Travelers Commercial Casualty Company v. Sielfleisch Roofing, Inc et al

Filing 32

MEMORANDUM AND ORDER re: 25 IT IS HEREBY ORDERED that the motion of defendants Sielfleisch Roofing, Inc., Mark Sielfleisch, and Lynette Guignard to quash the subpoena issued to Concord Bank (Doc. 25 ) is denied. IT IS FURTHER ORDERED that the motion of defendants Sielfleisch Roofing, Inc., Mark Sielfleisch, and Lynette Guignard to quash the subpoenas issued to Thomas W. Cunniff, LLC, and James T. O'Brien (Doc. 26 ) is denied. IT IS FURTHER ORDERED that all documents produced in response to the subpoenas issued to Concord Bank, Thomas W. Cunniff, LLC, and James T. O'Brien are subject to the protective order previously entered by this court. (Doc. 24 .). Signed by Magistrate Judge David D. Noce on 5/7/13. (KKS)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION

TRAVELERS COMMERCIAL
CASUALTY COMPANY,
Plaintiff,
v.
SIELFLEISCH ROOFING, INC. et al.,
Defendants.

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No. 4:12 CV 1550 DDN

MEMORANDUM & ORDER
This action is before the court on the motions of defendants Sielfleisch Roofing,
Inc., Mark Sielfleisch, and Lynette Guignard to quash the subpoenas plaintiff Travelers
Commercial Casualty Company issued to Concord Bank and to accountants Thomas W.
Cunniff, LLC and James T. O’Brien. (Docs. 25, 26.) The court heard oral argument on
May 3, 2013.

I. BACKGROUND
On August 8, 2012, plaintiff Travelers Commercial Casualty Company
commenced this action against defendants Sielfleisch Roofing, Inc., Mark Sielfleisch, and
Lynette Guignard.

(Doc. 1.)

According to the complaint, the following occurred.

Plaintiff is a stock insurance company organized under Connecticut law. (Id. at ¶ 2.)
Defendant Sielfleisch Roofing, Inc. is a corporation organized under Missouri law. (Id.
at ¶ 3.) Defendants Mark Sielfleisch and Lynette Guignard are Missouri citizens and the
principals and the sole supervisors and executives of Mark H. Sielfleisch Roofing, Inc.
and MHS Roofing Maintenance and Repair, Inc. (Id. at ¶¶ 4, 20.)

Plaintiff issued a workers’ compensation and employer liability insurance policy
to Mark H. Sielfleisch Roofing, Inc. and MHS Roofing Maintenance and Repair, Inc. to
cover the period of May 9, 2003 to May 9, 2004. (Id. at ¶ 8.) On February 6, 2004,
plaintiff canceled the policy due to a failure to cooperate with plaintiff’s auditor. (Id. at ¶
8.) Subsequently, plaintiff billed Mark H. Sielfleisch Roofing, Inc. and MHS Roofing
Maintenance and Repair, Inc. for overdue premiums, but they refused to pay. (Id. at ¶¶
10-11.)
On July 28, 2009, plaintiff filed suit against Mark H. Sielfleisch Roofing, Inc. and
MHS Roofing Maintenance and Repair, Inc. in Missouri circuit court to recover the
unpaid premiums. (Id. at ¶ 12.) On December 9, 2010, the circuit court awarded plaintiff
$145,412.83. (Id. at ¶ 14.)
On February 15, 2011, counsel for Mark H. Sielfleisch Roofing, Inc. and MHS
Roofing Maintenance and Repair, Inc. e-mailed plaintiff’s counsel, stating for the first
time that neither corporation had actively conducted business for several years and that
the value of their aggregate assets was $25,000. (Id. at ¶ 21, Doc. 1-1.) Thereafter, Mark
Sielfleisch and Lynette Guignard stated that they formed Sielfleisch Roofing, Inc. to take
advantage of preferential contracting opportunities for women-owned businesses. (Doc.
1 at ¶ 23.) However, the Missouri Office of Equal Opportunity reports no record of
defendants applying for or receiving certification as a women-owned business. (Id. at ¶
23.)
Plaintiff alleges successor liability and piercing the corporate veil against
defendant Sielfleisch Roofing, Inc. (Id. at ¶¶ 26-48.) Plaintiff further alleges against all
defendants actual and constructive fraudulent transfer, tortious interference with business
expectancy, and negligent misrepresentation. (Id. at ¶¶ 49-98.)

