Hutchins v. Palmer
Hutchins v. Palmer
2015 WL 13713335 (E.D.N.Y. 2015)
March 31, 2015
Tomlinson, A. Kathleen, United States Magistrate Judge
Summary
The Court granted Plaintiffs' motion to compel ESI discovery from the Palmer Defendants, ordered them to produce copies of relevant emails to the Plaintiffs by April 25, 2014, and warned that a daily monetary sanction would be imposed if the materials were not produced. The Court also denied Defendants' motion to quash Plaintiffs' subpoena and granted Plaintiffs' motion to extend discovery.
PASTOR PERRY HUTCHINS and MARIAN HUTCHINS, Plaintiffs,
v.
ANDRE MARC PALMER, OPAL PALMER, RHEMA WEALTH MANAGEMENT CORPORATION, a New York corporation, CURTIS PETERSON, ANN SCOTT, CURTIS INTERNATIONAL EXPRESS, INC., BONNIE SCOTT, JR., ZENA SCOTT, EXPRESS INTERNATIONAL, LLC, ROSCOE D. JOHNSON, JR., PASCO COMMUNITY DEVELOPMENT FOUNDATION, INC., a District of Columbia corporation, Defendants
v.
ANDRE MARC PALMER, OPAL PALMER, RHEMA WEALTH MANAGEMENT CORPORATION, a New York corporation, CURTIS PETERSON, ANN SCOTT, CURTIS INTERNATIONAL EXPRESS, INC., BONNIE SCOTT, JR., ZENA SCOTT, EXPRESS INTERNATIONAL, LLC, ROSCOE D. JOHNSON, JR., PASCO COMMUNITY DEVELOPMENT FOUNDATION, INC., a District of Columbia corporation, Defendants
CV 12-5927 (JFB) (AKT)
United States District Court, E.D. New York
Filed March 31, 2015
Tomlinson, A. Kathleen, United States Magistrate Judge
MEMORANDUM AND ORDER
I. PRELIMINARY STATEMENT
*1 This action is brought by Plaintiffs Pastor Perry Hutchins and his wife Marian Hutchins (collectively, the “Plaintiffs”) against Andre Marc Palmer and Opal Palmer (together, the “Palmer Defendants”), Rhema Wealth Management Corporation, a New York corporation, as well as several other defendant co-conspirators. Plaintiffs assert that the Palmer Defendants managed and controlled Rhema and conspired with the co-defendants to defraud Plaintiffs out of funds exceeding $160,000. Plaintiffs seek recovery from Defendants pursuant to the Racketeer Influenced and Corrupt Organization chapter of the Organized Crime Control Act, 18 U.S.C. § 1961, et seq., (“RICO”). Specifically, Plaintiffs seek to void, rescind, and secure restitution from contracts into which Andre Palmer, an unregistered investment advisor, fraudulently induced Plaintiffs to enter in violation of Section 215, 15 U.S.C. § 80b-15, of the Investment Advisers Act of 1940, 15 U.S.C. § 80b-1, et seq. (“Investment Advisers Act”), and in violation of common law fraud.
Pending before the Court are three discovery motions. First, Plaintiff moves to compel production of electronically stored information (“ESI”) held or controlled by the Palmer Defendants, pursuant to Fed. R. Civ. P. 37. Moreover, Plaintiffs request that the Court endorse their proposed order, submitted pursuant to Fed. R. Civ. P. 34(b)(2)(E), to dictate a protocol for the inspection and production of Defendants’ ESI. Plaintiffs also move the Court to impose sanctions against the Defendants, in accordance with Fed. R. Civ. P. 37(b), based on Defendants’ failure to comply with their duty to preserve, retain, and produce relevant ESI. The Palmer Defendants oppose the motion, claiming that Plaintiffs’ counsel erroneously suggests that Defendants are withholding relevant discovery. It has been represented to the Court that the remaining ESI sought by Plaintiffs is housed on an inoperable computer and is thus unrecoverable.
Second, Palmer Defendants move to quash Plaintiffs’ subpoena served on The Charles Schwab Corporation (“Charles Schwab”) requesting “any and all records” of the transactions engaged in by the Palmer Defendants as well as Rhema Wealth Management Corporation (“Rhema Corp.”). SeePalmer Defendants’ Motion to Quash Subpoena (“Defs.’ Mot. to Quash”) [DE 64]. In particular, the Palmer Defendants oppose the subpoena on the grounds that (1) it seeks to circumvent the rules for discovery under Rule 34since it requests information which is the subject of Plaintiff’s motion to compel discovery and (2) it seeks the disclosure of information that is privileged under Rule 45(d)(3)(A)(iii) or, alternatively, the disclosure of trade secret or confidential research development, or commercial information under Rule 45(d)(3)(B)(i). Id. at 1-2.
Plaintiffs oppose the motion, arguing that Defendants lack any basis to quash the subpoena. See Plaintiffs’ Memorandum of Points and Authorities in Opposition to Defendants’ Motion to Quash Subpoena Duces TecumServed on the Charles Schwab Corporation and Charles Schwab AB & Co., Inc. (“Pl.’s Opp’n”) [DE 65]. First, Plaintiffs contend that Defendants lack standing with respect to the non-party subpoena. Id. at 2-3. Second, Plaintiffs claim that Defendants’ motion is untimely and hence all objections should be deemed waived. Id. at 3-4. Third, Plaintiffs assert that the materials requested fall within the broad interpretation of “relevance” under Rule 45, Id. at 4-6. Fourth, Plaintiffs state that Defendants have failed to articulate any privilege which would attach to the subpoenaed materials. Id.at 6-8. Finally, even assuming that Defendants have met their burden in asserting that the materials qualify as “trade secret or other confidential research, development, or commercial information” under Rule 45(d)(3)(B), Plaintiffs have shown a “substantial need” for the materials” in light of Defendants’ intransigent conduct in discovery. Id. at 8-9. In this latter scenario, the Plaintiffs argue that the Court should order the production of these materials subject to a protective order. Id.
*2 Finally, Plaintiffs request that the Court extend discovery, claiming that there exists good cause for the request in light of, inter alia, the pending motion to compel and the outstanding subpoena responses. See DE 60. The Defendants oppose this motion, asserting, among other things, that they have fully complied with their ESI discovery obligations and that Plaintiffs could have, but failed to, serve non-party subpoenas at the outset of discovery. See DE 62.
Based on the reasons set forth below in this Memorandum and Order, Plaintiffs’ motion to compel discovery [DE 55] is GRANTED, in part, and DENIED, in part; Defendants’ motion to quash [DE 64] is DENIED; and Plaintiffs’ motion to extend discovery [DE 60] is GRANTED.
II. BACKGROUND
A. The Amended Complaint
In or about March 2006, the Perry Hutchins was in search of a home equity line of credit in order to fund repairs to his home in Queens, New York. Plaintiff was referred to Defendant Andre Palmer. After an initial telephone discussion between Plaintiff and Andre Palmer, Palmer came to Plaintiffs’ home to meet. During this meeting, Defendant Andre Palmer represented to Plaintiffs that he was a religious or evangelical Christian, who sought to advise his clients and investors in pursuing faith-based projects. Pastor Hutchins understood “Rhema” was the Greek word meant to indicate respect for and interest in the spiritual aspects of the Christian faith. Pastor Hutchins advised Defendant Palmer during this initial meeting that he was earning a modest salary and that he and his wife had no experience in investing, but were still interested in investing for purposes of retirement, and were particularly interested in faith-based investing. Plaintiffs also advised Palmer that they had no money to invest, but Defendant Palmer advised them that they could borrow from the equity in their home in Queens, in order to make investments with him.
