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Superior Court_ State of California - The Superior Court of California


                  COUNTY OF SANTA CLARA
              Department 1, Honorable James P. Kleinberg Presiding
                               _____________, Courtroom Clerk
                                ____________, Court Reporter
                          191 North First Street, San Jose, CA 95113
                     Telephone: 408.882.2110 - Facsimile: 408.882.2493
                  To contest the ruling, call (408) 808-6856 before 4:00 P.M.

                 DATE: MARCH 1, 2013  TIME: 9 A.M.
                     (SEE RULE OF COURT 3.1312)

LINE #      CASE #            CASE TITLE                                RULING
LINE 1   100CV788657 People v. Atlantic   Click on LINE 1 for ruling
                     Richfield, et al.
LINE 2   108CV118962 Park Townsend HOA v. Motion by Defendants/Cross-
                        Park Townsend LLC            Complainants Park Townsend, LLC;
                                                     GKB Development Co., LLC; and
                                                     Trident General Contractors, Inc. to
                                                     Continue Trial is reset to March 8, 2013
                                                     by the moving party.
LINE 3   108CV119684 Rosales v. Heavenly             Click on LINE 3 for ruling
                     Construction, Inc.
LINE 4   110CV162915 The Irvine Company v.           Click on LINE 4 for tentative ruling
                     Segue Construction, Inc.
LINE 5   110CV163395 Butterfield Professional        Continued to April 5, 2013 at 9:00 A.M.
                     Center v. Venture CC
                     Morgan Hill, Inc.
LINE 6   110CV178283 County of Monterey v.           Motions by Nova Partners, Inc. and
                     Nova Partners, Inc.             Environmental Systems, Inc. for
                                                     Determination of Good Faith Settlement are
                                                     continued to March 22, 2013 at 9:00 A.M.
LINE 7   112CV220249 Knee v. Brocade         Click on LINE 7 for tentative ruling
                     Communications Systems,
LINE 8   112CV230085 Sullivan v. Amar                Click on LINE 8 for ruling
                     Enterprises, Inc.
Calendar line 1

Case Name: People vs. Atlantic Richfield Co., et al.
Case No.:  1-00-CV-788657

This is an action by a group of governmental entities acting on behalf of the People of the State
of California (the “People”) seeking to hold certain lead paint manufacturers responsible for
the lead paint contained in private and public homes, buildings, and properties throughout the
State of California. The governmental entities include the Counties of Santa Clara, Alameda,
Los Angeles, Monterey, San Mateo, Solano, and Ventura, and the Cities of Oakland, San
Diego, and San Francisco (collectively the “Prosecuting Entities”). The defendants include
Atlantic Richfield Company, Conagra Grocery Products Company, E.I. Du Pont De Nemours
and Company, NL Industries, Inc., and The Sherwin-Williams Company (“Sherwin-Williams”)
(collectively “Defendants”). On March 16, 2011, the People filed their Fourth Amended
Complaint for public nuisance, which seeks an order requiring abatement of all lead from
private and public homes, buildings, and property in the Public Entities’ jurisdictions.

On July 22, 2011, the Court appointed Hon. Eugene F. Lynch (Ret.) as the Discovery Referee
in this matter pursuant to Code of Civil Procedure section 639, subdivision (a)(5).

On May 29, 2012, Sherwin-Williams filed its Fourth Amended Cross-Complaint (“FACC”) for
declaratory judgment against the Prosecuting Entities. On January 10, 2013, the Court granted,
with leave to amend, Sherwin-Williams’ motion to strike the prayer for attorney’s fees in
Cross-Defendants’ Answer to the FACC on the ground that Code of Civil Procedure section
1021.5 precludes an award of attorney’s fees in favor of public entities, and the Answer does
not otherwise plead an entitlement by contract, statute or law to attorney’s fees.

Before the Court now are three matters: (1) Sherwin-Williams’ motion to strike the prayer for
attorney’s fees from the Amended Answer to the Fourth Amended Cross-Complaint
(“4ACC”); (2) non-party Childhood Lead Poisoning Prevention Branch’s (“CLPPB”) objection
to the Discovery Referee’s January 14, 2013 Recommendation; and (3) CLPPB’s objection to
the Discovery Referee’s January 31, 2013 Recommendation.

Motion to Strike

Sherwin-Williams moves to strike the prayer for attorney’s fees in the People’s Amended
Answer to the 4ACC. In the Amended Answer’s prayer, Cross-Defendants seek “reasonable
attorneys’ fees, to the extent allowed by law. Cross-Defendants put in this prayer because
Sherwin-Williams has sought attorneys’ fees in its prayer at page 5:11, without specifying the
grounds for its claimed right to attorneys’ fees. Because of the reciprocal rights to attorneys’
fees under many circumstances, Cross-Defendants have requested attorneys’ fees, to the extent
allowable by law, to preserve their right to request them if appropriate.”1

Sherwin-Williams argues the prayer in the Amended Answer suffers from the same defect
identified by the Court in its January 10, 2013 order. Cross-Defendants argue they are entitled
to reciprocal attorney’s fees pursuant to Civil Code section 1717 because Sherwin-Williams
seeks attorney’s fees in the FACC without identifying a contractual, statutory or legal basis.

