Dommel Properties, LLC et al v. Jonestown Bank and Trust Company et al
Filing
83
MEMORANDUM AND ORDER denying plaintiff's motion to quash & for protective order 77 & directing Denise McHenry to comply w/ deft Jonestown Bank & Trust Co's doc requests w/in 30 days from date of this order & directing parties to forthwith arrange for Ms. McHenry to be deposed... (See memo & order for complete details.) Signed by Chief Judge Christopher C. Conner on 9/11/13. (ki)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
DOMMEL PROPERTIES, LLC,
LAND OF BELIEVE FARM, INC.,
WILLIAM J. DOMMEL, and
ROBERT W. DOMMEL,
:
:
:
:
:
Plaintiffs,
:
:
v.
:
:
JONESTOWN BANK AND TRUST :
COMPANY, now known as JBT,
:
LEBANON COUNTY TAX CLAIM :
BUREAU, and SALLIE A. NEUIN, :
:
Defendants
:
CIVIL ACTION NO. 1:11-CV-02316
(Chief Judge Conner)
MEMORANDUM
Presently before the court in the above-captioned matter is a motion to quash
and for a protective order (Doc. 77), filed by plaintiffs William Dommel, Robert
Dommel, Land of Believe Farm, Inc. (the “Farm”), and Dommel Properties, Inc.
(“Dommel Properties”). Plaintiffs seek protection from a subpoena in which
defendant Jonestown Bank and Trust (the “Bank”) demands that Denise McHenry
appear for a deposition and produce documents evidencing division of assets from
her marriage and divorce from plaintiff William Dommel. (Doc. 81-1, Ex. E). For
the reasons that follow, the court will deny plaintiffs’ motion to quash and for a
protective order (Doc. 77).
I.
Background
Plaintiffs William Dommel and his late father, Robert Dommel, engaged in
the horse-breeding trade through their businesses, the Farm and Dommel
Properties. (Doc. 1 at 3). Plaintiffs filed the Complaint (Doc. 1) against the Bank
and defendant Sallie A. Neuin, Director of the Lebanon County Tax Claim Bureau
(the “TCB”) and a member of the Board of Directors of the Bank, for claims arising
from three promissory notes plaintiffs executed with the Bank, secured by two
farms and hunting property. (Id. at 3-5). Soon after execution of the notes,
plaintiffs expressed concern to the Bank about the financially precarious position of
their businesses. (Id. at 6). Plaintiffs allege that the Bank encouraged them to
continue construction on their farm and that, despite confessing judgment on the
notes in October 2008, the Bank represented that it would work with plaintiffs to
resolve the debt and would not execute upon the confessed judgments. (Id. at 6-7).
Plaintiffs allege that the Bank subsequently executed on the judgments and, after
chilling bidding at plaintiffs’ sale, the Bank purchased the first farm at a sheriff’s
sale for costs only, failing to credit the market value of the farm against plaintiffs’
debt. (Id. at 8-9).
Plaintiffs further allege that, through her positions at the Bank and the TCB,
Ms. Neuin became aware of the value of the properties and plaintiffs’ borrowing
history with the Bank, and initiated a tax sale for plaintiffs’ other farm. (Id. at 9-10).
Contrary to the statements of Bank representatives that the Bank had no interest
in purchasing the second farm, plaintiffs later discovered that the Bank purchased
the second farm at the tax sale. (Id. at 10-11).
Plaintiffs brought eleven claims against the Bank, Ms. Neuin, and the TCB
due to the decline of their businesses and loss of their properties. (Id.) Pursuant to
2
the court’s Order (Doc. 64), on March 19, 2013, the court dismissed all claims against
the TCB and some of the claims against the Bank and Ms. Neuin. The remaining
claims against the Bank are governed by state law and are as follows: intentional
interference with contract (Count V), fraud (Count VII), negligence (Count VIII),
promissory estoppel (Count X), and deepening insolvency (Count XI). The
remaining claims against Ms. Neuin are as follows: violation of substantive due
process rights under 42 U.S.C. § 1983 (Count I), intentional interference with
contract (Count V), and conversion (Count VI).
