Allison v. Clos-ette Too, L.L.C. et al
Filing
98
MEMORANDUM AND ORDER denying 71 Motion to Amend/Correct; denying 71 Motion to Compel; granting in part and denying in part 85 Motion to Quash: For the foregoing reasons, the plaintiff's motion to amend the complaint and motion to com pel (Docket no. 71) are denied, and her motion to quash (Docket no. 85) is granted in part and denied in part. Discovery is re-opened for the limited purpose of allowing Lone Star and Gerald Casey to respond to the defendants' subpoenas, as limited above; they are directed to do so within 10 days of the issuance of this order. (Signed by Magistrate Judge James C. Francis on 1/9/2015) Copies Mailed By Chambers. (tn)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- - - - - - - - - - - - - - - - - -:
CLAIRE ALLISON,
: 14 Civ. 1618 (LAK) (JCF)
:
Plaintiff,
:
MEMORANDUM
:
AND ORDER
- against :
:
CLOS-ETTE TOO, L.L.C., CLOS-ETTE, :
L.L.C., and MELANIE CHARLTON
:
FASCITELLI,
:
:
Defendants.
:
- - - - - - - - - - - - - - - - - -:
JAMES C. FRANCIS IV
UNITED STATES MAGISTRATE JUDGE
The plaintiff, Claire Allison, has filed motions to amend the
Complaint,
to
compel
the
production
of
electronically
stored
information in native format, and to quash subpoenas issued by the
defendants to several non-parties.
For the following reasons, the
motions to amend and compel are denied, and the motion to quash is
granted in part and denied in part.
Background
This action was originally filed in New York Supreme Court,
and was removed to this Court on March 10, 2014.
The Complaint
asserted employment-related claims against three defendants: Closette Too, LLC (“C2”), the plaintiff’s former employer; Melanie
Charlton Fascitelli (“Ms. Charlton”), the owner of C2; and Closette, LLC, the alleged parent company of C2.
Complaint alleges as follows.
Ms. Allison applied for a position
with C2 and was hired by Ms. Charlton.
4, 5, 15-16).
In short, the
(Complaint (“Compl.”), ¶¶
At the time, she was employed as Vice President of
Asset Management at Lone Star Funds.
1
(Compl., ¶ 15).
In March
2012, she began to work in her spare time for C2, devoting up to
forty hours per week to the company, while continuing her full-time
employment at Lone Star Funds. (Compl., ¶¶ 16, 18). After working
for C2 for several months, Ms. Allison and Ms. Charlton began
discussions regarding Ms. Allison’s salary and membership interest
in C2.
(Compl., ¶¶ 24, 30, 31).
Ms. Allison alleges that she and
Ms. Charlton ultimately agreed that she would receive a salary of
$150,000 per year and an 8% membership interest, with 3% to vest
immediately and 5% to vest at various milestones.
31, 33-34).
(Compl., ¶¶ 30-
Ms. Allison was terminated from Lone Star Funds in
December 2012.
(Compl., ¶ 35).
On January 17, 2013, having
received no compensation from C2, she inquired about her salary.
(Compl., ¶ 36).
Ms. Charlton responded that the plaintiff was
being paid with a membership interest.
(Compl., ¶ 36).
On April
4, 2013, Ms. Allison informed Ms. Charlton that she would no longer
work for C2, but would retain her equity interest. (Compl., ¶ 38).
Ms. Charlton informed the plaintiff that her equity interest had
not vested, but offered her a one-half percent interest for
“helping with the business plan.”
(Compl., ¶¶ 38-39).
The defendants filed motions to dismiss the Complaint for
failure to state a claim.
The plaintiff opposed the defendants’
motions and filed a cross-motion to amend the Complaint.
I
recommended that the motion to amend be denied with leave to replead and that the defendants’ motions to dismiss be granted in
part and denied in part.
Allison v. Clos-ette Too, LLC, No. 14
Civ. 1618, 2014 WL 4996358, at *1 (S.D.N.Y. Sept. 15, 2014), report
2
and recommendation adopted, 2014 WL 5002099 (S.D.N.Y. Oct. 7,
2014). The dismissed claims included all claims against Clos-ette,
as the facts alleged in the Complaint “show[ed] no more than the
existence of a parent-subsidiary relationship between Clos-ette and
C2, which is not enough to justify piercing the corporate veil.”
Id. at *7. The surviving claims allege violation of the Fair Labor
Standards Act and New York Labor Law by C2 and Ms. Charlton, and
breach of contract and quasi-contract by C2.
Id. at *12.
Discussion
A.
Motion to Amend
The plaintiff moves to amend the complaint to add “numerous
additional facts clarified and fully developed during discovery,”
which she states “not only lend more specificity to the Plaintiff’s
claims, but also further support [the] Plaintiff’s claim for veil
piercing as to Clos-ette.”
