Case Name: Xinying Chu, et al. v. Bethany Liou, et al.
Case No.: 19CV342173

This action arises from a dispute between members of a partnership, Defendant GCRC Cupertino Fund (“GCRC”). Plaintiffs Xinying Chu, et al. (“Plaintiffs”) are a group of over forty limited partners of GCRC who believe that partnership funds have been misused and have sued Defendants GCRC, Golden California Regional Center LLC (the General Partner of GCRC) and Bethany Liou (the manager of the General Partner). The Complaint, filed on January 25, 2019, states claims for (1) Breach of Fiduciary Duty (against Defendants Golden California and Liou as manager); (2) Conversion (against Defendants Golden California and Liou as manager); (3) Breach of Statutory Books-and-Records Obligation (against Defendants Golden California and GCRC), and; (4) Application for Judicial Dissolution under §15908.02 of the Uniform Limited Partnership Act of 2008.

Currently before the Court is Defendants’ motion to quash business records subpoenas issued by Plaintiffs to Bank of America and US Trust seeking the production of account records of Defendants GCRC and Golden California, as well as certain account records of Defendant Liou. Plaintiffs’ original subpoenas were issued in March 2019. After Defendants objected and the parties met and conferred on the issue, Plaintiffs issued a second set of subpoenas on April 16, 2019, somewhat narrowed as a result of the parties’ discussions. Defendants also found these subpoenas objectionable and this motion followed. Defendants ask the Court to quash both subpoenas in their entirety and “request a protective order to address the subpoenas.” (Notice of Motion and Motion at p. 2:5-9.) Nowhere in their moving papers do Defendants describe the requested protective order.

The subpoenas at issue (attached as exhibit 6 to the declaration of Defense Counsel Peter Bales) seek the following records:

From U.S. Trust: “1. All account opening documents relating any account in the name of GCRC Cupertino Fund, LP, including Account No. [omitted]. 2. For the period from January 1, 2016 through the present, all account statements and sub-accounts statements relating to any account in the name of GCRC Cupertino Fund, LP, including Account No. [ ]. 3. For the period from January 1, 2016 though the present, any and all documents concerning the source or sources of all depositions or other additions to any account in the name of GCRC Cupertino Fund, LP, including Account No. [ ], including without limitation any and all information concerning the institution, account number and title holder of the account or accounts which were the source or sources of said deposits or additions. 4. For the period from January 1, 2016 through the present, any and all documents concerning any and all checks or other subtractions from any account in the name of GCRC Cupertino Fund, LP, including Account No. [ ], including without limitation copies of all checks issued against said accounts. 5. For the period from January 1, 2016 through the present, all account statements and sub-account statements relating to any account in the name of Bethany Liou into which funds have been transferred from an account in the name of GCRC Cupertino Fund, LP, including Account No. [ ].” (Brackets added.)

From Bank of America: “1. Account opening documents relating to any account in the name of GCRC Cupertino Fund, LP, including Account No. [omitted]. 2. For the period from January 1, 2016 through the present, all account statements and sub-account statements relating to any account in the name of GCRC Cupertino Fund, LP, including Account No. [ ]. 3. For the period from January 1, 2016 though the present, any and all documents concerning the source or sources of all deposits or other additions to any account in the name of GCRC Cupertino Fund, LP, including Account No. [ ], including without limitation any and all information concerning the institution, account number and title holder of the account or accounts which were the source or sources of said deposits or additions. 4. For the period from January 1, 2016 through the present, any and all documents concerning any and all checks or other subtractions from any account in the name of GCRC Cupertino Fund, LP, including Account No. [ ], including without limitation copies of all checks issued against said accounts. 5. Account opening documents relating to the account in the name of Golden California Regional Center, LLC, Account No. [omitted]. 6. For the period from January 1, 2016 through the present, all account statements and sub-account statements relating to the account in the name of Golden California Regional Center, LLC, Account No. [ ]. 7. For the period from January 1, 2016 through the present, any and all documents concerning the source or sources of all deposits or other additions to the account in the name of Golden California Regional Center, LLC, Account No. [ ], including without limitation any and all information concerning the institution, account number and title holder of the account or accounts which were the source or sources of said deposits or additions. 8. For the period from January 1, 2016 though the present, any and all documents concerning any and all checks or other subtractions from the account in the name of Golden California Regional Center, LLC, Account no. [ ], including without limitation copies of all checks issued against said accounts. 9. For the period from January 1, 2016 through the present, all account statements and sub-account statements relating to any account in the name of Bethany Liou into which funds have been transferred from an account in the name of GCRC Cupertino Fund, LP, including Account No. [ ].” (Brackets added.)

Motion to Quash business record subpoenas
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.” (Code of Civil Procedure (“CCP”) § 1987.1(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.) CCP §1987.1 is silent as to which party bears the burden of persuasion. However, case law indicates that the party objecting to the discovery (i.e., the party moving to quash the subpoena) bears the burden of explaining and justifying its objections. (See Fairmont Ins. Co. v. Super. Ct. (Stendell) (2000) 22 Cal.4th 245, 255.)

The right to privacy protects an individual’s “reasonable expectation of privacy against a serious invasion.” (Pioneer Electronics, Inc. v. Sup. Ct. (2007) 40 Cal.4th 360, 370.) A party seeking to prevent discovery on the basis of the right of privacy must demonstrate that a legally protected privacy interest exists, there is a reasonable expectation of privacy under the particular circumstances, and the disclosure of the information would constitute a serious invasion of that interest. (Alch v. Sup. Ct. (2008) 165 Cal.App.4th 1412, 1423 (Alch).) 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 an issue in the litigation. (Britt v. Sup. Ct. (1978) 20 Cal.3d 844, 850.) Once direct relevance has been shown, the proponent of discovery must demonstrate that the information sought is not available through less intrusive means. (Allen v. Sup. Ct. (1984) 151 Cal.App.3d 447, 449.) In order to fairly balance the competing interests, courts must weigh the party’s privacy interest against the requesting party’s need for the information, the state’s interest, if any, and any other relevant interests presented. (Alch, supra, 165 Cal.App.4th at pp. 1432-1434.)

