Coventry Capital US LLC v. EEA Life Settlements, Inc. et al

Filing 189

DECISION AND ORDER: Accordingly, for the reasons stated above, it is hereby ORDERED that the objection filed by Defendant EEA Life Settlements, Inc. (Dkt. No. 174) to the Opinion and Order of Magistrate Judge Sarah Cave dated November 26, 2019 (Dkt. No. 162) is OVERRULED and that Opinion and Order is AFFIRMED. (Signed by Judge Victor Marrero on 2/10/2020) (mro)

USDCSDNY

DOCUM ENT
ELECTRONICALLY FILED
DOC#: ---,,.,..,--+-+-,,-+.,,....,..-DA TE FILED:

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

-----------------------------------x

--------

COVENTRY CAPITAL US LLC,
Plaintiff,

17 Civ . 7417

- against -

(VM)

DECISION AND ORDER

EEA LIFE SETTLEMENTS INC., et al.,
Defendants.

-----------------------------------x
VICTOR MARRERO, United States District Judge.

Plaintiff Coventry Capital US LLC
this

diversity

Settlements ,
Hiren

Inc.

Patel

Individual

action

against

("Coventry")

defendants

("EEA") , Vincent Piscaer

("Patel,"
Defendants ,"

and

together

and ,

brought

EEA

Life

("Piscaer") , and

with

collectively,

Piscaer,

"the

"Defendants"),

alleging that Defendants engaged in a pattern of fraudulent
conduct aimed at undermining the negotiation of a contract to
sell a portfolio of life insurance policies to Coventry.

(See

"Complaint," Dkt . No. 31 . ) The Complaint brings claims of (1)
breach

of

contract

misrepresentation

(against

EEA),

(against all

(2)

fraud/intentional

Defendants),

and

(3)

aiding

and abetting fraud/intentional misrepresentation (against the
Individual Defendants) .
On

November

26,

2019 ,

Magistrate

Judge

Sarah

Cave

granted Coventry ' s motion to compel EEA to produce documents
held by its affiliates EEA Fund Management Limited ("EEA UK")

1

and EEA Life Settlements Fund PCC Limited

(the "Fund")

and

ordered EEA to search for and produce responsive documents
held by EEA UK and the Fund.

(See "Judge Cave's Decision,"

Dkt . No.

2019,

Judge

162 . ) On December 1,

Cave's

Decision

Procedure 7 2 (a)

pursuant

to

EEA timely objected to
Federal

Rule

of

Civil

( "Rule 72 " ) . ( See "Objection," Dkt . No. 174 . )

Now before the Court are the Objection , Coventry's opposition
to EEA ' s Objection, and EEA' s reply .
No . 18 3;

"Reply," Dkt . No.

18 4.)

( See "Opposition," Dkt.

For the reasons set forth

below , the Court overrules EEA's Objection and affirms Judge
Cave 's Decision .
I .

A.

BACKGROUND

FACTUAL BACKGROUND
EEA is wholly owned by EEA Life Settlement Master Fund

II Limited,

which is wholly owned by EEA Life Settlements

Holdings Limited ("EEA Holdings"). The Fund wholly owns EEA
Holdings. Pursuant to an investment management agreement (the
"Management
Management

Agreement")
(Guernsey)

between

the

Fund

and

EEA

Fund

Limited (the "Guernsey Manager"), the

Guernsey Manager manages the Fund ,

EEA Holdings ,

EEA Life

Settlement Master Fund II Limited, and EEA. Under a marketing
agreement between the Guernsey Manager and EEA UK,

EEA UK

acts as marketing agent for the Fund . Anath Capital Group
Limited

(" Anath")

wholly owns the Guernsey Manager and EEA
2

UK.

Defendant Patel is a director and the Managing Director

of EEA UK and a d i rector of Anath .
director

of

the

Guernsey Manager

Defendant Piscaer is a

and Head

of Alternative

Investments for EEA UK.
B.

THE DISCOVERY DISPUTE
The present dispute arises from requests for production

that

Coventry

served

on

the

Defendants

seeking

documents

regarding EEA ' s business dealings with Coventry that are in
the actual possession of EEA UK ,

the Guernsey Manager ,

and

the Fund.
On

February

production ;
order

Magistrate

dated

representations
(Dkt . No.
depose

2018,

8'

Judge

March

2 9,

that

they

47 . ) However,

Christopher

Coventry

Daly

Pitman
2018

moved

denied

based

lacked access

the

compel

motion

by

Defendants'

on
to

to

the

documents .

