Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_06-cv-02818/USCOURTS-caed-2_06-cv-02818-12/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1332 Diversity-(Citizenship)

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

JOHN SACA,

Plaintiff, No. CIV S-06-2818 MCE EFB

vs.

J.P. MOLYNEUX STUDIO LTD., et al., 

ORDER

Defendants. 

 /

This case was before the undersigned on December 18, 2007, for hearing on plaintiff’s

expedited motion for a protective order. Suzanne M. Alves appeared as plaintiff’s counsel and 

I. Hooshie Broomand appeared as defense counsel. For the reasons set forth below, plaintiff’s

motion is granted in part and denied in part. 

I. BACKGROUND

Because this case has previously been before the court on no fewer than seventeen other

discovery motions in this relatively simple breach of contract suit and countersuit, the court will

not rehash here the factual background of this litigation. Presently before the court is plaintiff’s

motion for an order protecting from disclosure categories of financial information similar to that

which he previously obtained from defendants.

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 As set forth in defendants’ papers, plaintiff did not produce the documents until

plaintiff’s deposition was already two hours underway. The documents were numerous and

unidentified, and were unaccompanied by a copy of the privilege log filed that same day as an

exhibit to this motion. The timing of that production, in light of plaintiff’s earlier and frequent

complaints that defendants failed to produce documents sufficiently in advance of depositions

and without privilege logs, is disappointing. In ruling on plaintiff’s earlier motions which

complained of similar last minute document productions, the court stressed the efficiency of

producing documents to be discussed at a deposition in advance of the deposition, and has

modified orders to reschedule depositions in order to allow plaintiff time for such pre-deposition

review. Furthermore, as plaintiff’s counsel is aware, a privilege log is not simply a document to

be filed with the court in support of a motion, but that is to be timely provided to opposing

counsel so that she/he may assess the claim of privilege. See Fed. R. Civ. P. 26(b)(5)

(description of the withheld documents must be sufficient to “enable other parties” to assess the

claim) (emphasis added).

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On November 2, 2007, defendants served a deposition notice on plaintiff, setting his

deposition for December 4, 2007. Appended to the notice were several requests for production

of documents to be produced at the deposition. See Fed. R. Civ. P. 30(b)(2) (notice to a party

deponent may be accompanied by a request under Rule 34 to produce documents and tangible

things at the deposition).

On November 20, 2007, the parties were before the court on a different discovery motion,

and at the hearing, plaintiff requested and was granted a two-week extension of time to respond

to discovery. Plaintiff did not divulge whether the extension pertained to the document requests

appended to the discovery notice, nor whether an extension would affect their timely production

at the deposition. In any event, the parties agreed to continue plaintiff’s deposition to December

11, 2007, at which time plaintiff did produce some responsive documents.1

 The withheld

documents are the subject of this discovery order.

Plaintiff made his initial objections to several of the document requests in

correspondence dated November 28, 2007. See Declaration of Kevin D. Hull in Support of a

Protective Order (“Hull Decl.”), Exh. B. Plaintiff objected to several requests seeking financial

information regarding plaintiff and companies owned or controlled by him, and requested that

defendants withdraw them as “unnecessarily invasive into the privileges and privacy rights of

Mr. Saca and [his companies].” Id. Defendant responded by letter dated December 5, 2007, and

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indicated that he would not withdraw those requests. On December 11, 2007, plaintiff filed this

motion for a protective order. The court addresses each disputed request below. 

II. DOCUMENT REQUESTS

A. Tax Returns

Document request no. 15 appended to Mr. Saca’s deposition notice seeks “all income tax

returns from 2002 through 2006.” See Hull Decl., Exh. B at 4:6-7. Plaintiff objects on the basis

of California’s qualified tax return privilege. 

Because the court’s jurisdiction over this action is premised solely on diversity, and

because no federal questions are presented either in the complaint or counterclaim, the court

must determine substantive privileges under the state law that otherwise governs the case (i.e.,

California law). Fed. R. Evid. 501; Pagano v. Oroville Hosp., 145 F.R.D. 683, 687 (E.D. Cal.

1993) (privileges asserted in federal question cases shall be governed by federal law, while state

privilege law should apply to purely state claims brought in federal court pursuant to diversity

jurisdiction). 

