United States District Court, E.D. New York
AP LINKS, LLC, and ST. ANNE'S DEVELOPMENT COMPANY, LLC, Plaintiffs,
JAY EDMUND RUSS and RUSS & RUSS, P.C., Defendants.
DECISION AND ORDER
A. KATHLEEN TOMLINSON, Magistrate Judge.
Plaintiffs AP Links, LLC ("AP Links") and St. Anne's Development Company, LLC ("SADC") (collectively, "Plaintiffs") commenced this diversity action alleging that Defendants Jay Edmund Russ ("Russ") and Russ & Russ, P.C. (collectively, "Defendants") breached their fiduciary duties to the Plaintiffs. In addition, Plaintiffs claim that the Defendants tortiously interfered with a contract SADC entered into with Neal and Terry Trabich (hereafter, "the Trabiches") in which SADC arranged a credit line up to $1 million with a third-party lender (the "Facility Agreement"). See Compl. [DE 1] ¶¶ 24-25, 79-82. The credit line was for the Trabiches' use to help finance the construction of a golf course. Compl. ¶¶ 24-25.
As is the case with certain other lawsuits filed in New York and Maryland involving these parties,  the present action stems from: (1) a November 8, 2000 Consulting Agreement entered into by AP Links and Global Golf, Inc.; and (2) the May 2, 2006 Facility Agreement entered into by, inter alia, SADC and the Trabiches. See Compl. ¶¶ 7-29.
In this particular action, Plaintiffs are now suing Defendant Jay Russ, the attorney who, at one point, represented Global Golf and the Trabiches. See generally Compl. Plaintiffs have asserted three causes of action, the first two on behalf of Plaintiff AP Links and the third on behalf of Plaintiff SADC. The first cause of action, breach of fiduciary duty, is based on Plaintiffs' claim that Defendant owed AP Links a duty of care since AP Links was a creditor of Global Golf. Compl. ¶¶ 68-72. In its second claim, AP Links states that as a creditor of Global Golf, AP Links was intended to be a third-party beneficiary of a certain Escrow Agreement created by an Asset Purchase Agreement between Global Golf and the company Confer Bethpage, wherein Confer Bethpage acquired certain assets of Global Golf. Plaintiffs contend that the Defendants caused AP Links to lose that benefit by, among other things, making payments to non-creditors of Global Golf and not to AP Links. Compl. ¶¶ 73-78. The third claim asserts tortious interference with contract. Here, Plaintiffs allege that the Defendants procured the breach of the Facility Agreement by leveraging Defendant Russ' role as counsel for both sides of the transaction in which he advised the Trabiches to grant and record a mortgage on their property in direct violation of the Agreement. Compl. ¶¶ 79-82.
Non-party witness Paul Batista now moves to quash a subpoena (the "Subpoena") served upon him by the Plaintiffs. See Batista Letter Mot. to Quash (the "Batista Mot.") [DE 95]. The documents at issue relate to (i) communications between Batista and certain of his clients; (ii) invoices for legal services rendered in a related case, as well as fee agreements with the Trabiches and/or Global Golf; and (iii) documents related to purported conflicts of interest. See Subpoena [DE 91-1]. Plaintiffs oppose the motion, arguing primarily that the documents sought are relevant to this action. See Pls.' Opp. to the Batista Mot. ("Pls.' Opp.") [DE 96]. Defendants have submitted a letter in support of the motion. Defs.' Letter in Supp. of the Batista Mot. ("Defs.' Letter") [DE 97]. For the following reasons, Attorney Batista's motion is GRANTED in part and DENIED in part.
I. RELEVANT BACKGROUND
As noted, this dispute involves claims for, inter alia, tortious interference with contract and breach of fiduciary duty related to Defendants' alleged disbursement of the assets of the insolvent golf course management company, Global Golf, which was owned and operated by Neal Trabich. See generally Compl. Specifically, Plaintiffs allege that Defendant Jay Russ improperly paid others who were not bona fide creditors of Global Golf from the company's escrow fund when he should have paid Plaintiffs. Id. Plaintiffs contend that some of the escrow funds were improperly paid to Attorney Batista and his firm for lawsuits related to the underlying incidents giving rise to this matter, but where Global Golf and the Trabiches were not parties. Id. In light of the previous motions filed in this action, the Court assumes familiarity with the lengthy factual history of this litigation as well as the specific underlying allegations set forth in the Complaint.
The Court notes that there are (or were) three other cases in this Court arising from the incidents underlying the Complaint, in addition to at least two cases in the United States District Court for the District of Maryland. See Pls.' Opp. 2 n.2. Attorney Batista represented the following parties in those matters: Neil and Terry Trabich, Global Golf, Confer Bethpage, LLC, Gordon Lenz and Jay Russ.
