Cohen v. Trump

Filing 102

ORDER Sustaining in Part and Overruling in Part Plaintiff's Objection to Magistrate Judge's May 13, 2015 Order (EFC 76 ). The Court finds that Plaintiff has failed to make a sufficient showing as to these non-party defendants and, therefore, overrules Plaintiff's objection. The Court also overrules Plaintiff's objection to the extent he seeks an order allowing any further written or document discovery or authorizing any further discovery of anykind in the Makaeff case. The fact discovery cut-off date shall be extended to August 10, 2015 for the limited purpose of completing these depositions. Signed by Judge Gonzalo P. Curiel on 6/30/15.(dlg)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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ART COHEN, Individually and on
Behalf of All Others Similarly
Situated,

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v.

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Plaintiff,

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DONALD J. TRUMP,

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CASE NO. 13-cv-2519-GPC-WVG
Related Case: 10-cv-0940-GPC-WVG
ORDER SUSTAINING IN PART
AND OVERRULING IN PART
PLAINTIFF’S OBJECTIONS TO
MAGISTRATE JUDGE’S MAY 13,
2015 ORDER
[ECF No. 76]

Defendant.

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Before the Court is Plaintiff’s objection to the Magistrate Judge’s May 13, 2015

21 discovery order (ECF No. 73). (ECF No. 76.) Defendant Donald J. Trump
22 (“Defendant” or “Trump”) filed an opposition of May 29, 2015. (ECF No. 84.) On
23 June 3, 2015, Plaintiff filed a reply. (ECF No. 87.) Based on the reasoning below, the
24 Court sustains in part and overrules in part Plaintiff’s objections to the Magistrate
25 Judge’s discovery order.
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LEGAL STANDARD
Under Federal Rule of Civil Procedure 72(a), aggrieved parties may file

3 objections to the rulings of a magistrate judge in non-dispositive matters within
4 fourteen days. In reviewing a magistrate judge’s order, the district judge “must
5 consider timely objections and modify or set aside any part of the order that is clearly
6 erroneous or is contrary to law.” Fed. R. Civ. P. 72(a); 28 U.S.C. § 636(b)(1)(A); see
7 also United States v. Raddatz, 447 U.S. 667, 673 (1980); Osband v. Woodford, 290
8 F.3d 1036, 1041 (9th Cir. 2002). Consequently, discretionary orders, such as those
9 denying discovery, “will be overturned only if the district court is left with the definite
10 and firm conviction that a mistake has been made.” Ctr. for Biological Diversity v.
11 Fed. Highway Admin., 290 F. Supp. 2d 1175, 1199–1200 (S.D. Cal. 2003) (quoting
12 Weeks v. Samsung Heavy Indus. Co., 126 F.3d 926, 943 (7th Cir. 1997)).
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DISCUSSION
Plaintiff objects to the Magistrate Judge’s ruling that Plaintiff shall not be

15 permitted to question Defendant or any other deponent about the capital contributions
16 Defendant and others made directly or indirectly to Trump University, or the capital
17 contributions received directly or indirectly from Trump University, because such
18 information is irrelevant. (ECF No. 73 at 3, 12.)
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The Federal Rules of Civil Procedure generally allow for broad discovery,

20 authorizing parties to obtain discovery regarding “any nonprivileged matter that is
21 relevant to any party’s claim or defense.” Fed. R. Civ. P. 26(b)(1). Also, “[f]or good
22 cause, the court may order discovery of any matter relevant to the subject matter
23 involved in the action.” Id. Relevant information for discovery purposes includes any
24 information “reasonably calculated to lead to the discovery of admissible evidence,”
25 and need not be admissible at trial to be discoverable. Id. There is no requirement that
26 the information sought directly relate to a particular issue in the case. Rather,
27 relevance encompasses “any matter that bears on, or that reasonably could lead to other
28 matter that could bear on, any issue that is or may be [presented] in the case.”
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1 Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978). District courts have
2 broad discretion to determine relevancy for discovery purposes. See Hallett v. Morgan,
3 296 F.3d 732, 751 (9th Cir. 2002). Similarly, district courts have broad discretion to
4 limit discovery where the discovery sought is “unreasonably cumulative or duplicative,
5 or can be obtained from some other source that is more convenient, less burdensome,
6 or less expensive.” Fed. R. Civ. P. 26(b)(2)(C); see also Crawford–El v. Britton, 523
7 U.S. 574, 598 (1998) (trial court has “broad discretion to tailor discovery narrowly and
8 to dictate the sequence of discovery”). Limits should be imposed where the burden or
9 expense outweighs the likely benefits. Id.
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Plaintiff disputes the Magistrate Judge’s holding that evidence of profits made

