Sethi, et al. v. Mitsakos, et al.		CASE NO. 114CV258862
DATE: 10 July 2014	TIME: 9:00	LINE NUMBER: 25

This matter will be heard by the Honorable Judge Socrates Peter Manoukian in Department 19 in the Old Courthouse, 2nd Floor, 161 North First Street, San Jose. Any party opposing the tentative ruling must call Department 19 at 408.808.6856 and the opposing party no later than 4:00 PM Wednesday 9 July 2014.  Please specify the issue to be contested when calling the Court and counsel.

On 10 July 2014, the motions of defendants Nicholas Mitsakos and Arcadia International Investment Advisors, Inc. to quash deposition subpoenas were argued and submitted.  Mr. Mitsakos also moves for a protective order, and both defendants seek monetary sanctions.  Plaintiff Ravinder S. Sethi filed an opposition to each motion in which he also requests monetary sanctions.

Statement of Facts

In 2001, plaintiff Ravinder S. Sethi (“Sethi”) and defendant Nicholas Mitsakos (“Mitsakos”) filed lawsuits against each other in the Superior Court of California.  (Sethi v. Kohli, et al. (Super. Ct. Santa Clara County, No. 1-01-CV-801293) (hereinafter, the “Underlying Action”) and Mitsakos v. Sethi (Super. Ct. Alameda County, No. 01-016787).)  They took their dispute to binding arbitration, and the arbitrator issued a default award against Mitsakos.  This Court (Hon. Mark H. Pierce) confirmed the arbitration award and entered judgment against Mitsakos in the Underlying Action on December 3, 2013.

On January 10, 2014, Sethi filed the present action against Mitsakos and defendant Arcadia International Investment Advisors, Inc. (“Arcadia,” [1] collectively with Mitsakos, “Defendants”), initially asserting a single cause of action for “creditor’s suit.”  On May 29, 2014, Sethi filed the operative first amended complaint (the “FAC”), asserting two causes of action for “creditor’s suit” and a third cause of action for fraudulent conveyance against both Defendants.  In his first two causes of action, Sethi alleges that Arcadia and other persons or entities presently unknown to him have possession or control of certain securities in which Mitsakos has an interest.  In his third cause of action, he further alleges that he obtained a lien on a bank account owned by Mitsakos that contained certain shares of common stock, but Mitsakos caused all of his personal securities holdings to be transferred to a brokerage account opened in Arcadia’s name, then closed that account and transferred its contents to a new and different brokerage account opened in the name of an unknown person or entity.  Sethi seeks an order applying this property to his judgment against Mitsakos in the Underlying Action.

On January 27, 2014 the Court (Hon. Carol W. Overton) granted in part Sethi’s request for injunctive relief, ordering that Mitsakos and his agents be enjoined from selling or transferring any interest of Mitsakos in certain securities and proceeds therefrom.

Discovery Dispute

On April 19, 2014, Sethi served a notice to consumer upon Mitsakos indicating that he had served subpoenas for the production of business records (the “Subpoenas”) upon five third-party entities: (1) Cho Kwan, CPA, Inc. (“Kwan”); (2) Wells Fargo Bank, N.A. (“Wells Fargo”); (3) Merrill Lynch, Pierce, Fenner & Smith, Inc. (“Merrill Lynch”); (4) B. Riley & Co., LLC (“B. Riley”); and (5) Meru Networks, Inc. (“Meru”).  Mitsakos contends that the first four Subpoenas are substantially similar to subpoenas Sethi previously served in the Underlying Action on December 19, 2013, which Mitsakos moved to quash, and which Sethi withdrew on May 16, 2014.  The parties met and conferred regarding those prior subpoenas and the Subpoenas served in this action, but were apparently unable to come to agreement concerning the scope of the discovery sought by Sethi.

On May 9, 2014, Mitsakos filed a motion to quash the Subpoenas and for a protective order, along with a request for judicial notice.  On June 5, Arcadia filed its own motion to quash the Subpoenas and request for judicial notice.  On June 24, the Court granted Sethi’s ex parte application for an order continuing the hearing on these motions, and continued the hearing to July 10.  On June 27, Sethi filed papers in opposition to each motion, and on June 30, he filed “corrected” opposition papers.  Mitsakos and Arcadia each filed reply papers on July 2.  Mitsakos included an additional request for judicial notice with his reply papers, and Arcadia included objections to evidence with its reply.  On July 7, Sethi filed objections to evidence in response to Defendants’ papers.

Discussion

Both Mitsakos and Arcadia contend that the Subpoenas should be quashed in their entireties because they are procedurally improper and outside the scope of permissible discovery “in aid of enforcement of a money judgment.”  (See Code Civ. Proc. (“CCP”), § 2016.070.)  In addition, Defendants contend that each of the individual document requests within the Subpoenas should be eliminated or narrowed for a variety of reasons.

1.         I.     Legal Standard

The court may, “upon motion reasonably made by a [party] … make an order quashing [a] subpoena entirely, modifying it, or directing compliance with it upon those terms or conditions as the court shall declare, including protective orders.”  (CCP, § 1987.1, subds. (a) and (b)(1).)  In addition, the court may make “any other order as may be appropriate to protect the [moving party] from unreasonable or oppressive demands,” including unreasonable violations of his or her right to privacy.  (Id.)

