Opinion
08-24-2023
Y.C., Plaintiff, v. A.C., Defendant.
Counsel for Plaintiff The Law Firm of Laurence P. Greenberg By: Laurence P. Greenberg, Esq. Counsel for Defendant Daniel H. Stock, PLLC By: Daniel H. Stock, Esq.
Unpublished Opinion
Counsel for Plaintiff
The Law Firm of Laurence P. Greenberg
By: Laurence P. Greenberg, Esq.
Counsel for Defendant
Daniel H. Stock, PLLC
By: Daniel H. Stock, Esq.
ARIEL D. CHESLER, J.S.C.
The following e-filed documents, listed by NYSCEF document number (Motion 006) 276, 277, 278, 279, 280, 281, 282, 283, 284, 285, 287, 291, 292, 293, 294, 295, 296, 297, 298, 299, 300, 301, 302, 303, 304, 305, 306, 307, 308, 309, 310, 311, 312, 313, 314, 315, 316 were read on this motion to/for QUASH SUBPOENA, FIX CONDITIONS.
Upon the foregoing documents, it is
On November 29, 2022, Plaintiff filed an application to (i) quash the subpoena Defendant served on 4.A.D., or in the alternative (ii) modify the same to limit it to information up to and including the valuation date for L.R.
BACKGROUND
The Plaintiff and Defendant were married on August 8, 1999, in New York, NY. There are two unemancipated children of the marriage. Plaintiff filed this action for divorce on April 25, 2019. On July 17, 2019, the parties entered into a stipulation in which they agreed to complete document production within a 45-day period. Now, more than three years later, the parties still cannot agree on which documents they are required to produce.
On September 23, 2022, the Defendant served the Plaintiff with the 4.A.D. Subpoena. The subpoena seeks financial discovery related to Plaintiff's active and/or passive investment in 4.A.D. 4.A.D. is a business entity that owns real property located at [REDACTED], Brooklyn, New York. The Plaintiff and his business partner, S.A., co-developed the property at [REDACTED], which is now home to a luxury condominium building. 4.A.D.M. is the managing entity for 4.A.D. That managing entity has two members who each hold 50% interest therein: L.R. and L.4.A.M. The Plaintiff is the Managing Member and majority owner (63.72%) of L.R. L.R. invested in 4.A.D. The Plaintiff secured the funding for that deal and closed the transaction through the L.R. entity. The returns on L.R's investment in 4.A.D. rely on the success of the real property at [REDACTED] because 4.A.D. is an entity that was established to run the development of the project.
MOTION TO QUASH 4.A.D. SUBPOENA
TIMELINESS
The Plaintiff argues that the subpoena is untimely, referencing the advice of the Court to enter into a schedule for any outstanding non-party examinations to be completed within 60 days. While the Court would have hoped that all efforts for discovery could have been completed in a timelier fashion, it is clear that the information being sought in the subpoena arose later in the discovery process.
RELEVANCE OF THE DEMAND
Plaintiff argues that the document demand from 4.A.D. is improper and irrelevant on the ground that it seeks disclosure of financial information from unrelated third parties because approximately 70% of 4.A.D. is owned by non-parties to this action. Additionally, Defendant argues that the requested subpoena directly relates to the parties' marital investment and its value is relevant to this action.
The standard to be applied on a motion to quash a subpoena duces tecum is whether the requested information is "utterly irrelevant" to any proper inquiry. Gertz v. Richards, 233 A.D.2d 366 [2nd Dept. 1996]. It is the one moving to vacate the subpoena who has the burden of establishing that the subpoena should be vacated under such circumstances. Kapon v. Koch, 23 N.Y.3d 32 [2014]. L.R. maintained a 30.92% interest in 4.A.D. as of the date of commencement, and the full and complete financial information requested from 4.A.D. is necessary to determine the dollar value of the stake that L.R. holds in that business. This Court must determine the dollar value of the returns on the investment in 4.A.D. to Order an appropriate remedy for equitable distribution of the marital investment and thus cannot consider the requested information utterly irrelevant. Therefore, it cannot be said that the subpoena seeks information that is utterly irrelevant.
Further, efforts to obtain the information directly from Plaintiff have been futile necessitating the issuance of the subpoena.
DIRECT INTEREST AND VALUATION DATE
Plaintiff argues that Defendant is not entitled to financial discovery on 4.A.D. because (i) L.R. invested in 4.A.D., not Plaintiff, and because (ii) the success of L.R. and 4.A.D. is a result of Plaintiff's hard work through a web of business entities that he has interest in, whereas Defendant's role in the success of those businesses has been "passive" at best. Defendant notes that Plaintiff invested in 4.A.D., through L.R., during the marriage, and that Plaintiff does not dispute that L.R. is a marital asset.
It is undisputed that Plaintiff invested marital assets in 4.A.D. through L.R., a company of which he is the manager and majority owner (63.72%), during the marriage. Certainly, the investment in 4.A.D. constitutes a marital investment, and, as such, the Defendant is entitled to equitable distribution of the appreciation thereof.
Moreover, Plaintiff argues that if this court determines that Defendant is entitled to financial discovery on 4.A.D. it should be limited up to and including the date of commencement of this action because Plaintiff's investment in 4.A.D. is "active." Defendant disputes Plaintiff's allegation that the investment in 4.A.D. is "active" and instead argues the investment is "passive."
It is a bedrock principle of matrimonial law that both parties to a divorce action are entitled to equitable distribution of all marital assets, including investments and the appreciation thereof, in the absence of a prenuptial agreement indicating otherwise. Active assets are generally valued as of the day of commencement of a divorce action, whereas passive assets are typically valued as of the date of trial. Greenwald v. Greenwald, 164 A.D.2d 706, 716 [1st Dept. 1991]. Such a formulation of the active-passive analysis, however, is not a rule of law. It is a general guidepost that should be used to facilitate a just outcome in any particular case. Raskopf v. Raskopf, 641 N.Y.S.2d 993, 994 [Supreme Court, New York County 1996]. Ultimately, it is within the court's discretion to determine a valuation date that is tailored to the facts in order to provide for equitable distribution of the marital asset pool. Thus, Courts under this jurisdiction have found that parties to a divorce action are equally entitled to updated financial information in the course of discovery.
As with any investment made with marital assets during the marriage, Plaintiff is required to produce financial discovery on the 4.A.D., regardless of the relative percentage of work he contributed toward the appreciation of the investment compared to the Defendant.
The court disagrees with Plaintiff's proposed modification of the discovery request on two grounds. First, whether the investment in 4.A.D. is active or passive is an issue that will need to be determined at trial. Second, it is not necessary to determine whether the investment in 4.A.D. is active or passive at this stage in the litigation because the active-passive analysis is not dispositive of the appropriate valuation date. This court will determine the valuation date for 4.A.D. once it hears arguments from both parties that are tailored to the facts of this case.
The Court has considered all other arguments raised and finds them unavailing.
Accordingly, it is
ORDERED, the motion to quash the 4.A.D. Subpoena or in the alternative modify the same to limit it to information up to and including the valuation date for L.R. is denied in its entirety.