Ocean Sky Int'l, LLC v. Limu Co.
Ocean Sky Int'l, LLC v. Limu Co.
2020 WL 13302828 (W.D. La. 2020)
April 23, 2020
Hayes, Karen L., United States Magistrate Judge
Summary
The court denied LIMU's motion to quash the third-party subpoena issued by Ocean Sky to PNC Bank. The court instructed the parties to provide Ocean Sky with the precise name used by Ariix in transferring funds to LIMU's account, and the dates that LIMU received payments from Ariix. The court also instructed the parties to revise the subpoena to limit it to these specific documents, plus documents indicating who opened, controls, and is the account holder of PNC Account No. 1206538986.
Additional Decisions
OCEAN SKY INTERNATIONAL L. L. C., ET AL.
v.
L I M U CO., L.L.C., ET AL
v.
L I M U CO., L.L.C., ET AL
CASE NO. 3:18-CV-00528
United States District Court, W.D. Louisiana
Filed April 23, 2020
Counsel
John C. Roa, Law Office of John C. Roa, Monroe, LA, Scott W. Wellman, Pro Hac Vice, Chris Wellman, Pro Hac Vice, Wellman & Warren, Laguna Hills, CA, for Suni Enterprises Inc., Ocean Sky International Inc.Alexander Chien MacInnes, Pro Hac Vice, George M. Snellings, IV, Thomas G. Zentner, Jr., Nelson Zentner et al., Monroe, LA, Maureen B. Soles, Pro Hac Vice, Robert W. Thielhelm, Jr., Pro Hac Vice, Baker & Hostetler, Orlando, FL, for LIMU Co., L.L.C.
Michael L. DuBos, Patrick Scott Wolleson, Breithaupt DuBos & Wolleson, Monroe, LA, for Gary Raser.
Hayes, Karen L., United States Magistrate Judge
MEMORANDUM ORDER
*1 Before the undersigned magistrate judge, on reference from the District Court, is defendant, The Limu Company, L.L.C. (“LIMU”)'s motion to quash a third-party subpoena pursuant to Rules 45(d)(2)(b), 45(d)(3), and 26(b) of the Federal Rules of Civil Procedure. [doc. # 149].[1]
By this motion, LIMU seeks to quash a subpoena duces tecum issued by plaintiffs Ocean Sky International, Inc. and Suni Enterprises, Inc. (collectively, “Ocean Sky”) to PNC Bank requiring PNC to produce the following documents at their attorney's office in Laguna Hills, California:
1. All monthly bank statements related to PNC Account No. 1206538986 between May 31, 2019 to Present Date. The statements must include all deposits, transfers and withdrawals transacted.
2. All DOCUMENTS indicating who opened, controls and is the account holder of PNC Account No. 1206538986.
3. All copies of images of checks deposited into the PNC Account No. 1206538986 between May 31, 2019 to Present Date.
(M/Quash, Exh. 1).
However, because the subpoena seeks compliance not in this district, but in the Central District of California, this court presently lacks authority to act upon the subpoena, i.e., to quash or modify it. Fed.R.Civ.P. 45(d)(3)(A) (“the court for the district where compliance is required must quash or modify a subpoena ...”).
Nevertheless, because at least some of the issues raised by the motion to quash likely will persist, and in an attempt to circumvent the need for further motion practice in a district court that is unfamiliar with this matter, this court will proceed to provide the parties with some apparently much-needed, albeit non-binding, guidance.
In its motion, LIMU interposed three objections to the subpoena: it required compliance more than 100 miles away from where PNC regularly transacted business; many of the requested documents were not relevant; and the scope of the request was overbroad. Generally, however, only the person to whom the subpoena is directed has standing to challenge its scope or validity. For example, a party does not have standing to assert that a third-party's compliance with a subpoena would place an undue burden on the third-party. Glacier Films (USA), Inc. v. Does 1-29, No. 15-CV-4016, 2015 WL 8989217, at *2 (N.D. Ill. Dec. 15, 2015) (“A defendant cannot claim an undue burden from a subpoena directed at a third party.”); § 65:247 STANDING TO ATTACK A SUBPOENA, 28 Fed. Proc., L. Ed. § 65:247.