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II. DISCUSSION
Defendants move to quash the subpoena directed to Concord Bank, arguing that it
is overbroad, vague, and not reasonably calculated to lead to the discovery of admissible
evidence. Defendants move to quash the subpoenas directed to accountants Thomas W.
Cunniff, LLC and James T. O’Brien, arguing that they violate the accountant-client
privilege and the Fifth Amendment right against self-incrimination and that they are
overbroad and not reasonably calculated to lead to the discovery of admissible evidence.
Alternatively, defendants move that any production of documents be produced under a
protective order. (Docs. 25, 26.)

A. Motion to Quash the Subpoena Directed to Concord Bank
On April 3, 2013, plaintiff issued a subpoena to Concord Bank that requested the
production of:
All notes, financing statements, or other documents by which the Bank
obtained any interest in the assets, inventory, equipment, or other property
of any one or more of the following: Mark H. Sielfleisch Roofing, Inc.;
MHS Roofing Maintenance & Repair, Inc.; Mark H. Sielfleisch; Lynette
Guignard, a/k/a Lynette Sielfleisch; and Sielfleisch Roofing, Inc.
(Doc. 25-1.)
Defendants argue that the subpoena is overbroad because it does not specify a time
frame. Specifically, defendants argue that because Sielfleisch Roofing, Inc. commenced
operations in 2004, Mark H. Sielfleisch Roofing, Inc. ceased operations in 2004 and
MHS Roofing Maintenance & Repair, Inc. ceased operations in 2009, the relevant time
periods are the years 2004 and 2009.
“[P]arties may obtain discovery regarding any matter, not privileged, that is
relevant to the claim or defense of any party, including the claim or defense of any
party.” Fed R. Civ. P. 26(b)(1). Plaintiff argues that the request is relevant for their
fraudulent transfer and successor liability claims.
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Under Missouri law, generally, “where one corporation sells or otherwise transfers
all of its assets to another corporation, the latter is not liable for the debts and liabilities of
the former.” Roper Elec. Co. v. Quality Castings, Inc., 60 S.W.3d 708, 711 (Mo. Ct.
App. 2001). However, one exception is where the purchasing corporation is merely a
continuation of the selling corporation. Id. The relevant factors recognized by Missouri
include “whether the business operations are identical” and “whether the transferee uses
the same trucks, equipment, labor force, supervisors and name of the transferor.” Id. The
court finds that the documents requested by plaintiff could demonstrate these factors.
Moreover, use of the same equipment could be demonstrated, for example, by a
financing statement regarding a piece of equipment with MHS Roofing Maintenance &
Repair, Inc. as debtor and a second financing statement regarding the same equipment
with Sielfleisch Roofing, Inc. as debtor, regardless of the dates of either financing
statements. Further, fraudulent transfer and successor liability actions typically involve
fact-intensive inquiries and circumstantial evidence.

See e.g., id. at 713 (successor

liability); Brockmann v. O'Neill, 565 S.W.2d 796, 798-99 (Mo. Ct. App. 1978)
(successor liability); Allison v. Mildred, 307 S.W.2d 447, 454 (Mo. 1957); Herrold v.
Hart, 290 S.W.2d 49, 55 (Mo. 1956) (fraudulent transfer). Thus, defendants’ argument
that the request is overbroad due to not limiting the request to particular years is without
merit.
Defendants also argue that the subpoena is vague because it is unclear whether
plaintiff seeks documents that transfer no interest to Concord Bank. However, the court
finds that the subpoena clearly states that plaintiff does not seek such documents and the
parties agree on this interpretation of the subpoena. (Doc. 25 at 2; Doc. 27 at 7-8.)
Defendants further argue that because Mark H. Sielfleisch Roofing, Inc. and MHS
Roofing Maintenance & Repair, Inc. did not own real property, requesting documents
regarding the Concord Bank’s security interests in real property is not reasonably
calculated to lead to the discovery of admissible evidence. However, plaintiff does not
limit the request to real property.

