Vasquez v. CA School of Culinary Arts ( 2014 )

Filed 8/27/14; pub. order 9/26/14 (see end of opn.)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
DANIEL VASQUEZ et al., No. B250600
Plaintiffs and Respondents, (Los Angeles County
Super. Ct. BC393129)
v.
CALIFORNIA SCHOOL OF CULINARY
ARTS, INC., et al.,
Defendants;
SALLIE MAE, INC.,
Real Party in Interest and
Appellant.
APPEAL from an order of the Superior Court of Los Angeles County. Jane L.
Johnson, Judge. Affirmed.
Stroock & Stroock & Lavan, Lisa M. Simonetti, Joann M. Nguyen and Wesley M.
Griffith for Real Party in Interest and Appellant.
Gallo LLP, Ray E. Gallo and Dominic R. Valerian; Kirtland & Packard, Michael
Louis Kelly, Behram V. Parekh and Joshua A. Fields for Plaintiffs and Respondents.
No appearance for Defendants.
Real party in interest and appellant Sallie Mae, Inc. (Sallie Mae) appeals from an
order awarding plaintiffs and respondents Daniel Vasquez, et al. (collectively, plaintiffs)
$11,487 in attorney fees and costs incurred after plaintiffs successfully opposed Sallie
Mae’s motion to quash a business records subpoena seeking electronically stored
information pertaining to student loans made to them by Sallie Mae. We affirm the trial
court’s order.
BACKGROUND
The parties
Plaintiffs are 1,034 former students who enrolled in a culinary school owned
and/or operated by defendants California School of Culinary Arts, Inc. and Career
Education Corporation. In their amended consolidated complaint, plaintiffs allege that
defendants defrauded them into enrolling in culinary school by numerous
misrepresentations about graduation rates, employment prospects after graduation, and
anticipated income levels. Plaintiffs asserted claims for fraud, breach of contract, and
violations of the Unfair Competition Law, Consumer Legal Remedies Act, and the
Private Postsecondary and Vocational Education Reform Act.
Sallie Mae services student loans obtained by some of the plaintiffs for the
purpose of attending defendants’ culinary program.1
The business records subpoenas
Plaintiffs issued a business records subpoena to Sallie Mae on July 25, 2012 (the
first subpoena) seeking production of their loan files. Sallie Mae responded with an
August 13, 2012 letter offering to comply with the first subpoena if plaintiffs agreed to
pay Sallie Mae’s processing fees, including, as authorized by Evidence Code section
1563, subdivision (b), $.10 per page for photocopies and $24 per hour for clerical time.
The letter explained that the average borrower file consists of approximately 300 pages
and requires between two and three hours of clerical time to process and that some
borrowers may have multiple loans and multiple loan files. Obtaining the requested
1 Sallie Mae previously was a defendant in this action but was dismissed on
November 22, 2011.
2
documents could thus have cost the 800 plaintiffs with Sallie Mae loans more than
$60,000.
Because the cost of obtaining hard copies of their loan files was prohibitive,
plaintiffs revised their document request by serving a second subpoena on September 28,
2012 (the second subpoena). The second subpoena sought electronically stored
information consisting of 44 specific data fields on student loans for 786 plaintiffs and
requested that the information be produced “on digital data disk(s) in a reasonably usable
form, i.e., in a format that is electronically searchable and sortable.” The second
subpoena also requested a cost estimate for complying with the subpoena before Sallie
Mae produced the electronically stored information.
Upon Sallie Mae’s receipt of the second subpoena, counsel engaged in an email
exchange in which plaintiffs repeatedly asked Sallie Mae for a revised cost estimate for
producing the requested electronically stored information. Sallie Mae’s counsel initially
refused to comply with the subpoena, stating that “Sallie Mae has no obligation to do
research on the loans . . . and to prepare a spreadsheet.” Sallie Mae’s counsel also
expressed doubt that plaintiff’s revised request “would significantly reduce the cost,
given the research involved.” Plaintiffs’ counsel explained that the second subpoena was
“not a request for research, but a request for data Sallie Mae maintains in its database.”