Support
of
Plaintiff’s
(Plaintiff’s Memorandum of Law in
Motion
to
Amend
Complaint
and
Compel
Discovery (“Pl. Memo. I”) at 3).
1.
General Legal Standard
Rule 15 of the Federal Rules of Civil Procedure provides that
courts
should
requires.”
“freely
give
leave
[to
amend]
when
justice
so
Fed. R. Civ. P. 15(a)(2); see also Foman v. Davis, 371
U.S. 178, 182 (1962); Aetna Casualty & Surety Co. v. Aniero
Concrete Co., 404 F.3d 566, 603–04 (2d Cir. 2005).
However, it is
within “the sound discretion of the court” to determine whether to
grant or deny leave to amend.
John Hancock Mutual Life Insurance
Co. v. Amerford International Corp., 22 F.3d 458, 462 (2d Cir.
3
1994). Regarding the use of this discretion, the Supreme Court has
stated:
In the absence of any apparent or declared reason -- such
as undue delay, bad faith or dilatory motive on the part
of the movant, repeated failure to cure deficiencies by
amendments previously allowed, undue prejudice to the
opposing party by virtue of allowance of the amendment,
futility of amendment, etc. -- the leave sought should
. . . be freely given.
Foman, 371 U.S. at 182 (internal quotation marks omitted); see also
McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 200 (2d Cir.
2007) (“A district court has discretion to deny leave for good
reason, including futility, bad faith, undue delay, or undue
prejudice to the opposing party.”).
In this case, there has not
been undue delay in the filing of the motion, which was filed less
than one month after the motions to dismiss were decided, see
Securities and Exchange Commission v. DCI Telecommunications, Inc.,
207 F.R.D. 32, 34-35 (S.D.N.Y. 2002) (allowing amendment where
plaintiff obtained discovery supporting amendment a few months
before filing motion); American Medical Association v. United
Healthcare
Corp.,
No.
00
Civ.
2800,
2006
WL
3833440,
at
*4
(S.D.N.Y. Dec. 29, 2006) (finding no undue delay where party moved
to
amend
several
months
after
learning
relevant
facts
in
discovery), nor have the defendants alleged that the amendment
would be unduly prejudicial, see Alexander Interactive, Inc. v.
Adorama, Inc., No. 12 Civ. 6608, 2014 WL 113728, at *3 (S.D.N.Y.
Jan. 13, 2014) (noting that the non-moving party bears the burden
of demonstrating that “substantial prejudice” would result if the
proposed amendment were granted).
4
However, the defendants argue
that
the
motion
should
be
denied
as
futile.
(Defendants’
Memorandum of Law in Opposition to Plaintiff’s Motion to Amend and
Compel Discovery (“Def. Memo. I”) at 7-8).
2.
Futility
“It is well established that ‘[l]eave to amend need not be
granted . . . where the proposed amendment would be “futil[e].”’”
Williams v. Citigroup Inc., 659 F.3d 208, 214 (2d Cir. 2011)
(alterations in original) (quoting Advanced Magnetics, Inc. v.
Bayfront Partners, Inc., 106 F.3d 11, 18 (2d Cir. 1997)).
“An
amendment is futile when ‘it could not withstand a motion to
dismiss pursuant to Rule 12(b)(6).’”
Demel v. Group Benefits Plan
for Employees of Northern Telecom, Inc., No. 07 Civ. 0189, 2012 WL
1108311, at *6 (S.D.N.Y. March 30, 2012) (quoting Oneida Indian
Nation v. City of Sherrill, 337 F.3d 139, 168 (2d Cir. 2003), rev’d
on other grounds, 544 U.S. 197 (2005)); see also AEP Energy
Services Gas Holding Co. v. Bank of America, N.A., 626 F.3d 699,
726 (2d Cir. 2010); Slay v. Target Corp., No. 11 Civ. 2704, 2011 WL
3278918, at *2 (S.D.N.Y. July 20, 2011) (“Futility generally turns
on whether the proposed amended pleading states a viable claim.”);
Penn Group, LLC v. Slater, No. 07 Civ. 729, 2007 WL 2020099, at *4
(S.D.N.Y. June 13, 2007) (collecting cases).
A court may deny a
motion to amend as futile only where no colorable grounds exist to
support
the
proposed
claim;
if
it
“sets
forth
facts
and
circumstances which may entitle the plaintiff to relief, then
futility is not a proper basis on which to deny the amendment.”
Saxholm AS v. Dynal, Inc., 938 F. Supp. 120, 124 (E.D.N.Y. 1996);
5
see also Cinelli v. Oppenheim-Ephratah Central School District, No.
6:07 CV 235, 2008 WL 111174, at *1 (N.D.N.Y. Jan. 7, 2008) (where
amendments are colorable and based upon disputed facts, “they
should be allowed, and a comprehensive legal analysis deferred to
subsequent motions to dismiss or for summary judgment.”).
