Case Name: Ron Shulman, et al. v. County of Santa Clara, et al.

Case No.: 17CV317089

Motion to Compel County of Santa Clara’s Further Responses to Plaintiff’s Notice and Demand to Inspect Documents and Things Under Code of Civil Procedure § 2031.010(b)

Factual and Procedural Background

From 1995 to 2013, plaintiffs Ron Shulman and Ellen Shulman (“Shulmans”) owned property located at 1459 Hamilton Avenue in Palo Alto (“Original Residence”). (First Amended Complaint (“FAC”), ¶1.) The Shulmans are the current owners of 95 Mount Vernon Lane in Atherton (“Replacement Residence”). (Id.)

Defendant RFBPO LLC (“LLC”) purchased the Original Residence on October 8, 2013 for $14 million dollars. (FAC, ¶¶4 and 9.) Defendant Santa Clara County Assessor’s Office assessed the Original Residence value at $4.86 million dollars. (FAC, ¶4.) LLC is controlled and/or owned by Mark Zuckerberg (“Zuckerberg”), founder of Facebook. (FAC, ¶9.)

On October 25, 2013, the Shulmans purchased the Replacement Residence and made renovations which were completed in September 2015. (FAC, ¶10.) On October 25, 2016, the Shulmans filed a claim in San Mateo County under Proposition 90 for persons over 55 years old for transfer of the base year value of the Original Residence in Santa Clara County to their Replacement Residence in San Mateo County. (FAC, ¶11.)

Revenue and Taxation Code section 69.5 provides the Shulmans are allowed to transfer the base year value of their original residence to their replacement residence if two conditions are met: (1) the replacement residence is constructed within the second year following the date of sale of the original residence, and (2) the “full cash value” of the replacement residence does not exceed 110% of the “full cash value” of the original residence at the time of sale. (FAC, ¶11.) There is no dispute plaintiffs met the first condition. (Id.)

In a letter dated December 20, 2016, San Mateo County denied the Shulmans claim for base year value transfer. (FAC, ¶12.) San Mateo County’s denial was based solely on the Santa Clara County Assessor’s determination that the 2014 fair market value of the Original Residence was $4.86 million. (FAC, ¶13.) The Shulmans did not receive actual notice of Santa Clara County’s assessment at the time it was made. (Id.)

The Santa Clara County Assessor ignored the actual sales price of the Original Residence and erroneously undervalued the Original Residence. (FAC, ¶14.) The Original Residence is adjacent to Zuckerberg’s home. (FAC, ¶15.) LLC had plans to demolish the Original Residence and other residences adjacent to Zuckerberg’s home in order to create a private compound for Zuckerberg. (Id.)

In 2009, the Shulmans completed an extensive remodel of the Original Residence at a cost of approximately $3 million, yet the Santa Clara County Assessor valued the improvements at only $660,000. (Id.) Zuckerberg’s entities purchased other residences adjacent to Zuckerberg’s home around the same time as LLC’s purchase of the Original Residence and for similar sums ($10 million and $14.5 million) but all were assessed at a small fraction of the actual purchase price despite being different in size and condition. (Id.)

On February 3, 2017, the Shulmans filed an assessment appeal application in San Mateo County challenging the denial of their claim for base year value transfer pursuant to Proposition 90. (FAC, ¶19.) In a letter decision dated August 30, 2017, the San Mateo County Assessment Appeals Board ultimately determined it did not have jurisdiction to determine the value of [plaintiff Shulmans’] original residence located at 1459 Hamilton Avenue in Palo Alto other than as determined by the Santa Clara County Assessor. (FAC, ¶20.)

On October 10, 2017, the Shulmans filed an action against defendant County of Santa Clara (“County”). The complaint asserted a single cause of action entitled, “SANTA CLARA COUNTY ASSESSOR ERRED IN EXERCISE OF JUDGMENT AS TO THE ASSESSED VALUE OF THE ORIGINAL RESIDENCE.”

On December 29, 2017, the Shulmans filed the operative first amended complaint (“FAC”) adding LLC as a defendant, but otherwise asserting the same cause of action.

On February 21, 2018, defendant County and LLC both filed their respective answers to the Shulmans’ FAC.

Discovery Dispute

On November 6, 2017, the Shulmans served defendant County with a Notice and Demand to Inspect Documents and Things Under Code of Civil Procedure § 2031.010(b) (“RPD”). The Shulmans’ RPD sought “Any and all DOCUMENTS and COMMUNICATIONS relating to the assessment of the real property located at” 1459 Hamilton Avenue [Original Residence], 1451 Hamilton Avenue, and 1462 Edgewood Drive in Palo Alto.

On December 18, 2017, County served the Shulmans’ with a response to RPD.

