*1 This case is before the Court on the Motion to Quash Subpoena Directed to Municipal Bank or, in the Alternative, for a Protective Order (#21) filed by Defendant Anthony Malzone (“Defendant”). Plaintiff Bruce Dickstein (“Plaintiff”) filed a Response (#24) in opposition. For the reasons discussed below, Defendant's Motion to Quash (#21) is granted in part and denied in part.

I. Background[1]

Plaintiff and Defendant are co-founders and general partners of the partnership “Dickstein and Malzone Partnership,” which sometimes does business as “Cornerstone” (the “Partnership”). The Partnership owns forty-seven (47) properties, mostly single-family homes, and rents to tenants. In his Complaint (#1), Plaintiff sues Defendant for Breach of the Partnership Agreement, Breach of Fiduciary Duty, an Accounting, Default Judgment, or alternatively, Dissolution of the Partnership. Plaintiff claims Defendant usurped rental payments due to the Partnership and used them for his personal benefit.

Around 2007, the Partnership purchased forty-seven (47) real estate parcels (the “Properties”). Approximately twenty-two (22) of the Properties are subject to Section 8 of the Housing Act of 1937, 42 U.S.C. § 1437f (“Section 8”). The Partnership finances thirty-four (34) Properties through the Bank of Bourbonnais, where the Partnership maintains its primary bank account (the “Partnership Account”) held in Plaintiff's and Defendant's name.

Historically, Defendant was the partner who primarily collected rent from tenants and Section 8 payments from governmental agencies. Before October 2022, the Kankakee County Housing Authority paid the Section 8 payments by check to Defendant personally. To the best of Plaintiff's knowledge, before October 2022, Defendant received Section 8 housing checks every month, or occasionally, every other month and deposited them into the Partnership Account every month. Tenants directly deposited the rent payments into the Partnership Account, or Defendant collected and deposited them into the Partnership Account.

Around June 2022, Plaintiff states he noticed the Partnership regularly needed extra capital to cover the Properties' mortgage, taxes, and other expenses despite no major changes in rental occupancies. Because Plaintiff had to frequently contribute additional capital to cover expenses, Plaintiff started suspecting around July 2022 that Defendant may be withdrawing Partnership Account funds for his personal benefit.

In September 2022, Plaintiff asked for copies of the Partnership Account records, including checks and deposits relating to the Section 8 housing payments. Plaintiff learned Defendant had been taking part of some Section 8 payments in cash instead of depositing the entire check into the Partnership Account. Plaintiff believes Defendant used those funds solely for his personal benefit. That September, Plaintiff demanded Defendant comply with the Partnership Agreement and told Defendant he wished to withdraw from the Partnership. Shortly after that, Plaintiff learned Defendant informed the Bank of Bourbonnais that Defendant was finished depositing funds into the Partnership Account.

*2 In late September, the Kankakee County Housing Authority Manager contacted Plaintiff, informing him that Defendant had refused to turn on water at one of the Section 8 Properties and that the water bill was held in Defendant's name. The Kankakee County Housing Authority stopped making rental payments for the Property and found it uninhabitable for a period because the water was turned off.

On March 2, 2023, the Bank of Bourbonnais informed Plaintiff and Defendant it was concerned that the Properties were not being managed properly. (#23-3). The Bank stated tenants renting the Properties managed by Defendant had complained about broken pipes, water leakage, lack of heat and water, and defects making the Properties uninhabitable. Additionally, the full remittance and account of rents collected had not been provided.

In addition, Plaintiff received bank account records from the Bank of Bourbonnais, including a list of all deposits from any tenant at the Properties and all payments made by the Kankakee Housing Authority. (#23-1 ¶¶ 54-55). Based on that information, Plaintiff discovered the Partnership Bank account failed to receive rent for nineteen of the residential Properties in May 2023. Id. at ¶ 56. Further, Plaintiff states Defendant has failed to provide Plaintiff any financial information regarding rent payments to the Partnership or how Defendant handled rent paid in cash to him personally. Defendant states several of the nineteen Properties are vacant and others house tenants who have failed to pay rent and are subject to eviction proceedings or will be shortly. (#28-A ¶ at 5).

On June 13, 2023, Plaintiff served a Subpoena Duces Tecum on Municipal Bank in Bourbonnais, Illinois (the “Subpoena”). The Subpoena seeks monthly bank account statements from January 2007 through May 2023 for any and all accounts held in Defendant's name. On June 30, 2023, Defendant filed the instant Motion to Quash (#21).

Defendant states he has maintained three personal accounts in his name at Municipal Bank and four accounts held jointly with three of his children, who are not parties to this matter. Defendant seeks to quash the Subpoena as to all seven of his personal accounts. Alternatively, Defendant asks for a protective order requiring Municipal Bank to produce the statements directly to defense counsel so they can review them and redact any and all personal financial information unrelated to the Partnership or the Properties. Defendant states he can then provide the statements with the proposed redactions to the Court for in camera review if necessary.

Plaintiff argues he needs all bank account statements for all of Defendants' accounts to determine whether Defendant has deposited cash or rental checks belonging to the Partnership into his personal bank account without Plaintiff's knowledge or consent. Plaintiff proposes the Court enter a protective order so that the bank records will be kept confidential and not used for any purpose other than in this litigation.

