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Tentative Ruling
Judge Pauline Maxwell
Department 6 SB-Anacapa
1100 Anacapa Street P.O. Box 21107 Santa Barbara, CA 93121-1107

CIVIL LAW & MOTION

Bagdasarian Insurance Group vs E&J Gallo Winery

Case No: 15CV03781
Hearing Date: Wed Dec 13, 2017 9:30

Nature of Proceedings: Motion to Compel

TENTATIVE RULING: The motion is granted, as outlined below. Further verified responses shall be provided no later than December 29, 2017.

 

BACKGROUND: Plaintiff Bagdasarian Insurance Group (BIG) is a California corporation that markets and sells life insurance products. Plaintiff Christopher Bagdasarian (Bagdasarian) is an employee of BIG, which is owned and controlled by his father, Michael Bagdasarian. In December 2013, BIG sold a life insurance product to the executives of defendant E & J Gallo Winery (Gallo) through Pacific Mutual Life Insurance Company. The premium for the executive life insurance plan was approximately $1 million per year. For the first two years that the executive plan was in force, BIG was to receive a commission equal to approximately 90% of the annual premium. Starting in year three of the policy, BIG’s commission was to decrease substantially. During the first year that the life policy was in force, from December 2013 to December 2014, Gallo paid the $1 million premium to Pacific Life and BIG received the full amount of its commission. In October 2014, however, Gallo informed Bagdasarian that, though it wanted to keep its executive life insurance plan with Pacific Life in force, it wanted to terminate its relationship with BIG and hire a new agent.

BIG and Bagdasarian allege that Gallo orally agreed to keep the executive plan in force and to pay the annual premium in December 2014 so that BIG would receive the commission for policy year 2015 in exchange for BIG’s agreement to continue servicing the policy until Gallo made the transition to a new agent. In November 2014, however, Gallo refused to pay the annual premium to Pacific Life, telling Bagdasarian that it wanted the new agent to receive the commission for policy year 2015. Gallo allegedly threatened that if BIG would not forego its commission for 2015, Gallo would simply cancel its executive plan with Pacific Life and find another insurer, which would have subjected BIG to a “charge-back” penalty from Pacific Life on its earlier commission for not keeping the policy in force. When Gallo refused to forward the annual premium to Pacific Life, BIG was forced to return its 2014 commission. Pacific Life also terminated its contract with BIG in March 2015. On October 29, 2015, BIG and Bagdasarian filed the present action against Gallo. The operative complaint, the TAC, was filed on June 22, 2016, and alleges causes of action against Gallo for (1) breach of oral contract and (2) intentional interference with contractual relations; Gallo’s demurrer to the second cause of action was sustained, without leave to amend on August 31, 2016.

On September 20, 2016, Gallo answered and cross-complained against BIG, Bagdasarian, and Michael Bagdasarian for (1) professional negligence, (2) fraud and deceit, (3) aiding and abetting fraudulent deceit, and (4) negligent misrepresentation. Gallo alleges that the cross-defendants induced Gallo to purchase life insurance policies that were more expensive and less beneficial than other policies available on the market in order to generate higher commissions, misrepresenting the cost of the policies relative to those provided by other insurance policies. Gallo further alleges that BIG and Bagdasarian never disclosed that Christopher Bagdasarian had been convicted of federal felonies for fraud and perjury in connection with a reinsurance company he had established and that he was barred by the Securities and Exchange Commission from associating with any broker or investment advisor. Gallo claims that had it known of Bagdasarian’s criminal history and unlicensed status, it would not have purchased the executive plan from BIG. Contrary to Gallo’s policies communicated to cross-defendants, cross-defendants approached Gallo executives directly to sell them insurance and investment products and solicited a political contribution from one executive. In October 2014, when Gallo was looking for another insurance agent, C. Bagdasarian falsely represented that the 2015 policy premium had to be paid early to prevent a lapse in coverage. At this time, Gallo learned of C. Bagdasarian’s criminal history and decided to terminate the relationship. C. Bagdasarian then falsely represented that cross-defendants had earned the commissions for the 2015 year and would only cooperate with a new agent if Gallo made sure they received commissions for the 2015 year.

