United States of America v. Dillon et al
Filing
74
MEMORANDUM DECISION AND ORDER. Defendant Cherie Dillon and Third Party Ken Dillons Motions To Amend Subpoena and Extract Exempted Property (Dkts. 68 , 70 ) are DENIED. The Clerk is directed to administratively terminate the motion filed at Dkt. 222 in United States v. Dillon, No. 1:16-cr-00037-BLW. The Dillons are directed to provide responsive documents within 30 days of this Order. Signed by Judge B Lynn Winmill. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (alw)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO
UNITED STATES OF AMERICA,
Plaintiff,
Case No. 1:17-cv-00498-BLW
MEMORANDUM DECISION
AND ORDER
v.
CHERIE R. DILLON and DENTAL
HEALTHCARE WITH HEART, P.C.,
(successor in interest to DENTAL
HEALTHCARE WITH HEART,
PLLC),
Defendants.
INTRODUCTION
Before the Court are two substantially identical pro se motions filed by
defendant Cherie R. Dillon and third party Ken Dillon. Each motion is styled as a
“motion to amend subpoena and extract exempted property.” See Dkts. 68, 70. The
Court will construe these motions as motions to modify subpoenas the government
has served upon the Dillons. For the reasons explained below, the Court will deny
the motions.
BACKGROUND
In November 2019, this Court entered a $1.1 million judgment in this case –
$550,000 against Defendant Cherie Dillon and $550,000 against Defendant Dental
MEMORANDUM DECISION AND ORDER - 1
Healthcare with Heart, P.C. The government is gathering information about the
Dillons’ assets as part of its effort to collect on the judgment. In September 2022,
the United States served two separate subpoenas, one on Ms. Dillon and one upon
her spouse, Ken Dillon. The subpoenas seek various records related to each of the
Dillon’s financial accounts, including their retirement accounts. As one
representative example, the subpoenas direct the Dillons to turn over monthly or
quarterly account statements, from January 2022 to present, for all financial
accounts. See Subpoenas, Ex. A thereto, Dkt. 71-1. Additionally, focusing
specifically on retirement accounts held at Edward Jones, the subpoenas state that
the documents provided for those accounts must show “all deposits, withdrawals,
distributions, and transfers” from January 1, 2022 to the present. Id. Then, under an
additional heading titled “Additional Documentation Related to Edward Jones
Accounts,” the subpoenas contain the following directive:
Provide documentation showing any withdrawal or distribution
from Edward Jones accounts on or after January 1, 2022 and
provide documentation showing where the funds were
deposited (if not paid toward the Asset Forfeiture amount).
Provide documentation showing the current location of funds
withdrawn or distributed from Edward Jones accounts after
January 1, 2022 (unless withdrawal or distribution went to pay
the Asset Forfeiture amount). If the funds withdrawn or
distributed from Edward Jones accounts are no longer in your
custody or control, provide documentation (such as receipts)
evidencing the expenditure of the funds.
Id.
MEMORANDUM DECISION AND ORDER - 2
The Dillons have partly complied with the subpoena. In November 2022,
they produced six account statements (covering the period May through October
2022) for two IRAs held at E-Trade. They also provided this explanation in an
email to government counsel:
Mr. Humphries:
I am sending this information in reference to your subpoena. After
the Judge made his decision on the forfeiture method and process
of splitting the Edward Jones accounts in half and using Cherie’s
50% of Both retirement plans to Pay the Restitution and the
Forfeiture. The remaining 50% of Both accounts would be Ken’s.
All of the Edward Jones accounts were closed and the fund were
rolled over into E trade. (copies of pertinent statements enclosed).
The remaining 50% of Cherie’s retirement funds have been being
sold and used to cover home repairs and maintenance, property
survey, fence installation, auto repair and maintenance, medical
procedures and bills and any other expenditures that have that have
arisen. Also attorney fee pay off. An actual accounting of these
expenditures has not been maintained and the home repairs are in
an ongoing state.