“There is no recognized federal or state constitutional right to maintain the privacy of tax

returns. California courts, however, have interpreted state taxation statutes as creating a statutory

privilege against disclosing tax returns.” Weingarten v. Superior Court, 102 Cal.App.4th 268,

274 (Cal. Ct. App. 2002) (citations omitted). 

This statutory privilege is not absolute. It “will not be upheld when (1) the circumstances

indicate an intentional waiver of the privilege; (2) the gravamen of the lawsuit is inconsistent

with the privilege; or (3) a public policy greater than that of the confidentiality of tax returns is

involved.” Weingarten, 102 Cal.App.4th at 274 (internal citations and quotations omitted). 

California courts have held that the “public policy” exception “applies only when

warranted by a legislatively declared public policy,” Id., at 274, and that the “[p]ublic policy

favoring discovery in civil litigation is not, by itself, sufficiently compelling to overcome the

privilege.” Fortunato v. Superior Court, 114 Cal.App.4th 475, 483 (Cal. Ct. App. 2003). 

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It is not entirely clear which exception to the tax privilege defendants find applicable

here. Defendants do not assert that plaintiff has waived the privilege, nor that there is a

legislatively declared public policy compelling disclosure. Rather, defendants seem to assert that

the gravamen of the lawsuit is inconsistent with the privilege. That is, they assert that “the core

of defendants’ defenses and counterclaim is that because plaintiff failed to pay defendants in

accordance with their contract, defendants exercised their option to cease work until plaintiff

agreed to pay the remaining amounts.” Defs.’ Supp. Opp’n, at 5:25-27. Defendants claim that

the “information contained in plaintiffs’ tax returns will likely show whether plaintiff was

financially capable of making the required payments, an essential component to defendants’ case

and affirmative defenses.” Id., at 6:1-3. 

Although the tax returns may indeed be relevant evidence regarding plaintiff’s ability to

make the required payments, it is not the only such evidence of plaintiff’s ability to pay during

the relevant time periods. The claims and defenses in this case do not directly implicate

plaintiff’s tax returns, and as such, the assertion of the privilege is not “inconsistent with the

gravamen of the lawsuit.” Cf. Wilson v. Superior Court, 63 Cal.App.3d 825, 829 (Cal. Ct. App.

1976) (finding assertion of the tax return privilege inconsistent with the gravamen of the lawsuit

where plaintiff sued his accountant for faulty tax advice); Newson v. City of Oakland, 37

Cal.App.3d 1050, 1055 (Cal. Ct. App. 1974) (privilege inconsistent with claims of lost income);

see also Young v. United States, 149 F.R.D. 199, 205 (S.D. Cal. 1993) (plaintiff waives any tax

return privilege to the extent a plaintiff places tax records in issue by making a claim for lost

income). Accordingly, the court finds that plaintiff has properly asserted the tax return privilege

and the protective order is granted as to request for production no. 15.

B. Secured Transactions

Document request no. 16 appended to Mr. Saca’s deposition notice seeks “all documents

relating or referring to any secured transactions (‘secured transactions’ shall mean any

transaction based upon a security agreement that concerns a security interest, whereby personal

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 Confusingly, request no. 40 seeks the same information as request no. 38, but for a

period from 2002, rather than 2000, to present. 

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or real property is pledged as collateral for performance or for a debt) you signed from 2001 to

present.)” Hull Decl., Exh. B at 4:9-12. “You” is defined as “you, your agents, your employees,

your INSURANCE companies, their agents, your attorneys, your accountants, your investigators

and anyone else acting on your behalf.” Id., at 2:12-14.

Plaintiff objects to this request on grounds that it is overbroad and that it seeks

information that is “unnecessarily invasive of plaintiff’s privacy rights.” With regard to

overbreadth, defendants acknowledged at the hearing that it could be more narrowly tailored to

address the subject matter of the lawsuit, i.e., the contract between the parties. As drafted, this

request seeks information regarding secured transactions made more than two years before the

contract in this case was even contemplated by the parties. See Compl., Exh. A (contract signed

in September 2003). Further, the request encompasses potentially all secured transactions signed

by Mr. Saca, either on his own behalf or on behalf of his several companies, that presumably

have no bearing on the subject matter of this lawsuit. 