The court may also make any order that justice requires to protect the party from unwarranted annoyance, embarrassment, or oppression, or undue burden and expense, including a protective order providing that certain writings or tangible things designated for production not be produced.  (CCP, § 2025.420, subds. (b) and (b)(11).)[2]

1.       II.     Sethi’s Opposition to Mitsakos’s Motion

As an initial matter, Mitsakos contends that the Court should disregard Sethi’s opposition to his motion on the ground that the opposition was untimely.

The Court’s order regarding the briefing schedule in this matter provided that Mitsakos’s opposition papers were to be served by the deadline provided by the CCP.  CCP section 1005, subdivision (b) requires all opposing papers to be filed and served at least nine court days before the hearing.  However, no paper may be rejected for filing on the ground that it was untimely filed.  (Cal. Rules of Court, rule 3.1300(d).)  The Court may, in its discretion, refuse to consider a late-filed paper.  (See Cal. Rules of Court, rule 3.1300(d).)  While Mitsakos’s opposition was untimely, Sethi submitted a reply brief addressing the merits of the opposition and does not request more time to respond to it. Therefore, given the absence of prejudice and in deference to the principle that matters should be decided on their merits, the Court will consider the opposition papers filed by Sethi.[3]

1.      III.     Requests for Judicial Notice

In support of his motion, Mitsakos requests judicial notice of: (1) the complaint in Mitsakos v. Sethi (Super. Ct. Alameda County, No. 01-016787); (2) and (3) the complaint and cross-complaint in the Underlying Action; (4) the Court’s (Hon. Joseph F. Biafore) order granting defendants’ motion to stay proceedings and compel arbitration in the Underlying Action; (5) the parties’ agreement regarding dismissal of action and referral to arbitration in Case No. 01-016787; (6) and (7) the Court’s (Hon. Mark H. Pierce) orders confirming the arbitration award and entering judgment in the Underlying Action; (8) Mitsakos’s motion to quash filed in the Underlying Action; (9) the original complaint in this action; and (10) a stipulation and order continuing the hearing and briefing schedule on Mitsakos’s motion to quash in the Underlying Action.  With the exception of item 5, judicial notice of these documents is appropriate given that they are court records relevant to the procedural history of this action.  Mitsakos’s request is thus GRANTED as to items 1-4 and 6-10.  (Evid. Code, § 452, subd. (d); People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422, fn. 2 [only relevant matters are subject to judicial notice].)  With respect to item 5, the parties’ agreement does not appear to have been filed with any court, and is not a “source of reasonably indisputable accuracy.”  Mitsakos’s request is consequently DENIED as to item 5.  (Evid. Code, § 452, subds. (d) and (e).)

In support of its motion, Arcadia requests judicial notice of the same items that are the subject of Mitsakos’s request, as well as the FAC.  Arcadia’s request is GRANTED as to items 1-4 and 6-10 from Mitsakos’s request and DENIED as to item 5 for the reasons discussed above.  Arcadia’s request for judicial notice of the FAC is GRANTED given that the FAC is a relevant court record.

Finally, with his reply papers, Mitsakos requests judicial notice of the FAC and the Court’s order continuing the hearing and briefing schedules for the instant motions.  This request is GRANTED in its entirety given that it pertains to relevant court records.

To the extent that the parties’ requests are granted, however, the Court takes judicial notice of the existence of these documents only, and not of the truth of statements contained therein.  (See Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1564 [a court may take judicial notice of the existence of each document in a court file, but can only take judicial notice of the truth of facts asserted in documents such as orders, findings of fact and conclusions of law, and judgments].)

1.     IV.     Objections to Evidence

Arcadia submitted a number of objections to evidence with its reply papers, and Sethi submitted objections to evidence in response to Defendants’ moving and reply papers.  There is no authority for the proposition that the Court must rule on an evidentiary objection made in connection with a discovery motion.  Furthermore, the evidence the parties object to is not necessary to the Court’s resolution of the instant motions.  The Court, therefore, declines to rule on the parties’ evidentiary objections.

1.       V.     Motions to Quash the Subpoenas in Their Entireties

Both Mitsakos and Arcadia contend that the Subpoenas should be quashed in their entireties because they are procedurally improper and outside the scope of permissible discovery “in aid of enforcement of a money judgment.”  (See CCP, § 2016.070.)

CCP section 2016.070 provides that the Civil Discovery Act “applies to discovery in aid of enforcement of a money judgment only to the extent provided in Article 1 (commencing with Section 708.010) of Chapter 6 of Title 9 of Part 2.”  That article (CCP, §§ 708.010-708.030) establishes a judgment creditor’s right to propound written interrogatories and inspection demands upon a judgment debtor once a money judgment becomes enforceable.  (See CCP, § 708.010, subd. (a).)  Defendants contend that the discovery sought in this action is “in aid of enforcement of” the judgment in the Underlying Action, and consequently is not subject to the Civil Discovery Act because it does not consist of written interrogatories or inspection demands propounded upon Mitsakos.

