*1 On October 5, 2016, plaintiff RePet, Inc. (“RePet” or “the company”) filed a motion to compel further discovery (docket no. 69) and noticed a hearing for November 1, 2016. Plaintiff asks the court to compel defendant Shubin “Vincent” Zhao (“Zhao”) to provide further responses to three interrogatories and eleven requests for production of documents (“RFPs”). Plaintiff also claims defendant has unreasonably delayed the parties' entry of a stipulated protective order governing disclosures made in this case, and accordingly asks the court to enter a protective order. The motion is supported by a joint stipulation (“JS”) setting forth the parties' respective positions, as well as declarations from the parties' counsel and exhibits thereto.

On October 27, 2016, the court vacated the hearing set for November 1, 2016. See docket no. 75. Having reviewed the papers filed, and for the reasons discussed below, the court grants the motion to compel as follows.

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff RePet is a company that recycles plastic bottle waste. Defendant Zhao founded the company in 2009 and was its Chief Executive Officer until late October 2014, with signature authority and control over the company's bank accounts until August 2014.

Plaintiff filed its First Amended Complaint (“FAC”) on January 8, 2016, alleging defendant converted, stole, and embezzled the company's funds by transferring funds and property to himself and other entities he controlled. See FAC, docket no. 14, ¶¶ 10-31. On February 10, 2016, defendant answered the FAC, denying the allegations against him and raising several affirmative defenses, including unclean hands. On April 20, 2016, defendant filed his First Amended Counterclaim, asserting various claims on behalf of himself, as well as derivative claims on behalf of the company against certain individual counterdefendants. On June 28, 2016, the court dismissed defendant's derivative claims with leave to amend, which defendant amended on July 15, 2016. On September 2, 2016, the court dismissed defendant's derivative claims without leave to amend.

Plaintiff filed the instant motion on October 5, 2016. Plaintiff seeks supplemental responses to Interrogatory nos. 11-13 and RFP nos. 1-5, 24-25, 40-41, 44, and 54 from its first sets of interrogatories and RFPs, which plaintiff served on defendant on June 20, 2016 and to which defendant responded on August 8, 2016. See Declaration of Ward J. Lott (“Lott Decl.”), docket no. 69-2, Exs. D-G.

Interrogatory no. 11 calls for defendant to state the name, address, and telephone number of each bank or financial institution that issued defendant a credit card used for personal or household purchases, between August 1, 2009 and December 31, 2014, and the corresponding credit card account numbers. JS at 5; Lott Decl., Ex. D at 4.

Interrogatory no. 12 asks defendant to state the name, address, telephone number, and corresponding account numbers of each bank or financial institution where defendant held a bank account in his name, between August 1, 2009 and December 31, 2014. JS at 9; Lott Decl., Ex. D at 5.

*2 Interrogatory no. 13 asks defendant to state the name, address, telephone number, and corresponding account numbers of each bank or financial institution into which defendant deposited any funds received or obtained from the company. JS at 9; Lott Decl., Ex. D at 5.

Defendant objected to each of these interrogatories, claiming the information requested has no relevance to any of plaintiff's claims and is not reasonably calculated to lead to the discovery of admissible evidence. Lott Decl., Ex. E at 8-9. Defendant also claims the interrogatories seek information protected by his right to financial privacy under the California Constitution. Id.

RFP nos. 1-5 request all documents related to the following financial information: defendant's salary or compensation while employed by the company (RFP no. 1); any funds, other than salary, that defendant received or obtained from the company at any time (RFP no. 2); any loans or property defendant received or obtained from the company at any time (RFP no. 3); defendant's acquisition, or proposed acquisition, of any company common or preferred stock (RFP no. 4); and the source of any funds defendant provided to the company to purchase company common or preferred stock (RFP no. 5). Id., Ex. F at 5-6.

RFP no. 24 calls for all documents reflecting charges and/or payments on defendant's credit cards, including but not limited to account statements, at any time from January 1, 2013 through April 30, 2014. Id., Ex. F at 8. RFP no. 25 requests all bank statements from any bank accounts either in defendant's name, for which defendant had signature authority, or in which defendant deposited any funds received or obtained from the company, between July 1, 2010 through December 31, 2014. Id.

