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PETER L. ISOLA (SBN 144146)
pisola@hinshawlaw.com
ROBERT I. LOCKWOOD (SBN 259870)
tlockwood@hinshawlaw.com
HINSHAW & CULBERTSON LLP
One California Street, 18th Floor
San Francisco, CA 94111
Telephone: 415-362-6000
Facsimile: 415-834-9070
Attorneys for Defendants
RYAN GILBERT and SEAN O’MALLEY
WILLIAM T. WEBB (SBN 193832)
wwebb@webblegalgroup.com
JENNIFER D. YU (SBN 291603)
jyu@webblegalgroup.com
Webb Legal Group
155 Montgomery Street, Suite 1200
San Francisco, CA 94104
Telephone: 415-277-7200
Facsimile: 415-277-7210
Attorneys for Defendants
BILLFLOAT, INC., RYAN GILBERT
and SEAN O’MALLEY
ELECTRONICALLY
FILED
Superior Court of Calffomia,
County of San Francisco
10/21/2016
Clerk of the Court
BY-SANDRA SCHIRO
Deputy Clerk
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF SAN FRANCISCO
UNLIMITED JURISDICTION
GOLDEN PACIFIC BANK, N.A., a National
Bank,
Plaintiff,
vs.
BILLFLOAT, INC., RYAN GILBERT, SEAN
O’MALLEY, and DOES 1 - 50, inclusive,
Defendants.
BILLFLOAT, INC.,
Cross-Complainant,
v.
GOLDEN PACIFIC BANK, N.A., and ROE!
1-50,
Cross-Defendants.
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Case No. CGC-16-549804
DISCOVERY
OPPOSITION OF DEFENDANTS
GILBERT AND O'MALLEY TO
PLAINTIFF GOLDEN PACIFIC BANK,
N.A.'S MOTION TO COMPEL FURTHER
AMENDED RESPONSES TO REQUESTS
FOR PRODUCTION OF DOCUMENTS,
SET ONE; AND REQUEST FOR
SANCTIONS
Judge: Harold E. Kahn
Date: November 3, 2016
Time: 9:00 a.m.
Dept.: 302
Transferred from Sacramento: 01/11/2016
Trial Date: None Set
Action Filed: October 2, 2015
OPPOSITION TO MOTION TO COMPEL
Case No. CGC-16-549804
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TABLE OF CONTENTS
Page(s)
INTRODUCTION wiesssssesssesssssssessssecssvessnecssssesssecsssessseacassssavessiecssueessneeneeerereesneenssesereeanecssaee 1
STATEMENT OF FACTS .uesssecssesssssesssessssesssseesseessscsseevecesseesssesssvesnseecsenesssessesecanasessnacaneesnneees 2
GPB's Complaint and Document Requests to BillFloat......iesssssessseesseceesecsnesseenneeens 2
B. GPB's Duplicative Document Requests to Defendant ............escsececeeeesssesesesteneenteenees 3
Cc. Defendants’ Initial Responses ...........cccsecsseesseseesseeessseccsecesseecsussesseeseessssueessneceseesneceeaee 4
D. Defendants’ Amended Responses.......scsssssssesssssssecssessecsessnsssnesasssceseeavevessnessseseesssssntes 5
E, GPB Cuts off Productive Meet and Confer Communications Prematurely . 5
LEGALS FANDARD A atetacedotedatot erat stot atest akstcbsbabarataaatdet tat ekatekatabababsbatstarshctsetadeteietebetetstspsburstea 6
ARGUMENT. ccsssssssessseesscsnscssseessseessesssssesssssssesssvessseasessseessrssssassssesusseseccaseeseeauearnsenesseeesee 8
A. GPB's Entire Motion Should Be Denied Because GPB Failed to Properly
Meet and Confer .....eecssecsseessssesseesssessseesssesenssscseessessvees
B. As to Request Nos. 1-86, Defendants' Amended Responses Are Proper and
GPB Has Not Shown Good Cause To Compel Further Amendment Or a
Duplicate Production .......cccccsesssecsseecsecssssesssssesessreceresneenessvssnessneaeeaneareneeneesserseaenseeenes 8
Cc. As to Request Nos. 87-91, Defendants' Objections Are Justified 0.0... csssesseeneennes 9
1, Request No. 87 9
2. Request No. 88 ...sseccsesssssecsssecsssessssecevesscsssesssressessssecsssesssvesseesserseceuseessneeneesnees 10
3, Request No. 89 v..sseccssessssssssseesssesssvessesscsserssseessvscsssessseeesseesseeseeestsssseensueeeneesnae 10
4, Request No. 90 w.ccecsssessssesseeseesscsssssssssncsvessressesseeseersstseenreanearsatsnsennenseaneeneees 11
5. Request No. 91 we 11
Dz. GPB's Inflated Request for Sanctions is Not Based on Work Performed on
This Motion and is Not Warranted Because Defendants’ Position Is
Substantially Justified 0... cesesessessnecsseseesesessessesneesecavecneecseeareneeneesesseesneeseeensaneces ll
E, GPB Should Be Sanctioned For Bringing this Motion.. 12
CONCLUSION ....ccssssssssssrssesssssnscsseessssnsssvososossrsassassnsssusssssspevosenetssesssesvssesevosesevsnegansensseneeneeess 12
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TABLE OF AUTHORITIES
Page(s)
Cases
Associated Brewers Distrib. Co., Inc. v. Sup.Ct. (Jos. Schlitz Brewing Co.)
(1967) 65 Cal. App.2d 583 veccsssescsssssesesssssesssssesesssssssereessssvecssssverssssecssutessnsesssnecsessunscssneseseseeesseeesns 7
Calcor Space Facility, Inc. v. Superior Court
(1997) 53 Cal. App.4th 216 w.cccscsssecssseessesssecsssssssessesssseassecssucesisssesssessecsssessneessuecanecssanessesnes 6,7
Fuss v. Superior Court
(1969) 273 Cal. App.2d 807 v.eccessessssessssecssecssusesseesssssserssseasusessusesusessussassseesneenecseneeneessuesasesneeesee 6
Ghanooni v. Super Shuttle of Los Angeles
(1993) 20 Cal. App.4th 256 ....ccccscssseccsssssesssessssessusssvesssusessseessssnssssesseesssssasecnuseesuecasesssnesseassesse 11
Glenfed Develop. Corp. v. Sup.Ct. (National Union Fire Ins. Co. of Pittsburgh,
Penn.)
(1997) 53 Cal. App.4th 1113 ..ccsccsessseessseessesssseesesesesssssesssseessesseessessssseessvessseeessvesasssssnuesasenneentee 7
Kirkland v. Sup.Ct. (Guess?, Inc.)
(2002) 95 Cal.App.4th 92 ...secccsesssescssssscssssesecssesessnsssesssseccssssesssssecssusesssessssseessssnesessuecseesseeesneeersns 7
Obregon y. Superior Court
(1998) 67 Cal. App.4th 424 oo... eccsescccsnesssseesessneecseecsssssvecsssavecsussesssecessvesssueesssssvtesaneseesneessneeesans 7
Valley Bank of Nevada v. Sup.Ct. (Barkett)
(1975) 15 Cal.3d 652 .10, 11
Volkswagen of America, Inc. v. Sup.Ct. (Rusk)
(2006) 139 Cal.App.4th 1481 ..ccsccsssecseesseessesseesseessssessusessuessiesussscsssessvesssneessuseanecessnecneerneesnee 7
Statutes
COP § 2017.01 0....cscecsssssssssssecseseesssecssssssecesssersssssecsesssecssecsesssessssssssessssesssssecsussessnersessussersssvecetannsenseesesane 9
COP IE 20ST 2S OI lr atelalatelelsbsadatetadedadedotatebelelatebabahel seenshdedodedolsdelutadalataholshataedecedodetoleledelelolelstaheberatasbded 8
COP § 2031.310(8) vressressssecssessecssessseeesseesssesssesssieessseesneeseesses
COP § 2031.31 0(D)(1) cssscesseessessseesseecsseesssecssssessessssessecsseessssesssecssnesssessssasessnecseessneessvecssaesameessneaneenaeetee 7
COP § 2031.310(b)(2) vessssssessesssessveccsseesssecssesssvecssseesseesscesssecsavesssecssesssseesnsevsssvesssvessusetasecaseeesavenseeennets 8
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I INTRODUCTION
Plaintiff Golden Pacific Bank ("GPB") filed this Motion to distract attention away from
GPB's own discovery abuses in this Action. Defendant BillFloat, Inc. ("BillFloat") and its founders,
Defendants Ryan Gilbert and Sean O'Malley ("Defendants" or "Individual Defendants"), have
already been forced to file motions to compel against GPB because of GPB's refusal to substantively
respond to even basic written discovery for over half a year. Now, realizing it has no justification
for its positions and faced with the threat of sanctions, GPB filed this Motion, which fails to raise
any legitimate discovery issue.
