Opinion
2:22-cv-01988-APG-BNW
04-25-2023
JAMES DUFFY, a.k.a. JIM DUFFY, an individual, Plaintiff, v. JPMORGAN CHASE BANK, NATIONAL ASSOCIATION Defendants.
BALLARD SPAHR LLP By: Madeleine Coles Madeleine Coles, Esq. Joel E. Tasca, Esq. Attorneys for Defendant JPMorgan Chase Bank, N.A.
BALLARD SPAHR LLP
By: Madeleine Coles
Madeleine Coles, Esq.
Joel E. Tasca, Esq.
Attorneys for Defendant JPMorgan Chase Bank, N.A.
[PROPOSED] PROTECTIVE ORDER
Defendant JPMorgan Chase Bank, N.A. (“Defendant”) filed a motion to dismiss Plaintiff James Duffy's (“Plaintiff”) First Amended Complaint on February 22, 2023. Concurrently therewith, Defendant filed a motion to stay discovery pending resolution of the motion to dismiss, which Plaintiff opposed. On April 6, 2023, the Court heard oral argument on the motion to stay. The Court denied the motion but indicated that it would enter a protective order limiting discovery to certain requests as articulated and agreed to by Plaintiff during the hearing.
The Court hereby enters this Protective Order pursuant to the Court's authority under FRCP 26(c).
IT IS HEREBY ORDERED:
Until this Court decides Defendant's motion to dismiss, the Parties shall not engage in discovery in any form except as follows:
(1) Plaintiff may request that Defendant produce opening statements related to the Markowitz Attorney Trust Account;
(2) Plaintiff may request that Defendant produce reports made to the State Bar of Nevada and/or the State Bar of New York related to the Markowitz Attorney Trust Account;
(3) Plaintiff may request that Defendant produce documents evidencing complaints from any person who deposited funds into the Markowitz Attorney Trust Account;
(4) Plaintiff may request that Defendant produce its internal policies and procedures in effect in February 2009 (the month the Markowitz Attorney Trust Account was opened) relating to bar verification of attorneys seeking to open an attorney trust account and the handling of attorneys barred outside of the state in which they seek to open an attorney trust account.
Defendant shall conduct a reasonable records search and produce documents responsive to each of the above described categories to the extent that any such documents exist. Defendant shall also reserve the right to make any good faith objections to Plaintiff's requests.
IT IS SO ORDERED.
Exhibit 1
Ballard Spahr
U.S. Magistrate Judge Brenda Weksler
U.S. District of Nevada
333 Las Vegas Blvd. South
Las Vegas, Nevada 89101
Re: Duffy v. JPMorgan Chase Bank, N.A. - 2:22-cv-01988-APG-BNW
Dear Judge Weksler:
Attached for your review please find a proposed order regarding discovery in this matter pursuant to your oral ruling during the hearing on Chase's motion to stay discovery held April 6, 2023. The proposed order was submitted to counsel for Plaintiff James Duffy, and the Parties met and conferred in good faith, but were unable to agree on the substance of the order. At the April 6 hearing, Plaintiff unambiguously agreed to limit all discovery in this case, pending this Court's ruling on Chase's motion to dismiss, to the specific discovery described during the hearing. See Tr. Of Apr. 6, 2023 Hrg. at 14:2-9 (attached as Exhibit 2 hereto). The only discovery discussed during the hearing was (1) the account's opening statements, (2) reporting on the account to the State Bar of New York and the State Bar of Nevada, (3) complaints received by Chase from other persons who had deposited funds into the account, and (4) policies and procedures for determining the bar status of an attorney opening an attorney trust account. Id. at 8:15; 8:17-9:6; 10:5-9; 12:3-17. However, in discussing the terms of a proposed order, Plaintiff demanded broad, vague discovery in excess of what had been agreed to during the hearing. While there is no reason any discovery is needed immediately, Chase attempted to negotiate in good faith with Plaintiffs regarding the scope of discovery, but was unsuccessful. Everything Plaintiff demands can be sought in the unlikely event his complaint survives Chase's motion to dismiss. Chase's proposed order accurately reflects the agreement made by Plaintiffs with this Court regarding the discovery that will be sought before any ruling on the motion to dismiss. Therefore, Chase respectfully submits that this Court should enter its proposed order.
Very truly yours, BALLARD SPAHR LLP
Joel E. Tasca Madeleine Coles
Exhibit 2
CERTIFIED COPY
TRANSCRIPT OF PROCEEDINGS
BEFORE THE HONORABLE BRENDA N. WEKSLER, UNITED STATES DISTRICT COURT MAGISTRATE JUDGE
Recorded by: Jeff Miller
Transcribed by: PAIGE M. CHRISTIAN, RPR, CRR, CCR #955
United States District Court 333 Las Vegas Boulevard South Las Vegas, Nevada 89101
Proceedings recorded by electronic sound recording.