Judge Pitman permitted Coventry to
(~Daly"),

an

EEA

director ,

on

questions of EEA ' s access to documents held by EEA UK ,

the

Guernsey Manager, and the Fund . (See id.; Dkt. Nos. 138, 139 . )
At

a

May

11,

2018

conference

before

Judge

Pitman,

Coventry asserted that the Individual Defendants had admitted
that they had access to the documents in the ordinary course
of business and therefore had the practical ability to produce
the documents .

(See Dkt. No. 62 at 5 - 6.) Judge Pitman ordered

the Individual Defendants to produce the documents that were
3

"in their possession, custody, or control for any purpose."
(Id. at 22:21-23.) When the Individual Defendants requested
the

documents,

however,

the

Guernsey

Manager

and

EEA

UK

expressed the view that production of the documents by the
Individual

Defendants

would

constitute

misappropriation.

(Dkt. No. 66-20.)
On

June

12,

2018,

Coventry

moved

to

sanction

the

Individual Defendants and compel EEA to produce documents in
the possession of the Guernsey Manager.
January 2 4,

2019,

(See Dkt. No. 66.) On

Judge Pi trnan denied both motions.

( "Judge

Pitman's Decision," Dkt. No. 111.)
Coventry objected to Judge Pitman's Decision,
November 1,

2019,

and,

on

the Court sustained Coventry's objection

and set aside that ruling.

( See "Discovery Order," Dkt. No.

149.) In the Discovery Order, the Court held that Coventry is
entitled to an adverse inference in the event the Individual
Defendants

do

not

produce

certain documents

parties EEA UK and the Guernsey Manager.
Court reasoned that,

held by non-

(See id. at 11.) The

in light of the Individual Defendants'

status as directors, they had access to the documents in the
ordinary course of business and, moreover, had influence over
their employers' decisions as to whether to comply with the
Court's production order.
Court

concluded that

the

( Id.

at

9-10.)

Individual
4

Accordingly,

Defendants

the

should not

benefit from EEA UK and the Guernsey Manager ' s "unilaterally
imposed restriction "

on their access

to the documents

" in

response to Judge Pitman's order compelling production . " (Id .
at 10.)

The Court also granted Coventry ' s motion to compel

production by EEA of certain documents held by the Guernsey
Manager.

The

Court

reasoned that

the

Management Agreement

gives EEA a contractual right to documents from the Guernsey
Manager.
C.

JUDGE CAVE'S DECISION
While Coventry's objection to Judge

was pending,

Pitman ' s

Decision

Coventry sought to renew its February 8 ,

2018

motion to compel EEA to produce documents held by EEA UK and
the Fund based on Daly's deposition testimony .

(See Dkt. No .

145 ; Judge Cave's Decision at 4 & n.l . )
On

November

26 ,

2019 ,

Judge

Cave

granted

Coventry's

motion and ordered EEA to search for and produce documents
held by EEA UK and the Fund . Judge Cave explained that Daly
testified that he received documents and information from the
Fund and EEA UK upon request or in the ordinary course of
business . Based on this testimony, Judge Cave concluded that
EEA could access documents held by the Fund and EEA UK in the
ordinary course of business and therefore had control over
such documents within the meaning of Rule 34 of the Federal
Rules of Civil Procedure 34 ("Rule 34") . With regard to EEA's
5

claim that

it

lacked the

practical

ability to access

the

documents, Judge Cave reasoned that EEA was pointing to "the
same type of
Marrero

has

'unilaterally imposed restriction'
already

concluded do [es]

'not

that Judge

supply a

valid

defense to production.'" (Judge Cave's Decision at 6 (quoting
Discovery Order at 9-10) .)
EEA timely objected.
D.

( See Objection.)

THE PARTIES' ARGUMENTS
EEA

argues

that

Judge

Cave's

Decision

is

clearly

erroneous and contrary to law for three reasons . First, EEA
contends that this Court's Discovery Order does not support
Judge Cave's Decision. EEA argues that the present dispute is
distinguishable from those addressed in the Discovery Order
because it does not concern any contractual right to documents
or

any

Rather,

unilaterally
according

to

imposed
EEA,

restrictions
the

present

by

an

employer .

dispute

concerns

whether EEA may be compelled to produce documents that EEA UK
and the Fund have repeatedly denied it.

