Rubinstein et al v. The Keshet Inter Vivos Trust et al

Filing 258

ORDER denying 225 Art Deck's Motion to Quash; denying 225 Art Deck's Motion for Protective Order. Signed by Magistrate Judge Edwin G. Torres on 1/11/2019. See attached document for full details. (js02)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 17-61019-Civ-WILLIAMS/TORRES
ARTURO RUBINSTEIN, et al.,
Plaintiffs,
v.
THE KESHET INTER VIVOS TRUST, et al.,
Defendants.
______________________________________/
ORDER ON NON-PARTY ART DECK’S
MOTION TO QUASH AND FOR PROTECTIVE ORDER
This matter is before the Court on non-party, Art Deck, Inc.’s (“Art Deck”)
motion to quash subpoenas that the Keshet Inter Vivos Trust (the “Trust”), Yoram
Yehuda (“Mr. Yehuda”), and Sharona Yehuda (“Mrs. Yehuda”) (collectively,
“Defendants”) served on Art Deck’s financial institutions, EH Bank and Union Bank
(the “Banks”). [D.E. 225]. Defendants responded to Art Deck’s motion on December
19, 2018 [D.E. 241] to which Art Deck did not reply. Therefore, Art Deck’s motion is
now ripe for disposition.

After careful consideration of the motions, response,

relevant authority, and for the reasons discussed below, Art Deck’s motion is
DENIED.
I.

BACKGROUND

Arturo Rubinstein (“Mr. Rubinstein”), Fab Rock Investments, LLC’s (“Fab
Rock”), and Oceanside Mile, LLC’s (“Oceanside”) (collectively, “Plaintiffs”) filed this
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action on May 22, 2017 and alleged the following claims: federal and Florida RICO
violations, tortious interference, unjust enrichment conversion, rescission, quiet
title, and injunctive relief. [D.E. 1]. This case relates to a Florida Limited Liability
Company named Oceanside that was formed in 2006.

Mrs. Yehuda and her

husband Mr. Yehuda were Oceanside’s two founding members. Oceanside’s purpose
was to purchase, renovate, and operate the Sea Bonay Beach Resort, a hotel located
in Broward County, Florida (the “Hotel Property”). The Yehudas transferred their
interests in Oceanside to the Trust, and, in 2007, 49.5% of Oceanside’s equity was
sold to other individuals/entities.
In January 2012 – to avoid foreclosure – the Yehudas enlisted the help of Mr.
Rubinstein in offering his personal guaranty to Oceanside’s lender so that it would
extend the maturity date of a loan.

Mr. Rubenstein apparently never gave a

personal guaranty to Oceanside’s lender, as the lender refused to extend the loan’s
maturity date. Nevertheless, the Trust gratuitously assigned all of its interest in
Oceanside to Fab Rock, and Fab Rock was designated as Oceanside’s managing
member.1
Notwithstanding these transfers, Plaintiffs allowed the Yehudas to continue
their management of the day to day operations of the Hotel Property. In 2013,
Oceanside filed for bankruptcy, but recovered with the help of a multi-million-dollar
loan from Stonegate Bank and payments from Fab Rock. Shortly thereafter, the
Yehudas began attempts to secretly seize control of Oceanside from Fab Rock.
Plaintiffs allege that Mr. Rubinstein was always the managing member of
Fab Rock and Oceanside.
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Plaintiffs claim that the Yehudas forged Mr. Rubinstein’s signature on an
agreement regarding the assignment of the Trust’s interest in Oceanside to Fab
Rock and an amendment to that agreement granting the Trust an option to
reacquire that interest from Fab Rock. Mrs. Yehuda disputes this contention and
claims that she properly exercised the option agreement by delivering written notice
to Mr. Rubinstein in December 2015.
In June 2016, Plaintiffs uncovered certain improprieties about the Yehudas’
management of the Hotel Property. Plaintiffs demanded that the Yehudas turn
over management and operation of the Hotel Property to Mr. Rubinstein.

