v. H&R Block Eastern Enterprises, Inc.
ORDER: The movants' motion to quash, doc. 1, as amended, doc. 2, is DENIED without prejudice to renew it through replacement counsel. The Court STAYS enforcement of respondent's subpoena for 14 days from the date this Order is served. Finally, the movants' motion for oral argument is DENIED as moot. Doc. 10. Signed by Magistrate Judge G. R. Smith on 2/15/17. (jlm)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA
CATHY S. CONAWAY, individually
and in her capacity as the
CONSERVATOR of BETTY L.
SANKS, and SANKS ENTERPRISES,
H&R BLOCK EASTERN
(Pending in the United States District
Court for the Western District of
Cathy S. Conaway, individually and as conservator for her
mother, joins with Sanks Enterprises, Inc. (SEI) -- her mother’s taxpreparation business -- in moving to partially quash subpoenas arising
out of H&R Block Eastern Enterprises, Inc. v. Sanks , CV416-206
(W.D. Mo.) (“ Sanks ” litigation). MC416-011, doc. 1, as amended , doc.
2. H&R Block (HRB), which filed Sanks against her brother for
defrauding it and thus wants SEI-related documents from Cathy,
opposes. MC416-011, doc. 3. For the purpose of this Order, the Court
accepts as true facts taken from the parties’ filings.
Partly opposing HRB’s subpoenas, 1 movants’ factual recitation
generally dovetails with HRB’s facts. Betty L. Sanks founded SEI, at
5669 Ogeechee Road, Savannah, (the “5669 office”) in 1988.2 She
remains its sole shareholder. Doc. 1 at 2. Yet in 2011 Cathy’s brother,
Claude L. Sanks, Jr., represented to HRB that he owned SEI (d/b/a
“Sanks Income Tax and Business Services”). Doc. 3 at 5. Claude told
that lie to secure a 2011 agreement with HRB to convert “his” business
into an HRB franchise. Under that agreement, he also acquired a second
location across the street, at 5710 Ogeechee Road (the “5710 office”). Id.
For a while HRB believed that he operated both locations as an
HRB franchise. Doc. 3 at 5. But at some point Cathy, after noticing
Cathy says that two of the three subpoenas were withdrawn by agreement, leaving
only the one served upon her at issue here. Doc. 1 at 1. HRB disagrees:
This is not so. Rather, [Cathy] has unilaterally represented that there would
be no documents responsive to those subpoenas that are not already
responsive and available for production by her in response to the subpoena
directed to her individually. Accordingly, while the other subpoenas are still
active and [Cathy] has failed to respond to them, [HRB] interprets the Motion
to mean that [Cathy] is withholding documents responsive to all three of the
Doc. 3 at 2 n. 2.
Confusingly, the parties call it by various names like “the Business,” or “the
Company,” or various d/b/a names.
HRB trade dress showing up at the 5669 office, asked Claude what he
was doing. She challenged his ownership assertions. He lied to her and
claimed that he HRB-franchised only the 5710 office. Id. at 6. He never
disclosed that lie to HRB, but instead relocated the 5710 office a few
miles away “to improve visibility.” He assured HRB that he would move
the 5569 office as well, since that building was being sold or demolished.
Id. at 6. He thus convinced HRB to pay him $1 million to sell the entire
business, operating from both offices, to it. Id.
But Claude never moved the 5569 office, and that office never
closed. Doc. 3 at 6 . HRB ultimately confronted Claude, who further
misled it by reassuring HRB that he would transfer the rest (Betty’s
portion) of the business to it, but never did. Doc. 3 at 7. HRB thus
has received only a fraction of what it paid Claude for ( i.e. , clients and
revenues), and has alleged that much of it remains under Cathy’s
control. And Cathy continues to operate (in competition with HRB)
the 5569 office to this day. Id. HRB thus sued Claude ( Sanks ) for
fraud, etc., and presses its subpoena against the movants. Id. at 8-9.
HRB asserts additional facts which, if they don’t suggest
“familial collusion,” certainly demonstrate that Cathy, who has
continued operating the 5569 office as “Sanks Income Tax and
Business Services” (thus, an HRB competitor), doc. 3 at 8-9, is in a
position to assist her brother’s efforts by in bad faith stonewalling
HRB. HRB underscores the undisputed events timeline here:
[Cathy] amended the state registration for [SEI] to name her
mother as CEO and herself as CFO, replacing her brother, and
claimed to H&R Block that [Claude] had never owned the
Business at all. H&R Block subsequently filed suit against
[Claude] for, inter alia, defrauding H&R Block, failing to deliver
the Business as promised, and breaching the parties’ contracts
Doc. 3 at 2-3 (footnote added). HRB also points out that
while [Cathy] is not named as a party to [its Sanks case against
Claude], she, the Business she is running, and the entity
through which she is operating ( i.e ., Sanks Enterprises d/b/a
Sanks Income Tax and Business Services) are central to the
dispute being litigated. Moreover, [Cathy] and Sanks
Enterprises/Sanks Income Tax and Business Services are in a
unique position to provide information and materials that are
both directly relevant to the Lawsuit and not available to H&R
Block from other sources. Accordingly, H&R Block served the
Subpoenas to obtain this discovery.