Second,

EEA argues

that Judge Cave's Decision is contrary to law because the
Daly

deposition

testimony

does

not,

in

fact,

support

a

conclusion that EEA had control over documents held by EEA UK
and the

Fund.

According to

EEA,

Daly's

testimony that

he

received some documents and information from the Fund and EEA
UK does not support a conclusion that EEA has access to all
6

responsive documents held by those entities. EEA claims that
it

has

already

produced

all

responsive,

non-privileged

documents it received from the Fund and EEA UK in the ordinary
course.

Third,

EEA

contends

that

Judge

Cave's

Decision

overlooked that the Fund and EEA UK refuse to provide the
documents to EEA, which, according to EEA, demonstrates that
EEA lacks control over the documents. EEA argues that Judge
Cave's Decision erroneously distinguished In re Application
of Potanina, Nos. 14 Misc. 31, 2015 WL 4476612 (S.D.N.Y. June
30,

2015),

in

concluding

that

EEA

has

control

over

the

documents.
In support of its Objection, EEA submitted a December 5,
2019 letter from counsel for the Guernsey Manager and EEA UK
to counsel for EEA.
175-1.)

( the "December 5, 2 019 Letter," Dkt. No.

In the letter,

counsel for the Guernsey Manager and

EEA UK deny that EEA has a right to require production from
those entities.
In its Opposition, Coventry argues that EEA's objection
to

Judge

Cave's

Decision

should

be

overruled

for

three

reasons. First, Coventry argues that Judge Cave's Decision is
fully

consistent with the

Discovery Order.

Both decisions

applied the rule that a party has the practical ability to
obtain -- and therefore must produce -- documents to which it
has access in the ordinary course of business.
7

Second, Coventry contends that Judge Cave's finding that
EEA has access in the ordinary course to documents held by
the

Fund

and

EEA

UK

is

not

clearly

erroneous.

Coventry

explains that this finding is supported by Daly's testimony
that

it is "standard" for EEA UK and the

Fund t o provide

documents to EEA and that they have never denied EEA access
to documents except in response to document requests in this
litigation.

(Opposition at

9-11

(citing "Daly Deposition,"

Dkt. No. 145-5, at 40:8-11, 44:12-23, 63:9-65:10, 65:14-66:8,
67:17-71:5,

117:12-15).)

Coventry argues that Judge Cave's

finding of access is also not clearly erroneous because the
requested documents relate to the sale of a substantial amount
of EEA's assets and because EEA worked closely with the Fund,
EEA UK's director Patel, and EEA UK's officer Piscaer on the
transaction.
Third,

Coventry

responds

that

Judge

Cave

did

not

overlook that EEA UK and the Fund have refused to provide
documents to EEA but correctly held that such a unilaterally
imposed restriction does not relieve EEA of its production
obligations. Relatedly, Coventry argues that the Court must
disregard the December 5,

2019 Letter because it is factual

evidence that was not presented to the magistrate judge and
thus not part of the record of this proceeding.

8

In its Reply, EEA maintains that Judge Cave's Decision
"overextends"
attempts

to

the

Discovery

distinguish

Order.

its

(Reply

position

from

at

2-4.)

that

EEA

of

the

Individual Defendants, asserting that Daly is not an employee
of the

Fund or EEA UK and does

internal documents or databases
business.
indicates

Second,
that

EEA

he,

in

not have access

in the ordinary course of

contends
fact,

to their

does

that
not

Daly's

testimony

customarily

receive

internal Fund and EEA UK documents in his work on behalf of
EEA. Third, EEA argues that its relationship to the Fund and
EEA UK does not support an inference that EEA has access to
documents held by those entities.
With respect to EEA UK, EEA Inc. argues that the entities
have distinct ownership, management, officers, directors, and
information

systems.

While

acknowledging

that

EEA

is

an

indirect subsidiary of the Fund, EEA emphasizes that it has
separate

directors

and

information

decisions

without

the

Fund.

In

systems
response

and
to

can

make

Coventry's

argument that the Court cannot consider the December 5, 2019
Letter, EEA states that the letter is merely support for its
prior argument that EEA lacks the practical ability to obtain
EEA UK's documents.

9

II.
A.

LEGAL STANDARD

THE DISCOVERY DISPUTE
Rule 72 provides that when a party timely objects to a

magistrate judge's order regarding a non-dispositive pretrial
matter,

the district judge "must

. modify or set aside

any part of the order that is clearly erroneous or is contrary
to

law."