Sallie Mae’s counsel refused to provide a cost estimate and referred plaintiff’s counsel to
the “cost statute.” Salle Mae then filed a motion to quash the business records subpoena
on October 22, 2012.
Motion to quash
In its motion to quash, Sallie Mae argued that the business records subpoena was
improper because it sought information that was irrelevant and unrelated to the
underlying lawsuit; it sought information that plaintiffs already had; it improperly
imposed on Sallie Mae an affirmative duty to do something other than produce existing
documents and records; and it shifted the cost and burden of plaintiffs’ litigation efforts
to Sallie Mae. Sallie Mae also filed objections to the business records subpoena on
various grounds, including that it was unduly burdensome, that the information sought
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was not relevant or was already in plaintiffs’ possession, and was outside the proper
scope of discovery, in that it would require Sallie Mae to perform research, implement
information technology programming, and create a spreadsheet.
Plaintiffs opposed the motion to quash, arguing that the requested information was
relevant to their action against defendants and that they did not have that information.
Plaintiffs further argued that they were entitled, under Code of Civil Procedure section
1985.8,2 to require Sallie Mae to produce the requested electronically stored information
on digital data disks in a format that is electronically searchable and sortable. Plaintiffs
acknowledged their obligation to pay the reasonable costs Sallie Mae would incur in
complying with the second subpoena, but argued that they were not required to pay for
the cost of producing paper records they were not seeking. Plaintiffs claimed Sallie Mae
lacked substantial justification for its motion to quash and asked the trial court to award
them reasonable attorney fees and expenses incurred in opposing the motion. In reply to
plaintiffs’ opposition, Sallie Mae continued to argue that the subpoena improperly sought
to have Sallie Mae undertake electronic data research for free.
The trial court denied Sallie Mae’s motion to quash, finding that the information
sought by plaintiffs was relevant and not already in their possession. The court
concluded that Sallie Mae was obligated, under section 1985.8, subdivision (b), to
provide the requested information in accordance with plaintiffs’ specifications. The trial
court further found that Sallie Mae’s objections to the subpoena, including the objection
that plaintiffs were seeking to avoid paying the reasonable cost of complying with the
subpoena, to be without merit. The trial court stated that “Although the court cannot
conclude that the motion was made in bad faith, many of the objections appear to be
without substantial justification, particularly in view of the fact that Sallie Mae, Inc.
continues to make arguments (such as costs) which Plaintiffs have already agreed to
pay.” The trial court ordered plaintiffs and Sallie Mae to meet and confer regarding
2 All further statutory references are to the Code of Civil Procedure, unless
otherwise stated.
4
compliance with the subpoena and scheduled a further hearing on plaintiffs’ request for
attorney fees.
Request for attorney fees
Plaintiffs and Sallie Mae submitted a joint status report in connection with the
hearing on plaintiffs’ request for attorney fees. Plaintiffs reported that Sallie Mae had
estimated the cost of complying with the business records subpoena at $18,848 and had
provided a declaration explaining its estimate. Plaintiffs stated they were willing to pay
Sallie Mae’s estimated price subject to a credit of $11,487 for the costs incurred in
opposing Sallie Mae’s motion to quash. Plaintiffs further stated they had requested
ownership of the computer code Sallie Mae would write in order to comply with the
subpoena to avoid incurring the same programming costs for future productions.
Sallie Mae stated that complying with the subpoena would require a complex
computer programming and data extraction project that would cost $18,848. The cost
estimate, and programming and data extraction tasks necessary to comply with the
subpoena were explained in detail in a declaration by Sallie Mae’s senior director of
systems development. Sallie Mae further stated that it had rejected plaintiffs’ proposal
that they own any computer code Sallie Mae creates in order to comply with the
subpoena. Sallie Mae urged the court to deny plaintiffs’ request for attorney fees,
arguing that plaintiffs continued to “unreasonably resist the costs associated with
compliance.”