11 by a fraud defendant through his alleged scheme are irrelevant and non-discoverable.
12 (ECF No. 76 at 1.) Specifically, he objects to the Magistrate Judge’s order on the
13 grounds that the Magistrate Judge (1) did not acknowledge the broad scope of
14 discovery, (b) did not put the burden on Defendant to justify his resistance to the
15 discovery Plaintiff requested, (3) did not reject Plaintiff’s argument that the evidence
16 sought is relevant to showing Trump’s control over Trump University, and (4) failed
17 to address three additional reasons Plaintiff proffered as to why the evidence is
18 relevant—namely, motive, bias, and piercing the corporate veil. (Id. at 2-3.) Plaintiff
19 asks this Court to “permit him to obtain complete information about Trump and his
20 partners’ direct and indirect contributions into, and benefits from, Trump University,
21 including all related documents and all related testimony from all past and future
22 deponents in this case.” (ECF No. 76 at 1.)
23 A.

Instructions Not to Respond

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This discovery dispute arose because Defendant’s counsel refused to allow

25 deponents to answer any questions concerning money or benefits Defendant and others
26 contributed to, or received from, Trump University, either directly or indirectly (and
27 because Plaintiff expressed its intent to ask similar questions at future depositions).
28 (ECF No. 73 at 1-2.) As the Magistrate Judge recently acknowledged in this case,
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There are few situations where an instruction not to answer a deposition
question is appropriate. Brincko v. Rio Props., Inc., 278 F.R.D. 576, 581
(D.Nev. 2011). A person may instruct a deponent not to answer only when
necessary to preserve a privilege, to enforce a limitation ordered by the
court, or to present a motion under Rule 30(d)(3). Fed R. Civ. P.
30(c)(2).”

5 (ECF No 93 at 4-5.)1 It appears Defendant’s counsel instructed deponents not to
6 answer in reliance on the Magistrate Judge’s February 13, 2012 (ECF No. 93) and June
7 26, 2012 (ECF No. 111) rulings denying discovery of similar information in Makaeff
8 v. Trump University, LLC, et al., Case. No. 10cv940-GPC-WVG (“the Makaeff case”).
9 (See ECF No. 73 at 3 (explaining that Defendant argued the inquires were
10 impermissible because the Magistrate Judge previously ruled in the Makaeff case (ECF
11 Nos. 93 & 111) that such financial information was irrelevant and, thus, Plaintiff’s
12 questions were an attempted end-run around the Court’s orders in Makaeff).) This was
13 not a valid grounds for instructing witnesses not to answer. Though the parties have
14 shared discovery between this case and the Makaeff case, the cases are not consolidated
15 such that the Magistrate Judge’s ruling in Makaeff was binding in this case. The
16 Magistrate Judge acknowledges as much in the challenged May 13, 2015 order in this
17 case by expressly “extend[ing] its ruling in the Makaeff case to the instant case.” (ECF
18 No. 73 at 6.) Thus, the, burden on the motion before the Magistrate Judge should have
19 been on Defendant to explain why his counsel instructed witnesses not to answer and
20 why he should not have to disclose financial information. See Fed R. Civ. P. 30(c)(2).
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Plaintiff argues that the Magistrate Judge instead put the onus on Plaintiff. The

22 Magistrate Judge’s order states that “[s]imply because Defendant is a public figure and
23 regularly discusses his wealth does not negate any right that he has to object to
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Rule 30(d)(3)(A) of the Federal Rules of Civil Procedure states that “[a]t any time during a

26 deposition, the deponent or a party may move to terminate or limit it on the ground that it is being
conducted in bad faith or in a manner that unreasonably annoys, embarrasses, or oppresses the

27 deponent or party.” Fed. R. Civ. P. 30(d)(3)(A). It does not appear that Defendant’s counsel based
their instruction not to answer on this rule and Defendant makes no such argument in the briefing

28 before this Court.

