Opinion
Index No. 656213/2017
05-18-2022
Jacob KINDLER, Urban Homes, Inc., and Urban Homes Remodeling, Inc., Plaintiffs, v. Dariusz ZYLEWICZ, Defendant.
Munzer & Saunders, LLP, New York, NY (Craig A. Saunders of counsel), for plaintiffs. Finkelstein Filler, LLP, New York, NY (Edward R. Finkelstein of counsel), for defendant.
Munzer & Saunders, LLP, New York, NY (Craig A. Saunders of counsel), for plaintiffs.
Finkelstein Filler, LLP, New York, NY (Edward R. Finkelstein of counsel), for defendant.
Gerald Lebovits, J.
Plaintiff Jacob Kindler owns plaintiffs Urban Home Remodeling, Inc. (UHR) and Urban Homes, Inc. (UH). Defendant, Dariusz Zylewicz, was formerly a 40% partner in UHR and UH with Kindler.
On March 23, 2017, plaintiffs entered into an agreement to buy out defendant's 40% interest in UHR and UH for $264,000, to be paid in three installments. After making the first two payments, plaintiffs refused in August 2017 to make the final payment, claiming that they had learned that defendant had made false representations about the financial condition of UHR and UH.
On October 4, 2017, plaintiffs brought this action, asserting claims in breach of contract and unjust enrichment, fraudulent inducement, and conversion. Plaintiffs seek rescission of the March 2017 purchase agreement. Defendant counterclaimed for breach of contract and breach of the agreement's non-disparagement clause.
On October 9, 2018, defendant served the Amended Interrogatories and Demand for the Production of Documents (First Demands) containing 25 discovery demands. Plaintiffs have claimed that they fully complied with defendant's First Demands. On November 11, 2020, defendant served the Second Interrogatories and Demand for the Production of Documents (Second Demands) containing 15 demands, to which Plaintiffs have not yet responded.
This motion concerns the Second Demands. Plaintiffs move under CPLR 3103 for a protective order shielding them from having to respond to those demands. Defendants cross-move to compel under CPLR 3124.
DISCUSSION
CPLR 3103 (a) provides that "the court may at any time on its own initiative, or on motion of any party or of any person from whom or about whom discovery is sought, make a protective order denying, limiting, conditioning or regulating the use of any disclosure device. Such order shall be designed to prevent unreasonable annoyance, expense, embarrassment, disadvantage, or other prejudice to any person or the courts."
This court considers each of the Second Demands in turn.
No. 1: Defendant seeks the names of all individuals who are or were officers, directors, employees and shareholders of UHR and UH on or after March 24, 2017. (See NYSCEF No. 48 at 1.) That information, though, was already requested in Demand No. 4 of defendant's First Demands. (See NYSCEF No. 20, at 5.) And defendant does not dispute plaintiffs’ representation on this motion that they fully responded to those demands. (See NYSCEF No. 42, at 1.) Plaintiffs need not respond further.
No. 2: Defendant seeks all persons who are or were officers, directors, employees and shareholders of Urban Homes Industries LLC (UHI) on or after March 24, 2017. (See NYSCEF No. 48 at 1.) But UHI is not a party either to this action or to the underlying agreement. Defendant has failed to establish that the information he seeks about UHI is nonetheless relevant here. Plaintiffs need not respond to this demand.
No. 3: Defendant seeks copies of UHR's, UH's and UHI's federal and state tax returns for tax years 2017, 2018 and 2019. (See NYSCEF No. 48, at 1.)
A party seeking to compel production of a tax return must identify the particular information the return will contain and its relevance and explain why other possible sources of the information sought are inaccessible or likely to be unproductive. (See Nanbar Realty Corp. v. Pater Realty Co. , 242 AD2d 208, 209 [1st Dept 1997].)
Here, plaintiffs have alleged that defendant fraudulently induced them to enter into the March 2017 agreement by materially misrepresenting the financial condition of UH and UHR; and that these misrepresentations potentially exposed plaintiffs to significant tax liabilities. Plaintiffs made these allegations in a complaint filed in October 2017—that is, in tax year 2018. As a result, the UH and UHR state and federal tax returns for 2017 and 2018 are material and relevant to this action and must be produced. The UH and UHR tax returns for 2019, however, which concern only time periods after the allegations of the complaint, are not relevant and need not be produced. Nor, as discussed above with respect to Second Demand No. 2, are UHI's tax returns relevant.
No. 4: Defendant seeks copies of all documents concerning any communications between Kindler and any accountant since March 24, 2017, concerning: (a) the books and records of UH, UHR and UHI; or (b) the tax returns of UH, UHR and UHI; and/or (e) any financial statements of UH, UHI and UHR. (See NYSCEF No. 48 at 2.)
Defendant has not established the relevance of documents and communications between Kindler and any accountant that were generated or exchanged after the filing of the complaint in October 2017; nor the relevance of documents and communications concerning UHI. Documents and communications between Kindler and accountants concerning the books and records, tax returns, and financial statements of UH and UHR that were generated or exchanged between March 24, 2017, and October 4, 2017, on the other hand, are relevant and should be produced. Given this limited, specific time period, this court is not persuaded by plaintiffs’ objection that defendant's request for "all" such documents and communications necessarily renders the request overbroad.