Defendant Palmer then introduced Plaintiffs to Cheryl George, who at the time was working in New York as a mortgage broker, sharing office space with Defendant Palmer and Rhema Corp. Defendant Palmer advised Plaintiffs that they should acquire a fixed-rate home equity line of credit (“HELOC”). Palmer told Plaintiffs that a HELOC was similar to having a credit card. In March 2006, Plaintiffs met with Cheryl George at Rhema Corp.’s offices. After that meeting, George filed an application on behalf of the Plaintiffs to borrow approximately $200,000 from the equity in their Queens home. This application was approved. George represented to the Plaintiffs that she would attend the closing of the HELOC to guide them. At closing, however, the Plaintiffs closed the HELOC with a non fixed-rateHELOC.
In April or May 2006, Defendant Andre Palmer called Plaintiffs and asked if they were interested in investing in the renovation of a brownstone in Brooklyn. Palmer represented that if Plaintiffs invested $100,000, they would receive that amount back with an additional 18% interest within three months of the investment. Plaintiffs claimed they did not have sufficient funds to invest, to which Defendant Palmer suggested that they borrow from the HELOC. In or about June 2006, Plaintiffs invested in the brownstone. In September 2006, Defendant Palmer returned the original $100,000 investment to Plaintiffs, with an additional 10% interest. Defendant Palmer received a commission for the investment, of which the Plaintiffs were unaware until 2012.
*3 Allendale Road Property
In September 2006, Defendant Palmer approached the Plaintiffs to encourage them to invest in PASCO, a corporation managed by Roscoe Johnson. Palmer told the Plaintiffs that this company was involved in religious work. He also represented to the Plaintiffs that (a) Johnson and PASCO owned a home at 2106 Allendale Road, Baltimore, Maryland and (b) that PASCO intended to renovate that property and then manage it as an assisted living facility to benefit people in need in the area. Palmer introduced the Plaintiffs to Johnson, with full knowledge that Johnson and PASCO were incapable of providing a return on any investment, and without explaining to the Plaintiffs the risk associated with investing in a non-public and/or start up investment. On or about September 22, 2006, Plaintiffs issued a check for $25,000, payable to PASCO, in exchange for an indenture purporting to hold the property in escrow for Plaintiffs. According to Johnson and Defendant Palmer, the money would be used to renovate the property. Such indenture was never issued, however, and Palmer failed to disclose the fact that he would be paid a commission from the $25,000. Palmer and Johnson agreed that the Plaintiffs would be repaid in installments of $3,750 every three months, the first of which was due on December 22, 2006. Defendant Palmer was fully aware that neither Johnson nor PASCO owned title to the property, but failed to inform the Plaintiffs of that fact. The Plaintiffs were told that their name would be put on the deed to the property. However, the Plaintiffs only received two installments of $3,750, and their name was never put on the deed to the Allendale Road property. From 2008 to 2010, the Plaintiffs demanded repayment of their $25,000 investment. Palmer responded by claiming the money was being used to renovate another property at 4749 Park Heights Avenue in Baltimore, Maryland.
The land records of the State of Maryland reveal that, on or about January 1, 2009, Johnson and PASCO borrowed $292,000, using the Allendale Road property as security. Defendant Palmer was aware of this loan, but did not inform Plaintiffs of the loan, and none of the loan was used to repay the Plaintiffs original investment of $25,000.
Park Heights Property
In or about October 2006, Defendant Palmer took Plaintiffs to visit the original property on Allendale Road in Maryland. Defendant Palmer and Roscoe Johnson represented to Plaintiffs that they should invest in the Park Heights property, which was owned by GMAC Mortgage Corporation. Palmer represented that he and Johnson would use the Plaintiffs’ investment to renovate the property and sell it at a raffle, after which they would return the Plaintiffs’ initial investment and a profit along with it. Defendant Palmer and Roscoe Johnson did not inform Plaintiffs that PASCO was not entitled to raffle the Park Heights property for a profit. On December 7, 2006, Plaintiffs issued a check in the amount of $22,500 to purchase that Park Heights property. On or about December 12, 2006, the property was purchased for $14,500 from GMAC. The Plaintiffs were not advised of this purchase at the time. Thereafter, Defendant Palmer and Roscoe Johnson demanded that the Plaintiffs make more payments towards the renovation of the Park Heights property, and that if they did not, Plaintiffs would lose the “value” of their “investment.” As a result, the Plaintiffs made payments from October 2007 until November 2008, totaling over $32,000. Plaintiffs also gave Defendant Palmer use of Home Depot and Lowe’s credit cards, to which Defendant Palmer charged over $4,000. On or about December 11, 2007, Plaintiff attended a meeting with Andre Palmer and Roscoe Johnson in Floral Park, New York. Johnson made demands of the Plaintiffs to pay more money or the raffle would have to be discontinued.
*4 In late 2008, Plaintiffs visited the Park Heights property, which was still incomplete. Despite this fact, Johnson claimed that the property was ready for raffle. Johnson asked for $1,200 to repair the roof, which the Plaintiffs paid.
In or about November 2009, Roscoe Johnson contacted the Plaintiffs to meet with him in Brooklyn, New York. According to Johnson, the purpose of the meeting was to have Palmer and Johnson sign an application that would be delivered to the State of Maryland, which would temporarily transfer ownership of the Park Heights property from Palmer and Plaintiffs to PASCO for purposes of the raffle. Plaintiffs came to the meeting with their brother and sister in law. At the meeting, Plaintiffs asked Johnson for receipts showing what they had spent their money on, Johnson informed them that he could not give them receipts. He gave the Plaintiffs a document to sign. Plaintiffs said that Defendant Palmer was also on the deed, so he would also need to sign. Johnson called Palmer, who appeared and signed the document and left. No raffle was ever held.
On or about August 16, 2011, the Securities Commissioner of Maryland determined by written order that PASCO and Roscoe Johnson had defrauded the Plaintiffs in connection with the Allendale Road and Park Heights properties, and ordered Johnson and PASCO to return Plaintiffs their funds. To date, no funds have been returned to the Plaintiffs.
The Scott Property
In November 2006, Andre Palmer called Plaintiffs to advise them of another investment. Palmer promised that, if Plaintiff gave him $60,000, he would provide the funds to a couple in California, namely, Bonnie Scott, Jr. and his spouse Zena Scott, and Plaintiffs would receive their money back in three months, plus interest of 17%. Palmer put Bonnie Scott’s brother-in-law, Curtis Peterson, on the phone with the Plaintiffs, and introduced him has a California “broker.” Peterson advised that the investment was safe, but the Scotts needed the funding soon or they would lose their home at 25873 Annette Avenue in Moreno Valley, California. Peterson and Palmer knew that the Scotts were related to Peterson, but did not disclose this information to the Plaintiffs. On November 30, 2006, in reliance on these assertions, Plaintiffs sent a $60,000 to Curtis Peterson. In return the Scotts sent a signed promissory note, which asserted their promise to repay it plus interest. The Scotts made a few small payments, the last of which was mailed in November 2010.
On or about February 7, 2011, the United States Securities and Exchange Commission (“SEC”) filed a civil suit in the United States District Court for the Central District of California against Curtis Peterson, Ann Scott, and their business entities, Curtis International and Express International, alleging that all of them (with the assistance of others) had committed securities fraud in excess of $3 million by offering unregistered and false securities to the public. On or about January 25, 2012, the Court entered final judgment against Curtis Peterson, Ann Scott, Curtis International, and Express International, enjoining them from further violations of the U.S. securities laws and requiring them to disgorge the more than $3 million they had solicited through fraud.
