Michael W. Dickinson, Inc. v. Martin Collins Surfaces & Footings, LLC
Filing
67
MEMORANDUM OPINION & ORDER: 1) 44 Motion for Protective Order and Modification of Subpoenas and 45 Motion for Protective Order are GRANTED. 2) 52 MOTION to Compel for Production of Documents by Keeneland Ventures PT, LLC is DENIED. 3 ) 64 MOTION to Compel Production of Documents from Keeneland Association is DENIED. 4) 57 MOTION for Hearing is DENIED. 5) Pla's subpoenas are MODIFIED to exclude him from discovering info re the finances or assets of third parties oth er than the judgment creditor Martin Collins Surface & Footings, LLC. 6) Central Bank & Trust Company is directed with WITHHOLD from production any documents that relate to the finances of third parties or assets of third parties which were not previ ously held by Martin Collins Surfaces & Footings, LLC, which might otherwise be responsive to Michael W. Dickinson, Inc.'s subpoena (including but not limited to requests 2, 7, 8, 10, 11, 12, or 14). 7) Neither Keeneland Ventures PT, LLC, Keenel and Association, Inc., Martin Collins USA, LLC, nor Martin Collins Surfaces & Footings, LLC, shall be required to produce documents regarding the finances or assets of parties other than Martin Collins Surfaces & Footings, LLC. 8) This order is FINAL AND APPEALABLE and THERE IS NO JUST CAUSE FOR DELAY. Signed by Judge Joseph M. Hood on 11/20/2012.(SCD)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DIVISION OF KENTUCKY
CENTRAL DIVISION at LEXINGTON
MICHAEL W. DICKINSON, INC.,
)
)
)
)
)
)
)
)
)
)
Plaintiff,
v.
MARTIN COLLINS SURFACES &
FOOTINGS, LLC,
Defendant.
Civil Case No.
5:11-cv-281-JMH
MEMORANDUM OPINION & ORDER
***
This matter is before the Court upon several motions.
Defendant Martin Collins Surfaces & Footings, LLC, filed a
Motion for a Protective Order and Modification of Subpoenas
(D.E.
44),
opposition
to
which
(D.E.
46)
Plaintiff
and
filed
Defendant
a
Response
replied
(D.E.
in
55).
Third-party Martin Collins USA, LLC, filed a Motion for a
Protective
Order
(D.E.
45),
to
which
Plaintiff
filed
a
Response in opposition (D.E. 49) and Martin Collins USA,
LLC replied (D.E. 56).
Plaintiff also filed a Motion to
Compel Production of Documents from Keeneland Ventures PT,
LLC
(D.E.
52)
and
a
Motion
to
Compel
Production
of
Documents from Keeneland Association, Inc. (D.E. 64), to
which Keeneland Ventures PT, LLC and Keeneland Association,
Inc. responded in opposition (D.E. 59, 65) and Plaintiff
replied
(D.E.
60,
66).
Finally,
Motion for Hearing (D.E. 57).
Plaintiff
has
filed
a
All pending motions are ripe
for review.
For
the
reasons
stated
below,
Defendant
Martin
Collins Surfaces & Footings’s Motion for a Protective Order
and
Modification
of
Subpoenas
(D.E.
44)
and
third-party
Martin Collins USA’s Motion for a Protective Order (D.E.
45)
will
be
granted,
and
Plaintiff’s
Motions
to
Compel
Production of Documents from Keeneland Ventures PT, LLC and
Keeneland Association, Inc. (D.E. 52, 64) will be denied.
Further, because the Court has determined that all issues
raised in the discovery motions can be resolved without the
benefit of a hearing, Plaintiff’s Motion for Hearing (D.E.
57) is denied.
I. Facts & Procedural History
Defendant,
Martin
Collins
Surfaces
&
Footings,
LLC
(“MCSF”) was formerly a Kentucky limited liability company
wholly owned by two members: Martin Collins International,
Ltd.
(MCI)
Ventures”)
and
by
Keeneland
and
through
(“Keeneland Association”).
on
September
Dissolution).
23,
Upon
Ventures
PT,
Keeneland
LLC
(“Keeneland
Association,
Inc.
Defendant voluntarily dissolved
2011.