Following a May 28, 2013 hearing, the trial court granted plaintiffs’ request for
$11,487 in attorney fees, finding that Sallie Mae’s motion to quash was without
substantial justification for the reasons stated in the court’s previous ruling denying the
motion to quash.
This appeal followed. During pendency of the appeal, plaintiffs filed a motion
under section 907 and California Rules of Court, rule 8.276(a), seeking $25,245 in
sanctions against Sallie Mae and its attorney, Lisa Simonetti, jointly and severally, for
filing a frivolous appeal.
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DISCUSSION
I. Standard of review
Section 1987.2, subdivision (a), provides that a trial court may in its discretion
award reasonable attorney fees and expenses incurred in making or opposing a motion to
quash “if the court finds the motion was made or opposed in bad faith or without
substantial justification.” “Substantial justification” means “that a justification is clearly
reasonable because it is well grounded in both law and fact. [Citations.]” (Doe v. United
States Swimming, Inc. (2011) 200 Cal. App. 4th 1424, 1434.) We review the trial court’s
ruling on the discovery sanction imposed here under the abuse of discretion standard.
(Id. at p. 1435.)
II. Propriety of attorney fee award
Sallie Mae contends there was substantial justification for its motion to quash
because plaintiffs’ right to discovery was limited to the production of existing records
and information and Sallie Mae was not required to undertake extensive computer
programming in order to create a spreadsheet that did not already exist. Although Sallie
Mae does not appeal the denial of its motion to quash, its appeal of the trial court’s
sanctions order challenges one of the bases for the trial court’s ruling on that motion --
that plaintiffs’ subpoena sought information within the scope of permissible discovery
under section 1985.8. As we discuss, the trial court did not err by concluding that Sallie
Mae lacked substantial legal and factual justification for its refusal to comply with the
subpoena.
A. Section 1985.8
The Electronic Discovery Act, effective June 29, 2009, added to the Code of Civil
Procedure provisions regarding discovery of electronically stored information, including
section 1985.8. (Assem. Bill No. 5 (2009-2010 Reg. Sess.) § 2.) The Act was amended
in 2012 to expand the provisions regarding electronic discovery and, among other things,
set forth procedures for objecting to the specified form or forms of producing the
electronically stored information requested by the subpoena. (Sen. Bill No. 1574 (2011-
2012 Reg. Sess.) § 4.) Those amendments became effective on January 1, 2013. (Ibid.)
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We apply the provisions of section 1985.8 in effect at the time Sallie Mae was
served with the second subpoena, before the effective date of the 2012 amendments.
Those provisions required non-parties such as Sallie Mae to produce electronically stored
information, notwithstanding Sallie Mae’s assertion to the contrary.
Section 1985.8, subdivision (a)(1) states: “A subpoena in a civil proceeding may
require that electronically stored information, as defined in Section 2016.020,3 be
produced and that the party serving the subpoena, or someone acting on the party’s
request, be permitted to inspect, copy, test, or sample the information.” The statute
allows the party serving the subpoena to “specify the form or forms in which each type of
information is to be produced.” (§ 1985.8, subd. (b).) It further provides that “[i]f
necessary, the subpoenaed person, at the reasonable expense of the subpoenaing party,
shall, through detection devices, translate any data compilations, included in the
subpoena into a reasonably usable form.” (Id., subd. (g).)4
Section 1985.8 allows the subpoenaed person to oppose production of
electronically stored information “on the basis that the information is from a source that
is not reasonably accessible because of undue burden or expense.” (§ 1985.8, subd. (d).)5
The subpoenaed person bears the burden of establishing such inaccessibility. (Ibid.)
Even if the subpoenaed person establishes that the electronically stored information is not
reasonably accessible because of undue burden or expense, the court may order its
production if the court finds good cause for doing so. (Id., subd. (f)).6 In such cases, the
court may limit the discovery or impose conditions, including “allocation of the expense
of discovery.” (Ibid.)
3 Section 2016.020, subdivision (e) states: “‘Electronically stored information’
means information that is stored in an electronic medium.”
