Zurich American Insurance Company v. Staffing Concepts National, Inc. et al

Filing 353

ORDER denying 331 Motion to Quash; denying 332 Motion to Quash; granting 335 Motion to Compel. Signed by Magistrate Judge Amanda Arnold Sansone on 7/15/2019. (BEE)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
ZURICH AMERICAN INSURANCE
COMPANY,
Plaintiff,
v.

Case No.: 8:14-cv-775-T-23AAS

JOHN EDWARD WALKER HARDIN,
LEASING RESOURCES OF AMERICA 4,
INC., and COHESIVE NETWORKS, INC.,
Defendants.
__________________________________________/
ORDER
John Edward Walker Hardin, Leasing Resources of America 4, Inc. (Leasing
Resources), and Cohesive Networks, Inc. (Cohesive) (collectively, the defendants)
move to quash subpoenas served on Bank of America, N.A., Wells Fargo, N.A., Cohen
& Grieb, P.A., and Morgenstern, Phifer & Messina, P.A. (Docs. 331, 332). In the
alternative, the defendants request a protective order preventing the subpoenaed
discovery. (Id.). Zurich American Insurance Company (Zurich) moves to compel the
defendants to produce Hardin’s financial records. (Doc. 335).
I.

BACKGROUND
Zurich obtained judgments against Leasing Resources for over $4.7 million

following a jury trial and verdict in Zurich’s favor. (Docs. 162, 173, 178). Zurich
alleges it collected only a small fraction on the judgments because Hardin, the sole
owner of Leasing Resources, depleted Leasing Resources’ assets and transferred
Leasing Resources’ business to Cohesive, another entity owned by Hardin. (Doc. 306).
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Zurich initiated these supplementary proceedings seeking to hold John Hardin and
Cohesive responsible for Leasing Resources’ debt based on the doctrines of alter ego
and successor liability. (Docs. 298, 305).
Zurich served subpoenas requesting Hardin’s bank account statements and
related records from Bank of America and Wells Fargo. (Doc. 331, Exs. 2, 3). Zurich
also served subpoenas seeking Mr. Hardin’s accounting records from two separate
accounting firms.

(Doc. 332, Exs. 2, 3).

The defendants moved to quash the

subpoenas or for a protective order preventing disclosure of the requested financial
records.

(Docs.

331, 332).

Zurich opposes the defendants’ motions to quash

subpoenas or for a protective order. (Docs. 333, 334). According to the defendants’
supplemental statement, after a partial resolution of the two motions to quash or for
a protective order, the only issue remaining in dispute is whether these banks and
accounting firms must produce Hardin’s financial statements, tax returns, bank
records, and credit card statements to Zurich. (Doc. 336, p. 2).
By separate motion, Zurich moves to compel production of Hardin’s financial
records in response to Zurich’s document request nos. 11, 17, 37, and 41. (Doc. 335).
The defendants oppose Zurich’s motion to compel. (Docs. 337, 341, 346).
II.

ANALYSIS
A.

The Defendants’ Motions to Quash Subpoenas or for a Protective
Order (Docs. 331, 332)

The defendants move to quash the subpoenas under Federal Rule of Civil
Procedure 45 or for a protective order under Federal Rule of Civil Procedure 26(c).

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(Docs. 331, 332). Zurich argues the defendants lack standing to quash the third-party
subpoenas and failed to establish good cause for a protective order. (Docs. 333, 334).
1.

Standing

Under Rule 45, the “court for the district where compliance is required must
quash or modify a subpoena that: (i) fails to allow a reasonable time to comply; (ii)
requires a person to comply beyond the geographical limits specified in Rule 45(c);
(iii) requires disclosure of privileged or other protected matter, if no exception or
waiver applies; or (iv) subjects a person to undue burden.” Fed. R. Civ. P. 45(d)(3)(A).
Ordinarily a party lacks standing to quash a subpoena served on a third party unless
the party seeks to quash based on a “personal right or privilege with respect to the
materials subpoenaed.” Brown v. Braddick, 595 F.2d 961, 967 (5th Cir. 1979)1; see
also Maxwell v. Health Ctr. of Lake City, Inc., No. 3:05-CV-1056-J-32MCR, 2006 WL
1627020, at *2 (M.D. Fla. June 6, 2006) (same).
A party challenging a subpoena seeking the party’s financial records from
another source lacks standing to move to quash the subpoena under Rule 45. See
Popoli v. Ft. Myers Lodge #1899 Loyal Order of Moose, Inc., No. 2:15-cv-311-FtM29CM, 2015 WL 9031929, at *2 (M.D. Fla. Dec. 16, 2015) (collecting cases). In AutoOwners Ins. Co. v. Southeast Floating Docs, Inc., the defendants moved to quash
third-party subpoenas requesting the defendants’ financial records. 231 F.R.D. 426,
428 (M.D. Fla. Sep. 28, 2005). The court concluded the

