Peoples National Bank, N.A. v. Mehlman et al

Filing 75

MEMORANDUM AND ORDER...IT IS HEREBY ORDERED that Defendants' motion to quash is GRANTED. (Doc. No. 65 .) IT IS FURTHER ORDERED that Plaintiff's motion to compel, as further limited by Plaintiffs memorandum, is GRANTED. (Doc. No. 68 .) IT IS FURTHER ORDERED that on or before June 17, 2016, the parties shall submit a joint proposed scheduling plan for the continued litigation of this case. Only one proposed scheduling plan may be submitted, and it must be signed by counsel for all p arties. It will be the responsibility of counsel for Plaintiff to actually submit the joint proposed scheduling plan to the Court. If the parties cannot agree as to any matter required to be contained in the joint plan, the disagreement must be set out clearly in the joint proposal, and the Court will resolve the dispute. ( Joint Scheduling Plan due by 6/17/2016.). Signed by District Judge Audrey G. Fleissig on 6/7/2016. (NEB)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION

PEOPLES NATIONAL BANK, N.A.,
Plaintiff,
vs.
DEBRA J. MEHLMAN, et al.,
Defendants.

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Case No. 4:15CV00996 AGF

MEMORANDUM AND ORDER
This matter is before the Court Plaintiff’s motion (Doc. No. 68) to compel further
discovery responses and documents, and Defendant’s motion (Doc. No. 65) to quash
subpoenas served on two non-parties. For the reasons set forth below, both motions shall
be granted.
BACKGROUND
The lawsuit arises out of two loans made by Plaintiff People’s National Bank, N.A.,
in 2007 and in 2008, in the total amount of approximately $3.6 million to Defendant Mark
S. Mehlman Realty Inc. (“MSM Realty”); both loans were guaranteed by Defendant Mark
Mehlman. After Plaintiff obtained a judgment in state court against these two Defendants
for approximately $1.3 million for money owed on the loans, Plaintiff filed the present
action against Mark Mehlman; MSM Realty; Debra Mehlman, individually and as trustee
of her trust; Mehlman Homes Realty, LLC (“MHR”); Mark S. Mehlman Homes (“MSM
Homes”), LLC; and Mark Mehlman’s sons, Scott Mehlman and Blair Mehlman. Plaintiff
alleges in Count I that Mark Mehlman fraudulently induced Plaintiff to extend the loans,

and in Counts II through VII that all Defendants engaged in fraudulent transfers to prevent
Plaintiff from collecting almost all of the $1.3 million judgment.
The requests for production and interrogatories at issue seek production of financial
information, including tax returns, accounting records, and bank records, generally from
2007 to the present. Additionally, Plaintiff seeks documents and information about the
consideration Debra Mehlman and her trust received from MSM Homes and MHR, and
capital contributions Debra Mehlman, her trust, and Mark Mehlman made to MSM Homes
and MHR. Plaintiff also seeks the trust documents establishing and governing Debra
Mehlman’s trust, and employment contracts in effect from 2007 to present between MSM
Realty and any employee or contractor of MSM Realty. With respect to requests that
were initially unlimited in time, Plaintiff has limited its requests to going back to 2007 with
respect to MSM Realty, and to 2009 and 2010 with respect to MSM Homes and MHR,
respectively.
The third-party subpoenas at issue were directed to Rubin Brown LLP and Ken
Rubin (“Rubin Brown”), the accountants for Defendants, who were asked to produce “all
documents and communications regarding the general financial condition of” MSM
Realty, MSM Homes, and MHR, as well as the income tax returns of MSM Realty.
With respect to the motion to compel, Defendants argue that the information sought
is irrelevant and that the discovery requests at issue are overbroad. In support of their
motion to quash, Defendants, joined by Rubin Brown LLP and Ken Rubin, state that the
documents at issue are in Defendants’ possession but Defendants have objected to their
production, and Plaintiff should not be allowed to obtain documents from third parties as
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an “end run” around Defendants’ objections. They also argue that the third parties should
be protected from the undue burden and expense of production.
Plaintiff argues that production from the third parties is warranted in this case
because of evidence that Defendants have in the past produced contradictory financial
information. Plaintiff argues that the accountants are most likely to have and provide
non-fraudulent information as a financial firm responsible for preparing Defendants’ taxes.
Plaintiff also notes that Defendants’ initial disclosure stated that Rubin Brown LLP has
discoverable information which “may support Defendants’ claims or defenses,” including
information detailing the financial condition of MHR, MSM Homes, and MSM Realty, and
that it “defies belief” that Defendants might use this information in defense of the lawsuit,
but that neither Defendants nor third parties should be required to produce the documents.
In response to Defendants’ assertion that Plaintiff’s requests are overbroad, Plaintiff notes
that its requests are limited to topics for which Defendants disclosed Rubin Brown LLP as
having relevant information.
DISCUSSION
Under Federal Rule of Civil Procedure 26(b)(1), parties 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 stake 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.
Fed. R. Civ. P. 26(b)(1). “Information within this scope of discovery need not be
admissible in evidence to be discoverable.” Id. The party seeking discovery bears the
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burden of showing relevancy. Hofer v. Mack Trucks, Inc., 981 F.2d 377, 380 (8th Cir.
1992). In the discovery context, relevancy “has been construed broadly to encompass any
matter that bears on, or that reasonably could lead to other matter that could bear on, any
issue that is or may be in the case.” Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340,
351 (1978). Rule 26(b)(2)(C), however, requires the court to curtail the discovery of
admittedly relevant evidence if:
(i)

the discovery sought is unreasonably cumulative or duplicative, or
can be obtained from some other source that is more convenient, less
burdensome, or less expensive;

