United States District Court, S.D. New York
December 22, 2005.
FIRST INDEMNITY OF AMERICA INSURANCE COMPANY, ET AL., Plaintiffs,
STAMATIOS SHINAS, ET AL., Defendants.
The opinion of the court was delivered by: KEVIN FOX, Magistrate Judge
MEMORANDUM & ORDER
Plaintiffs First Indemnity of America Insurance Company ("FIA")
and AXA Global Risk U.S. Insurance Company ("AXA") (collectively
"plaintiffs") have moved, pursuant to Rule 45(e) of the Federal
Rules of Civil Procedure, to hold in contempt non-party Scott
Yaffe ("Yaffe") for his failure to: (a) appear for oral
examination; and (b) produce documents, pursuant to subpoena.
Yaffe is an attorney with the law firm Lindabury, McCormick and
Estabrook, P.A. ("Lindabury"), and counsel to non-party Highlands
Insurance Company ("Highlands"). Plaintiffs also seek an order
directing Yaffe to appear for oral examination and to produce the
subject documents, and an award of the attorney's fees and costs
they incurred in connection with bringing the instant motion.
Highlands opposes the motion to hold Yaffe in contempt. In
addition, by cross motion, Highlands asks the Court to: (1) quash
the subpoena issued to Yaffe; (2) issue a protective order
enjoining plaintiffs and their counsel from using any
confidential information they may have obtained and barring them from obtaining further discovery; (3)
issue an order holding attorney Robert E. Nies, and the law firm
Wolff & Samson, PC, counsel to the plaintiffs, in contempt for
abuse of process; and (4) award Highlands the reasonable
attorney's fees and costs it incurred as a result of opposing
plaintiffs' motion for contempt and filing its cross motion. In
reply, the plaintiffs contend, among other things, that Highlands
has no standing to bring the instant motion to quash and,
moreover, that motion is untimely.
FIA, a New Jersey corporation, procures the issuance of surety
payment and performance bonds and provides related services in
connection with such bonds. AXA, a New York corporation, executes
performance and payment bonds as surety in the construction
industry. Yaffe and Lindabury serve as attorneys for Highlands on
surety bond matters.
The complaint alleges, among other things, violations of the
Federal Racketeer Influenced and Corrupt Organizations Act,
fraud, constructive fraud and unjust enrichment. According to
plaintiffs, the defendants various individuals, partnerships,
corporations and joint ventures engaged in an "elaborate
scheme" to defraud plaintiffs through the creation of a number of
sham business entities whose main purpose was to procure
performance and payment bonds from AXA and other sureties in
order to gain access to government contracts. Plaintiffs claim
that the defendants then diverted the bonded contract proceeds
for their personal financial gain. As a result, plaintiffs
contend, they have had to assume the burden of completing the
projects undertaken by the defendants and paying any
On January 20, 2005, counsel to the plaintiffs served Yaffe
with a subpoena duces tecum (the "Subpoena"). The Subpoena
directed Yaffe to appear for oral examination at the offices of plaintiffs' counsel on February 9, 2005, and to bring with him
any and all documents, exclusive of any privileged
communications: (i) evidencing any business or personal
relationship between Yaffe and any defendant; (ii) evidencing any
business or personal relationship between Yaffe and any project
owner(s) with respect to any project(s) for which surety bonds
were issued on behalf of any defendant; (iii) reflecting any
communications between Yaffe and any defendant with respect to
services he provided; (iv) concerning the default of any
corporate defendant on any project for which surety bonds were
issued on behalf of any defendant; (v) reflecting any
communications between Yaffe and any project owner(s) with
respect to any project for which surety bonds were issued on
behalf of any defendant; and (vi) reflecting any distribution of
contract proceeds from any project for which surety bonds were
issued on behalf of any defendant.
After the Subpoena was served, counsel to the plaintiffs and
counsel to Highlands engaged in written correspondence concerning
the conditions under which Yaffe would comply with the Subpoena.
A review of counsels' communications in this regard reveals,
among other things, that on February 7, 2005, Yaffe was
representing both Highlands and individual defendant John Rusin
("Rusin"), and that the plaintiffs' reason for seeking the
discovery demanded in the Subpoena was to obtain information
about Rusin and defendant Alasia Company ("Alasia").