On June 26, 2013, the Bank sent plaintiffs’ counsel Notices of Deposition and
Subpoenas, including a copy of a subpoena addressed to Ms. Denise McHenry.
(Doc. 78-1, Ex. A). Ms. McHenry is the former wife of plaintiff William Dommel, and
their divorce was finalized on July 22, 2011. (Doc. 81-1, Ex. A). On July 18, 2013, the
Bank served Ms. McHenry with the subpoena. (Doc. 81-1, Ex. E). The subpoena
sought the deposition testimony of Ms. McHenry on August 1, 2013, as well as the
production of “[a]ny and all documents showing or evidencing the division of
property with respect to your marriage and divorce from William Dommel
including, without limitation, horses and equipment.” (Id.)
Plaintiffs filed the instant motion on July 19, 2013. (Doc. 77). Plaintiffs move
to quash the subpoena pursuant to Federal Rule of Civil Procedure 45 on the
grounds that: (1) the subpoena is facially invalid; (2) the subpoena requires
disclosure of confidential information protected by spousal privilege, including the
privilege not to testify against one’s spouse and the privilege not to testify about
3
confidential communications between spouses; and (3) the subpoena is overly broad
and unduly burdensome, requiring the issuance of a protective order. (Doc. 78).
The Bank opposes the motion and argues that Ms. McHenry’s testimony and
documents regarding the business operations and division of the Dommels’ assets
are relevant and material to its affirmative defense that the failure of plaintiffs’
horse-breeding business was not due to the Bank’s actions as plaintiffs allege, but
instead was due to the departure of Ms. McHenry, who had the knowledge and
expertise to run the business. (Doc. 81). This issue is fully briefed and ripe for
disposition.
II.
Discussion
The Federal Rules of Civil Procedure allow for the discovery of “any
nonprivileged matter that is relevant to any party’s claim or defense.” FED . R. CIV .
P. 26(b)(1). Such relevant evidence need not be admissible as long as it “appears
reasonably calculated to lead to the discovery of admissible evidence.” Id. Federal
Rule of Civil Procedure 45 sets forth the procedures through which a party may
seek discovery from a nonparty. Plaintiffs move to quash the subpoena pursuant to
Rule 45 on the grounds that: (1) the subpoena is facially defective; (2) the subpoena
requires disclosure of confidential information protected by spousal privilege under
Pennsylvania law; and (3) the subpoena is overly broad and unduly burdensome,
and further requests the issuance of a protective order. (Doc. 78). The court shall
address each issue in turn.
4
A.
Facially Valid
Plaintiffs assert that the subpoena is facially invalid because neither the
Clerk of the Court nor the Bank’s attorney signed the subpoena. (Doc. 78 at 7).
Federal Rule of Civil Procedure 45 establishes that a valid subpoena may be signed
and issued either by the Clerk of the Court or an attorney as an officer of the court.
FED . R. CIV . P. 45(a)(3). The Bank’s attorney, Stephanie DiVittore, Esq. of the law
firm Rhoads & Sinon LLP, issued and signed the subpoena as an officer of the
court and served Ms. McHenry on July 18, 2013. (Doc. 81, Ex. E). The subpoena is
therefore facially valid on this basis.
Plaintiffs further allege that the Bank did not comply with the notice
requirement of Rule 45(b)(1) because Plaintiffs only received an unsigned version of
the subpoena on June 26, 2013, prior to service of the subpoena on Ms. McHenry, and
never received a copy of the final subpoena.1 (Doc. 78-1, Ex. A; Doc. 82 at 7-8). Rule
45(b)(1) requires the party seeking production of documents from a nonparty to serve
notice on all other parties. FED . R. CIV . P. 45(b)(1). The commentary to the Federal
Rules of Civil Procedure indicates that a subpoena served as notice on all other parties
1
Plaintiffs raise a new argument in their reply brief that the subpoena of Ms.
