RBC Bank USA v. Epps et al

Filing 131

ORDER denying 92 Motion to Quash; granting 101 Motion to Compel. Defendants Alvin H. Shuman, McKean Properties, LLC, and David OConnell shall serve their responses to Plaintiffs discovery requests within ten days of the date of this Order. Signed by Magistrate Judge Thomas E Rogers, III on 02/13/2012.(dsto, )

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH CAROLINA
FLORENCE DIVISION
RBC BANK (USA),

)
)
Plaintiff,
)
)
-vs)
)
)
THOMAS DARIN EPPS, et al;
)
)
Defendants.
)
___________________________________ )
I.

Civil Action No.: 4:11-cv-0124-RBH-TER

ORDER

INTRODUCTION
Presently before the Court are Defendant Robert Hedesh, Esq.’s Motion to Quash (Document

# 92) and Plaintiff’s Motion to Compel (Document # 101). All pretrial proceedings in this case were
referred to the undersigned pursuant to the provisions of 28 U.S.C. § 636(b)(1)(A) and (B) and Local
Rule 73.02(B)(2)(e), DSC.
II.

MOTION TO QUASH
Defendant Robert Hedesh, Esq. (Hedesh) seeks an order quashing a subpoena issued by

Plaintiff to Horry County State Bank that requests production of all banking records of Hedesh or
his law practice, Robert A. Hedesh, Esq., for the year 2008.
This case involves alleged RICO violations. Plaintiff asserts that in 2008, it extended loans
to 24 borrowers, each of whom ostensibly sought either to acquire or to refinance residential property
located in the Myrtle Beach area. Plaintiff alleges that, in reality, the borrowers were either
participants in an elaborate mortgage fraud scheme or “straw buyers” recruited to participate in such
a scheme.
Plaintiff alleges in its Complaint that Hedesh “was the principal escrow agent, settlement

agent and closing attorney” used in the transactions. Complaint ¶ 53(m). Hedesh has elsewhere
testified that, during the time of these transactions, he maintained three trust accounts. Deposition
of Robert A. Hedesh, taken Sept. 11, 2009, in Robert A. Hedesh, Esq., LLC v. Seidel, No.
2009-CP-26-3278 (Hedesh 2009 Dep.), pp. 36-37 (attached as Exhibit A to Plaintiff’s Response).
Two of those accounts, maintained at another bank, were for transactions not involving Malia
McCaffrey, a central figure in the scheme. The third trust account, at Horry County State Bank, was
used exclusively for McCaffrey’s transactions. Hedesh 2009 Dep. p. 37. As alleged in the
Complaint, McCaffrey, a Title Agent, assisted the Enterprise by preparing fraudulent HUD-1s,
accepting borrower contributions from third-parties, and distributing proceeds to co-conspirators
through various dummy corporations. She had sole custody of the checkbook for the Horry County
State Bank trust account, which was used for all of the transactions in which she was involved.
Hedesh 2009 Dep. p. 103. The checks were located in McCaffrey’s office, which at the time of these
transactions was located several blocks away from Hedesh’s office. Hedesh 2009 Dep. pp. 66-67.
Hedesh did not have a key to either McCaffrey’s office or to the credenza in which the checks were
located. Hedesh Dep. pp. 119; 121-122.
When a new client came in for closing, McCaffrey created the file and continued to retain
it, even after the matter closed. Deposition of Robert A. Hedesh, taken July 7, 2010, in First
Reliance Bank v. Wolf, No. CP-09-21-973 (Hedesh 2010 Dep.), pp. 9-10; 12-13 (attached as Exhibit
B to Plaintiff’s Response). She would perform the title search. Hedesh 2010 Dep. pp. 6-7. She would
then receive the loan package from the bank, including the lender closing documents. Hedesh 2010
Dep, pp. 5, 100. If Hedesh was called upon to prepare a deed, it was McCaffrey who actually
prepared it. Hedesh 2009 Dep. p. 99.

McCaffrey would prepare the HUD-1, produce the
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disbursement checks, and set up the date and time for the closing. Hedesh 2010 Dep. pp. 5, 25;
Hedesh 2009 Dep. p. 101. Hedesh also allowed McCaffrey to reconcile the IOLTA account, asking
only, “did it balance?” Hedesh 2009 Dep. pp. 34-35.
Hedesh argues that the subpoena is overly broad because the information sought by Plaintiff
in the subpoena will include loan closing transactions for clients who have no connection to this
action. Plaintiff argues that such a result is unavoidable and one purpose for the requested discovery
is to discover the existence and extent of third party involvement in the RICO scheme and limiting
the subpoena to include transactions involving only those parties about which Plaintiff already
knows would defeat this purpose. Further, Plaintiff argues, the bank has no way to determine which
deposits and which checks are for which transactions.
“Parties may obtain discovery regarding any nonprivileged matter that is relevant to any
party’s claim or defense–including the existence, description, nature, custody, condition, and location
of any documents or other tangible things and the identity and location of persons who know of any
discoverable matter.” Fed.R.Civ.P. 26(b)(1). “Determining whether a subpoena is overly broad
‘cannot be reduced to formula; for relevancy and adequacy or excess in the breadth of the subpoena
are matters variable in relation to the nature, purposes and scope of the inquiry.’” Packwood v.
Senate Select Committee on Ethics, 510 U.S. 1319, 114 S.Ct. 1036, 1037 (1994) (citing Oklahoma
Press Publishing Co. v. Walling, 327 U.S. 186, 209, 66 S.Ct. 494, 505-506, 90 L.Ed. 614 (1946)).
Based upon the facts presented, the subpoena as written is not overly broad as it is limited to (1) the
bank account over which the evidence indicates McCaffery1 had significant control and (2) the year
1

