Summary
overruling movant's overbreadth objection for failure to show more tailored alternative
Summary of this case from Sec. & Exch. Comm'n v. LauraOpinion
Case No. Part I M8-85(JFK), Related USDC Connecticut No. 3:06-cv-56 (AWT).
April 24, 2007
MEMORANDUM OPINION ORDER
Before the Court is the motion of non-party Bruce Griffith, made in Part I, the emergency relief and miscellaneous part of the Southern District of New York, to quash a subpoena duces tecum issued by the Government to non-party American Express. For the reasons set forth below, the motion is denied.
BACKGROUND
The instant motion stems from an action brought on January 12, 2006 by Plaintiff Beverly Griffith against the United States, pending in the United States District Court for the District of Connecticut, to quiet title to real property at 16 Crystal Lake Drive, in Weston, Connecticut (the "Property"). The Revocable Trust of Beverly Griffith (the "Trust") holds legal title to the Property.
On February 2, 2005, the Government filed a Notice of Federal Tax Lien ("NFTL") against property owned by the Trust, for unpaid federal tax liabilities in the amount of approximately $2.5 million of Beverly Griffith's husband, Bruce Griffith. The Government's filing of the NFTL against the Trust, and its subsequent defense of Mrs. Griffith's action to quiet title, were based on the legal theories that (1) the Trust is the nominee of Mr. Griffith; (2) the Trust is Mr. Griffith's alter ego; and/or (3) Mr. Griffith's conveyance of the Property to Mrs. Griffith, in 1990, and Mrs. Griffith's subsequent conveyance of the Property to the Trust, in 1995, were fraudulent transfers. Beverly Griffith claims that title to the Property is held by the Trust free and clear of any liens imposed by the Government.
On February 17, 2007, the Government issued a subpoena to non-party American Express ("Amex") in the Southern District of New York. The subpoena seeks the production of account statements, billing statements, and similar records that relate to Mr. Griffith's credit card accounts with American Express. The Government asserts that production of such records will help to establish Mr. Griffith's equitable ownership of the Trust. Mr. Griffith has moved to quash the subpoena, pursuant to Rule 45(c) of the Federal Rules of Civil Procedure and 12 U.S.C. § 3410; or, alternatively, to transfer this motion to the District of Connecticut, or to stay adjudication of the instant motion until the District of Connecticut rules on Mr. Griffith's motion for a protective order, relating to the Amex records at issue in the instant motion, that is pending before that court.
DISCUSSION
"`Ordinarily a party has no standing to quash a subpoena served on a third party, unless the party claims some personal right or privilege with regard to the documents sought.'" Chazin v. Lieberman, 129 F.R.D. 97, 98 (S.D.N.Y. 1990) (quoting 9 Wright Miller, Federal Practice and Procedure § 2457 (1971)). Personal rights may include "the individual interest in avoiding disclosure of personal matters." McVane v. FDIC (In re McVane), 44 F.3d 1127, 1136 (2d Cir. 1995) (citations omitted). Accordingly, courts of this circuit have found that "individuals, whose banking records are subpoenaed, have a privacy interest in their personal financial affairs that gives them standing to move to quash a subpoena served on a non-party financial institution."Arias-Zeballos v. Tan, No. 06 Civ. 1268, 2007 U.S. Dist. LEXIS 5068, at *2-3 (S.D.N.Y. Jan. 24, 2007) (collecting cases). Here, it is undisputed that Mr. Griffith, who claims a privacy interest in the records of his accounts with Amex, has standing to move pursuant to Federal Rule 45(c) to quash the Government's subpoena of those records.