*5 Palmer’s Use of OLINT
From 2006 through August 2011, Andre Palmer and Opal Palmer, using Rhema Corp., induced others to invest in the Overseas Locket International Corporation (“OLINT”), a Ponzi scheme which was operated out of the Caribbean by David A. Smith, one of Defendants’ co-conspirators. In or about late 2007, Palmer brought Perry Hutchins to meet with an attorney in New York, to discuss investing in OLINT. Andre Palmer brought Hutchins to the meeting to induce Hutchins into believing that Palmer was a “careful and savvy investor.”
On or about August 10, 2010, Smith was indicted in the United States District Court for the Southern District of Florida on six counts of wire fraud and 16 counts of money laundering. Smith entered into a plea agreement with the United States Attorney in July 2010. As a result of the fraud committed by Andre Palmer in connection with OLINT, numerous investors lost their investments in OLINT. Palmer attempted to communicate with the victims of the OLINT scheme to convince them that he was also a victim; however, Palmer received a commission on all funds that he steered to Smith and OLINT.
Plaintiffs bring the first cause of action for racketeering activity, pursuant to RICO, 18 U.S.C. § 1962(d), against all Defendants. The second count is for common law fraud against all Defendants. Count three seeks rescission pursuant to the Investment Advisers Act, 15 U.S.C. § 80b-1, et seq., against Defendants Palmer, Peterson and Scott. The fourth claim is also against these same Defendants for breach of fiduciary duty. In the fifth cause of action, Plaintiffs allege a violation of wire fraud under RICO, 18 U.S.C. § 1962(a), against Palmer Defendants and Rhema. In the sixth count, all Defendants are alleged to have committed wire fraud in violation of RICO, 18 U.S.C. § 1962(c).
B. Relevant Procedural History
This action was commenced on November 30, 2012. See DE 1. The Palmer Defendants initially appeared in this action in a pro se capacity and both of them individually moved to dismiss the Complaint on May 8, 2013 for failure to state a claim. See DE 11, 12. Plaintiffs filed an Amended Complaint on June 7, 2013. See DE 17.
Plaintiffs’ counsel and both Pro Se Palmer Defendants subsequently appeared for a status conference before this Court on July 9, 2013. See DE 19. In pertinent part, the Court noted that it would be conducting discovery in stages in light of the Palmer Defendants’ pro se status. Id. ¶ 4. In relevant part, the Court noted that Plaintiffs are “not permitted to seek identification of the pro se defendants’ bank accounts at this time.” Id. In addition, the Court authorized the parties to serve document subpoenas on non-parties through October 1, 2013. Id. ¶ 5.
On July 19, 2013, the Palmer Defendants moved to dismiss Plaintiffs’ Amended Complaint. See DE 21, 22. On October 1, 2013, Attorney Vernita Charles filed a Notice of Appearance and came into the case as counsel of record for the Palmer Defendants. See DE 27. On the following day, counsel for the Palmer Defendants filed a Notice of Withdrawal of Defendants’ Motion to Dismiss the Complaint. See DE 28. The Palmer Defendants motions’ to dismiss were thereafter terminated from the docket. See Oct. 3, 2013 Electronic Order. In light of the appearance of counsel in this action on behalf of the Pro Se Palmer Defendants, the Court scheduled a telephone conference for November 19, 2013 at 10 a.m. to discuss the status of discovery. See Oct. 31, 2013 Electronic Order.
*6 On November 19, 2013, the Plaintiffs and Palmer Defendants appeared for a telephone conference before this Court. See DE 35. As an initial matter, the Court directed the Palmer Defendants to file their Answer to the Amended Complaint by November 27, 2013. Id. ¶ 1. In light of the appearance of counsel for the Palmer Defendants, the Court directed counsel for the Palmer Defendants to serve Rule 26(a) Initial Disclosures on Plaintiffs by December 11, 2013. Id. ¶ 4. Counsel were further advised that if they needed to obtain documents or a deposition from any non-party witnesses, subpoenas directed to those witnesses should be served as early as possible. Id. ¶ 6.
In addition, the parties were given until January 3, 2014 to confer and reach an agreement on the method by which ESI shall be produced in this case. Id. ¶ 8. As the Court instructed, “[t]he parties are to file their letter agreement, executed by all counsel, on ECF no later than January 3advising me of what agreement/procedure has been put in place, and the specific details of such agreement. In the alternative, if there is no ESI relevant to this case, the parties shall so advise me in the same manner.” Id. (emphasis in original). In light of the fact that the Palmer Defendants were no longer proceeding in a pro se capacity, the Court implemented an Initial Case Management and Scheduling Order (“CMSO”). Id. ¶ 3; DE 36.
On December 5, 2013, the Palmer Defendants interposed their Answer to the Amended Complaint. See DE 38. On January 3, 2014, Plaintiffs submitted their proposed ESI agreement, noting that they attempted to confer with the Palmer Defendants regarding the proposal but were unable to reach opposing counsel. See DE 40. On January 6, 2014, the Court directed the Palmer Defendants to advise the Court why they had failed to respond to Plaintiffs’ proposed ESI agreement. See Jan. 6, 2014 Electronic Order. On that same day, counsel for the Palmer Defendants filed a letter explaining that she had “briefly discussed” the ESI agreement with Plaintiffs’ counsel. See DE 41. Counsel noted that Plaintiffs’ counsel “can propose whatever methodology he wishes concerning electronically stored information to me, as we do not have any ESI to exchange.” Id. Further, counsel for the Palmer Defendants explained that “[i]n essence, I have no problem if the court ‘[s]o ordered’ Plaintiff’s proposal in the correspondence addressed to me, which was dated January 2, 2014.” Id. In light of these representations, the Court “so ordered” the ESI agreement proposed by Plaintiffs’ counsel [DE 40-1] in a January 7, 2014 Electronic Order. See Jan. 7, 2014 Electronic Order.
The Plaintiffs and the Palmer Defendants appeared for a discovery status conference before this Court on April 10, 2014. See DE 44. In pertinent part, the Court turned its attention to ESI production and noted as follows:
Plaintiffs’ counsel asserts that over the course of several years as the investments at issue were underperforming, plaintiffs began a campaign of correspondence with Andre Palmer, 95% of which was by email. In response to the Court’s inquiry, counsel for Andre Palmer confirmed that he has a computer at home which he used for emailing through a [G]mail account. Defendant Palmer has since gotten a new computer, but did note that he has access to some old emails that he kept on a junk drive. The Court directed Defendant Palmer and his attorney to review all email available back to 2006 and to produce copies of the responsive emails to plaintiffs’ counsel by April 25, 2014. Defendants’ counsel is reminded that she has a duty under existing case law to supervise and oversee the production of those emails and that this is not a task left to the discretion of the defendant Palmers. Counsel is expected to review the computer and junk drive and to take steps to ensure that the production is accurate and complete. The Court will begin to impose a daily monetary sanction if those materials are not produced by April 25. Once the materials are received by plaintiffs’ counsel, Attorney Rotbert will have a maximum of two weeks to bring any motions relating to alleged deficiencies or other problems with that production.
On April 25, 2014, Plaintiffs filed their first motion to compel discovery. SeeDE 45. Having reviewed the motion, the Court, on April 28, 2014, issued an Order deferring a ruling on the motion since Plaintiffs’ counsel failed to include a Rule 37.3 certification confirming that the parties engaged in a “good faith” meet-and-confer regarding outstanding discovery issues after the April 10, 2014 conference. See April 28, 2014 Electronic Order (emphasis in original).