Transcript produced by mechanical stenography and computer.
For Plaintiff James Duffy:
JONATHAN D. BLUM, ESQ.
WILEY PETERSEN
1050 Indigo Drive Suite 200B
Las Vegas, NV 89145
(702) 910-3329
E-mail: jblum@wileypetersenlaw.com
-AND
KENNETH J. CATANZARITE, ESQ. (Pro Hac Vice)
CATANZARITE LAW CORPORATION
C/O Jennifer Weaver
2331 W. Lincoln Avenue
Anaheim, CA 92801
(714) 520-5544
E-mail: kcatanzarite@catanzarite.com
For Defendant JP Morgan Chase Bank, National Association:
JOEL EDWARD TASCA, ESQ.
BALLARD SPAHR LLP
1980 Festival Plaza Drive
Suite 900
Las Vegas, NV 89135
(702) 471-7000
E-mail: tasca@ballardspahr.com
-AND
MADELEINE COLES, ESQ.
BALLARD SPAHR LLP
1980 Festival Plaza Drive
Suite 900
Las Vegas, NV 89135
(702) 379-1157
E-mail: colesm@ballardspahr.com
PROCEEDINGS
COURTROOM ADMINISTRATOR: Your Honor, good afternoon. We are now calling James Duffy vs. JP Morgan Chase Bank, National Association. The case number is 2:22-CV-01988-APG-BNW.
Beginning with plaintiff's counsel, will all counsel please state your names for the record.
MR. BLUM: Good afternoon, Your Honor. John Blum on behalf of plaintiff.
THE COURT: Good afternoon, Mr. Blum.
MR. CATANZARITE: Good afternoon, Your Honor. Ken Catanzarite appearing also for the plaintiff pro hac vice.
THE COURT: Good afternoon.
MR. TASCA: Good afternoon, Your Honor. Joel Tasca for defendant JP Morgan Chase.
THE COURT: Good afternoon, Mr. Tasca.
MS. COLES: Good afternoon, Your Honor. This is Madeline Coles also for the defendant, JP Morgan Chase.
THE COURT: All right. So we are here on defendant's motion to stay discovery. This is at Document 22. Plaintiff opposed at Document 29. And the defense replied at Document 31.
I set this case for argument, so let me go ahead and hear, starting with the defendants.
Is it going to be Mr. Tasca or Ms. Coles?
MR. TASCA: It will be me, Mr. Tasca.
THE COURT: All right. Go ahead, Mr. Tasca.
MR. TASCA: Thank you, Your Honor.
So as cases go, as lawsuits go, our view of this case is that the plaintiff has asserted some claims that really push the balance of plausibility. Basically, what we're trying to do is (indiscernible) responsible for fraud committed by others just because those others used an account at the bank to commit that fraud. So there's no allegation that -- that Chase was actively involved in any of the alleged fraud that happened to Mr. Duffy.
All that Chase did was it held the bank account. And I have to give credit to the plaintiff's lawyers. They've come up with a very, sort of, creative way to get this -- that Mr. Duffy believed that Mr. Markowitz, who is the account holder at the bank, was barred in Nevada, and it's that, that led him astray and made him deposit money. And, you know, it's a creative theory, but it just doesn't withstand the legal scrutiny.
And we do have pending motions to dismiss, which Your Honor may or may not have gotten to look at. But there are a number of claims asserted, four claims, in the amended complaint (indiscernible) second crack at trying to allege claims because it is the amended complaint.
All the claims, in our view, can be dismissed without discovery because we have legal defenses to those claims. And it's a negligent misrepresentation claim. That's the first one. That fails as a matter of law because there's no allegation that Chase ever made any misrepresentation or -- or even made a representation -- forget about misrepresentation -- to Mr. Duffy about anything.
All Chase did was it had an account where the funds supposedly were deposited that -- that were allegedly then dissipated fraudulently. Chase didn't do anything else. No direct communication is alleged, and then (indiscernible) second crack at trying to allege this.
So that -- that's the principal reason the negligent misrepresentation claim fails. There are other reasons. Those were in our papers. But I don't want to belabor the discussion.
There was a second claim for fraudulent transfer, and I understand that that claim has been abandoned by the plaintiffs in -- in their opposition brief
THE COURT: So let me -- let me just interrupt you here a moment.
MR. TASCA: Sure.