McHenry is also facially invalid because it was not served with the appropriate
witness fees as required by Rule 45(b)(1). (Doc. 82 at 8). Arguments raised for the
first time in a reply brief are generally waived. Fairness requires that nonmovants
have the opportunity to respond to any arguments presented by the movant.
Tristate HVAC Equipment, LLP v. Big Belly Solar, Inc., 752 F. Supp. 2d 517, 529 n.8
(E.D. Pa. 2010); see United States v. Medeiros, 710 F. Supp. 106, 110 (M.D. Pa. 1989)
(“It is improper for a party to present a new argument in his or her reply brief.”).
For this reason, the court deems this argument waived and declines to consider it.
5
to an action should detail the essentials of the directed production in order for any
interested party to attend at the time and place of the discovery, review or object to the
documents, and otherwise monitor the proceedings to protect their own interests.
FED . R. CIV . P. 45 cmt. C45-6. The only difference between the unsigned subpoena
Plaintiffs received and the subpoena served upon Ms. McHenry is the signature of Ms.
DiVittore as an officer of the court. Both versions of the subpoena contain the details
of the document request and time and place of appearance for the deposition. The
court concludes that the unsigned subpoena plaintiffs received was sufficient notice
under Rule 45(b)(1) and the subpoena is valid.
B.
Spousal Privilege
Plaintiffs further seek to quash the subpoena served upon Ms. McHenry on the
basis that the information sought from Ms. McHenry is protected by spousal privilege.
(Doc. 78 at 2-5). Federal Rule of Civil Procedure 45 states that the court must quash
or modify a subpoena that requires disclosure of privileged information if no exception
or waiver is applicable. FED . R. CIV . P. 45(c)(3)(A)(iii). In civil actions, Pennsylvania
law2 recognizes two types of spousal privilege: the privilege not to provide adverse
testimony against one’s spouse, see 42 PA . CONS. STAT . § 5924, and the privilege not to
testify about confidential communications between spouses, see 42 PA. CONS. STAT . §
2
Under the Federal Rules of Evidence, state privilege laws are controlling
when state law supplies the rule of decision with respect to a claim or defense. FED .
R. EVID . 501. In the case sub judice, plaintiffs’ remaining claims against the Bank
are state law claims and, therefore, Pennsylvania privilege law shall govern the
court’s decision.
6
5923. For the reasons explained below, the court concludes that neither the privilege
against adverse testimony nor the privilege protecting confidential communications
provides a basis to quash the subpoena served upon Ms. McHenry.
i.
Adverse Testimony
Plaintiffs argue to extend the privilege against adverse testimony beyond
marriage and divorce to cover all matters arising during the course of the marriage.
(Doc. 82 at 2). Under Pennsylvania law, the adverse testimony privilege states that
“[i]n a civil matter neither husband nor wife shall be competent or permitted to testify
against each other.” 42 PA . CONS. STAT . § 5924(a). It is well-established, however, that
the privilege applies only during the marriage and does not apply once the marriage
ceases to exist. See Commonwealth v. Borris, 372 A.2d 451, 453-54 (Pa. Super Ct. 1977)
(holding that there is no disqualification for adverse testimony after the dissolution of
marriage, but the disqualification for communications of a confidential nature may still
apply); Stewart v. F.A. N. Co., 65 Pa. Super. 195 (Pa. Super. Ct. 1916).
Plaintiffs point to Commonwealth v. Valle-Velez, 995 A.2d 1264 (Pa. Super. Ct.
2010), in support of the contention that the adverse testimony privilege’s purpose of
maintaining marital harmony continues upon divorce. (Doc. 82 at 2). In Valle-Velez,
however, the couple had separated and initiated divorce proceedings, but were not yet
legally divorced. Valle-Velez, 995 A.2d at 1269 (stating that the privilege still served to
maintain marital harmony where the couple was not yet divorced). It is clearly
distinguishable from this case where the divorce of Mr. William Dommel and Ms.
7
McHenry was finalized on July 22, 2011. (Doc. 81-1, Ex. A). The adverse testimony
privilege, therefore, does not apply, and Ms. McHenry may testify against Mr. William
Dommel.
ii.