No. 5 : Defendant seeks copies of any appraisals of UH and/or UHR that were made or obtained between March 24, 2017, and the date of the response to the Second Demands. (See NYSCEF No. 48 at 2.) Those documents, however, were already requested in defendant's First Demand No. 21. (See NYSCEF No. 20 at 8.) Plaintiffs therefore need not respond further to this demand.
No. 6: Defendant seeks copies of any financial statements concerning UH, UHI and/or UHR that were prepared or obtained between March 24, 2017, and the date of the response to the Second Demands. (See NYSCEF No. 48 at 2.) For the reasons given above with respect to Second Demand Nos. 2 and 4, plaintiffs must produce only those financial statements that (i) concern UH and/or UHR, and (ii) were prepared or provided to plaintiffs between March 24, 2017, and October 4, 2017.
No. 7: Defendant seeks copies of all contracts executed by or for UH, UHI and/or UHR from March 24, 2017 to the date of the response to the Second Demands. (See NYSCEF No. 48 at 2.)
For the reasons given above with respect to Second Demand Nos. 2 and 4, plaintiffs must produce only those contracts executed by or for UH and/or UHR from March 24, 2017, to October 4, 2017.
No. 8: Defendant seeks the account number and bank branch location for any accounts held in the name of or for UH, UHI and/or UHR, for the period of March 24, 2017 to the date of the response to the Second Demands. (See NYSCEF No. 48 at 2.)
This court concludes that this demand is overbroad and insufficiently justified with respect to UH and UHR; and that for the reasons discussed above, the demand with respect to UHI does not seek any relevant information. Plaintiffs need not respond to this demand.
No. 9: Defendant seeks the date, amount, payee for any payment or transfer made by or for UH, UHI and UHR, and copies of all documents concerning the foregoing, for the period of March 24, 2017, to the date of the response to the Second Demands. (See NYSCEF No. 48 at 2.)
With respect to UHI, defendant has not established the relevance of this demand at all. With respect to UH and UHR, defendant has not established the relevance of this demand for periods beyond March 24, 2017, to October 4, 2017. Additionally, the demand, as framed, is unduly broad and burdensome even when limited to that period. Plaintiffs need not respond to this demand in its present form. This conclusion is without prejudice to defendant serving a more focused and specific demand, limited to the March-October 2017 time period.
No. 10: Defendant seeks the date, amount, payor for any payment or transfer made to or for UH, UHI and UHR, and copies of all documents concerning the foregoing, for the period of March 24, 2017, to the date of the response to the Second Demands. (See NYSCEF No. 48 at 2.)
For the reasons given above on Second Demand Nos. 2, 4, and 9, plaintiffs need not respond to this demand. This determination is without prejudice to defendant serving a more focused and specific demand, limited to the March-October 2017 time period.
No. 11: Defendant seeks each person that has hired UH, UHR and/or UHI, and copies of all documents concerning the foregoing, for the period of March 24, 2017, to the date of the response to the Second Demands. (See NYSCEF No. 48 at 2.)
No. 12: Defendant seeks each multi-unit project and/or any other commercial projects for which UH, UHR and/or UHI have been hired and/or for which UH, UHI and UHR have provided labor and materials, and copies of all documents concerning the foregoing, for the period of March 24, 2017, to the date of the response to the Second Demands. (See NYSCEF No. 48 at 3.)
Plaintiffs must produce responsive documents only with respect to (i) UH and UHR for (ii) the period March 24, 2017, to October 4, 2017.
No. 13: With respect to any person identified in response to Second Demand Nos. 11 and 12, Defendant seeks the address, current status of the engagement, nature of and the amount paid to UH, UHR and/or UHI and copies of all documents concerning the foregoing. (See NYSCEF No. 48 at 3.)
For the same reasons as Second Demand Nos. 2, 4 & 9, with respect to any person identified in response to Nos. 11 and 12, plaintiffs must produce the address and documents sufficient to identify the status of the engagement as of October 4, 2017; and the amount paid by October 4, 2017, or promised as of October 4, 2017, to be paid in the future to UH and/or UHR.
No. 14: Defendant seeks copies of all profit and loss statements for UH, UHR, and UHI, for the period of March 24, 2017, to the date of the response to the Second Demands. (See NYSCEF No. 48 at 3.)
Plaintiffs need only produce financial statements for (i) UH and UHR that (ii) pertain to the period of March 24, 2017, to October 4, 2017, and need not otherwise respond further.
No. 15: Defendant seeks the date, transferor, transferee and circumstances concerning the transfers of assets or property by UHR and UH, and copies of all documents concerning the foregoing, for the period of March 24, 2017, to the date of the response to the Second Demands. (See NYSCEF No. 48 at 3.)
For the reasons given above on Second Demand Nos. 2, 4, and 9, plaintiffs need not respond to this demand. This determination is without prejudice to defendant serving a more focused and specific demand, limited to the March-October 2017 time period.
Accordingly, for the foregoing reasons, it is hereby
ORDERED that defendant's cross-motion to compel is granted in part and denied in part as set forth above; and it is further
ORDERED that plaintiffs must within 30 days of entry of this order supplement their responses to defendant's Second Demands accordingly; and it is further
ORDERED that plaintiff's motion for a protective order is denied as academic.