Further, even assuming the truth of defendants’
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allegation, the fact that a request will not result in the discovery of admissible evidence
does not mean that the request is not reasonably calculated to do so. Demanding that
discovery requests result in admissible evidence would undercut the fundamental
purposes of discovery, which include narrowing the issues and obtaining knowledge of
relevant facts. See Mawby v. United States, 999 F.2d 1252, 1254 (8th Cir. 1993).
Finally, defendants argue that the subpoena does not specifically describe the
relevant personal property or fixtures and, therefore, the request is not reasonably
calculated to lead to the discovery of admissible evidence. Considering plaintiff’s claims
and the scope and purposes of discovery, such specificity is not required for this
subpoena.
Accordingly, defendants’ motion to quash the subpoena issued to Concord Bank is
denied.

B. Motion to Quash the Subpoenas Directed to Thomas W. Cunniff, LLC and James
T. O’Brien
On April 3, 2013, plaintiff issued subpoenas to Thomas W. Cunniff, LLC, and
James T. O’Brien that requested production of:
1. All tax returns and any other documents filed with the Internal Revenue
Service and/or Missouri Department of Revenue by or on behalf of
Sielfleisch Roofing, Inc. at any time.
2. All documents received from the Internal Revenue Service and/or
Missouri Department of Revenue regarding Sielfleisch Roofing, Inc. at any
time.
3. All tax returns any other documents filed with the Internal Revenue
Service and/or Missouri Department of Revenue by or on behalf of Mark
H. Sielfleisch regarding tax years from 2004-2008.
4. All documents received from the Internal Revenue Service and/or
Missouri Department of Revenue by or on behalf of Mark H. Sielfleisch
regarding tax years 2004-2008.
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5. All tax returns and any other documents filed with the Internal Revenue
Service and/or Missouri Department of Revenue by or on behalf of Lynette
Guignard aka Lynette Sielfleisch for tax years 2004-2008.
6. All documents received from the Internal Revenue Service and/or
Missouri Department of Revenue regarding Lynette Guignard aka Lynette
Sielfleisch for tax years 2004-2008.
7. All tax returns and any other documents filed with the Internal Revenue
Service and/or Missouri Department of Revenue by or on behalf of Mark
H. Sielfleisch Roofing, Inc. regarding tax years 2003 to present.
8. All documents received from the Internal Revenue Service and/or
Missouri Department of Revenue regarding Mark H. Sielfleisch Roofing,
Inc. regarding tax years 2003 to present.
9. All tax returns and any other documents filed with the Internal Revenue
Service and/or Missouri Department of Revenue by or on behalf of MHS
Roofing Maintenance & Repair, Inc. regarding tax years 2003 to present.
10. All documents received from the Internal Revenue Service and/or
Missouri Department of Revenue regarding MHS Roofing Maintenance &
Repair, Inc. regarding tax years 2003 to present.
11. All documents creating, memorializing, discussing, or amending a
controlled group of corporations for tax purposes involving one or more of
the following entities: Mark H. Sielfleisch Roofing, Inc.; MHS Roofing
Maintenance & Repair, Inc.; and/or Sielfleisch Roofing, Inc.
12. All tax apportionment plans involving one or more of the following
entities. Mark H. Sielfleisch Roofing, Inc.; MHS Roofing Maintenance &
Repair, Inc.; and/or Sielfleisch Roofing, Inc.
13. All financial statements, including without limitation balance sheets,
income statements, profit/loss statements, audited financials, or the like for
Mark H. Sielfleisch Roofing, Inc. from 2003 to present.
14. All financial statements, including without limitation balance sheets,
income statements, profit/loss statements, audited financials, or the like for
MHS Roofing Maintenance & Repair, Inc. from 2003 to present.
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15. All financial statements, including without limitation balance sheets,
income statements, profit/loss statements, audited financials, or the like for
Sielfleisch Roofing, Inc. at any time.
(Docs. 26-1; 26-2.)
Defendants argue that plaintiff’s request is barred by the accountant-client
privilege. Fed. R. Evid. 501 states that the state law that supplies the rule of decision also
supplies the law regarding privileges.