GPB's Motion is deeply flawed and only exposes GPB to further sanctions. To cover itself,
increase the cost to Defendants, and distract the Court, GPB has manufactured a discovery dispute
that emphasizes form over substance and ignores the practical reality that all responsive materials
requested either have been or are now being produced by Defendants' company and co-Defendant,
BillFloat. At issue is a single set of 91 document requests propounded by GPB on all Defendants.
These sets of inspection demands, although separate pieces of paper, are substantively the same: the
parties names are just switched in several places. Moreover, the same categories of documents
requested of Gilbert and O'Malley have been sought from BillFloat.
To date, BillFloat has served timely written responses to three (3) separate Inspection
Demands served by GPB. Further, BillFloat has worked tirelessly to review thousands of internal
documents, including but not limited to records involving Gilbert and O'Malley, and has already
produced at least 75,444 pages of documents in response to these and other requests. See Isola
Declaration, 3, Exh. 1. In response to the demands upon them, Defendants Gilbert and O'Malley
initially served responses stating that they would coordinate compliance efforts with BillFloat. GPB
then met and conferred with Defendants to ensure Defendants did not have any other responsive
material not already turned over to the company. Pursuant to an agreement between counsel,
Defendants Gilbert and O'Malley again reviewed their own records and confirmed in verified
amended responses that they did not have any further materials to produce. Thus, all records
requested of Gilbert and O'Malley are in the possession, custody and control of BillFloat,
Accordingly, Defendants Gilbert and O'Malley's written responses are more than adequate; these
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responses affirm that a diligent search has been conducted and that no further records, beyond what
was turned over to BillFloat, exist. The Code of Civil Procedure does not require a duplicate
production by directors, officers, or employees of a company, which would be an extreme waste of
time, money and other resources. When a Company is a party to litigation (as BillFloat is here),
good practice does not contemplate that officers, directors and/or employees of the company will
receive subpoenas for the production of records already requested of and produced by the Company.
Yet, that is essentially what GPB is doing here in effort to drag on the discovery process and
preclude this action from getting to the merits.
GPB has received or is in the process of receiving all responsive non-privileged documents to
Request Nos. 1-86 from Gilbert and O'Malley's company, BillFloat. Therefore, the only dispute of
any possible importance involves the final five (5) requests (Nos. 87-91). In response to these few
requests, Defendants have asserted numerous well-supported objections, including but not limited to
the fact that that these particular requests are not relevant, are impermissibly compound, vague,
overbroad, and are unduly burdensome. Moreover, a few requests in this range (Nos. 87-91) also
invade the privacy rights of third parties as they implicate sensitive financial information.
Defendants Gilbert and O'Malley have repeatedly asked for clarification and for compromise to
reduce the burden imposed by the current wording, and to negotiate a solution whereby they will not
be sued by third parties for divulging sensitive confidential financial information. GPB has refused
to narrow these requests at all and chose to file this motion instead of working with Defendants
productively to reach a compromise, a result which is encouraged by both the text and spirit of the
Discovery Act.
For all of these reasons, and those discussed more fully below, Defendants Gilbert and
O'Malley respectfully request that the Court deny this Motion and deny GPB's request for sanctions.
Further, Defendants request an award of sanctions against GPB in the amount of $6900 to reimburse
them for the reasonable attorney's fees incurred in opposing the Motion.
Il STATEMENT OF FACTS
A. GPB's Complaint and Document Requests to BillFloat
On October 2, 2015, GPB filed its Complaint against former business partner BillFloat,
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asserting causes of action for fraud, breach of contract, and various business torts (“Complaint”).
(See Robert Lockwood Deel. at {2, Ex. A). GPB has sued not only BillFloat, but also Defendants
Gilbert and O’Malley individually for fraud and misappropriation of trade secrets. Id. GPB
asserted a variety of other business tort causes of action against BillFloat only. Id.
On December 7, 2015, GPB served its First Inspection Demand with 86 categories of
documents on BillFloat. (Lockwood Decl. at 93, Ex. B). BillFloat served its written responses to
that request on March 4, 2016. (Lockwood Decl. at 4, Ex. C). On February 24, 2016, GPB served
its Second Inspection Demand to BillFloat with 65 more categories of documents requested (Nos.
87-151). (Lockwood Decl. at §5, Ex. D). BillFloat served written responses to that second set of
document requests on March 28, 2016. (Lockwood Decl. at 46, Ex. E). On March 10, 2016, GBP
served upon BillFloat its Third Inspection Demand with 55 separate categories of documents (Nos.
152-206). (Lockwood Decl. at 7, Ex. F). BillFloat served its written responses to GPB's Third
Inspection Demand on April 11, 2016. (Lockwood Decl. at 48, Ex. G). In response to these 206
requests in GPB's three Inspection Demands, BillFloat has, to date, already produced approximately
74,836 pages of documents. (Lockwood Deel. at 49).
B. GPB's Duplicative Document Requests to Defendants
On April 8, 2016, GPB served separate sets of largely duplicative document requests on
Defendant Gilbert and Defendant O'Malley. (Lockwood Decl., 11-12, Exhs. H and I). Each of
these Inspection Demands has 91 categories of documents requested and, except for the swapping of
"Ryan Gilbert" for "Sean O'Malley" in several places, the document requests issued to the
individual defendants are identical. Moreover, except for the final five (5) categories in these
requests to Mr. Gilbert and Mr. O'Malley (Nos. 87-91 in each), the requests are substantively the
same requests as those propounded on BillFloat. Jd See, for example, Demand Nos. 87-100 in
GPB's Second Inspection Demand to BillFloat (Exh. D) and compare to categories 1-18 to Gilbert
and O'Malley (Exhs. H and I). Requests Nos. 19-68 to Gilbert and O'Malley (Exhs. H and I) overlap
with corresponding Requests Nos. 3-73 to BillFloat. All three (3) of GPB's inspection demands to
BillFloat are attached to the Lockwood Declaration (Exhs. B, D, F).
Notwithstanding the redundant nature of the requests for documents served upon Gilbert and
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Deancan. AnenIASO'Malley, the Individual Defendants timely served comprehensive responses in good faith on May
10, 2016. (Lockwood Decl. at 413-14, Exhs. J and K). In these written responses, Gilbert and
O'Malley had to address identical records requests to which BillFloat had already responded by
agreeing to comply and produce responsive materials. In responding to these corresponding requests
which had already been made to BillFloat, Gilbert and O'Malley stated, in their respective written
responses that, without waiving any objection raised: 1) they would make available any non-
privileged responsive documents to the extent such materials had not already been produced by
BillFloat; or 2) that all responsive records have already been or will be produced by Billfloat. Id.
This made good, practical sense because BillFloat had already produced documents in response to
these same requests. Id.
Cc. Defendants' Initial Responses
On June 15, 2016, GPB sent meet and confer letters to Defendants taking issue with the
responses of Gilbert and O'Malley. (Lockwood Decl. at §§15-16, Exhs. L and M). Both letters are
completely lacking in of any authority on point supporting GPB's contention that the written
responses of Gilbert or O'Malley were, in any way, improper, or that either Individual Defendant is
required to serve a production that would duplicate the materials provided by BillFloat. Id.
Nevertheless, Defendants responded in writing on July 12, 2016, setting forth in detail why GPB's
position improperly emphasized form over substance and lacked merit. (Lockwood Decl. at §{16-
17, Exhs, N and $.! Importantly, counsel for Defendants Gilbert and O'Malley confirmed in this
correspondence that the Individual Defendants did not have any responsive documents independent
of BillFloat. Id.
On July 12, 2016, counsel for GPB and counsel for the Individual Defendants spoke by
telephone regarding the responses at issue here. (Lockwood Decl. 17). With respect to Requests 1-
86, Gilbert and O'Malley's counsel reiterated that GPB's objections improperly emphasized form
over substance and ignored the reality that all responsive material was already provided or being
produced by BillFloat. Jd. Further, Defendants' counsel reminded GPB's counsel that the same
’ Significantly, GPB failed to include the responsive correspondence sent July 12, 2016 as an exhibit to the instant
motion.
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Case No. CGC-16-549804requests at issue had been propounded on BillFloat and advised that Defendants did not have
possession of any responsive documents outside of what was previously turned over to the company,
BillFloat. Id. Since BillFloat was already producing the records which, in the absence of BillFloat
being a co-defendant in the action, Defendants would otherwise produce, it was made clear to GPB's
counsel that it would be neither efficient nor practical for Individual Defendants to serve a duplicate
set of production records. Jd. However, as a compromise, counsel for Defendants offered to
confirm this point in verified amended responses and GPB's counsel agreed to this proposal at the
time. Id, With respect to Requests 87-91, Defendants' counsel reiterated the reasons why these
requests were impermissibly compound, vague, ambiguous, overbroad, and, in some instances,
sought information protected by the privacy rights of third parties. Jd. GPB never made any effort
to narrow these Requests 87-91 or offer a compromise as to any of them. /d.