Confidential Communications
The confidential communications privilege provides that “in a civil matter
neither husband nor wife shall be competent or permitted to testify to confidential
communications made by one to the other, unless this privilege is waived upon the
trial.” 42 PA . CONS. STAT . § 5923. A privileged confidential communication made
between husband and wife outlasts divorce and even death. Hunter v. Hunter, 83
A.2d 401, 403 (Pa. Super. Ct. 1951). Only the spouse asserting the privilege may
waive the confidential communications privilege. Commonwealth v. Savage, 695
A.2d 820, 823 (Pa. Super. Ct. 1997).
To determine whether Mr. William Dommel may assert privilege for
confidential communications, the court must address three issues: (1) whether the
Bank’s subpoena seeks information that qualifies as confidential communications;
(2) whether the confidential communications privilege applies to business or
property-related matters; and (3) whether Mr. William Dommel waived the
confidential communications privilege through his own testimony and divorce
proceedings in the public record. The court will address each issue below in turn.
8
a.
Qualification as Confidential Communication
In Pennsylvania, the application of the confidential communications privilege
depends upon the nature and character of a particular communication and the
circumstances under which it was made. Hunter, 83 A.2d at 403. In order to qualify
as a confidential communication, the information must be made in confidence and
with the intention that it not be disclosed. Savage, 695 A.2d at 823; Commonwealth
v. Dubin, 581 A.2d 944, 946 (Pa. Super. Ct. 1990) (“To be protected as a confidential
communication, knowledge must be gained through the marital relationship and in
the confidence which that relationship inspires.”).
Plaintiffs assert that the Bank’s subpoena for documents regarding the
disposition of marital property is explicitly seeking confidential communications
between husband and wife. (Doc. 82 at 3). The court agrees with plaintiffs that the
issue of marriage and divorce is a sensitive subject, but unlike cases where the
communications are made based on the trust of the marital relationship, Mr.
William Dommel and Ms. McHenry created the documents related to the division of
assets in divorce proceedings and, therefore, were not communications made in
confidence between spouses.
Moreover, in response to the court’s request (which occurred during the
July 30, 2013 conference call), the Bank clarifies that it seeks information about the
operation and ownership of plaintiffs’ horse-breeding business, which was affected
by the division of Mr. William Dommel and Ms. McHenry’s assets. (Doc. 81 at 7-8).
9
In similar cases, Pennsylvania state courts have rejected claims of privilege over
business and financial information because such information is neither confidential
or a communication between spouses. When the requested information evidences
business transactions with third parties, such information is not a direct
communication between the spouses. See Dubin, 581 A.2d at 947 (holding, under a
similar privilege statute for criminal actions, that bank records, tax returns, and
other financial information were not confidential communications between spouses
and only evidenced business transactions with third persons); Huffman v.
Simmons, 200 A. 274, 278 (Pa. Super Ct. 1938) (stating that a spouse may testify to
facts, relating to the other spouse’s transactions, which came to her knowledge
apart from confidential communications).
The Bank does not seek information about Mr. William Dommel and Ms.
McHenry’s marriage and relationship, but rather the details of the business they
ran together until their divorce in 2011, including background and experience in
horse-breeding, responsibilities in the horse-breeding business, location of financial
books and records, the current status of any assets for the horse-breeding business,
and breeder’s awards. (Doc. 81 at 8). Such details cannot be considered
communications between spouses because Ms. McHenry gained the information
regarding the plaintiffs’ businesses from her own participation. Furthermore,
related documentation would only evidence business transactions with third
parties. The court concludes that such financial and business information is not a
10
confidential communication between spouses and the privilege, therefore, does not
apply.
b.
Business or Property Matters
To the extent that any information falling within the ambit of the subpoena
would include confidential communications between spouses, the Bank asserts that
such privilege would not cover business or property matters discussed between Mr.