Specifically, the plaintiffs seek "non-privileged, factual
information" concerning Yaffe's relationship with Rusin, Alasia
and a joint venture comprised of Alasia and GBE Contracting
Corporation, as well as "the fraud perpetrated by the
defendants." The plaintiffs maintain that Yaffe has relevant
information about these matters because "apparently [Yaffe] . . .
served for years in a non-legal caretaker or custodial trustee role for
defendant Alasia's assets." The plaintiffs contend that they
learned about Yaffe's alleged relationship with Rusin and Alasia
from Rusin's personal tax accountant, Tom Daly, in late December
2004. Plaintiffs state: "The information provided included the
contention by Mr. Daly that  Yaffe was in control of the
finances of Alasia and that Alasia had paid personal bills of 
Rusin." Plaintiffs contend that, even if Yaffe lacks personal
knowledge of the specific bonds and projects at issue in this
case, nevertheless, he may know about "the diversion of trust
funds to Alasia and Rusin . . . the current use of those funds,
and the misuse of the corporate form by the defendants for
personal benefit." Such information, plaintiffs contend, "appears
reasonably calculated to lead to the discovery of admissible
evidence," Fed.R.Civ.P. 26(b)(1), by shedding light on the
cause of the defaults on the bonded projects and the inability of
the defendants to perform their contractual and financial
obligations. Plaintiffs assert that they have no interest in, and
do not seek, confidential information from or about Highlands.
On March 3, 2005, counsel to Highlands wrote to counsel to the
plaintiffs informing him that Yaffe would appear for oral
examination and would bring with him documents, "if any, that he
has and which relate to the projects which are the subject matter
of your complaint." Thereafter, counsel to Highlands, in a letter
dated March 31, 2005, informed counsel to the plaintiffs that
Yaffe, in fact, did not have any documents that fit the
descriptions contained in the first through fourth and sixth
categories of document requests. Moreover, counsel explained,
with respect to the fifth category of requests, while Yaffe had
information about communications regarding projects bonded by
Highlands, he did not have any documents "evidencing
communications for which a surety bond was issued by FIA or AXA
on behalf of any of the defendants in your case." Counsel also noted that Yaffe's
activity on behalf of Highlands "postdate[d]" the filing of the
On April 8, 2005, counsel to Highlands announced that his
client intended to move to quash the Subpoena. However, no action
was taken at that time, nor did Yaffe appear for oral examination
or produce any documents. Consequently, on May 20, 2005,
plaintiffs filed the instant motion for an order of contempt
against Yaffe for his failure to comply with the Subpoena.
Highlands' cross motion followed.
In his affirmation in support of Highlands' cross motion, Yaffe
contends that he has "no discoverable documents [or] discoverable
testimony to offer." Furthermore, Yaffe states, "I possess no
knowledge or documents directly or indirectly pertaining to any
of the projects or bonds that are pled in the complaint." Yaffe
notes that he began representing Highlands over a month after the
instant action was commenced and, therefore, has "no first-hand
knowledge of any facts relating to the complaint." Yaffe suggests
that the Subpoena "necessarily seek[s] to obtain information
belonging to Highlands." However, Yaffe maintains, "I do not
conduct business with any of the Defendants or project owners nor
do I have any personal relationships with them."
The plaintiffs argue that Highlands lacks standing to move to
quash the Subpoena because it is neither a party to the instant
lawsuit nor the recipient of the Subpoena. In addition, the
plaintiffs claim that Highlands has waived its right to object to
the Subpoena because it failed to respond timely. "In the absence of a claim of privilege, a party usually does
not have standing to object to a subpoena directed to a non-party
witness." Estate of Yaron Ungar v. Palestinian Authority, No.
18MS0302, 2005 WL 3005810, at *11 (S.D.N.Y. Nov. 7, 2005)
(quoting Langford v. Chrysler Motor Co., 513 F.2d 1121, 1126
[2d Cir. 1975]). Whether a non-party has standing to quash a
subpoena served on another non-party depends on the nature of the
information sought. In Estate of Yaron Ungar, the court found
that a non-party had standing to move to quash a subpoena which
had been served on its attorneys and which sought information
concerning the non-party's financial dealings with the defendant,
because the information was protected by attorney-client
privilege. See id. Courts have also found standing to quash
subpoenas directed towards the personal bank or brokerage
accounts of a non-party. See, e.g., Catskill Dev., L.L.C. v.