As when
considering a motion to dismiss under Rule 12(b)(6), the court must
“accept
as
allegations,
plaintiff.”
true
and
all
of
draw
all
the
proposed
reasonable
complaint’s
inferences
in
factual
favor
of
Henneberry v. Sumitomo Corp. of America, 415 F. Supp.
2d 423, 433 (S.D.N.Y. 2006).
The party opposing the motion to
amend bears the burden of establishing that leave to amend would be
futile. Amaya v. Roadhouse Brick Oven Pizza, Inc., 285 F.R.D. 251,
253 (E.D.N.Y. 2012); Sotheby’s, Inc. v. Minor, No. 08 Civ. 7694,
2009 WL 3444887, at *3 (S.D.N.Y. Oct. 26, 2009).
3.
Piercing the Corporate Veil
The plaintiff claims that the proposed amendment alleges facts
sufficient to justify piercing the corporate veil as to Clos-ette
under an alter-ego theory of liability.
(Pl. Memo. I at 3;
Plaintiff’s Reply Memorandum of Law in Support of Plaintiff’s
Motion to Amend Complaint and Compel Discovery at 4).
Under
Delaware law,1 “a court can pierce the corporate veil of an entity
. . . where a subsidiary is in fact a mere instrumentality of its
owner.”
Geyer v. Ingersoll Publications Co., 621 A.2d 784, 793
1
As explained in my report and recommendation regarding the
motions to dismiss, the question of whether Clos-ette may be liable
as C2’s alter-ego is governed by Delaware law. Allison, 2014 WL
4996358, at *6.
6
(Del. Ch. 1992).
piercing,
a
Ms.
To prevail under the alter-ego theory of veil
Allison
must
show
“(1)
that
the
parent
and
subsidiary operated as a single economic entity and (2) that an
overall element of injustice or unfairness . . . [is] present.”
Fletcher
v.
(alterations
Atex,
in
Inc.,
68
original)
F.3d
1451,
(internal
1457
quotation
(2d
Cir.
marks
1995)
omitted)
(discussing Delaware law).
a.
Single Economic Entity
“[A]n alter ego analysis must start with an examination of
factors
which
reveal
how
the
corporation
operates
particular defendant’s relationship to that operation.”
and
the
NetJets
Aviation, Inc. v. LHC Communication, LLC, 537 F.3d 168, 176-77 (2d
Cir. 2008) (alteration in original) (internal quotation marks
omitted). Whether two corporations functioned as a single economic
entity
is
corporate
determined
formalities
by
looking
were
at
ignored,
such
funds
factors
were
as
whether
siphoned
or
intermingled, capitalization was adequate, or the subsidiary was a
“mere sham.”
In re Digital Music Antitrust Litigation, 812 F.
Supp. 2d 390, 418 (S.D.N.Y. 2011).
“Simply phrased, the standard
may be restated as: ‘whether [the two entities] operated as a
single economic entity such that it would be inequitable for th[e]
Court to uphold a legal distinction between them.’”
NetJets
Aviation, 537 F.3d at 177 (alteration in original) (quoting Mabon,
Nugent & Co. v. Texas American Energy Corp., No. Civ. A. 8578, 1990
WL 44267, at *5 (Del. Ch. April 12, 1990)).
“In the alter-ego
analysis of [a limited liability corporation (“LLC”)], somewhat
7
less emphasis is placed on whether the LLC observed internal
formalities because fewer such formalities are legally required.”2
NetJets Aviation, 537 F.3d at 178.
“[N]o single factor c[an] justify a decision to disregard the
corporate entity, but . . . some combination of them [i]s required
. . . .”
Id. at 177 (alteration in original) (internal quotation
marks omitted) (quoting Harco National Insurance Co. v. Green
Farms, Inc., Civ. A. No. 1131, 1989 WL 110537, at *5 (Del. Ch.
Sept. 19, 1989)); see, e.g., National Gear & Piston, Inc. v.
Cummins Power, 975 F. Supp. 2d 392, 404 (S.D.N.Y. 2013) (finding
allegations
that
characteristics
of
“do
a
no
more
than
parent-subsidiary
restate
the
common
relationship”
to
be
insufficient for veil-piercing under Delaware law); VFS Financing,
Inc. v. Falcon Fifty LLC, 17 F. Supp. 3d 372 (S.D.N.Y. 2014) (“The
separate corporate existences of parent and subsidiary will not be
set aside merely on a showing of common management of the two
entities, nor on a showing that the parent owned all the stock of
the subsidiary.” (internal quotation marks omitted)).
under
LLC
rules,
if
two
entities
“fail[]
to
However,
follow
legal
formalities when contracting with each other it would be tantamount
to declaring that they are indeed one and the same.”
NetJets
Aviation, 537 F.3d at 178 (internal quotation marks omitted).
