Allstate Ins. Co. v. All Cnty., LLC
Allstate Ins. Co. v. All Cnty., LLC
2020 WL 5668956 (E.D.N.Y. 2020)
September 22, 2020
Bulsara, Sanket J., United States Magistrate Judge
Summary
The court granted the motion for a protective order to quash the subpoenas served on JPMorgan Chase Bank N.A., First Central Savings Bank, Israel Discount Bank of New York, and Gregory Dellicarpini, CPA by Plaintiffs. The court found that the subpoenas were overly broad and unduly burdensome, and that Allstate had failed to establish relevance and proportionality. The court also noted that any future subpoena request must contain appropriate cover instructions.
ALLSTATE INSURANCE COMPANY, ALLSTATE INDEMNITY COMPANY, ALLSTATE PROPERTY & CASUALTY INSURANCE COMPANY, and ALLSTATE FIRE & CASUALTY INSURANCE COMPANY, Plaintiffs,
v.
ALL COUNTY, LLC, DAVID R. PAYNE, M.D., JEFFREY BYRNE, THOMAS MALLILO, GEORGIA MALLILO, ROBIN GROSSMAN, FRANK MONTERISI, MDHB VENTURES, INC., and ALLIED MANAGEMENT GROUP, LLC, Defendants
v.
ALL COUNTY, LLC, DAVID R. PAYNE, M.D., JEFFREY BYRNE, THOMAS MALLILO, GEORGIA MALLILO, ROBIN GROSSMAN, FRANK MONTERISI, MDHB VENTURES, INC., and ALLIED MANAGEMENT GROUP, LLC, Defendants
19-CV-7121-WFK-SJB
United States District Court, E.D. New York
Signed September 22, 2020
Counsel
Emily Sarah Schierhorst, Jasmine Garcia-Vieux, Nathan A. Tilden, Richard D. King, Jr., Smith & Brink, P.C., Garden City, NY, Michael W. Whitcher, Shauna L. Sullivan, Smith & Brink, P.C., Braintree, MA, for Plaintiffs.Ira Levine, Massapequa, NY, A. Ross Pearlson, Melissa Falk Wernick, Chiesa Shahinian & Giantomasi PC, New York, NY, Stephen Abraham Strauss, Law Office of Stephen A. Strauss, P.C., Whitestone, NY, for Defendants.
Bulsara, Sanket J., United States Magistrate Judge
ORDER
*1 Defendants All County, LLC (“All County”), David R. Payne, M.D., Jeffrey Byrne, Thomas Mallilo, Georgia Mallilo, Robin Grossman, Frank Monterisi, MDHB Ventures, Inc. (“MDHB”), and Allied Management Group, LLC (“Defendants”) have moved to quash subpoenas served on JPMorgan Chase Bank N.A. (“JPMorgan”), First Central Savings Bank, Israel Discount Bank of New York, and Gregory Dellicarpini, CPA by Plaintiffs (collectively, “Allstate”). (Defs.’ Mot. to Quash Subpoenas dated June 4, 2020 (“Mot.”), Dkt. No. 41). The subpoenas seek, in essence, all of Defendants’ financial information, including all books and records for the past decade from All County's banks and its accountant.
Allstate alleges that All County—which provides diagnostic radiology services under New York's “no-fault” insurance law—made misrepresentations to the Department of Health when it applied for Article 28 licensure, including about its true ownership. (Compl. dated Dec. 19, 2019, Dkt. No. 1, ¶¶ 161–262). Relying on State Farm Mutual Automobile Insurance Co. v. Mallela, 4 N.Y.3d 313 (2005), Allstate contends it is entitled to claw back all payments made to All County.
Rule 45 of the Federal Rules of Civil Procedure permits a party to serve a subpoena on a third-party for the production of documents. Fed. R. Civ. P. 45(a)(1)(A)(iii). A court must quash a subpoena that subjects a person to an undue burden, see id. r. 45(d)(3)(A)(iv), but a person who is not the subpoena recipient cannot move to quash on burden grounds, even if the person has standing to object to the subpoena, see, e.g., Powell v. Allied Universal Sec. Servs., No. 17-CV-6133, 2018 WL 4378168, at *1 (E.D.N.Y. Aug. 9, 2018); Malibu Media, LLC v. Doe No. 4, No. 12-CV-2950, 2012 WL 5987854, at *2 (S.D.N.Y. Nov. 30, 2012).
Although labeled as a motion to quash, All County objects to the subpoenas here on the grounds of relevance and proportionality. A Rule 45 subpoena—like all discovery—must fit within the scope of discovery permitted in a civil case. That is, discovery is limited to “any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case.” Fed. R. Civ. P. 26(b)(1); In re Refco Sec. Litig., 759 F. Supp. 2d 342, 345 (S.D.N.Y. 2011) (“Subpoenas issued under Rule 45 are subject to the relevance requirement of Rule 26(b)(1).”). A court may issue a protective order prohibiting discovery that exceeds these limits. Fed. R. Civ. P. 26(c)(1) (“The court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense, including ... forbidding inquiry into certain matters, or limiting the scope of disclosure or discovery to certain matters[.]”). Thus, All County's motion to quash is best understood as a motion for protective order, though courts often use the language of quashing a subpoena when discussing relevance and proportionality.
