United States District Court, E.D. New York
April 20, 2005.
UNITED STATES OF AMERICA,
RW PROFESSIONAL LEASING SERVICES CORP., also known as "Professional Leasing Services," ROCHELLE BESSER, also known as "Rochelle Drayer," BARRY DRAYER, ROGER DRAYER, ADAM DRAYER, MYRNA KATZ, and STEPHEN BARKER, Defendants.
The opinion of the court was delivered by: ARTHUR SPATT, District Judge
MEMORANDUM OF DECISION AND ORDER
This decision concerns a motion pursuant to Rule 17(c) of the
Federal Rules of Criminal Procedure ("Fed.R.Crim.P.") by
non-party CIT Group, Inc. ("CIT") to quash the Subpoena ducus
tecum (the "Subpoena") served by RW Professional Leasing Services
Corp. ("RW"). In the alternative, CIT seeks to limit or modify
On or about April 2, 2003, RW was indicted and charged, along
with other defendants, with conspiracy to commit bank fraud and
wire fraud, and with committing bank fraud, and money laundering.
According to the superseding indictment filed on March 4, 2004,
RW was a closely held corporation that arranged financing for
medical providers to lease equipment and offered working capital
loans to medical providers. To provide these services, RW
obtained loans from financial institutions for the purported
purpose of purchasing medical equipment that would be leased to
medical providers. In many instances, the leases and the medical
equipment served as collateral for the loans.
The indictment charges that RW devised a scheme that involved
submitting sham documentation to financial institutions in order
to create the false impression that RW was providing leases for
its customers. It is further alleged that RW issued phony
equipment invoices directly to the medical providers in order to
receive payments that should have gone directly to the lending institutions. Instead of
submitting the medical provider's lease payments to the lending
institutions, it is alleged that RW would intentionally retain
the lease payments. In addition, it is alleged that RW concealed
prepayments and defaults of medical providers by creating false
checks that were designed to make it appear as though the medical
providers were continuing to make payments under their leases.
Newcourt Leasing Corporation ("Newcourt"), formerly known as
AT&T Capital Leasing Services, Inc. ("AT&T Capital"), was one of
the lending institutions that RW dealt with in these financial
transactions. CIT, the non-party and movant in this dispute, is
the successor to Newcourt. Beginning in 1992, RW was one of
approximately 30 other lease originators that participated in a
leasing arrangement with AT&T Capital known as the "Private Label
Program." This program allowed lease originators to arrange all
aspects of a capital lease and then present it to AT&T Capital
for funding. This included originating the leases; approving
applications; generating lease documents; and approving all
vendors, brokers, and end-users. After preparing the lease, the
lease originator would then present the leases to AT&T Capital.
If AT&T Capital decided to become the funding source it would
purchase the lease contract for a discounted price.
Through the Private Label Program, AT&T Capital was assigned
leases by RW and was granted a continuing security interest in
all equipment included in those leases, but it did not assume any of RW's obligations or duties.
At one point during their business relationship, the RW portfolio
of leases funded through AT&T's Capital exceeded $53 million and
included more than 1,300 lessees.
In August 1995, AT&T and RW ceased doing additional business
with each other but RW continued to manage and service the leases
that remained affiliated with AT&T. In that same year, CIT
succeeded AT&T Capital and withdrew the remaining leases that
were being serviced by RW. It is further alleged that when CIT
introduced itself to the lessees of these leases it became aware
of the apparent conversion of CIT's funds and the fraudulent and
wrongful action of RW and its principals as detailed in the
In 1996, RW commenced a law suit in Nassau County Supreme Court
against CIT (the "state action") alleging certain contract claims
related to the withdrawal of the leases. In this action CIT
brought several counterclaims against RW and its principals
asserting, among other things, fraud, misrepresentation,
conversion, and a request for a permanent injunction. The state
action lasted for seven years. In April 2003, the state action
was settled after the commencement of the criminal proceeding
There was extensive discovery by and between CIT and RW in the
state action. CIT asserts that it responded to fourteen separate
document demands and three separate sets of interrogatories
propounded by RW. CIT also states that no less than eighty-eight banker's boxes of documents were exchanged. The
documents that RW sought in the initial proceeding were retrieved
by CIT from computer databases that have been in use since 1992.
