Motion Quash

Cal. Super. - 6th Dist.March 15, 2018

1 Philip J. Wang (State Bar No. 218349) STOEL RIVES LLP 2 Three Embarcadero Center, Suite 1120 San Francisco, CA 94111 3 Telephone: 415.617.8900 Facsimile: 415.617.8907 4 Email: philip.wang@stoel.com Attorneys for Defendant 6 PayActiv, Inc. 7 8 9 SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SANTA CLARA 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 STOEL RIVES LLP ATTORNEYS AT LAW SAN FRANCISCO PEDRO IBARRA, an individual, Plaintiff, V. PA YACTIV, INC., a Delaware Corporation, and DOES 1 through 50, inclusive, Defendants. PAY ACTIV, INC.' S NOTICE OF MOTION AND MP A ISO MOTION TO QUASH Q76'i040'i 1 ()()67/i'ili-00001 Case No. 18CV325038 DEFENDANT PAYACTIV, INC.'S NOTICE OF MOTION AND MOTION; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO QUASH CIVIL SUBPOENAS FOR PERSONAL APPEARANCE AT HEARING Hearing: Date: August 9, 2018. Time: 9:00 am Dept.: D-09 Judge: Hon. Mary E. Arand Filed Concurrently With: 1. Request for Judicial Notice 2. [Proposed] Order re: Judicial Notice 3. Declaration of Philip J. Wang 4. Declaration of Marc A. Al; and 5. [Proposed] Order re: Motion to Quash Action Filed: March 15, 20l8 No trial date. Case No. 18CV325038 Electronically Filed by Superior Court of CA, County of Santa Clara, on 7/16/2018 4:07 PM Reviewed By: V. Taylor Case #18CV325038 Envelope: 1728680 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 NOTICE OF MOTION AND MOTION JO ALL PARTIES AND THEIR ATTORNEYS OF RECORD: PLEASE TAKE NOTICE that on August 9, 2018, at 9:00 a.m. in Department 9 of the above-entitled Court, located at 191 N. First Street, San Jose, California, Defendant PayActiv, Inc. ("PayActiv") will move the Court for an order to quash subpoenas for personal appearance at hearing. The Motion will be based on this Notice and Motion, the attached Memorandum of Points and Authorities, Request for Judicial Notice, Declaration of Philip J. Wang, Declaration of Marc A. Al and on any other matters properly before the Court at the time of the hearing. Per California Rules of Court, Rule 3.1308, the Court has adopted a tentative rulings procedure for civil law and motion. A tentative ruling on a civil matter will be available after 2:00 p.m. on the com1 day immediately preceding the scheduled hearing on that matter by signing onto the Court's web site at www.scscourt.org and selecting "Tentative Rulings," or by telephoning ( 408) 882-2515. Dated: July 16, 2018 18 19 20 21 22 23 24 25 26 27 28 STOEL RIVES LLP PAYACTIV, INC.'S NOTICE OF MOTION AND MP A ISO MOTION TO QUASH -1- Case No. 18CV325038 ATTORNEYS AT LAW SAN FRANCISCO ()7/i,040, 1 001i71i,li-00001 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 STOEL RIVES LLF ATTORNEvs A1 LAw SAN FRANCISCO MEMORANDUM OF POINTS AND AUTHORITIES I. PRELIMINARY STATEMENT Defendant PayActiv, Inc. (“Defendanl” 0r “C0mpany”) seeks protection from seven subpoenas issued by this Court at the demand ofpro se Plaintiff Pedro Ibarra for attendance at an August 16, 201 8 motion hearing at which Mr. Ibarra seeks to disqualify PayActiv’s counsel. Plaintiffperceives a potential conflict of interest between the Defendant and its Chief Operating Officer, Who is not a party t0 this proceeding. Subpoenas were issued to undersigned counsel, a Stoel Rives attorney based in Minnesota, two outside Company directors, two outside Company advisors, and the Company’s Chief Technology Officer. Declaration of Philip J. Wang, fl 2-8 & Ex. A-E. The subpoenas do not seek relevant testimony, call for privileged testimony, seek to compel attendance of a Witness who resides and works outside the California courts’ jurisdiction, and are a blatant attempt to harass Defendant and its officers, directors, and outside advisors, therefore, the Court should quash Plaintiff’s civil subpoenas to Kabir Masra, Amer Akhtar, Ajit Medhekar, Sanjiv Das, Sohail Aslam, Philip J. Wang and Marc A1, Esq., and awarding the Company its attorney’s fees and costs in bringing this motion. Plaintiff is a disgruntled former employee of Defendant, who is seeking significant sums from Defendant for alleged employment discrimination and alleged