4 The 2013 amendments renumbered this section as subdivision (h).
5 The 2013 amendments renumbered this section as subdivision (e).
6 The 2013 amendments renumbered this section as subdivision (g).
7
Subdivision (k) of section 1985.8 states that “An order of the court requiring
compliance with a subpoena issued under this section shall protect a person who is
neither a party nor a party’s officer from undue burden or expense resulting from
compliance.” (§1985.8, subd. (k).)7
Section 1985.8 authorized plaintiffs to request electronically stored information
and to “specify the form or forms in which each type of information is to be produced.”
(§ 1985.8, subd. (b).) The statute required Sallie Mae to “translate any data compilations
included in the subpoena into a reasonably usable form.” (Former § 1985.8, subd. (g).)
The subpoena sought information within the permissible scope of discovery under section
1985.8.
B. Federal case law
The motion to quash was premised on the ground that the subpoena was improper
because it required Sallie Mae to do more than produce records as they already exist and
that Sallie Mae could not be compelled to perform research, or to compile data through a
programming effort in order to create a spreadsheet.
There is little California case law regarding discovery of electronically stored
information under section 1985.8. We look, therefore, to federal case law on the
discovery of electronically stored information under the Federal Rules of Civil Procedure
for guidance on the subject. “‘Because of the similarity of California and federal
discovery law, federal decisions have historically been considered persuasive absent
contrary California decisions.’ [Citation.]” (Ellis v. Toshiba America Information
Systems, Inc. (2013) 218 Cal. App. 4th 853, 862, fn. 6, quoting Liberty Mutual Ins. Co. v.
Superior Court (1992) 10 Cal. App. 4th 1282, 1288.)
Federal decisions hold that a court will not automatically assume that compliance
with a subpoena is unduly burdensome because it requests the production of
electronically stored information. (Zubulake v. UBS Warburg LLC (S.D.N.Y. 2003) 217
F.R.D 309, 318.) Federal courts have also held that a subpoenaed person may not object
7 The 2013 amendments renumbered this section as subdivision (l).
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to the production of relevant nonprivileged electronically stored information on the
ground that such information can be produced in paper form if the requesting party has
specified production in an electronic format. (See Rowe Entertainment, Inc. v. William
Morris Agency, Inc. (S.D.N.Y. 2002) 205 F.R.D. 421, 428; Playboy Enterprises v. Welles
(S.D.Cal. 1999) 60 F. Supp. 2d 1050, 1053.) Sallie Mae’s argument that it cannot be
compelled “to do anything other than to produce records as they already exist” is legally
unpersuasive. That the requested documents exist in paper form does not excuse Sallie
Mae’s obligation under section 1985.8 to produce them in an electronic format and in a
reasonably usable form.
Under federal law, a nonparty cannot avoid complying with a subpoena seeking
electronically stored information on the ground that it must create new code to format and
extract that information from its existing systems. In Gonzales v. Google, Inc. (N.D.Cal.
2006) 234 F.R.D 674 (Gonzales), nonparty Google, Inc. challenged a subpoena by the
United States Attorney General to compile and produce information from Google’s
search index and to produce a significant number of search queries entered by Google
users. The requested information was sought in connection with litigation between the
American Civil Liberties Union and the Attorney General challenging the
constitutionality of the federal Child Online Protection Act. (Id. at p. 678.) Google
argued that compliance with the subpoena imposed an undue burden because it did not
maintain search query information in the ordinary course of business in the format
requested by the government. (Id. at p. 683.) After acknowledging that “[a]s a general
rule, non-parties are not required to create documents that do not exist, simply for the
purposes of discovery,” the court in Gonzales noted: “[G]oogle has not represented that
it is unable to extract the information requested from its existing systems. Google
contends that it must create new code to format and extract query and URL data from
many computer banks, in total requiring up to eight full time days of engineering time.
Because the Government has agreed to compensate Google for the reasonable costs of
production, and given the extremely scaled-down scope of the subpoena as modified, the
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Court does not find that the technical burden of production excuses Google from
complying with the subpoena.” (Ibid.)
