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1 CRAIG D. BRAUN, State Bar No. 166519
SAM VAN EERDEN, State Bar No. 283069
2 BRAUN GOSLING, A LAW CORPORATION
3 1620 Mill Rock Way, Suite 400
Bakersfield, CA 93311
4 Telephone: (661) 663-8300
Facsimile: (661) 663-8388
5 E-Mail: svaneerden@braungosling.com
6
Attorneys for CHRIS JOHNSTON and
7 LIVE.RESIDE LLC
8
9 SUPERIOR COURT OF THE STATE OF CALIFORNIA
10 COUNTY OF KERN – METROPOLITAN DIVISION
11 CHRIS JOHNSTON, an individual, Case No. BCV-19-103089-TSC
12
Plaintiff, UNLIMITED CIVIL CASE
13
vs. SEPARATE STATEMENT OF DEMANDS
14 AND RESPONSES IN DISPUTE IN
15 JAMES McKAY, an individual; SUPPORT OF CHRIS JOHNSTON’S
et al., MOTION TO COMPEL FURTHER
16 RESPONSES OF VIRGINIA MCKAY TO
Defendants, DEMANDS FOR INSPECTION AND
17 COPYING, SET ONE
18 and
[concurrently filed with Notice of Motion
19 MILLENNIUM HOMES, LLC, a California and Motion; Request for Judicial Notice;
limited liability company; Declaration of Sam Van Eerden]
20 et al.,
21 DATE: May 2, 2024
Nominal Defendants. TIME: 8:30 a.m.
22 DEPT: 17
23 ASSIGNED FOR ALL PURPOSES TO
24 AND RELATED CROSS-ACTIONS. JUDGE: Hon. Thomas S. Clark
DEPARTMENT: 17
25 COMPLAINT FILED: October 29, 2019
TRIAL DATE: November 4, 2024
26
27
Pursuant to Rule 3.1345 of the California Rules of Court, Chris Johnston submits the
28
following Separate Statement of Demands and Responses in Dispute regarding Demands for
1
SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF
CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA
MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE
1 Inspection and Copying of Documents, Set One, propounded by Chris Johnston (“JOHNSTON”)
2 to Virginia McKay (“MCKAY”), and for which JOHNSTON seeks to compel further response
3 from MCKAY.
4 The following is Demand No. 2 and the response received, as well as the reasons why a
5 further response should be compelled, and MCKAY’s objections should be deemed unmeritorious.
6 DEMANDS FOR INSPECTION AND COPYING AND RESPONSES IN DISPUTE
7 DEMAND FOR INSPECTION AND COPYING
8 DEMAND FOR PRODUCTION NO. 2:
9 All bank account statements for the period of January 1, 2017 through January 1, 2021 for any and
10 all bank accounts owned by or maintained for the benefit of Calbase, LLC. (This request is
11 intended to include, but is not limited to, statements related to the business checking account in the
12 name of Calbase, LLC, with an account number ending in 1677.)
13 RESPONSE TO DEMAND FOR INSPECTION NO. 2:
14 PRELIMINARY STATEMENT
15 VIRGINIA MCKAY (“Responding Party”) bases these responses on a diligent
16 investigation of the facts of this case conducted by Responding Party and its counsel. Relevant
17 information may exist that is not yet known to Responding Party and relevant documents may
18 exist that Responding Party has not yet located, identified, or reviewed in any detail. For those
19 reasons, these responses only reflect Responding Party’s current understanding, belief, and
20 knowledge about the subject matter of the Requests.
21 These responses are not an admission or representation that further relevant documents do
22 not exist. Responding Party anticipates that further documents may be discovered or identified.
23 Subject to the objections asserted herein, Responding Party is responding in good faith to the
24 requests based upon information presently available to it within the time limitations that Cod and
25 these requests impose. These responses should not be construed to prejudice the right of
26 Responding Party to utilize any additional evidence that may be discovered or developed.
27 Responding Party reserves the right to supplement, alter, or amend any of the responses provided
28 herein up to and including the first day of trial based upon subsequently discovered evidence.
2
SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF
CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA
MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE
1 No incidental or implied admissions are intended in these responses. The fact that
2 Responding Party has responded to any part of all of any particular request is not an admission
3 that Responding Party accepts or admits the existence of any fact set forth or assumed by such
4 request, or that such request constitutes admissible evidence. The fact that Responding Party has
5 answered any part or all of any request is not intended to be and shall not be construed to be a
6 waiver by Responding Party of all objections or any part of any objection to any such request.
7 Responding Party intends these responses to be consistent with and to be read consistent
8 with Responding Party's previous and subsequent discovery responses and any apparent conflict
9 between and/or among them is purely unintentional.
10 RESPONSE TO DEMAND FOR PRODUCTION NO. 2:
11 Objection. This request is overbroad and unduly burdensome as to time and scope. This
12 request seeks personal confidential information subject to the privacy rights of Responding Party
13 and third parties who have not received notice of this request and have not had the opportunity to
14 object to the disclosure of their personal information. This request seeks information that is neither
15 relevant to the subject matter of this action nor reasonably calculated to lead to the discovery of
16 admissible evidence.
17 FACTUAL AND LEGAL REASONS FOR COMPELLING A FURTHER RESPONSE:
18 A. Summary of Argument.
19 JOHNSTON’s operative complaint (First Amended Complaint and Derivative Complaint for
20 Damages and Injunctive Relief, filed June 30, 2023 [“FAC”]) alleges that MCKAY is an officer of
21 defendant, CALBASE, LLC (“CALBASE”). The FAC also alleges that MCKAY is liable for the
22 acts of CALBASE on an alter ego theory, that MCKAY commingled funds of CALBASE, and that
23 McKay used CALBASE as a mere “shell, instrumentality, or conduit for the business of [MCKAY]
24 . . .” The FAC also alleges that MCKAY “aided and abetted [primary defendant James McKay] in
25 his breach of [fiduciary] duties by CALBASE receiving funds misappropriated by [James McKay]
26 from TARINA HOMES in an effort to assist him in misappropriating assets of TARINA HOMES.”
27 The damages caused by this misconduct were alleged to be in excess of $1,000,000.
28 In light of the allegations of the FAC, including MCKAY’s alleged control of CALBASE
3
SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF
CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA
MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE
1 and use of CALBASE for purposes of misappropriating funds, this Demand’s request for bank
2 account statements is clearly relevant to the subject matter and calculated to lead to admissible
3 evidence.
4 With regard to the timeframe for the account statements that are the subject of this Demand,
5 the FAC alleges that as of “in or about late 2016” JOHNSTON and James McKay had already been
6 engaged in the joint venture between various entities that is relevant to this action (including the
7 ones from which MCKAY allegedly received misappropriated funds). Moreover, the FAC alleged
8 that “in or about late 2016”, JOHNSTON and James McKay made further oral agreements
9 concerning the joint venture, which were thereafter breached, with MCKAY’s assistance. To the
10 extent that CALBASE was utilized by MCKAY for the purpose of misappropriating funds as
11 alleged in the FAC, the financial accounts maintained for the benefit of CALBASE during that
12 same time period are certainly relevant to this action. Moreover, while this action was filed prior to
13 January 1, 2021, the commencement of this action does not make subsequent bank accounts
14 statements irrelevant as those bank statements may still provide admissible evidence – or lead to the
15 discovery of admissible evidence – showing how misappropriated funds were used (i.e., not for the
16 benefit of the nominal defendants).