Hedesh has elsewhere acknowledged that McCaffrey was “involved in some wrongdoing
with respect to mortgage transactions.” (RBC Bank v. Hedesh et. al., 5:11-CV-19 (E.D.N.C.),
Doc. No. 16, ¶ 13).
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2008, the year in which Plaintiff alleges it suffered as a result of the alleged scheme.
Hedesh also argues that the subpoena seeks privileged information, citing to Rule 1.6 of the
South Carolina Rules of Professional Conduct, Rule 407, SCACR, and two South Carolina Ethics
Advisory Opinions. Ruel 1.6(a) provides, “[a] lawyer shall not reveal information relating to the
representation of a client unless the client gives informed consent, the disclosure is impliedly
authorized in order to carry out the representation or the disclosure is permitted by paragraph (b).”
The attorney-client privilege is to be narrowly construed. Hawkins v. Stables, 148 F.3d 379,
383 (4th Cir. 1998). “The burden is on the proponent of the attorney-client privilege to demonstrate
its applicability.” United States v. Jones, 696 F.2d 1069, 1072 (4th Cir. 1982). Other than the Ethics
Advisory Opinions2, which he acknowledges are not binding law, Hedesh fails to point to any
authority that an attorney’s bank records are protected by the attorney-client privilege. Rather, courts
that have considered the issue have rejected such an argument. For example, in SEC v. First Security
Bank of Utah, 447 F.2d 166 (10th Cir. 1971), the 10th Circuit rejected the intervenors-attorneys’
argument that a subpoena requiring production of their bank records violated the attorney-client
privilege. As the court noted,
[t]he deposit and disbursement of money in a commercial checking account are not
confidential communications. The records are the property of the bank and are made
by it for its business purposes. . . . The maintenance of checking accounts is not
shown to have any relevance to any communications made in confidence between a
lawyer and client for the purpose of obtaining legal advice. A client may not
2

The Ethics Advisory Committee notes in one of the Opinions submitted by Hedesh that
“[a]lthough some information may be both privileged and ethically protected, much information
that is ethically protected may not be privileged. Courts and other bodies with subpoena power
can require its revelation. . . . The Committee advances no opinion on the issue of whether such
information is “privilege” [sic] under applicable rules of evidence, or the corresponding issue of
whether a court of competent jurisdiction could order its disclosure.” Ethics Advisory Opinion
90-14.
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immunize his business transactions from discovery by the device of a lawyer’s
commercial checking account.
SEC, 447 F.2d at 167. See also Reiserer v. United States, 479 F.3d 1160, 1165 (9th Cir. 2007)
(“there is no confidentiality where a third party such as a bank either receives or generates the
documents sought”); In re Grand Jury Subpoena, 831 F.2d 225, 227-228 (11th Cir. 1987) (“An
attorney who acts as his client’s agent for receipt or disbursement of money or property to or from
third parties is not acting in a legal capacity, and records of such transactions are not privileged.”);
Harris v. United States, 413 F.2d 316, 319-20 (9th Cir. 1969) (“[T]he client, by writing the check
which the attorney will later cash or deposit at the bank, has set the check afloat on a sea of strangers.
The client knows when delivering the check, and the attorney knows when cashing or depositing it,
that the check will be viewed by various employees at the bank where it is cashed or deposited, at
the clearing house through which it must pass, and at his own bank to which it will eventually return.
Thus, the check is not a confidential communication, as is the consultation between attorney and
client.”); O’Donnell v. Sullivan, 364 F.2d 43, 44 (1st Cir. 1966) (finding that bank records are not
confidential communications to an attorney by a client). Because Horry County State Bank’s records
do not involve confidential communications between Hedesh and his clients, the records are not
protected by the attorney-client privilege.3
Accordingly, Hedesh’s Motion to Quash (Document # 92) is denied.
III.

MOTION TO COMPEL
Plaintiff seeks an order compelling Defendants Alvin H. Shuman, McKean Properties, LLC,

3

Defendant asserts globally the attorney-client privilege over this bank account.
However, no privilege log has been submitted. Thus, to the extent a particular transaction or
document would be protected, it is not before the Court.
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and David O’Connell4 (these Defendants) to respond to Plaintiff’s Interrogatories and Requests for
Production of Documents (discovery requests). On April 29, 2011, Plaintiff served its discovery
requests on these Defendants. Responses to the discovery requests were due June 1, 2011. These
Defendants failed to serve their responses by the deadline. Plaintiff sent a letter to these Defendants
granting an extension of the deadline through June 20, 2011. These Defendants failed to serve their
responses by the extended deadline. As a result, Plaintiff filed the present Motion to Compel. These
Defendants have not filed a Response to the Motion to Compel. Accordingly, Plaintiff’s Motion to
Compel is granted. Defendants Alvin H. Shuman, McKean Properties, LLC, and David O’Connell
shall serve their responses to Plaintiff’s discovery requests within ten days of the date of this Order.
IV.

CONCLUSION
For the reasons discussed above, Hedesh’s Motion to Quash (Document # 92) is DENIED

and Plaintiff’s Motion to Compel (Document # 101) is GRANTED. Defendants Alvin H. Shuman,
McKean Properties, LLC, and David O’Connell shall serve their responses to Plaintiff’s discovery
requests within ten days of the date of this Order.
IT IS SO ORDERED.
s/Thomas E. Rogers, III
Thomas E. Rogers, III
United States Magistrate Judge
February 13, 2012
Florence, South Carolina

4

Plaintiff also included Defendants John M. Warner, Jr. and Warfin Developers, LLC in
its Motion to Compel, but subsequently withdrew its Motion as to these two Defendants after it
received their discovery responses.
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