Defendants also point to CCP section 708.120, which establishes a procedure through which a judgment creditor may apply ex parte for an order authorizing an examination in court of a third party who “has possession or control of property in which the judgment debtor has an interest or is indebted to the judgment debtor in an amount exceeding two hundred fifty dollars.”  (CCP, § 708.120, subd. (a).)  While a subpoena may be issued in connection with such an examination, it must be “tethered to” the examination itself.  (Fox Johns Lazar Pekin & Wexler, APC v. Super. Ct. (Brewer Corp.) (2013) 219 Cal. App. 4th 1210, 1222.)  “[T]he examination of a third party under section 708.120 is limited to exploring the third party’s possession of the judgment debtor’s property or any debt owed the judgment debtor,” and the scope of the documents requested in a third-party subpoena issued in connection with such an examination “must be similarly curtailed.”  (Id.; see CCP, § 708.120, subd. (a) [court shall order a third party subject to examination “to answer concerning such property or debt” as is described above].)

In light of these authorities, Defendants appear to contend that Sethi can only obtain discovery in this action through interrogatories and inspection demands propounded upon Mitsakos, or third-party subpoenas issued in connection with an examination pursuant to Code of Civil Procedure section 708.120, which must be limited in scope to encompass documents pertaining to the third party’s possession of Mitsakos’s property or debt owed to him.  Sethi, by contrast, argues that he is entitled to the full range of discovery available in a civil action, because he has elected to proceed not by utilizing the procedures authorized by Code of Civil Procedure section 708.010 et seq. in the Underlying Action, but by filing an independent civil action.

The Court is unaware of any authority addressing this issue directly.  However, Whitehouse v. Six Corp. (1995) 40 Cal.App.4th 527 (hereinafter, “Whitehouse”), which is cited by Sethi and Defendants in support of their opposite positions, provides some guidance.  Whitehouse arose in the context of a third party claim brought pursuant to CCP section 720.110 et seq.  These provisions establish a procedure whereby a third person claiming a superior interest in property levied under a writ of attachment, writ of execution, prejudgment or postjudgment writ of possession, or writ of sale may file a claim with the levying officer in the original action rather than a separate action at law.  (CCP, §§ 720.110 and 720.120; see also Whitehouse v. Six Corp., supra, 40 Cal.App.4th at p. 535 [noting that certain rights to which claimant would be entitled in an action at law are excluded in a third party claim proceeding].)

Whitehouse noted “[t]he general rule … that discovery is not available in those proceedings in which a creditor seeks to enforce a judgment,” citing the predecessor to CCP section 2016.070.  (Whitehouse v. Six Corp., supra, 40 Cal.App.4th at p. 536.)  However, in holding the appellant third party claimant did not have a right to discovery, the court specifically noted that “[a]ppellants selected this expeditious and relatively inexpensive [third party claim] procedure to clear title in preference to other equitable and legal remedies, e.g., an action to quiet title, injunctive relief, declaratory relief, a suit for damages, or a suit to recover possession of the property.”  (Id.)  Whitehouse’s holding was thus expressly limited to the context of proceedings to enforce a judgment held in an underlying action rather than in a separate action, and Whitehouse suggests that there would be no such limitation on the right to discovery where a claimant elected to proceed through a separate action.  (See id. at p. 538 [“Litigants who choose to travel the express route by way of a third party claim procedure may not suddenly transfer to the more traditional, less expeditious route. There are no exits. By choosing the third party claim form of adjudication, appellants were provided with a relatively inexpensive and speedy determination of their claim ….”].)

Here, Sethi has chosen to proceed through an independent civil action asserting creditor’s claims and a claim for fraudulent transfer rather than by proceedings in the Underlying Action.  The former claims “may be brought … without the necessity of first … examining the third person” under CCP section 708.120 (see Cal. Law Revision Com. Com., Deering’s Cal. Codes Ann. (2014 ed.), CCP, § 708.210), and the latter claim is authorized by a section of the Civil Code independent from those sections of the CCP establishing a judgment creditor’s rights to enforce a money judgment (see Civ. Code, § 3439 et seq.).  Consequently, the discovery sought by the Subpoenas is not directly “in aid of enforcement of a money judgment” as contemplated by CCP section 2016.070.  Rather, this discovery is in aid of Sethi’s independent claims and is governed by the Civil Discovery Act.

Defendants’ motions are accordingly DENIED to the extent they seek an order quashing the Subpoenas in their entireties.[4]

1.     VI.     Motions to Quash or Limit the Individual Requests

Defendants contend that the Court should quash or narrow each of the individual document requests within the Subpoenas because they seek documents protected by the tax return privilege and the right to privacy and are overly broad.[5]

1. A.     Tax Return Privilege

The subpoena to Kwan seeks documents regarding information provided to Kwan for the purpose of preparing tax statements and which were reviewed or considered by him in connection with the same process (Request Nos. 1-2); documents related to Mitsakos’s and Arcadia’s bank account statements (Request Nos. 3-5); documents concerning Mitsakos’s communications concerning bank accounts in the names of specified entities (Request No. 6); documents concerning  Defendants’ compensation for services Mitsakos provided to specified entities (Request Nos. 8 and 9); and documents associated with Mitsakos’s communications concerning the judgment in the Underlying Action and the Court’s order granting injunctive relief in this action (Request No. 11.)