RFP no. 40 seeks all documents related to the withdrawal of $400,000 from the company's bank account on or about August 13, 2010. Id., Ex. F at 10. RFP no. 41 asks for all documents related to the disposition of the same $400,000. Id.

RFP no. 44 requests all documents related to the “solvency or financial condition” of Novopet GMBH (“Novopet”) from July 1, 2009 to October 30, 2014. Id., Ex. F at 2, 10. In the FAC, plaintiff alleges Novopet is one of defendant's German companies. FAC ¶ 18; see JS at 15-16. Plaintiff claims, inter alia, that defendant caused the company to transfer $100,000 to Novopet on or about September 3, 2010 and classify this transfer as a loan to Novopet. FAC ¶ 18. Plaintiff alleges defendant then caused the company to write off Novopet's then-outstanding loan balance as bad debt on or about April 29, 2011, claiming Novopet was insolvent. Id.

RFP no. 54 calls for similar documents to those requested in RFP no. 44, but relating to Tecnopenales S.A. de C.V. (“Tecnopenales”) “at any time in 2013 or 2014.” Lott Decl., Ex. F at 3, 12. In the FAC, plaintiff alleges Tecnopenales is a Mexican company in which defendant held a financial interest or was attempting to obtain a financial interest. FAC ¶ 21. Among other allegations, plaintiff claims defendant caused the company to transfer approximately $172,000 in company funds to Tecnopenales from September to December 2012, and then caused the company's books to falsely describe those transfers as payments for “raw materials.” Id.; see JS at 16. Plaintiff also alleges defendant sold approximately $68,000 in company equipment to Tecnopenales in 2013 and later wrote off an outstanding $51,000 balance owed by Tecnopenales as bad debt, claiming Tecnopenales was insolvent. FAC ¶ 22.

*3 Defendant issued mostly identical objections to each of these RFPs, asserting: the information requested is irrelevant to the parties' claims or defenses; the term “related to” is vague, ambiguous, and overbroad as generally defined in plaintiff's RFPs; and the requests seek information protected by the attorney-client and attorney work product privileges, as well as the financial privacy provisions of the California Constitution. Lott Decl., Ex. G at 3-5, 15-16, 22-23, 25, 30. Defendant also objected to RFP nos. 1-5, 40-41, and 54 on the ground that those requests seek information already in plaintiff's possession, custody, or control. Id., Ex. G at 3-5, 22-23, 30.

On October 12, 2016, the court issued an order granting plaintiff's ex parte application to modify the June 7, 2016 scheduling order in this case. Docket no. 70. Pursuant to the court's order, the discovery cutoff is now May 5, 2017. Id. at 8.

LEGAL STANDARDS

Fed. R. Civ. P. 26(b) permits “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). To be relevant, the information sought “need not be admissible in evidence.” Id. A “relevant matter” under Rule 26(b)(1) is any matter that “bears on, or that reasonably could lead to other matters that could bear on, any issue that is or may be in the case.” Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351, 98 S. Ct. 2380, 57 L. Ed. 2d 253 (1978). In determining proportionality, the court “consider[s] the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.” Fed. R. Civ. P. 26(b)(1).

A party may propound interrogatories relating to any matter that may be inquired to under Rule 26(b). Fed. R. Civ. P. 33(a). A responding party is obligated to respond to the fullest extent possible, and any objections must be stated with specificity. Fed. R. Civ. P. 33(b)(3)-(4). In general, a responding party is not required “to conduct extensive research in order to answer an interrogatory, but a reasonable effort to respond must be made.” Haney v. Saldana, 2010 WL 3341939, at *3 (E.D. Cal. Aug. 24, 2010) (citing L.H. v. Schwarzenegger, 2007 WL 2781132, at *2 (E.D. Cal. Sep. 21, 2007)).

A party may request documents “in the responding party's possession, custody, or control.” Fed. R. Civ. P. 34(a)(1). A request is adequate if it describes items with “reasonable particularity”; specifies a reasonable time, place, and manner for the inspection; and specifies the form or forms in which electronic information can be produced. Fed. R. Civ. P. 34(b). “Thus, a request is sufficiently clear if it places the party upon reasonable notice of what is called for and what is not.” Richmond v. Mission Bank, 2015 WL 1637835, at *2 (E.D. Cal. Apr. 13, 2015) (internal citation and quotation marks omitted).