(D.E.
dissolution,
44-2,
Central
Articles
Bank
&
of
Trust
Company (“Central Bank”) had a first priority lien on all
2
of Defendant’s assets. (D.E. 44, MCSF Motion for Protective
Order, at 2).
Plaintiff filed a Complaint for breach of contract on
May 11, 2011, naming MCSF as the sole Defendant.
(D.E. 1,
Complaint).
This Court entered a Judgment in favor of
Plaintiff
November
on
18,
2011.
(D.E.
36,
37).
The
motions involved in this case all relate to Plaintiff’s
efforts to engage in post-judgment discovery to satisfy the
judgment obtained against Defendant.
Specifically, since
Defendant failed to satisfy the judgment, Plaintiff issued
post-judgment discovery subpoenas to not only Defendant,
but
also
several
third
parties
including
Keeneland
Ventures, Keeneland Association, MCI, Martin Collins USA,
LLC (MCUSA) and Central Bank.
Plaintiff’s subpoenas seek
to recover a host of information from these third parties
which relates not only to tracing Defendant’s assets and
determining
its
connection
to
its
members,
but
also
to
uncovering a substantial amount of information about the
individual assets of the third parties themselves.
II. Analysis
Fed. R. Civ. P. 69(a)(2) provides, in relevant part,
that, “in aid of the judgment or execution, [Plaintiff] may
obtain discovery from any person . . . as provided in these
rules.”
However,
the
scope
3
of
discovery
that
may
be
obtained
from
third
parties
by
a
judgment
creditor
is
limited to that necessary for “the purpose of discovering
any concealed or fraudulently transferred assets” of the
judgment debtor.
Magnaleasing, Inc. v. Staten Island Mall,
76 F.R.D. 559, 561 (S.D.N.Y. 1977).
The party seeking such
discovery must make “a threshold showing of the necessity
and relevance” of the information sought.
Trs. of N. Fla.
Operating Eng’rs Health & Welfare Fund v. Lane Crane Serv.,
Inc.,
148
“disclosure
generally
F.R.D.
662,
664
concerning
the
not
(M.D.
Fla.
assets
contemplated
by
1993).
of
Rule
a
Further,
non-party
69(a),”
and
is
such
discovery should only be permitted when “the relationship
between the judgment debtor and the non-party is sufficient
to raise a reasonable doubt about the bona fides of the
transfer of assets between them.”
Magnaleasing, Inc., 76
F.R.D. at 562.
Plaintiff
instant
case.
has
failed
First,
to
meet
Plaintiff’s
this
burden
attempt
to
in
the
discover
information from MCUSA clearly exceeds the bounds of Rule
69(a)(2).
that
MCUSA
Plaintiff theorizes without any factual support
is
the
American
subsidiary
of
MCI,
although
MCUSA vehemently denies that it is owned or operated by MCI
or any subsidiary thereof.
(D.E. 56, MCUSA Reply, at 3).
Regardless of MCUSA’s corporate structure, Plaintiff has
4
failed to articulate why discovery from MCUSA – which was
never a member of Defendant – is relevant or necessary.
For
example,
fraudulent
place.
failed
Plaintiff
transfers
between
has
never
Defendant
alleged
and
MCUSA
took
Nor have there been any allegations that MCUSA
to
pay
sufficient
consideration
for
Defendant’s
assets purchased upon Defendant’s dissolution.
Defendant
has
already
produced
discovery
Further,
to
Plaintiff
detailing all of the asset transfers to MCUSA.
MCUSA Motion for Protective Order, at 3).
not
that
only
include
the
consideration
(D.E. 45,
These documents
MCUSA
paid
for
Defendant’s assets, but also reveal that all assets were
sold
either
at
public
auction
or
at
a
private
sale
supervised by Central Bank, Defendant’s primary creditor.
(D.E. 45, MCUSA Motion for Protective Order, at 3).
In
sum, there is simply no evidence that MCUSA engaged in
fraudulent transfers with Defendant and Plaintiff has thus
failed to meet its burden to show otherwise.