17 With respect to the assertion of “privacy rights of Responding Party and third parties”, no
18 further notice is required to obtain the documents requested by this Demand. Moreover, MCKAY
19 does not even specifically identify any “third parties” whose privacy rights are supposedly
20 implicated. If MCKAY was truly concerned for the privacy interests of others, MCKAY could have
21 easily informed those parties of this demand. Additionally, even documents subject to a right to
22 privacy can still be discovered by balancing the interests of the parties to the litigation. “Disclosure
23 in the face of an objection based on the right of privacy depends on the balancing of the need for
24 discovery against the patient's need for confidentiality.” (Family Law Financial Discovery (Cal.
25 CEB 2022) §15.34.)
26 Counsel for JOHNSTON’s meet and confer letter to counsel for MCKAY included the
27 following statement/request: “In light of the relevancy of the requested documents, and in light of
28 the analytical framework of Hill v National Collegiate Athletic Ass'n (1994) 7 C4th 1, 15 (see also:
4
SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF
CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA
MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE
1 California Civil Discovery Practice (4th ed. Cal. CEB 2022) §1.57.), please identify a legally
2 protected privacy interest (whether concerning “informational privacy” or “autonomy privacy”),
3 and explain the “extent and gravity” of the claimed invasion of privacy.” No response to this request
4 was provided.
5 B. Scope of Discovery.
6 Pursuant to Code of Civil Procedure section 2017.010,
7
Unless otherwise limited by order of the court in accordance with this
8 title, any party may obtain discovery regarding any matter, not
9 privileged, that is relevant to the subject matter involved in the
pending action or to the determination of any motion made in that
10 action, if the matter either is itself admissible in evidence or appears
reasonably calculated to lead to the discovery of admissible evidence.
11 Discovery may relate to the claim or defense of the party seeking
12 discovery or of any other party to the action. Discovery may be
obtained of the identity and location of persons having knowledge of
13 any discoverable matter, as well as of the existence, description,
nature, custody, condition, and location of any document,
14
electronically stored information, tangible thing, or land or other
15 property.
16 C. Plaintiff is Entitled to Discover Relevant Evidence.
17 “For discovery purposes, information is relevant if it "might reasonably assist a party
18 in evaluating the case, preparing for trial, or facilitating settlement . . . ." (Weil & Brown, Cal.
19 Practice Guide: Civil Procedure Before Trial (The Rutter Group 1994) Discovery, P 8:66.1, p. 8C-
20 1.) Admissibility is not the test and information, unless privileged, is discoverable if it might
21 reasonably lead to admissible evidence. (Davies v. Superior Court (1984) 36 Cal. 3d 291, 301
22 [204 Cal. Rptr. 154, 682 P.2d 349].) (Gonzalez v. Superior Court (1995) 33 Cal. App. 4th 1539,
23 1546.)
24 As indicated above, the first and most basic limitation on the scope of discovery is that the
25 information sought must be relevant to the “subject matter” of the pending action or to the
26 determination of a motion in that action. (Code Civ. Proc., §2017.010.) Although the phrase
27 “subject matter” does not lend itself to precise definition, it is broader than relevancy to the issues
28 (which determines admissibility of evidence at trial). (Bridgestone/Firestone, Inc. v. Sup.Ct.
5
SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF
CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA
MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE
1 (1992) 7 Cal.App.4th 1384, 1392.)
2 For discovery purposes, information should be regarded as “relevant to the subject matter”
3 if it might reasonably assist a party in evaluating the case, preparing for trial, or facilitating
4 settlement thereof. (Gonzalez v. Sup.Ct. (1995) 33 Cal.App.4th 1539, 1546 (citing text); Lipton v.
5 Sup.Ct. (1996) 48 Cal.App.4th 1599, 1611 (citing text); Stewart v. Colonial Western Agency, Inc.
6 (2001) 87 Cal.App.4th 1006, 1013 (citing text).) Information that relates to a claim or defense of
7 any party is relevant to the subject matter of the litigation. This information is subject to
8 discovery, even though the information may be inadmissible at trial. Information supporting
9 allegations in the pleadings, including affirmative defenses and general denials, is relevant without
10 regard as to who has the burden of proof on the issue for which the information is sought.
11 (Dompeling v. Superior Court (1981) 117 Cal.App.3d 798; Singer v. Superior Court (1960) 54
12 Cal.2d 318.)
13 The “relevance to the subject matter” and “reasonably calculated to lead to discovery of
14 admissible evidence” standards are applied liberally. Any doubt is generally resolved in favor of
15 permitting discovery, particularly where the precise issues in the case are not yet clearly
16 established. (Colonial Life & Acc. Ins. Co. v. Sup.Ct. (1982) 31 Cal.3d 785, 790, fns. 7-8.)
17 In the face of an "irrelevance" objection, an order granting discovery is proper unless there
18 is no reasonable possibility that the responses will lead to the discovery of admissible evidence or
19 will be helpful in preparing for trial. (Sav-On Drugs, Inc. v. Superior Court (1975) 15 Cal.3d 1, 5.)
20 Doubts concerning relevance should usually be resolved in favor of permitting discovery.
21 (California Life and Accident Ins. Co. v. Superior Court (1982) 31Cal.3d 785.) Moreover, all
22 doubts about discovery are resolved in favor of disclosure. (Glenfed Development Corp. v.
23 Superior Court, supra.)
24 D. Plaintiff Has the Right to Discover Defendants’ Contentions and Facts in Support
25 of Such Contentions.
26 A party may discover its opponent's contentions on some issue, although they are merely
27 opinions which would be inadmissible at trial. Again, admissibility is not the test. Contentions are
28 discoverable because they are relevant to the “subject matter” and may reasonably lead to
6
SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF
CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA
MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE
1 discovery of admissible evidence. This is true whether the contentions relate to issues of fact or
2 law. (West Pico Furniture Co. of Los Angeles v. Sup.Ct. (1961) 56 Cal.2d 407, 416-417.) In
3 addition, a party may be compelled to disclose the evidence supporting each such claim or
4 contention. (Burke v. Sup.Ct. (1969) 71 Cal.2d 276, 281-282.)
5 “… a defendant in California courts may be required through discovery to disclose not
6 only the evidentiary facts underlying his affirmative defenses (Singer v. Superior Court, supra, 54
7 Cal.2d 318, 323-325 [defendant required to disclose the facts underlying his allegations of
8 contributory negligence and assumption of risk]) and denials ( Durst v. Superior Court, 218
9 Cal.App.2d 460, 464-465 [32 Cal.Rptr. 627] [defendant required to disclose the facts underlying
10 his denial that plaintiff had been injured or disabled]) but also whether or not he makes a particular
11 contention, either as to the facts or as to the possible issues in the case. (Universal Underwriters
12 Ins. Co. v. Superior Court, supra, 250 Cal.App.2d 722, 728; see also Sheets v. Superior Court,
13 257 Cal.App.2d 1, 13 [64 Cal.Rptr. 753].) (Burke v. Superior Court (1969) 71 Cal. 2d 276, 281-
14 282.)
15 E. Duties When Responding to Demands for Inspection and Copying.
16 Pursuant to Code of Civil Procedure section 2031.210,
17 (a) The party to whom a demand for inspection, copying, testing, or
sampling has been directed shall respond separately to each item or
18 category of item by any of the following:
19 (1) A statement that the party will comply with the particular demand
for inspection, copying, testing, or sampling by the date set for the
20 inspection, copying, testing, or sampling pursuant to paragraph (2) of
21 subdivision (c) of Section 2031.030 and any related activities.
(2) A representation that the party lacks the ability to comply with the
22
demand for inspection, copying, testing, or sampling of a particular
23 item or category of item.
24 (3) An objection to the particular demand for inspection, copying,
testing, or sampling.