William Dommel and Ms. McHenry. As both parties correctly point out, the
privilege for confidential communications generally excludes knowledge or
communications between spouses relating to matters of business or property in the
absence of contrary indications. Commonwealth v. Darush, 420 A.2d 1071, 1076 (Pa.
Super. Ct. 1980); Stewart, 65 Pa. Super. at 201-02 (finding that confidential
communications privilege does not include ordinary business transactions).
Plaintiffs argue that the Bank’s subpoena calls for inherently confidential
communications because the subject of the communications is the marital
relationship and its termination. (Doc. 82 at 5-6). In Darush, the court permitted
the testimony of a party’s former wife related to financial difficulties of his business
because she was the bookkeeper of the business. Darush, 420 A.2d at 1075-76. The
court held that the confidential communications privilege did not cover knowledge
she gained in that role because there was no indication such knowledge was meant
to be confidential. Id. at 1076 (stating that spousal privilege does not extend to all
ordinary daily exchanges between spouses).
11
Similarly, in this case, the information at issue directly relates to Ms.
McHenry’s admitted role in plaintiffs’ horse-breeding business and the subsequent
financial difficulties that gave rise to this action. The record is devoid of any
evidence that Mr. William Dommel and Ms. McHenry intended for the knowledge
Ms. McHenry gained in her role in the family business to be confidential,
particularly when the parties fought over business assets in divorce proceedings.
The court concludes that the confidential communications privilege, therefore, does
not protect communications between Mr. William Dommel and Ms. McHenry
regarding the jointly-operated horse-breeding business and related property.
c.
Waiver of Privilege
To the extent that the confidential communications privilege applies, the
Bank argues that Mr. William Dommel waived it for communications related to Ms.
McHenry’s role and operation of the business and property. The Bank asserts that
Mr. Dommel waived the privilege by offering testimony on the same issues in his
deposition. (Doc. 81 at 10-11). The parties have the court at a disadvantage because
Mr. Dommel’s deposition is not a matter of record.
This omission is not fatal to the court’s consideration of the waiver argument,
however, because Mr. Dommel disclosed Ms. McHenry’s role in the family business
in the public record through divorce proceedings. For this reason, the court finds
that Mr. Dommel waived the spousal privilege. Communications that are intended
to be disclosed to third parties are generally not protected by privilege because
there would be no reasonable expectation of confidentiality in such
12
communications. Barrett v. Vojtas, 182 F.R.D. 177, 179 (W.D. Pa. 1998);
Commonwealth. v. Hunter, 60 A.3d 156, 159-60 (Pa. Super. Ct. 2013) (finding that
defendant could not have reasonably expected her texts to her husband to remain
confidential where she testified that the texts had been the subject of a county child
welfare agency hearing that likely contained relevant material for the current
proceedings).
In the divorce proceedings, William J. Dommel filed a Petition for Special
Relief expressly regarding the operation and financial status of plaintiffs’ horsebreeding business. (Doc. 81-1, Ex. C). Mr. Dommel stated that Ms. McHenry
retained all of the breeder’s awards, which was an integral part of the business’s
income, and removed all of the office equipment and horse registrations, which
negatively impacted the operation of the business. (Id.) Morever, Mr. Dommel
alleged that, as a result of Ms. McHenry’s actions, the business was unable to pay its
bills and the Bank commenced foreclosure proceedings. (Id.) Based upon these
allegations in the public record, it is clear that Mr. Dommel waived any spousal
privilege with regards to Ms. McHenry’s role in and the operation of plaintiffs’
business. He simply did not have a reasonable expectation of confidentiality in
court filings made on the record, which directly placed the operation of the
business and division of assets at issue.
13
C.
Protective Order for Undue Burden
Plaintiff also seek a protective order because plaintiffs allege that the
subpoena issued to Ms. McHenry is overly broad and unduly burdensome. Federal
Rule of Civil Procedure 45 states that the court “must quash or modify a subpoena”
that “subjects a person to undue burden.” FED . R. CIV . P. 45(c)(3)(A)(iv). Similarly,
Rule 26© permits the court, for good cause, to issue a protective order to prevent
annoyance, embarrassment, or undue burden. FED . R. CIV . P. 26(c)(1).