In late July, 2017, Gallo served special interrogatories and a demand for production of documents. The interrogatories sought to have BIG identify all entities who purchased or paid for life insurance policies or products for their executives or employees through or with the assistance of any employee of BIG from 2008 through 2014 (No. 1); identify all entities who purchased any insurance policy or product through (or with the assistance of) any employee of BIG from 2008 through 2014 (No. 2); identify all individuals for whom any executive life insurance policy or product was purchased through (or with the assistance of) any employee of BIG from 2008 through 2014 (No. 3); and identify all individuals for whom any insurance policy or product was purchased through (or with the assistance of) any employee of BIG from 2008 through 2014. (No. 4). The interrogatories defined “IDENTIFY” as seeking information about an individual including their full name, whether the individual is alive or not, his or her present or last known business or home address and home telephone number, and present or last known business affiliation; with respect to an entity, it was defined to seek the full name and present or last known address of the entity.

The demand for production sought, among other things, documents sufficient to show the identity of any entity that was a client or customer of BIG at any time between the beginning of 2008 and the end of 2014 (No. 1); and documents sufficient to show the identity of any individual that was a client or customer of BIG at any time between the beginning of 2008 and the end of 2014 (No. 2).

On August 10, 2017, Gallo issued deposition subpoenas for the production of business records to eight life insurance companies, seeking all documents in their possession, custody, or control sufficient to identify each entity that placed or purchased insurance policies for its employees or executives through BIG, at any time from 2008 through 2014. BIG moved to quash the subpoenas, contending they were not served properly, that they were overbroad, and that they violated the privacy rights of BIG and numerous third parties.

On September 20, 2017, BIG responded to the Special Interrogatories and Demand for Production. It objected and refused to respond to either Special Interrogatory Nos. 1-4 or Demand for Production Nos. 1-2. Its objections included overbreadth; burden; harassment; relevance; that the request sought confidential, proprietary business, commercial, or sensitive information; and that the request sought information that violates the privacy rights of BIG, individually named parties, and third parties unrelated to the litigation.

On September 27, 2017, this Court heard and granted BIG’s motion to quash the deposition subpoenas served on the life insurance companies. While Gallo had contended, in opposing the motions, that it was merely seeking a list of the corporate entities that purchased insurance policies through BIG during the time period relevant to the action, the Court noted that although the wide variety of documents sought may be sufficient to identify what Gallo called “corporate entities,” they would also reveal all manner of information about those who purchased policies for their employees or executives through BIG, including personal information and financial information, not just about the purchasing entities but about the employees and executives for whom they purchased policies. The Court found the Borse case relied on by Gallo (Borse v. Superior Court (1970) 7 Cal.App.3d 286, 288) to be instructive because the party sought only names and addresses through use of interrogatories, and not a document production that sought every sort of document that might identify the individuals, but could contain private and unrelated information.

In meet and confer efforts on the special interrogatories and requests for production, and after noting the Court’s comments on the overbreadth of the deposition subpoenas, Gallo narrowed the production requests so as to seek only a printout from a database with customer names. It further stressed that the interrogatories sought only customer names and limited contact information. After meet and confer efforts reached an impasse with respect to these requests, Gallo filed the current motion to compel.

ANALYSIS: The motion is granted, as outlined herein. Further verified responses shall be provided no later than December 29, 2017.

As stated by the California Supreme Court in Williams v. Superior Court (2017) 3 Cal.5th 531, 541, in the absence of contrary court order, a civil litigant’s right to discovery is broad. Any party may obtain discovery regarding any matter, not privileged, that is relevant to the subject matter involved in the pending action if the matter either is itself admissible in evidence or appears reasonably calculated to lead to the discovery of admissible evidence. (Ibid.) The right includes an entitlement to learn the identity and location of persons having knowledge of any discoverable matter. (Ibid.) Statutes governing discovery must be liberally construed in favor of disclosure unless the request is clearly improper by virtue of well-established causes for denial. This means that disclosure is a matter of right unless statutory of public policy considerations clearly prohibit it. (Ibid.)

The Williams court stated further that a party may use interrogatories to request the identity and location of those with knowledge of discoverable matters, and that it is not the burden of the propounding party to show that the interrogatory seeks relevant, discoverable information. (Ibid.) Rather, as a litigant, it is entitled to demand answers to its interrogatories as a matter of right and without a prior showing, unless the party on whom those interrogatories are served objects and shows cause why the questions are not within the purview of the code section. (Ibid.) While the party propounding interrogatories may have the burden of filing a motion to compel if it finds the answers it receives unsatisfactory, the burden of justifying any objection and failure to respond remains at all times with the party resisting an interrogatory. (Ibid.)

