Appel v. Wolf, No. 3:2018cv00814 - Document 89 (S.D. Cal. 2022)
Court Description: ORDER denying 80 Motion to Compel Deposition Questions. Signed by Magistrate Judge Bernard G. Skomal on 6/27/2022. (fth)
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Appel v. Wolf Doc. 89 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 HOWARD APPEL, Case No.: 18-cv-814-L-BGS Plaintiff, 12 13 v. 14 ROBERT S. WOLF, ORDER DENYING DEFENDANT’S MOTION TO COMPEL PLAINTIFF TO RESPOND TO DEPOSITION QUESTIONS Defendant. 15 16 [ECF 80] 17 18 I. 19 INTRODUCTION Defendant Robert S. Wolf has filed a Motion to Compel Plaintiff to Respond to 20 Deposition Questions and Plaintiff Howard Appel has filed an Opposition. (ECF 80, 21 83.1) The parties’ Joint Statement indexing the relevant portions of the transcript of 22 Plaintiff’s deposition is also before the Court. (ECF 77.) 23 24 25 1 26 27 28 At the request of the parties, the briefing schedule included the filing of an index of the portions of the transcript the parties would both rely on in their briefing. (ECF 77.) The Court did not require the parties to directly quote every question from the transcript in their briefs because they were providing the index, however, the Court did require “clear citations to the transcript and appropriate summaries of the testimony at issue.” (ECF 76 1 18-cv-814-L-BGS Dockets.Justia.com 1 Defendant seeks an order from the Court compelling Plaintiff to appear for a 2 further deposition and answer questions regarding Millennium Health Care (ECF 80 at 3 10-15)2 and questions where he invoked the attorney-client privilege to either not answer, 4 or not fully answer certain questions (ECF 80 at 16-20). Additionally, Defendant seeks 5 sanctions against Plaintiff for terminating the deposition. (ECF 80 at 20-21.) In 6 opposing the Motion, Plaintiff relies on the Court’s prior Order regarding the irrelevancy 7 of discovery regarding Millennium and argues the same is true here (ECF 83 at 9-12), 8 notes that Defendant failed to actually brief the relevancy of the questions to 9 impeachment (id. at 12-13), and argues the attorney-client privilege was properly invoked 10 (id. at 13-15) and was not waived (id. at 15-19). Additionally, in opposing Defendant’s 11 request for sanctions, Plaintiff argues that even if Defendant were entitled to further 12 responses to questions, Defendant is still not entitled to sanctions because Defendant’s 13 harassing conduct and verbal abuse by Defendant necessitated termination of the 14 deposition. (ECF 83 at 19-20.) 15 Having considered the parties’ briefing and for the reasons set forth below, the 16 Court DENIES Defendant’s Motion. 17 II. BACKGROUND3 18 Plaintiff’s Complaint asserts a single claim for libel per se for a statement 19 Defendant made about Plaintiff in a November 27, 2017 email to three attorneys 20 representing Plaintiff and two attorneys that represented Concierge Auctions, LLC 21 22 23 24 25 26 27 28 at 5 n.6.) Accordingly, the Court has only considered the issues and questions raised and addressed in the parties’ briefs. 2 The Court cites the CM/ECF electronic pagination throughout unless otherwise noted. 3 The Court only briefly notes the procedural history and allegations asserted in this case as necessary to provide context to the arguments raised by both parties that rely on the allegations of Plaintiff’s Complaint and prior court decisions. A more detailed background is provided in the Court’s Order Quashing eight subpoenas issued by Defendant. (Appel v. Wolf, Case No. 21-cv-1466-L-BGS, ECF 24 (Order Granting in Part Motions to Quash Subpoenas.) 2 18-cv-814-L-BGS 1 (“Concierge”). (Compl. [ECF 1] ¶¶ 9-13, 14-19 (First Claim for Relief, Libel Per Se); 2 ECF 83 at 6.) The email was related to a case between Plaintiff and Concierge. (Compl. 3 ¶¶ 3-6, 10.) In the email, Defendant stated: 4 By the way, I know Howard Appel from when I used to head the litigation side at Gersten Savage, more than 10 years ago. Howard had legal issues (securities fraud) along with Montrose Capital and Jonathon Winston who were also clients at the time. Please send him my regards. 5 6 7 (Id. ¶10 (hereinafter “November 2017 Statement.”) 8 9 Defendant has conceded this statement was mistaken and made about a different 10 Howard Appel. (Decl. of Robert Wolf [ECF 5-2] (“Wolf Decl.”) ¶ 8 (“[P]laintiff turned 11 out to be a different Howard Appel . . .”).) However, the Complaint alleges that 12 Defendant refused to retract the statement despite two requests for a retraction or 13 apology. (Compl. ¶ 13.) 14 Earlier in this case, Defendant filed a special motion to strike under California’s 15 anti-SLAPP statute, California Civil Code § 425.16. (ECF 5.) It was denied by the 16 district court and Defendant filed an interlocutory appeal to the Ninth Circuit. (ECF 29 17 (denying), ECF 31 (appeal).)4 In affirming the district court, the Ninth Circuit explained 18 that “the district court correctly held that Appel was reasonably likely to succeed on the 19 merits of his claim, given that Wolf’s email was facially defamatory and not immunized 20 by California’s litigation privilege.” Appel v. Wolf, 839 Fed. Appx. 78, 80 (9th Cir. Dec. 21 14, 2020). Following the interlocutory appeal, this case proceeded. (ECF 50.) 22 23 During discovery, Defendant issued eight subpoenas to non-parties that the Court quashed. (See Exhibit A to Plaintiff’s Opposition [ECF 83-1] or ECF 24 (Order granting 24 25 26 27 28 4 Plaintiff also filed a cross appeal (ECF 36) that the Ninth Circuit did not reach. (ECF 36 (Plaintiff’s cross appeal); Appel v. Wolf, 839 Fed. Appx. 78, 79 n.1 (9th Cir. Dec. 14, 2020). 3 18-cv-814-L-BGS 1 in part motions to quash subpoenas) in Case No. 21-cv-1466-L-BGS5 (hereinafter “Quash 2 Order”).) Plaintiff moved to quash the subpoenas. (Id.) The Court quashed the 3 subpoenas for numerous reasons, including that Defendant had not established the 4 discovery sought regarding Millennium, where Plaintiff was previously President, was 5 relevant to the statement that Plaintiff “had legal issues (securities fraud).” (Id. at 16-21.) 6 Rather, Defendant attempted to equate allegations regarding potential Medicare fraud at 7 Millennium with Plaintiff having legal issues with securities fraud. (Id. at 18, 22 (finding 8 Defendant failed to show how Millennium conduct was relevant to “legal issues” as 9 opposed to factual issues).) The Court explained that the November 2017 Statement 10 concerned only legal issues regarding securities fraud and that does encompass 11 “discovery about Appel’s alleged fraudulent conduct . . . to prove facts that he was so 12 involved.” (Id.) The Court also found Defendant failed to identify how the many broad 13 requests at issue would be relevant to his truth defense (id. at 23,) and that the requests 14 were not proportional to the needs of the case (id. at 23-25). 15 After numerous delays by the parties, Plaintiff was finally deposed on January 13, 16 2022. The parties initially contacted the Court regarding Plaintiff’s January 13, 2022 17 deposition shortly after it, on January 20, 2022. (ECF 73.) However, the parties did not 18 have the transcript of Plaintiff’s deposition and requested to delay briefing the dispute 19 until they obtained it. (ECF 73-74.) Following the parties’ notification of the Court that 20 they received the transcript, the Court issued a briefing schedule. 6 (ECF 76.) This 21 Motion followed. 22 23 Generally, Defendant’s arguments can be categorized by questions regarding Millennium that Plaintiff refused to answer and questions where Plaintiff invoked the 24 25 26 27 28 5 The Order was issued in three related cases raising the same arguments. The cases originated in three different districts, but were eventually transferred to this district under Federal Rule of Civil Procedure 45(f). 6 The briefing schedule was also extended at the parties’ request. (ECF 79.) 4 18-cv-814-L-BGS 1 attorney-client privilege to either not answer or not fully answer questions. (ECF 80 at 2 10-15 (Millennium); 15-16 (attorney-client privilege as to Millennium); 16-17 (attorney- 3 client privilege waived as to website post); 17-20 (attorney-client privilege waived by 4 filing this case).) Defendant also seeks sanctions for Plaintiff’s termination of the 5 deposition. (ECF 80 at 20-21.) The Court first addresses the Millennium questions, then 6 consider the attorney-client privilege issues, and finally addresses the issue of sanctions.7 7 III. 8 9 MILLENIUM QUESTIONS Defendant seeks a Court Order requiring Plaintiff to sit for an additional deposition and answer questions Defendant asserts relate “to the sale of securities omitting material 10 information” including regarding Millennium’s alleged submission of false claims to 11 Medicare, a Department of Justice investigation into Millennium, and whether these 12 activities were concealed from lenders participating in a 2014 credit agreement with 13 Millennium.8 (ECF 80 at 12-15; ECF 77, Index Nos. 14-15, 88-90, 95-98, 100, 102-04, 14 109, 113-114, 116, 118.) Defendant claims questions on these topics are within the scope 15 of his defense that Plaintiff “had legal issues (securities fraud).” (Id. at 6.) He claims his 16 defense is that his statement in the email regarding Plaintiff was true based on Plaintiff’s 17 own conduct which constituted securities fraud. (Id. at 6.) As detailed below, relying on 18 allegations in lawsuits filed regarding conduct at Millennium and the 2014 Credit 19 Agreement, Defendant asserts that these questions are relevant “to both Appel’s burden 20 to show [Defendant’s] claim is materially false” and Wolf’s defense that the statement is 21 true, i.e. his truth defense. (Id. at 10-15.) 