Democratic Republic of the Congo v. Air Capital Group, LLC et al

Filing 298

ORDER denying 292 the Non-Parties' Amended Motion to Quash. Signed by Magistrate Judge Edwin G. Torres on 1/8/2018. (js02)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 12-Civ-20607-COOKE/TORRES
THE DEMORATIC REPUBLIC OF THE CONGO,
Plaintiff,
v.
AIR CAPITAL GROUP, LLC, MARIO ABAD,
individually, and JAIME SANCHEZ, individually,
and COMERCIAL JET, INC.,
Defendants.
______________________________________/
ORDER ON THE NON-PARTIES’ AMENDED MOTION TO QUASH
This matter is before the Court on World Air Logistics, LLC’s, Aerothrust
Holdings Leasing, LLC’s, and Aerothrust Holdings, LLC (collectively, the “NonParties”) amended motion to quash the Democratic Republic of Congo’s (“Plaintiff”)
subpoenas. [D.E. 292]. Plaintiff responded to the Non-Parties’ motion on November
29, 2017 [D.E. 294] to which the Non-Parties replied on December 6, 2017. [D.E.
295]. Therefore, the Non-Parties’ motion is now ripe for disposition. After careful
consideration of the motion, response, reply and relevant authority, and for the
reasons discussed below, the Non-Parties’ motion is DENIED.

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I.

BACKGROUND

Plaintiff filed this action on February 14, 2012. [D.E. 1]. This case is based
on a contractual dispute with respect to the repair of Plaintiff’s aircraft. Plaintiff
alleges that it entered into an agreement with Air Capital Group, LLC (“ACG”), and
its CEO Mario Abad (“Abad”) (collectively, the “Debtors” or “Defendants”).
Plaintiff’s complaint alleges five counts against the Debtors: fraud in the
inducement in count 1, breach of contract in count 2, fraud in counts 3 and 4, and a
violation of Florida’s Deceptive and Unfair Trade Practices Act. The case proceeded
to trial and the jury returned a verdict in favor of Plaintiff on counts 2-4 and in
favor of Plaintiff on count 5 as to Debtors ACG and Abad only. Plaintiff holds a
judgment against ACG in the amount of $1,328,723.26 and an additional
$1,229,114.59 against ACG and Abad.

The Court also awarded Plaintiff

$1,017,926.44 in attorneys’ fees and costs. [D.E. 288].
More than three years have passed since the Court entered a multi-million
dollar judgment in Plaintiff’s favor and – to date – the Debtors have not paid
anything to Plaintiff in satisfaction of the judgment entered against them. As such,
Plaintiff has served post-judgment discovery on the Debtors, as well as their related
entities – the Non-Parties.1 Plaintiff has subpoenaed documents for the purpose of
determining whether the Debtors transferred assets to any of the Non-Parties and
to what extent the Non-Parties may be the Debtors’ successors or alter egos.

In connection with post-judgment discovery efforts, the parties submitted a
stipulated confidentiality agreement and protective order that the Court entered on
August 24, 2016. [D.E. 285].
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II.

ANALYSIS

The Non-Parties argue that Plaintiff’s subpoena should be quashed because
the information sought is irrelevant, and constitutes confidential, commercial, and
financial information that will subject the Non-Parties to undue burdens and
expenses.

The subpoena seeks the following items: (1) Aerothrust Leasing’s

complete tax returns for the years 2014-2017, (2) financial statements on
Aerothrust Leasing’s assets and liabilities, (3) Aerothrust Leasing’s bank
statements for checking, saving, certificate of deposit, and money market accounts,
(4) all bills of sale or other written evidence of the gift, sale, purchase, or other
transfer or real or personal property, and (5) all bills of sale or other written
evidence of the gift, sale, purchase, or other transfer of real or personal property by
Aerothrust Leasing from the Judgment Debtors.2
The Non-Parties contend that the only requests that are remotely relevant
are requests 4 and 5, but even those requests are also allegedly improper because
the items sought are designated as confidential. The Non-Parties further suggest
that Plaintiff has outstanding discovery requests to Defendants in this case and
that the Non-Parties have failed to explain why the information sought cannot be
more easily obtained from the parties to the underlying action. Therefore, the NonParties conclude that Plaintiff’s subpoena should be quashed because (1) Plaintiff
has failed to satisfy its burden in making a heightened showing of fraudulent
concealment or an alter ego relationship between the Debtors and the Non-Parties,
The requests are limited to a date range of March 19, 2014 until the date of a
response to the subpoena.
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(2) the subpoena violates Rule 45 of the Federal Rules of Civil Procedure, and (3)
the subpoena requires the Non-Parties to compile extensive materials that will
cause an undue burden and expense.
Plaintiff argues in response that the Non-Parties’ motion must fail for three
independent reasons. First, Plaintiff suggests that the Non-Parties failed to confer
with Plaintiff in violation of the Local Rules. Second, Plaintiff contends that the
Non-Parties failed to support their arguments with any evidence or specifics. And
third, Plaintiff claims that discovery from the Non-Parties is necessary given the
Non-Parties’ close and extensive relationship with the Debtors.
Rule 69(a) of the Federal Rules of Civil Procedure provides, in part, the
following:
[i]n aid of the judgment or execution, the judgment creditor or a
successor in interest when that interest appears of record, may obtain
discovery from any person, including the judgment debtor, in the
manner provided in these rules or in the manner provided by the
practice of the state in which the district court is held.
Fed. R. Civ. P. 69(a) (emphasis added). “Under this Rule, discovery may be had of
the judgment debtor or third persons without separate suit and, if discovery is
pursued under the federal rules . . . all the discovery devices of the Rules may be
used as in the progress of the action.” Caisson Corporation v. County West Building
Corporation, 62 F.R.D. 331, 334 (E.D. Pa. 1974).

