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Tentative Ruling
Judge Colleen Sterne
Department 5 SB-Anacapa
1100 Anacapa Street P.O. Box 21107 Santa Barbara, CA 93121-1107


Wayne Ni vs Peter Mckee et al

Case No: 1415328
Hearing Date: Mon Jul 08, 2013 9:30

Nature of Proceedings: Demurrer; Motion for Protective Order/Motion to Quash

Santa Barbara County Superior Court Department 5 Judge Colleen K. Sterne Tentative Ruling July 8, 2013 Case: Wayne W. Ni, etc., v. Peter J. McKee, et al., Case No. 1415328 Motion: (1) Demurrer of Defendants to First Amended Complaint (2) Motion of Plaintiff Wayne W. Ni for a Protective Order and to Quash Deposition Notice Tentative Ruling: (1) The demurrer of defendants is sustained with leave to amend as (a) to the first cause of action to the extent the first cause of action includes individual (i.e., not derivative) claims of plaintiff Wayne Ni against defendants, and (b) to the third cause of action. In all other respects the demurrer is overruled. Ni shall file and serve his second amended complaint on or before July 23, 2013. (2) The motion of Wayne W. Ni for a protective order is denied. The parties are ordered to meet and confer as to the date for Ni’s deposition to commence. Defendants’ request for an award of monetary sanctions is denied. Discussion: (1) Demurrer As set forth in the First Amended Complaint (“FAC”): Defendant McKeeCom is a California corporation that produces and sells communication systems utilized by commercial crane manufacturers and operators. (FAC, ¶¶ 4, 10.) Until 2007, the sole shareholders, officers and directors of McKeeCom were defendants Peter J. McKee (“P. McKee”) and Shaun D. McKee (“S. McKee”). (FAC, ¶ 10.) (P. McKee is the father of S. McKee. (Ibid.) P. McKee and S. McKee are collectively referred to as the “McKees.”) In 2007 the McKees paid themselves base salaries of $220,000 each and gave themselves bonuses of $345,000 each. (Ibid.) In or around 2008, the McKees moved into plaintiff Wayne W. Ni’s neighborhood, and, aware of Ni’s prior business successes, asked Ni to join McKeeCom as its CFO. (FAC, ¶ 11.) The McKees promised Ni a 25 percent stake in McKeeCom. (Ibid.) Ni trusted them and based upon this promise agreed to join McKeeCom. (Ibid.) Ni and the McKees executed a written contract (the “Contract”) outlining Ni’s role as CFO and providing for Ni’s compensation, including base compensation, benefits, Ni’s receipt of a 25 percent stake in McKeeCom and Ni’s entitlement to 25 percent of any distributions to the shareholders/ owners. (FAC, ¶ 12.) Ni’s ownership of 25 percent of McKeeCom was also memorialized in two sets of McKeeCom minutes executed by the McKees. (Ibid.) Ni’s base pay for 2008, was $120,000; the McKees raised their base pay to $360,000 each. (FAC, ¶ 13.) In or around 2008, a third party offered to purchase McKeeCom for $5 million. (FAC, ¶ 14.) This offer was rejected as below fair market value. (Ibid.) At $5 million for McKeeCom, Ni’s 25 percent stake was worth $1.25 million. (Ibid.) After the $5 million offer was refused, Ni improved McKeeCom in several ways, making it more profitable and increasing its fair market value. (FAC, ¶ 15.) In or around early 2009, Ni discovered that the McKees had for years kept a second set of books which demonstrated that the McKees were diverting McKeeCom inventory and funds to the McKees personally. (FAC, ¶ 16.) The McKees’ diversion of inventory and funds affected Ni in that Ni was entitled to 25 percent of any distributions and the diversions lowered the value of McKeeCom as a whole. (Ibid.) Upon discovering this alternate accounting, Ni addressed it with P. McKee, who admitted the existence of the second set of books. (FAC, ¶ 17.) Soon after, Ni was terminated from McKeeCom. (Ibid.) When Ni was terminated, P. McKee stated that Ni had done a great job but had to be let go because of the downturn in the economy. (Ibid.) The McKees unsuccessfully attempted to intimidate Ni into relinquishing his stake in McKeeCom, but Ni continues to be the 25 percent owner of McKeeCom. (FAC, ¶ 18.) Ni has attempted to obtain an accounting of McKeeCom, but the McKees will not provide an accounting nor allow Ni access to the books and records. (FAC, ¶ 19.) The McKees will not pay Ni his share of distributions and refuse to communicate with Ni about McKeeCom. (Ibid.) The McKees have paid themselves dividends to the exclusion of Ni and paid themselves additional salaries as disguised dividends to the exclusion of Ni. (Ibid.) P. McKee has since engaged in a series of actions harassing and defaming Ni. (FAC, ¶¶ 20-28.) The McKees have looted McKeeCom and paid themselves with corporate funds which they deposited into their own personal bank accounts. (FAC, ¶ 29.) The McKees treated McKeeCom as their “alter ego” rather than as a separate entity. (Ibid.) Ni has not demanded that the board of directors of McKeeCom file a lawsuit