D. Defendants' Amended Responses
After the July 12 phone call between counsel, the Individual Defendants upheld their end of
the bargain and served amended verified responses to Request Nos. 1-86 on August 12, 2016. In
these amended responses, Defendants affirmed that they had performed a reasonable and
diligent search and do not have any responsive documents independent of BillFloat. (Lockwood
Decl. at §{]18-20, Exhs. O and P). Request Nos. 87-91 were not amended because Defendants were
waiting for GPB to respond to their request to reach compromise and reduce the burden imposed by
the current wording. Id.
On September 1, 2016, GPB sent Individual Defendants a letter taking issue with the
amended responses. Therein, GPB changed its position regarding the language previously agreed
upon and, instead, contended that the language accepted in the July 12 phone call and incorporated
into the August 12 amended responses was, nonetheless, improper. (Lockwood Decl. at (21, Ex.
Q). As to Requests 87-91, GPB maintained its refusal to narrow the original language or otherwise
propose any compromise to reduce the burden imposed by the original wording. Id.
E. GPB Cuts off Productive Meet and Confer Communications Prematurely
On September 19, 2016, Individual Defendants! counsel sent GPB's counsel an email which
stated:
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We ask that you further meet and confer on these responses in good
faith given that GPB's deadline to move to compel further responses is
still weeks away. Please let us know exactly how you propose
Defendants further amend their responses. Per our prior agreement,
Defendants Gilbert and O'Malley have searched and confirmed they do
not have any responsive documents independent of BillFloat (on
which GPB propounded the same requests). BillFloat has produced
thousands of pages of responsive documents in response, and we
understand an additional supplemental production will be served
shortly. It is not efficient, nor is it the individual defendant’s
obligation, to serve duplicate documents. GPB is already getting all
responsive documents and we do not see a basis for a motion to
compel. Please further advise.
(Lockwood Decl. at 22, Ex. R).
Instead of picking up the phone, communicating in writing, or otherwise attempting to
informally resolve this dispute, GPB refused to engage in any further meet and confer efforts and
proceeded to file this Motion, notwithstanding the fact that Defendants had extended GPB's motion
to compel deadline by a few weeks and indicated they would extend it further to facilitate a
continued productive dialogue. Id
Tt LEGAL STANDARD
The Discovery Act is intended, among other things, to effectuate efficiency and to expedite a
party’s preparation for trial. Discovery is not intended to delay or obstruct the exchange of
information, but rather intended to facilitate it so that there are no surprises at trial and the parties are
fully apprised of the issues and facts that lead to the dispute.
“The civil discovery statutes are intended to accomplish the following
results: (1) To give greater assistance to the parties in ascertaining the
truth and in checking and preventing injury; (2) to provide an effective
means of detecting and exposing false, fraudulent and sham claims and
defenses; (3) to make available in a simple, convenient and
inexpensive way, facts which otherwise could not be provided except
with great difficulty; (4) to educate the parties in advance of trial as to
the real value of their claims and defenses, thereby encouraging
settlement; (5) to expedite litigation; (6) to safeguard against surprise;
(7) to prevent delays; (8) to simplify and narrow the issues; and (9) to
expedite and facilitate both preparation and trial...”
Fuss v. Superior Court (1969) 273 Cal.App.2d 807, 816.
However, courts have recognized the discovery statutes are prone to misuse absent judicial
consideration of the great burdens which may be imposed on parties and non-parties alike. Calcor
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Space Facility, Inc. v. Superior Court (1997) 53 Cal.App.4th 216, 221. Accordingly, "Judges must
become more aggressive in curbing abuses and insisting discovery devices be used as tool to
facilitate litigation rather than as weapons to wage litigation. These tools should be well calibrated;
the lancet is to be preferred over the sledge hammer." Id. "Any discovery request, even an initial
one, can be misused in an attempt to generate settlement leverage by creating burden, expense,
embarrassment, distraction, etc." Obregon v. Superior Court (1998) 67 Cal.App.4th 424, 431.
Where a response to a document request has been made, the requesting party may move to
compel further responses only if the moving party can show the response contained: (1) objections;
(2) an agreement to comply that is incomplete; or (3) a statement of inability to comply that is
incomplete or evasive. See Code of Civil Procedure ("CCP") § 2031.310(a).
In addition, the motion must set forth "specific facts showing good cause justifying the
discovery sought" by the request. CCP § 2031.310(b)(1); Kirkland v. Sup.Ct. (Guess?, Inc.) (2002)
95 Cal.App.4th 92, 98. To establish “good cause,” the burden is on the moving party to show not
only relevance to the subject matter (e.g., how the information in the documents would tend to prove
or disprove some issue in the case), but also specific facts justifying discovery (e.g., why such
information is necessary from the responding party for trial preparation or to prevent surprise at
trial). Glenfed Develop. Corp. v. Sup.Ct. (National Union Fire Ins. Co. of Pittsburgh, Penn.) (1997)
53 Cal.App.4th 1113, 1117. Courts have held that the fact that there is no alternative source for the
information sought is an "important factor" in establishing “good cause” for inspection. Associated
Brewers Distrib. Co., Inc. v. Sup.Ct. (Jos. Schlitz Brewing Co.) (1967) 65 Cal.App.2d 583, 588
(decided under former law).
The Court is not required to grant an order for document production. Instead, the Court
should properly weigh whatever probative value the records are likely to have against the cost, time,
expenses and disruption of normal business likely to result from an order compelling production
thereof from the responding party. Volkswagen of America, Inc. v. Sup.Ct. (Rusk) (2006) 139
Cal.App.4th 1481, 1497 (citing text); Calcor, supra, 53 Cal.App.4th at 223. Here, an analysis of
these issues cuts in favor of Defendants Gilbert and O'Malley because their co-defendant BillFloat,
the entity with which each is affiliated as admitted in the Complaint (Exh. A, {¥ 3-4 and 7), has
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produced documents responsive to the overwhelming majority of the categories in issue. As to the
remaining categories (Nos. 87-91), the Motion should likewise be denied for the reasons stated
herein,
IV) ARGUMENT
A. GPB's Entire Motion Should Be Denied Because GPB Failed to Properly Meet
and Confer
In making this Motion, GPB is required to show a reasonable and good faith attempt to
resolve the issues outside of court. See CCP §§ 2016.040, 2031.310(b)(2). Here, as set forth above,
the only parties acting in good faith were Individual Defendants, who amended nearly every single
one of their responses and would have proceeded to so a second time if GPB had not unilaterally cut
off the meet and confer negotiations. GPB should not be rewarded for its gamesmanship in agreeing
with Defendants' counsel on acceptable amended language for the written responses, having
Defendants spend substantial time inserting this agreed-upon amended language in the supplemental
responses, but then deciding after the fact that this language still was not good enough. GPB's
counsel simply ignored repeated requests by counsel for Gilbert and O'Malley to specify what else
GPB wanted Defendants to say and, instead, filed this premature motion weeks before the existing
deadline. This conduct is not consistent with the language or spirit of the Discovery Act and did not
satisfy GPB's good faith duty. Therefore, the Motion should be denied for this reason alone.
B. As to Request Nos. 1-86, Defendants' Amended Responses Are Proper and GPB
Has Not Shown Good Cause To Compel Further Amendment Or a Duplicate
Production
GPB's entire argument regarding the amended responses to Request Nos. 1-86 boils down to
an objection as to form alone. GPB takes issue with the statement by the Individual Defendants
Gilbert and O'Malley that they performed a reasonably diligent search and do not have any
responsive documents other than what has already been turned over to and organized and produced
by BillFloat. However, CCP section 2031.230 specifically permits parties to state they are unable to
comply with a request because they do not have possession of the requested material and to identify
who does. This is the essence of what Defendants have done. Defendants have now confirmed
under oath not only that they have nothing further, but also that they have performed a reasonably
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PEANEAN.? ANEAANEdiligent search to reach that conclusion. The mere fact that GPB or its counsel does not want to
accept the statements of the Individual Defendants in their amended responses does not support a
motion to compel further responses.
Further, the rejection of GPB's motion is supported by common sense: an unqualified
compliance statement would trigger the overly burdensome and entirely unnecessary obligation to
serve a records production that duplicates what BillFloat has done and continues to do (i.e., produce
thousands of pages of documents). This is not a situation where a party is pointing to its adversary
or another unrelated defendant's production and claiming "I do not have anything you do not have."
