Case Number: KC069918 Hearing Date: March 01, 2019 Dept: O

Defendant Shah’s demurrer to plaintiff’s first amended complaint is OVERRULED as to uncertainty, SUSTAINED with 10 days leave to amend as to the 11th cause of action, and SUSTAINED as to the 6th – 7th causes of action. The court will hear from the parties regarding any grounds warranting leave to amend the 6th – 7th causes of action. Defendant Shah’s motion to strike is DENIED.

This matter before the Court includes two consolidated actions: (1) the first one filed by plaintiff Madhu Sudan (“plaintiff”) in the lead case, KC069918; and (2) the second one by defendant Hiren Shah (“defendant”) in the consolidated case, KC070020. Plaintiff and defendant each own 50% interest in Shanti Prakash, Inc. They are also 50% partners in S&S Partnership, which owns real property in Baldwin Park, California. Both plaintiff and defendant allege that the other has breached his fiduciary and contractual duties.

At issue is plaintiff’s First Amended Complaint. Defendant demurs to the 6th, 7th, and 11th causes of action on the grounds that they fail so state facts sufficient to constitute a cause of action, and are uncertain.

UNCERTAINTY

Demurrer on grounds of uncertainty will not be sustained unless the complaint is so bad that the defendant cannot reasonably respond. (Koury v. Maly’s of California (1993) 14 Cal.App.4th 612, 616.)

The court finds that the FAC is not so uncertain that defendant cannot reasonably respond. As a result, the demurrer on ground of uncertainty is OVERRULED.

6th – 7th CAUSES OF ACTION: INTENTIONAL INTERFERENCE WITH CONTRACTUAL RELATIONS AND INTENTIONAL INTERFERENCE WITH ECONOMIC ADVANTAGE

The elements are: (1) plaintiff had a valid and existing contract with a third party; (2) defendant had knowledge of the contract; (3) defendant committed intentional and unjustified acts designed to interfere with or disrupt the contract; (4) actual interference with or disruption of the relationship; and (5) resulting damages. (Shamblin v. Berge (1985) 166 Cal. App. 3d 118, 123.)

A plaintiff must plead and prove (1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) the defendant’s intentional acts designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the defendant’s acts. (Reeves v. Hanlon (2004) 33 Cal.4th 1140, 1152 n. 6; see also Smith v. Pust (1993) 19 Cal. App. 4th 263, 274 (the act must have been intentionally directed at the plaintiff or done in the plaintiff’s presence).)

“[T]he tort cause of action for interference with contract does not lie against a party to the contract.” (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 514.) “One contracting party owes no general tort duty to another not to interfere with performance of the contract; its duty is simply to perform the contract according to its terms. The tort duty not to interfere with the contract falls only on strangers–interlopers who have no legitimate interest in the scope or course of the contract’s performance.” (Id.) Further, it is also well established that corporate agents and employees acting for and on behalf of a corporation cannot be held liable for inducing a breach of the corporation’s contract. (Shoemaker v. Myers (1990) 52 Cal.3d 1, 24.)

Paragraphs 68 and 4 allege that plaintiff had a contractual relationship with Shanti Prakash, Inc. Paragraphs 71, 73, and 78 allege that defendant did not pay plaintiff Medical Directorship Fees for the years 2015 – 2017.

The Third Cause of Action alleges that defendant refused to pay plaintiff his share of the income/profit for the years 2015 – 2017. Both the 6th and 7th causes of action allege the same injuries as in the contract claim in the Third Cause of Action. Thus, the FAC does not allege any tort damages that are different from the contract claim against defendant.

Further, both plaintiff and defendant are parties to the very contract and relationship that plaintiff alleges defendant interfered with: “One contracting party owes no general tort duty to another not to interfere with performance of the contract; its duty is simply to perform the contract according to its terms. The tort duty not to interfere with the contract falls only on strangers–interlopers who have no legitimate interest in the scope or course of the contract’s performance.” (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 514.)

Plaintiff primarily relies on Woods v. Fox Broadcasting Sub., Inc. (2005) 129 Cal.App.4th 344, but Woods is distinguishable. There, the appellate court criticized the trial court’s application of the Applied Equipment holding to its facts. The trial court interpreted the quoted language from Applied Equipment to mean that “not only were contracting parties immune from interference claims, so too were another class of defendants who, although not parties to a contract, were not true “strangers” to the contract because they had some general interest in the contractual relationship.” In each of the cases cited by Applied Equipment, “[n]one considered the potential liability of noncontracting parties who had some general economic interest or other stake in the contract.” (Woods, supra, 129 Cal.App.4th at 352.) In Woods, Fox Broadcasting was not a party to the contract. The contract was with Fox Family. Fox Broadcasting requested that the court apply the Applied Equipment immunity to it because it had a general economic stake in the contract as the shareholder of the Fox Family. The court refused to broaden the immunity to Fox Broadcasting.

Woods is completely distinguishable. Here, both plaintiff and defendant are the only parties to a contract that plaintiff claims defendant interfered with. Contracting parties and their agents are immune from interference claims.