    Amended Answer, prayer ¶ 2.

Cross-Defendants further argue that they are entitled to attorney’s fees under section 1021.5
because they are being sued not in their capacities as public entities, but as property owners.

The motion to strike is GRANTED WITHOUT LEAVE TO AMEND. Civil Code section
1717 applies only to “any action on a contract,” and Sherwin-Williams’ cross-action is not
based upon a contract. The private attorney general statute specifically provides that “[w]ith
respect to actions involving public entities, this section applies to allowances against, but not in
favor of, public entities[.]” (Cal. Code Civ. Proc., § 1021.5; see also City of Carmel-by-the-
Sea v. Board of Supervisors (1986) 183 Cal.App.3d 229, 255 [“[A] public entity is not to
receive attorney’s fees under the private attorney general theory.” Sherwin-Williams’ cross-
action is one “involving public entities.”

Objections to the Discovery Referee’s January 14 and 31, 2013 Recommendations

The following factual background is adapted from the parties’ papers and Court records.

CLPPB is a statewide public health program administered by the California Department of
Public Health (“DPH”) that works to protect children from lead exposure, identifies tens of
thousands of children each year who are exposed to lead, and sees that lead-exposed children
receive care to mitigate the effects of lead. CLPPB is not a party in this action.

On January 25, 2012, the Court affirmed the Discovery Referee’s October 27, 2011
Recommendation that the Prosecuting Entities produce the Response and Surveillance System
for Childhood Lead Exposures (“RASSCLE”) I and II databases owned by the DPH to which
the Prosecuting Entities have access. However, the Court ordered that notice be given to the
children and their families to either obtain consent to disclosure or an opportunity to object,
and that any RASSCLE information produced be redacted to exclude personally identifying
information. On May 23, 2012, the Court approved publication notice as a reasonable means
of providing notice.

Meanwhile, in May of 2012, CLPPB provided Defendants with millions of electronic records
of blood lead tests from its RASSCLE II database from 1992 through 2010. Later, CLPPB
supplemented this production by providing information contained in the age-of-housing fields
in RASSCLE II for these millions of records.

On June 15, 2012, Sherwin-Williams subpoenaed the entire RASSCLE II database from
CLPPB, requesting that all information in the RASSCLE I and II databases be provided in an
“electronic format readable by Microsoft Access or Microsoft SQL.”2 In August 2012, CLPPB
began asking Sherwin-Williams to identify the fields it is seeking from RASSCLE.3 CLPPB
then offered to make the RASSCLE II database available for inspection and recommended that
Sherwin-Williams consider Gensa Corporation (“Gensa”), which had designed the RASSCLE
II database and was contractually authorized to view the confidential information contained

  Decl. Charles J. Antonen ISO CLPPB’s Obj. to Jan. 31, 2013 Rec., Exh. C. According to Sherwin-Williams,
this was necessary because several of the Prosecuting Entities asserted that they were missing blood lead level
(“BLL”) test results and could not produce electronic copies of RASSCLE.
  According to CLPPB, Sherwin-Williams agreed to provide this information, but has yet to do so. Sherwin-
Williams argues a list of fields is unnecessary because the subpoena requires the production of all fields in
RASSCLE, except those portions that the Court ordered to be redacted.

therein. Gensa’s task was to formulate software “scripts” that redact private information.
Sherwin-Williams retained Gensa in October of 2012.

In November of 2012, CLPPB provided Gensa with unrestricted access to the RASSCLE II
database to answer specific, technical questions posed by Sherwin-Williams. In December of
2012, CLPPB provided Gensa with unrestricted access to extract information from the
RASSCLE II database.

On December 14, 2012, the Court ordered that all RASSCLE materials be provided by the
parties and the State of California no later than February 13, 2013 on a rolling basis.

In January of 2013, CLPPB provided Gensa with a DPH-issued encrypted flash drive and
secure, around-the-clock, off-site access to assist in its extraction of information from
RASSCLE II. However, according to Sherwin-Williams, CLPPB unnecessarily restricted
Gensa’s work by requiring Gensa to use a State-supplied computer that was severely
underpowered for the redaction project, refusing to provide Gensa with a current version of
RASSCLE, and restricting the type of software Gensa could use. Sherwin-Williams demanded
on-site access, but acceded to the right to review the work product of Gensa. CLPPB declined
this request on the grounds that unauthorized personal information could be embedded in
Gensa’s work product, and there was no feasible way to check for it.