While the scope of discovery

directed at judgment debtors is broad, third parties are generally only examined “as
to the judgment debtor’s assets and are not required to disclose their own assets.”

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National Union Fire Ins. Co. of Pittsburgh, Pa. v. Van Waeyenberghe, 148 F.R.D.
256, 257 (N.D. Ind. 1993).
However, a third-parties’ assets may be discoverable upon a “heightened
showing of necessity and relevance,” meaning “at least some demonstration of
concealed or fraudulent transfers or alter ego relationship with the judgment
debtor,” is generally warranted. Trustees of Amalgamated Ins. Fund v. Jordan Mfg.
Corp., 2008 WL 343132, at *1 (S.D. Fla. Feb. 5, 2008) (quoting Uniden Corporation
of America v. Duce Trading Company, Ltd., 1993 WL 286102, 1 (W.D.N.Y. 1993));
see also 2245 Venetian Court Bldg. 4, Inc. v. Harrison, 149 So. 3d 1176, 1179 (Fla.
2d DCA 2014) (‘“[W]e have . . . held that a nonparty may be subject to postjudgment
discovery where the “judgment creditor can provide a good reason and close link
between the unrelated entity and the judgment debtor.”’) (quoting Gen. Elec.
Capital Corp. v. Nunziata, 124 So. 3d 940, 942 (Fla. 2d DCA 2013)); Trustees of N.
Florida Operating Engineers Health & Welfare Fund v. Lane Crane Serv., Inc., 148
F.R.D. 662, 664 (M.D. Fla. 1993) (“When the ground for the discovery is an alleged
alter ego relationship with the judgment debtor, there must be facts before the
Court to show the basis for the allegation.”) (citing Strick Corp. v. Thai Teak
Products Company, Ltd., 493 F. Supp. 1210, 1218 (E.D. Pa. 1980)).
One case, in particular, is instructive on how courts consider a close link
between a nonparty and a judgment debtor.

In Trustees

of

the

North

Florida

Operating Engineers Health & Welfare Fund v. Lane Crane Service, Inc., 148 F.R.D.
662 (M.D. Fla. 1993), the court held that a judgment creditor was entitled, pursuant
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to Rule 69 to seek discovery from a nonparty on the basis of an alter ego theory.
The court relied on the fact that: (1) the judgment debtor became defunct within one
month of the formation of the new company; (2) the son of the principal of the debtor
company was the sole owner of the new company; (3) the debtor company and the
new company utilized the same address; (4) the debtor company and the new
company engaged in the same kind of business; and (5) the new company employed
some of the debtor company’s former employees. See id. at 664. The court held that
while any one of those factors, standing alone, might not be sufficient to make the
requisite showing, the combination of those factors provided a basis for the
creditor’s allegation of an alter ego relationship sufficient to justify the requested
discovery. Accordingly, the court opined that creditors “can hardly be expected to
make the prima facie showing required to implead [the nonparties in
supplementary proceedings] before having access to discovery which would allow
them to determine if such a showing can be made.” Id.
Here, the record adequately demonstrates that the Non-Parties and the
Debtors share a close relationship in that they have many of the same (1)
principals, (2) places of businesses, and (3) registered agents. The Debtors also
formed all of the Non-Parties. See, e.g., Harrison, 149 So. 3d at 1180 (“Here it is the
combination of factors that leads us to conclude that a “close link” has been
established: timing of the corporate name change and appointment of new officers
shortly following Bateman’s default, the fact that the two Venetian entities involved
in this appeal share the same address, the fact that the Venetian entities share
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corporate officers, and the fact that Bateman was still involved either as an owner
or officer with several of the Venetian entities even after the judgment was
obtained.”).

When coupled with the contention that the Non-Parties may have

transferred assets to the Debtors and/or may be successor or alter egos, we find that
Plaintiff has persuasively demonstrated a heightened showing of necessity and
relevance for the disclosure of the items requested. See Bozo v. Bozo, 2013 WL
12128680, at *2 (S.D. Fla. Aug. 16, 2013) (“Given the number of corporate entities
purportedly affiliated with Respondents and Non-Parties close relationship with
Respondents, the Court finds that the information sought in the subpoenas is
relevant to the claims at issue, and Non-Parties’ objections to the subpoena on these
grounds fails.”) (internal citation omitted).
While the Non-Parties believe that the requested items are confidential, that
argument rings hollow because the Non-Parties failed to offer any specifics aside
from conclusory assertions.