25 ***
26 Code Civ. Proc., § 2031.220 provides that:
27 A statement that the party to whom a demand for inspection, copying,
testing, or sampling has been directed will comply with the particular
28 demand shall state that the production, inspection, copying, testing, or
7
SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF
CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA
MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE
1 sampling, and related activity demanded, will be allowed either in
whole or in part, and that all documents or things in the demanded
2 category that are in the possession, custody, or control of that party
3 and to which no objection is being made will be included in the
production.
4 And, as it relates to a claimed inability to comply with a particular demand, Code Civ. Proc.,
5 § 2031.230 provides that:
6 A representation of inability to comply with the particular demand for inspection,
copying, testing, or sampling shall affirm that a diligent search and a reasonable inquiry
7 has been made in an effort to comply with that demand. This statement shall also specify
8 whether the inability to comply is because the particular item or category has never
existed, has been destroyed, has been lost, misplaced, or stolen, or has never been, or is
9 no longer, in the possession, custody, or control of the responding party. The statement
shall set forth the name and address of any natural person or organization known or
10 believed by that party to have possession, custody, or control of that item or category of
11 item.
12
F. The Propounding Party May Move for an Order Compelling a Further Response to a
13
Demand for Inspection and Copying.
14
Code Civ. Proc., § 2031.310, provides in relevant part as follows:
15
(a) On receipt of a response to a demand for inspection, copying,
16
testing, or sampling, the demanding party may move for an order
17 compelling further response to the demand if the demanding party
deems that any of the following apply:
18
(1) A statement of compliance with the demand is incomplete.
19
20 (2) A representation of inability to comply is inadequate, incomplete,
or evasive.
21
22 (3) An objection in the response is without merit or too general.
23 (b) A motion under subdivision (a) shall comply with each of the
following:
24
25 (1) The motion shall set forth specific facts showing good cause
justifying the discovery sought by the demand.
26
(2) The motion shall be accompanied by a meet and confer
27 declaration under Section 2016.040.
28
8
SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF
CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA
MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE
1 (3) In lieu of a separate statement required under the California Rules
of Court, the court may allow the moving party to submit a concise
2 outline of the discovery request and each response in dispute.
3
(c) Unless notice of this motion is given within 45 days of the service
4 of the verified response, or any supplemental verified response, or on
or before any specific later date to which the demanding party and the
5 responding party have agreed in writing, the demanding party waives
6 any right to compel a further response to the demand.
7 ***
8
G. Manner of Production
9
Pursuant to Code of Civil Procedure section 2031.280,
10
(a) Any documents or category of documents produced in
11
response to a demand for inspection, copying, testing, or sampling
12 shall be identified with the specific request number to which the
documents respond.
13
***
14
MCKAY provided no document production in response to the Demand that is the subject of
15
this Motion.
16
H. MCKAY’s Objections should be deemed unmeritorious and the Court should order
17
MCKAY to provide further responses that do not include said unmeritorious
18
objections.
19
In response to Demand No. 2, MCKAY asserted numerous objections, all of which are
20
unmeritorious. Those objections are summarized here, along with legal analysis demonstrating
21
their lack of merit with respect to JOHNSTON’s Demands.
22
I. Objections.
23
In response to Demand No. 2, McKay asserted numerous objections, including (1)
24
overbroad, (2) unduly burdensome, (3) lack of relevance, and (4) violative of privacy rights.
25
26
1. Overbroad/Unduly Burdensome.
27
This objection is only valid if the breadth of the demand imposes an undue burden or is
28
irrelevant to the subject matter. (Williams v. Superior Court (2017) 3 Cal.5th 531, 549-550; Mead
9
SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF
CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA
MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE
1 Reinsurance Co. v. Superior Court (1986) 188 Cal.App.3d 313; Code Civ. Proc., § 2017.010.)
2 As it relates to the Demands, they are all relevant to the subject matter of the within cause.
3 As to the breadth of the Demands, insofar that the Demands relate to discoverable matter and, in
4 particular, the allegations of the pleadings of the parties to this action, it is hard to fathom how the
5 Demands impose an undue burden on McKay.
6
7 2. Lack of Relevance.
8 This objection is improper. Code Civ. Proc., § 2017.010 provides that:
9 Unless otherwise limited by order of the court in accordance
with this title, any party may obtain discovery regarding any matter,
10 not privileged, that is relevant to the subject matter involved in the
11 pending action or to the determination of any motion made in that
action, if the matter either is itself admissible in evidence or appears
12 reasonably calculated to lead to the discovery of admissible evidence.
Discovery may relate to the claim or defense of the party seeking
13 discovery or of any other party to the action. Discovery may be
14 obtained of the identity and location of persons having knowledge of
any discoverable matter, as well as of the existence, description,
15 nature, custody, condition, and location of any
document, electronically stored information, tangible thing, or land or
16
other property.
17 Each of the individual demands contained in the Demands relate to the claims of either
18 Johnston or McKay in this within cause. As such, they clearly fall within the scope of discovery.
19 Pursuant to Evidence Code, § 210,
20 “Relevant evidence” means evidence, including evidence relevant to
21 the credibility of a witness or hearsay declarant, having any tendency
in reason to prove or disprove any disputed fact that is of consequence
22 to the determination of the action.
23 As it relates to all of the demands, including the ones to which an irrelevance objection has
24 been made, the documents sought by JOHNSTON are expected to have a “tendency in reason to
25 prove or disprove any disputed fact that is of consequence to the determination of the action.”
26
27
28
10
SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF
CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA
MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE
1
2 3. Privilege/Privacy Rights of others.
3 MCKAY does not provide any legitimate basis for the asserted privacy objections, and
4 insofar as JOHNSTON has alleged that MCKAY utilized CALBASE for the purposes of
5 misappropriating funds and harming the nominal defendants, the bank records of CALBASE are
6 highly relevant. Additionally, to the extent that MCKAY is making a privilege objection and
7 withholding documents on those grounds, a privilege log is required, something that she has not
8 provided. Finally, even documents subject to a right to privacy can still be discovered by balancing
9 the interests of the parties to the litigation. “Disclosure in the face of an objection based on the right
10 of privacy depends on the balancing of the need for discovery against the patient's need for
11 confidentiality.” (Family Law Financial Discovery (Cal. CEB 2022) §15.34.) When a party seeks to
12 discover information protected by a right of privacy, the information is discoverable only if the
13 information sought is directly relevant to the issues in litigation; and the need for the information
14 outweighs the privacy interest at issue. (See Binder v Superior Court (1987) 196 CA3d 893, 901,
15 disapproved on other grounds in Williams v Superior Court (2017) 3 C5th 531, 557 n8.)
16 If the party seeking discovery can establish that the information is directly relevant to the
17 issues being litigated, then the court will apply the analytical framework of Hill v National
18 Collegiate Athletic Ass'n (1994) 7 C4th 1, 15, to determine whether to permit the discovery. The
19 party resisting the discovery due to privacy concerns must (1) Identify a legally protected privacy
20 interest (whether concerning "informational privacy" or "autonomy privacy" as defined in §3.157);
21 (2) Establish a reasonable expectation of privacy regarding that interest; and (3) Explain the "extent
22 and gravity" of the invasion of privacy. (California Civil Discovery Practice (4th ed. Cal. CEB
23 2022) §1.57.) Counsel for Johnston asked counsel for MCKAY to provide this information, or a
24 privilege log if relevant, and MCKAY did not do so.
25
26
27
28
11
SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF
CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA
MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE
1 When asserting claims of privilege or attorney work product protection, the objecting party
2 must provide “sufficient factual information” to enable other parties to evaluate the merits of the
3 claim, “including, if necessary, a privilege log.” [ CCP § 2031.240(c)(1) (emphasis added); Lopez v.