Accordingly, the court instructs defendants to redraft this request so that it is more

narrowly tailored to the time period and subject matter at issue in this lawsuit. The court

reserves ruling on any privacy objections pending the redrafting of this request. However, as

noted below, the court is not inclined to find that privacy interests concerning Mr. Saca’s ability

to pay under the terms of the contract outweigh the public policy favoring discovery in litigation. 

C. Payments by Third Parties

Document requests nos. 38, 39, and 40 each seek documents relating or referring to

payments made by non-parties Saca Development and Saca Builders on behalf of plaintiff “for

any reason.” Hull Decl., Exh. B, at 6:25-7:6. The request as to Saca Development seeks such

documents from 2000 to present (request no. 38),2 and the request as to Saca Builders seeks such

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 For the first time at the hearing, plaintiff objected that these requests should have been

propounded on the third party entities themselves, via a Rule 45 subpoena. The court advised

plaintiff that defendants were entitled to seek any information Mr. Saca may have in his

possession relating to these entities under Rule 30, but agreed that defendants were able to seek

relevant information pursuant to Rule 45 if they deem that to be an appropriate course of action. 

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 The court recognizes that plaintiff’s inclusion of a punitive damages claim in the

complaint places defendants’ financial condition at issue. See Oakes v. Halvorsen Marine, Ltd.,

179 F.R.D. 281, 286 (C.D. Cal. 1998). Even so, the court finds it rather ironic that plaintiff now

holds closely to his chest the same kinds of financial information he has managed to obtain from

defendants.

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documents from 2002 to present (request no. 39).3 

Plaintiff objected to these requests, arguing that they unnecessarily invade the privacy

rights of plaintiff and the various business entities.4

 Plaintiff also argues that disclosing such

information will necessarily implicate the tax return privilege. However, plaintiff has failed to

convince the court that producing information concerning payments made by these entities on

behalf of plaintiff necessarily requires him to produce his tax returns. The court finds the tax

privilege inapplicable to these documents. 

Regarding plaintiff’s objections on the basis of privacy, the court balances those interests

with the needs of the litigation. 

The right of privacy in California extends to financial privacy in litigation, but is “subject

to balancing the needs of the litigation with the sensitivity of the information/records sought.” 

Davis v. Leal, 43 F. Supp. 2d 1102, 1110 (E.D. Cal. 1999) (citing Valley Bank of Nevada v.

Superior Court, 15 Cal.3d 652, 657 (Cal. 1975)). “Balancing of competing interests is

underscored by the overall balancing provisions contained within Rule 26(b), Federal Rules of

Civil Procedure. This Rule allows the court on its own initiative to limit discovery based, inter

alia, on the needs of the case, the importance of the issues at stake, and undue burden.” Pagano

v. Oroville Hosp., 145 F.R.D. 683, 698 (E.D. Cal. 1993). 

California’s broad discovery statutes recognize “the historically important state interest

of facilitating the ascertainment of truth in connection with legal proceedings.” Britt v. Superior

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Court, 20 Cal.3d 844, 857 (1978). “When an individual’s right of privacy in his financial affairs

conflicts with the public need for discovery in litigation, the competing interests must be

carefully balanced.” Valley Bank of Nevada, 15 Cal.3d at 657.

The privacy rights of businesses are accorded even less weight under California law. 

Corporations do not have a right to privacy under article I, section 1 of the California

Constitution. Roberts v. Gulf Oil Corp., 147 Cal.App.3d 770, 795 (Cal. Ct. App. 1983); Zurich

American Ins. Co. v. Superior Court, 155 Cal.App.4th 1485, 1504 (Cal. Ct. App. 2007). The

extent of privacy rights enjoyed by other business entities is less clear, but such rights are much

less robust than those enjoyed by individuals. See Hecht, Solberg, Robinson, Goldberg &

Bagley LLP v. Superior Court, 137 Cal.App.4th 579, 594 (Cal. Ct. App. 2006) (noting weaker

rights of business entities and affirming order compelling LLP to produce documents that were

otherwise discoverable under relevancy standards). 

