Tibble v. Daniels
Filing
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ORDER granting in part 12 motion to compel. Dawn Daniels and Tony Daniels shall each file a brief on or before June 27, 2016. The briefs may be filed ex parte and under seal. Signed on 6/6/16 by Chief District Judge Greg Kays. (Strodtman, Tracy)
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI
SOUTHWESTERN DIVISION
THOMAS R. TIBBLE,
Trustee,
v.
DAWN ANGEL DANIELS
d/b/a AD CONSULTING SERVICES,
Defendant.
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Case No. 3:14-mc-05006-DGK
ORDER REGARDING MOTION TO COMPEL
This matter arises from a bankruptcy trustee’s attempt to satisfy a default judgment.
Defendant Dawn Daniels and her husband, Tony Daniels (collectively “the Daniels”), failed to
comply with a court order directing them to provide certain financial documents. They also
declined to answer almost all questions during a Rule 69 examination by invoking their right
against self-incrimination.
Now before the Court is the bankruptcy’s trustee’s motion (Doc. 12) for an order holding
the Daniels in contempt for failing to comply with the court order. In the alternative, the
bankruptcy trustee requests an order compelling the Daniels to produce the documents and
answer questions.
For the following reasons, the motion is GRANTED IN PART. The Court ORDERS the
Daniels to produce the requested documents on or before June 27, 2016. The Court also
ORDERS the Daniels to file separate briefs explaining in detail the factual basis for their
invocation of their right to remain silent for each question they refused to answer at the first
examination and that they still refuse to answer. These briefs shall be filed on or before June 27,
2016, and may be filed ex parte and under seal.
After reviewing the briefs, the Court will rule on the validity of the privilege with respect
to each question. If appropriate, the Court will also set a date for a second Rule 69 examination.
Background
The Bankruptcy Court for the Western District of Michigan appointed Plaintiff Thomas
R. Tibble the Chapter 7 Bankruptcy Trustee (“the Trustee”) for Michigan Biodiesel, LLC in In re
Michigan Biodiesel, LLC, Case No. 10-05786-SWD. On October 9, 2013, the Trustee filed suit
against Defendant in the Western District of Michigan for receiving money that her brother-inlaw, Tracy Daniels, had improperly transferred to her in 2011 from Michigan Biodiesel’s
operating account. On January 8, 2014, the Trustee obtained a default judgment for $328,221.64
(“the Judgment”) against Defendant. The Judgment was certified and registered in this District
on January 22, 2014.
To determine Defendant’s ability and means to satisfy the Judgment and to locate her
non-exempt assets, the Trustee sought to conduct a Rule 69 post-judgment examination1 of the
Daniels. The Court referred the matter to a magistrate judge.2 On April 3, 2015, the magistrate
granted the motion and issued an order (Doc. 4) (“the Order”) directing the Daniels to produce
twenty-two types of documents from which the Trustee could discern Defendant’s ability and
means to satisfy the Judgment. Among other things, the Order sought: deeds, contracts and other
papers identifying any real estate in which Defendant had an interest; earnings statements and
employment contracts; income tax returns; bank statements from all banks or other financial
1
Federal Rule of Civil Procedure 69 provides that “[i]n aid of the judgment or execution, the judgment creditor . . .
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). This entitles a judgment creditor to
conduct “a very thorough examination of the judgment debtor,” and to depose “almost anyone [] who may provide
relevant information.” Credit Lyonnais, S.A. v. SGC Int’l, Inc., 160 F.3d 428, 430 (8th Cir. 1998).
2
The Honorable David Rush, Magistrate Judge for the Western District of Missouri.
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institutions in which Defendant had an account of any kind; and other documents or accounts
tending to show Defendant’s net worth. Order at 1-3.
The Rule 69 examination was originally set for May 21, 2015, but was rescheduled to
July 21, 2015, after Defendant requested additional time to compile the requested documents.
A.
Document Production
Prior to and on the day of the examination, the Daniels produced some documents; they
did not, however, produce those documents most critical to discerning Defendant’s ability and
means to pay the Judgment. For example, while they produced a bank statement dated April 30,
2015, for Angel Eyes Photography LLC (a small business checking account), as well as
statements from Liberty Bank for Dawn Chick Daniels d/b/a AD Consulting Services
from June 30, 2009, through September 30, 2013, they did not produce any bank or financial
statements for personal accounts held by them either individually or jointly. Additionally, the
Liberty Bank statements reflect regular transfers to a checking account numbered 1100166650
and another account ending in 569 into which transfers in excess of $250,000 were made during
a three month period, but the Daniels did not produce any statements for these accounts.
With respect to the Order’s directive to provide real estate documents, the Daniels
produced a warranty deed for a lot described in three sets of mortgage documents as Lot 3 of
Deer Meadows of Lawrence County, Missouri. But they did not produce other documents
identified in the Order, such as W-2 forms, 1099 forms, paycheck stubs, current/prior real estate
holdings, and statements of debts and assets, which a bank would have required them to provide
before making a loan.