Plaintiffs filed the instant second motion to compel ESI on May 16, 2014. See DE 55. On June 15, 2014, Plaintiffs filed a motion for an extension of time to complete discovery. See DE 60. The Palmer Defendants filed a motion on June 27, 2014 to quash the subpoena served by Plaintiffs’ counsel on non-party Charles Schwab. See DE 64.
III. DISCUSSION
A. Plaintiffs’ Motion to Compel ESI Discovery
Rule 26 of the Federal Rules of Civil Procedure provides for the discovery of relevant, non-privileged information which “appears reasonably calculated to lead to the discovery of admissible evidence.” Fed. R. Civ. P. 26(b). “ ‘Relevance” under Rule 26 ‘has been construed broadly to encompass any matter that bears on, or that reasonably could lead to other matter that could bear on any issue that is or may be in the case.’ ” Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978); Maresco v. Evans Chemetics, Div. of W.R. Grace & Co., 964 F.2d 106, 114 (2d Cir. 1992) (noting that the scope of discovery under Rule 26(b) is “very broad”); Greene v. City of New York, No. 08 Civ. 243, 2012 WL 5932676, at *3 (E.D.N.Y. Nov. 27, 2012) (citing Crosby v. City of New York, 269 F.R.D. 267, 282 (S.D.N.Y. 2010) (explaining that Rule 26 must be construed broadly to include any matter that has, or could reasonably have, bearing on any issue that is, or may be, in the case); Barrett v. City of New York, 237 F.R.D. 39, 40 (E.D.N.Y. 2006) (noting that the information sought “need not be admissible at trial to be discoverable.”). “Electronic documents are no less subject to disclosure than paper records.” Rowe Entertainment v. William Morris Agency, Inc., 205 F.R.D. 421, 428 (S.D.N.Y. 2002). “This is true not only of electronic documents that are currently in use, but also of documents that may have been deleted and now reside only on backup disks.” Zubulake v. UBS Warburg LLC, 217 F.R.D. 309, 317 (S.D.N.Y. 2003).
Notwithstanding the foregoing principles, however, “[t]he party seeking discovery must make a prima facie showing that the discovery sought is more than merely a fishing expedition.” Barbara v. MarineMax, Inc., No. 12 Civ. 368, 2013 WL 1952308, at *2 (E.D.N.Y. May 10, 2013) (citing Wells Fargo Bank, N.A. v. Konover, No. 05 Civ. 1924, 2009 WL 585430, at *5 (D.Conn. Mar. 4, 2009); Evans v. Calise, No. 92 Civ. 8430, 1994 WL 185696, at *1 (S.D.N.Y. May 12, 1994)). In general, “[a] district court has broad latitude to determine the scope of discovery and to manage the discovery process.” EM Ltd. v. Republic of Argentina, 695 F.3d 201, 207 (2d Cir. 2012) (citing In re Agent Orange Prod. Liab. Litig., 517 F.3d 76, 103 (2d Cir. 2008)); Barbara, 2013 WL 1952308, at *3 (“Courts afford broad discretion in magistrates’ resolution of discovery disputes.”); Coggins v. Cnty. of Nassau, No. 07 Civ. 3624, 2014 WL 495646, at *2 (E.D.N.Y. Feb. 6, 2014) (A district court has “broad discretion to determine whether an order should be entered protecting a party from disclosure of information claimed to be privileged or confidential.”) (internal quotation omitted).
*8 Pursuant to Fed. R. Civ. P. 37(a) and Local Civil Rule 37.3(c), Plaintiffs move the Court to compel ESI discovery “held or controlled” by the Palmer Defendants. See Pl.’s Mot. to Compel at 1. In addition, the Plaintiffs ask the Court to endorse their proposed ESI protocol, pursuant to Fed. R. Civ. P. 34(b)(2)(E), to which the Palmer Defendants have refused to enter into by way of stipulation. Id. (citing Plaintiffs’ Proposed ESI Protocol (“ESI Protocol”) annexed to Pl.’s Mot. to Compel as Ex. “A” [DE 55-1] ). Plaintiffs assert that, as outlined in a line of cases that include Scalera v. Electrograph Sys., Inc., 262 F.R.D. 162, 177 (E.D.N.Y. 2009), Defendants’ counsel has failed to comply with her duty to locate relevant information and ensure preservation of ESI that is responsive to Plaintiffs’ requests for production.
Plaintiffs’ counsel maintains that the requested “ESI is relevant to this action because Defendants used a computer to conduct and monitor their affairs, and to communicate, via e-mail, with their co-conspirators and all Plaintiffs.” See Pl.’s Mot. to Compel at 2. Defendants “incomplete, evasive, and deficient responses to Plaintiff’s ESI requests have raised Plaintiffs’ litigation costs and thwarted Plaintiffs’ efforts to prosecute this matter.” Id. For example, the Court ordered that the parties confer and submit a joint ESI agreement by January 2, 2014. Id. When the Court ordered the Defendants to respond to Plaintiffs’ proposed ESI agreement, the Palmer Defendants stated that Plaintiffs “can propose whatever methodology he wishes concerning electronically stored information to me, as we do not have any ESI to exchange.” DE 41. Plaintiffs find this representation suspect, particularly in light of the fact that Plaintiffs served a Litigation Hold Letter on January 11, 2011. See Pl.’s Mot. to Compel at 2; see also Plaintiffs’ Litigation Hold Letter (“Litigation Hold Letter”), dated January 10, 2011, annexed as Ex. “D” to Pl.’s Mot. to Compel [DE 55-4]. In pertinent part, that letter advised the Palmer Defendants, in detail, of their obligations to preserve relevant ESI, including the requirement “to commence and maintain a regime for preserving all records and data, however stored, including by electronic means.” Pl.’s Mot. to Compel at 2 (quoting Litigation Hold Letter at 1).
Plaintiffs claim that Defendants’ response to the January 11, 2011 Litigation Hold Letter was deficient. Id. at 3. For example, Defendants never properly responded to Interrogatory No. 2, which called for the specific steps taken by Defendants’ counsel in response to the Litigation Hold Letter:
Interrogatory No. 2: Describe in detail all steps that you undertook, whether or not successfully, to secure documents relating to the transactions and occurrences described in the Amended Complaint in this action, including without limitation, all steps that you took in response to the Hutchinses’ “Litigation Hold Letter” dated January 10, 2011, delivered to you shortly thereafter (and attached thereto).
Amended Response: The computer used during the timeframe during which the causes of action, which are delineated in the Complaint, was replaced by Defendant Palmer in approximately 2010, before the Litigation Hold Letter was drafted. Defendant Palmer still has the computer, but believes that the hard drive was corrupted, as the computer was extremely slow and nonfunctional, which was the reason that he replaced the computer. After the computer was replaced in 2010, neither [sic] the Defendants Andre Palmer nor Opal Palmer deleted any information from the computer that pertains to any of the parties in this case, or any evidence that would relate to the causes of action pertaining to this case.
*9 Id. at 3-4. Due to this “inadequate and evasive response,” Plaintiffs assert that it is not possible to know what steps, if any, Defendants took to locate and secure relevant data, or attempt to recover files from the hard drive - - which Defendants claim was corrupted or is merely slow. Id at 4. If relevant ESI was lost because of an alleged computer replacement, Defendants were obligated to provide Defendants with an affidavit confirming the breakdown of the pre-2010 computer and the consequential loss of data. Id. According to Plaintiffs, Defendants’ “nonchalant attitude” toward their discovery obligations is “reflective of a breach of duty to locate and preserve relevant information as outlined in Scalera.” Id.
