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BRASSCO, INC. v. KLIPO

June 21, 2004.

BRASSCO, INC. Plaintiff,
v.
ANDRZEJ KLIPO and BEATA KLIPO, Defendants.



The opinion of the court was delivered by: DEBRA FREEMAN, Magistrate Judge

MEMORANDUM AND ORDER

INTRODUCTION

Plaintiff Brassco, Inc. ("Brassco") moves to compel defendants Andrzej Klipo and Beata Klipo (collectively "the Klipos") to produce certain financial statements, tax returns, and information regarding real estate allegedly owned by the Klipos. Brassco additionally moves for an order allowing it to serve a subpoena duces tecum on Marine Midland Bank for information with respect to certain bank accounts in the Klipos' name. Brassco also requests that the Court issue a Request for International Judicial Assistance pursuant to the Hague Convention, 28 U.S.C. § 1781, so that certain documents held by financial institutions in Poland may be produced for use at trial in this case, in the United States. The Klipos oppose the motion to compel, but argue in the alternative that, should the motion be granted, production should be made pursuant to a protective order. The Klipos further request that Brassco pay all costs and expenses related to providing any discovery items that the Court orders produced.

  Brassco's motion to compel is granted in part and denied in part. To the extent that it is granted, any information that is produced in accordance with this Order should be treated as confidential, pending issuance of a protective order, the form of which should be discussed between the parties and proposed to the Court. Brassco's further motion for a Request for International Judicial Assistance pursuant to the Hague Convention is also granted in part and denied in part, for the same reasons set forth herein. A Request reflecting the Court's ruling is being separately issued by the Court. Finally, the Klipos' request that their discovery costs be shifted to Brassco is denied.

  BACKGROUND

  Brassco brings this action against its two former employees for damages arising out of alleged fraud, breach of contract, breach of fiduciary duty, breach of the duty of loyalty, misappropriation, conversion, prima facie tort, and for an accounting. (Complaint ("Compl.") filed April 26, 1999 (Dkt. 1) at ¶ 1.) Between July 1, 1994 and July 31, 1998, Andrzej Klipo was the President and Treasurer of Brassco, and between August 1, 1994 and July 31, 1998, Beata Klipo was the President's assistant. (Id.) The Klipos are married and are citizens of Poland, although, during the relevant periods, they resided in the state of New York, where Brassco maintains its executive offices. (Id. ¶¶ 2-4; 14.)

  Brassco alleges that the Klipos, without the knowledge of Brassco's Board of Directors, caused Brassco to deviate from its business strategy of marketing in the United States metal products produced in Poland (Id. ¶ 1) Instead, the Klipos allegedly caused Brassco to purchase agriculture products and processed food in the United States ("food products"), for sale to companies in Poland and Canada ("the Foreign Companies"), which were run by the Klipos' friends. (Id.) Brassco alleges that the Klipos recorded the food products sales as metal products transactions in Brassco's corporate ledger and that they caused Brassco to sell food products at or below cost, essentially extending interest-free credit to the foreign buyers. (Id. ¶¶ 19-28.) Brassco further alleges that the Klipos failed to inquire as to the creditworthiness of any of the Foreign Companies, and continued to cause Brassco to sell the food products on very favorable terms, even when the Klipos knew that the Foreign Companies were behind in payment on the outstanding invoices. (Id. at ¶¶ 24-26.) As a result of the food product transactions, Brassco allegedly suffered substantial actual and consequential damages. (Id. ¶ 1.)

  DISCUSSION

  I. BRASSO'S MOTION TO COMPEL

  A. Legal Standards

  Rule 26(b)(1) states that parties may obtain discovery "regarding any matter, not privileged, that is relevant to the claim or defense of any party. . . . Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence." Id.; see also Nat'l Cong. for Puerto Rican Rights ex rel. Perez v. City of New York, 194 F.R.D. 88, 92 (S.D.N.Y. 2000) ("In federal actions, discovery should be broad, and all relevant materials which are reasonably calculated to lead to the discovery of admissible evidence should be [discoverable].") (quotation marks and citation omitted). Limitations are imposed only "on discovery sought in bad faith, to harass or oppress the party subject to it, when it is irrelevant, or when the examination is on matters protected by a recognized privilege." In re Six Grand Jury Witnesses, 979 F.2d 939, 943 (2d Cir. 1992) (citing Hickman v. Taylor, 329 U.S. 495, 507-08, 67 S.Ct. 385, 391-92, 91 L.Ed. 451 (1947)).

  When a party fails to respond to discovery requests, Rule 37 permits the requesting party to apply for an order compelling disclosure or discovery. Fed.R.Civ.P. 37(a). Specifically, a party may move to compel document production, disclosures required under Rule 26(a), or answers to interrogatories or deposition questions.

  B. Financial Documents

  Brassco requests that the Klipos be compelled to produce information related to several bank accounts, specifically: signature cards; new account forms; year-end or other periodic account summaries; monthly or other periodic account statements; computer printouts of all transactions; documents concerning wire transfers into or out of the accounts, instructions with respect to such transfers; and any other correspondence, for the time period from January 1, 1994 to December 31, 1999. (Letter Motion Pursuant to Rules 26(b) and 37 of the Federal Rules of Civil Procedure ...


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