Sherwin-Williams then asked the Referee to permit Gensa to share the results of the redaction
scripts to expedite the process of redacting. On January 14, 2013, the Referee granted
Sherwin-Williams’ request and ordered one defense attorney, Chris Lopata, and one non-Gensa
consultant (James Wolf of H5) to have access to the results of the scripts in order to ensure that
the script is working and not over-redacting. The Referee reasoned that because Mr. Lopata
was the only attorney who would have access and would sign a protective order prohibiting
disclosure of any personal information he may receive to anyone including his client, the
chance of disclosure was “minimal in the extreme.”4

On January 24, 2013, Sherwin-Williams informed CLPPB that it had received work product
from Gensa containing the names and home addresses of individuals who had objected to the
disclosure of their personal information.5 Apparently, Gensa’s president, Robert Lutolf, had
sent an email to Mr. Lopata and Mr. Wolf and a number of other recipients that inadvertently
contained a script containing the names and addresses of individuals whose employers had
objected to the RASSCLE production. This list had been compiled by Gilardi & Co., the
notice agent.6 According to Sherwin-Williams, Mr. Lopata stopped reading the script as soon
has he saw a first name, deleted the script and instructed the other non-Gensa recipients to do
the same, and notified counsel for CLPPB of the inadvertent disclosure. However, CLPPB
immediately terminated Gensa’s access to RASSCLE and initiated an investigation by the
California Highway Patrol.

  Jan. 14, 2013 Rec. at p. 3.
  Decl. Antonen, Exh. J.
  According to the Jan. 31, 2013 Rec. Order, the list was created by Gilardi & Co. and provided to CLPPB for the
purpose of identifying individuals whose records should be redacted. On January 18, 2013, CLPPB placed the list
on the RASSCLE II computer, thereby making the list available to Gensa. Thereafter, Gensa wrote a script called
“create objectors” whose purpose was to remove information about objectors from RASSCLE II. The “create
objectors” script only contained the names and addresses of the objectors. (Jan. 31, 2013 Rec. at p. 2.)

On January 28, 2013, CLPPB filed its objection to the January 14, 2013 Recommendation.

On January 29, 2013, Sherwin-Williams set an emergency hearing before the Referee. CLPPB
complained that Sherwin-Williams did not obtain an order shortening time for this hearing, but
the Referee overruled CLPPB’s objection for the lack of notice. In his January 31, 2013
Recommendation, the Referee found the disclosure to be inadvertent and not prejudicial, and
due the looming trial date and the need for the RASSCLE databases for trial preparation and
discovery, the Referee ordered CLPPB to immediately reinstate Gensa’s access to RASSCLE
as it existed on January 22, 2013 so that Gensa could continue the redaction process. The
Referee also ordered CLPPB to host the RASCCLE database on a computer or server that is
adequate for Gensa’s tasks, meaning it should contain one quad core processor, 16GB of RAM,
a fast Solid State Drive (SSD) that contains 250GB of storage, a Windows 64-bit operating
system, and 100GB of backup storage “within 2 calendar days of the entry of this Order and

The next day, February 1, 2013, CLPPB filed an objection to the January 31, 2013
recommendation and requested leave to submit briefing. The Court granted the request, noting
that California law permits a party ten days to file objections to a discovery referee’s
recommendation. On February 4, 2013, Sherwin-Williams filed an ex parte application for
reconsideration of the Court’s February 1, 2013 order and to shorten time on the CLPPB’s
objections to the January 14 and 31 recommendations. On February 5, 2013, the Court denied
the request to shorten time on the objections, but ordered that Gensa’s access to the RASSCLE
database be immediately restored.

CLPPB argues the January 14, 2013 Recommendation undermines the Court’s prior orders
regarding RASSCLE redaction/production because it permits a lawyer for Sherwin-Williams to
view unauthorized information and does not impose any limitations on his further participation
in the proceedings. CLPPB argues that at a minimum, the Recommendation should have
barred any lawyer for Sherwin-Williams who came in contact with the information from
having any further participation in the matter. CLPPB argues the parties’ amended protective
order is inadequate because it fails to set forth any data security standards with respect to the
transmission and storage of confidential information and a framework for determining who
pays for statutorily required notification due to a security breach.

As for the January 31, 2013 Recommendation, CLPPB first argues that access for Gensa is no
longer needed because the RASSCLE production was completed on February 13, 2013 through
the production of four databases (Datasets A-D) that are linkable by Patient ID and/or Address
ID based on the types of information negotiated by the parties in the Court-approved notice.
CLPPB argues, however, that if the Court permits Gensa’s continued access to the RASSCLE
databases, the Court should revise the amended protective order in this matter to protect the
DPH’s intellectual property, ensure that any individual acquiring RASCCLE data abides by the
DPH’s data security standards, and ensure the DPH can seek indemnification in case it is
required to provide statutorily mandated notice. As for the Referee’s order that CLPPB host
the RASSCLE database on a more powerful computer, CLPPB argues this requires technology
in excess of its current capabilities.