Here the primary concern is financial privacy as the records sought are bank records. It is well established that an individual’s bank records are protected by a right of privacy. (See Fortunato v. Super. Ct. (Ingrassia) (2003) 114 Cal.App.4th 475, 480-481 [stating that “[a] bank customer reasonably expects the bank to maintain the confidentiality of private financial matters”; also stating that “a court faced with a motion for protective order should carefully balance ‘the right of civil litigants to discover relevant facts, on the one hand, with the right of bank customers to maintain reasonable privacy regarding their financial affairs, on the other’”].)

However, the right of privacy contained in Article I, Section 1 of the California Constitution is limited to “people,” meaning natural persons. (Roberts v. Gulf Oil Corp. (1983) 147 Cal.App.3d 770, 791.) Corporations and other business entities enjoy a general right of privacy, but do not enjoy the level of protection afforded individuals. (Id., at p. 795.) The business entity’s right to privacy must be balanced against the relevancy of the information sought, with any doubts resolved in favor of allowing discovery. (Hecht, Solberg, Robinson, Goldberg & Bagley v. Sup. Ct. (2006) 137 Cal.App.4th 579, 595; see also Ameri-Medical Corp. v. Workers’ Comp. Appeals Bd. (1996) 42 Cal.App.4th 1260, 1288-1289.)

Defendants’ motion to quash is GRANTED in part and DENIED in part as follows:

As an initial matter the Court finds Defendants’ argument that the subpoenas were issued in violation of CCP §2025.210’s 20-day “hold” unpersuasive as Defendants had generally appeared before the subpoenas were issued. A general appearance occurs where a party, either directly or through counsel, participates in some act which constitutes a recognition of the Court’s authority (CCP §1014). The list of acts that constitute a general appearance contained in CCP §1014 is illustrative, not exhaustive. “A general appearance is not necessarily a formal, technical step or act. The term is applied to various acts which, under established principles of procedure, are deemed to confer jurisdiction of the person. The underlying theory is that a defendant makes a general appearance when he takes any part in the action or proceeding.” (2 Witkin, Cal. Procedure (5th ed., 2008) Jurisdiction, §192, pp. 799-800.)

The submission by the parties of a joint stipulation for a preliminary injunction in early March 2019 (see exhibit 2 to the declaration of Plaintiffs’ Counsel Robert Lu) —a stipulation signed by Defendant Bethany Liou on March 7, 2019 and clearly drafted with the full participation of Defense Counsel (see exhibits 3, 3A, 3B and 3C to the Robert Lu Declaration)—constituted a general appearance by Defendants that occurred before they filed their motion to quash service of summons on March 20, 2019 (a motion that was later taken off calendar) and before the subpoenas were issued. The fact that the stipulation was initially rejected for filing by the Clerk’s office because Defendants’ filing fees had not yet been paid and that the fact that the Court did not sign the submitted stipulation until March 29, 2019 does not alter the fact that the joint submission of the stipulation was a general appearance. Defendants undeniably participated in an act that recognized the Court’s authority, a joint request that the Court impose an enforceable preliminary injunction, before they filed a motion to quash service and before these subpoenas were issued.

Defendants’ argument that there was insufficient notice to consumers is also unpersuasive as neither GCRC nor Golden California Regional Center qualify as “consumers” as defined by CCP §1985.3(a)(2) and Defendant Liou was served as a party defendant, and is not a non-party individual “consumer” in these circumstances.

To the extent the subpoenas seek the financial records of the business entity Defendants GCRC and Golden California Regional Center (items 1-4 on the U.S. Trust subpoena and items 1-8 on the Bank of America subpoena) the motion to quash is DENIED. The information sought is clearly relevant and Plaintiffs, as members of the partnership, have a right to investigate GCRC’s finances. As noted above, a business entity’s right to privacy must be balanced against the relevancy of the information sought, with any doubts resolved in favor of allowing the discovery. Here, Defendants have not met their burden to substantiate their very generally stated objections that, as directed to these business entity defendants, the subpoenas are “improperly overbroad” or seek “irrelevant” information.

To the extent the subpoenas seek the financial records of Defendant Liou (item 5 on the U.S. Trust subpoena and item 9 on the Bank of America subpoena) the motion to quash is GRANTED. While the information sought does appear to be directly relevant, Defendant Liou has a much stronger right to privacy, and the Court is not convinced that, as directed to her, the information sought by the subpoenas is not available through less intrusive means, as Plaintiff Jue Wang has now propounded requests for production of documents on Defendant Liou seeking substantially the same information. (See exhibit C to the declaration of Defense Counsel David Adams, submitted with Defendants’ Reply.) This portion of the order does not foreclose Plaintiffs from issuing business records subpoenas relating to Defendant Liou at some later date if she does not cooperate with reasonable discovery efforts.

Monetary Sanctions
In making an order under CCP § 1987.1 regarding a motion to quash, a court has the discretion to “award the amount of the reasonable expenses incurred in making or opposing the motion, including reasonable attorney’s fees, if the court finds 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(a)

Both sides request monetary sanctions. Both requests are DENIED as the Court declines to exercise its discretion to impose sanctions on either side.