Park Place Enter. Corp., 206 F.R.D. 78, 93 (S.D.N.Y. 2002)
(finding that non-party Native American tribe had standing to
quash subpoena directed to tribe's bank because tribe had privacy
interest in its banking documents).
In this case, Highlands seeks to quash a subpoena directed to
an attorney affiliated with the law firm it has retained as
counsel. However, it does not appear that the information sought
through the Subpoena is protected by attorney-client privilege or
a privacy interest.
The Subpoena, by its express terms, seeks no information from
or about Highlands and excludes any privileged communications. In
motion papers, furthermore, counsel to the plaintiffs has
explained that plaintiffs' purpose in seeking, through the
Subpoena, to depose Yaffe, and obtain the subject documents from
him, is to uncover information he may have about Rusin and others
and their alleged involvement in fraudulent business activities.
There is no suggestion that such information, if it exists, is
protected by attorney-client privilege in virtue of the
relationship between Yaffe and Highlands. Moreover, any information that would
be subject to a claim of privilege in virtue of that relationship
has not been sought by the plaintiffs through the Subpoena.
Furthermore, since the Subpoena does not seek information,
including confidential information, from or about Highlands, that
entity can have no privacy interest in the subpoenaed material.
Therefore, the Court finds that Highlands lacks standing to
object to the Subpoena.*fn1 Accordingly, Highlands' motion
to quash the Subpoena is denied. Highlands' motions for a
protective order, an order holding plaintiffs' counsel in
contempt for abuse of process, and an award of attorney's fees
also must be denied on the same ground.*fn2
Contempt of Court
Rule 45 of the Federal Rules of Civil Procedure provides that
"[f]ailure by any person without adequate excuse to obey a
subpoena served upon that person may be deemed a contempt of the
court from which the subpoena issued." Fed.R.Civ.P. 45(e).
Under this rule, the court has power to issue an order of
contempt on the basis of Yaffe's failure to comply with the
Subpoena. See Diamond v. Simon, No. 89 Civ. 7061, 1994 WL
10622, at *1 (S.D.N.Y. Jan. 10, 1994).
In this case, there is no dispute that Yaffe was properly
served with the Subpoena. Thereafter, through his representative,
counsel to Highlands, Yaffe first agreed to appear for oral
examination and to produce documents, then asserted that he
intended to move to quash the Subpoena or limit the scope of the plaintiffs' inquiries.
However, neither Yaffe nor counsel to Highlands took any such
action, nor did they raise any opposition to plaintiffs' letter
application for permission to bring the instant motion. Further,
the affirmations submitted by Yaffe and counsel to Highlands in
opposition to the instant motion and in support of Highlands'
cross motions have not adequately explained the failure to comply
with the Subpoena. Yaffe and Highlands contend, among other
things, that the testimony and documents plaintiffs seek to
elicit are irrelevant. However, under the circumstances, the
Court finds that the testimony and material sought from Yaffe are
likely to be relevant to the subject matter of this litigation.
Accordingly, the Court finds that Yaffe must respond to the
Subpoena by January 6, 2006, or the Court will certify facts to
the assigned district judge so that he may be adjudged in
Plaintiffs seek an award of reasonable attorney's fees and
costs incurred as a result of Yaffe's noncompliance with the
Subpoena and to oppose Highlands' cross motion. The Court finds
that an award of attorney's fees and costs is appropriate in this
case. Accordingly, plaintiffs are directed to submit an itemized
list of expenses with supporting documentation for the Court's
approval. Any objection to the reasonableness of the amount
claimed by the plaintiffs must be submitted to the Court not more
than ten days after service of the plaintiffs' lists of expenses.
For the reasons set forth above, Yaffe shall, on or before
January 6, 2006, appear for oral examination and produce
documents to the plaintiff in accordance with the Subpoena, or
the Court will certify facts to the assigned district judge so
that he may be adjudged in contempt. In addition the plaintiffs'
motion for an award of attorney's fees and costs incurred as a
result of bringing the instant motion and opposing Highlands'
cross motion is granted. Finally, Highlands' cross motion is denied in every respect.
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