(ii)

the party seeking discovery has had ample opportunity to obtain the
information by discovery in the action; or

(iii)

the proposed discovery is outside the scope permitted by Rule
26(b)(1).

Rule 45 provides the rules governing subpoenas directed at nonparties, and
authorizes a district court to quash a subpoena when the subpoena requires disclosure of
privileged or other protected matter, or when it subjects a person to undue burden. Fed. R.
Civ. P. 45(d)(3)(A) (iii) and (iv). The court has especially wide latitude in deciding
whether to quash a subpoena issued to a nonparty. Swann v. Calahan, No. 4:11CV00369
(JCH), 2011 WL 3608056, at *1 (E.D. Mo. Aug. 15, 2011). A “party seeking to quash a
subpoena bears the burden to demonstrate that compliance would be unreasonable or
oppressive.” Enviropak Corp. v. Zenfinity Capital, LLC, No. 4:14CV00754 ERW, 2014
WL 4715384, at *3 (E.D. Mo. Sept. 22, 2014). “Concern for the unwanted burden thrust
upon non-parties is a factor entitled to special weight in evaluating the balance of
competing needs.” Miscellaneous Docket Matter No. 1 v. Miscellaneous Docket Matter
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No. 2, 197 F.3d 922, 927 (8th Cir. 1999). If the party seeking the information can easily
obtain the same information without burdening the nonparty, the court will quash the
subpoena. See In re Cantrell, No. 09-mc-0158-CV-W-GAF, 2009 WL 1066011, at *2
(W.D. Mo. Apr. 21, 2009) (quashing a nonparty document subpoena because a party in the
action had the information).
Here the Court concludes that given the nature of this lawsuit, the financial
statements, tax returns, accounting records, records of consideration received by one
Defendant from another, bank records, and (capital) contributions made to MSM Homes
and MHR Realty by other Defendants are relevant and generally discoverable. Given the
time limits Plaintiff has added to its requests that did not have such limits, and the other
limitations set forth in Plaintiff’s memoranda, the Court does not believe the requests are
overbroad. In addition, the trust documents for the Debra Mehlman Trust are relevant.
The Court notes that a protective order is in place in this case pursuant to which Defendants
can designate as “confidential,” documents they believe contain confidential information.
The Court agrees with Defendants and Rubin Brown, however, that Plaintiff is
properly limited to obtaining the documents and information it seeks from Defendants at
this time. Defendants have represented that all documents that Plaintiff seeks from Rubin
Brown are in Defendants’ possession. As such, the documents should be produced
pursuant to this Order. To the extent any documents covered by this Order on the motion
to compel are only in the custody of Rubin Brown, the Court assumes and finds that such
documents are in Defendants’ “control,” and Defendants must obtain them from Rubin
Brown and produce them.
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Plaintiff’s arguments for seeking the material from Defendants’ accountants are
unpersuasive. Defendants have represented that they do not intend to call Rubin Brown’s
accountants as witnesses at trial and, as Defendants note, they would likely be precluded
from doing so in light of the representations in their motion to quash. If Defendants fail to
produce any of the relevant discoverable material, claiming the documents are solely in the
custody of Rubin Brown, or if after the production of documents Plaintiff can make a
proper showing that the financial records produced by Defendants appear to be irregular or
inauthentic, Plaintiff may file a motion to reconsider this Court’s Order on the motion to
quash.
CONCLUSION
Accordingly,
IT IS HEREBY ORDERED that Defendants’ motion to quash is GRANTED.
(Doc. No. 65.)
IT IS FURTHER ORDERED that Plaintiff’s motion to compel, as further limited
by Plaintiff’s memorandum, is GRANTED. (Doc. No. 68.)
IT IS FURTHER ORDERED that on or before June 17, 2016, the parties shall
submit a joint proposed scheduling plan for the continued litigation of this case. Only one
proposed scheduling plan may be submitted, and it must be signed by counsel for all
parties. It will be the responsibility of counsel for Plaintiff to actually submit the joint
proposed scheduling plan to the Court. If the parties cannot agree as to any matter

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required to be contained in the joint plan, the disagreement must be set out clearly in the
joint proposal, and the Court will resolve the dispute.

________________________________
AUDREY G. FLEISSIG
UNITED STATES DISTRICT JUDGE
Dated this7th day of June, 2016.

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