Rather, Mr, Gilbert and Mr. O'Malley have been sued as officers and co-founders of BillFloat, the
entity defendant which likewise has been named in the only two causes of action asserted against
Gilbert and O'Malley: for Fraud (Third Cause of Action); and Misappropriation of Trade Secrets
(Fifth Cause of Action). GPB has requested the same documents from all three (3) defendants; and
the responsive materials have been and continue to be produced by BillFloat. Billfloat has already
spent hundreds of hours reviewing documents and responding to these same requests. Requiring that
a duplicate production set be provided by or on behalf of Individual Defendants Gilbert and
O'Malley is not justified, would impose an undue burden upon the Defendants, and would not yield
any new evidence in the case. Instead, such duplicative effort would merely result in an unnecessary
increase in the time and expense of this litigation. Therefore, the Motion should be denied as to
these Requests 1-86.
Cc. As to Request Nos. 87-91, Defendants' Objections Are Justified
1, Request No. 87
GPB requests "ALL text messages" between Individual Defendants (i.c., Gilbert and
O'Malley), Evan Singer, Brad Garret, or BillFloat board members that "reference" Virginia Varela.
Defendants’ objections are appropriate given the circumstances. This request is impermissibly
compound since it asks for communications between multiple parties in the disjunctive. The phrase
"text messages" is undefined. It is unclear what medium(s) of communication GPB is referring to,
be it cell phone, interoffice messaging, or other forms of communication. Of greater concern is the
fact that GPB is asking for any material that "references" a third party without regard to whether the
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material has anything to do with the issues in this litigation and without placing any time limitation
on the request whatsoever. Thus, GPB cannot establish the initial requirement for this request: that
it be reasonably calculated to lead to the discovery of admissible evidence. CCP § 2017.010.
Moreover, because the term "reference" is not even defined, GPB is effectively asking Defendants
Gilbert and O'Malley to search unspecified locations for unspecified terms. This is unduly
burdensome, and compliance is impossible without further clarification. Defendants repeatedly
expressed a willingness to meet and confer with GPB regarding a more narrowly tailored approach.
GPB made no effort to narrow this request at all and cut off the dialogue prematurely.
2. Request No. 88
GPB requests all emails between Individual Defendants, Evan Singer, Brad Garret, or
BillFloat board members that "reference" Virginia Varela. Again, Defendants! objections are
warranted, This request is likewise impermissibly compound since it asks for communications
between multiple parties in the disjunctive. GPB is again asking for any material that "references" a
third party without regard to whether the material has anything to do with the issues in this litigation
and without placing any time limitation on the request whatsoever. As in No. 87, GPB cannot
establish the initial requirement that any discovery request be reasonably calculated to lead to the
discovery of admissible evidence. The term "references" is undefined, so GPB is asking Defendants
to search unspecified locations for unspecified terms. This is unduly burdensome and compliance is
impossible without further clarification. Defendants repeatedly expressed a willingness to meet and
confer with GPB regarding a more narrowly tailored approach to this request as well. However,
GPB made no effort to narrow this request at all and cut off the dialogue prematurely.
3. Request No. 89
GPB requests "ALL text messages between YOU and ANY PERSON that reference fees
charged by BILLFLOAT pursuant to the SmartBiz program." Defendants’ objections are well taken,
Again, the phrase "text messages" is not defined and there is no time period specified. Furthermore,
many of the documents responsive to this request may contain private and confidential information
of other lenders and banks with whom BillFloat does business and/or regarding loan applicant
customers, neither of which may be disclosed to GPB. See Valley Bank of Nevada v. Sup.Ct.
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(Barkett) (1975) 15 Cal.3d 652, 658. Defendants tried to further meet and confer with GPB
regarding a more narrowly tailored request. However, GPB has made no effort to narrow this
category.
4, Request No. 90
GPB requests "ALL text messages between YOU and ANY PERSON that reference ANY
expense referenced in ANY JOINT IP SOW that BILLFLOAT, INC. delivered to the BANK."
Defendants’ objections are valid. The phrase "text messages" is not defined and there is no time
period specified. Further, documents potentially responsive to this request may contain private and
confidential information of other lenders and banks with whom BillFloat does business and/or
regarding loan applicant customers; none of these records may be disclosed to GPB. See Valley
Bank of Nevada, supra, 15 Cal.3d at 658. Defendants tried to further meet and confer with GPB
regarding a more narrowly tailored request. However, GPB has made no effort to narrow this
category.
5. Request No. 91
GPB requests "ALL text messages between (Ryan Gilbert and Sean O’ Malley) that reference
or regard GOLDEN PACIFIC BANK’s participation in the SMARTBIZ program." This request has
the same flaws as Nos. 87-90 discussed above; Defendants' objections are justified and should be
sustained, Again, the phrase "text messages" is not defined and there is no time period specified.
Further, documents potentially responsive to this request may contain private and confidential
information of other lenders and banks with whom BillFloat does business and/or regarding loan
applicant customers; such records may not be disclosed to GPB. See Valley Bank of Nevada, supra,
15 Cal.3d at 658. Again, counsel for Defendants Gilbert and O'Malley was willing to meet and
confer with GPB regarding a more narrowly tailored request. GPB refused.
D. GPB's Inflated Request for Sanctions is Not Based on Work Performed on This
Motion and is Not Warranted Because Defendants' Position Is Substantially
Justified
As an initial matter, GPB's request for sanctions should be denied because it is based on a
declaration of counsel regarding work performed opposing a separate and unrelated motion. The
Court is only authorized to award as sanctions the moving party's reasonable expenses including
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DEFENDANTS' OPPOSITION TO MOTION TO COMPEL
Case No, CGC-16-549804attorney fees on the motion to compel. “Reasonable expenses” include the time moving party's
counsel spent in research and preparation of the motion and court time in connection with the
motion. See Ghanooni v. Super Shuttle of Los Angeles (1993) 20 Cal.App.4th 256, 262. But here,
GPB's request is expressly based on time GPB's counsel spent "preparing and revising the opposition
papers." See Declaration of Christopher Onstott ("Onstott Decl." at 10, page 3, lines 22-23). It is
unclear to which "opposition" Mr. Onstott's Declaration refers, but his Declaration does not describe
or support work associated with this Motion.
Accordingly, there is no evidence before the court regarding time spent by GPB's counsel on
this Motion, which is necessary for the Court to consider a valid request for sanctions. Further, as
discussed above, Individual Defendants' positions on the discovery at issue are substantially justified
and do not warrant sanctions. Defendants’ counsel engaged in multiple good faith efforts to resolve
informally the issues by this motion, including possible further amendment of the written responses.
Ultimately, GPB's counsel had no interest in that process.. Counsel for Individual Defendants
extended GPB's deadline to move to compel several times in order to promote productive dialogue.
With respect to the amended responses to Request Nos. 1-86, Defendants believe in good faith that
they have complied with their obligations. GPB's refusal to accept the updated form of Gilbert and
O'Malley's written responses ignores the fact that GPB has received and is receiving all responsive
documents from BillFloat. As stated, Defendants’ objections to the remaining requests have merit:
Defendants asked GPB several times to narrow these inquiries or to propose compromise, but GPB
refused.
E. GPB Should Be Sanctioned For Bringing this Motion
Defendants have been forced to incur at least $6900 in having to oppose this Motion and
respectfully request reimbursement of this sum. (See Lockwood Decl. at §23; Declaration of Peter
L, Isola ("Isola Decl." at 2).
Vv CONCLUSION
GPB's discovery motion has raised no real issue. To date, BillFloat has served timely written
responses to three (3) separate Inspection Demands served by GPB. Further, BillFloat has worked
tirelessly to review thousands of internal documents, including but not limited to records involving
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Gilbert and O'Malley, and has already produced at least 75,444 pages of documents in response to
these and other requests. See Isola Declaration, §3, Exh. 1. Individual Defendants and opposing
parties Ryan Gilbert and Sean O'Malley have likewise satisfied their discovery obligations. GPB's
motion has unnecessarily increased the expense of this litigation, but GPB has not and cannot
identify any particular records relevant to this action which it contends have not been produced.
For the foregoing reasons, Defendants respectfully request that the Court deny this Motion
and deny GPB's request for sanctions. Further, Defendants request an award of sanctions against
GPB in the amount of $6900 to reimburse them for the reasonable expense in having to oppose this
Motion.
