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The Democratic Republic of Congo v. Air Capital Group, LLC

United States District Court, S.D. Florida

January 8, 2018

THE DEMORATIC REPUBLIC OF THE CONGO, Plaintiff,
v.
AIR CAPITAL GROUP, LLC, MARIO ABAD, individually, and JAIME SANCHEZ, individually, and COMERCIAL JET, INC., Defendants.

          ORDER ON THE NON-PARTIES' AMENDED MOTION TO QUASH

          EDWIN G. TORRES United States Magistrate Judge

         This matter is before the Court on World Air Logistics, LLC's, Aerothrust Holdings Leasing, LLC's, and Aerothrust Holdings, LLC (collectively, the “Non-Parties”) amended motion to quash the Democratic Republic of Congo's (“Plaintiff”) subpoenas. [D.E. 292]. Plaintiff responded to the Non-Parties' motion on November 29, 2017 [D.E. 294] to which the Non-Parties replied on December 6, 2017. [D.E. 295]. Therefore, the Non-Parties' motion is now ripe for disposition. After careful consideration of the motion, response, reply and relevant authority, and for the reasons discussed below, the Non-Parties' motion is DENIED.

         I. BACKGROUND

         Plaintiff filed this action on February 14, 2012. [D.E. 1]. This case is based on a contractual dispute with respect to the repair of Plaintiff's aircraft. Plaintiff alleges that it entered into an agreement with Air Capital Group, LLC (“ACG”), and its CEO Mario Abad (“Abad”) (collectively, the “Debtors” or “Defendants”). Plaintiff's complaint alleges five counts against the Debtors: fraud in the inducement in count 1, breach of contract in count 2, fraud in counts 3 and 4, and a violation of Florida's Deceptive and Unfair Trade Practices Act. The case proceeded to trial and the jury returned a verdict in favor of Plaintiff on counts 2-4 and in favor of Plaintiff on count 5 as to Debtors ACG and Abad only. Plaintiff holds a judgment against ACG in the amount of $1, 328, 723.26 and an additional $1, 229, 114.59 against ACG and Abad. The Court also awarded Plaintiff $1, 017, 926.44 in attorneys' fees and costs. [D.E. 288].

         More than three years have passed since the Court entered a multi-million dollar judgment in Plaintiff's favor and - to date - the Debtors have not paid anything to Plaintiff in satisfaction of the judgment entered against them. As such, Plaintiff has served post-judgment discovery on the Debtors, as well as their related entities - the Non-Parties.[1] Plaintiff has subpoenaed documents for the purpose of determining whether the Debtors transferred assets to any of the Non-Parties and to what extent the Non-Parties may be the Debtors' successors or alter egos.

         II. ANALYSIS

         The Non-Parties argue that Plaintiff's subpoena should be quashed because the information sought is irrelevant, and constitutes confidential, commercial, and financial information that will subject the Non-Parties to undue burdens and expenses. The subpoena seeks the following items: (1) Aerothrust Leasing's complete tax returns for the years 2014-2017, (2) financial statements on Aerothrust Leasing's assets and liabilities, (3) Aerothrust Leasing's bank statements for checking, saving, certificate of deposit, and money market accounts, (4) all bills of sale or other written evidence of the gift, sale, purchase, or other transfer or real or personal property, and (5) all bills of sale or other written evidence of the gift, sale, purchase, or other transfer of real or personal property by Aerothrust Leasing from the Judgment Debtors.[2]

         The Non-Parties contend that the only requests that are remotely relevant are requests 4 and 5, but even those requests are also allegedly improper because the items sought are designated as confidential. The Non-Parties further suggest that Plaintiff has outstanding discovery requests to Defendants in this case and that the Non-Parties have failed to explain why the information sought cannot be more easily obtained from the parties to the underlying action. Therefore, the Non-Parties conclude that Plaintiff's subpoena should be quashed because (1) Plaintiff has failed to satisfy its burden in making a heightened showing of fraudulent concealment or an alter ego relationship between the Debtors and the Non-Parties, (2) the subpoena violates Rule 45 of the Federal Rules of Civil Procedure, and (3) the subpoena requires the Non-Parties to compile extensive materials that will cause an undue burden and expense.

