BENNETT KOO, Plaintiff, v. JAI JUNE RHEE, et al., Defendants.


JAIN JUNE RHEE,
Cross-Complainant, v. BENNETT KOO, et al.,
Cross-Defendants.
Case No.: BC580540

Hearing Date: March 27, 2017

[TENTATIVE] ORDER RE:
MOTION TO QUASH TWO (2) DEPOSITION SUBPOENAS FOR PRODUCTION OF BUSINESS RECORDS FROM BW CPA GROUP


BACKGROUND
This action arises out of a dispute regarding real property located in Los Angeles, CA (“Property”). Plaintiff Bennett Koo (“Plaintiff”) and Defendant Jai June Rhee (“Rhee”) were involved in a previous action (“Underlying Action”) wherein Plaintiff obtained a money judgment in the sum of $3.8 million. Plaintiff alleges that he properly recorded a judgment lien on the Property, but that Rhee and his wife, Defendant Eun Jung Kim (“Kim”), fraudulently transferred interests in the Property to Defendant Myong Ju Kim (“Myong”). Plaintiff’s first amended complaint asserts causes of action for (1) fraudulent transfer, (2) equitable subrogation, (3) declaratory relief, (4) defamation, (5) false light invasion of privacy, (6) civil extortion, and (7) intentional infliction of emotional distress.
In the second amended cross-complaint, Rhee and Kim allege that Koo fraudulently induced Rhee into entering a stipulated judgment in the Underlying Action. Rhee and Kim assert claims for (1) declaratory relief, (2) cancellation of instruments, (3) fraud, (4) defamation, and (5) false light invasion of privacy.
REQUEST FOR JUDICIAL NOTICE
Plaintiffs’ request for judicial notice is GRANTED.
DISCUSSION
Defendants Jain June Rhee and Eun Jung Kim (“Defendants”) move to quash two deposition subpoenas for production of business records served on the custodian of records for BW CPA Group by Plaintiff/Cross-Defendants Bennett Koo and FNS, Inc. (“Plaintiffs”). Defendants contend that the subpoenas violate privacy rights in that they seek tax returns and other tax related documents. Defendants also contend that the subpoenas violated a stipulated protective order.
The “statutory tax return privilege is not absolute. . . [and] will not be upheld when: (1) the circumstances indicate an intentional waiver of the privilege; (2) the gravamen of the lawsuit is inconsistent with the privilege; or (3) a public policy greater than that of the confidentiality of tax returns is involved. This latter exception is narrow and applies only ‘when warranted by a legislatively declared public policy.’ A trial court has broad discretion in determining the applicability of a statutory privilege.” (Weingarten v. Superior Court (2002) 102 Cal. App. 4th 268, 274.)
In opposition, Plaintiffs argue that the tax returns are necessary to investigate the alleged fraudulent transfer in this action. Plaintiffs contend that this information is necessary because Defendants assert that Property secured a loan Myong gave to Rhee and Kim, but the financial records produced by Defendants and various bank subpoenas have not produced any evidence of this purported loan, and that Defendants have failed to produce missing pages from their tax records. Plaintiffs contend that IRS records are necessary to show whether Myong received interest payments on the purported loan. In granting Plaintiffs’ motion to compel further responses to request for production, the Court rejected Defendants’ invocation of the tax return privilege, finding that “Plaintiff’s need for such evidence clearly outweighs Defendants’ limited interest in keeping their tax returns confidential.” (October 5, 2016 Ruling.) Plaintiffs show that Defendants have failed to produce relevant discovery regarding the purported loan, and that they have exhausted less intrusive means of discovery. As such, Plaintiffs show that they are entitled to discovery of Defendants’ tax returns.
Defendants also contend that the subpoenas violate the protective order. However, the protective order mere establishes a right to designate certain documents as “confidential”—it does not limit the scope of discovery. (See Stipulated Protective Order, filed March 2, 2016.)
Accordingly, the motion to quash is DENIED.
Plaintiffs request cross-sanctions in the amount of $2,700. Given that the arguments raised by Defendants in this motion were previously rejected by the Court, the Court finds that Defendants acted without substantial justification in bringing this motion. Accordingly, the request for sanctions is GRANTED.