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Merritt v. Redwood Investments, LLC

United States District Court, S.D. California

September 13, 2019

WILLIAM MERRITT, et al., Plaintiffs,
v.
REDWOOD INVESTMENTS, LLC, et al., Defendants.

          ORDER: (1) DENYING DEFENDANTS REDWOOD INVESTMENTS, LLC AND CHI KUANG HWANG'S MOTION TO QUASH PLAINTIFFS' FOUR SUBPOENAS TO THIRD PARTIES (ECF NO. 57); AND (2) ISSUING PROTECTIVE ORDER

          Hon. Jill L. Burkhardt United States Magistrate Judge

         Before the Court is a motion to quash filed by Defendants Redwood Investments, LLC and Chi Kuang Hwang (collectively, "Defendants") regarding four third-party subpoenas duces tecum issued by Plaintiffs Abdoulaye Diallo ("Diallo") and William Merritt ("Merritt") (collectively, "Plaintiffs") following the Honorable Janis L. Sammartino's dismissal of their First Amended Complaint. (ECF No. 57.) Plaintiffs oppose the motion. (ECF No. 60.)

         On September 3, 2019, this motion was referred to the undersigned judge for determination. The Court finds that this motion is suitable for determination on the papers submitted without oral argument. See CivLR 7.1(d)(1). For the reasons set forth below, the Court DENIES the motion to quash, but sua sponte issues a protective order forbidding Plaintiffs from using the formal discovery process to conduct plausibility discovery, effectively quashing the four third-party subpoenas duces tecum issued by Plaintiffs.

         I. BACKGROUND

         Dasha Riley and Merritt commenced this action on August 3, 2018 against Redwood Investments, LLC, SoCal Metro Holdings, LLC, Christopher Carnes, and Tonika Miller. (ECF No. 1.) On October 3, 2018, Merritt and Diallo filed a First Amended Complaint ("FAC")[1] against Defendants Redwood Investments, LLC, SoCal Metro Holdings, LLC, Christopher Carnes, Tonika Miller, and Chi Kuang Hwang. (ECF No. 13.) In the FAC, Plaintiffs allege that Defendants "engaged in an illegal and fraudulent transfer of real property commonly known as 4026 Charles Street, San Diego, California, 91941 ('Property')." (FAC at ¶ 1.)

         In the FAC, Plaintiffs brought the following claims: a civil RICO violation against all Defendants, civil conspiracy to commit mail fraud and wire fraud against all Defendants, for cancellation of the fraudulent grant deeds against Defendant Carnes, constructive fraud against all Defendants, and elder financial abuse of Merritt against all Defendants. (See Id. at ¶¶ 127-85.) Defendants thereafter filed motions to dismiss the FAC. (See ECF Nos. 27, 30, 32.)

         On August 6, 2019, Judge Sammartino dismissed Plaintiffs' claim for civil conspiracy to commit mail fraud and wire fraud with prejudice and dismissed Plaintiffs' RICO claim with leave to amend. (ECF No. 54 at 13-18.) The Court declined to exercise supplemental jurisdiction over Plaintiffs' remaining state law claims. (Id. at 18-19.) Accordingly, the Court dismissed all of Plaintiffs' claims. The Court thereafter gave Plaintiffs thirty (30) days to file a Second Amended Complaint curing the deficiencies in their pleading. (Mat 22.)

         On September 3, 2019, Plaintiffs requested a thirty (30) day extension of time to file a Second Amended Complaint because they "require additional time in order to conduct discovery so as to properly plead the particularity and continuity elements of the RICO claim." (ECF No. 56 at 3.) Finding good cause, the Court granted this extension of time. (ECF No. 59.) Accordingly, Plaintiffs' Second Amended Complaint is now due on or before October 7, 2019. (Id.)

         II. LEGAL STANDARD

         Pursuant to Federal Rule of Civil Procedure 26(b)(1), "[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case . . . ." Fed.R.Civ.P. 26(b)(1). Federal Rule of Civil Procedure 45 governs discovery of non-parties by subpoena. See Fed. R. Civ. P. 45(a)(1); Salt v. Corona Reg'l Med. Ctr., 884 F.3d 1218, 1224 (9th Cir. 2018). The Advisory Committee Notes to the 1970 Amendments to Rule 45 state that the "scope of discovery through a subpoena is the same as that applicable to [Federal Rule of Civil Procedure] 34 and the other discovery rules." Fed.R.Civ.P. 45 advisory committee notes on 1970 amendments. Under Rule 34, the rule governing the production of documents between parties, the proper scope of discovery is as specified in Rule 26(b). Fed.R.Civ.P. 34; see also Heat & Control, Inc. v. Hester Indus., Inc., 785 F.2d 1017, 1023 (Fed. Cir. 1986) ("[R]ule 45(b)(1) must be read in light of Rule 26(b)"); Exxon Shipping Co. v. U.S. Dept. of Interior, 34 F.3d 774, 779 (9th Cir. 1994) (applying both Rule 26 and Rule 45 standards to a motion to quash subpoena).

         Under Rule 45, the nonparty served with a subpoena duces tecum may make objections to the subpoena, but must do so within 14 days after service or before the time for compliance, whichever is earlier. Fed.R.Civ.P. 45(d)(2)(B). On timely motion, the court may quash or modify the subpoena. Fed.R.Civ.P. 45(d)(3)(A). As a general rule, "a party has no standing to quash a subpoena served upon a third party, except as to claims of privilege relating to the documents being sought." Cal. Sportfishing Prot. Alliance v. Chico Scrap Metal, Inc., 299 F.R.D. 638, 643 (E.D. Cal. 2014); see also Moon v. SCP Pool Corp., 232 F.R.D. 633, 636 (CD. Cal. 2005); Clair v. Schlachter, No. 2:13-cv-804-KJM-EFB P (TEMP), 2016 WL 2984107, at *5 (E.D. Cal. May 23, 2016). "A party's objection that a subpoena issued to a non-party seeks irrelevant information or imposes an undue burden on the non-party is not grounds on which the objecting party has standing to assert, especially where the non-party, itself, has not objected." Clair, 2016 WL 2984107, at *5 (citing Moon, 232 F.R.D. at 636-37).

         "A party may, however, move for a protective order in regard to a subpoena issued to a non-party if it believes its own interest is jeopardized by the discovery sought by a third party and has standing under Rule 26(c) to seek a protective order regarding subpoenas issued to non-parties which seek irrelevant information." Clair, 2016 WL 2984107, at *5; see also In re REMEC, Inc. Sec. Litig., No. 04-cv-1948 JLS (AJB), 2008 WL 2282647, at *1 (S.D. Cal. May 30, 2008).

         III. DISCUSSION

         A. Defendants' Arguments in Support of ...


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