Securities and Exchange Commisison v. Pence

Filing 78

OPINION AND ORDER: re: 61 MOTION to Authorize Substitute Service of Process for a Subpoena Ad Testificandum on Michael A. Stegawski, Esq. filed by Stephen B Pence. For the foregoing reasons, Pence's motion for authorization for alternative se rvice of process for a subpoena ad testificandum (Docket # 61) is granted as described herein. Proof of service shall be filed in accordance with Fed. R. Civ. P. 45(b)(4). Counsel for Pence is directed to email this Order to Stegawski at the email addresses listed in this Opinion and Order. SO ORDERED. (Signed by Magistrate Judge Gabriel W. Gorenstein on 9/28/2017) Copies Mailed By Chambers. (ama)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
---------------------------------------------------------------X
SECURITIES AND EXCHANGE COMMISSION, :
Plaintiff,

STEPHEN B. PENCE,
Defendant.

15 Civ. 7077 (GBD) (GWG)

:

-v.-

:

OPINION AND ORDER

:
:

---------------------------------------------------------------X
GABRIEL W. GORENSTEIN, UNITED STATES MAGISTRATE JUDGE
The Securities and Exchange Commission (“SEC”) has sued Stephen B. Pence for
alleged securities laws violations arising from his activities in 2009 and 2010 in connection with
two entities: PSQ, LLC (“PSQ”) and General Employment Enterprises, Inc. (“GEE”). See
Complaint, filed Sept. 9, 2015 (Docket # 1) (“Compl.”), ¶¶ 1-9. Pence now moves this Court for
an Order authorizing substituted service of a subpoena ad testificandum on Michael A.
Stegawski, Esq., a nonparty witness.1 The SEC has joined in Pence’s request for substituted
service. See Def. Mem. at 1. For the reasons set forth below, this motion is granted.
I. BACKGROUND
In its complaint, the SEC asserts that PSQ was nominally owned in its entirety by Pence
and that in 2009 it acquired a controlling interest in GEE. Compl. ¶¶ 2, 27. The SEC alleges,
inter alia, that Pence misrepresented to GEE’s shareholders the source of PSQ’s funding for this

1

See Notice of Motion for Authorization for Substitute Service of Process for a
Subpoena Ad Testificandum, filed Aug. 11, 2017 (Docket # 61); Declaration of Alan S. Lewis in
Support of Motion for Authorization for Substitute Service of Process for a Subpoena Ad
Testificandum, filed Aug. 11, 2017 (Docket # 62) (“Lewis Decl.”); Memorandum of Law in
Support of Defendant’s Motion for Authorization for Substitute Service of Process for a
Subpoena Ad Testificandum, filed Aug. 11, 2017 (Docket # 63) (“Def. Mem.”).

acquisition. Compl. ¶ 32. Stegawski was a lawyer who represented PSQ. See Def. Mem. at 1.
On July 13, 2017, the SEC issued a subpoena for the deposition of Stegawski to take place on
August 21, 2017. See Amended Notice of Deposition (annexed as Ex. B to Lewis Decl.).
Some time in early July, Pence’s counsel contacted Stegawski by email at [e-mail], and also reached him by telephone at [phone] x l01. See Def. Mem. at 1;
Letter from Alan S. Lewis to the Court, filed July 27, 2017 (Docket # 51) (“Lewis Letter”), at 1.
Stegawski was registered with the Florida Bar and listed as a professional associate on the
website of “Convergent Capital Group” at the time of contact. See Def. Mem. at 1; Lewis Letter
at 1. Pence’s counsel discovered that email address and phone number through that website and
Stegawski’s Florida Bar registration. See id. The same email address and phone number were
also contained in a court filing that Stegawski signed in an unrelated case filed in the Southern
District of Florida. See Stegawski’s Response in Opposition to Motion for Attorneys’ Fees and
Costs, Organizacion Miss America Latina, Inc. v. Urquidi, No. 16 Civ. 22225 (S.D. Fla. July 24,
2017) (annexed as Ex. D to Lewis Decl.) (“Stegawksi Mem.”), at *3, 5.2 However, Stegawski
stopped responding to counsel’s phone calls and emails as of July 7, 2017. See Def. Mem. at 12.
The SEC subsequently made 14 unsuccessful attempts to personally serve Stegawski
with a subpoena ad testificandum at five different locations. See Proofs of Service (annexed as
Ex. C to Lewis Decl.) (“Proofs of Service”), at *2-5. Their efforts are described below.
Between July 14, 2017, and July 21, 2017, the SEC unsuccessfully made five attempts to
serve Stegawski at 1111 Brickell Avenue, Suite 1100, in Miami, Florida. See Proofs of Service

