FDIC v. Greif
Filing
22
MEMORANDUM AND ORDER denying 12 Motion to Quash; denying 13 Motion to Quash. Signed by Magistrate Judge Kenneth G. Gale on 8/3/2020. (df)
Case 2:00-cv-02170-KHV-KGG Document 22 Filed 08/03/20 Page 1 of 9
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
FEDERAL DEPOSIT INSURANCE
CORPORATION,
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Plaintiff,
vs.
LEOPOLD H. GREIF,
Defendant.
Action No. 00-CV-2170
MEMORANDUM & ORDER DENYING
MOTION TO QUASH SUBPOENAS DUCES TECUM
Currently pending before the Court is Motion to Quash Subpoenas filed by
Defendant Leopold H. Greif and Movant J.D. Rosen, Inc. After review of the
motions and relevant filings, the Court DENIES the Motions to Quash (Docs. 12
and 13).
FACTUAL BACKGROUND
On February 5, 1998, Defendant filed a Voluntary Petition in Bankruptcy in
the District of Kansas under Case No. 98-40253. (Doc. 12). In that case, an
adversary proceeding was filed on May 7, 1998, Case No. 98-07042 by the Federal
Deposit Insurance Corporation seeking its claim to be determined
nondischargeable pursuant to 11 USC 523(a). (Id.) On June 22, 1999, the United
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States Bankruptcy Court entered a judgment on behalf of the plaintiff and against
the defendant in the amount of $4,529,026.00 as a nondischargeable debt in the
bankruptcy proceeding. (Id.) On July 6, 2000, this Court entered a civil judgment
against Defendant Leopold Greif in the amount of $1 million plus pre- and postjudgment interest. (Doc. 21.) The judgment was issued in favor of the FDIC as
Receiver for the failed Midland Bank of Kansas. (Id.) At the close of the MBK
receivership, the FDIC as Receiver for MBK assigned the judgment to the FDIC in
its corporate capacity. (Id.)
Defendant has not tendered any funds in payment of the judgment amount,
claiming that he does not have income or assets. Plaintiff, however, claims that it
has recently obtained documents indicating that Defendant and his wife are the
sole owners of “Sequoia Corporation” with assets valued at $5.99 million.
(Document 21 at 1.) Plaintiff alleges that Defendant has used funds from Sequoia
to pay “a significant portion” of the Defendant’s personal expenses. (Id. at 2.)
Plaintiff additionally provides that Sequoia’s accountant and an associate both
represented to a mortgage lender that Sequoia is solely owned by and for the
benefit of Defendant and his wife. (Id.)
Accordingly, the FDIC served subpoenas on JDR and Director Weiss for the
following information regarding Sequoia:
1. All Documents Related to: (a) the Defendant; (b) the Subjects, and each of
them; (c) any person, entity or trust that the Defendant and/or any of the
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Subjects disbursed funds to or received funds from; and/or (d) any entity or
trust in which the Defendant and/or one or more of the Subjects has or had
an ownership interest, during the time period defined above.
2. Documents to be produced include, but are not limited to:
a. E-Mail Messages (Sent or Received) Related to the Defendant and/or
any of the Subjects;
b. Formal and/or Informal Written Correspondence;
c. Bills and/or Invoices;
d. Evidence of Payment of Bills and/or Invoices;
e. Notes to Files;
f. Internal Memoranda;
g. General Ledgers;
h. Trial Balances;
i. Cash Receipt and Disbursement Ledgers;
j. Account Statements;
k. Tax Returns;
l. Source, Backup and/or Supporting Documentation for Tax Returns;
m) Accounting Workpapers;
m. Payroll Records; and
n. Insurance Policy Records.
3. All Documents relating to payments made to or for the Defendant and/or any
of the Subjects [incl. Sequoia], including, but not limited to:
a.
b.
c.
d.
e.
f.
g.
h.
i.