2
Under the Delaware Limited Liability Company Act, Del. Code
Ann. tit. 6, § 18-101 et seq., an LLC is required only to (1)
execute and file a proper certificate of formation, § 18-201(a);
(2) maintain a registered office in Delaware, § 18-104(a)(1); (3)
have a registered agent for service of process in Delaware, § 18104(a)(2); and (4) maintain certain records such as membership
lists and tax returns, § 18-305(a).
8
In the proposed amended complaint, Ms. Allison alleges that
Ms. Charlton is the sole owner of both Clos-ette and C2 (Proposed
Amended
Complaint
(“Amend.
Compl.”),
attached
as
Exh.
1
to
Affidavit of Thomas M. Lancia dated Oct. 31, 2014, ¶ 12) and that
she is solely responsible for hiring and firing decisions for both
companies (Amend. Compl., ¶ 13).
The companies have shared office
space and telephone numbers since June 2011.
15).
(Amend. Compl., ¶
The proposed amended complaint further alleges that the
companies have intermingled finances, and that loans and payments
made between the two companies are neither documented nor expected
to be reimbursed.
(Amend. Compl., ¶¶ 16-24, 29, 33, 46).
The
plaintiff specifies that the companies’ sole employee routinely
performs work for both companies but is compensated by only one
(Amend. Compl., ¶¶ 16-18); that Clos-ette paid the full rent for
the shared office space and other business bills through at least
2012, without being reimbursed by C2 (Amend. Compl., ¶¶ 21-22);
that C2 has fulfilled orders for Clos-ette clients without being
reimbursed (Amend. Compl., ¶ 46); and that the two companies have
previously held a shared bank account and filed business taxes as
a single entity (Amend. Compl., ¶¶ 20, 29).
These allegations are sufficient to allow the Court to draw
the reasonable inference that Clos-ette and C2 have operated as a
single economic entity.
See Soroof Trading Development Co. v. GE
Microgen, Inc., 283 F.R.D. 142, 150-51 (S.D.N.Y. 2012) (finding
allegations that wholly-owned subsidiary was undercapitalized, that
parent company provided all capital for subsidiary venture, that
9
subsidiary was staffed by parent’s personnel, that parent leased
subsidiary’s
space,
and
that
parent
had
representation
on
subsidiary’s board of directors and management committee sufficient
to support first element of alter-ego liability).
b.
Injustice or Unfairness
However, to prevail under the alter-ego theory, Ms. Allison
must also show the presence of “an overall element of injustice or
unfairness.”
omitted).
Fletcher, 68 F.3d at 1457 (internal quotation marks
“To satisfy this element of a veil-piercing attack, a
plaintiff must allege injustice or unfairness that is a result of
an abuse of the corporate form.”
National Gear, 975 F. Supp. 2d at
406; accord Trevino v. Merscorp, Inc., 583 F. Supp. 2d 521, 530 (D.
Del.
2008).
“[I]t
is
well
established
that
a
plaintiff’s
underlying cause of action alone is insufficient to satisfy the
injustice requirement.”
National Gear, 975 F. Supp. 2d at 406;
accord NetJets Aviation, 537 F.3d at 183 (“[T]he claimed injustice
must consist of more than merely the [claim] . . . that is the
basis of the plaintiff’s lawsuit.”).
While the facts used to show
that business entities operated as a single enterprise can support
the element of fraud or inequality, NetJets Aviation, 537 F.3d at
183, disregard of the corporate form is not itself sufficient
without an allegation that such disregard was actually used to
perpetrate an injustice, Zubik v. Zubik, 384 F.2d 267, 273 (3d Cir.
1967), cert. denied, 390 U.S. 988 (1968).
“Effectively, the
corporation must be a sham and exist for no other purpose than as
a vehicle for fraud.” Wallace ex rel. Cencom Cable Income Partners
10
II, Inc. v. Wood, 752 A.2d 1175, 1184 (Del. Ch. 1999); accord
National Gear, 975 F. Supp. 2d at 406.
While the plaintiff alleges facts supporting the inference
that Clos-ette and C2 operated as a single economic entity, she
does not allege that this arrangement was used to perpetrate an
injustice or unfairness independent of her own claims. The amended
complaint’s allegations that Clos-ette and C2 had intermingled
finances and shared ownership and control are not themselves
sufficient to support the second element of alter-ego liability.
See National Gear, 975 F. Supp. 2d at 406; Zubik, 384 F.2d at 273;
cf. Soroof, 283 F.R.D. at 151-52 (finding allegations that parent
company siphoned fees from subsidiary, used corporate form to avoid
legal and financial obligations, and caused subsidiary to make
promises it could not keep in order to reap financial windfall
sufficient
to
support
inference
of
injustice
under
alter-ego
theory).
Because the proposed allegations are insufficient to justify
piercing the corporate veil, the amendment would be futile.
The
plaintiff’s motion to amend the complaint is therefore denied.
B.
Motion to Compel
The plaintiff seeks to compel the production in native format
of electronically stored information that was previously produced
to her by the defendants.