Further, Plaintiffs assert that “litigation surrounding the very same transactions was reasonably foreseeable as far back as August 2008,” even though counsel for Plaintiffs in this case only served the Litigation Hold Letter on January 11, 2011. Id. Plaintiffs’ previous attorney of record was in communication with Defendants about the investments at issue as early as August 11, 2008 and sent Defendants a letter in which the “threat of litigation was reasonably foreseeable to Defendants.” Id. Nonetheless, almost seven years later, Defendants have still not complied with their ESI preservation obligations. Id.
Pursuant to the Court’s directives at the April 10, 2014 status conference, the parties engaged in an in-person meet-and-confer at Plaintiffs’ law offices in Brooklyn, New York on May 1, 2014 in order to resolve “the ongoing deficiencies regarding Defendants’ discovery failures, including as to ESI.” Id. Plaintiffs note that, following this meeting, they offered to pay for a forensic analyst to “examine the hard drives of any equipment used for the business of [Defendants].” Id. (quoting Email from Plaintiffs’ Counsel to Defendants’ Counsel, dated May 2, 2014, annexed to Pl.’s Mot. to Compel as Ex. “G”). In particular, Plaintiffs’ counsel made the following offer:
7. Please consent to an order allowing Plaintiffs to hire a forensic examiner to examine the hard drives of Defendants’ electronic equipment, including any hard drives of any equipment used for the business of Rhema. Plaintiffs agree to pay for the examination, unless the examiner finds discoverable matter, in which case the cost shall be borne by Defendants. This is standard. I will provide you with a standard form of protocol and order for such examination.
Plaintiffs argue that Defendants have breached their obligation to ensure preservation of ESI that is responsive to Plaintiffs’ requests for production. Id. at 2-3. As Plaintiffs point out, the Court reminded counsel of her obligations to oversee and supervise the production of relevant ESI at the April 10, 2014 conference: The Court directed Defendant Palmer and his attorney to review all
email available back to 2006 and to produce copies of the responsive emails to plaintiffs’ counsel by April 25, 2014. Defendants’ counsel is reminded that she has a duty under existing case law to supervise and oversee the production of those emails and that this is not a task left to the discretion of the defendant Palmers. Counsel is expected to review the computer and junk drive and to take steps to ensure that the production is accurate and complete.
DE 44 ¶ 5. However, Defendants have failed to comply. See Pl.’s Mot. to Compel at 3.
Plaintiffs claim that Defendants communicated extensively by email with Plaintiffs and other parties involved in the events giving rise to this RICO action. Id. at 5. However, Defendants produced no emails or ESI materials in their Rule 26(a) Initial Disclosures. Id. Defendants have also made inconsistent representations concerning the ESI within their custody. Id. For example, on January 6, 2014, Defendants claimed they had no ESI to produce, see DE 41, but subsequently, on April 23, 2014, Defendants produced 17 emails dated from 2006 to 2009. Id. In light of these inconsistent representations, Plaintiffs contend that there is yet more ESI to be discovered. Id. For example, Plaintiffs have annexed a June 23, 2007 email between Plaintiffs and Rhema Corp. to their motion papers, “which is nowhere to be found in Defendants’ production to Plaintiffs on April 23, 2014.” Id. According to Defendants, “[i]t is highly unlikely that Defendants (and Rhema Corp.) operated an investment advisory business without the persistent use of computers, e-mails, and data storage devices.” Id. In light of these inconsistencies, Defendants’ failure to comply with their preservation obligations, and the evidence of gaps in their ESI production, the Plaintiffs seek appropriate relief from the Court Id.
*10 At the outset, Defendants note that “this motion is about the Plaintiff[s] wanting the Defendants Palmer to pay for the cost of [f]orensic evaluation of an inoperative computer.” See Defs.’ Opp’n at 1. During the May 1, 2014 meet-and-confer, Defendants’ counsel asserted that her two primary objections to paying for a forensic evaluation were that (1) the costs of the evaluation to be borne by Palmer Defendants “could be thousands of dollars” and (2) the claims at issue are “not based on security investments, which are strongly data driven,” but rather, consist of “three real estate transactions” to which Defendants acted as the brokers. Id. at 1-2. Real estate contracts, according to Defendants’ counsel, are “primarily paper based, where deeds, contracts, and mortgages are the basis of most transactions.” Id. at 2.
Moreover, Defendants note that they produced all emails in the custody of Andre Palmer. Id. Counsel directed Palmer to “get all correspondence on email concerning this case that was available through his internet based email account.” Id. Defendants’ counsel suggests that Palmer “retrieved all of the demanded emails that appeared after searching for the Plaintiff’s name-and the name of other Defendants, which I gave to opposing counsel.” Id. Counsel even allowed for Plaintiffs to submit any objections they may have after reviewing these emails. Id.
Defendants’ counsel also maintains that she has complied with her ESI preservation obligations. Id. at 3. Defendants note that “[t]he computer that was in use during the time the cause of action arose, (which was during the years 2006-2009) was replaced. Replaced simply means that my clients no longer use it because, as is customary with many computers, it was slowing down after many years of usage, was freezing, and was losing its functionality.” Id. Counsel states that “[t]he computer is in the same inoperable state that it has been for approximately five years!” Id. Although a new computer was purchased, the old one was not thrown away “due to the sensitive information that was on the computer from the clients that DID invest with Defendant Andre Palmer concerning securities.” Id. (emphasis in original). Contrary to Plaintiffs’ contentions, Defendants note that, pursuant the directives issued by the Court at the April 10, 2014 conference, Defendants “printed out each and every email that was disclosed as part of the search. No emails were withheld. To indicate why certain emails were not retained that were written over 7 to 8 years ago, would require speculation.” Id. at 3-4. Moreover, all relevant emails in this case should already be in the Plaintiffs’ custody, argues Defendants’ counsel, because it was the Defendants who emailed Plaintiffs during the events at issue in this action. Id. at 4. Thus, Plaintiffs would be aware if Defendants were withholding any emails by simply reviewing their own inboxes. Id.
With respect to the January 23, 2007 email discovered by Plaintiffs but missing from Defendants’ production, Defendants note that “[s]aid emails have no substantial information.” Id. at 4. For example, “[s]ome emails have two words, like ‘see attached’ – as indicated in the June 23, 2007 email, - and the attached document that subsequently follows the email is a contract of property that the Plaintiff[ ]s[’] invested in California.” Id. The email attachment (i.e., the contract) was already produced to Plaintiffs’ counsel in their Initial Disclosures. Id.
Having reviewed the parties’ arguments concerning Defendants’ ESI production as well as the evidentiary submissions attached to the motion papers, the Court finds that Defendants have not fully complied with their ESI preservation and production obligations. At the April 10, 2014 conference, the Court explained that Defendants’ “[c]ounsel is expected to review the computer and junk drive and to take steps to ensure that the production is accurate and complete.” DE 44 ¶ 5. Subsequently, Defendants produced to Plaintiffs’ counsel a total of seventeen (17) emails including four (4) email attachments going back to 2006. See Defs.’ Opp’n, Ex. “A.” This appears to be a very small number of emails for a RICO matter involving numerous defendants dating back nearly ten years. Moreover, Plaintiffs point to the absence of the June 23, 2007 email from Defendants’ production. Although counsel for Defendants states that there was nothing relevant within this email and that the attachment was already produced in paper discovery, the Court finds this disclosure to be a further basis to question whether counsel’s oversight of Defendants’ email search was truly “accurate and complete.”
