j2Cloud Services, Inc. et al v. Fax87 et al

Filing 8

ORDER denying 1 Motion for Protective Order; denying 4 Motion to Quash. The deposition of Mr. Layton scheduled for March 24, 2017, may proceed. The Clerk is directed to terminate this matter. Signed by Judge Candy W. Dale. (klw)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

J2 CLOUD SERVICES, INC., and
ADVANCED MESSAGING
TECHNOLOGIES, INC.,

Case No. 1:17-mc-09721-EJL-CWD
MEMORANDUM DECISION AND
ORDER

Plaintiffs,
v.
FAX 87, FARJAD FANI, MATT
JOHNSON FINANCE, INC., ELNAZ
FANI, ONE VOIX, MIRALUNA
CABERTE YARDAN, STEVEN
THONG WAY SEN, ROBERT
BEAULIEU, CHARLES
MONTGOMERY, ONLINEFAXES,
SOLIDFAX, FAXVISION,
EFAX4LESS, MYPHONEFAX,
RESELLFAX, AND DOES 1-10,
Defendants.

INTRODUCTION
On March 17, 2017, Defendant MyPhoneFax (MPF) filed a motion for protective
order pursuant to Fed. Rule Civ. P. 26 regarding the scheduling by Plaintiffs j2 Cloud
Services, Inc., and Advanced Messaging Technologies, Inc., of a Rule 45 deposition of

MEMORANDUM DECISION AND ORDER - 1

non-party witness Derek Layton. Plaintiffs served a notice of deposition on March 20,
2017, and the deposition is set for March 24, 2017, in Boise, Idaho.
This matter was filed as a miscellaneous action here in the District of Idaho, and is
related to ongoing litigation in the United States District Court for the Central District of
California, 2:13-cv-05353-DDP-AJW, pending before Judge Pregerson. 1 MPF’s
protective order seeks to vacate the deposition, and requests that it be postponed until
Judge Pregerson rules on a pending motion to vacate default judgment, which was
entered against MPF in the California action. That motion is scheduled for oral argument
on Monday, March 27, 2017.
On March 22, 2017, Layton filed a motion to quash the third party subpoena and
requested a stay. Like MPF, Layton requested the deposition be stayed until a ruling is
issued on MPF’s motion to vacate default judgment.
Because the deposition is set for March 24, 2017, the Court conducted a
telephonic hearing with the parties on March 22, 2017, at 4:00 p.m. After carefully
considering the parties’ respective arguments, the relevant authorities, and reviewing the
docket and related filings in the underlying California litigation, the Court will deny both
motions. The deposition may proceed as scheduled, for the reasons explained below.

1

The Court has reviewed the docket and filings related to this matter via Pacer. All docket numbers refer to filings
in the underlying California action.

MEMORANDUM DECISION AND ORDER - 2

BACKGROUND
Plaintiff j2 provides Internet fax services to customers in the United States and
around the world. 2 On March 29, 2011, j2 sued defendants Farjad Fani, Fax87, and Matt
Johnson Finance, Inc. (“MJF”), for infringing two patents related to Plaintiff’s internet
fax services. (Dkt. No. 1). Mr. Fani was the President, Vice President, Secretary and sole
officer and director of MJF, which was doing business as Fax87 and selling internet fax
services. (Dkt. No. 156-2, F. Fani Response to RFA Nos. 32-33, 35).
The parties later settled the 2011 lawsuit. (Dkt. Nos. 43-15, 43-16). Defendants
promised to make quarterly payments and provide royalty reports; accordingly, j2
dismissed the 2011 litigation and granted the defendants a license. (Dkt. No. 43-16,
License Agreement).
The present lawsuit arose when Defendants stopped making payments and
providing royalty reports after the fourth quarter of 2012, and committed several
other alleged breaches of the license agreement. In 2013, Mr. Fani informed j2 that
he/Defendant MJF “sold Fax87.com on December 31, 2012, and have nothing to do
with Fax87.com since then.” (Dkt. No. 168-2). He did not identify the
purported buyer.
j2 filed this second lawsuit on July 24, 2013, in the United States District Court for
the Central District of California, (the California action), initially naming as defendants
Fax87.com, Mr. Fani, MJF and Does 1 & 2. (Dkt. No. 1). With the court’s permission, j2

2

Due to this Court’s lack of familiarity with this matter, the background was gleaned from Plaintiffs’
representations in its memorandum in opposition to the motion to vacate, filed on January 24, 2017, at Docket 236.