THE COURT: I think that -- I mean, it seems to me that your -- your arguments are catered towards the preliminary peek test, which are not particularly helpful to the moving party, just because it requires that I can be convinced that the motion to dismiss is going to be granted, right?
So it seems to me that you're better off arguing good cause as to why this case should be stayed. So I'd rather hear your arguments on that.
MR. TASCA: Of course, Your Honor. And we did recognize that -- that Your Honor does follow a different standard from the preliminary peek standard. I think, you know, in drafting the papers, a lot of these things sort of merged together. They move around. So I think that, you know, looking at this from the -- from the good cause perspective, I think, you know, our -- our view of this is that the claims are very weak. Again, it kind of merges back as the preliminary peek.
But, you know, if they were to go forward, they are not (indiscernible) complicated claims. There is a claim of negligence against Chase. There's no law that informs the negligence standard because there is no duty here, as we argue in our papers. But even if the Court were to say, Well, but let's see if they can establish a duty in discovery, we're going to need to do expert discovery to explain what the duty is that a bank has in this situation and what would be a breach of that duty. So there's going to be expert discovery necessary.
There is going to be complicated fact discovery. There is an aiding and abetting breach of fiduciary duty claim that's been asserted against Chase. That claim necessarily requires that the plaintiffs prove that Chase knowingly participated -- or knowingly substantially assisted in the fraud. And -- and, of course, knowledge is something that rarely can be proven with direct evidence. There would need to be indirect evidence involving discovery of the relationships between Chase and the two alleged fraudsters. We already know that there's one other incident involving Mr. Duffy and (indiscernible) two alleged fraudsters. So there's going to be discovery on those things, as well.
We're also talking about an attorney trust account. And so, if they're going to get discovery related to the account, there are going to be what we believe are supporting issues of attorney-client privilege that we're going to have to waive.
They are seeking -- we know already they are seeking policy and procedure documents, which Chase are very sensitive about. So there's going to have to be either compromised or motion practice on that subject because Chase will seek a protective order.
So this is just, kind of, a sampling of the types -- this is not a car accident. This is a complicated novel creative theory by the plaintiffs, and so, if they were to get past the motion to dismiss, this case is going to be very involved. And our position is simply that that discovery should not start now, and instead, it should await a determination as to whether any of these claims are either plausible, which we respectfully submit they are not, and this -- this case is either going to be dismissed or, at a minimum, significantly (indiscernible).
THE COURT: Thank you so much.
All right. For the plaintiff, is it going to be Mr. Blum or Mr. Cat- -- say that one more time for me.
MR. CATANZARITE: Catanzarite.
THE COURT: Catanzarite.
Is it going to be you, sir?
MR. CATANZARITE: (Indiscernible).
THE COURT: All right. Go ahead.
MR. CATANZARITE: Yeah. (Indiscernible). If you will.
In focusing on what we've asked for in terms of discovery, I -- I, frankly, don't agree that it is -- that it involves all of the, shall we say, argument -- nature of the argument that my colleague has raised. For example, the account opening statements would be something that should be freely available. That -- that's not privileged.
Reports on this account to the State of Nevada, State Bar of Nevada, Supreme Court with respect to this account being a Nevada IOLTA account would certainly not be privileged.
One of the arguments advanced in opposition to the motion to dismiss by my colleagues are that, hey, look, this is equivalent of a New York IOLTA account, which is a significant argument that they make. And therefore, we've asked, Do you, Chase, with respect to this account, have any recording with regard to this account to the State of New York?
I will tell you that the State of New York indicates there's none. And that's the reason they've denied any claim by Mr. Duffy with respect to the New York clients' security fund because there's no trust account properly -- or properly set up for this account out of state to New York, which precludes Duffy from making his claim.
So I do -- I do not agree that at least that scope of discovery would be so difficult to provide. Those are either things they did or did not do. I think they may have done something with respect to Nevada, but I don't believe they did anything with respect to New York.
Moreover, the question of the 14 years of account history, I'll tell you what our interest is. Our interest is, did Chase receive other objections by victims with respect to the processing of that account? In other words, did they receive warnings? Were they on notice, red flagged, that this account -- was there someone like Ms. Choy (phonetic) or somebody else who's reported, Hey, Chase, these guys took my money improperly. I -- you should not allow this to happen?
That should have caused some red flags to go up in Chase's account. So I don't need all of the -- I can -- at this stage, we could agree to limit that aspect to any, shall we say, other complaints about the management of the account by persons who deposited money to the account. That would be one way of narrowing the scope of the discovery.
With respect to
THE COURT: I'm sorry. Your suggestion is to narrow it how, specifically, so that I can go back to the defense and ask them?