In Bonner v. City of Richard, 661 F.2d 1206, 120711th Cir. 1981) (en banc), the
Eleventh Circuit adopted as binding precedent the decisions of the Fifth Circuit
rendered before October 1, 1981.
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financial records sought are business records of nonparties. Defendants have not established any expectation
of privacy in their business transactions with other
corporations and have not made any factual showing that
the records are confidential or proprietary. Therefore
Defendants fail to establish a “personal right” regarding
the records . . . Therefore, Defendants do not have standing
under rule 45 to quash the subpoenas regarding financial
records.
Id. at 429.
To the court’s knowledge, third-parties Bank of America, N.A., Wells Fargo,
N.A., Cohen & Grieb, P.A., and Morgenstern, Phifer & Messina, P.A. have not
objected to or otherwise opposed production of the Hardin’s financial records. Like
the defendants in Auto-Owners Ins. Co., the defendants have not proven a personal
right or privilege in the documents sought and lack standing to challenge the thirdparty subpoenas. Thus, the defendants’ motion to quash the subpoenas at issue is
denied.
2.

Good Cause for a Protective Order

Although the defendants lack standing to challenge the subpoenas under Rule
45, they have standing to move for a protective order under Rule 26 if the subpoenas
seek irrelevant information. Auto-Owners, 231 F.R.D. at 429. Under Rule 26(c), “the
court where the action is pending . . . may, for good cause, issue an order to protect a
party or person from annoyance, embarrassment, oppression, or undue burden or
expense.” Fed. R. Civ. P. 26(c)(1). When evaluating whether a movant has satisfied
his burden of establishing good cause for a protective order, a court should balance
the non-moving party’s interest in obtaining discovery against the moving party’s

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harm that would result from the discovery. Farnsworth v. Procter & Gamble, Co.,
758 F.2d 1545, 1547 (11th Cir. 1985).
Zurich seeks to collect from Hardin, as Leasing Resources’ alter ego, judgments
Zurich obtained against Leasing Resources. An “important factor” in determining
alter ego liability is “whether corporate funds were used for the individual’s benefit.”
Eckhardt v. United States, 463 F. App’x 852, 856 (11th Cir. 2012). Courts also look
to whether the alleged alter ego engaged in improper conduct by “commingling funds
of the corporation with funds of other corporations and with personal funds.” Omega
Psi Phi Fraternity, Inc. v. HCE Grp. of Co., No. 11-cv-80479, 2011 WL 13228098, at
*3 (S.D. Fla. Oct. 19, 2011); see also Sec. & Exch. Comm’n v. Torchia, No. 1:15-CV3904-WSD, 2016 WL 6212002, at *3 (N.D. Ga. Oct. 25, 2016) (holding commingling
of funds and treatment by an individual of corporate assets as his own are factors for
determining whether to pierce the corporate veil based on the theory of alter ego);
Guarantee Ins. Co. v. Brand Mgmt. Serv. Inc., No. 12-61670-CIV, 2013 WL 11971273,
at *2 (S.D. Fla. Dec. 23, 2013) (holding that the plaintiffs had a compelling need for
tax returns as for its alter ego claim).
Hardin’s financial statements, tax returns, bank records, and credit card
statements are relevant to Zurich’s claim for alter ego liability. (See Doc. 334, Ex. B,
Zurich v. Henry Hardin, No. 1:16-cv-02312, at *2 (N.D. Ga. April 27, 2017) (ordering
production of personal tax returns, bank statements, credit card statements, and
financial statements from alleged alter ego)).

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Hardin’s financial records are also relevant to Zurich’s successor liability
claim. To establish a claim for successor liability one or more of these grounds must
be present: a) the transaction is a de facto merger; b) the successor is a mere
continuation of the predecessor; or c) the transaction is a fraudulent effort to avoid
the liabilities of the predecessor. Murphy v. Blackjet, Inc., No. 13-80280-CIV, 2016
WL 3017224, at *4 (S.D. Fla. May 26, 2016). Hardin’s financial statements, tax
returns, bank records, and credit card statements are relevant to all three grounds
for successor liability because transfers would show a continuation of corporate assets
and operations and improper channeling of funds. See id.
“It is the movant’s burden to establish that compliance with a subpoena would
result in an undue burden.” Eastwood Enters., LLC v. Farha, No. 8:07-CV-1940, 2010
WL 11508180, at *4 (M.D. Fla. Apr. 26, 2010). Here, it is the subpoenaed thirdparties’ burden to produce the requested documents. To the extent the defendants
have confidentiality concerns, the court entered an Agreed Protective Order under
which the defendants can designate the records as “Confidential Information.” (See
Doc. 321).
The subpoenas are sufficiently narrowed to Hardin’s financial statements, tax
returns, bank records, and credit card statements. The balance weighs in favor of
Zurich and, thus, the defendants’ request for a protective order is denied.
B.