Defendants contend that a number of these requests should be quashed because they impermissibly seek discovery pertaining to their tax returns and related information.[6]

Taxpayers are privileged to withhold copies of their federal and state tax returns from disclosure.  (Webb v. Standard Oil Co. (1957) 49 Cal.2d 509, 513.)  The purpose of the tax return privilege “is to facilitate tax enforcement by encouraging a taxpayer to make full and truthful declarations in his return, without fear that his statements will be revealed or used against him for other purposes.”  (Id.)  The privilege extends to the tax return and specific entries therein, as well as documents, such as W-2 forms, that must be attached to, and constitute an integral part of, the return.  (Sav-On Drugs, Inc. v. Super. Ct. (Botney) (1975) 15 Cal.3d 1, 4-5 (hereinafter, “Sav-On Drugs” [interrogatories requesting information about deductions and adjustments made on tax returns and forms that were used to prepare the same sought privileged information]; Brown v. Super. Ct. (Executive Car Leasing, Inc.) (1977) 71 Cal.App.3d 141, 143-144 [“W-2 forms, which are required to be attached to a taxpayer’s state and federal income tax returns, constitute an integral part of the return and qualify as ‘information contained in the returns’” within the meaning of Sav-On Drugs].)

Sethi contends that the tax return privilege applies only to returns and other documents that form an “integral part” of the returns, and not to records and data on the basis of which such documents are prepared.  However, the tax return privilege protects a broader range of documents than the returns themselves in order to preclude “attempts to avoid the application of the privilege by indirect means.”  (Sav-On Drugs, Inc. v. Super. Ct. (Botney), supra, 15 Cal.3d at p. 7.)  Permitting the discovery of information provided to one’s accountant for the purpose of preparing a tax return would indirectly permit the discovery of the information reflected on the tax return itself and, like the discovery rejected in Sav-On Drugs, would thwart the policy behind the privilege.

Accordingly, Defendants’ motions are GRANTED as to Request Nos. 1-2 in the subpoena to Kwan, which seek documents regarding information provided to Kwan for the purpose of preparing tax statements and which were reviewed or considered by him in connection with the same process.

However, the tax return privilege does not provide a basis to quash the remaining requests in the subpoena to Kwan, which do not reference tax statements.  There is no broader “accountant-client” privilege that would protect all information transmitted to one’s accountant, and, as with other privileges, the ultimate facts concerning an individual’s or entity’s financial circumstances do not become privileged merely because they were communicated in a context that does give rise to a privilege.

Finally, Defendants also contend that producing the information sought by many of these requests would require Kwan to violate Business and Professions Code section 17530.5, which prohibits the disclosure of information obtained in the business of preparing federal or state income tax returns.  However, subdivision (a)(1) of that section expressly provides that such disclosure is not a violation if made pursuant to a court order such as this one.  Section 17530.5 “on its face does not purport to create or codify a privilege shielding a litigant from discovery of the litigant’s own tax returns or making those returns inadmissible at trial—it operates only to prevent persons in the business of preparing others’ tax returns from voluntarily disclosing their clients’ information.”  (Firestone v. Hoffman (2006) 140 Cal. App. 4th 1408, 1418.)  Accordingly, section 17530.5 does not provide a basis to quash any of the remaining requests in the subpoena to Kwan.

1. B.     Right to Privacy and Overbreadth

Defendants contend that each of the requests in the Subpoenas should be quashed as overbroad and/or violative of their and third parties’ rights to privacy.

The right to privacy protects an individual’s “reasonable expectation of privacy against a serious invasion.” (Pioneer Electronics, Inc. v. Super. Ct. (Olmstead) (2007) 40 Cal.4th 360, 370.) It is well-established that the right to privacy extends to a person’s financial affairs. (See Cobb v. Super. Ct. (Tleel) (1979) 99 Cal.App.3d 543, 550.) While the right to privacy does not generally apply to corporations (Roberts v. Gulf Oil Corp. (1983) 147 Cal.App.3d 770, 791), a corporation may have a protectible privacy interest depending on the strength of the nexus between the artificial entity and human beings and the context in which the controversy arises (id. at pp. 797).

Where a serious invasion of the right to privacy is shown, the proponent of the discovery must demonstrate that the information sought is “directly relevant” to a claim or defense, and “essential to the fair resolution of the lawsuit.” (Britt v. Super. Ct. (San Diego Unified Port District) (1978) 20 Cal.3d 844, 859; see also Binder v. Super. Ct. (Neufeld) (1987) 196 Cal.App.3d 893, 901 [holding “direct relevance” requires something more than an assertion that the requested discovery might lead to admissible evidence].) Once direct relevance has been demonstrated, the proponent of discovery must show that the information sought is not available through less intrusive means. (Allen v. Super. Ct. (Sierra) (1984) 151 Cal.App.3d 447, 449.) The court must then carefully balance the right to privacy on the one hand, and the right of civil litigants to discover facts, on the other. (Pioneer Electronics, Inc. v. Super. Ct., supra, 40 Cal.4th at p. 371.)

Where no privacy interests are implicated, discovery is allowed for any matter that is not privileged, relevant to the subject matter involved in the action, and reasonably calculated to lead to the discovery of admissible evidence.  (CCP, § 2017.010.) The “relevance to the subject matter” and “reasonably calculated to lead to the discovery of admissible evidence” standards are applied liberally with any doubt generally resolved in favor of discovery.  (Colonial Life & Acc. Ins. Co. v. Super. Ct. (Perry) (1982) 31 Cal.3d 785, 790.)  Moreover, for discovery purposes, information is “relevant to the subject matter” if it might reasonably assist a party in evaluating the case, preparing for trial, or facilitating settlement. (Gonzalez v. Super. Ct. (City of San Fernando) (1995) 33 Cal.App.4th 1539, 1546.)