MEMORANDUM DECISION AND ORDER - 3

filed the First Amended and Supplemental Complaint (“FAC”) on April 15, 2016, adding
various claims and related parties, including Defendant MyPhoneFax (MPF), that were
identified through j2’s extensive investigation efforts. (Dkt. No. 43). j2 served all
defendants with the FAC. (Dkt. Nos. 46, 48-50, 80). MPF was served at what Plaintiffs
believed to be its principal place of business in the Philippines. (Dkt. No. 80).
The court granted Plaintiffs j2 Cloud Services, Inc.’s and Advanced Messaging
Technologies, Inc.’s motion for default judgment against MPF on December 15, 2016,
and issued a judgment that same day. (Dkt. 196, 197.) On December 19, 2016, MPF
(noted by MPF to have been sued incorrectly as MYPHONEFAX.COM) entered a
special appearance for the limited purpose of challenging jurisdiction and the entry of
default judgment against MPF. (Dkt. 198.) MPF claimed to be the entity that purchased
Fax87’s assets.
On December 21, 2016, MPF filed an ex parte application to stay the case pending
enforcement of a default judgment. (Dkt. 206.) On December 28, 2016, MPF filed a
motion to vacate the default judgment. (Dkt. 212.) The motion to vacate is predicated
upon lack of service of legal process on MPF. In support of both motions, MPF included
a declaration from Mr. Joffe. (Dkt. Nos. 206-2, 212-1). Upon consideration of the
motions, on December 29, 2016, the court granted MPF’s motion for stay of execution on
the default judgment. (Dkt. 215.) MPF’s motion to vacate the default judgment is
scheduled to be heard before District Judge Pregerson on Monday, March 27, 2017.

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In filings with the court, Mr. Joffe claims to be “the individual with signing
authority for [MyPhoneFax] in [his] capacity as president of International Company
Management Services Ltd., the manager of [MyPhoneFax].” (Dkt. No 206-2 ¶ 2). Mr.
Joffe testified also that “MPF’s principal place of business is located in Colombia.” (Dkt.
No. 212-1 ¶ 2). He contends MPF does not have any facilities in the Philippines. (Id. ¶ 8).
Among other things, his declarations and court filings provide information as to MPF’s
customer base, the alleged irreparable harm that the company would suffer from an
injunction, as well as an explanation about how to port fax numbers. (See generally Dkt.
Nos. 206-2, 212-1). Plaintiffs contended the declarations were false, and issued a notice
of deposition on January 11, 2017, scheduling Joffe’s deposition for January 24, 2017.
(Dkt. 234.)
On January 23, 2017, MPF filed an ex parte application for a protective order,
seeking to prevent Plaintiffs from deposing Mr. Joffe. MPF argued it was improper to
depose a defendant which had not appeared, and sought to postpone any deposition until
the final adjudication of MPF’s motion to vacate the default judgment. Plaintiffs filed an
opposition that same date, arguing there was no basis to preclude Plaintiffs from taking
depositions, particularly since other parties disclosed Joffe as a person with knowledge
relevant to the California action. (Dkt. 236.)
On January 25, 2017, Magistrate Judge Andrew Wistrich entered a brief order
denying MPF’s ex parte application for a protective order as to Plaintiffs’ notice of
deposition of Mr. Joffe. (Dkt. 239.) The court found the application was procedurally
defective because no showing of irreparable injury was made, and MPF waited until the
MEMORANDUM DECISION AND ORDER - 5