The responding party must respond in writing and is obliged to produce all specified relevant and non-privileged documents, tangible things, or electronically stored information in its “possession, custody, or control” on the date specified. Fed. R. Civ. P. 34(a). Actual possession, custody or control is not required.

In the alternative, a party may state an objection to a request, including the reasons. Fed. R. Civ. P. 34(b)(2)(A)-(B). In moving to compel the production of documents, the moving party has the burden of demonstrating “actual and substantial prejudice” from the denial of discovery. Hallet v. Morgan, 296 F.3d 732, 751 (9th Cir. 2002); Fed. R. Civ. P. 37(a)(3)(B)(iv).

DISCUSSION

*4 In its portion of the joint stipulation, plaintiff repeats many of its allegations from the FAC to support its contention that the financial information sought in the instant motion is “critical to piecing together the various schemes allegedly perpetrated by [defendant].” JS at 5. Plaintiff further claims there is “no proportionality issue here” because it seeks information relating directly to the parties' dispute, which concerns millions of dollars. Id. at 6. Moreover, plaintiff argues there is no undue burden to defendant producing the requested information, because it “mostly consists of summaries, or information that can be obtained from summaries, which have already been prepared by the pertinent financial institutions and/or by [defendant's] affiliated entities.” Id.

Finally, plaintiff claims defendant's purported privacy rights under the California Constitution are outweighed by the allegations of fraud at issue in this case, where plaintiff has detailed various transactions in which defendant has shifted funds between the company, his personal accounts, and his affiliated entities both in the United States and abroad. Id. at 7. To the extent any discovery request requires disclosure of any of defendant's confidential information, plaintiff argues a protective order may adequately address the scope of that disclosure. Id. at 7-8.

In response, defendant mostly repeats the arguments made in his August 8, 2016 objections to both the interrogatories and RFPs. Defendant also claims he “fully intends to arrive at an agreed-upon protective order” that is appropriate for this case, but argues the entry of such an order is “irrelevant to [plaintiff's] attempt to invade [his] privacy interests” and that plaintiff “has still failed to establish the direct relevance of the private, financial documents and information [plaintiff] is seeking.” Id. at 37.

Defendant's Financial Information Is Within the Scope of Discovery

The court first considers whether plaintiff's interrogatories and RFPs request discoverable information. In light of plaintiff's allegations in the FAC, the court agrees with plaintiff that information concerning defendant's personal finances during his time of employment at the company, as well as the financial condition of defendant's affiliated entities during the same time period, is relevant because it may show whether defendant was engaging in the fraudulent conduct alleged.

While defendant argues plaintiff's discovery requests are overbroad, plaintiff has identified several transactions in the FAC during defendant's time as Chief Executive Officer of the company that allege misappropriation of company funds for plaintiff's personal use, or transactions with entities that tend to demonstrate a breach of defendant's fiduciary duties to the company. FAC ¶¶ 10-31. In its portion of the joint stipulation, plaintiff also stated it has subpoenaed records of defendant's personal credit card, which indicate this card was used for automatic withdrawals from the company's bank account from May 2013 to January 2014 to pay off over $89,000 of personal expenses unrelated to the company's business activities. JS at 18.

Plaintiff's allegations in both the FAC and the joint stipulation put defendant's financial activity, both personally and through the use of various affiliated entities, plainly at issue during the time period defendant was employed at the company. Thus, the court disagrees with defendant's contention, repeated across most of his portions of the joint stipulation, that plaintiff's discovery requests are “not tied in any way to the allegations in [plaintiff's] FAC and [they] therefore [seek] documents that are not ‘directly relevant’ to its claims.” See JS at 21, 22, 24, 26, 27. Further, in light of the scope, size, and specificity of plaintiff's allegations of defendant's wrongdoing in the FAC, the court also finds the discovery at issue is proportional to the needs of the case. Although certainly some of the documents sought should already be in plaintiff's possession, given defendant's former position in the company, it is reasonable for plaintiff to also seek the documents from defendant, who may well have relevant documents plaintiff does not.