The Court will address the appropriate scope of the Subpoenas in light of these principles and the parties’ remaining arguments.

1. 1.      Documents Pertaining to Bank Accounts

As discussed above, the subpoena to Kwan seeks documents regarding Mitsakos’s and Arcadia’s bank account statements (Request Nos. 3-5) and documents relating to Mitsakos’s communications concerning bank accounts in his own name, Arcadia’s name, and the names of third parties MKS Ventures, LLC and Mitsakos Holdings, LLC (Request No. 6).

Similarly, the subpoenas to Wells Fargo, Merrill Lynch, and B. Riley seek account statements and documents evidencing deposits or transfers into and withdrawls or transfers out of accounts in Mitsakos’s name (Request Nos. 1-3 in each subpoena), accounts in Arcadia’s name (Request Nos. 4-6 in each subpoena), and accounts for which Mitsakos is the authorized representative or signatory (Request Nos. 7-9 in the subpoena to Wells Fargo and B. Riley and Request No. 7 in the subpoena to Merrill Lynch).  The subpoena to Wells Fargo seeks documents relating to communications between Mitsakos and the Wells Fargo portfolio manager for his personal accounts (Request No. 10), Arcadia’s accounts (Request No. 11), and any accounts for which Mitsakos is the authorized representative or signatory (Request No. 12).  The subpoena to Merrill Lynch seeks documents concerning communications between Mitsakos and any Merrill Lynch employee regarding accounts managed by Mitsakos from January 2011 to the present.  (Request No. 8.)  Finally, the subpoena to B. Riley seeks communications between Mistakos and any B. Riley employee regarding accounts in Mitsakos’s or Arcadia’s names (Request No. 10) and documents relating to transactions involving accounts in Mitsakos’s or Arcadia’s names from November 1, 2013 to present (Request Nos. 11 and 12).

1. a.      Mitsakos’s Bank Accounts

Discovery concerning accounts in Mitsakos’s own name is clearly relevant to this action, in which Sethi alleges that Mitsakos transferred possession of his assets to Arcadia and other persons or entities presently unknown to Sethi, and is furthermore expressly provided for even in the context of more limited third-party examination proceedings to enforce a judgment (see CCP, § 708.120, subd. (a) [authorizing examination of a third party who has control of property in which the judgment debtor has an interest]).  Although Mitsakos has a privacy interest in such information, under the circumstances, such interest is outweighed by the public’s interest in facilitating the enforcement of judgments.  (See Hooser v. Super. Ct. (Ray) (2000) 84 Cal.App.4th 997, 1004 [noting public’s interest in facilitating the enforcement of judgments may require disclosure of otherwise private information].)  While Mitsakos contends that Sethi has alternative means of discovering this information—namely, through examination proceedings or interrogatories—these methods would not meaningfully lessen the burden on his privacy interest, and, as discussed above, Sethi is entitled to proceed through this independent action rather than through more limited post-judgment proceedings in the Underlying Action.

Mitsakos contends that the Subpoenas (which seek documents dating from 2010, 2006 or 1999, or include no time restriction at all) should be limited to cover the past two years because counsel for Sethi has indicated that this is the time period he is most concerned with, and broader requests are “unreasonable and impractical.”  (See Motion, 14.)  Sethi disputes this statement, contends that the accounts at issue were inactive during that time, and asserts that none of the subpoena recipients have communicated objections based upon burden.  Given that Mitsakos’s objection to the temporal scope of the Subpoenas appears to be based upon burden, but Mitsakos has presented no evidence of the work required to respond to the Subpoenas, the Court will not limit their temporal scope.  (See W. Pico Furniture Co. v. Super. Ct. (Pacific Finance Loans) (1961) 56 Cal.2d 407, 417 [any objection based upon burden must be supported by evidence showing the quantum of work required to respond to the request at issue].)

The discovery sought by the Subpoenas with respect to Mistakos’s accounts is consequently permissible.

1. b.      Arcadia’s Bank Accounts

Arcadia states that it is an investment management company that accepts money from third parties and invests these funds in securities.  It asserts, without further explanation, that the information sought by the Subpoenas pertaining to its bank accounts “would impermissibly reveal the identities of the third-party investors, the amounts they invested, what they invested in, and the returns they received on their investments.”  (Motion at p. 8.)  It is not clear to the Court that the documents requested by the Subpoenas would include such information, but, to the extent that they do, Arcadia’s customers have a privacy interest in this information.  (See Hooser v. Super. Ct. (Ray) (2000) 84 Cal.App.4th at p. 1008 [subpoena recipient’s “clients have a right of privacy as to their financial affairs”].)  However, this privacy interest can be protected through the redaction of any client identifying information reflected on the documents encompassed by the Subpoenas.

Arcadia also contends that the requests pertaining to its bank accounts violate its own right to privacy in its financial information.  However, the right to privacy does not generally apply to corporations (Roberts v. Gulf Oil Corp., supra, 147 Cal.App.3d at p. 791), and Arcadia does not explain why the Court should find that it does under the circumstances presented here, other than with its argument concerning the privacy interests of its third-party investors, addressed above.  Consequently, the Court finds no privacy interest on behalf of Arcadia in this information other than the interest it asserts on behalf of its clients.

