Prospect Mortgage, LLC v. David Shumard, et al.		CASE NO. 112CV231227
DATE: 25 July 2014	TIME: 9:00	LINE NUMBER: 5

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 Thursday 24 July 2014.  Please specify the issue to be contested when calling the Court and counsel.

On 25 July 2014, the following motions were argued and submitted:

(1) the motion of Defendants David Shumard (“David”), American Financial Network, Inc. (“AFN”), Jerry Shumard (“Jerry”), and John Telesco (“Telesco”) (collectively, “Defendants”) to compel Steven Herbert (“Herbert”) to produce documents and for monetary sanctions,

(2) Defendants’ motion to compel Pollie Barnes (“Barnes”) to produce documents and for monetary sanctions, and

(3) Defendants’ motion to compel Julie Chroust (“Chroust”) to produce documents and for monetary sanctions. Plaintiff filed a formal consolidated opposition to Defendants’ motions to compel.

Statement of Facts

This action arises from an employment dispute between David and Prospect, a residential retail lender. From January 2010 to November 2011, David served as Prospect’s Branch Manager for its San Jose office, then as District Manager for its San Jose, Salinas and Fresno offices. As a term and condition of his employment, David agreed that for a period of 18 months after the termination of his employment he would not engage in the solicitation of Propsect’s employees. In addition, David agreed that he would not disclose any of Prospect’s confidential information both during and after his employment.

On 15 November 2011, David resigned from his employment with Prospect and joined AFN, one of Prospect’s direct competitors. Prospect alleges that David has solicited at least 18 Prospect employees to leave their employment, disclosed its confidential information, and disparaged it in a public forum.

In its operative first amended complaint, Prospect asserts six causes of action against David and AFN for (1) breach of contract, (2) breach of the duty of loyalty, (3) breach of fiduciary duty, (4) interference with contractual relations, (5) interference with economic advantage, and (6) violation of Business and Professions Code section 17200.

David, Jerry and Telesco filed a cross-complaint against Prospect. They allege that, while employed at Prospect, they discovered that Prospect was intentionally violating a number of federal and state laws. Despite voicing their objections to these practices to management and the human resources department, the practices continued. To avoid complicity in Prospect’s unlawful conduct, on 15 November 2014, David and Telesco resigned from Prospect. David, Jerry and Telesco allege that, on that same day, Prospect terminated Jerry due to David’s complaints about its unlawful conduct. They assert two causes of action against Prospect for wrongful termination and constructive discharge in violation of public policy and unlawful business practices.

 

Discovery Dispute

On 9 January 2014, Defendants noticed the deposition of Prospect employees Barnes, Herbert and Chroust. Each notice of deposition included a request for the production of 13 separate categories of documents (“RPD”). Barnes, Herbert and Chroust served identical objections and substantive responses to the RPD.

On 24 February 2014, Herbert appeared for his deposition. With respect to the RPD, he provided Defendants with only a number of text messages. In addition, he testified that additional documents responsive to the demands may exist including emails, but he did not search for them and deletes his emails regularly.

The following day, 25 February 2014, Barnes and Chroust appeared for their depositions. Despite indicating that responsive documents might exist, both failed to produce any documents responsive to the RPD. Barnes further testified that she deletes her emails regularly.

On 11 and 12 April 2014, Defendants’ counsel sent a meet and confer letter to Prospect’s counsel concerning these deponents’ purported failure to produce all documents responsive to the RPD. He indicated that each deponent testified that additional responsive documents exist and requested that Prospect provide these documents immediately.

On 18 April 2014, the parties agreed to extend the deadline to file a motion to compel until 9 May 2014, in order to allow additional time to informally resolve the dispute.

On 24 April 2014, Prospect’s counsel sent a detailed letter in response. He indicated that requiring third-party deponents to search for documents is improper, the requests are overbroad, no good cause exists for the production of documents, and each deponent’s records are protected by the right to privacy.

On 1 May 2014, the parties agreed to extend the deadline to file a motion to compel until 6 June 2014. Despite further efforts to meet and confer, the parties were unable to informally resolve the dispute. Accordingly, on 5 June 2014, Defendants filed their motions to compel Barnes, Herbert, and Chroust to produce documents.

On 20 June 2014, Defendants filed an ex parte application to continue the hearing on the motions to compel to 25 July 2014, and the Court (Hon. Joseph Huber) granted the application.

On 14 July 2014, Prospect filed its consolidated opposition to the motions, and Defendants filed their reply on 18 July 2014.

Discussion

Defendants move to compel production of documents withheld at the depositions of Barnes, Herbert and Chroust. In particular, Defendants seek documents responsive to RPD Nos. 4-6 for each deponent.RPD No. 4 seeks all writings evidencing, concerning and/or relating to the compensation the deponent receives from his or her employment with Prospect.

RPD No. 5 seeks all writings evidencing, concerning, and/or relating to each deponent’s use of and/or the compensation derived from the use of the Accumulator and/or Concession Policy and/or Point Bank.

RPD No. 6 seeks all writings evidencing, concerning and/or relating to how the Accumulator and/or Concession Policy and/or Point Bank functions.

Prospect objected to each of these requests.