Here, as in Gonzales, Sallie Mae never stated that it was unable to extract the
requested information from its existing database. Although plaintiffs repeatedly asked
Sallie Mae for a cost estimate for extracting and producing the requested information and
acknowledged their obligation to pay for the “reasonable costs” of production, Sallie
Mae refused to provide a cost estimate until after its motion to quash had been denied.
The cases cited by Sallie Mae in support of its position, many of them
nonpublished federal decisions, are distinguishable. Clausnitzer v. Federal Express
Corp. (N.D.Ga. 2007) 2007 U.S. Dist. LEXIS 61699, Butler v. Portland General Electric
Co. (D.Or. 1990) 1990 U.S. Dist. LEXIS 1407, and Paramount Pictures Corp. v.
ReplayTV (C.D.Cal. 2002) 2002 U.S. Dist. LEXIS 27800, each involved requests for data
or information that the subpoenaed person did not already maintain. In the instant case,
Sallie Mae did not contend that it did not maintain the requested information in its
database. It simply argued that it should not be required to extract that information and
produce it in the form requested by plaintiffs.
Ulrich v. Ethyl Gasoline Corp. (W.D.Ky. 1942) 2 F.R.D. 357, on which Sallie
Mae also relies, is not only distinguishable from the instant case, it supports plaintiffs’
position. In Ulrich, the defendant objected to a subpoena on the ground that it required
the defendant to extract and compile information from existing documents, “a very
laborious undertaking with considerable expense attached.” (Id. at p. 359.) The court in
Ulrich required the defendant to do so, provided the plaintiffs paid for the reasonable cost
of complying with the subpoena. (Id. at p. 360.) In this case, plaintiffs did not seek to
have Sallie Mae extract and compile information contained in the paper copies of their
loan documents -- a labor intensive and expensive process -- but to extract electronically
stored information from an existing database. Plaintiffs never expressed an unwillingness
to pay for the reasonable cost of doing so, but rather repeatedly asked Sallie Mae for a
cost estimate. Sallie Mae refused not only to comply with the subpoena, but to provide
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the requested cost estimate. The trial court did not err by concluding that Sallie Mae’s
refusal to comply with the subpoena lacked substantial legal justification.
C. No factual justification
Substantial evidence supports the trial court’s finding that Sallie Mae’s objection
that plaintiffs sought to avoid paying the reasonable cost of the programming and data
compilation effort necessary to comply with the subpoena was without merit. The record
shows that plaintiffs acknowledged their obligation to pay for the reasonable costs of
production. They repeatedly asked Sallie Mae for a cost estimate. Sallie Mae ignored
these requests and did not provide a cost estimate until its motion to quash had been
denied and plaintiffs’ request for attorney fees was being heard.
The trial court did not err by concluding that Sallie Mae lacked substantial factual
justification for refusing to comply with the second subpoena. The order awarding
plaintiffs the attorney fees they incurred in opposing the motion to quash was not an
abuse of discretion.
DISPOSITION
The order awarding plaintiffs their attorney fees and expenses is affirmed.
Plaintiffs’ motion for sanctions is denied. Plaintiffs are awarded their costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.
____________________________, J.
CHAVEZ
We concur:
__________________________, Acting P. J.
ASHMANN-GERST
__________________________, J.*
FERNS
________________________________________________________________________
* Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.
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Filed 9/26/14
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
DANIEL VASQUEZ et al., No. B250600
Plaintiffs and Respondents, (Los Angeles County
Super. Ct. BC393129)
v.
ORDER FOR PUBLICATION
CALIFORNIA SCHOOL OF CULINARY
ARTS, INC., et al.,
Defendants;
SALLIE MAE, INC.,
Real Party in Interest and
Appellant.
THE COURT:*
The opinion in the above entitled matter filed on August 27, 2014, was not
certified for publication.
For good cause it now appears that the opinion should be published in the Official
Reports and it is so ordered.
*ASHMANN-GERST, Acting P. J., CHAVEZ, J., FERNS†
† Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.
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