Arcadia further argues that the Subpoenas are overly broad because they seek unlimited information pertaining to all types of accounts.  In addition, Arcadia contends that the Subpoenas are overly broad because, as discussed above, they seek information dating back for a number of years if not indefinitely.  However, Arcadia does not explain its argument that information pertaining to certain types of accounts or periods of time is not relevant to this action, it does not propose a way in which the Subpoenas might be limited to address these issues, and the Court finds that it is not appropriate to limit the Subpoenas on the basis of these arguments.  Nevertheless, the Court agrees that the requests for information pertaining to Arcadia’s accounts are overly broad given that Arcadia’s finances are only at issue in this case insofar as it has possession of or has transferred possession of assets belonging to Mitsakos.  Consequently, the Court limits these requests to encompass documents pertaining to assets that are or ever were owned by Mitsakos or were transferred from Mitsakos, including documents related to any transfers or withdrawals of such assets.

1. c.      Third Party Bank Accounts

Also on the grounds of privacy and overbreadth, Mitsakos objects to the production of documents associated with accounts belonging to third parties MKS Ventures, LLC and Mitsakos Holdings, LLC, as well as to other entities whose accounts Mitsakos merely manages or is associated with as a signatory or authorized representative.

Mitsakos does not explain his privacy objection with respect to these third party corporations, and the Court finds that it lacks merit for the same reasons discussed above with respect to Arcadia’s privacy objection.

In support of his overbreadth argument, Mitsakos contends that documents pertaining to third party accounts are irrelevant to this action because Sethi alleges only that Arcadia has possession of securities in which Mitsakos has an interest and/or owes Mitsakos a debt, and Sethi cannot pierce the corporate veil to hold third parties liable for the judgment against Mitsakos.  However, the FAC in fact alleges that Mitsakos transferred assets to a number of unknown entities in addition to Arcadia, and that assets he transferred to Arcadia were subsequently transferred to an unknown entity.  Sethi may pursue discovery concerning such assets through this action.  Consequently, documents pertaining to accounts with third party entities with which Mitsakos has been associated are relevant.

As with documents pertaining to Arcadia’s finances, however, information concerning other third party entities’ finances is only relevant insofar as it pertains to assets owned by or transferred from Mitsakos.  Accordingly, the Court limits these requests to encompass documents pertaining to assets that are or ever were owned by Mitsakos or were transferred from Mitsakos, including documents concerning transfers or withdrawals of such assets.

1. d.      Conclusion

In accordance with the above, Mitsakos’s motion is DENIED as to Request No. 3 in the subpoena to Kwan; Request Nos. 1-3 in the subpoenas to Wells Fargo, Merrill Lynch, and B. Riley; Request No. 10 in the subpoena to Wells Fargo; and request No. 12 in the subpoena to B. Riley.

Defendants’ motions are GRANTED IN PART as to Request Nos. 4-6 in the subpoenas to Kwan, Wells Fargo, Merrill Lynch, and B. Riley; Request Nos. 7-9 in the subpoenas to Wells Fargo and B. Riley; Request Nos. 11 and 12 in the subpoena to Wells Fargo; Request Nos. 7 and 8 in the subpoena to Merrill Lynch; and Request Nos. 10 and 11 in the subpoena to B. Riley.  Insofar as these requests seek documents pertaining to accounts owned by Arcadia or third parties, they are limited to encompass documents pertaining to assets that are or ever were owned by Mitsakos or were transferred from Mitsakos, including documents concerning transfers or withdrawals of such assets.  Any identifying information pertaining to Arcadia’s clients shall be redacted.  The motions are otherwise DENIED as to these requests.

1. 2.      Documents Related to This Action and the Underlying Action

Defendants also seek to quash the following requests seeking documents related to this action and the Underlying Action: Request Nos. 9-11 in the subpoena to Kwan, which seek documents associated with Mitsakos’s communications concerning the temporary protective order and judgment in the Underlying Action and the Court’s order granting injunctive relief in this action; Request No. 13 in the subpoena to Wells Fargo, which seeks documents regarding Mitsakos’s communications concerning the temporary protective order in the Underlying Action; Request Nos. 13-15 in the subpoena to B. Riley, which seek documents pertaining to the temporary protective order issued in the Underlying Action and concerning the closure of accounts in Mitsakos’s or Arcadia’s names following service of the temporary protective order upon B. Riley; and Request Nos. 13-15 in the subpoena to Meru, which seek documents discussing the temporary protective order and judgment in the Underlying Action and the Court’s order granting injunctive relief in this action.

Defendants challenge these requests using the same privacy and overbreadth arguments previously addressed.  Defendants’ privacy arguments fail as already discussed, and the relevance of communications concerning this and the Underlying Action is clear.  Furthermore, Sethi alleges in his cause of action for fraudulent transfer that Mitsakos transferred assets to an account in Arcadia’s name with B. Riley’s predecessor, which were subsequently transferred to an unknown entity when the Arcadia account was closed after judgment issued in the Underlying Action.  Consequently, the requests to B. Riley pertaining to closure of accounts in Mitsakos’s or Arcadia’s names following service of the temporary protective order are also relevant.

The motions to quash are thus DENIED as to Request Nos. 9-11 in the subpoena to Kwan, Request No. 13 in the subpoena to Wells Fargo, Request Nos. 13-15 in the subpoena to B. Riley, and Request Nos. 13-15 in the subpoena to Meru.