on behalf of McKeeCom against the McKees because such an act would be futile in that the McKees would not file a lawsuit against themselves for looting McKeeCom. (FAC, ¶ 30.) Ni, then appearing in propria persona, filed his original complaint on January 18, 2013, asserting causes of action for: (1) breach of fiduciary duty; (2) conversion; (3) breach of contract; (4) harassment, defamation and intentional infliction of emotional distress; and (5) accounting. Defendants demurred to original complaint. The court sustained the demurrer with leave to amend as to first and third cause of action and as to the claim of defamation in the fourth cause of action, and otherwise overruled the demurrer. Ni, now represented by counsel, filed his FAC on May 9, 2013. The FAC asserts seven causes of action: (1) breach of fiduciary duty and aiding and abetting breach of fiduciary duty; (2) conversion and aiding and abetting conversion; (3) breach of contract; (4) intentional interference with contract; (5) accounting; (6) defamation; and (7) intentional infliction of emotional distress. Defendants demur to the FAC. Defendants assert that Ni has no standing to assert the first cause of action for breach of fiduciary duty, which may only be brought as a shareholder derivative action, that it does not allege sufficient facts, and that it is uncertain by improperly including a separate cause of action for aiding and abetting. Defendants assert that the separate cause of action for aiding and abetting breach of fiduciary duty and the second cause of action, including the claim for aiding and abetting, is defective for the same reason. Defendants assert that the third cause of action for breach of contract is insufficiently alleged and is uncertain. Ni opposes the demurrer, asserting that the causes of action are sufficiently stated. (2) Motion for Protective Order On May 20, 2013, attorney Michael P. Denver, counsel for Ni, received a voicemail message from defense counsel’s office inquiring as to the taking of Ni’s deposition in mid- June. (Denver decl., ¶ 5.) Denver reviewed this voicemail on May 21. Also on May 21, 2013, defendants served on Ni by mail a notice of deposition of Ni to take place on June 14. (Steponovich decl., exhibit C.) The notice of deposition states that it is being taken by all three defendants. (Ibid.) On the morning of May 22, Denver emailed attorney Michael Steponovich, Jr., counsel for defendants, explaining a potential conflict during the weeks of June 10 and June 17 and asking Steponovich to confirm authority to accept service for all defendants. (Denver decl., exhibit 1, p. 14.) Steponovich replied that he had already sent out a deposition notice on May 21; Steponovich also asked if Ni would waive a conflict of interest for Steponovich to represent both McKeeCom and the McKees so that Steponovich could accept service on behalf of McKeeCom. (Ibid.) The parties’ counsel engaged in a lengthy series of emails addressing this conflict issue as it relates to Ni’s assertion of both individual and derivative claims in the FAC. In an email dated May 29, Steponovich stated that there is no conflict for his representation of all defendants in defense of Ni’s personal claims and that no proper derivative complaint yet exists. (Denver decl., exhibit 1, p. 4.) Also on May 29, Steponovich served an amended notice of Ni’s deposition, still scheduled for June 14, but stating that the deposition is being taken only by the McKees. (Denver decl., exhibit 3.) On June 5, Denver sent a letter to Steponovich objecting to the deposition notice on the grounds that a conflict of interest exists by reason of Steponovich’s representation of all defendants in this action. (Denver decl., exhibit 5.) Also on June 5, Ni filed this motion for a protective order and to quash defendants’ deposition notice. The motion requests that the deposition of Ni not go forward until the conflict issue is resolved. Ni argues that if different counsel is brought in for McKeeCom, the different counsel would want another deposition of Ni. Defendants oppose the motion. Defendants argue that the FAC is not a derivative action, that no conflict now exists, and that defendants are entitled to take Ni’s deposition. Defendants request monetary sanctions be awarded against Ni in the amount of $5,425.00. Analysis: (1) Demurrer “We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed. [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.]” (Evans v. City of Berkeley (2006) 38 Cal.4th 1, 6, internal quotation marks omitted.) (A) Derivative Actions Ni’s first cause of action is for breach of fiduciary duty. The heading for the first cause of action states that it is brought by Ni and McKeeCom against all defendants. (FAC, at p. 6.) “[A] derivative suit is one in which the shareholder seeks ‘redress of the wrong to the corporation. [Citations.]’ [Citation.] Thus, an action ‘“is derivative, i.e., in the corporate right, if the gravamen of the complaint is injury to the corporation, or to the whole body of its stock and property without any severance or distribution among individual holders, or it seeks to recover assets for the corporation or to prevent the dissipation of its assets.” [Citations.]’ [Citation.] On the other hand, a direct or individual suit by a stockholder ‘“is a suit to enforce a right against the corporation which the stockholder possesses as an individual.” [Citation.]’ [Citation.] A direct (as opposed to a derivative) action is maintainable ‘only if the damages [are] not incidental to an injury to the corporation. [Citation.]’ [Citation.] And ‘“[t]he two actions are mutually exclusive: i.e., the right of action and recovery belongs to either the shareholders (direct action) or the corporation (derivative action).”’ [Citations.]” (Bader v. Anderson (2009) 179 Cal.App.4th 775, 793.) In ruling on the demurrer to the original complaint, the court found that the allegations of the complaint showed breaches of fiduciary duty by the McKees to McKeeCom but did not show breaches of fiduciary duty to Ni individually. The breaches alleged by Ni in the FAC are fundamentally that the McKees misappropriated McKeeCom property. (FAC, ¶ 34.) The harm from this type of breach is to McKeeCom; the harm to Ni is in the reduction in the proportionate value of his ownership of McKeeCom. As the court previously ruled, this type of breach would be addressable either as an action brought by McKeeCom itself or as an action brought derivatively on behalf of McKeeCom. “The management owes to the stockholders a duty to take proper steps to enforce all claims which the corporation may have. When it fails to perform this duty, the stockholders have a right to do so. Thus, although the corporation is made a defendant in a derivative suit, the corporation nevertheless is the real plaintiff and it alone benefits from the decree; the stockholders derive no benefit therefrom except the indirect benefit resulting from a realization upon the corporation’s assets.” (Jones v. H. F. Ahmanson & Co. (1969) 1 Cal.3d 93, 107.) In the FAC, Ni has asserted this claim of breach of fiduciary duty derivatively on behalf of McKeeCom. (FAC, ¶ 4.) Procedurally, this derivative action is brought by Ni as the stockholder plaintiff asserting the right of McKeeCom as nominal defendant. Ni has alleged the elements of a shareholder derivative action by him as a shareholder of record of McKeeCom against the McKees for their breach of fiduciary duties owed to McKeeCom. (See Corp. Code, § 800.) Defendants assert that Ni must bring this derivative claim in an action separate from his individual claims. In making this argument, defendants confuse the concept of a cause of action, i.e., violation of a primary right, with the concept of an action, i.e., a lawsuit. “Under the ‘primary right’ theory of pleading followed in California, a cause of action is based upon the injury suffered by a plaintiff, regardless of the particular legal theory or theories upon which plaintiff seeks redress. [Citation.] Where the complaint alleges a violation of different primary rights, it states different causes of action.” (Freidberg v. Cox (1987) 197 Cal.App.3d 381, 388.) Thus, as quoted above, a single injury arising out of a corporate transaction may give rise either to a cause of action in the corporation or to a cause of action in the individual, but not to both. The injury is to be contrasted with the transaction giving rise to the injury. “[T]he same facts regarding injury to the corporation may underlie a personal cause of action, such as intentional infliction of emotional distress, breach of contract, fraud, or defamation ….” (Nelson v. Anderson (1999) 72 Cal.App.4th 111, 124-125.) The difference is that the corporation may not assert a violation of a primary right of the individual and the individual may not assert a violation of a primary right of the corporation except by derivative action. Here, Ni argues that he asserts causes of action both personally and derivatively. Whether those causes of action may exist in the same action, i.e., in the same complaint, is a question of joinder of causes of action. The question of joinder of causes of action is resolved by statute: “A plaintiff who in a complaint, alone or with coplaintiffs, alleges a cause of action against one or more defendants may unite with such cause any other causes which he has either alone or with any coplaintiffs against any of such defendants.” (Code Civ. Proc., § 427.10, subd. (a).) Defendants appear to argue that Ni’s only claim in his first cause of action is an individual claim. This is incorrect. Ni has adequately alleged a derivative cause of action. Under Code of Civil Procedure section 427.10, subdivision (a), Ni may assert a derivative cause of action in the same complaint in the same lawsuit