Opinion
Index No. 651570/2013
04-06-2020
SPRUCE INTERIORS, LLC d/b/a Spruce Interior Design, Plaintiff, v. BH 25 PIERREPONT LLC, Erez Itzhaki, and Sheerlee Itzhaki, Defendants.
Kurzman Eisenberg Corbin & Lever, LLP, White Plains, NY (Bruce W. Bieber of counsel), for plaintiff. Law Offices of Michael B. Wolk, P.C., New York, NY (Michael B. Wolk of counsel), for nonparty movants.
Kurzman Eisenberg Corbin & Lever, LLP, White Plains, NY (Bruce W. Bieber of counsel), for plaintiff.
Law Offices of Michael B. Wolk, P.C., New York, NY (Michael B. Wolk of counsel), for nonparty movants.
Gerald Lebovits, J.
This motion arises out of ongoing efforts by plaintiff Spruce Interiors, LLC, to enforce a 2017 money judgment it obtained against defendant BH 25 Pierrepont LLC. As part of those efforts, Spruce Interiors issued a post-judgment subpoena to nonparty Signature Bank under CPLR 5223 and 5224, seeking six months worth of bank records for each of six bank accounts that appeared in bank statements of BH 25 Pierrepont during the period in which BH 25 Pierrepont was indebted to Spruce. The holders of those six accounts now move to quash the subpoena, and for sanctions under 22 NYCRR § 130-1.1. Spruce opposes the motion to quash and seeks sanctions as well. The motion to quash is granted in part and denied in part; the respective requests for sanctions are denied.
As an initial matter, Spruce argues that movants lack standing to move to quash a subpoena directed toward a bank and seeking the bank's records. This court need not resolve that question here: Given this financial information's potential sensitivity, the court concludes that to the extent that Spruce's subpoena is overbroad, it would be appropriate for the court to enter a protective order under CPLR 5240 sua sponte.
In challenging the subpoena, movants argue that the subpoena is jurisdictionally defective because it was not served on the holders of the accounts about which Spruce seeks records from the bank. This court disagrees. It is undisputed that Spruce properly served the subpoena on the bank itself—and indeed that the bank is willing to comply with the subpoena. Movants cite no authority for the proposition that Spruce was required also to serve the account holders.
Movants claim that Spruce was required to serve them as a matter of due process of law. Movants do not, however, identify any property interest of which movants would be deprived should the bank produce its own account records to Spruce.
Movants also argue that the subpoena is substantively defective because it goes beyond seeking financial records and information of the judgment debtor to seeking nonparties' financial information. This court agrees in part—but only in part.
The cases on which movants rely make clear that a post-judgment enforcement subpoena may seek only information related to the judgment debtor's assets, and may not subpoena nonparties' financial information merely because those nonparties are closely tied or related to the judgment debtor. (See Carlyle, LLC v. Beekman Garage LLC , 157 AD3d 509, 510 [1st Dept. 2018] ; Stern v. Carlin Communications, Inc. , 210 AD2d 110, 111 [1st Dept. 1994].) By the same token, though, that the financial records sought are those of nonparties does not itself render a subpoena irrelevant if a basis exists to believe that the financial records contain information relating to the assets of the judgment debtor.
Here, Spruce asserts—and movants do not dispute—that it is seeking records of the six nonparty accounts because BH 25 Pierrepont's bank statements indicate that those six accounts received transfers from BH 25 during a six-month portion of the period in which BH 25 owed money to Spruce. The fact of those transfers sufficiently demonstrates for relevance purposes that the records of the six accounts contain information relating to the assets of the judgment debtor. At the same time, Spruce does not provide any basis to conclude that all transactions engaged in by the six nonparty accounts during the six-month period at issue related to assets of BH 25. This court must therefore strike a balance between requiring production of information relevant to the asset transfers prompting the challenged subpoena (and information that may be relevant to any future fraudulent conveyance action), and requiring disclosure of irrelevant and private financial information of nonparties.
Spruce also does not explain why the account-opening documents for these accounts would shed light on the whereabouts of assets of BH 25.
This court concludes that the nonparty motion to quash should be granted in part, as follows. The motion to quash item 1 of the subpoena is granted in full. With respect to the bank statements sought in item 2 of the subpoena, the bank shall, before it produces the statements, redact all transaction information other than information pertaining to (i) transactions involving BH 25 Pierrepont; and (ii) transactions among or involving one or more of the six nonparty accounts at issue. With respect to the various types of transaction documents sought in item 2 of the subpoena, the bank must produce documents relating only to transactions involving BH 25 or one of the six nonparty accounts at issue.
Movants argue that because Spruce's basis for seeking this information is essentially that the transfers from BH 25 to the six accounts were fraudulent conveyances, Spruce may only seek such information through discovery in a fraudulent-conveyance action. This court disagrees. Movant relies on the First Department's decision in Stern ; but that case holds only that if a fraudulent-conveyance action is already pending , disclosure into assets within the scope of that action should be sought in the action itself and not through a related post-judgment enforcement subpoena. That is not the case here.
Finally, given that some of the information sought by the subpoena at issue here is relevant to enforcing Spruce's judgment, this court denies the branch of movants' motion seeking sanctions. Spruce did not cross-move for sanctions; and its subpoena was partly overbroad in any event. This court therefore denies Spruce's request for sanctions.
The parties also spar about whether Spruce was required to move to compel or whether movants were required to move to quash in order to put the issue of the subpoenas' validity before the court. Given this court's conclusions on relevance and on sanctions, though, this question is academic.
Accordingly, it is
ORDERED that the branch of nonparties' motion seeking to quash Spruce's subpoena is granted in part and denied in part as set forth above; and it is further
ORDERED that the branch of nonparties' motion seeking sanctions against Spruce is denied.