22 23 Plaintiff argues the questions are not relevant to Defendant’s statement that Plaintiff “had legal issues (securities fraud).” (ECF 83 at 5, 9-12.) As to the questions 24 25 7 26 27 28 Defendant mentions Plaintiff’s credibility in his introduction (ECF 80 at 7-8), but does not otherwise address it. Despite this, the Court has also addressed this issue. 8 As noted above the Court will only address the questions and topic areas put forth in the parties’ briefs given the Court’s requirement of clear citations and summaries of any testimony at issue. (ECF 76 at 5 n.6.) 5 18-cv-814-L-BGS 1 regarding Medicare billing at Millennium, Plaintiff argues the Court already found the 2 topic irrelevant to Plaintiff having “legal issues (securities fraud).” (Id. at 9-10 (quoting 3 Quash Order at 16).) As to the questions regarding Millennium’s financial transactions, 4 Plaintiff relies on the Court’s differentiation between legal and factual issues to assert 5 that none of the lawsuits Defendant relies as a basis to ask questions about Millenniums’ 6 financial transactions indicate Plaintiff, as opposed to others, had any legal issues with 7 securities fraud. (ECF 83 at 10-12.) And finally, Plaintiff again argues that none of this 8 information has any connection at all to Defendant’s actual statement that Plaintiff “had 9 legal issues (securities fraud) along with Montrose Capital and Jonathan Winston who 10 were also clients at the time.” (ECF 83 at 12 (emphasis in Plaintiff’s brief).) Plaintiff 11 emphasizes that none of the information sought by Defendant has anything to do with 12 Montrose Capital, Jonathon Winston, or Plaintiff being a client of Defendant. (Id.) 13 A. 14 Rule 26(b)(1) provides that “[p]arties may obtain discovery regarding any non- Relevancy 15 privileged matter that is relevant to any party’s claim or defense and proportional to the 16 needs of the case considering the importance of the issues at stake in the action, the 17 amount in controversy, the parties’ relative access to relevant information, the parties’ 18 resources, the importance of the discovery in resolving the issues, and whether the burden 19 or expense of the proposed discovery outweighs its likely benefit.” Fed. R. Civ. P. 20 26(b)(1). 21 “District courts have broad discretion in controlling discovery” and “in 22 determining relevancy.” Laub v. Horbaczewski, 331 F.R.D. 516, 521 (C.D. Cal. 2019) 23 (citing Hallett v. Morgan, 296 F.3d 732, 751 (9th Cir. 2002) and Surfvivor Media, Inc. v. 24 Survivor Prods., 406 F.3d 625, 635 (9th Cir. 2005). “Evidence is relevant if: (a) it has 25 any tendency to make a fact more or less probable than it would be without the evidence; 26 and (b) the fact is of consequence in determining the action.” Fed. R. Evid. 401. 27 “Information within the scope of discovery need not be admissible in evidence to be 28 discoverable.” Fed. R. Civ. P. 26(b)(1). 6 18-cv-814-L-BGS 1 B. 2 The Court does not repeat the lengthy discussion of defamation and the truth Defamation and Truth Defense 3 defense included in the Court’s November 9, 2021 Order. (Quash Order at 9-10.) 4 However, given the Court is addressing the relevancy of the questions to Plaintiff’s libel 5 per se claim and Defendant’s truth defense, the Court briefly notes the following 6 standards. “Defamation . . . involves the intentional publication of a statement of fact 7 that is false, unprivileged, and has a natural tendency to injure or which causes special 8 damage.” Smith v. Maldonado, 72 Cal. App. 4th 637, 645 (1999); see also Appel, 839 9 Fed. Appx. at *80 (“A claim for defamation under California law involves “a 10 publication” that is “false,” defamatory,” unprivileged,” and that “has a natural tendency 11 to injure or that causes special damage.”) (quoting Taus v. Loftus, 40 Cal. 4th 683 12 (2007)). “[A] defamatory meaning must be found, if at all, in reading the publication as a 13 whole . . . [not] snippets taken out of context.” Kaelin v. Globe Commc’ns Corp., 162 14 F.3d 1036, 1040 (9th Cir. 1998). However, “[b]y the same token, not every word of an 15 allegedly defamatory publication has to be false and defamatory to sustain a libel action.” 16 (Id. (citing Masson v. New Yorker Magazine, 501 U.S. 496, 510 (1999)). 17 Here, Plaintiff asserts a single claim for libel per se. (ECF 1 ¶¶ 14-19) “A 18 statement is libel per se, or libel on its face, when it ‘is defamatory without the need for 19 explanatory matter such as an inducement, innuendo, or other extrinsic fact.’” Quidel 20 Corp. v. Siemens Med. Solutions USA, Inc., __ F.Supp.3d __, 2020 WL 1820247, at *4 21 (S.D. Cal. 2020) (quoting Overstock.com, Inc. v. Gradient Analytics, Inc., 151 Cal. App. 22 4th 688, 700 (2007)); see also Barnes-Hind, Inc. v. Superior Court., 181 Cal. App. 3d 23 377, 382 (1986) (“A libel which is defamatory of the plaintiff without the necessity of 24 explanatory matter, such as inducement, innuendo, or other extrinsic fact, is said to be 25 libel on its face.”) 26 For a libel per se claim, a plaintiff is not required to prove he suffered special 27 damages, i.e. “that he has suffered in respect to his property, business, trade, profession 28 or occupation . . . a result of the alleged libel, and no other” to obtain an award of 7 18-cv-814-L-BGS 1 damages. Barnes-Hind, Inc., 181 Cal. App. 3d at 382 (citations omitted). If a plaintiff 2 “proves a libel per se claim, it is unnecessary to prove special damages; rather, damage to 3 reputation is presumed.” Quidel Corp., 2020 WL 1820247, at *4 (citing Barnes-Hind, 4 181 Cal. App. 3d at 381). 5 “In all cases of alleged defamation, whether libel or slander, the truth of the 6 offensive statement or communication is a complete defense against civil liability, 7 regardless of bad faith or malicious purpose.” Smith, 72 Cal. App. 4th at 646 (collecting 8 cases).9 To establish a truth defense, a “defendant must prove the truth of all important 9 aspects in the statement. However, defendant is not required to prove the truth of every 10 word of the statement or to prove its literal truth.” Gantry Constr. Co. v. Am. Pipe and 11 Const. Co., 49 Cal. App. 3d 186, 194 (1975); see also Smith, 72 Cal. App. 4th at 646-47. 12 C. 13 Defendant identifies the following questions: Defendant’s Questions • Mr. Appel, you were president of Millennium Health Care at the time that it 14 15 entered into a credit agreement with several hedge funds and institutional investors 16 in April 2014, correct? (ECF No. 77, Index Nos. 14-15.) 17 • Mr. Appel, this credit agreement was, as you can see, dated April 15, 2014, and it 18 19 was executed when you were president of Millennium, correct? (Index Nos. 88-90) 20 21 22 23 24 25 26 27 28 9 CACI No. 1720 Affirmative Defense—Truth: [Name of defendant] is not responsible for [name of plaintiff]’s harm, if any, if [name of defendant] proves that [his/her/nonbinary pronoun/its] statement(s) about [name of plaintiff] [was/were] true. [Name of defendant] does not have to prove that the statement(s) [was/were] true in every detail, so long as the statement(s) [was/were] substantially true. 8 18-cv-814-L-BGS 1 • Millennium did not disclose the Department of Justice investigation into 2 Millennium prior to the closing of this credit agreement, correct? (Index Nos. 95- 3 96, Exh. 11.) 4 5 • Mr. Appel, you knew that a grand jury had been paneled by a federal prosecutor in 6 2012, well before this credit agreement had been executed, right? (Index No. 96. 7 Exh. 11.) 8 9 10 • Mr. Appel, you were aware in 2012 that Millennium was served with a subpoena by the Department of Justice, right? (Index No. 97.) 11 12 • Millennium did not disclose that either a grand jury had been paneled by the 13 federal prosecutor or that Millennium had been served with a subpoena by the 14 Department of Justice in -- prior to April 15, 2014, when this credit agreement 15 closed; is that correct? (Index No. 98.) 16 17 18 • Millennium's materials that were soliciting the lenders did not accurately represent Millennium's compliance with requirements of the law, right? (No. 100.) 19 20 • Millennium did not accurately represent that there was no investigation pending or 21 threatened that would reasonably expect -- be expected to have a material adverse 22 effect on Millennium, right? (Index No. 102.) 23 24 25 • Mr. Appel, Millennium did not disclose to any of the lenders that were party to this credit agreement any of its fraudulent billing practices, right? (Index No. 103.) 26 27 28 9 18-cv-814-L-BGS 1 • Millennium did not disclose to any of the lenders participating in this credit 2 agreement of Millennium's submission of false claims to the Medicare program, 3 right? (Index No. 104.) 4 5 • In connection with the credit agreement that we’re looking at as Exhibit 11, isn't it 6 a fact that in soliciting and receiving this $1.8 billion loan, Millennium was 7 participating in securities fraud? (Index No. 109, Exh. 13.) 8 9 • Mr. Appel, is that your signature? (Index No. 113.) 