as personal claims. Thus, Ni’s derivative causes of action are not subject to demurrer merely by being brought in the same action as causes of action he asserts individually. (See Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 38 [“If the complaint states a cause of action under any theory, regardless of the title under which the factual basis for relief is stated, that aspect of the complaint is good against a demurrer.”].) (B) Aiding and Abetting Defendants also assert that Ni has improperly comingled a cause of action for aiding and abetting with the cause of action for breach of fiduciary duty. “California has adopted the common law rule for subjecting a defendant to liability for aiding and abetting a tort. ‘“Liability may … be imposed on one who aids and abets the commission of an intentional tort if the person (a) knows the other’s conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other to so act or (b) gives substantial assistance to the other in accomplishing a tortious result and the person’s own conduct, separately considered, constitutes a breach of duty to the third person.” [Citations.]’ [Citation.]” (Casey v. U.S. Bank Nat. Assn. (2005) 127 Cal.App.4th 1138, 1144.) The liability imposed for aiding and abetting is liability as a joint tortfeasor in the commission of the tort. (Howard v. Superior Court (1992) 2 Cal.App.4th 745, 749.) The first cause of action alleges that the McKees each breached their fiduciary duties and, alternatively, that each aided and abetted breaches by the other. (FAC, ¶ 33.) “California … law provide[s] for aiding and abetting liability when board directors are aware that a fellow board director has violated a fiduciary duty to the shareholders, and knowingly and substantially assist in that breach.” (Kruss v. Booth (2010) 185 Cal.App.4th 699, 729.) Because the function of aiding and abetting liability is create joint tortfeasor liability in a third party for the tortious conduct of another, standing to assert aiding and abetting liability is identical to standing to assert the underlying tort. Thus, Ni’s claims for aiding and abetting breaches of fiduciary duties owed by the McKees to McKeeCom must also be brought derivatively rather than individually. As discussed above, Ni has adequately alleged the first cause of action as a derivative action and therefore this additional basis for liability is not improperly asserted against the McKees. As discussed below, inclusion of separate claims, such as for aiding and abetting, under a single heading is organizationally unhelpful but is not a basis for a demurrer. Accordingly, defendants’ demurrer to the first cause of action will be overruled to the extent the first cause of action comprises Ni’s derivative action against defendants. (C) Individual Actions Although the first cause of action adequately alleges a derivative cause of action for breach of fiduciary duty against defendants, Ni also argues that he has asserted an individual claim for breach of fiduciary duty against defendants based upon defendants’ failure to communicate with Ni. (Opposition, at p. 4.) As discussed above, there is no legal impediment for a plaintiff to bring both individual claims and derivative claims in the same lawsuit. A practical problem exists, however, where a plaintiff combines allegations asserting multiple, separate “causes of action,” i.e., violations of primary rights, under a single heading labeled as a single “cause of action.” Generally speaking, each cause of action (usually further segregated as a count according to each unique legal theory of liability) should be separately identified, labeled and numbered. (Rules of Court, rule 2.112.) The rule requiring separate identification of causes of action serves multiple useful purposes throughout the litigation. However, since 1973, failing to separately state a cause of action has not been a basis for a demurrer. (See Stats. 1973, ch. 828, § 2, p. 1476 [amending Code Civ. Proc., § 430.10 to eliminate that ground for demurrer].) Defendants also demur to Ni’s individual claims. Because Ni has stated a derivative claim within the first cause of action, this demurrer would appear to violate the rule that “a demurrer cannot rightfully be sustained to part of a cause of action ….” (Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1047.) However, a demurrer is proper as to separate causes of action which are combined under the single label of one “cause of action.” (Code Civ. Proc., § 430.50, subd. (a) [“A demurrer to a complaint … may be taken to the whole complaint … or to any of the causes of action stated therein.”].) As noted above, Ni’s derivative claim (which asserts the violation of a right of McKeeCom) and Ni’s individual claim (which asserts the violation of a right of Ni) involve different primary rights because different harm is alleged, and therefore the derivative and individual claims