The demurrer is SUSTAINED. The Court will hear from the parties regarding any grounds warranting leave to amend.

11th CAUSE OF ACTION: FINANCIAL ELDER ABUSE

The elements of a cause of action under the Elder Abuse and Dependent Adults Act, Welfare and Institutions Code Section 15600, et seq. (the “Act”) are statutory, and reflect the legislature’s intent to provide enhanced remedies to encourage private, civil enforcement of laws against elder abuse and neglect. (Intrieri v. Superior Court (2004) 117 Cal.App.4th 72, 82.)

To state a cause of action for dependent adult or elder abuse under the Act and obtain the heightened remedies provided under the Act, the plaintiff must plead facts showing two elements: (1) the defendant has subjected dependent adult or elder to statutorily-defined physical abuse, neglect or financial abuse; and (2) the defendant acted with recklessness, malice, oppression, or fraud in the commission of the abuse. (Welf. & Inst. Code § 15657.) Under the Act, abuse of an elder or a dependent adult entails either of the following: (a) physical abuse, neglect, financial abuse, abandonment, isolation, abduction, or other treatment with resulting physical harm or pain or mental suffering; (b) the deprivation by a care custodian of goods or services that are necessary to avoid physical harm or mental suffering. (Welf. & Inst Code § 15610.07; Covenant Care, Inc. v. Superior Court (2004) 32 Cal.4th 771, 779, fn. 3.) Like other statutory causes of action, a claim must be pled with particularity. (Covenant Care, Inc. v. Superior Court (2004) 32 Cal.4th 771, 790.) Specifically:

“Financial abuse” of an elder or dependent adult occurs when a person or entity does any of the following: (1) Takes, secretes, appropriates, obtains, or retains real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both. (2) Assists in taking, secreting, appropriating, obtaining, or retaining real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both. (3) Takes, secretes, appropriates, obtains, or retains, or assists in taking, secreting, appropriating, obtaining, or retaining, real or personal property of an elder or dependent adult by undue influence, as defined in Section 15610.70.

(Welf. & Inst. Code § 15610.30.)

Here, paragraph 106 alleges that defendant wrongfully withheld his consent to release payments for Medical Director fees, income/profit of the Corporation and the Partnership for the years 2015 – 2017 and retained or deprived plaintiff of the income. What is alleged is the wrongful appropriation of the income belonging to the Corporation and the Partnership, not some personal property belonging to plaintiff.

The demurrer is SUSTAINED with 10 days leave to amend.

MOTION TO STRIKE

Defendant moves to strike punitive damages allegations per Code of Civil Procedure Section 435 and 436, and Civil Code Section 3294.

Civil Code Section 3294, provides, in part:

In an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant.

“The court may, upon a motion made pursuant to Section 435 . . . strike out any irrelevant, false, or improper matter inserted in any pleading . . . [or s]trike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.” (CCP § 436(a),(b).) The grounds for a motion to strike must appear on the face of the pleading under attack, or from matter which the court may judicially notice. (CCP § 437(a).)

In an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant. (1) “Malice” means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others. (2) “Oppression” means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights. (3) “Fraud” means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury. (CC § 3294.)

The Court finds that the Breach of Fiduciary Duty claims sufficiently allege facts supporting the imposition of punitive damages. Specifically, paragraph 63-64 alleges that defendant breached his fiduciary duty by wrongfully refusing to release plaintiff’s 50% share of partnership income for the years 2015 – 2017.

As a result, the motion to strike is DENIED. (Plaintiff’s motion to strike will also be heard. A tentative order denying plaintiff’s motion was previously posted.

Plaintiff’s motion to quash is DENIED. The alternative motion for a protective order is GRANTED.

Plaintiff moves to quash subpoenas pursuant to Code of Civil Procedure Section 1987 et seq.:

If a subpoena requires the attendance of a witness or the production of books, documents, electronically stored information, or other things before a court, or at the trial of an issue therein, or at the taking of a deposition, the court, upon motion reasonably made by any person described in subdivision (b), or upon the court’s own motion after giving counsel notice and an opportunity to be heard, may make an order quashing the subpoena entirely, modifying it, or directing compliance with it upon those terms or conditions as the court shall declare, including protective orders. In addition, the court may make any other order as may be appropriate to protect the person from unreasonable or oppressive demands.

(CCP § 1987.1.)

Except as specified in subdivision (c), in making an order pursuant to motion made under subdivision (c) of Section 1987 or under Section 1987.1, the court may in its discretion award the amount of the reasonable expenses incurred in making or opposing the motion, including reasonable attorney’s fees, if the court finds the motion was made or opposed in bad faith or without substantial justification or that one or more of the requirements of the subpoena was oppressive.

(CCP § 1987.2(a).)

The subpoenas request any and all documents relating to any complaints, suspensions, admonishments, failure to follow guidelines, failure to complete paperwork/records of plaintiff, plaintiff’s personnel file, “quantros” file, and any of plaintiff’s requests to not work.