Here, defendants claim a need for information concerning payments made by the abovedescribed business entities on behalf of plaintiff in order to rebut plaintiff’s allegations

concerning the extent of his damages. More specifically, defendants note that some of plaintiff’s

payments under the contract were made by the various entities. See Defs.’ Supp. Opp’n, Exh. A.

Defendants challenge plaintiff’s attempt to recover for himself the amounts paid by these

entities. Defendants are entitled to discovery such information. Fed. R. Civ. P. 26(b). However,

defendants fail to explain how payments by these entities on behalf of plaintiff, if any, prior to

September 2003, have any bearing on this lawsuit. 

In an effort to balance plaintiff’s privacy interests with the needs of the litigation, the

court orders defendants to redraft requests for production nos. 38 through 40 so that they are

more narrowly tailored to the subject matter of the lawsuit and the purported reasons for

propounding them. 

The court otherwise overrules defendants’ objections to these requests on the basis of

privacy. On balance, defendants’ need for the requested information outweighs plaintiff’s and

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the business entities’ privacy interests. However, in consideration of the sensitive nature of the

requested financial information, the court orders that the terms of the previously-entered

stipulated protective order shall apply equally to plaintiff’s production of documents following

service of the redrafted discovery requests. 

To the extent plaintiff intends to reassert objections to production of plaintiff’s financial

information, the court reiterates that it is disinclined to order that such discovery not occur at all. 

Although plaintiff’s complaint is distinguished by inclusion of a claim for punitive damages,

which claim requires evidence of defendants’ financial condition, see Oakes v. Halvorsen

Marine, Ltd., 179 F.R.D. 281, 284 (C.D. Cal. 1998), plaintiff’s financial condition is not wholly

irrelevant. 

For example, at the hearing, defendants argued that one of their defenses to plaintiff’s

lawsuit is plaintiff’s alleged anticipatory breach of the contract. The court has reviewed

defendants’ answer and counterclaim and fails to see where that legal theory is plead either as a

defense or as a separate cause of action against plaintiff. However, it does appear that plaintiff

has plead anticipatory repudiation in his answer to defendants’ counterclaim. See Answer to

Counterclaim, 4:12-19. More specifically, plaintiff alleges that defendants are barred from

claiming breach of contract based on defendants’ repudiations. Id. 

“Although an anticipatory breach or repudiation of a contract by one party allows the

injured party to sue for damages without performing or offering to perform his or her own

obligations, that party cannot recover damages without presenting evidence sufficient to

establish that, but for the breach, he or she was ready, willing and able to perform as required by

the contract.” Ersa Grae Corp. v. Fluor Corp., 1 Cal.App.4th 613, 627 (Cal. Ct. App. 1991)

(rejecting contention that proof of the plaintiff’s ability to perform is limited to actions for

specific performance). 

Thus, to the extent plaintiff’s defense to the counterclaim is based on defendants’ alleged

repudiation of the contract, defendants are entitled to discover evidence relevant to plaintiff’s

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ability to perform, which in this case implicates plaintiff’s ability to pay. Accordingly, the court

admonishes the parties to attempt to cooperate in completing discovery, to avoid propounding

oppressive and marginally relevant requests, and to work toward agreeing to disclosing sensitive

information pursuant to a mutually agreeable, and mutually applicable stipulated protective

order. The court further encourages the parties to consider the costs of filing weekly discovery

motions versus litigating (or settling) this case on the merits. 

III. CONCLUSION

In accordance with the foregoing, IT IS ORDERED that: 

1. Plaintiff’s motion is granted in part and denied in part. 

2. The motion for a protective order is granted as to request for production no. 15 seeking

“all income tax returns.” 

3. The motion is denied without prejudice as to requests for production nos. 16, and 38-

40. Defendants are ordered to redraft those requests consistent with this order, and serve them

promptly on plaintiff. Within twenty days of receipt of the redrafted requests, plaintiff shall

provide responses thereto. Plaintiff’s production of documents shall be governed by the terms of

the previously-entered stipulated protective order, which, by this order is modified to apply

reciprocally to plaintiff’s production.

DATED: January 3, 2008.

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