Ken and Cherie Dillon
Nov. 16, 2022 email, Ex. C to Gvt. Motion, Dkt. 71-3. The government notes that
the Dillons did not produce any account statements for Edward Jones or for other
accounts. Mtn. Mem., Dkt. 71, at 3. Additionally, the government reports that “The
Dillons have also not provided documentation as to the use or location of the funds
withdrawn from the Edward Jones account(s) except for the E-Trade statements.”
Id. The Dillons, for their part, argue that the retirement accounts are “exempt from
MEMORANDUM DECISION AND ORDER - 3
garnishment.” As such, they ask the Court to “amend” the subpoena.
LEGAL STANDARD
Post-judgment discovery is governed by Federal Rule of Civil Procedure
69(a)(2), which provides:
In aid of the judgment or execution, the judgment creditor or a
successor in interest whose interest appears of record may obtain
discovery from any person – including the judgment debtor – as
provided in these rules or by the procedure of the state where the
court is located.
Fed. R. Civ. P. 69(a)(2). 1 The scope of post-judgment discovery under Rule
69(a)(2) is very broad – it is “constrained principally in that it must be calculated to
assist in collecting on a judgment.” EM Ltd. v. Republic of Argentina, 695 F.3d
201, 207 (2d Cir. 2012); see also United States v. Conces, 507 F.3d 1028, 1040
(6th Cir. 2007) (describing the scope of post-judgment discovery as “very broad”);
FDIC v. LeGrand, 43 F.3d 163, 172 (5th Cir. 1995) (same). It follows, then, that
post-judgment discovery must be relevant to the existence or transfer of a
judgment debtor’s assets. See generally Fed. R. Civ. P. 26.
Post-judgment discovery is permitted against third parties, so long as it is
aimed at uncovering information about the judgment debtor’s financial affairs. See
1
Idaho’s Rule of Civil Procedure 69(c) similarly provides for post-judgment discovery:
“In aid of the judgment or execution, the judgment creditor or successor in interest . . . may
obtain discovery from any person, including the judgment debtor, as provided in these rules and
may examine any person, including the judgment debtor, in the manner provided by these rules.”
MEMORANDUM DECISION AND ORDER - 4
generally Caisson Corp. v. Cnty. West Bldg. Corp., 62 F.R.D. 331, 334 (E.D. Pa.
1974). Courts often allow judgment creditors to obtain discovery from third-party
spouses, reasoning that information about a spouse’s financial affairs may lead to
discovery of marital assets that can be used to satisfy the judgment, or to money or
property that was transferred to the spouse to evade creditors. See Andrews v.
Raphaelson, No. 5:09-cv-077, 2009 WL 1211136, at *3 (E.D. Ky. Apr. 30, 2009);
see also, e.g., Vazquez v. Ranieri Cheese Corp., No. CV-07-464, 2013 WL
101579, at *2 (E.D.N.Y. Jan. 8, 2013) (“[D]iscovery concerning a non-party’s
assets is permitted if the relationship between the judgment debtor and the nonparty is such that the non-party may possess concealed or fraudulently transferred
assets of the judgment debtor ....”).
Here, the government served Rule 45 subpoenas upon Ms. Dillon and her
husband.2 See generally Fed. R. Civ. P. 45. As with all discovery, a party serving a
Rule 45 subpoena bears the initial burden of demonstrating the requested discovery
is relevant as defined by Rule 26 of the Federal Rules of Civil Procedure. The
2
Rule 45 governs discovery directed at nonparties. Ms. Dillon is a party, so the
government could have served a Rule 34 request for production of documents upon her. After
all, Rule 69 entitles a judgment creditor to “the full panoply of federal discovery measures” –
including a Rule 34 request. See Magnaleasing, Inc. v. Staten, 76 F.R.D. 559, 560 n.1 (S.D.N.Y.
1977). But this is a distinction without a difference, given that a person facing a Rule 45
subpoena is subject to the same obligations as a party proceeding under Rule 34. See generally
Fed. R. Civ. P. 45, Advisory Comm. Notes, 1991 Amend. Sub (a).
MEMORANDUM DECISION AND ORDER - 5
person commanded to produce documents may serve a written objection to the
subpoena. Fed. R. Civ. P. 45(d)(2)(B). They also may file a motion for a protective
order or to quash or modify the subpoena. Fed. R. Civ. P. 45(d)(3) and (e).
