Opinion
Index No. 651526/2020
10-12-2022
Seaport Global Holdings LLC, Plaintiff, v. Eric Dusansky, Defendant.
Manatt, Phelps & Phillips, LLP, New York, NY (Ronald G. Blum and Matthew F. Bruno of counsel), for plaintiff. Polsinelli PC, New York, NY (Gabriel Levinson of counsel), for defendant.
Unpublished Opinion
Manatt, Phelps & Phillips, LLP, New York, NY (Ronald G. Blum and Matthew F. Bruno of counsel), for plaintiff.
Polsinelli PC, New York, NY (Gabriel Levinson of counsel), for defendant.
Gerald Lebovits, J.
The following e-filed documents, listed by NYSCEF document number (Motion 003) 68, 69, 70, 71, 72, 73, 74, 75, 76, 78, 79, 80, 81, 82, 83, 84, 85 were read on this motion for PROTECTIVE ORDER.
In this action, plaintiff Seaport Global Holdings, LLC, an investment bank, claims that defendant Eric Dusansky, its former employee, refuses to repay money he owes Seaport under the terms of a promissory note Dusansky executed in Seaport's favor. Dusansky counterclaims, alleging that Seaport failed to pay him the full amount of commissions and deal-related credits that he was owed under his employment contract.
This is the third discovery motion in this action thus far. Seaport served nonparty Ethan Garber, a Tennessee resident, with a document subpoena seeking information about a possible loan made by Garber to Dusansky. Dusansky moves to quash the subpoena and for a protective order. The motion is granted.
DISCUSSION
Dusansky raises two types of arguments in support of his motion to quash. Point I, infra, addresses Dusansky's procedural challenge to the subpoena's validity. Point II concerns Dusansky's challenge to the relevance of the information sought by the subpoena.
I. Dusansky's Procedural Challenge to the Subpoena
As an initial matter, this court is unpersuaded by Dusansky's contention that the subpoena is invalid because Seaport failed to include the circumstances or reasons requiring disclosure of the documents sought by the subpoena, as required for nonparty subpoenas by CPLR 3101 (a) (4). The subpoena undisputedly attached a copy of the complaint in this action. This court agrees with Seaport that the attached complaint provided Garber with sufficient notice why Seaport was seeking documents from him. (See Matter of Kapon v Koch, 23 N.Y.3d 32, 39 [2014].)
Dusansky contends that Seaport's attaching the complaint to the subpoena, without more, was insufficient to provide the necessary explanation because on their face the allegations in the complaint had nothing to do with any loans made by Garber to Dusansky. (See NYSCEF No. 74 at 9-11.) That contention, though, is seeking essentially to bootstrap Dusansky's challenge to the substantive relevance of the information sought by the subpoena (discussed in Point II, infra) into a challenge to the subpoena's CPLR 3101 (a) (4) explanation. This court is not persuaded that these two independent requirements for nonparty subpoenas should be treated as overlapping or mutually reinforcing, as Dusansky suggests.
Dusansky also argues that the subpoena is procedurally defective because it was invalidly served on an out-of-state resident. Seaport asserts that this procedural objection was waived by Garber's accepting service of the subpoena and beginning to compile responsive documents. This court agrees with Dusansky.
Generally, "out-of-State service of [a] subpoena[ ] on a nonresident [is] unauthorized and void." (Peterson v Spartan Indus., 40 A.D.2d 807, 807-808 [1st Dept 1972]; see Judiciary Law§ 2-b [1] [providing that "[a] court of record has power to issue a subpoena requiring the attendance of a person found in the state to testify in a cause pending in that court"].) However, the Uniform Interstate Depositions and Discovery Act, which both Tennessee and New York have adopted (see Tenn Code Ann §§ 24-9-201-24-9-207; CPLR 3119), provide for the (re)issuance and enforcement on an in-state resident of a subpoena from an out-of-state action. Because Garber is a Tennessee resident, the governing statute is that of Tennessee. Under that statute, an out-of-state party seeking to subpoena someone living in Tennessee must "submit... [the] subpoena to a clerk of court in the county in which discovery is sought to be conducted" who then will "promptly issue... [it] for service." (Tenn Code Ann § 24-9-203.) Seaport has not shown-through the service copy of the subpoena itself or otherwise-that it complied with Tennessee's requirements for obtaining in-state issuance of Seaport's subpoena. Absent that showing, the subpoena is invalid.
Conversely, if Garber were a New York resident, and the underlying action being contested by two Tennessee litigants, the governing law would be supplied by CPLR 3119. (See CPLR 3119 [b].)
Seaport contends, however, that Garber consented to service of the subpoena in an email sent on April 10, 2022, thereby waiving any personal-jurisdiction objection. But accepting service of a subpoena, standing alone, is insufficient to waive an objection to the authority of the court to issue the subpoena. (See e.g. Cherfas v Wolf, 2008 NY Slip Op 51397[U], at *2 [Sup Ct, Kings County July 14, 2008] [explaining that "[s]ervice of process, no matter how flawlessly executed, cannot by itself vest a court with jurisdiction over a non-domiciliary of New York state"]; accord Best v Guthrie Med. Group, P.C., 175 A.D.3d 1048, [4th Dept 2019] ["The acceptance of service, standing alone, does not constitute an appearance or otherwise waive an objection to personal jurisdiction... without... an additional action that could be construed as either a formal or informal appearance."].)
