Opinion
Index 651739/2020
12-23-2021
HEATHER BARLOW, VALUE EXTRACTION SERVICES LLC, PHILLIP LOFASO, JAKE . HENRICKSON, MAKEEDA PERKINS, JEN DOBIES, . ROES 1-2, and all other similarly situated and or interested parties, Plaintiffs v. CHRISTOPHER SKROUPA, INSPIRE' SUMMITS LLC d/b/a SKYTOP STRATEGIES, DAVID KATZ, JOHN STEPHEN. WILSON, PAULA LUFF, and ADVISORY BOARD MEMBERS DOES 1-20, Defendants
Unpublished Opinion
DECISION AND ORDER
LUCY BILLINGS, J.S.C.
I. DEFENDANTS' 'MOTION TO QUASH PLAINTIFFS' SUBPOENAS
Defendants -move to 'quash plaintiffs' four subpoenas duces tecum .issued-to Wells Fargo Bank October 20, 2020, JPMorgan Chase Bank, N.A., January 13, 2021, Citibank January 13, 2021, 'and Fidelity Legal Operations January 20, 2021. C.P.L.R. § 2304. Defendants..request either that plaintiffs destroy all documents received in response to the subpoenas and any copies of those documents or that plaintiffs' attorneys keep- those documents confidential.- C.P.L.R. § 3103(a). The-court already temporarily ordered the latter alternative in the order to show cause signed November 10, 2021, reinstating this motion. The court also ordered plaintiffs temporarily to cease further enforcement of the subpoenas, to notify the subpoenas' recipients temporarily to cease production of any further documents in response to the subpoenas, C.P.L.R. §§ 2304, 3103(a) and (b), 'a'nd to serve on defendants all subpoenas issued and all documents received in response. C.P.L.R. § 3120(3). Finally,, defendants request a further protective order prohibiting plaintiffs from serving further subpoenas without the court's permission, C.P.L.R. § 3103(a), and notice to defendants, C.P.L.R. § 3120(3), and an award of attorneys' fees and expenses incurred by defendants in response to the four subpoenas, including pursuing this motion. The only authority defendants cite for this last request for relief is 22 N.Y.C.R.R. § 130-1.1, authorizing sanctions.
Plaintiffs have complied with the temporary relief ordered and agreed to the relief requested except the alternative of destroying the documents received, the- prohibition against serving further subpoenas without the court's permission, and the award of attorneys' fees and expenses. The remaining relief that the court temporarily ordered and- that plaintiffs agreed to is warranted. Plaintiffs failed to serve the four subpoenas on defendants when plaintiffs served the subpoenas on the "four financial institutions and failed to notify defendants within five days after receiving the documents produced in response to the subpoenas-. C.P.L.R. § 3120(3). Although plaintiffs protest that defendants were unrepresented when plaintiffs served the-subpoenas and received the responsive documents, plaintiffs did not serve the subpoenas on defendants themselves, nor notify them' of the documents received. Nevertheless, since plaintiffs complied with these requirements once a new attorney appeared for defendants, 'and defendants show no prejudice from this delay, it does not rise to the level of sanctionable conduct. 22 N.Y.C.R.R. § 130-1.1(c); Bradley v. Bradley, 167 A.D.3d 489, 489-90 (1st Dep't 2019); Koranqy v. Malone, 161 A.D.3d 645, 646 (1st Dep't 2018); Curtis v. Tabak Is Tribeca, LLC, 144 A.D.3d 509, 509-10 (1st Dep't 2016); Gordon Group Invs., LLC v. Kuqler 127 A.D.3d 592, 594 (1st Dep't 2015).
Two of the subpoenas also failed to set forth the "circumstances or reasons" why the documents were sought. C.P.L.R. § 3101(a)(4); Kapon v. Koch, 23 N.Y.3d 32, 39 (2014); Harold Levinson Assoc, Inc. v. Wong, 128 A.D.3d 566, 567 (1st Dep't 2015); Nacos v. Nacos. 124 A.D.3d 462, 463 (1st Dep't, 2015) . The subpoenas to Wells Fargo Bank and Fidelity Legal . Operations comply with this requirement by notifying the recipients that the documents were "necessary to prove deliberate nonpayment of fees, wages, and loans to independent contractors and employees, as well as commingling of individual and corporate funds." Decl. of Adam E. Engel Ex. A, at 2. See id. Ex. D, at 2; Kaiafas v. Ammos NYC LLC, 179 A.D.3d 416, 417 (1st Dep't 2020). The subpoenas to JPMorgan Chase Bank and Citibank, however, omit any such explanation to these nonparties. As nonparties, JPMorgan Chase Bank and Citibank are entitled to know the parties' claims or defenses to which these banks' disclosure may be relevant. Kapon v. Koch, 23 N.Y.3d at 37, 39; Kaiafas v. Ammos NYC LLC. 179 A.D.3d at 417.
