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Court Determines if Subpoenas Were Defective

In an action by the guardian of the person and property of an incompetent (ward), the founder and former president and chief executive officer of defendant and third-party plaintiff, a not-for-profit corporation formed in 1968 to deliver various health-related and other services to the poor in the South Bronx. A New York Family Lawyer said the suit includes claims for, among other things, breach of contract, an accounting of deferred compensation deposited into a trust account for the ward, liquidated damages, and breach of corporation’s obligation to pay the ward’s medical expenses and retirement benefits.

According to a New York Custody Lawyer, the corporation answered the complaint, denying the material allegations therein, and commenced a third-party action against the ward’s Family Trust, established by the members of his family, in which it alleges, inter alia, that the ward engaged in various acts of self-dealing and malfeasance, including improper maintenance of time records and misuse of corporate funds and credit cards for certain personal expenses for hotels, trips and gifts. According to the corporation, the incompetent previously obtained substantial payments and benefits from it and now seeks additional compensation based on unverified, inaccurate and unreliable time records, as well as unauthorized benefits and insurance policies for himself and others. The corporation also seeks damages and/or an offset against all amounts sought by plaintiff, plus a return of prior payments made to, or on behalf of, the ward during the period he breached his fiduciary duties, including disgorgement of assets transferred by the ward to the family trust.

Thereafter, the corporation served a total of 13 subpoenas duces tecum on nonparties, including 3 nonparty movants, seeking, inter alia, production of all documents concerning the ward’s relationship to the nonparty movants, any business trips taken by him on behalf of the nonparty movants, and the employment or equity interest of any member of his family in the nonparty movants. A Nassau County Family Lawyer said the subpoenas also sought all documents regarding any equity interest of the corporation’s former comptroller, and the payment of salary, benefits and dividends to him in connection with his relationship to the nonparty movants. Finally, the subpoenas sought all documents concerning any contracts between the nonparty movants and the corporation.

Plaintiff and the Family Trust moved, pursuant to CPLR 3103, for a protective order quashing all 13 nonparty subpoenas issued by the corporation on the grounds, inter alia, that the subpoenas were facially defective and thus unenforceable because they did not contain a notice setting forth the reasons why such disclosure was sought, as required by CPLR 3101 (a) (4), and that they lacked specificity and were overly broad in that they contained “scattergun demands for all manner of records without showing any relationship to the issues framed by the pleadings in this action.”

In opposition, the corporation maintained that the documents sought from the nonparties were necessary and material to prove that the ward was not entitled to hundreds of thousands of dollars of compensation and benefits that he sought in the lawsuit, and were further necessary to provide specific documentary support for its affirmative defenses and counterclaims that the ward was liable to it for damages and forfeiture of compensation and benefits due to his actions and omissions as president of the corporation.

Thereafter, by notice of motion, nonparties also moved pursuant to CPLR 2304 to quash the subpoenas served upon them on the additional grounds that they were unduly burdensome, lacked the requisite specificity and inappropriately sought to broaden the scope of discovery, citing the corporation’s failure to meet its burden of showing inability to obtain the records otherwise. A corporation also asserted that the subpoenaed records were critical to its defenses. A Nassau County Custody Lawyer said the counterclaims especially in light of the fact that the ward suffers from Alzheimer’s disease and will be unable to provide any testimony regarding the subjects of the subpoenas and that plaintiff claims to have no knowledge or documents regarding these issues critical to its defense and counterclaims.

The motion court, finding that none of the subpoenas served by the corporation provide the notice required by CPLR 3101 (a) (4) to the nonparties from whom discovery is sought and are thus facially invalid, granted plaintiff’s and the family trust’s motion and quashed the subpoenas served on all nonparties, except those that had already been complied with during the pendency of the motion. The court also granted the remainder of the nonparty movants’ motion to quash the portions of the subpoenas seeking to discover compensation records for the ward’s family and for the former comptroller on the ground that such records, regardless from whom they are requested, are patently irrelevant. However, it denied that portion of the nonparty movants’ motion seeking to quash the portion of the subpoenas that sought discovery of compensation records for the ward.

The issue to be resolved in this case is whether, in the circumstances presented, the motion court properly granted motions to quash certain nonparty subpoenas duces tecum on the ground that they were defective on their face because they failed to comply with CPLR 3101 (a) (4), which requires that a request for disclosure from “any other person be upon notice stating the circumstances or reasons such disclosure is sought or required.

The Court reversed the motion court’s order to the extent appealed from and hold that the motions to quash the subpoenas should have been denied in all respects.

CPLR 3101 (a), which establishes the broad scope of disclosure in CPLR article 31 and mandates full disclosure of all matter material and necessary in the prosecution or defense of an action, “sounds the keynote for the entire article and has pervasive bearing on all of it”. Unless otherwise provided by the CPLR or the court, the normal method of obtaining disclosure from parties to an action, for instance, depositions upon oral questions shall be by stipulation or on notice without leave of the court.