In order to comply with discovery, CIT had to employ a computer
consultant to write computer programs that could extricate the
necessary information from these databases. This consultant was
employed at the expense of CIT so that they could comply with
RW's discovery demands.
On August 25, 2004 RW filed the Subpoena with the Deputy Clerk
of the United States District Court for the Eastern District of
New York. The Subpoena consists of twenty-one document requests.
On November 11, 2004, CIT filed the instant motion to quash the
Subpoena arguing that it should not be compelled to comply
because the requests are general and unspecific. In addition, CIT
claims that many of the documents sought by the Subpoena are not
relevant and are inadmissible.
In particular, CIT states that they should not have to
re-produce the documents that were exchanged during discovery in
the state action because they were either already produced and
provided by CIT to RW, or produced to CIT by RW. CIT also asserts
that the document requests consist of only generalized and
unspecified demands that would result in the production of every
document ever created, generated, or received in relation to RW's
1,300 leases funded by AT&T. CIT contends that fourteen of RW's
requests for documents lack specificity; are overly broad; and
fail to focus on the events where RW is alleged to have engaged
in fraudulent and wrongful activities. In addition, according to CIT
many of the requests seek company wide information that is wholly
irrelevant to RW and its criminal litigation.
CIT also claims that the Subpoena served upon it is
unreasonable and oppressive. CIT asserts that the requests were
not made in good faith and therefore constitute a "fishing
expedition." It further states that any production of documents
in accordance with the Subpoena should properly be limited to
those relevant documents which pertain to the accounts relating
to the alleged fraudulent and wrongful activities of RW and its
RW concedes that certain documents were provided during the
state action, and that those documents need not be re-produced.
However, RW claims that CIT did not fully comply with RW's
discovery requests in the state action, and therefore, in that
respect the Subpoena in the criminal action does not request
duplicative material. RW also claims that CIT has not, in these
motion papers, provided any specific information as to what
documents it has already produced in response to RW's requests.
RW proposes that CIT provide it with a Bate-stamp number and a
certificate of authenticity for all the documents it has already
produced so that the information may be admissible as evidence
under Rule 803(6) of the Federal Rules of Evidence. RW also
argues that many of the documents produced in the state action by
CIT were substantially redacted and that CIT should not be
entitled to make such redactions in this criminal case document production. RW also contends that all
the documents requested are relevant and integral parts of RW's
defense in the criminal case in that they will show that RW was
not a sham operation, and was not engaged in any kind of fraud.
I. Motion to Quash a Subpoena Standard
Federal Rules of Criminal Procedure section 17(c) governs the
issuance of Subpoenas that seek production of documents and other
items in criminal cases. Rule 17(c) states:
(c) Producing Documents and Objects.
(1) In General. A Subpoena may order the witness to
produce any books, papers, documents, data, or other
objects the Subpoena designates. The court may direct
the witness to produce the designated items in court
before trial or before they are to be offered in
evidence. When the items arrive, the court may permit
the parties and their attorneys to inspect all or
part of them.
(2) Quashing or Modifying the Subpoena. On motion
made promptly, the court may quash or modify the
Subpoena if compliance would be unreasonable or
The purpose of rule 17(c) is not to facilitate discovery, but
to enable a party to obtain and inspect evidentiary material
prior to trial. United States v. Nixon, 418 U.S. 683, 698-99,
94 S. Ct. 3090, 41 L. Ed. 2d 1039 (1974). The courts have held
that Rule 17(c) should not be broadly interpreted as a discovery
tool in criminal cases and that "courts must be careful that Rule 17(c) is not turned into a
broad discovery device." United States v. Cherry,
876 F. Supp 547, 552 (S.D.N.Y. 1995) (quoting United States v. Cuthbertson,
630 F.2d 139, 146 (3d Cir. 1980)).
In United States v. Nixon, the Supreme Court articulated a
four-tiered test of factual issues for the trial court to resolve
when deciding whether to quash or modify a subpoena duces tecum.