The

Yehudas refused. In August 2016, Oceanside filed a lawsuit in California to remove
the Yehudas from managing and operating the Hotel Property, alleging that the
Yehudas: (1) misappropriated Oceanside’s hotel proceeds, (2) created an entity to
seize control of Oceanside and to convince third parties that the Yehudas were the
managing members of Oceanside, and (3) entered into transactions on behalf of
Oceanside without its knowledge or consent. In their defense, the Yehudas argue
that Fab Rock had no interest in Oceanside because the Trust exercised its option to
reacquire all of Fab Rock’s interest in Oceanside.
On April 28, 2017, the buyers purchased the Hotel Property from Oceanside
for $13.5 million, pursuant to a warranty deed that was recorded in Broward
County’s public records on May 1, 2017. Mrs. Yehuda signed the deed as the sole
manager of Oceanside. On the date of the sale, the Department’s records reflected
that Mrs. Yehuda was Oceanside’s sole manager.
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Prior to the sale, Mrs. Yehuda

also executed an affidavit in connection with the closing – swearing (1) that she was
Oceanside’s sole manager, (2) that she was authorized to execute deeds and other
documents necessary to convey real property on Oceanside’s behalf, and (3) that all
the prerequisites needed to authorize the Hotel Property’s sale had been
effectuated. After Plaintiffs learned of the transaction, they sued.
II.

APPLICABLE PRINCIPLES AND LAW

Federal Rule of Civil Procedure 45 provides that a subpoena must be
modified or quashed if it “requires disclosure of privileged or other protected
matter” or “subjects a person to [an] undue burden.” Fed. R. Civ. P. 45(c)(3); see
also Wiwa v. Royal Dutch Petroleum Co., 392 F.3d 812, 817–18 (5th Cir. 2004)
(“Under Federal Rule of Civil Procedure 45, a court may quash or modify a
subpoena if it (1) fails to allow a reasonable time for compliance; (2) requires a
person who is not a party to travel more than 100 miles from where the person
resides; (3) requires disclosure of privileged or protected matter; or (4) subjects a
person to undue burden.”) (footnote omitted). “Whether a burdensome subpoena is
reasonable ‘must be determined according to the facts of the case,’ such as the
party’s need for the documents and the nature and importance of the litigation.”
Wiwa, 392 F.3d 818 (quoting Linder v. Dep’t of Def., 133 F.3d 17, 24 (D.C. Cir.
1998)).
To determine whether a subpoena imposes an undue burden, courts must
consider at least six factors:

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(1) [the] relevance of the information requested; (2) the need of the
party for the documents; (3) the breadth of the document request; (4)
the time period covered by the request; (5) the particularity with which
the party describes the requested documents; and (6) the burden
imposed. Further, if the person to whom the document request is
made is a non-party, the court may also consider the expense and
inconvenience to the non-party.
Wiwa, 392 F.3d at 818. As part of this inquiry, “[a] trial court has broad, but not
unlimited, discretion in evaluating the circumstances of a case when considering
quashing a subpoena on grounds of oppressiveness. It must carefully examine the
circumstances presented to it and, when appropriate, consider the possibility of
modifying the subpoena rather than quashing.”

Northrop Corp. v. McDonnell

Douglas Corp., 751 F.2d 395, 403 (D.C. Cir. 1984).
“Rule 26(c) allows the issuance of a protective order if ‘good cause’ is shown.
In addition to requiring good cause, this circuit has also required the district court
to balance the interests of those requesting the order.

A ‘district court must

articulate its reasons for granting a protective order sufficient for appellate review.”’
McCarthy v. Barnett Bank of Polk Cty., 876 F.2d 89, 91 (11th Cir. 1989) (citations
omitted); see also Auto-Owners Ins. Co. v. Southeast Floating Docks, Inc., 231 F.R.D.
426, 429–30 (M.D. Fla. 2005) (“Rule 26(c) provides that upon a showing of good
cause, a court ‘may make any order which justice requires to protect a party or
person from annoyance, embarrassment, oppression, or undue burden or expense.’
The party seeking a protective order has the burden to demonstrate good cause, and
must make ‘a particular and specific demonstration of fact as distinguished from

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stereotyped and conclusory statements’ supporting the need for a protective order.”)
(citations omitted).
“A non-party seeking a protective order has the initial burden of showing that
the information sought is confidential and that the disclosure of that information
might be harmful.