Insurance-Life;
Insurance-Medical;
Insurance-Auto;
Retirement Account;
Auto Lease or Financing;
Per Diem Travel Expenses;
Entertainment Expenses;
Consulting Fees; and/or
Salary.
4. All Documents relating to relationships (including but not limited to,
contractual, employment, management and/or ownership) You have and/or
had, at any time during the period covered by this Subpoena, with the
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Defendant and/or any of the Subjects and/or any company or entity owned
and/or controlled by the Defendant.
According to Defendant, because there has not been payment of any portion
of the judgment, there has been no execution or attempt to enforce the judgment
and the judgment has not been renewed in accordance with Kansas law within the
last 20 years, the judgment is dormant and unenforceable pursuant to K.S.A. § 602403. (Doc. 12 at 2.) Additionally, Defendant and Movant claim that the
subpoena creates an undue burden and expense for them and serves “no legitimate
purpose since the judgment is dormant and unenforceable.” (Doc. 12 at 2.)
ANALYSIS
A.
The Fair Debt Collection Practices Act Preempts Conflicting
Kansas State Law.
When a state statute or law contradicts a federal statute or law, the federal
law will always preempt state law. On its face, the applicable state law in this
matter is K.S.A. § 60-2403(a), which states “a judgment becomes dormant if an
execution is not issued within five years from the date of entry of any judgment in
any court of record in this state.” However, the Fair Debt Collection Practices Act
(FDCPA) is a federal law controlling an agency of the federal government seeking
to enforce a judgment.
When deciding which law is applicable, Federal Rule of Civil Procedure 69
provides guidance. The Rule states that the federal government’s enforcement by
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writ of execution “must accord with the procedures of the state where the court is
located,” unless, “a federal statute governs to the extent it applies.” Fed.R.Civ.P.
69(a)(1). The Fair Debt Collection Practices Act is such a statute. See United
States v. Gianelli, 543 F.3d 1178, 1182 (9th Cir. 2008). Additionally, the FDCPA
provides that it is “the exclusive civil procedure for the United States to recover a
judgment on a debt.” 28 U.S.C. § 3001. The FDCPA further states that it “shall
preempt state law to the extent such law is inconsistent.” 28 U.S.C. § 3003(d). See
also United States v. Rostoff, 164 F.3d 63, 70 (1st Cir. 1999) (holding that if the
government receives the beneficial interest of a debt, then the FDCPA is a proper
collection vehicle).
Prior to the FDCPA, the diversity of states’ laws with respect to federal debt
collection interfered greatly with the efficiency of enforcement activity, leading
Congress to create the FDCPA in 1990 in order to alleviate that conflict. United
States v. Wadley, No. 94-488-PAB-KLM, 2014 WL 1977240, at *1 (D. Col. May
15, 2014) (quoting H.R. Rep. No. 101-736, Discussion (Sept. 21, 1990)). The
FDCPA replaced state collection laws with a comprehensive federal statutory
framework for the collection of debts owed to the federal government. Id.; see
also N.L.R.B. v. E.D.P Medical Computer Systems, Inc., 6 F.3d 951, 954 (2nd Cir.
1993).
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The FDCPA does not impose a time restriction on the government’s ability
to enforce judgments through other methods (i.e., writ of execution or
garnishment). 28 U.S.C. § 3203(a). Congress deliberately left out a time
restriction of enforceability in the FDCPA, thus showing their intention for
execution procedures to track the indefinite life of a judgment in favor of the
United States. See United States v. Pierce, 231 B.R. 890, 892 (E.D.N.C., 1998).
In Pierce the court affirmatively stated “pursuant to the FDCPA, the United States
has an indefinite length of time in which to execute on a judgment against the
judgment debtor.” Id. Thus, the traditional rule that “a federal judgment is
unrestricted in duration” is incorporated within the FDCPA. Id.