*11 According to Defendants’ counsel, she “required [her] client to get all correspondence on email concerning this case that was available through his internet based email account.” See Defs.’ Opp’n at 2. Andre Palmer then “retrieved all of the demanded emails that appeared after searching for the Plaintiff’s name-and the name of other Defendants, which [Defendants’ counsel] gave to opposing counsel.” Id. Counsel for Defendants states that her client “used the search engine feature of the email, and printed out each and every email that was disclosed as part of the search” and that “[n]o emails were withheld.” Id. at 3-4. Counsel asserts that it would “require speculation” to determine “why certain emails were not retained that were written over 7 to 8 years ago.” Id. at 4. The Court finds that counsel’s summary of Defendants’ ESI search lacks sufficient detail. Significantly, there is no indication whether counsel herself was even present during the search or supervised it in any respect.
Further, the Court notes that both Plaintiffs testified about the existence of email communications with Defendants during the period in which the allegedly fraudulent transactions transpired. For example, Pastor Hutchins was asked:
Q. Were you ever told that you have a deed giving you property in California?
A. I have E-mails.
Q. You have E-mails saying?
A. E-mails, me asking Andre Palmer, am I on the deed. He answers, I have it, yes, you are on the deed.
See Deposition Transcript of Perry Hutchins, dated April 9, 2014, annexed to Defs.’ Opp’n as Ex. “B” at 27:24-25 to 28:3-7. [DE 58]. Pastor Hutchins was also asked whether he investigated the California property in which Defendants induced him to invest:
Q. Did you ever contact an attorney in California to make sure this deed was filed?
A. I believe I got it, I got an answer from the attorney that there is no record of you being on the deed. I do have an E-mail from Andre Palmer that he said, yes, you are on the deed. I had one E-mail that says, no - - yes, you are on the deed. Then one later that says, no, you are not on the deed. So, that’s how I can answer.
Id. at 29:13-22. Similarly, co-Plaintiff and spouse Marian Hutchins also testified about email communications with Andre Palmer:
Q. From who did you obtain most of your understanding of these investments?
A. I will say this, there was a lot[ ] of communications through E-mails with Andre Palmer that I have.
Q. From you?
A. Yes.
Q. And in these communications, were you asking him details about the investments?
A. Some.
See Deposition Transcript of Marian Hutchins, dated April 9, 2014, annexed to Defs.’ Opp’n as Ex. “C” at 21:8-17 [DE 59]. The sworn testimony of the Plaintiffs reflects the exchange of email communications with Defendants and others associated with the Defendants, for which there must be an accounting by the Defendants.
The Court also takes note of Defendants’ inconsistent representations concerning discovery. While Defendants’ counsel noted that the Palmers have no relevant ESI to produce, counsel subsequently produced a number of emails and other electronic materials after the Court compelled her clients to do so under her direct supervision at the April 10, 2014 conference. The Court concludes that there has not been a thorough vetting by the Defendants of the ESI in this case.
Moreover, the Court is concerned that Defendants failed to implement a litigation hold as early as August 11, 2008 when they received a letter from Plaintiffs’ former attorney requesting “status updates” concerning the repayment of their loans and/or settlement of their real estate investments in connection with the Allendale Road and Park Heights properties in Baltimore, Maryland. See Pl.’s Mot. to Compel, Ex. “H” [DE 55-8]. There is no indication that Defendants did so here. It is well-settled that the duty to preserve arises, not when litigation is certain, but rather when it is “reasonably foreseeable.” Byrnie v. Town of Cromwell, Bd. of Educ., 243 F.3d 93, 107 (2d Cir. 2001); see F.D.I.C. v. Malik, No. 09 Civ. 4805, 2012 WL 1019978, at *1 n.1 (E.D.N.Y. Mar. 26, 2012) (holding that duty to preserve arose when attorneys who allegedly destroyed documents represented the plaintiff in the underlying transaction at issue); In re Semrow, No. 03 Civ. 1142, 2011 WL 1304448, at *3 (D. Conn. Mar. 31, 2011) (holding that duty to preserve vessel arose prior to commencement of suit because the fact that fatalities occurred should have put party on notice of future litigation); Siani v. State Univ. of New York at Farmingdale, No. 09 Civ. 407, 2010 WL 3170664, at *6 (E.D.N.Y. Aug. 10, 2010) (holding that receipt of letter informing defendants of alleged discrimination and intent to pursue claim triggered duty to preserve); see also Zubulake v. UBS Warburg LLC, 229 F.R.D. 422 (S.D.N.Y. 2004) (holding that the duty to preserve relevant documents begins once a party “reasonably anticipates litigation.”); Creative Res. Gr. of New Jersey, Inc. v. Creative Res. Grp., 212 F.R.D. 94, 106 (E.D.N.Y. 2002) (concluding that the duty to preserve arose months prior to the commencement of the lawsuit when the problems that eventually led to the filing of the lawsuit first surfaced).
*12 The Court finds here that Palmer Defendants’ duty was triggered once the demand letter was served by Plaintiffs’ prior counsel in August 2008. Simply because suit was not commenced until November 2012 does not change the triggering of their preservation obligations. See Abcon Assocs. v. Haas & Najarian, No. 12 Civ. 928, 2014 WL 4981440, at *9 (E.D.N.Y. Oct. 6, 2014) (“The fact that Abcon waited over two years to commence this action does not change the fact that this suit was reasonably foreseeable at that time.”) (internal citation omitted).
“A party’s discovery obligations do not end with the implementation of a litigation hold – to the contrary, that’s only the beginning ... [c]ounsel must oversee compliance with the ligation hold, monitoring the party’s efforts to retain and produce the relevant documents.” Scalera, 262 F.R.D. at 177(outlining the steps that counsel should take to ensure compliance with preservation obligations). There is a substantial question whether the Palmer Defendants breached their obligation to preserve the integrity of the old and apparently now “inoperable” computer. The Court finds Defendants’ response to this issue woefully deficient. Defendants have not articulated all steps that were taken to preserve the computer after it was “replaced” in 2010, how any materials were copied or downloaded from the old computer, who has accessed the computer at any time since 2010, what attempts were specifically made by Defendants, or a vendor, or anyone else for that matter, among other things. Nor has there been an articulation by counsel as to what exactly she did to comply with the Court’s directives to her regarding the supervision of the search.
For all of these reasons, the Court finds justification for the concerns raised regarding the accuracy and comprehensiveness of Defendants’ ESI production. Accordingly, the Court will permit Plaintiffs’ counsel to conduct a separate deposition of Defendant Andre Palmer (and Opal Palmer if necessary) to explore in greater detail all of the steps undertaken to preserve ESI, including the “inoperable computer” from August 2008 when Defendants received the demand letter from Plaintiffs’ prior counsel. See Alter v. Rocky Point Sch. Dist., No. 13 Civ. 1100, 2014 WL 4966119, at *3 (ED.N.Y. Sept. 30, 2014) (noting that the defendant was previously directed at a status conference “to produce an affidavit from Ms. Wilson within ten days setting forth the particulars of how she conducted the search(es) for relevant documents and ESI responsive to the discovery demands served by the [P]laintiff.”) (internal quotation omitted); Distefano v. Law Offices of Barbara H. Katsos, PC, No. 11 Civ. 2893, 2013 WL 1339548, *1-2 (E.D.N.Y. Mar. 29, 2013) (requiring defendants to produce affidavit detailing the circumstances surrounding the loss of ESI during a prior discovery conference). The Court directs that the deposition be conducted within thirty (30) days of this Order. The cost of this ESI deposition shall be borne by the Defendants and Plaintiffs’ counsel is on notice that the Court expects the time expended to be held to a minimum.