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Finally, the Daniels did not produce any documents related to their salary, monthly
commissions, or earnings statements, or any other information showing their income or means of
support.
The Daniels did not invoke their right against self-incrimination with respect to any act of
production. In fact, they provided some documents shortly before the hearing began.
B.
Refusal to Answers Questions During the Examination
The Daniels appeared for the debtor examination but refused to answer any substantive
questions. At the beginning of the hearing, the Daniels, through attorney Dee Wampler, stated
that they were invoking their right against self-incrimination under the Fifth Amendment to the
United States Constitution and its state analog under Article 1, Section 9 of the Missouri
Constitution, and they would refuse to answer any question other than their name, address,
Social Security number, and date of birth. July 21, 2015, Hr’g Tr. at 8-9 (Doc. 13-2). The
Daniels claimed they were going to be prosecuted in the Western District of Michigan “for false
tax returns and false claims and mail fraud and wire fraud under the applicable statutes and they
may also conceivably be prosecuted in state court there, as well as state court here.” Id. at 9.
The Trustee’s attorney responded that he had spoken with an Assistant United States
Attorney in the Western District of Michigan. This prosecutor indicated the Daniels had been
given limited immunity in a federal criminal case related to Michigan Biodiesel brought against
Tony Daniels’ brother, Tracy Daniels, but he was not aware of any other potential prosecution
against either Defendant Dawn Daniels or Tony Daniels. The Trustee subsequently submitted
communications from the United States Attorney’s Office which indicates the Daniels likely
have, in fact, received limited immunity in that case in exchange for their testimony.3
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The Trustee submitted a letter dated October 6, 2014 (Doc. 13-3 at 1-2), and an email dated October 7, 2014 (Doc.
13-3 at 3), from the United States Attorney’s office for the Western District of Michigan. The letter outlines the
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During the subsequent Rule 69 examination, the Trustee asked Defendant whether she
had produced specific documents. Id. at 19-25. The Trustee also questioned the Daniels about
any property Defendant owned, transfers or gifts she had made, or other income or assets
Defendant might have. Id. at 27-36, 43-57. The Daniels answered questions concerning their
names and addresses, but refused to answer every other question, typically doing so by stating
“Take the Fifth” or “Fifth Amendment,” incorporating a general objection articulated by counsel
at the beginning of the hearing, but not making any detailed factual basis for the invocation. Id.
at 8-57.
Discussion
The Trustee argues that the Daniels have violated the Order by: (1) deliberately failing to
produce most of the requested documents; and (2) refusing to answer almost every question by
making a blanket invocation of the right against self-incrimination.
With respect to the
documents, the Trustee contends the Daniels have simply failed to produce the most important
documents, despite being granted additional time for the purpose of compiling them. With
respect to the questioning, the Trustee argues the Daniels’ blanket invocation of the Fifth
Amendment was improper, and that they have not shown they will face a real hazard if required
to answer.
In response, the Daniels state they have substantially complied with the Order’s directive
to provide documents. They make a conclusory assertion that they have made a valid invocation
of their rights against self-incrimination because they could face prosecution, and that answering
the Trustee’s questions might incriminate them. They do not, however, argue that the act of
production might incriminate them.
terms under which the Daniels would make a proffer statement, and the email confirms that the Daniels did, in fact,
give truthful proffer statements. The email states they will receive their non-prosecution agreements after they have
testified before the grand jury, which was expected to occur in November or December of 2014.
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The Daniels’ arguments are not persuasive.
With respect to the production of documents, the record is clear that the Daniels have not
substantially complied with the Order, nor have they established any valid reason for failing to
provide most of the requested documents, and it is now too late to assert any Fifth Amendment
or other legal argument for refusing to provide them. See Koenig v. Bourdeau Constr. LLC, No.
4:13-cv-0477SNLJ, 2015 WL 1411937, at *3 (E.D. Mo. Mar. 26, 2015) (“As there were no other
[Fifth Amendment] objections made at the time of the deposition, all other objections have been
waived.”) Accordingly, this portion of the motion is GRANTED. The Daniels shall provide all
of the requested documents on or before June 1, 2016. If they fail to comply, the Court will hold
them in contempt.
Turning to the privilege question, the Court notes that in this case federal law governing
the privilege against self-incrimination applies, not Missouri law. State privilege law applies in
federal court when state law provides the applicable rule of decision, but when federal law
governs the underlying subject matter, federal law concerning the privilege controls. Fed. R.
Evid. 501; see Couch v. United States, 409 U.S. 322, 335 (1973) (rejecting taxpayer’s claim of
accountant-client privilege in response to IRS summons issued to her accountant because no
such privilege exists under federal law). Since this was a Rule 69 examination taken to enforce a
judgment rendered in a bankruptcy proceeding, federal privilege law applies. See Koenig, 2015
WL 1411937, at *2 (holding federal privilege law, not state law, governs in Rule 69 examination
taken following a judgment entered in an FLSA action).