Plaintiff objects to the subpoenas on the basis that they seek peer review records that are exempt from discovery per Evidence Code Section 1157, violate plaintiff’s privacy rights, and are overbroad in scope.

Evidence Code Section 1157 provides that the proceedings and records of medical staff committees, as defined in Section 805 of the Business and Professions Code, having responsibility of evaluation and improvement of the quality of care rendered in a hospital are immune from discovery.

Plaintiff contends that his personnel records are maintained by the hospital’s medical staff for review by its various committees. However, plaintiff fails to point to any section of the Hospital bylaws that state that such records are “maintained” by the hospital medical staff “for review” by its committees. Instead, the bylaws state that “complaints or reports of disruptive and inappropriate conduct of medical staff members are subject to review.” (See Supplemental Declaration of Madhu Sudan, Exhibit (“Exh.”) A § 2.7-1.) Plaintiff’s personnel records do not constitute “records of and proceedings before medical investigative committees.” (Santa Rosa Memorial Hospital v. Superior Court (1985) 174 Cal.App.3d 711, 724.) Where “records of the hospital administrative staff do not contain reference to proceedings of the medical advisory board and, to that extent, are not within the protection of section 1157.” (Shulz v. Supeiror Court (1977) 66 Cal.App.3d 440, 446.)

Further, the subpoenas specifically exclude the proceedings and records of the very committees protected by Evidence Code Section 1157, i.e. “please exclude or apply redactions to… documents… the proceedings and records of organized committees of your staff or of a peer review body, as defined in Section 805 of the Business and Professions Code.”

Because plaintiff has not established that any of the records contained in his personnel records contain reference to proceedings of the medical advisory board, plaintiff failed to establish that Evidence Code Section 1157 applies.

Plaintiff also contends that his records are protected by the right of privacy. However, the constitutional right of privacy is not absolute; it may be abridged when there is a compelling state interest. Inquiry into one’s private affairs will not be constitutionally justified simply because the inadmissible and irrelevant matter sought might lead to other relevant evidence. The burden is on the party seeking the constitutionally protected information to establish direct relevance. (Harris v. Superior Court (1992) 3 Cal.App.4th 661, 665.) Even when discovery of private information is found directly relevant to the issues of ongoing litigation, it will not be automatically allowed; there must then be a “careful balancing” of the compelling public need for discovery against the fundamental right of privacy. If an intrusion on the right of privacy is deemed necessary under the circumstances of a particular case, any such intrusion should be the “least intrusive means” to satisfy the interest. (Lantz v. Superior Court (1994) 28 Cal.App.4th 1839, 1854-1855.)

Good cause exists to compel discovery because defendant has presented evidence that plaintiff’s personality resulted in reduced business and complaints. Such complaints are directly relevant to defendant’s breach of fiduciary duty claims because plaintiff’s conduct limited referral sources and vendors and caused difficulties with hiring and retaining personnel. To ensure the least restrictive means to satisfy the state’s interest in the information, the court will issue a protective order to limit the discovery to attorney’s eyes only.

Further, because the gravamen of the complaint is the withholding of income from 2015 – 2017, the court will limit the scope of the discovery to plaintiff’s conduct occurring on or after 2012, which is three years prior to 2015, and through 2017.

Accordingly, the motion to quash is DENIED. The alternative motion for a protective order is GRANTED.

Defendant Shah’s motion for a protective order is GRANTED. No sanctions.

Shah moves for a protective order pursuant to CCP 2031.060:

When an inspection, copying, testing, or sampling of documents, tangible things, places, or electronically stored information has been demanded, the party to whom the demand has been directed, and any other party or affected person, may promptly move for a protective order. This motion shall be accompanied by a meet and confer declaration under Section 2016.040. (b) The court, for good cause shown, may make any order that justice requires to protect any party or other person from unwarranted annoyance, embarrassment, or oppression, or undue burden and expense.

(CCP § 2031.060.)

As part of the litigation, both plaintiff and defendant have requested documents from each other as well as documents from third parties. Shah was informed by an attorney for an outside medical organization that certain documents may contain confidential information and should be treated as such. Shah then circulated a proposed stipulated protective order to all parties regarding the treatment of confidential documents. (See Declaration Saleem Erakat ¶ 3, Exh. A-B.)

In opposition, plaintiff states that the parties agreed to a discovery moratorium up to 2/28/19 (See Declaration of Andre Picciurro ¶ 8, Exh. 1), and that the instant motion violates the agreement.

However, the parties agreed to a moratorium on “new discovery… initiated before” 2/28/19. (Id.) Here, defendant is merely seeking a stipulation concerning discovery that was previously propounded.

Notably, plaintiff does not assert any objections to the terms of the stipulated protective order, which would presumably protect Sudan as well.

Accordingly, the motion is GRANTED. No sanctions because the motion was opposed with substantial justification based on a misinterpretation of the discovery moratorium.