Date: October 21, 2016
HINSHAW & CULBERTSON LLP
D4 ww ) Q
By: tot A. Ne rn*e
PETER L, ISOLA
ROBERT I. LOCKWOOD
Attorneys for Defendants
RYAN GILBERT and SEAN O’MALLEY
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DEFENDANTS' OPPOSITION TO MOTION TO COMPEL
Case No. CGC-16-549804
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PETER L. ISOLA (SBN 144146) pisola@hinshawlaw.com ROBERT I. LOCKWOOD (SBN 259870) tlockwood@hinshawlaw.com HINSHAW & CULBERTSON LLP One California Street, 18th Floor San Francisco, CA 94111 Telephone: 415-362-6000 Facsimile: 415-834-9070 Attorneys for Defendants RYAN GILBERT and SEAN O’MALLEY WILLIAM T. WEBB (SBN 193832) wwebb@webblegalgroup.com JENNIFER D. YU (SBN 291603) jyu@webblegalgroup.com Webb Legal Group 155 Montgomery Street, Suite 1200 San Francisco, CA 94104 Telephone: 415-277-7200 Facsimile: 415-277-7210 Attorneys for Defendants BILLFLOAT, INC., RYAN GILBERT and SEAN O’MALLEY ELECTRONICALLY FILED Superior Court of Calffomia, County of San Francisco 10/21/2016 Clerk of the Court BY-SANDRA SCHIRO Deputy Clerk SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF SAN FRANCISCO UNLIMITED JURISDICTION GOLDEN PACIFIC BANK, N.A., a National Bank, Plaintiff, vs. BILLFLOAT, INC., RYAN GILBERT, SEAN O’MALLEY, and DOES 1 - 50, inclusive, Defendants. BILLFLOAT, INC., Cross-Complainant, v. GOLDEN PACIFIC BANK, N.A., and ROE! 1-50, Cross-Defendants. ) ) ) j ) ) ) ) ) ) ) ) ) ) 8) ) j ) ) Case No. CGC-16-549804 DISCOVERY OPPOSITION OF DEFENDANTS GILBERT AND O'MALLEY TO PLAINTIFF GOLDEN PACIFIC BANK, N.A.'S MOTION TO COMPEL FURTHER AMENDED RESPONSES TO REQUESTS FOR PRODUCTION OF DOCUMENTS, SET ONE; AND REQUEST FOR SANCTIONS Judge: Harold E. Kahn Date: November 3, 2016 Time: 9:00 a.m. Dept.: 302 Transferred from Sacramento: 01/11/2016 Trial Date: None Set Action Filed: October 2, 2015 OPPOSITION TO MOTION TO COMPEL Case No. CGC-16-549804 3529670v3 0980208Rw oC eo ND 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 It Il IV v TABLE OF CONTENTS Page(s) INTRODUCTION wiesssssesssesssssssessssecssvessnecssssesssecsssessseacassssavessiecssueessneeneeerereesneenssesereeanecssaee 1 STATEMENT OF FACTS .uesssecssesssssesssessssesssseesseessscsseevecesseesssesssvesnseecsenesssessesecanasessnacaneesnneees 2 GPB's Complaint and Document Requests to BillFloat......iesssssessseesseceesecsnesseenneeens 2 B. GPB's Duplicative Document Requests to Defendant ............escsececeeeesssesesesteneenteenees 3 Cc. Defendants’ Initial Responses ...........cccsecsseesseseesseeessseccsecesseecsussesseeseessssueessneceseesneceeaee 4 D. Defendants’ Amended Responses.......scsssssssesssssssecssessecsessnsssnesasssceseeavevessnessseseesssssntes 5 E, GPB Cuts off Productive Meet and Confer Communications Prematurely . 5 LEGALS FANDARD A atetacedotedatot erat stot atest akstcbsbabarataaatdet tat ekatekatabababsbatstarshctsetadeteietebetetstspsburstea 6 ARGUMENT. ccsssssssessseesscsnscssseessseessesssssesssssssesssvessseasessseessrssssassssesusseseccaseeseeauearnsenesseeesee 8 A. GPB's Entire Motion Should Be Denied Because GPB Failed to Properly Meet and Confer .....eecssecsseessssesseesssessseesssesenssscseessessvees B. As to Request Nos. 1-86, Defendants' Amended Responses Are Proper and GPB Has Not Shown Good Cause To Compel Further Amendment Or a Duplicate Production .......cccccsesssecsseecsecssssesssssesessreceresneenessvssnessneaeeaneareneeneesserseaenseeenes 8 Cc. As to Request Nos. 87-91, Defendants' Objections Are Justified 0.0... csssesseeneennes 9 1, Request No. 87 9 2. Request No. 88 ...sseccsesssssecsssecsssessssecevesscsssesssressessssecsssesssvesseesserseceuseessneeneesnees 10 3, Request No. 89 v..sseccssessssssssseesssesssvessesscsserssseessvscsssessseeesseesseeseeestsssseensueeeneesnae 10 4, Request No. 90 w.ccecsssessssesseeseesscsssssssssncsvessressesseeseersstseenreanearsatsnsennenseaneeneees 11 5. Request No. 91 we 11 Dz. GPB's Inflated Request for Sanctions is Not Based on Work Performed on This Motion and is Not Warranted Because Defendants’ Position Is Substantially Justified 0... cesesessessnecsseseesesessessesneesecavecneecseeareneeneesesseesneeseeensaneces ll E, GPB Should Be Sanctioned For Bringing this Motion.. 12 CONCLUSION ....ccssssssssssrssesssssnscsseessssnsssvososossrsassassnsssusssssspevosenetssesssesvssesevosesevsnegansensseneeneeess 12 i DEFENDANTS' OPPOSITION TO MOTION TO COMPEL Case No. CGC-16-54980410 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES Page(s) Cases Associated Brewers Distrib. Co., Inc. v. Sup.Ct. (Jos. Schlitz Brewing Co.) (1967) 65 Cal. App.2d 583 veccsssescsssssesesssssesssssesesssssssereessssvecssssverssssecssutessnsesssnecsessunscssneseseseeesseeesns 7 Calcor Space Facility, Inc. v. Superior Court (1997) 53 Cal. App.4th 216 w.cccscsssecssseessesssecsssssssessesssseassecssucesisssesssessecsssessneessuecanecssanessesnes 6,7 Fuss v. Superior Court (1969) 273 Cal. App.2d 807 v.eccessessssessssecssecssusesseesssssserssseasusessusesusessussassseesneenecseneeneessuesasesneeesee 6 Ghanooni v. Super Shuttle of Los Angeles (1993) 20 Cal. App.4th 256 ....ccccscssseccsssssesssessssessusssvesssusessseessssnssssesseesssssasecnuseesuecasesssnesseassesse 11 Glenfed Develop. Corp. v. Sup.Ct. (National Union Fire Ins. Co. of Pittsburgh, Penn.) (1997) 53 Cal. App.4th 1113 ..ccsccsessseessseessesssseesesesesssssesssseessesseessessssseessvessseeessvesasssssnuesasenneentee 7 Kirkland v. Sup.Ct. (Guess?, Inc.) (2002) 95 Cal.App.4th 92 ...secccsesssescssssscssssesecssesessnsssesssseccssssesssssecssusesssessssseessssnesessuecseesseeesneeersns 7 Obregon y. Superior Court (1998) 67 Cal. App.4th 424 oo... eccsescccsnesssseesessneecseecsssssvecsssavecsussesssecessvesssueesssssvtesaneseesneessneeesans 7 Valley Bank of Nevada v. Sup.Ct. (Barkett) (1975) 15 Cal.3d 652 .10, 11 Volkswagen of America, Inc. v. Sup.Ct. (Rusk) (2006) 139 Cal.App.4th 1481 ..ccsccsssecseesseessesseesseessssessusessuessiesussscsssessvesssneessuseanecessnecneerneesnee 7 Statutes COP § 2017.01 0....cscecsssssssssssecseseesssecssssssecesssersssssecsesssecssecsesssessssssssessssesssssecsussessnersessussersssvecetannsenseesesane 9 COP IE 20ST 2S OI lr atelalatelelsbsadatetadedadedotatebelelatebabahel seenshdedodedolsdelutadalataholshataedecedodetoleledelelolelstaheberatasbded 8 COP § 2031.310(8) vressressssecssessecssessseeesseesssesssesssieessseesneeseesses COP § 2031.31 0(D)(1) cssscesseessessseesseecsseesssecssssessessssessecsseessssesssecssnesssessssasessnecseessneessvecssaesameessneaneenaeetee 7 COP § 2031.310(b)(2) vessssssessesssessveccsseesssecssesssvecssseesseesscesssecsavesssecssesssseesnsevsssvesssvessusetasecaseeesavenseeennets 8 ii DEFENDANTS' OPPOSITION TO MOTION TO COMPEL Case No, CGC-16-549804Row aa 10 11 12 13 14 15 16 17 19 20 21 22 23 24 25 26 27 28 I INTRODUCTION Plaintiff Golden Pacific Bank ("GPB") filed this Motion to distract attention away from GPB's own discovery abuses in this Action. Defendant BillFloat, Inc. ("BillFloat") and its founders, Defendants Ryan Gilbert and Sean O'Malley ("Defendants" or "Individual Defendants"), have already been forced to file motions to compel against GPB because of GPB's refusal to substantively respond to even basic written discovery for over half a year. Now, realizing it has no justification for its positions and faced with the threat of sanctions, GPB filed this Motion, which fails to raise any legitimate discovery issue. GPB's Motion is deeply flawed and only exposes GPB to further sanctions. To cover itself, increase the cost to Defendants, and distract the Court, GPB has manufactured a discovery dispute that emphasizes form over substance and ignores the practical reality that all responsive materials requested either have been or are now being produced by Defendants' company and co-Defendant, BillFloat. At issue is a single set of 91 document requests propounded by GPB on all Defendants. These sets of inspection demands, although separate pieces of paper, are substantively the same: the parties names are just switched in several places. Moreover, the same categories of documents requested of Gilbert and O'Malley have been sought from BillFloat. To date, BillFloat has served timely written responses to three (3) separate Inspection Demands served by GPB. Further, BillFloat has worked tirelessly to review thousands of internal documents, including but not limited to records involving Gilbert and O'Malley, and has already produced at least 75,444 pages of documents in response to these and other requests. See Isola Declaration, 3, Exh. 1. In response to the demands upon them, Defendants Gilbert and O'Malley initially served responses stating that they would coordinate compliance efforts with BillFloat. GPB then met and conferred with Defendants to ensure Defendants did not have any other responsive material not already turned over to the company. Pursuant to an agreement between counsel, Defendants Gilbert and O'Malley again reviewed their own records and confirmed in verified amended responses that they did not have any further materials to produce. Thus, all records requested of Gilbert and O'Malley are in the possession, custody and control of BillFloat, Accordingly, Defendants Gilbert and O'Malley's written responses are more than adequate; these 1 DEFENDANTS! OPPOSITION TO MOTION TO COMPEL Case No. CGC-16-549804 dennern.a anenrne& ra aA w 10 HW 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 responses affirm that a diligent search has been conducted and that no further records, beyond what was turned over to BillFloat, exist. The Code of Civil Procedure does not require a duplicate production by