eve of the deposition to file the application. The court found also that the application
lacked substantive merit, as nothing in Fed. Rule Civ. P. 26 or 30 prohibited Plaintiffs
from taking Joffe’s deposition. According to Plaintiffs’ representation to this Court, the
deposition went ahead as planned, and MPF’s counsel participated fully in the
deposition. 3
In connection with the California action, Plaintiffs sought to depose Derek Layton,
a resident of Caldwell, Idaho. MPF represents Layton has worked as an independent
contractor for MPF since approximately 2012, and whom continues to provide various
services to MPF including, but not limited to, web development, website design, and
financial services. On November 17, 2016, Plaintiffs served a Rule 45 subpoena upon
Layton seeking production of documents and an oral deposition. (Carlson Decl. ¶ 2.) On
January 26, 2017, MPF’s attorney authored a letter to Plaintiffs’ attorney, objecting to the
subpoena served upon Layton. Nonetheless, document production ensued, and apparently
MPF reviewed documents Layton identified as responsive to the subpoena prior to
turning them over to Plaintiffs. Layton’s counsel indicated to the Court at the hearing that
document production is almost complete, and that Layton intends to provide a privilege
log identifying documents withheld from production. 4

3

At the hearing, counsel for MPF represented the deposition was limited to issues related to the hearing regarding
the motion to vacate the default judgment. The court’s order, however, does not place any limitation on the scope of
the deposition.
4
Counsel for Layton confirmed also that the motion to quash is not based on any concern about the protective orders
already in place in the California action, alleviating the Court’s question whether Rule 45(d)(3)(A)(iii) was
implicated.

MEMORANDUM DECISION AND ORDER - 6

On March 7, 2017, Plaintiffs’ counsel emailed Layton’s attorney in an effort to
schedule Layton’s oral deposition during the week of either March 13 or March 20, 2017.
On March 9, 2017, MPF’s counsel emailed both Plaintiffs’ counsel and Layton’s counsel,
asserting MPF was prevented from participating and fully defending its interests because
of the posture of the California action, and indicated MPF objected to Plaintiffs
proceeding with Layton’s deposition. MPF asserted that Plaintiffs should wait to depose
Layton until the motion to vacate was adjudicated, and MPF’s role in the California
action is ascertained. Nonetheless, on March 13, 2017, counsel for Layton unequivocally
indicated March 24, 2017, worked for the deposition of Layton, and asked what time
Plaintiffs’ counsel would like to start. Plaintiffs’ counsel accepted, and the deposition is
scheduled to begin at 9:30 a.m. tomorrow.
On March 17, 2017, Layton’s counsel raised, on behalf of his client, the concern
that Layton might be subjected to multiple depositions and the concomitant expense
associated with multiple appearances. On March 20, 2017, Plaintiffs served Layton with
a subpoena to appear at the deposition on March 24, 2017, at 9:30 a.m., in Boise, Idaho.
On March 21, 2017, Layton’s counsel informed Plaintiffs via letter that Layton
objected to the subpoena on the grounds that it imposed an undue burden under Rule
45(d)(3) and Rule 26(c), and asserted that the deposition should be rescheduled to allow
MPF, and other defendants, to fully participate in the deposition. Otherwise, Layton
claimed he would be subjected to multiple depositions covering the same topics, resulting
in a waste of time and resources. Layton’s counsel represented also that he understood
Layton had no information about the pending motion to vacate the default judgment set
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for hearing on March 27, 2017. Plaintiffs’ counsel had, however, already booked his
travel to Boise to take Layton’s deposition.
On March 17, 2017, MPF filed a motion for protective order pursuant to Rule
26(c) as a miscellaneous action in this Court. (Dkt. 1.) On March 22, 2017, Layton filed a
motion to quash the third party subpoena pursuant to Rule 45. Because the Court
understood that the parties had scheduled Layton’s deposition for March 24, 2017, the
Court conducted an expedited telephonic hearing at 4:00 p.m. on March 22, 2017, at
which counsel for MPF, Layton, and Plaintiffs appeared. Since Plaintiffs had not had the
opportunity to file a written response to the two motions, the Court gave considerable
latitude to Plaintiffs’ counsel to explain their position.
Plaintiffs’ counsel represented to the Court that Layton is believed to have
information regarding the motion to vacate the default judgment, as well as information
pertinent to the issues in the lawsuit, and that he intended to ask for an expedited
transcript to present information to the court on March 27, 2017, in the California action.
MPF and Layton deny this representation. Given such, the Court asked MPF’s counsel if
anything was precluding MPF from attending the deposition on March 24, 2017, to which
MPF’s counsel responded that its special, limited appearance precluded its participation
because MPF was not a party. To that argument, Plaintiffs’ counsel represented Plaintiffs
would stipulate that MPF’s attendance would not waive its right to maintain its special
limited appearance in the California action, and that it could participate in the deposition
fully as if it were a party.