    Jan. 31, 2013 Rec. at 2-3.

Sherwin-Williams argues that CLPPB’s February 13, 2013 production is not a substitute for
producing the full RASSCLE database in accordance with the Court’s orders. According to
Sherwin-Williams, the February 13, 2013 production contains only limited extracts of data and
is improperly based on the information identified in publication notice approved by the Court
in July of 2012. Sherwin-Williams argues that CLPPB’s obligation was instead to produce the
entire RASSCLE database subject to redactions. Sherwin-Williams argues it would be far
more burdensome for it to try to fill in the gaps of CLPPB’s limited production by analyzing
hard-copy files.

Sherwin-Williams argues CLPPB has consistently disregarded orders of the Court and Referee
regarding RASSCLE production, impeded Gensa’s access to the RASSCLE database, and used
the inadvertent disclosure on January 24, 2013 as a pretext for shutting down the redaction
process. Sherwin-Williams argues the CHP investigation initiated by CLPPB was premature
and unwarranted because the list of objectors compiled by Gilardi & Co. is not a “record” for
purposes of the California Information Practices Act (“IPA”), nor does it contain “personal
information” within the meaning of the IPA; thus, the IPA’s notice procedures are not triggered
by the inadvertent, de minimis disclosure of names and addresses of objectors. As for
CLPPB’s suggestions for amending the protective order, Sherwin-Williams argues this is not a
basis for defying the Court’s order to produce the RASSCLE database, and CLPPB has not met
and conferred on amending the protective order, even though Sherwin-Williams is willing to
discuss the amendments.

Analysis: From Sherwin-Williams’ standpoint, these objections are consistent with a pattern
of obstruction by CLPPB that has unreasonably impeded the State’s RASSCLE production.
However, CLPPB has an important and undisputed interest in maintaining the privacy of
certain information in the RASSCLE databases, and the Court has consistently recognized the
importance of this interest. Sherwin-Williams minimizes the importance of the January 24,
2013 disclosure, calling it a “nonevent.”8 However, there is no dispute that the Lutolf
communication contained sensitive information it should not have, and this disclosure occurred
a mere ten days after Defendants’ agents were granted access to Gensa’s script review, after
CLPPB had warned of the possibility of inadvertent disclosures. Even though the record
shows that Defendants promptly took action to prevent prejudice from the disclosure, it was
still a confirmation of CLPPB’s concerns. The Court is mindful of CLPPB’s statutory and
administrative duties with regard to the release of personal information in its custody.

On this note, Sherwin-Williams argues that a list of objectors’ names and addresses compiled
by Gilardi & Co. does not constitute a public record subject to the IPA. Sherwin-Williams
cites Moghadam v. Regents of Univ. of Cal. (2008) 169 Cal.App.4th 466, where the appellate
court held that student exams were not “records” and did not contain “personal information”
within the meaning of the IPA. However, Moghadam did not address Civil Code section
1798.29 of the IPA, which provides:

           Any agency that owns or licenses computerized data that includes personal
           information shall disclose any breach of the security of the system following
           discovery or notification of the breach in the security of the data to any resident
           of California whose unencrypted personal information was, or is reasonably
           believed to have been, acquired by an unauthorized person. The disclosure shall

    Sherwin-Williams’ Opp. to Obj. to Jan. 31, 2013 Rec. at p. 7.

        be made in the most expedient time possible and without unreasonable delay,
        consistent with the legitimate needs of law enforcement, as provided in
        subdivision (c), or any measures necessary to determine the scope of the breach
        and restore the reasonable integrity of the data system.

(Civ. Code, § 1798.29, subd. (a).)

        For purposes of this section, “personal information” means an individual’s first
        name or first initial and last name in combination with any one or more of the
        following data elements, when either the name or the data elements are not
         (1) Social security number.
         (2) Driver’s license number or California Identification Card number.
         (3) Account number, credit or debit card number, in combination with any
        required security code, access code, or password that would permit access to an
        individual’s financial account.
         (4) Medical information.
         (5) Health insurance information.

(Id., subd. (g).)

        For purposes of this section, “medical information” means any information
        regarding an individual’s medical history, mental or physical condition, or
        medical treatment or diagnosis by a health care professional.

(Id., subd. (h)(2).)

This disclosure obligation is imposed on any agency that owns or licenses computerized data
that includes “personal information” and is triggered upon “any breach of the security of the
system” where personal information “is reasonably believed to have been[] acquired by an
unauthorized person.” The agency must disclose the breach “without unreasonable delay.”
There is no question that the DPH owns or licenses computerized data that includes “personal
information” in RASSCLE. As CLLPB points out, the exact text of Mr. Lutolf’s email would
aid in determining whether medical information (such as references to blood lead tests) was
also disclosed in conjunction with the names and addresses, but this email has not been
disclosed. At any rate, it appears the information necessarily pertains to individuals who were
tested for lead, which is a clear implication of descriptive medical information of those
individuals identified by name and address. At the very least, the circumstances were
sufficient to trigger an investigation into possible unauthorized acquisition of personal
information, and CLPPB’s recourse to law enforcement was entirely consistent with section
1729.98. Even if the January 24, 2013 incident did not formally trigger section 1798.29’s
disclosure requirements, it is clear now that inadvertent disclosures are more than just a
theoretical possibility. Thus, it is far from unreasonable for CLPPB to demand data security
standards and some means of indemnity for the costs of disclosure when Defendants or their
agents are responsible for a breach. Sherwin-Williams’ attempt to trivialize these concerns is
not well-taken.