For disclosure purposes, a party is distinguished from a nonparty and where disclosure is sought against a nonparty more stringent requirements are imposed on the party seeking disclosure. Thus, where the person to be deposed is not a party, he or she must be served with a subpoena issued pursuant to CPLR 3106 (b). Where production of “books, papers and other things” is also sought in conjunction with his or her deposition, a notice or subpoena pursuant to CPLR 3111 is the appropriate device, and the party serving the subpoena should describe the items sought and be certain to make the subpoena unambiguous, requiring both attendance by the recipient and production of the item. If the party seeking the disclosure is not interested in taking a deposition, but merely wants a nonparty witness to produce for discovery and inspection a paper or other tangible item in his or her possession, the remedy is an outright subpoena under CPLR 3120.

Prior to 2003, although a nonparty witness could be deposed simply by service of a subpoena with the requisite notice of the circumstances or reasons why such disclosure was sought, a subpoena duces tecum requiring production of documents to be used in conjunction with such deposition was not sufficient. A motion on notice was required by former CPLR 3120 (b) to obtain nonparty document discovery. Such subpoena would also be defective where it did not contain nor was it accompanied by a notice required by CPLR 3101 (a) (4).

Here, however, it was only in response to the motion by the plaintiff and the third-party defendant for a protective order quashing the subpoenas served on the nonparties that Hunts Point invoked CPLR 3120 and argued that rule 3120 contains no requirement that a subpoena include the notice required by CPLR 3101 (a) (4), and that such notice appears to be applicable only to subpoenas requiring deposition testimony, which is not the case here.

In quashing the subpoenas as facially invalid, the motion court, relying on this Court’s decision in previous cases which held that although the corporation eloquently articulated the need for the discovery sought, such notice was provided to the court and not the nonparties from whom discovery is sought. Consequently, the court held that notice must be given to those subpoenaed. However, whether the motion court could have permitted the omissions to be corrected was a question the case did not reach since no such relief was sought. Here, on the other hand, the corporation, citing the case, requested such relief, albeit in a footnote to its opposing papers.

Accordingly, the court now reach the question and hold that the CPLR 3101 (a) (4) notice requirement applicable to subpoenas duces tecum issued pursuant to CPLR 3111 is equally applicable to nonparty subpoenas issued pursuant to CPLR 3120. Nevertheless, although the better practice, indeed the mandatory requirement of CPLR 3101 (a) (4), is to include the requisite notice on the face of the subpoena or in a notice accompanying it, given the evidence presented by the corporation in opposition, the motions to quash the subpoenas should have been denied. The motion court’s findings, that the corporation’s papers articulated the need for the discovery sought and that “the majority of the items sought are relevant to the defense of the litigation herein” and are “not so voluminous so as to constitute an undue burden on the custodians of said documents,” were sufficient to grant such relief absent any apparent prejudice to the nonparties served.

It is well settled that the purpose of a subpoena duces tecum is to compel the production of specific documents that are relevant and material to facts at issue in a pending judicial proceeding. It is equally well settled that a motion to quash a subpoena duces tecum should be granted only where the materials sought are utterly irrelevant to any proper inquiry. “Moreover, the burden of establishing that the requested documents and records are utterly irrelevant is on the person being subpoenaed”

Plaintiff, the third-party defendant and the nonparty movants have failed to demonstrate that the nonparty movants’ compensation records for the ward’s family members and former comptroller were utterly irrelevant. Rather, the compensation records sought by Hunts Point pertain to the former comptroller, ward’s son, the president of the non-parties corporation; and ward’s wife and plaintiff herein, an executive with the other non-party correctly argues that since this action involves alleged malfeasance on the part of the ward, the salaries of his son and wife are very material to its affirmative defenses and counterclaims that the ward breached his fiduciary duties to the corporation. The compensation records of the ward’s wife and son at companies with which he caused the corporation to contract may, at the very least, serve to demonstrate the extent of the ward’s personal interest in those entities and any possible breach of his fiduciary duty to the corporation.

Thus, given the foregoing uncontested allegations, the corporation is entitled to the requested records from the non-parties in order to establish to what extent the ward and his family members profited or received benefits from those entities while the corporation had contracts with them. The family members’ compensation records are highly relevant because they can show the extent to which those family members were profiting by his alleged breach of fiduciary duty when he and the former comptroller purportedly steered business to these entities for their own personal financial gain and that of the family. Since the subpoenas directed to the nonparty movants are aimed at production of compensation records critical to proving the corporation’s defenses and counterclaims, it cannot be said that such records are utterly irrelevant. Rather, the records sought are material and necessary to the facts at issue in this lawsuit.

Accordingly, the order of the Supreme Court, Bronx County, which, insofar as appealed from as limited by the briefs, granted the motions of plaintiff and third-party defendant and the nonparty movants to quash certain nonparty subpoenas duces tecum served upon the nonparties in search of records showing the compensation received by the ward and his family members and defendant’s former comptroller, and quashed in their entirety all other nonparty subpoenas duces tecum, should be reversed, on the law, the facts and in the exercise of discretion, without costs, the motions denied and the nonparty witnesses directed to comply with the subpoenas within 20 days of service upon them of a copy of this Court’s order with notice of entry.

Here in Stephen Bilkis and Associates, we handle numerous family related cases. Our Bronx County Domestic Violence Attorneys are here to defend abused spouses. Similarly, our Bronx County Order of protection lawyers will help those abused victim in order to vindicate their rights.

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