10 11 • Mr. Appel, in signing this document on behalf of Millennium Laboratories, 12 Millennium Laboratories was misrepresenting their legal issues with the 13 Department of Justice in order to induce the lenders to provide the $1.8 billion 14 loan, right? (Index No. 114.) 15 16 • And these materials in the confidential information memorandum misrepresented 17 that there was no investigation pending or threatened that would reasonably be 18 expected to have an adverse material effect on Millennium, correct? (Index No. 19 116, Exh. 13.) 20 21 22 23 24 • Mr. Appel, the contents of Exhibit 13 nowhere disclosed that there was a grand jury impaneled to investigate Medicare fraud by Millennium, correct? (Index No. 118, Exh. 13.) (ECF 80 at 14-15): 25 D. Analysis 26 The crux of Defendant’s argument for the relevancy of these questions is that 27 “Appel sold securities to investors while making material misstatements under the 28 securities fraud statutes by claiming Millennium was compliant with the law and 10 18-cv-814-L-BGS 1 standards promulgated by regulatory agencies.” (Id. at 13-14.) However, all the 2 questions are about Millennium and Plaintiff’s conduct at Millennium. None of the 3 questions regard Plaintiff having legal issues with securities fraud at Millennium. At 4 most these questions attempt to establish Plaintiff’s alleged participation in a fraud 5 committed by Millennium regarding billing and the 2014 Credit Agreement. 6 Defendant relies on numerous lawsuits to argue Defendant’s November 2017 7 statement that Plaintiff had “legal issues (securities fraud)” was not materially false. 8 (ECF 80 at 11-13.) Plaintiff argues none of these lawsuits demonstrate he “had legal 9 issues (securities fraud)” because two were not brought against him and the one cited that 10 did include him as a defendant was not for securities fraud. (ECF 83 at 11-12.) And, like 11 the lawsuits, Plaintiff argues there is no indication in the DOJ letter to an attorney at 12 Millennium that Defendant quotes in his Motion that Plaintiff was being pursued for 13 securities fraud. (Id. at 11.) Because these allegations provide the basis for Defendant’s 14 relevancy argument regarding Plaintiff having “legal issues (securities fraud),” the Court 15 reviews each of them. 16 Defendant cites many of the allegations in the Complaint in Kirschner v. 17 JPMorgan Chase Bank, as well as portions of rulings in In re Millennium Lab Holdings 18 II, LLC, and Opt–Out Lenders v. Millennium Lab Holdings II, LLC (In re Millennium Lab 19 Holdings II, LLC ).10 (ECF 80 at 11-13.) Defendant relies on them for the proposition 20 that Plaintiff was one of the controlling persons who received proceeds from 21 Millennium’s misrepresentations about its financial condition. (ECF 80 at 11). 22 Defendant also claims they show “… Appel’s involvement in preparing the Millennium 23 offering materials and communications he had with investors regarding the legality of 24 25 10 26 27 28 Kirschner v. JPMorgan Chase Bank,Case No. 17-cv-6334, (Sup. Ct N.Y. Cnty. 2018) (Exhibit 2); In re Millennium Lab Holdings II, LLC No. 15-12284 (LSS), 2019 WL 1005657, at *1 (Bankr. D. Del. Feb. 28, 2019) (Exhibit 6); Opt–Out Lenders v. Millennium Lab Holdings II, LLC (In re Millennium Lab Holdings II, LLC ), 242 F. Supp. 3d 322, 340–41 (D. Del. 2017). 11 18-cv-814-L-BGS 1 Millennium’s sales, marketing, and billing practices,…” (Id. at 12.) Defendant quotes a 2 portion of a DOJ letter to a Millennium attorney in a case indicating Millennium was 3 being investigated for fraudulent billing practices. (Id. at 13.) In sum, Defendant alleges 4 that “…Appel sold securities to investors while making material misstatements under the 5 securities fraud statutes by claiming Millennium was compliant with the law and 6 standards promulgated by regulatory agencies.” (Id. at 13-14.) Thus, Defendant argues 7 that Plaintiff should be compelled to answer questions about this conduct. (Id. at 14.) 8 Plaintiff was not named as a defendant in Kirschner v. JPMorgan Chase Bank, 9 Case No. 17-cv-6334 or In re Millennium Lab Holdings II, No. 15-12284. But, 10 Defendant relies on the allegations of the Complaint to try to prove Plaintiff’s conduct as 11 President of Millennium was securities fraud. (ECF 80 at 11-12.) However, proving his 12 conduct or misconduct does not equate to Plaintiff having legal issues regarding 13 securities fraud. As Plaintiff notes, these allegations might show the banks named as 14 defendants had legal issues with securities fraud because they were named in lawsuits 15 alleging securities fraud, but not Plaintiff. (ECF 83 at 10-11 (“[The]se lawsuits might be 16 evidence that the banks ‘had legal issues (securities fraud),’ but not [Plaintiff].”) The 17 DOJ letter referenced in an action between Millennium and an insurer that Defendant 18 relies on is even further removed. (ECF 80 at 13 (citing Millennium Labs, Inc. v. Allied 19 World Ins. Co., 135 F. Supp. 3d 1165, 1169 (S. D. Cal. 2015)11).) It concerns policy 20 coverage and the portion of the DOJ letter cited identifies an investigation for false or 21 fraudulent billing. 22 Opt–Out Lenders v. Millennium Lab Holdings II, LLC was filed against Plaintiff 23 and other named defendants, none of whom are Montrose Capital or Jonathon Winston. 24 25 11 26 27 28 The Court has considered this reference for purposes of Defendant’s Motion because Defendant relies on the decision only to quote part of a DOJ letter quoted in the decision. (ECF 80 at 13.) However, the Court notes that a motion for reconsideration of this decision, based on newly discovered evidence, was later granted. Millennium Labs., Inc. v. Allied World Assurance Co., 165 F. Supp. 3d 931 (S.D. Cal. 2016). 12 18-cv-814-L-BGS 1 In re Millennium Lab Holdings II, LLC, 242 F.Supp.3d 322, 340–41 (D. Del. 2017). The 2 Complaint alleged: 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 (i) violation of RICO and conspiracy to violate RICO (18 U.S.C. §§ 1962(c) & (d)), based on allegations that Defendants engaged in fraudulent billing practices, including sending illegal reimbursement requests to Medicare and state Medicaid agencies; (ii) fraud and deceit based on intentional misrepresentation, aiding and abetting fraud, and conspiracy to commit fraud, based on allegations that Defendants made false and misleading representations, for the purpose of inducing Appellants to enter into the Credit Agreement, regarding the accuracy of Debtors’ financial records, Debtors’ compliance with applicable laws, and the existence of pending investigations and litigation against the Debtors; and (iii) restitution, based on allegations that, as a result of the fraudulent inducement, Defendants received a benefit of more than $100 million of loans issued under the Credit Agreement. Id. at 330. Plaintiff being named in this Complaint can be said to have legal issues regarding these allegations. However, this Complaint does not allege securities fraud against Plaintiff. As the Court has previously ruled, Wolf’s discovery requests involve him seeking to prove that Appel was involved in different fraudulent conduct. However, the email limits the discovery to legal issues regarding securities fraud. Legal issues involve questions of the law whereas factual issues involve one party’s evidence (facts) controverted by another’s evidence. Hence, discovery about Appel’s alleged fraudulent conduct seeks evidence to prove facts that he was so involved. [The Defendant] does not address how the requested discovery is relevant to legal issues that Appel supposedly had. 22 23 24 (ECF 24 at 22.) This same analysis applies here. The Court found that discovery to prove Plaintiff 25 was involved in fraud does not go to prove he had legal issues concerning securities 26 fraud. (Quash Order at 22.) Such discovery involves factual issues, not legal issues. 27 (Id.) Although Defendant has focused his deposition questions and his briefing more on 28 the financial transaction and what was or was not disclosed prior to it, including the DOJ 13 18-cv-814-L-BGS 1 letter, Defendant’s allegations are still about potential fraudulent conduct at Millennium, 2 not Plaintiff having “legal issues (securities fraud).” (November 2017 Statement.) In 3 sum, the questions Defendant wants Plaintiff to answer are to show Plaintiff was involved 4 in the preparation of offering materials and communications he had or did not have with 5 investors regarding the legality of Millennium’s sales, marketing, and billing practices. 6 He also seeks to establish he was one of the controlling persons who received proceeds 7 from Millennium’s fraud. These questions are meant to establish that Plaintiff was 8 involved in Millennium’s fraudulent conduct. The questions are not designed to establish 9 that Plaintiff had legal issues regarding securities fraud. They do not seek information 10 relevant to the statement that Plaintiff “had legal issues (securities fraud).” (November 11 2017 Statement.) 12 Notwithstanding, none of Defendant’s allegations against Plaintiff include 13 Montrose Capital or Jonathon Winston. As the Court explained in its Order quashing 14 Defendant’s subpoenas, the allegations regarding Millennium lack any “connection to 15 [Defendant’s] statement that Appel has ‘legal issues (securities fraud) along with 16 Montrose Capital and Jonathon Winston.” (Quash Order at 16 (emphasis added).) 