Under federal law, to invoke the privilege “the witness must have ‘reasonable cause to
apprehend danger from a direct answer.’” Schembre v. AGR Constr. Co., No. 4:06-cv-943(CEF),
2007 WL 3268443, at *2 (E.D. Mo. Nov. 2, 2007) (quoting Hoffman v. United States, 341 U.S.
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479, 486 (1951)). While the privilege extends not only “to answers that would in themselves
support a conviction . . . but likewise embraces those which would furnish a link in the chain of
evidence needed to prosecute the claimant,” Hoffman, 341 U.S. at 486, “[t]here is no blanket
Fifth Amendment right to refuse to answer questions in noncriminal proceedings.” Capitol
Prods. Corp. v. Hernon, 457 F.2d 541, 542 (8th Cir. 1972).
To invoke the privilege in a noncriminal proceeding, the witness must specifically claim
it with respect to a particular question. Id. The court then determines whether the witness is
facing a real risk of incrimination. Id. at 542-43.
In making this determination, the court
considers whether it is “evident 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
might be dangerous because injurious disclosure could result.” Hoffman, 341 U.S. at 486-87.
This is not a criminal case; this is a civil case where a blanket invocation is
impermissible. See Capitol Prods., 457 F.2d at 542. The Court finds the Daniels have failed to
show that they are facing a real risk of incrimination with respect to answering the questions they
refused to answer. Indeed, their indiscriminate invocation of the waiver appears designed to
prevent the Trustee from satisfying the Judgment. In the context of this case, it is difficult to see
how the answer to “Does your wife own any patents, copyrights, licenses, franchises or any other
general intangible property?” could be incriminating, much less how the answer to “Are you
currently married?” or “What’s your husband’s full name?” could be. Yet the Daniels have
refused to answer each of these questions. Hr’g Tr. at 26, 48-49. As in the Koenig, Schembre,
and Capitol Products cases, there is nothing in the record that suggests “the purpose of the
examination was anything other than an ordinary Rule 69 deposition for the purpose of
discovering assets to satisfy the judgment.” Koenig, 2015 WL 1411937, at *3; see Capitol
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Prods., 457 F.2d at 543 (“The defendant has not alleged that the purpose of the examination was
anything other than an ordinary search of his assets in order to satisfy the judgment against
him.”); Schembre 2007 WL 3268443, at *3 (“As in the present matter,” there was not “any
reason to believe that the purpose of the examination was anything other than a search of his
assets to satisfy the judgment.”). This weighs in favor of ordering the Daniels to answer the
Trustee’s questions.
The wrinkle here is that the Daniels have been the targets of a criminal investigation for
their actions at issue here.
But they have also appear to have received immunity from
prosecution in that case, and nothing in the record indicates they are the target of any other
criminal investigations related to this matter.
Of course, the lack of evidence in the record showing that answering the Trustee’s
questions might incriminate the Daniels may just reflect defense counsel’s failure to make an
adequate record supporting their invocation. This seems unlikely given that the magistrate
repeatedly cautioned defense counsel that a blanket invocation was not permissible, and that he
would need to make a clear record with respect to each question. Hr’g Tr. at 7, 10-12. Even so,
out of an abundance of caution, before the Court compels the Daniels to answer any of the
Trustee’s questions, it will give them one final opportunity to provide a factual basis for their
assertion that they have “reasonable cause to apprehend danger from” answering these questions.
See Capitol Prods., 457 F.2d at 544 (directing the district court to “give the defendant an
opportunity to develop the facts underlying his fear of incrimination”).
Accordingly, Dawn Daniels and Tony Daniels shall each file a brief explaining in detail
the factual basis for their invocation of their right to remain silent for each question they refused
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to answer during the first examination and still refuse to answer.4 These briefs shall explain: (1)
whether each has received immunity in the federal criminal case/investigation in the Western
District of Michigan, and if so, provide a copy of the grant of immunity; (2) the status of the
criminal case/investigation in the Western District of Michigan; (3) whether either of the Daniels
is currently the target of any other state or federal criminal investigations related to this civil
case, and if so, the details of that investigation; and (4) the detailed factual and legal basis for
their belief that they have “reasonable cause to apprehend danger from” directly answering each
of the questions they refused to answer during the first examination and that they still refuse to
answer. These briefs shall be filed on or before June 27, 2016, and may be filed ex parte and
under seal to avoid any risk that even explaining why they cannot answer might incriminate
them.
After the Court has reviewed these briefs, it will rule on the propriety of the invocation
for each question and then, if appropriate, set a date for a second examination. If the Daniels fail
to file such briefs, the Court will simply rule on the existing record.
For the reasons discussion above, the motion (Doc. 12) is GRANTED IN PART.
IT IS SO ORDERED.
Date: June 6, 2016
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/s/ Greg Kays
GREG KAYS, CHIEF JUDGE
UNITED STATES DISTRICT COURT
Defendant, for example, might drop her objection to answering the question, “Are you currently married?”
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