Further, the Court will permit Plaintiffs’ counsel to utilize a “third-party forensic computer analyst to examine the Palmers’ devices that are likely to contain relevant ESI” once the special deposition of Andre Palmer is completed and if Plaintiffs’ counsel still wishes to proceed with the forensic examination. If Plaintiffs’ counsel decides to do so, then he is directed to proceed in accordance with his original offer to the Defendants (see Pls.’ Mot. to Compel, Ex. “G”) - - Plaintiffs to pay for the initial examination. SeePl.’s Mot. to Compel at 5. If the examination finds discoverable material, then Plaintiffs’ counsel must come back to the Court before proceeding further and provide the Court with a written estimate of the potential cost from Plaintiffs’ vendor to retrieve that information for the Court to review. Plaintiffs’ counsel will have 14 days from the completion of the special deposition of Andre Palmer to provide the estimate to the Court. Plaintiffs have not satisfied the seven-factor test set forth in Zubulake to show that the costs of any forensic examination of ESI should be shifted to the Palmer Defendants. See Defs.’ Opp’n at 4-6 (citing Zubulake, 217 F.R.D. 309).
*13 Finally, Plaintiffs move for sanctions to be imposed on Defendant under Fed. R. Civ. P. 37(b), since Defendants’ production of emails and ESI was not “accurate and complete.” The Court, however, is deferring the question of any further sanctions being imposed until the foregoing matters have been concluded.
Accordingly, Plaintiffs’ motion to compel ESI discovery is GRANTED, in part, and DENIED, in part.
B. Palmer Defendants’ Motion to Quash
Under Rule 45 of the Federal Rules of Civil Procedure, “[o]n timely motion, the issuing court must quash or modify a subpoena that . . . requires disclosure of privileged or other protected matter, if no exception or waiver applies; or subjects a person to undue burden.” Fed. R. Civ. P. 45(c)(3)(A)(iii)-(iv). “The party issuing the subpoena must demonstrate that the information sought is relevant and material to the allegations and claims at issue in the proceedings.” Night Hawk Ltd. v. Briarpatch Ltd., 03 Civ. 1382, 2003 WL 23018833, at *8 (S.D.N.Y. Dec. 23, 2003); see also Salvatorie Studios, Int’l v. Mako’s Inc., 01 Civ. 4430, 2001 WL 913945, 2001 WL 913945, at *1 (S.D.N.Y. Aug. 14, 2001). Relevance “has been construed broadly to encompass any matter that bears on, or that reasonably could lead to other matter that could bear on any issue that is or may be in the case.” Oppenheimer Fund, Inc., 437 U.S. 340, 351; Maresco v. Evans Chemetics, Div. of W.R. Grace & Co., 964 F.2d 106, 114 (2d Cir. 1992)(noting that the scope of discovery under Rule 26(b) is “very broad”); Annunziato v. Collecto, Inc., 296 F.R.D. 112, 119-20 (E.D.N.Y. 2013); Barrett, 237 F.R.D. at 40 (noting that the information sought “need not be admissible at trial to be discoverable”).
“Once the party issuing the subpoena has demonstrated the relevance of the requested documents, the party seeking to quash the subpoena bears the burden of demonstrating that the subpoena is over-broad, duplicative, or unduly burdensome.” Kingsway Fin. Servs., Inc. v. Pricewaterhouse-Coopers LLP, No. 03 Civ. 5560, 2008 WL 4452134, at *4 (S.D.N.Y. Oct. 2, 2008); see John Wiley & Sons, Inc. v. Doe Nos. 1-30, 284 F.R.D. 185, 189 (S.D.N.Y. 2012) (burden on motion to quash is borne by the moving party) (citing Pegoraro v. Marrero, No. 10 Civ. 0051, 2012 WL 1948887, at *4 (S.D.N.Y. May 29, 2012); Ford Motor Credit Co. v. Meehan, No. 05 Civ. 4807, 2008 WL 2746373, at *5 (E.D.N.Y. July 11, 2008) (“The burden of persuasion in a motion to quash a subpoena ... is borne by the movant.”) (citing Sea Tow Int’l, Inc. v. Pontin, 246 F.R.D. 421, 424 (E.D.N.Y. 2007)).
Further, “[a] determination to grant or deny ... a motion to quash a subpoena is discretionary.” John, 284 F.R.D. 185, 189 (citing Pegoraro, 2012 WL 1948887, at *4); see In re Subpoena Issued to Dennis Friedman, 350 F.3d 65, 68 (2d Cir. 2003); Solomon v. Nassau Cnty., 274 F.R.D. 455, 460 (E.D.N.Y. 2011) (“Motions to quash subpoenas under the Rules are ‘entrusted to the sound discretion of the district court.’ ”) (quoting In re Fitch, Inc., 330 F.3d 104, 108 (2d Cir. 2003)); Libaire v. Kaplan, 760 F. Supp. 2d 288, 291 (E.D.N.Y. 2011) (“The decision whether to quash or modify a subpoena is committed to the sound direction of the trial court.”) (citations omitted). Further, as a general matter, a district court has broad latitude to determine the scope of discovery and to manage the discovery process. See, e.g., EM Ltd. v. Republic of Argentina, 695 F.3d 201, 207 (2d Cir. 2012) (citing In re Agent Orange Prod. Liab. Litig., 517 F.3d at 103).
*14 Here, the Palmer Defendants move to quash the subpoena served by Plaintiffs on Charles Schwab. Defendants assert that the subpoena: (1) seeks to circumvent the rules for discovery between parties under Rule 34by using a Subpoena to obtain the receipt of information already requested in a pending motion to compel ESI; (2) requires disclosure of privileged or protected matter under the Federal Rules of Civil Procedure and; (3) requires disclosure of a trade secret or confidential research, development, or commercial information under Fed. R. Civ. P. 45(d)(3)(B)(i). The June 30, 2014 subpoena served on Charles Schwab calls for the production of
[a]ny and all records of transactions by Sheryl (Opal) Palmer and/or Andre Palmer and/or Rhema Wealth Management Corporation, including without limitation JP Morgan Account 786411694 at Location 00460 in or about New York City, from March 1, 2006, through and including the date of your response to this subpoena.
See Defs.’ Mot. to Quash, Ex. “A” [DE 64-1].
As a threshold matter, Defendants concede that when a subpoena is issued on a non-party, a motion to quash must be brought by the recipient of the subpoena. Defendants claim that an exception applies here, namely, that if a “party claims a personal right or privilege regarding the production sought by the subpoena on the non-party, the party has standing to move to quash or modify the subpoena.” Alloco Recycling Ltd. v. Doherty, 220 F.R.D. 407, 411 (S.D.N.Y. 2004) (defendant had standing to raise privilege objections to the subpoenaed documents because the documents sought came out of the obligations that a third-party had with defendant). Plaintiffs assert that Defendants lack standing to quash, contending that only non-party Charles Schwab may move to quash since they are the party named as the respondent in the subpoena. Pls.’ Opp’n at 2-3. However, the Court finds that since Plaintiffs are clearly seeking materials related to “any and all records of transactions” of the Palmer Defendants and/or their corporation, Defendants have standing to quash this subpoena.
Next, Plaintiffs contend that Defendants’ motion is time-barred. See Pl.’s Opp’n at 3 (citing Horace Mann Ins. Co. v. Nationwide Mut. Ins. Co., 240 F.R.D. 44,47 (D. Conn. 2007) (“The Second Circuit has held that a party objection to a subpoena for production and inspection must set forth all of its grounds for objection, including privilege grounds, within fourteen days of service of the subpoena.”) (citing DC Creditor Corp. v. Dabah, 151 F.3d 75, 81 (2d Cir. 1998)). Whereas Plaintiff served their initial subpoena on Charles Schwab on May 21, 2014, Defendants did not move to quash until June 26, 2014. Id.