ANALYSIS
The Court will construe the Dillons’ pro se filings as a request to modify the
subpoenas on the ground that they seek information about retirement accounts,
which they claim are exempt from execution.
1. Timeliness
As a threshold matter, the government says the Court should deny the
motion because it was filed two days late. Based on the Dillons’ explanation,
alongside the fact that this delay is de minimis, the Court will grant the Dillons a
retroactive extension and reach the merits of their motion. The Dillons should be
warned, however, that the Court will not always grant such extensions. If there are
any additional proceedings in this matter, they should be sure to timely comply
with all relevant deadlines or timely seek and obtain extensions of those deadlines.
2. The Request for Documents Related to the Edward Jones Accounts
Turning to the merits, the Dillons’ primary argument is that they should not
have to turn over documents about their retirement accounts because those
accounts are exempt from execution. But just because an asset may be exempt
from execution does not categorically prohibit a judgment creditor from seeking
MEMORANDUM DECISION AND ORDER - 6
discovery about that asset. Rather, “the judgment creditor is allowed discovery to
find out about assets on which execution can issue or about assets that have been
fraudulently transferred or are otherwise beyond the reach of execution.” 12
Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 3014
(3d. ed. 2022). And, as the government has pointed out, other courts have
permitted post-judgment discovery related to retirement accounts – even where the
judgment debtor has argued that the accounts are exempt from execution.
In ITOCHU Int’l, Inc. v. Devon Robotics, LLC, 303 F.R.D. 229, 233 (E.D.
Pa. 2014), for example, the judgment creditor sought information about retirement
accounts because it “questioned whether the asset transfers into these allegedlyprotected retirement accounts were proper.” The court allowed the judgment
creditor to obtain discovery so that it could determine whether those transfers were,
in fact, proper. The court said that whether the accounts could be executed upon
was a question reserved for another day. Id.
Similarly, in Bell v. Lantz, No. 1:13-cv-0035, 2015 WL 6609290 (S.D. Ind.
Oct. 30, 2015), the court allowed a judgment creditor to obtain information about a
retirement account because the judgment creditor believed the defendant was
concealing assets. The court held that although the judgment creditor “offered no
proof of concealment, he should be allowed to discover asset information in an
effect to substantiate his suspicions and to discover information that may lead to
MEMORANDUM DECISION AND ORDER - 7
the discovery of other assets subject to execution.” Id. at *3.
The central teaching of these types of cases – as well as those cited above –
is that in the post-judgment context, a judgment creditor has a legitimate need
acquire to information reasonably available to locate and identify the judgment
debtor’s assets. Put differently, “a judgment creditor is entitled to fish for assets of
the judgment debtor.” Banco Central de Paraguay v. Paraguay Humanitarian
Foundation, Inc., No. 01-Civ-9649, 2006 WL 3456521, at *9 (S.D.N.Y. Nov. 30,
2006). Here, the government is not seeking information about a static retirement
account – that is, one that does not have any recent withdrawals or deposits.
Rather, it is trying to track withdrawals from those accounts to determine where
any assets purchased with those funds (or the funds themselves) are currently
located. Seeking this sort of information is a legitimate attempt to identify and
locate assets that may be subject to execution. Accordingly, the Court will deny the
motion.
The Court will clarify, however, that, at this point it is not deciding whether
any given asset is subject to execution. Rather, it is simply allowing the
government to engage in discovery related to retirement accounts, including the
Edward Jones accounts.
MEMORANDUM DECISION AND ORDER - 8
ORDER
IT IS ORDERED that:
1. Defendant Cherie Dillon and Third Party Ken Dillon’s Motions To
Amend Subpoena and Extract Exempted Property (Dkts. 68, 70) are
DENIED.
2. The Clerk is directed to administratively terminate the motion filed at
Dkt. 222 in United States v. Dillon, No. 1:16-cr-00037-BLW.
3. The Dillons are directed to provide responsive documents within 30 days
of this Order.
DATED: February 8, 2023
_________________________
B. Lynn Winmill
U.S. District Court Judge
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