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Century 21 Real Estate, LLC v. All Professional Realty

June 8, 2012

CENTURY 21 REAL ESTATE, LLC, PLAINTIFF,
v.
ALL PROFESSIONAL REALTY, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Gregory G. Hollows United States Magistrate Judge

ORDER

Previously pending on this court's law and motion calendar for June 7, 2012, were Century 21 Real Estate LLC's ("Century 21") motion to quash subpoena served on Century 21 Select, filed May 24, 2012, (dkt. no. 71), and All Professional's application for order to show cause re: contempt, filed May 31, 2012 (dkt. no. 79).*fn1 The parties have now filed their joint statements. Virginia Cale appeared on behalf of defendants. Aaron Rudin represented plaintiff.

After hearing oral argument and reviewing the joint statement, the court now issues the following order.

BACKGROUND

Plaintiff Century 21 Real Estate LLC ("Century 21") brought this action against defendants All Professional Realty, Inc., Century 21 All Professional, Steven Wright, and Carol Wright ("All Professional") on October 12, 2010, alleging that All Professional continued to use Century 21's trademarks after a franchise agreement was properly terminated by Century 21 due to All Professional's failure to make certain required payments. Century 21's claims are for Federal, State and Common Law Trademark Infringement; Federal and State Unfair Competition; breach of contract; breach of guaranty; breach of promissory note; account stated; quantum merit; and for an accounting.

In a separate complaint now consolidated with this action, All Professional claims that Century 21 breached the franchise agreements in various ways, including failing to enforce the Policies and Procedures Manual on other franchisees by permitting other franchisees to recruit All Professional's productive agents, failing to provide promised tools and systems, permitting former All Professional Hawaii broker John Sherman to go to another Century 21 franchise to directly compete with All Professional Hawaii, and allowing another Century 21 franchisee, Century 21 Select, into All Professional's territory in Folsom. This complaint contains claims for violation of a termination provision of the California Franchise Relations Act, Cal. Bus. & Prof. Code § 20020, violation of California's Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200-17210, intentional interference with business advantage, breach of contract, breach of implied covenant of good faith and fair dealing, fraud, negligent interference with business advantage, and interference with contract.*fn2

The termination of the contract between the parties took place in 2010. Judge Shubb found in his preliminary injunction order that it appeared as though Century 21 properly terminated the agreement with All Professional for not making payments under the terms of the franchise agreements, and he granted a preliminary injunction to prevent All Professional from using Century 21's trademarks. He denied All Professional's motion for preliminary injunction seeking to restore All Professional's benefits under the franchise agreements.*fn3 (Dkt. no. 28.)

DISCUSSION

I. Century 21's Motion to Quash Subpoena Directed at Century 21 Select This motion concerns All Professional's subpoena served on Century 21 Select

("Select") on May 15, 2012, seeking information pertaining to ten real estate agents who All Professional claims were lured away by Select. The subpoena seeks production of documents only, "reflecting any commission split agreements between Century 21 Select and real estate agent [named] from [various dates in 2007 and 2008 depending on the agent] to the present." (Joint Stmt., filed June 4, 2012, Ex. 1.) After meet and confer sessions, All Professional agreed to extend the May 31, 2012 compliance date to a date following the hearing on this motion.

This motion is brought by Century 21 only. While Century 21 does not having standing to object on the basis of undue burden imposed on a third party per se, it may object if it has "a personal right or privilege with regard to the documents sought," Fenstermacher v. Moreno, 2010 WL 5071042, *3 (E.D. Cal. 2010), "or if its own interest is jeopardized by discovery sought from a third person." Koh v. S.C. Johnson & Son, Inc., 2011 WL 940227, *2 (N.D. Cal. 2011) (quoting 8A Charles Alan Wright, Arthur R. Miller & Richard L. Marcus, Federal Practice and Procedure Civil 3d § 2035). If discovery sought were truly irrelevant, Century 21 would have standing to object to discovery subpoenaed from a third party because it might wind up paying for litigation expenses and time expended by its counsel if the discovery were to be disputed.

Neither Select nor its agents have participated in this motion. Therefore, privacy issues or claims that the subpoena requests confidential business or financial information of Select or its individual agents will not be considered here. Century 21 may raise relevance or other personal right or privilege only.

Century 21 claims that this information is not relevant to Century 21's franchise agreements with All Professional, and that it has standing to protect its franchisees from harassment. Century 21 further argues that All Professional is improperly attempting to obtain this information for use in another unrelated action against Select and others.

The court agrees with All Professional's argument that the subpoena is relevant to its claims that Century 21 actively encouraged other franchisees to improperly recruit All Professional's agents in order to compete against All Professional (and thereby violate express or implied terms of the All Professional franchise agreement). All Professional points out that Select's principal, Dan Jacuzzi, offered to buy All Professional's Folsom office for years but the Wrights declined. All Professional claims that its agents told Steve Wright that Select offered some of these agents a far better commission split than they were receiving at All Professional, that the agents would be able to keep 90% of the commission -- an unusual situation. A "90-10" split compared to a traditional "60-40" split may certainly create an implication that the purpose was to entice agents to Select through better financial terms. All Professional also points out an internal note, dated April 18, 2008, in which Century 21's business consultant, Tara Scholl, stated that Steve Wright was copying her on emails between himself and Dan Jacuzzi which reflected that Jacuzzi was proactively recruiting Wright's agents. According to All Professional, compliance with the Policies and Procedures Manual was a material term of the franchise agreements, and Century 21's failure to enforce the anti-recruiting policy would show that Century 21 breached the implied covenant of good faith and fair dealing. All Professional claims that when it ...


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