         Plaintiff argues in response that the Non-Parties' motion must fail for three independent reasons. First, Plaintiff suggests that the Non-Parties failed to confer with Plaintiff in violation of the Local Rules. Second, Plaintiff contends that the Non-Parties failed to support their arguments with any evidence or specifics. And third, Plaintiff claims that discovery from the Non-Parties is necessary given the Non-Parties' close and extensive relationship with the Debtors.

         Rule 69(a) of the Federal Rules of Civil Procedure provides, in part, the following:

[i]n aid of the judgment or execution, the judgment creditor or a successor in interest when that interest appears of record, may obtain discovery from any person, including the judgment debtor, in the manner provided in these rules or in the manner provided by the practice of the state in which the district court is held.

Fed. R. Civ. P. 69(a) (emphasis added). “Under this Rule, discovery may be had of the judgment debtor or third persons without separate suit and, if discovery is pursued under the federal rules . . . all the discovery devices of the Rules may be used as in the progress of the action.” Caisson Corporation v. County West Building Corporation, 62 F.R.D. 331, 334 (E.D. Pa. 1974). While the scope of discovery directed at judgment debtors is broad, third parties are generally only examined “as to the judgment debtor's assets and are not required to disclose their own assets.” National Union Fire Ins. Co. of Pittsburgh, Pa. v. Van Waeyenberghe, 148 F.R.D. 256, 257 (N.D. Ind. 1993).

         However, a third-parties' assets may be discoverable upon a “heightened showing of necessity and relevance, ” meaning “at least some demonstration of concealed or fraudulent transfers or alter ego relationship with the judgment debtor, ” is generally warranted. Trustees of Amalgamated Ins. Fund v. Jordan Mfg. Corp., 2008 WL 343132, at *1 (S.D. Fla. Feb. 5, 2008) (quoting Uniden Corporation of America v. Duce Trading Company, Ltd., 1993 WL 286102, 1 (W.D.N.Y. 1993)); see also 2245 Venetian Court Bldg. 4, Inc. v. Harrison, 149 So.3d 1176, 1179 (Fla. 2d DCA 2014) (‘“[W]e have . . . held that a nonparty may be subject to postjudgment discovery where the “judgment creditor can provide a good reason and close link between the unrelated entity and the judgment debtor.”') (quoting Gen. Elec. Capital Corp. v. Nunziata, 124 So.3d 940, 942 (Fla. 2d DCA 2013)); Trustees of N. Florida Operating Engineers Health & Welfare Fund v. Lane Crane Serv., Inc., 148 F.R.D. 662, 664 (M.D. Fla. 1993) (“When the ground for the discovery is an alleged alter ego relationship with the judgment debtor, there must be facts before the Court to show the basis for the allegation.”) (citing Strick Corp. v. Thai Teak Products Company, Ltd., 493 F.Supp. 1210, 1218 (E.D. Pa. 1980)).

         One case, in particular, is instructive on how courts consider a close link between a nonparty and a judgment debtor. In Trustees of the North Florida Operating Engineers Health & Welfare Fund v. Lane Crane Service, Inc., 148 F.R.D. 662 (M.D. Fla. 1993), the court held that a judgment creditor was entitled, pursuant to Rule 69 to seek discovery from a nonparty on the basis of an alter ego theory. The court relied on the fact that: (1) the judgment debtor became defunct within one month of the formation of the new company; (2) the son of the principal of the debtor company was the sole owner of the new company; (3) the debtor company and the new company utilized the same address; (4) the debtor company and the new company engaged in the same kind of business; and (5) the new company employed some of the debtor company's former employees. SeeId. at 664. The court held that while any one of those factors, standing alone, might not be sufficient to make the requisite showing, the combination of those factors provided a basis for the creditor's allegation of an alter ego relationship sufficient to justify the requested ...


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