A. Nature of Motion

Defendants base their motions to compel production of documents on Code of Civil Procedure section 2025.450. That section provides, in pertinent part, that if after the service of a deposition notice a party to the action or an employee of a party to the action fails to appear for examination, or to proceed with it, or to produce for inspection any document, the party giving notice of the deposition may move for an order compelling the deponent’s attendance and testimony, and the production for inspection of any document described in the deposition notice.

In opposition, Prospect contends that Code of Civil Procedure section 2025.480, rather than section 2025.450, applies to the present motions. Prospect’s argument is persuasive.

Section 2025.480 provides that if a deponent fails to answer any question at a deposition or to produce any document under the deponent’s control, the party seeking discovery may move the court for an order compelling that answer or production. Section 2025.480 contemplates a deponent’s appearance at the deposition, followed by either a refusal to answer a question or a failure to produce a requested document. (See Unzipped Apparel, LLC v. Bader (2007) 156 Cal.App.4th 123, 133 [analogizing motion to compel pursuant to section 2025.480 to motion to compel further responses to requests for production of documents].)

In contrast, section 2025.450 applies only when a deponent completely fails to appear and, consequently, does not produce the documents described in the deposition notice. (See Code Civ. Proc., § 2025.450, subd. (a) [“the party giving notice may move for an order compelling the deponent’s attendance and testimony, and the production for inspection of any document, electronically stored information, or tangible thing described in the deposition notice.”].)

Here, Barnes, Herbert and Chroust each appeared for their depositions, at which time they purportedly failed to produce all requested documents. As these deponents did appear for their depositions, the motions to compel production of documents are subject to the requirements of Code of Civil Procedure section 2025.480, rather than section 2025.450.

               B. Defective Service of Motion

As a threshold matter, Prospect contends that Defendants’ motions should be denied because they failed to serve Barnes, Herbert and Chroust with notice of the motions.

Pursuant to Code of Civil Procedure section 2025.480, subdivision (c), a party who files a motion to compel the production of documents under the deponent’s control that is specified in the deposition notice  must give notice of the motion to all parties and to the deponent either orally at the deposition or by subsequent service in writing. California Rules of Court, rule 3.1346 further requires that a written notice and all moving papers supporting a motion to compel production of a document from a nonparty deponent must be personally served on the nonparty deponent unless he or she agrees to service by mail.

Here, Defendants’ proof of service of the motions and the supporting papers does not list Barnes, Herbert or Chroust, and there is no other evidence indicating that Barnes, Herbert or Chroust were served with the written notice of the motions. Thus, it appears that Defendants did not comply with the requirements of section 2025.480, subdivision (c) and rule 3.1346.

In response, Defendants first contend that the motions were properly served because Barnes, Herbert and Chroust are party-affiliated witnesses. This argument is not persuasive. There is no party-affiliated witness exception to either Code of Civil Procedure section 2025.480 or California Rules of Court, rule 3.1346. Service of a notice of deposition to a party compels that party to produce an “officer, director, managing agent, or employee of that party” for deposition. (See Code Civ. Proc., § 2025.280.) The service of the notice of deposition does not provide the court with jurisdiction over a party-affiliated witness. (See Weil&Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2014) ¶ 8:519, p. 8E-36 [“The requirement that an ‘officer, director, managing agent or employee’ appear for deposition without the necessity of subpoena does not mean that such persons are subject to the court’s personal jurisdiction. Rather, it means that it is the responsibility of the party to produce such persons for deposition (or risk …sanctions…)”].) Thus, the deponents’ status as party-affiliated witnesses does not exempt Defendants from the service requirements of section 2025.480 and rule 3.1346.

Second, Defendants argue that the service of the motions on the law firm of Davis Wright Tremaine LLP, Prospect’s counsel, was proper under Code of Civil Procedure section 1015 and California Rules of Court, rule 1.12. This argument lacks merit. Code of Civil Procedure section 1015 states, in pertinent part, that “where a party has an attorney in the action or proceeding, the service of papers, when required, must be upon the attorney instead of the party….” In turn, California Rules of Court, rule 1.21(a) provides that “[w]henever a document is required to be served on a party, the service must be made on the party’s attorney if the party is represented.”  This authority expressly applies only to parties to the action, not party-affiliated witnesses. Thus, section 1015 and rule 1.12 do not render Defendants’ service of the motion on Prospect’s attorneys effective relative to the deponents.

Finally, the lack of notice to Barnes, Herbert and Chroust implicates a due process issue because “fundamental principles of due process call for those with an interest in the matter to have notice and the opportunity to be heard.” (Monarch Healthcare v. Superior Court (2000) 78 Cal.App.4th 1282, 1286.) Here, Defendants seek significant monetary sanctions against Barnes ($5,070), Herbert ($5,070) and Chroust ($3,070). As such, they have a personal interest in the matter and must be permitted to have notice and an opportunity to be heard.

Accordingly, Defendants’ motions to compel production of documents are CONTINUED to 29 August 2014, at 9:00 AM, in Department 19, so that Barnes, Herbert and Chroust may be afforded with notice.

Conclusion and Order

Defendants’ motions to compel Barnes, Herbert and Chroust to produce documents attendant to their notices of deposition are CONTINUED to 29 August 2014, at 9:00 AM, in Department 19, to afford Defendants the opportunity to serve Barnes, Herbert and Chroust with the notices of motion and supporting papers.