The Shulmans found County’s response to RPD deficient and improper and on January 22, 2018, the Shulmans’ counsel sent County’s counsel a meet and confer letter. County’s counsel responded on January 25, 2018 standing firm on their objections but offering to contact the current owners of the three properties that are the subject of the RPD and give them the option to waive their privacy rights. The current owners all declined to waive their rights.

On April 17, 2018, the Shulmans filed the motion now before the court, a motion to compel County’s further responses to RPD.

I. Plaintiff Shulmans’ motion to compel defendant County’s further responses to RPD is GRANTED.

Upon receipt of a response to a demand for inspection, including requests for the production of documents, the demanding party may move for an order compelling further response to the demand if the demanding party deems that any of the following apply:

1. A statement of compliance with the demand is incomplete.
2. A representation of inability to comply is inadequate, incomplete, or evasive.
3. An objection in the response is without merit or too general.

(Code Civ. Proc., §2031.310, subd. (a)(1) – (3).)

A. Meet and confer.

“The motion shall be accompanied by a meet and confer declaration under Section 2016.040.” (Code Civ. Proc., §2031.310, subd. (b)(2).) “A meet and confer declaration in support of a motion shall state facts showing a reasonable and good faith attempt at an informal resolution of each issue presented by the motion.” (Code Civ. Proc., §2016.040.) A reasonable and good faith attempt at informal resolution requires that the parties present the merits of their respective positions with candor, specificity, and support. (Townsend v. Super. Ct. (1998) 61 Cal.App.4th 1431, 1435, 1439.) The level of effort at informal resolution which satisfies the “reasonable and good faith attempt” standard depends upon the circumstances of the case. (Obregon v. Super. Ct. (1998) 67 Cal.App.4th 424, 431.)

As a preliminary matter, defendant County contends the Shulmans did not adequately meet and confer in advance of the filing of this motion because the Shulmans raise arguments in their motion to compel that they did not raise during the meet and confer process. In reply, the Shulmans’ counsel asserts she raised multiple arguments during the meet and confer process with County’s counsel but that County refused to adjust its position. However, the Shulmans offer no evidentiary basis for their factual assertion in reply.

Although the parties could have met and conferred further and while it is always the court’s preference for more, rather than less, informal efforts at resolution, the court finds the Shulmans made a reasonable and good faith attempt. The court will reach the merits of the Shulmans’ motion.

B. Good cause/ relevance/ jurisdiction.

The motion for order compelling further responses “shall set forth specific facts showing good cause justifying the discovery sought by the inspection demand.” (Code Civ. Proc., §2031.310, subd. (b)(1); see also Code Civ. Proc., §2025.450, subd. (b)(1); Kirkland v. Sup. Ct. (2002) 95 Cal.App.4th 92, 98 (Kirkland).) To establish “good cause,” the burden is on the moving party to show both relevance to the subject matter (e.g., how the information in the documents would tend to prove or disprove some issue in the case) and specific facts justifying discovery (e.g., why such information is necessary for trial preparation or to prevent surprise at trial). (Glenfed Develop. Corp. v. Sup. Ct. (1997) 53 Cal.4th 1113, 1117.) Where the moving party establishes “good cause,” the burden shifts to the responding party to justify its objections. (Kirkland, supra, 95 Cal.App.4th at p. 98.)

The Shulmans contend good cause exists for production of assessment records related to the Original Residence and neighboring residences because the issue in this case is whether County erred in assessing the Original Residence (and neighboring residence) following their sale to LLC and other entities controlled by Zuckerberg. The Shulmans contend the records will reveal what information the County relied upon in making its determination of reassessed value and from this, the Shulmans will be able to demonstrate whether and how the County erred in assessing the Original Residence.

In opposition, County does not deny the requested documents would be relevant to a determination of the propriety of the assessment. Instead, County contends the information is not relevant because the court lacks jurisdiction to grant the relief that the Shulmans seek, i.e., the court cannot make a determination of assessed value. County relies upon Plaza Hollister Ltd. Partnership v. County of San Benito (1999) 72 Cal.App.4th 1, 23 (Plaza) where the court wrote, “The county boards of equalization, rather than the courts, are the proper tribunal for exercising judgment on valuation questions concerning individual assessments on the local roll.” Yet, the court in Plaza recognized, “when the taxpayer challenges the validity of the valuation method itself, the trial judge is faced with a question of law. [Citations.] That question, stated in terms of the more modern authorities discussed above, is whether the challenged method of valuation is arbitrary, in excess of discretion, or in violation of the standards prescribed by law.” (Plaza, supra, 72 Cal.App.4th at p. 24.) “Accordingly, when reviewing an equalization determination properly before it in a refund action, a court may correct an assessment and grant a tax refund if value is calculable as a matter of law without remanding to the county board of equalization.” (Ibid.) “However, where a judgment must still be exercised as to value, a remand to the local board of equalization is required.” (Ibid.)

