Case Number: KC061475 Hearing Date: April 08, 2014 Dept: O

Raphael v. Rizk, et al. (KC061475)

1. Plaintiff Raphael’s MOTION TO CONTEST REPORT NO. 2 OF DISCOVERY REFEREE

Respondent: Defendant Rizk

2. Defendant Rizk’s MOTION TO CONTEST REPORT NO. 2 OF DISCOVERY REFEREE

Respondent: Plaintiff Raphael

3. Defendant Rizk’s RENEWED MOTION TO BIFURCATE

Respondent: Plaintiff Raphael

TENTATIVE RULING

1. Plaintiff’s Motion Contesting Discovery Report

Plaintiff Raphael’s motion to contest report no. 2 of discovery referee is DENIED.

Any party may file an objection to the referee’s report or recommendations within 10 days after the referee serves and files the report, or within another time as the court may direct. The objection shall be served on the referee and all other parties. Responses to the objections shall be filed with the court and served on the referee and all other parties within 10 days after the objection is served. The court shall review any objections to the report and any responses submitted to those objections and shall thereafter enter appropriate orders. Nothing in this section is intended to deprive the court of its power to change the terms of the referee’s appointment or to modify or disregard the referee’s recommendations, and this overriding power may be exercised at any time, either on the motion of any party for good cause shown or on the court’s own motion. (CCP 643(c).)

The court shall impose a monetary sanction under Chapter 7 (commencing with Section 2023.010) against any party, person, or attorney who unsuccessfully makes or opposes a motion to extend or to reopen discovery, UNLESS IT FINDS THAT THE ONE SUBJECT TO THE SANCTION ACTED WITH SUBSTANTIAL JUSTIFICATION OR THAT OTHER CIRCUMSTANCES MAKE THE IMPOSITION OF THE SANCTION UNJUST. (CCP 2024.050(c).)

Although Plaintiff was the prevailing party, the Discovery Referee’s Report delineates circumstances that make the imposition of the sanction unjust, such as sanctions “largely on the basis of grievances arising from discovery battles predating the reference.” (Motion, Exhibit 5, Report, 3:23-25.) Accordingly, motion is DENIED.

2. Defendant’s Motion Contesting Discovery Report

Defendant Rizk’s motion to contest report no. 2 of discovery referee is DENIED.

Any party may file an objection to the referee’s report or recommendations within 10 days after the referee serves and files the report, or within another time as the court may direct. The objection shall be served on the referee and all other parties. Responses to the objections shall be filed with the court and served on the referee and all other parties within 10 days after the objection is served. The court shall review any objections to the report and any responses submitted to those objections and shall thereafter enter appropriate orders. Nothing in this section is intended to deprive the court of its power to change the terms of the referee’s appointment or to modify or disregard the referee’s recommendations, and this overriding power may be exercised at any time, either on the motion of any party for good cause shown or on the court’s own motion. (CCP 643(c).)

The statutory tax return privilege is not absolute. The privilege will not be upheld when: 1) circumstances indicate an intentional waiver; 2) the gravamen of the lawsuit is inconsistent with the privilege; or 3) a public policy greater than the confidentiality of the tax returns is involved. (Schnabel v. Superior Court(1993) 5 Cal. 4th 704, 721.)

Here, Defendant contends that the order for production of J.R. Shell’s tax returns is improper because a portion of the years specified in the Referee’s recommendation were filed under the persona tax return of Jean Rizk, who is deceased. As such, production of these tax returns would violate the privacy of Jean Rizk. However, the right of privacy is purely a personal one, and it cannot be asserted by anyone other than the person whose privacy is invaded. Plaintiff must plead, and prove that his privacy is invaded… Further, the right does not survive but dies with the person. (Flynn v. Higham (1983) 149 Cal. App. 3d 677, 683.) Therefore, Defendant’s assertion of the deceased Jean Rizk’s right of privacy is improper.

Moreover, Plaintiff has shown that the privilege will not be upheld when: 1) circumstances indicate an intentional waiver; 2) the gravamen of the lawsuit is inconsistent with the privilege; or 3) a public policy greater than the confidentiality of the tax returns is involved. (Schnabel v. Superior Court(1993) 5 Cal. 4th 704, 721.)

Here, both Jean Rizk and George Rizk waived the privilege by filing the business returns under their tax returns, an intentional act on their part. Further, the gravamen of this lawsuit is the wrongful conversion by Defendant George Rizk and his brother Jean Rizk of the assets of Caderex, which include J.R. Shell. Therefore, the gravamen of this lawsuit is inconsistent with the continued assertion of the taxpayer privilege. Finally, the purpose of the privilege is to encourage a taxpayer to make full and truthful declarations in his return. It is not to facilitate the tax payer in perpetrating a fraud, and would be inconsistent with public policy.

The Referee acknowledges these considerations when he explained that “[i]f a jury were to find that Plaintiff was cheated out of his ownership and profits as a shareholder of Caderex, Inc., it would seem manifestly unfair to deprive him of his proof of damages under the theory that Caderex was (improperly) dissolved, and that its profits could be hidden behind the personal tax privacy of Jean Rizk, Goerge Rizk and/or his spouse.” (Motion, Exhibit D, Report, 4:3-6.)

Accordingly, motion is DENIED.

3. Motion to Bifurcate

Defendant Rizk’s renewed motion to bifurcate is DENIED.

The court finds the renewed motion is procedurally proper because the court denied Defendant’s prior motion without prejudice.

When the answer pleads that the action is barred by the statute of limitations, or by a prior judgment, or that another action is pending upon the same cause of action, or sets up any other defense not involving the merits of the plaintiff’s cause of action but constituting a bar or ground of abatement to the prosecution thereof, the court may, either upon its own motion or upon the motion of any party, proceed to the trial of the special defense or defenses before the trial of any other issue in the case. (CCP 597.) Similarly, CCP 1048(b) provides: “The court, in furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition and economy, may order a separate trial of any cause of action, including a cause of action asserted in a cross-complaint, or of any separate issue or of any number of causes of action or issues, preserving the right of trial by jury required by the Constitution or a statute of this state or of the United States.”

Defendant contends trial of his statute of limitations defense will resolve a threshold issue of this case, and would be dispositive of the entire action. Defendant contends the statute of limitations began to run on 11/17/95 because this was when Plaintiff learned that J. Rizk could not deliver title to the two lots.

In opposition, Plaintiff contends the statute of limitations does not apply because the purported November 1995 proposal never came to fruition as a valid contract since it lacked consideration.

The court again finds that bifurcation would not promote the interests of judicial economy because the parties would still need to try the contract cause of action to determine whether the statute of limitations defense would apply (i.e. when the statute of limitations begins to run). Further, the court does not find that judicial economy will be promoted by empanelling two different juries and dividing this trial into two different phases. Motion is DENIED.