directors, officers, or employees of a company, which would be an extreme waste of time, money and other resources. When a Company is a party to litigation (as BillFloat is here), good practice does not contemplate that officers, directors and/or employees of the company will receive subpoenas for the production of records already requested of and produced by the Company. Yet, that is essentially what GPB is doing here in effort to drag on the discovery process and preclude this action from getting to the merits. GPB has received or is in the process of receiving all responsive non-privileged documents to Request Nos. 1-86 from Gilbert and O'Malley's company, BillFloat. Therefore, the only dispute of any possible importance involves the final five (5) requests (Nos. 87-91). In response to these few requests, Defendants have asserted numerous well-supported objections, including but not limited to the fact that that these particular requests are not relevant, are impermissibly compound, vague, overbroad, and are unduly burdensome. Moreover, a few requests in this range (Nos. 87-91) also invade the privacy rights of third parties as they implicate sensitive financial information. Defendants Gilbert and O'Malley have repeatedly asked for clarification and for compromise to reduce the burden imposed by the current wording, and to negotiate a solution whereby they will not be sued by third parties for divulging sensitive confidential financial information. GPB has refused to narrow these requests at all and chose to file this motion instead of working with Defendants productively to reach a compromise, a result which is encouraged by both the text and spirit of the Discovery Act. For all of these reasons, and those discussed more fully below, Defendants Gilbert and O'Malley respectfully request that the Court deny this Motion and deny GPB's request for sanctions. Further, Defendants request an award of sanctions against GPB in the amount of $6900 to reimburse them for the reasonable attorney's fees incurred in opposing the Motion. Il STATEMENT OF FACTS A. GPB's Complaint and Document Requests to BillFloat On October 2, 2015, GPB filed its Complaint against former business partner BillFloat, 2 DEFENDANTS' OPPOSITION TO MOTION TO COMPEL Case No. CGC-16-54980410 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 asserting causes of action for fraud, breach of contract, and various business torts (“Complaint”). (See Robert Lockwood Deel. at {2, Ex. A). GPB has sued not only BillFloat, but also Defendants Gilbert and O’Malley individually for fraud and misappropriation of trade secrets. Id. GPB asserted a variety of other business tort causes of action against BillFloat only. Id. On December 7, 2015, GPB served its First Inspection Demand with 86 categories of documents on BillFloat. (Lockwood Decl. at 93, Ex. B). BillFloat served its written responses to that request on March 4, 2016. (Lockwood Decl. at 4, Ex. C). On February 24, 2016, GPB served its Second Inspection Demand to BillFloat with 65 more categories of documents requested (Nos. 87-151). (Lockwood Decl. at §5, Ex. D). BillFloat served written responses to that second set of document requests on March 28, 2016. (Lockwood Decl. at 46, Ex. E). On March 10, 2016, GBP served upon BillFloat its Third Inspection Demand with 55 separate categories of documents (Nos. 152-206). (Lockwood Decl. at 7, Ex. F). BillFloat served its written responses to GPB's Third Inspection Demand on April 11, 2016. (Lockwood Decl. at 48, Ex. G). In response to these 206 requests in GPB's three Inspection Demands, BillFloat has, to date, already produced approximately 74,836 pages of documents. (Lockwood Deel. at 49). B. GPB's Duplicative Document Requests to Defendants On April 8, 2016, GPB served separate sets of largely duplicative document requests on Defendant Gilbert and Defendant O'Malley. (Lockwood Decl., 11-12, Exhs. H and I). Each of these Inspection Demands has 91 categories of documents requested and, except for the swapping of "Ryan Gilbert" for "Sean O'Malley" in several places, the document requests issued to the individual defendants are identical. Moreover, except for the final five (5) categories in these requests to Mr. Gilbert and Mr. O'Malley (Nos. 87-91 in each), the requests are substantively the same requests as those propounded on BillFloat. Jd See, for example, Demand Nos. 87-100 in GPB's Second Inspection Demand to BillFloat (Exh. D) and compare to categories 1-18 to Gilbert and O'Malley (Exhs. H and I). Requests Nos. 19-68 to Gilbert and O'Malley (Exhs. H and I) overlap with corresponding Requests Nos. 3-73 to BillFloat. All three (3) of GPB's inspection demands to BillFloat are attached to the Lockwood Declaration (Exhs. B, D, F). Notwithstanding the redundant nature of the requests for documents served upon Gilbert and 3 DEFENDANTS' OPPOSITION TO MOTION TO COMPEL Case No. CGC-16-549804 Deancan. AnenIASO'Malley, the Individual Defendants timely served comprehensive responses in good faith on May 10, 2016. (Lockwood Decl. at 413-14, Exhs. J and K). In these written responses, Gilbert and O'Malley had to address identical records requests to which BillFloat had already responded by agreeing to comply and produce responsive materials. In responding to these corresponding requests which had already been made to BillFloat, Gilbert and O'Malley stated, in their respective written responses that, without waiving any objection raised: 1) they would make available any non- privileged responsive documents to the extent such materials had not already been produced by BillFloat; or 2) that all responsive records have already been or will be produced by Billfloat. Id. This made good, practical sense because BillFloat had already produced documents in response to these same requests. Id. Cc. Defendants' Initial Responses On June 15, 2016, GPB sent meet and confer letters to Defendants taking issue with the responses of Gilbert and O'Malley. (Lockwood Decl. at §§15-16, Exhs. L and M). Both letters are completely lacking in of any authority on point supporting GPB's contention that the written responses of Gilbert or O'Malley were, in any way, improper, or that either Individual Defendant is required to serve a production that would duplicate the materials provided by BillFloat. Id. Nevertheless, Defendants responded in writing on July 12, 2016, setting forth in detail why GPB's position improperly emphasized form over substance and lacked merit. (Lockwood Decl. at §{16- 17, Exhs, N and $.! Importantly, counsel for Defendants Gilbert and O'Malley confirmed in this correspondence that the Individual Defendants did not have any responsive documents independent of BillFloat. Id. On July 12, 2016, counsel for GPB and counsel for the Individual Defendants spoke by telephone regarding the responses at issue here. (Lockwood Decl. 17). With respect to Requests 1- 86, Gilbert and O'Malley's counsel reiterated that GPB's objections improperly emphasized form over substance and ignored the reality that all responsive material was already provided or being produced by BillFloat. Jd. Further, Defendants' counsel reminded GPB's counsel that the same ’ Significantly, GPB failed to include the responsive correspondence sent July 12, 2016 as an exhibit to the instant motion. 4 DEFENDANTS' OPPOSITION TO MOTION TO COMPEL Case No. CGC-16-549804requests at issue had been propounded on BillFloat and advised that Defendants did not have possession of any responsive documents outside of what was previously turned over to the company, BillFloat. Id. Since BillFloat was already producing the records which, in the absence of BillFloat being a co-defendant in the action, Defendants would otherwise produce, it was made clear to GPB's counsel that it would be neither efficient nor practical for Individual Defendants to serve a duplicate set of production records. Jd. However, as a compromise, counsel for Defendants offered to confirm this point in verified amended responses and GPB's counsel agreed to this proposal at the time. Id, With respect to Requests 87-91, Defendants' counsel reiterated the reasons why these requests were impermissibly compound, vague, ambiguous, overbroad, and, in some instances, sought information protected by the privacy rights of third parties. Jd. GPB never made any effort to narrow these Requests 87-91 or offer a compromise as to any of them. /d. D. Defendants' Amended Responses After the July 12 phone call between counsel, the Individual Defendants upheld their end of the bargain and served amended verified responses to Request Nos. 1-86 on August 12, 2016. In these amended responses, Defendants affirmed that they had performed a reasonable and diligent search and do not have any responsive documents independent of BillFloat. (Lockwood Decl. at §{]18-20, Exhs. O and P). Request Nos. 87-91 were not amended because Defendants were waiting for GPB to respond to their request to reach compromise and reduce the burden imposed by the current wording. Id. On September 1, 2016, GPB sent Individual Defendants a letter taking issue with the amended responses. Therein, GPB changed its position regarding the language previously agreed upon and, instead, contended that the language accepted in the July 12 phone call and incorporated into the August 12 amended responses was, nonetheless, improper. (Lockwood Decl. at (21, Ex. Q). As to Requests 87-91, GPB maintained its refusal to narrow the original language or otherwise propose any compromise to reduce the burden imposed by the original wording. Id. E. GPB Cuts off Productive Meet and Confer Communications