With respect to the discovery at issue, BIG has objected to providing responses on a variety of grounds. It has also objected to the motion to compel, contending that it is improper because it does not cite the authority for a motion to compel further answers to interrogatories, and cites only to the statutory authority for a motion to compel further response to demands for inspection and production. Clearly, BIG well knows that such authority exists, and the objection is one of form over substance, which has no effect upon the Court’s ability to rule on the motion’s merits.

Next, BIG contends that the discovery is duplicative and harassing, because it seeks the same information that was sought in the deposition subpoenas this court quashed in September, contending that continuous discovery into the same matter constitutes oppression. However, the Court did not, in quashing the business records subpoenas, make any ruling that the information sought was not discoverable. Rather, it noted that a records request seeking documents sufficient to identify those who had purchased policies from BIG was overly broad, and would result in the production of all manner of documents containing all manner of personal and financial information, not just about the purchasing entities but about the employees and executives for whom they purchased the policies. The Court at that time expressly noted that the Borse case relied upon by Gallo in opposition of the motion to quash involved interrogatories requesting names and addresses, and not a document production. At a minimum, to the extent that Gallo is now seeking limited information through interrogatories, it is not oppressive “continuous discovery into the same matter.”

BIG then objects that the discovery sought is overbroad and burdensome, contending that Gallo has provided no information about how an insured individual who may not have had any direct contact with BIG may have relevant information that would justify an invasion of their privacy. This actually appears to be three objections in one, including (1) overbreadth, (2) burden, and (3) privacy, which will be analyzed separately.

The Williams case discussed the proper analysis when discovery is objected to on the basis of overbreadth. It noted that under the Legislature’s very liberal and flexible standard of relevance, any doubts as to relevance should generally be resolved in favor of permitting discovery. (Williams v. Superior Court, supra, 3 Cal.5th at p. 542.) It looked to the allegations of the operative complaint, in order to ascertain whether the information sought was within the scope of discovery permitted under Code of Civil Procedure section 2017.010 [any party may obtain discovery regarding any matter, not privileged, that is relevant to the subject matter involved in the pending action, and is either itself admissible in evidence or appears reasonably calculated to lead to the discovery of admissible evidence].

Gallo contends, in its motion, that discovery of BIG’s other customers is relevant, since it may give rise to evidence of a pattern of deceptive behavior by BIG which is relevant to the element of its intent to commit fraud. Gallo cites Messerall v. Rubin (1961) 195 Cal.App.2d 497, 501, for the proposition that “cases of fraud are exceptions to the general rule that other offenses of the accused are not relevant to establish the main charge. Where fraud is charged, evidence of other frauds or fraudulent representations of like character, committed by the same parties at or near the same time is admissible to prove intent.” As a result, plaintiffs pursing claims of fraud are entitled to investigate whether the defendant also defrauded other similarly situated parties. (See Borse v. Superior Court (1970) 7 Cal.App.3d 286, 288-289, in which the court found names and addresses of other parties who might have been defrauded at or near the same time were reasonably calculated to lead to the discovery of admissible evidence.) Gallo also contends that, contrary to its instructions, BIG directly marketed insurance and investment products to its executives.

Identifying information for other parties who might also have been defrauded by BIG during the same time frame as its conduct toward Gallo, is therefore reasonably calculated to lead to the discovery of admissible evidence, and falls squarely within the discovery permitted under Code of Civil Procedure section 2017.010. BIG made no effort whatsoever to support its overbreadth claim as to the interrogatories seeking the identifying information for the entities who had purchased life insurance policies or products from BIG for their executives or employees, or purchased any other insurance policy or product from BIG, and Interrogatory Nos. 1 and 2 are clearly not overbroad.

Rather, BIG only addressed Nos. 3 and 4, which relate to the executives or employees for whom life insurance policies or products, or for whom other insurance policies or products were purchased from BIG. Even then, all that BIG asserts is that Gallo has provided no information about how an insured individual who may not have had any direct contact with BIG may have relevant information. That is true, but as the Williams court stated, it is not the burden of the propounding party to show that the interrogatory seeks relevant, discoverable information; rather the burden of justifying any objection remains at all times on the party resisting an interrogatory. Simply saying that Gallo has not provided information to support that the individuals whose identifying information is sought may have any relevant information, fails to meet that burden. Further, Gallo has alleged that BIG directly marketed its products to Gallo executives, contrary to Gallo’s wishes. Consequently, Gallo employees could potentially have relevant information about the marketing methods utilized by BIG, including potentially fraudulent methods. BIG has failed to meet its burden of justifying its overbreadth objection, requiring that it be overruled.

