Opinion
11251/17
09-25-2019
I.A., Plaintiff, v. E.M., Defendant.
Attorney for Plaintiff: Mario DeRossi Attorney for Defendant: Michael Hammerman
Attorney for Plaintiff: Mario DeRossi
Attorney for Defendant: Michael Hammerman
Elisa S. Koenderman, J.
Plaintiff moves via order to show cause to quash certain judicial subpoenas duces tecum (see CPLR 2304 ) which Defendant served upon various nonparties to the instant divorce action, including Plaintiff's mother Z.A., Plaintiff's brother R.A., Plaintiff's ex-sister-in-law N.R. and Plaintiff's accountant O.A . Plaintiff claims that the subpoenas are facially defective in that they fail to provide the requisite notice (see CPLR 3101 ) and that the disclosure sought is irrelevant and immaterial to the action. Alternatively, Plaintiff moves for a protective order (see CPLR 3103[a] ), arguing that the subpoenas are overly broad and unduly burdensome. Defendant opposes. The court granted a stay of compliance with the subpoenas pending decision. In determining the motion, the court considered Plaintiff's Order to Show Cause; Defendant's Opposition in Affirmation; and Plaintiff's Affidavit in Reply (see CPLR 2219 ). Pursuant to the following analysis, the court lifts the stay of compliance and denies Plaintiff's motion to quash but grants a protective order to the extent indicated (see CPLR 3103[a] ).
Plaintiff has withdrawn her objection to the subpoena served on M.B., c/o FM Home Loans LLC regarding Loan #3516015222 for the parties' Hollywood, FL property.
Under CPLR 3101(a)(4), a party shall obtain "full disclosure" of information "material and necessary in the prosecution or defense of an action" from a nonparty "upon notice stating the circumstances or reasons such disclosure is sought or required" ( Hudson City Savings Bank v. 59 Sands Point , 153 A.D.3d 611, 612 [2d Dept. 2017] ). The words "material and necessary" must be interpreted liberally to require disclosure "of any facts bearing on the controversy which will assist preparation for trial by sharpening the issues and reducing delay and prolixity" ( Redmond v. Hanypsiak , 153 A.D.3d 1374, 1375 [2d Dept. 2017], citing Kapon v. Koch , 23 N.Y.3d 32, 38 [2014] ). The "only meaningful distinction" between subpoenas to parties and nonparties is that the latter must be provided with "notice," i.e. the "circumstances or reasons" regarding why the subpoenaing party "seeks or requires the disclosure" ( Kapon , 23 N.Y.3d at 36 ). Indeed, a party moving to quash a subpoena bears the initial burden to establish either that the information is "utterly irrelevant to the action or that the futility of the process to uncover anything legitimate is inevitable or obvious" (Redmond , 153 A.D.3d at 612-613, citing Kapon , 23 N.Y.3d at 34 ; see also Bianchi v. Galster Mgt. Corp. , 131 A.D.3d 558, 559 [2d Dept. 2015] ["after the subpoenaing party has established compliance with the CPLR 3101[a][4] notice requirement, disclosure from a nonparty requires no more than a showing that the requested information is relevant ..."] ). If the party seeking to quash the subpoena successfully meets that burden, then the subpoenaing party "must establish that the discovery sought is ‘material and necessary,’ ... i.e. that it is relevant" ( Kapon , 23 N.Y.3d at 34 ).
The subpoenas addressed to Plaintiff's brother, ex-sister-in-law and accountant seek disclosure of information regarding various entities owned by Plaintiff and/or her family members, including but not limited to Midtown Abstract LLC, Precise Examining LLC , Migdal Eliyahu LLC , NR Marketing & Management SVC, LLC , and Superior Services, LLC, which allegedly did business with Select Settlement Services, Inc., a corporation Plaintiff owned during the marriage. The subpoena addressed to Plaintiff's mother requests statements for any accounts at TD Bank, Chase Bank or Signature Bank held jointly between Plaintiff and her mother or between Plaintiff's mother and Plaintiff's brother. The subpoena addressed to Signature Bank requests statements for any accounts held individually or jointly by Plaintiff, her brother, her ex-sister-in-law, her mother and her accountant, as well as documents and statements for any accounts held by Plaintiff's and/or her family member's corporate entities. All the subpoenas request documents from January 1, 2013 to present.