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DISCUSSION
MPF argues that, since it was not properly served with process, it is under no
obligation to appear at, and cannot meaningfully participate in, a deposition noticed in a
case in which it is not a party. (Dkt. 1-1.) MPF contends the deposition should be
deferred until the motion to vacate the default judgment is decided, and it can participate
in the case and defend its interests if the motion is granted. MPF argues also that it is
saddled with the choice of incurring the costs of attending an unnecessary deposition
when there is doubt as to MPF’s position in the case. And finally, MPF asserts that, if the
default judgment is vacated, a second deposition of Layton would be required, which
MPF contends would be wasteful for it, and Layton’s attorney asserts is unduly
burdensome for his client.
Initially, the Court could discern no urgency to Plaintiffs’ request to depose
Layton. However, upon reviewing the California court docket, the Court understands the
facts are much different than represented by the parties in the briefs before the Court.
Magistrate Judge Andrew Wistrich considered identical arguments raised by MPF before
the Court here, and allowed the deposition of Jaffe to proceed with no limitations.
Furthermore, Plaintiffs’ counsel confirmed during the hearing that he would stipulate that
MPF could participate fully during the deposition without jeopardizing its limited and
special appearance in the California action.
In addition, with regard to Layton’s motion and reliance on Rule 45(d)(1)’s undue
burden or expense provision, the Court finds it is speculative at this juncture whether
Layton would be subject to multiple depositions. The only party objecting to the
MEMORANDUM DECISION AND ORDER - 9

deposition at this time is MPF, and MPF is the party contending that “multiple
defendants” may want to depose Layton in the future, without any support. MPF’s
objection rings hollow, given these facts, as well as the willingness of Plaintiffs’ counsel
to stipulate to MPF’s participation as a full party without waiving MPF’s limited
appearance during the deposition. If the issue of multiple depositions does arise, the
Court in Idaho, or the Court in California, whichever is appropriate, can address the issue
at that time.
Although it appears the parties dispute the nature of the relationship between
Layton and MPF, it is clear that Layton has a business relationship with MPF and has
knowledge pertinent to this litigation. And, despite Layton’s and MPF’s protests to the
contrary, Plaintiffs’ counsel represented to this Court that Layton may have information
pertinent to Monday’s hearing before the California court.
Finally, even after MPF notified Layton’s counsel of its objection to the
deposition, Layton’s counsel unequivocally agreed to the date of March 24, 2017, for
Layton’s deposition. Layton gave unconditional assent to the date proposed. It therefore
appears to the Court that, upon further reflection and perhaps consultation with MPF’s
counsel, Layton changed his tune. The timing of Layton’s change of heart does not pass
the smell test.

MEMORANDUM DECISION AND ORDER - 10

CONCLUSION
Based upon the above, the Court sees no reason to postpone Layton’s deposition.
Apparently, the California court felt the same when MPF presented similar arguments in
support of its request to postpone the deposition of Mr. Jaffe. The Court finds no reason
to depart from Judge Wistrich’s conclusion regarding the same. Accordingly, both
motions will be denied.

ORDER
NOW THEREFORE IT IS HEREBY ORDERED:
1)

Plaintiffs’ Motion for Protective Order (Dkt. 1) is DENIED.

2)

Layton’s Motion to Quash Third Party Subpoena and for Stay (Dkt. 4) is
DENIED.

3)

The Clerk is directed to terminate this matter.

DATED: March 23, 2017

_________________________
Honorable Candy W. Dale
United States Magistrate Judge

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