Missouri law governs inquiries regarding

privileges in this case. The relevant Missouri statute states:
A licensee shall not be examined by judicial process or proceedings without
the consent of the licensee's client as to any communication made by the
client to the licensee in person or through the media of books of account
and financial records, or the licensee's advice, reports or working papers
given or made thereon in the course of professional employment, nor shall
a secretary, stenographer, clerk or assistant of a licensee, or a public
accountant, be examined, without the consent of the client concerned,
regarding any fact the knowledge of which he or she has acquired in his or
her capacity as a licensee.
Mo. Rev. Stat. § 326.322(2).
Plaintiff argues that defendants’ affirmative defenses waived the accountant-client
privilege by placing their financial condition and tax status at issue. Under Missouri law,
placing the subject matter of a privileged communication at issue waives the accountantclient privilege. State ex rel. Rowland v. O'Toole, 884 S.W.2d 100, 103 (Mo. Ct. App.
1994).
In the underlying state action, counsel for Mark H. Sielfleisch Roofing, Inc., MHS
Roofing Maintenance and Repair, Inc., and Sielfleisch Roofing, Inc. sent an email, dated
February 15, 2011, to defendants’ counsel, which included the following representations:
At this time, neither Mark H. Sielfleisch Roofing, Inc. and MHS Roofing
Maintenance and Repair, Inc. are active businesses and have not been for
several years. Mark H. Sielfleisch Roofing, Inc. retains certain of its
original assets including a 2000 crane, as well as a 2001 and 2005 truck.
Mark Sielfleisch estimates the total value of those assets to be about
$25,000.
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Sielfleisch Roofing, Inc. is a completely separate legal entity from the other
two companies and has observed all appropriate corporate formalities with
respect to separate assets, separate books, a separate FEIN number,
different ownership, and different management.
If you would like to see the latest financial statements for MHS Roofing
Maintenance & Repair Inc. and Mark H. Sielfleisch Roofing, Inc. I would
be happy to provide that information in advance of next week’s settlement
meeting.
(Doc. 1-1 at 2.)1 The court finds that the February 15, 2011 email waives the accountantclient privilege of Mark H. Sielfleisch Roofing, Inc., MHS Roofing Maintenance and
Repair, Inc., and Sielfleisch Roofing, Inc.
Although Missouri courts have addressed the issue of waiver resulting from
placing the subject matter of privileged communications at issue, few have addressed the
contours of the privilege. However, courts have found the accountant-client privilege
analogous to the attorney-client privilege. See State ex rel. Sw. Bell Publications v.
Ryan, 754 S.W.2d 30, 32 (Mo. Ct. App. 1988); Rose v. Commercial Factors of Atlanta,
Inc., 262 Ga. App. 528, 529, 586 S.E.2d 41, 42-43 (2003); Fed. Ins. Co. v. Arthur
Anderson & Co., 816 S.W.2d 328, 330 (Tenn. 1991).
Plaintiff argues that the accountant-client privilege does not apply to documents
sent to or received from third parties. Missouri courts have held that voluntarily sharing
information with a third party waives the attorney-client privilege. Lipton Realty, Inc. v.
St. Louis Hous. Auth., 705 S.W.2d 565, 570 (Mo. Ct. App. 1986). They have also held
that the attorney-client privilege does not attach to documents created by third parties
merely because attorneys possess them. State ex rel. Great Am. Ins. Co. v. Smith, 574
S.W.2d 379, 385 (Mo. 1978); Bd. of Registration for Healing Arts v. Spinden, 798
S.W.2d 472, 476 (Mo. Ct. App. 1990). Therefore, accountant-client privilege does not
apply to documents received from or filed with the Internal Revenue Service or the