MR. CATANZARITE: Sure. We would simply ask with respect to the history at this point, were there any other persons who deposited money to that Markowitz account who then complained to Chase about the account? So we would -- we would agree at this first pass to limit it to that.
THE COURT: And this is, what, 14 years?
MR. CATANZARITE: 14 years, yes. And we'll see. Maybe there's only two or three, if there's any, that would be significant to us.
Next, policies and procedures. I -- I can appreciate the defense is concerned about policies and procedures. But I question, do the policies and procedures set forth a set of requirements where Chase is supposed to confirm when they're opening a Nevada IOLTA account that the lawyer's licensed in Nevada? If not, what's the next step?
Do they have a trigger or, shall we say, a policy and procedure that there could be lawyers from Nevada opening out-of-state trust accounts? If so, were they then obligated under their internal policies and procedures to contact the state to see if an out-of-state account could be maintained?
Had they done that here, then Duffy would have a claim against the New York IOLTA fund, but he doesn't because the account wasn't set up that way.
Did there -- did they violate their own internal policies and procedures that would have protected those within a class of persons to whom there could be an anticipated, shall we say, duty or relationship where these -- where persons were induced to put money into this account and then defrauded again, but the proper New York account was never set up?
Those are -- I think we could limit. I'd be happy to limit this initial wave of discovery.
We already have an expert on board on this, and that's been their suggestion of what they'd like to see. I don't think I need to see all the ins and outs of the account. I do agree with Mr. Tasca that our Request No. 2 was brought in that regard. But frankly, we did not anticipate, at the time we wrote the discovery, that there was 14 years of this account relationship.
So -- and we would be interested in that right now
THE COURT: So that I'm clear, you're suggesting to narrow the history of the account of 14 years to any individuals who had deposited money and who have subsequently complained, correct?
MR. CATANZARITE: Yes.
THE COURT: And with regard to the policies and procedures, how, specifically, are you willing to narrow this? Policies and procedures regarding what?
MR. CATANZARITE: Okay. I'd like to see their policies and procedures -- first of all, I'd like to see the -- if I can see, the table of contents, because I find in litigation that a table of contents may describe something differently than what I thought it -- how I think it might be defined.
But what we're looking for is what policies and procedures are there for determining the -- the attorney opening the trust account is a Nevada barred attorney, and if not a Nevada barred attorney presenting in Nevada, what, if they -- do they then have to inquire where are you barred? And if barred, then in New York, Chase -- the nature of the bank as broad a bank as it is, does it have New York-related policies and procedures that would then have to have been followed to open the New York compliant trust account?
THE COURT: And with regards to the attorney-client privilege, you're suggesting that there is no attorney-client privilege you would be claiming?
MR. CATANZARITE: Well, we have an attorney -- we have a privilege -- attorney-client privilege that they would be claiming. I -- I don't see that we need to get into that, unless the Court views the complaints by the persons who deposited money into the trust account as being attorney-client privilege, in which case, we'd be agreeable that they can redact that at this point. We're simply looking at what notice was given, redact the name of the complaining party.
THE COURT: All right. Mr. Tasca.
MR. TASCA: Thank you, Your Honor.
So, you know, what I heard being articulated is -- is really only going to be a first step, I'm sure. I'm sure they're going to ask for what -- what they just said, and then they're going to want to go deeper. And then they're going to want to take depositions. We're going to need a protective order
THE COURT: Well, I guess, my question is this: I mean, what if I were to enter an order where I only allow the plaintiffs to go after this discovery that's been described today? How would you feel about that?
MR. TASCA: Well, Your Honor, we'd obviously prefer you grant our motion in its entirety. (Indiscernible). I mean, that would be better than -- better than nothing.
We would ask that, you know, if we have to provide that, that maybe at this point, there be no depositions, at least, taken or -- or further discovery requests, at least until the motion to dismiss is decided. But this would give the plaintiffs (indiscernible) something they can sink their teeth into and keep going on it. I -- yeah. I mean, that -- that is not an unreasonable compromise.
THE COURT: All right. So, I mean, I would be willing to, sort of, split the baby here. I mean, so long as the plaintiffs would be in agreement not to go after any other discovery, other than what we've described here today, so there will be no deposition at this stage of the game or any other discovery other than what's been discussed until the motion to dismiss has been decided.
So I'll hear from you, sir.
MR. CATANZARITE: We'd agree to that, Your Honor. I -- I think that's a reasonable compromise at this stage.
THE COURT: All right. So, I guess, then, I mean, the posture of this motion is as a motion to stay discovery. So I suppose I'll go ahead and give you my order denying the motion to stay discovery, but I will go ahead and enter a protective order allowing the parties only to enter into the specific discovery that we went ahead and talked about today.