Id. at 3.
Cathy knows that HRB accuses Claude of lying to it about his sole
SEI-ownership claims that included the 5669 location. Doc. 1 at 3. She
also knows that at some point he entered into an “Asset Purchase
Agreement” (APA) with HRB, and that HRB understood the APA to
mean that Claude was selling it “the entire tax preparation business at
the 5669 Ogeechee Road location where [SEI] maintains its offices. . . .”
Id. at 3. But she says she only learned of this in January 2015, when she
received a cease and desist letter from HRB’s counsel. Id.
Before this Court Cathy stands on her claim that Claude had no
authority to sell any of SEI to anyone, and that she was unaware of such
activity. Doc. 1 at 3-4. In fact, she claims, she had her lawyer demand an
explanation from Claude, and further demand that he rectify the
situation “to make it clear to HRB that he had conveyed no assets of the
Company and was without the authority to do so.” Id. at 4. She even
asked to be part of Claude’s attempts to resolve the matter with HRB,
but was excluded. Id. at 4. She admits that she is still operating SEI
today, and does not dispute that it is an HRB competitor. Id. at 4-5.
A non-party “may invoke the inherent power of the court to secure
protection from discovery which seeks confidential or privileged
information or which would cause undue burden on the non-party.”
Fadalla v. Life Automotive Products, Inc ., 258 F.R.D. 501, 504 (M.D. Fla.
2007). They bear the burden of showing grounds to quash.
Royal Dutch Petroleum Co ., 392 F.3d 812, 818 (5th Cir. 2004). This
Court therefore must balance HRB’s need for discovery against the
burden that its subpoena imposes upon the movants, which includes
their interest in keeping the requested information confidential for
Id. It thus examines relevance,
breadth of the subpoena’s document requests, the time period covered by
them, the particularity with which the documents are described, and
status of each target as a non-party. Id. ; Fadalla, 258 F.R.D. at 504. 3
Again, a typical quash ruling protects against a subpoena that
“‘requires disclosure of privileged or other protected matter’ or ‘subjects
a person to undue burden.’ FED. R. CIV. P. 45(d)(3).”
LLC v. Doe , 2014 WL 11958625 at *2 (S.D. Fla. July 17, 2014). For that
matter, subpoenaing parties must take reasonable steps to avoid
As was recently explained:
The scope of discovery through a subpoena is the same as that applicable to
Rule 34 and other discovery rules. Fed. R. Civ. P. 45 advisory committee's note
to the 1970 Amendment. Thus, a court must examine a request contained in a
subpoena duces tecum under the same standards set forth in Rule 26(b).
Federal Rule of Civil Procedure 26 provides that the “[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....” Fed. R. Civ. P.
26(b)(1). Moreover, a non-party may be granted a protective order from
providing discovery upon a showing of “good cause.” Fed. R. Civ. P. 26(c).
Soricelli v. GEICO Indemnity Company , 2017 WL 275967 at * 1 (M.D. Fla. Jan. 20,
imposing undue burden or expense on their targets; abusers can be
sanctioned. Fed.R.Civ.P. 45(d)(1); E.E.O.C. v. Dillard's, Inc., 2009 WL
917828 at * 2 (M.D. Fla. Mar. 31, 2009).
Here HRB wants things like SEI’s “revenues, expenses, profits, and
losses” during the “Claude-HRB transaction” time period, doc. 1 at 6,
along with documentation on who precisely has owned SEI, ownershipchange reasons, and so forth. Id. at 7. It also wants, inter alia, Cathy’s
and SEI’s telephone records from July 1, 2014 onward. Id. at 9-10.
To that end, HRB unmistakably intimates familial collusion of
See doc. 3-4 at 11 ¶ 56 (“[Cathy’s] business at the 5669
Ogeechee Road office was, in reality, the continued operation of the very
same Business that [Claude] represented he could and would sell to
[HRB].”); id. at 12 ¶ 57 (“[Cathy] not only continued to use the identical
trade name, “Sanks Income Tax and Business Services,” telephone
number . . . website address (http://www.sanksincometax.com ), and other
assets that [Claude] agreed to sell to H&R Block at the reopened office,
but [Cathy] also continued to hold the operation out as the same
Business that had been sold, offering the very same services that the
Business had offered (and now offers through [HRB]), including income
tax preparation and accounting services.”).
But HRB, argues Cathy, simply seeks too much, including the
proprietary information of a known competitor:
HRB has no substantial need . . . to obtain detailed information
on the financial performance of the Company. There are
alternative, and even superior, ways available for HRB to prove
damages without availing itself of the detailed financial records
of a nonparty competitor, which by any objective assessment is
not the “best evidence available” on that point, if it even rises to
the level of any evidence at all.