wrongful termination. Within days from his termination, Plaintiff exercised a very small portion of his stock option rights by purchasing a single share of PayActiv stock at $0.025. Plaintiff, issued a books and records demand on the Company. Following the Company’s denial of his request, Plaintiff exercised the rest of his options, purchasing 65,624 more shares for a total of $1,640.60, and brought the instant case to enforce his broad books-and-records demand, purportedly t0 investigate unspecified allegations. On June 20, 201 8, Mr. Ibarra filed a motion t0 disqualify the Company’s outside counsel, Stoel Rives LLP, on the grounds that Stoel Rives had represented the Company’s COO Ijaz Anwar in a series 0f unrelated matters years before Mr. Anwar became employed by the Company. Starting the next day, Mr. Ibarra obtained at least seven subpoenas to compel the attendance 0f witnesses at the disqualification motion hearing, including Company directors PAYACTIV, INC.’s NOTICE 0F -2- Case No. 18CV325038 MOTION AND MFA Iso MOTION To QUASH 0765040§ I (106765630001 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 SI'OEL Rlvas LLP AHHkMV~ r\( Ln SAN mam 1m x: w Kabir Masra and Amer Akhtar, outside advisers to the Company Ajit Medhekar and Sanjiv Das, and CTO Mr. Sohail Aslam, the undersigned counsel, and Stoel Rives attorney Marc Al. thn askcd Whom hc had subpoenaed and what testimony he hopes to elicit, Plaintiff refused to answer. Wang Decl., 1] 9 & Ex. F. Plaintiffs subpoenas should be quashed because they: 1. d0 not seek relevant testimony; 2. are unreasonable, burdensome, and issued to harass; 3. lack jurisdictional reach t0 compel Minnesota resident Marc A11, to attend the Court hearing in California; and 4. call for privileged testimony. Therefore, the Court should quash Mr. Ibarra’s civil subpoenas and award attorneys’ fees in the amount 0f $1 1,000.00. II. BACKGROUND FACTS Defendant PayActiV is a Delaware corporation With its principal place of business in San Jose, California, and Mr. Ibarra is a former employee of Defendant. Immediately following Plaintiffs termination, Plaintiff exercised a right to purchase one share of PayActiv stock for cc $0.025, and immediately sought to exercise a right to inspect all of PayActiv’s accounting books and records, including all bank statements, payroll summaries, credit card statements, records 0f wire transfers of funds, annual financial statements, tax returns and records relating to past, present or proposed equity and debt financings; minutes of proceedings of the stockholders and the board and committees 0f the board of the Company; and correspondence fi‘om any federal or state regulatory authority or agcncy pertaining t0 the business of the Company.” fl Complaint, Attachment A, at 1. After thc Company rejcctcd that demand, see Answer, Attachment 2, Plaintiff purchased 65,624 additional shares, which was the balance of the 65,625 shares as t0 which his option rights had vested as of December 4, 2017. s_eg Complaint at 3; Answer at 2, n.1 & Attachment 1. On January 28, 2018, Plaintiff made a second demand for inspection 0f the same broad category of documents. Complaint at 4 & Attachment A at 3. Plaintiff’s second inspection l Ibarra also issued a subpoena in Minnesota in an effort t0 compel MI. Al t0 attend the Court hearing in California which contravenes Minnesota law and is the subject of a motion to quash in Minnesota. fie; Minn. Rules 0f Civil Procedure 45.01(d). PAYACTIV, INCRS NOTICE 0F -3- Case No. 180V325038 MOTION AND MPA Iso MOTION T0 QUASH 07(5040‘7 V V)fl(\7(\§(x»0()fl0l 1 2 3 4 5 6 7 9 10 11 12 8 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 demand was substantially similar to the first demand and did not address any of the Company's objections to the first inspection demand, including the fact that the demand clearly did not relate to Plaintiffs "interests as a shareholder," which is a statutory threshold. Cal. Corp. Code § 1601(a). No proper inspection purpose is set forth in Plaintiffs extremely broad demand to inspect, which far exceeded the statutorily available scope even ifthere would have been a proper demand and a