The relief sought by the Shulmans in their FAC is made in the alternative. The Shulmans ask this court to correct the assessment value of the Original Residence. (See FAC, p. 10, lines 12 – 15.) Alternatively, the Shulmans ask that the court “remand the matter with specific instructions to the Assessor to correct its error.” (See FAC, p. 10, lines 15 – 17.) In their FAC, the Shulmans challenge the validity of the valuation method which, as stated above, is a question of law. If the valuation method is determined to be invalid, the final determination of value may have to be decided by the local board of equalization, but the court is not precluded from determining the validity of the valuation method in the first instance.

C. Revenue and Taxation Code section 408.

County argues further that the documents being sought are, by statute, confidential and not subject to public inspection. County cites Revenue & Taxation Code section 408, subdivision (a) which states, in relevant part, “Except as otherwise provided in subdivisions (b), (c), (d), (e), and (g), any information and records in the assessor’s office that are not required by law to be kept or prepared by the assessor … are not public documents and shall not be open to public inspection.”

Section 408 is found in Part 2 of Division 1 of the Revenue and Taxation Code. Chapter 3 of this part is entitled ‘Assessment Generally.’ These portions of the code are concerned primarily with valuation principles to be observed by the assessor in making his appraisals [f]or purposes of preparing the assessment roll. Thus, section 408 is intended to outline the rights of the taxpayer and the assessor with respect to the information used by the assessor for these purposes. (In general, see Ehrman and Flavin, Taxing California Property, ss 39, 267, 268; 22 Hast.L.J. 1.)

(Henderson v. Bettis (1975) 53 Cal.App.3d 486, 491–492 (Henderson).)

“[S]ection 408 of the Revenue and Taxation Code … does nothing more than set up a procedure affording the taxpayer access to information relating to the appraisal and assessment of his property.” (Henderson, supra, 53 Cal.App.3d at p. 495.)

In effect, the Shulmans are seeking information relating to the appraisal and assessment of a property they previously owned and properties now owned by third parties. This implicates the third parties’ right to privacy. The right of privacy established by the California Constitution protects an individual’s “reasonable expectation of privacy against a serious invasion.” (Pioneer Electronics (USA), Inc. v. Superior Court (2007) 40 Cal.4th 360, 370 (Pioneer), citing Hill v. National Collegiate Athletic Assn. (1994) 7 Cal.4th 1, 40.) Where a serious invasion of a reasonable expectation of privacy is shown, the proponent of discovery must demonstrate that information sought is “directly relevant” to a claim or defense, and “essential to the fair resolution of the lawsuit.” (Britt v. Superior Court (1978) 20 Cal.3d 844, 859; Harris v. Superior Court (1992) 3 Cal.App.4th 661, 665.) If direct relevance is shown, the court must “carefully balance” the right of privacy, on the one hand, and the right of civil litigants to discover relevant facts, on the other. (Valley Bank of Nevada v. Superior Court (1975) 15 Cal.3d 652, 657; see also Pioneer, supra, 40 Cal.4th at p. 371.)

The court will assume that third parties have a right to privacy in information regarding the appraisal and assessment of their property and the discovery being sought is a serious invasion of that right to privacy. As discussed above, the Shulmans have adequately demonstrated to this court that the information being sought is directly relevant and essential to their claim that County erred in assessing the Original Residence. As such, the court must carefully balance the third party owner’s right to privacy and the right of the Shulmans to obtain relevant facts. On balance, the court finds the balance lies in favor of allowing the Shulmans access to the information being sought.

“[T]he constitutional right to privacy is not absolute. It may be outweighed by supervening concerns. The state has enough of an interest in discovering the truth in legal proceedings, that it may compel disclosure of confidential material.” (Palay v. Superior Court (1993) 18 Cal.App.4th 919, 933; internal citations omitted.) “Even sensitive and personal information may be ordered disclosed if it is shown to be ‘directly relevant’ and ‘essential to a fair determination’ of the action.” (Weil & Brown et al., CAL. PRAC. GUIDE: CIV. PROC. BEFORE TRIAL (The Rutter Group 2018) ¶8:326, pp. 8C-116 to 8C-117 citing Alch v. Superior Court (2008) 165 Cal.App.4th 1412, 1431 – 1432.)

Accordingly, plaintiff Shulmans’ motion to compel County of Santa Clara’s further responses to plaintiff’s Notice and Demand to Inspect Documents and Things Under Code of Civil Procedure § 2031.010(b) is GRANTED. Defendant County shall provide a verified further response, without objection, to plaintiff Shulmans’ RPD and shall produce documents responsive thereto within 30 calendar days from notice of entry of order. Any responsive documents produced by defendant County shall be subject to a protective order.