17 Although the Court went on to consider the relevancy of discovery to Defendant’s 18 narrowed version of the November 2017 Statement in greater depth as it has here, the 19 Court explained that Defendant “made a specific statement about [Plaintiff] and none of 20 the discovery sought [was] of consequence to the truth of that actual statement,” which 21 includes it being “along with Montrose Capital and Jonathon Winston who were also 22 clients at the time.” (November 2017 Statement.) However, Defendant has still not 23 addressed this issue. In fact, Defendant’s brief does not even acknowledge any portion of 24 the statement beyond “legal issues (securities fraud)” or provide any authority for 25 completely ignoring the rest of the November 2017 Statement. This is a particularly 26 problematic issue to ignore given the Court’s prior finding that the lack of any connection 27 to the more complete version of this statement was itself a “sufficient reason to find the 28 discovery sought irrelevant.” (Id.) 14 18-cv-814-L-BGS 1 While Defendant has somewhat shifted and narrowed the focus of discovery from 2 conduct related to Medicare fraud at Millennium to the financial transaction between 3 Millennium and the banks, these allegations still lack any connection to Defendant’s 4 claim that Plaintiff was a client and had legal issues with securities fraud with Jonathon 5 Winston and Montrose Capital. As Plaintiff argues in opposition, “[n]one of the 6 information that [Defendant] is seeking to discover shows that [Plaintiff] had legal issues 7 related to securities fraud, much less that such issues were connected to Montrose Capital 8 or Jonathon Winston, or that [Plaintiff] was a client of [Defendant’s].” (ECF 83 at 12.) It 9 is clear that the information Defendant seeks to delve into with these questions has no 10 connection to Defendant’s statement when more than Defendant’s snippet is considered. 11 While the Court recognizes the most negative part of the statement is that Plaintiff had 12 “legal issues (securities fraud),” that does not mean Defendant is permitted to modify his 13 own statement for purpose of discovery without explanation or authority, exclude most of 14 the statement to make it less specific, and then try to encompass facts having nothing to 15 do with the accurate version of the statement. 16 Defendant provides no connection between his questions and securities fraud along 17 with Montrose and Winston. Therefore, even assuming Plaintiff had legal issues about 18 securities fraud, such issues would also have to include Montrose Capital and Winston in 19 order to prove the defense of truth. They do not. 20 The Court need not address proportionality given the Court’s finding on relevancy, 21 however, the discovery sought is also not proportional to the needs of the case. Rule 22 26(b)(1) provides that “[p]arties may obtain discovery regarding any non-privileged 23 matter that is relevant to any party’s claim or defense and proportional to the needs of the 24 case considering the importance of the issues at stake in the action, the amount in 25 controversy, the parties’ relative access to relevant information, the parties’ resources, the 26 importance of the discovery in resolving the issues, and whether the burden or expense of 27 the proposed discovery outweighs its likely benefit.” Fed. R. Civ. P. 26(b)(1). In 28 discussing the 2015 Amendments regarding proportionality, the Advisory Committee 15 18-cv-814-L-BGS 1 reiterated a prior note, that “[t]he objective is to guard against redundant or 2 disproportionate discovery by giving the court authority to reduce the amount of 3 discovery that may be directed to matters that are otherwise proper subjects of inquiry.” 4 Adv. Comm. Notes to Rule 26 (2015 Amendments) (quoting Adv. Comm. Notes to 1983 5 Amendments)). 6 Here, the discovery sought, even if relevant at all under Defendant’s broad reading 7 of “legal issues (securities fraud)” would still be very tangential to the November 2017 8 Statement. Defendant’s November 2017 Statement was about someone else. 9 Additionally, opening up this peripheral area to discovery would lead to even more 10 minimally relevant or irrelevant and burdensome discovery. 11 On the surface, these deposition questions do not carry the same burden and 12 expense imposed by the eight subpoenas Defendant issued in that they are burdening a 13 party rather than a non-party and they are narrower that the overbroad and sweeping 14 requests in the subpoenas. However, opening up this line of inquiry has the potential to 15 create a morass of expensive and burdensome irrelevant or hypothetically minimally 16 relevant and disproportionate discovery. Not only might it lead to further 17 disproportionate discovery on non-parties on a peripheral issue, but Plaintiff would be in 18 the position of trying to disprove these allegations regarding factual conduct. 12 As noted 19 above, the entire basis for even asking the questions are allegations in complaints in 20 lawsuits, only one of which was against Plaintiff, and that one did not allege securities 21 fraud. The parties would end up conducting something tantamount to a trial on Plaintiff’s 22 factual conduct at Millennium. Not only are these not “legal issues,” as discussed above 23 and in the Court’s Quash Order, but they are regarding completely different facts than 24 alleged in the November 2017 Statement. 25 26 27 28 12 The Court is not finding the reopening of discovery would be warranted, but only noting the potential for highly burdensome responsive discovery that would be equally irrelevant or, even assuming minimal relevance, not proportional to the needs of the case. 16 18-cv-814-L-BGS 1 While the Court is well aware of its ability to limit tangential discovery, the whole 2 purpose of the proportionality factors is “ to guard against . . . disproportionate discovery 3 by giving the court authority to reduce the amount of discovery that may be directed to 4 matters that are otherwise proper subjects of inquiry.” Adv. Comm. Notes to Rule 26 5 (2015 Amendments) (quoting Adv. Comm. Notes to 1983 Amendments)). Even if these 6 questions sought relevant discovery on “matters that are otherwise proper subjects of 7 inquiry,” it would be minimally and, for the reasons stated above, disproportionate to the 8 needs of the case. Id. 9 IV. 10 ATTORNEY-CLIENT PRIVILEGE Defendant’s challenges to Plaintiff’s assertion of attorney-client privilege can be 11 categorized into three categories of questions: (1) Millennium related; (2) 12 conciergescams.com posting; and (3) additional questions. (ECF 80 at 8-10, 15-20.) 13 A. 14 “The attorney-client privilege, set forth at Evidence Code section 954, confers a Legal Standard 15 privilege on the client ‘to refuse to disclose, and to prevent another from disclosing, a 16 confidential communication between client and lawyer.’” Costco Wholesale Corp. v. 17 Superior Court, 47 Cal. 4th 725, 732, 734 (2009). “Its fundamental purpose ‘is to 18 safeguard the confidential relationship between clients and their attorneys so as to 19 promote full and open discussion of the facts and tactics surrounding individual legal 20 matters.” Id. (quoting Mitchell v. Superior Court, 37 Cal. 3d 591, 599 (1984)). “The 21 attorney-client privilege attaches to a confidential communication between the attorney 22 and the client and bars discovery of the communication irrespective of whether it 23 includes unprivileged material.” Id. 24 25 26 27 28 Under Evidence Code section 952, a “confidential communication between client and lawyer” is defined as information transmitted between a client and his lawyer in the course of that relationship and in confidence by a means which, so far as the client is aware, discloses the information to no third persons other than those who are present to further the interest of the client in the consultation or those to 17 18-cv-814-L-BGS 1 2 3 whom disclosure is reasonably necessary for the transmission of the information or the accomplishment of the purpose for which the lawyer is consulted, and includes a legal opinion formed and the advice given by the lawyer in the course of that relationship. 4 5 6 Mitchell, 37 Cal. 3d at 600. “Evidence Code section 912 specifically provides that waiver of the attorney-client 7 privilege, as well as other recognized privileges, occurs when any holder of the privilege 8 ‘has disclosed a significant part of the communication or has consented to such disclosure 9 made by anyone’” Id. at 601. 10 B. 11 Defendant argues that Plaintiff could not invoke the attorney-client privilege as to 12 certain questions (Index Nos. 93-105, 108-118) that pertained to Millennium. (ECF 80 at 13 16.) He asserts that because Plaintiff left Millennium in 2015 and then Millennium went 14 through bankruptcy, the trustee in dissolution holds the privilege, not Appel. (Id. (citing 15 Venture Law Group v. Superior Court, 118 Cal. App. 4th 96, 105 (2004) and United 16 States v. Plache, 913 F.2d 1375, 1381 (9th Cir. 1990)).) 17 MILLENIUM Plaintiff first argues that Defendant misses the point because Plaintiff was 18 represented by counsel in his individual capacity and that provided a separate right. 