are separate causes of action. (See Craig v. County of Los Angeles (1990) 221 Cal.App.3d 1294, 1301 [scope of cause of action determined by primary rights, the most significant factor of which is the harm suffered].) As a consequence, the court may consider defendants’ demurrer against Ni’s individual claims notwithstanding overruling the demurrer as to Ni’s derivative claims. In opposition to the demurrer, Ni argues that he has stated an individual cause of action based upon the McKees’ failure to communicate with Ni. (Opposition, at p. 4.) “[D]irectors and majority shareholders owe a fiduciary duty to minority shareholders which requires ‘“complete candor’ in disclosing fully ‘all of the facts and circumstances surrounding’ …” a transaction involving the minority. ‘In evaluating whether defendants satisfied their fiduciary duty of candor, the question is one of materiality.’” … Thus a director or majority shareholder breaches the duty of candor owed to the minority by disseminating false information or making misleading omissions.” (Neubauer v. Goldfarb (2003) 108 Cal.App.4th 47, 62-63 [applying Delaware law].) The opposition points to the general allegations that the McKees failed “to communicate to Ni what was happening at McKeeCom,” that the McKees failed “to honor Ni’s ownership rights,” and that the McKees denied Ni “access to the books and records.” (FAC, ¶ 34.) Failure to communicate “what was happening” is not a sufficient allegation of the breach of duty to communicate. Directors and majority shareholder do not have a duty to inform minority shareholders of everything that is going on in a corporation. As noted above, the issue is one of materiality. Ni has not alleged facts to show that the missing communication was a material omission. Ni has not asserted the refusal of access the books and records as a violation of Ni’s corporate inspection rights (Corp. Code, § 1601) but has asserted the refusal as a breach of fiduciary duty owed to Ni by the McKees. Again, Ni has not alleged facts showing that the omissions were material so as to breach the McKees’ fiduciary duties as majority shareholders to Ni as a minority shareholder. Ni’s allegation that the McKees failed to honor Ni’s ownership rights is equally uncertain. This allegation may reflect a violation of duties owed by the McKees to Ni. (See Stephenson v. Drever (1997) 16 Cal.4th 1167, 1178 [“‘Majority shareholders may not use their power to control corporate activities to benefit themselves alone or in a manner detrimental to the minority. Any use to which they put the corporation or their power to control the corporation must benefit all shareholders proportionately and must not conflict with the proper conduct of the corporation’s business.’”].) But the allegation may also be a characterization of Ni’s derivative allegations that the McKees are misappropriating corporate assets. To state an individual claim, Ni must clearly allege conduct of the McKees in breach of a duty owed directly to Ni resulting in damage to Ni. Defendants’ demurrer to the first cause of action will be sustained to the extent that the first cause of action comprises Ni’s individual cause of action for breach of fiduciary duty against defendants. (D) Conversion Ni’s second cause of action is for conversion. Ni alleges: “The McKees knowingly and wrongfully exercised dominion and control over McKeeCom and Ni’s money and property, including Ni’s share of all dividends and disguised dividends withheld from Ni, without their knowledge or consent. In doing so, the McKees converted McKeeCom’s and Ni’s money and property.” (FAC, ¶ 38.) Defendants argue that, like the first cause of action, this action is based upon harm to McKeeCom and can only be brought as a derivative action. For the same reasons as discussed as to the first cause of action, Ni has alleged such a derivative claim. That this is brought in part derivatively is confirmed by the title for the second cause of action, which states that that action is being brought by both McKeeCom and Ni. (FAC, p. 7.) Ni has also alleged that the McKees have converted Ni’s own money and property. The court previously ruled that these allegations were sufficient for Ni to state an individual action for conversion. Defendants’ demurrer to the second cause of action will be overruled. (E) Breach of Contract Ni’s third cause of action is for breach of contract. Defendants demur to this cause of action on the grounds that Ni does not adequately allege the contract and does not adequately allege liability of the McKees. “A cause of action for breach of contract requires pleading of a contract, plaintiff’s performance or excuse for failure to perform, defendant’s breach and damage to plaintiff resulting therefrom. [Citation.] A written contract may be pleaded either by its terms—set out verbatim in the complaint or a copy of the contract attached to the complaint and incorporated therein by reference—or by its legal effect. [Citation.] In order to plead a contract by its legal effect, plaintiff must ‘allege the substance of its relevant terms. This is more difficult, for it requires a careful analysis of the instrument, comprehensiveness in statement, and avoidance of legal conclusions.’ [Citation.]” (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1489.) The allegations of the terms of the contract are general and do not correspond to the specific obligations which Ni alleges were breached. (Compare FAC, ¶¶ 12-13 with ¶ 44- 45.) In opposition to the demurrer, Ni includes the declaration of his counsel attaching the contract documents. Declarations and documentary evidence are not considered in determining the sufficiency of a complaint on demurrer. (See Executive Landscape Corp. v. San Vicente Country Villas IV Assn. (1983) 145 Cal.App.3d 496, 499 [“demurrer cannot be granted on the basis of a showing of extrinsic matters by inference from attached exhibits, affidavits or otherwise except those matters which are subject to judicial notice”].) Defendants object to the declaration on evidentiary grounds. While the court does not consider the truth of the contents of the declaration and its attachments, the court does consider this as evidence of Ni’s ability to amend the complaint. Defendants’ demurrer to the third cause of action will be sustained based upon Ni’s failure to adequately allege the contract. Defendants also argue that Ni does not adequately allege liability by the McKees as alter egos of McKeeCom. “To recover on an alter ego theory, a plaintiff need not use the words ‘alter ego,’ but must allege sufficient facts to show a unity of interest and ownership, and an unjust result if the corporation is treated as the sole actor. [Citation.] An allegation that a person owns all of the corporate stock and makes all of the management decisions is insufficient to cause the court to disregard the corporate entity.” (Leek v. Cooper (2011) 194 Cal.App.4th 399, 415.) “A claim … based on the alter ego theory[] is not itself a claim for substantive relief, e.g., breach of contract or to set aside a fraudulent conveyance, but rather, procedural, i.e., to disregard the corporate entity as a distinct defendant and to hold the alter ego individuals liable on the obligations of the corporation where the corporate form is being used by the individuals to escape personal liability, sanction a fraud, or promote injustice.” (Hennessey’s Tavern, Inc. v. American Air Filter Co. (1988) 204 Cal.App.3d 1351, 1359.) Ni appears to allege a contract only between Ni and McKeeCom. As a result, alter ego allegations are necessary for Ni to assert liability against the McKees individually for breach of contract by McKeeCom. As discussed above, Ni has failed to adequately allege the substantive claim against McKeeCom. Ni therefore has not alleged a substantive claim against the McKees based upon alter ego liability. Defendants’ demurrer to the third cause of action will be sustained as to all defendants. (F) Leave to Amend With respect to the first cause of action, Ni combines his derivative claims (which are adequately alleged) with his personal claims (which are not adequately alleged). With respect to the third cause of action, Ni fails to allege the contract but has provided evidence of his ability to do so. The allegations in these causes of action do not show that further amendment to state a cause of action would be futile. The court will grant leave to amend. Leave to amend includes leave for Ni to reorganize his pleadings so in the amended complaint Ni can provide separate headings for separate causes of action in compliance with Rules of Court, rule 2.112. (2) Motion for Protective Order (A) Request for Judicial Notice In opposition to Ni’s motion for a protective order, defendants have requested that the court take judicial notice of: (exhibit A) the court’s tentative decision of April 22, 2013, with respect to defendants’ demurrer to the original complaint in this action; (exhibit B) defendants’ demurrer to the FAC in this action; (exhibit C) the May 21, 2013, notice of deposition; (exhibit D) the emails exchanged between counsel between May 22 and June 6; (exhibits D1-D23) emails exchanged between counsel; and (exhibit E) the May 29, 2013, amended notice of deposition. The tentative decision attached as exhibit A was incorporated in the court’s ruling on the demurrer. Exhibit B is the demurrer in this action discussed above. The court will take judicial notice of these documents as court records. (Evid. Code, § 452, subd. (d)(1).) Judicial notice extends to the contents of these documents but not to the truth of matters set forth therein. The remaining documents are not court records and defendants have made no showing that judicial notice is appropriate as to these documents. Nonetheless, these