Plaintiff's mother admits that she was the "sole owner/member of Precise Examining LLC" which dissolved on December 31, 2017.
Plaintiff's brother admits that he was the "sole owner/member of Migdal Eliahu LLC." Additionally, Plaintiff's ex-sister-in-law admits that she is "a member of ... Magen Eliyahu Enterprises Corp., which is owned by [R.A.]."
Plaintiff's ex-sister-in-law admits that she is "a member of NR Marketing & Management SVC, LLC."
Plaintiff initially stated that she does not hold any joint bank accounts with her mother. She subsequently admitted that "I did in fact have a joint bank account with [my mother]" but "at this time, I do not." Plaintiff contends that her previous denial "was a simple mistake in that I believed I was a beneficiary on my mother's account as opposed to holding joint title of the account with her." Regardless, Plaintiff has withdrawn her objection to disclosure of bank statements for any joint accounts between her mother and herself.
Each subpoena contains the following notice: "the reason for seeking disclosure pursuant to Article 31 of the CPLR is that you are believed to have material and relevant documents and information relating to the parties' finances in the above captioned matter that will bear on the disposition of marital property, the credibility of Plaintiff and others as well as child support and other matters." Because the subpoenas adequately state the circumstances or reasons why the disclosure is sought, Defendant has satisfied the notice requirement under CPLR 3101(a)(4) (see also Reid v. Soults , 138 A.D.3d 1091, 1092 [2d Dept. 2016] ). Moreover, Plaintiff has failed to establish that the subpoenas request information that is utterly irrelevant to the action. Rather, Defendant has demonstrated that the disclosure sought is material and necessary to determine Plaintiff's actual income to calculate support for the parties' child , A.S.-A. (D.O.B. 1/24/17).
The parties executed a post-nuptial agreement on February 14, 2017 in which they ostensibly waived maintenance and resolved equitable distribution.
Defendant claims that Plaintiff, her mother, her brother and her ex-sister-in-law are or were involved in a scheme to reduce Plaintiff's reportable income. Defendant alleges that less than a year before Plaintiff filed the divorce action, she dissolved her successful New York business, Select Settlement Services Inc. , and that Plaintiff's brother, who incorporated an identically named company in South Dakota registered to do business in New York , assumed control of Plaintiff's clients. Thus, Defendant argues that Plaintiff transferred her business to her brother to divest herself of income.
Plaintiff dissolved her company, Select Settlement Services, Inc., in January 2017 and commenced the divorce action on November 15, 2017.
Plaintiff's brother incorporated his business in South Dakota as Select Settlement Services, Inc. but uses Select Settlement Services I, Inc. to do business in New York. Plaintiff admits that the only reason for doing so is that her brother cannot operate his business in New York using the same name as any other preexisting entity, including her company.
Although Plaintiff denies that she gave or sold her business to her brother, she admits that "about eight (8) months" before she dissolved her company, her brother "created a similarly named entity separate and apart from my company and took the pipeline of business." She further admits that "once my brother created the new company, I became a W2 employee receiving a salary and working set hours ." Plaintiff alleges that she closed her business after she began to lose clients because of her "inability to effectively manage [the business] and keep up with the workload" due to complications from her high-risk pregnancy. She somewhat inconsistently asserts, however, that "because my company had gained a reputation and [the company name] had good will and value to it, my brother decided to take the clients, without buying out the corporate entity, to protect himself from liability." Plaintiff neither describes the purported "liability" nor explains how her brother's actions would "protect" him from it. Finally, Plaintiff declares that her brother's company "is not my company and never was my company" despite sharing the same clients and essentially the same name.
Notably, Plaintiff was employed by her brother's company before she dissolved her own business.
Defendant submits Plaintiff's 2015 tax returns for Select Settlement Services Inc., which show $1,100,038 in annual gross sales and $545,659 in annual profit (Defendant's Exhibit 6).
