Dish Network L.L.C. et al v. Sonicview USA, Inc. et al

Filing 173

ORDER Compelling Production of Defendants' Business Records. Signed by Magistrate Judge William V. Gallo on 4/10/2012.(mtb)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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DISH NETWORK, LLC., et al.,

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Plaintiffs,

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v.

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SONIC VIEW USA, INC., et al.,

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Defendants.

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Civil No. 09-1553-L(WVG)
ORDER COMPELLING PRODUCTION OF
DEFENDANTS’ BUSINESS RECORDS

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On March 4, 2011, the Court compelled Defendants to produce
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several categories of financial documents.1 This order was appealed
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and upheld by the District Judge assigned to the case.

Defendants

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produced some responsive documents and claimed that they did not
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have any further responsive documents.

However, the production was

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incomplete. Therefore, Plaintiffs subpoenaed Defendants’ banks for
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complete responsive information.

Defendants moved to quash the

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subpoenas.
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These included documents sufficient to show Defendants’ net worth and
profits, income statements, operating statements, profit and loss statements,
balance sheets and tax returns.

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On August 23, 2011, the Court granted in part and denied in

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part Defendants’ Motion to Quash.

Specifically, the Court ordered

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that the subpoenaed documents be produced to Defendants’ counsel for

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redaction of personal expenses such as medical bills and household

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expenses.

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documents be produced to Plaintiffs along with a privilege log.

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This order was also appealed and upheld by the District Judge

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assigned to the case.

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produce in a timely fashion.

The Court further ordered that, within ten days, the

Defendants failed to comply with the order to

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On November 21, 2011, the Court ordered Plaintiffs’ counsel

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to submit a list of Defendants’ previously-subpoenaed business

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financial records indicating the account numbers of the records and

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the status of their production. The Court also ordered Defendants’

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counsel to submit letter briefs addressing the discoverability of

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Defendants’ business financial records. On November 23, 2011, the

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Court received Plaintiff’s counsel’s list (“Exhibit A list”). On

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December

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Defendants’ counsel.

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2011,

the

Court

received

the

letter

briefs

from

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On December 19, 2011, the Court ordered Defendants to produce

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the records identified in the Exhibit A list on or before January

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20, 2012. Defendants were permitted to redact personal expenses and

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Cyndi Phu’s separate property interests.2

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day before the deadline, Defendants produced some but not all of

On January 19, 2012, one

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Cyndi Phu, a non-party to this lawsuit, is the wife of Defendant Alan

Phu.

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these records.3

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tively comply with the Court’s order.

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Therefore, Defendants have again failed to substan-

The Court, having reviewed the pertinent letters and briefs,
and GOOD CAUSE APPEARING, HEREBY ORDERS:

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A.

On or before April 24, 2012, Defendants shall produce

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statements

for

all

Sonicview

and

HT

Solutions

bank

accounts,

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including but not limited to, HT Solutions accounts at Wells Fargo

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Bank ending in 2087 and 3798, from January 1, 2006 to present.

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Defendants contend that discovery closed on September 30,

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2011 and that Plaintiffs are consequently time-barred from raising

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a discovery dispute. However, the Court has ordered discovery since

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that date due to Defendants’ repeated failure to comply with the

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Court’s orders (specifically those orders dated March 4, 2011;

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August 23, 2011; and December 19, 2011.)

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of rewarding Defendants for their delays and willful failure to

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comply with court orders by cutting off Plaintiffs’ rightful pursuit

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of discovery.

The Court has no intention

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Defendants further contend the Sonicview and HT Solutions

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bank accounts were not compelled by the December 19, 2011 Order.

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However, the December 19, 2011 order was directly related to the

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previous orders which did specify those accounts.

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tion of the Sonicview and HT Solutions bank accounts were not

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compelled by the December 19, 2011 order, their production was

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nonetheless compelled by other previous orders.
B. On or before April 24, 2012, Defendants shall produce

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Even if produc-

records for the following additional accounts (“New Accounts”):

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Defendants’ March 2 letter to the Court claims that they “produced all
of the records listed in Exhibit A” but contradict themselves four sentences
later, stating that the documents were produced “[w]ith three exceptions...”

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1. Bank of America and Wells Fargo accounts with numbers

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ending in 4697, 1348, 6060, 2592, 6421, 3859, 1647, 6265, 7359, and

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9990, which received transfers from Roberto Sanz’s accounts, from

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January 1, 2006 to present.

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2. Bank of America accounts with numbers ending in 5815,

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1199, 4649, 6320, 7448, 8548, and 3388 which received transfers from

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Duane Bernard’s accounts, from January 1, 2006 to present.

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3.

Scotttrade

and

USAA

Federal

Savings

accounts

which

received transfers totalling $200,000 and $18,500, respectively,
from Duane Bernard’s accounts, from January 1, 2006 to present.
Defendants object to production of these accounts on the

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basis that they were not included on the Exhibit A list.