418 U.S. at 683, 94 S. Ct. 3090, 41 L. Ed. 2d 1039. Under the
rule in Nixon, in order for a document request to be valid, it
must not be unreasonable or oppressive. To demonstrate that a
subpoena is not "unreasonable or oppressive" a party must show:
(1) the documents are evidentiary and relevant; (2)
that they are not otherwise procurable reasonably in
advance of trial by exercise of due diligence; (3)
that the party can not otherwise properly prepare for
trial without such production and inspection in
advance to trial and that the failure to obtain such
inspection may tend unreasonably to dely the trial;
and (4) the application is made in good faith and is
not intended as a general "fishing expedition."
Nixon, 418 U.S. at 699-700, 94 S. Ct. 3090, 41 L. Ed. 2d 1039.
In sum, the test in Nixon requires that a party seeking the
production of the documents demonstrate that the materials are
(1) relevant; (2) admissible; (3) specifically identified; and
(4) not otherwise procurable. Id. The burden of proving
relevance and admissibility is on the proponent of the subpoena.
Id.; United States v. Brown, 1995 U.S. Dist. LEXIS 8996, at
*9 (S.D.N.Y. June 30, 1995) (stating that the defendant issuing the subpoena "has [the] burden of specifically
identifying the materials sought and showing that they are
relevant and admissible").
In order to meet its burden, the proponent has to show that the
documents sought are both relevant and admissible at the time of
the attempted procurement. The fact that they are potentially
relevant or may be admissible is not sufficient. See United
States v. Marchisio, 344 F.2d 653, 669 (2d Cir. 1965); United
States v. Jenkins, No. 02-Cr. 1384, 2003 U.S. Dist. Lexis 4312,
at *14 (S.D.N.Y. Mar. 21, 2003). "In this respect, Rule 17(c) can
be contrasted with the civil rules which permit the issuance of
subpoenas to seek production of documents or other materials
which, although not themselves admissible, could lead to
admissible evidence." Cherry, 876 F. Supp. 547, 553 (S.D.N.Y.
1995) (citing Marchisio, 344 F.2d at 669)).
When determining whether a request for documents is
specifically identified, the proponent must show that the
subpoena is being used to obtain relevant evidence and not merely
as a "fishing expedition" to expand discovery. "If the moving
party cannot reasonably specify the information contained or
believed to be contained in the documents sought but merely hopes
that something useful [may] turn up," the specificity requirement
will not be satisfied. United States v. Noriega,
764 F. Supp. 1480, 1493 (S.D. Fla. 1991). A request is generally sufficiently
specific where it limits documents to a reasonable period of time
and states with reasonable particularity the subjects to which the documents relate. See In re Grand Jury
Subpeona, 1992 WL 142014, at *7 (E.D.N.Y. 1992).
II. The Subpoena at Issue
RW's Subpoena makes twenty-one (21) requests for documents from
CIT. The Subpoena runs the gamut, soliciting from CIT a range of
information including, among other things: all documents relating
to RW customers; all documents relating to CIT's losses that were
attributable to RW customers; all documents relating to RW
reserve accounts; and all documents relating to any
communications between CIT and the Government.
A. Document Requests 1, 2, 4, 15 and 21
Requests 1, 2, 4, 15 and 21 in the Subpoena seek the following:
1) Documents relating or referring to losses to CIT
attributable to [RW] customers, including but not
limited to an identification of all customers, the
amount of loss attributed to each customer, and
documents showing the basis for the calculations of
all such losses.
2) Ledgers, including computer printouts, relating to
all customers included in the response to item 1
. . .
4) Cash journals reflecting deposits for all [RW]
. . .
15) All documents relating or referring to contacts
between CIT and American Express Business finances
relating to [RW].
21) All documents relating or referring to any
efforts made by CIT to pursue delinquent [RW]
accounts from February 2000-date.