II. Legal Standard

Pursuant to Rule 45, a party has a general right to subpoena any person to produce designated documents for inspection and copying. Fed. R. Civ. P. 45. This right is not limitless, however. Generally, a party is only permitted to obtain discovery regarding a 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). Specifically, Rule 45 provides several express protections for individuals subject to a subpoena. Davis v. City of Springfield, 2009 WL 910204, * 4-5 (C.D. Ill. 2009). A court may quash or modify a subpoena if it “requires disclosure of privileged or other protected matter and no exception or waiver applies, or subjects a person to undue burden.” Fed. R. Civ. P. 45(c)(3)(A)(iii)-(iv). The movant bears the burden of persuasion in a motion to quash a subpoena. Pettit v. City of Columbus, 2005 WL 2218373, at *1 (S.D. Ind. Sept. 9, 2005).

*3 The Court may also issue a protective order pursuant to Rule 26(c). “[T]he court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense.” Fed. R. Civ. P. 26(c). “To determine whether a party has shown good cause, the district court must balance the parties' interests, taking into account the importance of disclosure to the nonmovant and the potential harm to the party seeking the protective order.” Calhoun v. City of Chicago, 273 F.R.D. 421, 422 (N.D. Ill. 2011). Rule 26(c) gives the Court the power to forbid disclosure or discovery, to specify the terms for disclosure or discovery, and to forbid the inquiry into certain matters. Fed. R. Civ. P. 26(c)(1)(A-D).

III. Analysis

Defendant argues that Plaintiff's subpoena is overly broad because it covers a period of sixteen years without regard to the personal financial information contained in the bank records. Defendant also argues that Plaintiff's proposed protective order is insufficient because it would require producing private, unrelated transactions including those belonging to his daughters, who are nonparties.

Here, Defendant's personal bank account information is relevant to Plaintiff's claims that he misappropriated partnership funds. Plaintiff has represented that he intends to do a full accounting of the partnership accounts to track the inventory of rent received by the Partnership since the Partnership's inception. He intends to use Defendant's bank account statements to track any deposits of cash or rental checks in those accounts during that timeframe. It is clear from the pleadings that Defendant has accepted cash payments for rent and seems to have comingled payments in his accounts and the Partnership accounts. Without a current accounting of these payments, one must be constructed from the records. Given the nature of both the claims and defenses in this case, such an accounting is clearly relevant and proportional to the needs of the case. It also causes Defendant no undue burden, as Plaintiff will be the one gathering the records and performing the accounting.[2]

As to the joint bank accounts, Defendant's family members have privacy interests that warrant protection, but Defendant's hand in those accounts also warrants discovery of them. Defendant acknowledges the Kankakee County Housing Authority sent Defendant one check per month that covered the subsidy payments to the Properties as well as Defendant's daughter's property. Defendant states this was because Defendant was listed as a co-signer on his daughter's property. When Defendant received the monthly Kankakee County Housing Authority check, Defendant states he would deposit it into the partnership bank account, but retain that portion of the check belonging to his daughter's property. Defendant would use a portion of the Kankakee County Housing Authority checks to pay for necessary repairs for the Properties. According to Plaintiff, at least one tenant also claims that Defendant demanded the tenant pay her rent in cash directly to his daughter. (See Declaration of Bruce Dickstein, #14-1 at ¶ 47). Thus, the joint bank account information is relevant to the accounting and proportional to the needs of the case for the same reasons as Defendant's personal account information.

Defendant has failed to show that the information contained in the bank statements is privileged or otherwise protected, that an exception or waiver applies, or that it subjects a person to undue burden. “Generally, courts have only quashed subpoenas in situations where the moving party has demonstrated that the subpoena seeks secret pricing or technical information, the disclosure of which would likely harm the moving party.” Sabuco v. Pecelunas, 2019 WL 13215194, at *2 (N.D. Ill. Sept. 17, 2019). While the bank records will reveal information about Defendant's and Defendant's daughter's financial transactions, Defendant has failed to identify any confidential information that would be disclosed in the bank records sufficient to support quashing the subpoena. “Bank records in this case will only reveal credits and debits, and not the type of technical information that rises to the level contemplated by Rule 45(d).” Id.

*4 Moreover, a confidentiality order that prohibits the use of confidential information “for any purpose whatsoever other than in this litigation” and limits use of family member information to attorneys and experts will protect any privacy concerns. The Court has entered a protective order that will govern this case. (See Protective Order, #31) All bank records produced in this litigation (including those in response to the Subpoena) should be labeled as Confidential and subject to the confidentiality order. All bank records that implicate a nonparty's financial information should be labeled as Highly Confidential – Attorney's Eyes Only and treated accordingly.

Defendant's Motion to Quash (#21) is granted in part and denied in part. It is denied in that it seeks to quash any part of the subpoena. It is granted in that it seeks a confidentiality order to protect against disclosure of the records.

IV. Conclusion

For the reasons discussed above, Defendant's Motion to Quash (#21) is granted in part and denied in part.

ENTERED this 5th day of September, 2023.