Fed.

erroneous'
and

firm

Civ.

P.

72 (a).

"A

finding

is

'clearly

if the reviewing court is left with the definite
conviction

R.F.M.A.S.,
2010)

R.

Inc. v.

that
So,

a

mistake

748 F.

Supp.

has

been

2d 244,

committed."

248

(S.D.N.Y.

(citation omitted). "Similarly, a finding is contrary

to law when it fails to apply or misapplies relevant statutes,
case law, or rules of procedure." Id. "Therefore, pursuant to
these

standards,

a

magistrate

judge's

determinations

on

discovery matters are entitled to substantial deference." Id.
The party seeking to overturn such determinations bears a
"heavy burden." Id.
B.

RULE 34
A party may serve upon any other party a

produce

documents

"in

the

responding

party's

request to
possession,

custody, or control." Fed. R. Civ. P. 34(a) (1). "The concept
of 'control' has been construed broadly ." In re Flag Telecom
Holdings,
2006).

Ltd.

Indeed ,

Secs.

Litig.,

"'control'

236 F.R.D.

177,

180

(S.D.N.Y.

does not require that the party
10

have

legal ownership or actual physical possession of the

documents at issue;
under

a

party's

rather,

control

documents are considered to be

when

that

party

has

the

right,

authority, or practical ability to obtain the documents from
a non-party to the action." Bank of New York v. Meridien BIAO
Bank Tanzania Ltd.,

171 F.R.D. 135, 146-47

(S.D.N.Y. 1997).

"One of the circumstances which warrants a finding of control
is where a corporate entity has the ability in the ordinary
course

of

business

to

obtain

corporate entity." SEC v.
469,

at

*7

(S.D.N.Y.

documents

held

Credit Bancorp,

Oct.

28,

2009).

Ltd.,

The

by

another

194 F.R.D.

party

seeking

discovery has the burden of showing that the documents are
within the other party's control. Linde v. Arab Bank PLC, 262
F.R.D. 136, 141 (E.D.N.Y. 2009).
III. DISCUSSION

Judge
Court's

Cave's

Decision

is

Order.

In

Discovery

Defendants'

control

over

their

fully

consistent

assessing
employers'

the

with

this

Individual

documents,

the

Discovery Order relied on the rule that a party's "'ability
in the ordinary course of business to obtain' . . . documents"
from a non-party establishes the party's control over the
documents.

(Discovery

Order

Application of Bloomfield Inv.

at

9-10

Res.

Corp.,

(quoting

In

315 F.R.D.

re
165,

168 (S.D.N.Y. 2016)) .) Judge Cave's application of this rule
11

to assess EEA's control over documents held by the Fund and
EEA UK was not contrary to law. EEA emphasizes that it has no
contractual right to obtain documents from those entities.

A

party that lacks a contractual right to obtain a third-party's
documents, however, may nonetheless be found to have control
over

the

third-party's

documents

based

on

a

demonstrated

ability to access those documents in the ordinary course of
business.
Corp.,

See Camden Iron and Metal,

138

F.R.D.

438,

441-42

Inc.

v.

(D.N.J.

Marubeni Am.

1991)

(listing

"alternate grounds" supporting a finding of control).
The Court is also not persuaded that Judge Cave clearly
erred in finding that EEA has access in the ordinary course
of

business

to

documents

held

by

EEA

UK

and

the

Fund.

(Objection at 9; Reply at 4-6.) EEA argues that Daly received
only "discrete, targeted information" and that, according to
Daly's deposition testimony, it was not "standard" for him to
receive internal EEA UK correspondence about potential sales,
negotiations, or transactions.
1,

at

44:16-19;

Nonetheless,

(Reply at 5 (citing Dkt. 185-

63:19-64:6;

65:4-13,

117:18-21).)

Daly testified that EEA UK and the Fund never

denied him access to documents except when refusing requests
for documents to produce in this litigation.
at 68:5-69:3; 70:8-71:5.)

12

( See Daly Dep.

In addition,

Daly testified that employees of EEA UK,

the Guernsey Manager,

and the

Fund provided him documents

from EEA UK and the Fund approximately four times per year;
that he has "seen internal communications among personnel at
. EEA UK[] and the [F]und regarding the transaction with
Coventry"; and that it was standard for Piscaer,

an EEA UK

officer, to send Daly internal correspondence about potential
sales of policies held by the Fund and about EEA tax issues.
(See id. at 40:8-11, 44:12-15, 63:9-64:6, 65:4-66:10.)
Daly
provide
EEA's

also

testified

documents
investment

that

Piscaer

requested by Mark
advisor.

