Case Number: EC060892    Hearing Date: August 01, 2014    Dept: NCD

TENTATIVE RULING (8-1-14)
#8
EC 060892
DIVERSIFIED ACCEPTANCE CORPORATION v. KYUNDIBEKYAN

Defendant Mid-Century Insurance Company’s Motion to Compel Further Production of Documents as to the Notice of Continuance of Deposition and Second Amended Notice of Deposition of Vardan Kyundibekyan

Defendant Mid-Century Insurance Company’s Motion to Compel Further Production of Documents as to the Notice of Continuance of Deposition and Second Amended Notice of Deposition of Armine Kyundibekyan

Plaintiff Vardan Kyumbidekyan’s Motion to Quash Deposition Subpoena to Bank of America, NA

Plaintiff Vardan Kyumbidekyan’s Motion to Quash Deposition Subpoena to Wells Fargo and Company

TENTATIVE:
Defendant Mid-Century Insurance Company’s Motion to Compel Further Production of Documents as to the Notice of Continuance of Deposition and Second Amended Notice of Deposition of Vardan Kyundibekyan

Defendant Mid-Century Insurance Company’s Motion to Compel Further Production of Documents as to the Notice of Continuance of Deposition and Second Amended Notice of Deposition of Armine Kyundibekyan

Motions are GRANTED in part. Motions are DENIED as to Request No. 30. No tax returns need be produced. Motions are GRANTED as to all other requests. Deponents are to produce all responsive documents at resumed depositions to be conducted on or before ________________, with all described documents to be produced. At the depositions, the deponents may be examined on the documents produced.

Monetary sanctions sought by both sides are DENIED.

Plaintiff Vardan Kyumbidekyan’s Motion to Quash Deposition Subpoena to Bank of America, NA

Plaintiff Vardan Kyumbidekyan’s Motion to Quash Deposition Subpoena to Wells Fargo and Company

Motions to Quash are GRANTED.
Deposition Subpoena Served on Bank of America, NA and Wells Fargo and Company are quashed. Defendant has failed to establish that the information, although relevant, is not available through less intrusive means, such as by compelling its production from plaintiffs. The motion is denied without prejudice to seeking such information if it is not made available through less intrusive means.

Sanctions requested by both sides are DENIED.

FACTUAL BACKGROUND:
Plaintiff Diversified Acceptance Corporation dba M. Leonard & Associates alleges that it is the assignee of a claim on an open book account owed by defendant Vardan Kyundibekyan to plaintiff’s assignor,Vortex Restoration, in the sum of $27,082.19.

The matter has been consolidated with a case in which defendants, as plaintiffs, allege that while they were insured by defendant Mid-Century Insurance Company, their property was damaged when unknown persons unlawfully entered the property, stealing plaintiffs’ personal belongings and causing water damage from the removal of copper plumbing from the premises. The Kyundibekyans allege that Mid-Century has refused to pay the benefits owed plaintiffs under the policy, and has engaged in insurance bad faith. (Evidently the collections action concerns sums owed to a company which, with the approval of Mid-Century, performed emergency water repair services at the premises).

ANALYSIS:
Further Responses to Document Demands
Here, the two motions seek from Vardan and Armine documents concerning their financial status for the period May 1, 2011 through January 1, 2013, including personal and business bank accounts, investment accounts, balances, deposits and withdrawals, bank statements, and federal income tax returns from 2008. Defendant also seeks from Vardan documents concerning the Victorville Dwelling, including mortgage payments, its condition and financing.

There is no dispute here that the requests seek private financial information of the Kyundibekyans. Defendant argues, however, that these documents are directly relevant in this matter because the insurer has good reason to suspect that the Kyundibekyans engaged in fraud in claiming $80,000 in losses of personal property from the residence. The argument is that the residence was only a part time residence, the majority of the items are those for which the Kyundibekyans were unable to produce receipts or documentation, and which they claimed had been purchased within the preceding year, and that the Kyundibekyans claimed income, combined with their recent spending of $90,000 in a downpayment on the Victorville Dwelling, suggest that they were experiencing financial difficulties at the time and so did not have the means to spend $80,000 on purchases and also had a motive to engage in fraud in connection with their claim.

Personal financial information comes within the zone of privacy protected by article I, section 1 of the California Constitution. Valley Bank of Nevada v. Superior Court (1975) 15 Cal.3d 652, 656.

“When an individual’s right of privacy in his financial affairs conflicts with the public need for discovery in litigation, the competing interests must be carefully balanced. Even where the balance weighs in favor of disclosure of private information, the scope of the discovery will be narrowly circumscribed; such an invasion of the right of privacy must be drawn with narrow specificity and is permitted only to the extent necessary for a fair resolution of the lawsuit.”
Moskowitz v. Superior Court (1982) 137 Cal.App.3d 313, 316.