proper purpose. See id. The next day, January 29, 2018, Plaintiff, by and through the Structure Law Group, made a multi-million dollar demand upon PayActiv "for settlement of any and all claims against PayActiv, Inc. ('PayActiv'), whether arising from or relating to his employment, his use of PayActiv products as a consumer, his ownership of capital stock of PayActiv, or otherwise." Mr. Iban-a further sought a seat on the Board of Directors, reinstatement of employment, and a two percent ownership interest in the Company. Wang Deel. Ex. I. Plaintiff, by and through the Structure Law Group, commenced the instant action on March 15, 2018, seeking the inspection of numerous corporate records. Plaintiff did not nan-ow the categories of documents, and continues to seek access to all "accounting books and records, including all bank statements, payroll summaries, credit card statements, records of wire transfers of funds, annual financial statements, tax returns and records relating to past, present or proposed equity and debt financings; minutes of proceedings of the stockholders and the board and committees of the board of the Company; and correspondence from any federal or state regulatory authority or agency pertaining to the business of the Company." See Complaint. Plaintiffs Complaint is limited to a claim for inspection and a claim for declaratory relief, as well as a claim for attorney's fees under Cal. Corp. Code§ 1604 and Cal. Corp. Code 2200, although the Structure Law Group, LLP, has since withdrawn, and Plaintiff is proceedingpra se. In the meantime, Plaintiff retained Sanford Heisler Sharp, LLP to pursue a wrongful termination claim against the Company. See Wang Deel. ,i15. As of the date of this motion, no wrongful termination claims are believed to have been filed by Plaintiff against the Company. Wang Deel. ,i 13. On June 20, 2018, while still represented by the Structure Law Group, Plaintiff filed a STOEL RIVES LLP PAYACTIV, INC.'S NOTICE OF MOTION AND MP A ISO MOTION TO QUASH -4- Case No. 18CV325038 ATTORNEYS AT LAW SAN FRANCISCO ()76�040� l 00676�6-0000 l hulk) N001 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 STOEL RIVES LLP ATTORNEYS A1 LAw SAN FRANCISCO motion to disqualify Stoel Rives on the grounds of a perceived conflict of interest. Plaintiff contends that because Stoel Rives previously represented PayActiv’s COO Ijaz Anwar in a series offraud allegations, Stoel Rives should be barred from representing PayActiV. E Motion to Disqualify filed on June 20, 201 8. The hearing on Plaintiff’s motion to disqualify is set for August 16, 2018 at 9:00 a.m. Between June 22, 201 8 and June 28, 201 8, Plaintiff issued at least seven civil subpoenas to testify at the August 16 hearing: Company Directors Kabir Masra and Amer Akhtar, outside advisers Ajit Medhekar and Sanjiv Das, and PayActiv CTO Mr. Sohail Aslarn and outside counsel Marc A. Al and Philip J. Wang. When asked how many subpoenas he issued and the basis of these individual’s testimony, Plaintiff refused to provide an explanation, but instead simply provided a witness list. Sic Wang Dec]. 11119-10, Ex F-G. III. ARGUMENT a. Legal Standard A party may move to quash a subpoena. CCP § 1987.1(a), (b). CCP § 1987.1(a) “authorize[s] a trial court to protect a party or witness from abusive discovery.” Allen V. Superior w, 151 Cal.App.3d 447, 449 (1984). A Court has “broad discretion” in issuing discovery orders. Hayden V. Friedman, 190 Cal.App.3d 409, 413 (1961). Furthermore, the Court may “in its discretion award the amount of the reasonable expenses incurred in making 0r opposing the motion, including reasonable attorney’s fees, if the court finds the motion was made 0r opposed in bad faith or without substantial justification or that one 0r more 0fthe requirements ofthe subpoena was oppressive. CCP § 1987.2(a). b. The Subpoenas Seek Irrelevant Testimonv The civil subpoenas issued by Plaintiff are not relevant to the hearing on the motion to disqualify and should therefore be quashed.m Slagle v. Superior Ct., 211 Cal.App.3d 1309, 13 14 (1 989) (finding that Plaintiff’s medical history prior to the accident is only discoverable