Prematurely On September 19, 2016, Individual Defendants! counsel sent GPB's counsel an email which stated: 5 DEFENDANTS' OPPOSITION TO MOTION TO COMPEL Case No. CGC-16-549804& Oo Oe IY Hw 10 12 13 4 15 16 17 18 19 20 21 22 23 24 25 26 27 28 We ask that you further meet and confer on these responses in good faith given that GPB's deadline to move to compel further responses is still weeks away. Please let us know exactly how you propose Defendants further amend their responses. Per our prior agreement, Defendants Gilbert and O'Malley have searched and confirmed they do not have any responsive documents independent of BillFloat (on which GPB propounded the same requests). BillFloat has produced thousands of pages of responsive documents in response, and we understand an additional supplemental production will be served shortly. It is not efficient, nor is it the individual defendant’s obligation, to serve duplicate documents. GPB is already getting all responsive documents and we do not see a basis for a motion to compel. Please further advise. (Lockwood Decl. at 22, Ex. R). Instead of picking up the phone, communicating in writing, or otherwise attempting to informally resolve this dispute, GPB refused to engage in any further meet and confer efforts and proceeded to file this Motion, notwithstanding the fact that Defendants had extended GPB's motion to compel deadline by a few weeks and indicated they would extend it further to facilitate a continued productive dialogue. Id Tt LEGAL STANDARD The Discovery Act is intended, among other things, to effectuate efficiency and to expedite a party’s preparation for trial. Discovery is not intended to delay or obstruct the exchange of information, but rather intended to facilitate it so that there are no surprises at trial and the parties are fully apprised of the issues and facts that lead to the dispute. “The civil discovery statutes are intended to accomplish the following results: (1) To give greater assistance to the parties in ascertaining the truth and in checking and preventing injury; (2) to provide an effective means of detecting and exposing false, fraudulent and sham claims and defenses; (3) to make available in a simple, convenient and inexpensive way, facts which otherwise could not be provided except with great difficulty; (4) to educate the parties in advance of trial as to the real value of their claims and defenses, thereby encouraging settlement; (5) to expedite litigation; (6) to safeguard against surprise; (7) to prevent delays; (8) to simplify and narrow the issues; and (9) to expedite and facilitate both preparation and trial...” Fuss v. Superior Court (1969) 273 Cal.App.2d 807, 816. However, courts have recognized the discovery statutes are prone to misuse absent judicial consideration of the great burdens which may be imposed on parties and non-parties alike. Calcor 6 DEFENDANTS' OPPOSITION TO MOTION TO COMPEL Case No. CGC-16-549804& Com aA Aw i 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Space Facility, Inc. v. Superior Court (1997) 53 Cal.App.4th 216, 221. Accordingly, "Judges must become more aggressive in curbing abuses and insisting discovery devices be used as tool to facilitate litigation rather than as weapons to wage litigation. These tools should be well calibrated; the lancet is to be preferred over the sledge hammer." Id. "Any discovery request, even an initial one, can be misused in an attempt to generate settlement leverage by creating burden, expense, embarrassment, distraction, etc." Obregon v. Superior Court (1998) 67 Cal.App.4th 424, 431. Where a response to a document request has been made, the requesting party may move to compel further responses only if the moving party can show the response contained: (1) objections; (2) an agreement to comply that is incomplete; or (3) a statement of inability to comply that is incomplete or evasive. See Code of Civil Procedure ("CCP") § 2031.310(a). In addition, the motion must set forth "specific facts showing good cause justifying the discovery sought" by the request. CCP § 2031.310(b)(1); Kirkland v. Sup.Ct. (Guess?, Inc.) (2002) 95 Cal.App.4th 92, 98. To establish “good cause,” the burden is on the moving party to show not only relevance to the subject matter (e.g., how the information in the documents would tend to prove or disprove some issue in the case), but also specific facts justifying discovery (e.g., why such information is necessary from the responding party for trial preparation or to prevent surprise at trial). Glenfed Develop. Corp. v. Sup.Ct. (National Union Fire Ins. Co. of Pittsburgh, Penn.) (1997) 53 Cal.App.4th 1113, 1117. Courts have held that the fact that there is no alternative source for the information sought is an "important factor" in establishing “good cause” for inspection. Associated Brewers Distrib. Co., Inc. v. Sup.Ct. (Jos. Schlitz Brewing Co.) (1967) 65 Cal.App.2d 583, 588 (decided under former law). The Court is not required to grant an order for document production. Instead, the Court should properly weigh whatever probative value the records are likely to have against the cost, time, expenses and disruption of normal business likely to result from an order compelling production thereof from the responding party. Volkswagen of America, Inc. v. Sup.Ct. (Rusk) (2006) 139 Cal.App.4th 1481, 1497 (citing text); Calcor, supra, 53 Cal.App.4th at 223. Here, an analysis of these issues cuts in favor of Defendants Gilbert and O'Malley because their co-defendant BillFloat, the entity with which each is affiliated as admitted in the Complaint (Exh. A, {¥ 3-4 and 7), has 7 DEFENDANTS' OPPOSITION TO MOTION TO COMPEL Case No. CGC-16-54980410 i 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 produced documents responsive to the overwhelming majority of the categories in issue. As to the remaining categories (Nos. 87-91), the Motion should likewise be denied for the reasons stated herein, IV) ARGUMENT A. GPB's Entire Motion Should Be Denied Because GPB Failed to Properly Meet and Confer In making this Motion, GPB is required to show a reasonable and good faith attempt to resolve the issues outside of court. See CCP §§ 2016.040, 2031.310(b)(2). Here, as set forth above, the only parties acting in good faith were Individual Defendants, who amended nearly every single one of their responses and would have proceeded to so a second time if GPB had not unilaterally cut off the meet and confer negotiations. GPB should not be rewarded for its gamesmanship in agreeing with Defendants' counsel on acceptable amended language for the written responses, having Defendants spend substantial time inserting this agreed-upon amended language in the supplemental responses, but then deciding after the fact that this language still was not good enough. GPB's counsel simply ignored repeated requests by counsel for Gilbert and O'Malley to specify what else GPB wanted Defendants to say and, instead, filed this premature motion weeks before the existing deadline. This conduct is not consistent with the language or spirit of the Discovery Act and did not satisfy GPB's good faith duty. Therefore, the Motion should be denied for this reason alone. B. As to Request Nos. 1-86, Defendants' Amended Responses Are Proper and GPB Has Not Shown Good Cause To Compel Further Amendment Or a Duplicate Production GPB's entire argument regarding the amended responses to Request Nos. 1-86 boils down to an objection as to form alone. GPB takes issue with the statement by the Individual Defendants Gilbert and O'Malley that they performed a reasonably diligent search and do not have any responsive documents other than what has already been turned over to and organized and produced by BillFloat. However, CCP section 2031.230 specifically permits parties to state they are unable to comply with a request because they do not have possession of the requested material and to identify who does. This is the essence of what Defendants have done. Defendants have now confirmed under oath not only that they have nothing further, but also that they have performed a reasonably 8 DEFENDANTS' OPPOSITION TO MOTION TO COMPEL, Case No, CGC-16-549804 PEANEAN.? ANEAANEdiligent search to reach that conclusion. The mere fact that GPB or its counsel does not want to accept the statements of the Individual Defendants in their amended responses does not support a motion to compel further responses. Further, the rejection of GPB's motion is supported by common sense: an unqualified compliance statement would trigger the overly burdensome and entirely unnecessary obligation to serve a records production that duplicates what BillFloat has done and continues to do (i.e., produce thousands of pages of documents). This is not a situation where a party is pointing to its adversary or another unrelated defendant's production and claiming "I do not have anything you do not have." Rather, Mr, Gilbert and Mr. O'Malley have been sued as officers and co-founders of BillFloat, the entity defendant which likewise has been named in the only two causes of action asserted against Gilbert and O'Malley: for Fraud (Third Cause of Action); and Misappropriation of Trade Secrets (Fifth Cause of Action). GPB has requested the same documents from all three (3) defendants; and the responsive materials have been and continue to be produced by BillFloat. Billfloat has already spent hundreds of hours reviewing documents and responding to these same requests. Requiring that a duplicate production set be provided by or on behalf of Individual Defendants Gilbert and O'Malley is not justified, would impose an undue burden upon