For the reasons explained below, the motion for a protective order is granted.
*2 Allstate contends that Defendants lack standing to object to the subpoena. (Pls.’ Opp. to Mot. dated June 8, 2020 (“Opp.”), Dkt. No. 44, at 2–3). “[I]n general, a litigant will be able to establish the necessary standing to challenge a subpoena issued to a non-party where the litigant is able to assert ‘a personal right or privilege with regard to the subpoenaed information.’ ” Sky Med. Supply Inc. v. SCS Support Claim Servs., Inc., No. 12-CV-6383, 2017 WL 1133349, at *8 (E.D.N.Y. Mar. 24, 2017) (quoting Allstate Ins. Co. v. A & F Med. P.C., No. 14-CV-6756, 2016 WL 7116067, at *2 (E.D.N.Y. Dec. 6, 2016)). Though the subpoenas are directed to third parties, because the subpoenas seek financial information about All County, it has standing to seek relief. Id. (“In this Circuit, courts are generally in agreement that financial records (including banking records) fall within the scope of information to which a party enjoys a personal right or privilege.” (collecting cases)); see also Equinox Gallery Ltd. v. Dorfman, No. 17-CV-230, 2018 WL 637764, at *1 & n.1 (S.D.N.Y. Jan. 22, 2018) (“[G]iven that the asset discovery that Defendants are opposing relates to the existence and alleged dissipation of Defendants’ assets, this Court accepts that, based on their privacy interest in their own financial information, Defendants have standing to move to quash the subpoena at issue.”). In any event, the question of standing is beside the point where the objection to the subpoena is on relevance or proportionality—as All County's is—and the motion is properly understood as one for a protective order. Hughes v. Hartford Life & Accident Ins. Co., No. 19-CV-1611, 2020 WL 2615531, at *14 (D. Conn. May 22, 2020) (“Even if Hartford has no standing, the Court certainly does. In cases where the party lacks standing to challenge a subpoena served on a non-party, the Court may nevertheless exercise its inherent authority to limit irrelevant or non-proportional discovery.”).
Allstate attempts to justify the subpoenas by arguing that the information is relevant—on the theory that Defendants’ records are necessary to establish the illegal ownership and operation of All County through a “money trail.” (Opp. at 1, 3–5). To be sure, financial information can be helpful to show a relationship between entities, which, although not dispositive to ownership, is indicative of a common linkage. The problem with Allstate's argument is that its relevance argument is made in a vacuum—it more or less ignores the proportionality and overbreadth objections raised by All County. In addition to being relevant, document requests must be proportional, even when directed to a third-party. Sky Med. Supply Inc., 2017 WL 1133349, at *11 (“Although the financial documents sought are relevant, they must also be proportional to the needs of the case.”). Rule 26 contains the parameters for reviewing proportionality, namely “the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.” Fed. R. Civ. P. 26(b)(1); see also Fed. R. Civ. P. 26(b)(1) advisory committee's note to 2015 amendments (“The present amendment restores the proportionality factors to their original place in defining the scope of discovery.”). Allstate's requests are disproportionate under these standards.
Instead of asking for financial information about transactions between All County and MDHB or other non-licensed corporation, for example, the subpoenas take a blunderbuss approach. Although Allstate's motion papers state the subpoenas are “narrowly-tailored to seek specific documents related to transactions between the Defendants and others,” (Opp. at 5), the subpoenas belie the assertion. If that is all the subpoenas sought, then the overbreadth issues would be far less significant. But the subpoenas are not so limited. For example, the subpoena to JPMorgan identifies a single All County account—and asks for all “documents,” which includes account application documents, accounting opening documents, all statements, cancelled checks, wire transfers (regardless of source) in and out of the account, and “[a]ny and all related correspondence.” (Subpoena to JPMorgan dated Mar. 5, 2020 (“JPMorgan Subpoena”), attached as Ex. A to Certification of A. Ross Pearlson, Esq., Dkt. No. 42, §§ III.2, IV.1). Each of the other bank subpoenas operates in the same way: they seek all documents any way related to an account for a ten-year period, dating from January 1, 2010. (Id. § IV.1; Subpoena to First Central Savings Bank dated Mar. 5, 2020, attached as Ex. A to Certification of Ross Pearlson, Esq. Dkt. No. 42, § IV.1; Subpoena to Israel Discount Bank of New York dated Mar. 5, 2020, attached as Ex. A to Certification of Ross Pearlson, Esq. Dkt. No. 42, § IV.1).