2

“*__” refers to pagination supplied by the ECF system.
2

at *2. Stegawski is also registered with the Georgia Bar, and this address was listed in his
Georgia Bar registration.3 The address was also listed in his filing in the Southern District of
Florida. See Stegawski Mem. at *3, 5. On four of these occasions, a person named “Maria”
stated that Stegawski was unavailable, but provided no additional information. See Proofs of
Service at *2. The process server noted that this location was a “virtual office/executive suite,”
but the receptionist stated that someone from the office was usually present at the office. See
Proofs of Service at *2.
On July 19, 2017, and July 20, 2017, a process server made two unsuccessful attempts to
personally serve Stegawski at 5325 Mount Vernon Parkway NW, a residential address in
Atlanta, Georgia. See Proofs of Service at *4. This address was “believed to be associated with
Mr. Stegawski.” Def. Mem. at 2-3. On the first attempt, a male occupant stated that Stegawski
did not reside there, but refused to give his own name. See Proofs of Service at *4. On the
second attempt, no one answered the door after the process server knocked, despite the presence
of cars in the driveway. See id.
Between July 19, 2017, and July 24, 2017, a process server also attempted to personally
serve Stegawski four times at an office located at 3525 Piedmont Road 7 Piedmont Center, Suite

3

See Member Directory: Mr. Michael Andrew Stegawski, State Bar of Georgia,
https://www.gabar.org/MemberSearchDetail.cfm?ID=MzEwMTA4. We note that Stegawski’s
Florida Bar registration identifies “111 Brickell Avenue Suite 1100,” instead of “1111 Brickell
Avenue Suite 1100,” as the address of “Convergent Advisory Services, P.A” and states that
Stegawski is its “Managing Partner.” See Member Profile: Michael Andrew Stegawski, The
Florida Bar, https://www.floridabar.org/mybarprofile/51589 (last visited Sept. 21, 2017).
However, given the other sources listing his address as 1111 Brickell Avenue Suite 1100, and
the fact that a process server was informed that Stegawski was “unavailable” when service was
attempted at 1111 Brickell Avenue Suite 1100, see Proofs of Service at *2, we are satisfied that
“111 Brickell Avenue” is a typographical error and the intended address is “1111 Brickell
Avenue.”
3

300, in Atlanta, Georgia. See Proofs of Service at *4. This address was associated with
Stegawski’s firm, Convergent Capital. See Def. Mem. at 2. On each occasion, a receptionist
told the process server that Stegawski was not in the office that day. See Proofs of Service at *4.
On the final attempt, the receptionist said that the location was a “virtual office” and that
Stegawski could be seen by appointment only. See id.
On July 21, 2017, a process server made two attempts to serve Stegawski at 1033 NE
17th Way Unit 401, a residential address in Fort Lauderdale, Florida. See Proofs of Service at
*3. The intercom at that location indicated that the code for “M. Stegawski” was “433.” See id.
However, the property manager for that location stated that the resident for that address was not
Stegawski, and that Stegawski likely moved out at least two years before the manager took over.
See id. The process server also spoke with the person occupying Stegawski’s former unit, who
said that he occasionally received mail for Stegawski but had never met Stegawski. See id.
Finally, on July 28, 2017, a process server also attempted to serve Stegawski at an office
address in Fort Lauderdale, Florida, at 5200 33rd Blvd, Suite 207. See Proofs of Service at *5.
At that address, the process server encountered someone by the name of Stella Rojas, who
informed the process server that her company, Operations for ITL USA, Inc., had occupied that
address for five or six years. See id. Rojas informed the process server that her company
occasionally received mail for Stegawski, but denied knowing Stegawski. See id.
On July 27, 2017, counsel for Pence wrote the Court seeking an order permitting
substituted service on Stegawski. See Lewis Letter. That same week, the Court’s law clerk
emailed and telephoned Stegawski at the same email address and telephone number that was
used by Pence’s counsel. See Order, filed July 31, 2017 (Docket # 53), at 1; Lewis Letter. The
law clerk’s messages to Stegawski requested only that he return the call to Chambers. In
4