Under Federal Rule 45, "[o]n timely motion, the court by which a subpoena was issued shall quash or modify the subpoena if it . . . subjects a person to undue burden." Fed.R.Civ.P. 45(c)(3)(A)(iv). In a motion to quash a subpoena, the movant bears the burden of demonstrating an undue burden. Jones v. Hirschfeld, 219 F.R.D. 71, 74-75 (S.D.N.Y. 2003). The determination of whether a subpoena imposes an "undue burden" is committed to the discretion of the trial court. Id. at 74. Whether a subpoena imposes an undue burden depends upon "`such factors as relevance, the need of the party for the documents, the breadth of the document request, the time period covered by it, the particularity with which the documents are described and the burden imposed.'" Travelers Indemnity Co. v. Metropolitan Life Insurance Co., 228 F.R.D. 111, 113 (D. Conn. 2005) (internal citation omitted) (quoting United States v. International Business Machines Corp., 83 F.R.D. 97, 104 (S.D.N.Y. 1979)).
Here, Mr. Griffith objects to the subpoena essentially on the ground that the information sought by the Government is irrelevant. Federal Rule 26 sets forth the standard by which a court determines the relevance of the information sought by a subpoena issued under Rule 45. See During v. City Univ. of N.Y., No. 05 Civ. 6992, 2006 U.S. Dist. LEXIS 53684, at *6 (S.D.N.Y. Aug. 1, 2006). Under Rule 26, a party is authorized to obtain information "regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action" and information "reasonably calculated to lead to discovery of admissible evidence." Fed.R.Civ.P. 26(b)(1). For purposes of discovery, relevance as it relates to the subject matter of an action is broadly constructed "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). The term "reasonably calculated" in Rule 26(b)(1) means "any possibility" that the information sought may be relevant. Morse/Diesel, Inc. v. Fidelity and Deposit Co. of Maryland, 122 F.R.D. 447, 449 (S.D.N.Y. 1988) (quoting Fed.R.Civ.P. 26(b)(1)). A district court "`whose only connection with a case is supervision of discovery ancillary to an action in another district should be especially hesitant to pass judgment on what constitutes relevant evidence thereunder.'" In re Honeywell Int'l, Inc. Sec. Litig., 230 F.R.D. 293, 301 (S.D.N.Y. 2003) (quoting Truswal Sys. Corp. v. Hydro Eng'q, Inc., 813 F.2d 1207, 1211-12 (Fed. Cir. 1987). Where relevance is in doubt, the district court is to be permissive. Id. Relevance under Federal Rule 26 is far broader than the standard under Federal Rule of Evidence 401, which governs the standard at trials. See Arch Assocs. v. HuAmerica Int'l., No. 93 Civ. 2168, 1994 U.S. Dist. LEXIS 746, at *3 (S.D.N.Y. Jan. 28, 1994).
The financial records sought from Amex by the Government's subpoena are clearly relevant. Records of Mr. Griffith's accounts with Amex could reveal Mr. Griffith's financial dealings with the Trust. The information that the Government seeks via the subpoena thus is reasonably calculated to lead to the discovery of admissible evidence regarding the extent to which the Trust is Mr. Griffith's nominee and/or alter ego.
Mr. Griffith does not contest that proof of his financial entanglement with the Trust could support the Government's nominee and/or alter ego theories. Rather, Mr. Griffith contends that the Government's nominee and alter ego theories must fail as a matter of law because those doctrines are not cognizable under Connecticut state law; therefore, Mr. Griffith argues, any information sought by the Government on the basis of those theories is necessarily irrelevant. The Government counters that it has asserted its nominee and alter ego theories under state and federal common law doctrines of equitable ownership and therefore is not limited to Connecticut state law. In any event, the Government argues, a valid question of law exists as to the viability of its nominee and alter ego theories, and this Court should not preclude discovery sheerly "on the basis that the [Connecticut District] court may rule against it on the merits." (Mem. Resp. to Mot. To Quash, 5.) The Court agrees with the Government. It would not be appropriate for this Court, when called upon to adjudicate a non-party's motion to quash a subpoena issued to a non-party, to make a determination about the legal sufficiency of the Government's defense in the underlying action. Thus, the Court finds that the information sought by the subpoena is relevant within the meaning of Rule 26.