*3 As for the subpoena to All County's accountants, Gregory Dellicarpini, CPA, it is breathtaking in its scope. It seeks all of the documents, for a six-year period, reflecting “any accounting services” provided to Defendants, including but not limited to those related to tax-preparation services; all ledgers, journals, and profit and loss statements; all documents relied on to calculate Defendants’ income or report tax deductions, including officer compensation, as well as repairs, advertising, marketing, and office expenses; all communications with any Defendant; and all bills for any accounting services. (Subpoena to Gregory Dellicarpini, CPA dated May 29, 2020, attached as Ex. A to Certification of Ross Pearlson, Esq., Dkt. No. 42, §§ II(O), III).
Allstate should have been more straightforward: instead of enumerating 12 categories of documents, it should have said “all documents in any way related to All County.” The detail in the accountant subpoena merely highlights the broad nature of the request; there is no document related to All County that would escape production. Allstate does little to explain or justify such a subpoena. Asking an accountant to turn over every document related to a client is nothing more than a fishing expedition into the financial affairs of the target. E.g., Henry v. Morgan's Hotel Grp., Inc., No. 15-CV-1789, 2016 WL 303114, at *2 (S.D.N.Y. Jan. 25, 2016) (“By failing to limit its subpoena to certain categories of documents, Defendant is ‘merely trying to engage in a fishing expedition.’ ” (quoting Lewin v. Nackard Bottling Co., No. 10-CV-8041, 2010 WL 4607402, at *1 (D. Ariz. Nov. 4, 2010))). If Allstate were a civil regulatory agency, perhaps such a subpoena would be appropriate; but it is not, and it is subject to the limitations on discovery, for which it must bear the burden of establishing relevance and proportionality, which it has failed to do.
Nor does Allstate answer Defendants’ objection to the temporal scope of the subpoenas. Given the theory of Allstate's complaint, that at the time All County applied for Article 28 licensure it made a false statement, it is not at all obvious that information for that entire period is pertinent and relevant (at least no justification is provided in the briefing). The breadth of the subpoena is not commensurate with the needs of case. See GEICO v. Mayzenberg, No. 17-CV-2802, 2018 WL 10517074, at *3 (E.D.N.Y. June 29, 2018) (modifying Rule 45 subpoenas issued to nonparties in RICO no-fault insurance litigation as “overbroad in that they seek documents and information without a temporal limitation that is proportional to the needs of this case”); Sky Med. Supply Inc., 2017 WL 1133349, at *11 (quashing subpoena in RICO no-fault insurance litigation, in part because—“[a]fter reviewing the overall scope of the Chase Subpoenas—which seek [all] financial documents from 2005 through 2015—the Court finds that as written, the Chase Subpoenas are overly broad and unduly burdensome in scope, especially given the limited nature and extent of the claims comprising the SAC”).
Allstate's other attempts to justify their broad subpoenas are unpersuasive. It cites to two cases—State Farm Mutual Auto Insurance Co. v. Pointe Physical Therapy LLC, 255 F. Supp. 3d 700 (E.D. Mich. 2017) and Allstate Insurance Co. v. Elzanaty, No. 11-CV-3862, 2012 U.S. Dist. LEXIS 171962 (E.D.N.Y. Dec. 4, 2012). Neither aids Allstate. Pointe Physical stands for the unremarkable proposition that a subpoena directed by an insurer to a financial institutional can survive relevance and proportionality review. 255 F. Supp. 3d at 710. But unlike State Farm, which “articulated support for all of the proportionality factors,” id., Allstate ignores virtually all of the proportionality factors in Rule 26(b), and for the reasons previously stated, the subpoenas here have virtually no limit to the information sought about All County. In Elzanaty, the actual breadth of the subpoena not a subject of the opinion—which addresses only relevance and burden of production—since it appears the argument was not raised, and therefore it is of limited utility. 2012 U.S. Dist. LEXIS 171962, at *3–5.
*4 The overbroad nature of the subpoenas warrants a protective order. Allstate can try again, for the third time. (See Order dated May 14, 2020). For example, the bank subpoenas could be limited to and documents sufficient to show the ownership of the accounts, if that is the intention. Or it could attempt to fashion a subpoena that is actually “narrowly tailored” in the fashion it has suggested in its briefs—a limitation that is absent from the subpoenas themselves.
One other point. Any future subpoena request must contain appropriate cover instructions. Allstate's current instructions direct the subpoena recipient to produce additional records beyond those in the actual requests themselves. (E.g., JPMorgan Subpoena, instructions § III(2) (defining “document” to include all correspondence, account statements, account documents, and wire transfers, among other documents)). Such instructions are overly broad. See, e.g., Michael G. Stag, LLC v. Stuart H. Smith, LLC, No. 18-CV-3425, 2019 WL 4918050, at *4 (E.D. La. Oct. 4, 2019) (modifying a nonparty subpoena to exclude “unnecessary and excessively compulsive instructions and definitions”). Such broad instructions also undermine any suggestion that the subpoenas are limited in scope.
SO ORDERED.