response, a voicemail was left on the Court’s voicemail box on July 31 at 8:13 a.m. in which the
caller identified himself as Stegawski and stated that he was “interest[ed] in offering any type of
assistance that [he] can,” that he was “aware of the case,” that he was “actively monitoring the
court docket,” and that he was aware of the letter seeking substituted service. See id. at 1-2.
On July 31, 2017, the Court issued an Order scheduling a telephone conference for
August 8, 2017. See Order, filed July 31, 2017 (Docket # 53), at 1. The Court mailed a copy of
this Order to the 1111 Brickell Avenue address, see id. at 2, and it was not returned as
undeliverable. Counsel for Pence arranged for the telephone conference, in which Stegawski
participated. The Court asked Stegawski if he would simply agree to substituted service of the
subpoena but he refused to do so. See Minute Entry for Proceedings Held Before Magistrate
Judge Gabriel W. Gorenstein: Telephone Conference Held on Aug. 8, 2017, entered Aug. 8,
2017 (“Tel. Conf.”). The Court granted Pence leave to file a motion seeking substituted service.
See id.
Pence now requests an Order permitting substituted service of the subpoena on Stegawski
by email sent to the above-mentioned address, and by certified mail sent to the office address at
1111 Brickell Avenue, Suite 1100, Miami, FL 33131. See Def. Mem. at 5-6. The Court notes
that Stegawski’s current Florida Bar registration still lists the address on Brickell Avenue as his
address. See Member Profile: Michael Andrew Stegawski, The Florida Bar,
https://www.floridabar.org/mybarprofile/51589 (last visited Sept. 21, 2017).4 It contains,
however, a different email address: [e-mail]. See id. It also
contains a new telephone number: [phone]. See id.

4

See footnote 3.
5

In Stegawski’s Georgia Bar registration, he provides the same phone number as appears
on the current Florida registration and an email address at the same domain name:
[e-mail]. Both the Florida and Georgia Bar registrations list the same
fax number for Stegawski: [phone]. 5
II. DISCUSSION
Rule 45 of the Federal Rules of Civil Procedure states that “[s]erving a subpoena requires
delivering a copy to the named person.” Fed. R. Civ. P. 45. The word “delivering” is not
defined in the Rules. Nonetheless, in the past, many courts have interpreted this language as
requiring personal service. See Agran v. City of New York, 1997 WL 107452, at *1 (S.D.N.Y.
Mar. 11, 1997) (“the weight of authority is that a subpoena duces tecum must be served
personally”); King v. Crown Plastering Corp., 170 F.R.D. 355, 356 (E.D.N.Y. 1997) (noting in
dictum that “the majority of cases seem to agree that service under Rule 45 of the Federal Rules
of Civil Procedure must be done in person”); see also Conanicut Inv. Co. v. Coopers & Lybrand
(In Re Deposition Subpoena Directed to Smith), 126 F.R.D. 461, 462 (E.D.N.Y. 1989) (“the
Court has no discretion to permit alternative service [under Rule 45] when a party has difficulty
effecting service”); 9A Charles Alan Wright et al., Fed. Prac. and Proc. § 2454 (3d ed. 2017)
(“[t]he longstanding interpretation of Rule 45 has been that personal service of subpoenas is
required”).
Nonetheless, “[t]here is no Second Circuit case law interpreting the Rule 45 requirement
of delivery as requiring personal service.” Kenyon v. Simon & Schuster, Inc., 2016 WL

5

See Member Directory: Mr. Michael Andrew Stegawski, State Bar of Georgia,
https://www.gabar.org/MemberSearchDetail.cfm?ID=MzEwMTA4 (last visited Sept. 21, 2017).
See Member Profile: Michael Andrew Stegawski, The Florida Bar,
https://www.floridabar.org/mybarprofile/51589 (last visited Sept. 21, 2017).
6