So would it make more sense for the parties to go ahead and draft something for my approval jointly?
MR. TASCA: I was going to suggest that, Your Honor, just so we're, you know, all on the same page as to what, exactly, they want and what we're (indiscernible). And so, I think we can work with plaintiff's counsel or agreeable to do that (indiscernible).
THE COURT: All right. So let me go ahead and read you my order, then.
I'll deny the motion to stay discovery, but again, the reason why I'm denying the motion to stay discovery is because of this agreement that the parties have reached in court today to limit the discovery in the ways that were discussed in court today.
All right. So the parties are familiar with the facts of this case and the related arbitration. Accordingly, the Court will only repeat them here as necessary.
Defendants move to stay discovery as it recently filed a motion to dismiss plaintiff's amended complaint.
Defendant's motion to dismiss seeks to dismiss all of plaintiff's claims under Rule 12(b) (6) for failure to state a claim.
Defendant argues that discovery should be stayed and under the preliminary peek test because -- because its motion to dismiss will be dispositive and no additional discovery is needed to decide it.
Defendant also argues that discovery should be stayed under the good cause test as discovery is already proving to be unduly burdensome and will likely continue in this matter.
Plaintiff disagrees, arguing that discovery should not be stayed. Plaintiff argues that defendant has not met its heavy burden under the preliminary peek test to convince this Court that plaintiff will be unable to proceed on any claim.
Plaintiff also argues that good cause does not exist to stay discovery as the case is not complex and discovery will not be overly burdensome.
Finally, plaintiff argues that he will be prejudiced if discovery is stayed because he is over 80 years old.
The federal rules do not provide for an automatic stay or blanket stays of discovery because of potentially dispositive motions. However, courts may stay discovery in certain circumstances.
As mentioned before, there are two main tasks. One is the preliminary peek test under Kor Media. The other one is the good cause test as explained in Schrader v. Wynn.
Here, defendant argues that discovery should be stayed under both tests and plaintiff disagrees. The Court here agrees with plaintiff that a discovery stay is not appropriate in this case under either test given what we discussed here today.
Under the preliminary peek test, a discovery stay is not appropriate. The Court is not convinced that defendant will succeed on its motion to dismiss on all claims. That does not mean that you won't succeed. I'm just not convinced at this stage. I have written at length about how difficult it is for a court in my situation to be able to be convinced of anything based on a preliminary peek.
However, I will not go in any depth regarding the motion to dismiss as it's the court's -- the district court's rule to evaluate the propriety of the motion to dismiss.
Accordingly, the Court will not stay discovery under the preliminary peek test, and under the good cause test, I find that even though defendant argues that discovery is proving to be unduly, unduly burdensome, based on the broad discovery requests and it could potentially complicate facts and expert required -- discovery, I find that the middle ground that we were able to strike today takes care of the concerns that the defense may have, and the defense seems to also agree that that is a good compromise.
The Court is unpersuaded by the arguments made in the defense -- by the defense and, as a result, finds that no good cause has been shown.
So I will go ahead and allow you to prepare a joint protective order that delineates in detail the discovery that we discussed in court today. And I'm going to ask you to make sure that we get that no later than next Friday.
So what is today? Is today the 7th?
COURTROOM ADMINISTRATOR: Today's the 6th, Your Honor, and the date for next Friday, Your Honor, would be April the 14th.
THE COURT: All right. Does that work for plaintiffs?
MR. CATANZARITE: It does, Your Honor.
THE COURT: Defense.
MR. TASCA: It works for us, as well, Your Honor. I guess I would just ask while we're all here, if plaintiff's counsel could send us, sort of, you know, a list of what they described today, and we could take a look at it. That could be a good way to start.
THE COURT: All right. Sounds wonderful. So I'll be looking for the joint protective order by Friday, the 14th. If you need additional time to put that together, just let me know, and I'm happy to grant additional time. Okay?
MR. CATANZARITE: Thank you, Your Honor.
THE COURT: All right
MR. TASCA: Thank you, Your Honor.
THE COURT: -- wonderful. Have a good weekend, everyone.
MR. TASCA: You, too.
MS. COLES: Thank you, Your Honor.
(Proceedings adjourned at 1:45 p.m.)
--o0o
I, Paige M. Christian, a court-appointed transcriber, certify that the foregoing is a correct transcript transcribed from the official electronic sound recording of the proceedings in the above-entitled matter.
Dated: April 13, 2023
Paige M. Christian, RPR, CRR, CCR #955 Official Court Reporter United States District Court District of Nevada