(See

id.

never

refused

to

Feaster of ViaSource,
at

86 :6-87:12.)

EEA

contends that Daly used some of the documents he received in
his roles at ViaSource and the Fund, rather than in his role
as an EEA director.

(Reply at 5 (citing Dkt. 185-1, at 41:6-

17; 46:16-20) .) Regardless, Daly's testimony indicates a flow
of information and documents from EEA UK and the Fund to EEA
in the ordinary course of business and thus provides ample
support for Judge Cave's finding. As Judge Cave pointed out,
this finding is "consistent with EEA Inc.'s assertion in its
initial disclosures

that

it had access

to its affiliate' s

documents and its waiver of the issue of access in response

13

to Coventry's document requests."

(Judge Cave's Decision at

4 (citing Dkt. No. 145-1, at 3 -4 ) .)

1

Finally, Judge Cave did not commit clear error in holding
that EEA has control over the documents despite the refusal
of

EEA UK

and

the

Fund

to

provide

them

for

purposes

of

production. As this Court explained in the Discovery Order,
the Rule 34 analysis focuses on a party's "ability to obtain
documents on demand," which is "not affected by the source's
unilaterally
Resolution Tr.
110

(D.

Colo .

Corp.

imposed
v.

1992);

restrictions

Deloitte
accord

&

Touche,

Societe

on

disclosure."

145 F.R.D.

108,

Internationale

Pour

Participations Industrielles Et Commerciales, S.A. v . Rogers,
357 U.S. 197, 204-05

(1958)

(holding that a foreign company

had control of and could be ordered to produce records held
by a bank although Swiss penal law and the Swiss Government's
constructive seizure of the
ability to
that

the

employers'

comply) .
Individual
documents

revoked their access.

records

Accordingly,

the

Defendants

had

notwithstanding

limited the

company's

Discovery Order held
control
that

over

their

their

employers

( Discovery Order at 10.)

1

Because the Court concludes that Judge Cave's finding that EEA had
access to documents in the ordinary course of business is not clearly
erroneous , the Court need not decide whether EEA has control according to
the alternate theories advanc ed by Coventry.

14

EEA insists that its situation is "entirely different"
from

that

of

the

Individual

Defendants

but

identifies

no

relevant distinction. In light of Daly's testimony that this
litigation is the only occasion in which EEA UK and the Fund
have denied EEA access to documents , the Court is persuaded
that this case is more analogous to Resolution Trust,
F.R.D.

108,

4476612.

than

In

re

Application

of

Potanina,

2015

145
WL

In concluding that an officer lacked the practical

ability to obtain documents in In re Application of Potanina,
the court credited the individual's testimony that his access
and authority at the company were limited and that he never
previously
documents.

exercised

broad

authority

See id. at n.4. 2 Thus,

to

request

company

Judge Cave did not err in

distinguishing In re Application of Potanina based on EEA's
demonstrated ability to access documents held by EEA UK and
the Fund.

The other case EEA cites,

Shcherbakovs kiy v .

Da

Capo Al Fine, Ltd., 490 F.3d 130 (2d Cir. 2007), also did not
involve

a

party

with

a

demonstrated

ability

to

access

documents held by a non-party. 3

In addition, the court ' s holding reflected the unique considerations
applicable to discovery under 28 U.S.C. § 1782. See In re Application of
Potanina, 2015 WL 4476612, at *3.
3
Because the Court concludes that refusals by EEA UK and the Fund to
provide EEA with the requested documents d o not relieve EEA o f its
production obligations, the Court need not consider the December 5 , 2019
Letter, which was not presented to Magistrate Judge Cave.
2

15

IV .

ORDER

Accordingly, for the reasons stated above , it is hereby
ORDERED that the objection filed by Defendant EEA Life

Settlements , Inc.

(Dkt . No. 174) to the Opinion and Order of

Magistrate Judge Sarah Cave dated November 26, 2019 (Dkt. No.
162) is OVERRULED and that Opinion and Order is AFFIRMED.

SO ORDERED.

Dated :

~

New York, New York
10 February 2020

U. S.D.J.

16