Notwithstanding this history, the Court is persuaded that Gensa’s continued access to the
RASSCLE databases may still be necessary. Granted, the sufficiency of Gensa’s February 13,

2013 production is not an issue before the Court at this time. However, CLPPB appears to
admit that the databases produced on February 13, 2013 are abridged in some manner based on
the information identified in the July 2012 notice. Sherwin-Williams claims that of 827 fields
known to exist in RASSCLE, CLPPB produced only 69 of them. CLPPB justifies this limited
production on the fact that Sherwin-Williams “refused to specify the fields it was seeking from
the RASSCLE databases[.]”9 However, the subpoena and production order were not limited to
or contingent upon certain fields specified by Sherwin-Williams. The Court has ordered a full
production of the RASSCLE databases, subject to redactions that Gensa has apparently not yet
completed. Thus, CLPPB’s objection to the January 31, 2013 Recommendation reinstating
Gensa’s access to RASSCLE is OVERRULED.

Nor does the Court feel that its prior orders regarding RASSCLE production are undermined
by allowing Messrs. Locata and Wolf to review the results of the redaction scripts to ensure
that the script is working and not over-redacting. CLPPB does not dispute the potential for
over-redaction by the software script, nor does CLPPB dispute that Mr. Locata’s signing of the
protective order is sufficient to keep him from disclosing any personal information he sees
while overseeing the Gensa script redaction.

The parties appear to be close to agreement on possible amendments to the protective order
that would address (1) data security standards with respect to the transmission and storage of
confidential information, (2) indemnity for statutorily-required notification due to a security
breach, and (3) protection of the DPH’s intellectual property. The Court orders the parties to
meaningfully meet and confer within 10 calendar days on an amended protective order
addressing these points.

As for the technical requirements contained in the January 31, 2013 Recommendation,
Sherwin-Williams demonstrates that the technology Gensa uses to access and redact
RASSCLE is inadequate, so some form of upgrade is in order. However, CLPPB claims that
solid state drives have not been approved for use as a standard and asks that the technical
requirements be tailored to its actual capabilities. Based on the Declaration of Robert Lutolf
submitted by Sherwin-Williams in response to this matter,10 the Court orders CLPPB to host
the RASSCLE databases on a computer or server that contains a quad core processor, 16GB of
RAM, a 7200 rpm hard drive with 250GB of storage and at least 100GB of backup storage
(either on the computer or on a server) within 2 days of entry of the final Order on this matter.

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    Briefing re Obj. to Jan. 31, 2013 Rec. at p. 7.
    See Decl. Lutolf ¶¶ 22-24.

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Case Name: Rosales v. Heavenly Construction, Inc.
Case No.: 1-08-CV-119684

The issue here is the appropriate distribution of a settlement check for $1,226.09 that has not
been distributed to one member of the class, Jose Mendez Polvos. The matter has been
continued twice now for Mr. Polvos' counsel, Tomas Margain, Esq. to locate him. The last
request for continuance was on January 22, 2013. Mr. Margain stated that he was working
with Mr. Polvos' father to get his son's photo I.D. and W-9 form. On January 25, 2013, the
matter was continued to March 1, 2013.

Nothing has been filed since the January 25, 2013 hearing. In his last declaration, Mr. Margain
suggested donating the funds to the Santa Clara University Katherine and George Alexander
Community Law center through the cy pres doctrine.

Alternatively, the Court may redistribute the $1,226.09 among the rest of the class.

The Court ORDERS as follows: All settlement checks have been issued, or funds transmitted,
in this case except for $1,226.09 owed to Jose Mendez Polvos. The record reflects that despite
repeated attempts, including communication with Mr. Polvos' father, Plaintiffs' counsel Tomas
Margain has been unable to obtain identification and documentation from Mr. Polvos in order
to verify his entitlement to the $1,226.09. (See Suppl. Decl. T. E. Margain ISO Compliance
Hrg., ¶ 6.) Accordingly, the Court orders Mr. Margain to redistribute the remaining $1,226.09
to the rest of the Class.

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Case Name: The Irvine Company, LLC vs. Segue Construction, Inc.
Case No.:  1-10-CV-162915

Jim Sisco (“Sisco”) dba Armor Company (“Armor Company”) moves for an order vacating the
default entered against Armor Company on November 18, 2011.