CIT contends that it has already produced the requested
documents during discovery in the state action and that they can
be reasonably procured by RW itself though due diligence. RW admits that CIT need not re-produce the
materials it has previously delivered in the state action, but
merely provide it with the Bate-stamp numbers and certificates of
authenticity for the documents sought.
The Court finds requests 1, 2, 4, 15 and 21 to be unreasonable.
RW admits that its Subpoena seeks duplicate records, but states
that it is not in the position to assess the extent to which the
previous production satisfies CIT's obligation under this
Subpoena. In the Court's view, it is unreasonable to burden CIT
to re-produce documents that were already given to RW. As for the
documents that were redacted, through due diligence, RW can
provide a more detailed description of the redacted documents so
that CIT can respond accordingly. In fact, in the state action,
CIT provided RW with a privilege log that can be used to specify
particular documents that were redacted. Through due diligence,
it appears that RW can specify with greater particularity the
documents that were produced in the state action and the
documents that were not produced. It unreasonable for CIT to be
burdened with searching its records to find what documents were
previously produced where RW could discover this through their
B. Document Requests 3, 5, and 7-9
Requests 3, 5, and 7-9 in the Subpoena seek information
regarding former customers of RW: 3) All documents relating to [RW] customers,
including but not limited to, pay history statements.
. . .
5) All documents relating or referring to a) suspense
accounts; b) special suspense accounts; c) dummy
accounts relating to [RW]. Such documents should
include, without limitations all correspondence,
letters, memos, e-mails, telephone messages, and
notes of meetings.
. . .
7) All documents relating or referring to [RW]
8) All documents relating or referring to
conversations with [RW] customers, including, but not
limited to, message logs, message histories, memos,
correspondence, e-mails, and notes of meetings.
9) Documents relating or referring to any customer
related problems for [RW].
These requests for documents are overbroad and totally
unreasonable. Requests for documents must be made with
specificity so that the party subpoenaed can produce them and the
court can determine whether they are relevant and not merely an
attempt to "discover" all documents of any kind held by CIT.
See, e.g., United States v. Morris, 287 F.3d 985
, 991 (10th
Cir. 2002). "If the moving party cannot reasonably specify the
information contained or believed to be contained in the
documents sought but merely hopes that something useful will turn
up," the specificity requirement will not be met and the requests
will be denied. Noriega, 764 F. Supp. at 1493.
Here, the court finds that RW has not met its burden in showing
that the documents sought were for a specific purpose and not as
a mere expansion of discovery. The document requests do not meet
the specificity requirement because they are too generalized;
fail to adequately specify the information sought; and demand from CIT each and every document ever generated, created or
received by CIT in relation to all 1,300 or more lessees of RW
assigned by RW to CIT since 1992.
In its response to CIT's motion to quash, RW does not address
the broadness of its requests, and only asserts that all the
information sought was relevant. To show that a subpoena is not
unreasonable or oppressive a RW must establish that the materials
sought are admissible, relevant and specifically identified. A
request is considered sufficiently specific where it states with
reasonable particularity the subjects to which the documents
relate and limits documents to a reasonable period of time.
Here, neither requirement is met. The requests contain no
restriction on the time period. Rather, the Defendant asks for
"[a]ll documents relating or referring to. . . ." In essence this
could amount to a massive search for countless documents, at
great expense to CIT, in order to attempt to properly comply.
This burden is unreasonable and oppressive. Accordingly, that
part of the Subpoena request with respect to these documents is
C. Document Requests 6, 13, and 14
Requests 6, 13 and 14 seek documents relating to information
exchanged between CIT and the Government, as follows:
6) Documents reflecting an itemization of documents
provided to the government. If such itemization does
not exist in the form of a currently existing document, provide copies of all documents
provided to the government.
. . .
13) All documents relating or referring to the
Suspicious Activity Report prepared on or about May
14) All documents identifying CIT employees who
participated in the preparation of the Suspicious
Activity Report on or about May 4, 2000.