5930265, at *3 (S.D.N.Y. Oct. 11, 2016) (internal quotation marks and alterations omitted)
(quoting Tube City IMS, LLC v. Anza Capital Partners, LLC, 2014 WL 6361746, at *2
(S.D.N.Y. Nov. 14, 2014)). And more recent cases in this Circuit have pointed out that “the
language of Rule 45 does not explicitly demand personal service of a subpoena.” JPMorgan
Chase Bank, N.A. v. IDW Group, LLC, 2009 WL 1313259, at *2 (S.D.N.Y. May 11, 2009)
(internal quotation marks omitted) (quoting Cordius Tr. v. Kummerfield, 2000 WL 10268, at *2
(S.D.N.Y. Jan. 3, 2000)). As these cases have noted, Rule 45’s language “neither requires inhand service nor prohibits alternative means of service.” Id.
Thus, “recognizing that nothing in Rule 45’s language itself calls for personal service,”
district courts in recent years “have authorized alternative service that is reasonably designed to
ensure that a witness actually receives a subpoena.” Kenyon, 2016 WL 5930265, at *3; see also
Tube City IMS, LLC, 2014 WL 6361746, at *2 (collecting cases). These courts have granted
requests for alternative methods of service of subpoenas — for example, by certified mail —
where such service “reasonably insures actual receipt of the subpoena by the witness” and
“comports with due process” insofar as it is “reasonably calculated under the circumstances to
provide [the witness] with both notice and an opportunity to present objections.” JPMorgan
Chase Bank, N.A., 2009 WL 1313259, at *3 (quoting Cordius Tr., 2000 WL 10268, at *2); see
also Tube City IMS, LLC, 2014 WL 6361746, at *3 (granting party’s request to serve Rule 45
subpoena by certified mail). Courts typically require a party seeking leave to serve by
alternative means “to demonstrate a prior diligent attempt[s] to personally serve” before
permitting substituted service under Rule 45. Kenyon, 2016 WL 5930265, at *3. Some courts,
however, have not even required a party to move for an order permitting alternative service in
advance of such service. See Ultradent Prods., Inc. v. Hayman, 2002 WL 31119425, at *4
7

(S.D.N.Y. Sept. 24, 2002) (service by certified mail was sufficient even when party did not move
for an order authorizing substitute service in advance of service).
In finding that alternative service is available, courts have noted that interpreting Rule 45
this way comports with the interpretive principle in Fed. R. Civ. P. 1 to “construe[], administer[],
and employ[]” the Federal Rules of Civil Procedure “to secure the just, speedy, and inexpensive
determination of every action and proceeding.” See Cordius Tr., 2000 WL 10268, at *2 (“In
accordance with . . . Rule 1, Fed. R. Civ. P., and given the textual ambiguity of Rule 45
combined with the repeated attempts of the plaintiff to effectuate personal service, and the cost
and delay that would result by requiring further attempts at such service, plaintiff is permitted to
serve [the witness] by certified mail.”).
We are persuaded by the more recent line of cases. By its text, Rule 45 requires only
“delivering” the subpoena to the named person, Fed. R. Civ. P. 45(b)(1), and does not dictate the
manner in which the delivery must occur. Notably, Rule 45(b)(4) requires that the proof of
service of a subpoena, which must be filed with the issuing court, specify the “manner of
service” of the subpoena. As noted in Cordius Trust, reading Rule 45 to permit only personal
service would render this portion of the Rule superfluous. 2000 WL 10268, at *2. Moreover,
we agree that permitting service by alternative means in appropriate cases better hews to the
interpretive principle in Fed. R. Civ. P. 1 that the Federal Rules of Civil Procedure should be
construed to provide for the “just, speedy, and inexpensive” resolution of federal judicial actions.
See id. at *2. Thus, the Court finds that Rule 45 permits service of subpoenas by means other
than personal service under appropriate circumstances.
Such circumstances are obviously present in this case. The SEC has already attempted
personal service on Stegawski 14 times at five locations. See Proofs of Service at *2-5. Courts
8

have ordered substituted service of subpoenas after far fewer attempts at personal service have
failed. See Tube City IMS LLC, 2014 WL 6361746, at *1-2 (ordering substituted service after
six failed attempts at personal service); Ultradent Prods., Inc., 2002 WL 31119425, at *4
(permitting substituted service after two failed attempts at personal service). More to the point,
Stegawski has registered his telephone numbers and email addresses with state bars of which he
is a member and has in fact responded to email and telephone calls at other email addresses and
telephone numbers that he has supplied. See Order, filed July 31, 2017 (Docket # 53), at 1. He
also participated in a telephone conference with the Court and parties’ counsel on August 8,
2017, which discussed the efforts to serve him and during which he refused to consent to any
service other than personal service.6 See Tel. Conf. Thus, he is obviously aware of the attempts
to serve him. And he has stated that he is monitoring the docket in this case. The parties’
diligent attempts to personally serve Stegawski, coupled with Stegawski’s use of an email
address and actual knowledge of the parties’ attempts to serve him, easily justify an order
permitting alternative or “substituted” service. See generally Med. Diagnostic Imaging, PLLC v.
CareCore Nat’l, LLC, 2008 WL 3833238, at *3 (permitting service by delivering a copy of the
subpoena to the witness’s place of employment and mailing a copy by first class mail, and noting
“[t]o allow a witness to avoid appearing for his deposition when he acknowledges that he has
actual knowledge that he is being sought for a deposition . . . undermines the requirement in
Federal Rule of Civil Procedure 1”).