Once the non-party has established both prongs, the party

seeking to compel the disclosure must show that the discovery sought is both
relevant to the pending action and necessary.” Coty Inc. v. C Lenu, Inc., 2010 WL
5392887, at *3 (S.D. Fla. Dec. 22, 2010) (citing American Standard, Inc. v.
Humphrey, 2007 WL 1186654, at *2–3 (M.D. Fla. Apr.19, 2007) (noting that “the
party resisting discovery . . . has the burden to show that the information sought by
[the p]laintiff is confidential and that disclosure would be harmful” and that “[o]nly
after such a showing is made does the burden shift to the party seeking the
discovery to show the information sought is relevant and necessary.”)) (citations
omitted).
It is well settled that “[t]he litigant seeking the protective order must
articulate the injury with specificity.”

United States v. Dentsply Int’l, Inc., 187

F.R.D. 152, 158 (D. Del. 1999) (citations omitted); see also United States v. Garrett,
571 F.2d 1323, 1326 n. 3 (5th Cir. 1978) (finding that a party seeking a protective
order must show not just speculative harm but must make a “particular and specific
demonstration

of

fact

as

distinguished

from

stereotyped

and

conclusory

statements”) (citations omitted); see also United States v. Dentsply Int’l, Inc., 187
F.R.D. at 158 (“‘Broad allegations of harm, unsubstantiated by specific examples,’
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do not support a showing for good cause.”) (quoting Cipollone v. Liggett Group, Inc.,
785 F.2d 1108, 1121 (3d Cir. 1986)).

“In other words, the party seeking the

protective order must show good cause by demonstrating a particular need for
protection” because “[b]road allegations of harm, unsubstantiated by specific
examples or articulated reasoning, do not satisfy the Rule 26(c) test.” Trinos v.
Quality Staffing Servs. Corp., 250 F.R.D. 696, 698 (S.D. Fla. 2008) (citing Cipollone
v. Liggett Group, Inc., 785 F.2d 1108, 1121 (3d Cir. 1986)); see also Gen. Dynamics
Corp. v. Selb Mfg. Corp., 481 F.2d 1204, 1212 (8th Cir. 1973).
III.

ANALYSIS

On November 21, 2018, Defendants served a notice of intent to serve
subpoenas seeking financial records relating to Art Deck from the Banks.
subpoenas contained two separate requests for productions:
All bank account statements, unredacted incoming and outgoing wire
transfer records, deposit records, and copies of unredacted incoming
and outgoing checks from the time period dating from 01-01-2014
through 12-31-2016 for Union Bank Account No. XXXXXX09621, held
in the name of Art Deck, Inc. The subpoenaing party believes that the
branch associated with the account holder is located in Panorama City,
California (PO Box 512380, Los Angeles); and
All bank account statements, unredacted incoming and outgoing wire
transfer records, deposit records, and copies of unredacted incoming
and outgoing checks from the time period dating from 01-01-2014
through 12-31-2016 for EH National Bank Account No. XXXXXX2,
held in the name of Art Deck, Inc. The subpoenaing party believes
that the branch associated with the account holder is presently located
at 8484 Wilshire Blvd, Suite 100, Beverly Hills, CA 90211.
[D.E. 225].

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The

Art Deck claims that the subpoenas are improper for several reasons. First,
Art Deck argues that the deadline for compliance in the subpoenas (December 5,
2018) is untimely under the Court’s Local Rules and the Court’s amended
scheduling order.

Pursuant to Local Rule 26.1(d) “subpoenas seeking the

production of documents must be served in sufficient time that the response is due
on or before the discovery cutoff date.” S.D.L.R. 26.1(d). The subpoenas in this case
were served on November 21, 2018 and provided a document production deadline of
December 5, 2018. However, Art Deck states that the Court’s amended scheduling
order provided a discovery cutoff date of November 30, 2018 – meaning that the
documents sought were due after the discovery deadline.

Because Defendants

violated the Local Rules, Art Deck concludes that the subpoenas are defective.
Second, Art Deck argues that the subpoenas are improper because they seek
confidential financial records that are protected under Florida’s constitutional right
of privacy.

Art Deck is concerned that its personal and confidential financial data

is at risk of being disclosed for no compelling reason and that this may affect the
information of its clients. And third, Art Deck claims that the subpoenas are not
limited in scope and that it enables Defendants to rummage through sensitive
confidential information to annoy and harass Art Deck.
Art Deck’s initial argument – that the subpoenas run afoul of the Court’s
Local Rules and the Court’s scheduling order – misses the mark because it is a moot
point.

Art Deck claims that Defendants violated the Local Rules because the

discovery cutoff passed on November 30, 2018 and that the documents requested
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included a production date of December 5, 2018. It is certainly true that subpoenas
seeking the production of documents must be served so that a response is due on or
before the discovery cutoff date.