1. 3.      Documents Related to Mitsakos’s Compensation

Request Nos. 7 and 8 in the subpoena to Kwan seek documents concerning Mitsakos’s (Request No. 7) and Arcadia’s (Request No. 8) compensation for services provided by Mitsakos (Request Nos. 7 and 8) or Arcadia (Request No. 8) to four specified entities: Meru, Ubiquity Broadcasting Corporation or Ubiquity Corporation (hereinafter, “Ubiquity”), Cardax Pharmaceuticals, Inc., and Sardis Capital Limited.

The subpoena to Meru seeks documents pertaining to: the terms of Mitsakos’s compensation from Meru since 2010 and the receipt of, ownership of, or past or future entitlement to any such compensation (Request Nos. 1 and 2), as well as communications regarding such compensation (Request Nos. 7-8); the sale, transfer, or assignment of stock Mitsakos has held at any time since 2010 (Request No. 3), as well as communications regarding Mitsakos’s receipt of such stock (Request Nos. 9-10); the terms of any awards of restricted stock granted to Mitsakos since 2010 (Request No. 4); and any interest Arcadia has held in any stock issued by Meru to Mitsakos at any time (Request Nos. 5 and 6), as well as communications regarding such stock (Request Nos. 11-12).

Both Defendants challenge these requests using the same privacy and overbreadth arguments discussed above.

Defendants’ privacy arguments fail for the reasons already discussed.  As to the scope of the requests, documents pertaining to compensation provided in exchange for services provided by Mitsakos are relevant to the issue of whether such assets were transferred to Arcadia or another entity inappropriately.  Furthermore, Sethi alleges in the FAC that Arcadia has possession of securities issued by Meru and Ubiquity specifically, so documents pertaining to Arcadia’s compensation for services provided to these entities are also relevant.  However, it is unclear how documents pertaining to Arcadia’s compensation for services Arcadia itself provided to Cardax Pharmaceuticals, Inc. and Sardis Capital Limited are relevant to this action.  Accordingly, Request No. 8 in the subpoena to Kwan shall be limited to exclude such documents.

Thus, the motions to quash are DENIED as to Request No. 7 in the subpoena to Kwan and Request Nos. 1-12 in the subpoena to Meru.  Arcadia’s motion is GRANTED IN PART as to Request No. 8 in the subpoena to Kwan.  Request No. 8 is limited to encompass documents pertaining to compensation for services provided by Mitsakos to all four entities and to services provided by Arcadia to Meru and Ubiquity only.  The motion is otherwise DENIED as to this request.

1. C.     Attorney-Client Privileged Documents

Mitsakos contends that the Subpoenas “invade the attorney-client privilege to the extent [his] counsel communicated with the recipients as necessary persons to further the interest of the client in consultation,” and such privileged communications should be excluded from the subpoena recipients’ productions.  (Motion at p. 14.)  The Court notes that Mitsakos does not definitively indicate whether or not counsel actually communicated with subpoena recipients in this fashion.  Nevertheless, such communications may be privileged, which Sethi acknowledges at least as to communications with Kwan.

Accordingly, the subpoena recipients shall produce any responsive communications with Misakos’s counsel to Mitsakos rather than to Sethi and shall provide a log of these communications to Sethi.  Upon receipt of such documents, Mitsakos shall review the documents and determine whether he believes they are protected by the attorney-client privilege.  Within 20 calendar days of receiving the documents, Mitsakos shall produce to Sethi those documents in which he does not claim a privilege and provide a privilege log identifying any documents withheld on the basis of privilege and providing a factual basis for the privilege claimed.

1.    VII.     Mitsakos’s Motion for a Protective Order

Finally, Mitsakos asks the Court to issue a protective order, requesting somewhat inconsistently that the order either prohibit Sethi “from issuing further improper, burdensome, and irrelevant subpoenas to third parties requesting disclosure of Mr. Mitsakos’ and the Non-Parties (sic) [MKS Ventures, LLC and Mitsakos Holdings, LLC] information and assets” and that it prohibit him “from issuing further discovery regarding the assets of third parties” generally.  (Motion, p. 15; see also Notice of Motion, p. 2 [requesting an order prohibiting Sethi from issuing any further discovery seeking information regarding assets of third parties].)

In his reply papers, Mitsakos contends that Sethi’s service of third party subpoenas has caused serious disruption to his business relationships and declares that he was not re-elected to the Meru Board of Directors in May 2014 because of the Subpoenas and Sethi’s judgment enforcement efforts generally.  Mitsakos argues that “[a]t a minimum, a protective order should issue that requires Sethi to serve any third party subpoena on Mr. Mitsakos at least twenty-one (21) days prior to serving it on any third-party” to “allow Mr. Mitsakos time to review the subpoena and bring a motion to quash the subpoena, if necessary, before the subpoena can be served and cause further harm to his business relationships.”  (Reply, p. 9.)

While certain of the requests included in the Subpoenas are overbroad as discussed above, none of the Subpoenas was wholly inappropriate, and the Court does not find good cause to issue a protective order limiting Sethi’s ability to serve third party subpoenas in this action.  In the FAC, Sethi specifically alleges that Mitsakos transferred shares in Meru in which he holds an interest in order to avoid the judgment in the Underlying Action.  Sethi is entitled to conduct discovery on this issue and to enforce his judgment against Mitsakos, and the asserted fact that Meru reacted to these efforts by declining to support Mitsakos in his bid for re-election to the Board of Directors does not demonstrate that Sethi’s efforts have been oppressive or harassing.