The original Complaint in this construction defect action was filed by plaintiff The Irvine
Company LLC (“Plaintiff”) on February 2, 2010. Defendant Segue Construction (“Segue”)
filed its Cross-Complaint on March 10, 2010. Armor Company’s default was entered on
March 29, 2011. On October 5, 2011, Plaintiff filed a First Amended Complaint (“FAC”)
naming Armor Company as one of the defendants, setting aside the initial default. However,
Armor Company did not appear, and default on Plaintiff’s FAC was entered on November 18,

Sisco’s request for judicial notice of the Discharge of Debtor James Sisco f/d/b/a Armor
Company, dated August 30, 2005 in Case No. 04-57175 of the U.S. Bankruptcy Court for the
Northern District of California is GRANTED. (Evid. Code, § 452, subd. (d) [record of a court
of record of the United States].) Sisco’s request for judicial notice of plaintiff The Irvine
Company LLC’s (“Plaintiff”) Complaint and defendant Segue Construction’s (“Segue”) Cross-
Complaint is also GRANTED. (Evid. Code, § 452, subd. (d).)

According to Sisco, he worked on the subject construction project between 2001 and 2004 and
then filed for personal bankruptcy under Chapter 7 of the Bankruptcy Code. During the
bankruptcy action, the trustee found no assets for distribution and it was a “no asset-no bar
date” case, and Sisco received a discharge of all debts on August 30, 2005. Sisco argues the
discharge applies to the causes of action against the Armor Company even though Plaintiff and
Segue were not listed in the bankruptcy petition because each and every one of the causes of
action in the Complaint and Cross-Complaint pertains to work Sisco f/d/b/a Armor Company
performed prior to his bankruptcy discharge, and the debts and liabilities surrounding these
claims were thus discharged pursuant to 11 USCS § 727. Sisco argues that a bankruptcy
discharge operates as a permanent injunction against all actions to collect discharged debts as a
personal liability, and the commencement of this action against Armor Company is a direct
violation of this statutory injunction. Sisco argues all judgments obtained in violation of the
injunction, such as the defaults taken by Plaintiff and Segue, are void.

In opposition, Plaintiff argues the bankruptcy discharge does not apply where a plaintiff does
not seek to recover directly against a discharged debtor but instead agrees to proceed against
the debtor in a nominal capacity to trigger insurance coverage. Plaintiff argues it filed this
action without knowledge of Sisco’s bankruptcy discharge,11 and in a separate motion before
the Northern District Court, has agreed to stipulate that it will not pursue collection against
Sisco personally, but will instead proceed only against Sisco’s available insurance proceeds.12
   See Decl. Eric C. McAllister ISO Pltf’s Opp. to Mot. Enforce Bankr. Inj. ¶ 13. According to Mr. McAllister,
Plaintiff first learned of Armor Company’s 2004 bankruptcy petition and 2005 bankruptcy discharge during
Sisco’s August 15, 2012 deposition, and neither Armor Company nor its counsel had disclosed the bankruptcy
   Decl. McAllister ¶ 17. On January 22, 2013, Plaintiff filed a Motion to Determine Non-Applicability of
Bankruptcy Injunction with the Northern District Court, in which Plaintiff has agreed not to enforce any judgment

It seems appropriate to continue this matter until the U.S. Bankruptcy Court for the Northern
District of California rules upon Plaintiff’s motion for determination of non-applicability of the
bankruptcy injunction, since that motion seems to overlap with the issues raised by Plaintiff
here. According to Plaintiff, that motion is set to be heard on February 28, 2013.

The instant motion is CONTINUED to Friday, March 8, 2013 at 9:00 a.m.

                                                    - oo0oo -

ultimately obtained in this action against Armor Company directly and has agreed to limit its recovery efforts to
Armor Company’s available insurance proceeds

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Case Name: Stephen Knee vs. Brocade Communications Systems, Inc., et al.
Case No.:  1-12-CV-220249

This is a shareholder class action by plaintiff Stephen Knee (“Plaintiff”), individually and on
behalf of shareholders of defendant Brocade Communications Systems, Inc. (“Brocade”),
alleging that individual defendants Judy Bruner, Renato DiPentima, Alan Earhart, John W.
Gerdelman, David House, Glenn Jones, Michael Klayko, L. William Krause, and Sanjay
Vaswani (the “Individual Defendants”) breached fiduciary duties of care, loyalty and good
faith to Brocade’s shareholders by attempting to dilute the holdings of Plaintiff and other
members of the putative class in Brocade common stock without proper disclosure of the full
impact of the dilution, and Brocade aided and abetted the Individual Defendants’ breaches.13
Specifically, Plaintiff alleges that on February 24, 2012, Brocade filed a Proxy Statement on
Form Schedule 14A in which the Board of Directors recommended that Brocade’s
shareholders approve a proposal and restatement of the company’s 2009 Stock Plan to increase
the Stock Plan’s reserves by 35 million shares (“Proposal Three”),14 but the proposal was not
fully and accurately described in the Proxy, and misrepresented the dilutive impact that the
proposal may have on existing shareholders.15 On or about April 10, 2012, the Court granted
Plaintiff’s motion preliminary injunction to enjoin the April 12, 2012 shareholder vote until
Defendants cured the alleged breaches of fiduciary duty.