Zurich’s Motion to Compel

District courts have broad discretion in handling discovery matters. See
Republic of Ecuador v. Hinchee, 741 F.3d 1185, 1188 (11th Cir. 2013). “Unless

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otherwise limited by court order, . . . [p]arties may obtain discovery regarding any
nonprivileged matter that is relevant to any party’s claim or defense and proportional
to the needs of the case . . . Information within this scope of discovery need not be
admissible in evidence to be discoverable.” Fed. R. Civ. P. 26(b)(1). The Federal Rules
of Civil Procedure strongly favor full discovery whenever possible. Farnsworth, 758
F.2d at 1547.
Zurich moves to compel Hardin’s bank records, credit card statements, tax
returns, and financial statements in response to Zurich’s document request nos. 11,
17, 37, and 41. (Doc. 335). The specific requests and responses are:
Request No. 11 (Hardin’s bank records): All
Documents and Communications Relating to any bank
accounts maintained by Hardin, including but not limited
to any monthly statements, quarterly statements, annual
statements, cancelled checks, wire transfers, deposits,
receipts, confirmations, and all other information for any
account where Hardin is an account holder, beneficiary, coaccount holder, or co-beneficiary, including but not limited
to the statements for any checking or savings accounts at
Bank of America, Wells Fargo, or The Brand Banking
Company.
Response: Objection, overbroad and unduly burdensome.
* * * *
Request No. 17 (Hardin’s credit card statements). All
Documents and Communications Relating to any credit
cards or debit cards maintained by Hardin, including but
not limited to any monthly statements, quarterly
statements, annual statements, and all other information
for any account where Hardin is an account holder or coaccount holder.
Response: Objection, overbroad, unduly burdensome, and
irrelevant.

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* * * *
Request No. 37 (Hardin’s tax returns): Hardin’s state
and federal income tax returns, including but not limited
to draft and final returns, tax preparer’s notes,
Communications to or from the IRS, and Communications
to or from any arm of the state or federal government
Relating to taxes.
Response: Objection, overbroad and unduly burdensome,
and violation of the accountant-client privilege.
* * * *
Request No. 41 (Hardin’s financial statements):
Hardin’s financial statements, including but not limited to
all draft and final monthly, quarterly, and annual
statements, preparer’s notes, and Communications to or
from the preparer.
Response: Objection, overbroad and unduly burdensome,
and violative of the accountant-client privilege.
Federal Rules of Civil Procedure 34(b)(2)(B) provides discovery responses must
be stated with specificity. See Middle District Discovery (2015) at 12 (“Objections to
requests for production should be specific, not generalized . . .. Boilerplate objections
such as ‘the request is overly broad, unduly burdensome, and outside the scope of
permissible discovery’ are insufficient without a full, fair explanation particular to
the facts of the case.”).
In response to Zurich’s discovery requests, the defendants state boilerplate
objections including overbroad and unduly burdensome (in response to request nos.
11, 17, 37, and 41) and irrelevant (in response to request no. 17), without further
explanation of why Zurich’s discovery requests are improper. See Miccosukee Tribe
of Indians of Florida v. Cypress, No. 12-22439-CIV, 2013 WL 10740706, at *1 (S.D.
Fla. June 28, 2013) (“When a party responds to a discovery request with objections,
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it must do so in a [clear] and unambiguous manner, and must include a supporting
explanation or justification for the objections.”); Pepperwood of Naples Condo. Ass’n,
Inc. v. Nationwide Mut. Fire Ins. Co., No. 2:10-cv-753-FtM-36SPC, 2011 WL 3841557,
at *3 (M.D. Fla. Aug. 29, 2011) (“Defendant must state specific grounds for each
objection.”).
Boilerplate or general objections constitute a waiver of the objections to the
discovery sought. See Spencer v. City of Orlando, Florida, no. 6:15-cv-345-Orl-37TBS,
2016 WL 397935, at *2 (M.D. Fla. Feb. 2, 2016) (concluding that objections that are
“are too vague and nonspecific” fail to “preserve any objection to the requested
discovery.”).