documents, which are discussed by both parties and incorporated in their respective supporting declarations, will be considered by the court as evidence. (B) Protective Order “The court, for good cause shown, may make any order that justice requires to protect any party, deponent, or other natural person or organization from unwarranted annoyance, embarrassment, or oppression, or undue burden and expense. This protective order may include, but is not limited to, one or more of the following directions: [¶] … [¶] (5) That the deposition be taken only on certain specified terms and conditions.” (Code Civ. Proc., § 2025.420, subd. (b)(5).) Ni’s concern throughout this motion is that Ni will be subject to multiple depositions. According to Ni, a conflict of interest exists by the concurrent representation of the McKees and McKeeCom. When this conflict is resolved, McKeeCom will get separate counsel who will demand a new deposition. Ni seeks an order to delay his deposition until this conflict issue is resolved to avoid being subjected to two depositions. Defendants’ first argument in response is that the FAC is not a derivative action and therefore Ni’s concern about multiple depositions is not now properly presented. As discussed above, the court disagrees as to the state of the pleadings. Ni has alleged derivative claims that are properly presented in this action. Defendants’ second argument in response is that Ni has not brought a motion to disqualify counsel and, even if he did, Ni would not have standing to so. It is certainly correct that Ni has not brought a motion to disqualify counsel. Because such a motion is not before the court, the court expresses no opinion as to the outcome of such a motion if it were brought. The conflict issue is largely a problem for defendants’ counsel rather than a problem for Ni. The Code of Civil Procedure provides the rule that resolves this motion: “Once any party has taken the deposition of any natural person, including that of a party to the action, neither the party who gave, nor any other party who has been served with a deposition notice pursuant to Section 2025.240 may take a subsequent deposition of that deponent.” (Code Civ. Proc., § 2025.610, subd. (a).) “Notwithstanding subdivision (a), for good cause shown, the court may grant leave to take a subsequent deposition ….” (Code Civ. Proc., § 2025.610, subd. (b).) Defendants P. McKee, S. McKee and McKeeCom have all demurred to the FAC as discussed above. Thus, there is no dispute that all three defendants have appeared in this action and are represented as of record by attorney Steponovich. “The party who prepares a notice of deposition shall give the notice to every other party who has appeared in the action. The deposition notice, or the accompanying proof of service, shall list all the parties or attorneys for parties on whom it is served.” (Code Civ. Proc., § 2025.240, subd. (a).) While the revised deposition notice purports to eliminate McKeeCom as a noticing party, the notice is effective to set the deposition only if notice of the deposition is given to McKeeCom. Because McKeeCom is represented by Steponovich, the same attorney representing the McKees, any notice given by Steponovich on behalf of any single defendant would be deemed given by him to all other defendants represented by him. Therefore, regardless of what defendant formally gives the notice, McKeeCom is subject to the limitation of section 2025.610, subdivision (a), preventing subsequent depositions without a court order on a showing of good cause. As a result, if the deposition of Ni goes forward now, all defendants, including McKeeCom, will be represented at the deposition and McKeeCom would be precluded from taking another deposition of Ni without a court order upon a showing of good cause. If any defendant requested such an order, it would be considered by the court in the context in which it would be made, including the existence and result of this motion for a protective order, and would be granted or denied based upon the merits of the motion at that time and on terms that may then be just and proper. Ordinarily, change of counsel is not by itself good cause for a subsequent deposition. Because no subsequent deposition of Ni could be taken by McKeeCom as of right even if new counsel is brought in, defendants may proceed now with Ni’s deposition with the expectation that no additional deposition of Ni would be proper absent a court order or stipulation of the parties. Accordingly, the court will deny Ni’s motion for a protective order. Defendants have requested monetary sanctions against Ni for bringing this motion. The court finds that Ni’s arguments are substantially justified and Ni’s concern about being subjected to multiple depositions is not unreasonable. Defendants’ request for monetary sanctions will be denied.
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