With
regard
Plaintiff
to
seeks
all
other
third
post-judgment
parties
discovery,
from
which
Plaintiff’s
argument primarily rests on its conclusory assertion that
Keeneland
Ventures,
Keeneland
5
Association,
and
MCI
are
partners and Defendant is their partnership.1
(D.E. 48,
Plaintiff Response to MCSF Motion for Protective Order, at
2); (D.E. 66, Plaintiff Reply in Further Support of its
Motion
to
Compel
Association,
at
Production
3).
of
Documents
Specifically,
from
Plaintiff
Keeneland
points
out
that on Defendant’s tax returns, Keeneland Ventures and MCI
are
listed
as
partners;
that
on
Defendant’s
website,
Defendant is “held out to the world as a partnership of MCI
and
Keeneland
expressed
an
Association”;
interest
in
and
that
quickly
MCI
and
resolving
Keeneland
Plaintiff’s
claim against Defendant through a series of emails.
(D.E.
48, Plaintiff Response to MCSF Motion for Protective Order,
at 2).
However,
Defendant
is
it
a
is
clear
limited
from
liability
the
public
company
record
under
that
Kentucky
law, of which Keeneland Ventures by and through Keeneland
Association and MCI were simply members.
Operating Agreement).
(D.E. 55-1, MCSF
Defendant’s tax returns were filed
under the term “partnership” because the federal government
does not recognize an LLC as a classification for federal
tax purposes; rather, the “IRS will treat an LLC either as
1
As alleged by Keeneland Association and to the best of
this Court’s knowledge, Keeneland Association, Inc. is the
sole member of Keeneland Ventures, PT LLC. In turn,
Keeneland Ventures PT, LLC was a fifty percent of Defendant
MCSF while MCI owned the other fifty percent.
6
a corporation, partnership, or as part of the owner’s tax
return,” and the LCC must file as one of these entities
accordingly.2
Moreover, the Court sees nothing out of the
ordinary with Defendant’s website since it merely states
that Defendant is “backed by years of experience” from two
recognizable
MCI.
MCI
industry
leaders,
Keeneland
(D.E. 46-2, MCSF Website).
owned
Defendant,
there
is
Association
and
Given that Keeneland and
nothing
misleading
or
unacceptable about this public statement.
Finally, the fact that Keeneland Ventures, Keeneland
Association and MCI wanted to quickly resolve Plaintiff’s
claim against Defendant is entirely consistent with their
dual ownership of the company and neither implies that they
were
actually
in
wrongdoing afoot.
a
“partnership”
nor
that
there
was
Frankly, Plaintiff presents absolutely
no evidence from which the Court might conclude that there
has been an inappropriate transfer of funds from the nowdefunct Defendant to these entities.
Therefore, Plaintiff
has failed to meet its burden to show that the information
it
seeks
is
necessary
and
relevant
to
its
attempt
collect a judgment.
2
http://www.irs.gov/Individuals/Self-Employed/LLC-Filingas-a-Corporation-or-Partnership
7
to
Plaintiff
judgment
argues
discovery
that
against
it
can
broadly
Keeneland
pursue
Ventures,
post-
Keeneland
Association, and/or MCI under the theory that these parties
breached the corporeal form, and thus it is appropriate for
this Court to pierce the corporate veil.
Plaintiff
claims
it
is
“entitled
to
Specifically,
obtain
information,
among other things, regarding the scope of the partnership
between Keeneland or Keeneland Association, Inc. and MCI,
the relationship of the parties to MCSF, and the assets
available to satisfy the judgment entered against MCSF.”
(D.E. 54, Plaintiff’s Motion to Compel, at 8-9).
Although
Plaintiff has not presented any facts suggesting that any
breach of corporeal form has occurred, he argues, without
providing any legal authority, that he need not set forth
facts supporting veil piercing at this point.
(D.E. 48,
Plaintiff’s Response to MCSF’s Motion, at 12).
Plaintiff’s request reflects a misunderstanding of the
breadth of Fed. R. Civ. P. 69(a).
While it may be true
that post-judgment discovery has a broad scope, it has its
limits.
See United States v. Conces, 507 F.3d 1028, 1040
(6th Cir. 2007).
“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.” Trs. of N. Fla. Operating Eng’rs Health &
8
Welfare Fund, 148 F.R.D. at 664 (citing Strick Corp. v.
Thai Teak Prods. Co., Ltd., 493 F. Supp. 1210, 1218 (E.D.
Pa. 1980)).
This threshold showing is necessary because
“[t]he interest of third parties in their privacy must be
balanced against the need of the judgment creditor to the
documents in question.”