19 (ECF 83 at 18.) Plaintiff goes on to argue that even if the privilege belonged only to 20 Millennium, Defendant is still wrong because Plaintiff “has no ability to waive privilege 21 on behalf of Millennium.” (Id. at 18-19 (citing Commodity Futures Trading Comm’n v. 22 Weintraub, 471 U.S. 343, 349 (1985)).) And, Plaintiff argues the questions are irrelevant, 23 as previously discussed. (Id. at 18.) 24 For solvent corporations, “[t]he power to waive the corporate attorney-client 25 privilege rests with the corporation’s management and is normally exercised by its 26 officers and directors.” U.S. v. Chen, 99 F.3d 1495, 1502 (9th Cir. 1996) (quoting 27 Commodity Futures Trading Comm’n, 471 U.S. at 348). “The managers, of course, must 28 exercise the privilege in a manner consistent with their fiduciary duty to act in the best 18 18-cv-814-L-BGS 1 interests of the corporation and not of themselves as individuals.” Commodity Futures 2 Trading Comm’n, 471 U.S. at 348-49 (citingDodge v. Ford Motor Co., 204 Mich. 459, 3 507 (1919)). 4 As the cases relied on by Plaintiff and Defendant indicate, “[w]hen control of a 5 corporation passes to new management, the authority to assert and waive the 6 corporation’s attorney-client privilege passes as well.” Chen, 99 F.3d at 1502 (quoting 7 Commodity Futures Trading Comm’n, 471 U.S. at 343, 348); see also Venture Law 8 Group, 118 Cal. App. 4th at 105 (quoting the same from Commodity Futures Trading 9 Comm’n, 471 U.S. at 348-49). “New managers installed as a result of a takeover, merger, 10 loss of confidence by shareholders, or simply normal succession, may waive the attorney- 11 client privilege with respect to communications made by former officers and directors.” 12 Commodity Futures Trading Comm’n, 471 U.S. at 349; see also Venture Law Group, 118 13 Cal. App. 4th at 105 (quoting the same from Commodity Futures Trading Comm’n, 471 14 U.S. at 348-49). “Displaced managers may not assert the privilege over the wishes of 15 current managers, even as to statements that the former might have made to counsel 16 concerning matters within the scope of their corporate duties.” Commodity Futures 17 Trading Comm’n, 471 U.S. at 349; see also Venture Law Group, 118 Cal. App. 4th at 105 18 (quoting the same from Commodity Futures Trading Comm’n, 471 U.S. at 349). 19 The dispute in Commodity Futures Trading centered on the control of the attorney- 20 client privilege of a corporation in bankruptcy. The Supreme Court held “that the trustee 21 of a corporation in bankruptcy has the power to waive the corporation’s attorney-client 22 privilege with respect to prebankruptcy communications.” Commodity Futures Trading 23 Comm’n, 471 U.S. at 358. The court explained “that vesting in the trustee control of the 24 corporation’s attorney-client privilege most closely comports with the allocation of the 25 waiver power to management outside of bankruptcy without in any way obstructing the 26 careful design of the Bankruptcy Code.” Id. at 354. 27 28 These cases explain what Plaintiff does not dispute, that as a pre-bankruptcy officer, Plaintiff lacks the authority to waive the attorney-client privilege on behalf of 19 18-cv-814-L-BGS 1 Millennium. (ECF 83 at 18 (Arguing Defendant “fails to account for the other side of that 2 same coin—Appel has no authority to waive that privilege on behalf of Millennium.”).) 3 This is also the case as to the portions of the cases relied on by Defendant. In the portion 4 of Venture Law Group Defendant relies on, the court, relying on Commodity Futures 5 Trading, found individual directors and officers could not impliedly waive the attorney- 6 client privilege by asserting an advice of counsel defense. Venture Law Group, 118 Cal. 7 App. 4th at 105. Similarly, in Plache, the court denied suppression of evidence based on 8 attorney-client privilege because the privilege belonged to the corporation that retained 9 counsel for the corporate entity, not the individual defendant. Plache, 913 F.2d at 1380- 10 11 81 (citing Commodity Futures Trading Comm’n, 471 U.S. at 349). However, none of these address whether a former corporate officer like Plaintiff 12 could be compelled to answer questions implicating the corporation’s attorney-client 13 privilege when he lacks authority to waive the privilege on behalf of the corporation. 14 This is not a situation where the Court is determining if a former officer could waive 15 privilege on behalf of the corporation or if the former corporate officer can assert it “over 16 the wishes of current managers.” See Commodity Futures Trading Comm’n, 471 U.S. at 17 349 (“Displaced managers may not assert the privilege over the wishes of current 18 managers, even as to statements that the former might have made to counsel concerning 19 matters within the scope of their corporate duties.”) (emphasis added). Here, there is no 20 dispute Plaintiff cannot waive the privilege for Millennium, and the record before the 21 Court reflects Plaintiff is not asserting privilege over the wishes of anyone. He is simply 22 not waiving the privilege and not answering questions implicating his former employer’s 23 privilege. 24 Defendant is effectively saying that because Plaintiff is no longer an officer, he 25 cannot assert the privilege to protect Millennium’s privileged communications. 26 However, as Plaintiff explains, if Defendant’s “position were adopted, then the attorney- 27 client privilege owed to a corporation [could] easily be circumvented by deposing the 28 corporation’s former directors and officers in their individual capacities.” (ECF 83 at 20 18-cv-814-L-BGS 1 19.) Additionally, as a practical matter Plaintiff would effectively be disclosing 2 Millennium’s privileged communications despite Plaintiff lacking the ability to waive 3 privilege. The Court is not persuaded, based on Defendant’s briefing and cases cited, that 4 the attorney-client privilege should be so easily extinguished. Plaintiff’s assertion of the 5 privilege was proper under the circumstances. Notwithstanding, Plaintiff asserts, and Defendant has not disputed, 13 that as to the 6 7 questions in Index Nos.93-105, 108-118, Plaintiff was represented by counsel in his 8 individual capacity. Therefore, he had a separate right to assert the attorney-client 9 privilege. (ECF 83 at 18.) As such the Court finds that the questions above infringed on 10 Plaintiff’s individual attorney-client relationship with his counsel and he had the right to 11 assert that privilege. 12 Additionally, these questions are not relevant based on the analysis above. They 13 all regard conduct at Millennium and are irrelevant and not proportional to the needs of 14 the case for all the reasons stated above. (See supra III.D.) 15 C. 16 Defendant seeks to compel testimony regarding who made the decision to publish Website 17 the lawsuit detailed at Exhibit 9 (ECF 80-1 at 178) and why. (ECF 80 at 16-17) The 18 questions that related to these topics are Index Nos. 77-80, 83, 87. (ECF 80 at 16-17.) 19 Defendant asserts Plaintiff waived attorney-client privilege as to any questions regarding 20 the conciergescams.com posting by (1) disclosing a significant part of a confidential 21 communication; and (2) because he should not be permitted to shield facts as opposed to 22 communications. (ECF 80 at 16-17 (citing Edward Wildman Palmer LLP v. Superior 23 Court, 231 Cal. App. 4th 1214, 1226 (2014).) 24 25 26 27 28 13 Although the Court’s briefing schedule did not provide for a reply brief, Defendant could have sought leave to file one. (ECF 76 (“Absent leave of Court, no reply brief may be filed.”) (emphasis added). 21 18-cv-814-L-BGS 1 Plaintiff argues that the questions are irrelevant because they are inquiring about a 2 posting that simply disclosed the defamatory statement already disclosed in this case with 3 the indication that a lawsuit was filed against Defendant for making the statement. (ECF 4 83 at 17.) As to waiver of attorney-client privilege based on the posting, Plaintiff argues 5 that there was no waiver because the posting does not disclose any confidential 6 communication. (Id. at 17-18.) 7 8 1. Waiver “Evidence Code section 912 specifically provides that waiver of the attorney-client 9 privilege, as well as other recognized privileges, occurs when any holder of the privilege 10 ‘has disclosed a significant part of the communication or has consented to such disclosure 11 made by anyone.’” Mitchell, 37 Cal. 3d at 601. 12 In Mitchell, the court held that plaintiff “did not waive her attorney-client privilege 13 through her mere acknowledgment of the fact that she had discussed [the topic at issue] 14 with her attorney.” Id. at 603. The court explained that “[t]his meager admission did not 15 disclose any of the actual substance or content of those discussions, . . . and the client’s 16 answers did not reveal the very specifics which the interrogatories were designed to 17 produce.” Id. The court was “not persuaded that plaintiff’s responses disclosed ‘a 18 significant part of the communication’ with her attorneys, for such a conclusion would 19 require considerably more depth and specificity than were present in [the plaintiff’s] 20 answers” and found no waiver of the attorney-client privilege. Id. (quoting Evid. Code 21 § 912). 22 Similarly, in the present case, posting the lawsuit on the website did not disclose 23 any part, much less a significant part, of the attorney-client communications. 