Accordingly, LIMU does not have standing to advance challenges to the subpoena's place of compliance or the breadth of discovery, which implicate the third-party's burden in responding to the subpoena. However, LIMU maintains a privacy interest in its bank records, and therefore, enjoys standing to contest the relevancy of plaintiffs' request for all of its bank records. See Old Towne Dev. Grp., L.L.C. v. Matthews, No. 09-224, 2009 WL 2021723, at *1 (M.D. La. July 9, 2009).
*2 As pointed out by LIMU, plaintiffs' fraudulent conveyance claim against defendants is limited to allegations that Ariix directly paid Raser the proceeds for the purchase LIMU's genealogy. (3rd Amend. Compl., ¶¶ 93-96). If PNC Account No. 1206538986 is owned by LIMU, and Ariix made its initial and installment payments to that account, then any subsequent payments or disbursements from LIMU to Raser lie outside the limited scope of the fraudulent conveyance claim, which, by its terms, contemplated a direct payment from Ariix to Raser.[1] Furthermore, contrary to Ocean Sky's suggestion, there is no indication that LIMU completely terminated its operations at the time of the Ariix sale, and thus, there may be any number of transactions with other persons, entities, promoters, etc. that are not relevant to this litigation.
In sum, LIMU should provide Ocean Sky with the precise name used by Ariix in transferring funds to LIMU's account, and the dates that LIMU received payments from Ariix pursuant to the sale. Once received, Ocean Sky should revise its subpoena to limit it to the foregoing, specific deposits from Ariix, plus “[a]ll DOCUMENTS indicating who opened, controls and is the account holder of PNC Account No. 1206538986.”
Given the parties' mixed success on the issues raised herein, the court finds that -- insofar as they are available in the present context -- fees are not warranted under Rule 37(a)(5). Nonetheless, even if not required per se under Rule 37 or Local Rule 37.1, it goes without saying that the parties should endeavor to resolve their discovery disputes amicably between themselves, rather than resorting to judicial intervention before they even have exchanged their respective viewpoints and arguments. To that end, counsel are instructed to reacquaint themselves with their responsibilities and obligations under the Code of Professionalism, applicable to all attorneys who appear before this court. See Standing Order 1.95
Finally, LIMU's request for fees and costs under Rule 11 is unfounded and unwarranted. Fed.R.Civ.P. 11(d).
For these reasons,
IT IS ORDERED that LIMU's motion to quash [doc. # 149 is DENIED.
IT IS FURTHER ORDERED that the parties' cross-requests for fees, costs, and/or expenses [doc. #s 152 and 153] are DENIED.
In Chambers, Monroe, Louisiana, this 23rd day of April 2020.
Footnotes
As this motion is not excepted within 28 U.S.C. § 636(b)(1)(A), nor dispositive of any claim on the merits within the meaning of Rule 72 of the Federal Rules of Civil Procedure, this order is issued under the authority thereof, and in accordance with the standing order of this court. Any appeal must be made to the district judge in accordance with Rule 72(a) and L.R. 74.1(W).
In its response brief, Ocean Sky asks the court to reject a “narrow interpretation” of its Third Amended Complaint that limits its fraudulent conveyance claim to direct payment of funds from Ariix to Raser. See Pl. Opp. Memo, pg. 6, n.4. However, it was Ocean Sky that narrowly drafted its fraudulent conveyance claim. Ocean Sky also emphasizes that one of the essential elements of its claim is to show that the sale caused or increased the obligor's insolvency. La. Civ. Code Art. 2036. Even so, whether LIMU is presently insolvent is no more than minimally relevant to whether the Ariix sale was “fraudulent,” because LIMU's post-sale insolvency could stem from many causes, including the ever-increasing cost of the present litigation. The crux of the matter is whether LIMU (as opposed to Raser) received reasonable consideration for the sale of its genealogy to Ariix. In fact, the relief sought by Ocean Sky via its fraudulent conveyance claim is an order requiring Raser to return to LIMU any proceeds from the sale of LIMU's genealogy that Ariix paid to Raser. See 3rd Amend. Compl. Accordingly, whether or how LIMU spent the consideration that it actually received from Ariix is beyond the scope of Ocean Sky's claim. Indeed, any time a party is sued, there is a risk that that party might take steps to “protect” assets from any judgment. However, there is no evidence that LIMU has engaged in such conduct. Furthermore, as LIMU is wont to say, courts do not routinely permit financial discovery prior to judgment.