Mistakos’s motion for a protective order is thus DENIED.

1.   VIII.     Requests for Monetary Sanctions

Mitsakos, Arcadia, and Sethi each request monetary sanctions in connection with the instant motions.

1. A.     Defendants’ Requests for Monetary Sanctions

In connection with their motions to quash, Mitsakos and Arcadia request monetary sanctions pursuant to CCP sections 1987.2 and 2017.020, subdivision (b).

In making an order pursuant to CCP 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 it finds that 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, subd. (a).)  Here, while the Court has quashed or narrowed certain requests included in the Subpoenas, the Court finds that these requests were not oppressive and declines to award sanctions pursuant to CCP section 1987.2.

CCP section 2017.020, subdivision (b) provides that the court shall impose a monetary sanction against any party who unsuccessfully opposes a motion for a protective order.  Here, Sethi’s opposition to Mitsakos’s motion for a protective order was successful, and Arcadia did not move for a protective order as an initial matter.  Sanctions are consequently not authorized by section 2017.020.

Defendants’ requests for monetary sanctions are accordingly DENIED.

1. B.     Sethi’s Requests for Monetary Sanctions

Sethi requests monetary sanctions against Mitsakos and his counsel pursuant to CCP sections 1987.2 and 2017.020, subdivision (b), and against Arcadia and its counsel pursuant to CCP section 1987.2.

As to Sethi’s requests pursuant to CCP section 1987.2, subd. (a), Defendants’ motions were partially successful, and the Court finds that they were not made in bad faith or without substantial justification.  Accordingly, the Court will not award sanctions under this section.

CCP section 2017.020, subdivision (b) provides that the court shall impose a monetary sanction against any party who unsuccessfully makes a motion for a protective order, “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.”  Here, Mitsakos’s motion for a protective order was made as part of his partially successful motion to quash.  It is impossible to determine from Sethi’s counsel’s declaration how much time counsel spent responding to the motion for a protective order as opposed to the motion to quash, and it appears to the Court that the additional time spent should have been minimal.  The Court finds that these circumstances make the imposition of sanctions connected to Mitsakos’s motion for a protective order unjust.

Consequently, Sethi’s requests for monetary sanctions are DENIED.

Conclusion and Order

Mitsakos’s request for judicial notice submitted with his moving papers is GRANTED as to items 1-4 and 6-10 and DENIED as to item 5.  Arcadia’s request for judicial notice is also GRANTED as to items 1-4 and 6-10 from Mitsakos’s request and DENIED as to item 5, and is furthermore GRANTED as to the FAC.  Mitsakos’s request for judicial notice submitted with his reply papers is GRANTED in its entirety.

Defendants’ motions are DENIED to the extent they seek an order quashing the Subpoenas in their entireties.

Defendants’ motions are GRANTED as to Request Nos. 1-2 in the subpoena to Kwan.  Request Nos. 1-2 in the subpoena to Kwan are hereby quashed.

Defendants’ motions to quash are DENIED as to Request Nos. 3, 7, and 9-11 in the subpoena to Kwan, Request Nos. 1-3 in the subpoenas to Wells Fargo, Merrill Lynch, and B. Riley; Request Nos. 10 and 13 in the subpoena to Wells Fargo, Request Nos. 12-15 in the subpoena to B. Riley, and Request Nos. 1-15 in the subpoena to Meru.

Defendants’ motions are GRANTED IN PART as to Request Nos. 4-6 in the subpoenas to Kwan, Wells Fargo, Merrill Lynch, and B. Riley; Request Nos. 7-9 in the subpoenas to Wells Fargo and B. Riley; Request Nos. 11 and 12 in the subpoena to Wells Fargo; Request Nos. 7 and 8 in the subpoena to Merrill Lynch; and Request Nos. 10 and 11 in the subpoena to B. Riley.  Insofar as these requests seek documents pertaining to accounts owned by Arcadia or third parties, they are limited to encompass documents pertaining to assets that are or ever were owned by Mitsakos or were transferred from Mitsakos, including documents concerning transfers or withdrawals of such assets.  Any identifying information pertaining to Arcadia’s clients shall be redacted from these documents.  The motions are otherwise DENIED as to these requests.

Arcadia’s motion is GRANTED IN PART as to Request No. 8 in the subpoena to Kwan.  Request No. 8 is limited to encompass documents pertaining to compensation for services provided by Mitsakos to all four entities and to services provided by Arcadia to Meru and Ubiquity only.  The motion is otherwise DENIED as to this request.

The subpoena recipients shall produce all documents responsive to the Subpoenas, as limited by this Order, to counsel for Sethi within 20 calendar days of the filing of this Order, with the exception that the subpoena recipients shall produce any responsive communications with Misakos’s counsel to Mitsakos rather than to Sethi and shall provide a log of these communications to Sethi.  Upon receipt of such documents, Mitsakos shall review the documents and determine whether he believes they are protected by the attorney-client privilege.  Within 20 calendar days of receiving the documents, Mitsakos shall produce to Sethi those documents in which he does not claim a privilege and provide a privilege log identifying any documents withheld on the basis of privilege and providing a factual basis for the privilege claimed.

Mistakos’s motion for a protective order is DENIED.

The parties’ requests for monetary sanctions are DENIED.