4 Watchtower Bible & Tract Soc. of New York, Inc. (2016) 246 CA4th 566, 596-597, 201 CR3d 156,
5 181—the burden to show preliminary facts supporting application of privilege not met where
6 Defendant failed to produce privilege log or identify any specific confidential communications]”
7 (Weil & Brown et al., CAL. PRAC. GUIDE: CIV. PRO. BEFORE TRIAL (The Rutter Group 2019)
8 Inspection Demands, ¶ 8:1474.5.)
9 As the term is commonly used by courts and attorneys, a
“privilege log” identifies each document for which a privilege or
10 work product protection is claimed, its author, recipients, date of
11 preparation, and the specific privilege or work product protection
claimed. [Hernandez v. Sup.Ct. (Acheson Indus., Inc.) (2003) 112
12 CA4th 285, 291-292, 4 CR3d 883, 888-889 , fn. 6 ; see CCP §
2031.240(c)(2) —Legislative intent to codify concept
13 of privilege log “as that term is used in California case law”]
14 “The information in the privilege log must be sufficiently specific to
allow a determination of whether each withheld document is or is not
15 [in] fact privileged.” [Wellpoint Health Networks, Inc. v. Sup.Ct.
(McCombs) (1997) 59 CA4th 110, 130, 68 CR2d 844, 857;
16 see Catalina Island Yacht Club v. Sup.Ct. (Beatty) (2015) 242 CA4th
17 1116, 1130, 195 CR3d 694, 704 & fn. 5—privilege log deficient due
to failure to describe documents or contents (other than noting they
18 were emails with counsel) since not all communications with
attorneys are privileged]
19
20 (The Rutter Group 2019) Inspection Demands, ¶ 8:1474.5a.)
21 J. The Court May and Should Impose Monetary Sanctions Against McKay for McKay’s
22 Failure to Provide Further Response to the Demand that is the subject of this Motion.
23 Pursuant to Code of Civil Procedure, § 2031.310(h),
24 Except as provided in subdivision (j), the court shall impose a
25 monetary sanction under Chapter 7 (commencing with Section
2023.010) against any party, person, or attorney who unsuccessfully
26 makes or opposes a motion to compel further response to a demand,
unless it finds that the one subject to the sanction acted with
27 substantial justification or that other circumstances make the
28 imposition of the sanction unjust.
12
SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF
CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA
MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE
1 Sanctions are also mandatory under a motion pursuant to Code Civ. Proc., § 2031.300(c).
2 Moreover, Code Civ. Proc., § 2023.030, provides in relevant part as follows:
3 To the extent authorized by the chapter governing any particular
discovery method or any other provision of this title, the court, after
4 notice to any affected party, person, or attorney, and after opportunity
5 for hearing, may impose the following sanctions against anyone
engaging in conduct that is a misuse of the discovery process:
6
(a) The court may impose a monetary sanction ordering that one
7
engaging in the misuse of the discovery process, or any attorney
8 advising that conduct, or both pay the reasonable expenses,
including attorney’s fees, incurred by anyone as a result of that
9 conduct. The court may also impose this sanction on one
unsuccessfully asserting that another has engaged in the misuse of
10
the discovery process, or on any attorney who advised that
11 assertion, or on both. If a monetary sanction is authorized by any
provision of this title, the court shall impose that sanction unless it
12 finds that the one subject to the sanction acted with substantial
13 justification or that other circumstances make the imposition of
the sanction unjust.
14
***
15
16 Misuses of the discovery process include failing to respond or to submit to an authorized
17 method of discovery (Code Civ. Proc., § 2023.010(d)), as well as making, without substantial
18 justification, an unmeritorious objection to discovery (Code Civ. Proc., § 2023.010(e), and making
19 an evasive response to discovery (Code Civ. Proc., § 2023.010(f).)
20 SUMMARY OF RELEVANT PLEADINGS:
21 The within action involves both direct and derivative claims against defendants.
22 JOHNSTON and the primary defendant, JAMES, owned and operated multiple businesses
23 together. As alleged in the FAC, in 2019 JOHNSTON discovered that JAMES had embezzled
24 millions of dollars from the entities, including by taking checks made payable to two of the
25 entities and depositing them into different banks accounts that bore similar names to the entities
26 those checks were actually made payable to. The accounts that JAMES deposited these checks
27 into had been opened by JAMES without JOHNSTON’s knowledge or consent, and JAMES had
28 control of the monies in these accounts. This scheme was accomplished by, among other tactics,
13
SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF
CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA
MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE
1 using financial accounts in the name of Higher Grounds Solutions, Inc. (“Higher Grounds”) and
2 CALBASE, LLC (“CALBASE”), defendants in this action. JAMES is alleged to be the alter ego
3 of Higher Grounds and CALBASE. MCKAY is an officer of and is also alleged to be the alter ego
4 of CALBASE. The FAC alleged that MCKAY knowingly participated and aided and abetted in
5 the felonious stealing of money perpetrated by JAMES, CALBASE, and Higher Grounds, conduct
6 which damaged nominal defendant Tarina Homes in excess of $1,000,000.00.
7 JOHNSTON’s direct claims in this suit involve breach of oral contract and fraud. The
8 derivative claims against MCKAY include (1) breach of fiduciary duties and aiding and abetting
9 breach of fiduciary duties, and (2) theft and embezzlement. JAMES has asserted that the accounts
10 that he opened (without JOHNSTON’s knowledge or consent) in names similar to those of the
11 entities and into which JAMES caused monies belonging to the entities to be deposited, were used
12 to fund the ongoing business activities of the entities he and JOHNSTON were involved in.
13 However, significant amounts of monies from those accounts were funneled to MCKAY in the
14 form of checks and other account transfers, in spite of the fact that these payments bore no
15 apparent connection to the ongoing business activities of the entities. Tracing the money that
16 JAMES and MCKAY caused to be transferred/deposited into and withdrawn/transferred out of
17 these accounts is therefore an important aspect of this litigation and a primary subject of the
18 discovery.
19 JAMES has filed a Verified Cross-Complaint against JOHNSTON and other Cross-
20 Defendants, including causes of action for Conversion, Trespass to Chattels, Breach of Fiduciary
21 Duty, Accounting, Defamation, Declaratory Relief, Involuntary Dissolution of Limited Liability
22 Companies, Involuntary Dissolution of Limited Partnership, and Involuntary Dissolution of
23 Corporation. JAMES’ cross-complaint includes allegations that JOHNSTON wrongfully diverted
24 monies from the business entities.