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the Exhibit A list includes categories of accounts whose numbers

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were unknown. When discovery produces new information that identi-

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fies previously unknown accounts to which large transfers have been

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made, the interests of justice require production of the newly

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discovered accounts.

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cation of new and relevant accounts for which timely requests for

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production were made.

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Defendants

However,

Here, Plaintiffs’ diligence yielded identifi-

They must now be produced.

further

contend

that

they

“have

no

present

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obligation to explain or clarify any particular entry in any of the

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bank statements which were produced in compliance” with the December

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19, 2011 order.

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transfers made from the produced accounts to the New Accounts, the

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transfers may have been fraudulent.

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dants to explain why statements for the New Accounts should not be

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produced.

However, given the timing, number, and size of the

The burden rests with Defen-

Defendants have failed to do so.

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C. On or before April 24, 2012, Defendants shall produce all

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financial records pertaining to Wells Fargo account numbers ending

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in 7683, 5347, and 6221, from January 1, 2006 to present.

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more, Defendants shall produce statements for the same period

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pertaining to any other accounts that received more than $5,000.00

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in a single transaction from the Wells Fargo accounts ending in

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7683, 5347, 6221.

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Further-

Defendants withheld production of information pertaining to
these

accounts,

claiming

that

they

are

the

sole

and

separate

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property of Cyndi Phu, a non-party to this lawsuit.

However,

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Plaintiffs note that Defendant Alan Phu transferred $223,834.37 to

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one of these accounts (numbered 7683) through his Satellite Dish

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Expert account.

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Fraudulent Transfer Act (“UFTA”) applies.

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3439.04-3439.05.

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policy of protecting creditors from fraudulent transfer, including

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transfers between spouses.”4

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(2003).

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any

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Therefore, statements from this account are necessary to determine

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whether the transfer must be set aside as fraudulent under UFTA.5

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See Keeley v. Anderson, 14 Cal. App. 2d 467, 470 (1936) (to

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determine whether transfer from husband to wife was made to defraud

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creditors, evidence regarding all circumstances must be examined);

On this basis, Plaintiffs contend that the Uniform
See Cal. Civ. Code §§

UFTA reflects, in part, California’s “general

Mejia v. Reed 31 Cal. 4th 657, 668

Defendants have not explained this transfer or identified

reasonably

equivalent

value

received

in

exchange

for

it.

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This policy has been recognized for over a century.
See, e.g.,
Threlkel v. Scott, 4 Cal. Unrep. 346, 348 (1893) (a fraudulent conveyance from
husband to wife is void as against his creditors, irrespective of his intention
to commit a fraud.)
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The Court’s March 4, 2011, order makes clear its intention not to
conduct separate discovery on the issue of damages, should liability be proven.

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see also Filip v. Bucurenciu, 129 Cal. App. 4th 825, 834 (2005)

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(“Whether a conveyance was made with fraudulent intent is a question

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of fact, and proof often consists of inferences from the circum-

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stances surrounding the transfer.”) Thus, where a defendant and his

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non-party spouse commingle assets into a single account, and the

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transfer appears fraudulent, the recipient account must be consid-

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ered tainted for discovery purposes.

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financial records pertaining to the recipient accounts are relevant

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and discoverable.

Accordingly, in this case,

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Defendants’ contention that the receiving account is solely

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held in a non-party’s name due to a transmutation agreement is

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simply immaterial.

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agreements to transmute community property into separate property,

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[such] transmutation can [still] amount to a fraudulent transfer.”

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In re Kimmel, 367 B.R. 174, 177 (N.D. Cal. 2007).

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beyond comprehension that an individual may attempt to conceal ill-

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gotten gains by transferring them to an account held solely by a

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trusted non-party rather than one bearing his or her own name.

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UFTA’s prohibition on fraudulent transfers does not contain an

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exception allowing fraudulent transfers between spouses. Therefore,

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the California policy allowing the creditors of one spouse to

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enforce UFTA against transfers between spouses applies even when the

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recipient now holds the subject property solely.

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v. Reed, 31 Cal. 4th 657, 664, 668-69 (2003).

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D.

First, although “California permits postnuptial

Second, it is not

See, e.g., Mejia

On or before April 24, 2012 Plaintiffs shall file with

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the Court a brief that states the amount and legal basis for their

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requests for expenses and monetary sanctions under Rules 11 or 37.

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The brief shall also contain documents that support the amount of

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monetary sanctions requested.

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E. On several prior occasions, similar production of records

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has been ordered by the Court.

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permitted Defendants to redact personal expenses and solely-held

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property.

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“redacting” entire accounts without good cause, the Court will not

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extend this privilege to Defendants again.

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produced by this order shall be produced in their entirety.

Since

Defendants

On those occasions, the Court

have

abused

this

opportunity

by

All statements ordered
Any

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privacy interests will be protected by the Protective Order already

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in place in this case.

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IT IS SO ORDERED.

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DATED:

April 10, 2012

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Hon. William V. Gallo
U.S. Magistrate Judge

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