The plaintiff originally requested this
information on or about July 8, 2014, without specifying a format.
(Pl. Memo. I at 5; Def. Memo. I at 9).
The defendants responded to
the plaintiff’s demands on or about July 24, 2014, and supplemented
11
their response on various dates.
(Def. Memo. I at 9).
The
plaintiff did not object to the format of these productions. (Def.
Memo. I at 9).
However, as the plaintiff’s brief indicates, the
defendants’ August 3, 2014 document demand, which requested that
all electronically stored information be produced in native format
(Def. Memo. I at 9), inspired the plaintiff to make a reciprocal
request
regarding
the
documents
defendants.
(Pl. Memo. I at 5).
between
parties’
the
counsel
on
previously
produced
by
the
Following an oral discussion
this
issue,3
the
plaintiff’s
counsel requested by e-mail that the defendants reproduce the
earlier production in native format.
(E-mail of Krystina Maola
dated Oct. 28, 2014, attached as part of Exhibit A to Affidavit of
Krystina Maola dated Oct. 31, 2014 (“Maola Aff.”)).
When the
defendants declined to do so (E-mail of Michael P. Mangan dated
Oct. 28, 2014, attached as part of Exhibit A to Maola Aff.), the
plaintiff filed the instant motion to compel.
Under Rule 34 of the Federal Rules of Civil Procedure, a party
may specify the form in which electronically stored information is
to be produced.
Fed. R. Civ. P. 34(b)(1)(C).
3
“If a request does
The parties disagree on the contents of this discussion,
which took place on October 14, 2014. The plaintiffs claim that
the defendants’ counsel promised to reproduce the previously
produced electronically stored information in native format upon a
written request. (Pl. Memo. I at 5). The defendants maintain that
their counsel promised only that, should the plaintiff make any
follow-up requests for production, responsive documents could be
produced in native format. (Def. Memo. I at 10). Even assuming
the plaintiff’s understanding of the conversation, the plaintiff
provides no legal support for the proposition that such a promise
would be legally binding, nor does she claim that she has suffered
any prejudice from the defendants’ failure to adhere to the alleged
promise.
12
not specify a form for producing electronically stored information,
a party must produce it in a form or forms in which it is
ordinarily maintained or in a reasonably usable form or forms.”
Fed. R. Civ. P. 34(b)(2)(E)(ii).
The plaintiff did not originally
object to the format of the defendants’ productions.
I at 9).
(Def. Memo.
She does not appear to contest that it is “reasonably
usable,” nor does she even allege that native format documents
would be more useful to her.
As “[a] party need not produce the
same electronically stored information in more than one form,” Fed.
R. Civ. P. 34(b)(2)(E)(3), the plaintiff’s motion to compel is
denied.
C.
Motion to Quash
Finally, the plaintiff moves to quash subpoenas served by the
defendants on three non-parties: Lone Star Acquisitions, LLC (“Lone
Star”), the University of Miami (the “University”), and Seema
Gohil.
The plaintiff asserts that the subpoenas must be quashed
both because the defendants did not provide proper notice of them
and because the information they seek is irrelevant.
(Plaintiff’s
Memorandum of Law in Support of Plaintiff’s Motion to Quash ThirdParty Subpoenas (“Pl. Memo. II”) at 1-3).
As the defendants have
represented that they no longer intend to seek information from Ms.
Gohil (Defendants’ Memorandum of Law in Opposition to Plaintiff’s
Motion to Quash Non-Party Subpoenas (“Def. Memo. II”) at 5), the
motion is moot with respect to the Gohil subpoena.
1.
The
Background
defendants
served
subpoenas
13
on
Lone
Star
and
the
University of Miami (the plaintiff’s alma mater) between September
10 and September 15, 2014 (Pl. Memo. II at 2; Def. Memo. II at 4),
with a return date of September 24 (Def. Memo. II at 4).
The
plaintiff did not receive notice of these subpoenas until September
18.
(Pl. Memo. II at 2; Def. Memo. II at 4).
2014,
the
defendants.
University
produced
(Pl. Memo. II at 1).
responsive
On September 24,
documents
the
At some point, the defendants
also made unsuccessful efforts to serve Ms. Gohil.
at 5).
to
(Def. Memo. II
The plaintiff learned of these efforts on September 26,
2014, whereupon she requested a conference regarding the non-party
subpoenas by letter motion.
(Pl. Memo. II at 2).
I denied the plaintiff’s motion, and advised the plaintiff
that she could file a formal motion to quash the subpoenas. (Order
dated Sept. 29, 2014).
I further ordered that the third-party
subpoenas were not to be enforced until such motion was decided.
(Order dated Sept. 29, 2014).
On November 10, 2014, I ordered the
subpoenaed parties to comply with the defendants’ subpoenas by
November 17, 2014, unless they or the plaintiff objected by that
date.
(Order dated November 10, 2014).
The plaintiff’s motion to
quash was filed on November 17, 2014.