Seaport's contention is further undermined by the ambiguous character of the emails from Garber on which Seaport is relying to show waiver. Counsel for Seaport emailed Garber a copy of the subpoena, and asked him to "confirm that you accept service of this subpoena via email." (NYSCEF No. 82 at 2.) Garber initially responded that he "confirm[ed] receipt of your email subpoena," then wrote a second email shortly afterward to "further clarify" that he "accept[ed] service of the subpoena." (Id.) This exchange leaves unclear whether Garber intended by these emails to consent to service on him in Tennessee of a binding New York subpoena, or only to receipt of a copy of that subpoena by email, rather than in hardcopy.
That Garber appears not to be an attorney (see NYSCEF No. 85 at 5 [reply mem. of law]) underscores this facial ambiguity.
Seaport's argument that Garber waived any challenge to the subpoena by "start[ing to] assembl[e] the[ ] communications" (id.) is unconvincing. True, a motion to quash a nonparty subpoena may be waived through compliance. The question, though, whether partial compliance constitutes a waiver has not yet been resolved by the New York appellate courts. And Seaport supplies no authority for the proposition that a subpoena recipient has partially complied with the subpoena for waiver purposes merely by beginning to assemble responsive documents. In Aronov v Rosenfeld (2022 WL 1746520, at *1 [Sup Ct, NY County May 27, 2022]), relied upon by Seaport, it was undisputed that the nonparty subpoena recipient had produced documents before opting to contest the subpoena's validity. The same was true in Matter of Cuomo v Dreamland Amusements Inc. (See 2009 NY Slip Op 50062[U], at *5 & n 2 [Sup Ct, NY County Jan. 6, 2009]; cf. Callaghan v Ery Tenant LLC, 2019 WL 506878, at *1 [Sup Ct, NY County Oct. 4, 2019] [holding that a "purported conversation between defense counsel and the subpoenaed party's general counsel" about scheduling a deposition in response to the subpoena "amounts to hearsay insufficient to find waiver"].) This court declines to hold that Garber partially complied with Seaport's document subpoena without having produced any documents to Seaport.
See Aronov v Rosenfeld, Index No. 655592/2019, NYSCEF No. 153 at 3 [mem. of law in support of cross-motion to quash]; id., NYSCEF No. 152 at 6 [mem. of law in opp. to cross-motion].)
Although, as Seaport points out, Garber did not timely object to the subpoena, Dusansky did. Given Dusansky's standing to challenge the subpoena under CPLR 3103 (a), that objection is sufficient to avoid waiver.
II. Dusansky's Challenge to the Subpoena's Relevance
Although the subpoena's procedural defects are a sufficient basis to grant Dusansky's motion to quash, for the parties' guidance this decision also addresses whether the subpoena seeks potentially relevant information. Seaport argues that the subpoena is aimed at gathering information about whether Dusansky misrepresented his ability to repay the loan underlying the promissory note when he executed the note, and also about the validity of Dusansky's affirmative defenses. This court is unpersuaded.
A party moving to quash a nonparty subpoena must make a showing either "that the discovery sought is 'utterly irrelevant' to the action or that the 'futility of the process to uncover anything legitimate is inevitable or obvious.'" (Matter of Kapon, 23 N.Y.3d at 34.) Should the moving party make this showing, "the subpoenaing party must then establish that the discovery sought" is, in fact "'material and necessary' to the prosecution or defense of an action, i.e., that it is relevant." (Id.)
Dusansky argues that any loans made to him by Garber are irrelevant to this action, because those loans are unrelated to Dusansky's obligations under the promissory note and employment agreement on which Seaport bases its breach-of-contract claims. (See NYSCEF No. 74 at 2, 10-11, 12.) In response, Seaport argues that the putative Garber loan would shed light on "whether Dusansky misrepresented his ability to repay Seaport" the amounts owed under the promissory note. (NYSCEF No. 83 at 6.) This response is without merit.
Whether Dusansky made any misrepresentations to Seaport that caused it to loan him money might be relevant to a claim (or counterclaim) sounding in fraud/fraudulent inducement. But neither Seaport nor Dusansky has asserted that type of claim-only breach-of-contract causes of action.
Additionally, the promissory note on which Seaport now seeks to collect provided that Seaport would be repaid through retaining a percentage of Dusansky's net commissions earned during his employment with Seaport, rather than from other assets (present or anticipated) held by Dusansky. (See NYSCEF No. 85 at 9-10; NYSCEF No. 81 at ¶ 1.) Seaport's relevance arguments are based instead on the materially different repayment provisions of two prior promissory notes executed by Dusansky in Seaport's favor, in which "Dusansky represented that he anticipated a substantial settlement payment from a class action lawsuit" and promised "to pay all proceeds that he received" over to Seaport, "up to the amount borrowed." (NYSCEF No. 83 at 6.) The operative note-which "supersedes all prior understandings and agreements relating thereto" (NYSCEF No. 81 at 4)-omits that representation and any obligation to repay Seaport from settlement proceeds.
For that same reason, this court disagrees with Seaport's argument that the existence and timing of the Garber loan might support an argument that Dusansky acted inequitably toward Seaport with respect to the operative note and as a result cannot raise equitable defenses. (See NYSCEF No. 83 at 7.)
In short, Dusansky has shown that the discovery sought from Garber by Seaport is" 'utterly irrelevant' to the action." (Matter of Kapon, 23 N.Y.3d at 34.)
Accordingly, it is
ORDERED that Dusansky's motion to quash and for a protective order is granted; and it is further
ORDERED that Dusansky serve a copy of this order with notice of its entry on Seaport, and on Garber by email and overnight mail directed to his last-known address.