For motions to quash or requests for a protective order, the court must
balance the need of the party seeking discovery against any hardships created by
permitting discovery. Lindsay v. C.R. Bard, Inc., Misc. Nos. 1:MC-10-441 & 1:MC10-442, 2011 WL 240104, at *1 (M.D. Pa. Jan. 24, 2011). The court will consider the
following factors: (1) relevance; (2) the requesting party’s need; (3) the breadth of
the request; and (4) the burden imposed. Id.; Grider v. Keystone Health Plan Cent.,
Inc., Civ. A. No. 05-MC-40, 2005 WL 2030456, at *7 (M.D. Pa. July 28, 2005).
In considering these factors, the court finds that the Bank’s need for the
information outweighs the burden on Ms. McHenry. Plaintiffs argue that the Bank
has not demonstrated a need for the documents and testimony covered by the
subpoena and that the request is not narrowly tailored to relevant material. (Doc.
78 at 5-6). On the contrary, the Bank has clarified the precise issues that it seeks to
pursue, and has demonstrated its need for the business records because plaintiffs
have not been able to provide the evidence. (Doc. 81 at 14-15). Moreover, the scope
of the document request in the subpoena is limited to documents evidencing the
14
division of property from the divorce, including horses and equipment. (Id. at 14).
These requests are clearly relevant to the issue of the decline and current state of
the businesses and property.
Finally, Plaintiffs have failed to establish good cause for the issuance of a
protective order. The court is authorized to issue a protective order only after the
requesting party meets its burden to show that good cause exists for protection of
the material at issue. Glenmede Trust Co. v. Thompson, 56 F.3d 476, 483 (3d Cir.
1995). Good cause is established when the requesting party demonstrates that
disclosure will cause a “clearly defined and serious injury.” Id. Broad allegations of
harm, however, when unsubstantiated with specific examples or clear reasoning, do
not establish a showing of good cause. Pansy v. Borough of Stroudsburg, 23 F.3d
772, 786 (3d Cir. 1994). Plaintiffs generally claim that the risk of injury to Ms.
McHenry outweighs the Bank’s need for the information, and the subpoena is solely
designed to harass and embarrass Mr. Dommel and Ms. McHenry. (Doc. 82 at 8-10).
This type of broad allegation is insufficient to establish good cause.
III.
Conclusion
For the foregoing reasons, the court will deny plaintiff’s motion to quash and
for a protective order (Doc. 77). An appropriate order will issue.
/S/ CHRISTOPHER C. CONNER
CHRISTOPHER C. CONNER
Chief Judge, Middle District of Pennsylvania
Dated:
September 11, 2013
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
DOMMEL PROPERTIES, LLC,
LAND OF BELIEVE FARM, INC.,
WILLIAM J. DOMMEL, and
ROBERT W. DOMMEL,
Plaintiffs,
v.
JONESTOWN BANK AND TRUST
COMPANY, now known as JBT,
LEBANON COUNTY TAX CLAIM
BUREAU, and SALLIE A. NEUIN,
Defendants
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
CIVIL ACTION NO. 1:11-CV-02316
(Chief Judge Conner)
ORDER
AND NOW, this 11th day of September, 2013, upon consideration of
plaintiffs’ motion to quash and for a protective order (Doc. 77), and for the reasons
set forth in the accompanying memorandum, it is hereby ORDERED that:
1.
The motion to quash and for a protective order (Doc. 77) is DENIED.
2.
On or before thirty (30) days from the date of this order, Ms. Denise
McHenry shall comply with defendant Jonestown Bank & Trust
Company’s document requests, and the parties shall forthwith arrange
for Ms. McHenry to be deposed pursuant to Federal Rule of Civil
Procedure 30, subject to all of Ms. McHenry’s other legal rights and
privileges.
/S/ CHRISTOPHER C. CONNER
CHRISTOPHER C. CONNER
Chief Judge, Middle District of Pennsylvania
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?