Inc.,
130
F.R.D.
Blaw Knox Corp. v. AMR Indus.,
400,
403
(E.D.
Wis.
1990).
This
is
considered “a factual determination which can only be made
on a case by case basis.”
Id.
In this case, veil piercing was not an issue in the
underlying case, and Plaintiff provides no facts suggesting
that veil piercing is appropriate now.
Rather, Plaintiff’s
theory of discovery arises out of the idea that partners
have
liabilities
extension
–
an
for
alter
partnership
ego
theory
debts
and
that
could
let
it
–
by
recover
against these entities if they are in fact determined to be
partners.
The
premise
of
Plaintiff’s
argument
is
fundamentally flawed since, as explained above, there is no
evidence that there existed a partnership in lieu of a
limited liability corporation.
Moreover, there is simply
no evidence that any third party was disregarding corporate
formalities
with
Defendant.
Therefore,
what
Plaintiff
essentially asks this Court to do is to allow it to engage
in a fishing expedition under the guise of post-judgment
9
discovery to determine if a basis exists to pierce the
corporate veil, even though no facts currently suggest that
piercing is appropriate.
Rule 69(a)(2) does not permit
post-judgment discovery to this extreme.
In support of its argument to the contrary, Plaintiff
cites
United States v. Conces, 507 F.3d 1028 (6th Cir.
2007), for the proposition that post-judgment discovery has
a broad scope.
that
is
not
Specifically,
information
relevant
However, Conces was a very different case
analogous
there
was
sought
and
to
no
question
during
clearly
Plaintiff’s
in
Conces
post-judgment
articulated;
situation.
that
discovery
rather,
the
the
was
defendant
refused to produce the United States’ discovery requests
because he believed responding to them would violate his
Fifth Amendment protection against self-incrimination.
at 1040.
noted
in
Id.
Thus, while it is true that the Sixth Circuit
Conces
that
post-judgment
discovery
under
Rule
69(a)(2) has a broad scope, the inherent caveat is that the
discovery sought is relevant and necessary.
Id.
This is a
bar that Plaintiff’s requests do not meet.
Plaintiff
also
cites
to
Andrews
v.
Raphaelson,
No.
5:09-cv-077-JBC, 2009 WL 1211136 (E.D. Ky. Apr. 30, 2009),
for the proposition that a judgment creditor is “entitled
to ‘utilize the full panoply of federal discovery measures’
10
provided
for
under
federal
and
state
law
to
obtain
information from parties and non-parties alike, including
information about assets on which execution can issue or
about assets that have been fraudulently transferred.”
at *3.
Id.
However, Andrews also fails to support Plaintiff’s
argument.
In Andrews, the plaintiff brought fraud and conversion
claims against two defendants, a husband and wife.
*1.
Id. at
The jury found in favor of the plaintiff on her claim
against
the
defendant
husband
and
entered
a
judgment
against him; however, the jury found against the plaintiff
on her claims against the defendant wife, and the court
dismissed all claims against her.
Id.
efforts
to
against
husband,
she
collect
sought
a
judgment
post-judgment
In the plaintiff’s
the
discovery
defendant
against
the
wife which included joint income tax returns filed with her
husband.
non-party,
Id. at *2.
objected
The wife, who was then considered a
to
this
discovery
confidential, and overly broad.
Id.
as
irrelevant,
However, the court
correctly noted that it is “beyond question that a judgment
creditor is allowed to ask a judgment debtor for asset and
financial information relating to the debtor’s spouse or
other
family
members,”
and
allowed
the
plaintiff
to
discover the information from the wife despite her non11
party status.
Id. at *3 (citing Nat’l Union Fire Ins. Co.
of
v.
Pittsburgh
Van
Waeyenberghe,
148
F.R.D.
256,
257
(N.D. Ind. 1993).
Before us is an entirely different case.
underlying
claim
claim
the
and
in
Andrews
jury
found
was
in
a
First, the
fraudulent
favor
of
conversion
the
plaintiff.