“On its face, however, this 14-day deadline applies to the person who is the subject of the subpoena...” Univ. Sports Publ’ns Co. v. Playmakers Media Co., No. 09 Civ. 8206, 2011 WL 1143005, at *3 (S.D.N.Y. Mar. 21, 2011). That “same deadline does not apply to [Defendants], which moved to quash the subpoena on the basis of privilege.” Id. (citing Estate of Ungar v. Palestinian Auth., 332 Fed. Appx. 643, 645 (2d Cir. 2009) (summary order) (finding that a party has standing to raise a privilege claim regarding the material sought in a subpoena directed to a non-party witness); New York Marine & Gen. Ins. Co. v. Tradeline LLC, 186 F.R.D. 317, 321 (S.D.N.Y. 1999) (“There is no ‘unmistakable deadline [in Rule 45] for assertion of objections,’ at least to the extent they concern privileges.”) (quoting In re DG Acquisition Corp., 151 F.3d 75, 81-82 (2d Cir. 1998)). “Rule 45contemplates that a party’s privilege claim can be raised even after documents have been produced pursuant to a non-party subpoena.” Univ. Sports Publ’ns Co., 2011 WL 1143005, at *3 (citing Fed. R. Civ. P. 45(d)(2)(B) (setting forth the procedure for a person raising a privilege claim with respect to “information produced in response to a subpoena”)). Accordingly, the Palmer Defendants’ motion is not untimely.
*15 Defendants’ counsel further claims that this subpoena is an attempt by Plaintiffs to circumvent discovery. Specifically, Defendants note that they have opposed Plaintiffs’ pending motion to compel on the grounds that disclosure of their former clients’ personal identifying information is improper, irrelevant, and a breach their clients’ privacy interests. Moreover, Plaintiffs have sought, via a third-party, the same category documents which Defendants contend should be withheld from disclosure and are at issue in the pending motion to compel. Defendants further assert that Plaintiffs’ subpoena is overbroad. Accordingly, Defendants assert that they are entitled to a protective order, pursuant to Fed. R. Civ. P. 45(c)(2).
For their part, Plaintiffs argue that there is sufficient relevance in the information sought from the subpoenaed parties. See AP Links, LLC. v Russ, 299 F.R.D. 7, 11 (E.D.N.Y. 2014) (“Relevance has been construed broadly to encompass any matter that bears on, or that reasonably could lead to other matter that could bear on any issue that is or may be in the case.”) (internal quotation omitted). Plaintiffs assert that the Defendants “engaged in a pattern and practice of soliciting and accepting cash from individuals throughout the United States for the purpose of investigating in securities or real estate in order to provide the ‘investor’ with a profit.” Amended Compl. ¶ 81. Further, the Plaintiffs point out that Defendants have a mistaken understanding of Rule 45. Discovery produced pursuant to a subpoena served under Rule 45 does not need to be admissible at trial; rather, the materials need only bear relevance to the claims or defenses of the case.
The Court finds that the requested materials fall within the broad scope of “relevance” as construed under Rule 45. These bank records are relevant to determining what the Palmer Defendants actually did with the funds received during the course of the allegedly fraudulent real estate transactions at issue in this RICO action. Plaintiffs have requested materials dating back to the beginning of the allegations in this case - - 2006. The Court has similarly allowed Plaintiffs to conduct discovery in other areas (i.e., emails) going back to this time period. In addition, the subpoena is not an improper circumvention of discovery. In her opposition to Plaintiffs’ May 16, 2014 motion to compel, Defendants’ counsel noted that she “consented to opposing counsel...subpoenaing whatever bank documents that may exist from the Bank. I even supplied the Bank Account, and Bank institutions from which he may issue a subpoena.” See Defs.’ Opp’n at 2. With this representation, the Court is hard-pressed to find that the Plaintiffs have circumvented discovery.
The Palmer Defendants assert that the subpoenaed documents arose from an obligation that Charles Schwab had with Defendant Andre Palmer’s investment firm, Rhema Wealth Management and that the materials are therefore privileged. See Defs.’ Mot. to Quash at 3-4. Plaintiffs claim that Defendants have failed establish that the subpoenaed materials are privileged in any way. Rule 45(e)(2)(A) requires that the party asserting the privilege to both “(i) expressly make the claim” of privilege and “(ii) describe the nature of the withheld communications.” The burden of establishing the privilege “cannot be met by ‘mere conclusory or ipse dixit assertions’ in unsworn motion papers authored by attorneys.” Gulf Islands Leasing, Inc. v. Bombardier Capital, Inc., 215 F.R.D. 466, 472 (S.D.N.Y. 2003) (quoting von Bulow by Auersperg v. von Bulow, 811 F.2d 136, 146 (2d Cir. 1987); United States v. Ackert, 169 F.3d 136, 139-140 (2d Cir. 1999) (communication between an attorney and an investment-advisor about a client’s prospective transaction was not privileged). Defendants offer no support for their conclusion that “an obligation of utmost privacy” is “inherent” in their fiduciary duty to their former clients. Defs.’ Opp’n at 4. Further, Defendants have failed to offer the Court with any authority suggesting that a privilege attaches to the actual transactions entered into between Defendants and their former clients. Id.
*16 Although the Court doubts that any privilege attaches to the subpoenaed records requested from Charles Schwab, in an abundance of caution, the Court is directing Plaintiffs’ counsel to take steps to have the subpoenaed documents made returnable directly to this Court. See Green v. Beer, No. 06 Civ. 4156, 2010 WL 3422723, at *4-5 (S.D.N.Y. Aug. 24, 2010) (communications between the plaintiff’s counsel and financial advisors was not privileged because the financial advisors did not serve “some specialized purpose in facilitating the attorney-client communication”) (internal citations omitted). Once the Court receives the documents, the Court will set up a time with Defendants’ counsel to come to the Court to undertake a privilege review of the documents at issue under the Court’s supervision.
Accordingly, the Palmer Defendants’ motion to quash is DENIED.
C. Plaintiffs’ Motion to Extend Discovery
Finally, Plaintiffs request that discovery be extended in light of the outstanding discovery issues in this case. See DE 60. At the April 10, 2014 status conference, the Court ordered that fact depositions and discovery shall be completed by June 30, 2014, adding that “[t]he Court has no intention of extending this date.” DE 44 ¶ 8. Notwithstanding Defendants’ opposition to this request, the Court finds that there exists “good cause” to extend discovery at this juncture. In light of the issues surrounding Defendants’ ESI production and the non-party subpoenas, discovery has been delayed in this matter. Moreover, these issues will likely impact the completion of depositions in this case as well. Defendants’ counsel has already offered to produce her clients for depositions over the course of three days. These depositions cannot proceed until there is an assurance that all discovery has been produced to Plaintiffs.
Accordingly, the Court is GRANTING the motion to extend discovery, without date at this time. The Court will implement the remaining deadlines for the final pre-trial phase at of this case once the issues addressed in this Memorandum and Order have been resolved.
IV. CONCLUSION
In light of the foregoing findings, Plaintiffs’ motion to compel discovery [DE 55] is GRANTED, in part, and DENIED, in part; Defendants’ motion to quash [DE 64] is DENIED; and Plaintiffs’ motion to extend discovery [DE 60] is GRANTED, to the extent set forth in this Memorandum and Order.
SO ORDERED.