Because there is no authority from the Tenth Circuit Court of Appeals,
similar decisions from other states and federal courts serve as persuasive authority
for how the FDCPA should be applied to this issue. In United States v. Gianelli,
supra, the Ninth Circuit ruled that because the FDCPA provides no time limit for
the collection of debts by writ of execution, the FDCPA preempts state laws that
prevent enforcement of a debt after a certain period from the entry of that
judgment. 543 F.3d at 1183. Though the applicable state law in that case imposed
a 10-year limitation on enforcement, the Court allowed the government to collect
on a restitution judgment 12 years after it was entered. Id. Similarly, in Soberanes
Recovery Pool I, LLC v. Todd & Hughes Const. Corp., 509 F.3d 216, 219 (5th Cir.
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2007), the Fifth Circuit found that a judgment was dormant under Texas state law
because it was between two private parties. The court did, however, specifically
note that when a judgment is being enforced by a federal agency such as the FDIC,
the FDCPA is the applicable law, thus evading the state’s time-bar.
When analyzing Congress’s purpose for the FDCPA and comparing other
Courts’ rulings on this issue, it is clear the FDCPA is the governing law. As
explained in Wadley and Pierce, the FDCPA’s main purpose is to allow the federal
government to recover an owed debt indefinitely under 28 U.S.C. § 3203(a)).
Applying K.S.A. § 60-2403(a) to this issue would completely disregard the
FDCPA’s purpose of having uniform federal procedures for the collection of debts
to the federal government. Setting this precedent could potentially lead to conflict
between states and federal agencies as well as cause confusion and inefficiency in
future debt collection judgments.
B.
The Discovery Sought Does Not Constitute an Undue Burden and
Serves a Legitimate Purpose.
Defendant and movant both claim that the subpoena seeks voluminous
documents to be produced and would subject them to undue burden in violation of
Fed.R.Civ.P. 45(d)(1), as it “would serve no legitimate purpose since the judgment
upon which the subpoena is based is dormant and unenforceable.” (Doc. 12, at 2;
Doc. 13, at 2.) As stated above, however, the judgment is enforceable, not
dormant. The Court must then look at the scope of the Subpoenas.
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Fed.R.Civ.P. 26(b) states:
[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,
considering the importance of the issues at state in the
action, the amount in controversy, the parties' relative
access to relevant information, the parties' resources, the
importance of the discovery in resolving the issues, and
whether the burden or expense of the proposed discovery
outweighs its likely benefit. Information within this
scope of discovery need not be admissible in evidence to
be discoverable.
As such, the requested information must be nonprivileged, relevant, and
proportional to the needs of the case to be discoverable. Furthermore, Federal
Rules of Civil Procedure 69(a) “authorizes discovery by a judgment creditor for
the purpose of discovering any concealed or fraudulently transferred assets.”
Magnaleasing, Inc. v. Staten Island Mall, 76 F.R.D. 559, 561 (S.D.N.Y. 1977).
In post judgment discovery, information is relevant if it might “give the judgment
creditor useful and necessary information concerning the whereabouts of property
which might satisfy the judgment.” Id.
The evidence provided shows that Mr. Greif, assisted by JDR and Director
Weiss, established Sequoia to hold his assets, valued at $5.99 million as of June
2019. (Exhs. 1, 4, 5.) Additionally, Mr. Greif is routinely transferring tens of
thousands of dollars from Sequoia to his wife. (Exhs. 2, 3.) The Court agrees with
Plaintiff that these facts support the scope of its subpoenas served on Sequoia,
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JDR, and Director Weiss. As such, Defendant and movants motions to quash
subpoenas fail.
IT IS THEREFORE ORDERED that the Movant and Defendant’s Motions
to Quash (Docs. 12 and 13) are DENIED.
IT IS SO ORDERED.
Dated at Wichita, Kansas, on this 3rd day of August, 2020.
S/ KENNETH G. GALE
KENNETH G. GALE
United States Magistrate Judge
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