Defendant also claims that Plaintiff's mother, brother and ex-sister-in-law opened various LLCs with no legitimate business purposes but which received payments from Plaintiff's business; that Plaintiff had access to the LLCs' funds; and that Plaintiff withdrew money from the LLCs to use for personal expenses or to store in a safe deposit box . Defendant states that he observed Plaintiff write checks from her business to her family members' LLCs. He alleges that Plaintiff had checkbooks for several LLC accounts including Midtown Abstract LLC, Precise Examining LLC and Migdal Eliyahu LLC. Defendant attests that he saw Plaintiff withdraw cash from certain LLC accounts and that "her brother would come by to get his share." He asserts that on various occasions he overheard Plaintiff and her brother talking on the phone about what money she had deposited and what was available. Defendant states he once saw "piles of cash laid out on a table" in Plaintiff's office which Plaintiff's brother referred to as "LLC benefits."
Defendant submits a picture of a safe deposit box which Plaintiff allegedly sent to Defendant via text message on August 10, 2015 (Defendant's Exhibit 7).
Plaintiff's mother dissolved this company on December 31, 2017, six (6) weeks after Plaintiff filed for divorce.
Defendant states that the LLCs were Migdal Eliyahu LLC and NR Marketing LLC.
Moreover, Defendant acknowledges that, at Plaintiff's behest and with her brother's assistance, Defendant opened his own company, Superior Services, LLC. He asserts that when Plaintiff "asked me to open an LLC in my name ... I did not even know what an LLC was." Defendant contends that Plaintiff asked him to open the LLC "because she had too much income and need[ed] to take it off her name" so that "she would not have to pay [her ex-husband] as much in child support ." Defendant states that he observed Plaintiff write checks from her business to his LLC, deposit them into the LLC account and then withdraw funds to pay her personal credit card bills and mortgages.
Plaintiff has four children from a prior marriage.
Defendant states that Plaintiff was a signatory on the Superior Services LLC account at Signature Bank.
Defendant insists that "when I realized what [Plaintiff] was doing, I told her I want her to close all of it down and I was not going to pay any taxes on what she was doing." Defendant submits an alleged text message exchange from December 21, 2016 between Plaintiff and himself where they appear to be arguing about the money that Plaintiff deposited and withdrew from Defendant's LLC account (Defendant's Exhibit 9). During the exchange, Plaintiff states, "if you want lets [sic ] transfer the company to my mom's name" and "I will email u [sic ] form to sign to transfer company," evincing not only Plaintiff's flippancy but also her family members' complicity in her business dealings.
Although Plaintiff does not admit that she diverted or misappropriated funds, she does not deny that her mother, brother and ex-sister-in-law opened various LLCs that received payments from Plaintiff's business. In fact, although Plaintiff declares that she "never personally paid NR Marketing," she acknowledges that her business paid her ex-sister-in-law's company "for client referrals, advertisement and management." Plaintiff explains that when she incorporated her business, her ex-sister-in-law "also had a title company, NR Abstract" which "transferred the book of business to my company along with a list of their clients ." Plaintiff's states that her ex-sister-in-law then formed NR Marketing Management Services LLC to manage and advertise Plaintiff's business. Plaintiff adds that NR Marketing Management Services LLC "would also often refer clients" to Plaintiff's business to "help [it] grow" and that "as a result of their client referrals [Plaintiff's business] would pay NR Marketing a commission fee." In any event, Plaintiff does not provide any information regarding the business purposes of her other family members' LLCs or describe their business relationships to her company.
Interestingly, this is what subsequently transpired between Plaintiff's and her brother's companies.
The circumstances surrounding the dissolution of Plaintiff's business and the creation of her brother's virtually identical business are profoundly suspect. Additionally, the nature and purpose of the financial dealings between Plaintiff's business and her family members' LLCs, as well as those between Plaintiff personally and her family members, demand explanation. Indeed, Plaintiff's selective admissions and denials lend credence to Defendant's allegations. Accordingly, because the subpoenas request information that is relevant to the divorce action, the court lifts the stay of compliance and denies Plaintiff's motion to quash.
Nevertheless, excluding those to which Plaintiff has withdrawn her objection , the subpoenas are overly broad in that they request information from January 1, 2013, more than three years before the marriage began. Therefore, the court grants a protective order (see CPLR 3103[a] ) and limits the scope of disclosure to information from the date of marriage, April 3, 2016, to present.
Specifically, the subpoena to Plaintiff's mother regarding any joint accounts between her and Plaintiff, and the subpoena to M.B., c/o FM Home Loans LLC regarding the loan for the parties' Hollywood, FL property.
Any other application not specifically addressed herein is denied.
This constitutes the decision and order of the court.