BIG has also objected on grounds of burden. As noted further by the California Supreme Court in Williams v. Superior Court, supra, Code of Civil Procedure section 2017.020(a) permits a trial court to limit the scope of discovery if it determines that the burden, expense, or intrusiveness of the discovery clearly outweighs the likelihood that the information sought will lead to the discovery of admissible evidence. However, once again, the party opposing discovery has an obligation to supply the basis for the determination. (Williams v. Superior Court, supra, 3 Cal.5th at p. 549.) An objection based upon burden must be sustained by evidence showing the quantum of work required. (Ibid.) Here, BIG has not provided any information to support its burden objection, and the objection must therefore be overruled.

BIG also has objected to the discovery by contending it violates the right to privacy. While its discovery responses contended that the information sought would violate BIG’s own privacy rights, as well as those of the individually named parties and third parties unrelated to the litigation, its opposition to the motion to compel never mentions any privacy rights other than those of third parties unrelated to the litigation. Specifically, BIG asserts, as noted above, that Gallo has provided no explanation how an insured individual who may not have had any direct contact with BIG (referring to the employees for whom policies were purchased) may have relevant information that would justify an invasion of their privacy. BIG argues that discovery that intrudes into constitutionally protected areas cannot be justified solely on the grounds that it may lead relevant evidence, and that even where discovery of private information is found directly relevant to the issues of ongoing litigation, it will not be automatically allowed, and there must be a careful balancing of the compelling public need for discovery against the fundamental right to privacy, citing Board of Trustees of Leland Stanford Junior University v. Superior Court (1981) 119 Cal.App.3d 516, 528-530. BIG is half right. While the first portion of the argument remains true, to the extent that the Board of Trustees case provides authority for the necessity of a party seeking discovery of private information in all cases to demonstrate a “compelling state need” or “compelling need” for the information, it was expressly disapproved by the California Supreme Court in the Williams case. (See Williams v. Superior Court, supra, 3 Cal.5th at p. 557, fn. 8.)

The Williams court held that courts must place the burden on the party asserting a privacy interest to establish its extent and the seriousness of the prospective invasion, and against that showing must weigh the countervailing interests the opposing party identifies. However, what suffices to justify an invasion of a privacy interest varies according to the context, and only obvious invasions of interests fundamental to personal autonomy must be supported by a compelling interest.

As the California Supreme Court further summarized and explained in Lewis v. Superior Court (2017) 3 Cal.5th 561, issued a week after the Williams decision, there is a two-part inquiry utilized to determine whether the right to privacy has been violated:

“First, the complaining party must meet three “ ‘threshold elements' ... utilized to screen out claims that do not involve a significant intrusion on a privacy interest protected by the state constitutional privacy provision.” [Citation omitted.] The party must demonstrate ‘(1) a legally protected privacy interest; (2) a reasonable expectation of privacy in the circumstances; and (3) conduct by defendant constituting a serious invasion of privacy.’ [Citation omitted.] This initial inquiry is necessary to ‘permit courts to weed out claims that involve so insignificant or de minimis an intrusion on a constitutionally protected privacy interest as not even to require an explanation or justification by the defendant.’ [Citation omitted.]

“Second, if a claimant satisfies the threshold inquiry, ‘[a] defendant may prevail in a state constitutional privacy case by negating any of the three elements just discussed or by pleading and proving, as an affirmative defense, that the invasion of privacy is justified because it substantively furthers one or more countervailing interests.’ [Citation omitted.] ‘The plaintiff, in turn, may rebut a defendant's assertion of countervailing interests by showing there are feasible and effective alternatives to defendant's conduct which have a lesser impact on privacy interests.’ [Citation omitted.]

“The standard that a defendant's proffered countervailing interests must satisfy varies based on the privacy interest asserted: ‘Where the case involves an obvious invasion of an interest fundamental to personal autonomy, e.g., freedom from involuntary sterilization or the freedom to pursue consensual familial relationships, a ‘compelling interest’ must be present to overcome the vital privacy interest. If in contrast, the privacy interest is less central, or in bona fide dispute, general balancing tests are employed.’ [Citation omitted.] ‘The existence of a sufficient countervailing interest or an alternative course of conduct present[s] threshold questions of law for the court. The relative strength of countervailing interests and the feasibility of alternatives present mixed questions of law and fact.... [I]n cases where material facts are undisputed, adjudication as a matter of law may be appropriate.’ [Citation omitted.]” (Lewis v. Superior Court (2017) 3 Cal.5th 561, 571-572.)