Therefore, there was obviously some evidence of fraudulent
transfers in Andrews allowing the plaintiff to meet her
burden
to
financial
show
that
information
the
was
defendant’s
necessary
and
attempt to enforce the court’s judgment.
wife’s
private
relevant
to
her
To the contrary
in this case, Plaintiff’s underlying claim is a breach of
contract dispute, and Plaintiff has not since presented any
compelling
evidence
that
fraudulent
transfers
Defendant and any third party occurred.
between
Therefore, unlike
the Andrews plaintiff, Plaintiff here has failed to meet
its burden.
Second,
whereas
the
Andrews
plaintiff
sought
to
discover clearly relevant information about the defendant
which
naturally
included
some
about
his
Plaintiff
has
only
about
wife,
Defendant’s
past
confidential
requested
and
information
information
present
not
financial
situation, but also, for example, “any and all documents”
accounting
for
“any
Keeneland
12
Ventures
Asset”
or
“any
Martin
Collins
Central Bank).
relevant
entity
asset.”
(D.E.
44-8,
Subpoena
to
Thus, whereas the Andrews plaintiff sought
information
primarily
about
the
defendant
that
naturally involved some peripheral information about his
wife,
Plaintiff
here
seeks
to
uncover
everything
about
Keeneland Ventures, Keeneland Association, MCI and MCUSA as
if
they
were
something
also
more
information
to
defendants
justify
regarding
the
in
its
this
case.
requests,
finances
or
Without
discovery
assets
of
of
third
parties other than the defendant judgment debtor is beyond
the scope of post-judgment discovery, pursuant to Fed. R.
Civ. P. 69(a)(2).
Notably, Defendant has never disputed that Plaintiff
can freely discover its own assets and financial status and
can make reasonable inquiry into the disposition of assets
it once held.
Order,
at
(D.E. 44, Defendant’s Motion for Protective
5).
Indeed,
Defendant
has
already
produced
documents relating to its own past and present financial
status,
returns,
including
documents
its
own
financial
regarding
its
records
dissolution,
and
tax
documents
relating to its Central Bank loan, documents relating to
the public auction of its assets, documents regarding the
sale and transfer of its remaining assets in connection
with
its
dissolution,
and
non-privileged
13
communications
between Defendant and its members concerning the dispute
with
Plaintiff.
(D.E.
Protective Order, at 5).
44,
Defendant’s
Motion
for
Thus, Defendant has, to the best
of this Court’s knowledge, been completely compliant with
Plaintiff’s requests to the extent that they are within the
bounds of
Fed. R. Civ. P. 69(a)(2).
III. Conclusion
Accordingly, IT IS ORDERED:
(1)
Footings,
that
Defendant
LLC’s
Motion
Martin
for
a
Collins
Surfaces
Protective
Order
&
and
Modification of Subpoenas [D.E. 44] and third-party Martin
Collins USA, LLC’s Motion for a Protective Order [D.E. 45]
are GRANTED;
(2) that Plaintiff’s Motion to Compel Production of
Documents from Keeneland Ventures PT, LLC, is DENIED.
(3) that Plaintiff’s Motion to Compel Production of
Documents from Keeneland Association, Inc., is DENIED.
(4) that Plaintiff’s Motion for Hearing [D.E. 57] is
DENIED.
(5) that Plaintiff’s subpoenas are hereby MODIFIED to
exclude
him
from
discovering
information
regarding
the
finances or assets of third parties other than the judgment
creditor Martin Collins Surfaces & Footings, LLC;
14
(6)
that Central Bank & Trust Company is directed to
WITHHOLD from production any documents that relate to the
finances of third parties or assets of third parties which
were
not
Footings,
previously
LLC,
held
which
by
might
Martin
Collins
otherwise
be
Surfaces
responsive
&
to
Michael W. Dickinson, Inc.’s subpoena (including but not
limited to requests 2, 7, 8, 10, 11, 12, or 14);
(7)
that
neither
Keeneland
Ventures
PT,
LLC,
Keeneland Association, Inc., Martin Collins USA, LLC, nor
Martin Collins Surfaces & Footings, LLC, shall be required
to produce documents regarding the finances or assets of
parties other than Martin Collins Surfaces & Footings, LLC
as the judgment debtor in this case in response to the
subpoenas
and
requests
served
upon
them
by
Plaintiff,
Michael W. Dickinson, Inc.
(8)
that this Order is FINAL AND APPEALABLE and THERE
IS NO JUST CAUSE FOR DELAY.
This the 20th day of November, 2012.
15
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