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The Sands Harbor Marina Corp. v. Wells Fargo Insurance Services of Oregon, Inc.

United States District Court, E.D. New York

March 31, 2018

THE SANDS HARBOR MARINA CORP., SANDS HARBOR MARINA LLC, THE SANDS HARBOR MARINA OPERATING CORP., SANDS HARBOR MARINA OPERATING LLC, GREG W. EAGLE, PINE CREEK RANCH, LLC and UNIVERSITY 1248, LLC, Plaintiffs,
v.
WELLS FARGO INSURANCE SERVICES OF OREGON, INC., WELLS FARGO BANK, N.A., EVMC REAL ESTATE CONSULTANTS, INC., LARRY ESACOVE, THE ESTATE OF AIDA ESACOVE, DAVID P. GUILOT, ANTHONY B. CHOPRA, TISDALE & NICHOLSON, LLP, JEFFREY A. TISDALE, GUY C. NICHOLSON and MICHAEL D. REIS, Defendants.

          MEMORANDUM AND ORDER

          ANNE Y. SHIELDS, UNITED STATES MAGISTRATE JUDGE.

         In this nearly ten year old matter, the recipient of a Rule 45 subpoena, non-party Dogali Law Group (“DLG”), formerly known as Forzis & Dogali, P.A, has moved to recover costs and fees from defendant Wells Fargo Insurance Services of Oregon, Inc. (“WFIS”). DLG claims that it incurred $39, 709 in costs and attorneys' fees, complying with WFIS' subpoena. WFIS argues that DLG's claimed expenses are exaggerated, unnecessary, or incurred as a result of its own efforts to resist complying with the subpoena.

         After carefully examining the documentation submitted by DLG, I conclude that DLG's reasonable costs of compliance totals $10, 537.33.

         BACKGROUND

         The plaintiffs are individuals and entities in the business of real estate acquisition and development. Third Amended Complaint (“TAC”), ¶¶ 4-5, Docket Entry (“DE”) [147]. Defendant WFIS is an insurance broker licensed to sell insurance as part of the Wells Fargo group of companies, and as relevant to this matter, is the successor in interest to Accordia, the brokerage that employed defendant Michael Reis (“Reis”). Plaintiffs allege that the various defendants were involved in fraudulent conspiracy to obtain advance loan commitment fees from Plaintiffs under the pretense that the fees were to be used for the acquisition of third-party real estate financing. Id. ¶¶ 1-2.

         Pertinent to the instant motion, Plaintiffs are real estate developers who allegedly sought financing from the defendant EVMC Real Estate Consultants, Inc. (“EVMC”) for development projects in Florida from 2005-2008. TAC ¶¶ 4-5, 13. Plaintiffs alleges that there was never any financing available, and that the representations made with regard thereto were just a ruse designed to deceive Plaintiffs into paying commitment fees. Id. ¶¶ 1, 13, 15. Plaintiffs alleges that defendants Tisdale & Nicholson, LLP (“T&N”), who served as counsel to EVMC, reis (acting in his capacity as an employee of WFIS) and the other defendants engaged in a scheme “mastermind[ed]” by defendants Aida and Larry Esacove (the “Esacoves”) (via their “alter ego” EVMC) to fraudulently induce them to wire funds to defendant T&N, which then disbursed the funds to all of the other alleged conspirators. Id. ¶¶ 1, 4-5, 13-14, 24, 40, 89, 103, 121, 141, 259.

         A. The 2010 Subpoena

         On July 21, 2010, WFIS issued a subpoena concerning EVMC and its principals on Forzis & Dogali (“FD”), the Florida law firm that represented EVMC in connection with the loan transactions that are at issue in this case. See Declaration of Andy Dogali in Suport of Dogali Law Group's Motion for Award of Expenses Pursuant to Rule 45 (“Dogali Decl.”), Ex. 1 (“2010 Subpoena”), DE [290-3]. In September 2010, FD representatives produced documents and withheld 56 documents on the basis of privilege. Dogali Decl., Ex. 4, DE [290-3] FD billed EVMC $3, 958.83 for the work done to respond to the 2010 subpoena, see Dogali Decl., Ex. 5 (“2010 Invoice”), DE [290-3], but later sought reimbursement for the same from counsel for WFIS. Dogali Decl., Ex. 7, DE [290-3].

         B. WFIS and Plaintiffs' Motion to Compel T&N to Produce Privileged Documents

         Six years later, the T&N defendants, in response to WFIS' document requests, withheld documents based upon attorney-client privilege between the Tisdale firm and their client EVMC (the “T&N Withheld Documents”). WFIS and Plaintiffs' objected to the privilege assertion for a number of reasons, among them, that the California Secretary of State website reflected that EVMC was suspended from doing business by the California Secretary of State Franchise and tax Board, and because defendant Larry Esacove has previously waived the attorney-client privilege on behalf of EVMC in a previous action. On July 15, 2016, WFIS and Plaintiffs moved this Court to compel production of the T&N Withheld Documents. See DE [258], [261].