A brief review of the matters in this District is helpful to the resolution of this motion. SADC filed suit against Gordon Lenz on April 29, 2008 in SADC v. Lenz, No. 08-cv-1730 (the "SADC Action."). According to SADC, Lenz, through his company Confer Bethpage LLC, acquired certain assets from Global Golf under the terms of an Asset Purchase Agreement and became the assignee of the lucrative Bethpage Licensing Agreement. See generally SADC Action Compl. Lenz also loaned Terry Trabich $500, 000 pursuant to a mortgage and note on the property that was the basis of the Facility Agreement with SADC. Id. As such, SADC alleges tortious interference with contract since the Facility Agreement allegedly prohibited encumbrances from being placed on the property. Id. This Court held a settlement conference with the parties in the SADC Action and that case was closed on January 24, 2013. Lenz was represented by Paul Batista in the SADC Action.
In AP Links, LLC v. Global Golf, Inc., 08-cv-3602 (the "AP Links Action"), AP Links filed a complaint on March 18, 2008 against Global Golf, the Trabiches, Confer Bethpage, and Gordon Lenz for breach of the Consulting Agreement. See generally Global Golf Action Compl. [CV 08-3602 DE 1]. The Trabiches were dismissed from that action, without prejudice [CV 08-3602 DE 167], and Lenz and Confer Bethpage were dismissed from the action with prejudice [CV 08-3602 DE 174]. The remaining parties filed a consent judgment in 2013, and a final judgment was entered against Global Golf in the amount of $75, 000 on February 13, 2013 [CV 08-3602 DE 177]. Paul Batista represented Global Golf, the Trabiches, Confer Bethpage, and Gordon Lenz in the AP Links Action.
On November 17, 2008, Lenz and Russ filed a complaint against Young and SADC in Lenz et al. v. Young et al., 08-cv-3795 (the "Defamation Action"). Lenz and Russ claimed Young made defamatory statements published in a Maryland newspaper regarding the facts giving rise to these litigations. See generally Defamation Action Compl. [CV 08-3795 DE 1]. Defendants were granted summary judgment on May 3, 2011 [CV 08-3795 DE 113]. Plaintiffs appealed but the decision was affirmed by the Second Circuit, [CV 08-3795 DE 117], and the case remains closed. Attorney Batista represented Plaintiffs Lenz and Russ in the Defamation Action.
As noted, the action now before this Court deals primarily with the alleged wrongdoing of Defendant Russ. Although some of the escrow payments were made for the defense of lawsuits in which the Trabiches and Global Golf were parties, the propriety of the escrow payments, Plaintiffs maintain, would depend on the case in which the services were performed and the nature of those services. See generally Compl.
On December 20, 2012, Plaintiffs wrote to the Court stating that Neal and Terry Trabich had executed waivers of the attorney-client privilege and work product privilege on behalf of themselves and Global Golf. DE 68. The waivers were attached to the submission. Id. Plaintiffs asserted that, in light of the waivers, they were entitled to certain discovery materials. Id. Plaintiffs further stated that they would be serving subpoenas on other attorneys for information Plaintiffs believed was presumptively discoverable in light of the Trabiches' waivers. Id. Paul Batista, Esq. was one of the attorneys upon whom Plaintiffs served a subpoena.
Attorney Batista wrote to the Court on January 9, 2013 and stated that while he did not contest the validity of the Trabiches' waivers, he disagreed with Plaintiffs' position that the Trabiches' waivers also constituted a waiver of Defendant Russ's privilege. DE 77. In light of Russ's objections to the subpoenas, Attorney Batista also requested guidance from the Court. Id. On February 5, 2013, Defendants wrote the Court to join in the application of Attorney Batista to stay any responses to the subpoenas until the validity of the waivers was determined, or, in the alternative, to quash the Subpoena served on Attorney Batista. DE 81. On February 21, 2013, the Court stayed any response to the Subpoena served upon Attorney Batista until the issue of the validity of the Trabiches' waivers was determined.
On May 23, 2013, the Court held a hearing with the parties to resolve outstanding discovery issues and to address the purported waiver of attorney-client and work product privileges previously asserted by Neal and Terry Trabich. DE 89. Ultimately, after conducting a hearing and placing the Trabiches under oath, the Court determined that the Trabiches' privilege waivers were valid. See id. However, the Court also found that the Subpoena served upon Attorney Batista was overbroad. Id . ¶ 4. The Court gave Plaintiffs' counsel until June 3, ...