Assuming the explanation provided to Wells Fargo Bank and' Fidelity Legal Operations conveys valid "circumstances or reasons" why the documents were sought, the documents sought extend well beyond these purposes to a wide swath of personal as well as corporate financial information, involving transactions not just .among the parties, but with their family members and other nonparties. The subpoena to Wells Fargo Bank, seeks all bank statements for all accounts' of defendants Skroupa and Inspire Summits LLC, doing business as Skytop Strategies, over a span of years extending beyond the periods when plaintiffs allege 'they were not paid, showing every charge against those accounts, every transfer from those accounts, and the recipients of those transfers.- The subpoena to Fidelity Legal Operations seeks all bank statements for all accounts of defendant Wilson as well as Skroupa and Inspire Summits LLC, doing business as Skytop Strategies, and other records showing loans and financing, including their sources, to the latter defendant and transactions between any of the three parties, over an even longer time span. Plaintiffs do not need all those documents to prove that plaintiffs were not paid fees or wages due from defendants or not repaid loans 'to defendants or that Skytop Strategies commingled-its funds with Skroupa's or other individual defendants' funds. Horn v. Nestor, 172 A.D.3d 659, 659 (1st Dep't 2019); Curran v. New York City Tr. Auth., 161 A.D.3d 649, 649 (1st Dep't 2018); DeLeonardis v. Hara, 136 A.D.3d 558, 558 (1st Dep't 2016); Matter of Souza, 80 A.D.3d 446, 446 (1st Dep't 2011). See Nacos v. Nacos, 124 A.D.3d at 463.
The subpoenas to JPMorgan Chase Bank and Citibank likewise seek all bank statements and other records of transactions between either Katz or his nonpparty law firm and Skytop Strategies. These transactions might relate to any firm "employees' attendance at, presentation at, or sponsorship of Skytop Strategies' conferences. Again, plaintiffs do not explain the relevance of document's relating to Katz's law firm or its other employees. Nor do plaintiffs explain how Katz's own attendance at, presentation at, or sponsorship of Skytop, Strategies' conferences, even if it involved waiving his attendance fee, paying him for a presentation, or receiving payment for his sponsorship, are relevant to a failure to pay plaintiffs or commingling of funds between Skytop Strategies and Katz. Similarly, the documents sought relating to transactions between Katz and defendant Luff, a. Skytop Strategies advisory board member, are unlikely to lead to evidence of a failure to pay plaintiffs. or commingling of funds with Skytop Strategies.
Plaintiffs concede that they, have sought, much of the same information from defendants directly and have agreed to re-serve the subpoenas to the four' .nonparties. Therefore,, after defendants have responded to plaintiffs' document requests to defendants, plaintiffs may re-serve the subpoenas to Wells Fargo Bank, JPMorgan Chase Bank, Citibank, and' Fidelity Legal Operations, seeking relevant - information that plaintiffs did not receive from defendants. Any new subpoenas must be carefully tailored to seek only documents that may prove (1) that plaintiffs were not paid fees or wages due from defendants or not repaid loans to defendants or (2) that Skytop Strategies commingled its funds with Skroupa's or other individual defendants' funds. The period for which the first category of documents may be sought shall be limited to the period when plaintiffs allege they were not paid. The period for which the second category of documents may be sought shall be limited to the period when plaintiffs allege they were not paid and since then. Plaintiffs shall not seek information pertaining to defendants' nonparty family members, employers, co-employees, or law firms. If, as plaintiffs insist, they seek Katz's financing agreements with and financial control of Skytop Strategies, plaintiffs may seek those agreements and documents showing his financial control, but not every financial transaction by Skytop, Katz, his law firm, or his family members.
II. PLAINTIFFS' CROSS-MOTION FOR ATTORNEYS' FEES AND EXPENSES
Plaintiffs cross-move for attorneys' fees and expenses incurred by plaintiffs in response to the reinstatement of this motion after the action was remanded from the United States ' District Court for the Southern District of New York. Plaintiffs insist that they resolved this motion before it was reinstated, by agreeing to keep the documents received confidential; to cease further enforcement of the subpoenas temporarily; to notify the subpoenas' recipients to cease production of further documents temporarily, C.P.L.R. §§ 2304, 3103(a) and (b); to serve the subpoenas and documents received in response on defendants, C.P.L.R. § 3120(3); and to re-serve the subpoenas.
The court denies plaintiffs' cross-motion for three reasons. First, plaintiffs consented to the reinstatement of defendants' motion to quash the subpoenas. NYSCEF No. 159. Second, plaintiffs already had opposed the motion before it was reinstated and expended no more time or resources in opposing the motion except in serving their cross-motion. NYSCEF Nos. 72-74, 153-54. Finally, plaintiffs' nonappearance for their cross-motion December 10, 2021, at 3:30 p.m., despite abundant advance notice and their consent to that time, is reason alone to deny the cross-motion.
III. CONCLUSION
Consequently, for the reasons explained above, the court grants defendants' motion to quash plaintiffs' four subpoenas duces tecum issued to Wells Fargo Bank October '20, 2020, JPMorgan Chase Bank, N.A., January 13, 2021, Citibank January 13, 2021, and Fidelity Legal Operations January 20, 2021. C.P.L.R. § 2304. Plaintiffs shall destroy all documents received in response to the subpoenas and any copies of those documents, cease further enforcement of the subpoenas, and notify the subpoenas' recipients to cease production of any further documents in response to the subpoenas.- C.P.L.R. § 3103(a).. Plaintiffs, shall serve on defendants any future subpoenas issued and all documents received in response. C.P.L.R. § 3120(3). The court denies defendants all other relief requested, including attorneys' fees and expenses, 22 N.Y.C.R.R. § 130-1.1(c), and denies plaintiffs' cross-motion for attorneys' fees and expenses.