Mr. Griffith also argues that the subpoena should be quashed because it is overly broad. The subpoena seeks the production of all of Mr. Griffith's Amex account records, from the date the accounts were open through the date of compliance. Mr. Griffith asserts that "such broad, unfettered access to Bruce Griffith's financial information is clearly and unequivocally a violation of Bruce Griffith's privacy rights." (Mot. to Quash, 10.) Apart from suggesting that the subpoena could be limited to seek production only of those records that relate to the Property, however, Mr. Griffith has not shown how the Government's subpoena could be tailored more narrowly to obtain relevant information. As discussed above, to the extent that the subpoenaed records are capable of showing Mr. Griffith's involvement with the Trust, those records may support the Government's theories of Mr. Griffith's equitable ownership of the Trust and, in turn, of the Property. Thus, the subpoena is not overbroad. The Government concedes, however, that the subpoena should be limited to seek production only of records beginning on January 1, 1989, the date when Mr. Griffith first incurred federal income tax liability.
Finally, although Mr. Griffith has asserted in conclusory fashion that the Government's subpoena violates his privacy rights, the Court finds that the Government's interest in the Amex account records outweighs Mr. Griffith's privacy rights. As the Government notes, Mr. Griffith's failure to pay approximately $2.5 million in federal income taxes precipitated the Government's filing of an NFTL, Beverly Griffith's resulting action to quiet title, and the Government's subsequent attempt to seek Mr. Griffith's financial records in an effort to defend against Mrs. Griffith's suit. Here, in other words, Mr. Griffith's own actions have led the Government to seek production of his financial records. Thus, the Court is "unable to conclude that the personal intrusion is so great that it outweighs defendant[`s] right to pursue relevant material through the subpoena in issue." Sierra Rutile Ltd. v. Katz, No. 90 Civ. 4913, 1994 U.S. Dist. LEXIS 6188, at *13 (S.D.N.Y. May 11, 1994).
In sum, the information sought by the Government is relevant and not overbroad, and the Government's interest in discovery is not outweighed by Mr. Griffith's privacy interest. Mr. Griffith therefore has not made the required showing, under Rule 45(c), that the Government's subpoena of his Amex records constitutes an undue burden.
Mr. Griffith characterizes the instant motion to quash as arising not only from Federal Rule 45(c), but also from the financial Privacy Act, 12 U.S.C. § 3401 et seq., which permits the customer of a financial institution to move to quash a judicial subpoena, on the ground that the information sought by the subpoena is irrelevant. 12 U.S.C. § 3410(a). A court will deny the motion, however, if "there is a demonstrable reason to believe that the law enforcement inquiry is legitimate and a reasonable belief that the records sought are relevant to the inquiry." § 3410(c). Because the Government's inquiry is on its face legitimate and the Court has determined that the records sought are relevant to the Government's inquiry, Mr. Griffith's motion to quash also fails under 12 U.S.C. § 3410(a).
In the alternative, Mr. Griffith requests that the Court either transfer this motion to the District of Connecticut or stay adjudication until the District of Connecticut rules on Mr. Griffith's pending motion for a protective order with respect to the Amex records at issue. Because Amex, the subpoenaed party, has not objected to the subpoena or moved for a transfer or stay, the Court declines to transfer the action or stay the proceedings. See In re Sealed Case, 141 F.3d 337 (D.C. Cir. 1998); McMahan Sec. Co., L.P. v. FB Foods, Inc. (In re FB Foods, Inc.), Pt. I No. M8-85, 2005 U.S. Dist. LEXIS 26301, at *3 (S.D.N.Y. Nov. 1, 2005).
CONCLUSION
For the foregoing reasons, Mr. Griffith's motion to quash the Government's subpoena of his Amex records is DENIED, except that the subpoena is modified so that Amex is required to produce records relating to Mr. Griffith's accounts only from January 1, 1989.