the Defendants, and would not yield any new evidence in the case. Instead, such duplicative effort would merely result in an unnecessary increase in the time and expense of this litigation. Therefore, the Motion should be denied as to these Requests 1-86. Cc. As to Request Nos. 87-91, Defendants' Objections Are Justified 1, Request No. 87 GPB requests "ALL text messages" between Individual Defendants (i.c., Gilbert and O'Malley), Evan Singer, Brad Garret, or BillFloat board members that "reference" Virginia Varela. Defendants’ objections are appropriate given the circumstances. This request is impermissibly compound since it asks for communications between multiple parties in the disjunctive. The phrase "text messages" is undefined. It is unclear what medium(s) of communication GPB is referring to, be it cell phone, interoffice messaging, or other forms of communication. Of greater concern is the fact that GPB is asking for any material that "references" a third party without regard to whether the 9 DEFENDANTS' OPPOSITION TO MOTION TO COMPEL Case No. CGC-16-549804we xa a 10 u 12 13 14 15 16 17 18 19 20 21 2 23 24 25 26 27 28 material has anything to do with the issues in this litigation and without placing any time limitation on the request whatsoever. Thus, GPB cannot establish the initial requirement for this request: that it be reasonably calculated to lead to the discovery of admissible evidence. CCP § 2017.010. Moreover, because the term "reference" is not even defined, GPB is effectively asking Defendants Gilbert and O'Malley to search unspecified locations for unspecified terms. This is unduly burdensome, and compliance is impossible without further clarification. Defendants repeatedly expressed a willingness to meet and confer with GPB regarding a more narrowly tailored approach. GPB made no effort to narrow this request at all and cut off the dialogue prematurely. 2. Request No. 88 GPB requests all emails between Individual Defendants, Evan Singer, Brad Garret, or BillFloat board members that "reference" Virginia Varela. Again, Defendants! objections are warranted, This request is likewise impermissibly compound since it asks for communications between multiple parties in the disjunctive. GPB is again asking for any material that "references" a third party without regard to whether the material has anything to do with the issues in this litigation and without placing any time limitation on the request whatsoever. As in No. 87, GPB cannot establish the initial requirement that any discovery request be reasonably calculated to lead to the discovery of admissible evidence. The term "references" is undefined, so GPB is asking Defendants to search unspecified locations for unspecified terms. This is unduly burdensome and compliance is impossible without further clarification. Defendants repeatedly expressed a willingness to meet and confer with GPB regarding a more narrowly tailored approach to this request as well. However, GPB made no effort to narrow this request at all and cut off the dialogue prematurely. 3. Request No. 89 GPB requests "ALL text messages between YOU and ANY PERSON that reference fees charged by BILLFLOAT pursuant to the SmartBiz program." Defendants’ objections are well taken, Again, the phrase "text messages" is not defined and there is no time period specified. Furthermore, many of the documents responsive to this request may contain private and confidential information of other lenders and banks with whom BillFloat does business and/or regarding loan applicant customers, neither of which may be disclosed to GPB. See Valley Bank of Nevada v. Sup.Ct. 10 DEFENDANTS' OPPOSITION TO MOTION TO COMPEL Case No, CGC-16-549804 Ferner ANENINEa nw eo 10 ie 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (Barkett) (1975) 15 Cal.3d 652, 658. Defendants tried to further meet and confer with GPB regarding a more narrowly tailored request. However, GPB has made no effort to narrow this category. 4, Request No. 90 GPB requests "ALL text messages between YOU and ANY PERSON that reference ANY expense referenced in ANY JOINT IP SOW that BILLFLOAT, INC. delivered to the BANK." Defendants’ objections are valid. The phrase "text messages" is not defined and there is no time period specified. Further, documents potentially responsive to this request may contain private and confidential information of other lenders and banks with whom BillFloat does business and/or regarding loan applicant customers; none of these records may be disclosed to GPB. See Valley Bank of Nevada, supra, 15 Cal.3d at 658. Defendants tried to further meet and confer with GPB regarding a more narrowly tailored request. However, GPB has made no effort to narrow this category. 5. Request No. 91 GPB requests "ALL text messages between (Ryan Gilbert and Sean O’ Malley) that reference or regard GOLDEN PACIFIC BANK’s participation in the SMARTBIZ program." This request has the same flaws as Nos. 87-90 discussed above; Defendants' objections are justified and should be sustained, Again, the phrase "text messages" is not defined and there is no time period specified. Further, documents potentially responsive to this request may contain private and confidential information of other lenders and banks with whom BillFloat does business and/or regarding loan applicant customers; such records may not be disclosed to GPB. See Valley Bank of Nevada, supra, 15 Cal.3d at 658. Again, counsel for Defendants Gilbert and O'Malley was willing to meet and confer with GPB regarding a more narrowly tailored request. GPB refused. D. GPB's Inflated Request for Sanctions is Not Based on Work Performed on This Motion and is Not Warranted Because Defendants' Position Is Substantially Justified As an initial matter, GPB's request for sanctions should be denied because it is based on a declaration of counsel regarding work performed opposing a separate and unrelated motion. The Court is only authorized to award as sanctions the moving party's reasonable expenses including i DEFENDANTS' OPPOSITION TO MOTION TO COMPEL Case No, CGC-16-549804attorney fees on the motion to compel. “Reasonable expenses” include the time moving party's counsel spent in research and preparation of the motion and court time in connection with the motion. See Ghanooni v. Super Shuttle of Los Angeles (1993) 20 Cal.App.4th 256, 262. But here, GPB's request is expressly based on time GPB's counsel spent "preparing and revising the opposition papers." See Declaration of Christopher Onstott ("Onstott Decl." at 10, page 3, lines 22-23). It is unclear to which "opposition" Mr. Onstott's Declaration refers, but his Declaration does not describe or support work associated with this Motion. Accordingly, there is no evidence before the court regarding time spent by GPB's counsel on this Motion, which is necessary for the Court to consider a valid request for sanctions. Further, as discussed above, Individual Defendants' positions on the discovery at issue are substantially justified and do not warrant sanctions. Defendants’ counsel engaged in multiple good faith efforts to resolve informally the issues by this motion, including possible further amendment of the written responses. Ultimately, GPB's counsel had no interest in that process.. Counsel for Individual Defendants extended GPB's deadline to move to compel several times in order to promote productive dialogue. With respect to the amended responses to Request Nos. 1-86, Defendants believe in good faith that they have complied with their obligations. GPB's refusal to accept the updated form of Gilbert and O'Malley's written responses ignores the fact that GPB has received and is receiving all responsive documents from BillFloat. As stated, Defendants’ objections to the remaining requests have merit: Defendants asked GPB several times to narrow these inquiries or to propose compromise, but GPB refused. E. GPB Should Be Sanctioned For Bringing this Motion Defendants have been forced to incur at least $6900 in having to oppose this Motion and respectfully request reimbursement of this sum. (See Lockwood Decl. at §23; Declaration of Peter L, Isola ("Isola Decl." at 2). Vv CONCLUSION GPB's discovery motion has raised no real issue. To date, BillFloat has served timely written responses to three (3) separate Inspection Demands served by GPB. Further, BillFloat has worked tirelessly to review thousands of internal documents, including but not limited to records involving 12 DEFENDANTS' OPPOSITION TO MOTION TO COMPEL Case No. CGC-16-549804 Bere? NNEAINEa Dn Bs oo 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gilbert and O'Malley, and has already produced at least 75,444 pages of documents in response to these and other requests. See Isola Declaration, §3, Exh. 1. Individual Defendants and opposing parties Ryan Gilbert and Sean O'Malley have likewise satisfied their discovery obligations. GPB's motion has unnecessarily increased the expense of this litigation, but GPB has not and cannot identify any particular records relevant to this action which it contends have not been produced. For the foregoing reasons, Defendants respectfully request that the Court deny this Motion and deny GPB's request for sanctions. Further, Defendants request an award of sanctions against GPB in the amount of $6900 to reimburse them for the reasonable expense in having to oppose this Motion. Date: October 21, 2016 HINSHAW & CULBERTSON LLP D4 ww ) Q By: tot A. Ne rn*e PETER L, ISOLA ROBERT I. LOCKWOOD Attorneys for Defendants RYAN GILBERT and SEAN O’MALLEY 13 DEFENDANTS' OPPOSITION TO MOTION TO COMPEL Case No. CGC-16-549804 Berner. nnonrne