24 Defendant’s questions as to who decided to post the lawsuit and why do impinge on 25 attorney-client communications, as objected to by the Plaintiff at the deposition. 26 Therefore, the Court finds that the posting of the lawsuit did not waive his attorney-client 27 privilege as to these communications. 28 22 18-cv-814-L-BGS 1 2 2. Specific Facts Where the privilege applies, it may not be used to “shield facts, as opposed to 3 communications, from discovery.” Zurich Am. Ins. Co. v. Superior Court, 155 Cal. App. 4 4th 1485, 1504 (2007); Upjohn Co v. United States, 449 U.S. 383, 395-96 (1981) (“The 5 protection of the privilege extends only to communications and not to facts. A fact is one 6 thing and a communication concerning that fact is an entirely different thing”) (emphasis 7 in original) (citation omitted). “[R]elevant facts may not be withheld merely because 8 [they were] incorporated into a communication involving an attorney,” and knowledge 9 that is not otherwise privileged does not become so by being communicated to an 10 attorney. Costco Wholesale Corp. v. Superior Court, 47 Cal. 4th 725, 735 (2009); Zurich 11 Am. Ins. Co., 155 Cal. App. 4th at 1504. 12 “Knowledge which is not otherwise privileged does not become so merely by 13 being communicated to an attorney.’” Costco, 47 Cal. 4th at 735 (quoting Greyhound 14 Corp. v. Superior Court 56 Cal.2d 355, 397 (1961)). “Obviously, a client may be 15 examined on deposition or at trial as to the facts of the case, whether or not he has 16 communicated them to his attorney.” Id. “While the privilege fully covers 17 communications as such, it does not extend to subject matter otherwise unprivileged 18 merely because that subject matter has been communicated to the attorney.” Id. “Thus, ‘a 19 litigant may not silence a witness by having him reveal his knowledge to the litigant’s 20 attorney’” (quoting D.I. Chadbourne, Inc. v. Superior Court, 60 Cal.2d 723, 734 (1964)). 21 On the other hand, the privilege bars discovery of a privileged communication 22 irrespective of whether it includes unprivileged material; “when the communication is a 23 confidential one between attorney and client, the entire communication, including its 24 recitation or summary of factual material, is privileged.” Costco, 47 Cal. 4th at 736. 25 “Sections 956 through 962 enumerate eight exceptions to the attorney-client privilege.” 26 Palmer, 230 Cal. App. 4th at 1227. “Where none of these exceptions apply, ‘[t]he 27 privilege is absolute and disclosure may not be ordered, without regard to relevance, 28 23 18-cv-814-L-BGS 1 necessity or any particular circumstances peculiar to the case.’” Id. (quoting Costco, 47 2 Cal. 4th at 736 and citing Kerner v. Superior Court, 206 Cal. App. 4th 84, 111 (2012)). 3 The issue Defendant raises here is whether Plaintiff’s confidential communications 4 with his attorney also contain facts that are not privileged. The questions that the 5 Defendant identifies as asking for facts rather than confidential communications that he 6 wants the Court to compel Plaintiff to answer are Index Nos. 77-80, 83 and 87. Numbers 7 77-80 all ask Plaintiff whether it was his decision to place Exhibit 9 (ECF 80-1) on the 8 internet. Number 83 regards whether Plaintiff authorized the posting. Number 87 9 regards when Plaintiff found out that it was posted on the internet. 10 Although it appears Defendant is asking about facts, the questions do not appear to 11 seek relevant discovery and even if minimally relevant, they are not proportional to the 12 needs of the case under Rule 26(b)(1). As noted above, “relevant facts may not be 13 withheld merely because [they were] incorporated into a communication involving an 14 attorney,” and knowledge that is not otherwise privileged does not become so by being 15 communicated to an attorney. Costco, 47 Cal. 4th at 735; Zurich Am. Ins. Co., 155 Cal. 16 App. 4th at 1504 (emphasis added). And, as detailed above, under Rule 26(b)(1), 17 Defendant is entitled to nonprivileged matters that are relevant to his claim or defense 18 and proportional to the needs of the case. One of the factors the Court considers as to 19 proportionality is how important the discovery is to resolving the issues in the case. Rule 20 26(b)(1) (“[P]arties may obtain discovery regarding any non-privileged matter that is 21 relevant to any party’s claim or defense and proportional to the needs of the case 22 considering . . . the importance of the discovery in resolving the issues”). Defendant has 23 failed to show how answers to these questions are relevant to important issues in the case, 24 and how answers to these questions resolve those issues. Therefore, the Court finds 25 compelling answers to these questions would not be proportional to the needs of the case 26 because they are not relevant to resolving important issues in the case. 27 28 24 18-cv-814-L-BGS 1 D. 2 Defendant argues Plaintiff has put communications with his attorneys at issue and Additional Questions 3 this requires either a finding of waiver or imposition of evidentiary sanctions. (ECF 80 at 4 17-20.) Defendant initially claims that Plaintiff refused to answer any questions about 5 damages he seeks as to each addressee on the email. (Id. at 18 (citing Index Nos. 48-49, 6 50 and 65).) At the deposition, Plaintiff objected primarily based on attorney-client 7 privilege. Plaintiff specifically indicates that he is not seeking “special damages 8 according to proof,” but rather seeking only presumed damages based on his single claim 9 for libel per se based on Defendant’s facially defamatory November 2017 Statement. 10 (ECF 83 at 16.) He asserts that his damages are presumed as to each of the five 11 addressees. (Id.) 12 For a defamation per se claim, a plaintiff may recover actual damages of harm to 13 his reputation and/or shame, mortification, or hurt feelings. CACI 1704 (addressing 14 Actual Damages). However, even if Plaintiff has not proved the above damages, he is 15 entitled to assumed damages. CACI 1704 (“Even if [Plaintiff] has not proved any actual 16 damages for harm to reputation or sham, mortification, or hurt feelings, the law assumes 17 that [Plaintiff] has suffered this harm. Without presenting evidence of damage, [Plaintiff] 18 is entitled to receive compensation for this assumed harm in whatever sum you believe is 19 reasonable.”); Barnes-Hind, Inc., 181 Cal. App. 3d at 382 (If a plaintiff proves a 20 statement is libel per se, a plaintiff is not required to prove he suffered special damages, 21 i.e. “that he has suffered in respect to his property, business, trade, profession or 22 occupation . . . a result of the alleged libel, and no other” to obtain an award of 23 damages.); see also Quidel Corp., 2020 WL 1820247, at *4 (citing Barnes-Hind, 181 24 Cal. App. 3d at 381) (If a plaintiff “proves a libel per se claim, it is unnecessary to prove 25 special damages; rather, damage to reputation is presumed.”). Without presenting any 26 evidence, the law assumes he has suffered this harm and he is entitled to receive 27 compensation for his assumed harm in whatever sum the jury believes is reasonable. Id. 28 25 18-cv-814-L-BGS 1 Notwithstanding that Plaintiff is only seeking presumed damages, Plaintiff 2 answered the content of these questions regarding damages. Questions 47 and 48 were 3 answered, and question 49 was answered by questions 47-48. Question 50 was also 4 answered. 5 Defendant next cites to numerous index numbers (ECF 80 at 19) in which Plaintiff 6 either objected based on attorney-client privilege or objected to any communication with 7 an attorney and otherwise allowed Plaintiff to answer. (Id.) Defendant argues that 8 Plaintiff abused the attorney-client privilege because he is withholding relevant evidence. 9 Defendant cites Steiny & Company v. California Electric Supply for the proposition that: 10 When a party asserting a claim invokes privilege to withhold crucial evidence, the policy favoring full disclosure of relevant evidence conflicts with the policy underlying the privilege. Courts have resolved this conflict by holding that the proponent of the claim must give up the privilege in order to pursue the claim. 11 12 13 14 (ECF 80 at 20 (quoting Steiny & Co. v. California Elec. Supply Co., 79 Cal. App. 4th 15 285, 292 (2000).) The decision goes on to indicate that “[w]here privileged information 16 goes to the heart of the claim, fundamental fairness requires that it be disclosed for the 17 litigation to proceed.” Steiny & Company, 79 Cal. App. 4th at 292. 18 However, in Berns v. Sentry Select Insurance Company, the Ninth Circuit clarified 19 this exception, explaining that “[a]lthough [plaintiff] cites cases that he claims show there 20 can be exceptions to the attorney-client privilege when “fairness requires” or a party uses 21 it as a “sword and a shield,” the cases that he cites do not apply here because they involve 22 advice-of-counsel defenses, attorney disparagement, and the trade-secrets privilege.” 