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1 disclosing information about money that he, or others, have put into or taken out of
2 Trump University.” (ECF No. 73 at 4.) There is no explanation as to the legal basis
3 for such an objection and no indication that Defendant made a sufficient showing to
4 justify an instruction not to answer on these grounds. The order then goes on to
5 distinguish an unpublished case cited by Plaintiff refuting the existence of a federal
6 right to financial privacy, but again, it was Defendant’s burden to support his claim that
7 such a right existed in the first place, and there is no indication in the order that
8 Defendant met his burden.
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In its opposition brief before this Court, Defendant cites Stallworth v. Brollini,

10 288 F.R.D. 439, 444 (N.D. Cal. 2012), which notes a Supreme Court decision
11 discussing a constitutional right of privacy in personal information. But both cases
12 involve confidential medical information. Moreover, Stallworth goes on to state that
13 “[t]his right, however, is not absolute and . . . is subject to a balancing test.”2
14 Defendant did not address this balancing test. Defendant also cites Premium Serv.
15 Corp. v. Sperry & Hutchinson Co., 511 F.2d 225, 229 (9th Cir. 1975), wherein the
16 Ninth Circuit affirmed a district court’s order quashing a subpoena for tax returns based
17 on the public policy of encouraging taxpayers to file complete and accurate returns, but
18 noted that “[t]ax returns do not enjoy an absolute privilege from discovery.” Neither
19 of these cases support a finding that a broad federal right to financial privacy exists that
20 bars discovery regarding any financial transactions of a defendant accused of
21 defrauding large numbers of people. Further, Defendant has not explained, and the
22 Magistrate Judge did not clarify, why Trump’s financial information would not
23 adequately be protected by the protective order. (See ECF No. 73 at 4.)
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“Relevant factors to be considered in this balancing test include the type of record requested,
the information it does or might contain, the potential for harm in any subsequent non-consensual
disclosure, the injury from disclosure to the relationship in which the record was generated, the
adequacy of safeguards to prevent unauthorized disclosure, the degree of need for access, and whether
there is an express statutory mandate, articulated public policy, or other recognizable public interest
militating toward access.” Stallworth, 288 F.R.D. at 444 (citing Doe v. Attorney General, 941 F.2d
780, 796 (9th Cir.1991).
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While the Magistrate Judge did not make clear that the burden fell on Defendant

2 to initially justify his counsel’s instructions not the answer, the Magistrate Judge did,
3 in fact, base his order on arguments made by Defendant. The Court now reviews those
4 grounds. In arguing this issue before the Magistrate Judge, Defendant relied on the
5 Magistrate Judge’s prior orders in the Makaeff case (ECF Nos. 93 & 111) and his
6 argument that these financial questions are irrelevant to Plaintiff’s civil RICO action.
7 (ECF No. 73 at 3.)
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In discussing his prior rulings in the Makaeff case, the Magistrate Judge first

9 cited his February 13, 2012 order, wherein the Magistrate Judge held:
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Whether [Donald] Trump received money from Trump University, or
the amount of money he received, will not provide information on the
extent of Trump’s personal involvement in running Trump University.
An absentee shareholder or owner could just as easily receive
compensation without any participation.

13 (ECF No. 73 at 3 (citing Makaeff, Doc. No. 93 at 14.)) The argument about an absentee
14 shareholder is generally true, however, as the Magistrate Judge highlights, Trump has
15 already admitted in response to Defendant’s Interrogatory No. 10 to having had
16 “significant involvement with both the operation and overall business strategy of
17 Trump University.” (ECF No. 73 at 6.) And, while the Magistrate Judge opines that
18 Plaintiff does not need Trump’s financial information to show Trump’s level of
19 involvement in running the organization when he already has better evidence (Trump’s
20 admission), one somewhat vague interrogatory response does not substitute for more
21 detailed information showing the level of day-to-day transactions Defendant was
22 involved in. Cumulative evidence is not irrelevant evidence.3 The scope of discovery
23 is broad, authorizing discovery of any nonprivileged material relevant to any claim or
24 defense. Fed. R. Civ. P. 26(b)(1). Under the RICO statue, Plaintiff must prove that
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Moreover, while the court may, on its own motion, limit discovery if the requested discovery

27 is “unreasonably cumulative or duplicative,” Fed. R. Civ. P. 26(b)(2)(C)(I), there is no indication in

the Magistrate Judge’s order that he found the financial information to be “unreasonably” cumulative

28 of other discovery.

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1 Trump “conduct[ed] or participate[ed], directly or indirectly, in the conduct of such
2 enterprise's affairs through a pattern of racketeering activity or collection of unlawful
3 debt.” 18 U.S.C.A. § 1962(c). In his complaint, Plaintiff alleged that Trump exercised
4 substantial control over Trump University, that Trump provided the operating capital,
5 that Trump participated in operations and management of Trump University, that
6 Trump knowingly and willfully conducted and participated in Trump University, and
7 made money from Trump University. (ECF No. 1 ¶¶ 64, 67, 70, 81, 86.) Thus,
8 Trump’s payments to, and receipt of funds from, Trump University would be relevant
9 to supporting Plaintiffs claims.
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The Magistrate Judge also cited his June 26, 2012 ruling:

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Finally, on the first page of Plaintiffs’ Second Amended Complaint,
Plaintiffs themselves refer to Defendant Trump as a “billionaire land
mogul.” (Doc. No. 41 at 2.) Defendant Trump’s financial wherewithal
cannot seriously be in question by Plaintiffs. If Plaintiffs truly believe that
Defendant Trump’s net worth information is necessary to this litigation,
there are other, less burdensome avenues available to them to obtain the
information. As the Court noted in its February Order, “Defendant Donald
Trump’s net worth is publicly-available information and can be obtained
through a simple Google search, which reveals sources for the
information.” (Doc. No. 93 at 13.)