2.
The Lone Star Subpoenas
a.
Notice
The plaintiff argues that the Lone Star subpoenas must be
quashed because the defendants did not notify her of them in a
timely manner.
Rule 45 of the Federal Rules of Civil Procedure
requires that if a subpoena “commands the production of documents,
14
electronically stored information, or tangible things . . . , then
before it is served on the person to whom it is directed, a notice
and copy of the subpoena must be served on each party.”
Civ. P. 45(a)(4).
Fed. R.
Notice allows other parties an opportunity to
object to the production or to serve a demand for additional
information.
See Fed. R. Civ. P. 45(a)(4) Advisory Committee’s
Notes, 2013 Amendment; see also Cootes Drive LLC v. Internet Law
Library, Inc., No. 01 Civ. 877, 2002 WL 424647, at *2 (S.D.N.Y.
March 19, 2002).
Some courts have treated a party’s failure to
strictly adhere to the prior notice rule as grounds to quash the
subpoena.
See, e.g., Mirra v. Jordan, 13 Civ. 5519, 2014 WL
2511020, at *3 (S.D.N.Y. May 28, 2014); Cootes Drive LLC, 2002 WL
424647, at *2; Schweizer v. Mulvehill, 93 F. Supp. 2d 376, 412
(S.D.N.Y. 2000); Murphy v. Board of Education, 196 F.R.D. 220, 222
(W.D.N.Y. 2000).
“The majority approach, however, requires that
the aggrieved party demonstrate some form of prejudice resulting
from the failure to provide advance notice.”
Kingsway Financial
Services, Inc. v. Pricewaterhouse-Coopers LLP, No. 03 Civ. 5560,
2008 WL 4452134, at *3 (S.D.N.Y. Oct. 2, 2008); see also Fox
Industries, Inc. v. Gurovich, No. 03 CV 5166, 2006 WL 2882580, at
*11 (E.D.N.Y. Oct. 6, 2006); Zinter Handling, Inc. v. General
Electric Co., No. 04 CV 500, 2006 WL 3359317, at *2 (N.D.N.Y. Nov.
16, 2006); Seewald v. IIS Intelligent Info Systems, Ltd., No. 95 CV
824, 1996 WL 612497, at *5 (E.D.N.Y. Oct. 16, 1996).
The plaintiff does not claim to have been prejudiced by the
late notice of the Lone Star subpoenas.
15
To the contrary, I
postponed enforcement of the subpoenas in order to allow the
plaintiff the opportunity to file the instant motion (Order dated
Sept. 29, 2014), and Lone Star has not, to my knowledge, responded
to the subpoenas to date.
Because the plaintiff has not been
prejudiced by the late notice, I decline to quash the subpoenas on
Rule
45
grounds,
and
will
address
the
plaintiff’s
relevance
arguments.
b.
Relevance
i.
Standing
As an initial matter, the defendants contend that Ms. Allison
does not have standing to move to quash the Lone Star subpoenas on
relevance grounds because she has not asserted that the materials
sought from Lone Star are privileged.
(Def. Memo. II at 7).
A
party generally lacks standing to challenge a subpoena served on a
non-party unless the objecting party has a personal right or
privilege in the information sought.
See Estate of Ungar v.
Palestinian Authority, 332 Fed. App’x 643, 645 (2d Cir. 2009);
Langford v. Chrysler Motors Corp., 513 F.2d 1121, 1126 (2d Cir.
1975); 9A Charles Alan Wright & Arthur R. Miller, Federal Practice
& Procedure, § 2459 (3d ed. 2008). However, courts have repeatedly
found that an individual possesses a privacy interest with respect
to information contained in her employment records and therefore
has standing to challenge subpoenas seeking such records.
See,
e.g., Lev v. South Nassau Communities Hospital, No. 10 CV 5435,
2011 WL 3652282, at *1 (E.D.N.Y. Aug. 18, 2011); Hendricks v. Total
Quality Logistics, LLC, 275 F.R.D. 251, 253 n.1 (S.D. Ohio 2011);
16
Barrington v. Motgage IT, Inc., No. 07-61304-CIV, 2007 WL 4370647,
at *2 (S.D. Fla. Dec. 10, 2007) (collecting cases). As Ms. Allison
therefore has standing to challenge the Lone Star subpoenas, I will
address the merits of her relevance arguments.
ii.
Legal Standard
Generally, “[p]arties may obtain discovery regarding any
nonprivileged matter that is relevant to any party’s claim or
defense.”
Fed. R. Civ. P. 26(b)(1).
relevance,
for
purposes
of
“Although not unlimited,
discovery,
is
an
extremely
broad
Condit v. Dunne, 225 F.R.D. 100, 105 (S.D.N.Y. 2004);
concept.”
see also Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351
(1978) (relevance is “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”).
Indeed,
“the ‘right of litigants to discover and present relevant evidence
in civil litigation is given great weight in federal courts.’”