When dealing with matters of private information, the following considerations should affect the exercise of the trial court’s discretion:
“. . . the purpose of the information sought,
the effect that disclosure will have on the parties and on the trial, the
nature of the objections urged by the party resisting disclosure, and ability of
the court to make an alternative order which may grant partial disclosure,
disclosure in another form, or disclosure only in the event that the party
seeking the information undertakes certain specified burdens which appear just
under the circumstances.
Valley Bank, at 658, quoting Greyhound Corp. v. Superior Court (1961) 56
Cal.2d 355, 382

Where private information is sought, the burden is on the party seeking discovery to show a particularized need for the information sought, that the information is directly relevant to the cause of action or defense. Britt v. Superior Court (1978) 20 Cal.3d 844, 859. The moving party must also show that the information sought is not available from other sources or through less intrusive means. Allen v. Superior Court (1984) 151 Cal.App.3d 447, 449.

Defendant cites Ram v. Infinity Select Insurance (2011 USDC N. D. Cal) 807 F.Supp.2d 843, a federal case applying California law, in which in granting a motion for summary judgment in favor of the insurer on the ground the insured had failed to cooperate in the investigation of his loss, rendering the insurance contract void, observing that “When an insured refuses to produce records and answer questions as to his financial condition, the insurer may suffer prejudice because it is unable to thoroughly investigate the claim and determine its proper course of action.” Ram, at 857. In connection with the case before it, involving a claim for theft of a vehicle, the court concluded:
“where an insured has reason to suspect fraud in relation to a theft claim, inquiries into the insured’s financial status are relevant and material, and a refusal to answer questions on that subject constitutes a material breach of the insurance contract.”
Ram, at 859.

The opposition argues that here the documents are not relevant, and are presumptively private.

Plaintiffs argue that in contrast to the cases relied upon by defendant, there is no evidence of wrongdoing or deception on the part of plaintiffs, shy of their inability to show documentary proof of some of their claimed losses, and that they have explained that the were unable to produce such proof because the receipts were in an item stolen during the burglary. They argue that a third person has pleaded guilty to the burglary, so they obviously were not involved in staging their claim, and that defendant has evidence that plaintiffs had been seen moving large amounts of furniture into the home prior to the break-in and were current on their mortgage payments.

The argument here is apparently not that plaintiffs were involved in the alleged break-in, but that they had motivation due to their financial circumstances to take advantage of the circumstances and inflate their claim and include items which were not actually taken from the house. In addition, as suggested in Ram, this may be a case where it can be argued that by making a claim under the policy, plaintiffs had essentially waived certain financial privacy rights pursuant to the obligation under the policy to cooperate in the investigation of claims made. While this is evidently not a case, as those relied upon, in which a policy obligation to cooperate or provide an examination under oath are at issue, it still appears that under the circumstances the financial condition of plaintiffs at the time of the break-in and their claim to the insurer is relevant to an issue in this matter.

The reply argues that the documents submitted with the opposition, including the document concerning the arrest for the burglary, reference a July 23, 2012 date when the burglary was reported to have occurred on August 11, 2012, itself giving rise to some suspicion concerning plaintiffs’ claim. The reply also attaches the police report in which plaintiffs reported only $20,500 worth of stolen items. It appears that the overall showing is sufficient to render discoverable (although perhaps not admissible) evidence concerning the general financial condition of plaintiffs at the time, which is sought fairly narrowly through these requests. The motion is therefore granted.

With respect to the tax returns, however (Request No. 30 as to each deponent), the standard is more rigid.

There is a recognized privacy privilege with respect to tax returns. Weingarten v. Superior Court (2002) 102 Cal.App.4th 268, 278.

Here, the moving papers fail to establish any intentional waiver of the privilege or recognized public policy which would be served here by requiring the disclosure of tax returns, particularly when providing the financial information otherwise sought may very well produce the information needed. The motion as to the tax returns is therefore denied.

Sanctions
Although the motion is granted, there was substantial justification for opposing it and withholding the documents which were presumptively private, and plaintiffs were reasonable in putting defendants to their proof with respect to the direct relevance of such documents, particularly in the face of the break-in not being a set up by these parties. No sanctions shall be awarded.

Plaintiffs request sanctions for failure to meet and confer, but it appears there was sufficient meet and confer prior to this motion being filed, and the parties had simply reached an impasse. No sanctions shall be awarded.

Quash Subpoenas
The subpoenas here seek financial information from two banks. Again, there is no dispute that the information includes private financial information, presumptively protected, and with respect to the subpoenas to third parties, there is no showing here that the information is not available through less intrusive means, such as by obtaining it directly from plaintiffs. The motions to quash the subpoenas are therefore granted without prejudice in light of the granting of the motion to compel further documents to be produced at deposition. If plaintiffs do not satisfactorily produce the subject documents or information, and defendant can establish that it has been unable to obtain the information through less intrusive means, these subpoenas may become appropriate.

Both sides also request sanctions in connection with these motions.

Again, the motions here were not made or opposed in bad faith, but pursuant to a genuine dispute, and although defendants probably should have first pursued the documents from plaintiffs directly before serving the subpoenas, at the time there was a trial date closely approaching in July, and plaintiffs were obviously not voluntarily producing the documents. Under the circumstances, no sanctions shall be awarded.