25 MCKAY’s answer generally denied the allegations of the FAC and asserted numerous
26 affirmative defenses, including the following:
27 1. Failure to State a Claim
28 2. Statute of Limitations
14
SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF
CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA
MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE
1 3. Laches
2 4. Unclean Hands
3 5. Waiver and Estoppel
4 6. Good Faith
5 7. Plaintiff’s Conduct
6 8. Plaintiff’s Consent
7 9. Uncertain
8 10. Failure to Mitigate
9 11. Business Judgment
10 12. Spoilation of Evidence
11 13. Offset/Setoff
12 14. Justification
13 15. No Causation
14 16. Impossibility
15 17. Fraud and Deceit of Plaintiff
16 18. Statute of Frauds
17 19. Unjust Enrichment
18 20. Satisfaction
19 21. Lack of Standing
20 22. Release
21 23. Equitable Estoppel
22 24. Full Performance
23 25. Ratification
24 26. Comparative or Proportional Liability
25 Dated: March 22, 2024 BRAUN GOSLING,
A LAW CORPORATION
26
27
By: ___________________________________
28 Sam Van Eerden, Esq., Attorneys for Plaintiff
15
SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF
CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA
MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE
Preview
1 CRAIG D. BRAUN, State Bar No. 166519 SAM VAN EERDEN, State Bar No. 283069 2 BRAUN GOSLING, A LAW CORPORATION 3 1620 Mill Rock Way, Suite 400 Bakersfield, CA 93311 4 Telephone: (661) 663-8300 Facsimile: (661) 663-8388 5 E-Mail: svaneerden@braungosling.com 6 Attorneys for CHRIS JOHNSTON and 7 LIVE.RESIDE LLC 8 9 SUPERIOR COURT OF THE STATE OF CALIFORNIA 10 COUNTY OF KERN – METROPOLITAN DIVISION 11 CHRIS JOHNSTON, an individual, Case No. BCV-19-103089-TSC 12 Plaintiff, UNLIMITED CIVIL CASE 13 vs. SEPARATE STATEMENT OF DEMANDS 14 AND RESPONSES IN DISPUTE IN 15 JAMES McKAY, an individual; SUPPORT OF CHRIS JOHNSTON’S et al., MOTION TO COMPEL FURTHER 16 RESPONSES OF VIRGINIA MCKAY TO Defendants, DEMANDS FOR INSPECTION AND 17 COPYING, SET ONE 18 and [concurrently filed with Notice of Motion 19 MILLENNIUM HOMES, LLC, a California and Motion; Request for Judicial Notice; limited liability company; Declaration of Sam Van Eerden] 20 et al., 21 DATE: May 2, 2024 Nominal Defendants. TIME: 8:30 a.m. 22 DEPT: 17 23 ASSIGNED FOR ALL PURPOSES TO 24 AND RELATED CROSS-ACTIONS. JUDGE: Hon. Thomas S. Clark DEPARTMENT: 17 25 COMPLAINT FILED: October 29, 2019 TRIAL DATE: November 4, 2024 26 27 Pursuant to Rule 3.1345 of the California Rules of Court, Chris Johnston submits the 28 following Separate Statement of Demands and Responses in Dispute regarding Demands for 1 SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE 1 Inspection and Copying of Documents, Set One, propounded by Chris Johnston (“JOHNSTON”) 2 to Virginia McKay (“MCKAY”), and for which JOHNSTON seeks to compel further response 3 from MCKAY. 4 The following is Demand No. 2 and the response received, as well as the reasons why a 5 further response should be compelled, and MCKAY’s objections should be deemed unmeritorious. 6 DEMANDS FOR INSPECTION AND COPYING AND RESPONSES IN DISPUTE 7 DEMAND FOR INSPECTION AND COPYING 8 DEMAND FOR PRODUCTION NO. 2: 9 All bank account statements for the period of January 1, 2017 through January 1, 2021 for any and 10 all bank accounts owned by or maintained for the benefit of Calbase, LLC. (This request is 11 intended to include, but is not limited to, statements related to the business checking account in the 12 name of Calbase, LLC, with an account number ending in 1677.) 13 RESPONSE TO DEMAND FOR INSPECTION NO. 2: 14 PRELIMINARY STATEMENT 15 VIRGINIA MCKAY (“Responding Party”) bases these responses on a diligent 16 investigation of the facts of this case conducted by Responding Party and its counsel. Relevant 17 information may exist that is not yet known to Responding Party and relevant documents may 18 exist that Responding Party has not yet located, identified, or reviewed in any detail. For those 19 reasons, these responses only reflect Responding Party’s current understanding, belief, and 20 knowledge about the subject matter of the Requests. 21 These responses are not an admission or representation that further relevant documents do 22 not exist. Responding Party anticipates that further documents may be discovered or identified. 23 Subject to the objections asserted herein, Responding Party is responding in good faith to the 24 requests based upon information presently available to it within the time limitations that Cod and 25 these requests impose. These responses should not be construed to prejudice the right of 26 Responding Party to utilize any additional evidence that may be discovered or developed. 27 Responding Party reserves the right to supplement, alter, or amend any of the responses provided 28 herein up to and including the first day of trial based upon subsequently discovered evidence. 2 SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE 1 No incidental or implied admissions are intended in these responses. The fact that 2 Responding Party has responded to any part of all of any particular request is not an admission 3 that Responding Party accepts or admits the existence of any fact set forth or assumed by such 4 request, or that such request constitutes admissible evidence. The fact that Responding Party has 5 answered any part or all of any request is not intended to be and shall not be construed to be a 6 waiver by Responding Party of all objections or any part of any objection to any such request. 7 Responding Party intends these responses to be consistent with and to be read consistent 8 with Responding Party's previous and subsequent discovery responses and any apparent conflict 9 between and/or among them is purely unintentional. 10 RESPONSE TO DEMAND FOR PRODUCTION NO. 2: 11 Objection. This request is overbroad and unduly burdensome as to time and scope. This 12 request seeks personal confidential information subject to the privacy rights of Responding Party 13 and third parties who have not received notice of this request and have not had the opportunity to 14 object to the disclosure of their personal information. This request seeks information that is neither 15 relevant to the subject matter of this action nor reasonably calculated to lead to the discovery of 16 admissible evidence. 17 FACTUAL AND LEGAL REASONS FOR COMPELLING A FURTHER RESPONSE: 18 A. Summary of Argument. 19 JOHNSTON’s operative complaint (First Amended Complaint and Derivative Complaint for 20 Damages and Injunctive Relief, filed June 30, 2023 [“FAC”]) alleges that MCKAY is an officer of 21 defendant, CALBASE, LLC (“CALBASE”). The FAC also alleges that MCKAY is liable for the 22 acts of CALBASE on an alter ego theory, that MCKAY commingled funds of CALBASE, and that 23 McKay used CALBASE as a mere “shell, instrumentality, or conduit for the business of [MCKAY] 24 . . .” The FAC also alleges that MCKAY “aided and abetted [primary defendant James McKay] in 25 his breach of [fiduciary] duties by CALBASE receiving funds misappropriated by [James McKay] 26 from TARINA HOMES in an effort to assist him in misappropriating assets of TARINA HOMES.” 27 The damages caused by this misconduct were alleged to be in excess of $1,000,000. 28 In light of the allegations of the FAC, including MCKAY’s alleged control of CALBASE 3 SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE 1 and use of CALBASE for purposes of misappropriating funds, this Demand’s request for bank 2 account statements is clearly relevant to the subject matter and calculated to lead to admissible 3 evidence. 4 With regard to the timeframe for the account statements that are the subject of this Demand, 5 the FAC alleges that as of “in or about late 2016” JOHNSTON and James McKay had already been 6 engaged in the joint venture between various entities that is relevant to this action (including the 7 ones from which MCKAY allegedly received misappropriated funds). Moreover, the FAC alleged 8 that “in or about late 2016”, JOHNSTON and James McKay made further oral agreements 9 concerning the joint venture, which were thereafter breached, with MCKAY’s assistance. To the 10 extent that CALBASE was utilized by MCKAY for the purpose of misappropriating funds as 11 alleged in the FAC, the financial accounts maintained for the benefit of CALBASE during that 12 same time period are certainly relevant to this action. Moreover, while this action was filed prior to 13 January 1, 2021, the commencement of this action does not make subsequent bank accounts 14 statements irrelevant as those bank statements may still provide admissible evidence – or lead to the 15 discovery of admissible evidence – showing how misappropriated funds were used (i.e., not for the 16 benefit of the nominal defendants). 