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The court notes that defendants’ current counsel did not represent defendants in the
underlying state action.
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Missouri Department of Revenue, or other documents similarly received from or sent to
another third party.
Defendants respond that filing documents with taxing authorities did not waive the
privilege because defendants expected confidentiality due to the fact that such documents
are not publicly available. However, although Missouri courts have not considered this
issue, other courts have held that filing documents with the Internal Revenue Service
waives the attorney-client privilege. See e.g., United States v. Cote, 456 F.2d 142, 145
(8th Cir. 1972); United States v. Mierzwicki, 500 F. Supp. 1331, 1334-35 (D. Md. 1980);
United States v. Schlegel, 313 F. Supp. 177, 179-80 (D. Neb. 1970).
Accordingly, the accountant-client privilege does not protect the documents
requested in the subpoenas directed to Thomas W. Cunniff, LLC, and James T. O’Brien.
Defendants Mark Sielfleisch and Lynette Guignard also invoke the Fifth
Amendment privilege against self-incrimination.

The Fifth Amendment states, “No

person . . . shall be compelled in any criminal case to be a witness against himself.” The
privilege may be invoked in civil proceedings “where the answers might be incriminating
in future criminal proceedings.” United States v. Nace, 418 F.3d 945, 947 (8th Cir.
2005). “[A] person may be required to produce specific documents even though they
contain incriminating assertions of fact or belief because the creation of those documents
was not ‘compelled’ within the meaning of the privilege.” United States v. Hubbell, 530
U.S. 27, 35 (2000). However, the act of production itself may have “a compelled
testimonial aspect” that might communicate “the existence, custody, and authenticity of
the documents.” Id. at 36-37.
Defendants do not elaborate on their invocation of the privilege. In civil cases, the
Fifth Amendment does not provide an all-encompassing right of refusal to discovery
requests. Gen. Dynamics Corp. v. Selb Mfg. Co., 481 F.2d 1204, 1212 (8th Cir. 1973);
Capitol Products Corp. v. Hernon, 457 F.2d 541, 542 (8th Cir.1972). Rather, the court
must determine “from the implications of the question, in the setting in which it is asked,
that a responsive answer to the question or an explanation of why it cannot be answered
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might be dangerous because injurious disclosure could result.” Capital Products Corps.,
457 F.3d at 543. Defendants offer no explanation other than they might be held liable in
the future for unpaid taxes. Such is a clearly speculative prospect. The court concludes
that defendants have not satisfied their burden of establishing a legally sufficient basis for
successfully invoking the Fifth Amendment as a bar to these subpoenas.
Defendants further object to each request, arguing that the requests are overbroad
and not reasonably calculated to lead to the discovery of admissible evidence. However,
these objections are substantially similar to the objections regarding the Concord Bank
subpoena discussed and overruled above.
Accordingly, defendants’ motion to quash the subpoenas issued to accountants
Thomas W. Cunniff, LLC and James T. O’Brien is denied.

C. Protective Order
Defendants request that the documents produced in response to the subpoenas
issued to Concord Bank, Thomas W. Cunniff, LLC, and James T. O’Brien be subject to
the protective order previously entered by this court. (Doc. 24.) Plaintiff acquiesces to
this request. (Doc. 27 at 9; Doc. 28 at 14.) Accordingly, documents produced in
response to the subpoenas issued to Concord Bank, Thomas W. Cunniff, LLC, and James
T. O’Brien are subject to the protective order previously entered by this court.

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III. CONCLUSION
IT IS HEREBY ORDERED that the motion of defendants Sielfleisch Roofing,
Inc., Mark Sielfleisch, and Lynette Guignard to quash the subpoena issued to Concord
Bank (Doc. 25) is denied.
IT IS FURTHER ORDERED that the motion of defendants Sielfleisch Roofing,
Inc., Mark Sielfleisch, and Lynette Guignard to quash the subpoenas issued to Thomas
W. Cunniff, LLC, and James T. O’Brien (Doc. 26) is denied.
IT IS FURTHER ORDERED that all documents produced in response to the
subpoenas issued to Concord Bank, Thomas W. Cunniff, LLC, and James T. O’Brien are
subject to the protective order previously entered by this court. (Doc. 24.)

/S/ David D. Noce
k
UNITED STATES MAGISTRATE JUDGE
Signed on May 7, 2013.

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