Consequently, the defendants waived any objections, other than

privilege, to the discovery requests. Rather than grant Zurich’s motion to compel on
this basis alone, the court will consider the defendants’ proffered objections.
1.

Accountant-Client Privilege

Accountant-client privilege protects certain “confidential communications”
between Hardin and his accountants that are “not intended to be disclosed to third
persons other than: (1) those to whom disclosure is in furtherance of the rendition of
accounting services to the client; (2) those reasonably necessary for the transmission
of the communication.” TIC Park Centre 9, LLC v. Cabot, No. 16-24569-Civ, 2017 WL
9988745, at *9 (S.D. Fla. June 9, 2017) (citing Fla. Stat. § 90.5055(1)(c)).

The

defendants have not established that the required elements have been satisfied.
Zurich agreed to limit its request to the tax returns themselves, excluding
communications with the accountant. (See Doc. 335, Ex. D). Tax returns do not

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constitute a “confidential communication” implicating the privilege. See, e.g., JeldWen, Inc. v. Nebula Glass Int’l Inc., No. 07-22326-CIV, 2008 WL 11333314, at *3–4
(S.D. Fla. Feb. 26, 2008) (“tax returns are not privileged” and “any underlying factual
information would not be protected from disclosure”).

Thus, the defendants’

accountant-client privilege objection is overruled.
2.

Overbroad and Unduly Burdensome

Claims of overbreadth and undue burden should be supported by specific
information demonstrating how the request is overly broad and unduly burdensome.
Bank of Mongolia v. M & P Glob. Fin. Servs., Inc., 258 F.R.D. 514, 519 (S.D. Fla.
2009); see also Trinos v. Quality Staffing Servs. Corp., 250 F.R.D. 696, 698 (S.D. Fla.
2008) (holding that “courts should only limit discovery ‘based on evidence of the
burden involved, not on a mere recitation that the discovery request is unduly
burdensome.’”). The defendants failed to demonstrate how production of Hardin’s
financial statements, tax returns, bank records, and credit card statements is
overbroad or unduly burdensome.

Rather, Zurich’s document requests are

appropriately limited to January 1, 2010, when Leasing Resources entered its
insurance program with Zurich, through the present. (Doc. 335, Ex. A, ¶ O). Thus,
the defendants’ overbroad and unduly burdensome objections are overruled.
3.

Relevance

The defendants object to Zurich’s requests for Hardin’s credit card statements
as irrelevant. Because credit card statements would show charges Hardin made on
behalf of Leasing Resources, the statements are relevant to determining whether

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Hardin commingled corporate and personal funds. (See Doc. 335, Ex. C, Zurich, Case
No. 1:16-cv-02312) (ordering production of personal credit card statements from
alleged alter ego). Thus, the defendants’ relevance objection is overruled.
* * * *
Zurich’s document request nos. 11, 17, 37, and 41 seek documents that are
relevant and proportional to this action. The defendants’ objections are without merit
and overruled.
4.

Attorney’s Fees

Under Federal Rule of Civil Procedure 37(a)(5), if the court grants a motion to
compel, the court must award the prevailing party reasonable expenses, including
attorney’s fees, incurred as a result of submitting the motion. Fed. R. Civ. P. 37(a)(5).
The court must give the losing party an opportunity to be heard and the court must
not award fees if:
(i) the movant filed the motion before attempting in good faith to obtain
the disclosure or discovery without court action;
(ii) the opposing party’s nondisclosure, response, or objection was
substantially justified; or
(iii) other circumstances make an award of expenses unjust.
Id.
Here, Zurich conferred with the defendants in good faith before submitting its
motion to compel. (Doc. 335, p. 14). The defendants also had the opportunity to
respond to Zurich’s request for attorney’s fees. (Doc. 337). The defendants failed to
substantially justify their objections. Therefore, Zurich’s request for attorney’s fees

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is granted in conformity with Rule 37(a)(5).
III.

CONCLUSION
Accordingly, it is ORDERED:
(1)

The defendants’ motions to quash subpoenas or for a protective order

(Docs. 331, 332) are DENIED.
(2)

Zurich’s motion to compel (Doc. 335) is GRANTED. The defendants

must produce the requested financial statements, tax returns, bank records, and
credit card statements by July 30, 2019. Also, by July 30, 2019, the parties must
confer in good faith to stipulate to the reasonable attorney’s fees Zurich incurred
related to its motion to compel. If the parties fail to stipulate to reasonable attorney’s
fees incurred, then, by August 9, 2019, Zurich may submit a motion for attorney’s
fees, including affidavits and materials that support the amount sought.
ENTERED in Tampa, Florida, on July 15, 2019.

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