766 23 F. App’x 515, 518 (9th Cir. 2019). The court goes on to explain, [f]or instance, in United 24 States v. Amlani, we held that the defendant waived attorney-client privilege when the 25 defendant made a claim of attorney disparagement.” Id. (citing 169 F.3d 1189, 1191 (9th 26 Cir. 1999)). “In Columbia Pictures Television, Inc. v. Krypton Broadcasting of 27 Birmingham, Inc., the defendant waived the advice-of-counsel defense by invoking the 28 attorney-client privilege.” Id. (citing 259 F.3d 1186, 1196 (9th Cir. 2001)). And, “[i]n 26 18-cv-814-L-BGS 1 Chevron Corp. v. Pennzoil Co., the defendant waived attorney-client privilege by 2 invoking the advice-of-counsel defense. 974 F.2d 1156, 1162 (9th Cir. 1992)). The court 3 then explains that Steiny & Company “did not involve the attorney-client privilege,” 4 rather, it “involved the trade-secrets privilege.” Id. (citing 79 Cal.App.4th 285). The 5 court then explained that the defendant had “not raised any advice-of-counsel defense nor 6 a claim of attorney disparagement” and found “[n]o exception to the attorney-client 7 privilege applies.” Id. 8 9 Similarly, this case does not fit into one of the exceptions cited by Berns. And unlike Steiny & Company, this case does involve the attorney-client privilege. 10 Further, as detailed above, the privilege bars discovery of a privileged communication 11 irrespective of whether it includes unprivileged material; “when the communication is a 12 confidential one between attorney and client, the entire communication, including its 13 recitation or summary of factual material, is privileged.” Costco, 47 Cal. 4th at 736. 14 “Sections 956 through 962 enumerate eight exceptions to the attorney-client privilege.” 15 Palmer, 230 Cal. App. 4th at 1227. “Where none of these exceptions apply, ‘[t]he 16 privilege is absolute and disclosure may not be ordered, without regard to relevance, 17 necessity or any particular circumstances peculiar to the case.’” Id. (quoting Costco, 47 18 Cal. 4th at 736 and citing Kerner, 206 Cal. App. 4th at 111). 19 In this case none of the above cited exceptions to the attorney-client privilege 20 apply. Further, Defendant does not argue that the Plaintiff’s objections based on the 21 attorney-client privilege were not confidential communications. His position appears to 22 be that by making the objections, the Plaintiff is withholding crucial evidence as stated in 23 Steiny & Company. (ECF 80 at 20.) 24 Although the privilege is absolute and disclosure may not be ordered, the Court 25 applies the crucial evidence test from Steiny & Company to the questions cited by 26 Defendant that regard the attorney-client privilege. Of note, Defendant does not address 27 the relevance of the answers to the questions he cites and why the answers are crucial to 28 the claim of libel per se. Nor does Defendant claim the Plaintiff waived the attorney27 18-cv-814-L-BGS 1 client privilege. See Steiny & Co., 79 Cal. App. 4th at 292 (“Hughes and Morley had the 2 right to stand on the privilege, but not the right to proceed with their claim while at the 3 same time insisting on withholding key evidence from their adversary.”) 4 5 Defendant divided the questions into three groups. (ECF 80 at 19.) Defendant’s first summary of the questions cited states, 6 Appel testified he is retired precluding harm to his ‘occupation’ and could not testify to a single witness who knew the statement was false when they read it, that understood Wolf’s email accused him ‘of being under indictment or other felonious conduct’ or any recipient knew at the time the other ‘Howard Appel’ was a ‘criminal’ or his basis for claiming Wolf accused him of criminal activity. 7 8 9 10 11 (ECF 80 at 19.) Defendant does not explain the relevancy of these topics to Defamation Per Se. See 12 13 CACI No. 1704; analysis above and III.B.14 14 15 16 17 18 19 20 14 CACI No. 1704: [Name of plaintiff] claims that [name of defendant] harmed [him/her/nonbinary pronoun] by making [one or more of] the following statement(s): [list all claimed per se defamatory statement(s)]. To establish this claim, [name of plaintiff] must prove all of the following: 27 Liability 1. That [name of defendant] made [one or more of] the statement(s) to [a person/persons] other than [name of plaintiff]; 2. That [this person/these people] reasonably understood that the statement(s) [was/were] about [name of plaintiff]; 3. [That [this person/these people] reasonably understood the statement(s) to mean that [insert ground(s) for defamation per se, e.g., “[name of plaintiff] had committed a crime”]]; 4. That [name of defendant] failed to use reasonable care to determine the truth or falsity of the statement(s). ... 28 Assumed Damages 21 22 23 24 25 26 28 18-cv-814-L-BGS 1 The Court further reviewed each question in this first group. Index Questions 2 Numbers 33-35 were answered. Questions Numbers 69 and 71 regarded the allegation in 3 the complaint as to why Plaintiff believed that Wolf was accusing him of felonious 4 conduct. The Court finds answers to these questions involved the attorney-client 5 privilege. Numbers 72-73 were answered. Numbers 44-45 were answered. Number 53 6 regarded who on the email chain was unaware Wolf’s statement was untrue. Other than 7 Plaintiff’s attorneys, counsel allowed Plaintiff to answer. Defendant, instead of following 8 up with a revised question, requested a break. Numbers 60-62 regarded whether Plaintiff 9 was claiming that Preis, Boss, and Reynolds were aware or not that Defendant’s email 10 was false. Number 63 presented no question. Number 64 was answered except as it 11 regarded his counsel. Numbers 85-86 were answered. 12 The Court finds the answers to these unanswered questions were covered by 13 attorney-client privilege. Further, the Court finds answers to these questions are not 14 crucial evidence as to the claim of libel per se. Defendant has not even addressed how 15 answers to these questions are relevant to important issues in the case. Again, the Court 16 notes that “relevant facts may not be withheld merely because [they were] incorporated 17 into a communication involving an attorney,” and knowledge that is not otherwise 18 privileged does not become so by being communicated to an attorney. Costco, 47 Cal. 4th 19 at 735; Zurich Am. Ins. Co., 155 Cal. App. 4th at 1504. However, Plaintiff fails to proffer 20 how the answers to the unanswered questions are facts relevant to resolving important 21 issues in the case. Therefore, the Court also finds that they are not proportional to the 22 needs of the case. 23 24 25 26 27 28 Even if [name of plaintiff] has not proved any actual damages for harm to reputation or shame, mortification, or hurt feelings, the law assumes that [he/she/nonbinary pronoun] has suffered this harm. Without presenting evidence of damage, [name of plaintiff] is entitled to receive compensation for this assumed harm in whatever sum you believe is reasonable. You must award at least a nominal sum, such as one dollar. 29 18-cv-814-L-BGS 1 Defendant summarizes the second group of questions, stating that Plaintiff: 2 Could not testify that anyone mistook him for the ‘other Howard Appel’ nor that Wolf’s email harmed his reputation, veracity or honesty or caused him to be shunned or ridiculed. (citing ECF 77, Index Nos. 16-28, 30, 38-42; 8586 (“And just to confirm, are you aware of anyone who has shunned you or ridiculed you because of Exhibit 1?”). (ECF 80 at 19) 3 4 5 6 (ECF 80 at 19.) Defendant asks the Court to apply the test from Steiny & Company, but does not 7 8 apply it himself. He does not establish how the answers to these inquiries are crucial 9 evidence to the claim of libel per se when limited to assumed damages. However the 10 Court has reviewed all the questions cited and applied the test. As detailed below, the 11 Court finds this is not “crucial evidence” going “to the heart of that claim” that 12 “fundamental fairness requires . . . be disclosed for the litigation to proceed” given 13 Plaintiff is only asserting a libel per se claim and not seeking actual damages.15 The Court reviewed the questions cited by Defendant and Plaintiff’s responses. 14 15 Question Numbers 16-28 involve asking Plaintiff if he had discussions with his attorneys 16 about the email and whether it exposed him to ridicule, contempt or angered him and the 17 like. Number 30 inquires as to whom Plaintiff discussed that he was angered by the 18 email. Number 38 asks if the statement caused any harm to his reputation. Numbers 39- 19 40 concern whether the email caused his attorneys to doubt his honesty and veracity. 20 Number 42 regarded whether anyone expressed doubt in his veracity or honesty as a 21 result of the email statement. Numbers 85-86 ask if Plaintiff is aware of anyone that has 22 shunned or ridiculed him because of the statement. 23 24 25 15 26 27 28 As previously noted, Plaintiff has repeatedly indicated he is not seeking actual damages and is limiting himself to presumed damages for his single claim of libel per se. (ECF 83 at 14 (“Appel is entitled to recover presumed damages, so no evidence of damages needs to be presented”); 16 (“Wolf’s argument might have been apposite had Appel sought to recover special damages according to proof, but Appel is not doing that here.”). 30 18-cv-814-L-BGS 1 The questions that directly reference discussions he had with his attorneys (16-28, 2 39-41) are clearly attorney-client communications and the answers are not discoverable 3 because they do not seek crucial evidence sufficient to breach the privilege. Numbers 30, 4 38, 42, and 85-86 were answered. The Court finds that to the extent an answer was 5 withheld it was not sufficiently crucial to a claim or defense that “fundamental fairness 6 requires it be disclosed for the litigation to proceed.” Steiny & Co., 79 Cal. App. 4th at 7 292. 