The action settled on July 26, 2012, and the Court granted final approval of the settlement on
December 14, 2012.

Brocade and the Individual Defendants (collectively “Defendants”) now move to seal the
unredacted versions of Exhibits D and E to the Declaration of David E. Bower in Support of
Motion for Final Approval of Settlement and Approval of Attorney Fees and Expenses, lodged
on December 7, 2012. The redactions to Exhibit D are found on pages BRCD000005,
BRCD000007, BRCD000012, BRCD000013, and BRCD000016. The redactions to Exhibit E
are found on pages BRCD000025, BRCD000040, and BRCD000041.

“The court may order that a record be filed under seal only if it expressly finds facts that
establish: [¶] (1) There exists an overriding interest that overcomes the right of public access to
the record; [¶] (2) The overriding interest supports sealing the record; [¶] (3) A substantial
probability exists that the overriding interest will be prejudiced if the record is not sealed; [¶]
(4) The proposed sealing is narrowly tailored; and [¶] (5) No less restrictive means exist to
achieve the overriding interest.” (Cal. Rules of Court, rule 2.550(d).) Financial information
involving confidential matters relating to the business operations of a party may be sealed
where public revelation of the information would interfere with the party’s ability to effectively
compete in the marketplace and there is a substantial probability that their revelation would
prejudice the foregoing legitimate interests of the party. (See Universal City Studios, Inc. v.
Superior Court (2003) 110 Cal.App.4th 1273, 1285-1286.)

   See Compl. ¶ 37.
   See Compl. ¶ 3.
   See Compl. ¶¶ 24-25.

Bower Exhibits D and E contain presentation materials provided to the Brocade Compensation
Committee in connection with Proposal Three, including confidential discussions of certain
key projections, discussions of Brocade’s internal strategy concerning equity utilization of
shares available under the 2009 Stock Plan, and projections concerning equity utilization of the
proposed increase to the share reserve. Defendants have an overriding interest in maintaining
the confidentiality of this sensitive, non-public business information because it pertains to
projections of Brocade’s future business plans. There is a substantial likelihood that Brocade’s
business interests would be prejudiced if the record is not sealed due to the fact that this
information would be known by Brocade’s competitors and the general public. The proposed
sealing is narrowly tailored and there is no less restrictive means to achieve the overriding

The motion to seal is GRANTED. The unredacted versions of Exhibits D and E to the
Declaration of David E. Bower in Support of Motion for Final Approval of Settlement and
Approval of Attorney Fees and Expenses are hereby sealed, and the redacted versions of these
exhibits attached as Exhibit A to the Declaration of Nicholas R. Miller ISO the motion to seal
shall be placed in the public record.

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Calendar line 8

Case Name: Sullivan et al. vs. Amar Enterprises, Inc., et al.
Case No.:  1-12-CV-230085

This putative class action for violations of wage and hour laws is brought by plaintiffs Scott
Sullivan, John Aguilar, and Alfred Mauricio Alvarado (“Plaintiffs”) against defendants Amar
Enterprises, Inc. (“AEI”) and Harinder Gahunia (“Gahunia”) (collectively “Defendants”).
According to the operative First Amended Complaint (“FAC”), Defendants are engaged in the
business of providing limousine services and “Plaintiffs…were employed by Defendants as
limousine drivers.”16 The FAC alleges that Gahunia is a natural person with an ownership
stake in AEI.17 The FAC asserts seven causes of action for: (1) failure to pay minimum wage;
(2) failure to pay overtime wage; (3) failure to provide meal and rest breaks; (4) failure to
provide accurate wage statements; (5) failure to timely pay all wages due and owing; (6)
Private Attorney General Act; (7) unfair business practices.

Defendants demur to the FAC on the grounds that Gahunia was not Plaintiffs’ employer.
Defendants argue that under Reynolds v. Bement (2005) 36 Cal.4th 1075, individual owners or
officers cannot be held personally liable for Labor Code violations (first through sixth causes
of action). As to the seventh cause of action for unfair business practices, Defendants argue
that Plaintiffs fail to allege any facts showing that Gahunia was actively and directly
participating in the alleged unfair business practice and that he acted outside the course and
scope of his employment to establish personal liability against him under the analysis set forth
in Bradstreet v. Wong (2008) 161 Cal.App.4th 1440.