where “Plaintiff s conduct is shown to be relevant to the issue ofproximate causation if ‘good cause for diselosure’ 1's shown”). Here, Plaintiff’s motion seeks to disqualify Stoel Rives, LLP from representing the Company in this books and records demand because PAYACTIV, INCRS NOTICE 0F -5- Case No. 18CV325038 MOTION AND MPA Iso MOTION T0 QUASH 076i040€ I 0067656-OOOOI L») kn \lo 1o 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 S'IOHI. RIVES LLP ATTORNEVS AT LAw SAN FRANCISCO attorney Marc A1 previously represented the Company’s COO Ijaz Anwar in a series of unrelated lawsuits in Minnesota after the company Mr. Anwar was then employed by, and owned an interest in, became the victim of a multi-million dollar Ponzi scheme, the perpetrator of which is now in federal prison. E Declaration of Marc A. A1 11 3. Besides the fact that Plaintiff s motion is based 0n nothing more than innuendo, Plaintiff’s motion t0 disqualify is fatally defective because: 1. there is no conflict; and 2. even if there were a conflict, Plaintiff does not have standing to disqualify the Company’s choice ofcounsel. First, there is no conflict. A conflict only arises in successive representations where the counsel represents the adverse parties in a substantially related matter. E Lynn V. George, 15 Cal.App.5th 630, 637 (2017) (“Where an attorney successively represents clients with adverse interests, and where the subjects of the two representations are substantially related, the need to protect the first client’s confidential information requires that the attorney be disqualified from the second representation”) (citing Acacia Patent Acquisition. LLC V. Superior Court, 234 Cal.App.4lh 1091 (2015)). Here, Mr. Anwar and the Company do not have conflicting interests in this records-request case, the Minnesota representations ended long ago, and those cases bear no relationship to the books-and-records demand being litigated here. E Request [or Judicial Notice Exhibit A-C (dockets for the Minnesota matters). Second, even assuming there were a conflict between Mr. Anwar and the Company, Plaintiff does not have standing to challenge the Company’s choice of counsel. Standing is a prerequisite to bring a motion to disqualify. EQ at 636-3 7. “Standing may arise from an attorney-client relationship between the moving party and targeted counsel or from a duty 0f confidentiality owed by the attorney to the moving party despite the absence of an attorney-client relationship.” E. (citations omitted). Here, any hypothetical conflict belongs 10 the Company and Mr. Anwar and the Company is entitled to its choice of counsel. Stoel Rives has no attorney- client relationship with the Plaintiff nor does Stoel Rives owe Plaintiff any duty of confidentiality. No testimony solicited by the civil subpoenas would affect this analysis. Accordingly, the subpoenas should be quashed. PAYACTIV, INCRS NOTICE 0F -6- Case No. 1861325038 MOTION AND MPA Iso MOTION T0 QUASH 076€040€ 1 006 76€6.00001 1 2 3 5 6 7 8 9 10 11 12 13 14 4 15 16 17 18 19 20 21 22 23 24 25 26 27 28 c. The Subpoenas Are Unreasonable and Oppressive Unreasonable or oppressive subpoenas are subject to a motion to quash. CCP 1987. l(a). An oppressive demand can be found where: the discovering party intended to create an unreasonable burden for the responding party or the ultimate effect of the discovery burden is excessive compared to how useful the information will be to the discovering party. West Pico Furniture Co. v. Superior Ct., 56 Cal.2d at 407,417 (1961). Here, there can be no serious doubt about Plaintiffs intention to harass the Company and its officer, directors, advisors, and outside counsel and to seek pre-suit discovery to support his wrongful termination claims. Immediately upon his termination, Plaintiff exercised stock option rights and purchased a single share of stock at $0.025 and made an exceedingly broad demand to inspect books and records based on his status as holder of a single share. See Complaint Attachment A. Following the Company's denial of Plaintiffs demand, Plaintiff exercised stock option rights with respect to the rest of his options, made a