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17 (Makaeff, Doc. No. 111 at 3-4.) In this case, Plaintiffs seeks more than just a figure
18 of Trump’s net worth. Moreover, the Court finds it is not fair to say that Trump’s net
19 worth is equally available to Plaintiff from publicly-available sources. Publicly20 available figures of Trump’s wealth have been the subject of wild speculation and
21 range anywhere from $4 to $9 billion. Simply stated, Plaintiffs are entitled to answers
22 made under penalty of perjury.
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Next, Defendant argued, and the Magistrate Judge agreed, that evidence of an

24 economic motive is irrelevant in a RICO action. (ECF No. 73 at 5-6.) The Magistrate
25 Judge is correct that in Nat’l Org. Of Women v. Scheidler, 510 U.S. 249, 252 (1994),
26 the Court stated: “[w]e granted certiorari to determine whether RICO requires proof
27 that either the racketeering enterprise or the predicate acts of racketeering were
28 motivated by an economic purpose. We hold that RICO requires no such economic
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1 motive.” However, the Court does not read the Supreme Court’s holding that an
2 economic motive is not required, as implying that a evidence showing that one exists
3 is, therefore, per se irrelevant.
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Though district courts have broad discretion to determine relevancy for

5 discovery purposes, see Hallett, 296 F.3d at 751, and also to limit discovery where its
6 burden outweighs its likely benefit, Fed. R. Civ. P. 26(b)(2)(C), the Court finds the
7 Magistrate Judge’s conclusions that Defendant’s financial information is per se
8 irrelevant to this case, that one interrogatory response provides a better showing of
9 control, and that the information is obtainable from a less burdensome public source
10 to be contrary to law. Finally, the Court finds no evidence on the record before it that
11 the protective order would not adequately protect Trump’s confidential, financial
12 information.
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Plaintiff’s Arguments

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Next, the Court addresses the argument that the Magistrate Judge erred by not

15 addressing the motive, bias, or piercing arguments Plaintiff raised in the instant action.
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Plaintiff argues that a showing that Trump invested millions of dollars in a

17 fraudulent scheme and took millions more in profits from that scheme is relevant to
18 Trump’s motive or intent to defraud. (ECF No. 76 at 1, 6.) While the Supreme Court
19 made clear in Nat’l Org. Of Women that an economic motive is not a required element
20 of a RICO claim, Plaintiff correctly points out that motive is not an element of any
21 offense, yet courts routinely admit evidence of motive to prove a range of offenses.
22 (ECF No. 76 at 3.) In United States v. Reyes, 660 F.3d 454, 463 (9th Cir. 2011), the
23 Ninth Circuit upheld the district court’s decision to admit at trial evidence that the
24 defendant had made money on a fraudulent scheme involving backdated stock options,
25 explaining: “[t]he district court permitted the introduction of the Options Gains
26 Evidence because it related to motive, knowledge, and intent, and because it
27 demonstrated that Reyes made money in the backdating scheme.” The court expressly
28 acknowledged that “the Government was allowed to introduce evidence about Reyes's
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1 motivation for his involvement in the backdating scheme, his scienter, even if such
2 evidence is generally not sufficient, standing alone, to prove intent to defraud.” Reyes,
3 660 F.3d at 464 (noting that the district court did forbid introduction of the total
4 amount of money Reyes made ($500 million) only out of concern that the amount was
5 so high as to be unduly prejudicial). The rationale offered for doing so was that this
6 “relevant and not unfairly prejudicial evidence related to Reyes’s motive” and
7 “permitted the jury to draw a reasonable inference that he knew what he was doing, and
8 how the scheme operated to his benefit.” Id. The Court finds the same is true here.4
9 Moreover, Reyes found motive evidence to be admissible at trial. At issue here is
10 simply what evidence is discoverable and the scope of discovery extends beyond
11 admissible evidence. Fed. R. Civ. P. 26(b)(1). The Court finds that financial evidence
12 showing Trump’s motive is relevant and discoverable.
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Plaintiff also argues that evidence of Trump’s financial gain is relevant to show

14 bias. (ECF No. 76 at 7.) The Supreme Court has explained bias as follows:
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Bias is a term used in the “common law of evidence” to describe the
relationship between a party and a witness which might lead the witness
to slant, unconsciously or otherwise, his testimony in favor of or against
a party. Bias may be induced by a witness' like, dislike, or fear of a party,
or by the witness' self-interest. Proof of bias is almost always relevant
because the jury, as finder of fact and weigher of credibility, has
historically been entitled to assess all evidence which might bear on the
accuracy and truth of a witness' testimony.