Plaintiffs argue the demurrer should be overruled because (1) it admits that Plaintiffs state
valid claims against AEI; (2) individuals may be held personally liable for Labor Code
violations as alter egos; (3) Reynolds and Bradstreet have been abrogated by Martinez v.
Combs (2010) 49 Cal.4th 35, which expanded the definition of “employer” for wage claims to
include anyone who exercises control over a worker’s wages, hours or working conditions, or
who suffers or permits a worker to work, or who engages a worker to work; and (4) an Unfair
Competition Law (“UCL”) claim can, by its express terms, be stated against any “person” who
commits an unfair business practice.

Analysis: “Notwithstanding any agreement to work for a lesser wage, any employee receiving
less than the legal minimum wage or the legal overtime compensation applicable to the
employee is entitled to recover in a civil action the unpaid balance of the full amount of this
minimum wage or overtime compensation, including interest thereon, reasonable attorney’s
fees, and costs of suit.” (Cal. Lab. Code, § 1194, subd. (a).) “The Legislature has thus given
an employee a cause of action for unpaid minimum wages without specifying who is liable.
That only an employer can be liable, however, seems logically inevitable as no generally
applicable rule of law imposes on anyone other than an employer a duty to pay wages.”
(Martinez v. Combs (2010) 49 Cal.4th 35, 49.)

Plaintiffs are correct that under Martinez, in actions under section 1194, courts must look to the
applicable wage order definition of the employment relationship rather than just the common

     FAC ¶¶ 8-9.
     FAC ¶ 6.

law. Reynolds and Bradstreet involved applications of the common law definition of
“employer” rather than applicable wage orders to conclude that certain individuals and entities
were not “employers” for purposes of section 1194. The Supreme Court in Martinez held that
the decision in Reynolds “spoke too broadly in concluding that the common law defines the
employment relationship in actions under section 1194” (Martinez, supra, 49 Cal.4th at p. 50,
fn. 12), finding that the statutory and historical context of section 1194 “shows unmistakably
that the Legislature intended the IWC’s wage orders to define the employment relationship in
actions under the statute.” (Id. at p. 52.) However, the Martinez court noted:

       This is not to say the common law plays no role in the IWC’s definition of the
       employment relationship. In fact, the IWC’s definition of employment
       incorporates the common law definition as one alternative. As defined in the
       wage orders, “ ‘[e]mployer’ means any person … who … employs or exercises
       control over the wages, hours, or working conditions of any person,” and “
       ‘[e]mploy’ means to engage, suffer, or permit to work.” [Citation.] The verbs
       “to suffer” and “to permit,” as we have seen, are terms of art in employment
       law. [Citation.] In contrast, the verb “to engage” has no other apparent
       meaning in the present context than its plain, ordinary sense of “to employ,” that
       is, to create a common law employment relationship. . . . To employ, then,
       under the IWC’s definition, has three alternative definitions. It means: (a) to
       exercise control over the wages, hours or working conditions, or (b) to suffer or
       permit to work, or (c) to engage, thereby creating a common law employment

(Martinez, supra, 49 Cal.4th at p. 64, original emphasis.) Furthermore, although Martinez
cautioned against reading Reynolds too broadly, it still found that Reynolds “properly holds
that the IWC’s definition of ‘employer’ does not impose liability on individual corporate
agents acting within the scope of their agency. [Citation.]” (Id. at p. 66.)

Here, the applicable wage order is IWC Wage Order No. 9-2001, which governs the
transportation industry. It provides, in relevant part, the following definitions:

       (D) “Employ” means to engage, suffer, or permit to work.

       (E) “Employee” means any person employed by an employer.

       (F) “Employer” means any person as defined in Section 18 of the Labor Code,
       who directly or indirectly, or through an agent or any other person, employs or
       exercises control over the wages, hours, or working conditions of any person.

(Cal. Code Regs., tit. 8, § 11090.2(D), (E), and (F).) Section 18 of the Labor Code provides:
“‘Person’ means any person, association, organization, partnership, business trust, limited
liability company, or corporation.”

Thus, Plaintiffs’ general position is well-taken that Gahunia’s status as a natural person does
not insulate him from liability as an “employer” for purposes of section 1194. However, the
FAC lacks factual allegations that would support the inference that Gahunia engaged, suffered,
or permitted Plaintiffs to work for him, or that he exercised control over Plaintiffs’ wages,
hours, or working conditions. The bare allegation in paragraph 9 that “Plaintiffs, and each of

them, were employed by Defendants” is a legal conclusion, which the Court cannot consider in
testing the sufficiency of the causes of action. (Kong v. City of Hawaiian Gardens
Redevelopment Agency (2002) 108 Cal. App. 4th 1028, 1037.) The only factual allegation as
to Gahunia is that he “held an ownership stake in [AEI]”18, but this is insufficient to allege an
employment relationship under the applicable wage order’s definitions. There are no
allegations to support the inference that Gahunia is the alter ego of AEI.

For these reasons, the demurrer to the FAC is SUSTAINED with 10 days’ leave to amend as
to Gahunia.

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     FAC ¶ 6.


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