Mays v. Town of Hempstead, No. 10 CV 3998, 2011 WL 4345164, at *2
(E.D.N.Y. Sept. 15, 2011) (quoting Apicella v. McNeil Laboratories,
Inc., 66 F.R.D. 78, 82 (E.D.N.Y. 1975)).
Moreover, “[r]elevant
information need not be admissible at the trial if the discovery
appears
reasonably
admissible evidence.”
calculated
to
lead
to
the
discovery
of
Fed. R. Civ. P. 26(b)(1).
The burden of demonstrating relevance is on the party seeking
discovery.
See, e.g., Mandell v. Maxon Co., No. 06 Civ. 460, 2007
WL 3022552, at *1 (S.D.N.Y. Oct. 16, 2007).
“Once relevance has
been shown, it is up to the responding party to justify curtailing
17
discovery.”
Fireman’s
Fund
Insurance
Co.
v.
Great
American
Insurance Co. of New York, 284 F.R.D. 132, 134 (S.D.N.Y. 2012)
(internal quotation marks omitted).
iii.
Plaintiff’s Employment File
The first demand served on Lone Star by the defendants is for:
Claire Allison’s employment file, including, without
limitation, all employment agreement(s), employment
offer(s), notice(s) of promotion, accommodation(s),
salary
and
bonus(es),
notice(s)
of
termination,
performance review(s), warning(s) and admonition(s),
severance agreement(s), and any documents, including all
correspondence, notes, memos, applications, forms, and
all
other
documents,
regarding
her
employment,
compensation, and termination.
(Subpoena to Produce Documents, Information, or Objects or to
Permit Inspection of Premises in a Civil Action (“Lone Star
Subpoena”), attached as part of Exh. 1 to Certification of Thomas
M. Lancia dated Nov. 17, 2014 (“Lancia Cert.”), at 2).
The defendants argue that the information sought regarding Ms.
Allison’s salary is relevant to her quantum meruit claims.
Memo. II at 3).
(Def.
They assert that in salary negotiations with C2,
the plaintiff represented that the $200,000 she demanded was
“significantly less than her salary at Lone Star.”
at 3).
(Def. Memo. II
However, the defendants do not explain how Ms. Allison’s
previous salary is relevant to the value of the services she
provided to C2.
“The doctrine of quantum meruit or quasi contract
was developed by the law in order to make sure that a person who
receives the benefit of services pays the reasonable value of such
services to the person who performed them.”
Zolotar v. New York
Life Insurance Co., 172 A.D.2d 27, 33, 576 N.Y.S.2d 850, 854 (1st
18
Dep’t 1991).
In order to recover in quasi-contract, New York law
requires a claimant to establish “(1) the performance of the
services in good faith, (2) the acceptance of the services by the
person
to
whom
they
compensation
therefor,
services.”
Martin
are
rendered,
and
(4)
H.
the
Bauman
(3)
an
reasonable
Associates,
expectation
value
Inc.
v.
of
of
H
the
&
M
International Transport, Inc., 171 A.D.2d 479, 484, 567 N.Y.S.2d
404, 408 (1st Dep’t 1991) (internal quotation marks omitted).
A
person’s salary history could in theory be relevant to the value of
the services she provides.
However, here, the defendants have not
alleged any similarity between the work Ms. Allison performed as
Vice President of Asset Management at Lone Star and the services
she provided to C2. Information regarding Ms. Allison’s salary and
bonuses at Lone Star are therefore irrelevant.
The same rationale applies to the defendants’ demand for
information regarding Ms. Allison’s “performance and experience
with Lone Star.”
The defendants argue that this information is
relevant to the plaintiff’s quantum meruit claim.
at
7).
However,
even
though
the
defendants
(Def. Memo. II
have
taken
the
plaintiff’s deposition and are therefore presumably familiar with
her work history, they do not allege that the skills required for
her responsibilities at Lone Star were applicable to her work at
C2; therefore, they have not met their burden to establish the
relevance of this information.
The defendants’ argument regarding the information sought on
Ms. Allison’s termination is confusing.
19
They note that while the
complaint alleges that the plaintiff was terminated because of the
time she dedicated to her work for C2, the plaintiff has given
various other explanations for her termination at different times.
(Def. Memo. II at 2-3).
The cause of Ms. Allison’s departure from
Lone Star may have been relevant to a promissory estoppel claim,
but all such claims have been dismissed. Allison, 2014 WL 5002099,
at *1.
Because the defendants have not identified a surviving
claim or defense to which Ms. Allison’s termination from Lone Star
is relevant, I grant the plaintiff’s motion to quash this portion
of the subpoena.
The same ruling applies to the defendants’
requests for warnings and admonitions given to the plaintiff, the
plaintiff’s performance reviews, and severance agreements.
iv.