20 United States v. Abel, 469 U.S. 45, 52 (1984). The Court finds that the amount of
21 money Trump made from Trump University and the extent to which he controlled
22 decisions about how the school was run and when distributions were made to him bear
23 on Trump’s self-interest and represents evidence of possible bias. The Court, therefore,
24 finds financial evidence showing Trump’s potential bias is relevant and discoverable.
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Defendant argues that what must be shown is intent at beginning of the enterprise, so
Trump’s ultimate profit is irrelevant. (ECF No. 84 at 4.) However, Defendant provides no case
citation for this proposition and Reyes suggests otherwise. Further, Plaintiff seeks testimony regarding
financial transactions throughout the course of the enterprise, not simply a single figure of Trump’s
total profits.
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Finally, Plaintiff argues that evidence of the money Trump invested in Trump

2 University through shell entities and evidence of what he personally received is
3 relevant to piercing the corporate veil. (ECF No. 76 at 7-8.) While Plaintiff points to
4 evidence in this case that Trump invested in Trump University through two LLCs, but
5 then had payments made out directly to him—which suggests some piercing
6 issues—Plaintiff has not sufficiently articulated how this is relevant in a case where
7 Trump is a defendant in his individual capacity. The Court, therefore, finds that this
8 argument fails.
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Trump’s Partners’ Financial Information and Other Discovery
The relief Plaintiff seeks is somewhat of a moving target throughout his

11 objection. At certain points, Plaintiff also requests discovery of contributions made,
12 and benefits received, by Trumps’ partners. (ECF No. 76 at 1; ECF No. 87 at 7.)
13 However, Plaintiff rarely mentions these unnamed individuals in his argument and does
14 not explain why discovery of these non-parties’ financial information is warranted.
15 The Court, therefore, OVERRULES Plaintiff’s objection as to “Trump’s partners.”
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Plaintiff also seeks “complete information” about Trump’s contributions into,

17 and benefits from, Trump University. (Id.) However, the Court finds that the
18 Magistrate Judge’s May 13, 2015 order was limited to appropriate areas of inquiry
19 during depositions and this Court’s order is thus limited in scope as well. This Court’s
20 order shall not be construed as allowing any further written or document discovery or
21 as authorizing any further discovery of any kind in the Makaeff case. Thus, to the
22 extent Plaintiff seeks anything other than permission to question Defendant or any
23 other deponent about the capital contributions Defendant made directly or indirectly
24 to Trump University, or the capital contributions he received directly or indirectly from
25 Trump University, Plaintiff’s objection is OVERRULED.
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CONCLUSION
In sum, the Court finds the Magistrate Judge’s order contrary to law in that

3 questioning regarding the capital contributions Defendant made directly or indirectly
4 to Trump University, or the capital contributions he received directly or indirectly from
5 Trump University is relevant to showing Defendant’s motive and bias, is not equally6 available from other sources, and is not covered by a federal right to privacy. The
7 Court, therefore, SUSTAINS Plaintiff’s objection. To the extent Plaintiff seeks
8 information related to Trump’s partners’ contributions into, and benefits from, Trump
9 University, the Court finds that Plaintiff has failed to make a sufficient showing as to
10 these non-party defendants and, therefore, OVERRULES Plaintiff’s objection. The
11 Court also OVERRULES Plaintiff’s objection to the extent he seeks an order allowing
12 any further written or document discovery or authorizing any further discovery of any
13 kind in the Makaeff case.
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Plaintiff shall be allowed to reopen any depositions where Defendant’s counsel

15 instructed a witness not to answer financial questions regarding Trump and Defendant
16 shall bear the cost of said depositions. However, Plaintiff’s questioning shall be
17 limited in accordance with this order and shall not exceed two hours for any reopened
18 deposition. The fact discovery cut-off date shall be extended to August 10, 2015 for
19 the limited purpose of completing these depositions.
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IT IS SO ORDERED.

21 DATED: June 30, 2015
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HON. GONZALO P. CURIEL
United States District Judge

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