6

The Court was surprised and disappointed that Stegawski refused to consent to
alternative service or to suggest any manner in which he can be served. Indeed, it seems entirely
inconsistent with his status as an officer of the Florida and Georgia courts and as an officer of
the federal courts in Florida and Georgia where he is admitted. An attorney should understand
that the “duty to avoid unnecessary expenses of serving” a summons as articulated in Fed. R.
Civ. P. 4(d)(1) should inform an attorney’s own conduct even where Rule 4 does not apply.
9

Some cases have suggested that alternative service under Rule 45 must be accomplished
in accordance with Rule 4, which in turn, see Fed. R. Civ. P. 4(e)(1), permits service on an
individual to be made in accordance with the state law where the district court sits or where
service is made. See Briarpatch Ltd., L.P. v. Geisler Roberdeau, Inc., 2006 WL 1311967, at *2
(S.D.N.Y. May 12, 2006). New York procedural law, in turn, provides that service on an
individual at a place of business is effective if sent by first class mail and also left with someone
of “suitable age and discretion at the [witness’s] actual place of business.” N.Y. C.P.L.R.
308(2). While we might well order service by that means, and leave it at that, we are also
mindful that alternative service of a subpoena should be “calculated to provide timely actual
notice.” Tube City IMS, LLC, 2014 WL 6361746, at *2. Given that 1100 Brickell Avenue was
visited by a process server and was characterized as a “virtual office,” we believe there are better
means to effectuate notice on Stegawski. See N.Y. C.P.L.R. 308(5) (permitting alternative
service on individuals where other means of service is “impracticable”).
Accordingly, the Court directs that the following method of service will be deemed
proper service of a subpoena on Stegawski:
(1) mailing the subpoena, along with any required fees, see Fed. R. Civ. P. 45(b)(1), by
certified mail to
Michael A. Stegawski
Convergent Advisory Services, P.A.
1111 Brickell Avenue, Suite 1100
Miami, FL 33131
(2) emailing a copy of the subpoena to the following email addresses: [e-mail], [e-mail], [e-mail]

10

(3) faxing a copy of the subpoena to [phone] (assuming the number actually
accepts faxes)
(4) attempting to contact Stegawski by telephone at the telephone number with which he
communicated to Pence’s attorney and at the following number: [phone]. If Stegawski
does not answer, a message or voicemail shall be left (if there is a working voicemail system)
informing Stegawski that he has been served with a subpoena by mail and email (and fax, if
applicable), and that if he requires a copy of the subpoena, he may contact the caller at a number
(with a voicemail system) the caller should provide.
The Court believes that there is virtually no possibility that Stegawski will fail to be
aware of a subpoena served by these means. Thus, service in this fashion is “reasonably
calculated under the circumstances to provide [Stegawski] with both notice and an opportunity to
present objections.” JPMorgan Chase Bank, N.A., 2009 WL 1313259, at *3 (quoting Cordius
Tr., 2000 WL 10268, at *2) (internal quotation marks omitted) (permitting service of subpoena
by certified mail and email).
IV. CONCLUSION
For the foregoing reasons, Pence’s motion for authorization for alternative service of
process for a subpoena ad testificandum (Docket # 61) is granted as described herein. Proof of
service shall be filed in accordance with Fed. R. Civ. P. 45(b)(4).
Counsel for Pence is directed to email this Order to Stegawski at the email addresses
listed in this Opinion and Order.

11

SO ORDERED.
DATED:

New York, New York
September 28, 2017

Copy mailed to:
Michael A. Stegawski
Convergent Advisory Services, P.A.
1111 Brickell A venue, Suite 1100
Miami, FL 33131

12