17 With respect to the assertion of “privacy rights of Responding Party and third parties”, no 18 further notice is required to obtain the documents requested by this Demand. Moreover, MCKAY 19 does not even specifically identify any “third parties” whose privacy rights are supposedly 20 implicated. If MCKAY was truly concerned for the privacy interests of others, MCKAY could have 21 easily informed those parties of this demand. Additionally, even documents subject to a right to 22 privacy can still be discovered by balancing the interests of the parties to the litigation. “Disclosure 23 in the face of an objection based on the right of privacy depends on the balancing of the need for 24 discovery against the patient's need for confidentiality.” (Family Law Financial Discovery (Cal. 25 CEB 2022) §15.34.) 26 Counsel for JOHNSTON’s meet and confer letter to counsel for MCKAY included the 27 following statement/request: “In light of the relevancy of the requested documents, and in light of 28 the analytical framework of Hill v National Collegiate Athletic Ass'n (1994) 7 C4th 1, 15 (see also: 4 SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE 1 California Civil Discovery Practice (4th ed. Cal. CEB 2022) §1.57.), please identify a legally 2 protected privacy interest (whether concerning “informational privacy” or “autonomy privacy”), 3 and explain the “extent and gravity” of the claimed invasion of privacy.” No response to this request 4 was provided. 5 B. Scope of Discovery. 6 Pursuant to Code of Civil Procedure section 2017.010, 7 Unless otherwise limited by order of the court in accordance with this 8 title, any party may obtain discovery regarding any matter, not 9 privileged, that is relevant to the subject matter involved in the pending action or to the determination of any motion made in that 10 action, if the matter either is itself admissible in evidence or appears reasonably calculated to lead to the discovery of admissible evidence. 11 Discovery may relate to the claim or defense of the party seeking 12 discovery or of any other party to the action. Discovery may be obtained of the identity and location of persons having knowledge of 13 any discoverable matter, as well as of the existence, description, nature, custody, condition, and location of any document, 14 electronically stored information, tangible thing, or land or other 15 property. 16 C. Plaintiff is Entitled to Discover Relevant Evidence. 17 “For discovery purposes, information is relevant if it "might reasonably assist a party 18 in evaluating the case, preparing for trial, or facilitating settlement . . . ." (Weil & Brown, Cal. 19 Practice Guide: Civil Procedure Before Trial (The Rutter Group 1994) Discovery, P 8:66.1, p. 8C- 20 1.) Admissibility is not the test and information, unless privileged, is discoverable if it might 21 reasonably lead to admissible evidence. (Davies v. Superior Court (1984) 36 Cal. 3d 291, 301 22 [204 Cal. Rptr. 154, 682 P.2d 349].) (Gonzalez v. Superior Court (1995) 33 Cal. App. 4th 1539, 23 1546.) 24 As indicated above, the first and most basic limitation on the scope of discovery is that the 25 information sought must be relevant to the “subject matter” of the pending action or to the 26 determination of a motion in that action. (Code Civ. Proc., §2017.010.) Although the phrase 27 “subject matter” does not lend itself to precise definition, it is broader than relevancy to the issues 28 (which determines admissibility of evidence at trial). (Bridgestone/Firestone, Inc. v. Sup.Ct. 5 SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE 1 (1992) 7 Cal.App.4th 1384, 1392.) 2 For discovery purposes, information should be regarded as “relevant to the subject matter” 3 if it might reasonably assist a party in evaluating the case, preparing for trial, or facilitating 4 settlement thereof. (Gonzalez v. Sup.Ct. (1995) 33 Cal.App.4th 1539, 1546 (citing text); Lipton v. 5 Sup.Ct. (1996) 48 Cal.App.4th 1599, 1611 (citing text); Stewart v. Colonial Western Agency, Inc. 6 (2001) 87 Cal.App.4th 1006, 1013 (citing text).) Information that relates to a claim or defense of 7 any party is relevant to the subject matter of the litigation. This information is subject to 8 discovery, even though the information may be inadmissible at trial. Information supporting 9 allegations in the pleadings, including affirmative defenses and general denials, is relevant without 10 regard as to who has the burden of proof on the issue for which the information is sought. 11 (Dompeling v. Superior Court (1981) 117 Cal.App.3d 798; Singer v. Superior Court (1960) 54 12 Cal.2d 318.) 13 The “relevance to the subject matter” and “reasonably calculated to lead to discovery of 14 admissible evidence” standards are applied liberally. Any doubt is generally resolved in favor of 15 permitting discovery, particularly where the precise issues in the case are not yet clearly 16 established. (Colonial Life & Acc. Ins. Co. v. Sup.Ct. (1982) 31 Cal.3d 785, 790, fns. 7-8.) 17 In the face of an "irrelevance" objection, an order granting discovery is proper unless there 18 is no reasonable possibility that the responses will lead to the discovery of admissible evidence or 19 will be helpful in preparing for trial. (Sav-On Drugs, Inc. v. Superior Court (1975) 15 Cal.3d 1, 5.) 20 Doubts concerning relevance should usually be resolved in favor of permitting discovery. 21 (California Life and Accident Ins. Co. v. Superior Court (1982) 31Cal.3d 785.) Moreover, all 22 doubts about discovery are resolved in favor of disclosure. (Glenfed Development Corp. v. 23 Superior Court, supra.) 24 D. Plaintiff Has the Right to Discover Defendants’ Contentions and Facts in Support 25 of Such Contentions. 26 A party may discover its opponent's contentions on some issue, although they are merely 27 opinions which would be inadmissible at trial. Again, admissibility is not the test. Contentions are 28 discoverable because they are relevant to the “subject matter” and may reasonably lead to 6 SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE 1 discovery of admissible evidence. This is true whether the contentions relate to issues of fact or 2 law. (West Pico Furniture Co. of Los Angeles v. Sup.Ct. (1961) 56 Cal.2d 407, 416-417.) In 3 addition, a party may be compelled to disclose the evidence supporting each such claim or 4 contention. (Burke v. Sup.Ct. (1969) 71 Cal.2d 276, 281-282.) 5 “… a defendant in California courts may be required through discovery to disclose not 6 only the evidentiary facts underlying his affirmative defenses (Singer v. Superior Court, supra, 54 7 Cal.2d 318, 323-325 [defendant required to disclose the facts underlying his allegations of 8 contributory negligence and assumption of risk]) and denials ( Durst v. Superior Court, 218 9 Cal.App.2d 460, 464-465 [32 Cal.Rptr. 627] [defendant required to disclose the facts underlying 10 his denial that plaintiff had been injured or disabled]) but also whether or not he makes a particular 11 contention, either as to the facts or as to the possible issues in the case. (Universal Underwriters 12 Ins. Co. v. Superior Court, supra, 250 Cal.App.2d 722, 728; see also Sheets v. Superior Court, 13 257 Cal.App.2d 1, 13 [64 Cal.Rptr. 753].) (Burke v. Superior Court (1969) 71 Cal. 2d 276, 281- 14 282.) 15 E. Duties When Responding to Demands for Inspection and Copying. 16 Pursuant to Code of Civil Procedure section 2031.210, 17 (a) The party to whom a demand for inspection, copying, testing, or sampling has been directed shall respond separately to each item or 18 category of item by any of the following: 19 (1) A statement that the party will comply with the particular demand for inspection, copying, testing, or sampling by the date set for the 20 inspection, copying, testing, or sampling pursuant to paragraph (2) of 21 subdivision (c) of Section 2031.030 and any related activities. (2) A representation that the party lacks the ability to comply with the 22 demand for inspection, copying, testing, or sampling of a particular 23 item or category of item. 24 (3) An objection to the particular demand for inspection, copying, testing, or sampling. 