And it is also true that the Banks were not

required to respond to the subpoenas because Defendants would have been unable
to compel compliance under the Court’s Local Rules. See Lira v. Arrow Air, Inc.,
2007 WL 188163, at *2 (S.D. Fla. Jan. 22, 2007) (refusing to compel defendant to
produce witnesses for additional discovery after the close of the discovery period).
But, the Banks timely responded to the subpoenas with their production of
documents and neither objected to nor moved for a protective order. That is, while
the subpoenas ran afoul of the Court’s Local Rules, the Banks complied with the
production request notwithstanding their right to refuse Defendants’ request.
Because this issue is now moot, Art Deck’s argument lacks merit.2
Art Deck’s second argument– that Florida’s right to privacy forecloses the
discovery sought – is misplaced because it is well settled that “an organization or
corporate entity has no personal right to privacy under Florida law” as
“only living individuals have a personal right to privacy under Florida law.”

Joe

Ervin’s Fitness Clubs, Inc. v. United Nat’l Ins. Co., 2007 WL 9698317, at *4 (S.D.
Fla. July 25, 2007), Report and Recommendation adopted, 2007 WL 9698318 (S.D.
Fla. Aug. 10, 2007). Art Deck’s related contention – that the subpoenas improperly
targeted its clients – is also feeble because Art Deck fails to explain how bank
Even if the Banks had refused to produce documents and objected to the
subpoenas, this may not have undermined the validity of the subpoenas given the
importance of the documents requested and the small amount of time that passed
after the discovery cutoff.
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2

statements reflect confidential client information. In other words, Art Deck never
clarifies how the information contained in the bank statements reflects information
about its clients. Because these arguments are unclear and conclusory, they lack
merit.
Art Deck’s final argument is that the subpoenas should be quashed because it
subjects Art Deck to annoyance and harassment.

Art Deck’s contention is

unpersuasive because it relies on boilerplate objections.

And “[b]y presenting

boilerplate objections, [Art Deck] fails to provide the Court with any details on how
the subpoena[s] [are] improper or how [they] appl[y] to the items requested.” Ctr.
for Individual Rights v. Chevaldina, 2017 WL 5905191, at *5 (S.D. Fla. Nov. 29,
2017) (citing Miccosukee Tribe of Indians of Florida, 2013 WL 10740706, at *2 (S.D.
Fla. June 28, 2013) (“Specificity is required in objections because without it both the
requesting party and the Court lacks sufficient information to understand the scope
of

the

objection,

and

to

fairly

consider

whether

the

objection

has

merit.”); Pepperwood of Naples Condo. Ass’n, Inc. v. Nationwide Mut. Fire Ins. Co.,
2011 WL 3841557, at *3 (M.D. Fla. Aug. 29, 2011) (“Defendant must state specific
grounds for each objection.”); U.S.C.F.T.C. v. Am. Derivatives Corp., 2007 WL
1020838, at *3 (N.D. Ga. Mar. 30, 2007) (“Merely stating that a discovery request is
vague or ambiguous, without specifically stating how it is so, is not a legitimate
objection to discovery.”)).
Setting aside that problem, the documents sought are highly relevant
because they relate to Mr. Rubinstein’s testimony in this case. Mr. Rubinstein
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testified that he contributed considerable sums of money to Oceanside under the
assumption that he was Oceanside’s majority owner.

This includes a $500,000

contribution made to pay down the original loan on the hotel. Mr. Rubinstein also
testified that the $500,000 payment came from a loan received from Mr. Schatzky in
March 2014. Mr. Rubinstein claims that over the course of several months, he
repaid Mr. Schatzky and that the source of this money was from Art Deck. In other
words, Mr. Rubinstein testified that he used income from Art Deck to repay a
$500,000 loan at the center of this litigation. Because the documents sought are
relevant to the issues presented, Art Deck’s motion to quash and motion for
protective order must be DENIED.
IV.

CONCLUSION

For the foregoing reasons, it is hereby ORDERED AND ADJUDGED that
Art Deck’s motion to quash and motion for a protective order are DENIED.
DONE AND ORDERED in Chambers at Miami, Florida, this 11th day of
January, 2019.
/s/ Edwin G. Torres
EDWIN G. TORRES
United States Magistrate Judge

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