The Court only reaches the weighing of the invasion against the countervailing interests if the party claiming privacy establishes the initial three factors. (Williams, supra, 3 Cal.5th at p. 555.) Here, BIG has not done so, and it is not necessary to proceed to the weighing stage of the determination.

While less sensitive than one’s medical history or financial data, home contact information is generally considered private. (Williams, supra, 3 Cal.5th at p. 554.) The inquiry then proceeds to the second factor, i.e., whether there is a reasonable expectation of privacy in the particular circumstances. In other words, would the other entities and individuals who purchased life insurance policies or products from BIG expect their contact information to be withheld from a party seeking to prove that BIG defrauded it when selling life insurance to it? While most people do not wish to have their home contact information widely disseminated by those they have trusted with it, it could well be reasonable for them to hope that it might be provided to a party such as Gallo, even if just to allow themselves the opportunity to understand what Gallo contended occurred, and assure themselves that they were not also victimized in their purchase of life insurance policies or products from BIG. The third factor—a serious invasion of privacy—is also absent. All that is being sought is contact information. Gallo is not seeking personal financial information or other more sensitive personal information about any individual who might have purchased or been the beneficiary of his or her employer’s purchase of a life insurance or other product from BIG.

Having failed to meet the first three threshold factors, the Court need not progress to the balancing of interests. However, even if it did so, the case does not involve an obvious invasion of an interest fundamental to personal autonomy, and the countervailing interest which would be balanced against the privacy interests need not be a compelling one. Having presented the interest in discovering whether other clients of BIG might have been similarly defrauded, for purposes of showing the fraud element of intent, Gallo’s interests would outweigh the minimal privacy interests of the third party clients, had the Court reached the weighing process. No privacy interests preclude the requested discovery.

BIG further objects to the seven year time span of the discovery sought, given that Gallo seeks the information for the years 2008 through 2014. BIG contends that because Gallo only actually made purchase from BIG in 2009 and 2013, the time span of the information sought is excessive. Gallo responds by asserting that while it only purchased new insurance programs through BIG in both late 2009/early 2010 and in late 2013/early 2014, BIG continuously attempted to sell insurance programs to it from 2008 through 2014. Gallo identifies how BIG started working with a Gallo employee in 2008 to run illustrations for potential changes to Gallo’s life insurance program; pitched Company Owned Life Insurance in 2009; solicited Gallo and presented another life insurance product in late 2011/early 2012; and beginning in 2010 administered the executive life policies and renewed them every year between 2010 and 2013. Gallo asserts that it is for that reason that it seeks customer information for 2008-2014.

The Court finds that, under the circumstances presented in this case, the 2008 to 2014 time frame for the responses is reasonable and appropriate.

The Court will therefore grant the motion to compel further answers to interrogatories 1 through 4. The Court will, however, limit the information to be disclosed solely to names and addresses, such as was permitted in Borse, supra.

The Court grants the motion with some trepidation, knowing full well that the manner in which the information is handled by Gallo could have serious consequences to the on-going business of BIG. The Court cautions Gallo and its attorneys to be ever-mindful of their professional responsibilities, with any contacts with present or former BIG clients made in as neutral (and absolutely non-inflammatory) manner as is humanly possible, so as to prevent any unwarranted interference with the client relationships. The Court will not hesitate to impose serious sanctions (monetary, issue, evidentiary, or terminating), penalties, and/or other consequences (potentially including reports of misconduct to the State Bar) should it become aware that the information has been mishandled.

With respect to the motion to compel further response to the production demand, the Court notes that in meet and confer, BIG amended its once-again horribly overbroad document requests seeking any documents which reflected the identity of any entity or individual clients, to simply seek a computerized print-out of a list of clients. BIG objects that it cannot be compelled to create a document for production. That statement seriously misapprehends the nature of a production demand, and also appears to represent a position which BIG takes only when it doesn’t want to turn over the information, since it previously produced computer-generated documents in response to a production demand. If BIG’s computer system truly cannot create a document listing the clients, BIG can present a further response, accompanied by a declaration of an employee with personal knowledge, explaining that the request cannot be accommodated by its computer system. If the system can create the list, it shall be produced (redacted to exclude any information other than the names and addresses, and to limit it to the appropriate time range).

The further verified responses to the discovery shall be provided by BIG no later than December 29, 2017.

 
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