second demand for the inspection of the same broad swath of documents, and the next day demanded millions of dollars, a seat on the Board of Directors, reinstatement, and more stock. See Wang Deel. Ex J. Through the counsel demanding millions of dollars and a seat on the Board, Mr. Ibarra filed this lawsuit two weeks later, ostensibly to enforce his books and records demand. Since that time, Plaintiff retained Sanford Heisler to pursue wrongful termination claims against the Company. See Wang Deel. 115. Upon filing a motion to disqualify Stoel Rives, Plaintiff caused the Court to issue at least seven subpoenas and when asked, refused to tell Defendant's counsel who was subpoenaed and what the intended scope of the testimony would be. See Wang Deel. 12-9, Ex. A-F. When asked to detail which allegations he seeks to investigate as part of his books-and-records demand, Plaintiff refused to answer and threatened to file a motion for protective order to avoid answering discovery requests related to his purpose. See Wang Deel. 19, Ex. J. As explained previously, there is no reason to believe that the subpoenaed Californians would have relevant testimony about Plaintiffs motion to disqualify Stoel Rives, LLP. Thus, the only plausible explanation for the subpoenas is to harass the Company and its officers, directors, and outside counsel and advisors and to seek unlawful pre-suit discovery to support his wrongful termination claims. STOEL RIVES LLP PA YACTIV, INC.'S NOTICE OF MOTION AND MPA ISO MOTION TO QUASH -7- Case No. 18CV325038 ATTORNEYS AT LAW SAN FRANCISCO Q76,n4n, 1 nnl\76,6-nnnn 1 1o 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 STOEL RIVEs LLP ATTORNEYS AT LAW SAN FRANcIsco d. Marc Al is Not Subiect t0 the Jurisdiction of the Civil Subpoena and the Subpoena Calls for Privileged Information The California subpoena t0 Marc Al is defective 0n its face because California courts cannot compel a non-party resident of a foreign state 10 testify in California. E CCP §1989 (“A witness is not obliged to attend as a witness before any court, judge, justice 0r any other officer, unless the witness is a resident within the state at the time 0f service.”) Notwithstanding this clear limitation and after being informed 0f this defect, Plaintiff insisted 0n serving Marc Al in Minnesota with a Minnesota subpoena, again seeking appearance in this Court, in Violation 0f Minnesota Rule 0f Civil Procedure 45.01(d). Sfi Wang Decl. Ex. B. Marc A1 is a resident 0f Minnesota, has not been in California for years, and the subpoena against him is defective 0n its face. E Marc Al Decl. 1p. Moreover, the subpoena t0 Mr. Al is barred by thc attorncy-clicnt privilege. E Evidence Code § 950 m. Mr. A1 is being called in his capacity as lawyer for Mr. Anwar and hc could not testify without divulging privileged information belonging t0 Mr. Anwar. PAYACTIV, INCRS NOTICE 0F -8- Case No. 18CV325038 MOTION AND MPA ISO MOTION T0 QUASH 0765040‘ 1 0067656410001 1 e. The Subpoenas Are Designed to Harass 2 The Court may award attorneys' fees where the subpoena was oppressive or an opposition 3 to the motion to quash is made without substantial justification. See CCP 1987.2(a). As described 4 above, the subpoenas are oppressive: they do not seek relevant testimony to the motion to 5 disqualify hearing and Plaintiff refused to answer straight-forward questions about whom he 6 subpoenaed and the substance of the intended testimony. It is clear that the subpoenas were 7 served in bad faith to harass the Company and its officers, directors, and advisors, drive up 8 litigation costs, and seek pre-suit discovery for his wrongful-termination claim against the 9 Company. As a result, the Court should quash all subpoenas issued in this matter to Mr. Ibarra 10 and award PayActiv its attorney's fees and costs in having to bring this motion, in the amount of 11 $15,284.00. SeeWangDecl. 1117-19. 12 13 Dated: July 16, 2018 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 STOEL RIVES LLP ATTORNEYS AT LAW SAN FRANCISCO PAYACTIV, INC.'S NOTICE OF MOTION AND MPA ISO MOTION TO QUASH Q76�040� 1 0067/i�li-00001 STOEL RIVES LLP -9- Case No. 18CV325038