVERRULED.

Wang and WCAC’s motion to compel Chou to produce documents to request number 3 is GRANTED. Chou shall produce any non-privileged documents within 10 calendar days of the Order to Wang and WCAC’s counsel. To the extent that Chou withholds any documents on the ground of attorney-client privilege or work product doctrine, Chou must provide a privilege log that “adequately identifies each document the responding party claims is privileged and the factual basis for the privilege claim” so that the Court may evaluate the merits of the asserted objection. (Catalina Island Yacht Club v. Superior Court (2015) 242 Cal.App.4th 1116, 1127.)

Chou’s request for monetary sanctions

In opposition to the motion, Chou requests monetary sanctions in the amount of $7,945 against Wang, WCAC and/or their counsel. The opposition requests “that sanctions be awarded against Defendants” (Opposition, p.1:7), “Sanctions Should Be Awarded Against Wang’s Counsel” (Opposition, p.13:9-10), and “that the Court award $7,945 in sanctions against Wang” (Opposition, p.14:20). Accordingly, the request does not consistently “identify every person, party and attorney against whom the sanction is sought,” as is required by Code of Civil Procedure section 2023.040. Regardless, Chou did not substantially prevail in opposing the motion. Chou’s request for monetary sanctions is DENIED.

Wang and WCAC’s request for monetary sanctions

In connection with their motion, Wang and WCAC request monetary sanctions in the amount of $8,840.00 against Chou and Chou’s counsel, Greg Groeneveld and Justin Hsiang. The request for sanctions is code-compliant. Wang and WCAC have substantially prevailed on their motion. However, the request for monetary sanctions is excessive. Accordingly, Wang and WCAC’s request for monetary sanctions is GRANTED in part. Chou’s counsel shall pay counsel for Wang and WCAC the amount of $1,200 within 10 calendar days of this Order.

Request for continuance of the April 15, 2019 hearing on the TRO

Wang and WCAC request a continuance of the April 15, 2019 hearing on the order to show cause as to why a temporary restraining order should not issue, asserting that they need “sufficient time to obtain the requested information” from Chou. As stated above, Chou is ordered to produce all responsive documents and a privilege log within 10 calendar days of the Order. This would give Wang and WCAC a month to review the information provided by Chou, and prepare their argument. In light of the fact that Chou will provide all responsive documents and a privilege log within 10 days, the request for continuance is DENIED. However, the April 15 hearing on the application for preliminary injunction will be heard on Tuesday April 16, 2019 in Department 10.

The Court will prepare the Order.