Grievances Filed by Plaintiff
The defendants also demanded that Lone Star produce “all
written or recorded complaints made by Claire Allison about [Lone
Star], its employees, officers, and/or principals during or after
her
employment,
including
without
limitation
any
mistreatment, harassment, and /or discrimination.”
Subpoena at 2).
claim
for
(Lone Star
To the extent that such information may be
relevant to Ms. Allison’s departure from Lone Star, they are
irrelevant for the reasons stated above.
The plaintiff has not
alleged mistreatment or discrimination by the defendants in this
case, and the defendants have not offered an explanation of the
relevance of this information to any claims or defenses.
portion of the subpoena is therefore quashed.
20
This
v.
Plaintiff’s Termination
The defendants’ third demand of Lone Star seeks additional
information regarding Ms. Allison’s termination and the cause of
such termination.
(Lone Star Subpoena at 2). For the reasons
discussed above, this portion of the subpoena seeks irrelevant
information and is therefore quashed.
vi.
The
defendants’
Plaintiff’s Hours
fourth
demand
of
Lone
Star
is
for
all
documentation regarding the hours Ms. Allison spent working for
Lone Star between November 2011 and January 2013, including her
daily schedule.
(Lone Star Subpoena at 2).
The defendants argue
that this information is relevant to her quantum meruit and minimum
wage claims. The plaintiff alleges that she worked forty hours per
week for C2 while also working between sixty and eighty hours per
week for Lone Star.
(Def. Memo. II at 2 (citing Compl., ¶ 18;
Deposition of Claire Allison dated Aug. 19, 2014, attached as
Exhibit B to Def. Memo. II, at 73-74)).
As the defendants argue,
Ms. Allison’s hours at Lone Star, including her daily schedule, are
potentially relevant to the accuracy of the number of hours she
claims to have worked for C2.
The motion to quash is therefore
denied with respect to this demand.
vii. Testimony of Gerald Casey
The defendants’ subpoena of Gerald Casey, Lone Star’s Managing
Director, seeks testimony regarding Ms. Allison’s (1) employment at
Lone Star, (2) hours and days at Lone Star, (3) termination from
Lone Star, and (4) complaints made against Lone Star. (Subpoena of
21
Gerald Casey, attached as part of Exhibit 1 to Lancia Cert., at 2).
The same rulings discussed above apply here.
The motion to quash
this subpoena is therefore denied with respect to the second
subject and granted with respect to the first, third and fourth
subjects.
3.
The University of Miami Subpoena
The plaintiff argues that the University of Miami subpoena
was, like the Lone Star subpoenas, not properly noticed under Rule
45 of the Federal Rules of Civil Procedure.
(Pl. Memo. II at 2).
Unlike Lone Star, however, the University has already produced
documents to the defendants. (Pl. Memo. II at 1). These documents
were produced on September 24, 2014, prior to my order that the
non-party subpoenas not be enforced until the plaintiff’s motion to
quash could be adjudicated.
(Pl. Memo. II at 1; Order dated Sept.
29, 2014).
As discussed above, the majority approach to Rule 45’s prior
notice requirement is to quash an improperly-noticed non-party
subpoena if the moving party has suffered prejudice from the late
notice. Kingsway Financial Services, Inc., 2008 WL 4452134, at *3.
Because
the
University
promptly
responded
to
the
defendants’
subpoena, the defendants’ failure to provide Ms. Allison with prior
notice of this subpoena deprived her of the opportunity to object
to the production. As such, the plaintiff has been prejudiced, and
I need not reach the parties’ arguments regarding the relevance of
the information sought by the subpoena.
The defendants are
enjoined from reviewing the information provided to them by the
22
University,
must return such information to the University,
and
must provide to the plaintiff copies of any information they have
already reviewed.
Cf.
Mirra,
2014 WL 2511020,
at
*3
(ordering
party not to use any information received through subpoena quashed
due
to
prior
Commission
v.
notice
violation);
Tony's
Lounge,
Equal
Inc.,
No.
2486764, at *2 (S.D. Ill. Aug. 13, 2009)
Employment
3:08
CV
Opportunity
677,
2009
WL
(same)
Conclusion
For the foregoing reasons, the plaintiff's motion to amend the
complaint and motion to compel (Docket no. 71) are denied, and her
motion to quash (Docket no.
part.
85)
is granted in part and denied in
Discovery is re-opened for the limited purpose of allowing
Lone Star and Gerald Casey to respond to the defendants' subpoenas,
as limited above; they are directed to do so within 10 days of the
issuance of this order.
SO ORDERED.
~s ~.·-:E-c~0
L,J ~~*~D
[C
STATES MAGISTRATE JUDGE
Dated: New York, New York
January 9, 2015
Copies mailed this date:
Thomas M. Lancia, Esq.
Thomas M. Lancia PLLC
22 Cortlandt St., 16th Floor
New York, NY 10007
Michael P. Mangan, Esq.
Mangan Ginsburg LLP
80 Maiden Lane, Suite 509
New York, NY 10038
23
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?