         On October 5, 2016, this Court granted WFIS' motion to compel the T&N Withheld Documents. See DE [271]. Inter alia, with respect to T&N's assertion of the attorney-client privilege, this Court ordered that the “privilege can only be asserted by persons authorized to act on the dissolved corporation's behalf during the windup process [by] its outgoing management personnel.” Declaration of Louis A. Russo in opposition to Non-Party Dogali Law Group's Motion for Award of Expenses pursuant to Rule 45 (“Russo Decl.”), Ex. A Transcript of October 5, 2016 Hearing (“Tr.”), 5:17-19, DE [291-3]. Tis Court held that the privilege was not being asserted in connection with EVMC's defense or prosecution of actions during its winding up phase because “EVMC is not defending the action” and “the same is true for the parties who might qualify as its outgoing management and personnel who might have asserted a privilege.” Tr. 5:22-23. Therefore, “[a]s a defunct corporation, there's no one who can speak for EVMC to assert the privilege.” Tr. 5:25-6:1. This Court ordered that the privilege could no longer be asserted since Larry Esacove had previously waived it in a prior action. Tr. 6:3-9.

         C. The 2017 Subpoena

         Following this Court's privilege ruling, counsel for WFIS requested that DLG produce the 2010 Privileged Documents. Counsel conferred and efforts were made for the parties to reach an amicable resolution regarding the production of the withheld documents. During these communications, it was disclosed that DLG's files were almost all electronically kept and that production would be time consuming. Dogali Decl., Ex. 13 at 84, [1] DE [290-4]. Counsel for WFIS offered to have their e-discovery venders assess the situation and propose a less costly solution, in an effort to reduce the time and costs in responding.

         After substantial correspondence, on January 23, 2017, WFIS issued a broader subpoena to DLG. Dogali Decl., Ex. 14 (the “2017 Subpoena”), DE [290-4]. The 2017 Subpoena provided DLG with this Court's Privilege Ruling and the Larry Esacove waiver, and made clear that no privilege could be asserted on behalf of EVMC.

         Following the issuance of the 2017 Subpoena, WFIS counsel and Andy Dogali (“Dogali”), President and sole shareholder of DLG, continued communications regarding an agreement of fees. Dogali Decl. ¶ 2.On January 30, 2017, Dogali requested $6, 400 for fees associated with the production and provided WFIS counsel support for his request. Dogali Decl. ¶ 24. WFIS counsel disagreed with the $6, 400 request arguing through email, that there was no longer a need to review for privilege and as far as conducting an electronic search, WFIS had offered to provide outside staff to assist with production. Dogali Decl. Ex. 15 at 81-82, DE [290-4]. WFIS' counsel then invited Dogali to join a conference with this Court on the following day to discuss the issue. Id. Dogali declined the invitation. Dogali Decl. ¶ 25.

         On February 23, 2017, DLG submitted its Objections and Responses to Subpoena Duces Tecum, and provided a chart detailing what was in each of DLG's eight files for EVMC. Dogali Decl. ¶¶ 30. Dogali also submitted an updated fee proposal of $8, 750 for the work done for 2017 Subpoena, after Dogali reduced the actual costs by more than 40%. Dogali Decl. ¶ 32. Dogali also included the 2010 invoice which created a total fee request of $12, 708.83. Id.

         On March 6, 2017, WFIS' counsel advised Dogali that they believed his request to be unreasonable and proposed a $4, 500 payment. Dogali Decl. ¶ 34. On March 15, 2017, WFIS' counsel requested an update and response to their proposed payment. Id. ¶ 35. On March 17, 2017, WFIS submitted a letter to this Court requesting it compel DLG to produce the 2010 Privileged Documents. See DE [281]. A courtesy copy of the letter was emailed to Dogali on the same day. Id.

         On March 23, 2017, Dogali communicated to WFIS' counsel that he intended to file opposition to the letter motion. Dogali Decl. ¶ 37. Dogali also communicated that he would accept $8, 400 in resolution of all the Rule 45 costs for the 2010 and 2017 Subpoenas. Id. ¶ 38. This amount included the 2010 invoice and over a 70% reduction in the 2017 fees. Id.

         On March 29, 2017, with WFIS' letter still unopposed, this Court ordered that the 2010 Privileged Documents be produced by no later than April 10, 2017. See DE [281]. On April 10, 2017, WFIS' counsel received an email from Dogali with an attachment containing a “Dogali Law Group, P.A.'s Motion for Reconsideration, and/or for Modification of Order dated March 29, 2017, and for Protective Order” (“Reconsideration Application”). Russo Decl., Ex. B, DE [291-3]. All counsel conferred and sought a phone conference with this Court.

         Thereafter, following two separate phone conferences, this Court ordered DLG to produce all documents responsive to the subpoena, encouraged all parties to see is a resolution could be worked out, and after it became apparent that it could ...


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