CIT claims that the Government is already in possession of such
documents and RW should seek to obtain the information from the
Government. The second prong of the Nixon test states that the
party seeking the production of documents has the burden to show
that the documents sought are not otherwise procurable by the
exercise of due diligence. Since the information sought is
apparently in the possession of the Government, it should
therefore be readily obtained in the usual manner. This request
is unreasonable and unnecessary. Accordingly, the request for
these documents is denied.
D. Document Request 10 Request 10 seeks all documents relating or referring to any
attempts to retrieve RW pay histories from the CIT computer
system. As stated above, in order for a document request to be
deemed reasonable, the proponent of the request must show that
the information sought is relevant at the time of procurement. RW
states that this information is highly relevant because it shows
CIT's attempts to retrieve information regarding its customer's
problems with RW and this evidence, according to RW, bears on the
reliability of CIT's record-keeping. CIT is not on trial here,
and its reliability of record keeping is therefore not at issue.
This request is also denied.
E. Document Request 11
Request 11 seeks "[a]ll documents relating to CIT's profits
from RW transactions for the years 1992-date." As repeatedly
stated above, a request for documents must seek information that
is relevant to the case at issue. RW contends that this
information may be useful as evidence if the issue of the alleged
loss has to be tried. However, the proponent of the Subpoena must
show that the documents sought are both relevant and admissible
at the time of procurement, rather than having the potential of
being relevant at some time in the future. As such, the Court
finds that this request is seeking evidence that is not presently
relevant to the criminal trial against RW and must be denied. F. Document Request 16
Document request 16 seeks "[a]ll documents relating or
referring to the use of lock boxes for all private label
sources." The term "lock box" is not defined in the RW papers. RW
states that this information can be used in its defense to show
that there was a problem with CIT's record keeping and invoice
system and therefore RW was not engaged in fraud. As stated
above, RW, not CIT is on trial here, and the issue is not whether
CIT maintained a proper record keeping system. As such, this
request must also be denied.
G. Document Requests 17, 18, and 19
Request 17, 18, and 19 seek:
17) All documents reflecting, relating to, or
referring to CIT's knowledge of [RW]'s making of
payments on behalf of customers, including without
limitation, all correspondence, letters, notes,
e-mails, memos, telephone messages, and notes of
18) All documents relating or referring to CIT's
knowledge of bankruptcies relating to any [RW]
19) All documents relating or referring to any
customers that were part of a [RW] portfolio who were
also part of another CIT portfolio.
The Court finds that RW has met its burden of proving relevance
with regard to these requests. The information sought could be
used as evidence in support of the claim that RW did not
deliberately try to conceal from CIT information about its
customers. The information is also relevant to show that RW made
the payments that the indictment alleges RW retained. As for
specificity, the requests appear reasonable and sufficiently tailored so as not to be too burdensome on CIT.
Therefore, the Court denies CIT's motion to quash with respect to
requests 17, 18, and 19.
H. Document Request 20
Document Request 20 seeks "[a]ll documents relating or
referring to any offer by [RW] to purchase its CIT portfolio."
CIT claims that this request is irrelevant because it does not
have anything to do with potential defenses RW may have in the
criminal case. In response, RW merely asserts that offers by it
to purchase the CIT portfolio is relevant to show that RW
attempted to mitigate CIT's alleged loss. Whether RW attempted to
mitigate CIT's loss is not relevant to RW's criminal liability.
The court finds that this is insufficient to meet the burden of
showing that the information sought is relevant to the criminal
case. Accordingly, this request is denied.
For all the foregoing reasons, it is hereby
ORDERED, that CIT's motion to quash the Subpoena is GRANTED
with regard to requests 1-16, and 20-21, without prejudice to the
issuance of a subpoena that conforms to the requirements of (1)
relevance; (2) admissibility; (3) specificity; and (4) not being
otherwise procurable; and it is further
ORDERED, that CIT's motion to quash the Subpoena is DENIED
with regard to requests 17, 18, and 19; and it is further ORDERED, that CIT produce the documents as requested in this
Order by June 6, 2005.
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