Doc. 2 at 5 (emphasis omitted).
The Court is inclined to rule in HRB’s favor. A fraudulent market
is not a free market, and HRB has advanced a pretty convincing claim
that Claude defrauded it. And, since it’s too easy for family members to
collude in such a situation, whatever “competitive harm” SEI might
suffer, and whatever privacy invasion Cathy might endure, should yield
to HRB’s right to glean from the subpoenaed documents evidence of
collusion, fraud, damages, etc. The relevancy standard here, after all, is
See, e.g. , Gonzales v. Google, Inc ., 234 F.R.D. 674, 681
(N.D. Cal. 2006) (“A district court whose only connection with a case is
supervision of discovery ancillary to an action in another district should
be especially hesitant to pass judgment on what constitutes relevant
evidence thereunder. Where relevance is in doubt . . . the court should
be permissive.”) (quotes and cite omitted); supra n. 3. Also, protective
orders may well enable movants and HRB to structure subpoena
compliance without unduly inflicting “competitive harm.”
But a legal wrinkle has arisen. Recall that there are three “quash”
movants before this Court: Cathy individually, Cathy as conservator for
her mother, and SEI. After they filed their quash motion, their counsel
withdrew. Doc. 19. A corporation, however, must be represented by
counsel. Palazzo v. Gulf Oil Corp ., 764 F.2d 1381, 1385 (11th Cir. 1985);
Davis-Brown v. Federal Deposit Insurance Corporation (FDIC) , 2016 WL
5858997 at * 3 (S.D. Ga. Oct. 4, 2016). And conservators can’t represent
wards in court. Black v. Alabama , 2015 WL 668080 at * 2 (M.D. Ala.
Feb. 17, 2015); Oliver v. Southcoast Medical Group , LLC, 2011 WL
2600618 at * 2 (S.D. Ga. June 13, 2011).
The Court thus cannot not entertain any pleadings filed by SEI
unless it is represented by counsel. See N. Augusta Mgmt. Grp., LLC v.
Sw. Golf Grp., Inc ., 2011 WL 1151128 at *1 (S.D. Ga. Mar. 28, 2011).
Furthermore, Cathy is not a lawyer admitted to this Court’s bar, so she
cannot represent SEI, nor litigate on behalf of her mother.
Still, the movants do have their now ex-lawyer’s briefing before the
Court. And Cathy may appear “individually,” representing herself. 28
U.S.C. § 1654 (“[i]n all courts of the United States the parties may plead
and conduct their own cases personally or by counsel. . .”). Plus it’s
undisputed that HRB subpoenaed, inter alia, Cathy’s personal phone
records, doc. 1-2 at 4, so she should be able to litigate that much pro se .
Yet, the movants’ own filings show that Betty is SEI’s sole shareholder,
doc. 1 at 2, which means that Cathy is not only advancing her own
individual interests, but Betty’s/SEI’s. And the quest for her phone
records is obviously aimed at uncovering evidence that a sister might be
abetting her brother’s fraud in the sale of SEI , not anything personal to
Cathy. Her phone records may well inextricably intertwine SEI’s
It therefore is reasonably probable that a ruling here will
unavoidably enmesh Cathy’s pro se right to litigate her personal rights
Nothing prevented counsel from attaching affidavits to support the factual
assertions that they advanced in support of the narrative here. The Court is thus
constrained to assume “briefing facts” as true, which is never a good idea (yet, the
Court cannot stop and hold a mini-trial to support every motion’s factual narrative).
with the litigation of rights belonging to Betty and SEI. If the Court
rules against Cathy, she would -- as a controlling principal and as
someone in charge of her mother’s business (hence, SEI’s) affairs, have
to produce the subpoenaed individual and SEI records, and be under a
fiduciary obligation to defend both SEI’s and Betty’s legal interests. And
if the Court rules for her, HRB will be free to move for reconsideration,
appeal (etc.), and thus put her mother and SEI to the task of responding.
Except that they can’t. Not without a lawyer. In fact, they cannot
file anything further in this case except through counsel. Since no
replacement counsel has appeared, it makes sense to pause and deny the
quash motion without prejudice to renew it through replacement
counsel. To accommodate that end, the Court will stay enforcement of
HRB’s subpoena for 14 days from the date this Order is served.
The movants’ motion to quash, doc. 1, as amended , doc. 2, is
DENIED without prejudice to renew it through replacement counsel.
The Court STAYS enforcement of respondent’s subpoena for 14 days
from the date this Order is served. Finally, the movants’ motion for oral
argument is DENIED as moot. Doc. 10.
SO ORDERED , this 15th day of February, 2017.
UNITED STATES MAGISTRATE JUDGE
SOUTHERN DISTRICT OF GEORGIA
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