8 As to the third group of questions, Defendant summarizes them as follows, “Appel 9 did testify it was ‘quite possible’ he knew of the ‘other’ Howard Appel before learning of 10 Wolf’s November 2017 email, but refused to testify to anything related to why, within 11 hours of Wolf’s email, Appel’s counsel sent a link regarding the ‘other Howard Appel’s 12 conduct.” (ECF 19 (citing ECF 77, Trans. at 63:3-17, Index Nos. 74-75, depo Exs. 3, 7).) 13 The Court, without some explanation by Defendant, cannot find how such information is 14 crucial evidence. 15 The Court has additionally reviewed the cited questions. As to Number 63 there 16 was no question asked. Numbers 74-75 inquired whether Plaintiff told someone other 17 than his attorney to send a link to an article to Defendant to which Plaintiff responded in 18 the negative. 19 In sum, the Court finds that answers to these three groups of questions do not go to 20 the heart of the claim, and fundamental fairness does not require that answers be 21 disclosed for the litigation to proceed. Steiny & Company, 79 Cal. App. 4th at 292. 22 V. 23 CREDIBILITY In the introduction to his brief, Defendant asserts that Plaintiff’s credibility is as 24 issue and cites to questions in the Index he claims concerns specific instances of past 25 conduct for which he should be allowed to cross examine for impeachment under Federal 26 Rule of Evidence 608(b). (ECF 80 at 7-8.) Plaintiff accurately notes in his Opposition 27 that Defendant never goes on to argue this basis in his brief. (ECF 83 at 12 (“Wolf raised 28 the issue of impeachment in the introduction of his motion . . . but wisely dropped the 31 18-cv-814-L-BGS 1 issue, never bothering to argue that point in his motion.”) However, presumably out of 2 an abundance of caution, Plaintiff goes on to argue that none of the questions asked could 3 be for purposes of impeachment because the questions at issue related to acts of 4 Millennium. (Id.) Putting aside the issues under Rule 403, Plaintiff additionally argues 5 his credibility is not at issue, as asserted by Defendant, based on punitive damages 6 because that inquiry is as to Defendant’s maliciousness, not Plaintiff’s credibility. (ECF 7 83 at 13 (citing Cal. Civ. Code § 3294(a) and CACI No. 1704).) 8 Rule 608, relied on by Defendant, states in pertinent part that: 9 Except for a criminal conviction under Rule 609, extrinsic evidence is not admissible to prove specific instances of a witness’s conduct in order to attack or support the witness’s character for truthfulness. But the court may, on cross-examination, allow them to be inquired into if they are probative of the character for truthfulness or untruthfulness of: (1) the witness; or (2) another witness whose character the witness being cross-examined has testified about. 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Although referring to cross examination of Plaintiff for specific instances of conduct to attack Plaintiff’s character for truthfulness, none of the cited questions (Nos. 44-45, 68, 71) regard any alleged acts by Plaintiff for impeachment. Nor does Defendant summarize the specific instances of conduct about which he seeks to cross exam Plaintiff. Therefore, Defendant has not established Plaintiff should be compelled to answers these questions under Rule 608(b). Notwithstanding, after Plaintiff terminated the deposition, Defendant asked questions that were unanswered and all of which regarded Millennium’s Medicare fraud. (ECF 77 at 34-38.) Defendant himself, not his attorney, argued that if Plaintiff engaged in bad acts, those would be relevant for impeachment under Rule 608(b)(1). (ECF 77 at 34.) He further stated that he can ask him about Millennium’s criminal conduct and false claims and Medicare fraud to impeach his credibility. (Id. at 35) 27 28 32 18-cv-814-L-BGS 1 All of these questions regard Millennium’s conduct. Plaintiff is not Millennium, 2 and therefore answers to these questions are not relevant to impeach Plaintiff’s character 3 under Rule 608. In sum, the Court finds that answers to the cited index questions are not 4 relevant to impeach Plaintiff’s character for truthfulness. 5 VI. 6 SANCTIONS Defendant seeks sanctions because Plaintiff unilaterally terminated the deposition 7 without obtaining a court order. (ECF 80 at 20-21 (citing Rule 30(d)).) He seeks leave to 8 file a fee application. (Id. at 21.) In support, Defendant indicates Plaintiff walked out of 9 the deposition and Plaintiff was not offered for further deposition. (Id.) 10 Plaintiff explains that he suspended the deposition under Rule 30(d)(3) (ECF 83 at 11 19-20) and identifies numerous issues with Defendant’s conduct at the deposition that led 12 to the termination of the deposition. (ECF 83 at 5-6, 8-9, 19-20.) Plaintiff’s brief 13 explains that given the Court’s prior ruling as to the irrelevancy of discovery about 14 Millennium, Plaintiff’s counsel stated multiple times that questions about Millennium 15 would not be answered. (Id. at 8 (citing ECF 77 at Nos. 12, 59, 63).) Plaintiff’s counsel 16 also proposed to stipulate that if Defendant would forego asking each and every 17 Millennium question, Plaintiff would not later object that Defendant failed to ask specific 18 questions. (Id.) Plaintiff also points to Defendant himself, not his counsel, repeatedly 19 taunting Plaintiff’s counsel to “grow up,” calling Plaintiff’s counsel a coward, and 20 Defendant himself repeatedly making arguments on the record and requesting numerous 21 lengthy breaks to confer with his attorney who was conducting the deposition. (Id. at 5-6 22 and 8-9 (citing ECF 77 at Nos. 29 (“grow up”), 129 (“You’re a coward Brower. You’re a 23 coward”)); Id. at 8 (citing ECF 77 Nos. 15, 43, 46, 52, 54, and 106) (breaks).) Plaintiff 24 also explains that he repeatedly stated his objection that the deposition was being 25 conducted to harass the Plaintiff. (Id. at 19 (citing ECF 77, Index No. 29, 98).) Plaintiff 26 argues that he properly terminated the deposition under Rule 30(d)(3) because it reached 27 the point it was being take solely for purposes of harassment. (Id. at 19-20.) Further, 28 33 18-cv-814-L-BGS 1 consistent with Rule 30(d)(3), Plaintiff suspended the deposition to obtain a court order. 2 He also argues that the Defendant’s behavior violated Civil L.R. 2.1, verbal abuse. 3 Rule 30(d)(2) provides for sanctions against one who “impedes, delays or 4 frustrates the fair examination of the deponent.” Fed. R. Civ. P. 30(d)(2). Rule 30(d)(2) 5 sanctions do not require a finding of bad faith. BNSF Ry. Co. v. San Joaquin Valley Rr. 6 Co., No. 1:08-cv-01086-AWI-SMS, 2009 WL 3872043, at *3 (E.D. Cal. Nov. 17, 2009). 7 The Rule “explicitly authorizes the court to impose the cost resulting from obstructive 8 tactics that unreasonably prolong a deposition on the person engaged in such obstruction” 9 and the “sanction may be imposed on a non-party witness as well as a party or attorney.” 10 Rule 30 advisory committee notes (1993 Amendments). “The sanctions under Rule 11 30(d)(2) ‘may include attorney’s fees incurred as a result of the improper conduct and the 12 necessity of filing a motion with the Court.’” Lee v. Pep Boys-Manny Moe & Jack of 13 California, No. 12-CV-05064-JSC, 2015 WL 9268118, at *3 (N.D. Cal. Dec. 21, 2015) 14 (quoting BNSF Ry. Co., 2009 WL 3872043, at *3). Rule 30(d)(2) sanctions are 15 discretionary. Id. (citing Batts v. Cnty. of Santa Clara, No. C 08-00286 JW, 2010 WL 16 545847, at *2 (N.D. Cal. Feb. 11, 2010). 17 Pursuant to Rule 30(d)(3)(A), a party may move to terminate a deposition “on the 18 ground that it is being conducted in bad faith or in a manner that unreasonably annoys, 19 embarrasses, or oppresses the deponent or party.” 20 The deposition took place on January 13, 2022. The parties jointly contacted the 21 Court on January 20, 2022 to raise this discovery dispute. The Court thereafter ordered 22 briefing. This Court reviewed the parties’ briefs and issued this Order. As such the 23 Court deems that Rule 30(d)(3)’s requirement of a motion is satisfied. 24 Plaintiff unilaterally terminated the deposition, thereby impeding the deposition 25 per Rule 30(d)(2). At the deposition, Defendant repeatedly questioned Plaintiff regarding 26 the fraudulent conduct at Millennium. The Court in its order on the motion to quash 27 found that discovery to prove Medicare fraud was not relevant to Plaintiff having “legal 28 issues (securities fraud).” (Quash Order at 22.) The repeated questioning about 34 18-cv-814-L-BGS 1 Millennium could be viewed as harassment and the conduct by Defendant himself is 2 deemed to be annoying. The Court finds sanctions are not appropriate under these 3 circumstances. 4 VII. CONCLUSION 5 Defendant’s Motion to Compel and for Sanctions is DENIED. The Court 6 previously granted the parties’ Joint Motion to continue the deadline to file pretrial 7 motions to two weeks after the Court’s ruling on this Motion. (ECF 88.) The Court sets 8 that deadline for July 12, 2022. 9 10 IT IS SO ORDERED. Dated: June 27, 2022 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 35 18-cv-814-L-BGS
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