25 *** 26 Code Civ. Proc., § 2031.220 provides that: 27 A statement that the party to whom a demand for inspection, copying, testing, or sampling has been directed will comply with the particular 28 demand shall state that the production, inspection, copying, testing, or 7 SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE 1 sampling, and related activity demanded, will be allowed either in whole or in part, and that all documents or things in the demanded 2 category that are in the possession, custody, or control of that party 3 and to which no objection is being made will be included in the production. 4 And, as it relates to a claimed inability to comply with a particular demand, Code Civ. Proc., 5 § 2031.230 provides that: 6 A representation of inability to comply with the particular demand for inspection, copying, testing, or sampling shall affirm that a diligent search and a reasonable inquiry 7 has been made in an effort to comply with that demand. This statement shall also specify 8 whether the inability to comply is because the particular item or category has never existed, has been destroyed, has been lost, misplaced, or stolen, or has never been, or is 9 no longer, in the possession, custody, or control of the responding party. The statement shall set forth the name and address of any natural person or organization known or 10 believed by that party to have possession, custody, or control of that item or category of 11 item. 12 F. The Propounding Party May Move for an Order Compelling a Further Response to a 13 Demand for Inspection and Copying. 14 Code Civ. Proc., § 2031.310, provides in relevant part as follows: 15 (a) On receipt of a response to a demand for inspection, copying, 16 testing, or sampling, the demanding party may move for an order 17 compelling further response to the demand if the demanding party deems that any of the following apply: 18 (1) A statement of compliance with the demand is incomplete. 19 20 (2) A representation of inability to comply is inadequate, incomplete, or evasive. 21 22 (3) An objection in the response is without merit or too general. 23 (b) A motion under subdivision (a) shall comply with each of the following: 24 25 (1) The motion shall set forth specific facts showing good cause justifying the discovery sought by the demand. 26 (2) The motion shall be accompanied by a meet and confer 27 declaration under Section 2016.040. 28 8 SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE 1 (3) In lieu of a separate statement required under the California Rules of Court, the court may allow the moving party to submit a concise 2 outline of the discovery request and each response in dispute. 3 (c) Unless notice of this motion is given within 45 days of the service 4 of the verified response, or any supplemental verified response, or on or before any specific later date to which the demanding party and the 5 responding party have agreed in writing, the demanding party waives 6 any right to compel a further response to the demand. 7 *** 8 G. Manner of Production 9 Pursuant to Code of Civil Procedure section 2031.280, 10 (a) Any documents or category of documents produced in 11 response to a demand for inspection, copying, testing, or sampling 12 shall be identified with the specific request number to which the documents respond. 13 *** 14 MCKAY provided no document production in response to the Demand that is the subject of 15 this Motion. 16 H. MCKAY’s Objections should be deemed unmeritorious and the Court should order 17 MCKAY to provide further responses that do not include said unmeritorious 18 objections. 19 In response to Demand No. 2, MCKAY asserted numerous objections, all of which are 20 unmeritorious. Those objections are summarized here, along with legal analysis demonstrating 21 their lack of merit with respect to JOHNSTON’s Demands. 22 I. Objections. 23 In response to Demand No. 2, McKay asserted numerous objections, including (1) 24 overbroad, (2) unduly burdensome, (3) lack of relevance, and (4) violative of privacy rights. 25 26 1. Overbroad/Unduly Burdensome. 27 This objection is only valid if the breadth of the demand imposes an undue burden or is 28 irrelevant to the subject matter. (Williams v. Superior Court (2017) 3 Cal.5th 531, 549-550; Mead 9 SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE 1 Reinsurance Co. v. Superior Court (1986) 188 Cal.App.3d 313; Code Civ. Proc., § 2017.010.) 2 As it relates to the Demands, they are all relevant to the subject matter of the within cause. 3 As to the breadth of the Demands, insofar that the Demands relate to discoverable matter and, in 4 particular, the allegations of the pleadings of the parties to this action, it is hard to fathom how the 5 Demands impose an undue burden on McKay. 6 7 2. Lack of Relevance. 8 This objection is improper. Code Civ. Proc., § 2017.010 provides that: 9 Unless otherwise limited by order of the court in accordance with this title, any party may obtain discovery regarding any matter, 10 not privileged, that is relevant to the subject matter involved in the 11 pending action or to the determination of any motion made in that action, if the matter either is itself admissible in evidence or appears 12 reasonably calculated to lead to the discovery of admissible evidence. Discovery may relate to the claim or defense of the party seeking 13 discovery or of any other party to the action. Discovery may be 14 obtained of the identity and location of persons having knowledge of any discoverable matter, as well as of the existence, description, 15 nature, custody, condition, and location of any document, electronically stored information, tangible thing, or land or 16 other property. 17 Each of the individual demands contained in the Demands relate to the claims of either 18 Johnston or McKay in this within cause. As such, they clearly fall within the scope of discovery. 19 Pursuant to Evidence Code, § 210, 20 “Relevant evidence” means evidence, including evidence relevant to 21 the credibility of a witness or hearsay declarant, having any tendency in reason to prove or disprove any disputed fact that is of consequence 22 to the determination of the action. 23 As it relates to all of the demands, including the ones to which an irrelevance objection has 24 been made, the documents sought by JOHNSTON are expected to have a “tendency in reason to 25 prove or disprove any disputed fact that is of consequence to the determination of the action.” 26 27 28 10 SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE 1 2 3. Privilege/Privacy Rights of others. 3 MCKAY does not provide any legitimate basis for the asserted privacy objections, and 4 insofar as JOHNSTON has alleged that MCKAY utilized CALBASE for the purposes of 5 misappropriating funds and harming the nominal defendants, the bank records of CALBASE are 6 highly relevant. Additionally, to the extent that MCKAY is making a privilege objection and 7 withholding documents on those grounds, a privilege log is required, something that she has not 8 provided. Finally, even documents subject to a right to privacy can still be discovered by balancing 9 the interests of the parties to the litigation. “Disclosure in the face of an objection based on the right 10 of privacy depends on the balancing of the need for discovery against the patient's need for 11 confidentiality.” (Family Law Financial Discovery (Cal. CEB 2022) §15.34.) When a party seeks to 12 discover information protected by a right of privacy, the information is discoverable only if the 13 information sought is directly relevant to the issues in litigation; and the need for the information 14 outweighs the privacy interest at issue. (See Binder v Superior Court (1987) 196 CA3d 893, 901, 15 disapproved on other grounds in Williams v Superior Court (2017) 3 C5th 531, 557 n8.) 