*5 As such, the court finds that discovery into whether defendant was using certain bank accounts, credit cards, or affiliated business entities to fraudulently conceal or misappropriate company funds is relevant to the claims in issue, and is permissible and proportional discovery under the Federal Rules of Civil Procedure.

Defendant's Right to Privacy Does Not Preclude Disclosure of the Financial Information Sought

Although defendant objected to the RFPs as calling for information protected by the attorney-client privilege and attorney work-product doctrine, he does not appear to stand on this objection in opposing the motion to compel, nor is there any indication of how the documents sought might be protected by such privileges. But defendant does clearly argue the information sought in all the discovery requests at issue is protected by his right to financial privacy.

In a diversity jurisdiction case such as this one, state law governs matters of privilege. Oakes v. Halvorsen Marine, Ltd., 179 F.R.D. 281, 284 (C.D. Cal. 1998); Fed. R. Evid. 501. The right to privacy is set forth in the California Constitution. Cal. Const. art. I, § 1. This right “extends to financial privacy in litigation, but ... is subject to balancing the needs of the litigation with the sensitivity of the information/records sought.” Davis v. Leal, 43 F. Supp. 2d 1102, 1110 (E.D. Cal. 1999) (quoting Valley Bank of Nevada v. Superior Court, 15 Cal. 3d 652, 657, 125 Cal. Rptr. 553, 542 P. 2d 977 (1975)). Consequently, the right to privacy is not an “absolute bar to discovery,” and “may be subject to invasion.” E.E.O.C. v. California Psychiatric Transitions, 258 F.R.D. 391, 395 (E.D. Cal. 2009).

“The burden is on the requesting party to demonstrate that the information is directly relevant to the case, and that the information needs of the case outweigh the need for non-disclosure.” Davis, 43 F. Supp. 2d at 1111. The party asserting the financial privacy privilege under California law has the initial burden to establish the existence of the privilege; then, the burden shifts to the party seeking the information to justify the need for the information. Id. “Information and documents which implicate private financial information are of the type that have been declared presumptively privileged.” Id. (citing Valley Bank of Nevada, 15 Cal. 3d at 657).

Here, there can be little question defendant has a legally protected privacy interest in his private financial information. See Burkle v. Burkle, 135 Cal. App. 4th 1045, 1063, 37 Cal. Rptr. 3d 805 (2006) (“The right to privacy extends to one's personal financial information.”). But “actionable invasions of privacy must be sufficiently serious in their nature, scope, and actual or potential impact to constitute an egregious breach of the social norms underlying the privacy right. Thus, the extent and gravity of the invasion is an indispensable consideration in assessing an alleged invasion of privacy.” Hill v. Nat'l Collegiate Athletic Assn., 7 Cal. 4th 1, 37, 26 Cal. Rptr. 2d 834, 865 P.2d 633 (1994). Defendant's only substantial argument to establish such a serious violation of his right to privacy here is to claim plaintiff's overbroad requests attempt “to paint every transaction involving [defendant] as somehow improper.” See JS at 19. In balancing the interests of the parties, the court finds defendant has not sufficiently demonstrated that plaintiff's need for the personal financial information requested is outweighed by defendant's protections under the state financial privacy privilege.

*6 Moreover, a party's interest in the confidentiality of financial information may be adequately addressed via a protective order. Oakes, 179 F.R.D. at 284; Hill, 7 Cal. 4th at 38 (privacy concerns are assuaged “if intrusion is limited and confidential information is carefully shielded from disclosure except to those who have a legitimate need to know”). District courts have broad latitude to grant protective orders to prevent disclosure of materials for many types of information, including confidential commercial information. Phillips ex rel. Estates of Byrd v. Gen. Motors Corp., 307 F.3d 1206, 1211 (9th Cir. 2002) (citing Fed. R. Civ. P. 26(c)). As such, the court finds defendant's privacy concerns under California law may be addressed by a protective order in this case. Such an order suffices to maintain the confidential nature of the information sought during the discovery process, so as to not violate defendant's right to privacy.

ORDER

For the reasons discussed above, IT IS THEREFORE ORDERED:

For an example of a proposed protective order, the parties are directed to the Sample Stipulated Protective Order that is attached to the Magistrate Judge's Procedures and Schedules on the court's website.