See Eastwood Enterprises, LLC v. Farha, 2010 WL

11508180, at *3 (M.D. Fla. Apr. 26, 2010) (“These conclusory statements, however,
are insufficient to justify quashing or modifying the subpoenas or entering a
protective order.”); (citing U & I Corp. v. Advanced Med. Design, Inc., 251 F.R.D.
667, 673 (M.D. Fla. 2008) (United States v. Garrett, 571 F.2d 1323, 1326 n.3 (5th
Cir. 1978); Estate of Manship v. United States, 240 F.R.D. 700, 702 (N.D. Ga. 2006)).
Moreover, the Non-Parties’ confidentiality concerns are minimized with the parties’
confidentiality agreement which provides that “[t]hird parties producing documents
in the course of this Action may also designate documents as ‘CONFIDENTIAL’
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subject to the same protections and constraints as the parties to the action.” [D.E.
294]. See DatCard Sys., Inc. v. PacsGear, Inc., 2011 WL 2491515, at *2 (D. Minn.
Apr. 25, 2011), Report and Recommendation adopted, 2011 WL 2491366 (D. Minn.
June 23, 2011) (as to the claim that production of the documents would require
disclosure of highly sensitive proprietary information, the court found the claim
“unfounded in light of the Protective Order in the underlying case”); Ford Motor Co.
v. Edgewood Properties, Inc., 2010 WL 4687820, at *4 (D.N.J. November 10,
2010) (recognizing “that there is an important privacy interest in [corporate]
financial documents, the Court agrees that the information can be protected
[;t]herefore, the Court . . . require[d] that the information be disclosed pursuant to
a confidentiality order, only to be used in connection with this litigation”); Medical
Technology, Inc. v. Breg, Inc., 2010 WL 3734719, at *5 (E.D. Pa. September 21,
2010) (finding

that

any confidentiality concerns

“associated

with

production

according to the terms of the subpoenas are cured by the general Protective Order
issued in the underlying Texas litigation”); Gomez v. J.R. Hycee Conyeor Co., Inc.,
2008 WL 64675, at *1 (E.D.N.Y. January 4, 2008) (finding that the defendant’s
“proposal to enter into a protective order limiting the use of the documents produced
to this litigation . . . adequately addresses [the third-party’s] interest in keeping its
proprietary information confidential”).
With respect to the Non-Parties’ contention that the subpoena is unduly
burdensome, the Non-Parties failed to offer any specific argument explaining why
the discovery requests are unreasonable. See Auto-Owners Ins. Co. v. Se. Floating
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Docks, Inc., 231 F.R.D. 426, 429 (M.D. Fla. 2005) (finding that the objecting party
must make a “particular and specific demonstration of fact as distinguished from
stereotyped and conclusory statements”). The Non-Parties merely argue that the
subpoena would require them to search for, compile, and produce information. Yet,
that contention – without more – is wholly unconvincing and does not satisfy their
burden of demonstrating how the request is overly burdensome.

See Sallah v.

Worldwide Clearing LLC, 855 F. Supp. 2d 1364, 1376 (S.D. Fla. 2012) (“A party
objecting on these grounds must explain the specific and particular way in which a
request

is

vague,

overly

broad,

or

unduly

burdensome.

In

addition, claims of undue burden should be supported by a statement (generally an
affidavit) with specific information demonstrating how the request is overly
burdensome.”) (citing See Benfatto v. Wachovia Bank, N.A., 2008 WL 4938418, *4
(S.D. Fla. Nov. 19, 2008); (Convertino v. U.S. Dep’t of Justice, 565 F. Supp. 2d 10, 14
(D.D.C. 2008)). Therefore, this argument also lacks merit.
In sum, Plaintiff has sufficiently established that there is a close link
between the Debtors and the Non-Parties to justify a review of the Non-Parties’
assets. And the Non-Parties have failed to demonstrate that the items sought are
irrelevant, confidential, or that the subpoena would impose an undue burden.
Because the Non-Parties’ motion fails in several ways, the Non-Parties’ motion to
quash Plaintiff’s subpoena must be DENIED.

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III.

CONCLUSION

For the foregoing reasons, it is hereby ORDERED AND ADJUDGED that
the Non-Parties’ motion to quash is DENIED. [D.E. 292]. The Non-Parties shall
comply with Plaintiff’s subpoenas within twenty-one (21) days from the date of this
Order.
DONE AND ORDERED in Chambers at Miami, Florida, this 8th day of
January, 2018.
/s/ Edwin G. Torres
EDWIN G. TORRES
United States Magistrate Judge

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