16 If the party seeking discovery can establish that the information is directly relevant to the 17 issues being litigated, then the court will apply the analytical framework of Hill v National 18 Collegiate Athletic Ass'n (1994) 7 C4th 1, 15, to determine whether to permit the discovery. The 19 party resisting the discovery due to privacy concerns must (1) Identify a legally protected privacy 20 interest (whether concerning "informational privacy" or "autonomy privacy" as defined in §3.157); 21 (2) Establish a reasonable expectation of privacy regarding that interest; and (3) Explain the "extent 22 and gravity" of the invasion of privacy. (California Civil Discovery Practice (4th ed. Cal. CEB 23 2022) §1.57.) Counsel for Johnston asked counsel for MCKAY to provide this information, or a 24 privilege log if relevant, and MCKAY did not do so. 25 26 27 28 11 SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE 1 When asserting claims of privilege or attorney work product protection, the objecting party 2 must provide “sufficient factual information” to enable other parties to evaluate the merits of the 3 claim, “including, if necessary, a privilege log.” [ CCP § 2031.240(c)(1) (emphasis added); Lopez v. 4 Watchtower Bible & Tract Soc. of New York, Inc. (2016) 246 CA4th 566, 596-597, 201 CR3d 156, 5 181—the burden to show preliminary facts supporting application of privilege not met where 6 Defendant failed to produce privilege log or identify any specific confidential communications]” 7 (Weil & Brown et al., CAL. PRAC. GUIDE: CIV. PRO. BEFORE TRIAL (The Rutter Group 2019) 8 Inspection Demands, ¶ 8:1474.5.) 9 As the term is commonly used by courts and attorneys, a “privilege log” identifies each document for which a privilege or 10 work product protection is claimed, its author, recipients, date of 11 preparation, and the specific privilege or work product protection claimed. [Hernandez v. Sup.Ct. (Acheson Indus., Inc.) (2003) 112 12 CA4th 285, 291-292, 4 CR3d 883, 888-889 , fn. 6 ; see CCP § 2031.240(c)(2) —Legislative intent to codify concept 13 of privilege log “as that term is used in California case law”] 14 “The information in the privilege log must be sufficiently specific to allow a determination of whether each withheld document is or is not 15 [in] fact privileged.” [Wellpoint Health Networks, Inc. v. Sup.Ct. (McCombs) (1997) 59 CA4th 110, 130, 68 CR2d 844, 857; 16 see Catalina Island Yacht Club v. Sup.Ct. (Beatty) (2015) 242 CA4th 17 1116, 1130, 195 CR3d 694, 704 & fn. 5—privilege log deficient due to failure to describe documents or contents (other than noting they 18 were emails with counsel) since not all communications with attorneys are privileged] 19 20 (The Rutter Group 2019) Inspection Demands, ¶ 8:1474.5a.) 21 J. The Court May and Should Impose Monetary Sanctions Against McKay for McKay’s 22 Failure to Provide Further Response to the Demand that is the subject of this Motion. 23 Pursuant to Code of Civil Procedure, § 2031.310(h), 24 Except as provided in subdivision (j), the court shall impose a 25 monetary sanction under Chapter 7 (commencing with Section 2023.010) against any party, person, or attorney who unsuccessfully 26 makes or opposes a motion to compel further response to a demand, unless it finds that the one subject to the sanction acted with 27 substantial justification or that other circumstances make the 28 imposition of the sanction unjust. 12 SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE 1 Sanctions are also mandatory under a motion pursuant to Code Civ. Proc., § 2031.300(c). 2 Moreover, Code Civ. Proc., § 2023.030, provides in relevant part as follows: 3 To the extent authorized by the chapter governing any particular discovery method or any other provision of this title, the court, after 4 notice to any affected party, person, or attorney, and after opportunity 5 for hearing, may impose the following sanctions against anyone engaging in conduct that is a misuse of the discovery process: 6 (a) The court may impose a monetary sanction ordering that one 7 engaging in the misuse of the discovery process, or any attorney 8 advising that conduct, or both pay the reasonable expenses, including attorney’s fees, incurred by anyone as a result of that 9 conduct. The court may also impose this sanction on one unsuccessfully asserting that another has engaged in the misuse of 10 the discovery process, or on any attorney who advised that 11 assertion, or on both. If a monetary sanction is authorized by any provision of this title, the court shall impose that sanction unless it 12 finds that the one subject to the sanction acted with substantial 13 justification or that other circumstances make the imposition of the sanction unjust. 14 *** 15 16 Misuses of the discovery process include failing to respond or to submit to an authorized 17 method of discovery (Code Civ. Proc., § 2023.010(d)), as well as making, without substantial 18 justification, an unmeritorious objection to discovery (Code Civ. Proc., § 2023.010(e), and making 19 an evasive response to discovery (Code Civ. Proc., § 2023.010(f).) 20 SUMMARY OF RELEVANT PLEADINGS: 21 The within action involves both direct and derivative claims against defendants. 22 JOHNSTON and the primary defendant, JAMES, owned and operated multiple businesses 23 together. As alleged in the FAC, in 2019 JOHNSTON discovered that JAMES had embezzled 24 millions of dollars from the entities, including by taking checks made payable to two of the 25 entities and depositing them into different banks accounts that bore similar names to the entities 26 those checks were actually made payable to. The accounts that JAMES deposited these checks 27 into had been opened by JAMES without JOHNSTON’s knowledge or consent, and JAMES had 28 control of the monies in these accounts. This scheme was accomplished by, among other tactics, 13 SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE 1 using financial accounts in the name of Higher Grounds Solutions, Inc. (“Higher Grounds”) and 2 CALBASE, LLC (“CALBASE”), defendants in this action. JAMES is alleged to be the alter ego 3 of Higher Grounds and CALBASE. MCKAY is an officer of and is also alleged to be the alter ego 4 of CALBASE. The FAC alleged that MCKAY knowingly participated and aided and abetted in 5 the felonious stealing of money perpetrated by JAMES, CALBASE, and Higher Grounds, conduct 6 which damaged nominal defendant Tarina Homes in excess of $1,000,000.00. 7 JOHNSTON’s direct claims in this suit involve breach of oral contract and fraud. The 8 derivative claims against MCKAY include (1) breach of fiduciary duties and aiding and abetting 9 breach of fiduciary duties, and (2) theft and embezzlement. JAMES has asserted that the accounts 10 that he opened (without JOHNSTON’s knowledge or consent) in names similar to those of the 11 entities and into which JAMES caused monies belonging to the entities to be deposited, were used 12 to fund the ongoing business activities of the entities he and JOHNSTON were involved in. 13 However, significant amounts of monies from those accounts were funneled to MCKAY in the 14 form of checks and other account transfers, in spite of the fact that these payments bore no 15 apparent connection to the ongoing business activities of the entities. Tracing the money that 16 JAMES and MCKAY caused to be transferred/deposited into and withdrawn/transferred out of 17 these accounts is therefore an important aspect of this litigation and a primary subject of the 18 discovery. 19 JAMES has filed a Verified Cross-Complaint against JOHNSTON and other Cross- 20 Defendants, including causes of action for Conversion, Trespass to Chattels, Breach of Fiduciary 21 Duty, Accounting, Defamation, Declaratory Relief, Involuntary Dissolution of Limited Liability 22 Companies, Involuntary Dissolution of Limited Partnership, and Involuntary Dissolution of 23 Corporation. JAMES’ cross-complaint includes allegations that JOHNSTON wrongfully diverted 24 monies from the business entities. 25 MCKAY’s answer generally denied the allegations of the FAC and asserted numerous 26 affirmative defenses, including the following: 27 1. Failure to State a Claim 28 2. Statute of Limitations 14 SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE 1 3. Laches 2 4. Unclean Hands 3 5. Waiver and Estoppel 4 6. Good Faith 5 7. Plaintiff’s Conduct 6 8. Plaintiff’s Consent 7 9. Uncertain 8 10. Failure to Mitigate 9 11. Business Judgment 10 12. Spoilation of Evidence 11 13. Offset/Setoff 12 14. Justification 13 15. No Causation 14 16. Impossibility 15 17. Fraud and Deceit of Plaintiff 16 18. Statute of Frauds 17 19. Unjust Enrichment 18 20. Satisfaction 19 21. Lack of Standing 20 22. Release 21 23. Equitable Estoppel 22 24. Full Performance 23 25. Ratification 24 26. Comparative or Proportional Liability 25 Dated: March 22, 2024 BRAUN GOSLING, A LAW CORPORATION 26 27 By: ___________________________________ 28 Sam Van Eerden, Esq., Attorneys for Plaintiff 15 SEPARATE STATEMENT OF DEMANDS AND RESPONSES IN DISPUTE IN SUPPORT OF CHRIS JOHNSTON’S MOTION TO COMPEL FURTHER RESPONSES OF VIRGINIA MCKAY TO DEMANDS FOR INSPECTION AND COPYING, SET ONE